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, 2012
Date of reporting period: September 30, 2012
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, 2012. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 2012 Best Fixed Income Funds Manager
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income Large Company Universe for the three-year period ended 11/30/11, based on risk-adjusted returns. Lipper’s Large Company Universe is comprised of fund families with more than $40 billion in total net assets. Only fund families with at least five bond funds were eligible for the fixed income funds manager award. Asset Class Group Awards are given for the three-year period only.
Best Short-Intermediate Municipal Debt Fund
Lipper Classification Awards are granted annually to the fund in each Lipper classification that consistently delivered the strongest risk-adjusted performance (calculated with dividends reinvested). Fund Classification Awards were given for three-year, five-year, and ten-year periods ended 11/30/11. The fund did not win the award for other time periods.
Glossary
Barclays 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 1-10 Year U.S. Municipal Securities Index – A subset of the BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity less than 10 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 reflects actual distributions made to shareholders. The annualized distribution yield is calculated by summing the last 30 days of income at a given month end and annualizing to a 360-day year. The result is divided by the ending maximum offering price.
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.
Consumer Price Index (CPI) – Index that measures prices of a fixed basket of goods bought by a typical consumer, including food,
transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. Also known as the cost-of-living index.
Core CPI – Consumer Price Index minus the energy and food components.
Core PCE Price Index – Personal Consumption Expenditures (PCE) prices excluding food and energy.
Duration – A bond’s sensitivity to interest rates. 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
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 Bond – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Gross Domestic Product (GDP) – A country’s income minus foreign investments: the total value of all goods and services produced within a country in a year, minus net income from investments in other countries.
Quantitative Easing – The Federal Reserve’s monetary policy used to stimulate the U.S. economy following the recession that began in 2007/08.
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.
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 often fail to stack up over longer periods of time.
We apply time-tested techniques to manage risk and pursue attractive returns. These include:
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment 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 or call 800.847.0200.
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 0.74%, as disclosed in the most recent Prospectus.
Average Annual Total Returns For Periods Ended September 30, 2012 | ||||||||||||||||||||
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 9/28/84) | ||||||||||||||||||||
Without sales charge | 4.36 | % | 4.16 | % | 4.71 | % | 3.59 | % | 5.49 | % | ||||||||||
With sales charge | 2.79 | % | 3.64 | % | 4.38 | % | 3.44 | % | 5.43 | % |
30-Day Yields, A Shares As of September 30, 2012 | ||
Annualized Distribution Yield | SEC Yield | |
1.87% | 0.73% |
Key Portfolio Attributes As of September 30, 2012 | ||||
Number of Bonds | 1,449 | |||
Effective Duration | 3.3 Yrs | |||
Average Maturity | 4.0 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 13.
This page is not part of the Annual Report. 5
Thornburg Limited Term Municipal Fund – September 30, 2012
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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 13, 2012
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 31 cents to $14.70 per share during the fiscal year ended September 30, 2012. If you were with us for the entire period, you received dividends of 31.1 cents per share. If you reinvested your dividends, you received 31.4 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 slightly underperformed the index with a total return of 4.36% at NAV for the fiscal year ended
September 30, 2012, versus 4.50% for the BofA Merrill Lynch 1–10 Year U.S. Municipal Securities Index. The Fund generated 2.04% more price appreciation, but 2.18% less income.
The market’s positive returns were primarily due to declining interest rates and narrowing credit spreads. Interest rates declined more for longer maturities; consequently longer-maturity bonds outperformed shorter-maturity bonds. As credit spreads compressed, lower-quality bonds outperformed higher-quality bonds. The Fund’s additional price appreciation is due to several factors. Our interest rate sensitivity as measured by the Fund’s duration and differing allocations along the yield curve subtracted 0.26% of relative price appreciation. Our overweight to the insured and revenue sectors subtracted 0.13%. We underweighted the general obligation and pre-refunded sectors, which added 0.79% of relative price performance. Our overweight to lower credit quality securities added 0.68% of performance relative to the benchmark. Other risk factors accounted for another 0.96%.
The Economy and the Federal Reserve
During the first quarter of the fiscal year, economic activity appeared to be picking up; the December 2011 gross domestic product (GDP) reading was a strong 4.1%. The acceleration in activity proved to be an illusion as the March and June 2012 GDP readings were 2.0% and 1.3%, respectively. Non-farm payrolls continued to grow but at rather anemic rates. The unemployment rate began the fiscal year at 9.0% and decreased to 7.8% by the end of the fiscal year. Inflation, as measured by the Consumer Price Index (CPI), is running in the 2.0% range. If one subtracts the food and energy components to arrive at core CPI, the last reading was likewise at 2.0%. But given higher readings earlier in the year, the trend shows a decline. Inflation as measured by the Personal Consumption Expenditure Index (PCE), the Federal Reserve Board’s (the Fed) favored inflation measure, is running at a core level of 1.6%. All of these economic indicators and others point to an economy on shaky footing.
In addition to these fundamental factors, many investors are concerned about the impact of the so-called “fiscal cliff”, which The Washington Post referred to as follows:
The “ fiscal cliff” is a term coined by Federal Reserve Chairman Ben S. Bernanke. It refers to a collection of changes in current law that are all set to strike in January, triggering the sharpest reduction in the federal budget deficit in more than 40 years.
Certified Annual Report 7
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
The Post goes on to say that taxes would also increase:
For most taxpayers, the bulk of the increase would be triggered by the expiration of tax cuts enacted in 2001 and 2003 during the George W. Bush administration. The expiration of President Obama’s payroll tax holiday, which shaved two percentage points off the 6.2 percent Social Security tax, comes in a close second. If these issues are not addressed many analysts think the United States will be pushed into another recession.
On top of all this, Europe is still a mess, but the fixed income markets seem not to be as headline sensitive to news coming out of Europe as they were last year. The Fed, at its last meeting decided to enter into its third round of quantitative easing – QE3. In this round, the Fed will concentrate its security purchases to the mortgage market in an effort to lower borrowing costs for homebuyers, which should spur the housing market. As anyone who has recently applied for a mortgage knows, it is not the interest cost of the product that stands as a borrower’s major roadblock. The fixed income markets’ initial reaction to the latest Fed move was an increase in inflation expectations and a decrease in bond prices, though this fear has subsided in recent weeks.
The Presidential Election and Tax Policy
Tax policy and the federal deficit have proven to be key election season issues. Both candidates have put forward their respective plans for deficit reduction; both could influence the municipal bond market. Table I shows a side-by-side analysis based on a recent article in The Bond Buyer, a leading publication on the municipal bond market.
Table I | ||
Obama | Romney | |
Extends the 2001 and 2003 tax cuts for individuals earning under $200,000 and families earning under $250,000. | Permanently extend all the 2001 and 2003 tax cuts. Eliminate taxation of investment income for individuals earning less than $200,000. | |
Returns to the Clinton Era highest marginal tax rate of 39.6% . | Lowers marginal rates across the board by 20%, eliminates the alternative minimum tax. | |
In a jobs bill he floated last October and his 2013 budget, Obama proposed to place a 28% cap on the value of tax-exempt interest for the wealthy. | Announced he would cap individual tax deductions at $17,000. Not clear if he would cap exclusions, like tax exemption, as well as deductions. | |
Bruce Bartlett, former policy adviser to President Ronald Reagan and Treasury official under President George H. W. Bush, said without a doubt Obama’s tax proposals would be more beneficial to the municipal market primarily because he wants to impose higher tax rates on the wealthy, which would make tax-exempt bonds more attractive. | While Romney has not specifically mentioned capping tax exemption, in a Wall Street Journal editorial in August, Glenn Hubbard, his senior economic adviser, said the exclusion of interest on tax-exempt municipal bonds is “on the table” for the Republican candidate. |
8 Certified Annual Report
One can see that both candidates’ potential tax policies, as known today, could influence the municipal bond market. However, as with most election rhetoric, the eventual legislation may look nothing like the campaign proposals. There are two things that people should never watch being made, sausage and legislation!
The Municipal Market
The demand picture in the municipal market improved during the fiscal year. Investors poured $56 billion into municipal bond mutual funds over the last 12 months. The total assets in municipal bond mutual funds were $562 billion, according to the Investment Company Institute, a mutual fund industry advocacy group. Assets in municipal bond mutual funds on November 30, 2010, just before the six-month period of investor exodus, were $497 billion. On the other side of the ledger, the supply picture improved. The supply of new-issue municipal bonds was $379 billion for the 12 months ended September 30, 2012. This exceeded the $329 billion for the 12 months ending September 30, 2011 by $50 billion – or a 15% increase.
The trend towards lower interest rates continued throughout this fiscal year. With short-term yields anchored near zero, investors moved out along the yield curve in search of more income. This caused long-term maturities to decrease in yield much more than short-term maturities. The average change in yield for the Thornburg Limited Term Municipal Fund’s investment universe (1–10 years) as measured by the average change in yield of a AAA general obligation bond was 0.05% for the first half of the fiscal year. In the second half of the fiscal year, the same measure of average yield change decreased 0.29%. See Graph I.
Investors, again in a search for income, have been willing to pay much more for lower quality securities than any time since 2008. This caused quality spreads to narrow and lower-quality securities to out-perform higher-quality securities. On December 30, 2011, the incremental yield an investor gained for buying a BBB security
Graph I: AAA General Obligation Municipal Yield Changes for 9/30/2011 Through 9/30/2012
Past performance does not guarantee future results.
Certified Annual Report 9
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
Past performance does not guarantee future results.
versus a AAA security with a five-year maturity was 2.48%. On September 30, 2012, that incremental yield equaled 1.63%, a 0.85% decrease. Graph II shows the quarter-by-quarter and cumulative total return performance of the BofA Merrill Lynch 1–10 Year U.S. Municipal Securities Index for the fiscal year.
The credit picture in the municipal market is still mixed. At the state level, revenues continue to increase. At the local level, which has a heavy reliance on real estate taxes, the continued decline of assessed values has put pressure on local finances. Pension funding levels continue to decline due to poor investment returns and cutbacks in the annual pension contributions. Several state and local pension plans, recognizing the unsustainability of this condition, have begun to reform their pension systems, calling for higher participant contributions, higher retirement ages, or both. These and other measures have caused us to forsake investments in the state of Illinois and Puerto Rico general obligation debt.
In the last semi-annual letter to shareholders, we noted the risks of rising interest rates. As bond portfolio managers, we are always worried. If bonds are doing well, the economy is probably doing poorly, and we worry. If the economy is doing well, we worry because yields are probably rising and bond prices are declining. Such is the life we have chosen!
The level of real yields (yield less inflation) is a measure of value for fixed income products. Real yield levels are at record lows across all fixed income products. Relative to other fixed income products, municipal bonds appear to be attractive. Graph III illustrates this measure.
The Federal Reserve tends to favor an inflation measure known as the PCE Index, and we adopt that measure in our yield calculations here. Real yield levels for a five-year AAA general obligation municipal bond using core PCE as an inflation measure are negative and at 20-year lows, so we worry. At the same time, we are reminded of a famous quote by John Maynard Keynes, “The market can stay irrational longer than you can
10 Certified Annual Report
Past performance does not guarantee future results.
stay solvent.” Solvency is not an issue, of course, but Graph III would suggest rationality is. This state of affairs can continue for some time, but it is still a risk. The long-term average real yield for a five-year AAA municipal general obligation bond is 1.45%, meaning that since May 1991, investors have demanded 1.45% above the core PCE inflation rate to invest in five-year AAA general obligation bonds. The current yield on a five-year AAA municipal general obligation bond is 0.62%. If this relationship were return to the average long-term real yield level, one of three things would have to happen. First, five-year interest rates would need to increase about 2.50%. Second, inflation would need to decrease by about 2.50%. Neither of these two outcomes would be pleas-ant. Third, some combination of the two prior outcomes could occur, which also promises to be unpleasant. Investors should use this information to recognize the risk inherent in fixed income products at these historically low yield levels. They should take this opportunity to review their portfolios and determine whether their portfolios are properly diversified. In addition, they should ask themselves if they have an appropriate time horizon in mind for their investments. We suggest two to three years from the point that question is asked.
Certified Annual Report 11
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
Conclusion
Your Thornburg Limited Term Municipal Fund currently consists of a laddered portfolio structure of over 1,440 securities. We ladder our core portfolios because we believe this structure has the potential to maximize an investor’s income. In fact, in an internal study of portfolio structures (using indices as proxies for portfolios) extending back to 1997, a hypothetical laddered portfolio structure outperformed bullet and barbell structures approximately 2/3 of the time (for a copy of the study, go to www.thornburg.com/whyladder). Past performance does not guarantee future results, of course. The laddered structure manages a portfolio’s yield curve exposure with a roughly equal weighting of each maturity, thereby mitigating a major risk factor. Graph I illustrates that yield changes are not uniform across the Limited Term Municipal Fund’s investment universe. Laddering also reduces reinvestment risk by ensuring that a portion of the portfolio matures each year, so it can be reinvested. Graph IV describes the percentages of your Fund’s bond port-folio maturing in each of the coming years. We thank you for the trust you have placed with us and will continue to keep that foremost in our minds.
Sincerely,
Christopher Ihlefeld | Christopher Ryon, CFA | Josh Gonze | ||
Portfolio Manager | Portfolio Manager | 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.
12 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
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 — 1.55% | ||||||||||||
Alabama Public School and College Authority, 5.00% due 5/1/2013 (Education System Capital Improvements) | AA/Aa1 | $ | 5,000,000 | $ | 5,139,800 | |||||||
Alabama Public School and College Authority, 5.00% due 5/1/2015 (Education System Capital Improvements) | NR/Aa1 | 8,530,000 | 9,514,789 | |||||||||
Alabama Public School and College Authority, 5.00% due 5/1/2016 (Education System Capital Improvements) | AA/Aa1 | 5,000,000 | 5,783,100 | |||||||||
Alabama State Board of Education, 3.00% due 5/1/2017 (Calhoun Community College) | NR/A1 | 2,070,000 | 2,213,969 | |||||||||
Alabama State Board of Education, 3.00% due 5/1/2018 (Calhoun Community College) | NR/A1 | 2,130,000 | 2,275,969 | |||||||||
Alabama State Board of Education, 4.00% due 5/1/2019 (Calhoun Community College) | NR/A1 | 2,195,000 | 2,459,607 | |||||||||
Alabama State Board of Education, 4.00% due 5/1/2020 (Calhoun Community College) | NR/A1 | 1,000,000 | 1,117,550 | |||||||||
Alabama State Board of Education, 4.00% due 5/1/2021 (Calhoun Community College) | NR/A1 | 1,000,000 | 1,105,300 | |||||||||
Alabama State Board of Education, 4.00% due 5/1/2022 (Calhoun Community College) | NR/A1 | 1,230,000 | 1,355,595 | |||||||||
City of Birmingham GO, 5.00% due 10/1/2013 (Government Services; Insured: MBIA) | AA/Aa2 | 2,500,000 | 2,611,125 | |||||||||
City of Birmingham GO, 5.00% due 2/1/2015 (Government Services) | AA/Aa2 | 4,240,000 | 4,643,436 | |||||||||
City of Birmingham GO, 4.00% due 8/1/2015 (Government Services) | AA/Aa2 | 3,005,000 | 3,264,422 | |||||||||
City of Birmingham GO, 5.00% due 2/1/2016 (Government Services) | AA/Aa2 | 3,775,000 | 4,274,659 | |||||||||
City of Birmingham GO, 4.00% due 8/1/2016 (Government Services) | AA/Aa2 | 3,645,000 | 4,056,812 | |||||||||
City of Birmingham GO, 5.00% due 2/1/2017 (Government Services) | AA/Aa2 | 2,045,000 | 2,382,180 | |||||||||
City of Birmingham GO, 4.00% due 8/1/2017 (Government Services) | AA/Aa2 | 2,760,000 | 3,127,991 | |||||||||
City of Birmingham GO, 5.00% due 2/1/2018 (Government Services) | AA/Aa2 | 2,000,000 | 2,379,480 | |||||||||
City of Mobile Industrial Development Board PCR, 1.65% due 6/1/2034 put 3/20/2017 (Alabama Power Company Barry Plant Project) | A/A2 | 6,000,000 | 6,129,900 | |||||||||
City of Mobile Industrial Development Board Pollution Control, 5.00% due 6/1/2034 put 3/19/2015 (Alabama Power Company Barry Plant Project) | A/A2 | 6,000,000 | 6,585,720 | |||||||||
City of Mobile Private Placement Warrants GO, 4.50% due 8/15/2016 (Senior Center) | NR/NR | 1,420,000 | 1,480,236 | |||||||||
City of Mobile Warrants GO, 5.00% due 2/15/2019 (City Capital Improvements) | AA-/Aa2 | 2,000,000 | 2,365,360 | |||||||||
East Alabama Health Care Authority GO, 5.00% due 9/1/2021 | A/NR | 1,245,000 | 1,455,305 | |||||||||
East Alabama Health Care Authority GO, 5.00% due 9/1/2022 | A/NR | 800,000 | 927,872 | |||||||||
Montgomery Waterworks and Sanitation, 5.00% due 9/1/2016 | AAA/Aa1 | 2,080,000 | 2,424,760 | |||||||||
Montgomery Waterworks and Sanitation, 5.00% due 9/1/2019 | AAA/Aa1 | 3,375,000 | 4,060,631 | |||||||||
Town of Courtland Industrial Development Board, 4.75% due 5/1/2017 (Solid Waste Disposal-International Paper Company Project) | BBB/NR | 5,000,000 | 5,251,300 | |||||||||
University of Alabama at Birmingham Hospital, 5.25% due 9/1/2017 | A+/A1 | 2,500,000 | 2,869,950 | |||||||||
University of Alabama at Birmingham Hospital, 5.00% due 9/1/2018 | A+/A1 | 1,500,000 | 1,729,980 | |||||||||
ALASKA — 0.66% | ||||||||||||
Alaska Energy Power Authority, 6.00% due 7/1/2013 (Bradley Lake Hydroelectric; Insured: AGM) | AA-/Aa2 | 1,600,000 | 1,660,944 | |||||||||
Alaska Housing Finance Corp. GO, 5.00% due 12/1/2018 (Insured: Natl-Re) | AA+/Aa2 | 2,000,000 | 2,357,060 | |||||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2014 | AA+/Aa3 | 2,000,000 | 2,136,480 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2015 | AA+/Aa3 | $ | 1,900,000 | $ | 2,110,596 | |||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2016 | AA+/Aa3 | 1,000,000 | 1,144,460 | |||||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2017 | AA+/Aa3 | 3,000,000 | 3,532,110 | |||||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2018 | AA+/Aa3 | 2,455,000 | 2,953,758 | |||||||||
Alaska Municipal Bond Bank, 5.00% due 6/1/2014 (Insured: Natl-Re) (State Aid Withholding) | AA/Aa2 | 1,175,000 | 1,264,418 | |||||||||
North Slope Boro GO, 5.00% due 6/30/2015 (Insured: Natl-Re) | AA-/Aa3 | 3,250,000 | 3,642,112 | |||||||||
North Slope Boro GO, 5.00% due 6/30/2017 (Insured: Natl-Re) | AA-/Aa3 | 8,800,000 | 10,491,976 | |||||||||
Valdez Alaska Marine Terminal, 5.00% due 1/1/2021 (BP Pipelines, Inc.) | A/A2 | 7,000,000 | 8,367,450 | |||||||||
ARIZONA — 3.30% | ||||||||||||
Arizona Board of Regents COP, 5.00% due 7/1/2018 (Arizona State University; Insured: Natl-Re) | AA-/A1 | 1,285,000 | 1,471,698 | |||||||||
Arizona Board of Regents COP, 5.00% due 7/1/2019 (Arizona State University; Insured: Natl-Re) | AA-/A1 | 3,735,000 | 4,263,017 | |||||||||
Arizona Board of Regents COP, 5.00% due 6/1/2022 (University of Arizona) | AA-/Aa3 | 6,080,000 | 7,368,778 | |||||||||
Arizona HFA, 5.25% due 1/1/2018 (Banner Health) | AA-/NR | 3,500,000 | 4,163,110 | |||||||||
Arizona HFA, 5.00% due 7/1/2018 (Catholic Health Care West) | A/A2 | 1,470,000 | 1,700,055 | |||||||||
Arizona HFA, 5.00% due 7/1/2019 (Catholic Health Care West) | A/A2 | 1,365,000 | 1,582,854 | |||||||||
Arizona HFA, 5.00% due 7/1/2020 (Catholic Health Care West) | A/A2 | 1,290,000 | 1,488,492 | |||||||||
Arizona Lottery, 5.00% due 7/1/2018 (Insured: AGM) | AA-/Aa3 | 8,370,000 | 10,067,352 | |||||||||
Arizona Lottery, 5.00% due 7/1/2020 (Insured: AGM) | AA-/Aa3 | 8,000,000 | 9,803,680 | |||||||||
Arizona School Facilities Board, 5.00% due 7/1/2016 (Insured: AMBAC) | NR/NR | 5,775,000 | 6,391,366 | |||||||||
Arizona Transportation Board, 5.00% due 7/1/2019 | AA+/Aa2 | 3,500,000 | 4,332,755 | |||||||||
Arizona Transportation Board, 5.00% due 7/1/2021 | AA+/Aa2 | 7,465,000 | 9,409,782 | |||||||||
Arizona Transportation Board, 5.00% due 7/1/2022 | AA+/Aa2 | 5,000,000 | 6,215,450 | |||||||||
City of Chandler, 3.00% due 7/1/2013 | AA/Aa3 | 1,905,000 | 1,942,890 | |||||||||
City of Chandler, 3.00% due 7/1/2014 | AA/Aa3 | 2,790,000 | 2,911,449 | |||||||||
City of Phoenix Civic Improvement Corp., 3.00% due 7/1/2013 | A+/A1 | 1,000,000 | 1,019,400 | |||||||||
Glendale IDA, 5.00% due 5/15/2015 (Midwestern University) | A-/NR | 1,000,000 | 1,083,870 | |||||||||
Glendale IDA, 5.00% due 5/15/2016 (Midwestern University) | A-/NR | 1,325,000 | 1,472,367 | |||||||||
Glendale IDA, 5.00% due 5/15/2017 (Midwestern University) | A-/NR | 1,440,000 | 1,630,224 | |||||||||
Glendale Western Loop 101 Public Facilities Corp., 6.00% due 7/1/2019 | AA/A3 | 2,200,000 | 2,344,650 | |||||||||
Maricopa County IDA Health Facilities, 4.125% due 7/1/2015 (Catholic Health Care West) | A/A2 | 1,000,000 | 1,081,380 | |||||||||
Maricopa County IDA Health Facilities, 5.00% due 7/1/2038 put 7/1/2014 (Catholic Health | ||||||||||||
Care West) | A/A2 | 7,500,000 | 7,969,875 | |||||||||
Mesa Highway GO, 3.25% due 7/1/2016 | AA+/Aa3 | 10,000,000 | 10,464,600 | |||||||||
Mohave County IDA, 5.00% due 4/1/2014 (Mohave Prison LLC; Insured: Syncora) (ETM) | AA+/NR | 3,135,000 | 3,353,635 | |||||||||
Mohave County IDA, 7.25% due 5/1/2015 (Mohave Prison LLC) | BBB+/NR | 12,100,000 | 13,434,993 | |||||||||
Navajo County PCR, 5.50% due 6/1/2034 put 6/1/2014 (Arizona Public Service Co.) | BBB/Baa1 | 1,600,000 | 1,708,976 | |||||||||
Navajo County PCR, 5.50% due 6/1/2034 put 6/1/2014 (Arizona Public Service Co.) | BBB/Baa1 | 2,600,000 | 2,767,674 | |||||||||
Navajo County PCR, 5.75% due 6/1/2034 put 6/1/2016 (Arizona Public Service Co.) | BBB/Baa1 | 9,700,000 | 10,942,570 | |||||||||
Northern Arizona University COP, 5.00% due 9/1/2019 (Insured: AMBAC) | A/A2 | 3,500,000 | 3,665,865 | |||||||||
Pima County IDA, 6.40% due 7/1/2013 (Arizona Charter Schools) | NR/Baa3 | 190,000 | 190,828 | |||||||||
Pima County IDA, 5.00% due 7/1/2016 (Metro Police Facility) | AA/Aa3 | 2,500,000 | 2,798,600 | |||||||||
a Pima County IDA, 5.00% due 7/1/2017 (Metro Police Facility) | AA/Aa3 | 3,000,000 | 3,424,830 | |||||||||
Pima County IDA, 5.00% due 7/1/2018 (Metro Police Facility) | AA/Aa3 | 3,285,000 | 3,798,150 | |||||||||
Pima County IDA, 5.00% due 7/1/2019 (Metro Police Facility) | AA/Aa3 | 2,000,000 | 2,332,780 | |||||||||
Pima County Sewer, 4.00% due 7/1/2014 | A+/NR | 1,500,000 | 1,586,205 | |||||||||
Pima County Sewer, 5.00% due 7/1/2015 | A+/NR | 1,250,000 | 1,390,750 | |||||||||
Pima County Sewer, 5.00% due 7/1/2016 | A+/NR | 2,000,000 | 2,295,940 | |||||||||
Pima County Sewer, 4.50% due 7/1/2017 (Insured: AGM) | AA-/Aa3 | 5,000,000 | 5,831,500 | |||||||||
Pima County Sewer, 5.00% due 7/1/2017 | A+/NR | 2,750,000 | 3,240,270 | |||||||||
Pima County Sewer, 5.00% due 7/1/2018 | A+/NR | 2,000,000 | 2,403,120 | |||||||||
Pima County Sewer, 5.00% due 7/1/2018 (Insured: AGM) | AA-/Aa3 | 5,000,000 | 6,046,350 | |||||||||
Salt River Agricultural Improvement & Power District, 3.00% due 1/1/2014 | AA/Aa1 | 11,275,000 | 11,652,712 | |||||||||
Scottsdale IDA, 5.00% due 9/1/2019 (Scottsdale Healthcare) | A-/A3 | 6,885,000 | 7,693,230 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Town of Gilbert Public Facilities Municipal Property Corporation, 3.00% due 7/1/2015 | AA/Aa2 | $ | 1,080,000 | $ | 1,142,856 | |||||||
University Arizona Medical Center Corp. GO, 5.00% due 7/1/2014 | BBB+/Baa1 | 1,000,000 | 1,059,410 | |||||||||
Yuma Property Corp. Utility Systems, 5.00% due 7/1/2016 (Insured: Syncora) | A+/A1 | 2,000,000 | 2,259,540 | |||||||||
Yuma Property Corp. Utility Systems, 5.00% due 7/1/2018 (Insured: Syncora) | A+/A1 | 2,130,000 | 2,433,205 | |||||||||
ARKANSAS — 0.28% | ||||||||||||
Fort Smith Water & Sewer, 2.00% due 10/1/2013 (Insured: AGM) | AA-/NR | 1,000,000 | 1,013,800 | |||||||||
Fort Smith Water & Sewer, 3.00% due 10/1/2014 (Insured: AGM) | AA-/NR | 1,000,000 | 1,048,040 | |||||||||
Fort Smith Water & Sewer, 3.50% due 10/1/2016 (Insured: AGM) | AA-/NR | 1,370,000 | 1,516,193 | |||||||||
Fort Smith Water & Sewer, 3.50% due 10/1/2017 (Insured: AGM) | AA-/NR | 1,930,000 | 2,167,139 | |||||||||
Fort Smith Water & Sewer, 4.00% due 10/1/2018 (Insured: AGM) | AA-/NR | 1,000,000 | 1,156,350 | |||||||||
Fort Smith Water & Sewer, 4.00% due 10/1/2019 (Insured: AGM) | AA-/NR | 1,670,000 | 1,941,325 | |||||||||
Jefferson County Hospital, 4.00% due 6/1/2015 (Jefferson Regional Medical Center; Insured: AGM) | AA-/NR | 1,205,000 | 1,289,470 | |||||||||
Jefferson County Hospital, 4.00% due 6/1/2016 (Jefferson Regional Medical Center; Insured: | ||||||||||||
AGM) | AA-/NR | 1,395,000 | 1,501,745 | |||||||||
Jefferson County Hospital, 4.00% due 6/1/2017 (Jefferson Regional Medical Center; Insured: AGM) | AA-/NR | 1,375,000 | 1,486,691 | |||||||||
Jefferson County Hospital, 4.50% due 6/1/2018 (Jefferson Regional Medical Center; Insured: AGM) | AA-/NR | 1,495,000 | 1,667,045 | |||||||||
Jefferson County Hospital, 4.50% due 6/1/2019 (Jefferson Regional Medical Center; Insured: AGM) | AA-/NR | 1,580,000 | 1,760,689 | |||||||||
CALIFORNIA — 9.83% | ||||||||||||
Alameda County COP, 5.00% due 12/1/2017 (Santa Rita Jail; Insured: AMBAC) | AA/NR | 1,000,000 | 1,180,730 | |||||||||
Anaheim Public Financing Authority, 5.25% due 10/1/2018 (Electric Systems Generation; Insured: AGM) | AA-/Aa3 | 1,560,000 | 1,566,115 | |||||||||
Anaheim Public Financing Authority, 0% due 9/1/2022 (Public Facility Improvements; Insured: AGM) | AA-/Aa3 | 3,250,000 | 2,225,925 | |||||||||
Brentwood Infrastructure, 2.00% due 11/1/2015 (Insured: AGM) | AA-/NR | 520,000 | 527,134 | |||||||||
Brentwood Infrastructure, 4.00% due 11/1/2016 (Insured: AGM) | AA-/NR | 325,000 | 351,917 | |||||||||
Brentwood Infrastructure, 5.00% due 11/1/2017 (Insured: AGM) | AA-/NR | 965,000 | 1,097,765 | |||||||||
Brentwood Infrastructure, 5.25% due 11/1/2018 (Insured: AGM) | AA-/NR | 1,020,000 | 1,185,260 | |||||||||
Brentwood Infrastructure, 5.25% due 11/1/2019 (Insured: AGM) | AA-/NR | 725,000 | 851,143 | |||||||||
Cabrillo USD GO, 0% due 8/1/2015 (Educational Facilities Projects; Insured: AMBAC) | NR/NR | 1,000,000 | 963,420 | |||||||||
Calexico USD COP, 5.75% due 9/1/2013 | A-/NR | 590,000 | 607,446 | |||||||||
California Educational Facilities Authority, 5.00% due 4/1/2017 (Pitzer College) | NR/A3 | 1,460,000 | 1,667,072 | |||||||||
California Educational Facilities Authority, 5.00% due 4/1/2021 (Chapman University) | NR/A2 | 4,870,000 | 5,825,884 | |||||||||
California HFFA, 5.50% due 2/1/2017 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | A-/NR | 2,575,000 | 2,902,926 | |||||||||
California HFFA, 5.50% due 2/1/2019 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | A-/NR | 2,865,000 | 3,328,643 | |||||||||
California HFFA, 5.75% due 2/1/2020 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | A-/NR | 1,975,000 | 2,343,515 | |||||||||
California HFFA, 5.00% due 3/1/2020 (Catholic Healthcare West Health Facilities) | A/A2 | 4,400,000 | 5,214,308 | |||||||||
California HFFA, 5.75% due 2/1/2021 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | A-/NR | 1,695,000 | 2,005,863 | |||||||||
California HFFA, 5.00% due 3/1/2021 (Catholic Healthcare West Health Facilities) | A/A2 | 3,450,000 | 4,064,755 | |||||||||
California HFFA, 5.25% due 3/1/2022 (Catholic Healthcare West Health Facilities) | A/A2 | 7,020,000 | 8,333,863 | |||||||||
California HFFA, 5.00% due 7/1/2027 put 7/1/2014 (Catholic Healthcare West Health Facilities) | A/A2 | 3,500,000 | 3,727,500 | |||||||||
California HFFA, 5.00% due 7/1/2028 put 7/1/2014 (Catholic Healthcare West Health Facilities) | A/A2 | 2,000,000 | 2,130,000 | |||||||||
California Infrastructure & Economic Development Bank, 0.16% due 9/1/2037 put 10/1/2012 (Los Angeles County Museum of Natural History Foundation; LOC: Wells Fargo Bank) (daily demand notes) | AA-/Aa1 | 21,265,000 | 21,265,000 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
California PCR Financing Authority, 0.20% due 11/1/2026 put 10/1/2012 (Pacific Gas & Electric; LOC: JPMorgan Chase Bank) (daily demand notes) | AA+/NR | $ | 6,300,000 | $ | 6,300,000 | |||||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: Natl-Re) | BBB/A2 | 895,000 | 898,661 | |||||||||
California State Department of Water Resources, 5.00% due 5/1/2015 | AA-/Aa3 | 5,000,000 | 5,582,750 | |||||||||
California State Department of Water Resources, 5.00% due 5/1/2016 | AA-/Aa3 | 5,000,000 | 5,796,050 | |||||||||
California State Economic Recovery GO, 5.00% due 7/1/2018 | A+/Aa3 | 4,000,000 | 4,898,160 | |||||||||
California State Economic Recovery GO, 5.00% due 7/1/2020 | A+/Aa3 | 4,200,000 | 5,148,948 | |||||||||
California State GO, 4.75% due 4/1/2018 (Various Purposes) | A-/A1 | 1,250,000 | 1,482,937 | |||||||||
California State GO, 5.00% due 9/1/2020 (Tax-Exempt Various Purposes) | A-/A1 | 10,000,000 | 12,265,000 | |||||||||
California State GO, 5.00% due 9/1/2021 (Tax-Exempt Various Purposes) | A-/A1 | 5,000,000 | 6,163,700 | |||||||||
California State GO, 0.16% due 5/1/2034 put 10/1/2012 (Kindergarten University Public Education Facilities; LOC: State Street B&T Co.) (daily demand notes) | AA-/Aa2 | 1,500,000 | 1,500,000 | |||||||||
California State Housing Finance Agency, 2.50% due 12/1/2017 (One Santa Fe Apartments- MFH; Collateralized: GNMA) | NR/Aaa | 1,725,000 | 1,773,438 | |||||||||
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 | 3,499,800 | |||||||||
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 | 3,573,660 | |||||||||
California State Public Works Board, 5.00% due 11/1/2017 (California State University) | BBB+/Aa3 | 3,000,000 | 3,520,050 | |||||||||
California State Public Works Board, 5.00% due 11/1/2018 (California State University) | BBB+/Aa3 | 2,700,000 | 3,219,480 | |||||||||
California State Public Works Board, 5.00% due 10/1/2020 (California State University) | BBB+/A2 | 1,000,000 | 1,215,610 | |||||||||
California State Public Works Board, 5.00% due 10/1/2021 (Various Department Projects) | BBB+/A2 | 1,000,000 | 1,211,980 | |||||||||
California State School Cash Reserve Program Authority, 2.00% due 10/31/2012 | SP-1+/NR | 1,000,000 | 1,001,520 | |||||||||
California State School Cash Reserve Program Authority, 2.00% due 12/31/2012 | SP-1+/NR | 8,000,000 | 8,033,360 | |||||||||
California State School Cash Reserve Program Authority, 2.00% due 12/31/2012 | SP-1+/NR | 5,500,000 | 5,522,935 | |||||||||
California Statewide Community Development Authority, 5.00% due 6/15/2013 | A-/A1 | 9,500,000 | 9,818,725 | |||||||||
California Statewide Community Development Authority, 5.00% due 4/1/2019 (Kaiser Credit Group) | A+/NR | 27,000,000 | 32,256,630 | |||||||||
California Statewide Community Development Authority, 5.00% due 7/1/2020 (Aspire Public Schools; Insured: College for Certain LLC) | NR/NR | 2,100,000 | 2,112,159 | |||||||||
California Statewide Community Development Authority PCR, 4.10% due 4/1/2028 put 4/1/2013 (Southern California Edison County; Insured: Syncora) | A/A1 | 1,000,000 | 1,018,250 | |||||||||
Castaic USD GO, 0% due 5/1/2018 (Insured: Natl-Re/FGIC) | A+/NR | 7,000,000 | 5,618,060 | |||||||||
Centinela Valley USD GO, 4.00% due 12/1/2013 | SP-1+/NR | 5,665,000 | 5,885,142 | |||||||||
Central Valley Financing Authority, 5.00% due 7/1/2017 (Carson Ice) | A+/A1 | 600,000 | 694,596 | |||||||||
Central Valley Financing Authority, 5.00% due 7/1/2019 (Carson Ice) | A+/A1 | 1,750,000 | 2,086,437 | |||||||||
Chula Vista COP, 5.25% due 3/1/2018 | A-/NR | 1,170,000 | 1,338,468 | |||||||||
Chula Vista COP, 5.25% due 3/1/2019 | A-/NR | 1,235,000 | 1,427,648 | |||||||||
Clovis USD GO, 0% due 8/1/2019 (Insured: Natl-Re/FGIC) | AA/NR | 2,685,000 | 2,236,175 | |||||||||
Escondido Union High School District GO, 0% due 11/1/2020 | BBB/Baa2 | 2,655,000 | 1,961,169 | |||||||||
Golden State Tobacco Securitization Corp., 5.50% due 6/1/2043 pre-refunded 6/1/2013 | AA+/Aaa | 2,000,000 | 2,071,180 | |||||||||
Inland Valley Development Agency, 5.25% due 4/1/2013 (ETM) | NR/NR | 2,000,000 | 2,050,460 | |||||||||
Inland Valley Development Agency, 5.50% due 4/1/2014 (ETM) | NR/NR | 2,000,000 | 2,153,240 | |||||||||
Irvine USD, 5.25% due 9/1/2017 (Community Facilities District 86; Insured: AGM) | AA-/NR | 5,000,000 | 5,803,450 | |||||||||
Irvine USD, 5.25% due 9/1/2018 (Community Facilities District 86; Insured: AGM) | AA-/NR | 3,000,000 | 3,534,210 | |||||||||
Irvine USD, 5.25% due 9/1/2019 (Community Facilities District 86; Insured: AGM) | AA-/NR | 3,000,000 | 3,572,640 | |||||||||
Kern Community College District COP, 4.00% due 4/1/2014 | SP-1+/NR | 12,000,000 | 12,537,600 | |||||||||
Los Angeles Convention and Exhibition Center Authority, 5.00% due 8/15/2018 | A+/A2 | 2,095,000 | 2,408,810 | |||||||||
Los Angeles County Public Works Authority, 5.00% due 8/1/2019 (Multiple Capital Projects) | A+/A1 | 17,935,000 | 21,306,601 | |||||||||
Los Angeles County Public Works Financing Authority, 5.00% due 8/1/2018 (Multiple Capital Projects) | A+/A1 | 4,000,000 | 4,716,400 | |||||||||
Los Angeles Department of Water & Power, 0.18% due 7/1/2034 put 10/1/2012 (SPA: Wells Fargo Bank N.A.) (daily demand notes) | AA-/Aa3 | 2,100,000 | 2,100,027 | |||||||||
Los Angeles USD COP, 5.00% due 10/1/2017 (Information Technology; Insured: AMBAC) | A+/A1 | 2,445,000 | 2,844,513 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Los Angeles USD COP, 5.50% due 12/1/2018 (Educational Facilities Improvements) | A+/A1 | $ | 4,600,000 | $ | 5,548,520 | |||||||
Los Angeles USD COP, 5.50% due 12/1/2019 (Educational Facilities Improvements) | A+/A1 | 7,040,000 | 8,563,034 | |||||||||
Los Angeles USD GO, 5.00% due 7/1/2018 (Educational Facilities Improvements; Insured: AGM) | AA/Aa2 | 4,000,000 | 4,770,440 | |||||||||
Monterey County COP, 5.00% due 8/1/2016 (Insured: AGM) | AA/Aa3 | 1,435,000 | 1,629,127 | |||||||||
Monterey County COP, 5.00% due 8/1/2018 (Insured: AGM) | AA/Aa3 | 2,260,000 | 2,657,331 | |||||||||
Mount San Antonio Community College GO, 0% due 8/1/2017 | AA/Aa2 | 5,000,000 | 4,562,550 | |||||||||
Newport Beach, 5.00% due 12/1/2038 put 2/7/2013 (Hoag Memorial Hospital) | AA/Aa3 | 3,000,000 | 3,049,350 | |||||||||
Northern California Power Agency, 5.00% due 7/1/2017 (Hydroelectric Project) | A+/A2 | 1,000,000 | 1,186,450 | |||||||||
Northern California Power Agency, 5.00% due 6/1/2018 (Lodi Energy Center) | A-/A3 | 4,480,000 | 5,354,182 | |||||||||
Northern California Power Agency, 5.00% due 7/1/2019 (Hydroelectric Project) | A+/A2 | 1,000,000 | 1,223,430 | |||||||||
Northern California Power Agency, 5.00% due 7/1/2020 (Hydroelectric Project) | A+/A2 | 1,325,000 | 1,587,588 | |||||||||
Orange County Public Financing Authority, 5.00% due 7/1/2017 | A+/Aa3 | 1,245,000 | 1,470,768 | |||||||||
Palo Alto USD GO, 0% due 8/1/2019 | AAA/Aa1 | 1,000,000 | 858,550 | |||||||||
Palomar Community College District GO, 0% due 8/1/2021 Pittsburgh Redevelopment Agency, 5.00% due 8/1/2018 (Los Medanos Community | AA-/Aa2 | 2,560,000 | 1,882,317 | |||||||||
Development; Insured: Natl-Re) | BBB+/Baa2 | 5,150,000 | 5,238,168 | |||||||||
Redding Electrical Systems COP, 5.00% due 6/1/2020 (Insured: AGM) | NR/Aa3 | 3,955,000 | 4,640,797 | |||||||||
Sacramento City USD GO, 4.00% due 7/1/2019 (Educational Facilities Improvements) | A+/A1 | 5,455,000 | 6,189,407 | |||||||||
Sacramento City USD GO, 5.00% due 7/1/2021 (Educational Facilities Improvements) | A+/A1 | 3,265,000 | 3,947,711 | |||||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2017 (Procter & Gamble) | A+/A1 | 750,000 | 881,813 | |||||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2017 (Insured: AMBAC) | BBB/NR | 8,290,000 | 8,890,445 | |||||||||
Sacramento County Sanitation Districts Financing Authority, 0.21% due 12/1/2039 put 10/1/2012 (LOC: Morgan Stanley) (daily demand notes) | AAA/Aa3 | 12,425,000 | 12,425,000 | |||||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2016 (Cosumnes Project; Insured: Natl-Re) | BBB/A3 | 4,870,000 | 5,373,996 | |||||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2019 (Cosumnes Project; Insured: Natl-Re) | BBB/A3 | 5,000,000 | 5,507,000 | |||||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2020 (Cosumnes Project; Insured: Natl-Re) | BBB/A3 | 8,675,000 | 9,482,295 | |||||||||
San Diego Convention Center Expansion Financing Authority, 5.00% due 4/15/2020 | A+/NR | 4,000,000 | 4,739,040 | |||||||||
San Diego Convention Center Expansion Financing Authority, 5.00% due 4/15/2021 | A+/NR | 3,000,000 | 3,556,170 | |||||||||
San Diego Convention Center Expansion Financing Authority, 5.00% due 4/15/2022 | A+/NR | 8,000,000 | 9,448,640 | |||||||||
San Diego Redevelopment Agency, 4.50% due 9/1/2019 (Centre City Redevelopment; Insured: AMBAC) | NR/Ba1 | 1,240,000 | 1,305,695 | |||||||||
San Diego USD GO, 5.50% due 7/1/2020 (Insured: Natl-Re) | AA-/Aa2 | 10,000,000 | 12,788,500 | |||||||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: AGM) | AA-/Aa2 | 7,600,000 | 6,064,876 | |||||||||
San Jose Redevelopment Agency, 6.00% due 8/1/2015 (Insured: Natl-Re) | BBB/Baa2 | 2,780,000 | 3,022,194 | |||||||||
San Luis & Delta-Mendota Water Authority, 4.50% due 3/1/2014 (DHCCP Development Project) | A+/NR | 3,900,000 | 4,092,660 | |||||||||
Santa Ana Financing Authority, 6.25% due 7/1/2018 (Police Administration & Holding Facility; Insured: Natl-Re) | BBB/Baa2 | 4,035,000 | 4,709,612 | |||||||||
Santa Ana USD GO, 0% due 8/1/2019 (Insured: Natl-Re/FGIC) | BBB/NR | 3,425,000 | 2,829,461 | |||||||||
Santa Clara County Financing Authority, 4.00% due 5/15/2014 (Multiple Facilities) | AA/A1 | 4,245,000 | 4,470,834 | |||||||||
Solano County COP, 5.00% due 11/15/2017 | AA-/A1 | 1,580,000 | 1,842,628 | |||||||||
Southeast Resource Recovery Facilities Authority, 5.25% due 12/1/2017 (Insured: AMBAC) | A+/A1 | 2,000,000 | 2,089,920 | |||||||||
State of California, 2.50% due 6/20/2013 (General Fund Cash Management) | SP-1+/Mig1 | 64,700,000 | 65,739,729 | |||||||||
State of California GO, 0.17% due 5/1/2034 put 10/1/2012 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa2 | 40,200,000 | 40,200,000 | |||||||||
State of California GO, 0.20% due 5/1/2034 put 10/1/2012 (Kindergarten University Facilities; LOC: Citibank N.A./California State Teachers’ Retirement System) (daily demand notes) | A/Aa3 | 2,500,000 | 2,500,000 | |||||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2018 (Tuolumne Co.) | A+/A2 | 2,000,000 | 2,376,020 | |||||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2019 (Tuolumne Co.) | A+/A2 | 2,000,000 | 2,412,640 | |||||||||
Tustin Community Redevelopment Agency, 4.00% due 9/1/2017 (Tustin Redevelopment) | A/NR | 935,000 | 998,094 | |||||||||
Tustin Community Redevelopment Agency, 4.00% due 9/1/2019 (Tustin Redevelopment) | A/NR | 1,010,000 | 1,075,529 | |||||||||
Tustin Community Redevelopment Agency, 4.00% due 9/1/2020 (Tustin Redevelopment) | A/NR | 1,050,000 | 1,110,869 | |||||||||
Twin Rivers USD GO, 0% due 4/1/2014 (Educational Facilities Improvements) | SP-1/NR | 3,490,000 | 3,418,350 | |||||||||
Ventura County COP, 5.00% due 8/15/2016 | AA/Aa3 | 1,520,000 | 1,741,616 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Ventura County COP, 5.25% due 8/15/2017 | AA/Aa3 | $ | 1,635,000 | $ | 1,933,093 | |||||||
West Contra Costa USD GO, 0% due 8/1/2022 (Educational Facilities Projects; Insured: AGM) | AA-/Aa3 | 4,000,000 | 2,766,320 | |||||||||
West Covina Redevelopment Agency, 6.00% due 9/1/2022 (Fashion Plaza) | AA+/NR | 6,085,000 | 7,221,191 | |||||||||
COLORADO — 3.42% | ||||||||||||
Adams County Platte Valley Medical Center, 5.00% due 2/1/2015 (Brighton Community | ||||||||||||
Hospital Association; Insured: Natl-Re/FHA) | BBB/NR | 1,530,000 | 1,654,909 | |||||||||
Adams County Platte Valley Medical Center, 5.00% due 8/1/2015 (Brighton Community Hospital Association; Insured: Natl-Re/FHA) | BBB/NR | 1,565,000 | 1,716,523 | |||||||||
Beacon Point Metropolitan District, 4.375% due 12/1/2015 (LOC: Compass Bank) | BBB/NR | 970,000 | 972,454 | |||||||||
City & County of Denver Airport System, 5.00% due 11/15/2016 (Insured: Natl-Re) | A+/A1 | 1,725,000 | 2,023,960 | |||||||||
City & County of Denver Airport System, 5.00% due 11/15/2017 (Insured: Natl-Re) | A+/A1 | 1,000,000 | 1,203,170 | |||||||||
City & County of Denver COP, 5.00% due 5/1/2013 (Human Services Center Properties; Insured: MBIA) | AA+/Aa1 | 3,890,000 | 3,994,836 | |||||||||
City & County of Denver COP, 5.00% due 5/1/2014 (Human Services Center Properties; Insured: MBIA) | AA+/Aa1 | 4,000,000 | 4,268,480 | |||||||||
City & County of Denver COP, 5.00% due 12/1/2016 (Buell Theatre/Jail Dormitory; Insured: Natl-Re) | AA+/Aa1 | 3,025,000 | 3,189,560 | |||||||||
City & County of Denver COP, 0.20 % due 12/1/2029 put 10/1/2012 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa1 | 44,905,000 | 44,905,000 | |||||||||
City & County of Denver COP, 0.20 % due 12/1/2031 put 10/1/2012 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa1 | 25,710,000 | 25,710,000 | |||||||||
City of Longmont, 6.00% due 5/15/2019 | AA+/NR | 3,215,000 | 4,071,058 | |||||||||
Colorado Educational & Cultural Facilities, 4.00% due 6/1/2014 (NCSL) | A/A3 | 1,300,000 | 1,357,434 | |||||||||
Colorado Educational & Cultural Facilities, 5.00% due 6/1/2016 (NCSL) | A/A3 | 1,475,000 | 1,643,386 | |||||||||
Colorado Educational & Cultural Facilities, 5.00% due 6/1/2018 (NCSL) | A/A3 | 1,625,000 | 1,883,781 | |||||||||
Colorado Educational & Cultural Facilities, 5.00% due 6/1/2020 (NCSL) | A/A3 | 1,805,000 | 2,140,225 | |||||||||
Colorado Educational & Cultural Facilities, 5.00% due 6/1/2021 (NCSL) | A/A3 | 1,000,000 | 1,180,190 | |||||||||
Colorado Educational & Cultural Facilities, 0.20% due 5/1/2037 put 10/1/2012 (National Jewish Federation; LOC: JPMorgan Chase Bank) (daily demand notes) | NR/Aa3 | 650,000 | 650,000 | |||||||||
Colorado Educational & Cultural Facilities, 0.20% due 9/1/2038 put 10/1/2012 (National Jewish Federation; LOC: JPMorgan Chase Bank) (daily demand notes) | NR/Aa3 | 950,000 | 950,000 | |||||||||
Colorado HFA, 5.00% due 11/15/2013 (Adventist Health/Sunbelt Group) | AA-/Aa3 | 2,840,000 | 2,989,952 | |||||||||
Colorado HFA, 5.00% due 11/15/2015 (Adventist Health/Sunbelt Group) | AA-/Aa3 | 2,365,000 | 2,686,049 | |||||||||
Colorado HFA, 5.25% due 5/15/2017 (Northern Colorado Medical Center; Insured: AGM) | AA-/NR | 1,185,000 | 1,387,078 | |||||||||
Colorado HFA, 5.25% due 5/15/2019 (Northern Colorado Medical Center; Insured: AGM) | AA-/NR | 2,225,000 | 2,692,206 | |||||||||
Colorado HFA, 5.50% due 10/1/2038 put 11/12/2015 (Catholic Health Initiatives) | AA/Aa2 | 1,000,000 | 1,146,260 | |||||||||
Colorado HFA, 5.00% due 7/1/2039 put 11/8/2012 (Catholic Health Initiatives) | AA/Aa2 | 3,500,000 | 3,517,885 | |||||||||
Colorado HFA, 5.00% due 7/1/2039 put 11/12/2013 (Catholic Health Initiatives) | AA/Aa2 | 7,255,000 | 7,623,336 | |||||||||
Colorado HFA, 5.00% due 7/1/2039 put 11/11/2014 (Catholic Health Initiatives) | AA/Aa2 | 3,000,000 | 3,278,460 | |||||||||
Colorado Higher Education COP, 5.00% due 11/1/2013 | AA-/Aa2 | 1,025,000 | 1,074,128 | |||||||||
Denver City & County COP, 0.20% due 12/1/2029 put 10/1/2012 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa2 | 23,310,000 | 23,310,000 | |||||||||
Denver Convention Center Hotel Authority, 5.25% due 12/1/2014 (Insured: Syncora) | BBB-/Baa3 | 3,450,000 | 3,651,756 | |||||||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2019 pre-refunded 12/1/2013 (Insured: Syncora) | NR/NR | 5,000,000 | 5,271,150 | |||||||||
Denver Convention Center Hotel Authority, 5.25% due 12/1/2021 (Insured: Syncora) | BBB-/Baa3 | 3,700,000 | 3,901,391 | |||||||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2022 pre-refunded 12/1/2013 (Insured: Syncora) | NR/NR | 2,000,000 | 2,108,460 | |||||||||
Denver Convention Center Hotel Authority, 5.25% due 12/1/2022 (Insured: Syncora) | BBB-/Baa3 | 1,000,000 | 1,046,330 | |||||||||
Denver West Metropolitan District GO, 5.00% due 12/1/2021 (Insured: AGM) | AA-/NR | 2,175,000 | 2,626,334 | |||||||||
E-470 Public Highway Authority, 0% due 9/1/2014 (Insured: Natl-Re) | BBB/Baa2 | 1,910,000 | 1,826,820 | |||||||||
Park Creek Metropolitan District, 5.00% due 12/1/2015 (Insured: AGM) | AA-/NR | 1,000,000 | 1,119,620 | |||||||||
Park Creek Metropolitan District, 5.00% due 12/1/2016 (Insured: AGM) | AA-/NR | 1,035,000 | 1,189,049 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Park Creek Metropolitan District, 5.00% due 12/1/2017 (Insured: AGM) | AA-/NR | $ | 1,525,000 | $ | 1,782,527 | |||||||
Park Creek Metropolitan District, 5.50% due 12/1/2018 (Insured: AGM) | AA-/NR | 1,200,000 | 1,461,408 | |||||||||
Park Creek Metropolitan District, 5.50% due 12/1/2019 (Insured: AGM) | AA-/NR | 1,000,000 | 1,237,220 | |||||||||
Regional Transportation District COP, 5.00% due 6/1/2018 | A-/Aa3 | 1,750,000 | 2,056,390 | |||||||||
Regional Transportation District COP, 5.00% due 6/1/2019 | A-/Aa3 | 4,730,000 | 5,634,754 | |||||||||
Regional Transportation District COP, 5.00% due 6/1/2020 | A-/Aa3 | 3,655,000 | 4,372,805 | |||||||||
Regional Transportation District COP, 5.50% due 6/1/2021 | A-/Aa3 | 2,370,000 | 2,881,375 | |||||||||
Southlands Metropolitan District GO, 6.75% due 12/1/2016 pre-refunded 12/1/2014 | AA+/NR | 745,000 | 818,494 | |||||||||
State of Colorado COP, 3.00% due 3/1/2013 (Colorado Penitentiary II Project) | AA-/Aa2 | 1,205,000 | 1,214,411 | |||||||||
State of Colorado COP, 4.00% due 3/1/2014 (Colorado Penitentiary II Project) | AA-/Aa2 | 1,285,000 | 1,334,383 | |||||||||
State of Colorado COP, 5.00% due 3/1/2016 (Colorado Penitentiary II Project) | AA-/Aa2 | 2,000,000 | 2,270,860 | |||||||||
State of Colorado COP, 5.00% due 3/1/2017 (Colorado Penitentiary II Project) | AA-/Aa2 | 2,000,000 | 2,338,700 | |||||||||
State of Colorado COP, 5.00% due 3/1/2018 (Colorado Penitentiary II Project) | AA-/Aa2 | 1,500,000 | 1,790,715 | |||||||||
CONNECTICUT — 0.79% | ||||||||||||
Connecticut Health & Educational Facilities Authority, 0.16% due 7/1/2036 put 10/1/2012 (Yale University) (daily demand notes) | AAA/Aaa | 11,400,000 | 11,400,000 | |||||||||
Connecticut Health & Educational Facilities Authority, 0.17% due 7/1/2036 put 10/1/2012 (Yale University) (daily demand notes) | AAA/Aaa | 26,030,000 | 26,030,000 | |||||||||
b State of Connecticut GO Floating Rate Note, 0.867% due 9/15/2024 (Public Improvements) | AA/Aa3 | 10,000,000 | 10,002,900 | |||||||||
DISTRICT OF COLUMBIA — 0.87% | ||||||||||||
District of Columbia, 4.00% due 4/1/2015 (National Public Radio) | AA-/Aa3 | 1,000,000 | 1,076,330 | |||||||||
District of Columbia, 5.00% due 4/1/2016 (National Public Radio) | AA-/Aa3 | 500,000 | 568,875 | |||||||||
District of Columbia, 4.00% due 4/1/2017 (National Public Radio) | AA-/Aa3 | 1,830,000 | 2,059,390 | |||||||||
District of Columbia, 5.00% due 4/1/2018 (National Public Radio) | AA-/Aa3 | 1,195,000 | 1,426,519 | |||||||||
District of Columbia, 5.00% due 4/1/2019 (National Public Radio) | AA-/Aa3 | 805,000 | 974,936 | |||||||||
District of Columbia, 5.00% due 4/1/2020 (National Public Radio) | AA-/Aa3 | 1,250,000 | 1,523,625 | |||||||||
District of Columbia Convention Center Authority, 5.00% due 10/1/2013 (Washington Convention Center; Insured: AMBAC) | A/A1 | 3,000,000 | 3,122,640 | |||||||||
District of Columbia COP, 5.25% due 1/1/2013 (Insured: AMBAC) | A/NR | 2,085,000 | 2,109,415 | |||||||||
District of Columbia COP, 5.25% due 1/1/2015 (Insured: Natl-Re/FGIC) | A/Aa3 | 2,875,000 | 3,139,672 | |||||||||
District of Columbia COP, 5.25% due 1/1/2016 (Insured: Natl-Re/FGIC) | A/Aa3 | 4,625,000 | 5,194,846 | |||||||||
District of Columbia COP, 5.00% due 1/1/2018 | A/Aa3 | 5,000,000 | 5,586,550 | |||||||||
District of Columbia COP, 5.00% due 1/1/2019 (Insured: Natl-Re) | A/Aa3 | 5,000,000 | 5,545,900 | |||||||||
District of Columbia COP, 4.50% due 1/1/2021 (Insured: Natl-Re/FGIC) | A/Aa3 | 1,100,000 | 1,196,833 | |||||||||
District of Columbia GO, 6.00% due 6/1/2018 (Insured: Natl-Re) | A+/Aa2 | 5,000,000 | 6,270,950 | |||||||||
District of Columbia GO, 5.25% due 6/1/2020 (Insured: Syncora) | A+/Aa2 | 3,005,000 | 3,759,045 | |||||||||
District of Columbia Housing Finance Agency, 5.00% due 7/1/2014 (Insured: AGM-HUD Loan) | AA-/Aa3 | 1,195,000 | 1,271,815 | |||||||||
District of Columbia Housing Finance Agency, 5.00% due 7/1/2015 (Insured: AGM-HUD Loan) | AA-/Aa3 | 1,480,000 | 1,621,962 | |||||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2014 (Dulles Toll Road; Insured: AGM) | AA-/Aa3 | 2,000,000 | 1,936,220 | |||||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2016 (Dulles Toll Road; Insured: AGM) | AA-/Aa3 | 4,000,000 | 3,628,360 | |||||||||
FLORIDA — 7.83% | ||||||||||||
Broward County, 5.00% due 9/1/2013 (Port Facilities) | A-/A2 | 2,000,000 | 2,072,900 | |||||||||
Broward County, 5.00% due 10/1/2014 (Airport, Marina & Port Improvements; Insured: AMBAC) (ETM) | NR/A1 | 1,625,000 | 1,774,370 | |||||||||
Broward County, 5.00% due 10/1/2014 (Airport, Marina & Port Improvements; Insured: AMBAC) | A+/A1 | 2,375,000 | 2,589,059 | |||||||||
Broward County, 5.00% due 9/1/2017 (Port Facilities) | A-/A2 | 2,820,000 | 3,239,108 | |||||||||
Broward County, 4.00% due 10/1/2017 (Airport, Marina & Port Improvements) | A+/A1 | 250,000 | 284,188 | |||||||||
Broward County, 5.00% due 10/1/2017 (Airport, Marina & Port Improvements) | A+/A1 | 1,000,000 | 1,185,240 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Broward County, 5.50% due 9/1/2018 (Port Facilities) | A-/A2 | $ | 3,500,000 | $ | 4,176,130 | |||||||
Broward County, 4.00% due 10/1/2018 (Airport, Marina & Port Improvements) | A+/A1 | 425,000 | 485,567 | |||||||||
Broward County, 5.00% due 10/1/2018 (Airport, Marina & Port Improvements) | A+/A1 | 500,000 | 600,190 | |||||||||
Broward County, 5.50% due 9/1/2019 (Port Facilities) | A-/A2 | 2,800,000 | 3,385,760 | |||||||||
Broward County, 5.00% due 10/1/2019 (Airport, Marina & Port Improvements) | A+/A1 | 1,000,000 | 1,207,980 | |||||||||
Broward County, 4.00% due 10/1/2020 (Airport, Marina & Port Improvements) | A+/A1 | 1,660,000 | 1,885,129 | |||||||||
Broward County, 5.00% due 10/1/2020 (Airport, Marina & Port Improvements) | A+/A1 | 2,000,000 | 2,419,320 | |||||||||
Broward County School Board COP, 5.25% due 7/1/2015 (Insured: AGM) | AA-/Aa3 | 3,035,000 | 3,378,896 | |||||||||
Broward County School Board COP, 5.00% due 7/1/2016 (Insured: AGM) | AA-/Aa3 | 1,495,000 | 1,697,827 | |||||||||
Broward County School Board COP, 5.25% due 7/1/2016 (Insured: AGM) | AA-/Aa3 | 7,630,000 | 8,734,900 | |||||||||
Broward County School Board COP, 5.25% due 7/1/2016 (Insured: AGM) | AA-/Aa3 | 3,715,000 | 4,252,969 | |||||||||
Broward County School Board COP, 5.00% due 7/1/2017 | A/Aa3 | 1,000,000 | 1,147,510 | |||||||||
Broward County School Board COP, 5.00% due 7/1/2021 | A/Aa3 | 4,000,000 | 4,737,280 | |||||||||
Broward County School Board COP, 5.00% due 7/1/2022 | A/Aa3 | 4,580,000 | 5,422,170 | |||||||||
Capital Projects Finance Authority, 5.50% due 10/1/2012 (Insured: Natl-Re) | BBB/Baa2 | 1,820,000 | 1,820,091 | |||||||||
Capital Projects Finance Authority, 5.50% due 10/1/2015 (Insured: Natl-Re) | BBB/Baa2 | 2,660,000 | 2,672,156 | |||||||||
City of Fort Myers, 5.00% due 12/1/2018 (Insured: Natl-Re) | A+/Aa3 | 2,195,000 | 2,511,234 | |||||||||
City of Gainesville, 6.50% due 10/1/2013 (Utilities Systems) | AA/Aa2 | 4,800,000 | 5,076,096 | |||||||||
City of Gainesville, 0.21% due 10/1/2026 put 10/1/2012 (Utilities Systems; SPA: SunTrust Bank) (daily demand notes) | AA/Aa2 | 5,775,000 | 5,775,000 | |||||||||
City of Gainesville, 0.23% due 10/1/2026 put 10/1/2012 (Utilities Systems; SPA: Suntrust Bank) (daily demand notes) | AA/Aa2 | 18,260,000 | 18,260,000 | |||||||||
City of Lakeland, 3.00% due 11/15/2013 (Lakeland Regional Health Systems) | NR/A2 | 1,000,000 | 1,025,420 | |||||||||
City of Lakeland, 4.00% due 11/15/2014 (Lakeland Regional Health Systems) | NR/A2 | 1,000,000 | 1,054,700 | |||||||||
City of Lakeland, 5.00% due 10/1/2016 (Energy System; Insured: AGM) | AA/Aa3 | 9,780,000 | 11,315,362 | |||||||||
City of Lakeland, 5.00% due 10/1/2017 (Energy System; Insured: AGM) | AA/Aa3 | 7,105,000 | 8,424,967 | |||||||||
City of Lakeland, 5.00% due 10/1/2019 (Energy System; Insured: AGM) | AA/Aa3 | 5,000,000 | 6,113,500 | |||||||||
City of Lakeland, 5.00% due 11/15/2019 (Lakeland Regional Health Systems) | NR/A2 | 5,640,000 | 6,586,618 | |||||||||
City of Lakeland, 5.00% due 10/1/2020 (Energy System; Insured: AGM) | AA/Aa3 | 1,695,000 | 2,082,562 | |||||||||
City of Miami, 5.00% due 1/1/2018 (Street & Sidewalk Improvement Program; Insured: Natl-Re) | A-/A2 | 1,970,000 | 2,299,955 | |||||||||
City of North Miami, 5.00% due 4/1/2013 (Johnston & Wales University; Insured: Syncora) | NR/NR | 1,530,000 | 1,555,077 | |||||||||
Collier County, 4.00% due 10/1/2014 | AA/Aa2 | 1,410,000 | 1,509,814 | |||||||||
Escambia County HFA, 5.25% due 11/15/2014 (Ascension Health Credit) | AA+/Aa1 | 1,835,000 | 2,018,243 | |||||||||
Flagler County School Board COP, 5.00% due 8/1/2014 (Insured: AGM) | AA-/Aa3 | 1,605,000 | 1,725,054 | |||||||||
Flagler County School Board COP, 5.00% due 8/1/2015 (Insured: AGM) | AA-/Aa3 | 1,500,000 | 1,667,895 | |||||||||
Florida Atlantic University Financing Corp., 5.00% due 7/1/2014 (Innovation Village Capital Improvements) | A/A1 | 1,950,000 | 2,103,251 | |||||||||
Florida Atlantic University Financing Corp., 5.00% due 7/1/2015 (Innovation Village Capital Improvements) | A/A1 | 2,395,000 | 2,658,450 | |||||||||
Florida Atlantic University Financing Corp., 5.00% due 7/1/2016 (Innovation Village Capital Improvements) | A/A1 | 2,275,000 | 2,591,725 | |||||||||
Florida Department of Management Services, 5.25% due 9/1/2016 (Insured: AGM) | AA+/Aa2 | 3,500,000 | 4,078,445 | |||||||||
Florida Higher Educational Facilities Financing Authority, 4.00% due 4/1/2013 (Nova Southeastern University) | BBB/Baa2 | 1,100,000 | 1,116,830 | |||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2014 (Nova Southeastern University) | BBB/Baa2 | 2,365,000 | 2,486,892 | |||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2015 (Nova Southeastern University) | BBB/Baa2 | 2,350,000 | 2,539,645 | |||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2016 (Nova Southeastern University) | BBB/Baa2 | 2,345,000 | 2,590,170 | |||||||||
Florida Higher Educational Facilities Financing Authority, 5.25% due 4/1/2017 (Nova Southeastern University) | BBB/Baa2 | 1,325,000 | 1,504,246 | |||||||||
Florida Higher Educational Facilities Financing Authority, 5.25% due 4/1/2018 (Nova Southeastern University) | BBB/Baa2 | 2,630,000 | 2,991,309 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2019 (University of Tampa) | BBB+/NR | $ | 1,225,000 | $ | 1,400,212 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2019 (Nova Southeastern University) | BBB/Baa2 | 1,035,000 | 1,183,036 | |||||||||
Florida Higher Educational Facilities Financing Authority, 5.50% due 4/1/2019 (Nova Southeastern University) | BBB/Baa2 | 1,705,000 | 1,972,770 | |||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2020 (Nova Southeastern University) | BBB/Baa2 | 1,030,000 | 1,180,802 | |||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2022 (University of Tampa) | BBB+/NR | 620,000 | 714,724 | |||||||||
Florida Hurricane Catastrophe Fund Finance Corp., 5.00% due 7/1/2014 | AA-/Aa3 | 11,000,000 | 11,850,300 | |||||||||
Florida State Board of Governors, 4.00% due 7/1/2020 (University System Capital Improvements) | AA/Aa2 | 4,055,000 | 4,608,548 | |||||||||
Florida State Board of Governors, 4.00% due 7/1/2021 (University System Capital Improvements) | AA/Aa2 | 4,215,000 | 4,778,672 | |||||||||
Florida State Board of Governors, 4.00% due 7/1/2022 (University System Capital Improvements) | AA/Aa2 | 4,385,000 | 4,973,730 | |||||||||
Florida State Correctional Privatization Commission COP, 5.00% due 8/1/2015 (Insured: AMBAC) | AA+/Aa2 | 2,000,000 | 2,155,900 | |||||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2012 | AA+/NR | 770,000 | 770,254 | |||||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2014 | AA+/NR | 905,000 | 969,481 | |||||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2015 | AA+/NR | 925,000 | 1,020,164 | |||||||||
Florida State Department of Transportation GO, 5.00% due 7/1/2018 | AAA/Aa1 | 3,000,000 | 3,586,440 | |||||||||
Florida State Housing Finance Corp., 1.625% due 1/1/2015 (Captiva Cove Apartments-Multi- Family Mtg; Insured: FNMA) | NR/Aaa | 1,600,000 | 1,602,480 | |||||||||
Florida Turnpike Authority, 5.00% due 7/1/2013 (Department of Transportation) | AA-/Aa3 | 4,875,000 | 5,047,282 | |||||||||
Highlands County HFA, 5.00% due 11/15/2015 (Adventist Health System/Sunbelt Group) | AA-/Aa3 | 1,000,000 | 1,129,260 | |||||||||
Highlands County HFA, 5.00% due 11/15/2016 (Adventist Health System Orange County Health Facilities) | AA-/Aa3 | 1,000,000 | 1,160,240 | |||||||||
Highlands County HFA, 5.00% due 11/15/2017 (Adventist Health System Orange County Health Facilities) | AA-/Aa3 | 3,200,000 | 3,807,872 | |||||||||
Highlands County HFA, 5.00% due 11/15/2017 (Adventist Health System/Sunbelt Group) | AA-/Aa3 | 1,000,000 | 1,127,800 | |||||||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health System Orange County Health Facilities) | AA-/Aa3 | 3,000,000 | 3,603,540 | |||||||||
Hillsborough County, 5.00% due 3/1/2015 (Water and Wastewater System Capital Improvements; Insured: Natl-Re/FGIC) | A+/A1 | 5,000,000 | 5,458,250 | |||||||||
Hillsborough County Community Investment, 5.00% due 11/1/2016 (Transportation Related Capital Improvements; Insured: AMBAC) | AA/A1 | 1,000,000 | 1,157,780 | |||||||||
Hillsborough County Community Investment, 5.00% due 11/1/2018 (Court Facilities) | AA/A1 | 4,210,000 | 5,026,740 | |||||||||
Hillsborough County Community Investment, 5.00% due 11/1/2019 (Court Facilities) | AA/A1 | 4,420,000 | 5,313,017 | |||||||||
Hillsborough County Community Investment, 5.00% due 11/1/2020 (Court Facilities) | AA/A1 | 4,645,000 | 5,623,841 | |||||||||
Hillsborough County Community Investment, 5.00% due 11/1/2021 (Court Facilities) | AA/A1 | 4,880,000 | 5,933,592 | |||||||||
Hillsborough County Community Investment, 5.00% due 11/1/2021 (Jail and Storm Water Projects) | AA/A1 | 2,300,000 | 2,796,570 | |||||||||
Hillsborough County Community Investment, 5.00% due 11/1/2022 (Jail and Storm Water Projects) | AA/A1 | 3,005,000 | 3,678,811 | |||||||||
Hillsborough County School Board COP, 5.25% due 7/1/2017 | AA-/Aa2 | 1,000,000 | 1,172,600 | |||||||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2016 (Insured: Syncora) | NR/A3 | 2,000,000 | 2,193,820 | |||||||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2017 (Insured: Syncora) | NR/A3 | 2,000,000 | 2,227,920 | |||||||||
Hollywood Water & Sewer, 5.00% due 10/1/2014 (Insured: AGM) | NR/Aa2 | 1,300,000 | 1,357,148 | |||||||||
Jacksonville Economic Development Commission, 6.00% due 9/1/2017 (Florida Proton Therapy Institute) | NR/NR | 4,500,000 | 5,122,530 | |||||||||
JEA Electric System, 5.00% due 10/1/2014 | A+/Aa3 | 7,165,000 | 7,662,967 | |||||||||
JEA Electric System, 4.00% due 10/1/2016 | A+/Aa3 | 3,540,000 | 3,986,713 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
JEA Water & Sewer Systems, 3.50% due 10/1/2013 | AA/Aa2 | $ | 5,565,000 | $ | 5,743,303 | |||||||
JEA Water & Sewer Systems, 5.00% due 10/1/2018 | AA/Aa2 | 1,500,000 | 1,842,900 | |||||||||
Kissimmee Utilities Authority, 5.25% due 10/1/2016 (Electrical Systems; Insured: AGM) | NR/Aa3 | 1,700,000 | 1,978,443 | |||||||||
Lake County School Board COP, 5.25% due 6/1/2017 (Insured: AMBAC) | A/NR | 2,000,000 | 2,313,620 | |||||||||
Lake County School Board COP, 5.25% due 6/1/2018 (Insured: AMBAC) | A/NR | 1,475,000 | 1,735,279 | |||||||||
Marion County Hospital District, 5.00% due 10/1/2015 (Munroe Regional Health Systems) | NR/A3 | 1,000,000 | 1,092,680 | |||||||||
Miami Beach GO, 4.00% due 9/1/2019 | AA-/Aa2 | 2,745,000 | 3,182,333 | |||||||||
Miami Beach GO, 5.00% due 9/1/2020 | AA-/Aa2 | 3,720,000 | 4,587,169 | |||||||||
Miami Beach GO, 4.00% due 9/1/2021 | AA-/Aa2 | 1,015,000 | 1,175,959 | |||||||||
Miami Beach GO, 5.00% due 9/1/2022 | AA-/Aa2 | 1,000,000 | 1,229,390 | |||||||||
Miami Dade County, 5.80% due 10/1/2012 (Special Housing-HUD Section 8) | NR/Baa3 | 625,000 | 625,163 | |||||||||
Miami Dade County, 0% due 10/1/2015 (Professional Sports Franchise Facilities; Insured: AGM) | AA-/Aa3 | 3,845,000 | 3,597,920 | |||||||||
Miami Dade County, 0% due 10/1/2016 (Professional Sports Franchise Facilities; Insured: AGM) | AA-/Aa3 | 3,535,000 | 3,216,744 | |||||||||
Miami Dade County, 0% due 10/1/2017 (Professional Sports Franchise Facilities; Insured: AGM) | AA-/Aa3 | 2,435,000 | 2,133,157 | |||||||||
Miami Dade County, 0% due 10/1/2018 (Professional Sports Franchise Facilities; Insured: AGM) | AA-/Aa3 | 5,385,000 | 4,541,655 | |||||||||
Miami Dade County, 0% due 10/1/2019 (Professional Sports Franchise Facilities; Insured: AGM) | AA-/Aa3 | 2,170,000 | 1,732,940 | |||||||||
Miami Dade County Educational Facilities Authority GO, 5.00% due 4/1/2016 (University of Miami; Insured: AMBAC) | A-/A3 | 3,000,000 | 3,326,040 | |||||||||
Miami Dade County Expressway Authority, 5.00% due 7/1/2019 | AA-/Aa3 | 6,530,000 | 7,785,392 | |||||||||
Miami Dade County GO, 5.25% due 7/1/2018 (Building Better Communities) | AA-/Aa2 | 4,540,000 | 5,560,093 | |||||||||
Miami Dade County School Board COP, 5.00% due 5/1/2014 | A/A1 | 1,000,000 | 1,064,210 | |||||||||
Miami Dade County School Board COP, 5.00% due 10/1/2015 (Insured: AMBAC) | A/A1 | 1,000,000 | 1,109,200 | |||||||||
Miami Dade County School Board COP, 5.00% due 5/1/2016 | A/A1 | 4,015,000 | 4,514,024 | |||||||||
Miami Dade County School Board COP, 5.00% due 10/1/2016 (Insured: AMBAC) | A/A1 | 1,000,000 | 1,136,910 | |||||||||
Miami Dade County School Board COP, 5.00% due 5/1/2032 put 5/1/2016 | A/A1 | 6,000,000 | 6,614,880 | |||||||||
Miami Dade County School District GO, 5.375% due 8/1/2015 (Insured: AGM) | AA-/Aa3 | 5,000,000 | 5,646,650 | |||||||||
Orange County HFA, 5.00% due 10/1/2013 (Orlando Health) | A/A2 | 1,100,000 | 1,144,935 | |||||||||
Orange County HFA, 5.00% due 10/1/2014 (Orlando Health) | A/A2 | 2,790,000 | 2,989,931 | |||||||||
Orange County HFA, 5.00% due 10/1/2017 (Orlando Health) | A/A2 | 1,980,000 | 2,266,823 | |||||||||
Orange County HFA, 5.25% due 10/1/2019 (Orlando Health) | A/A2 | 5,860,000 | 6,944,920 | |||||||||
Orange County HFA, 6.25% due 10/1/2021 (Orlando Health; | A/A2 | 1,870,000 | 2,367,326 | |||||||||
Orlando & Orange County Expressway Authority, 5.00% due 7/1/2013 (Insured: AMBAC) | A/A2 | 5,845,000 | 6,047,237 | |||||||||
Orlando & Orange County Expressway Authority, 8.25% due 7/1/2016 (Insured: Natl-Re/ IBC/FGIC) | BBB/A2 | 3,000,000 | 3,746,910 | |||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2018 (Master Lease Purchase Agreement) | NR/Aa3 | 800,000 | 960,992 | |||||||||
Palm Beach County School Board COP, 4.00% due 8/1/2019 (Master Lease Purchase Agreement) | NR/Aa3 | 940,000 | 1,077,005 | |||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2020 (Master Lease Purchase Agreement) | NR/Aa3 | 1,090,000 | 1,323,565 | |||||||||
Palm Beach County School Board COP, 4.00% due 8/1/2021 (Master Lease Purchase Agreement) | NR/Aa3 | 3,835,000 | 4,355,218 | |||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2022 (Master Lease Purchase Agreement) | NR/Aa3 | 1,660,000 | 2,027,740 | |||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2032 put 8/1/2016 (Master Lease Purchase Agreement) | NR/Aa3 | 1,000,000 | 1,149,890 | |||||||||
Polk County School District, 5.00% due 10/1/2013 (Insured: Natl-Re) | A/Baa2 | 2,000,000 | 2,076,200 | |||||||||
Putnam County Development Authority PCR, 5.35% due 3/15/2042 put 5/1/2018 (Seminole Project; Insured: AMBAC) | A-/A3 | 10,000,000 | 11,239,500 | |||||||||
Putnam County Development Authority PCR, 5.35% due 3/15/2042 put 5/1/2018 (Seminole Project; Insured: AMBAC) | A-/A3 | 3,125,000 | 3,512,344 | |||||||||
South Broward Hospital District, 5.00% due 5/1/2020 (Insured: Natl-Re) | AA-/Aa3 | 7,260,000 | 7,918,772 | |||||||||
South Florida Water Management District COP, 5.00% due 10/1/2015 (Insured: AMBAC) | AA/Aa2 | 1,000,000 | 1,115,250 | |||||||||
South Miami HFA, 5.00% due 8/15/2016 (Baptist Health) | AA/Aa2 | 1,560,000 | 1,796,761 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
South Miami HFA, 5.00% due 8/15/2017 (Baptist Health) | AA/Aa2 | $ | 4,610,000 | $ | 5,447,314 | |||||||
St. John’s County IDA, 5.50% due 8/1/2014 (Presbyterian Retirement) | NR/NR | 1,450,000 | 1,499,155 | |||||||||
St. Petersburg HFA, 5.50% due 11/15/2015 (All Children’s Hospital; Insured: AMBAC) | NR/A1 | 1,995,000 | 2,008,247 | |||||||||
St. Petersburg HFA, 5.50% due 11/15/2016 (All Children’s Hospital; Insured: AMBAC) | NR/A1 | 1,980,000 | 1,993,147 | |||||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2021 (Insured: AGM) | AA-/Aa3 | 5,000,000 | 6,000,150 | |||||||||
Tampa Bay Regional Water Supply Authority, 5.00% due 10/1/2017 | AA+/Aa2 | 5,615,000 | 6,749,848 | |||||||||
Tampa Bay Regional Water Supply Authority, 5.00% due 10/1/2018 | AA+/Aa2 | 2,890,000 | 3,538,863 | |||||||||
Tampa Bay Regional Water Supply Authority, 5.00% due 10/1/2019 | AA+/Aa2 | 3,000,000 | 3,721,950 | |||||||||
Tampa Baycare Health Systems, 5.00% due 11/15/2016 | NR/Aa2 | 2,855,000 | 3,297,439 | |||||||||
Tampa Baycare Health Systems, 5.00% due 11/15/2017 | NR/Aa2 | 1,215,000 | 1,437,163 | |||||||||
Tampa Sports Authority, 5.75% due 10/1/2015 (Tampa Bay Arena; | BBB/Baa2 | 950,000 | 986,404 | |||||||||
University of Central Florida Athletics Association, Inc. COP, 5.00% due 10/1/2016 (Insured: Natl-Re/FGIC) | BBB/NR | 1,640,000 | 1,768,609 | |||||||||
Volusia County Educational Facility Authority, 4.00% due 10/15/2013 | AA-/Aa3 | 675,000 | 692,645 | |||||||||
Volusia County Educational Facility Authority, 5.00% due 10/15/2016 | AA-/Aa3 | 2,320,000 | 2,595,686 | |||||||||
Volusia County Educational Facility Authority, 4.00% due 10/15/2017 | AA-/Aa3 | 1,030,000 | 1,119,322 | |||||||||
Volusia County Educational Facility Authority, 5.00% due 10/15/2018 | AA-/Aa3 | 2,075,000 | 2,376,912 | |||||||||
Volusia County Educational Facility Authority, 5.00% due 10/15/2019 | AA-/Aa3 | 2,245,000 | 2,587,273 | |||||||||
GEORGIA — 2.09% | ||||||||||||
Burke County Development Authority PCR, 2.50% due 1/1/2040 put 3/1/2013 (Oglethorpe Power) | A/Baa1 | 7,000,000 | 7,055,580 | |||||||||
City of Atlanta, 5.25% due 12/1/2016 (Atlantic Station; Insured: AGM) | AA-/Aa3 | 3,850,000 | 4,353,079 | |||||||||
City of Atlanta, 5.00% due 1/1/2018 (Airport Passenger Facility) | NR/A1 | 2,100,000 | 2,511,348 | |||||||||
City of Atlanta, 5.00% due 1/1/2019 (Hartsfield-Jackson Atlanta International Airport) | NR/A1 | 3,145,000 | 3,793,876 | |||||||||
City of Atlanta, 5.00% due 1/1/2020 (Airport Passenger Facility) | NR/A1 | 6,000,000 | 7,346,520 | |||||||||
City of Atlanta, 5.25% due 1/1/2020 (Hartsfield-Jackson Atlanta International Airport) | NR/A1 | 5,000,000 | 6,161,000 | |||||||||
City of Atlanta, 5.00% due 1/1/2021 (Airport Passenger Facility) | NR/A1 | 7,000,000 | 8,448,790 | |||||||||
City of Atlanta, 5.50% due 1/1/2021 (Hartsfield-Jackson Atlanta International Airport) | NR/A1 | 3,525,000 | 4,435,296 | |||||||||
City of Atlanta Water & Wastewater, 5.50% due 11/1/2014 | A/A1 | 3,000,000 | 3,297,810 | |||||||||
City of Atlanta Water & Wastewater, 5.50% due 11/1/2015 | A/A1 | 4,000,000 | 4,571,600 | |||||||||
City of Atlanta Water & Wastewater, 5.00% due 11/1/2016 (Insured: AGM) | AA-/Aa3 | 3,215,000 | 3,744,736 | |||||||||
City of Atlanta Water & Wastewater, 5.50% due 11/1/2016 | A/A1 | 8,215,000 | 9,733,214 | |||||||||
City of Atlanta Water & Wastewater, 5.00% due 11/1/2017 (Insured: AGM) | AA-/Aa3 | 4,745,000 | 5,666,574 | |||||||||
City of Atlanta Water & Wastewater, 6.00% due 11/1/2019 | A/A1 | 5,650,000 | 7,294,093 | |||||||||
Fulton County Development Authority, 5.00% due 10/1/2022 (Georgia Tech Athletic Association) | NR/A2 | 2,300,000 | 2,804,643 | |||||||||
Fulton County Facilities COP, 5.00% due 11/1/2017 | AA-/Aa3 | 8,400,000 | 9,790,956 | |||||||||
Fulton County Facilities COP, 5.00% due 11/1/2019 | AA-/Aa3 | 6,600,000 | 7,865,946 | |||||||||
Gainesville Water & Sewer, 6.00% due 11/15/2012 (Insured: Natl-Re/FGIC) | AA-/Aa3 | 595,000 | 599,439 | |||||||||
Georgia Municipal Electric Authority, 6.50% due 1/1/2017 | A+/A1 | 1,415,000 | 1,587,602 | |||||||||
Lagrange Troup County Hospital Authority, 5.00% due 7/1/2018 (West Georgia Health Foundation, Inc.) | A+/Aa2 | 2,500,000 | 2,766,950 | |||||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2013 (Georgia Gas) | A-/Baa2 | 1,500,000 | 1,527,975 | |||||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2014 (Georgia Gas) | A/A2 | 3,000,000 | 3,181,320 | |||||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2014 (Georgia Gas) | A-/Baa2 | 3,845,000 | 4,004,337 | |||||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2015 (Georgia Gas) | A-/Baa2 | 2,000,000 | 2,128,120 | |||||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2018 (Georgia Gas) | A-/Baa2 | 5,000,000 | 5,551,000 | |||||||||
Municipal Electric Authority of Georgia, 6.60% due 1/1/2018 (Insured: Natl-Re) | BBB/A1 | 2,975,000 | 3,305,255 |
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Valdosta & Lowndes County Hospital Authority, 5.00% due 10/1/2022 (South Medical Center) | AA-/Aa2 | $ | 1,500,000 | $ | 1,784,475 | |||||||
GUAM — 0.24% | ||||||||||||
Government of Guam, 5.25% due 12/1/2016 | BBB+/NR | 5,610,000 | 6,263,621 | |||||||||
Government of Guam, 5.25% due 12/1/2017 | BBB+/NR | 2,000,000 | 2,251,280 | |||||||||
Government of Guam, 5.50% due 12/1/2018 | BBB+/NR | 3,000,000 | 3,449,220 | |||||||||
Government of Guam, 5.50% due 12/1/2019 | BBB+/NR | 2,000,000 | 2,292,940 | |||||||||
HAWAII — 0.27% | ||||||||||||
State of Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Kapiolani Health Care; Insured: Natl-Re) | BBB/A3 | 315,000 | 326,611 | |||||||||
State of Hawaii GO, 5.00% due 12/1/2019 | AA/Aa2 | 3,000,000 | 3,763,050 | |||||||||
State of Hawaii GO, 5.00% due 12/1/2020 | AA/Aa2 | 2,500,000 | 3,160,300 | |||||||||
State of Hawaii GO, 5.00% due 12/1/2021 | AA/Aa2 | 3,000,000 | 3,828,150 | |||||||||
State of Hawaii GO, 5.00% due 12/1/2022 | AA/Aa2 | 4,000,000 | 5,014,840 | |||||||||
IDAHO — 0.32% | ||||||||||||
Twin Falls Urban Renewal Agency, 4.95% due 8/1/2014 | NR/NR | 860,000 | 888,887 | |||||||||
Twin Falls Urban Renewal Agency, 5.15% due 8/1/2017 | NR/NR | 1,455,000 | 1,506,973 | |||||||||
University of Idaho, 5.25% due 4/1/2041 put 4/1/2021 | A+/Aa3 | 14,120,000 | 16,670,496 | |||||||||
ILLINOIS — 8.16% | ||||||||||||
Bolingbrook GO, 0% due 1/1/2016 (Insured: Natl-Re) | NR/Aa3 | 1,500,000 | 1,357,350 | |||||||||
Bolingbrook GO, 0% due 1/1/2017 (Insured: Natl-Re) | NR/Aa3 | 2,000,000 | 1,713,260 | |||||||||
Chicago Board of Education GO, 6.25% due 1/1/2015 (Insured: Natl-Re) | BBB/A2 | 1,310,000 | 1,381,330 | |||||||||
Chicago Board of Education GO, 5.25% due 12/1/2017 (Chicago School Reform Board; Insured: Natl-Re/FGIC) | A+/A2 | 4,100,000 | 4,909,012 | |||||||||
Chicago Board of Education GO, 5.00% due 12/1/2018 (Insured: Natl-Re) | A+/A2 | 1,000,000 | 1,188,710 | |||||||||
Chicago Board of Education GO, 0.20% due 3/1/2036 put 10/1/2012 (Capital Improvement Program; LOC: JPMorgan Chase Bank) (State Aid Withholding) (daily demand notes) | AAA/Aa1 | 27,460,000 | 27,460,000 | |||||||||
Chicago GO, 5.375% due 1/1/2013 (Insured: Natl-Re) (ETM) | BBB/Aa3 | 675,000 | 684,018 | |||||||||
Chicago GO, 5.375% due 1/1/2013 (Insured: Natl-Re) | NR/Aa3 | 420,000 | 425,544 | |||||||||
Chicago GO, 0% due 1/1/2016 (City Colleges; Insured: Natl-Re/FGIC) | A+/Aa3 | 2,670,000 | 2,508,839 | |||||||||
Chicago GO, 5.44% due 1/1/2018 (Insured: Natl-Re) | A+/Aa3 | 3,050,000 | 3,447,201 | |||||||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2015 (Insured: AGM) | AA-/Aa3 | 8,460,000 | 9,344,155 | |||||||||
Chicago Housing Authority Capital Program, 5.00% due 7/1/2016 (Insured: AGM) | AA-/Aa3 | 2,000,000 | 2,265,820 | |||||||||
Chicago Illinois Board of Education GO, 5.00% due 12/1/2018 | A+/A2 | 3,000,000 | 3,566,130 | |||||||||
Chicago Illinois Board of Education GO, 5.00% due 12/1/2019 | A+/A2 | 2,000,000 | 2,394,440 | |||||||||
Chicago Illinois Board of Education GO, 0% due 12/1/2020 (Insured: BHAC/FGIC) | AA+/Aa1 | 12,000,000 | 9,430,560 | |||||||||
Chicago Illinois Board of Education GO, 5.00% due 12/1/2020 | A+/A2 | 2,500,000 | 2,986,100 | |||||||||
Chicago Illinois Board of Education GO, 0.20% due 3/1/2031 put 10/1/2012 (LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | 3,800,000 | 3,800,000 | |||||||||
Chicago Illinois Board of Education GO, 0.17% due 3/1/2035 put 10/1/2012 (LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | 14,035,000 | 14,035,018 | |||||||||
Chicago Illinois Park District GO, 5.00% due 1/1/2018 (Personal Property Replacement) | AA+/Aa2 | 1,150,000 | 1,362,992 | |||||||||
Chicago Illinois Public Building Commerce Building, 4.00% due 1/1/2013 | NR/Aa2 | 3,275,000 | 3,302,805 | |||||||||
Chicago Illinois Public Building Commerce Building, 5.25% due 12/1/2013 (Insured: Natl-Re/ FGIC) | BBB/A2 | 3,000,000 | 3,158,340 | |||||||||
Chicago Illinois Transit Authority Capital Grant, 5.25% due 6/1/2017 (Federal Transit Administration) | A/A1 | 3,000,000 | 3,488,010 | |||||||||
Chicago Illinois Transit Authority Capital Grant, 5.50% due 6/1/2018 (Federal Transit Administration) | A/A1 | 2,500,000 | 2,967,775 | |||||||||
City of Chicago, 5.50% due 1/1/2013 (Midway Airport; Insured: Natl-Re) | A/A2 | 1,180,000 | 1,193,487 |
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
City of Chicago, 4.00% due 1/1/2018 (Wastewater Transmission) | A+/Aa3 | $ | 1,475,000 | $ | 1,685,645 | |||||||
City of Chicago, 6.75% due 6/1/2022 (Pilsen Redevelopment) | NR/NR | 5,000,000 | 5,216,150 | |||||||||
City of Chicago, 0.23% due 1/1/2034 put 10/1/2012 (SPA: JPMorgan Chase Bank) (dailydemand notes) | AAA/Aa3 | 63,445,000 | 63,445,000 | |||||||||
City of Chicago Building Acquisition Certificates GO, 5.40% due 1/1/2018 (Parking Facility Improvements; Insured: AGM) | AA-/Aa3 | 3,000,000 | 3,012,390 | |||||||||
Community College District No. 516 GO, 4.50% due 12/15/2020 (Waubonsee Community College) | NR/Aa1 | 1,325,000 | 1,549,203 | |||||||||
Community College District No. 516 GO, 5.00% due 12/15/2021 (Waubonsee Community College) | NR/Aa1 | 6,175,000 | 7,468,971 | |||||||||
Cook County Community Consolidated School District GO, 9.00% due 12/1/2016 (Tinley Park; Insured: Natl-Re/FGIC) | NR/Aa2 | 2,500,000 | 3,142,425 | |||||||||
Cook County Community High School District, 5.00% due 12/15/2012 (Insured: AGM) | AA-/NR | 3,180,000 | 3,209,924 | |||||||||
Cook County Community High School District, 5.00% due 12/15/2013 (Insured: AGM) | AA-/NR | 6,875,000 | 7,208,987 | |||||||||
Cook County Community School District GO, 9.00% due 12/1/2013 (Oak Park; Insured: Natl-Re/FGIC) | NR/Aa2 | 2,250,000 | 2,455,357 | |||||||||
Cook County Community School District GO, 9.00% due 12/1/2018 (Insured: Natl-Re/FGIC) | NR/Aa2 | 4,000,000 | 5,672,920 | |||||||||
Cook County GO, 5.00% due 11/15/2012 (ETM) | AA/Aa3 | 6,000,000 | 6,036,180 | |||||||||
Cook County GO, 6.25% due 11/15/2013 (Insured: Natl-Re) (ETM) | AA/Aa3 | 3,995,000 | 4,265,901 | |||||||||
Cook County GO, 5.00% due 11/15/2019 | AA/Aa3 | 3,690,000 | 4,459,697 | |||||||||
Cook County GO, 5.00% due 11/15/2020 | AA/Aa3 | 3,590,000 | 4,254,186 | |||||||||
Cook County GO, 5.00% due 11/15/2021 | AA/Aa3 | 5,000,000 | 6,085,950 | |||||||||
DeKalb County USD GO, 0% due 1/1/2021 | AA-/Aa2 | 6,140,000 | 4,760,403 | |||||||||
Forest Preserve District of Cook County GO, 5.00% due 11/15/2021 | AA/Aa2 | 1,500,000 | 1,846,560 | |||||||||
Illinois Educational Facilities, 4.75% due 3/1/2030 put 3/1/2017 (Art Institute of Chicago) | A+/A1 | 3,030,000 | 3,429,536 | |||||||||
Illinois Educational Facilities, 5.00% due 3/1/2030 put 3/1/2017 (Art Institute of Chicago) | NR/A1 | 3,000,000 | 3,389,130 | |||||||||
Illinois Educational Facilities, 5.25% due 3/1/2034 put 3/1/2018 (Art Institute of Chicago) | NR/NR | 3,500,000 | 4,028,675 | |||||||||
Illinois Educational Facilities, 3.40% due 11/1/2036 put 11/1/2017 (Medical Terminal Field Museum) | A/NR | 1,300,000 | 1,384,942 | |||||||||
Illinois Educational Facilities, 4.15% due 11/1/2036 put 11/1/2012 (Field Museum) | A/A2 | 5,250,000 | 5,264,437 | |||||||||
Illinois Educational Facilities, 4.30% due 11/1/2036 put 11/1/2013 (Field Museum) | A/A2 | 3,100,000 | 3,202,734 | |||||||||
Illinois Finance Authority, 5.00% due 12/1/2012 (Columbia College) | BBB+/NR | 1,000,000 | 1,005,870 | |||||||||
Illinois Finance Authority, 4.00% due 2/15/2013 (Alexian Brothers Health Systems) | NR/A2 | 1,500,000 | 1,514,595 | |||||||||
Illinois Finance Authority, 5.00% due 2/15/2014 (Alexian Brothers Health Systems) | NR/A2 | 3,000,000 | 3,117,810 | |||||||||
Illinois Finance Authority, 5.00% due 5/1/2014 (Student Housing) | NR/Baa3 | 3,895,000 | 4,106,654 | |||||||||
Illinois Finance Authority, 5.00% due 11/1/2014 (Central DuPage Health) | AA/NR | 5,000,000 | 5,402,400 | |||||||||
Illinois Finance Authority, 4.00% due 4/1/2015 (Advocate Health Care) | AA/Aa2 | 3,000,000 | 3,237,150 | |||||||||
Illinois Finance Authority, 5.00% due 10/1/2015 (DePaul University) | NR/A3 | 1,000,000 | 1,099,470 | |||||||||
Illinois Finance Authority, 5.00% due 11/1/2015 (Central DuPage Health) | AA/NR | 5,000,000 | 5,583,400 | |||||||||
Illinois Finance Authority, 5.25% due 12/1/2015 (Columbia College) | BBB+/NR | 1,620,000 | 1,774,321 | |||||||||
Illinois Finance Authority, 5.00% due 4/1/2016 (Advocate Health Care) | AA/Aa2 | 1,250,000 | 1,421,250 | |||||||||
Illinois Finance Authority, 5.00% due 12/1/2016 (Columbia College) | BBB+/NR | 1,710,000 | 1,899,092 | |||||||||
Illinois Finance Authority, 5.00% due 11/1/2017 (Rush University Medical Center; Insured: Natl-Re) | A-/A2 | 1,000,000 | 1,130,720 | |||||||||
Illinois Finance Authority, 5.00% due 12/1/2017 (Columbia College) | BBB+/NR | 1,395,000 | 1,576,573 | |||||||||
Illinois Finance Authority, 5.50% due 11/1/2018 (Advocate Health Care) | AA/Aa2 | 1,000,000 | 1,202,100 | |||||||||
Illinois Finance Authority, 5.00% due 4/1/2020 (Advocate Health Care) | AA/Aa2 | 1,000,000 | 1,171,070 | |||||||||
Illinois Finance Authority, 4.00% due 12/1/2021 (Trinity Health) | AA/Aa2 | 1,000,000 | 1,116,410 | |||||||||
Illinois Finance Authority, 2.625% due 2/1/2033 put 8/1/2015 (Peoples Gas Light & Coke Co.) | A-/A1 | 9,500,000 | 9,888,265 | |||||||||
Illinois Finance Authority, 4.30% due 6/1/2035 put 6/1/2016 (Peoples Gas Light & Coke Co.; Insured: AMBAC) | A-/A1 | 2,550,000 | 2,829,607 | |||||||||
Illinois Finance Authority, 3.00% due 7/1/2042 put 5/6/2014 (Prairie Power; Insured: National Rural Utilities Cooperative) | A/NR | 17,150,000 | 17,568,974 |
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Illinois Finance Authority, 0.20% due 8/1/2043 put 10/1/2012 (University of Chicago Medical Center; Insured: JPMorgan Chase) (daily demand notes) | AAA/Aa1 | $ | 1,400,000 | $ | 1,400,000 | |||||||
Illinois HFA, 6.00% due 7/1/2017 (Lake Forest Hospital) | AA+/Aa2 | 1,500,000 | 1,506,225 | |||||||||
Illinois Toll Highway Authority, 5.50% due 1/1/2014 (Insured: AGM) | AA-/Aa3 | 17,190,000 | 18,139,060 | |||||||||
Illinois Toll Highway Authority, 5.50% due 1/1/2015 (Insured: AGM) | AA-/Aa3 | 5,000,000 | 5,479,850 | |||||||||
Kane & DeKalb Counties Community GO, 0% due 2/1/2021 | NR/Aa3 | 3,165,000 | 2,369,889 | |||||||||
Kane County Forest Preservation District GO, 5.00% due 12/15/2015 (Insured: Natl-Re/FGIC) | AA+/NR | 2,780,000 | 3,153,910 | |||||||||
Kane McHenry Cook & DeKalb Counties GO, 0% due 12/1/2021 (Insured: AMBAC) | NR/Aa3 | 2,000,000 | 1,495,740 | |||||||||
Lake County Community High School District GO, 9.00% due 2/1/2014 (Insured: AGM) | AAA/Aa3 | 1,925,000 | 2,132,611 | |||||||||
Lake County Community High School District GO, 9.00% due 2/1/2015 (Insured: AGM) | AAA/Aa3 | 1,610,000 | 1,906,353 | |||||||||
Lake County Community High School District GO, 9.00% due 2/1/2016 (Insured: AGM) | AAA/Aa3 | 1,890,000 | 2,378,282 | |||||||||
Lake County Community High School District GO, 9.00% due 2/1/2017 (Insured: AGM) | AAA/Aa3 | 2,025,000 | 2,697,280 | |||||||||
McHenry & Kane Counties Community Consolidated School District GO, 0% due 1/1/2017 (Insured: Natl-Re) | NR/Baa2 | 1,185,000 | 1,050,467 | |||||||||
Metropolitan Pier & Exposition Authority, 0% due 6/15/2013 pre-refunded 10/18/2010 (McCormick Place Expansion; Insured: Natl-Re) (ETM) | BBB/A3 | 485,000 | 483,419 | |||||||||
Metropolitan Pier & Exposition Authority, 0% due 6/15/2013 (McCormick Place Expansion; Insured: Natl-Re) | AAA/A3 | 560,000 | 555,940 | |||||||||
Metropolitan Pier & Exposition Authority, 0% due 6/15/2016 (McCormick Place Expansion; Insured: Natl-Re/FGIC) | BBB/NR | 3,475,000 | 3,340,309 | |||||||||
Metropolitan Pier & Exposition Authority, 0% due 6/15/2016 (McCormick Place Expansion; Insured: Natl-Re/FGIC) | BBB/A3 | 8,245,000 | 7,657,296 | |||||||||
Metropolitan Pier & Exposition Authority, 5.00% due 12/15/2020 (McCormick Place Expansion) | AAA/NR | 4,000,000 | 4,896,440 | |||||||||
Northern Illinois University, 4.00% due 4/1/2013 (Auxiliary Facilities; Insured: AGM) | NR/Aa3 | 1,000,000 | 1,016,110 | |||||||||
Peoria Tazewell Etc. Counties Community College District No. 54 GO, 4.25% due 12/1/2015 | AA+/Aa2 | 2,360,000 | 2,598,690 | |||||||||
Quincy Illinois, 5.00% due 11/15/2014 (Blessing Hospital) | A-/A3 | 1,000,000 | 1,052,430 | |||||||||
Quincy Illinois, 5.00% due 11/15/2016 (Blessing Hospital) | A-/A3 | 1,750,000 | 1,901,638 | |||||||||
Railsplitter Tobacco Settlement Authority, 5.00% due 6/1/2019 | A/NR | 22,000,000 | 25,510,760 | |||||||||
Railsplitter Tobacco Settlement Authority, 5.125% due 6/1/2019 | A/NR | 6,780,000 | 7,913,887 | |||||||||
Regional Transportation Authority GO, 6.25% due 7/1/2014 | AA/Aa3 | 3,500,000 | 3,837,855 | |||||||||
Sangamon County Community Unit School District No. 5, 5.00% due 1/1/2015 (Insured: AGM) | AA/NR | 2,210,000 | 2,423,044 | |||||||||
Southwestern Illinois Development Authority, 5.125% due 8/15/2016 (Anderson Hospital) | BBB-/Baa3 | 1,190,000 | 1,272,265 | |||||||||
State of Illinois, 3.50% due 6/15/2013 (Build Illinois Bonds) | AAA/A2 | 6,455,000 | 6,604,175 | |||||||||
State of Illinois, 3.50% due 6/15/2014 (Build Illinois Bonds) | AAA/A2 | 6,455,000 | 6,795,566 | |||||||||
State of Illinois, 5.125% due 6/15/2015 pre-refunded 6/15/2013 (Build Illinois Bonds) | AAA/A1 | 5,000,000 | 5,168,050 | |||||||||
State of Illinois, 5.00% due 6/15/2016 (Build Illinois Bonds) | AAA/NR | 3,500,000 | 4,058,110 | |||||||||
State of Illinois, 5.50% due 6/15/2016 (Build Illinois Bonds) | AAA/A2 | �� | 2,020,000 | 2,028,444 | ||||||||
Town of Cicero Cook County GO, 5.25% due 1/1/2019 (Economic Redevelopment; Insured: Syncora) | NR/NR | 6,140,000 | 6,380,504 | |||||||||
Town of Cicero Cook County GO, 5.00% due 12/1/2019 (Economic Redevelopment) | A+/NR | 1,070,000 | 1,228,692 | |||||||||
University of Illinois Board of Trustees COP, 5.00% due 10/1/2019 (Insured: AGM) | AA-/Aa2 | 2,000,000 | 2,300,540 | |||||||||
Village of Broadview, 5.375% due 7/1/2015 | NR/NR | 3,400,000 | 3,403,842 | |||||||||
Village of Melrose Park, 5.20% due 7/1/2018 (Insured: Natl-Re) | BBB/Baa2 | 1,190,000 | 1,203,150 | |||||||||
Waukegan Illinois GO, 5.00% due 12/30/2019 (Insured: AGM) | NR/Aa3 | 1,935,000 | 2,290,788 | |||||||||
Waukegan Illinois GO, 5.00% due 12/30/2020 (Insured: AGM) | NR/Aa3 | 1,000,000 | 1,184,610 | |||||||||
Waukegan Illinois GO, 5.00% due 12/30/2021 (Insured: AGM) | NR/Aa3 | 2,100,000 | 2,489,424 | |||||||||
Waukegan Illinois GO, 5.00% due 12/30/2022 (Insured: AGM) | NR/Aa3 | 1,000,000 | 1,190,010 | |||||||||
Will County Valley View Community Unit School District No. 365 GO, 0% due 11/1/2018 (Insured: AGM) | AA/Aa2 | 3,370,000 | 2,944,706 | |||||||||
INDIANA — 4.52% | ||||||||||||
Allen County Economic Development, 5.00% due 12/30/2012 (Indiana Institute of Technology) | NR/NR | 700,000 | 702,982 | |||||||||
Allen County Jail Building Corp., 5.00% due 10/1/2014 (Insured: Syncora) | NR/Aa2 | 1,000,000 | 1,081,110 | |||||||||
Allen County Jail Building Corp., 5.00% due 10/1/2015 (Insured: Syncora) | NR/Aa2 | 1,480,000 | 1,654,314 |
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Allen County Jail Building Corp., 5.00% due 10/1/2016 (Insured: Syncora) | NR/Aa2 | $ | 1,520,000 | $ | 1,722,616 | |||||||
Allen County Redevelopment District, 5.00% due 11/15/2016 | NR/A2 | 1,000,000 | 1,102,950 | |||||||||
Avon Community School Building Corp., 5.00% due 7/15/2017 (Insured: AMBAC) (State Aid Withholding) | A/NR | 2,500,000 | 2,933,325 | |||||||||
Board of Trustees for the Vincennes University, 3.00% due 6/1/2014 | NR/Aa3 | 1,000,000 | 1,034,260 | |||||||||
Board of Trustees for the Vincennes University, 3.00% due 6/1/2015 | NR/Aa3 | 1,000,000 | 1,051,550 | |||||||||
Board of Trustees for the Vincennes University, 4.00% due 6/1/2018 | NR/Aa3 | 1,000,000 | 1,135,860 | |||||||||
Board of Trustees for the Vincennes University, 5.00% due 6/1/2020 | NR/Aa3 | 1,000,000 | 1,228,280 | |||||||||
Brownsburg 1999 School Building Corp., 5.00% due 7/15/2013 (Insured: AGM) (State Aid Withholding) | AA+/Aa3 | 1,000,000 | 1,035,800 | |||||||||
Brownsburg 1999 School Building Corp., 5.00% due 7/15/2018 (Insured: AGM) (State Aid Withholding) | AA+/NR | 3,430,000 | 3,835,083 | |||||||||
Brownsburg 1999 School Building Corp., 5.00% due 8/1/2018 (Insured: AGM) (State Aid Withholding) | AA+/Aa3 | 1,250,000 | 1,399,863 | |||||||||
Carmel Redevelopment Authority, 3.00% due 2/1/2013 (Economic Development) | AA+/NR | 960,000 | 967,498 | |||||||||
Carmel Redevelopment Authority, 3.00% due 8/1/2013 (Economic Development) | AA+/NR | 915,000 | 932,312 | |||||||||
Carmel Redevelopment Authority, 3.00% due 2/1/2014 (Economic Development) | AA+/NR | 965,000 | 992,155 | |||||||||
Carmel Redevelopment Authority, 3.00% due 8/1/2014 (Economic Development) | AA+/NR | 915,000 | 949,752 | |||||||||
Carmel Redevelopment Authority, 0% due 2/1/2015 (Performing Arts Center) | AA+/Aa1 | 1,575,000 | 1,533,231 | |||||||||
Carmel Redevelopment Authority, 4.00% due 2/1/2015 (Economic Development) | AA+/NR | 990,000 | 1,058,914 | |||||||||
Carmel Redevelopment Authority, 4.00% due 8/1/2015 (Economic Development) | AA+/NR | 975,000 | 1,056,305 | |||||||||
Carmel Redevelopment Authority, 5.00% due 8/1/2021 (Economic Development) | AA+/NR | 2,405,000 | 2,934,340 | |||||||||
Carmel Redevelopment Authority, 5.00% due 8/1/2022 (Economic Development) | AA+/NR | 2,510,000 | 3,083,284 | |||||||||
Carmel Redevelopment District COP, 5.75% due 7/15/2022 | NR/NR | 4,470,000 | 4,801,763 | |||||||||
City of Fort Wayne, 4.25% due 8/1/2013 (Sewer Works Improvements) | NR/Aa3 | 1,715,000 | 1,761,271 | |||||||||
City of Fort Wayne, 4.25% due 8/1/2014 (Sewer Works Improvements) | NR/Aa3 | 1,745,000 | 1,844,099 | |||||||||
City of Fort Wayne, 4.25% due 8/1/2015 (Sewer Works Improvements) | NR/Aa3 | 1,780,000 | 1,929,378 | |||||||||
Clay Multiple School Building Corp., 4.00% due 7/15/2015 (State Aid Withholding) | AA+/NR | 1,000,000 | 1,077,600 | |||||||||
Clay Multiple School Building Corp., 5.00% due 7/15/2016 (State Aid Withholding) | AA+/NR | 1,295,000 | 1,477,556 | |||||||||
Clay Multiple School Building Corp., 5.00% due 1/15/2017 (State Aid Withholding) | AA+/NR | 1,000,000 | 1,158,100 | |||||||||
Evansville Vanderburgh Public Library Leasing Corp., 5.00% due 7/15/2014 (Insured: AMBAC) | A+/NR | 1,000,000 | 1,058,260 | |||||||||
Evansville Vanderburgh Public Library Leasing Corp., 5.00% due 7/15/2015 (Insured: AMBAC) | A+/NR | 1,000,000 | 1,088,880 | |||||||||
Hammond Multi-School Building Corp., 5.00% due 1/15/2014 (Insured: Natl-Re/FGIC) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,057,950 | |||||||||
Indiana Bond Bank, 5.25% due 10/15/2016 (Special Gas Program) | NR/A2 | 1,545,000 | 1,774,093 | |||||||||
Indiana Bond Bank, 5.00% due 10/15/2017 (Special Gas Program) | NR/A2 | 5,000,000 | 5,767,300 | |||||||||
Indiana Bond Bank, 5.00% due 8/1/2021 (Columbus Learning Center) | AA/NR | 1,300,000 | 1,586,130 | |||||||||
Indiana Finance Authority, 3.00% due 3/1/2013 (Indiana University Health System) | A+/A1 | 1,500,000 | 1,516,005 | |||||||||
Indiana Finance Authority, 5.00% due 11/1/2014 (Sisters of St. Francis Health Services, Inc.) | NR/Aa3 | 1,000,000 | 1,088,100 | |||||||||
Indiana Finance Authority, 5.00% due 5/1/2015 (Parkview Health Systems) | A+/A1 | 1,500,000 | 1,644,075 | |||||||||
Indiana Finance Authority, 4.90% due 1/1/2016 (Indiana Power & Light Co.) | BBB/A3 | 11,650,000 | 12,818,728 | |||||||||
Indiana Finance Authority, 5.00% due 5/1/2016 (Parkview Health Systems) | A+/A1 | 3,090,000 | 3,474,458 | |||||||||
Indiana Finance Authority, 5.00% due 7/1/2016 (Forensic & Health Science; Insured: Natl-Re) | AA+/Aa1 | 1,030,000 | 1,180,349 | |||||||||
Indiana Finance Authority, 5.00% due 9/15/2016 (Marian University Health Sciences) | BBB-/NR | 1,500,000 | 1,610,160 | |||||||||
Indiana Finance Authority, 5.00% due 5/1/2017 (Parkview Health Systems) | A+/A1 | 1,000,000 | 1,142,950 | |||||||||
Indiana Finance Authority, 5.00% due 9/15/2017 (Marian University Health Sciences) | BBB-/NR | 1,690,000 | 1,826,163 | |||||||||
Indiana Finance Authority, 5.25% due 7/1/2018 (Wabash Correctional Facilities) | AA+/Aa1 | 1,000,000 | 1,213,510 | |||||||||
Indiana Finance Authority, 5.25% due 7/1/2018 (Rockville Correctional Facilities) | AA+/NR | 2,150,000 | 2,609,046 | |||||||||
Indiana Finance Authority, 5.00% due 9/15/2018 (Marian University Health Sciences) | BBB-/NR | 1,790,000 | 1,941,398 | |||||||||
Indiana Finance Authority, 5.00% due 11/1/2018 (Indianapolis Airport) | AA+/Aa2 | 2,750,000 | 3,342,185 | |||||||||
Indiana Finance Authority, 5.00% due 11/1/2018 (Sisters of St. Francis Health Services, Inc.) | NR/Aa3 | 1,250,000 | 1,489,850 | |||||||||
Indiana Finance Authority, 5.00% due 9/15/2019 (Marian University Health Sciences) | BBB-/NR | 1,250,000 | 1,354,525 | |||||||||
Indiana Finance Authority, 5.00% due 3/1/2020 (Indiana University Health System) | A+/A1 | 5,000,000 | 5,832,450 | |||||||||
Indiana Finance Authority, 5.00% due 9/15/2020 (Marian University Health Sciences) | BBB-/NR | 2,245,000 | 2,430,212 |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Indiana Finance Authority, 5.00% due 3/1/2021 (Indiana University Health System) | A+/A1 | $ | 9,880,000 | $ | 11,526,798 | |||||||
Indiana Finance Authority, 5.00% due 9/15/2021 (Marian University Health Sciences) | BBB-/NR | 2,320,000 | 2,495,090 | |||||||||
Indiana Finance Authority, 5.00% due 3/1/2022 (Indiana University Health System) | A+/A1 | 3,240,000 | 3,741,034 | |||||||||
Indiana Finance Authority, 0.23% due 2/1/2035 put 10/1/2012 (Stadium Project; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/NR | 92,925,000 | 92,925,000 | |||||||||
Indiana Health Facility Financing Authority, 5.50% due 11/15/2015 (Ascension Health) | AA+/Aa1 | 510,000 | 518,430 | |||||||||
Indiana Health Facility Financing Authority, 5.50% due 11/15/2016 (Ascension Health) | AA+/Aa1 | 1,385,000 | 1,407,894 | |||||||||
Indiana Health Facility Financing Authority, 5.00% due 10/1/2027 put 6/1/2017 (Ascension Health) | NR/Aa2 | 7,000,000 | 8,136,240 | |||||||||
Indiana Multi-School Building Corp., 5.00% due 7/15/2016 (Insured: Natl-Re) | AA/Baa2 | 5,000,000 | 5,759,050 | |||||||||
Indianapolis Local Public Improvement Bond Bank, 6.75% due 2/1/2014 (Circle Centre) | AA/NR | 705,000 | 733,320 | |||||||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 1/1/2015 (Waterworks; Insured: Natl-Re) | A+/A2 | 1,000,000 | 1,090,730 | |||||||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 7/1/2015 (Waterworks; Insured: Natl-Re) | A+/A2 | 1,000,000 | 1,109,700 | |||||||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 7/1/2016 (Insured: Natl-Re/FGIC) | AA+/Aa1 | 1,030,000 | 1,147,781 | |||||||||
Indianapolis Multi-School Building Corp. First Mtg, 5.50% due 7/15/2015 (Insured: Natl-Re) | AA/Baa2 | 1,690,000 | 1,907,148 | |||||||||
Ivy Tech Community College, 4.00% due 7/1/2013 | AA-/NR | 1,000,000 | 1,024,440 | |||||||||
Ivy Tech Community College, 4.00% due 7/1/2014 | AA-/NR | 1,500,000 | 1,581,465 | |||||||||
Knox Middle School Building Corp., 0% due 1/15/2020 | BBB/NR | 1,295,000 | 1,012,936 | |||||||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2014 (Insured: Natl-Re/ FGIC) (State Aid Withholding) | AA+/NR | 1,200,000 | 1,297,320 | |||||||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2015 (Insured: Natl-Re/ FGIC) (State Aid Withholding) | AA+/NR | 1,250,000 | 1,403,675 | |||||||||
Mount Vernon of Hancock County Multi-School Building Corp., 5.00% due 7/15/2013 (Insured: Natl-Re) (State Aid Withholding) (ETM) | BBB/Baa2 | 825,000 | 855,773 | |||||||||
Mount Vernon of Hancock County Multi-School Building Corp., 5.00% due 7/15/2013 (Insured: Natl-Re) (State Aid Withholding) | A/Baa2 | 230,000 | 237,514 | |||||||||
Mount Vernon of Hancock County Multi-School Building Corp., 5.00% due 7/15/2014 (Insured: Natl-Re) (State Aid Withholding) (ETM) | BBB/Baa2 | 870,000 | 941,871 | |||||||||
Mount Vernon of Hancock County Multi-School Building Corp., 5.00% due 7/15/2014 (Insured: Natl-Re) (State Aid Withholding) | A/Baa2 | 265,000 | 284,067 | |||||||||
Mount Vernon of Hancock County Multi-School Building Corp., 5.00% due 7/15/2015 (Insured: Natl-Re) (State Aid Withholding) (ETM) | BBB/Baa2 | 870,000 | 981,143 | |||||||||
Mount Vernon of Hancock County Multi-School Building Corp., 5.00% due 7/15/2015 (Insured: Natl-Re) (State Aid Withholding) | A/Baa2 | 270,000 | 299,300 | |||||||||
MSD of Warren Township Vision 2005 School Building Corp., 5.00% due 7/10/2015 (Insured: Natl-Re/FGIC) (State Aid Withholding) | AA+/NR | 2,895,000 | 3,190,203 | |||||||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2016 (146th Street Extension A) | AA-/NR | 1,660,000 | 1,907,240 | |||||||||
Perry Township Multischool Building Corp., 5.00% due 7/10/2014 (Insured: AGM) (State Aid Withholding) | NR/Aa2 | 2,130,000 | 2,295,906 | |||||||||
Plainfield Community High School Building Corp., 5.00% due 1/15/2015 (Insured: Natl-Re/FGIC) | A/NR | 1,445,000 | 1,571,351 | |||||||||
Rockport PCR, 6.25% due 6/1/2025 put 6/2/2014 (Indiana Michigan Power Co.) | BBB/Baa2 | 4,100,000 | 4,413,035 | |||||||||
Rockport PCR, 6.25% due 6/1/2025 put 6/2/2014 (Indiana Michigan Power Co.) | BBB/Baa2 | 1,000,000 | 1,076,350 | |||||||||
a South Bend Community School Building Corp., 4.00% due 1/15/2013 (State Aid Withholding) | AA+/NR | 1,545,000 | 1,559,430 | |||||||||
South Bend Community School Building Corp., 4.00% due 1/15/2013 | AA+/NR | 1,400,000 | 1,413,076 | |||||||||
South Bend Community School Building Corp., 4.00% due 7/15/2013 (State Aid Withholding) | AA+/NR | 1,000,000 | 1,024,870 | |||||||||
South Bend Community School Building Corp., 5.00% due 7/15/2016 (Insured: Natl-Re/ FGIC) (State Aid Withholding) | AA+/NR | 1,785,000 | 2,069,761 | |||||||||
West Clark School Building Corp., 5.25% due 1/15/2014 (Insured: Natl-Re) | AA+/Baa2 | 1,335,000 | 1,417,209 |
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
IOWA — 0.49% | ||||||||||||
Des Moines Independent Community School District, 4.00% due 6/1/2019 (School Infrastructure; Insured: AGM) | AA-/Aa3 | $ | 3,870,000 | $ | 4,416,754 | |||||||
Des Moines Independent Community School District, 4.00% due 6/1/2020 (School Infrastructure; Insured: AGM) | AA-/Aa3 | 3,990,000 | 4,572,141 | |||||||||
Des Moines Independent Community School District, 4.00% due 6/1/2021 (School Infrastructure; Insured: AGM) | AA-/Aa3 | 4,125,000 | 4,660,961 | |||||||||
Des Moines Independent Community School District, 4.00% due 6/1/2022 (School Infrastructure; Insured: AGM) | AA-/Aa3 | 2,140,000 | 2,391,792 | |||||||||
Iowa Finance Authority, 5.00% due 2/15/2014 (Iowa Health System; Insured: AGM) | NR/Aa3 | 2,500,000 | 2,643,050 | |||||||||
Iowa Finance Authority, 5.00% due 2/15/2015 (Iowa Health System; Insured: AGM) | NR/Aa3 | 2,300,000 | 2,517,005 | |||||||||
Iowa Finance Authority, 5.00% due 2/15/2016 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,600,000 | 1,808,640 | |||||||||
Iowa Finance Authority, 5.00% due 8/15/2016 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,500,000 | 1,720,710 | |||||||||
Iowa Finance Authority, 5.00% due 2/15/2017 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,600,000 | 1,855,440 | |||||||||
Iowa Finance Authority, 5.00% due 8/15/2017 (Iowa Health System; Insured: AGM) | NR/Aa3 | 990,000 | 1,162,755 | |||||||||
Iowa Finance Authority, 5.00% due 2/15/2018 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,405,000 | 1,661,764 | |||||||||
KANSAS — 0.80% | ||||||||||||
City of Burlington Environmental Improvement, 5.25% due 12/1/2023 put 4/1/2013 (Kansas City Power & Light Co.; Insured: Syncora) | BBB+/A3 | 5,000,000 | 5,102,200 | |||||||||
City of Burlington Environmental Improvement, 5.375% due 9/1/2035 put 4/1/2013 (Kansas City Power & Light Co.; Insured: Natl-Re/FGIC) | BBB/Baa2 | 12,500,000 | 12,763,375 | |||||||||
City of Wichita GO, 0.30% due 8/15/2013 (Norris Training Systems) | SP-1+/Mig1 | 26,900,000 | 26,902,690 | |||||||||
Kansas Development Finance Authority, 5.00% due 11/1/2015 | AA/Aa2 | 2,605,000 | 2,948,391 | |||||||||
KENTUCKY — 1.03% | ||||||||||||
Jefferson County School District Finance Corp., 5.25% due 1/1/2016 (Insured: AGM) | AA-/Aa2 | 2,145,000 | 2,459,586 | |||||||||
Kentucky Economic DFA, 0% due 10/1/2019 (Norton Health Care; Insured: Natl-Re) | BBB/Baa2 | 5,000,000 | 3,860,450 | |||||||||
Kentucky Economic DFA, 0% due 10/1/2021 (Norton Health Care; Insured: Natl-Re) | BBB/Baa2 | 2,685,000 | 1,865,243 | |||||||||
Kentucky Economic DFA, 5.00% due 5/1/2039 put 11/11/2014 (Catholic Health) | AA/Aa2 | 5,000,000 | 5,430,850 | |||||||||
Kentucky Municipal Power Agency, 4.00% due 9/1/2015 (Insured: AGM) | AA-/Aa3 | 2,955,000 | 3,214,360 | |||||||||
Louisville and Jefferson County Metropolitan Sewer District, 2.50% due 12/12/2012 | SP-1+/Mig1 | 44,990,000 | 45,165,911 | |||||||||
LOUISIANA — 3.03% | ||||||||||||
City of Bossier, 4.00% due 12/1/2018 (Public Improvements; Insured: AGM) | AA-/Aa3 | 2,020,000 | 2,328,414 | |||||||||
City of Bossier, 4.50% due 12/1/2021 (Public Improvements; Insured: AGM) | AA-/Aa3 | 2,240,000 | 2,677,830 | |||||||||
City of Lafayette, 4.00% due 11/1/2016 (Utilities System Improvements) | A+/A1 | 1,395,000 | 1,560,559 | |||||||||
City of Lafayette, 5.00% due 11/1/2019 (Utilities System Improvements) | A+/A1 | 1,000,000 | 1,222,800 | |||||||||
City of Monroe, 5.00% due 3/1/2017 pre-refunded 3/1/2015 (Garrett Road Economic Development; Insured: Radian) | NR/NR | 1,505,000 | 1,627,055 | |||||||||
City of New Orleans GO, 5.00% due 12/1/2019 (Public Improvements; Insured: AGM) | BBB/A3 | 3,080,000 | 3,678,167 | |||||||||
City of New Orleans GO, 5.00% due 12/1/2020 (Public Improvements; Insured: AGM) | BBB/A3 | 3,000,000 | 3,573,480 | |||||||||
City of New Orleans GO, 5.00% due 12/1/2021 (Public Improvements; Insured: AGM) | BBB/A3 | 5,700,000 | 6,759,687 | |||||||||
East Baton Rouge Sewer Commission, 4.00% due 2/1/2013 (Wastewater System Improvements) | AA-/Aa3 | 1,000,000 | 1,012,470 | |||||||||
East Baton Rouge Sewer Commission, 5.00% due 2/1/2014 (Wastewater System Improvements) | AA-/Aa3 | 1,000,000 | 1,059,630 | |||||||||
East Baton Rouge Sewer Commission, 5.00% due 2/1/2018 (Wastewater System Improvements; Insured: AGM) | AA-/Aa3 | 3,000,000 | 3,421,410 | |||||||||
Ernest N. Morial New Orleans Exhibit Hall, 5.00% due 7/15/2013 (Insured: AMBAC) | BBB/NR | 2,075,000 | 2,137,748 | |||||||||
Jefferson Sales Tax District, 5.00% due 12/1/2018 (Insured: AGM) | AA-/Aa3 | 2,000,000 | 2,411,420 | |||||||||
Louisiana Citizens Property Insurance Corp., 5.00% due 6/1/2015 (Insured: AMBAC) | A-/A3 | 10,265,000 | 11,231,963 | |||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.00%due 10/1/2013 (LCTCS Facilities Corp.) | AA-/A1 | 1,500,000 | 1,547,460 |
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.00%due 10/1/2014 (LCTCS Facilities Corp.) | AA-/A1 | $ | 1,500,000 | $ | 1,591,875 | |||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00%due 3/1/2015 (Independence Stadium) | A/NR | 1,000,000 | 1,083,500 | |||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00%due 3/1/2016 (Independence Stadium) | A/NR | 1,000,000 | 1,110,750 | |||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.00%due 10/1/2016 (Town of Vinton Public Power Authority; Insured: AGM) | AA-/NR | 1,000,000 | 1,088,960 | |||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00%due 3/1/2017 (Independence Stadium) | A/NR | 1,265,000 | 1,434,535 | |||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.00%due 10/1/2017 (Town of Vinton Public Power Authority; Insured: AGM) | AA-/NR | 1,000,000 | 1,103,770 | |||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00%due 3/1/2018 (Independence Stadium) | A/NR | 1,000,000 | 1,153,610 | |||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.50%due 10/1/2018 (Town of Vinton Public Power Authority; Insured: AGM) | AA-/NR | 1,000,000 | 1,142,090 | |||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.50%due 10/1/2019 (Town of Vinton Public Power Authority; Insured: AGM) | AA-/NR | 1,000,000 | 1,144,950 | |||||||||
Louisiana Offshore Terminal Authority, 5.00% due 10/1/2018 (Loop LLC Project) | NR/NR | 22,000,000 | 25,624,280 | |||||||||
Louisiana Offshore Terminal Authority, 2.125% due 10/1/2037 put 10/1/2015 (Loop LLC Project) | A-/NR | 5,000,000 | 5,076,050 | |||||||||
Louisiana Public Facilities Authority, 5.00% due 8/1/2013 (Department of Public Safety; Insured: AGM) | AA-/Aa3 | 2,500,000 | 2,582,275 | |||||||||
Louisiana Public Facilities Authority, 5.00% due 5/15/2014 (Ochsner Clinic Foundation) | NR/Baa1 | 1,000,000 | 1,048,160 | |||||||||
Louisiana Public Facilities Authority, 5.00% due 5/15/2015 (Ochsner Clinic Foundation) | NR/Baa1 | 1,825,000 | 1,963,627 | |||||||||
Louisiana Public Facilities Authority, 5.75% due 7/1/2015 (Franciscan Missionaries of Our Lady Health System; Insured: AGM) | AA-/Aa3 | 1,325,000 | 1,484,980 | |||||||||
Louisiana Public Facilities Authority, 2.875% due 11/1/2015 (Entergy Gulf States) | BBB+/A3 | 2,500,000 | 2,587,600 | |||||||||
Louisiana Public Facilities Authority, 5.00% due 5/15/2016 (Ochsner Clinic Foundation) | NR/Baa1 | 1,000,000 | 1,094,420 | |||||||||
Louisiana Public Facilities Authority, 5.00% due 5/15/2017 (Ochsner Clinic Foundation) | NR/Baa1 | 1,035,000 | 1,148,912 | |||||||||
Louisiana Public Facilities Authority, 5.00% due 5/15/2018 (Ochsner Clinic Foundation) | NR/Baa1 | 2,000,000 | 2,209,960 | |||||||||
Louisiana State GO, 5.00% due 8/1/2017 (Insured: Natl-Re) | AA/Aa2 | 4,000,000 | 4,485,560 | |||||||||
Louisiana State Office Facilities Corp., 3.75% due 3/1/2015 (State Capitol) | AA-/Aa3 | 5,000,000 | 5,342,300 | |||||||||
Louisiana State Office Facilities Corp., 5.00% due 5/1/2015 (State Capitol) | NR/Aa3 | 2,830,000 | 3,126,556 | |||||||||
Louisiana State Office Facilities Corp., 5.00% due 5/1/2016 (State Capitol) | NR/Aa3 | 1,000,000 | 1,140,770 | |||||||||
Louisiana State Office Facilities Corp., 5.00% due 5/1/2018 (State Capitol) | NR/Aa3 | 2,500,000 | 2,989,900 | |||||||||
Louisiana State Office Facilities Corp., 5.00% due 5/1/2021 (State Capitol) | NR/Aa3 | 4,595,000 | 5,503,110 | |||||||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | BBB/Baa3 | 2,400,000 | 2,513,376 | |||||||||
New Orleans Audubon Commission GO, 5.00% due 10/1/2016 (Aquarium Tax) | A/NR | 2,380,000 | 2,694,446 | |||||||||
New Orleans Audubon Commission GO, 4.00% due 10/1/2018 (Aquarium Tax; Insured: AGM) | AA-/NR | 1,110,000 | 1,230,946 | |||||||||
Parish of St. Charles, 4.00% due 12/1/2040 put 6/1/2022 (Valero Energy Corp. Refinery) | BBB/Baa2 | 14,000,000 | 15,204,420 | |||||||||
Parishwide School District GO, 5.00% due 9/1/2016 (Insured: AGM) | AA-/Aa3 | 4,500,000 | 5,138,775 | |||||||||
Parishwide School District GO, 5.00% due 9/1/2018 (Insured: AGM) | AA-/Aa3 | 4,800,000 | 5,689,104 | |||||||||
Parishwide School District GO, 5.00% due 9/1/2020 (Insured: AGM) | AA-/Aa3 | 3,840,000 | 4,625,126 | |||||||||
Plaquemines Parish Law Enforcement District GO, 5.00% due 9/1/2019 | BBB+/NR | 1,005,000 | 1,159,458 | |||||||||
Plaquemines Parish Law Enforcement District GO, 5.00% due 9/1/2021 | BBB+/NR | 1,115,000 | 1,256,940 | |||||||||
Regional Transit Authority, 0% due 12/1/2015 (Insured: Natl-Re/FGIC) | BBB/NR | 3,670,000 | 3,238,371 | |||||||||
Regional Transit Authority Sales Tax, 5.00% due 12/1/2017 (Insured: AGM) | AA-/Aa3 | 755,000 | 897,687 | |||||||||
Regional Transit Authority Sales Tax, 5.00% due 12/1/2019 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,224,380 | |||||||||
Regional Transit Authority Sales Tax, 5.00% due 12/1/2021 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,212,650 | |||||||||
Regional Transit Authority Sales Tax, 5.00% due 12/1/2022 (Insured: AGM) | AA-/Aa3 | 1,110,000 | 1,331,922 | |||||||||
St. Tammany Parish, 5.00% due 6/1/2017 (Insured: CIFG) | A+/NR | 1,405,000 | 1,594,422 | |||||||||
Terrebonne Parish Hospital Service District, 4.00% due 4/1/2014 (General Medical Center) | A/A2 | 800,000 | 828,560 | |||||||||
Terrebonne Parish Hospital Service District, 4.00% due 4/1/2015 (General Medical Center) | A/A2 | 575,000 | 608,362 | |||||||||
Terrebonne Parish Hospital Service District, 4.00% due 4/1/2017 (General Medical Center) | A/A2 | 1,000,000 | 1,080,430 |
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Terrebonne Parish Hospital Service District, 5.00% due 4/1/2018 (General Medical Center) | A/A2 | $ | 1,000,000 | $ | 1,141,730 | |||||||
Terrebonne Parish Hospital Service District, 5.00% due 4/1/2019 (General Medical Center) | A/A2 | 1,810,000 | 2,070,604 | |||||||||
Terrebonne Parish Hospital Service District, 5.00% due 4/1/2021 (General Medical Center) | A/A2 | 2,320,000 | 2,637,817 | |||||||||
MAINE — 0.06% | ||||||||||||
Maine Finance Authority, 3.80% due 11/1/2015 (Waste Management, Inc.) | BBB/NR | 3,440,000 | 3,762,259 | |||||||||
MARYLAND — 0.34% | ||||||||||||
Maryland Economic Development Corp., 5.00% due 6/1/2021 (Public Health Laboratory) | AA+/Aa1 | 8,725,000 | 10,928,237 | |||||||||
Maryland Economic Development Corp., 4.00% due 6/1/2022 (Public Health Laboratory) | AA+/Aa1 | 8,245,000 | 9,567,086 | |||||||||
MASSACHUSETTS — 1.59% | ||||||||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2017 | A-/NR | 2,540,000 | 2,892,247 | |||||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2018 | A-/NR | 2,825,000 | 3,255,530 | |||||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2019 | A-/NR | 2,765,000 | 3,202,589 | |||||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2020 | A-/NR | 2,965,000 | 3,416,955 | |||||||||
Greater Lawrence Vocational Technical High School District GO, 2.00% due 3/1/2013 (State Aid Withholding) | NR/Aa2 | 1,470,000 | 1,479,143 | |||||||||
Massachusetts Development Finance Agency, 5.75% due 12/1/2042 put 5/1/2019 (Dominion Energy Brayton) | A-/Baa2 | 2,000,000 | 2,412,380 | |||||||||
Massachusetts DFA, 5.625% due 1/1/2015 (Semass Partnership; Insured: Natl-Re) | BBB/Baa2 | 1,025,000 | 1,033,108 | |||||||||
Massachusetts DFA, 3.45% due 12/1/2015 (Carleton-Willard Village) | A-/NR | 2,245,000 | 2,271,671 | |||||||||
Massachusetts DFA, 5.625% due 1/1/2016 (Semass Partnership; Insured: Natl-Re) | BBB/Baa2 | 1,970,000 | 1,985,740 | |||||||||
Massachusetts DFA, 0.20% due 10/1/2042 put 10/1/2012 (Boston University; LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | 27,175,000 | 27,175,000 | |||||||||
Massachusetts Educational Financing Authority, 5.25% due 1/1/2016 | AA/NR | 2,450,000 | 2,718,716 | |||||||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2017 | AA/NR | 1,700,000 | 1,955,918 | |||||||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2018 | AA/NR | 11,170,000 | 12,996,518 | |||||||||
Massachusetts Educational Financing Authority, 5.75% due 1/1/2020 | AA/NR | 7,500,000 | 9,125,175 | |||||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2012 (Berkshire Health Systems; Insured: AGM) | AA-/Aa3 | 2,330,000 | 2,330,816 | |||||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2013 (Berkshire Health Systems; Insured: AGM) | AA-/Aa3 | 3,215,000 | 3,338,231 | |||||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 7/1/2014 (UMass Memorial Health Care) | A-/Baa1 | 2,750,000 | 2,892,258 | |||||||||
a Massachusetts Health & Educational Facilities Authority, 5.00% due 7/1/2015 (UMass Memorial Health Care) | A-/Baa1 | 2,625,000 | 2,833,031 | |||||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 7/1/2018 (UMass Memorial Health Care) | A-/Baa1 | 4,290,000 | 4,833,543 | |||||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2019 (Berkshire Health Systems; Insured: AGM) | AA-/Aa3 | 1,750,000 | 1,886,185 | |||||||||
Massachusetts Health & Educational Facilities Authority, 0.18% due 7/1/2039 put 10/1/2012 (Wellesley College) (daily demand notes) | AA+/Aaa | 1,200,000 | 1,200,000 | |||||||||
MICHIGAN — 4.89% | ||||||||||||
Byron Center Michigan Public Schools, 3.00% due 5/1/2013 | AA-/NR | 1,745,000 | 1,770,739 | |||||||||
Byron Center Michigan Public Schools, 4.00% due 5/1/2015 | AA-/NR | 1,985,000 | 2,146,361 | |||||||||
Byron Center Michigan Public Schools, 4.00% due 5/1/2017 (Insured: AGM/Q-SBLF) | AA-/NR | 1,305,000 | 1,473,397 | |||||||||
Byron Center Michigan Public Schools, 4.00% due 5/1/2018 (Insured: AGM/Q-SBLF) | AA-/NR | 1,935,000 | 2,203,230 | |||||||||
Byron Center Michigan Public Schools, 4.00% due 5/1/2020 (Insured: AGM/Q-SBLF) | AA-/NR | 1,000,000 | 1,146,290 | |||||||||
City of Battle Creek County of Calhoun GO, 5.00% due 5/1/2020 (Downtown Development; Insured: AMBAC) | AA-/Aa3 | 3,200,000 | 3,682,912 | |||||||||
City of Detroit, 5.00% due 7/1/2013 (Sewage Disposal System; Insured: AGM) | AA-/Aa3 | 1,590,000 | 1,629,273 |
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
City of Detroit, 5.00% due 7/1/2014 (Sewage Disposal System; Insured: Natl-Re) | A/Baa2 | $ | 2,000,000 | $ | 2,098,300 | |||||||
City of Detroit, 5.00% due 7/1/2014 (Sewage Disposal System; Insured: AGM) | AA-/Aa3 | 2,060,000 | 2,170,416 | |||||||||
City of Detroit, 5.00% due 7/1/2015 (Sewage Disposal System; Insured: Natl-Re) | A/Baa2 | 3,000,000 | 3,219,390 | |||||||||
City of Detroit, 5.00% due 7/1/2015 (Water Supply System; Insured: Natl-Re/FGIC) | A+/Baa2 | 6,000,000 | 6,489,840 | |||||||||
City of Detroit, 5.50% due 7/1/2015 (Sewage Disposal System; Insured: AGM) | AA-/Aa3 | 3,920,000 | 4,258,766 | |||||||||
City of Detroit, 6.00% due 7/1/2015 (Water Supply System; Insured: Natl-Re) | A+/Baa2 | 3,380,000 | 3,743,384 | |||||||||
City of Detroit, 6.50% due 7/1/2015 (Water Supply System; Insured: Natl-Re/FGIC) | A+/NR | 900,000 | 975,699 | |||||||||
City of Detroit, 5.00% due 7/1/2016 (Water Supply System; Insured: AGM) | AA-/Aa3 | 2,750,000 | 3,012,157 | |||||||||
City of Detroit, 5.50% due 7/1/2016 (Sewage Disposal System; Insured: Natl-Re) | A+/Baa2 | 375,000 | 417,454 | |||||||||
City of Detroit, 5.50% due 7/1/2017 (Sewage Disposal System; Insured: AGM) | AA-/Aa3 | 825,000 | 930,427 | |||||||||
City of Detroit, 5.50% due 7/1/2018 (Sewage Disposal System; Insured: AGM) | AA-/Aa3 | 3,000,000 | 3,417,660 | |||||||||
City of Detroit, 5.25% due 7/1/2019 (Sewage Disposal System; Insured: Natl-Re) | A+/Baa2 | 3,900,000 | 4,311,801 | |||||||||
City of Detroit, 5.25% due 7/1/2020 (Sewage Disposal System; Insured: Natl-Re) | A+/Baa2 | 4,305,000 | 4,730,377 | |||||||||
City of Detroit, 5.25% due 7/1/2020 (Sewage Disposal System; Insured: Natl-Re) | A+/Baa2 | 3,415,000 | 3,752,436 | |||||||||
City of Detroit, 5.25% due 7/1/2022 (Sewage Disposal System; Insured: AGM) | AA-/Aa3 | 3,000,000 | 3,444,090 | |||||||||
City of Grand Haven, 5.50% due 7/1/2016 (Electric System; Insured: Natl-Re) | BBB/Baa2 | 3,890,000 | 4,322,996 | |||||||||
Dickinson County Health Care Systems, 5.50% due 11/1/2013 (Insured: ACA) | NR/NR | 2,160,000 | 2,163,672 | |||||||||
Economic Development Corporation of Dickinson County, 5.75% due 6/1/2016 (International Paper Co.) | BBB/Baa3 | 8,845,000 | 8,874,631 | |||||||||
Genesee County GO, 2.00% due 5/1/2013 | NR/A1 | 1,000,000 | 1,006,100 | |||||||||
Gull Lake Community School District GO, 0% due 5/1/2013 (Insured: Natl-Re/FGIC) | BBB/NR | 490,000 | 485,129 | |||||||||
Kalamazoo Hospital Finance Authority, 4.00% due 5/15/2015 (Bronson Methodist Hospital; Insured: AGM) | NR/Aa3 | 1,735,000 | 1,862,297 | |||||||||
Kalamazoo Hospital Finance Authority, 4.00% due 5/15/2016 (Bronson Methodist Hospital; Insured: AGM) | NR/Aa3 | 1,850,000 | 2,030,208 | |||||||||
Kalamazoo Hospital Finance Authority, 4.50% due 5/15/2017 (Bronson Methodist Hospital; Insured: AGM) | NR/Aa3 | 1,830,000 | 2,079,026 | |||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2018 (Bronson Methodist Hospital; Insured: AGM) | AA-/Aa3 | 1,520,000 | 1,791,092 | |||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2018 (Bronson Methodist Hospital; Insured: AGM) | AA-/Aa3 | 2,500,000 | 2,945,875 | |||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2020 (Bronson Methodist Hospital; Insured: AGM) | NR/Aa3 | 1,735,000 | 2,081,844 | |||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2021 (Bronson Methodist Hospital; Insured: AGM) | NR/Aa3 | 2,350,000 | 2,782,071 | |||||||||
Kent Hospital Finance Authority, 5.25% due 1/15/2047 put 1/15/2014 (Spectrum Health) | AA/Aa3 | 5,865,000 | 6,196,079 | |||||||||
Kentwood Public Schools GO, 5.00% due 5/1/2015 pre-refunded 5/1/2013 (Insured: Natl-Re) | AA-/Aa2 | 4,050,000 | 4,163,886 | |||||||||
Livingston County GO, 4.00% due 5/1/2018 (Howell Public Schools; | AA-/NR | 1,000,000 | 1,135,920 | |||||||||
Livingston County GO, 4.00% due 5/1/2020 (Howell Public Schools; | AA-/NR | 1,000,000 | 1,141,480 | |||||||||
Livingston County GO, 4.00% due 5/1/2021 (Howell Public Schools; | AA-/NR | 1,000,000 | 1,138,280 | |||||||||
Michigan Finance Authority, 2.00% due 8/20/2013 (School District Operating Cash Flow Management) (State Aid Withholding) | SP-1+/NR | 7,000,000 | 7,096,390 | |||||||||
Michigan State Building Authority, 5.25% due 10/15/2012 (Insured: AGM) | AA-/Aa3 | 4,285,000 | 4,295,027 | |||||||||
Michigan State Building Authority, 5.25% due 10/15/2014 (Insured: AGM) | AA-/Aa3 | 4,300,000 | 4,511,517 | |||||||||
Michigan State Building Authority, 5.00% due 10/15/2015 (Insured: AMBAC) | A+/Aa3 | 6,000,000 | 6,751,800 | |||||||||
Michigan State Building Authority, 5.25% due 10/15/2015 (Insured: AGM) | AA-/Aa3 | 1,305,000 | 1,368,684 | |||||||||
Michigan State Building Authority, 5.50% due 10/15/2017 | A+/Aa3 | 4,000,000 | 4,838,880 | |||||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2013 (Sparrow Hospital) | A+/A1 | 1,225,000 | 1,282,244 | |||||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2015 (Oakwood Hospital) | A/A2 | 2,500,000 | 2,750,850 | |||||||||
Michigan State Hospital Finance Authority, 5.50% due 11/15/2015 (Henry Ford Health System) | A/A1 | 2,300,000 | 2,597,436 | |||||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2016 (Oakwood Hospital) | A/A2 | 1,205,000 | 1,360,445 | |||||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2016 (Ascension Health) | AA+/Aa1 | 3,530,000 | 4,081,704 | |||||||||
Michigan State Hospital Finance Authority, 5.50% due 11/1/2017 pre-refunded 11/1/2013 (Oakwood Hospital) | AA+/A2 | 5,000,000 | 5,284,850 |
32 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2017 (Sparrow Memorial Hospital) | A+/A1 | $ | 1,500,000 | $ | 1,721,520 | |||||||
Michigan State Hospital Finance Authority, 5.50% due 11/15/2017 (Henry Ford Health System) | A/A1 | 1,530,000 | 1,814,060 | |||||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2018 (Oakwood Hospital) | A/A2 | 1,000,000 | 1,133,470 | |||||||||
Michigan State Hospital Finance Authority, 5.50% due 11/15/2018 (Henry Ford Health System) | A/A1 | 3,500,000 | 4,239,375 | |||||||||
Michigan State Hospital Finance Authority, 6.00% due 12/1/2018 (Trinity Health) | AA/Aa2 | 2,000,000 | 2,517,180 | |||||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2019 (Oakwood Hospital) | A/A2 | 2,000,000 | 2,234,020 | |||||||||
Michigan State Hospital Finance Authority, 5.00% due 10/1/2026 put 6/1/2017 (Ascension Health) | NR/Aa2 | 12,140,000 | 14,086,649 | |||||||||
Michigan State Hospital Finance Authority, 5.75% due 12/1/2034 put 12/1/2015 (Trinity Health) | AA/Aa2 | 10,000,000 | 11,402,400 | |||||||||
Michigan State Housing Development Authority, 5.00% due 4/1/2016 (Multi-Family Mtg Loan Financing) | AA/NR | 3,460,000 | 3,554,735 | |||||||||
Michigan State Housing Development Authority, 4.00% due 10/1/2016 (Multi-Family Mtg Loan Financing) | AA/NR | 1,715,000 | 1,881,526 | |||||||||
Michigan Strategic Fund, 2.80% due 12/1/2013 (Waste Management, Inc.) | BBB/NR | 2,850,000 | 2,912,130 | |||||||||
Michigan Strategic Fund, 5.00% due 10/15/2017 (Michigan House of Representatives Facilities; Insured: AGM) | AA-/Aa3 | 2,000,000 | 2,305,540 | |||||||||
Michigan Strategic Fund, 5.25% due 6/1/2018 (Clark Retirement Community, Inc. Project) | BB/NR | 1,415,000 | 1,399,874 | |||||||||
Michigan Strategic Fund, 5.25% due 10/15/2019 (Michigan House of Representatives Facilities; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,171,870 | |||||||||
Michigan Strategic Fund, 5.25% due 10/15/2020 (Michigan House of Representatives Facilities; Insured: AGM) | AA-/Aa3 | 4,025,000 | 4,659,098 | |||||||||
Michigan Strategic Fund, 5.25% due 8/1/2029 put 8/1/2014 (Detroit Edison Co. Exempt Facilities Project) | A/NR | 7,500,000 | 8,038,875 | |||||||||
Michigan Strategic Fund, 5.50% due 8/1/2029 put 8/1/2016 (Detroit Edison Co. Exempt Facilities Project) | A/NR | 5,160,000 | 5,902,318 | |||||||||
Romeo Community School District GO, 5.00% due 5/1/2018 (Insured: Natl-Re/Q-SBLF) | AA-/Aa2 | 3,050,000 | 3,388,184 | |||||||||
Royal Oak Hospital Finance Authority, 6.25% due 9/1/2014 (William Beaumont Hospital) | A/A1 | 1,000,000 | 1,088,980 | |||||||||
Royal Oak Hospital Finance Authority, 5.25% due 8/1/2017 (William Beaumont Hospital) | A/A1 | 5,855,000 | 6,610,646 | |||||||||
School District of the City of Detroit GO, 5.00% due 5/1/2020 (School Building & Site; Insured: Q-SBLF) | AA-/Aa2 | 2,200,000 | 2,605,988 | |||||||||
School District of the City of Detroit GO, 5.00% due 5/1/2021 (School Building & Site; Insured: Q-SBLF) | AA-/Aa2 | 4,000,000 | 4,761,000 | |||||||||
School District of the City of Detroit GO, 5.00% due 5/1/2022 (School Building & Site; Insured: Q-SBLF) | AA-/Aa2 | 3,000,000 | 3,572,220 | |||||||||
Sparta Area Schools, Counties of Kent and Ottawa GO, 4.00% due 5/1/2016 (School Building & Site; Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,094,690 | |||||||||
Sparta Area Schools, Counties of Kent and Ottawa GO, 5.00% due 5/1/2017 (School Building & Site; Insured: Q-SBLF) | AA-/NR | 1,085,000 | 1,255,844 | |||||||||
Sparta Area Schools, Counties of Kent and Ottawa GO, 5.00% due 5/1/2018 (School Building & Site; Insured: Q-SBLF) | AA-/NR | 1,285,000 | 1,507,806 | |||||||||
Sparta Area Schools, Counties of Kent and Ottawa GO, 5.00% due 5/1/2020 (School Building & Site; Insured: Q-SBLF) | AA-/NR | 1,335,000 | 1,593,656 | |||||||||
Wayne County Airport Authority, 5.00% due 12/1/2017 (Detroit Metropolitan Airport; Insured: Natl-Re/FGIC) | A/A2 | 1,000,000 | 1,176,480 | |||||||||
Wayne County Airport Authority, 5.00% due 12/1/2017 (Detroit Metropolitan Airport) | A/A2 | 2,420,000 | 2,847,082 | |||||||||
Wayne County Airport Authority, 5.00% due 12/1/2019 (Detroit Metropolitan Airport) | A/A2 | 12,645,000 | 15,029,594 | |||||||||
Wayne County Airport Authority, 5.50% due 12/1/2019 (Detroit Metropolitan Airport) | A/A2 | 2,600,000 | 3,176,316 | |||||||||
Wayne County Airport Authority, 5.50% due 12/1/2020 (Detroit Metropolitan Airport) | A/A2 | 4,395,000 | 5,382,688 | |||||||||
Wayne County Airport Authority, 5.50% due 12/1/2020 (Detroit Metropolitan Airport) | A/A2 | 3,115,000 | 3,815,034 | |||||||||
Western Townships Utilities Authority GO, 4.00% due 1/1/2013 (Sewage Disposal System) | AA/NR | 1,000,000 | 1,008,940 | |||||||||
Western Townships Utilities Authority GO, 4.00% due 1/1/2014 (Sewage Disposal System) | AA/NR | 1,000,000 | 1,040,880 | |||||||||
Western Townships Utilities Authority GO, 5.00% due 1/1/2015 (Sewage Disposal System) | AA/NR | 1,870,000 | 2,041,872 | |||||||||
Western Townships Utilities Authority GO, 5.00% due 1/1/2016 (Sewage Disposal System) | AA/NR | 1,670,000 | 1,885,898 | |||||||||
Western Townships Utilities Authority GO, 5.00% due 1/1/2017 (Sewage Disposal System) | AA/NR | 1,500,000 | 1,743,375 |
Certified Annual Report 33
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Western Townships Utilities Authority GO, 5.00% due 1/1/2018 (Sewage Disposal System) | AA/NR | $ | 1,500,000 | $ | 1,778,655 | |||||||
MINNESOTA — 1.14% | ||||||||||||
City of St. Cloud, 5.00% due 5/1/2013 (Centracare Health Systems) | NR/A1 | 1,000,000 | 1,026,750 | |||||||||
City of St. Cloud, 5.00% due 5/1/2015 (Centracare Health Systems) | NR/A1 | 1,000,000 | 1,100,100 | |||||||||
City of St. Cloud, 5.00% due 5/1/2016 (Centracare Health Systems) | NR/A1 | 1,250,000 | 1,414,912 | |||||||||
City of St. Cloud, 5.00% due 5/1/2017 (Centracare Health Systems) | NR/A1 | 2,920,000 | 3,384,981 | |||||||||
City of St. Cloud, 5.00% due 5/1/2017 (Centracare Health Systems) | NR/A1 | 1,000,000 | 1,159,240 | |||||||||
City of St. Cloud, 5.00% due 5/1/2018 (Centracare Health Systems) | NR/A1 | 3,105,000 | 3,640,923 | |||||||||
City of St. Cloud, 5.00% due 5/1/2019 (Centracare Health Systems) | NR/A1 | 3,495,000 | 4,127,665 | |||||||||
City of St. Cloud, 5.00% due 5/1/2020 (Centracare Health Systems) | NR/A1 | 3,200,000 | 3,839,776 | |||||||||
City of St. Paul Housing & Redevelopment Authority, 5.25% due 5/15/2021 (Regions Hospital) | A-/A3 | 1,070,000 | 1,156,424 | |||||||||
City of St. Paul Housing & Redevelopment Authority and City of Minneapolis, 5.25% due 12/1/2012 (Group Health Plan, Inc.) | A-/A3 | 1,000,000 | 1,008,390 | |||||||||
City of St. Paul Housing & Redevelopment Authority and City of Minneapolis, 5.25% due 12/1/2013 (Group Health Plan, Inc.) | A-/A3 | 2,200,000 | 2,318,822 | |||||||||
City of St. Paul Housing & Redevelopment Authority and City of Minneapolis, 6.00% due 12/1/2019 (Group Health Plan, Inc.) | A-/A3 | 1,000,000 | 1,047,200 | |||||||||
Minneapolis-St. Paul Metropolitan Airports Commission, 5.00% due 1/1/2017 (Insured: AMBAC) | AA-/NR | 8,005,000 | 9,296,527 | |||||||||
Minnesota Agricultural & Economic Development Board, 4.00% due 2/15/2014 (Essential Health; Insured: AGM) | AA-/NR | 3,460,000 | 3,606,462 | |||||||||
Minnesota Agricultural & Economic Development Board, 5.00% due 2/15/2015 (Essential Health; Insured: AGM) | AA-/NR | 1,335,000 | 1,457,980 | |||||||||
Minnesota Agricultural & Economic Development Board, 5.00% due 2/15/2017 (Essential Health; Insured: AGM) | AA-/NR | 2,500,000 | 2,886,425 | |||||||||
Northern Municipal Power Agency, 5.00% due 1/1/2019 (Electric System) | A-/A2 | 5,000,000 | 6,041,550 | |||||||||
Northern Municipal Power Agency, 5.00% due 1/1/2020 (Electric System) | A-/A2 | 3,500,000 | 4,250,820 | |||||||||
St. Paul Housing & Redevelopment Authority, 5.00% due 2/1/2018 (Gillette Children’s Specialty Healthcare Project) | A-/NR | 1,255,000 | 1,420,534 | |||||||||
St. Paul Housing & Redevelopment Authority, 5.25% due 2/1/2020 (Gillette Children’s Specialty Healthcare Project) | A-/NR | 2,010,000 | 2,308,284 | |||||||||
Tobacco Securitization Authority, 5.00% due 3/1/2020 | A/NR | 2,000,000 | 2,337,900 | |||||||||
Tobacco Securitization Authority, 5.00% due 3/1/2021 | A/NR | 2,000,000 | 2,347,100 | |||||||||
Tobacco Securitization Authority, 5.00% due 3/1/2022 | A/NR | 6,100,000 | 7,164,511 | |||||||||
MISSISSIPPI — 0.22% | ||||||||||||
Medical Center Educational Building, 4.00% due 6/1/2015 (University of Mississippi Medical Center) | AA-/Aa2 | 2,325,000 | 2,513,441 | |||||||||
Medical Center Educational Building, 4.00% due 6/1/2016 (University of Mississippi Medical Center) | AA-/Aa2 | 3,300,000 | 3,655,674 | |||||||||
Mississippi Development Bank, 5.00% due 8/1/2018 (Department of Corrections) | AA-/NR | 4,910,000 | 5,861,607 | |||||||||
Mississippi Development Bank Canton Public Improvement GO, 4.75% due 7/1/2017 | NR/NR | 1,230,000 | 1,325,461 | |||||||||
MISSOURI — 1.53% | ||||||||||||
Cass County COP, 3.00% due 5/1/2014 | A/NR | 1,425,000 | 1,465,399 | |||||||||
Cass County COP, 4.00% due 5/1/2015 | A/NR | 1,000,000 | 1,066,910 | |||||||||
Cass County COP, 4.00% due 5/1/2018 | A/NR | 2,255,000 | 2,487,874 | |||||||||
Cass County COP, 4.50% due 5/1/2019 | A/NR | 1,270,000 | 1,439,443 | |||||||||
Cass County COP, 5.00% due 5/1/2020 | A/NR | 2,255,000 | 2,649,986 | |||||||||
Cass County COP, 5.00% due 5/1/2021 | A/NR | 1,750,000 | 2,023,350 | |||||||||
Jackson County, 4.00% due 12/1/2014 (Truman Sports Complex) | NR/A1 | 2,580,000 | 2,733,149 | |||||||||
Kansas City IDA, 4.00% due 9/1/2014 (NNSA National Security Campus) | NR/NR | 1,535,000 | 1,573,805 | |||||||||
Kansas City IDA, 5.00% due 9/1/2018 (Kansas City Downtown Redevelopment District) | AA-/A1 | 2,000,000 | 2,338,500 |
34 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Kansas City Municipal Assistance Corp., 5.00% due 4/15/2018 (Bartle Music Hall and Municipal Auditorium Parking Garage; Insured: Natl-Re/FGIC) | AA-/Aa3 | $ | 1,000,000 | $ | 1,176,630 | |||||||
Missouri Development Finance Board, 4.00% due 6/1/2014 (Electric Systems) | A-/NR | 3,930,000 | 4,097,732 | |||||||||
Missouri Development Finance Board, 4.00% due 6/1/2015 (Electric Systems) | A-/NR | 1,000,000 | 1,063,660 | |||||||||
Missouri Development Finance Board, 4.00% due 6/1/2016 (Electric Systems) | A-/NR | 1,560,000 | 1,689,979 | |||||||||
Missouri Development Finance Board, 5.00% due 6/1/2017 (Electric Systems) | A-/NR | 1,525,000 | 1,746,460 | |||||||||
Missouri Development Finance Board, 5.00% due 6/1/2018 (Electric Systems) | A-/NR | 1,705,000 | 1,978,414 | |||||||||
Missouri Development Finance Board, 5.00% due 6/1/2019 (Electric Systems) | A-/NR | 1,790,000 | 2,096,502 | |||||||||
Missouri Development Finance Board, 5.00% due 6/1/2020 (Electric Systems) | A-/NR | 1,000,000 | 1,173,380 | |||||||||
Missouri Development Finance Board, 0.20% due 12/1/2033 put 10/1/2012 (Nelson Gallery Foundation; SPA: JPMorgan Chase Bank) (daily demand notes) | AAA/Aaa | 23,440,000 | 23,440,000 | |||||||||
Missouri Regional Convention & Sports Complex Authority, 5.25% due 8/15/2016 (Insured: AMBAC) | AA+/Aa2 | 1,800,000 | 1,877,616 | |||||||||
Missouri State Health & Educational Facilities Authority, 4.00% due 4/1/2015 (Webster University) | NR/A2 | 2,155,000 | 2,298,695 | |||||||||
Missouri State Health & Educational Facilities Authority, 4.00% due 4/1/2016 (Webster University) | NR/A2 | 1,685,000 | 1,830,247 | |||||||||
Missouri State Health & Educational Facilities Authority, 4.00% due 4/1/2017 (Webster University) | NR/A2 | 2,360,000 | 2,594,348 | |||||||||
Missouri State Health & Educational Facilities Authority, 5.00% due 5/15/2017 (Children’s Mercy Hospital) | A+/NR | 1,000,000 | 1,130,630 | |||||||||
Missouri State Health & Educational Facilities Authority, 5.00% due 5/15/2019 (Children’s Mercy Hospital) | A+/NR | 1,000,000 | 1,152,620 | |||||||||
Missouri State Health & Educational Facilities Authority, 5.00% due 5/15/2020 (Children’s Mercy Hospital) | A+/NR | 1,000,000 | 1,142,200 | |||||||||
Platte County, 4.00% due 4/1/2017 (Community & Resource Centers) | NR/A1 | 1,500,000 | 1,639,410 | |||||||||
Platte County, 4.00% due 4/1/2018 (Community & Resource Centers) | NR/A1 | 2,110,000 | 2,320,135 | |||||||||
Platte County, 5.00% due 4/1/2019 (Community & Resource Centers) | NR/A1 | 2,000,000 | 2,325,040 | |||||||||
Platte County, 5.00% due 4/1/2021 (Community & Resource Centers) | NR/A1 | 2,440,000 | 2,864,658 | |||||||||
Springfield Public Utilities COP, 5.00% due 12/1/2013 (Insured: Natl-Re) | AA/A1 | 2,000,000 | 2,106,400 | |||||||||
St. Louis Municipal Finance Corp., 4.00% due 2/15/2013 (City Justice Center) | A/A1 | 750,000 | 760,305 | |||||||||
St. Louis Municipal Finance Corp., 4.00% due 2/15/2014 (City Justice Center) | A/A1 | 1,000,000 | 1,045,170 | |||||||||
St. Louis Municipal Finance Corp., 5.00% due 2/15/2015 (City Justice Center) | A/A1 | 1,250,000 | 1,362,600 | |||||||||
St. Louis Municipal Finance Corp., 5.00% due 2/15/2016 (City Justice Center) | A/A1 | 2,065,000 | 2,308,154 | |||||||||
St. Louis Municipal Finance Corp., 5.00% due 2/15/2017 (City Justice Center) | A/A1 | 2,000,000 | 2,281,200 | |||||||||
St. Louis Municipal Finance Corp., 5.00% due 2/15/2018 (City Justice Center) | A/A1 | 3,865,000 | 4,471,805 | |||||||||
NEBRASKA — 0.31% | ||||||||||||
Omaha Public Power District, 5.00% due 2/1/2013 (Electric System) | AA/Aa1 | 5,000,000 | 5,022,250 | |||||||||
Public Power Generation Agency, 5.00% due 1/1/2020 (Nebraska Whelan Energy Center; Insured: AMBAC) | A-/A2 | 9,930,000 | 11,296,666 | |||||||||
Public Power Generation Agency, 5.00% due 1/1/2021 (Nebraska Whelan Energy Center; Insured: AMBAC) | A-/A2 | 1,860,000 | 2,099,624 | |||||||||
NEVADA — 1.71% | ||||||||||||
Carson City, 4.00% due 9/1/2015 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 1,000,000 | 1,063,770 | |||||||||
Carson City, 4.00% due 9/1/2016 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 1,245,000 | 1,341,923 | |||||||||
Carson City, 5.00% due 9/1/2019 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 1,000,000 | 1,139,390 | |||||||||
Carson City, 5.00% due 9/1/2020 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 1,000,000 | 1,133,560 | |||||||||
Carson City, 5.00% due 9/1/2022 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 2,250,000 | 2,553,750 | |||||||||
City of Las Vegas COP, 5.00% due 9/1/2016 (City Hall) | AA-/Aa3 | 4,000,000 | 4,515,320 | |||||||||
City of Las Vegas COP, 5.00% due 9/1/2017 (City Hall) | AA-/Aa3 | 4,300,000 | 4,941,259 | |||||||||
City of Las Vegas COP, 5.00% due 9/1/2018 (City Hall) | AA-/Aa3 | 4,000,000 | 4,672,120 | |||||||||
City of Las Vegas GO, 7.00% due 4/1/2017 (Performing Arts Center) | AA/Aa2 | 1,825,000 | 2,250,243 |
Certified Annual Report 35
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
City of Las Vegas GO, 7.00% due 4/1/2018 (Performing Arts Center) | AA/Aa2 | $ | 2,095,000 | $ | 2,675,273 | |||||||
City of Las Vegas Redevelopment Agency, 5.00% due 6/15/2013 (Fremont Street) | BBB-/NR | 3,685,000 | 3,731,284 | |||||||||
City of Las Vegas Special Local Improvement District 707, 5.375% due 6/1/2013 (Insured: AGM) | AA-/Aa3 | 970,000 | 975,995 | |||||||||
City of Reno, 5.25% due 6/1/2014 (Washoe Medical Center; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,066,400 | |||||||||
City of Reno, 5.25% due 6/1/2016 (Washoe Medical Center; Insured: AGM) | AA-/Aa3 | 1,100,000 | 1,250,238 | |||||||||
City of Reno, 5.25% due 6/1/2018 (Washoe Medical Center; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,182,110 | |||||||||
Clark County GO, 5.00% due 11/1/2014 | AA+/Aa1 | 4,000,000 | 4,368,760 | |||||||||
Clark County GO, 5.00% due 11/1/2017 (Insured: AMBAC) | AA+/Aa1 | 1,185,000 | 1,376,093 | |||||||||
Clark County Improvement District, 5.00% due 12/1/2015 (Insured: AMBAC) | BBB+/NR | 1,735,000 | 1,880,272 | |||||||||
Clark County School District GO, 5.00% due 6/15/2015 (Insured: Natl-Re) | AA-/Aa3 | 1,000,000 | 1,056,300 | |||||||||
Clark County School District GO, 5.50% due 6/15/2015 pre-refunded 12/15/2012 (Insured: AGM) | AA-/Aa3 | 5,470,000 | 5,696,020 | |||||||||
Las Vegas Clark County Library District GO, 5.00% due 1/1/2018 | AA/Aa2 | 6,535,000 | 7,752,667 | |||||||||
Las Vegas Clark County Library District GO, 5.00% due 1/1/2019 | AA/Aa2 | �� | 3,000,000 | 3,616,950 | ||||||||
Las Vegas Convention & Visitors Authority, 5.25% due 7/1/2013 (Insured: AMBAC) | A+/A1 | 1,530,000 | 1,583,734 | |||||||||
Las Vegas Convention & Visitors Authority, 5.25% due 7/1/2014 (Insured: AMBAC) | A+/A1 | 2,680,000 | 2,880,946 | |||||||||
Las Vegas Convention & Visitors Authority, 5.25% due 7/1/2015 (Insured: AMBAC) | A+/A1 | 4,620,000 | 5,143,492 | |||||||||
Las Vegas Convention & Visitors Authority, 5.00% due 7/1/2019 (Insured: AMBAC) | A+/A1 | 6,000,000 | 6,610,680 | |||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2017 | AA+/Aa2 | 1,050,000 | 1,237,677 | |||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2019 | AA+/Aa2 | 1,000,000 | 1,220,930 | |||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2020 | AA+/Aa2 | 4,255,000 | 5,228,884 | |||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2020 | AA+/Aa2 | 5,080,000 | 6,242,710 | |||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2021 | AA+/Aa2 | 5,000,000 | 6,191,750 | |||||||||
Redevelopment Agency of the City of Mesquite, 7.00% due 6/1/2019 (Public Facility and Redevelopment Projects) | BBB+/NR | 1,000,000 | 1,047,470 | |||||||||
Washoe County GO, 5.00% due 7/1/2021 (Reno-Sparks Convention & Visitors Authority) | AA/Aa2 | 1,700,000 | 2,079,593 | |||||||||
Washoe County GO, 5.00% due 7/1/2022 (Reno-Sparks Convention & Visitors Authority) | AA/Aa2 | 2,500,000 | 3,022,725 | |||||||||
NEW HAMPSHIRE — 0.36% | ||||||||||||
New Hampshire Business Finance Authority PCR, 5.375% due 5/1/2014 (Central Maine Power Co.) | BBB+/Baa1 | 1,365,000 | 1,447,200 | |||||||||
New Hampshire Health & Educational Facilities, 5.00% due 10/1/2016 (Southern New Hampshire Health Systems) | A-/NR | 1,260,000 | 1,406,185 | |||||||||
New Hampshire Health & Educational Facilities, 5.00% due 10/1/2017 (Southern New Hampshire Health Systems) | A-/NR | 1,000,000 | 1,134,130 | |||||||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2016 (Insured: Natl-Re) | A+/A1 | 2,985,000 | 3,487,107 | |||||||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2017 (Insured: Natl-Re) | A+/A1 | 3,130,000 | 3,759,506 | |||||||||
b New Hampshire Turnpike System, 5.00% due 2/1/2016 | A+/A1 | 3,000,000 | 3,384,900 | |||||||||
b New Hampshire Turnpike System, 5.00% due 2/1/2017 | A+/A1 | 2,425,000 | 2,809,702 | |||||||||
b New Hampshire Turnpike System, 5.00% due 2/1/2018 | A+/A1 | 1,295,000 | 1,532,930 | |||||||||
b New Hampshire Turnpike System, 5.00% due 2/1/2020 | A+/A1 | 1,000,000 | 1,204,970 | |||||||||
b New Hampshire Turnpike System, 5.00% due 2/1/2021 | A+/A1 | 1,260,000 | 1,525,961 | |||||||||
NEW JERSEY — 2.18% | ||||||||||||
Camden County Improvement Authority, 5.00% due 7/1/2014 (Cooper Medical School) | A+/A2 | 2,845,000 | 3,031,973 | |||||||||
Camden County Improvement Authority, 5.00% due 7/1/2015 (Cooper Medical School) | A+/A2 | 2,990,000 | 3,285,322 | |||||||||
Camden County Improvement Authority, 5.00% due 7/1/2016 (Cooper Medical School) | A+/A2 | 3,040,000 | 3,430,914 | |||||||||
City of Paterson, 4.25% due 6/15/2015 (General Improvement; Insured: AGM) (State Aid Withholding) | NR/Aa3 | 1,275,000 | 1,353,260 | |||||||||
Essex County Improvement Authority, 5.125% due 10/1/2016 (Insured: Natl-Re) | NR/Aa2 | 2,545,000 | 2,774,406 | |||||||||
Hudson County COP, 7.00% due 12/1/2012 (Insured: Natl-Re) | BBB/Baa2 | 1,610,000 | 1,624,957 | |||||||||
Hudson County COP, 7.00% due 12/1/2013 (Insured: Natl-Re) | BBB/Baa2 | 710,000 | 751,642 | |||||||||
Hudson County COP, 6.25% due 12/1/2014 (Insured: Natl-Re) | BBB/Baa2 | 1,500,000 | 1,635,750 | |||||||||
Hudson County COP, 6.25% due 12/1/2016 (Insured: Natl-Re) | BBB/Baa2 | 550,000 | 637,874 |
36 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Hudson County Improvement Authority, 5.25% due 10/1/2014 (Hudson County Lease; Insured: AGM) | AA-/Aa3 | $ | 3,000,000 | $ | 3,248,340 | |||||||
Hudson County Improvement Authority, 4.75% due 10/1/2015 (Hudson County Lease; Insured: AGM) | AA-/Aa3 | 2,000,000 | 2,210,100 | |||||||||
Hudson County Improvement Authority, 4.75% due 10/1/2016 (Hudson County Lease; Insured: AGM) | AA-/Aa3 | 3,155,000 | 3,569,535 | |||||||||
Hudson County Improvement Authority, 4.75% due 10/1/2017 (Hudson County Lease; Insured: AGM) | AA-/Aa3 | 4,065,000 | 4,676,295 | |||||||||
Hudson County Improvement Authority, 4.75% due 10/1/2018 (Hudson County Lease; Insured: AGM) | AA-/Aa3 | 2,000,000 | 2,334,260 | |||||||||
Hudson County Improvement Authority, 4.75% due 10/1/2019 (Hudson County Lease; Insured: AGM) | AA-/Aa3 | 4,390,000 | 5,151,489 | |||||||||
Hudson County Improvement Authority, 5.375% due 10/1/2020 (Hudson County Lease; Insured: AGM) | AA-/Aa3 | 1,955,000 | 2,389,597 | |||||||||
Jersey City GO, 3.00% due 12/14/2012 (State Aid Withholding) | NR/NR | 5,000,000 | 5,010,100 | |||||||||
Jersey City GO, 5.00% due 9/1/2013 (Insured: Natl-Re) (State Aid Withholding) | BBB/A2 | 5,820,000 | 6,041,684 | |||||||||
Monmouth County Improvement Authority, 5.00% due 12/1/2016 (Insured: AMBAC) | NR/NR | 1,000,000 | 1,114,320 | |||||||||
New Jersey EDA, 5.00% due 11/15/2014 (Seabrook Village) | NR/NR | 1,000,000 | 1,039,050 | |||||||||
New Jersey EDA, 5.00% due 12/15/2016 (School Facilities Construction) | A+/A1 | 10,000,000 | 11,697,200 | |||||||||
New Jersey EDA, 5.50% due 12/15/2019 (School Facilities Construction; Insured: AMBAC) | A+/A1 | 5,525,000 | 6,972,882 | |||||||||
New Jersey Health Care Facilities Financing Authority, 5.00% due 7/1/2013 (St Peter’s University Hospital) | BBB-/Ba1 | 1,000,000 | 1,022,130 | |||||||||
New Jersey Health Care Facilities Financing Authority, 5.00% due 7/1/2014 (St Peter’s University Hospital) | BBB-/Ba1 | 3,575,000 | 3,736,483 | |||||||||
New Jersey Health Care Facilities Financing Authority, 5.00% due 7/1/2015 (St Peter’s University Hospital) | BBB-/Ba1 | 3,520,000 | 3,762,739 | |||||||||
New Jersey Higher Educational Assistance Authority, 5.00% due 12/1/2017 | AA/Aa2 | 1,500,000 | 1,743,570 | |||||||||
New Jersey Higher Educational Assistance Authority, 5.00% due 12/1/2018 | AA/Aa2 | 3,000,000 | 3,541,110 | |||||||||
New Jersey Higher Educational Assistance Authority, 5.25% due 12/1/2019 | AA/Aa2 | 5,000,000 | 6,021,000 | |||||||||
New Jersey State Transit Corp. COP, 5.25% due 9/15/2013 (Insured: AMBAC) | A/Aa3 | 11,050,000 | 11,532,995 | |||||||||
New Jersey State Transit Corp. COP, 5.50% due 9/15/2013 (Insured: AMBAC) | A/Aa3 | 7,650,000 | 8,019,036 | |||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2019 | A+/A1 | 1,000,000 | 1,216,060 | |||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2020 | A+/A1 | 1,000,000 | 1,222,300 | |||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2021 | A+/A1 | 2,360,000 | 2,896,239 | |||||||||
Ocean Township Municipal Utility Authority, 6.00% due 8/1/2017 (Insured: Natl-Re) | BBB/Baa2 | 3,075,000 | 3,431,546 | |||||||||
Passaic Valley Sewer Commissioners GO, 5.625% due 12/1/2018 (Sewer System) | NR/A2 | 1,210,000 | 1,448,781 | |||||||||
Passaic Valley Sewer Commissioners GO, 5.75% due 12/1/2019 (Sewer System) | NR/A2 | 2,000,000 | 2,440,340 | |||||||||
Passaic Valley Sewer Commissioners GO, 5.75% due 12/1/2020 (Sewer System) | NR/A2 | 2,800,000 | 3,438,904 | |||||||||
Passaic Valley Sewer Commissioners GO, 5.75% due 12/1/2021 (Sewer System) | NR/A2 | 1,000,000 | 1,234,670 | |||||||||
NEW MEXICO — 0.77% | ||||||||||||
City of Albuquerque, 5.50% due 7/1/2013 (Albuquerque International Sunport & Double Eagle II Airports) | A/A2 | 1,820,000 | 1,891,271 | |||||||||
Gallup PCR, 5.00% due 8/15/2016 (Insured: AMBAC) | A/A3 | 2,500,000 | 2,745,750 | |||||||||
Incorporated County of Los Alamos, 5.50% due 6/1/2017 | AA+/Aa3 | 2,365,000 | 2,867,988 | |||||||||
Incorporated County of Los Alamos, 5.50% due 6/1/2018 | AA+/Aa3 | 2,205,000 | 2,740,881 | |||||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2018 | AAA/Aaa | 5,000,000 | 5,979,400 | |||||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2021 | AAA/Aaa | 3,000,000 | 3,585,780 | |||||||||
State of New Mexico, 5.00% due 7/1/2014 | AA/Aa1 | 7,435,000 | 8,047,347 | |||||||||
State of New Mexico, 5.00% due 7/1/2015 | AA/Aa1 | 5,500,000 | 6,196,520 | |||||||||
State of New Mexico, 5.00% due 7/1/2016 | AA/Aa1 | 10,265,000 | 12,007,792 | |||||||||
NEW YORK — 7.49% | ||||||||||||
Amherst Development Corp., 5.00% due 10/1/2015 (Student Housing; Insured: AGM) | AA-/Aa3 | 1,535,000 | 1,703,221 |
Certified Annual Report 37
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
City of New York GO, 0.14 % due 8/1/2015 put 10/1/2012 (LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | $ | 7,700,000 | $ | 7,700,019 | |||||||
City of New York GO, 0.17% due 8/1/2021 put 10/1/2012 (LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | 800,000 | 800,000 | |||||||||
City of New York GO, 0.22% due 8/1/2035 put 10/1/2012 (SPA: Landesbank Hessen- Thuringen) (daily demand notes) | AA/Aa2 | 7,870,000 | 7,870,000 | |||||||||
Erie County Individual Development Agency, 5.00% due 5/1/2015 (Buffalo School District) | AA-/Aa3 | 3,000,000 | 3,329,100 | |||||||||
Erie County Individual Development Agency, 5.00% due 5/1/2016 (Buffalo School District) | AA-/Aa3 | 8,795,000 | 10,083,380 | |||||||||
Erie County Individual Development Agency, 5.00% due 5/1/2017 (Buffalo School District) | AA-/Aa3 | 7,265,000 | 8,555,337 | |||||||||
Erie County Individual Development Agency, 5.00% due 5/1/2018 (Buffalo School District) | AA-/Aa3 | 5,000,000 | 6,009,650 | |||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2020 | A/A2 | 12,955,000 | 15,842,929 | |||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2021 | A/A2 | 24,325,000 | 29,790,098 | |||||||||
Monroe County Industrial Development Corp., 5.00% due 6/1/2018 (St. John Fisher College) | BBB+/NR | 1,425,000 | 1,640,032 | |||||||||
Monroe County Industrial Development Corp., 5.00% due 6/1/2019 (St. John Fisher College) | BBB+/NR | 1,030,000 | 1,184,933 | |||||||||
Monroe County Industrial Development Corp., 5.00% due 6/1/2022 (St. John Fisher College) | BBB+/NR | 2,000,000 | 2,309,460 | |||||||||
Nassau County GO, 2.50% due 10/31/2012 | SP-1+/NR | 13,500,000 | 13,525,110 | |||||||||
Nassau County IDA, 5.25% due 3/1/2018 (New York Institute of Technology) | BBB+/NR | 1,260,000 | 1,460,416 | |||||||||
Nassau County IDA, 5.25% due 3/1/2020 (New York Institute of Technology) | BBB+/NR | 1,715,000 | 2,024,952 | |||||||||
Nassau Health Care Corp., 3.125% due 12/15/2012 (Insured: AGM) | AA-/Aa3 | 5,000,000 | 5,025,900 | |||||||||
New York City Health & Hospital Corp. GO, 5.00% due 2/15/2013 (Health Care Facilities Improvements) | A+/Aa3 | 2,755,000 | 2,801,449 | |||||||||
New York City Health & Hospital Corp. GO, 5.00% due 2/15/2019 (Health Care Facilities Improvements) | A+/Aa3 | 2,700,000 | 3,197,556 | |||||||||
New York City Health & Hospital Corp. GO, 5.00% due 2/15/2021 (Health Care Facilities Improvements) | A+/Aa3 | 2,615,000 | 3,079,319 | |||||||||
New York City Health and Hospital Corp. GO, 5.00% due 2/15/2020 (Health Care Facilities Improvements) | A+/Aa3 | 10,000,000 | 11,887,400 | |||||||||
New York City Municipal Water Finance Authority, 0.20% due 6/15/2039 put 10/1/2012 (Water and Sewer System; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA+/Aa2 | 10,905,000 | 10,905,000 | |||||||||
New York City Municipal Water Finance Authority, 0.24% due 6/15/2039 put 10/1/2012 (Water and Sewer System; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA+/Aa2 | 38,800,000 | 38,800,000 | |||||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2012 (City Transitional Capital Plan) (State Aid Withholding) | AAA/Aaa | 5,000,000 | 5,022,000 | |||||||||
New York City Transitional Finance Authority, 4.00% due 7/15/2014 (School Financing Act) (State Aid Withholding) | AA-/Aa3 | 2,000,000 | 2,129,780 | |||||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2014 (City Transitional Capital Plan) (State Aid Withholding) | AAA/Aaa | 2,000,000 | 2,191,280 | |||||||||
New York City Transitional Finance Authority, 5.00% due 7/15/2016 (School Financing Act) (State Aid Withholding) | AA-/Aa3 | 3,155,000 | 3,672,799 | |||||||||
New York City Transitional Finance Authority, 5.00% due 1/15/2018 (School Financing Act) (State Aid Withholding) | AA-/Aa3 | 4,865,000 | 5,820,535 | |||||||||
New York City Transitional Finance Authority, 0.20% due 8/1/2031 put 10/1/2012 (SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AAA/Aaa | 32,350,000 | 32,353,742 | |||||||||
New York State Dormitory Authority, 5.00% due 11/1/2012 (Insured: SONYMA) | NR/Aa1 | 1,255,000 | 1,259,844 | |||||||||
New York State Dormitory Authority, 5.50% due 7/1/2013 (Winthrop South Nassau University) | NR/Baa1 | 1,500,000 | 1,547,820 | |||||||||
New York State Dormitory Authority, 5.25% due 8/15/2013 (Presbyterian Hospital; Insured: AGM/FHA) | AA-/Aa3 | 3,650,000 | 3,804,066 | |||||||||
New York State Dormitory Authority, 5.00% due 11/1/2013 (Insured: SONYMA) | NR/Aa1 | 3,105,000 | 3,116,954 | |||||||||
New York State Dormitory Authority, 5.25% due 2/15/2014 (Presbyterian Hospital; Insured: AGM) | AA-/Aa3 | 2,405,000 | 2,558,631 | |||||||||
New York State Dormitory Authority, 3.00% due 8/15/2014 (Mental Health Services Facilities) (ETM) | NR/NR | 10,000 | 10,489 | |||||||||
New York State Dormitory Authority, 3.00% due 8/15/2014 (Mental Health Services Facilities) | AA-/NR | 2,630,000 | 2,758,423 | |||||||||
New York State Dormitory Authority, 5.00% due 11/1/2014 (Insured: SONYMA) | NR/Aa1 | 1,010,000 | 1,013,868 |
38 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
New York State Dormitory Authority, 5.25% due 5/15/2015 (Insured: Natl-Re/IBC) | BBB/Aa3 | $ | 10,000,000 | $ | 10,822,500 | |||||||
New York State Dormitory Authority, 5.25% due 8/15/2015 (New York Presbyterian Hospital; Insured: AGM/FHA) | AA-/Aa3 | 5,075,000 | 5,536,926 | |||||||||
New York State Dormitory Authority, 5.50% due 7/1/2016 pre-refunded 7/1/2013 (Brooklyn Law School; Insured: Radian) | BBB+/Baa1 | 1,220,000 | 1,267,531 | |||||||||
New York State Dormitory Authority, 5.50% due 2/15/2017 (Mental Health Services Facilities) | AA-/NR | 5,000,000 | 5,998,850 | |||||||||
New York State Dormitory Authority, 5.25% due 5/15/2017 (Court Facilities Lease; Insured: AMBAC) | AA-/Aa3 | 4,585,000 | 5,431,620 | |||||||||
New York State Dormitory Authority, 5.50% due 7/1/2017 pre-refunded 7/1/2013 (Brooklyn Law School; Insured: Radian) | BBB+/Baa1 | 2,500,000 | 2,597,400 | |||||||||
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 | 1,575,636 | |||||||||
New York State Dormitory Authority, 5.50% due 2/15/2018 (Mental Health Services Facilities) | AA-/NR | 5,000,000 | 6,156,600 | |||||||||
New York State Dormitory Authority, 5.00% due 12/15/2019 (Metropolitan Transportation Authority Service Contract) | AAA/NR | 60,000,000 | 75,212,400 | |||||||||
New York State Dormitory Authority, 5.00% due 7/1/2020 (NYSARC, Inc. Developmental Disability Programs) | NR/Aa3 | 1,000,000 | 1,203,030 | |||||||||
New York State Energy Research & Development Authority, 2.25% due 12/1/2015 (New York Electric & Gas Corp.) | BBB+/Baa1 | 5,000,000 | 5,123,350 | |||||||||
New York State Thruway Authority, 5.00% due 1/1/2020 (Governor Thomas E. Dewey Thruway) | A+/A1 | 2,000,000 | 2,413,940 | |||||||||
New York State Thruway Authority, 5.00% due 1/1/2021 (Governor Thomas E. Dewey Thruway) | A+/A1 | 2,500,000 | 3,046,975 | |||||||||
New York State Thruway Authority, 5.00% due 1/1/2022 (Governor Thomas E. Dewey Thruway) | A+/A1 | 3,000,000 | 3,688,740 | |||||||||
Patchogue-Medford Union Free School District GO, 4.25% due 10/1/2015 (Insured: MBIA) (State Aid Withholding) | BBB/Baa2 | 1,000,000 | 1,092,800 | |||||||||
Port Authority 148th GO, 5.00% due 8/15/2017 (Insured: AGM) | AA-/Aa3 | 4,725,000 | 5,644,910 | |||||||||
Suffolk County Economic Development Corp., 5.00% due 7/1/2020 (Catholic Health Services) | A-/A3 | 5,000,000 | 5,961,950 | |||||||||
Suffolk County Economic Development Corp., 5.00% due 7/1/2021 (Catholic Health Services) | A-/A3 | 5,000,000 | 5,940,850 | |||||||||
Suffolk County Economic Development Corp., 5.00% due 7/1/2022 (Catholic Health Services) | A-/A3 | 5,000,000 | 5,895,850 | |||||||||
Suffolk County IDA Civic Facilities GO, 5.25% due 3/1/2019 (New York Institute of Technology) | BBB+/Baa2 | 1,400,000 | 1,492,134 | |||||||||
Tobacco Settlement Financing Corp., 5.00% due 6/1/2014 | AA-/NR | 5,000,000 | 5,372,100 | |||||||||
Tobacco Settlement Financing Corp., 5.00% due 6/1/2018 | AA-/NR | �� | 3,725,000 | 4,499,316 | ||||||||
Triborough Bridge & Tunnel Authority GO, 0.17% due 1/1/2032 put 10/1/2012 (MTA Bridgesand Tunnels; LOC: California State Teachers’ Retirement System) (daily demand notes) | AA-/Aa1 | 13,600,000 | 13,600,043 | |||||||||
United Nations Development Corp., 5.00% due 7/1/2016 | NR/A1 | 3,400,000 | 3,932,440 | |||||||||
United Nations Development Corp., 5.00% due 7/1/2017 | NR/A1 | 3,000,000 | 3,559,320 | |||||||||
United Nations Development Corp., 5.00% due 7/1/2019 | NR/A1 | 4,000,000 | 4,880,800 | |||||||||
NORTH CAROLINA — 1.56% | ||||||||||||
Catawba County, 4.00% due 10/1/2015 | AA-/Aa2 | 1,620,000 | 1,765,946 | |||||||||
Catawba County, 4.00% due 10/1/2016 | AA-/Aa2 | 1,000,000 | 1,115,700 | |||||||||
Catawba County, 4.00% due 10/1/2017 | AA-/Aa2 | 1,000,000 | 1,134,140 | |||||||||
Charlotte Mecklenburg Hospital Authority, 5.00% due 1/15/2016 (Carolinas Health Network) | AA-/Aa3 | 3,420,000 | 3,869,080 | |||||||||
Charlotte Mecklenburg Hospital Authority, 5.00% due 1/15/2017 (Carolinas Health Network) | AA-/Aa3 | 2,000,000 | 2,323,560 | |||||||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2013 | A-/Baa1 | 1,055,000 | 1,068,135 | |||||||||
North Carolina Eastern Municipal Power Agency, 7.00% due 1/1/2013 (Insured: Natl-Re/IBC) | BBB/Baa1 | 740,000 | 750,486 | |||||||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2016 (Insured: AMBAC) | A-/NR | 1,700,000 | 1,928,582 | |||||||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: AMBAC) | NR/Baa1 | 7,500,000 | 9,208,725 | |||||||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: BHAC/AMBAC) | AA+/Aa1 | 5,965,000 | 7,361,406 | |||||||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2019 (Insured: AGM) | AA-/Aa3 | 3,000,000 | 3,556,710 | |||||||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2021 | A-/Baa1 | 5,000,000 | 6,098,200 | |||||||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2022 | A-/Baa1 | 4,715,000 | 5,731,507 |
Certified Annual Report 39
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
North Carolina Infrastructure Finance Corp. COP, 5.00% due 2/1/2017 pre-refunded 2/1/2014 (Correctional Facilities) | AA+/Aa1 | $ | 2,400,000 | $ | 2,552,016 | |||||||
North Carolina Medical Care Commission, 5.00% due 9/1/2013 (Rowan Regional Medical Center; Insured: AGM/FHA 242) (ETM) | AA-/Aa3 | 1,000,000 | 1,042,840 | |||||||||
North Carolina Municipal Power Agency, 5.50% due 1/1/2013 (Catawba Electric) (ETM) | NR/NR | 800,000 | 810,984 | |||||||||
North Carolina Municipal Power Agency, 5.50% due 1/1/2013 (Catawba Electric) | A/A2 | 1,705,000 | 1,727,830 | |||||||||
North Carolina Municipal Power Agency, 5.25% due 1/1/2017 (Catawba Electric) | A/A2 | 3,100,000 | 3,662,092 | |||||||||
North Carolina Municipal Power Agency, 5.25% due 1/1/2019 (Catawba Electric; Insured: Natl-Re) | A/A2 | 3,020,000 | 3,057,991 | |||||||||
North Carolina State Infrastructure Finance Corp. COP, 5.00% due 2/1/2016 pre-refunded 2/1/2014 (Correctional Facilities) | AA+/Aa1 | 5,000,000 | 5,316,700 | |||||||||
State of North Carolina, 5.00% due 11/1/2019 | AA+/Aa1 | 23,635,000 | 29,437,629 | |||||||||
NORTH DAKOTA — 0.03% | ||||||||||||
County of Ward, 5.00% due 7/1/2013 (Trinity Health System) | BBB-/NR | 1,560,000 | 1,604,585 | |||||||||
OHIO — 2.77% | ||||||||||||
Akron, Bath & Copley Joint Township Hospital District, 5.00% due 11/15/2021 (Children’s Hospital Medical Center) | NR/A1 | 1,000,000 | 1,171,420 | |||||||||
Allen County Hospital Facilities, 5.00% due 9/1/2015 (Catholic Healthcare Partners) | AA-/A1 | 10,000,000 | 11,172,500 | |||||||||
Allen County Hospital Facilities, 5.00% due 9/1/2016 (Catholic Healthcare Partners) | AA-/A1 | 10,000,000 | 11,491,200 | |||||||||
American Municipal Power, 5.25% due 2/15/2018 (Hydroelectric Projects) | A/A3 | 5,500,000 | 6,476,580 | |||||||||
American Municipal Power, 5.25% due 2/15/2019 (Hydroelectric Projects) | A/A3 | 5,015,000 | 5,994,179 | |||||||||
American Municipal Power, Inc., 5.00% due 2/15/2020 (AMP Fremont Energy Center) | A/A1 | 1,865,000 | 2,257,620 | |||||||||
American Municipal Power, Inc., 5.00% due 2/15/2021 (AMP Fremont Energy Center) | A/A1 | 1,300,000 | 1,580,787 | |||||||||
American Municipal Power, Inc., 5.00% due 2/15/2022 (AMP Fremont Energy Center) | A/A1 | 2,750,000 | 3,365,120 | |||||||||
City of Akron, 5.00% due 12/1/2021 (Community Learning Centers) | AA+/NR | 4,120,000 | 5,076,746 | |||||||||
City of Akron COP, 5.00% due 12/1/2013 (Canal Park Baseball Stadium; Insured: AGM) | AA-/NR | 3,000,000 | 3,150,720 | |||||||||
City of Akron COP, 5.00% due 12/1/2014 (Canal Park Baseball Stadium; Insured: AGM) | AA-/NR | 2,000,000 | 2,175,140 | |||||||||
City of Akron GO, 5.00% due 12/1/2019 (Various Improvement Projects) | AA-/NR | 1,685,000 | 2,049,095 | |||||||||
City of Cleveland GO, 5.50% due 10/1/2019 (Insured: AMBAC) | AA/A1 | 1,260,000 | 1,551,211 | |||||||||
Cleveland Package Facilities, 5.25% due 9/15/2021 pre-refunded 10/21/2012 (Insured: AGM) (ETM) | AA-/Aa3 | 965,000 | 1,239,668 | |||||||||
Cleveland Package Facilities, 5.25% due 9/15/2021 (Insured: AGM) | AA-/Aa3 | 2,035,000 | 2,454,882 | |||||||||
Cleveland State University, 5.00% due 6/1/2019 (Campus Capital Projects) | A+/A1 | 1,000,000 | 1,213,140 | |||||||||
Cleveland State University, 5.00% due 6/1/2020 (Campus Capital Projects) | A+/A1 | 700,000 | 854,042 | |||||||||
Cleveland State University, 5.00% due 6/1/2021 (Campus Capital Projects) | A+/A1 | 1,000,000 | 1,222,300 | |||||||||
Cleveland State University, 5.00% due 6/1/2022 (Campus Capital Projects) | A+/A1 | 2,000,000 | 2,441,100 | |||||||||
Cleveland-Cuyahoga County Port Authority, 5.00% due 10/1/2019 (Cleveland Museum of Art) | AA+/NR | 2,000,000 | 2,464,780 | |||||||||
Cuyahoga County, 6.00% due 1/1/2021 pre-refunded 7/1/2013 (Cleveland Clinic) | NR/NR | 2,550,000 | 2,660,797 | |||||||||
Cuyahoga County, 6.00% due 1/1/2021 pre-refunded 7/1/2013 (Cleveland Clinic) | AA-/Aa2 | 2,450,000 | 2,556,452 | |||||||||
Deerfield Township, 5.00% due 12/1/2017 | NR/A1 | 1,000,000 | 1,146,890 | |||||||||
Garfield Heights City School District GO, 5.375% due 12/15/2016 (School Improvements; Insured: Natl-Re) | NR/A1 | 1,625,000 | 1,879,183 | |||||||||
Greater Cleveland Regional Transportation Authority GO, 5.00% due 12/1/2015 (Insured: Natl-Re) | NR/Aa2 | 1,000,000 | 1,128,310 | |||||||||
Kent State University, 5.00% due 5/1/2020 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,220,300 | |||||||||
Montgomery County, 5.25% due 10/1/2038 put 11/1/2013 (Catholic Health Initiatives) | AA/Aa2 | 2,500,000 | 2,625,800 | |||||||||
Ohio State Air Quality Development Authority, 5.625% due 6/1/2018 (FirstEnergy Nuclear) | BBB-/Baa2 | 5,000,000 | 5,830,900 | |||||||||
Ohio State Air Quality Development Authority, 5.75% due 6/1/2033 put 12/1/2011 (FirstEnergy Nuclear) | BBB-/Baa3 | 5,800,000 | 6,523,608 | |||||||||
Ohio State Air Quality Development Authority, 3.375% due 1/1/2034 put 7/1/2015 (FirstEnergy Nuclear) | BBB-/Baa3 | 7,200,000 | 7,462,296 |
40 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Ohio State Air Quality Development Authority, 3.875% due 12/1/2038 put 6/1/2014 (Columbus Southern Power Co.) | BBB/Baa1 | $ | 4,800,000 | $ | 4,948,896 | |||||||
Ohio State Building Authority, 5.00% due 10/1/2015 (Insured: Natl-Re/FGIC) | AA/Aa2 | 4,600,000 | 5,192,940 | |||||||||
Ohio State Building Authority, 5.00% due 10/1/2020 | AA/Aa2 | 1,700,000 | 2,063,834 | |||||||||
Ohio State Department Administrative Services COP, 5.00% due 9/1/2015 (Insured: Natl-Re) | AA/Aa2 | 1,950,000 | 2,149,758 | |||||||||
Ohio State Water Development Authority PCR, 5.875% due 6/1/2033 put 6/1/2016 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa2 | 5,500,000 | 6,225,560 | |||||||||
Ohio State Water Development Authority PCR, 3.375% due 1/1/2034 put 7/1/2015 (FirstEnergy Nuclear) | BBB-/Baa3 | 24,400,000 | 25,235,700 | |||||||||
RiverSouth Authority, 5.00% due 12/1/2019 (RiverSouth Area Redevelopment) | AA+/Aa2 | 2,500,000 | 3,034,575 | |||||||||
State of Ohio, 5.00% due 10/1/2020 (Cultural and Sports Capital Facilities) | AA/Aa2 | 3,845,000 | 4,678,750 | |||||||||
State of Ohio GO, 4.00% due 10/1/2014 (Revitalization Project) | AA-/Aa3 | 2,075,000 | 2,216,909 | |||||||||
State of Ohio Higher Educational Facility Commission, 5.05% due 7/1/2037 put 7/1/2016 (Kenyon College) | A+/A1 | 3,375,000 | 3,784,860 | |||||||||
University of Akron Ohio, 5.00% due 1/1/2018 (Insured: AGM) | AA-/Aa3 | 3,415,000 | 4,074,300 | |||||||||
OKLAHOMA — 1.90% | ||||||||||||
Canadian County Educational Facilities Authority, 4.00% due 9/1/2019 (Mustang Public Schools) | A+/NR | 1,410,000 | 1,585,348 | |||||||||
Canadian County Educational Facilities Authority, 4.50% due 9/1/2020 (Mustang Public Schools) | A+/NR | 2,690,000 | 3,108,672 | |||||||||
Canadian County Educational Facilities Authority, 4.50% due 9/1/2021 (Mustang Public Schools) | A+/NR | 2,290,000 | 2,647,011 | |||||||||
Cleveland County Public Facilities Authority, 4.00% due 6/1/2013 (Norman Public Schools) | A+/NR | 5,000,000 | 5,117,450 | |||||||||
Comanche County Hospital Authority, 5.25% due 7/1/2015 (Insured: Radian) | BBB-/NR | 1,340,000 | 1,449,505 | |||||||||
Oklahoma County Finance Authority, 4.00% due 3/1/2013 (Putnam City Public Schools) | A/NR | 2,580,000 | 2,614,262 | |||||||||
Oklahoma County Finance Authority, 3.125% due 9/1/2013 (Western Heights Public Schools) | A+/NR | 2,525,000 | 2,571,207 | |||||||||
Oklahoma County Finance Authority, 5.00% due 9/1/2016 (Western Heights Public Schools) | A+/NR | 3,000,000 | 3,397,890 | |||||||||
Oklahoma County Finance Authority, 5.00% due 9/1/2017 (Western Heights Public Schools) | A+/NR | 4,075,000 | 4,719,502 | |||||||||
Oklahoma County Finance Authority, 5.00% due 9/1/2018 (Western Heights Public Schools) | A+/NR | 2,120,000 | 2,488,329 | |||||||||
Oklahoma County ISD, 3.00% due 1/1/2013 | A+/NR | 3,880,000 | 3,903,784 | |||||||||
Oklahoma County ISD, 3.00% due 1/1/2014 | A+/NR | 2,880,000 | 2,961,734 | |||||||||
Oklahoma DFA, 5.25% due 12/1/2012 (Duncan Regional Hospital) | A-/NR | 1,330,000 | 1,340,707 | |||||||||
Oklahoma DFA, 5.00% due 8/15/2017 (Integris Health) | AA-/Aa3 | 4,375,000 | 5,124,219 | |||||||||
Oklahoma DFA, 0.20% due 8/15/2033 put 10/1/2012 (Integris Health; Insured: AGM; SPA: JPMorgan Chase Bank) (daily demand notes) | AA-/Aa3 | 48,380,000 | 48,380,083 | |||||||||
Oklahoma Municipal Power Authority, 5.00% due 1/1/2013 | A/A2 | 3,745,000 | 3,788,629 | |||||||||
Oklahoma Municipal Power Authority, 5.00% due 1/1/2014 (Insured: AGM) | A/A2 | 4,005,000 | 4,220,349 | |||||||||
Oklahoma State Industrial Authority, 5.00% due 7/1/2016 (Medical Research Foundation) | NR/A1 | 1,165,000 | 1,308,889 | |||||||||
a Oklahoma State Industrial Authority, 5.25% due 7/1/2017 (Medical Research Foundation) | NR/A1 | 1,075,000 | 1,242,582 | |||||||||
Tulsa County Industrial Authority, 4.50% due 9/1/2020 (Broken Arrow Public Schools) | AA-/NR | 1,585,000 | 1,839,171 | |||||||||
Tulsa County Industrial Authority, 4.50% due 9/1/2021 (Broken Arrow Public Schools) | AA-/NR | 8,775,000 | 10,143,022 | |||||||||
OREGON — 0.18% | ||||||||||||
Clackamas County, 5.00% due 7/15/2037 put 7/15/2014 (Legacy Health Systems) | A+/A2 | 6,465,000 | 6,878,437 | |||||||||
Oregon Facilities Authority, 5.00% due 3/15/2015 (Legacy Health Systems) | A+/A2 | 1,635,000 | 1,780,956 | |||||||||
Oregon Facilities Authority, 5.00% due 3/15/2016 (Legacy Health Systems) | A+/A2 | 1,000,000 | 1,118,490 | |||||||||
Oregon State Department of Administrative Services COP, 5.00% due 11/1/2014 (Insured: Natl-Re/FGIC) | AA/Aa2 | 1,000,000 | 1,093,800 | |||||||||
PENNSYLVANIA — 3.60% | ||||||||||||
Adams County IDA, 5.00% due 8/15/2014 (Gettysburg College) | A/A2 | 1,000,000 | 1,073,600 | |||||||||
Adams County IDA, 5.00% due 8/15/2016 (Gettysburg College) | A/A2 | 1,250,000 | 1,425,613 | |||||||||
Adams County IDA, 5.00% due 8/15/2017 (Gettysburg College) | A/A2 | 1,340,000 | 1,560,283 | |||||||||
Adams County IDA, 5.00% due 8/15/2019 (Gettysburg College) | A/A2 | 1,765,000 | 2,115,423 |
Certified Annual Report 41
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2017 (University of Pittsburgh Medical Center) | A+/Aa3 | $ | 3,000,000 | $ | 3,509,970 | |||||||
Allegheny County Hospital Development Authority, 5.00% due 9/1/2017 (University of Pittsburgh Medical Center) | A+/Aa3 | 1,875,000 | 2,206,537 | |||||||||
Allegheny County Hospital Development Authority, 5.00% due 5/15/2018 (University of Pittsburgh Medical Center) | A+/Aa3 | 5,915,000 | 6,988,454 | |||||||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2018 (University of Pittsburgh Medical Center) | A+/Aa3 | 3,000,000 | 3,551,520 | |||||||||
Allegheny County Hospital Development Authority, 5.00% due 9/1/2018 (University of Pittsburgh Medical Center) | A+/Aa3 | 2,000,000 | 2,387,060 | |||||||||
Allegheny County Redevelopment Authority, 5.10% due 7/1/2014 (Pittsburgh Mills) | NR/NR | 890,000 | 921,337 | |||||||||
Chester County School Authority, 5.00% due 4/1/2016 (Intermediate School; Insured: AMBAC) | A+/NR | 1,915,000 | 2,135,704 | |||||||||
City of Philadelphia, 5.00% due 6/15/2013 (Water & Wastewater System; Insured: AGM) | AA-/Aa3 | 7,020,000 | 7,255,732 | |||||||||
City of Philadelphia, 5.00% due 6/15/2017 (Water and Wastewater System; Insured: AGM) | AA-/Aa3 | 5,570,000 | 6,562,630 | |||||||||
City of Philadelphia Gas Works, 5.375% due 7/1/2014 (Insured: AGM) | AA-/Aa3 | 7,280,000 | 7,787,343 | |||||||||
City of Philadelphia Gas Works, 5.00% due 9/1/2014 (Insured: AGM) | AA-/Aa3 | 3,000,000 | 3,201,030 | |||||||||
City of Philadelphia Gas Works, 5.00% due 10/1/2014 (Insured: AMBAC) | BBB+/Baa2 | 1,825,000 | 1,952,312 | |||||||||
City of Philadelphia Gas Works, 5.00% due 9/1/2015 (Insured: AGM) | AA-/Aa3 | 3,315,000 | 3,553,514 | |||||||||
City of Philadelphia Gas Works, 5.00% due 7/1/2018 (Insured: AGM) | AA-/Aa3 | 1,395,000 | 1,601,083 | |||||||||
City of Pittsburgh GO, 5.50% due 9/1/2014 (Insured: AMBAC) | BBB/A1 | 905,000 | 945,200 | |||||||||
City of Pittsburgh GO, 5.25% due 9/1/2016 (Insured: AGM) | AA-/Aa3 | 3,000,000 | 3,469,440 | |||||||||
City of Pittsburgh GO, 5.25% due 9/1/2017 (Insured: AGM) | AA-/Aa3 | 2,210,000 | 2,504,836 | |||||||||
City of Pittsburgh GO, 5.25% due 9/1/2018 (Insured: AGM) | AA-/Aa3 | 3,240,000 | 3,648,596 | |||||||||
Geisinger Authority Montour County, 0.15% due 6/1/2041 put 10/1/2012 (Geisinger Health Systems; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 300,000 | 300,000 | |||||||||
Geisinger Authority Montour County, 0.15% due 6/1/2041 put 10/1/2012 (Geisinger Health System; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 34,570,000 | 34,570,000 | |||||||||
Hospitals and Higher Educational Facilities Authority of Philadelphia, 0.20% due 7/1/2022put 10/1/2012 (The Children’s Hospital of Philadelphia; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 4,500,000 | 4,500,000 | |||||||||
Hospitals and Higher Educational Facilities Authority of Philadelphia, 0.20% due 2/15/2024put 10/1/2012 (The Children’s Hospital of Philadelphia; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 1,700,000 | 1,700,000 | |||||||||
Hospitals and Higher Educational Facilities Authority of Philadelphia, 0.20% due 7/1/2025put 10/1/2012 (The Children’s Hospital of Philadelphia; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 10,600,000 | 10,600,000 | |||||||||
Lancaster County Solid Waste Management Authority, 5.00% due 12/15/2012 | AA-/A3 | 3,475,000 | 3,506,240 | |||||||||
Monroeville Finance Authority, 5.00% due 2/15/2021 (University of Pittsburgh Medical Center) | A+/Aa3 | 2,400,000 | 2,878,416 | |||||||||
Monroeville Finance Authority, 5.00% due 2/15/2022 (University of Pittsburgh Medical Center) | A+/Aa3 | 1,000,000 | 1,212,650 | |||||||||
Montgomery County IDA, 5.00% due 8/1/2016 (Regional Medical Center; Insured: FHA) | AA/Aa2 | 1,000,000 | 1,143,110 | |||||||||
Montgomery County IDA, 5.00% due 2/1/2017 (Regional Medical Center; Insured: FHA) | AA/Aa2 | 1,000,000 | 1,154,120 | |||||||||
Montgomery County IDA, 5.00% due 2/1/2020 (Regional Medical Center; Insured: FHA) | AA/Aa2 | 1,000,000 | 1,174,570 | |||||||||
Norwin School District GO, 4.00% due 4/1/2018 (Insured: AGM) (State Aid Withholding) | AA-/Aa3 | 1,835,000 | 2,079,569 | |||||||||
Pennsylvania EDA, 3.70% due 11/1/2021 put 5/1/2015 (Waste Management, Inc.) | BBB/NR | 7,750,000 | 8,177,102 | |||||||||
Pennsylvania EDA, 3.00% due 12/1/2037 put 9/1/2015 (PPL Energy Supply) | BBB/NR | 14,000,000 | 14,352,660 | |||||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 6/1/2015 (Philadelphia University) | BBB/Baa2 | 1,440,000 | 1,512,000 | |||||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 5/15/2019 (University of Pittsburgh Medical Center) | A+/Aa3 | 5,600,000 | 6,679,624 | |||||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 5/15/2020 (University of Pittsburgh Medical Center) | A+/Aa3 | 5,100,000 | 6,109,392 | |||||||||
Pennsylvania Turnpike Commission, 0.80% due 12/1/2012 | A+/Aa3 | 2,500,000 | 2,500,900 | |||||||||
Philadelphia Authority for Industrial Development, 5.00% due 8/1/2020 (Mast Charter School) | BBB+/NR | 765,000 | 800,986 | |||||||||
Philadelphia Municipal Authority, 5.25% due 11/15/2017 (Lease Appropriation; Insured: AGM) | AA-/Aa3 | 2,100,000 | 2,210,481 | |||||||||
Philadelphia Parking Authority, 5.00% due 9/1/2016 | A/A1 | 1,500,000 | 1,704,900 |
42 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Philadelphia Parking Authority, 5.00% due 9/1/2017 | A/A1 | $ | 1,020,000 | $ | 1,182,027 | |||||||
Philadelphia School District GO, 5.00% due 9/1/2013 (State Aid Withholding) | A+/Aa3 | 2,000,000 | 2,087,260 | |||||||||
Philadelphia School District GO, 4.50% due 9/1/2017 (State Aid Withholding) | A+/Aa3 | 2,270,000 | 2,559,856 | |||||||||
Philadelphia School District GO, 5.00% due 9/1/2019 (State Aid Withholding) | A+/Aa3 | 18,000,000 | 20,890,260 | |||||||||
Philadelphia School District GO, 5.00% due 9/1/2019 (State Aid Withholding) | A+/Aa3 | 4,210,000 | 4,886,000 | |||||||||
Philadelphia School District GO, 5.25% due 9/1/2021 (State Aid Withholding) | A+/Aa3 | 2,265,000 | 2,663,912 | |||||||||
Pittsburgh School District GO, 3.00% due 9/1/2013 (Insured: AGM) | AA-/Aa3 | 2,100,000 | 2,150,232 | |||||||||
RHODE ISLAND — 1.23% | ||||||||||||
Convention Center Authority, 5.25% due 5/15/2015 (Insured: Natl-Re) | BBB/Baa2 | 1,115,000 | 1,167,082 | |||||||||
a Convention Center Authority, 5.00% due 5/15/2019 (Insured: AGM) | AA-/Aa3 | 10,000,000 | 10,292,000 | |||||||||
Convention Center Authority, 5.00% due 5/15/2020 (Insured: AGM) | AA-/Aa3 | 6,830,000 | 6,971,108 | |||||||||
Rhode Island Economic Development Corp., 5.00% due 6/15/2014 (RIDOT Transit Improvements; Insured: AGM) | AA-/Aa2 | 2,000,000 | 2,065,980 | |||||||||
Rhode Island State Health & Education Building Corp., 5.25% due 7/1/2014 (Memorial Hospital; LOC: Fleet Bank) | NR/NR | 1,565,000 | 1,610,620 | |||||||||
Rhode Island State Health & Education Building Corp., 5.25% due 4/1/2015 (Johnson & Wales University; Insured: Syncora) | NR/NR | 1,500,000 | 1,534,710 | |||||||||
State of Rhode Island and Providence Plantations, 5.00% due 10/1/2014 (Department of Children, Youth, and Families; Insured: MBIA) | AA-/Aa3 | 1,000,000 | 1,072,390 | |||||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 10/1/2019 (Consolidated Capital Development) | AA/Aa2 | 5,000,000 | 6,154,450 | |||||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 8/1/2020 (Consolidated Capital Development) | AA/Aa2 | 8,365,000 | 10,261,094 | |||||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 8/1/2021 (Consolidated Capital Development) | AA/Aa2 | 16,535,000 | 20,306,964 | |||||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 8/1/2022 (Consolidated Capital Development) | AA/Aa2 | 9,825,000 | 12,090,055 | |||||||||
SOUTH CAROLINA — 0.51% | ||||||||||||
Georgetown County Environmental Improvement, 5.70% due 4/1/2014 (International Paper Co.) | BBB/Baa3 | 7,975,000 | 8,514,190 | |||||||||
Greenville County School District, 5.25% due 12/1/2015 (Building Equity Sooner for Tomorrow) | AA/Aa2 | 1,000,000 | 1,058,310 | |||||||||
Greenville County School District, 5.50% due 12/1/2016 (Building Equity Sooner for Tomorrow) | AA/Aa2 | 3,500,000 | 4,168,500 | |||||||||
Greenwood County, 5.00% due 10/1/2013 (Self Regional Health Care; Insured: AGM) | AA-/Aa3 | 2,000,000 | 2,084,500 | |||||||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2015 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,125,520 | |||||||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2016 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,159,810 | |||||||||
Piedmont Municipal Power Agency, 6.75% due 1/1/2019 (Insured: Natl-Re/FGIC) | NR/Baa1 | 3,695,000 | 4,795,703 | |||||||||
South Carolina Jobs Economic Development Authority, 5.00% due 8/15/2014 (CareAlliance Health Services; Insured: AGM) | AA-/Aa3 | 4,000,000 | 4,269,400 | |||||||||
South Carolina Jobs Economic Development Authority, 5.00% due 8/15/2015 (CareAlliance Health Services; Insured: AGM) | AA-/Aa3 | 3,000,000 | 3,298,680 | |||||||||
SOUTH DAKOTA — 0.39% | ||||||||||||
South Dakota Building Authority, 4.50% due 6/1/2016 (Insured: Natl-Re/FGIC) | AA/NR | 2,000,000 | 2,260,060 | |||||||||
a South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2015 (Regional Health) | NR/A1 | 1,390,000 | 1,548,585 | |||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 11/1/2015 (Sanford Health) | A+/A1 | 1,310,000 | 1,464,003 | |||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2016 (Regional Health) | NR/A1 | 1,000,000 | 1,137,000 | |||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 4/1/2017 (Prairie Lakes Health) | A+/NR | 2,215,000 | 2,480,822 | |||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2017 (Regional Health) | NR/A1 | 1,100,000 | 1,271,721 | |||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 4/1/2018 (Prairie Lakes Health) | A+/NR | 2,290,000 | 2,605,356 | |||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2018 (Regional Health) | NR/A1 | 1,275,000 | 1,485,885 |
Certified Annual Report 43
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 4/1/2019 (Prairie Lakes Health) | A+/NR | $ | 2,440,000 | $ | 2,805,902 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2020 (Regional Health) | NR/A1 | 1,000,000 | 1,167,210 | |||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 7/1/2021 (Avera Health Issue) | A+/A1 | 1,370,000 | 1,602,037 | |||||||||
South Dakota Housing Development Authority, 4.00% due 11/1/2016 (Single Family Mtg) | NR/Aa3 | 1,060,000 | 1,170,993 | |||||||||
South Dakota Housing Development Authority, 4.00% due 11/1/2017 (Single Family Mtg) | NR/Aa3 | 1,075,000 | 1,200,646 | |||||||||
South Dakota Housing Development Authority, 4.00% due 11/1/2018 (Single Family Mtg) | NR/Aa3 | 1,185,000 | 1,339,856 | |||||||||
TENNESSEE — 0.70% | ||||||||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2014 | NR/Baa2 | 3,200,000 | 3,388,544 | |||||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2015 | NR/Baa2 | 3,500,000 | 3,756,795 | |||||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2019 | NR/Baa2 | 6,000,000 | 6,605,640 | |||||||||
Tennessee Energy Acquisition Corp., 5.00% due 9/1/2015 | A-/Baa2 | 3,000,000 | 3,254,430 | |||||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2017 | BBB/Baa3 | 5,000,000 | 5,512,400 | |||||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2017 | A-/Baa2 | 11,000,000 | 12,445,620 | |||||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2018 | A-/Baa2 | 5,000,000 | 5,691,950 | |||||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2020 | A-/Baa2 | 1,190,000 | 1,345,402 | |||||||||
TEXAS — 8.83% | ||||||||||||
Amarillo Health Facilities Corp., 5.50% due 1/1/2015 (Baptist St. Anthony’s Hospital Corp.; Insured: AGM) | NR/Aa3 | 1,065,000 | 1,137,601 | |||||||||
Austin Community College Public Facilities Corp., 5.25% due 8/1/2017 (Round Rock Campus) | AA/Aa2 | 1,500,000 | 1,798,980 | |||||||||
Bexar Metropolitan Water District, 4.50% due 5/1/2021 (Waterworks System; Insured: Natl-Re) | A/A1 | 1,200,000 | 1,330,956 | |||||||||
Brazos River Authority, 4.90% due 10/1/2015 (Center Point Energy; Insured: Natl-Re) | BBB/Baa2 | 4,535,000 | 4,935,486 | |||||||||
Capital Area Cultural Education Facilities Finance Corp., 5.00% due 4/1/2013 (Roman Catholic Diocese of Austin) | NR/Baa2 | 670,000 | 683,159 | |||||||||
Capital Area Cultural Education Facilities Finance Corp., 5.00% due 4/1/2014 (Roman Catholic Diocese of Austin) | NR/Baa2 | 890,000 | 936,013 | |||||||||
Capital Area Cultural Education Facilities Finance Corp., 5.00% due 4/1/2015 (Roman Catholic Diocese of Austin) | NR/Baa2 | 1,100,000 | 1,194,710 | |||||||||
Capital Area Cultural Education Facilities Finance Corp., 5.00% due 4/1/2018 (Roman Catholic Diocese of Austin) | NR/Baa2 | 1,370,000 | 1,555,032 | |||||||||
City of Austin, 5.50% due 11/15/2013 (Electric Utility System; Insured: AMBAC) | A+/A1 | 1,000,000 | 1,058,500 | |||||||||
City of Austin, 5.00% due 5/15/2014 (Water and Wastewater System; Insured: AMBAC) | AA/Aa2 | 2,890,000 | 3,106,230 | |||||||||
City of Austin, 5.00% due 5/15/2015 (Water and Wastewater System; Insured: AMBAC) | AA/Aa2 | 1,520,000 | 1,698,007 | |||||||||
City of Austin, 5.00% due 11/15/2022 (Water and Wastewater System) | AA/Aa2 | 2,640,000 | 3,312,646 | |||||||||
City of Bryan, 4.00% due 7/1/2014 (Electric System) | A+/A1 | 1,300,000 | 1,373,190 | |||||||||
City of Bryan, 5.00% due 7/1/2015 (Electric System) | A+/A1 | 1,150,000 | 1,277,823 | |||||||||
City of Bryan, 5.00% due 7/1/2019 (Electric System) | A+/A1 | 8,000,000 | 9,289,200 | |||||||||
City of Denton GO, 3.00% due 2/15/2013 | AA/Aa2 | 2,710,000 | 2,737,859 | |||||||||
City of Denton GO, 3.00% due 2/15/2014 | AA/Aa2 | 3,325,000 | 3,438,050 | |||||||||
City of Denton GO, 4.00% due 2/15/2015 | AA/Aa2 | 3,445,000 | 3,720,152 | |||||||||
City of Denton GO, 4.00% due 2/15/2016 | AA/Aa2 | 3,535,000 | 3,924,663 | |||||||||
City of Denton GO, 5.00% due 2/15/2017 | AA/Aa2 | 3,675,000 | 4,344,217 | |||||||||
City of Denton GO, 5.00% due 2/15/2019 | AA/Aa2 | 3,990,000 | 4,894,573 | |||||||||
City of Denton GO, 5.00% due 2/15/2020 | AA/Aa2 | 4,195,000 | 5,079,893 | |||||||||
City of Houston, 5.00% due 11/15/2013 (Combined Utility System; Insured: AGM) | AA/Aa2 | 3,000,000 | 3,159,090 | |||||||||
City of Houston, 5.00% due 9/1/2014 (Convention & Entertainment Facilities Department) | A-/A2 | 2,000,000 | 2,157,720 | |||||||||
City of Houston, 5.00% due 9/1/2014 (Convention & Entertainment Facilities Department) | A-/A2 | 1,300,000 | 1,402,518 | |||||||||
City of Houston, 5.00% due 7/1/2015 (Airport System) | AA-/Aa3 | 2,600,000 | 2,888,990 | |||||||||
City of Houston, 5.00% due 7/1/2017 (Airport System) | AA-/Aa3 | 1,600,000 | 1,884,448 | |||||||||
City of Houston, 5.00% due 7/1/2018 (Airport System) | AA-/Aa3 | 1,000,000 | 1,199,110 | |||||||||
City of Houston, 0% due 9/1/2020 (Insured: AGM/AMBAC) | AA-/Aa3 | 3,650,000 | 2,781,811 | |||||||||
City of Houston COP, 6.25% due 12/15/2014 (Water Conveyance System; Insured: AMBAC) | NR/NR | 2,850,000 | 3,092,421 |
44 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
City of Laredo, 5.00% due 3/15/2013 (Sports Venue Improvement; Insured: AMBAC) | A+/A1 | $ | 1,745,000 | $ | 1,779,499 | |||||||
City of Laredo, 5.00% due 3/15/2014 (Sports Venue Improvement; Insured: AMBAC) | A+/A1 | 1,835,000 | 1,940,953 | |||||||||
City of Laredo, 5.00% due 3/15/2015 (Sports Venue Improvement; Insured: AMBAC) | A+/A1 | 1,930,000 | 2,111,478 | |||||||||
City of Laredo GO, 5.00% due 2/15/2018 (Insured: Natl-Re) | AA/Aa2 | 2,000,000 | 2,356,060 | |||||||||
City of Richardson GO, 5.00% due 2/15/2014 (Insured: Natl-Re) | AAA/Aaa | 3,000,000 | 3,187,860 | |||||||||
City of San Antonio, 1.15% due 12/1/2027 put 12/3/2012 (Electric and Gas Systems; SPA: BNP Paribas) | AA-/Aa2 | 27,000,000 | 27,036,720 | |||||||||
City of Weslaco GO Waterworks & Sewer System, 5.25% due 2/15/2019 (Waterworks and Sewer System; Insured: Natl-Re) | BBB+/A3 | 2,835,000 | 3,281,796 | |||||||||
Collin County GO, 5.00% due 2/15/2016 (Road and Highway Construction) | AAA/Aaa | 1,465,000 | 1,680,252 | |||||||||
Corpus Christi Business & Job Development Corp., 5.00% due 3/1/2021 (Seawall Project) | A+/A2 | 625,000 | 740,888 | |||||||||
Dallas Convention Center Hotel Development Corp., 0% due 1/1/2018 | A+/A1 | 5,240,000 | 4,520,181 | |||||||||
Dallas Convention Center Hotel Development Corp., 5.00% due 1/1/2019 | A+/A1 | 5,200,000 | 6,123,260 | |||||||||
Dallas County Utility & Reclamation District, 5.00% due 2/15/2017 (Insured: AMBAC) | BBB+/A3 | 1,160,000 | 1,307,784 | |||||||||
Dallas County Utility & Reclamation District, 5.00% due 2/15/2017 (Insured: AMBAC) | BBB+/A3 | 1,260,000 | 1,420,524 | |||||||||
Dallas County Utility & Reclamation District, 5.00% due 2/15/2018 (Insured: AMBAC) | BBB+/A3 | 1,935,000 | 2,159,615 | |||||||||
Dallas County Utility & Reclamation District, 5.00% due 2/15/2018 (Insured: AMBAC) | BBB+/A3 | 2,035,000 | 2,271,223 | |||||||||
Dallas County Utility & Reclamation District, 5.00% due 2/15/2019 (Insured: AMBAC) | BBB+/A3 | 2,175,000 | 2,408,421 | |||||||||
Dallas-Fort Worth International Airport, 4.00% due 11/1/2012 | A+/A1 | 1,000,000 | 1,003,410 | |||||||||
Dallas-Fort Worth International Airport, 5.00% due 11/1/2013 | A+/A1 | 1,175,000 | 1,232,375 | |||||||||
Dallas-Fort Worth International Airport, 5.00% due 11/1/2014 | A+/A1 | 1,300,000 | 1,417,286 | |||||||||
Dallas-Fort Worth International Airport, 5.00% due 11/1/2015 | A+/A1 | 3,370,000 | 3,803,550 | |||||||||
Grayson County GO, 4.00% due 1/1/2020 (State Highway Toll System) | AA/Aa2 | 2,000,000 | 2,326,160 | |||||||||
Grayson County GO, 5.00% due 1/1/2022 (State Highway Toll System) | AA/Aa2 | 3,000,000 | 3,751,380 | |||||||||
Guadalupe-Blanco River Authority PCR, 5.625% due 10/1/2017 (AEP Texas Central Co.) | BBB/Baa2 | 5,000,000 | 5,728,700 | |||||||||
Harris County Cultural Education Facilities Finance Corp., 0.20% due 9/1/2031 put 10/1/2012 (Texas Medical Center; LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | 27,540,000 | 27,540,000 | |||||||||
Harris County Cultural Education Facilities Finance Corp., 0.20% due 9/1/2031 put 10/1/2012 | ||||||||||||
(Texas Medical Center; LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | 5,735,000 | 5,735,000 | |||||||||
Harris County Educational Facilities Finance Corp., 5.00% due 11/15/2015 (Teco Project) | AA/Aa3 | 1,450,000 | 1,646,722 | |||||||||
Harris County Educational Facilities Finance Corp., 5.00% due 11/15/2018 (Teco Project) | AA/Aa3 | 1,365,000 | 1,674,882 | |||||||||
Harris County Educational Facilities Finance Corp., 5.00% due 11/15/2019 (Teco Project) | AA/Aa3 | 1,000,000 | 1,242,530 | |||||||||
Harris County Health Facilities Development Corp., 5.00% due 11/15/2015 pre-refunded 11/15/2013 (Teco Project; Insured: Natl-Re) | AA/Aa3 | 1,500,000 | 1,573,680 | |||||||||
Harris County Health Facilities Development Corp., 5.00% due 7/1/2016 (Christus Health; Insured: AGM) | AA-/Aa3 | 5,860,000 | 6,736,422 | |||||||||
Harris County Hospital District, 5.00% due 2/15/2014 (Insured: Natl-Re) | A/A2 | 1,275,000 | 1,338,967 | |||||||||
Harris County Hospital District, 5.00% due 2/15/2017 (Insured: Natl-Re) | A/A2 | 1,500,000 | 1,701,480 | |||||||||
Houston Higher Education Finance Corp., 5.875% due 5/15/2021 (Cosmos Foundation, Inc.) | BBB/NR | 1,000,000 | 1,129,430 | |||||||||
Houston Higher Education Finance Corp., 0.18 % due 5/15/2048 put 10/1/2012 (William Marsh Rice University) (daily demand notes) | AAA/Aaa | 21,085,000 | 21,085,071 | |||||||||
Houston Higher Education Finance Corp., 0.20% due 5/15/2048 put 10/1/2012 (William Marsh Rice University) (daily demand notes) | AAA/Aaa | 22,875,000 | 22,875,000 | |||||||||
Houston ISD, 5.00% due 2/15/2014 (Limited Tax Schoolhouse) | AA+/Aaa | 2,000,000 | 2,127,740 | |||||||||
Houston ISD, 5.00% due 2/15/2015 (Limited Tax Schoolhouse) | AA+/Aaa | 2,450,000 | 2,711,954 | |||||||||
Houston ISD Public West Side, 0% due 9/15/2014 (Insured: AMBAC) | AA/Aa2 | 6,190,000 | 6,089,165 | |||||||||
Hutto ISD GO, 0% due 8/1/2017 (Guaranty: PSF) | AAA/NR | 2,170,000 | 1,958,382 | |||||||||
Irving ISD GO, 0% due 2/15/2017 (Guaranty: PSF) | AAA/Aaa | 1,000,000 | 921,090 | |||||||||
Kerrville Health Facilities Development Corp., 5.25% due 8/15/2021 (Sid Peterson Memorial Hospital) | BBB-/NR | 4,000,000 | 4,213,240 | |||||||||
Lower Colorado River Authority, 5.875% due 5/15/2016 (Insured: BHAC/FSA) | NR/Aa1 | 2,210,000 | 2,219,812 | |||||||||
Mission Economic Development Corp., 3.75% due 12/1/2018 put 5/1/2015 (Waste Management, Inc.) | BBB/NR | 8,500,000 | 9,066,525 | |||||||||
North East ISD GO, 5.00% due 8/1/2016 (Guaranty: PSF) | AAA/Aaa | 2,000,000 | 2,342,980 |
Certified Annual Report 45
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
North Texas University, 5.00% due 4/15/2014 | NR/Aa2 | $ | 1,250,000 | $ | 1,337,038 | |||||||
North Texas University, 5.00% due 4/15/2016 | NR/Aa2 | 2,250,000 | 2,592,382 | |||||||||
Northside ISD GO, 1.75% due 6/1/2037 put 6/1/2013 (Educational Facilities Improvements; Guaranty: PSF) | AAA/NR | 19,195,000 | 19,245,867 | |||||||||
Sam Rayburn Municipal Power Agency, 5.50% due 10/1/2012 | NR/Baa2 | 6,000,000 | 6,002,640 | |||||||||
Sam Rayburn Municipal Power Agency, 5.00% due 10/1/2017 | BBB+/NR | 1,000,000 | 1,162,880 | |||||||||
Sam Rayburn Municipal Power Agency, 5.00% due 10/1/2019 | BBB+/NR | 2,565,000 | 3,040,987 | |||||||||
Sam Rayburn Municipal Power Agency, 5.00% due 10/1/2020 | BBB+/NR | 1,620,000 | 1,929,436 | |||||||||
San Juan Higher Education Finance Authority, 5.125% due 8/15/2020 (IDEA Public Schools) | BBB/NR | 2,000,000 | 2,213,360 | |||||||||
State of Texas, 2.50% due 8/30/2013 (General Revenue Fund Cash Management) | SP-1+/Mig1 | 118,000,000 | 120,453,220 | |||||||||
Tarrant County Cultural Educational Facilities Finance Corp., 5.00% due 8/15/2016 (Scott & White Memorial Hospital) | A/A1 | 2,280,000 | 2,584,562 | |||||||||
Tarrant County Cultural Educational Facilities Finance Corp., 5.00% due 8/15/2017 (Scott & White Memorial Hospital) | A/A1 | 2,000,000 | 2,309,880 | |||||||||
Tarrant County Cultural Educational Facilities Finance Corp., 0.20% due 10/1/2041 put 10/1/2012 (Methodist Hospitals of Dallas; LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | 19,930,000 | 19,930,000 | |||||||||
Texas Municipal Power Agency, 0% due 9/1/2013 (Insured: Natl-Re) | A+/A2 | 1,000,000 | 994,440 | |||||||||
Texas Municipal Power Agency, 5.00% due 9/1/2017 (Insured: AGM) | AA-/Aa3 | 10,000,000 | 11,949,400 | |||||||||
Texas Public Finance Authority, 5.00% due 1/1/2014 (Unemployment Compensation) | AAA/Aaa | 5,000,000 | 5,292,950 | |||||||||
Texas Public Finance Authority, 5.00% due 7/1/2014 (Unemployment Compensation) | AAA/Aaa | 5,000,000 | 5,406,250 | |||||||||
Texas Public Finance Authority, 5.00% due 10/15/2014 (Stephen F. Austin University; Insured: Natl-Re) | NR/A1 | 1,305,000 | 1,419,214 | |||||||||
Texas Public Finance Authority, 5.00% due 10/15/2015 (Stephen F. Austin University; Insured: Natl-Re) | NR/A1 | 1,450,000 | 1,631,221 | |||||||||
Texas Public Finance Authority, 5.00% due 7/1/2017 (Unemployment Compensation) | AAA/Aaa | 15,500,000 | 17,667,675 | |||||||||
Uptown Development Authority, 5.00% due 9/1/2015 (Infrastructure Improvements) | BBB/NR | 1,370,000 | 1,508,082 | |||||||||
Uptown Development Authority, 5.00% due 9/1/2017 (Infrastructure Improvements) | BBB/NR | 1,580,000 | 1,780,676 | |||||||||
Uptown Development Authority, 5.00% due 9/1/2018 (Infrastructure Improvements) | BBB/NR | 1,870,000 | 2,120,430 | |||||||||
Uptown Development Authority, 5.00% due 9/1/2019 (Infrastructure Improvements) | BBB/NR | 1,945,000 | 2,208,703 | |||||||||
Waco Health Facilities Development Corp., 4.00% due 9/1/2013 (Hillcrest Health System; Insured: Natl-Re) (ETM) | BBB/NR | 1,000,000 | 1,032,570 | |||||||||
West Harris County Regional Water Authority, 5.25% due 12/15/2012 (Insured: AGM) | AA-/Aa3 | 2,435,000 | 2,459,983 | |||||||||
U.S. VIRGIN ISLANDS — 0.22% | ||||||||||||
Virgin Islands Public Finance Authority, 6.75% due 10/1/2019 (Matching Fund Loan Diageo Project) | NR/Baa3 | 7,690,000 | 9,066,510 | |||||||||
Virgin Islands Water & Power Authority, 4.75% due 7/1/2015 | BBB-/Baa2 | 1,000,000 | 1,075,230 | |||||||||
Virgin Islands Water & Power Authority, 4.75% due 7/1/2016 | BBB-/Baa2 | 1,225,000 | 1,344,719 | |||||||||
Virgin Islands Water & Power Authority, 4.75% due 7/1/2017 | BBB-/Baa2 | 1,300,000 | 1,434,342 | |||||||||
UTAH — 1.13% | ||||||||||||
Intermountain Power Agency, 5.00% due 7/1/2013 | A+/A1 | 5,000,000 | 5,178,250 | |||||||||
Intermountain Power Agency, 5.25% due 7/1/2014 (Insured: Natl-Re) | A+/Baa2 | 2,300,000 | 2,424,407 | |||||||||
Murray City, 0.20% due 5/15/2037 put 10/1/2012 (IHC Health Services, Inc.; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa1 | 31,785,000 | 31,785,000 | |||||||||
Murray City, 0.20% due 5/15/2037 put 10/1/2012 (IHC Health Services, Inc.; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa1 | 1,400,000 | 1,400,000 | |||||||||
Weber County, 0.20% due 2/15/2031 put 10/1/2012 (IHC Health Services, Inc.; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA+/Aa1 | 11,220,000 | 11,220,000 | |||||||||
Weber County, 0.20% due 2/15/2035 put 10/1/2012 (IHC Health Services, Inc.; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA+/Aa1 | 15,925,000 | 15,925,000 |
46 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
VERMONT — 0.37% | ||||||||||||
Vermont Colleges GO, 4.00% due 7/1/2017 | A+/NR | $ | 5,375,000 | $ | 5,948,136 | |||||||
Vermont Economic Development Authority, 5.00% due 12/15/2020 (Vermont Public Service Corp.) | NR/A3 | 14,250,000 | 16,490,243 | |||||||||
VIRGINIA — 0.26% | ||||||||||||
Fairfax County EDA, 5.00% due 8/1/2016 | AA+/Aa2 | 2,600,000 | 2,982,096 | |||||||||
Fairfax County IDA, 4.00% due 5/15/2022 (Inova Health Systems Project) | AA+/Aa2 | 5,500,000 | 6,280,120 | |||||||||
Fairfax County IDA, 5.00% due 5/15/2022 (Inova Health Systems Project) | AA+/Aa2 | 5,000,000 | 6,133,100 | |||||||||
WASHINGTON — 1.87% | ||||||||||||
Energy Northwest, 5.00% due 7/1/2013 (Bonneville Power Administration Project 1) | AA-/Aa1 | 3,835,000 | 3,973,789 | |||||||||
Energy Northwest, 5.00% due 7/1/2014 (Wind Project; Insured: AMBAC) | A/A2 | 2,575,000 | 2,755,456 | |||||||||
Energy Northwest, 5.00% due 7/1/2017 (Bonneville Power Administration Project 1) | AA-/Aa1 | 5,000,000 | 5,985,050 | |||||||||
Energy Northwest, 5.00% due 7/1/2017 (Bonneville Power Administration Project 3) | AA-/Aa1 | 5,470,000 | 6,547,645 | |||||||||
King County Federal Way School District No. 210 GO, 4.125% due 12/1/2019 (Insured: Natl- Re/FGIC) | AA+/Aa1 | 2,000,000 | 2,285,260 | |||||||||
Port of Seattle, 5.50% due 9/1/2018 (Insured: Natl-Re/FGIC) | A/A1 | 5,000,000 | 6,091,700 | |||||||||
Seattle Municipal Light & Power, 5.00% due 2/1/2016 | AA-/Aa2 | 1,000,000 | 1,148,330 | |||||||||
Seattle Municipal Light & Power, 5.00% due 2/1/2017 | AA-/Aa2 | 2,000,000 | 2,366,080 | |||||||||
Skagit County Public Hospital District No. 1 GO, 4.00% due 12/1/2017 (Skagit Regional Health) | NR/A1 | 1,000,000 | 1,110,660 | |||||||||
Skagit County Public Hospital District No. 1 GO, 4.00% due 12/1/2018 (Skagit Regional Health) | NR/A1 | 1,270,000 | 1,423,619 | |||||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2019 (Skagit Regional Health) | NR/A1 | 1,695,000 | 2,016,406 | |||||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2020 (Skagit Regional Health) | NR/A1 | 1,570,000 | 1,891,771 | |||||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2021 (Skagit Regional Health) | NR/A1 | 3,135,000 | 3,769,399 | |||||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2022 (Skagit Regional Health) | NR/A1 | 3,635,000 | 4,395,333 | |||||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2018 (Island Hospital) | NR/A1 | 1,000,000 | 1,125,300 | |||||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2019 (Island Hospital) | NR/A1 | 1,000,000 | 1,123,430 | |||||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2020 (Island Hospital) | NR/A1 | 1,000,000 | 1,126,660 | |||||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2021 (Island Hospital) | NR/A1 | 1,000,000 | 1,116,550 | |||||||||
Skagit County Public Hospital District No. 2 GO, 5.00% due 12/1/2022 (Island Hospital) | NR/A1 | 1,700,000 | 2,047,174 | |||||||||
Snohomish County Public Utilities District, 5.00% due 12/1/2015 (Insured: AGM) | AA-/Aa3 | 5,015,000 | 5,387,263 | |||||||||
State of Washington COP, 5.00% due 7/1/2019 (State & Local Agency Real & Personal Property Projects) (State Aid Withholding) | NR/Aa2 | 1,000,000 | 1,227,040 | |||||||||
State of Washington COP, 5.00% due 7/1/2020 (State & Local Agency Real & Personal Property Projects) (State Aid Withholding) | NR/Aa2 | 3,290,000 | 4,063,874 | |||||||||
State of Washington COP, 5.00% due 7/1/2021 (State & Local Agency Real & Personal Property Projects) (State Aid Withholding) | NR/Aa2 | 3,125,000 | 3,890,406 | |||||||||
State of Washington COP, 5.00% due 7/1/2022 (State & Local Agency Real & Personal Property Projects) (State Aid Withholding) | NR/Aa2 | 3,000,000 | 3,768,510 | |||||||||
State of Washington GO, 0% due 1/1/2018 (Stadium and Exhibition Center; Insured: Natl- Re/FGIC) | AA+/Aa1 | 4,000,000 | 3,715,120 | |||||||||
State of Washington GO, 0% due 1/1/2019 (Stadium and Exhibition Center; Insured: Natl- Re/FGIC) | AA+/Aa1 | 3,000,000 | 2,666,820 | |||||||||
State of Washington GO, 0% due 12/1/2019 (Motor Vehicle Capital Appreciation; Insured: Natl-Re) | AA+/Aa1 | 3,030,000 | 2,638,342 | |||||||||
State of Washington Public Power Supply Systems, 0% due 7/1/2013 (Nuclear Project No. 3; Insured: Natl-Re/IBC) | AA-/Aa1 | 1,760,000 | 1,755,072 | |||||||||
State of Washington Public Power Supply Systems, 0% due 7/1/2015 (Nuclear Project No. 3; Insured: Natl-Re/IBC) | AA-/Aa1 | 3,000,000 | 2,934,270 | |||||||||
Washington Health Care Facilities Authority, 5.00% due 7/1/2013 (Overlake Hospital Medical Center; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,032,300 | |||||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2013 (Multicare Health Systems) | AA-/A1 | 1,250,000 | 1,292,712 |
Certified Annual Report 47
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2014 (Multicare Health Systems) | AA-/A1 | $ | 1,500,000 | $ | 1,589,640 | |||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2015 (Multicare Health Systems) | AA-/A1 | 2,000,000 | 2,176,480 | |||||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2016 (Multicare Health Systems) | AA-/A1 | 2,075,000 | 2,293,207 | |||||||||
Washington Health Care Facilities Authority, 5.375% due 12/1/2016 (Group Health Cooperative of Puget Sound; Insured: AMBAC) | BB+/NR | 2,000,000 | 2,007,420 | |||||||||
Washington Health Care Facilities Authority, 5.00% due 7/1/2017 (Overlake Hospital Medical Center) | A-/A3 | 1,245,000 | 1,390,304 | |||||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2017 (Multicare Health Systems) | AA-/A1 | 1,000,000 | 1,120,530 | |||||||||
Washington Health Care Facilities Authority, 5.25% due 8/1/2018 (Highline Medical Center; Insured: FHA 242) | A+/NR | 7,955,000 | 9,270,121 | |||||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2018 (Multicare Health Systems) | AA-/A1 | 2,000,000 | 2,274,180 | |||||||||
Washington Health Care Facilities Authority, 5.00% due 7/1/2019 (Overlake Hospital Medical Center) | A-/A3 | 1,050,000 | 1,187,162 | |||||||||
Washington Health Care Facilities Authority, 4.75% due 7/1/2020 (Overlake Hospital Medical Center) | A-/A3 | 1,000,000 | 1,125,450 | |||||||||
Yakima County School District, 5.00% due 12/1/2012 (Insured: Natl-Re) | NR/Aa1 | 1,270,000 | 1,280,541 | |||||||||
WEST VIRGINIA — 0.29% | ||||||||||||
City of Clarksburg, 5.25% due 9/1/2019 (Insured: Natl-Re/FGIC) | BBB/NR | 1,425,000 | 1,444,750 | |||||||||
Kanawha, Mercer, Nicholas Counties Single Family Mtg, 0% due 2/1/2015 pre-refunded 2/1/2014 | NR/Aaa | 2,260,000 | 2,017,796 | |||||||||
Mason County PCR, 2.00% due 10/1/2022 put 10/1/2014 (Appalachian Power Co.) | NR/Baa2 | 1,500,000 | 1,508,400 | |||||||||
Monongalia County Building Commission, 5.25% due 7/1/2020 (Monongalia General Hospital) | A-/NR | 3,880,000 | 4,119,862 | |||||||||
West Virginia EDA PCR, 4.85% due 5/1/2019 put 9/4/2013 (Appalachian Power Company) | BBB/Baa2 | 1,000,000 | 1,030,280 | |||||||||
West Virginia EDA PCR, 4.85% due 5/1/2019 put 9/4/2013 (Appalachian Power Company) | BBB/Baa2 | 1,000,000 | 1,030,280 | |||||||||
West Virginia Higher Education Policy Commission, 5.00% due 4/1/2020 (Higher Education Facilities) | A+/Aa3 | 1,000,000 | 1,219,680 | |||||||||
West Virginia Higher Education Policy Commission, 5.00% due 4/1/2021 (Higher Education Facilities) | A+/Aa3 | 1,000,000 | 1,229,060 | |||||||||
West Virginia Higher Education Policy Commission, 5.00% due 4/1/2022 (Higher Education Facilities) | A+/Aa3 | 1,500,000 | 1,853,895 | |||||||||
West Virginia University, 0% due 4/1/2013 (Insured: AMBAC) | A+/Aa3 | 2,000,000 | 1,993,420 | |||||||||
WISCONSIN — 0.71% | ||||||||||||
State of Wisconsin, 5.00% due 7/1/2015 (Petroleum Environmental Cleanup Fund Award Program) | AA/Aa2 | 4,000,000 | 4,479,560 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/15/2014 (Aurora Health Care, Inc.) | NR/A3 | 4,265,000 | 4,565,427 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/15/2015 (Aurora Health Care, Inc.) | NR/A3 | 4,100,000 | 4,511,394 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/15/2016 (Aurora Health Care, Inc.) | NR/A3 | 3,695,000 | 4,155,619 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 4/15/2017 (Aurora Health Care, Inc.) | NR/A3 | 1,295,000 | 1,468,310 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2017 (Agnesian Health Care, Inc.) | A-/A3 | 1,000,000 | 1,116,710 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/15/2017 (Aurora Health Care, Inc.) | NR/A3 | 5,025,000 | 5,727,746 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2018 (Agnesian Health Care, Inc.) | A-/A3 | 1,855,000 | 2,102,234 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2019 (Agnesian Health Care, Inc.) | A-/A3 | 1,000,000 | 1,127,030 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2020 (Agnesian Health Care, Inc.) | A-/A3 | 2,110,000 | 2,404,788 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2020 (ProHealth Care, Inc.) | A+/A1 | 1,075,000 | 1,260,061 |
48 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2021 (ProHealth Care, Inc.) | A+/A1 | $ | 2,575,000 | $ | 3,008,553 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2022 (ProHealth Care, Inc.) | A+/A1 | 1,600,000 | 1,847,520 | |||||||||
Wisconsin Health & Educational Facilities Authority, 5.125% due 8/15/2027 put 8/15/2016 (Aurora Health Care, Inc.) | NR/A3 | 4,500,000 | 5,016,646 | |||||||||
|
| |||||||||||
TOTAL INVESTMENTS — 98.62% (Cost $5,611,770,627) | $ | 5,911,013,917 | ||||||||||
OTHER ASSETS LESS LIABILITIES — 1.38% | 82,424,393 | |||||||||||
|
| |||||||||||
NET ASSETS — 100.00% | $ | 5,993,438,310 | ||||||||||
|
|
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. Bonds issued with a maturity of one year or less are assigned Moody’s ratings from MIG-1 to MIG-4 and Standard and Poor’s ratings from SP-1+ to SP-3 with MIG-1 and SP-1+ being the strongest ratings. |
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 | SONYMA | State of New York Mortgage Authority | |||
AGM | Insured by Assured Guaranty Municipal Corp. | SPA | Stand-by Purchase Agreement | |||
AMBAC | Insured by American Municipal Bond Assurance Corp. | Syncora | Insured by Syncora Guarantee Inc. | |||
BHAC | Insured by Berkshire Hathaway Assurance Corp. | USD | Unified School District | |||
CIFG | CIFG Assurance North America Inc. | |||||
COP | Certificates of Participation | See notes to financial statements. | ||||
DFA | Development Finance Authority | |||||
EDA | Economic Development Authority | |||||
ETM | Escrowed to Maturity | |||||
FGIC | Insured by Financial Guaranty Insurance Co. | |||||
FHA | Insured by Federal Housing Administration | |||||
FNMA | Collateralized by Federal National Mortgage Association | |||||
FSA | Insured by Financial Security Assurance Co. | |||||
GNMA | Insured by Government National Mortgage Association | |||||
GO | General Obligation | |||||
HFA | Health Facilities Authority | |||||
HFFA | Health Facilities Financing Authority | |||||
IBC | Insured Bond Certificate | |||||
IDA | Industrial Development Authority | |||||
ISD | Independent School District | |||||
JEA | Jacksonville Electric Authority | |||||
LOC | Letter of Credit | |||||
MBIA | Insured by Municipal Bond Investors Assurance | |||||
Mtg | Mortgage | |||||
NCSL | National Conference of State Legislature | |||||
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 |
Certified Annual Report 49
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
ASSETS | ||||
Investments at value (cost $5,611,770,627) (Note 2) | $ | 5,911,013,917 | ||
Cash | 11,346,923 | |||
Receivable for investments sold | 22,195,000 | |||
Receivable for fund shares sold | 30,043,669 | |||
Interest receivable | 58,675,396 | |||
Prepaid expenses and other assets | 83,550 | |||
|
| |||
Total Assets | 6,033,358,455 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 25,301,047 | |||
Payable for fund shares redeemed | 10,354,065 | |||
Payable to investment advisor and other affiliates (Note 3) | 2,480,408 | |||
Accounts payable and accrued expenses | 475,261 | |||
Dividends payable | 1,309,364 | |||
|
| |||
Total Liabilities | 39,920,145 | |||
|
| |||
NET ASSETS | $ | 5,993,438,310 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (1,177,027 | ) | |
Net unrealized appreciation on investments | 299,243,290 | |||
Accumulated net realized gain (loss) | (3,092,444 | ) | ||
Net capital paid in on shares of beneficial interest | 5,698,464,491 | |||
|
| |||
$ | 5,993,438,310 | |||
|
| |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($2,131,540,323 applicable to 145,033,999 shares of beneficial interest outstanding - Note 4) | $ | 14.70 | ||
Maximum sales charge, 1.50% of offering price | 0.22 | |||
|
| |||
Maximum offering price per share | $ | 14.92 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($777,025,817 applicable to 52,773,189 shares of beneficial interest outstanding - Note 4) | $ | 14.72 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($3,084,872,170 applicable to 209,870,891 shares of beneficial interest outstanding - Note 4) | $ | 14.70 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
50 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg Limited Term Municipal Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $51,447,662) | $ | 147,235,015 | ||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 14,391,353 | |||
Administration fees (Note 3) | ||||
Class A Shares | 2,389,755 | |||
Class C Shares | 803,623 | |||
Class I Shares | 1,309,616 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 4,779,509 | |||
Class C Shares | 3,234,084 | |||
Transfer agent fees | ||||
Class A Shares | 672,355 | |||
Class C Shares | 311,728 | |||
Class I Shares | 718,642 | |||
Registration and filing fees | ||||
Class A Shares | 136,475 | |||
Class C Shares | 79,698 | |||
Class I Shares | 150,852 | |||
Custodian fees (Note 3) | 558,773 | |||
Professional fees | 97,611 | |||
Accounting fees | 122,635 | |||
Trustee fees | 148,746 | |||
Other expenses | 425,892 | |||
|
| |||
Total Expenses | 30,331,347 | |||
Less: | ||||
Fees paid indirectly (Note 3) | (24,593 | ) | ||
|
| |||
Net Expenses | 30,306,754 | |||
|
| |||
Net Investment Income | 116,928,261 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (253,680 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 109,312,126 | |||
|
| |||
Net Realized and Unrealized Gain | 109,058,446 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 225,986,707 | ||
|
|
See notes to financial statements.
Certified Annual Report 51
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Limited Term Municipal Fund |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 116,928,261 | $ | 109,234,125 | ||||
Net realized gain (loss) on investments | (253,680 | ) | 400,325 | |||||
Net unrealized appreciation (depreciation) on investments | 109,312,126 | 33,955,135 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 225,986,707 | 143,589,585 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (40,670,113 | ) | (40,261,376 | ) | ||||
Class C Shares | (11,881,023 | ) | (11,239,321 | ) | ||||
Class I Shares | (64,377,125 | ) | (57,733,428 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 441,112,029 | 25,207,173 | ||||||
Class C Shares | 237,635,398 | 40,398,775 | ||||||
Class I Shares | 801,326,547 | 318,758,568 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 1,589,132,420 | 418,719,976 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 4,404,305,890 | 3,985,585,914 | ||||||
|
|
|
| |||||
End of Year | $ | 5,993,438,310 | $ | 4,404,305,890 | ||||
|
|
|
|
See notes to financial statements.
52 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
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 has three classes of shares of beneficial interest outstanding: 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 may be subject to a service fee, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and 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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reason-ably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: 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. 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 ordinarily valued at amortized cost, which approximates market value.
In any case where the market value of a debt obligation held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. In any case where a pricing service fails to provide a price for a debt obligation
Certified Annual Report 53
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
held by the Fund, the Committee determines a fair value for the debt obligation using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from an independent pricing service. 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 5,911,013,917 | $ | — | $ | 5,911,013,917 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 5,911,013,917 | $ | — | $ | 5,911,013,917 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2012.
54 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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: Investment transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on investments purchased are amortized to call dates or maturity dates of the respective investments. Realized gains and losses from the sale of investments 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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.
Certified Annual Report 55
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
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, 2012, the Distributor has advised the Fund that it earned commissions aggregating $12,264 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $91,455 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, 2012, 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 a distribution plan pursuant to Rule 12b-1, applicable only to the Fund’s Class C shares under which the Fund compensates the Distributor for services in promoting the sale of Class C shares of the Fund at an annual rate of up to .25 of 1% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, fees paid indirectly were $24,593.
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 54,107,919 | $ | 787,098,134 | 34,018,460 | $ | 480,834,989 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 2,233,518 | 32,542,776 | 2,121,045 | 29,967,195 | ||||||||||||
Shares repurchased | (25,997,455 | ) | (378,528,881 | ) | (34,515,435 | ) | (485,595,011 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 30,343,982 | $ | 441,112,029 | 1,624,070 | $ | 25,207,173 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 21,938,370 | $ | 320,066,110 | 10,957,730 | $ | 155,484,465 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 617,961 | 9,021,510 | 556,994 | 7,884,261 | ||||||||||||
Shares repurchased | (6,273,080 | ) | (91,452,222 | ) | (8,723,778 | ) | (122,969,951 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 16,283,251 | $ | 237,635,398 | 2,790,946 | $ | 40,398,775 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 86,658,506 | $ | 1,262,228,836 | 68,377,616 | $ | 967,194,986 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 3,667,418 | 53,444,458 | 3,399,837 | 48,048,652 | ||||||||||||
Shares repurchased | (35,332,908 | ) | (514,346,747 | ) | (49,330,992 | ) | (696,485,070 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 54,993,016 | $ | 801,326,547 | 22,446,461 | $ | 318,758,568 | ||||||||||
|
|
|
|
|
|
|
|
56 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2012, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $1,430,879,795 and $587,721,685, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 5,611,783,277 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 299,560,149 | ||
Gross unrealized depreciation on a tax basis | (329,509 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 299,230,640 | ||
|
|
At September 30, 2012, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2011, of $409,196. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
The Fund utilized $155,516 of capital loss carryforwards during the year ended September 30, 2012.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) became effective for the Fund’s fiscal year ending September 30, 2012. The Act requires that future capital losses generated by the Fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a Fund’s pre-enactment capital losses will expire unused.
At September 30, 2012, the Fund had cumulative 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:
2015 | $ | 2,478,154 | ||
2016 | 192,444 | |||
|
| |||
$ | 2,670,598 | |||
|
|
At September 30, 2012, the Fund did not have any undistributed tax basis net tax-exempt income, net ordinary income or undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2012 and September 30, 2011 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 116,700,482 | $ | 108,960,884 | ||||
Ordinary income | 227,779 | 273,241 | ||||||
|
|
|
| |||||
Total | $ | 116,928,261 | $ | 109,234,125 | ||||
|
|
|
|
Certified Annual Report 57
Thornburg Limited Term Municipal Fund | September 30, 2012 |
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, credit risk, interest rate risk, management risk, market and economic risk, and liquidity risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
58 Certified Annual Report
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Certified Annual Report 59
Thornburg Limited Term Municipal Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Year | 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 Year | Net | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 14.39 | 0.31 | 0.31 | 0.62 | (0.31 | ) | — | (0.31 | ) | $ | 14.70 | 2.13 | 0.72 | 0.72 | 0.72 | 4.36 | 12.72 | $ | 2,131,540 | ||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 14.27 | 0.36 | 0.12 | 0.48 | (0.36 | ) | — | (0.36 | ) | $ | 14.39 | 2.53 | 0.74 | 0.74 | 0.74 | 3.43 | 16.15 | $ | 1,649,965 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 14.41 | 0.27 | 0.31 | 0.58 | (0.27 | ) | — | (0.27 | ) | $ | 14.72 | 1.85 | 0.99 | 0.99 | 0.99 | 4.08 | 12.72 | $ | 777,026 | ||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.30 | 0.32 | 0.11 | 0.43 | (0.32 | ) | — | (0.32 | ) | $ | 14.41 | 2.27 | 1.00 | 1.00 | 1.00 | 3.08 | 16.15 | $ | 525,923 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 14.39 | 0.36 | 0.31 | 0.67 | (0.36 | ) | — | (0.36 | ) | $ | 14.70 | 2.46 | 0.39 | 0.39 | 0.39 | 4.71 | 12.72 | $ | 3,084,872 | ||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.27 | 0.41 | 0.12 | 0.53 | (0.41 | ) | — | (0.41 | ) | $ | 14.39 | 2.87 | 0.40 | 0.40 | 0.40 | 3.78 | 16.15 | $ | 2,228,418 | ||||||||||||||||||||||||||||||||||||||
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 |
(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, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
60 Certified Annual Report | Certified Annual Report 61 |
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
62 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,021.70 | $ | 3.66 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.38 | $ | 3.65 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,019.60 | $ | 5.01 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.04 | $ | 5.01 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,023.40 | $ | 1.97 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,023.05 | $ | 1.97 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.72%; C: 0.99%; I: 0.39%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table above 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 above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
63 Certified Annual Report
INDEX COMPARISON | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg Limited Term Municipal Fund versus BofA Merrill Lynch 1–10 Year U.S. Municipal Securities Index,
Barclays Five-Year Municipal Bond Index, and Consumer Price Index (September 30, 2002 to September 30, 2012)
AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 9/28/84) | 2.79 | % | 4.38 | % | 3.44 | % | 5.43 | % | ||||||||
C Shares (Incep: 9/1/94) | 3.58 | % | 4.42 | % | 3.30 | % | 3.91 | % | ||||||||
I Shares (Incep: 7/5/96) | 4.71 | % | 5.05 | % | 3.93 | % | 4.58 | % |
Effective February 1, 2012, the Fund’s benchmark changed from the Barclays Five-Year Municipal Bond Index to the BofA Merrill Lynch 1-10 Year U.S. Municipal Securities Index. The Advisor believes that the new index better reflects the Fund’s principal investment strategies, including the Fund’s practice of investing in obligations having a range of maturities.
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 or call 800.847.0200. 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.
64 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 65
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE(1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
66 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 Thorn-burg 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 the sole director and control-ling 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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 67
OTHER INFORMATION | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 (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. A description of the Policy 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, 2012, dividends paid by the Fund of $116,700,482 (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 reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 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 11, 2012.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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.
68 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s performance in the context of the Fund’s objectives and reason-able expectations, and business, market and economic conditions, (iii) measures of the Fund’s investment performance over different periods of time relative to two categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of accounting and other services, the Advisor’s 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 considered (among other aspects of the data) performance data for the ten most recent calendar years, which showed that the Fund produced positive returns in accordance with expectations in all years, that the Fund’s investment return for the most recent calendar year exceeded the average return of the mutual fund category for which calendar year data was presented, and that the Fund’s returns exceeded or were comparable to the average returns of the category in all of the preceding nine years. Other noted quantitative data showed that the Fund’s investment returns fell within the top decile of performance for the first fund 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 within the top quartile of performance for the second fund category for the one-year and three-year periods ended with the second quarter and within the top decile of performance for the fund category for the five-year period. These data indicated to the Trustees that the Fund’s investment performance met expectations in view of the Fund’s stated objectives and strategies in the market conditions for the relevant periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures also 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of municipal debt mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data noted by the Trustees showed that the management fee charged to the Fund was comparable to the median and average fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was comparable to the median and average expense ratios for the fund category. 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 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
Certified Annual Report 69
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2012 (Unaudited) |
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 information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its 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 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.
70 Certified Annual Report
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TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
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.
72 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 website 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 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 Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
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74 This page is not part of the Annual Report.
THORNBURG FUND FAMILY
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 thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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Waste not, Wait not | ||||||
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This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. | By switching from your postal mailbox to your email inbox, you reduce paper clutter, improve record keeping access, and help conserve our natural resources. | |||||
Investment Advisor: Thornburg Investment Management® 800.847.0200 | Go to www.thornburg.com/edelivery and sign up to receive your shareholder reports, prospectuses, and proxy statements electronically. | |||||
Distributor: Thornburg Securities Corporation® 800.847.0200 | You invest in the future, without spending a dime. | |||||
TH858 |
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2012. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 2012 Best Fixed Income Funds Manager
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income Large Company universe for the three-year period ended 11/30/11, based on risk-adjusted returns. Lipper’s Large Company universe is comprised of fund families with more than $40 billion in total net assets. Only fund families with at least five bond funds were eligible for the fixed income funds manager award. Asset Class Group Awards are given for the three-year period only.
Glossary
BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index – This index is a subset of the BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity greater than or equal to 3 years and less than 15 years.
BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index – This index is a subset of the BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity greater than or equal to 7 years and less than 12 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 reflects actual distributions made to shareholders. The annualized distribution yield is calculated by summing the last 30 days of income at a given month end and annualizing to a 360-day year. The result is divided by the ending maximum offering price.
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.
Consumer Price Index (CPI) – Index that measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. Also known as the cost-of-living index.
Core CPI – Consumer Price Index minus the energy and food components.
Core PCE Price Index – Personal Consumption Expenditures (PCE) prices excluding food and energy.
Duration – A bond’s sensitivity to interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
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IMPORTANT INFORMATION, CONTINUED |
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 Bond – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Gross Domestic Product (GDP) – A country’s income minus foreign investments: the total value of all goods and services produced within a country in a year, minus net income from investments in other countries.
Quantitative Easing – The Federal Reserve’s monetary policy used to stimulate the U.S. economy following the recession that began in 2007/08.
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.
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 often fail to stack up over longer periods of time.
We apply time-tested techniques to manage risk and purse attractive returns. These include:
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment 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. |
Portfolio Managers
Josh Gonze, Chris Ryon,CFA, 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 or call 800.847.0200.
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 0.95%, 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, 2012
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 7/22/91) | ||||||||||||||||||||
Without sales charge | 7.69 | % | 5.51 | % | 5.38 | % | 4.21 | % | 5.36 | % | ||||||||||
With sales charge | 5.52 | % | 4.81 | % | 4.95 | % | 4.00 | % | 5.26 | % |
30-Day Yields, A Shares
As of September 30, 2012
Annualized Distribution Yield | SEC Yield | ||||
2.57% | 1.49 | % |
Key Portfolio Attributes
As of September 30, 2012
Number of Bonds | 398 | |||
Effective Duration | 5.6 Yrs | |||
Average Maturity | 8.2 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 14.
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Thornburg Intermediate Municipal Fund – September 30, 2012
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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 13, 2012
Dear Fellow Shareholder:
We are pleased to present the annual report for the Thornburg Intermediate Municipal Fund. The net asset value (NAV) of the Class A shares increased by 63 cents to $14.22 per share during the fiscal year ended September 30, 2012. If you were with us for the entire period, you received dividends of 40.2 cents per share. If you reinvested your dividends, you received 40.8 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 outperformed the Index with a total return of 7.69% at NAV for the fiscal year ended September 30, 2012, versus 7.06% for the BofA Merrill Lynch 3–15 Year U.S. Municipal Securities Index. The Fund generated 2.02% more price appreciation but 1.39% less income.
The markets’ positive returns were primarily due to declining interest rates and narrowing credit spreads. Interest rates declined more for longer maturities; consequently longer-maturity bonds outperformed shorter-maturity bonds. As credit spreads compressed, lower-quality bonds outperformed higher-quality bonds. The Fund’s additional price appreciation is due to several factors. Our interest-rate sensitivity as measured by the Fund’s duration and differing allocations along the yield curve added 0.80% of relative price appreciation. Our overweight to the insured and revenue sectors added 0.04%. We underweighted the general obligation and pre-refunded sectors, which added 0.13% of relative price performance. Our overweight to lower credit quality securities added 0.42% of performance relative to the benchmark. Other risk factors accounted for an additional positive 0.63%.
The Economy and the Federal Reserve
During the first quarter of the fiscal year, economic activity appeared to be picking up; the December 2011 gross domestic product (GDP) reading was a strong 4.1%. But the acceleration in activity proved to be an illusion, as the March and June 2012 GDP readings were 2.0% and 1.3%, respectively. Non-farm payrolls continued to grow but at rather anemic rates. The unemployment rate began the fiscal year at 9.0% and decreased to 7.8% by the end of the fiscal year. Inflation as measured by the Consumer Price Index (CPI) is running in the 2.0% range. If one subtracts the food and energy components to arrive at Core CPI, the last reading was likewise at 2.0%. But given higher readings earlier in the year, the trend shows a decline. Inflation as measured by the Personal Consumption Expenditure Index (PCE), the Federal Reserve Board’s (the Fed) favored inflation measure, is running at a core level of 1.6%. All of these economic indicators and others point to an economy on shaky footing.
Certified Annual Report 7
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
In addition to these fundamental factors, many investors are concerned about the impact of the so-called “fiscal cliff”, which The Washington Post referred to as follows:
The “ fiscal cliff” is a term coined by Federal Reserve Chairman Ben S. Bernanke. It refers to a collection of changes in current law that are all set to strike in January, triggering the sharpest reduction in the federal budget deficit in more than 40 years.
The Post goes on to say that taxes would also increase:
For most taxpayers, the bulk of the increase would be triggered by the expiration of tax cuts enacted in 2001 and 2003 during the George W. Bush administration. The expiration of President Obama’s payroll tax holiday, which shaved two percentage points off the 6.2 percent Social Security tax, comes in a close second. If these issues are not addressed many analysts think the United States will be pushed into another recession.
On top of all this, Europe is still a mess, but the fixed income markets seem not to be as headline sensitive to news coming out of Europe as they were last year. The Fed decided at its last meeting to enter into a third round of quantitative easing – QE3. In this round, the Fed will concentrate its security purchases in the mortgage markets in an effort to lower borrowing costs for homebuyers, which should spur the housing market. But as anyone who has recently applied for a mortgage knows, it is not the interest cost of the product that stands as a borrower’s major roadblock. The fixed income markets’ initial reaction to the latest Fed move was an increase in inflation expectations and a decrease in bond prices, though this fear has subsided in recent weeks.
The Presidential Election and Tax Policy
Tax policy and the federal deficit have proven to be key election season issues. Both candidates have put forward their respective plans for deficit reduction; both could influence the municipal bond market. Table I shows a side-by-side analysis based on a recent article in The Bond Buyer, a leading publication on the municipal bond market.
8 Certified Annual Report
Table I
Obama | Romney | |
Extends the 2001 and 2003 tax cuts for individuals earning under $200,000 and families earning under $250,000. | Permanently extend all the 2001 and 2003 tax cuts. Eliminate taxation of investment income for individuals earning less than $200,000. | |
Returns to the Clinton Era highest marginal tax rate of 39.6%. | Lowers marginal rates across the board by 20%, eliminates the alternative minimum tax. | |
In a jobs bill he floated last October and his 2013 budget, Obama proposed to place a 28% cap on the value of tax-exempt interest for the wealthy. | Announced he would cap individual tax deductions at $17,000. Not clear if he would cap exclusions, like tax exemption, as well as deductions. | |
Bruce Bartlett, former policy adviser to President Ronald Reagan and Treasury official under President George H. W. Bush, said without a doubt Obama’s tax proposals would be more beneficial to the municipal market primarily because he wants to impose higher tax rates on the wealthy, which would make tax-exempt bonds more attractive. | While Romney has not specifically mentioned capping tax exemption, in a Wall Street Journal editorial in August, Glenn Hubbard, his senior economic adviser, said the exclusion of interest on tax-exempt municipal bonds is “on the table” for the Republican candidate. |
One can see that both candidates’ potential tax policies, as understood today, could influence the municipal bond market. However, as with most election rhetoric, the eventual legislation may look nothing like the campaign proposals. There are two things that people should never watch being made, sausage and legislation!
The Municipal Market
The demand picture in the municipal market improved during the fiscal year. Investors poured $56 billion into municipal bond mutual funds over the last 12 months. The total assets in municipal bond mutual funds were $562 billion, according to the Investment Company Institute, a mutual fund industry advocacy group. Assets in municipal bond mutual funds on November 30, 2010, just before the six-month period of investor exodus, were $497 billion. On the other side of the ledger, the supply picture improved. The supply of new issue municipal bonds was $379 billion for the year ended September 30, 2012. This exceeded the $329 billion for the year ended September 30, 2011 by $50 billion, for a 15% increase.
Certified Annual Report 9
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
The trend towards lower interest rates continued throughout this fiscal year. With short-term yields anchored near zero, investors moved out the yield curve in search of income. This caused long-term maturities to decrease in yield much more than short-term maturities. The average change in yield for the Thornburg Intermediate Municipal Fund’s investment universe (1–20 years), as measured by the average change in yield of a AAA general obligation bond, was negative 0.13% for the first half of the fiscal year. In the second half of the fiscal year, the same measure of average yield change decreased 0.42%. This decline in average yields was 1.5 times that of the 1–10 year maturity range of the municipal market. See Graph I.
Investors, again in a search for income, have been willing to pay much more for lower-quality securities than any time since 2008. This caused quality spreads to narrow and lower-quality securities to out-perform higher quality securities. On December 30, 2011 the incremental yield an investor gained for buying a BBB security versus an AAA security with a 10-year maturity was 3.00%. On September 30, 2012, that incremental yield equaled 2.08%, a 0.92% decrease. Graph II shows the quarter-by-quarter and cumulative total return performance of the BofA Merrill Lynch 3–15 Year U.S. Municipal Securities Index for the fiscal year.
The credit picture in the municipal market is still mixed. At the state level, revenues continue to increase. At the local level, which has a heavy reliance on real estate taxes, the continued decline of assessed values has put pressure on local finances. Pension funding levels continue to decline due to
Graph I: AAA General Obligation Municipal Yield Changes for 9/30/2011 through 9/30/2012
Past performance does not guarantee future results.
10 Certified Annual Report
poor investment returns and cutbacks in annual pension contributions. Several state and local pension plans, recognizing the folly of this condition, have begun to reform their pension systems, calling for higher participant contributions, higher retirement ages, or both. These and other measures have caused us to forsake investments in the state of Illinois and Puerto Rico general obligation debt.
Graph II: BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index
Quarterly and Cumulative Total Returns
Past performance does not guarantee future results.
In the last semi-annual letter to shareholders, we noted the risks of rising interest rates. As bond portfolio managers, we are always worried. If bonds are doing well, the economy is probably doing poorly, so we worry. If the economy is doing well, we worry because yields are probably rising and bond prices are declining. Such is the life we have chosen!
The level of real yields (yield less inflation) is a measure of value for fixed income products. Real yield levels are at record lows across all fixed income products. Relative to other fixed income products, municipal bonds appear attractive. Graph III on the following page illustrates this measure.
Real yield levels for a 10-year AAA general obligation municipal bond using the Fed’s favored inflation measure – the Core PCE – are near 20-year lows, and we worry. At the same time, we are reminded of a famous quote by John Maynard Keynes, “The market can stay irrational longer than you can stay solvent.” Solvency is not an issue, of course, but Graph III would suggest rationality is. This state of affairs can continue for some time, but it is still a risk. The long-term average real yield for a ten-year AAA municipal general obligation bond is 2.18%. Meaning that since May 1991, investors have demanded 2.18% above the Core PCE inflation rate to invest in ten-year AAA general obligation bonds. The current yield on a ten-year AAA municipal general obligation bond is 1.69% and Core PCE inflation is 1.60% as of August 31, 2012 (last data point available). If this relationship
Certified Annual Report 11
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
Graph III: 10-Year AAA Muni Real Yield Using Core PCE
Past performance does not guarantee future results.
were to return to the average long-term real yield level, one of three things would have to happen. First, 10-year interest rates would need to increase about 2.00%. Second, inflation would have to decrease by about 2.00%. Neither of these two outcomes would be pleasant. Third, some combination of the two prior outcomes could occur, which also promises to be unpleasant. Investors should use this information to recognize the risk inherent in fixed-income products at these historically low yield levels. They should take this opportunity to review their portfolios and determine whether these portfolios are properly diversified. In addition, they should ask themselves whether they have an appropriate time horizon in mind for their investments. We suggest two to three years from the point the question is asked.
Conclusion
Your Thornburg Intermediate Municipal Fund currently consists of a laddered portfolio structure of 398 securities. We ladder our core portfolios because we believe this structure has the potential to maximize an investor’s income. In fact, in an internal study of portfolio structures (using indices as proxies for portfolios) extending back to 1997, a hypothetical laddered portfolio structure outperformed
12 Certified Annual Report
bullet and barbell structures approximately 2/3 of the time (for a copy of the study, go to www.thornburg.com/whyladder). Past performance does not guarantee future results, of course. Laddering manages a portfolio’s yield-curve exposure via a roughly equal weighting of each maturity, thereby mitigating a major risk factor. Graph I illustrates that yield changes are not uniform across the Intermediate Municipal Fund’s investment universe. Laddering also reduces reinvestment risk by ensuring that a portion of the portfolio matures each year so it can be reinvested. Graph IV describes the percentages of your Fund’s bond portfolio maturing in each of the coming years. We thank you for the trust you have placed with us and will continue to keep that foremost in our minds.
Graph IV: % of Portfolio Maturing
As of 9/30/12. Percentages vary over time.
Data may not add up to 100% due to rounding.
Sincerely, | ||||
![]() | ![]() | ![]() | ||
Christopher Ihlefeld | Christopher Ryon,CFA | Josh Gonze | ||
Portfolio Manager | Portfolio Manager | 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 13
SCHEDULE OF INVESTMENTS | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
SUMMARY OF SECURITY CREDIT RATINGS†
May not add up to 100% due to rounding.
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 — 1.34% | ||||||||||
Alabama Drinking Water Finance Authority, 5.25% due 8/15/2015 (Insured: AMBAC) | NR/NR | $ | 1,200,000 | $ | 1,326,000 | |||||
Alabama Public School & College Authority, 5.00% due 5/1/2016 | NR/Aa1 | 2,000,000 | 2,313,240 | |||||||
City of Mobile Industrial Development Board PCR, 1.65% due 6/1/2034 put 3/20/2017 (Alabama Power Company Barry Plant Project) | A/A2 | 2,000,000 | 2,043,300 | |||||||
East Alabama Health Care Authority GO, 5.00% due 9/1/2027 (Health Care Facilities Capital Improvements) | A/NR | 1,250,000 | 1,377,575 | |||||||
Montgomery Water Works & Sanitary Sewer Board, 4.00% due 9/1/2014 | AAA/Aa1 | 1,310,000 | 1,397,377 | |||||||
Montgomery Water Works & Sanitary Sewer Board, 5.00% due 9/1/2017 | AAA/Aa1 | 2,185,000 | 2,617,936 | |||||||
University of Alabama at Birmingham Hospital, 5.25% due 9/1/2025 | A+/A1 | 2,000,000 | 2,207,900 | |||||||
ALASKA — 0.53% | ||||||||||
Alaska Municipal Bond Bank, 5.00% due 10/1/2017 (Insured: Natl-Re/FGIC) | AA/Aa2 | 2,470,000 | 2,726,460 | |||||||
Anchorage GO, 6.00% due 10/1/2012 (Insured: Natl-Re/FGIC) | AA+/NR | 125,000 | 125,060 | |||||||
Valdez Alaska Marine Terminal, 5.00% due 1/1/2021 (BP Pipelines, Inc.) | A/A2 | 2,000,000 | 2,390,700 | |||||||
ARIZONA — 2.57% | ||||||||||
Arizona HFA, 5.00% due 7/1/2017 (Catholic Health Care West) | A/A2 | 1,450,000 | 1,654,972 | |||||||
City of Tucson GO, 9.75% due 7/1/2013 (ETM) | AA-/NR | 500,000 | 535,710 | |||||||
Mohave County IDA, 7.25% due 5/1/2015 (Mohave Prison LLC) | BBB+/NR | 4,630,000 | 5,140,828 | |||||||
Phoenix Civic Improvement Corp., 5.00% due 7/1/2017 (Insured: Natl-Re) | AA/Aa3 | 1,000,000 | 1,181,850 | |||||||
Pima County IDA, 5.00% due 12/1/2030 (Providence Day School Project) | BBB+/NR | 2,000,000 | 2,047,020 | |||||||
Salt Verde Financial Corporation, 5.25% due 12/1/2022 (Salt River Project Agricultural Improvement and Power District) | A-/Baa2 | 2,000,000 | 2,223,260 | |||||||
Salt Verde Financial Corporation, 5.25% due 12/1/2028 (Salt River Project Agricultural Improvement and Power District) | A-/Baa2 | 735,000 | 821,216 | |||||||
State of Arizona, 5.00% due 7/1/2019 (Insured: AGM) | AA-/Aa3 | 7,280,000 | 8,875,266 | |||||||
University Medical Center Corporation GO, 5.00% due 7/1/2015 (Health Care Facilities) | BBB+/Baa1 | 1,000,000 | 1,088,810 | |||||||
University of Arizona, 5.00% due 8/1/2024 | AA-/Aa3 | 1,635,000 | 1,913,081 | |||||||
CALIFORNIA — 11.97% | ||||||||||
Anaheim Public Financing Authority, 0% due 9/1/2023 (Anaheim Convention Center & Walt Disney Co. Development Agreement; Insured: AGM) | AA-/Aa3 | 10,000,000 | 6,503,800 | |||||||
Brea Redevelopment Agency, 0% due 8/1/2023 (Parking Facility and Public Improvements) | AA-/NR | 3,320,000 | 1,946,317 | |||||||
Brentwood Infrastructure Financing Authority, 5.00% due 11/1/2026 (Insured: AGM) | AA-/NR | 2,000,000 | 2,219,760 | |||||||
California Educational Facilities Authority, 5.50% due 4/1/2029 (Pitzer College) | NR/A3 | 3,000,000 | 3,410,130 | |||||||
California HFFA, 5.00% due 11/15/2022 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,000,000 | 1,141,880 | |||||||
California HFFA, 5.00% due 11/15/2023 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,000,000 | 1,126,640 | |||||||
California HFFA, 5.25% due 3/1/2027 (Catholic Health Care) | A/A2 | 5,250,000 | 6,005,160 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
California Infrastructure & Economic Development Bank, 5.75% due 8/15/2029 (King City Joint Union High School District) | A-/NR | $ | 1,500,000 | $ | 1,688,700 | |||||
California Infrastructure & Economic Development Bank, 0.16% due 9/1/2037 put 10/1/2012 (Los Angeles County Museum of Natural History Foundation; LOC: Wells Fargo Bank) (daily demand notes) | AA-/Aa1 | 900,000 | 900,000 | |||||||
California PCR Financing Authority, 5.25% due 6/1/2023 put 12/1/2017 (Solid Waste Disposal-Republic Services, Inc.) (AMT) | BBB/Baa3 | 2,000,000 | 2,273,580 | |||||||
California State Housing Finance Agency, 4.55% due 2/1/2015 (Home Mtg; Insured: FGIC) | BBB/Baa2 | 2,640,000 | 2,732,479 | |||||||
California State Public Works Board, 5.00% due 6/1/2017 (Regents of University of California; Insured: Natl-Re/FGIC) | AA-/Aa2 | 2,000,000 | 2,366,500 | |||||||
California State Public Works Board, 5.00% due 4/1/2028 (Corrections & Rehabilitation and Judicial Council) | BBB+/A2 | 2,500,000 | 2,844,425 | |||||||
California State School Cash Reserve Program Authority, 2.00% due 10/31/2012 | SP-1+/NR | 7,000,000 | 7,010,640 | |||||||
California State School Cash Reserve Program Authority, 2.00% due 12/31/2012 | SP-1+/NR | 1,000,000 | 1,004,170 | |||||||
California Statewide Community Development Authority, 6.25% due 8/15/2028 (Enloe Medical Center; Insured: California Mtg Insurance) | A-/NR | 1,050,000 | 1,214,598 | |||||||
California Statewide Community Development Authority, 6.00% due 7/1/2030 (Aspire Public Schools) | NR/NR | 7,045,000 | 7,273,821 | |||||||
Carson Redevelopment Agency, 6.25% due 10/1/2022 (Redevelopment Project Area No. 1) | A-/NR | 1,620,000 | 1,872,898 | |||||||
Carson Redevelopment Agency, 6.375% due 10/1/2024 (Redevelopment Project Area No. 1) | A-/NR | 1,300,000 | 1,496,066 | |||||||
Chico Redevelopment Agency, 5.00% due 4/1/2030 (Chico Amended & Merged Redevelopment; Insured: AMBAC) | A+/NR | 4,000,000 | 4,129,720 | |||||||
Corona-Norco USD COP, 5.00% due 4/15/2018 (Insured: AGM) | AA-/Aa3 | 1,245,000 | 1,451,247 | |||||||
Corona-Norco USD COP, 5.00% due 4/15/2021 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,162,960 | |||||||
El Camino Hospital District, 6.25% due 8/15/2017 (Insured: AMBAC) (ETM) | NR/NR | 680,000 | 778,362 | |||||||
Franklin-McKinley School District GO, 5.25% due 8/1/2027 (Insured: Natl-Re/FGIC) | NR/A1 | 1,000,000 | 1,223,360 | |||||||
Fresno USD GO, 6.00% due 8/1/2026 (Educational Facilities and Improvements; Insured: Natl-Re) | A+/Baa2 | 1,065,000 | 1,357,886 | |||||||
Golden West Schools Financing Authority, 0% due 8/1/2018 pre-refunded 8/1/2013 (Insured: Natl-Re) | BBB/Baa2 | 2,140,000 | 1,502,152 | |||||||
Grossmont Union High School District GO, 0% due 8/1/2025 (School Improvements; Insured: AGM) | AA-/Aa2 | 1,000,000 | 594,750 | |||||||
Kern Community College District COP, 4.00% due 4/1/2014 | SP-1+/NR | 5,000,000 | 5,224,000 | |||||||
Lodi Public Financing Authority, 5.00% due 10/1/2023 (City Police Building and Jail) | A/NR | 1,120,000 | 1,275,523 | |||||||
Los Angeles Regional Airport Improvement Corp., 5.00% due 1/1/2017 (LAX Fuel Corp.; Insured: AGM) (AMT) | AA-/Aa3 | 1,120,000 | 1,200,483 | |||||||
M-S-R Energy Authority, 6.125% due 11/1/2029 | A-/NR | 2,500,000 | 3,058,425 | |||||||
Merced Redevelopment Agency, 6.25% due 9/1/2029 (Gateways Redevelopment) | BB+/NR | 1,500,000 | 1,602,210 | |||||||
Mojave USD COP, 0% due 9/1/2021 (Insured: AGM) | AA-/NR | 1,095,000 | 761,069 | |||||||
Mojave USD COP, 0% due 9/1/2023 (Insured: AGM) | AA-/NR | 1,100,000 | 665,412 | |||||||
Pittsburg Redevelopment Agency, 0% due 8/1/2025 (Los Medanos Community Development Project; Insured: AMBAC) | BBB+/NR | 2,900,000 | 1,412,358 | |||||||
Redwood City Redevelopment Agency, 0% due 7/15/2023 (Redevelopment Area A-2; Insured: AMBAC) | A-/NR | 2,060,000 | 1,190,000 | |||||||
San Jose Redevelopment Agency, 5.25% due 8/1/2027 (Merged Area Redevelopment Project) | A/Ba1 | 2,400,000 | 2,450,856 | |||||||
San Jose Redevelopment Agency, 5.375% due 8/1/2028 (Merged Area Redevelopment Project) | A/Ba1 | 1,175,000 | 1,207,171 | |||||||
San Mateo Union High School District GO, 0% due 9/1/2019 (Educational Facilities Improvements; Insured: Natl-Re/FGIC) | AA/Aa1 | 3,000,000 | 2,554,740 | |||||||
Saratoga Union School District GO, 0% due 9/1/2023 (Insured: Natl-Re) | AA+/Aa2 | 900,000 | 606,420 | |||||||
Southeast Resource Recovery Facilities Authority, 5.375% due 12/1/2013 (Insured: AMBAC) (AMT) | A+/A1 | 1,000,000 | 1,041,400 | |||||||
State of California, 2.50% due 6/20/2013 (General Fund Cash Management) | SP-1+/Mig1 | 5,400,000 | 5,486,778 | |||||||
State of California GO, 5.25% due 9/1/2026 (Kindergarten University Facilities) | A-/A1 | 5,000,000 | 5,968,650 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
State of California GO, 0.20% due 5/1/2034 put 10/1/2012 (Kindergarten University Facilities; LOC: Citibank N.A./California State Teachers’ Retirement System) (daily demand notes) | A/Aa3 | $ | 900,000 | $ | 900,000 | |||||
State of California GO, 0.22% due 5/1/2034 put 10/1/2012 (Kindergarten University Facilities; LOC: Citibank N.A./California State Teachers’ Retirement System) (daily demand notes) | A/Aa3 | 8,310,000 | 8,310,000 | |||||||
Tuolumne Wind Project Authority, 5.875% due 1/1/2029 (Tuolumne Co.) | A+/A2 | 3,000,000 | 3,590,760 | |||||||
Turlock Irrigation District, 5.00% due 1/1/2021 | A+/A2 | 1,750,000 | 2,091,250 | |||||||
Victor Elementary School District GO, 0% due 8/1/2025 (Insured: Natl-Re/FGIC) | A+/Aa3 | 1,535,000 | 897,008 | |||||||
COLORADO — 3.44% | ||||||||||
Adams County, 5.00% due 8/1/2014 (Platte Valley Medical Center; Insured: Natl-Re/FHA 242) | BBB/NR | 1,000,000 | 1,066,900 | |||||||
ADCOM Public Facilities Leasing Trust COP, 5.75% due 12/1/2016 (Adams County Communications Center, Inc.-Emergency Telephone System Project) | NR/A1 | 1,080,000 | 1,085,130 | |||||||
Denver City & County COP, 0.20% due 12/1/2029 put 10/1/2012 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa2 | 3,500,000 | 3,500,000 | |||||||
Denver City & County COP, 0.20% due 12/1/2029 put 10/1/2012 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa1 | 300,000 | 300,000 | |||||||
Denver City & County COP, 0.20% due 12/1/2031 put 10/1/2012 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa1 | 350,000 | 350,000 | |||||||
Denver Convention Center Hotel Authority, 5.25% due 12/1/2023 (Insured: Syncora) | BBB-/Baa3 | 2,430,000 | 2,545,377 | |||||||
El Paso County School District GO, 7.10% due 12/1/2013 (State Aid Withholding) | AA-/Aa2 | 500,000 | 538,525 | |||||||
Housing Authority of the City and County of Denver, 5.20% due 11/1/2027 pre-refunded 11/1/2017 (Three Towers Rehabilitation; Insured: AGM) | NR/Aaa | 1,220,000 | 1,475,066 | |||||||
Housing Authority of the City and County of Denver, 5.20% due 11/1/2027 (Three Towers Rehabilitation; Insured: AGM) | NR/Aa3 | 1,335,000 | 1,442,120 | |||||||
Jefferson County School District No. R-1 GO, 5.00% due 12/15/2026 (Educational Facility Improvements) (State Aid Withholding) | AA-/Aa2 | 8,000,000 | 10,357,600 | |||||||
North Range Metropolitan District GO, 5.00% due 12/15/2021 (Insured: ACA) | NR/NR | 1,500,000 | 1,489,515 | |||||||
Northwest Parkway Public Highway Authority, 5.20% due 6/15/2014 (Insured: AGM) (ETM) | AA-/Aa3 | 1,005,000 | 1,086,827 | |||||||
Park Creek Metropolitan District, 5.25% due 12/1/2020 (Insured: AGM) | AA-/NR | 1,120,000 | 1,346,430 | |||||||
Public Authority for Colorado Energy Gas, 6.125% due 11/15/2023 | A-/Baa2 | 2,000,000 | 2,376,880 | |||||||
Regional Transportation District, 5.50% due 6/1/2022 | A-/Aa3 | 3,000,000 | 3,600,930 | |||||||
Southlands Metropolitan District GO, 7.00% due 12/1/2024 pre-refunded 12/1/2014 | AA+/NR | 1,370,000 | 1,565,814 | |||||||
CONNECTICUT — 0.63% | ||||||||||
Connecticut Health & Educational Facilities Authority, 5.75% due 7/1/2029 (Ethel Walker School) | BBB-/NR | 1,350,000 | 1,466,950 | |||||||
Connecticut Health & Educational Facilities Authority, 0.16% due 7/1/2036 put 10/1/2012 (Yale University) (daily demand notes) | AAA/Aaa | 500,000 | 500,000 | |||||||
Connecticut Health & Educational Facilities Authority, 0.17% due 7/1/2036 put 10/1/2012 (Yale University) (daily demand notes) | AAA/Aaa | 2,235,000 | 2,235,000 | |||||||
a State of Connecticut GO Floating Rate Note, 0.68% due 9/15/2017 (Public Improvements) | AA/Aa3 | 2,000,000 | 2,007,200 | |||||||
DISTRICT OF COLUMBIA — 1.72% | ||||||||||
District of Columbia Association of American Medical Colleges, 5.00% due 2/15/2017 (Insured: AMBAC) (ETM) | NR/NR | 1,000,000 | 1,169,850 | |||||||
District of Columbia COP, 5.25% due 1/1/2014 (Insured: Natl-Re/FGIC) | A/Aa3 | 2,000,000 | 2,108,580 | |||||||
District of Columbia COP, 5.00% due 1/1/2020 (Insured: Natl-Re/FGIC) | A/Aa3 | 3,900,000 | 4,297,020 | |||||||
District of Columbia GO, 6.00% due 6/1/2015 (Insured: Natl-Re) | A+/Aa2 | 3,000,000 | 3,418,320 | |||||||
Metropolitan Airports Authority, 0% due 10/1/2023 (Dulles Toll Road; Insured: AGM) | AA-/Aa3 | 4,890,000 | 3,110,382 | |||||||
Metropolitan Airports Authority, 0% due 10/1/2024 (Dulles Toll Road; Insured: AGM) | AA-/Aa3 | 5,000,000 | 2,996,300 | |||||||
FLORIDA — 8.44% | ||||||||||
Broward County School Board COP, 5.00% due 7/1/2020 (Master Lease Purchase Agreement; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,114,800 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Broward County School Board COP, 5.00% due 7/1/2026 (Master Lease Purchase Agreement) | A/Aa3 | $ | 3,000,000 | $ | 3,457,590 | |||||
Broward County School Board COP, 5.00% due 7/1/2027 (Master Lease Purchase Agreement) | A/Aa3 | 2,000,000 | 2,296,000 | |||||||
City of Gainesville, 0.21% due 10/1/2026 put 10/1/2012 (Utilities Systems; SPA: SunTrust Bank) (daily demand notes) | AA/Aa2 | 4,940,000 | 4,940,000 | |||||||
City of Lakeland, 5.00% due 10/1/2018 (Energy System; Insured: AGM) | AA/Aa3 | 2,000,000 | 2,416,080 | |||||||
City of Lakeland, 5.25% due 10/1/2036 (Energy System) | AA/A1 | 2,770,000 | 3,633,437 | |||||||
Correctional Privatization Commission COP, 5.00% due 8/1/2017 (Insured: AMBAC) | AA+/Aa2 | 1,000,000 | 1,076,030 | |||||||
Escambia County HFA, 5.95% due 7/1/2020 (Florida Health Care Facility Loan; Insured: AMBAC) | NR/NR | 2,225,000 | 2,330,643 | |||||||
b Flagler County School Board COP, 5.00% due 8/1/2020 (Insured: AGM) | AA-/Aa3 | 2,560,000 | 2,799,309 | |||||||
Florida Board of Education GO, 9.125% due 6/1/2014 (Capital Outlay) | AAA/Aa1 | 165,000 | 173,304 | |||||||
Florida Municipal Loan Council, 5.00% due 10/1/2020 (Insured: Natl-Re) | A-/Baa2 | 1,000,000 | 1,088,720 | |||||||
Florida Municipal Loan Council, 5.00% due 10/1/2024 (Insured: Natl-Re) | A-/Baa2 | 2,235,000 | 2,430,048 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2018 (South Florida Evaluation Treatment) | AA+/NR | 2,090,000 | 2,308,447 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2019 (South Florida Evaluation Treatment) | AA+/NR | 2,255,000 | 2,490,693 | |||||||
Florida State Department of Environmental Protection, 5.00% due 7/1/2017 (Florida Forever; Insured: Natl-Re/FGIC) | AA-/A1 | 1,000,000 | 1,045,470 | |||||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | AA-/Aa3 | 1,100,000 | 1,235,861 | |||||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | AA-/Aa3 | 875,000 | 983,071 | |||||||
Hillsborough County, 5.00% due 3/1/2017 (Water & Wastewater System Capital Improvements; Insured: Natl-Re/FGIC) | A+/A1 | 5,630,000 | 6,198,630 | |||||||
Hollywood Community Redevelopment Agency, 5.00% due 3/1/2021 (Insured: Syncora) | NR/A3 | 3,000,000 | 3,233,790 | |||||||
Lake County School Board Master Lease Program COP, 5.00% due 6/1/2026 (School District Facility Projects) | A/NR | 1,210,000 | 1,385,970 | |||||||
Manatee County, 5.00% due 10/1/2016 (Insured: AMBAC) | AA-/Aa2 | 1,000,000 | 1,079,850 | |||||||
Marion County Hospital District, 5.00% due 10/1/2022 (Munroe Regional Health) | NR/A3 | 1,000,000 | 1,115,610 | |||||||
Miami Dade County GO, 5.00% due 10/1/2023 (Seaport Properties) | AA-/Aa2 | 1,040,000 | 1,247,397 | |||||||
Miami Dade County GO, 6.25% due 7/1/2026 (Building Better Communities) | AA-/Aa2 | 2,130,000 | 2,576,150 | |||||||
Miami Dade County School Board COP, 5.00% due 10/1/2021 (Insured: AMBAC) | A/A1 | 3,035,000 | 3,532,527 | |||||||
Miami Dade County School Board COP, 5.25% due 5/1/2022 (Insured: AGM) | AA-/Aa3 | 2,600,000 | 3,022,500 | |||||||
Miami GO, 5.375% due 9/1/2015 (Insured: Natl-Re) | BBB/A2 | 1,000,000 | 1,002,820 | |||||||
Orange County HFA, 6.25% due 10/1/2013 (Orlando Regional Hospital; Insured: Natl-Re) | A/A2 | 440,000 | 462,427 | |||||||
Orange County HFA, 6.25% due 10/1/2016 (Orlando Regional Hospital; Insured: Natl-Re) | A/A2 | 2,545,000 | 2,830,931 | |||||||
b Orange County HFA, 5.125% due 10/1/2026 (Orlando Health) | A/A2 | 2,000,000 | 2,214,840 | |||||||
Palm Beach County School Board COP, 5.00% due 8/1/2032 put 8/1/2016 | NR/Aa3 | 1,500,000 | 1,724,835 | |||||||
Sarasota County Public Hospital Board, 4.202% due 10/1/2021 (Sarasota Memorial Hospital; Insured: Natl-Re) | BBB/A1 | 2,000,000 | 1,987,060 | |||||||
South Miami HFA, 5.00% due 8/15/2022 (Baptist Health Group) | AA/Aa2 | 1,500,000 | 1,719,945 | |||||||
St. Johns County IDA, 5.85% due 8/1/2024 (Presbyterian Retirement) | NR/NR | 4,885,000 | 5,134,477 | |||||||
State of Florida Board of Governors, 4.00% due 7/1/2023 (University System Capital Improvement) | AA/Aa2 | 4,565,000 | 5,123,117 | |||||||
Tampa Health Systems, 5.50% due 11/15/2013 (Catholic Health East Group; Insured: Natl-Re) | BBB/Aa2 | 1,050,000 | 1,104,075 | |||||||
University of Central Florida COP Convocation Corp., 5.00% due 10/1/2019 (Insured: Natl- Re/FGIC) | BBB/NR | 1,135,000 | 1,178,607 | |||||||
GEORGIA — 2.18% | ||||||||||
City of Atlanta Water & Wastewater, 5.50% due 11/1/2022 (Insured: Natl-Re/FGIC) | A/A1 | 530,000 | 643,113 | |||||||
City of Atlanta Water & Wastewater, 5.50% due 11/1/2024 (Insured: AGM) | AA-/Aa3 | 5,000,000 | 5,883,200 | |||||||
Clarke County Hospital Authority, 5.00% due 1/1/2023 (Athens Regional Medical Center) | AA/Aa1 | 2,060,000 | 2,475,667 | |||||||
Clarke County Hospital Authority, 5.00% due 1/1/2024 (Athens Regional Medical Center) | AA/Aa1 | 2,310,000 | 2,755,091 | |||||||
Clarke County Hospital Authority, 5.00% due 1/1/2025 (Athens Regional Medical Center) | AA/Aa1 | 525,000 | 620,949 | |||||||
Clarke County Hospital Authority, 5.00% due 1/1/2026 (Athens Regional Medical Center) | AA/Aa1 | 725,000 | 852,317 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Fulton County Development Authority, 5.00% due 10/1/2019 (Georgia Tech Athletic Association) | NR/A2 | $ | 3,000,000 | $ | 3,641,550 | |||||
Municipal Electric Authority of Georgia, 6.60% due 1/1/2018 (Insured: Natl-Re) | BBB/A1 | 3,015,000 | 3,349,695 | |||||||
Valdosta & Lowndes County Hospital Authority, 5.00% due 10/1/2024 (South Medical Center) | AA-/Aa2 | 1,200,000 | 1,413,096 | |||||||
HAWAII — 1.28% | ||||||||||
State of Hawaii Department of Budget & Finance, 6.40% due 7/1/2013 (Kapiolani Health Care; Insured: Natl-Re) | BBB/A3 | 455,000 | 471,771 | |||||||
State of Hawaii GO, 5.00% due 12/1/2027 | AA/Aa2 | 10,000,000 | 12,240,800 | |||||||
ILLINOIS — 7.89% | ||||||||||
Chicago Board of Education GO, 0.20% due 3/1/2035 put 10/1/2012 (Capital Improvement Program; LOC: JPMorgan Chase Bank) (State Aid Withholding) (daily demand notes) | AAA/Aa1 | 895,000 | 895,000 | |||||||
Chicago Board of Education GO, 0.20% due 3/1/2036 put 10/1/2012 (Capital Improvement Program; LOC: JPMorgan Chase Bank) (State Aid Withholding) (daily demand notes) | AAA/Aa1 | 9,095,000 | 9,095,000 | |||||||
Chicago Midway Airport, 5.00% due 1/1/2019 (Insured: AMBAC) (AMT) | A-/A3 | 1,210,000 | 1,281,729 | |||||||
Chicago Transit Authority, 5.00% due 12/1/2018 | AA/Aa3 | 1,500,000 | 1,811,430 | |||||||
Chicago Wastewater Transmission, 5.00% due 1/1/2014 | A+/Aa3 | 1,485,000 | 1,566,779 | |||||||
City of Chicago, 6.25% due 11/15/2013 (Near South Redevelopment; Insured: ACA) | NR/NR | 875,000 | 875,577 | |||||||
City of Chicago, 5.30% due 1/1/2014 (Lincoln Belmont; Insured: ACA) | NR/NR | 1,590,000 | 1,592,417 | |||||||
City of Chicago, 0% due 11/15/2014 (Near South Redevelopment; Insured: ACA) | NR/NR | 1,440,000 | 1,296,187 | |||||||
City of Chicago, 0.23% due 1/1/2034 put 10/1/2012 (SPA: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa3 | 1,435,000 | 1,435,000 | |||||||
City of Waukegan GO, 4.00% due 12/30/2015 (Insured: AGM) | NR/Aa3 | 500,000 | 540,065 | |||||||
City of Waukegan GO, 5.00% due 12/30/2016 (Insured: AGM) | NR/Aa3 | 1,500,000 | 1,707,645 | |||||||
City of Waukegan GO, 5.00% due 12/30/2017 (Insured: AGM) | NR/Aa3 | 1,680,000 | 1,942,937 | |||||||
City of Waukegan GO, 5.00% due 12/30/2018 (Insured: AGM) | NR/Aa3 | 2,000,000 | 2,347,280 | |||||||
Cook County GO, 5.25% due 11/15/2024 | AA/Aa3 | 3,000,000 | 3,573,420 | |||||||
Cook County School District GO, 0% due 12/1/2022 (ETM) | NR/NR | 2,000,000 | 1,579,620 | |||||||
Illinois Educational Facilities Authority, 5.00% due 11/1/2016 (Rush University Medical Center) | A-/A2 | 1,000,000 | 1,113,510 | |||||||
Illinois Educational Facilities Authority, 5.75% due 11/1/2028 (Rush University Medical Center) | A-/A2 | 1,000,000 | 1,127,110 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2016 (Central DuPage Health) | AA/NR | 2,000,000 | 2,295,340 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2017 (Central DuPage Health) | AA/NR | 2,000,000 | 2,350,280 | |||||||
Illinois Finance Authority, 5.00% due 8/1/2022 (Bradley University; Insured: Syncora) | A/NR | 1,000,000 | 1,076,340 | |||||||
Illinois Finance Authority, 6.125% due 11/1/2023 (Advocate Health) | AA/Aa2 | 5,175,000 | 6,277,585 | |||||||
Illinois HFA, 5.70% due 2/20/2021 (Midwest Care Centers, Inc.; Collateralized GNMA) | NR/Aaa | 695,000 | 703,806 | |||||||
McHenry & Lake Counties Community Consolidated School District No. 15 GO, 0% due 1/1/2017 pre-refunded 1/1/2017 (Insured: AGM) (ETM) | NR/Aa2 | 45,000 | 43,165 | |||||||
McHenry & Lake Counties Community Consolidated School District No. 15 GO, 0% due 1/1/2017 (Insured: AGM) | NR/Aa2 | 955,000 | 866,386 | |||||||
Metropolitan Pier & Exposition Authority, 5.00% due 12/15/2022 (McCormick Place Expansion Project) | AAA/NR | 1,000,000 | 1,233,580 | |||||||
Railsplitter Tobacco Settlement Authority, 5.50% due 6/1/2023 | A-/NR | 13,000,000 | 15,238,990 | |||||||
Sangamon County School District COP, 5.875% due 8/15/2018 (Hay Edwards; Insured: ACA) | NR/NR | 2,600,000 | 2,601,638 | |||||||
Southern Illinois University, 0% due 4/1/2014 (Insured: Natl-Re) | BBB/A2 | 1,425,000 | 1,371,049 | |||||||
Southern Illinois University, 5.00% due 4/1/2014 (Housing & Auxiliary Facilities System; Insured: Natl-Re) | A+/A2 | 1,350,000 | 1,428,867 | |||||||
Southern Illinois University, 5.25% due 4/1/2019 (Housing & Auxiliary Facilities System; Insured: Natl-Re) | A+/A2 | 1,000,000 | 1,201,830 | |||||||
Southwestern Illinois Development Authority, 0% due 12/1/2024 (Insured: AGM) | AA-/NR | 2,975,000 | 1,846,374 | |||||||
State of Illinois, 5.00% due 6/15/2018 (Build Illinois) | AAA/NR | 2,000,000 | 2,408,100 | |||||||
Tazewell County School District GO, 9.00% due 12/1/2024 (Insured: Natl-Re/FGIC) | NR/A1 | 1,205,000 | 1,945,075 | |||||||
University of Illinois, 0% due 4/1/2014 (Insured: Natl-Re) | BBB/Aa2 | 1,590,000 | 1,566,611 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
INDIANA — 7.71% | ||||||||||
Allen County Economic Development, 5.75% due 12/30/2015 (Indiana Institute of Technology) | NR/NR | $ | 1,355,000 | $ | 1,375,948 | |||||
Allen County Jail Building Corp., 5.00% due 4/1/2018 (Insured: Syncora) | NR/Aa2 | 2,495,000 | 2,836,466 | |||||||
Allen County Redevelopment District, 5.00% due 11/15/2018 | NR/A2 | 1,560,000 | 1,704,721 | |||||||
Carmel Redevelopment Authority, 0% due 2/1/2016 (Performing Arts Center) | AA+/Aa1 | 1,730,000 | 1,643,950 | |||||||
Carmel Redevelopment Authority, 0% due 2/1/2021 (Performing Arts Center) | AA+/Aa1 | 2,000,000 | 1,565,440 | |||||||
Carmel Redevelopment District COP, 6.50% due 7/15/2035 (Performing Arts Center) | NR/NR | 2,730,000 | 2,909,634 | |||||||
Clay Multi-School Building Corp., 4.00% due 7/15/2013 (State Aid Withholding) | AA+/NR | 1,290,000 | 1,320,251 | |||||||
Clay Multi-School Building Corp., 5.00% due 1/15/2018 (State Aid Withholding) | AA+/NR | 1,735,000 | 2,064,997 | |||||||
Fort Wayne Redevelopment Authority, 5.00% due 8/1/2023 (Harrison Square; Insured: AGM) | NR/Aa2 | 2,290,000 | 2,550,968 | |||||||
Hobart Building Corp., 6.50% due 7/15/2019 (Insured: Natl-Re) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,317,770 | |||||||
Indiana Bond Bank, 5.25% due 10/15/2020 (Natural Gas Utility Improvements) | NR/A2 | 5,340,000 | 6,273,379 | |||||||
Indiana Bond Bank, 5.25% due 4/1/2023 (Hendricks Regional; Insured: AMBAC) | AA/NR | 2,000,000 | 2,483,600 | |||||||
Indiana Finance Authority, 0.20% due 2/1/2037 put 10/1/2012 (Stadium Project; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa2 | 4,200,000 | 4,200,000 | |||||||
Indiana Finance Authority, 0.20% due 2/1/2037 put 10/1/2012 (Stadium Project; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa3 | 6,900,000 | 6,900,000 | |||||||
Indiana HFA, 5.75% due 9/1/2015 (Methodist Hospital) (ETM) | AA+/A3 | 445,000 | 453,637 | |||||||
Indiana State Finance Authority, 5.00% due 3/1/2019 (University Health) | A+/A1 | 5,000,000 | 5,792,350 | |||||||
Indiana State Finance Authority, 5.25% due 9/15/2022 (Marian University) | BBB-/NR | 2,480,000 | 2,694,024 | |||||||
Indiana State Finance Authority, 5.25% due 9/15/2023 (Marian University) | BBB-/NR | 2,605,000 | 2,815,614 | |||||||
Indiana State Finance Authority, 0.23% due 2/1/2035 put 10/1/2012 (Lease Appropriation; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/NR | 18,000,000 | 18,000,000 | |||||||
Indiana State Finance Authority, 4.10% due 11/15/2046 put 11/3/2016 (Ascension Health) | AA+/Aa1 | 1,000,000 | 1,111,920 | |||||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 1/1/2019 (Airport Authority Project; Insured: AGM) (AMT) | AA-/Aa3 | 3,065,000 | 3,099,635 | |||||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2017 (146th Street Extension) | AA-/NR | 1,000,000 | 1,145,710 | |||||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2020 (146th Street Extension) | AA-/NR | 1,000,000 | 1,127,190 | |||||||
Vincennes University, 5.375% due 6/1/2022 | NR/Aa3 | 895,000 | 1,096,366 | |||||||
IOWA — 0.31% | ||||||||||
Coralville COP, 5.25% due 6/1/2022 | NR/Baa2 | 2,980,000 | 3,042,580 | |||||||
KANSAS — 1.22% | ||||||||||
City of Wichita, 4.00% due 11/15/2012 (Via Christi Health System) | AA-/NR | 1,000,000 | 1,004,760 | |||||||
City of Wichita GO, 0.30% due 8/15/2013 (Norris Training Systems) | SP-1+/Mig1 | 10,000,000 | 10,001,000 | |||||||
Wyandotte County School District GO, 5.00% due 9/1/2014 (Insured: Natl-Re/FGIC) | NR/A1 | 1,030,000 | 1,112,884 | |||||||
KENTUCKY — 0.81% | ||||||||||
Kentucky EDA, 5.85% due 10/1/2015 (Norton Healthcare; Insured: Natl-Re) | BBB/Baa2 | 2,665,000 | 2,804,326 | |||||||
Kentucky EDA, 0% due 10/1/2024 (Norton Healthcare; Insured: Natl-Re) | BBB/Baa2 | 6,130,000 | 3,605,053 | |||||||
Kentucky EDA, 5.75% due 12/1/2028 (Louisville Arena; Insured: AGM) | AA-/Aa3 | 1,500,000 | 1,682,100 | |||||||
LOUISIANA — 2.60% | ||||||||||
Louisiana Local Government Environment Facilities Authority, 5.00% due 3/1/2014 (Independence Stadium) | A/NR | 1,000,000 | 1,050,460 | |||||||
Louisiana Office Facilities Corp., 5.00% due 5/1/2014 (State Capitol) | NR/Aa3 | 1,000,000 | 1,068,110 | |||||||
Louisiana Offshore Terminal Authority, 2.125% due 10/1/2037 put 10/1/2015 (Loop LLC Project) | A-/NR | 2,500,000 | 2,538,025 | |||||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2022 (Black & Gold Facilities; Insured: CIFG) | AA-/Aa3 | 1,590,000 | 1,735,882 | |||||||
Morehouse Parish PCR, 5.25% due 11/15/2013 (International Paper Co.) | BBB/Baa3 | 3,000,000 | 3,141,720 | |||||||
New Orleans Aviation Board, 5.25% due 1/1/2018 (Insured: AGM) (AMT) | AA-/Aa3 | 1,000,000 | 1,167,950 | |||||||
New Orleans Aviation Board, 5.25% due 1/1/2020 (Insured: AGM) | AA-/Aa3 | 2,000,000 | 2,263,040 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
New Orleans Regional Transit Authority, 5.00% due 12/1/2023 (Insured: AGM) | AA-/Aa3 | $ | 1,000,000 | $ | 1,189,940 | |||||
New Orleans Regional Transit Authority, 5.00% due 12/1/2024 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,180,060 | |||||||
Plaquemines Parish Law Enforcement District GO, 5.00% due 9/1/2023 | BBB+/NR | 1,230,000 | 1,351,807 | |||||||
Plaquemines Parish Law Enforcement District GO, 5.00% due 9/1/2025 | BBB+/NR | 1,350,000 | 1,470,083 | |||||||
Plaquemines Parish Law Enforcement District GO, 5.15% due 9/1/2027 | BBB+/NR | 1,490,000 | 1,630,403 | |||||||
Plaquemines Parish Law Enforcement District GO, 5.30% due 9/1/2029 | BBB+/NR | 1,650,000 | 1,810,990 | |||||||
St. Tammany Parish, 5.00% due 6/1/2019 (Insured: CIFG) | A+/NR | 1,300,000 | 1,456,884 | |||||||
St. Tammany Parish, 5.00% due 6/1/2020 (Insured: CIFG) | A+/NR | 1,000,000 | 1,111,880 | |||||||
Terrebonne Parish Hospital Service District 1, 5.00% due 4/1/2028 (General Medical Center) | A/A2 | 1,500,000 | 1,637,085 | |||||||
MASSACHUSETTS — 0.13% | ||||||||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2022 (Student Loan Review) | AA/NR | 1,130,000 | 1,324,236 | |||||||
MICHIGAN — 4.39% | ||||||||||
City of Detroit, 5.00% due 7/1/2015 (Water Supply System; Insured: AGM) | AA-/Aa3 | 1,260,000 | 1,352,144 | |||||||
City of Detroit, 4.25% due 7/1/2016 (Water Supply System; Insured: Natl-Re) | BBB/Baa2 | 1,100,000 | 1,200,001 | |||||||
City of Detroit, 5.25% due 7/1/2020 (Sewage Disposal System; Insured: Natl-Re) | A+/Baa2 | 3,000,000 | 3,296,430 | |||||||
City of Troy Michigan GO, 5.00% due 10/1/2016 | AAA/NR | 1,060,000 | 1,221,671 | |||||||
Detroit City School District GO, 5.25% due 5/1/2026 (School Building & Site Improvement; Insured: AGM/Q-SBLF) | AA-/Aa2 | 3,150,000 | 3,878,059 | |||||||
Detroit City School District GO, 5.25% due 5/1/2027 (School Building & Site Improvement; Insured: AGM/Q-SBLF) | AA-/Aa2 | 1,000,000 | 1,234,840 | |||||||
Kalamazoo Hospital Finance Authority, 6.25% due 6/1/2014 (Borgess Medical Center; Insured: FGIC) (ETM) | AA+/Aaa | 650,000 | 710,151 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2019 (Bronson Hospital; Insured: AGM) | AA-/Aa3 | 2,000,000 | 2,330,960 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2022 (Bronson Hospital; Insured: AGM) | NR/Aa3 | 2,470,000 | 2,890,295 | |||||||
Kalamazoo Hospital Finance Authority, 5.25% due 5/15/2026 (Bronson Hospital) | NR/A2 | 1,285,000 | 1,457,357 | |||||||
Kent Hospital Finance Authority, 7.25% due 1/15/2013 (Butterworth Hospital; Insured: Natl- Re) (ETM) | AA/Aa3 | 85,000 | 86,010 | |||||||
Michigan Finance Authority, 5.00% due 4/1/2026 (Government Loan Program) | A+/NR | 1,580,000 | 1,763,075 | |||||||
Michigan Public Educational Facilities Authority, 5.50% due 9/1/2022 (Black River School) | NR/NR | 1,110,000 | 1,108,268 | |||||||
Michigan Public School Academy, 8.00% due 8/1/2035 (Will Carleton Charter School) | NR/NR | 975,000 | 1,016,828 | |||||||
Michigan State Building Authority, 5.25% due 10/15/2017 (Insured: AGM) | AA-/Aa3 | 2,450,000 | 2,567,429 | |||||||
Michigan State Building Authority, 0% due 10/15/2025 (Insured: Natl-Re/FGIC) | A+/Aa3 | 6,000,000 | 3,294,600 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2024 (Sparrow Health System) | A+/A1 | 2,140,000 | 2,311,906 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Health System) | A/A2 | 3,000,000 | 3,231,240 | |||||||
Michigan Strategic Fund, 5.25% due 10/15/2023 (Michigan House of Representatives Facilities; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,130,100 | |||||||
Royal Oak Hospital Finance Authority, 5.25% due 8/1/2016 (William Beaumont Hospital) | A/A1 | 2,000,000 | 2,221,120 | |||||||
Royal Oak Hospital Finance Authority, 8.00% due 9/1/2029 (William Beaumont Hospital) | A/A1 | 2,540,000 | 3,258,007 | |||||||
State of Michigan Trunk Line Fund, 5.50% due 11/1/2020 (Insured: AGM) | AA+/Aa2 | 1,500,000 | 1,950,870 | |||||||
MINNESOTA — 1.87% | ||||||||||
City of St. Cloud, 5.00% due 5/1/2014 (Centracare Health System) | NR/A1 | 835,000 | 889,158 | |||||||
Housing & Redevelopment Authority of the City of St. Paul, 5.25% due 5/15/2020 (HealthPartners Health System) | A-/A3 | 1,965,000 | 2,148,511 | |||||||
Housing & Redevelopment Authority of the City of St. Paul and the City of Minneapolis, 6.00% due 12/1/2018 (HealthPartners Health System) | A-/A3 | 1,000,000 | 1,047,200 | |||||||
Minnesota Agriculture & Economic Development Board, 5.50% due 2/15/2025 (Essential Healthcare; Insured: AGM) | AA-/NR | 2,500,000 | 2,962,975 | |||||||
Tobacco Securitization Authority, 5.25% due 3/1/2025 (Tobacco Settlement) | A-/NR | 5,000,000 | 5,759,400 | |||||||
Tobacco Securitization Authority, 5.25% due 3/1/2026 (Tobacco Settlement) | A-/NR | 5,000,000 | 5,711,650 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
MISSISSIPPI — 0.96% | ||||||||||
Medical Center Educational Building Corp., 4.00% due 6/1/2014 (University of Mississippi Medical Center) | AA-/Aa2 | $ | 1,240,000 | $ | 1,305,770 | |||||
Mississippi Development Bank, 5.00% due 3/1/2018 (Municipal Energy Agency Power Supply; Insured: Syncora) | NR/Baa1 | 1,920,000 | 2,084,486 | |||||||
Mississippi Development Bank, 5.00% due 7/1/2022 (Canton Public Improvement) | NR/NR | 1,935,000 | 2,146,902 | |||||||
Mississippi Development Bank, 5.25% due 8/1/2027 (Department of Corrections) | AA-/NR | 3,415,000 | 3,974,138 | |||||||
MISSOURI — 1.77% | ||||||||||
Missouri Development Finance Board, 5.00% due 4/1/2019 (Eastland Center) | A-/NR | 1,000,000 | 1,106,640 | |||||||
Missouri Development Finance Board, 5.00% due 4/1/2021 (Eastland Center) | A-/NR | 2,000,000 | 2,178,280 | |||||||
Missouri Development Finance Board, 5.125% due 4/1/2022 (Eastland Center) | A-/NR | 2,000,000 | 2,211,380 | |||||||
Missouri Development Finance Board, 0.20% due 12/1/2033 put 10/1/2012 (Nelson Gallery Foundation; SPA: JPMorgan Chase Bank) (daily demand notes) | AAA/Aaa | 5,460,000 | 5,460,000 | |||||||
Missouri Health and Educational Facilities Authority, 5.00% due 4/1/2019 (Webster University) | NR/A2 | 2,235,000 | 2,594,187 | |||||||
Missouri Health and Educational Facilities Authority, 5.00% due 4/1/2021 (Webster University) | NR/A2 | 2,520,000 | 2,945,981 | |||||||
Tax Increment Financing Commission of Kansas City, 5.25% due 3/1/2018 (Maincor Project-Public Improvements) | NR/NR | 1,000,000 | 1,052,420 | |||||||
NEVADA — 1.42% | ||||||||||
Carson City, 5.00% due 9/1/2027 (Carson Tahoe Regional Medical Center) | BBB+/NR | 2,450,000 | 2,693,971 | |||||||
Clark County School District GO, 5.50% due 6/15/2016 pre-refunded 12/15/2012 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,041,320 | |||||||
Washoe County GO, 5.00% due 7/1/2026 (Reno Sparks Convention & Visitors Authority) | AA/Aa2 | 5,000,000 | 5,829,950 | |||||||
Washoe County GO, 5.00% due 7/1/2029 (Reno Sparks Convention & Visitors Authority) | AA/Aa2 | 2,000,000 | 2,296,040 | |||||||
Washoe County GO, 5.00% due 7/1/2032 (Reno Sparks Convention & Visitors Authority) | AA/Aa2 | 2,000,000 | 2,263,180 | |||||||
NEW HAMPSHIRE — 1.39% | ||||||||||
Manchester Housing & Redevelopment Authority, 0% due 1/1/2016 (Insured: Radian/ACA) | NR/Caa1 | 4,990,000 | 3,703,877 | |||||||
New Hampshire Business Finance Authority PCR, 5.375% due 5/1/2014 (Central Maine Power Co.) | BBB+/Baa1 | 3,920,000 | 4,156,063 | |||||||
New Hampshire Health & Education Facilities Authority, 5.25% due 10/1/2023 (Southern New Hampshire Medical Center) | A-/NR | 1,000,000 | 1,095,750 | |||||||
a State of New Hampshire, 5.00% due 2/1/2022 (Turnpike System) | A+/A1 | 2,250,000 | 2,737,463 | |||||||
a State of New Hampshire, 5.00% due 2/1/2024 (Turnpike System) | A+/A1 | 1,755,000 | 2,101,384 | |||||||
NEW JERSEY — 0.96% | ||||||||||
Essex County Improvement Authority, 5.50% due 10/1/2024 (County Correctional Facilities & State Court Facilities; Insured: Natl-Re) | NR/Aa2 | 2,500,000 | 3,259,475 | |||||||
New Jersey EDA, 5.50% due 9/1/2026 (School Facilities Construction; Insured: AMBAC) | A+/A1 | 2,000,000 | 2,591,320 | |||||||
Passaic Valley Sewage Commissioners GO, 5.75% due 12/1/2022 | NR/A2 | 3,000,000 | 3,729,570 | |||||||
NEW MEXICO — 0.77% | ||||||||||
City of Farmington PCR, 4.70% due 9/1/2024 (Arizona Public Service Co.) | BBB/Baa1 | 3,000,000 | 3,341,820 | |||||||
Las Cruces State Shared GRT, 5.00% due 6/1/2030 | NR/Aa3 | 2,040,000 | 2,366,277 | |||||||
Rio Rancho Public School District No. 94, 5.00% due 8/1/2015 (State Aid Withholding) | NR/Aa1 | 1,715,000 | 1,926,854 | |||||||
NEW YORK — 2.94% | ||||||||||
City of New York GO, 0.14% due 8/1/2021 put 10/1/2012 (LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | 2,000,000 | 2,000,000 | |||||||
Erie County IDA, 5.00% due 5/1/2019 (Buffalo City School District) | AA-/Aa3 | 3,000,000 | 3,657,450 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
New York City Municipal Water Finance Authority, 0.24% due 6/15/2039 put 10/1/2012 (Water and Sewer System; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA+/Aa2 | $ | 4,050,000 | $ | 4,050,000 | |||||
New York State Dormitory Authority, 5.625% due 7/1/2016 (City University System) | AA-/Aa3 | 995,000 | 1,124,847 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2017 (Bishop Henry B. Hucles Nursing Home; Insured: SONYMA) | NR/Aa1 | 850,000 | 976,455 | |||||||
New York State Dormitory Authority, 5.25% due 5/15/2021 (State University Educational Facilities) | AA-/Aa3 | 500,000 | 630,115 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2023 (Miriam Osborn Memorial Home Assoc.) | NR/NR | 2,180,000 | 2,435,649 | |||||||
New York State Dormitory Authority, 5.00% due 12/15/2027 (State Educational & Medical Facilities) | AAA/NR | 10,000,000 | 12,393,600 | |||||||
United Nations Development Corp., 5.00% due 7/1/2025 | NR/A1 | 1,700,000 | 1,951,328 | |||||||
NORTH DAKOTA — 0.25% | ||||||||||
County of Ward Health Care Facilities, 5.125% due 7/1/2021 (Trinity Health System) | BBB-/NR | 1,000,000 | 1,054,010 | |||||||
North Dakota Building Authority, 4.25% due 12/1/2015 (Insured: Natl-Re) | AA/Aa2 | 1,305,000 | 1,457,554 | |||||||
OHIO — 3.70% | ||||||||||
Akron, Bath Copley Joint Township Hospital District, 5.00% due 11/15/2024 (Children’s Hospital Medical Center of Akron) | NR/A1 | 1,000,000 | 1,140,570 | |||||||
City of Cleveland GO, 5.00% due 12/1/2016 (Various Municipal Capital Improvements) | AA/A1 | 1,000,000 | 1,156,920 | |||||||
City of Cleveland GO, 5.00% due 12/1/2024 (Various Municipal Capital Improvements) | AA/A1 | 1,000,000 | 1,199,870 | |||||||
City of Cleveland GO, 5.00% due 12/1/2026 (Various Municipal Capital Improvements) | AA/A1 | 1,230,000 | 1,459,813 | |||||||
City of Hamilton, 5.25% due 10/1/2017 (Wastewater System; Insured: AGM) | NR/Aa3 | 1,500,000 | 1,694,790 | |||||||
Cleveland Cuyahoga County Port Authority, 6.25% due 5/15/2016 (LOC: FifthThird Bank) | BBB/NR | 925,000 | 935,675 | |||||||
Cleveland Cuyahoga County Port Authority, 5.00% due 10/1/2021 (Cleveland Museum of Art) | AA+/NR | 1,330,000 | 1,626,377 | |||||||
County of Allen Hospital Facilities, 5.00% due 5/1/2025 (Catholic Health Partners-Mercy Health West Facility) | AA-/A1 | 4,470,000 | 5,186,005 | |||||||
County of Allen Hospital Facilities, 5.00% due 5/1/2026 (Catholic Health Partners-Mercy Health West Facility) | AA-/A1 | 3,855,000 | 4,440,189 | |||||||
Deerfield Township, 5.00% due 12/1/2016 | NR/A1 | 1,035,000 | 1,168,308 | |||||||
Deerfield Township, 5.00% due 12/1/2025 | NR/A1 | 1,000,000 | 1,071,860 | |||||||
Franklin County Convention Facilities Authority, 5.25% due 12/1/2015 pre-refunded 12/1/2012 (Insured: AMBAC) | AA/Aaa | 1,000,000 | 1,008,710 | |||||||
Lucas County Health Care Facility, 5.00% due 8/15/2021 (Sunset Retirement Community) | NR/NR | 1,000,000 | 1,100,690 | |||||||
Lucas County Health Care Facility, 5.125% due 8/15/2025 (Sunset Retirement Community) | NR/NR | 1,250,000 | 1,339,462 | |||||||
Ohio State Air Quality Development Authority, 5.70% due 8/1/2020 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa3 | 3,000,000 | 3,505,050 | |||||||
Ohio State Air Quality Development Authority, 5.10% due 11/1/2042 put 5/1/2013 (Columbus Southern Power; Insured: Natl-Re) (AMT) | BBB/Baa1 | 3,000,000 | 3,075,900 | |||||||
Ohio State Water Development Authority PCR, 5.875% due 6/1/2033 put 6/1/2016 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa2 | 1,000,000 | 1,131,920 | |||||||
Ohio State Water Development Authority PCR, 3.375% due 7/1/2033 put 7/1/2015 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa3 | 3,000,000 | 3,102,750 | |||||||
State of Ohio Higher Educational Facility Commission, 5.05% due 7/1/2037 put 7/1/2016 (Kenyon College) | A+/A1 | 1,200,000 | 1,345,728 | |||||||
OKLAHOMA — 0.83% | ||||||||||
Oklahoma City Municipal Water and Sewer, 0% due 7/1/2013 (Insured: AMBAC) | NR/NR | 1,485,000 | 1,474,694 | |||||||
Oklahoma State Industries Authority, 5.50% due 7/1/2023 (Oklahoma Medical Research Foundation) | NR/A1 | 3,730,000 | 4,251,379 | |||||||
Oklahoma State Power Authority, 5.00% due 1/1/2018 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,194,750 | |||||||
Tulsa County Industrial Authority, 5.00% due 12/15/2024 (St. Francis Health System, Inc.) | AA+/Aa2 | 1,130,000 | 1,313,004 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
PENNSYLVANIA — 3.79% | ||||||||||
Allegheny County Hospital Development Authority, 5.00% due 5/15/2019 (University of Pittsburgh Medical Center) | A+/Aa3 | $ | 2,500,000 | $ | 2,981,975 | |||||
Allegheny County IDA, 5.90% due 8/15/2026 (Propel Charter School-McKeesport) | BBB-/NR | 1,145,000 | 1,219,036 | |||||||
Allegheny County IDA, 6.375% due 8/15/2035 (Propel Charter School-McKeesport) | BBB-/NR | 1,130,000 | 1,227,417 | |||||||
Bradford County IDA, 5.20% due 12/1/2019 (International Paper Company) | BBB/Baa3 | 2,620,000 | 2,812,125 | |||||||
Chartiers Valley Industrial & Community Development Authority, 5.75% due 12/1/2022 (Asbury Health Center) | NR/NR | 900,000 | 945,288 | |||||||
Geisinger Authority Montour County, 0.15% due 6/1/2041 put 10/1/2012 (Geisinger Health System; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 8,130,000 | 8,130,000 | |||||||
Hospitals and Higher Educational Facilities Authority of Philadelphia, 0.20% due 7/1/2022 put 10/1/2012 (The Children’s Hospital of Philadelphia; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 1,300,000 | 1,300,000 | |||||||
Hospitals and Higher Educational Facilities Authority of Philadelphia, 0.20% due 2/15/2024 put 10/1/2012 (The Children’s Hospital of Philadelphia; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 200,000 | 200,000 | |||||||
Hospitals and Higher Educational Facilities Authority of Philadelphia, 0.20% due 7/1/2025 put 10/1/2012 (The Children’s Hospital of Philadelphia; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 1,000,000 | 1,000,000 | |||||||
Pennsylvania Economic Development Financing Authority, 4.625% due 12/1/2018 (Colver Project; Insured: AMBAC) (AMT) | BBB-/Ba1 | 6,570,000 | 6,667,433 | |||||||
Pennsylvania Higher Education Facilities Authority, 0% due 7/1/2020 (Insured: AMBAC) | NR/NR | 2,032,839 | 1,150,241 | |||||||
Pennsylvania Turnpike Commission, 0% due 12/1/2030 (PennDOT-Mass Transit Agencies) | A-/A3 | 4,000,000 | 3,919,600 | |||||||
School District of Philadelphia GO, 5.00% due 9/1/2018 (School Reform Commission) (State Aid Withholding) | A+/Aa3 | 5,250,000 | 6,065,430 | |||||||
RHODE ISLAND — 0.14% | ||||||||||
Rhode Island Health & Education Building Corp., 5.25% due 7/1/2015 (Memorial Hospital; LOC: Fleet Bank) | NR/NR | 1,325,000 | 1,362,299 | |||||||
SOUTH CAROLINA — 1.97% | ||||||||||
Berkeley County School District Installment Lease, 5.00% due 12/1/2019 | A/A1 | 2,000,000 | 2,229,900 | |||||||
Greenwood School Facilities, Inc., 5.00% due 12/1/2025 (Greenwood School District 50; Insured: AGM) | AA-/Aa3 | 2,400,000 | 2,661,576 | |||||||
Lexington One School Facilities Corp. School District 1, 5.00% due 12/1/2019 | NR/Aa3 | 1,000,000 | 1,121,760 | |||||||
Lexington One School Facilities Corp. School District 1, 5.25% due 12/1/2021 | NR/Aa3 | 1,700,000 | 1,894,327 | |||||||
Scago Educational Facilities Corp., 5.00% due 12/1/2017 (Colleton School District; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,142,090 | |||||||
Scago Educational Facilities Corp., 5.00% due 4/1/2019 (Spartanburg School District; Insured: AGM) | AA-/Aa3 | 2,740,000 | 3,053,840 | |||||||
Scago Educational Facilities Corp., 5.00% due 4/1/2021 (Spartanburg School District; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,112,030 | |||||||
b South Carolina Housing Finance & Development Authority, 5.875% due 7/1/2022 (AMT) | NR/Aa1 | 1,925,000 | 2,112,668 | |||||||
South Carolina Housing Finance & Development Authority, 5.30% due 7/1/2023 (AMT) | NR/Aa1 | 930,000 | 987,242 | |||||||
Sumter School Facilities Inc. School District 2, 5.00% due 12/1/2021 (Insured: AGM) | AA-/Aa3 | 2,855,000 | 3,233,544 | |||||||
SOUTH DAKOTA — 0.35% | ||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 7/1/2023 (Avera Health) | A+/A1 | 1,375,000 | 1,575,695 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 11/1/2024 (Sanford Health) | A+/A1 | 1,700,000 | 1,923,414 | |||||||
TENNESSEE — 1.16% | ||||||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2014 | NR/Baa2 | 1,000,000 | 1,058,920 |
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2023 | BBB/Baa3 | $ | 2,500,000 | $ | 2,699,125 | |||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2023 | A-/Baa2 | 7,000,000 | 7,781,830 | |||||||
TEXAS — 8.14% | ||||||||||
Austin Community College District, 5.50% due 8/1/2023 (Round Rock Campus) | AA/Aa2 | 2,180,000 | 2,582,690 | |||||||
Bexar County Health Facilities Development Corp., 5.00% due 7/1/2027 (Army Retirement Residence) | BBB/NR | 1,915,000 | 1,967,452 | |||||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2021 (Insured: Syncora) | A/A1 | 1,300,000 | 1,436,396 | |||||||
Bexar Metropolitan Water District Waterworks, 5.00% due 5/1/2022 (Insured: Syncora) | A/A1 | 2,300,000 | 2,525,952 | |||||||
City of Bryan, 3.00% due 7/1/2013 (Electric System) | A+/A1 | 1,000,000 | 1,018,400 | |||||||
City of Cedar Park GO, 5.00% due 2/15/2016 pre-refunded 2/15/2014 (Recreational Facility Improvements; Insured: Natl-Re) | BBB/Aa2 | 75,000 | 79,885 | |||||||
City of Cedar Park GO, 5.00% due 2/15/2016 (Recreational Facility Improvements; Insured: Natl-Re) | NR/Aa2 | 560,000 | 593,594 | |||||||
City of Cedar Park GO, 5.00% due 2/15/2016 pre-refunded 2/15/2014 (Recreational Facility Improvements; Insured: Natl-Re) | BBB/Aa2 | 365,000 | 388,878 | |||||||
City of Houston, 5.00% due 9/1/2013 | A-/A2 | 1,500,000 | 1,563,210 | |||||||
City of Houston, 5.00% due 9/1/2013 | A-/A2 | 1,400,000 | 1,458,996 | |||||||
City of Laredo, 5.00% due 3/15/2018 (Sports Venue Improvements; Insured: AMBAC) | A+/A1 | 2,040,000 | 2,200,630 | |||||||
City of Pharr Higher Education Finance Authority, 5.75% due 8/15/2024 (IDEA Public Schools) | BBB/NR | 5,050,000 | 5,618,478 | |||||||
City of San Antonio Passenger Facility, 5.00% due 7/1/2024 (Airport System Improvements) (AMT) | A-/A2 | 2,065,000 | 2,364,115 | |||||||
City of San Antonio Passenger Facility, 5.00% due 7/1/2025 (Airport System Improvements) (AMT) | A-/A2 | 1,160,000 | 1,321,263 | |||||||
Dallas County Utilities & Reclamation District, 5.15% due 2/15/2022 (Insured: AMBAC) | BBB+/A3 | 3,000,000 | 3,273,150 | |||||||
Dallas-Fort Worth International Airport, 5.00% due 11/1/2015 | A+/A1 | 1,000,000 | 1,128,650 | |||||||
Eagle Mountain & Saginaw Texas ISD GO, 2.50% due 8/1/2050 put 8/1/2014 (School Improvements; Guaranty: PSF) | AAA/NR | 1,000,000 | 1,032,900 | |||||||
Gulf Coast Center, 6.75% due 9/1/2020 (Mental Health Center Acquisition Program) | BBB/NR | 1,115,000 | 1,135,549 | |||||||
Harris County Hospital District, 5.00% due 2/15/2015 (Insured: Natl-Re) | A/A2 | 2,075,000 | 2,249,217 | |||||||
Houston Airport System, 5.00% due 7/1/2014 | A/NR | 1,000,000 | 1,074,820 | |||||||
Houston Higher Education Finance Corp., 6.50% due 5/15/2031 (Cosmos Foundation, Inc.) | BBB/NR | 700,000 | 839,636 | |||||||
Kimble County Hospital District GO, 5.00% due 8/15/2017 | NR/NR | 510,000 | 557,552 | |||||||
Kimble County Hospital District GO, 5.00% due 8/15/2018 | NR/NR | 525,000 | 579,395 | |||||||
La Vernia Higher Education Finance Corp., 5.75% due 8/15/2024 (Kipp, Inc.) | BBB/NR | 3,000,000 | 3,399,660 | |||||||
Mission Economic Development Corporation, 6.00% due 8/1/2020 put 8/1/2013 (Waste Management, Inc. Project) (AMT) | BBB/NR | 3,250,000 | 3,395,340 | |||||||
Northside ISD GO, 1.75% due 6/1/2037 put 6/1/2013 (Educational Facilities Improvements; Guaranty: PSF) | AAA/NR | 4,125,000 | 4,135,931 | |||||||
San Juan Higher Education Finance Authority, 5.75% due 8/15/2024 (IDEA Public Schools) | BBB/NR | 1,590,000 | 1,791,294 | |||||||
Stafford Economic Development Corp., 6.00% due 9/1/2017 (Convention Center-Performing Arts Center Theater Complex; Insured: Natl-Re/FGIC) | A+/A1 | 1,775,000 | 2,040,008 | |||||||
State of Texas, 2.50% due 8/30/2013 (General Revenue Fund Cash Management) | SP-1+/Mig1 | 15,000,000 | 15,311,850 | |||||||
Tarrant County Cultural Educational Facilities Finance Corp., 0.20% due 10/1/2041 put 10/1/2012 (Methodist Hospitals of Dallas; LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | 1,665,000 | 1,665,000 | |||||||
Texas City Industrial Development Corp., 7.375% due 10/1/2020 (BP Pipelines N.A., Inc.) | A/A2 | 2,450,000 | 3,357,358 | |||||||
Texas Public Finance Authority, 5.00% due 8/15/2023 (IDEA Public Schools; Insured: ACA) | BBB/NR | 3,000,000 | 3,191,850 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 6.00% due 2/15/2030 (Cosmos Foundation, Inc.) | BBB/NR | 1,750,000 | 2,010,243 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2030 (IDEA Public Schools; Insured: ACA) | BBB/NR | 2,000,000 | 2,083,280 | |||||||
Uptown Development Authority, 5.50% due 9/1/2029 (Infrastructure Improvement) | BBB/NR | 1,250,000 | 1,374,288 |
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
U.S. VIRGIN ISLANDS — 0.59% | ||||||||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 | NR/Baa3 | $ | 5,000,000 | $ | 5,892,200 | |||||
UTAH — 0.41% | ||||||||||
City of Herriman, 5.75% due 11/1/2027 (Towne Center Assessment Area) | A/NR | 1,000,000 | 1,148,830 | |||||||
Local Building Authority of Salt Lake Valley Fire Service Area, 5.25% due 4/1/2020 | NR/Aa2 | 1,250,000 | 1,482,937 | |||||||
Murray City, 0.20% due 5/15/2037 put 10/1/2012 (IHC Health Services, Inc.; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa1 | 1,405,000 | 1,405,000 | |||||||
VIRGINIA — 0.88% | ||||||||||
County of Hanover IDA, 6.00% due 10/1/2021 (FirstHealth Richmond Memorial Hospital) (ETM) | BBB/NR | 795,000 | 861,915 | |||||||
Fauquier County IDRB, 5.50% due 10/1/2016 (Insured: Radian) | BBB+/NR | 1,000,000 | 1,022,850 | |||||||
Virginia Housing Development Authority Commonwealth Mtg GO, 4.85% due 4/1/2019 (Multi-Family Housing Development) (AMT) | AAA/Aaa | 3,100,000 | 3,420,137 | |||||||
Virginia Housing Development Authority Commonwealth Mtg GO, 4.85% due 10/1/2019 (Multi-Family Housing Development) (AMT) | AAA/Aaa | 3,100,000 | 3,419,393 | |||||||
WASHINGTON — 2.11% | ||||||||||
Seattle Municipal Power and Light, 5.00% due 2/1/2019 | AA-/Aa2 | 3,000,000 | 3,701,940 | |||||||
Skagit County Public Hospital District No. 1 GO, 5.125% due 12/1/2015 (Skagit Valley Hospital; Insured: Natl-Re) | NR/A1 | 1,900,000 | 2,137,614 | |||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2025 (Skagit Regional Health) | NR/A1 | 4,860,000 | 5,730,815 | |||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2028 (Skagit Regional Health) | NR/A1 | 3,000,000 | 3,474,150 | |||||||
Washington Health Care Facilities, 5.25% due 8/15/2024 (Multicare Systems; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,134,210 | |||||||
Washington Health Care Facilities, 6.25% due 8/1/2028 (Highline Medical Centers; Insured: FHA 242) | A+/NR | 3,985,000 | 4,758,887 | |||||||
WEST VIRGINIA — 0.17% | ||||||||||
West Virginia Hospital Finance Authority, 5.00% due 6/1/2020 (United Hospital Center; Insured: AMBAC) | A+/A2 | 1,530,000 | 1,652,186 | |||||||
WISCONSIN — 2.02% | ||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2021 (Agnesian Health Care, Inc.) | A-/A3 | 2,170,000 | 2,399,478 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2023 (ProHealth Care, Inc.) | A+/A1 | 1,980,000 | 2,263,239 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2024 (ProHealth Care, Inc.) | A+/A1 | 2,460,000 | 2,780,587 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.50% due 7/1/2025 (Agnesian Health Care, Inc.) | A-/A3 | 5,000,000 | 5,619,800 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2025 (ProHealth Care, Inc.) | A+/A1 | 3,180,000 | 3,561,282 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2026 (ProHealth Care, Inc.) | A+/A1 | 3,055,000 | 3,392,211 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 97.75% (Cost $904,604,454) | $ | 969,769,202 | ||||||||
OTHER ASSETS LESS LIABILITIES — 2.25% | 22,271,987 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 992,041,189 | ||||||||
|
|
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. Bonds issued with a maturity of one year or less are assigned Moody’s ratings from MIG-1 to MIG-4 and Standard and Poor’s ratings from SP-1+ to SP-3 with MIG-1 and SP-1+ being the strongest ratings. |
a | When-issued security. |
b | Segregated as collateral for a when-issued security. |
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
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 | |
ETM | Escrowed to Maturity | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FHA | Insured by Federal Housing Administration | |
GNMA | Insured by Government National Mortgage Association | |
GO | General Obligation | |
GRT | Gross Receipts Tax | |
HFA | Health Facilities Authority | |
HFFA | Health Facilities Financing Authority | |
IDA | Industrial Development Authority | |
IDRB | Industrial Development Revenue Bond | |
ISD | Independent School District | |
LOC | Letter of Credit | |
Mtg | Mortgage | |
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. | |
USD | Unified School District |
See notes to financial statements.
26 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
ASSETS | ||||
Investments at value (cost $904,604,454) (Note 2) | $ | 969,769,202 | ||
Cash | 2,330,481 | |||
Receivable for investments sold | 13,638,911 | |||
Receivable for fund shares sold | 4,289,093 | |||
Interest receivable | 10,768,465 | |||
Prepaid expenses and other assets | 36,999 | |||
|
| |||
Total Assets | 1,000,833,151 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 6,611,514 | |||
Payable for fund shares redeemed | 885,398 | |||
Payable to investment advisor and other affiliates (Note 3) | 618,589 | |||
Accounts payable and accrued expenses | 117,558 | |||
Dividends payable | 558,903 | |||
|
| |||
Total Liabilities | 8,791,962 | |||
|
| |||
NET ASSETS | $ | 992,041,189 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (3,781 | ) | |
Net unrealized appreciation on investments | 65,164,748 | |||
Accumulated net realized gain (loss) | (1,821,108 | ) | ||
Net capital paid in on shares of beneficial interest | 928,701,330 | |||
|
| |||
$ | 992,041,189 | |||
|
| |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($456,527,424 applicable to 32,105,854 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* ($170,070,509 applicable to 11,945,088 shares of beneficial interest outstanding - Note 4) | $ | 14.24 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($365,443,256 applicable to 25,733,540 shares of beneficial interest outstanding - Note 4) | $ | 14.20 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 27
STATEMENT OF OPERATIONS | ||
Thornburg Intermediate Municipal Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $4,562,176) | $ | 32,849,075 | ||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 4,136,402 | |||
Administration fees (Note 3) | ||||
Class A Shares | 526,560 | |||
Class C Shares | 184,264 | |||
Class I Shares | 147,493 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,053,119 | |||
Class C Shares | 888,336 | |||
Transfer agent fees | ||||
Class A Shares | 151,437 | |||
Class C Shares | 74,540 | |||
Class I Shares | 122,079 | |||
Registration and filing fees | ||||
Class A Shares | 42,188 | |||
Class C Shares | 31,983 | |||
Class I Shares | 30,456 | |||
Custodian fees (Note 3) | 133,363 | |||
Professional fees | 44,598 | |||
Accounting fees | 19,164 | |||
Trustee fees | 26,400 | |||
Other expenses | 70,531 | |||
|
| |||
Total Expenses | 7,682,913 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (106,653 | ) | ||
Fees paid indirectly (Note 3) | (4,480 | ) | ||
|
| |||
Net Expenses | 7,571,780 | |||
|
| |||
Net Investment Income | 25,277,295 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 2,323,034 | |||
Net change in unrealized appreciation (depreciation) on investments | 35,830,543 | |||
|
| |||
Net Realized and Unrealized Gain | 38,153,577 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 63,430,872 | ||
|
|
See notes to financial statements.
28 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Intermediate Municipal Fund |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 25,277,295 | $ | 25,759,429 | ||||
Net realized gain (loss) on investments | 2,323,034 | 347,891 | ||||||
Net unrealized appreciation (depreciation) on investments | 35,830,543 | (4,587,013 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 63,430,872 | 21,520,307 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (12,120,165 | ) | (13,661,413 | ) | ||||
Class C Shares | (3,778,248 | ) | (3,975,988 | ) | ||||
Class I Shares | (9,378,882 | ) | (8,122,028 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 56,002,136 | (25,338,872 | ) | |||||
Class C Shares | 38,025,992 | (2,034,648 | ) | |||||
Class I Shares | 120,086,204 | 30,234,435 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 252,267,909 | (1,378,207 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 739,773,280 | 741,151,487 | ||||||
|
|
|
| |||||
End of Year | $ | 992,041,189 | $ | 739,773,280 | ||||
|
|
|
|
See notes to financial statements.
Certified Annual Report 29
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
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 has three classes of shares of beneficial interest outstanding: 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 may be subject to a service fee, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and 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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: 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. 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 ordinarily valued at amortized cost, which approximates market value.
30 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
In any case where the market value of a debt obligation held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. In any case where a pricing service fails to provide a price for a debt obligation held by the Fund, the Committee determines a fair value for the debt obligation using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from a different independent pricing service. 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board, (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 969,769,202 | $ | — | $ | 969,769,202 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 969,769,202 | $ | — | $ | 969,769,202 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2012.
Certified Annual Report 31
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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: Investment transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on investments purchased are amortized to call dates or maturity dates of the respective investments. Realized gains and losses from the sale of investments 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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, 2012, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $106,653 for Class C shares.
32 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
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, 2012, the Distributor has advised the Fund that it earned net commissions aggregating $13,483 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $12,088 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, 2012, 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 a distribution plan pursuant to Rule 12b-1, applicable only to the Fund’s Class C shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C shares of the Fund at an annual rate of up to .35 of 1% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, fees paid indirectly were $4,480.
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 7,619,891 | $ | 106,230,975 | 5,028,226 | $ | 66,853,658 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 644,066 | 8,991,046 | 685,893 | 9,091,944 | ||||||||||||
Shares repurchased | (4,246,912 | ) | (59,219,885 | ) | (7,682,668 | ) | (101,284,474 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 4,017,045 | $ | 56,002,136 | (1,968,549 | ) | $ | (25,338,872 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 3,973,096 | $ | 55,487,969 | 2,153,415 | $ | 28,743,629 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 195,519 | 2,733,791 | 199,501 | 2,647,910 | ||||||||||||
Shares repurchased | (1,444,650 | ) | (20,195,768 | ) | (2,539,929 | ) | (33,426,187 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 2,723,965 | $ | 38,025,992 | (187,013 | ) | $ | (2,034,648 | ) | ||||||||
|
|
|
|
|
|
|
|
Certified Annual Report 33
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 11,479,675 | $ | 160,071,744 | 7,875,098 | $ | 104,437,154 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 424,006 | 5,917,617 | 389,907 | 5,164,406 | ||||||||||||
Shares repurchased | (3,290,060 | ) | (45,903,157 | ) | (6,042,219 | ) | (79,367,125 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 8,613,621 | $ | 120,086,204 | 2,222,786 | $ | 30,234,435 | ||||||||||
|
|
|
|
|
|
|
|
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2012, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $274,977,726 and $135,055,154, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 904,604,454 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 65,816,979 | ||
Gross unrealized depreciation on a tax basis | (652,231 | ) | ||
|
| |||
Net unrealized appreciation (depreciation)on investments (tax basis) | $ | 65,164,748 | ||
|
|
The Fund utilized $2,305,987 of capital loss carryforwards during the year ended September 30, 2012. For the year ended September 30, 2012, $1,991,995 of capital loss carryforwards from prior years expired.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) became effective for the Fund’s fiscal year ending September 30, 2012. The Act requires that future capital losses generated by the Fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a Fund’s pre-enactment capital losses will expire unused.
At September 30, 2012, the Fund had cumulative 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:
2013 | $ | 39,577 | ||
2017 | 391,762 | |||
2018 | 533,767 | |||
2019 | 856,003 | |||
|
| |||
$ | 1,821,109 | |||
|
|
In order to account for book/tax differences, the Fund decreased accumulated net realized loss by $1,991,995 and decreased net capital paid in on shares of beneficial interest by $1,991,995. This reclassification has no impact on the net asset value of the Fund. Reclassification resulted from the expiration of capital loss carryforwards.
34 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 |
At September 30, 2012, the Fund did not have any undistributed tax basis net tax-exempt income, net ordinary income or undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2012 and September 30, 2011 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 25,125,981 | $ | 25,608,742 | ||||
Ordinary income | 151,314 | 150,687 | ||||||
|
|
|
| |||||
Total | $ | 25,277,295 | $ | 25,759,429 | ||||
|
|
|
|
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, credit risk, interest rate risk, management risk, market and economic risk, and liquidity risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
Certified Annual Report 35
FINANCIAL HIGHLIGHTS | ||
Thornburg Intermediate Municipal Fund |
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 13.59 | 0.40 | 0.63 | 1.03 | (0.40 | ) | — | (0.40 | ) | $ | 14.22 | 2.88 | 0.93 | 0.93 | 0.93 | 7.69 | 16.94 | $ | 456,527 | ||||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 13.64 | 0.48 | (0.05 | ) | 0.43 | (0.48 | ) | — | (0.48 | ) | $ | 13.59 | 3.59 | 0.95 | 0.95 | 0.95 | 3.27 | 18.33 | $ | 381,839 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.61 | 0.36 | 0.63 | 0.99 | (0.36 | ) | — | (0.36 | ) | $ | 14.24 | 2.56 | 1.24 | 1.24 | 1.31 | 7.36 | 16.94 | $ | 170,071 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.65 | 0.44 | (0.04 | ) | 0.40 | (0.44 | ) | — | (0.44 | ) | $ | 13.61 | 3.29 | 1.24 | 1.24 | 1.32 | 3.05 | 18.33 | $ | 125,512 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.58 | 0.44 | 0.63 | 1.07 | (0.45 | ) | — | (0.45 | ) | $ | 14.20 | 3.18 | 0.61 | 0.61 | 0.61 | 7.96 | 16.94 | $ | 365,443 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.62 | 0.52 | (0.04 | ) | 0.48 | (0.52 | ) | — | (0.52 | ) | $ | 13.58 | 3.90 | 0.63 | 0.63 | 0.63 | 3.67 | 18.33 | $ | 232,422 | |||||||||||||||||||||||||||||||||||||||
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 |
(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, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
36 Certified Annual Report | Certified Annual Report 37 |
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
38 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,036.10 | $ | 4.76 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.32 | $ | 4.73 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,034.50 | $ | 6.31 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.26 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,037.80 | $ | 3.15 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.91 | $ | 3.12 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.94%; C: 1.24%; I: 0.62%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table above 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 above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In dition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 39
INDEX COMPARISON | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg Intermediate Municipal Fund versus BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index, BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index and Consumer Price Index (September 30, 2002 to
September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 7/22/91) | 5.52 | % | 4.95 | % | 4.00 | % | 5.26 | % | ||||||||
C Shares (Incep: 9/1/94) | 6.76 | % | 5.09 | % | 3.92 | % | 4.50 | % | ||||||||
I Shares (Incep: 7/5/96) | 7.96 | % | 5.71 | % | 4.55 | % | 5.07 | % |
Effective February 1, 2012, the Fund’s benchmark changed from the BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index to the BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index. The Advisor believes that the new index better reflects the Fund’s principal investment strategies, including the Fund’s practice of investing in obligations having a range of maturities.
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 or call 800.847.0200. 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.
40 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 41
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE(1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
42 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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 43
OTHER INFORMATION | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 (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. A description of the Policy 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, 2012, dividends paid by the Fund of $25,125,981 (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 reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 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 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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 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.
44 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s investment performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (iii) measures of the Fund’s investment performance over various periods of time relative to two categories of municipal debt mutual funds selected by independent mutual fund analyst firms, and relative to a broad-based securities index, and (iv) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of accounting and other services, the Advisor’s 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 considered (among other aspects of the data) performance data for the ten most recent calendar years, which showed that the Fund had produced positive investment returns in accordance with expectations in nine of ten years, that the Fund’s return for the most recent calendar year had exceeded the average return of the mutual fund category for which calendar year data was presented, and that the Fund’s returns had exceeded or had been comparable to the average returns of the category in all of the preceding nine calendar years. Other noted quantitative data showed that the Fund’s investment returns fell at or within the top quartile of performance for the first fund 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 returns also fell within or near the top quintile of performance for the second fund category for the same periods. These data indicated to the Trustees that the Fund’s investment performance met expectations in view of the Fund’s stated objectives and strategies in the market conditions for the relevant periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures also 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of municipal debt mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged to the Fund was slightly higher than the median and average fee levels for the fund category, and that the expense ratio for a reference share class of the Fund was somewhat higher than the median and average expense ratios for the fund category. The Trustees did not find the differences 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 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 fee levels are determined.
Certified Annual Report 45
OTHER INFORMATION, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its 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 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.
46 Certified Annual Report
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This page is not part of the Annual Report. 47
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
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.
48 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 website 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 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 Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 49
THORNBURG FUND FAMILY
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 thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
This page is not part of the Annual Report. 51
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TH079 |
IMPORTANT INFORMATION
The information presented on the following pages is current as of September 30, 2012. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 counterparty risk and 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 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 2012 Best Fixed Income Funds Manager
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income Large Company universe for the three-year period ended 11/30/11, based on risk-adjusted returns. Lipper’s Large Company universe is comprised of fund families with more than $40 billion in total net assets. Only fund families with at least five bond funds were eligible for the fixed income funds manager award. Asset Class Group Awards are given for the three-year period only.
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 an 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 reflects actual distributions made to shareholders. The annualized distribution yield is calculated by summing the last 30 days of income at a given month end and annualizing to a 360-day year. The result is divided by the ending maximum offering price.
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.
Consumer Price Index (CPI) – Index that measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. Also known as the cost-of-living index.
This page is not part of the Annual Report. 3
IMPORTANT INFORMATION, CONTINUED
Core CPI – Consumer Price Index minus the energy and food components.
Core PCE Price Index – Personal Consumption Expenditures (PCE) prices excluding food and energy.
Duration – A bond’s sensitivity to interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
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 Bond – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Gross Domestic Product (GDP) – A country’s income minus foreign investments: the total value of all goods and services produced within a country in a year, minus net income from investments in other countries.
Quantitative Easing – The Federal Reserve’s monetary policy used to stimulate the U.S. economy following the recession that began in 2007/08.
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.
4 This page is not part of the Annual Report.
THORNBURG STRATEGIC MUNICIPAL INCOME FUND
The Thornburg Strategic Municipal Income Fund differentiates itself in four ways from other high-yield municipal funds.
Ÿ | First, it has a more flexible mandate; we go where we perceive value. This allows us to search various sectors, issuers, credit qualities, geographic areas, and segments of the yield curve. |
Ÿ | Second, we don’t have a legacy of bonds purchased prior to the credit meltdown of 2007–2008. |
Ÿ | Third, the Fund does not use leverage, as do many other high-yield muni funds. |
Ÿ | Finally, we believe that we can apply some of the risk-management skills we have demonstrated in our investment grade funds. Our portfolio managers have over 55 years of combined experience in the municipal market. |
Portfolio Managers
Josh Gonze, Chris Ryon, CFA, and Chris Ihlefeld
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | Since Inception | ||||||||||
A Shares (Incep: 4/1/09) | ||||||||||||
Without sales charge | 11.71 | % | 7.74 | % | 11.94 | % | ||||||
With sales charge | 9.45 | % | 7.02 | % | 11.31 | % |
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 thorn-burg.com or call 800.847.0200.
The maximum sales charge for the Fund’s Class A shares is 2.00%. The total annual fund operating expense of Class A shares is 1.38%, 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, 2013, so that actual expenses for Class A shares do not exceed 1.25%.
30-Day Yields, A Shares
As of September 30, 2012
Annualized | SEC | |
Distribution Yield | Yield | |
2.80% | 2.09% |
Without fee waivers and expense reimbursements, the 30-day SEC Yield would have been 1.98% and the Annualized Distribution Yield would have been 2.69%.
Key Portfolio Attributes
As of September 30, 2012
Number of Bonds | 180 | |||
Effective Duration | 7.6 Yrs | |||
Average Maturity | 14.1 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 13.
This page is not part of the Annual Report 5
Thornburg Strategic Municipal Income Fund — September 30, 2012
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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, 2012
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 $1.11 to $15.17 per share during the fiscal year ended September 30, 2012. If you were with us for the entire period, you received dividends of 49.7 cents per share. If you reinvested your dividends, you received 50.5 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. The Class A shares of your Fund outperformed the index with a total return of 11.71% at NAV for the fiscal year ended September 30, 2012, compared to the 8.96% for the BofA Merrill Lynch Municipal Master Index. The Fund generated 3.73% more price appreciation, but 0.98% less income.
The markets’ positive returns were primarily due to declining interest rates and narrowing credit spreads. Interest rates declined more for longer maturities and consequently longer maturity bonds outperformed shorter maturity bonds. As credit spreads compressed, lower-quality bonds outperformed higher-quality bonds. The Fund’s additional price appreciation is due to several factors. Our interest rate sensitivity as measured by the Fund’s duration and differing allocations along the yield curve added 0.79% of relative price appreciation. Our overweight to the insured and revenue sectors added 2.08%. We underweighted the general obligation and pre-refunded sectors, which added 0.50% of relative price performance. Our overweight to lower credit quality securities added 1.35% of performance relative to its benchmark. Our allocations to bonds of varying dollars prices cost the Fund 1.33% of relative price performance. Other risk factors accounted for an additional 0.34%.
The Economy and the Federal Reserve
During the first quarter of the fiscal year, economic activity looked to be picking up. The December 2011 gross domestic product (GDP) reading was a strong 4.1%. The pickup in activity proved to be an illusion as the March and June 2012 GDP readings were 2.0% and 1.3% respectively. Non-farm payrolls continued to grow, but at rather anemic rates. The unemployment rate began the fiscal year at 9.0% and decreased to 7.8% by the end of the fiscal year.
Inflation as measured by the Consumer Price Index (CPI) is running in the 2.0% range. If one takes out the food and energy components (Core CPI), the trend is declining with the last reading of 2.0%. Inflation as measured by the Personal Consumption Expenditure Index (PCE), the Federal Reserve Board’s (the Fed) favorite inflation measure, is running at a core level of 1.6%. All of these economic indicators and others point to an economy that is on shaky footing.
In addition to these fundamental factors, many investors are concerned about the impact of the “fiscal cliff”, which The Washington Post described as follows:
The “ fiscal cliff” is a term coined by Federal Reserve Chairman Ben S. Bernanke. It refers to a collection of changes in current law that are all set to strike in January, triggering the sharpest reduction in the federal budget deficit in more than 40 years.
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED
The Washington Post goes on to say that taxes would also increase:
For most taxpayers, the bulk of the increase would be triggered by the expiration of tax cuts enacted in 2001 and 2003 during the George W. Bush administration. The expiration of President Obama’s payroll tax holiday, which shaved two percentage points off the 6.2 percent Social Security tax, comes in a close second. If these issues are not addressed many analysts think the United States will be pushed into another recession.
On top of all this, Europe is still a mess but the fixed income markets seem not to be as headline sensitive to news coming out of Europe as they were last year. The Fed, at its last meeting, decided to enter into its third round of quantitative easing, known as QE3. In this round, the Fed will concentrate its security purchases to the mortgage market in an effort to lower borrowing costs for homebuyers, which should spur the housing market. As anyone who has recently applied for a mortgage knows, it is not the interest cost of the product that stands as a borrower’s major roadblock. The fixed income market’s initial reaction to the latest Fed move was an increase in inflation expectations and a decrease in bond prices, though this fear has subsided in recent weeks.
The Presidential Election and Tax Policy
Tax policy and the federal deficit have proven to be key election season issues. Both candidates have put forward their respective plans for deficit reduction; both could influence the municipal bond market. Below, in Table I is a side-by-side analysis based on a recent article in the Bond Buyer, a leading publication about the municipal bond market.
Table I
Obama | Romney | |
Extends the 2001 and 2003 tax cuts for individuals earning under $200,000 and families earning under $250,000. | Permanently extend all the 2001 and 2003 tax cuts. Eliminate taxation of investment income for individuals earning less than $200,000. | |
Returns to the Clinton Era highest marginal tax rate of 39.6%. | Lowers marginal rates across the board by 20%, eliminates the alternative minimum tax. | |
In a jobs bill he floated last October and his 2013 budget, Obama proposed to place a 28% cap on the value of tax-exempt interest for the wealthy. | Announced he would cap individual tax deductions at $17,000. Not clear if he would cap exclusions, like tax exemption, as well as deductions. | |
Bruce Bartlett, former policy adviser to President Ronald Reagan and Treasury official under President George H. W. Bush, said without a doubt Obama’s tax proposals would be more beneficial to the municipal market primarily because he wants to impose higher tax rates on the wealthy, which would make tax-exempt bonds more attractive. | While Romney has not specifically mentioned capping tax exemption, in a Wall Street Journal editorial in August, Glenn Hubbard, his senior economic adviser, said the exclusion of interest on tax-exempt municipal bonds is “on the table” for the Republican candidate. |
8 Certified Annual Report
One can see that both candidates’ potential tax policies, as known today, could influence the municipal bond market. However, as with most election rhetoric the eventual legislation may look nothing like the original thoughts. There are two things that people should never watch being made, sausage and legislation!
The Municipal Market
The demand picture in the municipal market improved during the fiscal year. Investors poured $56 billion into municipal bond mutual funds over the last twelve months. The total assets in municipal bond mutual funds were $562 billion according to the Investment Company Institute, a mutual fund industry advocacy group. Assets in municipal bond mutual funds on November 30, 2010, just before the six-month period of investor exodus, were $497 billion. On the other side of the ledger, the supply picture improved. The supply of new issue municipal bonds was $379 billion for the 12 months ending September 30, 2012. This exceeded the $329 billion for the twelve months ending September 30, 2011, by $50 billion, or a 15% increase.
The trend towards lower interest rates continued throughout this fiscal year. With short-term yields anchored near zero, investors moved out along the yield curve in search of more income. This caused long-term maturities to decrease in yield much more than short-term maturities. The average change in yield for the Thornburg Strategic Municipal Income Fund’s investment universe (1-30 years) as measured by the average change in yield of a AAA general obligation bond, was negative 0.17% for the first half of the fiscal year. In the second half of the fiscal year the same measure of average yield change decreased 0.45%. This change in average yields was almost double that of the 1-10 year maturity range of the municipal market. See Graph I.
Graph I: AAA General Obligation Municipal Yield Changes for 9/30/2011 through 9/30/2012
Past performance does not guarantee future results.
Certified Annual Report 9
LETTER TO SHAREHOLDERS,
CONTINUED
Graph II: BofA Merrill Lynch Municipal Master Index
Quarterly and Cumulative Total Returns
Past performance does not guarantee future results.
Investors, again in a search for income, have been willing to pay much more for lower quality securities than any time since 2008. This caused quality spreads to narrow and lower quality securities to out-perform higher quality securities. On December 30, 2011, the incremental yield an investor picked up for buying a BBB security versus an AAA security with a 10-year maturity was 3.00%. On September 30, 2012, that incremental yield equaled 2.08%, a 0.92% decrease. Graph II shows the quarter by quarter and cumulative total return performance of the BofA Merrill Lynch Municipal Master Index for the fiscal year.
The credit picture in the municipal market is still mixed. At the state level, revenues continue to increase. At the local level, which has a heavy reliance on real estate taxes, the continued decline of assessed values has put pressure on local finances. Pension funding levels continue to decline due to poor investment returns and cutbacks in annual pension contributions. Several state and local pension plans, recognizing the folly of this condition, have begun to reform their pension system calling for higher participant contributions, higher retirement ages or both. These measures and others have caused us to forsake investments in the state of Illinois and Puerto Rico general obligation debt.
In the last semi-annual letter to shareholders, we noted the risks of rising interest rates. As bond portfolio managers, we are always worried. If bonds are doing well, the economy is probably doing poorly, and we worry. If the economy is doing well, we worry because yields are probably rising and bond prices are declining. This is the life we chose.
The level of real yields (yield less inflation) is a measure of value for fixed income products. Real yield levels are at record lows across all fixed income products. Relative to other fixed income products, municipal bonds appear to be attractive. Graph III illustrates this measure.
Real yield levels for a 30-year AAA general obligation municipal bond using Core PCE as an inflation measure are near 20-year lows, and we worry. At the same time, we are reminded of a famous quote by John Maynard Keynes, “The market can stay irrational longer than you can stay solvent.” Not that solvency is an issue but Graph III would suggest rationality is. This state of affairs can continue for some time, but it is still a risk.
10 Certified Annual Report
Graph III: 30 Year AAA Muni Real Yield Using Core PCE
Past performance does not guarantee future results.
The long-term average real yield for a 30-year AAA municipal general obligation bond is 3.03%. This means that since May 1991, investors have demanded 3.03% above the Core PCE inflation rate to invest in 30-year AAA general obligation bonds. The current yield on a 30-year AAA municipal general obligation bond is 3.35% and Core PCE inflation is 1.60% as of August 31, 2012 (last data point available). If this relationship were to return back to the average long-term real yield level one of three things must happen. First, 30-year interest rates need to increase approximately 1.25%. Second, inflation must decrease by 1.25%. Neither of these two outcomes will be pleasant. Third, some combination of the two prior outcomes could occur, which also promises to be unpleasant. Investors should use this information to recognize the risk inherent in fixed income products at these historically low yield levels. They should take this opportunity to review their portfolios and determine if these portfolios are properly diversified. In addition, they should ask themselves if they have an appropriate time horizon in mind for their investments; we suggest two to three years from the point you ask yourself that question.
Conclusion
Your Thornburg Strategic Municipal Income Fund continues to traverse the municipal market looking for undervalued securities. We do not maintain a laddered portfolio structure for this Fund as we do for the “core” funds (Limited and Intermediate). This Fund strives to offer its shareholders a durable income stream and as such purchases securities with longer durations (market risk) and lower credit quality when valuations are attractive. We would like to thank you for the trust you have placed with us and will continue to keep that foremost in our minds.
Certified Annual Report 11
LETTER TO SHAREHOLDERS,
CONTINUED
Sincerely, | ||||
Christopher Ihlefeld | Christopher Ryon, CFA | Josh Gonze | ||
Portfolio Manager | Portfolio Manager | 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.
12 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
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 — 0.56% | ||||||||||
City of Mobile Industrial Development Board PCR, 1.65% due 6/1/2034 put 3/20/2017 (Alabama Power Company Barry Plant Project) | A/A2 | $ | 1,000,000 | $ | 1,021,650 | |||||
ARIZONA — 1.04% | ||||||||||
Maricopa County PCR, 6.00% due 5/1/2029 put 5/1/2014 (Arizona Public Service Co.) | BBB/Baa1 | 500,000 | 534,815 | |||||||
Pima County IDA, 6.25% due 7/1/2013 (Arizona Charter Schools) | NR/Baa3 | 185,000 | 185,736 | |||||||
Pima County IDA, 5.875% due 4/1/2022 (Cambridge Academy) | NR/NR | 435,000 | 454,706 | |||||||
Pima County IDA, 5.125% due 12/1/2040 (Providence Day School) | BBB+/NR | 710,000 | 716,319 | |||||||
CALIFORNIA — 21.30% | ||||||||||
Brea Redevelopment Agency, 0% due 8/1/2032 (Redevelopment Project AB) | AA-/NR | 1,370,000 | 372,613 | |||||||
Brea Redevelopment Agency, 0% due 8/1/2034 (Redevelopment Project AB) | AA-/NR | 5,000,000 | 1,141,700 | |||||||
California HFFA, 6.25% due 2/1/2026 (Community Program Developmental Disabilities; Insured: California Mtg Insurance) | A-/NR | 1,500,000 | 1,766,400 | |||||||
California HFFA, 5.00% due 11/15/2034 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 420,000 | 451,781 | |||||||
California Housing Finance Agency, 4.625% due 8/1/2016 (Low-Moderate Income Housing Loans; Insured: FGIC) (AMT) | BBB/Baa2 | 1,175,000 | 1,222,576 | |||||||
California Housing Finance Agency, 4.625% due 8/1/2026 (Low-Moderate Income Housing Loans; Insured: FGIC) (AMT) | BBB/Baa2 | 560,000 | 544,846 | |||||||
California Municipal Finance Authority, 8.50% due 11/1/2039 (Harbor Regional Center) | NR/Baa1 | 1,000,000 | 1,205,420 | |||||||
California State Public Works Board, 5.00% due 4/1/2028 (Corrections & Rehabilitation and Judicial Council) | BBB+/A2 | 1,000,000 | 1,137,770 | |||||||
California State Public Works Board, 6.25% due 4/1/2034 (Department of General Services-Offices Renovation) | BBB+/A2 | 100,000 | 118,825 | |||||||
California Statewide Communities Development Authority, 5.00% due 8/15/2039 (Children’s Hospital of Los Angeles; Insured: Natl-Re) | BBB/Baa2 | 1,185,000 | 1,217,433 | |||||||
California Statewide Communities Development Authority, 6.125% due 7/1/2046 (Aspire Public Schools) | NR/NR | 1,000,000 | 1,033,150 | |||||||
Calipatria USD, 0% due 8/1/2025 (Educational Facilities Improvements; Insured: ACA) | NR/NR | 2,425,000 | 1,120,980 | |||||||
Carson Redevelopment Agency, 7.00% due 10/1/2036 (Project Area 1) | A-/NR | 500,000 | 586,885 | |||||||
Chico Redevelopment Agency, 5.00% due 4/1/2030 (Chico Amended & Merged Redevelopment; Insured: AMBAC) | A+/NR | 1,000,000 | 1,032,430 | |||||||
City of Los Angeles, 5.00% due 6/1/2027 (Insured: MBIA) (Wastewater System) | AA/Aa3 | 600,000 | 616,686 | |||||||
Corona-Norco USD COP, 5.00% due 4/15/2031 (Insured: AGM) | AA-/Aa3 | 1,750,000 | 1,937,442 | |||||||
County of El Dorado, 5.00% due 9/1/2026 (El Dorado Hills Development-Community Facilities) | A/NR | 630,000 | 706,583 | |||||||
Daly County Housing Development Finance Agency, 5.25% due 12/15/2023 (Franciscan Mobile Park) | A/NR | 650,000 | 701,174 | |||||||
Kern Community College District COP, 4.00% due 4/1/2014 | SP-1+/NR | 2,500,000 | 2,612,000 | |||||||
M-S-R Energy Authority, 6.50% due 11/1/2039 | A-/NR | 1,000,000 | 1,318,890 | |||||||
Merced Redevelopment Agency, 6.50% due 9/1/2039 (Merced Gateways Redevelopment) | BB+/NR | 300,000 | 320,445 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Moorpark Mobile Home Park, 6.15% due 5/15/2031 (Villa Del Arroyo) | BBB/NR | $ | 1,000,000 | $ | 1,099,600 | |||||
Newport-Mesa USD, 0% due 8/1/2034 (Orange County District Schools) | AA/Aa1 | 5,000,000 | 1,882,450 | |||||||
Oak Park USD GO, 0% due 8/1/2030 (Insured: AGM) | AA-/Aa3 | 500,000 | 206,080 | |||||||
Pittsburg Redevelopment Agency, 0% due 8/1/2027 (Los Medanos Community Development; Insured: AMBAC) | BBB+/NR | 1,275,000 | 548,097 | |||||||
Pittsburg Redevelopment Agency, 0% due 8/1/2028 (Los Medanos Community Development; Insured: AMBAC) | BBB+/NR | 5,000,000 | 2,011,900 | |||||||
Placentia-Yorba Linda USD COP, 5.00% due 10/1/2030 (Educational Facilities Construction; Insured: Natl-Re/FGIC) | A+/A1 | 1,500,000 | 1,567,635 | |||||||
Redwood City Redevelopment Agency, 0% due 7/15/2021 (Redevelopment Project Area 2; Insured: AMBAC) | A-/NR | 1,285,000 | 839,825 | |||||||
Riverside County Asset Leasing Corp., 0% due 6/1/2021 (Riverside County Hospital; Insured: Natl-Re) | BBB/A2 | 535,000 | 350,602 | |||||||
San Diego USD, 0% due 7/1/2035 | AA-/Aa2 | 1,700,000 | 569,551 | |||||||
San Francisco City & County Redevelopment Financing Authority, 0% due 8/1/2023 (Redevelopment Project; Insured: Natl-Re) | A/Baa2 | 925,000 | 564,898 | |||||||
San Francisco City & County Redevelopment Financing Authority, 6.50% due 8/1/2039 (Mission Bay North Redevelopment) | A-/NR | 250,000 | 290,643 | |||||||
San Francisco City & County Redevelopment Financing Authority, 6.75% due 8/1/2041 (Mission Bay North Redevelopment) | A-/NR | 500,000 | 585,610 | |||||||
San Jose Redevelopment Agency, 5.50% due 8/1/2035 (Merged Area Redevelopment) | A/Ba1 | 1,000,000 | 1,017,110 | |||||||
Sonoma County Community Redevelopment Agency, 6.50% due 8/1/2034 (The Springs Redevelopment; Insured: AGM) | AA-/NR | 100,000 | 104,206 | |||||||
State of California, 2.50% due 6/20/2013 (General Fund Cash Management) | SP-1+/Mig1 | 1,050,000 | 1,066,873 | |||||||
State of California GO, 0.17% due 5/1/2034 put 10/1/2012 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa2 | 400,000 | 400,000 | |||||||
State of California GO, 0.20% due 5/1/2034 put 10/1/2012 (Kindergarten University Facilities; LOC: Citibank N.A./California State Teachers’ Retirement System) (daily demand notes) | A/Aa3 | 1,430,000 | 1,430,000 | |||||||
State of California GO, 0.22% due 5/1/2034 put 10/1/2012(Kindergarten University Facilities; LOC: Citibank N.A./California State Teachers’ Retirement System) (daily demand notes) | A/Aa3 | 1,000,000 | 1,000,000 | |||||||
Union Elementary School District, 0% due 9/1/2027 (Santa Clara County District Schools; Insured: Natl-Re) | AA+/NR | 905,000 | 490,239 | |||||||
Whittier Public Financing Authority, 5.00% due 11/1/2030 (Whittier Boulevard Redevelopment Project; Insured: AMBAC) | A-/NR | 1,425,000 | 1,438,951 | |||||||
COLORADO — 4.90% | ||||||||||
Denver City & County COP, 0.20% due 12/1/2029 put 10/1/2012 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa2 | 3,225,000 | 3,225,000 | |||||||
Denver Convention Center Hotel Authority, 5.125% due 12/1/2026 (Insured: Syncora) | BBB-/Baa3 | 1,000,000 | 1,034,780 | |||||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2030 (Insured: Syncora) | BBB-/Baa3 | 450,000 | 466,128 | |||||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2035 (Insured: Syncora) | BBB-/Baa3 | 605,000 | 621,625 | |||||||
Eagle Bend Metropolitan District GO, 5.00% due 12/1/2020 (Insured: Radian) | A-/NR | 1,010,000 | 1,053,814 | |||||||
Eagle River Fire District, 6.625% due 12/1/2024 | NR/NR | 225,000 | 249,118 | |||||||
Eagle River Fire District, 6.875% due 12/1/2030 | NR/NR | 400,000 | 443,192 | |||||||
Public Authority for Colorado Energy, 5.75% due 11/15/2018 (Natural Gas Purchase) | A-/Baa2 | 770,000 | 885,092 | |||||||
Public Authority for Colorado Energy, 6.50% due 11/15/2038 (Natural Gas Purchase) | A-/Baa2 | 260,000 | 331,835 | |||||||
Regional Transportation District COP, 5.375% due 6/1/2031 | A-/Aa3 | 500,000 | 573,280 | |||||||
CONNECTICUT — 1.16% | ||||||||||
Connecticut Health & Educational Facilities Authority, 6.00% due 7/1/2039 (Ethel Walker School) | BBB-/NR | 1,000,000 | 1,096,870 | |||||||
a State of Connecticut GO, 0.68% due 9/15/2017 (Public Improvements) Floating Rate Note | AA/Aa3 | 1,000,000 | 1,003,600 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
DISTRICT OF COLUMBIA — 0.42% | ||||||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2027 (Dulles Toll Road; Insured: AGM) | AA-/Aa3 | $ | 1,500,000 | $ | 755,760 | |||||
FLORIDA — 7.26% | ||||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2027 (Nova Southeastern University) | BBB/Baa2 | 1,000,000 | 1,098,780 | |||||||
Gainesville Utilities Systems, 0.21% due 10/1/2026 put 10/1/2012 (SPA: SunTrust Bank) (daily demand notes) | AA/Aa2 | 865,000 | 865,000 | |||||||
Hollywood Community Redevelopment Agency, 5.625% due 3/1/2024 | NR/A3 | 340,000 | 351,893 | |||||||
Lakeland Energy System, 5.25% due 10/1/2036 | AA/A1 | 2,000,000 | 2,623,420 | |||||||
Miami GO, 5.00% due 1/1/2017 (Homeland Defense/Neighborhood Capital Improvements) | BBB-/A3 | 1,245,000 | 1,355,743 | |||||||
Miami GO, 5.00% due 1/1/2018 (Homeland Defense/Neighborhood Capital Improvements) | BBB-/A3 | 1,790,000 | 1,959,226 | |||||||
Miami-Dade County School Board COP, 5.00% due 8/1/2027 (District School Facilities and Infrastructure) | A/A1 | 1,100,000 | 1,232,275 | |||||||
Pinellas County Educational Facilities Authority, 5.25% due 10/1/2030 (Barry University) | BBB/NR | 500,000 | 547,245 | |||||||
Sarasota County Public Hospital Board, 4.202% due 10/1/2021 (Sarasota Memorial Hospital; Insured: Natl-Re) | BBB/A1 | 1,000,000 | 993,530 | |||||||
Sarasota County Public Hospital Board, 5.50% due 7/1/2028 (Sarasota Memorial Hospital; Insured: Natl-Re) | BBB/A1 | 665,000 | 792,820 | |||||||
St. Johns County IDA, 5.625% due 8/1/2034 (Presbyterian Retirement) | NR/NR | 230,000 | 238,324 | |||||||
Tampa Sports Authority, 5.75% due 10/1/2020 (Tampa Bay Arena; Insured: Natl-Re) | BBB/Baa2 | 1,000,000 | 1,115,740 | |||||||
GEORGIA — 1.55% | ||||||||||
City of Atlanta, 6.25% due 11/1/2034 (Water and Wastewater Capital Improvement Program) | A/A1 | 500,000 | 608,265 | |||||||
Fulton County Development Authority, 5.00% due 10/1/2019 (Georgia Tech Athletic Association) | NR/A2 | 1,000,000 | 1,213,850 | |||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2018 (Georgia Gas) | A/A2 | 515,000 | 590,679 | |||||||
Main Street Natural Gas, Inc., 5.50% due 9/15/2023 (Georgia Gas) | A-/Baa2 | 350,000 | 404,303 | |||||||
GUAM — 1.24% | ||||||||||
Guam Government, 5.75% due 12/1/2034 (Layon Solid Waste Disposal Facility) | BBB+/NR | 500,000 | 562,370 | |||||||
Guam Government Department of Education COP, 6.875% due 12/1/2040 (John F. Kennedy High School) | B/NR | 1,000,000 | 1,098,950 | |||||||
Guam Government GO, 7.00% due 11/15/2039 | B+/NR | 520,000 | 587,850 | |||||||
ILLINOIS — 5.70% | ||||||||||
City of Chicago, 4.70% due 11/15/2013 (Near South Redevelopment; Insured: AMBAC) | NR/NR | 800,000 | 802,336 | |||||||
City of Chicago, 6.75% due 6/1/2022 (Pilsen Redevelopment) | NR/NR | 1,000,000 | 1,043,230 | |||||||
City of Chicago, 5.00% due 1/1/2035 (Midway Airport Development Plan; Insured: Natl-Re) | A/A2 | 1,055,000 | 1,057,996 | |||||||
Cook County GO, 5.25% due 11/15/2033 | AA/Aa3 | 1,000,000 | 1,139,560 | |||||||
Illinois Civic Center, 5.375% due 12/15/2012 (Insured: AGM) | NR/Aa3 | 505,000 | 507,086 | |||||||
Illinois Finance Authority, 5.75% due 11/15/2037 (OSF Healthcare System) | A/A3 | 330,000 | 361,010 | |||||||
Illinois Finance Authority, 6.00% due 5/15/2039 (OSF Healthcare System) | A/A3 | 1,565,000 | 1,815,854 | |||||||
Metropolitan Pier & Exposition Authority, 5.00% due 6/15/2050 (McCormick Place) | AAA/A3 | 1,500,000 | 1,632,885 | |||||||
Railsplitter Tobacco Settlement Authority, 6.00% due 6/1/2028 | A-/NR | 1,000,000 | 1,178,220 | |||||||
Village of Melrose Park GO, 6.75% due 12/15/2016 (Redevelopment Project Costs; Insured: Natl-Re) | NR/Baa2 | 250,000 | 279,685 | |||||||
Village of Melrose Park GO, 6.75% due 12/15/2021 (Redevelopment Project Costs; Insured: Natl-Re) | NR/Baa2 | 410,000 | 519,913 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
INDIANA — 5.66% | ||||||||||
Carmel Redevelopment District COP, 6.50% due 7/15/2035 (Performing Arts Center) | NR/NR | $ | 1,000,000 | $ | 1,065,800 | |||||
Indiana Finance Authority, 6.00% due 12/1/2019 (U.S. Steel Corp.) | BB/B1 | 2,500,000 | 2,789,225 | |||||||
Indiana Finance Authority, 0.23% due 2/1/2035 put 10/1/2012 (Lease Appropriation; SPA: | ||||||||||
JPMorgan Chase Bank) (daily demand notes) | AA+/NR | 2,800,000 | 2,800,000 | |||||||
Indiana Finance Authority, 0.20% due 2/1/2037 put 10/1/2012 (Lease Appropriation; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa2 | 2,500,000 | 2,500,000 | |||||||
b Indiana Finance Authority, 6.375% due 9/15/2041 (Marian University) | BBB-/NR | 1,000,000 | 1,108,630 | |||||||
KANSAS — 2.76% | ||||||||||
City of Wichita GO, 0.30% due 8/15/2013 (Norris Training Systems) | SP-1+/Mig1 | 3,900,000 | 3,900,390 | |||||||
City of Wichita MFR, 5.90% due 12/1/2016 (Brentwood Apartments) | B/NR | 400,000 | 379,556 | |||||||
City of Wichita MFR, 5.85% due 12/1/2025 (Brentwood Apartments) | B/NR | 895,000 | 732,352 | |||||||
KENTUCKY — 1.49% | ||||||||||
Kentucky EDA, 0% due 10/1/2021 (Norton Healthcare, Inc.; Insured: Natl-Re) | BBB/Baa2 | 715,000 | 496,703 | |||||||
Kentucky EDA, 0% due 10/1/2022 (Norton Healthcare, Inc.; Insured: Natl-Re) | BBB/Baa2 | 2,490,000 | 1,636,578 | |||||||
Owen County Waterworks Systems, 6.25% due 6/1/2039 (American Water Co.) | BBB+/Baa2 | 500,000 | 564,055 | |||||||
LOUISIANA — 1.56% | ||||||||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2032 (Black & Gold Facilities; Insured: CIFG) | AA-/Aa3 | 120,000 | 126,101 | |||||||
Louisiana Public Facilities Authority, 5.375% due 5/15/2043 (Ochsner Clinic Foundation) | NR/Baa1 | 500,000 | 523,390 | |||||||
Parish of St. Charles, 4.00% due 12/1/2040 put 6/1/2022 (Valero Energy Corp. Refinery) | BBB/Baa2 | 2,000,000 | 2,172,060 | |||||||
MASSACHUSETTS — 0.27% | ||||||||||
Massachusetts Educational Financing Authority, 6.00% due 1/1/2028 | AA/NR | 420,000 | 490,573 | |||||||
MICHIGAN — 7.72% | ||||||||||
Charter County of Wayne, 5.00% due 12/1/2030 (Airport Hotel; Insured: Natl-Re) | BBB+/Baa2 | 805,000 | 805,354 | |||||||
Detroit School District, 5.00% due 5/1/2025 (School Building & Site; Insured: Q-SBLF) | AA-/Aa2 | 1,000,000 | 1,159,890 | |||||||
Detroit School District, 5.25% due 5/1/2027 (School Building & Site; Insured: AGM) | AA-/Aa2 | 1,000,000 | 1,234,840 | |||||||
Detroit Water and Sewerage Department, 5.25% due 7/1/2039 (Sewage Disposal System; Insured: AGM) | A+/Baa2 | 1,250,000 | 1,337,575 | |||||||
Detroit Water Supply Systems, 5.00% due 7/1/2018 (Insured: Natl-Re) | BBB/Baa2 | 350,000 | 384,090 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2036 (Bronson Methodist Hospital) | NR/A2 | 1,000,000 | 1,072,630 | |||||||
Kalamazoo Hospital Finance Authority, 5.25% due 5/15/2041 (Bronson Healthcare Group) | NR/A2 | 1,000,000 | 1,102,700 | |||||||
Michigan Finance Authority, 5.00% due 4/1/2031 (Local Government Loan Program) | A+/NR | 1,000,000 | 1,090,020 | |||||||
Michigan Finance Authority, 8.125% due 4/1/2041 (Hope Academy) | NR/NR | 1,000,000 | 1,170,900 | |||||||
Michigan Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Southshore Medical Center) | A/A2 | 650,000 | 700,102 | |||||||
Michigan Hospital Finance Authority, 5.75% due 4/1/2032 pre-refunded 4/1/2013 (Various Hospital Facility Improvements) | AA+/A2 | 150,000 | 154,205 | |||||||
Michigan Hospital Finance Authority, 5.75% due 11/15/2039 (Henry Ford Health) | A/A1 | 1,000,000 | 1,151,750 | |||||||
Michigan Housing Development Authority, 3.375% due 11/1/2016 (AMT) | AA/NR | 865,000 | 891,607 | |||||||
Michigan Public School Academy, 8.00% due 8/1/2035 (Will Carleton Charter School) | NR/NR | 1,070,000 | 1,115,903 | |||||||
Michigan Strategic Fund, 5.00% due 8/1/2013 (NSF International) | A-/NR | 300,000 | 308,457 | |||||||
Michigan Strategic Fund, 7.00% due 5/1/2021 (The Detroit Edison Company; Insured: Natl- Re/AMBAC) | NR/NR | 250,000 | 326,717 | |||||||
MINNESOTA — 0.29% | ||||||||||
St. Paul Housing & Redevelopment Authority, 5.25% due 5/15/2023 | A-/A3 | 100,000 | 106,797 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
Washington County Housing Redevelopment Authority, 5.625% due 6/1/2037 (Birchwood & Woodbury) | NR/NR | $ | 415,000 | $ | 422,462 | |||||
MISSOURI — 1.23% | ||||||||||
Kansas City Tax Increment Financing Commission, 5.25% due 3/1/2018 (Maincor Project- Public Improvements) | NR/NR | 1,265,000 | 1,331,311 | |||||||
Missouri Development Finance Board, 0.20% due 12/1/2033 put 10/1/2012 (Nelson Gallery Foundation; SPA: JPMorgan Chase Bank) (daily demand notes) | AAA/Aaa | 900,000 | 900,000 | |||||||
NEVADA — 1.61% | ||||||||||
Carson City, 5.00% due 9/1/2033 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 1,250,000 | 1,345,162 | |||||||
Redevelopment Agency of the City of Mesquite, 7.00% due 6/1/2019 (Public Facility and Redevelopment Projects) | BBB+/NR | 700,000 | 733,229 | |||||||
Redevelopment Agency of the City of Mesquite, 7.125% due 6/1/2021 (Public Facility and Redevelopment Projects) | BBB+/NR | 300,000 | 312,738 | |||||||
Redevelopment Agency of the City of Mesquite, 7.375% due 6/1/2024 (Public Facility and Redevelopment Projects) | BBB+/NR | 500,000 | 520,610 | |||||||
NEW JERSEY — 0.43% | ||||||||||
Higher Education Student Assistance Authority, 5.75% due 12/1/2039 (NJCLASS Student Loan Program) (AMT) | A/A2 | 750,000 | 775,672 | |||||||
NEW MEXICO — 0.61% | ||||||||||
City of Farmington PCR, 4.70% due 9/1/2024 (Arizona Public Service Co.) | BBB/Baa1 | 1,000,000 | 1,113,940 | |||||||
NEW YORK — 2.62% | ||||||||||
New York State Dormitory Authority, 5.00% due 6/15/2031 (Metropolitan Transportation Authority and Urban Development Corp.) | AAA/NR | 3,000,000 | 3,621,150 | |||||||
New York Thruway Authority, 5.00% due 1/1/2037 (Governor Thomas E. Dewey Thruway) | A+/A1 | 1,000,000 | 1,135,480 | |||||||
OHIO — 2.83% | ||||||||||
American Municipal Power, Inc., 5.00% due 2/15/2037 (AMP Fremont Energy Center) | A/A1 | 1,000,000 | 1,114,790 | |||||||
Cleveland Cuyahoga County Port Authority, 6.25% due 5/15/2016 (LOC: FifthThird Bank) | BBB/NR | 345,000 | 348,981 | |||||||
Cleveland Cuyahoga County Port Authority, 7.00% due 5/15/2040 (Insured: City Appropriations) | BBB/NR | 1,000,000 | 1,131,840 | |||||||
Ohio State Water Development Authority PCR, 5.875% due 6/1/2033 put 6/1/2016 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa2 | 1,000,000 | 1,131,920 | |||||||
Ohio State Water Development Authority PCR, 3.375% due 7/1/2033 put 7/1/2015 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa3 | 1,350,000 | 1,396,238 | |||||||
OREGON — 0.84% | ||||||||||
Oregon MFR Pass-Through Certificates, 6.05% due 11/1/2034 (AMT) | NR/Baa1 | 500,000 | 500,490 | |||||||
Western Generation Agency, 5.00% due 1/1/2016 (Wauna Cogeneration; Insured: ACA) | NR/NR | 1,000,000 | 1,027,900 | |||||||
PENNSYLVANIA — 5.33% | ||||||||||
Allegheny County IDA, 6.75% due 8/15/2035 (Propel Charter School) | BBB-/NR | 950,000 | 1,056,542 | |||||||
Hospitals and Higher Educational Facilities Authority of Philadelphia, 0.20% due 7/1/2025 put 10/1/2012 (The Children’s Hospital of Philadelphia; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 1,000,000 | 1,000,000 | |||||||
Pennsylvania Economic Development Financing Authority, 5.00% due 12/1/2014 (Colver Project; Insured: AMBAC) (AMT) | BBB-/Ba1 | 450,000 | 459,261 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
Pennsylvania Economic Development Financing Authority, 4.625% due 12/1/2018 (Colver Project; Insured: AMBAC) (AMT) | BBB-/Ba1 | $ | 1,800,000 | $ | 1,826,694 | |||||
Pennsylvania Turnpike Commission, 0% due 12/1/2030 (Convertible Capital Appreciation) | A-/A3 | 2,000,000 | 1,959,800 | |||||||
Philadelphia Airport, 5.00% due 6/15/2027 (AMT) | A+/A2 | 2,000,000 | 2,238,040 | |||||||
Philadelphia IDA, 6.00% due 8/1/2035 (Mast Charter School) | BBB+/NR | 1,000,000 | 1,132,700 | |||||||
RHODE ISLAND — 0.45% | ||||||||||
Housing Authority of the City of Pawtucket, 5.50% due 9/1/2022 (Public Housing Development) | AA-/NR | 315,000 | 384,502 | |||||||
Housing Authority of the City of Pawtucket, 5.50% due 9/1/2024 (Public Housing Development) | AA-/NR | 350,000 | 421,438 | |||||||
SOUTH DAKOTA — 0.47% | ||||||||||
South Dakota Health & Educational Facilities Authority, 5.50% due 11/1/2040 (Sanford Health) | A+/A1 | 750,000 | 845,460 | |||||||
TENNESSEE — 0.37% | ||||||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2015 | BBB/Baa3 | 100,000 | 106,621 | |||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2024 | A-/Baa2 | 500,000 | 554,790 | |||||||
TEXAS — 11.13% | ||||||||||
Austin Convention Enterprises, Inc., 5.25% due 1/1/2024 (Austin Convention Center; Insured: Syncora) | BB+/Ba1 | 720,000 | 769,111 | |||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2034 (Austin Convention Center; Insured: Syncora) | BB+/Ba1 | 665,000 | 687,863 | |||||||
Clifton Higher Education Finance Corp., 9.00% due 2/15/2038 (Tejano Center for Community Concerns, Inc.) | BBB-/NR | 1,000,000 | 1,194,380 | |||||||
Gulf Coast Waste Disposal Authority, 6.10% due 8/1/2024 (International Paper Co.) (AMT) | BBB/Baa3 | 100,000 | 100,351 | |||||||
Houston Higher Education Finance Corp., 0.18% due 5/15/2048 put 10/1/2012 (William Marsh Rice University) (daily demand notes) | AAA/Aaa | 780,000 | 780,000 | |||||||
Kimble County Hospital District, 6.25% due 8/15/2033 | NR/NR | 500,000 | 555,000 | |||||||
La Vernia Higher Education Finance Corp., 6.25% due 8/15/2039 (Kipp, Inc.) | BBB/NR | 1,000,000 | 1,166,150 | |||||||
San Antonio Energy Acquisition Public Facilities Corp., 5.50% due 8/1/2021 | A-/Baa3 | 40,000 | 45,392 | |||||||
San Juan Higher Education Finance Authority, 6.70% due 8/15/2040 (IDEA Public School) | BBB/NR | 1,000,000 | 1,161,830 | |||||||
State of Texas, 2.50% due 8/30/2013 (General Revenue Fund Cash Management) | SP-1+/Mig1 | 3,500,000 | 3,572,765 | |||||||
Tarrant County Cultural Educational Facilities Finance Corp., 0.20% due 10/1/2041 put 10/1/2012 (Methodist Hospitals of Dallas; LOC: JPMorgan Chase Bank) (daily demand notes) | AAA/Aa1 | 1,955,000 | 1,955,000 | |||||||
Texas City Industrial Development Corp., 7.375% due 10/1/2020 (BP Pipelines N.A., Inc.) | A/A2 | 1,000,000 | 1,370,350 | |||||||
Texas Multi-Family Housing Corp., 7.00% due 7/1/2043 (HDSA Affordable Housing Pool) | BB/NR | 3,000,000 | 3,022,950 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 4.15% due 8/15/2016 (IDEA Public Schools; Insured: ACA) | BBB/NR | 100,000 | 107,097 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 2/15/2018 (Cosmos Foundation, Inc.) | BBB/NR | 785,000 | 826,895 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2023 (IDEA Public Schools; Insured: ACA) | BBB/NR | 155,000 | 164,912 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2030 (IDEA Public Schools; Insured: ACA) | BBB/NR | 1,500,000 | 1,562,460 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 6.20% due 2/15/2040 (Cosmos Foundation, Inc.) | BBB/NR | 1,000,000 | 1,148,990 | |||||||
U.S. VIRGIN ISLANDS — 0.41% | ||||||||||
Virgin Islands Public Finance Authority, 6.75% due 10/1/2037 | NR/Baa3 | 500,000 | 591,625 | |||||||
Virgin Islands Water & Power Authority, 5.50% due 7/1/2017 | NR/NR | 150,000 | 150,360 | |||||||
UTAH — 1.06% | ||||||||||
Herriman City, 4.75% due 11/1/2022 (Towne Center Access and Utility Improvements) | A/NR | 1,000,000 | 1,115,710 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
Issuer-Description | Credit Rating† | Principal Amount | Value | |||||||
Murray City, 0.20% due 5/15/2037 put 10/1/2012 (IHC Health Services, Inc.; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa1 | $ | 800,000 | $ | 800,000 | |||||
VERMONT — 0.44% | ||||||||||
Vermont Student Assistance Corp., 5.10% due 6/15/2032 (Student Loan Program) (AMT) | A/NR | 760,000 | 789,184 | |||||||
VIRGINIA — 0.86% | ||||||||||
Lexington IDA Residential Care Facility, 5.375% due 1/1/2028 (Kendal at Lexington) | NR/NR | 1,000,000 | 1,018,750 | |||||||
Virginia Small Business Financing Authority, 9.00% due 7/1/2039 (Hampton RDS Proton) | NR/NR | 500,000 | 540,250 | |||||||
WASHINGTON — 0.61% | ||||||||||
Washington Health Care Facilities Authority, 5.70% due 7/1/2038 (Overlake Hospital Medical Center) | A-/A3 | 1,000,000 | 1,111,240 | |||||||
WISCONSIN — 2.01% | ||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2027 (ProHealth Care, Inc.) | A+/A1 | 3,300,000 | 3,644,091 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 98.19% (Cost $163,320,885) | $ | 178,063,074 | ||||||||
OTHER ASSETS LESS LIABILITIES — 1.81% | 3,290,248 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 181,353,322 | ||||||||
|
|
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. Bonds issued with a maturity of one year or less are assigned Moody’s ratings from MIG-1 to MIG-4 and Standard and Poor’s ratings from SP-1+ to SP-3 with MIG-1 and SP-1+ being the strongest ratings. |
a | When-issued security. |
b | Segregated as collateral for a when-issued security. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ACA | Insured by American Capital Access | |
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. | |
GO | General Obligation | |
HFFA | Health Facilities Financing Authority | |
IDA | Industrial Development Authority | |
LOC | Letter of Credit | |
MBIA | Insured by Municipal Bond Investors Assurance | |
Mtg | Mortgage | |
MFR | Multi-Family Revenue | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
Q-SBLF | Qualified School Bond Loan Fund | |
Radian | Insured by Radian Asset Assurance | |
SPA | Stand-by Purchase Agreement | |
Syncora | Insured by Syncora Guarantee Inc. | |
USD | Unified School District |
See notes to financial statements.
Certified Annual Report 19
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
ASSETS | ||||
Investments at value (cost $163,320,885) (Note 2) | $ | 178,063,074 | ||
Cash | 254,611 | |||
Receivable for investments sold | 1,165,000 | |||
Receivable for fund shares sold | 1,096,312 | |||
Interest receivable | 2,098,131 | |||
Prepaid expenses and other assets | 23,003 | |||
|
| |||
Total Assets | 182,700,131 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 1,000,000 | |||
Payable for fund shares redeemed | 80,743 | |||
Payable to investment advisor and other affiliates (Note 3) | 136,215 | |||
Accounts payable and accrued expenses | 49,516 | |||
Dividends payable | 80,335 | |||
|
| |||
Total Liabilities | 1,346,809 | |||
|
| |||
NET ASSETS | $ | 181,353,322 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 3,622 | ||
Net unrealized appreciation on investments | 14,742,189 | |||
Accumulated net realized gain (loss) | 431,429 | |||
Net capital paid in on shares of beneficial interest | 166,176,082 | |||
|
| |||
$ | 181,353,322 | |||
|
| |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($65,445,781 applicable to 4,315,010 shares of beneficial interest outstanding—Note 4) | $ | 15.17 | ||
Maximum sales charge, 2.00% of offering price | 0.31 | |||
|
| |||
Maximum offering price per share | $ | 15.48 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($23,521,020 applicable to 1,549,180 shares of beneficial interest outstanding—Note 4) | $ | 15.18 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($92,386,521 applicable to 6,085,721 shares of beneficial interest outstanding—Note 4) | $ | 15.18 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
20 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg Strategic Municipal Income Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $280,708) | $ | 6,586,471 | ||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,078,438 | |||
Administration fees (Note 3) | ||||
Class A Shares | 68,243 | |||
Class C Shares | 23,706 | |||
Class I Shares | 35,116 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 136,486 | |||
Class C Shares | 113,792 | |||
Transfer agent fees | ||||
Class A Shares | 29,199 | |||
Class C Shares | 14,637 | |||
Class I Shares | 25,065 | |||
Registration and filing fees | ||||
Class A Shares | 22,370 | |||
Class C Shares | 27,495 | |||
Class I Shares | 22,278 | |||
Custodian fees (Note 3) | 55,880 | |||
Professional fees | 41,068 | |||
Accounting fees | 3,108 | |||
Trustee fees | 4,008 | |||
Other expenses | 21,700 | |||
|
| |||
Total Expenses | 1,722,589 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (76,228 | ) | ||
Fees paid indirectly (Note 3) | (357 | ) | ||
|
| |||
Net Expenses | 1,646,004 | |||
|
| |||
Net Investment Income | 4,940,467 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 431,431 | |||
Net change in unrealized appreciation (depreciation) on investments | 10,241,692 | |||
|
| |||
Net Realized and Unrealized Gain | 10,673,123 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 15,613,590 | ||
|
|
See notes to financial statements.
Certified Annual Report 21
STATEMENTS OF CHANGES IN NET ASSETS |
Thornburg Strategic Municipal Income Fund |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,940,467 | $ | 3,933,277 | ||||
Net realized gain (loss) on investments | 431,431 | 98,722 | ||||||
Net unrealized appreciation (depreciation) on investments | 10,241,692 | (464,465 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 15,613,590 | 3,567,534 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (1,821,624 | ) | (1,443,523 | ) | ||||
Class C Shares | (577,455 | ) | (599,513 | ) | ||||
Class I Shares | (2,541,388 | ) | (1,887,215 | ) | ||||
From realized gains | ||||||||
Class A Shares | (35,959 | ) | (48,451 | ) | ||||
Class C Shares | (13,233 | ) | (26,448 | ) | ||||
Class I Shares | (48,816 | ) | (67,868 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 21,540,065 | 11,532,230 | ||||||
Class C Shares | 6,778,829 | 401,837 | ||||||
Class I Shares | 32,570,889 | 12,899,113 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 71,464,898 | 24,327,696 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 109,888,424 | 85,560,728 | ||||||
|
|
|
| |||||
End of Year | $ | 181,353,322 | $ | 109,888,424 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 3,622 | $ | 3,622 |
See notes to financial statements.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
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 has three classes of shares of beneficial interest outstanding: 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 may be subject to a service fee, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and 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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services, and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: 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. 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 ordinarily valued at amortized cost, which approximates market value.
In any case where the market value of a debt obligation held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. In any case where a pricing service fails to provide a price for a debt obligation held by the Fund, the Committee determines a fair value for the debt obligation using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from a different independent pricing service. 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities Municipal Bonds | $ | 178,063,074 | $ | — | $ | 178,063,074 | $ | — | ||||||||
Total Investments in Securities | $ | 178,063,074 | $ | — | $ | 178,063,074 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2012.
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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: Investment transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on investments purchased are amortized to call dates or maturity dates of the respective investments. Realized gains and losses from the sale of investments 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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, 2012, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $31,039 for Class A shares and $45,189 for Class C shares.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
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, 2012, the Distributor has advised the Fund that it earned net commissions aggregating $1,085 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $1,384 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, 2012, 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 a distribution plan pursuant to Rule 12b-1, applicable only to the Fund’s Class C shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C shares of the Fund at an annual rate of up to .35 of 1% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, fees paid indirectly were $357.
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 2,136,532 | $ | 31,110,750 | 1,515,491 | $ | 20,437,728 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 97,853 | 1,436,857 | 83,263 | 1,126,525 | ||||||||||||
Shares repurchased | (750,631 | ) | (11,007,542 | ) | (748,444 | ) | (10,032,023 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,483,754 | $ | 21,540,065 | 850,310 | $ | 11,532,230 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 727,947 | $ | 10,720,340 | 500,548 | $ | 6,822,609 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 28,039 | 412,028 | 28,470 | 385,419 | ||||||||||||
Shares repurchased | (296,969 | ) | (4,353,539 | ) | (511,043 | ) | (6,806,191 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 459,017 | $ | 6,778,829 | 17,975 | $ | 401,837 | ||||||||||
|
|
|
|
|
|
|
|
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 3,079,352 | $ | 45,330,018 | 2,118,197 | $ | 28,788,268 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 144,496 | 2,125,272 | 114,091 | 1,545,006 | ||||||||||||
Shares repurchased | (1,027,578 | ) | (14,884,401 | ) | (1,304,041 | ) | (17,434,161 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 2,196,270 | $ | 32,570,889 | 928,247 | $ | 12,899,113 | ||||||||||
|
|
|
|
|
|
|
|
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2012, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $66,852,176 and $16,156,631, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 163,320,885 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 14,759,883 | ||
Gross unrealized depreciation on a tax basis | (17,694 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 14,742,189 | ||
|
|
At September 30, 2012, the Fund had distributable tax basis net ordinary income of $388,000 and capital gains of $43,428.
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2012 and September 30, 2011 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 4,841,870 | $ | 3,828,976 | ||||
Ordinary income | 98,597 | 238,593 | ||||||
Capital gains | 98,008 | 5,449 | ||||||
|
|
|
| |||||
Total | $ | 5,038,475 | $ | 4,073,018 | ||||
|
|
|
|
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, credit risk, interest rate risk, management risk, market and economic risk, and liquidity risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
Certified Annual Report 27
Thornburg Strategic Municipal Income Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless Periods are Fiscal Years Sept. 30, | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 14.06 | 0.49 | 1.13 | 1.62 | (0.50 | ) | (0.01 | ) | (0.51 | ) | $ | 15.17 | 3.34 | 1.25 | 1.25 | 1.31 | 11.71 | 12.52 | $ | 65,446 | |||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 14.22 | 0.59 | (0.14 | ) | 0.45 | (0.59 | ) | (0.02 | ) | (0.61 | ) | $ | 14.06 | 4.37 | 1.25 | 1.25 | 1.38 | 3.47 | 19.45 | $ | 39,808 | ||||||||||||||||||||||||||||||||||||||
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) | 2.92 | (d) | 18.65 | 14.37 | $ | 11,761 | ||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 14.07 | 0.45 | 1.12 | 1.57 | (0.45 | ) | (0.01 | ) | (0.46 | ) | $ | 15.18 | 3.04 | 1.55 | 1.55 | 1.78 | 11.38 | 12.52 | $ | 23,521 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.23 | 0.55 | (0.14 | ) | 0.41 | (0.55 | ) | (0.02 | ) | (0.57 | ) | $ | 14.07 | 4.07 | 1.55 | 1.55 | 1.83 | 3.16 | 19.45 | $ | 15,344 | ||||||||||||||||||||||||||||||||||||||
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 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 14.07 | 0.53 | 1.13 | 1.66 | (0.54 | ) | (0.01 | ) | (0.55 | ) | $ | 15.18 | 3.62 | 0.95 | 0.95 | 0.95 | 12.03 | 12.52 | $ | 92,386 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.23 | 0.63 | (0.14 | ) | 0.49 | (0.63 | ) | (0.02 | ) | (0.65 | ) | $ | 14.07 | 4.62 | 0.99 | 0.99 | 1.03 | 3.74 | 19.45 | $ | 54,736 | ||||||||||||||||||||||||||||||||||||||
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, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
28 Certified Annual Report | Certified Annual Report 29 |
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
30 Certified Annual Report
| ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning | Ending | Expenses Paid | ||||||||||
Account Value | Account Value | During Period† | ||||||||||
4/1/12 | 9/30/12 | 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,051.00 | $ | 6.41 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.75 | $ | 6.31 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,048.70 | $ | 7.90 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.28 | $ | 7.78 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,052.50 | $ | 4.88 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.24 | $ | 4.81 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.25%; C: 1.54%; I: 0.95%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table above 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 above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 31
| ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 (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, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
Since | ||||||||||||
1 Yr | 3 Yrs | Inception | ||||||||||
A Shares (Incep: 4/1/09) | 9.45 | % | 7.02 | % | 11.31 | % | ||||||
C Shares (Incep: 4/1/09) | 10.78 | % | 7.42 | % | 11.63 | % | ||||||
I Shares (Incep: 4/1/09) | 12.03 | % | 8.03 | % | 12.26 | % |
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 or call 800.847.0200. 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.
32 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE (1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | �� | |
Thornburg Strategic Municipal Income Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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 Strategic Municipal Income Fund | September 30, 2012 (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. A description of the Policy 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, 2012 dividends paid by the Fund of $4,841,870 (or the maximum allowed) are tax exempt dividends and $98,008 are designated as taxable long-term capital gain dividends for federal income tax purposes.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 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 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 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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.
36 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, and (iii) measures of 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, 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 considered (among other aspects of the data) performance data for the two full calendar years since the Fund’s inception, which showed that the Fund’s investment return for the most recent year exceeded the average return of the mutual fund category for which calendar year data was presented and was comparable to the average return of the category for the preceding year. Other noted quantitative data showed that the Fund’s investment returns fell at the third quartile of performance for the first fund category for the three-month period ended with the second quarter of the current year, fell in the bottom quartile for the year-to-date period and fell near or above the midpoint of performance for the category for the one-year and three-year periods, and that the Fund’s investment returns fell within the top quartile of performance for the second fund category for the three-month and year-to-date periods ended with the second quarter and fell within the top decile of performance for the one-year and three-year 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of municipal debt mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged to the Fund was slightly higher than the median and average fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was higher than the median and slightly higher than the average expense ratios for the fund category. The Trustees did not find the differences 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 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 37
OTHER INFORMATION, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2012 (Unaudited) |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its capabilities. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as the Fund increases in size due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
38 Certified Annual Report
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This page is not part of the Annual Report. 39
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
40 This page is not part of the Annual Report.
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 website 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 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 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 FUND FAMILY
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.
Ÿ | Thornburg Value Fund |
Ÿ | Thornburg International Value Fund |
Ÿ | Thornburg Core Growth Fund |
Ÿ | Thornburg Investment Income Builder Fund |
Ÿ | Thornburg Global Opportunities Fund |
Ÿ | Thornburg International Growth Fund |
Ÿ | 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.
Ÿ | Thornburg Limited Term Municipal Fund |
Ÿ | Thornburg Intermediate Municipal Fund |
Ÿ | Thornburg California Limited Term Municipal Fund |
Ÿ | Thornburg New Mexico Intermediate Municipal Fund |
Ÿ | Thornburg New York Intermediate Municipal Fund |
Ÿ | Thornburg Strategic Municipal Income Fund |
Ÿ | Thornburg Limited Term U.S. Government Fund |
Ÿ | Thornburg Limited Term Income Fund |
Ÿ | 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 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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TH1978 |
IMPORTANT INFORMATION
The information presented on the following pages is current as of September 30, 2012. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 2012 Best Fixed Income Funds Manager
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income Large Company universe for the three-year period ended 11/30/11, based on risk-adjusted returns. Lipper’s Large Company universe is comprised of fund families with more than $40 billion in total net assets. Only fund families with at least five bond funds were eligible for the fixed income funds manager award. Asset Class Group Awards are given for the three-year period only.
Glossary
Barclays 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 1-10 Year U.S. Municipal Securities Index – This index is a subset of the BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity less than 10 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 reflects actual distributions made to shareholders. The annualized distribution yield is calculated by summing the last 30 days of income at a given month end and annualizing to a 360-day year. The result is divided by the ending maximum offering price.
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.
Consumer Price Index (CPI) – Index that measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. Also known as the cost-of-living index.
Core CPI – Consumer Price Index minus the energy and food components.
Core PCE Price Index – Personal Consumption Expenditures (PCE) prices excluding food and energy.
Duration – A bond’s sensitivity to interest rates. 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
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 Bond – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Gross Domestic Product (GDP) – A country’s income minus foreign investments: the total value of all goods and services produced within a country in a year, minus net income from investments in other countries.
Quantitative Easing – The Federal Reserve’s monetary policy used to stimulate the U.S. economy following the recession that began in 2007/08.
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.
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 often fail to stack up over longer periods of time.
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 reinvestment 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. |
Portfolio Managers
Josh Gonze, Chris Ryon, CFA, 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 or call 800.847.0200.
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 0.96%, 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, 2012
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 2/19/87) | ||||||||||||||||||||
Without sales charge | 4.78 | % | 4.34 | % | 4.57 | % | 3.35 | % | 4.77 | % | ||||||||||
With sales charge | 3.24 | % | 3.82 | % | 4.26 | % | 3.20 | % | 4.71 | % |
30-Day Yields, A Shares
As of September 30, 2012
Annualized Distribution Yield | SEC Yield | |
1.89% | 0.82% |
Key Portfolio Attributes
As of September 30, 2012
Number of Bonds | 220 | |||
Effective Duration | 3.2 Yrs | |||
Average Maturity | 4.1 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 California Limited Term Municipal Fund – September 30, 2012
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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 17, 2012
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 34 cents to $13.75 per share during the fiscal year ended September 30, 2012. If you were with us for the entire period, you received dividends of 29.4 cents per share. If you reinvested your dividends, you received 29.8 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 slightly outperformed the index with a total return of 4.78% at NAV for the fiscal year ended September 30, 2012, compared to 4.50% for the BofA Merrill Lynch 1–10 Year U.S. Municipal Securities Index. The Fund generated 2.43% more price appreciation, but 2.15% less income.
The markets’ positive returns were primarily due to declining interest rates and narrowing credit spreads. Interest rates declined more for longer maturities and consequently longer-maturity bonds outperformed shorter-maturity bonds. As credit spreads compressed, lower-quality bonds outperformed higher-quality bonds. The Fund’s additional price appreciation is due to several factors. Our interest rate sensitivity as measured by the Fund’s duration and differing allocations along the yield curve subtracted 0.14% of relative price appreciation. Our overweight to the insured and revenue sectors added 0.71% of relative price performance. We underweighted the general obligation and pre-refunded sectors, which added 0.88% of relative price performance. Our overweight to lower credit quality securities added 0.16% of performance relative to the benchmark. Other risk factors accounted for an additional 0.82%.
The California Economy, the Fiscal Cliff, and the Federal Reserve
The California economy seems to be improving. The Sacramento Bee reported that the California economy added 298,000 private-sector jobs in the last year, led by the tech sector. A recent Wells Fargo Securities report recently stated: “The state’s gross domestic product grew by 2.0 percent in 2011 and likely accelerated during the first half of this year.” The same report also cited an improvement in the real estate market: “Sales of existing single family homes have increased 16.7 percent over the past year and permits for new home construction have risen 16.1 percent.” Along with these indicators, total income rose at a 3.9% annualized rate for the first quarter of 2012, a 2.5% increase from the previous year. California still attracts 50% of all new venture-capital dollars nationally.
Although these early signs of improvement are encouraging, California still faces some significant hurdles. Tax revenues have been weaker than forecast, and a November ballot measure to raise the tax rate for seven years on incomes of more than $250,000 is uncertain. If the initiative is not passed, budget cuts to education spending would be triggered. A slowdown in Asia would have a negative impact on California’s trade activity, a historic strength of the Californian economy.
In addition to these fundamental factors, many investors are concerned about the impact of the so-called “fiscal cliff”, which The Washington Post referred to as follows:
The “ fiscal cliff” is a term coined by Federal Reserve Chairman Ben S. Bernanke. It refers to a collection of changes in current law that are all set to strike in January, triggering the sharpest reduction in the federal budget deficit in more than 40 years.
Certified Annual Report 7
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
The Post goes on to say that taxes would also increase:
For most taxpayers, the bulk of the increase would be triggered by the expiration of tax cuts enacted in 2001 and 2003 during the George W. Bush administration. The expiration of President Obama’s payroll tax holiday, which shaved two percentage points off the 6.2 percent Social Security tax, comes in a close second. If these issues are not addressed many analysts think the United States will be pushed into another recession.
On top of all this, Europe is still a mess, but the fixed-income markets seem not to be as headline sensitive to news coming out of Europe as they were last year. At its last meeting, the Federal Reserve Board (the Fed) decided to enter into a third round of quantitative easing – QE3. In this round, the Fed will concentrate security purchases in the mortgage markets in an effort to lower borrowing costs for home-buyers, which should spur the housing market. As anyone who has recently applied for a mortgage knows, it is not the interest cost of the product that stands as a borrower’s major roadblock. The fixed income markets’ initial reaction to the latest Fed move was an increase in inflation expectations and a decrease in bond prices, though this fear has subsided in recent weeks.
The Presidential Election and Tax Policy
Tax policy and the federal deficit have proven to be key election season issues. Both candidates have put forward their respective plans for deficit reduction; both could influence the municipal bond market. Table I shows a side-by-side analysis, based on a recent article in The Bond Buyer, a leading publication on the municipal bond market.
Table I
Obama | Romney | |
Extends the 2001 and 2003 tax cuts for individuals earning under $200,000 and families earning under $250,000. | Permanently extend all the 2001 and 2003 tax cuts. Eliminate taxation of investment income for individuals earning less than $200,000. | |
Returns to the Clinton Era highest marginal tax rate of 39.6% . | Lowers marginal rates across the board by 20%, eliminates the alternative minimum tax. | |
In a jobs bill he floated last October and his 2013 budget, Obama proposed to place a 28% cap on the value of tax-exempt interest for the wealthy. | Announced he would cap individual tax deductions at $17,000. Not clear if he would cap exclusions, like tax exemption, as well as deductions. | |
Bruce Bartlett, former policy adviser to President Ronald Reagan and Treasury official under President George H. W. Bush, said without a doubt Obama’s tax proposals would be more beneficial to the municipal market primarily because he wants to impose higher tax rates on the wealthy, which would make tax-exempt bonds more attractive. | While Romney has not specifically mentioned capping tax exemptions, in a Wall Street Journal editorial in August, Glenn Hubbard, his senior economic adviser, said the exclusion of interest on tax-exempt municipal bonds is “on the table” for the Republican candidate. |
One can see that both candidates’ potential tax policies, as understood today, could influence the municipal bond market. However, as with most election rhetoric, the eventual legislation may look nothing like the campaign proposals. There are two things that people should never watch being made, sausage and legislation!
8 Certified Annual Report
The Municipal Market
The demand picture in the municipal market improved during the fiscal year. Investors poured $56 billion into municipal bond mutual funds over the last 12 months. The total assets in municipal bond mutual funds were $562 billion according to the Investment Company Institute, a mutual fund industry advocacy group. Assets in municipal bond mutual funds on November 30, 2010, just before the six-month period of investor exodus, were $497 billion. On the other side of the ledger, the supply picture improved. The supply of new issue municipal bonds was $379 billion for the 12 months ended September 30, 2012. This exceeded the $329 billion for the 12 months ended September 30, 2011 by $50 billion, for a 15% increase.
The trend towards lower interest rates continued throughout this fiscal year. With short-term yields anchored near zero, investors moved out along the yield curve in search of more income. This caused long-term maturities to decrease in yield much more than short-term maturities. The average change in yield for the Thornburg California Limited Term Municipal Fund’s investment universe (1–10 years), as measured by the average change in yield of a AAA general obligation bond, was negative 0.05% for the first half of the fiscal year. In the second half of the fiscal year, the same measure of average yield change decreased 0.29%. See Graph I.
Investors, again in a search for income, have been willing to pay much more for lower-quality securities than any time since 2008. This caused quality spreads to narrow and lower-quality securities to outperform higher-quality securities. On December 30, 2011, the incremental yield an investor gained for buying a BBB security versus an AAA security with a five-year maturity was 2.48%. On September 30, 2012, that incremental yield equaled 1.63%, a 0.85% decrease. Graph II shows the quarter-by-quarter and cumulative total return performance of the BofA Merrill Lynch 1–10 Year U.S. Municipal Securities Index for the fiscal year.
Graph I: AAA General Obligation Municipal Yield Changes for 9/30/2011 through 9/30/2012
Past performance does not guarantee future results.
Certified Annual Report 9
LETTER TO SHAREHOLDERS, CONTINUED |
Graph II: BofA Merrill Lynch 1–10 Year U.S. Municipal Securities Index
Quarterly and Cumulative Total Returns
The credit picture in California is still mixed. The credit rating of the state itself seems to be improving as investors are demanding less and less yield premium to buy the state’s general obligation credit. One year ago, investors demanded 1.30% higher yield versus a generic AAA-rated municipal general obligation bond; today, that credit spread has compressed to 0.65%. The drivers of this compression could be one of three things (or a combination of all three). First, investors’ views of California’s economic outlook are improving. Second, investors are stretching for income. Finally, investors are very concerned about the prospect of increasing state income taxes.
The local credit picture is very different from the state’s economic picture. Many localities are straining with the loss of redevelopment agency revenue, which now must be remitted to the state. Several have made headlines with high-profile Chapter 9 bankruptcy filings. Table II outlines basic financial information on the California cities that recently filed for Chapter 9 protections, or are on the brink of doing so.
Table II
Credit Risk Factor | City of Stockton | City of San Bernardino | Town of Mammoth Lakes | City of Atwater | ||||||||||||
Change in Property Tax Receipts | -29 | % | -15 | % | -12 | % | -13 | % | ||||||||
Public Safety Expenses as a percent of General Fund Expenses | 76 | % | 68 | % | 28 | % | 57 | % | ||||||||
Pension Expenses as a percent of General Fund Expenses | 11 | % | 12 | % | 11 | % | 17 | % | ||||||||
Other Post-Employment Benefit Expenses as a percent of General Fund Expenses | 23 | % | 4 | % | N/A | 15 | % | |||||||||
Bonded Debt Service as a percent of General Fund Expenses | 9 | % | 6 | % | 7 | % | 0 | % | ||||||||
Bonded per Capita Debt | $ | 771 | $ | 399 | $ | 325 | $ | 0 |
Source: Thornburg
10 Certified Annual Report
The Town of Mammoth Lakes should be excluded from the discussion because the driver of their Chapter 9 filing was the loss of a lawsuit to a developer, centering on a hotel project near the airport. It seems the town managers neglected to obtain FAA approval for the project! The other cities share key characteristics: each had double-digit declines in tax revenues resulting from the declines in real estate assessed values, and each paid their public service employees a great deal in terms of salaries and pension expenses. Debt was not the primary driver in these cities’ seeking Chapter 9 protections. The Stockton Chapter 9 bankruptcy will be very interesting to follow; issues such as state versus federal law primacy in bankruptcy will be decided. Some observers have said that the final decisions will be years away due to lengthy appeals. We at Thornburg Investment Management will continue to apply sound, fundamental, bottom-up credit analysis to securities we intend to purchase and will continually review the securities we hold to avoid these pitfalls.
In the last semi-annual letter to shareholders, we noted the risks of rising interest rates. As bond portfolio managers, we are always worried. If bonds are doing well, the economy is probably doing poorly, and we worry. If the economy is doing well, we worry because yields are probably rising and bond prices declining. Such is the life we have chosen!
The level of real yields (yield less inflation) is a measure of value for fixed-income products. Real yield levels are at record lows across all fixed income products. Relative to other fixed-income products, municipal bonds appear to be attractive. Graph III illustrates this measure.
Graph III: 5 Yr AAA Muni Real Yield Using Core PCE
Certified Annual Report 11
LETTER TO SHAREHOLDERS, CONTINUED |
Graph IV: % of Portfolio Maturing
The Federal Reserve tends to favor the Personal Consumption Expenditure Index (PCE) as an inflation measure; here, we use that index in our real yield calculations. Real yield levels for five-year AAA general-obligation municipal bonds, using Core PCE as the inflation measure, are negative and are at 20-year lows. We worry. At the same time, we are reminded of a famous quote by John Maynard Keynes, “The market can stay irrational longer than you can stay solvent.” Solvency is not an issue, of course, but Graph III would suggest rationality is. This state of affairs can continue for some time, but it remains a risk. The long-term average real yield for a five-year AAA municipal general obligation bond is 1.45%, meaning that since May 1991, investors have demanded 1.45% above the Core PCE inflation rate to invest in five-year AAA general obligation bonds. The current yield on a five-year AAA municipal general obligation bond is 0.62%. If this relationship were to return to the average long-term real yield level, one of three things would have to happen. First, five-year interest rates would need to increase by about 2.50%. Second, inflation would have to decrease by about 2.50%. Neither of these two outcomes would be pleasant. Third, some combination of the two prior outcomes could occur, which also promises to be unpleasant. Investors should use this information to recognize the risk inherent in fixed-income products at these historically low yield levels. They should take this opportunity to review their portfolios and determine if they are properly diversified. In addition, investors should ask themselves if they have an appropriate time horizon in mind for their investments. We suggest two to three years from the point that question is posed.
Conclusion
Your Thornburg California Limited Term Municipal Fund currently consists of a laddered portfolio structure of 220 securities. We ladder our core portfolios because we believe this structure has the potential to maximize an investor’s income. In fact, in an internal study of portfolio structures (using indices as proxies for portfolios) extending back to 1997, a hypothetical laddered portfolio structure outperformed bullet and barbell structures approximately 2/3 of the time (for a copy of the study, go to www.thornburg. com/whyladder). Past performance does not guarantee future results, of course. The laddering structure manages a portfolio’s yield-curve exposure via a roughly equal weighting of each maturity, thereby mitigating a major risk factor. Graph I illustrates that yield changes are not uniform across the Fund’s
12 Certified Annual Report
investment universe. Laddering also reduces reinvestment risk by ensuring that a portion of the portfolio matures each year, so it can be reinvested. Graph IV describes the percentages of your Fund’s bond portfolio maturing in each of the coming years. We thank you for the trust you have placed with us and will continue to keep that foremost in our minds.
Sincerely, | ||||
![]() | ![]() | ![]() | ||
Christopher Ihlefeld | Christopher Ryon, CFA | Josh Gonze | ||
Portfolio Manager | Portfolio Manager | 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 13
SCHEDULE OF INVESTMENTS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
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 | |||||||
Alameda County COP, 5.625% due 12/1/2016 (Santa Rita Jail; Insured: AMBAC) | AA/NR | $ | 1,830,000 | $ | 2,162,438 | |||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2021 (Capital Projects) | AA/A1 | 1,000,000 | 1,238,080 | |||||||
Alvord USD GO, 5.25% due 2/1/2014 (Insured: Natl-Re) | A+/Baa2 | 1,150,000 | 1,203,245 | |||||||
Anaheim Public Financing Authority, 5.00% due 10/1/2020 (Electric System Distribution; Insured: AMBAC) | NR/NR | 445,000 | 479,492 | |||||||
Anaheim Public Financing Authority, 5.00% due 10/1/2021 (Electric System Distribution; Insured: AMBAC) | NR/NR | 820,000 | 878,622 | |||||||
Anaheim Public Financing Authority, 0% due 9/1/2022 (Public Facility Improvements; Insured: AGM) | AA-/Aa3 | 3,000,000 | 2,054,700 | |||||||
Antelope Valley Community College District GO, 2.00% due 11/30/2012 | SP-1+/NR | 3,050,000 | 3,058,753 | |||||||
Bay Area Toll Authority, 5.00% due 4/1/2016 (San Francisco Bay Area) | AA/Aa3 | 2,075,000 | 2,395,401 | |||||||
Calexico USD COP, 6.75% due 9/1/2017 | A-/NR | 3,060,000 | 3,585,218 | |||||||
California Educational Facilities Authority, 5.00% due 4/1/2018 (Pitzer College) | NR/A3 | 1,540,000 | 1,784,429 | |||||||
California Educational Facilities Authority, 0% due 10/1/2019 (Loyola Marymount University; Insured: Natl-Re) | NR/A2 | 2,025,000 | 1,650,982 | |||||||
California Educational Facilities Authority, 5.00% due 4/1/2020 (Pitzer College) | NR/A3 | 1,445,000 | 1,705,273 | |||||||
California Educational Facilities Authority, 5.00% due 4/1/2022 (Chapman University) | NR/A2 | 2,000,000 | 2,367,240 | |||||||
California HFFA, 4.00% due 2/1/2013 (Community Program Developmental Disabilities; Insured: California Mtg Insurance) | A-/NR | 1,665,000 | 1,680,251 | |||||||
California HFFA, 5.25% due 10/1/2013 (Providence Health and Services) | AA/Aa2 | 650,000 | 680,843 | |||||||
California HFFA, 5.00% due 8/15/2014 (Cedars-Sinai Medical Center) | NR/A2 | 1,500,000 | 1,618,515 | |||||||
California HFFA, 5.50% due 10/1/2017 (Providence Health and Services) | AA/Aa2 | 1,100,000 | 1,331,781 | |||||||
California HFFA, 5.50% due 2/1/2018 (Community Program Developmental Disabilities; Insured: California Mtg Insurance) | A-/NR | 2,715,000 | 3,127,626 | |||||||
California HFFA, 6.00% due 10/1/2018 (Providence Health and Services) | AA/Aa2 | 1,000,000 | 1,260,250 | |||||||
California HFFA, 5.00% due 11/15/2018 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,235,000 | 1,413,322 | |||||||
California HFFA, 5.10% due 2/1/2019 (Episcopal Home; Insured: California Mtg Insurance) | A-/NR | 1,635,000 | 1,833,456 | |||||||
California HFFA, 5.00% due 11/15/2020 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,190,000 | 1,363,562 | |||||||
California HFFA, 5.25% due 3/1/2022 (Catholic Healthcare West Health Facilities) | A/A2 | 1,000,000 | 1,187,160 | |||||||
California HFFA, 5.125% due 7/1/2022 (Catholic Healthcare West Health Facilities) | A/A2 | 2,635,000 | 2,860,292 | |||||||
California HFFA, 1.45% due 8/15/2023 put 3/15/2017 (Lucile Salter Packard Children’s Hospital) | AA/Aa3 | 3,000,000 | 3,052,110 | |||||||
California HFFA, 5.00% due 7/1/2027 put 7/1/2014 (Catholic Healthcare West Health Facilities) | A/A2 | 2,000,000 | 2,130,000 | |||||||
California Mobilehome Park Financing Authority, 5.00% due 11/15/2013 (Rancho Vallecitos; Insured: ACA) | NR/NR | 570,000 | 577,598 | |||||||
California PCR Financing Authority, 5.90% due 6/1/2014 (San Diego Gas & Electric) | A/A2 | 2,500,000 | 2,723,175 | |||||||
California PCR Financing Authority, 5.25% due 6/1/2023 put 12/1/2017 (Solid Waste Disposal-Republic Services, Inc.) (AMT) | BBB/Baa3 | 2,820,000 | 3,205,748 | |||||||
California PCR Financing Authority, 0.20% due 11/1/2026 put 10/1/2012 (Pacific Gas & Electric; LOC: JPMorgan Chase Bank) (daily demand notes) | AA+/NR | 7,900,000 | 7,900,026 | |||||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: Natl-Re) | BBB/A2 | 1,785,000 | 1,792,301 | |||||||
California State Department of Water Resources Power Supply, 5.00% due 5/1/2015 | AA-/Aa3 | 5,000,000 | 5,582,750 | |||||||
California State Economic Recovery GO, 5.00% due 7/1/2015 (Insured: | A+/Aa3 | 500,000 | 541,040 | |||||||
California State Economic Recovery GO, 5.00% due 7/1/2018 | A+/Aa3 | 3,000,000 | 3,673,620 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
California State Housing Finance Agency, 3.70% due 8/1/2013 (Insured: FGIC) | BBB/Baa2 | $ | 1,670,000 | $ | 1,693,931 | |||||
California State Housing Finance Agency, 3.80% due 2/1/2014 (Insured: FGIC) | BBB/Baa2 | 770,000 | 781,311 | |||||||
California State Housing Finance Agency, 5.00% due 2/1/2014 (Insured: FGIC) (AMT) | BBB/Baa2 | 2,405,000 | 2,439,560 | |||||||
California State Housing Finance Agency, 4.85% due 8/1/2016 (Insured: AGM) (AMT) | AA-/Aa3 | 1,000,000 | 1,064,440 | |||||||
California State Housing Finance Agency, 5.00% due 8/1/2017 (Insured: AGM) (AMT) | AA-/Aa3 | 980,000 | 1,044,572 | |||||||
California State Housing Finance Agency, 5.125% due 8/1/2018 (Insured: AGM) (AMT) | AA-/Aa3 | 1,000,000 | 1,057,670 | |||||||
California State Housing Finance Agency, 3.05% due 12/1/2019 (Insured: FHA) | NR/Aaa | 735,000 | 755,146 | |||||||
California State Infrastructure & Economic Development Bank, 5.25% due 8/15/2020 (King City High School) | A-/NR | 1,000,000 | 1,172,430 | |||||||
California State Public Works Board, 5.25% due 10/1/2013 (California State University) | BBB+/Aa3 | 500,000 | 501,925 | |||||||
California State Public Works Board, 5.25% due 12/1/2014 (California Community Colleges) | BBB+/A2 | 1,525,000 | 1,530,765 | |||||||
California State Public Works Board, 5.00% due 1/1/2015 (Correctional Facilities Improvements; Insured: AMBAC) | BBB+/A2 | 2,000,000 | 2,182,880 | |||||||
California State Public Works Board, 5.00% due 11/1/2015 (University of California) | AA-/Aa2 | 1,000,000 | 1,095,310 | |||||||
California State Public Works Board, 5.00% due 11/1/2016 (California State University-J. Paul Leonard & Sutro Library) | BBB+/Aa3 | 1,000,000 | 1,150,180 | |||||||
California State Public Works Board, 5.00% due 6/1/2020 (University of California; Insured: Natl-Re/FGIC) | AA-/Aa2 | 1,185,000 | 1,453,367 | |||||||
California State Public Works Board, 5.125% due 3/1/2021 (Various State Participating Agency Capital Projects) | BBB+/A2 | 1,635,000 | 1,947,628 | |||||||
California State Public Works Board, 5.00% due 12/1/2021 (Judicial Council Projects) | BBB+/A2 | 2,500,000 | 3,034,425 | |||||||
California State Public Works Board, 5.00% due 12/1/2022 (Judicial Council Projects) | BBB+/A2 | 1,200,000 | 1,432,428 | |||||||
California State School Cash Reserve Program Authority, 2.00% due 10/31/2012 | SP-1+/NR | 3,000,000 | 3,004,560 | |||||||
California Statewide Community Development Authority, 5.50% due 8/15/2014 (Enloe Medical Center; Insured: California Mtg Insurance) | A-/NR | 750,000 | 805,208 | |||||||
California Statewide Community Development Authority, 5.00% due 4/1/2019 (Kaiser Credit Group) | A+/NR | 3,600,000 | 4,300,884 | |||||||
California Statewide Community Development Authority, 5.00% due 7/1/2020 (Aspire Public Schools; Insured: College for Certain LLC) | NR/NR | 1,460,000 | 1,468,453 | |||||||
California Statewide Community Development Authority, 4.10% due 4/1/2028 put 4/1/2013 (Southern California Edison County; Insured: Syncora) | A/A1 | 2,000,000 | 2,036,300 | |||||||
California Statewide Community Development Authority PCR, 4.10% due 4/1/2028 put 4/1/2013 (Southern California Edison County; Insured: Syncora) | A/A1 | 3,225,000 | 3,283,856 | |||||||
Calipatria USD, 0% due 8/1/2025 (Educational Facilities Improvements; Insured: ACA) | NR/NR | 5,000,000 | 2,311,300 | |||||||
Carson Redevelopment Agency, 6.00% due 10/1/2019 (Project Area 1) | A-/NR | 1,050,000 | 1,237,236 | |||||||
Castaic USD GO, 0% due 5/1/2018 (Insured: Natl-Re/FGIC) | A+/NR | 3,200,000 | 2,568,256 | |||||||
Centinela Valley USD GO, 4.00% due 12/1/2013 | SP-1+/NR | 3,000,000 | 3,116,580 | |||||||
Central Valley Financing Authority, 5.00% due 7/1/2015 (Carson Ice) | A+/A1 | 1,000,000 | 1,102,780 | |||||||
Central Valley Financing Authority, 5.25% due 7/1/2020 (Carson Ice) | A+/A1 | 500,000 | 606,820 | |||||||
Cerritos Public Financing Authority, 5.00% due 11/1/2014 (Insured: AMBAC) | A-/NR | 1,260,000 | 1,334,680 | |||||||
Chabot-Las Positas Community College District GO, 0% due 8/1/2018 (Capital Improvements; Insured: AMBAC) | AA-/Aa2 | 2,465,000 | 2,054,232 | |||||||
Chula Vista COP, 5.25% due 3/1/2020 (Capital Facilities Project) | A-/NR | 1,300,000 | 1,510,132 | |||||||
Chula Vista Elementary School District COP, 4.70% due 9/1/2022 (Insured: | BBB/Baa2 | 900,000 | 904,563 | |||||||
City of Burbank California Water and Power Electric, 5.00% due 6/1/2015 (Electric Systems Capital Improvements) | AA-/A1 | 750,000 | 836,580 | |||||||
City of Burbank California Water and Power Electric, 5.00% due 6/1/2016 (Electric Systems Capital Improvements) | AA-/A1 | 500,000 | 576,980 | |||||||
City of Burbank California Water and Power Electric, 5.00% due 6/1/2017 (Electric Systems Capital Improvements) | AA-/A1 | 1,000,000 | 1,191,910 | |||||||
City of Burbank California Water and Power Electric, 5.00% due 6/1/2018 (Electric Systems Capital Improvements) | AA-/A1 | 360,000 | 438,106 | |||||||
City of Burbank California Water and Power Electric, 5.00% due 6/1/2020 (Electric Systems Capital Improvements) | AA-/A1 | 625,000 | 778,613 | |||||||
City of Folsom, 4.00% due 12/1/2014 (Community Facilities District No. 2) | A+/NR | 755,000 | 790,160 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
City of Folsom, 5.00% due 12/1/2016 (Community Facilities District No. 2) | A+/NR | $ | 1,100,000 | $ | 1,230,460 | |||||
City of Folsom, 5.00% due 12/1/2018 (Community Facilities District No. 2) | A+/NR | 965,000 | 1,101,712 | |||||||
City of Los Angeles COP, 3.00% due 11/1/2030 put 2/1/2018 (American Academy of Dramatic Arts; LOC: TD Bank N.A.) | NR/Aa2 | 3,000,000 | 3,155,460 | |||||||
City of Moorpark Mobile Home Park, 4.90% due 5/15/2017 (Villa Del Arroyo) | BBB/NR | 965,000 | 1,009,062 | |||||||
City of Oxnard Financing Authority, 5.00% due 5/1/2013 (Solid Waste System; Insured: AMBAC) (AMT) | A-/NR | 2,115,000 | 2,153,408 | |||||||
City of Oxnard Financing Authority, 5.25% due 6/1/2014 (Wastewater Treatment Plants; Insured: Natl-Re/FGIC) | BBB/NR | 1,000,000 | 1,028,400 | |||||||
City of Porterville COP, 6.30% due 10/1/2018 (Public Service Capital Projects; Insured: AMBAC) | NR/NR | 1,250,000 | 1,353,325 | |||||||
City of Seal Beach Redevelopment Agency, 5.20% due 12/15/2013 (Seal Beach Mobile Home Park; Insured: ACA) | NR/NR | 245,000 | 248,224 | |||||||
City of Torrance, 5.00% due 9/1/2020 (Torrance Memorial Medical Center) | A/A2 | 1,155,000 | 1,358,961 | |||||||
City of Torrance, 6.00% due 6/1/2022 (Torrance Memorial Medical Center) | A/A2 | 2,600,000 | 2,609,906 | |||||||
City of Vallejo, 5.00% due 5/1/2017 (Water Improvement Project; Insured: | BBB/Baa2 | 1,240,000 | 1,340,948 | |||||||
City of Whittier, 5.375% due 8/1/2014 (Solid Waste; Insured: AMBAC) | NR/NR | 370,000 | 370,803 | |||||||
Contra Costa Water District, 2.50% due 10/1/2013 | AA/NR | 2,000,000 | 2,046,720 | |||||||
Corona-Norco USD GO, 2.00% due 12/31/2012 | SP-1+/NR | 5,000,000 | 5,021,100 | |||||||
Corona-Norco USD GO, 0% due 9/1/2017 (Insured: AGM) | AA-/Aa2 | 1,595,000 | 1,461,690 | |||||||
County of El Dorado Community Facilities District, 5.00% due 9/1/2019 (El Dorado Hills Development) | A/NR | 1,700,000 | 1,972,969 | |||||||
County of Monterey COP, 5.00% due 8/1/2014 (Natividad Medical Center; Insured: AGM) | AA/Aa3 | 2,000,000 | 2,142,300 | |||||||
County of Monterey COP, 5.25% due 8/1/2021 (Natividad Medical Center; Insured: AGM) | AA/Aa3 | 3,700,000 | 4,393,306 | |||||||
County of Stanislaus, 5.75% due 5/1/2015 (Insured: Natl-Re) | A+/Baa2 | 1,815,000 | 1,973,250 | |||||||
Delano Financing Authority, 5.00% due 12/1/2017 (Police Station and Capital Improvements) | A/NR | 1,085,000 | 1,253,674 | |||||||
Delano Financing Authority, 5.00% due 12/1/2018 (Police Station and Capital Improvements) | A/NR | 1,135,000 | 1,330,390 | |||||||
Delano Financing Authority, 5.00% due 12/1/2019 (Police Station and Capital Improvements) | A/NR | 1,195,000 | 1,417,378 | |||||||
Fillmore Public Financing Authority, 5.00% due 5/1/2016 (Water Recycling; Insured: CIFG) | AA-/Aa3 | 735,000 | 816,534 | |||||||
Fresno USD GO, 5.90% due 8/1/2017 (Educational Facilities Improvements; Insured: Natl-Re) | A+/Baa2 | 590,000 | 694,395 | |||||||
Fresno USD GO, 5.90% due 8/1/2018 (Educational Facilities Improvements; Insured: Natl-Re) | A+/Baa2 | 630,000 | 756,920 | |||||||
Fresno USD GO, 5.90% due 8/1/2019 (Educational Facilities Improvements; Insured: Natl-Re) | A+/Baa2 | 675,000 | 818,404 | |||||||
Fresno USD GO, 5.00% due 2/1/2020 (Educational Facilities Improvements; Insured: Natl-Re) | A+/Baa2 | 2,510,000 | 2,891,871 | |||||||
Fresno USD GO, 5.90% due 8/1/2020 (Educational Facilities Improvements; Insured: Natl-Re) | A+/Baa2 | 720,000 | 878,069 | |||||||
Fullerton Public Financing Authority, 5.00% due 9/1/2016 (Insured: AMBAC) | A/NR | 1,775,000 | 1,902,835 | |||||||
Hemet USD GO, 4.00% due 8/1/2018 (Insured: AGM) | AA-/NR | 1,335,000 | 1,516,186 | |||||||
Irvine Public Facilities & Infrastructure Authority, 2.00% due 9/2/2013 | BBB+/NR | 1,000,000 | 1,008,870 | |||||||
Irvine Public Facilities & Infrastructure Authority, 3.00% due 9/2/2015 | BBB+/NR | 570,000 | 587,761 | |||||||
Irvine Public Facilities & Infrastructure Authority, 3.00% due 9/2/2016 | BBB+/NR | 1,290,000 | 1,331,873 | |||||||
Kern Community College District COP, 4.00% due 4/1/2014 | SP-1+/NR | 3,000,000 | 3,134,400 | |||||||
Lindsay USD COP, 5.75% due 10/1/2017 (Insured: AGM) | AA-/NR | 1,160,000 | 1,294,746 | |||||||
Lindsay USD COP, 6.00% due 10/1/2018 (Insured: AGM) | AA-/NR | 680,000 | 777,832 | |||||||
Lodi Public Financing Authority, 3.00% due 10/1/2016 (City Police Building and Jail) | A/NR | 830,000 | 870,894 | |||||||
Lodi Public Financing Authority, 5.00% due 10/1/2020 (City Police Building and Jail) | A/NR | 965,000 | 1,115,038 | |||||||
Lodi Public Financing Authority, 5.00% due 10/1/2021 (City Police Building and Jail) | A/NR | 1,020,000 | 1,177,590 | |||||||
Lodi Public Financing Authority, 5.00% due 10/1/2022 (City Police Building and Jail) | A/NR | 1,040,000 | 1,194,263 | |||||||
Long Beach Bond Finance Authority, 5.00% due 11/15/2012 (Natural Gas Utility Improvements) | A-/Baa2 | 1,050,000 | 1,055,502 | |||||||
Los Alamitos USD GO, 0% due 9/1/2016 (School Facilities Improvement) | SP-1+/Aa2 | 2,000,000 | 1,889,960 | |||||||
Los Angeles Convention & Exhibition Center Authority, 5.00% due 8/15/2016 | A+/A2 | 2,000,000 | 2,237,220 | |||||||
Los Angeles Convention & Exhibition Center Authority, 5.00% due 8/15/2017 | A+/A2 | 1,660,000 | 1,889,146 | |||||||
Los Angeles County Public Works Financing Authority, 5.00% due 9/1/2014 (Multiple Facilities Projects; Insured: Natl-Re/FGIC) | BBB/NR | 2,990,000 | 3,206,745 | |||||||
Los Angeles County Public Works Financing Authority, 4.25% due 6/1/2016 (Calabasas Landfill; Insured: AMBAC) | A+/A1 | 1,000,000 | 1,062,780 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Los Angeles County Public Works Financing Authority, 5.00% due 8/1/2018 (Multiple Capital Projects) | A+/A1 | $ | 2,060,000 | $ | 2,428,946 | |||||
Los Angeles County Schools Regionalized Business Services Corp. COP, 0% due 8/1/2021 (Insured: AMBAC) | NR/NR | 2,135,000 | 1,416,039 | |||||||
Los Angeles Department of Airports, 5.50% due 5/15/2018 (Los Angeles International Airport) (AMT) | AA/Aa3 | 2,000,000 | 2,402,880 | |||||||
Los Angeles Department of Water & Power, 0.18% due 7/1/2034 put 10/1/2012 (SPA: Wells Fargo Bank N.A.) (daily demand notes) | AA-/Aa3 | 3,200,000 | 3,200,000 | |||||||
Los Angeles Department of Water & Power, 0.15% due 7/1/2035 put 10/1/2012 (SPA: Royal Bank of Canada) (daily demand notes) | AA/Aa2 | 10,600,000 | 10,600,000 | |||||||
Los Angeles Municipal Improvement Corp., 5.00% due 11/1/2017 (Capital Equipment) | A+/A3 | 3,235,000 | 3,764,667 | |||||||
Los Angeles USD COP, 5.00% due 10/1/2014 (Information Technology Projects; Insured: AMBAC) | A+/A1 | 725,000 | 786,342 | |||||||
Los Angeles USD COP, 5.00% due 10/1/2015 (Information Technology Projects; Insured: AMBAC) | A+/A1 | 1,500,000 | 1,670,985 | |||||||
Los Angeles USD COP, 5.50% due 12/1/2018 (Educational Facilities Improvements) | A+/A1 | 2,000,000 | 2,412,400 | |||||||
Mark West Union School District GO, 4.125% due 8/1/2020 (Educational Facilities Improvements; Insured: Natl-Re/FGIC) | AA-/NR | 1,275,000 | 1,311,797 | |||||||
Merced Redevelopment Agency, 5.25% due 9/1/2020 | BB+/NR | 1,190,000 | 1,254,367 | |||||||
Milpitas Redevelopment Agency, 5.00% due 9/1/2015 (Insured: Natl-Re) | A/Baa2 | 2,200,000 | 2,290,750 | |||||||
Mojave USD COP, 0% due 9/1/2017 (Educational Facilities Improvements; Insured: AGM) | AA-/NR | 1,045,000 | 933,687 | |||||||
Mojave USD COP, 0% due 9/1/2018 (Educational Facilities Improvements; Insured: AGM) | AA-/NR | 1,095,000 | 931,210 | |||||||
Mojave USD GO, 0% due 6/1/2013 (Cash Flow Management) | SP-1+/NR | 2,070,000 | 2,056,690 | |||||||
Northern California Power Agency, 4.00% due 7/1/2015 (Hydroelectric Project) | A+/A2 | 500,000 | 545,860 | |||||||
Northern California Power Agency, 5.00% due 7/1/2016 (Hydroelectric Project) | A+/A2 | 500,000 | 578,800 | |||||||
Northern California Power Agency, 5.00% due 7/1/2017 (Hydroelectric Project) | A+/A2 | 100,000 | 118,645 | |||||||
Northern California Power Agency, 5.00% due 7/1/2018 (Hydroelectric Project) | A+/A2 | 1,250,000 | 1,514,300 | |||||||
Northern California Power Agency, 5.00% due 6/1/2019 (Lodi Energy Center) | A-/A3 | 2,340,000 | 2,832,172 | |||||||
Norwalk Redevelopment Agency, 5.00% due 10/1/2014 (Insured: Natl-Re) | BBB/Baa2 | 625,000 | 661,600 | |||||||
Palomar Pomerado Health GO, 0% due 8/1/2019 (Insured: AGM) | AA-/Aa3 | 2,000,000 | 1,652,240 | |||||||
Palomar Pomerado Health GO, 0% due 8/1/2021 (Insured: Natl-Re) | A+/A1 | 2,635,000 | 1,952,693 | |||||||
Pittsburg Redevelopment Agency, 5.00% due 8/1/2020 (Los Medanos Community Development Project; Insured: Natl-Re) | BBB+/Baa2 | 1,205,000 | 1,221,725 | |||||||
Pomona USD GO, 6.10% due 2/1/2020 (Educational Facilities Improvements; Insured: Natl-Re) | A/Baa2 | 465,000 | 569,597 | |||||||
Redding Electrical Systems COP, 5.00% due 6/1/2020 (Insured: AGM) | NR/Aa3 | 2,500,000 | 2,933,500 | |||||||
Regents of the University of California, 4.00% due 5/15/2017 (Campus Housing and Facilities) | AA-/Aa2 | 1,250,000 | 1,433,438 | |||||||
Richmond Joint Powers Financing Authority, 5.25% due 5/15/2013 | A+/NR | 105,000 | 105,258 | |||||||
Ridgecrest Redevelopment Agency, 5.00% due 6/30/2016 (Ridgecrest Redevelopment Project) | A-/Ba1 | 1,055,000 | 1,152,123 | |||||||
Ridgecrest Redevelopment Agency, 5.00% due 6/30/2017 (Ridgecrest Redevelopment Project) | A-/Ba1 | 1,055,000 | 1,165,100 | |||||||
Ridgecrest Redevelopment Agency, 5.25% due 6/30/2018 (Ridgecrest Redevelopment Project) | A-/Ba1 | 1,050,000 | 1,179,339 | |||||||
Ridgecrest Redevelopment Agency, 5.50% due 6/30/2019 (Ridgecrest Redevelopment Project) | A-/Ba1 | 1,050,000 | 1,203,206 | |||||||
Ridgecrest Redevelopment Agency, 5.50% due 6/30/2020 (Ridgecrest Redevelopment Project) | A-/Ba1 | 1,040,000 | 1,195,407 | |||||||
Riverside County Palm Desert Financing Authority, 5.00% due 5/1/2013 (County Facilities Projects) | AA-/A2 | 1,000,000 | 1,026,890 | |||||||
Riverside County Public Financing Authority, 3.625% due 10/1/2012 (Jurupa Valley Desert & Interstate 215; Insured: Natl-Re) | BBB/Baa2 | 1,245,000 | 1,245,087 | |||||||
Rosemead Community Development Commission, 5.00% due 10/1/2015 (Redevelopment Project Area No. 1; Insured: AMBAC) | A+/NR | 1,015,000 | 1,093,449 | |||||||
Rosemead Community Development Commission, 5.00% due 10/1/2016 (Redevelopment Project Area No. 1; Insured: AMBAC) | A+/NR | 700,000 | 768,033 | |||||||
Roseville Natural Gas Financing Authority, 5.00% due 2/15/2017 | A-/Baa2 | 1,390,000 | 1,520,604 | |||||||
Sacramento City Financing Authority, 0% due 11/1/2014 (Insured: Natl-Re) | BBB/Baa2 | 3,480,000 | 3,281,118 | |||||||
Sacramento City USD GO, 5.00% due 7/1/2021 (Educational Facilities Improvements) | A+/A1 | 3,600,000 | 4,352,760 | |||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2015 (Procter & Gamble Project) | A+/A1 | 1,100,000 | 1,221,627 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2019 (Procter & Gamble Project) | A+/A1 | $ | 625,000 | $ | 757,488 | |||||
Sacramento County Sanitation Districts Financing Authority, 0.21% due 12/1/2039 put 10/1/2012 (LOC: Morgan Stanley) (daily demand notes) | AAA/Aa3 | 18,300,000 | 18,300,000 | |||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2020 (Cosumnes Project; Insured: Natl-Re) | BBB/A3 | 3,000,000 | 3,279,180 | |||||||
San Bernardino County Community Facilities District, 5.30% due 9/1/2013 | NR/NR | 300,000 | 309,831 | |||||||
San Diego Redevelopment Agency, 5.00% due 9/1/2014 (Centre City Redevelopment; Insured: AMBAC) | NR/Ba1 | 200,000 | 210,546 | |||||||
San Diego Redevelopment Agency, 5.25% due 9/1/2015 (Centre City Redevelopment; Insured: AGM) | AA-/Aa3 | 1,375,000 | 1,387,361 | |||||||
San Diego Redevelopment Agency, 5.00% due 9/1/2018 (Centre City Redevelopment; Insured: AMBAC) | NR/Ba1 | 3,215,000 | 3,516,985 | |||||||
San Diego Redevelopment Agency, 0% due 9/1/2019 (Centre City Redevelopment; Insured: AGM) | AA-/Aa3 | 1,910,000 | 1,562,246 | |||||||
San Diego Redevelopment Agency, 5.80% due 11/1/2021 (Horton Plaza) | A-/Ba1 | 2,635,000 | 2,640,244 | |||||||
San Diego USD GO, 5.50% due 7/1/2020 (Insured: Natl-Re) | AA-/Aa2 | 1,390,000 | 1,777,601 | |||||||
San Francisco City & County Airports Commission, 4.00% due 5/1/2013 | A+/A1 | 500,000 | 510,885 | |||||||
San Francisco City & County COP, 5.00% due 11/1/2022 (525 Golden Gate Ave-Public Utilities Commission Office Project) | AA-/A1 | 700,000 | 824,250 | |||||||
San Francisco City & County Redevelopment Agency, 0% due 7/1/2013 (George R. Moscone Convention Center) | AA-/Aa3 | 1,200,000 | 1,192,752 | |||||||
San Francisco City & County Redevelopment Agency, 5.25% due 8/1/2013 (San Francisco Redevelopment Project; Insured: Natl-Re/FGIC) | A/Ba1 | 1,250,000 | 1,284,138 | |||||||
San Francisco City & County Redevelopment Agency, 5.25% due 8/1/2014 (San Francisco Redevelopment Project; Insured: Natl-Re/FGIC) | A/Ba1 | 2,000,000 | 2,043,820 | |||||||
San Francisco City & County Redevelopment Agency, 5.00% due 6/1/2020 (San Francisco Redevelopment Project; Insured: AGM) | AA-/Aa3 | 1,730,000 | 2,052,299 | |||||||
San Joaquin County COP, 5.50% due 11/15/2013 (Capital Facilities; Insured: Natl-Re) | BBB/Baa2 | 690,000 | 700,447 | |||||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: AGM) | AA-/Aa2 | 5,000,000 | 3,990,050 | |||||||
San Jose Financing Authority, 5.25% due 6/1/2016 (Civic Center Project; Insured: AMBAC) | AA/Aa3 | 500,000 | 502,090 | |||||||
San Luis & Delta-Mendota Water Authority, 4.50% due 3/1/2014 (DHCCP Development Project) | A+/NR | 2,000,000 | 2,098,800 | |||||||
San Mateo Flood Control District COP, 5.25% due 8/1/2017 (Colma Creek; Insured: Natl-Re) | BBB/Baa2 | 1,000,000 | 1,001,810 | |||||||
San Mateo Union High School District GO, 0% due 9/1/2019 (Educational Facilities Improvements; Insured: Natl-Re/FGIC) | AA/Aa1 | 2,000,000 | 1,703,160 | |||||||
Santa Ana Financing Authority, 6.25% due 7/1/2018 (Police Administration & Holding Facility; Insured: Natl-Re) | BBB/Baa2 | 2,000,000 | 2,334,380 | |||||||
Santa Ana USD GO, 0% due 8/1/2020 (Insured: Natl-Re/FGIC) | BBB/NR | 2,035,000 | 1,601,810 | |||||||
Santa Clara County Financing Authority, 4.00% due 5/15/2017 (Multiple Facilities) | AA/A1 | 1,000,000 | 1,120,740 | |||||||
Santa Margarita-Dana Point Authority, 7.25% due 8/1/2013 (Improvement Districts 3-3A, 4-4A; Insured: Natl-Re) | BBB/Baa2 | 2,000,000 | 2,088,780 | |||||||
Santa Monica Community College District GO, 0% due 8/1/2018 (College District Capital Improvements; Insured: MBIA) | AA/Aa1 | 1,320,000 | 1,080,895 | |||||||
Solano County COP, 5.00% due 11/15/2013 (Health & Social Services Headquarters) | AA-/A1 | 1,780,000 | 1,868,519 | |||||||
Solano County COP, 5.00% due 11/15/2016 (Health & Social Services Headquarters) | AA-/A1 | 1,000,000 | 1,145,710 | |||||||
Southeast Resource Recovery Facilities Authority, 5.375% due 12/1/2013 (Insured: AMBAC) (AMT) | A+/A1 | 1,060,000 | 1,103,884 | |||||||
Southeast Resource Recovery Facilities Authority, 5.25% due 12/1/2017 (Insured: AMBAC) | A+/A1 | 1,000,000 | 1,044,960 | |||||||
Southern California Public Power Authority, 5.00% due 11/1/2013 (Gas Project No. 1) | BBB/Baa1 | 1,000,000 | 1,039,020 | |||||||
Southern California Public Power Authority, 0% due 7/1/2015 (Multiple Transmission Projects; Insured: Natl-Re) | AA-/Aa3 | 1,500,000 | 1,451,115 | |||||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Mead-Adelanto Projects; Insured: AMBAC) | NR/Aa3 | 450,000 | 483,147 | |||||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Mead-Phoenix Project; Insured: AMBAC) | NR/Aa3 | 275,000 | 295,350 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Southern California Public Power Authority, 5.00% due 7/1/2016 (Southern Transmission Project) | AA-/NR | $ | 2,000,000 | $ | 2,331,420 | |||||
State of California, 2.50% due 6/20/2013 (General Fund Cash Management) | SP-1+/Mig1 | 8,850,000 | 8,992,219 | |||||||
State of California GO, 5.00% due 3/1/2017 (Various Capital Projects; Insured: Syncora) | A-/A1 | 2,860,000 | 3,260,572 | |||||||
State of California GO, 5.25% due 2/1/2018 pre-refunded 2/1/2013 (Kindergarten University Facilities) | AA+/Aaa | 3,000,000 | 3,051,720 | |||||||
State of California GO, 5.00% due 9/1/2020 (Kindergarten University Facilities) | A-/A1 | 2,000,000 | 2,453,000 | |||||||
State of California GO, 0.17% due 5/1/2034 put 10/1/2012 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa2 | 1,000,000 | 1,000,000 | |||||||
State of California GO, 0.20% due 5/1/2034 put 10/1/2012 (Kindergarten University Facilities; LOC: Citibank N.A./California State Teachers’ Retirement System) (daily demand notes) | A/Aa3 | 4,500,000 | 4,500,000 | |||||||
State of California GO, 0.22% due 5/1/2034 put 10/1/2012 (Kindergarten University Facilities; LOC: Citibank N.A./California State Teachers’ Retirement System) (daily demand notes) | A/Aa3 | 850,000 | 850,000 | |||||||
Sweetwater Union High School District COP, 4.00% due 9/1/2014 (Rancho Del Rey Middle School; Insured: Natl-Re) | BBB/Baa2 | 1,020,000 | 1,063,442 | |||||||
Sweetwater Union High School District COP, 5.00% due 9/1/2021 (High Schools No. 11 & No. 12 Projects; Insured: AGM) | AA-/Aa3 | 2,250,000 | 2,278,777 | |||||||
Tracy Area Public Facilities Financing Agency, 5.875% due 10/1/2019 (Community Facilities District No. 87) | BBB/Baa2 | 590,000 | 597,298 | |||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2015 (Tuolumne Co.) | A+/A2 | 500,000 | 546,075 | |||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2018 (Tuolumne Co.) | A+/A2 | 1,690,000 | 2,007,737 | |||||||
Turlock Irrigation District, 5.00% due 1/1/2015 | A+/A2 | 1,125,000 | 1,232,123 | |||||||
Turlock Irrigation District, 5.00% due 1/1/2019 | A+/A2 | 1,000,000 | 1,204,330 | |||||||
Tustin Community Redevelopment Agency, 3.50% due 9/1/2014 (Public Improvements; Insured: AGM) | AA-/NR | 760,000 | 797,172 | |||||||
Twin Rivers USD COP, 3.50% due 6/1/2041 put 5/31/2013 (Educational Facilities Improvements; Insured: AGM) | AA-/NR | 2,000,000 | 2,005,380 | |||||||
Twin Rivers USD GO, 0% due 4/1/2014 (Educational Facilities Improvements) | SP-1/NR | 1,000,000 | 979,470 | |||||||
Ukiah USD GO, 0% due 8/1/2019 (Insured: Natl-Re) | A/A1 | 2,000,000 | 1,666,880 | |||||||
Upper Lake Union High School District GO, 0% due 8/1/2020 (Insured: | NR/Baa2 | 1,050,000 | 751,328 | |||||||
Val Verde USD COP, 5.00% due 1/1/2014 (Insured: Natl-Re/FGIC) (ETM) | NR/NR | 445,000 | 471,598 | |||||||
Washington USD Yolo County COP, 5.00% due 8/1/2017 (West Sacramento High School; Insured: AMBAC) | A/NR | 725,000 | 823,172 | |||||||
Washington USD Yolo County COP, 5.00% due 8/1/2021 (West Sacramento High School; Insured: AMBAC) | A/NR | 910,000 | 995,030 | |||||||
Washington USD Yolo County COP, 5.00% due 8/1/2022 (West Sacramento High School; Insured: AMBAC) | A/NR | 2,010,000 | 2,183,684 | |||||||
West Contra Costa USD GO, 4.00% due 8/1/2013 (Educational Facilities Improvements; Insured: AGM) | AA-/Aa3 | 500,000 | 512,875 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 97.99% (Cost $379,227,809) | $ | 397,623,662 | ||||||||
OTHER ASSETS LESS LIABILITIES — 2.01% | 8,165,645 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 405,789,307 | ||||||||
|
|
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. Bonds issued with a maturity of one year or less are assigned Moody’s ratings from MIG-1 to MIG-4 and Standard and Poor’s ratings from SP-1+ to SP-3 with MIG-1 and SP-1+ being the strongest ratings. |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
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 | |
ETM | Escrowed to Maturity | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FHA | Insured by Federal Housing Administration | |
GO | General Obligation | |
HFFA | Health Facilities Financing Authority | |
LOC | Letter of Credit | |
MBIA | Insured by Municipal Bond Investors Assurance | |
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. | |
USD | Unified School District |
See notes to financial statements.
20 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
ASSETS | ||||
Investments at value (cost $379,227,809) (Note 2) | $ | 397,623,662 | ||
Cash | 4,834,124 | |||
Receivable for fund shares sold | 1,069,434 | |||
Interest receivable | 3,657,717 | |||
Prepaid expenses and other assets | 106 | |||
|
| |||
Total Assets | 407,185,043 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 896,344 | |||
Payable to investment advisor and other affiliates (Note 3) | 246,824 | |||
Accounts payable and accrued expenses | 46,255 | |||
Dividends payable | 206,313 | |||
|
| |||
Total Liabilities | 1,395,736 | |||
|
| |||
NET ASSETS | $ | 405,789,307 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 2,404 | ||
Net unrealized appreciation on investments | 18,395,853 | |||
Accumulated net realized gain (loss) | 293,032 | |||
Net capital paid in on shares of beneficial interest | 387,098,018 | |||
|
| |||
$ | 405,789,307 | |||
|
| |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($150,155,024 applicable to 10,921,990 shares of beneficial interest outstanding - Note 4) | $ | 13.75 | ||
Maximum sales charge, 1.50% of offering price | 0.21 | |||
|
| |||
Maximum offering price per share | $ | 13.96 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($59,562,945 applicable to 4,328,857 shares of beneficial interest outstanding - Note 4) | $ | 13.76 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($196,071,338 applicable to 14,248,467 shares of beneficial interest outstanding - Note 4) | $ | 13.76 | ||
|
|
* | 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 California Limited Term Municipal Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $3,100,753) | $ | 10,571,141 | ||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,709,371 | |||
Administration fees (Note 3) | ||||
Class A Shares | 171,530 | |||
Class C Shares | 64,740 | |||
Class I Shares | 76,429 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 343,059 | |||
Class C Shares | 260,193 | |||
Transfer agent fees | ||||
Class A Shares | 38,938 | |||
Class C Shares | 23,707 | |||
Class I Shares | 35,702 | |||
Registration and filing fees | ||||
Class A Shares | 38 | |||
Class C Shares | 38 | |||
Class I Shares | 38 | |||
Custodian fees (Note 3) | 79,171 | |||
Professional fees | 28,652 | |||
Accounting fees | 8,492 | |||
Trustee fees | 10,113 | |||
Other expenses | 32,770 | |||
|
| |||
Total Expenses | 2,882,981 | |||
Less: | ||||
Fees paid indirectly (Note 3) | (5,833 | ) | ||
|
| |||
Net Expenses | 2,877,148 | |||
|
| |||
Net Investment Income | 7,693,993 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 293,032 | |||
Net change in unrealized appreciation (depreciation) on investments | 7,910,143 | |||
|
| |||
Net Realized and Unrealized Gain | 8,203,175 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 15,897,168 | ||
|
|
See notes to financial statements.
22 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg California Limited Term Municipal Fund
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 7,693,993 | $ | 7,152,466 | ||||
Net realized gain (loss) on investments | 293,032 | 230,108 | ||||||
Net unrealized appreciation (depreciation) on investments | 7,910,143 | 752,244 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 15,897,168 | 8,134,818 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,954,435 | ) | (3,228,051 | ) | ||||
Class C Shares | (975,200 | ) | (1,034,416 | ) | ||||
Class I Shares | (3,764,358 | ) | (2,889,999 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 22,903,988 | 8,719,932 | ||||||
Class C Shares | 12,392,594 | 3,784,147 | ||||||
Class I Shares | 71,789,804 | 41,213,163 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 115,289,561 | 54,699,594 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 290,499,746 | 235,800,152 | ||||||
|
|
|
| |||||
End of Year | $ | 405,789,307 | $ | 290,499,746 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 2,404 | $ | 88 |
See notes to financial statements.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
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 outstanding: 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 may be subject to a service fee, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and 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 Policy and Procedures: The Fund’s Trustees of the Trust (“the Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (“the Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: 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. 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 ordinarily valued at amortized cost, which approximates market value.
In any case where the market value of a debt obligation held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. In any case where a pricing service fails to provide a price for a debt obligation held by
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
the Fund, the Committee determines a fair value for the debt obligation using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from a different independent pricing service. 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 Committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt obligation.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 397,623,662 | $ | — | $ | 397,623,662 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 397,623,662 | $ | — | $ | 397,623,662 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2012.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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: Investments transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on investments purchased are amortized to call dates or maturity dates of the respective investments. Realized gains and losses from the sale of investments 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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.
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
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, 2012, the Distributor has advised the Fund that it refunded commissions of $13,258 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $5,358 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, 2012, 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 a distribution plan pursuant to Rule 12b-1, applicable only to the Fund’s Class C shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C shares of the Fund at an annual rate of up to .25 of 1% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, fees paid indirectly were $5,833.
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 3,337,311 | $ | 45,421,777 | 2,623,333 | $ | 34,563,347 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 165,009 | 2,247,338 | 155,786 | 2,053,355 | ||||||||||||
Shares repurchased | (1,821,571 | ) | (24,765,127 | ) | (2,115,963 | ) | (27,896,770 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,680,749 | $ | 22,903,988 | 663,156 | $ | 8,719,932 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 1,559,315 | $ | 21,248,082 | 995,972 | $ | 13,168,906 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 51,394 | 700,402 | 51,658 | 681,227 | ||||||||||||
Shares repurchased | (701,947 | ) | (9,555,890 | ) | (765,757 | ) | (10,065,986 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 908,762 | $ | 12,392,594 | 281,873 | $ | 3,784,147 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 7,459,712 | $ | 101,835,082 | 5,116,896 | $ | 67,639,490 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 162,300 | 2,214,254 | 119,897 | 1,582,985 | ||||||||||||
Shares repurchased | (2,366,192 | ) | (32,259,532 | ) | (2,136,868 | ) | (28,009,312 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 5,255,820 | $ | 71,789,804 | 3,099,925 | $ | 41,213,163 | ||||||||||
|
|
|
|
|
|
|
|
Certified Annual Report 27
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2012, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $106,637,353 and $40,388,008, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 379,227,809 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 18,491,687 | ||
Gross unrealized depreciation on a tax basis | (95,834 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 18,395,853 | ||
|
|
In order to account for permanent book/tax differences, the Fund increased undistributed net investment income by $2,316 and decreased net capital paid in on shares of beneficial interest by $2,316. This reclassification has no impact on the net asset value of the Fund. Reclassifications resulted primarily from non-deductible expenses.
At September 30, 2012, the Fund did not have any undistributed tax basis net tax-exempt income, or net ordinary income. At September 30, 2012, the Fund had $293,032 undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2012 and September 30, 2011 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 7,693,980 | $ | 7,145,306 | ||||
Ordinary income | 13 | 7,160 | ||||||
|
|
|
| |||||
Total | $ | 7,693,993 | $ | 7,152,466 | ||||
|
|
|
|
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, credit risk, interest rate risk, management risk, market and economic risk, liquidity risk, and the risks of investing primarily in the obligations of a single state. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
28 Certified Annual Report
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Certified Annual Report 29
Thornburg California Limited Term Municipal Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 13.41 | 0.29 | 0.34 | 0.63 | (0.29 | ) | — | (0.29 | ) | $ | 13.75 | 2.15 | 0.95 | 0.95 | 0.95 | 4.78 | 13.06 | $ | 150,155 | ||||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 13.38 | 0.36 | 0.03 | 0.39 | (0.36 | ) | — | (0.36 | ) | $ | 13.41 | 2.71 | 0.96 | 0.96 | 0.96 | 2.98 | 13.33 | $ | 123,910 | ||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.42 | 0.26 | 0.34 | 0.60 | (0.26 | ) | — | (0.26 | ) | $ | 13.76 | 1.88 | 1.22 | 1.22 | 1.22 | 4.49 | 13.06 | $ | 59,563 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.40 | 0.32 | 0.02 | 0.34 | (0.32 | ) | — | (0.32 | ) | $ | 13.42 | 2.45 | 1.22 | 1.22 | 1.22 | 2.63 | 13.33 | $ | 45,897 | ||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.42 | 0.33 | 0.35 | 0.68 | (0.34 | ) | — | (0.34 | ) | $ | 13.76 | 2.46 | 0.62 | 0.62 | 0.62 | 5.12 | 13.06 | $ | 196,071 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.40 | 0.40 | 0.02 | 0.42 | (0.40 | ) | — | (0.40 | ) | $ | 13.42 | 3.03 | 0.63 | 0.62 | 0.63 | 3.24 | 13.33 | $ | 120,693 | ||||||||||||||||||||||||||||||||||||||||
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 |
(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, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
30 Certified Annual Report | Certified Annual Report 31 |
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
32 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,020.90 | $ | 4.79 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.26 | $ | 4.79 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,019.60 | $ | 6.14 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.92 | $ | 6.14 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,021.90 | $ | 3.13 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.90 | $ | 3.13 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.95%; C: 1.22%; I: 0.62%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table above 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 above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 33
INDEX COMPARISON | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg California Limited Term Municipal Fund versus BofA Merrill Lynch 1-10 Year U.S. Municipal Securities Index, Barclays Five-Year Municipal Bond Index, and Consumer Price Index (September 30, 2002 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
Since | ||||||||||||||||
1 Yr | 5 Yrs | 10 Yrs | Inception | |||||||||||||
A Shares (Incep: 2/19/87) | 3.24 | % | 4.26 | % | 3.20 | % | 4.71 | % | ||||||||
C Shares (Incep: 9/1/94) | 3.98 | % | 4.29 | % | 3.08 | % | 3.75 | % | ||||||||
I Shares (Incep: 4/1/97) | 5.12 | % | 4.91 | % | 3.69 | % | 4.31 | % |
Effective February 1, 2012, the Fund’s benchmark changed from the Barclays Five-Year Municipal Bond Index to the BofA Merrill Lynch 1-10 Year U.S. Municipal Securities Index. The Advisor believes that the new index better reflects the Fund’s principal investment strategies, including the Fund’s practice of investing in obligations having a range of maturities.
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 or call 800.847.0200. 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.
34 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 35
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE(1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
36 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 Thorn-burg 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. (8) 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 California Limited Term Municipal Fund | September 30, 2012 (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. A description of the Policy 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, 2012, dividends paid by the Fund of $7,693,980 (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 reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 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 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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.
38 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s investment performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (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 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 considered (among other aspects of the data) performance data for the ten most recent calendar years, which showed that the Fund had produced positive returns in accordance with expectations in all years, that the Fund’s investment return for the most recent calendar year exceeded the average return of the mutual fund category for which calendar year data was presented, and that the Fund’s returns exceeded or were comparable to the average returns of the category in eight of the preceding nine years. Noted quantitative data further showed that the Fund’s investment returns fell within the top decile of performance for the first fund 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 within the top quartile of performance for the second fund category for the one-year and three-year period ended with the second quarter and within the top decile for the five-year period. These data indicated to the Trustees that the Fund’s investment performance met expectations in view of the Fund’s stated objectives and strategies in the market conditions for the relevant periods. Measures of portfolio volatility, risk and return considered by the Trustees demonstrated that the Fund’s performance relative to these measures also 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of municipal debt mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged to the Fund was comparable to the median and slightly higher than the average fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was somewhat higher than the median and slightly higher than the average expense ratios for the fund category. The Trustees did not find the differences 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 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 that the fee rates charged by investment advisors to institutional clients had limited relevance to the evaluation
Certified Annual Report 39
OTHER INFORMATION, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2012 (Unaudited) |
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 information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its 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 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.
40 Certified Annual Report
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TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
42 This page is not part of the Annual Report.
RETIREMENT AND EDUCATION ACCOUNTS
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our website 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 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 Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
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THORNBURG FUND FAMILY
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 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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TH859 |
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2012. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 2012 Best Fixed Income Funds Manager
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income Large Company universe for the three-year period ended 11/30/11, based on risk-adjusted returns. Lipper’s Large Company universe is comprised of fund families with more than $40 billion in total net assets. Only fund families with at least five bond funds were eligible for the fixed income funds manager award. Asset Class Group Awards are given for the three-year period only.
Glossary
BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index – This index is a subset of the BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity greater than or equal to 3 years and less than 15 years.
BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index – This index is a subset of the BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity greater than or equal to 7 years and less than 12 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 reflects actual distributions made to shareholders. The annualized distribution yield is calculated by summing the last 30 days of income at a given month end and annualizing to a 360-day year. The result is divided by the ending maximum offering price.
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.
Consumer Price Index (CPI) – Index that measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. Also known as the cost-of-living index.
Core CPI – Consumer Price Index minus the energy and food components.
Core PCE Price Index – Personal Consumption Expenditures (PCE) prices excluding food and energy.
Duration – A bond’s sensitivity to interest rates. 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
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 Bond – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Gross Domestic Product (GDP) – A country’s income minus foreign investments: the total value of all goods and services produced within a country in a year, minus net income from investments in other countries.
Quantitative Easing – The Federal Reserve’s monetary policy used to stimulate the U.S. economy following the recession that began in 2007/08.
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.
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 often fail to stack up over longer periods of time.
We apply time-tested techniques to manage risk and pursue attractive returns. These include:
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment 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. |
Portfolio Managers
Josh Gonze, Chris Ryon, CFA, 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 or call 800.847.0200.
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, 2012
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 6/18/91) | ||||||||||||||||||||
Without sales charge | 4.80 | % | 4.03 | % | 4.71 | % | 3.84 | % | 4.94 | % | ||||||||||
With sales charge | 2.70 | % | 3.33 | % | 4.28 | % | 3.64 | % | 4.84 | % |
30-Day Yields, A Shares
As of September 30, 2012
Annualized Distribution Yield | SEC Yield | |||
2.62% | 0.98 | % |
Key Portfolio Attributes
As of September 30, 2012
Number of Bonds | 123 | |||
Effective Duration | 4.8Yrs | |||
Average Maturity | 9.0Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 14.
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Thornburg New Mexico Intermediate Municipal Fund — September 30, 2012
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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 13, 2012
Dear Fellow Shareholder:
We are pleased to present the annual report for the Thornburg New Mexico Intermediate Municipal Fund. The net asset value (NAV) of the Class A shares increased by 23 cents to $13.95 per share during the fiscal year ended September 30, 2012. If you were with us for the entire period, you received dividends of 40.8 cents per share. If you reinvested your dividends, you received 41.4 cents per share. Dividends per share were lower for Class D shares and higher for Class I shares to account for varying class-specific expenses. The Class A shares of your Fund underperformed the index with a total return of 4.80% at NAV for the fiscal year ended September 30, 2012, compared to 7.06% for the BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index. The investment-universe constraints of a single-state fund can often lead to wide performance variations, and the Fund generated 0.94% less price appreciation and 1.32% less income.
The markets’ positive returns were primarily due to declining interest rates and narrowing credit spreads. Interest rates declined more for longer maturities; consequently, longer-maturity bonds outperformed shorter-maturity bonds. As credit spreads compressed, lower-quality bonds outperformed higher quality bonds. The Fund’s overall price depreciation is due to several factors. Our interest-rate sensitivity, as measured by the Fund’s duration and differing allocations along the yield curve added 0.34% of relative price appreciation. Our overweight to the insured and revenue sectors subtracted 0.34%. We underweighted the general obligation and pre-refunded sectors, which added 0.13% of relative price performance. Our overweight to lower-credit-quality securities subtracted 0.46% of performance relative to the benchmark. Other risk factors subtracted 0.61%.
The New Mexico Economy, the Fiscal Cliff, and the Presidential Election
The relative economic health of the state of New Mexico, as measured by Bloomberg’s Economic Evaluation of the States index, is 51 out of 51 (the index includes the District of Columbia), even with our state’s unique strengths. This index is based on data from the second quarter of 2012 versus the second quarter of 2011. The data used in the index includes the following:
• | Percentage change in mortgage delinquency rates |
• | Percentage change in personal income |
• | Percentage change in tax revenue |
• | Percentage change in non-farm employment |
• | Percentage change in home prices |
• | Percentage change in equity index - a capitalization-weighted index consisting of equities domiciled in New Mexico |
Certified Annual Report 7
LETTER TO SHAREHOLDERS, CONTINUED
The overall economic health grade reflected in this index is negative 9.6% (as of 10/18/2012), based on a scale ranging from 11.0% to negative 11.0%. The best-performing state based on this evaluation metric is North Dakota, which posted an economic evaluation reading of 10.8%.
Positive Drivers
The positive factors in New Mexico’s evaluation were personal income, which increased 2.0% from the second quarter of 2011 versus the same quarter in 2012. Personal income is defined as the income that is received by all persons from all sources, as reported by the Bureau of Economic Analysis (BEA). The equity index was up 12.4% for the same period.
Negative Drivers
The other five factors were negative – to varying degrees. Mortgage delinquencies were up 0.2%; this measure shows “seriously” delinquent (90+ days) first-mortgage loans. This statistic began to climb in late 2008, reaching a high of 6.3% in March 2012. It has hovered between 5.9% and 6.13% since then; the last reading in June 2012 was 6.13%. State tax revenues were down 9.0%. This measure is based on the quarterly summary of state government tax revenue provided by the U.S. Census Bureau. New Mexico quarterly state tax revenues hit a high point in March 2006 and a low in September 2011. Due to the significant decline in revenues in September 2011, New Mexico state quarterly tax revenues are down 26% (on average) since June 2011. If one were to exclude the September decline as anomalous, quarterly state tax revenue would be down 11%. Non-farm payrolls were lower by 0.5%. Finally, home prices were down by 2.3%.
Unique Strengths
On the bright side, oil and gas resources provided over $2 billion in annual taxes and other revenues to the state. New Mexico’s August unemployment rate of 6.5% was below the national average of 8.1%.
The Fiscal Cliff
In addition to these fundamental factors, many investors are concerned about the impact of the so-called “fiscal cliff”, which The Washington Post referred to as follows:
The “ fiscal cliff” is a term coined by Federal Reserve Chairman Ben S. Bernanke. It refers to a collection of changes in current law that are all set to strike in January, triggering the sharpest reduction in the federal budget deficit in more than 40 years.
The Post goes on to say that taxes would also increase:
For most taxpayers, the bulk of the increase would be triggered by the expiration of tax cuts enacted in 2001 and 2003 during the George W. Bush administration. The expiration of President Obama’s payroll tax holiday, which shaved two percentage points off the 6.2 percent Social Security tax, comes in a close second. If these issues are not addressed, many analysts think the United States will be pushed into another recession.
8 Certified Annual Report
On top of all this, Europe is still a mess, but the fixed income markets seem not to be as headline sensitive to news coming out of Europe as they were last year. In its most recent meeting, the Federal Reserve Board (the Fed) decided to enter into a third round of quantitative easing, known as QE3. In this round, the Fed will concentrate its security purchases in the mortgage markets in an effort to lower borrowing costs for homebuyers, which should spur the housing market. But as anyone who has recently applied for a mortgage knows, it is not the interest cost of the product that stands as a borrower’s major roadblock. The fixed income markets’ initial reaction to the latest Fed move was an increase in inflation expectations and a decrease in bond prices, though this fear has subsided in recent weeks.
The Presidential Election and Tax Policy
Tax policy and the federal deficit have proven to be key election-season issues. Both candidates have put forward their respective plans for deficit reduction; both could influence the municipal bond market. Table I shows a side-by-side analysis based on a recent article in The Bond Buyer, a leading publication on the municipal bond market.
Table I
Obama | Romney | |
Extends the 2001 and 2003 tax cuts for individuals earning under $200,000 and families earning under $250,000. | Permanently extend all the 2001 and 2003 tax cuts. Eliminate taxation of investment income for individuals earning less than $200,000. | |
Returns to the Clinton Era highest marginal tax rate of 39.6%. | Lowers marginal rates across the board by 20%, eliminates the alternative minimum tax. | |
In a jobs bill he floated last October and his 2013 budget, Obama proposed to place a 28% cap on the value of tax-exempt interest for the wealthy. | Announced he would cap individual tax deductions at $17,000. Not clear if he would cap exclusions, like tax exemption, as well as deductions. | |
Bruce Bartlett, former policy adviser to President Ronald Reagan and Treasury official under President George H. W. Bush, said without a doubt Obama’s tax proposals would be more beneficial to the municipal market primarily because he wants to impose higher tax rates on the wealthy, which would make tax-exempt bonds more attractive. | While Romney has not specifically mentioned capping tax exemption, in a Wall Street Journal editorial in August, Glenn Hubbard, his senior economic adviser, said the exclusion of interest on tax-exempt municipal bonds is “on the table” for the Republican candidate. |
One can see that both candidates’ potential tax policies, as understood today, could influence the municipal bond market. However, as with most election rhetoric, the eventual legislation may look nothing like the campaign proposals. There are two things that people should never watch being made, sausage and legislation!
Certified Annual Report 9
LETTER TO SHAREHOLDERS, CONTINUED
The Municipal Market
The demand picture in the municipal market improved during the fiscal year. Investors poured $56 billion into municipal bond mutual funds over the last 12 months. The total assets in municipal bond mutual funds were $562 billion, according to the Investment Company Institute, a mutual fund industry advocacy group. Assets in municipal bond mutual funds on November 30, 2010, just before the six-month period of investor exodus, were $497 billion. On the other side of the ledger, the supply picture improved. Nationally, the supply of new issue municipal bonds was up 44.5% for the period January through September 2012. During the same period, the supply of new-issue municipal bonds originating from New Mexico issuers decreased by 6.1%.
The trend towards lower interest rates continued throughout this fiscal year. With short-term yields anchored near zero, investors moved out along the yield curve in search of more income. This caused long-term maturities to decrease in yield much more than short-term maturities. The average change in yield for the Thornburg New Mexico Intermediate Municipal Fund’s investment universe (1–20 years), as measured by the average change in yield of a AAA general obligation bond, was negative 0.13% for the first half of the fiscal year. In the second half of the fiscal year, the same measure of average yield change was 0.42%. This decline in average yields was 1.5 times that of the 1–10 year maturity range of the municipal market. See Graph I.
Graph I: AAA General Obligation Municipal Yield Changes for 9/30/2011 through 9/30/2012
10 Certified Annual Report
Investors, again in a search for income, have been willing to pay much more for lower-quality securities than any time since 2008. This caused quality spreads to narrow and lower quality securities to outperform higher quality securities. On December 30, 2011, the incremental yield an investor gained for buying a BBB security versus a AAA security with a 10-year maturity was 3.00%. On September 30, 2012, that incremental yield equaled 2.08%, a 0.92% decrease. Graph II shows the quarter-by-quarter and cumulative total return performance of the BofA Merrill Lynch 3–15 Year U.S. Municipal Securities Index for the fiscal year.
The credit picture in the municipal market is still mixed. Total tax revenues at the state of New Mexico have been mixed over the last year. The decrease in tax revenues experienced in September 2011 appears to be a seasonal anomaly, having occurred each September for the last few years. Tax revenues in the quarters that followed showed the same seasonal volatility, but at much lower absolute levels. At the local level – heavily reliant on real estate taxes – the continued decline of assessed values has put pressure on local finances. Pension funding levels continue to decline due to poor investment returns and cutbacks in annual pension contributions. New Mexico’s state pension plans were 72% funded according to the June 2012 Pew Center on the States The Widening Gap Update. The same group estimates that a 80% funding level is sufficient to meet future liabilities.
In the most recent semi-annual letter to shareholders, we noted the risks of rising interest rates. As bond portfolio managers, we are always worried. If bonds are doing well, the economy is probably doing poorly, and we worry. If the economy is doing well, we worry because yields are probably rising and bond prices are declining. Such is the life we have chosen!
The level of real yields (yield less inflation) is a measure of value for fixed income products. Real yield levels are at record lows across all fixed income products. Relative to other fixed income products, municipal bonds appear to be attractive. Graph III on the next page illustrates this measure.
Graph II: BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index
Quarterly and Cumulative Total Returns
Certified Annual Report 11
LETTER TO SHAREHOLDERS, CONTINUED
Real yield levels for ten-year AAA general obligation municipal bonds using Core Personal Consumption Expenditures (PCE) as an inflation measure are near 20-year lows. And we worry. At the same time, we are reminded of a famous quote by John Maynard Keynes, “The market can stay
Graph III: 10-Year AAA Muni Real Yield Using Core PCE
irrational longer than you can stay solvent.” Solvency is not an issue, of course, but Graph III would suggest rationality is. This state of affairs can continue for some time, but it is still a risk. The long-term average real yield for a ten-year AAA municipal general obligation bond is 2.18%. Meaning that since May 1991, investors have demanded 2.18% above the Core PCE inflation rate to invest in ten-year AAA general-obligation bonds. The current yield on a ten-year AAA municipal general-obligation bond is 1.69%, and Core PCE inflation is 1.60% as of August 31, 2012 (the last data point available). If this relationship were to return to the average long-term real yield level, one of three things would have to happen. First, 10-year interest rates would need to increase about 2.00%. Second, inflation would have to decrease by about 2.00%. Neither of these two outcomes would be pleasant. Third, some combination of the two prior outcomes could occur, which also promises to be unpleasant. Investors should use this information to recognize the risk inherent in fixed income products at these historically low yield levels. They should take this opportunity to review their portfolios and determine whether these portfolios are properly diversified. In addition, they should ask themselves if they have an appropriate time horizon in mind for their investments. We suggest two to three years from the point that question is posed.
12 Certified Annual Report
Graph IV: % of Portfolio Maturing
Conclusion
Your Thornburg New Mexico Intermediate Municipal Fund currently consists of a laddered portfolio structure of 123 securities. We ladder our core portfolios because we believe this structure has the potential to maximize an investor’s income. In fact, in an internal study of portfolio structures (using indices as proxies for portfolios) extending back to 1997, a hypothetical laddered portfolio structure outperformed bullet and barbell structures approximately 2/3 of the time (for a copy of the study, go to www.thornburg.com/whyladder). Past performance does not guarantee future results, of course. Laddering manages a portfolio’s yield curve exposure with a roughly equal weighting of each maturity, mitigating a major risk factor. Graph I illustrates that yield changes are not uniform across the New Mexico Intermediate Municipal Fund’s investment universe. Laddering also reduces reinvestment risk by ensuring that a portion of the portfolio matures each year, so it can be reinvested. Graph IV describes the percentages of your Fund’s bond portfolio maturing in each of the coming years. We would like to thank you for the trust you have placed with us and will continue to keep that foremost in our minds.
Sincerely, | ||||
![]() | ![]() | |||
Christopher Ihlefeld | Christopher Ryon,CFA | Josh Gonze | ||
Portfolio Manager | Portfolio Manager | 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 13
SCHEDULE OF INVESTMENTS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 |
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 | |||||||
a Albuquerque Metropolitan Arroyo Flood Control Authority GO, 2.00% due 8/1/2013 (Flood Control System Improvements) | AAA/Aaa | $ | 2,200,000 | $ | 2,233,682 | |||||
Albuquerque Municipal School District No. 12 GO, 5.00% due 8/1/2019 (Bernalillo and Sandoval Counties School Facilities) (State Aid Withholding) | AA/Aa1 | 5,885,000 | 7,357,662 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2012 (Public Capital Improvements) | AAA/Aa2 | 1,000,000 | 1,000,420 | |||||||
Bernalillo County GRT, 5.00% due 4/1/2021 (Government Services; Insured: Natl-Re) | AAA/Aa2 | 3,000,000 | 3,577,980 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2022 (Government Services; Insured: AMBAC) | AAA/Aa2 | 3,170,000 | 4,097,764 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2023 (Government Services; Insured: AMBAC) | AAA/Aa2 | 1,275,000 | 1,657,334 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2025 (Government Services; Insured: AMBAC) | AAA/Aa2 | 3,850,000 | 5,107,872 | |||||||
Bernalillo County GRT, 5.25% due 4/1/2027 (Government Services) | AAA/Aa2 | 100,000 | 126,965 | |||||||
Bernalillo County GRT, 5.70% due 4/1/2027 (Juvenile Detention Facilities) | AAA/Aa2 | 3,000,000 | 3,939,000 | |||||||
Bernalillo County GRT, 5.70% due 4/1/2027 (Government Services; Insured: Natl-Re) | AAA/Aa2 | 415,000 | 544,895 | |||||||
Bernalillo County Water Utility Authority, 5.00% due 7/1/2021 | AA+/Aa2 | 1,760,000 | 2,138,717 | |||||||
Bernalillo County Water Utility Authority, 5.50% due 7/1/2025 | AA+/Aa2 | 1,000,000 | 1,258,340 | |||||||
Bernalillo County Water Utility Authority, 5.00% due 7/1/2026 | AA+/Aa2 | 1,420,000 | 1,687,130 | |||||||
Central New Mexico Community College, 4.00% due 8/15/2023 | AA+/Aa1 | 1,920,000 | 2,211,840 | |||||||
City of Albuquerque, 5.50% due 7/1/2013 (Albuquerque International Sunport) | A/A2 | 4,000,000 | 4,156,640 | |||||||
City of Albuquerque, 5.00% due 7/1/2014 | A/A2 | 1,000,000 | 1,077,300 | |||||||
City of Albuquerque GRT, 5.00% due 7/1/2021 | AAA/Aa2 | 1,340,000 | 1,609,809 | |||||||
City of Albuquerque GRT, 5.00% due 7/1/2021 | AAA/Aa2 | 3,000,000 | 3,604,050 | |||||||
City of Albuquerque IDRB, 5.15% due 4/1/2016 (MCT Industries Inc.; LOC: Bank of the West) (AMT) | NR/A2 | 820,000 | 834,219 | |||||||
City of Albuquerque IDRB, 5.25% due 4/1/2017 (MCT Industries Inc.; LOC: Bank of the West) (AMT) | NR/A2 | 2,140,000 | 2,176,123 | |||||||
City of Farmington, 5.00% due 6/1/2013 (San Juan Regional Medical Center) | NR/A3 | 500,000 | 513,650 | |||||||
City of Farmington, 5.00% due 6/1/2017 (San Juan Regional Medical Center) | NR/A3 | 1,035,000 | 1,174,218 | |||||||
City of Farmington, 5.125% due 6/1/2018 (San Juan Regional Medical Center) | NR/A3 | 570,000 | 597,799 | |||||||
City of Farmington, 5.125% due 6/1/2019 (San Juan Regional Medical Center) | NR/A3 | 645,000 | 672,896 | |||||||
b City of Farmington, 5.00% due 6/1/2022 (San Juan Regional Medical Center) | NR/A3 | 2,825,000 | 3,083,600 | |||||||
City of Farmington PCR, 4.70% due 9/1/2024 (Arizona Public Service Co.) | BBB/Baa1 | 4,000,000 | 4,455,760 | |||||||
City of Farmington PCR, 1.875% due 6/1/2032 put 9/1/2017 (El Paso Electric Co. Four Corners Project) | BBB/Baa2 | 3,300,000 | 3,309,405 | |||||||
City of Gallup PCR Tri-State Generation, 5.00% due 8/15/2013 (Insured: AMBAC) | A/A3 | 2,110,000 | 2,183,301 | |||||||
City of Gallup PCR Tri-State Generation, 5.00% due 8/15/2017 (Insured: AMBAC) | A/A3 | 3,540,000 | 3,863,521 | |||||||
City of Rio Rancho GRT, 5.00% due 6/1/2014 (Public Service Facility Projects; Insured: Natl-Re/FGIC) | AA-/Aa2 | 955,000 | 1,022,843 | |||||||
City of Rio Rancho GRT, 5.00% due 6/1/2016 (Public Service Facility Projects; Insured: Natl-Re/FGIC) | AA-/Aa2 | 555,000 | 618,836 | |||||||
City of Rio Rancho GRT, 5.00% due 6/1/2022 (Public Service Facility Projects; Insured: Natl-Re/FGIC) | AA-/Aa2 | 1,000,000 | 1,104,450 | |||||||
Colfax County GRT, 5.00% due 9/1/2019 (Government Center Facility) | A-/NR | 760,000 | 880,460 | |||||||
Colfax County GRT, 5.50% due 9/1/2029 (Government Center Facility) | A-/NR | 2,510,000 | 2,854,297 | |||||||
County of Los Alamos GRT, 5.75% due 6/1/2016 (Public Facilities Projects) | AA+/Aa3 | 1,000,000 | 1,183,830 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
County of Los Alamos GRT, 5.625% due 6/1/2023 (Public Facilities Projects) | AA+/Aa3 | $ | 1,000,000 | $ | 1,206,040 | |||||
County of Los Alamos GRT, 5.75% due 6/1/2024 (Public Facilities Projects) | AA+/Aa3 | 3,000,000 | 3,623,880 | |||||||
County of Los Alamos GRT, 5.75% due 6/1/2025 (Public Facilities Projects) | AA+/Aa3 | 1,000,000 | 1,206,760 | |||||||
Dona Ana County, 5.50% due 12/1/2014 (County Administrative Facilities; Insured: Radian) | A/NR | 460,000 | 501,497 | |||||||
Dona Ana County GRT, 5.50% due 6/1/2016 (County Jail Improvement Project; Insured: AMBAC) | NR/NR | 250,000 | 274,170 | |||||||
Espanola Public School District, 3.55% due 7/1/2013 (State Aid Withholding) | NR/Aa1 | 410,000 | 419,594 | |||||||
Grant County Department of Health, 5.50% due 7/1/2020 (Ft. Bayard) | AA/Aa1 | 1,565,000 | 1,832,224 | |||||||
Grant County Department of Health, 5.50% due 7/1/2021 (Ft. Bayard) | AA/Aa1 | 1,655,000 | 1,924,037 | |||||||
Grant County Department of Health, 5.50% due 7/1/2022 (Ft. Bayard) | AA/Aa1 | 1,745,000 | 2,014,463 | |||||||
Guam Government 5.375% due 12/1/2024 | BBB+/NR | 2,000,000 | 2,205,320 | |||||||
Las Cruces State Shared GRT, 5.00% due 6/1/2021 | NR/Aa3 | 730,000 | 890,461 | |||||||
Las Cruces State Shared GRT, 5.00% due 6/1/2022 | NR/Aa3 | 765,000 | 922,139 | |||||||
Las Cruces State Shared GRT, 5.00% due 6/1/2023 | NR/Aa3 | 800,000 | 956,184 | |||||||
Las Cruces State Shared GRT, 5.00% due 6/1/2024 | NR/Aa3 | 840,000 | 999,575 | |||||||
Las Cruces State Shared GRT, 5.00% due 6/1/2030 | NR/Aa3 | 2,000,000 | 2,319,880 | |||||||
Las Cruces State Shared GRT, 5.00% due 6/1/2037 | NR/Aa3 | 5,000,000 | 5,582,700 | |||||||
Los Alamos County Utility Systems, 5.00% due 7/1/2013 (Insured: AGM) | AA-/Aa3 | 1,265,000 | 1,309,111 | |||||||
Los Ranchos de Albuquerque, 4.50% due 9/1/2040 (Albuquerque Academy) | AA-/NR | 3,000,000 | 3,218,880 | |||||||
New Mexico Educational Assistance Foundation, 4.10% due 9/1/2015 (Insured: Fitch) (AMT) | NR/Aaa | 2,000,000 | 2,155,000 | |||||||
New Mexico Educational Assistance Foundation, 4.00% due 9/1/2016 | NR/Aaa | 540,000 | 597,575 | |||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2019 | AAA/Aaa | 1,000,000 | 1,207,100 | |||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2022 | AAA/Aaa | 3,000,000 | 3,555,570 | |||||||
b New Mexico Finance Authority, 5.00% due 6/15/2013 (Bernalillo County Metropolitan Court; Insured: AMBAC) | NR/Aa2 | 2,280,000 | 2,356,152 | |||||||
New Mexico Finance Authority, 5.00% due 6/1/2014 (Various Governmental Projects; Insured: Natl-Re) | AAA/Aa1 | 2,660,000 | 2,742,300 | |||||||
New Mexico Finance Authority, 5.25% due 6/1/2015 (Various Governmental Projects; Insured: AMBAC) | AAA/Aa1 | 1,000,000 | 1,078,860 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2015 (Bernalillo County Metropolitan Court; Insured: AMBAC) | NR/Aa2 | 2,360,000 | 2,634,539 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2018 (Bernalillo County Metropolitan Court; Insured: AMBAC) | NR/Aa2 | 2,915,000 | 3,223,669 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2019 (UNM Health Sciences Center; Insured: Natl-Re) | NR/Aa2 | 1,215,000 | 1,341,238 | |||||||
New Mexico Finance Authority, 5.00% due 6/1/2020 (Various Governmental Projects; Insured: AMBAC) | AAA/Aa1 | 365,000 | 417,096 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2022 (Various Governmental Projects; Insured: Natl-Re) | AA/Aa2 | 1,300,000 | 1,505,686 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2024 (Various Governmental Projects; Insured: Natl-Re) | AA/Aa2 | 7,000,000 | 8,079,960 | |||||||
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 | 1,926,303 | |||||||
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 | 1,113,470 | |||||||
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 | 1,319,462 | |||||||
New Mexico Hospital Equipment Loan Council, 6.00% due 8/1/2023 (Presbyterian Healthcare Services) | AA/Aa3 | 6,000,000 | 7,018,980 | |||||||
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 | 1,120,270 | |||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 8/1/2039 (Presbyterian Healthcare Services) | AA/Aa3 | 3,000,000 | 3,246,870 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
New Mexico Housing Authority MFR, 5.30% due 12/1/2022 (El Paseo Apartments; Insured: AMBAC) (AMT) | NR/NR | $ | 850,000 | $ | 849,958 | |||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2015 | A+/A1 | 490,000 | 540,225 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2020 | A+/A1 | 590,000 | 704,436 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2023 | A+/A1 | 685,000 | 798,135 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2024 | A+/A1 | 525,000 | 606,858 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2025 | A+/A1 | 505,000 | 581,008 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2028 | A+/A1 | 1,500,000 | 1,702,290 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2031 | A+/A1 | 1,700,000 | 1,907,196 | |||||||
New Mexico MFA SFMR, 5.25% due 7/1/2023 (HERO Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 930,000 | 1,014,732 | |||||||
New Mexico MFA SFMR, 5.375% due 7/1/2023 (Saver Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 860,000 | 863,672 | |||||||
New Mexico MFA SFMR, 4.625% due 3/1/2028 (NIBP Program; Collateralized: GNMA/ FNMA/FHLMC) | AA+/NR | 1,955,000 | 2,128,819 | |||||||
New Mexico MFA SFMR, 5.50% due 7/1/2028 (HERO Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 2,020,000 | 2,176,166 | |||||||
New Mexico MFA SFMR, 5.60% due 7/1/2028 (Saver Loan Program; Collateralized: GNMA/ FNMA/FHLMC) (AMT) | AA+/NR | 775,000 | 842,417 | |||||||
New Mexico MFA SFMR, 6.05% due 7/1/2028 (Sandpiper Apartments; Insured: FHA) (AMT) | AA-/NR | 2,335,000 | 2,454,949 | |||||||
New Mexico MFA SFMR, 5.40% due 9/1/2029 (Saver Loan Program; Collateralized: GNMA/ FNMA/FHLMC) | AA+/NR | 775,000 | 865,660 | |||||||
New Mexico State University, 5.00% due 4/1/2013 (Insured: AGM) | AA/Aa2 | 1,000,000 | 1,023,960 | |||||||
Regents of the University of New Mexico, 5.00% due 1/1/2014 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/FHA) | AA-/Aa3 | 1,000,000 | 1,051,430 | |||||||
Regents of the University of New Mexico, 5.00% due 6/1/2015 (Campus Improvements; Insured: AMBAC) | AA/Aa2 | 1,590,000 | 1,779,194 | |||||||
Regents of the University of New Mexico, 5.25% due 6/1/2015 (UNM Hospital Capital Improvements) | AA/Aa2 | 1,195,000 | 1,233,109 | |||||||
Regents of the University of New Mexico, 5.00% due 1/1/2016 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/FHA) | AA-/Aa3 | 2,920,000 | 3,102,675 | |||||||
Regents of the University of New Mexico, 5.00% due 1/1/2017 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/FHA) | AA-/Aa3 | 2,000,000 | 2,132,520 | |||||||
Regents of the University of New Mexico, 5.00% due 1/1/2018 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/FHA) | AA-/Aa3 | 2,000,000 | 2,125,660 | |||||||
Regents of the University of New Mexico, 5.25% due 6/1/2018 (UNM Hospital Capital Improvements) | AA/Aa2 | 1,200,000 | 1,238,268 | |||||||
Regents of the University of New Mexico, 5.00% due 1/1/2019 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/FHA) | AA-/Aa3 | 3,000,000 | 3,176,070 | |||||||
Regents of the University of New Mexico, 5.00% due 7/1/2019 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/FHA) | AA-/Aa3 | 3,000,000 | 3,171,510 | |||||||
Regents of the University of New Mexico, 5.00% due 1/1/2020 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/FHA) | AA-/Aa3 | 2,310,000 | 2,442,063 | |||||||
Regents of the University of New Mexico, 5.00% due 7/1/2020 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/FHA) | AA-/Aa3 | 500,000 | 528,585 | |||||||
Regents of the University of New Mexico, 6.00% due 6/1/2021 (Campus Buildings Acquisition & Improvements) | AA/Aa2 | 610,000 | 733,190 | |||||||
a Rio Rancho Public School District No. 94 GO, 3.00% due 8/1/2013 (Sandoval County School Facilities) (State Aid Withholding) | NR/Aa1 | 2,795,000 | 2,859,369 | |||||||
Rio Rancho Public School District No. 94 GO, 4.00% due 8/1/2013 (Sandoval County School Facilities) (State Aid Withholding) | NR/Aa1 | 1,210,000 | 1,246,953 | |||||||
Rio Rancho Public School District No. 94 GO, 4.00% due 8/1/2014 (Sandoval County School Facilities) (State Aid Withholding) | NR/Aa1 | 1,715,000 | 1,825,000 | |||||||
San Juan County GRT, 5.00% due 6/15/2014 (Insured: Natl-Re) | A+/A2 | 1,225,000 | 1,312,881 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Sandoval County Incentive Payment, 4.00% due 6/1/2015 (Intel Corp.) | A+/NR | $ | 625,000 | $ | 645,031 | |||||
Sandoval County Incentive Payment, 5.00% due 6/1/2020 (Intel Corp.) | A+/NR | 6,390,000 | 6,921,073 | |||||||
Sandoval County Landfill Improvement, 5.50% due 8/15/2015 | NR/Baa2 | 1,090,000 | 1,132,379 | |||||||
Sandoval County Landfill Improvement, 5.75% due 8/15/2018 | NR/Baa2 | 1,335,000 | 1,379,509 | |||||||
Santa Fe County, 5.50% due 5/15/2015 (El Castillo Retirement) | BBB-/NR | 594,000 | 595,123 | |||||||
Santa Fe County, 5.80% due 5/15/2018 (El Castillo Retirement) | BBB-/NR | 1,835,000 | 1,837,661 | |||||||
Santa Fe County, 5.625% due 5/15/2025 (El Castillo Retirement) | BBB-/NR | 1,250,000 | 1,250,475 | |||||||
Santa Fe County Correctional Systems, 5.00% due 2/1/2018 (Insured: AGM) | AA-/Aa3 | 1,080,000 | 1,188,670 | |||||||
Santa Fe County Correctional Systems, 6.00% due 2/1/2027 (Insured: AGM) | AA-/Aa3 | 1,520,000 | 1,919,806 | |||||||
Santa Fe County GRT, 5.00% due 6/1/2025 | AA+/Aa1 | 1,400,000 | 1,603,000 | |||||||
Santa Fe County GRT, 5.00% due 6/1/2026 | AA+/Aa1 | 1,535,000 | 1,748,641 | |||||||
Silver City GRT, 4.00% due 6/1/2029 | A+/NR | 1,000,000 | 1,090,210 | |||||||
Silver City GRT, 4.25% due 6/1/2032 | A+/NR | 1,050,000 | 1,137,034 | |||||||
Taos County GRT, 4.75% due 10/1/2012 (ETM) | NR/A3 | 1,500,000 | 1,500,570 | |||||||
Ventana West Public Improvement District, 6.625% due 8/1/2023 | NR/NR | 1,885,000 | 1,919,175 | |||||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 | NR/Baa3 | 2,500,000 | 2,946,100 | |||||||
Virgin Islands Water & Power Authority, 5.00% due 7/1/2025 (Electric System) | BB+/Baa3 | 990,000 | 1,046,064 | |||||||
Virgin Islands Water & Power Authority, 5.00% due 7/1/2026 (Electric System) | BB+/Baa3 | 1,090,000 | 1,149,296 | |||||||
Zuni Public School District, 5.00% due 8/1/2028 (Teacher Housing Projects) | A/NR | 1,600,000 | 1,806,816 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 92.29% (Cost $218,930,164) | $ | 237,799,214 | ||||||||
OTHER ASSETS LESS LIABILITIES — 7.71% | 19,861,787 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 257,661,001 | ||||||||
|
|
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. Bonds issued with a maturity of one year or less are assigned Moody’s ratings from MIG-1 to MIG-4 and Standard and Poor’s ratings from SP-1+ to SP-3 with MIG-1 and SP-1+ being the strongest ratings. |
a | When-issued security. |
b | Segregated as collateral for a when-issued security. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
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 Association | |
GO | General Obligation | |
GRT | Gross Receipts Tax | |
IDRB | Industrial Development Revenue Bond | |
LOC | Letter of Credit | |
MFA | Mortgage Finance Authority | |
MFR | Multi-Family Revenue | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
Radian | Insured by Radian Asset Assurance | |
SFMR | Single Family Mortgage Revenue Bond |
See notes to financial statements.
Certified Annual Report 17
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 |
ASSETS | ||||
Investments at value (cost $218,930,164) (Note 2) | $ | 237,799,214 | ||
Cash | 22,307,473 | |||
Receivable for fund shares sold | 264,700 | |||
Interest receivable | 3,030,403 | |||
Prepaid expenses and other assets | 795 | |||
|
| |||
Total Assets | 263,402,585 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 5,080,502 | |||
Payable for fund shares redeemed | 343,850 | |||
Payable to investment advisor and other affiliates (Note 3) | 179,782 | |||
Accounts payable and accrued expenses | 43,182 | |||
Dividends payable | 94,268 | |||
|
| |||
Total Liabilities | 5,741,584 | |||
|
| |||
NET ASSETS | $ | 257,661,001 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (25,896 | ) | |
Net unrealized appreciation on investments | 18,869,050 | |||
Accumulated net realized gain (loss) | (1,163,043 | ) | ||
Net capital paid in on shares of beneficial interest | 239,980,890 | |||
|
| |||
$ | 257,661,001 | |||
|
| |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($187,577,844 applicable to 13,442,482 shares of beneficial interest outstanding - Note 4) | $ | 13.95 | ||
Maximum sales charge, 2.00% of offering price | 0.28 | |||
|
| |||
Maximum offering price per share | $ | 14.23 | ||
|
| |||
Class D Shares: | ||||
Net asset value, offering and redemption price per share ($31,983,762 applicable to 2,290,792 shares of beneficial interest outstanding - Note 4) | $ | 13.96 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($38,099,395 applicable to 2,731,939 shares of beneficial interest outstanding - Note 4) | $ | 13.95 | ||
|
|
See notes to financial statements.
18 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg New Mexico Intermediate Municipal Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $1,164,076) | $ | 9,829,937 | ||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 1,259,540 | |||
Administration fees (Note 3) | ||||
Class A Shares | 232,472 | |||
Class D Shares | 34,676 | |||
Class I Shares | 19,094 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 464,945 | |||
Class D Shares | 138,704 | |||
Transfer agent fees | ||||
Class A Shares | 57,358 | |||
Class D Shares | 11,034 | |||
Class I Shares | 5,453 | |||
Registration and filing fees | ||||
Class A Shares | 524 | |||
Class D Shares | 525 | |||
Class I Shares | 525 | |||
Custodian fees (Note 3) | 60,632 | |||
Professional fees | 27,276 | |||
Accounting fees | 5,873 | |||
Trustee fees | 7,367 | |||
Other expenses | 21,570 | |||
|
| |||
Total Expenses | 2,347,568 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (8,488 | ) | ||
Fees paid indirectly (Note 3) | (13,217 | ) | ||
|
| |||
Net Expenses | 2,325,863 | |||
|
| |||
Net Investment Income | 7,504,074 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (1,163,043 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 5,728,003 | |||
|
| |||
Net Realized and Unrealized Gain | 4,564,960 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 12,069,034 | ||
|
|
See notes to financial statements.
Certified Annual Report 19
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg New Mexico Intermediate Municipal Fund
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 7,504,074 | $ | 7,774,237 | ||||
Net realized gain (loss) on investments | (1,163,043 | ) | 421,555 | |||||
Net unrealized appreciation (depreciation) on investments | 5,728,003 | (1,832,064 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 12,069,034 | 6,363,728 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (5,492,712 | ) | (6,076,310 | ) | ||||
Class D Shares | (748,415 | ) | (687,399 | ) | ||||
Class I Shares | (1,262,947 | ) | (1,010,528 | ) | ||||
From realized gains | ||||||||
Class A Shares | (142,643 | ) | (168,225 | ) | ||||
Class D Shares | (19,090 | ) | (20,580 | ) | ||||
Class I Shares | (32,129 | ) | (22,438 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (809,076 | ) | (16,253,032 | ) | ||||
Class D Shares | 7,285,463 | 322,750 | ||||||
Class I Shares | (4,267,820 | ) | 14,724,089 | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 6,579,665 | (2,827,945 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 251,081,336 | 253,909,281 | ||||||
|
|
|
| |||||
End of Year | $ | 257,661,001 | $ | 251,081,336 | ||||
|
|
|
|
See notes to financial statements.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 |
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 has three classes of shares of beneficial interest outstanding: 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 may be subject to a service fee, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and 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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: 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. 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 ordinarily valued at amortized cost, which approximates market value.
In any case where the market value of a debt obligation held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. In any case where a pricing service fails to provide a price for a debt obligation held by the Fund, the Committee determines a fair value for the debt obligation using procedures in accordance with a policy approved
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 |
by the Trustees, which may include the use of a price obtained from a different independent pricing service. 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 237,799,214 | $ | — | $ | 237,799,214 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 237,799,214 | $ | — | $ | 237,799,214 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2012.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 |
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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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: Investment transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on investments purchased are amortized to call dates or maturity dates of the respective investments. Realized gains and losses from the sale of investments 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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, 2012, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $8,488 for Class D shares.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 |
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, 2012, the Distributor has advised the Fund that it earned net commissions aggregating $581 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, 2012, 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 a distribution plan pursuant to Rule 12b-1, applicable only to the Fund’s Class D shares, under which the Fund compensates the Distributor for services in promoting the sale of Class D shares of the Fund at an annual rate of up to .25 of 1% per annum of the average daily net assets attributable to Class D shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, fees paid indirectly were $13,217.
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,301,259 | $ | 18,006,908 | 1,168,293 | $ | 15,776,655 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 312,719 | 4,326,709 | 330,856 | 4,448,456 | ||||||||||||
Shares repurchased | (1,673,821 | ) | (23,142,693 | ) | (2,720,968 | ) | (36,478,143 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (59,843 | ) | $ | (809,076 | ) | (1,221,819 | ) | $ | (16,253,032 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class D Shares | ||||||||||||||||
Shares sold | 710,780 | $ | 9,852,694 | 452,641 | $ | 6,130,011 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 51,740 | 716,479 | 45,105 | 606,858 | ||||||||||||
Shares repurchased | (237,274 | ) | (3,283,710 | ) | (478,285 | ) | (6,414,119 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 525,246 | $ | 7,285,463 | 19,461 | $ | 322,750 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 249,807 | $ | 3,463,659 | 1,123,761 | $ | 15,329,793 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 78,558 | 1,086,275 | 59,248 | 797,322 | ||||||||||||
Shares repurchased | (633,977 | ) | (8,817,754 | ) | (103,888 | ) | (1,403,026 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (305,612 | ) | $ | (4,267,820 | ) | 1,079,121 | $ | 14,724,089 | ||||||||
|
|
|
|
|
|
|
|
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2012, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $29,879,160 and $27,353,750, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 218,930,164 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 18,877,160 | ||
Gross unrealized depreciation on a tax basis | (8,110 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 18,869,050 | ||
|
|
At September 30, 2012, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2011 of $1,163,043. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
In order to account for book/tax differences, the Fund decreased accumulated net realized loss by $72 and increased distribution in excess of net investment income by $72. Reclassifications result from a reclass of distributions.
At September 30, 2012, the Fund did not have any undistributed tax basis net tax-exempt income, net ordinary income or undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2012 and September 30, 2011 are excludable by shareholders from gross income for federal income tax purposes.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 7,497,663 | $ | 7,767,483 | ||||
Ordinary income | 62,223 | 6,754 | ||||||
Capital gains | 138,050 | 211,243 | ||||||
|
|
|
| |||||
Total | $ | 7,697,936 | $ | 7,985,480 | ||||
|
|
|
|
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, credit risk, interest rate risk, management risk, market and economic risk, liquidity risk, and the risks of investing primarily in the obligations of a single state. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
Certified Annual Report 25
Thornburg New Mexico Intermediate Municipal Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 13.72 | 0.41 | 0.24 | 0.65 | (0.41 | ) | (0.01 | ) | (0.42 | ) | $ | 13.95 | 2.95 | 0.95 | 0.95 | 0.95 | 4.80 | 11.66 | $ | 187,578 | |||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 13.78 | 0.44 | (0.05 | ) | 0.39 | (0.44 | ) | (0.01 | ) | (0.45 | ) | $ | 13.72 | 3.23 | 0.96 | 0.96 | 0.96 | 2.93 | 10.64 | $ | 185,208 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
Class D Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.72 | 0.37 | 0.26 | 0.63 | (0.38 | ) | (0.01 | ) | (0.39 | ) | $ | 13.96 | 2.71 | 1.18 | 1.18 | 1.22 | 4.62 | 11.66 | $ | 31,984 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.78 | 0.40 | (0.05 | ) | 0.35 | (0.40 | ) | (0.01 | ) | (0.41 | ) | $ | 13.72 | 2.97 | 1.22 | 1.21 | 1.22 | 2.66 | 10.64 | $ | 24,228 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.71 | 0.46 | 0.25 | 0.71 | (0.46 | ) | (0.01 | ) | (0.47 | ) | $ | 13.95 | 3.30 | 0.61 | 0.61 | 0.61 | 5.24 | 11.66 | $ | 38,099 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.77 | 0.48 | (0.05 | ) | 0.43 | (0.48 | ) | (0.01 | ) | (0.49 | ) | $ | 13.71 | 3.57 | 0.62 | 0.61 | 0.62 | 3.28 | 10.64 | $ | 41,645 | ||||||||||||||||||||||||||||||||||||||
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 |
(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%. |
+ | Based on weighted average shares outstanding, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
26 Certified Annual Report | Certified Annual Report 27 |
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
28 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,028.10 | $ | 4.81 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.25 | $ | 4.79 | ||||||
Class D Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,026.50 | $ | 6.32 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.76 | $ | 6.30 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,030.70 | $ | 3.11 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.94 | $ | 3.10 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.95%; D: 1.25%; I: 0.61%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table above 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 above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 29
INDEX COMPARISON | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg New Mexico Intermediate Municipal Fund versus BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index, BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index and Consumer Price Index (September 30, 2002 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 6/18/91) | 2.70 | % | 4.28 | % | 3.64 | % | 4.84 | % | ||||||||
D Shares (Incep: 6/1/99) | 4.62 | % | 4.44 | % | 3.57 | % | 3.88 | % | ||||||||
I Shares (Incep: 2/1/07) | 5.24 | % | 5.07 | % | — | 4.95 | % |
Effective February 1, 2012, the Fund’s benchmark changed from the BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index to the BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index. The Advisor believes that the new index better reflects the Fund’s principal investment strategies, including the Fund’s practice of investing in obligations having a range of maturities.
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 or call 800.847.0200. 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).
30 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 31
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE(1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
32 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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 New Mexico Intermediate Municipal Fund | September 30, 2012 (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. A description of the Policy 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, 2012, dividends paid by the Fund of $7,497,663 (or the maximum allowed) are tax exempt dividends and $138,050 are being reported as taxable long-term capital gain dividends for federal income tax purposes.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 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 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 to plan for 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.
34 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s investment performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (iii) measures of the Fund’s investment performance over various 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 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 considered (among other aspects of the data) performance data for the ten most recent calendar years, which showed that the Fund generally produced positive investment returns in accordance with expectations for the years considered, that the Fund’s return for the most recent calendar year was comparable to the average return of the mutual fund category for which calendar year data was presented, and that the Fund’s returns exceeded or were comparable to the average returns of the category in a majority of the preceding nine calendar years. Other noted quantitative data showed that the Fund’s investment returns fell in the fourth quartile of performance for the first fund category for the one-year period ended with the second quarter of the current year, fell near the third quartile for the three-year period and near the midpoint of the category for the five-year period, and that the Fund’s investment returns similarly fell in the fourth quartile of performance of the second fund category for the one-year period, within the third quartile for the three-year period and near the midpoint of performance for the five-year period. These data indicated to the Trustees that the Fund’s investment performance met expectations in view of the Fund’s stated objectives and strategies in the market conditions for the relevant periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to those measures also 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a universe of fixed income mutual funds assembled by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged to the Fund was slightly higher than the median and average fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was comparable to the average and slightly higher than the median expense ratios for the fund category. The Trustees did not find the differences 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
Certified Annual Report 35
OTHER INFORMATION, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
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 differences in the circumstances in which the respective fees originate.
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its 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.
36 Certified Annual Report
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This page is not part of the Annual Report. 37
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
38 This page is not part of the Annual Report.
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 website 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 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 Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
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THORNBURG FUND FAMILY
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 thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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TH080 |
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2012. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 | THNYX | 885-215-665 | ||
Class I | TNYIX | 885-216-705 |
Lipper’s 2012 Best Fixed Income Funds Manager
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income Large Company universe for the three-year period ended 11/30/11, based on risk-adjusted returns. Lipper’s Large Company universe is comprised of fund families with more than $40 billion in total net assets. Only fund families with at least five bond funds were eligible for the fixed income funds manager award. Asset Class Group Awards are given for the three-year period only.
Glossary
BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index – This index is a subset of the BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity greater than or equal to 3 years and less than 15 years.
BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index – This index is a subset of the BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity greater than or equal to 7 years and less than 12 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 reflects actual distributions made to shareholders. The annualized distribution yield is calculated by summing the last 30 days of income at a given month end and annualizing to a 360-day year. The result is divided by the ending maximum offering price.
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.
Consumer Price Index (CPI) – Index that measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. Also known as the cost-of-living index.
Core CPI – Consumer Price Index minus the energy and food components.
Core PCE Price Index – Personal Consumption Expenditures (PCE) prices excluding food and energy.
Duration – A bond’s sensitivity to interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
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IMPORTANT INFORMATION, CONTINUED |
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 Bond – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Gross Domestic Product (GDP) – A country’s income minus foreign investments: the total value of all goods and services produced within a country in a year, minus net income from investments in other countries.
Quantitative Easing – The Federal Reserve’s monetary policy used to stimulate the U.S. economy following the recession that began in 2007/08.
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.
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 often fail to stack up over longer periods of time.
We apply time-tested techniques to manage risk and pursue attractive returns. These include:
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment 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. |
Portfolio Managers
Josh Gonze, Chris Ryon,CFA, 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 or call 800.847.0200.
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, 2013, 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, 2012
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 9/5/97) | ||||||||||||||||||||
Without sales charge | 6.90 | % | 4.92 | % | 5.25 | % | 3.97 | % | 4.54 | % | ||||||||||
With sales charge | 4.79 | % | 4.22 | % | 4.83 | % | 3.76 | % | 4.39 | % |
30-Day Yields, A Shares
As of September 30, 2012
Annualized Distribution Yield | SEC Yield | |||
2.61% | 1.19 | % |
Without fee waivers and expense reimbursements, the 30-day SEC Yield would have been 1.09% and the Annualized Distribution Yield would have been 2.51%.
Key Portfolio Attributes
As of September 30, 2012
Number of Bonds | 57 | |||
Effective Duration | 5.7 Yrs | |||
Average Maturity | 8.7 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 14.
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Thornburg New York Intermediate Municipal Fund – September 30, 2012
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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 13, 2012
Dear Shareholder:
We are pleased to present the annual report for the Thornburg New York Intermediate Municipal Fund. The net asset value (NAV) of the Class A shares increased by 51 cents to $13.44 per share during the fiscal year ended September 30, 2012. If you were with us for the entire period, you received dividends of 37.1 cents per share. If you reinvested your dividends, you received 37.6 cents per share. Dividends per share were higher for Class I shares to account for varying class-specific expenses. The Class A shares of your Fund underperformed the index with a total return of 6.90% at NAV for the fiscal year ended September 30, 2012, compared to 7.06% for the BofA Merrill Lynch 3–15 Year U.S. Municipal Securities Index, a broad national-market representation of the municipal bond market. The constrained investment universe of a single-state fund can often lead to wide performance variations, and the Fund generated 1.32% more price appreciation and 1.48% less income.
The markets’ positive returns were primarily due to declining interest rates and narrowing credit spreads. Interest rates declined more for longer maturities; consequently longer-maturity bonds outperformed shorter-maturity bonds. As credit spreads compressed, lower-quality bonds outperformed higher-quality bonds. The Fund’s additional price appreciation is due to several factors. Our interest-rate sensitivity, as measured by the Fund’s duration and differing allocations along the yield curve, added 0.56% of relative price appreciation. Our overweight to the insured and revenue sectors subtracted 0.38%. We underweighted the general obligation and pre-refunded sectors, which added 0.11% of relative price performance. Our overweight to lower-credit-quality securities added 0.73% of performance relative to the benchmark. Other risk factors accounted for an additional 0.30%.
The New York Economy, the Fiscal Cliff, and the Presidential Election
The relative economic health of the state of New York, as measured by Bloomberg’s Economic Evaluation of the States Index, is 35 out of 51 (the index includes the District of Columbia). This index is based on data from the second quarter of 2012 compared to data from the second quarter of 2011. The data used in this index includes the following:
• | Percentage change in mortgage delinquency rates |
• | Percentage change in personal income |
• | Percentage change in tax revenue |
• | Percentage change in non-farm employment |
• | Percentage change in home prices |
• | Percentage change in equity index – a capitalization-weighted index consisting of equities domiciled in New York |
Certified Annual Report 7
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
The overall economic health grade reflected by this index is negative 1.8% (as of 10/18/2012) and is based on a scale ranging from 11.0% to negative 11.0%. The best-performing state based on this evaluation metric is North Dakota, which posted an economic evaluation reading of 10.8%.
Positive Drivers
The positive factors in New York’s evaluation were personal income, which increased 2.1% from the second quarter of 2011 versus the same quarter in 2012. Personal income is defined as the income received by all persons from all sources, as reported by the Bureau of Economic Analysis (BEA). State tax revenues increased 2.1%. This measure is based on the quarterly summary of state government tax revenue provided by the U.S. Census Bureau. New York’s quarterly state tax revenues hit a high point in March 2011. The variation in the last year’s quarterly revenue figures is not out of the ordinary; the revenues are higher overall than in the same period in 2010 or 2011. Non-farm payrolls were higher by 1.7%. The equity index was up 5.0% for the same period.
Negative Drivers
“Seriously” delinquent (90+ days) first-mortgage loans were up 0.5%. This measure began to climb in late 2007 reaching a high of 9.53% in June 2012. It has been hovering between 9.00% and 9.53% for the last year.
Unique Issues
New York’s 9.1% August unemployment rate was above the 8.1% national average.
The Fiscal Cliff
In addition to these fundamental factors, many investors are concerned about the impact of the “fiscal cliff”, which The Washington Post referred to as follows:
The “fiscal cliff” is a term coined by Federal Reserve Chairman Ben S. Bernanke. It refers to a collection of changes in current law that are all set to strike in January, triggering the sharpest reduction in the federal budget deficit in more than 40 years.
The Post goes on to say that taxes would also increase:
For most taxpayers, the bulk of the increase would be triggered by the expiration of tax cuts enacted in 2001 and 2003 during the George W. Bush administration. The expiration of President Obama’s payroll tax holiday, which shaved two percentage points off the 6.2 percent Social Security tax, comes in a close second. If these issues are not addressed, many analysts think the United States will be pushed into another recession.
On top of all this, Europe is still a mess, but the fixed income markets seem not to be as headline sensitive to news coming out of Europe as they were last year. At its most recent meeting, the Federal Reserve Board (the Fed), decided to enter into a third round of quantitative easing – QE3. In this round, the Fed will concentrate its security purchases in the mortgage markets in an effort
8 Certified Annual Report
to lower borrowing costs for homebuyers, which should spur the housing market. But as anyone who has recently applied for a mortgage knows, it is not the interest cost of the product that stands as a borrower’s major roadblock. The fixed income markets’ initial reaction to the latest Fed move was an increase in inflation expectations and a decrease in bond prices, though this fear has subsided in recent weeks.
The Presidential Election and Tax Policy
Tax policy and the federal deficit have proven to be key election-season issues. Both candidates have put forward their respective plans for deficit reduction; both could influence the municipal bond market. Table I shows a side-by-side analysis based on a recent article in The Bond Buyer, a leading publication on the municipal bond market.
Table I
Obama | Romney | |
Extends the 2001 and 2003 tax cuts for individuals earning under $200,000 and families earning under $250,000. | Permanently extend all the 2001 and 2003 tax cuts. Eliminate taxation of investment income for individuals earning less than $200,000. | |
Returns to the Clinton Era highest marginal tax rate of 39.6%. | Lowers marginal rates across the board by 20%, eliminates the alternative minimum tax. | |
In a jobs bill he floated last October and his 2013 budget, Obama proposed to place a 28% cap on the value of tax-exempt interest for the wealthy. | Announced he would cap individual tax deductions at $17,000. Not clear if he would cap exclusions, like tax exemption, as well as deductions. | |
Bruce Bartlett, former policy adviser to President Ronald Reagan and Treasury official under President George H. W. Bush, said without a doubt Obama’s tax proposals would be more beneficial to the municipal market primarily because he wants to impose higher tax rates on the wealthy, which would make tax-exempt bonds more attractive. | While Romney has not specifically mentioned capping tax exemption, in a Wall Street Journal editorial in August, Glenn Hubbard, his senior economic adviser, said the exclusion of interest on tax-exempt municipal bonds is “on the table” for the Republican candidate. |
One can see that both candidates’ potential tax policies, as understood today, could influence the municipal bond market. However, as with most election rhetoric, the eventual legislation may look nothing like the campaign proposals. There are two things that people should never watch being made, sausage and legislation!
The Municipal Market
The demand picture in the municipal market improved during the fiscal year. Investors poured $56 billion into municipal bond mutual funds over the last 12 months. The total assets in municipal bond mutual funds were $562 billion according to the Investment Company Institute, a mutual fund
Certified Annual Report 9
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
industry advocacy group. Assets in municipal bond mutual funds on November 30, 2010, just before the six-month period of investor exodus, were $497 billion. On the other side of the ledger, the supply picture improved. Nationally, the supply of new-issue municipal bonds was up 44.5% for the period January through September 2012. During the same period, the supply of new issue municipal bonds originating from New York issuers increased by 61.3%.
The trend towards lower interest rates continued throughout this fiscal year. With short-term yields anchored near zero, investors moved out along the yield curve in search of more income. This caused long-term maturities to decrease in yield much more than short-term maturities. The average change in yield for the Thornburg New York Intermediate Municipal Fund’s investment universe (1-20 years) as measured by the average change in yield of a AAA general-obligation bond, was negative 0.13% for the first half of the fiscal year. In the second half of the fiscal year, the same measure of average yield change was 0.42%. This decline in average yields was 1.5 times that of the 1–10 year maturity range of the municipal market. See Graph I.
Graph I: AAA General Obligation Municipal Yield Changes for 9/30/2011 through 9/30/2012
Past performance does not guarantee future results.
Investors, again in a search for income, have been willing to pay much more for lower-quality securities than any time since 2008. This caused quality spreads to narrow, and lower-quality securities to out-perform higher quality securities. On December 30, 2011, the incremental yield an investor gained for buying a BBB security versus a AAA security with a 10-year maturity was 3.00%. On September 30, 2012, that incremental yield equaled 2.08%, a 0.92% decrease. Graph II shows the quarter-by-quarter and cumulative total return performance of the BofA Merrill Lynch 3–15 Year U.S. Municipal Securities Index for the fiscal year.
10 Certified Annual Report
Graph II: BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index
Quarterly and Cumulative Total Returns
Past performance does not guarantee future results.
The credit picture in the municipal market is still mixed. Total tax revenues at the state of New York have been increasing moderately over the last year. New York’s state pension plans were 94% funded according to the June 2012 Pew Center on the States, The Widening Gap Update. The same group estimates that a 80% funding level is sufficient to meet future liabilities. Issuers in New York State are among the most sophisticated in the municipal bond market, and as interest rates hit historic lows, they rushed to market to refund outstanding (higher yielding) debt. At the local level, heavily reliant on real estate taxes, the continued decline of assessed values has pressured local finances. Pension funding levels continue to decline due to poor investment returns and cutbacks in annual pension contributions.
In the most recent semi-annual letter to shareholders, we noted the risks of rising interest rates. As bond portfolio managers, we are always worried. If bonds are doing well, the economy is probably doing poorly. If the economy is doing well, we worry because yields are probably rising and bond prices are declining. Such is the life we have chosen.
The level of real yields (yield less inflation) is a measure of value for fixed income products. Real yield levels are at record lows across all fixed-income products. Relative to other fixed income products, municipal bonds appear to be attractive. Graph III illustrates this measure.
The Personal Consumption Expenditure (PCE) Index is the Federal Reserve’s favored inflation measure, and we use that measure here. Real yield levels for a ten-year AAA general-obligation municipal bond using Core PCE as an inflation measure (PCE minus adjustments for food and energy costs) are near 20-year lows, and we worry. At the same time, we are reminded of a famous
Certified Annual Report 11
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
Graph III: 10-Year AAA Muni Real Yield Using Core PCE
Past performance does not guarantee future results.
quote by John Maynard Keynes, “The market can stay irrational longer than you can stay solvent.” Solvency is not an issue, of course, but Graph III would suggest rationality is. This state of affairs can continue for some time, but it is still a risk. The long-term average real yield for a ten-year AAA municipal general-obligation bond is 2.18%, meaning that since May 1991, investors have demanded 2.18% above the Core PCE inflation rate to invest in ten-year AAA general-obligation bonds. The current yield on a ten-year AAA municipal general-obligation bond is 1.69%, and Core PCE inflation is 1.60%, as of August 31, 2012 (the last data point available). If this relationship were to return to the average long-term real yield level, one of three things would have to happen. First, 10-year interest rates would need to increase about 2.00%. Second, inflation would have to decrease by about 2.00%. Neither of these two outcomes would be pleasant. Third, some combination of the two prior outcomes could occur, which also promises to be unpleasant. Investors should use this information to recognize the risk inherent in fixed income products at these historically low yield levels. They should take this opportunity to review their portfolios and determine if these portfolios are properly diversified. In addition, they should ask themselves if they have an appropriate time horizon in mind for their investments. We suggest two to three years from the point that question is posed.
12 Certified Annual Report
Graph IV: % of Portfolio Maturing
As of 9/30/12. Percentages vary over time.
Data may not add up to 100% due to rounding.
Conclusion
Your Thornburg New York Intermediate Municipal Fund currently consists of a laddered portfolio structure of 57 securities. We ladder our core portfolios because we believe this structure has the potential to maximize an investor’s income. In fact, in an internal study of portfolio structures (using indices as proxies for portfolios) extending back to 1997, a hypothetical laddered portfolio structure outperformed bullet and barbell structures approximately 2/3 of the time (for a copy of the study, go to www.thornburg.com/whyladder). Past performance does not guarantee future results, of course. Laddering manages a portfolio’s yield curve exposure with a roughly equal weighting of each maturity, mitigating a major risk factor. Graph I illustrates that yield changes are not uniform across the New York Intermediate Municipal Fund’s investment universe. Laddering also reduces reinvestment risk by ensuring that a portion of the portfolio matures each year so it can be reinvested. Graph IV describes the percentages of your Fund’s bond portfolio maturing in each of the coming years. We would like to thank you for the trust you have placed with us and will continue to keep that foremost in our minds.
Sincerely,
![]() | ![]() | |||
Christopher Ihlefeld | Christopher Ryon, CFA | Josh Gonze | ||
Portfolio Manager | Portfolio Manager | 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 13
SCHEDULE OF INVESTMENTS | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 |
SUMMARY OF SECURITY CREDIT RATINGS†
May not add up to 100% due to rounding.
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 | |||||||
Babylon New York GO, 5.00% due 9/1/2015 (Insured: AMBAC) | NR/NR | $ | 465,000 | $ | 504,655 | |||||
Dutchess County IDA, 5.00% due 8/1/2020 (Bard College) | NR/Baa1 | 825,000 | 917,384 | |||||||
Dutchess County IDA, 5.00% due 8/1/2021 (Bard College) | NR/Baa1 | 1,100,000 | 1,217,359 | |||||||
Erie County IDA School Facilities, 5.25% due 5/1/2025 (Buffalo City School District) | AA-/Aa3 | 1,000,000 | 1,191,580 | |||||||
Guam Government, 5.375% due 12/1/2024 | BBB+/NR | 1,000,000 | 1,102,660 | |||||||
Hempstead Town Local Development Corp., 5.00% due 7/1/2028 (Hofstra University) | A/A3 | 500,000 | 575,250 | |||||||
Long Island Power Authority, 5.25% due 9/1/2029 | NR/A3 | 645,000 | 802,322 | |||||||
Monroe County Industrial Development Corp., 4.00% due 6/1/2016 (St. John Fisher College) | BBB+/NR | 880,000 | 951,491 | |||||||
Nassau County IDA, 4.75% due 3/1/2026 (New York Institute of Technology) | BBB+/NR | 1,000,000 | 1,099,860 | |||||||
New York City GO, 5.00% due 8/1/2025 | AA/Aa2 | 400,000 | 470,648 | |||||||
New York City Health and Hospital Corp. GO, 5.00% due 2/15/2020 (Health Care Facilities Improvements) | A+/Aa3 | 770,000 | 915,330 | |||||||
New York City Health and Hospitals Corp. GO, 5.00% due 2/15/2025 (Health Care Facilities Improvements) | A+/Aa3 | 1,000,000 | 1,142,160 | |||||||
New York City Metropolitan Transportation Authority, 6.25% due 11/15/2023 | A/A2 | 1,000,000 | 1,277,550 | |||||||
New York City Municipal Water Finance Authority, 5.75% due 6/15/2013 (Water and Sewer System; Insured: Natl-Re) (ETM) | AAA/A2 | 520,000 | 532,704 | |||||||
New York City Municipal Water Finance Authority, 0.24% due 6/15/2039 put 10/1/2012 (Water and Sewer System; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA+/Aa2 | 400,000 | 400,000 | |||||||
New York City Transitional Finance Authority, 5.00% due 1/15/2020 (World Trade Center Recovery) (State Aid Withholding) | AA-/Aa3 | 1,000,000 | 1,207,390 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2020 (World Trade Center Recovery) | AAA/Aaa | 1,000,000 | 1,135,180 | |||||||
New York City Transitional Finance Authority, 0.20% due 8/1/2031 put 10/1/2012 (SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AAA/Aaa | 1,700,000 | 1,700,000 | |||||||
New York Convention Center Development Corp., 5.00% due 11/15/2017 (Hotel Unit Fee; Insured: AMBAC) | NR/A1 | 1,000,000 | 1,105,300 | |||||||
New York Environmental Facilities Corp., 6.875% due 6/15/2014 (Pollution Control) | AAA/Aaa | 215,000 | 216,189 | |||||||
New York Municipal Bond Bank Agency, 5.00% due 4/15/2018 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,190,650 | |||||||
New York State Dormitory Authority, 5.25% due 2/15/2014 (Presbyterian Hospital; Insured: AGM) | AA-/Aa3 | 500,000 | 531,940 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2014 (School District Financing Program; Insured: AGM) (State Aid Withholding) | AA-/Aa3 | 1,000,000 | 1,082,520 | |||||||
New York State Dormitory Authority, 5.00% due 2/15/2015 (Mental Health Services; Insured: AMBAC) | AA-/NR | 1,000,000 | 1,104,410 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2016 (Bishop Henry B. Hucles Nursing Home; Insured: SONYMA) | NR/Aa1 | 600,000 | 692,994 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2018 (School District; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,188,980 | |||||||
New York State Dormitory Authority, 5.25% due 10/1/2018 (School District; Insured: AGM) | AA-/Aa3 | 775,000 | 932,496 | |||||||
New York State Dormitory Authority, 5.00% due 3/15/2019 pre-refunded 3/15/2015 (University & College Improvements; Insured: AGM) | AA-/NR | 950,000 | 1,058,822 | |||||||
New York State Dormitory Authority, 5.00% due 3/15/2019 (University & College Improvements; Insured: AGM) | AAA/NR | 50,000 | 55,334 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
New York State Dormitory Authority, 5.50% due 7/1/2019 pre-refunded 7/1/2013 (Brooklyn Law School; Insured: Radian) | BBB+/Baa1 | $ | 1,400,000 | $ | 1,454,544 | |||||
New York State Dormitory Authority, 5.00% due 7/1/2020 (NYSARC, Inc. Developmental Disability Programs) | NR/Aa3 | 1,175,000 | 1,413,560 | |||||||
New York State Dormitory Authority, 5.00% due 2/15/2021 (Interfaith Medical Center) | AA-/NR | 2,000,000 | 2,433,700 | |||||||
New York State Dormitory Authority, 5.25% due 7/1/2022 (St. John’s University; Insured: Natl-Re) | A-/A3 | 1,000,000 | 1,246,130 | |||||||
New York State Dormitory Authority, 5.00% due 1/15/2023 (Municipal Health Facilities) | AA-/Aa3 | 1,000,000 | 1,128,430 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2024 (Bishop Henry B. Hucles Nursing Home; Insured: SONYMA) | NR/Aa1 | 1,000,000 | 1,090,430 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2024 (Miriam Osborn Memorial Home Assoc.) | NR/NR | 1,540,000 | 1,720,088 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2024 (School District; Insured: AGM) (State Aid Withholding) | AA-/Aa3 | 1,000,000 | 1,176,050 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2025 (Miriam Osborn Memorial Home Assoc.) | NR/NR | 1,105,000 | 1,223,555 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2027 (Interagency Council Pooled Loan Program) | NR/Aa3 | 1,000,000 | 1,129,330 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2027 (Teachers College, Columbia University) | A+/A1 | 750,000 | 892,125 | |||||||
New York State Dormitory Authority, 5.25% due 7/1/2027 (Health Quest Systems; Insured: AGM) | AA-/Aa3 | 500,000 | 548,355 | |||||||
New York State Dormitory Authority, 5.25% due 5/1/2030 (North Shore Long Island Jewish Medical) | A-/A3 | 1,000,000 | 1,120,300 | |||||||
New York State Energy Research & Development Authority, 2.25% due 12/1/2015 (New York Electric & Gas Corp.) | BBB+/Baa1 | 1,000,000 | 1,024,670 | |||||||
New York State Thruway Authority Highway & Bridge Trust Fund, 5.00% due 4/1/2022 | AA/NR | 1,000,000 | 1,184,960 | |||||||
New York State Urban Development Corp., 5.25% due 1/1/2021 | AA-/NR | 1,000,000 | 1,192,850 | |||||||
Oneida County IDA, 6.10% due 6/1/2020 (Presbyterian Home for Central New York; LOC: HSBC Bank USA) | NR/A1 | 450,000 | 451,584 | |||||||
Onondaga Civic Development Corp., 5.00% due 7/1/2021 (Le Moyne College) | NR/Baa2 | 1,000,000 | 1,133,420 | |||||||
Onondaga Civic Development Corp., 5.50% due 12/1/2031 (Upstate Properties Development) | A+/NR | 1,000,000 | 1,169,430 | |||||||
Port Authority New York & New Jersey, 5.00% due 8/15/2022 (Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,189,320 | |||||||
Syracuse Industrial Development Agency, 5.25% due 5/1/2026 (Syracuse City School District) | AA-/Aa3 | 2,150,000 | 2,576,968 | |||||||
Tobacco Settlement Funding Corp., 5.50% due 6/1/2021 | AA-/Aa3 | 1,000,000 | 1,034,820 | |||||||
Town of Amherst Development Corp., 5.00% due 10/1/2020 (University at Buffalo Foundation Facility-Student Housing; Insured: AGM) | AA-/Aa3 | 1,000,000 | 1,193,420 | |||||||
Triborough Bridge & Tunnel Authority GO, 5.00% due 11/15/2025 (MTA Bridges and Tunnels) | AA-/Aa3 | 1,410,000 | 1,660,712 | |||||||
United Nations Development Corp., 5.00% due 7/1/2025 | NR/A1 | 710,000 | 814,966 | |||||||
Utica IDA Civic Facility, 5.25% due 7/15/2016 (Munson Williams Proctor Institute) | NR/A2 | 210,000 | 210,861 | |||||||
Utica IDA Civic Facility, 5.375% due 7/15/2019 (Munson Williams Proctor Institute) | NR/A2 | 525,000 | 527,011 | |||||||
Virgin Islands Water & Power Authority, 5.50% due 7/1/2017 | NR/NR | 1,350,000 | 1,353,240 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 98.40% (Cost $54,750,190) | $ | 59,597,987 | ||||||||
OTHER ASSETS LESS LIABILITIES — 1.60% | 970,963 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 60,568,950 | ||||||||
|
|
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. Bonds issued with a maturity of one year or less are assigned Moody’s ratings from MIG-1 to MIG-4 and Standard and Poor’s ratings from SP-1+ to SP-3 with MIG-1 and SP-1+ being the strongest ratings. |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
AGM | Insured by Assured Guaranty Municipal Corp. | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
ETM | Escrowed to Maturity | |
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.
16 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 |
ASSETS | ||||
Investments at value (cost $54,750,190) (Note 2) | $ | 59,597,987 | ||
Cash | 204,175 | |||
Receivable for fund shares sold | 187,224 | |||
Interest receivable | 740,766 | |||
Prepaid expenses and other assets | 308 | |||
|
| |||
Total Assets | 60,730,460 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 62,298 | |||
Payable to investment advisor and other affiliates (Note 3) | 36,332 | |||
Accounts payable and accrued expenses | 27,904 | |||
Dividends payable | 34,976 | |||
|
| |||
Total Liabilities | 161,510 | |||
|
| |||
NET ASSETS | $ | 60,568,950 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (16,847 | ) | |
Net unrealized appreciation on investments | 4,847,797 | |||
Accumulated net realized gain (loss) | (133,211 | ) | ||
Net capital paid in on shares of beneficial interest | 55,871,211 | |||
|
| |||
$ | 60,568,950 | |||
|
| |||
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($55,861,631 applicable to 4,155,801 shares of beneficial interest outstanding - Note 4) | $ | 13.44 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
|
| |||
Maximum offering price per share | $ | 13.71 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($4,707,319 applicable to 350,197 shares of beneficial interest outstanding - Note 4) | $ | 13.44 | ||
|
|
See notes to financial statements.
Certified Annual Report 17
STATEMENT OF OPERATIONS | ||
Thornburg New York Intermediate Municipal Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Interest income (net of premium amortized of $264,653) | $ | 2,071,539 | ||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 273,048 | |||
Administration fees (Note 3) | ||||
Class A Shares | 63,140 | |||
Class I Shares | 2,047 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 126,281 | |||
Transfer agent fees | ||||
Class A Shares | 23,791 | |||
Class I Shares | 3,794 | |||
Registration and filing fees | ||||
Class A Shares | 293 | |||
Custodian fees (Note 3) | 28,127 | |||
Professional fees | 26,081 | |||
Accounting fees | 1,199 | |||
Trustee fees | 1,561 | |||
Other expenses | 14,423 | |||
|
| |||
Total Expenses | 563,785 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (35,232 | ) | ||
Fees paid indirectly (Note 3) | (1,094 | ) | ||
|
| |||
Net Expenses | 527,459 | |||
|
| |||
Net Investment Income | 1,544,080 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (1,824 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 2,135,272 | |||
|
| |||
Net Realized and Unrealized Gain | 2,133,448 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 3,677,528 | ||
|
|
See notes to financial statements.
18 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg New York Intermediate Municipal Fund |
Year Ended | Year Ended | |||||||
September 30, 2012 | September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,544,080 | $ | 1,520,039 | ||||
Net realized gain (loss) on investments | (1,824 | ) | (98,557 | ) | ||||
Net unrealized appreciation (depreciation) on investments | 2,135,272 | 195,166 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,677,528 | 1,616,648 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (1,416,550 | ) | (1,450,725 | ) | ||||
Class I Shares | (127,530 | ) | (69,314 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 8,331,577 | (2,726,714 | ) | |||||
Class I Shares | 1,038,620 | 1,720,642 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 11,503,645 | (909,463 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 49,065,305 | 49,974,768 | ||||||
|
|
|
| |||||
End of Year | $ | 60,568,950 | $ | 49,065,305 | ||||
|
|
|
|
See notes to financial statements.
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 |
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 has two classes of shares of beneficial interest outstanding: Class A and Institutional Class (Class I) shares. Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee and (ii) Class I shares are sold at net asset value without a sales charge at the time of purchase and may be subject to a service fee, and (iii) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent 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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: 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. 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 ordinarily valued at amortized cost, which approximates market value.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 |
In any case where the market value of a debt obligation held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. In any case where a pricing service fails to provide a price for a debt obligation held by the Fund, the Committee determines a fair value for the debt obligation using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from a different independent pricing service. 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 Committee decides whether or not to use the pricing service’s valuation or to to use an alternative method to determine a fair value for the debt obligation.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 59,597,987 | $ | — | $ | 59,597,987 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 59,597,987 | $ | — | $ | 59,597,987 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2012.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 |
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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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: Investment transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on investments purchased are amortized to call dates or maturity dates of the respective investments. Realized gains and losses from the sale of investments 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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 year ended September 30, 2012, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $31,075 for Class A shares and $4,157 for Class I shares.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 |
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, 2012, the Distributor has advised the Fund that it earned net commissions aggregating $871 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, 2012, 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 are 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, 2012, fees paid indirectly were $1,094.
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 880,583 | $ | 11,619,127 | 807,669 | $ | 10,231,983 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 74,364 | 982,762 | 79,211 | 995,815 | ||||||||||||
Shares repurchased | (323,381 | ) | (4,270,312 | ) | (1,122,823 | ) | (13,954,512 | ) | ||||||||
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| |||||||||
Net increase (decrease) | 631,566 | $ | 8,331,577 | (235,943 | ) | $ | (2,726,714 | ) | ||||||||
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Class I Shares | ||||||||||||||||
Shares sold | 131,881 | $ | 1,742,051 | 200,446 | $ | 2,554,922 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 8,665 | 114,614 | 4,201 | 53,168 | ||||||||||||
Shares repurchased | (62,258 | ) | (818,045 | ) | (70,956 | ) | (887,448 | ) | ||||||||
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| |||||||||
Net increase (decrease) | 78,288 | $ | 1,038,620 | 133,691 | $ | 1,720,642 | ||||||||||
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NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2012, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $15,098,807 and $6,808,290, respectively.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 |
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 54,750,190 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 4,847,797 | ||
Gross unrealized depreciation on a tax basis | — | |||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 4,847,797 | ||
|
|
At September 30, 2012, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2011 of $1,824. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
At September 30, 2012, the Fund had cumulative tax basis capital losses of $98,557, 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 do not expire but are required to be utilized to offset future gains prior to the utilization of losses that occurred in years prior to the fiscal year ending September 30, 2012, which may expire prior to utilization.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) became effective for the Fund’s fiscal year ending September 30, 2012. The Act requires that future capital losses generated by the Fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a Fund’s pre-enactment capital losses will expire unused.
At September 30, 2012, the Fund had tax basis capital losses of $32,830, which expire September 30, 2014.
At September 30, 2012, the Fund did not have any undistributed tax basis net tax-exempt income, net ordinary income or undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2012 and September 30, 2011 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the fiscal years ending September 30, 2012 and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 1,544,080 | $ | 1,519,692 | ||||
Ordinary income | — | 347 | ||||||
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| |||||
Total | $ | 1,544,080 | $ | 1,520,039 | ||||
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OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, credit risk, interest rate risk, management risk, market and economic risk, liquidity risk, and the risks of investing primarily in the obligations of a single state. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
24 Certified Annual Report
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Certified Annual Report 25
Thornburg New York Intermediate Municipal Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the Year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Year | 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 | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 12.93 | 0.37 | 0.51 | 0.88 | (0.37 | ) | — | (0.37 | ) | $13.44 | 2.80 | 0.99 | 0.99 | 1.05 | 6.90 | 13.37 | $ | 55,862 | |||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 12.82 | 0.41 | 0.11 | 0.52 | (0.41 | ) | — | (0.41 | ) | $12.93 | 3.26 | 0.99 | 0.99 | 1.07 | 4.20 | 26.39 | $ | 45,551 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 12.92 | 0.41 | 0.52 | 0.93 | (0.41 | ) | — | (0.41 | ) | $13.44 | 3.12 | 0.67 | 0.67 | 0.77 | 7.33 | 13.37 | $ | 4,707 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 12.82 | 0.45 | 0.10 | 0.55 | (0.45 | ) | — | (0.45 | ) | $12.92 | 3.54 | 0.67 | 0.67 | 0.71 | 4.45 | 26.39 | $ | 3,514 | |||||||||||||||||||||||||||||||||||||||
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, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
26 Certified Annual Report | Certified Annual Report 27 |
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
28 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,038.70 | $ | 5.05 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,040.40 | $ | 3.41 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.66 | $ | 3.38 |
† | 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 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table above 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 above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 29
INDEX COMPARISON | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg New York Intermediate Municipal Fund versus BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index, BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index, and Consumer Price Index (September 5, 1997 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 9/5/97) | 4.79 | % | 4.83 | % | 3.76 | % | 4.39 | % | ||||||||
I Shares (Incep: 2/1/10) | 7.33 | % | — | — | 6.41 | % |
Effective February 1, 2012, the Fund’s benchmark changed from the BofA Merrill Lynch 7-12 Year U.S. Municipal Securities Index to the BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index. The Advisor believes that the new index better reflects the Fund’s principal investment strategies, including the Fund’s practice of investing in obligations having a range of maturities.
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 or call 800.847.0200. 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% . There is no sales charge for Class I shares
30 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 31
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE(1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
32 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. (8) 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 New York Intermediate Municipal Fund | September 30, 2012 (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. A description of the Policy 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, 2012 dividends paid by the Fund of $1,544,080 (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 reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 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 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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.
34 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. In addition, The Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (iii) measures of the Fund’s investment performance over various 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 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 considered (among other aspects of the data) performance data for the ten most recent calendar years, which showed that the Fund produced positive investment returns in accordance with expectations in the years considered, that the Fund’s return for the most recent calendar year exceeded the average return of the mutual fund category for which calendar year data was presented, and that the Fund’s returns exceeded or were comparable to the average returns of the category in a majority of the preceding nine calendar years. Other noted quantitative data showed that the Fund’s investment returns fell above the midpoint of performance for the first fund category for the one-year and three-year periods ended with the second quarter of the current year and within the top quartile of the same category for the five-year period, and fell above the midpoint of performance for the second category for the one-year period ended with the second quarter and at the top quartile of the same category for the three-year and five-year periods. These data indicated to the Trustees that the Fund’s investment performance met expectations in view of the Fund’s stated objectives and strategies in the market conditions for the relevant periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to those measures also 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 and the Fund’s investment performance, comparison of the actual Advisor’s fee and Fund expenses to the statement of fees and expenses in the Fund’s prospectus, and comparisons of the Advisor’s fee and overall Fund expenses to median and average fees and expenses charged to a category of municipal debt mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged to the Fund was comparable to the median and average management fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was slightly higher than the median and comparable to the average expense ratios for the fund category. 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.
Certified Annual Report 35
OTHER INFORMATION, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2012 (Unaudited) |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its capabilities. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as the Fund grows in size, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s 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.
36 Certified Annual Report
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TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
38 This page is not part of the Annual Report.
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 website 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 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 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 FUND FAMILY
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 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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TH860 |
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2012. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Funds’ shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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, R3, and R5 shares may not be available to all investors.
Limited Term U.S. | NASDAQ | |||
Government Fund | SYMBOLS | CUSIPS | ||
Class A | LTUSX | 885-215-103 | ||
Class B | LTUBX | 885-215-848 | ||
Class C | LTUCX | 885-215-830 | ||
Class I | LTUIX | 885-215-699 | ||
Class R3 | LTURX | 885-215-491 | ||
Class R5 | LTGRX | 885-216-861 | ||
Limited Term Income Fund | ||||
Class A | THIFX | 885-215-509 | ||
Class C | THICX | 885-215-764 | ||
Class I | THIIX | 885-215-681 | ||
Class R3 | THIRX | 885-215-483 | ||
Class R5 | THRRX | 885-216-853 |
Lipper’s 2012 Best Fixed Income Funds Manager
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income Large Company universe for the three-year period ended 11/30/11, based on risk-adjusted returns. Lipper’s Large Company universe is comprised of fund families with more than $40 billion in total net assets. Only fund families with at least five bond funds were eligible for the fixed income funds manager award. Asset Class Group Awards are given for the three-year period only.
Glossary
Barclays 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 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.
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 reflects actual distributions made to shareholders. The annualized distribution yield is calculated by summing the last 30 days of income at a given month end and annualizing to a 360-day year. The result is divided by the ending maximum offering price.
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.
Duration – A bond’s sensitivity to interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
Government-Sponsored Enterprise (GSE) – Certain financial services corporations (examples: the Federal Home Loan Banks and Freddie Mac) created by the United States Congress, whose intended function is to enhance the flow of credit to targeted sectors of the economy. The desired effect of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors by reducing the risk of capital losses to investors.
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.
This page is not part of the Annual Report. 3
IMPORTANT INFORMATION, CONTINUED
Option Adjusted Spread (OAS) – The flat spread over the treasury yield curve required to discount a security payment to match its market price.
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.
4 This page is not part of the Annual Report.
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 often fail to stack up over longer periods of time.
Portfolio Manager
Jason Brady, 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 or call 800-847-0200.
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 0.89%, as disclosed in the most recent Prospectus.
Portfolio Ladder
As of September 30, 2012
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment and interest-rate risk. |
• | Investing on a cash-only basis without using leverage. While leveraged strategies may enhance returns when 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. |
Long-Term Stability of Principal
Net Asset Value History of A shares from November 16, 1987 through September 30, 2012
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 11/16/87) | ||||||||||||||||||||
Without sales charge | 2.29 | % | 3.21 | % | 4.51 | % | 3.53 | % | 5.70 | % | ||||||||||
With sales charge | 0.77 | % | 2.69 | % | 4.19 | % | 3.38 | % | 5.63 | % |
30-Day Yields, A Shares
As of September 30, 2012
Annualized Distribution Yield | SEC Yield | |||
2.60% | 1.12 | % |
Key Portfolio Attributes
As of September 30, 2012
Number of Bonds | 182 | |||
Effective Duration | 2.9 Yrs | |||
Average Maturity | 3.5 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 11.
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THORNBURG LIMITED TERM INCOME FUND
The Thornburg Limited Term Income Fund takes the laddering strategy to the broader fixed-income market. Expanding beyond government and agency securities brings additional risks – as well as potentially higher returns. Our team addresses these uncertainties by employing a comprehensive approach to risk management. While utilizing the ladder to balance interest-rate and reinvestment risk, the team also:
Portfolio Managers
Jason Brady,CFA and Lon Erickson,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 or call 800-847-0200.
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 0.98% as disclosed in the most recent Prospectus.
Portfolio Ladder
As of September 30, 2012
• | 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. |
Long-Term Stability of Principal
Net Asset Value History of A shares from October 1, 1992 through September 30, 2012
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 10/1/92) | ||||||||||||||||||||
Without sales charge | 7.04 | % | 6.35 | % | 6.43 | % | 4.84 | % | 5.72 | % | ||||||||||
With sales charge | 5.46 | % | 5.80 | % | 6.11 | % | 4.68 | % | 5.64 | % |
30-Day Yields, A Shares
As of September 30, 2012
Annualized Distribution Yield | SEC Yield | |||
2.77% | 1.83 | % |
Key Portfolio Attributes
As of September 30, 2012
Number of Bonds | 523 | |||
Effective Duration | 3.5 Yrs | |||
Average Maturity | 4.5 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 16.
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Thornburg Limited Term Income Funds –
September 30, 2012
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report 7
October 28, 2012
Dear Fellow Shareholders:
We are pleased to present the annual reports for the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund for the year ended September 30, 2012. The net asset value (NAV) of a Class A share of the Thornburg Limited Term U.S. Government Fund decreased 4 cents in the period to $13.86. If you were invested for the entire period, you received dividends of 35.4 cents per share. If you reinvested your dividends, you received 35.8 cents per share. The net asset value of a Class A share of the Thornburg Limited Term Income Fund increased 40 cents in the period to $13.72. If you were invested for the entire period, you received dividends of 42.3 cents per share. If you reinvested your dividends, you received 43.0 cents per share. Dividends per share were lower for Class B, C, and R3 shares and higher for Class I and R5 shares as a percentage of NAV to account for varying class-specific expenses. Please examine the accompanying exhibits for more detailed information.
The yields on U.S. Treasuries were very stable over the course of the past year, with some price appreciation along with a meager income stream driving returns in that sector. Volatility in credit spreads (defined as the additional yield the market requires for investing in risky securities versus credit risk-less U.S. Treasuries) on all non-Treasury bond asset classes also remained relatively low, though that lack of significant volatility increased investors’ confidence in those sectors. The two-year U.S. Treasury moved from a 0.245% yield to a 0.232% yield over the course of the past year, while the 10-year U.S. Treasury moved from a 1.916% yield to a 1.634% yield. Credit spreads recovered from a near-term high at the beginning of this past fiscal year (October 1, 2011) and advanced without much pause. The Barclays Corporate Credit Index Option Adjusted Spread (or the difference between Treasuries and the average investment-grade corporate bond) moved from 2.38% on September 30, 2011 to 1.56% on September 30, 2012. This is a significant movement and has placed high-quality corporate bonds very close to their all-time lows in yield. The price appreciation of corporate bonds relative to U.S. government securities is largely responsible for the difference in total returns over the past year between the two funds discussed here.
We believe that the run of capital appreciation in high quality bond funds such as the Thornburg Limited Term U.S. Government and the Thornburg Limited Term Income Funds is very well advanced. Though there is always the risk of a “Japan” scenario (an extended period of very low yields), this is not our base case. In an environment in which rates slowly return to a more “normalized” level, there is likely to be a period in which returns on high quality bond funds are close to zero or indeed negative (depending on the speed of adjustment). While a portfolio position in our Funds — in order to reduce volatility and provide ballast in an ugly market — is a prudent part of any investor’s allocation, the prospective returns of the Funds themselves are unlikely to be particularly additive. Indeed, inflation effects make the likely real returns of these Funds flat at best — given the current yields of most of our investment universe. Even in a benign, recovering-credit environment, spreads are low enough that the movements of underlying so called “risk-free” Treasury rates will dominate price volatility. As such, it is useful to remember why our “Limited Term” Funds are loath to invest notably further out the curve into longer duration securities.
8 Certified Annual Report
As a reminder, while “Limited Term” refers to a 10-year and shorter investment universe, the longer end of the curve (more than 10 years) is only 13% of the Barclays Aggregate Index. As a result, we are capturing the vast majority of the various opportunities available in the marketplace. Though the yield curve is steep and therefore the promised yield on the 30-year Treasury is quite high relative to the two-year, we don’t think that over time the additional volatility that investors must endure to achieve this higher yield is worth it. (This is not to mention the opportunity cost of foregoing future investment opportunities that will likely crop up somewhere between two and 30 years’ time. This concentration on maturing securities is central to our laddering approach.) We will continue to invest shareholder funds in accordance with our mandate of a good risk/reward balance, muted price volatility, and low correlation to equities.
In previous letters, we discussed the fact that the nearly uninterrupted recovery from early 2009 through 2012 was a boon to us at Thornburg as we altered the Limited Term Income Fund’s credit allocation (along with that of multiple other funds) to take advantage of unprecedented levels during the late 2008/ early 2009 upset. The Fund reached its prospectus limitation (minimum 65%) on A and above credit at several points over that time period. Today we remain close to that limit, but are focused on reducing sector risk (financials are typically, still, highly rated and represent about one-third of the corporate universe) through a continued skew towards industrial credits. Corporates are still a focus for the Limited Term Income Fund given that the quality of corporate balance sheets remains quite high relative to government and individual balance sheets. Even in the Thornburg Limited Term U.S. Government Fund, with its more restrictive purview, we took advantage of spread tightening, given our significant allocation to Government Sponsored Enterprise (GSE) mortgage debt that traded at levels that provided a notable income advantage versus Treasuries. All of these advantages are narrowing and our caution is increasing as a result.
We continue to believe that the Federal Reserve’s extraordinarily accommodative policy has been a key driver of returns on “risk” assets in the marketplace, and their commitment to unlimited quantitative easing (purchasing many of the same securities that are part of the investment universe of our Funds) will continue to distort prices and make real investment returns difficult. In addition, a market that is obsessed with one moving part (Fed/global central bank policy) is liable to be subject to more volatility than a more idiosyncratically driven market. We continue to be alert to this potential for volatility. Again, given low yield levels, this has the potential to be more destructive than constructive to net asset values.
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 2.29% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Barclays Intermediate Government Index produced a 2.39% total return over the same time period. The average return for the Lipper Short-Intermediate U.S. Government Bond category was 2.21%. The Class A shares of the Thornburg Limited Term Income Fund produced a total return of 7.04% over the twelve-month period, assuming a beginning-of-period investment at the net asset value. The Barclays Intermediate Government/Credit Index produced a 4.40% total return over the same time period. The average return for the Lipper Short-Intermediate Investment Grade category was 5.16%. Both Barclays indices reflect no deduction for fees, expenses, or taxes.
In any environment, high quality bond funds should represent a safe haven, not necessarily a source of tremendous return. Thornburg Investment Management will continue to strive to give you, the bond investor, a consistent income stream and a set of funds which are not highly correlated to equity markets’ returns. The broad distribution of fund returns in the past three, five, and 10 years shows that those that reached for yield by taking incremental risk for which they were not compensated have suffered, while
Certified Annual Report 9
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
those not nimble enough to take advantage of opportunities in the market did not benefit from a market recovery. In many cases investors have been surprised by their fixed income allocation’s performance. 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. In this environment, though low-quality fixed income can move in tandem with equities, the risk of holding extremely high quality cash instruments or U.S. Treasuries alone is also present especially when one considers potential erosion of purchasing power due to potential long-run inflation. As a result, we continue to try to place capital preservation (in all senses of the term) at the top of the list of priorities for these core Funds. While we don’t believe that yields will rise dramatically in the near term given an outlook for slow economic growth, rest assured that we at Thornburg are very cognizant of that longer-term risk, and are investing accordingly.
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 balances duration and yield in a way that is designed to provide the best risk-adjusted bond returns over time.
Thank you very much for investing in our Funds. We feel that the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund are appropriate investments for those looking for core bond investments. While we of course cannot guarantee future performance, Thornburg Investment Management will continue to strive to chart a steady course in what continues to be a volatile marketplace.
Sincerely, | ||
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Jason H. Brady, CFA | Lon R. Erickson, CFA | |
Portfolio Manager | 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.
10 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2012 |
SUMMARY OF TYPES OF HOLDINGS
Issuer-Description | Principal Amount | Value | ||||||
U.S. TREASURY SECURITIES — 8.42% | ||||||||
United States Treasury Notes, 2.625%, 12/31/2014 | $ | 2,000,000 | $ | 2,106,344 | ||||
United States Treasury Notes, 1.375%, 11/30/2015 | 2,500,000 | 2,580,723 | ||||||
United States Treasury Notes, 2.625%, 2/29/2016 | 2,000,000 | 2,153,109 | ||||||
United States Treasury Notes, 4.875%, 8/15/2016 | 5,000,000 | 5,848,711 | ||||||
United States Treasury Notes, 4.625%, 2/15/2017 | 4,000,000 | 4,707,219 | ||||||
United States Treasury Notes, 2.25%, 11/30/2017 | 3,500,000 | 3,782,215 | ||||||
United States Treasury Notes, 3.625%, 2/15/2020 | 1,000,000 | 1,178,430 | ||||||
United States Treasury Notes Inflationary Index, 2.00%, 7/15/2014 | 2,430,980 | 2,592,405 | ||||||
United States Treasury Notes Inflationary Index, 1.875%, 7/15/2015 | 4,711,680 | 5,179,498 | ||||||
United States Treasury Notes Inflationary Index, 2.00%, 1/15/2016 | 5,771,850 | 6,470,337 | ||||||
|
| |||||||
TOTAL U.S. TREASURY SECURITIES (Cost $33,151,306) | 36,598,991 | |||||||
|
| |||||||
U.S. GOVERNMENT AGENCIES — 18.71% | ||||||||
Carobao Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.829%, 9/7/2024 | 4,750,000 | 4,808,567 | ||||||
Federal Agricultural Mtg Corp., 6.71%, 7/28/2014 | 200,000 | 221,854 | ||||||
Federal Farm Credit Bank, 6.06%, 5/28/2013 | 240,000 | 249,244 | ||||||
Federal Farm Credit Bank, 3.98%, 1/22/2015 | 1,000,000 | 1,083,399 | ||||||
Federal Home Loan Bank, 5.375%, 6/13/2014 | 2,000,000 | 2,171,710 | ||||||
Federal Home Loan Bank, 5.00%, 12/8/2017 | 3,000,000 | 3,634,062 | ||||||
Federal Home Loan Bank, 2.25%, 3/26/2018 | 3,000,000 | 3,025,873 | ||||||
Federal Home Loan Mtg Corp., 4.50%, 1/15/2015 | 5,000,000 | 5,478,065 | ||||||
Federal Home Loan Mtg Corp., 4.875%, 6/13/2018 | 3,000,000 | 3,644,381 | ||||||
Federal National Mtg Assoc., 4.40%, 2/19/2015 | 1,585,000 | 1,737,683 | ||||||
a Government of Tunisia, (Guaranty: U.S. Agency for International Development), 1.686%, 7/16/2019 | 5,000,000 | 4,981,220 | ||||||
Mtg-Linked Amortizing Notes, Series 2012-1 Class A10, 2.06%, 1/15/2022 | 2,961,935 | 3,022,043 | ||||||
New Valley Generation I, Tennessee Valley Authority, 7.299%, 3/15/2019 | 2,763,157 | 3,289,099 | ||||||
Overseas Private Investment Corp., 4.10%, 11/15/2014 | 628,800 | 631,403 | ||||||
a Petroleos Mexicanos, (Guaranty: Export-Import Bank of the United States), 1.70%, 12/20/2022 | 3,100,000 | 3,135,650 | ||||||
Private Export Funding Corp., 4.974%, 8/15/2013 | 2,700,000 | 2,812,266 | ||||||
Private Export Funding Corp., 5.45%, 9/15/2017 | 3,000,000 | 3,659,184 | ||||||
Small Business Administration Participation Certificates, Series 2001-20D Class 1, 6.35%, 4/1/2021 | 3,704,574 | 4,125,299 | ||||||
Small Business Administration Participation Certificates, Series 2001-20F Class 1, 6.44%, 6/1/2021 | 2,288,815 | 2,561,483 | ||||||
Small Business Administration Participation Certificates, Series 2002-20A Class 1, 6.14%, 1/1/2022 | 1,249,608 | 1,394,382 | ||||||
Small Business Administration Participation Certificates, Series 2002-20K Class 1, 5.08%, 11/1/2022 | 1,461,809 | 1,619,441 | ||||||
Small Business Administration Participation Certificates, Series 2005-20H Class 1, 5.11%, 8/1/2025 | 871,374 | 978,775 | ||||||
Small Business Administration Participation Certificates, Series 2007-20D Class 1, 5.32%, 4/1/2027 | 1,682,289 | 1,935,611 | ||||||
Small Business Administration Participation Certificates, Series 2007-20F Class 1, 5.71%, 6/1/2027 | 941,815 | 1,095,496 | ||||||
Small Business Administration Participation Certificates, Series 2007-20I Class 1, 5.56%, 9/1/2027 | 3,037,177 | 3,509,137 | ||||||
Small Business Administration Participation Certificates, Series 2007-20K Class 1, 5.51%, 11/1/2027 | 1,849,446 | 2,133,601 | ||||||
Small Business Administration Participation Certificates, Series 2008-20G Class 1, 5.87%, 7/1/2028 | 4,640,124 | 5,405,973 | ||||||
Tennessee Valley Authority, 4.75%, 8/1/2013 | 3,000,000 | 3,114,257 | ||||||
b,c U.S. Department of Transportation Headquarters, Series 2004 Class A-2, 5.594%, 12/7/2021 | 2,472,189 | 2,946,080 | ||||||
Union 13 Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.87%, 6/28/2024 | $ | 2,940,042 | $ | 2,985,201 | ||||
|
| |||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $76,408,448) | 81,390,439 | |||||||
|
|
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2012 |
Issuer-Description | Principal Amount | Value | ||||||
MORTGAGE BACKED — 64.04% | ||||||||
Federal Home Loan Mtg Corp., CMO Series 1321 Class TE, 7.00%, 8/15/2022 | 337,313 | 374,293 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2420 Class MC, 6.00%, 2/15/2017 | 375,567 | 404,144 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2509 Class TV, 5.50%, 4/15/2022 | 635,034 | 640,587 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2527 Class BP, 5.00%, 11/15/2017 | 907,679 | 968,117 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2529 Class MB, 5.00%, 11/15/2017 | 933,949 | 999,108 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2553 Class GB, 5.00%, 1/15/2018 | 682,212 | 728,586 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2558 Class BD, 5.00%, 1/15/2018 | 3,229,611 | 3,450,250 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2622 Class PE, 4.50%, 5/15/2018 | 1,703,146 | 1,798,611 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2628 Class DQ, 3.00%, 11/15/2017 | 133,445 | 135,360 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2641 Class WE, 4.50%, 1/15/2033 | 334,918 | 354,964 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2642 Class JE, 5.00%, 9/15/2032 | 2,000,000 | 2,135,643 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2649 Class QH, 4.50%, 7/15/2018 | 840,405 | 895,275 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2692 Class QD, 5.00%, 12/15/2022 | 2,010,711 | 2,081,614 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2731 Class Vl, 5.50%, 12/15/2014 | 1,128,732 | 1,178,123 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2770 Class UD, 4.50%, 5/15/2017 | 203,506 | 203,815 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2808 Class VA, 5.50%, 5/15/2015 | 3,532,445 | 3,730,940 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00%, 6/15/2019 | 333,996 | 340,508 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2825 Class VP, 5.50%, 6/15/2015 | 2,434,926 | 2,555,767 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2827 Class BU, 3.50%, 7/15/2019 | 2,333,637 | 2,430,227 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3020 Class VA, 5.50%, 11/15/2014 | 312,775 | 313,266 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3067 Class PJ, 5.50%, 7/15/2031 | 344,020 | 344,385 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3271 Class LU, 5.50%, 1/15/2018 | 1,690,568 | 1,704,934 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3291 Class BY, 4.50%, 3/15/2022 | 3,000,000 | 3,270,656 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3331 Class PB, 6.00%, 1/15/2031 | 206,976 | 207,012 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3351 Class PK, 5.50%, 1/15/2032 | 132,294 | 132,349 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3456 Class KV, 5.50%, 9/15/2017 | 1,802,046 | 1,844,859 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3477 Class VA, 5.50%, 7/15/2019 | 3,465,113 | 3,656,766 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3480 Class VA, 6.00%, 6/15/2019 | 2,087,747 | 2,304,017 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3563 Class BC, 4.00%, 6/15/2022 | 251,588 | 255,298 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3589 Class CA, 4.00%, 10/15/2021 | 989,330 | 1,028,014 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3640 Class EL, 4.00%, 3/15/2020 | 1,944,127 | 2,054,057 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3678 Class AL, 4.50%, 10/15/2027 | 1,137,353 | 1,176,828 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3704 Class DC, 4.00%, 11/15/2036 | 921,424 | 1,006,315 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3872 Class DT, 4.00%, 6/15/2026 | 1,175,330 | 1,342,050 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3920 Class AB, 3.00%, 9/15/2025 | 2,404,252 | 2,483,772 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3922 Class PQ, 2.00%, 4/15/2041 | 3,568,893 | 3,620,895 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3981 Class ME, 3.00%, 1/15/2027 | 3,778,285 | 4,007,769 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3996 Class VN, 3.50%, 3/15/2025 | 4,820,927 | 5,223,835 | ||||||
Federal Home Loan Mtg Corp., CMO Series 4050 Class MV, 3.50%, 8/15/2023 | 3,415,796 | 3,723,296 | ||||||
Federal Home Loan Mtg Corp., CMO Series 4097 Class TE, 1.75%, 5/15/2039 | 3,991,828 | 4,016,662 | ||||||
Federal Home Loan Mtg Corp., CMO Series R003 Class VA, 5.50%, 8/15/2016 | 756,694 | 766,646 | ||||||
Federal Home Loan Mtg Corp., CMO Series R012 Class AB, 5.50%, 12/15/2020 | 119,742 | 120,122 | ||||||
Federal Home Loan Mtg Corp., Multifamily Structured Pass-Through Certificates, CMO Series K708 Class A2, 2.13%, 1/25/2019 | 5,100,000 | 5,336,121 | ||||||
Federal Home Loan Mtg Corp., Multifamily Structured Pass-Through Certificates, CMO Series K709 Class A2, 2.086%, 3/25/2019 | 3,000,000 | 3,128,984 | ||||||
Federal Home Loan Mtg Corp., Pool D98887, 3.50%, 1/1/2032 | 3,348,977 | 3,589,423 | ||||||
Federal Home Loan Mtg Corp., Pool 1N1736, 2.92%, 4/1/2037 | 281,600 | 281,600 | ||||||
Federal Home Loan Mtg Corp., Pool AK6768, 3.00%, 3/1/2027 | 3,821,206 | 4,052,419 | ||||||
Federal Home Loan Mtg Corp., Pool B14155, 3.50%, 5/1/2019 | 633,568 | 673,127 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2012 |
Issuer-Description | Principal Amount | Value | ||||||
Federal Home Loan Mtg Corp., Pool C90041, 6.50%, 11/1/2013 | $ | 2,231 | $ | 2,277 | ||||
Federal Home Loan Mtg Corp., Pool D37120, 7.00%, 7/1/2023 | 10,003 | 11,085 | ||||||
Federal Home Loan Mtg Corp., Pool E96575, 4.50%, 6/1/2018 | 1,778,964 | 1,905,159 | ||||||
Federal Home Loan Mtg Corp., Pool G12079, 4.50%, 4/1/2019 | 1,441,434 | 1,547,720 | ||||||
Federal Home Loan Mtg Corp., Pool G12140, 4.00%, 2/1/2020 | 401,565 | 428,845 | ||||||
Federal Home Loan Mtg Corp., Pool G13517, 4.00%, 5/1/2024 | 935,431 | 993,896 | ||||||
Federal Home Loan Mtg Corp., Pool G13804, 5.00%, 3/1/2025 | 1,833,410 | 1,978,579 | ||||||
Federal Home Loan Mtg Corp., Pool J11371, 4.50%, 12/1/2024 | 2,126,869 | 2,277,744 | ||||||
Federal Home Loan Mtg Corp., Pool J13583, 3.50%, 11/1/2025 | 2,361,324 | 2,533,442 | ||||||
Federal Home Loan Mtg Corp., Pool J14888, 3.50%, 4/1/2026 | 2,902,803 | 3,069,034 | ||||||
Federal Home Loan Mtg Corp., REMIC Series 3626 Class AV, 5.50%, 10/15/2020 | 2,321,537 | 2,376,222 | ||||||
Federal Home Loan Mtg Corp., REMIC Series 4072 Class VA, 3.50%, 10/15/2023 | 2,963,578 | 3,231,766 | ||||||
Federal National Mtg Assoc., CMO Series 1993-32 Class H, 6.00%, 3/25/2023 | 42,603 | 47,716 | ||||||
Federal National Mtg Assoc., CMO Series 2002-18 Class PC, 5.50%, 4/25/2017 | 214,183 | 218,868 | ||||||
Federal National Mtg Assoc., CMO Series 2003-15 Class CY, 5.00%, 3/25/2018 | 550,109 | 586,695 | ||||||
Federal National Mtg Assoc., CMO Series 2003-4 Class PE, 5.00%, 2/25/2018 | 1,402,351 | 1,508,002 | ||||||
Federal National Mtg Assoc., CMO Series 2003-49 Class YD, 5.50%, 6/25/2023 | 677,667 | 723,839 | ||||||
Federal National Mtg Assoc., CMO Series 2003-66 Class PA, 3.50%, 2/25/2033 | 247,311 | 258,967 | ||||||
Federal National Mtg Assoc., CMO Series 2003-89 Class XC, 6.00%, 9/25/2014 | 519,544 | 531,200 | ||||||
Federal National Mtg Assoc., CMO Series 2003-9 Class DB, 5.00%, 2/25/2018 | 633,806 | 677,257 | ||||||
Federal National Mtg Assoc., CMO Series 2003-W3 Class 1A2, 7.00%, 8/25/2042 | 3,259,226 | 3,783,090 | ||||||
Federal National Mtg Assoc., CMO Series 2004-33 Class MW, 4.50%, 1/25/2030 | 1,978,360 | 2,071,302 | ||||||
Federal National Mtg Assoc., CMO Series 2004-35 Class CA, 4.00%, 12/25/2017 | 87,910 | 88,197 | ||||||
Federal National Mtg Assoc., CMO Series 2005-26 Class G, 5.00%, 6/25/2032 | 1,068,154 | 1,111,490 | ||||||
Federal National Mtg Assoc., CMO Series 2005-99 Class VA, 5.50%, 11/25/2016 | 1,036,686 | 1,121,021 | ||||||
Federal National Mtg Assoc., CMO Series 2006-121 Class VA, 5.50%, 3/25/2017 | 745,468 | 772,230 | ||||||
Federal National Mtg Assoc., CMO Series 2007-60 Class VA, 6.00%, 12/25/2017 | 2,846,316 | 2,972,677 | ||||||
Federal National Mtg Assoc., CMO Series 2007-65 Class PB, 6.00%, 10/25/2032 | 566,213 | 566,614 | ||||||
Federal National Mtg Assoc., CMO Series 2008-54 Class EA, 5.00%, 7/25/2019 | 2,023,962 | 2,104,525 | ||||||
Federal National Mtg Assoc., CMO Series 2009-111 Class VB, 4.50%, 2/25/2021 | 1,589,408 | 1,656,694 | ||||||
Federal National Mtg Assoc., CMO Series 2009-17 Class AH, 2.349%, 3/25/2039 | 1,387,788 | 1,396,435 | ||||||
Federal National Mtg Assoc., CMO Series 2009-49 Class KA, 5.00%, 2/25/2024 | 475,412 | 506,246 | ||||||
Federal National Mtg Assoc., CMO Series 2009-52 Class AJ, 4.00%, 7/25/2024 | 1,112,594 | 1,172,327 | ||||||
Federal National Mtg Assoc., CMO Series 2009-70 Class NK, 4.50%, 8/25/2019 | 714,537 | 757,329 | ||||||
Federal National Mtg Assoc., CMO Series 2009-78 Class A, 4.50%, 8/25/2019 | 1,011,125 | 1,069,349 | ||||||
Federal National Mtg Assoc., CMO Series 2010-46 Class VM, 5.00%, 5/25/2021 | 2,470,615 | 2,673,774 | ||||||
Federal National Mtg Assoc., CMO Series 2010-6 Class VA, 5.00%, 2/25/2021 | 2,765,022 | 3,008,392 | ||||||
Federal National Mtg Assoc., CMO Series 2010-69 Class EJ, 2.50%, 7/25/2024 | 1,309,075 | 1,337,265 | ||||||
Federal National Mtg Assoc., CMO Series 2011-103 Class VA, 4.00%, 12/25/2022 | 2,781,216 | 3,031,402 | ||||||
Federal National Mtg Assoc., CMO Series 2011-106 Class LV, 3.50%, 1/25/2023 | 3,702,925 | 3,953,132 | ||||||
Federal National Mtg Assoc., CMO Series 2011-110 Class JV, 4.00%, 1/25/2023 | 3,100,024 | 3,383,141 | ||||||
Federal National Mtg Assoc., CMO Series 2011-118 Class V, 4.00%, 10/25/2029 | 3,079,589 | 3,364,174 | ||||||
Federal National Mtg Assoc., CMO Series 2011-124 Class QA, 2.00%, 12/25/2041 | 4,959,229 | 5,045,972 | ||||||
Federal National Mtg Assoc., CMO Series 2011-45 Class VA, 4.00%, 3/25/2024 | 3,652,055 | 4,036,436 | ||||||
Federal National Mtg Assoc., CMO Series 2011-63 Class MV, 3.50%, 7/25/2024 | 3,687,960 | 4,005,357 | ||||||
Federal National Mtg Assoc., CMO Series 2011-70 Class CA, 3.00%, 8/25/2026 | 6,896,423 | 7,379,835 | ||||||
Federal National Mtg Assoc., CMO Series 2011-72 Class KV, 3.50%, 11/25/2022 | 2,185,089 | 2,350,415 | ||||||
Federal National Mtg Assoc., CMO Series 2011-88 Class WA, 2.50%, 9/25/2026 | 3,524,697 | 3,641,733 | ||||||
Federal National Mtg Assoc., CMO Series 2011-98 Class VC, 3.50%, 1/25/2023 | 4,165,785 | 4,490,969 | ||||||
Federal National Mtg Assoc., CMO Series 2012-36 Class CV, 4.00%, 6/25/2023 | 3,855,482 | 4,227,307 | ||||||
Federal National Mtg Assoc., CMO Series 2012-48 Class PD, 2.00%, 7/25/2041 | 4,382,642 | 4,474,068 | ||||||
Federal National Mtg Assoc., CMO Series 2012-50 Class LV, 3.50%, 8/25/2023 | 5,302,207 | 5,669,749 | ||||||
Federal National Mtg Assoc., Pool 044003, 8.00%, 6/1/2017 | 6,254 | 6,724 | ||||||
Federal National Mtg Assoc., Pool 050811, 7.50%, 12/1/2012 | 479 | 482 | ||||||
Federal National Mtg Assoc., Pool 050832, 7.50%, 6/1/2013 | 111 | 112 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2012 |
Issuer-Description | Principal Amount | Value | ||||||
Federal National Mtg Assoc., Pool 076388, 9.25%, 9/1/2018 | $ | 17,373 | $ | 18,937 | ||||
Federal National Mtg Assoc., Pool 190555, 7.00%, 1/1/2014 | 2,054 | 2,104 | ||||||
Federal National Mtg Assoc., Pool 251759, 6.00%, 5/1/2013 | 1,619 | 1,636 | ||||||
Federal National Mtg Assoc., Pool 252648, 6.50%, 5/1/2022 | 48,587 | 54,526 | ||||||
Federal National Mtg Assoc., Pool 342947, 7.25%, 4/1/2024 | 117,576 | 133,246 | ||||||
Federal National Mtg Assoc., Pool 443909, 6.50%, 9/1/2018 | 34,645 | 37,702 | ||||||
Federal National Mtg Assoc., Pool 555207, 7.00%, 11/1/2017 | 13,851 | 15,956 | ||||||
Federal National Mtg Assoc., Pool 726308, 4.00%, 7/1/2018 | 876,389 | 936,024 | ||||||
Federal National Mtg Assoc., Pool 889906, 4.00%, 7/1/2023 | 834,152 | 890,913 | ||||||
Federal National Mtg Assoc., Pool 895572, 2.945%, 6/1/2036 | 712,494 | 765,709 | ||||||
Federal National Mtg Assoc., Pool 930986, 4.50%, 4/1/2019 | 1,496,927 | 1,612,763 | ||||||
Federal National Mtg Assoc., Pool AA2870, 4.00%, 3/1/2024 | 1,971,488 | 2,105,642 | ||||||
Federal National Mtg Assoc., Pool AD8191, 4.00%, 9/1/2025 | 2,248,342 | 2,438,573 | ||||||
Federal National Mtg Assoc., Pool AJ1752, 3.50%, 9/1/2026 | 4,509,786 | 4,873,388 | ||||||
Federal National Mtg Assoc., Pool AK6518, 3.00%, 3/1/2027 | 4,270,151 | 4,579,237 | ||||||
Federal National Mtg Assoc., Pool MA0045, 4.00%, 4/1/2019 | 1,107,677 | 1,187,205 | ||||||
Federal National Mtg Assoc., Pool MA0071, 4.50%, 5/1/2019 | 789,045 | 850,103 | ||||||
Federal National Mtg Assoc., Pool MA0125, 4.50%, 7/1/2019 | 597,425 | 643,655 | ||||||
Federal National Mtg Assoc., Pool MA0380, 4.00%, 4/1/2020 | 1,474,763 | 1,580,646 | ||||||
Government National Mtg Assoc., CMO Series 2004-45 Class C, 5.67%, 10/16/2033 | 3,000,000 | 3,360,525 | ||||||
Government National Mtg Assoc., CMO Series 2004-45 Class C, 5.585%, 11/20/2059 | 5,288,568 | 5,877,064 | ||||||
Government National Mtg Assoc., CMO Series 2005-67 Class C, 4.907%, 3/16/2035 | 1,655,177 | 1,789,128 | ||||||
Government National Mtg Assoc., CMO Series 2009-105 Class A, 3.456%, 12/16/2050 | 2,675,436 | 2,802,098 | ||||||
Government National Mtg Assoc., CMO Series 2009-92 Class VA, 5.00%, 10/20/2020 | 1,235,155 | 1,368,012 | ||||||
Government National Mtg Assoc., CMO Series 2010-160 Class VY, 4.50%, 1/20/2022 | 872,588 | 992,300 | ||||||
Government National Mtg Assoc., Pool 000623, 8.00%, 9/20/2016 | 10,975 | 11,670 | ||||||
Government National Mtg Assoc., Pool 003550, 5.00%, 5/20/2019 | 593,610 | 647,872 | ||||||
Government National Mtg Assoc., Pool 453928, 7.00%, 7/15/2017 | 772 | 779 | ||||||
Government National Mtg Assoc., Pool 714631, 5.691%, 10/20/2059 | 2,096,392 | 2,319,798 | ||||||
Government National Mtg Assoc., Pool 721652, 5.044%, 5/20/2061 | 4,240,953 | 4,839,203 | ||||||
Government National Mtg Assoc., Pool 731491, 5.156%, 12/20/2060 | 4,237,216 | 4,874,239 | ||||||
Government National Mtg Assoc., Pool 751388, 5.307%, 1/20/2061 | 3,495,677 | 4,031,508 | ||||||
Government National Mtg Assoc., Pool 751392, 5.00%, 2/20/2061 | 5,373,415 | 6,312,408 | ||||||
Government National Mtg Assoc., Pool 757313, 4.307%, 12/20/2060 | 5,961,884 | 6,583,184 | ||||||
Government National Mtg Assoc., Pool 765151, 4.692%, 7/20/2061 | 3,087,263 | 3,508,683 | ||||||
Government National Mtg Assoc., Pool 894205, 4.00%, 8/20/2039 | 2,025,826 | 2,147,768 | ||||||
Government National Mtg Assoc., Pool MA0100, 2.50%, 5/20/2042 | 4,855,775 | 5,091,458 | ||||||
|
| |||||||
TOTAL MORTGAGE BACKED (Cost $272,332,503) | 278,495,349 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 4.60% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.20% dated 9/28/2012 due 10/1/2012, repurchase price $20,000,333 collateralized by 7 U.S. Government Agency debt securities, having an average coupon of 1.286%, credit rating of AAA, maturity dates from 12/25/2017 to 9/20/2042, and having an aggregate market value of $20,387,038 at 9/28/2012 | 20,000,000 | 20,000,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $20,000,000) | 20,000,000 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 95.77% (Cost $401,892,257) | $ | 416,484,779 | ||||||
OTHER ASSETS LESS LIABILITIES — 4.23% | 18,403,557 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 434,888,336 | ||||||
|
|
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2012 |
Footnote Legend
a | Yankee Bond - Denominated in U.S. dollars and is issued in the U.S. by foreign banks and corporations. |
b | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees. |
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, 2012, the aggregate value of these securities in the Fund’s portfolio was $2,946,080, representing 0.68% of the Fund’s net assets. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
CMO | Collateralized Mortgage Obligation |
Mtg | Mortgage |
REMIC | Real Estate Mortgage Investment Conduit |
VA | Veterans Affairs |
See notes to financial statements.
Certified Annual Report 15
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
SUMMARY OF SECURITY CREDIT RATINGS†
We have used ratings from Moody’s Investors Service. Where Moody’s ratings are not available, we have used Standard & Poor’s ratings. Where neither rating is available, we have used ratings from Fitch Ratings. “NR” = not rated.
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
U.S. TREASURY SECURITIES — 0.74% | ||||||||||
United States Treasury Notes, 1.75% due 4/15/2013 | NR/NR | $ | 2,500,000 | $ | 2,521,289 | |||||
United States Treasury Notes, 2.50% due 3/31/2015 | NR/NR | 6,500,000 | 6,860,090 | |||||||
United States Treasury Notes, 5.125% due 5/15/2016 | NR/NR | 1,000,000 | 1,169,000 | |||||||
United States Treasury Notes, 4.875% due 8/15/2016 | NR/NR | 2,000,000 | 2,339,484 | |||||||
United States Treasury Notes, 3.00% due 2/28/2017 | NR/NR | 2,000,000 | 2,215,062 | |||||||
United States Treasury Notes, 2.125% due 8/15/2021 | NR/NR | 5,000,000 | 5,289,102 | |||||||
|
| |||||||||
TOTAL U.S. TREASURY SECURITIES (Cost $18,956,393) | 20,394,027 | |||||||||
|
| |||||||||
U.S. GOVERNMENT AGENCIES — 3.21% | ||||||||||
a Agribank FCB, 9.125% due 7/15/2019 | A-/NR | 14,185,000 | 18,825,126 | |||||||
Carobao Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.829% due 9/7/2024 | NR/NR | 10,000,000 | 10,123,300 | |||||||
Federal National Mtg Assoc., 7.491% due 8/1/2014 | AA+/Aaa | 10,437 | 10,437 | |||||||
b Government of Tunisia, (Guaranty: U.S. Agency for International Development), 1.686% due 7/16/2019 | NR/NR | 10,000,000 | 9,962,440 | |||||||
c MSN 41079 and 41084 Ltd., (Guaranty: Export-Import Bank of the United States), 1.717% due 7/13/2024 | NR/NR | 12,000,000 | 12,000,000 | |||||||
Mtg-Linked Amortizing Notes, Series 2012-1 Class A10, 2.06% due 1/15/2022 | AA+/NR | 4,072,661 | 4,155,309 | |||||||
b Petroleos Mexicanos, (Guaranty: Export-Import Bank of the United States), 1.70% due 12/20/2022 | NR/NR | 6,000,000 | 6,069,000 | |||||||
Private Export Funding Corp., 5.45% due 9/15/2017 | AA+/Aaa | 3,000,000 | 3,659,184 | |||||||
c Santa Rosa Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.693% due 8/15/2024 | NR/NR | 6,000,000 | 6,007,500 | |||||||
Small Business Administration Participation Certificates, Series 2001-20J Class 1, 5.76% due 10/1/2021 | NR/NR | 1,277,863 | 1,412,771 | |||||||
Small Business Administration Participation Certificates, Series 2008-20D Class 1, 5.37% due 4/1/2028 | NR/NR | 2,665,245 | 3,068,236 | |||||||
Small Business Administration, Series 2005-P10A Class 1, 4.638% due 2/10/2015 | NR/NR | 988,359 | 1,047,089 | |||||||
Tagua Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.732% due 9/18/2024 | NR/NR | 2,500,000 | 2,518,625 | |||||||
c Tortola Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.732% due 9/18/2024 | NR/NR | 2,815,000 | 2,815,000 | |||||||
a,c U.S. Department of Transportation, 6.001% due 12/7/2021 | NR/NR | 3,000,000 | 3,691,268 | |||||||
a,c U.S. Department of Transportation Headquarters, Series 2004 Class A-2, 5.594% due 12/7/2021 | NR/NR | 2,266,173 | 2,700,574 | |||||||
|
| |||||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $ 83,898,834) | 88,065,859 | |||||||||
|
| |||||||||
OTHER GOVERNMENT — 2.91% | ||||||||||
b Export-Import Bank of Korea, 8.125% due 1/21/2014 | A+/Aa3 | 11,250,000 | 12,245,456 | |||||||
b Export-Import Bank of Korea, 5.875% due 1/14/2015 | A+/Aa3 | 3,000,000 | 3,298,794 | |||||||
b Government of Aruba, 6.80% due 4/2/2014 | A-/NR | 5,616,000 | 5,902,922 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
a,b Government of Bermuda, 5.603% due 7/20/2020 | AA-/Aa2 | $ | 3,000,000 | $ | 3,480,000 | |||||
a,b Government of Bermuda, 4.138% due 1/3/2023 | AA-/Aa2 | 4,000,000 | 4,203,718 | |||||||
b Korea Finance Corp., 4.625% due 11/16/2021 | A+/Aa3 | 7,500,000 | 8,474,145 | |||||||
a,b Korea Housing Finance Co., 3.50% due 12/15/2016 | NR/Aa2 | 6,000,000 | 6,384,274 | |||||||
a,b Republic of Iceland, 4.875% due 6/16/2016 | BBB-/Baa3 | 11,000,000 | 11,455,180 | |||||||
a,b Republic of Iceland, 5.875% due 5/11/2022 | BBB-/NR | 5,000,000 | 5,450,000 | |||||||
a,b State of Qatar, 3.125% due 1/20/2017 | AA/Aa2 | 4,000,000 | 4,210,000 | |||||||
b Swedish Export Credit Corp., 1.75% due 5/30/2017 | AA+/Aa1 | 14,300,000 | 14,610,310 | |||||||
|
| |||||||||
TOTAL OTHER GOVERNMENT (Cost $75,733,857) | 79,714,799 | |||||||||
|
| |||||||||
MORTGAGE BACKED — 8.77% | ||||||||||
Federal Home Loan Mtg Corp., CMO Interest Only Series K008 Class X1, 1.834% due 6/25/2020 | NR/NR | 39,222,042 | 3,750,922 | |||||||
Federal Home Loan Mtg Corp., CMO Interest Only Series K710 Class X1, 1.916% due 5/25/2019 | NR/NR | 49,971,619 | 4,839,217 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2528 Class HN, 5.00% due 11/15/2017 | NR/NR | 586,142 | 623,565 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2627 Class GY, 4.50% due 6/15/2018 | NR/NR | 3,061,956 | 3,248,138 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2628 Class AB, 4.50% due 6/15/2018 | NR/NR | 784,947 | 814,798 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2654 Class OG, 5.00% due 2/15/2032 | NR/NR | 556,354 | 574,070 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2682 Class JG, 4.50% due 10/15/2023 | NR/NR | 2,656,201 | 2,858,683 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2778 Class JD, 5.00% due 12/15/2032 | NR/NR | 2,251,527 | 2,335,528 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2780 Class VJ, 5.00% due 4/15/2015 | NR/NR | 498,547 | 499,369 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2808 Class VA, 5.50% due 5/15/2015 | NR/NR | 1,587,045 | 1,676,224 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | NR/NR | 333,996 | 340,508 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2825 Class VP, 5.50% due 6/15/2015 | NR/NR | 1,799,123 | 1,888,410 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2827 Class BU, 3.50% due 7/15/2019 | NR/NR | 2,800,364 | 2,916,272 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2943 Class BV, 5.00% due 3/15/2016 | NR/NR | 1,853,426 | 1,937,324 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3083 Class U, 4.50% due 1/15/2017 | NR/NR | 818,648 | 819,881 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3195 Class PD, 6.50% due 7/15/2036 | NR/NR | 3,898,975 | 4,353,445 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3291 Class BY, 4.50% due 3/15/2022 | NR/NR | 4,000,000 | 4,360,875 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3504 Class PC, 4.00% due 1/15/2039 | NR/NR | 737,708 | 775,562 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3563 Class BC, 4.00% due 6/15/2022 | NR/NR | 503,176 | 510,596 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3589 Class CA, 4.00% due 10/15/2021 | NR/NR | 1,483,995 | 1,542,020 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3872 Class DT, 4.00% due 6/15/2026 | NR/NR | 881,497 | 1,006,537 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3919 Class VB, 4.00% due 8/15/2024 | NR/NR | 5,636,552 | 6,258,048 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3922 Class PQ, 2.00% due 4/15/2041 | NR/NR | 5,353,340 | 5,431,343 | |||||||
Federal Home Loan Mtg Corp., CMO Series 4050 Class MV, 3.50% due 8/15/2023 | NR/NR | 3,902,652 | 4,253,980 | |||||||
Federal Home Loan Mtg Corp., CMO Series 4079 Class WV, 3.50% due 3/15/2027 | NR/NR | 3,763,723 | 4,105,173 | |||||||
Federal Home Loan Mtg Corp., CMO Series 4097 Class TE, 1.75% due 5/15/2039 | NR/NR | 11,975,485 | 12,049,985 | |||||||
Federal Home Loan Mtg Corp., Pool D98887, 3.50% due 1/1/2032 | AA+/Aaa | 11,210,684 | 12,015,577 | |||||||
Federal Home Loan Mtg Corp., Pool J17504, 3.00% due 12/1/2026 | AA+/Aaa | 4,619,237 | 4,935,547 | |||||||
Federal Home Loan Mtg Corp., Pool P10039, 5.00% due 4/1/2013 | AA+/Aaa | 127,043 | 127,958 | |||||||
Federal Home Loan Mtg Corp., REMIC Series 3626 Class AV, 5.50% due 10/15/2020 | NR/NR | 3,869,229 | 3,960,370 | |||||||
Federal Home Loan Mtg Corp., REMIC Series 3838 Class GV, 4.00% due 3/15/2024 | NR/NR | 11,142,013 | 12,453,720 | |||||||
Federal Home Loan Mtg Corp., REMIC Series 4072 Class VA, 3.50% due 10/15/2023 | NR/NR | 2,982,173 | 3,252,043 | |||||||
Federal National Mtg Assoc., CMO Series 2003-4 Class PE, 5.00% due 2/25/2018 | NR/NR | 1,413,184 | 1,519,652 | |||||||
Federal National Mtg Assoc., CMO Series 2003-74 Class KN, 4.50% due 8/25/2018 | NR/NR | 631,822 | 652,316 | |||||||
Federal National Mtg Assoc., CMO Series 2003-92 Class VG, 5.00% due 9/25/2014 | NR/NR | 418,814 | 433,613 | |||||||
Federal National Mtg Assoc., CMO Series 2003-W3 Class 1A2, 7.00% due 8/25/2042 | NR/NR | 1,866,212 | 2,166,174 | |||||||
Federal National Mtg Assoc., CMO Series 2004-33 Class MW, 4.50% due 1/25/2030 | NR/NR | 2,048,699 | 2,144,945 | |||||||
Federal National Mtg Assoc., CMO Series 2005-35 Class VG, 5.00% due 4/25/2016 | NR/NR | 810,916 | 815,827 | |||||||
Federal National Mtg Assoc., CMO Series 2005-48 Class AR, 5.50% due 2/25/2035 | NR/NR | 1,209,679 | 1,326,104 | |||||||
Federal National Mtg Assoc., CMO Series 2007-26 Class VH, 5.50% due 2/25/2018 | NR/NR | 3,558,148 | 3,758,581 | |||||||
Federal National Mtg Assoc., CMO Series 2007-42 Class PA, 5.50% due 4/25/2037 | NR/NR | 1,986,270 | 2,166,543 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
Federal National Mtg Assoc., CMO Series 2007-65 Class PB, 6.00% due 10/25/2032 | NR/NR | $ | 582,523 | $ | 582,936 | |||||
Federal National Mtg Assoc., CMO Series 2008-54 Class EA, 5.00% due 7/25/2019 | NR/NR | 2,698,616 | 2,806,034 | |||||||
Federal National Mtg Assoc., CMO Series 2008-55 Class VA, 5.00% due 7/25/2019 | NR/NR | 3,372,371 | 3,472,874 | |||||||
Federal National Mtg Assoc., CMO Series 2009-111 Class VB, 4.50% due 2/25/2021 | NR/NR | 1,589,408 | 1,656,694 | |||||||
Federal National Mtg Assoc., CMO Series 2009-17 Class AH, 2.349% due 3/25/2039 | NR/NR | 2,312,980 | 2,327,392 | |||||||
Federal National Mtg Assoc., CMO Series 2009-49 Class KA, 5.00% due 2/25/2024 | NR/NR | 1,109,294 | 1,181,242 | |||||||
Federal National Mtg Assoc., CMO Series 2009-5 Class A, 4.50% due 12/25/2023 | AA+/Aaa | 3,140,851 | 3,326,854 | |||||||
Federal National Mtg Assoc., CMO Series 2009-52 Class AJ, 4.00% due 7/25/2024 | NR/NR | 1,854,324 | 1,953,879 | |||||||
Federal National Mtg Assoc., CMO Series 2009-65 Class GA, 4.50% due 11/25/2023 | NR/NR | 739,173 | 777,897 | |||||||
Federal National Mtg Assoc., CMO Series 2009-70 Class NK, 4.50% due 8/25/2019 | NR/NR | 1,786,343 | 1,893,322 | |||||||
Federal National Mtg Assoc., CMO Series 2009-70 Class PA, 5.00% due 8/25/2035 | NR/NR | 1,131,259 | 1,155,637 | |||||||
Federal National Mtg Assoc., CMO Series 2009-89 Class BV, 4.50% due 12/25/2020 | NR/NR | 2,344,290 | 2,429,219 | |||||||
Federal National Mtg Assoc., CMO Series 2011-100 Class VE, 4.00% due 12/25/2022 | NR/NR | 7,167,644 | 7,325,931 | |||||||
Federal National Mtg Assoc., CMO Series 2011-103 Class VA, 4.00% due 12/25/2022 | NR/NR | 2,755,258 | 3,003,109 | |||||||
Federal National Mtg Assoc., CMO Series 2011-15 Class VA, 4.00% due 4/25/2022 | NR/NR | 1,765,200 | 1,928,194 | |||||||
Federal National Mtg Assoc., CMO Series 2011-88 Class WA, 2.50% due 9/25/2026 | NR/NR | 2,863,816 | 2,958,908 | |||||||
Federal National Mtg Assoc., CMO Series 2011-89 Class VA, 4.00% due 9/25/2023 | NR/NR | 6,387,011 | 6,879,671 | |||||||
Federal National Mtg Assoc., CMO Series 2012-36 Class CV, 4.00% due 6/25/2023 | NR/NR | 3,517,164 | 3,856,361 | |||||||
Federal National Mtg Assoc., CMO Series 2012-48 Class PD, 2.00% due 7/25/2041 | NR/NR | 14,462,719 | 14,764,423 | |||||||
Federal National Mtg Assoc., Pool 357384, 4.50% due 5/1/2018 | AA+/Aaa | 472,347 | 508,899 | |||||||
Federal National Mtg Assoc., Pool 897936, 5.50% due 8/1/2021 | AA+/Aaa | 2,214,134 | 2,408,389 | |||||||
Federal National Mtg Assoc., Pool AK6518, 3.00% due 3/1/2027 | AA+/Aaa | 5,956,318 | 6,387,452 | |||||||
Government National Mtg Assoc., CMO Series 2009-35 Series KV, 4.50% due 6/20/2020 | NR/NR | 3,741,736 | 4,045,999 | |||||||
Government National Mtg Assoc., CMO Series 2009-68 Class DP, 4.50% due 11/16/2038 | NR/NR | 1,842,942 | 2,001,560 | |||||||
Government National Mtg Assoc., Pool 003007, 8.50% due 11/20/2015 | AA+/Aaa | 10,667 | 11,404 | |||||||
Government National Mtg Assoc., Pool 714631, 5.691% due 10/20/2059 | AA+/Aaa | 5,660,258 | 6,263,454 | |||||||
Government National Mtg Assoc., Pool 721652, 5.044% due 5/20/2061 | AA+/Aaa | 6,183,116 | 7,055,338 | |||||||
Government National Mtg Assoc., Pool 731491, 5.156% due 12/20/2060 | AA+/Aaa | 4,057,789 | 4,667,837 | |||||||
Government National Mtg Assoc., Pool 751388, 5.307% due 1/20/2061 | AA+/Aaa | 5,493,206 | 6,335,227 | |||||||
Government National Mtg Assoc., Pool 765151, 4.692% due 7/20/2061 | AA+/Aaa | 4,991,075 | 5,672,372 | |||||||
Government National Mtg Assoc., Pool 827148, 1.625% due 2/20/2024 | AA+/Aaa | 28,550 | 29,511 | |||||||
Government National Mtg Assoc., Pool MA0100, 2.50% due 5/20/2042 | AA+/Aaa | 4,904,823 | 5,142,887 | |||||||
|
| |||||||||
TOTAL MORTGAGE BACKED (Cost $236,432,201) | 240,310,349 | |||||||||
|
| |||||||||
ASSET BACKED SECURITIES — 10.61% | ||||||||||
ADVANCE RECEIVABLES — 0.95% | ||||||||||
AH Mtg Advance Trust, Series SART-1 Class A1R, 2.23% due 5/10/2043 | AAA/NR | 7,000,000 | 7,000,885 | |||||||
AH Mtg Advance Trust, Series SART-1 Class A2, 3.37% due 5/10/2043 | AAA/NR | 5,000,000 | 5,000,000 | |||||||
AH Mtg Advance Trust, Series SART-2 Class B1, 6.90% due 9/15/2043 | BBB/NR | 10,000,000 | 10,002,498 | |||||||
AH Mtg Advance Trust, Series SART-3 Class 1A2, 3.72% due 3/13/2044 | AAA/NR | 4,000,000 | 4,005,533 | |||||||
|
| |||||||||
26,008,916 | ||||||||||
|
| |||||||||
AUTO RECEIVABLES — 0.53% | ||||||||||
Santander Drive Auto Receivables Trust, 2.86% due 6/15/2017 | A/NR | 869,781 | 873,077 | |||||||
Santander Drive Auto Receivables Trust, 2.72% due 5/16/2016 | AA/Aa1 | 2,500,000 | 2,559,404 | |||||||
a,b SMART Trust, Series 2012-2USA Class A3B Floating Rate Bond, 1.174% due 10/14/2016 | NR/Aaa | 8,000,000 | 8,009,386 | |||||||
a,b SMART Trust, Series 2012-2USA Class A4B Floating Rate Bond, 1.474% due 3/14/2018 | NR/Aaa | 3,000,000 | 3,016,957 | |||||||
|
| |||||||||
14,458,824 | ||||||||||
|
| |||||||||
COMMERCIAL MTG TRUST — 2.03% | ||||||||||
Banc of America Commercial Mtg Inc., Series 2002-PB2 Class C, 6.349% due 6/11/2035 | B+/Aa1 | 3,045,000 | 3,071,997 | |||||||
Banc of America Commercial Mtg Inc., Series 2006-6 Class A3, 5.369% due 10/10/2045 | AAA/Aaa | 3,000,000 | 3,262,413 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
a Banc of America Re-Remic Trust Series 2012-CLRN Class A Floating Rate Bond, 1.39% due 8/15/2029 | NR/NR | $ | 5,000,000 | $ | 5,000,000 | |||||
a CFCRE Commercial Mtg Trust Series 2011-C1 Class A4, 4.961% due 4/15/2044 | NR/Aaa | 11,877,000 | 14,208,441 | |||||||
Citigroup Commercial Mtg Trust, Series 2004-HYB2 Class B1, 2.93% due 3/25/2034 | B+/Caa2 | 370,373 | 315,208 | |||||||
Commercial Mtg Pass-Through Certificates, Series 2011-THL Class A, 3.376% due 6/9/2028 | NR/Aaa | 4,845,243 | 4,962,301 | |||||||
Commercial Mtg Pass-Through Certificates, Series 2011-THL Class B, 4.554% due 6/9/2028 | NR/Aa2 | 1,500,000 | 1,578,814 | |||||||
Credit Suisse Commercial Mtg Capital Certificates, Series 2007-C2 Class A2, 5.448% due 1/15/2049 | AAA/Aaa | 154,730 | 157,206 | |||||||
DBUBS Mtg Trust CMO, Series 2011-LC1A Class A1, 3.742% due 11/10/2046 | NR/Aaa | 5,317,555 | 5,779,703 | |||||||
DBUBS Mtg Trust CMO, Series 2011-LC2A Class A1FL, 1.578% due 7/12/2044 | NR/Aaa | 1,348,086 | 1,372,868 | |||||||
JPMorgan Chase Commercial Mtg, Series 2004-C3 Class A-5, 4.878% due 1/15/2042 | NR/Aaa | 5,000,000 | 5,370,269 | |||||||
JPMorgan Chase, Series 2011-FL1 Class B, 3.971% due 11/15/2028 | AA/Aa2 | 2,725,000 | 2,765,875 | |||||||
Morgan Stanley Re-REMIC Trust, Series 2009-GG10 Class A4A, 5.983% due 8/12/2045 | NR/Aaa | 2,838,000 | 3,333,699 | |||||||
a Rialto Real Estate Fund LLC, CMO Series 2012-LT1A Class A, 4.75% due 2/15/2025 | NR/Baa3 | 367,354 | 367,568 | |||||||
Wachovia Bank Commercial Mtg Trust, Series 2004-C10 Class C, 4.842% due 2/15/2041 | AA+/Aaa | 4,000,000 | 4,060,790 | |||||||
|
| |||||||||
55,607,152 | ||||||||||
|
| |||||||||
CREDIT CARD — 0.63% | ||||||||||
First Financial Bank USA, Series 2010-C Class B, 5.19% due 9/17/2018 | AA-/NR | 2,000,000 | 2,014,777 | |||||||
First Financial Bank USA, Series 2010-D Class A, 3.72% due 6/17/2019 | AAA/NR | 5,000,000 | 5,131,105 | |||||||
a,b Turquoise Card Backed Securities plc, Series 2012-1A Class A Floating Rate Bond, 1.021% due 6/17/2019 | NR/Aaa | 10,000,000 | 10,009,306 | |||||||
|
| |||||||||
17,155,188 | ||||||||||
|
| |||||||||
OTHER ASSET BACKED — 2.87% | ||||||||||
a,c,d Beacon Container Finance LLC, 3.72% due 9/20/2027 | NR/NR | 10,000,000 | 10,062,500 | |||||||
a,b Cie Financement Foncier, 2.50% due 9/16/2015 | AAA/Aaa | 6,000,000 | 6,204,480 | |||||||
a,b Cronos Containers Program Ltd., 3.81% due 9/18/2027 | A/NR | 6,700,000 | 6,787,100 | |||||||
Dominos Pizza Master Issuer LLC, 5.216% due 1/25/2042 | BBB+/Baa1 | 9,925,000 | 10,807,521 | |||||||
a GTP Cellular Sites LLC, 3.721% due 3/15/2042 | NR/NR | 9,500,000 | 9,733,605 | |||||||
MIRAMAX LLC, 6.25% due 10/20/2021 | BBB/Baa3 | 7,500,000 | 7,883,107 | |||||||
Nomura Asset Securities Corp., 7.328% due 3/15/2030 | AAA/Aaa | 1,806,589 | 1,816,446 | |||||||
c Northwind Holdings LLC Floating Rate Bond, 1.198% due 12/1/2037 | A/Baa1 | 4,566,138 | 3,652,911 | |||||||
Sierra Receivables Funding Co. LLC, 2.84% due 11/20/2028 | A+/NR | 7,297,646 | 7,313,508 | |||||||
Sonic Capital LLC, 5.438% due 5/20/2041 | BBB/Baa2 | 7,680,000 | 8,534,400 | |||||||
a,b Trafigura Securitisation Finance plc, Series 2012-1A Class A Floating Rate Bond, 2.621% due 10/15/2015 | AAA/Aaa | 6,000,000 | 6,004,632 | |||||||
|
| |||||||||
78,800,210 | ||||||||||
|
| |||||||||
RESIDENTIAL MTG TRUST — 2.52% | ||||||||||
Ameriquest Mtg Securities Inc., Series 2004-R12 Class A4 Floating Rate Note, 0.687% due 1/25/2035 | A+/Aaa | 3,170,882 | 3,125,510 | |||||||
Arran Residential Mtg Funding plc, Series 2011-1A Class A2C, 1.884% due 11/19/2047 | NR/Aaa | 5,000,000 | 5,032,373 | |||||||
Banc of America Mtg Securities, Inc., Series 2004-4 Class 1A2, 5.50% due 5/25/2034 | AAA/NR | 787,579 | 798,594 | |||||||
Banc of America Mtg Securities, Inc., Series 2005 A Class B1 Floating Rate Note, 3.178% due 2/25/2035 | NR/NR | 2,700,349 | 234,606 | |||||||
Bear Stearns Mtg, Series 2004-3 Class 1-A2, 3.101% due 7/25/2034 | BBB+/B1 | 251,354 | 238,270 | |||||||
Countrywide Home Loan, Series 2004 Class 1-A, 2.827% due 7/20/2034 | A/B1 | 470,888 | 467,433 | |||||||
FNBC Trust, Series 1993 A, 8.08% due 1/5/2018 | A+/Aa1 | 819,871 | 910,368 | |||||||
a,b Fosse Master Issuer plc, Series 2011-1A Class A2 Floating Rate Bond, 1.855% due 10/18/2054 | AAA/Aaa | 7,776,589 | 7,896,541 | |||||||
a FREMF Mtg Trust, Series 2012-K709 Class B, 3.872% due 4/25/2045 | NR/NR | 10,000,000 | 10,318,115 | |||||||
Home Equity Asset Trust, Series 2006-3 Class 2A, 0.397% due 7/25/2036 | AAA/A1 | 1,391,017 | 1,383,549 | |||||||
Merrill Lynch Mtg Investors, Series 2003 E Class B3, 2.467% due 10/25/2028 | A+/B3 | 1,079,643 | 367,268 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
Merrill Lynch Mtg Investors, Series 2004 A4 Class M1, 2.582% due 8/25/2034 | CCC/NR $ | 807,860 | $ | 605,852 | ||||||
New Century Home Equity Loan Trust, Series 2005-2 Class A2C, 0.517% due 6/25/2035 | AAA/Aa1 | 4,152,565 | 4,124,631 | |||||||
Option One Mtg Loan Trust, Series 2005-5 Class A3 Floating Rate Note, 0.427% due 12/25/2035 | AAA/Baa2 | 1,660,218 | 1,570,422 | |||||||
Popular ABS Mtg Pass-Through Trust, Series 2005-4 Class AF5, 5.537% due 9/25/2035 | AAA/Baa1 | 6,316,321 | 6,629,820 | |||||||
Residential Asset Mtg Products, Inc., 0.517% due 3/25/2035 | NR/Aa3 | 919,702 | 872,007 | |||||||
Residential Asset Mtg Products, Inc., 7.125% due 4/25/2031 | AAA/NR | 2,792,115 | 3,039,764 | |||||||
a RiverView HECM Trust Series 2007-1 Class A, 0.69% due 5/25/2047 | A-/Ba3 | 6,300,462 | 5,453,837 | |||||||
b Saecure B.V., Series 11A Class A1A, 1.997% due 7/30/2092 | NR/Aaa | 4,924,086 | 5,030,337 | |||||||
b Silverstone Master Issuer, Series 2010-1A Class A1 Floating Rate Note, 1.853% due 1/21/2055 | AAA/Aaa | 5,000,000 | 5,063,056 | |||||||
Structured Asset Securities Corp., 2.735% due 3/25/2033 | AAA/Baa1 | 3,079,125 | 3,096,090 | |||||||
Structured Asset Securities Corp., 5.50% due 3/25/2019 | AAA/Ba2 | 1,347,206 | 1,376,527 | |||||||
Washington Mutual Mtg, Series 2003-S13 Class 21-A1, 4.50% due 12/25/2018 | AAA/NR | 1,253,418 | 1,270,499 | |||||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 2.615% due 2/25/2035 | CC/C | 921,701 | 84,251 | |||||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 2.614% due 3/25/2035 | NR/NR | 890,261 | 57,696 | |||||||
|
| |||||||||
69,047,416 | ||||||||||
|
| |||||||||
STUDENT LOAN — 1.08% | ||||||||||
SLM Student Loan Trust, Series 2003-C Class A2 Floating Rate Bond, 0.779% due 9/15/2020 | A+/Aa2 | 3,388,403 | 3,270,889 | |||||||
SLM Student Loan Trust, Series 2004-B Class A3 Floating Rate Bond, 0.719% due 3/15/2024 | A+/Aaa | 8,000,000 | 6,569,110 | |||||||
SLM Student Loan Trust, Series 2006-A Class A4 Floating Rate Bond, 0.579% due 12/15/2023 | A+/Aa1 | 12,075,000 | 11,477,557 | |||||||
SLM Student Loan Trust, Series 2006-B Class A3 Floating Rate Bond, 0.529% due 12/15/2022 | AA/Aaa | 3,087,759 | 3,078,921 | |||||||
SLM Student Loan Trust, Series 2011-B Class A2, 3.74% due 2/15/2029 | AAA/Aaa | 5,000,000 | 5,357,391 | |||||||
|
| |||||||||
29,753,868 | ||||||||||
|
| |||||||||
TOTAL ASSET BACKED SECURITIES (Cost $287,802,031) | 290,831,574 | |||||||||
|
| |||||||||
CORPORATE BONDS — 55.87% | ||||||||||
AUTOMOBILES & COMPONENTS — 1.38% | ||||||||||
AUTOMOBILES — 1.38% | ||||||||||
a American Honda Finance Corp., 1.50% due 9/11/2017 | A+/A1 | 2,000,000 | 2,008,362 | |||||||
a American Honda Finance Corp., 1.00% due 8/11/2015 | A+/A1 | 3,000,000 | 3,006,075 | |||||||
a American Honda Finance Corp., 2.60% due 9/20/2016 | A+/A1 | 5,000,000 | 5,269,775 | |||||||
a Harley-Davidson Funding Corp., 5.25% due 12/15/2012 | BBB+/Baa1 | 3,000,000 | 3,023,271 | |||||||
a Hyundai Capital America, 3.75% due 4/6/2016 | BBB+/Baa2 | 500,000 | 531,916 | |||||||
b Hyundai Capital Services, Inc., 6.00% due 5/5/2015 | BBB+/Baa2 | 8,000,000 | 8,803,704 | |||||||
a Nissan Motor Acceptance Corp., 1.95% due 9/12/2017 | BBB+/A3 | 15,000,000 | 15,132,840 | |||||||
|
| |||||||||
37,775,943 | ||||||||||
|
| |||||||||
BANKS — 12.04% | ||||||||||
COMMERCIAL BANKS — 11.22% | ||||||||||
a,b ABN AMRO Bank N.V., 4.25% due 2/2/2017 | A+/A2 | 1,000,000 | 1,072,680 | |||||||
a,b ANZ National International Ltd., 3.125% due 8/10/2015 | AA-/Aa3 | 4,000,000 | 4,174,568 | |||||||
a,b ANZ National International Ltd., 6.20% due 7/19/2013 | AA-/Aa3 | 1,000,000 | 1,039,451 | |||||||
a,b Australia and New Zealand Bank, 2.40% due 11/23/2016 | NR/Aaa | 6,000,000 | 6,286,200 | |||||||
a,b Banco Bradesco, 4.50% due 1/12/2017 | BBB/Baa1 | 2,500,000 | 2,662,500 | |||||||
a,b Banco Latinoamericano de Comercio Exterior, S.A., 3.75% due 4/4/2017 | BBB/NR | 4,000,000 | 4,150,000 | |||||||
a,b Banco Santander Brasil Floating Rate Bond, 2.485% due 3/18/2014 | BBB/Baa1 | 7,883,000 | 7,753,821 | |||||||
a,b Banco Santander Chile, 3.875% due 9/20/2022 | A/Aa3 | 3,000,000 | 3,009,330 | |||||||
a,b Bank of China Hong Kong, 3.75% due 11/8/2016 | A+/Aa3 | 4,000,000 | 4,280,188 | |||||||
b Bank of Nova Scotia, 2.55% due 1/12/2017 | AA-/Aa1 | 5,000,000 | 5,290,720 | |||||||
a,b Barclays Bank plc, 2.50% due 9/21/2015 | AAA/Aaa | 14,650,000 | 15,195,566 | |||||||
a,b BNP Paribas Home Loan Covered Bonds SA, 2.20% due 11/2/2015 | AAA/Aaa | 10,000,000 | 10,297,000 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
a CoBank, ACB, 7.875% due 4/16/2018 | A-/NR | $ | 14,331,000 | $ | 17,938,972 | |||||
a,b Commonwealth Bank of Australia, 2.25% due 3/16/2017 | NR/Aaa | 7,500,000 | 7,800,750 | |||||||
b Corp Andina de Fomento, 3.75% due 1/15/2016 | A+/Aa3 | 11,000,000 | 11,532,664 | |||||||
a,b Credit Agricole London, 1.903% due 1/21/2014 | A/A2 | 7,000,000 | 7,022,302 | |||||||
a,b Danske Bank A/S, 3.75% due 4/1/2015 | A-/Baa1 | 4,000,000 | 4,119,320 | |||||||
b,c DFS Funding Corp. Floating Rate Note, 1.214% due 6/15/2015 | NR/Baa3 | 4,400,000 | 4,136,000 | |||||||
a,b DNB Bank ASA, 3.20% due 4/3/2017 | A+/A1 | 10,000,000 | 10,444,000 | |||||||
a,b HSBC Bank plc, 3.50% due 6/28/2015 | AA-/Aa3 | 2,000,000 | 2,121,870 | |||||||
HSBC Bank USA, N.A., 4.875% due 8/24/2020 | A/A2 | 1,000,000 | 1,077,828 | |||||||
b HSBC Holdings plc, 4.875% due 1/14/2022 | A+/Aa3 | 2,000,000 | 2,290,042 | |||||||
HSBC USA, Inc., 2.375% due 2/13/2015 | A+/A2 | 2,000,000 | 2,058,880 | |||||||
a,b Intesa Sanpaolo SpA, 2.831% due 2/24/2014 | BBB+/Baa2 | 5,000,000 | 4,925,455 | |||||||
a,b Kookmin Bank, 7.25% due 5/14/2014 | AA/Aa1 | 7,000,000 | 7,640,437 | |||||||
a,b National Australia Bank, 2.00% due 6/20/2017 | NR/Aaa | 16,000,000 | 16,433,600 | |||||||
a,b National Bank of Canada, 2.20% due 10/19/2016 | NR/Aaa | 2,000,000 | 2,115,000 | |||||||
National City Bank Floating Rate Note, 0.78% due 6/7/2017 | A-/A3 | 4,000,000 | 3,823,712 | |||||||
a,b Oversea-Chinese Banking Corp. Ltd., 3.15% due 3/11/2023 | A+/Aa2 | 29,650,000 | 29,779,422 | |||||||
b Rabobank Nederland, 3.375% due 1/19/2017 | AA/Aa2 | 2,000,000 | 2,122,820 | |||||||
b Royal Bank of Scotland plc, 9.50% due 3/16/2022 | BBB-/NR | 17,000,000 | 19,040,000 | |||||||
a,b Societe Generale, 3.10% due 9/14/2015 | A/A2 | 6,000,000 | 6,125,988 | |||||||
a,c Sovereign Bank Lease Pass-Through Trust, 12.18% due 6/30/2020 | BBB+/A2 | 5,920,404 | 7,785,332 | |||||||
a,b Sparebank 1 Boligkreditt AS, 2.30% due 6/30/2018 | NR/Aaa | 8,000,000 | 8,349,600 | |||||||
a,b Standard Chartered plc, 3.20% due 5/12/2016 | A+/A2 | 5,000,000 | 5,218,550 | |||||||
b Svenska Handelsbanken AB, 3.125% due 7/12/2016 | AA-/Aa3 | 6,000,000 | 6,360,000 | |||||||
a,b Swedbank Hypotek AB, 2.375% due 4/5/2017 | AAA/Aaa | 5,000,000 | 5,235,500 | |||||||
a,b Toronto-Dominion Bank, 2.20% due 7/29/2015 | NR/Aaa | 3,000,000 | 3,140,700 | |||||||
a,b UBS AG London, 2.25% due 3/30/2017 | NR/Aaa | 12,543,000 | 13,054,554 | |||||||
US Bank NA, 3.778% due 4/29/2020 | A+/Aa3 | 10,000,000 | 10,622,220 | |||||||
a Webster Bank, 5.875% due 1/15/2013 | BBB-/Baa1 | 3,000,000 | 3,020,988 | |||||||
Wells Fargo Bank NA, 0.647% due 5/16/2016 | A+/A1 | 4,629,000 | 4,500,638 | |||||||
b Westpac Banking Corp., 3.00% due 8/4/2015 | AA-/Aa2 | 2,000,000 | 2,111,098 | |||||||
a,b Westpac Banking Corp. Floating Rate Note, 1.255% due 7/17/2015 | NR/Aaa | 5,000,000 | 5,041,445 | |||||||
a,b Woori Bank, 4.75% due 1/20/2016 | A-/A1 | 5,000,000 | 5,434,490 | |||||||
THRIFTS & MORTGAGE FINANCE — 0.82% | ||||||||||
a,b Northern Rock Asset Management, 5.625% due 6/22/2017 | AAA/Aaa | 20,000,000 | 22,474,000 | |||||||
|
| |||||||||
330,110,201 | ||||||||||
|
| |||||||||
CAPITAL GOODS — 2.51% | ||||||||||
AEROSPACE & DEFENSE — 0.06% | ||||||||||
Boeing Co., 5.00% due 3/15/2014 | A/A2 | 1,500,000 | 1,598,753 | |||||||
CONSTRUCTION & ENGINEERING — 0.33% | ||||||||||
a URS Corp., 3.85% due 4/1/2017 | BBB-/Baa3 | 8,995,000 | 9,057,057 | |||||||
INDUSTRIAL CONGLOMERATES — 0.89% | ||||||||||
General Electric Co., 5.25% due 12/6/2017 | AA+/Aa3 | 2,500,000 | 2,957,957 | |||||||
a,b Hutchison Whampoa Ltd., 3.50% due 1/13/2017 | A-/A3 | 5,000,000 | 5,303,385 | |||||||
b Philips Electronics N.V., 3.75% due 3/15/2022 | A-/A3 | 3,500,000 | 3,787,364 | |||||||
a,b Smiths Group plc, 7.20% due 5/15/2019 | BBB+/Baa2 | 3,000,000 | 3,677,100 | |||||||
a,b Smiths Group plc, 6.05% due 5/15/2014 | BBB+/Baa2 | 3,000,000 | 3,163,800 | |||||||
a Southern Star Central Gas Pipeline, Inc., 6.00% due 6/1/2016 | BBB-/Baa3 | 5,000,000 | 5,587,950 | |||||||
MACHINERY — 0.78% | ||||||||||
Aeroquip Vickers, Inc., 6.875% due 4/9/2018 | A-/NR | 1,500,000 | 1,802,617 | |||||||
Ingersoll Rand Co., 6.391% due 11/15/2027 | BBB+/Baa1 | 3,000,000 | 3,636,729 | |||||||
John Deere Capital Corp., 5.25% due 10/1/2012 | A/NR | 1,600,000 | 1,600,000 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
a,b Volvo Treasury AB, 5.95% due 4/1/2015 | BBB/Baa2 | $ | 13,100,000 | $ | 14,348,692 | |||||
TRADING COMPANIES & DISTRIBUTORS — 0.45% | ||||||||||
a,c Air Lease Corp., 7.375% due 1/30/2019 | NR/NR | 12,000,000 | 12,300,000 | |||||||
|
| |||||||||
68,821,404 | ||||||||||
|
| |||||||||
CONSUMER DURABLES & APPAREL — 0.21% | ||||||||||
HOUSEHOLD DURABLES — 0.11% | ||||||||||
Newell Rubbermaid, Inc., 2.00% due 6/15/2015 | BBB-/Baa3 | 3,000,000 | 3,039,678 | |||||||
TEXTILES, APPAREL & LUXURY GOODS — 0.10% | ||||||||||
Nike, Inc., 5.15% due 10/15/2015 | A+/A1 | 2,315,000 | 2,604,442 | |||||||
|
| |||||||||
5,644,120 | ||||||||||
|
| |||||||||
DIVERSIFIED FINANCIALS — 8.31% | ||||||||||
CAPITAL MARKETS — 4.59% | ||||||||||
b AMVESCAP plc, 5.375% due 2/27/2013 | A-/A3 | 5,606,000 | 5,704,363 | |||||||
Bank of New York Mellon, 2.40% due 1/17/2017 | A+/Aa3 | 7,000,000 | 7,366,695 | |||||||
a Blackstone Holdings Finance Co. LLC, 4.75% due 2/15/2023 | A/NR | 5,000,000 | 5,213,180 | |||||||
a,b CDP Financial, Inc., 3.00% due 11/25/2014 | AAA/Aaa | 4,000,000 | 4,196,504 | |||||||
a,b CDP Financial, Inc., 4.40% due 11/25/2019 | AAA/Aaa | 5,000,000 | 5,745,905 | |||||||
a,b Credit Suisse Group AG - Guernsey, 1.625% due 3/6/2015 | NR/Aaa | 13,000,000 | 13,224,796 | |||||||
Deutsche Bank Financial LLC, 5.375% due 3/2/2015 | BBB+/Baa3 | 5,000,000 | 5,295,020 | |||||||
a FMR LLC, 4.75% due 3/1/2013 | A+/A2 | 5,000,000 | 5,075,515 | |||||||
Goldman Sachs Group, Inc. Floating Rate Note, 0.853% due 7/22/2015 | A-/A3 | 8,890,000 | 8,604,098 | |||||||
Goldman Sachs Group, Inc. Floating Rate Note, 0.823% due 3/22/2016 | A-/A3 | 5,000,000 | 4,805,560 | |||||||
a,b IPIC GMTN Ltd., 3.125% due 11/15/2015 | AA/Aa3 | 1,000,000 | 1,037,000 | |||||||
a,b IPIC GMTN Ltd., 5.00% due 11/15/2020 | AA/Aa3 | 1,000,000 | 1,092,500 | |||||||
a Legg Mason, Inc., 5.50% due 5/21/2019 | BBB/Baa1 | 5,000,000 | 5,361,290 | |||||||
a,b Macquarie Bank Ltd., 5.00% due 2/22/2017 | A/A2 | 5,000,000 | 5,340,500 | |||||||
a,b Macquarie Bank Ltd., 3.45% due 7/27/2015 | A/A2 | 2,000,000 | 2,046,874 | |||||||
a,b Macquarie Group Ltd., 7.625% due 8/13/2019 | BBB/A3 | 2,000,000 | 2,318,600 | |||||||
a,b Macquarie Group Ltd., 7.30% due 8/1/2014 | BBB/A3 | 8,000,000 | 8,615,824 | |||||||
b Man Group plc, 6.50% due 8/1/2013 | NR/Baa3 | 5,000,000 | 5,141,000 | |||||||
b Man Group plc Floating Rate Note, 2.023% due 9/22/2015 | NR/Ba1 | 5,000,000 | 4,075,000 | |||||||
Merrill Lynch & Co., 0.993% due 5/2/2017 | BBB+/Baa3 | 2,500,000 | 2,261,232 | |||||||
Merrill Lynch & Co., 6.875% due 4/25/2018 | A-/Baa2 | 2,000,000 | 2,396,228 | |||||||
Morgan Stanley Floating Rate Note, 2.937% due 5/14/2013 | A-/Baa1 | 5,000,000 | 5,049,270 | |||||||
Murray Street Investment Trust, 4.647% due 3/9/2017 | A-/A3 | 5,000,000 | 5,369,360 | |||||||
b UBS AG Stamford, 7.625% due 8/17/2022 | BBB-/NR | 10,000,000 | 10,455,600 | |||||||
CONSUMER FINANCE — 0.80% | ||||||||||
American Express Credit Co., 5.125% due 8/25/2014 | A-/A2 | 3,000,000 | 3,245,220 | |||||||
American Express Credit Co., 2.80% due 9/19/2016 | A-/A2 | 8,000,000 | 8,505,840 | |||||||
American Express Credit Co., 1.75% due 6/12/2015 | A-/A2 | 1,000,000 | 1,022,872 | |||||||
a,b Banque PSA Finance, 2.361% due 4/4/2014 | BBB-/Baa3 | 7,000,000 | 6,862,366 | |||||||
Western Union Co., 3.65% due 8/22/2018 | A-/A3 | 2,000,000 | 2,214,940 | |||||||
DIVERSIFIED FINANCIAL SERVICES — 2.92% | ||||||||||
Bank of America Corp., 6.50% due 8/1/2016 | A-/Baa2 | 2,000,000 | 2,313,020 | |||||||
a,b BM&F Bovespa SA, 5.50% due 7/16/2020 | BBB+/Baa1 | 1,000,000 | 1,136,500 | |||||||
Citigroup, Inc., 6.00% due 12/13/2013 | A-/Baa2 | 2,000,000 | 2,121,128 | |||||||
Citigroup, Inc., 6.50% due 8/19/2013 | A-/Baa2 | 1,000,000 | 1,049,698 | |||||||
Citigroup, Inc., 5.00% due 9/15/2014 | BBB+/Baa3 | 3,000,000 | 3,164,160 | |||||||
a CME Group Index Services, 4.40% due 3/15/2018 | AA-/Aa3 | 4,530,000 | 5,098,162 | |||||||
General Electric Capital Corp. Floating Rate Note, 0.529% due 12/28/2018 | AA+/A1 | 4,850,000 | 4,065,803 | |||||||
General Electric Capital Corp. Floating Rate Note, 0.519% due 6/20/2014 | AA+/A1 | 4,000,000 | 3,971,536 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
a General Electric Capital Corp. /LJ VP Holdings LLC, 3.80% due 6/18/2019 | AA+/A1 | $ | 5,000,000 | $ | 5,276,125 | |||||
b IPIC GMTN Ltd., 3.75% due 3/1/2017 | AA/Aa3 | 3,000,000 | 3,156,000 | |||||||
a,b IPIC GMTN Ltd., 5.50% due 3/1/2022 | AA/Aa3 | 3,500,000 | 3,920,000 | |||||||
JPMorgan Chase Bank NA, 0.729% due 6/13/2016 | A/A1 | 16,875,000 | 16,263,754 | |||||||
b Korea Development Bank, 8.00% due 1/23/2014 | A/Aa3 | 3,000,000 | 3,261,744 | |||||||
MBNA Corp., 6.125% due 3/1/2013 | A-/Baa2 | 1,305,000 | 1,333,586 | |||||||
Moody’s Corp., 4.50% due 9/1/2022 | BBB+/NR | 4,700,000 | 4,983,010 | |||||||
Morgan Stanley, 5.55% due 4/27/2017 | A-/Baa1 | 5,000,000 | 5,481,615 | |||||||
a,b National Agricultural Cooperative Federation, 5.00% due 9/30/2014 | A/A1 | 2,000,000 | 2,139,296 | |||||||
National Rural Utilities CFC, 10.375% due 11/1/2018 | A+/A1 | 2,000,000 | 2,959,536 | |||||||
a USAA Capital Corp., 2.25% due 12/13/2016 | AA+/Aa1 | 8,000,000 | 8,338,664 | |||||||
|
| |||||||||
227,676,489 | ||||||||||
|
| |||||||||
ENERGY — 5.05% | ||||||||||
ENERGY EQUIPMENT & SERVICES — 0.49% | ||||||||||
Detroit Edison Corporate Senior Note Series D, 5.40% due 8/1/2014 | A/A2 | 2,000,000 | 2,157,440 | |||||||
Nabors Industries, Inc., 9.25% due 1/15/2019 | BBB/Baa2 | 2,000,000 | 2,617,440 | |||||||
Rowan Companies, Inc., 7.875% due 8/1/2019 | BBB-/Baa3 | 7,000,000 | 8,678,411 | |||||||
OIL, GAS & CONSUMABLE FUELS — 4.56% | ||||||||||
a,b BG Energy Capital plc, 2.875% due 10/15/2016 | A/A2 | 5,000,000 | 5,303,995 | |||||||
b BP Capital Markets plc, 3.875% due 3/10/2015 | A/A2 | 2,000,000 | 2,149,680 | |||||||
a,b Canadian Oil Sands Trust, 4.50% due 4/1/2022 | BBB/Baa2 | 3,000,000 | 3,218,748 | |||||||
a,b CNPC General Capital Ltd., 2.75% due 4/19/2017 | A+/A1 | 5,000,000 | 5,177,100 | |||||||
a DCP Midstream LLC, 9.75% due 3/15/2019 | BBB/Baa2 | 6,500,000 | 8,355,211 | |||||||
a,b Dolphin Energy Ltd., 5.50% due 12/15/2021 | NR/A1 | 2,000,000 | 2,313,000 | |||||||
Energen Corp., 4.625% due 9/1/2021 | BBB/Baa3 | 10,000,000 | 10,398,110 | |||||||
Energy Transfer Partners LP, 9.70% due 3/15/2019 | BBB-/Baa3 | 3,856,000 | 5,095,330 | |||||||
a,b Eni S.p.A., 4.15% due 10/1/2020 | A/A3 | 15,925,000 | 16,034,882 | |||||||
a Florida Gas Transmission, 4.00% due 7/15/2015 | BBB/Baa2 | 2,000,000 | 2,098,950 | |||||||
a,b Gazprom, 4.95% due 5/23/2016 | BBB/Baa1 | 4,000,000 | 4,235,080 | |||||||
a Gulf South Pipeline Co. LP, 4.00% due 6/15/2022 | BBB/Baa1 | 4,000,000 | 4,035,400 | |||||||
a,b Korea National Oil Corp., 4.00% due 10/27/2016 | A+/A1 | 2,000,000 | 2,162,622 | |||||||
b Norsk Hydro A/S, 6.70% due 1/15/2018 | AA-/Aa2 | 1,000,000 | 1,244,037 | |||||||
a Northern Natural Gas Co., 5.75% due 7/15/2018 | A/A2 | 50,000 | 59,852 | |||||||
NuStar Logistics LP, 4.75% due 2/1/2022 | BB+/Baa3 | 5,000,000 | 4,715,950 | |||||||
e Oneok Partners LP, 8.625% due 3/1/2019 | BBB/Baa2 | 7,865,000 | 10,327,012 | |||||||
a,b Origin Energy Finance Ltd., 5.45% due 10/14/2021 | BBB+/Baa1 | 10,000,000 | 11,100,240 | |||||||
a Semco Energy, Inc., 5.15% due 4/21/2020 | A-/A3 | 3,000,000 | 3,343,356 | |||||||
b Shell International Finance, 3.10% due 6/28/2015 | AA/Aa1 | 3,000,000 | 3,206,769 | |||||||
a,b Sinopec Group Overseas Development Ltd., 2.75% due 5/17/2017 | A+/Aa3 | 6,000,000 | 6,221,346 | |||||||
e Sunoco Logistics, 8.75% due 2/15/2014 | NR/Baa2 | 5,000,000 | 5,455,415 | |||||||
b Total Capital International S.A., 1.55% due 6/28/2017 | AA-/Aa1 | 6,500,000 | 6,621,888 | |||||||
a,b Woodside Finance Ltd., 8.125% due 3/1/2014 | BBB+/Baa1 | 2,000,000 | 2,182,506 | |||||||
|
| |||||||||
138,509,770 | ||||||||||
|
| |||||||||
FOOD, BEVERAGE & TOBACCO — 2.07% | ||||||||||
BEVERAGES — 0.79% | ||||||||||
Anheuser-Busch Cos., Inc., 4.375% due 1/15/2013 | A/A3 | 2,000,000 | 2,019,132 | |||||||
Coca Cola Enterprises, Inc., 5.71% due 3/18/2037 | AA-/NR | 3,380,000 | 4,145,966 | |||||||
b Coca Cola HBC Finance BV, 5.125% due 9/17/2013 | BBB/Baa1 | 6,524,000 | 6,700,885 | |||||||
b Coca Cola HBC Finance BV, 5.50% due 9/17/2015 | BBB/Baa1 | 7,985,000 | 8,625,844 | |||||||
FOOD PRODUCTS — 0.24% | ||||||||||
a,b BRF-Brasil Foods S.A., 5.875% due 6/6/2022 | BBB-/Baa3 | 5,000,000 | 5,462,500 |
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
Corn Products International, Inc., 3.20% due 11/1/2015 | BBB/Baa2 | $ | 1,000,000 | $ | 1,055,333 | |||||
TOBACCO — 1.04% | ||||||||||
Altria Group, Inc., 8.50% due 11/10/2013 | BBB/Baa1 | 1,000,000 | 1,085,174 | |||||||
Altria Group, Inc., 9.70% due 11/10/2018 | BBB/Baa1 | 1,014,000 | 1,452,353 | |||||||
a,b B.A.T International Finance plc, 2.125% due 6/7/2017 | BBB+/Baa1 | 8,000,000 | 8,184,128 | |||||||
a,b B.A.T International Finance plc, 3.25% due 6/7/2022 | BBB+/Baa1 | 4,000,000 | 4,104,696 | |||||||
Lorillard Tobacco Co., 8.125% due 6/23/2019 | BBB-/Baa2 | 5,000,000 | 6,447,970 | |||||||
Lorillard Tobacco Co., 6.875% due 5/1/2020 | BBB-/Baa2 | 5,000,000 | 6,138,070 | |||||||
UST, Inc., 5.75% due 3/1/2018 | BBB/NR | 1,000,000 | 1,198,093 | |||||||
|
| |||||||||
56,620,144 | ||||||||||
|
| |||||||||
HOTELS RESTAURANTS & LEISURE — 0.18% | ||||||||||
HOTELS, RESTAURANTS & LEISURE — 0.18% | ||||||||||
a Hyatt Hotels Corp., 5.75% due 8/15/2015 | BBB/Baa2 | 2,500,000 | 2,737,290 | |||||||
a,b TDIC Finance Ltd., 6.50% due 7/2/2014 | AA/A1 | 2,000,000 | 2,128,000 | |||||||
|
| |||||||||
4,865,290 | ||||||||||
|
| |||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.08% | ||||||||||
HOUSEHOLD PRODUCTS — 0.08% | ||||||||||
Energizer Holdings, Inc., 4.70% due 5/24/2022 | BBB-/Baa3 | 2,000,000 | 2,121,356 | |||||||
|
| |||||||||
2,121,356 | ||||||||||
|
| |||||||||
INSURANCE — 3.07% | ||||||||||
INSURANCE — 3.07% | ||||||||||
Aflac, Inc., 8.50% due 5/15/2019 | A-/A3 | 3,000,000 | 4,018,191 | |||||||
Aflac, Inc., 2.65% due 2/15/2017 | A-/A3 | 2,000,000 | 2,098,404 | |||||||
a Forethought Financial Group, Inc., 8.625% due 4/15/2021 | BBB-/Baa3 | 2,600,000 | 3,323,830 | |||||||
a Genworth Life Institutional Fund, 5.875% due 5/3/2013 | A/A3 | 1,000,000 | 1,020,127 | |||||||
Hanover Insurance Group, 6.375% due 6/15/2021 | BBB-/Baa3 | 2,480,000 | 2,838,568 | |||||||
Hartford Financial Services Group, Inc., 4.625% due 7/15/2013 | BBB/Baa3 | 5,370,000 | 5,507,499 | |||||||
Infinity Property & Casualty Corp., 5.00% due 9/19/2022 | NR/NR | 3,000,000 | 3,122,460 | |||||||
a ING U.S., Inc., 5.50% due 7/15/2022 | BBB-/Baa3 | 4,000,000 | 4,172,736 | |||||||
Kemper Corp., 6.00% due 5/15/2017 | BBB-/Baa3 | 1,950,000 | 2,119,500 | |||||||
a Liberty Mutual Group, Inc., 5.75% due 3/15/2014 | BBB-/Baa2 | 1,000,000 | 1,050,523 | |||||||
a MassMutual Global Funding LLC, 2.00% due 4/5/2017 | AA+/Aa2 | 8,000,000 | 8,215,240 | |||||||
a MetLife Global Funding I, 1.208% due 1/10/2014 | AA-/Aa3 | 6,000,000 | 6,032,502 | |||||||
a MetLife Global Funding I, 1.70% due 6/29/2015 | AA-/Aa3 | 4,000,000 | 4,080,024 | |||||||
a MetLife Institutional Funding II, 1.625% due 4/2/2015 | AA-/Aa3 | 5,000,000 | 5,074,645 | |||||||
b Montpelier Re Holdings Ltd., 6.125% due 8/15/2013 | BBB/NR | 7,035,000 | 7,274,443 | |||||||
a Prudential Covered Trust Co., 2.997% due 9/30/2015 | A/NR | 3,000,000 | 3,116,769 | |||||||
a,b QBE Insurance Group Ltd., 5.647% due 7/1/2023 | BBB+/Baa1 | 9,141,000 | 9,004,653 | |||||||
Unitrin, Inc., 6.00% due 11/30/2015 | BBB-/Baa3 | 5,000,000 | 5,254,525 | |||||||
a,b White Mountains Re Group Ltd., 6.375% due 3/20/2017 | BBB/Baa3 | 6,335,000 | 6,702,316 | |||||||
|
| |||||||||
84,026,955 | ||||||||||
|
| |||||||||
MATERIALS — 3.33% | ||||||||||
CHEMICALS — 0.53% | ||||||||||
E.I. du Pont de Nemours & Co., 4.125% due 3/6/2013 | A/A2 | 325,000 | 330,159 | |||||||
a Incitec Pivot Finance LLC, 6.00% due 12/10/2019 | BBB/Baa3 | 4,538,000 | 5,028,876 | |||||||
a Incitec Pivot Ltd., 4.00% due 12/7/2015 | BBB/Baa3 | 4,325,000 | 4,487,226 | |||||||
RPM International, Inc., 6.125% due 10/15/2019 | BBB-/Baa3 | 4,000,000 | 4,634,164 |
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
CONSTRUCTION MATERIALS — 0.05% | ||||||||||
CRH America, Inc., 8.125% due 7/15/2018 | BBB+/Baa2 | $ | 1,150,000 | $ | 1,398,493 | |||||
METALS & MINING — 2.75% | ||||||||||
a,b Anglo American Capital plc, 2.625% due 9/27/2017 | NR/NR | 9,700,000 | 9,732,980 | |||||||
a,b Anglo American Capital plc, 9.375% due 4/8/2014 | BBB+/Baa1 | 1,000,000 | 1,116,000 | |||||||
b Anglogold Holdings plc, 5.375% due 4/15/2020 | BBB-/Baa2 | 7,100,000 | 7,455,000 | |||||||
b Anglogold Holdings plc, 5.125% due 8/1/2022 | BBB-/Baa2 | 7,000,000 | 7,128,296 | |||||||
b Arcelormittal, 4.00% due 8/5/2015 | BB+/Baa3 | 3,000,000 | 2,981,040 | |||||||
b Arcelormittal, 10.10% due 6/1/2019 | BB+/Baa3 | 8,089,000 | 9,317,574 | |||||||
b Arcelormittal, 4.75% due 2/25/2017 | BB+/Baa3 | 3,000,000 | 2,942,577 | |||||||
a,b Codelco, Inc., 3.00% due 7/17/2022 | A/A1 | 5,000,000 | 5,039,235 | |||||||
b Kinross Gold Corp., 3.625% due 9/1/2016 | NR/Baa3 | 7,000,000 | 7,066,794 | |||||||
a,b,d Newcrest Finance Pty Ltd., 4.20% due 10/1/2022 | NR/NR | 5,000,000 | 5,033,710 | |||||||
b Teck Resources Ltd., 2.50% due 2/1/2018 | BBB/Baa2 | 1,700,000 | 1,707,415 | |||||||
a,b Xstrata Finance Canada Ltd., 3.60% due 1/15/2017 | BBB+/Baa2 | 10,000,000 | 10,459,670 | |||||||
a,b Xstrata Finance Canada Ltd., 4.95% due 11/15/2021 | BBB+/Baa2 | 5,000,000 | 5,356,910 | |||||||
|
| |||||||||
91,216,119 | ||||||||||
|
| |||||||||
MEDIA — 0.48% | ||||||||||
MEDIA — 0.48% | ||||||||||
a,b Globo Comunicacao e Participacoes S.A., 4.875% due 4/11/2022 | BBB/Baa2 | 5,000,000 | 5,418,750 | |||||||
The Washington Post Co., 7.25% due 2/1/2019 | BBB/Baa1 | 5,000,000 | 5,858,390 | |||||||
Time Warner Cable, Inc., 8.05% due 1/15/2016 | BBB/Baa2 | 200,000 | 238,455 | |||||||
Time Warner Cable, Inc., 7.50% due 4/1/2014 | BBB/Baa2 | 1,500,000 | 1,646,868 | |||||||
|
| |||||||||
13,162,463 | ||||||||||
|
| |||||||||
MISCELLANEOUS — 0.61% | ||||||||||
MISCELLANEOUS — 0.61% | ||||||||||
George Washington University, 4.411% due 9/15/2017 | A+/A1 | 1,750,000 | 1,993,040 | |||||||
Rensselaer Polytechnic I, 5.60% due 9/1/2020 | A-/A3 | 10,925,000 | 12,761,056 | |||||||
University of Chicago, 3.065% due 10/1/2024 | AA/Aa1 | 1,880,000 | 1,949,917 | |||||||
|
| |||||||||
16,704,013 | ||||||||||
|
| |||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE |
| |||||||||
BIOTECHNOLOGY — 0.29% | ||||||||||
Biogen Idec, Inc., 6.875% due 3/1/2018 | BBB+/Baa2 | 3,000,000 | 3,690,714 | |||||||
Genzyme Corp., 3.625% due 6/15/2015 | AA-/A2 | 3,000,000 | 3,239,475 | |||||||
Genzyme Corp., 5.00% due 6/15/2020 | AA-/A2 | 1,000,000 | 1,192,069 | |||||||
PHARMACEUTICALS — 0.39% | ||||||||||
b Teva Pharmaceuticals, 2.40% due 11/10/2016 | A-/A3 | 4,500,000 | 4,727,970 | |||||||
b Teva Pharmaceuticals, 3.65% due 11/10/2021 | A-/A3 | 3,500,000 | 3,794,049 | |||||||
Tiers Inflation Linked Trust Series Wyeth 2004-21 Trust Certificate CPI Floating Rate Note, 3.513% due 2/1/2014 | AA/A1 | 2,000,000 | 2,069,500 | |||||||
|
| |||||||||
18,713,777 | ||||||||||
|
| |||||||||
REAL ESTATE — 1.15% | ||||||||||
REAL ESTATE INVESTMENT TRUSTS — 1.15% | ||||||||||
Alexandria Real Estate Equities, Inc., 4.60% due 4/1/2022 | BBB-/Baa2 | 3,625,000 | 3,867,770 | |||||||
Commonwealth REIT (HRPT Properties), 6.25% due 6/15/2017 | BBB-/Baa2 | 4,000,000 | 4,358,704 | |||||||
a,b Goodman Funding Property Ltd., 6.00% due 3/22/2022 | BBB/Baa2 | 10,285,000 | 11,047,509 | |||||||
Ventas Realty LP/Ventas Capital Corp., 4.00% due 4/30/2019 | BBB/Baa2 | 2,000,000 | 2,136,682 |
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
Washington REIT, 4.95% due 10/1/2020 | BBB/Baa2 | $ | 9,100,000 | $ | 10,021,885 | |||||
|
| |||||||||
31,432,550 | ||||||||||
|
| |||||||||
RETAILING — 0.97% | ||||||||||
MULTILINE RETAIL — 0.31% | ||||||||||
Family Dollar Stores, Inc., 5.00% due 2/1/2021 | BBB-/Baa3 | 8,000,000 | 8,633,776 | |||||||
SPECIALTY RETAIL — 0.66% | ||||||||||
Best Buy Co., Inc., 3.75% due 3/15/2016 | BB+/Baa2 | 8,000,000 | 7,659,168 | |||||||
Best Buy Co., Inc., 7.00% due 7/15/2013 | BB+/Baa2 | 3,000,000 | 3,088,809 | |||||||
O’Reilly Automotive, Inc., 4.875% due 1/14/2021 | BBB/Baa3 | 5,000,000 | 5,563,835 | |||||||
Staples, Inc., 9.75% due 1/15/2014 | BBB/Baa2 | 1,500,000 | 1,659,508 | |||||||
|
| |||||||||
26,605,096 | ||||||||||
|
| |||||||||
SEMICONDUCTORS & SEMICONDUCTOR |
| |||||||||
SEMICONDUCTORS & SEMICONDUCTOR |
| |||||||||
KLA Tencor Corp., 6.90% due 5/1/2018 | BBB/Baa1 | 14,314,000 | 17,273,835 | |||||||
|
| |||||||||
17,273,835 | ||||||||||
|
| |||||||||
SOFTWARE & SERVICES — 1.10% | ||||||||||
INFORMATION TECHNOLOGY SERVICES — 0.42% | ||||||||||
Computer Sciences Corp., 6.50% due 3/15/2018 | BBB/Baa2 | 6,075,000 | 7,039,923 | |||||||
Electronic Data Systems Corp., 6.00% due 8/1/2013 | BBB+/A3 | 1,000,000 | 1,042,292 | |||||||
SAIC Inc., 4.45% due 12/1/2020 | A-/A3 | 2,000,000 | 2,197,408 | |||||||
Western Union Co., 6.50% due 2/26/2014 | A-/A3 | 1,000,000 | 1,080,641 | |||||||
SOFTWARE — 0.68% | ||||||||||
BMC Software, Inc., 7.25% due 6/1/2018 | BBB+/Baa2 | 15,564,000 | 18,747,865 | |||||||
|
| |||||||||
30,108,129 | ||||||||||
|
| |||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.87% |
| |||||||||
COMMUNICATIONS EQUIPMENT — 0.54% | ||||||||||
b Ericsson LM, 4.125% due 5/15/2022 | BBB+/A3 | 14,300,000 | 14,744,244 | |||||||
COMPUTERS & PERIPHERALS — 0.18% | ||||||||||
Hewlett-Packard Co., 3.30% due 12/9/2016 | BBB+/A3 | 2,000,000 | 2,084,818 | |||||||
Hewlett-Packard Co., 2.60% due 9/15/2017 | BBB+/A3 | 3,000,000 | 3,009,414 | |||||||
ELECTRONIC EQUIPMENT, INSTRUMENTS & |
| |||||||||
Tech Data Corp., 3.75% due 9/21/2017 | BBB-/Baa3 | 4,000,000 | 4,072,244 | |||||||
|
| |||||||||
23,910,720 | ||||||||||
|
| |||||||||
TELECOMMUNICATION SERVICES — 3.64% | ||||||||||
DIVERSIFIED TELECOMMUNICATION |
| |||||||||
b France Telecom, 5.375% due 7/8/2019 | A-/A3 | 10,000,000 | 11,753,320 | |||||||
a,c Hidden Ridge Facility, 5.65% due 1/1/2022 | NR/Baa1 | 4,376,519 | 4,726,641 | |||||||
Michigan Bell Telephone Co., 7.85% due 1/15/2022 | A-/NR | 3,000,000 | 4,058,652 | |||||||
a,b Oi S.A., 5.75% due 2/10/2022 | BBB-/Baa2 | 5,000,000 | 5,237,500 | |||||||
a,b Qtel International Finance Ltd., 3.375% due 10/14/2016 | A/A2 | 500,000 | 522,000 | |||||||
a,b Qtel International Finance Ltd., 6.50% due 6/10/2014 | A/A2 | 1,000,000 | 1,083,500 | |||||||
Qwest Corp., 6.75% due 12/1/2021 | BBB-/Baa3 | 3,000,000 | 3,605,172 | |||||||
a SBA Tower Trust, 4.254% due 4/15/2040 | NR/A2 | 9,225,000 | 9,717,310 | |||||||
a SBA Tower Trust, 5.101% due 4/15/2042 | NR/A2 | 2,305,000 | 2,568,644 | |||||||
b Telecom Italia Capital SA, 6.175% due 6/18/2014 | BBB/Baa2 | 3,000,000 | 3,157,500 | |||||||
b Telefonica Emisiones SAU, 6.421% due 6/20/2016 | BBB/Baa2 | 10,000,000 | 10,562,500 | |||||||
a,b Vivendi SA, 2.40% due 4/10/2015 | BBB/Baa2 | 2,000,000 | 2,026,556 |
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
a,b Vivendi SA, 3.45% due 1/12/2018 | BBB/Baa2 | $ | 5,000,000 | $ | 5,096,000 | |||||
WIRELESS TELECOMMUNICATION SERVICES — 1.30% | ||||||||||
b America Movil S.A.B. de C.V., 2.375% due 9/8/2016 | A-/A2 | 2,500,000 | 2,601,472 | |||||||
b America Movil S.A.B. de C.V., 5.00% due 10/16/2019 | A-/A2 | 5,000,000 | 5,841,565 | |||||||
a Crown Castle Towers LLC, 6.113% due 1/15/2040 | NR/A2 | 4,395,000 | 5,293,268 | |||||||
a Crown Castle Towers LLC, 5.495% due 1/15/2037 | NR/A2 | 8,220,000 | 9,375,929 | |||||||
a Richland Towers, 4.606% due 3/15/2041 | NR/NR | 2,515,376 | 2,690,435 | |||||||
a Unison Ground Lease Funding LLC, 6.392% due 4/15/2040 | NR/NR | 8,540,000 | 9,979,639 | |||||||
|
| |||||||||
99,897,603 | ||||||||||
|
| |||||||||
TRANSPORTATION — 2.20% | ||||||||||
AIR FREIGHT & LOGISTICS — 0.21% | ||||||||||
a FedEx Corp., 2.625% due 1/15/2018 | BBB/A3 | 5,000,000 | 5,078,076 | |||||||
FedEx Corp., 8.76% due 5/22/2015 | BBB/A3 | 640,076 | 686,481 | |||||||
AIRLINES — 0.88% | ||||||||||
f American Airlines Pass-Through Trust, 8.625% due 4/15/2023 | BBB-/Baa3 | 1,940,956 | 2,088,955 | |||||||
a Aviation Capital Group, 6.75% due 4/6/2021 | BB+/NR | 3,000,000 | 3,058,200 | |||||||
a Aviation Capital Group, 7.125% due 10/15/2020 | BB+/NR | 6,912,000 | 7,253,660 | |||||||
a,b BAA Funding Ltd., 2.50% due 6/25/2017 | A-/NR | 5,000,000 | 5,101,010 | |||||||
b,c Iberbond plc, 4.826% due 12/24/2017 | NR/Baa1 | 5,168,987 | 5,039,762 | |||||||
United Airlines, Inc. Pass-Through Certificates, 10.40% due 5/1/2018 | BBB+/Baa2 | 1,456,087 | 1,678,140 | |||||||
ROAD & RAIL — 1.11% | ||||||||||
a,b Asciano Finance, 5.00% due 4/7/2018 | BBB-/Baa2 | 2,000,000 | 2,147,932 | |||||||
a,b Asciano Finance, 4.625% due 9/23/2020 | BBB-/Baa2 | 5,830,000 | 5,961,810 | |||||||
a,b Asciano Finance, 3.125% due 9/23/2015 | BBB-/Baa2 | 3,000,000 | 3,044,067 | |||||||
a Penske Truck Leasing Co., LP/PTL Finance Corp., 2.50% due 3/15/2016 | BBB-/Baa3 | 6,000,000 | 5,998,434 | |||||||
a Penske Truck Leasing Co., LP/PTL Finance Corp., 3.75% due 5/11/2017 | BBB-/Baa3 | 9,970,000 | 10,227,794 | |||||||
Ryder System, Inc., 3.50% due 6/1/2017 | BBB/Baa1 | 2,885,000 | 3,055,224 | |||||||
|
| |||||||||
60,419,545 | ||||||||||
|
| |||||||||
UTILITIES — 5.31% | ||||||||||
ELECTRIC UTILITIES — 3.70% | ||||||||||
a,b E.ON International Finance BV, 5.80% due 4/30/2018 | A-/A3 | 2,000,000 | 2,418,000 | |||||||
a,b Electricite de France SA, 5.50% due 1/26/2014 | A+/Aa3 | 1,250,000 | 1,324,239 | |||||||
Empire District Electric Co., 4.65% due 6/1/2020 | BBB+/A3 | 3,000,000 | 3,332,760 | |||||||
a,b Enel Finance International S.A., 6.25% due 9/15/2017 | BBB+/Baa1 | 9,500,000 | 10,386,350 | |||||||
Entergy Louisiana LLC, 4.80% due 5/1/2021 | A-/A3 | 4,300,000 | 4,935,058 | |||||||
Entergy Texas, Inc., 3.60% due 6/1/2015 | BBB+/Baa2 | 3,000,000 | 3,127,068 | |||||||
Entergy Texas, Inc., 7.125% due 2/1/2019 | BBB+/Baa2 | 2,000,000 | 2,460,880 | |||||||
a Great River Energy Series 2007-A, 5.829% due 7/1/2017 | A-/Baa1 | 2,531,705 | 2,741,179 | |||||||
Gulf Power Co., 4.35% due 7/15/2013 | A/A3 | 925,000 | 951,092 | |||||||
a,b Iberdrola Finance Ireland Ltd., 3.80% due 9/11/2014 | BBB+/Baa1 | 6,000,000 | 6,108,060 | |||||||
Idaho Power Corp., 6.025% due 7/15/2018 | A-/A2 | 1,000,000 | 1,199,278 | |||||||
a Kincaid Generation LLC, 7.33% due 6/15/2020 | BBB-/Ba1 | 7,274,510 | 8,352,978 | |||||||
a,b Korea East-West Power Co., 2.50% due 7/16/2017 | A+/A1 | 5,000,000 | 5,092,370 | |||||||
a,b Korea Hydro and Nuclear Power Co., Ltd., 4.75% due 7/13/2021 | A+/A1 | 7,000,000 | 7,946,421 | |||||||
a,b Korea Southern Power Co., 5.375% due 4/18/2013 | A+/A1 | 1,000,000 | 1,020,600 | |||||||
Metropolitan Edison Co., 7.70% due 1/15/2019 | BBB-/Baa2 | 2,250,000 | 2,823,914 | |||||||
a Midland Cogen Venture, 6.00% due 3/15/2025 | BBB-/NR | 7,788,000 | 8,400,964 | |||||||
a Monongahela Power Co., 5.70% due 3/15/2017 | BBB+/Baa1 | 4,785,000 | 5,477,638 | |||||||
MP Environmental, 4.982% due 7/15/2016 | AAA/Aaa | 1,493,948 | 1,550,018 | |||||||
Public Service Co. of New Mexico, 5.35% due 10/1/2021 | BBB-/Baa3 | 3,000,000 | 3,178,485 | |||||||
a Rochester Gas & Electric, 5.90% due 7/15/2019 | A/A3 | 11,732,000 | 13,343,120 |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
a Steelriver Transmission Co. LLC, 4.71% due 6/30/2017 | NR/Baa2 | $ | 3,806,169 | $ | 3,916,129 | |||||
Toledo Edison Co., 7.25% due 5/1/2020 | BBB/Baa1 | 1,000,000 | 1,310,933 | |||||||
GAS UTILITIES — 0.35% | ||||||||||
a,b ENN Energy Holdings Ltd., 6.00% due 5/13/2021 | BBB-/Baa3 | 6,000,000 | 6,733,254 | |||||||
a Maritimes and North East Pipeline, 7.50% due 5/31/2014 | BBB-/Ba1 | 2,635,200 | 2,802,456 | |||||||
MULTI-UTILITIES — 1.26% | ||||||||||
Black Hills Corp., 5.875% due 7/15/2020 | BBB-/Baa3 | 5,000,000 | 5,697,770 | |||||||
a Enogex LLC, 6.25% due 3/15/2020 | BBB-/Baa3 | 3,640,000 | 4,103,849 | |||||||
a Enogex LLC, 6.875% due 7/15/2014 | BBB-/Baa3 | 4,000,000 | 4,282,116 | |||||||
a Niagara Mohawk Power Corp., 4.881% due 8/15/2019 | A-/A3 | 10,000,000 | 11,280,140 | |||||||
Scana Corp., 4.125% due 2/1/2022 | BBB/Baa3 | 2,000,000 | 2,052,620 | |||||||
a,b Taqa Abu Dhabi National Energy Co., 6.60% due 8/1/2013 | A-/A3 | 5,000,000 | 5,195,000 | |||||||
Union Electric Co., 4.65% due 10/1/2013 | BBB+/A3 | 2,000,000 | 2,064,168 | |||||||
|
| |||||||||
145,608,907 | ||||||||||
|
| |||||||||
TOTAL CORPORATE BONDS (Cost $1,457,196,397) | 1,531,224,429 | |||||||||
|
| |||||||||
CONVERTIBLE BONDS — 1.90% | ||||||||||
DIVERSIFIED FINANCIALS — 1.72% | ||||||||||
CAPITAL MARKETS — 1.72% | ||||||||||
Apollo Investment Corp., 5.75% due 1/15/2016 | BBB/NR | 14,075,000 | 14,497,250 | |||||||
Fifth Street Finance Corp., 5.375% due 4/1/2016 | BBB-/NR | 12,150,000 | 12,241,125 | |||||||
a Prospect Capital Corp., 5.75% due 3/15/2018 | BBB/NR | 20,000,000 | 20,287,500 | |||||||
|
| |||||||||
47,025,875 | ||||||||||
|
| |||||||||
MATERIALS — 0.18% | ||||||||||
METALS & MINING — 0.18% | ||||||||||
b Kinross Gold Corp., 1.75% due 3/15/2028 | NR/NR | 5,000,000 | 5,003,125 | |||||||
|
| |||||||||
5,003,125 | ||||||||||
|
| |||||||||
TOTAL CONVERTIBLE BONDS (Cost $50,307,176) | 52,029,000 | |||||||||
|
| |||||||||
MUNICIPAL BONDS — 6.02% | ||||||||||
American Fork City Utah, 5.07% due 3/1/2013 (Insured: AGM) | AA-/Aa3 | 120,000 | 121,787 | |||||||
American Municipal Power Ohio, Inc., 5.072% due 2/15/2018 | A/A1 | 5,000,000 | 5,623,800 | |||||||
Anaheim California Public Financing Authority, 5.316% due 9/1/2017 (Insured: Natl Re/FGIC) | BBB+/A1 | 2,205,000 | 2,220,281 | |||||||
Anaheim California Public Financing Authority, 5.486% due 9/1/2020 (Insured: Natl-Re/FGIC) | BBB+/A1 | 3,270,000 | 3,456,030 | |||||||
Brentwood California Infrastructure Financing Authority, 6.16% due 10/1/2019 | AA-/NR | 2,110,000 | 2,412,468 | |||||||
California Health Facilities Financing Authority, 6.76% due 2/1/2019 | A-/NR | 3,905,000 | 4,521,521 | |||||||
California School Finance Authority, 5.041% due 7/1/2020 (LOC: City National Bank) | AA+/NR | 4,000,000 | 4,404,000 | |||||||
Camden County New Jersey, 5.47% due 7/1/2018 | A+/A2 | 2,140,000 | 2,413,321 | |||||||
Camden County New Jersey, 5.62% due 7/1/2019 | A+/A2 | 3,025,000 | 3,419,490 | |||||||
Carson California Redevelopment Agency, 4.511% due 10/1/2016 | A-/NR | 5,000,000 | 5,028,050 | |||||||
City of North Little Rock Arkansas, 3.562% due 7/1/2022 (Insured: AGM) | AA-/NR | 8,185,000 | 8,192,612 | |||||||
City of Riverside California, 5.61% due 8/1/2017 | AA-/Aa2 | 2,000,000 | 2,303,920 | |||||||
Cleveland Cuyahoga County Ohio, 6.10% due 5/15/2013 | BBB-/NR | 200,000 | 200,480 | |||||||
Connecticut Housing Finance Authority, 5.071% due 11/15/2019 | AAA/Aaa | 3,430,000 | 3,604,038 | |||||||
Florida State Board of Education, 3.60% due 6/1/2015 | AAA/Aa1 | 3,000,000 | 3,203,130 | |||||||
Fort Collins Colorado Electric Utility, 4.92% due 12/1/2020 | AA-/NR | 2,250,000 | 2,473,650 | |||||||
Hanover Pennsylvania Area School District, 4.47% due 3/15/2013 (Insured: AGM) | AA-/Aa3 | 1,385,000 | 1,408,282 | |||||||
Illinois Finance Authority, 5.629% due 7/1/2016 (Insured: Syncora) | AA-/NR | 1,425,000 | 1,505,926 | |||||||
Irvine Ranch Water District Joint Powers Agency, 2.388% due 3/15/2014 | A-/NR | 14,725,000 | 14,753,714 | |||||||
Los Angeles California Department of Airports, 5.175% due 5/15/2017 | AA-/A1 | 4,000,000 | 4,463,840 |
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Credit Rating† | Principal | |||||||||
Issuer-Description | S&P/Moody’s | Amount | Value | |||||||
Los Angeles California Municipal Improvement Corp., 6.165% due 11/1/2020 | A+/A3 | $ | 10,000,000 | $ | 11,446,400 | |||||
Los Angeles County California Public Works Financing Authority, 5.591% due 8/1/2020 | A+/A1 | 3,000,000 | 3,352,620 | |||||||
Louisiana Public Facilities Authority, 5.72% due 7/1/2015 (Insured: CIFG) | AA-/Aa3 | 1,390,000 | 1,387,762 | |||||||
Maine Finance Authority, 4.55% due 10/1/2014 | A/NR | 750,000 | 776,798 | |||||||
Menomonee Falls Wisconsin GO, 4.25% due 11/1/2014 | NR/Aa2 | 3,350,000 | 3,424,705 | |||||||
a,c Midwest Family Housing, 5.168% due 7/1/2016 (Insured: CIFG) | AA-/Baa3 | 1,020,000 | 1,019,153 | |||||||
Mississippi Development Bank, 5.21% due 7/1/2013 (Insured: AGM) | AA-/NR | 1,200,000 | 1,236,192 | |||||||
New York City Transitional Finance Authority, 4.075% due 11/1/2020 | AAA/Aa1 | 2,500,000 | 2,759,800 | |||||||
New York, New York GO, 3.48% due 10/1/2018 | AA/Aa2 | 3,500,000 | 3,813,530 | |||||||
Oakland California Redevelopment Agency, 8.00% due 9/1/2016 | A-/NR | 4,200,000 | 4,622,268 | |||||||
Ohio Housing Financing Agency, 5.20% due 9/1/2014 (GNMA/FNMA) | NR/Aaa | 1,455,000 | 1,526,935 | |||||||
Oklahoma Development Finance Authority, 8.00% due 5/1/2020 | NR/NR | 8,500,000 | 8,602,765 | |||||||
Orleans Parish Louisiana School Board GO, 4.40% due 2/1/2021 | AA-/Aa3 | 10,000,000 | 10,956,500 | |||||||
Port St. Lucie Florida, 4.457% due 9/1/2014 (Wyndcrest) | A/Aa3 | 1,470,000 | 1,496,019 | |||||||
Redlands California Redevelopment Agency, 5.818% due 8/1/2022 (Insured: AMBAC) | A-/NR | 2,250,000 | 2,357,640 | |||||||
San Bernardino County California San Sevaine Redevelopment Agency, 7.135% due 9/1/2020 | BBB/NR | 1,840,000 | 1,941,605 | |||||||
San Francisco California City and County Redevelopment Financing Authority, 8.00% due 8/1/2019 | A/Ba1 | 6,500,000 | 7,491,770 | |||||||
San Jose California Redevelopment Agency, 3.447% due 8/1/2013 | A/Ba1 | 1,000,000 | 1,012,390 | |||||||
San Jose California Redevelopment Agency, 4.281% due 8/1/2014 | A/Ba1 | 750,000 | 777,443 | |||||||
San Luis Obispo County California, 7.45% due 9/1/2019 | AA-/NR | 3,950,000 | 4,844,754 | |||||||
San Marcos California Redevelopment Agency, 6.125% due 10/1/2018 | AA-/NR | 5,000,000 | 5,449,550 | |||||||
Victor New York, 9.20% due 5/1/2014 | NR/NR | 490,000 | 503,598 | |||||||
Wallenpaupack Pennsylvania Area School District GO, (State Aid Withholding), 3.80% due 9/1/2019 | AA-/NR | 3,000,000 | 3,145,170 | |||||||
Wallenpaupack Pennsylvania Area School District GO, (State Aid Withholding), 4.00% due 9/1/2020 | AA-/NR | 2,750,000 | 2,885,190 | |||||||
Wisconsin State Health and Educational Facilities, 7.08% due 6/1/2016 (Insured: ACA) | NR/NR | 1,325,000 | 1,305,986 | |||||||
Yuba California Levee Financing Authority, 6.375% due 9/1/2021 | AA-/NR | 1,000,000 | 1,085,640 | |||||||
|
| |||||||||
TOTAL MUNICIPAL BONDS (Cost $154,134,529) | 164,952,523 | |||||||||
|
| |||||||||
SHORT TERM INVESTMENTS — 8.87% | ||||||||||
Bank of New York Tri-Party Repurchase Agreement 0.28% dated 9/28/2012 due 10/1/2012, repurchase price $79,001,843 collateralized by 24 U.S. Government debt securities and 1 corporate debt securities, having an average coupon of 3.18%, a minimum credit weighting of AA-, maturity dates from 5/1/2019 to 10/1/2044, and having an aggregate market value of $80,507,134 at 9/28/12 | NR/NR | 79,000,000 | 79,000,000 | |||||||
McCormick & Co., Inc., 0.22% due 10/1/2012 | NR/NR | 13,532,000 | 13,532,000 | |||||||
Northern Illinois Gas Co., 0.33% due 10/1/2012 | NR/NR | 30,000,000 | 30,000,000 | |||||||
NYSE Euronext, Inc., 0.37% due 10/1/2012 | NR/NR | 90,462,000 | 90,462,000 | |||||||
Vodafone Group plc, 0.85% due 12/28/2012 USA | NR/NR | 30,000,000 | 29,937,667 | |||||||
|
| |||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $242,931,667) | 242,931,667 | |||||||||
|
| |||||||||
TOTAL INVESTMENTS — 98.90% (Cost $2,607,393,085) | $ | 2,710,454,227 | ||||||||
OTHER ASSETS LESS LIABILITIES — 1.10% | 30,028,996 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 2,740,483,223 | ||||||||
|
|
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Footnote Legend
† | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. Bonds issued with a maturity of one year or less are assigned Moody’s ratings from MIG-1 to MIG-4 and Standard and Poor’s ratings from SP-1+ to SP-3 with MIG-1 and SP-1+ being the strongest ratings. |
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, 2012, the aggregate value of these securities in the Fund’s portfolio was $1,044,459,065, representing 38.11% of the Fund’s net assets. |
b | Yankee Bond - Denominated in U.S. dollars and is issued in the U.S. by foreign banks and corporations. |
c | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees. |
d | When-issued security. |
e | Segregated as collateral for a when-issued security. |
f | Bond in default. |
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 | |
FCB | Farm Credit Bank | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FNMA | Collateralized by Federal National Mortgage Association | |
GNMA | Insured by Government National Mortgage Association | |
GO | General Obligation | |
LOC | Letter of Credit | |
Mtg | Mortgage | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
REIT | Real Estate Investment Trust | |
REMIC | Real Estate Mortgage Investment Conduit | |
SBA | Small Business Administration | |
Syncora | Insured by Syncora Guarantee Inc. | |
VA | Veterans Affairs |
See notes to financial statements.
30 Certified Annual Report
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Certified Annual Report 31
STATEMENTS OF ASSETS AND LIABILITIES | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
Thornburg Limited Term U.S. Government Fund | Thornburg��Limited Term Income Fund | |||||||
ASSETS | ||||||||
Investments at value (cost $401,892,257 and $2,607,393,085) (Note 2) | $ | 416,484,779 | $ | 2,710,454,227 | ||||
Cash | 17,159,520 | 1,457,841 | ||||||
Receivable for investments sold | — | 7,316,369 | ||||||
Receivable for fund shares sold | 959,322 | 21,506,787 | ||||||
Dividend and interest reclaim receivable | — | 125,680 | ||||||
Interest receivable | 1,775,919 | 21,567,772 | ||||||
Prepaid expenses and other assets | 48,065 | 92,333 | ||||||
|
|
|
| |||||
Total Assets | 436,427,605 | 2,762,521,009 | ||||||
|
|
|
| |||||
LIABILITIES | ||||||||
Payable for investments purchased | — | 14,970,503 | ||||||
Payable for fund shares redeemed | 1,062,280 | 4,081,483 | ||||||
Payable to investment advisor and other affiliates (Note 3) | 260,805 | 1,531,158 | ||||||
Accounts payable and accrued expenses | — | 330,143 | ||||||
Dividends payable | 216,184 | 1,124,499 | ||||||
|
|
|
| |||||
Total Liabilities | 1,539,269 | 22,037,786 | ||||||
|
|
|
| |||||
NET ASSETS | $ | 434,888,336 | $ | 2,740,483,223 | ||||
|
|
|
| |||||
NET ASSETS CONSIST OF: | ||||||||
Undistributed (distribution in excess of) net investment income | $ | 245,952 | $ | (139,845 | ) | |||
Net unrealized appreciation on investments | 14,592,522 | 103,061,142 | ||||||
Accumulated net realized gain (loss) | (3,230,276 | ) | 9,773,824 | |||||
Net capital paid in on shares of beneficial interest | 423,280,138 | 2,627,788,102 | ||||||
|
|
|
| |||||
$ | 434,888,336 | $ | 2,740,483,223 | |||||
|
|
|
|
32 Certified Annual Report
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2012 |
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 ($214,749,590 and $1,049,044,180 applicable to 15,496,973 and 76,439,856 shares of beneficial interest outstanding - Note 4) | $ | 13.86 | $ | 13.72 | ||||
Maximum sales charge, 1.50% of offering price | 0.21 | 0.21 | ||||||
|
|
|
| |||||
Maximum offering price per share | $ | 14.07 | $ | 13.93 | ||||
|
|
|
| |||||
Class B Shares: | ||||||||
Net asset value per share* ($3,452,205 applicable to 249,700 shares of beneficial interest outstanding - Note 4) | $ | 13.83 | $ | — | ||||
|
|
|
| |||||
Class C Shares: | ||||||||
Net asset value and offering price per share* ($102,790,113 and $604,313,984 applicable to 7,372,933 and 44,106,171 shares of beneficial interest outstanding - Note 4) | $ | 13.94 | $ | 13.70 | ||||
|
|
|
| |||||
Class I Shares: | ||||||||
Net asset value, offering and redemption price per share ($98,111,960 and $1,012,429,630 applicable to 7,080,409 and 73,758,973 shares of beneficial interest outstanding - Note 4) | $ | 13.86 | $ | 13.73 | ||||
|
|
|
| |||||
Class R3 Shares: | ||||||||
Net asset value, offering and redemption price per share ($15,485,727 and $73,373,487 applicable to 1,116,824 and 5,342,748 shares of beneficial interest outstanding - Note 4) | $ | 13.87 | $ | 13.73 | ||||
|
|
|
| |||||
Class R5 Shares: | ||||||||
Net asset value, offering and redemption price per share ($298,741and $1,321,942 applicable to 21,563 and 96,329 shares of beneficial interest outstanding - Note 4) | $ | 13.85 | $ | 13.72 | ||||
|
|
|
|
* | 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 33
STATEMENTS OF OPERATIONS | ||
Thornburg Limited Term Income Fund | Year Ended September 30, 2012 |
Thornburg Limited Term U.S. Government Fund | Thornburg Limited Term Income Fund | |||||||
INVESTMENT INCOME: | ||||||||
Interest income (net of premium amortized of $1,661,559 and $ 8,209,292 and net of paydown losses of $2,896,171 and $1,701,129) | $ | 11,567,274 | $ | 79,219,530 | ||||
|
|
|
| |||||
EXPENSES: | ||||||||
Investment advisory fees (Note 3) | 1,620,080 | 8,520,002 | ||||||
Administration fees (Note 3) | ||||||||
Class A Shares | 265,311 | 1,010,227 | ||||||
Class B Shares | 4,992 | — | ||||||
Class C Shares | 129,773 | 595,324 | ||||||
Class I Shares | 48,369 | 354,036 | ||||||
Class R3 Shares | 18,982 | 68,728 | ||||||
Class R5 Shares | 18 | 30 | ||||||
Distribution and service fees (Note 3) | ||||||||
Class A Shares | 530,622 | 2,020,454 | ||||||
Class B Shares | 39,833 | — | ||||||
Class C Shares | 520,103 | 2,399,707 | ||||||
Class R3 Shares | 76,012 | 276,069 | ||||||
Transfer agent fees | ||||||||
Class A Shares | 167,558 | 707,379 | ||||||
Class B Shares | 9,273 | — | ||||||
Class C Shares | 102,268 | 394,416 | ||||||
Class I Shares | 53,349 | 483,449 | ||||||
Class R3 Shares | 16,583 | 38,810 | ||||||
Class R5 Shares | 546 | 546 | ||||||
Registration and filing fees | ||||||||
Class A Shares | 33,851 | 129,191 | ||||||
Class B Shares | 19,109 | — | ||||||
Class C Shares | 25,685 | 60,248 | ||||||
Class I Shares | 29,382 | 112,326 | ||||||
Class R3 Shares | 20,203 | 23,019 | ||||||
Class R5 Shares | 15,263 | 14,869 | ||||||
Custodian fees (Note 3) | 100,223 | 258,891 | ||||||
Professional fees | 41,906 | 62,750 | ||||||
Accounting fees | 10,785 | 48,929 | ||||||
Trustee fees | 12,389 | 61,539 | ||||||
Other expenses | 49,985 | 287,150 | ||||||
|
|
|
| |||||
Total Expenses | 3,962,453 | 17,928,089 | ||||||
Less: | ||||||||
Expenses reimbursed by investment advisor (Note 3) | (60,714 | ) | (125,464 | ) | ||||
Fees paid indirectly (Note 3) | (28,494 | ) | — | |||||
|
|
|
| |||||
Net Expenses | 3,873,245 | 17,802,625 | ||||||
|
|
|
| |||||
Net Investment Income | $ | 7,694,029 | $ | 61,416,905 | ||||
|
|
|
|
34 Certified Annual Report
STATEMENTS OF OPERATIONS, CONTINUED | ||
Thornburg Limited Term Income Fund | Year Ended September 30, 2012 |
Thornburg Limited Term U.S. Government Fund | Thornburg Limited Term Income Fund | |||||||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||
Net realized gain (loss) on investments | $ | 603,821 | $ | 12,965,543 | ||||
Net change in unrealized appreciation (depreciation) on investments | 1,453,008 | 73,342,069 | ||||||
|
|
|
| |||||
Net Realized and Unrealized Gain | 2,056,829 | 86,307,612 | ||||||
|
|
|
| |||||
Net Increase in Net Assets Resulting from Operations | $ | 9,750,858 | $ | 147,724,517 | ||||
|
|
|
|
See notes to financial statements.
Certified Annual Report 35
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Limited Term U.S. Government Fund |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 7,694,029 | $ | 8,445,601 | ||||
Net realized gain (loss) on investments | 603,821 | 1,221,494 | ||||||
Net unrealized appreciation (depreciation) on investments | 1,453,008 | (931,450 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 9,750,858 | 8,735,645 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (5,424,214 | ) | (5,372,127 | ) | ||||
Class B Shares | (48,104 | ) | (69,647 | ) | ||||
Class C Shares | (2,366,058 | ) | (2,517,254 | ) | ||||
Class I Shares | (2,792,566 | ) | (1,872,821 | ) | ||||
Class R3 Shares | (373,741 | ) | (347,035 | ) | ||||
Class R5 Shares | (1,030 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 12,467,979 | 14,142,048 | ||||||
Class B Shares | (899,839 | ) | (816,910 | ) | ||||
Class C Shares | 2,899,499 | 1,254,589 | ||||||
Class I Shares | 15,374,578 | 27,792,691 | ||||||
Class R3 Shares | 2,769,576 | 165,396 | ||||||
Class R5 Shares | 297,969 | — | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 31,654,907 | 41,094,575 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 403,233,429 | 362,138,854 | ||||||
|
|
|
| |||||
End of Year | $ | 434,888,336 | $ | 403,233,429 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 245,952 | $ | 715,121 |
See notes to financial statements.
36 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Limited Term Income Fund |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 61,416,905 | $ | 39,561,285 | ||||
Net realized gain (loss) on investments | 12,965,543 | 11,878,682 | ||||||
Net unrealized appreciation (depreciation) on investments | 73,342,069 | (16,707,685 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 147,724,517 | 34,732,282 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (25,172,276 | ) | (16,646,234 | ) | ||||
Class C Shares | (13,689,646 | ) | (9,679,993 | ) | ||||
Class I Shares | (24,360,205 | ) | (13,126,192 | ) | ||||
Class R3 Shares | (1,669,104 | ) | (797,810 | ) | ||||
Class R5 Shares | (1,939 | ) | — | |||||
From realized gains | ||||||||
Class A Shares | (4,404,576 | ) | (1,414,228 | ) | ||||
Class C Shares | (2,727,096 | ) | (830,699 | ) | ||||
Class I Shares | (3,486,977 | ) | (945,122 | ) | ||||
Class R3 Shares | (237,575 | ) | (55,975 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 442,203,183 | 123,252,312 | ||||||
Class C Shares | 221,399,070 | 110,921,477 | ||||||
Class I Shares | 538,081,197 | 155,891,117 | ||||||
Class R3 Shares | 41,267,790 | 11,342,497 | ||||||
Class R5 Shares | 1,312,866 | — | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 1,316,239,229 | 392,643,432 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 1,424,243,994 | 1,031,600,562 | ||||||
|
|
|
| |||||
End of Year | $ | 2,740,483,223 | $ | 1,424,243,994 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | — | $ | 1,167,161 |
See notes to financial statements.
Certified Annual Report 37
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
NOTE 1 – ORGANIZATION
Thornburg Limited Term U.S. Government Fund (the “Government Fund”) and Thornburg Limited Term Income Fund (the “Income Fund”), 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 has six classes of shares of beneficial interest outstanding: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R3 and Class R5). The Government Fund no longer offers Class B shares for sale. The Income Fund currently offers five classes of shares of beneficial interest outstanding, Class A, Class C, Institutional Class (Class I), and Retirement Classes (Class R3 and Class R5). 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 were 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 and may be subject to a service fee, (v) Class R3 shares are sold at net asset value without a sales charge, but bear both a service fee and a distribution fee, (vi) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (vii) the respective classes may have different reinvestment privileges and conversion rights. Additionally, 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 Policy and Procedures: The Funds’ Trustees of the Trust (“the Trustees”) have authorized employees of the Funds’ investment advisor, acting as the Valuation and Pricing Committee (“the Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Funds’ investment advisor administer and implement the valuation process and make fair value decisions. Certain valuation determination issues have been described under “Valuation of Investments”. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Funds would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the determination of fair value for an investment may differ from the value that would be realized by the Funds upon a sale of the investment, and that difference could be material to the Funds’ financial statements. The 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.
38 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
Valuation of Investments: Debt obligations held by the Funds have a primary market over-the-counter and are valued by an independent pricing service approved by the Trustees. 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 ordinarily 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 Committee determines a fair value for the debt obligation using procedures in accordance with a policy 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 Funds may be unreliable, the Committee decides whether or not to use the pricing service’s valuation or to determine a fair value for the debt obligation.
Valuation Measurements: The Funds categorize their investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Account Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable valuation inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect the Funds’ assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability’s fair value measurement. The inputs or methodologies used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of each Funds’ investments. These inputs are summarized according to the three-level hierarchy listed below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
Level 3: Significant unobservable inputs, (including the Funds’ own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
Certified Annual Report 39
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
GOVERNMENT FUND
The following table displays a summary of the fair value measurements of the Government Fund’s net investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3(a) | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
U.S. Treasury Securities | $ | 36,598,991 | $ | 36,598,991 | $ | — | $ | — | ||||||||
U.S. Government Agencies | 81,390,439 | — | 78,444,359 | 2,946,080 | ||||||||||||
Mortgage Backed | 278,495,349 | — | 278,495,349 | — | ||||||||||||
Short Term Investments | 20,000,000 | — | 20,000,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 416,484,779 | $ | 36,598,991 | $ | 376,939,708 | $ | 2,946,080 |
(a) | In accordance with the guidance prescribed in Accounting Standards Update, (“ASU”) No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, unadjusted broker quotes were applied to portfolio investments characterized as Level 3 at September 30, 2012. It is the policy of the Funds to recognize transfers between Levels 1, 2, and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between Levels 1 and 2 for the year ended September 30, 2012. |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2012, is as follows:
U.S. Government Agencies | Total | |||||||
Beginning Balance 9/30/2011 | $ | 2,852,955 | $ | 2,852,955 | ||||
Accrued Discounts/(Premiums) | 2,959 | 2,959 | ||||||
Net Realized Gain/(Loss)(a) | 1,836 | 1,836 | ||||||
Gross Purchases | — | — | ||||||
Gross Sales | (121,407 | ) | (121,407 | ) | ||||
Change in Unrealized Appreciation (Depreciation)(b) | 209,737 | 209,737 | ||||||
Transfers into Level 3(c) | — | — | ||||||
Transfers out of Level 3(c) | — | — | ||||||
|
|
|
| |||||
Ending Balance 9/30/2012(d) | $ | 2,946,080 | $ | 2,946,080 |
(a) | Amount of net realized gain (loss) from investments recognized in net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2012. |
(b) | Amount of net change in unrealized appreciation (depreciation) on investments recognized in net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2012. |
(c) | Transfers into or out of Level 3 were into or out of Level 2, and were due to changes in other significant observable inputs available during the year ended September 30, 2012. Transfers into or out of Level 3 are based on the beginning market value of the period in which they occurred. |
(d) | Level 3 investments represent 0.68% of total Net Assets at the year ended September 30, 2012. Significant fluctuations of the unobservable inputs applied to portfolio investments characterized as Level 3 investments may increase or decrease the fair value of these portfolio investments. |
40 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
INCOME FUND
The following table displays a summary of the fair value hierarchy measurements of the Income Fund’s net investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3(a) | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
U.S. Treasury Securities | $ | 20,394,027 | $ | 20,394,027 | $ | — | $ | — | ||||||||
U.S. Government Agencies | 88,065,859 | — | 60,851,517 | 27,214,342 | ||||||||||||
Other Government | 79,714,799 | — | 79,714,799 | — | ||||||||||||
Mortgage Backed | 240,310,349 | — | 240,310,349 | — | ||||||||||||
Asset Backed Securities | 290,831,574 | — | 277,116,163 | 13,715,411 | ||||||||||||
Corporate Bonds | 1,531,224,429 | — | 1,497,236,694 | 33,987,735 | ||||||||||||
Convertible Bonds | 52,029,000 | — | 52,029,000 | — | ||||||||||||
Municipal Bonds | 164,952,523 | — | 163,933,370 | 1,019,153 | ||||||||||||
Short Term Investments | 242,931,667 | — | 242,931,667 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 2,710,454,227 | $ | 20,394,027 | $ | 2,614,123,559 | $ | 75,936,641 |
(a) | In accordance with the guidance prescribed in ASU No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, unadjusted broker quotes were applied to portfolio investments characterized as Level 3 at September 30, 2012. It is the policy of the Funds to recognize transfers between Levels 1, 2, and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between Levels 1 and 2 for the year ended September 30, 2012. |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2012, is as follows:
Asset Backed Securities | Corporate Bonds | Municipal Bonds | Other Government | Total | ||||||||||||||||
Beginning Balance 9/30/2011 | $ | 10,032,000 | $ | 20,171,794 | $ | — | $ | 8,568,169 | $ | 38,771,963 | ||||||||||
Accrued Discounts/(Premiums) | 29,811 | (91,105 | ) | 30,308 | (23,550 | ) | (54,536 | ) | ||||||||||||
Net Realized Gain/(Loss)(a) | 74,031 | 87,001 | 23,488 | 1,684 | 186,204 | |||||||||||||||
Gross Purchases | 9,999,553 | 17,319,310 | — | 24,225,640 | 51,544,503 | |||||||||||||||
Gross Sales | (465,111 | ) | (4,274,864 | ) | (165,000 | ) | (111,290 | ) | (5,016,265 | ) | ||||||||||
Change in Unrealized Appreciation (Depreciation)(b) | 169,305 | 1,384,794 | (44,582 | ) | 506,649 | 2,016,166 | ||||||||||||||
Transfers into Level 3 (c) | 3,907,822 | 12,051,861 | 1,174,939 | — | 17,134,622 | |||||||||||||||
Transfers out of Level 3 (c) | (10,032,000 | ) | (12,661,056 | ) | — | (5,952,960 | ) | (28,646,016 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending Balance 9/30/2012 (d) | $ | 13,715,411 | $ | 33,987,735 | $ | 1,019,153 | $ | 27,214,342 | $ | 75,936,641 |
(a) | Amount of net realized gain (loss) from investments recognized in net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2012. |
(b) | Amount of net change in unrealized appreciation (depreciation) on investments recognized in net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2012. |
(c) | Transfers into or out of Level 3 were into or out of Level 2, and were due to changes in other significant observable inputs available during the year ended September 30, 2012. Transfers into or out of Level 3 are based on the beginning market value of the period in which they occurred. |
(d) | Level 3 investments represent 2.77% of total Net Assets at the year ended September 30, 2012. Significant fluctuations of the unobservable inputs applied to portfolio investments characterized as Level 3 may increase or decrease the fair value of these portfolio investments. |
Certified Annual Report 41
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
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 uncertain tax position believed to be material to the preparation of each 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records at the trade date. Investments purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Funds is declared daily as a dividend on shares for which the Funds have received payment. Dividends are paid monthly and are reinvested in additional shares of the Funds at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually.
Repurchase Agreements: The Funds may invest excess cash in repurchase agreements whereby the Funds purchase investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
General: Investment transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on investments purchased are amortized over the life of the respective investments. Realized gains and losses from the sale of investments are recorded on an identified cost basis. The Funds invest in various mortgage-backed securities. Such investments 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 investments 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 investments 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 investments and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign investments, 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 values of such spot contracts are included in receivable for investments sold and payable for investments purchased on the Statement of Assets and Liabilities.
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 investments held. Such fluctuations are included with the net unrealized appreciation or depreciation from investments.
42 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
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 investment transactions, and the difference between the amount of income 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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 and Class R5 shares. For the year ended September 30, 2012, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $44,976 for the Class R3 shares and $15,738 for the Class R5 shares of the Government Fund and $110,169 for the Class R3 shares and $15,295 for the Class R5 shares 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, 2012, the Distributor has advised the Funds that they earned net commissions aggregating $10,488 from the sale of Class A shares of the Government Fund, $11,501 from the sale of Class A shares of the Income Fund, and collected contingent deferred sales charges aggregating $12,520 and $59,041 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, 2012, 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 C, and Class R3, and also applicable to Government Fund’s Class B 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 Class B shares, and an annual rate of up to .25 of 1% per annum of the average daily net assets attributable to Class C and Class R3 shares. Total fees incurred by each class of shares of the Funds under their respective Service and Distribution Plans for the year ended September 30, 2012, are set forth in the Statements 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 each Fund’s cash on deposit with the bank. This deposit agreement is an alternative to overnight investments. Custodial fees are 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, 2012, fees paid indirectly were $28,494 for the Government Fund and $0 for the Income Fund.
Certified Annual Report 43
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
Certain officers and Trustees of the Trust are also officers 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, 2012, 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, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 5,047,470 | $ | 69,868,966 | 6,089,014 | $ | 84,261,899 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 295,188 | 4,086,639 | 296,937 | 4,103,217 | ||||||||||||
Shares repurchased | (4,443,689 | ) | (61,487,626 | ) | (5,376,288 | ) | (74,223,068 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 898,969 | $ | 12,467,979 | 1,009,663 | $ | 14,142,048 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class B Shares | ||||||||||||||||
Shares sold | 57,885 | $ | 800,862 | 92,757 | $ | 1,288,851 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 2,898 | 40,033 | 4,432 | 61,084 | ||||||||||||
Shares repurchased | (126,040 | ) | (1,740,734 | ) | (157,102 | ) | (2,166,845 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (65,257 | ) | $ | (899,839 | ) | (59,913 | ) | $ | (816,910 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 2,770,702 | $ | 38,593,798 | 3,263,009 | $ | 45,521,197 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 131,511 | 1,831,613 | 132,767 | 1,845,636 | ||||||||||||
Shares repurchased | (2,695,423 | ) | (37,525,912 | ) | (3,317,720 | ) | (46,112,244 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 206,790 | $ | 2,899,499 | 78,056 | $ | 1,254,589 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 5,010,466 | $ | 69,361,668 | 3,547,628 | $ | 49,190,355 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 155,056 | 2,146,620 | 104,011 | 1,438,003 | ||||||||||||
Shares repurchased | (4,056,310 | ) | (56,133,710 | ) | (1,653,928 | ) | (22,835,667 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,109,212 | $ | 15,374,578 | 1,997,711 | $ | 27,792,691 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 691,586 | $ | 9,580,609 | 323,070 | $ | 4,463,372 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 25,564 | 354,172 | 24,162 | 333,959 | ||||||||||||
Shares repurchased | (516,999 | ) | (7,165,205 | ) | (335,949 | ) | (4,631,935 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 200,151 | $ | 2,769,576 | 11,283 | $ | 165,396 | ||||||||||
|
|
|
|
|
|
|
|
44 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
GOVERNMENT FUND (continued)
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class R5 Shares* | ||||||||||||||||
Shares sold | 21,925 | $ | 302,955 | — | $ | — | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 74 | 1,030 | — | — | ||||||||||||
Shares repurchased | (436 | ) | (6,016 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 21,563 | $ | 297,969 | — | $ | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
* Effective date for this class of shares was May 1, 2012
INCOME FUND | ||||||||||||||||
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 47,057,811 | $ | 631,127,101 | 20,710,535 | $ | 276,339,436 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,838,883 | 24,670,726 | 1,106,507 | 14,704,071 | ||||||||||||
Shares repurchased | (15,896,424 | ) | (213,594,644 | ) | (12,648,538 | ) | (167,791,195 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 33,000,270 | $ | 442,203,183 | 9,168,504 | $ | 123,252,312 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 21,374,155 | $ | 286,302,664 | 13,049,288 | $ | 173,595,727 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 971,990 | 13,011,563 | 570,537 | 7,571,261 | ||||||||||||
Shares repurchased | (5,818,601 | ) | (77,915,157 | ) | (5,303,599 | ) | (70,245,511 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 16,527,544 | $ | 221,399,070 | 8,316,226 | $ | 110,921,477 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 53,493,565 | $ | 718,064,995 | 21,300,995 | $ | 284,000,634 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,617,644 | 21,734,746 | 854,816 | 11,362,919 | ||||||||||||
Shares repurchased | (15,023,845 | ) | (201,718,544 | ) | (10,513,149 | ) | (139,472,436 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 40,087,364 | $ | 538,081,197 | 11,642,662 | $ | 155,891,117 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 4,091,469 | $ | 54,734,839 | 1,524,111 | $ | 20,253,169 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 136,421 | 1,833,436 | 60,933 | 810,560 | ||||||||||||
Shares repurchased | (1,137,089 | ) | (15,300,485 | ) | (731,735 | ) | (9,721,232 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 3,090,801 | $ | 41,267,790 | 853,309 | $ | 11,342,497 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R5 Shares* | ||||||||||||||||
Shares sold | 96,188 | $ | 1,310,927 | — �� | $ | — | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 141 | 1,939 | — | — | ||||||||||||
Shares repurchased | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 96,329 | $ | 1,312,866 | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
* | Effective date for this class of shares was May 1, 2012 |
Certified Annual Report 45
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2012, the Government Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $151,286,355 and $38,802,444, respectively, while the Income Fund had purchase and sale transactions of investment securities (excluding short-term investments and U.S. Government obligations) of $1,428,336,142 and $433,081,201, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Government Fund | Income Fund | |||||||
Cost of investments for tax purposes | $ | 401,892,257 | $ | 2,607,416,995 | ||||
|
|
|
| |||||
Gross unrealized appreciation on a tax basis | $ | 15,044,418 | $ | 110,726,918 | ||||
Gross unrealized depreciation on a tax basis | (451,896 | ) | (7,689,686 | ) | ||||
|
|
|
| |||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 14,592,522 | $ | 103,037,232 | ||||
|
|
|
|
At September 30, 2012, the Government Fund had deferred tax basis capital losses occurring subsequent to October 31, 2011, of $1,965,636. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
At September 30, 2012, the Government Fund had cumulative tax basis capital losses of $1,141,175, 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 do not expire but are required to be utilized to offset future gains prior to the utilization of losses that occurred in years prior to the fiscal year ending September 30, 2012, which may expire prior to utilization.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) became effective for the Fund’s fiscal year ending September 30, 2012. The Act requires that future capital losses generated by the Fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a Fund’s pre-enactment capital losses will expire unused.
At September 30, 2012, the Government Fund had cumulative 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:
2018 | $ | 17,316 | ||
2019 | 106,151 | |||
|
| |||
$ | 123,467 | |||
|
|
In order to account for permanent book/tax differences, the Government Fund decreased distribution in excess of net investment income by $2,842,515 and increased accumulated net realized loss by $2,842,515. The Income Fund decreased distribution in excess of net investment income by $2,169,259 and decreased accumulated net realized gain by $2,169,259. These reclassifications have no impact on the net asset values of the Funds. Reclassifications result primarily from paydown losses, which are recorded as an adjustment to interest income in the financial statements and as realized losses in the tax returns.
At September 30, 2012, the Government Fund had distributable tax basis net ordinary income of $462,138. The Income Fund had distributable tax basis net ordinary income of $6,852,487 and tax basis distributable capital gains of $3,929,901.
46 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
The tax character of distributions paid for the Government Fund for the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 11,005,713 | $ | 10,178,884 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 11,005,713 | $ | 10,178,884 | ||||
|
|
|
|
The tax character of the distributions paid by the Income Fund for the years ended September 30, 2012 and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 66,826,503 | $ | 40,250,229 | ||||
Capital gains | 8,922,891 | 3,246,024 | ||||||
|
|
|
| |||||
Total | $ | 75,749,394 | $ | 43,496,253 | ||||
|
|
|
|
OTHER NOTES:
Risks: Each Fund��s investments subject it to risks including, but not limited to, credit risk, interest rate risk, prepayment risk, management risk, market and economic risk, liquidity risk and, in the case of Income Fund, the risks associated with investments in non-U.S. issuers. Please see the Funds’ prospectus for a discussion of the risks associated with an investment in the Funds.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
Certified Annual Report 47
Thornburg Limited Term U.S. Government Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 13.90 | 0.25 | 0.06 | 0.31 | (0.35 | ) | — | (0.35 | ) | $ | 13.86 | 1.79 | 0.89 | 0.89 | 0.89 | 2.29 | 9.89 | $ | 214,749 | ||||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 13.94 | 0.33 | 0.03 | 0.36 | (0.40 | ) | — | (0.40 | ) | $ | 13.90 | 2.42 | 0.90 | 0.89 | 0.90 | 2.66 | 14.62 | $ | 202,910 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class B Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.87 | 0.06 | 0.06 | 0.12 | (0.16 | ) | — | (0.16 | ) | $ | 13.83 | 0.42 | 2.26 | 2.25 | 2.26 | 0.90 | 9.89 | $ | 3,452 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.91 | 0.16 | 0.02 | 0.18 | (0.22 | ) | — | (0.22 | ) | $ | 13.87 | 1.13 | 2.20 | 2.19 | 2.20 | 1.33 | 14.62 | $ | 4,368 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.98 | 0.21 | 0.07 | 0.28 | (0.32 | ) | — | (0.32 | ) | $ | 13.94 | 1.51 | 1.17 | 1.17 | 1.17 | 2.01 | 9.89 | $ | 102,790 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.03 | 0.30 | 0.02 | 0.32 | (0.37 | ) | — | (0.37 | ) | $ | 13.98 | 2.15 | 1.17 | 1.16 | 1.17 | 2.31 | 14.62 | $ | 100,212 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.90 | 0.29 | 0.07 | 0.36 | (0.40 | ) | — | (0.40 | ) | $ | 13.86 | 2.12 | 0.56 | 0.55 | 0.56 | 2.63 | 9.89 | $ | 98,112 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.94 | 0.37 | 0.04 | 0.41 | (0.45 | ) | — | (0.45 | ) | $ | 13.90 | 2.71 | 0.57 | 0.57 | 0.57 | 2.99 | 14.62 | $ | 82,994 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.91 | 0.23 | 0.07 | 0.30 | (0.34 | ) | — | (0.34 | ) | $ | 13.87 | 1.69 | 1.00 | 0.99 | 1.29 | 2.19 | 9.89 | $ | 15,486 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.95 | 0.32 | 0.03 | 0.35 | (0.39 | ) | — | (0.39 | ) | $ | 13.91 | 2.33 | 1.00 | 0.99 | 1.32 | 2.56 | 14.62 | $ | 12,749 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(c) | $ | 13.84 | 0.10 | 0.07 | 0.17 | (0.16 | ) | — | (0.16 | ) | $ | 13.85 | 1.87 | (d) | 0.68 | (d) | 0.67 | (d) | 44.86 | (d)(e) | 1.20 | 9.89 | $ | 299 |
(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 May 1, 2012. |
(d) | Annualized. |
(e) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
48 Certified Annual Report | Certified Annual Report 49 |
FINANCIAL HIGHLIGHTS
Thornburg Limited Term Income Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 13.32 | 0.39 | 0.52 | 0.91 | (0.42 | ) | (0.09 | ) | (0.51 | ) | $ | 13.72 | 2.94 | 0.93 | 0.93 | 0.93 | 7.04 | 23.72 | $ | 1,049,044 | |||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 13.41 | 0.46 | (0.04 | ) | 0.42 | (0.47 | ) | (0.04 | ) | (0.51 | ) | $ | 13.32 | 3.44 | 0.98 | 0.97 | 0.98 | 3.19 | 24.86 | $ | 578,731 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.30 | 0.36 | 0.52 | 0.88 | (0.39 | ) | (0.09 | ) | (0.48 | ) | $ | 13.70 | 2.70 | 1.18 | 1.18 | 1.18 | 6.78 | 23.72 | $ | 604,314 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.39 | 0.42 | (0.04 | ) | 0.38 | (0.43 | ) | (0.04 | ) | (0.47 | ) | $ | 13.30 | 3.19 | 1.22 | 1.22 | 1.23 | 2.93 | 24.86 | $ | 366,822 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.32 | 0.44 | 0.53 | 0.97 | (0.47 | ) | (0.09 | ) | (0.56 | ) | $ | 13.73 | 3.27 | 0.58 | 0.58 | 0.58 | 7.49 | 23.72 | $ | 1,012,430 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.41 | 0.50 | (0.04 | ) | 0.46 | (0.51 | ) | (0.04 | ) | (0.55 | ) | $ | 13.32 | 3.79 | 0.63 | 0.63 | 0.63 | 3.55 | 24.86 | $ | 448,669 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.33 | 0.39 | 0.52 | 0.91 | (0.42 | ) | (0.09 | ) | (0.51 | ) | $ | 13.73 | 2.88 | 0.99 | 0.99 | 1.19 | 6.97 | 23.72 | $ | 73,373 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.42 | 0.45 | (0.03 | ) | 0.42 | (0.47 | ) | (0.04 | ) | (0.51 | ) | $ | 13.33 | 3.42 | 0.99 | 0.99 | 1.29 | 3.17 | 24.86 | $ | 30,022 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(c) | $ | 13.47 | 0.16 | 0.27 | 0.43 | (0.18 | ) | — | (0.18 | ) | $ | 13.72 | 2.96 | (d) | 0.67 | (d) | 0.67 | (d) | 25.61 | (d)(e) | 3.19 | 23.72 | $ | 1,322 |
(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 May 1, 2012. |
(d) | Annualized. |
(e) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
50 Certified Annual Report | Certified Annual Report 51 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
Thornburg Limited Term Income Funds | September 30, 2012 |
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, 2012, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
52 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Limited Term Income Funds | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Limited Term U.S. Government Fund | ||||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.30 | $ | 4.51 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.53 | $ | 4.52 | ||||||
Class B Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,009.00 | $ | 11.68 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.37 | $ | 11.70 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,014.10 | $ | 5.89 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.15 | $ | 5.90 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.90 | $ | 2.86 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.17 | $ | 2.87 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.80 | $ | 4.99 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,014.35 | $ | 3.37 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.65 | $ | 3.39 | ||||||
Limited Term Income Fund | ||||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,038.10 | $ | 4.73 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.36 | $ | 4.69 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,036.90 | $ | 5.94 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.17 | $ | 5.89 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,040.60 | $ | 2.97 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.09 | $ | 2.94 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,037.80 | $ | 5.04 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,038.15 | $ | 3.41 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.65 | $ | 3.38 |
† | Thornburg Limited Term U.S. Government Fund expenses are equal to the annualized expense ratio for each class (A: 0.89%; B: 2.33%; C: 1.17%; I: 0.57%; R3: 0.99% R5: 0.67%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
† | Thornburg Limited Term Income Fund expenses are equal to the annualized expense ratio for each class (A: 0.93%; C: 1.17%; I: 0.58%; R3: 0.99% R5: 0.67%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your class of shares under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the table at right provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 53
INDEX COMPARISON | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg Limited Term U.S. Government Fund versus Barclays Intermediate Government Bond Index
and Consumer Price Index (November 16, 1987 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 11/16/87) | 0.77 | % | 4.19 | % | 3.38 | % | 5.63 | % | ||||||||
B Shares (Incep: 11/1/02) | -4.08 | % | 2.86 | % | — | 2.62 | % | |||||||||
C Shares (Incep: 9/1/94) | 1.51 | % | 4.22 | % | 3.24 | % | 4.69 | % | ||||||||
I Shares (Incep: 7/5/96) | 2.63 | % | 4.83 | % | 3.84 | % | 5.24 | % | ||||||||
R3 Shares (Incep: 7/1/03) | 2.19 | % | 4.44 | % | — | 3.47 | % | |||||||||
R5 Shares (Incep: 5/1/12) | — | — | — | 1.20 | % |
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 or call 800-847-0200. 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, Class R3, and Class R5 shares.
54 Certified Annual Report
INDEX COMPARISON | ||
Thornburg Limited Term Income Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg Limited Term Income Fund versus Barclays Intermediate Government/Credit Bond Index
and Consumer Price Index (October 1, 1992 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 10/1/92) | 5.46 | % | 6.11 | % | 4.68 | % | 5.64 | % | ||||||||
C Shares (Incep: 9/1/94) | 6.28 | % | 6.17 | % | 4.57 | % | 5.46 | % | ||||||||
I Shares (Incep: 7/5/96) | 7.49 | % | 6.81 | % | 5.19 | % | 6.06 | % | ||||||||
R3 Shares (Incep: 7/1/03) | 6.97 | % | 6.43 | % | — | 4.69 | % | |||||||||
R5 Shares (Incep: 5/1/12) | — | — | — | 3.19 | % |
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 or call 800-847-0200. 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, Class R3, and Class R5 shares.
Certified Annual Report 55
TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Income Funds | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
56 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE (1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report 57
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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.
58 Certified Annual Report
OTHER INFORMATION | ||
Thornburg Limited Term Income Funds | September 30, 2012 (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. A description of the Policy 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, 2012, dividends paid by the Thornburg Limited Term Income Fund of $8,922,891 are being reported as long-term capital gain dividends for federal income tax purposes.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 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 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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.
Certified Annual Report 59
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees reviewed information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (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 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 considered (among other aspects of the data) performance data for the ten most recent calendar years, which showed that the Fund had produced positive returns in accordance with expectations in all years, that the Fund’s investment return for the most recent calendar year exceeded the average return of the mutual fund category for which calendar year data was presented, and that the Fund’s returns exceeded or were comparable to the average returns of the category in all of the preceding nine calendar years. Other noted quantitative data showed that the Fund’s investment returns fell within the top quartile of performance for the first fund category for the one-year and three-year periods ended with the second quarter of the current year and fell within the top decile of performance for the five-year period, and that the Fund’s returns fell near the midpoint of performance for the second fund category for the one-year period ended with the second quarter and near the top quartile of performance for the three-year and five-year periods. These data indicated to the Trustees that the Fund’s investment performance met expectations in view of the Fund’s stated objectives and strategies in the market conditions for the relevant periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures also 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of U.S. government obligation mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged to the Fund was comparable to the median and slightly higher than the average fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was slightly higher than the median and comparable to the average expense ratios for the fund category. The Trustees did not find the differences 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
60 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 (Unaudited) |
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. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its capabilities. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by the other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
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 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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 selection of investments and execution of the Fund’s investment strategies. 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 Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s investment performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (iii) measures of the Fund’s investment performance
Certified Annual Report 61
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 (Unaudited) |
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 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 considered (among other aspects of the data) performance data for the ten most recent calendar years, which showed that the Fund had produced positive returns in accordance with expectations in most years, that the Fund’s investment return for the most recent calendar year exceeded the average return of the mutual fund category for which calendar year data was presented, and that the Fund’s return exceeded or was comparable to the average return of the category in all of the preceding nine calendar years. Noted quantitative data further showed that the Fund’s investment returns fell within the top decile of performance for the first fund 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 within the top quintile of performance for the second fund category for the one-year and three-year periods ended with the second quarter and within the first decile for the five-year period. These data indicated to the Trustees that the Fund’s investment performance met expectations in view of the Fund’s stated objectives and strategies in the market conditions for the relevant periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures also 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of fixed income mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged to the Fund was slightly higher than the median and average fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was slightly higher than the median and average expense ratios for the fund category. The Trustees did not find the differences 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 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. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its
62 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2012 (Unaudited) |
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 and may reasonably be expected to realize economies of scale as it grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds.
Certified Annual Report 63
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
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.
64 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 website 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 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 Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 65
THORNBURG FUND FAMILY
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 thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
This page is not part of the Annual Report. 67
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TH076 |
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2012. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 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, 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 | TSIAX | 885-215-228 | ||
Class C | TSICX | 885-215-210 | ||
Class I | TSIIX | 885-215-194 | ||
Class R3 | TSIRX | 885-216-887 | ||
Class R5 | TSRRX | 885-216-879 |
Lipper’s 2012 Best Fixed Income Funds Manager
Thornburg Investment Management ranked #1 out of 41 eligible firms in Lipper, Inc.’s fixed income Large Company universe for the three-year period ended 11/30/11, based on risk-adjusted returns. Lipper’s Large Company universe is comprised of fund families with more than $40 billion in total net assets. Only fund families with at least five bond funds were eligible for the fixed income funds manager award. Asset Class Group Awards are given for the three-year period only.
Glossary
Blended Index – The Blended Index is composed of 80% Barclays Aggregate Bond Index and 20% MSCI World Index. The Barclays 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 U.S. Corporate High-Yield Index – This index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging market debt.
Barclays U.S. Universal Index – This index represents the union of the U.S. Aggregate Index, U.S. Corporate High-Yield, 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.
Annualized Distribution Yield – The distribution yield reflects actual distributions made to shareholders. The annualized distribution yield is calculated by summing the last 30 days of income at a given month end and annualizing to a 360-day year. The result is divided by the ending maximum offering price.
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 Fitch Ratings.
Coupon – The interest rate stated on a bond when its issued. The coupon is typically paid semi-annually.
Duration – A bond’s sensitivity to interest rates. 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
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.
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.
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.
4 This page is not part of the Annual Report.
THORNBURG STRATEGIC INCOME FUND
Portfolio Managers
Jason Brady,CFA, and George Strickland
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 or call 800-847-0200.
The maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.32%, 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, 2013, so that actual expenses, for Class A shares, do not exceed 1.25%.
Harvesting a Sustainable Yield
Many investors are in need of significant income and typically turn to “high-yield” funds to find notable dividends. The simple yield statistic is potentially quite misleading. At Thornburg Investment Management, we believe we have a better income-generation mousetrap in the form of our Strategic Income Fund, which has a goal of high income, without resorting solely to the below investment grade portion of the taxable fixed income universe.
The idea behind this fund is that “high-yield,” in the context of a fund type, is not an investment goal but an asset type. Most taxable high-yield funds are solely focused on below investment grade corporate bonds. We believe this focus ultimately makes these funds less flexible and correspondingly less capable of succeeding in multiple investment climates. Below investment grade corporate bonds represent less than 2% of the total taxable investment universe. There is no reason to ignore huge chunks of the market merely because they do not have a very low credit quality; in fact, quite the opposite. By sifting through
30-Day Yields, Class A
As of September 30, 2012
SEC Yield | 4.10 | % | ||
Annualized Distribution Yield | 5.13 | % |
Without fee waivers and expense reimbursements, the 30-day SEC Yield would have been 4.00% and the Annualized Distribution Yield would have been 5.04%.
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | Since Inception | ||||||||||
A Shares (Incep: 12/19/07) | ||||||||||||
Without sales charge | 12.73 | % | 10.46 | % | 8.61 | % | ||||||
With sales charge | 7.65 | % | 8.77 | % | 7.57 | % | ||||||
Barclays U.S. Universal Index (Since 12/19/07) | 6.45 | % | 6.70 | % | 6.44 | % | ||||||
Blended Index (Since 12/19/07) | 8.51 | % | 6.72 | % | 5.10 | % |
Blended Index: 80% Barclays Aggregate Bond Index and 20% MSCI World Index
This page is not part of the Annual Report. 5
the available choices across many sub-asset classes, we are able to generate an interesting income stream from a variety of different sources. We believe this is likely to lead to a more stable fund with a robust yield.
This is the reason that our Strategic Income Fund has a much larger purview than a typical “high-yield” fund. Though we are currently focused on corporate bonds, that focus is a result of our belief that corporate balance sheets are currently the most attractive bond investment. Given the choice between government bonds, asset-backed bonds (mortgages, commercial mortgage, auto loans, etc.) and corporate bonds, we are skewing towards corporates.
The Thornburg Strategic Income Fund even has a small allocation to equity securities. As such, the occasional “bond-like” equity, which typically exhibits little growth but relatively strong income generation, is attractive. While adding equities to what is primarily a bond fund can add volatility (which we work hard to mitigate), we can find no good reason why we should ignore an asset class that can potentially be another diverse source of income for the Fund. Thornburg Investment Management has always tried to “go where the value is.” It is a mantra of ours across our Funds, regardless of the asset classes in which we invest.
Key Portfolio Attributes
For the Year Ended September 30, 2012
Fixed Income Statistics | Equity Statistics | |||||
Weighted Average Coupon | 6.4% | Portfolio P/E (12-mo. trailing) | 10.75 | |||
Average Maturity | 5.8 yrs | Median Market Cap | $2.8 B | |||
Effective Duration | 3.1 yrs | Equity & Pref. Equity Holdings | 25 | |||
Bond Holdings | 274 | |||||
Source: FactSet |
Portfolio Composition
As of September 30, 2012
Credit Quality Summary
As of September 30, 2012
6 This page is not part of the Annual Report.
Thornburg Strategic Income Fund –
September 30, 2012
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This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position.
Certified Annual Report 7
October 28, 2012
Dear Fellow Shareholder:
We are very pleased to present the annual report for the Thornburg Strategic Income Fund for the period ended September 30, 2012. The net asset value (NAV) of a Class A share of the Fund increased 42 cents to $12.28 since September 30, 2011. If you were invested for the entire period, you received dividends of 73.8 cents per share. If you reinvested your dividends, you received 75.8 cents per share. Dividends per share were lower for Class C and R3 and higher for Class I and R5 shares as a percentage of NAV to account for varying class-specific expenses. Please examine the accompanying report for more detailed information.
Putting income and price change together, the Class A shares of the Thornburg Strategic Income Fund produced a total return of 12.73% at NAV since September 30, 2011. A blended index of 80% of the Barclays Aggregate Bond Index and 20% of the MSCI World Index produced an 8.51% total return, and the Barclays U.S. Universal Index produced a 6.45% total return over the same time period. These indices reflect no deduction for fees, expenses, or taxes.
As we approach the five-year anniversary of the Fund’s inception (12/19/2007), we are inclined to step back for a moment and survey the investment landscape over that time period and into the future. The past five years have seen one of the worst and ugliest markets in history, followed — certainly for fixed income investors — by one of the best. Central bank liquidity has been a key driver of the recovery in markets even as economic fundamentals have been much slower to move back up. Many of the riskiest structures and behaviors we saw in 2007 (payment-in-kind notes, no-covenant bonds, credit enhancement on AAA asset-backed securities at very low levels, assuming a rosy future) have come and gone…and come back again. We remain of the opinion that our flexible mandate is crucial in our search for the best relative value opportunities in both good times and in bad.
The various markets in which we participate have continued to appreciate in price and depreciate in available yield. Over the past year, the Spanish 10-year note has moved higher in yield (we don’t own it) from 5.136% to 5.938%. Who would have guessed in that environment, and with the Euro crisis far from solved on a sustainable basis, that pan-European high yield (in the form of the Barclays index of that same name) would have appreciated 26.56%? Color us skeptical that those returns — along with the U.S. High Yield Index’s one-year return of 19.37% — are repeatable. With our income objective, we are finding opportunities notably fewer and further between. In addition, and as referenced earlier, we are increasingly aware of other market participants engaging in risky behavior without regard to the consequence. With central bank pressure on yield-seeking investors seeming to continue to the horizon, it isn’t surprising that yields on riskier, “yieldier” securities are approaching all-time lows.
That said, investing is (or should be) a forward-looking activity. We believe that a driver of lower default rates and riskier fixed income returns (as well as some significant portion of equity returns) is the easy-money policy of the Federal Reserve (the Fed), which is pumping large amounts of liquidity (money at zero percent interest rates) into the global economy. The U.S. continues to drag, along with a legacy of large consumer debt and growing government debt. Housing prices may be recovering (or at least not continuing to fall), but the employment-to-population ratio continues to bump along the bottom.
With regard to market movements, we are pleased to have participated in a good portion of the “risk on” market rally of the past several years. We feel as though our individual asset selection has also been a
8 Certified Annual Report
significant benefit to shareholders. Going forward, the environment for total returns is not as favorable, yet we believe that our asset selection as well as our portfolio positioning will continue to allow us to provide shareholders with a strong and sustainable income stream, with a good balance of risk and reward. We have recently kept the portfolio at a shorter duration to be better able to take advantage of interesting opportunities in the future. At the same time, though the Fed’s injections of liquidity have revved all risk markets to very hot levels, we still believe that deep security analysis and a disdain for what investors are being “forced” to do allows us to invest well and appropriately within our mandate. We are unlikely to be the highest yielding portfolio, but our broad purview certainly comes in handy in finding the best risk/ reward in the marketplace. We continue to find good stories and interesting risk/reward in various pockets of the marketplace. This has always been the investment style of Thornburg Investment Management, and this Fund is a great beneficiary of that legacy.
Because a lower-growth environment is likely to mute the potential for further significant capital appreciation across asset classes, we believe that remaining invested in income producing assets is crucial. While many market participants are caught between running for the safety of U.S. Treasuries in bad times and swapping out for notably risky assets in good times, this portfolio is intended to enjoy continued compounding of interesting yields. The Fund could certainly “print” a higher yield, but our objective remains a sustainable income stream as opposed to the highest possible one-period number. Selectively investing in assets we believe to be good quality and keeping an eye on income production is this Fund’s goal. It is a mindset that we believe will serve our shareholders over time and in many different environments.
Thank you very much for investing in the Strategic Income Fund. We believe that the Fund continues to be an appropriate investment for those looking for an attractive, sustainable yield from a variety of instruments. While future performance cannot be guaranteed, Thornburg Investment Management will continue to strive to chart a steady course in what continues to be a volatile marketplace.
Regards, | ||
![]() | ![]() | |
Jason H. Brady,CFA | George Strickland | |
Portfolio Manager | 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 Strategic Income Fund | September 30, 2012 |
Summary of Industry Exposure
As of 9/30/12
Diversified Financials | 9.9 | % | Media | 1.3 | % | |||||
Energy | 9.4 | % | Pharmaceuticals, Biotechnology & Life Sciences | 1.0 | % | |||||
Utilities | 7.1 | % | Commercial & Professional Services | 1.0 | % | |||||
Banks | 5.4 | % | Semiconductors & Semiconductor Equipment | 0.9 | % | |||||
Transportation | 5.3 | % | Retailing | 0.8 | % | |||||
Materials | 4.5 | % | Technology Hardware & Equipment | 0.6 | % | |||||
Telecommunication Services | 4.1 | % | Food & Staples Retailing | 0.2 | % | |||||
Capital Goods | 4.1 | % | Other Non-Classified Securities: | |||||||
Insurance | 3.3 | % | Asset Backed Securities | 11.4 | % | |||||
Real Estate | 2.7 | % | Other Securities | 3.1 | % | |||||
Health Care Equipment & Services | 2.6 | % | Municipal Bonds | 2.3 | % | |||||
Food, Beverage & Tobacco | 2.3 | % | Other Government | 0.4 | % | |||||
Miscellaneous | 1.7 | % | U.S. Treasury Securities | 0.4 | % | |||||
Software & Services | 1.7 | % | U.S. Government Agencies | 0.2 | % | |||||
Consumer Services | 1.6 | % | Other Assets & Liabilities | 10.7 | % |
Summary of Country Exposure
As of 9/30/12
United States | 66.2 | % | Norway | 0.6 | % | |||||
Canada | 3.5 | % | Mexico | 0.4 | % | |||||
Australia | 3.4 | % | United Arab Emirates | 0.4 | % | |||||
United Kingdom | 2.5 | % | South Korea | 0.4 | % | |||||
Brazil | 2.0 | % | Ireland | 0.3 | % | |||||
Cayman Islands | 1.5 | % | France | 0.3 | % | |||||
Bermuda | 1.3 | % | Russia | 0.3 | % | |||||
Japan | 1.0 | % | Italy | 0.3 | % | |||||
Switzerland | 1.0 | % | Czech Republic | 0.2 | % | |||||
Spain | 0.9 | % | Trinidad and Tobago | 0.2 | % | |||||
Luxembourg | 0.9 | % | Germany | 0.2 | % | |||||
Netherlands | 0.7 | % | Iceland | 0.2 | % | |||||
Argentina | 0.6 | % | Other Assets & Liabilities | 10.7 | % |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 3.19% | ||||||||
DIVERSIFIED FINANCIALS — 0.35% | ||||||||
CAPITAL MARKETS — 0.23% | ||||||||
Apollo Investment Corp. | 168,060 | $ | 1,322,632 | |||||
DIVERSIFIED FINANCIAL SERVICES — 0.12% | ||||||||
KKR Financial Holdings LLC | 73,000 | 733,650 | ||||||
|
| |||||||
2,056,282 | ||||||||
|
| |||||||
ENERGY — 0.53% | ||||||||
ENERGY EQUIPMENT & SERVICES — 0.31% | ||||||||
Seadrill Ltd. | 46,100 | 1,800,096 | ||||||
OIL, GAS & CONSUMABLE FUELS — 0.22% | ||||||||
Eni S.p.A. | 58,500 | 1,279,485 | ||||||
|
| |||||||
3,079,581 | ||||||||
|
| |||||||
INSURANCE — 0.05% | ||||||||
INSURANCE — 0.05% | ||||||||
Swiss Re Ltd. | 4,400 | 282,807 | ||||||
|
| |||||||
282,807 | ||||||||
|
| |||||||
REAL ESTATE — 1.81% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 1.81% | ||||||||
Annaly Capital Management, Inc. | 207,100 | 3,487,564 | ||||||
Chimera Investment Corp. | 770,900 | 2,089,139 | ||||||
Invesco Mtg Capital, Inc. | 242,900 | 4,889,577 | ||||||
|
| |||||||
10,466,280 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 0.34% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.34% | ||||||||
Telstra Corp. Ltd. | 483,000 | 1,963,983 | ||||||
|
| |||||||
1,963,983 | ||||||||
|
| |||||||
UTILITIES — 0.11% | ||||||||
ELECTRIC UTILITIES — 0.05% | ||||||||
Enel S.p.A. | 87,856 | 310,699 | ||||||
MULTI-UTILITIES — 0.06% | ||||||||
E. ON AG | 13,100 | 310,843 | ||||||
|
| |||||||
621,542 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $17,741,681) | 18,470,475 | |||||||
|
| |||||||
PREFERRED STOCK — 4.62% | ||||||||
BANKS — 2.22% | ||||||||
COMMERCIAL BANKS — 1.68% | ||||||||
First Niagara Financial Group Pfd, 8.75% | 40,000 | 1,168,752 | ||||||
GMAC Capital Trust I Pfd, 8.125% | 100,000 | 2,511,000 | ||||||
Huntington Bancshares Pfd, 8.50% | 750 | 956,250 | ||||||
Royal Bank of Scotland plc Pfd, 7.25% | 58,905 | 1,336,554 | ||||||
Webster Financial Corp. Pfd, 8.50% | 15 | 17,100 | ||||||
Wintrust Financial Corp. Pfd, 5.00% | 3,500 | 3,717,700 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30 ,2012 |
Shares/ Principal Amount | Value | |||||||
THRIFTS & MORTGAGE FINANCE — 0.54% | ||||||||
Falcons Funding Trust I Pfd, 8.875% | 3,000 | $ | 3,150,938 | |||||
|
| |||||||
12,858,294 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.39% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 0.39% | ||||||||
Pitney Bowes International Holdings Pfd, 6.125% | 2,500 | 2,266,562 | ||||||
|
| |||||||
2,266,562 | ||||||||
|
| |||||||
ENERGY — 0.93% | ||||||||
OIL, GAS & CONSUMABLE FUELS — 0.93% | ||||||||
b Sanchez Energy Corp. Pfd, 4.875% | 100,000 | 5,424,660 | ||||||
|
| |||||||
5,424,660 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 0.09% | ||||||||
FOOD PRODUCTS — 0.09% | ||||||||
H.J. Heinz Finance Co. Pfd, 8.00% | 5 | 527,813 | ||||||
|
| |||||||
527,813 | ||||||||
|
| |||||||
MISCELLANEOUS — 0.20% | ||||||||
U.S. GOVERNMENT AGENCIES — 0.20% | ||||||||
Farm Credit Bank of Texas Pfd, 10.00% | 1,000 | 1,168,750 | ||||||
|
| |||||||
1,168,750 | ||||||||
|
| |||||||
REAL ESTATE — 0.24% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 0.24% | ||||||||
Alexandria Real Estate Pfd, 7.00% | 50,000 | 1,367,500 | ||||||
|
| |||||||
1,367,500 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.20% | ||||||||
COMMUNICATIONS EQUIPMENT — 0.20% | ||||||||
Lucent Technologies Capital Trust I Pfd, 7.75% | 2,000 | 1,160,000 | ||||||
|
| |||||||
1,160,000 | ||||||||
|
| |||||||
UTILITIES — 0.35% | ||||||||
MULTI-UTILITIES — 0.35% | ||||||||
Centerpoint Energy, Inc. Pfd, 7.5% | 50,000 | 2,009,375 | ||||||
|
| |||||||
2,009,375 | ||||||||
|
| |||||||
TOTAL PREFERRED STOCK (Cost $25,081,991) | 26,782,954 | |||||||
|
| |||||||
ASSET BACKED SECURITIES — 11.43% | ||||||||
ADVANCE RECEIVABLES — 0.35% | ||||||||
AH Mtg Advance Trust, 6.90%, 9/15/2043 | $ | 2,000,000 | 2,000,499 | |||||
|
| |||||||
2,000,499 | ||||||||
|
| |||||||
COMMERCIAL MTG TRUST — 2.12% | ||||||||
c Capital Automotive REIT, Series 2012-1A Class A, 4.70%, 7/15/2042 | 2,993,106 | 2,992,495 | ||||||
Citigroup Commercial Mtg Trust, Series 2004-HYB2 Class B1, 2.93%, 3/25/2034 | 166,835 | 141,986 | ||||||
Commercial Mtg Pass-Through Certificates, Series 2011-FL1 Class B, 3.97%, 7/17/2028 | 1,780,670 | 1,809,606 | ||||||
b CVS Pass-Through Trust, 9.35%, 1/10/2023 | 4,605,000 | 5,350,550 | ||||||
b ORES NPL LLC, Series 2012-LV1 Class A, 4.00%, 9/25/2044 | 2,000,000 | 2,016,914 | ||||||
|
| |||||||
12,311,551 | ||||||||
|
|
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
OTHER ASSET BACKED — 2.49% | ||||||||
Dominos Pizza Master Issuer LLC, Series 2012-1A Class A2, 5.216%, 1/25/2042 | $ | 1,985,000 | $ | 2,161,504 | ||||
c JPR Royalty LLC, 14.00%, 12/1/2020 | 2,000,000 | 2,000,000 | ||||||
MIRAMAX LLC, Series 2011-1A Class A, 6.25%, 10/20/2021 | 1,500,000 | 1,576,621 | ||||||
MIRAMAX LLC, Series 2011-1A Class B, 10.00%, 10/20/2021 | 1,950,000 | 1,991,732 | ||||||
c Northwind Holdings LLC, 1.198%, 12/1/2037 | 1,304,611 | 1,043,689 | ||||||
b Richland Towers, 7.87%, 3/15/2041 | 2,000,000 | 2,054,684 | ||||||
Trafigura Securitisation Finance plc, Series 2012-1A Class B, 4.221%, 10/15/2015 | 2,000,000 | 2,002,432 | ||||||
Westgate Resorts, Series 2012-1 Class C, 11.00%, 9/20/2025 | 1,606,532 | 1,622,598 | ||||||
|
| |||||||
14,453,260 | ||||||||
|
| |||||||
RESIDENTIAL MTG TRUST — 5.20% | ||||||||
Banc of America Funding Corp., Series 2006-I Class SB1, 2.903%, 12/20/2036 | 932,813 | 194,535 | ||||||
Banc of America Mtg Services, Series 2005-A Class B1, 3.178%, 2/25/2035 | 900,116 | 78,202 | ||||||
Bayview Financial Acquisition Trust, 0.896%, 4/28/2039 | 4,000,000 | 2,576,440 | ||||||
Bear Stearns ARM Mtg, Series 2003-6 Class 2B-1, 2.497%, 8/25/2033 | 446,195 | 319,920 | ||||||
b CIT Mtg Loan Trust, Series 2007-1 Class 2A2, 1.467%, 10/25/2037 | 5,820,000 | 5,689,096 | ||||||
Countrywide, Series 2005-11 Class AF3, 4.778%, 2/25/2036 | 774,083 | 711,615 | ||||||
Countrywide, Series 2006-15 Class A6, 5.82%, 10/25/2046 | 378,720 | 323,562 | ||||||
CS First Boston Mtg Securities Co., Series 2005-CF1 Class M1, 0.917%, 3/25/2045 | 2,750,000 | 2,441,263 | ||||||
FBR Securitization Trust, Series 2005-2 Class M-1, 0.937%, 9/25/2035 | 3,000,000 | 2,415,491 | ||||||
FREMF Mtg Trust, Series 2012-K709 Class C, 3.872%, 4/25/2045 | 3,046,000 | 2,839,336 | ||||||
JPMorgan Mtg Acquisition Corp., Series 2006-CH1 Class A4, 0.357%, 7/25/2036 | 1,645,000 | 1,567,659 | ||||||
JPMorgan, Series 2007-CH5 Class A2, 0.267%, 5/25/2037 | 170,158 | 169,064 | ||||||
Merrill Lynch Mtg Investors Trust, 2.582%, 8/25/2034 | 323,144 | 242,341 | ||||||
Morgan Stanley Capital, Inc., Series 2005-HE7 Class A2C, 0.537%, 11/25/2035 | 1,505,969 | 1,431,272 | ||||||
New Century Home Equity Loan Trust, 0.647%, 6/25/2035 | 2,000,000 | 1,862,364 | ||||||
Park Place Securities, Inc., Series 2004- MHQ1 Class M2, 0.967%, 12/25/2034 | 2,250,000 | 1,868,433 | ||||||
Residential Asset Securities Corp., 0.367%, 6/25/2036 | 1,640,357 | 1,589,260 | ||||||
Structured Asset Investment Loan Trust, 1.177%, 8/25/2033 | 1,828,512 | 1,693,570 | ||||||
Structured Asset Securities Corp., Series 2004-20 Class 7A1, 5.25%, 11/25/2034 | 1,948,736 | 2,066,002 | ||||||
Wells Fargo Asset Securities Corp., Series 2005-AR1 Class B1, 2.615%, 2/25/2035 | 368,681 | 33,700 | ||||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 2.614%, 3/25/2035 | 329,726 | 21,369 | ||||||
|
| |||||||
30,134,494 | ||||||||
|
| |||||||
STUDENT LOAN — 1.27% | ||||||||
Access Group, Inc., Series 2005-A Class A3, 0.851%, 7/25/2034 | 4,000,000 | 2,876,089 | ||||||
SLM Student Loan Trust, Series 2004-B Class A3, 0.719%, 3/15/2024 | 2,000,000 | 1,642,277 | ||||||
SLM Student Loan Trust, Series 2006-A Class A4, 0.579%, 12/15/2023 | 3,000,000 | 2,851,567 | ||||||
|
| |||||||
7,369,933 | ||||||||
|
| |||||||
TOTAL ASSET BACKED SECURITIES (Cost $65,792,612) | 66,269,737 | |||||||
|
| |||||||
CORPORATE BONDS — 51.19% | ||||||||
BANKS — 2.83% | ||||||||
COMMERCIAL BANKS — 2.25% | ||||||||
b,d Banco do Brasil SA, 5.875%, 1/26/2022 | 1,000,000 | 1,070,000 | ||||||
b,d Banco Industrial e Comercial S.A., 6.25%, 1/20/2013 | 1,000,000 | 997,500 | ||||||
b,d Banco Pine SA, 8.75%, 1/6/2017 | 2,000,000 | 1,945,000 | ||||||
b,d Credit Agricole London, 1.903%, 1/21/2014 | 1,688,000 | 1,693,378 | ||||||
a,b,d,e Islandsbanki, 2.951%, 10/15/2008 | 60,000 | 18,000 | ||||||
a,b,d,e Landsbanki Islands HF, 5.73%, 8/25/2009 | 175,000 | 10,281 | ||||||
National City Bank Floating Rate Note, 0.78%, 6/7/2017 | 1,000,000 | 955,928 | ||||||
b PNC Preferred Funding Trust III Floating Rate Note, 8.70%, 12/31/2049 | 500,000 | 507,565 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30 ,2012 |
Shares/ Principal Amount | Value | |||||||
Provident Bank of Maryland, 9.50%, 5/1/2018 | $ | 1,500,000 | $ | 1,590,437 | ||||
d Royal Bank of Scotland plc, 9.50%, 3/16/2022 | 2,000,000 | 2,240,000 | ||||||
b Webster Bank, 5.875%, 1/15/2013 | 2,000,000 | 2,013,992 | ||||||
THRIFTS & MORTGAGE FINANCE — 0.58% | ||||||||
b,d Northern Rock Asset Management plc, 5.625%, 6/22/2017 | 3,000,000 | 3,371,100 | ||||||
|
| |||||||
16,413,181 | ||||||||
|
| |||||||
CAPITAL GOODS — 4.05% | ||||||||
INDUSTRIAL CONGLOMERATES — 1.56% | ||||||||
General Electric Capital Corp., 0.519%, 6/20/2014 | 1,000,000 | 992,884 | ||||||
b,d Hutchison Whampoa International (10) Ltd., 6.00%, Perpetual | 2,000,000 | 2,070,000 | ||||||
b Nesco LLC/Holdings Corp., 11.75%, 4/15/2017 | 1,250,000 | 1,331,250 | ||||||
Otter Tail Corp., 9.00%, 12/15/2016 | 4,000,000 | 4,650,000 | ||||||
MACHINERY — 0.18% | ||||||||
Case New Holland, Inc., 7.75%, 9/1/2013 | 1,000,000 | 1,046,250 | ||||||
TRADING COMPANIES & DISTRIBUTORS — 2.31% | ||||||||
c Air Lease Corp., 7.375%, 1/30/2019 | 3,000,000 | 3,075,000 | ||||||
b Aviation Capital Group, 7.125%, 10/15/2020 | 1,881,000 | 1,973,978 | ||||||
b Aviation Capital Group, 6.75%, 4/6/2021 | 2,500,000 | 2,548,500 | ||||||
International Lease Finance Corp., 4.875%, 4/1/2015 | 3,000,000 | 3,118,236 | ||||||
b International Lease Finance Corp., 6.50%, 9/1/2014 | 2,000,000 | 2,150,000 | ||||||
International Lease Finance Corp., 5.75%, 5/15/2016 | 500,000 | 530,121 | ||||||
|
| |||||||
23,486,219 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.56% | ||||||||
PROFESSIONAL SERVICES — 0.56% | ||||||||
Affinion Group, Inc., 7.875%, 12/15/2018 | 4,000,000 | 3,270,000 | ||||||
|
| |||||||
3,270,000 | ||||||||
|
| |||||||
CONSUMER SERVICES — 0.93% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.93% | 3,500,000 | 3,360,000 | ||||||
b Ruby Tuesday, Inc., 7.625%, 5/15/2020 | 3,500,000 | 3,360,000 | ||||||
b Sizzling Platter LLC, 12.25%, 4/15/2016 | 2,000,000 | 2,055,000 | ||||||
|
| |||||||
5,415,000 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 5.19% | ||||||||
CAPITAL MARKETS — 2.90% | ||||||||
b,d Macquarie Bank Ltd., 5.00%, 2/22/2017 | 2,000,000 | 2,136,200 | ||||||
b,d Macquarie Group Ltd., 7.30%, 8/1/2014 | 1,000,000 | 1,076,978 | ||||||
d Man Group plc, 2.023%, 9/22/2015 | 5,000,000 | 4,075,000 | ||||||
b Nationstar Mtg LLC/Nationstar Capital Corp., 9.625%, 5/1/2019 | 3,000,000 | 3,277,500 | ||||||
Oppenheimer Holdings, Inc., 8.75%, 4/15/2018 | 1,000,000 | 1,020,000 | ||||||
d UBS AG, 7.625%, 8/17/2022 | 5,000,000 | 5,227,800 | ||||||
CONSUMER FINANCE — 1.17% | ||||||||
b,c,d DFS Funding Corp., 1.214%, 6/15/2015 | 1,100,000 | 1,034,000 | ||||||
SLM Corp., 6.00%, 1/25/2017 | 2,000,000 | 2,177,500 | ||||||
SLM Corp., 6.25%, 1/25/2016 | 1,000,000 | 1,085,000 | ||||||
TMX Finance LLC, 13.25%, 7/15/2015 | 1,250,000 | 1,387,500 | ||||||
TMX Finance LLC, 13.25%, 7/15/2015 | 1,000,000 | 1,110,000 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 1.12% | ||||||||
d Banco BTG Pactual/Cayman, 5.75%, 9/28/2022 | 1,000,000 | 1,012,500 | ||||||
b Citicorp, 8.04%, 12/15/2019 | 250,000 | 293,192 | ||||||
Citigroup, Inc., 5.00%, 9/15/2014 | 750,000 | 791,040 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
c Counts, Series 1998 II-A, 6.67%, 2/15/2018 | $ | 165,809 | $ | 160,835 | ||||
d Korea Development Bank, 5.30%, 1/17/2013 | 200,000 | 202,329 | ||||||
Merrill Lynch & Co., 0.993%, 5/2/2017 | 2,500,000 | 2,261,233 | ||||||
SquareTwo Financial Corp., 11.625%, 4/1/2017 | 2,000,000 | 1,770,000 | ||||||
|
| |||||||
30,098,607 | ||||||||
|
| |||||||
ENERGY — 7.64% | ||||||||
ENERGY EQUIPMENT & SERVICES — 1.15% | ||||||||
b,d RDS Ultra-Deepwater Ltd., 11.875%, 3/15/2017 | 2,250,000 | 2,508,750 | ||||||
b Schahin II Finance Co. SPV, 5.875%, 9/25/2023 | 4,000,000 | 4,190,000 | ||||||
OIL, GAS & CONSUMABLE FUELS — 6.49% | ||||||||
b Aurora USA Oil & Gas, Inc., 9.875%, 2/15/2017 | 3,000,000 | 3,195,000 | ||||||
Black Elk Energy Offshore Operations LLC, 13.75%, 12/1/2015 | 2,000,000 | 2,025,000 | ||||||
b DCP Midstream LLC, 9.75%, 3/15/2019 | 500,000 | 642,708 | ||||||
b Endeavour International, 12.00%, 3/1/2018 | 3,000,000 | 3,300,000 | ||||||
Energy Transfer Partners LP, 8.50%, 4/15/2014 | 500,000 | 550,918 | ||||||
Energy Transfer Partners LP, 9.70%, 3/15/2019 | �� | 1,500,000 | 1,982,104 | |||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 2,000,000 | 2,240,000 | ||||||
b Everest Acquisition, LLC, 6.875%, 5/1/2019 | 1,000,000 | 1,070,000 | ||||||
b,d Gaz Capital SA, 7.51%, 7/31/2013 | 1,000,000 | 1,050,000 | ||||||
b Green Field Energy Services, 13.00%, 11/15/2016 | 2,000,000 | 1,960,000 | ||||||
b Maritimes & Northeast Pipeline LLC, 7.50%, 5/31/2014 | 878,400 | 934,152 | ||||||
b NFR Energy LLC, 9.75%, 2/15/2017 | 1,000,000 | 915,000 | ||||||
Northern Tier Energy LLC, 10.50%, 12/1/2017 | 1,350,000 | 1,478,250 | ||||||
b,d Origin Energy Finance Ltd., 5.45%, 10/14/2021 | 1,000,000 | 1,110,024 | ||||||
b,d Petro Co. Trinidad Tobago Ltd., 9.75%, 8/14/2019 | 1,000,000 | 1,285,000 | ||||||
Petrobras International Finance Co., 2.875%, 2/6/2015 | 1,000,000 | 1,027,826 | ||||||
a,b,d,e Petroplus Finance Ltd., 6.75%, 5/1/2014 | 1,000,000 | 140,000 | ||||||
Plains All American Pipeline LP, 8.75%, 5/1/2019 | 1,000,000 | 1,344,653 | ||||||
b QGOG Atlantic/Alaskan Rigs Ltd., 5.25%, 7/30/2018 | 1,781,200 | 1,852,448 | ||||||
Raam Global Energy Co., 12.50%, 10/1/2015 | 2,000,000 | 2,060,000 | ||||||
b Rockies Express Pipeline, 6.85%, 7/15/2018 | 2,000,000 | 2,045,000 | ||||||
bRockies Express Pipeline LLC, 3.90%, 4/15/2015 | 2,000,000 | 1,970,000 | ||||||
b Southern Star Central Gas Pipeline, Inc., 6.00%, 6/1/2016 | 2,000,000 | 2,235,180 | ||||||
Tennessee Gas Pipeline Co., 8.00%, 2/1/2016 | 1,000,000 | 1,189,985 | ||||||
|
| |||||||
44,301,998 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 1.42% | ||||||||
FOOD PRODUCTS — 1.20% | ||||||||
b,d BRF-Brasil Foods S.A., 5.875%, 6/6/2022 | 2,000,000 | 2,185,000 | ||||||
Bunge Ltd. Finance Co., 5.10%, 7/15/2015 | 321,000 | 344,835 | ||||||
b Harmony Foods Corp., 10.00%, 5/1/2016 | 2,000,000 | 2,100,000 | ||||||
b,d Minerva Luxembourg SA, 12.25%, 2/10/2022 | 2,000,000 | 2,307,400 | ||||||
TOBACCO — 0.22% | ||||||||
Lorillard Tobacco Co., 8.125%, 6/23/2019 | 1,000,000 | 1,289,594 | ||||||
|
| |||||||
8,226,829 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 2.13% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 0.57% | ||||||||
b Physio-Control International Corp., 9.875%, 1/15/2019 | 3,000,000 | 3,285,000 | ||||||
HEALTH CARE PROVIDERS & SERVICES — 0.91% | ||||||||
Aurora Diagnostics Holdings LLC, 10.75%, 1/15/2018 | 1,000,000 | 1,007,500 | ||||||
b Fresenius Medical Care, 6.50%, 9/15/2018 | 500,000 | 563,750 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30 ,2012 |
Shares/ Principal Amount | Value | |||||||
b Prospect Medical Holdings, Inc., 8.375%, 5/1/2019 | $ | 3,500,000 | $ | 3,710,000 | ||||
HEALTH CARE TECHNOLOGY — 0.65% | ||||||||
Merge Healthcare, Inc., 11.75%, 5/1/2015 | 3,500,000 | 3,788,750 | ||||||
|
| |||||||
12,355,000 | ||||||||
|
| |||||||
INSURANCE — 2.98% | ||||||||
INSURANCE — 2.98% | ||||||||
b Forethought Financial Group, 8.625%, 4/15/2021 | 1,330,000 | 1,700,267 | ||||||
b National Life Insurance of Vermont, 10.50%, 9/15/2039 | 1,000,000 | 1,335,293 | ||||||
b,d Oil Casualty Insurance, 8.00%, 9/15/2034 | 1,934,000 | 2,128,406 | ||||||
b Oil Insurance Ltd., 3.443%, 12/31/2049 | 1,000,000 | 874,040 | ||||||
b Prudential Holdings LLC, 8.695%, 12/18/2023 | 585,000 | 736,854 | ||||||
b,d QBE Insurance Group Ltd., 9.75%, 3/14/2014 | 780,000 | 850,568 | ||||||
b,d QBE Insurance Group Ltd., 5.647%, 7/1/2023 | 3,500,000 | 3,447,794 | ||||||
Unum Group, 7.125%, 9/30/2016 | 500,000 | 581,914 | ||||||
b,d White Mountains Re Group Ltd., 7.506%, 12/31/2049 | 2,500,000 | 2,547,900 | ||||||
Willis North America, Inc., 7.00%, 9/29/2019 | 1,286,000 | 1,528,941 | ||||||
b ZFS Finance USA Trust II, 6.45%, 12/15/2065 | 1,460,000 | 1,547,600 | ||||||
|
| |||||||
17,279,577 | ||||||||
|
| |||||||
MATERIALS — 3.41% | ||||||||
CHEMICALS — 0.17% | ||||||||
b,d Mexichem S.A.B. de C.V., 4.875%, 9/19/2022 | 1,000,000 | 1,015,000 | ||||||
CONSTRUCTION MATERIALS — 0.50% | ||||||||
Texas Industries, Inc., 9.25%, 8/15/2020 | 2,750,000 | 2,915,000 | ||||||
METALS & MINING — 2.64% | ||||||||
d ArcelorMittal, 10.10%, 6/1/2019 | 1,000,000 | 1,151,882 | ||||||
b,d FMG Resources, 8.25%, 11/1/2019 | 2,000,000 | 1,940,000 | ||||||
b,d IAMGOLD Corp., 6.75%, 10/1/2020 | 5,000,000 | 4,900,000 | ||||||
b,d Inmet Mining Corp., 8.75%, 6/1/2020 | 1,750,000 | 1,811,250 | ||||||
b Molycorp, Inc., 10.00%, 6/1/2020 | 3,000,000 | 2,970,000 | ||||||
b,d Posco, 8.75%, 3/26/2014 | 500,000 | 552,567 | ||||||
d Rio Tinto Alcan, Inc., 5.00%, 6/1/2015 | 50,000 | 55,158 | ||||||
d Thompson Creek Metals Co., 12.50%, 5/1/2019 | 2,000,000 | 1,905,000 | ||||||
MISCELLANEOUS — 0.10% | ||||||||
b,d Anglo American Capital, 9.375%, 4/8/2014 | 500,000 | 558,000 | ||||||
|
| |||||||
19,773,857 | ||||||||
|
| |||||||
MEDIA — 0.86% | ||||||||
MEDIA — 0.86% | ||||||||
Friendfinder Networks, Inc., 14.00%, 9/30/2013 | 523,741 | 432,086 | ||||||
b Live Nation Entertainment, Inc., 7.00%, 9/1/2020 | 1,000,000 | 1,040,000 | ||||||
b Proquest LLC, 9.00%, 10/15/2018 | 2,000,000 | 1,860,000 | ||||||
Washington Post Co., 7.25%, 2/1/2019 | 500,000 | 585,839 | ||||||
WMG Acquisition Corp., 9.50%, 6/15/2016 | 1,000,000 | 1,088,750 | ||||||
|
| |||||||
5,006,675 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 1.02% | ||||||||
LIFE SCIENCES TOOLS & SERVICES — 0.49% | ||||||||
b BPA Laboratories, Inc., 12.25%, 4/1/2017 | 3,000,000 | 2,850,000 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
PHARMACEUTICALS — 0.53% | ||||||||
b,c Alvogen Pharma U.S., Inc., 10.50%, 3/15/2019 | $ | 3,000,000 | $ | 3,030,000 | ||||
|
| |||||||
5,880,000 | ||||||||
|
| |||||||
REAL ESTATE — 0.67% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 0.67% | ||||||||
Bayview Financial Asset Trust, Series 2003-SSRA Class M, 1.567%, 10/25/2038 | 739,708 | 635,026 | ||||||
b,d Goodman Funding Property Ltd., 6.00%, 3/22/2022 | 3,000,000 | 3,222,414 | ||||||
|
| |||||||
3,857,440 | ||||||||
|
| |||||||
RETAILING — 0.82% | ||||||||
MULTILINE RETAIL — 0.18% | ||||||||
b,d Grupo Famsa S.A.B. de C.V., 11.00%, 7/20/2015 | 1,000,000 | 1,065,000 | ||||||
SPECIALTY RETAIL — 0.64% | ||||||||
b Penske Auto Group, Inc., 5.75%, 10/1/2022 | 1,000,000 | 1,025,000 | ||||||
b Sonic Automotive, Inc., 7.00%, 7/15/2022 | 2,500,000 | 2,675,000 | ||||||
|
| |||||||
4,765,000 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.63% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.63% | ||||||||
b Advanced Micro Devices, Inc., 7.50%, 8/15/2022 | 2,500,000 | 2,412,500 | ||||||
KLA Tencor Corp., 6.90%, 5/1/2018 | 1,000,000 | 1,206,779 | ||||||
|
| |||||||
3,619,279 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 0.99% | ||||||||
INTERNET SOFTWARE & SERVICES — 0.81% | ||||||||
b,d EAccess Ltd., 8.25%, 4/1/2018 | 2,955,000 | 2,689,050 | ||||||
EarthLink, Inc., 8.875%, 5/15/2019 | 2,000,000 | 1,995,000 | ||||||
SOFTWARE — 0.18% | ||||||||
Aspect Software, Inc., 10.625%, 5/15/2017 | 1,000,000 | 1,027,500 | ||||||
|
| |||||||
5,711,550 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.38% | ||||||||
COMMUNICATIONS EQUIPMENT — 0.19% | ||||||||
b Brightstar Corp., 9.50%, 12/1/2016 | 1,000,000 | 1,073,750 | ||||||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS — 0.19% | ||||||||
Avnet, Inc., 5.875%, 6/15/2020 | 1,000,000 | 1,118,432 | ||||||
|
| |||||||
2,192,182 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 3.52% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 2.24% | ||||||||
Centurylink, Inc., 6.45%, 6/15/2021 | 2,000,000 | 2,257,000 | ||||||
b Level 3 Communications, Inc., 8.875%, 6/1/2019 | 1,000,000 | 1,050,000 | ||||||
Level 3 Communications, Inc., 11.875%, 2/1/2019 | 1,000,000 | 1,135,000 | ||||||
Level 3 Financing, Inc., 4.469%, 2/15/2015 | 1,000,000 | 997,500 | ||||||
Qwest Corp., 6.75%, 12/1/2021 | 2,000,000 | 2,403,448 | ||||||
d Telefonica Emisiones SAU, 6.221%, 7/3/2017 | 2,000,000 | 2,090,000 | ||||||
d Telefonica Emisiones SAU, 5.134%, 4/27/2020 | 1,000,000 | 981,250 | ||||||
d Telefonica Emisiones SAU, 3.992%, 2/16/2016 | 1,000,000 | 995,000 | ||||||
d Telefonica Emisiones SAU, 6.421%, 6/20/2016 | 1,000,000 | 1,056,250 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 1.28% | ||||||||
b CC Holdings GS V LLC/Crown Castle Intl. Corp., 7.75%, 5/1/2017 | 1,500,000 | 1,601,250 | ||||||
b,d Digicel SA, 12.00%, 4/1/2014 | 500,000 | 557,500 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
b,d VimpelCom (UBS SA), 8.25%, 5/23/2016 | $ | 500,000 | $ | 551,865 | ||||
b,d VimpelCom Holdings BV, 7.504%, 3/1/2022 | 2,000,000 | 2,097,500 | ||||||
b WCP Wireless Site Fund, 6.829%, 11/15/2040 | 2,500,000 | 2,623,695 | ||||||
|
| |||||||
20,397,258 | ||||||||
|
| |||||||
TRANSPORTATION — 4.52% | ||||||||
AIR FREIGHT & LOGISTICS — 0.37% | ||||||||
b SPL Logistics Escrow LLC, 8.875%, 8/1/2020 | 2,000,000 | 2,140,000 | ||||||
AIRLINES — 3.71% | ||||||||
b,d Air Canada, 9.25%, 8/1/2015 | 2,000,000 | 2,080,000 | ||||||
a,e American Airlines, Inc., 13.00%, 8/1/2016 | 630,113 | 677,371 | ||||||
e American Airlines, Inc., 10.375%, 1/2/2021 | 2,195,205 | 2,381,797 | ||||||
a,e American Airlines, Inc., 10.50%, 10/15/2012 | 2,000,000 | 2,205,000 | ||||||
Continental Airlines, 6.90%, 7/2/2018 | 1,043,370 | 1,085,105 | ||||||
Continental Airlines, 7.02%, 11/1/2018 | 838,866 | 864,032 | ||||||
f Continental Airlines, 5.50%, 4/29/2022 | 500,000 | 512,500 | ||||||
b JetBlue Pass-Through Trust, 3.336%, 1/2/2014 | 5,000,000 | 4,912,500 | ||||||
United Airlines, Inc., 10.40%, 5/1/2018 | 1,456,087 | 1,678,140 | ||||||
US Airways, 5.90%, 4/1/2026 | 2,000,000 | 2,115,000 | ||||||
US Airways, 7.076%, 9/20/2022 | 961,654 | 983,291 | ||||||
US Airways, 6.25%, 10/22/2024 | 1,870,886 | 1,987,816 | ||||||
MARINE — 0.10% | ||||||||
b Windsor Petroleum Transport Corp., 7.84%, 1/15/2021 | 881,138 | 565,030 | ||||||
ROAD & RAIL — 0.34% | ||||||||
b J.B. Poindexter & Co., Inc., 9.00%, 4/1/2022 | 2,000,000 | 2,000,000 | ||||||
|
| |||||||
26,187,582 | ||||||||
|
| |||||||
UTILITIES — 6.64% | ||||||||
ELECTRIC UTILITIES — 3.03% | ||||||||
Alabama Power Capital Trust V, 3.561%, 10/1/2042 | 700,000 | 707,861 | ||||||
a,b,c,d,e Centrais Eletricas DO PA, 10.50%, 6/3/2016 | 2,000,000 | 320,000 | ||||||
b,d Dubai Electricity & Water, 6.375%, 10/21/2016 | 1,000,000 | 1,091,500 | ||||||
b Duquesne Light Holdings, 6.40%, 9/15/2020 | 2,000,000 | 2,363,352 | ||||||
b,d Enel Finance International S.A., 6.25%, 9/15/2017 | 1,500,000 | 1,639,950 | ||||||
Metropolitan Edison, 7.70%, 1/15/2019 | 250,000 | 313,768 | ||||||
PNM Resources, Inc., 9.25%, 5/15/2015 | 3,070,000 | 3,515,150 | ||||||
Public Service Co. of New Mexico, 7.95%, 5/15/2018 | 1,325,000 | 1,618,527 | ||||||
b Puget Energy, Inc., 5.625%, 7/15/2022 | 2,500,000 | 2,650,000 | ||||||
Puget Energy, Inc., 6.50%, 12/15/2020 | 2,000,000 | 2,293,760 | ||||||
b,d Taqa Abu Dhabi National Energy Co., 6.60%, 8/1/2013 | 1,000,000 | 1,039,000 | ||||||
GAS UTILITIES — 0.70% | ||||||||
b,d ENN Energy Holdings Ltd., 6.00%, 5/13/2021 | 1,000,000 | 1,122,209 | ||||||
b Source Gas LLC., 5.90%, 4/1/2017 | 1,250,000 | 1,333,343 | ||||||
Southern Union Co., 3.462%, 11/1/2066 | 2,000,000 | 1,595,000 | ||||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 1.65% | ||||||||
d Atlantic Power Corp. Co., 9.00%, 11/15/2018 | 2,000,000 | 2,125,000 | ||||||
b,d Inkia Energy Ltd., 8.375%, 4/4/2021 | 2,000,000 | 2,180,000 | ||||||
Ipalco Enterprises, Inc., 5.00%, 5/1/2018 | 2,500,000 | 2,618,750 | ||||||
b Midland Cogen Venture, 6.00%, 3/15/2025 | 1,947,000 | 2,100,241 | ||||||
RRI Energy, Inc., 7.625%, 6/15/2014 | 500,000 | 533,750 | ||||||
MULTI-UTILITIES — 1.26% | ||||||||
Black Hills Corp., 9.00%, 5/15/2014 | 500,000 | 559,059 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
CMS Energy Corp., 8.75%, 6/15/2019 | $ | 2,000,000 | $ | 2,596,116 | ||||
b Enogex LLC, 6.875%, 7/15/2014 | 1,000,000 | 1,070,529 | ||||||
NiSource Finance Corp., 6.40%, 3/15/2018 | 1,130,000 | 1,382,104 | ||||||
Sempra Energy, 9.80%, 2/15/2019 | 250,000 | 352,513 | ||||||
b Texas-New Mexico Power Co., 9.50%, 4/1/2019 | 1,000,000 | 1,360,684 | ||||||
|
| |||||||
38,482,166 | ||||||||
|
| |||||||
TOTAL CORPORATE BONDS (Cost $278,556,084) | 296,719,400 | |||||||
|
| |||||||
CONVERTIBLE BONDS — 5.98% | ||||||||
DIVERSIFIED FINANCIALS — 3.09% | ||||||||
CAPITAL MARKETS — 3.09% | ||||||||
Apollo Investment Corp., 5.75%, 1/15/2016 | 1,525,000 | 1,570,750 | ||||||
Fifth Street Finance Corp., 5.375%, 4/1/2016 | 4,650,000 | 4,684,875 | ||||||
Hercules Technology Growth Capital, Inc., 6.00%, 4/15/2016 | 1,000,000 | 1,019,375 | ||||||
b Prospect Capital Corp., 5.375%, 10/15/2017 | 2,000,000 | 2,056,250 | ||||||
b Prospect Capital Corp., 5.75%, 3/15/2018 | 3,500,000 | 3,550,312 | ||||||
b Technology Investment CA, 7.50%, 11/1/2017 | 5,000,000 | 5,058,050 | ||||||
|
| |||||||
17,939,612 | ||||||||
|
| |||||||
ENERGY — 0.33% | ||||||||
OIL, GAS & CONSUMABLE FUELS — 0.33% | ||||||||
SunPower Corp., 4.75%, 4/15/2014 | 2,000,000 | 1,895,000 | ||||||
|
| |||||||
1,895,000 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 0.40% | ||||||||
BEVERAGES — 0.40% | ||||||||
Central European Distribution Corp., 3.00%, 3/15/2013 | 2,500,000 | 2,318,750 | ||||||
|
| |||||||
2,318,750 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.51% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 0.51% | ||||||||
Hologic, Inc., 2.00%, 12/15/2037 | 3,000,000 | 2,975,625 | ||||||
|
| |||||||
2,975,625 | ||||||||
|
| |||||||
MATERIALS — 0.80% | ||||||||
CONSTRUCTION MATERIALS — 0.26% | ||||||||
d CEMEX SAB de CV, 4.875%, 3/15/2015 | 1,500,000 | 1,485,938 | ||||||
METALS & MINING — 0.54% | ||||||||
b,d Jaguar Mining, Inc., 4.50%, 11/1/2014 | 2,000,000 | 1,128,750 | ||||||
d Kinross Gold Corp., 1.75%, 3/15/2028 | 2,000,000 | 2,001,250 | ||||||
|
| |||||||
4,615,938 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.31% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.31% | ||||||||
d Trina Solar Ltd., 4.00%, 7/15/2013 | 2,000,000 | 1,780,000 | ||||||
|
| |||||||
1,780,000 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 0.20% | ||||||||
SOFTWARE — 0.20% | ||||||||
THQ, Inc., 5.00%, 8/15/2014 | 2,000,000 | 1,150,000 | ||||||
|
| |||||||
1,150,000 | ||||||||
|
|
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
TELECOMMUNICATION SERVICES — 0.23% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.23% | ||||||||
b Alaska Communication Systems Group, Inc., 6.25%, 5/1/2018 | $ | 2,000,000 | $ | 1,353,750 | ||||
|
| |||||||
1,353,750 | ||||||||
|
| |||||||
TRANSPORTATION — 0.11% | ||||||||
MARINE — 0.11% | ||||||||
b Ultrapetrol Bahamas Ltd., 7.25%, 1/15/2017 | 1,000,000 | 611,250 | ||||||
|
| |||||||
611,250 | ||||||||
|
| |||||||
TOTAL CONVERTIBLE BONDS (Cost $36,012,607) | 34,639,925 | |||||||
|
| |||||||
WARRANTS — 0.01% | ||||||||
a Green Field Energy Services | 2,000 | 62,000 | ||||||
|
| |||||||
TOTAL WARRANTS (Cost $78,418) | 62,000 | |||||||
|
| |||||||
MUNICIPAL BONDS — 2.25% | ||||||||
California Health Facilities Financing Authority (Developmental Disabilities), 7.875%, 2/1/2026 | 1,940,000 | 2,320,842 | ||||||
Los Angeles California Municipal Improvement Corp. (Build America Bonds), 6.165%, 11/1/2020 | 1,885,000 | 2,157,646 | ||||||
b,c,g Midwest Family Housing, 5.168%, 7/1/2016 | 660,000 | 659,452 | ||||||
Oakland California Redevelopment Agency, 8.00%, 9/1/2016 | 1,000,000 | 1,100,540 | ||||||
Ohio State Solid Waste (Republic Services Project), 4.25%, 4/1/2033 | 900,000 | 935,100 | ||||||
Oklahoma Development Finance Authority, 8.00%, 5/1/2020 | 1,500,000 | 1,518,135 | ||||||
San Bernardino County California Redevelopment Agency (San Sevaine), 8.45%, 9/1/2030 | 2,000,000 | 2,140,100 | ||||||
San Marcos California Redevelopment Agency, 6.125%, 10/1/2018 | 1,000,000 | 1,089,910 | ||||||
Texas State Public Finance Authority Charter School Finance Corp. (ED-New Frontiers), 8.75%, 8/15/2027 | 750,000 | 780,525 | ||||||
Wisconsin State Health & Educational Facilities (Richland Hospital), 7.08%, 6/1/2016 | 370,000 | 364,691 | ||||||
|
| |||||||
TOTAL MUNICIPAL BONDS (Cost $11,727,445) | 13,066,941 | |||||||
|
| |||||||
U.S. TREASURY SECURITIES — 0.36% | ||||||||
U.S. Treasury, 2.25%, 1/31/2015 | 2,000,000 | 2,091,859 | ||||||
|
| |||||||
TOTAL U.S. TREASURY SECURITIES (Cost $1,995,948) | 2,091,859 | |||||||
|
| |||||||
U.S. GOVERNMENT AGENCIES — 0.23% | ||||||||
b Agribank FCB, 9.125%, 7/15/2019 | 1,000,000 | 1,327,115 | ||||||
|
| |||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $1,038,800) | 1,327,115 | |||||||
|
| |||||||
OTHER GOVERNMENT — 0.37% | ||||||||
b,d Republic of Iceland, 5.875%, 5/11/2022 | 1,000,000 | 1,090,000 | ||||||
b,d Republic of Iceland, 4.875%, 6/16/2016 | 1,000,000 | 1,041,380 | ||||||
|
| |||||||
TOTAL OTHER GOVERNMENT (Cost $1,987,025) | 2,131,380 | |||||||
|
| |||||||
MORTGAGE BACKED — 0.00% | ||||||||
Federal National Mtg Assoc., CMO Series 1994-37 Class L, 6.50%, 3/25/2024 | 7,532 | 8,448 | ||||||
|
| |||||||
TOTAL MORTGAGE BACKED (Cost $7,559) | 8,448 | |||||||
|
|
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
FOREIGN BONDS — 6.58% | ||||||||
BANKS — 0.34% | ||||||||
COMMERCIAL BANKS — 0.34% | ||||||||
NRW Bank (NOK), 3.50%, 5/21/2013 | $ | 5,000,000 | $ | 883,138 | ||||
Royal Bank of Scotland Group plc (CAD), 5.875%, 5/12/2016 | 1,000,000 | 1,068,040 | ||||||
|
| |||||||
1,951,178 | ||||||||
|
| |||||||
CONSUMER SERVICES — 0.63% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.63% | ||||||||
b Arcos Dorados Holdings, Inc. (BRL), 10.25%, 7/13/2016 | 7,000,000 | 3,677,395 | ||||||
|
| |||||||
3,677,395 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 1.25% | ||||||||
CAPITAL MARKETS — 0.36% | ||||||||
Morgan Stanley (AUD), 3.927%, 3/1/2013 | 1,000,000 | 1,034,138 | ||||||
Morgan Stanley (BRL), 10.09%, 5/3/2017 | 2,000,000 | 1,062,523 | ||||||
CONSUMER FINANCE — 0.89% | ||||||||
b Cash Store Financial (CAD), 11.50%, 1/31/2017 | 1,750,000 | 1,798,062 | ||||||
b Lowell Group Financing plc (GBP), 10.75%, 4/1/2019 | 2,000,000 | 3,366,857 | ||||||
|
| |||||||
7,261,580 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 0.24% | ||||||||
FOOD & STAPLES RETAILING — 0.24% | ||||||||
Wesfarmers Ltd. (AUD), 6.16%, 9/11/2014 | 1,300,000 | 1,375,633 | ||||||
|
| |||||||
1,375,633 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 0.38% | ||||||||
BEVERAGES — 0.38% | ||||||||
Ambev International Finance Co., Ltd. (BRL), 9.50%, 7/24/2017 | 2,000,000 | 1,119,744 | ||||||
Anheuser-Busch InBev (BRL), 9.75%, 11/17/2015 | 2,000,000 | 1,112,344 | ||||||
|
| |||||||
2,232,088 | ||||||||
|
| |||||||
INSURANCE — 0.31% | ||||||||
INSURANCE — 0.31% | ||||||||
ELM BV (AUD), 7.635%, 12/31/2049 | 1,000,000 | 962,376 | ||||||
ELM BV (AUD), 4.568%, 12/31/2049 | 1,000,000 | 816,760 | ||||||
|
| |||||||
1,779,136 | ||||||||
|
| |||||||
MATERIALS — 0.33% | ||||||||
CONSTRUCTION MATERIALS — 0.33% | ||||||||
CEMEX Finance LLC (EUR), 9.625%, 12/14/2017 | 1,500,000 | 1,935,285 | ||||||
|
| |||||||
1,935,285 | ||||||||
|
| |||||||
MEDIA — 0.42% | ||||||||
MEDIA — 0.42% | ||||||||
b Corus Entertainment (CAD), 7.25%, 2/10/2017 | 1,000,000 | 1,074,153 | ||||||
CET 21 SPOL S.R.O. (EUR), 9.00%, 11/1/2017 | 1,000,000 | 1,387,854 | ||||||
|
| |||||||
2,462,007 | ||||||||
|
| |||||||
MISCELLANEOUS — 1.52% | ||||||||
MISCELLANEOUS — 1.52% | ||||||||
BK Nederlandse Gemeenten N.V. (NOK), 4.00%, 5/15/2015 | 5,000,000 | 911,309 | ||||||
Federative Republic of Brazil (BRL), 12.50%, 1/5/2016 | 6,120,000 | 3,790,189 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
International Bank for Reconstruction and Development (BRL), 9.00%, 4/28/2014 | $ | 1,000,000 | $ | 520,459 | ||||
c International Finance Corp. (KRW), 1.75%, 8/23/2013 | 1,450,000,000 | 1,300,196 | ||||||
Kommunalbanken AS (NOK), 4.00%, 1/26/2015 | 5,000,000 | 912,845 | ||||||
New South Wales Treasury Corp. (AUD), 4.076%, 11/20/2020 | 1,000,000 | 1,352,639 | ||||||
|
| |||||||
8,787,637 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 0.50% | ||||||||
INTERNET SOFTWARE & SERVICES — 0.50% | ||||||||
EAccess Ltd. (EUR), 8.375%, 4/1/2018 | 2,500,000 | 2,883,330 | ||||||
|
| |||||||
2,883,330 | ||||||||
|
| |||||||
TRANSPORTATION — 0.66% | ||||||||
AIR FREIGHT & LOGISTICS — 0.27% | ||||||||
b Livingston International (CAD), 10.125%, 11/9/2015 | 1,500,000 | 1,561,337 | ||||||
AIRLINES — 0.39% | ||||||||
c Iberbond 2004 plc (EUR), 4.235%, 12/24/2017 | 1,899,874 | 2,246,118 | ||||||
|
| |||||||
3,807,455 | ||||||||
|
| |||||||
TOTAL FOREIGN BONDS (Cost $36,044,244) | 38,152,724 | |||||||
|
| |||||||
OTHER SECURITIES — 3.06% | ||||||||
LOAN PARTICIPATIONS — 3.06% | ||||||||
Affinion Group, Inc., 5.00%, 7/16/2015 | 500,000 | 456,690 | ||||||
Baker & Taylor Acquisitions, 12.00%, 9/19/2016 | 5,000,000 | 4,850,000 | ||||||
Harland Clarke Holdings Corp., 1.00%, 6/30/2017 | 3,000,000 | 2,685,000 | ||||||
Insight Global, Inc., 6.50%, 8/16/2017 | 4,653,691 | 4,642,057 | ||||||
Lonestar Intermediate Super Holdings, 11.00%, 8/7/2019 | 2,000,000 | 2,123,340 | ||||||
b,c Private Restaurants Properties, Inc., 9.00%, 3/1/2017 | 2,988,686 | 2,988,686 | ||||||
|
| |||||||
TOTAL OTHER SECURITIES (Cost $17,444,562) | 17,745,773 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 9.64% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.28% dated 9/28/2012, due 10/01/2012,repurchase price $16,000,373 collateralized by 1 corporate debt security having a coupon of 6.45%, a minimum credit rating of AA-, maturity date of 9/15/2037, and having an aggregate market value of $17,250,664 at 9/28/2012 | 16,000,000 | 16,000,000 | ||||||
Consolidated Edison Co., 0.30%, 10/1/2012 | 8,379,000 | 8,379,000 | ||||||
Darden Restaurants, Inc., 0.32%, 10/1/2012 | 19,503,000 | 19,503,000 | ||||||
Oneok, Inc., 0.36%, 10/1/2012 | 12,000,000 | 12,000,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $55,882,000) | 55,882,000 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 98.91% (Cost $549,390,976) | $ | 573,350,731 | ||||||
|
| |||||||
OTHER ASSETS LESS LIABILITIES — 1.09% | 6,312,776 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 579,663,507 | ||||||
|
|
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
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, 2012, the aggregate value of these securities in the Fund’s portfolio was $222,674,930, representing 38.41% of the Fund’s net assets. |
c | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees. |
d | Yankee Bond - Denominated in U.S. dollars and is issued in the U.S. by foreign banks and corporations. |
e | Bond in default. |
f | When-issued security. |
g | Segregated as collateral for a when-issued security. |
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 | |
GBP | Great Britain Pound | |
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 23
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Strategic Income Fund | September 30, 2012 |
ASSETS | ||||
Investments at value (cost $549,390,976) (Note 2) | $ | 573,350,731 | ||
Cash | 205,857 | |||
Cash denominated in foreign currency (cost $135,502) | 135,469 | |||
Receivable for investments sold | 2,208,789 | |||
Receivable for fund shares sold | 6,305,746 | |||
Dividends receivable | 468,764 | |||
Dividend and interest reclaim receivable | 18,920 | |||
Interest receivable | 7,742,319 | |||
Prepaid expenses and other assets | 31,695 | |||
|
| |||
Total Assets | 590,468,290 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 8,767,027 | |||
Payable for fund shares redeemed | 664,672 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 172,941 | |||
Payable to investment advisor and other affiliates (Note 3) | 497,455 | |||
Accounts payable and accrued expenses | 122,545 | |||
Dividends payable | 580,143 | |||
|
| |||
Total Liabilities | 10,804,783 | |||
|
| |||
NET ASSETS | $ | 579,663,507 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (327,976 | ) | |
Net unrealized appreciation on investments | 23,798,974 | |||
Accumulated net realized gain (loss) | 5,670,696 | |||
Net capital paid in on shares of beneficial interest | 550,521,813 | |||
|
| |||
$ | 579,663,507 |
24 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($199,769,709 applicable to 16,268,125 shares of beneficial interest outstanding - Note 4) | $ | 12.28 | ||
Maximum sales charge, 4.50% of offering price | 0.58 | |||
|
| |||
Maximum offering price per share | $ | 12.86 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($188,782,416 applicable to 15,395,544 shares of beneficial interest outstanding - Note 4) | $ | 12.26 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($191,090,024 applicable to 15,593,383 shares of beneficial interest outstanding - Note 4) | $ | 12.25 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($10,673 applicable to 869 shares of beneficial interest outstanding - Note 4) | $ | 12.28 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($10,685 applicable to 872 shares of beneficial interest outstanding - Note 4) | $ | 12.25 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 25
STATEMENT OF OPERATIONS | ||
Thornburg Strategic Income Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $22,468) | $ | 3,165,957 | ||
Interest income (net of premium amortized of $773,755) | 28,804,809 | |||
|
| |||
Total Income | 31,970,766 | |||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 3,314,203 | |||
Administration fees (Note 3) | ||||
Class A Shares | 191,485 | |||
Class C Shares | 179,258 | |||
Class I Shares | 73,066 | |||
Class R3 Shares | 5 | |||
Class R5 Shares | 2 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 385,407 | |||
Class C Shares | 1,434,066 | |||
Class R3 Shares | 21 | |||
Transfer agent fees | ||||
Class A Shares | 140,671 | |||
Class C Shares | 131,809 | |||
Class I Shares | 99,480 | |||
Class R3 Shares | 546 | |||
Class R5 Shares | 546 | |||
Registration and filing fees | ||||
Class A Shares | 35,456 | |||
Class C Shares | 34,716 | |||
Class I Shares | 54,968 | |||
Class R3 Shares | 15,322 | |||
Class R5 Shares | 15,322 | |||
Custodian fees (Note 3) | 119,524 | |||
Professional fees | 69,861 | |||
Accounting fees | 10,689 | |||
Trustee fees | 12,646 | |||
Other expenses | 77,256 | |||
|
| |||
Total Expenses | 6,396,325 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (508,701 | ) | ||
|
| |||
Net Expenses | 5,887,624 | |||
|
| |||
Net Investment Income | $ | 26,083,142 | ||
|
|
26 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Strategic Income Fund | Year Ended September 30, 2012 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 4,989,172 | ||
Forward currency contracts (Note 7) | 604,317 | |||
Foreign currency transactions | (71,794 | ) | ||
|
| |||
5,521,695 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 22,294,669 | |||
Forward currency contracts (Note 7) | (370,801 | ) | ||
Foreign currency translations | 64,648 | |||
|
| |||
21,988,516 | ||||
|
| |||
Net Realized and Unrealized Gain | 27,510,211 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 53,593,353 | ||
|
|
See notes to financial statements.
Certified Annual Report 27
STATEMENTS OF CHANGES IN NET ASSETS |
Thornburg Strategic Income Fund |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 26,083,142 | $ | 16,437,230 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | 5,521,695 | 8,440,179 | ||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, and foreign currency translations | 21,988,516 | (15,811,464 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 53,593,353 | 9,065,945 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (9,390,218 | ) | (6,071,158 | ) | ||||
Class C Shares | (8,025,509 | ) | (5,413,401 | ) | ||||
Class I Shares | (9,337,938 | ) | (5,124,836 | ) | ||||
Class R3 Shares | (255 | ) | — | |||||
Class R5 Shares | (267 | ) | — | |||||
From realized gains | ||||||||
Class A Shares | (2,920,791 | ) | (1,920,858 | ) | ||||
Class C Shares | (2,624,522 | ) | (1,933,399 | ) | ||||
Class I Shares | (2,482,957 | ) | (1,595,561 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 77,622,309 | 36,566,623 | ||||||
Class C Shares | 75,908,284 | 29,275,505 | ||||||
Class I Shares | 85,319,439 | 30,458,308 | ||||||
Class R3 Shares | 10,455 | — | ||||||
Class R5 Shares | 10,467 | — | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 257,681,850 | 83,307,168 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 321,981,657 | 238,674,489 | ||||||
|
|
|
| |||||
End of Year | $ | 579,663,507 | $ | 321,981,657 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | — | $ | 396,704 |
See notes to financial statements.
28 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Strategic Income Fund | September 30, 2012 |
NOTE 1 – ORGANIZATION
Thornburg Strategic Income Fund (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 five classes of shares of beneficial interest outstanding: Class A, Class C, Institutional Class (Class I) and Retirement Classes (Class R3 and Class R5). Each class of shares of the Fund represents an interest in the same portfolio of investments, 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 may be subject to a service fee, (iv) Class R3 shares are sold at net asset value without a sales charge at the time of purchase, but bear both a service fee and distribution fee, (v) Class R5 shares are sold at net asset value without a sales charge at the time of purchase, and (vi) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and 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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: Portfolio investments listed or traded on a national securities exchange are valued on the valuation date at the last reported trade price on the exchange that is the primary market for the investment. Portfolio investments traded on an exchange for which there has been no trade that day and other equity investments traded in the over-the-counter market are valued at the mean between the last reported bid and ask prices. Portfolio investments reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign investments traded on exchanges outside the United States is valued at the price of the investment on the exchange that is normally the investment’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation measurement date.
Certified Annual Report 29
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
In any case where the market value of an equity investment held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. The Committee’s determinations are made using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from an independent pricing service. The pricing service ordinarily values equity investments 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. An investment’s market value is deemed not readily available whenever the exchange or market on which the investment is primarily traded is closed for the entire scheduled day of trading. Additionally, an investment’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 investment's primary exchange or market, but before the most recent close of trading in Fund shares, or an unusual event or significant period of time occurring since the availability of a market quotation, create a question about the reliability of the investment’s market value. On days when market volatility thresholds pre-determined by the Trustees are exceeded, foreign equity investments held by the Fund may be valued using synthetic pricing obtained from an independent pricing service approved by the Trustees, subject to the ability of the Committee to determine in any such instance to utilize market closing prices if the Committee considers closing prices to be more reliable.
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. 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 ordinarily 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 Committee determines a fair value for the debt obligation using procedures in accordance with a policy 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
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.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
When market volatility thresholds are exceeded, foreign equity investments may be fair valued according to other significant observable inputs rather than quoted market prices. The affected investments will be characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
30 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 18,470,475 | $ | 18,470,475 | $ | — | $ | — | ||||||||
Preferred Stock(a) | 26,782,954 | 19,908,978 | 6,873,976 | — | ||||||||||||
Asset Backed Securities | 66,269,737 | — | 60,233,553 | 6,036,184 | ||||||||||||
Corporate Bonds(b) | 296,719,400 | — | 289,099,565 | 7,619,835 | ||||||||||||
Convertible Bonds | 34,639,925 | — | 34,639,925 | — | ||||||||||||
Warrants | 62,000 | 62,000 | — | — | ||||||||||||
Municipal Bonds | 13,066,941 | — | 12,407,489 | 659,452 | ||||||||||||
U.S. Treasury Securities | 2,091,859 | 2,091,859 | — | — | ||||||||||||
U.S. Government Agencies | 1,327,115 | — | 1,327,115 | — | ||||||||||||
Other Government | 2,131,380 | — | 2,131,380 | — | ||||||||||||
Mortgage Backed | 8,448 | — | 8,448 | — | ||||||||||||
Foreign Bonds | 38,152,724 | — | 34,606,410 | 3,546,314 | ||||||||||||
Other Securities | 17,745,773 | — | 14,757,087 | 2,988,686 | ||||||||||||
Short Term Investments | 55,882,000 | — | 55,882,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 573,350,731 | $ | 40,533,312 | $ | 511,966,948 | $ | 20,850,471 | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (172,941 | ) | $ | — | $ | (172,941 | ) | $ | — | ||||||
Spot Currency | $ | (26 | ) | $ | (26 | ) | $ | — | $ | — |
(a) | At September 30, 2012, industry classifications for Preferred Stock in Level 2 consist of $3,168,038 in Banks, $527,813 in Food, Beverages, & Tobacco, $1,168,750 in Miscellaneous, and $2,009,375 in Utilities. |
(b) | In accordance with the guidance prescribed in Accounting Standards Update, (“ASU”) No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, unadjusted broker quotes were applied to portfolio investments characterized as Level 3 at September 30, 2012. Certain portfolio investments, representing $320,000 market value in the Corporate Bond asset category and characterized as Level 3, were fair valued by the Committee using adjusted broker quotes. |
* | 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, Inc. 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. |
Certified Annual Report 31
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
In accordance with the guidance prescribed in ASU No. 2011-04, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between Levels 1 and 2 for the year ended September 30, 2012, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the year.
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2012, is as follows:
Asset Backed Securities | Corporate Bonds | Foreign Bonds | Municipal Bonds | Other Securities | Total | |||||||||||||||||||
Beginning Balance 9/30/2011 | $ | 4,006,400 | $ | 4,029,779 | $ | 2,978,038 | $ | — | $ | 1,525,065 | $ | 12,539,282 | ||||||||||||
Accrued Discounts (Premiums) | 8,519 | 61,294 | 32,691 | 19,633 | 17,938 | 140,075 | ||||||||||||||||||
Net Realized Gain (Loss) (a) | 21,153 | 78,088 | (787,724 | ) | 15,681 | 31,148 | (641,654 | ) | ||||||||||||||||
Gross Purchases | 2,999,388 | 7,250,685 | 899,997 | — | 3,000,000 | 14,150,070 | ||||||||||||||||||
Gross Sales | (139,783 | ) | (2,218,686 | ) | (1,150,752 | ) | (110,000 | ) | (1,561,441 | ) | (5,180,662 | ) | ||||||||||||
Change in Unrealized Appreciation (Depreciation) (b) | 30,386 | (1,551,325 | ) | 883,996 | (29,325 | ) | (24,024 | ) | (690,292 | ) | ||||||||||||||
Transfers into Level 3 (c) | 1,116,521 | 1,990,000 | 1,233,655 | 763,463 | — | 5,103,639 | ||||||||||||||||||
Transfers out of Level 3 (c) | (2,006,400 | ) | (2,020,000 | ) | (543,587 | ) | — | — | (4,569,987 | ) | ||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ending Balance 9/30/2012 (d) | $ | 6,036,184 | $ | 7,619,835 | $ | 3,546,314 | $ | 659,452 | $ | 2,988,686 | $ | 20,850,471 |
(a) | Total amount of net realized gain (loss) from investments recognized in the net increase in assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2012. |
(b) | Total amount of net change in unrealized appreciation (depreciation) on investments recognized in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2012. |
(c) | Transfers into or out of Level 3 were into or out of Level 2, and were due to changes in other significant observable inputs available during the year ended September 30, 2012. Transfers into or out of Level 3 are based on the beginning market value of the period in which they occurred. |
(d) | Level 3 investments represent 3.60% of total Net Assets at the year ended September 30, 2012. Significant fluctuations of the unobservable inputs applied to portfolio investments characterized as Level 3 could be expected to increase or decrease the fair value of these portfolio investments. |
Foreign Currency Translation: Portfolio investments 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 investments and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign investments, 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 values of such spot contracts are included in receivable for investments sold and payable for investments purchased on the Statement of Assets and Liabilities.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on investments held. Such changes are included in net unrealized appreciation or depreciation from investments.
Reported net realized gains or losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on investment 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 change in unrealized appreciation and depreciation on foreign currency translations 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.
32 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains on investments of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these investments 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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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 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. Distributions to shareholders are based on income tax regulations and therefore, their characteristics may differ for financial statement and tax purposes.
Repurchase Agreements: The Funds may invest excess cash in repurchase agreements whereby the Funds purchase investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
General: Investment 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 investments is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of investments 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts could differ from those estimates.
Certified Annual Report 33
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
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, 2012, 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, 2012, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $85,219 for Class A shares, $375,199 for Class C shares, $16,542 for Class I shares, $15,877 for Class R3 shares, and $15,864 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, 2012, the Distributor has advised the Fund that it earned commissions aggregating $144,935 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $20,829 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, 2012, 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 a distribution plan pursuant to Rule 12b-1, applicable only to the Fund’s Class C shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C shares of the Fund at an annual rate of up to .75 of 1% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, there were no fees paid indirectly.
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 9,664,667 | $ | 115,185,244 | 5,977,653 | $ | 73,696,140 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 857,823 | 10,157,758 | 468,268 | 5,700,033 | ||||||||||||
Shares repurchased | (4,013,545 | ) | (47,720,693 | ) | (3,475,444 | ) | (42,829,550 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 6,508,945 | $ | 77,622,309 | 2,970,477 | $ | 36,566,623 | ||||||||||
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|
|
34 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 7,704,463 | $ | 91,665,165 | 3,644,725 | $ | 44,913,099 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 665,888 | 7,877,901 | 408,684 | 4,971,988 | ||||||||||||
Shares repurchased | (1,984,533 | ) | (23,634,782 | ) | (1,678,284 | ) | (20,609,582 | ) | ||||||||
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|
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|
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|
|
| |||||||||
Net increase (decrease) | 6,385,818 | $ | 75,908,284 | 2,375,125 | $ | 29,275,505 | ||||||||||
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| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 9,577,774 | $ | 113,908,972 | 5,860,149 | $ | 71,847,585 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 717,845 | 8,490,090 | 430,504 | 5,242,513 | ||||||||||||
Shares repurchased | (3,120,429 | ) | (37,079,623 | ) | (3,782,241 | ) | (46,631,790 | ) | ||||||||
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|
|
|
|
|
| |||||||||
Net increase (decrease) | 7,175,190 | $ | 85,319,439 | 2,508,412 | $ | 30,458,308 | ||||||||||
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Class R3 Shares* | ||||||||||||||||
Shares sold | 848 | $ | 10,200 | — | $ | — | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 21 | 255 | — | — | ||||||||||||
Shares repurchased | — | — | — | — | ||||||||||||
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| |||||||||
Net increase (decrease) | 869 | $ | 10,455 | — | $ | — | ||||||||||
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| |||||||||
Class R5 Shares* | ||||||||||||||||
Shares sold | 850 | $ | 10,200 | — | $ | — | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 22 | 267 | — | — | ||||||||||||
Shares repurchased | — | — | — | — | ||||||||||||
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| |||||||||
Net increase (decrease) | 872 | $ | 10,467 | — | $ | — | ||||||||||
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* | Inception date for these classes of shares was May 1, 2012. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2012, the Fund had purchase and sale transactions of investment securities (excluding short-term investments and U. S. Government obligations) of $338,822,876 and $143,012,195, respectively.
Certified Annual Report 35
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 549,149,950 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 35,990,569 | ||
Gross unrealized depreciation on a tax basis | (11,789,788 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 24,200,781 | ||
|
|
In order to account for permanent book/tax differences, the Fund increased distribution in excess of net investment income by $31,553 and increased accumulated net realized gain by $31,553. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from paydown losses, reclass of REIT income, and foreign currency gains (losses).
At September 30, 2012, the Fund had distributable tax basis net ordinary income of $3,209,938 and distributable tax basis capital gains of $2,298,957.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 28,759,881 | $ | 16,609,395 | ||||
Capital gains | 6,022,576 | 5,449,818 | ||||||
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|
| |||||
Total | $ | 34,782,457 | $ | 22,059,213 | ||||
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|
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50 (“ASC 815”), require certain disclosures. The disclosures are intended to provide users of financial statements with an 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, 2012, 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. Additionally, the Fund’s risk of loss may exceed the amounts recognized on the Statement of Assets and Liabilities.
The Fund entered into forward currency contracts during the year ended September 30, 2012 in the normal course of pursuing its investment objectives, in anticipation 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 appreciation and depreciation on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities, 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)
36 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 |
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 sell currency contracts are indicative of the activity for the year ended September 30, 2012. Open buy currency contracts are entered into for the purpose of closing open sell currency contracts and the values are dependent upon the values of open sell currency contracts within the year ended September 30, 2012.
The following table displays the outstanding forward currency contracts at September 30, 2012:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2012
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||
Euro | Sell | 3,530,900 | 02/21/2013 | 4,544,478 | $ | — | $ | (172,941 | ) | |||||||||||||
|
|
|
| |||||||||||||||||||
Total | $ | — | $ | (172,941 | ) | |||||||||||||||||
|
|
|
|
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2012 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2012
Liability Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (172,941 | ) |
The net realized gains (losses) from forward currency contracts, and the net change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2012 are disclosed in the following tables:
Amount of Net Realized Gain (Loss)
on Derivative Financial Instruments Recognized
in Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 604,317 | $ | 604,317 |
Amount of Net Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (370,801 | ) | $ | (370,801 | ) |
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, credit risk, interest rate risk, prepayment risk, management risk, market and economic risk, liquidity risk, risks affecting specific issuers, and the risks associated with investments in derivative instruments, smaller companies, non-U.S. issuers, real estate investment trusts, below investment grade debt obligations, and structured finance arrangements. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
Certified Annual Report 37
Thornburg Strategic Income Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the Year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 11.86 | 0.71 | 0.73 | 1.44 | (0.74 | ) | (0.28 | ) | (1.02 | ) | $ | 12.28 | 5.97 | 1.25 | 1.25 | 1.31 | 12.73 | 34.54 | $ | 199,770 | |||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 12.35 | 0.79 | (0.21 | ) | 0.58 | (0.79 | ) | (0.28 | ) | (1.07 | ) | $ | 11.86 | 6.47 | 1.20 | 1.20 | 1.32 | 4.78 | 48.09 | $ | 115,704 | ||||||||||||||||||||||||||||||||||||||
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 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 11.84 | 0.64 | 0.73 | 1.37 | (0.67 | ) | (0.28 | ) | (0.95 | ) | $ | 12.26 | 5.42 | 1.79 | 1.79 | 2.05 | 12.15 | 34.54 | $ | 188,782 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 12.34 | 0.72 | (0.22 | ) | 0.50 | (0.72 | ) | (0.28 | ) | (1.00 | ) | $ | 11.84 | 5.86 | 1.80 | 1.80 | 2.07 | 4.11 | 48.09 | $ | 106,684 | ||||||||||||||||||||||||||||||||||||||
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 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 11.83 | 0.74 | 0.73 | 1.47 | (0.77 | ) | (0.28 | ) | (1.05 | ) | $ | 12.25 | 6.27 | 0.96 | 0.96 | 0.97 | 13.06 | 34.54 | $ | 191,090 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 12.35 | 0.83 | (0.20 | ) | 0.63 | (0.87 | ) | (0.28 | ) | (1.15 | ) | $ | 11.83 | 6.71 | 0.97 | 0.97 | 0.98 | 5.16 | 48.09 | $ | 99,594 | ||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(e) | $ | 12.03 | 0.30 | 0.25 | 0.55 | (0.30 | ) | — | (0.30 | ) | $ | 12.28 | 5.93 | (d) | 1.22 | (d) | 1.22 | (d) | 373.07 | (d)(f) | 4.63 | 34.54 | $ | 11 | ||||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(e) | $ | 12.00 | 0.31 | 0.25 | 0.56 | (0.31 | ) | — | (0.31 | ) | $ | 12.25 | 6.22 | (d) | 0.97 | (d) | 0.97 | (d) | 372.35 | (d)(f) | 4.75 | 34.54 | $ | 11 |
(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. |
(e) | Effective date of this class of shares was May 1, 2012. |
(f) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
+ | Based on weighted average shares outstanding, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
38 Certified Annual Report | Certified Annual Report 39 |
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
40 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Strategic Income Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,054.10 | $ | 6.42 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.75 | $ | 6.31 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,051.50 | $ | 9.17 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,016.06 | $ | 9.02 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,055.70 | $ | 4.99 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.15 | $ | 4.90 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,055.38 | $ | 6.29 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.88 | $ | 6.18 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,056.81 | $ | 4.99 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.15 | $ | 4.90 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.25%; C: 1.79%; I: 0.97% R3: 1.22% R5: 0.97%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your class of shares under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the table above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 41
INDEX COMPARISON | ||
Thornburg Strategic Income Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg Strategic Income Fund versus Barclays U.S. Universal Index & Blended Index
(December 19, 2007 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 3 Yrs | Since Inception | ||||||||||
A Shares (Incep: 12/19/07) | 7.65 | % | 8.77 | % | 7.57 | % | ||||||
C Shares (Incep: 12/19/07) | 11.15 | % | 9.84 | % | 7.99 | % | ||||||
I Shares (Incep: 12/19/07) | 13.06 | % | 10.76 | % | 8.92 | % | ||||||
R3 Shares (Incep: 5/1/12)* | — | — | 4.63 | % | ||||||||
R5 Shares (Incep: 5/1/12)* | — | — | 4.75 | % | ||||||||
Barclays U.S. Universal Index (Since 12/19/07) | 6.45 | % | 6.70 | % | 6.44 | % | ||||||
Blended Index (Since 12/19/07) | 8.51 | % | 6.72 | % | 5.10 | % |
* | Not annualized for periods less than one year. |
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 or call 800-847-0200. 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 or call 800-847-0200. 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, and R5 shares.
42 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Strategic Income Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 43
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 (Unaudited) |
Name, Age, | ||||
Position Held with Fund | Other Directorships | |||
Year Elected | Principal Occupation(s) During Past Five Years | Held by Trustee | ||
James W. Weyhrauch, 53 | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of | None | ||
Trustee since 1996, | Nambe LLC, Santa Fe, NM (manufacturing & design company). | |||
Member of Audit Committee & | ||||
Operations Risk Oversight | ||||
Committee | ||||
EMERITUS TRUSTEE (1)(2)(4) | ||||
Eliot R. Cutler, 66 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel | Not Applicable | ||
Emeritus Trustee since 2012 | and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), | |||
Washington, D.C. and Beijing, China.(7) | ||||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 | Portfolio Manager, Vice President, and Managing Director of Thornburg | Not applicable | ||
Vice President since 1996, | Investment Management, Inc. | |||
Treasurer since 2007(6) | ||||
William V. Fries, 73 | Portfolio Manager, Vice President, and Managing Director of Thornburg | Not applicable | ||
Vice President since 1995 | Investment Management, Inc. | |||
Leigh Moiola, 45 | Vice President, Managing Director, and Director of Marketing of Thornburg | Not applicable | ||
Vice President since 2001 | Investment Management, Inc. | |||
Wendy Trevisani, 41 | Portfolio Manager and Managing Director of Thornburg Investment | Not applicable | ||
Vice President since 1999 | Management, Inc. | |||
Joshua Gonze, 49 | Portfolio Manager and Managing Director of Thornburg Investment | Not applicable | ||
Vice President since 1999 | Management, Inc. | |||
Christopher Ihlefeld, 42 | Portfolio Manager and Managing Director of Thornburg Investment | Not applicable | ||
Vice President since 2003 | Management, Inc. | |||
Leon Sandersfeld, 46 | Managing Director and Fund Accounting Director of Thornburg Investment | Not applicable | ||
Vice President since 2003 | Management, Inc. | |||
Sasha Wilcoxon, 38 | Managing Director, Director of Operations, and Vice President of Thornburg | Not applicable | ||
Vice President since 2003 | Investment Management, Inc. | |||
Secretary since 2007(6) | ||||
Edward Maran, 54 | Portfolio Manager and Managing Director of Thornburg Investment | Not applicable | ||
Vice President since 2004 | Management, Inc. | |||
Vinson Walden, 42 | Portfolio Manager and Managing Director of Thornburg Investment | Not applicable | ||
Vice President since 2004 | Management, Inc. | |||
Thomas Garcia, 41 | Vice President since 2011, Managing Director, Head Equity Trader, | Not applicable | ||
Vice President since 2006 | and Associate Portfolio Manager of Thornburg Investment Management, Inc. | |||
44 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 (Unaudited) |
Name, Age, | ||||
Position Held with Fund | Other Directorships | |||
Year Elected | Principal Occupation(s) During Past Five Years | Held by Trustee | ||
Lei Wang, 41 | Portfolio Manager and Managing Director of Thornburg Investment | Not applicable | ||
Vice President since 2006 | Management, Inc. | |||
Connor Browne, 33 | Portfolio Manager and Managing Director of Thornburg Investment | Not applicable | ||
Vice President since 2006 | Management, Inc. | |||
Jason Brady, 38 | Vice President since 2011, Portfolio Manager and Managing Director | Not applicable | ||
Vice President since 2007 | of Thornburg Investment Management, Inc. | |||
Lewis Kaufman, 36 | Portfolio Manager and Managing Director and, until 2009, an Associate | Not applicable | ||
Vice President since 2007 | Portfolio Manager of Thornburg Investment Management, Inc. | |||
Christopher Ryon, 56 | Portfolio Manager and Managing Director since 2009, and Associate | Not applicable | ||
Vice President since 2008 | Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; | |||
Principal of Vanguard Funds until 2008. | ||||
Lon Erickson, 37 | Portfolio Manager and Managing Director since 2010, and Associate | Not applicable | ||
Vice President since 2008 | Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; | |||
Senior Analyst of State Farm Insurance until 2008. | ||||
Kathleen Brady, 52 | Senior Tax Accountant of Thornburg Investment Management, | Not applicable | ||
Vice President since 2008 | Inc. | |||
(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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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 45
OTHER INFORMATION | ||
Thornburg Strategic Income Fund | September 30, 2012 (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, 2012, dividends paid by the Thornburg Strategic Income Fund of $6,022,576 are being reported as long-term capital gain dividends for federal income tax purposes.
For the tax year ended September 30, 2012, the Thornburg Strategic Income Fund is reporting 4.73% (or the maximum allowed) of the dividends paid from tax basis net ordinary income as qualifying for the reduced rate under the Jobs and Growth Tax Relief and Reconciliation Act of 2003.
3.26% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2012 is being reported as qualified for the corporate dividends received deduction.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
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 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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.
46 Certified Annual Report
OTHER INFORMATION , CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 (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 year. These reports addressed a wide variety of topics, including particularly the Advisor’s selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (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 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 considered (among other aspects of the data) performance data for the four calendar years since the Fund’s inception, which showed that the Fund’s investment return for the most recent calendar year exceeded the average return of the mutual fund category for which calendar year data was presented, and that the Fund’s returns exceeded the average return of the category in two of the three preceding calendar years. Other noted quantitative data showed that the Fund’s investment returns fell below the midpoint of performance for the first fund category for the three-month and one-year periods ended with the second quarter of the current year, fell in the top half for the year-to-date period and fell within the top quartile of performance for the three-year period, and that the Fund’s returns fell below the midpoint of performance for the second fund category for the three-month and one-year periods ended with the second quarter, fell in the top half for the year-to-date period and fell within the top quartile of performance for the three-year period.
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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee for the Fund was slightly higher than the median and average fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was slightly higher than the median and comparable to the average expense ratios for the fund category. The Trustees did not find the differences 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
Certified Annual Report 47
OTHER INFORMATION, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2012 (Unaudited) |
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. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its 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.
48 Certified Annual Report
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TRUSTEES’ STATEMENT TO SHAREHOLDERS | ||
Not part of the Certified Annual Report |
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
50 This page is not part of the Annual Report.
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 website 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 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 Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 51
THORNBURG FUND FAMILY
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 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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TH1784 |
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2012. The managers’ views, portfolio holdings, and sector diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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
S&P 500 Index – 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.
Earnings per Share (EPS) – The total earnings divided by the number of shares outstanding.
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
Portfolio Managers
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 or call 800.847.0200.
The maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.28%, 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 typically invests in 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 strive to 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 September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 10/2/95) | ||||||||||||||||||||
Without sales charge | 13.71 | % | 2.23 | % | -4.11 | % | 6.31 | % | 8.36 | % | ||||||||||
With sales charge | 8.58 | % | 0.67 | % | -4.99 | % | 5.82 | % | 8.07 | % | ||||||||||
S&P 500 Index | ||||||||||||||||||||
(Since 10/2/95) | 30.20 | % | 13.20 | % | 1.05 | % | 8.01 | % | 7.43 | % |
4 This page is not part of the Annual Report.
The current posture is to maintain a portfolio of 35–55 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 September 30, 2012
Top Contributors | Top Detractors | |
Gilead Sciences, Inc. | Tokyo Steel Manufacturing Co. Ltd. | |
The Gap, Inc. | MEMC Electronic Materials, Inc. | |
Google, Inc. Cl A | Alpha Natural Resources, Inc. | |
PulteGroup, Inc. | Genworth Financial Inc. Cl A | |
Community Health Systems, Inc. | Staples, Inc. | |
Source: FactSet |
Key Portfolio Attributes
As of September 30, 2012
Portfolio P/E Trailing 12-months* | 13.3x | |||
Portfolio Price to Cash Flow* | 6.1x | |||
Portfolio Price to Book Value* | 1.5x | |||
Median Market Cap* | $ | 16.9 B | ||
7-Year Beta (A Shares vs. S&P 500)* | 1.14 | |||
Number of Companies | 47 |
* | Source: FactSet |
Market Capitalization Exposure
As of September 30, 2012
Basket Structure
As of September 30, 2012
This page is not part of the Annual Report. 5
Thornburg Value Fund –
September 30, 2012
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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 15, 2012
Dear Fellow Shareholder:
For the Thornburg Value Fund, the fiscal year ending September 30, 2012 was disappointing. The Thornburg Value Fund did not keep pace with the S&P 500, rising 13.71%, for the Class A shares at net asset value (NAV), while the S&P 500 Index increased 30.20%. We can assure you, your portfolio managers and the investment team supporting the Thornburg Value Fund are working hard to improve results. A number of factors played into our underperformance. Our contrarian, bottom-up, long-term, fundamental investment style has not performed well in the past year’s macro-driven, risk-on/risk-off environment. We believe that searching for promising companies at a discount to our calculation of their long-term intrinsic value and purchasing them when they are out of favor is a winning strategy over the long term, though it has not worked well over the last two years. Additionally, we responded to what we viewed as significant opportunities to invest in deeply out of favor stocks by increasing the portfolio’s exposure to more volatile names that we believed provided a compelling risk/reward. In some of these cases, fundamentals held up as we expected, yet valuations declined meaningfully. In other cases, our fundamental theses were challenged and weak operating performance led to much lower stock prices than we would have predicted.
We have taken corrective actions in two ways: we have sold stocks whose fundamentals have deteriorated, and over the last few months, we have worked to bolster the consistent earner characteristics of the portfolio. We believe that the Thornburg Value Fund today has compelling individual investments that combine to create a portfolio that has better growth prospects than the S&P 500, but which trades at a similar valuation. We believe this portfolio has the potential to outperform in either a down or up market environment.
Over the past 12 months, a few specific investments had an outsized negative effect on the portfolio’s performance. In general, these stocks encountered unfavorable changes in the environment. Going forward, we will be more conservative in sizing positions in stocks with high volatility and will place greater emphasis on expected near-term performance.
Five leading detractors from portfolio performance were Tokyo Steel, Alpha Natural Resources, MEMC Electronic Materials, Genworth Financial, and Staples. These investments were mistakes and the explanations that follow are not meant to imply otherwise. We include these discussions because we believe you, our investors, have a right to understand what went wrong and that you deserve an explanation of the thought process behind the major detractors in the portfolio.
Tokyo Steel is, as the name implies, a Japanese steel company. The European sovereign debt crisis dampened global growth, and growth in China, in particular. As a result, steel prices in Asia collapsed. U.S. steel producers tend to have heavy debt loads. Tokyo Steel has more cash than debt and a brand new steel plant which, by our calculations, has significant cash flow generation potential. We believed Tokyo Steel was a lower risk investment because of its balance sheet and new plant, but those factors did not reduce share price volatility and, in fact, Tokyo Steel’s share price fell more than those of its U.S. counterparts.
Certified Annual Report 7
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
Alpha Natural Resources is a producer of both thermal and metallurgical coal. During the past year, the price of natural gas fell to the point that demand for thermal coal fell sharply. Metallurgical coal is a key ingredient in the production of steel. The economic slowdown in China caused metallurgical coal prices to fall sharply, too. We did not anticipate the magnitude of the changes in the price of natural gas or in Chinese steel demand. We sold our position roughly four months after our initial investment due to fundamental deterioration, but during our holding period the shares declined over 60%.
MEMC Electronic Materials was a company with three main lines of business: silicon wafer manufacturing for use in semiconductors, solar material manufacturing, and solar project development and management. Our bottom-up analysis indicated the company was undervalued on a sum-of-the-parts analysis at the time of investment. As the year progressed, fundamentals deteriorated sharply in the solar material manufacturing segment. Based on our sum-of-the-parts analysis, we believed MEMC Technology shares were attractive even considering the deterioration in the solar materials business. When the company failed to manage cash properly in their solar project development business, we became concerned about whether the company would be an ongoing entity and we sold the shares, notwithstanding our sum-of-the-parts calculation.
Genworth Financial is an insurance company with exposure to mortgage insurance, disability insurance, and long-term care insurance. During our holding period, the shares declined 25% while financial stocks in general were rising. Our perspective at the time of purchase was that Genworth was trading below book value, that pricing in each of its business lines was favorable, and that the company’s financial strength would prove adequate. Low long-term interest rates, sustained high unemployment, and investor fears regarding home prices caused investors to price in significant risk that Genworth may not be adequately capitalized.
Staples is the market leader in office supply superstores and delivery. Our investment thesis was that the company was a market-share gainer that was highly profitable and that when unemployment declined, Staples might experience a cyclical upturn that was not priced into the stock. During our holding period, unemployment did not decline significantly and, if anything, consumer and business confidence continued to deteriorate. When company results did not meet our expectations, we sold the stock. Staples declined 8% during our holding period, which does not seem so bad, but we had an over 3.0% weight in the position while consumer discretionary stocks were up over 36%, so the relative performance was significant.
Though overall results were disappointing, a few things did work in our favor during the year. Our low exposure to utilities and consumer staples benefitted performance. Additionally, a few of our investments showed strong fundamental development over the period and were rewarded with significant stock price appreciation. Our leading contributors included Gilead Sciences, The Gap, Google, Pulte Group, and Community Health Systems. We will highlight only two here, but there is more information about each of our holdings on our website at www.thornburg.com/funds.
8 Certified Annual Report
Gilead is the leader in HIV treatment and seems well positioned in the nascent market for all oral treatment of Hepatitis C infections. Gilead has recently launched a new combination pill for HIV (named Stribild) that we expect will increase both their share of patients on treatment and their profit opportunity per patient. Gilead owns all four components of Stribild, while they must share a portion of the revenues of most current treatment regimens with other drug companies. Within Hepatitis C, Gilead’s 7977 looks to be a leading part of a new Hepatitis C cure. There are tens of millions of potential patients who could benefit greatly if Gilead’s Hepatitis C treatment is as efficacious, safe, and side effect free as it currently appears to be.
We purchased Pulte Group during 2011 when few believed that a housing turnaround was possible within the next few years. Pulte was priced as though there would never be a housing recovery. We are now seeing the early signs of a bottoming of home prices and of increasing new builds. As a result, Pulte stock more than doubled during the fiscal year. We sold Pulte at our price target as much improved expectations are priced into the stock and we have found better opportunities elsewhere.
We continue to execute on the philosophy and approach that has worked over the long term in this and other strategies at Thornburg. We have learned from our disappointing recent performance and have taken corrective actions that we believe will be constructive. It is hard to own stocks in this market, but we are finding unusually compelling opportunities to invest in businesses with promising prospects that seem under-appreciated by the market. Accordingly, we believe this is a good time to be invested in equities in general, and in the Thornburg Value Fund, in particular.
We very much appreciate your continued investment in the Thornburg Value Fund.
Thank you for your continued trust.
Sincerely, | ||
![]() | ![]() | |
Connor Browne, CFA | Edward E. Maran, CFA | |
Portfolio Manager | 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, 2012 |
Top Ten Equity Holdings
As of 9/30/12
Gilead Sciences, Inc. | 4.5 | % | Metlife, Inc. | 3.1 | % | |||||
Google, Inc. | 4.5 | % | Inpex Corp. | 3.0 | % | |||||
Apple, Inc. | 4.4 | % | Community Health Systems, Inc. | 2.9 | % | |||||
Thermo Fisher Scientific, Inc. | 4.1 | % | The Gap, Inc. | 2.9 | % | |||||
JPMorgan Chase & Co. | 3.2 | % | ConocoPhillips | 2.7 | % |
Summary of Industry Exposure
As of 9/30/12
Energy | 13.7 | % | Commercial & Professional Services | 4.4 | % | |||||
Software & Services | 11.9 | % | Consumer Services | 3.9 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 11.5 | % | Semiconductors & Semiconductor Equipment | 2.1 | % | |||||
Technology Hardware & Equipment | 7.6 | % | Banks | 1.9 | % | |||||
Diversified Financials | 7.4 | % | Automobiles & Components | 1.8 | % | |||||
Telecommunication Services | 7.1 | % | Materials | 1.6 | % | |||||
Retailing | 6.9 | % | Consumer Durables & Apparel | 0.5 | % | |||||
Insurance | 6.9 | % | Other Assets & Liabilities | 4.5 | % | |||||
Health Care Equipment & Services | 6.3 | % |
Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 94.68% | ||||||||
AUTOMOBILES & COMPONENTS — 1.82% | ||||||||
AUTO COMPONENTS — 1.31% | ||||||||
a Delphi Automotive plc. | 877,150 | $ | 27,191,650 | |||||
AUTOMOBILES — 0.51% | ||||||||
a Tesla Motors, Inc. | 362,200 | 10,605,216 | ||||||
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37,796,866 | ||||||||
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BANKS — 1.90% | ||||||||
COMMERCIAL BANKS — 1.90% | ||||||||
Sterling Financial Corp. | 1,768,129 | 39,376,233 | ||||||
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39,376,233 | ||||||||
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COMMERCIAL & PROFESSIONAL SERVICES — 4.43% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 2.05% | ||||||||
a ADT Corp. | 1,180,000 | 42,480,000 | ||||||
PROFESSIONAL SERVICES — 2.38% | ||||||||
a Nielsen Holdings NV | 1,648,033 | 49,408,029 | ||||||
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91,888,029 | ||||||||
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10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
CONSUMER DURABLES & APPAREL — 0.50% | ||||||||
HOUSEHOLD DURABLES — 0.50% | ||||||||
Harman International Industries, Inc. | 227,169 | $ | 10,486,121 | |||||
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10,486,121 | ||||||||
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CONSUMER SERVICES — 3.88% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 3.88% | ||||||||
a Life Time Fitness, Inc. | 835,936 | 38,235,713 | ||||||
Yum! Brands, Inc. | 639,200 | 42,404,528 | ||||||
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80,640,241 | ||||||||
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DIVERSIFIED FINANCIALS — 7.41% | ||||||||
CAPITAL MARKETS — 2.46% | ||||||||
Charles Schwab Corp. | 3,996,100 | 51,110,119 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 4.95% | ||||||||
Citigroup, Inc. | 1,118,500 | 36,597,320 | ||||||
JPMorgan Chase & Co. | 1,631,140 | 66,028,547 | ||||||
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153,735,986 | ||||||||
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ENERGY — 13.68% | ||||||||
ENERGY EQUIPMENT & SERVICES — 1.45% | ||||||||
Halliburton Co. | 894,900 | 30,149,181 | ||||||
OIL, GAS & CONSUMABLE FUELS — 12.23% | ||||||||
Anadarko Petroleum Corp. | 446,500 | 31,219,280 | ||||||
a Bankers Petroleum Ltd. | 7,756,120 | 23,273,882 | ||||||
ConocoPhillips | 990,400 | 56,631,072 | ||||||
Exxon Mobil Corp. | 303,400 | 27,745,930 | ||||||
Inpex Corp. | 10,592 | 63,180,113 | ||||||
Total SA | 1,044,200 | 51,795,369 | ||||||
|
| |||||||
283,994,827 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 6.25% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 3.31% | ||||||||
a Alere, Inc. | 723,107 | 14,093,355 | ||||||
St. Jude Medical, Inc. | 1,296,422 | 54,618,259 | ||||||
HEALTH CARE PROVIDERS & SERVICES — 2.94% | ||||||||
a Community Health Systems, Inc. | 2,091,239 | 60,938,705 | ||||||
|
| |||||||
129,650,319 | ||||||||
|
| |||||||
INSURANCE — 6.93% | ||||||||
INSURANCE — 6.93% | ||||||||
Hartford Financial Services Group, Inc. | 2,624,040 | 51,011,338 | ||||||
Metlife, Inc. | 1,859,840 | 64,090,086 | ||||||
a,b,c NMI Holdings, Inc. | 2,944,500 | 28,708,875 | ||||||
|
| |||||||
143,810,299 | ||||||||
|
| |||||||
MATERIALS — 1.63% | ||||||||
CHEMICALS — 0.30% | ||||||||
LyondellBasell Industries NV | 120,700 | 6,235,362 | ||||||
METALS & MINING — 1.33% | ||||||||
c Tokyo Steel Mfg. | 8,202,308 | 27,642,324 | ||||||
|
| |||||||
33,877,686 | ||||||||
|
|
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 11.52% | ||||||||
BIOTECHNOLOGY — 5.71% | ||||||||
a Gilead Sciences, Inc. | 1,398,105 | $ | 92,736,305 | |||||
a Illumina, Inc. | 533,313 | 25,705,687 | ||||||
LIFE SCIENCES TOOLS & SERVICES — 4.10% | ||||||||
Thermo Fisher Scientific, Inc. | 1,447,000 | 85,127,010 | ||||||
PHARMACEUTICALS — 1.71% | ||||||||
a Valeant Pharmaceuticals International, Inc. | 642,617 | 35,517,441 | ||||||
|
| |||||||
239,086,443 | ||||||||
|
| |||||||
RETAILING — 6.94% | ||||||||
INTERNET & CATALOG RETAIL — 1.07% | ||||||||
a Amazon.com, Inc. | 87,200 | 22,176,704 | ||||||
SPECIALTY RETAIL — 5.87% | ||||||||
a AutoZone, Inc. | 102,249 | 37,798,388 | ||||||
c OfficeMax, Inc. | 3,035,162 | 23,704,615 | ||||||
The Gap, Inc. | 1,685,000 | 60,289,300 | ||||||
|
| |||||||
143,969,007 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.11% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.11% | ||||||||
Intel Corp. | 1,387,700 | 31,473,036 | ||||||
a MEMC Electronic Materials, Inc. | 4,519,013 | 12,427,286 | ||||||
|
| |||||||
43,900,322 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 11.85% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 5.22% | ||||||||
Accenture plc | 748,200 | 52,396,446 | ||||||
a Amdocs Ltd. | 1,699,248 | 56,058,191 | ||||||
INTERNET SOFTWARE & SERVICES — 4.46% | ||||||||
a Google, Inc. | 122,624 | 92,519,808 | ||||||
SOFTWARE — 2.17% | ||||||||
Microsoft Corp. | 1,513,800 | 45,080,964 | ||||||
|
| |||||||
246,055,409 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 7.58% | ||||||||
COMMUNICATIONS EQUIPMENT — 1.01% | ||||||||
a Juniper Networks, Inc. | 1,225,871 | 20,974,653 | ||||||
COMPUTERS & PERIPHERALS — 6.57% | ||||||||
Apple, Inc. | 136,400 | 91,014,264 | ||||||
a EMC Corp. | 928,300 | 25,314,741 | ||||||
a NetApp, Inc. | 612,200 | 20,129,136 | ||||||
|
| |||||||
157,432,794 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 6.25% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.96% | ||||||||
a Level 3 Communications, Inc. | 1,766,079 | 40,566,835 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 4.29% | ||||||||
KDDI Corp. | 598,600 | 46,482,778 | ||||||
SoftBank Corp. | 1,053,209 | 42,646,597 | ||||||
|
| |||||||
129,696,210 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $1,703,996,274) | 1,965,396,792 | |||||||
|
|
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
CONVERTIBLE BONDS — 0.83% | ||||||||
TELECOMMUNICATION SERVICES — 0.83% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.83% | ||||||||
Level 3 Communications, Inc., 6.50%, 10/1/2016 | $ | 12,049,000 | $ | 17,320,438 | ||||
|
| |||||||
17,320,438 | ||||||||
|
| |||||||
TOTAL CONVERTIBLE BONDS (Cost $12,049,000) | 17,320,438 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 5.76% | ||||||||
Darden Restaurants, Inc., 0.32%, 10/1/2012 | 39,764,000 | 39,764,000 | ||||||
DCP Midstream LLC, 0.36%, 10/1/2012 | 20,000,000 | 20,000,000 | ||||||
Kroger Co., 0.40%, 10/2/2012 | 18,964,000 | 18,963,789 | ||||||
McCormick & Co., Inc., 0.22%, 10/1/2012 | 6,468,000 | 6,468,000 | ||||||
NYSE Euronext, Inc., 0.37%, 10/1/2012 | 23,864,000 | 23,864,000 | ||||||
Tyco Electronics Group SA, 0.36%, 10/1/2012 | 10,416,000 | 10,416,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $119,475,789) | 119,475,789 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 101.27% (Cost $1,835,521,063) | $ | 2,102,193,019 | ||||||
LIABILITIES NET OF OTHER ASSETS — (1.27)% | (26,283,462 | ) | ||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 2,075,909,557 | ||||||
|
|
Footnote Legend
a | Non-income producing. |
b | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees. |
c | 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, 2011 | Gross Additions | Gross Reductions | Shares/Principal September 30, 2012 | Market Value September 30, 2012 | Investment Income | ||||||||||||||||||
NMI Holdings, Inc. | — | 3,500,000 | 555,500 | 2,944,500 | $ | 28,708,875 | $ | — | ||||||||||||||||
Office Depot* | 14,539,100 | — | 14,539,100 | — | — | — | ||||||||||||||||||
OfficeMax, Inc.* | 4,617,314 | — | 1,582,152 | 3,035,162 | — | — | ||||||||||||||||||
Tokyo Steel Mfg. | 10,800,400 | 428,700 | 3,026,792 | 8,202,308 | 27,642,324 | 451,127 | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total non-controlled affiliated issuers – 2.72% of net assets |
| $ | 56,351,199 | $ | 451,127 | |||||||||||||||||||
|
|
|
|
* | Issuers not affiliated at September 30, 2012. |
See notes to financial statements.
Certified Annual Report 13
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Value Fund | September 30, 2012 |
ASSETS | ||||
Investments at value | ||||
Non-affiliated issuers (cost $1,713,984,476) (Note 2) | $ | 2,045,841,820 | ||
Non-controlled affiliated issuers (cost $121,536,587) (Note 2) | 56,351,199 | |||
Cash | 358,284 | |||
Receivable for investments sold | 36,184,059 | |||
Receivable for fund shares sold | 8,073,887 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 521,363 | |||
Dividends receivable | 2,640,648 | |||
Dividend and interest reclaim receivable | 713,230 | |||
Interest receivable | 391,593 | |||
Prepaid expenses and other assets | 64,561 | |||
|
| |||
Total Assets | 2,151,140,644 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 54,182,103 | |||
Payable for fund shares redeemed | 15,083,712 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 3,257,024 | |||
Payable to investment advisor and other affiliates (Note 3) | 1,746,118 | |||
Accounts payable and accrued expenses | 962,130 | |||
|
| |||
Total Liabilities | 75,231,087 | |||
|
| |||
NET ASSETS | $ | 2,075,909,557 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (4,667,150 | ) | |
Net unrealized appreciation on investments | 263,923,468 | |||
Accumulated net realized gain (loss) | (1,084,665,467 | ) | ||
Net capital paid in on shares of beneficial interest | 2,901,318,706 | |||
|
| |||
$ | 2,075,909,557 | |||
|
|
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($ 470,119,780 applicable to 14,920,343 shares of beneficial interest outstanding - Note 4) | $ | 31.51 | ||
Maximum sales charge, 4.50% of offering price | 1.48 | |||
|
| |||
Maximum offering price per share | $ | 32.99 | ||
|
| |||
Class B Shares: | ||||
Net asset value per share* ($ 9,344,023 applicable to 319,400 shares of beneficial interest outstanding - Note 4) | $ | 29.25 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($ 185,285,634 applicable to 6,228,593 shares of beneficial interest outstanding - Note 4) | $ | 29.75 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($ 1,104,163,331 applicable to 34,248,881 shares of beneficial interest outstanding - Note 4) | $ | 32.24 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($ 131,012,641 applicable to 4,188,721 shares of beneficial interest outstanding - Note 4) | $ | 31.28 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($ 45,989,199 applicable to 1,460,186 shares of beneficial interest outstanding - Note 4) | $ | 31.50 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($ 129,994,949 applicable to 4,038,650 shares of beneficial interest outstanding - Note 4) | $ | 32.19 | ||
|
|
* | 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, 2012 |
INVESTMENT INCOME:
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $580,272) | $ | 28,142,361 | ||
Non-controlled affiliated issuers (net of foreign taxes withheld of $33,956) | 451,127 | |||
Interest income | 1,036,329 | |||
|
| |||
Total Income | 29,629,817 | |||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 22,518,297 | |||
Administration fees (Note 3) | ||||
Class A Shares | 820,991 | |||
Class B Shares | 14,505 | |||
Class C Shares | 298,524 | |||
Class I Shares | 817,438 | |||
Class R3 Shares | 201,584 | |||
Class R4 Shares | 64,163 | |||
Class R5 Shares | 105,491 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,641,359 | |||
Class B Shares | 115,910 | |||
Class C Shares | 2,384,580 | |||
Class R3 Shares | 805,073 | |||
Class R4 Shares | 127,920 | |||
Transfer agent fees | ||||
Class A Shares | 989,101 | |||
Class B Shares | 31,386 | |||
Class C Shares | 395,655 | |||
Class I Shares | 1,295,135 | |||
Class R3 Shares | 375,837 | |||
Class R4 Shares | 150,674 | |||
Class R5 Shares | 663,835 | |||
Registration and filing fees | ||||
Class A Shares | 27,224 | |||
Class B Shares | 19,347 | |||
Class C Shares | 21,284 | |||
Class I Shares | 87,327 | |||
Class R3 Shares | 21,841 | |||
Class R4 Shares | 20,315 | |||
Class R5 Shares | 19,534 | |||
Custodian fees (Note 3) | 337,120 | |||
Professional fees | 102,042 | |||
Accounting fees | 90,940 | |||
Trustee fees | 80,920 | |||
Other expenses | 429,993 | |||
|
| |||
Total Expenses | 35,075,345 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,015,696 | ) | ||
|
| |||
Net Expenses | 34,059,649 | |||
|
| |||
Net Investment Loss | $ | (4,429,832 | ) | |
|
|
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Value Fund | Year Ended September 30, 2012 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | ||||
Non-affiliated issuers | $ | (610,153,930 | ) | |
Non-controlled affiliated issuers | (27,520,076 | ) | ||
Forward currency contracts (Note 7) | 6,348,657 | |||
Foreign currency transactions | 257,958 | |||
|
| |||
(631,067,391 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | ||||
Non-affiliated issuers | 1,045,970,567 | |||
Non-controlled affiliated issuers | (1,556,487 | ) | ||
Forward currency contracts (Note 7) | (5,240,470 | ) | ||
Foreign currency translations | (73,457 | ) | ||
|
| |||
1,039,100,153 | ||||
|
| |||
Net Realized and Unrealized Gain | 408,032,762 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 403,602,930 | ||
|
|
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN NET ASSETS |
Thornburg Value Fund |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (4,429,832 | ) | $ | 2,415,580 | |||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (631,067,391 | ) | 320,363,158 | |||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations, and deferred taxes | 1,039,100,153 | (647,981,934 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 403,602,930 | (325,203,196 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class I Shares | (1,551,142 | ) | (1,083,639 | ) | ||||
Class R5 Shares | (70,867 | ) | (98,243 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (441,395,617 | ) | (245,975,542 | ) | ||||
Class B Shares | (5,887,171 | ) | (7,564,011 | ) | ||||
Class C Shares | (96,800,348 | ) | (53,791,108 | ) | ||||
Class I Shares | (1,093,676,019 | ) | 80,664,857 | |||||
Class R3 Shares | (59,407,562 | ) | (14,721,836 | ) | ||||
Class R4 Shares | (12,929,895 | ) | 3,094,266 | |||||
Class R5 Shares | (113,034,533 | ) | 7,376,378 | |||||
|
|
|
| |||||
Net Decrease in Net Assets | (1,421,150,224 | ) | (557,302,074 | ) | ||||
NET ASSETS: | ||||||||
Beginning of Year | 3,497,059,781 | 4,054,361,855 | ||||||
|
|
|
| |||||
End of Year | $ | 2,075,909,557 | $ | 3,497,059,781 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | — | $ | 3,088,447 |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Value Fund | September 30, 2012 |
NOTE 1 – ORGANIZATION
Thornburg Value 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 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 has seven classes of shares of beneficial interest outstanding: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R3, Class R4, and Class R5). The Fund no longer offers Class B shares for sale. 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 were 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 and may be subject to a service fee, (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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: Portfolio investments listed or traded on a national securities exchange are valued on the valuation date at the last reported trade price on the exchange that is the primary market for the security. Portfolio investments traded on an exchange for which there has been no trade that day and other equity investments traded in the over-the-counter market are valued at the mean between the last reported bid and ask prices. Portfolio investments reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign investment traded on exchanges outside the United States is valued at the price of the investment on the exchange that is normally the investment’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation measurement date.
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
In any case where the market value of an equity investment held by the Fund is not readily available, a determination of a fair value for the investment is made the Committee. The Committee’s determinations are made using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from an independent pricing service. The pricing service ordinarily values equity investments 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. An investment’s market value is deemed not readily available whenever the exchange or market on which the investment is primarily traded is closed for the entire scheduled day of trading. Additionally, a investment’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 investment’s primary exchange or market, but before the most recent close of trading in Fund shares, or an unusual event or significant period of time occurring since the availability of a market quotation, create a question about the reliability of the investment’s market value. On days when market volatility thresholds pre-determined by the Trustees are exceeded, foreign equity investments held by the Fund may be valued using synthetic pricing obtained from an independent pricing service approved by the Trustees, subject to the ability of the Committee to determine in any such instance to utilize market closing prices if the Committee considers closing prices to be more reliable.
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. 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 ordinarily 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 Committee determines a fair value for the debt obligation using procedures in accordance with a policy 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
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.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
When market volatility thresholds are exceeded, foreign equity investments may be fair valued according to other significant observable inputs rather than quoted market prices. The affected investments will be characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 1,965,396,792 | $ | 1,936,687,917 | $ | $ | 28,708,875 | |||||||||
Convertible Bonds | 17,320,438 | — | 17,320,438 | — | ||||||||||||
Short Term Investments | 119,475,789 | — | 119,475,789 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 2,102,193,019 | $ | 1,936,687,917 | $ | 136,796,227 | $ | 28,708,875 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 521,363 | $ | — | $ | 521,363 | $ | — | ||||||||
Spot Currency | $ | 19,512 | $ | 19,512 | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (3,257,024 | ) | $ | — | $ | (3,257,024 | ) | $ | — |
* | 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, Inc. 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. |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels 1 and 2 for the year ended September 30, 2012, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the year.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2012, is as follows:
Common Stock | Total | |||||||
Beginning Balance 9/30/2011 | $ | — | $ | — | ||||
Accrued Discounts/(Premiums) | — | — | ||||||
Net Realized Gain/(Loss)(a) | (16,689 | ) | (16,689 | ) | ||||
Gross Purchases | 35,000,000 | 35,000,000 | ||||||
Gross Sales | (5,538,311 | ) | (5,538,311 | ) | ||||
Change in Unrealized Appreciation | ||||||||
(Depreciation)(b) | (736,125 | ) | (736,125 | ) | ||||
Transfers into Level 3(c) | — | — | ||||||
Transfers out of Level 3(c) | — | — | ||||||
|
|
|
| |||||
Ending Balance 9/30/2012(d) | $ | 28,708,875 | $ | 28,708,875 |
(a) | Amount of net realized gain (loss) from investments recognized in net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2012. |
(b) | Amount of net change in unrealized appreciation (depreciation) on investments recognized in net assets is included in the Fund’s Statement of Operations for the year ended September 30, 2012. |
(c) | Transfers into or out of Level 3 were into or out of Level 2, and were due to changes in other significant observable inputs available during the year ended September 30, 2012. Transfers into or out of Level 3 are based on the beginning market value of the period in which they occurred. |
(d) | Level 3 investments represent 1.38% of Total Net Assets at the year ended September 30, 2012. Significant fluctuations of the unobservable inputs applied to portfolio investments characterized as Level 3 investments may increase or decrease the fair value of these portfolio investments. |
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 uncertain 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, 2012, 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.
Foreign Currency Translation: Portfolio investments 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 investments and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign investments, 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 values of such spot contracts are included in receivable for investments sold and payable for investments purchased on the Statement of Assets and Liabilities.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on investments held. Such changes are included in net unrealized appreciation or depreciation from investments.
Reported net realized gains or losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on investment 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 change in unrealized appreciation and depreciation on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at fiscal period end, resulting from changes in exchange rates.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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: Investment 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 investments is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of investments 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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, 2012, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,414 for Class A, $509,177 for Class R3 shares, $129,783 for Class R4 Shares, and $375,322 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, 2012, the Distributor has advised the Fund that it earned net commissions aggregating $24,016 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $10,905 from redemptions of Class C shares of the Fund.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
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, 2012, there were no 12b-1 service plan fees charged for Class I and 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 and Class C shares, and an annual rate of up to .25 of 1% per annum of the average daily net assets attributable to Class R3 shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, there were no fees paid indirectly.
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 2,352,990 | $ | 73,998,364 | 3,820,004 | $ | 131,182,658 | ||||||||||
Shares issued to shareholders inreinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (17,233,010 | ) | (515,396,078 | ) | (11,195,671 | ) | (377,165,665 | ) | ||||||||
Redemption fees received* | — | 2,097 | — | 7,465 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (14,880,020 | ) | $ | (441,395,617 | ) | (7,375,667 | ) | $ | (245,975,542 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class B Shares | ||||||||||||||||
Shares sold | 17,884 | $ | 502,215 | 22,294 | $ | 708,643 | ||||||||||
Shares issued to shareholders inreinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (222,434 | ) | (6,389,424 | ) | (263,171 | ) | (8,272,792 | ) | ||||||||
Redemption fees received* | — | 38 | — | 138 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (204,550 | ) | $ | (5,887,171 | ) | (240,877 | ) | $ | (7,564,011 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 275,887 | $ | 8,009,804 | 636,748 | $ | 21,058,206 | ||||||||||
Shares issued to shareholders inreinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (3,647,279 | ) | (104,810,897 | ) | (2,338,535 | ) | (74,851,535 | ) | ||||||||
Redemption fees received* | — | 745 | — | 2,221 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (3,371,392 | ) | $ | (96,800,348 | ) | (1,701,787 | ) | $ | (53,791,108 | ) | ||||||
|
|
|
|
|
|
|
|
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 8,910,782 | $ | 276,595,590 | 24,496,289 | $ | 847,217,485 | ||||||||||
Shares issued to shareholders inreinvestment of dividends | 41,518 | 1,245,554 | 22,978 | 860,513 | ||||||||||||
Shares repurchased | (44,342,531 | ) | (1,371,522,659 | ) | (22,329,324 | ) | (767,428,563 | ) | ||||||||
Redemption fees received* | — | 5,496 | — | 15,422 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (35,390,231 | ) | $ | (1,093,676,019 | ) | 2,189,943 | $ | 80,664,857 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 1,002,888 | $ | 30,300,227 | 1,565,821 | $ | 52,864,246 | ||||||||||
Shares issued to shareholders inreinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (2,965,638 | ) | (89,708,297 | ) | (2,039,207 | ) | (67,587,509 | ) | ||||||||
Redemption fees received* | — | 508 | — | 1,427 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (1,962,750 | ) | $ | (59,407,562 | ) | (473,386 | ) | $ | (14,721,836 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 513,200 | $ | 15,392,038 | 739,587 | $ | 25,201,045 | ||||||||||
Shares issued to shareholders inreinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (928,348 | ) | (28,322,089 | ) | (656,134 | ) | (22,107,183 | ) | ||||||||
Redemption fees received* | — | 156 | — | 404 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (415,148 | ) | $ | (12,929,895 | ) | 83,453 | $ | 3,094,266 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 1,670,971 | $ | 51,972,167 | 2,401,766 | $ | 83,473,333 | ||||||||||
Shares issued to shareholders inreinvestment of dividends | 2,345 | 70,250 | 2,591 | 96,926 | ||||||||||||
Shares repurchased | (5,266,749 | ) | (165,077,614 | ) | (2,171,290 | ) | (76,195,579 | ) | ||||||||
Redemption fees received* | — | 664 | — | 1,698 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (3,593,433 | ) | $ | (113,034,533 | ) | 233,067 | $ | 7,376,378 | ||||||||
|
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|
|
|
|
|
|
* | The Fund previously charged a redemption fee of 1% of the Class A and Class I shares redeemed or exchanged within 30 days of purchase. Effective February 1, 2012, the Fund stopped imposing this redemption fee. Redemption fees that were charged to any class prior to February 1, 2012 were 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, 2012, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $1,551,967,567 and $3,384,839,412, respectively.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 1,838,507,855 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 365,552,245 | ||
Gross unrealized depreciation on a tax basis | (101,867,081 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 263,685,164 | ||
|
|
At September 30, 2012, the Fund had deferred tax basis late-year ordinary investment losses and capital losses occurring subsequent to October 31, 2011 of $4,647,639 and $527,666,296, respectively. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
At September 30, 2012, the Fund had cumulative tax basis capital losses of $109,968,347, 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 do not expire but are required to be utilized to offset future gains prior to the utilization of losses that occurred in years prior to the fiscal year ending September 30, 2012, which may expire prior to utilization.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) became effective for the Fund’s fiscal year ending September 30, 2012. The Act requires that future capital losses generated by the Fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a Fund’s pre-enactment capital losses will expire unused.
At September 30, 2012, the Fund had cumulative 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 | $ | 204,425,697 | ||
2018 | 242,353,997 | |||
|
| |||
$ | 446,779,694 | |||
|
|
In order to account for permanent book/tax differences, the Fund increased distribution in excess of net investment income by $1,703,756, decreased accumulated net realized loss by $1,891,607 and decreased net capital paid in on shares of beneficial interest by $187,851. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from currency losses, non-deductible expenses, net operating losses, and the disposition of a partnership investment.
At September 30, 2012, the Fund had no undistributed tax basis ordinary income or capital gains.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 1,638,057 | $ | 1,181,882 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 1,638,057 | $ | 1,181,882 | ||||
|
|
|
|
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50 (“ASC 815”), require certain disclosures. The disclosures are intended to provide users of financial statements with an 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, 2012, 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. Additionally, the Fund’s risk of loss may exceed the amounts recognized on the Statement of Assets and Liabilities.
The Fund entered into forward currency contracts during the year ended September 30, 2012 in the normal course of pursuing its investment objectives, in anticipation 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 appreciation and depreciation on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities, as measured by the difference between the forward exchange rates at the reporting date and the forward exchange rates at each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations. The quarterly average values of open sell currency contracts for the year ended September 30, 2012 was $372,170,613. Open buy currency contracts are entered into for the purpose of closing open sell currency contracts and the values are dependent upon the values of open sell currency contracts during the year ended September 30, 2012.
The following table displays the outstanding forward currency contracts to buy or sell at September 30, 2012:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2012
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||||
Euro | Buy | 5,056,300 | 11/29/2012 | 6,501,418 | $ | 343,048 | $ | — | ||||||||||||||||
Euro | Sell | 21,747,300 | 11/29/2012 | 27,962,798 | — | (671,459 | ) | |||||||||||||||||
Euro | Sell | 19,678,500 | 11/29/2012 | 25,302,724 | — | (773,474 | ) | |||||||||||||||||
Japanese Yen | Buy | 3,690,172,000 | 02/27/2013 | 47,361,182 | 178,315 | — | ||||||||||||||||||
Japanese Yen | Sell | 18,553,929,000 | 02/27/2013 | 238,128,739 | — | (1,812,091 | ) | |||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total | $ | 521,363 | $ | (3,257,024 | ) | |||||||||||||||||||
|
|
|
|
Certified Annual Report 27
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 |
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2012 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2012
Asset Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 521,363 | |||
Liability Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (3,257,024 | ) |
The net realized gains (losses) from forward currency contracts, and the net change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2012 are disclosed in the following tables:
Amount of Net Realized Gain (Loss)
on Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 6,348,657 | $ | 6,348,657 |
Amount of Net Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (5,240,470 | ) | $ | (5,240,470 | ) |
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, management risk, market and economic risk, risks affecting specific issuers, liquidity risk, the risks associated with investments in smaller companies and non-U.S. issuers, credit risk, and interest rate risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
28 Certified Annual Report
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Certified Annual Report 29
Thornburg Value Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the Year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Year | 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 | 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 Year(Thousands) | |||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 27.71 | (0.10 | ) | 3.90 | 3.80 | — | — | — | $31.51 | (0.32 | ) | 1.32 | 1.32 | 1.32 | 13.71 | 54.16 | $ | 470,120 | |||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 30.44 | (0.03 | ) | (2.70 | ) | (2.73 | ) | — | — | — | $27.71 | (0.10 | ) | 1.28 | 1.28 | 1.28 | (8.97 | ) | 64.14 | $ | 825,700 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class B Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 25.99 | (0.38 | ) | 3.64 | 3.26 | — | — | — | $29.25 | (1.33 | ) | 2.34 | 2.34 | 2.36 | 12.53 | 54.16 | $ | 9,344 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 28.81 | (0.33 | ) | (2.49 | ) | (2.82 | ) | — | — | — | $25.99 | (1.03 | ) | 2.19 | 2.19 | 2.19 | (9.79 | ) | 64.14 | $ | 13,616 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 26.36 | (0.32 | ) | 3.71 | 3.39 | — | — | — | $29.75 | (1.09 | ) | 2.09 | 2.09 | 2.09 | 12.86 | 54.16 | $ | 185,286 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 29.18 | (0.28 | ) | (2.54 | ) | (2.82 | ) | — | — | — | $26.36 | (0.85 | ) | 2.03 | 2.03 | 2.03 | (9.66 | ) | 64.14 | $ | 253,065 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 28.26 | 0.02 | 3.99 | 4.01 | (0.03 | ) | — | (0.03 | ) | $32.24 | 0.07 | 0.93 | 0.93 | 0.93 | 14.18 | 54.16 | $ | 1,104,163 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 30.95 | 0.09 | (2.76 | ) | (2.67 | ) | (0.02 | ) | — | (0.02 | ) | $28.26 | 0.27 | 0.91 | 0.91 | 0.91 | (8.65 | ) | 64.14 | $ | 1,968,181 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 27.51 | (0.10 | ) | 3.87 | 3.77 | — | — | — | $31.28 | (0.34 | ) | 1.35 | 1.35 | 1.66 | 13.70 | 54.16 | $ | 131,013 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 30.24 | (0.06 | ) | (2.67 | ) | (2.73 | ) | — | — | — | $27.51 | (0.17 | ) | 1.35 | 1.35 | 1.64 | (9.03 | ) | 64.14 | $ | 169,234 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 27.68 | (0.07 | ) | 3.89 | 3.82 | — | — | — | $31.50 | (0.24 | ) | 1.25 | 1.25 | 1.50 | 13.80 | 54.16 | $ | 45,989 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 30.39 | (0.02 | ) | (2.69 | ) | (2.71 | ) | — | — | — | $27.68 | (0.06 | ) | 1.25 | 1.25 | 1.47 | (8.92 | ) | 64.14 | $ | 51,900 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 28.22 | — | (d) | 3.98 | 3.98 | (0.01 | ) | — | �� | (0.01 | ) | $32.19 | — | (e) | 0.99 | 0.99 | 1.17 | 14.10 | 54.16 | $ | 129,995 | ||||||||||||||||||||||||||||||||||||
2011 | $ | 30.92 | 0.07 | (2.76 | ) | (2.69 | ) | (0.01 | ) | — | (0.01 | ) | $28.22 | 0.20 | 0.98 | 0.99 | 1.09 | (8.70 | ) | 64.14 | $ | 215,364 | ||||||||||||||||||||||||||||||||||||
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 |
(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 were less than $(0.01) per share. |
(d) | Net investment income (loss) was less than $(0.01) per share. |
(e) | Net investment loss was less than (0.01)%. |
+ | Based on weighted average shares outstanding, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
30 Certified Annual Report | Certified Annual Report 31 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Value Fund
To the Trustees and Shareholders of Thornburg Value Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Value Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
32 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Value Fund | September 30, 2012 (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;
(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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 926.20 | $ | 6.37 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.38 | $ | 6.68 | ||||||
Class B Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 921.50 | $ | 11.35 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.18 | $ | 11.89 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 922.80 | $ | 10.09 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.51 | $ | 10.57 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 928.00 | $ | 4.49 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.34 | $ | 4.70 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 926.30 | $ | 6.50 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.25 | $ | 6.81 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 926.70 | $ | 6.02 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.75 | $ | 6.31 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 927.90 | $ | 4.77 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.32%; B: 2.36%; C: 2.10%; I: 0.93%; R3: 1.35%; R4: 1.25%; R5: 0.99% multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your class of shares under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the table above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 33
INDEX COMPARISON | ||
Thornburg Value Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg Value Fund versus S&P 500 Index (October 2, 1995 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 10/2/95) | 8.58 | % | -4.99 | % | 5.82 | % | 8.07 | % | ||||||||
B Shares (Incep: 4/3/00) | 7.53 | % | -5.31 | % | 5.61 | % | 0.85 | % | ||||||||
C Shares (Incep: 10/2/95) | 11.86 | % | -4.83 | % | 5.50 | % | 7.53 | % | ||||||||
I Shares (Incep: 11/2/98) | 14.18 | % | -3.75 | % | 6.71 | % | 5.03 | % | ||||||||
R3 Shares (Incep: 7/1/03) | 13.70 | % | -4.15 | % | — | 4.26 | % | |||||||||
R4 Shares (Incep: 2/1/07) | 13.80 | % | -4.05 | % | — | -2.25 | % | |||||||||
R5 Shares (Incep: 2/1/05) | 14.10 | % | -3.80 | % | — | 3.25 | % | |||||||||
S&P 500 Index (Since 10/2/95) | 30.20 | % | 1.05 | % | 8.01 | % | 7.43 | % |
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 or call 800.847.0200. 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.
34 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Value Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 35
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE (1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
36 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 Thorn-burg 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
Certified Annual Report 37
OTHER INFORMATION | ||
Thornburg Value Fund | September 30, 2012 (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, 2012, the Thornburg Value Fund is reporting 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.
The Fund is reporting 100.00% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2012 as qualified for the corporate dividends received deduction.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Value Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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.
38 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. 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 Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (iii) measures of the Fund’s investment performance over different periods of time relative to a category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to two broad-based securities indices, (iv) the Fund’s cumulative investment return since inception relative to a broad-based securities index, and (v) comparative measures of estimated earnings growth, portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of accounting and other services, the Advisor’s 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 considered (among other aspects of the data) comparative performance data for the ten most recent calendar years, which showed that the Fund’s investment return for the most recent calendar year was lower than the average return for the mutual fund category and the returns for the two indices, and that the Fund’s returns for the preceding nine calendar years exceeded or were comparable to the average returns of the category in five of nine years, exceeded the returns of the first index in five of nine years, and exceeded or were comparable to the returns of the second index in five of nine years. Other noted quantitative data showed that the Fund’s investment returns fell in the lowest decile of the fund category for the three-month, year-to-date, one-year, three-year and five-year periods ended with the second quarter of the current year. The Trustees also noted the Fund’s higher cumulative investment return (net of expenses) relative to the Fund’s benchmark index.
The Trustees requested and received from the Advisor explanations of investment judgments in recent periods which had contributed to the Fund’s relative investment performance, together with explanations of the Advisor’s decision-making approach going forward, which had been implemented by the Advisor before the Trustees’ meeting respecting the consideration of a renewal of the advisory agreement. The Trustees concluded, based upon their understanding of recent investment judgments, the Advisor’s explanations of its current decision-making approach and their assessment of the Advisor’s demonstrated capacities, and other considerations, that the nature, extent and quality of the Advisor’s services remained sufficient and that the Advisor is satisfactorily pursuing the Fund’s stated investment objectives.
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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of equity mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged to the Fund was slightly higher than the median and average fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was slightly higher than the median and comparable to the average expense ratios for the fund category. The Trustees did not find the differences 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
Certified Annual Report 39
OTHER INFORMATION, CONTINUED | ||
Thornburg Value Fund | September 30, 2012 (Unaudited) |
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. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its 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.
40 Certified Annual Report
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TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
42 This page is not part of the Annual Report.
RETIREMENT AND EDUCATION ACCOUNTS
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our website 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 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 Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 43
THORNBURG FUND FAMILY
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 thornburg.com
Thornburg Investment Management, Inc. 2300 North Ridgetop Road, Santa Fe, NM 87506
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TH077 |
Thornburg Investment Management® Thornburg International Value Fund Informational Brochure and Annual Report – September 30, 2012 Includes All Share Classes LIPPER FUND AWARDS 2012 UNITED STATES Best Large-Cap Growth Fund Ten-Year Period – Class I Shares Among 113 funds
Invest in our planet, while you invest with us You are concerned about the future, so are we. That is why we encourage you to go paperless and cut down on the amount of paper being used for regulatory mailings. Go to www.thornburg.com/edelivery and sign up to receive your shareholder reports, prospectuses, and proxy statements electronically. You invest in the future, without spending a dime. Edelivery Thornburg International Value Fund Value Knows No Boundaries The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types. As a secondary consideration, the Fund also seeks some current income. The Fund invests primarily in foreign securities and, under normal market conditions, invests at least 75% of its assets in foreign securities or depository receipts of foreign securities. The Fund may invest in developing countries.
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2012. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 declines in value and 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 applicable sales charges. If the sales charges had been included, the performance would have been lower.
Class I, R3, R4, R5 and R6 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 | ||
Class R6 | TGIRX | 885-216-804 |
Lipper Fund Awards 2012
Lipper Fund Awards are granted annually to the fund in each Lipper classification that consistently delivered the strongest risk-adjusted performance (calculated with dividends reinvested). Fund Classification Awards are given for three-year, five-year, and ten-year periods. The fund did not receive the award for all eligible time periods.
Glossary
MSCI EAFE (Europe, Australasia, Far East) Index – An unmanaged, market capitalization weighted index that is a common benchmark for international portfolio performance. The index is calculated with net dividends reinvested in U.S. dollars.
MSCI All Country (AC) 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.
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.
Dividend Yield – A ratio that shows how much a company pays out in dividends each year relative to its share price.
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.
Portfolio Yield – A weighted average dividend yield of all securities in a portfolio including cash.
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
Portfolio Managers
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 or call 800.847.0200.
The maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.25%, 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: its revenue and cash-generating model. We make an effort to get to know the company’s reputation in the industry, its people and its corporate culture.
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 5/28/98) | ||||||||||||||||||||
Without sales charge | 14.02 | % | 3.90 | % | -3.73 | % | 10.38 | % | 7.96 | % | ||||||||||
With sales charge | 8.89 | % | 2.31 | % | -4.61 | % | 9.88 | % | 7.62 | % | ||||||||||
MSCI EAFE Index | ||||||||||||||||||||
(Since 5/28/98) | 13.75 | % | 2.12 | % | -5.24 | % | 8.20 | % | 3.11 | % | ||||||||||
MSCI AC World ex-U.S. Index | ||||||||||||||||||||
(Since 5/28/98) | 15.04 | % | 3.63 | % | -3.67 | % | 10.32 | % | 4.74 | % |
4 This page is not part of the Annual Report.
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 September 30, 2012
Top Contributors | Top Detractors | |
Novo Nordisk A/S | HTC Corp. | |
SAP AG | Canon, Inc. | |
adidas AG | Itau Unibanco Holding S/A ADR | |
Volkswagen AG Pfd | Vallourec S.A. | |
British American Tobacco plc | Tesco plc | |
Source: FactSet |
Key Portfolio Attributes
As of September 30, 2012
Portfolio P/E Trailing 12-months* | 13.4x | |||
Portfolio Price to Cash Flow* | 5.9x | |||
Portfolio Price to Book Value* | 1.9x | |||
Median Market Cap* | $ | 36.8 B | ||
7-Year Beta (A Shares vs. MSCI EAFE)* | 0.9 | |||
Number of Companies | 67 |
* | Source: FactSet |
Market Capitalization Exposure
As of September 30, 2012
Basket Structure
As of September 30, 2012
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Thornburg International Value Fund – September 30, 2012
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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 14, 2012
Dear Fellow Shareholder:
The roller-coaster markets of the last couple of years continue. The Fund’s fiscal year ended September 30, 2012 had a relatively pleasant conclusion, but the ride was not smooth. What is now popularly characterized as “risk on/risk off” trading sentiment, mostly tied to macroeconomic policies and political events, has become as much a market driver week to week as have corporate profits and prospect of profits. By far the most direct impact on market sentiment over the past year has been the European debt crisis. Markets rallied with initiatives on resolution, but traded off as agreements proved too complex to implement. The challenge has been accepting austerity where needed without triggering economic recession or unraveling the integrity of the euro. Progress seems to have been made with a commitment to monetary stimulation by the European Central Bank in late July, triggering global stock market rallies that offset the declines suffered through the spring and early summer.
For the twelve months ended September 30, 2012, the total return for the Thornburg International Value Fund, Class A shares at net asset value (NAV), was 14.02%, slightly above the 13.75% for the MSCI EAFE Index and below the 15.04% for the MSCI AC World ex-U.S. Index. Though economic growth in much of the world has slowed, particularly in Europe and China, anticipated monetary stimulus has lifted markets. Underlying presumptions include some balance between austerity and growth in Europe, continuing slow recovery in the U.S. and the Americas, and a resumption of growth in China at above-average rates once the change in leadership takes place in November. We had good-performing holdings in virtually every economic sector with Danish healthcare company Novo Nordisk A/S, consumer discretionary sector holdings Volkswagen AG, Hyundai, and adidas AG, and technology issues SAP AG and Tencent among the leading relative-performance contributors. Some detractors from performance included HTC, Komatsu Ltd., Credit Suisse Group, Telefonica, and Canon. While we had positive absolute performance from most of our financial holdings — with notable contributions from Brazilian securities exchange BM&F Bovespa and German insurer Allianz AG — our broad financial sector holdings underperformed. Our Asia-centric bank holdings, coupled with our relative underweight, detracted from performance toward the end of the fiscal year as deeply depressed European banks — where we held limited exposure — enjoyed a dramatic rebound.
Of the holdings mentioned above that were detractors from performance, only Komatsu remains in the portfolio. While we trimmed the stock early in the year, we recently added to our position at lower prices. Other recent portfolio activity includes the addition of Accenture, Samsung Electronics, and Baidu. Accenture is a global leader in technology consulting and outsourcing, with a solid business model that generates strong free cash flow, supporting dividend growth and share buybacks.
Certified Annual Report 7
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
Samsung Electronics has long been a leader in semiconductor manufacturing and consumer electronics. Its position in manufacturing and product design has helped the company gain market share in smartphones, to split industry leadership with Apple. We initiated positions in Deutsche Bank AG and Royal Bank of Scotland Ltd., two European financial institutions whose valuations reflect the deep stresses within the European financial system. We also made opportunistic additions to existing positions, funding new holdings with sales and by trimming certain outsized positions where our original investment thesis worked well, despite the challenging market environment.
The good recent performance of global equity markets and our participation in the rise is encouraging. We remain well diversified, even though we hold only 67 stocks. Our largest holding is 3% of the portfolio. Emerging-market holdings amount to 16.3% of the portfolio. The bulk of our holdings pay dividends and the portfolio yield before expenses on a weighted average basis is 2.4%. Most of our holdings are large companies with strong balance sheets and industry-leading positions. As the stress in markets persists, the soundness of the companies in the Fund has been comforting, especially as reflected in portfolio volatility characteristics.
With reasonable prospects for a prolonged period of low interest rates, the present may be an opportune time to invest in equities, in our judgment. We will continue to invest in what we judge to be exceptional companies with attractive business models while recognizing the benefits of diversification among basic value, consistent earner, and emerging franchise companies. Thank you for your trust.
Sincerely,
![]() | ![]() | ![]() | ||
William V. Fries,CFA | Wendy Q. Trevisani | Lei Wang,CFA | ||
Portfolio Manager | Portfolio Manager | 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.
8 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg International Value Fund | September 30, 2012 |
Top Ten Equity Holdings
As of 9/30/12
Novo Nordisk A/S | 3.0 | % | CNOOC Ltd. | 2.3 | % | |||||
adidas AG | 2.6 | % | LVMH Moet Hennessy Louis Vuitton SA | 2.3 | % | |||||
Reckitt Benckiser plc | 2.4 | % | British American Tobacco plc | 2.3 | % | |||||
Nestle SA | 2.4 | % | Siemens AG | 2.1 | % | |||||
Schlumberger Ltd. | 2.4 | % | Toyota Motor Corp. | 2.1 | % |
Summary of Industry Exposure
As of 9/30/12
Banks | 10.3 | % | Household & Personal Products | 3.6 | % | |||||
Energy | 8.2 | % | Telecommunication Services | 3.6 | % | |||||
Automobiles & Components | 7.0 | % | Retailing | 3.3 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 7.0 | % | Food & Staples Retailing | 3.2 | % | |||||
Software & Services | 6.8 | % | Consumer Services | 3.0 | % | |||||
Capital Goods | 6.3 | % | Insurance | 2.9 | % | |||||
Food, Beverage & Tobacco | 6.1 | % | Media | 2.8 | % | |||||
Consumer Durables & Apparel | 5.7 | % | Semiconductors & Semiconductor Equipment | 2.1 | % | |||||
Materials | 5.0 | % | Transportation | 1.6 | % | |||||
Health Care Equipment & Services | 4.4 | % | Other Assets & Liabilities | 3.2 | % | |||||
Diversified Financials | 3.9 | % |
Summary of Country Exposure
As of 9/30/12 (percent of equity holdings)
United Kingdom | 23.3 | % | South Korea | 3.0 | % | |||||
Germany | 13.6 | % | Netherlands | 2.5 | % | |||||
Japan | 9.4 | % | Sweden | 2.5 | % | |||||
China | 7.8 | % | Ireland | 2.4 | % | |||||
France | 7.5 | % | Hong Kong | 2.2 | % | |||||
Switzerland | 7.5 | % | Mexico | 1.5 | % | |||||
Canada | 4.5 | % | United States | 1.5 | % | |||||
Brazil | 3.4 | % | India | 0.6 | % | |||||
Israel | 3.2 | % | Russia | 0.6 | % | |||||
Denmark | 3.0 | % |
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 94.87% | ||||||||
AUTOMOBILES & COMPONENTS — 5.07% | ||||||||
AUTO COMPONENTS — 1.24% | ||||||||
Cie Generale des Establissements Michelin | 4,265,411 | $ | 334,137,930 | |||||
AUTOMOBILES — 3.83% | ||||||||
Hyundai Motor Co. | 2,040,115 | 462,567,407 | ||||||
Toyota Motor Corp. | 14,729,026 | 573,760,111 | ||||||
|
| |||||||
1,370,465,448 | ||||||||
|
| |||||||
BANKS — 10.33% | ||||||||
COMMERCIAL BANKS — 10.33% | ||||||||
China Merchants Bank Co. Ltd. | 161,970,732 | 272,386,475 | ||||||
HSBC Holdings plc | 60,886,347 | 572,817,949 | ||||||
Industrial & Commercial Bank of China Ltd. | 482,819,400 | 285,181,660 | ||||||
Itau Unibanco Holding SA ADR | 17,136,300 | 261,842,664 | ||||||
Mitsubishi UFJ Financial Group, Inc. | 119,045,233 | 558,310,549 | ||||||
a Royal Bank of Scotland Group plc | 31,260,650 | 129,732,768 | ||||||
Standard Chartered plc | 23,401,106 | 529,033,258 | ||||||
Svenska Handelsbanken AB | 4,904,000 | 183,728,291 | ||||||
|
| |||||||
2,793,033,614 | ||||||||
|
| |||||||
CAPITAL GOODS — 6.29% | ||||||||
AEROSPACE & DEFENSE — 1.49% | ||||||||
Embraer S.A. | 5,421,345 | 144,316,204 | ||||||
Rolls Royce Holdings plc | 19,038,682 | 259,168,975 | ||||||
INDUSTRIAL CONGLOMERATES — 2.12% | ||||||||
Siemens AG | 5,755,800 | 574,041,530 | ||||||
MACHINERY — 2.68% | ||||||||
Fanuc Ltd. | 2,003,577 | 322,975,380 | ||||||
Komatsu Ltd. | 20,358,776 | 400,966,667 | ||||||
|
| |||||||
1,701,468,756 | ||||||||
|
| |||||||
CONSUMER DURABLES & APPAREL — 5.66% | ||||||||
TEXTILES, APPAREL & LUXURY GOODS — 5.66% | ||||||||
adidas AG | 8,678,635 | 711,974,168 | ||||||
LVMH Moet Hennessy Louis Vuitton SA | 4,085,056 | 614,191,514 | ||||||
Swatch Group AG | 510,260 | 203,561,459 | ||||||
|
| |||||||
1,529,727,141 | ||||||||
|
| |||||||
CONSUMER SERVICES — 2.96% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 2.96% | ||||||||
b Carnival plc | 10,740,103 | 395,943,223 | ||||||
Yum! Brands, Inc. | 6,079,200 | 403,294,128 | ||||||
|
| |||||||
799,237,351 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 3.86% | ||||||||
CAPITAL MARKETS — 1.61% | ||||||||
Deutsche Bank AG | 4,621,000 | 182,570,414 | ||||||
Julius Baer Group Ltd. | 7,225,258 | 251,981,353 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 2.25% | ||||||||
BM&F Bovespa SA | 29,219,800 | 176,565,569 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
Hong Kong Exchanges & Clearing Ltd. | 28,659,933 | $ | 432,816,162 | |||||
|
| |||||||
1,043,933,498 | ||||||||
|
| |||||||
ENERGY — 8.26% | ||||||||
ENERGY EQUIPMENT & SERVICES — 2.40% | ||||||||
Schlumberger Ltd. | 8,971,277 | 648,892,465 | ||||||
OIL, GAS & CONSUMABLE FUELS — 5.86% | ||||||||
BG Group plc | 27,351,692 | 552,093,668 | ||||||
Cenovus Energy, Inc. | 7,442,913 | 259,756,226 | ||||||
CNOOC Ltd. | 302,255,683 | 619,008,163 | ||||||
Coal India Ltd. | 22,562,250 | 153,608,948 | ||||||
|
| |||||||
2,233,359,470 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 3.23% | ||||||||
FOOD & STAPLES RETAILING — 3.23% | ||||||||
Tesco plc | 91,094,018 | 488,367,211 | ||||||
Wal-Mart de Mexico SAB de C.V. | 137,062,200 | 386,000,719 | ||||||
|
| |||||||
874,367,930 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 6.07% | ||||||||
BEVERAGES — 1.40% | ||||||||
SABMiller plc | 8,615,750 | 378,425,635 | ||||||
FOOD PRODUCTS — 2.42% | ||||||||
Nestle SA | 10,357,500 | 653,056,619 | ||||||
TOBACCO — 2.25% | ||||||||
British American Tobacco plc | 11,873,646 | 609,623,194 | ||||||
|
| |||||||
1,641,105,448 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 4.42% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 1.55% | ||||||||
Covidien plc | 7,054,798 | 419,196,097 | ||||||
HEALTH CARE PROVIDERS & SERVICES — 2.87% | ||||||||
Fresenius Medical Care AG & Co. | 7,344,894 | 538,563,895 | ||||||
Sinopharm Group Co. H | 74,602,800 | 238,604,270 | ||||||
|
| |||||||
1,196,364,262 | ||||||||
|
| |||||||
HOUSEHOLD & PERSONAL PRODUCTS — 3.57% | ||||||||
HOUSEHOLD PRODUCTS — 2.44% | ||||||||
Reckitt Benckiser plc | 11,484,320 | 661,124,688 | ||||||
PERSONAL PRODUCTS — 1.13% | ||||||||
Natura Cosmeticos SA | 11,170,800 | 304,445,283 | ||||||
|
| |||||||
965,569,971 | ||||||||
|
| |||||||
INSURANCE — 2.95% | ||||||||
INSURANCE — 2.95% | ||||||||
AIA Group Ltd. | 38,431,100 | 142,492,520 | ||||||
Allianz SE | 4,036,728 | 480,301,017 | ||||||
China Life Insurance Co. | 3,593,651 | 10,358,213 | ||||||
Dai-ichi Life Insurance Co. | 144,257 | 163,777,168 | ||||||
|
| |||||||
796,928,918 | ||||||||
|
|
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
MATERIALS — 4.99% | ||||||||
CHEMICALS — 4.81% | ||||||||
Air Liquide SA | 4,574,174 | $ | 566,937,061 | |||||
Potash Corp. of Saskatchewan, Inc. | 10,109,500 | 438,954,490 | ||||||
Syngenta AG | 786,530 | 293,955,657 | ||||||
METALS & MINING — 0.18% | ||||||||
Teck Resources Ltd. | 1,685,700 | 49,742,810 | ||||||
|
| |||||||
1,349,590,018 | ||||||||
|
| |||||||
MEDIA — 2.81% | ||||||||
MEDIA — 2.81% | ||||||||
Pearson plc | 16,108,031 | 314,735,973 | ||||||
Publicis Groupe | 7,975,402 | 446,334,726 | ||||||
|
| |||||||
761,070,699 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 6.98% | ||||||||
PHARMACEUTICALS — 6.98% | ||||||||
Novartis AG | 9,076,196 | 555,380,202 | ||||||
Novo Nordisk A/S | 5,067,870 | 800,603,784 | ||||||
Teva Pharmaceutical Industries Ltd. ADR | 12,869,900 | 532,942,559 | ||||||
|
| |||||||
1,888,926,545 | ||||||||
|
| |||||||
RETAILING — 3.28% | ||||||||
SPECIALTY RETAIL — 3.28% | ||||||||
Hennes & Mauritz AB | 13,523,874 | 469,819,152 | ||||||
Kingfisher plc | 98,103,317 | 418,538,160 | ||||||
|
| |||||||
888,357,312 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.15% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.15% | ||||||||
ARM Holdings plc | 28,514,516 | 264,760,020 | ||||||
Samsung Electronics Co. Ltd. | 261,456 | 316,638,348 | ||||||
|
| |||||||
581,398,368 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 6.79% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 0.78% | ||||||||
Accenture plc | 3,022,049 | 211,634,092 | ||||||
INTERNET SOFTWARE & SERVICES — 2.92% | ||||||||
a Baidu, Inc. ADR | 2,867,804 | 335,016,863 | ||||||
Tencent Holdings Ltd. | 8,571,735 | 292,944,948 | ||||||
a Yandex NV | 6,633,900 | 159,943,329 | ||||||
SOFTWARE — 3.09% | ||||||||
a Check Point Software Technologies Ltd. | 6,268,276 | 301,880,172 | ||||||
SAP AG | 7,542,813 | 534,175,158 | ||||||
|
| |||||||
1,835,594,562 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 3.56% | ||||||||
WIRELESS TELECOMMUNICATION SERVICES — 3.56% | ||||||||
KDDI Corp. | 5,649,200 | 438,674,423 | ||||||
Vodafone Group plc | 184,319,280 | 523,099,922 | ||||||
|
| |||||||
961,774,345 | ||||||||
|
|
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
TRANSPORTATION — 1.64% | ||||||||
ROAD & RAIL — 1.64% | ||||||||
Canadian National Railway Co. | 5,025,300 | $ | 444,665,697 | |||||
|
| |||||||
444,665,697 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $21,190,981,751) | 25,656,939,353 | |||||||
|
| |||||||
PREFERRED STOCK — 1.98% | ||||||||
AUTOMOBILES & COMPONENTS — 1.98% | ||||||||
AUTOMOBILES — 1.98% | ||||||||
Volkswagen AG Pfd | 2,925,675 | 533,680,596 | ||||||
|
| |||||||
TOTAL PREFERRED STOCK (Cost $256,125,379) | 533,680,596 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 3.17% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.28%, dated 9/28/2012 due 10/1/2012, repurchase price $104,002,427 collateralized by 10 U.S. Government securities, having an average coupon of 1.97%, a minimum credit rating of BBB-, maturity dates from 9/01/2033 to 09/01/2042, and having an aggregate market value of $105,931,242 at 9/28/2012 | $ | 104,000,000 | 104,000,000 | |||||
Consolidated Edison Co., 0.30%, 10/1/2012 | 29,166,000 | 29,166,000 | ||||||
CVS Corp., 0.30%, 10/1/2012 | 12,000,000 | 12,000,000 | ||||||
DCP Midstream LLC, 0.41%, 10/3/2012 | 17,000,000 | 16,999,613 | ||||||
DCP Midstream LLC, 0.41%, 10/4/2012 | 8,000,000 | 7,999,727 | ||||||
DCP Midstream LLC, 0.41%, 10/5/2012 | 8,817,000 | 8,816,598 | ||||||
Eni Coordination Center, 0.63%, 10/1/2012 | 100,000,000 | 100,000,000 | ||||||
Eni Finance USA, Inc., 0.63%, 10/2/2012 | 30,000,000 | 29,999,475 | ||||||
Indiana Finance Authority, 0.20%, due 2/1/2037 put 10/1/2012 (Stadium Project: SPA; JPMorgan | ||||||||
Chase Bank (Daily Demand Notes) | 38,425,000 | 38,425,000 | ||||||
Johnson Controls, 0.30%, 10/1/2012 | 50,000,000 | 50,000,000 | ||||||
Kinder Morgan Energy, 0.46%, 10/2/2012 | 10,155,000 | 10,154,870 | ||||||
Kinder Morgan Energy, 0.46%, 10/3/2012 | 124,290,000 | 124,286,824 | ||||||
Kinder Morgan Energy, 0.46%, 10/4/2012 | 15,555,000 | 15,554,404 | ||||||
Northeast Utilities, 0.39%, 10/3/2012 | 25,000,000 | 24,999,458 | ||||||
Spectra Energy Capital, 0.35%, 10/2/2012 | 21,000,000 | 20,999,796 | ||||||
Tyco Electronics Group SA, 0.35%, 10/1/2012 | 50,000,000 | 50,000,000 | ||||||
Tyco Electronics Group SA, 0.36%, 10/1/2012 | 14,584,000 | 14,584,000 | ||||||
Tyco Electronics Group SA, 0.36%, 10/2/2012 | 50,000,000 | 49,999,500 | ||||||
Xstrata Finance Canada Ltd., 0.46%, 10/5/2012 | 25,000,000 | 24,998,722 | ||||||
Xstrata Finance Canada Ltd., 0.46%, 10/3/2012 | 100,000,000 | 99,997,444 | ||||||
Xstrata Finance Canada Ltd., 0.46%, 10/1/2012 | 25,000,000 | 25,000,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $ 857,981,431) | 857,981,431 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 100.02% (Cost $22,305,088,561) | $ | 27,048,601,380 | ||||||
LIABILITIES NET OF OTHER ASSETS — (0.02)% | (5,045,872 | ) | ||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 27,043,555,508 | ||||||
|
|
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
Footnote Legend
a | Non-income producing. |
b | Investment in Affiliates - Holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940 because the Fund’s holding represented 5% or more of the company’s voting securities during the period, are shown below: |
Issuer | Shares/Principal September 30, 2011 | Gross Additions | Gross Reductions | Shares/Principal September 30, 2012 | Market Value September 30, 2012 | Investment Income | ||||||||||||||||||
Carnival plc | 12,085,525 | — | 1,345,422 | 10,740,103 | $ | 395,943,223 | $ | 11,059,010 | ||||||||||||||||
Yandex NV* | 6,633,900 | — | — | — | — | — | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total non-controlled affiliated issuers – 1.46% of net assets |
| $ | 395,943,223 | $ | 11,059,010 | |||||||||||||||||||
|
|
|
|
* | Issuer not affiliated at September 30, 2012. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt | |
ARM | Adjustable Rate Mortgage | |
Pfd | Preferred Stock | |
SPA | Stand-by Purchase Agreement |
See notes to financial statements.
14 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 15
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg International Value Fund | September 30, 2012 |
ASSETS | ||||
Investments at value | ||||
Non-affiliated issuers (cost $21,845,453,402) (Note 2) | $ | 26,652,658,157 | ||
Non-controlled affiliated issuers (cost $459,635,159) (Note 2) | 395,943,223 | |||
Cash denominated in foreign currency (cost $23,879,536) | 23,854,180 | |||
Receivable for investments sold | 28,796,435 | |||
Receivable for fund shares sold | 280,790,986 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 40,618,361 | |||
Dividends receivable | 49,757,794 | |||
Dividend and interest reclaim receivable | 35,442,868 | |||
Interest receivable | 7,341 | |||
Prepaid expenses and other assets | 107,116 | |||
|
| |||
Total Assets | 27,507,976,461 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 77,995,641 | |||
Payable for fund shares redeemed | 339,616,594 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 16,232,307 | |||
Payable to investment advisor and other affiliates (Note 3) | 18,517,374 | |||
Payable to custodian | 2,392,025 | |||
Accounts payable and accrued expenses | 9,667,012 | |||
|
| |||
Total Liabilities | 464,420,953 | |||
|
| |||
NET ASSETS | $ | 27,043,555,508 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 15,311,141 | ||
Net unrealized appreciation on investments | 4,766,458,967 | |||
Accumulated net realized gain (loss) | (5,034,927,057 | ) | ||
Net capital paid in on shares of beneficial interest | 27,296,712,457 | |||
|
| |||
$ | 27,043,555,508 | |||
|
|
16 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($ 5,429,315,534 applicable to 208,193,541 shares of beneficial interest outstanding - Note 4) | $ | 26.08 | ||
Maximum sales charge, 4.50% of offering price | 1.23 | |||
|
| |||
Maximum offering price per share | $ | 27.31 | ||
|
| |||
Class B Shares: | ||||
Net asset value per share* ($ 44,008,959 applicable to 1,806,231 shares of beneficial interest outstanding - Note 4) | $ | 24.37 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($ 1,254,731,824 applicable to 51,250,355 shares of beneficial interest outstanding - Note 4) | $ | 24.48 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($ 12,505,552,771 applicable to 469,136,727 shares of beneficial interest outstanding - Note 4) | $ | 26.66 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($ 1,323,765,398 applicable to 50,706,041 shares of beneficial interest outstanding - Note 4) | $ | 26.11 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($ 1,495,958,353 applicable to 57,632,679 shares of beneficial interest outstanding - Note 4) | $ | 25.96 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($ 4,512,144,336 applicable to 169,558,933 shares of beneficial interest outstanding - Note 4) | $ | 26.61 | ||
|
| |||
Class R6 Shares: | ||||
Net asset value, offering and redemption price per share ($ 478,078,333 applicable to 17,958,230 shares of beneficial interest outstanding - Note 4) | $ | 26.62 | ||
|
|
* | 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 17
STATEMENT OF OPERATIONS | ||
Thornburg International Value Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $54,290,337) | $ | 620,707,846 | ||
Non-controlled affiliated issuers | 11,059,010 | |||
Interest income | 4,139,855 | |||
|
| |||
Total Income | 635,906,711 | |||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 180,910,477 | |||
Administration fees (Note 3) | ||||
Class A Shares | 7,298,736 | |||
Class B Shares | 64,648 | |||
Class C Shares | 1,701,045 | |||
Class I Shares | 5,934,770 | |||
Class R3 Shares | 1,695,608 | |||
Class R4 Shares | 1,830,856 | |||
Class R5 Shares | 2,223,555 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 14,684,236 | |||
Class B Shares | 516,968 | |||
Class C Shares | 13,598,274 | |||
Class R3 Shares | 6,784,596 | |||
Class R4 Shares | 3,662,019 | |||
Transfer agent fees | ||||
Class A Shares | 10,717,095 | |||
Class B Shares | 114,445 | |||
Class C Shares | 2,391,530 | |||
Class I Shares | 11,478,435 | |||
Class R3 Shares | 3,280,320 | |||
Class R4 Shares | 5,083,974 | |||
Class R5 Shares | 12,704,092 | |||
Class R6 Shares | 455 | |||
Registration and filing fees | ||||
Class A Shares | 70,809 | |||
Class B Shares | 11,232 | |||
Class C Shares | 45,008 | |||
Class I Shares | 456,396 | |||
Class R3 Shares | 28,169 | |||
Class R4 Shares | 57,032 | |||
Class R5 Shares | 94,653 | |||
Class R6 Shares | 15,261 | |||
Custodian fees (Note 3) | 6,832,825 | |||
Professional fees | 361,491 | |||
Accounting fees | 723,160 | |||
Trustee fees | 781,940 | |||
Other expenses | 2,586,184 | |||
|
| |||
Total Expenses | $ | 298,740,294 |
18 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg International Value Fund | Year Ended September 30, 2012 |
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | $ | (8,279,106 | ) | |
Fees paid indirectly (Note 3) | (40,756 | ) | ||
|
| |||
Net Expenses | 290,420,432 | |||
|
| |||
Net Investment Income | 345,486,279 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | ||||
Non-affiliated issuers | (893,801,209 | ) | ||
Non-controlled affiliated issuers | (30,609,481 | ) | ||
Forward currency contracts (Note 7) | 179,429,526 | |||
Foreign currency transactions | (4,967,276 | ) | ||
|
| |||
(749,948,440 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | ||||
Non-affiliated issuers (net of change in deferred taxes payable of $804,343) | 3,754,457,426 | |||
Non-controlled affiliated issuers | 150,905,325 | |||
Forward currency contracts (Note 7) | (73,459,449 | ) | ||
Foreign currency translations | 1,005,684 | |||
|
| |||
3,832,908,986 | ||||
|
| |||
Net Realized and Unrealized Gain | 3,082,960,546 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 3,428,446,825 | ||
|
|
See notes to financial statements.
Certified Annual Report 19
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg International Value Fund |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 345,486,279 | $ | 331,364,536 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (749,948,440 | ) | (820,582,278 | ) | ||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations and deferred taxes | 3,832,908,986 | (2,589,492,789 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,428,446,825 | (3,078,710,531 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (64,056,950 | ) | (69,407,594 | ) | ||||
Class B Shares | (243,509 | ) | (378,403 | ) | ||||
Class C Shares | (7,630,934 | ) | (9,501,615 | ) | ||||
Class I Shares | (182,520,040 | ) | (161,485,921 | ) | ||||
Class R3 Shares | (13,188,781 | ) | (12,042,820 | ) | ||||
Class R4 Shares | (17,741,517 | ) | (13,798,685 | ) | ||||
Class R5 Shares | (64,779,792 | ) | (49,035,862 | ) | ||||
Class R6 Shares | (1,569,796 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (1,202,692,533 | ) | (27,083,080 | ) | ||||
Class B Shares | (18,438,983 | ) | (11,564,128 | ) | ||||
Class C Shares | (297,916,156 | ) | (77,646,803 | ) | ||||
Class I Shares | 190,061,072 | 2,800,593,247 | ||||||
Class R3 Shares | (105,812,185 | ) | 124,874,376 | |||||
Class R4 Shares | 29,709,129 | 614,382,031 | ||||||
Class R5 Shares | 302,005,139 | 1,808,444,762 | ||||||
Class R6 Shares | 471,270,252 | — | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 2,444,901,241 | 1,837,638,974 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 24,598,654,267 | 22,761,015,293 | ||||||
|
|
|
| |||||
End of Year | $ | 27,043,555,508 | $ | 24,598,654,267 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 15,311,141 | $ | 26,528,333 |
See notes to financial statements.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg International Value Fund | September 30, 2012 |
NOTE 1 – ORGANIZATION
Thornburg International Value Fund (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 has eight classes of shares of beneficial interest outstanding: Class A, Class B, Class C, Institutional Class (Class I), and Retirement Classes (Class R3, Class R4, Class R5, and Class R6). The Fund no longer offers Class B shares for sale. 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 were 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 and may be subject to a service fee, (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 and Class R6 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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: Portfolio investments listed or traded on a national securities exchange are valued on the valuation date at the last reported trade price on the exchange that is the primary market for the security. Portfolio investments traded on an exchange for which there has been no trade that day and other equity investments traded in the over-the-counter market are valued at the mean between the last reported bid and ask prices. Portfolio investments reported by NASDAQ are valued at the
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
NASDAQ official closing price. Any foreign investment traded on exchanges outside the United States is valued at the price of the investment on the exchange that is normally the investment’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation measurement date.
In any case where the market value of an equity investment held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. The Committee’s determinations are made using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from an independent pricing service. The pricing service ordinarily values equity investments 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. An investment’s market value is deemed not readily available whenever the exchange or market on which the investment is primarily traded is closed for the entire scheduled day of trading. Additionally, an investment’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 investment’s primary exchange or market, but before the most recent close of trading in Fund shares, or an unusual event or significant period of time occurring since the availability of a market quotation, create a question about the reliability of the investment’s market value. On days when market volatility thresholds pre-determined by the Trustees are exceeded, foreign equity investments held by the Fund may be valued using synthetic pricing obtained from an independent pricing service approved by the Trustees, subject to the ability of the Committee to determine in any such instance to utilize market closing prices if the Committee considers closing prices to be more reliable.
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. 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 ordinarily 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 Committee determines a fair value for the debt obligation using procedures in accordance with a policy 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
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.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
When market volatility thresholds are exceeded, foreign equity investments may be fair valued according to other significant observable inputs rather than quoted market prices. The affected investments will be characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 25,656,939,353 | $ | 25,656,939,353 | $ | — | $ | — | ||||||||
Preferred Stock | 533,680,596 | 533,680,596 | — | — | ||||||||||||
Short Term Investments | 857,981,431 | — | 857,981,431 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 27,048,601,380 | $ | 26,190,619,949 | $ | 857,981,431 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 40,618,361 | $ | — | $ | 40,618,361 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (16,232,307 | ) | $ | — | $ | (16,232,307 | ) | $ | — | ||||||
Spot Currency | $ | (100,546 | ) | $ | (100,546 | ) | $ | — | $ | — |
* | 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, Inc. 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. |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2012, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the year.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
Foreign Currency Translation: Portfolio investments 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 investments and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign investments, 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 values of such spot contracts are included in receivable for investments sold and payable for investments purchased on the Statement of Assets and Liabilities.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on investments held. Such changes are included in net unrealized appreciation or depreciation from investments.
Reported net realized gains or losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on investment 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 change in unrealized appreciation and depreciation on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains from investments of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these investments 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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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.
Repurchase Agreements: The Funds may invest excess cash in repurchase agreements whereby the Funds purchase investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Funds have the right to liquidate the collateral and apply the
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
General: Investment 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 investments is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of investments are recorded on an identified cost basis. Net investment income (other than class specific expenses) and realized gains and losses and unrealized appreciation or depreciation 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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, 2012, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,981,687 for Class R3 shares, $2,973,155 for Class R4 shares, $3,322,161 for Class R5 shares, and $2,103 for Class R6 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, 2012, the Distributor has advised the Fund that it earned net commissions aggregating $92,569 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $139,774 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, 2012, there were no 12b-1 service plan fees charged for Class I, R5 and R6 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 and Class C shares, and an annual rate of up to .25 of 1% per annum of the average daily net assets attributable to Class R3 shares.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, fees paid indirectly were $40,756.
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 44,154,940 | $ | 1,108,784,333 | 73,641,249 | $ | 2,053,810,641 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 2,252,162 | 56,255,306 | 2,281,219 | 60,621,181 | ||||||||||||
Shares repurchased | (94,550,543 | ) | (2,367,750,664 | ) | (77,421,500 | ) | (2,141,570,376 | ) | ||||||||
Redemption fees received* | — | 18,492 | — | 55,474 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (48,143,441 | ) | $ | (1,202,692,533 | ) | (1,499,032 | ) | $ | (27,083,080 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class B Shares | ||||||||||||||||
Shares sold | 18,153 | $ | 426,733 | 24,956 | $ | 650,315 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 7,356 | 167,235 | 10,266 | 258,925 | ||||||||||||
Shares repurchased | (803,916 | ) | (19,033,123 | ) | (482,497 | ) | (12,473,928 | ) | ||||||||
Redemption fees received* | — | 172 | — | 560 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (778,407 | ) | $ | (18,438,983 | ) | (447,275 | ) | $ | (11,564,128 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 3,972,384 | $ | 94,317,067 | 10,625,165 | $ | 281,685,590 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 229,919 | 5,280,728 | 251,558 | 6,347,965 | ||||||||||||
Shares repurchased | (16,849,073 | ) | (397,518,284 | ) | (13,969,796 | ) | (365,693,606 | ) | ||||||||
Redemption fees received* | — | 4,333 | — | 13,248 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (12,646,770 | ) | $ | (297,916,156 | ) | (3,093,073 | ) | $ | (77,646,803 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 157,722,651 | $ | 4,069,279,456 | 194,033,971 | $ | 5,513,907,653 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 5,106,228 | 130,962,371 | 3,752,040 | 101,301,163 | ||||||||||||
Shares repurchased | (156,331,425 | ) | (4,010,215,905 | ) | (99,981,535 | ) | (2,814,706,076 | ) | ||||||||
Redemption fees received* | — | 35,150 | — | 90,507 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 6,497,454 | $ | 190,061,072 | 97,804,476 | $ | 2,800,593,247 | ||||||||||
|
|
|
|
|
|
|
|
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 13,612,452 | $ | 342,095,280 | 21,235,494 | $ | 595,512,797 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 491,853 | 12,264,608 | 419,283 | 11,084,705 | ||||||||||||
Shares repurchased | (18,208,400 | ) | (460,176,195 | ) | (17,189,759 | ) | (481,734,413 | ) | ||||||||
Redemption fees received* | — | 4,122 | — | 11,287 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (4,104,095 | ) | $ | (105,812,185 | ) | 4,465,018 | $ | 124,874,376 | ||||||||
|
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|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 20,184,388 | $ | 506,211,370 | 33,293,650 | $ | 912,509,372 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 566,489 | 14,081,752 | 411,028 | 10,732,605 | ||||||||||||
Shares repurchased | (19,386,082 | ) | (490,588,320 | ) | (11,111,297 | ) | (308,869,392 | ) | ||||||||
Redemption fees received* | — | 4,327 | — | 9,446 | ||||||||||||
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|
|
| |||||||||
Net increase (decrease) | 1,364,795 | $ | 29,709,129 | 22,593,381 | $ | 614,382,031 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 58,044,149 | $ | 1,487,608,837 | 86,461,533 | $ | 2,440,528,039 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 2,402,448 | 61,341,403 | 1,721,328 | 46,512,270 | ||||||||||||
Shares repurchased | (48,008,440 | ) | (1,246,957,709 | ) | (23,871,556 | ) | (678,624,509 | ) | ||||||||
Redemption fees received* | — | 12,608 | — | 28,962 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 12,438,157 | $ | 302,005,139 | 64,311,305 | $ | 1,808,444,762 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R6 Shares ** | ||||||||||||||||
Shares sold | 17,994,013 | $ | 472,237,611 | — | $ | — | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 60,384 | 1,569,796 | — | — | ||||||||||||
Shares repurchased | (96,167 | ) | (2,537,155 | ) | — | — | ||||||||||
Redemption fees received* | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 17,958,230 | $ | 471,270,252 | — | $ | — | ||||||||||
|
|
|
|
|
|
|
|
* | The Fund previously charged a redemption fee of 1% of the Class A and Class I shares redeemed or exchanged within 30 days of purchase. Effective February 1, 2012, the Fund stopped imposing this redemption fee. Redemption fees that were charged to any class prior to February 1, 2012 were allocated to all classes upon receipt of payment based on relative net asset values of each class or other appropriate allocation methods. |
** | Effective date for this class of shares was May 1, 2012. |
NOTE 5 – SECURITIES TRANSACTIONS
For the year ended September 30, 2012, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $5,052,409,964 and $4,463,721,791, respectively.
Certified Annual Report 27
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 22,323,204,950 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 5,637,830,106 | ||
Gross unrealized depreciation on a tax basis | (912,433,676 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 4,725,396,430 | ||
|
|
At September 30, 2012, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2011 of $721,639,747. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
At September 30, 2012, the Fund had cumulative tax basis capital losses of $672,354,468, 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 do not expire but are required to be utilized to offset future gains prior to the utilization of losses that occurred in years prior to the fiscal year ending September 30, 2012, which may expire prior to utilization.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) became effective for the Fund’s fiscal year ending September 30, 2012. The Act requires that future capital losses generated by the Fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a Fund’s pre-enactment capital losses will expire unused.
At September 30, 2012, the Fund had cumulative 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 | |||
2019 | 753,530,754 | |||
|
| |||
$ | 3,598,430,401 | |||
|
|
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $4,972,152, increased net capital paid in on shares of beneficial interest by $4,876 and decreased accumulated net realized loss by $4,967,276. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from currency gains (losses).
At September 30, 2012, the fund had distributable tax basis ordinary income of $15,228,982.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, are as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 351,736,195 | $ | 315,650,900 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 351,736,195 | $ | 315,650,900 | ||||
|
|
|
|
28 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50 (“ASC 815”), require certain disclosures. The disclosures are intended to provide users of financial statements with an 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, 2012, 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. Additionally, the Fund’s risk of loss may exceed the amounts recognized on the Statement of Assets and Liabilities.
The Fund entered into forward currency contracts during the year ended September 30, 2012 in the normal course of pursuing its investment objectives, in anticipation 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 appreciation and depreciation on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities, 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 sell currency contracts are indicative of the activity for the year ended September 30, 2012. Open buy currency contracts are entered into for the purpose of closing open sell currency contracts and the values are dependent upon the values of open sell currency contracts within the year ended September 30, 2012.
The following table displays the outstanding forward currency contracts to buy or sell at September 30, 2012:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2012
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||
Euro | Sell | 1,343,714,900 | 11/08/2012 | 1,727,373,723 | $ | 33,007,012 | $ | — | ||||||||||||||
Euro | Buy | 333,158,900 | 11/08/2012 | 428,282,762 | 7,611,349 | — | ||||||||||||||||
Euro | Buy | 568,776,300 | 11/08/2012 | 731,173,878 | — | (16,232,307 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||
Total | $ | 40,618,361 | $ | (16,232,307 | ) | |||||||||||||||||
|
|
|
|
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement on Assets and Liabilities at September 30, 2012 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2012
Asset Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 40,618,361 | |||
Liability Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (16,232,307 | ) |
Certified Annual Report 29
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 |
The net realized gains (losses) from forward currency contracts, and the net change in unrealized appreciation (depreciation) on outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2012 are disclosed in the following tables:
Amount of Net Realized Gain (Loss)
on Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 179,429,526 | $ | 179,429,526 |
Amount of Net Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (73,459,449 | ) | $ | (73,459,449 | ) |
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, management risk, market and economic risk, risks affecting specific issuers, liquidity risk, the risks associated with investments in smaller companies and non-U.S. issuers, credit risk, and interest rate risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
30 Certified Annual Report
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Certified Annual Report 31
Thornburg International Value Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the Year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless Otherwise Periods are Years Ended Sept. 30, | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 23.14 | 0.28 | 2.95 | 3.23 | (0.29 | ) | — | (0.29 | ) | $ | 26.08 | 1.09 | 1.29 | 1.29 | 1.29 | 14.02 | 17.86 | $ | 5,429,316 | ||||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 26.00 | 0.30 | (2.89 | ) | (2.59 | ) | (0.27 | ) | — | (0.27 | ) | $ | 23.14 | 1.06 | 1.25 | 1.25 | 1.25 | (10.10 | ) | 20.78 | $ | 5,932,896 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class B Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 21.67 | 0.06 | 2.77 | 2.83 | (0.13 | ) | — | (0.13 | ) | $ | 24.37 | 0.26 | 2.09 | 2.09 | 2.09 | 13.07 | 17.86 | $ | 44,009 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 24.43 | 0.05 | (2.67 | ) | (2.62 | ) | (0.14 | ) | — | (0.14 | ) | $ | 21.67 | 0.21 | 2.06 | 2.06 | 2.06 | (10.80 | ) | 20.78 | $ | 56,002 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 21.77 | 0.08 | 2.77 | 2.85 | (0.14 | ) | — | (0.14 | ) | $ | 24.48 | 0.35 | 2.03 | 2.03 | 2.03 | 13.14 | 17.86 | $ | 1,254,732 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 24.54 | 0.08 | (2.70 | ) | (2.62 | ) | (0.15 | ) | — | (0.15 | ) | $ | 21.77 | 0.31 | 1.99 | 1.99 | 1.99 | (10.78 | ) | 20.78 | $ | 1,391,173 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 23.65 | 0.40 | 3.00 | 3.40 | (0.39 | ) | — | (0.39 | ) | $ | 26.66 | 1.53 | 0.88 | 0.88 | 0.88 | 14.47 | 17.86 | $ | 12,505,553 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 26.57 | 0.41 | (2.96 | ) | (2.55 | ) | (0.37 | ) | — | (0.37 | ) | $ | 23.65 | 1.45 | 0.88 | 0.88 | 0.88 | (9.77 | ) | 20.78 | $ | 10,942,112 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 23.17 | 0.24 | 2.95 | 3.19 | (0.25 | ) | — | (0.25 | ) | $ | 26.11 | 0.95 | 1.45 | 1.45 | 1.60 | 13.82 | 17.86 | $ | 1,323,766 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 26.04 | 0.24 | (2.89 | ) | (2.65 | ) | (0.22 | ) | — | (0.22 | ) | $ | 23.17 | 0.86 | 1.45 | 1.45 | 1.58 | (10.27 | ) | 20.78 | $ | 1,270,000 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 23.04 | 0.29 | 2.93 | 3.22 | (0.30 | ) | — | (0.30 | ) | $ | 25.96 | 1.16 | 1.25 | 1.25 | 1.45 | 14.05 | 17.86 | $ | 1,495,958 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 25.90 | 0.31 | (2.89 | ) | (2.58 | ) | (0.28 | ) | — | (0.28 | ) | $ | 23.04 | 1.12 | 1.25 | 1.25 | 1.41 | (10.11 | ) | 20.78 | $ | 1,296,493 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 23.61 | 0.37 | 3.00 | 3.37 | (0.37 | ) | — | (0.37 | ) | $ | 26.61 | 1.44 | 0.99 | 0.99 | 1.06 | 14.33 | 17.86 | $ | 4,512,144 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 26.53 | 0.40 | (2.98 | ) | (2.58 | ) | (0.34 | ) | — | (0.34 | ) | $ | 23.61 | 1.39 | 0.99 | 0.99 | 1.04 | (9.88 | ) | 20.78 | $ | 3,709,978 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class R6 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(c) | $ | 27.14 | 0.15 | (0.38 | ) | (0.23 | ) | (0.29 | ) | — | (0.29 | ) | $ | 26.62 | 1.35 | (d) | 0.76 | (d) | 0.76 | (d) | 0.76 | (d) | (0.77 | ) | 17.86 | $ | 478,078 |
(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 May 1, 2012. |
(d) | Annualized. |
+ | Based on weighted average shares outstanding, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
32 Certified Annual Report | Certified Annual Report 33 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg International Value Fund
To the Trustees and Shareholders of
Thornburg International Value Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg International Value Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
34 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg International Value Fund | September 30, 2012 (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;
(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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 986.40 | $ | 6.34 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.62 | $ | 6.44 | ||||||
Class B Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 982.50 | $ | 10.46 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.45 | $ | 10.62 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 982.80 | $ | 9.99 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.93 | $ | 10.15 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 988.70 | $ | 4.42 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.55 | $ | 4.50 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 985.60 | $ | 7.20 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.75 | $ | 7.31 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 986.60 | $ | 6.21 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.75 | $ | 6.31 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 987.80 | $ | 4.92 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | ||||||
Class R6 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 990.79 | $ | 3.77 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.21 | $ | 3.83 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.28%; B: 2.11%; C: 2.01%; I: 0.89%; R3: 1.45%; R4: 1.25%; R5: 0.99%; R6: 0.76%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your class of shares under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the table above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 35
INDEX COMPARISON | ||
Thornburg International Value Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg International Value Fund versus MSCI EAFE Index and MSCI AC World ex-U.S. Index (May 28, 1998 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 5/28/98) | 8.89 | % | -4.61 | % | 9.88 | % | 7.62 | % | ||||||||
B Shares (Incep: 4/3/00) | 8.07 | % | -4.84 | % | 9.67 | % | 4.99 | % | ||||||||
C Shares (Incep: 5/28/98) | 12.14 | % | -4.43 | % | 9.56 | % | 7.11 | % | ||||||||
I Shares (Incep: 3/30/01) | 14.47 | % | -3.34 | % | 10.85 | % | 7.55 | % | ||||||||
R3 Shares (Incep: 7/1/03) | 13.82 | % | -3.88 | % | — | 9.61 | % | |||||||||
R4 Shares (Incep: 2/1/07) | 14.05 | % | -3.68 | % | — | 0.76 | % | |||||||||
R5 Shares (Incep: 2/1/05) | 14.33 | % | -3.43 | % | — | 6.57 | % | |||||||||
R6 Shares (Incep: 5/1/12) | — | — | — | -0.77 | % | |||||||||||
MSCI EAFE Index (Since 5/28/98) | 13.75 | % | -5.24 | % | 8.20 | % | 3.11 | % | ||||||||
MSCI AC World ex-U.S. Index (Since 5/28/98) | 15.04 | % | -3.67 | % | 10.32 | % | 4.74 | % |
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 or call 800.847.0200. 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, R5 and R6 shares.
36 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg International Value Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 37
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE(1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
38 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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 International Value Fund | September 30, 2012 (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, 2012, the Thornburg International Value Fund is reporting 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, 2012, foreign source income and foreign taxes paid is $662,114,875, and $54,307,676, respectively.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg International Value Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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.
40 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 (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 throughout the year from the Advisor. These reports addressed a wide variety of topics, including particularly the Advisor’s selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s investment performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (iii) measures of the Fund’s investment performance over different periods of time relative to a category of foreign equity mutual funds selected by an independent mutual fund analyst firm, and relative to broad-based securities indices, (iv) the Fund’s cumulative investment return since inception relative to a broad-based securities index, and (v) comparative measures of estimated earnings growth, portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of accounting and other services, the Advisor’s 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 considered (among other aspects of the data) comparative performance data for the ten most recent calendar years, which showed that the Fund’s investment return for the most recent calendar year was comparable to the returns for the two securities indices considered and the average return of the fund category, and that the Fund’s returns for the preceding nine calendar years exceeded or were comparable to the returns of one index in eight of nine years, exceeded or were comparable to the returns of the second index in six of nine years, and exceeded or were comparable to the average returns of the fund category in eight of nine years. Noted quantitative data further showed that the Fund’s investment returns fell near the midpoint of investment performance for the category for the three-month period ended with the second quarter of the second year, fell at or near the third quartile for the year-to-date, one-year and three-year periods, and within the second quartile for the five-year period. Data presented to the Trustees also showed that the Fund’s annualized total returns over the ten-year period ended with the second quarter fell within the top decile of performance for the category, and also demonstrated the Fund’s higher cumulative return since inception (net of expenses) relative to the Fund’s benchmark 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of foreign equity mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data noted by the Trustees showed that the management fee charged to the Fund was slightly lower than the median and average fee levels of the category of mutual funds, and that the overall expense ratio for the Fund was slightly lower than the median and lower than the average expense ratios for the fund category. 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
Certified Annual Report 41
OTHER INFORMATION, CONTINUED | ||
Thornburg International Value Fund | September 30, 2012 (Unaudited) |
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. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its capabilities. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by the Fund and other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The information provided demonstrated to the Trustees that the Fund has realized economies of scale and may reasonably be expected to realize economies of scale as the Fund grows in size, due to the advisory agreement’s breakpoint fee structure and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds.
42 Certified Annual Report
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This page is not part of the Annual Report. 43
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
44 This page is not part of the Annual Report.
RETIREMENT AND EDUCATION ACCOUNTS
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our website 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 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 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
FIRM & PHILOSOPHY The Firm Thornburg Investment Management is a privately held investment management company based in Santa Fe, New Mexico with assets under management of $81 billion. Founded in 1982, the firm manages seven equity funds, nine bond funds, and separate portfolios for select institutions and individuals. Investment Philosophy We seek to preserve and increase the real wealth of the Funds’ shareholders after accounting for inflation, taxes, and investment expenses. We’re committed to disciplined investing and managing risk in all market environments. Portfolio Holdings Disclosure We believe you should know about your portfolio. Our website keeps investors informed of the Funds’ equity holdings. Go to www.thornburg.com/funds for commentary on our equity fund holdings. Co-Ownership of Funds We invest side-by-side with the Funds’ shareholders. Our employees have invested $247 million in Thornburg products.
THORNBURG FUND FAMILY
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 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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TH078 |
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2012. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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.
Impact due 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 that the acquired shares are held to the end of the first day.
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.
Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index. The performance of any index is not indicative of the performance of any particular investment.
Beta – Beta is a measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price. The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median, and half have values that are less.
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.
Selection Effect – The portion of portfolio excess return attributed to choosing different securities within groups compared to the benchmark.
This page is not part of the Annual Report. 3
THORNBURG CORE GROWTH FUND
Portfolio Managers
Tim Cunningham, CFA and Greg Dunn
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 or call 800.847.0200.
The maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.45%, 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 managers Tim Cunningham and Greg Dunn 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. Their overarching philosophy is to create a fund that pursues good performance over the long term, while seeking to reduce 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.
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | Since Inception | ||||||||||||||||
A Shares (Incep: 12/27/00) | ||||||||||||||||||||
Without sales charge | 43.36 | % | 11.98 | % | -1.59 | % | 11.66 | % | 4.23 | % | ||||||||||
With sales charge | 36.89 | % | 10.28 | % | -2.50 | % | 11.16 | % | 3.83 | % | ||||||||||
Russell 3000G Index | ||||||||||||||||||||
(Since: 12/27/00) | 29.35 | % | 14.69 | % | 3.22 | % | 8.57 | % | 1.63 | % |
4 This page is not part of the Annual Report.
How does the stock selection process work? Before adding a stock to the Fund’s portfolio, we drill down into the company and its business. The team believes that an intimate understanding of the companies in the portfolio is one of the most effective forms of risk management.
Companies are initially screened using a variety of quantitative factors. 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.
We are not go-along-with-the-crowd types and 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 tests 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 several ways before reaching an investment decision.
Stocks Contributing and Detracting
For the Year Ended September 30, 2012
Top Contributors | Top Detractors | |
RSC Holdings, Inc. | Supergroup plc | |
Zoll Medical Corp. | Vera Bradley, Inc. | |
SuccessFactors | Expeditors International of Washington, Inc. | |
Gilead Sciences, Inc. | Spirit Airlines, Inc. | |
Visa, Inc. | ON Semiconductor Corp. | |
Source: FactSet |
Key Portfolio Attributes
As of September 30, 2012
Portfolio P/E Trailing 12-months* | 25.8x | |||
Portfolio Price to Cash Flow* | 14.3x | |||
Portfolio Price to Book Value* | 3.6x | |||
Median Market Cap* | $ | 6.1 B | ||
7-Year Beta (A Shares vs. Russell 3000G)* | 1.17 | |||
Number of Companies | 48 |
* | Source: FactSet |
Market Capitalization Exposure
As of September 30, 2012
Basket Structure
As of September 30, 2012
This page is not part of the Annual Report. 5
Thornburg Core Growth Fund – September 30, 2012
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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 15, 2012
Dear Fellow Shareholder:
For the fiscal year ended September 30, 2012, the Thornburg Core Growth Fund returned 43.36% for the Class A shares at net asset value (NAV), materially outperforming its benchmark, the Russell 3000 Growth Index, which returned 29.35%. On September 30, 2012, the NAV of the Class A shares was $19.11.
On a point-to-point basis, domestic equity markets performed extremely well during the period. However, the headline numbers overlook the extreme volatility during the period. Markets rallied strongly off the summer lows in late 2011, as global macroeconomic data generally showed signs of improvement and market sentiment turned bullish. The summer of 2012 saw another significant downturn, very similar to the summer of 2011, as macro data deteriorated and investors generally became more cautious. This time it took a quasi-coordinated stimulus effort from several central banks around the world to create another strong rally in equity markets across the globe. We think it is important to note that these larger periods of rally and pullback do not tell the full story. Markets exhibited shorter-term periods of risk-on/risk-off sentiment, with investors rapidly entering and exiting high-beta and defensive stocks, often driven by macroeconomic headlines.
While we are very aware of macroeconomic conditions, we prefer to focus on individual stocks and their fundamentals. As bottom up, fundamentally driven stock pickers, we get excited when we see promising growth stocks trading at attractive valuations. So while the market volatility has been difficult for investors to stomach, the short-term hot/cold markets provide opportunities. We have been more active than usual with both trims and adds, as well as full sells and new buys. This helped contribute to our outperformance during the period. Fund investments in initial public offerings contributed 1.61% to performance for the fiscal year.
Stock selection is typically the primary driver of performance, as it was during this period. Our selection effect was materially positive in information technology, health care, industrials, and telecommunication services and materially negative in consumer discretionary. During the period, our contributors added significantly more to performance than detractors hurt, driving the strong excess returns. We were also pleased with our risk control; during the period, we had very few stocks that materially detracted from performance.
Top contributors to performance during this period included RSC Holdings, Zoll Medical, SuccessFactors, Gilead Sciences, and Visa.
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED |
Within the industrials sector, RSC Holdings, an equipment rental provider in North America, was acquired by United Rental for a 58% premium. We sold the position at our target price, but have recently reentered the combined entity after the stock pulled back to an attractive valuation while the fundamentals remain strong. Zoll Medical is a fast-growing provider of defibrillator products. As the stock appreciated, we sold the name at our target price. SuccessFactors, a provider of cloud-based software solutions, was acquired by SAP AG for a 50% premium, and we sold after the acquisition. Gilead Sciences continues to execute against its opportunity within the HIV and Hepatitis C markets, increasing market share and growing revenues. Visa continues to be a large position and a strong performer. The company is well positioned as one of two main players in a duopoly market. Visa continues to benefit from the move from cash and checks to credit and debit card transactions.
Top detractors for the period included Supergroup, Vera Bradley, Expeditors International of Washington, Spirit Airlines, and ON Semiconductor.
Supergroup, a U.K. based fashion retailer, declined as investors became increasingly concerned about the willingness and ability of U.K. retail consumers to continue discretionary spending in the difficult economic environment. Separately, we became increasingly concerned about deterioration in the perception of the brand and sold the stock. Vera Bradley designs fashion accessories for women; they are particularly strong in purses. We sold the stock as sales growth decelerated and we found more attractive opportunities elsewhere. Expeditors International of Washington is a global logistics company. They primarily match customers with cargo to ship to customers with capacity such as airfreight and ocean shipping lines. We sold the stock as global volumes declined on weak demand from Europe. Spirit Airlines is a domestic low cost carrier that reported weaker revenue trends than we anticipated. We sold the stock as it was not tracking our investment thesis. ON Semiconductor is a provider of mostly commodity semiconductor chips that go into a wide range of products; it is leveraged to general spending and the overall business cycle. The stock has sold off on general macroeconomic concerns; however, we believe the market is relatively close to the bottom of the cycle and that ON will prove to be a good performer in future periods.
The concerns that have driven the higher-than-normal market volatility continue to linger: the strength of the U.S. recovery, the European debt crisis, and the slowdown in the Chinese economy — to name a few of the larger ones. There is no easy, short-term fix for any of these issues, and we suspect they will continue to drive market volatility going forward. In the meantime, we will continue to attempt to take advantage of the opportunities presented. In risk-off environments, we will seek to add to existing positions and find exciting new opportunities trading at discounts. Alternatively, in risk-on environments, we will seek to trim or sell some of our holdings at elevated prices.
8 Certified Annual Report
As always, we will continue to seek out promising growth companies with sound business fundamentals trading at attractive valuations. Thank you for your investment in Thornburg Core Growth Fund.
Sincerely,
![]() | ![]() | |
Greg Dunn | Tim Cunningham,CFA | |
Managing Director | Managing Director | |
Portfolio Manager | 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, 2012 |
Top Ten Equity Holdings
As of 9/30/12
Apple, Inc. | 3.4 | % | AutoZone, Inc. | 2.8 | % | |||||
Visa, Inc. | 3.3 | % | Gilead Sciences, Inc. | 2.8 | % | |||||
Qualcomm, Inc. | 3.0 | % | The Advisory Board Co. | 2.5 | % | |||||
Google, Inc. | 2.9 | % | priceline.com, Inc. | 2.5 | % | |||||
Amazon.com, Inc. | 2.8 | % | Royal Caribbean Cruises Ltd. | 2.5 | % |
Summary of Industry Exposure
As of 9/30/12
Software & Services | 21.6 | % | Materials | 2.1 | % | |||||
Technology Hardware & Equipment | 13.6 | % | Banks | 2.1 | % | |||||
Retailing | 12.2 | % | Consumer Durables & Apparel | 2.0 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 7.3 | % | Capital Goods | 2.0 | % | |||||
Diversified Financials | 6.6 | % | Telecommunication Services | 1.9 | % | |||||
Commercial & Professional Services | 5.9 | % | Health Care Equipment & Services | 1.8 | % | |||||
Energy | 4.7 | % | Transportation | 1.7 | % | |||||
Consumer Services | 3.6 | % | Other Assets & Liabilities | 8.2 | % | |||||
Semiconductors & Semiconductor Equipment | 2.7 | % |
Summary of Country Exposure
As of 9/30/12 (percent of equity holdings)
United States | 93.2 | % | Canada | 2.5 | % | |||||
Israel | 2.8 | % | Argentina | 1.5 | % |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 91.85% | ||||||||
BANKS — 2.07% | ||||||||
COMMERCIAL BANKS — 2.07% | ||||||||
a SVB Financial Group | 231,630 | $ | 14,004,350 | |||||
|
| |||||||
14,004,350 | ||||||||
|
| |||||||
CAPITAL GOODS — 1.97% | ||||||||
TRADING COMPANIES & DISTRIBUTORS — 1.97% | ||||||||
a United Rentals, Inc. | 407,453 | 13,327,788 | ||||||
|
| |||||||
13,327,788 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 5.91% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 3.38% | ||||||||
a Portfolio Recovery Associates, Inc. | 93,791 | 9,794,594 | ||||||
a Stericycle, Inc. | 144,661 | 13,094,714 | ||||||
PROFESSIONAL SERVICES — 2.53% | ||||||||
a The Advisory Board Co. | 357,106 | 17,080,380 | ||||||
|
| |||||||
39,969,688 | ||||||||
|
| |||||||
CONSUMER DURABLES & APPAREL — 2.04% | ||||||||
TEXTILES, APPAREL & LUXURY GOODS — 2.04% | ||||||||
Nike, Inc. | 145,000 | 13,761,950 | ||||||
|
| |||||||
13,761,950 | ||||||||
|
| |||||||
CONSUMER SERVICES — 3.57% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 3.57% | ||||||||
Las Vegas Sands Corp. | 157,000 | 7,280,090 | ||||||
Royal Caribbean Cruises Ltd. | 558,997 | 16,887,299 | ||||||
|
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24,167,389 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 6.61% | ||||||||
CAPITAL MARKETS — 6.61% | ||||||||
a Affiliated Managers Group, Inc. | 112,387 | 13,823,601 | ||||||
Charles Schwab Corp. | 1,223,535 | 15,649,013 | ||||||
a WisdomTree Investments, Inc. | 2,273,419 | 15,231,907 | ||||||
|
| |||||||
44,704,521 | ||||||||
|
| |||||||
ENERGY — 4.70% | ||||||||
ENERGY EQUIPMENT & SERVICES — 2.15% | ||||||||
Halliburton Co. | 432,000 | 14,554,080 | ||||||
OIL, GAS & CONSUMABLE FUELS — 2.55% | ||||||||
a Continental Resources, Inc. | 131,000 | 10,073,900 | ||||||
a Sanchez Energy Corp. | 350,600 | 7,162,758 | ||||||
|
| |||||||
31,790,738 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 1.79% | ||||||||
HEALTH CARE PROVIDERS & SERVICES — 1.79% | ||||||||
a HMS Holdings Corp. | 361,100 | 12,071,573 | ||||||
|
| |||||||
12,071,573 | ||||||||
|
|
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
MATERIALS — 2.12% | ||||||||
METALS & MINING — 2.12% | ||||||||
Allegheny Technologies, Inc. | 449,373 | $ | 14,334,999 | |||||
|
| |||||||
14,334,999 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 7.29% | ||||||||
BIOTECHNOLOGY — 2.75% | ||||||||
a Gilead Sciences, Inc. | 280,479 | 18,604,172 | ||||||
LIFE SCIENCES TOOLS & SERVICES — 2.29% | ||||||||
a Illumina, Inc. | 320,300 | 15,438,460 | ||||||
PHARMACEUTICALS — 2.25% | ||||||||
a Valeant Pharmaceuticals International, Inc. | 275,400 | 15,221,358 | ||||||
|
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49,263,990 | ||||||||
|
| |||||||
RETAILING — 12.23% | ||||||||
DISTRIBUTORS — 1.67% | ||||||||
a LKQ Corp. | 609,640 | 11,278,340 | ||||||
INTERNET & CATALOG RETAIL — 5.32% | ||||||||
a Amazon.com, Inc. | 74,591 | 18,969,983 | ||||||
a priceline.com, Inc. | 27,432 | 16,973,001 | ||||||
SPECIALTY RETAIL — 5.24% | ||||||||
a AutoZone, Inc. | 51,181 | 18,920,080 | ||||||
a Tilly’s, Inc. | 372,090 | 6,820,410 | ||||||
a Urban Outfitters, Inc. | 258,900 | 9,724,284 | ||||||
|
| |||||||
82,686,098 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.74% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.74% | ||||||||
a Mellanox Technologies Ltd. | 70,403 | 7,148,016 | ||||||
a ON Semiconductor Corp. | 1,843,522 | 11,374,531 | ||||||
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18,522,547 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 21.62% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 5.09% | ||||||||
a Verifone Systems, Inc. | 432,000 | 12,031,200 | ||||||
Visa, Inc. | 166,806 | 22,398,710 | ||||||
INTERNET SOFTWARE & SERVICES — 6.57% | ||||||||
a Google, Inc. | 26,142 | 19,724,139 | ||||||
MercadoLibre, Inc. | 114,382 | 9,442,234 | ||||||
a VeriSign, Inc. | 312,898 | 15,235,004 | ||||||
SOFTWARE — 9.96% | ||||||||
a Allot Communications Ltd. | 382,525 | 10,144,563 | ||||||
a BroadSoft, Inc. | 221,602 | 9,090,114 | ||||||
a Ellie Mae, Inc. | 256,100 | 6,973,603 | ||||||
a Guidewire Software, Inc. | 317,702 | 9,864,647 | ||||||
a Imperva, Inc. | 243,262 | 8,998,261 | ||||||
Solera Holdings, Inc. | 275,377 | 12,080,789 | ||||||
a VMware, Inc. | 105,820 | 10,237,027 | ||||||
|
| |||||||
146,220,291 | ||||||||
|
|
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 13.59% | ||||||||
COMMUNICATIONS EQUIPMENT — 5.47% | ||||||||
a Aruba Networks, Inc. | 408,400 | $ | 9,182,874 | |||||
a Juniper Networks, Inc. | 451,700 | 7,728,587 | ||||||
Qualcomm, Inc. | 321,344 | 20,080,786 | ||||||
COMPUTERS & PERIPHERALS — 8.12% | ||||||||
Apple, Inc. | 34,911 | 23,294,714 | ||||||
a EMC Corp. | 527,544 | 14,386,125 | ||||||
a Fusion-io, Inc. | 284,100 | 8,599,707 | ||||||
a NetApp, Inc. | 262,968 | 8,646,388 | ||||||
|
| |||||||
91,919,181 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 1.85% | ||||||||
WIRELESS TELECOMMUNICATION SERVICES — 1.85% | ||||||||
a SBA Communications Corp. | 199,313 | 12,536,788 | ||||||
|
| |||||||
12,536,788 | ||||||||
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| |||||||
TRANSPORTATION — 1.75% | ||||||||
AIR FREIGHT & LOGISTICS — 1.75% | ||||||||
FedEx Corp. | 139,827 | 11,832,161 | ||||||
|
| |||||||
11,832,161 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $481,984,156) | 621,114,052 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 8.12% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.28% dated 9/28/2012 due 10/1/2012, repurchase price $10,000,233 collateralized by 2 corporate debt securities, having an aver-age coupon of 5.675%, a minimum credit rating of BBB, maturity dates from 7/15/2014 to 7/15/2041, and having an aggregate market value of $10,688,770 at 9/28/2012 | $ | 10,000,000 | 10,000,000 | |||||
Darden Restaurants, Inc., 0.32%, 10/1/2012 | 29,919,000 | 29,919,000 | ||||||
NYSE Euronext, Inc., 0.37%, 10/1/2012 | 15,000,000 | 15,000,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $54,919,000) | 54,919,000 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 99.97% (Cost $536,903,156) | $ | 676,033,052 | ||||||
OTHER ASSETS LESS LIABILITIES — 0.03% | 184,356 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 676,217,408 | ||||||
|
|
Footnote Legend
a | Non-income producing. |
See notes to financial statements.
Certified Annual Report 13
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Core Growth Fund | September 30, 2012 |
ASSETS | ||||
Investments at value (cost $536,903,156) (Note 2) | $ | 676,033,052 | ||
Cash | 116,316 | |||
Receivable for investments sold | 2,327,063 | |||
Receivable for fund shares sold | 717,102 | |||
Dividends receivable | 161,463 | |||
Interest receivable | 233 | |||
Prepaid expenses and other assets | 36,991 | |||
|
| |||
Total Assets | 679,392,220 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 2,011,546 | |||
Payable to investment advisor and other affiliates (Note 3) | 721,889 | |||
Accounts payable and accrued expenses | 441,377 | |||
|
| |||
Total Liabilities | 3,174,812 | |||
|
| |||
NET ASSETS | $ | 676,217,408 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (5,429,218 | ) | |
Net unrealized appreciation on investments | 139,129,896 | |||
Accumulated net realized gain (loss) | (562,725,186 | ) | ||
Net capital paid in on shares of beneficial interest | 1,105,241,916 | |||
|
| |||
$ | 676,217,408 | |||
|
|
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($ 225,944,866 applicable to 11,821,808 shares of beneficial interest outstanding - Note 4) | $ | 19.11 | ||
Maximum sales charge, 4.50% of offering price | 0.90 | |||
|
| |||
Maximum offering price per share | $ | 20.01 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($ 156,597,341 applicable to 9,010,357 shares of beneficial interest outstanding - Note 4) | $ | 17.38 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($ 116,567,163 applicable to 5,830,840 shares of beneficial interest outstanding - Note 4) | $ | 19.99 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($ 106,353,456 applicable to 5,566,676 shares of beneficial interest outstanding - Note 4) | $ | 19.11 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($ 9,343,574 applicable to 487,177 shares of beneficial interest outstanding - Note 4) | $ | 19.18 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($ 61,411,008 applicable to 3,075,100 shares of beneficial interest outstanding - Note 4) | $ | 19.97 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF OPERATIONS | ||
Thornburg Core Growth Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Dividend income | $ | 3,153,829 | ||
Interest income | 80,725 | |||
|
| |||
Total Income | 3,234,554 | |||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 5,993,444 | |||
Administration fees (Note 3) | ||||
Class A Shares | 284,995 | |||
Class C Shares | 195,147 | |||
Class I Shares | 62,212 | |||
Class R3 Shares | 143,087 | |||
Class R4 Shares | 12,127 | |||
Class R5 Shares | 31,733 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 569,984 | |||
Class C Shares | 1,560,969 | |||
Class R3 Shares | 571,584 | |||
Class R4 Shares | 24,093 | |||
Transfer agent fees | ||||
Class A Shares | 457,250 | |||
Class C Shares | 330,632 | |||
Class I Shares | 135,751 | |||
Class R3 Shares | 282,705 | |||
Class R4 Shares | 26,821 | |||
Class R5 Shares | 214,418 | |||
Registration and filing fees | ||||
Class A Shares | 21,979 | |||
Class C Shares | 20,955 | |||
Class I Shares | 23,888 | |||
Class R3 Shares | 30,175 | |||
Class R4 Shares | 22,696 | |||
Class R5 Shares | 21,475 | |||
Custodian fees (Note 3) | 109,751 | |||
Professional fees | 65,833 | |||
Accounting fees | 31,165 | |||
Trustee fees | 18,555 | |||
Other expenses | 51,011 | |||
|
| |||
Total Expenses | 11,314,435 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (703,663 | ) | ||
|
| |||
Net Expenses | 10,610,772 | |||
|
| |||
Net Investment Loss | $ | (7,376,218 | ) | |
|
|
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Core Growth Fund | Year Ended September 30, 2012 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 122,829,101 | ||
Foreign currency transactions | (3,148 | ) | ||
|
| |||
122,825,953 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 132,918,325 | |||
Foreign currency translations | 616 | |||
|
| |||
132,918,941 | ||||
|
| |||
Net Realized and Unrealized Gain | 255,744,894 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 248,368,676 | ||
|
|
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Core Growth Fund
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (7,376,218 | ) | $ | (10,476,393 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | 122,825,953 | 228,456,364 | ||||||
Net unrealized appreciation (depreciation) on investments and foreign currency translation | 132,918,941 | (168,137,714 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 248,368,676 | 49,842,257 | ||||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (63,234,219 | ) | (175,820,842 | ) | ||||
Class C Shares | (35,054,311 | ) | (79,773,991 | ) | ||||
Class I Shares | (43,751,698 | ) | (59,949,918 | ) | ||||
Class R3 Shares | (43,593,620 | ) | (110,226,931 | ) | ||||
Class R4 Shares | (4,685,753 | ) | (15,430,363 | ) | ||||
Class R5 Shares | (28,895,377 | ) | (284,360,787 | ) | ||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 29,153,698 | (675,720,575 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 647,063,710 | 1,322,784,285 | ||||||
|
|
|
| |||||
End of Year | $ | 676,217,408 | $ | 647,063,710 | ||||
|
|
|
|
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Core Growth Fund | September 30, 2012 |
NOTE 1 – ORGANIZATION
Thornburg Core Growth Fund (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 outstanding: 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 and may be subject to a service fee, (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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: Portfolio investments listed or traded on a national securities exchange are valued on the valuation date at the last reported trade price on the exchange that is the primary market for the security. Portfolio investments traded on an exchange for which there has been no trade that day and other equity investments traded in the over-the-counter market are valued at the mean between the last reported bid and ask prices. Portfolio investments reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign investment traded on exchanges outside the United States is valued at the price of the investment on the exchange that is normally the investment’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation measurement date.
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
In any case where the market value of an equity investment held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. The Committee’s determinations are made using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from an independent pricing service. The pricing service ordinarily values equity investments 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. An investment’s market value is deemed not readily available whenever the exchange or market on which the investment is primarily traded is closed for the entire scheduled day of trading. Additionally, an investment’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 investment’s primary exchange or market, but before the most recent close of trading in Fund shares, or an unusual event or significant period of time occurring since the availability of a market quotation, create a question about the reliability of the investment’s market value. On days when market volatility thresholds pre-determined by the Trustees are exceeded, foreign equity investments held by the Fund may be valued using synthetic pricing obtained from an independent pricing service approved by the Trustees, subject to the ability of the Committee to determine in any such instance to utilize market closing prices if the Committee considers closing prices to be more reliable.
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. 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 ordinarily 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 Committee determines a fair value for the debt obligation using procedures in accordance with a policy 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
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.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
When market volatility thresholds are exceeded, foreign equity investments may be fair valued according to other significant observable inputs rather than quoted market prices. The affected investments will be characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 621,114,052 | $ | 621,114,052 | $ | — | $ | — | ||||||||
Short Term Investments | 54,919,000 | — | 54,919,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 676,033,052 | $ | 621,114,052 | $ | 54,919,000 | $ | — |
* | 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, Inc. and Standard & Poor’s (S&P). |
In accordance with the guidance prescribed in ASU No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2012, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the year.
Foreign Currency Translation: Portfolio investments 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 investments and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign investments, 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 values of such spot contracts are included in receivable for investments sold and payable for investments purchased on the Statement of Assets and Liabilities.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on investments held. Such changes are included in net unrealized appreciation or depreciation from investments.
Reported net realized gains or losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on investment transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books, and the U.S. dollar equivalent of the amounts actually received or paid.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
Net change in unrealized appreciation and depreciation on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains on investments of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these investments 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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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.
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
General: Investments 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 investments is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of investments 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 (and under a separate agreement with the Trustees), 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.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
Use of Estimates: The preparation of financial statements, in conformity with United States 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 amounts 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, 2012, 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, 2012, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $675 for Class A shares, $110,914 for Class I shares, $341,523 for Class R3 shares, $37,340 for Class R4 shares, and $213,211 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, 2012, the Distributor has advised the Fund that it earned commissions aggregating $16,843 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $6,156 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, 2012, there were no 12b-1 service plan fees charged for Class I and 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 shares, and an annual rate of up to .25 of 1% per annum of the average daily net assets attributable to Class R3 shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, there were no fees paid indirectly.
Certain officers and Trustees of the Trust are also officers or directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,659,809 | $ | 28,820,612 | 1,523,774 | $ | 23,528,867 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (5,449,613 | ) | (92,055,088 | ) | (12,914,624 | ) | (199,351,773 | ) | ||||||||
Redemption fees received* | — | 257 | — | 2,064 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (3,789,804 | ) | $ | (63,234,219 | ) | (11,390,850 | ) | $ | (175,820,842 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 607,243 | $ | 9,426,297 | 660,446 | $ | 9,280,741 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (2,877,094 | ) | (44,480,784 | ) | (6,273,338 | ) | (89,056,037 | ) | ||||||||
Redemption fees received* | — | 176 | — | 1,305 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (2,269,851 | ) | $ | (35,054,311 | ) | (5,612,892 | ) | $ | (79,773,991 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 2,116,293 | $ | 37,348,099 | 2,621,591 | $ | 41,975,065 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (4,549,708 | ) | (81,099,955 | ) | (6,385,486 | ) | (101,926,048 | ) | ||||||||
Redemption fees received* | — | 158 | — | 1,065 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (2,433,415 | ) | $ | (43,751,698 | ) | (3,763,895 | ) | $ | (59,949,918 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 1,184,634 | $ | 20,242,338 | 1,804,561 | $ | 27,972,861 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (3,805,079 | ) | (63,836,088 | ) | (8,987,536 | ) | (138,200,925 | ) | ||||||||
Redemption fees received* | — | 130 | — | 1,133 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (2,620,445 | ) | $ | (43,593,620 | ) | (7,182,975 | ) | $ | (110,226,931 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 285,912 | $ | 4,904,776 | 489,460 | $ | 7,637,091 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (578,486 | ) | (9,590,540 | ) | (1,513,646 | ) | (23,067,562 | ) | ||||||||
Redemption fees received* | — | 11 | — | 108 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (292,574 | ) | $ | (4,685,753 | ) | (1,024,186 | ) | $ | (15,430,363 | ) | ||||||
|
|
|
|
|
|
|
|
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 944,144 | $ | 16,893,382 | 2,048,486 | $ | 33,073,276 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (2,695,752 | ) | (45,788,832 | ) | (19,949,793 | ) | (317,435,221 | ) | ||||||||
Redemption fees received* | — | 73 | — | 1,158 | ||||||||||||
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|
|
|
|
|
| |||||||||
Net increase (decrease) | (1,751,608 | ) | $ | (28,895,377 | ) | (17,901,307 | ) | $ | (284,360,787 | ) | ||||||
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* | The Fund previously charged a redemption fee of 1% of the Class A and Class I shares redeemed or exchanged within 30 days of purchase. Effective February 1, 2012, the Fund stopped imposing this redemption fee. Redemption fees that were charged to any class prior to February 1, 2012 were 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, 2012, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $819,906,228 and $1,087,783,025, respectively.
NOTE 6 — INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 539,352,671 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 145,925,569 | ||
Gross unrealized depreciation on a tax basis | (9,245,188 | ) | ||
|
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Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 136,680,381 | ||
|
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The Fund utilized $124,412,762 of capital loss carryforwards during the year ended September 30, 2012.
At September 30, 2012, the Fund had deferred tax basis late-year ordinary investment losses of $5,429,218. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) became effective for the Fund's fiscal year ending September 30, 2012. The Act requires that future capital losses generated by the Fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a Fund’s pre-enactment capital losses will expire unused.
At September 30, 2012, the Fund had cumulative 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 | $ | 306,917,260 | ||
2018 | 253,358,410 | |||
|
| |||
$ | 560,275,670 | |||
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Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 |
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $1,950,148, decreased accumulated net realized loss by $3,148, and decreased net investment loss by $1,947,000. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from nondeductible net operating loss and currency losses.
At September 30, 2012, the Fund did not have any undistributed tax basis, net ordinary income or undistributed tax basis capital gains.
The Fund did not pay any distributions during the years ended September 30, 2012 or September 30, 2011.
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50 (“ASC 815”), require certain disclosures. The disclosures are intended to provide users of financial statements with an 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. Additionally, the Fund’s risk of loss may exceed the amounts recognized on the Statement of Assets and Liabilities.
During the year ended September 30, 2012, the Fund did not invest in any derivative financial instruments of the type addressed by ASC 815.
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, management risk, market and economic risk, risks affecting specific issuers, liquidity risk, the risks associated with investments in smaller companies and non-U.S. issuers, credit risk, and interest rate risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
26 Certified Annual Report
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Certified Annual Report 27
Thornburg Core Growth Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the Year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 13.33 | (0.17 | ) | 5.95 | 5.78 | — | — | — | $ | 19.11 | (1.02 | ) | 1.48 | 1.49 | 1.48 | 43.36 | 122.93 | $ | 225,945 | ||||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 13.81 | (0.15 | ) | (0.33 | ) | (0.48 | ) | — | — | — | $ | 13.33 | (0.96 | ) | 1.45 | 1.45 | 1.45 | (3.48 | ) | 80.53 | $ | 208,135 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 12.22 | (0.28 | ) | 5.44 | 5.16 | — | — | — | $ | 17.38 | (1.79 | ) | 2.25 | 2.25 | 2.25 | 42.23 | 122.93 | $ | 156,597 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 12.75 | (0.24 | ) | (0.29 | ) | (0.53 | ) | — | — | — | $ | 12.22 | (1.71 | ) | 2.20 | 2.20 | 2.20 | (4.16 | ) | 80.53 | $ | 137,799 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.88 | (0.09 | ) | 6.20 | 6.11 | — | — | — | $ | 19.99 | (0.52 | ) | 0.99 | 0.99 | 1.08 | 44.02 | 122.93 | $ | 116,567 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.31 | (0.08 | ) | (0.35 | ) | (0.43 | ) | — | — | — | $ | 13.88 | (0.49 | ) | 0.99 | 0.99 | 1.07 | (3.00 | ) | 80.53 | $ | 114,679 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.33 | (0.18 | ) | 5.96 | 5.78 | — | — | — | $ | 19.11 | (1.04 | ) | 1.50 | 1.50 | 1.80 | 43.36 | 122.93 | $ | 106,353 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.82 | (0.16 | ) | (0.33 | ) | (0.49 | ) | — | — | — | $ | 13.33 | (1.01 | ) | 1.50 | 1.50 | 1.77 | (3.55 | ) | 80.53 | $ | 109,127 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.37 | (0.16 | ) | 5.97 | 5.81 | — | — | — | $ | 19.18 | (0.93 | ) | 1.40 | 1.40 | 1.78 | 43.46 | 122.93 | $ | 9,344 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.84 | (0.14 | ) | (0.33 | ) | (0.47 | ) | — | — | — | $ | 13.37 | (0.91 | ) | 1.40 | 1.40 | 1.76 | (3.40 | ) | 80.53 | $ | 10,423 | |||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.86 | (0.09 | ) | 6.20 | 6.11 | — | — | — | $ | 19.97 | (0.52 | ) | 0.98 | 0.99 | 1.32 | 44.08 | 122.93 | $ | 61,411 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.30 | (0.08 | ) | (0.36 | ) | (0.44 | ) | — | — | — | $ | 13.86 | (0.51 | ) | 0.99 | 0.99 | 1.22 | (3.08 | ) | 80.53 | $ | 66,901 | |||||||||||||||||||||||||||||||||||||
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 |
(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, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
28 Certified Annual Report | Certified Annual Report 29 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
Thornburg Core Growth Fund | September 30, 2012 |
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
30 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Core Growth Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,021.90 | $ | 7.39 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.69 | $ | 7.37 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,018.20 | $ | 11.08 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.02 | $ | 11.05 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,024.60 | $ | 5.01 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,021.90 | $ | 7.58 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.50 | $ | 7.57 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,022.40 | $ | 7.08 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.00 | $ | 7.06 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,024.60 | $ | 4.98 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.09 | $ | 4.96 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.46%; C: 2.20%; I: 0.99%; R3: 1.50%; R4: 1.40%; R5: 0.98%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your class of shares under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the table above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 31
INDEX COMPARISON | ||
Thornburg Core Growth Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg Core Growth Fund versus Russell 3000 Growth Index (December 27, 2000 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 5 Yrs | 10 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 12/27/00) | 36.89 | % | -2.50 | % | 11.16 | % | 3.83 | % | ||||||||
C Shares (Incep: 12/27/00) | 41.23 | % | -2.33 | % | 10.74 | % | 3.40 | % | ||||||||
I Shares (Incep: 11/1/03) | 44.02 | % | -1.12 | % | — | 7.28 | % | |||||||||
R3 Shares (Incep: 7/1/03) | 43.36 | % | -1.62 | % | — | 7.94 | % | |||||||||
R4 Shares (Incep: 2/1/07) | 43.46 | % | -1.53 | % | — | 0.27 | % | |||||||||
R5 Shares (Incep: 10/3/05) | 44.08 | % | -1.13 | % | — | 5.01 | % | |||||||||
Russell 3000G Index (Since: 12/27/00) | 29.35 | % | 3.22 | % | 8.57 | % | 1.63 | % |
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 or call 800.847.0200. 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.
32 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Core Growth Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE(1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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 Core Growth Fund | September 30, 2012 (Unaudited) |
PORTFOLIO PROXY VOTING
Policies and Procedures:
The Trust has delegated to Thornburg Investment Management, Inc. (the “Advisor”) voting decisions respecting proxies for the Fund’s voting securities. The Advisor makes voting decisions in accordance with its Proxy Voting Policy and Procedures. A description of the Policy and Procedures is available (i) without charge, upon request, by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg website at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s website at www.sec. gov.
Information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information is available (i) without charge, upon request by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg website at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Core Growth Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2012.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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 selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (iii) measures of the Fund’s investment returns over different periods of time, relative to a category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to
36 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 (Unaudited) |
broad-based securities indices, (iv) the Fund’s cumulative investment return since inception relative to the securities index, and (v) comparative measures of estimated earnings growth, portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of accounting and other services, the Advisor’s 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 considered (among other aspects of the data) comparative performance data for the ten most recent calendar years, which showed the Fund’s investment return for the most recent calendar year was higher than the average return for the mutual fund category and the return for one of the two indices and comparable to the return for the other index, and that the Fund’s returns for the preceding nine calendar years exceeded the average returns of the category in six of the nine years and exceeded or were comparable to the returns of each of the two indices in seven of the nine years. Other noted quantitative data showed that the Fund’s investment returns fell somewhat above the mid-point of performance for the mutual fund category for the year-to-date and somewhat below the mid-point for the three-year period ended with the second quarter of the current year, fell near the top decile of performance for the one-year period, and fell in the third quartile of performance for the category for the three-month period. Data presented to the Trustees also showed that the Fund’s returns over a ten-year period fell within the top decile of the performance for the category, and also demonstrated the Fund’s higher cumulative return since inception (net of expenses) relative to the Fund’s benchmark 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of equity mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged by the Advisor was somewhat higher than the median and average fee rates charged to the fund category, and that the overall expense ratio of a reference share class of the Fund was slightly higher than the median and average expense ratios for the fund category. The Trustees did not find these differences 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 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. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its 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
Certified Annual Report 37
OTHER INFORMATION, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2012 (Unaudited) |
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.
38 Certified Annual Report
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This page is not part of the Annual Report. 39
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
40 This page is not part of the Annual Report.
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 website 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 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 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 FUND FAMILY
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 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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TH082 |
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2012. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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
Brazil Bovespa Index – A gross total return index weighted by traded volume and it is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange.
German DAX Index – The DAX Index represents 30 of the largest and most liquid German companies that trade on the Frankfurt Exchange.
IBEX 35 Index – The IBEX 35 is the official index of the Spanish Continuous Market. The index is comprised of the 35 most liquid stocks traded on the Continuous Market.
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.
MSCI Philippines Index – This index is designed to measure the performance of the large and mid-cap segments of the Philippines market. With 19 constituents, the index covers about 85% of the Philippines equity universe.
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.
Gross Domestic Product (GDP) – A country’s income minus foreign investments: the total value of all goods and services produced within a country in a year, minus net income from investments in other countries.
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.
Selection Effect – The portion of portfolio excess return attributed to choosing different securities within groups compared to the benchmark.
This page is not part of the Annual Report. 3
THORNBURG INTERNATIONAL GROWTH FUND
Portfolio Managers
.
Tim Cunningham, CFA, and Greg Dunn
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 or call 800.847.0200.
The maximum sales charge for Class A shares is 4.50%. The total annual operating expenses of Class A shares are 1.54% as disclosed in the most recent Prospectus.
Comprehensive International Growth Investing
A major benefit of an interconnected global economy is the ability to tap into a country’s 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, the team employs a comprehensive, “go-everywhere” approach to growth investing. The team classifies stocks into various growth baskets: Growth Industry Leaders, Consistent Growth Companies, or Emerging Growth Companies. From those baskets, the team will typically build a portfolio of 35–55 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 diversifying across a large number of names, the team managing the Thornburg International Growth Fund believes that a more robust understanding of a smaller number of portfolio holdings is one of the most effective forms of risk management.
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 2/1/07) | ||||||||||||||||
Without sales charge | 18.03 | % | 15.35 | % | 2.12 | % | 5.96 | % | ||||||||
With sales charge | 12.72 | % | 13.58 | % | 1.19 | % | 5.11 | % | ||||||||
MSCI AC World ex-U.S. Growth Index | ||||||||||||||||
(Since 2/1/07) | 15.40 | % | 4.64 | % | -3.76 | % | -0.44 | % |
4 This page is not part of the Annual Report.
Much of the research process is focused on identifying how the overall market came to price a security. Many of the ideas are sourced through a quantitative screening process of the universe of international companies. Only those with the most appealing growth and valuation characteristics pass on to the step of having a complex financial model built. Thornburg’s growth investment team scours regulatory filings, visits company management, and interviews suppliers and customers. By doing this work, they develop their own view of the intrinsic value of the company. Only if their view is materially higher than the market do they make an investment.
Others may question how the team manages a growth portfolio, especially an international one, from Santa Fe, New Mexico. At Thornburg Investment Management, we embrace our location, away from the ancillary noise of the major money centers. We have access to Wall Street research, but prefer to come to our own conclusions about the value of an investment. The investment process allows the team to take a very broad view of what an attractively valued, international growth company looks like, and invest in those few companies that they believe provide the most attractive risk-reward trade-off. The result is a portfolio which at any given time will look quite unlike the MSCI AC World ex-U.S. Growth Index or the competition. All of this is done with a goal of providing attractive, consistent returns over the long term.
Stocks Contributing And Detracting
For the Year Ended September 30, 2012
Top Contributors | Top Detractors | |
Tower Bersama Infrastructure | Supergroup plc | |
MercadoLibre, Inc. | blinkx plc | |
Puregold Price Club, Inc. | zooplus AG | |
Jubilant FoodWorks Ltd. | Start Today Co. Ltd. | |
InterXion Holding N.V. | APR Energy plc | |
Source: FactSet |
Key Portfolio Attributes
As of September 30, 2012
Portfolio P/E Trailing 12-months* | 24.7x | |||
Portfolio Price to Cash Flow* | 14.4x | |||
Portfolio Price to Book Value* | 3.9x | |||
Median Market Cap* | $ | 3.7 B | ||
5-Year Beta (A Shares vs. Benchmark)* | 0.92 | |||
Number of Companies | 53 | |||
* Source: FactSet |
Market Capitalization Exposure
As of September 30, 2012
Basket Structure
As of September 30, 2012
This page is not part of the Annual Report. 5
Thornburg International Growth Fund –
September 30, 2012
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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 14, 2012
Dear Fellow Shareholder:
For the fiscal year ended September 30, 2012, the Thornburg International Growth Fund returned 18.03% for the Class A shares at net asset value (NAV), outperforming its benchmark, the MSCI All Country World ex-U.S. Growth Index, which returned 15.40%. On September 30, 2012, the NAV of the Class A shares was $15.78.
Broadly speaking, we’ve seen international markets rally, retreat, and rally again, swinging 15-20% in both directions over a period of months. Macroeconomic uncertainty, marginal gross domestic product (GDP) growth, and see-sawing investor sentiment have led to a continuation of the risk on/risk off investing environment we have grown accustomed to over the last couple of years. Overall, the trailing twelve-month period has treated investors well, but when viewed from a geographic standpoint, one sees that the market action was not a rising tide that lifted all boats. The German DAX Index was up 31%, but the Spanish IBEX Index declined 10%. In the emerging markets, the Philippines Index increased 35% while the Brazil Bovespa Index declined more than 8% (both include the impact of currency – a negative for Brazil, a positive for the Philippines).
We do not try to predict which markets will go up or down; rather, we focus our efforts on bottom-up stock selection, which has historically helped us avoid weak geographies and participate in strong ones. A good example is Brazil. At the end of 2010, we had nearly 7% of the Fund invested in Brazilian equities. By September 2011, we had no exposure to Brazil, and so, we avoided the bulk of the weak performance there over the past twelve months. It was not a top-down, macro call. It was a bottom-up, stock-by-stock decision. Our sell discipline drives us to sell stocks at price targets or when fundamentals begin to deteriorate, as happened to our holdings in Brazil. That helped us exit those positions at the appropriate time and avoid a tough market. As managers of an international fund, we have wide latitude to go where we find promising growth companies trading at attractive valuations, and for the most part over the past year, Brazil stocks simply did not make the cut as we added new names to the portfolio. In a volatile market with a significant disparity between winners and losers, we find ourselves relying on our bottom-up process to help us identify the best companies and, in turn, the best geographies.
Clearly, stock selection tends to be the primary driver of performance, as it was during this period. Our selection effect was materially positive in telecommunication services, industrials, consumer staples, and materials, and materially negative in consumer discretionary. Our investment decisions are driven by our bottom-up, fundamental research, so we were pleased to have such strong stock selection for the period.
Top contributors to performance during this period included Tower Bersama Infrastructure, MercadoLibre, Puregold Price Club, Jubilant FoodWorks, and InterXion Holding.
Certified Annual Report 7
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
Tower Bersama Infrastructure, headquartered in Indonesia, operates cell phone towers. Indonesia is in the relatively early stages of telecommunication development, where wireless carriers tend to own and operate their own in-house towers. This is highly inefficient as a typical tower is expensive and is capable of holding the equipment for several wireless providers. Tower Bersama has benefitted from acquiring a large block of towers from one of the wireless carriers and has been able to leverage those underutilized towers by adding additional tenants.
MercadoLibre, an eBay style e-commerce platform serving Latin America, benefits from the long-term structural trend of retail moving from physical stores to online following recent improvements to the firm’s online platform where there was a significant increase in customer transaction value on the platform.
Puregold Price Club is the second-largest retailer among hypermarkets, supermarkets, and cash-and-carry stores in the Philippines; the company also operates a Costco-like membership shopping club chain. The stock has performed well, driven by store expansion in a relatively underpenetrated retail market and by strong growth prospects from the membership-shopping segment.
Jubilant FoodWorks operates the Domino’s Pizza chain in India. While Jubilant FoodWorks has performed well on an operational level, increasing restaurant count and generating strong same store sales, they have also benefitted from a broad rally in risk assets, as India has been one of the best performing markets in the world for the period.
InterXion Holding is a data center company providing space, power, and cooling in a secured environment, housing customers’ computing, network, storage, and IT infrastructure. As data continues to grow and as cloud architecture becomes more prevalent, data centers should continue to proliferate.
Top detractors for the period included Supergroup, blinkx, zooplus, Start Today, and APR Energy.
Supergroup, a U.K. based fashion retailer, declined as investors became increasingly concerned about the willingness and ability of U.K. retail consumers to continue spending in the difficult economic environment. We also became increasingly concerned about deterioration in the brand and sold the stock.
blinkx is a London-based specialty search engine focused on analyzing and aggregating video content. It encountered significant selling pressure after missing earnings expectations, utilizing a dilutive secondary offering to fund an unpopular acquisition, and announcing a significant change in strategy. We sold blinkx due to the fundamental deterioration mentioned above and the impact on our investment thesis.
zooplus, an online retailer of pet food and pet supplies mostly in Europe, incurred expansion costs causing free cash flow to change from positive to negative. This limited the company’s ability to spend on marketing, hurting estimates of future sales and the stock price. We sold zooplus during the period.
Start Today operates an online shopping mall in Japan focused on fast fashion apparel. Start Today essentially functions as the outsourced e-commerce website for its retail partners, who sell their merchandise on Start Today’s online mall. Company management released aggressive targets for its fiscal year, and although growth has been impressive, it appears unlikely to meet the lofty growth targets. Subsequently, we have sold the stock.
8 Certified Annual Report
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
APR Energy plc is a temporary power generation company. They transport portable power generators to temporary locations to supplement power needs for natural disasters or temporary power shortages. APR has been aggressively ramping up their number of power generation units they own. We had expected the units to be easily deployed into use creating strong sales and earnings growth through high capacity utilization. Unfortunately, APR has not been able to deploy the power generation as quickly as they had planned. This slower pace of deployment caused lower than expected operating results and returns on capital employed – causing us to sell the stock.
The key concerns that have driven the higher-than-normal market volatility linger: the strength of the U.S. recovery, the European debt crisis, and the slowdown in the Chinese economy – to name a few of the larger ones. There is no easy, short-term “fix” for any of these issues and we suspect they will continue to drive market volatility going forward. In the meantime, we will continue to try to take advantage of the opportunities presented using our fundamentally focused, bottom-up process to lead us into promising growth companies with sound business fundamentals trading at attractive valuations.
Thank you for your investment in Thornburg International Growth Fund.
Sincerely,
Greg Dunn | Tim Cunningham,CFA | |
Managing Director | Managing Director | |
Portfolio Manager | 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
Thornburg International Growth Fund | September 30, 2012 |
Top Ten Equity Holdings
As of 9/30/12
Las Vegas Sands Corp. | 2.9 | % | Gemalto NV | 2.5 | % | |||||
Christian Hansen Holding AS | 2.7 | % | YOOX S.p.A | 2.4 | % | |||||
Kabel Deutschland Holding AG | 2.6 | % | Carnival Corp. | 2.3 | % | |||||
Telecity Group plc | 2.6 | % | Wirecard AG | 2.3 | % | |||||
priceline.com, Inc. | 2.6 | % | InterXion Holding NV | 2.2 | % |
Summary of Industry Exposure
As of 9/30/12
Software & Services | 22.4 | % | Media | 2.6 | % | |||||
Retailing | 12.4 | % | Commercial & Professional Services | 2.6 | % | |||||
Consumer Services | 8.7 | % | Technology Hardware & Equipment | 2.6 | % | |||||
Food & Staples Retailing | 7.1 | % | Pharmaceuticals, Biotechnology & Life Sciences | 2.2 | % | |||||
Materials | 6.5 | % | Household & Personal Products | 1.9 | % | |||||
Diversified Financials | 6.3 | % | Consumer Durables & Apparel | 1.8 | % | |||||
Semiconductors & Semiconductor Equipment | 5.8 | % | Telecommunication Services | 1.5 | % | |||||
Health Care Equipment & Services | 3.3 | % | Capital Goods | 1.1 | % | |||||
Energy | 3.1 | % | Other Assets & Liabilities | 8.1 | % |
Summary of Country Exposure
As of 9/30/12 (percent of equity holdings)
United States | 14.4 | % | Netherlands | 2.4 | % | |||||
United Kingdom | 13.9 | % | Argentina | 2.1 | % | |||||
Germany | 8.8 | % | Philippines | 2.0 | % | |||||
Canada | 8.6 | % | South Korea | 2.0 | % | |||||
Denmark | 5.0 | % | Poland | 1.8 | % | |||||
India | 4.8 | % | Russia | 1.8 | % | |||||
France | 4.6 | % | Indonesia | 1.7 | % | |||||
Israel | 4.6 | % | Costa Rica | 1.6 | % | |||||
China | 3.6 | % | Mexico | 1.5 | % | |||||
Ireland | 3.5 | % | Sweden | 1.5 | % | |||||
Australia | 3.1 | % | Hong Kong | 1.1 | % | |||||
Italy | 2.6 | % | Japan | 0.6 | % | |||||
Brazil | 2.4 | % |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
Shares/ | ||||||||
Principal Amount | Value | |||||||
COMMON STOCK — 91.86% | ||||||||
CAPITAL GOODS — 1.13% | ||||||||
MACHINERY — 1.13% | 106,968 | $ | 6,168,845 | |||||
|
| |||||||
a Wabco Holdings, Inc. | 6,168,845 | |||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 2.57% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 0.94% | ||||||||
Mineral Resources Ltd. | 643,423 | 5,119,133 | ||||||
PROFESSIONAL SERVICES — 1.63% | ||||||||
Experian plc | 535,000 | 8,889,713 | ||||||
14,008,846 | ||||||||
CONSUMER DURABLES & APPAREL — 1.85% | ||||||||
TEXTILES, APPAREL & LUXURY GOODS — 1.85% | ||||||||
Gildan Activewear, Inc. | 317,400 | 10,055,232 | ||||||
|
| |||||||
10,055,232 | ||||||||
|
| |||||||
CONSUMER SERVICES — 8.69% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 8.69% | ||||||||
Carnival Corp. | 346,100 | 12,611,884 | ||||||
Domino’s Pizza UK & IRL plc | 853,600 | 7,319,265 | ||||||
a Jubilant FoodWorks Ltd. | 437,203 | 11,341,417 | ||||||
Las Vegas Sands Corp. | 345,900 | 16,039,383 | ||||||
|
| |||||||
47,311,949 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 6.33% | ||||||||
CAPITAL MARKETS — 3.48% | ||||||||
CETIP SA | 581,400 | 7,628,679 | ||||||
Hargreaves Lansdown plc | 1,116,900 | 11,335,433 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 2.85% | ||||||||
Citigroup, Inc. | 280,100 | 9,164,872 | ||||||
Multi Commodity Exchange of India Ltd. | 261,600 | 6,353,391 | ||||||
|
| |||||||
34,482,375 | ||||||||
�� |
|
| ||||||
ENERGY — 3.10% | ||||||||
OIL, GAS & CONSUMABLE FUELS — 3.10% | ||||||||
Cenovus Energy, Inc. | 290,400 | 10,134,904 | ||||||
CNOOC Ltd. | 3,296,000 | 6,750,083 | ||||||
|
| |||||||
16,884,987 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 7.14% | ||||||||
FOOD & STAPLES RETAILING — 7.14% | ||||||||
Brazil Pharma SA | 710,000 | 4,255,272 | ||||||
Jeronimo Martins SPGS SA | 550,300 | 9,182,510 | ||||||
PriceSmart, Inc. | 104,882 | 7,941,665 | ||||||
Puregold Price Club, Inc. | 13,913,300 | 9,905,909 | ||||||
Wal-Mart de Mexico SAB de C.V. | 2,702,800 | 7,611,747 | ||||||
|
| |||||||
38,897,103 | ||||||||
|
|
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
Shares/ | ||||||||
Principal Amount | Value | |||||||
HEALTH CARE EQUIPMENT & SERVICES — 3.26% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 1.56% | ||||||||
Covidien plc | 143,239 | $ | 8,511,261 | |||||
HEALTH CARE PROVIDERS & SERVICES — 1.70% | ||||||||
Orpea | 230,375 | 9,236,552 | ||||||
|
| |||||||
17,747,813 | ||||||||
|
| |||||||
HOUSEHOLD & PERSONAL PRODUCTS — 1.86% | ||||||||
PERSONAL PRODUCTS — 1.86% | ||||||||
ABLE C&C Co. Ltd. | 124,500 | 10,104,056 | ||||||
|
| |||||||
10,104,056 | ||||||||
|
| |||||||
MATERIALS — 6.53% | ||||||||
CHEMICALS — 4.61% | ||||||||
Christian Hansen Holding AS | 487,300 | 14,682,417 | ||||||
Novozymes AS | 379,000 | 10,445,936 | ||||||
METALS & MINING — 1.92% | ||||||||
BHP Billiton Ltd. | 305,000 | 10,453,082 | ||||||
|
| |||||||
35,581,435 | ||||||||
|
| |||||||
MEDIA — 2.63% | ||||||||
MEDIA — 2.63% | 200,900 | 14,330,822 | ||||||
|
| |||||||
a Kabel Deutschland Holding AG | 14,330,822 | |||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 2.15% | ||||||||
PHARMACEUTICALS — 2.15% | 211,960 | 11,715,029 | ||||||
|
| |||||||
a Valeant Pharmaceuticals International, Inc. | 11,715,029 | |||||||
|
| |||||||
RETAILING — 12.42% | ||||||||
INTERNET & CATALOG RETAIL — 9.41% | ||||||||
a ASOS plc | 286,700 | 10,171,296 | ||||||
a CDON Group AB | 1,212,015 | 7,601,848 | ||||||
a MakeMyTrip Ltd. | 371,423 | 6,325,334 | ||||||
a priceline.com, Inc. | 22,558 | 13,957,311 | ||||||
a YOOX S.p.A | 1,029,400 | 13,175,389 | ||||||
MULTILINE RETAIL — 2.03% | ||||||||
Dollarama, Inc. | 173,000 | 11,042,366 | ||||||
SPECIALTY RETAIL — 0.98% | ||||||||
Hengdeli Holdings Ltd. | 18,572,000 | 5,365,103 | ||||||
|
| |||||||
67,638,647 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 5.80% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 5.80% | ||||||||
Arm Holdings plc | 915,900 | 8,504,219 | ||||||
a Dialog Semiconductor plc | 405,600 | 7,901,637 | ||||||
Infineon Technologies AG | 1,518,700 | 9,637,026 | ||||||
a Mellanox Technologies Ltd. | 54,860 | 5,569,936 | ||||||
|
| |||||||
31,612,818 | ||||||||
|
|
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
Shares/ | ||||||||
Principal Amount | Value | |||||||
SOFTWARE & SERVICES — 22.39% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 6.97% | ||||||||
Bit-isle, Inc. | 304,200 | $ | 3,165,177 | |||||
a InterXion Holding NV | 519,890 | 11,811,901 | ||||||
MasterCard, Inc. | 23,600 | 10,654,928 | ||||||
Wirecard AG | 536,005 | 12,308,732 | ||||||
INTERNET SOFTWARE & SERVICES — 8.24% | ||||||||
a Baidu, Inc. ADR | 96,775 | 11,305,255 | ||||||
MercadoLibre, Inc. | 124,291 | 10,260,222 | ||||||
Telecity Group plc | 976,080 | 14,114,632 | ||||||
a Yandex NV | 382,434 | 9,220,484 | ||||||
SOFTWARE — 7.18% | ||||||||
a Allot Communications Ltd. | 279,341 | 7,408,124 | ||||||
a Check Point Software Technologies Ltd. | 210,100 | 10,118,416 | ||||||
a Imperva, Inc. | 180,969 | 6,694,043 | ||||||
a Monitise plc | 9,219,520 | 5,359,563 | ||||||
Solera Holdings, Inc. | 216,700 | 9,506,629 | ||||||
|
| |||||||
121,928,106 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.50% | ||||||||
COMPUTERS & PERIPHERALS — 2.50% | ||||||||
|
| |||||||
Gemalto NV | 154,541 | 13,593,682 | ||||||
|
| |||||||
13,593,682 | ||||||||
TELECOMMUNICATION SERVICES — 1.51% | ||||||||
WIRELESS TELECOMMUNICATION SERVICES — 1.51% | 17,699,900 | 8,230,361 | ||||||
|
| |||||||
a Tower Bersama Infrastructure | 8,230,361 | |||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $432,219,269) | 500,292,106 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 7.50% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.28% dated 9/28/2012 due 10/1/2012, repurchase price $15,000,350 collateralized by 3 corporate debt securities, having an aver-age coupon of 3.025%, a minimum credit rating of BBB, maturity dates from 07/15/2017 to 9/15/2037, and having an aggregate market value of $16,198,531 at 9/28/2012 | $ | 15,000,000 | 15,000,000 | |||||
Darden Restaurants, Inc., 0.32%, 10/1/2012 | 8,696,000 | 8,696,000 | ||||||
Oneok, Inc., 0.36%, 10/1/2012 | 17,125,000 | 17,125,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $40,821,000) | 40,821,000 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 99.36% (Cost $473,040,269) | $ | 541,113,106 | ||||||
OTHER ASSETS LESS LIABILITIES — 0.64% | 3,492,247 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 544,605,353 | ||||||
|
|
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, 2012 |
ASSETS | ||||
Investments at value (cost $473,040,269) (Note 2) | $ | 541,113,106 | ||
Cash | 92,588 | |||
Cash denominated in foreign currency (cost $406,902) | 404,856 | |||
Receivable for fund shares sold | 3,657,278 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 921,982 | |||
Dividends receivable | 238,988 | |||
Dividend and interest reclaim receivable | 18,626 | |||
Interest receivable | 350 | |||
Prepaid expenses and other assets | 44,931 | |||
|
| |||
Total Assets | 546,492,705 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 712 | |||
Payable for fund shares redeemed | 425,889 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 272,138 | |||
Payable to investment advisor and other affiliates (Note 3) | 467,103 | |||
Deferred taxes payable | 587,638 | |||
Accounts payable and accrued expenses | 133,872 | |||
|
| |||
Total Liabilities | 1,887,352 | |||
|
| |||
NET ASSETS | $ | 544,605,353 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (1,799,732 | ) | |
Net unrealized appreciation on investments | 68,131,920 | |||
Accumulated net realized gain (loss) | (27,266,554 | ) | ||
Net capital paid in on shares of beneficial interest | 505,539,719 | |||
|
| |||
$ | 544,605,353 | |||
|
|
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($ 255,724,976 applicable to 16,205,873 shares of beneficial interest outstanding - Note 4) | $ | 15.78 | ||
Maximum sales charge, 4.50% of offering price | 0.74 | |||
|
| |||
Maximum offering price per share | $ | 16.52 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($ 55,656,057 applicable to 3,593,741 shares of beneficial interest outstanding - Note 4) | $ | 15.49 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($ 198,938,165 applicable to 12,406,273 shares of beneficial interest outstanding - Note 4) | $ | 16.04 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($ 5,709,280 applicable to 362,867 shares of beneficial interest outstanding - Note 4) | $ | 15.73 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($ 9,325,890 applicable to 593,888 shares of beneficial interest outstanding - Note 4) | $ | 15.70 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($ 19,250,985 applicable to 1,197,655 shares of beneficial interest outstanding - Note 4) | $ | 16.07 | ||
|
|
* | 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 International Growth Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $121,161) | $ | 3,982,234 | ||
Interest income | 63,230 | |||
Other income | 44 | |||
|
| |||
Total Income | 4,045,508 | |||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 3,219,195 | |||
Administration fees (Note 3) | ||||
Class A Shares | 218,793 | |||
Class C Shares | 56,151 | |||
Class I Shares | 65,328 | |||
Class R3 Shares | 4,687 | |||
Class R4 Shares | 4,483 | |||
Class R5 Shares | 5,034 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 437,720 | |||
Class C Shares | 449,734 | |||
Class R3 Shares | 18,808 | |||
Class R4 Shares | 9,014 | |||
Transfer agent fees | ||||
Class A Shares | 249,808 | |||
Class C Shares | 64,764 | |||
Class I Shares | 91,630 | |||
Class R3 Shares | 13,145 | |||
Class R4 Shares | 11,566 | |||
Class R5 Shares | 7,079 | |||
Registration and filing fees | ||||
Class A Shares | 48,282 | |||
Class C Shares | 15,476 | |||
Class I Shares | 59,100 | |||
Class R3 Shares | 20,439 | |||
Class R4 Shares | 20,377 | |||
Class R5 Shares | 20,377 | |||
Custodian fees (Note 3) | 201,310 | |||
Professional fees | 57,972 | |||
Accounting fees | 9,578 | |||
Trustee fees | 11,145 | |||
Other expenses | 79,035 | |||
|
| |||
Total Expenses | 5,470,030 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (298,503 | ) | ||
|
| |||
Net Expenses | 5,171,527 | |||
|
| |||
Net Investment Loss | $ | (1,126,019 | ) | |
|
|
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg International Growth Fund | Year Ended September 30, 2012 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | (16,338,908 | ) | |
Forward currency contracts (Note 7) | 2,287,901 | |||
Foreign currency transactions | (1,121,503 | ) | ||
|
| |||
(15,172,510 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $ 587,638) | 77,977,160 | |||
Forward currency contracts (Note 7) | 139,059 | |||
Foreign currency translations | 1,163,074 | |||
|
| |||
79,279,293 | ||||
|
| |||
Net Realized and Unrealized Gain | 64,106,783 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 62,980,764 | ||
|
|
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN NET ASSETS |
Thornburg International Growth Fund |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income (loss) | $ | (1,126,019 | ) | $ | 289,944 | |||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | (15,172,510 | ) | 22,326,541 | |||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations, and deferred taxes | 79,279,293 | (23,506,648 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 62,980,764 | (890,163 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (11,302 | ) | (125,932 | ) | ||||
Class I Shares | (245,656 | ) | (269,792 | ) | ||||
Class R3 Shares | (929 | ) | (3,181 | ) | ||||
Class R4 Shares | (4,505 | ) | (10 | ) | ||||
Class R5 Shares | (19,885 | ) | (991 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 122,496,950 | 71,401,549 | ||||||
Class C Shares | 12,620,154 | 9,489,209 | ||||||
Class I Shares | 99,601,452 | 36,053,441 | ||||||
Class R3 Shares | 3,119,582 | 801,199 | ||||||
Class R4 Shares | 8,359,179 | 163,213 | ||||||
Class R5 Shares | 17,083,118 | 214,537 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 325,978,922 | 116,833,079 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 218,626,431 | 101,793,352 | ||||||
|
|
|
| |||||
End of Year | $ | 544,605,353 | $ | 218,626,431 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | — | $ | 302,690 |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg International Growth Fund | September 30, 2012 |
NOTE 1 – ORGANIZATION
Thornburg International Growth Fund (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 outstanding: 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 and may be subject to a service fee, (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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: Portfolio investments listed or traded on a national securities exchange are valued on the valuation date at the last reported trade price on the exchange that is the primary market for the investment. Portfolio investments traded on an exchange for which there has been no trade that day and other equity investments traded in the over-the-counter market are valued at the mean between the last reported bid and ask prices. Portfolio investments reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign investment traded on exchanges outside the United States is valued at the price of the investment on the exchange that is normally the investment’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation measurement date.
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
In any case where the market value of an equity investment held by the Fund is not readily available, a determination of a fair value for the investment is made the Committee. The Committee’s determinations are made using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from an independent pricing service. The pricing service ordinarily values equity investments 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. An investment’s market value is deemed not readily available whenever the exchange or market on which the investment is primarily traded is closed for the entire scheduled day of trading. Additionally, an investment’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 investment’s primary exchange or market, but before the most recent close of trading in Fund shares, or an unusual event or significant period of time occurring since the availability of a market quotation, create a question about the reliability of the investment’s market value. On days when market volatility thresholds pre-determined by the Trustees are exceeded, foreign equity investments held by the Fund may be valued using synthetic pricing obtained from an independent pricing service approved by the Trustees, subject to the ability of the Committee to determine in any such instance to utilize market closing prices if the Committee considers closing prices to be more reliable.
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. 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 ordinarily 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 Committee determines a fair value for the debt obligation using procedures in accordance with a policy 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
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.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
When market volatility thresholds are exceeded, foreign equity investments may be fair valued according to other significant observable inputs rather than quoted market prices. The affected investments will be characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
Level 3: Significant unobservable inputs (including the Committee’s own assumptions in determining the fair value of investments) are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 500,292,106 | $ | 500,292,106 | $ | — | $ | — | ||||||||
Short Term Investments | 40,821,000 | — | 40,821,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 541,113,106 | $ | 500,292,106 | $ | 40,821,000 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 921,982 | $ | — | $ | 921,982 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (272,138 | ) | $ | — | $ | (272,138 | ) | $ | — | ||||||
Spot Currency | $ | (712 | ) | $ | (712 | ) | $ | — | $ | — |
* | 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, Inc. 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. |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2012, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the year.
Foreign Currency Translation: Portfolio investments 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 investments and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign investments, 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 values of such spot contracts are included in receivable for investments sold and payable for investments purchased on the Statement of Assets and Liabilities.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on investments held. Such changes are included in net unrealized appreciation or depreciation from investments.
Reported net realized gains or losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on investment 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 change in unrealized appreciation and depreciation on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains on investments of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these investments 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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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.
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
General: Investment 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 investments is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of investments are recorded on an identified cost basis. Net invest-
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
ment 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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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 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, 2012, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $5,936 for Class A shares, $2,476 for Class C shares, $192,351 for Class I shares, $37,295 for Class R3 shares, $29,950 for Class R4 shares, and $30,495 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, 2012, the Distributor has advised the Fund that it earned commissions aggregating $29,658 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $11,973 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, 2012, there were no 12b-1 service plan fees charged for Class I and 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 shares, and an annual rate of up to .25 of 1% per annum of the average daily net assets attributable to Class R3 shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, there were no fees paid indirectly.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 12,941,145 | $ | 187,401,388 | 6,155,661 | $ | 89,652,304 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 614 | 9,581 | 8,126 | 111,333 | ||||||||||||
Shares repurchased | (4,580,563 | ) | (64,921,668 | ) | (1,300,594 | ) | (18,367,562 | ) | ||||||||
Redemption fees received* | — | 7,649 | — | 5,474 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 8,361,196 | $ | 122,496,950 | 4,863,193 | $ | 71,401,549 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 1,496,024 | $ | 21,154,431 | 1,070,622 | $ | 15,291,607 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (602,003 | ) | (8,536,476 | ) | (409,267 | ) | (5,804,582 | ) | ||||||||
Redemption fees received* | — | 2,199 | — | 2,184 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 894,021 | $ | 12,620,154 | 661,355 | $ | 9,489,209 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 10,700,499 | $ | 156,001,081 | 5,109,347 | $ | 74,394,059 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 12,048 | 190,595 | 16,332 | 225,702 | ||||||||||||
Shares repurchased | (3,883,054 | ) | (56,595,538 | ) | (2,713,559 | ) | (38,570,995 | ) | ||||||||
Redemption fees received* | — | 5,314 | — | 4,675 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 6,829,493 | $ | 99,601,452 | 2,412,120 | $ | 36,053,441 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 353,632 | $ | 5,122,691 | 84,069 | $ | 1,212,823 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 44 | 683 | 230 | 3,141 | ||||||||||||
Shares repurchased | (135,178 | ) | (2,003,942 | ) | (29,493 | ) | (414,869 | ) | ||||||||
Redemption fees received* | — | 150 | — | 104 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 218,498 | $ | 3,119,582 | 54,806 | $ | 801,199 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 666,008 | $ | 9,582,033 | 44,069 | $ | 659,533 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 209 | 3,239 | 1 | 10 | ||||||||||||
Shares repurchased | (83,272 | ) | (1,226,176 | ) | (33,366 | ) | (496,336 | ) | ||||||||
Redemption fees received* | — | 83 | — | 6 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 582,945 | $ | 8,359,179 | 10,704 | $ | 163,213 | ||||||||||
|
|
|
|
|
|
|
|
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 1,282,201 | $ | 18,775,403 | 18,219 | $ | 259,606 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,254 | 19,885 | 71 | 991 | ||||||||||||
Shares repurchased | (114,778 | ) | (1,712,501 | ) | (3,113 | ) | (46,079 | ) | ||||||||
Redemption fees received* | — | 331 | — | 19 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,168,677 | $ | 17,083,118 | 15,177 | $ | 214,537 | ||||||||||
|
|
|
|
|
|
|
|
* | The Fund previously charged a redemption fee of 1% of the Class A and Class I shares redeemed or exchanged within 30 days of purchase. Effective February 1, 2012, the Fund stopped imposing this redemption fee. Redemption fees that were charged to any class prior to February 1, 2012 were 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, 2012, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $572,067,873 and $330,746,901, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 474,210,093 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 75,863,941 | ||
Gross unrealized depreciation on a tax basis | (8,960,928 | ) | ||
|
| |||
Net unrealized appreciation (depreciation)on investments (tax basis) | $ | 66,903,013 | ||
|
|
At September 30, 2012, the Fund had deferred tax basis late-year ordinary investment losses of $1,799,732 and capital losses of $13,574,084 occurring subsequent to October 31, 2011. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
The Fund utilized $700,346 of capital loss carryforwards during the year ended September 30, 2012.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) became effective for the Fund’s fiscal year ending September 30, 2012. The Act requires that future capital losses generated by the Fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a Fund’s pre-enactment capital losses will expire unused.
At September 30, 2012, the Fund had cumulative tax basis capital losses of $11,872,802, which expire on September 30, 2018.
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $427,377, decreased accumulated net realized losses by $1,121,503, and increased distribution in excess of net investment loss by $694,126. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from non-deductible net operating losses and foreign currency gains (losses).
At September 30, 2012, the Fund had no undistributed tax basis ordinary income or capital gains.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 |
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 282,168 | $ | 399,906 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 282,168 | $ | 399,906 | ||||
|
|
|
|
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50 (“ASC 815”), require certain disclosures. The disclosures are intended to provide users of financial statements with an 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, 2012, 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. Additionally, the Fund’s risk of loss may exceed the amounts recognized on the Statement of Assets and Liabilities.
The Fund entered into forward currency contracts during the year ended September 30, 2012 in the normal course of pursuing its investment objectives, in anticipation 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 appreciation and depreciation on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities, as measured by the difference between the forward exchange rates at the reporting date and the forward exchange rates at each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations. The quarterly average values of open sell currency contracts for the year ended September 30, 2012 was $80,243,866. Open buy currency contracts are entered into for the purpose of closing open sell currency contracts and the values are dependent upon the values of open sell currency contracts during the year ended September 30, 2012.
The following table displays the outstanding forward currency contracts at September 30, 2012:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2012
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||
Australian Dollar | Buy | 5,527,800 | 11/08/2012 | 5,715,829 | $ | 230,869 | $ | — | ||||||||||||||
Australian Dollar | Buy | 1,948,500 | 11/08/2012 | 2,014,778 | 92,661 | — | ||||||||||||||||
Australian Dollar | Sell | 7,344,000 | 03/11/2013 | 7,518,647 | — | (5,882 | ) | |||||||||||||||
Australian Dollar | Sell | 7,476,300 | 11/08/2012 | 7,730,607 | — | (204,216 | ) | |||||||||||||||
Euro | Sell | 27,591,500 | 03/20/2013 | 35,522,334 | 596,871 | — | ||||||||||||||||
Japanese Yen | Buy | 52,514,500 | 01/10/2013 | 673,629 | 1,581 | — | ||||||||||||||||
Japanese Yen | Sell | 286,969,000 | 01/10/2013 | 3,681,091 | – | (62,040 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||
Total | $ | 921,982 | $ | (272,138 | ) | |||||||||||||||||
|
|
|
|
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg International Growth Fund | September 30, 2012 |
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2012 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2012
Asset Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 921,982 | |||
Liability Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (272,138 | ) |
The net realized gains (losses) from forward currency contracts, and the net change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2012 are disclosed in the following tables:
Amount of Net Realized Gain (Loss)
on Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||
Foreign exchange contracts | $2,287,901 | $2,287,901 |
Amount of Net Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||
Foreign exchange contracts | $139,059 | $139,059 |
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, management risk, market and economic risk, risks affecting specific issuers, liquidity risk, the risks associated with investments in smaller companies and non-U.S. issuers, credit risk, and interest rate risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
Certified Annual Report 27
FINANCIAL HIGHLIGHTS | ||
Thornburg International Growth Fund |
PER SHARE PERFORMANCE (for a share outstanding throughout the Year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless | Net Asset Value Beginning of Year | 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 | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 13.37 | (0.06 | ) | 2.47 | 2.41 | — | (c) | — | — | $15.78 | (0.41 | ) | 1.51 | 1.51 | 1.52 | 18.03 | 95.17 | $ | 255,725 | ||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 12.25 | 0.03 | 1.13 | 1.16 | (0.04 | ) | — | (0.04 | ) | $13.37 | 0.19 | 1.51 | 1.50 | 1.54 | 9.43 | 142.59 | $ | 104,918 | |||||||||||||||||||||||||||||||||||||||
2010(b) | $ | 10.36 | — | (d) | 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 | ||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.23 | (0.17 | ) | 2.43 | 2.26 | — | — | — | $15.49 | (1.19 | ) | 2.27 | 2.27 | 2.28 | 17.08 | 95.17 | $ | 55,656 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 12.18 | (0.11 | ) | 1.16 | 1.05 | — | — | — | $13.23 | (0.77 | ) | 2.30 | 2.30 | 2.34 | 8.62 | 142.59 | $ | 35,706 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.55 | 0.02 | 2.50 | 2.52 | (0.03 | ) | — | (0.03 | ) | $16.04 | 0.10 | 0.99 | 0.99 | 1.14 | 18.60 | 95.17 | $ | 198,938 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 12.38 | 0.10 | 1.14 | 1.24 | (0.07 | ) | — | (0.07 | ) | $13.55 | 0.66 | 0.99 | 0.98 | 1.16 | 10.03 | 142.59 | $ | 75,538 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.34 | (0.06 | ) | 2.45 | 2.39 | — | (c) | — | — | $15.73 | (0.40 | ) | 1.50 | 1.50 | 2.49 | 17.94 | 95.17 | $ | 5,709 | ||||||||||||||||||||||||||||||||||||||
2011 | $ | 12.22 | 0.01 | 1.15 | 1.16 | (0.04 | ) | — | (0.04 | ) | $13.34 | 0.06 | 1.50 | 1.49 | 3.27 | 9.46 | 142.59 | $ | 1,925 | |||||||||||||||||||||||||||||||||||||||
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 | (e) | 2.09 | 103.57 | $ | 748 | ||||||||||||||||||||||||||||||||||||||
2008(f) | $ | 13.94 | 0.09 | (3.67 | ) | (3.58 | ) | — | — | — | $10.36 | 1.08 | (g) | 1.50 | (g) | 1.49 | (g) | 26.47 | (e)(g) | (25.68 | ) | 54.31 | $ | 113 | ||||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.31 | (0.04 | ) | 2.46 | 2.42 | (0.03 | ) | — | (0.03 | ) | $15.70 | (0.29 | ) | 1.40 | 1.40 | 2.23 | 18.17 | 95.17 | $ | 9,326 | |||||||||||||||||||||||||||||||||||||
2011 | $ | 12.18 | 0.07 | 1.10 | 1.17 | (0.04 | ) | — | (0.04 | ) | $13.31 | 0.46 | 1.40 | 1.40 | 32.23 | (e) | 9.62 | 142.59 | $ | 146 | ||||||||||||||||||||||||||||||||||||||
2010 | $ | 10.29 | 0.02 | 1.94 | 1.96 | (0.07 | ) | — | (0.07 | ) | $12.18 | 0.15 | 1.42 | 1.40 | 738.92 | (e) | 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 | (e) | 2.10 | 103.57 | $ | 2 | ||||||||||||||||||||||||||||||||||||||
2008(f) | $ | 13.94 | 0.10 | (3.68 | ) | (3.58 | ) | — | — | — | $10.36 | 1.16 | (g) | 1.40 | (g) | 1.40 | (g) | 861.94 | (e)(g) | (25.68 | ) | 54.31 | $ | 2 | ||||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.58 | 0.02 | 2.50 | 2.52 | (0.03 | ) | — | (0.03 | ) | $16.07 | 0.13 | 0.99 | 0.99 | 1.29 | 18.56 | 95.17 | $ | 19,251 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 12.40 | 0.08 | 1.17 | 1.25 | (0.07 | ) | — | (0.07 | ) | $13.58 | 0.55 | 0.99 | 0.99 | 10.60 | (e) | 10.09 | 142.59 | $ | 393 | ||||||||||||||||||||||||||||||||||||||
2010 | $ | 10.46 | (0.09 | ) | 2.12 | 2.03 | (0.09 | ) | — | (0.09 | ) | $12.40 | (0.83 | ) | 0.99 | 0.99 | 17.58 | (e) | 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 | (e) | 2.53 | 103.57 | $ | 9 | ||||||||||||||||||||||||||||||||||||||
2008 | $ | 14.03 | 0.14 | (3.71 | ) | (3.57 | ) | — | — | — | $10.46 | 1.57 | (g) | 0.96 | (g) | 0.95 | (g) | 851.43 | (e)(g) | (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) | Dividends from net investment income per share were less than $(0.01). |
(d) | Net investment income (loss) was less than $0.01 per share. |
(e) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
(f) | Effective date of this class of shares was February 1, 2008. |
(g) | Annualized. |
+ | Based on weighted average shares outstanding, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
30 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg International Growth Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.40 | $ | 7.74 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.31 | $ | 7.75 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,011.80 | $ | 11.31 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.76 | $ | 11.32 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,018.40 | $ | 5.00 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.50 | $ | 7.56 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.50 | $ | 7.57 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.20 | $ | 7.06 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.00 | $ | 7.06 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.70 | $ | 4.99 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.54%; C: 2.25%; I: 0.99%; R3: 1.50%; R4: 1.40%; R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your class of shares under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the table above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 31
INDEX COMPARISON | ||
Thornburg International Growth Fund | September 30, 2012 (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, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 3 Yr | 5 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 2/1/07) | 12.72 | % | 13.58 | % | 1.19 | % | 5.11 | % | ||||||||
C Shares (Incep: 2/1/07) | 16.08 | % | 14.46 | % | 1.46 | % | 5.27 | % | ||||||||
I Shares (Incep: 2/1/07) | 18.60 | % | 16.00 | % | 2.72 | % | 6.60 | % | ||||||||
R3 Shares (Incep: 2/1/08) | 17.94 | % | 15.38 | % | — | 3.34 | % | |||||||||
R4 Shares (Incep: 2/1/08) | 18.17 | % | 15.55 | % | — | 3.44 | % | |||||||||
R5 Shares (Incep: 2/1/08) | 18.56 | % | 15.99 | % | — | 3.85 | % | |||||||||
MSCI AC World ex-U.S. Growth Index (Since 2/1/07) | 15.40 | % | 4.64 | % | -3.76 | % | -0.44 | % |
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 or call 800.847.0200. 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.
32 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg International Growth Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE(1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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, 2012 (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, 2012, the Thornburg International Growth Fund is reporting 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.
The Fund is reporting 18.89% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the tax year ended September 30, 2012, qualified for the corporate dividends received deduction.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
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 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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.
36 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (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, (iv) the Fund’s cumulative investment return since inception relative to the securities index, and (v) comparative measures of estimated earnings growth, portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of accounting and other services, the Advisor’s 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 considered (among other aspects of the data) comparative performance data for the four calendar years since the Fund’s inception, which showed that the Fund’s investment return in calendar year 2008 was lower than the average return for the index and the return of the foreign growth fund category, but that the Fund’s return was higher than the return of the index and the average return of the fund category for calendar years 2009, 2010 and 2011. Other noted quantitative data showed that the Fund’s investment returns fell within the bottom quartile of performance for the fund category for the three-month period ended with second quarter of the current year, and fell within the highest quartile for the year-to-date period and within the highest decile of performance for the category for the one-year, three-year and five-year periods. The Trustees also noted the Fund’s higher cumulative return since its inception (net of expenses) relative to its benchmark 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 and the Fund’s investment performance, 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 payment of certain Fund expenses, and comparisons of the Advisor’s fee and overall Fund expenses to median and average fees and expenses charged to a category of foreign equity mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged to the Fund was comparable to the median and slightly higher than the average fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was slightly higher than the median and comparable to the average expense ratio for the fund universe. The Trustees did not find the differences 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 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
Certified Annual Report 37
OTHER INFORMATION, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2012 (Unaudited) |
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 information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its capabilities. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as the Fund increases in size due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature, extent and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds.
38 Certified Annual Report
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This page is not part of the Annual Report. 39
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
40 This page is not part of the Annual Report.
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 website 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 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 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 FUND FAMILY
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 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, 2012. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 Aggregate Bond Index and 75% MSCI World Index. The Barclays 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.
FINRA-Bloomberg Active U.S. Corporate Bond Indices – Represent a broader universe of index constituents, primarily through the inclusion of additional recently issued securities. As a result, there is a significant shift in Index Yield. This shift is reflective only of the additional index constituents and does not represent a market event
The 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.
MSCI Country Indices – Free float-adjusted market capitalization indices that are designed to measure equity market performance in that specific country in U.S. dollars.
MSCI Europe ex-U.K. – A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in Europe. The MSCI Europe Index consists of the following 15 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and Switzerland.
MSCI Nordic Countries – A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the Nordic region. The index consists of the following four developed market country indices: Denmark, Finland, Norway, and Sweden.
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.
S&P 500 Stock Index – 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
This page is not part of the Annual Report. 3
IMPORTANT INFORMATION, CONTINUED
direct investments into any index. The performance of any index is not indicative of the performance of any particular investment.
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 Fitch Ratings.
Coupon – The interest rate stated on a bond when it’s issued. The coupon is typically paid semi-annually.
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.
4 This page is not part of the Annual Report.
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 ten percent in 2010. Earnings have since materially improved, bringing the payout ratio back in line with the overall recent trend.
S&P 500 Index Payout Ratio
Corporate Willingness to Pay Dividends is Key to the Fund’s Investment Process
The Russell 1000 Index includes approximately 1,000 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. A reduction in the number of Russell 1000 firms paying dividends followed the 2008 recession. However, an upward trend appears to be emerging since 2008.
Percentage of Companies Paying Dividends
in Russell 1000 Index
This page is not part of the Annual Report. 5
THE DIVIDEND LANDSCAPE, CONTINUED
Rising Dividend Payments Despite Decreasing Dividend Yields
S&P 500 Index Average Yield vs. Annual Dividends from a Hypothetical
$10,000 Investment (Dividends not Reinvested)
Over time, the dollar dividend per unit of the S&P 500 Index has generally 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 an 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
In the (large cap) Russell 1000 Index, 61% of the top 100 dividend payers are in the financials and utilities sectors. In the (small cap) Russell 2000 Index, 75% 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 two 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.
6 This page is not part of the Annual Report.
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.
Average Dividend Yields (MSCI Indices)
of Markets Around the Globe
This page is not part of the Annual Report. 7
PORTFOLIO OVERVIEW
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.
Portfolio Managers
Jason Brady, 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 or call 800.847.0200.
The maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.21%, as disclosed in the most recent Prospectus.
Quarterly Dividend History, Class A
Year | Q1 | Q2 | Q3 | Q4 | Total | |||||||||||||||
2003 | 9.2 | ¢ | 11.2 | ¢ | 12.4 | ¢ | 17.5 | ¢ | 50.3 | ¢ | ||||||||||
2004 | 10.2 | ¢ | 12.5 | ¢ | 15.0 | ¢ | 21.8 | ¢ | 59.5 | ¢ | ||||||||||
2005 | 11.0 | ¢ | 13.6 | ¢ | 17.4 | ¢ | 29.0 | ¢ | 71.0 | ¢ | ||||||||||
2006 | 12.5 | ¢ | 16.0 | ¢ | 19.2 | ¢ | 33.0 | ¢ | 80.7 | ¢ | ||||||||||
2007 | 14.2 | ¢ | 18.5 | ¢ | 21.5 | ¢ | 36.8 | ¢ | 91.0 | ¢ | ||||||||||
2008 | 17.9 | ¢ | 21.8 | ¢ | 26.0 | ¢ | 36.8 | ¢ | 102.4 | ¢ | ||||||||||
2009 | 18.0 | ¢ | 24.2 | ¢ | 28.0 | ¢ | 34.5 | ¢ | 104.7 | ¢ | ||||||||||
2010 | 19.8 | ¢ | 25.0 | ¢ | 32.0 | ¢ | 36.0 | ¢ | 112.8 | ¢ | ||||||||||
2011 | 21.0 | ¢ | 26.0 | ¢ | 32.0 | ¢ | 37.5 | ¢ | 116.5 | ¢ | ||||||||||
2012 | 21.5 | ¢ | 26.0 | ¢ | 28.5 | ¢ |
30-day SEC Yield as of 9/30/12 (A Shares): 4.55%
Key Portfolio Attributes
As of September 30, 2012
Equity Statistics | ||||
Portfolio P/E (12-mo. trailing) | 12.5x | |||
Median Market Cap | $ | 12.2 B | ||
Equity & Pref. Equity Holdings | 99 | |||
Fixed Income Statistics | ||||
Weighted Ave. Coupon | 8.2 | % | ||
Average Maturity | 11.13 yrs | |||
Effective Duration | 3.97 yrs | |||
Bond Holdings | 199 |
Portfolio Composition
As of September 30, 2012
Average Annual Total Returns
For periods ended September 30, 2012
Since | ||||||||||||||||
1 Yr | 3 Yrs | 5 Yrs | Inception | |||||||||||||
A Shares (Incep: 12/24/02) | ||||||||||||||||
Without sales charge | 16.26 | % | 9.38 | % | 2.38 | % | 10.93 | % | ||||||||
With sales charge | 11.06 | % | 7.71 | % | 1.44 | % | 10.41 | % | ||||||||
Blended Index (Since 12/24/02) | 17.57 | % | 7.48 | % | 0.38 | % | 7.13 | % | ||||||||
S&P 500 Index (Since 12/24/02) | 30.20 | % | 13.20 | % | 1.05 | % | 7.17 | % |
Blended Index: 25% Barclays Aggregate Bond Index and 75% MSCI World Index
8 This page is not part of the Annual Report.
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. The Fund’s secondary objective is long-term capital appreciation. These objectives remain constant over time. However, the specific investments we have used to try to reach our objectives 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 9/30/12
Telecommunication Services | 19.9 | % | ||
Energy | 10.9 | % | ||
Utilities | 10.2 | % | ||
Diversified Financials | 8.6 | % | ||
Real Estate | 7.5 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 6.2 | % | ||
Banks | 4.4 | % | ||
Materials | 4.1 | % | ||
Food, Beverage & Tobacco | 3.8 | % | ||
Insurance | 3.4 | % |
Top Ten Industries
As of 6/30/12
Telecommunication Services | 23.8 | % | ||
Utilities | 11.3 | % | ||
Energy | 10.2 | % | ||
Real Estate | 8.3 | % | ||
Diversified Financials | 7.8 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 7.6 | % | ||
Banks | 6.0 | % | ||
Semiconductors & Semiconductor Equipment | 4.5 | % | ||
Food, Beverage & Tobacco | 4.3 | % | ||
Software & Services | 3.3 | % |
Top Ten Industries
As of 3/31/12
Telecommunication Services | 18.8 | % | ||
Energy | 11.8 | % | ||
Utilities | 9.2 | % | ||
Diversified Financials | 8.9 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 7.4 | % | ||
Insurance | 6.7 | % | ||
Real Estate | 6.6 | % | ||
Food, Beverage & Tobacco | 5.1 | % | ||
Banks | 4.4 | % | ||
Semiconductors & Semiconductor Equipment | 3.2 | % |
Top Ten Industries
As of 12/31/11
Telecommunication Services | 17.5 | % | ||
Energy | 12.3 | % | ||
Utilities | 10.4 | % | ||
Diversified Financials | 7.5 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 6.9 | % | ||
Real Estate | 6.9 | % | ||
Insurance | 5.0 | % | ||
Food, Beverage & Tobacco | 4.7 | % | ||
Banks | 4.2 | % | ||
Semiconductors & Semiconductor Equipment | 3.5 | % |
This page is not part of the Annual Report. 9
Thornburg Investment Income Builder Fund –
September 30, 2012
Table of Contents | ||||
11 | ||||
16 | ||||
32 | ||||
34 | ||||
36 | ||||
37 | ||||
48 | ||||
50 | ||||
51 | ||||
52 | ||||
53 | ||||
56 |
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.
10 Certified Annual Report
October 14, 2012
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, 2012. In addition, we will comment on the overall investment landscape, which continues to evolve.
Thornburg Investment Income Builder Fund paid dividends of $1.135 per Class A share in the twelve months ended September 30, 2012, down 1.3% from the $1.15 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 by $1.61 per share during the period, from $17.29 to $18.90, giving a total return including dividends of 16.26% at NAV.
For the fiscal year ended September 30, 2012 Thornburg Investment Income Builder Fund underperformed the blended index of 75% MSCI World Index and 25% Barclays Aggregate Bond Index (total return of 17.57%) and the S&P 500 Index (total return of 30.20%). It is not unusual for your Fund to trail these benchmarks over shorter trailing measurement periods where annualized benchmark returns are greater than 10%.
For the trailing five-year time period and since inception, your Fund has outperformed both indices, as noted on page 8 of this booklet for Class A shares. Performance relative to indices for all share classes over various periods is set forth on page 52. The quarter ended September 30, 2012 was the 39th full calendar quarter since the inception of Thornburg Investment Income Builder Fund in December, 2002. The Fund delivered a positive total return in 29 of these quarters. The Fund has delivered positive total returns in eight of its nine calendar years of existence.
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 or call 800.847.0200.
The maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.21% , as disclosed in the most recent Prospectus.
We do not expect to pay a capital gain dividend for 2012. At September 30, 2012, the Fund had realized capital losses of approximately $900 million, which may be carried forward to offset future capital gains to the extent permitted by regulations.
In assessing the performance of Thornburg Investment Income Builder 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, 2012. The MSCI World Index comprises 75%, and the entire equity portion, of the Fund’s global performance benchmark:
1. | All 10 sectors showed positive total returns, with a range of 5.8% (utilities) to more than 25% (health care, consumer discretionary, and information technology). |
2. | Income Builder Fund investments in firms in the financials (24% Fund weighting), telecommunication services (21%), energy (12%) and utilities (9%) sectors comprised the largest sector weightings in the Fund portfolio during the fiscal year. The Fund’s performance relative to the MSCI World Index was hurt by comparatively small portfolio allocations to firms in the strongly performing industrials and information technology sectors. |
Certified Annual Report 11
LETTER TO SHAREHOLDERS, CONTINUED |
3. | In the Income Builder portfolio, 66 equity investments contributed positive returns of at least .05% during the year ended September 30, 2012. Sixteen of our equity investments contributed returns of negative 0.05% or worse for the fiscal year. Nine of these sixteen negative performers cut their dividend payments during the fiscal year. We eliminated six of these dividend cutters from the Income Builder portfolio. |
4. | Your Fund’s average return from its investments in the financial sector was above the 25% performance of the equities in the finance sector of the MSCI World Index. Fund investments in Invesco Mortgage Capital, MFA Financial, KKR Financial Holdings, Ares Capital, and Huntington Bancshares 8.5% Preferred were among the strongest performers in the portfolio, with the first two of these also strong in the six-month period ended September 30, 2012. 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 as the year progressed, and the ongoing environment of low bond yields is making it impossible for many of these “non-bank” financials to maintain dividends at prior year levels. Nevertheless, financial asset prices are well supported by low interest rates, and investors appreciate the interesting-if-lower dividends paid by many of these firms in light of low and declining bond yields. Negative returns from small positions in Liechtensteinische Landesbank, Hong Kong Exchanges & Clearing, and Switzerland’s St. Galler Kantonalbank were offset by positive returns from the Fund’s other financial sector investments. |
5. | Your Fund’s holdings in the telecommunication services sector were mixed, contributing positively to relative and absolute performance in the last six months, but lagging the average return of firms from this sector for the fiscal year. AT&T, Australia’s Telstra, and multinational wireless network operator Vodafone Group each contributed significantly to performance for the year. On the other hand, Holland’s KPN, Spain’s Telefonica, and Telefonica Brazil each disappointed with negative contributions. The first two of these are no longer in the portfolio. |
6. | Among Income Builder’s investments in the energy sector, Italy’s ENI and France’s Total and Royal Dutch Shell were strong performers, joined by Seadrill and Canadian producers Husky Energy and Canadian Oil Sands, Ltd. Oil prices remained firm throughout the year, and much of the gas produced by the European multinationals was sold at formulas tied to oil prices. |
7. | Among Fund investments in the consumer staples sector, Philip Morris International, Kimberly Clark, Walgreen’s, and household products producer Reckitt Benckiser each added share price appreciation to rising dividends to generate positive contributions to portfolio performance. Over the last year, investors have bid up prices of most firms in this sector. |
8. | Your Fund’s holdings in the utilities sector lagged the already below market returns from this sector, weighted down by negative contributions from multinational electric power generators ENEL SpA and GDF Suez. ENEL reduced its dividend early in 2012, and we no longer own these shares. |
9. | Among other portfolio holdings, pharmaceutical firms Pfizer, Merck, and Roche each made positive contributions to portfolio performance for the fiscal year, joined by information technology giants Microsoft and Taiwan Semiconductor Manufacturing Company (TSMC). Microsoft has important new products coming to market this quarter, while TSMC foundries are busy producing semiconductors for an expanding array of devices. Other notable contributors included Southern Copper Corp., Australian airport operator Sydney Airport, and chemicals producer LyondellBasell Industries. The latter benefitted from low gas input prices in its North American processing operations. We eliminated small positions in Greek lottery |
12 Certified Annual Report
operator OPAP and Australian retailer David Jones Ltd. during the fiscal year, as business conditions for each worsened along with their domestic economic circumstances. |
The euro and Swiss franc each depreciated modestly vis-à-vis the U.S. dollar during the period, while the British pound and most Asian currencies appreciated modestly. We hedged a majority of the currency exposure to the euro and other European currencies tied to it, since we are more focused on risk control than on reaping possible currency gains from exposure to assets denominated in these currencies.
Within its bond portfolio, Investment Income Builder owned significantly fewer U.S. government and agency
Fixed Income and Cash Trend
Percent of Portfolio as of September 30, 2012
bonds than the Barclay’s U.S. Aggregate Bond Index. This fact was helpful in the fiscal year under review, since yield spreads of corporate credits over these government yield levels fell. Corporate bond prices have increased as their yields have declined. Readers of this commentary who are long-time shareholders of the Investment Income Builder Fund will recall that the interest bearing debt portion of the Fund’s portfolio has varied over time, ranging from less than 12% in mid 2005 to 45% at June 30, 2009.
For the September 30, 2012 fiscal year ended, approximately 79% of your Fund's income was derived from stock dividends, with the remaining 21% coming from interest. At September 30, the Fund portfolio included approximately 200 bonds and hybrid securities. Domestic stocks, including preferred stocks, comprise around 37% of the portfolio; foreign stocks around 45%; and cash and interest bearing investments 18%.
Investors have experienced well above average financial market volatility over the last four 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, so these highly volatile quarterly results have occurred just 20% of the time over the six-decade span. In 10 of the last 16 calendar quarters, the returns to the S&P 500 Index have been either less than negative 10%, or greater than positive 10%. Equity mutual fund investors clearly do not welcome the more volatile returns seen since September of 2008, as indicated by outflows of investor dollars from both equity mutual funds and individual equities. Returns to shareholders of Thornburg Investment Income Builder have been
Certified Annual Report 13
LETTER TO SHAREHOLDERS, CONTINUED |
considerably less volatile than returns to broad equity market indices, and we had net inflows of investor funds during the fiscal year.
One important feature of U.S. mutual funds like Thornburg Investment Income Builder is the ability of shareholders to conveniently redeem all or a portion of their investment on any Fund business day. Consider the five-year period from the onset of the Global Financial Crisis to September 30, 2012. Owners of approximately 372 million shares of Thornburg Investment Income Builder sold their shares at an average price of $17.61 between October 1, 2007 and September 30, 2012. We have no idea how these investors redeployed the funds redeemed from Income Builder. However, the fact that the Fund achieved a net asset value of $18.90 per share on September 30, 2012 and paid dividends totaling $5.49 per Class A share over this period sets a relatively high bar for the opportunity cost of having sold Fund shares, so far.
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 three years, due to more than 20% aggregate declines in dividends paid in 2009 in most developed country equity markets. Dividend increases since 2010 have brought aggregate dividends paid by U.S.-listed firms back to pre-financial crisis levels, and Standard & Poor’s predicts that new records for cash dividend payments will be reached in the U.S. market soon. For the U.S. equity market as a whole, the dividend payout ratio is around 33% of corporate earnings. For the Income Builder equity portfolio as a whole, the dividend payout ratio is slightly above 60%, reflecting our preference for owning firms with both the ability and willingness to pay attractive dividends. Outside the United States, dividend yields and payout ratios tend to be higher, but dividend growth will likely be lower. Readers should be aware that the reduced yields now available from bond investments pose a formidable near-term challenge to delivering year-over-year dividend increases on Investment Income Builder shares.
If the global economy recovers, we expect firming interest rates, better business conditions, and reduced anxiety from corporate boards about distributing retained earnings. To the extent that the global economy does not recover – and this is always a possibility – we can expect the opposite. One variable in the United States is the political debate around tax rates for dividends to higher income taxpayers, which continues the long running tug of war regarding “double taxation of dividends.” In effect, U.S. corporate profits are taxed prior to dividend payments, and then taxed again when dividends are received by non-corporate shareholders. If legislators raise the current 50% combined rate for the government’s share of distributed corporate profits (35% corporate tax rate + 15% tax rate on dividends received) to a higher level, it will act as a disincentive for corporations to favor dividends over other uses for accumulated earnings and profits.
Investors understandably seek additional clarity on how European governments (and financial institutions) will manage through a debt contraction and at least one state default. In addition, investors have questions about whether China can transition from an investment-led economy to a consumer-led economy, and whether the United States government can implement a reasonable framework of pro-growth policies while also reining in public sector borrowing.
We do not expect to know clear answers to these questions during the coming months. There will be news from day to day that will feed hopes or fan despair, thereby moving the prices of financial assets by significant percentages. In particular, we expect market-moving news as the U.S. Government addresses the so called “fiscal cliff,” which would cause more than $600 billion of tax increases and spending cuts to take effect in 2013 if Congress and the White House cannot rewrite the statutes in place today.
14 Certified Annual Report
Earnings expectations for the MSCI All Country World Index portfolio have been reduced for late 2012 and 2013, and global economic growth has been below prior expectations. Most major central banks around the world have significantly eased monetary conditions. Equity markets appear to expect that lower interest rates and plentiful liquidity will create a foundation for better economic growth in the future. Bond yields have dropped significantly, as indicated by a 1.66% decline in the FINRA-Bloomberg Index of Active Investment Grade U.S. Corporate Bond Yields, from 4.80% on September 30, 2011 to 3.14% on October 15, 2012. While lower interest rates are good news for borrowers, they have negative consequences for conservative savers. Interest income as a percentage of overall personal income in the United States has fallen from more than 11% in 2008 to less than 8% today, and the interest contribution to personal income is set to continue dropping in 2013 as previously issued bonds and CDs mature.
Investors must consider other options. Yields on taxable and tax-exempt money funds remain below 1/4 of one percent. Banks have aggressively reduced yields on all deposits. A very large pool of investor dollars is looking for better returns elsewhere, but in sensible investments. We are optimistic that the types of income producing investments owned by the Thornburg Investment Income Builder Fund will experience sustainable popularity among investors as their intrinsic values for income production are recognized. A high percentage of investor funds belong to people over the age of 55, for whom income is an increasingly necessary and desirable attribute.
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 a happy 2013.
Sincerely,
![]() | ![]() | |
Brian McMahon | Jason Brady, CFA | |
Portfolio Manager | 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 15
SCHEDULE OF INVESTMENTS | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Summary of Industry Exposure
As of 9/30/12
Telecommunication Services | 19.9 | % | Household & Personal Products | 1.6 | % | |||||
Energy | 10.9 | % | Food & Staples Retailing | 1.6 | % | |||||
Utilities | 10.2 | % | Capital Goods | 1.5 | % | |||||
Diversified Financials | 8.6 | % | Miscellaneous | 0.7 | % | |||||
Real Estate | 7.5 | % | Health Care Equipment & Services | 0.6 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 6.2 | % | Commercial & Professional Services | 0.2 | % | |||||
Banks | 4.4 | % | Technology Hardware & Equipment | 0.2 | % | |||||
Materials | 4.1 | % | Retailing* | 0.0 | % | |||||
Food, Beverage & Tobacco | 3.8 | % | Other Non-Classified Securities: | |||||||
Insurance | 3.4 | % | Asset Backed Securities | 0.6 | % | |||||
Consumer Services | 3.0 | % | Other Securities | 0.4 | % | |||||
Semiconductors & Semiconductor Equipment | 2.8 | % | U.S. Government Agencies | 0.1 | % | |||||
Software & Services | 2.8 | % | Municipal Bonds* | 0.0 | % | |||||
Transportation | 2.1 | % | Other Assets & Liabilities | 1.1 | % | |||||
Media | 1.7 | % |
* | Percentage was less than 0.1%. |
Top Ten Equity Holdings
As of 9/30/12
Telstra Corp. Ltd. | 2.5 | % | AT&T, Inc. | 2.2 | % | |||||
Microsoft Corp. | 2.4 | % | Total SA | 2.0 | % | |||||
GDF Suez | 2.4 | % | TDC A/S | 2.0 | % | |||||
Royal Dutch Shell plc ADR | 2.3 | % | JPMorgan Chase & Co. | 2.0 | % | |||||
Vodafone Group plc | 2.3 | % | Pfizer, Inc. | 2.0 | % |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Summary of Country Exposure
As of 9/30/12
United States | 48.2 | % | Czech Republic | 0.6 | % | |||||
France | 8.1 | % | Russia | 0.6 | % | |||||
Switzerland | 4.8 | % | South Africa | 0.6 | % | |||||
United Kingdom | 4.7 | % | Sweden | 0.6 | % | |||||
Netherlands | 4.4 | % | South Korea | 0.5 | % | |||||
Australia | 3.6 | % | Bermuda | 0.5 | % | |||||
China | 3.1 | % | Luxembourg | 0.5 | % | |||||
Brazil | 2.7 | % | Israel | 0.5 | % | |||||
Canada | 2.6 | % | Philippines | 0.4 | % | |||||
Denmark | 2.0 | % | Saudi Arabia | 0.4 | % | |||||
Italy | 1.7 | % | Cayman Islands | 0.3 | % | |||||
Singapore | 1.4 | % | Japan | 0.2 | % | |||||
Hong Kong | 1.4 | % | Argentina | 0.2 | % | |||||
Taiwan | 1.3 | % | Trinidad and Tobago* | 0.0 | % | |||||
Spain | 1.0 | % | Other Assets & Liabilities | 1.1 | % | |||||
Norway | 1.0 | % | ||||||||
Mexico | 1.0 | % |
* | Country percentage was less than 0.1% . |
Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 78.71% | ||||||||
BANKS — 1.30% | ||||||||
COMMERCIAL BANKS — 1.30% | ||||||||
Bank of China Ltd. | 147,000,000 | $ | 56,115,191 | |||||
Banque Cantonale Vaudoise | 44,400 | 23,014,354 | ||||||
Liechtensteinische Landesbank AG | 1,150,000 | 41,267,943 | ||||||
St. Galler Kantonalbank | 78,741 | 29,470,316 | ||||||
|
| |||||||
149,867,804 | ||||||||
|
| |||||||
CAPITAL GOODS — 1.19% | ||||||||
INDUSTRIAL CONGLOMERATES — 1.19% | ||||||||
Hopewell Holdings Ltd. | 29,499,840 | 101,768,846 | ||||||
NWS Holdings Ltd. | 22,021,000 | 35,499,191 | ||||||
|
| |||||||
137,268,037 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.05% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 0.05% | ||||||||
Mineral Resources Ltd. | 751,068 | 5,975,567 | ||||||
|
| |||||||
5,975,567 | ||||||||
|
| |||||||
CONSUMER SERVICES — 2.80% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 2.80% | ||||||||
McDonald’s Corp. | 1,460,000 | 133,955,000 | ||||||
SJM Holdings Ltd. | 25,905,000 | 56,259,658 | ||||||
Wynn Resorts Ltd. | 1,152,700 | 133,067,688 | ||||||
|
| |||||||
323,282,346 | ||||||||
|
|
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
DIVERSIFIED FINANCIALS — 6.63% | ||||||||
CAPITAL MARKETS — 3.56% | ||||||||
AllianceBernstein Holdings LP | 1,200,000 | $ | 18,492,000 | |||||
a Apollo Investment Corp. | 14,179,200 | 111,590,304 | ||||||
Ares Capital Corp. | 6,561,600 | 112,465,824 | ||||||
GAM Holding AG | 1,664,000 | 21,673,578 | ||||||
Och-Ziff Capital Management Group, LLC | 6,280,000 | 60,664,800 | ||||||
a Solar Capital Ltd. | 3,750,000 | 85,950,000 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 3.07% | ||||||||
JPMorgan Chase & Co. | 5,662,500 | 229,218,000 | ||||||
a KKR Financial Holdings, LLC | 12,400,000 | 124,620,000 | ||||||
|
| |||||||
764,674,506 | ||||||||
|
| |||||||
ENERGY — 8.77% | ||||||||
OIL, GAS & CONSUMABLE FUELS — 8.77% | ||||||||
BP plc | 13,687,300 | 96,476,289 | ||||||
Canadian Oil Sands Ltd. | 7,188,500 | 153,919,159 | ||||||
Eni S.p.A | 8,851,500 | 193,595,993 | ||||||
Husky Energy, Inc. | 2,655,000 | 71,350,931 | ||||||
Royal Dutch Shell plc ADR | 3,800,000 | 263,758,000 | ||||||
Total SA | 4,682,300 | 232,255,750 | ||||||
|
| |||||||
1,011,356,122 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 1.55% | ||||||||
FOOD & STAPLES RETAILING — 1.55% | ||||||||
Walgreen Co. | 4,900,000 | 178,556,000 | ||||||
|
| |||||||
178,556,000 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 3.28% | ||||||||
BEVERAGES — 1.40% | ||||||||
Coca Cola Co. | 4,248,000 | 161,126,640 | ||||||
FOOD PRODUCTS — 0.56% | ||||||||
Nestle SA | 1,025,000 | 64,627,857 | ||||||
TOBACCO — 1.32% | ||||||||
Lorillard, Inc. | 435,000 | 50,655,750 | ||||||
Philip Morris International, Inc. | 1,135,000 | 102,081,900 | ||||||
|
| |||||||
378,492,147 | ||||||||
|
| |||||||
HOUSEHOLD & PERSONAL PRODUCTS — 1.63% | ||||||||
HOUSEHOLD PRODUCTS — 1.63% | ||||||||
Kimberly-Clark Corp. | 840,000 | 72,055,200 | ||||||
Reckitt Benckiser Group plc | 2,013,500 | 115,912,354 | ||||||
|
| |||||||
187,967,554 | ||||||||
|
| |||||||
INSURANCE — 1.25% | ||||||||
INSURANCE — 1.25% | ||||||||
Gjensidige Forsikring ASA | 4,990,000 | 69,202,727 | ||||||
Scor SE | 2,041,200 | 52,631,368 | ||||||
Zurich Financial Services AG | 90,300 | 22,486,188 | ||||||
|
| |||||||
144,320,283 | ||||||||
|
|
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
MATERIALS — 2.96% | ||||||||
CHEMICALS — 1.54% | ||||||||
Israel Chemicals Ltd. | 4,416,000 | $ | 53,537,519 | |||||
LyondellBasell Industries NV | 2,397,200 | 123,839,352 | ||||||
METALS & MINING — 1.42% | ||||||||
Gold Fields Ltd. ADR | 2,850,000 | 36,622,500 | ||||||
Impala Platinum Holdings Ltd. | 1,822,600 | 30,438,712 | ||||||
Southern Copper Corp. | 2,829,400 | 97,218,184 | ||||||
|
| |||||||
341,656,267 | ||||||||
|
| |||||||
MEDIA — 1.31% | ||||||||
MEDIA — 1.31% | ||||||||
Eutelsat Communications | 4,705,000 | 151,244,667 | ||||||
|
| |||||||
151,244,667 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 5.92% | ||||||||
PHARMACEUTICALS — 5.92% | ||||||||
Merck & Co. | 4,700,000 | 211,970,000 | ||||||
Novartis AG | 2,000,000 | 122,381,712 | ||||||
Pfizer, Inc. | 9,221,300 | 229,149,305 | ||||||
Roche Holding AG | 640,000 | 119,561,935 | ||||||
|
| |||||||
683,062,952 | ||||||||
|
| |||||||
REAL ESTATE — 7.36% | ||||||||
REAL ESTATE INVESTMENT TRUSTS — 7.36% | ||||||||
Annaly Capital Management, Inc. | 5,733,000 | 96,543,720 | ||||||
Capstead Mortgage Corp. | 3,000,000 | 40,470,000 | ||||||
Chimera Investment Corp. | 45,100,000 | 122,221,000 | ||||||
a Dynex Capital, Inc. | 4,562,000 | 49,041,500 | ||||||
a Invesco Mortgage Capital, Inc. | 7,000,000 | 140,910,000 | ||||||
a MFA Financial, Inc. | 20,555,000 | 174,717,500 | ||||||
Senior Housing Properties Trust | 4,000,000 | 87,120,000 | ||||||
Two Harbors Investment Corp. | 2,700,000 | 31,725,000 | ||||||
a Washington REIT | 3,975,000 | 106,609,500 | ||||||
|
| |||||||
849,358,220 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.60% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.60% | ||||||||
Intel Corp. | 6,830,800 | 154,922,544 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 47,400,000 | 145,206,816 | ||||||
|
| |||||||
300,129,360 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 2.38% | ||||||||
SOFTWARE — 2.38% | ||||||||
Microsoft Corp. | 9,200,000 | 273,976,000 | ||||||
|
| |||||||
273,976,000 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 18.01% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 13.12% | ||||||||
AT&T, Inc. | 6,594,000 | 248,593,800 | ||||||
Cable and Wireless Communications plc | 54,375,162 | 31,680,035 | ||||||
KT Corp. | 1,582,370 | 50,115,324 | ||||||
Singapore Telecommunications Ltd. | 63,650,000 | 165,971,317 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
Swisscom AG | 261,000 | $ | 104,899,521 | |||||
TDC A/S | 31,642,000 | 230,490,549 | ||||||
Tele2 AB | 3,570,000 | 64,782,609 | ||||||
Telefonica Brasil ADR | 10,165,000 | 220,987,100 | ||||||
Telenor ASA | 2,291,700 | 44,682,729 | ||||||
Telstra Corp. Ltd. | 71,700,000 | 291,547,766 | ||||||
Ziggo N.V. | 1,740,000 | 59,153,024 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 4.89% | ||||||||
China Mobile Ltd. | 12,921,707 | 143,647,661 | ||||||
Etihad Etisalat Co. | 2,470,000 | 44,623,477 | ||||||
Philippine Long Distance Telephone Co. | 702,255 | 46,867,504 | ||||||
VimpelCom Ltd. ADR | 5,600,000 | 66,640,000 | ||||||
Vodafone Group plc | 92,568,865 | 262,711,345 | ||||||
|
| |||||||
2,077,393,761 | ||||||||
|
| |||||||
TRANSPORTATION — 1.63% | ||||||||
TRANSPORTATION INFRASTRUCTURE — 1.63% | ||||||||
China Merchants Holdings International Co. Ltd. | 27,651,000 | 85,405,878 | ||||||
Jiangsu Express Co., Ltd. | 43,208,000 | 36,220,040 | ||||||
Sydney Airport | 20,385,909 | 66,822,337 | ||||||
|
| |||||||
188,448,255 | ||||||||
|
| |||||||
UTILITIES — 8.09% | ||||||||
ELECTRIC UTILITIES — 4.44% | ||||||||
CEZ AS | 2,000,000 | 74,624,844 | ||||||
Duke Energy Corp. | 1,543,000 | 99,986,400 | ||||||
Electricite de France SA | 10,100,000 | 211,622,632 | ||||||
Entergy Corp. | 1,820,000 | 126,126,000 | ||||||
GAS UTILITIES — 0.19% | ||||||||
Enagas SA | 1,108,168 | 21,859,183 | ||||||
MULTI-UTILITIES — 3.46% | ||||||||
Dominion Resources, Inc. | 1,267,000 | 67,074,980 | ||||||
GDF Suez | 12,236,400 | 273,604,256 | ||||||
Sempra Energy | 900,000 | 58,041,000 | ||||||
|
| |||||||
932,939,295 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $ 8,430,196,137) | 9,079,969,143 | |||||||
|
| |||||||
PREFERRED STOCK — 3.70% | ||||||||
BANKS — 2.61% | ||||||||
COMMERCIAL BANKS — 2.61% | ||||||||
Barclays Bank plc Pfd, 7.10% | 200,000 | 5,024,000 | ||||||
Fifth Third Bancorp Pfd, 8.50% | 714,700 | 99,822,149 | ||||||
First Niagara Financial Group Pfd, 8.625% | 160,000 | 4,675,008 | ||||||
First Tennessee Bank Pfd, 3.75% | 12,000 | 8,565,000 | ||||||
GMAC Capital Trust I Pfd, 8.125% | 468,126 | 11,754,644 | ||||||
Huntington Bancshares Pfd, 8.50% | 95,087 | 121,235,925 | ||||||
Royal Bank of Scotland plc Pfd, 7.25% | 1,751,157 | 39,733,752 | ||||||
Wintrust Financial Corp. Pfd, 5.00% | 10,000 | 10,622,000 | ||||||
|
| |||||||
301,432,478 | ||||||||
|
|
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
| Shares/ Principal Amount | Value | ||||||||
DIVERSIFIED FINANCIALS — 0.02% | ||||||||||
CAPITAL MARKETS — 0.02% | ||||||||||
Morgan Stanley Pfd, 4.00% | 120,000 | $ | 2,389,200 | |||||||
|
| |||||||||
2,389,200 | ||||||||||
|
| |||||||||
INSURANCE — 0.20% | ||||||||||
INSURANCE — 0.20% | ||||||||||
Principal Financial Group Pfd, 5.563% | 234,400 | 22,678,200 | ||||||||
|
| |||||||||
22,678,200 | ||||||||||
|
| |||||||||
MISCELLANEOUS — 0.09% | ||||||||||
U.S. GOVERNMENT AGENCIES — 0.09% | ||||||||||
Farm Credit Bank of Texas Pfd, 10.00% | 9,000 | 10,518,750 | ||||||||
|
| |||||||||
10,518,750 | ||||||||||
|
| |||||||||
REAL ESTATE — 0.11% | ||||||||||
REAL ESTATE INVESTMENT TRUSTS — 0.11% | ||||||||||
Alexandria Real Estate Pfd, 7.00% | 463,500 | 12,676,725 | ||||||||
|
| |||||||||
12,676,725 | ||||||||||
|
| |||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.13% | ||||||||||
COMMUNICATIONS EQUIPMENT — 0.13% | ||||||||||
Lucent Technologies Capital Trust I Pfd, 7.75% | 26,500 | 15,370,000 | ||||||||
|
| |||||||||
15,370,000 | ||||||||||
|
| |||||||||
TELECOMMUNICATION SERVICES — 0.17% | ||||||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.17% | ||||||||||
Centaur Funding Corp. Pfd, 9.08% | 15,000 | 19,031,250 | ||||||||
|
| |||||||||
19,031,250 | ||||||||||
|
| |||||||||
UTILITIES — 0.37% | ||||||||||
MULTI-UTILITIES — 0.37% | ||||||||||
Centerpoint Energy, Inc. Pfd, 7.5% | 1,050,000 | 42,196,875 | ||||||||
|
| |||||||||
42,196,875 | ||||||||||
|
| |||||||||
TOTAL PREFERRED STOCK (Cost $341,723,635) | 426,293,478 | |||||||||
|
| |||||||||
ASSET BACKED SECURITIES — 0.69% | ||||||||||
COMMERCIAL MTG TRUST — 0.15% | ||||||||||
d CVS Pass-Through Trust, 9.35%, 1/10/2023 | $ | 15,000,000 | 17,428,500 | |||||||
|
| |||||||||
17,428,500 | ||||||||||
|
| |||||||||
OTHER ASSET BACKED — 0.19% f JPR Royalty, LLC, 14.00%, 12/1/2020 | 5,000,000 | 5,000,000 | ||||||||
MRMX, Series 2011-1A Class B, 10.00%, 10/20/2021 | 12,675,000 | 12,946,258 | ||||||||
f Northwind Holdings, LLC, 1.198%, 12/1/2037 | 4,566,138 | 3,652,911 | ||||||||
|
| |||||||||
21,599,169 | ||||||||||
|
| |||||||||
RESIDENTIAL MTG TRUST — 0.35% | ||||||||||
Banc of America Funding Corp., Series 2006-I Class SB1, 2.903%, 12/20/2036 | 3,133,784 | 653,539 | ||||||||
Banc of America Mtg Securities, Series 2005-A Class B1, 3.178%, 2/25/2035 | 5,025,349 | 436,602 | ||||||||
Bear Stearns ARM Mtg, Series 2003-6 Class 2B-1, 2.497%, 8/25/2033 | 446,195 | 319,920 | ||||||||
Citigroup Mtg Loan Trust, Inc., 2.93%, 3/25/2034 | 1,334,677 | 1,135,884 | ||||||||
FBR Securitization Trust, Series 2005-2 Class M1, 0.937%, 9/25/2035 | 20,100,000 | 16,183,792 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
Merrill Lynch Mtg Investors Trust, 2.582%, 8/25/2034 | $ | 5,945,846 | $ | 4,459,070 | ||||
Morgan Stanley Capital, Inc., Series 2005-HE7 Class A2C, 0.537%, 11/25/2035 | 8,019,007 | 7,621,263 | ||||||
Residential Asset Securities Corp., 0.367%, 6/25/2036 | 6,647,195 | 6,440,135 | ||||||
Structured Asset Security Corp., Series 2002-27A Class B1, 2.769%, 1/25/2033 | 2,276,207 | 1,320,272 | ||||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 2.615%, 2/25/2035 | 9,779,248 | 893,903 | ||||||
Wells Fargo Asset Securities Corp., Series 2005-AR2 Class B1, 2.614%, 3/25/2035 | 8,243,154 | 534,226 | ||||||
|
| |||||||
39,998,606 | ||||||||
|
| |||||||
TOTAL ASSET BACKED SECURITIES (Cost $97,487,083) | 79,026,275 | |||||||
|
| |||||||
CORPORATE BONDS — 12.25% | ||||||||
BANKS — 0.47% | ||||||||
COMMERCIAL BANKS — 0.47% | ||||||||
b,d Banco Industrial e Comercial S.A., 6.25%, 1/20/2013 | 9,000,000 | 8,977,500 | ||||||
b,d Banco Pine SA, 8.75%, 1/6/2017 | 7,274,000 | 7,073,965 | ||||||
Fifth Third Bancorp, 6.25%, 5/1/2013 | 2,750,000 | 2,838,998 | ||||||
b,d Groupe BPCE, 12.50%, 12/31/2049 | 10,211,000 | 11,566,306 | ||||||
National City Preferred Capital Trust I, 12.00%, 12/31/2049 | 3,250,000 | 3,320,720 | ||||||
PNC Financial Services Group, Inc., 8.25%, 12/31/2049 | 10,000,000 | 10,379,480 | ||||||
d PNC Preferred Funding Trust III, 8.70%, 12/31/2049 | 4,500,000 | 4,568,085 | ||||||
Provident Bank of Maryland, 9.50%, 5/1/2018 | 5,600,000 | 5,937,630 | ||||||
|
| |||||||
54,662,684 | ||||||||
|
| |||||||
CAPITAL GOODS — 0.31% | ||||||||
INDUSTRIAL CONGLOMERATES — 0.21% | ||||||||
d Nesco LLC/Holdings Corp., 11.75%, 4/15/2017 | 4,000,000 | 4,260,000 | ||||||
Otter Tail Corp., 9.00%, 12/15/2016 | 17,000,000 | 19,762,500 | ||||||
TRADING COMPANIES & DISTRIBUTORS — 0.10% | ||||||||
International Lease Finance Corp., 4.875%, 4/1/2015 | 2,000,000 | 2,078,824 | ||||||
d International Lease Finance Corp. E-Capital Trust I, 4.52%, 12/21/2065 | 15,000,000 | 10,200,000 | ||||||
|
| |||||||
36,301,324 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.15% | ||||||||
PROFESSIONAL SERVICES — 0.15% | ||||||||
Affinion Group, Inc., 7.875%, 12/15/2018 | 21,609,000 | 17,665,358 | ||||||
|
| |||||||
17,665,358 | ||||||||
|
| |||||||
CONSUMER SERVICES — 0.08% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.08% | ||||||||
d Seneca Nation Indians Capital Improvements Authority, 6.75%, 12/1/2013 | 1,455,000 | 1,450,300 | ||||||
d Sizzling Platter, LLC, 12.25%, 4/15/2016 | 7,500,000 | 7,706,250 | ||||||
|
| |||||||
9,156,550 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 0.96% | ||||||||
CAPITAL MARKETS — 0.08% | ||||||||
Goldman Sachs Group, Inc., 5.625%, 1/15/2017 | 8,000,000 | 8,816,840 | ||||||
CONSUMER FINANCE — 0.43% | ||||||||
American Express Credit Co., 5.875%, 5/2/2013 | 5,000,000 | 5,156,955 | ||||||
Capital One Capital IV, 6.745%, 2/5/2082 | 6,400,000 | 6,440,000 | ||||||
Capital One Financial Corp., 6.15%, 9/1/2016 | 25,000,000 | 28,537,550 | ||||||
SLM Corp., 4.00%, 7/25/2014 | 2,000,000 | 2,031,000 | ||||||
SLM Corp. LIBOR Floating Rate Note, 0.751%, 1/27/2014 | 5,000,000 | 4,855,615 | ||||||
TMX Finance LLC/TitleMax Finance Corp., 13.25%, 7/15/2015 | 2,500,000 | 2,775,000 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
DIVERSIFIED FINANCIAL SERVICES — 0.45% | ||||||||
Citigroup, Inc., 5.00%, 9/15/2014 | $ | 16,250,000 | $ | 17,139,200 | ||||
JPMorgan Chase & Co., 7.90%, 12/31/2049 | 15,000,000 | 17,035,950 | ||||||
b Korea Development Bank, 5.30%, 1/17/2013 | 800,000 | 809,317 | ||||||
MBNA Corp., 6.125%, 3/1/2013 | 2,000,000 | 2,043,810 | ||||||
National Rural Utilities CFC, 10.375%, 11/1/2018 | 5,000,000 | 7,398,840 | ||||||
SquareTwo Financial Corp., 11.625%, 4/1/2017 | 8,850,000 | 7,832,250 | ||||||
|
| |||||||
110,872,327 | ||||||||
|
| |||||||
ENERGY — 2.11% | ||||||||
ENERGY EQUIPMENT & SERVICES — 0.22% | ||||||||
Nabors Industries, Inc., 9.25%, 1/15/2019 | 10,500,000 | 13,741,560 | ||||||
b,d RDS Ultra-Deepwater Ltd., 11.875%, 3/15/2017 | 10,400,000 | 11,596,000 | ||||||
OIL, GAS & CONSUMABLE FUELS — 1.89% | ||||||||
Black Elk Energy Offshore Operations, LLC, 13.75%, 12/1/2015 | 16,750,000 | 16,959,375 | ||||||
d DCP Midstream, LLC, 9.75%, 3/15/2019 | 5,000,000 | 6,427,085 | ||||||
Enbridge Energy Partners LP, 9.875%, 3/1/2019 | 9,750,000 | 13,279,880 | ||||||
d Endeavour International Corp., 12.00%, 3/1/2018 | 17,000,000 | 18,700,000 | ||||||
d Enogex, LLC, 6.875%, 7/15/2014 | 2,000,000 | 2,141,058 | ||||||
d Enogex, LLC, 6.25%, 3/15/2020 | 2,500,000 | 2,818,578 | ||||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 20,880,000 | 23,385,600 | ||||||
d Everest Acquisition, LLC, 6.875%, 5/1/2019 | 2,000,000 | 2,140,000 | ||||||
b,d Gaz Capital SA, 8.146%, 4/11/2018 | 2,000,000 | 2,436,440 | ||||||
d Green Field Energy Services, 13.00%, 11/15/2016 | 16,000,000 | 15,680,000 | ||||||
d GS Caltex Corp., 7.25%, 7/2/2013 | 7,000,000 | 7,290,206 | ||||||
Kinder Morgan Energy Partners LP, 9.00%, 2/1/2019 | 8,000,000 | 10,607,488 | ||||||
d Maritimes & Northeast Pipeline, LLC, 7.50%, 5/31/2014 | 6,588,000 | 7,006,140 | ||||||
d NFR Energy, LLC, 9.75%, 2/15/2017 | 2,000,000 | 1,830,000 | ||||||
NuStar Logistics, 7.90%, 4/15/2018 | 18,000,000 | 20,410,290 | ||||||
Oneok Partners LP, 8.625%, 3/1/2019 | 8,000,000 | 10,504,271 | ||||||
b,d Petro Co. Trinidad Tobago Ltd., 9.75%, 8/14/2019 | 4,000,000 | 5,140,000 | ||||||
b,c,d,e Petroplus Finance Ltd., 6.75%, 5/1/2014 | 5,650,000 | 791,000 | ||||||
Plains Exploration and Production Co., 7.625%, 6/1/2018 | 1,000,000 | 1,065,000 | ||||||
RAAM Global Energy Co., 12.50%, 10/1/2015 | 15,000,000 | 15,450,000 | ||||||
Southern Union Co., 3.462%, 11/1/2066 | 23,020,000 | 18,358,450 | ||||||
Teppco Partners LP, 7.00%, 6/1/2067 | 7,000,000 | 7,358,750 | ||||||
d Woodside Financial Ltd., 8.125%, 3/1/2014 | 8,000,000 | 8,730,024 | ||||||
|
| |||||||
243,847,195 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 0.29% | ||||||||
FOOD PRODUCTS — 0.15% | 9,900,000 | 10,395,000 | ||||||
d Harmony Foods Corp., 10.00%, 5/1/2016 | ||||||||
b,d Minerva Luxembourg SA, 12.25%, 2/10/2022 | 6,000,000 | 6,922,200 | ||||||
TOBACCO — 0.14% | ||||||||
Altria Group, Inc., 8.50%, 11/10/2013 | 4,000,000 | 4,340,696 | ||||||
Altria Group, Inc., 9.70%, 11/10/2018 | 3,632,000 | 5,202,117 | ||||||
b,d B.A.T. International Finance, plc, 9.50%, 11/15/2018 | 5,000,000 | 6,969,385 | ||||||
|
| |||||||
33,829,398 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.58% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 0.05% | ||||||||
Alere, Inc., 8.625%, 10/1/2018 | 5,000,000 | 5,250,000 |
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
HEALTH CARE PROVIDERS & SERVICES — 0.31% | ||||||||
Aurora Diagnostics Holdings, LLC, 10.75%, 1/15/2018 | $ | 11,000,000 | $ | 11,082,500 | ||||
d Prospect Medical Holdings, Inc., 8.375%, 5/1/2019 | 23,500,000 | 24,910,000 | ||||||
HEALTH CARE TECHNOLOGY — 0.22% | ||||||||
Merge Healthcare, Inc., 11.75%, 5/1/2015 | 23,250,000 | 25,168,125 | ||||||
|
| |||||||
66,410,625 | ||||||||
|
| |||||||
INSURANCE — 1.75% | ||||||||
INSURANCE — 1.75% b,d Dai Ichi Mutual Life Insurance Co. Ltd., 7.25%, 12/31/2049 | 9,000,000 | 10,057,500 | ||||||
Hartford Financial Services Group, 8.125%, 6/15/2068 | 9,650,000 | 11,109,563 | ||||||
d Liberty Mutual Group, Inc., 5.75%, 3/15/2014 | 1,000,000 | 1,050,523 | ||||||
d Metlife Capital Trust X, 9.25%, 4/8/2068 | 12,000,000 | 15,840,000 | ||||||
Metlife, Inc., Series A, 6.817%, 8/15/2018 | 4,000,000 | 5,033,188 | ||||||
d National Life Insurance of Vermont, 10.50%, 9/15/2039 | 2,000,000 | 2,670,586 | ||||||
b,d Oil Insurance Ltd., 3.443%, 12/31/2049 | 4,000,000 | 3,496,160 | ||||||
d Prudential Holdings, LLC, 8.695%, 12/18/2023 | 4,500,000 | 5,668,110 | ||||||
b,d QBE Capital Funding III Ltd., 7.25%, 5/24/2041 | 60,000,000 | 60,750,000 | ||||||
b,d QBE Insurance Group Ltd., 5.647%, 7/1/2023 | 12,863,000 | 12,671,135 | ||||||
Transatlantic Holdings, Inc., 5.75%, 12/14/2015 | 14,647,000 | 16,273,051 | ||||||
d White Mountains Re Group Ltd., 7.506%, 12/31/2049 | 28,590,000 | 29,137,784 | ||||||
d ZFS Finance USA Trust II, 6.45%, 12/15/2065 | 25,748,000 | 27,292,880 | ||||||
d ZFS Finance USA Trust V, 6.50%, 5/9/2067 | 1,260,000 | 1,332,450 | ||||||
|
| |||||||
202,382,930 | ||||||||
|
| |||||||
MATERIALS — 0.92% | ||||||||
CONSTRUCTION MATERIALS — 0.38% b,d CEMEX Espana Luxembourg, 9.875%, 4/30/2019 | 1,460,000 | 1,492,850 | ||||||
d CEMEX Finance, LLC, 9.50%, 12/14/2016 | 10,000,000 | 10,325,000 | ||||||
CRH America, Inc., 8.125%, 7/15/2018 | 12,000,000 | 14,592,972 | ||||||
Texas Industries, Inc., 9.25%, 8/15/2020 | 16,350,000 | 17,331,000 | ||||||
CONTAINERS & PACKAGING — 0.04% d Plastipak Holdings, Inc., 10.625%, 8/15/2019 | 2,250,000 | 2,576,250 | ||||||
d Sealed Air Corp., 8.375%, 9/15/2021 | 2,000,000 | 2,240,000 | ||||||
METALS & MINING — 0.50% b,d Anglo American Capital plc, 9.375%, 4/8/2014 | 3,500,000 | 3,906,000 | ||||||
b,d FMG Resources Pty Ltd., 8.25%, 11/1/2019 | 8,500,000 | 8,245,000 | ||||||
d GTL Trade Finance, Inc., 7.25%, 10/20/2017 | 7,000,000 | 8,102,500 | ||||||
b,d Inmet Mining Corp., 8.75%, 6/1/2020 | 7,250,000 | 7,503,750 | ||||||
d Molycorp, Inc., 10.00%, 6/1/2020 | 22,500,000 | 22,275,000 | ||||||
b Thompson Creek Metals Co., 12.50%, 5/1/2019 | 8,000,000 | 7,620,000 | ||||||
|
| |||||||
106,210,322 | ||||||||
|
| |||||||
MEDIA — 0.32% | ||||||||
MEDIA — 0.32% | ||||||||
Comcast Cable Communications, LLC, 8.875%, 5/1/2017 | 5,000,000 | 6,554,870 | ||||||
Time Warner Cable, Inc., 8.75%, 2/14/2019 | 14,000,000 | 19,061,574 | ||||||
Time Warner Cable, Inc., 8.25%, 2/14/2014 | 4,000,000 | 4,402,204 | ||||||
WMG Holdings Corp., 13.75%, 10/1/2019 | 6,000,000 | 6,600,000 | ||||||
|
| |||||||
36,618,648 | ||||||||
|
|
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.23% | ||||||||
BIOTECHNOLOGY — 0.03% | ||||||||
Tiers Inflation Linked Trust, Series Wyeth 2004 21 Trust Certificate CPI Floating Rate Note, 3.513%, 2/1/2014 | $ | 3,000,000 | $ | 3,104,250 | ||||
LIFE SCIENCES TOOLS & SERVICES — 0.10% d BPA Laboratories, Inc., 12.25%, 4/1/2017 | 12,000,000 | 11,400,000 | ||||||
PHARMACEUTICALS — 0.10% d,f Alvogen Pharma U.S., Inc., 10.50%, 3/15/2019 | 12,000,000 | 12,120,000 | ||||||
|
| |||||||
26,624,250 | ||||||||
|
| |||||||
RETAILING — 0.05% | ||||||||
MULTILINE RETAIL — 0.01% b,d Grupo Famsa S.A.B. de C.V., 11.00%, 7/20/2015 | 1,500,000 | 1,597,500 | ||||||
SPECIALTY RETAIL — 0.04% | ||||||||
Best Buy, Inc., 7.00%, 7/15/2013 | 4,000,000 | 4,118,412 | ||||||
|
| |||||||
5,715,912 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.15% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.15% d Advanced Micro Devices, Inc., 7.50%, 8/15/2022 | 5,000,000 | 4,825,000 | ||||||
KLA Tencor Corp., 6.90%, 5/1/2018 | 10,000,000 | 12,067,790 | ||||||
|
| |||||||
16,892,790 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 0.27% | ||||||||
INTERNET SOFTWARE & SERVICES — 0.25% b,d EAccess Ltd., 8.25%, 4/1/2018 | 9,400,000 | 8,554,000 | ||||||
EarthLink, Inc., 8.875%, 5/15/2019 | 12,000,000 | 11,970,000 | ||||||
f Yahoo!, Inc., 6.65%, 8/10/2026 | 7,946,689 | 8,582,424 | ||||||
SOFTWARE — 0.02% | ||||||||
Aspect Software, Inc., 10.625%, 5/15/2017 | 2,000,000 | 2,055,000 | ||||||
|
| |||||||
31,161,424 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.05% | ||||||||
COMMUNICATIONS EQUIPMENT — 0.05% d Brightstar Corp., 9.50%, 12/1/2016 | 5,000,000 | 5,368,750 | ||||||
|
| |||||||
5,368,750 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 1.58% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 1.44% | ||||||||
b Deutsche Telekom International Finance B.V., 8.75%, 6/15/2030 | 26,150,000 | 39,332,451 | ||||||
Level 3 Communications, Inc., 11.875%, 2/1/2019 | 6,000,000 | 6,810,000 | ||||||
d Level 3 Communications, Inc., 8.875%, 6/1/2019 | 9,000,000 | 9,450,000 | ||||||
Qwest Corp., 6.75%, 12/1/2021 | 9,000,000 | 10,815,516 | ||||||
b Telecom Italia Capital SA, 5.25%, 10/1/2015 | 4,190,000 | 4,409,975 | ||||||
b Telefonica Emisiones SAU, 6.221%, 7/3/2017 | 2,770,000 | 2,894,650 | ||||||
b Telefonica Emisiones SAU, 7.045%, 6/20/2036 | 85,390,000 | 83,255,250 | ||||||
b,d Telemar Norte Leste SA, 5.50%, 10/23/2020 | 9,065,000 | 9,518,250 | ||||||
WIRELESS TELECOMMUNICATION SERVICES — 0.14% | ||||||||
b,d Digicel SA, 12.00%, 4/1/2014 | 2,000,000 | 2,230,000 | ||||||
b,d VimpelCom (UBS SA), 8.25%, 5/23/2016 | 4,500,000 | 4,966,785 | ||||||
b,d VimpelCom Holdings BV, 7.504%, 3/1/2022 | 8,735,000 | 9,160,831 | ||||||
|
| |||||||
182,843,708 | ||||||||
|
|
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
TRANSPORTATION — 0.41% | ||||||||
AIR FREIGHT & LOGISTICS — 0.08% | ||||||||
d SPL Logistics Escrow, LLC, 8.875%, 8/1/2020 | $ | 8,000,000 | $ | 8,560,000 | ||||
AIRLINES — 0.29% b,d Air Canada, 9.25%, 8/1/2015 | 17,000,000 | 17,680,000 | ||||||
e American Airlines, Inc., 13.00%, 8/1/2016 | 3,150,564 | 3,386,856 | ||||||
c,e American Airlines, Inc., 8.625%, 4/15/2023 | 8,734,304 | 9,400,294 | ||||||
US Airways, 6.25%, 10/22/2024 | 2,806,329 | 2,981,725 | ||||||
MARINE — 0.04% d Windsor Petroleum Transport Corp., 7.84%, 1/15/2021 | 7,880,014 | 5,053,059 | ||||||
|
| |||||||
47,061,934 | ||||||||
|
| |||||||
UTILITIES — 1.57% | ||||||||
ELECTRIC UTILITIES — 0.85% | ||||||||
Alabama Power Capital Trust V, 3.561%, 10/1/2042 | 4,000,000 | 4,044,920 | ||||||
Arizona Public Service Co., 8.75%, 3/1/2019 | 6,500,000 | 8,581,495 | ||||||
b,c,d,e,f Centrais Eletricas DO PA, 10.50%, 6/3/2016 | 16,000,000 | 2,560,000 | ||||||
b,d Enel Finance International S.A., 6.25%, 9/15/2017 | 40,000,000 | 43,732,000 | ||||||
Entergy Gulf States Louisiana, LLC, 6.00%, 5/1/2018 | 8,000,000 | 9,316,888 | ||||||
d Great River Energy, 5.829%, 7/1/2017 | 1,300,796 | 1,408,424 | ||||||
d Monongahela Power Co., 7.95%, 12/15/2013 | 2,000,000 | 2,158,042 | ||||||
d Texas-New Mexico Power Co., 9.50%, 4/1/2019 | 19,000,000 | 25,852,996 | ||||||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS — 0.24% b Atlantic Power Corp. Co., 9.00%, 11/15/2018 | 8,000,000 | 8,500,000 | ||||||
b,d Inkia Energy Ltd., 8.375%, 4/4/2021 | 18,000,000 | 19,620,000 | ||||||
MULTI-UTILITIES — 0.48% | ||||||||
Ameren Illinois Co., 9.75%, 11/15/2018 | 5,000,000 | 7,005,240 | ||||||
Black Hills Corp., 9.00%, 5/15/2014 | 4,500,000 | 5,031,531 | ||||||
NiSource Finance Corp., 6.15%, 3/1/2013 | 5,562,000 | 5,679,775 | ||||||
NiSource Finance Corp., 6.40%, 3/15/2018 | 20,000,000 | 24,462,020 | ||||||
Sempra Energy, 9.80%, 2/15/2019 | 7,750,000 | 10,927,888 | ||||||
Sempra Energy, 8.90%, 11/15/2013 | 2,000,000 | 2,175,214 | ||||||
|
| |||||||
181,056,433 | ||||||||
|
| |||||||
TOTAL CORPORATE BONDS (Cost $1,240,326,358) | 1,414,682,562 | |||||||
|
| |||||||
CONVERTIBLE BONDS — 1.16% | ||||||||
DIVERSIFIED FINANCIALS — 0.59% | ||||||||
CAPITAL MARKETS — 0.29% | ||||||||
Hercules Technology Growth Capital, Inc., 6.00%, 4/15/2016 | 10,000,000 | 10,193,750 | ||||||
d Prospect Capital Corp., 5.375%, 10/15/2017 | 8,000,000 | 8,225,000 | ||||||
d Technology Investment CA, 7.50%, 11/1/2017 | 15,000,000 | 15,174,150 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.30% | ||||||||
a KKR Financial Holdings, LLC, 7.50%, 1/15/2017 | 22,750,000 | 33,982,813 | ||||||
|
| |||||||
67,575,713 | ||||||||
|
| |||||||
ENERGY — 0.06% | ||||||||
OIL, GAS & CONSUMABLE FUELS — 0.06% | ||||||||
SunPower Corp., 4.50%, 3/15/2015 | 5,000,000 | 4,593,750 | ||||||
SunPower Corp., 4.75%, 4/15/2014 | 3,000,000 | 2,842,500 | ||||||
|
| |||||||
7,436,250 | ||||||||
|
|
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
FOOD, BEVERAGE & TOBACCO — 0.15% | ||||||||
BEVERAGES — 0.15% | ||||||||
Central European Distribution Corp., 3.00%, 3/15/2013 | $ | 18,239,000 | $ | 16,916,672 | ||||
|
| |||||||
16,916,672 | ||||||||
|
| |||||||
MATERIALS — 0.13% | ||||||||
CONSTRUCTION MATERIALS — 0.07% b CEMEX SAB de CV, 4.875%, 3/15/2015 | 8,500,000 | 8,420,313 | ||||||
METALS & MINING — 0.06% | ||||||||
b,d Jaguar Mining, Inc., 4.50%, 11/1/2014 | 11,000,000 | 6,208,125 | ||||||
|
| |||||||
14,628,438 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.07% | ||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.07% b Trina Solar Ltd., 4.00%, 7/15/2013 | 8,500,000 | 7,565,000 | ||||||
|
| |||||||
7,565,000 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 0.04% | ||||||||
SOFTWARE — 0.04% | ||||||||
THQ, Inc., 5.00%, 8/15/2014 | 9,136,000 | 5,253,200 | ||||||
|
| |||||||
5,253,200 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 0.11% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 0.11% d Alaska Communication Systems Group, Inc., 6.25%, 5/1/2018 | 15,600,000 | 10,559,250 | ||||||
Level 3 Communications, Inc., 7.00%, 3/15/2015 | 2,000,000 | 2,418,750 | ||||||
|
| |||||||
12,978,000 | ||||||||
|
| |||||||
TRANSPORTATION — 0.01% | ||||||||
MARINE — 0.01% dUltrapetrol Bahamas Ltd., 7.25%, 1/15/2017 | 2,750,000 | 1,680,938 | ||||||
|
| |||||||
1,680,938 | ||||||||
|
| |||||||
TOTAL CONVERTIBLE BONDS (Cost $133,467,899) | 134,034,211 | |||||||
|
| |||||||
WARRANTS — 0.00% c Green Field Energy Services | 16,000 | 496,000 | ||||||
|
| |||||||
TOTAL WARRANTS (Cost $627,343) | 496,000 | |||||||
|
| |||||||
MUNICIPAL BONDS — 0.03% | ||||||||
San Bernardino County California, 8.45%, 9/1/2030 | 2,555,000 | 2,733,978 | ||||||
Town of Victor New York, 9.20%, 5/1/2014 | 785,000 | 806,784 | ||||||
|
| |||||||
TOTAL MUNICIPAL BONDS (Cost $3,301,056) | 3,540,762 | |||||||
|
| |||||||
U.S. GOVERNMENT AGENCIES — 0.08% | ||||||||
d Agribank FCB, 9.125%, 7/15/2019 | 6,750,000 | 8,958,026 | ||||||
|
| |||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $6,750,000) | 8,958,026 | |||||||
|
|
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
OTHER GOVERNMENT — 0.03% | ||||||||
b Export-Import Bank of Korea, 8.125%, 1/21/2014 | $ | 2,750,000 | $ | 2,993,334 | ||||
|
| |||||||
TOTAL OTHER GOVERNMENT (Cost $2,746,896) | 2,993,334 | |||||||
|
| |||||||
FOREIGN BONDS — 1.85% | ||||||||
CONSUMER SERVICES — 0.20% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 0.20% d Arcos Dorados Holdings, Inc. (BRL), 10.25%, 7/13/2016 | 43,000,000 | 22,589,715 | ||||||
|
| |||||||
22,589,715 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 0.38% | ||||||||
CAPITAL MARKETS — 0.06% | ||||||||
Morgan Stanley (AUD), 3.927%, 3/1/2013 | 4,000,000 | 4,136,550 | ||||||
|
| |||||||
Morgan Stanley (BRL), 10.09%, 5/3/2017 | 4,560,000 | 2,422,553 | ||||||
|
| |||||||
CONSUMER FINANCE — 0.27% d Cash Store Financial (CAD), 11.50%, 1/31/2017 | 10,250,000 | 10,531,508 | ||||||
d Lowell Group Financing plc (GBP), 10.75%, 4/1/2019 | 12,000,000 | 20,201,139 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 0.05% | ||||||||
Bank of America Corp. (BRL), 10.00%, 11/19/2014 | 6,500,000 | 3,398,693 | ||||||
f Bank of America Corp. (BRL), 10.75%, 8/20/2018 | 5,000,000 | 2,663,707 | ||||||
|
| |||||||
43,354,150 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 0.02% | ||||||||
FOOD & STAPLES RETAILING — 0.02% | ||||||||
Wesfarmers Ltd. (AUD), 6.16%, 9/11/2014 | 2,000,000 | 2,116,358 | ||||||
|
| |||||||
2,116,358 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 0.08% | ||||||||
BEVERAGES — 0.08% | ||||||||
Ambev International Finance Co. Ltd. (BRL), 9.50%, 7/24/2017 | 7,669,000 | 4,293,656 | ||||||
Anheuser-Busch InBev (BRL), 9.75%, 11/17/2015 | 10,000,000 | 5,561,722 | ||||||
|
| |||||||
9,855,378 | ||||||||
|
| |||||||
INSURANCE — 0.14% | ||||||||
INSURANCE — 0.14% | ||||||||
ELM BV (AUD), 7.635%, 12/31/2049 | 10,500,000 | 10,104,949 | ||||||
ELM BV (AUD), 4.568%, 12/31/2049 | 8,000,000 | 6,534,079 | ||||||
|
| |||||||
16,639,028 | ||||||||
|
| |||||||
MATERIALS — 0.07% | ||||||||
CONSTRUCTION MATERIALS — 0.07% | ||||||||
CEMEX Finance, LLC (EUR), 9.625%, 12/14/2017 | 6,500,000 | 8,386,235 | ||||||
|
| |||||||
8,386,235 | ||||||||
|
| |||||||
MEDIA — 0.06% | ||||||||
MEDIA — 0.06% d Corus Entertainment (CAD), 7.25%, 2/10/2017 | 2,000,000 | 2,148,306 | ||||||
News America Holdings (AUD), 8.625%, 2/7/2014 | 4,000,000 | 4,322,281 | ||||||
|
| |||||||
6,470,587 | ||||||||
|
|
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
MISCELLANEOUS — 0.58% | ||||||||
MISCELLANEOUS — 0.58% | ||||||||
Federative Republic of Brazil (BRL), 12.50%, 1/5/2022 | $ | 20,000,000 | $ | 14,749,044 | ||||
Federative Republic of Brazil (BRL), 12.50%, 1/5/2016 | 65,401,000 | 40,503,616 | ||||||
New South Wales Treasury Corp. (AUD), 4.076%, 11/20/2020 | 8,500,000 | 11,497,437 | ||||||
|
| |||||||
66,750,097 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 0.08% | ||||||||
INTERNET SOFTWARE & SERVICES — 0.08% | ||||||||
EAccess Ltd. (EUR), 8.375%, 4/1/2018 | 8,200,000 | 9,457,323 | ||||||
|
| |||||||
9,457,323 | ||||||||
|
| |||||||
TRANSPORTATION — 0.08% | ||||||||
AIRLINES — 0.08% f Iberbond 2004 plc (EUR), 4.235%, 12/24/2017 | 7,599,497 | 8,984,473 | ||||||
|
| |||||||
8,984,473 | ||||||||
|
| |||||||
UTILITIES — 0.16% | ||||||||
ELECTRIC UTILITIES — 0.06% | ||||||||
Cia de Eletricidade do Estado da Bahia (BRL), 11.75%, 4/27/2016 | 12,000,000 | 6,378,098 | ||||||
MULTI-UTILITIES — 0.10% | ||||||||
Ville De Montreal (CAD), 5.45%, 12/1/2019 | 10,000,000 | 11,825,145 | ||||||
|
| |||||||
18,203,243 | ||||||||
|
| |||||||
TOTAL FOREIGN BONDS (Cost $194,929,150) | 212,806,587 | |||||||
|
| |||||||
OTHER SECURITIES — 0.45% | ||||||||
LOAN PARTICIPATIONS — 0.45% | ||||||||
Affinion Group, Inc., 5.00%, 7/16/2015 | 2,500,000 | 2,283,450 | ||||||
Baker & Taylor Acquisitions, 12.00%, 9/19/2016 | 11,000,000 | 10,670,000 | ||||||
b CEMEX Espana SA, 4.749%, 2/14/2014 | 5,000,000 | 4,750,000 | ||||||
Lonestar Intermediate Super Holdings, LLC, 11.00%, 8/7/2019 | 3,000,000 | 3,185,010 | ||||||
f Private Restaurants Properties, Inc., 9.00%, 3/1/2017 | 15,541,168 | 15,541,168 | ||||||
Texas Comp Electric Holdings, LLC, 3.741%, 10/10/2014 | 17,808,379 | 13,217,200 | ||||||
Texas Comp Electric Holdings, LLC, 3.938%, 10/31/2014 | 2,861,481 | 2,123,763 | ||||||
|
| |||||||
TOTAL OTHER SECURITIES (Cost $54,056,360) | 51,770,591 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 0.86% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.28%. Dated 9/28/2012 due 10/1/2012, repurchase price $15,000,350 collateralized by 3 corporate debt securities, having an average coupon of 3.375%, a minimum credit weighting of BBB+, maturity dates from 5/15/2017 to 2/15/2038, and having an aggregate market value of $16,143,749 at 9/28/2012 | 15,000,000 | 15,000,000 | ||||||
Darden Restaurants, Inc., 0.32%, 10/1/2012 | 39,479,000 | 39,479,000 | ||||||
Tyco Electronics Group SA, 0.36%, 10/1/2012 | 25,000,000 | 25,000,000 | ||||||
Vodafone Group plc, 0.85%, 12/28/2012 | 20,000,000 | 19,958,444 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $99,437,444) | 99,437,444 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 99.81% (Cost $10,605,049,361) | $ | 11,514,008,413 | ||||||
OTHER ASSETS LESS LIABILITIES — 0.19% | 21,473,802 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 11,535,482,215 | ||||||
|
|
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
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, 2011 | Gross Additions | Gross Reductions | Shares/Principal September 30, 2012 | Market Value September 30, 2012 | Investment Income | ||||||||||||||||||
Apollo Investment Corp. | 10,000,000 | 4,179,200 | — | 14,179,200 | $ | 111,590,304 | $ | 11,379,264 | ||||||||||||||||
Apollo Investment Corp., | 5,000,000 | 5,900,000 | 10,900,000 | — | — | 471,045 | ||||||||||||||||||
Dynex Capital, Inc. | 2,860,000 | 1,702,000 | — | 4,562,000 | 49,041,500 | 3,401,140 | ||||||||||||||||||
Invesco Mortgage Capital, Inc* | 5,414,300 | 1,585,700 | — | 7,000,000 | 140,910,000 | 17,977,570 | ||||||||||||||||||
KKR Financial Holdings, LLC | 11,900,000 | 500,000 | — | 12,400,000 | 124,620,000 | 10,116,000 | ||||||||||||||||||
KKR Financial Holdings, LLC, | 61,600,000 | — | 61,600,000 | — | — | 6,017,618 | ||||||||||||||||||
KKR Financial Holdings, LLC, | 22,750,000 | — | — | 22,750,000 | 33,982,813 | 956,597 | ||||||||||||||||||
MFA Financial, Inc. | 18,000,000 | 2,555,000 | — | 20,555,000 | 174,717,500 | 19,300,000 | ||||||||||||||||||
Solar Capital Ltd. | 3,750,000 | — | — | 3,750,000 | 85,950,000 | 9,000,000 | ||||||||||||||||||
Washington REIT* | 1,727,539 | 2,247,461 | — | 3,975,000 | 106,609,500 | 4,744,305 | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total non-controlled affiliated issuers – 7.17% of net assets |
| $ | 827,421,617 | $ | 83,363,539 | |||||||||||||||||||
|
|
|
|
* | Issuers not affiliated at September 30, 2011. |
b | Yankee Bond - Denominated in U.S. dollars and is issued in the U.S. by foreign banks and corporations. |
c | Non-income producing. |
d | 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, 2012, the aggregate value of these securities in the Fund’s portfolio was $763,879,294, representing 6.62% of the Fund’s net assets. |
e | Bond in default. |
f | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt |
ARM | Adjustable Rate Mortgage |
AUD | Denominated in Australian Dollars |
BRL | Denominated in Brazilian Real |
CAD | Denominated in Canadian Dollars |
CMO | Collateralized Mortgage Obligation |
CPI | Consumer Price Index |
EUR | Denominated in Euros |
FCB | Farm Credit Bank |
GBP | Great Britain Pound |
LIBOR | London Interbank Offered Rate |
MFA | Mortgage Finance Authority |
Mtg | Mortgage |
Pfd | Preferred Stock |
REIT | Real Estate Investment Trust |
See notes to financial statements.
30 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 31
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
ASSETS | ||||
Investments at value | ||||
Non-affiliated issuers (cost $9,820,078,146) (Note 2) | $ | 10,686,586,796 | ||
Non-controlled affiliated issuers (cost $784,971,215) (Note 2) | 827,421,617 | |||
Cash | 2,383,166 | |||
Cash denominated in foreign currency (cost $15,414,326) | 15,405,602 | |||
Receivable for investments sold | 93,181,182 | |||
Receivable for fund shares sold | 35,301,645 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 5,179,757 | |||
Dividends receivable | 45,462,200 | |||
Dividend and interest reclaim receivable | 13,963,877 | |||
Interest receivable | 39,306,354 | |||
Prepaid expenses and other assets | 34,054 | |||
|
| |||
Total Assets | 11,764,226,250 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 143,324,563 | |||
Payable for fund shares redeemed | 19,192,074 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 39,343,472 | |||
Payable to investment advisor and other affiliates (Note 3) | 11,242,048 | |||
Accounts payable and accrued expenses | 4,077,050 | |||
Dividends payable | 11,564,828 | |||
|
| |||
Total Liabilities | 228,744,035 | |||
|
| |||
NET ASSETS | $ | 11,535,482,215 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Undistributed net investment income | $ | 44,000,205 | ||
Net unrealized appreciation on investments | 874,371,508 | |||
Accumulated net realized gain (loss) | (1,021,746,341 | ) | ||
Net capital paid in on shares of beneficial interest | 11,638,856,843 | |||
|
| |||
$ | 11,535,482,215 | |||
|
|
32 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($3,420,877,069 applicable to 181,044,772 shares of beneficial interest outstanding - Note 4) | $ | 18.90 | ||
Maximum sales charge, 4.50% of offering price | 0.89 | |||
|
| |||
Maximum offering price per share | $ | 19.79 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($4,051,242,671 applicable to 214,418,737 shares of beneficial interest outstanding - Note 4) | $ | 18.89 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($3,981,954,903 applicable to 209,299,823 shares of beneficial interest outstanding - Note 4) | $ | 19.03 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($47,023,003 applicable to 2,489,151 shares of beneficial interest outstanding - Note 4) | $ | 18.89 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($19,470,776 applicable to 1,028,579 shares of beneficial interest outstanding - Note 4) | $ | 18.93 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($14,913,793 applicable to 784,353 shares of beneficial interest outstanding - Note 4) | $ | 19.01 | ||
|
|
* | 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 33
STATEMENT OF OPERATIONS | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $43,364,932) | $ | 542,511,175 | ||
Non-controlled affiliated issuers | 75,918,279 | |||
Interest income | ||||
Non-affiliated issuers (net of premium amortization of $2,112,299) | 153,242,472 | |||
Non-controlled affiliated issuers (net of premium amortization of $ 749,653) | 7,445,260 | |||
|
| |||
Total Income | 779,117,186 | |||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 72,277,730 | |||
Administration fees (Note 3) | ||||
Class A Shares | 3,904,223 | |||
Class C Shares | 4,563,070 | |||
Class I Shares | 1,749,751 | |||
Class R3 Shares | 50,916 | |||
Class R4 Shares | 17,492 | |||
Class R5 Shares | 4,689 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 7,820,953 | |||
Class C Shares | 36,599,667 | |||
Class R3 Shares | 203,968 | |||
Class R4 Shares | 34,968 | |||
Transfer agent fees | ||||
Class A Shares | 2,667,211 | |||
Class C Shares | 3,527,262 | |||
Class I Shares | 3,319,161 | |||
Class R3 Shares | 69,930 | |||
Class R4 Shares | 36,525 | |||
Class R5 Shares | 22,891 | |||
Registration and filing fees | ||||
Class A Shares | 135,318 | |||
Class C Shares | 101,084 | |||
Class I Shares | 123,955 | |||
Class R3 Shares | 20,330 | |||
Class R4 Shares | 21,545 | |||
Class R5 Shares | 24,211 | |||
Custodian fees (Note 3) | 2,144,001 | |||
Professional fees | 203,570 | |||
Accounting fees | 286,210 | |||
Trustee fees | 302,868 | |||
Other expenses | 1,162,364 | |||
|
| |||
Total Expenses | 141,395,863 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (2,485,830 | ) | ||
Fees paid indirectly (Note 3) | (1,456 | ) | ||
|
| |||
Net Expenses | 138,908,577 | |||
|
| |||
Net Investment Income | $ | 640,208,609 | ||
|
|
34 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2012 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | ||||
Non-affiliated issuers | $ | (356,947,610 | ) | |
Non-controlled affiliated issuers | 1,321,904 | |||
Forward currency contracts (Note 7) | 168,441,862 | |||
Foreign currency transactions | (7,405,443 | ) | ||
|
| |||
(194,589,287 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | ||||
Non-affiliated issuers | 1,089,164,519 | |||
Non-controlled affiliated issuers | 92,510,500 | |||
Forward currency contracts (Note 7) | (121,920,534 | ) | ||
Foreign currency translations | 2,341,792 | |||
|
| |||
1,062,096,277 | ||||
|
| |||
Net Realized and Unrealized Gain | 867,506,990 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 1,507,715,599 | ||
|
|
See notes to financial statements.
Certified Annual Report 35
STATEMENTS OF CHANGES IN NET ASSETS
Thornburg Investment Income Builder Fund
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 640,208,609 | $ | 468,555,483 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions, net of foreign capital gain taxes | (194,589,287 | ) | (19,014,722 | ) | ||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts and foreign currency translations | 1,062,096,277 | (642,066,221 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,507,715,599 | (192,525,460 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (194,518,753 | ) | (156,072,470 | ) | ||||
Class C Shares | (202,332,862 | ) | (157,547,088 | ) | ||||
Class I Shares | (228,077,408 | ) | (160,430,480 | ) | ||||
Class R3 Shares | (2,423,659 | ) | (1,872,389 | ) | ||||
Class R4 Shares | (840,952 | ) | (371,383 | ) | ||||
Class R5 Shares | (588,324 | ) | (302,648 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 417,639,282 | 913,176,735 | ||||||
Class C Shares | 570,383,451 | 1,170,437,918 | ||||||
Class I Shares | 811,511,415 | 1,426,933,566 | ||||||
Class R3 Shares | 8,691,494 | 13,878,035 | ||||||
Class R4 Shares | 8,058,175 | 9,181,603 | ||||||
Class R5 Shares | 9,693,298 | 1,448,645 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 2,704,910,756 | 2,865,934,584 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 8,830,571,459 | 5,964,636,875 | ||||||
|
|
|
| |||||
End of Year | $ | 11,535,482,215 | $ | 8,830,571,459 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 44,000,205 | $ | 34,187,394 |
See notes to financial statements.
36 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
NOTE 1 – ORGANIZATION
Thornburg Investment Income Builder Fund (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 outstanding: 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 and may be subject to a service fee, (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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: Portfolio investments listed or traded on a national securities exchange are valued on the valuation date at the last reported trade price on the exchange that is the primary market for the security. Portfolio investments traded on an exchange for which there has been no trade that day and other equity investments traded in the over-the-counter market are valued at the mean between the last reported bid and ask prices. Portfolio investments reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign investment traded on exchanges outside the United States is valued at the price of the security on the exchange that is normally the investment’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation measurement date.
Certified Annual Report 37
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
In any case where the market value of an equity investment held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. The Committee’s determinations are made using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from an independent pricing service. The pricing service ordinarily values equity investments 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. An investment’s market value is deemed not readily available whenever the exchange or market on which the investment is primarily traded is closed for the entire scheduled day of trading. Additionally, an investment’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 investment’s primary exchange or market, but before the most recent close of trading in Fund shares, or an unusual event or significant period of time occurring since the availability of a market quotation, create a question about the reliability of the investment’s market value. On days when market volatility thresholds pre-determined by the Trustees are exceeded, foreign equity investments held by the Fund may be valued using synthetic pricing obtained from an independent pricing service approved by the Trustees, subject to the ability of the Committee to determine in any such instance to utilize market closing prices if the Committee considers closing prices to be more reliable.
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. 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 ordinarily 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 Committee determines a fair value for the debt obligation using procedures in accordance with a policy 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
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.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board, (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
When market volatility thresholds are exceeded, foreign equity investments may be fair valued according to other significant observable inputs rather than quoted market prices. The affected investments will be characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
38 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 9,079,969,143 | $ | 9,079,969,143 | $ | — | $ | — | ||||||||
Preferred Stock(a) | 426,293,478 | 345,981,603 | 80,311,875 | — | ||||||||||||
Asset Backed Securities | 79,026,275 | — | 70,373,365 | 8,652,910 | ||||||||||||
Corporate Bonds(b) | 1,414,682,562 | — | 1,391,420,138 | 23,262,424 | ||||||||||||
Convertible Bonds | 134,034,211 | — | 134,034,211 | — | ||||||||||||
Warrants | 496,000 | 496,000 | — | — | ||||||||||||
Municipal Bonds | 3,540,762 | — | 3,540,762 | — | ||||||||||||
U.S. Government Agencies | 8,958,026 | — | 8,958,026 | — | ||||||||||||
Other Government | 2,993,334 | — | 2,993,334 | — | ||||||||||||
Foreign Bonds | 212,806,587 | — | 201,158,407 | 11,648,180 | ||||||||||||
Other Securities | 51,770,591 | — | 36,229,423 | 15,541,168 | ||||||||||||
Short Term Investments | 99,437,444 | — | 99,437,444 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 11,514,008,413 | $ | 9,426,446,746 | $ | 2,028,456,985 | $ | 59,104,682 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 5,179,757 | $ | — | $ | 5,179,757 | $ | — | ||||||||
Spot Currency | $ | 196,150 | $ | 196,150 | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (39,343,472 | ) | $ | — | $ | (39,343,472 | ) | $ | — | ||||||
Spot Currency | $ | (178,986 | ) | $ | (178,986 | ) | $ | — | $ | — |
(a) | At September 30, 2012, industry classifications for Preferred Stock in Level 2 consist of $8,565,000 in Banks, $10,518,750 in Miscellaneous,$ 19, 031, 250 in Telecommunication Services and $42,196,875 in Utilities . |
(b) | In accordance with the guidance prescribed in Accounting Standards Update, (“ASU”) No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, unadjusted broker quotes were applied to portfolio securities characterized as Level 3 investments at September 30, 2012. Certain portfolio investments, representing $2,560,000 market value in the Corporate Bonds asset category and characterized as Level 3 investments, were fair valued by the Committee using adjusted broker quotes. |
* | 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, Inc. 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. |
Certified Annual Report 39
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
In accordance with the guidance prescribed in ASU No. 2011-04, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between Levels 1 and 2 for the year ended September 30, 2012, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the year.
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2012, is as follows:
Asset Backed Securities | Corporate Bonds | Foreign Bonds | Other Securities | Total | ||||||||||||||||
Beginning Balance 9/30/2011 | $ | 5,000,000 | $ | 10,244,288 | $ | 15,167,391 | $ | 2,133,868 | $ | 32,545,547 | ||||||||||
Accrued Discounts (Premiums) | 29,811 | 42,064 | 131,792 | 25,099 | 228,766 | |||||||||||||||
Net Realized Gain (Loss) (a) | 74,031 | (4,997,610 | ) | (1,981,669 | ) | 43,582 | (6,861,666 | ) | ||||||||||||
Gross Purchases | — | 12,149,882 | 2,249,994 | 15,600,000 | 29,999,876 | |||||||||||||||
Gross Sales | (465,112 | ) | (165,587 | ) | (3,069,880 | ) | (2,227,768 | ) | (5,928,347 | ) | ||||||||||
Change in Unrealized Appreciation | 106,358 | (6,987,373 | ) | 2,348,265 | (33,613 | ) | (4,566,363 | ) | ||||||||||||
Transfers into Level 3 (c) | 3,907,822 | 15,920,000 | — | — | 19,827,822 | |||||||||||||||
Transfers out of Level 3 (c) | — | (2,943,240 | ) | (3,197,713 | ) | — | (6,140,953 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending Balance 9/30/2012 (d) | $ | 8,652,910 | $ | 23,262,424 | $ | 11,648,180 | $ | 15,541,168 | $ | 59,104,682 |
(a) | Total amount of net realized gain (loss) from investments recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended ended September 30, 2012. |
(b) | Total amount of net change in unrealized appreciation (depreciation) on investments recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended ended September 30, 2012. |
(c) | Transfers into or out of Level 3 were from or to Level 2, and were due to changes in other significant observable inputs available during the year ended September 30, 2012. Transfers into or out of Level 3 are based on the beginning market value of the period in which they occurred. |
(d) | Level 3 Investments represent 0.51% of total Net Assets at the year ended September 30, 2012. Significant fluctuations of the unobservable inputs applied to portfolio investments characterized as Level 3 investments could be expected to increase or decrease the fair value of these portfolio investments. |
Foreign Currency Translation: Portfolio investments 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 investments and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign investments, 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 values of such spot contracts are included in receivable for investments sold and payable for investments purchased on the Statement of Assets and Liabilities.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on investments held. Such changes are included in net unrealized appreciation or depreciation from investments.
Reported net realized gains or losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on investments 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 change in unrealized appreciation and depreciation on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at fiscal period end, resulting from changes in exchange rates.
40 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains on investments of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these investments 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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Fund is declared daily as a dividend on shares for which the Fund has received payment. Dividends are paid quarterly and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the dividend payment date, or at the shareholder’s option, paid in cash. Net realized capital gains, to the extent available, will be distributed at least annually. Distributions to shareholders are based on income tax regulations and therefore, their characteristics may differ for financial statement and tax purposes.
Repurchase Agreements: The Funds may invest excess cash in repurchase agreements whereby the Funds purchase investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
General: Investment 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 investments is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of investments 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 (and under a separate agreement with the Trustees), 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 United States generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the
Certified Annual Report 41
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
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 amounts 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, 2012, 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, 2012, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $2,402,757 for Class C shares, $36,062 for Class R3 shares, $18,776 for Class R4 shares, and $28,235 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, 2012, the Distributor has advised the Fund that it earned commissions aggregating $1,904,583 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $451,481 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, 2012, there were no 12b-1 service plan fees charged for Class I and 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 shares, and an annual rate of up to .25 of 1% per annum of the average daily net assets attributable to Class R3 shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, fees paid indirectly were $1,456.
Certain officers and Trustees of the Trust are also officers or directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
42 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended | Year Ended | |||||||||||||||
September 30, 2012 | September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 50,634,864 | $ | 922,597,532 | 66,659,959 | $ | 1,269,837,423 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 8,419,107 | 154,418,707 | 6,426,882 | 118,738,328 | ||||||||||||
Shares repurchased | (36,229,209 | ) | (659,394,554 | ) | (25,120,651 | ) | (475,421,839 | ) | ||||||||
Redemption fees received* | — | 17,597 | — | 22,823 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 22,824,762 | $ | 417,639,282 | 47,966,190 | $ | 913,176,735 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 52,069,804 | $ | 949,331,499 | 75,008,220 | $ | 1,434,355,675 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 8,174,226 | 149,832,339 | 6,023,434 | 111,069,630 | ||||||||||||
Shares repurchased | (29,066,753 | ) | (528,800,858 | ) | (19,855,761 | ) | (375,013,316 | ) | ||||||||
Redemption fees received* | — | 20,471 | — | 25,929 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 31,177,277 | $ | 570,383,451 | 61,175,893 | $ | 1,170,437,918 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 85,850,599 | $ | 1,573,345,423 | 94,540,995 | $ | 1,813,011,672 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 9,691,099 | 179,014,305 | 6,544,281 | 121,547,620 | ||||||||||||
Shares repurchased | (51,652,773 | ) | (940,867,728 | ) | (26,969,127 | ) | (507,647,985 | ) | ||||||||
Redemption fees received* | — | 19,415 | — | 22,259 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 43,888,925 | $ | 811,511,415 | 74,116,149 | $ | 1,426,933,566 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 916,684 | $ | 16,701,010 | 1,105,342 | $ | 21,102,445 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 120,502 | 2,208,654 | 90,089 | 1,663,483 | ||||||||||||
Shares repurchased | (565,100 | ) | (10,218,392 | ) | (465,040 | ) | (8,888,180 | ) | ||||||||
Redemption fees received* | — | 222 | — | 287 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 472,086 | $ | 8,691,494 | 730,391 | $ | 13,878,035 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 621,863 | $ | 11,383,323 | 583,010 | $ | 11,071,807 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 30,904 | 568,152 | 13,403 | 245,178 | ||||||||||||
Shares repurchased | (211,126 | ) | (3,893,368 | ) | (115,790 | ) | (2,135,440 | ) | ||||||||
Redemption fees received* | — | 68 | — | 58 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 441,641 | $ | 8,058,175 | 480,623 | $ | 9,181,603 | ||||||||||
|
|
|
|
|
|
|
|
Certified Annual Report 43
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Year Ended | Year Ended | |||||||||||||||
September 30, 2012 | September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 707,505 | $ | 12,944,687 | 165,122 | $ | 3,175,755 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 27,217 | 505,222 | 13,662 | 255,898 | ||||||||||||
Shares repurchased | (204,695 | ) | (3,756,654 | ) | (107,125 | ) | (1,983,050 | ) | ||||||||
Redemption fees received* | — | 43 | — | 42 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 530,027 | $ | 9,693,298 | 71,659 | $ | 1,448,645 | ||||||||||
|
|
|
|
|
|
|
|
* | The Fund previously charged a redemption fee of 1% of the Class A and Class I shares redeemed or exchanged within 30 days of purchase. Effective February 1, 2012, the Fund stopped imposing this redemption fee. Redemption fees that were charged to any class prior to February 1, 2012 were 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, 2012, the Fund had purchase and sale transactions of investments (excluding short-term investments and U. S. Government obligations) of $6,323,536,177 and $4,150,405,180, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 10,625,408,868 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 1,293,526,727 | ||
Gross unrealized depreciation on a tax basis | (404,927,182 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 888,599,545 | ||
|
|
At September 30, 2012, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2011 of $235,058,740. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
At September 30, 2012, the Fund had cumulative tax basis capital losses of $67,053,424, 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 do not expire but are required to be utilized to offset future gains prior to the utilization of losses that occured in years prior to the fiscal year ending September 30, 2012, which may expire prior to utilization.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) became effective for the Fund's fiscal year ending September 30, 2012. The Act requires that future capital losses generated by the Fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a Fund’s pre-enactment capital losses will expire unused.
At September 30, 2012, the Fund had cumulative 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.
44 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
Such capital loss carryforwards expire as follows:
2017 | $ | 229,347,589 | ||
2018 | 493,662,779 | |||
|
| |||
$ | 723,010,368 | |||
|
|
In order to account for permanent book/tax differences, the Fund increased undistributed net investment income by $625,475 and increased accumulated net realized loss by $625,475. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency transactions and investments in REITs and other regulated investment companies.
At September 30, 2012, the Fund had distributable net tax basis ordinary income of $45,154,454.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from | ||||||||
Ordinary income | $ | 628,781,958 | $ | 476,596,458 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 628,781,958 | $ | 476,596,458 | ||||
|
|
|
|
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50 (“ASC 815”), require certain disclosures. The disclosures are intended to provide users of financial statements with an 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, 2012, 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. Additionally, the Fund’s risk of loss may exceed the amounts recognized on the Statement of Assets and Liabilities.
The Fund entered into forward currency contracts during the year ended September 30, 2012 in the normal course of pursuing its investment objectives, in anticipation 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 appreciation and depreciation on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities, 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 sell currency contracts are indicative of the activity for the year ended September 30, 2012. Open buy currency contracts are entered into for the purpose of closing open sell currency contracts and the values are dependent upon the values of open sell currency contracts within the year ended September 30, 2012.
Certified Annual Report 45
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 |
The following table displays the outstanding forward currency contracts at September 30, 2012:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2012
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||
Euro | Sell | 1,116,977,500 | 02/28/2013 | 1,437,725,906 | $ | — | $ | (32,355,985 | ) | |||||||||||||
Great Britain Pound | Sell | 42,225,500 | 10/10/2012 | 68,184,074 | — | (2,414,902 | ) | |||||||||||||||
Great Britain Pound | Sell | 149,063,700 | 10/10/2012 | 240,702,190 | — | (4,257,349 | ) | |||||||||||||||
Swiss Franc | Sell | 172,228,900 | 10/10/2012 | 183,151,462 | 5,179,757 | — | ||||||||||||||||
Swiss Franc | Buy | 37,408,100 | 10/10/2012 | 39,780,479 | — | (315,236 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||
Total | $ | 5,179,757 | $ | (39,343,472 | ) | |||||||||||||||||
|
|
|
|
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2012 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2012
Asset Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 5,179,757 | |||
Liability Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (39,343,472 | ) |
The net realized gains (losses) from forward currency contracts, and the net change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2012 are disclosed in the following tables:
Amount of Net Realized Gain (Loss)
on Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 168,441,862 | $ | 168,441,862 |
Amount of Net Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (121,920,534 | ) | $ | (121,920,534 | ) |
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, management risk, market and economic risk, risks affecting specific issuers, credit risk, interest rate risk, prepayment risk, liquidity risk, and the risks associated with investments in smaller companies, non-U.S. issuers, and real estate investment trusts. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
46 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 47
Thornburg Investment Income Builder Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the Year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless Otherwise Periods are Years Ended Sept. 30, | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 17.29 | 1.15 | 1.60 | 2.75 | (1.14 | ) | — | (1.14 | ) | $ | 18.90 | 6.32 | 1.20 | 1.20 | 1.20 | 16.26 | 40.96 | $ | 3,420,877 | ||||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 18.31 | 1.12 | (0.99 | ) | 0.13 | (1.15 | ) | — | (1.15 | ) | $ | 17.29 | 5.91 | 1.21 | 1.21 | 1.21 | 0.42 | 30.34 | $ | 2,734,845 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 17.29 | 1.02 | 1.59 | 2.61 | (1.01 | ) | — | (1.01 | ) | $ | 18.89 | 5.63 | 1.90 | 1.90 | 1.97 | 15.43 | 40.96 | $ | 4,051,242 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 18.31 | 0.99 | (0.99 | ) | — | (1.02 | ) | — | (1.02 | ) | $ | 17.29 | 5.23 | 1.90 | 1.90 | 1.96 | (0.26 | ) | 30.34 | $ | 3,167,624 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 17.40 | 1.22 | 1.61 | 2.83 | (1.20 | ) | — | (1.20 | ) | $ | 19.03 | 6.67 | 0.89 | 0.89 | 0.89 | 16.61 | 40.96 | $ | 3,981,955 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 18.43 | 1.21 | (1.02 | ) | 0.19 | (1.22 | ) | — | (1.22 | ) | $ | 17.40 | 6.31 | 0.87 | 0.87 | 0.87 | 0.74 | 30.34 | $ | 2,878,655 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 17.28 | 1.10 | 1.60 | 2.70 | (1.09 | ) | — | (1.09 | ) | $ | 18.89 | 6.05 | 1.50 | 1.50 | 1.59 | 15.94 | 40.96 | $ | 47,023 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 18.30 | 1.08 | (1.00 | ) | 0.08 | (1.10 | ) | — | (1.10 | ) | $ | 17.28 | 5.67 | 1.50 | 1.50 | 1.58 | 0.13 | 30.34 | $ | 34,861 | |||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 17.31 | 1.12 | 1.61 | 2.73 | (1.11 | ) | — | (1.11 | ) | $ | 18.93 | 6.14 | 1.39 | 1.39 | 1.53 | 16.10 | 40.96 | $ | 19,471 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 18.34 | 1.15 | (1.06 | ) | 0.09 | (1.12 | ) | — | (1.12 | ) | $ | 17.31 | 6.02 | 1.40 | 1.40 | 1.65 | 0.19 | 30.34 | $ | 10,162 | |||||||||||||||||||||||||||||||||||||||
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 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 17.40 | 1.21 | 1.58 | 2.79 | (1.18 | ) | — | (1.18 | ) | $ | 19.01 | 6.61 | 0.99 | 0.99 | 1.29 | 16.44 | 40.96 | $ | 14,914 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 18.42 | 1.18 | (1.00 | ) | 0.18 | (1.20 | ) | — | (1.20 | ) | $ | 17.40 | 6.16 | 0.99 | 0.99 | 1.51 | 0.68 | 30.34 | $ | 4,424 | |||||||||||||||||||||||||||||||||||||||
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 |
(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. |
+ | Based on weighted average shares outstanding, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
48 Certified Annual Report | Certified Annual Report 49 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Investment Income Builder Fund
To the Trustees and Shareholders of
Thornburg Investment Income Builder Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Investment Income Builder Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
50 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Investment Income Builder Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,044.60 | $ | 6.19 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.95 | $ | 6.11 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,040.50 | $ | 9.69 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,015.50 | $ | 9.57 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,045.50 | $ | 4.67 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.43 | $ | 4.61 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,042.50 | $ | 7.66 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.50 | $ | 7.57 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,043.60 | $ | 7.15 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.00 | $ | 7.06 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,045.10 | $ | 5.06 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.21%; C: 1.90%; I: 0.91%; R3: 1.50%; R4: 1.40%; R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your class of shares under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the table above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 51
INDEX COMPARISON | ||
Thornburg Investment Income Builder Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg Investment Income Builder Fund versus S&P 500 Index and Blended Index
(December 24, 2002 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 5 Yrs | Since Inception | ||||||||||
A Shares (Incep: 12/24/02) | 11.06 | % | 1.44 | % | 10.41 | % | ||||||
C Shares (Incep: 12/24/02) | 14.43 | % | 1.70 | % | 10.30 | % | ||||||
I Shares (Incep: 11/3/03) | 16.61 | % | 2.71 | % | 9.73 | % | ||||||
R3 Shares (Incep: 2/1/05) | 15.94 | % | 2.13 | % | 7.68 | % | ||||||
R4 Shares (Incep: 2/1/08) | 16.10 | % | — | 3.65 | % | |||||||
R5 Shares (Incep: 2/1/07) | 16.44 | % | 2.62 | % | 5.06 | % | ||||||
Blended Index (Since 12/24/02) | 17.57 | % | 0.38 | % | 7.13 | % | ||||||
S&P 500 Index (Since 12/24/02) | 30.20 | % | 1.05 | % | 7.17 | % |
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 or call 800-847-0200. 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.
52 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Investment Income Builder Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 53
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE(1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
54 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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 Investment Income Builder Fund | September 30, 2012 (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, 2012, the Thornburg Investment Income Builder Fund is reporting 76.41% (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.
The Fund is reporting 18.17% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2012 qualified for the corporate dividends received deduction.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Investment Income Builder Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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.
56 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. 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 Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (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 a broad-based securities index, and relative to a blended performance benchmark comprised of two broad-based securities indices, (iv) the Fund’s cumulative investment return since inception relative to the blended benchmark, (v) comparative dividend payment data, and (vi) comparative measures of portfolio volatility, risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the Advisor’s performance of accounting and other services, the Advisor’s 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 considered (among other aspects of the data) comparative performance data for the nine calendar years since the Fund’s inception, which showed that the Fund’s investment return for the most recent calendar year was higher than the blended benchmark and the fund category and lower than the return for the index, and that the Fund’s returns for the preceding eight calendar years exceeded the returns of the blended benchmark in seven of eight years, exceeded the returns of the index in six of seven years for which data were provided, and exceeded or were comparable to the fund category in seven of eight years. Noted quantitative data also showed that the Fund’s investment returns fell at the top quartile of performance for the fund category for the three-month period ended with the second quarter of the current year, at the midpoint for the year-to-date period, within the second quartile for the one-year and five-year periods, and within the top decile of the fund category for the three-year period. The Trustees also noted their consideration of increasing levels of the Fund’s quarterly dividend payments in most periods since the Fund’s inception together with the annual increase in the Fund’s dividend in each year, and the Fund’s higher 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee charged to the Fund was comparable to the median and slightly higher than the average fee levels for the fund category, and that the overall expense ratio for a reference share class of the Fund was comparable to the median and slightly lower than the average expense ratios for the fund category. The Trustees did not find the differences significant in view of the other factors considered. The Trustees considered information about the fees charged by the Advisor to other investment
Certified Annual Report 57
OTHER INFORMATION, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2012 (Unaudited) |
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. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its 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.
58 Certified Annual Report
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This page is not part of the Annual Report. 59
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
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.
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 website 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 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 Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 61
THORNBURG FUND FAMILY
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 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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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, 2012. The managers’ views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 | 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.
S&P 500 Index – An unmanaged broad measure of the U.S. stock market.
Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index. 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.
This page is not part of the Annual Report. 3
THORNBURG GLOBAL OPPORTUNITIES FUND
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 or call 800.847.0200.
The maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.48%, 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 invest in promising companies that we feel are trading at a discount to their intrinsic value. As the balance sheets of global companies become more complex, it is 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.
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
Average Annual Total Returns
For Periods Ended September 30, 2012
1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 7/28/06) | ||||||||||||||||
Without sales charge | 23.22 | % | 8.20 | % | -1.93 | % | 7.26 | % | ||||||||
With sales charge | 17.67 | % | 6.54 | % | -2.83 | % | 6.47 | % | ||||||||
MSCI AC World Index (Since: 7/28/06) | 20.98 | % | 7.23 | % | -2.07 | % | 2.41 | % |
4 This page is not part of the Annual Report.
focus on the largest capitalization stocks, or alternatively, spread their assets across many names. In fact, about 70% of category assets are concentrated in ten funds, and the average world stock fund holds approximately 145 stocks (as of 9/30/12).
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 what we view as 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 September 30, 2012
Top Contributors | Top Detractors | |
Oshkosh Corp. | Liechtensteinische Landesbank AG | |
Google, Inc. Cl A | Mineral Resources Ltd. | |
KKR Financial Holdings LLC | Hewlett-Packard Co. | |
Swiss Re AG | BTG Pactual Parti Ltd | |
InterXion Holding N.V. | Carphone Warehouse Group plc | |
Source: FactSet |
Key Portfolio Attributes
As of September 30, 2012
Portfolio P/E Trailing 12-Months* | 14.2x | |||
Portfolio Price to Cash Flow* | 6.1x | |||
Portfolio Price to Book Value* | 1.6x | |||
Median Market Cap* | $ | 7.7 B | ||
5-Year Beta (A Shares vs. MSCI ACWI)* | 1.13 | |||
Number of Companies | 35 | |||
* Source: FactSet |
Market Capitalization Exposure
As of September 30, 2012
Asset Structure
As of September 30, 2012
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Thornburg Global Opportunities Fund – September 30, 2012
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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 16, 2012
Dear Fellow Shareholder:
This letter will highlight the results of Thornburg Global Opportunities Fund’s investment activities for the six and twelve month periods ended September 30, 2012.
For the fiscal year ended September 30, 2012, the Fund’s net asset value per share increased by $2.82 or 21.4%. Total return for the Class A shares for the fiscal year was 23.2%, taking into account income dividends paid of 21 cents per share, reinvested in Fund shares. The dividends per share were higher for Class I, R4 and R5 shares, and lower on the Class C and R3 shares, to account for varying class specific expenses. In the six months ended September 30, 2012, Thornburg Global Opportunities Fund net asset value per A share increased 2.18% from $15.63 to $15.97.
Performance comparisons of Global Opportunities Fund to the MSCI All Country (AC) World Index over various time periods are shown on page 34 of this Annual Report, and on Thornburg Investment Management’s website, www.thornburg.com. The performance of the Fund has compared well to its benchmark over most time periods since its inception in July of 2006. We outperformed the MSCI AC World Index by 2.24% for the 12 month period ended September 30, 2012. From its inception on July 28, 2006 through September 30, 2012, Thornburg Global Opportunities Fund has outperformed the same index by an average margin of 4.85% per year as shown on page 4. Quarter to quarter, your Fund’s performance versus the Index has varied: the Fund has outperformed the Index in 14 out of 24 full calendar quarters since inception. We urge shareholders to maintain a long term investment perspective.
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 or call 800.847.0200.
The maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.48%, as disclosed in the most recent Prospectus.
We do not expect to pay any capital gain distribution for 2012. At September 30, 2012, Global Opportunities Fund had tax basis realized capital losses of more than $170 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, 2012, because this is our global performance benchmark:
1. | All 10 sectors showed positive total returns, with a range of 6.6% (utilities) to more than 26% (health care and information technology). |
2. | In the Global Opportunities portfolio, returns from 42 of our investments were positive during the year ended September 30, 2012, while eight were negative. |
3. | Global Opportunities Fund investments in firms in the financials (24% Fund weighting), information technology (15%), industrials (13%) and consumer discretionary (12%) sectors comprised the largest sector weightings in the Fund portfolio during the fiscal year. |
Certified Annual Report 7
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
4. | Your Fund’s holdings in the financials and information technology sectors were the strongest positive contributors to outperformance during the fiscal year. The Fund’s holdings in the consumer staples sector appreciated over the course of the fiscal year, though their aggregate performance fell behind that of the index portfolio in this sector. The Global Opportunities Fund had no investments in utilities during the period under review, which aided performance relative to the index. |
5. | Your Fund’s average return from its investments in the financials sector was above the 24% performance of the equities in the finance sector of the MSCI AC World Index. Our investment choices in the financial sector ended up being the most positive driver of performance vis-a-vis the benchmark for the year ended September 30, 2012. Fund investments in BankAmerica Corp, Swiss Re AG, KKR Financial Holdings and Apollo Investments were among the strongest performers in the portfolio, with the latter two particularly strong in the six-month period ended September 30, 2012. 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 as the year progressed. Negative returns from Liechtenstein Landesbank and Brazil’s BTG Pactual were offset by positive returns from the Fund’s other financial sector investments. |
6. | Your Fund’s holdings in the information technology sector also outperformed those of the index during the fiscal year, showing particular strength during the second half. Among these, Dutch data center operator InterXion Holding joined Google and Microsoft as notable positive performers. |
7. | Among our investments in the industrials sector, Oshkosh Corp. and Fly Leasing delivered strong performances, while Australia’s Mineral Resources gave a negative return on expectations of slowing Chinese demand for iron ore. |
8. | Among our investments in the consumer discretionary sector, Brazilian homebuilder Cyrela Brazil Realty, German cable video/broadband provider Kabel Deutschland Holding, and Hong Kong broadcaster Television Broadcasts Ltd. each delivered strong performances for both the fiscal year as a whole and the six months ended September 30, 2012. Each of these is delivering operating results in line with our expectations. |
9. | Among other portfolio holdings, Australian telecom services provider Telstra delivered strong performance, while Brazil’s Telefonica Brasil SA showed share price weakness, particularly in the most recent six months. Oil & gas drillers Ensco plc and Ensign Energy Services and health care firms Valeant Pharmaceuticals International and Roche Holdings were strong performers for the fiscal year, each meeting or exceeding revenue and earnings expectations. For the six-month period ended September 30, 2012, Macau casino operator Galaxy Entertainment and U.S. drugstore operator Walgreen’s also delivered strong share price performances. The former was a new addition to the portfolio, while the latter recovered from earlier share price weakness following announcements of a promising merger with European druggist AllianceBoots and settlement of a long running pricing dispute with pharmaceutical benefits provider Express Scripts. |
8 Certified Annual Report
At September 30, 2012, domestic stocks comprised approximately 44.2% of your portfolio; foreign stocks around 49.9%; and cash and interest bearing debt the remaining 6%. We have hedged more than 50% of the currency risk associated with your Fund’s euro (~11% of the portfolio is invested in companies based in European Monetary Union countries) equity holdings. For now, we do not hedge the currency risk of our Australian dollar, Canadian dollar, and non-yen Asian currency denominated equity holdings, and we retain a hedge of less than 50% with respect to your Fund’s Swiss holdings.
The average price/earnings multiple of the 35 stocks in your portfolio on September 30, 2012, was 12.1x on an estimated forward basis, using estimates provided by FactSet and IBES. For comparative reference, the forward price/earnings multiples of the MSCI AC World Index at September 30, 2012 was approximately 12.6x, also using estimates compiled by FactSet and IBES. Industry weightings, country weightings, and the top equity holdings of Global Opportunities Fund are summarized on page 11 of this report.
We have experienced well-above-average financial market volatility over the last four years. Investment bank Credit Suisse points out that the average number of quarters with a return of greater than 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, so these “highly volatile” quarterly results have occurred just 20% of the time over the six-decade span. In ten of the last sixteen calendar quarters, the returns to the S&P 500 Index have been either less than negative 10%, or greater than positive 10%. Equity mutual fund investors clearly do not welcome the more volatile equity returns seen since September 2008, but we have been able to add value in these conditions.
This commentary will not include a rehash of macro-economic news that surrounds us each day. Investors understandably seek additional clarity on how European governments (and financial institutions) will manage through a debt contraction and at least one state default. In addition, investors have questions about whether China can transition from an investment-led economy to a consumer-led economy, and whether the United States government can implement a reasonable framework of pro-growth policies, while also reining in public sector borrowing.
We do not expect to know clear answers to these questions during the coming months. There will be news from day to day that will feed hopes, or fan despair, thereby moving the prices of financial assets by significant percentages. In particular, we expect market moving news as the U.S. Government addresses the so called “Fiscal Cliff,” which would cause more than $600 billion of tax increases and spending cuts to take effect in 2013 if Congress and the White House cannot rewrite those statutes in place today.
In last year’s Annual Report letter, we wrote:
“We believe that the stock price declines resulting from large numbers of investors selling equities have created very attractive valuations so long as the global economy does not enter into some kind of broad collapse. We do not foresee such a collapse, but rather a grinding transition to various new foundations for future growth in the different regions of the world.”
Since then, earnings expectations for the MSCI All Country World Index portfolio have been reduced for 2012 and 2013, and global economic growth has been below prior expectations. Most major central banks around the world have significantly eased monetary conditions, however, and equity markets
Certified Annual Report 9
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
appear to expect that lower interest rates and plentiful liquidity will indeed create a foundation for better economic growth in the future. Bond yields have dropped significantly, as indicated by a 1.66% decline in the FINRA-Bloomberg Index of Active Investment Grade U.S. Corporate Bond Yields from 4.80% on September 30, 2011 to 3.14% on October 15, 2012. Interest rate spreads on high-yield corporate debt relative to these investment-grade obligations have also narrowed over this period. While lower interest rates are good news for borrowers, they have negative consequences for conservative savers. Interest income as a percentage of overall personal income in the United States has fallen from more than 11% to less than 8% between 2008 and today, and this is set to continue dropping in 2013 as previously issued bonds and CDs mature and are replaced by lower yields.
Investors must consider other options. Business values are below historical averages. Overall sales and earnings results, while broadly below prior consensus analyst expectations, have come in reasonably well though mid-2012. This partially explains the strong performance of equities over the last year. A lack of optimism about future business conditions still keeps many equity investors on the sidelines, though the strong returns to most global stock markets during the first nine months of 2012 evidence buying interest from others, including firms buying back their own stock using low cost borrowed funds or idle cash. We expect these share buybacks to continue, possibly at an accelerated pace.
We believe that your portfolio investments carry low enough valuations to deliver interesting investment results in a variety of conditions. We have managed the Fund through a variety of macroeconomic settings since its inception in July 2006, adding significant value versus our benchmark over its 6+ year life. Thank you for being a shareholder of Thornburg Global Opportunities Fund.
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 | |
Portfolio Manager | 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.
10 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
Top Ten Equity Holdings
As of 9/30/12
InterXion Holding NV | 4.9 | % | EchoStar Corp. | 3.7 | % | |||||
BRF-Brasil Foods SA | 4.4 | % | Capital One Financial Corp. | 3.4 | % | |||||
SPDR Gold Trust | 4.2 | % | Valeant Pharmaceuticals International, Inc. | 3.3 | % | |||||
Level 3 Communications, Inc. | 4.0 | % | Fly Leasing Ltd. ADR | 3.3 | % | |||||
Google, Inc. | 4.0 | % | Weight Watchers International, Inc. | 3.2 | % |
Summary of Exposure
As of 9/30/12
Diversified Financials | 12.3 | % | Food, Beverage & Tobacco | 4.4 | % | |||||
Software & Services | 11.1 | % | Exchange Traded Funds | 4.2 | % | |||||
Telecommunication Services | 8.4 | % | Transportation | 2.5 | % | |||||
Energy | 6.6 | % | Consumer Durables & Apparel | 2.5 | % | |||||
Capital Goods | 6.5 | % | Food & Staples Retailing | 2.2 | % | |||||
Pharmaceuticals, Biotechnology & Life Sciences | 6.5 | % | Automobiles & Components | 2.0 | % | |||||
Technology Hardware & Equipment | 6.3 | % | Commercial & Professional Services | 1.9 | % | |||||
Consumer Services | 5.7 | % | Banks | 1.3 | % | |||||
Insurance | 5.1 | % | Other Assets & Liabilities | 5.9 | % | |||||
Media | 4.6 | % |
Summary of Country Exposure
As of 9/30/12 (percent of equity holdings)
United States | 44.5 | % | Australia | 4.7 | % | |||||
Switzerland | 9.6 | % | Hong Kong | 4.1 | % | |||||
Brazil | 9.3 | % | Ireland | 3.5 | % | |||||
Canada | 8.1 | % | Germany | 3.4 | % | |||||
Netherlands | 5.2 | % | China | 2.7 | % | |||||
United Kingdom | 4.9 | % |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
Shares/ Principal Amount | Value | |||||||
COMMON STOCK — 89.93% | ||||||||
AUTOMOBILES & COMPONENTS — 2.05% | ||||||||
AUTO COMPONENTS — 2.05% | ||||||||
a Delphi Automotive plc | 248,900 | $ | 7,715,900 | |||||
|
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7,715,900 | ||||||||
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BANKS — 1.26% | ||||||||
COMMERCIAL BANKS — 1.26% | ||||||||
Liechtensteinische Landesbank AG | 132,178 | 4,743,230 | ||||||
|
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4,743,230 | ||||||||
|
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CAPITAL GOODS — 6.54% | ||||||||
MACHINERY — 3.22% | ||||||||
a Oshkosh Corp. | 440,800 | 12,091,144 | ||||||
TRADING COMPANIES & DISTRIBUTORS — 3.32% | ||||||||
Fly Leasing Ltd. ADR | 925,113 | 12,498,277 | ||||||
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24,589,421 | ||||||||
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COMMERCIAL & PROFESSIONAL SERVICES — 1.91% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 1.91% | ||||||||
Mineral Resources Ltd. | 903,130 | 7,185,386 | ||||||
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7,185,386 | ||||||||
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CONSUMER DURABLES & APPAREL — 2.46% | ||||||||
HOUSEHOLD DURABLES — 2.46% | ||||||||
Cyrela Brazil Realty S.A. | 1,077,300 | 9,246,526 | ||||||
|
| |||||||
9,246,526 | ||||||||
|
| |||||||
CONSUMER SERVICES — 5.71% | ||||||||
DIVERSIFIED CONSUMER SERVICES — 3.24% | ||||||||
Weight Watchers International, Inc. | 230,753 | 12,183,758 | ||||||
HOTELS, RESTAURANTS & LEISURE — 2.47% | ||||||||
a Galaxy Entertainment Group Ltd. | 2,751,600 | 9,261,839 | ||||||
|
| |||||||
21,445,597 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 12.30% | ||||||||
CAPITAL MARKETS — 2.81% | ||||||||
Apollo Investment Corp. | 787,201 | 6,195,272 | ||||||
UBS AG | 359,646 | 4,378,465 | ||||||
CONSUMER FINANCE — 3.39% | ||||||||
Capital One Financial Corp. | 223,342 | 12,732,726 | ||||||
DIVERSIFIED FINANCIAL SERVICES — 6.10% | ||||||||
Bank of America Corp. | 1,246,300 | 11,004,829 | ||||||
KKR Financial Holdings LLC | 1,185,570 | 11,914,979 | ||||||
|
| |||||||
46,226,271 | ||||||||
|
| |||||||
ENERGY — 6.61% | ||||||||
ENERGY EQUIPMENT & SERVICES — 3.54% | ||||||||
Ensign Energy Services, Inc. | 300,400 | 4,614,017 | ||||||
Transocean Ltd. | 193,300 | 8,677,237 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
Shares/ | ||||||||
Principal Amount | Value | |||||||
OIL, GAS & CONSUMABLE FUELS — 3.07% | ||||||||
a Bankers Petroleum Ltd. | 3,846,700 | $ | 11,542,839 | |||||
|
| |||||||
24,834,093 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 2.18% | ||||||||
FOOD & STAPLES RETAILING — 2.18% | ||||||||
Walgreen Co. | 224,800 | 8,191,712 | ||||||
|
| |||||||
8,191,712 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 4.36% | ||||||||
FOOD PRODUCTS — 4.36% | ||||||||
BRF-Brasil Foods SA | 948,500 | 16,380,311 | ||||||
|
| |||||||
16,380,311 | ||||||||
|
| |||||||
INSURANCE — 5.06% | ||||||||
INSURANCE — 5.06% | ||||||||
Swiss Re | 149,650 | 9,618,652 | ||||||
Willis Group Holdings plc | 254,593 | 9,399,574 | ||||||
|
| |||||||
19,018,226 | ||||||||
|
| |||||||
MEDIA — 4.61% | ||||||||
MEDIA — 4.61% | ||||||||
a Kabel Deutschland Holding AG | 167,600 | 11,955,429 | ||||||
Television Broadcasts Ltd. | 725,380 | 5,365,009 | ||||||
|
| |||||||
17,320,438 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 6.49% | ||||||||
LIFE SCIENCES TOOLS & SERVICES — 1.39% | ||||||||
a Illumina, Inc. | 108,300 | 5,220,060 | ||||||
PHARMACEUTICALS — 5.10% | ||||||||
Roche Holding AG | 35,300 | 6,594,588 | ||||||
a Valeant Pharmaceuticals International, Inc. | 227,117 | 12,552,757 | ||||||
|
| |||||||
24,367,405 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 11.15% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 4.91% | ||||||||
a InterXion Holding NV | 811,936 | 18,447,186 | ||||||
INTERNET SOFTWARE & SERVICES — 4.00% | ||||||||
a Google, Inc. | 19,955 | 15,056,047 | ||||||
SOFTWARE — 2.24% | ||||||||
Microsoft Corp. | 282,300 | 8,406,894 | ||||||
|
| |||||||
41,910,127 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 6.29% | ||||||||
COMMUNICATIONS EQUIPMENT — 3.71% | ||||||||
a EchoStar Corp. | 486,941 | 13,955,729 | ||||||
COMPUTERS & PERIPHERALS — 2.58% | ||||||||
Apple, Inc. | 14,500 | 9,675,270 | ||||||
|
| |||||||
23,630,999 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 8.43% | ||||||||
DIVERSIFIED TELECOMMUNICATION SERVICES — 8.43% | 657,926 | 15,112,560 | ||||||
a Level 3 Communications, Inc. |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
Shares/ | ||||||||
Principal Amount | Value | |||||||
Telefonica Brasil ADR | 328,600 | $ | 7,143,764 | |||||
Telstra Corp. Ltd. | 2,311,263 | 9,398,097 | ||||||
|
| |||||||
31,654,421 | ||||||||
|
| |||||||
TRANSPORTATION — 2.52% | ||||||||
TRANSPORTATION INFRASTRUCTURE — 2.52% | ||||||||
China Merchants Holdings International Co. Ltd. | 3,064,400 | 9,465,038 | ||||||
|
| |||||||
9,465,038 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $300,279,337) | 337,925,101 | |||||||
|
| |||||||
EXCHANGE-TRADED FUNDS — 4.18% | ||||||||
a SPDR Gold Trust | 91,210 | 15,689,945 | ||||||
|
| |||||||
TOTAL EXCHANGE-TRADED FUNDS (Cost $14,734,322) | 15,689,945 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 6.02% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.28% dated 9/28/2012 due 10/1/2012, repurchase price $10,000,233 collateralized by 2 corporate debt securities, having an average coupon of 3.813%, a minimum credit rating of BBB-, maturity dates from 7/15/2014 to 5/15/2017, and having an aggregate market value of $10,767,699 at 9/28/2012 | $ | 10,000,000 | 10,000,000 | |||||
Darden Restaurants, Inc., 0.32%, 10/1/2012 | 12,639,000 | 12,639,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $22,639,000) | 22,639,000 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 100.13% (Cost $337,652,659) | $ | 376,254,046 | ||||||
LIABILITIES NET OF OTHER ASSETS — (0.13)% | (479,390 | ) | ||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 375,774,656 | ||||||
|
|
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.
14 Certified Annual Report
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Certified Annual Report 15
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
ASSETS | ||||
Investments at value (cost $337,652,659) (Note 2) | $ | 376,254,046 | ||
Cash | 64,690 | |||
Receivable for fund shares sold | 430,207 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 271,284 | |||
Dividends receivable | 748,165 | |||
Dividend and interest reclaim receivable | 106,991 | |||
Interest receivable | 233 | |||
Prepaid expenses and other assets | 45,000 | |||
|
| |||
Total Assets | 377,920,616 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 818,766 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 866,544 | |||
Payable to investment advisor and other affiliates (Note 3) | 312,705 | |||
Accounts payable and accrued expenses | 147,945 | |||
|
| |||
Total Liabilities | 2,145,960 | |||
|
| |||
NET ASSETS | $ | 375,774,656 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (4,725,571 | ) | |
Net unrealized appreciation on investments | 38,000,029 | |||
Accumulated net realized gain (loss) | (179,274,465 | ) | ||
Net capital paid in on shares of beneficial interest | 521,774,663 | |||
|
| |||
$ | 375,774,656 | |||
|
|
16 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($77,103,092 applicable to 4,827,997 shares of beneficial interest outstanding - Note 4) | $ | 15.97 | ||
Maximum sales charge, 4.50% of offering price | 0.75 | |||
|
| |||
Maximum offering price per share | $ | 16.72 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($76,737,829 applicable to 4,891,514 shares of beneficial interest outstanding - Note 4) | $ | 15.69 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($169,383,666 applicable to 10,544,981 shares of beneficial interest outstanding - Note 4) | $ | 16.06 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($ 894,489 applicable to 56,239 shares of beneficial interest outstanding - Note 4) | $ | 15.91 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($1,328,754 applicable to 83,586 shares of beneficial interest outstanding - Note 4) | $ | 15.90 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($50,326,825 applicable to 3,130,949 shares of beneficial interest outstanding - Note 4) | $ | 16.07 | ||
|
|
* | 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 Global Opportunities Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $121,496) | $ | 8,077,932 | ||
Interest income | 57,095 | |||
|
| |||
Total Income | 8,135,027 | |||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 2,925,613 | |||
Administration fees (Note 3) | ||||
Class A Shares | 96,584 | |||
Class C Shares | 95,071 | |||
Class I Shares | 70,439 | |||
Class R3 Shares | 383 | |||
Class R4 Shares | 1,318 | |||
Class R5 Shares | 19,396 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 193,094 | |||
Class C Shares | 760,412 | |||
Class R3 Shares | 1,537 | |||
Class R4 Shares | 2,638 | |||
Transfer agent fees | ||||
Class A Shares | 102,531 | |||
Class C Shares | 121,427 | |||
Class I Shares | 246,984 | |||
Class R3 Shares | 2,921 | |||
Class R4 Shares | 5,160 | |||
Class R5 Shares | 33,036 | |||
Registration and filing fees | ||||
Class A Shares | 20,737 | |||
Class C Shares | 20,642 | |||
Class I Shares | 29,287 | |||
Class R3 Shares | 19,808 | |||
Class R4 Shares | 19,996 | |||
Class R5 Shares | 20,143 | |||
Custodian fees (Note 3) | 149,600 | |||
Professional fees | 64,081 | |||
Accounting fees | 8,942 | |||
Trustee fees | 8,986 | |||
Other expenses | 52,382 | |||
|
| |||
Total Expenses | 5,093,148 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (412,435 | ) | ||
|
| |||
Net Expenses | 4,680,713 | |||
|
| |||
Net Investment Income | $ | 3,454,314 | ||
|
|
18 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Global Opportunities Fund | Year Ended September 30, 2012 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 6,844,559 | ||
Forward currency contracts (Note 7) | 978,561 | |||
Foreign currency transactions | (762,033 | ) | ||
|
| |||
7,061,087 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 60,514,103 | |||
Forward currency contracts (Note 7) | (28,607 | ) | ||
Foreign currency translations | 837,666 | |||
|
| |||
61,323,162 | ||||
|
| |||
Net Realized and Unrealized Gain | 68,384,249 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 71,838,563 | ||
|
|
See notes to financial statements.
Certified Annual Report 19
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 3,454,314 | $ | 4,355,687 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | 7,061,087 | 24,791,686 | ||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, and foreign currency translations | 61,323,162 | (45,345,971 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 71,838,563 | (16,198,598 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (1,101,887 | ) | (1,157,718 | ) | ||||
Class C Shares | (818,921 | ) | (645,237 | ) | ||||
Class I Shares | (2,138,758 | ) | (2,212,943 | ) | ||||
Class R3 Shares | (1,619 | ) | (2,094 | ) | ||||
Class R4 Shares | (14,589 | ) | (16,535 | ) | ||||
Class R5 Shares | (604,925 | ) | (374,849 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | (11,261,925 | ) | (16,331,866 | ) | ||||
Class C Shares | (8,102,839 | ) | (7,627,935 | ) | ||||
Class I Shares | 23,854,604 | (7,493,930 | ) | |||||
Class R3 Shares | 733,390 | (86,609 | ) | |||||
Class R4 Shares | 225,946 | (468,511 | ) | |||||
Class R5 Shares | 9,951,359 | 20,998,920 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 82,558,399 | (31,617,905 | ) | |||||
NET ASSETS: | ||||||||
Beginning of Year | 293,216,257 | 324,834,162 | ||||||
|
|
|
| |||||
End of Year | $ | 375,774,656 | $ | 293,216,257 | ||||
|
|
|
|
See notes to financial statements.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
NOTE 1 – ORGANIZATION
Thornburg Global Opportunities Fund (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 outstanding: 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 and may be subject to a service fee, (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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: Portfolio investments listed or traded on a national securities exchange are valued on the valuation date at the last reported trade price on the exchange that is the primary market for the investment. Portfolio investments traded on an exchange for which there has been no trade that day and other equity investments traded in the over-the-counter market are valued at the mean between the last reported bid and ask prices. Portfolio investments reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign investment traded on exchanges outside the United States is valued at the price of the investment on the exchange that is normally the investment’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation measurement date.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
In any case where the market value of an equity investment held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. The Committee’s determinations are made using procedures in accordance with a policy approved by the Trustees, which may include the use of a price obtained from an independent pricing service. The pricing service ordinarily values equity investments 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. An investment’s market value is deemed not readily available whenever the exchange or market on which the investment is primarily traded is closed for the entire scheduled day of trading. Additionally, an investment’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 investment’s primary exchange or market, but before the most recent close of trading in Fund shares, or an unusual event or significant period of time occurring since the availability of a market quotation, create a question about the reliability of the investment’s market value. On days when market volatility thresholds pre-determined by the Trustees are exceeded, foreign equity investments held by the Fund may be valued using synthetic pricing obtained from an independent pricing service approved by the Trustees, subject to the ability of the Committee to determine in any such instance to utilize market closing prices if the Committee considers closing prices to be more reliable.
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. 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 ordinarily 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 Committee determines a fair value for the debt obligation using procedures in accordance with a policy 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
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.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board, (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
When market volatility thresholds are exceeded, foreign equity investments may be fair valued according to other significant observable inputs rather than quoted market prices. The affected investments will be characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 337,925,101 | $ | 337,925,101 | $ | — | $ | — | ||||||||
Exchange–Traded Funds | 15,689,945 | 15,689,945 | — | — | ||||||||||||
Short Term Investments | 22,639,000 | — | 22,639,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 376,254,046 | $ | 353,615,046 | $ | 22,639,000 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 271,284 | $ | — | $ | 271,284 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (866,544 | ) | $ | — | $ | (866,544 | ) | $ | — |
* | 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, Inc. 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. |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2012, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the year.
Foreign Currency Translation: Portfolio investments 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 investments and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign investments, 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 values of such spot contracts are included in receivable for investments sold and payable for investments purchased on the Statement of Assets and Liabilities.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on investments held. Such changes are included in net unrealized appreciation or depreciation from investments.
Reported net realized gains or losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on investment 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 change in unrealized appreciation and depreciation on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at fiscal period end, resulting from changes in exchange rates.
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains on investments of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these investments 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 uncertain 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, 2012, management has not identified any such position for which an asset or 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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.
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
General: Investment 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 investments is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of investments 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
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
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 (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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, 2012, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $304,049 for Class I shares, $22,991 for Class R3 shares, $24,473 for Class R4 shares, and $60,922 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, 2012, the Distributor has advised the Fund that it earned commissions aggregating $10,907 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $5,121 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, 2012, there were no 12b-1 service plan fees charged for Class I and 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 shares, and an annual rate of up to .25 of 1% per annum of the average daily net assets attributable to Class R3 shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, there were no fees paid indirectly.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
Certain officers and Trustees of the Trust are also officers 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, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 853,746 | $ | 12,457,821 | 1,213,749 | $ | 19,050,548 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 70,808 | 989,188 | 65,489 | 1,009,001 | ||||||||||||
Shares repurchased | (1,687,138 | ) | (24,708,934 | ) | (2,337,595 | ) | (36,392,274 | ) | ||||||||
Redemption fees received* | — | — | — | 859 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (762,584 | ) | $ | (11,261,925 | ) | (1,058,357 | ) | $ | (16,331,866 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 538,895 | $ | 7,769,777 | 484,330 | $ | 7,505,708 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 48,742 | 672,643 | 35,338 | 530,417 | ||||||||||||
Shares repurchased | (1,140,342 | ) | (16,545,259 | ) | (1,015,605 | ) | (15,664,859 | ) | ||||||||
Redemption fees received* | — | — | — | 797 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (552,705 | ) | $ | (8,102,839 | ) | (495,937 | ) | $ | (7,627,937 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 4,505,733 | $ | 64,312,088 | 2,881,752 | $ | 45,325,074 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 138,782 | 1,942,947 | 128,855 | 2,006,584 | ||||||||||||
Shares repurchased | (2,873,125 | ) | (42,400,431 | ) | (3,651,130 | ) | (54,826,948 | ) | ||||||||
Redemption fees received* | — | — | — | 1,360 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,771,390 | $ | 23,854,604 | (640,523 | ) | $ | (7,493,930 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 52,219 | $ | 759,470 | 6,732 | $ | 109,304 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 104 | 1,439 | 129 | 1,980 | ||||||||||||
Shares repurchased | (1,812 | ) | (27,519 | ) | (12,006 | ) | (197,894 | ) | ||||||||
Redemption fees received* | — | — | — | 1 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 50,511 | $ | 733,390 | (5,145 | ) | $ | (86,609 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 38,859 | $ | 586,646 | 21,139 | $ | 330,995 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,050 | 14,589 | 1,080 | 16,534 | ||||||||||||
Shares repurchased | (25,057 | ) | (375,289 | ) | (50,230 | ) | (816,051 | ) | ||||||||
Redemption fees received* | — | — | — | 11 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 14,852 | $ | 225,946 | (28,011 | ) | $ | (468,511 | ) | ||||||||
|
|
|
|
|
|
|
|
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
Year Ended September 30, 2012 | Year Ended September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 746,703 | $ | 10,797,179 | 1,372,588 | $ | 22,550,663 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 42,912 | 601,202 | 23,791 | 374,849 | ||||||||||||
Shares repurchased | (97,533 | ) | (1,447,022 | ) | (125,826 | ) | (1,926,900 | ) | ||||||||
Redemption fees received* | — | — | — | 308 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 692,082 | $ | 9,951,359 | 1,270,553 | $ | 20,998,920 | ||||||||||
|
|
|
|
|
|
|
|
* | The Fund previously charged a redemption fee of 1% of the Class A and Class I shares redeemed or exchanged within 30 days of purchase. Effective February 1, 2012, the Fund stopped imposing this redemption fee. Redemption fees that were charged to any class prior to February 1, 2012 were 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, 2012, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $218,033,380 and $207,858,582, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 347,554,819 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 51,481,305 | ||
Gross unrealized depreciation on a tax basis | (22,782,078 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 28,699,227 | ||
|
|
At September 30, 2012, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2011, of $3,879,619. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
The Fund utilized $11,034,721 of capital loss carryforwards during the year ended September 30, 2012.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) became effective for the Fund’s fiscal year ending September 30, 2012. The Act requires that future capital losses generated by the Fund may be carried over indefinitely, but these losses must be used prior to the utilization of any pre-enactment capital losses. Since pre-enactment capital losses may only be carried forward for eight years, there may be a greater likelihood that all or a portion of a Fund’s pre-enactment capital losses will expire unused.
At September 30, 2012, the Fund had cumulative 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 | $ | 30,924,998 | ||
2018 | 140,739,212 | |||
|
| |||
$ | 171,664,210 | |||
|
|
Certified Annual Report 27
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
In order to account for permanent book/tax differences, the Fund increased distribution in excess of net investment income by $766,450, increased net capital paid in on shares of beneficial interest by $4,418, and decreased accumulated net realized loss by $762,032. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign currency gains (losses).
At September 30, 2012, the Fund had distributable tax basis net ordinary income of $850,693.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 4,685,117 | $ | 4,409,376 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 4,685,117 | $ | 4,409,376 | ||||
|
|
|
|
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50 (“ASC 815”), require certain disclosures. The disclosures are intended to provide users of financial statements with an 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, 2012, 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. Additionally, the Fund’s risk of loss may exceed the amounts recognized on the Statement of Assets and Liabilities.
The Fund entered into forward currency contracts during the year ended September 30, 2012 in the normal course of pursuing its investment objectives, in anticipation 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 appreciation and depreciation on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities, as measured by the difference between the forward exchange rates at the reporting date and the forward exchange rates at each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations. The quarterly average values of open sell currency contracts for the year ended September 30, 2012 was $38,924,180. Open buy currency contracts are entered into for the purpose of closing open sell currency contracts and the values are dependent upon the values of open sell currency contracts during the year ended September 30, 2012
28 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 |
The following table displays the outstanding forward currency contracts at September 30, 2012:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2012
Contract Description | Buy/Sell | Contract Amount | Contract Value Date | Value USD | Unrealized Appreciation | Unrealized Depreciation | ||||||||||||||||
Euro | Sell | 18,757,400 | 02/08/2013 | 24,138,475 | $ | — | $ | (866,544 | ) | |||||||||||||
Swiss Franc | Sell | 5,019,200 | 10/03/2012 | 5,336,833 | 231,024 | — | ||||||||||||||||
Swiss Franc | Buy | 1,696,700 | 10/03/2012 | 1,804,073 | 40,260 | — | ||||||||||||||||
|
|
|
| |||||||||||||||||||
Total | $ | 271,284 | $ | (866,544 | ) | |||||||||||||||||
|
|
|
|
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2012 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2012
Asset Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 271,284 | |||
Liability Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (866,544 | ) |
The net realized gains (losses) from forward currency contracts, and the net change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2012 are disclosed in the following tables:
Amount of Net Realized Gain (Loss)
on Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | 978,561 | $ | 978,561 |
Amount of Net Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (28,607 | ) | $ | (28,607 | ) |
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, management risk, market and economic risk, risks affecting specific issuers, liquidity risk, the risks associated with investments in smaller companies, non-U.S. issuers, and real estate investment trusts, credit risk, and interest rate risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
Certified Annual Report 29
Thornburg Global Opportunities Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the Year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless Otherwise Noted, Periods are Fiscal Years Ended Sept. 30, | Net Asset Value Beginning of Year | 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 13.15 | 0.14 | 2.89 | 3.03 | (0.21 | ) | — | (0.21 | ) | $ | 15.97 | 0.94 | 1.49 | 1.49 | 1.49 | 23.22 | 66.07 | $ | 77,103 | ||||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 13.98 | 0.18 | (0.82 | ) | (0.64 | ) | (0.19 | ) | — | (0.19 | ) | $ | 13.15 | 1.13 | 1.48 | 1.48 | 1.48 | (4.81 | ) | 70.33 | $ | 73,538 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class C Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 12.98 | 0.02 | 2.84 | 2.86 | (0.15 | ) | — | (0.15 | ) | $ | 15.69 | 0.17 | 2.27 | 2.27 | 2.27 | 22.21 | 66.07 | $ | 76,738 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.83 | 0.06 | (0.80 | ) | (0.74 | ) | (0.11 | ) | — | (0.11 | ) | $ | 12.98 | 0.40 | 2.23 | 2.23 | 2.23 | (5.45 | ) | 70.33 | $ | 70,643 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.20 | 0.21 | 2.90 | 3.11 | (0.25 | ) | — | (0.25 | ) | $ | 16.06 | 1.44 | 0.99 | 0.99 | 1.21 | 23.82 | 66.07 | $ | 169,384 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.01 | 0.26 | (0.83 | ) | (0.57 | ) | (0.24 | ) | — | (0.24 | ) | $ | 13.20 | 1.65 | 0.99 | 0.99 | 1.11 | (4.30 | ) | 70.33 | $ | 115,837 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||
Class R3 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.11 | 0.11 | 2.90 | 3.01 | (0.21 | ) | — | (0.21 | ) | $ | 15.91 | 0.75 | 1.50 | 1.50 | 9.01 | (c) | 23.22 | 66.07 | $ | 894 | |||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.93 | 0.18 | (0.82 | ) | (0.64 | ) | (0.18 | ) | — | (0.18 | ) | $ | 13.11 | 1.12 | 1.49 | 1.49 | 14.23 | (c) | (4.77 | ) | 70.33 | $ | 75 | ||||||||||||||||||||||||||||||||||||
2010 | $ | 13.08 | 0.17 | 0.87 | 1.04 | (0.19 | ) | — | (0.19 | ) | $ | 13.93 | 1.28 | 1.46 | 1.46 | 32.05 | (c) | 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 | (c) | 3.61 | 103.02 | $ | 20 | |||||||||||||||||||||||||||||||||||||||
2008(d) | $ | 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 | (c)(e) | (24.78 | ) | 83.70 | $ | 35 | |||||||||||||||||||||||||||||||||
Class R4 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.09 | 0.15 | 2.88 | 3.03 | (0.22 | ) | — | (0.22 | ) | $ | 15.90 | 1.05 | 1.40 | 1.40 | 3.72 | 23.36 | 66.07 | $ | 1,329 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 13.90 | 0.19 | (0.81 | ) | (0.62 | ) | (0.19 | ) | — | (0.19 | ) | $ | 13.09 | 1.23 | 1.40 | 1.40 | 3.16 | (4.66 | ) | 70.33 | $ | 900 | |||||||||||||||||||||||||||||||||||||
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 | (c) | 3.73 | 103.02 | $ | 1,244 | ||||||||||||||||||||||||||||||||||||||
2008(d) | $ | 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 | (c)(e) | (24.74 | ) | 83.70 | $ | 3 | |||||||||||||||||||||||||||||||||
Class R5 Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 13.21 | 0.21 | 2.90 | 3.11 | (0.25 | ) | — | (0.25 | ) | $ | 16.07 | 1.44 | 0.99 | 0.99 | 1.15 | 23.80 | 66.07 | $ | 50,327 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.02 | 0.29 | (0.86 | ) | (0.57 | ) | (0.24 | ) | — | (0.24 | ) | $ | 13.21 | 1.84 | 0.99 | 0.99 | 1.24 | (4.29 | ) | 70.33 | $ | 32,223 | |||||||||||||||||||||||||||||||||||||
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 | (c) | 4.25 | 103.02 | $ | 86 | ||||||||||||||||||||||||||||||||||||||
2008(d) | $ | 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 | (c)(e) | (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) | 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. |
+ | Based on weighted average shares outstanding, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
30 Certified Annual Report | Certified Annual Report 31 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Global Opportunities Fund
To the Trustees and Shareholders of Thornburg Global Opportunities Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Global Opportunities Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
32 Certified Annual Report
Thornburg Global Opportunities Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning Account Value 4/1/12 | Ending Account Value 9/30/12 | Expenses Paid During Period† 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,021.70 | $ | 7.52 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.56 | $ | 7.51 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.50 | $ | 11.40 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.70 | $ | 11.38 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,024.20 | $ | 5.01 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,021.80 | $ | 7.58 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.50 | $ | 7.57 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,022.50 | $ | 7.08 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.00 | $ | 7.06 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,023.60 | $ | 5.01 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.05 | $ | 5.00 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.49%; C: 2.26%; I: 0.99%; R3: 1.50%; R4: 1.40%; R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table at right provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your class of shares under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the table above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 33
INDEX COMPARISON | ||
Thornburg Global Opportunities Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg Global Opportunities Fund versus MSCI AC World Index (July 28, 2006 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
1 Yr | 3 Yrs | 5 Yrs | Since Inception | |||||||||||||
A Shares (Incep: 7/28/06) | 17.67 | % | 6.54 | % | -2.83 | % | 6.47 | % | ||||||||
C Shares (Incep: 7/28/06) | 21.21 | % | 7.37 | % | -2.68 | % | 6.43 | % | ||||||||
I Shares (Incep: 7/28/06) | 23.82 | % | 8.73 | % | -1.43 | % | 7.80 | % | ||||||||
R3 Shares (Incep: 2/1/08) | 23.22 | % | 8.21 | % | — | -0.27 | % | |||||||||
R4 Shares (Incep: 2/1/08) | 23.36 | % | 8.28 | % | — | -0.19 | % | |||||||||
R5 Shares (Incep: 2/1/08) | 23.80 | % | 8.70 | % | — | 0.24 | % | |||||||||
MSCI AC World Index (Since: 7/28/06) | 20.98 | % | 7.23 | % | -2.07 | % | 2.41 | % |
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 or call 800.847.0200. 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.
34 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Global Opportunities Fund | September 30, 2012 (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, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 35
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE (1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
36 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 (Unaudited) |
Name, Age, Position Held with Fund Year Elected | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 Thorn-burg 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | Assistant vice presidents, assistant secretaries and assistant treasurers are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
Certified Annual Report 37
OTHER INFORMATION | ||
Thornburg Global Opportunities Fund | September 30, 2012 (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, 2012, the Thornburg Global Opportunities Fund is reporting 84.69% (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.
The Fund is reporting 21.96% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the tax year ended September 30, 2012 qualified for the corporate dividends received deduction.
For the year ended September 30, 2012, foreign source income and foreign taxes paid are $6,460,380 and $121,496, respectively.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Global Opportunities Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2012.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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 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.
38 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 (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 year. These reports addressed a wide variety of topics, including particularly the Advisor’s selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s investment performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (iii) measures of the Fund’s investment returns over various periods of time relative to a category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to a broad-based securities index, (iv) the Fund’s cumulative investment return since inception relative to the securities index, and (v) comparative measures of estimated earnings growth, portfolio risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, 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 considered (among other aspects of the data) comparative performance data for the five calendar years since the Fund’s inception, which showed that the Fund’s investment return for the most recent calendar year was comparable to the average return for the fund category and the return for the index, and that the Fund’s investment returns exceeded the average returns for the category and the returns for the index in three of the preceding four years. Other noted quantitative data showed that the Fund’s investment returns fell within the bottom 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 and fell near the top third of the category for the three-year and five-year periods. The Trustees also noted the Fund’s higher cumulative investment return since its inception (net of expenses) relative to the Fund’s benchmark 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 and the Fund’s investment performance, 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 overall Fund expenses to median and average fees and expenses charged to a category of equity mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data noted by the Trustees showed that the management fee charged to the Fund was slightly higher than the median and somewhat higher than the average fee rates for the fund category, and that the overall expense ratio of a reference share class of the Fund was comparable to the median and average expense ratios for the fund category. The Trustees did not find the differences 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
Certified Annual Report 39
OTHER INFORMATION, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2012 (Unaudited) |
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. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its capabilities. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, the demonstrated economies of scale enjoyed by other Funds of the Trust as they had grown in size, and economies of scale realized by other mutual funds. The information provided demonstrated to the Trustees that the Fund may reasonably be expected to realize economies of scale as it grows in size, due to the breakpoint fee structure of the advisory agreement and other factors. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees considered the Advisor’s receipt of certain research services, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
The Trustees concluded, based upon their consideration of these and other factors, that the management fee charged to the Fund by the Advisor was fair and reasonable in view of the nature and quality of the services provided by the Advisor, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, and comparisons of fees and costs charged to the Fund to fees and expenses charged to other mutual funds.
40 Certified Annual Report
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TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
42 This page is not part of the Annual Report.
RETIREMENT AND EDUCATION ACCOUNTS
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1/2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our website 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 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 Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
This page is not part of the Annual Report. 43
THORNBURG FUND FAMILY
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 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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IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2012. The manager’s views, portfolio holdings, and sector and country diversification are provided for the general information of the Fund’s shareholders and are subject to change; to the extent this information is historical, it should not be considered predictive of future circumstances. 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 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.
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. The MSCI Emerging Markets Index consists 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, Indonesia, Philippines, and Russia) – Free float-adjusted market capitalization indices that are designed to measure equity market performance in that specific country.
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.
Basis Point (bps) – A unit equal to 1/100th of 1%. 1% = 100 basis points (bps).
Consumer Price Index (CPI) – Measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. The CPI is also known as the cost-of-living index.
Debt-to-Capital Ratio (debt-to-cap) – A measurement of a company’s financial leverage, calculated as the company’s debt divided by its total capital.
Gross Domestic Product (GDP) – A country’s income minus foreign investments: the total value of all goods and services produced within a country in a year, minus net income from investments in other countries.
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) – 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
Portfolio Manager
Lewis Kaufman,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 or call 800.847.0200.
The maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.89%, 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, 2013, so that actual expenses for Class A shares do not exceed 1.83%.
Developing World
Philosophy/Strategy
• | A flexible approach to developing markets targeting long-term capital appreciation, with an emphasis on risk-adjusted return. |
• | Focus on self-funding businesses predicated on sound business fundamentals rather than financial leverage. |
• | The ability to pursue the best risk-adjusted developing country opportunities, irrespective of domicile. |
• | The portfolio is diversified across basic value, consistent earner, and emerging franchise companies. |
A Case for Developing Markets
• | The Developing World Fund can complement the dollar diversification provided by other international strategies. Developing world currencies may benefit from manageable public debt/GDP ratios, current account and budget surpluses, and above-average GDP growth potential. |
• | Household debt levels in the developing world are generally lower than those in the developed world, thereby presenting the possibility of increasing credit penetration and stronger domestic consumption. |
• | Structural reforms surrounding health insurance, social security, education and currency should lead to stronger domestic consumption in many developing markets, while helping to smooth the transition away from export-driven growth models. |
• | Many developing world countries have funded recent stimulus initiatives through reserves built earlier in the decade, and remain on sound fiscal footing. |
Average Annual Total Returns
For Periods Ended September 30, 2012
Since | ||||||||
1 Yr | Inception | |||||||
A Shares (Incep: 12/16/09) | ||||||||
Without sales charge | 25.68 | % | 10.38 | % | ||||
With sales charge | 20.02 | % | 8.58 | % | ||||
MSCI Emerging Markets Index | ||||||||
(Since 12/16/09) | 16.93 | % | 3.62 | % |
4 This page is not part of the Annual Report.
Why Thornburg?
• | We have aligned interests. We are a privately held business, we invest side by side with our clients, and we are investment driven not market driven. |
• | Collaborative, team-oriented approach provides for input from multiple members of the Thornburg Investment Management team and provides an installed base of knowledge on existing holdings. |
• | We believe that stock selection is the best form of risk management. In-depth research allows the team to have a more intimate understanding of the companies in the portfolio. |
Basket Summary
• | Basic Value Companies – Companies which, in Thornburg’s opinion, are financially sound with well established businesses selling at low valuations relative to the companies’ net assets or potential earning power. |
• | Consistent Earners – Companies which normally exhibit steady earnings growth, cashflow characteristics, and/or dividend growth. These companies may have above average profitability measures and normally sell at above average valuations. |
• | Emerging Franchises – Companies which, in Thornburg’s opinion, are in the process of establishing a leading position in a product, service, or market with the potential to grow at an above average rate. |
Stocks Contributing and Detracting
For the Year Ended September 30, 2012
Top Contributors | Top Detractors | |
Puregold Price Club, Inc. | St. Shine Optical Co. Ltd. | |
MercadoLibre, Inc. | Hengdeli Holdings Ltd. | |
Raia Drogasil SA | Turkiye Garanti Bankasi A.S. | |
Mayora Indah | Bankers Petroleum Ltd. | |
Tencent Holdings Ltd. | Diagnosticos da America S/A | |
Source: FactSet |
Key Portfolio Attributes
As of September 30, 2012
Portfolio P/E Trailing 12-months* | 20.2x | |||
Portfolio Price to Cash Flow* | 16.8x | |||
Portfolio Price to Book Value* | 4.3x | |||
Median Market Cap* | $ | 3.6 B | ||
Number of Companies | 49 |
* | Source: FactSet |
Market Capitalization Exposure
As of September 30, 2012
Basket Structure
As of September 30, 2012
This page is not part of the Annual Report. 5
Thornburg Developing World Fund – September 30, 2012
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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 15, 2012
Dear Fellow Shareholder:
We are pleased to present the third annual report for the Thornburg Developing World Fund for the year ended September 30, 2012. The net asset value (NAV) of a Class A share of the Fund increased $3.21 to $15.71 per share in the past 12 months, representing a total return of 25.68% compared to 16.93% for the MSCI Emerging Markets Index. While market progress has not been linear, renewed monetary vigor from developed-market policy makers has overwhelmed economic deterioration in major emerging markets including Brazil, China, and India.
Looking back at the last twelve months, September 2011 essentially marked the bottom for most markets. Fueled by the initial “sugar rush” of a market rebound, markets such as Brazil and Russia outperformed in the early months of the rally, while more structurally compelling stories delivered better returns when measured over the entire year. For example, Brazil returned 34.95% in dollar terms between September 30, 2011 and March 2, 2012, but just 5.61% for the year ended September 30, 2012. Indeed, some of Brazil’s structural challenges began to manifest themselves - including high levels of consumer indebtedness and a widening current-account deficit. The current-account pressure and slowing economic growth prompted the central bank to cut policy rates aggressively (from 12.0% to 7.3%), which in turn contributed to a 13% decline in the currency. Similarly, Russia returned 34.48% in dollar terms between September 30, 2011 and March 2, 2012, but a more pedestrian 17.65% for the year ended September 30, 2012. Russia too faces its share of longer-term constraints, including an unattractive backdrop for business investment, which continues to pressure gross domestic product (GDP) growth rates.
By comparison, the Philippines returned a relatively average 28.0% in dollar terms between September 30, 2011 and March 2, 2012, but transcended global equity market volatility the balance of the year - returning 41.97% for the twelve months ended September 30, 2012. Indeed, returns in the Philippines proved more durable than those in other emerging markets, as worker remittances drove currency appreciation against the dollar, a long-anticipated investment cycle took root, and the country’s virtually debt-free consumers enjoyed improved access to credit. With a limited amount of its sovereign obligations held by foreign investors, growing foreign exchange reserves, and limited commodity linkages, the Philippines continues to benefit from a low degree of external dependence and a relatively uncorrelated economic cycle. The Thornburg Developing World Fund maintained an average of 4.64% of assets invested in the Philippines compared with a benchmark weighting of 0.79%, with the Philippines contributing 330 basis points (bps) to the Fund’s total return in the year ended September 30, 2012. Similarly, Indonesia represented an average of 10.2% of portfolio assets compared to 2.78% for the benchmark, contributing 375 bps to the Fund’s total return.
Also noteworthy in the past twelve months is the unprecedented and increasingly accommodative stance of monetary policy makers in the U.S., Europe, and Japan. While constructive in the near term, developed market monetary accommodation is unlikely to prove a sufficient condition for sustained emerging markets returns; what is also required is high business confidence that spurs investment, growth in consumer incomes and changes in the propensity to spend that result in increased consumption, and strong public finances that support government spending. While these elements will likely prove elusive for most Western economies in the coming years, they are within the grasp of most of the countries represented in the Developing World Fund. For example, we believe an improved security situation should support business investment in Colombia. We also believe increased bargaining power of labor relative to capital and the gradual formation of social safety nets should result in strong consumption growth in China - even as export growth slows. Continued government programs, in our opinion,
Certified Annual Report 7
LETTER TO SHAREHOLDERS, | ||
CONTINUED |
should support resilient GDP growth outcomes in Saudi Arabia and Malaysia. Reflecting these dynamics, the Fund has maintained an average of 24.00% of assets in consumer staples (benchmark: 7.45%) in the year ended September 30, 2012, and 16.06% of assets in the consumer discretionary sector (benchmark: 8.34%). These two sectors have in turn combined to contribute 12.57% to portfolio performance in the last year, versus a combined 1.99% for the MSCI Emerging Markets Index.
As a final point of emphasis, we believe that by avoiding permanent capital impairment at the stock and currency levels during periods of market duress, we can best achieve our primary goal of long-term capital appreciation. Over the life of the Fund, we have remained focused on financially sound, free cash flow generative companies with business models not predicated on leverage - largely in pursuit of this goal. Combined with limited portfolio exposure to currencies with substantial devaluation potential in dollar terms, we believe we have crafted a unique approach to capital appreciation in an emerging markets context. Moreover, we have endeavored to do so while reducing the volatility of the Fund where possible. The merit of this approach is visible in the Fund’s upside and downside captures between January 1, 2010 and September 30, 2012. Our performance is 6.08% compared to 6.03%, five bps better than the benchmark in months where the market has risen, but negative 3.21% compared to negative 4.19%, 98 bps better than the benchmark in months where the market has declined. It is our sincere hope that we can retain this characteristic over time, against the backdrop of a dynamic market environment.
We thank you for your trust and confidence.
Lewis Kaufman,CFA
Portfolio Manager
Managing Director
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 or call 800.847.0200.
The maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.89%, 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, 2013, so that actual expenses for Class A shares do not exceed 1.83%.
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.
8 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Developing World Fund | September 30, 2012 |
Top Ten Equity Holdings
As of 9/30/12
Puregold Price Club, Inc. | 3.3 | % | Gran Tierra Energy, Inc. | 2.7 | % | |||||
Cognizant Tech Solutions Corp. | 3.1 | % | Security Bank Corp. | 2.6 | % | |||||
Credicorp Ltd. | 3.0 | % | CETIP SA | 2.6 | % | |||||
Wynn Macau Ltd. | 3.0 | % | Yandex NV | 2.5 | % | |||||
Tencent Holdings Ltd. | 2.7 | % | Colgate Palmolive Co. | 2.3 | % |
Summary of Industry Exposure
As of 9/30/12
Software & Services | 17.0 | % | Health Care Equipment Services | 4.7 | % | |||||
Food & Staples Retailing | 14.7 | % | Materials | 4.7 | % | |||||
Banks | 11.4 | % | Consumer Durables Apparel | 3.7 | % | |||||
Consumer Services | 7.6 | % | Diversified Financials | 2.6 | % | |||||
Food, Beverage & Tobacco | 6.5 | % | Commercial & Professional Services | 1.6 | % | |||||
Energy | 6.2 | % | Transportation | 1.4 | % | |||||
Household & Personal Products | 5.7 | % | Other Assets & Liabilities | 6.7 | % | |||||
Retailing | 5.5 | % |
Summary of Country Exposure
As of 9/30/12 (percent of equity holdings)
China | 12.6 | % | South Africa | 3.0 | % | |||||
Brazil | 11.8 | % | Poland | 2.3 | % | |||||
United States | 10.4 | % | Argentina | 2.2 | % | |||||
Indonesia | 10.1 | % | Mexico | 2.1 | % | |||||
Philippines | 9.5 | % | Chile | 1.6 | % | |||||
Russia | 8.2 | % | Malaysia | 1.6 | % | |||||
Hong Kong | 7.1 | % | Thailand | 1.6 | % | |||||
Colombia | 4.8 | % | Turkey | 1.6 | % | |||||
India | 4.8 | % | Taiwan | 1.4 | % | |||||
Peru | 3.3 | % |
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 |
Shares/ | ||||||||
Principal Amount | Value | |||||||
COMMON STOCK — 93.33% | ||||||||
BANKS — 11.38% | ||||||||
COMMERCIAL BANKS — 11.38% | ||||||||
Bancolombia S.A. ADR | 30,473 | $ | 1,819,543 | |||||
Credicorp Ltd. | 24,922 | 3,122,228 | ||||||
PT Bank Mandiri | 2,148,000 | 1,840,502 | ||||||
Sberbank-CLS | 747,800 | 2,181,193 | ||||||
Security Bank Corp. | 685,700 | 2,695,788 | ||||||
|
| |||||||
11,659,254 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 1.58% | ||||||||
COMMERCIAL SERVICES & SUPPLIES — 1.58% | ||||||||
Valid Solucoes SA | 86,700 | 1,623,019 | ||||||
|
| |||||||
1,623,019 | ||||||||
|
| |||||||
CONSUMER DURABLES & APPAREL — 3.76% | ||||||||
TEXTILES, APPAREL & LUXURY GOODS — 3.76% | ||||||||
Forus SA | 330,000 | 1,629,442 | ||||||
Trinity Ltd. | 3,328,000 | 2,227,523 | ||||||
|
| |||||||
3,856,965 | ||||||||
|
| |||||||
CONSUMER SERVICES — 7.63% | ||||||||
HOTELS, RESTAURANTS & LEISURE — 7.63% | ||||||||
a Bloomberry Resorts Corp. | 5,527,500 | 1,484,070 | ||||||
a Jubilant FoodWorks Ltd. | 66,950 | 1,736,740 | ||||||
NagaCorp Ltd. | 2,678,000 | 1,498,897 | ||||||
Wynn Macau Ltd. | 1,146,412 | 3,104,784 | ||||||
|
| |||||||
7,824,491 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 2.59% | ||||||||
CAPITAL MARKETS — 2.59% | ||||||||
CETIP SA | 202,500 | 2,657,048 | ||||||
|
| |||||||
2,657,048 | ||||||||
|
| |||||||
ENERGY — 6.24% | ||||||||
OIL, GAS & CONSUMABLE FUELS — 6.24% | ||||||||
a Gran Tierra Energy, Inc. | 528,883 | 2,732,912 | ||||||
Harum Energy Tbk | 3,227,500 | 1,989,786 | ||||||
Novatek OAO GDR | 14,100 | 1,668,030 | ||||||
|
| |||||||
6,390,728 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 14.66% | ||||||||
FOOD & STAPLES RETAILING — 14.66% | ||||||||
Bim Birlesik Magazalar A.S. | 35,700 | 1,489,776 | ||||||
Clicks Group Ltd. | 266,462 | 1,853,036 | ||||||
CP All plc | 1,348,400 | 1,555,172 | ||||||
Jeronimo Martins SGPS SA | 134,500 | 2,244,317 | ||||||
Magnit OJCS GDR | 43,800 | 1,488,762 | ||||||
PriceSmart, Inc. | 18,779 | 1,421,946 | ||||||
Puregold Price Club, Inc. | 4,820,400 | 3,432,000 | ||||||
Raia Drogasil SA | 134,067 | 1,540,225 | ||||||
|
| |||||||
15,025,234 | ||||||||
|
|
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 |
Shares/ | ||||||||
Principal Amount | Value | |||||||
FOOD, BEVERAGE & TOBACCO — 6.54% | ||||||||
BEVERAGES — 1.40% | ||||||||
Coca Cola Co. | 37,682 | $ | 1,429,278 | |||||
FOOD PRODUCTS — 5.14% | ||||||||
Biostime International Holdings Ltd. | 600,000 | 1,547,578 | ||||||
Mayora Indah | 929,300 | 2,175,164 | ||||||
Oldtown Berhad | 2,466,200 | 1,549,192 | ||||||
|
| |||||||
6,701,212 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 4.73% | ||||||||
HEALTH CARE EQUIPMENT & SUPPLIES — 1.88% | ||||||||
Shandong Weigao Group Medical Polymer Co. Ltd. | 1,486,394 | 1,924,594 | ||||||
HEALTH CARE PROVIDERS & SERVICES — 2.85% | ||||||||
Life Healthcare Group Holdings Ltd. | 258,940 | 987,786 | ||||||
a Qualicorp SA | 198,700 | 1,940,688 | ||||||
|
| |||||||
4,853,068 | ||||||||
|
| |||||||
HOUSEHOLD & PERSONAL PRODUCTS — 5.71% | ||||||||
HOUSEHOLD PRODUCTS — 2.26% | ||||||||
Colgate Palmolive Co. | 21,596 | 2,315,523 | ||||||
PERSONAL PRODUCTS — 3.45% | ||||||||
Dabur India Ltd. | 657,620 | 1,610,231 | ||||||
Hengan International Group Co. Ltd. | 204,500 | 1,927,889 | ||||||
|
| |||||||
5,853,643 | ||||||||
|
| |||||||
MATERIALS — 4.67% | ||||||||
CHEMICALS — 2.74% | ||||||||
Asian Paints Ltd. | 16,906 | 1,264,432 | ||||||
Sociedad Quimica Minera de Chile SA ADR | 25,000 | 1,541,000 | ||||||
METALS & MINING — 1.93% | ||||||||
Southern Copper Corp. | 57,584 | 1,978,586 | ||||||
|
| |||||||
4,784,018 | ||||||||
|
| |||||||
RETAILING — 5.45% | ||||||||
MULTILINE RETAIL — 2.11% | ||||||||
PT Mitra Adiperkasa Tbk | 3,240,500 | 2,167,105 | ||||||
SPECIALTY RETAIL — 3.34% | ||||||||
Ace Hardware Indonesia | 2,325,500 | 1,494,444 | ||||||
Cia Hering | 85,300 | 1,928,375 | ||||||
|
| |||||||
5,589,924 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 16.97% | ||||||||
INFORMATION TECHNOLOGY SERVICES — 3.09% | ||||||||
a Cognizant Tech Solutions Corp. | 45,252 | 3,164,020 | ||||||
INTERNET SOFTWARE & SERVICES — 10.84% | ||||||||
a Baidu, Inc. ADR | 19,531 | 2,281,611 | ||||||
Mercadolibre, Inc. | 25,121 | 2,073,739 | ||||||
PChome Online, Inc. | 245,402 | 1,389,692 | ||||||
Tencent Holdings Ltd. | 82,200 | 2,809,242 | ||||||
a Yandex NV | 105,904 | 2,553,345 | ||||||
SOFTWARE — 3.04% | ||||||||
a AutoNavi Holdings Ltd. ADR | 135,800 | 1,558,984 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 | |
Shares/ | ||||||||
Principal Amount | Value | |||||||
Totvs SA | 75,055 | $ | 1,559,041 | |||||
|
| |||||||
17,389,674 | ||||||||
|
| |||||||
TRANSPORTATION — 1.42% | ||||||||
TRANSPORTATION INFRASTRUCTURE — 1.42% | ||||||||
International Container Terminal Services, Inc. | 861,500 | 1,453,904 | ||||||
|
| |||||||
1,453,904 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $ 82,376,984) | 95,662,182 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 4.35% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.28% dated 9/28/2012 due 10/1/2012, repurchase price $2,000,047 collateralized by Devon Energy Corp., having a coupon of 5.60%, a minimum credit rating of BBB+, maturity date of 7/15/2041, and having a market value of $2,138,722 at 9/28/2012 | $ | 2,000,000 | 2,000,000 | |||||
Consolidated Edison Co., 0.30%, 10/1/2012 | 2,455,000 | 2,455,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $4,455,000) | 4,455,000 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 97.68% (Cost $86,831,984) | $ | 100,117,182 | ||||||
OTHER ASSETS LESS LIABILITIES — 2.32% | 2,382,006 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 102,499,188 | ||||||
|
|
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.
12 Certified Annual Report
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Certified Annual Report 13
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Developing World Fund | September 30, 2012 |
ASSETS | ||||
Investments at value (cost $ 86,831,984) (Note 2) | $ | 100,117,182 | ||
Cash | 17,607 | |||
Cash denominated in foreign currency (cost $40,686) | 40,684 | |||
Receivable for investments sold | 4,093,624 | |||
Receivable for fund shares sold | 1,571,402 | |||
Dividends receivable | 72,360 | |||
Dividend and interest reclaim receivable | 749 | |||
Interest receivable | 47 | |||
Prepaid expenses and other assets | 14,262 | |||
|
| |||
Total Assets | 105,927,917 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 2,996,914 | |||
Payable for fund shares redeemed | 82,707 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 90,513 | |||
Payable to investment advisor and other affiliates (Note 3) | 79,139 | |||
Deferred taxes payable | 104,746 | |||
Accounts payable and accrued expenses | 74,710 | |||
|
| |||
Total Liabilities | 3,428,729 | |||
|
| |||
NET ASSETS | $ | 102,499,188 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Net investment loss | $ | (77,281 | ) | |
Net unrealized appreciation on investments | 13,090,203 | |||
Accumulated net realized gain (loss) | (5,287,507 | ) | ||
Net capital paid in on shares of beneficial interest | 94,773,773 | |||
|
| |||
$ | 102,499,188 | |||
|
|
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($39,390,280 applicable to 2,507,849 shares of beneficial interest outstanding - Note 4) | $ | 15.71 | ||
Maximum sales charge, 4.50% of offering price | 0.74 | |||
|
| |||
Maximum offering price per share | $ | 16.45 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($10,006,292 applicable to 647,991 shares of beneficial interest outstanding -Note 4) | $ | 15.44 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($53,102,616 applicable to 3,326,479 shares of beneficial interest outstanding - Note 4) | $ | 15.96 | ||
|
|
* | 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 Developing World Fund | Year Ended September 30, 2012 |
INVESTMENT INCOME: | ||||
Dividend income (net of foreign taxes withheld of $105,955) | $ | 1,301,035 | ||
Interest income | 7,161 | |||
|
| |||
Total Income | 1,308,196 | |||
|
| |||
EXPENSES: | ||||
Investment advisory fees (Note 3) | 774,348 | |||
Administration fees (Note 3) | ||||
Class A Shares | 39,450 | |||
Class C Shares | 10,823 | |||
Class I Shares | 19,601 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 78,977 | |||
Class C Shares | 86,640 | |||
Transfer agent fees | ||||
Class A Shares | 47,069 | |||
Class C Shares | 20,065 | |||
Class I Shares | 37,207 | |||
Registration and filing fees | ||||
Class A Shares | 23,654 | |||
Class C Shares | 21,627 | |||
Class I Shares | 21,746 | |||
Custodian fees (Note 3) | 123,937 | |||
Professional fees | 64,299 | |||
Accounting fees | 2,095 | |||
Trustee fees | 2,119 | |||
Other expenses | 26,111 | |||
|
| |||
Total Expenses | 1,399,768 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (106,297 | ) | ||
Investment advisory fees waived by investment advisor (Note 3) | (125,715 | ) | ||
|
| |||
Net Expenses | 1,167,756 | |||
|
| |||
Net Investment Income | $ | 140,440 | ||
|
|
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Developing World Fund | Year Ended September 30, 2012 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments (net of foreign capital gain taxes paid of $4,613) | $ | (2,640,708 | ) | |
Foreign currency transactions | (138,191 | ) | ||
|
| |||
(2,778,899 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $50,623) | 19,301,468 | |||
Forward currency contracts (Note 7) | (90,513 | ) | ||
Foreign currency translations | 16,551 | |||
|
| |||
19,227,506 | ||||
|
| |||
Net Realized and Unrealized Gain | 16,448,607 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 16,589,047 | ||
|
|
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Developing World Fund |
Year Ended | Year Ended | |||||||
September 30, 2012 | September 30, 2011 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 140,440 | $ | 97,208 | ||||
Net realized gain (loss) on investments and foreign currency transactions, net of foreign capital gains taxes | (2,778,899 | ) | (2,485,598 | ) | ||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations, and deferred taxes | 19,227,506 | (10,551,982 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 16,589,047 | (12,940,372 | ) | |||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | — | (28,522 | ) | |||||
Class C Shares | — | (6,288 | ) | |||||
Class I Shares | — | (51,293 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4): | ||||||||
Class A Shares | 7,947,002 | 16,379,807 | ||||||
Class C Shares | 923,614 | 5,862,947 | ||||||
Class I Shares | 17,833,797 | 15,403,407 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 43,293,460 | 24,619,686 | ||||||
NET ASSETS: | ||||||||
Beginning of Year | 59,205,728 | 34,586,042 | ||||||
|
|
|
| |||||
End of Year | $ | 102,499,188 | $ | 59,205,728 | ||||
|
|
|
|
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Developing World Fund | September 30, 2012 |
NOTE 1 – ORGANIZATION
Thornburg Developing World Fund (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 outstanding: 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 may be subject to a service fee, and (iv) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allowable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and 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 Policy and Procedures: The Fund’s Trustees of the Trust (the “Trustees”) have authorized employees of the Fund’s investment advisor, acting as the Valuation and Pricing Committee (the “Committee”), to make certain valuation determinations, subject to oversight and review by the Trustees and the Audit Committee of the Trustees. The Committee and other employees of the Fund’s investment advisor administer and implement the valuation process and make fair value decisions. The Committee regularly reviews its own fair value decisions, as well as valuations, valuation techniques and services furnished by pricing services, considers circumstances in the markets which may require valuation determinations by the Committee and reviews previous valuation determinations. The Committee also reports on its activities, the performance of the pricing services and other matters to the Trustees and the Audit Committee of the Trustees.
In determining a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants at the measurement date. Typically, the fair value process employs standing instructions to use quoted prices in active markets or the use of independent pricing services. Less frequently, the Committee may make a fair value determination using other methods. However, because fair value prices are estimated prices, the 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 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 of Investments: Portfolio investments listed or traded on a national securities exchange are valued on the valuation date at the last reported trade price on the exchange that is the primary market for the investment. Portfolio investments traded on an exchange for which there has been no trade that day and other equity investments traded in the over-the-counter market are valued at the mean between the last reported bid and ask prices. Portfolio investments reported by NASDAQ are valued at the NASDAQ official closing price. Any foreign investment traded on exchanges outside the United States is valued at the price of the investment on the exchange that is normally the investment’s primary market, as of the close of that exchange preceding the time of the Fund’s valuation measurement date.
In any case where the market value of an equity investment held by the Fund is not readily available, a determination of a fair value for the investment is made by the Committee. The Committee’s determinations are made using procedures in accordance
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 |
with a policy approved by the Trustees, which may include the use of a price obtained from an independent pricing service. The pricing service ordinarily values equity investments 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. An investment’s market value is deemed not readily available whenever the exchange or market on which the investment is primarily traded is closed for the entire scheduled day of trading. Additionally, an investment’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 investment’s primary exchange or market, but before the most recent close of trading in Fund shares, or an unusual event or significant period of time occurring since the availability of a market quotation, create a question about the reliability of the investment’s market value. On days when market volatility thresholds pre-determined by the Trustees are exceeded, foreign equity investments held by the Fund may be valued using synthetic pricing obtained from an independent pricing service approved by the Trustees, subject to the ability of the Committee to determine in any such instance to utilize market closing prices if the Committee considers closing prices to be more reliable.
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. 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 ordinarily 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 Committee determines a fair value for the debt obligation using procedures in accordance with a policy 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 Committee decides whether or not to use the pricing service’s valuation or to use an alternative method to determine a fair value for the debt obligation.
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.
Valuation Measurements: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established by guidance by the Financial Accounting Standards Board (the “FASB”). Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs and minimize the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market data. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment’s level within the hierarchy is based on the lowest level input that is deemed significant to the fair value measurement. The methodologies and relative inputs used to value investments are not necessarily indications of the risk or liquidity associated with investing in those investments.
Various inputs are used in determining the fair value measurement of the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
When market volatility thresholds are exceeded, foreign equity investments may be fair valued according to other significant observable inputs rather than quoted market prices. The affected investments will be characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 |
Level 3: Significant unobservable inputs (including the Committee’s own assumptions in determining the fair value of investments), are generally applicable to investments fair valued with single broker quotes and other investments.
Portfolio investments with minimal, if any, market activity are characterized as Level 3 and are valued using significant unobservable inputs, typically including single broker quotes, which may be adjusted or unadjusted, related or comparable investments, recent transactions, and other relevant information. Valuations may also be based upon current market prices of investments that are comparable in coupon, rating, maturity, and industry, as applicable. An income based valuation approach would consider discounted anticipated future cash flows of the investment. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investment. The derived value of a Level 3 investment may not represent the value which is received upon disposition.
The following table displays a summary of the fair value hierarchy measurements of the Fund��s investments as of September 30, 2012. 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, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 95,662,182 | $ | 94,107,010 | $ | 1,555,172 | $ | — | ||||||||
Short Term Investments | 4,455,000 | — | 4,455,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 100,117,182 | $ | 94,107,010 | $ | 6,010,172 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Spot Currency | $ | 546 | $ | 546 | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (90,513 | ) | $ | — | $ | (90,513 | ) | $ | — | ||||||
Spot Currency | $ | (858 | ) | $ | (858 | ) | $ | — | $ | — |
* | 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, Inc. 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. |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, amending Topic 820 Fair Value Measurements and Disclosures, it is the policy of the Fund to recognize transfers between Levels 1, 2 and 3 and to disclose those transfers due to the underlying event which caused the movement. The Fund recognized a transfer from Level 1 to Level 2 during the year ended September 30, 2012 at the beginning market value of $1,052,958. The transfer was due to the investment advisor’s reassessment of the valuation inputs for the year ended September 30, 2012, which were deemed to be more indirectly observable than the valuation inputs used in the prior periods that the investment was held. The Fund recognized no other transfers between levels other than when the Fund exceeded market volatility thresholds for foreign equity investments during the year.
Foreign Currency Translation: Portfolio investments 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 investments and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign investments, 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 values of such spot contracts are included in receivable for investments sold and payable for investments purchased on the Statement of Assets and Liabilities.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 |
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on investments held. Such changes are included in net unrealized appreciation or depreciation from investments.
Reported net realized gains or losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on investments 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 change in unrealized appreciation and depreciation on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments 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 investments of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these investments 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 uncertain 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, 2012, 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 investments 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 an investment 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 investments to be purchased will be segregated on the Fund’s records on the trade date. Investments 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.
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
General: Investment 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 investments is recognized as soon as information is available to the Fund. Realized gains and losses from the sale of investments 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.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 |
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under a separate agreement with the Trustees), 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 United States 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 amounts 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, 2012, 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, 2012, the Advisor voluntarily waived investment advisory fees of $125,715. 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, 2012, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $27,743 for Class C shares, and $78,554 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, 2012, the Distributor has advised the Fund that it earned commissions aggregating $9,510 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $1,699 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, 2012, 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 a distribution plan pursuant to Rule 12b-1, applicable only to the Fund’s Class C shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C shares of the Fund at an annual rate of up to .75 of 1% per annum of the average daily net assets attributable to Class C shares. Total fees incurred by each class of shares of the Fund under their respective Service and Distribution Plans for the year ended September 30, 2012, 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 are 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, 2012, no fees were paid indirectly.
Certain officers and Trustees of the Trust are also officers or directors of the Advisor and Distributor. The compensation of independent Trustees is borne by the Trust.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2012, there were an unlimited number of shares of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Year Ended | Year Ended | |||||||||||||||
September 30, 2012 | September 30, 2011 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,082,854 | $ | 15,910,582 | 1,982,581 | $ | 30,656,908 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 1,639 | 25,513 | ||||||||||||
Shares repurchased | (570,116 | ) | (7,963,630 | ) | (966,885 | ) | (14,303,463 | ) | ||||||||
Redemption fees received* | — | 50 | — | 849 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 512,738 | $ | 7,947,002 | 1,017,335 | $ | 16,379,807 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 244,119 | $ | 3,529,222 | 559,204 | $ | 8,559,013 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 359 | 5,563 | ||||||||||||
Shares repurchased | (182,871 | ) | (2,605,622 | ) | (173,608 | ) | (2,701,877 | ) | ||||||||
Redemption fees received* | — | 14 | — | 248 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 61,248 | $ | 923,614 | 385,955 | $ | 5,862,947 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 1,646,787 | $ | 24,383,131 | 1,732,916 | $ | 27,280,362 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 2,828 | 44,294 | ||||||||||||
Shares repurchased | (460,724 | ) | (6,549,398 | ) | (806,467 | ) | (11,922,242 | ) | ||||||||
Redemption fees received* | — | 64 | — | 993 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,186,063 | $ | 17,833,797 | 929,277 | $ | 15,403,407 | ||||||||||
|
|
|
|
|
|
|
|
* | The Fund previously charged a redemption fee of 1% of the Class A and Class I shares redeemed or exchanged within 30 days of purchase. Effective February 1, 2012, the Fund stopped imposing this redemption fee. Redemption fees that were charged to any class prior to February 1, 2012 were 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, 2012, the Fund had purchase and sale transactions of investment securities (excluding short-term investments) of $119,147,531 and $98,968,983, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2012, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 87,536,534 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 14,905,203 | ||
Gross unrealized depreciation on a tax basis | (2,324,555 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 12,580,648 | ||
|
|
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 |
At September 30, 2012, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2011 of $2,196,037. For tax purposes, such losses will be reflected in the year ending September 30, 2013.
At September 30, 2012, the Fund had cumulative tax basis capital losses of $2,583,287, 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 do not expire but are required to be utilized to offset future gains prior to the utilization of losses that occurred in years prior to the fiscal year ending September 30, 2012, which may expire prior to utilization.
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized investment losses by $122,004, and decreased undistributed net investment income by $122,004. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from foreign capital gains taxes, foreign currency gains (losses), and passive foreign investment gains.
At September 30, 2012, the Fund had distributable tax basis net ordinary income of $28,445.
The tax character of distributions paid during the years ended September 30, 2012, and September 30, 2011, was as follows:
2012 | 2011 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | — | $ | 86,103 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | — | $ | 86,103 | ||||
|
|
|
|
NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FOREIGN INVESTMENT RISK
The Fund may use a variety of derivative financial instruments to hedge or adjust the risks affecting its investment portfolio or to enhance investment returns. Provisions of FASB Accounting Standards Codification ASC 815-10-50 (“ASC 815”), require certain disclosures. The disclosures are intended to provide users of financial statements with an 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, 2012, 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. Additionally, the Fund’s risk of loss may exceed the amounts recognized on the Statement of Assets and Liabilities.
The Fund entered into forward currency contracts during the year ended September 30, 2012 in the normal course of pursuing its investment objectives, in anticipation 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.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 |
These contracts are accounted for by the Fund under ASC 815. Unrealized appreciation and depreciation on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities, as measured by the difference between the forward exchange rates at the reporting date and the forward exchange rates at each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations. The quarterly average values of open sell currency contracts for the year ended September 30, 2012 was $393,465. Open buy currency contracts are entered into for the purpose of closing open sell currency contracts and the values are dependent upon the values of open sell currency contracts during the year ended September 30, 2012.
The following table displays the outstanding forward currency contracts at September 30, 2012:
Outstanding Forward Currency Contracts
to Buy or Sell at September 30, 2012
Contract | Contract | Value | Unrealized | Unrealized | ||||||||||||||||||
Contract Description | Buy/Sell | Amount | Value Date | USD | Appreciation | Depreciation | ||||||||||||||||
Euro | Sell | 91,000 | 01/10/2013 | 117,069 | $ | — | $ | (4,941 | ) | |||||||||||||
Euro | Sell | 180,100 | 01/10/2013 | 231,694 | — | (10,867 | ) | |||||||||||||||
Euro | Sell | 279,900 | 01/10/2013 | 360,083 | — | (16,747 | ) | |||||||||||||||
Euro | Sell | 1,048,600 | 01/10/2013 | 1,348,994 | — | (57,958 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||
Total | $ | — | $ | (90,513 | ) | |||||||||||||||||
|
|
|
|
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2012 is disclosed in the following table:
Fair Values of Derivative Financial Instruments
at September 30, 2012
Liability Derivatives | Balance Sheet Location | Fair Value | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (90,513 | ) |
The Fund recognized no realized gains or losses from forward currency contracts. The net change in unrealized appreciation (depreciation) of outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2012 is disclosed in the following table:
Amount of Net Change in Unrealized Appreciation (Depreciation)
of Derivative Financial Instruments Recognized in
Income for the Year Ended September 30, 2012
Total | Forward Currency Contracts | |||||||
Foreign exchange contracts | $ | (90,513 | ) | $ | (90,513 | ) |
OTHER NOTES:
Risks: The Fund’s investments subject it to risks including, but not limited to, management risk, market and economic risk, risks affecting specific issuers, liquidity risk, the risks associated with investments in smaller companies and non-U.S. issuers (including developing country issuers), credit risk, and interest rate risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2012 and the date of issuance of the financial statements, which require adjustment to, or disclosure in the accompanying financial statements.
26 Certified Annual Report
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Certified Annual Report 27
Thornburg Developing World Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the Year)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unless Otherwise Periods are 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 Year | 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 Year (Thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(b) | $ | 12.50 | (0.01 | ) | 3.22 | 3.21 | — | — | — | $ | 15.71 | (0.05 | ) | 1.69 | 1.69 | 1.85 | 25.68 | 129.49 | $ | 39,390 | ||||||||||||||||||||||||||||||||||||||||
2011(b) | $ | 14.44 | (0.01 | ) | (1.91 | ) | (1.92 | ) | (0.02 | ) | — | (0.02 | ) | $ | 12.50 | (0.05 | ) | 1.63 | 1.62 | 1.89 | (13.34 | ) | 129.15 | $ | 24,929 | |||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 12.37 | (0.11 | ) | 3.18 | 3.07 | — | — | — | $ | 15.44 | (0.76 | ) | 2.38 | 2.38 | 2.86 | 24.82 | 129.49 | $ | 10,006 | ||||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.39 | (0.11 | ) | (1.90 | ) | (2.01 | ) | (0.01 | ) | — | (0.01 | ) | $ | 12.37 | (0.74 | ) | 2.34 | 2.34 | 2.89 | (13.96 | ) | 129.15 | $ | 7,258 | |||||||||||||||||||||||||||||||||||
2010(c) | $ | 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | $ | 12.62 | 0.08 | 3.26 | 3.34 | — | — | — | $ | 15.96 | 0.57 | 1.09 | 1.09 | 1.45 | 26.47 | 129.49 | $ | 53,103 | ||||||||||||||||||||||||||||||||||||||||||
2011 | $ | 14.52 | 0.09 | (1.96 | ) | (1.87 | ) | (0.03 | ) | — | (0.03 | ) | $ | 12.62 | 0.55 | 1.04 | 1.04 | 1.47 | (12.89 | ) | 129.15 | $ | 27,019 | |||||||||||||||||||||||||||||||||||||
2010(c) | $ | 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) | Sales loads are not reflected in computing total return. |
(c) | Fund commenced operations on December 16, 2009. |
(d) | Annualized. |
+ | Based on weighted average shares outstanding, except for Dividends from Net Investment Income and Net Realized Gains, which are actual amounts per share. |
See notes to financial statements.
28 Certified Annual Report | Certified Annual Report 29 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
Thornburg Developing World Fund | September 30, 2012 |
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, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 26, 2012
30 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Developing World Fund | September 30, 2012 (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, 2012, and held until September 30, 2012.
Beginning | Ending | Expenses Paid | ||||||||||
Account Value | Account Value | During Period† | ||||||||||
4/1/12 | 9/30/12 | 4/1/12–9/30/12 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,011.60 | $ | 8.50 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,016.55 | $ | 8.52 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,007.80 | $ | 11.95 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.10 | $ | 11.98 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,014.60 | $ | 5.49 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.55 | $ | 5.50 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.69%; C: 2.38%; I: 1.09%) multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the table above 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 above provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Certified Annual Report 31
INDEX COMPARISON | ||
Thornburg Developing World Fund | September 30, 2012 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Thornburg Developing World Fund versus MSCI Emerging Markets Index (December 16, 2009 to September 30, 2012)
Average Annual Total Returns
For Periods Ended September 30, 2012 (with sales charge)
Since | ||||||||
1 Yr | Inception | |||||||
A Shares (Incep: 12/16/09) | 20.02 | % | 8.58 | % | ||||
C Shares (Incep: 12/16/09) | 23.82 | % | 9.69 | % | ||||
I Shares (Incep: 12/16/09) | 26.47 | % | 11.05 | % | ||||
MSCI Emerging Markets Index (Since 12/16/09) | 16.93 | % | 3.62 | % |
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 or call 800.847.0200. 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.
32 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Developing World Fund | September 30, 2012 (Unaudited) |
Name, Age, | Other | |||
Position Held with Fund | Directorships | |||
Year Elected | Principal Occupation(s) During Past Five Years | Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 66 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 of Thornburg Mortgage Advisory Corporation (investment manager to TMST, Inc.). | None | ||
Brian J. McMahon, 56 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight 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, 67 Trustee since 1994, Member of Audit Committee & Chairman of 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, 71 Trustee since 2000, Chairman of Audit Committee | Managing Member of Vestor Associates, LLC, Santa Fe, NM (private equity fund); Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund). | None | ||
Susan H. Dubin, 63 Trustee since 2004, Member of Audit Committee & Governance and Nominating Committee | President of Dubin Investments, Ltd., Greenwich, CT (private investment fund); Director and officer of various charitable organizations. | None | ||
Sally Corning, 51 Trustee since 2012, Member of Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Owen D. Van Essen, 58 Trustee since 2004, Member of Governance & Nominating Committee & Chairman of Operations Risk Oversight Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 (Unaudited) |
Name, Age, | Other | |||
Position Held with Fund | Directorships | |||
Year Elected | Principal Occupation(s) During Past Five Years | Held by Trustee | ||
James W. Weyhrauch, 53 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight Committee | Real estate broker, Santa Fe Properties, Santa Fe, NM; Vice Chairman of Nambe LLC, Santa Fe, NM (manufacturing & design company). | None | ||
EMERITUS TRUSTEE(1)(2)(4) | ||||
Eliot R. Cutler, 66 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel and, until 2009, partner in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
George T. Strickland, 49 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, 73 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 45 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Wendy Trevisani, 41 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 49 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ihlefeld, 42 Vice President since 2003 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 46 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 38 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Operations, and Vice President of Thornburg Investment Management, Inc. | Not applicable | ||
Edward Maran, 54 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 42 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 41 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable |
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 (Unaudited) |
Name, Age, | Other | |||
Position Held with Fund | Directorships | |||
Year Elected | Principal Occupation(s) During Past Five Years | Held by Trustee | ||
Lei Wang, 41 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 33 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Jason Brady, 38 Vice President since 2007 | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 36 Vice President since 2007 | Portfolio Manager and Managing Director and, until 2009, an Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 56 Vice President since 2008 | Portfolio Manager and Managing Director since 2009, and Associate Portfolio Manager from 2008–2009 of Thornburg Investment Management, Inc.; Principal of Vanguard Funds until 2008. | Not applicable | ||
Lon Erickson, 37 Vice President since 2008 | Portfolio Manager and Managing Director since 2010, and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc.; Senior Analyst of State Farm Insurance until 2008. | Not applicable | ||
Kathleen Brady, 52 Vice President since 2008 | Senior Tax Accountant of Thornburg Investment Management, Inc. | 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 the sole 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) | The Bylaws of the Trust currently require that each Trustee shall retire upon his having reached the age of 75 years. Otherwise each Trustee serves in office until the election and qualification of a successor or until the Trustee sooner dies, resigns, retires or is removed. |
(5) | Mr. McMahon is considered an “interested” Trustee under the Investment Company Act of 1940 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) | Mr. Cutler was a Trustee of the Trust through December 31, 2011, and was appointed as an Emeritus Trustee effective January 1, 2012. |
(8) | 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 Developing World Fund | September 30, 2012 (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, 2012, foreign source income and foreign taxes paid are $949,675 and $103,059, respectively.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2012. Complete information will be reported in conjunction with your 2012 Form 1099-DIV.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
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 Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2012.
In anticipation of their recent annual consideration of the advisory agreement’s renewal, the independent Trustees met in May 2012 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 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.
36 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 (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 selection of investments and execution of the Fund’s investment strategies. In addition, the Trustees considered information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (i) the Fund’s absolute investment performance and achievement of stated objectives, (ii) the Advisor’s commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (iii) measures of the Fund’s investment returns over different periods of time relative to a “diversified emerging markets” category of equity mutual funds selected by an independent mutual fund analyst firm, and relative to a broad-based securities index, (iv) the Fund’s cumulative investment return since inception relative to the securities index, and (v) comparative measures of estimated earnings growth, portfolio risk and return.
The Trustees also considered their perceptions of portfolio management personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, trade execution, the Advisor’s performance of accounting and other services, the Advisor’s 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 considered (among other aspects of the data) comparative performance data for the two full calendar years since the Fund’s inception, which showed that the Fund’s investment returns in each year exceeded the average return of the mutual fund category and the return of the Fund’s benchmark index. Other noted quantitative data showed that the Fund’s investment returns fell within the top quartile of performance for the fund category for the three-month period ended with the second quarter of the current year, and near or within the top decile of the category for the year-to-date and one-year periods. Data presented to the Trustees also demonstrated the Fund’s higher cumulative return since inception (net of expenses) relative to the Fund’s benchmark 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 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 and the Fund’s investment performance, 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 overall Fund expenses to median fees and expenses charged to a category of equity mutual funds selected by an independent mutual fund analyst firm. Comparative fee and expense data considered by the Trustees showed that the management fee for the Fund was somewhat lower than the median and average fee rates for the fund category, and that the overall expense ratio of a reference share class of the Fund was comparable to the median and average expense ratios for the fund category. 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 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 37
OTHER INFORMATION, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2012 (Unaudited) |
In reviewing the profitability of the Advisor, the Trustees considered data comparing the profitability of the Advisor to other investment management firms. The information provided did not indicate that the Advisor’s profitability was unusual, and the Trustees also considered in this regard the Advisor’s management of its costs and investment of resources to increase its 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.
38 Certified Annual Report
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This page is not part of the Annual Report. 39
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Reissued September 10, 2012
The Trustees believe current and prospective shareholders should know how we discharge our responsibilities in supervising the Funds’ investment advisor and in reviewing the advisor’s contract for renewal. Since 2005, we have issued a statement which sets out clearly the three principal guidelines that we follow in supervising the Trust’s investment advisor on your behalf. In accordance with our customary practice, in September of this year we again reviewed our statement and concluded we should reissue this statement outlining the principal features of our supervision of the advisor’s performance of investment management services for the Funds.
We begin with the premise that each shareholder selected his or her Fund because its investments are managed by the investment advisor identified in the prospectus and in accordance with the objective and policies described in the prospectus. We realize, as each of you do, that if you believe that your Fund’s stated objective and policies no longer serve your personal investment goals, you can sell your shares and leave the Fund.
Therefore, we believe that our primary supervisory task – our principal obligation to you – is to assess the nature and quality of the advisor’s services, and to confirm that the advisor actively and competently pursues the Fund’s objective, in accordance with the policies set out in the prospectus. To do this, we meet regularly with management to review your Fund’s portfolio and to discuss the advisor’s specific actions and judgments in pursuing the Fund’s objective. We do not substitute our own judgment for the advisor’s decisions in selecting investments; the advisor is paid to exercise its informed judgment on investment decisions, and we seek to confirm, in reviewing the advisor’s performance, that the advisor is doing just that.
Second, while we are conscious of costs and the effect that costs have on shareholders’ returns, we do not seek the lowest fees or expense ratio as our sole or primary objective. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
40 This page is not part of the Annual Report.
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 website 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 Value Fund |
• | Thornburg International Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg Investment Income Builder Fund |
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• | 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 FUND FAMILY
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 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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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.
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, is 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 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 | Year Ended | |||||||
September 30, 2011 | September 30, 2012 | |||||||
Thornburg Investment Trust | $ | 603,000 | $ | 826,950 |
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 | Year Ended | |||||||
September 30, 2011 | September 30, 2012 | |||||||
Thornburg Investment Trust | $ | -0- | $ | -0- |
Tax Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years for professional services rendered by PWC for tax compliance, tax advice or tax planning are set out below.
Year Ended | Year Ended | |||||||
September 30, 2011 | September 30, 2012 | |||||||
Thornburg Investment Trust | $ | 184,100 | $ | 210,200 |
All Other Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years for all other services rendered by PWC to the Trust are set out below.
Year Ended | Year Ended | |||||||
September 30, 2011 | September 30, 2012 | |||||||
Thornburg Investment Trust | $ | -0- | $ | 12,000 |
The figure shown under All Other Fees for the year ended September 30, 2012, includes amounts from out of pocket expenses during the 2011 annual audit as well as a consent fee pertaining to a closing agreement with the IRS during the fiscal year ended September 30, 2012.
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, 2012, 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 28, 2012 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Brian J. McMahon | |
Brian J. McMahon | ||
President and principal executive officer | ||
Date: | November 28, 2012 |
By: | /s/ George T. Strickland | |
George T. Strickland | ||
Treasurer and principal financial officer | ||
Date: | November 28, 2012 |