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, 2010
Date of reporting period: September 30, 2010
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
Thornburg Developing World Fund
Important Information
The information presented on the following pages is current as of September 30, 2010. 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 |
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 or 2010.
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.
BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index – A model portfolio of municipal obligations throughout the U.S., with an average maturity ranging from three to fifteen years.
BofA 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).
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 Yield – The distribution yield 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.
Basis Point (BPS) – A unit equal to 1/100th of 1%. 1% = 100 basis points (bps).
Bond Credit Ratings – A bond credit rating assesses the financial ability of a debt issuer to make timely payments of principal and interest. Ratings of AAA (the highest), AA, A, and BBB are investment-grade quality. Ratings of BB, B, CCC, CC, C, and D (the lowest) are considered below investment grade, speculative grade, or junk bonds. Unless otherwise noted, the ratings listed are from Municipal Market Data and are a combination of ratings from Standard and Poor’s, Moody’s Investors Service, and Fitch Ratings.
Effective Duration – A bond’s sensitivity to interest rates, incorporating the embedded option features, such as call provisions. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
This page is not part of the Annual Report. 3
Important Information,
Continued
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.
Insured Bond – A bond with interest and principal payments insured by a third party. Insured bonds are usually found as a feature of municipal bonds; they are purchased, underwritten and repackaged by a financial guarantee company who then sells the issue to investors.
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.
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.
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.
Treasury Inflation Protected Securities (TIPS) – Either a U.S. Treasury note or bond that offers protection from the effects of inflation. Using the Consumer Price Index as a guide, the value of the principal is adjusted to reflect the effects of inflation. A fixed interest rate is paid semi-annually on the adjusted amount. At maturity, if inflation has increased the value of the principal, the investor receives the higher value. If deflation has decreased the value, the investor receives the original face amount of the security.
4 This page is not part of the Annual Report.
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 were 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 0.86%, as disclosed in the most recent Prospectus.
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history of A shares from September 28, 1984 through September 30, 2010
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 9/28/84) | ||||||||||||||||||||
Without sales charge | 4.70 | % | 5.25 | % | 4.36 | % | 4.23 | % | 5.61 | % | ||||||||||
With sales charge | 3.15 | % | 4.71 | % | 4.04 | % | 4.07 | % | 5.55 | % | ||||||||||
30-DAY YIELDS, A SHARES
As of September 30, 2010
Annualized Distribution Yield | SEC Yield | |||
2.27% | 1.36 | % | ||
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2010
Number of Bonds | 1,069 | |||
Effective Duration | 3.5 Yrs | |||
Average Maturity | 4.3 Yrs | |||
See the entire portfolio in the Schedule of Investments beginning on page 11.
This page is not part of the Annual Report. 5
Thornburg Limited Term Municipal Fund
September 30, 2010
Table of Contents | ||||
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
6 Certified Annual Report
George Strickland Co-Portfolio Manager
Josh Gonze Co-Portfolio Manager
Christopher Ihlefeld Co-Portfolio Manager | October 11, 2010
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 27 cents to $14.27 per share during the fiscal year ended September 30, 2010. If you were with us for the entire period, you received dividends of 37.6 cents per share. If you reinvested your dividends, you received 38.1 cents per share. Dividends per share were lower for Class C shares and higher for Class I shares to account for varying class-specific expenses.
The Class A shares of your Fund produced a total return of 4.70% at NAV over the fiscal year ended September 30, 2010, compared to the 5.62% for the Barclays Capital Five-Year Municipal Bond Index. The main contributor to the difference in performance is that the Barclays Capital Five-Year Municipal Bond Index has all of its holdings in four- to six-year maturities. The Thornburg Limited Term Municipal Fund has holdings that span one- to ten-year maturities in a laddered structure. On average yields decreased 0.40% in the four- to six-year segment of the market while the average decrease in yields for the one- to ten-year segment of the market was around 0.30%. | |
The Economy and the Federal Reserve
On September 20, 2010, the National Bureau of Economic Research (NBER) announced that the recession ended in June 2009. The 9.6% of the American work force currently unemployed may beg to differ with this evaluation. The duration of the recession was 18 months, making it the longest recession since World War II. | ||
The economic picture has been largely unchanged during the fiscal year. The economy is suffering from a high degree of slack in the utilization of its productive resources. Banks are not lending even though the Federal Reserve (Fed) has pumped considerable amounts of money into the economy. Inflation and inflation expectations are quite muted. Gross Domestic Product (GDP), a measure of a country’s overall economic output, recorded a 1.6% increase in the quarter ended June 30, 2010, much higher than the negative 6.8% decrease posted in the quarter ended December 31, 2009, but lower than the long-term average growth rate experienced since 1973 of 2.7%. Capacity utilization, a measure of an economy’s usage of its productive resources, is running around 74.7%, well off the series low of 68.3% recorded in June of 2009 but below its long-term average of 81%. The Fed, seeking to bolster aggregate demand for goods and services, has pumped a tremendous amount of money into the economy. M2, a broad measure of money and money substitutes, has grown 15.9% since the beginning of 2008. But the velocity of M2, a measure of the rate at which money in circulation is used in transactions, is falling. Whether lending institutions are not lending or small and midsize businesses are not borrowing, the result is the same. Commercial and Industrial Loans and Leases (loans to corporations, commercial enterprises, or joint ventures) have decreased 15.2% since January of 2008. Small and midsized businesses, normally the engines of economic growth, |
Certified Annual Report 7
Letter to Shareholders,
Continued
are being starved of needed capital. Now let’s look at one measure of inflation, the Consumer Price Index (CPI). The year-over-year change in headline CPI has been running between 1.1% and 1.2% for the last three months. Core CPI (headline CPI less the food and energy components) has been running at 0.9% for the last four months. The market’s expectations of future inflation as measured by the inflation expectations used in the pricing of Treasury Inflation Protected Securities (TIPS) with five years to maturity has been running around the 1.4% rate. So inflation, the bane of fixed income investors, has been low and the market expects it to remain low.
The Federal Open Market Committee (FOMC) maintained a very accommodative stance toward monetary policy by keeping the Fed Funds rate effectively at 0% throughout the fiscal year. In addition to keeping the Fed Funds rate low, central banks around the world engaged in a policy known as “quantitative easing,” buying back bonds and other assets to boost demand and fight off deflation. The Fed bought $1.7 trillion in bonds to accomplish this goal. As these assets mature, the market is wondering what the Fed will do with the proceeds – buy more bonds (and what type of bonds?) or return the money to the Treasury. In their September 21, 2010 release the FOMC stated, “The Committee also will maintain their existing policy of reinvesting principal payments for their securities holdings.” So the Fed’s accommodative monetary policy will remain unchanged “for an extended period.”
As we look forward over the next 6–12 months, we believe the Fed will keep short-term interest rates low and the market will keep the slope of the yield curve (difference between long-term and short-term interest rates) steep. Of course if we see signs of an increase in economic activity, we will reevaluate this position. The next move by the Fed, in terms of short-term interest rates, would seem to be an increase, easy to say when short-term interest rates have reached the lower limit of zero.
The Municipal Market
The municipal market has performed very well over the fiscal year. The reasons for this performance are as follows: assets have continued to flow out of municipal money market funds and into municipal bond funds (primarily short-term municipal bond funds), investors’ appetite for risk assets has been whetted after their performance in 2009, and finally, anticipation of increased taxes has added to the allure of municipal bonds. Yields on the benchmark AAA general obligation bond have decreased during the fiscal year, but not uniformly for all maturities. Chart I illustrates these changes for maturities from 1 to 30 years.
Yields decreased anywhere from 0.12% (12 basis points) to 0.40% (40 basis points) depending on maturity. Notice that, in general, shorter maturities decreased in yield more than longer term maturities. This situation was caused by the in-flow of assets into short-term municipal bonds funds from municipal money market funds.
Not only have the general level of interest rates decreased over the past 12 months, but market participants have become less fearful when it comes to pricing credit risk. To illustrate this point, we will introduce the concept of “implied default
8 Certified Annual Report
rates.” The implied default rate is derived from current market prices for bonds of various credit categories (assuming different recovery rates) compared to a “default free” bond’s price. The implied default rate of all investment grade bonds with ten years of maturity for the BofA Merrill Lynch 3–15 Year U.S. Municipal Securities Index on September 30, 2009, as we calculated it, was 10.7% assuming a recovery rate of 60%. On August 31, 2010, the same implied default rate was 8.1%, a marked decrease from the beginning of the year. These implied default rates are well in excess of the historic default rates for investment grade municipal bonds, as calculated by Standard and Poor’s, of 0.09%.
As investors, we have been inundated with news reports concerning the impending disaster awaiting the municipal bond market due to the poor financial condition of state and local governments. We would like to borrow a concept from Mark Twain: “The reports of my death have been greatly exaggerated.” The reported demise of state and local government finances are, in our opinion, overblown. We are not being a “Pollyanna;” there is a great deal of fiscal stress in the market and investors can find cases that illustrate fiscal mismanagement, like the State of Illinois. But the municipal market is not monolithic; it is made up of more than just state and local government general obligation bonds. The BofA Merrill Lynch Municipal Master Index is made up of 39% revenue bonds, 10% pre-refunded bonds, with the remainder being either general obligation bonds or insured bonds. The Rockefeller Institute of Government reported on August 30, 2010, “State tax revenues are slowly rebounding.” State revenue growth posted a second quarter of positive growth (off of a very low base), compared to the same quarter a year ago of 2.2%. This increase was led mostly by increases in sales tax revenues (approx. 6%), although personal income taxes were also positive (approx. 1.6%). Budget gaps for fiscal year 2011 total $121 billion, or 19% of budgets in 46 states. Most of these gaps were filled with spending reductions, revenue increases, and increased aid from the federal government. Underfunded pension liabilities have been in the headlines. The Pew Center on the States reported in February 2010, “In aggregate, states’ systems were 84 percent funded – a relatively positive outcome, because most experts advise at least an 80 percent funding level.” There are some states that are worse off than others. Two states had less than 60 percent of the necessary assets on hand to meet their long-term pension obligations: Illinois and Kansas. Illinois was in the worst shape of any state, with a funding level of 54 percent and an unfunded liability of more than $54 billion. On the brighter side, Florida, New York, Washington, and Wisconsin have fully funded pension systems.
A Word about Municipal Bond Market Risk
The combination of a very accommodative Fed (Federal Funds rate near zero) and the continued disintermediation of assets out of municipal money market funds into municipal bond funds (mostly short-term municipal bond funds) has increased the interest rate risk in the municipal bond market. On December 31, 2008, municipal money market funds totaled almost $495 billion (50% of the combined municipal bond and money market fund total). By December 31, 2009, municipal money market funds totaled almost $401 billion (41% of the combined total). Today approximately $350 billion of investor’s assets remain in municipal money market funds or almost 36% of the combined municipal money market and bond fund assets. The reason for this exodus is quite simple: investors do not like to earn close to 0% on their invested funds no matter how “safe” they are. Although we do not anticipate much change in interest rates for the next 6–12 months, the next move in all likelihood will be to the upside. This means that investors should be ready for some capital losses in the future. The trade-off between the extra income earned in a bond fund and the expected capital loss can be mitigated by establishing an appropriate holding period for the investment. We believe that investors in the Limited Term Municipal Fund should plan to own the Fund for at least three years in order to decrease the chance that fluctuations in net asset value might overwhelm the income component of their total return.
Certified Annual Report 9
Letter to Shareholders,
Continued
Your Thornburg Limited Term Municipal Fund is a laddered portfolio of 1,069 municipal obligations from 49 states and territories. We ladder the maturity dates of the bonds in your portfolio so that some of the bonds are scheduled to mature during each of the coming years. Laddering short and intermediate bonds accomplishes two goals. First, the staggered bond maturities contained in a ladder reduce interest-rate risk and dampen the Fund’s price volatility. Second, laddering reduces reinvestment risk, by giving the Fund a steady cash flow stream from maturing bonds to reinvest toward the top of the ladder where yields are typically higher. Chart 2 describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
The Fund’s adherence to the discipline of the laddered structure served investors well. As you can see from Chart I on page 8, yields in the shorter segment of the 1–10 year maturity range of the market decreased more than any other segment of the market. By keeping with the discipline of the Fund’s laddered structure, we were able to capture a significant portion of that performance. Additionally, overweighting out-of-favor sectors, such as the revenue and insured sectors, along with under-weights to securities in the general obligation sector, we added incremental performance. We plan to continue to search for out-of-favor opportunities in the municipal market, using our fundamental, bottom-up approach to portfolio management, and the discipline of the laddered structure.
As of 9/30/10. Percentages vary over time.
Data may not add up to 100% due to rounding.
Thank you for investing in the 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, 2010 | |
SUMMARY OF SECURITY CREDIT RATINGS†
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† S&P/ Moody’s | Principal Amount | Value | |||||||
ALABAMA — 1.35% | ||||||||||
Alabama State Public School & College Authority, 5.00% due 5/1/2012 | AA/Aa1 | $ | 2,000,000 | $ | 2,139,580 | |||||
Alabama State Public School & College Authority, 5.00% due 5/1/2013 | AA/Aa1 | 5,000,000 | 5,538,700 | |||||||
Alabama State Public School & College Authority, 5.00% due 5/1/2015 | NR/Aa1 | 8,530,000 | 9,901,709 | |||||||
Alabama State Public School & College Authority, 5.00% due 5/1/2016 | AA/Aa1 | 5,000,000 | 5,869,850 | |||||||
Birmingham GO, 5.00% due 10/1/2013 (Insured: Natl-Re) | AA/Aa2 | 2,500,000 | 2,785,650 | |||||||
Huntsville GO, 5.50% due 11/1/2014 pre-refunded 5/1/2012 | AAA/Aaa | 3,425,000 | 3,769,350 | |||||||
Lake Martin Area IDA, 5.00% due 11/1/2011 (County Guaranty) | A/NR | 3,000,000 | 3,068,760 | |||||||
Mobile GO Warrants, 5.25% due 8/1/2012 (Insured: AGM) | AAA/Aa2 | 1,025,000 | 1,112,053 | |||||||
Mobile GO Warrants, 4.50% due 8/15/2016 | NR/NR | 2,040,000 | 2,128,373 | |||||||
Mobile Industrial Development PCR, 5.00% due 6/1/2034 put 3/19/2015 (Alabama Power Co.) | A/A2 | 6,000,000 | 6,736,920 | |||||||
Montgomery Waterworks & Sanitation, 5.00% due 9/1/2016 | AAA/Aa2 | 2,080,000 | 2,458,914 | |||||||
Montgomery Waterworks & Sanitation, 5.00% due 9/1/2019 | AAA/Aa2 | 3,375,000 | 3,976,931 | |||||||
University of Alabama at Birmingham Hospital Revenue, 5.25% due 9/1/2017 | A+/A1 | 2,500,000 | 2,786,225 | |||||||
University of Alabama at Birmingham Hospital Revenue, 5.00% due 9/1/2018 | A+/A1 | 1,500,000 | 1,644,630 | |||||||
ALASKA — 0.99% | ||||||||||
Alaska Energy Power Authority, 6.00% due 7/1/2011 (Bradley Lake Hydroelectric; Insured: AGM) | AAA/Aa3 | 955,000 | 989,924 | |||||||
Alaska Energy Power Authority, 6.00% due 7/1/2011 (Bradley Lake Hydroelectric; Insured: AGM) | AAA/Aa3 | 4,040,000 | 4,187,743 | |||||||
Alaska Energy Power Authority, 6.00% due 7/1/2013 (Bradley Lake Hydroelectric; Insured: AGM) | AAA/Aa3 | 1,600,000 | 1,792,480 | |||||||
Alaska Housing Finance Corp. GO, 5.00% due 12/1/2018 (Insured: Natl-Re) | AA/Aa2 | 2,000,000 | 2,265,880 | |||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2014 | AA-/Aa3 | 2,000,000 | 2,249,880 | |||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2015 | AA-/Aa3 | 1,900,000 | 2,172,992 | |||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2016 | AA-/Aa3 | 1,000,000 | 1,152,660 | |||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2017 | AA-/Aa3 | 3,000,000 | 3,464,100 | |||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2018 | AA-/Aa3 | 2,455,000 | 2,836,163 | |||||||
Alaska Municipal Bond Bank, 5.00% due 6/1/2014 (Insured: Natl-Re)(State Aid Withholding) | A+/Aa3 | 1,175,000 | 1,315,812 | |||||||
Alaska Student Loan Corp., 5.25% due 1/1/2012 (Insured: AGM) | AAA/NR | 3,000,000 | 3,130,230 | |||||||
North Slope Boro GO, 5.00% due 6/30/2015 (Insured: Natl-Re) | AA-/Aa3 | 3,250,000 | 3,758,398 | |||||||
North Slope Boro GO, 5.00% due 6/30/2017 (Insured: Natl-Re) | AA-/Aa3 | 8,800,000 | 10,356,192 | |||||||
ARIZONA — 3.90% | ||||||||||
Arizona Board of Regents COP, 5.00% due 7/1/2018 (Arizona State University; Insured: Natl-Re) | AA-/A1 | 1,285,000 | 1,458,629 | |||||||
Arizona Board of Regents COP, 5.00% due 7/1/2019 (Arizona State University; Insured: Natl-Re) | AA-/A1 | 3,735,000 | 4,194,442 | |||||||
Arizona HFA, 5.25% due 1/1/2018 (Banner Health) | A+/NR | 3,500,000 | 3,987,690 | |||||||
Arizona HFA, 5.00% due 7/1/2018 (Catholic Healthcare West) | A/A2 | 1,470,000 | 1,602,873 | |||||||
Arizona HFA, 5.00% due 7/1/2019 (Catholic Healthcare West) | A/A2 | 1,365,000 | 1,489,106 | |||||||
Arizona HFA, 5.00% due 7/1/2020 (Catholic Healthcare West) | A/A2 | 1,290,000 | 1,387,356 | |||||||
Arizona Lottery Revenue, 5.00% due 7/1/2018 (Insured: AGM) | AAA/Aa3 | 8,370,000 | 9,663,835 | |||||||
Arizona Lottery Revenue, 5.00% due 7/1/2020 (Insured: AGM) | AAA/Aa3 | 8,000,000 | 9,197,840 | |||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Arizona Transportation Board Highway Revenue, 5.25% due 7/1/2015 | AAA/Aaa | $ | 3,860,000 | $ | 4,206,937 | |||||
Chandler Street & Highway User Revenue, 3.00% due 7/1/2013 | AA/Aa2 | 1,905,000 | 2,016,728 | |||||||
Chandler Street & Highway User Revenue, 3.00% due 7/1/2014 | AA/Aa2 | 2,790,000 | 2,985,384 | |||||||
Glendale IDA, 5.00% due 5/15/2015 (Midwestern University) | A-/NR | 1,000,000 | 1,108,660 | |||||||
Glendale IDA, 5.00% due 5/15/2016 (Midwestern University) | A-/NR | 1,325,000 | 1,474,964 | |||||||
Glendale IDA, 5.00% due 5/15/2017 (Midwestern University) | A-/NR | 1,440,000 | 1,605,413 | |||||||
Glendale Western Loop 101 Public Facilities Corp., 6.00% due 7/1/2019 | AA/A1 | 2,200,000 | 2,390,498 | |||||||
Maricopa County IDA Health Facilities Revenue, 4.125% due 7/1/2015 (Catholic Healthcare West) A/A2 | 1,000,000 | 1,070,970 | ||||||||
Maricopa County IDA Health Facilities Revenue, 5.00% due 7/1/2016 (Catholic Healthcare West) | A/A2 | 2,475,000 | 2,479,405 | |||||||
Maricopa County IDA Health Facilities Revenue, 5.00% due 7/1/2038 put 7/1/2014 (Catholic Healthcare West) | A/A2 | 7,500,000 | 8,192,700 | |||||||
Maricopa County Pollution Control Corp. PCR, 5.50% due 5/1/2029 put 5/1/2012 (Arizona Public Service Co.) | BBB-/Baa2 | 10,000,000 | 10,394,700 | |||||||
Mesa Highway GO, 3.25% due 7/1/2016 | AA+/Aa3 | 10,000,000 | 10,407,200 | |||||||
Mohave County IDA, 5.00% due 4/1/2014 (Mohave Prison LLC; Insured: Syncora) (ETM) | AAA/NR | 3,135,000 | 3,588,917 | |||||||
Mohave County IDA, 7.25% due 5/1/2015 (Mohave Prison LLC) | BBB+/NR | 12,100,000 | 13,074,292 | |||||||
Navajo County PCR, 5.50% due 6/1/2034 put 6/1/2014 (Arizona Public Service Co.) | BBB-/Baa2 | 1,600,000 | 1,737,936 | |||||||
Navajo County PCR, 5.50% due 6/1/2034 put 6/1/2014 (Arizona Public Service Co.) | BBB-/Baa2 | 2,600,000 | 2,818,504 | |||||||
Navajo County PCR, 5.75% due 6/1/2034 put 6/1/2016 (Arizona Public Service Co.) | BBB-/Baa2 | 5,600,000 | 6,056,400 | |||||||
Northern Arizona University COP, 5.00% due 9/1/2019 (Insured: AMBAC) | A/A2 | 3,500,000 | 3,656,695 | |||||||
Pima County IDA, 6.40% due 7/1/2013 (Arizona Charter Schools) | NR/Baa3 | 625,000 | 634,338 | |||||||
Pima County IDA, 5.00% due 7/1/2016 (Metro Police Facility) | AA/Aa2 | 2,500,000 | 2,865,325 | |||||||
Pima County IDA, 5.00% due 7/1/2017 (Metro Police Facility) | AA/Aa2 | 3,000,000 | 3,447,180 | |||||||
Pima County IDA, 5.00% due 7/1/2018 (Metro Police Facility) | AA/Aa2 | 3,285,000 | 3,773,052 | |||||||
Pima County IDA, 5.00% due 7/1/2019 (Metro Police Facility) | AA/Aa2 | 2,000,000 | 2,300,000 | |||||||
Pima County Sewer Revenue, 4.50% due 7/1/2017 (Insured: AGM) | AAA/NR | 5,000,000 | 5,617,650 | |||||||
Pima County Sewer Revenue, 5.00% due 7/1/2018 (Insured: AGM) | AAA/NR | 5,000,000 | 5,772,900 | |||||||
Salt River Agricultural Improvement & Power District, 3.00% due 1/1/2014 | AA/Aa1 | 11,275,000 | 12,039,783 | |||||||
Salt River Agricultural Improvement & Power District, 5.00% due 1/1/2020 | AA/Aa1 | 1,205,000 | 1,208,916 | |||||||
Show Low IDA Hospital, 5.25% due 12/1/2010 (Navapache Regional Medical Center; Insured: ACA) | BBB/NR | 1,000,000 | 1,002,490 | |||||||
Yuma Property Corp. Utility Systems Revenue, 5.00% due 7/1/2016 (Insured: Syncora) | A+/A1 | 2,000,000 | 2,295,740 | |||||||
Yuma Property Corp. Utility Systems Revenue, 5.00% due 7/1/2018 (Insured: Syncora) | A+/A1 | 2,130,000 | 2,413,610 | |||||||
ARKANSAS — 0.03% | ||||||||||
Jefferson County Hospital Improvement, 5.50% due 6/1/2011 (Jefferson Hospital Association) | A/NR | 1,075,000 | 1,103,584 | |||||||
CALIFORNIA — 8.34% | ||||||||||
Alameda County COP, 5.00% due 12/1/2017 (Santa Rita Jail; Insured: AMBAC) | AA/NR | 1,000,000 | 1,158,290 | |||||||
Anaheim Public Financing Authority, 5.25% due 10/1/2018 (Electric Systems Generation; Insured: AGM) | AAA/Aa3 | 1,560,000 | 1,677,733 | |||||||
Calexico USD COP, 5.75% due 9/1/2013 | BBB+/NR | 1,685,000 | 1,769,553 | |||||||
California Educational Facilities, 5.00% due 4/1/2017 (Pitzer College) | NR/A3 | 1,460,000 | 1,632,718 | |||||||
California GO, 0.24% due 5/1/2034 put 10/1/2010 (Kindergarten; LOC: Citibank/California State Teachers Retirement) (daily demand notes) | A+/Aa3 | 4,400,000 | 4,400,000 | |||||||
California HFA, 5.00% due 7/1/2027 put 7/1/2014 (Catholic Healthcare West) | A/A2 | 3,500,000 | 3,843,070 | |||||||
California HFA, 5.00% due 7/1/2028 put 7/1/2014 (Catholic Healthcare West) | A/A2 | 2,000,000 | 2,196,040 | |||||||
California Infrastructure & Economic Development Bank, 0.22% due 10/1/2023 put 10/1/2010 (J. Paul Getty Trust) (daily demand notes) | AAA/Aaa | 10,615,000 | 10,615,000 | |||||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: Natl-Re) | A/A2 | 1,000,000 | 1,003,620 | |||||||
California State Department of Water Resources Power Supply, 3.70% due 5/1/2011 (Insured: Natl-Re) | AA-/Aa3 | 3,500,000 | 3,567,690 | |||||||
California State Department of Water Resources Power Supply, 5.50% due 5/1/2012 | AA-/Aa3 | 2,600,000 | 2,800,798 | |||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
California State Department of Water Resources Power Supply, 6.00% due 5/1/2013 | AA-/Aa3 | $ | 2,550,000 | $ | 2,786,309 | |||||
California State Department of Water Resources Power Supply, 5.00% due 5/1/2015 | AA-/Aa3 | 5,000,000 | 5,805,750 | |||||||
California State Department of Water Resources Power Supply, 0.25% due 5/1/2022 put 10/1/2010 (Insured: Bank of New York) (daily demand notes) | AA/Aa2 | 100,000 | 100,000 | |||||||
California State Department of Water Resources Power Supply, 0.27% due 5/1/2022 put 10/1/2010 (Insured: AGM) (daily demand notes) | AAA/Aa3 | 38,705,000 | 38,705,000 | |||||||
California State Economic Recovery, 5.00% due 7/1/2020 | A+/Aa3 | 4,000,000 | 4,682,160 | |||||||
California State Economic Recovery GO, 5.00% due 7/1/2016 | A+/Aa3 | 12,000,000 | 12,285,960 | |||||||
California State Economic Recovery GO, 5.00% due 7/1/2018 | A+/Aa3 | 4,000,000 | 4,736,240 | |||||||
California State Public Works Board, 5.00% due 9/1/2016 (Regents of University of California; Insured: Natl-Re/FGIC) | AA-/Aa2 | 3,000,000 | 3,513,900 | |||||||
California State Public Works Board, 5.00% due 9/1/2017 (Regents of University of California; Insured: Natl-Re/FGIC) | AA-/Aa2 | 3,000,000 | 3,531,540 | |||||||
California State Public Works Board, 5.00% due 11/1/2017 (California State University Trustees) | BBB+/Aa3 | 3,000,000 | 3,327,420 | |||||||
California State Public Works Board, 5.00% due 11/1/2018 (California State University Trustees) | BBB+/Aa3 | 2,700,000 | 2,954,151 | |||||||
California Statewide Communities Development Authority, 5.00% due 6/15/2013 | A-/A1 | 7,000,000 | 7,669,830 | |||||||
California Statewide Communities Development Authority, 5.00% due 5/15/2017 (Irvine LLC- UCI East Campus) | NR/Baa2 | 2,200,000 | 2,427,744 | |||||||
California Statewide Communities Development Authority, 5.00% due 4/1/2019 (Guaranty: Kaiser Permanente) | A+/NR | 25,000,000 | 28,158,250 | |||||||
California Statewide Communities Development Authority, 5.00% due 7/1/2020 (Aspire Public Schools) | NR/NR | 2,000,000 | 2,090,620 | |||||||
California Statewide Community Development Authority PCR, 4.10% due 4/1/2028 put 4/1/2013 (Southern California Edison Co.; Insured: Syncora) | A/A1 | 1,000,000 | 1,068,860 | |||||||
Central Valley Financing Authority, 5.00% due 7/1/2017 (Carson Ice) | A+/A1 | 600,000 | 687,030 | |||||||
Central Valley Financing Authority, 5.00% due 7/1/2019 (Carson Ice) | A+/A1 | 1,500,000 | 1,717,560 | |||||||
Chula Vista COP, 5.25% due 3/1/2018 | A-/NR | 1,170,000 | 1,286,766 | |||||||
Chula Vista COP, 5.25% due 3/1/2019 | A-/NR | 1,235,000 | 1,356,610 | |||||||
Desert Sands USD COP, 5.25% due 3/1/2016 | A+/A1 | 1,500,000 | 1,668,570 | |||||||
East Bay Water Systems Revenue, 0.30% due 6/1/2038 put 10/1/2010 (SPA: Dexia) (daily demand notes) | AAA/Aa1 | 2,215,000 | 2,215,000 | |||||||
Golden State Tobacco Securitization Corp., 5.50% due 6/1/2043 pre-refunded 6/1/2013 | AAA/Aaa | 2,000,000 | 2,256,260 | |||||||
Inland Valley Development Agency, 5.25% due 4/1/2013 | A/NR | 2,000,000 | 2,119,140 | |||||||
Inland Valley Development Agency, 5.50% due 4/1/2014 | A/NR | 2,000,000 | 2,150,380 | |||||||
Irvine Ranch Water District GO, 0.30% due 7/1/2035 put 10/1/2010 (LOC: Landesbank Baden) (daily demand notes) | A-/Aa2 | 2,550,000 | 2,550,000 | |||||||
Irvine Ranch Water District GO, 0.25% due 10/1/2041 put 10/1/2010 (LOC: Bank of America) (daily demand notes) | A+/Aa3 | 9,000,000 | 9,000,000 | |||||||
Irvine USD, 5.25% due 9/1/2017 (Community Facilities District 86; Insured: AGM) | AAA/NR | 5,000,000 | 5,670,400 | |||||||
Irvine USD, 5.25% due 9/1/2018 (Community Facilities District 86; Insured: AGM) | AAA/NR | 3,000,000 | 3,389,070 | |||||||
Irvine USD, 5.25% due 9/1/2019 (Community Facilities District 86; Insured: AGM) | AAA/NR | 3,000,000 | 3,386,910 | |||||||
Kern Community College District COP, 4.00% due 4/1/2014 | SP-1+/NR | 2,000,000 | 2,082,600 | |||||||
Los Angeles Convention & Exhibition Center Authority, 5.00% due 8/15/2018 | A+/A1 | 2,000,000 | 2,299,060 | |||||||
Los Angeles Department of Water & Power, 0.26% due 7/1/2035 put 10/1/2010 (Insured: Wells Fargo Bank N.A.) (daily demand notes) | AA/Aa2 | 11,500,000 | 11,500,000 | |||||||
Los Angeles USD COP, 5.00% due 10/1/2017 (Insured: AMBAC) | A+/A1 | 2,445,000 | 2,714,292 | |||||||
Los Angeles USD GO, 5.00% due 7/1/2018 (Insured: AGM) | AAA/Aa2 | 4,000,000 | 4,656,840 | |||||||
Monterey County COP, 5.00% due 8/1/2016 (Insured: AGM) | AAA/Aa3 | 1,435,000 | 1,647,208 | |||||||
Monterey County COP, 5.00% due 8/1/2018 (Insured: AGM) | AAA/Aa3 | 2,260,000 | 2,600,718 | |||||||
Mount San Antonio Community College GO, 0% due 8/1/2017 (Insured: Natl-Re) | AA/Aa2 | 5,000,000 | 4,041,900 | |||||||
Newport Beach Revenue, 5.00% due 12/1/2038 put 2/7/2013 (Hoag Memorial Hospital) | AA/Aa3 | 3,000,000 | 3,263,040 | |||||||
Northern California Power Agency Revenue, 5.00% due 7/1/2017 | A/A2 | 1,000,000 | 1,164,550 | |||||||
Northern California Power Agency Revenue, 5.00% due 6/1/2018 (Lodi Energy Center) | A-/A3 | 4,480,000 | 5,020,826 | |||||||
Certified Annual Report 13
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Northern California Power Agency Revenue, 5.00% due 7/1/2019 | A/A2 | $ | 1,000,000 | $ | 1,169,270 | |||||
Northern California Power Agency Revenue, 5.00% due 7/1/2020 | A/A2 | 1,325,000 | 1,510,089 | |||||||
Orange County Public Financing Authority, 5.00% due 7/1/2017 (Insured: Natl-Re) | A+/Aa3 | 1,245,000 | 1,449,865 | |||||||
Pittsburgh Redevelopment Agency, 5.00% due 8/1/2012 (Los Medanos Community Development; Insured: Natl-Re) | A+/Baa1 | 1,255,000 | 1,317,210 | |||||||
Pittsburgh Redevelopment Agency, 5.00% due 8/1/2018 (Los Medanos Community Development; Insured: Natl-Re) | A+/Baa1 | 5,150,000 | 5,308,826 | |||||||
Redding Electrical Systems Revenue COP, 5.00% due 6/1/2020 (Insured: AGM) | NR/Aa3 | 3,955,000 | 4,414,769 | |||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2017 (Procter & Gamble) | A+/A1 | 750,000 | 866,820 | |||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2016 (Cosumnes Project; Insured: Natl-Re) | A/Baa1 | 4,870,000 | 5,449,140 | |||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2019 (Cosumnes Project; Insured: Natl-Re) | A/Baa1 | 5,000,000 | 5,363,200 | |||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2020 (Cosumnes Project; Insured: Natl-Re) | A/Baa1 | 8,675,000 | 9,212,503 | |||||||
San Diego County Regional Transportation, 0.26% due 4/1/2038 put 10/1/2010 (SPA: Dexia) (daily demand notes) | AAA/Aa1 | 14,705,000 | 14,705,000 | |||||||
San Joaquin County Transportation Authority, 5.00% due 4/1/2011 | SP-1+/NR | 3,000,000 | 3,069,390 | |||||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: AGM) | AAA/Aa2 | 7,600,000 | 5,315,820 | |||||||
San Jose Redevelopment Agency Tax Allocation, 5.00% due 8/1/2020 (Insured: Natl-Re) | A/A2 | 1,850,000 | 1,930,771 | |||||||
San Luis & Delta-Mendota Water Authority, 4.50% due 3/1/2014 (Water Utility Improvements) | A+/NR | 3,900,000 | 4,199,988 | |||||||
San Mateo USD GO, 2.00% due 2/28/2011 | SP-1+/NR | 5,000,000 | 5,029,850 | |||||||
Santa Clara County Financing Authority Lease Revenue, 4.00% due 5/15/2011 (Multiple Facilities) | AA/Aa2 | 2,000,000 | 2,044,900 | |||||||
Santa Clara County Financing Authority Lease Revenue, 4.00% due 5/15/2014 (Multiple Facilities) | AA/Aa2 | 4,245,000 | 4,638,299 | |||||||
Santa Clara County Financing Authority Lease Revenue, 4.00% due 5/15/2017 (Multiple Facilities) | AA/Aa2 | 1,000,000 | 1,102,470 | |||||||
Solano County COP, 5.00% due 11/15/2017 | AA-/A1 | 1,580,000 | 1,760,705 | |||||||
Southeast Resource Recovery Facilities Authority, 5.25% due 12/1/2017 (Insured: AMBAC) | A+/A1 | 2,000,000 | 2,130,140 | |||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2018 (Tuolumne Co.) | A+/A1 | 2,000,000 | 2,282,680 | |||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2019 (Tuolumne Co.) | A+/A1 | 2,000,000 | 2,287,260 | |||||||
Twin Rivers USD GO, 0% due 4/1/2014 | A+/NR | 3,490,000 | 3,173,771 | |||||||
Ventura County COP, 5.00% due 8/15/2016 | AA/Aa3 | 1,520,000 | 1,745,553 | |||||||
Ventura County COP, 5.25% due 8/15/2017 | AA/Aa3 | 1,635,000 | 1,905,331 | |||||||
COLORADO — 2.10% | ||||||||||
Adams County Platte Valley Medical Center, 5.00% due 2/1/2015 (Brighton Community Hospital Association; Insured: FHA/Natl-Re) | A/NR | 1,530,000 | 1,687,605 | |||||||
Adams County Platte Valley Medical Center, 5.00% due 8/1/2015 (Brighton Community Hospital Association; Insured: FHA/Natl-Re) | A/NR | 1,565,000 | 1,735,507 | |||||||
Beacon Point Metropolitan District, 4.375% due 12/1/2015 (LOC: Compass Bank) | A/NR | 1,705,000 | 1,699,271 | |||||||
Broomfield Water Activity Enterprise, 5.30% due 12/1/2014 (Insured: Natl-Re) | NR/Aa3 | 1,620,000 | 1,646,374 | |||||||
Colorado COP, 3.00% due 3/1/2013 (Colorado Penitentiary) | AA-/Aa2 | 1,205,000 | 1,264,864 | |||||||
Colorado COP, 4.00% due 3/1/2014 (Colorado Penitentiary) | AA-/Aa2 | 1,285,000 | 1,400,933 | |||||||
Colorado COP, 5.00% due 3/1/2016 (Colorado Penitentiary) | AA-/Aa2 | 2,000,000 | 2,306,900 | |||||||
Colorado COP, 5.00% due 3/1/2017 (Colorado Penitentiary) | AA-/Aa2 | 2,000,000 | 2,314,960 | |||||||
Colorado COP, 5.00% due 3/1/2018 (Colorado Penitentiary) | AA-/Aa2 | 1,500,000 | 1,735,005 | |||||||
Colorado Educational & Cultural Facilities, 6.00% due 6/1/2011 (National Conference of State) | A/A3 | 370,000 | 375,620 | |||||||
Colorado Educational & Cultural Facilities, 4.00% due 6/1/2014 (NCSL) | A/A3 | 1,300,000 | 1,395,004 | |||||||
Colorado Educational & Cultural Facilities, 5.00% due 6/1/2016 (NCSL) | A/A3 | 1,475,000 | 1,652,428 | |||||||
Colorado Educational & Cultural Facilities, 5.00% due 6/1/2018 (NCSL) | A/A3 | 1,625,000 | 1,823,396 | |||||||
Colorado Educational & Cultural Facilities, 5.00% due 6/1/2020 (NCSL) | A/A3 | 1,805,000 | 2,006,925 | |||||||
Colorado Educational & Cultural Facilities, 5.00% due 6/1/2021 (NCSL) | A/A3 | 1,000,000 | 1,103,290 | |||||||
Colorado HFA, 5.00% due 11/15/2013 (Adventist Health/Sunbelt Group) | AA-/Aa3 | 2,840,000 | 3,095,430 | |||||||
Colorado HFA, 5.00% due 11/15/2015 (Adventist Health/Sunbelt Group) | AA-/Aa3 | 2,365,000 | 2,637,803 | |||||||
Colorado HFA, 5.25% due 5/15/2017 (Northern Colorado Medical Center; Insured: AGM) | AAA/NR | 1,185,000 | 1,338,908 | |||||||
Colorado HFA, 5.25% due 5/15/2019 (Northern Colorado Medical Center; Insured: AGM) | AAA/NR | 2,225,000 | 2,526,821 | |||||||
Colorado HFA, 5.50% due 10/1/2038 put 11/12/2015 (Catholic Health Initiatives) | AA/Aa2 | 1,000,000 | 1,172,270 | |||||||
14 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Colorado HFA, 5.00% due 7/1/2039 put 11/8/2012 (Catholic Health) | AA/Aa2 | $ | 3,500,000 | $ | 3,777,515 | |||||
Colorado HFA, 5.00% due 7/1/2039 put 11/12/2013 (Catholic Health) | AA/Aa2 | 5,000,000 | 5,547,650 | |||||||
Colorado HFA, 5.00% due 7/1/2039 put 11/11/2014 (Catholic Health) | AA/Aa2 | 3,000,000 | 3,391,320 | |||||||
Denver City & County Airport System, 5.00% due 11/15/2016 (Insured: Natl-Re) | A+/A1 | 1,515,000 | 1,752,188 | |||||||
Denver City & County Airport System, 5.00% due 11/15/2017 (Insured: Natl-Re) | A+/A1 | 1,000,000 | 1,157,120 | |||||||
Denver City & County COP, 5.00% due 5/1/2013 (Insured: Natl-Re) | AA+/Aa1 | 3,890,000 | 4,273,321 | |||||||
Denver City & County COP, 5.00% due 5/1/2014 (Insured: Natl-Re) | AA+/Aa1 | 4,000,000 | 4,518,360 | |||||||
Denver Convention Center Hotel Authority, 5.25% due 12/1/2014 (Insured: Syncora) | BBB-/Baa3 | 3,450,000 | 3,695,985 | |||||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2019 pre-refunded 12/1/2013 (Insured: Syncora) | NR/NR | 5,000,000 | 5,596,700 | |||||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2022 pre-refunded 12/1/2013 (Insured: Syncora) | NR/NR | 2,000,000 | 2,238,680 | |||||||
E-470 Public Highway Authority Capital Appreciation, 0% due 9/1/2014 (Insured: Natl-Re) | A/Baa1 | 1,910,000 | 1,646,477 | |||||||
a Mesa County Residual Revenue, 0% due 12/1/2011 (ETM) | NR/Aaa | 1,250,000 | 1,241,213 | |||||||
Park Creek Metropolitan District, 5.00% due 12/1/2015 (Insured: AGM) | AAA/NR | 1,000,000 | 1,150,650 | |||||||
Park Creek Metropolitan District, 5.00% due 12/1/2016 (Insured: AGM) | AAA/NR | 1,035,000 | 1,197,619 | |||||||
Park Creek Metropolitan District, 5.00% due 12/1/2017 (Insured: AGM) | AAA/NR | 1,525,000 | 1,769,640 | |||||||
Park Creek Metropolitan District, 5.50% due 12/1/2018 (Insured: AGM) | AAA/NR | 1,200,000 | 1,434,888 | |||||||
Park Creek Metropolitan District, 5.50% due 12/1/2019 (Insured: AGM) | AAA/NR | 1,000,000 | 1,203,160 | |||||||
Plaza Metropolitan District, 7.125% due 12/1/2010 (Public Improvement Fee/Tax Increment) | NR/NR | 2,270,000 | 2,274,245 | |||||||
Southlands Metropolitan District GO, 6.75% due 12/1/2016 pre-refunded 12/1/2014 | AAA/NR | 930,000 | 1,074,736 | |||||||
CONNECTICUT — 0.58% | ||||||||||
Connecticut Development Authority PCR, 5.75% due 6/1/2026 put 2/1/2012 (United Illuminating Co.) | NR/Baa2 | 1,000,000 | 1,041,980 | |||||||
Connecticut Health & Educational Facilities, 3.50% due 11/15/2029 put 2/1/2012 (Ascension Health) | AA/Aa1 | 1,930,000 | 1,994,076 | |||||||
Connecticut Health & Educational Facilities, 0.22% due 7/1/2036 put 10/1/2010 (Yale University) (daily demand notes) | AAA/Aaa | 20,000,000 | 20,000,000 | |||||||
DELAWARE — 0.03% | ||||||||||
Delaware EDA, 6.375% due 5/1/2027 pre-refunded 5/1/2012 (Peninsula United Methodist Homes) | NR/NR | 1,000,000 | 1,098,180 | |||||||
DISTRICT OF COLUMBIA — 1.20% | ||||||||||
District of Columbia Convention Center Authority, 5.00% due 10/1/2013 (Washington Convention Center; Insured: AMBAC) | A/A1 | 3,000,000 | 3,313,410 | |||||||
District of Columbia COP, 5.25% due 1/1/2013 (Insured: AMBAC) | A/NR | 5,950,000 | 6,206,147 | |||||||
District of Columbia COP, 5.25% due 1/1/2015 (Insured: Natl-Re/FGIC) | A/Aa3 | 2,875,000 | 3,239,004 | |||||||
District of Columbia COP, 5.25% due 1/1/2016 (Insured: Natl-Re/FGIC) | A/Aa3 | 4,625,000 | 5,271,714 | |||||||
District of Columbia COP, 5.00% due 1/1/2019 (Insured: Natl-Re) | A/Aa3 | 5,000,000 | 5,462,100 | |||||||
District of Columbia GO, 6.00% due 6/1/2018 (Insured: Natl-Re) | A+/Aa2 | 5,000,000 | 6,163,200 | |||||||
District of Columbia Revenue, 4.00% due 4/1/2015 (National Public Radio) | AA-/Aa3 | 1,000,000 | 1,101,850 | |||||||
District of Columbia Revenue, 5.00% due 4/1/2016 (National Public Radio) | AA-/Aa3 | 500,000 | 579,435 | |||||||
District of Columbia Revenue, 4.00% due 4/1/2017 (National Public Radio) | AA-/Aa3 | 1,630,000 | 1,802,177 | |||||||
District of Columbia Revenue, 5.00% due 4/1/2018 (National Public Radio) | AA-/Aa3 | 1,195,000 | 1,395,557 | |||||||
District of Columbia Revenue, 5.00% due 4/1/2019 (National Public Radio) | AA-/Aa3 | 805,000 | 943,025 | |||||||
District of Columbia Revenue, 5.00% due 4/1/2020 (National Public Radio) | AA-/Aa3 | 1,250,000 | 1,465,537 | |||||||
District of Columbia Tax Increment, 0% due 7/1/2011 (Mandarin Oriental; Insured: AGM) | AAA/Aa3 | 1,990,000 | 1,971,413 | |||||||
District of Columbia Tax Increment, 0% due 7/1/2012 (Mandarin Oriental; Insured: AGM) | AAA/Aa3 | 1,580,000 | 1,536,471 | |||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2014 (Dulles Toll Road; Insured: AGM) | AAA/Aa3 | 2,000,000 | 1,782,640 | |||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2016 (Dulles Toll Road; Insured: AGM) | AAA/Aa3 | 4,000,000 | 3,237,400 | |||||||
Washington DC Convention Center Authority, 5.00% due 10/1/2010 (Insured: AMBAC) | A/A1 | 2,530,000 | 2,530,304 | |||||||
Certified Annual Report 15
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
FLORIDA — 8.88% | ||||||||||
Broward County Airport Systems, 5.00% due 10/1/2014 (Insured: AMBAC) | A+/A1 | $ | 4,000,000 | $ | 4,501,600 | |||||
Broward County Educational Facilities Authority, 6.25% due 4/1/2013 (Nova Southeastern; Insured: Radian) | BBB/Baa2 | 1,705,000 | 1,744,812 | |||||||
Broward County Port Facilities, 5.00% due 9/1/2013 | A-/A2 | 2,000,000 | 2,181,200 | |||||||
Broward County Port Facilities, 5.00% due 9/1/2017 | A-/A2 | 2,820,000 | 3,158,203 | |||||||
Broward County Port Facilities, 5.50% due 9/1/2018 | A-/A2 | 3,500,000 | 4,019,540 | |||||||
Broward County Port Facilities, 5.50% due 9/1/2019 | A-/A2 | 2,800,000 | 3,221,848 | |||||||
Broward County School Board COP, 5.25% due 7/1/2016 (Insured: AGM) | AAA/Aa3 | 7,630,000 | 8,723,303 | |||||||
Broward County School Board COP, 5.00% due 7/1/2017 (Insured: Natl-Re/FGIC) | A+/Aa3 | 1,000,000 | 1,130,520 | |||||||
Capital Projects Finance Authority, 5.50% due 10/1/2012 (Insured: Natl-Re) | A/Baa1 | 1,820,000 | 1,847,864 | |||||||
Capital Projects Finance Authority, 5.50% due 10/1/2015 (Insured: Natl-Re) | A/Baa1 | 2,660,000 | 2,678,487 | |||||||
Capital Trust Agency Multi Family Housing, 5.15% due 11/1/2030 put 11/1/2010 (Shadow Run; Collateralized: FNMA) | NR/Aaa | 3,190,000 | 3,200,208 | |||||||
Escambia County HFA, 5.25% due 11/15/2014 (Ascension Health Credit) | AA/Aa1 | 1,000,000 | 1,149,010 | |||||||
Florida Atlantic University Financing Corp. Capital Improvements Revenue, 5.00% due 7/1/2014 (Innovation Village) | A/A2 | 1,950,000 | 2,166,782 | |||||||
Florida Atlantic University Financing Corp. Capital Improvements Revenue, 5.00% due 7/1/2015 (Innovation Village) | A/A2 | 2,395,000 | 2,684,603 | |||||||
Florida Atlantic University Financing Corp. Capital Improvements Revenue, 5.00% due 7/1/2016 (Innovation Village) | A/A2 | 2,275,000 | 2,559,079 | |||||||
Flagler County School Board COP, 5.00% due 8/1/2014 (Insured: AGM) | AAA/Aa3 | 1,605,000 | 1,793,443 | |||||||
Flagler County School Board COP, 5.00% due 8/1/2015 (Insured: AGM) | AAA/Aa3 | 1,500,000 | 1,691,055 | |||||||
Florida Board of Education Lottery Revenue, 5.50% due 7/1/2015 (Insured: AMBAC) | AAA/A1 | 3,500,000 | 3,671,920 | |||||||
Florida Department of Management Services, 5.25% due 9/1/2016 (Insured: AGM) | AAA/Aa2 | 3,500,000 | 4,111,240 | |||||||
Florida Hurricane Catastrophe, 5.00% due 7/1/2014 | AA-/Aa3 | 11,000,000 | 11,997,370 | |||||||
Florida State Correctional Privatization Commission COP, 5.00% due 8/1/2015 (Insured: AMBAC) | AA+/Aa2 | 2,000,000 | 2,222,940 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2012 | AA+/NR | 770,000 | 820,612 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2014 | AA+/NR | 905,000 | 1,006,360 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2015 | AA+/NR | 925,000 | 1,041,458 | |||||||
Florida State Department of Transportation GO, 5.375% due 7/1/2017 | AAA/Aa1 | 4,675,000 | 5,069,757 | |||||||
Florida State Department of Transportation GO, 5.00% due 7/1/2018 | AAA/Aa1 | 3,000,000 | 3,550,230 | |||||||
Florida Turnpike Authority, 5.00% due 7/1/2013 (Department of Transportation) | AA-/Aa3 | 4,875,000 | 5,422,804 | |||||||
Gainesville Utilities Systems Revenue, 6.50% due 10/1/2013 | AA/Aa2 | 4,800,000 | 5,568,960 | |||||||
Gainesville Utilities Systems Revenue, 0.38% due 10/1/2026 put 10/1/2010 (SPA: Suntrust Bank) (daily demand notes) | AA/Aa2 | 7,500,000 | 7,500,000 | |||||||
Gainesville Utilities Systems Revenue, 0.40% due 10/1/2026 put 10/1/2010 (SPA: Suntrust Bank) (daily demand notes) | AA/Aa2 | 29,650,000 | 29,650,000 | |||||||
Highlands County HFA, 5.00% due 11/15/2015 (Adventist Health) | AA-/Aa3 | 1,000,000 | 1,132,540 | |||||||
Highlands County HFA, 5.00% due 11/15/2016 (Adventist Health/Sunbelt Group) | AA-/Aa3 | 1,000,000 | 1,132,630 | |||||||
Highlands County HFA, 5.00% due 11/15/2017 (Adventist Health/Sunbelt Group) | AA-/Aa3 | 3,200,000 | 3,627,456 | |||||||
Highlands County HFA, 5.00% due 11/15/2017 (Adventist Health) | AA-/Aa3 | 1,000,000 | 1,098,810 | |||||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health/Sunbelt Group) | AA-/Aa3 | 3,000,000 | 3,409,050 | |||||||
Highlands County HFA, 3.95% due 11/15/2032 put 9/1/2012 (Adventist Health/Sunbelt Group) | AA-/Aa3 | 2,500,000 | 2,635,100 | |||||||
Hillsborough County Assessment, 5.00% due 3/1/2015 (Insured: Natl-Re/FGIC) | A+/A1 | 5,000,000 | 5,495,450 | |||||||
Hillsborough County IDA PCR, 5.10% due 10/1/2013 (Tampa Electric Co.) | BBB/Baa1 | 6,410,000 | 6,783,895 | |||||||
Hillsborough County IDA PCR, 5.00% due 12/1/2034 put 3/15/2012 (Tampa Electric Co.; Insured: AMBAC) | BBB/Baa1 | 4,000,000 | 4,180,240 | |||||||
Hillsborough County Investment Tax Revenue, 5.00% due 11/1/2016 (Insured: AMBAC) | AA+/Aa2 | 1,000,000 | 1,156,870 | |||||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2016 (Insured: Syncora) | NR/A3 | 2,000,000 | 2,180,060 | |||||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2017 (Insured: Syncora) | NR/A3 | 2,000,000 | 2,170,380 | |||||||
Hollywood Water & Sewer Revenue, 5.00% due 10/1/2014 (Insured: AGM) | NR/Aa2 | 1,300,000 | 1,442,415 | |||||||
JEA, 5.25% due 10/1/2012 (St. John’s River Park Systems) | AA-/Aa2 | 5,500,000 | 5,752,010 | |||||||
16 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
JEA, 5.00% due 10/1/2014 (Electric Systems) | A+/Aa3 | $ | 7,165,000 | $ | 8,056,254 | |||||
JEA St. Johns River Power Park, 5.00% due 10/1/2017 | AA-/Aa2 | 8,000,000 | 8,312,160 | |||||||
JEA Water & Sewer Systems Revenue, 3.50% due 10/1/2013 | AA-/Aa2 | 5,565,000 | 5,954,995 | |||||||
JEA Water & Sewer Systems Revenue, 5.00% due 10/1/2018 | AA-/Aa2 | 1,500,000 | 1,749,165 | |||||||
Kissimmee Utilities Authority Electrical Systems Revenue, 5.25% due 10/1/2016 (Insured: AGM) | NR/Aa3 | 1,700,000 | 1,987,164 | |||||||
Marion County Hospital District, 5.00% due 10/1/2015 (Munroe Regional Health Systems) | NR/A3 | 1,000,000 | 1,094,460 | |||||||
Miami Dade County Educational Facilities Authority, 5.00% due 4/1/2016 (University of Miami; Insured: AMBAC; GO of University) | A-/A3 | 3,000,000 | 3,353,880 | |||||||
a Miami Dade County Expressway Authority, 5.00% due 7/1/2019 (Insured: Assured Guaranty) | AAA/Aa3 | 6,530,000 | 7,455,628 | |||||||
Miami Dade County GO, 5.25% due 7/1/2018 (Building Better Communities) | AA-/Aa2 | 4,540,000 | 5,383,123 | |||||||
Miami Dade County Professional Sports Franchise Facilities Tax, 0% due 10/1/2015 (Insured: AGM) | AAA/Aa3 | 3,845,000 | 3,289,744 | |||||||
Miami Dade County Professional Sports Franchise Facilities Tax, 0% due 10/1/2016 (Insured: AGM) | AAA/Aa3 | 3,535,000 | 2,872,895 | |||||||
Miami Dade County Professional Sports Franchise Facilities Tax, 0% due 10/1/2017 (Insured: AGM) | AAA/Aa3 | 2,435,000 | 1,867,280 | |||||||
Miami Dade County Professional Sports Franchise Facilities Tax, 0% due 10/1/2018 (Insured: AGM) | AAA/Aa3 | 5,385,000 | 3,891,578 | |||||||
Miami Dade County Professional Sports Franchise Facilities Tax, 0% due 10/1/2019 (Insured: AGM) | AAA/Aa3 | 2,170,000 | 1,479,115 | |||||||
Miami Dade County School Board COP, 3.00% due 2/1/2011 (Insured: Assured Guaranty) | AAA/Aa3 | 3,000,000 | 3,020,760 | |||||||
Miami Dade County School Board COP, 5.00% due 5/1/2014 (Insured: Natl-Re) | A/A1 | 1,000,000 | 1,098,460 | |||||||
Miami Dade County School Board COP, 5.00% due 10/1/2015 (Insured: AMBAC) | A/A1 | 1,000,000 | 1,118,380 | |||||||
Miami Dade County School Board COP, 5.00% due 5/1/2016 (Insured: Natl-Re) | A/A1 | 4,015,000 | 4,501,176 | |||||||
Miami Dade County School Board COP, 5.00% due 10/1/2016 (Insured: AMBAC) | A/A1 | 1,000,000 | 1,120,200 | |||||||
Miami Dade County School Board COP, 5.50% due 5/1/2030 put 5/1/2011 (Insured: Natl-Re) | A/A1 | 1,010,000 | 1,032,139 | |||||||
Miami Dade County School District GO, 5.375% due 8/1/2015 (Insured: AGM) | AAA/Aa3 | 5,000,000 | 5,800,800 | |||||||
Miami Dade County Special Housing, 5.80% due 10/1/2012 (HUD Section 8) | NR/Baa3 | 1,115,000 | 1,149,141 | |||||||
Miami GO, 5.00% due 1/1/2017 (Homeland Defense/Neighborhood Capital Improvements) | BBB+/A3 | 1,245,000 | 1,394,985 | |||||||
Miami GO, 5.00% due 1/1/2018 (Homeland Defense/Neighborhood Capital Improvements) | BBB+/A3 | 2,040,000 | 2,278,700 | |||||||
Miami GO, 5.00% due 1/1/2019 (Homeland Defense/Neighborhood Capital Improvements) | BBB+/A3 | 1,870,000 | 2,086,490 | |||||||
Miami Special Obligation, 5.00% due 1/1/2018 (Insured: Natl-Re) | A/A2 | 1,970,000 | 2,265,165 | |||||||
North Miami Educational Facilities Revenue, 5.00% due 4/1/2013 (Johnston & Wales University; Insured: Syncora) | NR/NR | 1,530,000 | 1,618,419 | |||||||
Orange County HFA, 5.00% due 10/1/2014 (Orlando Health) | A/A2 | 2,790,000 | 3,046,875 | |||||||
Orange County HFA, 5.00% due 10/1/2017 (Orlando Health) | A/A2 | 1,980,000 | 2,161,764 | |||||||
Orange County HFA, 5.25% due 10/1/2019 (Orlando Health) | A/A2 | 3,000,000 | 3,270,510 | |||||||
Orlando & Orange County Expressway Authority, 6.50% due 7/1/2011 (Insured: Natl-Re/FGIC) | A/A1 | 3,550,000 | 3,695,302 | |||||||
Orlando & Orange County Expressway Authority, 5.00% due 7/1/2013 (Insured: AMBAC) | A/A1 | 5,845,000 | 6,431,195 | |||||||
Palm Beach County Public Improvement, 5.00% due 11/1/2030 put 11/1/2011 (Convention Center; Insured: Natl-Re/FGIC) | AA+/Aa1 | 3,000,000 | 3,114,330 | |||||||
Palm Beach County School Board COP, 5.375% due 8/1/2017 (Insured: AMBAC) | AA-/Aa3 | 7,000,000 | 7,281,750 | |||||||
Palm Beach County School Board COP, 5.00% due 8/1/2025 put 8/1/2011 (Insured: Natl-Re/FGIC) | AA-/NR | 25,040,000 | 25,898,371 | |||||||
Pelican Marsh Community Development District, 5.00% due 5/1/2011 (Insured: Radian) | NR/NR | 570,000 | 569,259 | |||||||
Polk County Transportation Improvement Revenue, 5.00% due 12/1/2025 put 12/1/2010 (Insured: AGM) | NR/Aa3 | 1,550,000 | 1,559,827 | |||||||
Port Everglades Authority, 5.00% due 9/1/2016 (Insured: AGM) | AAA/Aa3 | 9,990,000 | 10,318,571 | |||||||
Putnam County Development Authority PCR, 5.35% due 3/15/2042 put 5/1/2018 (Seminole Project; Insured: AMBAC) | A-/A3 | 10,000,000 | 11,087,300 | |||||||
South Miami HFA, 5.00% due 8/15/2016 (Baptist Health) | AA-/Aa3 | 1,560,000 | 1,761,817 | |||||||
South Miami HFA, 5.00% due 8/15/2017 (Baptist Health) | AA-/Aa3 | 4,610,000 | 5,221,609 | |||||||
St. John’s County IDA, 5.50% due 8/1/2014 (Presbyterian Retirement) | NR/NR | 2,755,000 | 2,949,007 | |||||||
Tampa Baycare Health Systems, 5.00% due 11/15/2016 | NR/Aa3 | 2,855,000 | 3,225,037 | |||||||
Tampa Baycare Health Systems, 5.00% due 11/15/2017 | NR/Aa3 | 1,215,000 | 1,372,294 | |||||||
Tampa Sports Authority Revenue, 5.75% due 10/1/2015 (Tampa Bay Arena; Insured: Natl-Re) | A/Baa1 | 1,500,000 | 1,589,580 | |||||||
University of Central Florida Athletics Association Inc. COP, 5.00% due 10/1/2016 (Insured: Natl-Re/FGIC) | A/NR | 1,640,000 | 1,788,928 | |||||||
Certified Annual Report 17
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
GEORGIA — 2.81% | ||||||||||
Atlanta Tax Allocation, 5.25% due 12/1/2016 (Atlantic Station; Insured: AGM) | AAA/Aa3 | $ | 3,850,000 | $ | 4,282,586 | |||||
Atlanta Water & Wastewater Revenue, 5.50% due 11/1/2014 (Insured: Natl-Re/FGIC) | A/A1 | 3,000,000 | 3,432,930 | |||||||
Atlanta Water & Wastewater Revenue, 5.50% due 11/1/2015 (Insured: Natl-Re/FGIC) | A/A1 | 4,000,000 | 4,623,680 | |||||||
Atlanta Water & Wastewater Revenue, 5.00% due 11/1/2016 (Insured: AGM) | AAA/Aa3 | 3,215,000 | 3,675,452 | |||||||
Atlanta Water & Wastewater Revenue, 5.50% due 11/1/2016 (Insured: Natl-Re/FGIC) | A/A1 | 8,215,000 | 9,560,863 | |||||||
Atlanta Water & Wastewater Revenue, 5.00% due 11/1/2017 (Insured: AGM) | AAA/Aa3 | 4,745,000 | 5,402,799 | |||||||
Atlanta Water & Wastewater Revenue, 6.00% due 11/1/2019 | A/A1 | 5,650,000 | 6,844,919 | |||||||
Burke County PCR, 4.75% due 1/1/2039 put 4/1/2011 (Oglethorpe Power; Insured: Natl-Re) | A/A3 | 10,000,000 | 10,188,100 | |||||||
Fulton County Facilities COP, 5.00% due 11/1/2017 | AA-/Aa3 | 8,400,000 | 9,663,360 | |||||||
Fulton County Facilities COP, 5.00% due 11/1/2019 | AA-/Aa3 | 6,600,000 | 7,585,116 | |||||||
Fulton County Facilities COP, 5.90% due 11/1/2019 pre-refunded 11/1/2010 (Insured: AGM/ AMBAC) | AAA/Aa3 | 16,865,000 | 17,113,590 | |||||||
Gainesville Water & Sewer Revenue, 6.00% due 11/15/2012 (Insured: Natl-Re/FGIC) | AA-/Aa3 | 1,200,000 | 1,271,496 | |||||||
Lagrange Troup County Hospital Authority, 5.00% due 7/1/2018 (West Georgia Health Foundation Inc.) | A+/Aa2 | 2,500,000 | 2,779,975 | |||||||
Main Street Natural Gas Inc., 5.00% due 3/15/2013 (Georgia Gas) | A/A2 | 1,500,000 | 1,587,975 | |||||||
Main Street Natural Gas Inc., 5.00% due 3/15/2014 (Georgia Gas) | A+/Aa3 | 3,000,000 | 3,225,930 | |||||||
Main Street Natural Gas Inc., 5.00% due 3/15/2014 (Georgia Gas) | A/A2 | 3,590,000 | 3,854,691 | |||||||
Main Street Natural Gas Inc., 5.00% due 3/15/2015 (Georgia Gas) | A/A2 | 2,000,000 | 2,146,200 | |||||||
Main Street Natural Gas Inc., 5.00% due 3/15/2018 (Georgia Gas) | A/A2 | 5,000,000 | 5,250,500 | |||||||
Monroe County Development Authority PCR, 6.80% due 1/1/2012 (Oglethorpe Power; Insured: Natl-Re) | A/A3 | 1,000,000 | 1,070,360 | |||||||
Monroe County Development Authority PCR, 4.50% due 7/1/2025 put 4/1/2011 (Georgia Power Co.) | A/A3 | 5,000,000 | 5,090,850 | |||||||
Municipal Electric Authority of Georgia, 6.60% due 1/1/2018 (Insured: Natl-Re) | A/A1 | 3,000,000 | 3,526,200 | |||||||
GUAM — 0.35% | ||||||||||
Guam Educational Financing Foundation COP, 5.00% due 10/1/2010 (Guam Public Schools) | A-/NR | 1,000,000 | 1,000,000 | |||||||
Guam Government Limited Obligation Revenue, 5.25% due 12/1/2016 | BBB-/NR | 5,610,000 | 6,144,072 | |||||||
Guam Government Limited Obligation Revenue, 5.25% due 12/1/2017 | BBB-/NR | 2,000,000 | 2,198,580 | |||||||
Guam Government Limited Obligation Revenue, 5.50% due 12/1/2018 | BBB-/NR | 3,000,000 | 3,356,910 | |||||||
Guam Government Limited Obligation Revenue, 5.50% due 12/1/2019 | BBB-/NR | 1,000,000 | 1,113,080 | |||||||
HAWAII — 0.18% | ||||||||||
Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Kapiolani Health Care; Insured: Natl-Re) | A/Baa1 | 890,000 | 925,342 | |||||||
Hawaii State Department of Budget & Finance, 4.95% due 4/1/2012 (Hawaiian Electric Company; Insured: Natl-Re) | A/Baa1 | 5,850,000 | 6,079,905 | |||||||
IDAHO — 0.25% | ||||||||||
Twin Falls Urban Renewal Agency, 4.95% due 8/1/2014 | NR/NR | 1,640,000 | 1,632,653 | |||||||
Twin Falls Urban Renewal Agency, 5.15% due 8/1/2017 | NR/NR | 1,455,000 | 1,399,433 | |||||||
University of Idaho, 1.00% due 4/1/2041 put 4/1/2021 | A+/Aa3 | 6,250,000 | 6,904,375 | |||||||
ILLINOIS — 8.73% | ||||||||||
Bolingbrook GO, 0% due 1/1/2016 (Insured: Natl-Re) | NR/Aa3 | 1,500,000 | 1,264,155 | |||||||
Bolingbrook GO, 0% due 1/1/2017 (Insured: Natl-Re) | NR/Aa3 | 2,000,000 | 1,575,700 | |||||||
Broadview Tax Increment Revenue, 5.375% due 7/1/2015 | NR/NR | 3,400,000 | 3,399,728 | |||||||
Chicago Board of Education GO, 6.25% due 1/1/2015 (Insured: Natl-Re) | A/Aa2 | 1,700,000 | 1,883,600 | |||||||
Chicago Board of Education GO, 5.25% due 12/1/2017 (Chicago School Reform Board; Insured: Natl-Re/FGIC) | AA-/Aa2 | 4,100,000 | 4,812,785 | |||||||
18 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Chicago Board of Education GO, 5.00% due 12/1/2018 (Insured: Natl-Re) | AA-/Aa2 | $ | 1,000,000 | $ | 1,154,100 | |||||
Chicago GO, 6.125% due 1/1/2012 (Insured: AMBAC) (ETM) | AA-/Aa3 | 775,000 | 830,382 | |||||||
Chicago GO, 6.125% due 1/1/2012 (Insured: AMBAC) | AA-/Aa3 | 225,000 | 238,815 | |||||||
Chicago GO, 5.375% due 1/1/2013 (Insured: Natl-Re) | AA-/Aa3 | 2,435,000 | 2,566,855 | |||||||
Chicago GO, 0% due 1/1/2016 (City Colleges; Insured: Natl-Re/FGIC) | AA-/Aa3 | 2,670,000 | 2,269,260 | |||||||
Chicago GO, 0% due 1/1/2018 (Capital Appreciation; Insured: Natl-Re) | AA-/Aa3 | 3,000,000 | 3,317,160 | |||||||
Chicago GO, 5.40% due 1/1/2018 (Insured: AGM) | AAA/Aa3 | 3,000,000 | 3,010,230 | |||||||
Chicago GO, 0.32% due 1/1/2040 put 10/7/2010 (Insured: AGM/SPA: Dexia ) (weekly demand notes) | AAA/Aa3 | 64,900,000 | 64,900,000 | |||||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2015 (Insured: AGM) | AAA/Aa3 | 8,460,000 | 9,638,393 | |||||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2016 (Insured: AGM) | AAA/Aa3 | 2,000,000 | 2,300,400 | |||||||
Chicago Midway Airport, 5.50% due 1/1/2013 (Insured: Natl-Re) | A/A2 | 1,180,000 | 1,287,722 | |||||||
Cicero Illinois GO, 5.25% due 1/1/2019 (Insured: Syncora) | NR/NR | 6,140,000 | 6,304,061 | |||||||
Cook County Community Consolidated School District GO, 0% due 12/1/2010 (Insured: AGM) | NR/Aa2 | 2,000,000 | 1,998,580 | |||||||
Cook County Community Consolidated School District GO, 0% due 12/1/2011 (Insured: AGM) (ETM) | NR/Aa3 | 2,370,000 | 2,354,453 | |||||||
Cook County Community Consolidated School District GO, 9.00% due 12/1/2016 (Tinley Park; Insured: Natl-Re/FGIC) | NR/Aa2 | 2,500,000 | 3,391,775 | |||||||
Cook County Community High School District, 5.00% due 12/15/2012 (Insured: Assured Guaranty) | AAA/NR | 3,180,000 | 3,475,867 | |||||||
Cook County Community High School District, 5.00% due 12/15/2013 (Insured: Assured Guaranty) | AAA/NR | 6,875,000 | 7,746,887 | |||||||
Cook County Community School District GO, 9.00% due 12/1/2013 (Oak Park; Insured: Natl-Re/FGIC) | NR/Aa2 | 2,250,000 | 2,772,698 | |||||||
Cook County GO, 3.25% due 11/15/2011 | AA/Aa2 | 1,250,000 | 1,287,513 | |||||||
Cook County GO, 5.00% due 11/15/2012 | AA/Aa2 | 6,000,000 | 6,504,360 | |||||||
Cook County GO, 6.25% due 11/15/2013 (Insured: Natl-Re) | AA/Aa2 | 3,995,000 | 4,514,550 | |||||||
De Kalb County USD GO, 0% due 1/1/2021 (Capital Appreciation) | AA-/Aa2 | 6,140,000 | 3,956,923 | |||||||
Illinois DFA, 6.00% due 11/15/2010 (Adventist Health; Insured: Natl-Re) | NR/Baa1 | 3,860,000 | 3,884,897 | |||||||
Illinois DFA, 6.00% due 11/15/2011 (Adventist Health; Insured: Natl-Re) | NR/Baa1 | 1,000,000 | 1,015,500 | |||||||
Illinois Educational Facilities, 4.75% due 3/1/2030 put 3/1/2017 (Art Institute of Chicago) | A+/A1 | 3,030,000 | 3,282,399 | |||||||
Illinois Educational Facilities, 5.00% due 3/1/2030 put 3/1/2017 (Art Institute of Chicago) | NR/A1 | 3,000,000 | 3,265,800 | |||||||
Illinois Educational Facilities, 5.25% due 3/1/2034 put 3/1/2018 (Art Institute of Chicago) | NR/A1 | 3,500,000 | 3,856,720 | |||||||
Illinois Educational Facilities, 4.15% due 11/1/2036 put 11/1/2012 (Field Museum) | A/A2 | 5,250,000 | 5,473,493 | |||||||
Illinois Educational Facilities, 4.30% due 11/1/2036 put 11/1/2013 (Field Museum) | A/A2 | 3,100,000 | 3,287,426 | |||||||
Illinois Finance Authority, 4.00% due 2/15/2013 (Alexian Brothers Health Systems) | NR/A3 | 1,500,000 | 1,543,410 | |||||||
Illinois Finance Authority, 5.00% due 2/15/2014 (Alexian Brothers Health Systems) | NR/A3 | 3,000,000 | 3,193,890 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2014 (Central Dupage Health) | AA/NR | 5,000,000 | 5,590,450 | |||||||
Illinois Finance Authority, 4.00% due 4/1/2015 (Advocate Health Care) | AA/Aa2 | 3,000,000 | 3,225,630 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2015 (Central Dupage Health) | AA/NR | 5,000,000 | 5,609,400 | |||||||
Illinois Finance Authority, 5.00% due 4/1/2016 (Advocate Health Care) | AA/Aa2 | 1,250,000 | 1,404,600 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2017 (Rush University Medical Center; Insured: Natl-Re) | A/A3 | 1,000,000 | 1,103,680 | |||||||
Illinois Finance Authority, 5.50% due 11/1/2018 (Advocate Health Care) | AA/Aa2 | 1,000,000 | 1,168,910 | |||||||
Illinois Finance Authority, 5.00% due 4/1/2020 (Advocate Health Care) | AA/Aa2 | 1,000,000 | 1,112,600 | |||||||
Illinois Finance Authority, 3.875% due 11/1/2030 put 5/1/2012 (Advocate Health Care) | AA/Aa2 | 2,000,000 | 2,049,200 | |||||||
b Illinois Finance Authority, 2.625% due 2/1/2033 put 8/1/2015 (Peoples Gas, Light, & Coke Co.) | A-/A1 | 9,500,000 | 9,478,435 | |||||||
Illinois Finance Authority, 3.00% due 7/1/2042 put 5/6/2014 (Prairie Power; Insured: National Rural UTI) | A/NR | 17,150,000 | 17,437,948 | |||||||
Illinois Finance Authority Student Housing, 5.00% due 5/1/2014 | NR/Baa3 | 3,895,000 | 4,023,808 | |||||||
Illinois HFA, 5.50% due 11/15/2011 (Methodist Medical Center; Insured: Natl-Re) | A/A2 | 3,000,000 | 3,008,160 | |||||||
Illinois HFA, 5.00% due 11/15/2013 (Northwestern Medical Facility; Insured: Natl-Re) | NR/A2 | 2,470,000 | 2,474,866 | |||||||
Illinois HFA, 6.00% due 7/1/2017 (Lake Forest Hospital) | AA+/Aa2 | 1,500,000 | 1,588,095 | |||||||
Illinois HFA, 6.125% due 11/15/2022 pre-refunded 11/15/2010 (Advocate Network Health Care) | AAA/Aa2 | 1,000,000 | 1,007,300 | |||||||
Certified Annual Report 19
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Illinois Sales Tax, 5.00% due 6/15/2011 | AAA/A1 | $ | 6,050,000 | $ | 6,233,012 | |||||
Illinois Sales Tax, 3.50% due 6/15/2012 | AAA/A1 | 6,055,000 | 6,302,105 | |||||||
Illinois Sales Tax, 3.50% due 6/15/2013 | AAA/A1 | 6,455,000 | 6,841,590 | |||||||
Illinois Sales Tax, 3.50% due 6/15/2014 | AAA/A1 | 6,455,000 | 6,904,913 | |||||||
Illinois Sales Tax, 5.125% due 6/15/2015 pre-refunded 6/15/2013 | AAA/A1 | 5,000,000 | 5,599,950 | |||||||
Illinois Sales Tax, 5.00% due 6/15/2016 | AAA/NR | 3,500,000 | 4,009,355 | |||||||
Illinois Sales Tax, 5.50% due 6/15/2016 | AAA/A1 | 3,000,000 | 3,086,130 | |||||||
Illinois Sales Tax, 5.50% due 6/15/2016 pre-refunded 6/15/2011 | AAA/A1 | 4,000,000 | 4,146,520 | |||||||
Illinois Toll Highway Authority, 5.50% due 1/1/2014 (Insured: AGM) | AAA/Aa3 | 17,190,000 | 19,611,727 | |||||||
Illinois Toll Highway Authority, 5.50% due 1/1/2015 (Insured: AGM) | AAA/Aa3 | 5,000,000 | 5,843,400 | |||||||
Kane County Forest Preservation District GO, 4.00% due 12/15/2015 (Insured: AMBAC) | AA/NR | 2,295,000 | 2,367,453 | |||||||
Kane County Forest Preservation District GO, 5.00% due 12/15/2015 (Insured: Natl-Re/FGIC) | AA/NR | 2,780,000 | 3,259,884 | |||||||
Kane County Waubonsee Community College District GO, 0% due 12/15/2013 (Insured: Natl-Re/FGIC) | AA+/Aa2 | 3,000,000 | 2,634,030 | |||||||
Lake County Community High School District GO, 0% due 12/1/2011 (Insured: Natl-Re/FGIC) | NR/NR | 3,235,000 | 3,140,894 | |||||||
McHenry & Kane Counties Community Consolidated School District GO, 0% due 1/1/2012 (Insured: Natl-Re/FGIC) | A/NR | 2,200,000 | 2,139,192 | |||||||
McLean & Woodford Counties United School District GO, 6.25% due 12/1/2014 (Insured: AGM) | NR/Aa2 | 1,005,000 | 1,067,531 | |||||||
Melrose Park Water Revenue, 5.20% due 7/1/2018 (Insured: Natl-Re) | A/Baa1 | 1,190,000 | 1,201,055 | |||||||
a Metropolitan Pier & Exposition Authority Dedicated State Tax, 0% due 6/15/2013 (McCormick Place; Insured: Natl-Re) | AAA/A2 | 1,045,000 | 988,998 | |||||||
Metropolitan Pier & Exposition Authority Dedicated State Tax, 0% due 6/15/2016 (McCormick Place; Insured: Natl-Re/FGIC) | A/A2 | 11,295,000 | 9,342,772 | |||||||
Peoria, Tazewell, Etc. Counties Community College District GO, 4.25% due 12/1/2015 | AA+/Aa2 | 2,360,000 | 2,636,734 | |||||||
Quincy Illinois, 5.00% due 11/15/2014 (Blessing Hospital) | A-/A3 | 1,000,000 | 1,062,560 | |||||||
Quincy Illinois, 5.00% due 11/15/2016 (Blessing Hospital) | A-/A3 | 1,000,000 | 1,056,200 | |||||||
Regional Transportation Authority, 6.25% due 7/1/2014 (Insured: Natl-Re; GO of Authority) | AA/Aa3 | 3,500,000 | 4,099,480 | |||||||
Sangamon County Community Unit School District No. 5, 5.00% due 1/1/2015 (Insured: AGM) | AAA/NR | 2,210,000 | 2,522,582 | |||||||
Southwestern Illinois Development Authority, 5.125% due 8/15/2016 (Anderson Hospital) | BBB/Baa2 | 1,700,000 | 1,786,275 | |||||||
Springfield Electric Revenue, 5.50% due 3/1/2013 pre-refunded 3/1/2011 (Insured: Natl-Re) | AA-/NR | 2,000,000 | 2,063,700 | |||||||
INDIANA — 4.44% | ||||||||||
Allen County Economic Development, 5.00% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 1,370,000 | 1,409,524 | |||||||
Allen County Jail Building Corp. First Mortgage, 5.75% due 10/1/2010 (ETM) | NR/NR | 565,000 | 565,073 | |||||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2014 (Insured: Syncora) | NR/Aa2 | 1,000,000 | 1,132,070 | |||||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2015 (Insured: Syncora) | NR/Aa2 | 1,480,000 | 1,692,262 | |||||||
Allen County Jail Building Corp. First Mortgage, 5.00% due 10/1/2016 (Insured: Syncora) | NR/Aa2 | 1,520,000 | 1,733,697 | |||||||
Allen County Redevelopment District, 5.00% due 11/15/2016 | NR/A2 | 1,000,000 | 1,110,460 | |||||||
Avon Community School Building Corp., 5.00% due 7/15/2017 (Insured: AMBAC)(State Aid Withholding) | A/NR | 2,500,000 | 2,892,300 | |||||||
Ball State University Student Fee, 5.75% due 7/1/2012 (Insured: Natl-Re/FGIC) | A+/Aa3 | 1,000,000 | 1,055,030 | |||||||
Boonville Junior High School Building Corp., 0% due 1/1/2011 (State Aid Withholding) | A/NR | 850,000 | 845,427 | |||||||
Boonville Junior High School Building Corp., 0% due 7/1/2011 (State Aid Withholding) | A/NR | 950,000 | 934,344 | |||||||
Brownsburg 1999 School Building Corp., 5.00% due 7/15/2013 (Insured: AGM; State Aid Withholding) | AAA/Aa3 | 1,000,000 | 1,106,480 | |||||||
Brownsburg 1999 School Building Corp., 5.00% due 7/15/2018 (Insured: AGM)(State Aid Withholding) | AAA/NR | 3,430,000 | 3,774,921 | |||||||
Brownsburg 1999 School Building Corp., 5.00% due 8/1/2018 (Insured: AGM)(State Aid Withholding) | AAA/Aa3 | 1,250,000 | 1,376,387 | |||||||
Carmel Redevelopment Authority, 0% due 2/1/2015 (Performing Arts Center) | AA+/Aa1 | 1,575,000 | 1,404,727 | |||||||
Central High School Building Corp., 5.00% due 2/1/2011 (First Mortgage; Insured: AMBAC) (State Aid Withholding) | AA+/NR | 1,970,000 | 2,000,732 | |||||||
Clay Multiple School Building Corp., 4.00% due 7/15/2015 (State Aid Withholding) | AA+/NR | 1,000,000 | 1,089,110 | |||||||
20 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Clay Multiple School Building Corp., 5.00% due 7/15/2016 (State Aid Withholding) | AA+/NR | $ | 1,295,000 | $ | 1,490,895 | |||||
Clay Multiple School Building Corp., 5.00% due 1/15/2017 (State Aid Withholding) | AA+/NR | 1,000,000 | 1,158,810 | |||||||
Evansville Vanderburgh, 5.00% due 7/15/2014 (Insured: AMBAC) | A+/NR | 1,000,000 | 1,116,360 | |||||||
Evansville Vanderburgh, 5.00% due 7/15/2015 (Insured: AMBAC) | A+/NR | 1,000,000 | 1,126,740 | |||||||
Fort Wayne Sewer Works Improvement, 4.25% due 8/1/2013 | NR/Aa3 | 1,715,000 | 1,844,946 | |||||||
Fort Wayne Sewer Works Improvement, 4.25% due 8/1/2014 | NR/Aa3 | 1,745,000 | 1,904,982 | |||||||
Fort Wayne Sewer Works Improvement, 4.25% due 8/1/2015 | NR/Aa3 | 1,780,000 | 1,950,097 | |||||||
Franklin Township Independent School Building Corp., 5.00% due 7/5/2018 (Insured: Natl-Re/ FGIC)(State Aid Withholding) | A/NR | 3,900,000 | 4,006,977 | |||||||
Hammond Multi-School Building Corp., 5.00% due 1/15/2014 (Insured: Natl-Re/FGIC)(State Aid Withholding) | AA+/NR | 1,000,000 | 1,125,830 | |||||||
Indiana Bond Bank, 5.25% due 10/15/2016 (Special Gas Program) | NR/Aa3 | 1,545,000 | 1,684,653 | |||||||
Indiana Bond Bank, 5.00% due 10/15/2017 | NR/Aa3 | 5,000,000 | 5,345,600 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2015 (Parkview Health Systems) | A+/A1 | 1,500,000 | 1,649,685 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2016 (Parkview Health Systems) | A+/A1 | 3,090,000 | 3,374,682 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2017 (Parkview Health Systems) | A+/A1 | 1,000,000 | 1,089,360 | |||||||
Indiana Finance Authority, 0.31% due 2/1/2035 put 10/1/2010 (Lease Appropriation; SPA: JP Morgan Chase Bank) (daily demand notes) | AA+/Aa2 | 26,100,000 | 26,100,000 | |||||||
Indiana Health Facilities, 5.00% due 11/1/2014 (Sisters of St. Francis) | NR/Aa3 | 1,000,000 | 1,123,530 | |||||||
Indiana Health Facilities, 5.50% due 11/15/2016 (Ascension Health Credit Group) | AA/Aa1 | 1,385,000 | 1,509,705 | |||||||
Indiana Health Facilities, 5.00% due 11/1/2018 (Sisters of St. Francis) | NR/Aa3 | 1,250,000 | 1,422,512 | |||||||
Indiana Health Facilities, 5.75% due 11/1/2021 pre-refunded 11/1/2011 (Sisters of St. Francis) | NR/Aa3 | 3,545,000 | 3,782,090 | |||||||
Indiana Health Facilities, 3.625% due 11/15/2036 put 8/1/2011 (Ascension Health) | AA/Aa1 | 3,955,000 | 4,059,135 | |||||||
Indiana Multi School Building Corp. First Mortgage, 5.00% due 7/15/2016 (Insured: Natl-Re) | AA/Baa1 | 5,000,000 | 5,805,050 | |||||||
Indiana State Finance Authority Revenue, 5.00% due 7/1/2011 (Wabash Correctional Facilities) | AA+/Aa1 | 1,390,000 | 1,434,619 | |||||||
Indiana State Finance Authority Revenue, 4.90% due 1/1/2016 (Indianapolis Power & Light Co.) | BBB/A3 | 11,650,000 | 12,795,078 | |||||||
Indiana State Finance Authority Revenue, 5.00% due 7/1/2016 (Forensic & Health Science; Insured: Natl-Re) | AA+/Aa1 | 1,030,000 | 1,186,509 | |||||||
Indiana State Finance Authority Revenue, 5.25% due 7/1/2018 (Wabash Correctional Facilities) | AA+/Aa1 | 1,000,000 | 1,193,460 | |||||||
Indiana State Finance Authority Revenue, 5.25% due 7/1/2018 (Rockville Correctional Facilities) | AA+/Aa1 | 2,150,000 | 2,565,939 | |||||||
Indiana State Finance Authority Revenue, 5.00% due 11/1/2018 | AA+/Aa2 | 2,750,000 | 3,189,312 | |||||||
Indiana State Finance Authority Revenue, 0.30% due 2/1/2037 put 10/1/2010 (Lease Appropriation; Insured: JP Morgan Chase Bank) (daily demand notes) | AA+/Aa3 | 10,000,000 | 10,000,000 | |||||||
Indiana State Finance Authority Revenue, 0.30% due 2/1/2037 put 10/1/2010 (Insured: JP Morgan Chase Bank) (daily demand notes) | AA+/Aa3 | 300,000 | 300,000 | |||||||
Indianapolis Local Public Improvement Bond Bank, 6.75% due 2/1/2014 | AA/NR | 1,270,000 | 1,377,315 | |||||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 1/1/2015 (Waterworks; Insured: Natl-Re) | AA-/A1 | 1,000,000 | 1,136,570 | |||||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 7/1/2015 (Waterworks; Insured: Natl-Re) | AA-/A1 | 1,000,000 | 1,146,640 | |||||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 7/1/2016 (Insured: Natl-Re/FGIC) | AA+/Aa1 | 1,030,000 | 1,178,959 | |||||||
Indianapolis Multi-School Building Corp., 5.50% due 7/15/2015 (First Mortgage; Insured: Natl-Re) | AA/Baa1 | 1,690,000 | 1,978,246 | |||||||
Ivy Tech Community College, 4.00% due 7/1/2013 | AA-/NR | 1,000,000 | 1,083,830 | |||||||
Ivy Tech Community College, 4.00% due 7/1/2014 | AA-/NR | 1,500,000 | 1,652,835 | |||||||
Knox Middle School Building Corp. First Mortgage, 0% due 1/15/2020 (Insured: Natl-Re/ FGIC) (State Aid Withholding) | A/NR | 1,295,000 | 850,776 | |||||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2014 (Insured: Natl-Re/ FGIC) (State Aid Withholding) | AA+/NR | 1,200,000 | 1,373,940 | |||||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2015 (Insured: Natl-Re/ FGIC) (State Aid Withholding) | AA+/NR | 1,250,000 | 1,455,862 | |||||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2013 (Insured: Natl-Re) (State Aid Withholding) | A+/Baa1 | 1,055,000 | 1,167,980 | |||||||
Certified Annual Report 21
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2014 (Insured: Natl-Re) (State Aid Withholding) | A+/Baa1 | $ | 1,135,000 | $ | 1,284,457 | |||||
Mount Vernon of Hancock County First Mortgage, 5.00% due 7/15/2015 (Insured: Natl-Re) (State Aid Withholding) | A+/Baa1 | 1,140,000 | 1,305,710 | |||||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2016 (146th Street Extension A) | AA-/NR | 1,660,000 | 1,903,522 | |||||||
Perry Township Multi School Building Corp., 5.00% due 7/10/2014 (Insured: AGM) (State Aid Withholding) | NR/Aa2 | 2,130,000 | 2,417,550 | |||||||
Plainfield Community High School Building Corp. First Mortgage, 5.00% due 1/15/2015 (Insured: Natl-Re/FGIC) | A/NR | 1,445,000 | 1,632,055 | |||||||
Rockport PCR, 6.25% due 6/1/2025 put 6/2/2014 (Indiana Michigan Power Co.) | BBB/Baa2 | 1,000,000 | 1,123,310 | |||||||
Rockport PCR, 6.25% due 6/1/2025 put 6/2/2014 (Indiana Michigan Power Co.) | BBB/Baa2 | 4,100,000 | 4,605,571 | |||||||
South Bend Community School Building Corp., 4.00% due 1/15/2013 (State Aid Withholding) | AA+/NR | 1,545,000 | 1,649,813 | |||||||
South Bend Community School Building Corp., 4.00% due 1/15/2013 | AA+/NR | 1,400,000 | 1,494,976 | |||||||
South Bend Community School Building Corp., 4.00% due 7/15/2013 (State Aid Withholding) | AA+/NR | 1,000,000 | 1,079,590 | |||||||
South Bend Community School Building Corp., 5.00% due 7/15/2016 (Insured: Natl-Re/FGIC) (State Aid Withholding) | AA+/NR | 1,785,000 | 2,091,235 | |||||||
Vincennes University, 3.00% due 6/1/2014 | NR/Aa3 | 1,000,000 | 1,047,680 | |||||||
Vincennes University, 3.00% due 6/1/2015 | NR/Aa3 | 1,000,000 | 1,047,040 | |||||||
Vincennes University, 4.00% due 6/1/2018 | NR/Aa3 | 1,000,000 | 1,081,920 | |||||||
Vincennes University, 5.00% due 6/1/2020 | NR/Aa3 | 1,000,000 | 1,143,180 | |||||||
Warren Township Vision 2005, 5.00% due 7/10/2015 (Insured: Natl-Re/FGIC)(State Aid Withholding) | AA+/NR | 2,895,000 | 3,318,828 | |||||||
Wawasee Community School Corp. First Mortgage, 5.50% due 7/15/2011 (State Aid Withholding) (ETM) | AA+/NR | 1,095,000 | 1,124,280 | |||||||
West Clark School Building Corp., 5.25% due 1/15/2014 (Insured: Natl-Re) | AA+/Baa1 | 1,335,000 | 1,511,327 | |||||||
West Clark School Building Corp. First Mortgage, 5.75% due 7/15/2011 (Insured: Natl-Re/ FGIC)(State Aid Withholding) | AA+/NR | 2,080,000 | 2,167,797 | |||||||
IOWA — 0.47% | ||||||||||
Des Moines Limited Obligation, 4.40% due 12/1/2015 put 12/1/2011 (Des Moines Parking Associates; LOC: Wells Fargo Bank) | NR/NR | 2,270,000 | 2,274,109 | |||||||
Dubuque Community School District, 2.75% due 7/1/2011 | NR/NR | 450,000 | 453,681 | |||||||
Dubuque Community School District, 2.75% due 1/1/2012 | NR/NR | 1,500,000 | 1,517,745 | |||||||
Iowa Finance Authority, 5.75% due 12/1/2010 (Trinity Health) | AA/Aa2 | 1,160,000 | 1,167,099 | |||||||
Iowa Health Facilities Revenue, 5.00% due 2/15/2014 (Iowa Health System; Insured: AGM) | NR/Aa3 | 2,500,000 | 2,777,975 | |||||||
Iowa Health Facilities Revenue, 5.00% due 2/15/2015 (Iowa Health System; Insured: AGM) | NR/Aa3 | 2,300,000 | 2,590,490 | |||||||
Iowa Health Facilities Revenue, 5.00% due 2/15/2016 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,600,000 | 1,817,200 | |||||||
Iowa Health Facilities Revenue, 5.00% due 8/15/2016 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,500,000 | 1,713,630 | |||||||
Iowa Health Facilities Revenue, 5.00% due 2/15/2017 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,600,000 | 1,825,616 | |||||||
Iowa Health Facilities Revenue, 5.00% due 8/15/2017 (Iowa Health System; Insured: AGM) | NR/Aa3 | 990,000 | 1,135,253 | |||||||
Iowa Health Facilities Revenue, 5.00% due 2/15/2018 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,405,000 | 1,611,240 | |||||||
KANSAS — 0.77% | ||||||||||
Burlington Environmental Improvement, 5.00% due 12/1/2023 put 4/1/2011 (Kansas City Power & Light; Insured: Syncora) | BBB+/A3 | 2,800,000 | 2,850,764 | |||||||
Burlington Environmental Improvement, 5.25% due 12/1/2023 put 4/1/2013 (Kansas City Power & Light; Insured: Syncora) | BBB+/A3 | 5,000,000 | 5,385,250 | |||||||
Burlington Environmental Improvement, 5.375% due 9/1/2035 put 4/1/2013 (Kansas City Power & Light; Insured: Natl-Re/FGIC) | NR/Baa2 | 12,500,000 | 13,501,000 | |||||||
Johnson County USD GO, 4.50% due 10/1/2014 | AA/Aaa | 5,750,000 | 5,962,463 | |||||||
Kansas Development Finance Authority, 5.00% due 11/1/2015 | AA/Aa2 | 2,605,000 | 3,034,017 | |||||||
22 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
KENTUCKY — 0.51% | ||||||||||
Jefferson County School District, 5.25% due 1/1/2016 (Insured: AGM) | AAA/Aa2 | $ | 2,145,000 | $ | 2,521,319 | |||||
Kentucky Economic DFA, 5.40% due 10/1/2010 (Norton Healthcare; Insured: Natl-Re) (ETM) | A/NR | 3,775,000 | 3,775,491 | |||||||
Kentucky Economic DFA, 5.40% due 10/1/2010 (Norton Healthcare; Insured: Natl-Re) | A/Baa1 | 4,055,000 | 4,055,405 | |||||||
Kentucky Economic DFA, 0% due 10/1/2021 (Norton Healthcare; Insured: Natl-Re) | A/Baa1 | 2,100,000 | 1,203,783 | |||||||
Kentucky Economic DFA, 5.00% due 5/1/2039 put 11/11/2014 (Catholic Health) | AA/Aa2 | 5,000,000 | 5,652,200 | |||||||
Kentucky Municipal Power Agency, 4.00% due 9/1/2015 (Insured: Assured Guaranty) | AAA/Aa3 | 2,955,000 | 3,245,536 | |||||||
LOUISIANA — 2.81% | ||||||||||
East Baton Rouge Sewer, 4.00% due 2/1/2013 | AA-/Aa2 | 1,000,000 | 1,068,390 | |||||||
East Baton Rouge Sewer, 5.00% due 2/1/2014 | AA-/Aa2 | 1,000,000 | 1,120,920 | |||||||
East Baton Rouge Sewer, 5.00% due 2/1/2018 (Insured: AGM) | AAA/Aa2 | 3,000,000 | 3,406,080 | |||||||
Ernest N. Morial New Orleans Exhibit Hall, 5.00% due 7/15/2013 (Insured: AMBAC) | BBB/NR | 2,075,000 | 2,204,148 | |||||||
Jefferson Sales Tax, 5.00% due 12/1/2018 (Insured: AGM) | AAA/Aa3 | 2,000,000 | 2,354,720 | |||||||
Louisiana Citizens Property Insurance Corp., 5.00% due 6/1/2015 (Insured: AMBAC) | A-/Baa2 | 10,265,000 | 11,213,281 | |||||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 9/1/2012 (Bellemont Apartments) | NR/Ba3 | 370,000 | 369,985 | |||||||
Louisiana Environmental Facilities & Community Development Authority, 4.00% due 10/1/2013 (LCTCS Facilities Corp.) | A+/A3 | 1,500,000 | 1,617,510 | |||||||
Louisiana Environmental Facilities & Community Development Authority, 4.00% due 10/1/2014 (LCTCS Facilities Corp.) | A+/A3 | 1,500,000 | 1,636,485 | |||||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2015 (Independence Stadium) | A/NR | 1,000,000 | 1,101,940 | |||||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2016 (Independence Stadium) | A/NR | 1,000,000 | 1,109,040 | |||||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2017 (Independence Stadium) | A/NR | 1,265,000 | 1,403,669 | |||||||
Louisiana Environmental Facilities & Community Development Authority, 5.00% due 3/1/2018 (Independence Stadium) | A/NR | 1,000,000 | 1,107,230 | |||||||
a Louisiana Offshore Terminal Authority, 5.00% due 10/1/2018 (Loop LLC) | A/NR | 22,000,000 | 24,809,400 | |||||||
Louisiana Public Facilities Authority Hospital Revenue, 5.75% due 7/1/2015 (Franciscan Missionaries; Insured: AGM) | AAA/Aa3 | 1,325,000 | 1,511,679 | |||||||
a Louisiana Public Facilities Authority Revenue, 5.00% due 8/1/2012 (Department of Public Safety; Insured: AGM) | AAA/Aa3 | 1,250,000 | 1,331,713 | |||||||
Louisiana Public Facilities Authority Revenue, 5.00% due 8/1/2013 (Department of Public Safety; Insured: AGM) | AAA/Aa3 | 2,500,000 | 2,736,175 | |||||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2014 (Ochsner Clinic Foundation) | NR/Baa1 | 1,000,000 | 1,073,090 | |||||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2015 (Ochsner Clinic Foundation) | NR/Baa1 | 1,825,000 | 1,970,909 | |||||||
b Louisiana Public Facilities Authority Revenue, 2.875% due 11/1/2015 (Entergy Gulf States) | BBB+/A3 | 2,500,000 | 2,497,150 | |||||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2016 (Ochsner Clinic Foundation) | NR/Baa1 | 1,000,000 | 1,074,360 | |||||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2017 (Ochsner Clinic Foundation) | NR/Baa1 | 1,035,000 | 1,108,350 | |||||||
Louisiana Public Facilities Authority Revenue, 5.00% due 5/15/2018 (Ochsner Clinic Foundation) | NR/Baa1 | 1,000,000 | 1,059,440 | |||||||
Louisiana Public Facilities Authority Revenue, 7.00% due 12/1/2038 put 12/1/2011 (Cleco Power LLC) | BBB/Baa2 | 9,000,000 | 9,453,060 | |||||||
Louisiana State GO, 5.00% due 8/1/2017 (Insured: Natl-Re) | AA-/Aa2 | 4,000,000 | 4,590,200 | |||||||
Monroe Sales Tax Increment Garrett Road Economic Development Area, 5.00% due 3/1/2017 pre-refunded 3/1/2015 (Insured: Radian) | NR/NR | 1,505,000 | 1,710,749 | |||||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | BBB/Baa3 | 2,400,000 | 2,579,976 | |||||||
Parishwide School District GO, 5.00% due 9/1/2016 (Insured: AGM) | AAA/Aa3 | 4,500,000 | 5,191,875 | |||||||
Parishwide School District GO, 5.00% due 9/1/2018 (Insured: AGM) | AAA/Aa3 | 4,800,000 | 5,548,992 | |||||||
Parishwide School District GO, 5.00% due 9/1/2020 (Insured: AGM) | AAA/Aa3 | 3,840,000 | 4,436,467 | |||||||
Plaquemines Parish Law Enforcement District GO, 5.00% due 9/1/2019 | BBB+/NR | 1,005,000 | 1,087,028 | |||||||
Certified Annual Report 23
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Plaquemines Parish Law Enforcement District GO, 5.00% due 9/1/2021 | BBB+/NR | $ | 1,115,000 | $ | 1,187,587 | |||||
Regional Transportation Authority, 8.00% due 12/1/2011 (Insured: Natl-Re/FGIC) | A-/NR | 1,250,000 | 1,332,387 | |||||||
b Regional Transportation Authority, 5.00% due 12/1/2017 (Sales Tax; Insured: AGM) | AAA/Aa3 | 755,000 | 865,464 | |||||||
b Regional Transportation Authority, 5.00% due 12/1/2019 (Sales Tax; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,143,640 | |||||||
b Regional Transportation Authority, 5.00% due 12/1/2021 (Sales Tax; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,124,180 | |||||||
b Regional Transportation Authority, 5.00% due 12/1/2022 (Sales Tax; Insured: AGM) | AAA/Aa3 | 1,110,000 | 1,233,809 | |||||||
St. Tammany Parish, 5.00% due 6/1/2017 (Insured: CIFG) | A+/NR | 1,405,000 | 1,588,367 | |||||||
MAINE — 0.09% | ||||||||||
Maine Finance Authority Solid Waste Disposal, 3.80% due 11/1/2015 (Waste Management, Inc.) | BBB/NR | 3,440,000 | 3,509,832 | |||||||
MASSACHUSETTS — 2.77% | ||||||||||
Massachusetts DFA, 5.625% due 1/1/2015 (Semass Partnership; Insured: Natl-Re) | A/Baa1 | 1,025,000 | 1,061,736 | |||||||
Massachusetts DFA, 3.45% due 12/1/2015 (Carleton-Willard Village) | A-/NR | 3,225,000 | 3,245,672 | |||||||
Massachusetts DFA, 5.625% due 1/1/2016 (Semass Partnership; Insured: Natl-Re) | A/Baa1 | 1,080,000 | 1,115,338 | |||||||
Massachusetts DFA Resource Recovery, 5.50% due 1/1/2011 (Semass Partnership; Insured: Natl-Re) | A/Baa1 | 3,970,000 | 4,000,807 | |||||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2017 | AA/NR | 1,700,000 | 1,945,803 | |||||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2018 | AA/NR | 7,500,000 | 8,442,825 | |||||||
Massachusetts Educational Financing Authority, 5.75% due 1/1/2020 | AA/NR | 7,500,000 | 8,556,075 | |||||||
Massachusetts GO, 0.32% due 3/1/2026 put 10/1/2010 (SPA: Dexia) (daily demand notes) | AA/Aa1 | 15,100,000 | 15,100,000 | |||||||
Massachusetts GO, 0.34% due 3/1/2026 put 10/1/2010 (SPA: Bank of America N.A.) (daily demand notes) | AA/Aa1 | 21,030,000 | 21,030,000 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2011 (Berkshire Health Systems; Insured: AGM) | AAA/NR | 2,345,000 | 2,433,078 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.375% due 5/15/2012 (New England Medical Center Hospital; Insured: Natl-Re/FGIC) (ETM) | NR/NR | 3,415,000 | 3,677,170 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2012 (Berkshire Health Systems; Insured: AGM) | AAA/NR | 2,330,000 | 2,484,572 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2013 (Berkshire Health Systems; Insured: AGM) | AAA/NR | 3,215,000 | 3,505,540 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 7/1/2014 (UMass Memorial Health Care) | BBB+/Baa1 | 2,750,000 | 2,949,787 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 7/1/2015 (UMass Memorial Health Care) | BBB+/Baa1 | 2,625,000 | 2,829,278 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 7/1/2018 (UMass Memorial Health Care) | BBB+/Baa1 | 4,290,000 | 4,561,514 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2019 (Berkshire Health Systems; Insured: AGM) | AAA/NR | 1,750,000 | 1,868,440 | |||||||
Massachusetts Health & Educational Facilities Authority, 0.22% due 8/15/2034 put 10/1/2010 (Tufts University; SPA: Bank of America N.A.) (daily demand notes) | AA-/Aa2 | 4,800,000 | 4,800,000 | |||||||
Massachusetts Health & Educational Facilities Authority, 0.31% due 12/1/2037 put 10/1/2010 (Museum of Fine Arts; SPA: Bank of America N.A.) (daily demand notes) | AA/Aa2 | 1,500,000 | 1,500,000 | |||||||
Massachusetts Solid Waste Disposal Revenue, 5.75% due 12/1/2042 put 5/1/2019 (Dominion Energy Brayton) | A-/Baa2 | 1,800,000 | 1,996,560 | |||||||
Massachusetts Western Turnpike Revenue, 5.55% due 1/1/2017 (Insured: Natl-Re) | A/Aa3 | 13,160,000 | 13,216,193 | |||||||
MICHIGAN — 4.94% | ||||||||||
Battle Creek, 5.00% due 5/1/2020 (Insured: AMBAC) | AA-/Aa3 | 3,200,000 | 3,544,928 | |||||||
Detroit Sewage Disposal Revenue, 5.00% due 7/1/2013 (Insured: AGM) | AAA/Aa3 | 1,590,000 | 1,720,650 | |||||||
Detroit Sewage Disposal Revenue, 5.00% due 7/1/2014 (Insured: Natl-Re) | A/A1 | 2,000,000 | 2,160,080 | |||||||
Detroit Sewage Disposal Revenue, 5.50% due 7/1/2015 (Insured: AGM) | AAA/Aa3 | 3,500,000 | 3,977,715 | |||||||
24 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Detroit Sewage Disposal Revenue, 5.50% due 7/1/2016 (Insured: Natl-Re) | A/Aa3 | $ | 375,000 | $ | 417,469 | |||||
Detroit Sewage Disposal Revenue, 5.50% due 7/1/2017 (Insured: AGM) | AAA/Aa3 | 550,000 | 634,546 | |||||||
Detroit Sewage Disposal Revenue, 5.25% due 7/1/2019 (Insured: Natl-Re) | A/Aa3 | 3,900,000 | 4,236,219 | |||||||
Detroit Sewage Disposal Revenue, 5.25% due 7/1/2020 (Insured: Natl-Re) | A/Aa3 | 3,415,000 | 3,669,383 | |||||||
Detroit Sewage Disposal Revenue, 5.25% due 7/1/2020 (Insured: Natl-Re) | A/Aa3 | 3,305,000 | 3,551,189 | |||||||
Detroit Water, 5.40% due 7/1/2011 (Insured: Natl-Re) | A/Aa3 | 1,000,000 | 1,024,440 | |||||||
Detroit Water Supply Systems, 6.00% due 7/1/2015 (Insured: Natl-Re) | A+/Aa3 | 3,280,000 | 3,764,325 | |||||||
Detroit Water Supply Systems, 5.00% due 7/1/2016 (Insured: AGM) | AAA/Aa3 | 2,750,000 | 3,026,293 | |||||||
Dickinson County Economic Development Corp. Environmental Impact, 5.75% due 6/1/2016 (International Paper Co.) | BBB/Baa3 | 4,845,000 | 4,979,933 | |||||||
Dickinson County Healthcare Systems, 5.50% due 11/1/2013 (Insured: ACA) | NR/NR | 2,535,000 | 2,564,533 | |||||||
Grand Haven Electric Revenue, 5.50% due 7/1/2016 (Insured: Natl-Re) | A/Baa1 | 3,890,000 | 4,276,044 | |||||||
Gull Lake Community School District GO, 0% due 5/1/2013 (Insured: Natl-Re/FGIC) | A/NR | 1,480,000 | 1,339,666 | |||||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 4.00% due 5/15/2015 (Bronson Hospital; Insured: AGM) | AAA/Aa3 | 1,735,000 | 1,838,840 | |||||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 4.00% due 5/15/2016 (Bronson Hospital; Insured: AGM) | AAA/Aa3 | 1,850,000 | 1,951,029 | |||||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 4.50% due 5/15/2017 (Bronson Hospital; Insured: AGM) | AAA/Aa3 | 1,830,000 | 1,968,915 | |||||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 5.00% due 5/15/2018 (Bronson Hospital; Insured: AGM) | AAA/Aa3 | 1,520,000 | 1,679,934 | |||||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 5.00% due 5/15/2018 (Bronson Hospital; Insured: AGM) | AAA/Aa3 | 2,500,000 | 2,763,050 | |||||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 5.00% due 5/15/2020 (Bronson Hospital; Insured: AGM) | NR/NR | 1,735,000 | 1,912,924 | |||||||
Kalamazoo Hospital Finance Authority Facilities Revenue, 5.00% due 5/15/2021 (Bronson Hospital; Insured: AGM) | NR/NR | 2,350,000 | 2,571,088 | |||||||
Kent Hospital Finance Authority, 5.25% due 1/15/2047 put 1/15/2014 (Spectrum Health) | AA/Aa3 | 5,865,000 | 6,569,093 | |||||||
Kentwood Public Schools GO, 5.00% due 5/1/2015 (Insured: Natl-Re) | AA-/Aa2 | 4,050,000 | 4,390,969 | |||||||
Lansing Steam & Electric Utility Systems, 5.00% due 7/1/2016 (Insured: AMBAC) | AA-/Aa2 | 2,000,000 | 2,119,880 | |||||||
Michigan HFA, 5.375% due 7/1/2012 (Port Huron Hospital; Insured: AGM) | AAA/Aa3 | 745,000 | 747,183 | |||||||
Michigan Housing Development Authority Rental Housing Revenue, 5.00% due 4/1/2016 (GO of Authority) | AA/NR | 4,685,000 | 4,891,562 | |||||||
Michigan State Building Authority, 5.25% due 10/1/2010 (State Police Communication Systems; Insured: Natl-Re) | A+/A1 | 2,000,000 | 2,000,240 | |||||||
Michigan State Building Authority, 5.25% due 10/15/2014 (Insured: AGM) | AAA/Aa3 | 4,300,000 | 4,796,048 | |||||||
Michigan State Building Authority, 5.00% due 10/15/2015 (Insured: AMBAC) | A+/Aa3 | 6,000,000 | 6,839,640 | |||||||
Michigan State Building Authority, 5.25% due 10/15/2015 (Insured: AGM) | AAA/Aa3 | 1,305,000 | 1,442,860 | |||||||
Michigan State Building Authority, 5.50% due 10/15/2017 | A+/Aa3 | 4,000,000 | 4,727,880 | |||||||
Michigan State COP, 4.25% due 9/1/2031 put 9/1/2011 (Insured: Natl-Re) | A/Baa1 | 5,500,000 | 5,516,390 | |||||||
Michigan State COP, 5.00% due 9/1/2031 put 9/1/2011 (Insured: Natl-Re) | A/Baa1 | 11,630,000 | 11,742,578 | |||||||
Michigan State HFA, 5.50% due 11/15/2015 (Henry Ford Health System) | A/A1 | 2,300,000 | 2,557,094 | |||||||
Michigan State HFA, 5.00% due 11/15/2017 (Sparrow Memorial Hospital) | A+/A1 | 1,000,000 | 1,089,880 | |||||||
Michigan State HFA, 5.50% due 11/15/2017 (Henry Ford Health System) | A/A1 | 1,530,000 | 1,701,039 | |||||||
Michigan State HFA, 5.50% due 11/15/2018 (Henry Ford Health System) | A/A1 | 3,500,000 | 3,889,165 | |||||||
Michigan State HFA, 5.75% due 12/1/2034 put 12/1/2015 (Trinity Health) | AA/Aa2 | 10,000,000 | 11,830,000 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2013 (Sparrow Hospital) | A+/A1 | 1,225,000 | 1,318,198 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2016 (Oakwood Hospital) | A/A2 | 1,205,000 | 1,295,230 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2016 (Ascension Health) | AA/Aa1 | 3,000,000 | 3,450,960 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2018 (Oakwood Hospital) | A/A2 | 1,000,000 | 1,060,120 | |||||||
Michigan State Hospital Finance Authority, 6.00% due 12/1/2018 (Trinity Health) | AA/Aa2 | 2,000,000 | 2,379,100 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2019 (Oakwood Hospital) | A/A2 | 2,000,000 | 2,105,520 | |||||||
Michigan State Hospital Finance Authority, 6.00% due 12/1/2020 (Trinity Health) | AA/Aa2 | 1,175,000 | 1,191,967 | |||||||
Certified Annual Report 25
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Michigan State Strategic Fund, 4.75% due 8/1/2011 (NSF International) | A-/NR | $ | 2,240,000 | $ | 2,282,874 | |||||
Michigan State Strategic Fund, 4.75% due 8/1/2012 (NSF International) | A-/NR | 2,345,000 | 2,429,186 | |||||||
Michigan State Strategic Fund, 5.00% due 10/15/2017 (Insured: AGM) | AAA/Aa3 | 2,000,000 | 2,312,600 | |||||||
Michigan State Strategic Fund, 5.25% due 6/1/2018 (Clark Retirement Community) | BBB-/NR | 910,000 | 905,960 | |||||||
Michigan State Strategic Fund, 5.25% due 8/1/2029 put 8/1/2014 (Detroit Edison Co.) | A-/NR | 2,500,000 | 2,749,725 | |||||||
Michigan State Strategic Fund, 5.50% due 8/1/2029 put 8/1/2016 (Detroit Edison Co.) | A-/NR | 2,500,000 | 2,833,950 | |||||||
Michigan State Strategic Fund, 4.85% due 9/1/2030 put 9/1/2011 (Detroit Edison Co.; Insured: AMBAC) | BBB/Baa1 | 4,850,000 | 4,941,762 | |||||||
Michigan Strategic Fund Solidwaste Disposal Revenue, 2.80% due 12/1/2013 (Waste Management Inc.) | BBB/NR | 2,850,000 | 2,863,794 | |||||||
Rockford Public Schools GO, 4.80% due 5/1/2017 (Insured: Q-SBLF) | AA-/Aa2 | 1,130,000 | 1,169,200 | |||||||
Romeo Community School District GO, 5.00% due 5/1/2018 (Insured: Natl-Re/Q-SBLF) | AA-/Aa2 | 3,050,000 | 3,397,975 | |||||||
Royal Oak Hospital Finance Authority Hospital Revenue, 6.25% due 9/1/2014 (William Beaumont Hospital) | A/A1 | 1,000,000 | 1,129,020 | |||||||
Royal Oak Hospital Finance Authority Hospital Revenue, 5.25% due 8/1/2017 (William Beaumont Hospital) | A/A1 | 5,855,000 | 6,343,248 | |||||||
Western Townships Utilities Authority Sewage Disposal GO, 3.00% due 1/1/2011 | AA/NR | 1,000,000 | 1,005,840 | |||||||
Western Townships Utilities Authority Sewage Disposal GO, 3.00% due 1/1/2012 | AA/NR | 655,000 | 672,174 | |||||||
Western Townships Utilities Authority Sewage Disposal GO, 4.00% due 1/1/2013 | AA/NR | 1,000,000 | 1,065,960 | |||||||
Western Townships Utilities Authority Sewage Disposal GO, 4.00% due 1/1/2014 | AA/NR | 1,000,000 | 1,084,370 | |||||||
Western Townships Utilities Authority Sewage Disposal GO, 5.00% due 1/1/2015 | AA/NR | 1,870,000 | 2,121,272 | |||||||
Western Townships Utilities Authority Sewage Disposal GO, 5.00% due 1/1/2016 | AA/NR | 1,670,000 | 1,915,891 | |||||||
Western Townships Utilities Authority Sewage Disposal GO, 5.00% due 1/1/2017 | AA/NR | 1,500,000 | 1,730,790 | |||||||
Western Townships Utilities Authority Sewage Disposal GO, 5.00% due 1/1/2018 | AA/NR | 1,500,000 | 1,735,425 | |||||||
Wyandotte School District GO, 4.00% due 5/1/2011 (Insured: Q-SBLF) | AAA/Aa3 | 2,810,000 | 2,860,411 | |||||||
MINNESOTA — 1.16% | ||||||||||
Dakota County Community Development Agency Multi Family Housing, 5.00% due 11/1/2017 (Commons on Marice) | NR/NR | 1,150,000 | 1,105,495 | |||||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2012 (HealthPartners Obligated Group) | BBB+/A3 | 1,000,000 | 1,057,580 | |||||||
Minneapolis St. Paul Health Care Systems, 5.25% due 12/1/2013 (HealthPartners Obligated Group) | BBB+/A3 | 2,200,000 | 2,364,032 | |||||||
Minneapolis St. Paul Metropolitan Airports, 5.00% due 1/1/2017 (Insured: AMBAC) | AA-/NR | 8,005,000 | 9,236,649 | |||||||
Minnesota Agricultural & Economic Development Board, 4.00% due 2/15/2014 (Essential Health; Insured: Assured Guaranty) | AAA/NR | 3,460,000 | 3,716,109 | |||||||
Minnesota Agricultural & Economic Development Board, 5.00% due 2/15/2015 (Essential Health; Insured: Assured Guaranty) | AAA/NR | 1,335,000 | 1,493,505 | |||||||
Minnesota Agricultural & Economic Development Board, 5.00% due 2/15/2017 (Essential Health; Insured: Assured Guaranty) | AAA/NR | 2,500,000 | 2,807,200 | |||||||
St. Cloud Health Care Revenue, 5.00% due 5/1/2012 (Centracare Health Systems) | NR/A2 | 1,000,000 | 1,055,020 | |||||||
St. Cloud Health Care Revenue, 5.00% due 5/1/2013 (Centracare Health Systems) | NR/A2 | 1,000,000 | 1,079,170 | |||||||
St. Cloud Health Care Revenue, 5.00% due 5/1/2015 (Centracare Health Systems) | NR/A2 | 1,000,000 | 1,109,960 | |||||||
St. Cloud Health Care Revenue, 5.00% due 5/1/2016 (Centracare Health Systems) | NR/A2 | 1,250,000 | 1,391,738 | |||||||
St. Cloud Health Care Revenue, 5.00% due 5/1/2017 (Centracare Health Systems) | NR/A2 | 2,920,000 | 3,281,438 | |||||||
St. Cloud Health Care Revenue, 5.00% due 5/1/2017 (Centracare Health Systems) | NR/A2 | 1,000,000 | 1,123,780 | |||||||
St. Cloud Health Care Revenue, 5.00% due 5/1/2018 (Centracare Health Systems) | NR/A2 | 3,105,000 | 3,441,209 | |||||||
St. Cloud Health Care Revenue, 5.00% due 5/1/2019 (Centracare Health Systems) | NR/A2 | 3,495,000 | 3,867,951 | |||||||
St. Cloud Health Care Revenue, 5.00% due 5/1/2020 (Centracare Health Systems) | NR/A2 | 3,200,000 | 3,527,648 | |||||||
St. Paul Housing & Redevelopment Authority Health Care Revenue, 5.00% due 2/1/2018 (Gillette Children’s Specialty) | A-/NR | 1,255,000 | 1,356,404 | |||||||
St. Paul Housing & Redevelopment Authority Health Care Revenue, 5.25% due 2/1/2020 (Gillette Children’s Specialty) | A-/NR | 2,010,000 | 2,176,127 | |||||||
26 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
St. Paul Housing & Redevelopment Authority Health Care Revenue, 5.25% due 5/15/2021 (HealthPartners Obligated Group) | BBB+/A3 | $ | 1,070,000 | $ | 1,111,323 | |||||
MISSISSIPPI — 0.99% | ||||||||||
Gautier Utility District Systems, 5.50% due 3/1/2012 (Insured: Natl-Re/FGIC) | NR/NR | 1,020,000 | 1,071,296 | |||||||
Medical Center Educational Building, 4.00% due 6/1/2015 (University of Mississippi Medical Center) | AA-/Aa2 | 2,325,000 | 2,548,572 | |||||||
Medical Center Educational Building, 4.00% due 6/1/2016 (University of Mississippi Medical Center) | AA-/Aa2 | 3,300,000 | 3,625,809 | |||||||
Mississippi Business Finance Corp., 0.25% due 12/1/2030 put 10/1/2010 (Chevron USA Inc; Guaranty Agreement: Chevron Corp.) (daily demand notes) | AA/Aa1 | 19,850,000 | 19,850,000 | |||||||
Mississippi Development Bank Canton Public Improvement GO, 4.75% due 7/1/2017 | NR/NR | 1,465,000 | 1,577,482 | |||||||
Mississippi Development Bank Special Obligation, 5.00% due 1/1/2011 (Insured: AGM/FGIC; Guaranty: Madison County) | AAA/Aa3 | 5,000,000 | 5,058,300 | |||||||
Mississippi Development Bank Special Obligation, 5.00% due 8/1/2018 (Department of Corrections) | AA-/NR | 4,910,000 | 5,653,914 | |||||||
MISSOURI — 0.73% | ||||||||||
Kansas City IDA, 4.00% due 9/1/2014 (NNSA National Security Campus) | NR/NR | 2,500,000 | 2,538,300 | |||||||
Missouri Development Finance Board Healthcare Facilities, 4.80% due 11/1/2012 (Lutheran Home Aged; LOC: Commerce Bank) | NR/Aa2 | 800,000 | 822,616 | |||||||
Missouri Housing Development Commission, 2.00% due 1/1/2012 | AA/NR | 3,000,000 | 3,051,960 | |||||||
Missouri Regional Convention & Sports Complex, 5.25% due 8/15/2016 (Insured: AMBAC) | AA+/Aa2 | 1,800,000 | 1,984,392 | |||||||
Missouri State Health & Educational Facilities Authority, 5.00% due 6/1/2011 (SSM Healthcare Corp.) | AA-/NR | 1,000,000 | 1,029,800 | |||||||
Missouri State Health & Educational Facilities Authority, 5.00% due 5/15/2017 (Children’s Mercy Hospital) | A+/NR | 1,000,000 | 1,096,020 | |||||||
Missouri State Health & Educational Facilities Authority, 5.00% due 5/15/2019 (Children’s Mercy Hospital) | A+/NR | 1,000,000 | 1,089,270 | |||||||
Missouri State Health & Educational Facilities Authority, 5.00% due 5/15/2020 (Children’s Mercy Hospital) | A+/NR | 1,000,000 | 1,076,070 | |||||||
Missouri State Health & Educational Facilities Authority, 0.27% due 2/15/2034 put 10/1/2010 (Washington University; Insured: Wells Fargo Bank N.A.) (daily demand notes) | AAA/Aaa | 14,210,000 | 14,210,000 | |||||||
Springfield Public Utilities COP, 5.00% due 12/1/2013 (Insured: Natl-Re) | AA/A1 | 2,000,000 | 2,209,280 | |||||||
NEBRASKA — 0.23% | ||||||||||
Madison County Hospital Authority, 5.50% due 7/1/2012 pre-refunded 1/1/2012 (Faith Regional Health Services; Insured: Radian) | NR/NR | 1,625,000 | 1,722,939 | |||||||
Omaha Public Power District Electric Systems, 5.00% due 2/1/2013 | AA/Aa1 | 5,000,000 | 5,450,250 | |||||||
University of Nebraska Facilities Corp., 2.00% due 7/15/2011 | AA/Aa1 | 2,100,000 | 2,128,497 | |||||||
NEVADA — 1.76% | ||||||||||
Clark County GO, 5.00% due 11/1/2014 | AA+/Aaa | 4,000,000 | 4,551,960 | |||||||
Clark County GO, 5.00% due 11/1/2017 (Insured: AMBAC) | AA+/Aaa | 1,185,000 | 1,368,118 | |||||||
Clark County Improvement District, 5.00% due 12/1/2015 (Insured: AMBAC) | BBB+/NR | 1,820,000 | 1,942,668 | |||||||
Clark County School District GO, 5.00% due 6/15/2015 (Insured: Natl-Re) | AA/Aa1 | 1,000,000 | 1,104,700 | |||||||
Clark County School District GO, 5.50% due 6/15/2015 (Insured: AGM) | AAA/Aa1 | 5,085,000 | 5,690,573 | |||||||
Las Vegas Clark County Library District GO, 5.00% due 1/1/2018 | AA/Aa2 | 6,535,000 | 7,532,698 | |||||||
Las Vegas Clark County Library District GO, 5.00% due 1/1/2019 | AA/Aa2 | 3,000,000 | 3,468,840 | |||||||
Las Vegas Convention & Visitors Authority, 5.25% due 7/1/2013 (Insured: AMBAC) | A+/Aa2 | 1,530,000 | 1,665,068 | |||||||
Las Vegas Convention & Visitors Authority, 5.25% due 7/1/2014 (Insured: AMBAC) | A+/Aa2 | 2,555,000 | 2,836,561 | |||||||
Las Vegas Convention & Visitors Authority, 5.00% due 7/1/2019 (Insured: AMBAC) | A+/Aa2 | 6,000,000 | 6,330,060 | |||||||
Certified Annual Report 27
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Las Vegas COP, 5.00% due 9/1/2016 (City Hall) | AA-/Aa2 | $ | 4,000,000 | $ | 4,506,160 | |||||
Las Vegas COP, 5.00% due 9/1/2017 (City Hall) | AA-/Aa2 | 4,300,000 | 4,841,413 | |||||||
Las Vegas COP, 5.00% due 9/1/2018 (City Hall) | AA-/Aa2 | 4,000,000 | 4,482,240 | |||||||
Las Vegas GO, 7.00% due 4/1/2017 (Performing Arts Center) | AA/Aa1 | 1,825,000 | 2,288,295 | |||||||
Las Vegas GO, 7.00% due 4/1/2018 (Performing Arts Center) | AA/Aa1 | 2,095,000 | 2,659,100 | |||||||
Las Vegas Special Local Improvement District 707, 5.125% due 6/1/2011 (Insured: AGM) | AAA/Aa3 | 1,535,000 | 1,542,690 | |||||||
Las Vegas Special Local Improvement District 707, 5.375% due 6/1/2013 (Insured: AGM) | AAA/Aa3 | 1,060,000 | 1,064,791 | |||||||
Las Vegas Valley Water District GO, 0.33% due 6/1/2036 put 10/1/2010 (SPA: Dexia) (daily demand notes) | AA+/Aa1 | 5,160,000 | 5,160,000 | |||||||
Las Vegas Water District GO, 5.00% due 6/1/2017 | AA+/Aa1 | 1,050,000 | 1,221,654 | |||||||
Las Vegas Water District GO, 5.00% due 6/1/2019 | AA+/Aa1 | 1,000,000 | 1,168,600 | |||||||
Las Vegas Water District GO, 0.33% due 6/1/2036 put 10/1/2010 (SPA: Dexia) (daily demand notes) | AA+/Aa1 | 1,135,000 | 1,135,000 | |||||||
Reno Hospital Revenue, 5.25% due 6/1/2014 (Washoe Medical Center; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,105,620 | |||||||
a Reno Hospital Revenue, 5.25% due 6/1/2016 (Washoe Medical Center; Insured: AGM) | AAA/Aa3 | 1,100,000 | 1,227,072 | |||||||
Reno Hospital Revenue, 5.25% due 6/1/2018 (Washoe Medical Center; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,119,910 | |||||||
NEW HAMPSHIRE — 0.29% | ||||||||||
New Hampshire Health & Educational Facilities, 4.50% due 8/1/2014 (Dartmouth-Hitchcock) | A+/NR | 1,835,000 | 1,982,938 | |||||||
New Hampshire Health & Educational Facilities, 5.00% due 10/1/2016 (Southern NH Health Systems) | A-/NR | 1,260,000 | 1,350,607 | |||||||
New Hampshire Health & Educational Facilities, 5.00% due 10/1/2017 (Southern NH Health Systems) | A-/NR | 1,000,000 | 1,070,000 | |||||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2016 (Insured: Natl-Re) | AA/Aa3 | 2,985,000 | 3,526,718 | |||||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2017 (Insured: Natl-Re) | AA/Aa3 | 3,130,000 | 3,721,632 | |||||||
NEW JERSEY — 1.39% | ||||||||||
Hudson County COP, 7.00% due 12/1/2012 (Insured: Natl-Re) | A/Baa1 | 1,000,000 | 1,112,480 | |||||||
Hudson County COP, 7.00% due 12/1/2013 (Insured: Natl-Re) | A/Baa1 | 710,000 | 817,764 | |||||||
Hudson County COP, 6.25% due 12/1/2014 (Insured: Natl-Re) | A/Baa1 | 1,500,000 | 1,737,660 | |||||||
New Jersey EDA, 5.00% due 11/15/2011 (Seabrook Village) | NR/NR | 1,000,000 | 1,017,030 | |||||||
New Jersey EDA, 5.00% due 11/15/2014 (Seabrook Village) | NR/NR | 1,000,000 | 1,024,250 | |||||||
New Jersey EDA, 5.00% due 12/15/2016 (School Facilities Construction) | AA-/Aa3 | 10,000,000 | 11,545,300 | |||||||
New Jersey EDA Cigarette Tax Revenue, 5.00% due 6/15/2011 (Insured: Natl-Re/FGIC) | BBB/Baa3 | 5,000,000 | 5,065,800 | |||||||
New Jersey EDA Cigarette Tax Revenue, 5.00% due 6/15/2012 (Insured: Natl-Re/FGIC) | BBB/Baa3 | 7,375,000 | 7,593,668 | |||||||
New Jersey Higher Educational Assistance Authority, 5.00% due 12/1/2017 | AA/Aa2 | 1,500,000 | 1,661,865 | |||||||
New Jersey Higher Educational Assistance Authority, 5.00% due 12/1/2018 | AA/Aa2 | 3,000,000 | 3,309,810 | |||||||
New Jersey Higher Educational Assistance Authority, 5.25% due 12/1/2019 | AA/Aa2 | 5,000,000 | 5,588,250 | |||||||
New Jersey State Transit Corp. COP, 5.25% due 9/15/2013 (Insured: AMBAC) | A/Aa3 | 6,000,000 | 6,551,040 | |||||||
New Jersey State Transit Corp. COP, 5.50% due 9/15/2013 (Insured: AMBAC) | A/Aa3 | 7,650,000 | 8,407,197 | |||||||
NEW MEXICO — 0.66% | ||||||||||
Albuquerque Airport, 5.50% due 7/1/2013 | A/A1 | 1,820,000 | 2,000,781 | |||||||
Gallup PCR, 5.00% due 8/15/2016 (Insured: AMBAC) | A/Baa1 | 2,400,000 | 2,609,304 | |||||||
Los Alamos County Gross Receipts Tax, 5.50% due 6/1/2017 | AA+/Aa3 | 2,365,000 | 2,865,221 | |||||||
Los Alamos County Gross Receipts Tax, 5.50% due 6/1/2018 | AA+/Aa3 | 2,205,000 | 2,698,788 | |||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2018 | AAA/Aaa | 5,000,000 | 5,810,000 | |||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2021 | AAA/Aaa | 3,000,000 | 3,438,810 | |||||||
New Mexico Highway Commission Tax, 5.00% due 6/15/2011 (Insured: AMBAC) (ETM) | AAA/Aa1 | 4,865,000 | 5,027,053 | |||||||
Santa Fe Gross Receipts Tax, 5.00% due 6/1/2011 | AA+/Aa3 | 1,750,000 | 1,801,152 | |||||||
28 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
NEW YORK — 6.44% | ||||||||||
Amherst Development Corp., 5.00% due 10/1/2015 (Student Housing; Insured: AGM) | AAA/Aa3 | $ | 1,535,000 | $ | 1,752,801 | |||||
Erie County Individual Development Agency, 5.00% due 5/1/2011 (Buffalo School District; Insured: AGM) | AAA/Aa3 | 8,750,000 | 8,985,025 | |||||||
Erie County Individual Development Agency, 5.00% due 5/1/2015 (Buffalo School District) | AA-/Aa3 | 3,000,000 | 3,450,270 | |||||||
Erie County Individual Development Agency, 5.00% due 5/1/2016 (Buffalo School District) | AA-/Aa3 | 8,795,000 | 10,240,458 | |||||||
Erie County Individual Development Agency, 5.00% due 5/1/2017 (Buffalo School District) | AA-/Aa3 | 7,265,000 | 8,512,546 | |||||||
Erie County Individual Development Agency, 5.00% due 5/1/2018 (Buffalo School District) | AA-/Aa3 | 5,000,000 | 5,870,100 | |||||||
Monroe County IDA, 5.375% due 6/1/2017 (St. John Fisher College; Insured: Radian) | NR/NR | 3,910,000 | 3,951,681 | |||||||
Nassau County Industrial Development Agency, 5.25% due 3/1/2018 (NY Institute of Technology) | BBB+/Baa2 | 1,260,000 | 1,397,214 | |||||||
Nassau County Industrial Development Agency, 5.25% due 3/1/2020 (NY Institute of Technology) | BBB+/Baa2 | 1,480,000 | 1,632,884 | |||||||
New York City GO, 3.00% due 8/1/2011 | AA/Aa2 | 17,400,000 | 17,789,412 | |||||||
New York City GO, 0.30% due 11/1/2026 put 10/1/2010 (Insured: AGM/SPA: Dexia ) (daily demand notes) | AAA/Aa2 | 19,760,000 | 19,760,000 | |||||||
New York City GO, 0.31% due 8/1/2028 put 10/1/2010 (SPA: Dexia) (daily demand notes) | AA/Aa2 | 17,560,000 | 17,560,000 | |||||||
New York City Health & Hospital Corp. GO of Corp., 5.00% due 2/15/2013 | A+/Aa3 | 2,755,000 | 2,981,323 | |||||||
New York City IDA, 5.25% due 6/1/2011 (Lycee Francais de New York; Insured: ACA) | BBB/Baa1 | 2,215,000 | 2,272,479 | |||||||
New York City IDA, 5.25% due 6/1/2012 (Lycee Francais de New York; Insured: ACA) | BBB/Baa1 | 2,330,000 | 2,471,967 | |||||||
New York City Municipal Water Finance Authority, 0.31% due 6/15/2033 put 10/1/2010 (SPA: Dexia) (daily demand notes) | AAA/Aa2 | 10,000,000 | 10,000,000 | |||||||
New York City Municipal Water Financing Authority, 5.375% due 6/15/2017 | AAA/Aa1 | 5,000,000 | 5,397,000 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2012 | AAA/Aaa | 5,000,000 | 5,456,450 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2014 | AAA/Aaa | 2,000,000 | 2,313,420 | |||||||
New York City Transitional Finance Authority, 5.00% due 1/15/2018 (State Aid Withholding) | AA-/Aa3 | 4,865,000 | 5,620,097 | |||||||
New York City Transitional Finance Authority, 0.27% due 8/1/2031 put 10/1/2010 (SPA: Landsbank Hessen) (daily demand notes) | AAA/Aaa | 2,600,000 | 2,600,000 | |||||||
New York Dormitory Authority, 5.25% due 5/15/2017 (Court Facilities Lease; Insured: AMBAC) | AA-/Aa3 | 3,585,000 | 4,168,638 | |||||||
New York Liberty Development Corp., 0.50% due 12/1/2049 put 1/18/2011 (World Trade Center) | A-1+/Aaa | 25,000,000 | 25,001,750 | |||||||
New York State Dormitory Authority, 5.50% due 7/1/2012 (Winthrop South Nassau University) | NR/Baa1 | 1,820,000 | 1,925,232 | |||||||
New York State Dormitory Authority, 5.00% due 11/1/2012 (Insured: SONYMA) | NR/Aa1 | 1,395,000 | 1,399,924 | |||||||
New York State Dormitory Authority, 5.50% due 7/1/2013 (Winthrop South Nassau University) | NR/Baa1 | 1,500,000 | 1,617,270 | |||||||
New York State Dormitory Authority, 5.25% due 8/15/2013 (Presbyterian Hospital; Insured: AGM/FHA) | AAA/Aa3 | 3,650,000 | 4,068,107 | |||||||
New York State Dormitory Authority, 5.00% due 11/1/2013 (Insured: SONYMA) | NR/Aa1 | 3,105,000 | 3,115,712 | |||||||
New York State Dormitory Authority, 3.00% due 8/15/2014 (Mental Health Services) | AA-/NR | 2,640,000 | 2,788,210 | |||||||
New York State Dormitory Authority, 5.00% due 11/1/2014 (Insured: SONYMA) | NR/Aa1 | 1,010,000 | 1,013,414 | |||||||
New York State Dormitory Authority, 5.25% due 8/15/2015 (New York Presbyterian Hospital; Insured: AGM/FHA) | AAA/Aa3 | 4,825,000 | 5,357,825 | |||||||
New York State Dormitory Authority, 5.50% due 7/1/2016 (Brooklyn Law School; Insured: Radian) | BBB+/Baa1 | 1,220,000 | 1,304,290 | |||||||
New York State Dormitory Authority, 5.50% due 2/15/2017 (Mental Health Services) | AA-/NR | 5,000,000 | 5,902,300 | |||||||
New York State Dormitory Authority, 5.50% due 7/1/2017 (Brooklyn Law School; Insured: Radian) | BBB+/Baa1 | 2,500,000 | 2,654,975 | |||||||
New York State Dormitory Authority, 5.50% due 10/1/2017 (School Districts Financing; Insured: Natl-Re; State Aid Withholding) | A+/A2 | 1,570,000 | 1,687,624 | |||||||
New York State Dormitory Authority, 5.50% due 2/15/2018 (Mental Health Services) | AA-/NR | 5,000,000 | 5,954,300 | |||||||
New York State Dormitory Authority, 5.25% due 11/15/2026 put 5/15/2012 (Insured: AMBAC) | AA-/Aa3 | 4,000,000 | 4,275,160 | |||||||
New York State Thruway Authority Service Contract, 5.50% due 4/1/2013 (Local Highway & Bridge; Insured: Syncora) | AA-/Aa3 | 1,000,000 | 1,071,290 | |||||||
Port Authority 148th, 5.00% due 8/15/2017 (Insured: AGM; GO of Authority) | AAA/Aa2 | 4,725,000 | 5,661,022 | |||||||
Rockland County GO, 1.50% due 3/9/2011 | NR/Mig1 | 17,500,000 | 17,549,700 | |||||||
Suffolk County Industrial Development Agency Civic Facilities GO, 5.25% due 3/1/2019 (NY Institute of Technology) | BBB+/Baa2 | 1,400,000 | 1,483,692 | |||||||
Tobacco Settlement Financing Corp. Asset Backed, 5.00% due 6/1/2011 | AA-/NR | 1,695,000 | 1,745,036 | |||||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2013 (Insured: Syncora) | AA-/Aa3 | 715,000 | 717,503 | |||||||
Certified Annual Report 29
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Tobacco Settlement Financing Corp. Asset Backed, 5.25% due 6/1/2013 | AA-/Aa3 | $ | 1,145,000 | $ | 1,149,008 | |||||
Tobacco Settlement Financing Corp. Asset Backed, 5.50% due 6/1/2015 | AA-/Aa3 | 3,000,000 | 3,011,100 | |||||||
United Nations Development Corp., 5.00% due 7/1/2016 | NR/A1 | 3,400,000 | 3,945,564 | |||||||
United Nations Development Corp., 5.00% due 7/1/2017 | NR/A1 | 3,000,000 | 3,497,700 | |||||||
United Nations Development Corp., 5.00% due 7/1/2019 | NR/A1 | 4,000,000 | 4,678,760 | |||||||
NORTH CAROLINA — 1.53% | ||||||||||
Buncombe County COP, 5.00% due 4/1/2019 (Insured: Natl-Re) | AA/Aa2 | 2,225,000 | 2,511,135 | |||||||
Charlotte Mecklenberg Hospital Authority Health Care Systems, 5.00% due 1/15/2016 (Carolinas Health Network) | AA-/Aa3 | 3,420,000 | 3,904,956 | |||||||
Charlotte Mecklenberg Hospital Authority Health Care Systems, 5.00% due 1/15/2017 (Carolinas Health Network) | AA-/Aa3 | 2,000,000 | 2,296,880 | |||||||
Mecklenburg County COP, 5.00% due 2/1/2011 | AA+/Aa1 | 1,000,000 | 1,015,570 | |||||||
North Carolina Eastern Municipal Power Agency, 5.375% due 1/1/2011 | A-/Baa1 | 3,000,000 | 3,034,620 | |||||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2012 | A-/Baa1 | 650,000 | 683,209 | |||||||
North Carolina Eastern Municipal Power Agency, 5.50% due 1/1/2012 | A-/Baa1 | 1,100,000 | 1,158,762 | |||||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2013 | A-/Baa1 | 1,055,000 | 1,147,692 | |||||||
North Carolina Eastern Municipal Power Agency, 7.00% due 1/1/2013 (Insured: Natl-Re) | A/Baa1 | 2,990,000 | 3,193,051 | |||||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2016 (Insured: AMBAC) | A-/NR | 1,700,000 | 1,938,476 | |||||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: AMBAC) | NR/Baa1 | 7,500,000 | 9,070,500 | |||||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: BHAC/AMBAC) | AA+/Aa1 | 5,700,000 | 6,960,612 | |||||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2019 (Insured: AGM) | AAA/Aa3 | 3,000,000 | 3,434,790 | |||||||
North Carolina Infrastructure Finance Corp. COP, 5.00% due 2/1/2017 (Correctional Facilities) | AA+/Aa1 | 2,400,000 | 2,632,488 | |||||||
North Carolina Medical Care Commission, 5.00% due 9/1/2013 (Rowan Regional Medical Center; Insured: AGM/FHA 242) | AAA/Aa3 | 1,000,000 | 1,087,200 | |||||||
North Carolina Municipal Power Agency, 5.50% due 1/1/2013 (Catawba Electric) (ETM) | NR/NR | 800,000 | 883,960 | |||||||
North Carolina Municipal Power Agency, 5.50% due 1/1/2013 (Catawba Electric) | NR/A2 | 1,705,000 | 1,874,255 | |||||||
North Carolina Municipal Power Agency, 5.25% due 1/1/2017 (Catawba Electric) | A/A2 | 3,000,000 | 3,495,480 | |||||||
North Carolina State Infrastructure Finance Corp. COP, 5.00% due 2/1/2016 (Correctional Facilities) | AA+/Aa1 | 5,000,000 | 5,540,550 | |||||||
University of North Carolina Systems Pool Revenue, 5.00% due 4/1/2012 (Insured: AMBAC) | NR/NR | 1,030,000 | 1,086,743 | |||||||
Wake County GO, 5.00% due 3/1/2011 | AAA/Aaa | 4,000,000 | 4,079,240 | |||||||
NORTH DAKOTA — 0.07% | ||||||||||
Ward County Health Care Facilities, 5.00% due 7/1/2011 (Trinity Obligated Group) | BBB+/NR | 1,000,000 | 1,019,020 | |||||||
Ward County Health Care Facilities, 5.00% due 7/1/2013 (Trinity Obligated Group) | BBB+/NR | 1,560,000 | 1,632,088 | |||||||
OHIO — 3.01% | ||||||||||
Akron COP, 5.00% due 12/1/2013 (Insured: AGM) | AAA/NR | 3,000,000 | 3,375,420 | |||||||
Akron COP, 5.00% due 12/1/2014 (Insured: AGM) | AAA/NR | 2,000,000 | 2,304,180 | |||||||
Allen County Hospital Facilities, 5.00% due 9/1/2015 (Catholic Healthcare Partners) | AA-/A1 | 10,000,000 | 11,245,400 | |||||||
Allen County Hospital Facilities, 5.00% due 9/1/2016 (Catholic Healthcare Partners) | AA-/A1 | 10,000,000 | 11,302,800 | |||||||
American Municipal Power, 5.25% due 2/15/2018 (Hydroelectric) | A/A2 | 5,500,000 | 6,331,160 | |||||||
American Municipal Power, 5.25% due 2/15/2019 (Hydroelectric) | A/A2 | 5,015,000 | 5,783,198 | |||||||
Cleveland Cuyahoga County Cultural Facilities Revenue, 5.00% due 10/1/2019 (Cleveland Museum of Art) | AA+/NR | 2,000,000 | 2,329,820 | |||||||
Greater Cleveland Regional Transportation Authority GO, 5.00% due 12/1/2015 (Insured: Natl-Re) | NR/Aa2 | 1,000,000 | 1,151,120 | |||||||
Hudson City GO, 6.35% due 12/1/2011 pre-refunded 12/1/2010 (Library Improvement) | NR/Aaa | 960,000 | 989,001 | |||||||
Montgomery County, 6.00% due 12/1/2010 (Catholic Health Initiatives) | AA/Aa2 | 1,530,000 | 1,544,673 | |||||||
Montgomery County, 5.25% due 10/1/2038 put 11/1/2013 (Catholic Health Initiatives) | AA/Aa2 | 2,500,000 | 2,792,800 | |||||||
Montgomery County, 4.10% due 10/1/2041 put 11/10/2011 (Catholic Health Initiatives) | AAA/Aa2 | 2,500,000 | 2,588,375 | |||||||
Ohio State Air Quality Development Authority, 5.625% due 6/1/2018 (FirstEnergy Nuclear) | BBB-/Baa1 | 5,000,000 | 5,584,250 | |||||||
30 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Ohio State Air Quality Development Authority, 5.75% due 6/1/2033 put 12/1/2011 (FirstEnergy Nuclear) | BBB-/Baa2 | $ | 2,500,000 | $ | 2,826,350 | |||||
b Ohio State Air Quality Development Authority, 3.375% due 1/1/2034 put 7/1/2015 (FirstEnergy Nuclear) | BBB-/Baa2 | 7,200,000 | 7,182,504 | |||||||
Ohio State Air Quality Development Authority, 3.875% due 12/1/2038 put 6/1/2014 (Columbus Southern Power Co.) | BBB/A3 | 4,800,000 | 5,025,936 | |||||||
Ohio State Building Authority, 5.00% due 10/1/2015 (Insured: Natl-Re/FGIC) | AA/Aa2 | 4,600,000 | 5,334,666 | |||||||
Ohio State Department Administrative Services COP, 5.00% due 9/1/2015 (Insured: Natl-Re) | AA/Aa2 | 1,950,000 | 2,189,460 | |||||||
Ohio State GO, 4.00% due 10/1/2014 put 6/1/2014 | AA-/Aa3 | 2,075,000 | 2,300,117 | |||||||
Ohio State Higher Educational Facilities, 5.05% due 7/1/2037 put 7/1/2016 (Kenyon College) | A+/A1 | 3,375,000 | 3,774,802 | |||||||
Ohio State Water Development Authority PCR, 5.875% due 6/1/2033 put 6/1/2016 (FirstEnergy Nuclear) | BBB-/Baa1 | 5,000,000 | 5,590,050 | |||||||
b Ohio State Water Development Authority PCR, 3.375% due 1/1/2034 put 7/1/2015 (FirstEnergy Nuclear) | BBB-/Baa2 | 24,400,000 | 24,340,708 | |||||||
University Akron Ohio General Receipts, 5.00% due 1/1/2018 (Insured: AGM) | AAA/Aa3 | 3,415,000 | 3,936,368 | |||||||
OKLAHOMA — 2.81% | ||||||||||
Cleveland County ISD, 3.00% due 3/1/2012 | NR/Aa2 | 4,040,000 | 4,171,462 | |||||||
Cleveland County Public Facilities Authority, 4.00% due 6/1/2013 (Norman Public Schools) | A+/NR | 5,000,000 | 5,320,400 | |||||||
Cleveland County Public Facilities Authority, 4.00% due 6/1/2014 (Norman Public Schools) | A+/NR | 5,000,000 | 5,390,300 | |||||||
Comanche County Hospital Authority, 5.00% due 7/1/2011 (Insured: Radian) | BBB-/NR | 1,000,000 | 1,019,400 | |||||||
Comanche County Hospital Authority, 5.25% due 7/1/2015 (Insured: Radian) | BBB-/NR | 1,340,000 | 1,445,431 | |||||||
Oklahoma County Finance Authority Educational Facilities, 3.50% due 3/1/2012 (Putnam City Public Schools) | A/NR | 3,825,000 | 3,931,373 | |||||||
Oklahoma County Finance Authority Educational Facilities, 4.00% due 3/1/2013 (Putnam City Public Schools) | A/NR | 2,580,000 | 2,725,151 | |||||||
a Oklahoma County Finance Authority Educational Facilities, 3.125% due 9/1/2013 (Western Heights Public Schools) | A+/NR | 2,525,000 | 2,605,143 | |||||||
Oklahoma County Finance Authority Educational Facilities, 4.00% due 3/1/2014 (Putnam City Public Schools) | A/NR | 3,380,000 | 3,618,053 | |||||||
Oklahoma County Finance Authority Educational Facilities, 5.00% due 9/1/2016 (Western Heights Public Schools) | A+/NR | 3,000,000 | 3,352,440 | |||||||
Oklahoma County Finance Authority Educational Facilities, 5.00% due 9/1/2017 (Western Heights Public Schools) | A+/NR | 4,075,000 | 4,556,461 | |||||||
Oklahoma County Finance Authority Educational Facilities, 5.00% due 9/1/2018 (Western Heights Public Schools) | A+/NR | 2,120,000 | 2,367,743 | |||||||
Oklahoma County ISD, 3.00% due 1/1/2012 | A+/NR | 3,880,000 | 3,995,546 | |||||||
Oklahoma County ISD, 3.00% due 1/1/2013 | A+/NR | 3,880,000 | 4,080,868 | |||||||
Oklahoma County ISD, 3.00% due 1/1/2014 | A+/NR | 3,880,000 | 4,127,699 | |||||||
Oklahoma County ISD, 3.00% due 1/1/2015 | A+/NR | 3,735,000 | 3,998,430 | |||||||
Oklahoma DFA, 5.75% due 6/1/2011 pre-refunded 12/1/2010 (Integris Health; Insured: AMBAC) | NR/Aa3 | 740,000 | 754,245 | |||||||
Oklahoma DFA Health Facilities, 5.00% due 8/15/2017 (Integris Health) | AA-/Aa3 | 4,375,000 | 4,955,431 | |||||||
Oklahoma DFA Health Systems, 5.25% due 12/1/2011 (Duncan Regional Hospital) | A/NR | 1,215,000 | 1,268,606 | |||||||
Oklahoma DFA Health Systems, 5.25% due 12/1/2012 (Duncan Regional Hospital) | A/NR | 1,330,000 | 1,428,487 | |||||||
Oklahoma Municipal Power Authority, 5.00% due 1/1/2013 | A/A2 | 3,745,000 | 4,085,720 | |||||||
Oklahoma Municipal Power Authority, 5.00% due 1/1/2014 (Insured: AGM) | AAA/Aa3 | 4,005,000 | 4,487,643 | |||||||
Oklahoma State Capital Improvement Authority, 0.32% due 7/1/2032 put 10/1/2010 (SPA: Bank of America N.A.) (daily demand notes) | AA/A1 | 10,900,000 | 10,900,000 | |||||||
Oklahoma State Capital Improvement Authority, 0.32% due 7/1/2033 put 10/1/2010 (daily demand notes) | AA/A1 | 14,600,000 | 14,600,000 | |||||||
Oklahoma State Capital Improvement Authority, 0.32% due 7/1/2034 put 10/1/2010 (SPA: Bank of America N.A.) (daily demand notes) | AA/A1 | 10,200,000 | 10,200,000 | |||||||
Oklahoma State Industrial Authority, 5.00% due 7/1/2016 (Medical Research Foundation) | NR/A1 | 1,165,000 | 1,287,220 | |||||||
Certified Annual Report 31
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Oklahoma State Industrial Authority, 5.25% due 7/1/2017 (Medical Research Foundation) | NR/A1 | $ | 1,075,000 | $ | 1,201,603 | |||||
OREGON — 0.32% | ||||||||||
Clackamas County Oregon Hospital Facilities, 5.00% due 7/15/2037 put 7/15/2014 (Legacy Health Systems) | A+/A2 | 6,000,000 | 6,659,040 | |||||||
Clackamas County Oregon Hospital Facilities, 5.00% due 7/15/2039 put 7/15/2012 (Legacy Health Systems) | A+/A2 | 2,000,000 | 2,121,260 | |||||||
Oregon Facilities Authority Revenue, 5.00% due 3/15/2015 (Legacy Health) | A+/A2 | 1,635,000 | 1,808,310 | |||||||
Oregon Facilities Authority Revenue, 5.00% due 3/15/2016 (Legacy Health) | A+/A2 | 1,000,000 | 1,103,280 | |||||||
Oregon State Department of Administrative Services COP, 5.00% due 11/1/2014 (Insured: Natl-Re/FGIC) | AA-/Aa2 | 1,000,000 | 1,145,910 | |||||||
PENNSYLVANIA — 4.39% | ||||||||||
Adams County IDA, 5.00% due 8/15/2014 (Gettysburg College) | A/A2 | 1,000,000 | 1,129,530 | |||||||
Adams County IDA, 5.00% due 8/15/2016 (Gettysburg College) | A/A2 | 1,250,000 | 1,441,425 | |||||||
Adams County IDA, 5.00% due 8/15/2017 (Gettysburg College) | A/A2 | 1,340,000 | 1,548,812 | |||||||
Adams County IDA, 5.00% due 8/15/2019 (Gettysburg College) | A/A2 | 1,765,000 | 2,042,970 | |||||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2017 (UPMC Health Systems) | A+/Aa3 | 3,000,000 | 3,428,580 | |||||||
Allegheny County Hospital Development Authority, 5.00% due 5/15/2018 (UPMC Health Systems) | A+/Aa3 | 5,915,000 | 6,793,969 | |||||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2018 (UPMC Health Systems) | A+/Aa3 | 3,000,000 | 3,423,360 | |||||||
Allegheny County Redevelopment Authority, 5.10% due 7/1/2014 (Pittsburgh Mills) | NR/NR | 1,450,000 | 1,464,370 | |||||||
Chester County School Authority, 5.00% due 4/1/2016 (Intermediate School; Insured: AMBAC) | A+/NR | 1,915,000 | 2,167,512 | |||||||
Commonwealth of Pennsylvania, 5.00% due 2/15/2011 | AA/Aa1 | 5,000,000 | 5,088,450 | |||||||
Montgomery County IDA, 5.00% due 8/1/2016 (Regional Medical Center; Insured: FHA) | AA/Aa2 | 1,000,000 | 1,123,960 | |||||||
Montgomery County IDA, 5.00% due 2/1/2017 (Regional Medical Center; Insured: FHA) | AA/Aa2 | 1,000,000 | 1,116,420 | |||||||
Montgomery County IDA, 5.00% due 2/1/2020 (Regional Medical Center; Insured: FHA) | AA/Aa2 | 1,000,000 | 1,108,450 | |||||||
Pennsylvania Economic Development Financing Authority, 3.00% due 12/1/2037 put 9/1/2015 (PPL Energy Supply) | BBB/Baa2 | 12,500,000 | 12,608,250 | |||||||
Pennsylvania EDA, 3.70% due 11/1/2021 put 5/1/2015 (Waste Management, Inc.) | BBB/NR | 7,750,000 | 7,870,823 | |||||||
Pennsylvania EDA, 5.00% due 12/1/2042 put 6/1/2012 (Exelon Generation) | NR/A3 | 2,550,000 | 2,688,771 | |||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 6/1/2015 (Philadelphia University) | BBB/Baa2 | 2,000,000 | 2,123,620 | |||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 5/15/2019 (UPMC Health Systems) | A+/Aa3 | 5,600,000 | 6,408,752 | |||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 5/15/2020 (UPMC Health Systems) | A+/Aa3 | 5,100,000 | 5,832,411 | |||||||
Pennsylvania Turnpike Commission Revenue, 0.79% due 12/1/2011 | A+/Aa3 | 2,500,000 | 2,491,200 | |||||||
Pennsylvania Turnpike Commission Revenue, 0.89% due 12/1/2012 | A+/Aa3 | 2,500,000 | 2,483,550 | |||||||
Philadelphia Authority for Industrial Development, 5.00% due 8/1/2020 (Mast Charter School) | BBB+/NR | 915,000 | 936,493 | |||||||
Philadelphia Gas Works, 5.375% due 7/1/2014 (Insured: AGM) | AAA/Aa3 | 7,280,000 | 8,248,458 | |||||||
Philadelphia Gas Works, 5.00% due 9/1/2014 (Insured: AGM) | AAA/Aa3 | 3,000,000 | 3,371,370 | |||||||
Philadelphia Gas Works, 5.00% due 10/1/2014 (Insured: AMBAC) | BBB+/Baa2 | 1,825,000 | 2,011,442 | |||||||
Philadelphia Gas Works, 5.00% due 9/1/2015 (Insured: AGM) | AAA/Aa3 | 3,315,000 | 3,671,263 | |||||||
Philadelphia Hospital & Higher Educational Facilities, 0.29% due 2/15/2021 put 10/1/2010 (Children’s Hospital; SPA: Bank of America) (daily demand notes) | AA/Aa2 | 11,200,000 | 11,200,000 | |||||||
Philadelphia Parking Authority Revenue, 5.00% due 9/1/2016 | A-/A1 | 1,500,000 | 1,707,420 | |||||||
Philadelphia Parking Authority Revenue, 5.00% due 9/1/2017 | A-/A1 | 1,020,000 | 1,163,483 | |||||||
Philadelphia School District GO, 5.00% due 9/1/2012 (State Aid Withholding) | A+/Aa2 | 5,000,000 | 5,342,900 | |||||||
Philadelphia School District GO, 5.00% due 9/1/2013 (State Aid Withholding) | A+/Aa2 | 5,000,000 | 5,487,450 | |||||||
Philadelphia School District GO, 4.50% due 9/1/2017 (State Aid Withholding) | A+/Aa2 | 2,270,000 | 2,498,725 | |||||||
Philadelphia School District GO, 5.00% due 9/1/2019 (State Aid Withholding) | A+/Aa2 | 15,000,000 | 16,890,600 | |||||||
32 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Philadelphia Water & Wastewater Revenue, 5.00% due 6/15/2013 (Insured: AGM) | AAA/Aa3 | $ | 7,020,000 | $ | 7,751,624 | |||||
Philadelphia Water & Wastewater Revenue, 5.00% due 6/15/2017 (Insured: AGM) | AAA/Aa3 | 5,570,000 | 6,468,552 | |||||||
Pittsburgh GO, 5.00% due 9/1/2012 (Insured: Natl-Re) | A/A1 | 3,415,000 | 3,632,638 | |||||||
Pittsburgh GO, 5.50% due 9/1/2014 (Insured: AMBAC) | BBB/A1 | 1,405,000 | 1,516,037 | |||||||
Pittsburgh GO, 5.50% due 9/1/2014 (Insured: AMBAC) | BBB/A1 | 1,750,000 | 1,826,808 | |||||||
Pittsburgh GO, 5.25% due 9/1/2016 (Insured: AGM) | AAA/Aa3 | 3,000,000 | 3,436,320 | |||||||
Pittsburgh GO, 5.25% due 9/1/2018 (Insured: AGM) | AAA/Aa3 | 3,240,000 | 3,621,996 | |||||||
Pittsburgh School District GO, 3.00% due 9/1/2011 (Insured: AGM) | AAA/Aa3 | 1,425,000 | 1,457,006 | |||||||
Pittsburgh School District GO, 3.00% due 9/1/2012 (Insured: AGM) | AAA/Aa3 | 1,670,000 | 1,740,040 | |||||||
Pittsburgh School District GO, 3.00% due 9/1/2013 (Insured: AGM) | AAA/Aa3 | 2,100,000 | 2,219,301 | |||||||
Pittsburgh Water & Sewer Authority Revenue, 2.625% due 9/1/2035 put 9/1/2012 (Insured: AGM) | AAA/NR | 2,000,000 | 2,020,880 | |||||||
Sayre HFA, 5.25% due 7/1/2011 (Latrobe Area Hospital; Insured: AMBAC) (ETM) | NR/NR | 1,400,000 | 1,450,330 | |||||||
Sayre HFA, 5.25% due 7/1/2012 (Latrobe Area Hospital; Insured: AMBAC) (ETM) | NR/NR | 1,000,000 | 1,080,210 | |||||||
RHODE ISLAND — 0.34% | ||||||||||
East Greenwich GO, 1.50% due 2/16/2011 | SP-1+/NR | 8,750,000 | 8,786,225 | |||||||
Providence GO, 5.50% due 1/15/2012 (Insured: Natl-Re/FGIC) | A/A1 | 1,880,000 | 1,991,202 | |||||||
Rhode Island COP, 5.00% due 10/1/2014 (Providence Plantations; Insured Natl-Re) | AA-/Aa3 | 1,000,000 | 1,132,860 | |||||||
Rhode Island State Health & Education Building Corp., 5.25% due 7/1/2014 (Memorial Hospital; LOC: Fleet Bank) | NR/NR | 1,565,000 | 1,686,100 | |||||||
SOUTH CAROLINA — 1.40% | ||||||||||
Georgetown County Environmental Improvement, 5.70% due 4/1/2014 (International Paper Co.) | BBB/Baa3 | 7,975,000 | 8,708,939 | |||||||
Greenville County School District, 5.25% due 12/1/2015 (Building Equity Sooner Tomorrow) | AA/Aa2 | 1,000,000 | 1,105,730 | |||||||
Greenville County School District, 5.50% due 12/1/2016 (Building Equity Sooner Tomorrow) | AA/Aa2 | 3,500,000 | 4,159,260 | |||||||
Greenwood County Hospital Facilities, 5.00% due 10/1/2013 (Self Regional Healthcare; Insured: AGM) | AAA/Aa3 | 2,000,000 | 2,194,880 | |||||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2015 (Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,144,920 | |||||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2016 (Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,153,440 | |||||||
Piedmont Municipal Power Agency, 6.75% due 1/1/2019 (Insured: Natl-Re/FGIC) | NR/Baa1 | 3,205,000 | 4,021,634 | |||||||
South Carolina Jobs Economic Development, 5.00% due 8/15/2014 (Insured: AGM; Care Alliance Health Services) | AAA/Aa3 | 4,000,000 | 4,461,520 | |||||||
South Carolina Jobs Economic Development, 5.00% due 8/15/2015 (Insured: AGM; Care Alliance Health Services) | AAA/Aa3 | 3,000,000 | 3,371,880 | |||||||
York County PCR, 0.75% due 9/15/2024 put 3/1/2011 (North Carolina Electric) | A/A2 | 11,000,000 | 10,998,900 | |||||||
York County PCR, 0.75% due 9/15/2024 put 3/1/2011 (North Carolina Electric) | A/A2 | 14,400,000 | 14,398,560 | |||||||
SOUTH DAKOTA — 0.09% | ||||||||||
South Dakota State Health & Educational Facilities Authority, 5.50% due 9/1/2011 (Rapid City Regional Hospital; Insured: Natl-Re) | A/A1 | 1,100,000 | 1,140,524 | |||||||
South Dakota State Health & Educational Facilities Authority, 6.00% due 11/1/2014 (Sioux Valley Hospital & Health Systems) | AA-/A1 | 1,015,000 | 1,069,698 | |||||||
South Dakota State Health & Educational Facilities Authority, 5.00% due 11/1/2015 (Sanford Health) | AA-/A1 | 1,310,000 | 1,466,336 | |||||||
TENNESSEE — 1.02% | ||||||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2014 | NR/A2 | 2,600,000 | 2,765,698 | |||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2015 | NR/A2 | 3,500,000 | 3,700,480 | |||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2019 | NR/A2 | 6,000,000 | 6,090,300 | |||||||
Knox County Health, Educational, & Housing Facilities, 0.35% due 1/1/2046 put 10/1/2010 (Covenant Health; Insured: Assured Guaranty, SPA: Suntrust Bank) (daily demand notes) | AAA/Aa3 | 1,400,000 | 1,400,000 | |||||||
Tennessee Energy Acquisition Corp., 5.00% due 9/1/2015 | BB+/Ba3 | 3,000,000 | 3,176,220 | |||||||
Certified Annual Report 33
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2017 | A/Baa1 | $ | 5,000,000 | $ | 5,238,350 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2017 | BB+/Ba3 | 11,000,000 | 11,644,270 | |||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2018 | BB+/Ba3 | 5,000,000 | 5,276,950 | |||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2020 | BB+/Ba3 | 1,190,000 | 1,248,393 | |||||||
TEXAS — 9.77% | ||||||||||
Amarillo Health Facilities Corp., 5.50% due 1/1/2011 (St. Anthony’s Hospital Corp.; Insured: AGM) | NR/Aa3 | 1,350,000 | 1,361,300 | |||||||
Amarillo Health Facilities Corp., 5.50% due 1/1/2015 (Baptist St. Anthony’s Hospital Corp.; Insured: AGM) | NR/Aa3 | 1,065,000 | 1,136,706 | |||||||
Austin Community College Public Facilities Corp., 5.25% due 8/1/2017 (Round Rock Campus) | AA+/Aa2 | 1,500,000 | 1,773,915 | |||||||
Austin Electrical Utilities Systems, 5.50% due 11/15/2013 (Insured: AMBAC) | A+/A1 | 1,000,000 | 1,133,300 | |||||||
Austin Water & Wastewater, 5.00% due 5/15/2014 (Insured: AMBAC) | AA/Aa2 | 2,890,000 | 3,299,715 | |||||||
Austin Water & Wastewater, 5.00% due 5/15/2015 (Insured: AMBAC) | AA/Aa2 | 1,520,000 | 1,768,733 | |||||||
Bexar County Housing Finance Corp. Multi Family Housing, 5.00% due 1/1/2011 (American Opportunity Housing; Insured: Natl-Re) | NR/Baa1 | 630,000 | 630,139 | |||||||
Bexar Metropolitan Water District Waterworks, 4.50% due 5/1/2021 (Insured: Natl-Re) | A/A1 | 1,200,000 | 1,230,756 | |||||||
Brazos River Authority, 4.90% due 10/1/2015 (Center Point Energy; Insured: Natl-Re) | A/Baa1 | 2,315,000 | 2,455,474 | |||||||
Bryan Electrical Systems, 4.00% due 7/1/2014 | A+/A1 | 1,300,000 | 1,424,878 | |||||||
Bryan Electrical Systems, 4.00% due 7/1/2014 | A+/A1 | 1,000,000 | 1,022,050 | |||||||
Bryan Electrical Systems, 4.00% due 7/1/2015 | A+/A1 | 1,110,000 | 1,131,900 | |||||||
Bryan Electrical Systems, 5.00% due 7/1/2015 | �� | A+/A1 | 1,150,000 | 1,319,763 | ||||||
Bryan Electrical Systems, 5.00% due 7/1/2016 | A+/A1 | 1,500,000 | 1,593,150 | |||||||
Bryan Electrical Systems, 5.00% due 7/1/2017 | A+/A1 | 3,205,000 | 3,388,230 | |||||||
Bryan Electrical Systems, 5.00% due 7/1/2019 | A+/A1 | 8,000,000 | 9,110,000 | |||||||
Clint ISD GO, 5.50% due 2/15/2011 (Guaranty: PSF) | AAA/Aaa | 1,700,000 | 1,733,269 | |||||||
Clint ISD GO, 5.50% due 2/15/2012 (Guaranty: PSF) | AAA/NR | 1,155,000 | 1,176,645 | |||||||
Collin County Limited Tax Improvement GO, 5.00% due 2/15/2016 | AAA/Aaa | 1,465,000 | 1,733,637 | |||||||
Corpus Christi Business & Job Development Corp., 5.00% due 9/1/2012 (Arena Project; Insured: AMBAC) | A/A2 | 1,025,000 | 1,095,295 | |||||||
Dallas Convention Center Hotel Development Corp., 0% due 1/1/2018 | A+/A1 | 5,240,000 | 3,906,630 | |||||||
Dallas Convention Center Hotel Development Corp., 5.00% due 1/1/2019 | A+/A1 | 5,200,000 | 5,841,836 | |||||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2017 (Insured: AMBAC) | BBB+/A3 | 1,160,000 | 1,277,404 | |||||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2017 (Insured: AMBAC) | BBB+/A3 | 1,260,000 | 1,387,525 | |||||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2018 (Insured: AMBAC) | BBB+/A3 | 1,935,000 | 2,095,799 | |||||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2018 (Insured: AMBAC) | BBB+/A3 | 2,035,000 | 2,204,108 | |||||||
Dallas County Texas Utility & Reclamation District, 5.00% due 2/15/2019 (Insured: AMBAC) | BBB+/A3 | 2,175,000 | 2,332,774 | |||||||
Dallas Fort Worth International Airport, 4.00% due 11/1/2012 | A+/A1 | 1,000,000 | 1,062,030 | |||||||
Dallas Fort Worth International Airport, 5.00% due 11/1/2013 | A+/A1 | 1,175,000 | 1,310,243 | |||||||
Dallas Fort Worth International Airport, 5.00% due 11/1/2014 | A+/A1 | 1,300,000 | 1,478,282 | |||||||
Dallas Fort Worth International Airport, 5.00% due 11/1/2015 | A+/A1 | 3,370,000 | 3,861,110 | |||||||
Denton GO, 2.00% due 2/15/2012 | AA/Aa2 | 3,115,000 | 3,171,818 | |||||||
Denton GO, 3.00% due 2/15/2014 | AA/Aa2 | 3,325,000 | 3,538,033 | |||||||
Denton GO, 4.00% due 2/15/2015 | AA/Aa2 | 3,445,000 | 3,831,529 | |||||||
Denton GO, 4.00% due 2/15/2016 | AA/Aa2 | 3,535,000 | 3,954,357 | |||||||
Denton GO, 5.00% due 2/15/2017 | AA/Aa2 | 3,675,000 | 4,331,722 | |||||||
Denton GO, 5.00% due 2/15/2018 | AA/Aa2 | 3,825,000 | 4,534,040 | |||||||
Denton GO, 5.00% due 2/15/2019 | AA/Aa2 | 3,990,000 | 4,750,374 | |||||||
Denton GO, 5.00% due 2/15/2020 | AA/Aa2 | 4,195,000 | 4,920,651 | |||||||
Duncanville ISD GO, 0% due 2/15/2011 (Guaranty: PSF) | AAA/Aaa | 4,945,000 | 4,936,742 | |||||||
Duncanville ISD GO, 0% due 2/15/2012 (Guaranty: PSF) | AAA/Aaa | 1,245,000 | 1,231,255 | |||||||
Fort Worth Water & Sewer, 5.25% due 2/15/2011 (Tarrant & Denton County) | AA/Aa1 | 1,390,000 | 1,415,465 | |||||||
Harris County Educational Facilities Finance Corp., 5.00% due 11/15/2015 (Teco Project) | AA/Aa3 | 1,450,000 | 1,664,513 | |||||||
Harris County Educational Facilities Finance Corp., 5.00% due 11/15/2018 (Teco Project) | AA/Aa3 | 1,365,000 | 1,593,173 | |||||||
34 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Harris County Educational Facilities Finance Corp., 5.00% due 11/15/2019 (Teco Project) | AA/Aa3 | $ | 1,000,000 | $ | 1,168,500 | |||||
Harris County Health Facilities Development Corp. Thermal Utility, 5.00% due 11/15/2015 (Teco Project; Insured: Natl-Re) | AA/Aa3 | 1,500,000 | 1,622,730 | |||||||
Harris County Hospital District Senior Lien, 5.00% due 2/15/2014 (Insured: Natl-Re) | A/A1 | 1,275,000 | 1,400,345 | |||||||
Harris County Hospital District Senior Lien, 5.00% due 2/15/2017 (Insured: Natl-Re) | A/A1 | 1,500,000 | 1,680,510 | |||||||
Harris County Sports Authority Senior Lien, 0% due 11/15/2010 (Insured: Natl-Re) | A/Baa1 | 3,260,000 | 3,241,711 | |||||||
Houston Airport Systems Revenue, 5.00% due 7/1/2015 | AA-/Aa3 | 2,600,000 | 2,976,142 | |||||||
Houston Airport Systems Revenue, 5.00% due 7/1/2017 | AA-/Aa3 | 1,600,000 | 1,854,608 | |||||||
Houston Airport Systems Revenue, 5.00% due 7/1/2018 | AA-/Aa3 | 1,000,000 | 1,158,360 | |||||||
Houston Airport Systems Revenue, 5.00% due 7/1/2019 | AA-/Aa3 | 2,750,000 | 3,145,175 | |||||||
Houston Higher Education Finance Corp., 0.22% due 5/15/2048 put 10/1/2010 (Rice University) (daily demand notes) | AAA/Aaa | 19,505,000 | 19,505,000 | |||||||
Houston ISD, 5.00% due 2/15/2014 (Limited Tax Schoolhouse) | AA+/Aaa | 2,000,000 | 2,271,460 | |||||||
Houston ISD, 5.00% due 2/15/2015 (Limited Tax Schoolhouse) | AA+/Aaa | 2,450,000 | 2,842,784 | |||||||
Houston ISD Public West Side, 0% due 9/15/2014 (Insured: AMBAC) | AA/Aa2 | 6,190,000 | 5,818,662 | |||||||
Houston Utilities System Revenue, 5.00% due 11/15/2013 (Insured: AGM) | AAA/Aa2 | 3,000,000 | 3,385,590 | |||||||
Hutto ISD GO, 0% due 8/1/2017 (Guaranty: PSF) | AAA/NR | 2,170,000 | 1,793,874 | |||||||
Irving ISD GO, 0% due 2/15/2017 (Guaranty: PSF) | AAA/Aaa | 1,000,000 | 841,010 | |||||||
Keller ISD GO, 0% due 8/15/2012 (Guaranty: PSF) | AAA/Aaa | 1,250,000 | 1,229,588 | |||||||
Kerrville Health Facilities Development Corp. Hospital Revenue, 5.25% due 8/15/2021 (Sid Peterson Memorial Hospital) | BBB-/NR | 4,000,000 | 4,069,000 | |||||||
Laredo GO, 5.00% due 2/15/2018 (Insured: Natl-Re) | AA-/Aa2 | 2,000,000 | 2,274,340 | |||||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2012 (Insured: AMBAC) | A+/A1 | 1,660,000 | 1,752,943 | |||||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2013 (Insured: AMBAC) | A+/A1 | 1,745,000 | 1,893,011 | |||||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2014 (Insured: AMBAC) | A+/A1 | 1,835,000 | 2,037,786 | |||||||
Laredo Sports Venue Sales Refunding & Improvement, 5.00% due 3/15/2015 (Insured: AMBAC) | A+/A1 | 1,930,000 | 2,168,934 | |||||||
Lower Colorado River Authority, 5.875% due 5/15/2016 (Insured: BHAC/FSA) | AAA/Aa1 | 2,210,000 | 2,218,685 | |||||||
Midtown Redevelopment Authority, 6.00% due 1/1/2011 (Insured: Radian) | A-/A3 | 740,000 | 747,962 | |||||||
Mission Economic Development Corp., 3.75% due 12/1/2018 put 5/1/2015 (Waste Management, Inc.) | BBB/NR | 8,500,000 | 8,611,010 | |||||||
North Central Health Facility Development, 5.00% due 5/15/2017 (Baylor Health Care System) | AA-/Aa2 | 5,000,000 | 5,007,750 | |||||||
North East ISD GO, 5.00% due 8/1/2016 (Guaranty: PFS) | AAA/Aaa | 2,000,000 | 2,382,320 | |||||||
North Texas Tollway Authority, 5.50% due 1/1/2038 put 1/1/2011 | A-/A2 | 19,500,000 | 19,728,150 | |||||||
North Texas Tollway Authority, 5.00% due 1/1/2043 put 1/1/2011 | A-/A2 | 2,140,000 | 2,162,170 | |||||||
North Texas University Revenue, 5.00% due 4/15/2014 | NR/Aa2 | 1,250,000 | 1,423,925 | |||||||
North Texas University Revenue, 5.00% due 4/15/2016 | NR/Aa2 | 2,250,000 | 2,644,717 | |||||||
Northside ISD GO, 1.75% due 6/1/2037 put 6/1/2013 (Various School Buildings; Guaranty: PSF) | AAA/NR | 20,000,000 | 20,030,800 | |||||||
Northside ISD GO, 1.50% due 8/1/2040 put 8/1/2012 (Guaranty: PSF) | AAA/Aaa | 4,000,000 | 4,027,680 | |||||||
Red River Authority PCR, 5.20% due 7/1/2011 (Southwestern Public Service; Insured: AMBAC) | A-/Baa1 | 7,780,000 | 7,800,461 | |||||||
Richardson Refunding & Improvement GO, 5.00% due 2/15/2014 (Insured: Natl-Re) | AAA/Aaa | 3,000,000 | 3,397,020 | |||||||
Sam Rayburn Municipal Power Agency, 5.50% due 10/1/2012 | BBB/Baa2 | 6,000,000 | 6,381,000 | |||||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2021 | NR/Baa2 | 8,300,000 | 8,576,058 | |||||||
State of Texas, 2.00% due 8/31/2011 (Tax & Revenue Anticipation Notes) | SP-1+/Mig1 | 73,500,000 | 74,597,355 | |||||||
Tarrant County Cultural Educational Facilities, 5.00% due 8/15/2016 (Scott & White Memorial Hospital) | A/A1 | 2,280,000 | 2,519,468 | |||||||
Tarrant County Cultural Educational Facilities, 5.00% due 8/15/2017 (Scott & White Memorial Hospital) | A/A1 | 2,000,000 | 2,203,660 | |||||||
Tarrant County Health Facilities Development Corp., 6.10% due 11/15/2011 pre-refunded 11/15/2010 (Adventist Health/Sunbelt Group) | NR/A1 | 730,000 | 742,468 | |||||||
Texas Municipal Power Agency, 0% due 9/1/2013 (Insured: Natl-Re) | A+/A2 | 1,000,000 | 954,820 | |||||||
Texas Municipal Power Agency, 5.00% due 9/1/2017 (Insured: AGM) | AAA/Aa3 | 10,000,000 | 11,783,000 | |||||||
Texas State Public Finance Authority, 5.00% due 10/15/2014 (Stephen F. Austin University; Insured: Natl-Re) | NR/A1 | 1,305,000 | 1,485,769 | |||||||
Certified Annual Report 35
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 (Unaudited) | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Texas State Public Finance Authority, 5.00% due 10/15/2015 (Stephen F. Austin University; Insured: Natl-Re) | NR/A1 | $ | 1,450,000 | $ | 1,667,152 | |||||
Uptown Development Authority, 5.00% due 9/1/2015 (Infrastructure Improvements) | BBB+/NR | 1,370,000 | 1,509,576 | |||||||
Uptown Development Authority, 5.00% due 9/1/2017 (Infrastructure Improvements) | BBB+/NR | 1,580,000 | 1,712,357 | |||||||
Uptown Development Authority, 5.00% due 9/1/2018 (Infrastructure Improvements) | BBB+/NR | 1,870,000 | 2,019,507 | |||||||
Uptown Development Authority, 5.00% due 9/1/2019 (Infrastructure Improvements) | BBB+/NR | 1,945,000 | 2,092,664 | |||||||
Waco Health Facilities Development Corp., 4.00% due 9/1/2013 (Hillcrest Health System; Insured: Natl-Re) (ETM) | A/NR | 1,000,000 | 1,088,000 | |||||||
Washington County Health Facilities Development Corp., 5.75% due 6/1/2019 (Trinity Medical Center; Insured: ACA) | NR/NR | 3,840,000 | 3,804,826 | |||||||
Weslaco GO Waterworks & Sewer System, 5.25% due 2/15/2019 (Insured: Natl-Re) | A/A2 | 2,835,000 | 3,237,145 | |||||||
West Harris County Regional Water, 5.25% due 12/15/2012 (Insured: AGM) | AAA/Aa3 | 2,435,000 | 2,656,122 | |||||||
U.S. VIRGIN ISLANDS — 0.32% | ||||||||||
Virgin Islands Public Finance Authority, 6.75% due 10/1/2019 (Matching Fund Loan Diageo Project) | BBB/Baa3 | 7,690,000 | 8,845,576 | |||||||
Virgin Islands Water & Power Authority, 4.75% due 7/1/2015 | BBB-/Baa2 | 1,000,000 | 1,088,780 | |||||||
Virgin Islands Water & Power Authority, 4.75% due 7/1/2016 | BBB-/Baa2 | 1,225,000 | 1,340,836 | |||||||
Virgin Islands Water & Power Authority, 4.75% due 7/1/2017 | BBB-/Baa2 | 1,300,000 | 1,427,647 | |||||||
UTAH — 0.74% | ||||||||||
Intermountain Power Agency Supply, 5.00% due 7/1/2012 | A+/A1 | 15,000,000 | 16,095,600 | |||||||
Intermountain Power Agency Supply, 5.00% due 7/1/2012 (Insured: Natl-Re) (ETM) | NR/NR | 4,355,000 | 4,370,896 | |||||||
Intermountain Power Agency Supply, 5.00% due 7/1/2013 | A+/A1 | 5,000,000 | 5,534,450 | |||||||
Nebo School District GO, 2.50% due 7/1/2012 | AAA/Aaa | 1,510,000 | 1,563,167 | |||||||
Salt Lake County Hospital Revenue, 5.50% due 5/15/2015 (IHC Health Services Inc.; Insured: AMBAC) | AA+/Aa1 | 2,000,000 | 2,074,180 | |||||||
VIRGINIA — 0.22% | ||||||||||
Alexandria IDA, 5.75% due 10/1/2010 (Institute for Defense; Insured: AMBAC) (ETM) | NR/NR | 1,195,000 | 1,195,179 | |||||||
Louisa IDA PCR, 5.00% due 11/1/2035 put 12/1/2011 (Virginia Electric & Power Company) | A-/NR | 3,000,000 | 3,124,950 | |||||||
Norton IDA Hospital Improvement, 5.75% due 12/1/2012 (Norton Community Hospital; Insured: ACA) | NR/NR | 1,460,000 | 1,496,091 | |||||||
Suffolk Redevelopment Housing Authority, 4.85% due 7/1/2031 put 7/1/2011 (Windsor at Potomac; Collateralized: FNMA) | NR/Aaa | 3,000,000 | 3,083,310 | |||||||
WASHINGTON — 2.54% | ||||||||||
Energy Northwest Washington Electric, 5.50% due 7/1/2012 (Insured: Natl-Re; Bonneville Power Administration) | AA/Aaa | 3,000,000 | 3,261,960 | |||||||
Energy Northwest Washington Electric, 5.00% due 7/1/2014 (Wind Project; Insured: AMBAC) | A-/A3 | 2,575,000 | 2,923,320 | |||||||
Energy Northwest Washington Electric, 5.375% due 7/1/2014 (Columbia Generation; Insured: AGM) | AAA/Aaa | 1,000,000 | 1,043,770 | |||||||
Energy Northwest Washington Electric, 6.00% due 7/1/2016 (Insured: AMBAC) | AA/Aaa | 2,415,000 | 2,635,997 | |||||||
Energy Northwest Washington Electric, 5.00% due 7/1/2017 (Bonneville Power Administration) | AA/Aaa | 5,470,000 | 6,528,281 | |||||||
a Energy Northwest Washington Electric, 5.00% due 7/1/2018 (Insured: Natl-Re) | AA/Aaa | 8,000,000 | 9,588,320 | |||||||
King & Snohomish Counties School District GO, 5.60% due 12/1/2010 (Insured: Natl-Re/FGIC) | AA-/Aa1 | 3,160,000 | 3,185,375 | |||||||
King County Sewer, 5.50% due 1/1/2016 (Insured: AGM) | AAA/Aa2 | 7,205,000 | 7,611,218 | |||||||
Lewis County Public Utility District, 5.00% due 10/1/2011 (Cowlitz Falls Hydroelectric; Insured: Syncora) | AA/Aaa | 2,000,000 | 2,089,400 | |||||||
Port Seattle Washington Revenue, 5.50% due 9/1/2018 (Insured: Natl-Re/FGIC) | A/A1 | 5,000,000 | 5,902,200 | |||||||
Seattle Municipal Light & Power Revenue, 5.00% due 2/1/2016 | AA-/Aa2 | 1,000,000 | 1,175,730 | |||||||
Seattle Municipal Light & Power Revenue, 5.00% due 2/1/2017 | AA-/Aa2 | 2,000,000 | 2,373,140 | |||||||
Snohomish County Public Utilities District, 5.00% due 12/1/2015 (Insured: AGM) | AAA/Aa3 | 5,015,000 | 5,641,775 | |||||||
36 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Washington State Convention and Trade Center, 5.00% due 7/1/2011 (Insured: Natl-Re) | AA/Aa2 | $ | 4,395,000 | $ | 4,409,240 | |||||
Washington State GO, 0% due 1/1/2018 (Insured: Natl-Re/FGIC) | AA+/Aa1 | 4,000,000 | 3,297,640 | |||||||
Washington State GO, 0% due 1/1/2019 (Insured: Natl-Re/FGIC) | AA+/Aa1 | 3,000,000 | 2,369,370 | |||||||
Washington State Health Care Facilities, 5.00% due 7/1/2017 (Overlake Hospital Medical Center) | BBB+/A3 | 1,245,000 | 1,351,709 | |||||||
Washington State HFA, 5.00% due 7/1/2013 (Overlake Hospital; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,086,380 | |||||||
Washington State HFA, 5.00% due 8/15/2013 (Multicare Health Systems) | A+/A1 | 1,250,000 | 1,356,612 | |||||||
Washington State HFA, 5.00% due 8/15/2014 (Multicare Health Systems) | A+/A1 | 1,500,000 | 1,651,215 | |||||||
Washington State HFA, 5.625% due 10/1/2014 (Providence Health Systems; Insured: Natl-Re) | AA/Aa2 | 3,000,000 | 3,136,620 | |||||||
Washington State HFA, 5.00% due 8/15/2015 (Multicare Health Systems) | A+/A1 | �� | 2,000,000 | 2,223,520 | ||||||
Washington State HFA, 5.00% due 8/15/2016 (Multicare Health Systems) | A+/A1 | 2,075,000 | 2,304,744 | |||||||
Washington State HFA, 5.375% due 12/1/2016 (Group Health Co-op of Puget Sound; Insured: AMBAC) | BBB+/NR | 2,000,000 | 2,052,300 | |||||||
Washington State HFA, 5.00% due 8/15/2017 (Multicare Health Systems) | A+/A1 | 1,000,000 | 1,101,830 | |||||||
Washington State HFA, 5.25% due 8/1/2018 (Highline Medical Center; Insured: AGM 242) | A+/NR | 8,095,000 | 9,182,725 | |||||||
Washington State HFA, 5.00% due 8/15/2018 (Multicare Health Systems) | A+/A1 | 2,000,000 | 2,187,560 | |||||||
Washington State HFA, 5.00% due 7/1/2019 (Overlake Hospital Medical Center) | BBB+/A3 | 1,050,000 | 1,123,636 | |||||||
Washington State HFA, 4.75% due 7/1/2020 (Overlake Hospital Medical Center) | BBB+/A3 | 1,000,000 | 1,042,770 | |||||||
Washington State Public Power Supply Systems, 5.40% due 7/1/2012 (Insured: AGM) | AAA/Aaa | 1,300,000 | 1,408,862 | |||||||
Washington State Public Power Supply Systems, 0% due 7/1/2013 (Insured: Natl-Re) | AA/Aaa | 1,760,000 | 1,700,178 | |||||||
Washington State Public Power Supply Systems, 0% due 7/1/2015 (Insured: Natl-Re) | AA/Aaa | 3,000,000 | 2,750,010 | |||||||
Yakima County School District, 5.00% due 12/1/2012 (Insured: Natl-Re) | NR/Aa1 | 1,270,000 | 1,388,263 | |||||||
WEST VIRGINIA — 0.27% | ||||||||||
Kanawha, Mercer, Nicholas Counties Single Family Mortgage, 0% due 2/1/2015 pre-refunded 2/1/2014 | NR/Aaa | 2,260,000 | 1,937,069 | |||||||
Monongalia County Community Hospital, 5.25% due 7/1/2020 (Monongalia General Hospital) | BBB+/NR | 4,485,000 | 4,677,855 | |||||||
West Virginia EDA PCR, 4.85% due 5/1/2019 put 9/4/2013 (Appalachian Power Company) | BBB/Baa2 | 1,000,000 | 1,070,260 | |||||||
West Virginia EDA PCR, 4.85% due 5/1/2019 put 9/4/2013 (Appalachian Power Company) | BBB/Baa2 | 1,000,000 | 1,070,260 | |||||||
West Virginia University, 0% due 4/1/2013 (Insured: AMBAC) | A+/Aa3 | 2,000,000 | 1,916,320 | |||||||
WISCONSIN — 0.39% | ||||||||||
Hudson School District GO, 4.625% due 10/1/2014 (Insured: AGM) | AAA/Aa1 | 1,885,000 | 1,955,951 | |||||||
Wisconsin Clean Water Revenue, 5.00% due 6/1/2017 pre-refunded 6/1/2011 | AA+/Aa1 | 2,455,000 | 2,531,817 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 4/15/2017 (Aurora Health Care Inc.) | NR/A3 | 1,295,000 | 1,391,996 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.125% due 8/15/2027 put 8/15/2016 (Aurora Health Care Inc.) | NR/A3 | 4,500,000 | 4,949,550 | |||||||
Wisconsin Petroleum, 5.00% due 7/1/2015 | AA/Aa2 | 4,000,000 | 4,635,840 | |||||||
TOTAL INVESTMENTS — 99.40% (Cost $3,805,833,294) | $ | 3,961,809,323 | ||||||||
OTHER ASSETS LESS LIABILITIES — 0.60% | 23,776,591 | |||||||||
NET ASSETS — 100.00% | $ | 3,985,585,914 | ||||||||
Certified Annual Report 37
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
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 | |
| AGM | Insured by Assured Guaranty Municipal Corp. | |
| AMBAC | Insured by American Municipal Bond Assurance Corp. | |
| BHAC | Insured by Berkshire Hathaway Assurance Corp. | |
| 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. | |
| GO | General Obligation | |
| HFA | Health Facilities Authority | |
| HUD | Department of Housing & Urban Development | |
| IBC | Insured Bond Certificate | |
| IDA | Industrial Development Authority | |
| ISD | Independent School District | |
| JEA | Jacksonville Electric Authority | |
| LOC | Letter of Credit | |
| Natl-Re | Insured by National Public Finance Guarantee Corp. | |
| PCR | Pollution Control Revenue Bond | |
| PSF | Guaranteed by Permanent School Fund | |
| Q-SBLF | Qualified School Bond Loan Fund | |
| Radian | Insured by Radian Asset Assurance | |
| SONYMA | State of New York Mortgage Authority | |
| SPA | Stand-by Purchase Agreement | |
| Syncora | Insured by Syncora Guarantee Inc. | |
| UPMC | University of Pittsburgh Medical Center | |
| USD | Unified School District |
38 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $3,805,833,294) (Note 2) | $ | 3,961,809,323 | ||
Cash | 1,029,014 | |||
Receivable for investments sold | 20,765,000 | |||
Receivable for fund shares sold | 27,577,994 | |||
Interest receivable | 42,067,861 | |||
Prepaid expenses and other assets | 91,522 | |||
Total Assets | 4,053,340,714 | |||
LIABILITIES | ||||
Payable for securities purchased | 57,684,765 | |||
Payable for fund shares redeemed | 6,280,778 | |||
Payable to investment advisor and other affiliates (Note 3) | 1,742,040 | |||
Accounts payable and accrued expenses | 359,800 | |||
Dividends payable | 1,687,417 | |||
Total Liabilities | 67,754,800 | |||
NET ASSETS | $ | 3,985,585,914 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | (1,180,592 | ) | |
Net unrealized appreciation on investments | 155,976,029 | |||
Accumulated net realized gain (loss) | (3,239,089 | ) | ||
Net capital paid in on shares of beneficial interest | 3,834,029,566 | |||
| $ | 3,985,585,914 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($1,613,581,508 applicable to 113,065,947 shares of beneficial interest outstanding - Note 4) | $ | 14.27 | ||
Maximum sales charge, 1.50% of offering price | 0.22 | |||
Maximum offering price per share | $ | 14.49 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($481,807,927 applicable to 33,698,992 shares of beneficial interest outstanding - Note 4) | $ | 14.30 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($1,890,196,479 applicable to 132,431,414 shares of beneficial interest outstanding - Note 4) | $ | 14.27 | ||
| * | 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 39
| STATEMENT OF OPERATIONS | ||
| Thornburg Limited Term Municipal Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $23,831,881) | $ | 102,005,850 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 9,448,037 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,664,612 | |||
Class C Shares | 425,639 | |||
Class I Shares | 652,353 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 3,329,225 | |||
Class C Shares | 3,405,107 | |||
Transfer agent fees | ||||
Class A Shares | 533,430 | |||
Class C Shares | 177,097 | |||
Class I Shares | 390,754 | |||
Registration and filing fees | ||||
Class A Shares | 172,780 | |||
Class C Shares | 76,986 | |||
Class I Shares | 202,020 | |||
Custodian fees (Note 3) | 406,535 | |||
Professional fees | 88,375 | |||
Accounting fees | 113,864 | |||
Trustee fees | 74,140 | |||
Other expenses | 255,548 | |||
Total Expenses | 21,416,502 | |||
Less: | ||||
Distribution fees waived (Note 3) | (1,702,554 | ) | ||
Net Expenses | 19,713,948 | |||
Net Investment Income | 82,291,902 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 425,081 | |||
Net change in unrealized appreciation (depreciation) of investments | 70,204,823 | |||
Net Realized and Unrealized Gain | 70,629,904 | |||
Net Increase in Net Assets Resulting from Operations | $ | 152,921,806 | ||
See notes to financial statements.
40 Certified Annual Report
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg Limited Term Municipal Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 82,291,902 | $ | 54,062,992 | ||||
Net realized gain (loss) on investments | 425,081 | 424,567 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 70,204,823 | 94,999,972 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 152,921,806 | 149,487,531 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (35,403,295 | ) | (27,978,683 | ) | ||||
Class C Shares | (8,052,710 | ) | (4,327,521 | ) | ||||
Class I Shares | (38,835,897 | ) | (21,756,788 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 542,169,927 | 286,098,982 | ||||||
Class C Shares | 265,854,064 | 98,146,852 | ||||||
Class I Shares | 993,524,455 | 391,133,787 | ||||||
Net Increase in Net Assets | 1,872,178,350 | 870,804,160 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 2,113,407,564 | 1,242,603,404 | ||||||
End of Year | $ | 3,985,585,914 | $ | 2,113,407,564 | ||||
Undistributed net investment income | $ | — | $ | 40,807 | ||||
See notes to financial statements.
Certified Annual Report 41
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
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 sixteen 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). 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).
42 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 3,961,809,323 | $ | — | $ | 3,961,809,323 | $ | — | ||||||||
Total Investments in Securities | $ | 3,961,809,323 | $ | — | $ | 3,961,809,323 | $ | — | ||||||||
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
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.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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.
Certified Annual Report 43
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
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, 2010, these fees were payable at annual rates ranging from .50 of 1% to .225 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2010, the Distributor has advised the Fund that it earned commissions aggregating $34,474 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $55,520 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I shares. 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, 2010, are set forth in the Statement of Operations. Distribution fees in the amount of $1,702,554 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, 2010, there were no fees paid indirectly.
Certain officers and Trustees of the Trust are also officers and/or directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 53,604,766 | $ | 750,685,059 | 30,849,769 | $ | 417,998,677 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,789,662 | 25,116,212 | 1,454,357 | 19,643,817 | ||||||||||||
Shares repurchased | (16,674,431 | ) | (233,631,344 | ) | (11,307,850 | ) | (151,543,512 | ) | ||||||||
Net Increase (Decrease) | 38,719,997 | $ | 542,169,927 | 20,996,276 | $ | 286,098,982 | ||||||||||
44 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 21,586,485 | $ | 303,022,953 | 8,903,827 | $ | 120,924,995 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 376,882 | 5,304,297 | 206,648 | 2,800,254 | ||||||||||||
Shares repurchased | (3,022,783 | ) | (42,473,186 | ) | (1,900,973 | ) | (25,578,397 | ) | ||||||||
Net Increase (Decrease) | 18,940,584 | $ | 265,854,064 | 7,209,502 | $ | 98,146,852 | ||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 96,757,098 | $ | 1,360,539,987 | 43,056,660 | $ | 582,984,830 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 2,281,105 | 32,036,218 | 1,340,862 | 18,142,630 | ||||||||||||
Shares repurchased | (28,455,767 | ) | (399,051,750 | ) | (15,632,398 | ) | (209,993,673 | ) | ||||||||
Net Increase (Decrease) | 70,582,436 | $ | 993,524,455 | 28,765,124 | $ | 391,133,787 | ||||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $1,865,361,662 and $345,732,860, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 3,805,841,565 | ||
Gross unrealized appreciation on a tax basis | $ | 157,866,655 | ||
Gross unrealized depreciation on a tax basis | (1,898,897 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 155,967,758 | ||
At September 30, 2010, the Fund did not have any undistributed tax-exempt, ordinary net income or undistributed capital gains.
At September 30, 2010, 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 | $ | 227,231 | ||
2015 | 2,811,143 | |||
2016 | 192,444 | |||
| $ | 3,230,818 | |||
The Fund utilized $1,654,829 of capital loss carryforwards during the year ended September 30, 2010.
Certified Annual Report 45
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 | |
In order to account for permanent book/tax differences, the Fund decreased net investment income by $1,221,399, decreased accumulated net realized investment loss by $1,221,477, and decreased net capital paid in on shares of beneficial interest by $78. This reclassification has no impact on the net asset value of the Fund. Reclassification resulted primarily from recharacterization of amortization income.
The tax character of distributions paid during the year ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 82,067,857 | $ | 53,956,985 | ||||
Ordinary income | 224,045 | 106,007 | ||||||
Total Distributions | $ | 82,291,902 | $ | 54,062,992 | ||||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class C shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .25 of 1%.
46 Certified Annual Report
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Certified Annual Report 47
| FINANCIAL HIGHLIGHTS | ||
| Thornburg Limited Term Municipal Fund | ||
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 14.00 | 0.37 | 0.28 | 0.65 | (0.38 | ) | — | (0.38 | ) | $ | 14.27 | 2.66 | 0.78 | 0.78 | 0.78 | 4.70 | 12.57 | $ | 1,613,582 | ||||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 13.22 | 0.47 | 0.78 | 1.25 | (0.47 | ) | — | (0.47 | ) | $ | 14.00 | 3.50 | 0.86 | 0.86 | 0.86 | 9.67 | 12.18 | $ | 1,040,628 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 13.49 | 0.48 | (0.27 | ) | 0.21 | (0.48 | ) | — | (0.48 | ) | $ | 13.22 | 3.54 | 0.89 | 0.88 | 0.89 | 1.54 | 17.78 | $ | 705,238 | |||||||||||||||||||||||||||||||||||||||
2007(b) | $ | 13.53 | 0.46 | (0.04 | ) | 0.42 | (0.46 | ) | — | (0.46 | ) | $ | 13.49 | 3.43 | 0.90 | 0.90 | 0.90 | 3.18 | 21.35 | $ | 696,717 | |||||||||||||||||||||||||||||||||||||||
2006(b) | $ | 13.59 | 0.44 | (0.06 | ) | 0.38 | (0.44 | ) | — | (0.44 | ) | $ | 13.53 | 3.28 | 0.91 | 0.90 | 0.91 | 2.87 | 23.02 | $ | 833,189 | |||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 14.02 | 0.33 | 0.29 | 0.62 | (0.34 | ) | — | (0.34 | ) | $ | 14.30 | 2.36 | 1.05 | 1.05 | 1.55 | 4.48 | 12.57 | $ | 481,808 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.24 | 0.43 | 0.79 | 1.22 | (0.44 | ) | — | (0.44 | ) | $ | 14.02 | 3.21 | 1.13 | 1.13 | 1.63 | 9.37 | 12.18 | $ | 206,952 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 13.51 | 0.44 | (0.27 | ) | 0.17 | (0.44 | ) | — | (0.44 | ) | $ | 13.24 | 3.26 | 1.17 | 1.16 | 1.67 | 1.26 | 17.78 | $ | 99,972 | |||||||||||||||||||||||||||||||||||||||
2007 | $ | 13.55 | 0.43 | (0.04 | ) | 0.39 | (0.43 | ) | — | (0.43 | ) | $ | 13.51 | 3.15 | 1.19 | 1.18 | 1.68 | 2.90 | 21.35 | $ | 86,564 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 13.62 | 0.41 | (0.07 | ) | 0.34 | (0.41 | ) | — | (0.41 | ) | $ | 13.55 | 3.00 | 1.18 | 1.18 | 1.68 | 2.52 | 23.02 | $ | 105,436 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 14.00 | 0.41 | 0.28 | 0.69 | (0.42 | ) | — | (0.42 | ) | $ | 14.27 | 2.98 | 0.44 | 0.44 | 0.44 | 5.04 | 12.57 | $ | 1,890,196 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.22 | 0.51 | 0.79 | 1.30 | (0.52 | ) | — | (0.52 | ) | $ | 14.00 | 3.81 | 0.53 | 0.53 | 0.53 | 10.03 | 12.18 | $ | 865,827 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 13.49 | 0.52 | (0.27 | ) | 0.25 | (0.52 | ) | — | (0.52 | ) | $ | 13.22 | 3.88 | 0.55 | 0.55 | 0.55 | 1.88 | 17.78 | $ | 437,393 | |||||||||||||||||||||||||||||||||||||||
2007 | $ | 13.53 | 0.51 | (0.04 | ) | 0.47 | (0.51 | ) | — | (0.51 | ) | $ | 13.49 | 3.78 | 0.57 | 0.57 | 0.57 | 3.53 | 21.35 | $ | 303,716 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 13.59 | 0.49 | (0.06 | ) | 0.43 | (0.49 | ) | — | (0.49 | ) | $ | 13.53 | 3.62 | 0.57 | 0.57 | 0.57 | 3.22 | 23.02 | $ | 285,878 | |||||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 48 Certified Annual Report | Certified Annual Report 49 | |
| 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, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
50 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,038.90 | $ | 3.96 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.18 | $ | 3.93 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,037.50 | $ | 5.33 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.84 | $ | 5.28 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,039.90 | $ | 2.26 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.85 | $ | 2.24 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.78%; C: 1.04%; I: 0.44%) 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 51
| INDEX COMPARISON | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 (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, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 9/28/84) | 3.15 | % | 4.04 | % | 4.07 | % | 5.55 | % | ||||||||
C Shares (Incep: 9/1/94) | 3.98 | % | 4.07 | % | 3.92 | % | 3.96 | % | ||||||||
I Shares (Incep: 7/5/96) | 5.04 | % | 4.70 | % | 4.58 | % | 4.62 | % | ||||||||
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.
52 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 (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, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 65 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. | None | ||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||
Susan H. Dubin, 61 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, 56 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, 51 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 53
| TRUSTEES AND OFFICERS , CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 (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, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
54 Certified Annual Report
| TRUSTEES AND OFFICERS , CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 55
| OTHER INFORMATION | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 (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, 2010, dividends paid by the Fund of $82,067,857 (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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 13, 2010.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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 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
56 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Limited Term Municipal Fund | September 30, 2010 (Unaudited) | |
context of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to two categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events, 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 evaluating quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations over various periods. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year had exceeded the average return for the mutual fund category for which calendar year returns were presented, that the Fund’s returns had been higher than the average returns for the category in all of the ten preceding calendar years, that the Fund’s investment returns had fallen within the top decile of the same category for the one-year, three-year and five-year periods ended with the second quarter of the current year, and that the Fund’s investment returns fell close to the top decile of a second fund category for the one-year period and within the top decile of the same category for the 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 fee 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, and 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. The Trustees observed that the management fee charged by the Advisor to the Fund was slightly lower than the median and average fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio was 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 provided, respectively, to institutional clients and to mutual funds. The Trustees confirmed their previous observations 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, 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 the adequacy of the Advisor’s resources and 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
Certified Annual Report 57
| OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2010 (Unaudited) | |
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.
58 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
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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60 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 Developing World 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 Developing World 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. 63
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Important Information
The information presented on the following pages was current as of September 30, 2010. 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 or 2010.
Glossary
BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index – The 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.
BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index – A model portfolio of municipal obligations throughout the U.S., with an average maturity ranging from three to fifteen years.
BofA 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).
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 Yield – The distribution yield 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.
Basis Point (BPS) – A unit equal to 1/100th of 1%. 1% = 100 basis points (bps)
Bond Credit Ratings – A bond credit rating assesses the financial ability of a debt issuer to make timely payments of principal and interest. Ratings of AAA (the highest), AA, A, and BBB are investment-grade quality. Ratings of BB, B, CCC, CC, C, and D (the lowest) are considered below investment grade, speculative grade, or junk bonds. Unless otherwise noted, the ratings listed are from Municipal Market Data and are a combination of ratings from Standard and Poor’s, Moody’s Investors Service, and Fitch Ratings.
Effective Duration – A bond’s sensitivity to interest rates, incorporating the embedded option features, such as call provisions. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
This page is not part of the Annual Report. 3
Important Information ,
Continued
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.
Insured Bond – A bond with interest and principal payments insured by a third party. Insured bonds are usually found as a feature of municipal bonds; they are purchased, underwritten and repackaged by a financial guarantee company who then sells the issue to investors.
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.
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.
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.
Treasury Inflation Protected Securities (TIPS) – Either a U.S. Treasury note or bond that offers protection from the effects of inflation. Using the Consumer Price Index as a guide, the value of the principal is adjusted to reflect the effects of inflation. A fixed interest rate is paid semi-annually on the adjusted amount. At maturity, if inflation has increased the value of the principal, the investor receives the higher value. If deflation has decreased the value, the investor receives the original face amount of the security.
4 This page is not part of the Annual Report.
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. |
CO-PORTFOLIO MANAGERS
Josh Gonze, George Strickland, and Chris Ihlefeld
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 0.98%, as disclosed in the most recent Prospectus.
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history of A shares from July 22, 1991 through September 30, 2010
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 7/22/91) | ||||||||||||||||||||
Without sales charge | 5.61 | % | 5.32 | % | 4.45 | % | 4.74 | % | 5.35 | % | ||||||||||
With sales charge | 3.52 | % | 4.61 | % | 4.03 | % | 4.53 | % | 5.23 | % | ||||||||||
30-DAY YIELDS, A SHARES
As of September 30, 2010
Annualized Distribution Yield | SEC Yield | |||
3.18% | 2.21 | % | ||
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2010
Number of Bonds | 379 | |||
Effective Duration | 5.9 Yrs | |||
Average Maturity | 8.6 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 11.
This page is not part of the Annual Report. 5
Thornburg Intermediate Municipal Fund
September 30, 2010
Table of Contents | ||||
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
6 Certified Annual Report
George Strickland Co-Portfolio Manager | October 11, 2010
Dear Fellow Shareholder:
We are pleased to present the annual report for the Thornburg Intermediate Municipal Fund. The | |
Josh Gonze Co-Portfolio Manager | The Class A shares of your Fund produced a total return of 5.61% at NAV over the fiscal year ended September 30, 2010, compared to the 6.75% for the BofA Merrill Lynch 7–12 Year U.S. Municipal Securities Index. The main contributor to the difference in performance is that the BofA Merrill Lynch 7–12 Year U.S. Municipal Securities Index has a longer effective duration than the Thornburg Intermediate Municipal Fund. Effective duration is a measure of a fund’s price sensitivity to changes in interest rates. As interest rates decline, funds with longer effective durations will enjoy greater price appreciation and additional income. As interest rates increase, funds with longer effective durations will also incur greater price depreciation (losses). | |
The Economy and the Federal Reserve
On September 20, 2010, the National Bureau of Economic Research (NBER) announced that the recession ended in June 2009. The 9.6% of the American work force currently unemployed may beg to differ with this evaluation. The duration of the recession was 18 months, making it the longest recession since World War II. | ||
Christopher Ihlefeld Co-Portfolio Manager | The economic picture has been largely unchanged during the fiscal year. The economy is suffering from a high degree of slack in the utilization of its productive resources. Banks are not lending even though the Federal Reserve (Fed) has pumped considerable amounts of money into the economy. Inflation and inflation expectations are quite muted. Gross Domestic Product (GDP), a measure of a country’s overall economic output, recorded a 1.6% increase in the quarter ended June 30, 2010, much higher than the negative 6.8% decrease posted in the quarter ended December 31, 2009, but lower than the long-term average growth rate experienced since 1973 of 2.7%. Capacity utilization, a measure of an economy’s usage of its productive resources, is running around 74.7%, well off the series low of 68.3% recorded in June of 2009 but below its long-term average of 81%. The Fed, seeking to bolster aggregate demand for goods and services, has pumped a tremendous amount of money into the economy. M2, a broad measure of money and money substitutes, has grown 15.9% since the beginning of 2008. But the velocity of M2, a measure of the rate at which money in circulation is used in transactions, is falling. Whether lending institutions are not lending or small and midsize businesses are not borrowing, the result is the same. Commercial and Industrial Loans and | |
Certified Annual Report 7
Letter to Shareholders,
Continued
Leases (loans to corporations, commercial enterprises, or joint ventures) have decreased 15.2% since January of 2008. Small and midsized businesses, normally the engines of economic growth, are being starved of needed capital. Now let’s look at one measure of inflation, the Consumer Price Index (CPI). The year-over-year change in headline CPI has been running between 1.1% and 1.2% for the last three months. Core CPI (headline CPI less the food and energy components) has been running at 0.9% for the last four months. The market’s expectations of future inflation as measured by the inflation expectations used in the pricing of Treasury Inflation Protected Securities (TIPS) with five years to maturity has been running around the 1.4% rate. So inflation, the bane of fixed income investors, has been low and the market expects it to remain low.
The Federal Open Market Committee (FOMC) maintained a very accommodative stance toward monetary policy by keeping the Fed Funds rate effectively at 0% throughout the fiscal year. In addition to keeping the Fed Funds rate low, central banks around the world engaged in a policy known as “quantitative easing,” buying back bonds and other assets to boost demand and fight off deflation. The Fed bought $1.7 trillion in bonds to accomplish this goal. As these assets mature, the market is wondering what the Fed will do with the proceeds – buy more bonds (and what type of bonds?) or return the money to the Treasury. In their September 21, 2010 release the FOMC stated, “The Committee also will maintain their existing policy of reinvesting principal payments for their securities holdings.” So the Fed’s accommodative monetary policy will remain unchanged “for an extended period.”
As we look forward over the next 6–12 months, we believe the Fed will keep short-term interest rates low and the market will keep the slope of the yield curve (difference between long-term and short-term interest rates) steep. Of course if we see signs of an increase in economic activity, we will reevaluate this position. The next move by the Fed, in terms of short-term interest rates, would seem to be an increase, easy to say when short-term interest rates have reached the lower limit of zero.
The Municipal Market
The municipal market has performed very well over the fiscal year. The reasons for this performance are as follows: assets have continued to flow out of municipal money market funds and into municipal bond funds (primarily short-term municipal bond funds), investors’ appetite for risk assets has been whetted after their performance in 2009, and finally, anticipation of increased taxes has added to the allure of municipal bonds. Yields on the benchmark AAA general obligation bond have decreased during the fiscal year, but not uniformly for all maturities. Chart 1 illustrates these changes for maturities from 1 to 30 years.
CHART 1: CHANGES IN AAA GENERAL OBLIGATION BOND YIELDS
10/1/2009 - 9/30/2010
Yields decreased anywhere from 0.12% (12 basis points) to 0.40% (40 basis points) depending on maturity. Notice that, in general, shorter maturities decreased in yield more than longer term maturities. This situation was caused by the in-flow of assets into short-term municipal bond funds from municipal money market funds.
8 Certified Annual Report
Not only have the general level of interest rates decreased over the past 12 months, but market participants have become less fearful when it comes to pricing credit risk. To illustrate this point, we will introduce the concept of “implied default rates.” The implied default rate is derived from current market prices for bonds of various credit categories (assuming different recovery rates) compared to a “default free” bond’s price. The implied default rate of all investment grade bonds with ten years of maturity for the BofA Merrill Lynch 3–15 Year U.S. Municipal Securities Index on September 30, 2009, as we calculated it, was 10.7% assuming a recovery rate of 60%. On August 31, 2010, the same implied default rate was 8.1%, a marked decrease from the beginning of the year. These implied default rates are well in excess of the historic default rates for investment grade municipal bonds, as calculated by Standard and Poor’s, of 0.09% .
As investors, we have been inundated with news reports concerning the impending disaster awaiting the municipal bond market due to the poor financial condition of state and local governments. We would like to borrow a concept from Mark Twain: “The reports of my death have been greatly exaggerated.” The reported demise of state and local government finances are, in our opinion, overblown. We are not being a “Pollyanna;” there is a great deal of fiscal stress in the market and investors can find cases that illustrate fiscal mismanagement, like the State of Illinois. But the municipal market is not monolithic; it is made up of more than just state and local government general obligation bonds. The BofA Merrill Lynch Municipal Master Index is made up of 39% revenue bonds, 10% pre-refunded bonds, with the remainder being either general obligation bonds or insured bonds. The Rockefeller Institute of Government reported on August 30, 2010, “State tax revenues are slowly rebounding.” State revenue growth posted a second quarter of positive growth (off of a very low base), compared to the same quarter a year ago of 2.2% . This increase was led mostly by increases in sales tax revenues (approx. 6%), although personal income taxes were also positive (approx. 1.6%) . Budget gaps for fiscal year 2011 total $121 billion, or 19% of budgets in 46 states. Most of these gaps were filled with spending reductions, revenue increases, and increased aid from the federal government. Underfunded pension liabilities have been in the headlines. The Pew Center on the States reported in February 2010, “In aggregate, states’ systems were 84 percent funded – a relatively positive outcome, because most experts advise at least an 80 percent funding level.” There are some states that are worse off than others. Two states had less than 60 percent of the necessary assets on hand to meet their long-term pension obligations: Illinois and Kansas. Illinois was in the worst shape of any state, with a funding level of 54 percent and an unfunded liability of more than $54 billion.” On the brighter side, Florida, New York, Washington, and Wisconsin have fully funded pension systems.
A Word about Municipal Bond Market Risk
The combination of a very accommodative Fed (Federal Funds rate near zero) and the continued disintermediation of assets out of municipal money market funds into municipal bond funds (mostly short-term municipal bond funds) has increased the interest rate risk in the municipal bond market. On December 31, 2008, municipal money market funds totaled almost $495 billion (50% of the combined municipal bond and money market fund total). By December 31, 2009, municipal money market funds totaled almost $401 billion (41% of the combined total). Today approximately $350 billion of investor’s assets remain in municipal money market funds or almost 36% of the combined municipal money market and bond fund assets. The reason for this exodus is quite simple: investors do not like to earn close to 0% on their invested funds no matter how “safe” they are. Although we do not anticipate much change in interest rates for the next 6–12 months, the next move in all likelihood will be to the upside. This means that investors should be ready for some capital losses in the future. The trade-off between the extra income earned in a bond fund and the expected capital loss can be mitigated by establishing an appropriate holding period for the investment. We believe that investors in the Intermediate Municipal Fund should plan to own the Fund for at
Certified Annual Report 9
Letter to Shareholders,
Continued
least three years in order to decrease the chance that fluctuations in net asset value might overwhelm the income component of their total return.
Your Thornburg Intermediate Municipal Fund is a laddered portfolio of 379 municipal obligations from 45 states and territories. We ladder the maturity dates of the bonds in your portfolio so that some of the bonds are scheduled to mature during each of the coming years. Laddering short and intermediate bonds accomplishes two goals. First, the staggered bond maturities contained in a ladder reduce interest-rate risk and dampen the Fund’s price volatility. Second, laddering reduces reinvestment risk by giving the Fund a steady cash flow stream from maturing bonds to reinvest toward the top of the ladder where yields are typically higher. Chart 2 describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
CHART 2: % OF PORTFOLIO MATURING
As of 9/30/10. Percentages vary over time.
Data may not add up to 100% due to rounding.
The Fund’s adherence to the discipline of the laddered structure served investors well. As you can see from Chart 1 on page 8, yields in the shorter segment of the 1–15 year maturity range of the market decreased more than any other segment of the market. By keeping with the discipline of the Fund’s laddered structure, we were able to capture a significant portion of that performance. Additionally, overweighting out-of-favor sectors, such as the revenue and insured sectors, along with underweights to securities in the general obligation sector, we added incremental performance. We plan to continue to search for out-of-favor opportunities in the municipal market, using our fundamental, bottom-up approach to portfolio management, and the discipline of the laddered structure.
Thank you for investing in the 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.
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
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† | Principal Amount | Value | |||||||
ALABAMA — 1.45% | ||||||||||
Alabama Public School & College Authority, 5.00% due 5/1/2016 | NR/Aa1 | $ | 2,000,000 | $ | 2,347,940 | |||||
Alabama State Federal Highway Finance Authority, 5.00% due 3/1/2016 (Insured: Natl-Re) | AA-/Aa2 | 1,000,000 | 1,052,370 | |||||||
Montgomery Water Works & Sanitary Sewer Board, 4.00% due 9/1/2012 | AAA/Aa2 | 1,120,000 | 1,193,136 | |||||||
Montgomery Water Works & Sanitary Sewer Board, 4.00% due 9/1/2014 | AAA/Aa2 | 1,310,000 | 1,457,467 | |||||||
Montgomery Water Works & Sanitary Sewer Board, 5.00% due 9/1/2017 | AAA/Aa2 | 2,185,000 | 2,599,276 | |||||||
University of Alabama at Birmingham Hospital Revenue, 5.25% due 9/1/2025 | A+/A1 | 2,000,000 | 2,119,020 | |||||||
ALASKA — 0.40% | ||||||||||
Alaska Municipal Bond Bank, 5.00% due 10/1/2017 (Insured: Natl-Re/FGIC) | A+/Aa3 | 2,470,000 | 2,718,704 | |||||||
Anchorage GO, 6.00% due 10/1/2012 (Insured: Natl-Re/FGIC) | AA/NR | 270,000 | 283,743 | |||||||
ARIZONA — 3.93% | ||||||||||
Arizona Health Facilities Authority, 5.00% due 1/1/2011 (Banner Health System) | A+/NR | 1,000,000 | 1,011,030 | |||||||
Arizona Health Facilities Authority, 5.00% due 7/1/2017 (Catholic Healthcare West) | A/A2 | 1,450,000 | 1,585,198 | |||||||
City of Mesa Utility System Revenue, 5.00% due 7/1/2023 (Insured: AGM) | AAA/Aa2 | 5,000,000 | 5,696,800 | |||||||
Mohave County IDA, 7.25% due 5/1/2015 (Mohave Prison LLC) | BBB+/NR | 4,640,000 | 5,013,613 | |||||||
Phoenix Civic Improvement Corp., 5.00% due 7/1/2017 (Insured: Natl-Re) | AA/Aa3 | 1,000,000 | 1,160,480 | |||||||
Pima County IDA, 6.70% due 7/1/2021 (Arizona Charter Schools) | NR/Baa3 | 2,600,000 | 2,614,846 | |||||||
Salt Verde Financial Corp. Gas Revenue, 5.25% due 12/1/2022 | A/A3 | 2,000,000 | 2,036,260 | |||||||
Salt Verde Financial Corp. Gas Revenue, 5.25% due 12/1/2028 | A/A3 | 500,000 | 499,380 | |||||||
State of Arizona, 5.00% due 7/1/2019 (Insured: AGM) | AAA/Aa3 | 7,280,000 | 8,390,200 | |||||||
Tucson GO, 9.75% due 7/1/2012 (ETM) | AA-/NR | 400,000 | 464,312 | |||||||
Tucson GO, 9.75% due 7/1/2013 (ETM) | AA-/NR | 500,000 | 622,805 | |||||||
ARKANSAS — 0.17% | ||||||||||
Springdale School District No. 050, 4.375% due 6/1/2021 (Insured: AMBAC)(State Aid Withholding) | NR/Aa3 | 1,225,000 | 1,226,176 | |||||||
CALIFORNIA — 10.51% | ||||||||||
California Department of Water Resources, 0.27% due 5/1/2022 put 10/7/2010 (Insured: AGM) (weekly demand notes) | AAA/Aa3 | 810,000 | 810,000 | |||||||
California Educational Facilities Authority, 5.50% due 4/1/2029 (Pitzer College) | NR/A3 | 3,000,000 | 3,271,080 | |||||||
California GO, 0.24% due 5/1/2034 put 10/7/2010 (Various Kindergarten; LOC: Citibank/California State Teachers Retirement) (weekly demand notes) | A+/Aa3 | 5,200,000 | 5,200,000 | |||||||
California HFA, 5.125% due 7/1/2022 (Catholic Healthcare West) | A/A2 | 1,785,000 | 1,882,068 | |||||||
California HFA, 0% due 8/1/2029 (Insured: AMBAC/FHA/VA) | A/A3 | 5,255,000 | 1,826,113 | |||||||
California Infrastructure & Economic Development Bank, 5.75% due 8/15/2029 (King City High School) | A-/NR | 1,500,000 | 1,585,590 | |||||||
California PCR, 5.35% due 12/1/2016 (Pacific Gas & Electric) (AMT) | A/A3 | 2,740,000 | 2,831,324 | |||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
California State Economic Recovery GO, 5.00% due 7/1/2016 | A+/Aa3 | $ | 3,400,000 | $ | 3,481,022 | |||||
California State Public Works Board Lease, 5.00% due 6/1/2017 (Regents of University of California; Insured: Natl-Re/FGIC) | AA-/Aa2 | 2,000,000 | 2,347,180 | |||||||
California Statewide Community Development Authority, 6.25% due 8/15/2028 (Enloe Medical Center; Insured: CA Mtg Insurance) | A-/NR | 1,050,000 | 1,151,682 | |||||||
California Statewide Community Development Authority, 6.00% due 7/1/2030 (Aspire Public Schools) | NR/NR | 7,045,000 | 7,289,603 | |||||||
Carson Redevelopment Agency Tax Allocation, 6.25% due 10/1/2022 | A-/NR | 1,620,000 | 1,815,988 | |||||||
Carson Redevelopment Agency Tax Allocation, 6.375% due 10/1/2024 | A-/NR | 1,300,000 | 1,447,849 | |||||||
Chico Redevelopment Agency, 5.00% due 4/1/2030 (Chico Amended & Merged Redevelopment; Insured: AMBAC) | A+/NR | 4,000,000 | 3,995,040 | |||||||
El Camino Hospital District, 6.25% due 8/15/2017 (Insured: AMBAC) (ETM) | NR/NR | 900,000 | 1,049,364 | |||||||
Golden West Schools Financing Authority, 0% due 8/1/2018 (Insured: Natl-Re) | A/Baa1 | 2,140,000 | 1,366,839 | |||||||
Lee Lake Water District Community Facilities, 5.75% due 9/1/2023 | NR/NR | 3,000,000 | 2,891,340 | |||||||
Los Angeles Department of Water & Power, 0.25% due 7/1/2034 put 10/1/2010 (SPA: Bank of America N.A.) (daily demand notes) | AA-/Aa3 | 1,200,000 | 1,200,000 | |||||||
Los Angeles Department of Water & Power, 0.26% due 7/1/2035 put 10/1/2010 (Insured: Wells Fargo Bank N.A.) (daily demand notes) | AA/Aa2 | 5,300,000 | 5,300,000 | |||||||
Los Angeles Regional Airport Improvement Corp., 5.00% due 1/1/2017 (LAX Fuel Corp.; Insured: AGM) (AMT) | AAA/Aa3 | 1,120,000 | 1,211,549 | |||||||
M-S-R Energy Authority, 6.125% due 11/1/2029 | A/NR | 2,500,000 | 2,742,450 | |||||||
Merced Redevelopment Agency, 6.25% due 9/1/2029 (Gateways Redevelopment) | A-/NR | 1,500,000 | 1,601,265 | |||||||
Mojave USD COP, 0% due 9/1/2021 (Insured: AGM) | AAA/NR | 1,095,000 | 643,816 | |||||||
Mojave USD COP, 0% due 9/1/2023 (Insured: AGM) | AAA/NR | 1,100,000 | 567,842 | |||||||
Monterey County COP, 5.25% due 8/1/2021 (Refinancing Project; Insured: AGM) | AAA/Aa3 | 3,700,000 | 4,241,865 | |||||||
Redwood City Redevelopment Agency, 0% due 7/15/2023 (Redevelopment Area A-2; Insured: AMBAC) | A-/NR | 2,060,000 | 988,182 | |||||||
San Jose Redevelopment Agency, 5.25% due 8/1/2027 (Merged Area Redevelopment Project) | A/A1 | 2,400,000 | 2,495,184 | |||||||
San Jose Redevelopment Agency, 5.375% due 8/1/2028 (Merged Area Redevelopment Project) | A/A1 | 1,175,000 | 1,227,393 | |||||||
San Mateo USD GO, 0% due 9/1/2019 (Insured: Natl-Re/FGIC) | AA/Aa1 | 3,000,000 | 2,189,370 | |||||||
Southeast Resource Recovery Facilities Authority, 5.375% due 12/1/2013 (Insured: AMBAC) (AMT) | A+/A1 | 1,000,000 | 1,083,960 | |||||||
Tuolumne Wind Project Authority, 5.875% due 1/1/2029 (Tuolumne Co.) | A+/A1 | 3,000,000 | 3,396,360 | |||||||
Turlock Irrigation District, 5.00% due 1/1/2021 | A+/A1 | 1,750,000 | 1,989,960 | |||||||
Victor Elementary School District GO, 0% due 8/1/2025 (Insured: Natl-Re/FGIC) | A+/Aa3 | 1,535,000 | 681,371 | |||||||
Washington USD COP, 5.00% due 8/1/2022 (New High School; Insured: AMBAC) | A/NR | 2,010,000 | 2,085,817 | |||||||
COLORADO — 3.08% | ||||||||||
Adams County, 5.00% due 8/1/2014 (Platte Valley Medical Center; Insured: Natl-Re/FHA 242) | A/NR | 1,000,000 | 1,104,610 | |||||||
Adams County Communication Center COP, 5.75% due 12/1/2016 (Adams County Communication Center) | NR/Baa1 | 1,265,000 | 1,309,870 | |||||||
Colorado Educational & Cultural Facilities, 5.25% due 8/15/2019 (Peak to Peak Charter School; Insured: Syncora) | A/NR | 1,375,000 | 1,448,384 | |||||||
Colorado HFA, 5.75% due 1/15/2022 (Vail Valley Medical Center) | BBB+/NR | 1,380,000 | 1,397,650 | |||||||
Denver City & County Airport, 5.50% due 11/15/2015 (Insured: Natl-Re/FGIC) (AMT) | A+/A1 | 5,000,000 | 5,219,400 | |||||||
Denver City & County Housing Authority, 5.20% due 11/1/2027 (Three Towers Rehabilitation; Insured: AGM) (AMT) | NR/Aa3 | 2,555,000 | 2,638,906 | |||||||
El Paso County School District GO, 7.10% due 12/1/2013 (State Aid Withholding) | AA-/Aa2 | 500,000 | 594,735 | |||||||
Madre Metropolitan District GO, 5.375% due 12/1/2026 | NR/NR | 2,215,000 | 1,511,693 | |||||||
North Range Metropolitan District GO, 5.00% due 12/15/2021 (Insured: ACA) | NR/NR | 1,500,000 | 1,250,970 | |||||||
Northwest Parkway Public Highway Authority, 0% due 6/15/2014 (Insured: AGM) (ETM) | AAA/Aa3 | 1,005,000 | 1,102,937 | |||||||
Park Creek Metropolitan District, 5.25% due 12/1/2020 (Insured: AGM) | AAA/NR | 1,120,000 | 1,307,656 | |||||||
Public Authority for Colorado Energy Gas Revenue, 6.125% due 11/15/2023 | A/A2 | 2,000,000 | 2,212,480 | |||||||
Southlands Metropolitan District GO, 7.00% due 12/1/2024 pre-refunded 12/1/2014 | AAA/NR | 1,370,000 | 1,699,828 | |||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
CONNECTICUT — 0.18% | ||||||||||
Connecticut Health & Educational Facility Authority, 5.75% due 7/1/2029 (Ethel Walker School) | BBB-/NR | $ | 1,350,000 | $ | 1,365,592 | |||||
DISTRICT OF COLUMBIA — 2.19% | ||||||||||
District of Columbia Association of American Medical Colleges, 5.00% due 2/15/2017 (Insured: AMBAC) | AA/Aa2 | 1,000,000 | 1,165,220 | |||||||
District of Columbia COP, 5.25% due 1/1/2014 (Insured: Natl-Re/FGIC) | A/Aa3 | 2,000,000 | 2,221,680 | |||||||
District of Columbia COP, 5.00% due 1/1/2020 (Insured: Natl-Re/FGIC) | A/Aa3 | 3,900,000 | 4,217,148 | |||||||
District of Columbia GO, 6.00% due 6/1/2015 (Insured: Natl-Re) | A+/Aa2 | 3,000,000 | 3,564,600 | |||||||
Metropolitan Airports Authority, 0% due 10/1/2023 (Dulles Toll Road; Insured: AGM) | AAA/Aa3 | 4,890,000 | 2,588,326 | |||||||
Metropolitan Airports Authority, 0% due 10/1/2024 (Dulles Toll Road; Insured: AGM) | AAA/Aa3 | 5,000,000 | 2,490,400 | |||||||
FLORIDA — 9.76% | ||||||||||
Broward County Housing Finance Authority MFR, 5.40% due 10/1/2011 (Pembroke Park Apartments; Guaranty: Florida Housing Finance Corp.) (AMT) | NR/NR | 110,000 | 110,186 | |||||||
Broward County School Board COP, 5.00% due 7/1/2020 (Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,096,600 | |||||||
Collier County Housing Finance Authority MFR, 4.90% due 2/15/2032 put 2/15/2012 (Goodlette Arms; Collateralized: FNMA) | NR/Aaa | 1,000,000 | 1,043,430 | |||||||
Crossings at Fleming Island Community Development, 5.60% due 5/1/2012 (Insured: Natl-Re) | A/Baa1 | 740,000 | 748,924 | |||||||
Escambia County HFA, 5.95% due 7/1/2020 (Florida Health Care Facility Loan; Insured: AMBAC) | NR/NR | 2,585,000 | 2,686,978 | |||||||
Flagler County School Board COP, 5.00% due 8/1/2020 (Insured: AGM) | AAA/Aa3 | 2,560,000 | 2,741,478 | |||||||
Florida Board of Education GO Capital Outlay, 9.125% due 6/1/2014 | AAA/Aa1 | 535,000 | 600,270 | |||||||
Florida Housing Finance Corp., 4.80% due 1/1/2016 (Homeowner Mtg; Insured: FHA 542) | AA+/Aa1 | 210,000 | 216,071 | |||||||
Florida Housing Finance Corp., 4.55% due 7/1/2022 (Homeowner Mtg; Insured: GNMA/ FNMA/FHLMC) | AA+/Aa1 | 1,570,000 | 1,596,769 | |||||||
Florida Municipal Loan Council, 5.00% due 10/1/2024 (Insured: Natl-Re) | A/Baa1 | 2,235,000 | 2,394,288 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2018 (South Florida Evaluation Treatment) | AA+/NR | 2,090,000 | 2,272,708 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2019 (South Florida Evaluation Treatment) | AA+/NR | 2,255,000 | 2,428,297 | |||||||
Florida State Department of Environmental Protection, 5.00% due 7/1/2017 (Florida Forever; Insured: Natl-Re/FGIC) | AA-/Aa3 | 1,000,000 | 1,076,520 | |||||||
Gainesville Utilities Systems Revenue, 0.40% due 10/1/2026 put 10/1/2010 (SPA: Suntrust Bank) (daily demand notes) | AA/Aa2 | 10,800,000 | 10,800,000 | |||||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | AA-/Aa3 | 875,000 | 946,295 | |||||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | AA-/Aa3 | 1,100,000 | 1,189,628 | |||||||
Hillsborough County IDA PCR, 5.10% due 10/1/2013 (Tampa Electric Co.) | BBB/Baa1 | 1,000,000 | 1,058,330 | |||||||
Hillsborough County Special Assessment, 5.00% due 3/1/2017 (Insured: Natl-Re/FGIC) | A+/A1 | 1,000,000 | 1,115,050 | |||||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2021 (Insured: Syncora) | NR/A3 | 3,000,000 | 3,114,390 | |||||||
Jacksonville HFA Hospital, 5.75% due 8/15/2014 pre-refunded 8/15/2011 (St. Vincents Medical Center) | NR/NR | 1,000,000 | 1,041,870 | |||||||
Lee County Solid Waste System, 5.625% due 10/1/2013 (Insured: Natl-Re) | NR/A3 | 2,400,000 | 2,486,688 | |||||||
Manatee County, 5.00% due 10/1/2016 (Insured: AMBAC) | AA-/Aa2 | 1,000,000 | 1,109,240 | |||||||
Marion County Hospital District, 5.00% due 10/1/2022 (Munroe Regional Health) | NR/A3 | 1,000,000 | 1,042,860 | |||||||
Miami Dade County GO, 6.25% due 7/1/2026 (Building Better Communities) | AA-/Aa2 | 2,130,000 | 2,504,326 | |||||||
Miami Dade County School Board COP, 5.00% due 10/1/2021 (Insured: AMBAC) | A/A1 | 3,035,000 | 3,331,368 | |||||||
Miami Dade County School Board COP, 5.25% due 5/1/2022 (Insured: AGM) | AAA/Aa3 | 2,600,000 | 2,917,330 | |||||||
Miami GO, 5.375% due 9/1/2015 (Insured: Natl-Re) | A/A1 | 1,000,000 | 1,077,190 | |||||||
Orange County HFA, 6.25% due 10/1/2013 (Orlando Regional Hospital; Insured: Natl-Re) | A/A2 | 440,000 | 486,908 | |||||||
Orange County HFA, 5.125% due 6/1/2014 (Mayflower Retirement; Insured: Radian) | NR/NR | 1,000,000 | 1,005,240 | |||||||
Orange County HFA, 6.25% due 10/1/2016 (Orlando Regional Hospital; Insured: Natl-Re) | A/A2 | 2,545,000 | 2,887,277 | |||||||
Certified Annual Report 13
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
Orange County HFA, 6.375% due 11/15/2020 pre-refunded 11/15/2010 (Adventist Health Systems) | NR/NR | $ | 1,000,000 | $ | 1,017,290 | |||||
Sarasota County Public Hospital Board, 3.269% due 10/1/2021 (Miles-Sarasota Memorial Hospital; Insured: Natl-Re) | A/A1 | 2,000,000 | 1,827,440 | |||||||
South Miami HFA, 5.00% due 8/15/2022 (Baptist Health Group) | AA-/Aa3 | 1,500,000 | 1,606,065 | |||||||
St. Johns County IDA, 5.85% due 8/1/2024 (Presbyterian Retirement) | NR/NR | 4,885,000 | 4,985,387 | |||||||
Tampa Bay Water Utilities System Revenue, 5.50% due 10/1/2022 (Insured: Natl-Re/FGIC) | AA+/Aa2 | 2,750,000 | 3,427,022 | |||||||
Tampa Health Systems, 5.50% due 11/15/2013 (Catholic Health East Group; Insured: Natl-Re) | A/Aa3 | 1,050,000 | 1,158,581 | |||||||
a University of Central Florida COP Convocation Corp., 5.00% due 10/1/2019 (Insured: Natl- Re/FGIC) | A/NR | 1,135,000 | 1,196,631 | |||||||
GEORGIA — 1.46% | ||||||||||
Atlanta Water and Wastewater, 5.50% due 11/1/2022 (Insured: Natl-Re/FGIC) | A/A1 | 530,000 | 613,327 | |||||||
Atlanta Water and Wastewater, 5.50% due 11/1/2024 (Insured: AGM) | AAA/Aa3 | 5,000,000 | 5,619,150 | |||||||
Atlanta Airport Revenue, 6.00% due 1/1/2018 (Insured: Natl-Re/FGIC) (AMT) | A+/A1 | 1,000,000 | 1,011,920 | |||||||
Municipal Electric Authority of Georgia, 6.60% due 1/1/2018 (Insured: Natl-Re) | A/A1 | 3,040,000 | 3,573,216 | |||||||
HAWAII — 0.18% | ||||||||||
Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Kapiolani Health Care; Insured: Natl-Re) | A/Baa1 | 1,270,000 | 1,320,432 | |||||||
IDAHO — 0.71% | ||||||||||
Boise City IDRB Corp., 5.00% due 5/15/2020 (Western Trailer Co.; LOC: Wells Fargo) (AMT) | NR/Aa2 | 2,000,000 | 2,036,500 | |||||||
Madison County Hospital Revenue, 5.25% due 9/1/2030 | BBB-/NR | 1,000,000 | 941,110 | |||||||
Madison County Hospital Revenue, 5.25% due 9/1/2037 | BBB-/NR | 2,500,000 | 2,254,075 | |||||||
ILLINOIS — 7.29% | ||||||||||
Chicago Midway Airport Second Lien, 5.00% due 1/1/2019 (Insured: AMBAC) (AMT) | A-/A3 | 1,210,000 | 1,267,911 | |||||||
Chicago O’Hare International Airport Revenue Second Lien, 5.75% due 1/1/2018 (Insured: AMBAC) (AMT) | A-/A2 | 3,050,000 | 3,105,876 | |||||||
Chicago Tax Increment, 6.25% due 11/15/2013 (Near South Redevelopment; Insured: ACA) | NR/NR | 1,550,000 | 1,590,656 | |||||||
Chicago Tax Increment, 0% due 11/15/2014 (Near South Redevelopment; Insured: ACA) | NR/NR | 1,340,000 | 1,080,790 | |||||||
Chicago Tax Increment Allocation, 5.30% due 1/1/2014 (Lincoln Belmont; Insured: ACA) | NR/NR | 2,285,000 | �� | 2,285,617 | ||||||
Chicago Transit Authority, 5.00% due 12/1/2018 | AA/Aa3 | 1,500,000 | 1,737,060 | |||||||
Cook County GO, 5.25% due 11/15/2024 | AA/Aa2 | 3,000,000 | 3,405,870 | |||||||
a Cook County School District GO, 0% due 12/1/2022 (ETM) | NR/NR | 2,000,000 | 1,358,100 | |||||||
Illinois DFA, 6.00% due 11/15/2012 (Adventist Health Group; Insured: Natl-Re) | NR/Baa1 | 2,860,000 | 2,902,929 | |||||||
Illinois Educational Facilities Authority, 5.00% due 11/1/2016 (Rush University Medical Center) | A/A3 | 1,000,000 | 1,104,390 | |||||||
Illinois Educational Facilities Authority, 5.625% due 10/1/2022 (Augustana College) | NR/Baa1 | 1,000,000 | 1,028,070 | |||||||
Illinois Educational Facilities Authority, 5.75% due 11/1/2028 (Rush University Medical Center) | A/A3 | 1,000,000 | 1,071,300 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2016 (Central Dupage Health) | AA/NR | 2,000,000 | 2,255,340 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2017 (Central Dupage Health) | AA/NR | 2,000,000 | 2,253,580 | |||||||
Illinois Finance Authority, 5.00% due 8/1/2022 (Bradley University; Insured: Syncora) | A/NR | 1,000,000 | 1,074,710 | |||||||
Illinois Finance Authority, 6.125% due 11/1/2023 (Advocate Health) | AA/Aa2 | 5,000,000 | 5,944,350 | |||||||
Illinois Finance Authority, 5.00% due 2/1/2027 (Newman Foundation; Insured: Radian) | NR/NR | 1,220,000 | 1,127,463 | |||||||
Illinois HFA, 6.00% due 7/1/2011 (Loyola University Health Systems; Insured: Natl-Re) | A/Baa1 | 1,370,000 | 1,402,565 | |||||||
Illinois HFA, 6.00% due 7/1/2012 (Loyola University Health Systems; Insured: Natl-Re) (ETM) | A/NR | 230,000 | 252,259 | |||||||
Illinois HFA, 5.70% due 2/20/2021 (Midwest Care Center; Collateralized: GNMA) | NR/Aaa | 805,000 | 826,815 | |||||||
McHenry & Lake Counties School District GO, 0% due 1/1/2017 (Insured: AGM) | NR/Aa2 | 1,000,000 | 836,790 | |||||||
Melrose Park Tax Increment, 6.50% due 12/15/2015 (Insured: AGM) | AAA/Aa3 | 1,015,000 | 1,025,891 | |||||||
Sangamon County School District COP, 5.875% due 8/15/2018 (Hay Edwards; Insured: ACA) | NR/NR | 2,300,000 | 2,309,315 | |||||||
Sherman Mtg, 6.10% due 10/1/2014 (Villa Vianney Health Care; Collateralized: FHA/GNMA) | AAA/NR | 70,000 | 70,928 | |||||||
14 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
Sherman Mtg, 6.20% due 10/1/2019 (Villa Vianney Health Care; Collateralized: FHA/GNMA) | AAA/NR | $ | 90,000 | $ | 91,102 | |||||
Southern Illinois University, 0% due 4/1/2014 (Insured: Natl-Re) | A/A2 | 1,425,000 | 1,299,016 | |||||||
Southern Illinois University, 5.00% due 4/1/2014 (Housing & Auxillary Facilities System; Insured: Natl-Re) | A+/A2 | 1,000,000 | 1,091,880 | |||||||
Southwestern Illinois Development Authority, 0% due 12/1/2024 (Insured: AGM) | AAA/NR | 2,975,000 | 1,653,148 | |||||||
State of Illinois, 5.00% due 6/15/2018 (Build Illinois) | AAA/NR | 2,000,000 | 2,296,500 | |||||||
Tazewell County School District GO, 9.00% due 12/1/2024 (Insured: Natl-Re/FGIC) | NR/A1 | 1,205,000 | 1,855,206 | |||||||
University of Illinois, 0% due 4/1/2014 (Insured: Natl-Re) | A/Aa2 | 1,590,000 | 1,494,298 | |||||||
Will County Community School District GO, 0% due 11/1/2011 (Insured: AGM) | AAA/Aa2 | 2,965,000 | 2,924,705 | |||||||
INDIANA — 5.59% | ||||||||||
Allen County Economic Development, 5.80% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 895,000 | 908,917 | |||||||
Allen County Economic Development, 5.75% due 12/30/2015 (Indiana Institute of Technology) | NR/NR | 1,355,000 | 1,402,723 | |||||||
Allen County Jail Building Corp., 5.00% due 4/1/2018 (Insured: Syncora) | NR/Aa2 | 2,495,000 | 2,775,812 | |||||||
Allen County Redevelopment District, 5.00% due 11/15/2018 | NR/A2 | 1,560,000 | 1,694,925 | |||||||
Avon Community School Building Corp., 5.00% due 1/10/2012 (First Mortgage; Insured: AMBAC) | A/NR | 1,330,000 | 1,395,928 | |||||||
Boone County Hospital Association, 5.625% due 1/15/2015 pre-refunded 7/15/2011 (Insured: Natl-Re/FGIC) | AA-/NR | 1,000,000 | 1,041,890 | |||||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2016 (Performing Arts Center) | AA+/Aa1 | 1,730,000 | 1,473,908 | |||||||
Carmel Redevelopment Authority Lease, 0% due 2/1/2021 (Performing Arts Center) | AA+/Aa1 | 2,000,000 | 1,302,040 | |||||||
Clay Multi School Building Corp., 4.00% due 7/15/2013 (State Aid Withholding; First Mtg) | AA+/NR | 1,290,000 | 1,374,830 | |||||||
Clay Multi School Building Corp., 5.00% due 1/15/2018 (State Aid Withholding; First Mtg) | AA+/NR | 1,735,000 | 2,033,143 | |||||||
Fort Wayne Redevelopment Authority, 5.00% due 8/1/2023 (Harrison Square; Insured: AGM) | NR/Aa2 | 2,290,000 | 2,539,427 | |||||||
Goshen Chandler School Building, 0% due 1/15/2011 (Insured: Natl-Re)(State Aid Withholding) | A/Baa1 | 1,020,000 | 1,015,369 | |||||||
Hobart Building Corp First Mortgage, 6.50% due 7/15/2019 (Insured: Natl-Re)(State Aid Withholding) | AA+/NR | 1,000,000 | 1,269,990 | |||||||
Indiana Bond Bank, 5.25% due 4/1/2023 (Hendricks Regional; Insured: AMBAC) | AA/NR | 2,000,000 | 2,327,700 | |||||||
Indiana Bond Bank Gas Program Revenue, 5.25% due 10/15/2020 | NR/Aa3 | 5,000,000 | 5,416,200 | |||||||
Indiana Finance Authority, 0.31% due 2/1/2035 put 10/1/2010 (Lease Appropriation; SPA: JP Morgan Chase Bank) (daily demand notes) | AA+/Aa2 | 1,200,000 | 1,200,000 | |||||||
Indiana Finance Authority, 4.10% due 11/15/2046 put 11/3/2016 (Ascension Health Credit Group) | AA/Aa1 | 1,000,000 | 1,098,410 | |||||||
Indiana HFA, 5.75% due 9/1/2015 (Methodist Hospital) (ETM) | AAA/A3 | 575,000 | 587,817 | |||||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2017 (146th Street Extension) | AA-/NR | 1,000,000 | 1,131,110 | |||||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2020 (146th Street Extension) | AA-/NR | 1,000,000 | 1,103,770 | |||||||
South Bend Community School Corp., 4.00% due 1/15/2012 (First Mtg) | AA+/NR | 1,260,000 | 1,311,370 | |||||||
South Bend Community School Corp., 4.00% due 7/15/2012 (State Aid Withholding; First Mtg) | AA+/NR | 1,510,000 | 1,595,073 | |||||||
South Bend Community School Corp., 4.00% due 7/15/2012 (First Mtg) | AA+/NR | 1,490,000 | 1,573,947 | |||||||
Vanderburgh County Redevelopment District Tax Increment, 5.00% due 2/1/2020 | A/NR | 1,000,000 | 1,032,090 | |||||||
Vincennes University, 5.375% due 6/1/2022 | NR/Aa3 | 895,000 | 1,034,629 | |||||||
West Clark School Building Corp. First Mtg, 5.75% due 7/15/2017 (Insured: Natl-Re/ FGIC) (State Aid Withholding) | AA+/NR | 1,685,000 | 1,783,539 | |||||||
IOWA — 0.94% | ||||||||||
Coralville COP, 5.25% due 6/1/2022 | NR/A1 | 2,980,000 | 3,193,666 | |||||||
Iowa Finance Authority, 6.00% due 7/1/2012 (Trinity Regional Hospital; Insured: AGM) | AAA/Aa3 | 435,000 | 459,734 | |||||||
Iowa Finance Authority, 5.75% due 12/1/2015 (Trinity Health) | AA/Aa2 | 1,250,000 | 1,269,600 | |||||||
Iowa Finance Authority, 6.00% due 12/1/2018 (Catholic Health Initiatives) | AA/Aa2 | 2,000,000 | 2,024,820 | |||||||
KANSAS — 0.16% | ||||||||||
Wyandotte County School District GO, 5.00% due 9/1/2014 (Insured: Natl-Re/FGIC) | NR/A1 | 1,030,000 | 1,169,658 | |||||||
Certified Annual Report 15
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
KENTUCKY — 0.82% | ||||||||||
Kentucky EDA, 5.85% due 10/1/2015 (Norton Healthcare; Insured: Natl-Re) | A/Baa1 | $ | 2,665,000 | $ | 2,905,516 | |||||
Kentucky EDA, 0% due 10/1/2024 (Norton Healthcare; Insured: Natl-Re) | A/Baa1 | 3,130,000 | 1,486,281 | |||||||
Kentucky EDA, 5.75% due 12/1/2028 (Louisville Arena; Insured: AGM) | AAA/Aa3 | 1,500,000 | 1,665,540 | |||||||
LOUISIANA — 2.81% | ||||||||||
East Baton Rouge Sewer Commission, 3.00% due 2/1/2012 | AA-/Aa2 | 1,000,000 | 1,028,320 | |||||||
Louisiana Local Government Environment Facilities Authority, 5.00% due 3/1/2014 (Independence Stadium) | A/NR | 1,000,000 | 1,089,180 | |||||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2022 (Black & Gold Facilities; Insured: CIFG) | BBB-/Baa3 | 1,500,000 | 1,554,645 | |||||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | BBB/Baa3 | 3,000,000 | 3,224,970 | |||||||
New Orleans Aviation Board, 5.25% due 1/1/2018 (Insured: AGM) (AMT) | AAA/Aa3 | 1,000,000 | 1,125,500 | |||||||
New Orleans Aviation Board, 5.25% due 1/1/2020 (Insured: AGM) | AAA/Aa3 | 2,000,000 | 2,176,920 | |||||||
Plaquemines Parish Law Enforcement District GO, 5.00% due 9/1/2023 | BBB+/NR | 1,230,000 | 1,282,078 | |||||||
Plaquemines Parish Law Enforcement District GO, 5.00% due 9/1/2025 | BBB+/NR | 1,350,000 | 1,393,376 | |||||||
Plaquemines Parish Law Enforcement District GO, 5.15% due 9/1/2027 | BBB+/NR | 1,490,000 | 1,532,867 | |||||||
Plaquemines Parish Law Enforcement District GO, 5.30% due 9/1/2029 | BBB+/NR | 1,650,000 | 1,689,963 | |||||||
b Regional Transit Authority, 5.00% due 12/1/2023 (Sales Tax; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,104,210 | |||||||
b Regional Transit Authority, 5.00% due 12/1/2024 (Sales Tax; Insured AGM) | AAA/Aa3 | 1,000,000 | 1,098,620 | |||||||
St. Tammany Parish Sales Tax Revenue, 5.00% due 6/1/2019 (Insured: CIFG) | A+/NR | 1,300,000 | 1,437,735 | |||||||
St. Tammany Parish Sales Tax Revenue, 5.00% due 6/1/2020 (Insured: CIFG) | A+/NR | 1,000,000 | 1,096,980 | |||||||
MASSACHUSETTS — 0.36% | ||||||||||
Massachusetts Health & Educational Facilities Authority, 0.22% due 7/1/2039 put 10/1/2010 (Wellesley College) (daily demand notes) | AA+/Aaa | 2,095,000 | 2,095,000 | |||||||
Massachusetts Housing Finance Agency, 6.125% due 12/1/2011 (Insured: Natl-Re) (AMT) | NR/Baa1 | 610,000 | 611,806 | |||||||
MICHIGAN — 6.07% | ||||||||||
b City of Troy Michigan GO, 5.00% due 10/1/2016 | AAA/NR | 1,060,000 | 1,244,928 | |||||||
Detroit School District GO, 5.25% due 5/1/2027 (Insured: AGM/Q-SBLF) | AAA/Aa2 | 1,000,000 | 1,094,330 | |||||||
Detroit Sewage Disposal Revenue, 5.25% due 7/1/2020 (Insured: Natl-Re) | A/Aa3 | 3,000,000 | 3,223,470 | |||||||
Detroit Sewage Disposal Revenue, 5.25% due 7/1/2020 (Senior Lien; Insured: AGM) | AAA/Aa3 | 7,720,000 | 8,739,040 | |||||||
Detroit Water Supply Systems, 5.00% due 7/1/2015 (Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,098,160 | |||||||
Kalamazoo Hospital Finance Authority, 6.25% due 6/1/2014 (Insured: FGIC; Borgess Medical Center) (ETM) | AAA/Aaa | 650,000 | 766,915 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2019 (Bronson Hospital; Insured: AGM) | AAA/Aa3 | 1,500,000 | 1,640,970 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2022 (Bronson Hospital; Insured: AGM) | AAA/Aa3 | 2,470,000 | 2,678,344 | |||||||
Kent Hospital Finance Authority, 7.25% due 1/15/2013 (Butterworth Hospital; Insured: Natl-Re) (ETM) | AA/Aa3 | 490,000 | 520,101 | |||||||
Michigan Higher Education Student Loan Authority, 3.95% due 3/1/2011 (Insured: AMBAC) (AMT) | AA/A1 | 750,000 | 742,110 | |||||||
Michigan Public Educational Facilities Authority, 5.50% due 9/1/2022 (Black River School) | NR/NR | 1,110,000 | 1,010,255 | |||||||
Michigan Public Educational Facilities Authority, 8.50% due 9/1/2029 (Bradford Academy) | BBB-/NR | 1,500,000 | 1,722,630 | |||||||
Michigan Public School Academy, 8.00% due 8/1/2035 (Will Carleton Charter School) | NR/NR | 1,000,000 | 974,620 | |||||||
Michigan State Building Authority, 5.25% due 10/15/2017 (Insured: AGM) | AAA/Aa3 | 2,450,000 | 2,699,606 | |||||||
Michigan State Building Authority, 0% due 10/15/2025 (Insured: Natl-Re/FGIC) | A+/Aa3 | 6,000,000 | 2,806,380 | |||||||
Michigan State Hospital Finance Authority, 5.10% due 6/1/2013 (McLaren Healthcare) | NR/Aa3 | 765,000 | 766,691 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2024 (Sparrow Obligated Group) | A+/A1 | 2,140,000 | 2,203,173 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Obligated Group) | A/A2 | 3,000,000 | 3,040,980 | |||||||
Michigan State Housing Development Authority, 5.05% due 10/1/2015 (Insured: Natl-Re) | AA/Baa1 | 1,400,000 | 1,408,638 | |||||||
Michigan Strategic Fund, 5.25% due 10/15/2023 (Michigan House of Representatives Facilities; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,114,900 | |||||||
Royal Oak Hospital Finance Authority, 5.25% due 8/1/2016 (William Beaumont Hospital) | A/A1 | 2,000,000 | 2,169,480 | |||||||
16 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
Royal Oak Hospital Finance Authority, 8.00% due 9/1/2029 | A/A1 | $ | 2,540,000 | $ | 3,085,059 | |||||
Southfield Economic Development Corp., 7.25% due 12/1/2010 | NR/NR | 270,000 | 269,660 | |||||||
MINNESOTA — 0.92% | ||||||||||
Minneapolis St. Paul Health, 6.00% due 12/1/2018 | BBB+/A3 | 1,000,000 | 1,050,400 | |||||||
Minnesota Agriculture & Economic Development Board, 5.50% due 2/15/2025 (Essential Healthcare; Insured: AGM) | AAA/NR | 2,500,000 | 2,803,100 | |||||||
St. Cloud Health Care Revenue, 5.00% due 5/1/2014 | NR/A2 | 835,000 | 915,786 | |||||||
St. Paul Housing & Redevelopment Authority, 5.25% due 5/15/2020 (Healthpartners Obligated Group) | BBB+/A3 | 1,965,000 | 2,052,659 | |||||||
MISSISSIPPI — 2.15% | ||||||||||
Medical Center Educational Building Corp., 3.00% due 6/1/2011 (Univerisity of Mississippi Medical Center) | AA-/Aa2 | 1,750,000 | 1,775,707 | |||||||
Medical Center Educational Building Corp., 4.00% due 6/1/2014 (University of Mississippi Medical Center) | AA-/Aa2 | 1,240,000 | 1,352,022 | |||||||
Mississippi Business Finance Corp., 0.25% due 12/1/2030 put 10/1/2010 (Chevron USA Inc; Guaranty Agreement: Chevron Corp.) | AA/Aa1 | 1,300,000 | 1,300,000 | |||||||
Mississippi Development Bank Special Obligation, 5.00% due 7/1/2022 (Canton Public Improvement) | NR/NR | 1,935,000 | 2,025,926 | |||||||
Mississippi Development Bank Special Obligation, 5.00% due 7/1/2027 (Lowndes County Industrial Development; Insured: AGM) | AAA/Aa3 | 2,500,000 | 2,651,075 | |||||||
Mississippi Development Bank Special Obligation, 5.25% due 8/1/2027 (Department of Corrections) | AA-/NR | 3,415,000 | 3,767,906 | |||||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply, 5.00% due 3/1/2018 (Insured: Syncora) | NR/Baa2 | 1,920,000 | 2,020,781 | |||||||
Mississippi Development Bank Special Obligation Municipal Energy Agency Power Supply, 5.00% due 3/1/2020 (Insured: Syncora) | NR/Baa2 | 1,000,000 | 1,039,860 | |||||||
MISSOURI — 0.81% | ||||||||||
Kansas City Tax Increment Financing Commission, 5.00% due 3/1/2012 (Maincor Project) | NR/NR | 620,000 | 626,405 | |||||||
Missouri Development Finance Board, 5.00% due 4/1/2019 | A/NR | 1,000,000 | 1,079,920 | |||||||
Missouri Development Finance Board, 5.00% due 4/1/2021 | A/NR | 2,000,000 | 2,125,280 | |||||||
Missouri Development Finance Board, 5.125% due 4/1/2022 | A/NR | 2,000,000 | 2,140,580 | |||||||
NEBRASKA — 0.28% | ||||||||||
Adams County Hospital Authority, 5.00% due 12/15/2023 | A-/NR | 2,000,000 | 2,078,920 | |||||||
NEVADA — 0.50% | ||||||||||
Clark County School District GO, 5.50% due 6/15/2016 (Insured: AGM) | AAA/Aa1 | 1,000,000 | 1,108,840 | |||||||
Washoe County GO, 0% due 7/1/2011 (Reno Sparks Convention Center; Insured: AGM) | AAA/Aa1 | 2,600,000 | 2,590,042 | |||||||
NEW HAMPSHIRE — 1.46% | ||||||||||
Manchester Housing & Redevelopment Authority, 0% due 1/1/2016 (Insured: Radian/ACA) | NR/Ba2 | 4,990,000 | 3,437,911 | |||||||
New Hampshire Business Finance Authority, 7.125% due 7/1/2027 put 2/1/2012 (United Illuminating Co.) (AMT) | NR/Baa2 | 1,000,000 | 1,046,810 | |||||||
New Hampshire Health & Education Facilities, 5.25% due 10/1/2023 (Southern New Hampshire Medical Center) | A-/NR | 1,000,000 | 1,039,630 | |||||||
New Hampshire IDA PCR, 5.90% due 8/1/2018 (CT Light & Power) (AMT) | BBB/Baa1 | 1,000,000 | 1,010,920 | |||||||
New Hampshire PCR, 5.375% due 5/1/2014 (Central Maine Power Co.) | BBB+/A3 | 3,920,000 | 4,322,623 | |||||||
Certified Annual Report 17
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
NEW JERSEY — 0.76% | ||||||||||
New Jersey EDA, 7.50% due 12/1/2019 (Spectrum for Living Development) | NR/NR | $ | 140,000 | $ | 140,657 | |||||
New Jersey EDA, 5.50% due 9/1/2026 (School Facilities Construction; Insured: AMBAC) | AA-/Aa3 | 2,000,000 | 2,374,160 | |||||||
New Jersey EDA, 0.27% due 9/1/2031 put 10/1/2010 (LOC: Bank of Nova Scotia/Lloyds TSB Bank plc) (daily demand notes) | A+/Aa3 | 3,100,000 | 3,100,000 | |||||||
NEW MEXICO — 1.29% | ||||||||||
City of Las Cruces, 5.00% due 6/1/2030 | NR/Aa3 | 4,040,000 | 4,456,565 | |||||||
Rio Rancho Public School District No 94, 3.00% due 8/1/2011 | NR/Aa1 | 1,580,000 | 1,614,428 | |||||||
Rio Rancho Public School District No 94, 5.00% due 8/1/2015 | NR/Aa1 | 1,715,000 | 1,997,100 | |||||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 | NR/NR | 1,510,000 | 1,496,833 | |||||||
NEW YORK — 1.64% | ||||||||||
Erie County IDA, 5.00% due 5/1/2019 (Buffalo City School District) | AA-/Aa3 | 3,000,000 | 3,534,120 | |||||||
New York City GO, 0.31% due 8/1/2028 put 10/1/2010 (SPA: Dexia) | AA/Aa2 | 1,500,000 | 1,500,000 | |||||||
New York City Transitional Finance Authority, 0.27% due 8/1/2031 put 10/1/2010 (SPA: Landsbank Hessen) (daily demand notes) | AAA/Aaa | 2,000,000 | 2,000,000 | |||||||
New York City Trust Cultural Resources, 5.75% due 7/1/2015 | NR/NR | 875,000 | 508,112 | |||||||
New York State Dormitory Authority, 5.625% due 7/1/2016 | AA-/Aa3 | 1,000,000 | 1,139,730 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2017 | NR/Aa1 | 850,000 | 969,527 | |||||||
New York State Dormitory Authority, 5.25% due 5/15/2021 | AA-/Aa3 | 500,000 | 577,770 | |||||||
United Nations Development Corp., 5.00% due 7/1/2025 | NR/A1 | 1,700,000 | 1,893,443 | |||||||
NORTH DAKOTA — 0.34% | ||||||||||
North Dakota Building Authority, 4.25% due 12/1/2015 (Insured: Natl-Re) | AA/Aa2 | 1,305,000 | 1,478,878 | |||||||
Ward County Health Care Facilities, 5.125% due 7/1/2021 | BBB+/NR | 1,000,000 | 1,016,090 | |||||||
OHIO — 2.96% | ||||||||||
Cleveland Cuyahoga County Port Authority, 6.25% due 5/15/2016 | NR/NR | 1,310,000 | 1,341,479 | |||||||
Cleveland Cuyahoga County Port Authority, 5.00% due 10/1/2021 | AA+/NR | 1,330,000 | 1,540,326 | |||||||
Deerfield Township Tax Increment, 5.00% due 12/1/2025 | NR/A1 | 1,000,000 | 1,029,670 | |||||||
Franklin County Health Care, 6.00% due 11/1/2010 | NR/Aa1 | 215,000 | 215,987 | |||||||
Hamilton Wastewater Systems, 5.25% due 10/1/2017 (Insured: AGM) | NR/Aa3 | 1,500,000 | 1,736,400 | |||||||
Lorain County Hospital Revenue, 5.625% due 10/1/2016 | AA-/A1 | 1,435,000 | 1,491,525 | |||||||
North Ridgeville Economic Development, 0% due 2/1/2015 | NR/NR | 105,000 | 74,725 | |||||||
Ohio State Air Quality Development Authority, 5.70% due 8/1/2020 | BBB-/Baa2 | 3,000,000 | 3,405,960 | |||||||
Ohio State Air Quality Development Authority, 4.85% due 8/1/2040 put 5/1/2012 (Columbus Southern Power; Insured: Natl-Re) (AMT) | BBB-/A3 | 1,500,000 | 1,569,135 | |||||||
Ohio State Air Quality Development Authority, 5.10% due 11/1/2042 put 5/1/2013 (Columbus Southern Power; Insured: Natl-Re) (AMT) | BBB/A3 | 3,000,000 | 3,219,840 | |||||||
Ohio State Higher Educational Facilities, 5.05% due 7/1/2037 put 7/1/2016 (Kenyon College) | A+/A1 | 1,200,000 | 1,342,152 | |||||||
b Ohio State Water Development Authority, 3.375% due 7/1/2033 put 7/1/2015 (First Energy Nuclear; Insured: First Energy Solutions) | BBB-e/Baa2 | 5,000,000 | 4,987,850 | |||||||
OKLAHOMA — 1.32% | ||||||||||
Oklahoma City Municipal Water & Sewer, 0% due 7/1/2011 | NR/NR | 1,125,000 | 1,112,749 | |||||||
Oklahoma City Municipal Water & Sewer, 0% due 7/1/2013 | NR/NR | 1,485,000 | 1,404,305 | |||||||
18 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
Oklahoma State DFA, 5.40% due 6/1/2013 pre-refunded 12/1/2010 (Oklahoma Hospital Association; Insured: AMBAC) | NR/Aa3 | $ | 825,000 | $ | 840,394 | |||||
Oklahoma State Industries Authority, 5.50% due 7/1/2023 (Oklahoma Medical Research Foundation) | NR/A1 | 3,730,000 | 4,087,856 | |||||||
Oklahoma State Power Authority, 5.00% due 1/1/2018 (Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,171,370 | |||||||
a Tulsa IDA, 5.00% due 12/15/2024 (St. Francis Health Systems) | AA/Aa2 | 1,130,000 | 1,188,342 | |||||||
PENNSYLVANIA — 1.91% | ||||||||||
Allegheny County Hospital Development, 5.00% due 5/15/2019 (University of Pittsburgh Medical Center) | A+/Aa3 | 2,500,000 | 2,848,875 | |||||||
Allegheny County IDA, 5.90% due 8/15/2026 (School Facility Development Inc.) | BBB-/NR | 1,240,000 | 1,271,620 | |||||||
Allegheny County IDA, 6.375% due 8/15/2035 (School Facility Development Inc.) | BBB-/NR | 1,130,000 | 1,148,091 | |||||||
Chartiers Valley Industrial & Community Development Authority, 5.75% due 12/1/2022 (Asbury Health Center) | NR/NR | 900,000 | 910,152 | |||||||
Lancaster County GO, 0% due 5/1/2014 (Insured: Natl-Re/FGIC) | NR/Aa2 | 795,000 | 705,968 | |||||||
Lancaster County GO, 0% due 5/1/2015 (Insured: Natl-Re/FGIC) | NR/Aa2 | 800,000 | 669,104 | |||||||
Pennsylvania Higher Education Facilities Authority, 0% due 7/1/2020 (Insured: AMBAC) | NR/NR | 2,032,839 | 991,822 | |||||||
Philadelphia School District GO, 5.00% due 9/1/2018 (State Aid Withholding) | A+/Aa2 | 5,000,000 | 5,640,000 | |||||||
RHODE ISLAND — 0.34% | ||||||||||
Rhode Island Health & Education Building Corp., 5.00% due 3/15/2014 (Salve Regina University; Insured: Radian) | NR/NR | 1,065,000 | 1,110,965 | |||||||
Rhode Island Health & Education Building Corp., 5.25% due 7/1/2015 (Memorial Hospital; LOC: Fleet Bank) | NR/NR | 1,325,000 | 1,415,816 | |||||||
SOUTH CAROLINA — 2.93% | ||||||||||
Berkeley County School District Installment Lease, 5.00% due 12/1/2019 | A/A1 | 2,000,000 | 2,202,260 | |||||||
Charleston Educational Excellence Financing Corp., 5.25% due 12/1/2020 (Charleston County School District) | AA-/Aa3 | 1,855,000 | 2,092,904 | |||||||
Greenwood School Facilities, Inc., 5.00% due 12/1/2025 (Greenwood School District 50; Insured: AGM) | AAA/Aa3 | 2,400,000 | 2,583,816 | |||||||
Lexington One School Facilities Corp. School District 1, 5.00% due 12/1/2019 | NR/Aa3 | 1,000,000 | 1,107,030 | |||||||
Lexington One School Facilities Corp. School District 1, 5.25% due 12/1/2021 | NR/Aa3 | 1,700,000 | 1,884,960 | |||||||
Scago Educational Facilities Corp., 5.00% due 12/1/2017 (Colleton School District; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,116,140 | |||||||
Scago Educational Facilities Corp., 5.00% due 4/1/2019 (Spartanburg School District; Insured: AGM) | AAA/Aa3 | 2,740,000 | 3,022,932 | |||||||
Scago Educational Facilities Corp., 5.00% due 4/1/2021 (Spartanburg School District; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,087,180 | |||||||
South Carolina Housing Finance & Development Authority, 5.875% due 7/1/2022 (AMT) | NR/Aa1 | 2,225,000 | 2,364,263 | |||||||
South Carolina Housing Finance & Development Authority, 5.30% due 7/1/2023 (AMT) | NR/Aa1 | 1,000,000 | 1,055,000 | |||||||
Sumter School Facilities Inc. School District 2, 5.00% due 12/1/2021 (Insured: AGM) | AAA/Aa3 | 2,855,000 | 3,182,754 | |||||||
SOUTH DAKOTA — 0.24% | ||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 11/1/2024 (Sanford Health) | AA-/A1 | 1,700,000 | 1,784,745 | |||||||
TENNESSEE — 1.74% | ||||||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2014 | NR/A2 | 1,000,000 | 1,063,730 | |||||||
Knox County Health, 4.90% due 6/1/2031 put 6/1/2011 (Eastowne Partners II Ltd.; Collateralized: FNMA) | AAA/NR | 1,875,000 | 1,925,250 | |||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2023 | A/Baa1 | 2,500,000 | 2,595,100 | |||||||
Certified Annual Report 19
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2023 | BB+/Ba3 | $ | 7,000,000 | $ | 7,305,200 | |||||
TEXAS — 13.67% | ||||||||||
Austin Community College District, 5.50% due 8/1/2023 | AA+/Aa2 | 2,180,000 | 2,516,330 | |||||||
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 | 1,374,688 | |||||||
Bexar County Health Facilities Development Corp., 5.00% due 7/1/2027 (Army Retirement Residence) | BBB/NR | 2,000,000 | 1,876,700 | |||||||
Bexar County Housing Finance Corp., 5.50% due 1/1/2016 | NR/Baa1 | 600,000 | 590,826 | |||||||
Bexar County Housing Finance Corp., 6.50% due 12/1/2021 | NR/Ba1 | 2,000,000 | 1,951,800 | |||||||
Bexar County Housing Finance Corp. MFR, 5.70% due 1/1/2021 | NR/Baa1 | 1,035,000 | 985,496 | |||||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2021 | A/A1 | 1,300,000 | 1,418,885 | |||||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2022 | A/A1 | 2,300,000 | 2,491,452 | |||||||
Birdville ISD GO, 0% due 2/15/2012 (Guaranty: PSF) | AAA/Aaa | 2,800,000 | 2,769,088 | |||||||
Bryan Electric Systems, 2.00% due 7/1/2011 | A+/A1 | 1,500,000 | 1,515,690 | |||||||
Bryan Electric Systems, 3.00% due 7/1/2012 | A+/A1 | 1,850,000 | 1,918,209 | |||||||
Bryan Electric Systems, 3.00% due 7/1/2013 | A+/A1 | 1,000,000 | 1,053,040 | |||||||
Cedar Park Improvement District GO, 5.00% due 2/15/2016 | AA/Aa2 | 1,000,000 | 1,111,920 | |||||||
Dallas County Utilities & Reclamation District, 5.15% due 2/15/2022 (Insured: AMBAC) | BBB+/A3 | 3,000,000 | 3,161,760 | |||||||
Dallas Fort Worth International Airport, 5.00% due 11/1/2015 | A+/A1 | 1,000,000 | 1,145,730 | |||||||
Denton GO, 2.00% due 2/15/2011 | AA/Aa2 | 2,080,000 | 2,092,563 | |||||||
Denton GO, 3.00% due 2/15/2013 | AA/Aa2 | 2,710,000 | 2,847,532 | |||||||
Duncanville ISD GO, 0% due 2/15/2016 pre-refunded 2/15/2012 | AAA/Aaa | 2,985,000 | 2,348,091 | |||||||
Duncanville ISD GO, 0% due 2/15/2016 (Guaranty: PSF) | AAA/Aaa | 15,000 | 11,678 | |||||||
Gulf Coast Center, 6.75% due 9/1/2020 (Mental Health Retardation Center) | BBB/NR | 1,320,000 | 1,355,086 | |||||||
Harris County Hospital District, 5.00% due 2/15/2015 (Insured: Natl-Re) | A/A1 | 2,075,000 | 2,310,429 | |||||||
Hays Consolidated ISD GO, 0% due 8/15/2013 pre-refunded 8/15/2011 (Guaranty: PSF) | AAA/Aaa | 4,000,000 | 3,576,480 | |||||||
Kimble County Hospital District GO, 5.00% due 8/15/2017 | NR/NR | 510,000 | 551,540 | |||||||
Kimble County Hospital District GO, 5.00% due 8/15/2018 | NR/NR | 525,000 | 564,438 | |||||||
La Vernia Higher Education Finance Corp., 5.75% due 8/15/2024 | BBB/NR | 3,000,000 | 3,139,800 | |||||||
Laredo Sports Venue Sales Tax, 5.00% due 3/15/2018 (Insured: AMBAC) | A+/A1 | 2,040,000 | 2,207,280 | |||||||
Lewisville Combination Contract Special Assessment District, 4.75% due 9/1/2012 (Insured: ACA) | NR/NR | 1,080,000 | 1,089,029 | |||||||
Midtown Redevelopment Authority Tax Increment Revenue, 6.00% due 1/1/2012 (Insured: Radian) | A-/A3 | 735,000 | 742,284 | |||||||
Midtown Redevelopment Authority Tax Increment Revenue, 6.00% due 1/1/2013 (Insured: Radian) | A-/A3 | 500,000 | 504,850 | |||||||
Mission EDA, 6.00% due 8/1/2020 put 8/1/2013 (Waste Management, Inc.) (AMT) | BBB/NR | 3,000,000 | 3,261,810 | |||||||
Northside ISD GO, 1.75% due 6/1/2037 put 6/1/2013 (Various School Buildings; Guaranty: PSF) | AAA/NR | 4,300,000 | 4,306,622 | |||||||
a Pharr Higher Education Finance Authority, 5.75% due 8/15/2024 | BBB/NR | 5,050,000 | 5,322,195 | |||||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2016 | BBB/Baa2 | 3,000,000 | 3,163,500 | |||||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2021 | NR/Baa2 | 2,575,000 | 2,660,644 | |||||||
Stafford Economic Development, 6.00% due 9/1/2017 (Insured: Natl-Re/FGIC) | A+/A1 | 1,775,000 | 2,121,675 | |||||||
State of Texas, 2.00% due 8/31/2011 (Tax & Revenue Anticipation Notes) | SP-1+/Mig1 | 15,000,000 | 15,223,950 | |||||||
Tarrant County Health Facilities, 6.625% due 11/15/2020 pre-refunded 11/15/2010 (Adventist/Sunbelt) | NR/A1 | 3,500,000 | 3,562,055 | |||||||
Texas City Industrial Development Corp., 7.375% due 10/1/2020 | A/A2 | 2,450,000 | 2,830,460 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 6.00% due 2/15/2030 (Cosmos Foundation) | BBB/NR | 1,750,000 | 1,815,888 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2030 (Idea Public School; Insured: ACA) | BBB/NR | 2,000,000 | 1,884,520 | |||||||
Texas State Public Finance Authority, 5.00% due 8/15/2023 | BBB/NR | 3,000,000 | 2,963,400 | |||||||
20 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
Travis County GO, 5.25% due 3/1/2021 | AAA/Aaa | $ | 1,000,000 | $ | 1,156,490 | |||||
Uptown Development Authority, 5.25% due 9/1/2024 (Infrastructure Improvement) | BBB+/NR | 500,000 | 517,615 | |||||||
Uptown Development Authority, 5.50% due 9/1/2029 (Infrastructure Improvement) | BBB+/NR | 1,250,000 | 1,305,450 | |||||||
U.S. VIRGIN ISLANDS — 0.77% | ||||||||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 | NR/Baa3 | 5,000,000 | 5,713,350 | |||||||
UTAH — 1.14% | ||||||||||
City of Herriman, 5.75% due 11/1/2027 (Towne Center Assessment Area) | A/NR | 1,000,000 | 1,084,260 | |||||||
County of Salt Lake, 5.50% due 5/15/2016 (IHC Health Services Inc; Insured: AMBAC) | AA+/Aa1 | 2,480,000 | 2,570,718 | |||||||
Salt Lake Valley Fire Services, 5.25% due 4/1/2020 | NR/Aa2 | 1,250,000 | 1,449,525 | |||||||
Utah County Municipal Building Authority, 5.50% due 11/1/2016 pre-refunded 11/1/2011 (Insured: AMBAC) | NR/Aa3 | 1,000,000 | 1,055,920 | |||||||
Utah State Board of Regents, 5.00% due 8/1/2021 (University of Utah Hospital) | AA/Aa2 | 1,000,000 | 1,141,300 | |||||||
Utah State Board of Regents, 5.00% due 8/1/2022 (University of Utah Hospital) | AA/Aa2 | 1,015,000 | 1,148,949 | |||||||
VIRGINIA — 0.66% | ||||||||||
Fauquier County IDRB, 5.50% due 10/1/2016 (Insured: Radian) | BBB+/NR | 1,000,000 | 1,059,820 | |||||||
Hanover County IDRB Medical Facilities, 6.00% due 10/1/2021 | A/NR | 795,000 | 798,283 | |||||||
Mecklenburg County Industrial Development Authority, 6.50% due 10/15/2017 (Virginia Electric and Power Company) | NR/Baa1 | 2,000,000 | 2,029,600 | |||||||
Norton IDA, 6.00% due 12/1/2014 (Norton Community Hospital; Insured: ACA) | NR/NR | 1,000,000 | 1,024,130 | |||||||
WASHINGTON — 3.00% | ||||||||||
King County Housing Authority, 5.20% due 5/1/2028 (Birch Creek Apts.) | AAA/NR | 2,400,000 | 2,563,032 | |||||||
Seattle Municipal Power and Light, 5.00% due 2/1/2019 | AA-/Aa2 | 3,000,000 | 3,600,570 | |||||||
Skagit County Public Hospital District GO, 5.125% due 12/1/2015 | NR/A1 | 1,900,000 | 2,161,934 | |||||||
Washington Economic Development Finance Authority, 1.75% due 6/1/2020 put 9/1/2011 (Waste Management; Guaranty: Waste Management, Inc.) | BBB/NR | 1,000,000 | 999,260 | |||||||
Washington Health Care Facilities, 6.00% due 12/1/2014 | AA/Aa2 | 1,735,000 | 1,758,301 | |||||||
Washington Health Care Facilities, 6.00% due 12/1/2015 | AA/Aa2 | 1,945,000 | 1,970,421 | |||||||
Washington Health Care Facilities, 5.25% due 8/15/2024 | AAA/Aa3 | 1,000,000 | 1,102,710 | |||||||
Washington Health Care Facilities, 6.25% due 8/1/2028 | A+/NR | 4,000,000 | 4,508,280 | |||||||
Washington Housing Finance Commission, 5.60% due 7/1/2011 | NR/NR | 500,000 | 503,510 | |||||||
Washington Housing Finance Commission, 6.10% due 1/1/2016 | NR/NR | 1,040,000 | 1,042,902 | |||||||
Washington Housing Finance Commission, 5.875% due 7/1/2019 | NR/NR | 1,000,000 | 1,005,790 | |||||||
Washington Public Power Supply, 0% due 7/1/2011 | AA/Aaa | 1,000,000 | 995,950 | |||||||
WEST VIRGINIA — 0.22% | ||||||||||
West Virginia Hospital Finance Authority, 5.00% due 6/1/2020 | A+/A2 | 1,530,000 | 1,637,268 | |||||||
Certified Annual Report 21
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
WISCONSIN — 0.36% | ||||||||||
Wisconsin Health & Educational Facilities, 5.75% due 8/15/2020 (Eagle River Memorial Hospital Inc.; Insured: Radian) | NR/NR | $ | 1,000,000 | $ | 1,010,560 | |||||
Wisconsin Housing & Economic Development, 5.875% due 11/1/2016 (Insured: AMBAC/GO of Authority) | AA/Aa3 | 1,635,000 | 1,638,695 | |||||||
TOTAL INVESTMENTS — 99.47% (Cost $703,273,420) | $ | 737,194,638 | ||||||||
OTHER ASSETS LESS LIABILITIES — 0.53% | 3,956,849 | |||||||||
NET ASSETS — 100.00% | $ | 741,151,487 | ||||||||
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 | LOC | Letter of Credit | |||
AGM | Insured by Assured Guaranty Municipal Corp. | Mtg | Mortgage | |||
AMBAC | Insured by American Municipal Bond Assurance Corp. | MFR | Multi Family Revenue | |||
AMT | Alternative Minimum Tax | Natl-Re | Insured by National Public Finance Guarantee Corp. | |||
CIFG | CIFG Assurance North America Inc. | PCR | Pollution Control Revenue Bond | |||
COP | Certificates of Participation | PSF | Guaranteed by Permanent School Fund | |||
DFA | Development Finance Authority | Q-SBLF | Qualified School Bond Loan Fund | |||
EDA | Economic Development Authority | Radian | Insured by Radian Asset Assurance | |||
ETM | Escrowed to Maturity | SONYMA | State of New York Mortgage Authority | |||
FGIC | Insured by Financial Guaranty Insurance Co. | SPA | Stand-by Purchase Agreement | |||
FHA | Insured by Federal Housing Administration | Syncora | Insured by Syncora Guarantee Inc. | |||
FHLMC | Insured by Federal Home Loan Mortgage Corp. | VA | Veterans Affairs | |||
FNMA | Collateralized by Federal National Mortgage Association | USD | Unified School District | |||
GNMA | Insured by Government National Mortgage Co. | |||||
GO | General Obligation | |||||
HFA | Health Facilities Authority | |||||
IBC | Insured Bond Certificate | |||||
IDA | Industrial Development Authority | |||||
IDRB | Industrial Development Revenue Bond | |||||
ISD | Independent School District |
22 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $703,273,420) (Note 2) | $ | 737,194,638 | ||
Cash | 1,647,011 | |||
Receivable for investments sold | 890,379 | |||
Receivable for fund shares sold | 3,130,148 | |||
Interest receivable | 9,095,449 | |||
Prepaid expenses and other assets | 45,019 | |||
Total Assets | 752,002,644 | |||
LIABILITIES | ||||
Payable for securities purchased | 8,550,691 | |||
Payable for fund shares redeemed | 1,093,389 | |||
Payable to investment advisor and other affiliates (Note 3) | 484,854 | |||
Accounts payable and accrued expenses | 100,248 | |||
Dividends payable | 621,975 | |||
Total Liabilities | 10,851,157 | |||
NET ASSETS | $ | 741,151,487 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (5,236 | ) | |
Net unrealized appreciation on investments | 33,921,218 | |||
Accumulated net realized gain (loss) | (6,495,625 | ) | ||
Net capital paid in on shares of beneficial interest | 713,731,130 | |||
| $ | 741,151,487 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($409,843,957 applicable to 30,057,358 shares of beneficial interest outstanding - Note 4) | $ | 13.64 | ||
Maximum sales charge, 2.00% of offering price | 0.28 | |||
Maximum offering price per share | $ | 13.92 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($128,448,646 applicable to 9,408,136 shares of beneficial interest outstanding - Note 4) | $ | 13.65 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($202,858,884 applicable to 14,897,133 shares of beneficial interest outstanding - Note 4) | $ | 13.62 | ||
| * | 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 23
| STATEMENT OF OPERATIONS | ||
| Thornburg Intermediate Municipal Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $2,266,075) | $ | 28,651,189 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 3,029,102 | |||
Administration fees (Note 3) | ||||
Class A Shares | 462,821 | |||
Class C Shares | 126,942 | |||
Class I Shares | 72,884 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 925,643 | |||
Class C Shares | 1,015,534 | |||
Transfer agent fees | ||||
Class A Shares | 166,822 | |||
Class C Shares | 51,891 | |||
Class I Shares | 61,759 | |||
Registration and filing fees | ||||
Class A Shares | 56,185 | |||
Class C Shares | 23,221 | |||
Class I Shares | 31,290 | |||
Custodian fees (Note 3) | 125,325 | |||
Professional fees | 42,688 | |||
Accounting fees | 21,632 | |||
Trustee fees | 14,725 | |||
Other expenses | 53,432 | |||
Total Expenses | 6,281,896 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (98,457 | ) | ||
Distribution fees waived (Note 3) | (406,214 | ) | ||
Fees paid indirectly (Note 3) | (922 | ) | ||
Net Expenses | 5,776,303 | |||
Net Investment Income | 22,874,886 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (1,218,528 | ) | ||
Net change in unrealized appreciation (depreciation) of investments | 14,346,155 | |||
Net Realized and Unrealized Gain | 13,127,627 | |||
Net Increase in Net Assets Resulting from Operations | $ | 36,002,513 | ||
See notes to financial statements.
24 Certified Annual Report
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg Intermediate Municipal Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 22,874,886 | $ | 21,828,387 | ||||
Net realized gain (loss) on investments | (1,218,528 | ) | (927,942 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 14,346,155 | 37,279,718 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 36,002,513 | 58,180,163 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (13,616,758 | ) | (12,998,383 | ) | ||||
Class C Shares | (3,446,376 | ) | (2,592,017 | ) | ||||
Class I Shares | (5,811,752 | ) | (6,237,987 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 65,256,428 | 2,986,741 | ||||||
Class C Shares | 45,484,026 | 16,101,754 | ||||||
Class I Shares | 73,966,608 | (54,649,369 | ) | |||||
Net Increase in Net Assets | 197,834,689 | 790,902 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 543,316,798 | 542,525,896 | ||||||
End of Year | $ | 741,151,487 | $ | 543,316,798 | ||||
See notes to financial statements.
Certified Annual Report 25
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
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 sixteen 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). 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).
26 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 737,194,638 | $ | — | $ | 737,194,638 | $ | — | ||||||||
Total Investments in Securities | $ | 737,194,638 | $ | — | $ | 737,194,638 | $ | — | ||||||||
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
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.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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
Certified Annual Report 27
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
sets 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, 2010, these fees were payable at annual rates ranging from .50 of 1% to .275 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2010, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $1,974 for Class A shares, $95,299 for Class C shares, and $1,184 for Class I shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2010, the Distributor has advised the Fund that it earned net commissions aggregating $7,119 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $9,959 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I shares. 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, 2010, are set forth in the Statement of Operations. Distribution fees in the amount of $406,214 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, 2010, fees paid indirectly were $922.
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, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 9,814,228 | $ | 131,038,400 | 5,285,883 | $ | 66,600,182 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 646,545 | 8,623,256 | 648,398 | 8,176,580 | ||||||||||||
Shares repurchased | (5,551,397 | ) | (74,405,228 | ) | (5,770,790 | ) | (71,790,021 | ) | ||||||||
Net Increase (Decrease) | 4,909,376 | $ | 65,256,428 | 163,491 | $ | 2,986,741 | ||||||||||
28 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 4,194,765 | $ | 56,036,321 | 2,555,789 | $ | 32,283,723 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 166,872 | 2,229,614 | 132,970 | 1,681,843 | ||||||||||||
Shares repurchased | (957,579 | ) | (12,781,909 | ) | (1,431,411 | ) | (17,863,812 | ) | ||||||||
Net Increase (Decrease) | 3,404,058 | $ | 45,484,026 | 1,257,348 | $ | 16,101,754 | ||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 7,702,918 | $ | 103,259,087 | 4,442,308 | $ | 55,720,365 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 314,775 | 4,195,091 | 367,683 | 4,621,413 | ||||||||||||
Shares repurchased | (2,512,352 | ) | (33,487,570 | ) | (9,222,969 | ) | (114,991,147 | ) | ||||||||
Net Increase (Decrease) | 5,505,341 | $ | 73,966,608 | (4,412,978 | ) | $ | (54,649,369 | ) | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $243,285,253 and $58,073,408, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 703,290,467 | ||
Gross unrealized appreciation on a tax basis | $ | 36,595,557 | ||
Gross unrealized depreciation on a tax basis | (2,691,386 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 33,904,171 | ||
At September 30, 2010, the Fund did not have any undistributed tax-exempt, ordinary net income or undistributed capital gains.
At September 30, 2010, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2009 of $1,203,893. For tax purposes, such losses will be reflected in the year ending September 30, 2011.
At September 30, 2010 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 under 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 | |||
2018 | 533,767 | |||
| $ | 5,274,685 | |||
Certified Annual Report 29
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 | |
The tax character of distributions paid during the year ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 22,755,331 | $ | 21,748,297 | ||||
Ordinary income | 119,555 | 80,090 | ||||||
Total Distributions | $ | 22,874,886 | $ | 21,828,387 | ||||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class C shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .35 of 1%.
30 Certified Annual Report
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Certified Annual Report 31
Thornburg Intermediate Municipal Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 (b) | $ | 13.40 | 0.49 | 0.24 | 0.73 | (0.49 | ) | — | (0.49 | ) | $ | 13.64 | 3.68 | 0.97 | 0.97 | 0.97 | 5.61 | 9.87 | $ | 409,844 | ||||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 12.47 | 0.54 | 0.93 | 1.47 | (0.54 | ) | — | (0.54 | ) | $ | 13.40 | 4.26 | 0.98 | 0.98 | 0.98 | 12.12 | 15.15 | $ | 337,037 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 13.15 | 0.52 | (0.68 | ) | (0.16 | ) | (0.52 | ) | — | (0.52 | ) | $ | 12.47 | 3.95 | 0.96 | 0.95 | 0.96 | (1.33 | ) | 22.00 | $ | 311,435 | |||||||||||||||||||||||||||||||||||||
2007(b) | $ | 13.30 | 0.51 | (0.15 | ) | 0.36 | (0.51 | ) | — | (0.51 | ) | $ | 13.15 | 3.84 | 0.99 | 0.98 | 0.99 | 2.74 | 22.55 | $ | 333,800 | |||||||||||||||||||||||||||||||||||||||
2006(b) | $ | 13.33 | 0.49 | (0.03 | ) | 0.46 | (0.49 | ) | — | (0.49 | ) | $ | 13.30 | 3.74 | 0.99 | 0.99 | 1.00 | 3.57 | 18.95 | $ | 366,702 | |||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.42 | 0.45 | 0.24 | 0.69 | (0.46 | ) | — | (0.46 | ) | $ | 13.65 | 3.39 | 1.24 | 1.24 | 1.73 | 5.25 | 9.87 | $ | 128,449 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 12.48 | 0.50 | 0.94 | 1.44 | (0.50 | ) | — | (0.50 | ) | $ | 13.42 | 3.99 | 1.24 | 1.24 | 1.76 | 11.90 | 15.15 | $ | 80,571 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 13.16 | 0.48 | (0.68 | ) | (0.20 | ) | (0.48 | ) | — | (0.48 | ) | $ | 12.48 | 3.67 | 1.25 | 1.24 | 1.75 | (1.61 | ) | 22.00 | $ | 59,243 | |||||||||||||||||||||||||||||||||||||
2007 | $ | 13.31 | 0.47 | (0.15 | ) | 0.32 | (0.47 | ) | — | (0.47 | ) | $ | 13.16 | 3.59 | 1.24 | 1.24 | 1.78 | 2.48 | 22.55 | $ | 53,890 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 13.34 | 0.46 | (0.03 | ) | 0.43 | (0.46 | ) | — | (0.46 | ) | $ | 13.31 | 3.49 | 1.24 | 1.24 | 1.78 | 3.31 | 18.95 | $ | 55,497 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.39 | 0.53 | 0.23 | 0.76 | (0.53 | ) | — | (0.53 | ) | $ | 13.62 | 3.99 | 0.65 | 0.65 | 0.65 | 5.87 | 9.87 | $ | 202,859 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 12.45 | 0.57 | 0.94 | 1.51 | (0.57 | ) | — | (0.57 | ) | $ | 13.39 | 4.59 | 0.66 | 0.66 | 0.68 | 12.56 | 15.15 | $ | 125,709 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 13.13 | 0.56 | (0.68 | ) | (0.12 | ) | (0.56 | ) | — | (0.56 | ) | $ | 12.45 | 4.28 | 0.64 | 0.63 | 0.64 | (1.02 | ) | 22.00 | $ | 171,848 | |||||||||||||||||||||||||||||||||||||
2007 | $ | 13.28 | 0.55 | (0.15 | ) | 0.40 | (0.55 | ) | — | (0.55 | ) | $ | 13.13 | 4.16 | 0.67 | 0.67 | 0.73 | 3.06 | 22.55 | $ | 125,890 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 13.31 | 0.54 | (0.03 | ) | 0.51 | (0.54 | ) | — | (0.54 | ) | $ | 13.28 | 4.07 | 0.67 | 0.67 | 0.75 | 3.90 | 18.95 | $ | 89,589 | |||||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 32 Certified Annual Report | Certified Annual Report 33 |
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, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
34 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,050.90 | $ | 4.97 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.22 | $ | 4.90 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,048.60 | $ | 6.34 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.88 | $ | 6.25 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,051.90 | $ | 3.26 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.89 | $ | 3.21 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.97%; C: 1.23%; I: 0.63%) 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 Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Intermediate Municipal Fund versus BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index
and Consumer Price Index (July 22, 1991 to September 30, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 7/22/91) | 3.52 | % | 4.03 | % | 4.53 | % | 5.23 | % | ||||||||
C Shares (Incep: 9/1/94) | 4.65 | % | 4.21 | % | 4.43 | % | 4.42 | % | ||||||||
I Shares (Incep: 7/5/96) | 5.87 | % | 4.78 | % | 5.07 | % | 4.97 | % | ||||||||
Performance data reflect past performance, which is no guarantee of future results. The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares. 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 BofA Merrill Lynch 7-12 Year U.S. Municipal Securities 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.
36 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
| Garrett Thornburg, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
| Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
| David A. Ater, 65 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. | None | ||
| David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||
| Susan H. Dubin, 61 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, 56 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, 51 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 Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
| William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
| Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
| Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
| Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
| Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
| Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
| Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
| Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
| Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
| Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
| Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
| Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
38 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
| Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
| Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
| Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
| Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
| Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
| Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
| Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
| Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 Intermediate Municipal Fund | September 30, 2010 (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, 2010, dividends paid by the Fund of $22,755,331 (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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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 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
40 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
of business, market and economic conditions, (ii) the Fund’s absolute investment performance and achievement of stated objectives, (iii) measures of the Fund’s investment performance over different periods of time relative to two categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events, 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 evaluating 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 over various periods. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year was higher than the average investment return for the category of municipal debt mutual funds for which calendar year returns were presented, that the Fund’s investment returns had exceeded the average returns of the same category in seven of the preceding ten calendar years, that the Fund’s investment returns fell within or near the top quartile of the same category for the one-year and five-year periods ended with the second quarter of the current year and above the midpoint of the category for the three-year period, and that the Fund’s investment returns fell within the top quartile of a second fund category for the one-year and five-year periods and above the midpoint of the category for the three-year period. 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 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, 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 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 somewhat higher than the median expense ratio and slightly higher 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 confirmed their previous observations 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, 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 the adequacy of the Advisor’s resources and 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
Certified Annual Report 41
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
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.
42 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
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. 43
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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 Developing World 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
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 Developing World 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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Important Information
The information presented on the following pages is current as of September 30, 2010. 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
BofA 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).
BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index – A model portfolio of municipal obligations throughout the U.S., with an average maturity ranging from three to fifteen 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 Yield – The distribution yield 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.
Basis Point (BPS) – A unit equal to 1/100th of 1%. 1% = 100 basis points (bps)
Bond Credit Ratings – A bond credit rating assesses the financial ability of a debt issuer to make timely payments of principal and interest. Ratings of AAA (the highest), AA, A, and BBB are investment-grade quality. Ratings of BB, B, CCC, CC, C, and D (the lowest) are considered below investment grade, speculative grade, or junk bonds. Unless otherwise noted, the ratings listed are from Municipal Market Data and are a combination of ratings from Standard and Poor’s, Moody’s Investors Service, and Fitch Ratings.
Effective Duration – A bond’s sensitivity to interest rates, incorporating the embedded option features, such as call provisions. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
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.
Insured Bond – A bond with interest and principal payments insured by a third party. Insured bonds are usually found as a feature of municipal bonds; they are purchased, underwritten and repackaged by a financial guarantee company who then sells the issue to investors.
This page is not part of the Annual Report 3
Important Information,
Continued
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.
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.
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.
Treasury Inflation Protected Securities (TIPS) – Either a U.S. Treasury note or bond that offers protection from the effects of inflation. Using the Consumer Price Index as a guide, the value of the principal is adjusted to reflect the effects of inflation. A fixed interest rate is paid semi-annually on the adjusted amount. At maturity, if inflation has increased the value of the principal, the investor receives the higher value. If deflation has decreased the value, the investor receives the original face amount of the security.
4 This page is not part of the Annual Report
Thornburg Strategic Municipal Income Fund
September 30, 2010
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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 5
George Strickland Co-Portfolio Manager
Josh Gonze Co-Portfolio Manager
Christopher Ryon,CFA Co-Portfolio Manager | October 11, 2010
Dear Fellow Shareholder:
We are pleased to present the annual report for the Thornburg Strategic Municipal Income Fund. The net asset value (NAV) of the Class A shares increased by 36 cents to $14.22 per share during the fiscal year ended September 30, 2010. If you were with us for the entire period, you received dividends of 61.4 cents per share. If you reinvested your dividends, you received 62.7 cents per share. Dividends per share were lower for Class C shares and higher for Class I shares to account for varying class-specific expenses.
Your Thornburg Strategic Municipal Income Fund is a portfolio of over 132 municipal obligations from 33 states and territories. The Class A shares of your Fund produced a total return of 8.20% at NAV over the fiscal year ended September 30, 2010, compared to 5.73% for the BofA Merrill Lynch Municipal Master Index. The Fund’s overweight to out-of-favor sectors, such as the revenue and insured sectors, along with an overweight to securities priced at a discount to par, and lower overall credit quality (A- versus AA3) accounted for most of the performance differential. We plan to continue to search for out-of-favor opportunities in the municipal market, using our fundamental, bottom-up approach to portfolio management.
The Economy and the Federal Reserve
On September 20, 2010, the National Bureau of Economic Research (NBER) announced that the recession ended in June 2009. The 9.6% of the American work force currently unemployed may beg to differ with this evaluation. The duration of the recession was 18 months, making it the longest recession since World War II.
The economic picture has been largely unchanged during the fiscal year. The economy is suffering from a high degree of slack in the utilization of its productive resources. Banks are not lending even though the Federal Reserve (Fed) has pumped considerable amounts of money into the economy. Inflation and inflation expectations are quite muted. Gross Domestic Product (GDP), a measure of a country’s overall economic output, recorded a 1.6% increase in the quarter ended June 30, 2010, much higher than the negative 6.8% decrease posted in the quarter ended December 31, 2009, but lower than the long-term average growth rate experienced since 1973 of 2.7%. Capacity utilization, a measure of an economy’s usage of its productive resources, is running around 74.7%, well off the series low of 68.3% recorded in June of 2009 but below its long-term average of 81%. The Fed, seeking to bolster aggregate demand for goods and services, has pumped a tremendous amount of money into the economy. M2, a broad measure of money and money substitutes, has grown 15.9% since the beginning of 2008. But the velocity of M2, a measure of the rate at which money in circulation is used in transactions, is falling. Whether lending institutions are not lending or small and midsize businesses are not borrowing, the result is the same. Commercial and industrial loans and leases (loans to corporations, commercial enterprises, or joint ventures) have decreased 15.2% since January of 2008. Small and midsized |
6 Certified Annual Report
Letter to Shareholders,
Continued
businesses, normally the engines of economic growth, are being starved of needed capital. Now let’s look at one measure of inflation, the Consumer Price Index (CPI). The year-over-year change in headline CPI has been running between 1.1% and 1.2% for the last three months. Core CPI (headline CPI less the food and energy components) has been running at 0.9% for the last four months. The market’s expectations of future inflation as measured by the inflation expectations used in the pricing of Treasury Inflation Protected Securities (TIPS) with five years to maturity has been running around the 1.4% rate. So inflation, the bane of fixed income investors, has been low and the market expects it to remain low.
The Federal Open Market Committee (FOMC) maintained a very accommodative stance toward monetary policy by keeping the Fed Funds rate effectively at 0% throughout the fiscal year. In addition to keeping the Fed Funds rate low, central banks around the world engaged in a policy known as “quantitative easing,” buying back bonds and other assets to boost demand and fight off deflation. The Fed bought $1.7 trillion in bonds to accomplish this goal. As these assets mature, the market is wondering what the Fed will do with the proceeds – buy more bonds (and what type of bonds?) or return the money to the Treasury. In their September 21, 2010 release the FOMC stated, “The Committee also will maintain their existing policy of reinvesting principal payments for their securities holdings.” So the Fed’s accommodative monetary policy will remain unchanged “for an extended period.”
As we look forward over the next 6–12 months, we believe the Fed will keep short-term interest rates low and the market will keep the slope of the yield curve (difference between long-term and short-term interest rates) steep. Of course if we see signs of an increase in economic activity, we will reevaluate this position. The next move by the Fed, in terms of short-term interest rates, would seem to be an increase, easy to say when short-term interest rates have reached the lower limit of zero.
| The Municipal Market | ||
| The municipal market has performed very well over the fiscal year. The reasons for this performance are as follows: assets have continued to flow out of municipal money market funds and into municipal bond funds (primarily short-term municipal bond funds), investors’ appetite for risk assets has been whetted after their performance in 2009, and finally, anticipation of increased taxes has added to the allure of municipal bonds. Yields on the benchmark AAA general obligation bond have decreased during the fiscal year, but not uniformly for all maturities. Chart I illustrates these changes for maturities from 1 to 30 years. |
| |
Yields decreased anywhere from 0.12% (12 basis points) to 0.40% (40 basis points) depending on maturity. Notice that, in general, shorter maturities decreased in yield more than longer term maturities. This situation was caused by the in-flow of assets into short-term municipal bond funds from municipal money market funds.
Not only have the general level of interest rates decreased over the past 12 months, but market participants have become less fearful when it comes to pricing credit risk. To illustrate this point, we will introduce the concept of “implied default rates.” The implied default rate is derived from current market prices for bonds of various credit categories (assuming different recovery
Certified Annual Report 7
Letter to Shareholders,
Continued
rates) compared to a “default free” bond’s price. The implied default rate of all investment grade bonds with ten years of maturity for the BofA Merrill Lynch 3–15 Year U.S. Municipal Securities Index on September 30, 2009, as we calculated it, was 10.7% assuming a recovery rate of 60%. On August 31, 2010, the same implied default rate was 8.1%, a marked decrease from the beginning of the year. These implied default rates are well in excess of the historic default rates for investment grade municipal bonds, as calculated by Standard and Poor’s, of 0.09%.
As investors, we have been inundated with news reports concerning the impending disaster awaiting the municipal bond market due to the poor financial condition of state and local governments. We would like to borrow a concept from Mark Twain: “The reports of my death have been greatly exaggerated.” The reported demise of state and local government finances are, in our opinion, overblown. We are not being a “Pollyanna;” there is a great deal of fiscal stress in the market and investors can find cases that illustrate fiscal mismanagement, like the State of Illinois. But the municipal market is not monolithic; it is made up of more than just state and local government general obligation bonds. The BofA Merrill Lynch Municipal Master Index is made up of 39% revenue bonds, 10% pre-refunded bonds, with the remainder being either general obligation bonds or insured bonds. The Rockefeller Institute of Government reported on August 30, 2010, “State tax revenues are slowly rebounding.” State revenue growth posted a second quarter of positive growth (off of a very low base), compared to the same quarter a year ago of 2.2%. This increase was led mostly by increases in sales tax revenues (approx. 6%), although personal income taxes were also positive (approx. 1.6%). Budget gaps for fiscal year 2011 total $121 billion, or 19% of budgets in 46 states. Most of these gaps were filled with spending reductions, revenue increases, and increased aid from the federal government. Underfunded pension liabilities have been in the headlines. The Pew Center on the States reported in February 2010, “In aggregate, states’ systems were 84 percent funded – a relatively positive outcome, because most experts advise at least an 80 percent funding level.” There are some states that are worse off than others. Two states had less than 60 percent of the necessary assets on hand to meet their long-term pension obligations: Illinois and Kansas. Illinois was in the worst shape of any state, with a funding level of 54 percent and an unfunded liability of more than $54 billion. On the brighter side, Florida, New York, Washington, and Wisconsin have fully funded pension systems.
A Word about Municipal Bond Market Risk
The combination of a very accommodative Fed (Federal Funds rate near zero) and the continued disintermediation of assets out of municipal money market funds into municipal bond funds (mostly short-term municipal bond funds) has increased the interest rate risk in the municipal bond market. On December 31, 2008, municipal money market funds totaled almost $495 billion (50% of the combined municipal bond and money market fund total). By December 31, 2009, municipal money market funds totaled almost $401 billion (41% of the combined total). Today approximately $350 billion of investor’s assets remain in municipal money market funds or almost 36% of the combined municipal money market and bond fund assets. The reason for this exodus is quite simple: investors do not like to earn close to 0% on their invested funds no matter how “safe” they are. Although we do not anticipate much change in interest rates for the next 6–12 months, the next move in all likelihood will be to the upside. This means that investors should be ready for some capital losses in the future. The trade-off between the extra income earned in a
8 Certified Annual Report
bond fund and the expected capital loss can be mitigated by establishing an appropriate holding period for the investment. We believe that investors in the Strategic Municipal Income Fund should plan to own the Fund for at least three years in order to decrease the chance that fluctuations in net asset value might overwhelm the income component of their total return.
Thank you for investing in the Thornburg Strategic Municipal Income Fund.
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 9
| SCHEDULE OF INVESTMENTS | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
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† S&P/ Moody’s | Principal Amount | Value | |||||||
ARIZONA — 1.38% | ||||||||||
Maricopa County PCR, 6.00% due 5/1/2029 put 5/1/2014 (Arizona Public Service Co.) | BBB-/Baa2 | $ | 500,000 | $ | 540,435 | |||||
Salt Verde Financial Corp. Gas Revenue, 5.25% due 12/1/2028 | A/A3 | 235,000 | 234,708 | |||||||
University Medical Center Corp., 6.25% due 7/1/2029 | BBB+/Baa1 | 100,000 | 109,283 | |||||||
a University Medical Center Corp., 6.50% due 7/1/2039 | BBB+/Baa1 | 275,000 | 299,654 | |||||||
CALIFORNIA — 19.80% | ||||||||||
California Financial Authority Revenue, 8.50% due 11/1/2039 (Harbor Regulation Control) | NR/Baa1 | 1,000,000 | 1,082,030 | |||||||
California HFA, 0% due 8/1/2029 (Insured: AMBAC/FHA/VA) | A/A3 | 1,605,000 | 557,737 | |||||||
California State Public Works Board, 6.25% due 4/1/2034 | BBB+/A2 | 100,000 | 108,356 | |||||||
California Statewide Communities Development Authority, 6.125% due 7/1/2046 (Aspire Public Schools) | NR/NR | 1,000,000 | 1,018,340 | |||||||
Calipatria Unified School District, 0% due 8/1/2025 (Capital Appreciation - Election 1995; Insured: ACA) | NR/NR | 2,425,000 | 857,650 | |||||||
Carson Redevelopment Agency Tax Allocation, 7.00% due 10/1/2036 (Project Area 1) | A-/NR | 500,000 | 571,395 | |||||||
Chico Redevelopment Agency, 5.00% due 4/1/2030 (Chico Amended & Merged Redevelopment; Insured: AMBAC) | A+/NR | 1,000,000 | 998,760 | |||||||
Daly County Housing Development Finance Agency, 5.25% due 12/15/2023 (Franciscan Mobile Park) | A-/NR | 650,000 | 651,105 | |||||||
Irvine Ranch Water District GO, 0.25% due 10/1/2041 put 10/1/2010 (Community Facilities District; LOC: Bank of America) (daily demand notes) | A+/Aa3 | 1,800,000 | 1,800,000 | |||||||
Lee Lake Water District, 5.875% due 9/1/2027 | NR/NR | 500,000 | 474,565 | |||||||
Los Angeles COP, 5.70% due 2/1/2018 | NR/Baa2 | 750,000 | 750,667 | |||||||
Los Angeles Department of Water & Power, 0.25% due 7/1/2034 put 10/1/2010 (SPA: Bank of America N.A.) (daily demand notes) | AA-/Aa3 | 2,600,000 | 2,600,000 | |||||||
M-S-R Energy Authority, 6.50% due 11/1/2039 | A/NR | 1,000,000 | 1,158,770 | |||||||
Merced Redevelopment Agency Tax Allocation, 6.50% due 9/1/2039 (Merced Gateways Redevelopment) | A-/NR | 300,000 | 316,152 | |||||||
Oak Park Unified School District GO, 0% due 8/1/2030 (Insured: AGM) | AAA/Aa3 | 500,000 | 163,350 | |||||||
Pittsburg Redevelopment Agency Tax Allocation, 0% due 8/1/2027 (Los Medanos Community Development; Insured: AMBAC) | A+/NR | 720,000 | 252,569 | |||||||
Redwood City Redevelopment Agency Tax Allocation, 0% due 7/15/2021 (Redevelopment Project Area 2; Insured: AMBAC) | A-/NR | 1,285,000 | 727,785 | |||||||
Riverside County Asset Leasing Corp., 0% due 6/1/2021 (Riverside County Hospital; Insured: Natl-Re) | A/A1 | 435,000 | 248,194 | |||||||
San Diego Unified School District, 0% due 7/1/2035 (Election 2008) | AA/Aa1 | 1,700,000 | 409,904 | |||||||
San Francisco City & County Redevelopment Financing Authority Tax Allocation, 0% due 8/1/2023 (Redevelopment Project; Insured: Natl-Re) | A/A1 | 825,000 | 407,715 | |||||||
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
San Francisco City & County Redevelopment Financing Authority Tax Allocation, 6.50% due 8/1/2039 (Mission Bay North Redevelopment) | A-/NR | $ | 250,000 | $ | 275,000 | |||||
San Jose Redevelopment Agency Tax, 5.50% due 8/1/2035 (Merged Area Redevelopment) | A/A1 | 1,000,000 | 1,032,910 | |||||||
Sonoma County Community Redevelopment Agency Tax Allocation, 6.50% due 8/1/2034 (The Springs Redevelopment; Insured: AGM) | AAA/NR | 100,000 | 106,110 | |||||||
Union Elementary School District, 0% due 9/1/2027 (Capital Appreciation - Election 1999; Insured: Natl-Re) | AA+/NR | 905,000 | 369,204 | |||||||
COLORADO — 7.43% | ||||||||||
Colorado Educational & Cultural Facilities Authority, 5.25% due 8/15/2019 (Peak to Peak Charter School; Insured: Syncora) | A/NR | 1,600,000 | 1,685,392 | |||||||
Denver Convention Center, 5.125% due 12/1/2026 (Insured: Syncora) | BBB-/Baa3 | 1,000,000 | 974,720 | |||||||
Denver Convention Center, 5.00% due 12/1/2030 (Insured: Syncora) | BBB-/Baa3 | 250,000 | 232,558 | |||||||
Denver Convention Center, 5.00% due 12/1/2035 (Insured: Syncora) | BBB-/Baa3 | 350,000 | 316,141 | |||||||
Eagle Bend Metropolitan District GO, 5.00% due 12/1/2020 (Insured: Radian) | A-/NR | 1,100,000 | 1,132,208 | |||||||
Eagle River Fire District, 6.625% due 12/1/2024 | NR/NR | 225,000 | 238,558 | |||||||
Eagle River Fire District, 6.875% due 12/1/2030 | NR/NR | 400,000 | 413,820 | |||||||
Pinery West Metropolitan District No. 2, 4.50% due 12/1/2032 | NR/NR | 500,000 | 391,720 | |||||||
Public Authority for Colorado Energy, 5.75% due 11/15/2018 (Natural Gas Purchase Revenue; Guaranty: BofA Merrill Lynch & Co.) | A/A2 | 625,000 | 673,625 | |||||||
Public Authority for Colorado Energy, 6.50% due 11/15/2038 (Natural Gas Purchase Revenue; Guaranty: BofA Merrill Lynch & Co.) | A/A2 | 250,000 | 299,410 | |||||||
CONNECTICUT — 1.18% | ||||||||||
Connecticut Health & Educational Facilities Authority, 6.00% due 7/1/2039 (Ethel Walker School) | BBB-/NR | 1,000,000 | 1,012,100 | |||||||
DISTRICT OF COLUMBIA — 0.72% | ||||||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2027 (Dulles Toll Road; Insured: AGM) | AAA/Aa3 | 1,500,000 | 619,410 | |||||||
FLORIDA — 1.92% | ||||||||||
Capital Trust Agency MFR, 5.875% due 6/1/2038 (American Opportunity Housing) | NR/B3 | 380,000 | 153,064 | |||||||
Hollywood Community Redevelopment Agency, 5.625% due 3/1/2024 | NR/A3 | 340,000 | 349,813 | |||||||
Santa Rosa Bay Bridge Authority, 0% due 7/1/2013 (Insured: Radian) | NR/NR | 100,000 | 50,897 | |||||||
Sarasota County Public Hospital Board, 3.269% due 10/1/2021 (Miles-Sarasota Memorial Hospital; Insured: Natl-Re) | A/A1 | 1,000,000 | 913,720 | |||||||
St. Johns County IDA, 5.625% due 8/1/2034 (Presbyterian Retirement) | NR/NR | 180,000 | 176,855 | |||||||
GEORGIA — 1.74% | ||||||||||
Atlanta Water & Waste Water, 6.25% due 11/1/2034 | A/A1 | 500,000 | 571,460 | |||||||
Main Street Natural Gas, Inc. (Georgia Gas), 5.00% due 3/15/2018 | A+/Aa3 | 515,000 | 544,381 | |||||||
Main Street Natural Gas, Inc. (Georgia Gas), 5.50% due 9/15/2023 | A/A2 | 350,000 | 371,689 | |||||||
GUAM — 2.49% | ||||||||||
Guam Government, 5.75% due 12/1/2034 (Section 30) | BBB-/NR | 500,000 | 525,395 | |||||||
Guam Government Department of Education COP, 6.875% due 12/1/2040 (John F. Kennedy High School) | B/NR | 1,000,000 | 1,021,280 | |||||||
Guam Government GO, 7.00% due 11/15/2039 | B+/NR | 520,000 | 579,160 | |||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
HAWAII — 0.35% | ||||||||||
Hawaii State Department of Budget & Finance, 5.45% due 11/1/2023 (Hawaiian Electric Co.; Insured: Natl-Re) (AMT) | NR/Baa1 | $ | 300,000 | $ | 300,249 | |||||
IDAHO — 0.21% | ||||||||||
Madison County Hospital Revenue COP, 5.25% due 9/1/2037 | BBB-/NR | 200,000 | 180,326 | |||||||
ILLINOIS — 6.13% | ||||||||||
Broadview Tax Increment Revenue, 5.25% due 7/1/2012 | NR/NR | 515,000 | 515,170 | |||||||
Chicago Tax Increment, 4.70% due 11/15/2013 (Near South Redevelopment; Insured: AMBAC) | NR/NR | 800,000 | 801,768 | |||||||
Cook County GO, 5.25% due 11/15/2033 | AA/Aa2 | 1,000,000 | 1,081,540 | |||||||
Illinois Educational Facilities Authority, 5.625% due 10/1/2022 (Augustana College) | NR/Baa1 | 625,000 | 642,544 | |||||||
Illinois Finance Authority, 5.75% due 11/15/2037 (OSF Healthcare System) | A/A3 | 330,000 | 339,877 | |||||||
a Illinois Finance Authority, 6.00% due 5/15/2039 (OSF Healthcare System) | A/A3 | 1,000,000 | 1,061,470 | |||||||
Sangamon County School District COP, 5.875% due 8/15/2018 (Hay Edwards; Insured: ACA) | NR/NR | 300,000 | 301,215 | |||||||
Southwestern Illinois Development Authority, 5.50% due 8/15/2020 (Southwestern Illinois Health Facilities) | BBB/Baa2 | 500,000 | 502,720 | |||||||
INDIANA — 0.11% | ||||||||||
Indiana Bond Bank, 5.25% due 10/15/2020 (Gas Revenue Program) | NR/Aa3 | 90,000 | 97,492 | |||||||
KANSAS — 0.84% | ||||||||||
Wichita Multi-Family Housing, 5.85% due 12/1/2025 (Brentwood Apartments) | B/NR | 895,000 | 714,183 | |||||||
KENTUCKY — 2.45% | ||||||||||
Kentucky EDA, 0% due 10/1/2021 (Norton Healthcare, Inc.; Insured: Natl-Re) | A/Baa1 | 365,000 | 209,229 | |||||||
Kentucky EDA, 0% due 10/1/2022 (Norton Healthcare, Inc.; Insured: Natl-Re) | A/Baa1 | 2,490,000 | 1,338,823 | |||||||
Owen County Waterworks Systems, 6.25% due 6/1/2039 (American Water Co.) | BBB+/Baa2 | 500,000 | 550,140 | |||||||
LOUISIANA — 2.57% | ||||||||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2032 (Black & Gold Facilities; Insured: CIFG) | BBB-/Baa3 | 120,000 | 115,075 | |||||||
Louisiana Public Facilities Authority, 5.375% due 5/15/2043 (Ochsner Clinic Foundation) | NR/Baa1 | 500,000 | 497,600 | |||||||
Orleans Parish School Board GO, 0% due 2/1/2015 (Insured: FGIC) | NR/NR | 645,000 | 496,147 | |||||||
West Feliciana Parish PCR, 6.60% due 9/1/2028 (Entergy Gulf States) | BBB/Baa2 | 1,085,000 | 1,086,487 | |||||||
MASSACHUSETTS — 3.47% | ||||||||||
Massachusetts Development Finance Agency, 5.75% due 12/1/2042 put 5/1/2019 (Dominion Energy Brayton) | A-/Baa2 | 200,000 | 221,840 | |||||||
Massachusetts Educational Financing Authority, 6.00% due 1/1/2028 | AA/NR | 500,000 | 542,805 | |||||||
Massachusetts Health & Educational Facilities Authority, 0.22% due 8/15/2034 put 10/1/2010 (Tufts University; SPA: Bank of America N.A.) (daily demand notes) | AA-/Aa2 | 800,000 | 800,000 | |||||||
Massachusetts Health & Educational Facilities Authority, 0.31% due 12/1/2037 put 10/1/2010 (Museum of Fine Arts; SPA: Bank of America N.A.) (daily demand notes) | AA/Aa2 | 1,400,000 | 1,400,000 | |||||||
MICHIGAN — 9.75% | ||||||||||
Detroit School District, 5.25% due 5/1/2027 (Insured: AGM) | AAA/Aa2 | 1,000,000 | 1,094,330 | |||||||
Detroit Sewage Disposal Revenue, 5.25% due 7/1/2020 (Insured: Natl-Re) | A/Aa3 | 1,000,000 | 1,074,490 | |||||||
Dickinson County Healthcare Systems, 5.80% due 11/1/2024 (Insured: ACA) | NR/NR | 230,000 | 230,778 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2036 (Bronson Methodist Hospital) | NR/A2 | 1,000,000 | 987,140 | |||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Michigan Public Educational Facilities Authority, 8.75% due 9/1/2039 (Bradford Academy) | BBB-/NR | $ | 500,000 | $ | 574,265 | |||||
Michigan Public School Academy, 8.00% due 8/1/2035 (Will Carleton Charter School) | NR/NR | 1,100,000 | 1,072,082 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Obligated Group) | A/A2 | 650,000 | 658,879 | |||||||
Michigan State Hospital Finance Authority, 5.75% due 4/1/2032 (Oakwood Obligated Group) | A/A2 | 150,000 | 151,632 | |||||||
Michigan State Hospital Finance Authority Revenue, 5.75% due 11/15/2039 | A/A1 | 1,000,000 | 1,040,230 | |||||||
Michigan State Strategic Fund, 5.00% due 8/1/2013 (NSF International) | A-/NR | 300,000 | 317,526 | |||||||
Michigan State Strategic Fund, 5.25% due 6/1/2018 (Clark Retirement Community) | BBB-/NR | 895,000 | 891,026 | |||||||
Michigan Strategic Fund, 7.00% due 5/1/2021 (The Detroit Edison Company; Insured: Natl-Re/ AMBAC) | NR/NR | 200,000 | 248,034 | |||||||
MINNESOTA — 1.00% | ||||||||||
Dakota County Community Development Agency, 5.00% due 11/1/2022 (Commons on Marice) | NR/NR | 400,000 | 368,852 | |||||||
St. Paul Housing & Redevelopment Authority, 5.25% due 5/15/2023 (Healthpartners Obligated Group) | BBB+/A3 | 100,000 | 102,967 | |||||||
Washington County Housing Redevelopment Authority, 5.625% due 6/1/2037 (Birchwood & Woodbury) | NR/NR | 415,000 | 387,349 | |||||||
MISSOURI — 0.40% | ||||||||||
Kansas City Tax Increment Financing Commission, 5.00% due 3/1/2012 (Maincor Project) | NR/NR | 340,000 | 343,512 | |||||||
NEVADA — 0.61% | ||||||||||
Mesquite Redevelopment Agency Tax Increment Revenue, 7.375% due 6/1/2024 | A-/NR | 500,000 | 525,000 | |||||||
NEW MEXICO — 0.85% | ||||||||||
Santa Fe County Charter School Foundation, 6.625% due 1/15/2036 (ATC Foundation) | NR/NR | 485,000 | 466,395 | |||||||
Santa Fe Educational Facilities, 5.50% due 3/1/2024 (St. Johns College) | NR/NR | 265,000 | 262,019 | |||||||
NEW YORK — 3.74% | ||||||||||
New York City GO, 0.31% due 8/1/2028 put 10/1/2010 (SPA: Dexia) (daily demand notes) | AA/Aa2 | 3,200,000 | 3,200,000 | |||||||
OHIO — 2.81% | ||||||||||
Cleveland Cuyahoga County Port Authority, 6.25% due 5/15/2016 (LOC: FifthThird Bank) | NR/NR | 490,000 | 501,775 | |||||||
Ohio State Water Development Authority PCR, 5.875% due 6/1/2033 put 6/1/2016 (FirstEnergy) | BBB-/Baa1 | 500,000 | 559,005 | |||||||
b Ohio State Water Development Authority PCR, 3.375% due 7/1/2033 put 7/1/2015 (FirstEnergy) | BBB-/Baa2 | 1,350,000 | 1,346,719 | |||||||
OREGON — 1.17% | ||||||||||
Western Generation Agency, 5.00% due 1/1/2016 (Wauna Cogeneration; Insured: ACA) | NR/NR | 1,000,000 | 1,003,450 | |||||||
PENNSYLVANIA — 7.25% | ||||||||||
Allegheny County Industrial Development Authority, 6.75% due 8/15/2035 (Propel Charter School) | BB+/NR | 1,000,000 | 1,018,650 | |||||||
Allegheny County Redevelopment Authority, 5.10% due 7/1/2014 (Pittsburgh Mills) | NR/NR | 185,000 | 186,833 | |||||||
a Pennsylvania Economic Development Financing Authority, 3.00% due 12/1/2037 put 9/1/2015 (PPL Energy Supply) | BBB/Baa2 | 1,500,000 | 1,512,990 | |||||||
Pennsylvania EDA, 5.00% due 12/1/2014 (Colver Project; Insured: AMBAC) (AMT) | BBB-/Ba1 | 450,000 | 452,826 | |||||||
b Pennsylvania Housing Finance Agency, 4.75% due 10/1/2025 (AMT) | AA+/Aa2 | 2,000,000 | 1,995,740 | |||||||
Philadelphia IDA, 6.00% due 8/1/2035 (Mast Charter School) | BBB+/NR | 1,000,000 | 1,033,670 | |||||||
Certified Annual Report 13
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
RHODE ISLAND — 0.90% | ||||||||||
Pawtucket Housing Authority Capital Funds Housing Revenue, 5.50% due 9/1/2022 | AA/NR | $ | 315,000 | $ | 366,266 | |||||
Pawtucket Housing Authority Capital Funds Housing Revenue, 5.50% due 9/1/2024 | AA/NR | 350,000 | 402,532 | |||||||
SOUTH DAKOTA — 0.91% | ||||||||||
South Dakota Health & Educational Facilities Authority, 5.50% due 11/1/2040 (Sanford Health) | AA-/A1 | 750,000 | 782,085 | |||||||
TENNESSEE — 0.73% | ||||||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2015 | A/Baa1 | 100,000 | 106,687 | |||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2024 | BB+/Ba3 | 500,000 | 519,540 | |||||||
TEXAS — 11.34% | ||||||||||
Austin Convention Enterprises, Inc., 5.25% due 1/1/2024 (Austin Convention Center; Insured: Syncora) | BB+/Ba1 | 720,000 | 669,802 | |||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2034 (Austin Convention Center; Insured: Syncora) | BB+/Ba1 | 615,000 | 520,677 | |||||||
Bexar County Housing Finance Corp. MFR, 5.70% due 1/1/2021 (American Opportunity Housing; Insured: Natl-Re) | NR/Baa1 | 100,000 | 95,217 | |||||||
Bexar County Housing Finance Corp. MFR, 5.80% due 1/1/2031 (American Opportunity Housing; Insured: Natl-Re) | NR/Baa1 | 550,000 | 498,322 | |||||||
Clifton Higher Education Finance Corp., 9.00% due 2/15/2038 | BBB-/NR | 1,000,000 | 1,183,770 | |||||||
Gulf Coast Waste Disposal Authority, 6.10% due 8/1/2024 (International Paper Co.) (AMT) | BBB/Baa3 | 100,000 | 101,496 | |||||||
Kimble County Hospital District, 6.25% due 8/15/2033 | NR/NR | 500,000 | 528,895 | |||||||
La Vernia Higher Education Finance Corp., 6.25% due 8/15/2039 (Kipp Inc.) | BBB/NR | 1,000,000 | 1,045,610 | |||||||
Sam Rayburn Municipal Power Agency, 6.00% due 10/1/2021 | NR/Baa2 | 100,000 | 103,326 | |||||||
San Antonio Energy Acquisition Public Facilities Corp., 5.50% due 8/1/2021 | A/A2 | 40,000 | 43,312 | |||||||
State of Texas, 2.00% due 8/31/2011 (Tax & Revenue Anticipation Notes) | SP-1+/MIG1 | 1,500,000 | 1,522,395 | |||||||
Texas City Industrial Development Corp., 7.375% due 10/1/2020 (Arco Pipe Line Company; Guaranty: Atlantic Richfield) | A/A2 | 1,000,000 | 1,155,290 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 4.15% due 8/15/2016 (Idea Public School; Insured: ACA) | BBB/NR | 100,000 | 99,276 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2023 (Idea Public School; Insured: ACA) | BBB/NR | 155,000 | 153,109 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2030 (Idea Public School; Insured: ACA) | BBB/NR | 1,000,000 | 942,260 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 6.20% due 2/15/2040 (Cosmos Foundation Inc.) | BBB/NR | 1,000,000 | 1,035,850 | |||||||
U.S. VIRGIN ISLANDS — 0.84% | ||||||||||
Virgin Islands Public Finance Authority, 6.75% due 10/1/2037 | BBB/Baa3 | 500,000 | 564,280 | |||||||
Virgin Islands Water & Power Authority, 5.50% due 7/1/2017 | NR/Baa3 | 150,000 | 150,286 | |||||||
UTAH — 1.23% | ||||||||||
a Herriman Utah Special Assessment, 4.75% due 11/1/2022 (Towne Center Assessment Area) | A/NR | 1,000,000 | 1,048,880 | |||||||
VIRGINIA — 2.56% | ||||||||||
Mecklenburg County Industrial Development Authority, 6.50% due 10/15/2017 (Virginia | ||||||||||
Electric and Power Company) | NR/Baa1 | 1,000,000 | 1,014,800 | |||||||
Norton IDA, 6.00% due 12/1/2014 (Norton Community Hospital; Insured: ACA) | NR/NR | 635,000 | 650,323 | |||||||
Virginia Small Business Financing Authority, 9.00% due 7/1/2039 (Hampton RDS Proton) | NR/NR | 500,000 | 527,430 | |||||||
14 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||||
WASHINGTON — 1.20% | ||||||||||||
Washington HFA, 5.70% due 7/1/2038 (Overlake Hospital Medical Center) | BBB+/A3 | $ | 1,000,000 | $ | 1,026,230 | |||||||
TOTAL INVESTMENTS — 100.08% (Cost $80,667,572) | $ | 85,632,534 | ||||||||||
LIABILITIES NET OF OTHER ASSETS — (0.08)% | (71,806 | ) | ||||||||||
NET ASSETS — 100.00% | $ | 85,560,728 | ||||||||||
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 | |
AGM | Insured by Assured Guaranty Municipal Corp. | |
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. | |
FHA | Insured by Federal Housing Administration | |
GO | General Obligation | |
HFA | Health Facilities Authority | |
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 | Stand-by Purchase Agreement | |
Syncora | Insured by Syncora Guarantee Inc. | |
VA | Veterans Affairs |
See notes to financial statements.
Certified Annual Report 15
| STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $80,667,572) (Note 2) | $ | 85,632,534 | ||
Cash | 1,624,213 | |||
Receivable for investments sold | 45,000 | |||
Receivable for fund shares sold | 811,255 | |||
Interest receivable | 978,327 | |||
Prepaid expenses and other assets | 19,439 | |||
Total Assets | 89,110,768 | |||
LIABILITIES | ||||
Payable for securities purchased | 3,350,000 | |||
Payable for fund shares redeemed | 42,083 | |||
Payable to investment advisor and other affiliates (Note 3) | 58,129 | |||
Accounts payable and accrued expenses | 42,359 | |||
Dividends payable | 57,469 | |||
Total Liabilities | 3,550,040 | |||
NET ASSETS | $ | 85,560,728 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (3,026 | ) | |
Net unrealized appreciation on investments | 4,964,962 | |||
Accumulated net realized gain (loss) | 142,051 | |||
Net capital paid in on shares of beneficial interest | 80,456,741 | |||
| $ | 85,560,728 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($28,165,647 applicable to 1,980,946 shares of beneficial interest outstanding - Note 4) | $ | 14.22 | ||
Maximum sales charge, 2.00% of offering price | 0.29 | |||
Maximum offering price per share | $ | 14.51 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($15,260,752 applicable to 1,072,188 shares of beneficial interest outstanding - Note 4) | $ | 14.23 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($42,134,329 applicable to 2,961,204 shares of beneficial interest outstanding - Note 4) | $ | 14.23 | ||
| * | 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 Strategic Municipal Income Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $40,368) | $ | 2,860,064 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 380,139 | |||
Administration fees (Note 3) | ||||
Class A Shares | 22,145 | |||
Class C Shares | 9,872 | |||
Class I Shares | 12,536 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 44,290 | |||
Class C Shares | 78,978 | |||
Transfer agent fees | ||||
Class A Shares | 10,510 | |||
Class C Shares | 4,911 | |||
Class I Shares | 6,509 | |||
Registration and filing fees | ||||
Class A Shares | 18,623 | |||
Class C Shares | 17,554 | |||
Class I Shares | 18,192 | |||
Custodian fees (Note 3) | 43,493 | |||
Professional fees | 50,083 | |||
Accounting fees | 1,956 | |||
Trustee fees | 1,067 | |||
Other expenses | 8,691 | |||
Total Expenses | 729,549 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (105,580 | ) | ||
Distribution fees waived (Note 3) | (31,591 | ) | ||
Fees paid indirectly (Note 3) | (639 | ) | ||
Net Expenses | 591,739 | |||
Net Investment Income | 2,268,325 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 377,353 | |||
Net change in unrealized appreciation (depreciation) of investments | 2,052,352 | |||
Net Realized and Unrealized Gain | 2,429,705 | |||
Net Increase in Net Assets Resulting from Operations | $ | 4,698,030 | ||
See notes to financial statements.
Certified Annual Report 17
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg Strategic Municipal Income Fund | ||
| Year Ended September 30, 2010 | Period Ended* September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 2,268,325 | $ | 397,331 | ||||
Net realized gain (loss) on investments | 377,353 | 80,474 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 2,052,352 | 2,912,610 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 4,698,030 | 3,390,415 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (779,270 | ) | (113,802 | ) | ||||
Class C Shares | (319,620 | ) | (29,017 | ) | ||||
Class I Shares | (1,169,435 | ) | (257,538 | ) | ||||
From realized gains | ||||||||
Class A Shares | (110,997 | ) | — | |||||
Class C Shares | (40,025 | ) | — | |||||
Class I Shares | (164,754 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 15,636,797 | 10,808,011 | ||||||
Class C Shares | 11,167,420 | 3,417,545 | ||||||
Class I Shares | 22,636,138 | 16,790,830 | ||||||
Net Increase in Net Assets | 51,554,284 | 34,006,444 | ||||||
NET ASSETS: | ||||||||
Beginning of Period | 34,006,444 | — | ||||||
End of Period | $ | 85,560,728 | $ | 34,006,444 | ||||
See notes to financial statements.
| * | For the period from commencement of operations on April 1, 2009 through September 30, 2009. |
18 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
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 sixteen 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). 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).
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2010. 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:
Certified Annual Report 19
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
| Fair Value Measurements at September 30, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 85,632,534 | $ | — | $ | 85,632,534 | $ | — | ||||||||
Total Investments in Securities | $ | 85,632,534 | $ | — | $ | 85,632,534 | $ | — | ||||||||
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
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.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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.
20 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
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, 2010, 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. 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, 2010, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $43,618 for Class A shares, $32,648 for Class C shares, and $29,314 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, 2010, the Distributor has advised the Fund that it earned net commissions aggregating $1,107 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $949 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I shares. 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, 2010, are set forth in the Statement of Operations. Distribution fees in the amount of $31,591 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, 2010, fees paid indirectly were $639.
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, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Period Ended* September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,292,244 | $ | 17,833,733 | 850,895 | $ | 10,837,932 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 53,595 | 735,252 | 7,045 | 92,971 | ||||||||||||
Shares repurchased | (213,606 | ) | (2,932,188 | ) | (9,227 | ) | (122,892 | ) | ||||||||
Net Increase (Decrease) | 1,132,233 | $ | 15,636,797 | 848,713 | $ | 10,808,011 | ||||||||||
Certified Annual Report 21
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Period Ended* September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 893,854 | $ | 12,358,292 | 264,135 | $ | 3,399,093 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 16,955 | 233,302 | 1,396 | 18,452 | ||||||||||||
Shares repurchased | (104,152 | ) | (1,424,174 | ) | — | — | ||||||||||
Net Increase (Decrease) | 806,657 | $ | 11,167,420 | 265,531 | $ | 3,417,545 | ||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 1,714,923 | $ | 23,915,174 | 1,383,622 | $ | 17,417,043 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 73,042 | 1,003,621 | 13,885 | 181,497 | ||||||||||||
Shares repurchased | (165,161 | ) | (2,282,657 | ) | (59,107 | ) | (807,710 | ) | ||||||||
Net Increase (Decrease) | 1,622,804 | $ | 22,636,138 | 1,338,400 | $ | 16,790,830 | ||||||||||
| * | The Fund commenced operations on April 1, 2009. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $48,153,515 and $7,817,293, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 80,667,572 | ||
Gross unrealized appreciation on a tax basis | $ | 5,067,775 | ||
Gross unrealized depreciation on a tax basis | (102,813 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 4,964,962 | ||
Distributable earnings – ordinary income (tax basis) | $ | 137,318 | ||
Distributable capital gains (tax basis) | $ | 4,733 |
At September 30, 2010, the Fund did not have any undistributed tax-exempt net income.
22 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 | |
The tax character of distributions paid during the year ended September 30, 2010, and period ended September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 2,190,183 | $ | 377,011 | ||||
Ordinary income | 393,918 | 23,346 | ||||||
Capital gains | — | — | ||||||
Total | $ | 2,584,101 | $ | 400,357 | ||||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class C shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .35 of 1%.
Certified Annual Report 23
Thornburg Strategic Municipal Income Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 13.86 | 0.60 | 0.48 | 1.08 | (0.61 | ) | (0.11 | ) | (0.72 | ) | $ | 14.22 | 4.40 | 1.25 | 1.25 | 1.50 | 8.20 | 16.26 | $ | 28,166 | |||||||||||||||||||||||||||||||||||||||
2009(b)(c) | $ | 11.94 | 0.29 | 1.91 | 2.20 | (0.28 | ) | — | (0.28 | ) | $ | 13.86 | 4.71 | (d) | 1.25 | (d) | 1.25 | (d) | 2.29 | (d) | 18.65 | 14.37 | $ | 11,761 | ||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.87 | 0.55 | 0.49 | 1.04 | (0.57 | ) | (0.11 | ) | (0.68 | ) | $ | 14.23 | 4.05 | 1.55 | 1.55 | 2.36 | 7.88 | 16.26 | $ | 15,261 | |||||||||||||||||||||||||||||||||||||||
2009(c) | $ | 11.94 | 0.27 | 1.93 | 2.20 | (0.27 | ) | — | (0.27 | ) | $ | 13.87 | 4.40 | (d) | 1.55 | (d) | 1.55 | (d) | 6.40 | (d)(e) | 18.58 | 14.37 | $ | 3,684 | ||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.87 | 0.64 | 0.48 | 1.12 | (0.65 | ) | (0.11 | ) | (0.76 | ) | $ | 14.23 | 4.66 | 0.99 | 0.99 | 1.11 | 8.48 | 16.26 | $ | 42,134 | |||||||||||||||||||||||||||||||||||||||
2009(c) | $ | 11.94 | 0.31 | 1.92 | 2.23 | (0.30 | ) | — | (0.30 | ) | $ | 13.87 | 4.90 | (d) | 0.99 | (d) | 0.99 | (d) | 2.12 | (d) | 18.87 | 14.37 | $ | 18,561 | ||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Fund commenced operations on April 1, 2009. |
| (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.
| 24 Certified Annual Report | Certified Annual Report 25 |
| 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, 2010, the results of its operations for the year then ended and the changes in its net assets 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
26 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,068.70 | $ | 6.48 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,066.30 | $ | 8.00 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.33 | $ | 7.81 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,070.10 | $ | 5.14 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.25%; C: 1.54%; 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 27
| INDEX COMPARISON | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Strategic Municipal Income Fund versus BofA Merrill Lynch Municipal Master Index
and Consumer Price Index (April 1, 2009 to September 30, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 4/1/09) | 6.06 | % | — | — | 16.58 | % | ||||||||||
C Shares (Incep: 4/1/09) | 7.28 | % | — | — | 17.85 | % | ||||||||||
I Shares (Incep: 4/1/09) | 8.48 | % | — | — | 18.49 | % | ||||||||||
Performance data reflect past performance, which is no guarantee of future results. The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares. Returns reflect the reinvestment of dividends and capital gains 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 BofA Merrill Lynch Municipal Master 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).
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.
28 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 (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, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 65 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. | None | ||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||
Susan H. Dubin, 61 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, 56 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, 51 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 29
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 (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, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
30 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 31
| OTHER INFORMATION | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 (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, 2010 dividends paid by the Fund of $2,190,183 (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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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 objectives. In addition, the Trustees
32 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Strategic Municipal Income Fund | September 30, 2010 (Unaudited) | |
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 a broad-based securities index.
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 evaluating quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns since inception and performance in accordance with expectations. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment returns exceeded the average return for each of the fund categories in the year-to-date and one-year periods ended with the second quarter of the current year, and that the Fund’s investment performance fell within the top decile of performance for both categories for the same periods.
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 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, 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 was higher than the median and average expense ratios for the group of mutual funds assembled by the mutual fund analyst firm, that the management fee was higher than the median and average fee rates for the same group of funds, but that the differences were not significant in view of 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 confirmed their previous observations 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 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 the adequacy of the Advisor’s resources and 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.
Certified Annual Report 33
| OTHER INFORMATION, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2010 (Unaudited) | |
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
34 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
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. 35
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36 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 Developing World Fund |
| • | Thornburg Limited Term U.S. Government Fund |
| • | Thornburg Limited Term Income Fund |
| • | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 37
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 Developing World 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. 39
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Important Information
The information presented on the following pages is current as of September 30, 2010. 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 or 2010.
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.
BofA Merrill Lynch California Core Municipal Securities Index – This index tracks the performance of U.S. dollar denominated investment grade tax-exempt debt publicly issued by California or Puerto Rico, and their political subdivisions, in the U.S. domestic market. Qualifying securities must have at least 1 year remaining term to final maturity, a fixed coupon, an investment grade rating (based on an average of Moody’s, S&P and Fitch), and a minimum amount outstanding of $25 million per maturity.
BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index – A model portfolio of municipal obligations throughout the U.S., with an average maturity ranging from three to fifteen years.
BofA 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).
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 Yield – The distribution yield 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.
Basis Point (BPS) – A unit equal to 1/100th of 1%. 1% = 100 basis points (bps).
Bond Credit Ratings – A bond credit rating assesses the financial ability of a debt issuer to make timely payments of principal and interest. Ratings of AAA (the highest), AA, A, and BBB are investment-grade quality. Ratings of BB, B, CCC, CC, C, and D (the lowest) are considered below investment grade, speculative grade, or junk bonds. Unless otherwise noted, the ratings listed are from Municipal Market Data and are a combination of ratings from Standard and Poor’s, Moody’s Investors Service, and Fitch Ratings.
Effective Duration – A bond’s sensitivity to interest rates, incorporating the embedded option features, such as call provisions. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
This page is not part of the Annual Report. 3
Important Information,
Continued
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
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.
Insured Bond – A bond with interest and principal payments insured by a third party. Insured bonds are usually found as a feature of municipal bonds; they are purchased, underwritten and repackaged by a financial guarantee company who then sells the issue to investors.
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.
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.
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.
Treasury Inflation Protected Securities (TIPS) – Either a U.S. Treasury note or bond that offers protection from the effects of inflation. Using the Consumer Price Index as a guide, the value of the principal is adjusted to reflect the effects of inflation. A fixed interest rate is paid semi-annually on the adjusted amount. At maturity, if inflation has increased the value of the principal, the investor receives the higher value. If deflation has decreased the value, the investor receives the original face amount of the security.
4 This page is not part of the Annual Report.
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. |
CO-PORTFOLIO MANAGERS
Josh Gonze, George Strickland, and Chris Ihlefeld
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 0.99%, as disclosed in the most recent Prospectus.
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history of A shares from February 19, 1987 through September 30, 2010
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 2/19/87) | ||||||||||||||||||||
Without sales charge | 5.29 | % | 5.03 | % | 4.25 | % | 3.85 | % | 4.85 | % | ||||||||||
With sales charge | 3.70 | % | 4.51 | % | 3.94 | % | 3.69 | % | 4.78 | % | ||||||||||
30-DAY YIELDS, A SHARES
As of September 30, 2010
Annualized Distribution Yield | SEC Yield | |||
2.56% | 1.51 | % | ||
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2010
Number of Bonds | 160 | |
Effective Duration | 3.8 Yrs | |
Average Maturity | 4.9 Yrs | |
See the entire portfolio in the Schedule of Investments beginning on page 11.
This page is not part of the Annual Report. 5
Thornburg California Limited Term Municipal Fund
September 30, 2010
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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 11, 2010
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 29 cents to $13.38 per share during the fiscal year ended September 30, 2010. If you were with us for the entire period, you received dividends of 38.9 cents per share. If you reinvested your dividends, you received 39.5 cents per share. Dividends per share were lower for Class C shares and higher for Class I shares to account for varying class-specific expenses. | |
Josh Gonze Co-Portfolio Manager | The Class A shares of your Fund produced a total return of 5.29% at NAV over the fiscal year ended September 30, 2010, compared to 5.62% for the Barclays Capital Five-Year Municipal Bond Index. The main contributor to the difference in performance is that the Barclays Capital Five-Year Municipal Bond Index has all of its holdings in four to six year maturities. The Thornburg California Limited Term Municipal Fund has holdings that span one to ten year maturities in a laddered structure. On average yields decreased 0.40% in the four to six year segment of the market while the average decrease in yields for the one to ten year segment of the market was around 0.30%.
The Economy and the Federal Reserve
On September 20, 2010, the National Bureau of Economic Research (NBER) announced that the recession ended in June 2009. The 9.6% of the American work force currently unemployed may beg to differ with this evaluation. The duration of the recession was 18 months, making it the longest recession since World War II. | |
Christopher Ihlefeld Co-Portfolio Manager | The economic picture has been largely unchanged during the fiscal year. The economy is suffering from a high degree of slack in the utilization of its productive resources. Banks are not lending even though the Federal Reserve (Fed) has pumped considerable amounts of money into the economy. Inflation and inflation expectations are quite muted. Gross Domestic Product (GDP), a measure of a country’s overall economic output, recorded a 1.6% increase in the quarter ended June 30, 2010, much higher than the negative 6.8% decrease posted in the quarter ended December 31, 2009, but lower than the long-term average growth rate experienced since 1973 of 2.7%. Capacity utilization, a measure of an economy’s usage of its productive resources, is running around 74.7%, well off the series low of 68.3% recorded in June of 2009 but below its long-term average of 81%. The Fed, seeking to bolster aggregate demand for goods and services, has pumped a tremendous amount of money into the economy. M2, a broad measure of money and money substitutes, has grown 15.9% since the beginning of 2008. But the velocity of M2, a measure of the rate at which money in circulation is used in transactions, is falling. Whether lending institutions are not lending or small and midsize businesses are not borrowing, the result is the same. Commercial and Industrial Loans and Leases (loans to | |
Certified Annual Report 7
Letter to Shareholders,
Continued
corporations, commercial enterprises, or joint ventures) have decreased 15.2% since January of 2008. Small and midsized businesses, normally the engines of economic growth, are being starved of needed capital. Now let’s look at one measure of inflation, the Consumer Price Index (CPI). The year-over-year change in headline CPI has been running between 1.1% and 1.2% for the last three months. Core CPI (headline CPI less the food and energy components) has been running at 0.9% for the last four months. The market’s expectations of future inflation as measured by the inflation expectations used in the pricing of Treasury Inflation Protected Securities (TIPS) with five years to maturity has been running around the 1.4% rate. So inflation, the bane of fixed income investors, has been low and the market expects it to remain low.
The Federal Open Market Committee (FOMC) maintained a very accommodative stance toward monetary policy by keeping the Fed Funds rate effectively at 0% throughout the fiscal year. In addition to keeping the Fed Funds rate low, central banks around the world engaged in a policy known as “quantitative easing,” buying back bonds and other assets to boost demand and fight off deflation. The Fed bought $1.7 trillion in bonds to accomplish this goal. As these assets mature, the market is wondering what the Fed will do with the proceeds – buy more bonds (and what type of bonds?) or return the money to the Treasury. In their September 21, 2010 release the FOMC stated, “The Committee also will maintain their existing policy of reinvesting principal payments for their securities holdings.” So the Fed’s accommodative monetary policy will remain unchanged “for an extended period.”
As we look forward over the next 6–12 months, we believe the Fed will keep short-term interest rates low and the market will keep the slope of the yield curve (difference between long-term and short-term interest rates) steep. Of course if we see signs of an increase in economic activity, we will reevaluate this position. The next move by the Fed, in terms of short-term interest rates, would seem to be an increase, easy to say when short-term interest rates have reached the lower limit of zero.
The Municipal Market
The municipal market has performed very well over the fiscal year. The reasons for this performance are as follows: assets have continued to flow out of municipal money market funds and into municipal bond funds (primarily short-term municipal bond funds), investors’ appetite for risk assets has been whetted after their performance in 2009, and finally, anticipation of increased taxes has added to the allure of municipal bonds. Yields on the benchmark AAA general obligation bond have decreased during the fiscal year, but not uniformly for all maturities. Chart I illustrates these changes for maturities from 1 to 30 years.
CHART 1: CHANGES IN AAA GENERAL OBLIGATION BOND YIELDS
10/1/2009 - 9/30/2010
Yields decreased anywhere from 0.12% (12 basis points) to 0.40% (40 basis points) depending on maturity. Notice that, in general, shorter maturities decreased in yield more than longer term maturities. This situation was caused by the in-flow of assets into short-term municipal bond funds from municipal money market funds.
8 Certified Annual Report
Not only have the general level of interest rates decreased over the past 12 months, but market participants have become less fearful when it comes to pricing credit risk. To illustrate this point, we will introduce the concept of “implied default rates.” The implied default rate is derived from current market prices for bonds of various credit categories (assuming different recovery rates) compared to a “default free” bond’s price. The implied default rate of all investment grade bonds with ten years of maturity for the BofA Merrill Lynch 3–15 year U.S. Municipal Securities Index on September 30, 2009, as we calculated it, was 10.7% assuming a recovery rate of 60%. On August 31, 2010, the same implied default rate was 8.1%, a marked decrease from the beginning of the year. These implied default rates are well in excess of the historic default rates for investment grade municipal bonds, as calculated by Standard and Poor’s, of 0.09%.
As investors, we have been inundated with news reports concerning the impending disaster awaiting the municipal bond market due to the poor financial condition of state and local governments. California is usually held up as the poster child for fiscal mismanagement and poor governance. Being 100 days late with its budget doesn’t do much to change this opinion. We would like to borrow a concept from Mark Twain, “The reports of my death have been greatly exaggerated,” and the forecasts of California’s demise are overstated. We are not being a “Pollyanna,” there is a great deal of fiscal stress in the state. But the California municipal market is not monolithic; it is made up of more than just state and local government general obligation bonds. The BofA Merrill Lynch California Core Municipal Securities Index is made up of 41% revenue bonds, with the remainder being either general obligation bonds or insured bonds. California is the eighth largest economy in the world and debt service payments are constitutionally mandated to be paid second to education expenditures. The Rockefeller Institute of Government reported in its August 30, 2010 report, that California’s percent change in state tax revenue decreased 0.9% from the second quarter of 2009. Personal income taxes were 11.5% higher, sales taxes were 10.1% higher and corporate income taxes were 42.3% lower. California’s budget shortfall of $19 billion was approximately 21.6% of the fiscal year 2011 budget, higher than the national average. It was balanced with a combination of planned spending cuts, federal aid, asset sales, and other factors. Though significant challenges remain, we have great confidence in the ability and willingness of the state to continue servicing its debt. California’s pension system is 87% funded, exceeding the national average.
A Word about Municipal Bond Market Risk
The combination of a very accommodative Fed (Federal Funds rate near zero) and the continued disintermediation of assets out of municipal money market funds into municipal bond funds (mostly short-term municipal bond funds) has increased the interest rate risk in the municipal bond market. On December 31, 2008, municipal money market funds totaled almost $495 billion (50% of the combined municipal bond and money market fund total). By December 31, 2009, municipal money market funds totaled almost $401 billion (41% of the combined total). Today approximately $350 billion of investor’s assets remain in municipal money market funds or almost 36% of the combined municipal money market and bond fund assets. The reason for this exodus is quite simple: investors do not like to earn close to 0% on their invested funds no matter how “safe” they are. Although we do not anticipate much change in interest rates for the next 6–12 months, the next move in all likelihood will be to the upside. This means that investors should be ready for some capital losses in the future. The trade-off between the extra income earned in a bond fund and the expected capital loss can be mitigated by establishing an appropriate holding period for the investment. We believe that investors in the California Limited Term Municipal Fund should plan to own the Fund for at least three years in order to decrease the chance that fluctuations in net asset value might overwhelm the income component of their total return.
Certified Annual Report 9
Letter to Shareholders,
Continued
Your Thornburg California Limited Term Municipal Fund is a laddered portfolio of 160 municipal obligations. We ladder the maturity dates of the bonds in your portfolio so that some of the bonds are scheduled to mature during each of the coming years. Laddering short and intermediate bonds accomplishes two goals. First, the staggered bond maturities contained in a ladder reduce interest-rate risk and dampen the Fund’s price volatility. Second, laddering reduces reinvestment risk by giving the Fund a steady cash flow stream from maturing bonds to reinvest toward the top of the ladder where yields are typically higher. Chart 2 describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
The Fund’s adherence to the discipline of the laddered structure served investors well. As you can see from Chart I on page 8, yields in the shorter segment of the 1–10 year maturity range of the market decreased more than any other segment of the market. By keeping with the discipline of the Fund’s laddered structure, we were able to capture a significant portion of that performance. Additionally, overweighting out-of-favor sectors, such as the revenue and insured sectors, along with under-weights to securities in the general obligation sector, we added incremental performance. We plan to continue to search for out-of-favor opportunities in the municipal market, using our fundamental, bottom-up approach to portfolio management, and the discipline of the laddered structure.
CHART 2: % OF PORTFOLIO MATURING
As of 9/30/10. Percentages vary over time.
Data may not add up to 100% due to rounding.
Thank you for investing in the 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.
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
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† S&P/Moody’s | Principal Amount | Value | |||||||
ABAG Finance Authority, 4.75% due 10/1/2011 (California School of Mechanical Arts) | NR/A3 | $ | 435,000 | $ | 446,819 | |||||
ABAG Finance Authority, 4.75% due 10/1/2012 (California School of Mechanical Arts) | NR/A3 | 455,000 | 470,097 | |||||||
Alameda County COP, 5.375% due 12/1/2010 (Insured: Natl-Re) | NR/A1 | 2,000,000 | 2,012,400 | |||||||
Alameda County COP, 5.625% due 12/1/2016 (Santa Rita Jail; Insured: AMBAC) | AA/NR | 1,830,000 | 2,177,352 | |||||||
Alvord USD GO, 5.25% due 2/1/2014 (Insured: Natl-Re) | A+/Baa1 | 1,150,000 | 1,281,721 | |||||||
Bay Area Toll Authority, 5.00% due 4/1/2016 (San Francisco Bay Area) | AA/Aa3 | 2,075,000 | 2,426,733 | |||||||
Burbank Water & Power, 5.00% due 6/1/2015 | AA-/A1 | 750,000 | 866,100 | |||||||
Burbank Water & Power, 5.00% due 6/1/2016 | AA-/A1 | 500,000 | 584,975 | |||||||
Burbank Water & Power, 5.00% due 6/1/2017 | AA-/A1 | 1,000,000 | 1,176,310 | |||||||
Burbank Water & Power, 5.00% due 6/1/2018 | AA-/A1 | 360,000 | 423,104 | |||||||
Burbank Water & Power, 5.00% due 6/1/2020 | AA-/A1 | 625,000 | 735,362 | |||||||
Calexico USD GO, 6.75% due 9/1/2017 | BBB+/NR | 3,060,000 | 3,379,801 | |||||||
California Educational Facilities Authority, 5.00% due 4/1/2018 (Pitzer College) | NR/A3 | 1,540,000 | 1,714,682 | |||||||
California Educational Facilities Authority, 0% due 10/1/2019 (Loyola Marymount University; Insured: Natl-Re) | NR/A2 | 2,025,000 | 1,382,710 | |||||||
California Educational Facilities Authority, 5.00% due 4/1/2020 (Pitzer College) | NR/A3 | 1,445,000 | 1,602,910 | |||||||
California HFA, 5.00% due 11/15/2011 (Cedars Sinai Medical Center) | NR/A2 | 1,500,000 | 1,560,735 | |||||||
California HFA, 5.25% due 10/1/2013 (Providence Health) | AA/Aa2 | 650,000 | 724,250 | |||||||
California HFA, 5.00% due 8/15/2014 (Cedars Sinai Medical Center) | NR/A2 | 1,500,000 | 1,662,390 | |||||||
California HFA, 6.00% due 10/1/2018 (Providence Health) | AA/Aa2 | 1,000,000 | 1,222,390 | |||||||
California HFA, 5.10% due 2/1/2019 (Episcopal Home) | A-/NR | 2,000,000 | 2,110,700 | |||||||
California HFA, 5.00% due 7/1/2027 put 7/1/2014 (Catholic Healthcare West) | A/A2 | 2,000,000 | 2,196,040 | |||||||
California HFA, 0% due 8/1/2029 (Insured: AMBAC/FHA/VA) | A/A3 | 2,405,000 | 835,737 | |||||||
California Housing Finance Agency, 4.85% due 8/1/2016 (Insured: AGM) (AMT) | AAA/Aa3 | 1,000,000 | 1,044,700 | |||||||
California Housing Finance Agency, 9.875% due 2/1/2017 | A/A3 | 1,345,000 | 1,372,559 | |||||||
California Housing Finance Agency, 5.00% due 8/1/2017 (Insured: AGM) (AMT) | AAA/Aa3 | 980,000 | 1,029,088 | |||||||
California Housing Finance Agency, 5.125% due 8/1/2018 (Insured: AGM) (AMT) | AAA/Aa3 | 1,000,000 | 1,017,230 | |||||||
California Infrastructure & Economic Development Bank, 5.25% due 8/15/2020 (King City High School) | A-/NR | 1,000,000 | 1,103,870 | |||||||
California Mobile Home Park Financing Authority, 4.75% due 11/15/2010 (Rancho Vallecitos; Insured: ACA) | NR/NR | 255,000 | 255,513 | |||||||
California Mobile Home Park Financing Authority, 5.00% due 11/15/2013 (Rancho Vallecitos; Insured: ACA) | NR/NR | 570,000 | 581,354 | |||||||
California Municipal Finance Authority, 1.625% due 2/1/2019 put 10/1/2011 (Waste Management, Inc. Project; Guaranty: Waste Management, Inc.) | BBB/NR | 1,000,000 | 999,340 | |||||||
California PCR, 5.90% due 6/1/2014 (San Diego Gas & Electric) | A/A2 | 2,500,000 | 2,867,125 | |||||||
California PCR, 5.35% due 12/1/2016 (Pacific Gas & Electric) (AMT) | A/A3 | 2,000,000 | 2,066,660 | |||||||
California PCR Solid Waste Disposal, 6.75% due 7/1/2011 (North County Recycling Center) (ETM) | NR/Aaa | 500,000 | 521,615 | |||||||
California PCR Solid Waste Disposal, 5.25% due 6/1/2023 put 12/1/2017 (Republic Services, Inc.) (AMT) | BBB/Baa3 | 1,620,000 | 1,680,086 | |||||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: Natl-Re) | A/A2 | 2,000,000 | 2,007,240 | |||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
California State Department of Water Resources Power Supply, 6.00% due 5/1/2013 | AA-/Aa3 | $ | 2,270,000 | $ | 2,480,361 | |||||
California State Department of Water Resources Power Supply, 5.00% due 5/1/2015 | AA-/Aa3 | 5,000,000 | 5,805,750 | |||||||
California State Economic Recovery GO, 5.00% due 7/1/2018 | A+/Aa3 | 3,000,000 | 3,552,180 | |||||||
California State GO, 5.75% due 10/1/2010 (Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,000,140 | |||||||
California State GO, 5.50% due 3/1/2012 (School Improvements; Insured: FGIC) | A/A1 | 230,000 | 234,451 | |||||||
California State GO, 0.24% due 5/1/2034 put 10/7/2010 (Various Kindergarten; LOC: Citibank N.A./California State Teachers Retirement) (weekly demand notes) | A+/Aa3 | 500,000 | 500,000 | |||||||
California State GO, 0.26% due 5/1/2034 put 10/1/2010 (Various Kindergarten; LOC: Citibank N.A. (daily demand notes) | AAA/Aa2 | 3,040,000 | 3,040,000 | |||||||
California State Public Works Board Lease, 5.25% due 10/1/2013 (California State University) | BBB+/Aa3 | 500,000 | 501,375 | |||||||
California State Public Works Board Lease, 5.25% due 12/1/2014 | BBB+/A2 | 1,525,000 | 1,531,862 | |||||||
California State Public Works Board Lease, 5.00% due 1/1/2015 (Department of Corrections; Insured: AMBAC) | BBB+/A2 | 2,000,000 | 2,186,080 | |||||||
California State Public Works Board Lease, 5.00% due 11/1/2015 (Various Universities) | AA-/Aa2 | 1,000,000 | 1,129,550 | |||||||
California State Public Works Board Lease, 5.00% due 11/1/2016 (California State University) | BBB+/Aa3 | 1,000,000 | 1,109,070 | |||||||
California Statewide Communities Development Authority, 5.00% due 6/15/2013 | A-/A1 | 2,500,000 | 2,739,225 | |||||||
California Statewide Communities Development Authority, 5.00% due 5/15/2015 (Irvine LLC-UCI East Campus) | NR/Baa2 | 2,300,000 | 2,539,016 | |||||||
California Statewide Communities Development Authority, 5.00% due 4/1/2019 (Guaranty: Kaiser Permanente) | A+/NR | 3,000,000 | 3,378,990 | |||||||
California Statewide Communities Development Authority, 5.00% due 7/1/2020 (Aspire Public Schools) | NR/NR | 1,350,000 | 1,411,168 | |||||||
California Statewide Community Development Authority, 5.25% due 8/1/2014 (East Campus Apartments; Insured: ACA) | NR/Baa1 | 1,215,000 | 1,264,754 | |||||||
California Statewide Community Development Authority, 5.50% due 8/15/2014 (Enloe Medical Center; Insured: CA Mtg Insurance) | A-/NR | 750,000 | 834,195 | |||||||
California Statewide Community Development Authority COP, 6.50% due 8/1/2012 (Cedars Sinai Center Hospital; Insured: Natl-Re) | A/A2 | 300,000 | 314,697 | |||||||
California Statewide Community Development Authority PCR, 4.10% due 4/1/2028 put 4/1/2013 (Southern California Edison Co.; Insured: Syncora) | A/A1 | 2,575,000 | 2,752,314 | |||||||
Calipatria Unified School District, 0% due 8/1/2025 (Capital Appreciation - Election 1995; Insured: ACA) | NR/NR | 5,000,000 | 1,768,350 | |||||||
Carson Redevelopment Agency Tax Allocation, 6.00% due 10/1/2019 (Project Area 1) | A-/NR | 1,050,000 | 1,215,795 | |||||||
Central Union High School District Imperial County, 5.00% due 8/1/2012 (Insured: Natl-Re/FGIC) | A+/NR | 830,000 | 872,720 | |||||||
Central Valley Financing Authority, 5.00% due 7/1/2015 (Carson Ice) | A+/A1 | 1,000,000 | 1,131,020 | |||||||
Central Valley Financing Authority, 5.25% due 7/1/2020 (Carson Ice) | A+/A1 | 500,000 | 580,715 | |||||||
Cerritos Public Financing Authority Tax Allocation, 5.00% due 11/1/2014 (Insured: AMBAC) | A-/NR | 1,260,000 | 1,362,904 | |||||||
Chula Vista COP, 5.25% due 3/1/2020 | A-/NR | 1,300,000 | 1,417,598 | |||||||
City of Folsom, 4.00% due 12/1/2014 (Community Facilities District No 2) | A+/NR | 755,000 | 794,841 | |||||||
City of Folsom, 5.00% due 12/1/2016 (Community Facilities District No 2) | A+/NR | 1,100,000 | 1,208,328 | |||||||
City of Folsom, 5.00% due 12/1/2018 (Community Facilities District No 2) | A+/NR | 965,000 | 1,046,330 | |||||||
Contra Costa Water District, 2.50% due 10/1/2013 | AA+/NR | 2,000,000 | 2,104,340 | |||||||
Corona Norco USD GO, 0% due 9/1/2017 (Insured: AGM) | AAA/Aa2 | 1,595,000 | 1,263,384 | |||||||
County of Stanislaus, 5.75% due 5/1/2015 (Insured: Natl-Re) | A+/Baa1 | 1,815,000 | 2,033,435 | |||||||
Desert Sands USD COP, 5.25% due 3/1/2014 | A+/A1 | 1,745,000 | 1,903,045 | |||||||
Desert Sands USD COP, 5.00% due 3/1/2017 | A+/A1 | 1,500,000 | 1,645,845 | |||||||
Escondido USD GO, 6.10% due 11/1/2011 (Insured: Natl-Re) | A/Baa1 | 500,000 | 502,315 | |||||||
Fillmore Public Financing Authority, 5.00% due 5/1/2016 (Water Recycling; Insured: CIFG) | A/A2 | 735,000 | 811,146 | |||||||
High Desert California Memorial Health Care, 5.40% due 10/1/2011 | NR/NR | 675,000 | 675,959 | |||||||
Inland Valley Development Agency, 5.25% due 4/1/2012 | A/NR | 1,490,000 | 1,555,575 | |||||||
Irvine Ranch Water District GO, 0.25% due 10/1/2041 put 10/1/2010 (LOC: Bank of America) (daily demand notes) | A+/Aa3 | 4,100,000 | 4,100,000 | |||||||
Kern Community College District COP, 4.00% due 4/1/2014 | SP-1+/NR | 2,000,000 | 2,082,600 | |||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
Kings Canyon Joint USD GO, 5.375% due 8/1/2017 (Insured: Natl-Re) | A+/NR | $ | 1,000,000 | $ | 1,047,740 | |||||
Lindsay USD COP, 5.75% due 10/1/2017 (Insured: AGM) | AAA/NR | 1,160,000 | 1,266,639 | |||||||
Lindsay USD COP, 6.00% due 10/1/2018 (Insured: AGM) | AAA/NR | 680,000 | 751,135 | |||||||
Los Angeles Convention & Exhibition Center Authority, 5.00% due 8/15/2016 | A+/A1 | 2,000,000 | 2,293,220 | |||||||
Los Angeles COP, 5.00% due 2/1/2012 (Insured: Natl-Re) | A+/A2 | 1,400,000 | 1,471,316 | |||||||
Los Angeles County Schools, 5.00% due 6/1/2016 (Insured: Natl-Re) | A/Baa1 | 1,000,000 | 1,097,990 | |||||||
Los Angeles County Schools, 5.00% due 6/1/2017 (Insured: Natl-Re) | A/Baa1 | 1,010,000 | 1,104,021 | |||||||
Los Angeles Department of Airports, 5.50% due 5/15/2018 (Los Angeles International Airport) | AA/Aa3 | 2,000,000 | 2,329,720 | |||||||
Los Angeles Department of Water & Power, 5.25% due 7/1/2011 (Insured: Natl-Re) | AA-/Aa3 | 3,000,000 | 3,110,850 | |||||||
Los Angeles Department of Water & Power, 0.25% due 7/1/2034 put 10/1/2010 (SPA: Bank of America N.A.) (daily demand notes) | AA-/Aa3 | 7,600,000 | 7,600,000 | |||||||
Los Angeles Solid Waste, 3.00% due 2/1/2011 | AA/Aa2 | 1,610,000 | 1,623,749 | |||||||
Los Angeles Solid Waste, 4.00% due 2/1/2012 | AA/Aa2 | 850,000 | 888,139 | |||||||
Los Angeles USD COP, 5.00% due 10/1/2015 (Insured: AMBAC) | A+/A1 | 1,500,000 | 1,666,740 | |||||||
Los Angeles USD GO, 5.50% due 7/1/2012 (Insured: Natl-Re) | AA-/Aa2 | 2,500,000 | 2,702,700 | |||||||
Merced Redevelopment Agency Tax Allocation, 5.25% due 9/1/2020 | A-/NR | 1,190,000 | 1,289,210 | |||||||
Milpitas Redevelopment Agency Tax Allocation, 5.00% due 9/1/2015 (Insured: Natl-Re) | A/Baa1 | 2,000,000 | 2,125,200 | |||||||
Mojave USD COP, 0% due 9/1/2017 (Insured: AGM) | AAA/NR | 1,045,000 | 822,122 | |||||||
Mojave USD COP, 0% due 9/1/2018 (Insured: AGM) | AAA/NR | 1,095,000 | 802,066 | |||||||
Monterey County COP, 5.00% due 8/1/2014 (Refinancing Project; Insured: AGM) | AAA/Aa3 | 2,000,000 | 2,253,020 | |||||||
Northern California Power Agency, 4.00% due 7/1/2015 | A/A2 | 500,000 | 540,155 | |||||||
Northern California Power Agency, 5.00% due 7/1/2016 | A/A2 | 500,000 | 579,790 | |||||||
Northern California Power Agency, 5.00% due 7/1/2018 | A/A2 | 1,250,000 | 1,459,362 | |||||||
Northern California Power Agency, 5.00% due 6/1/2019 (Lodi Energy Center) | NR/NR | 2,340,000 | 2,621,034 | |||||||
Norwalk Redevelopment Agency Tax Allocation, 5.00% due 10/1/2014 (Insured: Natl-Re) | A/Baa1 | 625,000 | 677,588 | |||||||
Orange County Public Finance Authority, 5.375% due 6/1/2015 (Juvenile Justice Center; Insured: AMBAC) | A+/Aa3 | 1,000,000 | 1,077,610 | |||||||
Oxnard Financing Authority Solid Waste, 5.25% due 6/1/2014 (Insured: Natl-Re/FGIC) | A+/NR | 1,000,000 | 1,096,040 | |||||||
Oxnard Financing Authority Waste Water, 5.00% due 5/1/2013 (Insured: AMBAC) (AMT) | A/NR | 2,115,000 | 2,281,324 | |||||||
Palomar Pomerado Health GO, 0% due 8/1/2019 (Insured: AGM) | AAA/Aa3 | 2,000,000 | 1,389,560 | |||||||
Pittsburg Redevelopment Agency Tax Allocation, 5.00% due 8/1/2020 (Los Medanos Community Development Project; Insured: Natl-Re) | A+/Baa1 | 1,105,000 | 1,128,139 | |||||||
Port Oakland, 5.75% due 11/1/2012 (Port, Airport & Marina Improvements; Insured: Natl-Re/FGIC) (AMT) | A/A2 | 2,160,000 | 2,167,517 | |||||||
Port Oakland, 5.75% due 11/1/2014 (Insured: Natl-Re/FGIC) (AMT) | A/A2 | 745,000 | 747,228 | |||||||
Redding Electrical Systems Revenue COP, 5.00% due 6/1/2020 (Insured: AGM) | NR/Aa3 | 2,500,000 | 2,790,625 | |||||||
Richmond Joint Powers Financing Authority, 5.25% due 5/15/2013 (Lease & Gas Tax) | A/NR | 300,000 | 300,375 | |||||||
Ridgecrest Redevelopment Agency, 5.00% due 6/30/2016 (Ridgecrest Redevelopment Project) | A-/Baa1 | 1,055,000 | 1,142,206 | |||||||
Ridgecrest Redevelopment Agency, 5.00% due 6/30/2017 (Ridgecrest Redevelopment Project) | A-/Baa1 | 1,055,000 | 1,135,613 | |||||||
Ridgecrest Redevelopment Agency, 5.25% due 6/30/2018 (Ridgecrest Redevelopment Project) | A-/Baa1 | 1,050,000 | 1,135,281 | |||||||
Ridgecrest Redevelopment Agency, 5.50% due 6/30/2019 (Ridgecrest Redevelopment Project) | A-/Baa1 | 1,050,000 | 1,149,823 | |||||||
Ridgecrest Redevelopment Agency, 5.50% due 6/30/2020 (Ridgecrest Redevelopment Project) | A-/Baa1 | 1,040,000 | 1,133,278 | |||||||
Riverside County, 0.25% due 12/1/2015 put 10/1/2010 (Riverside County Public Facility; LOC: State Street B&T Co.) (daily demand notes) | AA-/Aa2 | 1,200,000 | 1,200,000 | |||||||
Riverside County Palm Desert Financing Authority, 5.00% due 5/1/2013 | AA-/A1 | 1,000,000 | 1,083,130 | |||||||
Roseville Natural Gas Financing Authority, 5.00% due 2/15/2017 | A/A2 | 1,000,000 | 1,056,490 | |||||||
Sacramento City Financing Authority, 0% due 11/1/2014 (Insured: Natl-Re) | A/Baa1 | 3,310,000 | 2,795,560 | |||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2015 (Procter & Gamble) | A+/A1 | 1,100,000 | 1,255,903 | |||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2019 (Procter & Gamble) | A+/A1 | 625,000 | 723,956 | |||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2020 (Cosumnes Project; Insured: Natl-Re) | A/Baa1 | 3,000,000 | 3,185,880 | |||||||
San Bernardino County Community Facilities District, 5.10% due 9/1/2011 | NR/NR | 190,000 | 193,897 | |||||||
San Bernardino County Community Facilities District, 5.20% due 9/1/2012 | NR/NR | 205,000 | 212,878 | |||||||
San Bernardino County Community Facilities District, 5.30% due 9/1/2013 | NR/NR | 300,000 | 315,177 | |||||||
Certified Annual Report 13
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
San Bernardino County Multi-Family Housing, 4.75% due 12/15/2031 put 12/15/2011 (Rolling Ridge LLC; Collateralized: FNMA) | NR/Aaa | $ | 3,100,000 | $ | 3,228,184 | |||||
San Diego Redevelopment Agency, 4.50% due 9/1/2019 (Centre City Redevelopment; Insured: AMBAC) | NR/A2 | 1,240,000 | 1,286,054 | |||||||
San Francisco City & County Airports Commission, 5.25% due 5/1/2013 pre-refunded 5/1/11 (Insured: Natl-Re) | NR/NR | 425,000 | 436,977 | |||||||
San Francisco City & County Airports Commission, 5.25% due 5/1/2013 (Insured: Natl-Re) | A/A1 | 630,000 | 644,950 | |||||||
San Francisco City & County Redevelopment Agency, 0% due 7/1/2011 (George R. Moscone; Insured: Natl-Re) | AA-/Aa2 | 1,200,000 | 1,192,536 | |||||||
San Francisco City & County Redevelopment Agency, 0% due 7/1/2013 (George R. Moscone) | AA-/Aa2 | 1,200,000 | 1,149,432 | |||||||
San Joaquin County COP, 5.50% due 11/15/2013 (Capital Facilities; Insured: Natl-Re) | A/Baa1 | 1,000,000 | 1,040,450 | |||||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: AGM) | AAA/Aa2 | 5,000,000 | 3,497,250 | |||||||
San Jose Redevelopment Agency Tax Allocation, 5.25% due 8/1/2012 (Merged Area Redevelopment; Insured: Natl-Re) | A/A2 | 1,000,000 | 1,060,400 | |||||||
San Jose Redevelopment Agency Tax Allocation, 5.00% due 8/1/2020 (Insured: Natl-Re) | A/A2 | 1,200,000 | 1,252,392 | |||||||
San Luis & Delta-Mendota Water Authority, 4.50% due 3/1/2014 (Water Utility Improvements) | A+/NR | 2,000,000 | 2,153,840 | |||||||
San Mateo Flood Control District COP, 5.25% due 8/1/2017 (Colma Creek; Insured: Natl-Re) | A/Baa1 | 1,000,000 | 1,001,400 | |||||||
San Mateo USD GO, 0% due 9/1/2019 (Insured: Natl-Re/FGIC) | AA/Aa1 | 2,000,000 | 1,459,580 | |||||||
Santa Barbara County, 5.25% due 12/1/2014 (Insured: AMBAC) | AA+/Aa3 | 1,145,000 | 1,225,757 | |||||||
Santa Clara County Financing Authority, 5.00% due 5/15/2012 (Multiple Facilities) | AA/Aa2 | 1,000,000 | 1,068,340 | |||||||
Seal Beach Redevelopment Agency Mobile Home Park, 5.20% due 12/15/2013 (Insured: ACA) | NR/NR | 470,000 | 482,493 | |||||||
Solano County COP, 5.00% due 11/15/2013 | AA-/A1 | 1,780,000 | 1,967,683 | |||||||
Solano County COP, 5.00% due 11/15/2016 | AA-/A1 | 1,000,000 | 1,125,410 | |||||||
Southeast Resource Recovery Facilities Authority, 5.375% due 12/1/2013 (Insured: AMBAC) (AMT) | A+/A1 | 1,060,000 | 1,148,998 | |||||||
Southeast Resource Recovery Facilities Authority, 5.25% due 12/1/2017 (Insured: AMBAC) | A+/A1 | 1,000,000 | 1,065,070 | |||||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Insured: AMBAC) | NR/Aa3 | 350,000 | 402,826 | |||||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Insured: AMBAC) | NR/Aa3 | 250,000 | 287,733 | |||||||
Torrance Hospital Revenue, 6.00% due 6/1/2022 (Torrance Memorial Medical Center) | A+/A2 | 2,600,000 | 2,683,850 | |||||||
Tracy Area Public Facilities Financing Agency Special Tax, 5.875% due 10/1/2019 (Community Facilities District No. 87) | A/Baa1 | 590,000 | 607,930 | |||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2015 (Tuolumne Co.) | A+/A1 | 500,000 | 564,550 | |||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2018 (Tuolumne Co.) | A+/A1 | 1,460,000 | 1,666,356 | |||||||
Turlock Irrigation District, 5.00% due 1/1/2015 | A+/A1 | 1,125,000 | 1,276,661 | |||||||
Turlock Irrigation District, 5.00% due 1/1/2019 | A+/A1 | 1,000,000 | 1,156,280 | |||||||
Twin Rivers USD GO, 0% due 4/1/2014 | A+/NR | 1,000,000 | 909,390 | |||||||
University of California, 4.00% due 5/15/2017 (Ltd. Project) | AA-/Aa2 | 1,250,000 | 1,380,750 | |||||||
Upper Lake Union High School District GO, 0% due 8/1/2020 (Capital Appreciation; Insured: Natl-Re) | NR/Baa1 | 1,050,000 | 613,883 | |||||||
Val Verde USD COP, 5.00% due 1/1/2014 (Insured: Natl-Re/FGIC) (ETM) | NR/NR | 445,000 | 504,425 | |||||||
Victorville Redevelopment Agency, 5.00% due 12/1/2014 (Bear Valley Road Redevelopment; Insured: AGM) | AAA/Aa3 | 255,000 | 273,944 | |||||||
Washington USD COP, 5.00% due 8/1/2017 (New High School; Insured: AMBAC) | A/NR | 725,000 | 794,593 | |||||||
Washington USD Yolo County, 5.00% due 8/1/2021 (New High School; Insured: AMBAC) | A/NR | 910,000 | �� | 951,168 | ||||||
Whittier Solid Waste, 5.375% due 8/1/2014 (Insured: AMBAC) | NR/NR | 700,000 | 701,428 | |||||||
TOTAL INVESTMENTS — 97.97% (Cost $221,271,614) | $ | 231,005,080 | ||||||||
OTHER ASSETS LESS LIABILITIES — 2.03% | 4,795,072 | |||||||||
NET ASSETS — 100.00% | $ | 235,800,152 | ||||||||
Footnote Legend
| † | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. |
14 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
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 | |
| AGM | Insured by Assured Guaranty Municipal Corp. | |
| 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. | |
| FHA | Insured by Federal Housing Administration | |
| FNMA | Collateralized by Federal National Mortgage Association | |
| 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 | |
| SPA | Stand-by Purchase Agreement | |
| Syncora | Insured by Syncora Guarantee Inc. | |
| VA | Veterans Affairs | |
| USD | Unified School District |
See notes to financial statements.
Certified Annual Report 15
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $221,271,614) (Note 2) | $ | 231,005,080 | ||
Cash | 2,155,766 | |||
Receivable for investments sold | 1,170,000 | |||
Receivable for fund shares sold | 918,543 | |||
Interest receivable | 2,799,787 | |||
Prepaid expenses and other assets | 166 | |||
Total Assets | 238,049,342 | |||
LIABILITIES | ||||
Payable for securities purchased | 1,387,388 | |||
Payable for fund shares redeemed | 419,169 | |||
Payable to investment advisor and other affiliates (Note 3) | 155,839 | |||
Accounts payable and accrued expenses | 43,996 | |||
Dividends payable | 242,798 | |||
Total Liabilities | 2,249,190 | |||
NET ASSETS | $ | 235,800,152 | ||
NET ASSETS CONSIST OF: | ||||
Net unrealized appreciation on investments | 9,733,466 | |||
Accumulated net realized gain (loss) | (223,492 | ) | ||
Net capital paid in on shares of beneficial interest | 226,290,178 | |||
| $ | 235,800,152 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($114,813,316 applicable to 8,578,085 shares of beneficial interest outstanding - Note 4) | $ | 13.38 | ||
Maximum sales charge, 1.50% of offering price | 0.20 | |||
Maximum offering price per share | $ | 13.58 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($42,039,186 applicable to 3,138,222 shares of beneficial interest outstanding - Note 4) | $ | 13.40 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($78,947,650 applicable to 5,892,722 shares of beneficial interest outstanding - Note 4) | $ | 13.40 | ||
| * | 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 California Limited Term Municipal Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $1,174,272) | $ | 7,350,937 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 940,667 | |||
Administration fees (Note 3) | ||||
Class A Shares | 120,867 | |||
Class C Shares | 41,919 | |||
Class I Shares | 28,952 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 241,734 | |||
Class C Shares | 335,351 | |||
Transfer agent fees | ||||
Class A Shares | 32,312 | |||
Class C Shares | 17,104 | |||
Class I Shares | 12,261 | |||
Registration and filing fees | ||||
Class A Shares | 43 | |||
Class C Shares | 43 | |||
Class I Shares | 43 | |||
Custodian fees (Note 3) | 60,354 | |||
Professional fees | 26,172 | |||
Accounting fees | 4,734 | |||
Trustee fees | 4,145 | |||
Other expenses | 20,470 | |||
Total Expenses | 1,887,171 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (953 | ) | ||
Distribution fees waived (Note 3) | (167,676 | ) | ||
Fees paid indirectly (Note 3) | (1,072 | ) | ||
Net Expenses | 1,717,470 | |||
Net Investment Income | 5,633,467 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 68,938 | |||
Net change in unrealized appreciation (depreciation) of investments | 4,863,894 | |||
Net Realized and Unrealized Gain | 4,932,832 | |||
Net Increase in Net Assets Resulting from Operations | $ | 10,566,299 | ||
See notes to financial statements.
Certified Annual Report 17
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg California Limited Term Municipal Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 5,633,467 | $ | 4,598,784 | ||||
Net realized gain (loss) on investments | 68,938 | 361,086 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 4,863,894 | 5,790,621 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 10,566,299 | 10,750,491 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,846,029 | ) | (2,466,623 | ) | ||||
Class C Shares | (895,557 | ) | (626,833 | ) | ||||
Class I Shares | (1,891,881 | ) | (1,505,328 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 32,843,700 | 10,028,096 | ||||||
Class C Shares | 15,149,787 | 9,046,521 | ||||||
Class I Shares | 36,228,843 | (2,380,406 | ) | |||||
Net Increase in Net Assets | 89,155,162 | 22,845,918 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 146,644,990 | 123,799,072 | ||||||
End of Year | $ | 235,800,152 | $ | 146,644,990 | ||||
See notes to financial statements.
18 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
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 sixteen 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). 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 19
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 231,005,080 | $ | — | $ | 231,005,080 | $ | — | ||||||||
Total Investments in Securities | $ | 231,005,080 | $ | — | $ | 231,005,080 | $ | — | ||||||||
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
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.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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.
20 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
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, 2010, these fees were payable at annual rates ranging from .50 of 1% to .225 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares. For the year ended September 30, 2010, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $42 for Class A shares, and $911 for Class C shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2010, the Distributor has advised the Fund that it earned net commissions aggregating $1,555 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $4,523 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I shares. 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, 2010, are set forth in the Statement of Operations. Distribution fees in the amount of $167,676 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, 2010, fees paid indirectly were $1,072.
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, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 3,682,819 | $ | 48,257,610 | 2,070,439 | $ | 26,212,377 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 120,579 | 1,584,678 | 131,040 | 1,660,161 | ||||||||||||
Shares repurchased | (1,296,692 | ) | (16,998,588 | ) | (1,417,806 | ) | (17,844,442 | ) | ||||||||
Net Increase (Decrease) | 2,506,706 | $ | 32,843,700 | 783,673 | $ | 10,028,096 | ||||||||||
Certified Annual Report 21
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 1,487,118 | $ | 19,552,458 | 968,746 | $ | 12,324,994 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 45,232 | 595,327 | 34,750 | 441,022 | ||||||||||||
Shares repurchased | (379,476 | ) | (4,997,998 | ) | (295,558 | ) | (3,719,495 | ) | ||||||||
Net Increase (Decrease) | 1,152,874 | $ | 15,149,787 | 707,938 | $ | 9,046,521 | ||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 3,723,169 | $ | 49,022,751 | 2,296,396 | $ | 29,206,706 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 80,780 | 1,063,454 | 86,889 | 1,099,647 | ||||||||||||
Shares repurchased | (1,055,277 | ) | (13,857,362 | ) | (2,584,811 | ) | (32,686,759 | ) | ||||||||
Net Increase (Decrease) | 2,748,672 | $ | 36,228,843 | (201,526 | ) | $ | (2,380,406 | ) | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $102,518,199 and $24,125,570, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 221,271,614 | ||
Gross unrealized appreciation on a tax basis | $ | 9,835,171 | ||
Gross unrealized depreciation on a tax basis | (101,705 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 9,733,466 | ||
At September 30, 2010, the Fund did not have any undistributed tax-exempt, ordinary net income or undistributed capital gains.
At September 30, 2010, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2009 of $15,578. For tax purposes such losses will be reflected in the year ended September 30, 2011.
At September 30, 2010, the Fund had tax basis capital losses of $207,914, 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 $84,516 of capital loss carryforwards during the year ended September 30, 2010.
22 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 | |
The tax character of distributions paid during the year ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 5,626,927 | $ | 4,595,240 | ||||
Ordinary income | 6,540 | 3,544 | ||||||
Total Distributions | $ | 5,633,467 | $ | 4,598,784 | ||||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class C shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .25 of 1%.
Certified Annual Report 23
Thornburg California Limited Term Municipal Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless Otherwise | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 13.09 | 0.39 | 0.29 | 0.68 | (0.39 | ) | — | (0.39 | ) | $ | 13.38 | 2.94 | 0.97 | 0.97 | 0.97 | 5.29 | 13.69 | $ | 114,813 | ||||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 12.49 | 0.44 | 0.60 | 1.04 | (0.44 | ) | — | (0.44 | ) | $ | 13.09 | 3.48 | 0.98 | 0.98 | 0.99 | 8.50 | 44.06 | $ | 79,455 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 12.73 | 0.42 | (0.24 | ) | 0.18 | (0.42 | ) | — | (0.42 | ) | $ | 12.49 | 3.32 | 1.00 | 0.98 | 1.00 | 1.42 | 34.88 | $ | 66,023 | |||||||||||||||||||||||||||||||||||||||
2007(b) | $ | 12.77 | 0.43 | (0.04 | ) | 0.39 | (0.43 | ) | — | (0.43 | ) | $ | 12.73 | 3.37 | 0.99 | 0.99 | 1.01 | 3.10 | 22.71 | $ | 67,183 | |||||||||||||||||||||||||||||||||||||||
2006(b) | $ | 12.79 | 0.40 | (0.02 | ) | 0.38 | (0.40 | ) | — | (0.40 | ) | $ | 12.77 | 3.17 | 0.92 | 0.87 | 1.01 | 3.06 | 25.77 | $ | 80,589 | |||||||||||||||||||||||||||||||||||||||
2005(b) | $ | 13.02 | 0.36 | (0.23 | ) | 0.13 | (0.36 | ) | — | (0.36 | ) | $ | 12.79 | 2.75 | 1.00 | 0.99 | 1.02 | 0.98 | 26.33 | $ | 111,102 | |||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.10 | 0.35 | 0.30 | 0.65 | (0.35 | ) | — | (0.35 | ) | $ | 13.40 | 2.67 | 1.23 | 1.23 | 1.74 | 5.09 | 13.69 | $ | 42,039 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 12.50 | 0.41 | 0.60 | 1.01 | (0.41 | ) | — | (0.41 | ) | $ | 13.10 | 3.23 | 1.24 | 1.24 | 1.76 | 8.22 | 44.06 | $ | 26,004 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 12.74 | 0.39 | (0.24 | ) | 0.15 | (0.39 | ) | — | (0.39 | ) | $ | 12.50 | 3.06 | 1.26 | 1.24 | 1.78 | 1.16 | 34.88 | $ | 15,963 | |||||||||||||||||||||||||||||||||||||||
2007 | $ | 12.78 | 0.40 | (0.04 | ) | 0.36 | (0.40 | ) | — | (0.40 | ) | $ | 12.74 | 3.13 | 1.24 | 1.23 | 1.79 | 2.85 | 22.71 | $ | 14,449 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 12.80 | 0.37 | (0.02 | ) | 0.35 | (0.37 | ) | — | (0.37 | ) | $ | 12.78 | 2.92 | 1.18 | 1.13 | 1.83 | 2.80 | 25.77 | $ | 16,801 | |||||||||||||||||||||||||||||||||||||||
2005 | $ | 13.03 | 0.32 | (0.23 | ) | 0.09 | (0.32 | ) | — | (0.32 | ) | $ | 12.80 | 2.50 | 1.25 | 1.24 | 1.82 | 0.73 | 26.33 | $ | 20,021 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.10 | 0.43 | 0.30 | 0.73 | (0.43 | ) | — | (0.43 | ) | $ | 13.40 | 3.27 | 0.63 | 0.63 | 0.63 | 5.72 | 13.69 | $ | 78,948 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 12.50 | 0.48 | 0.60 | �� | 1.08 | (0.48 | ) | — | (0.48 | ) | $ | 13.10 | 3.81 | 0.65 | 0.65 | 0.65 | 8.86 | 44.06 | $ | 41,186 | |||||||||||||||||||||||||||||||||||||||
2008 | $ | 12.74 | 0.47 | (0.24 | ) | 0.23 | (0.47 | ) | — | (0.47 | ) | $ | 12.50 | 3.66 | 0.65 | 0.63 | 0.65 | 1.77 | 34.88 | $ | 41,814 | |||||||||||||||||||||||||||||||||||||||
2007 | $ | 12.78 | 0.47 | (0.04 | ) | 0.43 | (0.47 | ) | — | (0.47 | ) | $ | 12.74 | 3.71 | 0.66 | 0.65 | 0.68 | 3.44 | 22.71 | $ | 31,918 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 12.80 | 0.44 | (0.02 | ) | 0.42 | (0.44 | ) | — | (0.44 | ) | $ | 12.78 | 3.50 | 0.66 | 0.55 | 0.71 | 3.39 | 25.77 | $ | 28,334 | |||||||||||||||||||||||||||||||||||||||
2005 | $ | 13.03 | 0.40 | (0.23 | ) | 0.17 | (0.40 | ) | — | (0.40 | ) | $ | 12.80 | 3.09 | 0.68 | 0.67 | 0.73 | 1.31 | 26.33 | $ | 30,843 | |||||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 24 Certified Annual Report | Certified Annual Report 25 |
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, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
| PricewaterhouseCoopers LLP |
| New York, New York |
| November 17, 2010 |
26 Certified Annual Report
| Thornburg California Limited Term Municipal Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,040.50 | $ | 4.96 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.21 | $ | 4.91 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,039.90 | $ | 6.32 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.87 | $ | 6.25 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,043.00 | $ | 3.23 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.91 | $ | 3.20 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.97%; C: 1.24%; I: 0.63%) 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 27
| Thornburg California Limited Term Municipal Fund | September 30, 2010 (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, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 2/19/87) | 3.70 | % | 3.94 | % | 3.69 | % | 4.78 | % | ||||||||
C Shares (Incep: 9/1/94) | 4.57 | % | 4.00 | % | 3.56 | % | 3.78 | % | ||||||||
I Shares (Incep: 4/1/97) | 5.72 | % | 4.61 | % | 4.21 | % | 4.33 | % | ||||||||
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.
28 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||||
INTERESTED TRUSTEES(1)(2)(4) | ||||||
Garrett Thornburg, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||||
David A. Ater, 65 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. | None | ||||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||||
Susan H. Dubin, 61 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, 56 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, 51 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 29
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 (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, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
30 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 31
| OTHER INFORMATION | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 (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, 2010, dividends paid by the Fund of $5,626,927 (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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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 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
32 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 (Unaudited) | |
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 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 evaluating quantitative and comparative performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations. The 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 return for the California municipal debt mutual fund category for which calendar year returns were presented, that the Fund’s returns had been higher than or comparable to the average returns for the category in most of the preceding ten calendar years, that the Fund’s investment returns had fallen at the median of the same category for the one-year period ended with the second quarter of the current year and had fallen in the top decile of the same category for the three-year and five-year periods, and further, that the Fund’s investment returns had fallen within the top quartile of a second fund category for the one-year period and had fallen in the top decile for the three-year and five-year periods for the same category. Measures of portfolio volatility and risk considered by the Trustees demonstrated that the Fund’s portfolio volatility relative to those measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies.
Fees and Expenses; Profitability of Advisor; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, also considered the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees considered the 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, 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 Fund’s management fee was comparable to the median fee and slightly higher than the average fee for the group of mutual funds assembled by the mutual fund analyst firm, that the Fund’s overall expense ratio was comparable to the average expense ratio and somewhat higher than the median expense ratio 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 confirmed their previous observations that 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, 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 the adequacy of the Advisor’s resources and 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
Certified Annual Report 33
| OTHER INFORMATION, CONTINUED | ||
| Thornburg California Limited Term Municipal Fund | September 30, 2010 (Unaudited) | |
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.
34 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
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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36 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 Developing World Fund |
| • | Thornburg Limited Term U.S. Government Fund |
| • | Thornburg Limited Term Income Fund |
| • | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 37
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 Developing World 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. 39
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Important Information
The information presented on the following pages was current as of September 30, 2010. 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 or 2010.
Glossary
BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index – The 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.
BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index – A model portfolio of municipal obligations throughout the U.S., with an average maturity ranging from three to fifteen years.
BofA 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).
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 Yield – The distribution yield 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.
Basis Point (BPS) – A unit equal to 1/100th of 1%. 1% = 100 basis points (bps)
Bond Credit Ratings – A bond credit rating assesses the financial ability of a debt issuer to make timely payments of principal and interest. Ratings of AAA (the highest), AA, A, and BBB are investment-grade quality. Ratings of BB, B, CCC, CC, C, and D (the lowest) are considered below investment grade, speculative grade, or junk bonds. Unless otherwise noted, the ratings listed are from Municipal Market Data and are a combination of ratings from Standard and Poor’s, Moody’s Investors Service, and Fitch Ratings.
Effective Duration – A bond’s sensitivity to interest rates, incorporating the embedded option features, such as call provisions. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
This page is not part of the Annual Report. 3
Important Information,
Continued
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.
Insured Bond – A bond with interest and principal payments insured by a third party. Insured bonds are usually found as a feature of municipal bonds; they are purchased, underwritten and repackaged by a financial guarantee company who then sells the issue to investors.
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.
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.
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.
Treasury Inflation Protected Securities (TIPS) – Either a U.S. Treasury note or bond that offers protection from the effects of inflation. Using the Consumer Price Index as a guide, the value of the principal is adjusted to reflect the effects of inflation. A fixed interest rate is paid semi-annually on the adjusted amount. At maturity, if inflation has increased the value of the principal, the investor receives the higher value. If deflation has decreased the value, the investor receives the original face amount of the security.
4 This page is not part of the Annual Report.
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. |
CO-PORTFOLIO MANAGERS
Josh Gonze, George Strickland, and Chris Ihlefeld
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.
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history of A shares from June 18, 1991 through September 30, 2010
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 6/18/91) | ||||||||||||||||||||
Without sales charge | 4.38 | % | 5.28 | % | 4.39 | % | 4.39 | % | 5.06 | % | ||||||||||
With sales charge | 2.28 | % | 4.57 | % | 3.97 | % | 4.18 | % | 4.95 | % | ||||||||||
30-DAY YIELDS, A SHARES
As of September 30, 2010
Annualized Distribution Yield | SEC Yield | |||
2.88% | 1.68 | % | ||
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2010
Number of Bonds | 132 | |||
Effective Duration | 5.4 Yrs | |||
Average Maturity | 8.2 Yrs | |||
See the entire portfolio in the Schedule of Investments beginning on page 11.
This page is not part of the Annual Report. 5
Thornburg New Mexico Intermediate Municipal Fund
September 30, 2010
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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 11, 2010
Dear Fellow Shareholder:
We are pleased to present the annual report for the Thornburg New Mexico Intermediate Municipal
| |
| The Class A shares of your Fund produced a total return of 4.38% at NAV over the fiscal year ended September 30, 2010, compared to 6.75% for the BofA Merrill Lynch 7–12 Year U.S. Municipal Securities Index. The main contributor to the difference in performance is that the BofA Merrill Lynch 7–12 Year U.S. Municipal Securities Index has a longer effective duration than the Thornburg New Mexico Intermediate Municipal Fund. Effective duration is a measure of a fund’s price sensitivity to changes in interest rates. As interest rates decline, funds with longer effective durations will enjoy greater price appreciation and additional income. As interest rates increase, funds with longer effective durations will also incur greater price depreciation (losses). | ||
Josh Gonze Co-Portfolio Manager | The Economy and the Federal Reserve | |
| On September 20, 2010, the National Bureau of Economic Research (NBER) announced that the recession ended in June 2009. The 9.6% of the American work force currently unemployed may beg to differ with this evaluation. The duration of the recession was 18 months, making it the longest recession since World War II. | ||
Christopher Ihlefeld Co-Portfolio Manager | The economic picture has been largely unchanged during the fiscal year. The economy is suffering from a high degree of slack in the utilization of its productive resources. Banks are not lending even though the Federal Reserve (Fed) has pumped considerable amounts of money into the economy. Inflation and inflation expectations are quite muted. Gross Domestic Product (GDP), a measure of a country’s overall economic output, recorded a 1.6% increase in the quarter ended June 30, 2010, much higher than the negative 6.8% decrease posted in the quarter ended December 31, 2009, but lower than the long-term average growth rate of 2.7% experienced since 1973. Capacity utilization, a measure of an economy’s usage of its productive resources, is running around 74.7%, well off the series low of 68.3% recorded in June of 2009 but below its long-term average of 81%. The Fed, seeking to bolster aggregate demand for goods and services, has pumped a tremendous amount of money into the economy. M2, a broad measure of money and money substitutes, has grown 15.9% since the beginning of 2008. But the velocity of M2, a measure of the rate at which money in circulation is used in transactions, is falling. Whether lending institutions are not lending or small and midsize businesses are not borrowing, the result is the same. Commercial and Industrial Loans and | |
Certified Annual Report 7
Letter to Shareholders,
Continued
Leases (loans to corporations, commercial enterprises, or joint ventures) have decreased 15.2% since January of 2008. Small and midsized businesses, normally the engines of economic growth, are being starved of needed capital. Now let’s look at one measure of inflation, the Consumer Price Index (CPI). The year-over-year change in headline CPI has been running between 1.1% and 1.2% for the last three months. Core CPI (headline CPI less the food and energy components) has been running at 0.9% for the last four months. The market’s expectations of future inflation as measured by the inflation expectations used in the pricing of Treasury Inflation Protected Securities (TIPS) with five years to maturity has been running around the 1.4% rate. So inflation, the bane of fixed income investors, has been low and the market expects it to remain low.
The Federal Open Market Committee (FOMC) maintained a very accommodative stance toward monetary policy by keeping the Fed Funds rate effectively at 0% throughout the fiscal year. In addition to keeping the Fed Funds rate low, central banks around the world engaged in a policy known as “quantitative easing,” buying back bonds and other assets to boost demand and fight off deflation. The Fed bought $1.7 trillion in bonds to accomplish this goal. As these assets mature, the market is wondering what the Fed will do with the proceeds – buy more bonds (and what type of bonds?) or return the money to the Treasury. In their September 21, 2010 release the FOMC stated, “The Committee also will maintain their existing policy of reinvesting principal payments for their securities holdings.” So the Fed’s accommodative monetary policy will remain unchanged “for an extended period.”
As we look forward over the next 6–12 months, we believe the Fed will keep short-term interest rates low and the market will keep the slope of the yield curve (difference between long-term and short-term interest rates) steep. Of course if we see signs of an increase in economic activity, we will reevaluate this position. The next move by the Fed, in terms of short-term interest rates, would seem to be an increase, easy to say when short-term interest rates have reached the lower limit of zero.
The Municipal Market
The municipal market has performed very well over the fiscal year. The reasons for this performance are as follows: assets have continued to flow out of municipal money market funds and into municipal bond funds (primarily short-term municipal bond funds), investors’ appetite for risk assets has been whetted after their performance in 2009, and finally, anticipation of increased taxes has added to the allure of municipal bonds. Yields on the benchmark AAA general obligation bond have decreased during the fiscal year, but not uniformly for all maturities. Chart I illustrates these changes for maturities from 1 to 30 years.
CHART 1: CHANGES IN AAA GENERAL OBLIGATION BOND YIELDS
10/1/2009 - 9/30/2010
Yields decreased anywhere from 0.12% (12 basis points) to 0.40% (40 basis points) depending on maturity. Notice that, in general, shorter maturities decreased in yield more than longer term maturities. This situation was caused by the in-flow of assets into short-term municipal bond funds from municipal money market funds.
8 Certified Annual Report
Not only have the general level of interest rates decreased over the past 12 months, but market participants have become less fearful when it comes to pricing credit risk. To illustrate this point, we will introduce the concept of “implied default rates.” The implied default rate is derived from current market prices for bonds of various credit categories (assuming different recovery rates) compared to a “default free” bond’s price. The implied default rate of all investment grade bonds with ten years of maturity for the BofA Merrill Lynch 3–15 Year U.S. Municipal Securities Index on September 30, 2009, as we calculated it, was 10.7% assuming a recovery rate of 60%. On August 31, 2010, the same implied default rate was 8.1%, a marked decrease from the beginning of the year. These implied default rates are well in excess of the historic default rates for investment grade municipal bonds, as calculated by Standard and Poor’s, of 0.09%.
As investors, we have been inundated with news reports concerning the impending disaster awaiting the municipal bond market due to the poor financial condition of state and local governments. We would like to borrow a concept from Mark Twain, “The reports of my death have been greatly exaggerated.” We are not being a “Pollyanna,” there is a great deal of fiscal stress in the state. New Mexico’s estimated budget shortfall was $373 million, 7% of the $5.4 billion budget. Due to a stronger than average economy, this compares well to the 19% national average budget gap. The gap was closed with roughly equal amounts of spending cuts, federal aid, and tax increases. Officials project that the State will finish the 2011 fiscal year with a $223 million general fund reserve balance. New Mexico’s pension system is 83% funded, just below the national average.
A Word about Municipal Bond Market Risk
The combination of a very accommodative Fed (Federal Funds rate near zero) and the continued disintermediation of assets out of municipal money market funds into municipal bond funds (mostly short-term municipal bond funds) has increased the interest rate risk in the municipal bond market. On December 31, 2008, municipal money market funds totaled almost $495 billion (50% of the combined municipal bond and money market fund total). By December 31, 2009, municipal money market funds totaled almost $401 billion (41% of the combined total). Today approximately $350 billion of investor’s assets remain in municipal money market funds or almost 36% of the combined municipal money market and bond fund assets. The reason for this exodus is quite simple: investors do not like to earn close to 0% on their invested funds no matter how “safe” they are. Although we do not anticipate much change in interest rates for the next 6–12 months, the next move in all likelihood will be to the upside. This means that investors should be ready for some capital losses in the future. The trade-off between the extra income earned in a bond fund and the expected capital loss can be mitigated by establishing an appropriate holding period for the investment. We believe that investors in the New Mexico Intermediate Municipal Fund should plan to own the Fund for at least three years in order to decrease the chance that fluctuations in net asset value might overwhelm the income component of their total return.
Your Thornburg New Mexico Intermediate Municipal Fund is a laddered portfolio of 132 municipal obligations. We ladder the maturity dates of the bonds in your portfolio so that some of the bonds are scheduled to mature during each of the coming years. Laddering short and intermediate bonds accomplishes two goals. First, the staggered bond maturities contained in a ladder reduce interest-rate risk and dampen the Fund’s price volatility. Second, laddering reduces reinvestment risk by giving the Fund a steady cash flow stream from maturing bonds to reinvest toward the top of the ladder where yields are typically higher. Chart 2, on the following page, describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
Certified Annual Report 9
Letter to Shareholders,
Continued
The Fund’s adherence to the discipline of the laddered structure served investors well. As you can see from Chart I on page 8, yields in the shorter segment of the 1–10 year maturity range of the market decreased more than any other segment of the market. By keeping with the discipline of the Fund’s laddered structure, we were able to capture a significant portion of that performance. Additionally, overweighting out-of-favor sectors such as securities in the revenue and insured sectors, along with under-weights to securities in the general obligation sector, we added incremental performance. We plan to continue to search for out-of-favor opportunities in the municipal market, using our fundamental, bottom-up approach to portfolio management, and the discipline of the laddered structure.
CHART 2: % OF PORTFOLIO MATURING
As of 9/30/10. Percentages vary over time.
Data may not add up to 100% due to rounding.
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.
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 | |
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† S&P/Moody’s | Principal Amount | Value | |||||||
Albuquerque Airport, 5.50% due 7/1/2013 | A/A1 | $ | 4,000,000 | $ | 4,397,320 | |||||
Albuquerque GO, 3.25% due 7/1/2011 | AAA/Aa1 | 3,000,000 | 3,066,720 | |||||||
Albuquerque GRT, 0% due 7/1/2012 pre-refunded 7/1/2011 | AAA/Aa2 | 1,775,000 | 1,700,929 | |||||||
Albuquerque GRT, 0% due 7/1/2012 (Insured: AGM) | AAA/Aa2 | 225,000 | 213,633 | |||||||
Albuquerque GRT, 5.00% due 7/1/2021 | AAA/Aa2 | 1,340,000 | 1,559,479 | |||||||
Albuquerque GRT, 5.00% due 7/1/2021 | AAA/Aa2 | 3,000,000 | 3,491,370 | |||||||
Albuquerque IDRB, 5.15% due 4/1/2016 (MCT Industries Inc.; LOC: | NR/A1 | 1,170,000 | 1,234,034 | |||||||
Albuquerque IDRB, 5.25% due 4/1/2017 (MCT Industries Inc.; LOC: | NR/A1 | 2,140,000 | 2,245,245 | |||||||
Albuquerque Municipal School District GO, 5.00% due 8/1/2015 | AA/Aa1 | 655,000 | 657,391 | |||||||
Bernalillo County GO, 2.50% due 2/1/2013 | AAA/Aaa | 1,095,000 | 1,143,607 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2012 | AAA/Aa2 | 1,000,000 | 1,092,120 | |||||||
Bernalillo County GRT, 5.00% due 4/1/2021 (Insured: Natl-Re) | AA/Aa2 | 3,000,000 | 3,495,270 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2022 (Insured: AMBAC) | AAA/Aa2 | 3,170,000 | 3,939,866 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2023 (Insured: AMBAC) | AAA/Aa2 | 1,275,000 | 1,594,030 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2025 (Insured: AMBAC) | AAA/Aa2 | 3,850,000 | 4,858,315 | |||||||
Bernalillo County Water Utility Authority, 5.00% due 7/1/2021 | AAA/Aa1 | 1,520,000 | 1,790,849 | |||||||
Bernalillo County Water Utility Authority, 5.50% due 7/1/2025 | AAA/Aa1 | 1,000,000 | 1,193,690 | |||||||
Bernalillo County Water Utility Authority, 5.00% due 7/1/2026 | AAA/Aa1 | 1,420,000 | 1,602,513 | |||||||
Cibola County GRT, 6.00% due 11/1/2010 (Insured: AMBAC) (ETM) | NR/NR | 555,000 | 557,742 | |||||||
Colfax County GRT, 5.00% due 9/1/2019 | A-/NR | 930,000 | 987,902 | |||||||
Colfax County GRT, 5.50% due 9/1/2029 | A-/NR | 2,510,000 | 2,625,033 | |||||||
Dona Ana County Pilot Revenue, 5.50% due 12/1/2014 | A-/NR | 460,000 | 516,824 | |||||||
Farmington Hospital, 5.00% due 6/1/2017 (San Juan Regional Medical Center) | NR/A3 | 1,035,000 | 1,133,677 | |||||||
Farmington Hospital, 5.125% due 6/1/2018 (San Juan Regional Medical Center) | NR/A3 | 570,000 | 599,600 | |||||||
Farmington Hospital, 5.125% due 6/1/2019 (San Juan Regional Medical Center) | NR/A3 | 645,000 | 675,831 | |||||||
Farmington Hospital, 5.00% due 6/1/2022 (San Juan Regional Medical Center) | NR/A3 | 2,825,000 | 2,987,437 | |||||||
Farmington PCR, 4.00% due 6/1/2032 put 8/1/2012 | BBB/NR | 2,000,000 | 2,007,280 | |||||||
Farmington Utility Systems, 5.00% due 5/15/2012 (Insured: AGM) | AAA/A1 | 6,095,000 | 6,259,077 | |||||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2011 (Insured: AMBAC) | A/Baa1 | 500,000 | 514,130 | |||||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2012 (Insured: AMBAC) | A/Baa1 | 3,345,000 | 3,528,072 | |||||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2013 (Insured: AMBAC) | A/Baa1 | 2,110,000 | 2,278,568 | |||||||
Gallup PCR Tri-State Generation, 5.00% due 8/15/2017 (Insured: AMBAC) | A/Baa1 | 3,540,000 | 3,803,872 | |||||||
Grant County Department of Health, 5.50% due 7/1/2020 (Ft. Bayard) | AA/Aa1 | 1,565,000 | 1,796,432 | |||||||
Grant County Department of Health, 5.50% due 7/1/2021 (Ft. Bayard) | AA/Aa1 | 1,655,000 | 1,882,778 | |||||||
Grant County Department of Health, 5.50% due 7/1/2022 (Ft. Bayard) | AA/Aa1 | 1,745,000 | 1,967,453 | |||||||
Guam Government Ltd. Obligation Revenue, 5.375% due 12/1/2024 | BBB-/NR | 2,000,000 | 2,113,220 | |||||||
Las Cruces Shared GRT Revenue, 5.00% due 6/1/2021 | NR/Aa3 | 730,000 | 854,064 | |||||||
Las Cruces Shared GRT Revenue, 5.00% due 6/1/2022 | NR/Aa3 | 765,000 | 887,614 | |||||||
Las Cruces Shared GRT Revenue, 5.00% due 6/1/2023 | NR/Aa3 | 800,000 | 920,568 | |||||||
Las Cruces Shared GRT Revenue, 5.00% due 6/1/2024 | NR/Aa3 | 840,000 | 962,447 | |||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
Las Cruces Shared GRT Revenue, 5.00% due 6/1/2037 | NR/Aa | $ | 5,000,000 | $ | 5,343,600 | |||||
Los Alamos County GRT Improvement, 5.75% due 6/1/2016 | AA+/Aa3 | 1,000,000 | 1,213,460 | |||||||
Los Alamos County GRT Improvement, 5.625% due 6/1/2023 | AA+/Aa3 | 1,000,000 | 1,178,080 | |||||||
Los Alamos County GRT Improvement, 5.75% due 6/1/2024 | AA+/Aa3 | 3,000,000 | 3,531,660 | |||||||
Los Alamos County GRT Improvement, 5.75% due 6/1/2025 | AA+/Aa3 | 1,000,000 | 1,171,420 | |||||||
Los Alamos County Utility Systems, 5.00% due 7/1/2013 (Insured: AGM) | AAA/Aa3 | 1,265,000 | 1,404,960 | |||||||
Los Alamos Public School District, 2.00% due 8/1/2011 (State Aid Withholding) | NR/Aa1 | 2,150,000 | 2,178,831 | |||||||
Los Alamos Public School District, 2.00% due 8/1/2012 (State Aid Withholding) | NR/Aa1 | 1,025,000 | 1,051,998 | |||||||
Los Alamos Public School District, 2.00% due 8/1/2013 (State Aid Withholding) | NR/Aa1 | 2,160,000 | 2,234,628 | |||||||
New Mexico Educational Assistance Foundation, 4.10% due 9/1/2015 (Insured: Fitch) (AMT) | NR/Aaa | 2,000,000 | 2,153,280 | |||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2019 | AAA/Aaa | 1,000,000 | 1,163,520 | |||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2022 | AAA/Aaa | 3,000,000 | 3,397,230 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2013 (Insured: AMBAC) | NR/Aa3 | 2,280,000 | 2,523,436 | |||||||
New Mexico Finance Authority, 5.00% due 6/1/2014 (Insured: Natl-Re) | AA+/Aa1 | 2,660,000 | 2,937,172 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2014 (Insured: Natl-Re) | AA+/Aa1 | 2,100,000 | 2,401,707 | |||||||
New Mexico Finance Authority, 5.25% due 6/1/2015 (Insured: AMBAC) | AA+/Aa1 | 1,000,000 | 1,139,030 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2015 (Insured: AMBAC) | NR/Aa3 | 2,360,000 | 2,709,752 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2018 (Insured: AMBAC) | NR/Aa3 | 2,915,000 | 3,283,077 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2019 (Insured: Natl-Re) | NR/Aa3 | 1,215,000 | 1,371,905 | |||||||
New Mexico Finance Authority, 5.00% due 6/1/2020 (Insured: AMBAC) | AA+/Aa1 | 365,000 | 410,439 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2022 (Insured: Natl-Re) | AA-/Aa3 | 1,300,000 | 1,434,667 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2024 (Insured: Natl-Re) | AA-/Aa3 | 7,000,000 | 7,648,830 | |||||||
New Mexico Highway Commission Senior Sub Lien Tax, 5.50% due 6/15/2014 pre-refunded 6/15/2011 | AAA/Aa1 | 2,000,000 | 2,073,700 | |||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 8/1/2011 (Presbyterian Healthcare Services) | AA-/Aa3 | 2,915,000 | 2,997,903 | |||||||
New Mexico Hospital Equipment Loan Council, 5.75% due 8/1/2016 pre-refunded 8/1/2011 (Presbyterian Healthcare Services) | AA-/Aa3 | 3,205,000 | 3,379,256 | |||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2017 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | NR/NR | 1,730,000 | 1,998,115 | |||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2019 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | NR/NR | 1,000,000 | 1,154,980 | |||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2021 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | NR/NR | 1,185,000 | 1,368,651 | |||||||
New Mexico Hospital Equipment Loan Council, 6.00% due 8/1/2023 (Presbyterian Healthcare Services) | AA-/Aa3 | 6,000,000 | 6,838,980 | |||||||
New Mexico Hospital Equipment Loan Council, 5.25% due 7/1/2025 pre-refunded 7/1/2015 (St. Vincent Hospital; Insured: Radian) | NR/NR | 1,000,000 | 1,166,380 | |||||||
New Mexico Housing Authority MFR, 5.30% due 12/1/2022 (El Paseo Apartments; Insured: AMBAC) (AMT) | NR/NR | 960,000 | 893,050 | |||||||
New Mexico MFA Forward Mtg, 6.50% due 7/1/2025 (Collateralized: FNMA/GNMA) | AAA/NR | 100,000 | 104,326 | |||||||
New Mexico MFA MFR, 5.05% due 9/1/2027 (St. Anthony Apartments; Insured: FHA) (AMT) | NR/NR | 890,000 | 836,885 | |||||||
New Mexico MFA MFR, 6.05% due 7/1/2028 (Sandpiper Apartments; Insured: FHA) (AMT) | AA-/NR | 2,335,000 | 2,482,082 | |||||||
New Mexico MFA MFR, 5.00% due 7/1/2031 put 7/1/2011 (Sombra Del Oso Apartments; Collateralized: FNMA) | NR/Aaa | 2,000,000 | 2,057,440 | |||||||
New Mexico MFA MFR, 5.00% due 7/1/2031 put 7/1/2011 (Riverwalk Apartments; Collateralized: FNMA) | NR/Aaa | 1,910,000 | 1,964,855 | |||||||
New Mexico MFA MFR, 5.00% due 7/1/2031 put 7/1/2011 (Tierra Pointe I Apartments; Collateralized: FNMA) | NR/Aaa | 2,785,000 | 2,864,985 | |||||||
New Mexico MFA SFMR, 5.875% due 9/1/2020 (AMT) | AAA/NR | 135,000 | 141,473 | |||||||
New Mexico MFA SFMR, 5.25% due 7/1/2023 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | AAA/NR | 1,285,000 | 1,356,189 | |||||||
New Mexico MFA SFMR, 5.375% due 7/1/2023 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | AAA/NR | 1,780,000 | 1,903,746 | |||||||
New Mexico MFA SFMR, 5.50% due 7/1/2028 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | AAA/NR | 2,815,000 | 2,955,356 | |||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
New Mexico MFA SFMR, 5.60% due 7/1/2028 (Collateralized: GNMA/FNMA/FHLMC) (AMT) | AAA/NR | $ | 1,595,000 | $ | 1,694,321 | |||||
New Mexico MFA SFMR, 5.40% due 9/1/2029 (Collateralized: GNMA/FNMA/FHLMC) | AAA/NR | 980,000 | 1,048,296 | |||||||
New Mexico Mtg Finance Authority, 1.75% due 9/1/2012 (Villa Alegre; Insured: FHA) | AAA/NR | 1,000,000 | 1,010,520 | |||||||
New Mexico Severance Tax, 4.00% due 7/1/2016 | AA/Aa2 | 500,000 | 520,825 | |||||||
New Mexico State University, 5.00% due 4/1/2013 (Insured: AGM) | AAA/Aa2 | 1,000,000 | 1,104,790 | |||||||
Rio Rancho GRT, 5.00% due 6/1/2014 (Insured: Natl-Re/FGIC) | AA-/Aa2 | 955,000 | 1,079,293 | |||||||
Rio Rancho GRT, 5.00% due 6/1/2016 (Insured: Natl-Re/FGIC) | AA-/Aa2 | 555,000 | 629,098 | |||||||
Rio Rancho GRT, 5.00% due 6/1/2022 (Insured: Natl-Re/FGIC) | AA-/Aa2 | 1,000,000 | 1,074,530 | |||||||
Rio Rancho Public School District GO, 3.00% due 8/1/2012 (State Aid Withholding) | NR/Aa1 | 1,240,000 | 1,293,742 | |||||||
Rio Rancho Public School District GO, 4.00% due 8/1/2013 (State Aid Withholding) | NR/Aa1 | 1,210,000 | 1,316,214 | |||||||
Rio Rancho Public School District GO, 4.00% due 8/1/2014 (State Aid Withholding) | NR/Aa1 | 1,715,000 | 1,900,271 | |||||||
San Juan County Gasoline Tax/Motor Vehicle Improvement, 5.25% due 5/15/2014 | NR/Aa3 | 400,000 | 427,440 | |||||||
San Juan County Gasoline Tax/Motor Vehicle Improvement, 5.25% due 5/15/2022 | NR/Aa3 | 1,725,000 | 1,796,380 | |||||||
San Juan County GRT, 5.00% due 6/15/2014 (Insured: Natl-Re) | A+/Aa3 | 1,225,000 | 1,383,417 | |||||||
Sandoval County Incentive Payment, 4.00% due 6/1/2015 (Intel Corp.) | A+/NR | 1,000,000 | 1,039,050 | |||||||
Sandoval County Incentive Payment, 5.00% due 6/1/2020 (Intel Corp.) | A+/NR | 6,390,000 | 6,941,265 | |||||||
Sandoval County Landfill Improvement, 5.50% due 8/15/2015 | NR/Baa2 | 1,420,000 | 1,511,831 | |||||||
Sandoval County Landfill Improvement, 5.75% due 8/15/2018 | NR/Baa2 | 1,335,000 | 1,399,267 | |||||||
Santa Fe County, 5.50% due 5/15/2015 (El Castillo Retirement) | BBB-/NR | 939,000 | 939,939 | |||||||
Santa Fe County, 5.80% due 5/15/2018 (El Castillo Retirement) | BBB-/NR | 1,835,000 | 1,836,064 | |||||||
Santa Fe County, 7.25% due 7/1/2029 (Rancho Viejo Improvement District) | NR/NR | 1,665,000 | 1,666,116 | |||||||
Santa Fe County Charter School Foundation, 6.50% due 1/15/2026 (ATC Foundation) | NR/NR | 1,000,000 | 991,280 | |||||||
Santa Fe County Charter School Foundation, 6.625% due 1/15/2036 (ATC Foundation) | NR/NR | 1,030,000 | 990,489 | |||||||
Santa Fe County Correctional Systems, 5.00% due 2/1/2018 (Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,124,200 | |||||||
Santa Fe County Correctional Systems, 6.00% due 2/1/2027 (Insured: AGM) | AAA/Aa3 | 1,520,000 | 1,846,344 | |||||||
Santa Fe County GRT, 5.00% due 6/1/2025 | AA+/Aa1 | 1,400,000 | 1,568,098 | |||||||
Santa Fe County GRT, 5.00% due 6/1/2026 | AA+/Aa1 | 1,535,000 | 1,708,271 | |||||||
Santa Fe Educational Facilities, 5.40% due 3/1/2017 (St. John’s College) | BBB+/NR | 990,000 | 991,049 | |||||||
Santa Fe GRT, 5.25% due 6/1/2014 (Insured: AMBAC) | AA+/Aa3 | 1,025,000 | 1,088,734 | |||||||
Taos County GRT, 4.25% due 10/1/2010 (Insured: Radian) | NR/A3 | 1,000,000 | 1,000,070 | |||||||
Taos County GRT, 4.75% due 10/1/2012 (ETM) | NR/A3 | 1,500,000 | 1,624,050 | |||||||
University of New Mexico, 5.25% due 6/1/2013 | AA/Aa2 | 665,000 | 712,321 | |||||||
University of New Mexico, 5.25% due 6/1/2014 | AA/Aa2 | 335,000 | 357,774 | |||||||
University of New Mexico, 5.00% due 6/1/2015 (Insured: AMBAC) | AA/Aa3 | 1,590,000 | 1,848,613 | |||||||
University of New Mexico, 5.25% due 6/1/2015 | AA/Aa2 | 1,195,000 | 1,316,400 | |||||||
University of New Mexico, 5.25% due 6/1/2016 | AA/Aa2 | 645,000 | 688,847 | |||||||
University of New Mexico, 5.25% due 6/1/2017 | AA/Aa2 | 1,730,000 | 1,846,118 | |||||||
University of New Mexico, 5.25% due 6/1/2018 | AA/Aa2 | 1,825,000 | 1,944,665 | |||||||
University of New Mexico, 5.25% due 6/1/2018 | AA/Aa2 | 1,200,000 | 1,321,908 | |||||||
University of New Mexico, 5.25% due 6/1/2021 | AA/Aa2 | 1,000,000 | 1,065,330 | |||||||
University of New Mexico, 6.00% due 6/1/2021 | AA/Aa2 | 610,000 | 736,093 | |||||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 1/1/2016 | AAA/Aa3 | 2,920,000 | 3,230,630 | |||||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 1/1/2017 | AAA/Aa3 | 2,000,000 | 2,205,140 | |||||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 1/1/2018 | AAA/Aa3 | 2,000,000 | 2,197,560 | |||||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 1/1/2019 | AAA/Aa3 | 3,000,000 | 3,296,340 | |||||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 7/1/2019 | AAA/Aa3 | 3,000,000 | 3,296,340 | |||||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 1/1/2020 | AAA/Aa3 | 2,310,000 | 2,507,505 | |||||||
University of New Mexico Hospital Mtg Bonds, 5.00% due 7/1/2020 | AAA/Aa3 | 500,000 | 543,390 | |||||||
Ventana West Public Improvement District Special Tax, 6.625% due 8/1/2023 | NR/NR | 2,000,000 | 2,004,120 | |||||||
Certified Annual Report 13
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||||
Villa Hermosa Multi-Family Housing, 5.85% due 11/20/2016 | NR/NR | $ | 1,105,000 | $ | 1,073,353 | |||||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 | NR/Baa3 | 2,500,000 | 2,856,675 | |||||||||
TOTAL INVESTMENTS — 98.13% (Cost $234,178,301) | $ | 249,151,412 | ||||||||||
OTHER ASSETS LESS LIABILITIES — 1.87% | 4,757,869 | |||||||||||
NET ASSETS — 100.00% | $ | 253,909,281 | ||||||||||
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
| AGM | Insured by Assured Guaranty Municipal Corp. | |
| 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 | |
| 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.
14 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $234,178,301) (Note 2) | $ | 249,151,412 | ||
Cash | 1,134,817 | |||
Receivable for investments sold | 900,000 | |||
Receivable for fund shares sold | 368,463 | |||
Interest receivable | 3,108,247 | |||
Prepaid expenses and other assets | 888 | |||
Total Assets | 254,663,827 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 347,977 | |||
Payable to investment advisor and other affiliates (Note 3) | 176,846 | |||
Accounts payable and accrued expenses | 40,955 | |||
Dividends payable | 188,768 | |||
Total Liabilities | 754,546 | |||
NET ASSETS | $ | 253,909,281 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (25,824 | ) | |
Net unrealized appreciation on investments | 14,973,111 | |||
Accumulated net realized gain (loss) | (16,522 | ) | ||
Net capital paid in on shares of beneficial interest | 238,978,516 | |||
| $ | 253,909,281 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($202,870,312 applicable to 14,724,144 shares of beneficial interest outstanding - Note 4) | $ | 13.78 | ||
Maximum sales charge, 2.00% of offering price | 0.28 | |||
Maximum offering price per share | $ | 14.06 | ||
Class D Shares: | ||||
Net asset value, offering and redemption price per share ($24,068,007 applicable to 1,746,085 shares of beneficial interest outstanding - Note 4) | $ | 13.78 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($26,970,962 applicable to 1,958,430 shares of beneficial interest outstanding - Note 4) | $ | 13.77 | ||
See notes to financial statements.
Certified Annual Report 15
| STATEMENT OF OPERATIONS | ||
| Thornburg New Mexico Intermediate Municipal Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $1,081,852) | $ | 9,951,508 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,199,226 | |||
Administration fees (Note 3) | ||||
Class A Shares | 239,374 | |||
Class D Shares | 25,163 | |||
Class I Shares | 14,107 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 478,749 | |||
Class D Shares | 198,601 | |||
Transfer agent fees | ||||
Class A Shares | 59,645 | |||
Class D Shares | 9,839 | |||
Class I Shares | 2,648 | |||
Registration and filing fees | ||||
Class A Shares | 530 | |||
Class D Shares | 364 | |||
Class I Shares | 490 | |||
Custodian fees (Note 3) | 67,759 | |||
Professional fees | 25,921 | |||
Accounting fees | 9,555 | |||
Trustee fees | 5,573 | |||
Other expenses | 16,175 | |||
Total Expenses | 2,353,719 | |||
Less: | ||||
Distribution fees waived (Note 3) | (99,300 | ) | ||
Fees paid indirectly (Note 3) | (4,006 | ) | ||
Net Expenses | 2,250,413 | |||
Net Investment Income | 7,701,095 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 290,642 | |||
Net change in unrealized appreciation (depreciation) of investments | 2,643,615 | |||
Net Realized and Unrealized Gain | 2,934,257 | |||
Net Increase in Net Assets Resulting from Operations | $ | 10,635,352 | ||
See notes to financial statements.
16 Certified Annual Report
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg New Mexico Intermediate Municipal Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 7,701,095 | $ | 7,681,490 | ||||
Net realized gain (loss) on investments | 290,642 | 112,309 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 2,643,615 | 16,000,619 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 10,635,352 | 23,794,418 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (6,116,479 | ) | (6,101,848 | ) | ||||
Class D Shares | (587,742 | ) | (551,422 | ) | ||||
Class I Shares | (996,874 | ) | (1,028,220 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 12,659,410 | 11,158,658 | ||||||
Class D Shares | 6,475,741 | 545,907 | ||||||
Class I Shares | (909,152 | ) | 1,750,212 | |||||
Net Increase in Net Assets | 21,160,256 | 29,567,705 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 232,749,025 | 203,181,320 | ||||||
End of Year | $ | 253,909,281 | $ | 232,749,025 | ||||
See notes to financial statements.
Certified Annual Report 17
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 | |
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 sixteen 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). 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).
18 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 | |
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 249,151,412 | $ | — | $ | 249,151,412 | $ | — | ||||||||
Total Investments in Securities | $ | 249,151,412 | $ | — | $ | 249,151,412 | $ | — | ||||||||
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
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.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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.
Certified Annual Report 19
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 | |
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, 2010, these fees were payable at annual rates ranging from .50 of 1% to .275 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2010, the Distributor has advised the Fund that it earned net commissions aggregating $108 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I shares. 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, 2010, are set forth in the Statement of Operations. Distribution fees in the amount of $99,300 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, 2010, fees paid indirectly were $4,006.
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, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 2,128,410 | $ | 28,865,038 | 2,378,616 | $ | 31,086,102 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 279,226 | 3,785,910 | 282,925 | 3,693,096 | ||||||||||||
Shares repurchased | (1,475,832 | ) | (19,991,538 | ) | (1,840,942 | ) | (23,620,540 | ) | ||||||||
Net Increase (Decrease) | 931,804 | $ | 12,659,410 | 820,599 | $ | 11,158,658 | ||||||||||
20 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class D Shares | ||||||||||||||||
Shares sold | 695,376 | $ | 9,431,570 | 391,536 | $ | 5,149,917 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 33,430 | 453,643 | 33,869 | 442,320 | ||||||||||||
Shares repurchased | (251,759 | ) | (3,409,472 | ) | (384,329 | ) | (5,046,330 | ) | ||||||||
Net Increase (Decrease) | 477,047 | $ | 6,475,741 | 41,076 | $ | 545,907 | ||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 857,456 | $ | 11,590,412 | 194,089 | $ | 2,427,879 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 53,486 | 724,088 | 59,290 | 773,319 | ||||||||||||
Shares repurchased | (972,175 | ) | (13,223,652 | ) | (112,173 | ) | (1,450,986 | ) | ||||||||
Net Increase (Decrease) | (61,233 | ) | $ | (909,152 | ) | 141,206 | $ | 1,750,212 | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $41,239,733 and $17,774,925, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 234,178,301 | ||
Gross unrealized appreciation on a tax basis | $ | 15,237,485 | ||
Gross unrealized depreciation on a tax basis | (264,374 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 14,973,111 | ||
At September 30, 2010, the Fund did not have any undistributed tax-exempt, ordinary net income or undistributed capital gains.
At September 30, 2010, the Fund had $16,522 in 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 September 30, 2015.
The Fund utilized $290,642 capital loss carryforwards during the year ended September 30, 2010.
Certified Annual Report 21
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 | |
The tax character of distributions paid during the year ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 7,695,324 | $ | 7,677,759 | ||||
Ordinary income | 5,771 | 3,731 | ||||||
Total Distributions | $ | 7,701,095 | $ | 7,681,490 | ||||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class D shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .25% of 1%.
22 Certified Annual Report
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Certified Annual Report 23
Thornburg New Mexico Intermediate Municipal Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 13.63 | 0.43 | 0.15 | 0.58 | (0.43 | ) | — | (0.43 | ) | $ | 13.78 | 3.19 | 0.96 | 0.96 | 0.96 | 4.38 | 7.70 | $ | 202,870 | ||||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 12.64 | 0.47 | 0.99 | 1.46 | (0.47 | ) | — | (0.47 | ) | $ | 13.63 | 3.62 | 0.96 | 0.96 | 0.96 | 11.79 | 14.12 | $ | 187,940 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 13.10 | 0.47 | (0.46 | ) | 0.01 | (0.47 | ) | — | (0.47 | ) | $ | 12.64 | 3.56 | 0.97 | 0.95 | 0.97 | — | (c) | 13.48 | $ | 163,928 | ||||||||||||||||||||||||||||||||||||||
2007(b) | $ | 13.20 | 0.47 | (0.10 | ) | 0.37 | (0.47 | ) | — | (0.47 | ) | $ | 13.10 | 3.55 | 0.98 | 0.97 | 0.98 | 2.82 | 17.38 | $ | 169,130 | |||||||||||||||||||||||||||||||||||||||
2006(b) | $ | 13.22 | 0.45 | (0.02 | ) | 0.43 | (0.45 | ) | — | (0.45 | ) | $ | 13.20 | 3.41 | 0.99 | 0.98 | 0.99 | 3.31 | 11.59 | $ | 196,163 | |||||||||||||||||||||||||||||||||||||||
Class D Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.63 | 0.28 | 0.27 | 0.55 | (0.40 | ) | — | (0.40 | ) | $ | 13.78 | 2.92 | 1.22 | 1.22 | 1.71 | 4.11 | 7.70 | $ | 24,068 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 12.64 | 0.44 | 0.99 | 1.43 | (0.44 | ) | — | (0.44 | ) | $ | 13.63 | 3.35 | 1.23 | 1.23 | 1.73 | 11.50 | 14.12 | $ | 17,301 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 13.11 | 0.43 | (0.47 | ) | (0.04 | ) | (0.43 | ) | — | (0.43 | ) | $ | 12.64 | 3.29 | 1.24 | 1.22 | 1.74 | (0.35 | ) | 13.48 | $ | 15,525 | |||||||||||||||||||||||||||||||||||||
2007 | $ | 13.21 | 0.43 | (0.10 | ) | 0.33 | (0.43 | ) | — | (0.43 | ) | $ | 13.11 | 3.30 | 1.23 | 1.23 | 1.77 | 2.57 | 17.38 | $ | 13,524 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 13.23 | 0.41 | (0.02 | ) | 0.39 | (0.41 | ) | — | (0.41 | ) | $ | 13.21 | 3.15 | 1.24 | 1.24 | 1.82 | 3.04 | 11.59 | $ | 14,113 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.62 | 0.67 | (0.04 | ) | 0.63 | (0.48 | ) | — | (0.48 | ) | $ | 13.77 | 3.53 | 0.61 | 0.61 | 0.61 | 4.74 | 7.70 | $ | 26,971 | |||||||||||||||||||||||||||||||||||||||
2009 | $ | 12.63 | 0.52 | 0.99 | 1.51 | (0.52 | ) | — | (0.52 | ) | $ | 13.62 | 3.96 | 0.62 | 0.62 | 0.62 | 12.18 | 14.12 | $ | 27,508 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 13.10 | 0.51 | (0.47 | ) | 0.04 | (0.51 | ) | — | (0.51 | ) | $ | 12.63 | 3.90 | 0.63 | 0.61 | 0.63 | 0.26 | 13.48 | $ | 23,728 | |||||||||||||||||||||||||||||||||||||||
2007(d) | $ | 13.10 | 0.34 | — | 0.34 | (0.34 | ) | — | (0.34 | ) | $ | 13.10 | 3.95 | (e) | 0.63 | (e) | 0.62 | (e) | 0.63 | (e) | 2.64 | 17.38 | $ | 19,427 | ||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Total return figure was less than 0.01%. |
| (d) | Effective date of this class of shares was February 1, 2007. (e) Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 24 Certified Annual Report | Certified Annual Report 25 |
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, 2010, 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, 2010 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
26 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,040.30 | $ | 4.89 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.28 | $ | 4.84 | ||||||
Class D Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,038.90 | $ | 6.22 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.97 | $ | 6.16 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,042.10 | $ | 3.11 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.02 | $ | 3.08 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.96%; D: 1.22%; I: 0.61%) 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 27
| INDEX COMPARISON | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg New Mexico Intermediate Municipal Fund versus BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index and Consumer Price Index (June 18, 1991 to September 30, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 6/18/91) | 2.28 | % | 3.97 | % | 4.18 | % | 4.95 | % | ||||||||
D Shares (Incep: 6/1/99) | 4.11 | % | 4.10 | % | 4.11 | % | 3.93 | % | ||||||||
I Shares (Incep: 2/1/07) | 4.74 | % | — | — | 5.33 | % | ||||||||||
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 BofA Merrill Lynch 7-12 Year U.S. Municipal Securities 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.
28 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
| Garrett Thornburg, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
| Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
| David A. Ater, 65 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. | None | ||
| David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||
| Susan H. Dubin, 61 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, 56 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, 51 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 29
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
| George T. Strickland, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
| William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
| Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
| Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
| Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
| Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
| Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
| Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
| Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
| Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
| Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
| Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
| Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
| Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
30 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 31
| OTHER INFORMATION | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 (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, 2010, dividends paid by the Fund of $7,695,324 (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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the specified information with the Trustees and addressed questions by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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 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
32 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
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 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 reviewing 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. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year was somewhat lower than the average return of the mutual fund category for which calendar year data was presented, that the Fund’s returns 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 at the median of the same category for the one-year period ended with the second quarter of the current year and within the top quartile in the three-year and five-year periods, and that the Fund’s performance fell near or within the top quartile 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 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, and 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. The Trustees observed that the overall expense ratio of the Fund was slightly higher than average expense ratio and comparable to the median expense ratio 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, and 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 confirmed their previous observations 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, 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 Trustees noted the adequacy of the Advisor’s resources and 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
Certified Annual Report 33
| OTHER INFORMATION, CONTINUED | ||
| Thornburg New Mexico Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
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.
34 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
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. 35
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36 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 Developing World Fund |
| • | Thornburg Limited Term U.S. Government Fund |
| • | Thornburg Limited Term Income Fund |
Thornburg Strategic Income Fund
This page is not part of the Annual Report. 37
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 Developing World 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. 39
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Important Information
The information presented on the following pages is current as of September 30, 2010. 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 | THNYX | 885-215-665 | ||
Class I | TNYIX | 885-216-705 |
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 or 2010.
Glossary
BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index – The 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.
BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index – A model portfolio of municipal obligations throughout the U.S., with an average maturity ranging from three to fifteen years.
BofA 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).
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 Yield – The distribution yield 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.
Basis Point (BPS) – A unit equal to 1/100th of 1%. 1% = 100 basis points (bps)
Bond Credit Ratings – A bond credit rating assesses the financial ability of a debt issuer to make timely payments of principal and interest. Ratings of AAA (the highest), AA, A, and BBB are investment-grade quality. Ratings of BB, B, CCC, CC, C, and D (the lowest) are considered below investment grade, speculative grade, or junk bonds. Unless otherwise noted, the ratings listed are from Municipal Market Data and are a combination of ratings from Standard and Poor’s, Moody’s Investors Service, and Fitch Ratings.
Effective Duration – A bond’s sensitivity to interest rates, incorporating the embedded option features, such as call provisions. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
Fed Funds Rate – The interest rate at which a depository institution lends immediately available funds (balances at the Federal Reserve) to another depository institution overnight.
This page is not part of the Annual Report. 3
Important Information,
Continued
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.
Insured Bond – A bond with interest and principal payments insured by a third party. Insured bonds are usually found as a feature of municipal bonds; they are purchased, underwritten and repackaged by a financial guarantee company who then sells the issue to investors.
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.
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.
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.
Treasury Inflation Protected Securities (TIPS) – Either a U.S. Treasury note or bond that offers protection from the effects of inflation. Using the Consumer Price Index as a guide, the value of the principal is adjusted to reflect the effects of inflation. A fixed interest rate is paid semi-annually on the adjusted amount. At maturity, if inflation has increased the value of the principal, the investor receives the higher value. If deflation has decreased the value, the investor receives the original face amount of the security.
4 This page is not part of the Annual Report.
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 were 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. |
CO-PORTFOLIO MANAGERS
Josh Gonze, George Strickland, and Chris Ihlefeld
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 operating expenses of Class A shares are 1.07% as disclosed in the most recent Prospectus. Thornburg Investment Management and Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least February 1, 2011, so that actual expenses, for Class A shares, do not exceed 0.99%.
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history of A shares from September 5, 1997 through September 30, 2010
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 9/5/97) | ||||||||||||||||||||
Without sales charge | 3.68 | % | 5.06 | % | 4.30 | % | 4.34 | % | 4.38 | % | ||||||||||
With sales charge | 1.62 | % | 4.36 | % | 3.89 | % | 4.13 | % | 4.22 | % | ||||||||||
30-DAY YIELDS, A SHARES
As of September 30, 2010
Annualized Distribution Yield | SEC Yield | |||
3.14% | 1.77 | % | ||
Without fee waivers and expense reimbursements, the 30-day SEC Yield would have been 1.57% and the Annualized Distribution Yield would have been 2.94%.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2010
Number of Bonds | 52 | |||
Effective Duration | 5.4 Yrs | |||
Average Maturity | 8.7 Yrs | |||
See the entire portfolio in the Schedule of Investments beginning on page 11.
This page is not part of the Annual Report. 5
Thornburg New York Intermediate Municipal Fund
September 30, 2010
Table of Contents | ||||
| 7 | ||||
| 11 | ||||
| 13 | ||||
| 14 | ||||
| 15 | ||||
| 16 | ||||
| 20 | ||||
| 22 | ||||
| 23 | ||||
| 24 | ||||
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| 28 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
6 Certified Annual Report
George Strickland Co-Portfolio Manager | October 11, 2010
Dear Shareholder:
We are pleased to present the annual report for the Thornburg New York Intermediate Municipal | |
Josh Gonze Co-Portfolio Manager | The Class A shares of your Fund produced a total return of 3.68% at NAV over the fiscal year ended September 30, 2010, compared to 6.75% for the BofA Merrill Lynch 7–12 Year U.S. Municipal Securities Index. The main contributor to the difference in performance is that the BofA Merrill Lynch 7–12 Year U.S. Municipal Securities Index has a longer effective duration than the Thornburg New York Intermediate Municipal Fund. Effective duration is a measure of a fund’s price sensitivity to changes in interest rates. As interest rates decline, funds with longer effective durations will enjoy greater price appreciation and additional income. As interest rates increase, funds with longer effective durations will also incur greater price depreciation (losses).
The Economy and the Federal Reserve
On September 20, 2010, the National Bureau of Economic Research (NBER) announced that the recession ended in June 2009. The 9.6% of the American work force currently unemployed may beg to differ with this evaluation. The duration of the recession was 18 months, making it the longest recession since World War II. | |
Christopher Ihlefeld Co-Portfolio Manager | The economic picture has been largely unchanged during the fiscal year. The economy is suffering from a high degree of slack in the utilization of its productive resources. Banks are not lending even though the Federal Reserve (Fed) has pumped considerable amounts of money into the economy. Inflation and inflation expectations are quite muted. Gross Domestic Product (GDP), a measure of a country’s overall economic output, recorded a 1.6% increase in the quarter ended June 30, 2010, much higher than the negative 6.8% decrease posted in the quarter ended December 31, 2009, but lower than the long-term average growth rate experienced since 1973 of 2.7%. Capacity utilization, a measure of an economy’s usage of its productive resources, is running around 74.7%, well off the series low of 68.3% recorded in June of 2009 but below its long-term average of 81%. The Fed, seeking to bolster aggregate demand for goods and services, has pumped a tremendous amount of money into the economy. M2, a broad measure of money and money substitutes, has grown 15.9% since the beginning of 2008. But the velocity of M2, a measure of the rate at which money in circulation is used in transactions, is falling. Whether lending institutions are not lending or small and midsize businesses are not borrowing, the result is the same. Commercial and Industrial Loans and | |
Certified Annual Report 7
Letter to Shareholders,
Continued
Leases (loans to corporations, commercial enterprises, or joint ventures) have decreased 15.2% since January of 2008. Small and midsized businesses, normally the engines of economic growth, are being starved of needed capital. Now let’s look at one measure of inflation, the Consumer Price Index (CPI). The year-over-year change in headline CPI has been running between 1.1% and 1.2% for the last three months. Core CPI (headline CPI less the food and energy components) has been running at 0.9% for the last four months. The market’s expectations of future inflation as measured by the inflation expectations used in the pricing of Treasury Inflation Protected Securities (TIPS) with five years to maturity has been running around the 1.4% rate. So inflation, the bane of fixed income investors, has been low and the market expects it to remain low.
The Federal Open Market Committee (FOMC) maintained a very accommodative stance toward monetary policy by keeping the Fed Funds rate effectively at 0% throughout the fiscal year. In addition to keeping the Fed Funds rate low, central banks around the world engaged in a policy known as “quantitative easing,” buying back bonds and other assets to boost demand and fight off deflation. The Fed bought $1.7 trillion in bonds to accomplish this goal. As these assets mature, the market is wondering what the Fed will do with the proceeds – buy more bonds (and what type of bonds?) or return the money to the Treasury. In their September 21, 2010 release the FOMC stated, “The Committee also will maintain their existing policy of reinvesting principal payments for their securities holdings.” So the Fed’s accommodative monetary policy will remain unchanged “for an extended period.”
As we look forward over the next 6–12 months, we believe the Fed will keep short-term interest rates low and the market will keep the slope of the yield curve (difference between long-term and short-term interest rates) steep. Of course if we see signs of an increase in economic activity, we will reevaluate this position. The next move by the Fed, in terms of short-term interest rates, would seem to be an increase, easy to say when short-term interest rates have reached the lower limit of zero.
The Municipal Market
The municipal market has performed very well over the fiscal year. The reasons for this performance are as follows: assets have continued to flow out of municipal money market funds and into municipal bond funds (primarily short-term municipal bond funds), investors’ appetite for risk assets has been whetted after their performance in 2009, and finally, anticipation of increased taxes has added to the allure of municipal bonds. Yields on the benchmark AAA general obligation bond have decreased during the fiscal year, but not uniformly for all maturities. Chart I illustrates these changes for maturities from 1 to 30 years.
CHART 1: CHANGES IN AAA GENERAL OBLIGATION BOND YIELDS
10/1/2009 - 9/30/2010
Yields decreased anywhere from 0.12% (12 basis points) to 0.40% (40 basis points) depending on maturity. Notice that, in general, shorter maturities decreased in yield more than longer term maturities. This situation was caused by the in-flow of assets into short-term municipal bond funds from municipal money market funds.
8 Certified Annual Report
Not only have the general level of interest rates decreased over the past 12 months, but market participants have become less fearful when it comes to pricing credit risk. To illustrate this point, we will introduce the concept of “implied default rates.” The implied default rate is derived from current market prices for bonds of various credit categories (assuming different recovery rates) compared to a “default free” bond’s price. The implied default rate of all investment grade bonds with ten years of maturity for the BofA Merrill Lynch 3–15 Year U.S. Municipal Securities Index on September 30, 2009, as we calculated it, was 10.7% assuming a recovery rate of 60%. On August 31, 2010, the same implied default rate was 8.1%, a marked decrease from the beginning of the year. These implied default rates are well in excess of the historic default rates for investment grade municipal bonds, as calculated by Standard and Poor’s, of 0.09%.
As investors, we have been inundated with news reports concerning the impending disaster awaiting the municipal bond market due to the poor financial condition of state and local governments. We would like to borrow a concept from Mark Twain, “The reports of my death have been greatly exaggerated.” We are not being a “Pollyanna,” there is a great deal of fiscal stress in the state.
New York State legislators finally passed a budget (125 days late, California was only 100 days late). The state will increase revenues an additional $1 billion, by increasing taxes on the sale of clothing and a variety of businesses. The Governor’s communications director hailed the passage, “Today the state finalized a budget that closes a $9.2 billion budget gap.” That would place the budget gap at 6.7% of the $136.5 billion budget. Nationally the Center on Budget and Policy Priorities estimated that fiscal year 2011 budget gaps, “totaled $121 billion or 19 percent of budgets in 46 states.” New York’s budget gaps have been smaller than many parts of the country because the local economy, buoyed by recent Wall Street earnings, has held up relatively well. Notably the State closed the deficit with the help of $5.2 billion of spending cuts, and did not use deficit borrowings. New York’s pension system is 107% funded, well above the national average. Florida, Washington and Wisconsin joined New York as the only four states to have fully funded pension systems.
A Word about Municipal Bond Market Risk
The combination of a very accommodative Fed (Federal Funds rate near zero) and the continued disintermediation of assets out of municipal money market funds into municipal bond funds (mostly short-term municipal bond funds) have increased the interest rate risk in the municipal bond market. On December 31, 2008, municipal money market funds totaled almost $495 billion (50% of the combined municipal bond and money market fund total). By December 31, 2009, municipal money market funds totaled almost $401 billion (41% of the combined total). Today approximately $350 billion of investor’s assets remain in municipal money market funds or almost 36% of the combined municipal money market and bond fund assets. The reason for this exodus is quite simple: investors do not like to earn close to 0% on their invested funds no matter how “safe” they are. Although we do not anticipate much change in interest rates for the next 6–12 months, the next move in all likelihood will be to the upside. This means that investors should be ready for some capital losses in the future. The trade-off between the extra income earned in a bond fund and the expected capital loss can be mitigated by establishing an appropriate holding period for the investment. We believe that investors in the New York Intermediate Municipal Fund should plan to own the Fund for at least three years in order to decrease the chance that fluctuations in net asset value might overwhelm the income component of their total return.
Your Thornburg New York Intermediate Municipal Fund is a laddered portfolio of 52 municipal obligations. We ladder the maturity dates of the bonds in your portfolio so that some of the bonds are scheduled to mature during each of the coming years. Laddering short and intermediate bonds accomplishes two goals. First, the staggered bond maturities contained in a
Certified Annual Report 9
Letter to Shareholders,
Continued
ladder reduce interest-rate risk and dampen the Fund’s price volatility. Second, laddering reduces reinvestment risk by giving the Fund a steady cash flow stream from maturing bonds to reinvest toward the top of the ladder where yields are typically higher. Chart 2 describes the percentages of your Fund’s bond portfolio maturing in each of the coming years.
The Fund’s adherence to the discipline of the laddered structure served investors well. As you can see from Chart I on page 8, yields in the shorter segment of the 1–10 year maturity range of the market decreased more than any other segment of the market. By keeping with the discipline of the Fund’s laddered structure, we were able to capture a significant portion of that performance. Additionally, overweighting out-of-favor sectors, such as the revenue and insured sectors, along with under-weights to securities in the general obligation sector, we added incremental performance. We plan to continue to search for out-of-favor opportunities in the municipal market, using our fundamental, bottom-up approach to portfolio management, and the discipline of the laddered structure.
CHART 2: % OF PORTFOLIO MATURING
As of 9/30/10. Percentages vary over time.
Data may not add up to 100% due to rounding.
Thank you for investing in the 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.
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 | |
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† S&P/Moody’s | Principal Amount | Value | |||||||
Amherst Development Corp., 5.00% due 10/1/2020 (University at Buffalo Foundation Facility- Student Housing; Insured: AGM) | AAA/Aa3 | $ | 1,000,000 | $ | 1,151,190 | |||||
Amherst IDA Civic Facility, 5.75% due 4/1/2015 (Insured: ACA) | NR/NR | 465,000 | 483,777 | |||||||
Brookhaven IDA Civic Facility Revenue, 4.25% due 11/1/2037 put 11/1/2011 (LOC: North Fork Bank) | NR/NR | 1,075,000 | 1,075,516 | |||||||
Clarence Central School District, 5.00% due 5/15/2016 (Insured: AGM) (State Aid Withholding) | NR/Aa2 | 2,000,000 | 2,129,520 | |||||||
Dutchess County IDA, 5.00% due 8/1/2021 (Bard College) | NR/Baa1 | 1,100,000 | 1,180,124 | |||||||
Erie County IDA School Facilities Revenue, 5.25% due 5/1/2025 (Buffalo City School District) | AA-/Aa3 | 1,000,000 | 1,135,930 | |||||||
Guam Government Ltd. Obligation Revenue, 5.375% due 12/1/2024 | BBB-/NR | 1,000,000 | 1,056,610 | |||||||
Metropolitan Transportation Authority, 5.25% due 11/15/2024 (Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,072,460 | |||||||
Monroe County IDA, 5.375% due 6/1/2017 (St. John Fisher College; Insured: Radian) | NR/NR | 495,000 | 500,277 | |||||||
Nassau County IDA, 4.75% due 3/1/2026 (NY Institute of Technology) | BBB+/Baa2 | 1,000,000 | 1,030,610 | |||||||
Nassau County Industrial Development Agency, 5.25% due 3/1/2020 (NY Institute of Technology) | BBB+/Baa2 | 235,000 | 259,276 | |||||||
New York City GO, 5.00% due 8/1/2025 | AA/Aa2 | 400,000 | 441,808 | |||||||
New York City GO, 0.31% due 4/1/2035 put 10/1/2010 (SPA: Dexia) (daily demand notes) | AA/Aa2 | 300,000 | 300,000 | |||||||
New York City Metropolitan Transportation Authority, 6.25% due 11/15/2023 | A/A2 | 1,000,000 | 1,205,530 | |||||||
New York City Municipal Water Finance Authority, 5.75% due 6/15/2013 (ETM) | AAA/A2 | 1,000,000 | 1,063,620 | |||||||
New York City Transitional Finance Authority, 5.25% due 8/1/2016 pre-refunded 8/1/2012 (Insured: AMBAC) | AAA/Aaa | 135,000 | 147,043 | |||||||
New York City Transitional Finance Authority, 5.25% due 8/1/2016 (Insured: AMBAC) | AAA/Aaa | 865,000 | 933,966 | |||||||
New York City Transitional Finance Authority, 5.00% due 1/15/2020 (State Aid Withholding) | AA-/Aa3 | 1,000,000 | 1,136,920 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2020 | AAA/Aaa | 1,000,000 | 1,145,940 | |||||||
New York City Trust Cultural Resources, 5.75% due 7/1/2014 (Museum of American Folk Art; Insured: ACA) | NR/NR | 920,000 | 552,902 | |||||||
New York Convention Center Development Corp. Hotel Unit Fee, 5.00% due 11/15/2017 (Insured: AMBAC) | NR/A1 | 1,000,000 | 1,103,220 | |||||||
New York Dormitory Authority, 5.25% due 7/1/2011 (D’Youville College; Insured: Radian) | NR/NR | 370,000 | 379,039 | |||||||
New York Dormitory Authority, 5.25% due 8/15/2013 (Master Boces; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,038,660 | |||||||
New York Dormitory Authority, 5.00% due 2/15/2015 (Mental Health Services; Insured: AMBAC) | AA-/NR | 1,000,000 | 1,144,690 | |||||||
New York Dormitory Authority, 5.25% due 8/15/2015 (New York Presbyterian Hospital; Insured: AGM/FHA) | AAA/Aa3 | 585,000 | 649,602 | |||||||
New York Dormitory Authority, 5.00% due 7/1/2016 (Bishop Henry B. Hucles Nursing Home; Insured: SONYMA) | NR/Aa1 | 600,000 | 694,866 | |||||||
New York Dormitory Authority, 5.25% due 5/15/2017 (Court Facilities Lease; Insured: AMBAC) | AA-/Aa3 | 1,000,000 | 1,162,800 | |||||||
New York Dormitory Authority, 5.00% due 10/1/2018 (School District Revenue; Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,133,900 | |||||||
New York Dormitory Authority, 5.50% due 2/15/2019 pre-refunded 8/15/2011 (Mental Health Services; Insured: Natl-Re) | AA-/NR | 585,000 | 611,828 | |||||||
New York Dormitory Authority, 5.50% due 7/1/2019 (Brooklyn Law School; Insured: Radian) | BBB+/Baa1 | 1,400,000 | 1,470,532 | |||||||
New York Dormitory Authority, 6.10% due 7/1/2019 (Ryan Clinton Community Health Center; Insured: SONYMA) | NR/Aa1 | 925,000 | 937,848 | |||||||
New York Dormitory Authority, 5.25% due 7/1/2022 (St. John’s University; Insured: Natl-Re) | A/A3 | 1,000,000 | 1,168,440 | |||||||
New York Dormitory Authority, 5.00% due 1/15/2023 (Municipal Health Facilities) | AA-/A1 | 1,000,000 | 1,089,570 | |||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||||
New York Dormitory Authority, 5.00% due 7/1/2024 (Bishop Henry B. Hucles Nursing Home; Insured: SONYMA) | NR/Aa1 | $ | 1,000,000 | $ | 1,082,100 | |||||||
New York Dormitory Authority, 5.25% due 7/1/2027 (Health Quest Systems; Insured: AGM) | AAA/Aa3 | 500,000 | 547,470 | |||||||||
New York Dormitory Authority, 5.25% due 5/1/2030 (North Shore Long Island Jewish Medical) | A-/Baa1 | 1,000,000 | 1,049,250 | |||||||||
New York Dormitory Authority Personal Income Tax, 5.50% due 3/15/2012 | AAA/Aa2 | 1,000,000 | 1,071,620 | |||||||||
New York Dormitory Authority Personal Income Tax, 5.00% due 3/15/2019 (Insured: AGM) | AAA/Aa3 | 1,000,000 | 1,129,900 | |||||||||
New York Environmental Facilities Corp., 6.875% due 6/15/2014 (State Revolving Fund) | AAA/Aaa | 400,000 | 402,112 | |||||||||
New York State Thruway Authority General, 5.00% due 1/1/2018 (Insured: AMBAC) | A+/A1 | 1,000,000 | 1,102,360 | |||||||||
New York State Thruway Authority Highway & Bridge Trust Fund, 5.00% due 4/1/2022 | AA/NR | 1,000,000 | 1,125,010 | |||||||||
New York State Urban Development Corp., 5.25% due 1/1/2021 | AA-/NR | 1,000,000 | 1,162,570 | |||||||||
Oneida County IDA, 6.10% due 6/1/2020 (Presbyterian Home for Central NY; LOC: HSBC Bank USA) | NR/Aa3 | 450,000 | 455,625 | |||||||||
Onondaga Civic Development Corp., 5.00% due 7/1/2021 (Le Moyne College Project) | NR/Baa2 | 1,000,000 | 1,059,720 | |||||||||
Port Authority New York & New Jersey, 5.00% due 8/15/2022 (Insured: AGM) | AAA/Aa2 | 1,000,000 | 1,140,380 | |||||||||
Port Chester IDA, 4.75% due 7/1/2031 put 7/1/2011 (American Foundation; Collateralized: FNMA) | AAA/NR | 750,000 | 767,093 | |||||||||
Tobacco Settlement Funding Corp., 5.50% due 6/1/2021 | AA-/Aa3 | 1,000,000 | 1,084,250 | |||||||||
Triborough Bridge & Tunnel Authority, 5.00% due 11/15/2025 | AA-/Aa2 | 1,410,000 | 1,574,307 | |||||||||
United Nations Development Corp., 5.00% due 7/1/2025 | NR/A1 | 710,000 | 790,791 | |||||||||
Utica IDA Civic Facility, 5.25% due 7/15/2016 (Munson Williams Proctor Institute) | NR/A1 | 210,000 | 215,000 | |||||||||
Utica Industrial Development Agency, 5.375% due 7/15/2019 (Munson Williams Proctor Institute) | NR/A1 | 525,000 | 532,072 | |||||||||
Virgin Islands Water & Power Authority, 5.50% due 7/1/2017 | NR/Baa3 | 1,350,000 | 1,352,577 | |||||||||
TOTAL INVESTMENTS — 96.51% (Cost $45,714,862) | $ | 48,232,221 | ||||||||||
OTHER ASSETS LESS LIABILITIES — 3.49% | 1,742,547 | |||||||||||
NET ASSETS — 100.00% | $ | 49,974,768 | ||||||||||
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 | |
| AGM | Insured by Assured Guaranty Municipal Corp. | |
| 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 | |
| GO | General Obligation | |
| IDA | Industrial Development Authority | |
| LOC | Letter of Credit | |
| Natl-Re | Insured by National Public Finance Guarantee Corp. | |
| Radian | Insured by Radian Asset Assurance | |
| SONYMA | State of New York Mortgage Authority | |
| SPA | Stand-by Purchase Agreement |
See notes to financial statements.
12 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $45,714,862) (Note 2) | $ | 48,232,221 | ||
Cash | 1,006,352 | |||
Receivable for investments sold | 10,000 | |||
Receivable for fund shares sold | 237,982 | |||
Interest receivable | 642,075 | |||
Prepaid expenses and other assets | 908 | |||
Total Assets | 50,129,538 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 54,282 | |||
Payable to investment advisor and other affiliates (Note 3) | 26,683 | |||
Accounts payable and accrued expenses | 33,300 | |||
Dividends payable | 40,505 | |||
Total Liabilities | 154,770 | |||
NET ASSETS | $ | 49,974,768 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (16,847 | ) | |
Net unrealized appreciation on investments | 2,517,359 | |||
Accumulated net realized gain (loss) | (32,830 | ) | ||
Net capital paid in on shares of beneficial interest | 47,507,086 | |||
| $ | 49,974,768 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($48,203,052 applicable to 3,760,178 shares of beneficial interest outstanding - Note 4) | $ | 12.82 | ||
Maximum sales charge, 2.00% of offering price | 0.26 | |||
Maximum offering price per share | $ | 13.08 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($1,771,716 applicable to 138,218 shares of beneficial interest outstanding - Note 4) | $ | 12.82 | ||
See notes to financial statements.
Certified Annual Report 13
| STATEMENT OF OPERATIONS | ||
| Thornburg New York Intermediate Municipal Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $193,780) | $ | 1,935,597 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 221,674 | |||
Administration fees (Note 3) | ||||
Class A Shares | 54,525 | |||
Class I Shares | 357 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 109,051 | |||
Transfer agent fees | ||||
Class A Shares | 21,726 | |||
Class I Shares | 4,357 | |||
Registration and filing fees | ||||
Class A Shares | 292 | |||
Custodian fees (Note 3) | 25,692 | |||
Professional fees | 23,825 | |||
Accounting fees | 2,031 | |||
Trustee fees | 1,051 | |||
Other expenses | 10,357 | |||
Total Expenses | 474,938 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (37,827 | ) | ||
Fees paid indirectly (Note 3) | (488 | ) | ||
Net Expenses | 436,623 | |||
Net Investment Income | 1,498,974 | |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 6,049 | |||
Net change in unrealized appreciation (depreciation) of investments | 252,625 | |||
Net Realized and Unrealized Gain | 258,674 | |||
Net Increase in Net Assets Resulting from Operations | $ | 1,757,648 | ||
See notes to financial statements.
14 Certified Annual Report
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg New York Intermediate Municipal Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,498,974 | $ | 1,286,130 | ||||
Net realized gain (loss) on investments | 6,049 | 40,909 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 252,625 | 2,647,069 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,757,648 | 3,974,108 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (1,473,778 | ) | (1,286,130 | ) | ||||
Class I Shares | (25,196 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 7,862,026 | 6,741,948 | ||||||
Class I Shares | 1,738,988 | — | ||||||
Net Increase in Net Assets | 9,859,688 | 9,429,926 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 40,115,080 | 30,685,154 | ||||||
End of Year | $ | 49,974,768 | $ | 40,115,080 | ||||
See notes to financial statements.
Certified Annual Report 15
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 | |
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 sixteen 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 two classes of shares of beneficial interest: Class A and Institutional Class (Class I). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee and (ii) Class I shares are sold at net asset value without a sales charge at the time of purchase, and (iii) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent 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 New York Intermediate Municipal Fund | September 30, 2010 | |
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 48,232,221 | $ | — | $ | 48,232,221 | $ | — | ||||||||
Total Investments in Securities | $ | 48,232,221 | $ | — | $ | 48,232,221 | $ | — | ||||||||
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
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.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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.
Certified Annual Report 17
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 | |
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, 2010, 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 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, 2010, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $33,166 for Class A shares and $4,661 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, 2010, the Distributor has advised the Fund that it earned commissions aggregating $1,710 from the sale of Class A shares.
Pursuant to a service plan under Rule 12b-1 of the Investment Company Act of 1940, the Fund may reimburse to the Advisor an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to each class of shares of the Fund for payments made by the Advisor to securities dealers and other financial institutions to obtain various shareholder and distribution related services. For the period ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I shares. 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, 2010, fees paid indirectly were $488.
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, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Period Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,220,966 | $ | 15,381,956 | 957,975 | $ | 11,722,549 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 81,263 | 1,024,581 | 75,315 | 924,154 | ||||||||||||
Shares repurchased | (678,311 | ) | (8,544,511 | ) | (481,247 | ) | (5,904,755 | ) | ||||||||
Net Increase (Decrease) | 623,918 | $ | 7,862,026 | 552,043 | $ | 6,741,948 | ||||||||||
Class I Shares* | ||||||||||||||||
Shares sold | 137,346 | $ | 1,727,927 | — | $ | — | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,412 | 17,935 | — | — | ||||||||||||
Shares repurchased | (540 | ) | (6,874 | ) | — | — | ||||||||||
Net Increase (Decrease) | 138,218 | $ | 1,738,988 | — | $ | — | ||||||||||
| * | The effective date of this class of shares was February 1, 2010. |
18 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 | |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $14,510,799 and $5,051,627, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 45,714,862 | ||
Gross unrealized appreciation on a tax basis | $ | 2,881,367 | ||
Gross unrealized depreciation on a tax basis | (364,008 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 2,517,359 | ||
At September 30, 2010, the Fund did not have any undistributed tax-exempt, ordinary net income or undistributed capital gains.
The Fund utilized $6,049 of capital loss carryforwards during the year ended September 30, 2010.
At September 30, 2010, the Fund had tax basis capital losses of $32,830, 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.
The tax character of distributions paid during the year ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 1,497,309 | $ | 1,284,314 | ||||
Ordinary income | 1,665 | 1,816 | ||||||
Total Distributions | $ | 1,498,974 | $ | 1,286,130 | ||||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
Certified Annual Report 19
Thornburg New York Intermediate Municipal Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 12.79 | 0.42 | 0.04 | 0.46 | (0.43 | ) | — | (0.43 | ) | $ | 12.82 | 3.38 | 0.99 | 0.99 | 1.07 | 3.68 | 11.79 | $ | 48,203 | ||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 11.87 | 0.45 | 0.92 | 1.37 | (0.45 | ) | — | (0.45 | ) | $ | 12.79 | 3.67 | 0.99 | 0.99 | 1.07 | 11.77 | 13.00 | $ | 40,115 | ||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 12.30 | 0.44 | (0.43 | ) | 0.01 | (0.44 | ) | — | (0.44 | ) | $ | 11.87 | 3.61 | 1.01 | 0.99 | 1.08 | 0.07 | 13.42 | $ | 30,685 | |||||||||||||||||||||||||||||||||||||
2007(b) | $ | 12.38 | 0.46 | (0.08 | ) | 0.38 | (0.46 | ) | — | (0.46 | ) | $ | 12.30 | 3.74 | 1.01 | 0.99 | 1.11 | 3.13 | 14.91 | $ | 33,016 | |||||||||||||||||||||||||||||||||||||
2006(b) | $ | 12.44 | 0.45 | (0.06 | ) | 0.39 | (0.45 | ) | — | (0.45 | ) | $ | 12.38 | 3.66 | 1.01 | 0.99 | 1.11 | 3.23 | 15.38 | $ | 34,849 | |||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(c) | $ | 12.48 | 0.29 | 0.35 | 0.64 | (0.30 | ) | — | (0.30 | ) | $ | 12.82 | 3.53(d) | 0.67 | (d) | 0.67 | (d) | 1.32 | (d) | 5.22 | 11.79 | $ | 1,772 | |||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Effective date of this class of shares was February 1, 2010. |
| (d) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 20 Certified Annual Report | Certified Annual Report 21 |
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, 2010, 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, 2010 by correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
22 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,044.70 | $ | 5.07 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,046.40 | $ | 3.43 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.71 | $ | 3.39 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.99%; I: 0.67%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
| * | Hypothetical assumes a rate of return of 5% per year before expenses. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 23
| INDEX COMPARISON | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg New York Intermediate Municipal Fund versus BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index and Consumer Price Index (September 5, 1997 to September 30, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 9/5/97) | 1.62 | % | 3.89 | % | 4.13 | % | 4.22 | % | ||||||||
I Shares (Incep: 2/1/10) | — | — | — | 5.22 | %* | |||||||||||
| * | Not annualized for periods less than one year. |
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 BofA Merrill Lynch 7-12 Year U.S. Municipal Securities 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.
24 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 (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, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||||
David A. Ater, 65 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. | None | ||||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||||
Susan H. Dubin, 61 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, 56 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, 51 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 New York Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
26 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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
| OTHER INFORMATION | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 (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, 2010 dividends paid by the Fund of $1,497,309 (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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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
28 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
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 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 evaluating quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations over various periods. The 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 return for the New York municipal debt mutual fund category for which calendar year returns were presented, that the Fund’s returns had been higher than or comparable to the average returns for the category in most of the preceding ten calendar years, that the Fund’s investment returns had fallen within the lowest quartile of the same category for the one-year period ended with the second quarter of the current year but had fallen above the median for the category in the three-year and five year periods, and similarly, that the Fund’s investment return fell within the lowest quartile of a second fund category for the one-year period but fell above the median for the three-year and five-year periods for the same category. Measures of portfolio volatility and risk considered by the Trustees demonstrated that the Fund’s portfolio volatility relative to those measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of 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, and 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. The Trustees observed that the management fee charged by the Advisor to the Fund 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 confirmed their previous observations 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, 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 the adequacy of the Advisor’s resources and 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
Certified Annual Report 29
| OTHER INFORMATION, CONTINUED | ||
| Thornburg New York Intermediate Municipal Fund | September 30, 2010 (Unaudited) | |
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.
30 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
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. 31
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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 Developing World Fund |
| • | Thornburg Limited Term U.S. Government Fund |
| • | Thornburg Limited Term Income Fund |
| • | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 33
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 Developing World 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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Important Information
The information presented on the following pages was current as of September 30, 2010. 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 or 2010.
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 from one 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 from one 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.
Annualized Distribution Yield – The distribution yield 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.
Bond Credit Ratings – A bond credit rating assesses the financial ability of a debt issuer to make timely payments of principal and interest. Ratings of AAA (the highest), AA, A, and BBB are investment-grade quality. Ratings of BB, B, CCC, CC, C, and D (the lowest) are considered below investment grade, speculative grade, or junk bonds. Unless otherwise noted, the ratings listed are from Bloomberg Market Data and are a combination of ratings from Standard and Poor’s, Moody’s Investors Service, and/or Fitch Ratings.
Effective Duration – A bond’s sensitivity to interest rates, incorporating the embedded option features, such as call provisions. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
Lipper Short-Intermediate Investment Grade Category – Funds that invest at least 65% of their assets in investment grade debt issues (rated in top four grades) with dollar-weighted average maturities of one to five years.
Lipper Short-Intermediate U.S. Government Bond Category – Funds that invest at least 65% of assets in securities issued or guaranteed by the U.S. government, its agencies, or its instrumentalities, with dollar-weighted average maturities of one to five years.
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.
This page is not part of the Annual Report. 3
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 0.94%, as disclosed in the most recent Prospectus.
PORTFOLIO LADDER
As of September 30, 2010
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history of A shares from November 16, 1987 through September 30, 2010
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 11/16/87) | ||||||||||||||||||||
Without sales charge | 4.69 | % | 5.88 | % | 5.10 | % | 5.08 | % | 5.98 | % | ||||||||||
With sales charge | 3.12 | % | 5.34 | % | 4.79 | % | 4.92 | % | 5.91 | % | ||||||||||
30-DAY YIELDS
As of September 30, 2010
| Annualized Distribution Yield | SEC Yield | |||||||
A Shares | 2.77 | % | 1.85 | % | ||||
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2010
Number of Bonds | 159 | |||
Effective Duration | 2.5 Yrs | |||
Average Maturity | 2.9 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 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 operating expenses of Class A shares are 1.04% as disclosed in the most recent Prospectus. Thornburg Investment Management and Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least February 1, 2011, so that actual expenses, for Class A shares, do not exceed 0.99%.
PORTFOLIO LADDER
As of September 30, 2010
LONG-TERM STABILITY OF PRINCIPAL
Net asset value history of A shares from October 1, 1992 through September 30, 2010
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 10/1/92) | ||||||||||||||||||||
Without sales charge | 8.91 | % | 7.33 | % | 5.86 | % | 5.70 | % | 5.79 | % | ||||||||||
With sales charge | 7.23 | % | 6.79 | % | 5.54 | % | 5.54 | % | 5.70 | % | ||||||||||
30-DAY YIELDS
As of September 30, 2010
| Annualized Distribution Yield | SEC Yield | |||||||
A Shares | 3.60 | % | 2.28 | % | ||||
Without fee waivers and expense reimbursements, the 30-day SEC Yield would have been 2.17% and the Annualized Distribution Yield would have been 3.50%.
KEY PORTFOLIO ATTRIBUTES
As of September 30, 2010
Number of Bonds | 390 | |||
Effective Duration | 3.3 Yrs | |||
Average Maturity | 4.3 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 14.
This page is not part of the Annual Report. 5
Thornburg Limited Term Income Funds
September 30, 2010
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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
Jason Brady, CFA Portfolio Manager, Thornburg Limited Term U.S. Government Fund
Co-Portfolio Manager Thornburg Limited Term Income Fund | October 17, 2010
Dear Fellow Shareholder:
We are very pleased to present the annual report for the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund for the year ended September 30, 2010. The net asset value (NAV) of a Class A share of the Thornburg Limited Term U.S. Government Fund increased 16 cents per share in the period to $13.94. If you were invested for the entire period, you received dividends of 41.3 cents per share. If you reinvested your dividends, you received 41.8 cents per share. The net asset value of a Class A share of the Thornburg Limited Term Income Fund increased 60 cents in the period to $13.41 per share. If you were invested for the entire period, you received dividends of 51.8 cents per share. If you reinvested your dividends, you received 52.8 cents per share. Dividends per share were lower for Class B and C shares and higher for Class I and R3 shares to account for varying class-specific expenses. Please examine the accompanying exhibits for more detailed information. | |
Lon Erickson,CFA Co-Portfolio Manager Thornburg Limited Term Income Fund | 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. This appreciation was largely the source of strong investor returns across both Funds. This is in contrast to the previous year, where the considerable tightening in spreads (the additional yield the market requires for investing in risky securities versus credit risk-free U.S. Treasuries) on all non-Treasury bond asset classes drove returns. The two-year U.S. Treasury moved from a 0.95% yield to a 0.40% yield over the course of the past year, while the ten-year U.S. Treasury moved from a 3.31% yield to a 2.54% yield. As you can see, relatively, front-end securities moved less in yield than longer-term securities. This “flattening” of the yield curve was primarily the result of a stagnant U.S. economy and the market’s corresponding expectation that the Federal Reserve would purchase additional securities for its balance sheet in a second round of “quantitative easing.”
The aforementioned policy actions were largely due to a continued stagnation in the global economy. Despite this stagnation, credit spreads, after initially tightening in the fourth quarter of 2009, mainly hung around their average for the last 10 years. The Barclays Capital U.S. Corporate Bond Index, as an example, gained 12.27% over the course of the fiscal year ended September 30, 2010, with 8.49% of that due only to the underlying risk-free interest rate movement. The additional spread that investors were paid in yield to invest in the average corporate bond moved from 2.18% on September 30, 2009 to 1.70% on September 30, 2010.
While both Funds have outperformed their yield over the past two years, the math of fixed income securities is inexorable: this cannot continue. It is important for you as a shareholder to understand that while yield is a terrible measure of year-to-year returns (just look at the last three years), over the life of each individual security the best case scenario for return is the initially promised income. Furthermore, that yield is not just the income you will likely receive over time, but is also the cushion |
Certified Annual Report 7
Letter to Shareholders,
Continued
these securities provide on a year-to-year basis against negative events. In early 2009 we could discuss the difficult economic environment but at the same time note that many classes of fixed income securities were providing a tremendous amount of income, which was likely to significantly cushion the blow of future negative surprises. Now that cushion has eroded and accrued to you as the investor in the form of income, as well as net asset value gain.
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 4.69% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Barclays Intermediate Government Index produced a 6.19% total return over the same time period. The average return for the Lipper Short-Intermediate U.S. Government Bond category was 4.44%. The Class A shares of the Thornburg Limited Term Income Fund produced a total return of 8.91% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Barclays Intermediate Government/ Credit Index produced a 7.77% total return over the same time period. The average return for the Lipper Short-Intermediate Investment Grade category was 7.64%. Both Barclays indices reflect no deduction for fees, expenses, or taxes.
The Funds kept their effective durations somewhat shorter than the indices during much of the past year and as a result were at something of a disadvantage due to the yield curve flattening. At the same time, Thornburg’s prudent credit selection and corporate bond overweight within the Income Fund, clearly benefited the Fund. That overweight (which we decreased slightly over the course of the year as prices appreciated dramatically) was the biggest contributor to Fund outperformance for the fiscal year. In times of tightening credit spreads, U.S. Treasuries underperform any other fixed income security. Similarly, while the Thornburg Limited Term U.S. Government Fund continues to hold only instruments guaranteed by the U.S. government or government sponsored enterprises, the Fund’s holdings in non-Treasury securities including agency debentures and mortgages (which we continue to hold as a notable overweight) outperformed duration-matched U.S. Treasuries. We 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, we believe that the scope for further price appreciation in fixed income is limited. Though the economic environment appears to have stabilized, we continue to have some significant misgivings. Consumer credit continues to contract with negative implications for spending. Unemployment continues to be high and is stubbornly refusing to go down. Though the financial system has survived due to significant government intervention, the distance between mere survival and significant growth remains large. Furthermore, price appreciation in the fixed income universe has been significant. This is not to say that fixed income is a bad asset class without any place in investors’ portfolios. We are working hard to position the Funds in a prudent way, such that you can remain comfortable holding them as a part of your overall asset allocation.
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.
8 Certified Annual Report
No matter the direction of interest rates or credit spreads in the near-term, we believe your Funds are well positioned to achieve their longer-term goals of principal stability and reasonable income. The Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund are laddered portfolios of short-to-intermediate bonds. This strategy balances duration and yield in a way that is designed to provide the best risk-adjusted bond returns over time. We feel that the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund continue to be appropriate vehicles for those looking for core bond investments.
Thank you very much for investing in our Funds.
| Sincerely, | ||
 |  | |
| Jason H. Brady,CFA | Lon R. Erickson,CFA | |
| Co-Portfolio Manager | Co-Portfolio Manager | |
| Managing Director | Managing Director | |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 9
| SCHEDULE OF INVESTMENTS | ||
| Thornburg Limited Term U.S. Government Fund | September 30, 2010 | |
Issuer-Description | Principal Amount | Value | ||||||
U.S. TREASURY SECURITIES — 9.30% | ||||||||
United States Treasury Notes, 4.625%, 10/31/2011 | $ | 2,000,000 | $ | 2,093,438 | ||||
United States Treasury Notes, 4.875%, 6/30/2012 | 4,000,000 | 4,315,938 | ||||||
United States Treasury Notes, 2.625%, 2/29/2016 | 2,000,000 | 2,126,094 | ||||||
United States Treasury Notes, 4.875%, 8/15/2016 | 5,000,000 | 5,936,523 | ||||||
United States Treasury Notes, 4.625%, 2/15/2017 | 4,000,000 | 4,702,969 | ||||||
United States Treasury Notes, 3.625%, 2/15/2020 | 1,000,000 | 1,096,914 | ||||||
United States Treasury Notes Inflationary Index, 2.00%, 7/15/2014 | 2,313,140 | 2,501,892 | ||||||
United States Treasury Notes Inflationary Index, 1.875%, 7/15/2015 | 4,483,280 | 4,873,213 | ||||||
United States Treasury Notes Inflationary Index, 2.00%, 1/15/2016 | 5,492,050 | 6,018,944 | ||||||
TOTAL U.S. TREASURY SECURITIES (Cost $30,611,725) | 33,665,925 | |||||||
U.S. GOVERNMENT AGENCIES — 15.97% | ||||||||
a EJM Airport LLC Lease Revenue Bond, 6.271%, 5/15/2020 | 2,598,571 | 2,988,357 | ||||||
Federal Agricultural Mtg Corp., 6.71%, 7/28/2014 | 200,000 | 237,515 | ||||||
Federal Farm Credit Bank, 6.06%, 5/28/2013 | 240,000 | 273,554 | ||||||
Federal Farm Credit Bank, 3.98%, 1/22/2015 | 1,000,000 | 1,107,888 | ||||||
Federal Home Loan Bank, 5.375%, 6/13/2014 | 2,000,000 | 2,304,258 | ||||||
Federal Home Loan Bank, 5.00%, 12/8/2017 | 3,000,000 | 3,539,702 | ||||||
Federal Home Loan Bank, 2.25%, 3/26/2018 | 3,000,000 | 3,099,828 | ||||||
Federal Home Loan Mtg Corp., 4.50%, 1/15/2015 | 5,000,000 | 5,662,900 | ||||||
Federal Home Loan Mtg Corp., 5.50%, 3/28/2016 | 1,190,000 | 1,217,915 | ||||||
Federal Home Loan Mtg Corp., 4.875%, 6/13/2018 | 3,000,000 | 3,521,848 | ||||||
Federal National Mtg Assoc., 4.40%, 2/19/2015 | 1,585,000 | 1,786,784 | ||||||
Federal National Mtg Assoc., 2.00%, 3/26/2015 | 3,000,000 | 3,070,409 | ||||||
a Overseas Private Investment Corp., 4.10%, 11/15/2014 | 1,128,000 | 1,190,040 | ||||||
b Private Export Funding Corp., 5.685%, 5/15/2012 | 5,000,000 | 5,420,250 | ||||||
Private Export Funding Corp., 4.974%, 8/15/2013 | 2,700,000 | 3,020,171 | ||||||
Private Export Funding Corp., 5.45%, 9/15/2017 | 3,000,000 | 3,608,478 | ||||||
Small Business Administration Participation Certificates, Series 2007-20F Class 1, 5.71%, 6/1/2027 | 860,694 | 966,223 | ||||||
Small Business Administration Participation Certificates, Series 2007-20I Class 1, 5.56%, 9/1/2027 | 4,055,513 | 4,557,542 | ||||||
Small Business Administration Participation Certificates, Series 2008-20G Class 1, 5.87%, 7/1/2028 | 3,465,571 | 3,938,660 | ||||||
Tennessee Valley Authority, 4.75%, 8/1/2013 | 3,000,000 | 3,332,248 | ||||||
a,c U.S. Department of Transportation Headquarters, Series 2004 Class A-2, 5.594%, 12/7/2021 | 2,696,449 | 2,993,059 | ||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $53,295,884) | 57,837,629 | |||||||
MORTGAGE BACKED — 65.02% | ||||||||
Federal Home Loan Mtg Assoc., CMO Series 3684 Class CM, 2.50%, 8/15/2024 | 3,003,503 | 3,076,896 | ||||||
Federal Home Loan Mtg Corp., CMO Series 1321 Class TE, 7.00%, 8/15/2022 | 535,611 | 593,313 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2420 Class MC, 6.00%, 2/15/2017 | 904,094 | 978,899 | ||||||
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term U.S. Government Fund | September 30, 2010 | |
Issuer-Description | Principal Amount | Value | ||||||
Federal Home Loan Mtg Corp., CMO Series 2509 Class TV, 5.50%, 4/15/2022 | $ | 2,366,386 | $ | 2,508,112 | ||||
Federal Home Loan Mtg Corp., CMO Series 2527 Class BP, 5.00%, 11/15/2017 | 2,255,929 | 2,428,852 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2529 Class MB, 5.00%, 11/15/2017 | 1,919,967 | 2,077,335 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2553 Class GB, 5.00%, 1/15/2018 | 1,000,000 | 1,102,279 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2558 Class BD, 5.00%, 1/15/2018 | 4,185,535 | 4,657,200 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2585 Class CJ, 4.50%, 12/15/2032 | 3,138,720 | 3,323,988 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2622 Class PE, 4.50%, 5/15/2018 | 2,500,000 | 2,710,194 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2628 Class AB, 4.50%, 6/15/2018 | 897,757 | 935,221 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2628 Class DQ, 3.00%, 11/15/2017 | 438,446 | 450,250 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2641 Class WE, 4.50%, 1/15/2033 | 597,605 | 634,686 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2642 Class JE, 5.00%, 9/15/2032 | 2,000,000 | 2,200,714 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2649 Class QH, 4.50%, 7/15/2018 | 1,000,000 | 1,090,750 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2692 Class QD, 5.00%, 12/15/2022 | 2,575,000 | 2,779,731 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2731 Class Vl, 5.50%, 12/15/2014 | 2,028,497 | 2,185,583 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2738 Class QE, 5.00%, 7/15/2032 | 1,945,000 | 2,106,985 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2744 Class JG, 5.00%, 8/15/2032 | 1,500,000 | 1,616,818 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2764 Class UE, 5.00%, 10/15/2032 | 2,000,000 | 2,183,298 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2770 Class UD, 4.50%, 5/15/2017 | 2,400,000 | 2,522,388 | ||||||
b Federal Home Loan Mtg Corp., CMO Series 2802 Class NE, 5.00%, 2/15/2033 | 1,470,000 | 1,596,310 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2808 Class VA, 5.50%, 5/15/2015 | 5,878,337 | 6,383,994 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00%, 6/15/2019 | 824,578 | 848,841 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2825 Class VP, 5.50%, 6/15/2015 | 3,999,015 | 4,330,676 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2827 Class BU, 3.50%, 7/15/2019 | 2,500,000 | 2,638,800 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3020 Class VA, 5.50%, 11/15/2014 | 1,022,056 | 1,084,671 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3054 Class DW, 5.50%, 5/15/2034 | 1,480,923 | 1,589,112 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3067 Class PJ, 5.50%, 7/15/2031 | 3,000,000 | 3,172,128 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3068 Class VA, 5.50%, 10/15/2016 | 1,258,012 | 1,304,145 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3078 Class PC, 5.50%, 11/15/2030 | 2,250,000 | 2,370,856 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3178 Class MC, 6.00%, 4/15/2032 | 5,275,000 | 5,467,909 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3184 Class PC, 5.50%, 8/15/2032 | 5,535,000 | 5,743,631 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3187 Class LA, 5.50%, 4/15/2031 | 1,340,513 | 1,365,846 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3192 Class GB, 6.00%, 1/15/2031 | 975,191 | 990,088 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3216 Class NA, 6.00%, 5/15/2028 | 130,346 | 130,254 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3219 Class PD, 6.00%, 11/15/2035 | 3,000,000 | 3,315,467 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3228 Class PC, 5.50%, 7/15/2030 | 2,957,355 | 2,990,101 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3271 Class LU, 5.50%, 1/15/2018 | 2,399,458 | 2,563,182 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3319 Class PA, 5.50%, 8/15/2030 | 477,294 | 490,057 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3320 Class TC, 5.50%, 10/15/2032 | 2,000,000 | 2,113,506 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3331 Class PB, 6.00%, 1/15/2031 | 2,000,000 | 2,094,749 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3351 Class PK, 5.50%, 1/15/2032 | 3,000,000 | 3,119,104 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3456 Class KV, 5.50%, 9/15/2017 | 2,401,130 | 2,591,516 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3477, Class VA, 5.50%, 7/15/2019 | 4,259,854 | 4,653,211 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3480 Class VA, 6.00%, 6/15/2019 | 2,562,410 | 2,839,307 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3541 Class PA, 5.00%, 5/15/2039 | 1,660,127 | 1,814,198 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3563 Class BC, 4.00%, 6/15/2022 | 1,565,506 | 1,665,851 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3589 Class CA, 4.00%, 10/15/2021 | 1,794,396 | 1,916,835 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3640 Class EL, 4.00%, 3/15/2020 | 3,728,561 | 3,996,964 | ||||||
Federal Home Loan Mtg Corp., CMO Series R003 Class VA, 5.50%, 8/15/2016 | 1,091,823 | 1,163,570 | ||||||
Federal Home Loan Mtg Corp., CMO Series R012 Class AB, 5.50%, 12/15/2020 | 1,403,153 | 1,453,696 | ||||||
Federal Home Loan Mtg Corp., Pool 1N1736, 5.355%, 4/1/2037 | 484,688 | 510,928 | ||||||
Federal Home Loan Mtg Corp., Pool 298107, 10.25%, 8/1/2017 | 19,491 | 22,701 | ||||||
Federal Home Loan Mtg Corp., Pool B14155, 3.50%, 5/1/2019 | 1,053,283 | 1,105,001 | ||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term U.S. Government Fund | September 30, 2010 | |
Issuer-Description | Principal Amount | Value | ||||||
Federal Home Loan Mtg Corp., Pool C90041, 6.50%, 11/1/2013 | $ | 9,225 | $ | 9,679 | ||||
Federal Home Loan Mtg Corp., Pool D37120, 7.00%, 7/1/2023 | 21,323 | 23,443 | ||||||
Federal Home Loan Mtg Corp., Pool E96575, 4.50%, 6/1/2018 | 3,461,455 | 3,674,416 | ||||||
Federal Home Loan Mtg Corp., Pool G12140, 4.00%, 2/1/2020 | 885,895 | 938,391 | ||||||
Federal Home Loan Mtg Corp., Pool G13517, 4.00%, 5/1/2024 | 2,933,962 | 3,068,397 | ||||||
d Federal Home Loan Mtg Corp., Pool J11371, 4.50%, 12/1/2024 | 4,511,354 | 4,741,679 | ||||||
Federal Home Loan Mtg Corp., REMIC Series 3626 Class AV, 5.50%, 10/15/2020 | 2,860,864 | 3,079,705 | ||||||
Federal National Mtg Assoc., CMO Series 1993-32 Class H, 6.00%, 3/25/2023 | 64,970 | 70,881 | ||||||
Federal National Mtg Assoc., CMO Series 2002-18 Class PC, 5.50%, 4/25/2017 | 983,919 | 1,030,890 | ||||||
Federal National Mtg Assoc., CMO Series 2003-15 Class CY, 5.00%, 3/25/2018 | 1,017,000 | 1,111,107 | ||||||
Federal National Mtg Assoc., CMO Series 2003-4 Class PE, 5.00%, 2/25/2018 | 2,330,000 | 2,539,688 | ||||||
Federal National Mtg Assoc., CMO Series 2003-44 Class CB, 4.25%, 3/25/2033 | 1,803,353 | 1,890,552 | ||||||
Federal National Mtg Assoc., CMO Series 2003-66 Class PA, 3.50%, 2/25/2033 | 554,078 | 574,690 | ||||||
Federal National Mtg Assoc., CMO Series 2003-89 Class XC, 6.00%, 9/25/2014 | 1,013,298 | 1,077,134 | ||||||
Federal National Mtg Assoc., CMO Series 2003-9 Class DB, 5.00%, 2/25/2018 | 1,000,000 | 1,099,473 | ||||||
Federal National Mtg Assoc., CMO Series 2003-92 Class KH, 5.00%, 3/25/2032 | 2,000,000 | 2,146,823 | ||||||
Federal National Mtg Assoc., CMO Series 2004-2 Class QL, 4.00%, 2/25/2019 | 2,000,000 | 2,141,414 | ||||||
Federal National Mtg Assoc., CMO Series 2004-33 Class MW, 4.50%, 1/25/2030 | 2,897,000 | 3,108,006 | ||||||
Federal National Mtg Assoc., CMO Series 2004-35 Class CA, 4.00%, 12/25/2017 | 941,216 | 976,632 | ||||||
Federal National Mtg Assoc., CMO Series 2005-26 Class G, 5.00%, 6/25/2032 | 2,770,377 | 2,922,424 | ||||||
Federal National Mtg Assoc., CMO Series 2005-99 Class VA, 5.50%, 11/25/2016 | 1,473,238 | 1,620,658 | ||||||
Federal National Mtg Assoc., CMO Series 2006-121 Class VA, 5.50%, 3/25/2017 | 1,031,776 | 1,104,407 | ||||||
b Federal National Mtg Assoc., CMO Series 2006-57 Class PC, 5.50%, 10/25/2032 | 1,780,000 | 1,994,913 | ||||||
Federal National Mtg Assoc., CMO Series 2006-78 Class MB, 5.50%, 7/25/2034 | 3,000,000 | 3,286,223 | ||||||
Federal National Mtg Assoc., CMO Series 2007-42 Class YA, 5.50%, 1/25/2036 | 1,685,514 | 1,763,404 | ||||||
Federal National Mtg Assoc., CMO Series 2007-60 Class VA, 6.00%, 12/25/2017 | 3,747,399 | 4,020,337 | ||||||
Federal National Mtg Assoc., CMO Series 2007-65 Class PB, 6.00%, 10/25/2032 | 2,916,000 | 3,030,937 | ||||||
Federal National Mtg Assoc., CMO Series 2007-79 Class MB, 5.50%, 12/25/2030 | 1,000,000 | 1,042,545 | ||||||
Federal National Mtg Assoc., CMO Series 2007-83 Class PA, 6.00%, 3/25/2029 | 773,519 | 778,368 | ||||||
Federal National Mtg Assoc., CMO Series 2008-54 Class EA, 5.00%, 7/25/2019 | 2,509,086 | 2,714,241 | ||||||
Federal National Mtg Assoc., CMO Series 2008-55 Class VA, 5.00%, 7/25/2019 | 1,254,407 | 1,344,877 | ||||||
Federal National Mtg Assoc., CMO Series 2008-77 Class VA, 6.00%, 7/25/2019 | 3,455,084 | 3,810,495 | ||||||
Federal National Mtg Assoc., CMO Series 2009-111 Class VB, 4.50%, 2/25/2021 | 1,893,002 | 2,054,761 | ||||||
Federal National Mtg Assoc., CMO Series 2009-49 Class KA, 5.00%, 2/25/2024 | 1,023,452 | 1,099,639 | ||||||
Federal National Mtg Assoc., CMO Series 2009-52 Class AJ, 4.00%, 7/25/2024 | 2,225,344 | 2,360,897 | ||||||
Federal National Mtg Assoc., CMO Series 2009-70 Class NK, 4.50%, 8/25/2019 | 1,508,064 | 1,612,362 | ||||||
Federal National Mtg Assoc., CMO Series 2009-78 Class A, 4.50%, 8/25/2019 | 2,252,925 | 2,410,321 | ||||||
Federal National Mtg Assoc., CMO Series 2010-46 Class VM, 5.00%, 5/25/2021 | 2,913,220 | 3,204,246 | ||||||
Federal National Mtg Assoc., CMO Series 2010-69 Class EJ, 2.50%, 7/25/2024 | 4,534,941 | 4,673,968 | ||||||
Federal National Mtg Assoc., Pool 044003, 8.00%, 6/1/2017 | 14,228 | 15,779 | ||||||
Federal National Mtg Assoc., Pool 050811, 7.50%, 12/1/2012 | 8,505 | 8,877 | ||||||
Federal National Mtg Assoc., Pool 050832, 7.50%, 6/1/2013 | 6,438 | 6,719 | ||||||
Federal National Mtg Assoc., Pool 076388, 9.25%, 9/1/2018 | 50,317 | 56,344 | ||||||
Federal National Mtg Assoc., Pool 190555, 7.00%, 1/1/2014 | 9,409 | 9,937 | ||||||
Federal National Mtg Assoc., Pool 250387, 7.00%, 11/1/2010 | 83 | 83 | ||||||
Federal National Mtg Assoc., Pool 251759, 6.00%, 5/1/2013 | 15,599 | 16,833 | ||||||
Federal National Mtg Assoc., Pool 252648, 6.50%, 5/1/2022 | 88,548 | 97,523 | ||||||
d Federal National Mtg Assoc., Pool 255412, 6.00%, 10/1/2034 | 1,175,252 | 1,283,317 | ||||||
Federal National Mtg Assoc., Pool 334996, 7.00%, 2/1/2011 | 710 | 716 | ||||||
Federal National Mtg Assoc., Pool 342947, 7.25%, 4/1/2024 | 168,304 | 187,628 | ||||||
Federal National Mtg Assoc., Pool 384243, 6.10%, 10/1/2011 | 573,165 | 581,497 | ||||||
Federal National Mtg Assoc., Pool 406384, 8.25%, 12/1/2024 | 95,936 | 107,142 | ||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term U.S. Government Fund | September 30, 2010 | |
Issuer-Description | Principal Amount | Value | ||||||
Federal National Mtg Assoc., Pool 443909, 6.50%, 9/1/2018 | $ | 46,492 | $ | 51,027 | ||||
Federal National Mtg Assoc., Pool 516363, 5.00%, 3/1/2014 | 38,671 | 41,011 | ||||||
Federal National Mtg Assoc., Pool 555207, 7.00%, 11/1/2017 | 17,087 | 19,355 | ||||||
d Federal National Mtg Assoc., Pool 725863, 6.00%, 10/1/2034 | 1,531,998 | 1,672,866 | ||||||
Federal National Mtg Assoc., Pool 895572, 5.701%, 6/1/2036 | 1,166,522 | 1,226,293 | ||||||
Federal National Mtg Assoc., Pool 930986, 4.50%, 4/1/2019 | 3,634,345 | 3,842,610 | ||||||
Federal National Mtg Assoc., Pool AD8191, 4.00%, 9/1/2025 | 3,000,000 | 3,144,023 | ||||||
Federal National Mtg Assoc., Pool MA0045, 4.00%, 4/1/2019 | 2,535,223 | 2,673,570 | ||||||
Federal National Mtg Assoc., Pool MA0380, 4.00%, 4/1/2020 | 2,929,860 | 3,089,743 | ||||||
Federal National Mtg Assoc., REMIC Series 2002-59 Class B, 5.50%, 9/25/2017 | 1,231,825 | 1,332,736 | ||||||
Federal National Mtg Assoc., REMIC Series 2006-B1 Class AB, 6.00%, 6/25/2016 | 849,153 | 875,869 | ||||||
Federal National Mtg Assoc., REMIC Series 2008-3 Class VB, 5.00%, 10/25/2022 | 1,000,000 | 1,008,615 | ||||||
Federal National Mtg Assoc., REMIC Series 2008-86 Class PC, 5.00%, 3/25/2034 | 5,000,000 | 5,458,966 | ||||||
Government National Mtg Assoc., CMO Series 2008-56 Class CH, 5.00%, 5/20/2035 | 4,097,073 | 4,163,319 | ||||||
Government National Mtg Assoc., CMO Series 2009-92 Class VA, 5.00%, 10/20/2020 | 1,472,770 | 1,630,670 | ||||||
Government National Mtg Assoc., Pool 000623, 8.00%, 9/20/2016 | 20,448 | 22,518 | ||||||
Government National Mtg Assoc., Pool 003550, 5.00%, 5/20/2019 | 963,734 | 1,036,503 | ||||||
Government National Mtg Assoc., Pool 410240, 7.00%, 12/15/2010 | 498 | 499 | ||||||
Government National Mtg Assoc., Pool 410846, 7.00%, 12/15/2010 | 572 | 572 | ||||||
Government National Mtg Assoc., Pool 430150, 7.25%, 12/15/2026 | 28,151 | 31,575 | ||||||
Government National Mtg Assoc., Pool 453928, 7.00%, 7/15/2017 | 19,588 | 21,447 | ||||||
Government National Mtg Assoc., Pool 780448, 6.50%, 8/15/2011 | 5,818 | 5,901 | ||||||
TOTAL MORTGAGE BACKED (Cost $229,000,784) | 235,475,803 | |||||||
TOTAL INVESTMENTS — 90.29% (Cost $312,908,393) | $ | 326,979,357 | ||||||
OTHER ASSETS LESS LIABILITIES — 9.71% | 35,159,497 | |||||||
NET ASSETS — 100.00% | $ | 362,138,854 | ||||||
Footnote Legend
| a | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
| b | Segregated as collateral for a when-issued security. |
| 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, 2010, the aggregate value of these securities in the Fund’s portfolio was $2,993,059, representing 0.83% of the Fund’s net assets. |
| d | When-issued security. |
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, 2010 | |
We have used ratings from Standard & Poor’s (S&P). Where S&P ratings are not available, we have used Moody’s Investors Service.
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
U.S. TREASURY SECURITIES — 1.72% | ||||||||||
United States Treasury Notes, 1.00% due 4/30/2012 | AAA/Aaa | $ | 2,500,000 | $ | 2,525,391 | |||||
United States Treasury Notes, 1.75% due 4/15/2013 | AAA/Aaa | 2,500,000 | 2,575,879 | |||||||
United States Treasury Notes, 2.50% due 3/31/2015 | AAA/Aaa | 6,500,000 | 6,893,301 | |||||||
United States Treasury Notes, 5.125% due 5/15/2016 | AAA/Aaa | 1,000,000 | 1,197,891 | |||||||
United States Treasury Notes, 4.875% due 8/15/2016 | AAA/Aaa | 2,000,000 | 2,374,609 | |||||||
United States Treasury Notes, 3.00% due 2/28/2017 | AAA/Aaa | 2,000,000 | 2,151,406 | |||||||
TOTAL U.S. TREASURY SECURITIES (Cost $16,604,480) | 17,718,477 | |||||||||
U.S. GOVERNMENT AGENCIES — 3.08% | ||||||||||
a Agribank FCB, 9.125% due 7/15/2019 | A/NR | 8,060,000 | 9,997,092 | |||||||
b EJM Airport LLC Lease Revenue Bond, 6.271% due 5/15/2020 (Guaranty: United States of America) | NR/NR | 6,496,428 | 7,470,892 | |||||||
Federal National Mtg Assoc., 7.00% due 3/1/2011 | AAA/Aaa | 160 | 161 | |||||||
Federal National Mtg Assoc., 5.095% due 12/1/2011 | AAA/Aaa | 115,827 | 118,293 | |||||||
Federal National Mtg Assoc., 7.491% due 8/1/2014 | AAA/Aaa | 19,684 | 19,684 | |||||||
Federal National Mtg Assoc., 2.00% due 3/26/2015 | AAA/Aaa | 3,000,000 | 3,070,409 | |||||||
Private Export Funding Corp., 5.45% due 9/15/2017 | AA+/Aaa | 3,000,000 | 3,608,478 | |||||||
Small Business Administration Participation Certificates, Series 2008-20D Class 1, 5.37%due 4/1/2028 | NR/NR | 3,411,395 | 3,825,441 | |||||||
Small Business Administration, Series 2005-P10A Class 1, 4.638% due 2/10/2015 | NR/NR | 895,540 | 945,290 | |||||||
a,b U.S. Department of Transportation Headquarters, Series 2004 Class A-2, 5.594% due 12/7/2021 | A-/NR | 2,471,745 | 2,743,637 | |||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $29,399,820) | 31,799,377 | |||||||||
OTHER GOVERNMENT — 1.37% | ||||||||||
a,c Emirate of Abu Dhabi, 5.50% due 4/8/2014 | AA/Aa2 | 1,000,000 | 1,114,882 | |||||||
c Export-Import Bank of Korea, 8.125% due 1/21/2014 | A/A1 | 1,250,000 | 1,467,188 | |||||||
c Export-Import Bank of Korea, 5.875% due 1/14/2015 | A/A1 | 3,000,000 | 3,352,806 | |||||||
a,c Government of Bermuda, 5.603% due 7/20/2020 | AA/Aa2 | 3,000,000 | 3,243,000 | |||||||
c Nova Scotia Province Canada, 5.75% due 2/27/2012 | A+/Aa2 | 500,000 | 535,890 | |||||||
c Province of Ontario Canada, 4.10% due 6/16/2014 | AA-/Aa1 | 4,000,000 | 4,392,780 | |||||||
TOTAL OTHER GOVERNMENT (Cost $13,015,483) | 14,106,546 | |||||||||
MORTGAGE BACKED — 15.13% | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 2528 Class HN, 5.00% due 11/15/2017 | AAA/Aaa | 1,334,044 | 1,432,439 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2627 Class GY, 4.50% due 6/15/2018 | AAA/Aaa | 5,000,000 | 5,390,466 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2628 Class AB, 4.50% due 6/15/2018 | AAA/Aaa | 1,346,635 | 1,402,832 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2640 Class G, 4.50% due 7/15/2018 | AAA/Aaa | 2,580,667 | 2,680,651 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2654 Class OG, 5.00% due 2/15/2032 | AAA/Aaa | 1,000,000 | 1,070,087 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2682 Class JG, 4.50% due 10/15/2023 | AAA/Aaa | 5,000,000 | 5,390,666 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2738 Class QE, 5.00% due 7/15/2032 | AAA/Aaa | 3,000,000 | 3,243,524 | |||||||
14 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
Federal Home Loan Mtg Corp., CMO Series 2778 Class JD, 5.00% due 12/15/2032 | AAA/Aaa | $ | 4,000,000 | $ | 4,297,001 | |||||
Federal Home Loan Mtg Corp., CMO Series 2780 Class VJ, 5.00% due 4/15/2015 | AAA/Aaa | 1,207,105 | 1,275,798 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2802 Class NE, 5.00% due 2/15/2033 | AAA/Aaa | 1,042,000 | 1,131,534 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2808 Class VA, 5.50% due 5/15/2015 | AAA/Aaa | 2,640,999 | 2,868,179 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | AAA/Aaa | 824,578 | 848,841 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2825 Class VP, 5.50% due 6/15/2015 | AAA/Aaa | 2,954,799 | 3,199,858 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2827 Class BU, 3.50% due 7/15/2019 | AAA/Aaa | 3,000,000 | 3,166,560 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2902 Class QE, 5.50% due 6/15/2033 | AAA/Aaa | 1,400,000 | 1,527,367 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2915 Class KD, 5.00% due 9/15/2033 | AAA/Aaa | 4,046,000 | 4,406,869 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2943 Class BV, 5.00% due 3/15/2016 | AAA/Aaa | 2,779,388 | 2,995,056 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3054 Class DW, 5.50% due 5/15/2034 | AAA/Aaa | 946,276 | 1,015,407 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3083 Class U, 4.50% due 1/15/2017 | AAA/Aaa | 3,146,042 | 3,353,785 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3138 Class PC, 5.50% due 6/15/2032 | AAA/Aaa | 5,000,000 | 5,254,665 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3192 Class GB, 6.00% due 1/15/2031 | AAA/Aaa | 1,950,382 | 1,980,176 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3195 Class PD, 6.50% due 7/15/2036 | NR/NR | 5,300,000 | 5,955,613 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3255 Class QB, 5.50% due 5/15/2029 | AAA/Aaa | 3,000,000 | 3,043,781 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3504 Class PC, 4.00% due 1/15/2039 | AAA/Aaa | 1,806,180 | 1,876,364 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3541 Class PA, 5.00% due 5/15/2039 | AAA/Aaa | 2,490,191 | 2,721,297 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3563 Class BC, 4.00% due 6/15/2022 | AAA/Aaa | 3,131,012 | 3,331,701 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3589 Class CA, 4.00% due 10/15/2021 | AAA/Aaa | 2,691,595 | 2,875,252 | |||||||
Federal Home Loan Mtg Corp., Pool P10039, 5.00% due 4/1/2013 | AAA/Aaa | 1,170,090 | 1,204,819 | |||||||
Federal Home Loan Mtg Corp., REMIC Series 3626 Class AV, 5.50% due 10/15/2020 | AAA/Aaa | 4,768,107 | 5,132,842 | |||||||
Federal National Mtg Assoc., CMO Series 2003-4 Class PE, 5.00% due 2/25/2018 | AAA/Aaa | 2,348,000 | 2,559,308 | |||||||
Federal National Mtg Assoc., CMO Series 2003-64 Class EC, 5.50% due 5/25/2030 | AAA/Aaa | 43,466 | 43,439 | |||||||
Federal National Mtg Assoc., CMO Series 2003-74 Class KN, 4.50% due 8/25/2018 | AAA/Aaa | 1,502,163 | 1,560,552 | |||||||
Federal National Mtg Assoc., CMO Series 2003-92 Class VG, 5.00% due 9/25/2014 | AAA/Aaa | 830,896 | 883,838 | |||||||
Federal National Mtg Assoc., CMO Series 2004-33 Class MW, 4.50% due 1/25/2030 | AAA/Aaa | 3,000,000 | 3,218,508 | |||||||
Federal National Mtg Assoc., CMO Series 2005-35 VG, 5.00% due 4/25/2016 | AAA/Aaa | 1,222,876 | 1,301,215 | |||||||
Federal National Mtg Assoc., CMO Series 2005-48 Class AR, 5.50% due 2/25/2035 | AAA/Aaa | 2,128,162 | 2,331,361 | |||||||
Federal National Mtg Assoc., CMO Series 2006-51 Class PB, 5.50% due 8/25/2033 | AAA/Aaa | 3,000,000 | 3,216,515 | |||||||
Federal National Mtg Assoc., CMO Series 2007-26 Class VH, 5.50% due 2/25/2018 | AAA/Aaa | 4,661,250 | 5,100,057 | |||||||
Federal National Mtg Assoc., CMO Series 2007-42 Class PA, 5.50% due 4/25/2037 | AAA/Aaa | 3,456,559 | 3,659,668 | |||||||
Federal National Mtg Assoc., CMO Series 2007-65 Class PB, 6.00% due 10/25/2032 | AAA/Aaa | 3,000,000 | 3,118,248 | |||||||
Federal National Mtg Assoc., CMO Series 2008-54 Class EA, 5.00% due 7/25/2019 | AAA/Aaa | 3,345,448 | 3,623,790 | |||||||
Federal National Mtg Assoc., CMO Series 2008-55 Class VA, 5.00% due 7/25/2019 | AAA/Aaa | 2,926,951 | 3,138,047 | |||||||
Federal National Mtg Assoc., CMO Series 2009-111 Class VB, 4.50% due 2/25/2021 | AAA/Aaa | 1,893,002 | 2,049,135 | |||||||
Federal National Mtg Assoc., CMO Series 2009-49 Class KA, 5.00% due 2/25/2024 | AAA/Aaa | 2,388,054 | 2,565,824 | |||||||
Federal National Mtg Assoc., CMO Series 2009-5 Class A, 4.50% due 12/25/2023 | AAA/Aaa | 6,777,211 | 7,229,215 | |||||||
Federal National Mtg Assoc., CMO Series 2009-52 Class AJ, 4.00% due 7/25/2024 | AAA/Aaa | 3,708,907 | 3,934,829 | |||||||
Federal National Mtg Assoc., CMO Series 2009-65 Class GA, 4.50% due 11/25/2023 | AAA/Aaa | 2,101,483 | 2,270,786 | |||||||
Federal National Mtg Assoc., CMO Series 2009-70 Class NK, 4.50% due 8/25/2019 | AAA/Aaa | 3,770,161 | 4,002,261 | |||||||
Federal National Mtg Assoc., CMO Series 2009-70 Class PA, 5.00% due 8/25/2035 | AAA/Aaa | 3,082,720 | 3,300,298 | |||||||
Federal National Mtg Assoc., CMO Series 2009-89 Class BV, 4.50% due 12/25/2020 | AAA/Aaa | 2,803,098 | 3,027,501 | |||||||
Federal National Mtg Assoc., Pool 357384, 4.50% due 5/1/2018 | AAA/Aaa | 1,031,917 | 1,096,049 | |||||||
Government National Mtg Assoc., CMO Series 2009-35 Series KV, 4.50% due 6/20/2020 | AAA/Aaa | 4,519,178 | 4,910,357 | |||||||
Government National Mtg Assoc., CMO Series 2009-68 Class DP, 4.50% due 11/16/2038 | AAA/Aaa | 3,691,369 | 3,869,214 | |||||||
Government National Mtg Assoc., Pool 003007, 8.50% due 11/20/2015 | AAA/Aaa | 16,895 | 18,588 | |||||||
Government National Mtg Assoc., Pool 827148, 3.375% due 2/20/2024 | AAA/Aaa | 33,120 | 34,153 | |||||||
TOTAL MORTGAGE BACKED (Cost $153,029,052) | 156,136,186 | |||||||||
Certified Annual Report 15
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
ASSET BACKED SECURITIES — 5.97% | ||||||||||
BANKS — 0.03% | ||||||||||
COMMERCIAL BANKS — 0.03% | ||||||||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 2.858% due 2/25/2035 | B-/C | $ | 978,434 | $ | 138,430 | |||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 3.516% due 3/25/2035 | NR/NR | 1,051,200 | 160,577 | |||||||
| 299,007 | ||||||||||
CONSUMER SERVICES — 0.39% | ||||||||||
HOTELS, RESTAURANTS & LEISURE — 0.39% | ||||||||||
Dunkin 2006-1 Class A2, 5.779% due 6/20/2031 | NR/NR | 4,000,000 | 4,023,840 | |||||||
| 4,023,840 | ||||||||||
DIVERSIFIED FINANCIALS — 5.13% | ||||||||||
CAPITAL MARKETS — 4.53% | ||||||||||
a AHMAT Mtg Advance Trust, Series 2010-ADV1 Class A1, 3.968% due 8/6/2022 | AAA/NR | 2,000,000 | 2,000,000 | |||||||
Banc America Mtg Securities, Inc., Series 2005 A Class B1 Floating Rate Note, 3.531% due 2/25/2035 | NR/NR | 2,838,118 | 349,166 | |||||||
Banc of America Commercial Mtg Inc., Series 2006-6 Class A3, 5.369% due 10/10/2045 | NR/NR | 3,000,000 | 3,139,418 | |||||||
Bear Stearns Mtg, Series 2004-3 Class 1-A2, 2.979% due 7/25/2034 | A+/Aa3 | 354,314 | 302,184 | |||||||
a,c Cie Financement Foncier, 2.50% due 9/16/2015 | AAA/Aaa | 6,000,000 | 6,034,212 | |||||||
Citigroup Commercial Mtg Trust, Series 2004-HYB2 Class B1, 4.092% due 3/25/2034 | AA/A1 | 440,372 | 206,217 | |||||||
Commercial Mtg Pass-Through Certificates, Series 2001-J1A Class C, 6.83% due 2/14/2034 | NR/Aaa | 3,500,000 | 3,543,091 | |||||||
Countrywide Home Loan, Series 2004 Class 1-A, 2.827% due 7/20/2034 | AAA/Aa3 | 501,276 | 449,917 | |||||||
Credit Suisse Commercial Mtg Capital Certificates, Series 2007-C2 Class A2, 5.448% due 1/15/2049 | AAA/Aaa | 3,000,000 | 3,083,046 | |||||||
Greenwich Capital Commercial Funding Corp., Series 2004-GG1 Class A5, 4.883% due 6/10/2036 | AAA/Aaa | 1,500,000 | 1,522,634 | |||||||
a GS Mtg Securities Corp. II, Series 2001-ROCK Class C, 6.878% due 5/3/2018 | AAA/Aaa | 545,000 | 558,783 | |||||||
a GS Mtg Securities Corp. II, Series 2007-EOP Class A1, 0.348% due 3/6/2020 | AAA/Aaa | 4,991,452 | 4,846,220 | |||||||
JPMorgan Chase Commercial Mtg, Series 2004-C3 Class A-5, 4.878% due 1/15/2042 | NR/Aaa | 5,000,000 | 5,332,965 | |||||||
Merrill Lynch Mtg Investors, Series 2003 E Class B3, 1.756% due 10/25/2028 | A+/A2 | 1,202,133 | 467,925 | |||||||
Merrill Lynch Mtg Investors, Series 2004 A4 Class M1, 2.786% due 8/25/2034 | AA/NR | 861,206 | 388,675 | |||||||
Morgan Stanley Dean Witter Capital Trust, Series 2001 Xl-280 Class C, 6.756% due 2/3/2016 | NR/Aaa | 825,000 | 841,132 | |||||||
Nomura Asset Securities Corp., Series 1998-D6 Class A2, 7.287% due 3/15/2030 | AAA/Aaa | 5,683,000 | 6,407,715 | |||||||
Wachovia Bank Commercial Mtg Trust, Series 2004-C10 Class C, 4.842% due 2/15/2041 | AA+/Aaa | 4,000,000 | 4,003,024 | |||||||
Wachovia Bank Commercial Mtg Trust, Series 2005-C21 Class A-4, 5.374% due 10/15/2044 | AAA/Aaa | 3,000,000 | 3,275,200 | |||||||
CONSUMER FINANCE — 0.49% | ||||||||||
a First Financial Bank USA, Series 2010-C Class B, 5.19% due 9/17/2018 | NR/NR | 2,000,000 | 2,000,000 | |||||||
a World Financial Network Series 2010-1A Class A, 4.16% due 11/15/2012 | AAA/NR | 3,000,000 | 3,024,235 | |||||||
DIVERSIFIED FINANCIAL SERVICES — 0.11% | ||||||||||
FNBC Trust, Series 1993 A, 8.08% due 1/5/2018 | AA-/Aa1 | 1,009,540 | 1,130,371 | |||||||
| 52,906,130 | ||||||||||
INSURANCE — 0.42% | ||||||||||
INSURANCE — 0.42% | ||||||||||
a Northwind Holdings LLC, Series 2007-1A Class A1 Floating Rate Bond, 1.077% due 12/1/2037 (Insured: MBIA) | NR/NR | 5,666,018 | 4,312,916 | |||||||
| 4,312,916 | ||||||||||
TOTAL ASSET BACKED SECURITIES (Cost $66,397,668) | 61,541,893 | |||||||||
16 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
CORPORATE BONDS — 54.31% | ||||||||||
AUTOMOBILES & COMPONENTS — 2.10% | ||||||||||
AUTOMOBILES — 2.10% | ||||||||||
a American Honda Finance, 5.125% due 12/15/2010 | A+/A1 | $ | 1,500,000 | $ | 1,513,125 | |||||
a American Honda Finance, 2.639% due 6/29/2011 | A+/A1 | 3,500,000 | 3,557,575 | |||||||
a Harley-Davidson Funding Corp., 6.80% due 6/15/2018 (Guaranteed: Harley-Davidson Credit Corp.) | BBB/Baa1 | 2,500,000 | 2,718,223 | |||||||
a Harley-Davidson Funding Corp., 5.25% due 12/15/2012 (Guaranteed: Multiple Guarantors) | BBB/Baa1 | 3,000,000 | 3,158,271 | |||||||
a Hertz Vehicle Financing LLC, 2.60% due 2/15/2015 | NR/Aaa | 5,000,000 | 5,058,234 | |||||||
a,d Hyundai Capital America, 3.75% due 4/6/2016 (Guaranteed: Hyundai Motor Co.) | NR/NR | 500,000 | 498,965 | |||||||
a,c Hyundai Capital Services, Inc., 6.00% due 5/5/2015 | BBB/Baa2 | 4,000,000 | 4,365,596 | |||||||
Toyota Motor Credit Corp., 4.35% due 12/15/2010 | AA/Aa2 | 800,000 | 806,226 | |||||||
| 21,676,215 | ||||||||||
BANKS — 8.15% | ||||||||||
COMMERCIAL BANKS — 8.15% | ||||||||||
a,c ANZ National International, 6.20% due 7/19/2013 | AA/Aa2 | 1,000,000 | 1,111,379 | |||||||
a,c ANZ National International Ltd., 3.125% due 8/10/2015 (Guaranteed: ANZ National International Ltd.) | AA/Aa2 | 4,000,000 | 4,049,924 | |||||||
a,c Barclays Bank plc, 2.50% due 9/21/2015 | NR/NR | 5,000,000 | 5,026,035 | |||||||
Charter One Bank NA, 5.50% due 4/26/2011 | A-/A2 | 1,750,000 | 1,794,140 | |||||||
c Corp Andina de Fomento, 3.75% due 1/15/2016 | A+/A1 | 6,000,000 | 6,026,310 | |||||||
a,c Danske Bank A/S, 3.75% due 4/1/2015 | A/Aa3 | 4,000,000 | 4,175,220 | |||||||
a,c HSBC Bank plc, 3.50% due 6/28/2015 | AA/Aa2 | 2,000,000 | 2,097,924 | |||||||
HSBC Bank USA, N.A., 4.875% due 8/24/2020 | AA-/A1 | 1,000,000 | 1,043,000 | |||||||
a,c ICICI Bank Ltd., 5.50% due 3/25/2015 | BBB-/Baa2 | 5,000,000 | 5,275,590 | |||||||
National City Bank Floating Rate Note, 0.663% due 6/7/2017 | A/A2 | 4,000,000 | 3,590,720 | |||||||
Nations Bank Corp., 7.23% due 8/15/2012 | A/A2 | 250,000 | 273,375 | |||||||
North Fork Bancorp, Inc., 5.875% due 8/15/2012 | BBB-/Baa2 | 2,000,000 | 2,114,328 | |||||||
c Royal Bank of Scotland plc, 3.40% due 8/23/2013 (Guaranteed: Royal Bank of Scotland Group plc) | A+/Aa3 | 1,000,000 | 1,025,205 | |||||||
c Royal Bank of Scotland plc, 3.95% due 9/21/2015 (Guaranteed: Royal Bank of Scotland Group plc) | A+/Aa3 | 4,000,000 | 4,041,820 | |||||||
c Santander Financial Issuances Ltd., 6.375% due 2/15/2011 (Guaranteed: Banco Santander SA) | AA-/Aa3 | 4,000,000 | 4,078,032 | |||||||
a,c Santander Issuances, 6.50% due 8/11/2019 (Guaranteed: Banco Santander SA) | AA-/Aa3 | 5,000,000 | 5,233,155 | |||||||
Silicon Valley Bank, 5.70% due 6/1/2012 | BBB+/A2 | 3,500,000 | 3,643,643 | |||||||
Silicon Valley Bank, 6.05% due 6/1/2017 | BBB/A3 | 1,000,000 | 1,053,882 | |||||||
a,c Societe Generale, 3.10% due 9/14/2015 | A+/Aa2 | 6,000,000 | 6,039,107 | |||||||
Sovereign Bank, 5.125% due 3/15/2013 | A-/Baa1 | 4,000,000 | 4,190,352 | |||||||
a,c Toronto-Dominion Bank, 2.20% due 7/29/2015 | NR/Aaa | 3,000,000 | 3,040,233 | |||||||
a Webster Bank, 5.875% due 1/15/2013 | BBB-/Baa1 | 3,000,000 | 3,067,443 | |||||||
c Westpac Banking Corp., 3.00% due 8/4/2015 | AA/Aa1 | 2,000,000 | 2,042,722 | |||||||
Whitney National Bank, 5.875% due 4/1/2017 | BB/Baa1 | 4,000,000 | 3,708,108 | |||||||
a,c Woori Bank, 4.75% due 1/20/2016 | A-/A1 | 5,000,000 | 5,243,936 | |||||||
Zions Bancorp, 7.75% due 9/23/2014 | BBB-/NR | 1,000,000 | 1,059,597 | |||||||
| 84,045,180 | ||||||||||
CAPITAL GOODS — 3.96% | ||||||||||
AEROSPACE & DEFENSE — 0.16% | ||||||||||
Boeing Co., 5.00% due 3/15/2014 | A/A2 | 1,500,000 | 1,687,856 | |||||||
ELECTRICAL EQUIPMENT — 0.24% | ||||||||||
Emerson Electric Co., 4.125% due 4/15/2015 | A/A2 | 500,000 | 551,015 | |||||||
Emerson Electric Co., 5.75% due 11/1/2011 | A/A2 | 800,000 | 842,158 | |||||||
Certified Annual Report 17
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
Hubbell, Inc., 6.375% due 5/15/2012 | A/A3 | $ | 1,000,000 | $ | 1,070,528 | |||||
INDUSTRIAL CONGLOMERATES — 2.04% | ||||||||||
General Electric Capital Corp., 4.875% due 10/21/2010 | AA+/Aa2 | 2,500,000 | 2,504,893 | |||||||
General Electric Capital Corp. Floating Rate Note, 0.431% due 6/20/2014 | AA+/Aa2 | 4,000,000 | 3,826,200 | |||||||
General Electric Co., 5.25% due 12/6/2017 | AA+/Aa2 | 2,500,000 | 2,813,750 | |||||||
a,c Smiths Group plc, 7.20% due 5/15/2019 (Guaranteed: Smiths Group plc) | BBB+/Baa2 | 3,000,000 | 3,580,587 | |||||||
a Smiths Group plc, 6.05% due 5/15/2014 | BBB+/Baa2 | 2,500,000 | 2,781,037 | |||||||
Textron, Inc., 6.20% due 3/15/2015 | BBB-/Baa3 | 5,000,000 | 5,561,170 | |||||||
MACHINERY — 1.52% | ||||||||||
Caterpillar Financial Services Corp., 5.85% due 9/1/2017 | A/A2 | 1,500,000 | 1,763,292 | |||||||
Caterpillar Financial Services Corp. Floating Rate Note, 1.039% due 6/24/2011 | A/A2 | 3,200,000 | 3,217,645 | |||||||
c Ingersoll-Rand Global Holding Co., 9.50% due 4/15/2014 | BBB+/Baa1 | 500,000 | 618,667 | |||||||
a ITW CUPIDS Finance Trust I, 6.55% due 12/31/2011 | NR/A1 | 5,000,000 | 5,019,485 | |||||||
John Deere Capital Corp., 5.25% due 10/1/2012 | A/A2 | 1,600,000 | 1,739,181 | |||||||
a,c Volvo Treasury AB, 5.95% due 4/1/2015 | BBB-/Baa2 | 3,000,000 | 3,273,312 | |||||||
| 40,850,776 | ||||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.53% | ||||||||||
COMMERCIAL SERVICES & SUPPLIES — 0.53% | ||||||||||
Allied Waste North America, Inc., 6.875% due 6/1/2017 | BBB/Baa3 | 4,000,000 | 4,415,000 | |||||||
Science Applications International Corp., 6.25% due 7/1/2012 | A-/A3 | 1,000,000 | 1,086,346 | |||||||
| 5,501,346 | ||||||||||
CONSUMER DURABLES & APPAREL — 0.53% | ||||||||||
HOUSEHOLD DURABLES — 0.27% | ||||||||||
Fortune Brands, Inc., 6.375% due 6/15/2014 | BBB-/Baa3 | 2,500,000 | 2,836,450 | |||||||
TEXTILES, APPAREL & LUXURY GOODS — 0.26% | ||||||||||
Nike, Inc., 5.15% due 10/15/2015 | A+/A1 | 2,315,000 | 2,683,319 | |||||||
| 5,519,769 | ||||||||||
CONSUMER SERVICES — 0.75% | ||||||||||
HOTELS, RESTAURANTS & LEISURE — 0.75% | ||||||||||
International Game Technology, 7.50% due 6/15/2019 | BBB/Baa2 | 6,515,000 | 7,742,556 | |||||||
| 7,742,556 | ||||||||||
DIVERSIFIED FINANCIALS — 6.82% | ||||||||||
CAPITAL MARKETS — 3.49% | ||||||||||
c AMVESCAP plc, 5.375% due 2/27/2013 (Guaranteed: Invesco Ltd.) | A-/A3 | 5,606,000 | 5,977,773 | |||||||
Bear Stearns Co., Inc., 4.50% due 10/28/2010 | A+/Aa3 | 3,000,000 | 3,008,154 | |||||||
a,c CDP Financial, Inc., 3.00% due 11/25/2014 (Guaranteed: Caisse de Depot et Placement du Quebec) | NR/NR | 4,000,000 | 4,153,708 | |||||||
a FMR LLC, 4.75% due 3/1/2013 | A+/A2 | 5,000,000 | 5,295,615 | |||||||
a,c Macquarie Group Ltd., 7.30% due 8/1/2014 | A-/A2 | 3,000,000 | 3,392,055 | |||||||
a,c Macquarie Group Ltd., 7.625% due 8/13/2019 | NR/NR | 1,000,000 | 1,164,309 | |||||||
a,c Macquarie Group Ltd., 6.00% due 1/14/2020 | A-/A2 | 1,000,000 | 1,045,678 | |||||||
a,c Macquarie Group Ltd., 4.875% due 8/10/2017 | A-/A2 | 3,000,000 | 3,042,885 | |||||||
Merrill Lynch & Co., Inc., 6.875% due 4/25/2018 | A/A2 | 2,000,000 | 2,243,392 | |||||||
Morgan Stanley Floating Rate Note, 2.876% due 5/14/2013 | NR/A2 | 5,000,000 | 5,095,460 | |||||||
c Nomura Holdings, Inc., 5.00% due 3/4/2015 | BBB+/Baa2 | 1,500,000 | 1,620,093 | |||||||
CONSUMER FINANCE — 0.45% | ||||||||||
American Express Credit Corp., 5.875% due 5/2/2013 | BBB+/A2 | 3,000,000 | 3,301,788 | |||||||
Capital One Bank, 6.50% due 6/13/2013 | BBB/A3 | 300,000 | 331,925 | |||||||
18 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
Capital One Financial Corp., 5.70% due 9/15/2011 | BBB/Baa1 | $ | 950,000 | $ | 990,112 | |||||
DIVERSIFIED FINANCIAL SERVICES — 2.88% | ||||||||||
Bank of America Corp., 7.40% due 1/15/2011 | A-/A3 | 1,500,000 | 1,527,338 | |||||||
Bank of America Corp., 4.50% due 4/1/2015 | A/A2 | 1,000,000 | 1,049,246 | |||||||
a Bank of America Covered Bond Issuer, 5.50% due 6/14/2012 | AA/Aa2 | 3,000,000 | 3,168,030 | |||||||
a Bank of America Institutional Series B, 7.70% due 12/31/2026 | BB/Baa3 | 2,000,000 | 2,047,500 | |||||||
a,c BM&F Bovespa SA, 5.50% due 7/16/2020 | BBB+/Baa2 | 1,000,000 | 1,064,739 | |||||||
Citigroup, Inc., 6.50% due 8/19/2013 | A/A3 | 1,000,000 | 1,104,870 | |||||||
Citigroup, Inc., 6.125% due 5/15/2018 | A/A3 | 500,000 | 545,506 | |||||||
Citigroup, Inc., 5.00% due 9/15/2014 | A-/Baa1 | 3,000,000 | 3,115,920 | |||||||
Citigroup, Inc., 6.00% due 12/13/2013 | A/A3 | 2,000,000 | 2,192,768 | |||||||
a CME Group Index Services, 4.40% due 3/15/2018 | AA/Aa3 | 4,000,000 | 4,249,628 | |||||||
c Korea Development Bank, 8.00% due 1/23/2014 | A/A1 | 3,000,000 | 3,509,271 | |||||||
MBNA Corp., 6.125% due 3/1/2013 | A/A2 | 1,000,000 | 1,082,705 | |||||||
a,c National Agricultural Cooperative Federation, 5.00% due 9/30/2014 | A/A1 | 2,000,000 | 2,140,132 | |||||||
National Rural Utilities CFC, 10.375% due 11/1/2018 | A+/A1 | 2,000,000 | 2,864,030 | |||||||
| 70,324,630 | ||||||||||
ENERGY — 5.60% | ||||||||||
ENERGY EQUIPMENT & SERVICES — 1.52% | ||||||||||
Detroit Edison Corporate Senior Note Series D, 5.40% due 8/1/2014 | A-/A2 | 2,000,000 | 2,252,348 | |||||||
Nabors Industries, Inc., 9.25% due 1/15/2019 | BBB/Baa2 | 4,000,000 | 5,118,376 | |||||||
Rowan Companies, Inc., 7.875% due 8/1/2019 | BBB-/Baa3 | 7,000,000 | 8,354,521 | |||||||
OIL, GAS & CONSUMABLE FUELS — 4.08% | ||||||||||
c BP Capital Markets plc, 3.875% due 3/10/2015 | A/A2 | 2,000,000 | 2,080,852 | |||||||
ConocoPhillips, 4.75% due 2/1/2014 | A/A1 | 1,000,000 | 1,114,014 | |||||||
a DCP Midstream LLC, 9.75% due 3/15/2019 | BBB/Baa2 | 1,500,000 | 1,996,005 | |||||||
Enbridge Energy Partners LP, 9.875% due 3/1/2019 | BBB/Baa2 | 2,000,000 | 2,727,276 | |||||||
c Enbridge, Inc., 5.80% due 6/15/2014 | A-/Baa1 | 2,000,000 | 2,289,506 | |||||||
Energy Transfer Partners LP, 6.00% due 7/1/2013 | BBB-/Baa3 | 1,000,000 | 1,096,775 | |||||||
Energy Transfer Partners LP, 9.00% due 4/15/2019 | BBB-/Baa3 | 1,000,000 | 1,281,360 | |||||||
Enterprise Products Operating LLC, 5.20% due 9/1/2020 | BBB-/Baa3 | 1,000,000 | 1,082,844 | |||||||
Enterprise Products Operating LLC, 3.70% due 6/1/2015 | BBB-/Baa3 | 1,000,000 | 1,049,704 | |||||||
Enterprise Products Participating LP, 7.50% due 2/1/2011 | BBB-/Baa3 | 250,000 | 255,171 | |||||||
a Florida Gas Transmission, 4.00% due 7/15/2015 | BBB/Baa2 | 2,000,000 | 2,110,238 | |||||||
Murphy Oil Corp., 6.375% due 5/1/2012 | BBB/Baa3 | 750,000 | 802,799 | |||||||
c Norsk Hydro A/S, 6.70% due 1/15/2018 (Guaranteed: Statoil Petroleum AS) | AA-/Aa2 | 1,000,000 | 1,241,200 | |||||||
NuStar Logistics, 7.65% due 4/15/2018 | BBB-/Baa3 | 3,000,000 | 3,641,889 | |||||||
Phillips Petroleum Co., 9.375% due 2/15/2011 | A/A1 | 900,000 | 929,967 | |||||||
a Semco Energy, Inc., 5.15% due 4/21/2020 | BBB+/A3 | 3,000,000 | 3,279,651 | |||||||
c Shell International Finance, 3.10% due 6/28/2015 (Guaranteed: Royal Dutch Shell plc) | AA/Aa1 | 3,000,000 | 3,158,322 | |||||||
Sunoco Logistics Partner, 8.75% due 2/15/2014 | BBB/Baa2 | 4,500,000 | 5,267,416 | |||||||
a,c Woodside Finance Ltd., 8.125% due 3/1/2014 | A-/Baa1 | 1,500,000 | 1,764,245 | |||||||
a,c Woodside Finance Ltd., 8.75% due 3/1/2019 | A-/Baa1 | 2,500,000 | 3,265,910 | |||||||
a,c Woodside Finance Ltd., 4.50% due 11/10/2014 | A-/Baa1 | 1,500,000 | 1,609,632 | |||||||
| 57,770,021 | ||||||||||
FOOD, BEVERAGE & TOBACCO — 2.13% | ||||||||||
BEVERAGES — 0.75% | ||||||||||
Anheuser Busch Cos., Inc., 4.70% due 4/15/2012 | BBB+/Baa2 | 1,000,000 | 1,055,552 | |||||||
Anheuser Busch Cos., Inc., 4.375% due 1/15/2013 | BBB+/Baa2 | 2,000,000 | 2,130,048 | |||||||
a,c Bacardi Ltd., 8.20% due 4/1/2019 | BBB/Baa1 | 1,500,000 | 1,947,548 | |||||||
Coca Cola Co., 5.75% due 3/15/2011 | A+/Aa3 | 200,000 | 204,716 | |||||||
Certified Annual Report 19
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
a,c Sabmiller plc, 6.50% due 7/15/2018 | BBB+/Baa1 | $ | 2,000,000 | $ | 2,407,176 | |||||
FOOD PRODUCTS — 0.21% | ||||||||||
Corn Products International, Inc., 3.20% due 11/1/2015 | BBB/Baa2 | 1,000,000 | 1,019,245 | |||||||
Kraft Foods, Inc., 6.00% due 2/11/2013 | BBB-/Baa2 | 1,000,000 | 1,110,593 | |||||||
TOBACCO — 1.17% | ||||||||||
Altria Group, Inc., 8.50% due 11/10/2013 | BBB/Baa1 | 1,000,000 | 1,197,447 | |||||||
Altria Group, Inc., 9.70% due 11/10/2018 | BBB/Baa1 | 3,000,000 | 4,060,806 | |||||||
Lorillard Tobacco Co., 8.125% due 6/23/2019 | BBB-/Baa2 | 5,000,000 | 5,723,310 | |||||||
UST, Inc., 5.75% due 3/1/2018 | BBB/NR | 1,000,000 | 1,080,438 | |||||||
| 21,936,879 | ||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.22% | ||||||||||
HEALTH CARE PROVIDERS & SERVICES — 0.22% | ||||||||||
McKesson Corp., 6.50% due 2/15/2014 | A-/Baa2 | 1,000,000 | 1,147,252 | |||||||
Wellpoint, Inc., 6.00% due 2/15/2014 | A-/Baa1 | 1,000,000 | 1,132,460 | |||||||
| 2,279,712 | ||||||||||
HOTELS RESTAURANTS & LEISURE — 0.42% | ||||||||||
HOTELS, RESTAURANTS & LEISURE — 0.42% | ||||||||||
a Hyatt Hotels Corps., 5.75% due 8/15/2015 | BBB/Baa2 | 2,500,000 | 2,695,983 | |||||||
a,c TDIC Finance Ltd., 6.50% due 7/2/2014 | AA/A1 | 1,500,000 | 1,638,978 | |||||||
| 4,334,961 | ||||||||||
INSURANCE — 4.25% | ||||||||||
INSURANCE — 4.25% | ||||||||||
Aflac, Inc., 3.45% due 8/15/2015 | A-/A2 | 500,000 | 518,845 | |||||||
Alterra Finance LLC, 6.25% due 9/30/2020 (Guaranteed: Alterra Holdings USA, Inc.) | BBB/Baa2 | 3,000,000 | 3,010,944 | |||||||
Aon Corp., 3.50% due 9/30/2015 | BBB+/Baa2 | 1,000,000 | 1,018,781 | |||||||
Aon Corp., 5.00% due 9/30/2020 | BBB+/Baa2 | 1,000,000 | 1,021,215 | |||||||
CNA Financial Corp., 6.50% due 8/15/2016 | BBB-/Baa3 | 2,035,000 | 2,209,349 | |||||||
Fidelity National Financial, 6.60% due 5/15/2017 | BBB-/Baa3 | 5,000,000 | 5,159,480 | |||||||
a Genworth Life Institutional Fund, 5.875% due 5/3/2013 | A/A2 | 1,000,000 | 1,059,053 | |||||||
Hartford Financial Services Group, Inc., 4.625% due 7/15/2013 | BBB/Baa3 | 1,000,000 | 1,056,216 | |||||||
International Lease Finance Corp., 5.00% due 9/15/2012 | BB+/B1 | 2,000,000 | 1,990,000 | |||||||
a Liberty Mutual Group, Inc., 5.75% due 3/15/2014 | BBB-/Baa2 | 1,000,000 | 1,051,217 | |||||||
Lincoln National Corp., 4.75% due 2/15/2014 | A-/Baa2 | 1,000,000 | 1,060,655 | |||||||
a Ohio National Financial Services, 6.375% due 4/30/2020 | A/Baa1 | 1,000,000 | 1,086,082 | |||||||
a Pacific Life Global Funding CPI Floating Rate Note, 3.23% due 2/6/2016 | A+/A1 | 8,000,000 | 7,835,360 | |||||||
a Principal Life Global Funding, 4.40% due 10/1/2010 | A/Aa3 | 4,000,000 | 4,000,000 | |||||||
a,c QBE Insurance Group Ltd., 5.647% due 7/1/2023 | BBB+/Baa1 | 7,000,000 | 6,546,498 | |||||||
Transatlantic Holdings, Inc., 5.75% due 12/14/2015 | BBB+/Baa1 | 5,000,000 | 5,249,080 | |||||||
| 43,872,775 | ||||||||||
MATERIALS — 1.52% | ||||||||||
CHEMICALS — 0.62% | ||||||||||
a Chevron Phillips Chemical, 7.00% due 6/15/2014 | BBB/Baa1 | 4,000,000 | 4,625,944 | |||||||
Chevron Phillips Chemical, 7.00% due 3/15/2011 | BBB/Baa1 | 500,000 | 512,736 | |||||||
E.I. du Pont de Nemours & Co., 5.00% due 1/15/2013 | A/A2 | 333,000 | 364,254 | |||||||
E.I. du Pont de Nemours & Co., 4.125% due 3/6/2013 | A/A2 | 325,000 | 348,081 | |||||||
c Potash Corp. of Saskatchewan, 5.25% due 5/15/2014 | A-/Baa1 | 500,000 | 555,277 | |||||||
CONSTRUCTION MATERIALS — 0.49% | ||||||||||
CRH America, Inc., 8.125% due 7/15/2018 | BBB+/Baa1 | 4,150,000 | 5,004,170 | |||||||
20 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
METALS & MINING — 0.41% | ||||||||||
a,c Anglo American Capital, 9.375% due 4/8/2014 | BBB/Baa1 | $ | 1,000,000 | $ | 1,231,178 | |||||
c Arcelormittal, 3.75% due 8/5/2015 | BBB/Baa3 | 3,000,000 | 3,032,043 | |||||||
| 15,673,683 | ||||||||||
MEDIA — 1.38% | ||||||||||
MEDIA — 1.38% | ||||||||||
Comcast Corp., 6.30% due 11/15/2017 | BBB+/Baa1 | 1,000,000 | 1,179,909 | |||||||
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc., 7.625% due 5/15/2016 (Guaranteed: DIRECTV Holdings LLC) | BBB-/Baa2 | 5,000,000 | 5,575,000 | |||||||
c Thomson Reuters Corp., 5.95% due 7/15/2013 | A-/Baa1 | 2,000,000 | 2,245,394 | |||||||
Time Warner Cable, Inc., 5.40% due 7/2/2012 | BBB/Baa2 | 3,000,000 | 3,214,095 | |||||||
Time Warner Cable, Inc., 7.50% due 4/1/2014 | BBB/Baa2 | 1,500,000 | 1,767,960 | |||||||
Time Warner Co., Inc., 8.05% due 1/15/2016 | BBB/Baa2 | 200,000 | 244,927 | |||||||
| 14,227,285 | ||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 1.51% | ||||||||||
BIOTECHNOLOGY — 0.99% | ||||||||||
Biogen Idec, Inc., 6.875% due 3/1/2018 | BBB+/Baa3 | 5,000,000 | 5,867,165 | |||||||
a Genzyme Corp., 3.625% due 6/15/2015 | A-/Baa2 | 3,000,000 | 3,181,350 | |||||||
a Genzyme Corp., 5.00% due 6/15/2020 | A-/Baa2 | 1,000,000 | 1,111,935 | |||||||
PHARMACEUTICALS — 0.52% | ||||||||||
Abbott Labs, 3.75% due 3/15/2011 | AA/A1 | 500,000 | 507,671 | |||||||
Pfizer, Inc., 5.35% due 3/15/2015 | AA/A1 | 2,500,000 | 2,884,360 | |||||||
Tiers Inflation Linked Trust Series Wyeth 2004-21 Trust Certificate CPI Floating Rate Note, 2.998% due 2/1/2014 | AA/A1 | 2,000,000 | 1,996,700 | |||||||
| 15,549,181 | ||||||||||
REAL ESTATE — 1.10% | ||||||||||
REAL ESTATE INVESTMENT TRUSTS — 1.10% | ||||||||||
Commonwealth REIT, 5.875% due 9/15/2020 | BBB/Baa2 | 2,000,000 | 1,990,274 | |||||||
Commonwealth REIT (HRPT Properties), 6.25% due 6/15/2017 | BBB/Baa2 | 4,000,000 | 4,196,460 | |||||||
a Digital Realty Trust LP, 5.875% due 2/1/2020 | BBB/Baa2 | 1,000,000 | 1,063,123 | |||||||
a Digital Realty Trust LP, 4.50% due 7/15/2015 | BBB/Baa2 | 4,000,000 | 4,129,704 | |||||||
| 11,379,561 | ||||||||||
RETAILING — 0.60% | ||||||||||
SPECIALTY RETAIL — 0.60% | ||||||||||
Best Buy Co., Inc., 6.75% due 7/15/2013 | BBB-/Baa2 | 2,500,000 | 2,795,958 | |||||||
Staples, Inc., 9.75% due 1/15/2014 | BBB/Baa2 | 1,500,000 | 1,857,369 | |||||||
Staples, Inc., 7.75% due 4/1/2011 | BBB/Baa2 | 1,500,000 | 1,548,795 | |||||||
| 6,202,122 | ||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.56% | ||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.56% | ||||||||||
KLA Tencor Corp., 6.90% due 5/1/2018 | BBB/Baa1 | 5,000,000 | 5,735,460 | |||||||
| 5,735,460 | ||||||||||
SOFTWARE & SERVICES — 0.79% | ||||||||||
INFORMATION TECHNOLOGY SERVICES — 0.32% | ||||||||||
Computer Sciences Corp., 5.50% due 3/15/2013 | A-/Baa1 | 1,000,000 | 1,087,487 | |||||||
Electronic Data Systems Corp., 6.00% due 8/1/2013 | A/A2 | 1,000,000 | 1,136,557 | |||||||
Western Union Co., 6.50% due 2/26/2014 | A-/A3 | 1,000,000 | 1,148,510 | |||||||
Certified Annual Report 21
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||||
SOFTWARE — 0.47% | ||||||||||||
BMC Software, Inc., 7.25% due 6/1/2018 | BBB+/Baa2 | $ | 4,000,000 | $ | 4,829,824 | |||||||
| 8,202,378 | ||||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.63% | ||||||||||||
COMPUTERS & PERIPHERALS — 0.63% | ||||||||||||
Dell, Inc., 5.625% due 4/15/2014 | A-/A2 | 500,000 | 568,803 | |||||||||
a,c Seagate Technology International, 10.00% due 5/1/2014 | BBB/Baa3 | 5,000,000 | 5,900,000 | |||||||||
| 6,468,803 | ||||||||||||
TELECOMMUNICATION SERVICES — 2.69% | ||||||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.69% | ||||||||||||
AT&T, Inc., 4.85% due 2/15/2014 | A/A2 | 1,000,000 | 1,107,410 | |||||||||
AT&T, Inc., 5.80% due 2/15/2019 | A/A2 | 750,000 | 894,031 | |||||||||
Cellco Partnership, 3.75% due 5/20/2011 | A/A2 | 1,000,000 | 1,019,838 | |||||||||
Cellco Partnership Floating Rate Note, 2.946% due 5/20/2011 | A/A2 | 2,000,000 | 2,033,300 | |||||||||
a,b Hidden Ridge Facility, 5.65% due 1/1/2022 | A/Baa1 | 5,000,000 | 5,000,000 | |||||||||
Michigan Bell Telephone Co., 7.85% due 1/15/2022 | A/NR | 3,000,000 | 3,754,446 | |||||||||
a,c Qtel International Finance Ltd., 6.50% due 6/10/2014 | A/A2 | 1,000,000 | 1,123,760 | |||||||||
c Telecom Italia Capital SA, 6.175% due 6/18/2014 | BBB/Baa2 | 3,000,000 | 3,308,370 | |||||||||
c Telefonica Emisiones SAU, 6.421% due 6/20/2016 (Guaranteed: Telefonica SA) | A-/Baa1 | 5,000,000 | 5,860,345 | |||||||||
a,c Telemar Norte Leste SA, 5.50% due 10/23/2020 | BBB-/Baa2 | 3,000,000 | 3,037,500 | |||||||||
Verizon Communications, Inc., 6.10% due 4/15/2018 | A/A3 | 500,000 | 594,584 | |||||||||
| 27,733,584 | ||||||||||||
TRANSPORTATION — 0.59% | ||||||||||||
AIR FREIGHT & LOGISTICS — 0.05% | ||||||||||||
FedEx Corp., 8.76% due 5/22/2015 | BBB/Baa1 | 455,875 | 512,310 | |||||||||
AIRLINES — 0.27% | ||||||||||||
Continental Airlines Series 1997-4 Class 4-A, 6.90% due 1/2/2018 | BBB+/Baa2 | 141,649 | 148,732 | |||||||||
Delta Air Lines, Inc., 6.20% due 7/2/2018 | NR/NR | 2,500,000 | 2,600,000 | |||||||||
ROAD & RAIL — 0.27% | ||||||||||||
GATX Corp., 4.75% due 5/15/2015 | BBB/Baa1 | 1,000,000 | 1,069,197 | |||||||||
Ryder System, Inc., 7.20% due 9/1/2015 | BBB+/Baa1 | 1,500,000 | 1,765,864 | |||||||||
| 6,096,103 | ||||||||||||
UTILITIES — 7.48% | ||||||||||||
ELECTRIC UTILITIES — 4.19% | ||||||||||||
Aquila, Inc., 7.95% due 2/1/2011 | BBB/Baa3 | 1,500,000 | 1,531,774 | |||||||||
Centerpoint Energy, 7.00% due 3/1/2014 | BBB+/A3 | 2,000,000 | 2,359,668 | |||||||||
Commonwealth Edison Co., 6.15% due 3/15/2012 | A-/Baa1 | 910,000 | 976,160 | |||||||||
a,c E. ON International Finance BV, 5.80% due 4/30/2018 (Guaranteed: E. ON AG) | A/A2 | 2,000,000 | 2,366,684 | |||||||||
a,c Electricite de France SA, 5.50% due 1/26/2014 | A+/Aa3 | 1,250,000 | 1,410,459 | |||||||||
Empire District Electric Co., 4.65% due 5/28/2020 | BBB+/A3 | 3,000,000 | 3,187,641 | |||||||||
Entergy Gulf States, Inc., 5.70% due 6/1/2015 | BBB+/A3 | 460,000 | 460,788 | |||||||||
Entergy Texas, Inc., 7.125% due 2/1/2019 | BBB+/Baa2 | 1,500,000 | 1,832,857 | |||||||||
Entergy Texas, Inc., 3.60% due 6/1/2015 | BBB+/Baa2 | 3,000,000 | 3,149,910 | |||||||||
a Great River Energy Series 2007-A, 5.829% due 7/1/2017 (Insured: Natl-Re) | AAA/A2 | 3,245,677 | 3,641,747 | |||||||||
Gulf Power Co., 4.35% due 7/15/2013 | A/A3 | 925,000 | 992,830 | |||||||||
a,c Iberdrola Finance Ireland Ltd., 3.80% due 9/11/2014 (Guaranteed: Iberdrola SA) | A-/A3 | 6,000,000 | 6,163,938 | |||||||||
Idaho Power Corp., 6.025% due 7/15/2018 | A-/A2 | 1,000,000 | 1,176,974 | |||||||||
a,c Korea Southern Power Co., 5.375% due 4/18/2013 | A/A1 | 1,000,000 | 1,073,175 | |||||||||
Metropolitan Edison Co., 7.70% due 1/15/2019 | BBB-/Baa2 | 2,250,000 | 2,819,450 | |||||||||
22 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
a Monongahela Power Co., 5.70% due 3/15/2017 | BBB+/Baa1 | $ | 2,200,000 | $ | 2,461,281 | |||||
MP Environmental, 4.982% due 7/1/2014 | AAA/Aaa | 2,877,964 | 3,050,625 | |||||||
PPL Energy Supply LLC, 6.50% due 5/1/2018 | BBB/Baa2 | 1,000,000 | 1,157,164 | |||||||
Toledo Edison Co., 7.25% due 5/1/2020 | BBB/Baa1 | 1,000,000 | 1,259,324 | |||||||
c TransAlta Corp., 4.75% due 1/15/2015 | BBB/Baa2 | 2,000,000 | 2,169,822 | |||||||
GAS UTILITIES — 0.44% | ||||||||||
a Maritimes & Northeast Pipeline, 7.50% due 5/31/2014 | BBB/Baa3 | 1,920,800 | 2,097,014 | |||||||
NuStar Pipeline Operating Partnership LP, 5.875% due 6/1/2013 (Guaranteed: NuStar Energy LP) | BBB-/Baa3 | 2,000,000 | 2,181,624 | |||||||
Southern California Gas Co., 4.375% due 1/15/2011 | NR/Aa3 | 225,000 | 227,377 | |||||||
MULTI-UTILITIES — 2.85% | ||||||||||
Ameren Energy Generating Co., 7.00% due 4/15/2018 | BBB-/Baa3 | 2,000,000 | 2,009,552 | |||||||
Black Hills Corp., 5.875% due 7/15/2020 | BBB-/Baa3 | 5,000,000 | 5,288,285 | |||||||
Dominion Resources, Inc., 8.875% due 1/15/2019 | A-/Baa2 | 1,000,000 | 1,360,269 | |||||||
a Enogex LLC, 6.875% due 7/15/2014 | BBB+/Baa3 | 4,000,000 | 4,495,108 | |||||||
a Enogex LLC, 6.25% due 3/15/2020 | BBB+/Baa3 | 2,500,000 | 2,809,572 | |||||||
a Power Receivables Financing LLC, 6.29% due 1/1/2012 | NR/NR | 2,839,126 | 2,839,182 | |||||||
Sempra Energy, 6.50% due 6/1/2016 | BBB+/Baa1 | 500,000 | 598,230 | |||||||
Southern California Edison Co., 5.75% due 3/15/2014 | A/A1 | 500,000 | 574,579 | |||||||
a,c Taqa Abu Dhabi National Energy Co., 6.60% due 8/1/2013 | NR/A3 | 5,000,000 | 5,420,625 | |||||||
Union Electric Co., 4.65% due 10/1/2013 | BBB/A3 | �� | 2,000,000 | 2,171,958 | ||||||
Union Electric Co., 6.70% due 2/1/2019 | BBB/A3 | 500,000 | 607,889 | |||||||
Wisconsin Public Service Corp., 6.125% due 8/1/2011 | A/Aa3 | 1,150,000 | 1,198,959 | |||||||
| 77,122,494 | ||||||||||
TOTAL CORPORATE BONDS (Cost $522,337,466) | 560,245,474 | |||||||||
MUNICIPAL BONDS — 10.80% | ||||||||||
American Campus Properties Student Housing, 7.38% due 9/1/2012 (Insured: Natl-Re) | A/Baa1 | 1,270,000 | 1,286,218 | |||||||
American Fork City Utah Sales, 4.89% due 3/1/2012 (Insured: AGM) | AAA/Aa3 | 300,000 | 314,139 | |||||||
American Fork City Utah Sales, 5.07% due 3/1/2013 (Insured: AGM) | AAA/Aa3 | 120,000 | 129,079 | |||||||
Anaheim California Public Financing Authority, 5.316% due 9/1/2017 (Insured: Natl Re/FGIC) | A/A1 | 2,340,000 | 2,324,158 | |||||||
Anaheim California Public Financing Authority, 5.486% due 9/1/2020 (Insured: Natl-Re/FGIC) | A/A1 | 3,270,000 | 3,239,295 | |||||||
Brentwood California Infrastructure Financing Authority, 6.16% due 10/1/2019 | AA-/NR | 2,110,000 | 2,312,919 | |||||||
Brockton Massachusetts Taxable Economic Development, 6.45% due 5/1/2017 (Insured: Natl- Re/FGIC) | A/Aa3 | 115,000 | 120,949 | |||||||
California School Finance Authority, 5.041% due 7/1/2020 (LOC: City National Bank) | NR/NR | 4,000,000 | 4,137,080 | |||||||
Canadian County Oklahoma Educational Facilities Authority, 4.253% due 9/1/2014 | A+/NR | 3,000,000 | 3,195,840 | |||||||
Cleveland Cuyahoga County Ohio, 6.10% due 5/15/2013 | NR/NR | 720,000 | 725,126 | |||||||
Connecticut Housing Finance Authority, 5.071% due 11/15/2019 | AAA/Aaa | 4,090,000 | 4,581,127 | |||||||
Cook County Illinois School District 083, 4.625% due 12/1/2010 (Insured: AGM) | NR/Aa3 | 250,000 | 251,740 | |||||||
Cook County Illinois School District 083, 4.875% due 12/1/2011 (Insured: AGM) | NR/Aa3 | 150,000 | 157,575 | |||||||
Florida Capital Improvement Revenue, 5.477% due 7/1/2017 (Florida Atlantic University Finance Corp.) | A/A2 | 1,400,000 | 1,513,470 | |||||||
Florida Capital Improvement Revenue, 5.899% due 7/1/2018 (Florida Atlantic University Finance Corp.) | A/A2 | 1,000,000 | 1,101,700 | |||||||
Florida State Board of Education, 3.60% due 6/1/2015 | AAA/Aa1 | 3,000,000 | 3,215,130 | |||||||
Fort Collins Colorado Electric Utility, 4.92% due 12/1/2020 | AA-/NR | 2,250,000 | 2,330,010 | |||||||
Garfield County Oklahoma Educational Facilities Authority, 4.017% due 9/1/2015 | A/NR | 4,095,000 | 4,215,229 | |||||||
George Washington University, 4.411% due 9/15/2017 | A+/A1 | 1,750,000 | 1,869,752 | |||||||
Green Bay Wisconsin, 4.875% due 4/1/2011 (Insured: Natl-Re) | NR/Aa1 | 365,000 | 371,128 | |||||||
Hancock County Mississippi, 4.90% due 8/1/2011 (Insured: Natl-Re) | NR/A1 | 315,000 | 318,093 | |||||||
Hanover Pennsylvania Area School District Notes, 4.47% due 3/15/2013 (Insured: AGM) | AAA/Aa3 | 1,385,000 | 1,493,709 | |||||||
Certified Annual Report 23
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
Illinois Finance Authority Revenue Bonds, 5.629% due 7/1/2016 (Insured: Syncora) | A+/NR | $ | 2,030,000 | $ | 2,124,334 | |||||
Los Angeles California Department of Airports, 5.175% due 5/15/2017 | AA-/A1 | 4,000,000 | 4,257,200 | |||||||
Louisiana Public Facilities Authority, 5.72% due 7/1/2015 (Insured: CIFG) | BBB-/Baa3 | 2,120,000 | 2,080,123 | |||||||
Maine Finance Authority Waste Motor Oil, 4.55% due 10/1/2014 | A/NR | 1,495,000 | 1,576,014 | |||||||
Menomonee Falls Wisconsin GO, 4.25% due 11/1/2014 | NR/Aa2 | 3,350,000 | 3,571,066 | |||||||
a Midwest Family Housing, 5.168% due 7/1/2016 (Insured: CIFG) | NR/NR | 1,400,000 | 1,266,160 | |||||||
Mississippi Development Bank Special Obligation, 5.21% due 7/1/2013 (Insured: AGM) | AAA/NR | 1,200,000 | 1,318,224 | |||||||
Missouri State Development Finance Board, 5.45% due 3/1/2011 (Crackerneck Creek) | A/NR | 1,090,000 | 1,107,124 | |||||||
Montgomery County Maryland Revenue Authority, 5.00% due 2/15/2012 | AA+/Aa2 | 100,000 | 105,208 | |||||||
New Jersey Health Care Facilities Financing, 7.70% due 7/1/2011 (Insured: Connie Lee) | NR/NR | 25,000 | 25,943 | |||||||
e New Mexico Mtg Finance Authority, 5.77% due 1/1/2016 (GNMA/FNMA/FHLMC) | AAA/NR | 650,000 | 692,933 | |||||||
New Mexico Mtg Finance Authority, 5.00% due 7/1/2025 | AAA/NR | 935,000 | 952,887 | |||||||
New Rochelle New York Industrial Development Agency, 7.15% due 10/1/2014 (LOC: Bank of New York) | NR/Aaa | 230,000 | 242,643 | |||||||
New York State Urban Development Corp., 4.75% due 12/15/2011 | AAA/NR | 1,400,000 | 1,450,120 | |||||||
Newark New Jersey, 4.70% due 4/1/2011 (Insured: Natl-Re) | NR/Aa3 | 845,000 | 854,827 | |||||||
Newark New Jersey, 4.90% due 4/1/2012 (Insured: Natl-Re) | NR/Aa3 | 1,225,000 | 1,266,626 | |||||||
North Carolina Eastern Municipal Power, 4.43% due 1/1/2014 | A-/Baa1 | 2,000,000 | 2,095,520 | |||||||
Oakland California Redevelopment Agency, 8.00% due 9/1/2016 | A-/NR | 4,200,000 | 4,527,138 | |||||||
Ohio Housing Financing Agency Mtg, 5.20% due 9/1/2014 (GNMA/FNMA) | NR/Aaa | 2,395,000 | 2,590,528 | |||||||
Ohio State Solid Waste, 4.25% due 4/1/2033 (Republic Services) | BBB/NR | 1,000,000 | 1,022,300 | |||||||
Ohio State Taxable Development Assistance, 4.88% due 10/1/2011 (Insured: Natl-Re) | AA/Aa2 | 550,000 | 569,388 | |||||||
Oklahoma Development Finance Authority, 8.00% due 5/1/2020 | NR/NR | 8,500,000 | 8,615,770 | |||||||
Pasadena California Pension Funding, 7.33% due 5/15/2022 | AA+/NR | 2,000,000 | 2,309,680 | |||||||
Pennsylvania Economic Development, 4.70% due 11/1/2021 (Waste Management) | BBB/NR | 2,250,000 | 2,377,732 | |||||||
Port St. Lucie Florida Lease Revenue, 4.457% due 9/1/2014 (Wyndcrest) | A/Aa3 | 1,470,000 | 1,498,547 | |||||||
Redlands California Redevelopment Agency, 5.818% due 8/1/2022 (Insured: AMBAC) | A-/NR | 2,570,000 | 2,502,949 | |||||||
Riverside California Sewer Revenue, 5.61% due 8/1/2017 | AA/Aa2 | 2,000,000 | 2,241,980 | |||||||
San Francisco California City and County Redevelopment Financing Authority, 8.00% due 8/1/2019 | A/A1 | 5,000,000 | 5,984,150 | |||||||
San Jose California Redevelopment Agency Tax Allocation, 3.447% due 8/1/2013 | A/A1 | 1,000,000 | 1,011,220 | |||||||
San Jose California Redevelopment Agency Tax Allocation, 4.281% due 8/1/2014 | A/A1 | 750,000 | 760,673 | |||||||
San Luis Obispo County California, 7.45% due 9/1/2019 | AA-/NR | 3,450,000 | 4,090,320 | |||||||
Springfield Ohio City School District Tax Anticipation Notes, 6.35% due 12/1/2010 (Insured: AMBAC) | NR/NR | 1,400,000 | 1,408,316 | |||||||
Springfield Ohio City School District Tax Anticipation Notes, 6.40% due 12/1/2011 (Insured: AMBAC) | NR/NR | 1,500,000 | 1,559,685 | |||||||
Tazewell County Illinois Community High School, 5.20% due 12/1/2011 (Insured: AGM) | NR/Aa3 | 355,000 | 372,299 | |||||||
Tennessee State Taxable, 6.00% due 2/1/2013 | AA+/Aaa | 500,000 | 531,770 | |||||||
Texas Tech University, 6.00% due 8/15/2011 (Insured: Natl-Re) | AA/Aa2 | 245,000 | 254,753 | |||||||
Victor New York, 9.20% due 5/1/2014 | NR/NR | 905,000 | 948,250 | |||||||
Wisconsin State General Revenue, 4.80% due 5/1/2013 (Insured: AGM) | AAA/Aa3 | 200,000 | 216,858 | |||||||
Wisconsin State Health and Educational Facilities, 7.08% due 6/1/2016 (Insured: ACA) | NR/NR | 2,010,000 | 1,881,963 | |||||||
TOTAL MUNICIPAL BONDS (Cost $105,836,497) | 111,466,687 | |||||||||
24 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Limited Term Income Fund | September 30, 2010 | |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
SHORT TERM INVESTMENTS — 6.59% | ||||||||||
AGL Capital Corp., 0.27% due 10/1/2010 (Guaranteed: AGL Resources) | NR/NR | $ | 50,000,000 | $ | 50,000,000 | |||||
Chicago GO, 0.32% due 1/1/2040 put 10/7/2010 (Insured: AGM) (weekly demand notes) | AAA/Aa3 | 6,000,000 | 6,000,000 | |||||||
Pepco Holdings, Inc., 0.45% due 10/1/2010 | NR/NR | 12,000,000 | 12,000,000 | |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $68,000,000) | 68,000,000 | |||||||||
TOTAL INVESTMENTS — 98.97% (Cost $974,587,882) | $ | 1,021,014,640 | ||||||||
OTHER ASSETS LESS LIABILITIES — 1.03% | 10,585,922 | |||||||||
NET ASSETS — 100.00% | $ | 1,031,600,562 | ||||||||
Footnote Legend
| † | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. |
| 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, 2010, the aggregate value of these securities in the Fund’s portfolio was $261,266,628, representing 25.34% 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 is issued in the U.S. by foreign banks and corporations. |
| d | When-issued security. |
| e | 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 | |
| AGM | Insured by Assured Guaranty Municipal Corp. | |
| AMBAC | Insured by American Municipal Bond Assurance Corp. | |
| CIFG | CIFG Assurance North America Inc. | |
| CMO | Collateralized Mortgage Obligation | |
| CPI | Consumer Price Index | |
| CUPIDS | Cumulative Undivided Preferred Interests In Debt Securities | |
| 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 | |
| GNMA | Insured by Government National Mortgage Co. | |
| GO | General Obligation | |
| LOC | Letter of Credit | |
| MBIA | Insured by Municipal Bond Investors Assurance | |
| Mtg | Mortgage | |
| Natl-Re | Insured by National Public Finance Guarantee Corp. | |
| REIT | Real Estate Investment Trust | |
| REMIC | Real Estate Mortgage Investment Conduit | |
| Syncora | Insured by Syncora Guarantee Inc. | |
See notes to financial statements.
Certified Annual Report 25
| STATEMENTS OF ASSETS AND LIABILITIES | ||
| Thornburg Limited Term Income Funds | September 30, 2010 | |
| Thornburg Limited Term U.S. Government Fund | Thornburg Limited Term Income Fund | |||||||
ASSETS | ||||||||
Investments at value (cost $312,908,393 and $974,587,882) (Note 2) | $ | 326,979,357 | $ | 1,021,014,640 | ||||
Cash | 40,374,705 | 508,810 | ||||||
Receivable for investments sold | — | 4,140,371 | ||||||
Receivable for fund shares sold | 1,657,239 | 7,141,098 | ||||||
Interest receivable | 1,636,982 | 9,889,682 | ||||||
Prepaid expenses and other assets | 35,846 | 44,654 | ||||||
Total Assets | 370,684,129 | 1,042,739,255 | ||||||
LIABILITIES | ||||||||
Payable for securities purchased | 7,725,698 | 8,126,582 | ||||||
Payable for fund shares redeemed | 359,267 | 1,517,213 | ||||||
Payable to investment advisor and other affiliates (Note 3) | 231,295 | 610,170 | ||||||
Accounts payable and accrued expenses | 34,852 | 212,411 | ||||||
Dividends payable | 194,163 | 672,317 | ||||||
Total Liabilities | 8,545,275 | 11,138,693 | ||||||
NET ASSETS | $ | 362,138,854 | $ | 1,031,600,562 | ||||
NET ASSETS CONSIST OF: | ||||||||
Undistributed net investment income | $ | 505,476 | $ | 469,534 | ||||
Net unrealized appreciation on investments | 14,070,964 | 46,426,758 | ||||||
Accumulated net realized gain (loss) | (270,713 | ) | 2,587,677 | |||||
Net capital paid in on shares of beneficial interest | 347,833,127 | 982,116,593 | ||||||
| $ | 362,138,854 | $ | 1,031,600,562 | |||||
26 Certified Annual Report
| STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 | |
| Thornburg Limited Term U.S. Government Fund | Thornburg Limited Term Income Fund | |||||||
NET ASSET VALUE: | ||||||||
Class A Shares: | ||||||||
Net asset value and redemption price per share ($189,465,059 and $459,531,465 applicable to 13,588,341 and 34,271,082 shares of beneficial interest outstanding - Note 4) | $ | 13.94 | $ | 13.41 | ||||
Maximum sales charge, 1.50% of offering price | 0.21 | 0.20 | ||||||
Maximum offering price per share | $ | 14.15 | $ | 13.61 | ||||
Class B Shares: | ||||||||
Net asset value and offering price per share * ($5,215,152 applicable to 374,870 shares of beneficial interest outstanding - Note 4) | $ | 13.91 | $ | — | ||||
Class C Shares: | ||||||||
Net asset value and offering price per share * ($99,429,900 and $257,868,925 applicable to 7,088,087 and 19,262,401 shares of beneficial interest outstanding - Note 4) | $ | 14.03 | $ | 13.39 | ||||
Class I Shares: | ||||||||
Net asset value, offering and redemption price per share ($55,397,598 and $295,433,390 applicable to 3,973,486 and 22,028,947 shares of beneficial interest outstanding - Note 4) | $ | 13.94 | $ | 13.41 | ||||
Class R3 Shares: | ||||||||
Net asset value, offering and redemption price per share ($12,631,145 and $18,766,782 applicable to 905,390 and 1,398,638 shares of beneficial interest outstanding - Note 4) | $ | 13.95 | $ | 13.42 | ||||
| * | 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
| STATEMENTS OF OPERATIONS | ||
| Thornburg Limited Term Income Funds | Year Ended September 30, 2010 | |
| Thornburg Limited Term U.S. Government Fund | Thornburg Limited Term Income Fund | |||||||
INVESTMENT INCOME: | ||||||||
Interest income (net of premium amortized of $899,713 and $1,619,346) | $ | 11,071,135 | $ | 36,157,589 | ||||
EXPENSES: | ||||||||
Investment advisory fees (Note 3) | 1,113,708 | 3,592,291 | ||||||
Administration fees (Note 3) | ||||||||
Class A Shares | 201,830 | 427,432 | ||||||
Class B Shares | 6,482 | — | ||||||
Class C Shares | 108,612 | 219,441 | ||||||
Class I Shares | 16,845 | 105,385 | ||||||
Class R3 Shares | 12,201 | 18,157 | ||||||
Distribution and service fees (Note 3) | ||||||||
Class A Shares | 403,659 | 854,864 | ||||||
Class B Shares | 51,855 | — | ||||||
Class C Shares | 868,892 | 1,755,530 | ||||||
Class R3 Shares | 48,805 | 72,629 | ||||||
Transfer agent fees | ||||||||
Class A Shares | 161,914 | 319,929 | ||||||
Class B Shares | 11,738 | — | ||||||
Class C Shares | 106,291 | 169,140 | ||||||
Class I Shares | 22,950 | 112,400 | ||||||
Class R3 Shares | 6,804 | 10,892 | ||||||
Registration and filing fees | ||||||||
Class A Shares | 29,992 | 62,957 | ||||||
Class B Shares | 16,948 | — | ||||||
Class C Shares | 23,570 | 40,705 | ||||||
Class I Shares | 15,851 | 28,997 | ||||||
Class R3 Shares | 17,771 | 18,383 | ||||||
Custodian fees (Note 3) | 88,113 | 129,285 | ||||||
Professional fees | 35,959 | 47,889 | ||||||
Accounting fees | 10,667 | 27,173 | ||||||
Trustee fees | 6,304 | 17,039 | ||||||
Other expenses | 28,459 | 86,563 | ||||||
Total Expenses | 3,416,220 | 8,117,081 | ||||||
Less: | ||||||||
Expenses reimbursed by investment advisor (Note 3) | (30,623 | ) | (192,279 | ) | ||||
Distribution fees waived (Note 3) | (434,446 | ) | (877,765 | ) | ||||
Fees paid indirectly (Note 3) | (14,440 | ) | (590 | ) | ||||
Net Expenses | 2,936,711 | 7,046,447 | ||||||
Net Investment Income | $ | 8,134,424 | $ | 29,111,142 | ||||
28 Certified Annual Report
| STATEMENTS OF OPERATIONS, CONTINUED | ||
| Thornburg Limited Term Income Funds | Year Ended September 30, 2010 | |
| Thornburg Limited Term U.S. Government Fund | Thornburg Limited Term Income Fund | |||||||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||
Net realized gain (loss) on investments | $ | 399,593 | $ | 6,846,697 | ||||
Net change in unrealized appreciation (depreciation) of investments | 4,944,595 | 29,472,905 | ||||||
Net Realized and Unrealized Gain | 5,344,188 | 36,319,602 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 13,478,612 | $ | 65,430,744 | ||||
See notes to financial statements.
Certified Annual Report 29
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg Limited Term U.S. Government Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 8,134,424 | $ | 8,107,838 | ||||
Net realized gain (loss) on investments | 399,593 | 3,084,641 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 4,944,595 | 7,426,220 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 13,478,612 | 18,618,699 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (4,787,505 | ) | (4,723,163 | ) | ||||
Class B Shares | (93,775 | ) | (135,559 | ) | ||||
Class C Shares | (2,336,691 | ) | (2,517,507 | ) | ||||
Class I Shares | (1,098,052 | ) | (773,676 | ) | ||||
Class R3 Shares | (281,351 | ) | (226,391 | ) | ||||
From realized gains | ||||||||
Class A Shares | (656,646 | ) | — | |||||
Class B Shares | (24,928 | ) | — | |||||
Class C Shares | (362,681 | ) | — | |||||
Class I Shares | (121,390 | ) | — | |||||
Class R3 Shares | (36,511 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 44,591,116 | 13,712,593 | ||||||
Class B Shares | (791,168 | ) | 559,853 | |||||
Class C Shares | 18,334,888 | 12,728,762 | ||||||
Class I Shares | 30,071,156 | 2,724,836 | ||||||
Class R3 Shares | 4,880,471 | 992,513 | ||||||
Net Increase in Net Assets | 100,765,545 | 40,960,960 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 261,373,309 | 220,412,349 | ||||||
End of Year | $ | 362,138,854 | $ | 261,373,309 | ||||
Undistributed net investment income | $ | 505,476 | $ | 298,159 | ||||
See notes to financial statements.
30 Certified Annual Report
| STATEMENTS OF CHANGES IN NET ASSETS |
| Thornburg Limited Term Income Fund |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 29,111,142 | $ | 18,869,465 | ||||
Net realized gain (loss) on investments | 6,846,697 | 3,552,821 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments | 29,472,905 | 29,669,097 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 65,430,744 | 52,091,383 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (13,393,395 | ) | (8,418,379 | ) | ||||
Class C Shares | (6,421,751 | ) | (3,707,522 | ) | ||||
Class I Shares | (8,976,616 | ) | (6,277,646 | ) | ||||
Class R3 Shares | (570,120 | ) | (465,918 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 199,893,182 | 92,947,695 | ||||||
Class C Shares | 131,265,249 | 53,379,024 | ||||||
Class I Shares | 139,106,146 | 18,599,359 | ||||||
Class R3 Shares | 7,986,395 | (287,139 | ) | |||||
Net Increase in Net Assets | 514,319,834 | 197,860,857 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 517,280,728 | 319,419,871 | ||||||
End of Year | $ | 1,031,600,562 | $ | 517,280,728 | ||||
Undistributed net investment income | $ | 469,534 | $ | — | ||||
See notes to financial statements.
Certified Annual Report 31
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Limited Term Income Funds | September 30, 2010 | |
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 sixteen 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). 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). 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.
32 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 | |
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, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
U.S.Treasury Securities | $ | 33,665,925 | $ | 33,665,925 | $ | — | $ | — | ||||||||
U.S. Government Agencies | 57,837,629 | — | 50,666,173 | 7,171,456 | ||||||||||||
Mortgage Backed | 235,475,803 | — | 235,475,803 | — | ||||||||||||
Total Investments in Securities | $ | 326,979,357 | $ | 33,665,925 | $ | 286,141,976 | $ | 7,171,456 | ||||||||
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2010, was as follows:
| Beginning Balance 9/30/2009 | Gross Purchases | Gross Sales | Net Realized Gain/(Loss) | Net Unrealized Appreciation/ (Depreciation) | Net Transfers in/(out) of Level 3(b) | Ending Balance 9/30/2010 | ||||||||||||||||||||||
Investments in Securities(a) | $ | — | $ | 2,858,428 | $ | (340,706 | ) | $ | (255 | ) | $ | 308,128 | $ | 4,345,861 | $ | 7,171,456 | ||||||||||||
| (a) | Level 3 Securities represent 1.98% of Total Net Assets at the year ended September 30, 2010. |
| (b) | Transfers to Level 3 were from Level 2, and were due to a change in other significant observable inputs existing at the year ended September 30, 2010. Transfers into or out of Level 3 are based on the beginning market value of the year in which they occurred. |
INCOME FUND
The following table displays a summary of the inputs used to value the Fund’s net assets as of September 30, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
U.S.Treasury Securities | $ | 17,718,477 | $ | 17,718,477 | $ | — | $ | — | ||||||||
U.S. Government Agencies | 31,799,377 | — | 21,584,848 | 10,214,529 | ||||||||||||
Other Government | 14,106,546 | — | 14,106,546 | — | ||||||||||||
Mortgage Backed | 156,136,186 | — | 156,136,186 | — | ||||||||||||
Asset Backed Securities | 61,541,893 | — | 61,541,893 | — | ||||||||||||
Corporate Bonds | 560,245,474 | — | 555,245,474 | 5,000,000 | ||||||||||||
Municipal Bonds | 111,466,687 | — | 111,466,687 | — | ||||||||||||
Short Term Investments | 68,000,000 | — | 68,000,000 | — | ||||||||||||
Total Investments in Securities | $ | 1,021,014,640 | $ | 17,718,477 | $ | 988,081,634 | $ | 15,214,529 | ||||||||
Certified Annual Report 33
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 | |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2010, was as follows:
| Beginning Balance 9/30/2009 | Gross Purchases | Gross Sales | Net Realized Gain/(Loss) | Net Unrealized Appreciation/ (Depreciation) | Net Transfers in/(out) of Level 3(b) | Ending Balance 9/30/2010 | ||||||||||||||||||||||
Investments in Securities(a) | $ | — | $ | 12,146,070 | $ | (83,513 | ) | $ | 2,686 | $ | 466,264 | $ | 2,683,022 | $ | 15,214,529 | |||||||||||||
| (a) | Level 3 Securities represent 1.47% of Total Net Assets at the year ended September 30, 2010. |
| (b) | Transfers to Level 3 were from Level 2, and were due to a change in other significant observable inputs existing at the year ended September 30, 2010. Transfers into or out of Level 3 are based on the beginning market value of the year in which they occurred. |
Other Notes: It is the policy of the Funds to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Funds recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
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.
Management reviews each tax position believed to be material to the preparation of the Funds’ financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Funds’ tax returns remain subject to examination for three years after filing.
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 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 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.
34 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 | |
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, 2010, 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, 2010, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $30,623 for the Class R3 shares of the Government Fund and $81,474, $58,126, and $52,679 for the Class A, C, 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, 2010, the Distributor has advised the Funds that they earned net commissions aggregating $5,592 from the sale of Class A shares of the Government Fund, $9,686 from the sale of Class A shares of the Income Fund, and collected contingent deferred sales charges aggregating $12,789 and $29,041 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I shares. 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, 2010, are set forth in the Statements of Operations. Distribution fees of $434,446 and $877,765, 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
Certified Annual Report 35
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 | |
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, 2010, fees paid indirectly were $14,440 for the Government Fund and $590 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, 2010, 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, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 6,863,872 | $ | 94,820,720 | 7,044,523 | $ | 95,215,680 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 312,811 | 4,320,057 | 279,701 | 3,808,354 | ||||||||||||
Shares repurchased | (3,954,815 | ) | (54,549,661 | ) | (6,282,151 | ) | (85,311,441 | ) | ||||||||
Net Increase (Decrease) | 3,221,868 | $ | 44,591,116 | 1,042,073 | $ | 13,712,593 | ||||||||||
Class B Shares | ||||||||||||||||
Shares sold | 112,354 | $ | 1,549,558 | 293,980 | $ | 3,952,703 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 7,093 | 97,704 | 8,315 | 113,015 | ||||||||||||
Shares repurchased | (177,244 | ) | (2,438,430 | ) | (258,733 | ) | (3,505,865 | ) | ||||||||
Net Increase (Decrease) | (57,797 | ) | $ | (791,168 | ) | 43,562 | $ | 559,853 | ||||||||
Class C Shares | ||||||||||||||||
Shares sold | 3,854,657 | $ | 53,551,771 | 5,398,545 | $ | 73,120,285 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 140,523 | 1,952,489 | 132,715 | 1,818,052 | ||||||||||||
Shares repurchased | (2,679,800 | ) | (37,169,372 | ) | (4,556,448 | ) | (62,209,575 | ) | ||||||||
Net Increase (Decrease) | 1,315,380 | $ | 18,334,888 | 974,812 | $ | 12,728,762 | ||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 3,198,552 | $ | 44,258,618 | 1,353,081 | $ | 18,389,155 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 56,148 | 776,441 | 35,061 | 476,842 | ||||||||||||
Shares repurchased | (1,087,186 | ) | (14,963,903 | ) | (1,186,944 | ) | (16,141,161 | ) | ||||||||
Net Increase (Decrease) | 2,167,514 | $ | 30,071,156 | 201,198 | $ | 2,724,836 | ||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 565,861 | $ | 7,827,234 | 414,219 | $ | 5,628,281 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 22,746 | 314,344 | 16,151 | 220,135 | ||||||||||||
Shares repurchased | (236,222 | ) | (3,261,107 | ) | (357,273 | ) | (4,855,903 | ) | ||||||||
Net Increase (Decrease) | 352,385 | $ | 4,880,471 | 73,097 | $ | 992,513 | ||||||||||
36 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 | |
INCOME FUND
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 21,879,703 | $ | 285,979,591 | 11,110,221 | $ | 133,515,913 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 831,439 | 10,905,086 | 557,688 | 6,698,514 | ||||||||||||
Shares repurchased | (7,414,765 | ) | (96,991,495 | ) | (3,969,959 | ) | (47,266,732 | ) | ||||||||
Net Increase (Decrease) | 15,296,377 | $ | 199,893,182 | 7,697,950 | $ | 92,947,695 | ||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 12,001,955 | $ | 156,815,343 | 6,724,821 | $ | 80,629,530 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 339,961 | 4,453,016 | 218,899 | 2,628,336 | ||||||||||||
Shares repurchased | (2,299,042 | ) | (30,003,110 | ) | (2,524,932 | ) | (29,878,842 | ) | ||||||||
Net Increase (Decrease) | 10,042,874 | $ | 131,265,249 | 4,418,788 | $ | 53,379,024 | ||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 15,971,676 | $ | 209,108,311 | 5,532,405 | $ | 66,543,531 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 538,856 | 7,069,519 | 414,485 | 4,961,968 | ||||||||||||
Shares repurchased | (5,881,124 | ) | (77,071,684 | ) | (4,467,592 | ) | (52,906,140 | ) | ||||||||
Net Increase (Decrease) | 10,629,408 | $ | 139,106,146 | 1,479,298 | $ | 18,599,359 | ||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 1,088,310 | $ | 14,252,821 | 492,247 | $ | 5,906,665 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 41,086 | 538,934 | 35,956 | 429,574 | ||||||||||||
Shares repurchased | (517,688 | ) | (6,805,360 | ) | (555,753 | ) | (6,623,378 | ) | ||||||||
Net Increase (Decrease) | 611,708 | $ | 7,986,395 | (27,550 | ) | $ | (287,139 | ) | ||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2010, the Government Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $144,748,520 and $44,444,490, respectively, while the Income Fund had purchase and sale transactions of investment securities (excluding short-term investments and U.S. Government obligations) of $408,649,396 and $97,621,620, respectively.
Certified Annual Report 37
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 | |
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
| Government Fund | Income Fund | |||||||
Cost of investments for tax purposes | $ | 312,908,393 | $ | 974,611,777 | ||||
Gross unrealized appreciation on a tax basis | $ | 14,417,072 | $ | 52,850,065 | ||||
Gross unrealized depreciation on a tax basis | (346,108 | ) | (6,447,202 | ) | ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 14,070,964 | $ | 46,402,863 | ||||
Distributable earnings – ordinary income (tax basis) | $ | 699,640 | $ | 1,441,851 | ||||
Distributable capital gains (tax basis) | $ | — | $ | 2,611,572 | ||||
The Income Fund utilized $2,644,545 capital loss carryforwards during the year ended September 30, 2010.
At September 30, 2010, the Government Fund had deferred tax basis capital losses occurring subsequent to October 31, 2009 of $253,397. For tax purposes, such losses will be reflected in the year ending September 30, 2011.
At September 30, 2010, the Government Fund had tax basis capital losses of $17,316, 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, 2018.
In order to account for book/tax differences, the Government Fund decreased undistributed net investment loss by $670,267 and decreased accumulated net realized gain by $670,267. The Income Fund decreased undistributed net investment loss by $762,148 and decreased accumulated net realized gain by $762,148. These reclassifications have no impact on the net asset value of the Funds. Reclassifications result primarily from paydown gains and losses, which are recorded as an adjustment to ordinary income in the financial statements and as capital gains and losses for tax purposes.
For tax purposes, distributions of the Income Fund for the year ended September 30, 2010 and September 30, 2009, were paid from ordinary income.
The tax character of distributions paid for the Government Fund during the year ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 8,597,413 | $ | 8,376,296 | ||||
Capital gains | 1,202,117 | — | ||||||
Total | $ | 9,799,530 | $ | 8,376,296 | ||||
OTHER NOTES
Management has evaluated the impact on the Funds of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, each distribution plan applicable, respectively, to Class C shares and Class R3 shares of each Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .25 of 1%.
38 Certified Annual Report
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Certified Annual Report 39
| FINANCIAL HIGHLIGHTS | ||
| Thornburg Limited Term U.S. Government Fund | ||
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 13.78 | 0.39 | 0.80 | 1.19 | (0.41 | ) | (0.62 | ) | (1.03 | ) | $ | 13.94 | 2.81 | 0.93 | 0.92 | 0.93 | 4.69 | 16.01 | $ | 189,465 | |||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 13.26 | 0.41 | 0.54 | 0.95 | (0.43 | ) | — | (0.43 | ) | $ | 13.78 | 3.04 | 0.94 | 0.93 | 0.94 | 7.21 | 39.42 | $ | 142,872 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 12.97 | 0.45 | 0.29 | 0.74 | (0.45 | ) | — | (0.45 | ) | $ | 13.26 | 3.39 | 0.95 | 0.93 | 0.95 | 5.75 | 19.61 | $ | 123,625 | ||||||||||||||||||||||||||||||||||||||||
2007(b) | $ | 12.75 | 0.40 | 0.23 | 0.63 | (0.41 | ) | — | (0.41 | ) | $ | 12.97 | 3.13 | 0.98 | 0.97 | 0.99 | 5.03 | 43.35 | $ | 91,561 | ||||||||||||||||||||||||||||||||||||||||
2006(b) | $ | 12.76 | 0.37 | (0.01 | ) | 0.36 | (0.37 | ) | — | (0.37 | ) | $ | 12.75 | 2.90 | 0.99 | 0.96 | 0.99 | 2.87 | 7.47 | $ | 106,913 | |||||||||||||||||||||||||||||||||||||||
Class B Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.75 | 0.23 | 0.80 | 1.03 | (0.25 | ) | (0.62 | ) | (0.87 | ) | $ | 13.91 | 1.65 | 2.11 | 2.11 | 2.11 | 3.46 | 16.01 | $ | 5,215 | |||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.23 | 0.27 | 0.53 | 0.80 | (0.28 | ) | — | (0.28 | ) | $ | 13.75 | 1.96 | 2.01 | 2.01 | 2.04 | 6.08 | 39.42 | $ | 5,950 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 12.94 | 0.28 | 0.28 | 0.56 | (0.27 | ) | — | (0.27 | ) | $ | 13.23 | 2.08 | 2.26 | 2.25 | 2.26 | 4.37 | 19.61 | $ | 5,147 | ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 12.72 | 0.22 | 0.23 | 0.45 | (0.23 | ) | — | (0.23 | ) | $ | 12.94 | 1.73 | 2.40 | 2.39 | 2.63 | 3.55 | 43.35 | $ | 2,586 | ||||||||||||||||||||||||||||||||||||||||
2006 | $ | 12.73 | 0.18 | (0.01 | ) | 0.17 | (0.18 | ) | — | (0.18 | ) | $ | 12.72 | 1.41 | 2.51 | 2.48 | 3.21 | 1.32 | 7.47 | $ | 2,476 | |||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.87 | 0.35 | 0.81 | 1.16 | (0.38 | ) | (0.62 | ) | (1.00 | ) | $ | 14.03 | 2.53 | 1.21 | 1.20 | 1.71 | 4.39 | 16.01 | $ | 99,430 | |||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.34 | 0.37 | 0.55 | 0.92 | (0.39 | ) | — | (0.39 | ) | $ | 13.87 | 2.74 | 1.22 | 1.21 | 1.72 | 6.97 | 39.42 | $ | 80,039 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 13.04 | 0.41 | 0.30 | 0.71 | (0.41 | ) | — | (0.41 | ) | $ | 13.34 | 3.10 | 1.24 | 1.22 | 1.75 | 5.51 | 19.61 | $ | 63,998 | ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 12.83 | 0.37 | 0.22 | 0.59 | (0.38 | ) | — | (0.38 | ) | $ | 13.04 | 2.88 | 1.25 | 1.24 | 1.80 | 4.66 | 43.35 | $ | 25,566 | ||||||||||||||||||||||||||||||||||||||||
2006 | $ | 12.84 | 0.34 | (0.01 | ) | 0.33 | (0.34 | ) | — | (0.34 | ) | $ | 12.83 | 2.63 | 1.26 | 1.23 | 1.79 | 2.60 | 7.47 | $ | 25,132 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.78 | 0.42 | 0.82 | 1.24 | (0.46 | ) | (0.62 | ) | (1.08 | ) | $ | 13.94 | 3.09 | 0.60 | 0.59 | 0.60 | 5.03 | 16.01 | $ | 55,398 | |||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.26 | 0.45 | 0.53 | 0.98 | (0.46 | ) | — | (0.46 | ) | $ | 13.78 | 3.31 | 0.66 | 0.66 | 0.67 | 7.51 | 39.42 | $ | 24,887 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 12.97 | 0.49 | 0.29 | 0.78 | (0.49 | ) | — | (0.49 | ) | $ | 13.26 | 3.68 | 0.66 | 0.64 | 0.67 | 6.06 | 19.61 | $ | 21,275 | ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 12.75 | 0.44 | 0.23 | 0.67 | (0.45 | ) | — | (0.45 | ) | $ | 12.97 | 3.45 | 0.68 | 0.67 | 0.74 | 5.35 | 43.35 | $ | 15,963 | ||||||||||||||||||||||||||||||||||||||||
2006 | $ | 12.76 | 0.41 | (0.01 | ) | 0.40 | (0.41 | ) | — | (0.41 | ) | $ | 12.75 | 3.22 | 0.68 | 0.65 | 0.78 | 3.19 | 7.47 | $ | 14,900 | |||||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.79 | 0.38 | 0.80 | 1.18 | (0.40 | ) | (0.62 | ) | (1.02 | ) | $ | 13.95 | 2.73 | 0.99 | 0.99 | 1.31 | 4.62 | 16.01 | $ | 12,631 | |||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.27 | 0.41 | 0.53 | 0.94 | (0.42 | ) | — | (0.42 | ) | $ | 13.79 | 3.00 | 1.00 | 0.99 | 1.40 | 7.15 | 39.42 | $ | 7,625 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 12.97 | 0.44 | 0.30 | 0.74 | (0.44 | ) | — | (0.44 | ) | $ | 13.27 | 3.33 | 1.01 | 0.99 | 1.47 | 5.77 | 19.61 | $ | 6,367 | ||||||||||||||||||||||||||||||||||||||||
2007 | $ | 12.76 | 0.40 | 0.22 | 0.62 | (0.41 | ) | — | (0.41 | ) | $ | 12.97 | 3.15 | 1.00 | 0.99 | 1.64 | 4.93 | 43.35 | $ | 4,398 | ||||||||||||||||||||||||||||||||||||||||
2006 | $ | 12.77 | 0.37 | (0.01 | ) | 0.36 | (0.37 | ) | — | (0.37 | ) | $ | 12.76 | 2.90 | 1.00 | 0.97 | 1.55 | 2.86 | 7.47 | $ | 3,591 | |||||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 40 Certified Annual Report | Certified Annual Report 41 |
| FINANCIAL HIGHLIGHTS | ||
| Thornburg Limited Term Income Fund | ||
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 12.81 | 0.51 | 0.61 | 1.12 | (0.52 | ) | — | (0.52 | ) | $ | 13.41 | 3.88 | 0.99 | 0.99 | 1.01 | 8.91 | 16.35 | $ | 459,532 | ||||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 11.92 | 0.60 | 0.90 | 1.50 | (0.61 | ) | — | (0.61 | ) | $ | 12.81 | 5.04 | 0.99 | 0.99 | 1.04 | 13.05 | 45.31 | $ | 243,141 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 12.40 | 0.55 | (0.48 | ) | 0.07 | (0.55 | ) | — | (0.55 | ) | $ | 11.92 | 4.38 | 0.99 | 0.99 | 1.03 | 0.44 | 42.84 | $ | 134,372 | |||||||||||||||||||||||||||||||||||||||
2007(b) | $ | 12.37 | 0.50 | 0.04 | 0.54 | (0.51 | ) | — | (0.51 | ) | $ | 12.40 | 4.07 | 1.00 | 0.99 | 1.08 | 4.43 | 41.55 | $ | 155,021 | ||||||||||||||||||||||||||||||||||||||||
2006(b) | $ | 12.51 | 0.50 | (0.14 | ) | 0.36 | (0.50 | ) | — | (0.50 | ) | $ | 12.37 | 4.05 | 1.00 | 0.99 | 1.09 | 2.96 | 6.77 | $ | 190,670 | |||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 12.79 | 0.47 | 0.61 | 1.08 | (0.48 | ) | — | (0.48 | ) | $ | 13.39 | 3.62 | 1.24 | 1.24 | 1.77 | 8.64 | 16.35 | $ | 257,869 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 11.90 | 0.57 | 0.90 | 1.47 | (0.58 | ) | — | (0.58 | ) | $ | 12.79 | 4.79 | 1.24 | 1.24 | 1.82 | 12.78 | 45.31 | $ | 117,950 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 12.38 | 0.52 | (0.49 | ) | 0.03 | (0.51 | ) | — | (0.51 | ) | $ | 11.90 | 4.15 | 1.24 | 1.24 | 1.83 | 0.18 | 42.84 | $ | 57,114 | |||||||||||||||||||||||||||||||||||||||
2007 | $ | 12.35 | 0.47 | 0.03 | 0.50 | (0.47 | ) | — | (0.47 | ) | $ | 12.38 | 3.82 | 1.24 | 1.24 | 1.89 | 4.17 | 41.55 | $ | 40,769 | ||||||||||||||||||||||||||||||||||||||||
2006 | $ | 12.49 | 0.47 | (0.14 | ) | 0.33 | (0.47 | ) | — | (0.47 | ) | $ | 12.35 | 3.79 | 1.25 | 1.24 | 1.87 | 2.71 | 6.77 | $ | 44,361 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 12.82 | 0.55 | 0.60 | 1.15 | (0.56 | ) | — | (0.56 | ) | $ | 13.41 | 4.22 | 0.64 | 0.64 | 0.64 | 9.20 | 16.35 | $ | 295,433 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 11.92 | 0.64 | 0.90 | 1.54 | (0.64 | ) | — | (0.64 | ) | $ | 12.82 | 5.39 | 0.66 | 0.66 | 0.68 | 13.50 | 45.31 | $ | 146,099 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 12.40 | 0.59 | (0.48 | ) | 0.11 | (0.59 | ) | — | (0.59 | ) | $ | 11.92 | 4.72 | 0.66 | 0.66 | 0.67 | 0.77 | 42.84 | $ | 118,222 | |||||||||||||||||||||||||||||||||||||||
2007 | $ | 12.37 | 0.54 | 0.04 | 0.58 | (0.55 | ) | — | (0.55 | ) | $ | 12.40 | 4.39 | 0.67 | 0.67 | 0.72 | 4.76 | 41.55 | $ | 103,530 | ||||||||||||||||||||||||||||||||||||||||
2006 | $ | 12.51 | 0.54 | (0.14 | ) | 0.40 | (0.54 | ) | — | (0.54 | ) | $ | 12.37 | 4.38 | 0.68 | 0.67 | 0.72 | 3.30 | 6.77 | $ | 111,535 | |||||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 12.82 | 0.51 | 0.61 | 1.12 | (0.52 | ) | — | (0.52 | ) | $ | 13.42 | 3.89 | 0.99 | 0.99 | 1.35 | 8.90 | 16.35 | $ | 18,767 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 11.92 | 0.61 | 0.90 | 1.51 | (0.61 | ) | — | (0.61 | ) | $ | 12.82 | 5.08 | 0.99 | 0.99 | 1.48 | 13.13 | 45.31 | $ | 10,091 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 12.40 | 0.55 | (0.48 | ) | 0.07 | (0.55 | ) | — | (0.55 | ) | $ | 11.92 | 4.42 | 0.99 | 0.99 | 1.52 | 0.44 | 42.84 | $ | 9,712 | |||||||||||||||||||||||||||||||||||||||
2007 | $ | 12.38 | 0.50 | 0.03 | 0.53 | (0.51 | ) | — | (0.51 | ) | $ | 12.40 | 4.09 | 0.99 | 0.99 | 1.71 | 4.34 | 41.55 | $ | 6,191 | ||||||||||||||||||||||||||||||||||||||||
2006 | $ | 12.52 | 0.50 | (0.14 | ) | 0.36 | (0.50 | ) | — | (0.50 | ) | $ | 12.38 | 4.07 | 1.00 | 0.99 | 1.79 | 2.97 | 6.77 | $ | 3,331 | |||||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 42 Certified Annual Report | Certified Annual Report 43 |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
| Thornburg Limited Term Income Funds | ||
To the Trustees and Shareholders of
Thornburg Limited Term U.S. Government Fund
Thornburg Limited Term Income Fund
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Limited Term U.S. Government Fund and Thornburg Limited Term Income Fund (separate portfolios of Thornburg Investment Trust, hereafter referred to as the “Funds”) at September 30, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
44 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg Limited Term Income Funds | September 30, 2010 (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, 2010, and held until September 30, 2010.
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.
| Beginning Account Value 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
| Limited Term U.S. Government Fund | ||||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,032.80 | $ | 4.71 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.44 | $ | 4.68 | ||||||
Class B Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,026.60 | $ | 10.82 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.39 | $ | 10.76 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,032.00 | $ | 6.10 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.06 | $ | 6.06 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,034.60 | $ | 2.92 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.20 | $ | 2.90 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,032.40 | $ | 5.04 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 | ||||||
| Limited Term Income Fund | ||||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,051.50 | $ | 5.09 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,050.30 | $ | 6.34 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.88 | $ | 6.24 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,053.30 | $ | 3.34 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.82 | $ | 3.29 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,052.30 | $ | 5.10 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.09 | $ | 5.02 | ||||||
| † | Thornburg Limited Term U.S. Government Fund expenses are equal to the annualized expense ratio for each class (A: 0.92%; B: 2.13%; C: 1.20%; I: 0.57%; R3: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
| † | Thornburg Limited Term Income Fund expenses are equal to the annualized expense ratio for each class (A: 0.99%; C: 1.23%; I: 0.65%; 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. |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 45
| INDEX COMPARISON | ||
| Thornburg Limited Term U.S. Government Fund | September 30, 2010 (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, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (11/16/87) | 3.12 | % | 4.79 | % | 4.92 | % | 5.91 | % | ||||||||
B Shares (11/1/02) | -1.54 | % | 3.40 | % | — | 2.67 | % | |||||||||
C Shares (9/1/94) | 3.89 | % | 4.82 | % | 4.76 | % | 5.00 | % | ||||||||
I Shares (7/5/96) | 5.03 | % | 5.42 | % | 5.40 | % | 5.59 | % | ||||||||
R3 Shares (7/1/03) | 4.62 | % | 5.06 | % | — | 3.77 | % | |||||||||
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.
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 from one 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.
46 Certified Annual Report
| INDEX COMPARISON | ||
| Thornburg Limited Term Income Fund | September 30, 2010 (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, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (10/1/92) | 7.23 | % | 5.54 | % | 5.54 | % | 5.70 | % | ||||||||
C Shares (9/1/94) | 8.14 | % | 5.61 | % | 5.40 | % | 5.54 | % | ||||||||
I Shares (7/5/96) | 9.20 | % | 6.21 | % | 6.03 | % | 6.14 | % | ||||||||
R3 Shares (7/1/03) | 8.90 | % | 5.86 | % | — | 4.58 | % | |||||||||
Performance data reflect past performance, which is no guarantee of future results. The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares. For the Limited Term Income Fund, returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares is 1.50%. Class C shares include a 0.50% contingent deferred sales charge (CDSC) for the first year only. There is no sales charge for Class I shares or Class R3 shares.
The Barclays Capital Intermediate Government/ Credit Bond Index is an unmanaged, market-weighted index generally representative of intermediate government and investment grade corporate debt securities having maturities from one 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.
Certified Annual Report 47
| TRUSTEES AND OFFICERS | ||
| Thornburg Limited Term Income Funds | September 30, 2010 (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, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
| INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 65 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. | None | ||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||
Susan H. Dubin, 61 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, 56 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, 51 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 Limited Term Income Funds | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Certified Annual Report 49
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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
| OTHER INFORMATION | ||
| Thornburg Limited Term Income Funds | September 30, 2010 (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.
TAX INFORMATION
For the tax year ended September 30, 2010, dividends paid by the Thornburg Limited Term U.S. Government Fund of $1,202,117 are designated as long term capital gains 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, 2010. Complete information will be computed and reported in conjunction with your 2010 Form 1099-DIV.
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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s services and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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
Certified Annual Report 51
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 (Unaudited) | |
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 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 evaluating quantitative and performance data presented, the Trustees noted (among other aspects of the data) the Fund’s positive investment returns and performance in accordance with expectations over various periods. The 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, that the Fund’s returns fell within the top quartile of the same fund category for the one-year period ended with second quarter of the current year and within the top decile of the category for the three-year and five-year periods, and that the Fund’s returns fell within the top quartile of a second mutual fund category in the one-year, 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 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, and 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. 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 confirmed their previous observations 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, 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 the adequacy of the Advisor’s resources and 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
52 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 (Unaudited) | |
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.
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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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 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 evaluating 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. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment return in the most recent calendar year exceeded the average return of the fixed-income mutual fund category for which calendar year data was presented, that the Fund’s returns exceeded the average returns of the same fund category in most of the preceding ten calendar years, that the Fund’s returns fell within the top decile 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 quartile of a second mutual fund category in the one-year period and fell within the top decile of the second category in the three-year and five-year periods.
Certified Annual Report 53
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Limited Term Income Funds | September 30, 2010 (Unaudited) | |
Measures of portfolio volatility and risk considered by the Trustees demonstrated that the Fund’s relative portfolio volatility had continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor received any ancillary benefits from its relationship with the Fund.
In evaluating the level of the management fee, the Trustees considered the fee charged by the Advisor and the other expenses charged to the Fund in light of the nature and quality of services provided, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses, and 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. The Trustees observed that the overall expense ratio of the Fund was higher to a small extent than the median expense ratio and comparable to the average expense ratio for the group of mutual funds assembled by the mutual fund analyst firm, that the management fee was comparable to the median fee rate and higher to a small extent than the average fee rate for the same group of funds, and 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 confirmed their previous observations 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, 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 the adequacy of the Advisor’s resources and 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.
54 Certified Annual Report
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This page is not part of the Annual Report. 55
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
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.
56 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 Developing World 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. 57
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 Developing World 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. 59
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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 | You invest in the future, without spending a dime. | |||||
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Important Information
The information presented on the following pages was current as of September 30, 2010. 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.
The maximum sales charge for the Fund’s Class A shares is 4.50%. The total annual operating expense of the Fund’s Class A shares is 1.49%, as disclosed in the most recent Prospectus. Thornburg Investment Management and Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least February 1, 2011, so that actual expenses, for Class A shares, do not exceed 1.25%.
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 Index – The Blended Index is composed of 80% Barclays Capital Aggregate Bond Index and 20% MSCI World Index. The Barclays Capital Aggregate Bond Index is composed of approximately 8,000 publicly traded bonds including U.S. government, mortgage-backed, corporate and Yankee bonds. The index is weighted by the market value of the bonds included in the index. The MSCI World Index is an unmanaged market-weighted index that consists of securities traded in 24 of the world’s most developed countries. Securities are listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The index is calculated with net dividends reinvested, in U.S. dollars.
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+ 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.
Effective Duration – A bond’s sensitivity to interest rates, incorporating the embedded option features, such as call provisions. 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, 2010
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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
| ||
| October 17, 2010
| |
Dear Fellow Shareholder:
| ||
We are happy to present the annual report for the Thornburg Strategic Income Fund for the year ended September 30, 2010. The net asset value (NAV) of a Class A share of the Fund increased $0.72 to $12.35 over the course of the past year. If you were invested for the entire period, you received dividends of 81.2 cents per share. If you reinvested your dividends, you received 83.2 cents per share. Dividends per share were lower for Class C and higher for Class I shares to account for varying class-specific expenses. Please examine the accompanying exhibits for more detailed information.
| ||
| Jason H. Brady, CFA Co-Portfolio Manager | ||
| Since the Fund’s inception nearly three years ago, we have been navigating an environment of very high volatility in both the global fixed income and equity marketplaces. In spite of that, the Fund has continued to achieve its primary goal: a high and sustainable income stream. Going forward, we will continue to strive to achieve that goal through our investments in a diverse variety of assets around the globe.
Putting income and price change together, the Class A shares of the Thornburg Strategic Income Fund produced a total return of 14.07% (at NAV) over the course of the past year. A blended index of 80% of the Barclays Aggregate Bond Index and 20% of the MSCI World Index produced an 8.21% total return over the same time period. The Barclays U.S. Universal Index and the Barclays U.S. High Yield Index produced 8.92% and 18.44% total return, respectively. These indices reflect no deduction for fees, expenses, or taxes.
| |
| George Strickland Co-Portfolio Manager | ||
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 other fixed income instruments. The scope of credit spread tightening that occurred in 2009 did not recur in 2010. As we discussed last year, the scope of further tightening in credit was and is limited. Because of this, much of the Fund’s return this year occurred due to lower benchmark (risk- free) interest rates, continued strong income, and some positive movements in currencies and equities.
| ||
| The current economic environment is still difficult, with continued uncertainty around the shape of any potential recovery. Last year we wrote, “the U.S. recovery will be slow in coming and slow when it gets here.” Unfortunately that has proved to be correct. The global investment scope of the Fund does give us freedom to pursue many different types of opportunity, though similar challenges remain in many areas, such as the United Kingdom, developed Europe and Japan. Emerging markets may provide an engine for global growth, but asset prices continue to be high and complete decoupling seems unlikely. | ||
Certified Annual Report 5
Letter to Shareholders,
Continued
Because we believe that spread tightening is largely at an end, performance from fixed income will continue to 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. 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 believe the Fund’s objective to achieve income from a variety of different sources, we expect that could be a source of strength and total return over time. In short, selectively investing in a range of interesting global assets while keeping an eye on income production is our aim and a mindset that we believe will serve our shareholders well.
Thank you very much for investing in the Thornburg Strategic Income Fund. We believe that the Fund continues to be an appropriate investment for those looking for an attractive, sustainable yield from a variety of instruments.
Regards,
|
| |
| Jason H. 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, 2010 | |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/10
Energy | 10.8 | % | Retailing | 1.3 | % | |||||
Utilities | 10.0 | % | Health Care Equipment & Services | 1.1 | % | |||||
Banks | 9.3 | % | Consumer Services | 1.0 | % | |||||
Insurance | 9.0 | % | Automobiles & Components | 1.0 | % | |||||
Telecommunication Services | 7.7 | % | Commercial & Professional Services | 0.6 | % | |||||
Transportation | 7.0 | % | Food & Staples Retailing | 0.5 | % | |||||
Diversified Financials | 5.9 | % | Semiconductors & Semiconductor Equipment | 0.5 | % | |||||
Capital Goods | 5.7 | % | Industrials | 0.4 | % | |||||
Media | 3.8 | % | Pharmaceuticals, Biotechnology & Life Sciences | 0.1 | % | |||||
Food, Beverage & Tobacco | 3.0 | % | Other Non-Classified Securities: | |||||||
Miscellaneous | 2.7 | % | Asset Backed Securities | 2.7 | % | |||||
Real Estate | 2.1 | % | Municipal Bonds | 2.3 | % | |||||
Materials | 2.0 | % | U.S. Treasury Securities | 0.9 | % | |||||
Consumer Durables & Apparel | 1.6 | % | U.S. Government Agencies | 0.5 | % | |||||
Software & Services | 1.5 | % | Mortgage Backed* | 0.0 | % | |||||
Technology Hardware & Equipment | 1.5 | % | Other Assets & Cash Equivalents | 3.5 | % | |||||
* Industry percentage was less than 0.1%. |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/10
United States | 72.4 | % | Luxembourg | 0.6 | % | |||||
Australia | 4.8 | % | Netherlands | 0.6 | % | |||||
Bermuda | 3.6 | % | Germany | 0.5 | % | |||||
Canada | 2.1 | % | United Kingdom | 0.5 | % | |||||
Brazil | 1.9 | % | Trinidad and Tobago | 0.5 | % | |||||
South Korea | 1.4 | % | Mexico | 0.5 | % | |||||
Spain | 1.3 | % | China | 0.2 | % | |||||
Norway | 1.3 | % | Belgium | 0.2 | % | |||||
Cayman Islands | 1.0 | % | Singapore | 0.1 | % | |||||
Italy | 0.7 | % | Switzerland | 0.1 | % | |||||
Russia | 0.7 | % | Greece | 0.1 | % | |||||
Indonesia | 0.7 | % | Iceland* | 0.0 | % | |||||
United Arab Emirates | 0.7 | % | Other Assets & Cash Equivalents | 3.5 | % | |||||
* Country percentage was less than 0.1%. |
Certified Annual Report 7
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 5.01% | ||||||||
CONSUMER SERVICES — 0.05% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.05% | ||||||||
OPAP SA | 8,300 | $ | 131,254 | |||||
| 131,254 | ||||||||
DIVERSIFIED FINANCIALS — 0.99% | ||||||||
CAPITAL MARKETS — 0.72% | ||||||||
Apollo Investment Corp. | 168,060 | 1,719,254 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.27% | ||||||||
KKR Financial Holdings LLC | 73,000 | 640,940 | ||||||
| 2,360,194 | ||||||||
ENERGY — 1.08% | ||||||||
ENERGY EQUIPMENT & SERVICES — 0.55% | ||||||||
Seadrill Ltd. | 46,100 | 1,331,778 | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.53% | ||||||||
Eni S.p.A. | 58,500 | 1,262,445 | ||||||
| 2,594,223 | ||||||||
INSURANCE — 0.08% | ||||||||
INSURANCE — 0.08% | ||||||||
Swiss Re | 4,400 | 192,944 | ||||||
| 192,944 | ||||||||
REAL ESTATE — 1.29% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 1.29% | ||||||||
Annaly Capital Management, Inc. | 101,900 | 1,793,440 | ||||||
Chimera Investment Corp. | 165,900 | 655,305 | ||||||
Invesco Mortgage Capital | 29,000 | 624,080 | ||||||
| 3,072,825 | ||||||||
TELECOMMUNICATION SERVICES — 1.16% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.98% | ||||||||
France Telecom SA | 26,900 | 581,242 | ||||||
Telefonica SA | 21,500 | 532,414 | ||||||
Telstra Corp. Ltd. | 483,000 | 1,223,130 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.18% | ||||||||
Mobistar SA | 7,000 | 428,660 | ||||||
| 2,765,446 | ||||||||
UTILITIES — 0.36% | ||||||||
ELECTRIC UTILITIES — 0.36% | ||||||||
E. ON AG | 13,100 | 386,281 | ||||||
Enel S.p.A. | 87,856 | 468,300 | ||||||
| 854,581 | ||||||||
TOTAL COMMON STOCK (Cost $12,130,646) | 11,971,467 | |||||||
8 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
PREFERRED STOCK — 4.06% | ||||||||
BANKS — 2.15% | ||||||||
COMMERCIAL BANKS — 0.82% | ||||||||
Huntington Bancshares Pfd, 8.50% | 750 | $ | 791,250 | |||||
bSovereign REIT Pfd 12.00% | 1,000 | 1,162,500 | ||||||
Webster Financial Corp. Pfd Series A, 8.50% | 15 | 14,606 | ||||||
THRIFTS & MORTGAGE FINANCE — 1.33% | ||||||||
bFalcons Funding Trust I Pfd, 8.875% | 3,000 | 3,164,062 | ||||||
| 5,132,418 | ||||||||
FOOD, BEVERAGE & TOBACCO — 0.22% | ||||||||
FOOD PRODUCTS — 0.22% | ||||||||
bH.J. Heinz Finance Co. Pfd, 8.00% | 5 | 536,563 | ||||||
| 536,563 | ||||||||
INSURANCE — 0.42% | ||||||||
INSURANCE — 0.42% | ||||||||
Genworth Financial, Inc. Pfd Series A, 5.25% | 20,000 | 1,007,500 | ||||||
| 1,007,500 | ||||||||
MISCELLANEOUS — 0.44% | ||||||||
U.S. GOVERNMENT AGENCIES — 0.44% | ||||||||
aFarm Credit Bank of Texas Pfd, 10.00% | 1,000 | 1,039,688 | ||||||
| 1,039,688 | ||||||||
REAL ESTATE — 0.49% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 0.49% | ||||||||
Alexandria Real Estate Pfd, 7.00% | 50,000 | 1,170,000 | ||||||
| 1,170,000 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.34% | ||||||||
COMMUNICATIONS EQUIPMENT — 0.34% | ||||||||
Lucent Technologies Capital Trust I Pfd, 7.75% | 1,000 | 810,000 | ||||||
| 810,000 | ||||||||
TOTAL PREFERRED STOCK (Cost $9,101,575) | 9,696,169 | |||||||
ASSET BACKED SECURITIES — 2.63% | ||||||||
BANKS — 0.05% | ||||||||
COMMERCIAL BANKS — 0.05% | ||||||||
Wachovia Bank Commercial Mtg Trust Series 2007-C30 Class A1, 5.031%, 12/15/2043 | $ | 5,572 | 5,597 | |||||
Wachovia Bank Commercial Mtg Trust Series 2007-C31 Class A1, 5.14%, 4/15/2047 | 7,804 | 7,881 | ||||||
Wells Fargo Asset Securities Corp. Series 2005-AR1 Class B1, 2.858%, 2/25/2035 | 391,374 | 55,372 | ||||||
Wells Fargo Asset Securities Corp. Series 2005-AR2 Class B1, 3.516%, 3/25/2035 | 389,334 | 59,473 | ||||||
| 128,323 | ||||||||
DIVERSIFIED FINANCIALS — 1.47% | ||||||||
CAPITAL MARKETS — 0.38% | ||||||||
Bear Stearns ARM Mtg Series 2003-6 Class 2B-1, 2.806%, 8/25/2033 | 631,165 | 215,506 | ||||||
Bear Stearns Commercial Mtg Securities Series 2007-PW15 Class A1, 5.016%, 2/11/2044 | 2,579 | 2,634 | ||||||
Bear Stearns Commercial Mtg Securities Series 2007-T26 Class A1, 5.145%, 1/12/2045 | 40,718 | 41,678 | ||||||
Bear Stearns Commercial Mtg Securities Series 2007-T28 Class A1, 5.422%, 9/11/2042 | 20,123 | 20,771 | ||||||
Certified Annual Report 9
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
Credit Suisse Mtg Capital Certificates Series 2007-C1 Class A1, 5.227%, 2/15/2040 | $ | 9,638 | $ | 9,758 | ||||
Credit Suisse Mtg Capital Certificates Series 2007-C2 Class A1, 5.269%, 1/15/2049 | 2,305 | 2,312 | ||||||
Credit Suisse Mtg Capital Certificates Series 2007-C3 Class A1, 5.664%, 6/15/2039 | 260 | 260 | ||||||
GS Mtg Securities Corp. II Series 2007-GG10 Class A1, 5.69%, 8/10/2045 | 25,514 | 26,285 | ||||||
LB-UBS Commercial Mtg Trust Series 2007-C1 Class A1, 5.391%, 2/15/2040 | 10,557 | 10,745 | ||||||
Merrill Lynch Mtg Investors Trust, 2.786%, 8/25/2034 | 344,483 | 155,470 | ||||||
Merrill Lynch Mtg Trust, 5.393%, 11/12/2037 | 292,765 | 302,903 | ||||||
Merrill Lynch/Countrywide Commercial Mtg Trust Series 2007-5 Class A1, 4.275%, 8/12/2048 | 3,427 | 3,444 | ||||||
Merrill Lynch/Countrywide Commercial Mtg Trust Series 2007-6 Class A1, 5.175%, 3/12/2051 | 8,380 | 8,499 | ||||||
Morgan Stanley Capital I Series 2007-HQ11 Class A1, 5.246%, 2/20/2044 | 16,808 | 17,096 | ||||||
Morgan Stanley Capital I Series 2007-IQ13 Class A1, 5.05%, 3/15/2044 | 17,392 | 17,640 | ||||||
Morgan Stanley Capital I Series 2007-IQ14 Class A1, 5.38%, 4/15/2049 | 40,582 | 41,693 | ||||||
Morgan Stanley Capital I Series 2007-T25 Class A1, 5.391%, 11/12/2049 | 30,557 | 31,352 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 1.09% | ||||||||
Banc of America Commerical Mtg, Inc. Series 2007-2 Class A1, 5.421%, 1/10/2012 | 18,471 | 18,971 | ||||||
Banc of America Funding Corp. Series 2006-I Class SB1, 3.751%, 12/20/2036 | 974,959 | 95,462 | ||||||
Banc of America Mtg Services Series 2005-A Class B1, 3.531%, 2/25/2035 | 946,039 | 116,389 | ||||||
Citigroup Commercial Mtg Trust Series 2004-HYB2 Class B1, 4.092%, 3/25/2034 | 198,366 | 92,891 | ||||||
Citigroup Commercial Mtg Trust Series 2007-C6 Class A1, 5.622%, 12/10/2049 | 71,883 | 73,030 | ||||||
Citigroup/Deutsche Bank Commercial Mtg Series 2007-CD4 Class A1, 4.977%, 12/11/2049 | 24,703 | 24,933 | ||||||
Countrywide Series 2005-11 Class AF3, 4.778%, 2/25/2036 | 1,067,840 | 869,147 | ||||||
Countrywide Series 2006-15 Class A6, 5.826%, 10/25/2046 | 408,206 | 287,792 | ||||||
JPMorgan Chase Commercial Mtg Securities Corp. Series 2006-LDP9 Class A1, 5.17%, 5/15/2047 | 14,787 | 14,965 | ||||||
JPMorgan Chase Commercial Mtg Securities Corp. Series 2007-LDPX Class A1, 5.122%, 1/15/2049 | 4,537 | 4,572 | ||||||
JPMorgan Series 2007-CH5 Class A2, 0.306%, 5/25/2037 | 1,044,320 | 992,349 | ||||||
| 3,498,547 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.48% | ||||||||
PHARMACEUTICALS — 0.48% | ||||||||
bQHP PhaRMA, 10.25%, 3/15/2015 | 1,125,205 | 1,150,263 | ||||||
| 1,150,263 | ||||||||
TRANSPORTATION — 0.63% | ||||||||
AIRLINES — 0.63% | ||||||||
bAmerican Airlines Depositor Corp., 8.00%, 10/5/2010 | 1,500,000 | 1,499,220 | ||||||
| 1,499,220 | ||||||||
TOTAL ASSET BACKED SECURITIES (Cost $8,625,262) | 6,276,353 | |||||||
CORPORATE BONDS — 70.28% | ||||||||
AUTOMOBILES & COMPONENTS — 1.01% | ||||||||
AUTO COMPONENTS — 0.11% | ||||||||
bAffinia Group, Inc., 10.75%, 8/15/2016 | 250,000 | 278,125 | ||||||
AUTOMOBILES — 0.90% | ||||||||
bAmerican Honda Finance, 2.639%, 6/29/2011 | 500,000 | 508,225 | ||||||
bHarley Davidson Funding Corp. Series C, 6.80%, 6/15/2018 | 500,000 | 543,645 | ||||||
b,cHyundai Capital Services, 6.00%, 5/5/2015 | 1,000,000 | 1,091,399 | ||||||
| 2,421,394 | ||||||||
BANKS — 6.70% | ||||||||
COMMERCIAL BANKS — 6.70% | ||||||||
b,cBanco Industrial e Comercial S.A., 6.25%, 1/20/2013 | 1,000,000 | 1,030,000 | ||||||
b,c,dBanco Pine SA, 8.75%, 1/6/2017 | 1,000,000 | 985,000 | ||||||
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
Charter One Bank NA, 5.50%, 4/26/2011 | $ | 250,000 | $ | 256,306 | ||||
b,cDBS Bank Ltd., 5.125%, 5/16/2017 | 200,000 | 208,044 | ||||||
b,cGroupe BPCE, 12.50%, 8/29/2049 | 2,200,000 | 2,532,376 | ||||||
a,b,c,eIslandsbanki, 4.41%, 10/15/2008 | 60,000 | 18,300 | ||||||
a,b,c,eLandsBanki Islands HF, 5.73%, 8/25/2009 | 175,000 | 18,812 | ||||||
National City Bank Floating Rate Note, 0.663%, 6/7/2017 | 1,000,000 | 897,680 | ||||||
bPNC Preferred Funding Trust III Floating Rate Note, 8.70%, 12/31/2049 | 500,000 | 525,610 | ||||||
Provident Bank MD, 9.50%, 5/1/2018 | 1,500,000 | 1,637,607 | ||||||
b,cSantander Issuances, 6.50%, 8/11/2019 | 1,000,000 | 1,046,631 | ||||||
cShinhan Bank, 6.819%, 9/20/2036 | 100,000 | 101,407 | ||||||
Silicon Valley Bank, 6.05%, 6/1/2017 | 1,000,000 | 1,053,882 | ||||||
Sovereign Bank, 5.125%, 3/15/2013 | 100,000 | 104,759 | ||||||
Susquehanna Capital II, 11.00%, 3/23/2040 | 1,000,000 | 1,036,250 | ||||||
Webster Bank, 5.875%, 1/15/2013 | 2,000,000 | 2,044,962 | ||||||
Wells Fargo Capital XIII Preferred Note, 7.70%, 12/29/2049 | 500,000 | 518,750 | ||||||
Whitney National Bank, 5.875%, 4/1/2017 | 1,000,000 | 927,027 | ||||||
Zions Bancorp, 7.75%, 9/23/2014 | 1,000,000 | 1,059,597 | ||||||
| 16,003,000 | ||||||||
CAPITAL GOODS — 5.69% | ||||||||
AEROSPACE & DEFENSE — 0.90% | ||||||||
Triumph Group, Inc., 8.625%, 7/15/2018 | 2,000,000 | 2,150,000 | ||||||
BUILDING PRODUCTS — 0.50% | ||||||||
Owens Corning, Inc., 9.00%, 6/15/2019 | 1,000,000 | 1,182,901 | ||||||
INDUSTRIAL CONGLOMERATES — 1.98% | ||||||||
General Electric Capital Corp., 0.431%, 6/20/2014 | 1,000,000 | 956,550 | ||||||
Otter Tail Corp., 9.00%, 12/15/2016 | 3,000,000 | 3,210,000 | ||||||
b,cSmiths Group plc, 6.05%, 5/15/2014 | 500,000 | 556,207 | ||||||
MACHINERY — 1.84% | ||||||||
Case New Holland, Inc., 7.75%, 9/1/2013 | 1,000,000 | 1,086,250 | ||||||
cIngersoll-Rand Co., 9.50%, 4/15/2014 | 500,000 | 618,668 | ||||||
bMueller Water Products, 8.75%, 9/1/2020 | 500,000 | 525,000 | ||||||
bSPX Corp., 6.875%, 9/1/2017 | 1,000,000 | 1,060,000 | ||||||
Timken Co., 6.00%, 9/15/2014 | 1,000,000 | 1,111,923 | ||||||
TRADING COMPANIES & DISTRIBUTORS — 0.47% | ||||||||
b,cNoble Group Ltd. Mtg, 8.50%, 5/30/2013 | 1,000,000 | 1,127,702 | ||||||
| 13,585,201 | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.43% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 0.43% | ||||||||
Corrections Corp. of America, 6.25%, 3/15/2013 | 1,000,000 | 1,017,500 | ||||||
| 1,017,500 | ||||||||
CONSUMER DURABLES & APPAREL — 1.60% | ||||||||
HOUSEHOLD DURABLES — 1.60% | ||||||||
b,cCorporativo Javer SA, 13.00%, 8/4/2014 | 1,000,000 | 1,140,000 | ||||||
Fortune Brands, Inc., 6.375%, 6/15/2014 | 500,000 | 567,290 | ||||||
bFreedom Group, Inc., 10.25%, 8/1/2015 | 1,000,000 | 1,057,500 | ||||||
bFreedom Group, Inc., 10.25%, 8/1/2015 | 1,000,000 | 1,057,500 | ||||||
| 3,822,290 | ||||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
CONSUMER SERVICES — 0.88% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.88% | ||||||||
bCKE Restaurants, Inc., 11.375%, 7/15/2018 | $ | 1,000,000 | $ | 1,025,000 | ||||
bMGM Mirage, Inc., 9.00%, 3/15/2020 | 500,000 | 526,250 | ||||||
b,cTDIC Finance Ltd., 6.50%, 7/2/2014 | 500,000 | 546,326 | ||||||
| 2,097,576 | ||||||||
DIVERSIFIED FINANCIALS — 3.40% | ||||||||
CAPITAL MARKETS — 0.95% | ||||||||
b,cMacquarie Group Ltd., 7.30%, 8/1/2014 | 1,000,000 | 1,130,685 | ||||||
bMorgan Stanley, 10.09%, 5/3/2017 | 2,000,000 | 1,130,024 | ||||||
CONSUMER FINANCE — 0.90% | ||||||||
North Fork Bancorp, Inc., 5.875%, 8/15/2012 | 1,000,000 | 1,057,164 | ||||||
bTMX Finance LLC/TitleMax Finance Corp., 13.25%, 7/15/2015 | 1,000,000 | 1,091,250 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 1.55% | ||||||||
dBank of America Corp., 10.00%, 11/19/2014 | 1,750,000 | 992,908 | ||||||
bCiticorp Series 1999-1 Class 2, 8.04%, 12/15/2019 | 250,000 | 293,597 | ||||||
Citigroup, Inc., 5.00%, 9/15/2014 | 750,000 | 778,980 | ||||||
dCounts Series 1998 II-A, 6.67%, 2/15/2018 | 212,732 | 195,713 | ||||||
cKorea Development Bank, 5.30%, 1/17/2013 | 200,000 | 213,569 | ||||||
MBNA Corp., 6.125%, 3/1/2013 | 305,000 | 330,225 | ||||||
bSquareTwo Financial Corp., 11.625%, 4/1/2017 | 1,000,000 | 890,000 | ||||||
| 8,104,115 | ||||||||
ENERGY — 9.26% | ||||||||
ENERGY EQUIPMENT & SERVICES — 0.46% | ||||||||
Seacor Holdings, Inc., 7.375%, 10/1/2019 | 1,000,000 | 1,090,486 | ||||||
OIL, GAS & CONSUMABLE FUELS — 8.80% | ||||||||
b,cBumi Capital PTE Ltd., 12.00%, 11/10/2016 | 1,000,000 | 1,072,500 | ||||||
Cloud Peak Energy Resouces, 8.25%, 12/15/2017 | 1,000,000 | 1,056,250 | ||||||
bDCP Midstream LLC, 9.75%, 3/15/2019 | 500,000 | 665,335 | ||||||
Enbridge Energy Partners LP, 9.875%, 3/1/2019 | 250,000 | 340,910 | ||||||
Energy Transfer Partners LP, 8.50%, 4/15/2014 | 500,000 | 593,658 | ||||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 2,000,000 | 1,990,000 | ||||||
Forest Oil Corp., 8.50%, 2/15/2014 | 500,000 | 546,250 | ||||||
b,cGaz Capital SA, 7.51%, 7/31/2013 | 1,000,000 | 1,095,636 | ||||||
Inergy LP/Inergy Finance Corp., 8.75%, 3/1/2015 | 500,000 | 539,375 | ||||||
Kinder Morgan Energy Partners LP, 9.00%, 2/1/2019 | 250,000 | 325,525 | ||||||
bMaritimes & Northeast Pipeline LLC, 7.50%, 5/31/2014 | 960,400 | 1,048,507 | ||||||
bNGPL Pipeco, LLC, 6.514%, 12/15/2012 | 1,000,000 | 1,063,438 | ||||||
bNiska Gas Storage, 8.875%, 3/15/2018 | 2,000,000 | 2,140,000 | ||||||
b,cPetro Co. Trinidad Tobago Ltd., 9.75%, 8/14/2019 | 1,000,000 | 1,225,000 | ||||||
b,cPetroplus Finance Ltd., 6.75%, 5/1/2014 | 1,000,000 | 915,000 | ||||||
Plains All American Pipeline, LP, 8.75%, 5/1/2019 | 1,000,000 | 1,269,212 | ||||||
b,dRAAM Global Energy Co., 12.50%, 10/1/2015 | 2,000,000 | 2,040,000 | ||||||
Sunoco Logistics Partners LP, 8.75%, 2/15/2014 | 500,000 | 585,268 | ||||||
Tennessee Gas Pipeline Co., 8.00%, 2/1/2016 | 1,000,000 | 1,190,000 | ||||||
Teppco Partners LP, 7.00%, 6/1/2067 | 500,000 | 472,500 | ||||||
cTrans-Canada Pipelines Ltd., 6.35%, 5/15/2067 | 275,000 | 257,125 | ||||||
b,cWoodside Finance Ltd., 8.125%, 3/1/2014 | 500,000 | 588,081 | ||||||
| 22,110,056 | ||||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
FOOD, BEVERAGE & TOBACCO — 1.65% | ||||||||
BEVERAGES — 0.48% | ||||||||
b,cBacardi Ltd., 7.45%, 4/1/2014 | $ | 500,000 | $ | 591,258 | ||||
Constellation Brands, Inc., 8.375%, 12/15/2014 | 500,000 | 551,875 | ||||||
FOOD PRODUCTS — 0.69% | ||||||||
Bunge Ltd. Finance Co., 5.10%, 7/15/2015 | 321,000 | 339,832 | ||||||
b,cJBS Finance II Ltd., 8.25%, 1/29/2018 | 1,000,000 | 1,031,250 | ||||||
Treehouse Foods, Inc., 7.75%, 3/1/2018 | 250,000 | 268,750 | ||||||
TOBACCO — 0.48% | ||||||||
Lorillard Tobacco Co, 8.125%, 6/23/2019 | 1,000,000 | 1,144,662 | ||||||
| 3,927,627 | ||||||||
HEALTH CARE EQUIPMENT & SERVICES — 1.09% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 0.66% | ||||||||
bAlere, Inc., 8.625%, 10/1/2018 | 1,000,000 | 1,015,000 | ||||||
Beckman Coulter, Inc., 6.00%, 6/1/2015 | 500,000 | 571,475 | ||||||
HEALTH CARE TECHNOLOGY — 0.43% | ||||||||
bMerge Healthcare, Inc., 11.75%, 5/1/2015 | 1,000,000 | 1,022,500 | ||||||
| 2,608,975 | ||||||||
INDUSTRIALS — 0.43% | ||||||||
CAPITAL GOODS — 0.43% | ||||||||
Da-Lite Screen Co., Inc., 12.50%, 4/1/2015 | 1,000,000 | 1,025,000 | ||||||
| 1,025,000 | ||||||||
INSURANCE — 7.89% | ||||||||
INSURANCE — 7.89% | ||||||||
Fidelity National Financial, 6.60%, 5/15/2017 | 1,000,000 | 1,031,896 | ||||||
bInternational Lease Finance Corp., 6.50%, 9/1/2014 | 2,000,000 | 2,145,000 | ||||||
bNational Life Insurance of Vermont, 10.50%, 9/15/2039 | 1,000,000 | 1,215,560 | ||||||
Northwind Holdings LLC Series 2007-1A Class A1, 1.077%, 12/1/2037 | 1,618,862 | 1,232,262 | ||||||
b,c,dOil Casualty Insurance, 8.00%, 9/15/2034 | 1,934,000 | 1,817,960 | ||||||
b,cOil Insurance Ltd., 7.558%, 12/29/2049 | 1,000,000 | 886,810 | ||||||
bPrudential Holdings LLC, 8.695%, 12/18/2023 | 585,000 | 741,499 | ||||||
b,cQBE Insurance Group Ltd., 9.75%, 3/14/2014 | 780,000 | 943,603 | ||||||
b,cQBE Insurance Group Ltd., 5.647%, 7/1/2023 | 2,500,000 | 2,338,035 | ||||||
b,cSwiss Re Capital I, LP, 6.854%, 5/29/2049 | 3,000,000 | 2,793,435 | ||||||
Transatlantic Holdings, Inc., 5.75%, 12/14/2015 | 1,000,000 | 1,049,816 | ||||||
Unum Group, 7.125%, 9/30/2016 | 500,000 | 577,040 | ||||||
Willis North America, Inc., 7.00%, 9/29/2019 | 1,000,000 | 1,099,238 | ||||||
bZFS Finance USA Trust II, 6.45%, 12/15/2065 | 1,000,000 | 950,000 | ||||||
| 18,822,154 | ||||||||
MATERIALS — 1.98% | ||||||||
CHEMICALS — 0.48% | ||||||||
bChevron Phillips Chemical, 7.00%, 6/15/2014 | 1,000,000 | 1,156,486 | ||||||
CONTAINERS & PACKAGING — 0.23% | ||||||||
bPlastipak Holdings, Inc., 10.625%, 8/15/2019 | 500,000 | 555,000 | ||||||
METALS & MINING — 1.01% | ||||||||
Allegheny Technologies, Inc., 9.375%, 6/1/2019 | 1,000,000 | 1,208,571 | ||||||
Freeport-McMoRan Copper & Gold, Inc., 8.25%, 4/1/2015 | 500,000 | 535,000 | ||||||
Certified Annual Report 13
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
b,cPosco, 8.75%, 3/26/2014 | $ | 500,000 | $ | 598,642 | ||||
cRio Tinto Alcan, Inc., 5.00%, 6/1/2015 | 50,000 | 55,437 | ||||||
MISCELLANEOUS — 0.26% | ||||||||
b,cAnglo American Capital, 9.375%, 4/8/2014 | 500,000 | 615,589 | ||||||
| 4,724,725 | ||||||||
MEDIA — 2.78% | ||||||||
MEDIA — 2.78% | ||||||||
DIRECTV Holdings LLC, 6.375%, 6/15/2015 | 900,000 | 931,500 | ||||||
Echostar DBS Corp., 7.75%, 5/31/2015 | 1,000,000 | 1,066,250 | ||||||
bProquest LLC, 9.00%, 10/15/2018 | 3,000,000 | 3,045,000 | ||||||
Washington Post Co., 7.25%, 2/1/2019 | 500,000 | 600,296 | ||||||
b,dYahoo! Inc., 6.65%, 8/10/2026 | 969,929 | 1,002,906 | ||||||
| 6,645,952 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.11% | ||||||||
PHARMACEUTICALS — 0.11% | ||||||||
Axcan Intermediate Holdings, Inc., 12.75%, 3/1/2016 | 250,000 | 255,000 | ||||||
| 255,000 | ||||||||
REAL ESTATE — 0.12% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 0.12% | ||||||||
HRPT Properties Trust, 0.892%, 3/16/2011 | 275,000 | 274,438 | ||||||
| 274,438 | ||||||||
RETAILING — 1.34% | ||||||||
INTERNET & CATALOG RETAIL — 0.23% | ||||||||
Ticketmaster, 10.75%, 8/1/2016 | 500,000 | 547,500 | ||||||
MULTILINE RETAIL — 0.13% | ||||||||
cParkson Retail Group, 7.125%, 5/30/2012 | 300,000 | 310,890 | ||||||
SPECIALTY RETAIL — 0.98% | ||||||||
Best Buy, Inc., 6.75%, 7/15/2013 | 500,000 | 559,192 | ||||||
Nebraska Book Co., 10.00%, 12/1/2011 | 1,250,000 | 1,265,625 | ||||||
Staples, Inc., 7.75%, 4/1/2011 | 500,000 | 516,265 | ||||||
| 3,199,472 | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.48% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.48% | ||||||||
KLA Instruments Corp., 6.90%, 5/1/2018 | 1,000,000 | 1,147,092 | ||||||
| 1,147,092 | ||||||||
SOFTWARE & SERVICES — 0.90% | ||||||||
INTERNET SOFTWARE & SERVICES — 0.46% | ||||||||
bSSI Investment II, 11.125%, 6/1/2018 | 1,000,000 | 1,097,500 | ||||||
SOFTWARE — 0.44% | ||||||||
bAspect Software, Inc., 10.625%, 5/15/2017 | 1,000,000 | 1,038,750 | ||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 1.15% | 2,136,250 | |||||||
COMMUNICATIONS EQUIPMENT — 0.21% | ||||||||
Motorola, Inc., 7.625%, 11/15/2010 | 500,000 | 503,997 | ||||||
14 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
COMPUTERS & PERIPHERALS — 0.49% | ||||||||
b,cSeagate Technology International, 10.00%, 5/1/2014 | $ | 1,000,000 | $ | 1,180,000 | ||||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS — 0.45% | ||||||||
Avnet, Inc., 5.875%, 6/15/2020 | 1,000,000 | 1,062,554 | ||||||
| 2,746,551 | ||||||||
TELECOMMUNICATION SERVICES — 5.16% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 3.49% | ||||||||
Frontier Communications, 8.25%, 4/15/2017 | 1,000,000 | 1,093,750 | ||||||
b,cGlobal Crossing Ltd., 12.00%, 9/15/2015 | 1,000,000 | 1,130,000 | ||||||
Level 3 Financing, Inc., 9.25%, 11/1/2014 | 700,000 | 658,000 | ||||||
Qwest Corp., 8.875%, 3/15/2012 | 1,000,000 | 1,097,500 | ||||||
Qwest Corp., 8.375%, 5/1/2016 | 500,000 | 591,250 | ||||||
cTelecom Italia Capital, 1.135%, 7/18/2011 | 550,000 | 547,939 | ||||||
b,cVimpelcom, 8.25%, 5/23/2016 | 500,000 | 545,000 | ||||||
Windstream Corp., 8.125%, 8/1/2013 | 1,000,000 | 1,085,000 | ||||||
bZayo Group LLC., 10.25%, 3/15/2017 | 1,500,000 | 1,575,000 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 1.67% | ||||||||
bCC Holdings GS V LLC/Crown Castle Intl. Corp., 7.75%, 5/1/2017 | 1,500,000 | 1,657,500 | ||||||
b,cDigicel Group Ltd., 10.50%, 4/15/2018 | 1,600,000 | 1,756,000 | ||||||
b,cDigicel SA, 12.00%, 4/1/2014 | 500,000 | 582,500 | ||||||
| 12,319,439 | ||||||||
TRANSPORTATION — 7.01% | ||||||||
AIR FREIGHT & LOGISTICS — 0.21% | ||||||||
FedEx Corp., 8.76%, 5/22/2015 | 455,875 | 512,310 | ||||||
AIRLINES — 5.53% | ||||||||
b,cAir Canada, 9.25%, 8/1/2015 | 2,000,000 | 2,020,000 | ||||||
bAmerican Airlines, Inc., 10.50%, 10/15/2012 | 2,000,000 | 2,160,000 | ||||||
American Airlines, Inc., 13.00%, 8/1/2016 | 868,795 | 1,027,351 | ||||||
Continental Airlines, 6.90%, 7/2/2018 | 1,960,756 | 1,941,148 | ||||||
bJet Equipment Trust, 9.41%, 12/15/2013 | 1,628,252 | 1,533,195 | ||||||
dJetBlue Airways Corp., 0.764%, 1/2/2014 | 2,000,000 | 1,800,000 | ||||||
United Air Lines, Inc., 12.75%, 7/15/2012 | 495,600 | 557,550 | ||||||
bUnited Air Lines, Inc., 9.875%, 8/1/2013 | 2,000,000 | 2,170,000 | ||||||
MARINE — 1.02% | ||||||||
Commercial Barge Line Co., 12.50%, 7/15/2017 | 500,000 | 550,000 | ||||||
United Maritime LLC, 11.75%, 6/15/2015 | 1,000,000 | 1,002,500 | ||||||
b,dWindsor Petroleum Transport Corp., 7.84%, 1/15/2021 | 976,077 | 878,469 | ||||||
ROAD & RAIL — 0.25% | ||||||||
Ryder System, Inc., 7.20%, 9/1/2015 | 500,000 | 588,622 | ||||||
| 16,741,145 | ||||||||
UTILITIES — 9.22% | ||||||||
ELECTRIC UTILITIES — 3.55% | ||||||||
Alabama Power Capital Trust V, 3.633%, 10/1/2042 | 700,000 | 700,000 | ||||||
Aquila, Inc., 7.95%, 2/1/2011 | 500,000 | 510,592 | ||||||
Comed Financing III, 6.35%, 3/15/2033 | 1,500,000 | 1,314,267 | ||||||
Commonwealth Edison, 6.15%, 3/15/2012 | 300,000 | 321,811 | ||||||
bDuquesne Light Holdings, 6.40%, 9/15/2020 | 3,000,000 | 3,051,246 | ||||||
Entergy Texas, Inc., 7.125%, 2/1/2019 | 500,000 | 610,952 | ||||||
Certified Annual Report 15
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
b,cListrindo Capital BV, 9.25%, 1/29/2015 | $ | 500,000 | $ | 567,175 | ||||
Metropolitan Edison, 7.70%, 1/15/2019 | 250,000 | 313,272 | ||||||
b,cTaqa Abu Dhabi National Energy Co., 6.60%, 8/1/2013 | 1,000,000 | 1,084,125 | ||||||
GAS UTILITIES — 2.08% | ||||||||
Ferrellgas LP, 9.125%, 10/1/2017 | 1,500,000 | 1,625,625 | ||||||
bSource Gas LLC., 5.90%, 4/1/2017 | 1,000,000 | 996,412 | ||||||
Southern Union Co., 7.20%, 11/1/2066 | 2,000,000 | 1,805,000 | ||||||
Suburban Propane Partners LP, 7.375%, 3/15/2020 | 500,000 | 531,250 | ||||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.21% | ||||||||
RRI Energy, Inc., 7.625%, 6/15/2014 | 500,000 | 495,000 | ||||||
MULTI-UTILITIES — 3.38% | ||||||||
Amerenenergy Generating Co., 7.00%, 4/15/2018 | 1,000,000 | 1,004,776 | ||||||
Black Hills Corp., 9.00%, 5/15/2014 | 500,000 | 592,365 | ||||||
CMS Energy Corp., 8.75%, 6/15/2019 | 2,000,000 | 2,388,040 | ||||||
bEnogex LLC, 6.875%, 7/15/2014 | 1,000,000 | 1,123,777 | ||||||
NiSource Finance Corp., 6.40%, 3/15/2018 | 1,130,000 | 1,310,514 | ||||||
Sempra Energy, 9.80%, 2/15/2019 | 250,000 | 348,541 | ||||||
bTexas-New Mexico Power, 9.50%, 4/1/2019 | 1,000,000 | 1,314,942 | ||||||
| 22,009,682 | ||||||||
TOTAL CORPORATE BONDS (Cost $150,743,598) | 167,744,634 | |||||||
CONVERTIBLE BONDS — 4.04% | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.20% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 0.20% | ||||||||
Covanta Holding Corp., 1.00%, 2/1/2027 | 500,000 | 483,125 | ||||||
| 483,125 | ||||||||
DIVERSIFIED FINANCIALS — 0.75% | ||||||||
DIVERSIFIED FINANCIAL SERVICES — 0.75% | ||||||||
KKR Financial Holdings LLC, 7.00%, 7/15/2012 | 505,000 | 516,994 | ||||||
KKR Financial Holdings LLC, 7.50%, 1/15/2017 | 1,000,000 | 1,268,750 | ||||||
| 1,785,744 | ||||||||
ENERGY — 0.47% | ||||||||
ENERGY EQUIPMENT & SERVICES — 0.47% | ||||||||
Global Industries Ltd., 2.75%, 8/1/2027 | 1,600,000 | 1,126,000 | ||||||
| 1,126,000 | ||||||||
MEDIA — 0.54% | ||||||||
MEDIA — 0.54% | ||||||||
b,cCentral European Media, 3.50%, 3/15/2013 | 1,500,000 | 1,286,250 | ||||||
| �� | 1,286,250 | |||||||
REAL ESTATE — 0.22% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 0.22% | ||||||||
Washington REIT, 3.875%, 9/15/2026 | 500,000 | 513,125 | ||||||
| 513,125 | ||||||||
SOFTWARE & SERVICES — 0.63% | ||||||||
SOFTWARE — 0.63% | ||||||||
b,cTelvent Git SA, 5.50%, 4/15/2015 | 1,500,000 | 1,507,500 | ||||||
| 1,507,500 | ||||||||
16 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
TELECOMMUNICATION SERVICES — 1.23% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.42% | ||||||||
Global Crossing Ltd., 5.00%, 5/15/2011 | $ | 1,000,000 | $ | 1,002,500 | ||||
WIRELESS TELECOMMUNICATION SERVICES — 0.81% | ||||||||
NII Holdings, Inc., 3.125%, 6/15/2012 | 2,000,000 | 1,940,000 | ||||||
| 2,942,500 | ||||||||
TOTAL CONVERTIBLE BONDS (Cost $8,698,964) | 9,644,244 | |||||||
MUNICIPAL BONDS — 2.22% | ||||||||
Louisiana Public Facilities Authority Revenue (Black & Gold Facilities Project C), 5.15%, 4/1/2012 | 175,000 | 175,350 | ||||||
Michigan Higher Education Student Loan Authority, 3.95%, 3/1/2011 | 250,000 | 247,370 | ||||||
bMidwest Family Housing, 5.168%, 7/1/2016 | 910,000 | 823,004 | ||||||
Oakland California Redevelopment Agency, 8.00%, 9/1/2016 | 1,000,000 | 1,077,890 | ||||||
Ohio State Solid Waste (Republic Services Project), 4.25%, 4/1/2033 | 900,000 | 920,070 | ||||||
Oklahoma Development Finance Authority, 8.00%, 5/1/2020 | 1,500,000 | 1,520,430 | ||||||
Wisconsin State Health & Educational Facilities (Richland Hospital), 7.08%, 6/1/2016 | 565,000 | 529,009 | ||||||
TOTAL MUNICIPAL BONDS (Cost $4,967,542) | 5,293,123 | |||||||
U.S. TREASURY SECURITIES — 0.88% | ||||||||
U.S. Treasury, 2.25%, 1/31/2015 | 2,000,000 | 2,099,219 | ||||||
TOTAL U.S. TREASURY SECURITIES (Cost $1,992,645) | 2,099,219 | |||||||
U.S. GOVERNMENT AGENCIES — 0.52% | ||||||||
bAgribank FCB, 9.125%, 7/15/2019 | 1,000,000 | 1,240,334 | ||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $1,047,459) | 1,240,334 | |||||||
MORTGAGE BACKED — 0.01% | ||||||||
Federal National Mtg Assoc. CMO Series 1994-37 Class L, 6.50%, 3/25/2024 | 11,778 | 12,885 | ||||||
TOTAL MORTGAGE BACKED (Cost $11,827) | 12,885 | |||||||
FOREIGN BONDS — 6.86% | ||||||||
BANKS — 0.36% | ||||||||
COMMERCIAL BANKS — 0.36% | ||||||||
NRW.Bank (NOK), 3.50%, 5/21/2013 | 5,000,000 | 857,054 | ||||||
| 857,054 | ||||||||
CONSUMER SERVICES — 0.11% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.11% | ||||||||
a,eFU JI Food (HKD), 0%, 10/18/2010 | 7,000,000 | 271,999 | ||||||
| 271,999 | ||||||||
DIVERSIFIED FINANCIALS — 0.79% | ||||||||
CAPITAL MARKETS — 0.39% | ||||||||
Morgan Stanley (AUD), 5.08%, 3/1/2013 | 1,000,000 | 926,795 | ||||||
CONSUMER FINANCE — 0.40% | ||||||||
SLM Corp. (AUD), 6.00%, 12/15/2010 | 1,000,000 | 960,224 | ||||||
| 1,887,019 | ||||||||
Certified Annual Report 17
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
FOOD & STAPLES RETAILING — 0.54% | ||||||||
FOOD & STAPLES RETAILING — 0.54% | ||||||||
Wesfarmers Ltd. (AUD), 7.427%, 9/11/2014 | $ | 1,300,000 | $ | 1,287,032 | ||||
| 1,287,032 | ||||||||
FOOD, BEVERAGE & TOBACCO — 1.17% | ||||||||
BEVERAGES — 0.49% | ||||||||
bAmbev International Finance Co., Ltd. (BRL), 9.50%, 7/24/2017 | 2,000,000 | 1,170,213 | ||||||
FOOD PRODUCTS — 0.68% | ||||||||
Viterra, Inc. (CAD), 8.50%, 8/1/2017 | 1,500,000 | 1,632,899 | ||||||
| 2,803,112 | ||||||||
INSURANCE — 0.62% | ||||||||
INSURANCE — 0.62% | ||||||||
ELM BV (AUD), 7.635%, 12/31/2049 | 1,000,000 | 759,959 | ||||||
ELM BV (AUD), 6.125%, 12/27/2049 | 1,000,000 | 714,387 | ||||||
| 1,474,346 | ||||||||
MEDIA — 0.43% | ||||||||
MEDIA — 0.43% | ||||||||
bCorus Entertainment (CAD), 7.25%, 2/10/2017 | 1,000,000 | 1,030,440 | ||||||
| 1,030,440 | ||||||||
MISCELLANEOUS — 2.29% | ||||||||
MISCELLANEOUS — 2.29% | ||||||||
BK Nederlandse Gemeenten N.V. (NOK), 4.00%, 5/15/2015 | 5,000,000 | 876,827 | ||||||
International Finance Corp. (KRW), 1.75%, 8/23/2013 | 1,450,000,000 | 1,272,608 | ||||||
Kommunalbanken AS (NOK), 4.00%, 1/26/2015 | 5,000,000 | 876,019 | ||||||
New South Wales Treasury Corp. (AUD), 3.75%, 11/20/2020 | 1,000,000 | 1,063,572 | ||||||
Republic of Brazil (BRL), 12.50%, 1/5/2016 | 2,025,000 | 1,379,322 | ||||||
| 5,468,348 | ||||||||
TELECOMMUNICATION SERVICES — 0.16% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.16% | ||||||||
Wind Acquisition Finance SA (EUR), 11.75%, 7/15/2017 | 250,000 | 378,302 | ||||||
| 378,302 | ||||||||
UTILITIES — 0.39% | ||||||||
INDUSTRIAL POWER PRODUCTION / E NERGY TRADING — 0.39% | ||||||||
Alinta Networks Holdings (AUD), 5.05%, 9/21/2012 | 1,000,000 | 922,004 | ||||||
| 922,004 | ||||||||
TOTAL FOREIGN BONDS (Cost $15,323,711) | 16,379,656 | |||||||
SHORT TERM INVESTMENTS — 2.41% | ||||||||
Kinder Morgan Energy, 0.50%, 10/1/2010 | 5,750,000 | 5,750,000 | ||||||
TOTAL SHORT TERM INVESTMENTS (Cost $5,750,000) | 5,750,000 | |||||||
TOTAL INVESTMENTS — 98.92% (Cost $218,393,229) | $ | 236,108,084 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.08% | 2,566,405 | |||||||
NET ASSETS — 100.00% | $ | 238,674,489 | ||||||
18 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
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, 2010, the aggregate value of these securities in the Fund’s portfolio was $100,294,178, representing 42% of the Fund’s net assets. |
| c | Yankee Bond - Denominated in U.S. dollars and is 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. |
| e | Bond in default. |
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 Real | |
| CAD | Denominated in Canadian Dollars | |
| CMO | Collateralized Mortgage Obligation | |
| EUR | Denominated in Euros | |
| FCB | Farm Credit Bank | |
| HKD | Denominated in Hong Kong Dollars | |
| KRW | Denominated in Korean Won | |
| Mtg | Mortgage | |
| NOK | Denominated in Norwegian Krone | |
| Pfd | Preferred Stock | |
| REIT | Real Estate Investment Trust |
See notes to financial statements.
Certified Annual Report 19
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $218,393,229) (Note 2) | $ | 236,108,084 | ||
Cash | 586,815 | |||
Receivable for fund shares sold | 1,513,151 | |||
Dividends receivable | 213,418 | |||
Dividend and interest reclaim receivable | 5,213 | |||
Interest receivable | 3,566,618 | |||
Prepaid expenses and other assets | 23,281 | |||
Total Assets | 242,016,580 | |||
LIABILITIES | ||||
Payable for securities purchased | 1,384,667 | |||
Payable for fund shares redeemed | 1,404,172 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 106,550 | |||
Payable to investment advisor and other affiliates (Note 3) | 191,187 | |||
Accounts payable and accrued expenses | 94,718 | |||
Dividends payable | 160,797 | |||
Total Liabilities | 3,342,091 | |||
NET ASSETS | $ | 238,674,489 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 257,757 | ||
Net unrealized appreciation on investments | 17,621,922 | |||
Accumulated net realized gain (loss) | 5,444,387 | |||
Net capital paid in on shares of beneficial interest | 215,350,423 | |||
| $ | 238,674,489 | |||
20 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($83,822,237 applicable to 6,788,703 shares of beneficial interest outstanding - Note 4) | $ | 12.35 | ||
Maximum sales charge, 4.50% of offering price | 0.58 | |||
Maximum offering price per share | $ | 12.93 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($81,840,853 applicable to 6,634,601 shares of beneficial interest outstanding - Note 4) | $ | 12.34 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($73,011,399 applicable to 5,909,781 shares of beneficial interest outstanding - Note 4) | $ | 12.35 | ||
| * | 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
| STATEMENT OF OPERATIONS | ||
| Thornburg Strategic Income Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $39,935) | $ | 1,698,781 | ||
Interest income (net of premium amortized of $114,733) | 13,231,588 | |||
Other income | 214,236 | |||
Total Income | 15,144,605 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,400,173 | |||
Administration fees (Note 3) | ||||
Class A Shares | 88,317 | |||
Class C Shares | 80,402 | |||
Class I Shares | 25,857 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 176,635 | |||
Class C Shares | 643,220 | |||
Transfer agent fees | ||||
Class A Shares | 65,369 | |||
Class C Shares | 73,472 | |||
Class I Shares | 24,023 | |||
Registration and filing fees | ||||
Class A Shares | 21,922 | |||
Class C Shares | 24,226 | |||
Class I Shares | 30,098 | |||
Custodian fees (Note 3) | 73,732 | |||
Professional fees | 64,161 | |||
Accounting fees | 8,204 | |||
Trustee fees | 4,320 | |||
Other expenses | 31,166 | |||
Total Expenses | 2,835,297 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (290,387 | ) | ||
Fees paid indirectly (Note 3) | (231 | ) | ||
Net Expenses | 2,544,679 | |||
Net Investment Income | $ | 12,599,926 | ||
22 Certified Annual Report
| STATEMENT OF OPERATIONS, CONTINUED | ||
| Thornburg Strategic Income Fund | Year Ended September 30, 2010 | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 5,730,968 | ||
Forward currency contracts (Note 7) | 135,158 | |||
Foreign currency transactions | 19,151 | |||
| 5,885,277 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 6,902,195 | |||
Forward currency contracts (Note 7) | (44,147 | ) | ||
Foreign currency translations | 8,492 | |||
| 6,866,540 | ||||
Net Realized and Unrealized Gain | 12,751,817 | |||
Net Increase in Net Assets Resulting from Operations | $ | 25,351,743 | ||
| �� |
See notes to financial statements.
Certified Annual Report 23
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg Strategic Income Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 12,599,926 | $ | 6,238,168 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | 5,885,277 | 688,902 | ||||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | 6,866,540 | 17,147,020 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 25,351,743 | 24,074,090 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (4,807,279 | ) | (2,278,787 | ) | ||||
Class C Shares | (4,024,693 | ) | (1,843,592 | ) | ||||
Class I Shares | (3,652,715 | ) | (2,093,817 | ) | ||||
From realized gains | ||||||||
Class A Shares | (274,801 | ) | — | |||||
Class C Shares | (238,982 | ) | — | |||||
Class I Shares | (197,906 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 21,481,084 | 33,284,870 | ||||||
Class C Shares | 25,873,288 | 31,887,106 | ||||||
Class I Shares | 25,203,621 | 23,418,359 | ||||||
Net Increase in Net Assets | 84,713,360 | 106,448,229 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 153,961,129 | 47,512,900 | ||||||
End of Year | $ | 238,674,489 | $ | 153,961,129 | ||||
Undistributed net investment income | $ | 257,757 | $ | 129,172 | ||||
See notes to financial statements.
24 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
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 sixteen 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). 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 a price 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 25
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
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, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 11,971,467 | $ | 11,971,467 | $ | — | $ | — | ||||||||
Preferred Stock(a) | 9,696,169 | 6,975,000 | 2,721,169 | — | ||||||||||||
Asset Backed Securities | 6,276,353 | — | 6,276,353 | — | ||||||||||||
Corporate Bonds | 167,744,634 | — | 158,031,678 | 9,712,956 | ||||||||||||
Convertible Bonds | 9,644,244 | — | 9,644,244 | — | ||||||||||||
Municipal Bonds | 5,293,123 | — | 5,293,123 | — | ||||||||||||
U.S. Treasury Securities | 2,099,219 | 2,099,219 | — | — | ||||||||||||
U.S. Government Agencies | 1,240,334 | — | 1,240,334 | — | ||||||||||||
Mortgage Backed | 12,885 | — | 12,885 | — | ||||||||||||
Foreign Bonds | 16,379,656 | — | 16,379,656 | — | ||||||||||||
Short Term Investments | 5,750,000 | — | 5,750,000 | — | ||||||||||||
Total Investments in Securities | $ | 236,108,084 | $ | 21,045,686 | $ | 205,349,442 | $ | 9,712,956 | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (106,550 | ) | $ | — | $ | (106,550 | ) | $ | — | ||||||
| (a) | Industry classifications for Preferred Stock in Level 2 consisted of $1,177,106 in Banks, $536,563 in Food, Beverage & Tobacco, and $1,007,500 in Insurance at September 30, 2010. |
| * | See Schedule of Investments for a summary of the industry exposure as grouped according to the Global Industry Classification Standard (GICS), which is an industry taxonomy developed by MSCI Barra and Standard & Poor’s (S&P). |
| ** | 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 investment. |
26 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2010, was as follows:
| Beginning Balance 9/30/2009 | Gross Purchases | Gross Sales | Net Realized Gain/(Loss) | Net Unrealized Appreciation / (Depreciation) | Net Transfers in/(out) of Level 3(b) | Ending Balance 9/30/10 | ||||||||||||||||||||||
Investments in Securities(a) | $ | — | $ | 6,680,056 | $ | (51,436 | ) | $4,860 | $ | 664,267 | $ | 2,415,209 | $ | 9,712,956 | ||||||||||||||
| (a) | Level 3 Securities represent 4.07% of Total Net Assets at the year ended September 30, 2010. |
| (b) | Transfers to Level 3 were from Level 2, and were due to a change in other significant observable inputs existing at the year ended September 30, 2010. Transfers into or out of Level 3 are based on the beginning market value of the year in which they occurred. |
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
Foreign Currency Translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities, it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute to shareholders substantially all taxable income, including any net realized gain on investments of the Fund. Therefore, no provision for federal income taxes is required.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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.
Certified Annual Report 27
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
Dividends: Dividends to shareholders, if any, 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 manage -ment 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, 2010, 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. 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, 2010, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $68,134 for Class A shares, $210,009 for Class C shares, and $12,244 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, 2010, the Distributor has advised the Fund that it earned commissions aggregating $47,297 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $10,838 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I shares. 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, 2010, are set forth in the Statement of Operations.
28 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
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, 2010, fees paid indirectly were $231.
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, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 3,856,708 | $ | 45,792,994 | 4,070,731 | $ | 41,692,987 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 293,662 | 3,506,242 | 166,612 | 1,745,944 | ||||||||||||
Shares repurchased | (2,334,960 | ) | (27,818,152 | ) | (1,017,988 | ) | (10,154,061 | ) | ||||||||
Net Increase (Decrease) | 1,815,410 | $ | 21,481,084 | 3,219,355 | $ | 33,284,870 | ||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 2,960,710 | $ | 35,190,787 | 3,999,961 | $ | 40,130,318 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 231,359 | 2,762,178 | 115,785 | 1,220,711 | ||||||||||||
Shares repurchased | (1,013,608 | ) | (12,079,677 | ) | (967,856 | ) | (9,463,923 | ) | ||||||||
Net Increase (Decrease) | 2,178,461 | $ | 25,873,288 | 3,147,890 | $ | 31,887,106 | ||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 3,284,125 | $ | 39,301,651 | 2,608,167 | $ | 25,631,797 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 258,669 | 3,095,659 | 155,088 | 1,629,414 | ||||||||||||
Shares repurchased | (1,441,646 | ) | (17,193,689 | ) | (386,048 | ) | (3,842,852 | ) | ||||||||
Net Increase (Decrease) | 2,101,148 | $ | 25,203,621 | 2,377,207 | $ | 23,418,359 | ||||||||||
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments and U. S. Government obligations) of $135,001,619 and $68,943,954, respectively.
Certified Annual Report 29
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 218,012,808 | ||
Gross unrealized appreciation on a tax basis | $ | 23,375,172 | ||
Gross unrealized depreciation on a tax basis | (5,279,896 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 18,095,276 | ||
Distributable earnings – ordinary income (tax basis) | $ | 3,522,149 | ||
Distributable capital gains (tax basis) | $ | 1,853,821 |
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized investment gain by $13,346 and increased undistributed net investment income by $13,346. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign bond bifurcation, foreign currency gains/losses, and other return of capital adjustments.
The tax character of distributions paid during the year ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 13,135,555 | $ | 6,216,196 | ||||
Capital gains | 60,821 | — | ||||||
Total | $ | 13,196,376 | $ | 6,216,196 | ||||
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. This 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, 2010, 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, 2010 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
30 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 | |
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. Values of open currency contracts are indicative of the activity for the year ended September 30, 2010.
The following table displays the outstanding forward currency contracts at September 30, 2010:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2010
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||||
Euro | Sell | 1,400,900 | 02/22/2011 | 1,907,547 | $ | — | $ | (106,550 | ) | |||||||||||||||
Total | $ | — | $ | (106,550 | ) | |||||||||||||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2010 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2010
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (106,550 | ) | ||
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, 2010 are disclosed in the following tables:
Amount of Realized Gain (Loss) on Derivative Financial Instruments
Recognized in Income for the Year Ended September 30, 2010
| Total | Forward currency contracts | |||||||
Foreign exchange contracts | $ | 135,158 | $ | 135,158 | ||||
Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2010
| Total | Forward currency contracts | |||||||
Foreign exchange contracts | $ | (44,147 | ) | $ | (44,147 | ) | ||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
Certified Annual Report 31
Thornburg Strategic Income Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 11.63 | 0.81 | 0.77 | 1.58 | (0.81 | ) | (0.05 | ) | (0.86 | ) | $ | 12.35 | 6.86 | 1.25 | 1.25 | 1.35 | 14.07 | 38.87 | $ | 83,822 | |||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 10.57 | 0.78 | 1.06 | 1.84 | (0.78 | ) | — | (0.78 | ) | $ | 11.63 | 7.66 | 1.25 | 1.25 | 1.49 | 18.67 | 47.88 | $ | 57,853 | ||||||||||||||||||||||||||||||||||||||||
2008(b)(c) | $ | 11.94 | 0.59 | (1.41 | ) | (0.82 | ) | (0.55 | ) | — | (0.55 | ) | $ | 10.57 | 6.51 | (d) | 1.27 | (d) | 1.25 | (d) | 1.79 | (d) | (7.18 | ) | 36.22 | $ | 18,538 | |||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 11.62 | 0.75 | 0.77 | 1.52 | (0.75 | ) | (0.05 | ) | (0.80 | ) | $ | 12.34 | 6.31 | 1.80 | 1.80 | 2.12 | 13.48 | 38.87 | $ | 81,841 | |||||||||||||||||||||||||||||||||||||||
2009 | $ | 10.57 | 0.73 | 1.04 | 1.77 | (0.72 | ) | — | (0.72 | ) | $ | 11.62 | 7.13 | 1.79 | 1.79 | 2.29 | 17.95 | 47.88 | $ | 51,789 | ||||||||||||||||||||||||||||||||||||||||
2008(c) | $ | 11.94 | 0.55 | (1.42 | ) | (0.87 | ) | (0.50 | ) | — | (0.50 | ) | $ | 10.57 | 5.96 | (d) | 1.82 | (d) | 1.80 | (d) | 2.65 | (d) | (7.57 | ) | 36.22 | $ | 13,829 | |||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 11.64 | 0.85 | 0.75 | 1.60 | (0.84 | ) | (0.05 | ) | (0.89 | ) | $ | 12.35 | 7.13 | 0.98 | 0.98 | 1.00 | 14.27 | 38.87 | $ | 73,011 | |||||||||||||||||||||||||||||||||||||||
2009 | $ | 10.58 | 0.81 | 1.05 | 1.86 | (0.80 | ) | — | (0.80 | ) | $ | 11.64 | 7.94 | 0.99 | 0.99 | 1.12 | 18.95 | 47.88 | $ | 44,319 | ||||||||||||||||||||||||||||||||||||||||
2008(c) | $ | 11.94 | 0.63 | (1.42 | ) | (0.79 | ) | (0.57 | ) | — | (0.57 | ) | $ | 10.58 | 6.81 | (d) | 1.01 | (d) | 0.99 | (d) | 1.44 | (d) | (6.90 | ) | 36.22 | $ | 15,145 | |||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Fund commenced operations on December 19, 2007. |
| (d) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 32 Certified Annual Report | Certified Annual Report 33 |
| 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, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
34 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg Strategic Income Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,060.90 | $ | 6.45 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.81 | $ | 6.32 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,058.00 | $ | 9.26 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,016.07 | $ | 9.07 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,061.40 | $ | 5.10 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.12 | $ | 5.00 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A : 1.25%; C: 1.80%; I: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 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 Strategic Income Fund | September 30, 2010 (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, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010 (with sales charge)
| 1 Yr | Since Inception | |||||||
A Shares (Incep: 12/19/07) | 8.92 | % | 6.78 | % | ||||
C Shares (Incep: 12/19/07) | 12.48 | % | 7.95 | % | ||||
I Shares (Incep: 12/19/07) | 14.27 | % | 8.83 | % | ||||
Barclays U.S. Universal Index | 8.92 | % | 7.04 | % | ||||
Blended Index | 8.21 | % | 4.46 | % | ||||
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 Index is composed of 80% Barclays Capital Aggregate Bond Index and 20% MSCI World Index. The Barclays Capital Aggregate Bond Index is composed of approximately 8,000 publicly traded bonds including U.S. government, mortgage-backed, corporate and Yankee bonds. The index is weighted by the market value of the bonds included in the index. The MSCI World Index is an unmanaged market-weighted index that consists of securities traded in 24 of the world’s most developed countries. Securities are listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The index is calculated with net dividends reinvested, in U.S. dollars.
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. Investors cannot invest directly in an index.
36 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg Strategic Income Fund | September 30, 2010 (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, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 65 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. | None | ||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||
Susan H. Dubin, 61 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, 56 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, 51 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 Strategic Income Fund | September 30, 2010 (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, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Certified Annual Report 38
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 Strategic Income Fund | September 30, 2010 (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, 2010, dividends paid by the Thornburg Strategic Income Fund of $60,821 are designated as long term capital gains dividends for federal income tax purposes.
For the tax year ended September 30, 2010, the Thornburg Strategic Income Fund designates 4.76% (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.
2.26% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the tax year ended September 30, 2010 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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for the purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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.
40 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 (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 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 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 evaluating quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment return in the first full calendar year of the two calendar years of Fund operations since inception had been significantly lower than the returns of the fund category for which calendar year returns were presented, the index, and the blended benchmark, but that the Fund’s return for the most recent calendar year had been significantly higher than the returns of the same fund category, the index and the blended benchmark. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment returns had fallen at or near the median of the same fund category for the year-to-date and one-year periods ended with the second quarter of the current year, and that the Fund’s investment returns in the same periods had fallen above the median of the second fund category for which data was presented.
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 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, and 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. The Trustees observed that the management fee charged to the Fund was somewhat higher than the median and average fees charged to the group of funds assembled by the analyst firm, that the Fund’s expense ratio was comparable to the median and average expense ratios of the fund group, and 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 confirmed their previous observations 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 41
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Strategic Income Fund | September 30, 2010 (Unaudited) | |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms, 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 the adequacy of the Advisor’s resources and 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.
42 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
The Trustees are concerned that ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
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44 This page is not part of the Annual Report.
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 Developing World 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
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 Developing World 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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Important Information
The information presented on the following pages was current as of September 30, 2010. 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. Funds invested in a limited number of holdings may expose an investor to greater volatility.
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.
Alpha – A measure of the difference between a fund’s actual returns and its expected performance, given its level of risk as measured by beta.
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.
Forward P/E – Price to earnings ratio, using earnings estimates for the next four quarters.
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 Value Fund
Left to right:
Connor Browne,CFA, and Edward Maran,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 1.34%, 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 last 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 9/30/10
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 10/2/95) | ||||||||||||||||||||
Without sales charge | 3.21 | % | -7.83 | % | 2.05 | % | 1.32 | % | 9.27 | % | ||||||||||
With sales charge | -1.44 | % | -9.23 | % | 1.11 | % | 0.85 | % | 8.94 | % | ||||||||||
S&P 500 Index | ||||||||||||||||||||
(Since 10/2/95) | 10.16 | % | -7.16 | % | 0.64 | % | -0.43 | % | 6.49 | % | ||||||||||
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 9/30/10
Top Contributors | Top Detractors | |
| Smith International Inc. | Transocean Ltd. | |
| DIRECTV Group, Inc. | Gilead Sciences, Inc. | |
| ConocoPhillips | Monsanto Co. | |
| Varian Medical Systems, Inc. | Dell, Inc. | |
| ING Groep N.V. | Alere, Inc. | |
| Source: FactSet | ||
KEY PORTFOLIO ATTRIBUTES
As of 9/30/10
Portfolio P/E Trailing 12-months* | 12.9x | |||
Portfolio Price to Cash Flow* | 5.3x | |||
Portfolio Price to Book Value* | 1.4x | |||
Median Market Cap* | $ | 10.2 B | ||
7-Year Beta (A Shares vs. S&P 500)* | 1.07 | |||
Number of Companies | 50 | |||
| * | Source: FactSet |
MARKET CAPITALIZATION EXPOSURE
As of 9/30/10
BASKET STRUCTURE
As of 9/30/10
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Thornburg Value Fund
September 30, 2010
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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
Connor Browne,CFA Co-Portfolio Manager
Edward E. Maran,CFA Co-Portfolio Manager | October 18, 2010
Dear Fellow Shareholder:
It was a challenging fiscal year for the Thornburg Value Fund in terms of relative performance. While our results were positive, 3.21% for the total return of Class A shares at net asset value (NAV), we did not keep pace with the S&P 500 Index over the same period, which returned 10.16%. We think it is important to put this year’s performance in context, however. The fiscal year ended September 2009 was a terrific year for the Fund returning 7.65%, Class A shares at NAV vs. negative 6.91% for the S&P 500 Index. There are some reasons for optimism as we look ahead. Most of the investments that have been a drag on our performance this year are sound businesses with good growth prospects and attractive valuations. We are hopeful that these stocks may recover, as the underlying value of their businesses appears intact.
While we generally shy away from any macroeconomic prognostications in these pages, we do have an opinion on a current topic of interest in the press and media. It is your co-managers’ belief that any current discount in the valuation of equities that reflects the possibility of deflation is unwarranted. We believe that Ben Bernanke and the Federal Open Market Committee that he leads will fight deflation aggressively. We expect a second round of quantitative easing in the United States. We believe that this monetary stimulus will be effective and that expectations for economic growth and inflation will rise. In our opinion, the environment we anticipate should be favorable for equities in general and we believe the Thornburg Value Fund could benefit, too.
Let’s start out with what hurt performance during the year. In terms of the positioning of the portfolio, our overweight in the health care sector and our underweight in the industrials sector both weighed on performance. That said, weak stock price performance by a few of our individual holdings was a much greater driver of underperformance. Specifically, Transocean, Gilead Sciences, Actelion, Monsanto, Dell, and Alere were all weak performers during the period. All of these stocks remain in the portfolio today. In each case we remain bullish in the outlook for these companies and confident that they will contribute alpha, rather than destroy it, in future periods.
We wrote about Transocean in our semi-annual letter this year. Regarding the Deepwater Horizon oil spill in the Gulf of Mexico (Transocean owned the drilling rig), we stated, “The injuries, loss of life, and economic and environmental impacts of this incident are truly tragic.” But also that, “We currently believe the costs to Transocean associated with the Horizon disaster will be materially less than the decline in the market capitalization of the company since the incident.” We continue to believe this to be the case, and added to our Transocean position after the spill. We added another deepwater drilling company, Ensco, to the portfolio as well. Everyone is relieved that the environmental impact seems to be much better than worst case. Further, as the moratorium on Gulf of Mexico (GOM) drilling was recently lifted, we expect Transocean’s stock price to better reflect the true fundamentals of the business over time. Transocean was a very tough stock for us during the fiscal year, but it remains a large position and is an investment that we remain excited about. | |
Certified Annual Report 7
| Letter to Shareholders, | ||
Continued | ||
Gilead and Actelion are both biotechnology/pharmaceutical companies. Gilead has seen a tremendous decline in the value investors are willing to ascribe to its earnings. Gilead’s forward P/E multiple has declined from over 25x two years ago to under 10x today. Why? We think it has been a combination of concerns regarding health care reform in the United States, austerity measures in the European Union, and further investor attention on their 2017/2018 patent expirations. Gilead continues to dominate the treatment of HIV/AIDS, and has grown both revenues and earnings consistently for over a decade. We don’t believe the current low valuation is justified. Actelion reported a number of new drug development setbacks during the fiscal year that were disappointing to us and investors more broadly. At time of purchase, we believed the stock was cheap, even if we attributed value only to its currently marketed products and ignored the value of its pipeline. As of this writing, Actelion’s share price has improved dramatically since the end of our fiscal year as reports of a potential takeover have surfaced.
Monsanto has faced an avalanche of bad news. When we first invested, the company derived 15%–20% of its earnings from a herbicide product called Roundup, which was facing generic competition from China. Given the low growth and declining profitability of that business line, we attributed very little value to it, but we were very enthusiastic about their genetically modified seeds business, which contributed 80% of profits and had strong growth prospects. Since that time, competition intensified and the company is now selling Roundup at a price at or near breakeven. This was disappointing news, but even worse has been weak reported yields for Monsanto’s newest corn seed, their SuperStax. While we are monitoring these developments closely, we continue to believe that limited acreage available for farming and rising consumption of meat and poultry in emerging markets will put upward pressure on grain prices and that the value added of Monsanto’s genetically modified seeds will continue to rise.
Rounding out the weak performers for the year were Dell and Alere (formerly Inverness Medical). Dell’s current valuation looks very compelling to us today. While the substitution of tablets (Apple’s iPad) for laptops may hurt Dell’s future revenue growth opportunities, we believe that the company’s strong enterprise relationships, brand, and strong position in many emerging markets are often overlooked by investors. Alere is a health care company that operates two main businesses, the development and sales of point of care testing devices, and the management of chronic diseases. We believe the testing business should be a steady growth business and justifies more than the current stock price today. To the extent that Alere is successful in chronic disease management, the company could be a very strong investment for the Fund.
On the bright side, many stocks did perform well during the period. Smith International, an oil field services company, was acquired by Schlumberger during the fiscal year. Two other energy holdings, ConocoPhillips (the large integrated energy company) and Ensco (a drilling rig operator like Transocean) also performed very well. DIRECTV (DTV), the satellite television provider, was a great holding for us during the recession. We purchased DTV in August of 2007, just as we were headed into this terrible downturn. We viewed DTV as a Consistent Earning company, rather than as an at risk consumer discretionary holding, its sector categorization. Because of this differentiated view, we held on to our shares through the downturn, and captured 73% cumulative performance in DTV through our price target sale in June of this year. In contrast, the S&P 500 Index moved 22% lower during that same time period.
8 Certified Annual Report
Recent performance 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 has delivered strong results to investors since inception and we remain confident that it has the potential to deliver similar results in the future. We invite you to visit our web site at www.thornburg.com where you will find useful information on the Thornburg Value Fund as well as our other funds and investment topics.
Thank you for your trust and confidence.
| Sincerely, | ||
 |  | |
| Connor Browne,CFA | Edward E. Maran,CFA | |
| Co-Portfolio Manager | Co-Portfolio Manager | |
| Managing Director | Managing Director | |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 9
| SCHEDULE OF INVESTMENTS | ||
| Thornburg Value Fund | September 30, 2010 | |
TOP TEN HOLDINGS
As of 9/30/10
Gilead Sciences, Inc. | 4.2 | % | Google, Inc. | 3.3 | % | |||||
Transocean Ltd. | 3.9 | % | General Electric Co. | 3.2 | % | |||||
Dell, Inc. | 3.8 | % | Inpex Corp. | 3.0 | % | |||||
Fiserv, Inc. | 3.5 | % | Eli Lilly & Co. | 2.9 | % | |||||
ING Groep N.V. | 3.4 | % | Comcast Corp. | 2.8 | % |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/10
Energy | 17.1 | % | Telecommunication Services | 4.9 | % | |||||
Software & Services | 15.5 | % | Health Care Equipment & Services | 4.3 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 13.2 | % | Media | 4.3 | % | |||||
Diversified Financials | 9.1 | % | Insurance | 3.9 | % | |||||
Materials | 6.9 | % | Semiconductors & Semiconductor Equipment | 2.6 | % | |||||
Technology Hardware & Equipment | 5.6 | % | Consumer Services | 1.7 | % | |||||
Banks | 5.0 | % | Food & Staples Retailing | 0.2 | % | |||||
Capital Goods | 5.0 | % | Other Assets & Cash Equivalents | 0.7 | % |
| Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 96.41% | ||||||||
BANKS — 4.31% | ||||||||
COMMERCIAL BANKS — 4.31% | ||||||||
Mitsubishi UFJ Financial Group, Inc. | 16,426,201 | $ | 76,542,791 | |||||
a,bSterling Financial Corp. | 12,000,000 | 2,400,000 | ||||||
U.S. Bancorp | 4,421,058 | 95,583,274 | ||||||
| 174,526,065 | ||||||||
CAPITAL GOODS — 4.97% | ||||||||
AEROSPACE & DEFENSE — 1.76% | ||||||||
Lockheed Martin Corp. | 1,001,983 | 71,421,348 | ||||||
INDUSTRIAL CONGLOMERATES — 3.21% | ||||||||
General Electric Co. | 8,014,900 | 130,242,125 | ||||||
| 201,663,473 | ||||||||
CONSUMER SERVICES — 1.70% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 1.70% | ||||||||
bLife Time Fitness, Inc. | 1,746,636 | 68,939,723 | ||||||
| 68,939,723 | ||||||||
DIVERSIFIED FINANCIALS — 9.06% | ||||||||
CAPITAL MARKETS — 0.51% | ||||||||
AllianceBernstein Holding LP | 787,430 | 20,796,026 | ||||||
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
DIVERSIFIED FINANCIAL SERVICES — 8.55% | ||||||||
Bank of America Corp. | 7,672,000 | $ | 100,579,920 | |||||
bING Groep N.V. | 13,269,200 | 137,659,125 | ||||||
JPMorgan Chase & Co. | 2,844,125 | 108,275,839 | ||||||
| 367,310,910 | ||||||||
ENERGY — 17.06% | ||||||||
ENERGY EQUIPMENT & SERVICES — 6.46% | ||||||||
Ensco plc ADR | 2,320,000 | 103,773,600 | ||||||
bTransocean Ltd. | 2,457,200 | 157,973,388 | ||||||
OIL, GAS & CONSUMABLE FUELS — 10.60% | ||||||||
ConocoPhillips | 1,512,475 | 86,861,439 | ||||||
Inpex Corp. | 25,960 | 122,212,267 | ||||||
Marathon Oil Corp. | 2,643,300 | 87,493,230 | ||||||
OAO Gazprom ADR | 3,869,420 | 81,064,349 | ||||||
bSandridge Energy, Inc. | 9,215,065 | 52,341,569 | ||||||
| 691,719,842 | ||||||||
FOOD & STAPLES RETAILING — 0.20% | ||||||||
FOOD & STAPLES RETAILING — 0.20% | ||||||||
bRite Aid Corp. | 8,717,107 | 8,220,232 | ||||||
| 8,220,232 | ||||||||
HEALTH CARE EQUIPMENT & SERVICES — 4.28% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 3.74% | ||||||||
bAlere, Inc. | 2,029,900 | 62,784,807 | ||||||
bVarian Medical Services, Inc. | 1,468,090 | 88,819,445 | ||||||
HEALTH CARE PROVIDERS & SERVICES — 0.54% | ||||||||
bCommunity Health Systems, Inc. | 706,024 | 21,865,563 | ||||||
| 173,469,815 | ||||||||
INSURANCE — 3.93% | ||||||||
INSURANCE — 3.93% | ||||||||
Hartford Financial Services Group, Inc. | 2,700,540 | 61,977,393 | ||||||
Transatlantic Holdings, Inc. | 1,914,600 | 97,299,972 | ||||||
| 159,277,365 | ||||||||
MATERIALS — 6.21% | ||||||||
CHEMICALS — 2.28% | ||||||||
Monsanto Co. | 1,923,600 | 92,198,148 | ||||||
METALS & MINING — 3.93% | ||||||||
Tokyo Steel Mfg. | 7,435,600 | 87,734,379 | ||||||
United States Steel Corp. | 1,636,100 | 71,726,624 | ||||||
| 251,659,151 | ||||||||
MEDIA — 4.26% | ||||||||
MEDIA — 4.26% | ||||||||
Comcast Corp. | 6,792,675 | 115,543,402 | ||||||
Dish Network Corp. | 2,983,838 | 57,170,336 | ||||||
| 172,713,738 | ||||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 13.21% | ||||||||
BIOTECHNOLOGY — 6.36% | ||||||||
bActelion Ltd. | 1,080,600 | $ | 43,294,380 | |||||
bGilead Sciences, Inc. | 4,797,905 | 170,853,397 | ||||||
bTalecris Biotherapeutics Holdings Corp. | 1,920,400 | 43,938,752 | ||||||
LIFE SCIENCES TOOLS & SERVICES — 2.07% | ||||||||
bThermo Fisher Scientific, Inc. | 1,754,365 | 83,998,996 | ||||||
PHARMACEUTICALS — 4.78% | ||||||||
Eli Lilly & Co. | 3,167,730 | 115,717,177 | ||||||
Roche Holdings AG | 570,800 | 77,953,859 | ||||||
| 535,756,561 | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.64% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.64% | ||||||||
bMEMC Electronic Materials, Inc. | 6,469,851 | 77,120,624 | ||||||
bON Semiconductor Corp. | 4,126,527 | 29,752,260 | ||||||
| 106,872,884 | ||||||||
SOFTWARE & SERVICES — 15.49% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 7.92% | ||||||||
bAmdocs Ltd. | 3,023,348 | 86,649,154 | ||||||
Computer Sciences Corp. | 1,981,218 | 91,136,028 | ||||||
bFiserv, Inc. | 2,663,570 | 143,353,337 | ||||||
INTERNET SOFTWARE & SERVICES — 3.31% | ||||||||
bGoogle, Inc. | 255,554 | 134,367,738 | ||||||
SOFTWARE — 4.26% | ||||||||
bAdobe Systems, Inc. | 2,447,400 | 63,999,510 | ||||||
bANSYS, Inc. | 993,025 | 41,955,306 | ||||||
Microsoft Corp. | 2,722,100 | 66,664,229 | ||||||
| 628,125,302 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 5.65% | ||||||||
COMPUTERS & PERIPHERALS — 4.91% | ||||||||
bDell, Inc. | 11,801,700 | 152,950,032 | ||||||
bNCR Corp. | 3,368,100 | 45,907,203 | ||||||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS — 0.74% | ||||||||
Corning, Inc. | 1,650,735 | 30,175,436 | ||||||
| 229,032,671 | ||||||||
TELECOMMUNICATION SERVICES — 3.44% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.92% | ||||||||
bLevel 3 Communications, Inc. | 39,653,356 | 37,167,091 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 2.52% | ||||||||
China Mobile Ltd. | 8,188,500 | 83,902,350 | ||||||
bLeap Wireless International, Inc. | 1,498,818 | 18,510,402 | ||||||
| 139,579,843 | ||||||||
TOTAL COMMON STOCK (Cost $4,029,042,909) | 3,908,867,575 | |||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
PREFERRED STOCK — 0.68% | ||||||||
BANKS — 0.68% | ||||||||
COMMERCIAL BANKS — 0.68% | ||||||||
a,bSterling Financial Corp. Pfd, 0.00% | 300,000 | $ | 27,600,000 | |||||
TOTAL PREFERRED STOCK (Cost $27,600,000) | 27,600,000 | |||||||
CORPORATE BONDS — 1.19% | ||||||||
TELECOMMUNICATION SERVICES — 1.19% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.19% | ||||||||
Level 3 Financing, Inc., 9.25%, 11/1/2014 | $ | 51,489,000 | 48,399,660 | |||||
TOTAL CORPORATE BONDS (Cost $44,632,016) | 48,399,660 | |||||||
CONVERTIBLE BONDS — 1.04% | ||||||||
MATERIALS — 0.73% | ||||||||
METALS & MINING — 0.73% | ||||||||
cAnglogold Holdings Ltd., 3.50%, 5/22/2014 | 25,000,000 | 29,618,750 | ||||||
| 29,618,750 | ||||||||
TELECOMMUNICATION SERVICES — 0.31% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.31% | ||||||||
Level 3 Communications, Inc., 6.50%, 10/1/2016 | 12,049,000 | 12,320,102 | ||||||
TOTAL CONVERTIBLE BONDS (Cost $37,044,212) | 41,938,852 | |||||||
SHORT TERM INVESTMENTS — 1.16% | ||||||||
Atmos Energy Corp., 0.29%, 10/1/2010 | 47,000,000 | 47,000,000 | ||||||
TOTAL SHORT TERM INVESTMENTS (Cost $47,000,000) | 47,000,000 | |||||||
TOTAL INVESTMENTS — 100.48% (Cost $4,185,319,137) | $ | 4,073,806,087 | ||||||
LIABILITIES NET OF OTHER ASSETS — (0.48)% | (19,444,232 | ) | ||||||
NET ASSETS — 100.00% | $ | 4,054,361,855 | ||||||
Footnote Legend
| a | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
| b | Non-income producing. |
| 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, 2010, the aggregate value of these securities in the Fund’s portfolio was $29,618,750, representing 0.73% 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 | |
| Pfd | Preferred Stock |
See notes to financial statements.
Certified Annual Report 13
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg Value Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $4,185,319,137) (Note 2) | $ | 4,073,806,087 | ||
Cash | 724,816 | |||
Receivable for fund shares sold | 9,329,094 | |||
Dividends receivable | 5,967,596 | |||
Dividend and interest reclaim receivable | 636,965 | |||
Interest receivable | 2,321,944 | |||
Prepaid expenses and other assets | 65,023 | |||
Total Assets | 4,092,851,525 | |||
LIABILITIES | ||||
Payable for securities purchased | 935,124 | |||
Payable for fund shares redeemed | 17,075,569 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 15,756,867 | |||
Payable to investment advisor and other affiliates (Note 3) | 3,087,374 | |||
Accounts payable and accrued expenses | 1,616,474 | |||
Dividends payable | 18,262 | |||
Total Liabilities | 38,489,670 | |||
NET ASSETS | $ | 4,054,361,855 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 1,815,153 | ||
Net unrealized depreciation on investments | (127,194,751 | ) | ||
Accumulated net realized gain (loss) | (775,813,245 | ) | ||
Net capital paid in on shares of beneficial interest | 4,955,554,698 | |||
| $ | 4,054,361,855 | |||
14 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||||
| Thornburg Value Fund | September 30, 2010 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($1,131,593,792 applicable to 37,176,030 shares of beneficial interest outstanding - - Note 4) | $ | 30.44 | ||
Maximum sales charge, 4.50% of offering price | 1.43 | |||
Maximum offering price per share | $ | 31.87 | ||
Class B Shares: | ||||
Net asset value and offering price per share * ($22,036,462 applicable to 764,827 shares of beneficial interest outstanding - Note 4) | $ | 28.81 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($329,760,484 applicable to 11,301,772 shares of beneficial interest outstanding - Note 4) | $ | 29.18 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($2,087,380,037 applicable to 67,449,169 shares of beneficial interest outstanding - Note 4) | $ | 30.95 | ||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($200,362,111 applicable to 6,624,857 shares of beneficial interest outstanding - Note 4) | $ | 30.24 | ||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($54,460,797 applicable to 1,791,881 shares of beneficial interest outstanding - Note 4) | $ | 30.39 | ||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($228,768,172 applicable to 7,399,016 shares of beneficial interest outstanding - Note 4) | $ | 30.92 | ||
| * | 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 Value Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $1,135,337) | $ | 61,950,591 | ||
Interest income (net of premium amortized of $20,037) | 14,601,399 | |||
Total Income | 76,551,990 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 29,279,476 | |||
Administration fees (Note 3) | ||||
Class A Shares | 1,547,184 | |||
Class B Shares | 36,605 | |||
Class C Shares | 447,041 | |||
Class I Shares | 940,989 | |||
Class R3 Shares | 235,693 | |||
Class R4 Shares | 73,248 | |||
Class R5 Shares | 106,767 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 3,088,219 | |||
Class B Shares | 292,332 | |||
Class C Shares | 3,576,325 | |||
Class R3 Shares | 942,508 | |||
Class R4 Shares | 146,393 | |||
Transfer agent fees | ||||
Class A Shares | 2,011,115 | |||
Class B Shares | 66,475 | |||
Class C Shares | 561,408 | |||
Class I Shares | 2,038,020 | |||
Class R3 Shares | 467,713 | |||
Class R4 Shares | 177,728 | |||
Class R5 Shares | 619,266 | |||
Registration and filing fees | ||||
Class A Shares | 47,820 | |||
Class B Shares | 16,977 | |||
Class C Shares | 21,689 | |||
Class I Shares | 140,496 | |||
Class R3 Shares | 20,263 | |||
Class R4 Shares | 21,274 | |||
Class R5 Shares | 19,927 | |||
Custodian fees (Note 3) | 550,475 | |||
Professional fees | 132,155 | |||
Accounting fees | 167,260 | |||
Trustee fees | 98,255 | |||
Other expenses | 395,667 | |||
Total Expenses | 48,286,763 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,003,299 | ) | ||
Net Expenses | 47,283,464 | |||
Net Investment Income | $ | 29,268,526 | ||
16 Certified Annual Report
| STATEMENT OF OPERATIONS, CONTINUED | ||
| Thornburg Value Fund | Year Ended September 30, 2010 | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 399,144,302 | ||
Forward currency contracts (Note 7) | (4,208,059 | ) | ||
Foreign currency transactions | (863,395 | ) | ||
| 394,072,848 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (303,173,201 | ) | ||
Forward currency contracts (Note 7) | (15,756,867 | ) | ||
Foreign currency translations | 53,064 | |||
| (318,877,004 | ) | |||
Net Realized and Unrealized Gain | 75,195,844 | |||
Net Increase in Net Assets Resulting from Operations | $ | 104,464,370 | ||
See notes to financial statements.
Certified Annual Report 17
| STATEMENTS OF CHANGES IN NET ASSETS |
| Thornburg Value Fund |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 29,268,526 | $ | 45,726,331 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | 394,072,848 | (886,084,841 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | (318,877,004 | ) | 899,659,702 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 104,464,370 | 59,301,192 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (7,120,379 | ) | (16,118,746 | ) | ||||
Class B Shares | (57,103 | ) | (326,779 | ) | ||||
Class C Shares | (815,194 | ) | (2,935,911 | ) | ||||
Class I Shares | (17,633,649 | ) | (24,133,460 | ) | ||||
Class R3 Shares | (1,025,249 | ) | (2,185,830 | ) | ||||
Class R4 Shares | (339,423 | ) | (535,872 | ) | ||||
Class R5 Shares | (1,893,225 | ) | (2,440,948 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (100,540,665 | ) | 64,047,983 | |||||
Class B Shares | (17,635,969 | ) | (22,207,742 | ) | ||||
Class C Shares | (40,055,751 | ) | (43,229,232 | ) | ||||
Class I Shares | 479,233,524 | (326,092,244 | ) | |||||
Class R3 Shares | 34,129,445 | (5,811,678 | ) | |||||
Class R4 Shares | 10,529,029 | 11,324,512 | ||||||
Class R5 Shares | 60,623,632 | 21,262,560 | ||||||
Net Increase (Decrease) in Net Assets | 501,863,393 | (290,082,195 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 3,552,498,462 | 3,842,580,657 | ||||||
End of Year | $ | 4,054,361,855 | $ | 3,552,498,462 | ||||
Undistributed net investment income | $ | 1,815,153 | $ | 1,871,097 | ||||
See notes to financial statements.
18 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Value Fund | September 30, 2010 | |
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 sixteen 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). 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 a price 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 Value Fund | September 30, 2010 | |
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, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock(a) | $ | 3,908,867,575 | $ | 3,906,467,575 | $ | — | $ | 2,400,000 | ||||||||
Preferred Stock(a) | 27,600,000 | — | — | 27,600,000 | ||||||||||||
Corporate Bonds | 48,399,660 | — | 48,399,660 | — | ||||||||||||
Convertible Bonds | 41,938,852 | — | 41,938,852 | — | ||||||||||||
Short Term Investments | 47,000,000 | — | 47,000,000 | — | ||||||||||||
Total Investments in Securities | $ | 4,073,806,087 | $ | 3,906,467,575 | $ | 137,338,512 | $ | 30,000,000 | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (15,756,867 | ) | $ | — | $ | (15,756,867 | ) | $ | — | ||||||
| (a) | Industry classifications for Level 3 valuations consisted of $2,400,000 in Common Stock and $27,600,000 in Preferred Stock, both in Banks at September 30, 2010. |
| * | See Schedule of Investments for a summary of the industry exposure as grouped according to the Global Industry Classification Standard (GICS), which is an industry taxonomy developed by MSCI Barra and Standard & Poor’s (S&P). |
| ** | 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 investment. |
20 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 | |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2010, was as follows:
| Beginning Balance 9/30/2009 | Gross Purchases (b) | Gross Sales | Net Realized Gain/(Loss) | Net Unrealized Appreciation/ (Depreciation) | Net Transfers in/(out) of Level 3 | Ending Balance 9/30/2010 | ||||||||||||||||||||||
Investments in Securities(a) | $ | — | $ | 30,000,000 | $ | — | $ | — | $ | — | $ | — | $ | 30,000,000 | ||||||||||||||
| (a) | Level 3 Securities represent 0.74% of Total Net Assets at the year ended September 30, 2010. |
| (b) | Assets valued using Level 3 inputs comprised of purchases of unregistered stock during the year ended September 30, 2010. |
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
Foreign Currency Translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities, it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute to shareholders substantially all taxable income, including any net realized gain on investments of the Fund. Therefore, no provision for federal income taxes is required.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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, if any, 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.
Certified Annual Report 21
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 | |
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, 2010, 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, 2010, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $576,336 for Class R3 shares, $138,710 for Class R4 Shares, and $288,253 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, 2010, the Distributor has advised the Fund that it earned net commissions aggregating $78,214 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $26,809 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I and Class R5 shares. 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, 2010, 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, 2010, there were no fees paid indirectly.
Certain officers and Trustees of the Trust are also officers and/or directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
22 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 | |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 8,919,655 | $ | 275,295,386 | 21,996,783 | $ | 495,137,300 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 185,067 | 5,782,360 | 526,363 | 12,590,999 | ||||||||||||
Shares repurchased | (12,535,727 | ) | (381,632,085 | ) | (20,767,504 | ) | (443,715,236 | ) | ||||||||
Redemption fees received* | — | 13,674 | — | 34,920 | ||||||||||||
Net Increase (Decrease) | (3,431,005 | ) | $ | (100,540,665 | ) | 1,755,642 | $ | 64,047,983 | ||||||||
Class B Shares | ||||||||||||||||
Shares sold | 33,963 | $ | 1,007,852 | 123,500 | $ | 2,607,505 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,560 | 46,442 | 12,305 | 270,413 | ||||||||||||
Shares repurchased | (640,143 | ) | (18,690,579 | ) | (1,177,554 | ) | (25,087,288 | ) | ||||||||
Redemption fees received* | — | 316 | — | 1,628 | ||||||||||||
Net Increase (Decrease) | (604,620 | ) | $ | (17,635,969 | ) | (1,041,749 | ) | $ | (22,207,742 | ) | ||||||
Class C Shares | ||||||||||||||||
Shares sold | 1,160,118 | $ | 34,417,962 | 1,876,368 | $ | 41,683,603 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 23,192 | 698,534 | 110,865 | 2,523,300 | ||||||||||||
Shares repurchased | (2,561,879 | ) | (75,176,179 | ) | (4,196,286 | ) | (87,447,481 | ) | ||||||||
Redemption fees received* | — | 3,932 | — | 11,346 | ||||||||||||
Net Increase (Decrease) | (1,378,569 | ) | $ | (40,055,751 | ) | (2,209,053 | ) | $ | (43,229,232 | ) | ||||||
Class I Shares | ||||||||||||||||
Shares sold | 33,481,948 | $ | 1,049,288,699 | 22,175,103 | $ | 544,582,100 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 436,183 | 13,744,602 | 780,762 | 18,926,149 | ||||||||||||
Shares repurchased | (18,718,597 | ) | (583,820,763 | ) | (39,596,078 | ) | (889,646,618 | ) | ||||||||
Redemption fees received* | — | 20,986 | — | 46,125 | ||||||||||||
Net Increase (Decrease) | 15,199,534 | $ | 479,233,524 | (16,640,213 | ) | $ | (326,092,244 | ) | ||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 3,017,720 | $ | 92,556,011 | 1,686,345 | $ | 39,658,963 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 31,966 | 989,285 | 89,721 | 2,114,046 | ||||||||||||
Shares repurchased | (1,927,763 | ) | (59,417,965 | ) | (2,071,335 | ) | (47,589,434 | ) | ||||||||
Redemption fees received* | — | 2,114 | — | 4,747 | ||||||||||||
Net Increase (Decrease) | 1,121,923 | $ | 34,129,445 | (295,269 | ) | $ | (5,811,678 | ) | ||||||||
Certified Annual Report 23
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 1,194,182 | $ | 37,191,449 | 808,447 | $ | 20,006,549 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 9,282 | 288,552 | 18,317 | 442,047 | ||||||||||||
Shares repurchased | (898,513 | ) | (26,951,640 | ) | (392,575 | ) | (9,125,077 | ) | ||||||||
Redemption fees received* | — | 668 | — | 993 | ||||||||||||
Net Increase (Decrease) | 304,951 | $ | 10,529,029 | 434,189 | $ | 11,324,512 | ||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 3,281,252 | $ | 103,225,130 | 2,235,661 | $ | 55,055,512 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 59,336 | 1,869,704 | 99,135 | 2,411,510 | ||||||||||||
Shares repurchased | (1,440,353 | ) | (44,473,586 | ) | (1,587,441 | ) | (36,208,743 | ) | ||||||||
Redemption fees received* | — | 2,384 | — | 4,281 | ||||||||||||
Net Increase (Decrease) | 1,900,235 | $ | 60,623,632 | 747,355 | $ | 21,262,560 | ||||||||||
| * | 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, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $3,297,887,462 and $2,762,149,653, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 4,205,776,427 | ||
Gross unrealized appreciation on a tax basis | $ | 273,579,001 | ||
Gross unrealized depreciation on a tax basis | (405,549,341 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (131,970,340 | ) | |
Distributable earnings – ordinary income (tax basis) | $ | 1,182,245 |
At September 30, 2010, the Fund had deferred tax basis currency losses occurring subsequent to October 31, 2009 of $840,449. For tax purposes, such losses will be reflected in the year ending September 30, 2011.
24 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 | |
At September 30, 2010 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:
2017 | $ | 527,267,206 | ||
2018 | 242,353,997 | |||
| $ | 769,621,203 | |||
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $17,101 and decreased net realized investment loss by $17,101. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from currency losses and the disposition of a partnership investment.
The tax character of distributions paid during the year ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 28,884,222 | $ | 48,677,546 | ||||
Capital gains | — | — | ||||||
Total Distributions | $ | 28,884,222 | $ | 48,677,546 | ||||
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. This 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, 2010, 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, 2010 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. Values of open currency contracts are indicative of the activity for the year ended September 30, 2010.
Certified Annual Report 25
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 | |
The following table displays the outstanding forward currency contracts at September 30, 2010:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2010
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||||
Japanese Yen | Sell | 18,875,000,000 | 11/24/2010 | 226,208,672 | $ | — | $ | (15,312,460 | ) | |||||||||||||||
Japanese Yen | Sell | 3,585,000,000 | 03/02/2011 | 43,026,155 | — | (444,407 | ) | |||||||||||||||||
Total | $ | $ | (15,756,867 | ) | ||||||||||||||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2010 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2010
Liability Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (15,756,867 | ) | ||
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, 2010 are disclosed in the following tables:
Amount of Realized Gain (Loss)
on Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (4,208,059 | ) | $ | (4,208,059 | ) | ||
Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (15,756,867 | ) | $ | (15,756,867 | ) | ||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class R3 shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .25% of 1%.
26 Certified Annual Report
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Certified Annual Report 27
Thornburg Value Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 (b) | $ | 29.66 | 0.20 | 0.76 | 0.96 | (0.18 | ) | — | (0.18 | ) | $ | 30.44 | 0.65 | 1.31 | 1.31 | 1.31 | 3.21 | 72.75 | $ | 1,131,594 | ||||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 28.02 | 0.37 | 1.67 | 2.04 | (0.40 | ) | — | (0.40 | ) | $ | 29.66 | 1.58 | 1.34 | 1.34 | 1.34 | 7.65 | 83.00 | $ | 1,204,450 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 44.17 | 0.18 | (12.26 | ) | (12.08 | ) | (0.14 | ) | (3.93 | ) | (4.07 | ) | $ | 28.02 | 0.52 | 1.27 | 1.27 | 1.27 | (29.52 | ) | 70.65 | $ | 1,088,766 | ||||||||||||||||||||||||||||||||||||
2007(b) | $ | 37.59 | 0.29 | 7.86 | 8.15 | (0.27 | ) | (1.30 | ) | (1.57 | ) | $ | 44.17 | 0.70 | 1.27 | 1.27 | 1.27 | 22.23 | 79.29 | $ | 1,599,976 | |||||||||||||||||||||||||||||||||||||||
2006(b) | $ | 32.79 | 0.35 | 4.76 | 5.11 | (0.31 | ) | — | (0.31 | ) | $ | 37.59 | 1.02 | 1.35 | 1.34 | 1.35 | 15.63 | 51.36 | $ | 1,121,720 | ||||||||||||||||||||||||||||||||||||||||
Class B Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 28.21 | (0.04 | ) | 0.69 | 0.65 | (0.05 | ) | — | (0.05 | ) | $ | 28.81 | (0.13 | ) | 2.18 | 2.18 | 2.18 | 2.29 | 72.75 | $ | 22,036 | ||||||||||||||||||||||||||||||||||||||
2009 | $ | 26.66 | 0.16 | 1.58 | 1.74 | (0.19 | ) | — | (0.19 | ) | $ | 28.21 | 0.74 | 2.22 | 2.22 | 2.22 | 6.72 | 83.00 | $ | 38,630 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 42.36 | (0.09 | ) | (11.68 | ) | (11.77 | ) | .— | (c) | (3.93 | ) | (3.93 | ) | $ | 26.66 | (0.28 | ) | 2.05 | 2.05 | 2.05 | (30.05 | ) | 70.65 | $ | 64,287 | ||||||||||||||||||||||||||||||||||
2007 | $ | 36.17 | (0.04 | ) | 7.55 | 7.51 | (0.02 | ) | (1.30 | ) | (1.32 | ) | $ | 42.36 | (0.09 | ) | 2.07 | 2.07 | 2.07 | 21.26 | 79.29 | $ | 113,299 | |||||||||||||||||||||||||||||||||||||
2006 | $ | 31.60 | 0.07 | 4.58 | 4.65 | (0.08 | ) | — | (0.08 | ) | $ | 36.17 | 0.21 | 2.15 | 2.14 | 2.15 | 14.71 | 51.36 | $ | 96,587 | ||||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 28.55 | (0.03 | ) | 0.73 | 0.70 | (0.07 | ) | — | (0.07 | ) | $ | 29.18 | (0.09 | ) | 2.06 | 2.06 | 2.06 | 2.43 | 72.75 | $ | 329,761 | ||||||||||||||||||||||||||||||||||||||
2009 | $ | 26.99 | 0.18 | 1.61 | 1.79 | (0.23 | ) | — | (0.23 | ) | $ | 28.55 | 0.81 | 2.12 | 2.12 | 2.12 | 6.83 | 83.00 | $ | 361,966 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 42.82 | (0.08 | ) | (11.81 | ) | (11.89 | ) | (0.01 | ) | (3.93 | ) | (3.94 | ) | $ | 26.99 | (0.23 | ) | 2.02 | 2.01 | 2.02 | (30.03 | ) | 70.65 | $ | 401,880 | ||||||||||||||||||||||||||||||||||
2007 | $ | 36.55 | (0.02 | ) | 7.62 | 7.60 | (0.03 | ) | (1.30 | ) | (1.33 | ) | $ | 42.82 | (0.05 | ) | 2.03 | 2.03 | 2.03 | 21.29 | 79.29 | $ | 621,687 | |||||||||||||||||||||||||||||||||||||
2006 | $ | 31.92 | 0.09 | 4.62 | 4.71 | (0.08 | ) | — | (0.08 | ) | $ | 36.55 | 0.27 | 2.09 | 2.09 | 2.09 | 14.77 | 51.36 | $ | 490,399 | ||||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 30.15 | 0.30 | 0.80 | 1.10 | (0.30 | ) | — | (0.30 | ) | $ | 30.95 | 0.97 | 0.94 | 0.94 | 0.94 | 3.62 | 72.75 | $ | 2,087,380 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 28.47 | 0.46 | 1.70 | 2.16 | (0.48 | ) | — | (0.48 | ) | $ | 30.15 | 1.94 | 0.98 | 0.97 | 1.00 | 8.04 | 83.00 | $ | 1,575,522 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 44.80 | 0.32 | (12.45 | ) | (12.13 | ) | (0.27 | ) | (3.93 | ) | (4.20 | ) | $ | 28.47 | 0.92 | 0.91 | 0.90 | 0.91 | (29.24 | ) | 70.65 | $ | 1,961,495 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 38.11 | 0.44 | 7.96 | 8.40 | (0.41 | ) | (1.30 | ) | (1.71 | ) | $ | 44.80 | 1.05 | 0.93 | 0.92 | 0.93 | 22.62 | 79.29 | $ | 2,401,473 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 33.23 | 0.50 | 4.82 | 5.32 | (0.44 | ) | — | (0.44 | ) | $ | 38.11 | 1.41 | 0.98 | 0.97 | 0.98 | 16.10 | 51.36 | $ | 1,074,492 | ||||||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 29.48 | 0.17 | 0.76 | 0.93 | (0.17 | ) | — | (0.17 | ) | $ | 30.24 | 0.57 | 1.35 | 1.35 | 1.66 | 3.14 | 72.75 | $ | 200,362 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 27.86 | 0.36 | 1.66 | 2.02 | (0.40 | ) | — | (0.40 | ) | $ | 29.48 | 1.57 | 1.35 | 1.35 | 1.72 | 7.62 | 83.00 | $ | 162,231 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 43.94 | 0.17 | (12.19 | ) | (12.02 | ) | (0.13 | ) | (3.93 | ) | (4.06 | ) | $ | 27.86 | 0.50 | 1.35 | 1.35 | 1.66 | (29.54 | ) | 70.65 | $ | 161,517 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 37.43 | 0.26 | 7.81 | 8.07 | (0.26 | ) | (1.30 | ) | (1.56 | ) | $ | 43.94 | 0.63 | 1.35 | 1.35 | 1.63 | 22.11 | 79.29 | $ | 151,260 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 32.68 | 0.37 | 4.71 | 5.08 | (0.33 | ) | — | (0.33 | ) | $ | 37.43 | 1.05 | 1.36 | 1.35 | 1.69 | 15.60 | 51.36 | $ | 48,627 | ||||||||||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 29.62 | 0.19 | 0.78 | 0.97 | (0.20 | ) | — | (0.20 | ) | $ | 30.39 | 0.63 | 1.25 | 1.25 | 1.49 | 3.25 | 72.75 | $ | 54,461 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 27.99 | 0.39 | 1.67 | 2.06 | (0.43 | ) | — | (0.43 | ) | $ | 29.62 | 1.65 | 1.25 | 1.25 | 1.54 | 7.74 | 83.00 | $ | 44,037 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 44.14 | 0.19 | (12.23 | ) | (12.04 | ) | (0.18 | ) | (3.93 | ) | (4.11 | ) | $ | 27.99 | 0.58 | 1.24 | 1.24 | 1.48 | (29.47 | ) | 70.65 | $ | 29,462 | ||||||||||||||||||||||||||||||||||||
2007(d) | $ | 41.00 | 0.20 | 3.12 | 3.32 | (0.18 | ) | — | (0.18 | ) | $ | 44.14 | 0.70 | (e) | 1.25 | (e) | 1.25 | (e) | 2.34 | (e) | 8.09 | 79.29 | $ | 7,038 | ||||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 30.13 | 0.28 | 0.79 | 1.07 | (0.28 | ) | — | (0.28 | ) | $ | 30.92 | 0.91 | 0.99 | 0.99 | 1.12 | 3.54 | 72.75 | $ | 228,768 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 28.45 | 0.46 | 1.71 | 2.17 | (0.49 | ) | — | (0.49 | ) | $ | 30.13 | 1.93 | 0.98 | 0.98 | 1.18 | 8.05 | 83.00 | $ | 165,663 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 44.78 | 0.32 | (12.47 | ) | (12.15 | ) | (0.25 | ) | (3.93 | ) | (4.18 | ) | $ | 28.45 | 0.92 | 0.98 | 0.98 | 1.03 | (29.30 | ) | 70.65 | $ | 135,173 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 38.09 | 0.49 | 7.91 | 8.40 | (0.41 | ) | (1.30 | ) | (1.71 | ) | $ | 44.78 | 1.14 | 0.91 | 0.91 | 0.93 | 22.63 | 79.29 | $ | 106,906 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 33.22 | 0.24 | 5.07 | 5.31 | (0.44 | ) | — | (0.44 | ) | $ | 38.09 | 0.64 | 1.00 | 0.98 | 3.24 | 16.07 | 51.36 | $ | 10,483 | ||||||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Dividends from net investment income per share were less than $(0.01). |
| (d) | Effective date of this class of shares was February 1, 2007. |
| (e) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 28 Certified Annual Report | Certified Annual Report 29 |
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, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
30 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg Value Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 936.50 | $ | 6.57 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.28 | $ | 6.85 | ||||||
Class B Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 932.40 | $ | 10.65 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.05 | $ | 11.10 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 932.90 | $ | 10.08 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.64 | $ | 10.51 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 938.40 | $ | 4.55 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.37 | $ | 4.75 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 936.30 | $ | 6.55 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.30 | $ | 6.83 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 936.80 | $ | 6.07 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 938.10 | $ | 4.81 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.35%; B: 2.20%; C: 2.08%; I: 0.94%; R3: 1.35%; R4: 1.25%; 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 31
| INDEX COMPARISON | ||
| Thornburg Value Fund | September 30, 2010 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Value Fund versus S&P 500 Index (October 2, 1995 to September 30, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 10/2/95) | -1.44 | % | 1.11 | % | 0.85 | % | 8.94 | % | ||||||||
B Shares (Incep: 4/3/00) | -2.71 | % | 0.86 | % | 0.65 | % | 0.68 | % | ||||||||
C Shares (Incep: 10/2/95) | 1.43 | % | 1.28 | % | 0.54 | % | 8.43 | % | ||||||||
I Shares (Incep: 11/2/98) | 3.62 | % | 2.43 | % | 1.72 | % | 5.52 | % | ||||||||
R3 Shares (Incep: 7/1/03) | 3.14 | % | 2.00 | % | — | 4.98 | % | |||||||||
R4 Shares (Incep: 2/1/07) | 3.25 | % | — | — | -4.40 | % | ||||||||||
R5 Shares (Incep: 2/1/05) | 3.54 | % | 2.40 | % | — | 3.67 | % | |||||||||
S&P 500 Index (Since 10/2/95) | 10.16 | % | 0.64 | % | -0.43 | % | 6.49 | % | ||||||||
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.
32 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg Value Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||||
INTERESTED TRUSTEES(1)(2)(4) | ||||||
Garrett Thornburg, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||||
David A. Ater, 65 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. | None | ||||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||||
Susan H. Dubin, 61 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, 56 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, 51 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 33
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 (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, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
34 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 35
| OTHER INFORMATION | ||
| Thornburg Value Fund | September 30, 2010 (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, 2010, the Thornburg Value Fund designates 98.42% (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.
97.16% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2010 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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of that information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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.
36 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 (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 two broad-based securities indices, and (iv) comparative measures of portfolio volatility, risk and return. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events, 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 evaluating quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment return in the most recent calendar year was higher relative to the category of large blend equity mutual funds and the two broad based securities indices, and further noted in this context that the Fund’s returns had exceeded the returns of the category and the two indices in the majority of the preceding nine calendar years. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment returns fell within the lowest quartile of the fund category for the three-month, year-to-date and one-year periods ended with the second quarter of the current year, but that the Fund’s returns fell above the median of the category for the three-year period and within the top decile of the category for the five-year period. 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 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, and 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. The Trustees observed that the management fee charged to the Fund was somewhat higher than the median and average management fees for the group of mutual funds assembled by the analyst firm, that the overall expense ratio of the Fund was slightly higher than the median and comparable to the average expense ratios for the same group, and 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 confirmed their previous observations 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, 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
Certified Annual Report 37
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Value Fund | September 30, 2010 (Unaudited) | |
the Trustees noted the adequacy of the Advisor’s resources and 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.
38 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
The Trustees are concerned that ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report. 39
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40 This page is not part of the Annual Report.
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 Developing World Fund |
| • | Thornburg Limited Term U.S. Government Fund |
| • | Thornburg Limited Term Income Fund |
| • | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 41
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 Developing World 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. 43
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Important Information
The information presented on the following pages was current as of September 30, 2010. 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. Funds invested in a limited number of holdings may expose an investor to greater volatility.
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.
MSCI All Country World ex-U.S. Index – A market capitalization weighted index representative of the market structure of 44 developed and emerging market countries in North and South America, Europe, Africa, and the Pacific Rim, excluding securities of United States’ issuers. The index is calculated with gross dividends reinvested in U.S. dollars.
MSCI Emerging Markets Index – The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. As of May 27, 2010 the MSCI Emerging Markets Index consisted of the following 21 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.
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
CO-PORTFOLIO MANAGERS
Left to right:
Lei Wang,CFA, Wendy Trevisani, Bill Fries,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 1.34%, 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 9/30/10
| 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 5/28/98) | ||||||||||||||||||||
Without sales charge | 9.43 | % | -6.91 | % | 6.24 | % | 7.07 | % | 9.10 | % | ||||||||||
With sales charge | 4.49 | % | -8.33 | % | 5.27 | % | 6.58 | % | 8.69 | % | ||||||||||
MSCI EAFE Index | ||||||||||||||||||||
(Since: 5/28/98) | 3.27 | % | -9.51 | % | 1.97 | % | 2.56 | % | 3.36 | % | ||||||||||
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 50–75 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 9/30/10
Top Contributors | Top Detractors | |
| Novo Nordisk A/S | National Bank of Greece S.A. | |
| ARM Holdings plc | Vestas Wind Systems A/S | |
| LVMH Moët Hennessy Louis Vuitton | Lafarge SA | |
| CNOOC Ltd. | AXA SA | |
| Wal-Mart de Mexico SAB de C.V. | Dai-ichi Life Insurance Co. Ltd. | |
| Source: FactSet | ||
KEY PORTFOLIO ATTRIBUTES
As of 9/30/10
Portfolio P/E Trailing 12-months* | 16.5x | |||
Portfolio Price to Cash Flow* | 8.6x | |||
Portfolio Price to Book Value* | 1.9x | |||
Median Market Cap* | $ | 31.4 B | ||
7-Year Beta (A Shares vs. MSCI EAFE)* | 0.89 | |||
Number of Companies | 67 | |||
* Source: FactSet | ||||
MARKET CAPITALIZATION EXPOSURE
As of 9/30/10
BASKET STRUCTURE
As of 9/30/10
This page is not part of the Annual Report. 5
Thornburg International Value Fund
September 30, 2010
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
6 Certified Annual Report
William V. Fries,CFA Co-Portfolio Manager
Wendy Trevisani Co-Portfolio Manager | October 21, 2010
Dear Fellow Shareholder:
The fiscal year ended September 30, 2010 was both challenging and satisfying. Despite a fairly muted | |
Lei Wang,CFA Co-Portfolio Manager | For the twelve months ended September 30, 2010, the Thornburg International Value Fund (Class A shares at NAV) outperformed the MSCI EAFE Index, returning 9.43%, a positive spread of approximately six percentage points. It is worth noting that despite healthy capital appreciation over the past 18 months, there will be no capital gain distribution this year due to offsetting tax-loss carryforwards from prior years.
The diversification of our holdings and the three-basket approach served us well during the period, as we were able to perform reasonably well during periods of high volatility, | |
Certified Annual Report 7
| Letter to Shareholders, | ||
Continued | ||
resulting in superior aggregate performance over the period. Notably, our top ten performing stocks were in distinctive industries, propelled by company-specific dynamics, and spread across geographies as evidenced in this table:
COMPANY | INDUSTRY | COUNTRY | ||
Novo Nordisk A/S | Pharmaceuticals, Biotechnology & Life Sciences | Denmark | ||
ARM Holdings | Semiconductors & Semiconductor Equipment | United Kingdom | ||
LVMH Moët Hennessy Louis Vuitton SA | Consumer Durables & Apparel | France | ||
CNOOC Ltd. | Energy | China | ||
Wal-Mart de México SAB de C.V. | Food & Staples Retailing | Mexico | ||
Potash Corp. of Saskatchewan, Inc. | Materials | Canada | ||
Volkswagen AG | Automobiles & Components | Germany | ||
Hennes & Mauritz AB | Retailing | Sweden | ||
Canadian National Railway Co. | Transportation | Canada | ||
Nestlé SA | Food, Beverage & Tobacco | Switzerland | ||
Our consumer discretionary holdings staged notable rebounds and were the strongest contributor to our 12-month performance with LVMH Moët Hennessey leading the charge, up nearly 60% in local currencies. Hennes & Mauritz was another strong performer, up nearly 30% during the period. We own these companies not due to our belief in the superfluous opening of wallets, but due to strong franchises in what was a depressed industry, healthy balance sheets, and cost discipline, which allows for operating leverage as sales recover. We also had positive company-specific news flow in Novo Nordisk, which benefited from the approval of a new diabetes drug, Victoza, as well as delays in competitive products, and Potash, which received an offer from BHP Billiton.
We have cautiously added to more cyclically exposed stocks, such as Lafarge, Schlumberger, and Toyota, while establishing more recent positions in BG Group and ArcelorMittal. In addition, we have taken advantage of volatility to add to some of our financial institutions such as ING, BNP Paribas, and Intesa Sanpaolo. Concurrently, we have added to Consistent Earners, which are more likely to be less volatile in the case of a turn for the worse. Novartis, Teva, and Tesco are examples of companies well positioned in their respective industries, which expect to be able to continue to progress through economic volatility.
The unexpected recovery of markets in September was refreshing after a summer of economic debate and focus on the possibility of a double-dip recession in the United States, creating a drag on the global economy.
8 Certified Annual Report
There are still plenty of worries, not the least of which is continued consumer and financial institution deleveraging. Budget deficits in developed markets, the aftershock of accommodative monetary policies, and the lingering sovereign debt crisis in Europe have spurred contentious currency movements. In this challenging environment, many publicly traded corporate securities remain reasonably healthy. Liquidity is abundant, costs seem under control, profits are surprisingly good, and emerging market economies continue to expand. This generally favorable backdrop encourages our guarded optimism. We remain committed to finding investments with an embedded value proposition. If we do this well, our portfolio will have the potential to participate in a recovering market within the bounds of normal volatility. We would like to think that most of the surprises from here will be good ones, including a buoyant global stock market.
Thank you for our continued trust and confidence. To learn more about your portfolio’s holdings, please visit www.thornburg.com/funds.
| Sincerely, | ||||
 |  |  | ||
| William V. Fries,CFA | Wendy Q. Trevisani | Lei Wang,CFA | ||
| Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager | ||
| Managing Director | Managing Director | Managing Director | ||
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 9
| SCHEDULE OF INVESTMENTS | ||
| Thornburg International Value Fund | September 30, 2010 | |
TOP TEN HOLDINGS
As of 9/30/10
Novartis AG | 2.5 | % | Volkswagen AG Pfd | 2.3 | % | |||||
Teva Pharmaceutical Industries Ltd. ADR | 2.5 | % | SAP AG | 2.3 | % | |||||
Novo Nordisk A/S | 2.5 | % | CNOOC Ltd. | 2.3 | % | |||||
Hong Kong Exchanges & Clearing Ltd. | 2.4 | % | Tesco plc | 2.2 | % | |||||
LVMH Moët Hennessy Louis Vuitton SA | 2.4 | % | Standard Chartered plc | 2.2 | % |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/10
Banks | 11.3 | % | Media | 3.6 | % | |||||
Materials | 8.5 | % | Household & Personal Products | 3.1 | % | |||||
Energy | 8.3 | % | Retailing | 3.1 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 7.6 | % | Software & Services | 3.1 | % | |||||
Diversified Financials | 7.0 | % | Technology Hardware & Equipment | 3.0 | % | |||||
Automobiles & Components | 5.8 | % | Consumer Durables & Apparel | 2.4 | % | |||||
Food, Beverage & Tobacco | 5.1 | % | Consumer Services | 2.0 | % | |||||
Telecommunication Services | 4.7 | % | Insurance | 1.7 | % | |||||
Health Care Equipment & Services | 4.7 | % | Semiconductors & Semiconductor Equipment | 1.7 | % | |||||
Capital Goods | 4.6 | % | Transportation | 1.7 | % | |||||
Food & Staples Retailing | 3.7 | % | Other Assets & Cash Equivalents | 3.3 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/10 (percent of equity holdings)
United Kingdom | 19.9 | % | Israel | 2.6 | % | |||||
Japan | 9.5 | % | Hong Kong | 2.4 | % | |||||
China | 8.3 | % | Spain | 1.9 | % | |||||
France | 8.1 | % | Sweden | 1.9 | % | |||||
Germany | 7.7 | % | Taiwan | 1.9 | % | |||||
Canada | 6.6 | % | Australia | 1.8 | % | |||||
Switzerland | 6.0 | % | South Korea | 1.5 | % | |||||
Brazil | 4.9 | % | Italy | 1.1 | % | |||||
Netherlands | 4.7 | % | Turkey | 1.1 | % | |||||
Mexico | 3.8 | % | Ireland | 1.0 | % | |||||
Denmark | 3.3 | % |
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 94.33% | ||||||||
AUTOMOBILES & COMPONENTS — 3.48% | ||||||||
AUTOMOBILES — 3.48% | ||||||||
Hyundai Motor Co. | 2,522,953 | $ | 338,532,610 | |||||
Toyota Motor Corp. | 12,625,026 | 453,399,952 | ||||||
| 791,932,562 | ||||||||
BANKS — 11.23% | ||||||||
COMMERCIAL BANKS — 11.23% | ||||||||
BNP Paribas SA | 5,506,058 | 391,595,079 | ||||||
China Merchants Bank Co., Ltd. | 156,250,109 | 402,766,155 | ||||||
Industrial & Commercial Bank of China Ltd. | 551,287,100 | 410,684,501 | ||||||
Intesa Sanpaolo | 73,519,466 | 238,787,099 | ||||||
Mitsubishi UFJ Financial Group, Inc. | 83,007,600 | 386,798,711 | ||||||
Standard Chartered plc | 17,100,929 | 490,533,703 | ||||||
Turkiye Garanti Bankasi A.S. | 40,628,768 | 235,928,002 | ||||||
| 2,557,093,250 | ||||||||
CAPITAL GOODS — 4.59% | ||||||||
AEROSPACE & DEFENSE — 0.68% | ||||||||
Empresa Brasileira de Aeronautica SA ADR | 5,421,345 | 153,911,984 | ||||||
ELECTRICAL EQUIPMENT — 0.67% | ||||||||
aVestas Wind Systems A/S | 4,065,826 | 153,208,487 | ||||||
MACHINERY — 3.24% | ||||||||
Fanuc Ltd. | 2,157,007 | 274,664,404 | ||||||
Komatsu Ltd. | 19,900,792 | 461,999,699 | ||||||
| 1,043,784,574 | ||||||||
CONSUMER DURABLES & APPAREL — 2.36% | ||||||||
TEXTILES, APPAREL & LUXURY GOODS — 2.36% | ||||||||
LVMH Moët Hennessy Louis Vuitton SA | 3,659,311 | 536,768,720 | ||||||
| 536,768,720 | ||||||||
CONSUMER SERVICES — 1.96% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 1.96% | ||||||||
bCarnival plc | 11,352,925 | 446,214,264 | ||||||
| 446,214,264 | ||||||||
DIVERSIFIED FINANCIALS — 6.97% | ||||||||
CAPITAL MARKETS — 1.97% | ||||||||
Deutsche Bank AG | 4,376,311 | 239,505,365 | ||||||
Julius Baer Group Ltd. | 5,777,758 | 210,319,446 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 5.00% | ||||||||
BM&F Bovespa SA | 36,328,800 | 303,813,546 | ||||||
Hong Kong Exchanges & Clearing Ltd. | 27,309,600 | 537,825,436 | ||||||
aING Groep N.V. | 28,506,300 | 295,733,903 | ||||||
| 1,587,197,696 | ||||||||
ENERGY — 8.31% | ||||||||
ENERGY EQUIPMENT & SERVICES — 1.47% | ||||||||
Schlumberger Ltd. | 5,449,960 | 335,772,036 | ||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
OIL, GAS & CONSUMABLE FUELS — 6.84% | ||||||||
BG Group plc | 15,521,892 | $ | 272,727,556 | |||||
aCairn Energy plc | 20,001,560 | 142,523,110 | ||||||
Canadian Natural Resources Ltd. | 8,448,600 | 292,239,939 | ||||||
CNOOC Ltd. | 264,895,579 | 514,164,782 | ||||||
Petroleo Brasileiro S.A. ADR | 9,227,670 | 334,687,591 | ||||||
| 1,892,115,014 | ||||||||
FOOD & STAPLES RETAILING — 3.73% | ||||||||
FOOD & STAPLES RETAILING — 3.73% | ||||||||
Tesco plc | 75,808,518 | 504,931,236 | ||||||
Wal-Mart de Mexico SAB de C.V. | 137,062,200 | 344,785,940 | ||||||
| 849,717,176 | ||||||||
FOOD, BEVERAGE & TOBACCO — 5.10% | ||||||||
BEVERAGES — 1.21% | ||||||||
Sabmiller plc | 8,615,750 | 275,494,270 | ||||||
FOOD PRODUCTS — 1.83% | ||||||||
Nestlé SA | 7,807,300 | 415,928,515 | ||||||
TOBACCO — 2.06% | ||||||||
British American Tobacco plc | 12,595,425 | 469,822,027 | ||||||
| 1,161,244,812 | ||||||||
HEALTH CARE EQUIPMENT & SERVICES — 4.70% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 1.71% | ||||||||
Covidien plc | 5,658,498 | 227,415,034 | ||||||
Smith & Nephew plc | 17,870,272 | 162,960,280 | ||||||
HEALTH CARE PROVIDERS & SERVICES — 2.99% | ||||||||
Fresenius Medical Care AG & Co. | 6,521,994 | 402,811,756 | ||||||
bSinopharm Group Co. H | 67,089,500 | 277,131,079 | ||||||
| 1,070,318,149 | ||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 3.13% | ||||||||
HOUSEHOLD PRODUCTS — 1.89% | ||||||||
Reckitt Benckiser plc | 7,796,278 | 428,773,367 | ||||||
PERSONAL PRODUCTS — 1.24% | ||||||||
Natura Cosmeticos SA | 10,525,200 | 283,035,816 | ||||||
| 711,809,183 | ||||||||
INSURANCE — 1.73% | ||||||||
INSURANCE — 1.73% | ||||||||
China Life Insurance Co. | 53,195,000 | 209,794,879 | ||||||
Dai-ichi Life Insurance Co. | 153,157 | 184,933,225 | ||||||
| 394,728,104 | ||||||||
MATERIALS — 8.52% | ||||||||
CHEMICALS — 3.12% | ||||||||
Air Liquide SA | 2,824,140 | 344,537,372 | ||||||
Potash Corp. of Saskatchewan, Inc. | 2,532,600 | 364,795,704 | ||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
CONSTRUCTION MATERIALS — 1.50% | ||||||||
Lafarge SA | 5,984,204 | $ | 342,634,656 | |||||
METALS & MINING — 3.90% | ||||||||
ArcelorMittal | 8,580,800 | 282,618,324 | ||||||
BHP Billiton Ltd. | 10,477,762 | 394,052,355 | ||||||
Southern Copper Corp. | 6,022,400 | 211,506,688 | ||||||
| 1,940,145,099 | ||||||||
MEDIA — 3.58% | ||||||||
MEDIA — 3.58% | ||||||||
British Sky Broadcasting Group plc | 26,620,886 | 295,031,168 | ||||||
Pearson plc | 13,048,731 | 202,010,192 | ||||||
Publicis Groupe | 3,563,500 | 169,250,717 | ||||||
Thomson Reuters Corp. | 3,935,000 | 147,930,605 | ||||||
| 814,222,682 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 7.57% | ||||||||
PHARMACEUTICALS — 7.57% | ||||||||
Novartis AG | 10,081,996 | 578,151,401 | ||||||
Novo Nordisk A/S | 5,735,512 | 569,165,739 | ||||||
Teva Pharmaceutical Industries Ltd. ADR | 10,907,600 | 575,375,900 | ||||||
| 1,722,693,040 | ||||||||
RETAILING — 3.11% | ||||||||
SPECIALTY RETAIL — 3.11% | ||||||||
Hennes & Mauritz AB | 11,813,974 | 427,839,957 | ||||||
Kingfisher plc | 75,829,417 | 278,979,944 | ||||||
| 706,819,901 | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.73% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.73% | ||||||||
ARM Holdings plc | 37,119,800 | 228,697,592 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd. | 83,246,000 | 165,205,000 | ||||||
| 393,902,592 | ||||||||
SOFTWARE & SERVICES — 3.10% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 0.83% | ||||||||
aAmdocs Ltd. | 6,593,900 | 188,981,174 | ||||||
SOFTWARE — 2.27% | ||||||||
SAP AG | 10,441,393 | 516,489,119 | ||||||
| 705,470,293 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 3.03% | ||||||||
COMMUNICATIONS EQUIPMENT — 1.08% | ||||||||
HTC Corp. | 10,835,747 | 245,908,315 | ||||||
COMPUTERS & PERIPHERALS — 0.46% | ||||||||
aLogitech International SA | 6,057,621 | 105,537,548 | ||||||
OFFICE ELECTRONICS — 1.49% | ||||||||
Canon, Inc. | 7,259,138 | 338,696,005 | ||||||
| 690,141,868 | ||||||||
Certified Annual Report 13
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
TELECOMMUNICATION SERVICES — 4.74% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.33% | ||||||||
Koninklijke KPN N.V. | 7,983,443 | $ | 123,472,527 | |||||
Telefonica SA | 16,408,400 | 406,328,461 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 2.41% | ||||||||
America Movil SAB de C.V. ADR | 5,173,344 | 275,894,436 | ||||||
Rogers Communications, Inc. | 7,265,900 | 271,950,441 | ||||||
| 1,077,645,865 | ||||||||
TRANSPORTATION — 1.66% | ||||||||
ROAD & RAIL — 1.66% | ||||||||
Canadian National Railway Co. | 5,889,800 | 376,663,272 | ||||||
| 376,663,272 | ||||||||
TOTAL COMMON STOCK (Cost $17,952,064,238) | 21,470,628,116 | |||||||
PREFERRED STOCK — 2.34% | ||||||||
AUTOMOBILES & COMPONENTS — 2.34% | ||||||||
AUTOMOBILES — 2.34% | ||||||||
Volkswagen AG Pfd | 4,416,077 | 532,969,932 | ||||||
TOTAL PREFERRED STOCK (Cost $407,835,593) | 532,969,932 | |||||||
SHORT TERM INVESTMENTS — 3.41% | ||||||||
AGL Capital Corp., 0.31%, 10/1/2010 | $ | 14,500,000 | 14,500,000 | |||||
California State, put 10/7/2010 (LOC: Bank of America) (weekly demand notes), 0.26%, 5/1/2040 | 2,500,000 | 2,500,000 | ||||||
Chicago GO, put 10/7/2010 (Insured: AGM/SPA: Dexia) (weekly demand notes), 0.32%, 1/1/2040 | 34,440,000 | 34,440,000 | ||||||
Florida Power & Light Co., 0.25%, 10/1/2010 | 40,000,000 | 40,000,000 | ||||||
Houston, Texas Utilities Services, put 10/7/10 (Insured: AGM/SPA: Dexia) (weekly demand notes), 0.38%, 5/15/2034 | 44,595,000 | 44,595,000 | ||||||
McCormick & Co., 0.19% due 10/1/2010 | 50,000,000 | 50,000,000 | ||||||
Mississippi State, put 10/7/2010 (Nissan; Insured: Bank of America) (weekly demand notes), 0.25%, 11/1/2028 | 29,800,000 | 29,800,000 | ||||||
Missouri State Health & Educational Facilities Authority, put 10/1/2010 (Washington Univ.; SPA: Wells Fargo Bank N.A.) (daily demand notes), 0.27%, 2/15/2034 | 9,000,000 | 9,000,000 | ||||||
New York City Municipal Water Finance Authority, put 10/1/2010 (SPA: Dexia) (daily demand notes), 0.31%, 6/15/2033 | 7,000,000 | 7,000,000 | ||||||
New York City Municipal Water Finance, put 10/1/2010 (SPA: Landesbank Hessen-Thuringen) (daily demand notes), 0.27%, 6/15/2039 | 10,000,000 | 10,000,000 | ||||||
Northwest Natural Gas Co., 0.20%, 10/1/2010 | 40,000,000 | 40,000,000 | ||||||
Oglethorpe Power Corp., 0.26%, 10/5/2010 | 107,859,000 | 107,855,884 | ||||||
Pepco Holdings, Inc., 0.45%, 10/1/2010 | 8,000,000 | 8,000,000 | ||||||
Societe Generale North America, 0.15%, 10/1/2010 | 170,000,000 | 170,000,000 | ||||||
South Fulton Georgia Municipal Water & Sewer Authority, put 10/7/2010 (LOC: Bank of America) (weekly demand notes), 0.32%, 1/1/2033 | 7,455,000 | 7,455,000 | ||||||
UBS Finance, 0.19%, 10/1/2010 | 200,000,000 | 200,000,000 | ||||||
TOTAL SHORT TERM INVESTMENTS (Cost $775,145,884) | 775,145,884 | |||||||
TOTAL INVESTMENTS — 100.08% (Cost $19,135,045,715) | $ | 22,778,743,932 | ||||||
LIABILITIES NET OF OTHER ASSETS — (0.08)% | (17,728,639 | ) | ||||||
NET ASSETS — 100.00% | $ | 22,761,015,293 | ||||||
Footnote Legend
| a | Non-income producing. |
14 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
| 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, 2009 | Gross Additions | Gross Reductions | Shares/Principal September 30, 2010 | Market Value September 30, 2010 | Investment Income | ||||||||||||||||||
Carnival plc* | 8,974,400 | 2,378,525 | — | 11,352,925 | $ | 446,214,264 | $ | 2,977,523 | ||||||||||||||||
Sinopharm Group Co. H* | 18,370,800 | 48,718,700 | — | 67,089,500 | 277,131,079 | 89,488 | ||||||||||||||||||
Total non-controlled affiliated issuers - 3.18% of net assets |
| $ | 723,345,343 | $ | 3,067,011 | |||||||||||||||||||
| * | Issuers not affiliated at September 30, 2009. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ADR | American Depository Receipt | |
| AGM | Insured by Assured Guaranty Municipal Corp. | |
| ARM | Adjustable Rate Mortgage | |
| GO | General Obligation | |
| LOC | Letter of Credit | |
| Pfd | Preferred Stock | |
| SPA | Stand-by Purchase Agreement |
See notes to financial statements.
Certified Annual Report 15
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg International Value Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (Note 2) | ||||
Non-affiliated issuers (cost $18,413,539,334) | $ | 22,055,398,589 | ||
Non-controlled affiliated issuers (cost $721,506,381) | 723,345,343 | |||
Cash | 1,598,318 | |||
Cash denominated in foreign currency (cost $63,452,722) | 64,796,546 | |||
Receivable for investments sold | 222,315,995 | |||
Receivable for fund shares sold | 89,566,518 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 14,153,258 | |||
Dividends receivable | 39,274,654 | |||
Dividend and interest reclaim receivable | 9,219,344 | |||
Interest receivable | 35,684 | |||
Prepaid expenses and other assets | 113,653 | |||
Total Assets | 23,219,817,902 | |||
LIABILITIES | ||||
Payable for securities purchased | 256,046,010 | |||
Payable for fund shares redeemed | 40,792,798 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 136,905,656 | |||
Payable to investment advisor and other affiliates (Note 3) | 15,874,652 | |||
Accounts payable and accrued expenses | 9,163,878 | |||
Dividends payable | 19,615 | |||
Total Liabilities | 458,802,609 | |||
NET ASSETS | $ | 22,761,015,293 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 8,879,941 | ||
Net unrealized appreciation on investments | 3,523,042,770 | |||
Accumulated net realized gain (loss) | (3,467,428,859 | ) | ||
Net capital paid in on shares of beneficial interest | 22,696,521,441 | |||
| $ | 22,761,015,293 | |||
16 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($6,704,550,495 applicable to 257,836,014 shares of beneficial interest outstanding - Note 4) | $ | 26.00 | ||
Maximum sales charge, 4.50% of offering price | 1.23 | |||
Maximum offering price per share | $ | 27.23 | ||
Class B Shares: | ||||
Net asset value and offering price per share * ($74,083,336 applicable to 3,031,913 shares of beneficial interest outstanding - Note 4) | $ | 24.43 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($1,643,752,608 applicable to 66,990,198 shares of beneficial interest outstanding - - Note 4) | $ | 24.54 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($9,693,445,293 applicable to 364,834,797 shares of beneficial interest outstanding - Note 4) | $ | 26.57 | ||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($1,311,041,399 applicable to 50,345,118 shares of beneficial interest outstanding - Note 4) | $ | 26.04 | ||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($872,121,531 applicable to 33,674,503 shares of beneficial interest outstanding - Note 4) | $ | 25.90 | ||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($2,462,020,631 applicable to 92,809,471 shares of beneficial interest outstanding - Note 4) | $ | 26.53 | ||
| * | 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 International Value Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $38,544,333) | $ | 389,902,523 | ||
Non-controlled affiliated issuers (net of foreign taxes withheld of $8,949) | 3,067,011 | |||
Interest income | 2,021,616 | |||
Total Income | 394,991,150 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 131,361,211 | |||
Administration fees (Note 3) | ||||
Class A Shares | 7,243,658 | |||
Class B Shares | 95,536 | |||
Class C Shares | 1,984,472 | |||
Class I Shares | 3,944,900 | |||
Class R3 Shares | 1,447,492 | |||
Class R4 Shares | 858,482 | |||
Class R5 Shares | 948,519 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 14,407,705 | |||
Class B Shares | 764,522 | |||
Class C Shares | 15,879,599 | |||
Class R3 Shares | 5,787,814 | |||
Class R4 Shares | 1,715,008 | |||
Transfer agent fees | ||||
Class A Shares | 12,089,720 | |||
Class B Shares | 161,301 | |||
Class C Shares | 2,875,590 | |||
Class I Shares | 8,744,590 | |||
Class R3 Shares | 3,002,611 | |||
Class R4 Shares | 2,474,800 | |||
Class R5 Shares | 5,376,233 | |||
Registration and filing fees | ||||
Class A Shares | 232,554 | |||
Class B Shares | 18,458 | |||
Class C Shares | 96,973 | |||
Class I Shares | 907,983 | |||
Class R3 Shares | 31,274 | |||
Class R4 Shares | 46,326 | |||
Class R5 Shares | 47,232 | |||
Custodian fees (Note 3) | 6,953,500 | |||
Professional fees | 368,977 | |||
Accounting fees | 778,225 | |||
Trustee fees | 450,695 | |||
Other expenses | 2,226,339 | |||
Total Expenses | 233,322,299 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (5,442,814 | ) | ||
Net Expenses | 227,879,485 | |||
Net Investment Income | $ | 167,111,665 | ||
18 Certified Annual Report
| STATEMENT OF OPERATIONS, CONTINUED | ||
| Thornburg International Value Fund | Year Ended September 30, 2010 | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | (682,947,727 | ) | |
Forward currency contracts (Note 7) | 28,334,580 | |||
Foreign currency transactions | (4,234,623 | ) | ||
| (658,847,770 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | ||||
Non-affiliated issuers | 2,479,779,326 | |||
Non-controlled affiliated issuers* | 1,838,961 | |||
Forward currency contracts (Note 7) | (125,482,799 | ) | ||
Foreign currency translations | 1,445,698 | |||
| 2,357,581,186 | ||||
Net Realized and Unrealized Gain | 1,698,733,416 | |||
Net Increase in Net Assets Resulting from Operations | $ | 1,865,845,081 | ||
| * | Issuers not affiliated at Sept. 30, 2009. Net unrealized appreciation measured at September 30, 2010. |
See notes to financial statements.
Certified Annual Report 19
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg International Value Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 167,111,665 | $ | 145,886,647 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (658,847,770 | ) | (1,987,449,808 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments, forward currency contracts and foreign currency translations | 2,357,581,186 | 2,209,400,435 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,865,845,081 | 367,837,274 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (38,456,122 | ) | (47,691,328 | ) | ||||
Class B Shares | (198,599 | ) | (281,872 | ) | ||||
Class C Shares | (4,699,975 | ) | (6,234,690 | ) | ||||
Class I Shares | (87,399,958 | ) | (72,241,951 | ) | ||||
Class R3 Shares | (6,932,653 | ) | (8,457,824 | ) | ||||
Class R4 Shares | (5,643,833 | ) | (4,136,350 | ) | ||||
Class R5 Shares | (20,695,344 | ) | (14,813,551 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 889,589,596 | (151,656,229 | ) | |||||
Class B Shares | (12,642,863 | ) | (14,340,619 | ) | ||||
Class C Shares | (31,967,736 | ) | (234,811,763 | ) | ||||
Class I Shares | 2,642,039,493 | 990,522,432 | ||||||
Class R3 Shares | 168,532,316 | 113,114,566 | ||||||
Class R4 Shares | 285,485,092 | 249,654,449 | ||||||
Class R5 Shares | 867,059,993 | 392,644,180 | ||||||
Net Increase in Net Assets | 6,509,914,488 | 1,559,106,724 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 16,251,100,805 | 14,691,994,081 | ||||||
End of Year | $ | 22,761,015,293 | $ | 16,251,100,805 | ||||
Undistributed net investment income | $ | 8,879,941 | $ | 10,029,383 | ||||
See notes to financial statements.
20 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg International Value Fund | September 30, 2010 | |
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 sixteen 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). 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 a price 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 International Value Fund | September 30, 2010 | |
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, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 21,470,628,116 | $ | 21,470,628,116 | $ | — | $ | — | ||||||||
Preferred Stock | 532,969,932 | 532,969,932 | — | — | ||||||||||||
Short Term Investments | 775,145,884 | — | 775,145,884 | — | ||||||||||||
Total Investments in Securities | $ | 22,778,743,932 | $ | 22,003,598,048 | $ | 775,145,884 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 14,153,258 | $ | — | $ | 14,153,258 | $ | — | ||||||||
Spot Currency | $ | 1,334,683 | $ | 1,334,683 | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (136,905,656 | ) | $ | — | $ | (136,905,656 | ) | $ | — | ||||||
Spot Currency | $ | (199,930 | ) | $ | (199,930 | ) | $ | — | $ | — | ||||||
| * | See Schedule of Investments for a summary of the industry exposure as grouped according to the Global Industry Classification Standard (GICS), which is an industry taxonomy developed by MSCI Barra and Standard & Poor’s (S&P). |
| ** | 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 investment. |
22 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
Foreign Currency Translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities, it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute to shareholders substantially all taxable income, including any net realized gain on investments of the Fund. Therefore, no provision for federal income taxes is required.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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, if any, 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.
Certified Annual Report 23
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
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, 2010, 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, 2010, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $2,098,819 for Class R3 shares, $1,624,289 for Class R4 shares, and $1,719,706 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, 2010, the Distributor has advised the Fund that it earned net commissions aggregating $341,572 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $149,436 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I and Class R5 shares. 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, 2010, 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, 2010, there were no fees paid indirectly.
Certain officers and Trustees of the Trust are also officers and/or directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
24 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 98,256,291 | $ | 2,406,532,000 | 94,350,075 | $ | 1,855,765,245 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,284,114 | 31,575,504 | 1,910,696 | 39,880,680 | ||||||||||||
Shares repurchased | (63,800,486 | ) | (1,548,569,721 | ) | (106,827,831 | ) | (2,047,398,938 | ) | ||||||||
Redemption fees received* | — | 51,813 | — | 96,784 | ||||||||||||
Net Increase (Decrease) | 35,739,919 | $ | 889,589,596 | (10,567,060 | ) | $ | (151,656,229 | ) | ||||||||
Class B Shares | ||||||||||||||||
Shares sold | 49,186 | $ | 1,143,298 | 307,132 | $ | 5,564,270 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 5,827 | 132,783 | 9,713 | 190,063 | ||||||||||||
Shares repurchased | (609,378 | ) | (13,919,631 | ) | (1,134,846 | ) | (20,096,620 | ) | ||||||||
Redemption fees received* | — | 687 | — | 1,668 | ||||||||||||
Net Increase (Decrease) | (554,365 | ) | $ | (12,642,863 | ) | (818,001 | ) | $ | (14,340,619 | ) | ||||||
Class C Shares | ||||||||||||||||
Shares sold | 12,441,045 | $ | 288,168,162 | 13,413,646 | $ | 251,623,816 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 134,652 | 3,080,176 | 204,651 | 4,041,962 | ||||||||||||
Shares repurchased | (14,084,287 | ) | (323,230,328 | ) | (27,577,857 | ) | (490,508,597 | ) | ||||||||
Redemption fees received* | — | 14,254 | — | 31,056 | ||||||||||||
Net Increase (Decrease) | (1,508,590 | ) | $ | (31,967,736 | ) | (13,959,560 | ) | $ | (234,811,763 | ) | ||||||
Class I Shares | ||||||||||||||||
Shares sold | 170,443,043 | $ | 4,255,830,103 | 135,891,137 | $ | 2,743,024,095 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 2,095,554 | 52,935,805 | 2,218,946 | 47,387,069 | ||||||||||||
Shares repurchased | (66,945,828 | ) | (1,666,796,964 | ) | (91,998,012 | ) | (1,799,987,899 | ) | ||||||||
Redemption fees received* | — | 70,549 | — | 99,167 | ||||||||||||
Net Increase (Decrease) | 105,592,769 | $ | 2,642,039,493 | 46,112,071 | $ | 990,522,432 | ||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 20,220,086 | $ | 495,436,244 | 20,079,362 | $ | 393,943,531 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 252,563 | 6,217,484 | 355,098 | 7,415,099 | ||||||||||||
Shares repurchased | (13,635,248 | ) | (333,131,790 | ) | (14,936,306 | ) | (288,262,022 | ) | ||||||||
Redemption fees received* | — | 10,378 | — | 17,958 | ||||||||||||
Net Increase (Decrease) | 6,837,401 | $ | 168,532,316 | 5,498,154 | $ | 113,114,566 | ||||||||||
Certified Annual Report 25
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 20,306,284 | $ | 494,190,744 | 17,358,823 | $ | 351,220,800 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 166,103 | 4,086,982 | 137,569 | 2,904,177 | ||||||||||||
Shares repurchased | (8,731,380 | ) | (212,798,772 | ) | (5,390,436 | ) | (104,476,483 | ) | ||||||||
Redemption fees received* | — | 6,138 | — | 5,955 | ||||||||||||
Net Increase (Decrease) | 11,741,007 | $ | 285,485,092 | 12,105,956 | $ | 249,654,449 | ||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 47,990,020 | $ | 1,194,175,209 | 32,451,475 | $ | 662,220,472 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 768,879 | 19,399,053 | 642,611 | 13,721,112 | ||||||||||||
Shares repurchased | (13,949,845 | ) | (346,531,210 | ) | (14,216,177 | ) | (283,317,991 | ) | ||||||||
Redemption fees received* | — | 16,941 | — | 20,587 | ||||||||||||
Net Increase (Decrease) | 34,809,054 | $ | 867,059,993 | 18,877,909 | $ | 392,644,180 | ||||||||||
| * | 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, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $8,539,451,304 and $4,004,577,738, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 19,153,162,104 | ||
Gross unrealized appreciation on a tax basis | $ | 4,683,938,898 | ||
Gross unrealized depreciation on a tax basis | (1,058,357,070 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 3,625,581,828 | ||
Distributable earnings – ordinary income (tax basis) | $ | 14,985,300 |
26 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
At September 30, 2010, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2009 of $3,311,212 and $727,165,223, respectively. For tax purposes, such losses will be reflected in the year ending September 30, 2011.
At September 30, 2010, 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:
2017 | $ | 1,052,728,465 | ||
2018 | 1,792,171,182 | |||
| $ | 2,844,899,647 | |||
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $4,234,623 and decreased accumulated net realized investment loss by $4,234,623. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from currency gains/losses.
The tax character of distributions paid during the year ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 164,026,484 | $ | 153,857,566 | ||||
Capital gains | — | — | ||||||
Total | $ | 164,026,484 | $ | 153,857,566 | ||||
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. This 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, 2010, 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, 2010 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. Values of open currency contracts are indicative of the activity for the year ended September 30, 2010.
Certified Annual Report 27
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 | |
The following table displays the outstanding forward currency contracts at September 30, 2010:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2010
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||
Euro | Sell | 815,227,800 | 01/25/2011 | 1,110,356,138 | $ | — | $ | (61,936,502 | ) | |||||||||||||
Euro | Buy | 815,227,800 | 01/25/2011 | 1,110,356,138 | 1,630,025 | — | ||||||||||||||||
Great Britain Pound | Sell | 204,147,900 | 11/18/2010 | 320,592,205 | — | (25,831,218 | ) | |||||||||||||||
Great Britain Pound | Sell | 231,763,000 | 11/18/2010 | 363,958,734 | — | (27,041,384 | ) | |||||||||||||||
Great Britain Pound | Buy | 435,910,900 | 11/18/2010 | 684,550,939 | 12,523,233 | — | ||||||||||||||||
Mexican Peso | Sell | 6,300,000,000 | 11/30/2010 | 497,510,842 | — | (22,096,552 | ) | |||||||||||||||
Total | $ | 14,153,258 | $ | (136,905,656 | ) | |||||||||||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2010 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2010
Asset Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 14,153,258 | |||
Liability Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (136,905,656 | ) | ||
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, 2010 are disclosed in the following tables:
Amount of Realized Gain (Loss) on Derivative Financial Instruments
Recognized in Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 28,334,580 | $ | 28,334,580 | ||||
Change in Unrealized Appreciation (Depreciation) of Derivative Financial Instruments
Recognized in Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (125,482,799 | ) | $ | (125,482,799 | ) | ||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class R3 shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .25% of 1%.
28 Certified Annual Report
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Certified Annual Report 29
Thornburg International Value Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 23.91 | 0.18 | 2.07 | 2.25 | (0.16 | ) | — | (0.16 | ) | $ | 26.00 | 0.72 | 1.33 | 1.33 | 1.33 | 9.43 | 22.26 | $ | 6,704,550 | ||||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 23.68 | 0.21 | 0.24 | 0.45 | (0.22 | ) | — | (0.22 | ) | $ | 23.91 | 1.09 | 1.34 | 1.34 | 1.34 | 2.05 | 32.76 | $ | 5,309,704 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 36.09 | 0.37 | (9.59 | ) | (9.22 | ) | (0.31 | ) | (2.88 | ) | (3.19 | ) | $ | 23.68 | 1.23 | 1.28 | 1.28 | 1.28 | (27.77 | ) | 27.31 | $ | 5,510,070 | ||||||||||||||||||||||||||||||||||||
2007(b) | $ | 26.51 | 0.27 | 10.25 | 10.52 | (0.29 | ) | (0.65 | ) | (0.94 | ) | $ | 36.09 | 0.88 | 1.29 | 1.29 | 1.29 | 40.64 | 64.77 | $ | 7,111,205 | |||||||||||||||||||||||||||||||||||||||
2006(b) | $ | 22.80 | 0.32 | 4.00 | 4.32 | (0.21 | ) | (0.40 | ) | (0.61 | ) | $ | 26.51 | 1.25 | 1.33 | 1.33 | 1.33 | 19.30 | 36.58 | $ | 4,261,892 | |||||||||||||||||||||||||||||||||||||||
Class B Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 22.56 | (0.02 | ) | 1.95 | 1.93 | (0.06 | ) | — | (0.06 | ) | $ | 24.43 | (0.10 | ) | 2.10 | 2.10 | 2.10 | 8.59 | 22.26 | $ | 74,083 | ||||||||||||||||||||||||||||||||||||||
2009 | $ | 22.37 | 0.05 | 0.22 | 0.27 | (0.08 | ) | — | (0.08 | ) | $ | 22.56 | 0.29 | 2.13 | 2.13 | 2.13 | 1.24 | 32.76 | $ | 80,908 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 34.33 | 0.13 | (9.06 | ) | (8.93 | ) | (0.15 | ) | (2.88 | ) | (3.03 | ) | $ | 22.37 | 0.44 | 2.04 | 2.04 | 2.04 | (28.33 | ) | 27.31 | $ | 98,541 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 25.28 | 0.03 | 9.75 | 9.78 | (0.08 | ) | (0.65 | ) | (0.73 | ) | $ | 34.33 | 0.11 | 2.06 | 2.06 | 2.06 | 39.55 | 64.77 | $ | 135,486 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 21.82 | 0.11 | 3.81 | 3.92 | (0.06 | ) | (0.40 | ) | (0.46 | ) | $ | 25.28 | 0.44 | 2.13 | 2.13 | 2.13 | 18.32 | 36.58 | $ | 82,799 | |||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 22.65 | (0.01 | ) | 1.97 | 1.96 | (0.07 | ) | — | (0.07 | ) | $ | 24.54 | (0.03 | ) | 2.06 | 2.06 | 2.06 | 8.67 | 22.26 | $ | 1,643,753 | ||||||||||||||||||||||||||||||||||||||
2009 | $ | 22.46 | 0.06 | 0.22 | 0.28 | (0.09 | ) | — | (0.09 | ) | $ | 22.65 | 0.34 | 2.06 | 2.06 | 2.06 | 1.31 | 32.76 | $ | 1,551,488 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 34.45 | 0.15 | (9.10 | ) | (8.95 | ) | (0.16 | ) | (2.88 | ) | (3.04 | ) | $ | 22.46 | 0.50 | 2.00 | 2.00 | 2.00 | (28.28 | ) | 27.31 | $ | 1,852,185 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 25.37 | 0.05 | 9.78 | 9.83 | (0.10 | ) | (0.65 | ) | (0.75 | ) | $ | 34.45 | 0.17 | 2.01 | 2.01 | 2.01 | 39.63 | 64.77 | $ | 2,309,487 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 21.89 | 0.13 | 3.82 | 3.95 | (0.07 | ) | (0.40 | ) | (0.47 | ) | $ | 25.37 | 0.55 | 2.06 | 2.05 | 2.06 | 18.41 | 36.58 | $ | 1,290,250 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 24.42 | 0.29 | 2.11 | 2.40 | (0.25 | ) | — | (0.25 | ) | $ | 26.57 | 1.17 | 0.92 | 0.92 | 0.92 | 9.90 | 22.26 | $ | 9,693,445 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 24.18 | 0.31 | 0.24 | 0.55 | (0.31 | ) | — | (0.31 | ) | $ | 24.42 | 1.54 | 0.92 | 0.92 | 0.92 | 2.46 | 32.76 | $ | 6,330,268 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 36.77 | 0.51 | (9.79 | ) | (9.28 | ) | (0.43 | ) | (2.88 | ) | (3.31 | ) | $ | 24.18 | 1.64 | 0.89 | 0.89 | 0.89 | (27.45 | ) | 27.31 | $ | 5,152,506 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 26.99 | 0.41 | 10.42 | 10.83 | (0.40 | ) | (0.65 | ) | (1.05 | ) | $ | 36.77 | 1.32 | 0.90 | 0.90 | 0.90 | 41.17 | 64.77 | $ | 5,113,109 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 23.19 | 0.43 | 4.06 | 4.49 | (0.29 | ) | (0.40 | ) | (0.69 | ) | $ | 26.99 | 1.67 | 0.94 | 0.94 | 0.94 | 19.76 | 36.58 | $ | 2,034,453 | |||||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 23.96 | 0.15 | 2.07 | 2.22 | (0.14 | ) | — | (0.14 | ) | $ | 26.04 | 0.61 | 1.45 | 1.45 | 1.63 | 9.30 | 22.26 | $ | 1,311,041 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 23.73 | 0.20 | 0.23 | 0.43 | (0.20 | ) | — | (0.20 | ) | $ | 23.96 | 1.02 | 1.45 | 1.45 | 1.64 | 1.96 | 32.76 | $ | 1,042,248 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 36.18 | 0.33 | (9.63 | ) | (9.30 | ) | (0.27 | ) | (2.88 | ) | (3.15 | ) | $ | 23.73 | 1.07 | 1.45 | 1.45 | 1.62 | (27.90 | ) | 27.31 | $ | 902,150 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 26.58 | 0.23 | 10.26 | 10.49 | (0.24 | ) | (0.65 | ) | (0.89 | ) | $ | 36.18 | 0.75 | 1.45 | 1.45 | 1.61 | 40.43 | 64.77 | $ | 984,587 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 22.88 | 0.33 | 3.97 | 4.30 | (0.20 | ) | (0.40 | ) | (0.60 | ) | $ | 26.58 | 1.29 | 1.45 | 1.45 | 1.61 | 19.15 | 36.58 | $ | 445,081 | |||||||||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 23.82 | 0.21 | 2.05 | 2.26 | (0.18 | ) | — | (0.18 | ) | $ | 25.90 | 0.85 | 1.25 | 1.25 | 1.49 | 9.53 | 22.26 | $ | 872,122 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 23.60 | 0.26 | 0.21 | 0.47 | (0.25 | ) | — | (0.25 | ) | $ | 23.82 | 1.29 | 1.25 | 1.25 | 1.50 | 2.16 | 32.76 | $ | 522,363 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 36.02 | 0.44 | (9.62 | ) | (9.18 | ) | (0.36 | ) | (2.88 | ) | (3.24 | ) | $ | 23.60 | 1.51 | 1.25 | 1.25 | 1.40 | (27.73 | ) | 27.31 | $ | 231,960 | ||||||||||||||||||||||||||||||||||||
2007(c) | $ | 28.86 | 0.09 | 7.36 | 7.45 | (0.29 | ) | — | (0.29 | ) | $ | 36.02 | 0.42 | (d) | 1.25 | (d) | 1.25 | (d) | 1.70 | (d) | 25.90 | 64.77 | $ | 39,217 | ||||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 24.38 | 0.28 | 2.11 | 2.39 | (0.24 | ) | — | (0.24 | ) | $ | 26.53 | 1.11 | 0.99 | 0.99 | 1.08 | 9.86 | 22.26 | $ | 2,462,021 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 24.14 | 0.30 | 0.23 | 0.53 | (0.29 | ) | — | (0.29 | ) | $ | 24.38 | 1.51 | 0.99 | 0.99 | 1.08 | 2.40 | 32.76 | $ | 1,414,122 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 36.74 | 0.50 | (9.81 | ) | (9.31 | ) | (0.41 | ) | (2.88 | ) | (3.29 | ) | $ | 24.14 | 1.65 | 0.99 | 0.99 | 1.01 | (27.54 | ) | 27.31 | $ | 944,582 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 26.97 | 0.43 | 10.39 | 10.82 | (0.40 | ) | (0.65 | ) | (1.05 | ) | $ | 36.74 | 1.33 | 0.94 | 0.94 | 0.95 | 41.13 | 64.77 | $ | 450,944 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 23.18 | 0.45 | 4.03 | 4.48 | (0.29 | ) | (0.40 | ) | (0.69 | ) | $ | 26.97 | 1.76 | 0.95 | 0.95 | 0.96 | 19.72 | 36.58 | $ | 48,699 | |||||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Effective date of this class of shares was February 1, 2007. |
| (d) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 30 Certified Annual Report | Certified Annual Report 31 |
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, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
32 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg International Value Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,035.60 | $ | 7.02 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.17 | $ | 6.96 | ||||||
Class B Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,031.50 | $ | 10.84 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.40 | $ | 10.75 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,032.00 | $ | 10.65 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.59 | $ | 10.56 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,038.10 | $ | 4.83 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.32 | $ | 4.79 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,035.10 | $ | 7.40 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.80 | $ | 7.33 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,036.40 | $ | 6.38 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,037.90 | $ | 5.15 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.01 | $ | 5.10 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.38%; B: 2.13%; C: 2.09%; I: 0.95%; R3: 1.45%; R4: 1.25%; R5: 1.01%) 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 International Value Fund | September 30, 2010 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg International Value Fund versus MSCI EAFE Index (May 28, 1998 to September 30, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 5/28/98) | 4.49 | % | 5.27 | % | 6.58 | % | 8.69 | % | ||||||||
B Shares (Incep: 4/3/00) | 3.59 | % | 5.08 | % | 6.37 | % | 5.72 | % | ||||||||
C Shares (Incep: 5/28/98) | 7.67 | % | 5.48 | % | 6.25 | % | 8.22 | % | ||||||||
I Shares (Incep: 3/30/01) | 9.90 | % | 6.67 | % | — | 8.84 | % | |||||||||
R3 Shares (Incep: 7/1/03) | 9.30 | % | 6.10 | % | — | 12.10 | % | |||||||||
R4 Shares (Incep: 2/1/07) | 9.53 | % | — | — | 0.49 | % | ||||||||||
R5 Shares (Incep: 2/1/05) | 9.86 | % | 6.61 | % | — | 8.41 | % | |||||||||
MSCI EAFE Index (Since 5/28/98) | 3.27 | % | 1.97 | % | 2.56 | % | 3.36 | % | ||||||||
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.
34 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| �� Thornburg International Value Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 65 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. | None | ||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||
Susan H. Dubin, 61 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, 56 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, 51 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 International Value Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
36 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 International Value Fund | September 30, 2010 (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, 2010, 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, 2010, foreign taxes paid and foreign source income is $33,252,481 and $349,266,563, 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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the annual evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the specified information with the Trustees and addressed questions from the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider renewal of the 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 agreement, the Trustees did not identify any single factor as controlling, and this summary does not describe all of the matters considered by the Trustees in making their determination.
Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement, and evaluated the investment performance of the Fund.
In connection with their general supervision of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees received and considered reports throughout the year from the Advisor. These reports addressed
38 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 (Unaudited) | |
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) comparative measures of estimated earnings growth, portfolio volatility, risk and return. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events, 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 evaluating quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment return in the most recent calendar year was lower relative to one of the two broad based securities indices, that the Fund’s investment return was comparable to the other index and the category of foreign large blend equity mutual funds for the most recent calendar year, and also noted in this context that the Fund’s returns had exceeded the returns for both indices and the category in most of the preceding nine calendar years. The quantitative data presented further demonstrated to the Trustees that the Fund’s investment returns fell within the top quartile of the fund category for the one-year period ended with the second quarter of the current year, and fell within the top decile of the fund category for the three-month, year-to-date, 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 MSCI 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 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, and 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. The Trustees observed that the management fee charged by the Advisor to the Fund was lower than the median and average fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, and that the overall expense ratio also was 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 confirmed their previous observations 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, 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 the adequacy of the Advisor’s resources and 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 break-
Certified Annual Report 39
| OTHER INFORMATION, CONTINUED | ||
| Thornburg International Value Fund | September 30, 2010 (Unaudited) | |
point 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.
40 Certified Annual Report
| Trustees’ Statement to Shareholders | ||
Not part of the Certified Annual Report | ||
February 8, 2005, as readopted September 13, 2010
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 Developing World 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 Developing World 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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Thornburg Investment Management®
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Important Information
The information presented on the following pages was current as of September 30, 2010. 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. Funds invested in a limited number of holdings may expose an investor to greater volatility.
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.
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
PORTFOLIO MANAGER
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 1.49%, as disclosed in the most recent Prospectus.
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 whose 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 the investments that comprise 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 evaluate 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 9/30/10
| 1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 12/27/00) | ||||||||||||||||
Without sales charge | 1.47 | % | -12.63 | % | -0.23 | % | 1.68 | % | ||||||||
With sales charge | -3.09 | % | -13.97 | % | -1.14 | % | 1.20 | % | ||||||||
Russell 3000 Growth Index | ||||||||||||||||
(Since: 12/27/00) | 12.81 | % | -4.32 | % | 2.08 | % | -1.03 | % | ||||||||
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 scrutinize 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.
The team test the strength of a company’s underlying business model against a variety of what-if screens. Besides conducting site visits and interviewing company management, they also check in with a company’s major customers, suppliers, and distributors to get a complete picture of a company before investing. Revenue and cost of goods sold are given particular attention. All data points are broken down in as many ways as possible before reaching an investment decision.
STOCKS CONTRIBUTING AND DETRACTING
FOR THE YEAR ENDED 9/30/10
Top Contributors | Top Detractors | |
Las Vegas Sands Corp. | STEC, Inc. | |
DIRECTV | Charles Schwab Corp. | |
Telecity Group plc | Gilead Sciences, Inc. | |
Talecris Biotherapeutics Holdings Corp. | Amedisys, Inc. | |
Affiliated Managers Group, Inc. | Monsanto Co. | |
Source: FactSet | ||
KEY PORTFOLIO ATTRIBUTES
As of 9/30/10
Portfolio P/E Trailing 12-months* | 18.5x | |||
Portfolio Price to Cash Flow* | 10.6x | |||
Portfolio Price to Book Value* | 3.0x | |||
Median Market Cap* | $ | 4.0 B | ||
7-Year Beta (A Shares vs. Russell 3K G)* | 1.13 | |||
Number of Companies | 36 | |||
| * | Source: FactSet |
MARKET CAPITALIZATION EXPOSURE
As of 9/30/10
BASKET STRUCTURE
As of 9/30/10
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Thornburg Core Growth Fund
September 30, 2010
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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 15, 2010
Dear Fellow Shareholder:
We have certainly had a very tumultuous time over the past several years. Bailouts across the globe dominated the news a year ago; today, we have a “currency war” and quantitative easing. Without a doubt, these considerations impact stock prices, but our approach remains as it always has – seeking a nexus between growth and valuation. Unfortunately, returns over the trailing twelve months have been driven more by execution than valuation, and this has hurt our relative returns.
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Warren Buffett, probably the pre-eminent post war investor, famously commented (paraphrasing the pre-eminent pre-war investor, Benjamin Graham), “In the short run, the market’s a voting machine and sometimes people vote very unintelligently. In the long run, it’s a weighing machine and the weight of business and how it does is what affects values over time.” A cynic would say I am arguing that we are right and the market is wrong, but the fact remains that today great businesses that are facing issues, whether real or perceived, are cheap. Businesses with good growth and no easily discernible flaws have been more dear and have become even more expensive as investors have been willing to pay for the lack of concerns. In many ways, since the market has recovered from the liquidity crisis of 2008, investors have sought “growth at any price,” a sentiment we don’t fully share and don’t believe will create long-term sustainable returns.
For the fiscal year ended September 30, 2010, the Thornburg Core Growth Fund generated positive absolute and poor relative performance. On September 30, 2009, the net asset value (NAV) for the Class A shares was $13.61. As of the end of this fiscal year, the Fund’s NAV was $13.81. The Fund’s Class A shares (at NAV), having returned 1.47% over the past twelve months, have materially underperformed the benchmark. The Russell 3000 Growth Index returned 12.81% for the year ended September 30, 2010.
Poor stock selection was the main driver of underperformance during the period, particularly within the information technology sector where our valuation sensitivity seemed to keep us out of the best performing stocks. In hindsight, we misjudged
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Certified Annual Report 7
Letter to Shareholders,
Continued
the premium investors were willing to pay for growth during the year. The bulk of our technology exposure was in large cap stocks with attractive valuations. We continue to like these investments, but they have generally been relative underperformers. An additional headwind was the strong performance of industrial and telecommunication services stocks, areas where we had very little exposure. This is generally the case as these are not growth industries and produce few stocks that meet our criteria for investment.
Above, I mentioned that we don’t think our process is broken. Strategically and philosophically, we believe buying quality growth stocks at a discount is a winning approach to the market. Having said that, we are always making tactical adjustments to the process and believe that evolving our approach over time to reflect changes in the capital markets makes sense. We have always tried to own a bit of every market (high growth, momentum, classic growth, value, but our “sweet spot” is “growth at a reasonable price”).
Occasionally, markets become “narrow”– meaning a select segment of the market performs very strongly, to the detriment of other stocks. The best example of this is the internet bubble: an increasingly smaller part of the market drove the index and if you didn’t own those stocks, you were not performing. A quarter century before the internet bubble, we had the “Nifty Fifty” phenomenon, which featured an even narrower market (that also ended in tears). If narrowness persists in a market, we rarely participate due to high and increasing valuations, and thus we miss out on that performance. Our reticence to chase these stocks has clearly hurt returns, but I wouldn’t want to own most of those names at current levels. Where we do own high-multiple names, we’ve focused on names that have very powerful secular trends that can drive growth well into the future.
Our value-biased growth approach has driven the Fund’s performance since inception – with the Fund (at NAV) outperforming the benchmark in eight of the nine complete calendar years since we launched in late 2000. We continue to focus on the keys to our prior success, including rigorous research, always seeking new and better ideas than what we hold, minimizing errors in analysis, and weighting positions appropriately.
Growth as a style is clearly out of favor, and has been for 10 years. Numerous articles continue to be published about value investors buying “growth” stocks. Considering the global economy, true growth is what is scarce, especially with Gross Domestic Products slowing across the globe. In spite of this scarcity, so far we have mostly seen the highest tier of growth companies (in terms of highest growth rates and fewest perceived issues) do well, and there are many great investments that are growing nearly as well, at substantially lower valuations.
Since last year, there have been some changes to our team. Greg Dunn, associate portfolio manager, became a managing director of our firm. Thornburg Investment Management has been very proactive over its 28-year history in identifying and retaining important human capital, and we continue to consider it one of the most important things we can do. We also hired Tamara Manoukian as an equity analyst in February of 2010; she is a CFA charterholder and an experienced professional investor.
8 Certified Annual Report
Adherence to our core approach is reinforced by the culture and by the simple fact that every day I work with shareholders of the Core Growth Fund, who exist at all levels of our organization. Our firm-wide approach to investing is driven by three characteristics: having an intense focus on business fundamentals and valuation, being globally aware investors, and openly and proactively sharing investment information internally. Our culture has been an important part of our success historically, and we 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,
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 Core Growth Fund | September 30, 2010 | |
TOP TEN HOLDINGS
As of 9/30/10
Qualcomm, Inc. | 5.2 | % | Medco Health Solutions, Inc. | 3.9 | % | |||||
Google, Inc. | 4.4 | % | Charles Schwab Corp. | 3.8 | % | |||||
Gilead Sciences, Inc. | 4.3 | % | Affiliated Managers Group, Inc. | 3.7 | % | |||||
Amazon.com, Inc. | 4.1 | % | Amdocs Ltd. | 3.7 | % | |||||
Visa, Inc. | 4.1 | % | Fiserv, Inc. | 3.4 | % |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/10
Software & Services | 25.8 | % | Energy | 3.1 | % | |||||
Diversified Financials | 15.0 | % | Semiconductors & Semiconductor Equipment | 3.0 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 14.8 | % | Automobiles & Components | 2.4 | % | |||||
Consumer Services | 9.8 | % | Banks | 2.2 | % | |||||
Health Care Equipment & Services | 7.9 | % | Consumer Durables & Apparel | 2.1 | % | |||||
Retailing | 6.4 | % | Other Assets & Cash Equivalents | 2.3 | % | |||||
Technology Hardware & Equipment | 5.2 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/10 (% of equity holdings)
United States | 90.9 | % | Switzerland | 2.8 | % | |||||
United Kingdom | 6.1 | % | China | 0.2 | % |
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 97.71% | ||||||||
AUTOMOBILES & COMPONENTS — 2.36% | ||||||||
AUTO COMPONENTS — 2.36% | ||||||||
Gentex Corp. | 1,599,538 | $ | 31,206,986 | |||||
| 31,206,986 | ||||||||
BANKS — 2.18% | ||||||||
COMMERCIAL BANKS — 2.18% | ||||||||
aSVB Financial Group | 681,506 | 28,841,334 | ||||||
| 28,841,334 | ||||||||
CONSUMER DURABLES & APPAREL — 2.09% | ||||||||
TEXTILES, APPAREL & LUXURY GOODS — 2.09% | ||||||||
aSkechers USA, Inc. | 1,175,114 | 27,603,428 | ||||||
| 27,603,428 | ||||||||
CONSUMER SERVICES — 9.86% | ||||||||
DIVERSIFIED CONSUMER SERVICES — 5.30% | ||||||||
aCoinstar, Inc. | 749,040 | 32,201,229 | ||||||
aGrand Canyon Education, Inc. | 1,730,690 | 37,954,032 | ||||||
HOTELS, RESTAURANTS & LEISURE — 4.56% | ||||||||
aLas Vegas Sands Corp. | 821,389 | 28,625,407 | ||||||
aLife Time Fitness, Inc. | 800,932 | 31,612,786 | ||||||
| 130,393,454 | ||||||||
DIVERSIFIED FINANCIALS — 15.06% | ||||||||
CAPITAL MARKETS — 10.38% | ||||||||
aAffiliated Managers Group, Inc. | 632,282 | 49,324,319 | ||||||
Charles Schwab Corp. | 3,603,335 | 50,086,356 | ||||||
Goldman Sachs Group, Inc. | 261,825 | 37,854,659 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 4.68% | ||||||||
aIntercontinental Exchange, Inc. | 243,300 | 25,478,376 | ||||||
aMSCI, Inc. | 1,099,003 | 36,497,889 | ||||||
| 199,241,599 | ||||||||
ENERGY — 3.06% | ||||||||
OIL, GAS & CONSUMABLE FUELS — 3.06% | ||||||||
Frontier Oil Corp. | 1,533,161 | 20,544,357 | ||||||
aSandridge Energy, Inc. | 3,502,200 | 19,892,496 | ||||||
| 40,436,853 | ||||||||
HEALTH CARE EQUIPMENT & SERVICES — 7.95% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 3.31% | ||||||||
Covidien plc | 1,089,810 | 43,799,464 | ||||||
HEALTH CARE PROVIDERS & SERVICES — 4.64% | ||||||||
aHMS Holdings Corp. | 162,912 | 9,602,033 | ||||||
aMedco Health Solutions, Inc. | 995,100 | 51,804,906 | ||||||
| 105,206,403 | ||||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 14.78% | ||||||||
BIOTECHNOLOGY — 12.68% | ||||||||
aActelion Ltd. | 917,300 | $ | 36,751,744 | |||||
aAlexion Pharmaceuticals, Inc. | 465,965 | 29,989,507 | ||||||
aGilead Sciences, Inc. | 1,614,660 | 57,498,042 | ||||||
aTalecris Biotherapeutics Holdings Corp. | 1,898,627 | 43,440,586 | ||||||
PHARMACEUTICALS — 2.10% | ||||||||
aSalix Pharmaceuticals Ltd. | 699,137 | 27,769,722 | ||||||
| 195,449,601 | ||||||||
RETAILING — 6.37% | ||||||||
INTERNET & CATALOG RETAIL — 4.13% | ||||||||
aAmazon.com, Inc. | 348,215 | 54,690,648 | ||||||
SPECIALTY RETAIL — 2.24% | ||||||||
aDress Barn, Inc. | 1,247,294 | 29,623,232 | ||||||
| 84,313,880 | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.98% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.98% | ||||||||
aON Semiconductor Corp. | 5,465,198 | 39,404,078 | ||||||
| 39,404,078 | ||||||||
SOFTWARE & SERVICES — 25.84% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 11.14% | ||||||||
aAmdocs Ltd. | 1,701,406 | 48,762,296 | ||||||
aFiserv, Inc. | 824,084 | 44,352,201 | ||||||
Visa, Inc. | 730,956 | 54,280,793 | ||||||
INTERNET SOFTWARE & SERVICES — 9.23% | ||||||||
aEquinix, Inc. | 250,314 | 25,619,638 | ||||||
aGoogle, Inc. | 111,765 | 58,764,919 | ||||||
aRightNow Technologies, Inc. | 377,171 | 7,430,269 | ||||||
aTelecity Group plc | 3,887,556 | 30,259,984 | ||||||
SOFTWARE — 5.47% | ||||||||
aAutoNavi Holdings Ltd. ADR | 121,623 | 2,128,402 | ||||||
Microsoft Corp. | 1,783,238 | 43,671,499 | ||||||
aSourcefire, Inc. | 919,855 | 26,528,618 | ||||||
| 341,798,619 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 5.18% | ||||||||
COMMUNICATIONS EQUIPMENT — 5.18% | ||||||||
Qualcomm, Inc. | 1,520,100 | 68,586,913 | ||||||
| 68,586,913 | ||||||||
TOTAL COMMON STOCK (Cost $1,118,134,479) | 1,292,483,148 | |||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
SHORT TERM INVESTMENTS — 3.25% | ||||||||
AGL Capital Corp., 0.31%, 10/1/2010 | $ | 20,500,000 | $ | 20,500,000 | ||||
Atmos Energy Corp., 0.29%, 10/1/2010 | 22,500,000 | 22,500,000 | ||||||
TOTAL SHORT TERM INVESTMENTS (Cost $43,000,000) | 43,000,000 | |||||||
TOTAL INVESTMENTS — 100.96% (Cost $1,161,134,479) | $ | 1,335,483,148 | ||||||
LIABILITIES NET OF OTHER ASSETS — (0.96)% | (12,698,863 | ) | ||||||
NET ASSETS — 100.00% | $ | 1,322,784,285 | ||||||
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 |
See notes to financial statements.
Certified Annual Report 13
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg Core Growth Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $1,161,134,479) (Note 2) | $ | 1,335,483,148 | ||
Cash | 864,736 | |||
Receivable for investments sold | 4,159,094 | |||
Receivable for fund shares sold | 1,312,534 | |||
Dividends receivable | 217,962 | |||
Prepaid expenses and other assets | 37,929 | |||
Total Assets | 1,342,075,403 | |||
LIABILITIES | ||||
Payable for securities purchased | 11,443,487 | |||
Payable for fund shares redeemed | 5,872,515 | |||
Payable to investment advisor and other affiliates (Note 3) | 1,107,577 | |||
Accounts payable and accrued expenses | 867,470 | |||
Dividends payable | 69 | |||
Total Liabilities | 19,291,118 | |||
NET ASSETS | $ | 1,322,784,285 | ||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (96,317 | ) | |
Net unrealized appreciation on investments | 174,348,669 | |||
Accumulated net realized gain (loss) | (913,943,718 | ) | ||
Net capital paid in on shares of beneficial interest | 2,062,475,651 | |||
| $ | 1,322,784,285 | |||
14 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 | |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($372,953,553 applicable to 27,002,462 shares of beneficial interest outstanding - Note 4) | $ | 13.81 | ||
Maximum sales charge, 4.50% of offering price | 0.65 | |||
Maximum offering price per share | $ | 14.46 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($215,412,828 applicable to 16,893,100 shares of beneficial interest outstanding - Note 4) | $ | 12.75 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($172,126,254 applicable to 12,028,150 shares of beneficial interest outstanding - Note 4) | $ | 14.31 | ||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($212,360,003 applicable to 15,370,096 shares of beneficial interest outstanding - Note 4) | $ | 13.82 | ||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($24,968,532 applicable to 1,803,937 shares of beneficial interest outstanding - Note 4) | $ | 13.84 | ||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($324,963,115 applicable to 22,728,015 shares of beneficial interest outstanding - Note 4) | $ | 14.30 | ||
| * | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 15
| STATEMENT OF OPERATIONS | ||
| Thornburg Core Growth Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Dividend income | $ | 5,758,922 | ||
Interest income | 184,432 | |||
Total Income | 5,943,354 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 12,582,590 | |||
Administration fees (Note 3) | ||||
Class A Shares | 572,519 | |||
Class C Shares | 321,940 | |||
Class I Shares | 99,400 | |||
Class R3 Shares | 324,444 | |||
Class R4 Shares | 38,630 | |||
Class R5 Shares | 163,514 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,142,373 | |||
Class C Shares | 2,575,519 | |||
Class R3 Shares | 1,295,083 | |||
Class R4 Shares | 77,034 | |||
Transfer agent fees | ||||
Class A Shares | 1,103,811 | |||
Class C Shares | 610,435 | |||
Class I Shares | 312,695 | |||
Class R3 Shares | 784,709 | |||
Class R4 Shares | 133,657 | |||
Class R5 Shares | 848,123 | |||
Registration and filing fees | ||||
Class A Shares | 22,858 | |||
Class C Shares | 21,083 | |||
Class I Shares | 20,747 | |||
Class R3 Shares | 18,722 | |||
Class R4 Shares | 20,393 | |||
Class R5 Shares | 22,115 | |||
Custodian fees (Note 3) | 276,005 | |||
Professional fees | 77,982 | |||
Accounting fees | 65,590 | |||
Trustee fees | 37,907 | |||
Other expenses | 129,388 | |||
Total Expenses | 23,699,266 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,645,458 | ) | ||
Net Expenses | 22,053,808 | |||
Net Investment Loss | $ | (16,110,454 | ) | |
16 Certified Annual Report
| STATEMENT OF OPERATIONS, CONTINUED | ||
| Thornburg Core Growth Fund | Year Ended September 30, 2010 | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 118,531,968 | ||
Forward currency contracts (Note 7) | (156,415 | ) | ||
Foreign currency transactions | (96,228 | ) | ||
| 118,279,325 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (84,241,758 | ) | ||
Forward currency contracts (Note 7) | 43,193 | |||
Foreign currency translations | (1,521 | ) | ||
| (84,200,086 | ) | |||
Net Realized and Unrealized Gain | 34,079,239 | |||
Net Increase in Net Assets Resulting from Operations | $ | 17,968,785 | ||
See notes to financial statements.
Certified Annual Report 17
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg Core Growth Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (16,110,454 | ) | $ | (11,089,808 | ) | ||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | 118,279,325 | (722,672,084 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | (84,200,086 | ) | 640,445,502 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 17,968,785 | (93,316,390 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (143,803,748 | ) | (181,036,761 | ) | ||||
Class C Shares | (75,171,959 | ) | (73,693,439 | ) | ||||
Class I Shares | (48,814,392 | ) | (97,505,210 | ) | ||||
Class R3 Shares | (69,273,239 | ) | (10,832,300 | ) | ||||
Class R4 Shares | (5,941,399 | ) | 8,821,947 | |||||
Class R5 Shares | (3,484,259 | ) | 66,956,015 | |||||
Net Decrease in Net Assets | (328,520,211 | ) | (380,606,138 | ) | ||||
NET ASSETS: | ||||||||
Beginning of Year | 1,651,304,496 | 2,031,910,634 | ||||||
End of Year | $ | 1,322,784,285 | $ | 1,651,304,496 | ||||
See notes to financial statements.
18 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Core Growth Fund | September 30, 2010 | |
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 sixteen 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). 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 a price 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 Core Growth Fund | September 30, 2010 | |
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, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 1,292,483,148 | $ | 1,292,483,148 | $ | — | $ | — | ||||||||
Short Term Investments | 43,000,000 | — | 43,000,000 | — | ||||||||||||
Total Investments in Securities | $ | 1,335,483,148 | $ | 1,292,483,148 | $ | 43,000,000 | $ | — | ||||||||
| * | See Schedule of Investments for a summary of the industry exposure as grouped according to the Global Industry Classification Standard (GICS), which is an industry taxonomy developed by MSCI Barra and Standard & Poor’s (S&P). |
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
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.
20 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 | |
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute to shareholders substantially all taxable income, including any net realized gain on investments of the Fund. Therefore, no provision for federal income taxes is required.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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, if any, 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, 2010, 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
Certified Annual Report 21
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 | |
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, 2010, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $173,832 for Class I shares, $760,607 for Class R3 shares, $102,838 for Class R4 shares, and $608,181 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, 2010, the Distributor has advised the Fund that it earned commissions aggregating $26,384 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $16,831 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I and Class R5 shares. 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, 2010, 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, 2010, there were no fees paid indirectly.
Certain officers and Trustees of the Trust are also officers and/or directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 3,895,692 | $ | 53,800,051 | 9,126,775 | $ | 96,741,227 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (14,432,625 | ) | (197,604,891 | ) | (26,846,401 | ) | (277,785,984 | ) | ||||||||
Redemption fees received* | — | 1,092 | — | 7,996 | ||||||||||||
Net Increase (Decrease) | (10,536,933 | ) | $ | (143,803,748 | ) | (17,719,626 | ) | $ | (181,036,761 | ) | ||||||
Class C Shares | ||||||||||||||||
Shares sold | 1,070,092 | $ | 13,715,365 | 2,808,141 | $ | 28,136,349 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (7,016,592 | ) | (88,887,938 | ) | (10,711,900 | ) | (101,834,215 | ) | ||||||||
Redemption fees received* | — | 614 | — | 4,427 | ||||||||||||
Net Increase (Decrease) | (5,946,500 | ) | $ | (75,171,959 | ) | (7,903,759 | ) | $ | (73,693,439 | ) | ||||||
22 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 3,751,437 | $ | 53,348,009 | 4,198,353 | $ | 47,389,356 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (7,276,584 | ) | (102,162,877 | ) | (13,922,964 | ) | (144,898,258 | ) | ||||||||
Redemption fees received* | — | 476 | — | 3,692 | ||||||||||||
Net Increase (Decrease) | (3,525,147 | ) | $ | (48,814,392 | ) | (9,724,611 | ) | $ | (97,505,210 | ) | ||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 4,447,347 | $ | 61,659,930 | 6,870,209 | $ | 74,934,313 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (9,529,774 | ) | (130,933,778 | ) | (8,069,388 | ) | (85,770,165 | ) | ||||||||
Redemption fees received* | — | 609 | — | 3,552 | ||||||||||||
Net Increase (Decrease) | (5,082,427 | ) | $ | (69,273,239 | ) | (1,199,179 | ) | $ | (10,832,300 | ) | ||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 686,300 | $ | 9,351,159 | 1,420,248 | $ | 16,469,736 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (1,147,030 | ) | (15,292,633 | ) | (729,912 | ) | (7,648,053 | ) | ||||||||
Redemption fees received* | — | 75 | — | 264 | ||||||||||||
Net Increase (Decrease) | (460,730 | ) | $ | (5,941,399 | ) | 690,336 | $ | 8,821,947 | ||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 6,078,290 | $ | 86,903,397 | 14,249,535 | $ | 178,677,744 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (6,402,491 | ) | (90,388,466 | ) | (9,543,854 | ) | (111,724,983 | ) | ||||||||
Redemption fees received* | — | 810 | — | 3,254 | ||||||||||||
Net Increase (Decrease) | (324,201 | ) | $ | (3,484,259 | ) | 4,705,681 | $ | 66,956,015 | ||||||||
| * | 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 Core Growth Fund | September 30, 2010 | |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $1,073,864,043 and $1,422,580,574, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 1,161,565,193 | ||
Gross unrealized appreciation on a tax basis | $ | 211,470,314 | ||
Gross unrealized depreciation on a tax basis | (37,552,359 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 173,917,955 | ||
At September 30, 2010, the Fund had deferred tax basis currency losses occurring subsequent to October 31, 2009 of $96,317. For tax purposes, such losses will be reflected in the year ending September 30, 2011.
At September 30, 2010, 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 | |||
2018 | 253,358,410 | |||
| $ | 913,513,004 | |||
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $16,212,601, decreased accumulated net realized investment loss by $96,228, and decreased net investment loss by $16,116,373. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from nondeductible net operating loss and currency losses.
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. This 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, 2010, 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 Core Growth Fund | September 30, 2010 | |
The Fund entered into forward currency contracts during the year ended September 30, 2010 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. Values of open currency contracts are indicative of the activity for the year ended September 30, 2010.
There were no outstanding forward currency contracts in the Fund’s Statement of Assets and Liabilities at September 30, 2010.
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, 2010 are disclosed in the following tables:
Amount of Realized Gain (Loss)
on Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (156,415 | ) | $ | (156,415 | ) | ||
Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 43,193 | $ | 43,193 | ||||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class R3 shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .25% of 1%.
Certified Annual Report 25
| FINANCIAL HIGHLIGHTS | ||
| Thornburg Core Growth Fund | ||
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 13.61 | (0.15 | ) | 0.35 | 0.20 | — | — | — | $ | 13.81 | (1.09 | ) | 1.48 | 1.48 | 1.48 | 1.47 | 75.06 | $ | 372,954 | ||||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 13.36 | (0.09 | ) | 0.34 | 0.25 | — | — | — | $ | 13.61 | (0.81 | ) | 1.48 | 1.48 | 1.49 | 1.87 | 82.86 | $ | 511,065 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 20.72 | (0.10 | ) | (7.25 | ) | (7.35 | ) | — | (0.01 | ) | (0.01 | ) | $ | 13.36 | (0.58 | ) | 1.38 | 1.38 | 1.38 | (35.48 | ) | 79.73 | $ | 738,457 | |||||||||||||||||||||||||||||||||||
2007(b) | $ | 16.38 | (0.15 | ) | 4.49 | 4.34 | — | — | — | $ | 20.72 | (0.78 | ) | 1.37 | 1.36 | 1.37 | 26.50 | 82.37 | $ | 1,470,020 | ||||||||||||||||||||||||||||||||||||||||
2006(b) | $ | 14.21 | (0.13 | ) | 2.54 | 2.41 | — | (0.24 | ) | (0.24 | ) | $ | 16.38 | (0.86 | ) | 1.48 | 1.46 | 1.48 | 17.20 | 98.00 | $ | 502,345 | ||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 12.66 | (0.23 | ) | 0.32 | 0.09 | — | — | — | $ | 12.75 | (1.84) | 2.23 | 2.23 | 2.23 | 0.71 | 75.06 | $ | 215,413 | |||||||||||||||||||||||||||||||||||||||||
2009 | $ | 12.53 | (0.16 | ) | 0.29 | 0.13 | — | — | — | $ | 12.66 | (1.59) | 2.26 | 2.26 | 2.26 | 1.04 | 82.86 | $ | 289,224 | |||||||||||||||||||||||||||||||||||||||||
2008 | $ | 19.57 | (0.22 | ) | (6.81 | ) | (7.03 | ) | — | (0.01 | ) | (0.01 | ) | $ | 12.53 | (1.34) | 2.13 | 2.13 | 2.13 | (35.93 | ) | 79.73 | $ | 385,110 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 15.59 | (0.28 | ) | 4.26 | 3.98 | — | — | — | $ | 19.57 | (1.53) | 2.12 | 2.11 | 2.12 | 25.53 | 82.37 | $ | 664,252 | |||||||||||||||||||||||||||||||||||||||||
2006 | $ | 13.63 | (0.23 | ) | 2.43 | 2.20 | — | (0.24 | ) | (0.24 | ) | $ | 15.59 | (1.63) | 2.25 | 2.23 | 2.25 | 16.38 | 98.00 | $ | 187,180 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 14.04 | (0.09 | ) | 0.36 | 0.27 | — | — | — | $ | 14.31 | (0.60 | ) | 0.99 | 0.99 | 1.08 | 1.92 | 75.06 | $ | 172,126 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.71 | (0.03 | ) | 0.36 | 0.33 | — | — | — | $ | 14.04 | (0.29 | ) | 0.97 | 0.97 | 1.08 | 2.41 | 82.86 | $ | 218,300 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 21.16 | (0.03 | ) | (7.41 | ) | (7.44 | ) | — | (0.01 | ) | (0.01 | ) | $ | 13.71 | (0.17 | ) | 0.96 | 0.96 | 0.96 | (35.17 | ) | 79.73 | $ | 346,497 | |||||||||||||||||||||||||||||||||||
2007 | $ | 16.66 | (0.08 | ) | 4.58 | 4.50 | — | — | — | $ | 21.16 | (0.39 | ) | 0.98 | 0.97 | 0.98 | 27.01 | 82.37 | $ | 642,143 | ||||||||||||||||||||||||||||||||||||||||
2006 | $ | 14.37 | (0.05 | ) | 2.58 | 2.53 | — | (0.24 | ) | (0.24 | ) | $ | 16.66 | (0.40 | ) | 1.01 | 0.99 | 1.10 | 17.85 | 98.00 | $ | 188,422 | ||||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.62 | (0.15 | ) | 0.35 | 0.20 | — | — | — | $ | 13.82 | (1.11 | ) | 1.50 | 1.50 | 1.79 | 1.47 | 75.06 | $ | 212,360 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.37 | (0.09 | ) | 0.34 | 0.25 | — | — | — | $ | 13.62 | (0.84 | ) | 1.49 | 1.49 | 1.76 | 1.87 | 82.86 | $ | 278,576 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 20.75 | (0.13 | ) | (7.24 | ) | (7.37 | ) | — | (0.01 | ) | (0.01 | ) | $ | 13.37 | (0.74 | ) | 1.50 | 1.50 | 1.72 | (35.53 | ) | 79.73 | $ | 289,500 | |||||||||||||||||||||||||||||||||||
2007 | $ | 16.43 | (0.18 | ) | 4.50 | 4.32 | — | — | — | $ | 20.75 | (0.91 | ) | 1.51 | 1.50 | 1.64 | 26.29 | 82.37 | $ | 414,267 | ||||||||||||||||||||||||||||||||||||||||
2006 | $ | 14.26 | (0.13 | ) | 2.54 | 2.41 | — | (0.24 | ) | (0.24 | ) | $ | 16.43 | (0.90 | ) | 1.53 | 1.50 | 1.73 | 17.14 | 98.00 | $ | 90,167 | ||||||||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.63 | (0.14 | ) | 0.35 | 0.21 | — | — | — | $ | 13.84 | (1.01 | ) | 1.40 | 1.40 | 1.73 | 1.54 | 75.06 | $ | 24,968 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.37 | (0.08 | ) | 0.34 | 0.26 | — | — | — | $ | 13.63 | (0.77 | ) | 1.40 | 1.40 | 1.83 | 1.94 | 82.86 | $ | 30,871 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 20.73 | (0.13 | ) | (7.22 | ) | (7.35 | ) | — | (0.01 | ) | (0.01 | ) | $ | 13.37 | (0.78 | ) | 1.40 | 1.40 | 1.73 | (35.47 | ) | 79.73 | $ | 21,047 | |||||||||||||||||||||||||||||||||||
2007(c) | $ | 18.90 | (0.12 | ) | 1.95 | 1.83 | — | — | — | $ | 20.73 | (0.93 | )(d) | 1.41 | (d) | 1.40 | (d) | 8.74 | (d)(e) | 9.68 | 82.37 | $ | 3,508 | |||||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 14.02 | (0.08 | ) | 0.36 | 0.28 | — | — | — | $ | 14.30 | (0.60 | ) | 0.99 | 0.99 | 1.18 | 2.00 | 75.06 | $ | 324,963 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.70 | (0.04 | ) | 0.36 | 0.32 | — | — | — | $ | 14.02 | (0.34 | ) | 0.99 | 0.99 | 1.27 | 2.34 | 82.86 | $ | 323,268 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 21.15 | (0.05 | ) | (7.39 | ) | (7.44 | ) | — | (0.01 | ) | (0.01 | ) | $ | 13.70 | (0.30 | ) | 0.99 | 0.99 | 1.18 | (35.19 | ) | 79.73 | $ | 251,299 | |||||||||||||||||||||||||||||||||||
2007 | $ | 16.65 | (0.07 | ) | 4.57 | 4.50 | — | — | — | $ | 21.15 | (0.37 | ) | 0.95 | 0.95 | 0.97 | 27.03 | 82.37 | $ | 158,084 | ||||||||||||||||||||||||||||||||||||||||
2006(f) | $ | 14.43 | (0.05 | ) | 2.51 | 2.46 | — | (0.24 | ) | (0.24 | ) | $ | 16.65 | (0.38 | )(d) | 1.01 | (d) | 0.99 | (d) | 176.54 | (d)(e) | 17.29 | 98.00 | $ | 45 | |||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Effective date of this class of shares was February 1, 2007. |
| (d) | Annualized. |
| (e) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| (f) | Effective date of this class of shares was October 3, 2005. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 26 Certified Annual Report | Certified Annual Report 27 |
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, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
28 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg Core Growth Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 959.00 | $ | 7.38 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.53 | $ | 7.60 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 955.80 | $ | 11.00 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.82 | $ | 11.32 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 961.70 | $ | 4.87 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 959.70 | $ | 7.37 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.59 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 959.80 | $ | 6.88 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.05 | $ | 7.08 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 962.30 | $ | 4.87 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.50%; C: 2.24%; I: 0.99%; R3: 1.50%; 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 29
| INDEX COMPARISON | ||
| Thornburg Core Growth Fund | September 30, 2010 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Core Growth Fund versus Russell 3000 Growth Index (December 27, 2000 to September 30, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | Since Inception | ||||||||||
A Shares (Incep: 12/27/00) | -3.09 | % | -1.14 | % | 1.20 | % | ||||||
C Shares (Incep: 12/27/00) | -0.29 | % | -0.97 | % | 0.86 | % | ||||||
I Shares (Incep: 11/1/03) | 1.92 | % | 0.26 | % | 4.32 | % | ||||||
R3 Shares (Incep: 7/1/03) | 1.47 | % | -0.28 | % | 5.42 | % | ||||||
R4 Shares (Incep: 2/1/07) | 1.54 | % | — | -8.15 | % | |||||||
R5 Shares (Incep: 10/3/05) | 2.00 | % | — | 0.16 | % | |||||||
Russell 3000 Growth Index (Since: 12/27/00) | 12.81 | % | 2.08 | % | -1.03 | % | ||||||
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.
30 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg Core Growth Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||||
INTERESTED TRUSTEES(1)(2)(4) | ||||||
Garrett Thornburg, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||||
David A. Ater, 65 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. | None | ||||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||||
Susan H. Dubin, 61 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, 56 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, 51 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 31
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 (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, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||||
32 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 (Unaudited) | |
Name, Age, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor of shares for the Trust. |
| (4) | Each Trustee serves in office until the election and qualification of a successor. |
| (5) | Mr. McMahon is considered an “interested” Trustee because he is the chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
Certified Annual Report 33
| OTHER INFORMATION | ||
| Thornburg Core Growth Fund | September 30, 2010 (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 13, 2010.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the annual evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of this information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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 estimated earnings growth, portfolio volatility, risk and return. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment policies.
34 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 (Unaudited) | |
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, trade execution, the Advisor’s performance of accounting and other services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In reviewing quantitative and performance data presented, the Trustees noted (among other aspects of the data) that due in significant part to results in late 2007, 2008 and the first part of 2010, the Fund’s investment returns fell within or close to the lowest decile of the mid-cap growth category of mutual funds selected by an independent mutual fund analyst firm for the three-month, year-to-date, one-year and three-year periods ending with the second quarter of the current year, and somewhat below the median for the five-year period. The quantitative data further demonstrated to the Trustees, however, that the Fund’s investment return had been higher in the most recent calendar year than the returns of the fund category and the two broad based securities indices, and that the Fund’s investment returns had exceeded the return of the category in six of the preceding eight years and had also exceeded the returns of each of the two indices in seven of the eight calendar years preceding the most recent calendar year. 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 the management fee charged by the Advisor to the Fund, 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, and 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. 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 confirmed their previous observations that the differences between the fees charged by the Advisor to different types of clients did not appear exceptional, and 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, and 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 the adequacy of the Advisor’s resources and 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.
Certified Annual Report 35
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Core Growth Fund | September 30, 2010 (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.
36 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
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. 37
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38 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 Developing World 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. 39
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 Developing World 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. 41
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42 This page is not part of the Annual Report.
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This page is not part of the Annual Report. 43
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Important Information
The information presented on the following pages was current as of September 30, 2010. 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. Funds invested in a limited number of holdings may expose an investor to greater volatility.
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 – A market capitalization weighted index that 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
PORTFOLIO MANAGER
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 operating expenses of Class A shares are 1.97% as disclosed in the most recent Prospectus. Thornburg Investment Management and Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least February 1, 2011, so that actual expenses, for Class A shares, do not exceed 1.63%.
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 30–50 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 attempting to manage 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
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED 9/30/10
| 1 Yr | 3 Yr | Since Incep | ||||||||||
A Shares (Incep: 2/1/07) | ||||||||||||
Without sales charge | 18.82 | % | -4.91 | % | 1.98 | % | ||||||
With sales charge | 13.45 | % | -6.35 | % | 0.71 | % | ||||||
MSCI AC World ex-U.S. Growth Index | ||||||||||||
(Since 2/1/07) | 11.41 | % | -7.06 | % | -1.43 | % | ||||||
4 This page is not part of the Annual Report.
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.
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 9/30/10
Top Contributors | Top Detractors | |
| YOOX S.p.A. | Shanda Games Ltd. ADS | |
| ASOS plc | Actelion Ltd. | |
| MercadoLibre Corp. | Duoyuan Printing Inc. | |
| Telecity Group plc | AirMedia Group Inc. ADS | |
| Drogasil S/A | Regus plc | |
| Source: FactSet | ||
KEY PORTFOLIO ATTRIBUTES
As of 9/30/10
Portfolio P/E Trailing 12-months* | 22.7x | |||
Portfolio Price to Cash Flow* | 12.7x | |||
Portfolio Price to Book Value* | 3.4x | |||
Median Market Cap* | $ | 3.2 B | ||
Number of Companies | 40 | |||
* Source: FactSet | ||||
MARKET CAPITALIZATION EXPOSURE
As of 9/30/10
BASKET STRUCTURE
As of 9/30/10
This page is not part of the Annual Report 5
Thornburg International Growth Fund
September 30, 2010
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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 18, 2010
Dear Fellow Shareholder:
For the year ended September 30, 2010, the Thornburg International Growth Fund returned a positive 18.82% for Class A shares at net asset value (NAV), outperforming its benchmark, the MSCI AC World ex-US Growth Index, which returned a positive 11.41%. On September 30, 2009, the NAV per Class A share of the Fund was $10.36 and it ended the fiscal year on September 30, 2010 with an NAV of $12.25. Investments in initial public offerings with the Fund contributed positively to performance during the period. | |
| Flexibility is a hallmark of our firm’s approach to investing. That is evident in our top contributors, a group of widely disparate companies in terms of country, industry, and investment thesis; the names were Clicks Group Ltd. (South Africa), YOOX S.p.A. (Italy), ASOS plc (U.K.), MercadoLibre (Argentina), Telecity Group plc (U.K.), Drogasil SA (Brazil), Experian plc (U.K.), Diagnosticos da America SA (Brazil), and Seek Ltd. (Australia). | ||
| That flexibility allows us to scour the entire investment universe in search of great ideas, and allows us to focus on what has driven returns over the life of this Fund – stock selection. Stock selection isn’t just about finding winners. It is also about avoiding losers when possible, and minimizing the impact of “good tries” gone bad. While we had thirteen stocks over the trailing twelve months contribute more than 1% each to our total return, we only had four which detracted as much. We had noticeably positive selection effect (stock selection versus the benchmark, controlled in this case by sector) in information technology, consumer discretionary, industrials, financials, and energy. Stock selection drove our outperformance for the year. Our selection effect was moderately negative in consumer staples and health care, and more negative in the materials sector. We were considerably underweight in materials over the fiscal year. | ||
| Emerging markets have become a popular area to invest in recently. We’ve been deliberate in our approach to investing in emerging markets. We completely understand the opportunity – high Gross Domestic Product (GDP) growth, large and growing populations, increasing disposable incomes, strong currencies, etc. – and we want to participate. We are also highly conscious of the risks, including high expectations, less solid governance practices, less rigorous accounting practices, historically high valuations, and political risk. | ||
Certified Annual Report 7
| Letter to Shareholders, | ||
Continued | ||
Investing in international markets adds additional risks. In addition to considering security risk, both style and industry diversification, we also need to evaluate language and cultural barriers, accounting differences, currency, geographic diversification, exposure to emerging versus developed versus frontier markets, and sovereign risk.
Stock selection helps mitigate some of the risks, but when a given country or an investment style falls from favor in the market, you still own “the best house in a bad neighborhood” on a sentiment basis. Some of the best decisions we make in running this portfolio are less visible because they involve things we consciously don’t do, like avoiding certain stocks or markets.
For this reason our investment charter is broad and flexible, allowing us to invest or not invest in any country, which we believe allows us to add value over time. Today we believe both developed and emerging markets offer tremendous opportunities for growth investors; the developed markets because the pockets of true growth are rare, but cheap; and the emerging markets because growth is rampant, and selectivity and valuation are critical. Everyday we balance the opportunities and risks as we consider our exposure and the weightings of stocks within the portfolio.
Our value-biased growth approach has driven the Fund’s strong performance since inception. We continue to focus on the keys to our prior success, including rigorous research, always seeking new and better ideas than what we hold, minimizing errors in analysis, and weighting positions appropriately.
Since last year, there have been some changes to our team. Greg Dunn, associate portfolio manager, became a managing director of our firm. Thornburg Investment Management has been very proactive over its 28-year history in identifying and retaining important human capital, and we continue to consider it one of the most important things we can do. We also hired Tamara Manoukian as an equity analyst in February of 2010; she is a CFA charterholder and an experienced professional investor.
Adherence to our core approach is reinforced by the culture and by the simple fact that every day I work with shareholders of the International Growth Fund, who exist at all levels of our organization. Our firm-wide
8 Certified Annual Report
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 hope 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 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 International Growth Fund.
| Sincerely, | ||
| ||
Alexander M.V. Motola, CFA | ||
Managing Director | ||
Portfolio Manager | ||
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 9
| SCHEDULE OF INVESTMENTS | ||
| Thornburg International Growth Fund | September 30, 2010 | |
TOP TEN HOLDINGS
As of 9/30/10
Teva Pharmaceutical Industries Ltd. ADR | 3.8 | % | Grifols SA | 2.9 | % | |||||
Experian plc | 3.5 | % | Amdocs Ltd. | 2.9 | % | |||||
Covidien plc | 3.3 | % | AutoNavi Holdings Ltd. ADR | 2.9 | % | |||||
Fidessa Group plc | 3.0 | % | IG Group Holdings plc | 2.9 | % | |||||
Clicks Group Ltd. | 2.9 | % | Sony Corp. | 2.9 | % |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/10
Software & Services | 22.6 | % | Media | 2.8 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 14.6 | % | Semiconductors & Semiconductor Equipment | 2.4 | % | |||||
Retailing | 11.7 | % | Transportation | 2.4 | % | |||||
Commercial & Professional Services | 11.6 | % | Telecommunication Services | 2.2 | % | |||||
Energy | 6.2 | % | Technology Hardware & Equipment | 2.1 | % | |||||
Health Care Equipment & Services | 6.0 | % | Food, Beverage & Tobacco | 1.4 | % | |||||
Diversified Financials | 2.9 | % | Other Assets & Cash Equivalents | 8.3 | % | |||||
Consumer Durables & Apparel | 2.8 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/10 (percent of equity holdings)
United Kingdom | 21.7 | % | India | 4.3 | % | |||||
Brazil | 8.3 | % | South Africa | 3.2 | % | |||||
Ireland | 7.4 | % | Spain | 3.2 | % | |||||
Israel | 7.2 | % | Italy | 3.0 | % | |||||
China | 6.6 | % | South Korea | 2.6 | % | |||||
Germany | 5.3 | % | Mexico | 2.4 | % | |||||
Japan | 5.3 | % | Luxembourg | 1.9 | % | |||||
United States | 4.5 | % | Argentina | 1.6 | % | |||||
Switzerland | 4.4 | % | Greece | 1.5 | % | |||||
Canada | 4.3 | % | Australia | 1.3 | % |
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 91.67% | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 11.57% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 6.87% | ||||||||
CPP Group plc | 595,800 | $ | 2,494,285 | |||||
Multiplus SA | 166,200 | 2,694,365 | ||||||
Regus plc | 1,436,600 | 1,805,404 | ||||||
PROFESSIONAL SERVICES — 4.70% | ||||||||
Experian plc | 329,700 | 3,589,224 | ||||||
Seek Ltd. | 165,265 | 1,194,831 | ||||||
| 11,778,109 | ||||||||
CONSUMER DURABLES & APPAREL — 2.85% | ||||||||
HOUSEHOLD DURABLES — 2.85% | ||||||||
Sony Corp. | 93,900 | 2,903,161 | ||||||
| 2,903,161 | ||||||||
DIVERSIFIED FINANCIALS — 2.86% | ||||||||
DIVERSIFIED FINANCIAL SERVICES — 2.86% | ||||||||
IG Group Holdings plc | 372,500 | 2,909,416 | ||||||
| 2,909,416 | ||||||||
ENERGY — 6.23% | ||||||||
OIL, GAS & CONSUMABLE FUELS — 6.23% | ||||||||
Canadian Natural Resources Ltd. | 35,600 | 1,231,416 | ||||||
CNOOC Ltd. | 1,460,000 | 2,833,874 | ||||||
a OGX Petroleo e Gas Participacoes SA | 174,600 | 2,275,372 | ||||||
| 6,340,662 | ||||||||
FOOD, BEVERAGE & TOBACCO — 1.39% | ||||||||
BEVERAGES — 1.39% | ||||||||
Coca-Cola Hellenic Bottling Co. S.A. | 53,521 | 1,412,554 | ||||||
| 1,412,554 | ||||||||
HEALTH CARE EQUIPMENT & SERVICES — 5.96% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 3.26% | ||||||||
Covidien plc | 82,700 | 3,323,713 | ||||||
HEALTH CARE PROVIDERS & SERVICES — 2.70% | ||||||||
Diagnosticos da America SA | 228,000 | 2,748,936 | ||||||
| 6,072,649 | ||||||||
MEDIA — 2.77% | ||||||||
MEDIA — 2.77% | ||||||||
Thomson Reuters Corp. | 74,900 | 2,815,757 | ||||||
| 2,815,757 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 14.64% | ||||||||
BIOTECHNOLOGY — 6.71% | ||||||||
Abcam plc | 52,700 | 1,429,721 | ||||||
a Actelion Ltd. | 60,500 | 2,423,940 | ||||||
Grifols SA | 207,900 | 2,981,576 | ||||||
PHARMACEUTICALS — 7.93% | ||||||||
Bayer AG | 36,600 | 2,552,127 | ||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
Roche Holding AG | 12,100 | $ | 1,652,491 | |||||
Teva Pharmaceutical Industries Ltd. ADR | 73,300 | 3,866,575 | ||||||
| 14,906,430 | ||||||||
RETAILING — 11.71% | ||||||||
INTERNET & CATALOG RETAIL — 7.67% | ||||||||
aASOS plc | 97,200 | 1,733,048 | ||||||
aMakeMyTrip Ltd. | 33,000 | 1,277,430 | ||||||
Start Today Co. Ltd. | 725 | 2,022,670 | ||||||
aYOOX S.p.A | 271,850 | 2,775,791 | ||||||
MULTILINE RETAIL — 2.94% | ||||||||
Clicks Group Ltd. | 471,700 | 2,991,161 | ||||||
SPECIALTY RETAIL — 1.10% | ||||||||
aSuperGroup plc | 58,500 | 1,116,556 | ||||||
| 11,916,656 | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.41% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.41% | 2,453,428 | |||||||
aInfineon Technologies AG | 354,200 | 2,453,428 | ||||||
SOFTWARE & SERVICES — 22.63% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 4.97% | ||||||||
aAmdocs Ltd. | 102,629 | 2,941,347 | ||||||
Visa, Inc. | 28,500 | 2,116,410 | ||||||
INTERNET SOFTWARE & SERVICES — 6.84% | ||||||||
aMediamind Techologies, Inc. | 200,000 | 2,760,000 | ||||||
aMercadoLibre, Inc. | 20,322 | 1,466,842 | ||||||
aTelecity Group plc | 351,680 | 2,737,409 | ||||||
SOFTWARE — 10.82% | ||||||||
aAutoNavi Holdings Ltd. ADR | 166,300 | 2,910,250 | ||||||
aCheck Point Software Technologies Ltd. | 76,500 | 2,825,145 | ||||||
aChinaCache International Ltd. ADR | 30,100 | 418,390 | ||||||
Fidessa Group plc | 129,400 | 3,083,672 | ||||||
Playtech Ltd. | 260,100 | 1,773,285 | ||||||
| 23,032,750 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.06% | ||||||||
COMMUNICATIONS EQUIPMENT — 2.06% | ||||||||
Qualcomm, Inc. | 46,500 | 2,098,080 | ||||||
| 2,098,080 | ||||||||
TELECOMMUNICATION SERVICES — 2.20% | ||||||||
WIRELESS TELECOMMUNICATION SERVICES — 2.20% | ||||||||
America Movil SAB de C.V. | 838,000 | 2,239,694 | ||||||
| 2,239,694 | ||||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
TRANSPORTATION — 2.39% | ||||||||
AIR FREIGHT & LOGISTICS — 2.39% | ||||||||
Glovis Co. Ltd. | 18,200 | $ | 2,434,116 | |||||
| 2,434,116 | ||||||||
TOTAL COMMON STOCK (Cost $79,544,741) | 93,313,462 | |||||||
SHORT TERM INVESTMENTS — 4.81% | ||||||||
Kinder Morgan Energy, 0.50%, 10/1/2010 | $ | 4,900,000 | 4,900,000 | |||||
TOTAL SHORT TERM INVESTMENTS (Cost $4,900,000) | 4,900,000 | |||||||
TOTAL INVESTMENTS — 96.48% (Cost $84,444,741) | $ | 98,213,462 | ||||||
OTHER ASSETS LESS LIABILITIES — 3.52% | 3,579,890 | |||||||
NET ASSETS — 100.00% | $ | 101,793,352 | ||||||
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
See notes to financial statements.
Certified Annual Report 13
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg International Growth Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $84,444,741) (Note 2) | $ | 98,213,462 | ||
Cash | 2,578,858 | |||
Cash denominated in foreign currency (cost $1,963,395) | 2,059,286 | |||
Receivable for investments sold | 1,763,761 | |||
Receivable for fund shares sold | 588,286 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 688,228 | |||
Dividends receivable | 214,872 | |||
Dividend and interest reclaim receivable | 54,681 | |||
Prepaid expenses and other assets | 32,914 | |||
Total Assets | 106,194,348 | |||
LIABILITIES | ||||
Payable for securities purchased | 1,845,359 | |||
Payable for fund shares redeemed | 188,662 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 2,203,428 | |||
Payable to investment advisor and other affiliates (Note 3) | 83,951 | |||
Accounts payable and accrued expenses | 79,596 | |||
Total Liabilities | 4,400,996 | |||
NET ASSETS | $ | 101,793,352 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 144,293 | ||
Net unrealized appreciation on investments | 12,359,275 | |||
Accumulated net realized gain (loss) | (35,273,723 | ) | ||
Net capital paid in on shares of beneficial interest | 124,563,507 | |||
| $ | 101,793,352 | |||
14 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($36,527,064 applicable to 2,981,484 shares of beneficial interest outstanding - Note 4) | $ | 12.25 | ||
Maximum sales charge, 4.50% of offering price | 0.58 | |||
Maximum offering price per share | $ | 12.83 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($24,829,192 applicable to 2,038,365 shares of beneficial interest | $ | 12.18 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($39,168,827 applicable to 3,164,660 shares of beneficial interest outstanding - Note 4) | $ | 12.38 | ||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($1,094,203 applicable to 89,563 shares of beneficial interest outstanding - Note 4) | $ | 12.22 | ||
Class R4 Shares†: | ||||
Net asset value, offering and redemption price per share ($2,905 applicable to 239 shares of beneficial interest | $ | 12.18 | ||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($171,161 applicable to 13,801 shares of beneficial interest outstanding - - Note 4) | $ | 12.40 | ||
| * | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
| † | Due to size of net assets and shares outstanding, net asset value may not compute due to rounding. |
See notes to financial statements.
Certified Annual Report 15
| STATEMENT OF OPERATIONS | ||
| Thornburg International Growth Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $78,992) | $ | 1,225,427 | ||
Interest income | 15,677 | |||
Total Income | 1,241,104 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 689,835 | |||
Administration fees (Note 3) | ||||
Class A Shares | 35,342 | |||
Class C Shares | 26,566 | |||
Class I Shares | 14,189 | |||
Class R3 Shares | 1,019 | |||
Class R4 Shares | 4 | |||
Class R5 Shares | 57 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 70,683 | |||
Class C Shares | 212,527 | |||
Class R3 Shares | 4,074 | |||
Class R4 Shares | 6 | |||
Transfer agent fees | ||||
Class A Shares | 46,992 | |||
Class C Shares | 43,485 | |||
Class I Shares | 11,386 | |||
Class R3 Shares | 3,372 | |||
Class R4 Shares | 1,140 | |||
Class R5 Shares | 1,196 | |||
Registration and filing fees | ||||
Class A Shares | 22,314 | |||
Class C Shares | 22,026 | |||
Class I Shares | 21,747 | |||
Class R3 Shares | 18,132 | |||
Class R4 Shares | 18,132 | |||
Class R5 Shares | 18,132 | |||
Custodian fees (Note 3) | 97,695 | |||
Professional fees | 50,391 | |||
Accounting fees | 2,703 | |||
Trustee fees | 1,658 | |||
Other expenses | 9,191 | |||
Total Expenses | 1,443,994 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (120,564 | ) | ||
Investment advisory fees waived by investment advisor (Note 3) | (68,419 | ) | ||
Fees paid indirectly (Note 3) | (2,646 | ) | ||
Net Expenses | 1,252,365 | |||
Net Investment Loss | $ | (11,261 | ) | |
16 Certified Annual Report
| STATEMENT OF OPERATIONS, CONTINUED | ||
| Thornburg International Growth Fund | Year Ended September 30, 2010 | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 5,554,845 | ||
Forward currency contracts (Note 7) | 548,751 | |||
Foreign currency transactions | 214,563 | |||
| 6,318,159 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 9,330,174 | |||
Forward currency contracts (Note 7) | (1,513,636 | ) | ||
Foreign currency translations | 98,343 | |||
| 7,914,881 | ||||
Net Realized and Unrealized Gain | 14,233,040 | |||
Net Increase in Net Assets Resulting from Operations | $ | 14,221,779 | ||
See notes to financial statements.
Certified Annual Report 17
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg International Growth Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (11,261 | ) | $ | 300,793 | |||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | 6,318,159 | (35,731,869 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | 7,914,881 | 32,322,259 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 14,221,779 | (3,108,817 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (129,435 | ) | (345,267 | ) | ||||
Class C Shares | — | (109,592 | ) | |||||
Class I Shares | (222,424 | ) | (518,715 | ) | ||||
Class R3 Shares | (4,168 | ) | (1,928 | ) | ||||
Class R4 Shares | (16 | ) | (47 | ) | ||||
Class R5 Shares | (83 | ) | (42 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 7,623,208 | (2,611,014 | ) | |||||
Class C Shares | 1,984,070 | (3,186,558 | ) | |||||
Class I Shares | 9,475,126 | (2,620,197 | ) | |||||
Class R3 Shares | 200,963 | 483,136 | ||||||
Class R4 Shares | 19 | 47 | ||||||
Class R5 Shares | 324,084 | 5,940 | ||||||
Net Increase (Decrease) in Net Assets | 33,473,123 | (12,013,054 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 68,320,229 | 80,333,283 | ||||||
End of Year | $ | 101,793,352 | $ | 68,320,229 | ||||
Undistributed net investment income | $ | 144,293 | $ | 297,117 | ||||
See notes to financial statements.
18 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg International Growth Fund | September 30, 2010 | |
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 sixteen 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). 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 a price 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, 2010 | |
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, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 93,313,462 | $ | 92,895,072 | $ | 418,390 | $ | — | ||||||||
Short Term Investments | 4,900,000 | — | 4,900,000 | — | ||||||||||||
Total Investments in Securities | $ | 98,213,462 | $ | 92,895,072 | $ | 5,318,390 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 688,228 | $ | — | $ | 688,228 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (2,203,428 | ) | $ | — | $ | (2,203,428 | ) | $ | — | ||||||
Spot Currency | $ | (1,125 | ) | $ | (1,125 | ) | $ | — | $ | — | ||||||
| * | See Schedule of Investments for a summary of the industry exposure as grouped according to the Global Industry Classification Standard (GICS), which is an industry taxonomy developed by MSCI Barra and Standard & Poor’s (S&P). |
| ** | 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 investment. |
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
20 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
Foreign Currency Translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities, it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute to shareholders substantially all taxable income, including any net realized gain on investments of the Fund. Therefore, no provision for federal income taxes is required.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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, if any, 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.
Certified Annual Report 21
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
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, 2010, 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, 2010, the Advisor voluntarily waived investment advisory fees of $68,419. The Trust has also 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, 2010, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $2,071 for Class A shares, $10,098 for Class C shares, $47,322 for Class I shares, $22,441 for Class R3 shares, $19,272 for Class R4 shares, and $19,360 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, 2010, the Distributor has advised the Fund that it earned commissions aggregating $9,653 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $4,507 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I and Class R5 shares. 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, 2010, 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, 2010, fees paid indirectly were $2,646.
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.
22 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,295,491 | $ | 14,607,416 | 1,521,502 | $ | 12,014,685 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 10,856 | 117,457 | 42,746 | 313,329 | ||||||||||||
Shares repurchased | (643,507 | ) | (7,102,453 | ) | (1,990,658 | ) | (14,939,580 | ) | ||||||||
Redemption fees received* | — | 788 | — | 552 | ||||||||||||
Net Increase (Decrease) | 662,840 | $ | 7,623,208 | (426,410 | ) | $ | (2,611,014 | ) | ||||||||
Class C Shares | ||||||||||||||||
Shares sold | 618,259 | $ | 6,834,000 | 762,783 | $ | 5,916,858 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 9,948 | 72,723 | ||||||||||||
Shares repurchased | (442,078 | ) | (4,850,518 | ) | (1,222,548 | ) | (9,176,628 | ) | ||||||||
Redemption fees received* | — | 588 | — | 489 | ||||||||||||
Net Increase (Decrease) | 176,181 | $ | 1,984,070 | (449,817 | ) | $ | (3,186,558 | ) | ||||||||
Class I Shares | ||||||||||||||||
Shares sold | 1,240,075 | $ | 14,043,843 | 612,383 | $ | 4,995,741 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 18,921 | 206,051 | 65,869 | 484,137 | ||||||||||||
Shares repurchased | (423,456 | ) | (4,775,568 | ) | (1,041,778 | ) | (8,100,654 | ) | ||||||||
Redemption fees received* | — | 800 | — | 579 | ||||||||||||
Net Increase (Decrease) | 835,540 | $ | 9,475,126 | (363,526 | ) | $ | (2,620,197 | ) | ||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 33,942 | $ | 385,167 | 74,718 | $ | 578,635 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 386 | 4,168 | 264 | 1,928 | ||||||||||||
Shares repurchased | (17,232 | ) | (188,395 | ) | (13,404 | ) | (97,436 | ) | ||||||||
Redemption fees received* | — | 23 | — | 9 | ||||||||||||
Net Increase (Decrease) | 17,096 | $ | 200,963 | 61,578 | $ | 483,136 | ||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | — | $ | 3 | — | $ | — | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 2 | 16 | 7 | 47 | ||||||||||||
Shares repurchased | — | — | — | — | ||||||||||||
Redemption fees received* | — | — | — | — | ||||||||||||
Net Increase (Decrease) | 2 | $ | 19 | 7 | $ | 47 | ||||||||||
Certified Annual Report 23
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 613,212 | $ | 6,687,310 | 636 | $ | 5,903 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 7 | 83 | 6 | 42 | ||||||||||||
Shares repurchased | (600,288 | ) | (6,363,309 | ) | (1 | ) | (5 | ) | ||||||||
Redemption fees received* | — | — | — | — | ||||||||||||
Net Increase (Decrease) | 12,931 | $ | 324,084 | 641 | $ | 5,940 | ||||||||||
| * | 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, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $104,116,565 and $87,644,721, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 84,714,473 | ||
Gross unrealized appreciation on a tax basis | $ | 15,217,501 | ||
Gross unrealized depreciation on a tax basis | (1,718,512 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 13,498,989 | ||
Distributable earnings – ordinary income (tax basis) | $ | 399,912 |
In order to account for permanent book/tax differences, the Fund increased undistributed net realized investment loss by $214,563, and increased undistributed net investment income by $214,563. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains/losses.
At September 30, 2010, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2009 of $2,091,603. For tax purposes, such losses will be reflected in the year ending September 30, 2011.
At September 30, 2010, 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 | |||
2018 | 17,401,544 | |||
| $ | 34,682,963 | |||
24 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
The tax character of distributions paid during the years ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 356,126 | $ | 975,591 | ||||
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. This 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, 2010, 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, 2010 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. Values of open currency contracts are indicative of the activity for the year ended September 30, 2010.
Certified Annual Report 25
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
The following table displays the outstanding forward currency contracts, at September 30, 2010:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2010
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||||
Brazilian Real | Sell | 11,500,000 | 10/04/2010 | 6,796,690 | $ | — | $ | (456,410 | ) | |||||||||||||||
Brazilian Real | Buy | 2,630,000 | 10/04/2010 | 1,554,374 | 16,542 | — | ||||||||||||||||||
Brazilian Real | Buy | 3,220,700 | 10/04/2010 | 1,903,487 | 114,706 | — | ||||||||||||||||||
Brazilian Real | Buy | 1,991,400 | 10/04/2010 | 1,176,950 | 95,549 | — | ||||||||||||||||||
Brazilian Real | Buy | 2,556,000 | 10/04/2010 | 1,510,638 | 177,514 | — | ||||||||||||||||||
Brazilian Real | Buy | 1,101,900 | 10/04/2010 | 651,241 | 43,464 | — | ||||||||||||||||||
Euro | Sell | 4,517,000 | 03/29/2011 | 6,148,575 | — | (65,395 | ) | |||||||||||||||||
Euro | Sell | 1,701,600 | 10/18/2010 | 2,319,468 | — | (209,637 | ) | |||||||||||||||||
Euro | Sell | 6,905,000 | 10/18/2010 | 9,412,277 | — | (3,869 | ) | |||||||||||||||||
Euro | Buy | 8,606,600 | 10/18/2010 | 11,731,745 | 131,425 | — | ||||||||||||||||||
Great Britain Pound | Sell | 6,960,600 | 03/29/2011 | 10,920,815 | 89,532 | — | ||||||||||||||||||
Great Britain Pound | Sell | 3,796,900 | 10/18/2010 | 5,963,948 | — | (455,026 | ) | |||||||||||||||||
Great Britain Pound | Sell | 780,000 | 10/18/2010 | 1,225,178 | — | (35,600 | ) | |||||||||||||||||
Great Britain Pound | Sell | 6,900,000 | 10/18/2010 | 10,838,115 | — | (188,655 | ) | |||||||||||||||||
Great Britain Pound | Buy | 11,476,900 | 10/18/2010 | 18,027,241 | — | (148,725 | ) | |||||||||||||||||
Japanese Yen | Sell | 52,676,600 | 01/07/2011 | 631,714 | — | (36,021 | ) | |||||||||||||||||
Japanese Yen | Sell | 539,661,900 | 01/07/2011 | 6,471,797 | — | (363,361 | ) | |||||||||||||||||
Japanese Yen | Buy | 185,249,500 | 01/07/2011 | 2,221,571 | 19,496 | — | ||||||||||||||||||
South African Rand | Sell | 3,711,000 | 12/10/2010 | 526,823 | — | (62,478 | ) | |||||||||||||||||
South African Rand | Sell | 2,326,000 | 12/10/2010 | 330,205 | — | (31,797 | ) | |||||||||||||||||
South African Rand | Sell | 8,314,000 | 12/10/2010 | 1,180,276 | — | (146,454 | ) | |||||||||||||||||
Total | $ | 688,228 | $ | (2,203,428 | ) | |||||||||||||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2010 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
September 30, 2010
| Asset Derivatives | ||||||
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 688,228 | |||
| Liability Derivatives | ||||||
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (2,203,428 | ) | ||
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, 2010, are disclosed in the following tables:
Amount of Realized Gain (Loss) on
Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 548,751 | $ | 548,751 | ||||
26 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 | |
Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (1,513,636 | ) | $ | (1,513,636 | ) | ||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class R3 shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .25% of 1%.
Certified Annual Report 27
Thornburg International Growth Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless Fiscal | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 10.36 | — | (c) | 1.94 | 1.94 | (0.05 | ) | — | (0.05 | ) | $ | 12.25 | (0.02 | ) | 1.61 | 1.60 | 1.70 | 18.82 | 128.86 | $ | 36,527 | ||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 10.35 | 0.04 | 0.10 | 0.14 | (0.13 | ) | — | (0.13 | ) | $ | 10.36 | 0.52 | 1.62 | 1.61 | 1.95 | 1.89 | 103.57 | $ | 24,015 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 14.92 | 0.07 | (4.27 | ) | (4.20 | ) | — | (0.37 | ) | (0.37 | ) | $ | 10.35 | 0.53 | 1.56 | 1.55 | 1.63 | (28.98 | ) | 54.31 | $ | 28,414 | |||||||||||||||||||||||||||||||||||||
2007(b)(d) | $ | 11.94 | (0.03 | ) | 3.01 | 2.98 | — | — | — | $ | 14.92 | (0.29 | )(e) | 1.64 | (e) | 1.62 | (e) | 2.10 | (e) | 24.96 | 113.34 | $ | 25,145 | |||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 10.33 | (0.09 | ) | 1.94 | 1.85 | — | — | — | $ | 12.18 | (0.81 | ) | 2.38 | 2.38 | 2.51 | 17.91 | 128.86 | $ | 24,829 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 10.22 | (0.02 | ) | 0.18 | 0.16 | (0.05 | ) | — | (0.05 | ) | $ | 10.33 | (0.21 | ) | 2.37 | 2.37 | 2.72 | 1.76 | 103.57 | $ | 19,233 | ||||||||||||||||||||||||||||||||||||||
2008 | $ | 14.85 | (0.03 | ) | (4.23 | ) | (4.26 | ) | — | (0.37 | ) | (0.37 | ) | $ | 10.22 | (0.23 | ) | 2.32 | 2.32 | 2.45 | (29.53 | ) | 54.31 | $ | 23,638 | |||||||||||||||||||||||||||||||||||
2007(d) | $ | 11.94 | (0.10 | ) | 3.01 | 2.91 | — | — | — | $ | 14.85 | (1.13 | )(e) | 2.39 | (e) | 2.38 | (e) | 3.23 | (e) | 24.37 | 113.34 | $ | 12,376 | |||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 10.44 | 0.07 | 1.96 | 2.03 | (0.09 | ) | — | (0.09 | ) | $ | 12.38 | 0.58 | 0.99 | 0.99 | 1.25 | 19.60 | 128.86 | $ | 39,169 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 10.46 | 0.10 | 0.08 | 0.18 | (0.20 | ) | — | (0.20 | ) | $ | 10.44 | 1.17 | 0.99 | 0.99 | 1.42 | 2.56 | 103.57 | $ | 24,313 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 14.99 | 0.14 | (4.30 | ) | (4.16 | ) | — | (0.37 | ) | (0.37 | ) | $ | 10.46 | 1.03 | 1.00 | 0.99 | 1.25 | (28.57 | ) | 54.31 | $ | 28,164 | |||||||||||||||||||||||||||||||||||||
2007(d) | $ | 11.94 | 0.05 | 3.00 | 3.05 | — | — | — | $ | 14.99 | 0.52 | (e) | 1.01 | (e) | 0.99 | (e) | 1.64 | (e) | 25.54 | 113.34 | $ | 27,659 | ||||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 10.33 | 0.01 | 1.94 | 1.95 | (0.06 | ) | — | (0.06 | ) | $ | 12.22 | 0.07 | 1.50 | 1.50 | 4.34 | 18.98 | 128.86 | $ | 1,094 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 10.36 | 0.08 | 0.06 | 0.14 | (0.17 | ) | — | (0.17 | ) | $ | 10.33 | 0.94 | 1.46 | 1.46 | 6.14 | (f) | 2.09 | 103.57 | $ | 748 | |||||||||||||||||||||||||||||||||||||||
2008(g) | $ | 13.94 | 0.09 | (3.67 | ) | (3.58 | ) | — | �� | — | — | $ | 10.36 | 1.08 | (e) | 1.50 | (e) | 1.49 | (e) | 26.47 | (e)(f) | (25.68 | ) | 54.31 | $ | 113 | ||||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 10.29 | 0.02 | 1.94 | 1.96 | (0.07 | ) | — | (0.07 | ) | $ | 12.18 | 0.15 | 1.42 | 1.40 | 738.92 | (f) | 19.11 | 128.86 | $ | 3 | |||||||||||||||||||||||||||||||||||||||
2009 | $ | 10.36 | 0.07 | 0.06 | 0.13 | (0.20 | ) | — | (0.20 | ) | $ | 10.29 | 0.82 | 1.40 | 1.40 | 980.09 | (f) | 2.10 | 103.57 | $ | 2 | |||||||||||||||||||||||||||||||||||||||
2008(g) | $ | 13.94 | 0.10 | (3.68 | ) | (3.58 | ) | — | — | — | $ | 10.36 | 1.16 | (e) | 1.40 | (e) | 1.40 | (e) | 861.94 | (e)(f) | (25.68 | ) | 54.31 | $ | 2 | |||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 10.46 | (0.09 | ) | 2.12 | 2.03 | (0.09 | ) | — | (0.09 | ) | $ | 12.40 | (0.83 | ) | 0.99 | 0.99 | 17.58 | (f) | 19.56 | 128.86 | $ | 171 | |||||||||||||||||||||||||||||||||||||
2009 | $ | 10.46 | 0.08 | 0.11 | 0.19 | (0.19 | ) | — | (0.19 | ) | $ | 10.46 | 0.92 | 0.97 | 0.97 | 522.27 | (f) | 2.53 | 103.57 | $ | 9 | |||||||||||||||||||||||||||||||||||||||
2008(g) | $ | 14.03 | 0.14 | (3.71 | ) | (3.57 | ) | — | — | — | $ | 10.46 | 1.57 | (e) | 0.96 | (e) | 0.95 | (e) | 851.43 | (e)(f) | (25.45 | ) | 54.31 | $ | 2 | |||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Net investment income (loss) was less than $0.01 per share. |
| (d) | Fund commenced operations on February 1, 2007. |
| (e) | Annualized. |
| (f) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| (g) | Effective date of this class of shares was February 1, 2008. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 28 Certified Annual Report | Certified Annual Report 29 |
| 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, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
30 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg International Growth Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,059.70 | $ | 8.25 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.06 | $ | 8.08 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,055.50 | $ | 12.24 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.16 | $ | 11.99 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,063.60 | $ | 5.12 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,060.80 | $ | 7.75 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.59 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,060.10 | $ | 7.41 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.88 | $ | 7.25 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,062.60 | $ | 5.07 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.15 | $ | 4.97 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.60%; C: 2.37%; I: 0.99%; R3: 1.50%; 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.
Certified Annual Report 31
| INDEX COMPARISON | ||
| Thornburg International Growth Fund | September 30, 2010 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg International Growth Fund versus MSCI AC World ex-U.S. Growth Index
(February 1, 2007 to September 30, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010 (with sales charge)
| 1 Yr | 3 Yr | Since Inception | ||||||||||
A Shares (Incep: 2/1/07) | 13.45 | % | -6.35 | % | 0.71 | % | ||||||
C Shares (Incep: 2/1/07) | 16.91 | % | -5.44 | % | 1.39 | % | ||||||
I Shares (Incep: 2/1/07) | 19.60 | % | -4.31 | % | 2.64 | % | ||||||
R3 Shares (Incep: 2/1/08) | 18.98 | % | — | -3.77 | % | |||||||
R4 Shares (Incep: 2/1/08) | 19.11 | % | — | -3.73 | % | |||||||
R5 Shares (Incep: 2/1/08) | 19.56 | % | — | -3.32 | % | |||||||
MSCI AC World ex-U.S. Growth Index (Since 2/1/07) | 11.41 | % | -7.06 | % | -1.43 | % | ||||||
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 is a market capitalization weighted index that includes growth companies in developed and emerging markets throughout the world, excluding the United States.
32 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg International Growth Fund | September 30, 2010 (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, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
| INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 65 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. | None | ||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||
Susan H. Dubin, 61 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, 56 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, 51 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 33
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 (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, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
34 Certified Semi-Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 35
| OTHER INFORMATION | ||
| Thornburg International Growth Fund | September 30, 2010 (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, 2010, 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, 2010, foreign taxes paid and foreign source income is $70,477 and $1,553,365, 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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 2010 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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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.
36 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 (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 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) comparative measures of earnings growth, portfolio volatility, risk and return. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events, 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 evaluating quantitative and performance data presented, the Trustees noted (among other aspects of the data), that the Fund’s investment return for calendar year 2008 was lower than the average return for the index and the average return of the foreign growth fund category, but that the Fund’s return was higher than the index and the fund category for calendar year 2009. The quantitative data presented also demonstrated to the Trustees that the Fund’s investment returns fell within or near the highest decile of the fund category for the three-month, year-to-date, one-year and three-year periods ended with the second quarter of the current year. The Trustees also considered in this regard the Fund’s higher cumulative return (net of expenses) relative to the Fund’s benchmark MSCI All Country World (ex-U.S.) 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 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 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, the Advisor’s waiver of a 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 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 expense ratio and comparable to the average expense ratio for the group of mutual funds assembled by the mutual fund analyst firm, and that the management fee (net of fee waivers by the Advisor) was comparable to the 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 confirmed their previous observations 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, and 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 the adequacy of the Advisor’s resources and service capabilities. In reviewing the extent to which economies of scale
Certified Annual Report 37
| OTHER INFORMATION, CONTINUED | ||
| Thornburg International Growth Fund | September 30, 2010 (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 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.
38 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
The Trustees are concerned that ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report. 39
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40 This page is not part of the Annual Report.
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 Developing World Fund |
| • | Thornburg Limited Term U.S. Government Fund |
| • | Thornburg Limited Term Income Fund |
| • | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 41
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 Developing World 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. 43
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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 | |||||
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Important Information
The information presented on the following pages was current as of September 30, 2010. 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 composed of 25% Barclays Capital Aggregate Bond Index and 75% MSCI World Index. The Barclays Capital Aggregate Bond Index is composed of approximately 8,000 publicly traded bonds including U.S. government, mortgage-backed, corporate and Yankee bonds. The index is weighted by the market value of the bonds included in the index. The MSCI World Index is an unmanaged market-weighted index that consists of securities traded in 24 of the world’s most developed countries. Securities are listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The index is calculated with net dividends reinvested, in U.S. dollars.
Russell 1000 Index – An index that measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership.
Russell 2000 Index – An index that measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index including approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership.
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.
Effective Duration – A bond’s sensitivity to interest rates, incorporating the embedded option features, such as call provisions. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
Indicated Yield – The yield that a share of stock would return based on the most recent dividend payment. Indicated yield is calculated by dividing the indicated dividend by the current share price. It is usually quoted as a percentage.
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.
This page is not part of the Annual Report. 3
The Dividend Landscape
To appreciate the investment environment in which Thornburg Investment Income Builder Fund operates, 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 declined, causing the payout ratio to climb, even as dividends paid by the S&P 500 portfolio declined by more than 10 percent in 2010.
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 recent recession stalled dividend momentum.
4 This page is not part of the Annual Report.
Rising Dividend Payments Despite Decreasing Dividend Yields
Over time, the dollar dividend per unit of the S&P 500 Index has increased. Because the price of the index itself has increased even more, the yield on the S&P 500 Index, as a percentage of the current index price, has generally decreased in recent decades. You should note, however, that the yield on the original investment made at a fixed point in time (say, 1970 or 1989) has increased, even without reinvestment of dividends.
Hypothetical chart is for illustration purposes only and is not indicative of an investment in any particular security. Investors may not invest directly in an index.
A Truly Diversified Dividend-Paying Portfolio Must Look Beyond the Obvious High Yield Stocks!
The Top 100 Dividend Yields
| Russell 1000 Index | Russell 2000 Index | |||||||
Financials | 39 | % | 67 | % | ||||
Utilities | 30 | % | 4 | % | ||||
Telecommunication Services | 6 | % | 4 | % | ||||
Consumer Discretionary | 5 | % | 7 | % | ||||
Consumer Staples | 4 | % | 2 | % | ||||
Energy | 4 | % | 6 | % | ||||
Health Care | 4 | % | 0 | % | ||||
Information Technology | 4 | % | 3 | % | ||||
Industrials | 2 | % | 7 | % | ||||
Materials | 2 | % | 0 | % | ||||
Source: FactSet, as of September 30, 2010
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, 67% 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.
This page is not part of the Annual Report. 5
The Dividend Landscape, Continued
Global Diversification Can Improve the Portfolio Yield
Since firms outside the U.S. tend to pay higher dividends than U.S. firms, particularly outside the real estate and utility sectors, we maintain the ability to diversify the Thornburg Investment Income Builder Fund into foreign dividend-paying stocks to try to take advantage of these opportunities.
Source: Bloomberg and Thornburg Investment Management, as of September 30, 2010; Includes all stocks in a given country with market capitalizations greater than $500mm USD to eliminate micro-cap stocks.
6 This page is not part of the Annual Report.
Portfolio Overview
Thornburg Investment Income Builder Fund
Left to right:
Jason Brady, CFA, Brian McMahon, and Cliff Remily, 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 1.30%, as disclosed in the most recent Prospectus.
We do not expect each sequential quarter’s dividend to increase over that of the prior quarter, since dividend payments outside the United States tend to be seasonal. Rather, the Fund aspires to increase the dividend paid on an annual basis.
This page is not part of the Annual Report. 7
Portfolio Overview, Continued
The primary investment objective of Thornburg Investment Income Builder Fund is to provide a level of current income which exceeds the average yield on U.S. stocks, and which will generally grow, subject to periodic fluctuations, over the years on a per share basis. This objective remains constant over time. However, the specific investments we have used to try to reach our objective have changed over time. There is no guarantee the Fund will meet its investment objectives.
Business conditions for various industries and operating effectiveness at individual firms change over time. Investor preferences, expressed as both absolute and relative prices, also change over time. In the view of your portfolio management team, “some doors close and others open.” As shown in the tables below, the percentage industry allocations of your Fund evolve to reflect these changing conditions.
TOP TEN INDUSTRIES As of 9/30/10 |
| TOP TEN INDUSTRIES As of 6/30/10 |
| |||||||
Telecommunication Services | 17.5 | % | Telecommunication Services | 16.0 | % | |||||
Energy | 12.8 | % | Energy | 11.1 | % | |||||
Diversified Financials | 10.0 | % | Diversified Financials | 10.0 | % | |||||
Utilities | 8.0 | % | Utilities | 9.7 | % | |||||
Banks | 7.2 | % | Banks | 7.6 | % | |||||
Food, Beverage & Tobacco | 6.4 | % | Real Estate | 6.7 | % | |||||
Real Estate | 5.9 | % | Insurance | 5.7 | % | |||||
Insurance | 5.3 | % | Food, Beverage & Tobacco | 5.2 | % | |||||
Semiconductors & Semiconductor Equipment | 3.5 | % | Semiconductors & Semiconductor Equipment | 3.7 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 3.4 | % | Consumer Services | 3.2 | % | |||||
TOP TEN INDUSTRIES As of 3/31/10 |
| TOP TEN INDUSTRIES As of 12/31/10 |
| |||||||
Utilities | 11.8 | % | Energy | 12.5 | % | |||||
Telecommunication Services | 11.6 | % | Telecommunication Services | 12.2 | % | |||||
Energy | 11.5 | % | Utilities | 10.1 | % | |||||
Diversified Financials | 10.3 | % | Diversified Financials | 9.0 | % | |||||
Banks | 7.9 | % | Banks | 7.9 | % | |||||
Food, Beverage & Tobacco | 6.1 | % | Real Estate | 5.8 | % | |||||
Real Estate | 5.9 | % | Insurance | 5.1 | % | |||||
Insurance | 5.6 | % | Consumer Services | 4.9 | % | |||||
Consumer Services | 4.4 | % | Food, Beverage & Tobacco | 4.8 | % | |||||
Software & Services | 3.3 | % | Software & Services | 3.8 | % | |||||
8 This page is not part of the Annual Report.
Thornburg Investment Income Builder Fund
September 30, 2010
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| 28 | ||||
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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 semi-annual shareholder reports fully and fairly represents their financial position.
Certified Annual Report 9
October 18, 2010
Dear Fellow Shareholder:
This letter will highlight the basic results of your Fund’s investment activities for the six- and twelve-month periods ended September 30, 2010.
Thornburg Investment Income Builder Fund paid dividends of $1.11 per Class A share in the twelve months ended September 30, 2010, up nearly 4% from the $1.07 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 $17.38 to $18.31, giving a total return including dividends of 12.08% at NAV.
For the six-month period ended September 30, 2010, Thornburg Investment Income Builder paid dividends of 57¢ per Class A share, up 9% from 52.2¢ in the comparable prior year period. The NAV per Class A share declined from $18.36 to $18.31 during the six-month period. Changes in the seasonality of dividend payments and changes in the portfolio’s stock/bond mix influence the year-to-year comparison.
For the fiscal year ended September 30, 2010, Thornburg Investment Income Builder Fund outperformed the S&P 500 Index by 1.92%, and outperformed the Blended Index of 75% MSCI World Index/25% Barclays Capital Aggregate Bond Index by 4.58%.
For the three- and five-year time periods, and since inception, your Fund has significantly outperformed both indices, as noted on page seven of this booklet for Class A shares. Performance relative to indices for all share classes over various periods is set forth on page 46. Readers of this letter will remember the uncertain environment two years ago around September 30, 2008. This was approximately two weeks following the failure of Lehman Brothers, and near the beginning of “the great liquidation” of financial assets by an assortment of leveraged investors. We are pleased to report an average annual return of approximately 11.5% for Income Builder Class A shares in the subsequent two-year period ended September 30, 2010. This result exceeds those of the S&P 500 Index and the Blended Index by annual margins of approximately 10% and 7%, respectively.
While we recognize that every individual’s financial circumstances are subject to unforeseen change, we believe that shareholders of Thornburg Investment Income Builder Fund should have a multi-year investment horizon and try to avoid being shaken by the news of the moment. Owners of approximately 57 million shares of Thornburg Investment Income Builder Fund sold their shares at an average price of approximately $13.39 per share between October 1, 2008 and March 31, 2009. We have no idea how these investors redeployed the funds redeemed from Income Builder. The fact that the Fund achieved a price of $18.31 per share on September 30, 2010, and paid dividends totaling $2.18 over the course of the last two fiscal years sets a relatively high bar for the opportunity cost of having sold the Fund shares, thus far.
As has been the case in most prior years since the inception of Thornburg Investment Income Builder, we do not expect to pay any capital gain distribution for 2010.
10 Certified Annual Report
Letter to Shareholders,
Continued
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, 2010, because this comprises 75%, and all of the equity portion, of our global performance benchmark:
| 1. | Nine sectors (information technology, materials, telecommunications, consumer discretionary, health care, industrials, utilities, energy, and consumer staples) showed positive total returns, with a range of +18.9% (consumer discretionary) to +0.5% (utilities). |
| 2. | One sector (financials) showed a negative total return, -4.3%. |
Relative to the index weightings, Investment Income Builder had a relatively large portfolio allocation in financials and telecommunication services firms, with weightings of 28.5% and 13.5%, respectively, including bonds.
Your Fund’s average return from its investments in the financials sector was greater than 14% for the fiscal year, well above the negative 4.3% performance of the equities in the financials sector of the MSCI World Index. Our investment choices in the financials sector ended up being the greatest driver of outperformance vis-à-vis the benchmark for the year ended September 30, 2010. Among the 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, Australian property REIT Dexus Property Group, and corporate leveraged loan investor KKR Financial Holdings.
Your portfolio’s telecommunications equity investments delivered below-index average returns, in spite of their sizable dividends. Australian telecom incumbent Telstra, France Telecom, and Spain’s Telefónica each showed negative total returns for the year. Strong positive performances by Vodafone, CenturyLink and Qwest Communications, combined with workmanlike contributions from the portfolio’s telecom bonds, offset these negative performances. The offset was insufficient to catch up with the index returns from this sector. Investment Income Builder continues to have a large weighting in cash-generative telecommunication service providers.
Your portfolio’s underweighting in consumer staples and consumer discretionary stocks was a drag on relative performance, although McDonald’s and Philip Morris were both strong contributors to portfolio performance. A timely switch from BP to global deepwater driller Seadrill supported Income Builder’s above-index performance in the energy sector, and a strong contribution from Dominion Resources buttressed the Fund’s contribution from the relatively sluggish utility sector. Your Fund had relatively few investments in two of the best performing sectors of the MSCI World Index, materials and industrials, 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. International airport operator MAp Airports and Australian internet company Seek Ltd. were top Income Builder performers from the industrial sector.
Investment Income Builder had relatively few portfolio assets with negative performance during the year ended September 30th. Among these, Greek lottery operator OPAP suffered from the economic gloom in its home market, and German utilities RWE and E.ON both suffered from expectations of high gas input prices, low power demand, and additional tax burdens.
Certified Annual Report 11
Letter to Shareholders,
Continued
Within its bond portfolio, Investment Income Builder owned significantly fewer U.S. government and agency bonds than the Barclays Index. This was not harmful, as both the relative and absolute performance of corporate bonds was good during the period under review. Readers of this letter who are longtime 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. We rebuilt the bond portfolio at low prices and attractive yields during the chaotic period from mid-2008 to mid-2009. Investment Income Builder’s portfolio weighting in cash and interest-bearing debt declined from approximately 41% at September 30, 2009, to 31% at September 30, 2010, mostly because we invested a substantial majority of cash flows from portfolio income and new share sales in dividend-paying stocks over the course of the fiscal year. In general, your Fund’s debt investments have performed well.
As of September 30, 2010, the Fund portfolio included more than 200 bonds and hybrid securities, with an average cost of approximately 84% of the maturity value of these bonds. On average, secondary market prices of these bonds increased by around 5% of maturity value during the fiscal year and their aggregate market value on September 30, 2010 was approximately equal to the sum of their maturity values.
In the fiscal year ended September 30, 2010, approximately 66% of Income Builder’s income was derived from stock dividends, with the remaining 34% coming from interest. At September 30, 2010, domestic stocks, including preferred stocks, comprise around 32% of the portfolio, foreign stocks around 37%, and cash and interest-bearing investments 31%.
Since its inception, the dividend increases paid by Investment Income Builder have been powered primarily by dividend increases from the Fund’s equity holdings. These increases slowed significantly over the last two years. We have attempted to “weed” the portfolio of firms suffering significant business setbacks. Some firms that we continued to hold elected to pay down debt or retain more cash to increase flexibility. Other firms that had the ability to pay increased dividends, lacked the willingness to do so.
In general, the sustainability of dividends from your portfolio holdings has exceeded that of most major index portfolios, which typically showed annual declines exceeding 20% during 2009. In the first nine months of 2010, companies in the S&P 500 Index paid dividends totaling $151 billion. This figure is 3% higher than the $147 billion paid during the comparable period of 2009, but more than 18% lower than $185 billion paid in the comparable period of 2008. The general scarcity of growing dividends and the reduced yields now available from bond investments restricts our ability to increase the Fund’s dividend at the rates observed between 2003 and 2008. We will do our best in a challenging environment.
If the global economy recovers, we expect firming interest rates, better business conditions, and reduced anxiety from corporate boards about distributing retained earnings, and the opposite could occur if the economy doesn’t recover.
On average, the 60-plus companies in the equity portion of the Income Builder portfolio are expected to grow revenues in 2010 and 2011. We currently expect the weighted average earnings per share of these companies to increase by more than 10% in 2010. For 2011, average earnings of the equities held in the Income Builder portfolio are expected to grow by slightly more than 7%. We expect dividends from the average equity held in the Income Builder portfolio to be slightly positive in 2010 vs. 2009, though there is unusually high variation respecting dividend growth among the individual firms.
12 Certified Annual Report
Over the last seven years, the annual dividends paid by Thornburg Investment Income Builder from net investment income have increased at an average annual rate of 10.5%, from 55¢ per Class A share for the year ended September 30, 2004, to $1.11 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 | Cliff Remily, CFA | ||
Co-Portfolio Manager | Co-Portfolio Manager | Co-Portfolio Manager | ||
CEO & Chief Investment Officer | Managing Director | Managing Director | ||
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 13
| SCHEDULE OF INVESTMENTS | ||||||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |||||
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/10
Telecommunication Services | 17.5 | % | Retailing | 0.7 | % | |||||
Energy | 12.7 | % | Capital Goods | 0.6 | % | |||||
Diversified Financials | 10.0 | % | Technology Hardware & Equipment | 0.3 | % | |||||
Utilities | 8.0 | % | Health Care Equipment & Services | 0.2 | % | |||||
Banks | 7.2 | % | Consumer Durables & Apparel | 0.2 | % | |||||
Food, Beverage & Tobacco | 6.4 | % | Industrials | 0.2 | % | |||||
Real Estate | 5.9 | % | Automobiles & Components | 0.1 | % | |||||
Insurance | 5.3 | % | Commercial & Professional Services | 0.1 | % | |||||
Semiconductors & Semiconductor Equipment | 3.5 | % | Other Non-Classified Securities: | |||||||
Pharmaceuticals, Biotechnology & Life Sciences | 3.4 | % | Exchange Traded Funds | 0.9 | % | |||||
Software & Services | 3.2 | % | Other Securities | 0.4 | % | |||||
Consumer Services | 3.2 | % | Asset Backed Securities | 0.3 | % | |||||
Transportation | 2.6 | % | U.S. Government Agencies | 0.2 | % | |||||
Materials | 2.2 | % | Municipal Bonds * | 0.0 | % | |||||
Food & Staples Retailing | 1.2 | % | Other Assets & Cash Equivalents | 1.4 | % | |||||
Media | 1.1 | % | * Percentage was less than 0.1%. | |||||||
Miscellaneous | 0.8 | % |
TOP TEN EQUITY HOLDINGS
As of 9/30/10
Total SA | 2.7 | % | Coca Cola Co. | 2.2 | % | |||||
Telefonica SA | 2.5 | % | Philip Morris | 2.1 | % | |||||
Telstra Corp. Ltd. | 2.4 | % | Koninklijke KPN N.V. | 2.0 | % | |||||
Eni S.p.A. | 2.4 | % | Seadrill Ltd. | 2.0 | % | |||||
Enel S.p.A. | 2.4 | % | Vodafone Group plc | 1.9 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/10
United States | 54.4 | % | Luxembourg | 0.9 | % | |||||
Australia | 7.0 | % | Greece | 0.9 | % | |||||
Italy | 5.3 | % | Brazil | 0.9 | % | |||||
France | 5.2 | % | Singapore | 0.6 | % | |||||
Spain | 3.1 | % | Bermuda | 0.5 | % | |||||
Netherlands | 2.9 | % | Cayman Islands | 0.3 | % | |||||
United Kingdom | 2.5 | % | Germany | 0.3 | % | |||||
Norway | 2.4 | % | Malaysia | 0.3 | % | |||||
Switzerland | 2.3 | % | South Africa | 0.3 | % | |||||
China | 2.0 | % | South Korea | 0.3 | % | |||||
Canada | 1.9 | % | Russia | 0.2 | % | |||||
Taiwan | 1.7 | % | Indonesia | 0.1 | % | |||||
Mexico | 1.2 | % | Trinidad and Tobago | 0.1 | % | |||||
Hong Kong | 1.0 | % | Other Assets & Cash Equivalents | 1.4 | % |
14 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 64.65% | ||||||||
BANKS — 2.64% | ||||||||
COMMERCIAL BANKS — 2.64% | ||||||||
Banque Cantonale Vaudoise | 55,100 | $ | 28,232,687 | |||||
Intesa Sanpaolo | 12,296,800 | 31,666,471 | ||||||
Liechtensteinische Landesbank AG | 1,066,600 | 71,747,072 | ||||||
St. Galler Kantonalbank | 55,382 | 25,700,089 | ||||||
| 157,346,319 | ||||||||
CONSUMER SERVICES — 3.02% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 3.02% | ||||||||
Berjaya Sports Toto Berhad | 14,600,000 | 19,674,765 | ||||||
McDonald’s Corp. | 1,461,500 | 108,896,365 | ||||||
OPAP SA | 3,251,254 | 51,414,367 | ||||||
| 179,985,497 | ||||||||
DIVERSIFIED FINANCIALS — 6.01% | ||||||||
CAPITAL MARKETS — 4.00% | ||||||||
AllianceBernstein Holdings LP | 809,508 | 21,379,106 | ||||||
Apollo Investment Corp. | 8,579,600 | 87,769,308 | ||||||
Ares Capital Corp. | 4,515,393 | 70,665,900 | ||||||
Man Group plc. | 5,247,500 | 18,061,059 | ||||||
Solar Capital Ltd. | 1,901,000 | 40,776,450 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 2.01% | ||||||||
Bolsas y Mercados Espanoles | 885,600 | 23,675,045 | ||||||
Hong Kong Exchanges & Clearing Ltd. | 2,017,300 | 39,727,980 | ||||||
KKR Financial Holdings, LLC | 6,450,000 | 56,631,000 | ||||||
| 358,685,848 | ||||||||
ENERGY — 8.17% | ||||||||
ENERGY EQUIPMENT & SERVICES — 1.96% | ||||||||
Seadrill Ltd. | 4,037,294 | 116,633,014 | ||||||
OIL, GAS & CONSUMABLE FUELS — 6.21% | ||||||||
Canadian Oil Sands Trust | 2,780,400 | 68,800,645 | ||||||
Eni S.p.A. | 6,599,900 | 142,427,509 | ||||||
Total SA | 3,092,900 | 159,400,885 | ||||||
| 487,262,053 | ||||||||
FOOD & STAPLES RETAILING — 0.95% | ||||||||
FOOD & STAPLES RETAILING — 0.95% | ||||||||
Sysco Corp. | 1,985,500 | 56,626,460 | ||||||
| 56,626,460 | ||||||||
FOOD, BEVERAGE & TOBACCO — 5.84% | ||||||||
BEVERAGES — 2.16% | ||||||||
Coca Cola Co. | 2,198,900 | 128,679,628 | ||||||
FOOD PRODUCTS — 0.49% | ||||||||
Marine Harvest | 33,299,000 | 29,017,688 | ||||||
TOBACCO — 3.19% | ||||||||
Lorillard, Inc. | 799,100 | 64,175,721 | ||||||
Philip Morris | 2,255,700 | 126,364,314 | ||||||
| 348,237,351 | ||||||||
Certified Annual Report 15
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
INSURANCE — 0.61% | ||||||||
INSURANCE — 0.61% | ||||||||
Scor SE | 1,000,000 | $ | 23,897,778 | |||||
Zurich Financial Services AG | 52,400 | 12,280,792 | ||||||
| 36,178,570 | ||||||||
MATERIALS — 1.30% | ||||||||
METALS & MINING — 1.30% | ||||||||
Impala Platinum Holdings Ltd. | 665,900 | 17,196,227 | ||||||
Southern Copper Corp. | 1,713,300 | 60,171,096 | ||||||
| 77,367,323 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 3.32% | ||||||||
PHARMACEUTICALS — 3.32% | ||||||||
Eli Lilly & Co. | 2,634,100 | 96,223,673 | ||||||
Pfizer, Inc. | 5,934,600 | 101,897,082 | ||||||
| 198,120,755 | ||||||||
REAL ESTATE — 5.46% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 5.32% | ||||||||
Annaly Capital Management, Inc. | 4,167,200 | 73,342,720 | ||||||
Anworth Mtg Asset Corp. | 3,067,800 | 21,873,414 | ||||||
Chimera Investment Corp. | 14,242,600 | 56,258,270 | ||||||
Dexus Property Group | 78,947,249 | 65,242,003 | ||||||
a Invesco Mortgage Capital, Inc. | 1,915,165 | 41,214,351 | ||||||
MFA Financial, Inc. | 7,800,500 | 59,517,815 | ||||||
REAL ESTATE MANAGEMENT & DEVELOPMENT — 0.14% | ||||||||
Hopewell Holdings Ltd. | 2,598,500 | 8,422,933 | ||||||
| 325,871,506 | ||||||||
RETAILING — 0.51% | ||||||||
MULTILINE RETAIL — 0.51% | ||||||||
David Jones Ltd. | 6,324,700 | 30,443,420 | ||||||
| 30,443,420 | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.30% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.30% | ||||||||
Intel Corp. | 4,922,200 | 94,653,906 | ||||||
Mediatek, Inc. | 1,621,235 | 22,781,306 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 40,000,000 | 79,381,591 | ||||||
| 196,816,803 | ||||||||
SOFTWARE & SERVICES — 2.81% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 0.94% | ||||||||
Paychex, Inc. | 2,032,700 | 55,878,923 | ||||||
SOFTWARE — 1.87% | ||||||||
Microsoft Corp. | 4,557,000 | 111,600,930 | ||||||
| 167,479,853 | ||||||||
TELECOMMUNICATION SERVICES — 15.03% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 11.11% | ||||||||
CenturyLink, Inc. | 750,000 | 29,595,000 | ||||||
France Telecom SA | 4,791,700 | 103,536,741 | ||||||
16 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
Koninklijke KPN N.V. | 7,901,900 | $ | 122,211,377 | |||||
Qwest Communications International, Inc. | 11,950,000 | 74,926,500 | ||||||
Singapore Telecommunications Ltd. | 16,052,700 | 38,450,312 | ||||||
Telefonica SA | 5,993,074 | 148,409,140 | ||||||
Telstra Corp. Ltd. | 57,500,000 | 145,610,706 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 3.92% | ||||||||
China Mobile Ltd. | 11,151,207 | 114,259,324 | ||||||
SK Telecom Co. Ltd. | 24,000 | 3,609,735 | ||||||
Vodafone Group plc | 46,977,100 | 115,933,985 | ||||||
| 896,542,820 | ||||||||
TRANSPORTATION — 1.39% | ||||||||
TRANSPORTATION INFRASTRUCTURE — 1.39% | ||||||||
Hopewell Highway | 15,722,341 | 12,178,515 | ||||||
MAp Airports | 25,090,909 | 70,814,699 | ||||||
| 82,993,214 | ||||||||
UTILITIES — 4.29% | ||||||||
ELECTRIC UTILITIES — 2.98% | ||||||||
E.ON AG | 700,000 | 20,640,973 | ||||||
Enel S.p.A. | 26,607,100 | 141,824,057 | ||||||
Entergy Corp. | 200,000 | 15,306,000 | ||||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.26% | ||||||||
Algonquin Power & Utilities Corp. | 2,592,100 | 11,538,360 | ||||||
Algonquin Power & Utilities Corp. | 900,000 | 4,006,220 | ||||||
MULTI-UTILITIES — 1.05% | ||||||||
Dominion Resources, Inc. | 1,435,700 | 62,682,662 | ||||||
| 255,998,272 | ||||||||
TOTAL COMMON STOCK (Cost $3,692,395,105) | 3,855,956,064 | |||||||
PREFERRED STOCK — 4.36% | ||||||||
BANKS — 2.94% | ||||||||
COMMERCIAL BANKS — 2.94% | ||||||||
Barclays Bank plc Pfd, 7.10% | 200,000 | 4,980,000 | ||||||
Fifth Third Bancorp Pfd, 8.50% | 485,000 | 62,375,850 | ||||||
First Tennessee Bank Pfd, 3.75% | 12,000 | 7,781,250 | ||||||
Huntington Bancshares Pfd, 8.50% | 95,087 | 100,316,785 | ||||||
| 175,453,885 | ||||||||
DIVERSIFIED FINANCIALS — 0.42% | ||||||||
CAPITAL MARKETS — 0.04% | ||||||||
Morgan Stanley Pfd, 4.00% | 120,000 | 2,403,600 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.38% | ||||||||
Bank of America Corp. Pfd, 3.00% | 420,000 | 6,959,400 | ||||||
Citigroup Capital XII Pfd, 8.50% | 600,000 | 15,846,000 | ||||||
| 25,209,000 | ||||||||
INSURANCE — 0.06% | ||||||||
INSURANCE — 0.06% | ||||||||
Hartford Financial Services Group Pfd, 7.25% | 150,000 | 3,558,000 | ||||||
| 3,558,000 | ||||||||
Certified Annual Report 17
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ PrincipalAmount | Value | |||||||
MISCELLANEOUS — 0.16% | ||||||||
U.S. GOVERNMENT AGENCIES — 0.16% | ||||||||
Farm Credit Bank of Texas Pfd, 10.00% | 9,000 | $ | 9,357,187 | |||||
| 9,357,187 | ||||||||
REAL ESTATE — 0.26% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 0.26% | ||||||||
Sovereign REIT Pfd, 12.00% | 4,000 | 4,650,000 | ||||||
Alexandria Real Estate Pfd, 7.00% | 463,500 | 10,845,900 | ||||||
| 15,495,900 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.25% | ||||||||
COMMUNICATIONS EQUIPMENT — 0.25% | ||||||||
Lucent Technologies Capital Trust I Pfd, 7.75% | 18,000 | 14,580,000 | ||||||
| 14,580,000 | ||||||||
TELECOMMUNICATION SERVICES — 0.27% | ||||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.27% | ||||||||
b Centaur Funding Corp. Pfd, 9.08% | 15,000 | 16,340,625 | ||||||
| 16,340,625 | ||||||||
TOTAL PREFERRED STOCK (Cost $220,425,510) | 259,994,597 | |||||||
EXCHANGE TRADED FUNDS — 0.94% | ||||||||
iShares High Yield Corporate Bond | 625,000 | 56,056,250 | ||||||
TOTAL EXCHANGE TRADED FUNDS (Cost $46,047,908) | 56,056,250 | |||||||
ASSET BACKED SECURITIES — 0.35% | ||||||||
BANKS — 0.05% | ||||||||
COMMERCIAL BANKS — 0.05% | ||||||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 2.858%, 2/25/2035 | $ | 10,381,183 | 1,468,738 | |||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 3.516%, 3/25/2035 | 9,733,337 | 1,486,825 | ||||||
| 2,955,563 | ||||||||
DIVERSIFIED FINANCIALS — 0.09% | ||||||||
CAPITAL MARKETS — 0.05% | ||||||||
Bear Stearns ARM Mtg Series 2003-6 Class 2B-1, 2.806%, 8/25/2033 | 631,165 | 215,506 | ||||||
Merrill Lynch Mtg Investors Trust, 2.786%, 8/25/2034 | 6,338,479 | 2,860,651 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.04% | ||||||||
Banc of America Funding Corp. Series 2006-I Class SB1, 3.751%, 12/20/2036 | 3,275,375 | 320,703 | ||||||
Banc of America Mtg Securities Series 2005-A Class B1, 3.531%, 2/25/2035 | 5,281,739 | 649,797 | ||||||
Citigroup Mtg Loan Trust, Inc., 4.092%, 3/25/2034 | 1,586,924 | 743,126 | ||||||
Structured Asset Security Corp. Series 2002-27A Class B1, 2.549%, 1/25/2033 | 2,783,714 | 754,602 | ||||||
| 5,544,385 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.06% | ||||||||
PHARMACEUTICALS — 0.06% b QHP PhaRMA, 10.25%, 3/15/2015 | 3,375,614 | 3,450,788 | ||||||
| 3,450,788 | ||||||||
18 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
TRANSPORTATION — 0.15% | ||||||||
AIRLINES — 0.15% | ||||||||
b American Airlines Depositor Corp., 8.00%, 10/5/2010 | $ | 8,700,000 | $ | 8,695,476 | ||||
| 8,695,476 | ||||||||
TOTAL ASSET BACKED SECURITIES (Cost $48,378,840) | 20,646,212 | |||||||
CORPORATE BONDS — 21.90% | ||||||||
AUTOMOBILES & COMPONENTS — 0.15% | ||||||||
AUTOMOBILES — 0.15% | ||||||||
b American Honda Finance, 7.625%, 10/1/2018 | 7,000,000 | 8,863,001 | ||||||
| 8,863,001 | ||||||||
BANKS — 1.65% | ||||||||
COMMERCIAL BANKS — 1.65% | ||||||||
b,c Alfa Diversified, 2.292%, 3/15/2012 | 2,625,000 | 2,573,287 | ||||||
b,c Banco Industrial e Comercial S.A., 6.25%, 1/20/2013 | 9,000,000 | 9,270,000 | ||||||
Fifth Third Bancorp, 6.25%, 5/1/2013 | 2,750,000 | 3,011,027 | ||||||
b,c Groupe BPCE, 12.50%, 8/29/2049 | 19,011,000 | 21,883,182 | ||||||
b,c,d,e,f Landsbanki Islands HF, 7.431%, 12/31/2049 | 5,000,000 | 6,250 | ||||||
National City Preferred Capital Trust I, 12.00%, 12/29/2049 | 3,250,000 | 3,612,343 | ||||||
PNC Financial Services Group, Inc., 8.25%, 5/29/2049 | 10,000,000 | 10,621,900 | ||||||
b PNC Preferred Funding Trust III, 8.70%, 12/31/2049 | 4,500,000 | 4,730,490 | ||||||
Provident Bank MD, 9.50%, 5/1/2018 | 5,600,000 | 6,113,733 | ||||||
c Shinhan Bank, 6.819%, 9/20/2036 | 900,000 | 912,662 | ||||||
Silicon Valley Bank, 6.05%, 6/1/2017 | 26,713,000 | 28,152,350 | ||||||
Webster Capital Trust IV, 7.65%, 6/15/2037 | 1,950,000 | 1,616,772 | ||||||
Wells Fargo Capital XIII Preferred Note, 7.70%, 12/29/2049 | 2,500,000 | 2,593,750 | ||||||
Zions Bancorp, 7.75%, 9/23/2014 | 3,000,000 | 3,178,791 | ||||||
| 98,276,537 | ||||||||
CAPITAL GOODS — 0.55% | ||||||||
INDUSTRIAL CONGLOMERATES — 0.30% | ||||||||
Otter Tail Corp., 9.00%, 12/15/2016 | 17,000,000 | 18,190,000 | ||||||
TRADING COMPANIES & DISTRIBUTORS — 0.25% | ||||||||
International Lease Finance Corp., 5.125%, 11/1/2010 | 5,000,000 | 5,000,000 | ||||||
b International Lease Finance Corp. E-Capital Trust I, 5.90%, 12/21/2065 | 15,000,000 | 9,825,000 | ||||||
| 33,015,000 | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.01% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 0.01% | ||||||||
Allied Waste North America, Inc., 6.375%, 4/15/2011 | 500,000 | 514,450 | ||||||
| 514,450 | ||||||||
CONSUMER DURABLES & APPAREL — 0.19% | ||||||||
HOUSEHOLD DURABLES — 0.19% | $ | 10,000,000 | 11,400,000 | |||||
b Corporativo Javer SA, 13.00%, 8/4/2014 | 11,400,000 | |||||||
Certified Annual Report 19
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
CONSUMER SERVICES — 0.13% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.13% | ||||||||
b CKE Restaurants, Inc., 11.375%, 7/15/2018 | $ | 4,000,000 | $ | 4,100,000 | ||||
Seneca Nation of Indians Capital Improvements Authority, 6.75%, 12/1/2013 | 3,560,000 | 3,468,508 | ||||||
| 7,568,508 | ||||||||
DIVERSIFIED FINANCIALS — 1.78% | ||||||||
CAPITAL MARKETS — 0.14% | ||||||||
Goldman Sachs Group, Inc., 5.625%, 1/15/2017 | 8,000,000 | 8,471,528 | ||||||
CONSUMER FINANCE — 0.81% | ||||||||
American Express Credit Co., 5.875%, 5/2/2013 | 5,000,000 | 5,502,980 | ||||||
Capital One Capital IV, 6.745%, 2/17/2037 | 6,400,000 | 6,368,000 | ||||||
Capital One Financial Corp., 6.15%, 9/1/2016 | 25,000,000 | 27,408,800 | ||||||
SLM Corp., 4.00%, 7/25/2014 | 2,000,000 | 1,719,960 | ||||||
SLM Corp. LIBOR Floating Rate Note, 0.798%, 1/27/2014 | 5,000,000 | 4,318,940 | ||||||
b TMX Finance LLC/TitleMax Finance Corp., 13.25%, 7/15/2015 | 2,500,000 | 2,728,125 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.83% | ||||||||
Citigroup, Inc., 5.00%, 9/15/2014 | 16,250,000 | 16,877,900 | ||||||
c Export-Import Bank of Korea, 8.125%, 1/21/2014 | 2,750,000 | 3,227,812 | ||||||
JPMorgan Chase & Co., 7.90%, 4/29/2049 | 15,000,000 | 16,074,450 | ||||||
c Korea Development Bank, 5.30%, 1/17/2013 | 800,000 | 854,278 | ||||||
MBNA Corp., 6.125%, 3/1/2013 | 2,000,000 | 2,165,410 | ||||||
National Rural Utilities CFC, 10.375%, 11/1/2018 | 5,000,000 | 7,160,075 | ||||||
b SquareTwo Financial Corp., 11.625%, 4/1/2017 | 4,000,000 | 3,560,000 | ||||||
| 106,438,258 | ||||||||
ENERGY — 4.22% | ||||||||
ENERGY EQUIPMENT & SERVICES — 0.42% | ||||||||
b Calfrac Holdings LP, 7.75%, 2/15/2015 | 8,500,000 | 8,585,000 | ||||||
Nabors Industries, Inc., 9.25%, 1/15/2019 | 10,500,000 | 13,435,737 | ||||||
Seacor Holdings, Inc., 7.375%, 10/1/2019 | 2,000,000 | 2,180,972 | ||||||
Seitel, Inc., 9.75%, 2/15/2014 | 1,000,000 | 877,500 | ||||||
OIL, GAS & CONSUMABLE FUELS — 3.80% | ||||||||
b Bumi Capital PTE, Ltd., 12.00%, 11/10/2016 | 3,000,000 | 3,217,500 | ||||||
Cloud Peak Energy Resources, 8.25%, 12/15/2017 | 8,000,000 | 8,450,000 | ||||||
b DCP Midstream LLC, 9.75%, 3/15/2019 | 5,000,000 | 6,653,350 | ||||||
Enbridge Energy Partners LP, 9.875%, 3/1/2019 | 9,750,000 | 13,295,470 | ||||||
b Enogex LLC, 6.875%, 7/15/2014 | 2,000,000 | 2,247,554 | ||||||
b Enogex LLC, 6.25%, 3/15/2020 | 2,500,000 | 2,809,573 | ||||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 22,880,000 | 22,765,600 | ||||||
Enterprise Products Operating LP, 9.75%, 1/31/2014 | 4,000,000 | 4,898,632 | ||||||
b Gaz Capital SA, 8.146%, 4/11/2018 | 2,000,000 | 2,340,000 | ||||||
b,c,e,f Griffin Coal Mining Ltd., 9.50%, 12/1/2016 | 22,000,000 | 13,007,500 | ||||||
b GS Caltex Corp., 7.25%, 7/2/2013 | 7,000,000 | 7,761,180 | ||||||
Kinder Morgan Energy Partners, 9.00%, 2/1/2019 | 9,750,000 | 12,695,465 | ||||||
b Maritimes & Northeast Pipeline, LLC, 7.50%, 5/31/2014 | 7,203,000 | 7,863,803 | ||||||
Murphy Oil Corp., 6.375%, 5/1/2012 | 5,000,000 | 5,351,990 | ||||||
b Niska Gas Storage, 8.875%, 3/15/2018 | 8,739,000 | 9,350,730 | ||||||
NuStar Logistics, 7.65%, 4/15/2018 | 18,000,000 | 21,851,334 | ||||||
Oneok Partners LP, 5.90%, 4/1/2012 | 3,000,000 | 3,199,884 | ||||||
Oneok Partners LP, 8.625%, 3/1/2019 | 8,000,000 | 10,374,608 | ||||||
b,c Petro Co. Trinidad Tobago Ltd., 9.75%, 8/14/2019 | 4,000,000 | 4,900,000 | ||||||
20 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
b,c Petroplus Finance Ltd., 6.75%, 5/1/2014 | $ | 4,000,000 | $ | 3,660,000 | ||||
Plains Exploration & Production Co., 7.625%, 6/1/2018 | 1,000,000 | 1,050,000 | ||||||
b,d RAAM Global Energy Co., 12.50%, 10/1/2015 | 12,000,000 | 12,240,000 | ||||||
Southern Union Co., 7.20%, 11/1/2066 | 26,020,000 | 23,483,050 | ||||||
Teppco Partners LP, 7.00%, 6/1/2067 | 6,500,000 | 6,142,500 | ||||||
b,d Windsor Petroleum Transport Corp., 7.84%, 1/15/2021 | 8,729,056 | 7,856,151 | ||||||
b Woodside Financial Ltd., 8.125%, 3/1/2014 | 8,000,000 | 9,409,304 | ||||||
| 251,954,387 | ||||||||
FOOD & STAPLES RETAILING — 0.18% | ||||||||
FOOD & STAPLES RETAILING — 0.18% | ||||||||
Rite Aid Corp., 8.625%, 3/1/2015 | 3,000,000 | 2,591,250 | ||||||
Rite Aid Corp., 9.375%, 12/15/2015 | 9,500,000 | 8,193,750 | ||||||
| 10,785,000 | ||||||||
FOOD, BEVERAGE & TOBACCO — 0.49% | ||||||||
BEVERAGES — 0.05% | ||||||||
Anheuser Busch Cos., Inc., 4.70%, 4/15/2012 | 3,000,000 | 3,166,656 | ||||||
TOBACCO — 0.44% | ||||||||
Altria Group, Inc., 8.50%, 11/10/2013 | 4,000,000 | 4,789,788 | ||||||
Altria Group, Inc., 9.70%, 11/10/2018 | 10,750,000 | 14,551,222 | ||||||
b,c B.A.T. International Finance, plc, 9.50%, 11/15/2018 | 5,000,000 | 6,798,280 | ||||||
| 29,305,946 | ||||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.21% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 0.07% b Alere, Inc., 8.625%, 10/1/2018 | 4,000,000 | 4,060,000 | ||||||
HEALTH CARE TECHNOLOGY — 0.14% b Merge Healthcare, Inc., 11.75%, 5/1/2015 | 8,000,000 | 8,180,000 | ||||||
| 12,240,000 | ||||||||
INDUSTRIALS — 0.16% | ||||||||
CAPITAL GOODS — 0.16% | ||||||||
Da-Lite Screen Co., Inc., 12.50%, 4/1/2015 | 9,000,000 | 9,225,000 | ||||||
| 9,225,000 | ||||||||
INSURANCE — 4.37% | ||||||||
INSURANCE — 4.37% | ||||||||
American General Finance Corp., 4.875%, 7/15/2012 | 1,000,000 | 945,000 | ||||||
Hartford Financial Services Group, 8.125%, 6/15/2038 | 24,650,000 | 24,896,500 | ||||||
b Liberty Mutual Group, Inc., 5.75%, 3/15/2014 | 1,000,000 | 1,051,217 | ||||||
b Metlife Capital Trust X, 9.25%, 4/8/2068 | 24,000,000 | 28,320,000 | ||||||
Metlife, Inc. Series A, 6.817%, 8/15/2018 | 4,000,000 | 4,825,852 | ||||||
b National Life Insurance of Vermont, 10.50%, 9/15/2039 | 2,000,000 | 2,431,120 | ||||||
Northwind Holdings, LLC Series 2007-1A Class A1, 1.077%, 12/1/2037 | 5,666,018 | 4,312,916 | ||||||
b,c Oil Insurance Ltd., 7.558%, 12/29/2049 | 4,000,000 | 3,547,240 | ||||||
b Pacific Life Global Funding CPI Floating Rate Note, 3.23%, 2/6/2016 | 2,000,000 | 1,958,840 | ||||||
b Prudential Holdings, LLC, 8.695%, 12/18/2023 | 4,500,000 | 5,703,840 | ||||||
b,c QBE Insurance Group Ltd., 5.647%, 7/1/2023 | 10,613,000 | 9,925,426 | ||||||
SCOR SE, 6.154%, 7/29/2049 | 3,550,000 | 4,162,003 | ||||||
b Swiss Re Capital I, LP, 6.854%, 5/29/2049 | 148,865,000 | 138,614,901 | ||||||
Transatlantic Holdings, Inc., 5.75%, 12/14/2015 | 14,647,000 | 15,376,655 | ||||||
b ZFS Finance USA Trust II, 6.45%, 12/15/2065 | 14,198,000 | 13,488,100 | ||||||
Certified Annual Report 21
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
b ZFS Finance USA Trust V, 6.50%, 5/9/2037 | $ | 1,260,000 | $ | 1,171,800 | ||||
| 260,731,410 | ||||||||
MATERIALS — 0.94% | ||||||||
CONSTRUCTION MATERIALS — 0.27% | ||||||||
b,c C8 Capital Ltd., 6.64%, 12/31/2049 | 2,000,000 | 1,316,244 | ||||||
CRH America, Inc., 8.125%, 7/15/2018 | 12,000,000 | 14,469,888 | ||||||
CONTAINERS & PACKAGING — 0.03% | ||||||||
b Plastipak Holdings, Inc., 10.625%, 8/15/2019 | 1,750,000 | 1,942,500 | ||||||
METALS & MINING — 0.64% | ||||||||
Allegheny Technologies, Inc., 9.375%, 6/1/2019 | 3,000,000 | 3,625,713 | ||||||
b,c Anglo American Capital, 9.375%, 4/8/2014 | 3,500,000 | 4,309,123 | ||||||
b,c Bemax Resources Ltd., 9.375%, 7/15/2014 | 5,000,000 | 4,200,000 | ||||||
Freeport-McMoRan Copper & Gold, 8.25%, 4/1/2015 | 8,000,000 | 8,560,000 | ||||||
Freeport-McMoRan Copper & Gold, 8.375%, 4/1/2017 | 4,965,000 | 5,542,181 | ||||||
Freeport-McMoRan Corp., 6.125%, 3/15/2034 | 4,500,000 | 4,410,464 | ||||||
b GTL Trade Finance, Inc., 7.25%, 10/20/2017 | 7,000,000 | 7,796,250 | ||||||
| 56,172,363 | ||||||||
MEDIA — 0.64% | ||||||||
MEDIA — 0.64% | ||||||||
Comcast Cable Communications, 8.875%, 5/1/2017 | 5,000,000 | 6,464,310 | ||||||
DIRECTV Holdings LLC, 6.375%, 6/15/2015 | 5,100,000 | 5,278,500 | ||||||
DIRECTV Holdings LLC, 7.625%, 5/15/2016 | 3,000,000 | 3,345,000 | ||||||
Time Warner Cable, Inc., 8.75%, 2/14/2019 | 14,000,000 | 18,488,316 | ||||||
Time Warner Cable, Inc., 8.25%, 2/14/2014 | 4,000,000 | 4,773,804 | ||||||
| 38,349,930 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.05% | ||||||||
BIOTECHNOLOGY — 0.05% | ||||||||
Tiers Inflation Linked Trust Series Wyeth 2004 21 Trust Certificate CPI Floating Rate | ||||||||
Note, 2.903%, 2/1/2014 | 3,000,000 | 2,995,050 | ||||||
| 2,995,050 | ||||||||
RETAILING — 0.19% | ||||||||
INTERNET & CATALOG RETAIL — 0.03% | ||||||||
Ticketmaster, 10.75%, 8/1/2016 | 1,500,000 | 1,642,500 | ||||||
MULTILINE RETAIL — 0.03% | ||||||||
c Parkson Retail Group, 7.125%, 5/30/2012 | 2,110,000 | 2,186,595 | ||||||
SPECIALTY RETAIL — 0.13% | ||||||||
b Ace Hardware Corp., 9.125%, 6/1/2016 | 3,000,000 | 3,202,500 | ||||||
Best Buy, Inc., 6.75%, 7/15/2013 | 4,000,000 | 4,473,532 | ||||||
| 11,505,127 | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.25% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.25% | ||||||||
KLA Instruments Corp., 6.90%, 5/1/2018 | 10,000,000 | 11,470,920 | ||||||
National Semiconductor Corp., 6.15%, 6/15/2012 | 2,000,000 | 2,132,368 | ||||||
National Semiconductor Corp., 6.60%, 6/15/2017 | 1,000,000 | 1,165,654 | ||||||
| 14,768,942 | ||||||||
22 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
SOFTWARE & SERVICES — 0.22% | ||||||||
INTERNET SOFTWARE & SERVICES — 0.18% | ||||||||
b SSI Investments II/SSI Co-Issuer LLC, 11.125%, 6/1/2018 | $ | 3,000,000 | $ | 3,292,500 | ||||
d Yahoo! Inc., 6.65%, 8/10/2026 | 7,274,466 | 7,521,798 | ||||||
SOFTWARE — 0.04% | ||||||||
b Aspect Software, Inc., 10.625%, 5/15/2017 | 2,000,000 | 2,077,500 | ||||||
| 12,891,798 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.10% | ||||||||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS — 0.10% | ||||||||
Corning, Inc., 6.05%, 6/15/2015 | 6,000,000 | 6,042,378 | ||||||
| 6,042,378 | ||||||||
TELECOMMUNICATION SERVICES — 1.49% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.45% | ||||||||
c Deutsche Telekom International Finance B.V., 8.75%, 6/15/2030 | 26,150,000 | 36,616,616 | ||||||
c Global Crossing Ltd., 12.00%, 9/15/2015 | 4,000,000 | 4,520,000 | ||||||
Level 3 Financing, Inc., 9.25%, 11/1/2014 | 10,000,000 | 9,400,000 | ||||||
c Telecom Italia Capital SA, 5.25%, 10/1/2015 | 4,190,000 | 4,521,580 | ||||||
b,c Telemar Norte Leste SA, 5.50%, 10/23/2020 | 9,065,840 | 9,179,163 | ||||||
b,c Vimpelcom, 8.25%, 5/23/2016 | 4,500,000 | 4,905,000 | ||||||
Windstream Corp., 8.125%, 8/1/2013 | 10,800,000 | 11,718,000 | ||||||
b Zayo Group LLC, 10.25%, 3/15/2017 | 5,500,000 | 5,775,000 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.04% | ||||||||
b,c Digicel SA, 12.00%, 4/1/2014 | 2,000,000 | 2,330,000 | ||||||
| 88,965,359 | ||||||||
TRANSPORTATION — 0.37% | ||||||||
AIRLINES — 0.24% | ||||||||
b,c Air Canada, 9.25%, 8/1/2015 | 9,000,000 | 9,090,000 | ||||||
American Airlines, Inc., 13.00%, 8/1/2016 | 4,343,977 | 5,136,753 | ||||||
MARINE — 0.13% | ||||||||
Commercial Barge Line Co., 12.50%, 7/15/2017 | 5,000,000 | 5,500,000 | ||||||
United Maritime LLC, 11.75%, 6/15/2015 | 2,500,000 | 2,506,250 | ||||||
| 22,233,003 | ||||||||
UTILITIES — 3.56% | ||||||||
ELECTRIC UTILITIES — 1.79% | ||||||||
Alabama Power Capital Trust V, 3.633%, 10/1/2042 | 4,000,000 | 4,000,000 | ||||||
Aquila, Inc., 7.95%, 2/1/2011 | 3,000,000 | 3,063,549 | ||||||
Arizona Public Service Co., 5.50%, 9/1/2035 | 4,000,000 | 4,088,480 | ||||||
Arizona Public Service Co., 8.75%, 3/1/2019 | 6,500,000 | 8,539,726 | ||||||
Comed Financing III, 6.35%, 3/15/2033 | 2,961,000 | 2,594,363 | ||||||
b,c Enel Finance International S.A., 6.25%, 9/15/2017 | 38,000,000 | 43,096,712 | ||||||
Entergy Gulf States Louisiana LLC, 6.00%, 5/1/2018 | 8,000,000 | 9,252,672 | ||||||
b Great River Energy, 5.829%, 7/1/2017 | 1,872,755 | 2,101,288 | ||||||
b,c Listrindo Capital BV, 9.25%, 1/29/2015 | 2,750,000 | 3,119,462 | ||||||
b Monongahela Power Co., 7.95%, 12/15/2013 | 2,000,000 | 2,350,202 | ||||||
Certified Annual Report 23
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
b Texas-New Mexico Power, 9.50%, 4/1/2019 | $ | 19,000,000 | $ | 24,983,898 | ||||
GAS UTILITIES — 0.19% | ||||||||
Ferrellgas LP, 9.125%, 10/1/2017 | 1,000,000 | 1,083,750 | ||||||
Southwest Gas Corp., 7.625%, 5/15/2012 | 9,465,000 | 10,263,922 | ||||||
MULTI-UTILITIES — 1.58% | ||||||||
Ameren Illinois Co., 9.75%, 11/15/2018 | 5,000,000 | 6,699,430 | ||||||
Amerenenergy Generating, 7.00%, 4/15/2018 | 9,050,000 | 9,093,223 | ||||||
Black Hills Corp., 9.00%, 5/15/2014 | 4,500,000 | 5,331,280 | ||||||
Dominion Resources, Inc., 8.875%, 1/15/2019 | 14,750,000 | 20,063,968 | ||||||
NiSource Finance Corp., 6.15%, 3/1/2013 | 12,237,000 | 13,444,400 | ||||||
NiSource Finance Corp., 6.40%, 3/15/2018 | 20,000,000 | 23,194,940 | ||||||
Sempra Energy, 9.80%, 2/15/2019 | 7,750,000 | 10,804,779 | ||||||
Sempra Energy, 8.90%, 11/15/2013 | 2,000,000 | 2,404,888 | ||||||
Union Electric Co., 6.70%, 2/1/2019 | 2,500,000 | 3,039,443 | ||||||
| 212,614,375 | ||||||||
TOTAL CORPORATE BONDS (Cost $1,061,256,163) | 1,306,855,822 | |||||||
CONVERTIBLE BONDS — 3.23% | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.06% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 0.06% | ||||||||
Covanta Holding Corp., 1.00%, 2/1/2027 | 4,000,000 | 3,865,000 | ||||||
| 3,865,000 | ||||||||
DIVERSIFIED FINANCIALS — 1.52% | ||||||||
DIVERSIFIED FINANCIAL SERVICES — 1.52% | ||||||||
KKR Financial Holdings LLC, 7.00%, 7/15/2012 | 61,600,000 | 63,063,000 | ||||||
KKR Financial Holdings LLC, 7.50%, 1/15/2017 | 21,750,000 | 27,595,312 | ||||||
| 90,658,312 | ||||||||
ENERGY — 0.29% | ||||||||
ENERGY EQUIPMENT & SERVICES — 0.14% | ||||||||
Global Industries Ltd., 2.75%, 8/1/2027 | 5,000,000 | 3,518,750 | ||||||
SESI, LLC, 1.50%, 12/15/2026 | 5,000,000 | 4,843,750 | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.15% | ||||||||
Chesapeake Energy Corp., 2.25%, 12/15/2038 | 11,500,000 | 8,840,625 | ||||||
| 17,203,125 | ||||||||
MEDIA — 0.34% | ||||||||
MEDIA — 0.34% b Central European Media, 3.50%, 3/15/2013 | 19,011,000 | 16,301,932 | ||||||
Live Nation Entertainment, Inc., 2.875%, 7/15/2027 | 5,000,000 | 4,275,000 | ||||||
| 20,576,932 | ||||||||
REAL ESTATE — 0.19% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 0.19% b Extra Space Storage LP, 3.625%, 4/1/2027 | 10,000,000 | 9,750,000 | ||||||
Washington REIT, 3.875%, 9/15/2026 | 1,470,000 | 1,508,588 | ||||||
| 11,258,588 | ||||||||
24 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
SOFTWARE & SERVICES — 0.18% | ||||||||
SOFTWARE — 0.18% | ||||||||
b,c Telvent Git SA, 5.50%, 4/15/2015 | $ | 10,500,000 | $ | 10,552,500 | ||||
| 10,552,500 | ||||||||
TELECOMMUNICATION SERVICES — 0.65% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.19% | ||||||||
Global Crossing Ltd., 5.00%, 5/15/2011 | 9,250,000 | 9,273,125 | ||||||
Level 3 Communications, Inc., 7.00%, 3/15/2015 | 2,000,000 | 1,782,500 | ||||||
Level 3 Communications, Inc., 6.50%, 10/1/2016 | 500,000 | 511,250 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.46% | ||||||||
NII Holdings, 3.125%, 6/15/2012 | 28,000,000 | 27,160,000 | ||||||
| 38,726,875 | ||||||||
TOTAL CONVERTIBLE BONDS (Cost $171,426,904) | 192,841,332 | |||||||
MUNICIPAL BONDS — 0.03% | ||||||||
Victor New York, 9.20%, 5/1/2014 | 1,445,000 | 1,514,057 | ||||||
TOTAL MUNICIPAL BONDS (Cost $1,501,223) | 1,514,057 | |||||||
U.S. GOVERNMENT AGENCIES — 0.21% | ||||||||
b Agribank FCB, 9.125%, 7/15/2019 | 6,750,000 | 8,372,254 | ||||||
Federal National Mtg Association REMIC Series 2006-B1 Class AB, 6.00%, 6/25/2016 | 4,245,765 | 4,379,345 | ||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $10,984,557) | 12,751,599 | |||||||
FOREIGN BONDS — 2.49% | ||||||||
CONSUMER SERVICES — 0.01% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.01% | ||||||||
e,f FU JI Food and Catering (HKD), 0%, 10/18/2010 | 17,500,000 | 679,998 | ||||||
| 679,998 | ||||||||
DIVERSIFIED FINANCIALS — 0.27% | ||||||||
CAPITAL MARKETS — 0.18% | ||||||||
Morgan Stanley (AUD), 5.08%, 3/1/2013 | 4,000,000 | 3,707,182 | ||||||
Morgan Stanley (BRL), 10.09%, 5/3/2017 | 12,560,000 | 7,096,548 | ||||||
CONSUMER FINANCE — 0.02% | ||||||||
SLM Corp. (AUD), 6.00%, 12/15/2010 | 1,000,000 | 960,224 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.07% | ||||||||
d Bank of America Corp. (BRL), 10.00%, 11/19/2014 | 6,500,000 | 3,687,943 | ||||||
| 15,451,897 | ||||||||
FOOD & STAPLES RETAILING — 0.03% | ||||||||
FOOD & STAPLES RETAILING — 0.03% | ||||||||
Wesfarmers Ltd. (AUD), 7.427%, 9/11/2014 | 2,000,000 | 1,980,048 | ||||||
| 1,980,048 | ||||||||
FOOD, BEVERAGE & TOBACCO — 0.08% | ||||||||
BEVERAGES — 0.08% | ||||||||
Ambev International Finance Co., Ltd. (BRL), 9.50%, 7/24/2017 | 7,669,000 | 4,487,181 | ||||||
| 4,487,181 | ||||||||
Certified Annual Report 25
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
INSURANCE — 0.23% | ||||||||
INSURANCE — 0.23% | ||||||||
ELM BV (AUD), 7.635%, 12/31/2049 | $ | 10,500,000 | $ | 7,979,573 | ||||
ELM BV (AUD), 6.125%, 12/27/2049 | 8,000,000 | 5,715,092 | ||||||
| 13,694,665 | ||||||||
MEDIA — 0.10% | ||||||||
MEDIA — 0.10% b Corus Entertainment (CAD), 7.25%, 2/10/2017 | 2,000,000 | 2,060,881 | ||||||
News America Holdings (AUD), 8.625%, 2/7/2014 | 4,000,000 | 3,962,169 | ||||||
| 6,023,050 | ||||||||
MISCELLANEOUS — 0.65% | ||||||||
MISCELLANEOUS — 0.65% | ||||||||
New South Wales Treasury Corp. (AUD), 3.75%, 11/20/2020 | 8,500,000 | 9,040,361 | ||||||
Regional Muni of York (CAD), 5.00%, 4/29/2019 | 4,500,000 | 4,799,767 | ||||||
Republic of Brazil (BRL), 12.50%, 1/5/2016 | 15,750,000 | 10,728,059 | ||||||
Republic of Brazil (BRL), 12.50%, 1/5/2022 | 20,000,000 | 14,509,456 | ||||||
| 39,077,643 | ||||||||
TELECOMMUNICATION SERVICES — 0.08% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.08% | ||||||||
Wind Acquisition Finance SA (EUR), 11.75%, 7/15/2017 | 3,000,000 | 4,539,623 | ||||||
| 4,539,623 | ||||||||
TRANSPORTATION — 0.86% | ||||||||
TRANSPORTATION INFRASTRUCTURE — 0.86% | ||||||||
Southern Cross Air Corp. (AUD), 6.64%, 12/20/2016 | 55,833,500 | 51,537,387 | ||||||
| 51,537,387 | ||||||||
UTILITIES — 0.18% | ||||||||
MULTI-UTILITIES — 0.18% | ||||||||
Ville De Montreal (CAD), 5.45%, 12/1/2019 | 10,000,000 | 10,854,505 | ||||||
| 10,854,505 | ||||||||
TOTAL FOREIGN BONDS (Cost $119,392,993) | 148,325,997 | |||||||
OTHER SECURITIES — 0.42% | ||||||||
LOAN PARTICIPATIONS — 0.42% | ||||||||
Crown Castle Operating Co., 1.816%, 3/6/2014 | 2,946,701 | 2,874,271 | ||||||
Mylan Laboratories, Inc., 3.813%, 10/2/2014 | 3,912,363 | 3,900,352 | ||||||
Mylan Laboratories, Inc., 3.563%, 10/2/2014 | 1,775,274 | 1,769,824 | ||||||
Texas Comp Electric Holdings LLC, 4.066%, 10/10/2014 | 4,212,855 | 3,271,366 | ||||||
Texas Comp Electric Holdings LLC, 3.758%, 10/10/2014 | 13,681,818 | 10,583,707 | ||||||
Texas Comp Electric Holdings LLC, 4.033%, 10/31/2014 | 70,707 | 54,696 | ||||||
Texas Comp Electric Holdings LLC, 4.033%, 10/10/2014 | 40,404 | 31,375 | ||||||
Texas Comp Electric Holdings LLC, 3.758%, 5/10/2014 | 661,603 | 513,748 | ||||||
Texas Comp Electric Holdings, LLC, 3.758%, 10/10/2014 | 2,943,723 | 2,285,860 | ||||||
TOTAL OTHER SECURITIES (Cost $25,447,947) | 25,285,199 | |||||||
26 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
SHORT TERM INVESTMENTS — 2.03% | ||||||||
Atmos Energy Corp., 0.29%, 10/1/2010 | $ | 30,500,000 | $ | 30,500,000 | ||||
Kinder Morgan Energy, 0.50%, 10/1/2010 | 40,450,000 | 40,450,000 | ||||||
Pepco Holdings, Inc., 0.50%, 10/1/2010 | 50,000,000 | 50,000,000 | ||||||
TOTAL SHORT TERM INVESTMENTS (Cost $120,950,000) | 120,950,000 | |||||||
TOTAL INVESTMENTS — 100.61% (Cost $5,518,207,150) | $ | 6,001,177,129 | ||||||
LIABILITIES NET OF OTHER ASSETS — (0.61)% | (36,540,254 | ) | ||||||
NET ASSETS — 100.00% | $ | 5,964,636,875 | ||||||
Footnote Legend
| a | 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, 2009 | Gross Additions | Gross Reductions | Shares/Principal September 30, 2010 | Market Value September 30, 2010 | Investment Income | ||||||||||||||||||
Invesco Mortgage Capital, Inc. | 1,223,112 | 772,869 | 80,816 | 1,915,165 | $ | 41,214,351 | $ | 6,852,707 | ||||||||||||||||
Total non-controlled affiliated issuers – 0.69% of net assets |
| $ | 41,214,351 | $ | 6,852,707 | |||||||||||||||||||
| 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, 2010, the aggregate value of these securities in the Fund’s portfolio was $616,683,542, representing 10.33% of the Fund’s net assets. |
| c | Yankee Bond - Denominated in U.S. dollars and is 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. |
| e | Bond in default. |
| f | Non-income producing. |
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 Real | |
CAD | Denominated in Canadian Dollars | |
CPI | Consumer Price Index | |
EUR | Denominated in Euros | |
FCB | Farm Credit Bank | |
HKD | Denominated in Hong Kong Dollars | |
LIBOR | London Interbank Offered Rate | |
MFA | Mortgage Finance Authority | |
Mtg | Mortgage | |
Pfd | Preferred Stock | |
REIT | Real Estate Investment Trust | |
REMIC | Real Estate Mortgage Investment Conduit |
See notes to financial statements.
Certified Annual Report 27
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value | ||||
Non-affiliated issuers (cost $5,478,638,104) (Note 2) | $ | 5,959,962,778 | ||
Non-controlled affiliated issuers (cost $39,569,046) (Note 2) | 41,214,351 | |||
Cash | 680,942 | |||
Cash denominated in foreign currency (cost $21,228,072) | 21,783,062 | |||
Receivable for investments sold | 9,225,409 | |||
Receivable for fund shares sold | 47,092,956 | |||
Dividends receivable | 21,748,099 | |||
Dividend and interest reclaim receivable | 2,698,221 | |||
Interest receivable | 31,039,785 | |||
Prepaid expenses and other assets | 32,030 | |||
Total Assets | 6,135,477,633 | |||
LIABILITIES | ||||
Payable for securities purchased | 122,594,986 | |||
Payable for fund shares redeemed | 6,987,017 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 29,328,863 | |||
Payable to investment advisor and other affiliates (Note 3) | 5,612,920 | |||
Accounts payable and accrued expenses | 1,939,680 | |||
Dividends payable | 4,377,292 | |||
Total Liabilities | 170,840,758 | |||
NET ASSETS | $ | 5,964,636,875 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 29,915,619 | ||
Net unrealized appreciation on investments | 454,341,452 | |||
Accumulated net realized gain (loss) | (797,443,422 | ) | ||
Net capital paid in on shares of beneficial interest | 6,277,823,226 | |||
| $ | 5,964,636,875 | |||
28 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($2,018,202,593 applicable to 110,253,820 shares of beneficial interest outstanding - Note 4) | $ | 18.31 | ||
Maximum sales charge, 4.50% of offering price | 0.86 | |||
Maximum offering price per share | $ | 19.17 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($2,234,952,713 applicable to 122,065,567 shares of beneficial interest outstanding - Note 4) | $ | 18.31 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($1,682,616,025 applicable to 91,294,749 shares of beneficial interest outstanding - Note 4) | $ | 18.43 | ||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($23,550,435 applicable to 1,286,674 shares of beneficial interest outstanding - Note 4) | $ | 18.30 | ||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($1,949,591 applicable to 106,315 shares of beneficial interest outstanding - Note 4) | $ | 18.34 | ||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($3,365,518 applicable to 182,667 shares of beneficial interest outstanding - Note 4) | $ | 18.42 | ||
* 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 29
| STATEMENT OF OPERATIONS | ||
| Thornburg Investment Income Builder Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $14,936,255) | $ | 233,962,548 | ||
Non-controlled affiliated issuers | 6,852,707 | |||
Interest income (net of premium amortized of $623,021) | 124,134,299 | |||
Total Income | 364,949,554 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 34,262,770 | |||
Administration fees (Note 3) | ||||
Class A Shares | 2,091,630 | |||
Class C Shares | 2,209,293 | |||
Class I Shares | 622,126 | |||
Class R3 Shares | 22,471 | |||
Class R4 Shares | 1,138 | |||
Class R5 Shares | 859 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 4,183,260 | |||
Class C Shares | 17,674,346 | |||
Class R3 Shares | 89,687 | |||
Class R4 Shares | 2,272 | |||
Transfer agent fees | ||||
Class A Shares | 1,629,700 | |||
Class C Shares | 2,009,670 | |||
Class I Shares | 1,298,375 | |||
Class R3 Shares | 34,987 | |||
Class R4 Shares | 3,780 | |||
Class R5 Shares | 4,397 | |||
Registration and filing fees | ||||
Class A Shares | 141,450 | |||
Class C Shares | 109,725 | |||
Class I Shares | 81,671 | |||
Class R3 Shares | 17,753 | |||
Class R4 Shares | 18,584 | |||
Class R5 Shares | 21,867 | |||
Custodian fees (Note 3) | 1,027,580 | |||
Professional fees | 162,773 | |||
Accounting fees | 173,185 | |||
Trustee fees | 108,281 | |||
Other expenses | 521,624 | |||
Total Expenses | 68,525,254 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (2,182,572 | ) | ||
Net Expenses | 66,342,682 | |||
Net Investment Income | $ | 298,606,872 | ||
30 Certified Annual Report
| STATEMENT OF OPERATIONS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | Year Ended September 30, 2010 | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | ||||
Non-affiliated issuers | $ | (48,053,970 | ) | |
Non-controlled affiliated issuers | (4,498 | ) | ||
Forward currency contracts (Note 7) | (11,367,590 | ) | ||
Foreign currency transactions | 1,036,959 | |||
| (58,389,099 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | ||||
Non-affiliated issuers | 275,927,753 | |||
Non-controlled affiliated issuers | 14,489,354 | |||
Forward currency contracts (Note 7) | 6,113,032 | |||
Foreign currency translations | 543,438 | |||
| 297,073,577 | ||||
Net Realized and Unrealized Gain | 238,684,478 | |||
Net Increase in Net Assets Resulting from Operations | $ | 537,291,350 | ||
See notes to financial statements.
Certified Annual Report 31
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg Investment Income Builder Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 298,606,872 | $ | 196,665,498 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (58,389,099 | ) | (571,104,514 | ) | ||||
Increase (Decrease) in unrealized appreciation (depreciation) of investments, forward currency contracts and foreign currency translations | 297,073,577 | 646,925,555 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 537,291,350 | 272,486,539 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (105,095,569 | ) | (81,529,583 | ) | ||||
Class C Shares | (100,021,633 | ) | (77,646,832 | ) | ||||
Class I Shares | (82,223,032 | ) | (50,077,981 | ) | ||||
Class R3 Shares | (1,088,290 | ) | (760,087 | ) | ||||
Class R4 Shares | (59,426 | ) | (17,372 | ) | ||||
Class R5 Shares | (114,390 | ) | (22,654 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 529,891,266 | (9,678,354 | ) | |||||
Class C Shares | 715,272,973 | 6,320,252 | ||||||
Class I Shares | 707,722,464 | 116,899,650 | ||||||
Class R3 Shares | 7,823,039 | 2,235,374 | ||||||
Class R4 Shares | 1,799,483 | (220,497 | ) | |||||
Class R5 Shares | 2,943,638 | 199,300 | ||||||
Net Increase in Net Assets | 2,214,141,873 | 178,187,755 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 3,750,495,002 | 3,572,307,247 | ||||||
End of Year | $ | 5,964,636,875 | $ | 3,750,495,002 | ||||
Undistributed net investment income | $ | 29,915,619 | $ | 20,577,079 | ||||
See notes to financial statements.
32 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
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 sixteen 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). 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 a price 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 33
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
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, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 3,855,956,064 | $ | 3,855,956,064 | $ | — | $ | — | ||||||||
Preferred Stock(a) | 259,994,597 | 231,222,722 | 28,771,875 | — | ||||||||||||
Exchange Traded Funds | 56,056,250 | 56,056,250 | — | — | ||||||||||||
Asset Backed Securities | 20,646,212 | — | 20,646,212 | — | ||||||||||||
Corporate Bonds | 1,306,855,822 | — | 1,279,231,623 | 27,624,199 | ||||||||||||
Convertible Bonds | 192,841,332 | — | 192,841,332 | — | ||||||||||||
Municipal Bonds | 1,514,057 | — | 1,514,057 | — | ||||||||||||
U.S. Government Agencies | 12,751,599 | — | 12,751,599 | — | ||||||||||||
Foreign Bonds | 148,325,997 | — | 144,638,054 | 3,687,943 | ||||||||||||
Other Securities | 25,285,199 | — | 25,285,199 | — | ||||||||||||
Short Term Investments | 120,950,000 | — | 120,950,000 | — | ||||||||||||
Total Investments in Securities | $ | 6,001,177,129 | $ | 4,143,235,036 | $ | 1,826,629,951 | $ | 31,312,142 | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (29,328,863 | ) | $ | — | $ | (29,328,863 | ) | $ | — | ||||||
Spot Currency | $ | (86,968 | ) | $ | (86,968 | ) | $ | — | $ | — | ||||||
| (a) | Industry classifications for Preferred Stock in Level 2 consisted of $7,781,250 in Banks, $4,650,000 in REITS, and $16,340,625 in Telecommunication Services at September 30, 2010. |
| * | See Schedule of Investments for a summary of the industry exposure as grouped according to the Global Industry Classification Standard (GICS), which is an industry taxonomy developed by MSCI Barra and Standard & Poor’s (S&P). |
| ** | 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 investment. |
34 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2010, was as follows:
| Beginning Balance 9/30/2009 | Gross Purchases | Gross Sales | Net Realized Gain/(Loss) | Net Unrealized Appreciation/ (Depreciation) | Net Transfers in/(out) of Level 3(b) | Ending Balance 9/30/2010 | ||||||||||||||||||||||
Investments in Securities(a) | $ | — | $ | 16,438,165 | $ | (1,272,694 | ) | $ | 59,137 | $ | 1,364,612 | $ | 14,722,922 | $ | 31,312,142 | |||||||||||||
| (a) | Level 3 Securities represent 0.52% of Total Net Assets at the year ended September 30, 2010. |
| (b) | Transfers to Level 3 were from Level 2, and were due to a change in other significant observable inputs existing at the year ended September 30, 2010. Transfers into or out of Level 3 are based on the beginning market value of the year in which they occurred. |
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
Foreign Currency Translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities, it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute to shareholders substantially all taxable income, including any net realized gain on investments of the Fund. Therefore, no provision for federal income taxes is required.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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.
Certified Annual Report 35
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid quarterly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually. Distributions to shareholders are based on income tax regulations and therefore, their characteristics may differ for financial statement and tax purposes.
General: Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned and dividend income is recorded on the ex-dividend date. Certain income from foreign securities is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares of each class of shares at the beginning of the day (after adjusting for the current share activity of the respective class). Expenses common to all Funds are allocated among the Funds comprising the Trust based upon their relative net asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. Additionally, in the normal course of business the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown. However, based on experience, the Trust expects the risk of loss to be remote.
Use of Estimates: The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
NOTE 3 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, Thornburg Investment Management, Inc. (the “Advisor”) serves as the investment advisor and performs services to the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2010, 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, 2010, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $2,105,372 for Class C shares, $33,843 for Class R3 shares, $20,037 for Class R4 shares, and $23,320 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, 2010, the Distributor has advised the Fund that it earned commissions aggregating $1,270,308 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $170,865 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I and Class R5 shares. 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, 2010, are set forth in the Statement of Operations.
36 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
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, 2010, there were no fees paid indirectly.
Certain officers and Trustees of the Trust are also officers and/or directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 43,283,964 | $ | 770,088,645 | 23,619,565 | $ | 344,260,373 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 4,439,224 | 79,354,477 | 4,335,112 | 63,114,813 | ||||||||||||
Shares repurchased | (18,042,158 | ) | (319,573,633 | ) | (30,011,243 | ) | (417,076,271 | ) | ||||||||
Redemption fees received* | — | 21,777 | — | 22,731 | ||||||||||||
Net Increase (Decrease) | 29,681,030 | $ | 529,891,266 | (2,056,566 | ) | $ | (9,678,354 | ) | ||||||||
Class C Shares | ||||||||||||||||
Shares sold | 49,564,535 | $ | 883,762,048 | 20,018,794 | $ | 292,989,819 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 3,972,825 | 71,048,461 | 3,950,571 | 57,445,432 | ||||||||||||
Shares repurchased | (13,520,528 | ) | (239,560,490 | ) | (24,910,649 | ) | (344,138,583 | ) | ||||||||
Redemption fees received* | — | 22,954 | — | 23,584 | ||||||||||||
Net Increase (Decrease) | 40,016,832 | $ | 715,272,973 | (941,284 | ) | $ | 6,320,252 | |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 54,684,137 | $ | 981,032,227 | 25,254,006 | $ | 372,821,670 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 3,466,124 | 62,410,241 | 2,665,325 | 39,209,566 | ||||||||||||
Shares repurchased | (18,750,557 | ) | (335,736,228 | ) | (21,210,176 | ) | (295,144,783 | ) | ||||||||
Redemption fees received* | — | 16,224 | — | 13,197 | ||||||||||||
Net Increase (Decrease) | 39,399,704 | $ | 707,722,464 | 6,709,155 | $ | 116,899,650 | ||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 746,503 | $ | 13,383,203 | 421,734 | $ | 6,146,795 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 55,329 | 988,963 | 46,884 | 688,297 | ||||||||||||
Shares repurchased | (368,316 | ) | (6,549,359 | ) | (318,696 | ) | (4,599,932 | ) | ||||||||
Redemption fees received* | — | 232 | — | 214 | ||||||||||||
Net Increase (Decrease) | 433,516 | $ | 7,823,039 | 149,922 | $ | 2,235,374 | ||||||||||
Certified Annual Report 37
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 105,112 | $ | 1,826,925 | 2,542 | $ | 38,228 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,635 | 29,296 | 1,173 | 17,252 | ||||||||||||
Shares repurchased | (3,165 | ) | (56,750 | ) | (15,815 | ) | (275,982 | ) | ||||||||
Redemption fees received* | — | 12 | — | 5 | ||||||||||||
Net Increase (Decrease) | 103,582 | $ | 1,799,483 | (12,100 | ) | $ | (220,497 | ) | ||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 302,943 | $ | 5,496,684 | 40,091 | $ | 600,510 | ||||||||||
Shares issued to shareholders inreinvestment of dividends | 6,243 | 111,969 | 1,391 | 20,773 | ||||||||||||
Shares repurchased | (150,901 | ) | (2,665,036 | ) | (30,138 | ) | (421,988 | ) | ||||||||
Redemption fees received* | — | 21 | — | 5 | ||||||||||||
Net Increase (Decrease) | 158,285 | $ | 2,943,638 | 11,344 | $ | 199,300 | ||||||||||
| * | 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, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments and U.S. Government obligations) of $3,595,840,109 and $1,637,978,518, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 5,541,327,134 | ||
Gross unrealized appreciation on a tax basis | $ | 700,552,189 | ||
Gross unrealized depreciation on a tax basis | (240,702,194 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 459,849,995 | ||
Distributable earnings – ordinary income (tax basis) | $ | 41,310,220 |
At September 30, 2010, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2009 of $288,211 and $32,070,845 respectively. For tax purposes, such losses will be reflected in the year ended September 30, 2011.
38 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
At September 30, 2010, 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 carryfor-wards expire as follows:
2016 | $ | 4,262,779 | ||
2017 | 280,451,429 | |||
2018 | 493,662,779 | |||
| $ | 778,376,987 | |||
In order to account for permanent book/tax differences, the Fund increased undistributed net investment income by $2,061,030 and increased accumulated net realized investment loss by $2,061,030. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency transactions, investments in PFICs (Passive Foreign Investment Companies) and partnerships, and recharacterization of income received.
The tax character of distributions paid during the year ended September 30, 2010, and September 30, 2009, was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 288,602,340 | $ | 210,054,509 | ||||
Capital gains | — | — | ||||||
Total | $ | 288,602,340 | $ | 210,054,509 | ||||
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. This 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, 2010, 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, 2010 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. Values of open currency contracts are indicative of the activity for the year ended September 30, 2010.
Certified Annual Report 39
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
The following table displays the outstanding forward currency contracts at September 30, 2010:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2010
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||
Euro | Sell | 9,100,000 | 03/01/2011 | $ | 12,390,272 | $ | — | $ | (883,413 | ) | ||||||||||||
Euro | Sell | 253,400,000 | 10/06/2010 | 345,442,561 | — | (3,441,251 | ) | |||||||||||||||
Euro | Sell | 62,000,000 | 10/06/2010 | 84,520,279 | — | (7,834,339 | ) | |||||||||||||||
Euro | Sell | 1,328,700 | 10/06/2010 | 1,811,324 | — | (105,898 | ) | |||||||||||||||
Euro | Sell | 66,359,900 | 10/06/2010 | 90,463,827 | — | (5,921,978 | ) | |||||||||||||||
Euro | Sell | 43,100,000 | 10/06/2010 | 58,755,226 | — | (852,531 | ) | |||||||||||||||
Great Britain Pound | Sell | 16,000,000 | 10/06/2010 | 25,134,029 | — | (2,033,869 | ) | |||||||||||||||
Great Britain Pound | Sell | 2,985,600 | 10/06/2010 | 4,690,010 | — | (219,343 | ) | |||||||||||||||
Great Britain Pound | Sell | 7,100,000 | 10/06/2010 | 11,153,225 | — | (261,754 | ) | |||||||||||||||
Great Britain Pound | Sell | 19,200,000 | 10/06/2010 | 30,160,835 | — | (1,067,075 | ) | |||||||||||||||
Great Britain Pound | Sell | 6,946,500 | 10/06/2010 | 10,912,096 | — | (358,348 | ) | |||||||||||||||
Swiss Franc | Sell | 15,400,000 | 10/06/2010 | 15,672,196 | — | (1,234,741 | ) | |||||||||||||||
Swiss Franc | Sell | 72,600,000 | 10/06/2010 | 73,883,208 | — | (5,114,323 | ) | |||||||||||||||
Total | $ | — | $ | (29,328,863 | ) | |||||||||||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2010 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2010
| Liability Derivatives | ||||||
Balance Sheet Location | Fair Value | |||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (29,328,863 | ) | ||
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, 2010 are disclosed in the following tables:
Amount of Realized Gain (Loss) on Derivative Financial Instruments
Recognized in Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (11,367,590 | ) | $ | (11,367,590 | ) | ||
Change in Unrealized Appreciation (Depreciation) of Derivative Financial Instruments Recognized in Income for the Year Ended September 30, 2010
| ||||||||
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 6,113,032 | $ | 6,113,032 | ||||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class R3 shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .25% of 1%.
40 Certified Annual Report
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Certified Annual Report 41
Thornburg Investment Income Builder Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 17.38 | 1.14 | 0.90 | 2.04 | (1.11 | ) | — | (1.11 | ) | $ | 18.31 | 6.47 | 1.25 | 1.25 | 1.25 | 12.08 | 35.50 | $ | 2,018,202 | ||||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 16.86 | 1.01 | 0.58 | 1.59 | (1.07 | ) | — | (1.07 | ) | $ | 17.38 | 7.03 | 1.30 | 1.30 | 1.30 | 10.89 | 63.05 | $ | 1,400,454 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 23.35 | 1.04 | (6.04 | ) | (5.00 | ) | (1.02 | ) | (0.47 | ) | (1.49 | ) | $ | 16.86 | 5.01 | 1.25 | 1.25 | 1.25 | (22.48 | ) | 46.07 | $ | 1,393,268 | ||||||||||||||||||||||||||||||||||||
2007(b) | $ | 19.58 | 0.93 | 4.23 | 5.16 | (0.88 | ) | (0.51 | ) | (1.39 | ) | $ | 23.35 | 4.39 | 1.30 | 1.30 | 1.30 | 27.40 | 62.60 | $ | 1,697,061 | |||||||||||||||||||||||||||||||||||||||
2006(b) | $ | 17.93 | 0.78 | 1.98 | 2.76 | (0.77 | ) | (0.34 | ) | (1.11 | ) | $ | 19.58 | 4.22 | 1.38 | 1.38 | 1.38 | 16.05 | 55.29 | $ | 903,347 | |||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 17.39 | 1.03 | 0.89 | 1.92 | (1.00 | ) | — | (1.00 | ) | $ | 18.31 | 5.86 | 1.90 | 1.90 | 2.02 | 11.32 | 35.50 | $ | 2,234,953 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 16.87 | 0.92 | 0.59 | 1.51 | (0.99 | ) | — | (0.99 | ) | $ | 17.39 | 6.44 | 1.90 | 1.90 | 2.08 | 10.27 | 63.05 | $ | 1,426,613 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 23.37 | 0.90 | (6.04 | ) | (5.14 | ) | (0.89 | ) | (0.47 | ) | (1.36 | ) | $ | 16.87 | 4.36 | 1.90 | 1.90 | 2.03 | (23.02 | ) | 46.07 | $ | 1,399,947 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 19.60 | 0.81 | 4.22 | 5.03 | (0.75 | ) | (0.51 | ) | (1.26 | ) | $ | 23.37 | 3.79 | 1.90 | 1.89 | 2.06 | 26.64 | 62.60 | $ | 1,535,532 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 17.95 | 0.70 | 1.97 | 2.67 | (0.68 | ) | (0.34 | ) | (1.02 | ) | $ | 19.60 | 3.73 | 1.90 | 1.90 | 2.15 | 15.45 | 55.29 | $ | 636,947 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 17.50 | 1.22 | 0.89 | 2.11 | (1.18 | ) | — | (1.18 | ) | $ | 18.43 | 6.87 | 0.93 | 0.93 | 0.93 | 12.39 | 35.50 | $ | 1,682,616 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 16.97 | 1.07 | 0.59 | 1.66 | (1.13 | ) | — | (1.13 | ) | $ | 17.50 | 7.39 | 0.97 | 0.97 | 0.97 | 11.29 | 63.05 | $ | 908,126 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 23.50 | 1.10 | (6.06 | ) | (4.96 | ) | (1.10 | ) | (0.47 | ) | (1.57 | ) | $ | 16.97 | 5.34 | 0.89 | 0.89 | 0.89 | (22.20 | ) | 46.07 | $ | 766,772 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 19.71 | 1.02 | 4.24 | 5.26 | (0.96 | ) | (0.51 | ) | (1.47 | ) | $ | 23.50 | 4.74 | 0.95 | 0.94 | 0.95 | 27.80 | 62.60 | $ | 644,294 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 18.03 | 0.88 | 1.98 | 2.86 | (0.84 | ) | (0.34 | ) | (1.18 | ) | $ | 19.71 | 4.68 | 0.99 | 0.98 | 1.02 | 16.53 | 55.29 | $ | 308,859 | |||||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 17.38 | 1.11 | 0.88 | 1.99 | (1.07 | ) | — | (1.07 | ) | $ | 18.30 | 6.27 | 1.50 | 1.50 | 1.69 | 11.75 | 35.50 | $ | 23,550 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 16.85 | 1.00 | 0.58 | 1.58 | (1.05 | ) | — | (1.05 | ) | $ | 17.38 | 6.93 | 1.50 | 1.50 | 1.87 | 10.74 | 63.05 | $ | 14,828 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 23.34 | 1.00 | (6.05 | ) | (5.05 | ) | (0.97 | ) | (0.47 | ) | (1.44 | ) | $ | 16.85 | 4.89 | 1.49 | 1.49 | 1.77 | (22.69 | ) | 46.07 | $ | 11,848 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 19.58 | 0.86 | 4.24 | 5.10 | (0.83 | ) | (0.51 | ) | (1.34 | ) | $ | 23.34 | 4.00 | 1.50 | 1.50 | 2.16 | 27.10 | 62.60 | $ | 7,544 | |||||||||||||||||||||||||||||||||||||||
2006 | $ | 17.93 | 0.82 | 1.92 | 2.74 | (0.75 | ) | (0.34 | ) | (1.09 | ) | $ | 19.58 | 4.36 | 1.50 | 1.50 | 6.05 | 15.91 | 55.29 | $ | 1,301 | |||||||||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 17.47 | 1.22 | 0.74 | 1.96 | (1.09 | ) | — | (1.09 | ) | $ | 18.34 | 6.89 | 1.40 | 1.40 | 3.60 | 11.52 | 35.50 | $ | 1,950 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 16.94 | 1.01 | 0.59 | 1.60 | (1.07 | ) | — | (1.07 | ) | $ | 17.47 | 7.02 | 1.40 | 1.40 | 9.54 | (c) | 10.83 | 63.05 | $ | 48 | |||||||||||||||||||||||||||||||||||||||
2008(d) | $ | 21.22 | 0.66 | (4.39 | ) | (3.73 | ) | (0.55 | ) | — | (0.55 | ) | $ | 16.94 | 5.28 | (e) | 1.40 | (e) | 1.40 | (e) | 16.97 | (c)(e) | (17.79 | ) | 46.07 | $ | 251 | |||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 17.50 | 1.36 | 0.74 | 2.10 | (1.18 | ) | — | (1.18 | ) | $ | 18.42 | 7.67 | 0.99 | 0.99 | 2.35 | 12.31 | 35.50 | $ | 3,366 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 16.98 | 1.04 | 0.61 | 1.65 | (1.13 | ) | — | (1.13 | ) | $ | 17.50 | 7.14 | 0.99 | 0.99 | 9.20 | (c) | 11.19 | 63.05 | $ | 427 | |||||||||||||||||||||||||||||||||||||||
2008 | $ | 23.51 | 1.11 | (6.09 | ) | (4.98 | ) | (1.08 | ) | (0.47 | ) | (1.55 | ) | $ | 16.98 | 5.48 | 0.99 | 0.99 | 11.77 | (c) | (22.27 | ) | 46.07 | $ | 221 | |||||||||||||||||||||||||||||||||||
2007(f) | $ | 20.74 | 0.46 | 2.87 | 3.33 | (0.56 | ) | — | (0.56 | ) | $ | 23.51 | 3.17 | (e) | 0.99 | (e) | 0.98 | (e) | 278.77 | (c)(e) | 16.19 | 62.60 | $ | 72 | ||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| (d) | Effective date of this class of shares was February 1, 2008. |
| (e) | Annualized. |
| (f) | Effective date of this class of shares was February 1, 2007. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 42 Certified Annual Report | Certified Annual Report 43 |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 | |
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, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, NewYork
November 17, 2010
44 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,030.30 | $ | 6.42 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.74 | $ | 6.38 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,027.00 | $ | 9.62 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,015.58 | $ | 9.57 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,032.00 | $ | 4.82 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.32 | $ | 4.79 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,028.50 | $ | 7.62 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.58 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,029.60 | $ | 7.12 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.05 | $ | 7.08 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,031.70 | $ | 5.04 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.26%; C: 1.89%; I: 0.95%; R3: 1.50%; 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 45
| INDEX COMPARISON | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 (Unaudited) | |
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | Since Inception | ||||||||||
A Shares (Incep: 12/24/02) | 7.03 | % | 6.36 | % | 11.02 | % | ||||||
C Shares (Incep: 12/24/02) | 10.32 | % | 6.68 | % | 11.08 | % | ||||||
I Shares (Incep: 11/3/03) | 12.39 | % | 7.70 | % | 10.12 | % | ||||||
R3 Shares (Incep: 2/1/05) | 11.75 | % | 7.11 | % | 7.65 | % | ||||||
R4 Shares (Incep: 2/1/08) | 11.52 | % | — | 0.61 | % | |||||||
R5 Shares (Incep: 2/1/07) | 12.31 | % | — | 3.35 | % | |||||||
Blended Index (Since 12/24/02) | 7.50 | % | 2.85 | % | 7.04 | % | ||||||
S&P 500 Index (Since 12/24/02) | 10.16 | % | 0.64 | % | 5.30 | % | ||||||
Performance data reflects past performance, which is no guarantee of future results. The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares. Returns reflect the reinvestment of dividends and capital gains 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 composed of 25% Barclays Capital Aggregate Bond Index and 75% MSCI World Index. The Barclays Capital Aggregate Bond Index is composed of approximately 8,000 publicly traded bonds including U.S. government, mortgage-backed, corporate and Yankee bonds. The index is weighted by the market value of the bonds included in the index. The MSCI World Index is an unmanaged market-weighted index that consists of securities traded in 24 of the world’s most developed countries. Securities are listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The index is calculated with net dividends reinvested, in U.S. dollars. 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.
46 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 (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, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 65 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. | None | ||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||
Susan H. Dubin, 61 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, 56 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, 51 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 47
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 (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, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
48 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 49
| OTHER INFORMATION | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 (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, 2010, the Thornburg Investment Income Builder Fund designates 56.91% (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.
18.74% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2010 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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for the purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider a renewal of the 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 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.
50 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 (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 performance 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, and (iv) comparative measures of portfolio volatility, risk and return. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events, 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 evaluating quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment return for calendar year 2009 significantly exceeded the returns for the Fund’s blended benchmark, the S&P 500 and the world allocation mutual fund category, that the Fund’s returns exceeded the returns of the blended benchmark and the fund category in five of the six preceding calendar years, and exceeded the returns of the S&P 500 in each of the six preceding calendar years. The quantitative information presented also demonstrated to the Trustees that the Fund’s returns fell at or near the median of the fund category for the three-month and three-year periods ended with the second quarter of the current year, fell within or near the top quartile of the category for the year-to-date and five year periods, and fell within the top decile of the category for the one-year period. The Trustees considered 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 considered the Fund’s higher historical cumulative return (net of expenses) relative to the Fund’s blended benchmark since the Fund’s inception.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services were sufficient and that the Advisor had satisfactorily pursued the Fund’s stated investment objectives. The Trustees further concluded that the investment performance of the Fund was satisfactory in the context of the Fund’s objectives and policies, and prevailing market conditions.
Fees and Expenses; Profitability of Advisor; Economies of Scale; Ancillary Benefits to Advisor. The Trustees evaluated the level of the management fee charged by the Advisor to the Fund, and in this connection, reviewed the profitability of the Advisor, economies of scale potentially available to the Fund and whether the Advisor had 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, and 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. 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 fund analyst firm, that the management fee was somewhat higher than the median and average fee rates for the same group of equity income mutual funds, and 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 confirmed their previous observations 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 51
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Investment Income Builder Fund | September 30, 2010 (Unaudited) | |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms, 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 the adequacy of the Advisor’s resources and 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.
52 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
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 Developing World 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. 55
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 Developing World 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 | You invest in the future, without spending a dime. | |||||
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Important Information
The information presented on the following pages was current as of September 30, 2010. 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. Funds invested in a limited number of holdings may expose an investor to greater volatility.
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
MSCI All Country (AC) World Index – A market capitalization weighted index that 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.
This page is not part of the Annual Report. 3
Thornburg Global Opportunities Fund
CO-PORTFOLIO MANAGERS
W. Vinson Walden,CFA, and Brian McMahon
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 1.55%, as disclosed in the most recent Prospectus.
Investment fads come and go, and the landscape is littered with funds that 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 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 9/30/10
| 1 Yr | 3 Yr | Since Incep | ||||||||||
A Shares (Incep: 7/28/06) | ||||||||||||
Without sales charge | 7.98 | % | -8.20 | % | 6.76 | % | ||||||
With sales charge | 3.10 | % | -9.61 | % | 5.60 | % | ||||||
MSCI AC World Index | ||||||||||||
(Since: 7/28/06) | 8.42 | % | -7.48 | % | 0.45 | % | ||||||
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 77% of category assets are concentrated in ten funds, and the average world stock fund holds approximately 147 stocks (as of 9/30/10).
Thornburg Global Opportunities Fund is different, in that it will typically be focused in 30–40 stocks which the management team feels have the best combination of promise and discount. Each stock is analyzed 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 can be effective over the long term.
STOCKS CONTRIBUTING AND DETRACTING
FOR THE YEAR ENDED 9/30/10
Top Contributors | Top Detractors | |
| KKR Financial Holdings LLC | Bank of America Corp. | |
| Apollo Investment Corp. | Dell, Inc. | |
| Fly Leasing Ltd. ADR | Hartford Financial Svcs. Group, Inc. | |
| Ensco plc ADR | Global Crossing Ltd. | |
| BRF-Brasil Foods SA | United States Steel Corp. | |
| Source: FactSet | ||
KEY PORTFOLIO ATTRIBUTES
As of 9/30/10
Portfolio P/E Trailing 12-months* | 12.9x | |||
Portfolio Price to Cash Flow* | 6.0x | |||
Portfolio Price to Book Value* | 1.2x | |||
Median Market Cap* | $ | 6.4 B | ||
3-Year Beta (A Shares vs. MSCI AC World)* | 1.12 | |||
Number of Holdings | 33 | |||
| * | Source: FactSet |
MARKET CAPITALIZATION EXPOSURE
As of 9/30/10
PORTFOLIO COMPOSITION
As of 9/30/10
This page is not part of the Annual Report. 5
Thornburg Global Opportunities Fund
September 30, 2010
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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 18, 2010
Dear Fellow Shareholder:
This letter will highlight the results of Thornburg Global Opportunities Fund’s investment activities for the six- and twelvemonth periods ended September 30, 2010.
For the fiscal year ended September 30, the Fund’s net asset value (NAV) per share increased by 88 cents. Total return for the Class A shares for the fiscal year was 7.98%, taking into account income dividends paid of over 16 cents per share, reinvested in Fund shares. The dividends per share were higher for I, R3, R4, and R5 shares, and lower on the C shares, to account for varying class-specific expenses. In the six months ended September 30, 2010, Thornburg Global Opportunities Fund net asset value per A share decreased 4.70% from $14.67 to $13.98. The Fund paid dividends of 10 cents per share to give a total return for the six-month period of negative 4.02%.
Performance comparisons of Global Opportunities Fund to the MSCI All Country (AC) World Index over various time periods are shown on page 32. The performance of the Fund has compared well to its benchmark over most time periods since its inception in July of 2006. We trailed by 0.44% for the twelve-month period ended September 30, 2010, mostly due to lagging the MSCI AC World Index’s 14.35% gain in the September quarter. Since its inception on July 28, 2006, Thornburg Global Opportunities Fund has outperformed the same index by an average annualized margin of 6.31%.
We do not expect to pay any capital gain for 2010. At September 30, 2010, the Fund had tax basis realized capital losses of approximately $210 million, which may be carried forward to offset future capital gains to the extent permitted by regulations.
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 AC World Index over the year ended September 30, 2010, because this is our global performance benchmark:
| 1. | Nine sectors (consumer discretionary, consumer staples, energy, health care, industrials, information technology, materials, telecommunications, and utilities) showed positive total returns, with a range of +21% (consumer discretionary) to +1.8% (utilities). |
| 2. | One sector (financials) showed a total return of negative 1.0%. |
| 3. | In the Global Opportunities portfolio, returns from 29 of our investments were positive during the year ended September 30, 2010, 22 were negative, and one was flat. |
| 4. | The Fund’s investments in firms in the financials (36%), telecommunications (12%), and information technology (11%) sectors comprised the largest sector weightings in the Fund portfolio. Average returns of the Fund’s holdings in these sectors were 10.6%, 4.4%, and negative 4.4%, respectively, during the year. |
Certified Annual Report 7
Letter to Shareholders,
Continued
| 5. | Your Fund’s average return from its investments in the financials sector was 10.6% for the fiscal year, well above the negative 1.0% performance of the equities in the financials sector of the MSCI AC World Index. Our investment choices in the financials sector ended up being the most positive driver of performance vis-à-vis the benchmark for the year ended September 30, 2010. Among the best contributing investments to portfolio performance from this sector were corporate leveraged loan investor KKR Financial Holdings, business development company Apollo Investment, Dutch banking and insurance giant ING Groep, regional bank Fifth Third Bancorp, and commercial insurance broker Willis Group. The Fund’s investments in Bank of America Corp., Hartford Financial Services Group, Erste Bank, and Verwaltungs und Privat Bank were among the negative performers in the portfolio, particularly in the second half of the fiscal year when your Fund’s relative performance lagged the index. A growing expectation that interest rates will remain “lower for longer” in the United States and Europe caused near-term earnings estimates for several of our financial holdings to be reduced during the September quarter. Most of these investments are valued in the public markets at below normal multiples of book value. |
| 6. | Among our information technology investments, Dell and Microsoft weighed down portfolio performance relative to the index, while Google and Amdocs failed to deliver strong enough positive returns to overcome the drag. Interestingly, most of these had modest upward revisions in current-year earnings estimates over the course of 2010. Consensus 2011 earnings estimates for all four of these firms were revised upward as well. |
| 7. | Among your Fund’s holdings in the telecommunications sector, wireless infrastructure provider Crown Castle International delivered strong positive performance while fiber network operator Global Crossing declined. |
| 8. | Your Fund’s holdings in the energy sector outperformed those of the index during the fiscal year, showing strength late in the period. Offshore drillers Ensco and Transocean (added to the portfolio during the second half of the year) and made strong performance contributions. Russian gas giant Gazprom, global onshore driller Ensign Energy Services, and Italy’s Eni were Fund holdings that produced negative returns for the period. |
| 9. | Among other portfolio holdings, the following were leading contributors from other sectors: railcar and barge manufacturer Trinity Industries; Brazilian food company BRF-Brasil Foods; aircraft lessor Fly Leasing; and pharmaceutical producer Teva Pharmaceutical Industries. Steel producers United States Steel Corp. and Japan’s Tokyo Steel each burdened the portfolio with negative total returns within a strong global materials sector as reduced revenue and earnings outlooks for steel producers developed over the course of 2010. |
At September 30, 2010, domestic stocks comprised approximately 42% of your portfolio, foreign stocks around 56%, and cash and interest-bearing debt the remaining 2%. We have hedged more than 50% of the currency risk associated with our euro equity holdings (~9.5% of the portfolio). We have also hedged a majority of our modest exposure to the Japanese yen (<2% of the portfolio). For now, we do not hedge the currency risk of our Australian dollar, Canadian dollar, and non-yen Asian currency denominated equity holdings.
The average price/earnings multiple of the 33 stocks in your portfolio on September 30, 2010 was 10.8x on an estimated forward basis, using estimates provided by FactSet and IBES. For comparative reference, the forward price/earnings multiples of the MSCI All Country World Index was approximately 11.7x, using estimates compiled by Bloomberg.
8 Certified Annual Report
Industry weightings, country weightings, and the top equity holdings of Global Opportunities Fund are summarized on page ten of this report.
We have experienced well-above-average financial market volatility over the last two years. Investment bank Credit Suisse points out that the average number of quarters with a return of greater than positive 10% or less than negative 10% in each of the last six decades is just below eight per decade. There are 40 quarters per decade. In six of the last eight calendar quarters, the returns to the S&P 500 Index have been either less than negative 10%, or greater than positive 10%. In the June 2010 quarter, prices of stocks and bonds broadly declined on investor concerns about Greece, China, Europe, a sluggish jobs picture in the United States, and receding expectations regarding the strength of an economic recovery. In the September quarter, equity prices generally recovered as worries about economic growth in Europe and developing markets receded. Lingering concerns about the U.S. economy were expressed in currency depreciation, even as domestic stock prices broadly rallied.
Thank you for being a shareholder of Thornburg Global Opportunities Fund. As the calendar year draws to a close, last year’s global recession has given way to positive economic growth, which is expected to persist during 2011. 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, once they come through the current economic challenges with their competitive positions intact or improved.
Remember that you can review descriptions of many of the stocks in your portfolio on our internet site, www.thornburg.com/funds. Best wishes for a wonderful holiday season and New Year.
| Sincerely, | ||
 |  | |
| Brian McMahon | W. Vinson Walden,CFA | |
| Co-Portfolio Manager | Co-Portfolio Manager | |
| CEO & Chief Investment Officer | Managing Director | |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 9
| SCHEDULE OF INVESTMENTS | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
TOP TEN HOLDINGS
As of 9/30/10
Global Crossing Ltd. | 5.0 | % | Willis Group Holdings plc | 4.2 | % | |||||
BRF-Brasil Foods SA | 4.8 | % | Fifth Third Bancorp Pfd, 8.50% | 4.0 | % | |||||
Dell, Inc. | 4.3 | % | Ensign Energy Services, Inc. | 3.8 | % | |||||
KKR Financial Holdings LLC | 4.3 | % | Fly Leasing Ltd. ADR | 3.8 | % | |||||
ING Groep N.V. | 4.3 | % | Ensco plc ADR | 3.6 | % |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/10
Diversified Financials | 17.3 | % | Pharmaceuticals, Biotechnology & Life Sciences | 5.1 | % | |||||
Energy | 11.8 | % | Materials | 4.9 | % | |||||
Telecommunication Services | 10.5 | % | Food, Beverage & Tobacco | 4.8 | % | |||||
Banks | 10.0 | % | Technology Hardware & Equipment | 4.3 | % | |||||
Capital Goods | 9.6 | % | Food & Staples Retailing | 2.3 | % | |||||
Insurance | 9.6 | % | Other Assets & Cash Equivalents | 1.6 | % | |||||
Software & Services | 8.2 | % |
SUMMARY OF COUNTRY EXPOSURE
As of 9/30/10 (percent of equity holdings)
United States | 42.7 | % | Ireland | 3.8 | % | |||||
Switzerland | 10.5 | % | Australia | 3.6 | % | |||||
United Kingdom | 10.0 | % | Israel | 3.6 | % | |||||
Bermuda | 5.1 | % | China | 2.5 | % | |||||
Brazil | 4.8 | % | Japan | 2.3 | % | |||||
Netherlands | 4.4 | % | Italy | 1.6 | % | |||||
Canada | 3.8 | % | Hong Kong | 1.3 | % |
10 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 92.66% | ||||||||
BANKS — 4.24% | ||||||||
COMMERCIAL BANKS — 4.24% | ||||||||
China Merchants Bank Co., Ltd. | 696,541 | $ | 1,795,475 | |||||
Liechtensteinische Landesbank AG | 171,078 | 11,507,918 | ||||||
a,bSterling Financial Corp. | 2,400,000 | 480,000 | ||||||
| 13,783,393 | ||||||||
CAPITAL GOODS — 9.64% | ||||||||
AEROSPACE & DEFENSE — 3.23% | ||||||||
bSpirit Aerosystems Holdings, Inc. | 526,900 | 10,501,117 | ||||||
MACHINERY — 2.65% | ||||||||
Trinity Industries, Inc. | 385,521 | 8,585,553 | ||||||
TRADING COMPANIES & DISTRIBUTORS — 3.76% | ||||||||
Fly Leasing Ltd. ADR | 925,113 | 12,211,491 | ||||||
| 31,298,161 | ||||||||
DIVERSIFIED FINANCIALS — 17.36% | ||||||||
CAPITAL MARKETS — 5.66% | ||||||||
Apollo Investment Corp. | 1,086,453 | 11,114,414 | ||||||
Verwaltungs und Privat Bank AG | 72,200 | 7,274,004 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 11.70% | ||||||||
Bank of America Corp. | 772,400 | 10,126,164 | ||||||
bING Groep N.V. | 1,341,700 | 13,919,245 | ||||||
KKR Financial Holdings LLC | 1,590,600 | 13,965,467 | ||||||
| 56,399,294 | ||||||||
ENERGY — 11.80% | ||||||||
ENERGY EQUIPMENT & SERVICES — 10.24% | ||||||||
Ensco plc ADR | 263,500 | 11,786,355 | ||||||
Ensign Energy Services, Inc. | 997,900 | 12,249,468 | ||||||
bTransocean Ltd. | 143,600 | 9,232,044 | ||||||
OIL, GAS & CONSUMABLE FUELS — 1.56% | ||||||||
Eni S.p.A. | 234,400 | 5,058,411 | ||||||
| 38,326,278 | ||||||||
FOOD & STAPLES RETAILING — 2.31% | ||||||||
FOOD & STAPLES RETAILING — 2.31% | ||||||||
Walgreen Co. | 224,000 | 7,504,000 | ||||||
| 7,504,000 | ||||||||
FOOD, BEVERAGE & TOBACCO — 4.76% | ||||||||
FOOD PRODUCTS — 4.76% | ||||||||
BRF-Brasil Foods SA | 1,015,300 | 15,451,522 | ||||||
| 15,451,522 | ||||||||
INSURANCE — 9.56% | ||||||||
INSURANCE — 9.56% | ||||||||
Hartford Financial Services Group, Inc. | 337,700 | 7,750,215 | ||||||
Swiss Re | 222,450 | 9,754,613 | ||||||
Willis Group Holdings plc | 439,800 | 13,554,636 | ||||||
| 31,059,464 | ||||||||
Certified Annual Report 11
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
MATERIALS — 4.90% | ||||||||
CONSTRUCTION MATERIALS — 1.24% | ||||||||
bChina Resources Cement | 6,840,000 | $ | 4,028,793 | |||||
METALS & MINING — 3.66% | ||||||||
Tokyo Steel Manufacturing Co., Ltd. | 628,000 | 7,409,918 | ||||||
United States Steel Corp. | 102,234 | 4,481,939 | ||||||
| 15,920,650 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 5.11% | ||||||||
PHARMACEUTICALS — 5.11% | ||||||||
Roche Holding AG | 36,500 | 4,984,786 | ||||||
Teva Pharmaceutical Industries Ltd. ADR | 219,930 | 11,601,308 | ||||||
| 16,586,094 | ||||||||
SOFTWARE & SERVICES — 8.19% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 2.02% | ||||||||
bAmdocs Ltd. | 229,425 | 6,575,321 | ||||||
INTERNET SOFTWARE & SERVICES — 3.31% | ||||||||
bGoogle, Inc. | 20,450 | 10,752,405 | ||||||
SOFTWARE — 2.86% | ||||||||
Microsoft Corp. | 379,400 | 9,291,506 | ||||||
| 26,619,232 | ||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 4.30% | ||||||||
COMPUTERS & PERIPHERALS — 4.30% | ||||||||
bDell, Inc. | 1,077,700 | 13,966,992 | ||||||
| 13,966,992 | ||||||||
TELECOMMUNICATION SERVICES — 10.49% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 8.57% | ||||||||
bGlobal Crossing Ltd. | 1,257,607 | 16,172,826 | ||||||
Telstra Corp. Ltd. | 4,602,300 | 11,654,681 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 1.92% | ||||||||
China Mobile Ltd. | 609,000 | 6,240,036 | ||||||
| 34,067,543 | ||||||||
TOTAL COMMON STOCK (Cost $287,031,253) | 300,982,623 | |||||||
PREFERRED STOCK — 5.72% | ||||||||
BANKS — 5.72% | ||||||||
COMMERCIAL BANKS — 5.72% | ||||||||
Fifth Third Bancorp Pfd, 8.50% | 101,600 | 13,066,776 | ||||||
a,bSterling Financial Corp. Pfd 0.00% | 60,000 | 5,520,000 | ||||||
| 18,586,776 | ||||||||
TOTAL PREFERRED STOCK (Cost $8,263,464) | 18,586,776 | |||||||
12 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
SHORT TERM INVESTMENTS — 2.12% | ||||||||
Kinder Morgan Energy, 0.50%, 10/1/2010 | $ | 6,900,000 | $ | 6,900,000 | ||||
TOTAL SHORT TERM INVESTMENTS (Cost $6,900,000) | 6,900,000 | |||||||
TOTAL INVESTMENTS — 100.50% (Cost $302,194,717) | $ | 326,469,399 | ||||||
LIABILITIES NET OF OTHER ASSETS — (0.50)% | (1,635,237 | ) | ||||||
NET ASSETS — 100.00% | $ | 324,834,162 | ||||||
Footnote Legend
| a | Security currently fair valued by the valuation and pricing committee using procedures approved by the Trustees. |
| b | Non-income producing. |
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, 2010 | |
ASSETS | ||||
Investments at value (cost $302,194,717) (Note 2) | $ | 326,469,399 | ||
Cash | 385,754 | |||
Cash denominated in foreign currency (cost $29,274) | 31,183 | |||
Receivable for fund shares sold | 465,755 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 125,760 | |||
Dividends receivable | 663,559 | |||
Dividend and interest reclaim receivable | 80,293 | |||
Prepaid expenses and other assets | 45,639 | |||
Total Assets | 328,267,342 | |||
LIABILITIES | ||||
Payable for fund shares redeemed | 556,260 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 2,387,472 | |||
Payable to investment advisor and other affiliates (Note 3) | 281,155 | |||
Accounts payable and accrued expenses | 205,881 | |||
Dividends payable | 2,412 | |||
Total Liabilities | 3,433,180 | |||
NET ASSETS | $ | 324,834,162 | ||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (2,097,778 | ) | |
Net unrealized appreciation on investments | 22,022,838 | |||
Accumulated net realized gain (loss) | (212,470,539 | ) | ||
Net capital paid in on shares of beneficial interest | 517,379,641 | |||
| $ | 324,834,162 | |||
14 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($92,926,645 applicable to 6,648,938 shares of beneficial interest outstanding - Note 4) | $ | 13.98 | ||
Maximum sales charge, 4.50% of offering price | 0.66 | |||
Maximum offering price per share | $ | 14.64 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($82,139,353 applicable to 5,940,156 shares of beneficial interest outstanding - Note 4) | $ | 13.83 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($131,891,740 applicable to 9,414,114 shares of beneficial interest outstanding - Note 4) | $ | 14.01 | ||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($151,449 applicable to 10,873 shares of beneficial interest outstanding - - Note 4) | $ | 13.93 | ||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($1,345,217 applicable to 96,745 shares of beneficial interest outstanding - Note 4) | $ | 13.90 | ||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($16,379,758 applicable to 1,168,314 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.
Certified Annual Report 15
| STATEMENT OF OPERATIONS | ||
| Thornburg Global Opportunities Fund | Year Ended September 30, 2010 | |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $249,880) | $ | 7,417,482 | ||
Interest income | 966,880 | |||
Total Income | 8,384,362 | |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 2,642,532 | |||
Administration fees (Note 3) | ||||
Class A Shares | 115,032 | |||
Class C Shares | 104,564 | |||
Class I Shares | 60,436 | |||
Class R3 Shares | 79 | |||
Class R4 Shares | 1,572 | |||
Class R5 Shares | 2,067 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 229,938 | |||
Class C Shares | 836,509 | |||
Class R3 Shares | 278 | |||
Class R4 Shares | 3,144 | |||
Transfer agent fees | ||||
Class A Shares | 105,795 | |||
Class C Shares | 148,048 | |||
Class I Shares | 201,115 | |||
Class R3 Shares | 1,276 | |||
Class R4 Shares | 6,432 | |||
Class R5 Shares | 7,930 | |||
Registration and filing fees | ||||
Class A Shares | 19,113 | |||
Class C Shares | 18,710 | |||
Class I Shares | 18,365 | |||
Class R3 Shares | 17,976 | |||
Class R4 Shares | 18,182 | |||
Class R5 Shares | 18,077 | |||
Custodian fees (Note 3) | 114,955 | |||
Professional fees | 64,842 | |||
Accounting fees | 10,908 | |||
Trustee fees | 7,138 | |||
Other expenses | 49,371 | |||
Total Expenses | 4,824,384 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (309,685 | ) | ||
Net Expenses | 4,514,699 | |||
Net Investment Income | $ | 3,869,663 | ||
16 Certified Annual Report
| STATEMENT OF OPERATIONS, CONTINUED | ||
| Thornburg Global Opportunities Fund | Year Ended September 30, 2010 | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 37,656,187 | ||
Forward currency contracts (Note 7) | 481,222 | |||
Foreign currency transactions | (31,495 | ) | ||
| 38,105,914 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (20,540,677 | ) | ||
Forward currency contracts (Note 7) | (717,621 | ) | ||
Foreign currency translations | (1,775 | ) | ||
| (21,260,073 | ) | |||
Net Realized and Unrealized Gain | 16,845,841 | |||
Net Increase in Net Assets Resulting from Operations | $ | 20,715,504 | ||
See notes to financial statements.
Certified Annual Report 17
| STATEMENTS OF CHANGES IN NET ASSETS | ||
| Thornburg Global Opportunities Fund | ||
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 3,869,663 | $ | 7,339,482 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | 38,105,914 | (213,882,637 | ) | |||||
Increase (Decrease) in unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | (21,260,073 | ) | 170,184,097 | |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 20,715,504 | (36,359,058 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (1,057,336 | ) | (4,810,423 | ) | ||||
Class C Shares | (302,170 | ) | (3,391,652 | ) | ||||
Class I Shares | (2,033,417 | ) | (6,293,149 | ) | ||||
Class R3 Shares | (1,467 | ) | (1,185 | ) | ||||
Class R4 Shares | (16,293 | ) | (17,979 | ) | ||||
Class R5 Shares | (178,405 | ) | (1,340 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 5,589,247 | (50,588,757 | ) | |||||
Class C Shares | (4,319,558 | ) | (12,146,667 | ) | ||||
Class I Shares | 18,072,732 | (31,514,614 | ) | |||||
Class R3 Shares | 127,094 | (5,789 | ) | |||||
Class R4 Shares | 21,801 | 1,132,663 | ||||||
Class R5 Shares | 16,091,131 | 77,340 | ||||||
Net Increase (Decrease) in Net Assets | 52,708,863 | (143,920,610 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 272,125,299 | 416,045,909 | ||||||
End of Year | $ | 324,834,162 | $ | 272,125,299 | ||||
See notes to financial statements.
18 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
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 sixteen 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). 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 a price 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, 2010 | |
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, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock(a) | $ | 300,982,623 | $ | 300,502,623 | $ | — | $ | 480,000 | ||||||||
Preferred Stock(a) | 18,586,776 | 13,066,776 | — | 5,520,000 | ||||||||||||
Short Term Investments | 6,900,000 | — | 6,900,000 | — | ||||||||||||
Total Investments in Securities | $ | 326,469,399 | $ | 313,569,399 | $ | 6,900,000 | $ | 6,000,000 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 125,760 | $ | — | $ | 125,760 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (2,387,472 | ) | $ | — | $ | (2,387,472 | ) | $ | — | ||||||
| (a) | Industry classifications for Level 3 valuations consisted of $480,000 in Common Stock and $5,520,000 in Preferred Stock, both in Banks at September 30, 2010. |
| * | See Schedule of Investments for a summary of the industry exposure as grouped according to the Global Industry Classification Standard (GICS), which is an industry taxonomy developed by MSCI Barra and Standard & Poor’s (S&P). |
| ** | 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 investment. |
20 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2010, was as follows:
| Beginning Balance 9/30/2009 | Gross Purchases (b) | Gross Sales | Net Realized Gain/(Loss) | Net Unrealized Appreciation/ (Depreciation) | Net Transfers in/(out) of Level 3 | Ending Balance 9/30/2010 | ||||||||||||||||||||||
Investments in Securities(a) | $ | — | $ | 6,000,000 | $ | — | $ | — | $ | — | $ | — | $ | 6,000,000 | ||||||||||||||
| (a) | Level 3 Securities represent 1.85% of Total Net Assets at the year ended September 30, 2010. |
| (b) | Assets valued using Level 3 inputs consisted of purchases of unregistered stock during the year ended September 30, 2010. |
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the year ended September 30, 2010.
Foreign Currency Translation: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the translation date. When the Fund purchases or sells foreign securities, it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute to shareholders substantially all taxable income, including any net realized gain on investments of the Fund. Therefore, no provision for federal income taxes is required.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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.
Certified Annual Report 21
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
Dividends: Dividends to shareholders, if any, 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, 2010, 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, 2010, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $239,770 for Class I shares, $19,290 for Class R3 shares, $23,759 for Class R4 shares, and $26,866 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, 2010, the Distributor has advised the Fund that it earned commissions aggregating $23,486 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $5,543 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. For the year ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I and Class R5 shares. 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, 2010, are set forth in the Statement of Operations.
22 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
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, 2010, there were no fees paid indirectly.
Certain officers and Trustees of the Trust are also officers and/or directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,932,225 | $ | 26,869,017 | 3,316,626 | $ | 31,636,505 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 64,470 | 884,066 | 427,591 | 4,308,199 | ||||||||||||
Shares repurchased | (1,630,246 | ) | (22,166,671 | ) | (9,418,047 | ) | (86,535,753 | ) | ||||||||
Redemption fees received* | — | 2,835 | — | 2,292 | ||||||||||||
Net Increase (Decrease) | 366,449 | $ | 5,589,247 | (5,673,830 | ) | $ | (50,588,757 | ) | ||||||||
Class C Shares | ||||||||||||||||
Shares sold | 896,157 | $ | 12,294,052 | 1,742,187 | $ | 17,178,589 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 18,260 | 245,234 | 270,067 | 2,759,411 | ||||||||||||
Shares repurchased | (1,248,317 | ) | (16,861,356 | ) | (3,446,600 | ) | (32,086,524 | ) | ||||||||
Redemption fees received* | — | 2,512 | — | 1,857 | ||||||||||||
Net Increase (Decrease) | (333,900 | ) | $ | (4,319,558 | ) | (1,434,346 | ) | $ | (12,146,667 | ) | ||||||
Class I Shares | ||||||||||||||||
Shares sold | 3,274,574 | $ | 45,532,091 | 2,831,034 | $ | 30,394,273 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 133,385 | 1,837,387 | 548,896 | 5,653,896 | ||||||||||||
Shares repurchased | (2,151,068 | ) | (29,300,502 | ) | (6,680,462 | ) | (67,565,461 | ) | ||||||||
Redemption fees received* | — | 3,756 | — | 2,678 | ||||||||||||
Net Increase (Decrease) | 1,256,891 | $ | 18,072,732 | (3,300,532 | ) | $ | (31,514,614 | ) | ||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 9,552 | $ | 130,546 | 1,290 | $ | 13,314 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 98 | 1,351 | 120 | 1,185 | ||||||||||||
Shares repurchased | (328 | ) | (4,806 | ) | (2,484 | ) | (20,289 | ) | ||||||||
Redemption fees received* | — | 3 | — | 1 | ||||||||||||
Net Increase (Decrease) | 9,322 | $ | 127,094 | (1,074 | ) | $ | (5,789 | ) | ||||||||
Certified Annual Report 23
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
| Year Ended September 30, 2010 | Year Ended September 30, 2009 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 11,897 | $ | 163,293 | 93,846 | $ | 1,114,683 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,193 | 16,293 | 1,401 | 17,979 | ||||||||||||
Shares repurchased | (11,780 | ) | (157,823 | ) | — | — | ||||||||||
Redemption fees received* | — | 38 | — | 1 | ||||||||||||
Net Increase (Decrease) | 1,310 | $ | 21,801 | 95,247 | $ | 1,132,663 | ||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 1,156,994 | $ | 16,024,177 | 6,281 | $ | 76,001 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 12,827 | 178,404 | 106 | 1,339 | ||||||||||||
Shares repurchased | (8,074 | ) | (111,608 | ) | — | — | ||||||||||
Redemption fees received* | — | 158 | — | — | ||||||||||||
Net Increase (Decrease) | 1,161,747 | $ | 16,091,131 | 6,387 | $ | 77,340 | ||||||||||
| * | 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, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $227,861,767 and $188,696,739, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 311,001,744 | ||
Gross unrealized appreciation on a tax basis | $ | 34,934,400 | ||
Gross unrealized depreciation on a tax basis | (19,466,745 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 15,467,655 | ||
Distributable earnings – ordinary income (tax basis) | $ | 1,796,747 |
At September 30, 2010, the Fund had deferred tax basis currency losses occurring subsequent to October 31, 2009 of $30,821. For tax purposes, such losses will be reflected in the year ending September 30, 2011.
At September 30, 2010, 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.
24 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
Such loss carryforwards expire as follows:
2016 | $ | 88,134 | ||
2017 | 68,696,690 | |||
2018 | 140,977,215 | |||
| $ | 209,762,039 | |||
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $1,303,454, decreased accumulated net realized investment loss by $3,086,164 and increased distribution in excess of net investment income by $1,782,710. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains/losses, recharacterization of income from certain investments, and a disposition of a partnership investment.
The tax character of distributions paid during the year ended September 30, 2010 was as follows:
| 2010 | 2009 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 3,589,088 | $ | 14,515,728 | ||||
Capital gains | — | — | ||||||
Total distributions | $ | 3,589,088 | $ | 14,515,728 | ||||
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. This 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, 2010, 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, 2010 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. Values of open currency contracts are indicative of the activity for the year ended September 30, 2010.
Certified Annual Report 25
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 | |
The following table displays the outstanding forward currency contracts at September 30, 2010:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2010
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||
Euro | Sell | 9,575,400 | 02/23/2011 | $ | 13,038,302 | $ | — | $ | (697,287 | ) | ||||||||||||
Euro | Buy | 559,500 | 02/23/2011 | 761,841 | 51,119 | — | ||||||||||||||||
Japanese Yen | Sell | 543,205,300 | 12/09/2010 | 6,511,214 | — | (584,195 | ) | |||||||||||||||
Japanese Yen | Buy | 72,456,500 | 12/09/2010 | 868,511 | 11,068 | — | ||||||||||||||||
Swiss Franc | Sell | 15,700,000 | 10/06/2010 | 15,977,498 | — | (1,105,990 | ) | |||||||||||||||
Swiss Franc | Buy | 1,545,600 | 10/06/2010 | 1,572,919 | 63,573 | — | ||||||||||||||||
Total | $ | 125,760 | $ | (2,387,472 | ) | |||||||||||||||||
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2010 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2010
Asset Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 125,760 | |||
Liability Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (2,387,472 | ) | ||
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, 2010 are disclosed in the following tables:
Amount of Realized Gain (Loss)
on Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 481,222 | $ | 481,222 | ||||
Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2010
| Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (717,621 | ) | $ | (717,621 | ) | ||
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued. Effective October 1, 2010, the distribution plan applicable to Class R3 shares of the Fund has been amended by action of the Trustees to reduce the compensation payable under the plan to an annual rate of .25% of 1%.
26 Certified Annual Report
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Certified Annual Report 27
Thornburg Global Opportunities Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Period | Net Invest- ment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Invest- ment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 13.10 | 0.18 | 0.86 | 1.04 | (0.16 | ) | — | (0.16 | ) | $ | 13.98 | 1.29 | 1.47 | 1.47 | 1.47 | 7.98 | 66.27 | $ | 92,927 | ||||||||||||||||||||||||||||||||||||||||
2009(b) | $ | 13.38 | 0.29 | 0.03 | 0.32 | (0.60 | ) | — | (0.60 | ) | $ | 13.10 | 2.96 | 1.53 | 1.52 | 1.55 | 3.60 | 103.02 | $ | 82,309 | ||||||||||||||||||||||||||||||||||||||||
2008(b) | $ | 20.06 | 0.30 | (6.30 | ) | (6.00 | ) | (0.14 | ) | (0.54 | ) | (0.68 | ) | $ | 13.38 | 1.68 | 1.50 | 1.49 | 1.50 | (30.85 | ) | 83.70 | $ | 159,996 | ||||||||||||||||||||||||||||||||||||
2007(b) | $ | 12.86 | 0.07 | 7.29 | 7.36 | — | (c) | (0.16 | ) | (0.16 | ) | $ | 20.06 | 0.41 | 1.51 | 1.50 | 1.55 | 57.75 | 91.02 | $ | 262,475 | |||||||||||||||||||||||||||||||||||||||
2006(b)(d) | $ | 11.94 | 0.01 | 0.91 | 0.92 | — | — | — | $ | 12.86 | 0.34 | (e) | 1.70 | (e) | 1.63 | (e) | 6.12 | (e)(f) | 7.71 | 6.08 | $ | 8,477 | ||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 12.96 | 0.07 | 0.85 | 0.92 | (0.05 | ) | — | (0.05 | ) | $ | 13.83 | 0.48 | 2.28 | 2.28 | 2.28 | 7.10 | 66.27 | $ | 82,139 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.22 | 0.23 | 0.01 | 0.24 | (0.50 | ) | — | (0.50 | ) | $ | 12.96 | 2.36 | 2.31 | 2.31 | 2.35 | 2.79 | 103.02 | $ | 81,334 | ||||||||||||||||||||||||||||||||||||||||
2008 | $ | 19.87 | 0.17 | (6.24 | ) | (6.07 | ) | (0.04 | ) | (0.54 | ) | (0.58 | ) | $ | 13.22 | 0.97 | 2.25 | 2.24 | 2.25 | (31.38 | ) | 83.70 | $ | 101,908 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 12.84 | (0.06 | ) | 7.25 | 7.19 | — | (0.16 | ) | (0.16 | ) | $ | 19.87 | (0.34 | ) | 2.28 | 2.28 | 2.33 | 56.48 | 91.02 | $ | 107,298 | ||||||||||||||||||||||||||||||||||||||
2006(d) | $ | 11.94 | (0.01 | ) | 0.91 | 0.90 | — | — | — | $ | 12.84 | (0.40 | )(e) | 2.41 | (e) | 2.35 | (e) | 9.01 | (e)(f) | 7.54 | 6.08 | $ | 3,505 | |||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.13 | 0.24 | 0.87 | 1.11 | (0.23 | ) | — | (0.23 | ) | $ | 14.01 | 1.78 | 0.99 | 0.99 | 1.19 | 8.48 | 66.27 | $ | 131,892 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.45 | 0.37 | (0.01 | ) | 0.36 | (0.68 | ) | — | (0.68 | ) | $ | 13.13 | 3.65 | 0.99 | 0.99 | 1.33 | 4.16 | 103.02 | $ | 107,132 | |||||||||||||||||||||||||||||||||||||||
2008 | $ | 20.16 | 0.40 | (6.34 | ) | (5.94 | ) | (0.23 | ) | (0.54 | ) | (0.77 | ) | $ | 13.45 | 2.25 | 0.99 | 0.99 | 1.10 | (30.49 | ) | 83.70 | $ | 154,102 | ||||||||||||||||||||||||||||||||||||
2007 | $ | 12.87 | 0.17 | 7.29 | 7.46 | (0.01 | ) | (0.16 | ) | (0.17 | ) | $ | 20.16 | 0.97 | 1.00 | 0.99 | 1.20 | 58.51 | 91.02 | $ | 108,461 | |||||||||||||||||||||||||||||||||||||||
2006(d) | $ | 11.94 | 0.02 | 0.91 | 0.93 | — | — | — | $ | 12.87 | 0.90 | (e) | 1.04 | (e) | 0.99 | (e) | 2.98 | (e) | 7.79 | 6.08 | $ | 12,968 | ||||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.08 | 0.17 | 0.87 | 1.04 | (0.19 | ) | — | (0.19 | ) | $ | 13.93 | 1.28 | 1.46 | 1.46 | 32.05 | (f) | 7.97 | 66.27 | $ | 151 | |||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.37 | 0.26 | 0.05 | 0.31 | (0.60 | ) | — | (0.60 | ) | $ | 13.08 | 2.57 | 1.50 | 1.49 | 116.95 | (f) | 3.61 | 103.02 | $ | 20 | |||||||||||||||||||||||||||||||||||||||
2008(g) | $ | 17.91 | 0.29 | (4.70 | ) | (4.41 | ) | (0.13 | ) | — | (0.13 | ) | $ | 13.37 | 2.61 | (e) | 1.49 | (e) | 1.49 | (e) | 67.47 | (e)(f) | (24.78 | ) | 83.70 | $ | 35 | |||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.04 | 0.19 | 0.84 | 1.03 | (0.17 | ) | — | (0.17 | ) | $ | 13.90 | 1.38 | 1.40 | 1.40 | 3.29 | 7.96 | 66.27 | $ | 1,345 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.38 | 0.40 | (0.08 | ) | 0.32 | (0.66 | ) | — | (0.66 | ) | $ | 13.04 | 3.19 | 1.40 | 1.40 | 14.73 | (f) | 3.73 | 103.02 | $ | 1,244 | ||||||||||||||||||||||||||||||||||||||
2008(g) | $ | 17.91 | 0.28 | (4.69 | ) | (4.41 | ) | (0.12 | ) | — | (0.12 | ) | $ | 13.38 | 2.48 | (e) | 1.41 | (e) | 1.40 | (e) | 864.00 | (e)(f) | (24.74 | ) | 83.70 | $ | 3 | |||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 13.15 | 0.34 | 0.76 | 1.10 | (0.23 | ) | — | (0.23 | ) | $ | 14.02 | 2.46 | 0.99 | 0.99 | 1.64 | 8.41 | 66.27 | $ | 16,380 | ||||||||||||||||||||||||||||||||||||||||
2009 | $ | 13.46 | 0.53 | (0.15 | ) | 0.38 | (0.69 | ) | — | (0.69 | ) | $ | 13.15 | 4.36 | 0.97 | 0.97 | 239.11 | (f) | 4.25 | 103.02 | $ | 86 | ||||||||||||||||||||||||||||||||||||||
2008(g) | $ | 17.98 | 0.33 | (4.70 | ) | (4.37 | ) | (0.15 | ) | — | (0.15 | ) | $ | 13.46 | 2.97 | (e) | 0.92 | (e) | 0.92 | (e) | 850.59 | (e)(f) | (24.47 | ) | 83.70 | $ | 2 | |||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Dividends from net investment income per share were less than $(0.01). |
| (d) | Fund commenced operations on July 28, 2006. |
| (e) | Annualized. |
| (f) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| (g) | Effective date of this class of shares was February 1, 2008. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
| 28 Certified Annual Report | Certified Annual Report 29 |
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, 2010, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
30 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg Global Opportunities Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 959.80 | $ | 7.24 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.68 | $ | 7.46 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 956.10 | $ | 11.21 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.61 | $ | 11.54 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 962.10 | $ | 4.87 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 959.60 | $ | 7.26 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.66 | $ | 7.47 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 959.70 | $ | 6.88 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.05 | $ | 7.08 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 961.70 | $ | 4.87 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.47%; C: 2.29%; I: 0.99%; R3: 1.48%; 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 31
| INDEX COMPARISON | ||
| Thornburg Global Opportunities Fund | September 30, 2010 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Global Opportunities Fund versus MSCI AC World Index (July 28, 2006 to September 30, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010 (with sales charge)
| 1 Yr | 3 Yrs | Since Inception | ||||||||||
A Shares (Incep: 7/28/06) | 3.10 | % | -9.61 | % | 5.60 | % | ||||||
C Shares (Incep: 7/28/06) | 6.10 | % | -8.92 | % | 5.92 | % | ||||||
I Shares (Incep: 7/28/06) | 8.48 | % | -7.74 | % | 7.30 | % | ||||||
R3 Shares (Incep: 2/1/08) | 7.97 | % | — | -6.28 | % | |||||||
R4 Shares (Incep: 2/1/08) | 7.96 | % | — | -6.22 | % | |||||||
R5 Shares (Incep: 2/1/08) | 8.41 | % | — | -5.77 | % | |||||||
MSCI AC World Index (Since: 7/28/06) | 8.42 | % | -7.48 | % | 0.45 | % | ||||||
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 World Index (MSCI AC World Index) is a market capitalization weighted index that 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 cannot invest directly in an index.
32 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg Global Opportunities Fund | September 30, 2010 (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, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||||
David A. Ater, 65 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. | None | ||||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||||
Susan H. Dubin, 61 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, 56 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, 51 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 33
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
34 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorship Held by Trustee | ||
| Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
| Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
| Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
| Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
| Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
| Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
| Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
| Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen 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 35
| OTHER INFORMATION | ||
| Thornburg Global Opportunities Fund | September 30, 2010 (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, 2010, the Thornburg Global Opportunities Fund designates 79.78% (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.
30.66% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the tax year ended September 30, 2010 qualified for the corporate dividends received deduction.
For the tax year ended September 30, 2010, foreign taxes paid and foreign source income is $190,034 and $8,491,754, 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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 13, 2010.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2010 to plan the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the specified information with the Trustees and addressed questions presented by the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, the Trustees met to consider renewal of the 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 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.
36 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 (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) comparative measures of estimated earnings growth, portfolio volatility, risk and return. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events, 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, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In reviewing 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 2009, 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 quantitative data presented further demonstrated to the Trustees that the Fund’s investment returns fell near the median of the category for the three-month period ended with the second quarter of the current year but fell within the top quartile of the category for the three-year period and within or near the top decile of the category for the one-year 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 MSCI 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 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, and 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. The Trustees observed that the management fee charged to the Fund was slightly higher than the median and average fee rates charged to the group of mutual funds assembled by the mutual fund analyst firm, that the overall expense ratio was slightly higher than the median expense ratio and comparable to the average expense ratio 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 confirmed their previous observations 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, and 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
Certified Annual Report 37
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Global Opportunities Fund | September 30, 2010 (Unaudited) | |
Trustees noted the adequacy of the Advisor’s resources and 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.
38 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
The Trustees are concerned that ongoing commentaries and opinions reported in the media may confuse investors in general as to the supervisory duties of trustees of mutual funds and, in particular, leave Thornburg Investment Trust shareholders uncertain regarding how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. We decided to spell out clearly three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report. 39
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40 This page is not part of the Annual Report.
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 Developing World Fund |
| • | Thornburg Limited Term U.S. Government Fund |
| • | Thornburg Limited Term Income Fund |
| • | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 41
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 Developing World 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. 43
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Important Information
The information presented on the following pages was current as of September 30, 2010. The manager’s 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 developing countries, 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. Funds invested in a limited number of holdings may expose an investor to greater volatility.
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.
Minimum investments for Class I shares are higher than those for other classes. Class I shares may not be available to all investors.
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.
Impact to performance of IPOs, as disclosed in the following letter to shareholders, is calculated using the performance on the first day of the IPO, assuming held to the end of the first day.
Share Class | NASDAQ Symbol | Cusip | ||
Class A | THDAX | 885-216-408 | ||
Class C | THDCX | 885-216-507 | ||
Class I | THDIX | 885-216-606 |
Glossary
MSCI Emerging Markets Index – A free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. As of May 27, 2010 the MSCI Emerging Markets Index consisted of the following 21 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.
MSCI Country Indices (Brazil, India, and Russia) – Free float-adjusted market capitalization indices that are designed to measure equity market performance in that specific country.
MSCI China H Shares Index – The index reflects the performance of China’s H shares, which are securities of companies incorporated in the People’s Republic of China (PRC) and nominated by the Chinese Government for listing and trading on the Hong Kong Stock Exchange.
Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
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.
Price/Earnings ratio (P/E ratio) – A valuation ratio of a company’s current share price compared to its per-share earnings. P/E equals a company’s market value per share divided by earnings per share.
This page is not part of the Annual Report 3
Thornburg Developing World Fund
September 30, 2010
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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
Lewis Kaufman, CFA Portfolio Manager | October 14, 2010
Dear Fellow Shareholder:
We are pleased to present the first annual report for the Thornburg Developing World Fund for the period ended September 30, 2010. The net asset value (NAV) of a Class A share of the Fund increased $2.50 to $14.44 per share since the inception date of December 16, 2009. The Class A shares of the Thornburg Developing World Fund produced a total return of 20.94% (at NAV) since the December 16, 2009 inception, compared to 12.64% for the MSCI Emerging Markets Index over the same time period. By major market, MSCI Brazil is up 3.72% in U.S. dollar (USD) terms since the Fund’s inception, MSCI Russia up 0.47%, MSCI India up 22.54%, and the MSCI China H Shares Index up 3.68%.
The past year has seen broader recognition of the relative economic and fiscal health of most developing economies. In turn, portfolio flows and foreign direct investment into the developing world have accelerated, placing upward pressure on developing country asset prices. Currency in Brazil has appreciated 4.1% versus the U.S. dollar since the Fund’s inception, China 2.0%, India 3.8%, Indonesia 6.3%, South Africa 6.7% and Turkey 4.2%. In fact, of the major developing world currencies, only the Russian ruble depreciated during the period, declining by 0.9%. Capital flows have similarly placed upward pressure on stock valuations, as ever-increasing amounts of capital pursue a relatively fixed supply of equity securities. The median P/E multiple on forward earnings in the Developing World Fund has increased 3.7 points since the market nadir of May 25, 2010, and now stands at 18.4x. Moreover, in spite of higher valuations, the potential for further appreciation in developing world asset prices remains. As of the writing of this letter, a second round of quantitative easing (“QE2”) in the United States seems more likely than not, the fiscal liabilities of the United States, Europe, and Japan appear unlikely to peak in the near term, consumer deleveraging pressures continue in most developed economies, and relative interest rate differentials favor developing country assets. Capital formation continues to be supportive of developing world returns; IPOs have contributed 1.54% to the Fund’s performance since inception.
While we believe that the current portfolio still represents a compelling risk-adjusted vehicle for capital appreciation in the medium term, we must acknowledge that with higher asset prices comes the potential for a more volatile market environment. In particular, inflation remains a key variable against a backdrop of abundant liquidity, central bankers from major developing countries such as Brazil are considering mild forms of capital controls, and sovereign debt issues have the potential to deteriorate on a global stage. Against this dynamic backdrop, it is our hope that our dual emphasis on capital appreciation and risk management will be a distinguishing characteristic of the Thornburg Developing World Fund over time. If capital market conditions in the developing world erode, companies with stable and self-funding businesses can reduce the need for external financing when it might be least available, thereby setting the stage for continued business development in the medium term. |
Certified Annual Report 5
Letter to Shareholders,
Continued
Our emphasis on self-funding, capital-generative companies is evident in our top five holdings as of September 30, 2010. Colgate-Palmolive, which generates about half of its profits in developing countries such as Mexico, Brazil, India, and China, produced $2.7B in free cash flow in the year ended December 31, 2009, and could conceivably retire all of its outstanding debt maturities in less than 18 months time. Brazilian software maker Totvs SA is growing at double-digit rates and generating substantial free cash flow, while many technology companies globally struggle with more capital-intensive business models. South African retailer Clicks Group Ltd. has remained committed to self-financed expansion in the fragmented drug dispensing business, thereby allowing it to seize market share during the downturn. Moreover, our focus on defensive business characteristics has not precluded us from participating in the current ebullient market environment. We have observed that great businesses with the potential to compound at attractive rates over time can do so in the absence of aggressive capital structures. For example, our bank holdings in Turkey and Egypt continue to benefit from profitable industry structures, as regulators allowed for high levels of consolidation in the aftermath of home-grown banking crises a decade ago. As a result, each is able to finance high rates of loan growth with internally generated funds and low levels of leverage, and grew book value at approximately 25% during the depths of the global financial crisis.
We invite you to visit our website at www.thornburg.com, where you will find additional information about the Thornburg Developing World Fund. We thank you for your trust and confidence.
Sincerely,
Lewis Kaufman,CFA
Portfolio Manager
Managing Director
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager, and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
6 Certified Annual Report
| SCHEDULE OF INVESTMENTS | ||
| Thornburg Developing World Fund | September 30, 2010 | |
SUMMARY OF INDUSTRY EXPOSURE
As of 9/30/10
Software & Services | 13.7 | % | Consumer Services | 4.7 | % | |||||
Household & Personal Products | 10.2 | % | Health Care Equipment & Services | 3.1 | % | |||||
Materials | 9.2 | % | Consumer Durables & Apparel | 2.8 | % | |||||
Food & Staples Retailing | 8.8 | % | Food, Beverage & Tobacco | 2.2 | % | |||||
Banks | 8.8 | % | Transportation | 2.0 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 7.5 | % | Commercial & Professional Services | 2.0 | % | |||||
Energy | 6.3 | % | Telecommunication Services | 1.9 | % | |||||
Retailing | 5.9 | % | Other Assets & Cash Equivalents | 10.9 | % | |||||
| TOP TEN HOLDINGS | ||||||||||
As of 9/30/10
|
| |||||||||
Colgate Palmolive Co. | 4.1 | % | Genomma Lab Internacional SA | 2.6 | % | |||||
Totvs SA | 3.0 | % | China Shineway Pharmaceutical Group Ltd. | 2.6 | % | |||||
Clicks Group Ltd. | 2.8 | % | Tencent Holdings Ltd. | 2.5 | % | |||||
Turkiye Garanti Bankasi A.S. | 2.7 | % | VanceInfo Technologies ADR | 2.5 | % | |||||
Commercial International Bank | 2.7 | % | Komercni Banka A.S. | 2.5 | % | |||||
| SUMMARY OF COUNTRY EXPOSURE | ||||||||||
As of 9/30/10 (percent of equity holdings)
|
| |||||||||
China | 27.1 | % | Egypt | 3.0 | % | |||||
Brazil | 14.1 | % | Czech Republic | 2.8 | % | |||||
India | 8.0 | % | Netherlands | 2.6 | % | |||||
Mexico | 6.9 | % | Poland | 2.0 | % | |||||
Russia | 6.5 | % | United Kingdom | 1.9 | % | |||||
Turkey | 5.7 | % | Argentina | 1.7 | % | |||||
South Africa | 5.1 | % | Chile | 1.7 | % | |||||
Indonesia | 4.5 | % | Australia | 1.1 | % | |||||
United States | 4.5 | % | France | 0.8 | % | |||||
Certified Annual Report 7
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 89.13% | ||||||||
BANKS — 8.82% | ||||||||
COMMERCIAL BANKS — 8.82% | ||||||||
Commercial International Bank | 124,056 | $ | 926,116 | |||||
Komercni Banka A.S. | 3,934 | 858,082 | ||||||
Standard Chartered plc | 11,050 | 326,992 | ||||||
Turkiye Garanti Bankasi A.S. | 161,900 | 940,141 | ||||||
| 3,051,331 | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 1.97% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 1.97% | ||||||||
Multiplus SA | 41,900 | 679,265 | ||||||
| 679,265 | ||||||||
CONSUMER DURABLES & APPAREL — 2.84% | ||||||||
TEXTILES, APPAREL & LUXURY GOODS — 2.84% | ||||||||
Li Ning Co. Ltd. | 242,000 | 734,529 | ||||||
LVMH Moët Hennessy Louis Vuitton SA | 1,688 | 247,606 | ||||||
| 982,135 | ||||||||
CONSUMER SERVICES — 4.68% | ||||||||
DIVERSIFIED CONSUMER SERVICES — 2.27% | ||||||||
aNew Oriental Education & Technology Group, Inc. ADR | 8,063 | 786,788 | ||||||
HOTELS, RESTAURANTS & LEISURE — 2.41% | ||||||||
aCountry Style Cooking Restaurant Chain Co. Ltd. ADR | 16,500 | 471,735 | ||||||
aCtrip.com International Ltd. ADR | 7,544 | 360,226 | ||||||
| 1,618,749 | ||||||||
ENERGY — 6.28% | ||||||||
ENERGY EQUIPMENT & SERVICES — 2.35% | ||||||||
Schlumberger Ltd. | 13,214 | 814,115 | ||||||
OIL, GAS & CONSUMABLE FUELS — 3.93% | ||||||||
CNOOC Ltd. | 355,000 | 689,058 | ||||||
Novatek OAO GDR | 7,800 | 670,020 | ||||||
| 2,173,193 | ||||||||
FOOD & STAPLES RETAILING — 8.83% | ||||||||
FOOD & STAPLES RETAILING — 8.83% | ||||||||
Bim Birlesik Magazalar A.S. | 27,920 | 805,821 | ||||||
Drogasil S.A. | 20,489 | 523,123 | ||||||
Eurocash SA | 68,495 | 620,893 | ||||||
Magnit OJCS GDR | 21,638 | 545,278 | ||||||
Wal-Mart de Mexico SAB de C.V. | 222,350 | 559,331 | ||||||
| 3,054,446 | ||||||||
FOOD, BEVERAGE & TOBACCO — 2.21% | ||||||||
BEVERAGES — 0.71% | ||||||||
Sabmiller plc | 7,646 | 244,486 | ||||||
FOOD PRODUCTS — 1.50% | ||||||||
Mayora Indah | 453,500 | 520,826 | ||||||
| 765,312 | ||||||||
8 Certified Annual Report
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
HEALTH CARE EQUIPMENT & SERVICES — 3.10% | ||||||||
HEALTH CARE PROVIDERS & SERVICES — 3.10% | ||||||||
Diagnósticos da América SA | 54,900 | $ | 661,915 | |||||
Sinopharm Group Co. H | 99,600 | 411,424 | ||||||
| 1,073,339 | ||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 10.18% | ||||||||
HOUSEHOLD PRODUCTS — 4.05% | ||||||||
Colgate Palmolive Co. | 18,251 | 1,402,772 | ||||||
PERSONAL PRODUCTS — 6.13% | ||||||||
Dabur India Ltd. | 307,369 | 732,938 | ||||||
Hengan International Group Co. Ltd. | 77,500 | 781,608 | ||||||
Natura Cosméticos SA | 22,475 | 604,381 | ||||||
| 3,521,699 | ||||||||
MATERIALS — 9.15% | ||||||||
CHEMICALS — 3.80% | ||||||||
Asian Paints Ltd. | 13,490 | 800,979 | ||||||
Sociedad Quimica Minera de Chile SA ADR | 10,687 | 515,541 | ||||||
CONSTRUCTION MATERIALS — 2.48% | ||||||||
PT Indocement Tunggal Prakarsa Tbk | 415,700 | 857,017 | ||||||
METALS & MINING — 2.87% | ||||||||
Newcrest Mining Ltd. | 9,000 | 345,087 | ||||||
Southern Copper Corp. | 18,412 | 646,630 | ||||||
| 3,165,254 | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 7.49% | ||||||||
PHARMACEUTICALS — 7.49% | ||||||||
China Shineway Pharmaceutical Group Ltd. | 250,000 | 882,863 | ||||||
aGenomma Lab Internacional SA | 475,300 | 912,758 | ||||||
aPharmstandard GDR | 35,576 | 795,124 | ||||||
| 2,590,745 | ||||||||
RETAILING — 5.95% | ||||||||
INTERNET & CATALOG RETAIL — 1.40% | ||||||||
aMakemytrip Ltd. | 12,500 | 483,875 | ||||||
MULTILINE RETAIL — 2.80% | ||||||||
Clicks Group Ltd. | 152,815 | 969,036 | ||||||
SPECIALTY RETAIL — 1.75% | ||||||||
Truworths International Ltd. | 60,200 | 604,569 | ||||||
| 2,057,480 | ||||||||
SOFTWARE & SERVICES — 13.74% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 3.73% | ||||||||
Cielo SA | 96,300 | 838,356 | ||||||
Infosys Technologies Ltd. ADR | 6,680 | 449,631 | ||||||
INTERNET SOFTWARE & SERVICES — 4.45% | ||||||||
aChinaCache International Holdings Ltd. ADR | 9,900 | 137,609 | ||||||
aMercadolibre, Inc. | 7,327 | 528,863 | ||||||
Certified Annual Report 9
| SCHEDULE OF INVESTMENTS, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 | |
| Shares/ Principal Amount | Value | |||||||
Tencent Holdings Ltd. | 40,000 | $ | 873,841 | |||||
SOFTWARE — 5.56% | ||||||||
Totvs SA | 13,691 | 1,051,100 | ||||||
aVanceInfo Technologies ADR | 26,945 | 871,401 | ||||||
| 4,750,801 | ||||||||
TELECOMMUNICATION SERVICES — 1.87% | ||||||||
WIRELESS TELECOMMUNICATION SERVICES — 1.87% | ||||||||
China Mobile Ltd. | 63,000 | 645,521 | ||||||
| 645,521 | ||||||||
TRANSPORTATION — 2.02% | ||||||||
TRANSPORTATION INFRASTRUCTURE — 2.02% | ||||||||
China Merchants Holdings International Co. Ltd. | 192,000 | 697,835 | ||||||
| 697,835 | ||||||||
TOTAL COMMON STOCK (Cost $26,396,053) | 30,827,105 | |||||||
TOTAL INVESTMENTS — 89.13% (Cost $26,396,053) | $ | 30,827,105 | ||||||
OTHER ASSETS LESS LIABILITIES — 10.87% | 3,758,937 | |||||||
NET ASSETS — 100.00% | $ | 34,586,042 | ||||||
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 | |
| GDR | Global Depository Receipt |
See notes to financial statements.
10 Certified Annual Report
| STATEMENT OF ASSETS AND LIABILITIES | ||
| Thornburg Developing World Fund | September 30, 2010 | |
ASSETS | ||||
Investments at value (cost $26,396,053) (Note 2) | $ | 30,827,105 | ||
Cash | 3,182,275 | |||
Receivable for investments sold | 1,038,770 | |||
Receivable for fund shares sold | 1,018,954 | |||
Receivable from investment advisor | 10,719 | |||
Dividends receivable | 57,520 | |||
Prepaid expenses and other assets | 11,550 | |||
Total Assets | 36,146,893 | |||
LIABILITIES | ||||
Payable for securities purchased | 1,477,283 | |||
Payable for fund shares redeemed | 18,023 | |||
Deferred tax payable | 16,108 | |||
Accounts payable and accrued expenses | 49,437 | |||
Total Liabilities | 1,560,851 | |||
NET ASSETS | $ | 34,586,042 | ||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 11,955 | ||
Net unrealized appreciation on investments | 4,414,679 | |||
Accumulated net realized gain (loss) | (263,780 | ) | ||
Net capital paid in on shares of beneficial interest | 30,423,188 | |||
| $ | 34,586,042 | |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($14,115,582 applicable to 977,776 shares of beneficial interest outstanding - Note 4) | $ | 14.44 | ||
Maximum sales charge, 4.50% of offering price | 0.68 | |||
Maximum offering price per share | $ | 15.12 | ||
Class C Shares: | ||||
Net asset value and offering price per share * ($2,889,123 applicable to 200,788 shares of beneficial interest outstanding - Note 4) | $ | 14.39 | ||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($17,581,337 applicable to 1,211,139 shares of beneficial interest outstanding - Note 4) | $ | 14.52 | ||
| * | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 11
| STATEMENT OF OPERATIONS | ||
| Thornburg Developing World Fund | Period Ended September 30, 2010* | |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $11,795) | $ | 248,446 | ||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 107,350 | |||
Administration fees (Note 3) | ||||
Class A Shares | 4,748 | |||
Class C Shares | 924 | |||
Class I Shares | 3,247 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 9,496 | |||
Class C Shares | 7,394 | |||
Transfer agent fees | ||||
Class A Shares | 5,688 | |||
Class C Shares | 2,790 | |||
Class I Shares | 3,226 | |||
Registration and filing fees | ||||
Class A Shares | 24,105 | |||
Class C Shares | 24,105 | |||
Class I Shares | 24,125 | |||
Custodian fees (Note 3) | 55,573 | |||
Professional fees | 45,574 | |||
Accounting fees | 1,235 | |||
Trustee fees | 182 | |||
Other expenses | 27,247 | |||
Total Expenses | 347,009 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (71,451 | ) | ||
Investment advisory fees waived by investment advisor (Note 3) | (107,350 | ) | ||
Fees paid indirectly (Note 3) | (10,676 | ) | ||
Net Expenses | 157,532 | |||
Net Investment Income | $ | 90,914 | ||
| * | For the period from commencement of operations on December 16, 2009 through September 30, 2010. |
12 Certified Annual Report
| STATEMENT OF OPERATIONS, CONTINUED | ||
| Thornburg Developing World Fund | Period Ended September 30, 2010* | |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | (268,579 | ) | |
Foreign currency transactions | (74,160 | ) | ||
| (342,739 | ) | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $16,108) | 4,414,944 | |||
Foreign currency translations | (265 | ) | ||
| 4,414,679 | ||||
Net Realized and Unrealized Gain | 4,071,940 | |||
Net Increase in Net Assets Resulting from Operations | $ | 4,162,854 | ||
| * | For the period from commencement of operations on December 16, 2009 through September 30, 2010. |
See notes to financial statements.
Certified Annual Report 13
STATEMENT OF CHANGES IN NET ASSETS
Thornburg Developing World Fund
| Period Ended September 30, 2010* | ||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||
OPERATIONS: | ||||
Net investment income | $ | 90,914 | ||
Net realized gain (loss) on investments and foreign currency transactions | (342,739 | ) | ||
Increase (Decrease) in unrealized appreciation (depreciation) of investments, foreign currency translations, and deferred taxes | 4,414,679 | |||
Net Increase (Decrease) in Net Assets Resulting from Operations | 4,162,854 | |||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||
Class A Shares | 12,579,326 | |||
Class C Shares | 2,603,666 | |||
Class I Shares | 15,240,196 | |||
Net Increase in Net Assets | 34,586,042 | |||
NET ASSETS: | ||||
Beginning of Period | — | |||
End of Period | $ | 34,586,042 | ||
Undistributed net investment income | $ | 11,955 | ||
| * | For the period from commencement of operations on December 16, 2009 through September 30, 2010. |
See notes to financial statements.
14 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS | ||
| Thornburg Developing World Fund | September 30, 2010 | |
NOTE 1 – ORGANIZATION
Thornburg Developing World Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on December 16, 2009. 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 sixteen 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.
The Fund currently offers three classes of shares of beneficial interest: Class A, Class C, and Institutional Class (Class I). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, and (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 a price obtained from an independent pricing service. The pricing service ordinarily values equity securities in these instances using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures and index data and other data. A security’s market value is deemed not readily available whenever the exchange or market on which the security is primarily traded is closed for the entire scheduled day of trading. Additionally, a security’s market value may be deemed not readily available under other circumstances identified by the Trustees, including when developments occurring after the most recent close of the security’s primary exchange or market, but before the most recent close of trading in Fund shares, create a serious question about the reliability of the security’s market value.
In any case where a pricing service fails to provide a price for a debt obligation held by the Fund, the valuation and pricing committee determines a fair value for the debt obligation using procedures approved by the Trustees. Additionally, in any case where management believes that a price provided by a pricing service for a debt obligation held by the Fund may be unreliable, the valuation and pricing committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt obligation.
Certified Annual Report 15
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 | |
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, 2010. 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, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 30,827,105 | $ | 30,689,496 | $ | 137,609 | $ | — | ||||||||
Total Investments in Securities | $ | 30,827,105 | $ | 30,689,496 | $ | 137,609 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Spot Currency | $ | 719 | $ | 719 | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Spot Currency | $ | (197 | ) | $ | (197 | ) | $ | — | $ | — | ||||||
| * | See Schedule of Investments for a summary of the industry exposure as grouped according to the Global Industry Classification Standard (GICS), which is an industry taxonomy developed by MSCI Barra and Standard & Poor’s (S&P). |
| ** | 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 investment. |
Other Notes: It is the policy of the Fund to recognize significant transfers between Levels 1 and 2 and to disclose those transfers at the last date of the reporting period. The Fund recognized no significant transfers into and out of Levels 1 and 2 during the period ended September 30, 2010.
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.
16 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 | |
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the fair value of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these securities as reflected in the accompanying financial statements.
Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to “regulated investment companies” and to distribute to shareholders substantially all taxable income, including any net realized gain on investments of the Fund. Therefore, no provision for federal income taxes is required.
Management reviews each tax position believed to be material to the preparation of the Fund’s financial statements, to assess if it is more likely than not that the position would be sustained upon examination, based upon the technical merits of the position. As of September 30, 2010, management has not identified any such position for which a liability must be reflected in the Statement of Assets and Liabilities. The Fund’s tax returns remain subject to examination for three years after filing.
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, if any, 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 17
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 | |
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, 2010, these fees were payable at annual rates ranging from .975 of 1% to .775 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, 2010, the Advisor voluntarily waived investment advisory fees of $107,350. 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, 2010, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $15,415 for Class A shares, $25,438 for Class C shares, and $30,598 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, 2010, the Distributor has advised the Fund that it earned commissions aggregating $6,457 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $72 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. For the period ended September 30, 2010, there were no 12b-1 service plan fees charged for Class I shares. 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, 2010, are set forth in the Statement of Operations.
The Trust has an agreement with the custodian bank to indirectly pay a portion of the custodian’s fees through credits earned by the Fund’s cash on deposit with the bank. This deposit agreement is an alternative to overnight investments. Custodial fees have been adjusted to reflect amounts that would have been paid without this agreement, with a corresponding adjustment reflected as fees paid indirectly in the Statement of Operations. For the period ended September 30, 2010, fees paid indirectly were $10,676.
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, 2010, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
| Period Ended* September 30, 2010 | ||||||||
| Shares | Amount | |||||||
Class A Shares | ||||||||
Shares sold | 1,023,348 | $ | 13,148,906 | |||||
Shares issued to shareholders in reinvestment of dividends | — | — | ||||||
Shares repurchased | (45,572 | ) | (569,655 | ) | ||||
Redemption fees received** | — | 75 | ||||||
Net Increase (Decrease) | 977,776 | $ | 12,579,326 | |||||
18 Certified Annual Report
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 | |
| Period Ended* September 30, 2010 | ||||||||
| Shares | Amount | |||||||
Class C Shares | ||||||||
Shares sold | 207,298 | $ | 2,690,788 | |||||
Shares issued to shareholders in reinvestment of dividends | — | — | ||||||
Shares repurchased | (6,510 | ) | (87,135 | ) | ||||
Redemption fees received** | — | 13 | ||||||
Net Increase (Decrease) | 200,788 | $ | 2,603,666 | |||||
Class I Shares | ||||||||
Shares sold | 1,219,783 | $ | 15,347,231 | |||||
Shares issued to shareholders in reinvestment of dividends | — | — | ||||||
Shares repurchased | (8,644 | ) | (107,188 | ) | ||||
Redemption fees received** | — | 153 | ||||||
Net Increase (Decrease) | 1,211,139 | $ | 15,240,196 | |||||
| * | Fund commenced operations on December 16, 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 period ended September 30, 2010, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $33,322,780 and $6,662,946, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2010, information on the tax components of capital is as follows:
Cost of investments for tax purposes | $ | 26,396,124 | ||
Gross unrealized appreciation on a tax basis | $ | 4,554,397 | ||
Gross unrealized depreciation on a tax basis | (123,416 | ) | ||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 4,430,981 | ||
Distributable earnings – ordinary income (tax basis) | $ | 86,115 |
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized investment losses by $78,959, and decreased undistributed net investment income by $78,959. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains/losses.
At September 30, 2010, the Fund had deferred tax basis currency and capital losses occurring subsequent to October 31, 2009 of $74,446 and $263,709 respectively. For tax purposes, such losses will be reflected in the year ending September 30, 2011.
Certified Annual Report 19
| NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 | |
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. This 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 period ended September 30, 2010, the Fund did not invest in any derivative financial instruments of the type addressed by ASC 815.
OTHER NOTES
Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
20 Certified Annual Report
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Certified Annual Report 21
Thornburg Developing World Fund
| PER SHARE PERFORMANCE (for a share outstanding throughout the period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Period | Net Investment Income (Loss) | Net Realized & Unrealized Gain (Loss) on Investments | Total from Investment Operations | Dividends from Net Investment Income | Dividends from Net Realized Gains | Total Dividends | Net Asset Value End of Period | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return (%)(a) | Portfolio Turnover Rate (%) | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b)(c) | $ | 11.94 | 0.06 | 2.44 | 2.50 | — | — | — | $ | 14.44 | 0.55 | (d) | 1.83 | (d) | 1.82 | (d) | 3.30 | (d) | 20.94 | 47.37 | $ | 14,116 | ||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 11.94 | (0.01 | ) | 2.46 | 2.45 | — | — | — | $ | 14.39 | (0.11 | )(d) | 2.39 | (d) | 2.38 | (d) | 6.89 | (d) | 20.52 | 47.37 | $ | 2,889 | |||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 11.94 | 0.11 | 2.47 | 2.58 | — | — | — | $ | 14.52 | 1.09 | (d) | 1.10 | (d) | 1.09 | (d) | 2.63 | (d) | 21.61 | 47.37 | $ | 17,581 | ||||||||||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Fund commenced operations on December 16, 2009. |
| (c) | Sales loads are not reflected in computing total return. |
| (d) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
22 Certified Annual Report | Certified Annual Report 23 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Developing World Fund
To the Trustees and Shareholders of
Thornburg Developing World 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 Developing World Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2010, and the results of its operations, the change in net assets and the financial highlights for the period 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 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, 2010 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 17, 2010
24 Certified Annual Report
| EXPENSE EXAMPLE | ||
| Thornburg Developing World Fund | September 30, 2010 (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, 2010, and held until September 30, 2010.
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 4/1/10 | Ending Account Value 9/30/10 | Expenses Paid During Period† 4/1/10–9/30/10 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,142.40 | $ | 9.83 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,015.89 | $ | 9.25 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,139.40 | $ | 12.76 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.14 | $ | 12.01 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,146.00 | $ | 5.86 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.60 | $ | 5.52 | ||||||
| † | Expenses are equal to the annualized expense ratio for each class ( A: 1.83%; C: 2.38%; I: 1.09%) 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
| INDEX COMPARISON | ||
| Thornburg Developing World Fund | September 30, 2010 (Unaudited) | |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Thornburg Developing World Fund versus MSCI Emerging Markets Index (December 16, 2009 to September 30, 2010)
AVERAGE ANNUAL TOTAL RETURNS
For periods ended September 30, 2010 (with sales charge)
| 1 Yr | 5 Yrs | 10 Yrs | Since Inception* | |||||||||||||
A Shares (Incep: 12/16/09) | — | — | — | 15.52 | % | |||||||||||
C Shares (Incep: 12/16/09) | — | — | — | 19.52 | % | |||||||||||
I Shares (Incep: 12/16/09) | — | — | — | 21.61 | % | |||||||||||
MSCI Emerging Markets Index (Since 12/16/09) | — | — | — | 12.64 | % | |||||||||||
| * | Not annualized for periods less than one year. |
Performance data reflects past performance, which is no guarantee of future results. The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares. Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 4.50%. Class C shares are subject to a 1% CDSC for the first year only. There is no up-front sales charge for Class I shares. Class A and I shares are subject to a 1% 30-day redemption fee.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. As of May 27, 2010 the MSCI Emerging Markets Index consisted of the following 21 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. Investors cannot invest directly in an index.
26 Certified Annual Report
| TRUSTEES AND OFFICERS | ||
| Thornburg Developing World Fund | September 30, 2010 (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, 64 Chairman of Trustees, Trustee since 1987(3) | Chairman and controlling shareholder and, until 2008, CEO of Thornburg Investment Management, Inc. (investment advisor); Chairman, CEO, and controlling shareholder of Thornburg Securities Corporation (securities dealer); CEO until 2007 and Chairman until 2009 of TMST, Inc. (f/k/a Thornburg Mortgage, Inc.) (real estate investment trust); President and Sole Director until 2009 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 54 Trustee since 2001, Member of Governance & Nominating Committee, President since 1997(5)(6) | CEO since 2008, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 65 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. | None | ||
David D. Chase, 69 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, 64 Chairman of Governance & Nominating Committee, Trustee since 2004 | Senior Counsel and, until 2009, Partner of Akin, Gump, Strauss, Hauer & Feld LLP (law firm) in Washington, D.C. and Beijing, China. | None | ||
Susan H. Dubin, 61 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, 56 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, 51 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 Developing World Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(6)(7) | ||||
George T. Strickland, 47 Vice President since 1996, Treasurer since 2007(6) | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 71 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 43 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Alexander Motola, 40 Vice President since 2001 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 39 Vice President since 1999 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 47 Vice President since 1999 | Portfolio Manager since 2007, Managing Director, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 40 Vice President since 2003 | Portfolio Manager since 2007, Managing Director since 2006, and Associate Portfolio Manager until 2007 of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 44 Vice President since 2003 | Managing Director since 2007 and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 36 Vice President since 2003 Secretary since 2007(6) | Managing Director since 2007, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Ed Maran, 52 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 40 Vice President since 2004 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 39 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 39 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 31 Vice President since 2006 | Portfolio Manager since 2006, Managing Director, and Associate Portfolio Manager until 2006 of Thornburg Investment Management, Inc. | Not applicable | ||
28 Certified Annual Report
| TRUSTEES AND OFFICERS, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 (Unaudited) | |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
Jason Brady, 36 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager 2006–2007 of Thornburg Investment Management, Inc.; Portfolio Manager, Fortis Investments 2005–2006. | Not applicable | ||
Lewis Kaufman, 34 Vice President since 2007 | Portfolio Manager since 2007, Managing Director since 2007, and Associate Portfolio Manager until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 54 Vice President since 2008 | Portfolio Manager since 2009, Managing Director since 2009, and Associate Portfolio Manager 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 35 Vice President since 2008 | Portfolio Manager since 2010, Managing Director since 2010, and Associate Portfolio Manager 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 50 Vice President since 2008 | Senior Tax Accountant since 2007 of Thornburg Investment Management, Inc.; Chief Financial Officer of Vestor Partners, LP (private equity fund) until 2007. | Not applicable | ||
Jack Gardner, 56 Vice President since 2008 | Managing Director since 2007 of Thornburg Investment Management, Inc.; President since 2008 and National Sales Director of Thornburg Securities Corporation. | Not applicable | ||
Laura Hillstrom, 43 Vice President since 2009 | Chief Administrative Officer since 2009, Vice President and Managing Director, and Director of Information Systems until 2009 of Thornburg Investment Management, Inc. | Not applicable | ||
Cliff Remily, 34 Vice President since 2010 | Portfolio Manager and Managing Director since 2010, Associate Portfolio Manager 2008–2010, and Equity Research Analyst 2006–2008 of Thornburg Investment Management, Inc.; Intern-Equity Research Analyst of Brandes Investment Partners until 2006. | Not applicable | ||
| (1) | Each person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico 87506. |
| (2) | The Fund is one of sixteen 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 sixteen Funds of the Trust. Each Trustee oversees the sixteen 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 sixteen active Funds of the Trust, and is the sole director and controlling shareholder of Thornburg Securities Corporation, the distributor of shares for the Trust. |
| (4) | Each Trustee serves in office until the election and qualification of a successor. |
| (5) | Mr. McMahon is considered an “interested” Trustee because he is the chief executive officer and president of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
Certified Annual Report 29
| OTHER INFORMATION | ||
| Thornburg Developing World Fund | September 30, 2010 (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 currently available for the period from the Fund’s commencement of investment operations on December 16, 2009 through June 30, 2010, and will hereafter be available on or before August 31 of each year for the twelve months ending the preceding June 30. This information is available (i) without charge, upon request by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg web site at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s web site at www.sec.gov.
TAX INFORMATION
For the tax year ended September 30, 2010, the Thornburg Developing World Fund designates $167,739 (or the maximum allowed) as qualified dividend income eligible for the reduced rate under the Jobs and Growth Tax Relief and Reconciliation Act of 2003.
$10,850 (or the maximum allowed) of the Fund’s investment income for the period ended September 30, 2010 qualified for the corporate dividends received deduction.
For the period ended September 30, 2010, foreign taxes paid and foreign source income is $15,044 and $154,497, 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, 2010. Complete information will be computed and reported in conjunction with your 2010 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 Developing World 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 September 14, 2009. The Trustees reviewed and approved the continuance of the agreement again on September 13, 2010.
In considering their initial approval of the advisory agreement for the Fund, the Trustees 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 consistent with their established practice, the independent Trustees met in May 2010 to discuss the Trustees’ evaluation of the Advisor’s performance and to specify the information the Advisor would present to the Trustees for their review. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees at a meeting session scheduled for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentation and various specific issues respecting their consideration of the advisory agreement’s renewal. Following these sessions, on September 13, 2010, 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.
30 Certified Annual Report
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 (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 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. 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) the Fund’s investment performance since inception relative to a “diversified emerging markets” category of mutual funds selected by an independent mutual fund analyst firm, and relative to a broad-based securities index, and (iv) comparative estimated earnings growth data. The Trustees considered the effects of recent market and economic events on the Fund and the Advisor’s responses to those events, and evaluated the Advisor’s continued adherence to the Fund’s stated investment policies.
In evaluating quantitative and performance data presented, the Trustees noted (among other aspects of the data) that the Fund’s investment returns exceeded the average return of the emerging markets mutual fund category and the Fund’s benchmark MSCI Emerging Markets Index for the three-month and year-to-date periods ended with the second quarter of the current year, and that the Fund’s investment performance fell within the top decile of the fund category for the two periods.
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 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 portion of its management fee, and comparisons of the Advisor’s fee and other Fund expenses to median fees and expenses charged to a group of diversified international 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 somewhat higher than the median expense ratio for the group of mutual funds assembled by the mutual fund analyst firm, and that the management fee (before waivers by the Advisor) was comparable to the median fee rate for the same group of funds, but that the differences were not significant in view of the Advisor’s waiver of a substantial portion of its fee 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 confirmed their previous observations 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 31
| OTHER INFORMATION, CONTINUED | ||
| Thornburg Developing World Fund | September 30, 2010 (Unaudited) | |
In reviewing the profitability of the Advisor, the Trustees considered the Advisor’s costs and 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 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 the adequacy of the Advisor’s resources and 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 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.
32 Certified Annual Report
Trustees’ Statement to Shareholders
Not part of the Certified Annual Report
February 8, 2005, as readopted September 13, 2010
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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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 Developing World Fund |
| • | Thornburg Limited Term U.S. Government Fund |
| • | Thornburg Limited Term Income Fund |
| • | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 35
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 Developing World 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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38 This page is not part of the Annual Report.
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| TH2149 | ||||||
| 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. Effective December 6, 2009, the Trust amended its code of ethics to include language that prohibits certain contributions or solicitations for contributions by any officer or Trustee of the Trust who is an employee, officer or director of the Trust’s investment advisor or distributor to a political campaign in which an independent Trustee of the Trust is a candidate.
| 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, 2009 and September 30, 2010 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, 2009 | Year Ended September 30, 2010 | |||||||
Thornburg Investment Trust | $ | 353,000 | $ | 561,750 | ||||
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, 2009 | Year Ended September 30, 2010 | |||||||
Thornburg Investment Trust | $ | 18,500 | $ | -0- | ||||
The audit-related fees billed to the Trust in the year ended 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, 2009 and September 30, 2010 for professional services rendered by PWC for tax compliance, tax advice or tax planning are set out below.
| Year Ended September 30, 2009 | Year Ended September 30, 2010 | |||||||
Thornburg Investment Trust | $ | 168,730 | $ | 165,290 | ||||
All Other Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years ended September 30, 2009 and September 30, 2010 for all other services rendered by PWC to the Trust are set out below.
| Year Ended September 30, 2009 | Year Ended September 30, 2010 | |||||||
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.
Audit Committee Pre-Approval Policies and Procedures
As of September 30, 2010, 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, Strategic Municipal Income Fund, and Developing World Fund.
| By: | /s/ BRIAN J. MCMAHON | |
| Brian J. McMahon | ||
| President and principal executive officer | ||
| Date: | November 23, 2010 | |
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, 2010 | |
| By: | /s/ GEORGE T. STRICKLAND | |
| George T. Strickland | ||
| Treasurer and principal financial officer | ||
| Date: | November 23, 2010 | |