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, 2014
Date of reporting period: September 30, 2014
Item 1. Reports to Stockholders
The following annual reports are attached hereto, in order:
Thornburg Low Duration Municipal Fund
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 Low Duration Income 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
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages is current as of September 30, 2014. 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. Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. 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 Class A shares. Class I shares may not be available to all investors.
Share Class | NASDAQ Symbol | CUSIP | ||
Class A | TLMAX | 885-216-788 | ||
Class I | TLMIX | 885-216-770 |
Glossary
BofA Merrill Lynch 1-3 Year Municipal Securities Index – An index that 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 3 years.
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.
Personal Consumption Expenditure (PCE) Price Index – One measure of U.S. inflation that assesses the percentage change in prices of goods and services purchased by consumers throughout the economy. Of all the measures of consumer price inflation, the PCE price index covers the broadest set of goods and services.
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.
Basis Point (bp) – 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.
Credit Spread/Quality Spread – The difference between the yields of securities with different credit qualities.
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.
Fiscal Cliff – A combination of expiring tax cuts and across-the-board government spending cuts that were scheduled to become effective at the end of 2012. The idea behind the fiscal cliff was that if the federal government allowed these two events to proceed as planned, they would have a detrimental effect on an already shaky economy. At the same time, it was predicted that going over the fiscal cliff would significantly reduce the federal budget deficit.
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.
Participation Rate – The number of people who are either employed or are actively looking for work. The people who are no longer actively searching for work would not be included in the participation rate. During an economic recession, many workers often get discouraged and stop looking for employment, and as a result, the participation rate decreases.
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.
Yield Curve – A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.
This page is not part of the Annual Report 3
THORNBURG LOW DURATION MUNICIPAL FUND
Laddering – an All Weather Strategy
The newest addition to Thornburg’s municipal fund line-up is Thornburg Low Duration Municipal Fund. The Fund pursues its primary goal by investing principally in a laddered maturity portfolio of municipal obligations issued by states and state agencies, local governments and their agencies and by certain United States territories and possessions. Thornburg Investment Management actively manages the Fund’s portfolio.
In our opinion, current market conditions have created an ideal situation in which to launch this strategy. Because the magnitude of changes in value of interest-bearing obligations is greater for obligations with longer durations, given an equivalent change in interest rates, the Fund seeks to reduce changes in its share value compared to longer duration fixed income portfolios by maintaining a portfolio of investments with a dollar-weighted average duration of normally no more than three years. The Fund also attempts to reduce changes in its share value through credit analysis, selection, and diversification.
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 these techniques to manage risk and pursue attractive returns:
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment and interest rate risk. |
• | 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. |
• | Investing on a cash-only basis without using leverage. |
Portfolio Managers
Josh Gonze Chris Ryon, CFA
Objectives
The Fund seeks current income exemptfrom federal income taxes, consistent with preservation of capital.
Average Annual Total Returns
For Period Ended September 30, 2014
Since Inception | ||||
A Shares (Incep: 12/30/13) | ||||
Without sales charge | 0.40 | % | ||
With sales charge | -1.13 | % |
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 1.73%, as disclosed in the most recent Prospectus. Thornburg Investment Management and Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses until at least February 1, 2015, so that actual expenses for Class A shares do not exceed 0.70%.
30-Day Yields, A Shares
As of September 30, 2014
Annualized Distribution Yield | 0.23 | % | ||
SEC Yield | 0.18 | % |
Without fee waivers and expense reimbursements, the 30-day SEC Yield would have been negative 2.69% and the Annualized Distribution Yield would have been negative 2.65%. Unsubsidized yields may be disproportionately negative due to the size of net assets and fixed expenses.
Key Portfolio Attributes
As of September 30, 2014
Number of Bonds | 72 | |||
Effective Duration | 1.6 Yrs | |||
Average Maturity | 1.7 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 12.
4 This page is not part of the Annual Report
THORNBURG’S SUITE OF MUNICIPAL FUNDS
Municipal Funds for a Range of Interest-Rate Scenarios
At Thornburg, we often say that predicting interest rates is a fool’s game. And with the Federal Reserve still heavily involved in the markets, it’s even more difficult to forecast how rates may rise than when they may rise. Will long rates rise first and short rates follow? Will long and short rates climb simultaneously?
A traditional strategy to protect oneself against interest-rate risk is to move into shorter-duration bond strategies. But the seemingly counterintuitive response of moving to longer-duration strategies can sometimes yield better results.
Diversify Across the Yield Curve
This uncertainty points to why it’s important for investors to match their investment horizon to the duration of the strategy in which they’re invested, and to diversify assets across the yield curve.
For any interest-rate scenario, Thornburg’s comprehensive suite of municipal funds gives prudent investors the ability to diversify across the yield curve.
Diversify Across the Yield Curve with Thornburg Municipal Funds AAA General Obligation Municipal Yield Curve, as of September 30, 2014
| ![]() |
This page is not part of the Annual Report 5
Thornburg Low Duration Municipal Fund
September 30, 2014
Table of Contents | ||||
7 | ||||
12 | ||||
16 | ||||
17 | ||||
18 | ||||
19 | ||||
24 | ||||
26 | ||||
27 | ||||
28 | ||||
29 | ||||
32 |
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 and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
October 15, 2014
Dear Fellow Shareholder:
We are pleased to present the annual report for the Thornburg Low Duration Municipal Fund (the Fund). The net asset value (NAV) of the Class A shares increased by three cents to $12.34 per share during the fiscal period ended September 30, 2014. If you were with us for the entire period, you received dividends of 1.896 cents per share. If you reinvested your dividends, you received 1.897 cents per share. Dividends were higher for Class I shares, to account for varying class-specific expenses. The Class A shares underperformed the Fund’s benchmark index, with a 0.40% total return at NAV for the period from December 30, 2013, to September 30, 2014, compared to the 0.71% total return for the BofA Merrill Lynch 1-3 Year Municipal Securities Index. The Fund generated 2.81% more price return and 3.12% less income than its benchmark.
The Fund’s positive returns were driven by a combination of virtually unchanged interest rates in the very shortest maturities of the market (1-3 years), a consequence of a very accommodative Federal Reserve (the Fed) interest rate policy and a narrowing of credit spreads. In general, investors received smaller and smaller levels of yield for securities of lower credit quality with shorter maturity dates. Chart I illustrates this effect.
Interest-Rate Changes
As of the end of the fiscal period 2013, many market observers predicted increasing interest rates. The fear of the Fed curtailing purchases of Treasury and mortgage-backed securities had roiled the markets, though the eventual fact of tapering did not begin until December 18, 2013. This was the backdrop against which rates rose through the end of December 2013. Chart II illustrates the changes in rates by maturity for each quarter of fiscal 2014.
This chart highlights a few interesting phenomena:
1. | Interest rates changed by varying amounts for different maturities, highlighting the potential benefits of a portfolio that is diversified by maturity. We believe investors benefit by owning several funds that provide different exposures to various maturity segments of the market. |
Chart I | Quality Spreads: BBB Municipal Revenue Yields over AAA General Obligation Yields
as of 9/30/2014
Chart II | Changes in AAA General Obligation Municipal Yield Curve
9/30/2013 – 9/30/2014
Certified Annual Report 7
LETTER TO SHAREHOLDERS, | ||
CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
2. | In the quarter ended March 31, 2014, short-term interest rates increased as long-term rates continued to decline. This was doubtless a reaction by market participants to the risk of Fed activity and increases in short-term interest rates. |
3. | In the six-month period ended September 30, 2014, all interest rates declined and longer-term rates declined more than short-term rates. |
Table I shows changes in interest rates for the last two fiscal years. The table highlights that although interest rates have remained essentially unchanged in fiscal 2014, they have not retraced the upswing of fiscal 2013 (seen in the five year maturity, at least). One might use the analogy of a spring depressed by the Fed, waiting to be released with eventual normalization of short-term rates.
Table I | Yield Changes for the Last Two Fiscal Years
Fiscal Year Ending | Fiscal Year Ending | |||||||
Maturity | 9/30/2013 | 9/30/2014 | ||||||
1-Year | -0.02 | % | -0.03 | % | ||||
5-Year | +0.62 | % | -0.03 | % | ||||
10-Year | +0.83 | % | -0.32 | % | ||||
30-Year | +1.43 | % | -1.08 | % |
Source: Bloomberg
The Economy and the Federal Reserve Board
The U.S. economy has recently grown at an average rate of 2.0% as measured by gross domestic product (GDP), which is defined as the monetary value of all finished goods and services produced within a country’s borders over a specific time period. Many market participants believe that 2.0% GDP growth is suboptimal compared to rates in past recoveries, but the quarter ended December 31, 2013, produced a 3.5% growth rate and the quarter ended June 30, 2014, a 4.6% rate. Growth in the quarter ended March 31, 2014, was negative 2.1%; this anomaly has been attributed to weather effects.
Employment growth is another useful measure for gauging the health of the economy. The financial press highlights this as an area of focus for Fed Chair Janet Yellen. The economy has added approximately 220,000 jobs per month for the fiscal year. This growth has not come without volatility; only 84,000 jobs were added in December 2013 and 304,000 in April 2014. The unemployment rate has declined from 7.2% for the year ended September 30, 2013, to 5.9% as of September 30, 2014. This should make investors feel good about the economy, but other measures paint a mixed picture. One indicator is the U.S. labor force participation rate, which measures the size of the labor force as a percent of the working-age population. Since January 1990, this long-term average has been at 65.9%, but as of September 2014, the participation rate had declined to 62.7%. For fiscal year 2014, this measure has averaged 62.9%. Some economists and demographers attempt to explain the decline in the participation rate by the retirement of Baby Boomers, who have changed every demographic category they have passed through and have been referred to as “the pig in the python.” The thought that Baby Boomers would impact the labor force participation rate significantly enough to cause this decline is plausible, but we have seen no estimates of the effect.
The Fed began reducing purchases of U.S. Treasury and mortgage securities in December 2013 and will complete the process by October 2014. During 2013, the market’s anticipation of the Fed’s tapering its asset purchases sent long-term municipal yields up 1.43%. But in 2014, the reality of tapering (and other factors) sent long-term municipal yields down 1.08%. In its September 17, 2014, release, the Federal Open Market Committee (FOMC) stated:
“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
Later, in a press conference, Chair Yellen added more color to the policy statement:
“Let me reiterate, however, that the Committee’s expectations for the path of the federal funds rate are contingent on the economic outlook. If the economy proves to be stronger than anticipated by the Committee, resulting in a more rapid convergence of employment and inflation to the FOMC’s objectives, then increases in the federal funds rate are likely to occur sooner and to be more rapid than currently envisaged. Conversely, if economic performance disappoints, increases in the federal funds rate are likely to take place later and to be more gradual.”
8 Certified Annual Report
LETTER TO SHAREHOLDERS, | ||
CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
It is clear guidance like this that makes one long for Harry Truman’s “one-handed economist.” From all this, one can glean that the Fed will be “data dependent” (another term being thrown around in the financial press) in determining the future path of the federal funds rate (currently near zero).
Finally, let’s look at inflation. It is important to fixed-income investors because it is the primary determinant of future purchasing power. If inflation increases, the semi-annual coupon payment of most bonds carries less value in the economy. Inflation, as measured by core PCE (the Core Personal Consumption Expenditures Index, which is the Fed’s favored inflation measure) excludes volatile food and energy prices. Since September 2013, core PCE has increased from 1.33% to 1.47%, but this is still materially below the Fed’s inflation target of 2.00%. As 2014 prices of municipal bonds have risen and yields have declined, their after-inflation purchasing power has fallen. Chart III illustrates this point for a five-year AAA-rated general obligation bond.
Chart III shows that as of August 31, 2014, an investor in a five-year AAA general obligation bond received a real yield (the yield on a security after inflation is taken into account) of negative 0.33%. The yield failed to keep up with inflation, and the investor lost purchasing power. On August 31, a five-year AAA general obligation bond yielded 1.14%, with core PCE at 1.47%. As of September 30, 2014, a five-year AAA general obligation bond yielded 1.24%, with a real yield of negative 0.23%. The long-term average real yield of a five-year AAA general obligation bond is a mere 1.32%. These extremely low real yields are an important effect of the Fed’s keeping short-term rates very low.
Chart III | Five-Year AAA GO Real Yield (using Core PCE)
6/1/1994 – 8/31/2014
The Municipal Bond Market Credit Picture
The health of municipal market credit has generally been good, helped by GDP growth and increasing employment. But there have been some red flags recently. An August 2014 report from the Nelson A. Rockefeller Institute of Government at the State University of New York, “After Four Years of Uninterrupted Growth, Tax Revenues Decline in the First Quarter, and Preliminary Figures for the Second Quarter of 2014 Signal Further Declines in Personal Income Tax,” sums up certain observations:
• | “State tax revenues declined by 0.3% in the first quarter of 2014. This is the first time state revenues declined after four years of uninterrupted growth.” |
• | “Personal income tax collections showed a decline of 1.2% in the first quarter of 2014. The decline in personal income tax collections appear to be primarily due to the mirror-image effect of the initial impact of the fiscal cliff on taxpayer behavior, which had driven tax collections upward a year ago.” |
• | “Year-to-date figures show 2.8% growth in overall state tax collections in the first three quarters of fiscal 2014 compared to the same period of 2013.” |
• | “Local property tax revenues grew by 1.9% in the first quarter, marking the eighth consecutive quarter of growth in |
Certified Annual Report 9
LETTER TO SHAREHOLDERS, | ||
CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
This data source tells us that overall state revenue is up but that there has been some decline in personal income tax collections that may be explained by individuals pushing income into last year to take advantage of lower personal income tax rates. We would raise a yellow flag at this indicator; this trend bears watching. The point about local property taxes growing should come as no surprise, as the real estate market has improved in many places. This is a very good development for local governments, because property taxes are their primary source of revenues. Not surprisingly, employment also shows positive growth. Only Alaska (off 0.95%) shows a decline for the period from August 2013 through August 2014 (the latest data available at this writing). The three states with the largest increases in employment are North Dakota (up 4.47%), Utah (up 3.53%), and Texas (up 3.63%).
One of the highest hurdles to the health of the state economies is the funding levels of their pension plans. For too long, elected officials have over-promised and under-delivered (especially when it came to making payments to pensions) to their employees, and until recently, markets have proven more of a headwind. On October 9, 2014, Bloomberg reported, “State Pension Gaps Shrink for the First Time Since 2007.” Let us caution all readers: the shrinkage is barely perceptible, but even that is better than a poke in the eye with a sharp stick.
“The median state system last year had 69.3% of the assets needed to meet promised benefits, up from 68.7% in 2012, according to data compiled by Bloomberg.”
This sounds like great news until one realizes the industrywide, minimum acceptable funding level is said to be 80%. Thirteen states met or exceeded this; the state with the lowest (some would say worst) level is Illinois with a funding level of 39.3%, down from 40.4% in 2012. We continue to avoid purchase of the general obligation bonds of the State of Illinois for this and other reasons, although we do own certain other credits within the state.
Overall, the state of the states’ economies and their respective credit pictures is healthy, but there are some exceptions. Illinois is one. Exceptions at other levels are the City of Detroit (in the process of exiting Chapter 9 protection) and Puerto Rico, which by all reports doesn’t know what it is doing. We do not own either credit!
The long and short of the Puerto Rico story:
• | In March 2014, the island issued $3.5 billion of general obligation bonds, mostly sold to hedge funds that “only wanted to help the island.” At the time, the island’s officials said this would give them enough cash to last for 18 months. |
• | In June 2014, the governor signed legislation allowing the island’s public corporations to “restructure” their debt, the Puerto Rico Electric Power Authority (PREPA) being the best known among them. |
• | Later in 2014, PREPA reached “forbearance” agreements with its creditors, calling for, among other things, a “Chief Restructuring Officer” (for an engagement fee of around $10 million, which is not bad work if you can get it). |
• | In September, the island’s financial officials announced a $900 million “tax and revenue anticipation” note deal that would be placed with banks who were forced to hold the vast majority of it and could not sell it. That figure was later raised to $1.2 billion. This was six months after the March sale! The yield on these securities is 7.75%; California issued a similar security earlier in the summer for 0.10%. Think there is a difference in the credit? |
Conclusion
We do not believe that the fixed income markets, and municipal bonds particularly, represent any great value at present; real yields are negative in some segments of the market, and very low in others. But we do not believe shareholders should undertake a wholesale rebalancing of portfolios either. It is important to re-evaluate why we own fixed-income products and municipal bonds: as part of a well-balanced, diversified portfolio. Recent volatility certainly demonstrates the potential benefits of these investments. Diversification is one of the best ways for shareholders to manage risk, not only between asset classes but in positioning within markets. And we believe municipal bond investors may benefit from diversifying along the municipal bond yield curve.
Many shareholders may soon ask themselves “what should I do if interest rates begin to rise?” We would suggest having faith in the structure of your portfolio. A portion of your Fund’s assets are invested in floating-rate securities, which will readjust their
10 Certified Annual Report
LETTER TO SHAREHOLDERS, | ||
CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
income upwards when the Fed raises short-term rates. As a laddered, low-duration portfolio, most of the portfolio will be maturing in three years or less and will then be available to be reinvested at higher yields (see Chart IV). When interest rates do rise, prices will generally decline, but the remaining bonds in the portfolio will move closer to maturity and should increase in price over time. This Fund has the least interest rate risk of any of the Thornburg municipal bond funds, so any price adjustment should be minimal. We advise being patient when interest rates start to rise, lengthening your anticipated holding period.
We will continue to strive to manage your assets to fulfill the Fund’s objectives as set out in the prospectus.
Sincerely,
![]() | ![]() | |||
Christopher Ryon,CFA | Josh Gonze | |||
Portfolio Manager | Portfolio Manager | |||
Managing Director | Managing Director |
Chart IV | Percent of Portfolio Maturing
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 11
SCHEDULE OF INVESTMENTS | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 |
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 | |||||||
ARIZONA — 2.60% | ||||||||||
Pima County COP, 3.00% due 12/1/2014 (Sewer System & Fleet Services Facilities) | A+/NR | $ | 200,000 | $ | 200,984 | |||||
State of Arizona COP, 5.00% due 10/1/2014 (Lease-Purchases-Various State Agency Properties; Insured: AGM) | AA/A1 | 200,000 | 200,028 | |||||||
ARKANSAS — 1.33% | ||||||||||
Jefferson County, 4.00% due 6/1/2015 (Jefferson Regional Medical Center; Insured: AGM) | AA/NR | 200,000 | 204,594 | |||||||
CALIFORNIA — 12.71% | ||||||||||
Bay Area Toll Authority, 1.00% due 4/1/2047 (San Francisco Bay Area Toll Bridge) | AA/Aa3 | 250,000 | 250,912 | |||||||
California HFFA, 0.06% due 7/1/2016 put 10/1/2014 (Dignity Health; Insured: Natl-Re; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 200,000 | 200,000 | |||||||
California HFFA, 4.00% due 7/1/2016 (Children’s Hospital; Insured: AGM) | AA/A2 | 200,000 | 210,038 | |||||||
California Statewide Communities Development Authority, 5.25% due 7/1/2017 (St. Joseph Health System; Insured: AGM) | AA/A1 | 100,000 | 111,655 | |||||||
Jurupa Public Financing Authority, 4.00% due 9/1/2017 | BBB+/NR | 100,000 | 107,967 | |||||||
Murrieta Valley USD GO, 2.00% due 9/1/2016 (Riverside County Educational Facilities Construction and Modernization; Insured: BAM) | AA/NR | 200,000 | 205,412 | |||||||
San Diego Redevelopment Agency, 5.00% due 9/1/2016 (Centre City Redevelopment; Insured: AMBAC) | NR/Baa3 | 50,000 | 52,962 | |||||||
Successor Agency to the Richmond Community Redevelopment Agency, 4.00% due 9/1/2017 (Insured: BAM) | AA/NR | 300,000 | 325,914 | |||||||
Successor Agency to the Redevelopment Agency of the City of Chino, 5.00% due 9/1/2017 (Merged Chino Areas 2001 and 2003 and Central City Redevelopment Projects; Insured: BAM) | AA/NR | 300,000 | 335,787 | |||||||
Town of Hillsborough COP, 0.11% due 6/1/2035 put 10/1/2014 (Water and Sewer Systems) (daily demand notes) | AAA/NR | 160,000 | 160,000 | |||||||
COLORADO — 5.61% | ||||||||||
City & County of Denver Airport System, 0.20% due 11/15/2025 put 10/1/2014 (Denver International Airport; Insured: AGM; SPA: Morgan Stanley Bank) (daily demand notes) | AA/A1 | 200,000 | 200,000 | |||||||
City & County of Denver GO, 3.00% due 8/1/2015 (Civic Facilities and Denver Zoological Gardens Improvements) | AAA/Aaa | 200,000 | 204,788 | |||||||
Denver Convention Center Hotel Authority, 5.25% due 12/1/2014 (Insured: Syncora) | BBB-/Baa3 | 125,000 | 125,929 | |||||||
Regional Transportation District COP, 5.00% due 6/1/2017 (FasTracks Transportation System) | A/Aa3 | 300,000 | 333,912 | |||||||
DISTRICT OF COLUMBIA — 1.39% | ||||||||||
District of Columbia, 5.00% due 4/1/2016 (National Public Radio) (ETM) | AA-/Aa3 | 200,000 | 213,818 | |||||||
FLORIDA — 3.90% | ||||||||||
County of Osceola, 5.00% due 10/1/2017 (Transportation Capital Improvements; Insured: AMBAC) | A+/A1 | 150,000 | 167,846 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2015 (Nova Southeastern University) | BBB/Baa1 | 200,000 | 204,064 | |||||||
Hillsborough County IDA, 5.65% due 5/15/2018 (Tampa Electric Co.) | BBB+/A2 | 200,000 | 229,392 | |||||||
GEORGIA — 1.41% | ||||||||||
City of Atlanta, 5.25% due 12/1/2016 (Atlantic Station Project; Insured: AGM) | AA/A3 | 200,000 | 217,388 | |||||||
ILLINOIS — 8.24% | ||||||||||
Chicago Park District GO, 5.00% due 1/1/2017 (Capital Improvement Plan; Insured: Natl-Re) | AA+/A3 | 150,000 | 157,699 | |||||||
City of Chicago, 0.19% due 1/1/2034 put 10/1/2014 (Liquidity Facility; SPA: JPMorgan Chase Bank) (daily demand notes) | AAA/Baa1 | 200,000 | 200,000 | |||||||
City of Rockford GO, 3.00% due 12/15/2016 (New Fire Station Construction; Insured: AGM) | AA/A1 | 250,000 | 263,460 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
Illinois Development Finance Authority, 0.15% due 2/1/2021 put 10/1/2014 (Teachers Academy for Mathematics and Science: LOC: JPMorgan Chase Bank) (daily demand notes) | NR/Aa3 | $ | 100,000 | $ | 100,000 | |||||
Illinois Finance Authority, 4.30% due 6/1/2035 put 6/1/2016 (Peoples Gas Light & Coke Co.; Insured: AMBAC) | A/Aa3 | 200,000 | 211,382 | |||||||
Illinois State Toll Highway Authority, 0.07% due 1/1/2031 put 10/1/2014 (Insured: AGM; SPA: Bank of America N.A.) (daily demand notes) | AA/Aa3 | 200,000 | 200,000 | |||||||
Town of Cicero Cook County GO, 5.00% due 1/1/2018 (Cicero and Laramie Development Areas; Insured: AGM) | AA/A2 | 125,000 | 138,625 | |||||||
INDIANA — 2.76% | ||||||||||
Hammond Multi-School Building Corp., 4.00% due 7/15/2017 (Educational Facilities) (State Aid Withholding) | AA+/NR | 300,000 | 325,866 | |||||||
University of Southern Indiana, 0.15% due 10/1/2019 put 10/1/2014 (Wellness, Fitness, Recreational Facility; LOC: JPMorgan Chase Bank) (daily demand notes) | A+/Aa3 | 100,000 | 100,000 | |||||||
IOWA — 1.32% | ||||||||||
Iowa Finance Authority, 5.00% due 2/15/2015 (Iowa Health System; Insured: AGM) | NR/Aa3 | 200,000 | 203,394 | |||||||
LOUISIANA — 0.72% | ||||||||||
City of New Orleans, 5.00% due 12/1/2017 (Water System Facilities Capital Improvement Program) | BBB+/NR | 100,000 | 111,565 | |||||||
MASSACHUSETTS — 1.96% | ||||||||||
a Massachusetts Educational Financing Authority, 5.50% due 1/1/2017 | AA/NR | 275,000 | 302,819 | |||||||
MICHIGAN — 6.25% | ||||||||||
Goodrich Area School District GO, 5.00% due 5/1/2016 (Insured: AGM/Q-SBLF) | AA/Aa2 | 250,000 | 256,710 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2016 (Ascension Health) | AA+/Aa2 | 200,000 | 218,776 | |||||||
Michigan State Hospital Finance Authority, 5.75% due 12/1/2034 put 12/1/2015 (Trinity Health) | AA-/Aa2 | 200,000 | 212,604 | |||||||
Northville Public Schools GO, 5.00% due 5/1/2017 (Counties of Wayne, Oakland, Washtenaw Educational Facilities; Insured: Q-SBLF) | NR/Aa2 | 250,000 | 276,438 | |||||||
MISSOURI — 1.62% | ||||||||||
Missouri Development Finance Board, 0.04% due 12/1/2033 put 10/1/2014 (The Nelson Gallery Foundation; SPA: Northern Trust Co.) (daily demand notes) | AAA/Aaa | 250,000 | 250,000 | |||||||
NEVADA — 3.90% | ||||||||||
Carson City, 4.00% due 9/1/2016 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 200,000 | 210,266 | |||||||
City of Reno GO, 5.00% due 6/1/2017 (Fire Protection Projects) | A-/A1 | 200,000 | 222,608 | |||||||
Washoe County School District GO, 5.25% due 6/1/2017 (Educational Facilities; Insured: AGM) | AA/Aa3 | 150,000 | 168,215 | |||||||
NEW JERSEY — 3.12% | ||||||||||
New Jersey Educational Facilities Authority, 5.00% due 9/1/2016 (Higher Education Capital Improvement; Insured: AGM) | AA/A2 | 300,000 | 312,840 | |||||||
New Jersey Health Care Facilities Financing Authority, 5.00% due 1/1/2018 (Hackensack University Medical Center; Insured: AGM) | AA/A2 | 150,000 | 168,435 | |||||||
NEW YORK — 5.42% | ||||||||||
City of New York GO, 0.04% due 8/1/2021 put 10/1/2014 (City Budget Financial Management; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 200,000 | 200,000 | |||||||
Lake Placid Central School District GO, 5.00% due 6/15/2017 (Elementary, Middle/High School Projects; Insured: Natl-Re) (State Aid Withholding) | NR/Aa3 | 200,000 | 220,126 | |||||||
Monroe County Industrial Development Corp., 4.00% due 1/15/2018 (Monroe Community College Association; Insured: AGM) | AA/A2 | 200,000 | 215,342 | |||||||
New York State Dormitory Authority, 0.06% due 7/1/2034 put 10/1/2014 (St. John’s University; LOC: Bank of America) (daily demand notes) | AAA/A1 | 200,000 | 200,000 | |||||||
NORTH DAKOTA — 2.79% | ||||||||||
City of Williston GO, 5.00% due 5/1/2017 (Water, Sewer and Street Improvements) | BBB+/NR | 200,000 | 220,662 | |||||||
North Dakota Building Authority, 4.25% due 12/1/2015 (Various State Agency Capital Projects; Insured: Natl-Re) | AA+/Aa2 | 200,000 | 209,452 | |||||||
OHIO — 4.50% | ||||||||||
City of Cleveland, 3.00% due 10/1/2016 (Public Facilities) | AA/A1 | 200,000 | 209,664 | |||||||
County of Franklin, 4.00% due 11/15/2033 put 8/1/2016 (OhioHealth Corp. Hospital Facilities) | AA+/Aa2 | 200,000 | 212,682 | |||||||
University of Toledo, 3.50% due 6/1/2016 (University Facilities Improvements) | A/A1 | 260,000 | 272,139 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
PENNSYLVANIA — 7.53% | ||||||||||
Allegheny County Higher Education Building Authority, 5.50% due 3/1/2016 (Duquesne University Project; Insured: AMBAC) | NR/NR | $ | 115,000 | $ | 119,411 | |||||
City of Philadelphia Gas Works, 5.00% due 10/1/2017 (Insured: AMBAC) | BBB+/Baa2 | 200,000 | 221,564 | |||||||
East Allegheny School District GO, 2.00% due 4/1/2017 (Insured: BAM) (State Aid Withholding) | AA/A3 | 300,000 | 306,387 | |||||||
Pennsylvania Economic Development Financing Authority, 3.375% due 12/1/2040 put 7/1/2015 (Shippingport Project) | BBB-/NR | 200,000 | 202,356 | |||||||
The Hospitals and Higher Educational Facilities Authority of Philadelphia, 0.04% due 7/1/2022 put 10/1/2014 (The Children’s Hospital of Philadelphia; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 100,000 | 100,000 | |||||||
Wilson School District GO, 3.00% due 6/1/2017 (State Aid Withholding) | AA/NR | 200,000 | 211,896 | |||||||
SOUTH CAROLINA — 2.16% | ||||||||||
City of North Charleston Public Facilities Corp. COP, 5.00% due 10/1/2017 (Convention Center Complex) | AA-/NR | 300,000 | 333,144 | |||||||
TEXAS — 7.26% | ||||||||||
Brazos River Authority, 4.90% due 10/1/2015 (Houston Industries, Inc. Project; Insured: Natl-Re) | AA-/A3 | 200,000 | 208,266 | |||||||
Harris County Health Facilities Development Corp., 0.04% due 10/1/2041 put 10/1/2014 (Texas Children’s Hospital; SPA: Wells Fargo Bank N.A.) (daily demand notes) | AA/Aa2 | 200,000 | 200,000 | |||||||
Lower Colorado River Authority, 5.00% due 5/15/2015 | A/A1 | 200,000 | 206,028 | |||||||
State of Texas GO, 1.50% due 8/31/2015 (Cash Flow Management) | SP-1+/Mig1 | 500,000 | 506,250 | |||||||
UTAH — 2.59% | ||||||||||
Murray City, 0.04% due 5/15/2037 put 10/1/2014 (IHC Health Services, Inc.; SPA: JPMorgan Chase Bank) (daily demandnotes) | AA+/Aa1 | 200,000 | 200,000 | |||||||
Weber County, 0.04% due 2/15/2031 put 10/1/2014 (IHC Health Services, Inc.; SPA: The Bank of New York Mellon) (daily demand notes) | AA+/Aa1 | 200,000 | 200,000 | |||||||
VIRGINIA ��� 1.35% | ||||||||||
Fairfax County GO, 4.00% due 10/1/2015 (Public Facilities and Improvements) (State Aid Withholding) | AAA/Aaa | 200,000 | 207,692 | |||||||
WASHINGTON — 4.15% | ||||||||||
Ocean Beach School District No. 101 GO, 4.00% due 12/1/2017 (Educational Facilities) | NR/A2 | 300,000 | 327,888 | |||||||
Seattle Municipal Light & Power, 5.00% due 2/1/2016 | AA/Aa2 | 200,000 | 212,598 | |||||||
Washington Economic Development Finance Authority, 0.09% due 8/1/2025 put 10/1/2014 (Seadrunar Project; LOC: U.S. Bank) (daily demand notes) | AA-/NR | 100,000 | 100,000 | |||||||
WEST VIRGINIA — 1.30% | ||||||||||
b Mason County PCR, 1.625% due 10/1/2022 put 10/1/2018 (Appalachian Power Company Project) | BBB/NR | 200,000 | 200,576 | |||||||
WISCONSIN — 1.31% | ||||||||||
Wisconsin Health & Educational Facilities Authority, 1.25% due 8/15/2025 put 8/15/2017 (Aurora Health Care, Inc.) | NR/A3 | 200,000 | 201,330 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 99.20% (Cost $15,266,558) | $ | 15,300,545 | ||||||||
OTHER ASSETS LESS LIABILITIES — 0.80% | 122,771 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 15,423,316 | ||||||||
|
|
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 |
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:
AGM | Insured by Assured Guaranty Municipal Corp. | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
BAM | Insured by Build America Mutual Insurance Co. | |
COP | Certificates of Participation | |
ETM | Escrowed to Maturity | |
GO | General Obligation | |
HFFA | Health Facilities Financing Authority |
IDA | Industrial Development Authority | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
Q-SBLF | Insured by Qualified School Bond Loan Fund | |
Syncora | Insured by Syncora Guarantee Inc. | |
USD | Unified School District |
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $15,266,558) (Note 2) | $ | 15,300,545 | ||
Cash | 166,365 | |||
Receivable from investment advisor | 18,312 | |||
Interest receivable | 146,912 | |||
Prepaid expenses and other assets | 13,824 | |||
|
| |||
Total Assets | 15,645,958 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 200,000 | |||
Payable for fund shares redeemed | 133 | |||
Accounts payable and accrued expenses | 22,496 | |||
Dividends payable | 13 | |||
|
| |||
Total Liabilities | 222,642 | |||
|
| |||
NET ASSETS | $ | 15,423,316 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Net unrealized appreciation on investments | $ | 33,987 | ||
Net capital paid in on shares of beneficial interest | 15,389,329 | |||
|
| |||
$ | 15,423,316 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($2,751,358 applicable to 222,893 shares of beneficial interest outstanding - Note 4) | $ | 12.34 | ||
Maximum sales charge, 1.50% of offering price | 0.19 | |||
|
| |||
Maximum offering price per share | $ | 12.53 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($12,671,958 applicable to 1,026,570 shares of beneficial interest outstanding - Note 4) | $ | 12.34 | ||
|
|
See notes to financial statements.
16 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg Low Duration Municipal Fund | Period Ended September 30, 2014* |
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $187,028) | $ | 75,779 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 35,498 | |||
Administration fees (Note 3) | ||||
Class A Shares | 2,472 | |||
Class I Shares | 3,448 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 3,956 | |||
Transfer agent fees | ||||
Class A Shares | 4,670 | |||
Class I Shares | 7,900 | |||
Registration and filing fees | ||||
Class A Shares | 25,598 | |||
Class I Shares | 25,666 | |||
Custodian fees (Note 3) | 15,115 | |||
Professional fees | 46,904 | |||
Accounting fees | 275 | |||
Trustee fees | 305 | |||
Other expenses | 12,389 | |||
|
| |||
Total Expenses | 184,196 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (95,473 | ) | ||
Investment advisory fees and other fund level fees waived by investment advisor (Note 3) | (45,374 | ) | ||
Fees paid indirectly (Note 3) | (247 | ) | ||
|
| |||
Net Expenses | 43,102 | |||
|
| |||
Net Investment Income | 32,677 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net change in unrealized appreciation (depreciation) of investments | 33,987 | |||
|
| |||
Net Realized and Unrealized Gain | 33,987 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 66,664 | ||
|
|
* | For the period from commencement of operations on December 30, 2013 through September 30, 2014. |
See notes to financial statements.
Certified Annual Report 17
STATEMENT OF CHANGES IN NET ASSETS | ||
Thornburg Low Duration Municipal Fund |
Period Ended September 30, 2014* | ||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||
OPERATIONS | ||||
Net investment income | $ | 32,677 | ||
Net unrealized appreciation (depreciation) on investments | 33,987 | |||
|
| |||
Net Increase (Decrease) in Net Assets Resulting from Operations | 66,664 | |||
DIVIDENDS TO SHAREHOLDERS | ||||
From net investment income | ||||
Class A Shares | (4,035 | ) | ||
Class I Shares | (28,642 | ) | ||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||
Class A Shares | 2,744,115 | |||
Class I Shares | 12,645,214 | |||
|
| |||
Net Increase in Net Assets | 15,423,316 | |||
NET ASSETS | ||||
Beginning of period | — | |||
|
| |||
End of period | $ | 15,423,316 | ||
|
|
* | For the period from commencement of operations on December 30, 2013 through September 30, 2014. |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 |
NOTE 1 – ORGANIZATION
Thornburg Low Duration 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 eighteen 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 investment objective is to seek current income exempt from federal income tax.
The Fund currently offers two classes of shares of beneficial interest: Class A and Institutional Class (“Class I”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (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 allocable 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 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. 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 |
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).
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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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, 2014 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 15,300,545 | $ | — | $ | 15,300,545 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 15,300,545 | $ | — | $ | 15,300,545 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the period ended September 30, 2014.
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, 2014, 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: 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
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 |
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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the period ended September 30, 2014, these fees were payable at annual rates ranging from .40 of 1% to .225 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the period ended September 30, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $29 from the sale of Class A 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 .20 of 1% per annum of the average daily net assets attributable to each Class of shares of the Fund for payments made by the Advisor to securities dealers and other financial institutions to obtain various shareholder and distribution related services. For the period ended September 30, 2014, 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 and shareholder services.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class A and Class I expenses do not exceed 0.70% and 0.50%, respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal period.
For the period ended September 30, 2014, the Advisor contractually waived or reimbursed certain class specific expenses and administrative fees of $34,718 for Class A shares and $60,755 for Class I shares, and voluntarily waived investment advisory fees and other fund level fees of $45,374.
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 period ended September 30, 2014, fees paid indirectly were $247.
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 and is included as Trustee Fees on the Statement of Operations.
The percentages of direct investments by affiliated Trustees, Officers, and the Advisor in the Fund are approximately 39.1%.
The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the period ended September 30, 2014, the Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $4,707,134 in purchases.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Period Ended September 30, 2014* | ||||||
Shares | Amount | |||||
Class A Shares | ||||||
Shares sold | 225,443 | $2,775,568 | ||||
Shares issued to shareholders in reinvestment of dividends | 326 | 4,025 | ||||
Shares repurchased | (2,876 | ) | (35,478) | |||
|
|
| ||||
Net increase (decrease) | 222,893 | $2,744,115 | ||||
|
|
| ||||
Class I Shares | ||||||
Shares sold | 1,087,886 | $13,402,490 | ||||
Shares issued to shareholders in reinvestment of dividends | 2,321 | 28,630 | ||||
Shares repurchased | (63,637 | ) | (785,906) | |||
|
|
| ||||
Net increase (decrease) | 1,026,570 | $12,645,214 | ||||
|
|
|
* | The Fund commenced operations on December 30, 2013. |
NOTE 5 – INVESTMENT TRANSACTIONS
For the period ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $13,250,296 and $406,710, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 15,266,558 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 44,727 | ||
Gross unrealized depreciation on a tax basis | (10,740 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 33,987 | ||
|
|
At September 30, 2014, the Fund had undistributed tax basis net tax-exempt income of $13. The Fund did not have any undistributed tax basis net ordinary income or undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the period ended September 30, 2014, are excludable by shareholders from gross income for federal income tax purposes.
The tax character of distributions paid during the period ended September 30, 2014, was $32,677 from net tax-exempt income.
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, 2014, and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
22 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 23
Thornburg Low Duration Municipal Fund
PER SHARE PERFORMANCE (for a share outstanding throughout the Period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||
Unless Noted, Fiscal Sept. 30, | Net Asset Value Beginning of Period | Net | Net Realized & Unrealized Gain (Loss) on Investments | Total from | Dividends from Net Investment Income | Dividends | Total Dividends | Net Value End of | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions And Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total | Portfolio | Net Assets AT End of Period (Thousands) | |||||||||||||||||||||||||||||||||
Class A Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||
2014(b)(c) | $ | 12.31 | 0.02 | 0.03 | 0.05 | (0.02 | ) | — | (0.02 | ) | $12.34 | 0.20 | (d) | 0.66 | (d) | 0.65 | (d) | 3.14 | (d) | 0.40 | 4.54 | $ | 2,751 | |||||||||||||||||||||||||
Class I Shares |
| |||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 12.31 | 0.04 | 0.03 | 0.07 | (0.04 | ) | — | (0.04 | ) | $12.34 | 0.42 | (d) | 0.44 | (d) | 0.44 | (d) | 1.77 | (d) | 0.56 | 4.54 | $ | 12,672 |
(a) | Not annualized for periods less than one year. |
(b) | Fund commenced operations on December 30, 2013. |
(c) | Sales loads are not reflected in computing total return. |
(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.
24 Certified Annual Report | Certified Annual Report 25 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Low Duration Municipal Fund
To the Trustees and Shareholders of
Thornburg Low Duration 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 Low Duration Municipal Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2014, the results of its operations, the changes in its net assets and the financial highlights for the period of December 30, 2013, (commencement of operations) through September 30, 2014, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at September 30, 2014 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
26 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
Beginning | Ending | Expenses Paid | ||||||||||
Account Value | Account Value | During Period† | ||||||||||
4/1/14 | 9/30/14 | 4/1/14–9/30/14 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,003.30 | $ | 3.34 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.74 | $ | 3.37 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,004.50 | $ | 2.18 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.90 | $ | 2.20 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.66%; I: 0.43%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 27
INDEX COMPARISON | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
Since Inception | ||||
A Shares (Incep: 12/30/13) | -1.13 | % | ||
I Shares (Incep: 12/30/13) | 0.56 | % |
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%. There is no sales charge for Class I shares.
28 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
Name, Age, Year Elected, Position Held with Fund | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 29
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
Name, Age, Year Elected, Position Held with Fund | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
30 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
Name, Age, Year Elected, Position Held with Fund | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 31
OTHER INFORMATION | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (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.
No proxy voting information is currently available because the Fund commenced operations on December 30, 2013. The Fund expects to begin making annual proxy voting information available in accordance with applicable regulations commencing on or before August 31, 2014. 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.
TAX INFORMATION
For the tax period ended September 30, 2014, dividends paid by the Fund of $32,677 (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 period ending December 31, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Low Duration Municipal Fund pursuant to an investment advisory agreement. The Trustees considered the renewal of this agreement for the first time since its initial approval in 2013 and determined to renew the agreement on September 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the period addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of personnel developed in formal and informal meetings throughout the period, the Advisor’s staffing and other resources, the Advisor’s performance of accounting and other services under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
32 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (among other information) quantitative measures of the Fund’s absolute and relative investment performance.
The Trustees noted that quarterly reports during the period and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data considered by the Trustees in their evaluation showed that the Fund’s annualized investment returns fell in the third quartile of performance of a mutual fund category in the three-month period ended with the second quarter of the current period and fell in the fourth quartile of performance for the year-to-date period. Other data showed that the Fund’s annualized returns fell near the midpoint of performance of a second fund category for the three-month period and fell in the third quartile of performance for the year-to-date period.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection considered certain factors, including other fees and expenses charged to the Fund, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectus. Data considered included comparisons of the Fund’s advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the advisory fee for the Fund, before fee waivers, was comparable to the median and average fee levels for the fund category, and that the level of total expense for a representative share class, after fee waivers and expense reimbursements, was comparable to the median and average expense levels for the category. Data for the peer group showed that the Fund’s advisory fee level before fee waivers was comparable to the peer group median, and that the total expense level for a representative share class of the Fund after waivers and reimbursements was comparable to the peer group median.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
The profitability of the Fund was not considered because of the recent inception of the Fund and absence of profitability to the Advisor.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
Certified Annual Report 33
OTHER INFORMATION, CONTINUED | ||
Thornburg Low Duration Municipal Fund | September 30, 2014 (Unaudited) |
The Trustees concluded, based upon their consideration of the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
34 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 35
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
36 This page is not part of the Annual Report
This page is not part of the Annual Report 37
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
38 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 39
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH3172 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
Best Short-Intermediate Municipal Debt Fund
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). In 2014, Class I shares won for the ten-year period ended 11/30/2013 among 29 funds. The Fund did not win the award for other time periods.
The information presented on the following pages is current as of September 30, 2014. 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. Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. The laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
Performance data given at net asset value (NAV) does not take into account applicable sales charges. If the sales charges had been included, the performance would have been lower.
Minimum investments for Class I shares are higher than those for other classes. Class I shares may not be available to all investors.
SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||
Class A | LTMFX | 885-215-459 | ||
Class C | LTMCX | 885-215-442 | ||
Class I | LTMIX | 885-215-434 |
Glossary
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.
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.
Personal Consumption Expenditure (PCE) Price Index – One measure of U.S. inflation that assesses the percentage change in prices of goods and services purchased by consumers throughout the economy. Of all the measures of consumer price inflation, the PCE price index covers the broadest set of goods and services.
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 (bp) – 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.
Credit Spread/Quality Spread – The difference between the yields of securities with different credit qualities.
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.
Fiscal Cliff – A combination of expiring tax cuts and across-the-board government spending cuts that were scheduled to become effective at the end of 2012. The idea behind the fiscal cliff was that if the federal government allowed these two events to proceed as planned, they would have a detrimental effect on an already shaky economy. At the same time, it was predicted that going over the fiscal cliff would significantly reduce the federal budget deficit.
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.
Participation Rate – The number of people who are either employed or are actively looking for work. The people who are no longer actively searching for work would not be included in the participation rate. During an economic recession, many workers often get discouraged and stop looking for employment, and as a result, the participation rate decreases.
Revenue Bond – A bond on which the debt service is payable solely from the revenue generated from the operation of the project being financed or a category of facilities, or from other non-tax sources.
SEC Yield – SEC yield is computed in accordance with SEC standards measuring the net investment income per share over a specified 30-day period expressed as a percentage of the maximum offering price of the Fund’s shares at the end of the period.
Yield Curve – A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.
This page is not part of the Annual Report 3
THORNBURG LIMITED TERM MUNICIPAL FUND
Laddering – an All Weather Strategy
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 these techniques to manage risk and pursue attractive returns:
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment and interest rate risk. |
• | 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. |
• | Investing on a cash-only basis without using leverage. |
Portfolio Managers
Josh Gonze Chris Ryon, CFA
Objectives and Strategies
The Fund’s primary investment objective is to obtain as high a level of current income exempt from federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital (may be subject to Alternative Minimum Tax).
The secondary goal of the Fund is to reduce expected changes in its share price compared to longer intermediate and long-term bond portfolios.
This Fund is a laddered portfolio of municipal bonds with an average maturity of normally less than five years. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year. Cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. We regard the strategy as a good compromise for managing different types of risk.
Long-Term Stability of Principal
Net Asset Value History of A Shares from September 28, 1984 through September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
A Shares (Incep: 9/28/84) | ||||||||||||||||||||
Without sales charge | 3.20 | % | 2.37 | % | 3.04 | % | 3.34 | % | 5.21 | % | ||||||||||
With sales charge | 1.65 | % | 1.85 | % | 2.74 | % | 3.19 | % | 5.16 | % |
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 0.71%, as disclosed in the most recent Prospectus.
30-Day Yields, A Shares
As of September 30, 2014
Annualized Distribution Yield | 1.56 | % | ||
SEC Yield | 0.56 | % |
Key Portfolio Attributes
As of September 30, 2014
Number of Bonds | 1,912 | |||
Effective Duration | 3.2 Yrs | |||
Average Maturity | 3.8 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 12.
4 This page is not part of the Annual Report
THORNBURG’S SUITE OF MUNICIPAL FUNDS
Municipal Funds for a Range of Interest-Rate Scenarios
At Thornburg, we often say that predicting interest rates is a fool’s game. And with the Federal Reserve still heavily involved in the markets, it’s even more difficult to forecast how rates may rise than when they may rise. Will long rates rise first and short rates follow? Will long and short rates climb simultaneously?
A traditional strategy to protect oneself against interest-rate risk is to move into shorter-duration bond strategies. But the seemingly counterintuitive response of moving to longer-duration strategies can sometimes yield better results.
Diversify Across the Yield Curve
This uncertainty points to why it’s important for investors to match their investment horizon to the duration of the strategy in which they’re invested, and to diversify assets across the yield curve.
For any interest-rate scenario, Thornburg’s comprehensive suite of municipal funds gives prudent investors the ability to diversify across the yield curve.
Diversify Across the Yield Curve with Thornburg Municipal Funds AAA General Obligation Municipal Yield Curve, as of September 30, 2014
| ![]() |
This page is not part of the Annual Report 5
Thornburg Limited Term Municipal Fund
September 30, 2014
7 | ||||
12 | ||||
48 | ||||
49 | ||||
50 | ||||
51 | ||||
56 | ||||
58 | ||||
59 | ||||
60 | ||||
61 | ||||
64 |
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 and the results of their operations for the period presented.
6 Certified Annual Report
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
October 17, 2014
Dear Fellow Shareholder:
We are pleased to present the annual report for the Thornburg Limited Term Municipal Fund (the Fund). The net asset value (NAV) of the Class A shares increased by 20 cents to $14.58 per share during the fiscal year ended September 30, 2014. If you were with us for the entire period, you received dividends of 25.7 cents per share. If you reinvested your dividends, you received 25.9 cents per share. Dividends were lower for Class C shares and higher for Class I shares, to account for varying class-specific expenses. The Class A shares underperformed the Fund’s benchmark index, with a 3.20% total return at NAV for the fiscal year ended September 30, 2014, compared to the 3.67% total return for the BofA Merrill Lynch 1-10 Year U.S. Municipal Securities Index. The Fund generated 2.06% more price return and 2.53% less income than its benchmark.
The market’s positive returns were driven primarily by falling interest rates. Another driver was narrowing credit spreads. In general, investors received smaller and smaller levels of yield for securities of lower credit quality with shorter maturity dates. Chart I shows credit spreads for various maturities of municipal bonds.
Drivers of the Fund’s price return relative to its benchmark are as follows: Interest-rate sensitivity, as measured by the Fund’s duration and differing allocations along the yield curve, subtracted 0.04% of price performance; sector allocations added 0.44% of relative price performance; and the Fund’s overweight to lower-credit-quality securities added 0.48% of price performance versus the benchmark. Other risk factors accounted for another 1.18% of relative price performance.
Interest-Rate Changes
As of the end of fiscal year 2013, many market observers predicted increasing interest rates. The fear of the Federal Reserve (the Fed) curtailing purchases of Treasury and mortgage-backed securities had roiled the markets, though the eventual fact of tapering did not begin until December 18, 2013. This was the backdrop against which rates rose through the end of December 2013. Chart II illustrates the changes in rates by maturity for each quarter of fiscal 2014.
Chart I | Quality Spreads: BBB Municipal Revenue Yields over AAA General Obligation Yields
as of 9/30/2014
Chart II | Changes in AAA General Obligation Municipal Yield Curve
9/30/2013 – 9/30/2014
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
This chart highlights a few interesting phenomena:
1. | Interest rates changed by varying amounts for different maturities, highlighting the potential benefits of a portfolio that is diversified by maturity. We believe investors benefit by owning several funds that provide different exposures to various maturity segments of the market. |
2. | In the quarter ended December 31, 2013, short and long interest rates declined and intermediate rates continued to rise. The fall in short-term rates was a market reaction to the fear of rising rates and investor desire to shed duration or interest-rate risk. The decline in long-term rates was driven by opportunistic investors who wished to take advantage of a significant difference between short- and long-term rates. |
3. | In the quarter ended March 31, 2014, short-term interest rates rose as long-term rates continued to decline. This was doubtless a reaction to the risk of possible Fed tightening and increases in short-term rates. |
4. | In the six-month period ended September 30, 2014, interest rates all along the yield curve declined, and longer-term rates continued to slide more than short-term rates. |
Table I shows selected changes in rates for the last two fiscal years. The table highlights that although interest rates have declined in fiscal 2014, they have yet to retrace the upswing seen in fiscal 2013. It is noteworthy that rates on the short end (one to five years) of the market have been virtually unchanged, depressed by the Fed’s delay in normalizing benchmark short-term rates.
Table I Yield Changes for the Last Two Fiscal Years
MATURITY | FISCAL YEAR ENDING 9/30/2013 | FISCAL YEAR ENDING 9/30/2014 | ||
1-Year | -0.02% | -0.03% | ||
5-Year | +0.62% | -0.03% | ||
10-Year | +0.83% | -0.32% | ||
30-Year | +1.43% | -1.08% | ||
Source: Bloomberg |
The Economy and the Federal Reserve Board
The U.S. economy has recently grown at an average rate of 2.0% as measured by gross domestic product (GDP), which is defined as the monetary value of all finished goods and services produced within a country’s borders over a specific time period. Many market participants believe that 2.0% GDP growth is suboptimal compared to rates in past recoveries, but the quarter ended December 31, 2013, produced a 3.5% growth rate and the quarter ended June 30, 2014, a 4.6% rate. Growth in the quarter ended March 31, 2014, was negative 2.1%; this anomaly has been attributed to weather effects.
Employment growth is another useful measure for gauging the health of the economy. The financial press highlights this as an area of focus for Fed Chair Janet Yellen. The economy has added approximately 220,000 jobs per month for the fiscal year. This growth has not come without volatility; only 84,000 jobs were added in December 2013 and 304,000 in April 2014. The unemployment rate has declined from 7.2% for the year ended September 30, 2013, to 5.9% as of September 30, 2014. This should make investors feel good about the economy, but other measures paint a mixed picture. One indicator is the U.S. labor force participation rate, which measures the size of the labor force as a percent of the working-age population. Since January 1990, this long-term average has been at 65.9%, but as of September 2014, the participation rate had declined to 62.7%. For fiscal year 2014, this measure has averaged 62.9%. Some economists and demographers attempt to explain the decline in the participation rate by the retirement of Baby Boomers, who have changed every demographic category they have passed through and have been referred to as “the pig in the python.” The thought that Baby Boomers would impact the labor force participation rate significantly enough to cause this decline is plausible, but we have seen no estimates of the effect.
The Fed began reducing purchases of U.S. Treasury and mortgage securities in December 2013 and will complete the process by October 2014. During 2013, the market’s anticipation of the Fed’s tapering its asset purchases sent long-term municipal yields up 1.43%. But in 2014, the reality of tapering (and other factors) sent long-term municipal yields down 1.08% . In its September 17, 2014, release, the Federal Open Market Committee (FOMC) stated:
8 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
Later, in a press conference, Chair Yellen added more color to the policy statement:
“Let me reiterate, however, that the Committee’s expectations for the path of the federal funds rate are contingent on the economic outlook. If the economy proves to be stronger than anticipated by the Committee, resulting in a more rapid convergence of employment and inflation to the FOMC’s objectives, then increases in the federal funds rate are likely to occur sooner and to be more rapid than currently envisaged. Conversely, if economic performance disappoints, increases in the federal funds rate are likely to take place later and to be more gradual.”
It is clear guidance like this that makes one long for Harry Truman’s “one-handed economist.” From all this, one can glean that the Fed will be “data dependent” (another term being thrown around in the financial press) in determining the future path of the federal funds rate (currently near zero).
Finally, let’s look at inflation. It is important to fixed-income investors because it is the primary determinant of future purchasing power. If inflation increases, the semi-annual coupon payment of most bonds carries less value in the economy. Inflation, as measured by core PCE (the Core Personal Consumption Expenditures Index, which is the Federal Reserve’s favored inflation measure) excludes volatile food and energy prices. Since September 2013, core PCE has increased from 1.33% to 1.47%, but this is still materially below the Fed’s inflation target of 2.00%. As 2014 prices of municipal bonds have risen and yields have declined, their after-inflation purchasing power has fallen. Chart III illustrates this point for a five-year AAA-rated general obligation bond.
Chart III shows that as of August 31, 2014, an investor in a five-year AAA general obligation bond received a real yield (the yield on a security after inflation is taken into account) of negative 0.33% . The yield failed to keep up with inflation, and the investor lost purchasing power. On August 31, a five-year AAA general obligation bond yielded 1.14%, with core PCE at 1.47%. As of September 30, 2014, a five-year AAA general obligation bond yielded 1.24%, with a real yield of negative 0.23%. The long-term average real yield of a five-year AAA general obligation bond is a mere 1.32%. These extremely low real yields are an important effect of the Fed’s keeping short-term rates very low.
Chart III | Five-Year AAA GO Real Yield (using Core PCE)
6/1/1994 – 8/31/2014
The Municipal Bond Market Credit Picture
The health of municipal market credit has generally been good, helped by GDP growth and increasing employment. But there have been some red flags recently. An August 2014 report from the Nelson A. Rockefeller Institute of Government at the State University of New York, “After Four Years of Uninterrupted Growth, Tax Revenues Decline in the First Quarter, and Preliminary Figures for the Second Quarter of 2014 Signal Further Declines in Personal Income Tax,” sums up certain observations:
Certified Annual Report 9
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
• | “State tax revenues declined by 0.3% in the first quarter of 2014. This is the first time state revenues declined after four years of uninterrupted growth.” |
• | “Personal income tax collections showed a decline of 1.2% in the first quarter of 2014. The decline in personal income tax collections appear to be primarily due to the mirror-image effect of the initial impact of the fiscal cliff on taxpayer behavior, which had driven tax collections upward a year ago.” |
• | “Year-to-date figures show 2.8% growth in overall state tax collections in the first three quarters of fiscal 2014 compared to the same period of 2013.” |
• | “Local property tax revenues grew by 1.9% in the first quarter, marking the eighth consecutive quarter of growth in nominal terms.” |
This data source tells us that overall state revenue is up but that there has been some decline in personal income tax collections that may be explained by individuals pushing income into last year to take advantage of lower personal income tax rates. We would raise a yellow flag at this indicator; this trend bears watching. The point about local property taxes growing should come as no surprise, as the real estate market has improved in many places. This is a very good development for local governments, because property taxes are their primary source of revenues. Not surprisingly, employment also shows positive growth. Only Alaska (off 0.95%) shows a decline for the period from August 2013 through August 2014 (the latest data available at this writing). The three states with the largest increases in employment are North Dakota (up 4.47%), Utah (up 3.53%), and Texas (up 3.63%).
One of the highest hurdles to the health of the state economies is the funding levels of their pension plans. For too long, elected officials have over-promised and under-delivered (especially when it came to making payments to pensions) to their employees, and until recently, markets have proven more of a headwind. On October 9, 2014, Bloomberg reported, “State Pension Gaps Shrink for the First Time Since 2007.” Let us caution all readers: the shrinkage is barely perceptible, but even that is better than a poke in the eye with a sharp stick.
“The median state system last year had 69.3% of the assets needed to meet promised benefits, up from 68.7% in 2012, according to data compiled by Bloomberg.”
This sounds like great news until one realizes the industrywide, minimum acceptable funding level is said to be 80%. Thirteen states met or exceeded this; the state with the lowest (some would say worst) level is Illinois with a funding level of 39.3%, down from 40.4% in 2012. We continue to avoid purchase of the general obligation bonds of the State of Illinois for this and other reasons, although we do own certain other credits within the state.
Overall, the state of the states’ economies and their respective credit pictures is healthy, but there are some exceptions. Illinois is one. Exceptions at other levels are the City of Detroit (in the process of exiting Chapter 9 protection) and Puerto Rico, which by all reports doesn’t know what it is doing. We do not own either credit!
The long and short of the Puerto Rico story:
• | In March 2014, the island issued $3.5 billion of general obligation bonds, mostly sold to hedge funds that “only wanted to help the island.” At the time, the island’s officials said this would give them enough cash to last for 18 months. |
• | In June 2014, the governor signed legislation allowing the island’s public corporations to “restructure” their debt, the Puerto Rico Electric Power Authority (PREPA) being the best known among them. |
• | Later in 2014, PREPA reached “forbearance” agreements with its creditors, calling for, among other things, a “Chief Restructuring Officer” (for an engagement fee of around $10 million, which is not bad work if you can get it). |
• | In September, the island’s financial officials announced a $900 million “tax and revenue anticipation” note deal that would be placed with banks who were forced to hold the vast majority of it and could not sell it. That figure was later raised to |
10 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
$1.2 billion. This was six months after the March sale! The yield on these securities is 7.75%; California issued a similar security earlier in the summer for 0.10%. Think there is a difference in the credit? |
Conclusion
We do not believe that the fixed income markets, and municipal bonds particularly, represent any great value at present; real yields are negative in some segments of the market, and very low in others. But we do not believe shareholders should undertake a wholesale rebalancing of portfolios either. It is important to re-evaluate why we own fixed-income products and municipal bonds: as part of a well-balanced, diversified portfolio. Recent volatility certainly demonstrates the potential benefits of these investments. Diversification is one of the best ways for shareholders to manage risk, not only between asset classes but in positioning within markets. And we believe municipal bond investors may benefit from diversifying along the municipal bond yield curve.
Many shareholders may soon ask themselves “what should I do if interest rates begin to rise?” We would suggest having faith in the structure of your portfolio. A portion of your laddered Fund’s bonds mature each year and become available for reinvestment at higher yields (see Chart IV); this has the potential to increase income to shareholders. When interest rates do rise, prices will generally decline, but the remaining bonds in the portfolio will move closer to maturity and should increase in price over time. We advise being patient when interest rates start to rise, lengthening your anticipated holding period.
Chart IV | Percent of Portfolio Maturing
We will continue to strive to manage your assets to fulfill the Fund’s objectives as set out in the prospectus.
Sincerely,
![]() | ![]() | |||
Christopher Ryon, CFA | Josh Gonze | |||
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 11
SCHEDULE OF INVESTMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
Summary of Security Credit Ratings†
We have used ratings from Standard & Poor’s (S&P). Where S&P ratings are not available, we have used Moody’s Investors Service. Where neither rating is available, we have used ratings from Fitch Ratings. The category of investments identified as “AAA” in this graph includes investments which are pre-refunded or escrowed to maturity. Such investments are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities to satisfy the timely payment of principal and interest and, therefore, are normally deemed to be equivalent to AAA-rated securities.
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
ALABAMA — 1.46% | ||||||||||
Alabama Public School & College Authority, 5.00% due 5/1/2015 (Education System Capital Improvements) | NR/Aa1 | $ | 8,530,000 | $ | 8,772,934 | |||||
Alabama Public School & College Authority, 5.00% due 5/1/2016 (Education System Capital Improvements) | AA/Aa1 | 5,000,000 | 5,369,650 | |||||||
Alabama Public School & College Authority, 5.00% due 6/1/2019 (Education System Capital Improvements) | AA/Aa1 | 4,840,000 | 5,677,078 | |||||||
Alabama Public School & College Authority, 5.00% due 6/1/2019 (Education System Capital Improvements) | AA/Aa1 | 770,000 | 903,172 | |||||||
Alabama Public School & College Authority, 5.00% due 6/1/2020 (Education System Capital Improvements) | AA/Aa1 | 5,085,000 | 6,048,252 | |||||||
Alabama Public School & College Authority, 5.00% due 6/1/2021 (Education System Capital Improvements) | AA/Aa1 | 5,335,000 | 6,404,347 | |||||||
Alabama Public School & College Authority, 5.00% due 6/1/2022 (Education System Capital Improvements) | AA/Aa1 | 5,605,000 | 6,754,137 | |||||||
Alabama Public School & College Authority, 5.00% due 6/1/2023 (Education System Capital Improvements) | AA/Aa1 | 735,000 | 891,606 | |||||||
Alabama State Board of Education, 3.00% due 5/1/2017 (Calhoun Community College) | NR/A1 | 2,070,000 | 2,159,942 | |||||||
Alabama State Board of Education, 3.00% due 5/1/2018 (Calhoun Community College) | NR/A1 | 2,130,000 | 2,234,796 | |||||||
Alabama State Board of Education, 4.00% due 5/1/2019 (Calhoun Community College) | NR/A1 | 2,195,000 | 2,393,187 | |||||||
Alabama State Board of Education, 4.00% due 5/1/2020 (Calhoun Community College) | NR/A1 | 1,000,000 | 1,092,490 | |||||||
Alabama State Board of Education, 4.00% due 5/1/2021 (Calhoun Community College) | NR/A1 | 1,000,000 | 1,087,420 | |||||||
Alabama State Board of Education, 4.00% due 5/1/2022 (Calhoun Community College) | NR/A1 | 1,230,000 | 1,333,185 | |||||||
City of Birmingham GO, 5.00% due 2/1/2015 (Government Services) | AA/Aa2 | 4,240,000 | 4,309,409 | |||||||
City of Birmingham GO, 4.00% due 8/1/2015 (Government Services) | AA/Aa2 | 3,005,000 | 3,101,190 | |||||||
City of Birmingham GO, 5.00% due 2/1/2016 (Government Services) | AA/Aa2 | 3,775,000 | 4,001,500 | |||||||
City of Birmingham GO, 4.00% due 8/1/2016 (Government Services) | AA/Aa2 | 3,645,000 | 3,871,500 | |||||||
City of Birmingham GO, 5.00% due 2/1/2017 (Government Services) | AA/Aa2 | 2,045,000 | 2,244,510 | |||||||
City of Birmingham GO, 4.00% due 8/1/2017 (Government Services) | AA/Aa2 | 2,760,000 | 3,001,031 | |||||||
City of Birmingham GO, 5.00% due 2/1/2018 (Government Services) | AA/Aa2 | 2,000,000 | 2,254,500 | |||||||
City of Mobile GO, 4.50% due 8/15/2016 (Senior Center) | NR/NR | 745,000 | 763,282 | |||||||
City of Mobile GO, 5.00% due 2/15/2019 (Capital Improvements) | A+/Aa2 | 2,000,000 | 2,259,920 | |||||||
City of Mobile Industrial Development Board PCR, 1.65% due 6/1/2034 put 3/20/2017 (Alabama Power Company Barry Plant Project) | A/A1 | 6,000,000 | 6,126,660 | |||||||
City of Mobile Industrial Development Board PCR, 5.00% due 6/1/2034 put 3/19/2015 (Alabama Power Company Barry Plant Project) | A/A1 | 6,000,000 | 6,120,720 | |||||||
East Alabama Health Care Authority GO, 5.00% due 9/1/2021 | A/NR | 1,245,000 | 1,438,759 | |||||||
East Alabama Health Care Authority GO, 5.00% due 9/1/2022 | A/NR | 800,000 | 918,304 | |||||||
Montgomery Waterworks and Sanitation, 5.00% due 9/1/2016 | AAA/Aa1 | 2,080,000 | 2,259,400 | |||||||
Montgomery Waterworks and Sanitation, 5.00% due 9/1/2019 | AAA/Aa1 | 3,375,000 | 3,847,601 | |||||||
University of Alabama at Birmingham Hospital, 5.25% due 9/1/2017 | A+/A1 | 2,500,000 | 2,811,575 | |||||||
University of Alabama at Birmingham Hospital, 5.00% due 9/1/2018 | A+/A1 | 1,700,000 | 1,943,746 | |||||||
ALASKA — 0.66% | ||||||||||
Alaska Housing Finance Corp. GO, 5.00% due 12/1/2018 (Insured: Natl-Re) | AA+/Aa2 | 2,000,000 | 2,244,360 | |||||||
Alaska Industrial Development & Export Authority, 5.00% due 4/1/2023 (Greater Fairbanks Community Hospital Foundation) | A/NR | 1,000,000 | 1,165,870 | |||||||
Alaska Industrial Development & Export Authority, 5.00% due 4/1/2024 (Greater Fairbanks Community Hospital Foundation) | A/NR | 1,000,000 | 1,156,640 | |||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2015 | AA+/Aa3 | 1,900,000 | 1,946,645 | |||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2016 | AA+/Aa3 | 1,100,000 | 1,175,306 | |||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2017 | AA+/Aa3 | 3,000,000 | 3,317,130 | |||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2018 | AA+/Aa3 | 2,455,000 | 2,788,143 | |||||||
City of Valdez, 5.00% due 1/1/2021 (BP Pipelines (Alaska), Inc. Project) | A/A2 | 3,700,000 | 4,344,503 | |||||||
City of Valdez, 5.00% due 1/1/2021 (BP Pipelines (Alaska), Inc. Project) | A/A2 | 12,000,000 | 14,090,280 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
North Slope Borough GO, 5.00% due 6/30/2015 (Insured: Natl-Re) | AA-/Aa3 | $ | 3,250,000 | $ | 3,368,105 | |||||
North Slope Borough GO, 5.00% due 6/30/2017 (Insured: Natl-Re) | AA-/Aa3 | 8,800,000 | 9,821,240 | |||||||
State of Alaska, 5.00% due 10/1/2017 (Alaska International Airports System; Insured: Natl-Re) | AA-/A1 | 1,115,000 | 1,213,399 | |||||||
ARIZONA — 2.80% | ||||||||||
Arizona Board of Regents COP, 5.00% due 7/1/2018 (Arizona State University; Insured: Natl-Re) | AA-/A1 | 1,285,000 | 1,416,815 | |||||||
Arizona Board of Regents COP, 3.00% due 9/1/2018 (Northern Arizona University Projects) | A/A2 | 1,000,000 | 1,062,880 | |||||||
Arizona Board of Regents COP, 5.00% due 7/1/2019 (Arizona State University; Insured: Natl-Re) | AA-/A1 | 3,735,000 | 4,121,983 | |||||||
Arizona Board of Regents COP, 3.00% due 9/1/2019 (Northern Arizona University Projects) | A/A2 | 2,525,000 | 2,675,919 | |||||||
Arizona Board of Regents COP, 5.00% due 9/1/2019 (Arizona State University) | AA-/A1 | 1,085,000 | 1,258,058 | |||||||
Arizona Board of Regents COP, 5.00% due 9/1/2020 (Northern Arizona University Projects) | A/A2 | 1,000,000 | 1,157,570 | |||||||
Arizona Board of Regents COP, 5.00% due 9/1/2020 (Arizona State University) | AA-/A1 | 3,170,000 | 3,705,350 | |||||||
Arizona Board of Regents COP, 5.00% due 9/1/2021 (Arizona State University) | AA-/A1 | 4,020,000 | 4,715,219 | |||||||
Arizona Board of Regents COP, 5.00% due 6/1/2022 (University of Arizona) | A+/Aa3 | 6,080,000 | 7,129,773 | |||||||
Arizona Board of Regents COP, 5.00% due 9/1/2022 (Northern Arizona University Projects) | A/A2 | 2,500,000 | 2,899,700 | |||||||
Arizona Board of Regents COP, 5.00% due 9/1/2022 (Arizona State University) | AA-/A1 | 4,380,000 | 5,143,828 | |||||||
Arizona Board of Regents COP, 5.00% due 9/1/2023 (Northern Arizona University Projects) | A/A2 | 3,325,000 | 3,807,391 | |||||||
Arizona Board of Regents COP, 5.00% due 9/1/2023 (Arizona State University) | AA-/A1 | 5,580,000 | 6,554,101 | |||||||
Arizona HFA, 5.25% due 1/1/2018 (Banner Health) | AA-/NR | 3,500,000 | 3,970,015 | |||||||
Arizona HFA, 5.00% due 7/1/2018 (Dignity Health) | A/A3 | 1,470,000 | 1,650,736 | |||||||
Arizona HFA, 5.00% due 7/1/2019 (Dignity Health) | A/A3 | 1,365,000 | 1,556,387 | |||||||
Arizona HFA, 5.00% due 7/1/2020 (Dignity Health) | A/A3 | 1,290,000 | 1,469,942 | |||||||
Arizona School Facilities Board, 5.00% due 7/1/2016 (State School Land Trust; Insured: AMBAC) | NR/NR | 5,775,000 | 6,196,286 | |||||||
Arizona School Facilities Board, 5.00% due 1/1/2017 pre-refunded 7/1/2015 (State School Improvement) | AAA/Aaa | 1,225,000 | 1,269,872 | |||||||
Arizona School Facilities Board, 5.00% due 7/1/2018 (State School Land Trust; Insured: AMBAC) | NR/NR | 4,040,000 | 4,561,928 | |||||||
Arizona School Facilities Board COP, 5.25% due 9/1/2023 (School Site and Building Projects) | A+/A1 | 1,315,000 | 1,507,319 | |||||||
Arizona Transportation Board, 5.00% due 7/1/2019 | AA+/Aa2 | 3,510,000 | 4,127,900 | |||||||
Arizona Transportation Board, 5.00% due 7/1/2021 | AA+/Aa2 | 7,465,000 | 8,969,720 | |||||||
Arizona Transportation Board, 5.00% due 7/1/2022 | AA+/Aa2 | 5,000,000 | 5,930,950 | |||||||
City of Tucson, 5.00% due 7/1/2022 | AA+/A1 | 2,135,000 | 2,504,953 | |||||||
City of Tucson GO, 3.625% due 7/1/2015 (Insured: Natl-Re) | AA-/Aa3 | 1,750,000 | 1,796,130 | |||||||
City of Yuma Municipal Property Corp., 5.00% due 7/1/2016 (Water and Wastewater System; Insured: Syncora) | A+/A1 | 2,000,000 | 2,149,180 | |||||||
City of Yuma Municipal Property Corp., 5.00% due 7/1/2018 (Water and Wastewater System; Insured: Syncora) | A+/A1 | 2,130,000 | 2,335,098 | |||||||
Deer Valley USD No. 97 of Maricopa County, 4.00% due 7/1/2015 (2004 School Improvement Project; Insured: AGM) | NR/Aa2 | 1,325,000 | 1,363,160 | |||||||
Glendale IDA, 5.00% due 5/15/2015 (Midwestern University) | A-/NR | 1,000,000 | 1,025,440 | |||||||
Glendale IDA, 5.00% due 5/15/2016 (Midwestern University) | A-/NR | 1,325,000 | 1,405,189 | |||||||
Glendale IDA, 5.00% due 5/15/2017 (Midwestern University) | A-/NR | 1,440,000 | 1,567,714 | |||||||
Maricopa County IDA Health Facilities, 4.125% due 7/1/2015 (Dignity Health) | A/A3 | 1,600,000 | 1,646,224 | |||||||
Maricopa County Public Finance Corp., 5.00% due 7/1/2024 (Insured: AMBAC) | AA+/Aa1 | 1,000,000 | 1,072,550 | |||||||
Mohave County IDA, 7.25% due 5/1/2015 (Mohave Prison LLC) | BBB+/NR | 6,265,000 | 6,416,488 | |||||||
Navajo County PCR, 5.75% due 6/1/2034 put 6/1/2016 (Arizona Public Service Co.) | A-/A3 | 9,700,000 | 10,489,774 | |||||||
Phoenix Union High School District No. 210 of Maricopa County GO, 4.00% due 7/1/2015 (2003 School Improvement Project; Insured: Natl-Re) | AA/Aa2 | 1,500,000 | 1,543,770 | |||||||
Pima County, 5.00% due 7/1/2015 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 1,400,000 | 1,451,170 | |||||||
Pima County, 5.00% due 7/1/2016 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 2,000,000 | 2,161,260 | |||||||
Pima County, 4.50% due 7/1/2017 (Ina & Roger Road Wastewater Reclamation Facilities; Insured: AGM) | AA/A2 | 5,040,000 | 5,569,956 | |||||||
Pima County, 5.00% due 7/1/2017 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 2,750,000 | 3,076,617 | |||||||
Pima County, 3.00% due 7/1/2018 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 500,000 | 538,080 | |||||||
Pima County, 5.00% due 7/1/2018 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 2,000,000 | 2,299,500 | |||||||
Pima County, 5.00% due 7/1/2018 (Ina & Roger Road Wastewater Reclamation Facilities; Insured: AGM) | AA/A2 | 5,000,000 | 5,748,750 | |||||||
Pima County, 5.00% due 7/1/2018 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 700,000 | 804,825 | |||||||
Pima County, 5.00% due 7/1/2020 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 500,000 | 593,680 | |||||||
Pima County, 3.00% due 7/1/2021 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 1,200,000 | 1,283,700 | |||||||
Pima County, 5.00% due 7/1/2021 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 400,000 | 478,380 | |||||||
Pima County, 3.00% due 7/1/2022 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 1,325,000 | 1,401,638 | |||||||
Pima County, 5.00% due 7/1/2022 (Ina & Roger Road Wastewater Reclamation Facilities) | AA-/NR | 500,000 | 599,880 | |||||||
Pima County COP, 3.00% due 12/1/2014 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 2,220,000 | 2,230,922 | |||||||
Pima County COP, 5.00% due 12/1/2015 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 1,250,000 | 1,319,538 | |||||||
Pima County COP, 5.00% due 12/1/2016 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 600,000 | 657,930 | |||||||
Pima County COP, 5.00% due 12/1/2017 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 1,395,000 | 1,575,011 | |||||||
Pima County COP, 5.00% due 12/1/2019 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 500,000 | 582,920 | |||||||
Pima County COP, 5.00% due 12/1/2020 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 765,000 | 896,534 | |||||||
Pima County COP, 5.00% due 12/1/2021 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 1,220,000 | 1,429,925 | |||||||
Pima County COP, 5.00% due 12/1/2022 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 1,275,000 | 1,494,160 | |||||||
Scottsdale IDA, 5.00% due 9/1/2019 (Scottsdale Healthcare) | A-/A2 | 6,885,000 | 7,759,464 | |||||||
State of Arizona COP, 5.00% due 10/1/2014 (Lease-Purchases-Various State Agency Properties; Insured: AGM) | AA/A1 | 10,175,000 | 10,176,424 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
State of Arizona Department of Administration, 5.00% due 7/1/2018 (State Lottery; Insured: AGM) | AA/A1 | $ | 8,370,000 | $ | 9,543,474 | |||||
State of Arizona Department of Administration, 5.00% due 7/1/2020 (State Lottery; Insured: AGM) | AA/A1 | 8,705,000 | 10,202,608 | |||||||
Town of Gilbert Public Facilities Municipal Property Corp., 3.00% due 7/1/2015 | AA/Aa2 | 1,080,000 | 1,101,740 | |||||||
ARKANSAS — 0.49% | ||||||||||
Arkansas Development Finance Authority, 2.00% due 12/1/2016 (State Dept. of Environmental Quality Project) | AA-/NR | 460,000 | 473,368 | |||||||
Board of Trustees of the University of Arkansas, 1.00% due 11/1/2014 (Fayetteville Campus Capital Projects) | NR/Aa2 | 295,000 | 295,236 | |||||||
Board of Trustees of the University of Arkansas, 2.00% due 9/15/2015 (Fayetteville Campus Athletic Facilities) | NR/Aa2 | 455,000 | 463,026 | |||||||
Board of Trustees of the University of Arkansas, 2.00% due 11/1/2015 (Fayetteville Campus Capital Projects) | NR/Aa2 | 375,000 | 382,399 | |||||||
Board of Trustees of the University of Arkansas, 2.00% due 11/1/2016 (Fayetteville Campus Capital Projects) | NR/Aa2 | 600,000 | 619,074 | |||||||
Board of Trustees of the University of Arkansas, 5.00% due 9/15/2019 (Fayetteville Campus Athletic Facilities) | NR/Aa2 | 600,000 | 651,498 | |||||||
City of Fort Smith, 3.00% due 10/1/2014 (Water and Sewer System Construction; Insured: AGM) | AA/NR | 1,000,000 | 1,000,080 | |||||||
City of Fort Smith, 3.50% due 10/1/2016 (Water and Sewer System Construction; Insured: AGM) | AA/NR | 1,370,000 | 1,450,104 | |||||||
City of Fort Smith, 3.50% due 10/1/2017 (Water and Sewer System Construction; Insured: AGM) | AA/NR | 1,930,000 | 2,081,601 | |||||||
City of Fort Smith, 4.00% due 10/1/2018 (Water and Sewer System Construction; Insured: AGM) | AA/NR | 1,000,000 | 1,111,580 | |||||||
City of Fort Smith, 4.00% due 10/1/2019 (Water and Sewer System Construction; Insured: AGM) | AA/NR | 1,670,000 | 1,871,318 | |||||||
Independence County PCR, 4.90% due 7/1/2022 (Entergy Mississippi, Inc.; Insured: AMBAC) | NR/A3 | 6,400,000 | 6,513,664 | |||||||
Jefferson County, 4.00% due 6/1/2015 (Jefferson Regional Medical Center; Insured: AGM) | AA/NR | 1,005,000 | 1,028,085 | |||||||
Jefferson County, 4.00% due 6/1/2016 (Jefferson Regional Medical Center; Insured: AGM) | AA/NR | 1,395,000 | 1,463,229 | |||||||
Jefferson County, 4.00% due 6/1/2017 (Jefferson Regional Medical Center; Insured: AGM) | AA/NR | 1,375,000 | 1,463,413 | |||||||
Jefferson County, 1.55% due 10/1/2017 (Entergy Arkansas, Inc. Project) | A-/A3 | 10,000,000 | 10,153,700 | |||||||
Jefferson County, 4.50% due 6/1/2018 (Jefferson Regional Medical Center; Insured: AGM) | AA/NR | 1,495,000 | 1,632,660 | |||||||
Jefferson County, 4.50% due 6/1/2019 (Jefferson Regional Medical Center; Insured: AGM) | AA/NR | 1,580,000 | 1,744,067 | |||||||
CALIFORNIA — 7.82% | ||||||||||
Alameda County COP, 5.00% due 12/1/2017 (Santa Rita Jail; Insured: AMBAC) | AA/NR | 1,220,000 | 1,374,159 | |||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2021 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | 1,000,000 | 1,199,720 | |||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2022 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | 2,000,000 | 2,408,820 | |||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2023 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | 3,200,000 | 3,880,032 | |||||||
Anaheim Public Financing Authority, 0% due 9/1/2022 (Public Improvements Project; Insured: AGM) | AA/A2 | 3,250,000 | 2,612,382 | |||||||
Brentwood Infrastructure, 2.00% due 11/1/2015 (Insured: AGM) | AA/NR | 520,000 | 527,072 | |||||||
Brentwood Infrastructure, 4.00% due 11/1/2016 (Insured: AGM) | AA/NR | 325,000 | 345,283 | |||||||
Brentwood Infrastructure, 5.00% due 11/1/2017 (Insured: AGM) | AA/NR | 965,000 | 1,070,571 | |||||||
Brentwood Infrastructure, 5.25% due 11/1/2018 (Insured: AGM) | AA/NR | 1,020,000 | 1,164,330 | |||||||
Brentwood Infrastructure, 5.25% due 11/1/2019 (Insured: AGM) | AA/NR | 725,000 | 840,913 | |||||||
Cabrillo USD GO, 0% due 8/1/2015 (Educational Facilities; Insured: AMBAC) | NR/NR | 1,000,000 | 995,930 | |||||||
Cabrillo USD GO, 0% due 8/1/2021 (Educational Facilities; Insured: AMBAC) | NR/NR | 1,000,000 | 816,980 | |||||||
California Educational Facilities Authority, 5.00% due 4/1/2017 (Pitzer College) | NR/A2 | 1,460,000 | 1,612,804 | |||||||
California Educational Facilities Authority, 5.00% due 4/1/2021 (Chapman University) | NR/A2 | 4,870,000 | 5,709,880 | |||||||
California HFFA, 5.50% due 2/1/2017 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | A/NR | 2,575,000 | 2,836,903 | |||||||
California HFFA, 5.50% due 2/1/2019 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | A/NR | 2,865,000 | 3,319,389 | |||||||
California HFFA, 5.75% due 2/1/2020 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | A/NR | 1,975,000 | 2,349,736 | |||||||
California HFFA, 5.00% due 3/1/2020 (Catholic HealthCare West Health Facilities) | A/A3 | 4,400,000 | 5,206,696 | |||||||
California HFFA, 5.75% due 2/1/2021 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | A/NR | 1,695,000 | 2,041,831 | |||||||
California HFFA, 5.00% due 3/1/2021 (Catholic HealthCare West Health Facilities) | A/A3 | 3,450,000 | 4,093,977 | |||||||
California HFFA, 5.25% due 3/1/2022 (Catholic HealthCare West Health Facilities) | A/A3 | 7,020,000 | 8,337,022 | |||||||
California HFFA, 5.00% due 7/1/2043 put 10/15/2020 (St. Joseph Health System) | AA-/A1 | 5,000,000 | 5,946,750 | |||||||
California Infrastructure & Economic Development Bank, 0.03% due 9/1/2037 put 10/1/2014 (Los Angeles County Museum of Natural History Foundation; LOC: Wells Fargo Bank N.A.) (daily demand notes) | AA-/Aa1 | 5,500,000 | 5,500,000 | |||||||
California Pollution Control Financing Authority, 0.02% due 11/1/2026 put 10/1/2014 (Pacific Gas & Electric Co.; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AA+/NR | 1,900,000 | 1,900,000 | |||||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: Natl-Re) | AA-/A1 | 570,000 | 572,434 | |||||||
California State Department of Water Resources, 5.00% due 5/1/2015 (Power Supply Program) | AA-/Aa2 | 5,000,000 | 5,142,700 | |||||||
California State Department of Water Resources, 5.00% due 5/1/2016 (Power Supply Program) | AA-/Aa2 | 5,000,000 | 5,372,950 | |||||||
California State Economic Recovery GO, 5.00% due 7/1/2018 | AA/Aa2 | 4,000,000 | 4,627,880 | |||||||
California State Economic Recovery GO, 5.00% due 7/1/2020 | AA/Aa2 | 4,200,000 | 4,956,420 | |||||||
California State Housing Finance Agency, 2.50% due 12/1/2017 (One Santa Fe Apartments-Multi Family Housing; Collateralized: GNMA) | NR/Aa1 | 1,725,000 | 1,751,996 | |||||||
California State Public Works Board, 5.00% due 9/1/2016 (Regents of University of California; Insured: Natl-Re) (ETM) | AA+/Aaa | 3,000,000 | 3,268,200 | |||||||
California State Public Works Board, 5.00% due 9/1/2017 (Regents of University of California; Insured: Natl-Re) (ETM) | AA+/Aaa | 3,000,000 | 3,382,950 | |||||||
California State Public Works Board, 5.00% due 11/1/2017 (California State University) | A-/Aa3 | 3,000,000 | 3,393,060 | |||||||
California State Public Works Board, 5.00% due 11/1/2018 (California State University) | A-/Aa3 | 2,700,000 | 3,127,734 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
California State Public Works Board, 5.00% due 4/1/2020 (Riverside Campus) | A-/A1 | $ | 1,585,000 | $ | 1,878,811 | |||||
California State Public Works Board, 5.00% due 6/1/2020 (Yuba City Courthouse) | A-/A1 | 1,675,000 | 1,991,123 | |||||||
California State Public Works Board, 5.00% due 6/1/2020 (Coalinga State Hospital) | A-/A1 | 5,685,000 | 6,757,930 | |||||||
California State Public Works Board, 5.00% due 10/1/2020 (California State University) | A-/A1 | 1,000,000 | 1,195,120 | |||||||
California State Public Works Board, 5.00% due 11/1/2020 (Various Capital Projects) | A-/A1 | 1,500,000 | 1,794,900 | |||||||
California State Public Works Board, 5.00% due 4/1/2021 (Riverside Campus) | A-/A1 | 890,000 | 1,065,570 | |||||||
California State Public Works Board, 5.00% due 6/1/2021 (Yuba City Courthouse) | A-/A1 | 1,250,000 | 1,499,888 | |||||||
California State Public Works Board, 5.00% due 6/1/2021 (Coalinga State Hospital) | A-/A1 | 5,000,000 | 5,999,550 | |||||||
California State Public Works Board, 5.00% due 10/1/2021 (Various Capital Projects) | A-/A1 | 1,000,000 | 1,204,910 | |||||||
California State Public Works Board, 5.00% due 11/1/2021 (Laboratory Facility and San Diego Courthouse) | A-/A1 | 750,000 | 904,538 | |||||||
California State Public Works Board, 5.00% due 11/1/2021 (Various Capital Projects) | A-/A1 | 1,750,000 | 2,110,588 | |||||||
California State Public Works Board, 5.00% due 4/1/2022 (California School for the Deaf Riverside Campus) | A-/A1 | 500,000 | 599,700 | |||||||
California State Public Works Board, 5.00% due 6/1/2022 (Coalinga State Hospital) | A-/A1 | 11,555,000 | 13,886,221 | |||||||
California State Public Works Board, 5.00% due 11/1/2022 (Laboratory Facility and San Diego Courthouse) | A-/A1 | 10,075,000 | 12,163,547 | |||||||
California State Public Works Board, 5.00% due 6/1/2023 (Yuba City Courthouse) | A-/A1 | 1,900,000 | 2,293,490 | |||||||
a California State Public Works Board, 5.00% due 11/1/2024 (Laboratory Facility and San Diego Courthouse) | A-/A1 | 2,050,000 | 2,463,567 | |||||||
California Statewide Communities Development Authority, 5.00% due 4/1/2019 (Kaiser Foundation Hospitals) | A+/NR | 27,000,000 | 31,490,910 | |||||||
California Statewide Communities Development Authority, 5.00% due 7/1/2020 (Aspire Public Schools; LOC: PCSD Guaranty Pool I, LLC) | NR/NR | 1,825,000 | 1,894,879 | |||||||
Castaic Lake Water Agency COP, 0% due 8/1/2023 (Water System Improvement; Insured: AMBAC) | AA/NR | 10,125,000 | 7,917,750 | |||||||
Castaic USD GO, 0% due 5/1/2018 (Insured: Natl-Re) | AA-/NR | 4,870,000 | 4,291,152 | |||||||
Central Valley Financing Authority, 5.00% due 7/1/2017 (Carson Ice) | AA-/A1 | 600,000 | 669,690 | |||||||
Central Valley Financing Authority, 5.00% due 7/1/2019 (Carson Ice) | AA-/A1 | 1,750,000 | 2,043,055 | |||||||
Chula Vista COP, 5.25% due 3/1/2018 | AA-/NR | 1,170,000 | 1,337,907 | |||||||
Chula Vista COP, 5.25% due 3/1/2019 | AA-/NR | 1,235,000 | 1,445,049 | |||||||
City and County of San Francisco GO, 5.00% due 6/15/2015 (Various Capital Projects) | AA+/Aa1 | 18,385,000 | 19,020,202 | |||||||
Clovis USD GO, 0% due 8/1/2019 (Insured: Natl-Re) | AA/A3 | 2,685,000 | 2,466,602 | |||||||
Community Facilities District No. 86-1 of the Irvine USD, 5.25% due 9/1/2018 (Insured: AGM) | AA/NR | 3,000,000 | 3,436,410 | |||||||
Community Facilities District No. 86-1 of the Irvine USD, 5.25% due 9/1/2019 (Insured: AGM) | AA/NR | 3,000,000 | 3,501,960 | |||||||
County of Los Angeles COP, 0% due 3/1/2017 (Disney Parking Garage and Walt Disney Concert Hall) | AA/A1 | 1,075,000 | 1,051,071 | |||||||
County of Los Angeles COP, 0% due 9/1/2017 (Disney Parking Garage and Walt Disney Concert Hall; Insured: AMBAC) | AA/A1 | 1,200,000 | 1,164,528 | |||||||
County of Orange Community Facilities District No. 86-1 of the Irvine USD, 5.25% due 9/1/2017 (Educational Facilities; Insured: AGM) | AA/NR | 5,000,000 | 5,593,900 | |||||||
Escondido Union High School District GO, 0% due 11/1/2020 (Insured: Natl-Re) | AA-/A3 | 2,655,000 | 2,283,273 | |||||||
Los Angeles Convention and Exhibition Center Authority, 5.00% due 8/15/2018 | A+/A2 | 2,295,000 | 2,630,116 | |||||||
Los Angeles County Public Works Financing Authority, 5.00% due 8/1/2018 (Multiple Capital Projects) | AA/A1 | 4,000,000 | 4,603,040 | |||||||
Los Angeles County Public Works Financing Authority, 5.00% due 8/1/2019 (Multiple Capital Projects) | AA/A1 | 17,935,000 | 21,032,016 | |||||||
Los Angeles USD COP, 5.00% due 10/1/2017 (Educational Facilities and Information Technology Infrastructure; Insured: AMBAC) | A+/A1 | 2,445,000 | 2,760,356 | |||||||
Los Angeles USD COP, 5.50% due 12/1/2018 (Educational Facilities and Information Technology Infrastructure) | A+/A1 | 4,600,000 | 5,428,000 | |||||||
Los Angeles USD COP, 5.50% due 12/1/2019 (Educational Facilities Improvements) | A+/A1 | 7,040,000 | 8,473,626 | |||||||
Los Angeles USD GO, 5.00% due 7/1/2018 pre-refunded 7/1/2017 (Educational Facilities Improvements; Insured: AGM) | AA/Aa2 | 4,000,000 | 4,482,080 | |||||||
Los Angeles USD GO, 5.00% due 7/1/2022 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 12,260,000 | 14,894,184 | |||||||
Los Angeles USD GO, 5.00% due 7/1/2023 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 11,950,000 | 14,600,629 | |||||||
Los Angeles USD GO, 5.00% due 7/1/2024 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 10,640,000 | 13,115,822 | |||||||
Monterey County COP, 5.00% due 8/1/2016 (Insured: AGM) | AA/A1 | 1,435,000 | 1,544,476 | |||||||
Monterey County COP, 5.00% due 8/1/2018 (Insured: AGM) | AA/A1 | 2,260,000 | 2,559,156 | |||||||
Mount San Antonio Community College GO, 0% due 8/1/2017 (Insured: Natl-Re) (ETM) | AA/Aa2 | 5,000,000 | 4,921,300 | |||||||
Needles USD GO, 0% due 8/1/2023 | AA-/A3 | 1,005,000 | 675,189 | |||||||
North City West School Facilities Financing Authority, 5.00% due 9/1/2023 (Carmel Valley Educational Facilities; Insured: AGM) | AA/NR | 4,545,000 | 5,234,431 | |||||||
Northern California Power Agency, 5.00% due 7/1/2017 (Hydroelectric Project) | A+/A1 | 1,000,000 | 1,121,990 | |||||||
Northern California Power Agency, 5.00% due 6/1/2018 (Lodi Energy Center) | A-/A2 | 4,480,000 | 5,152,269 | |||||||
Northern California Power Agency, 5.00% due 7/1/2019 (Hydroelectric Project) | A+/A1 | 1,000,000 | 1,176,040 | |||||||
Northern California Power Agency, 5.00% due 7/1/2020 (Hydroelectric Project) | A+/A1 | 1,325,000 | 1,534,655 | |||||||
Orange County Public Financing Authority, 5.00% due 7/1/2017 (Insured: Natl-Re) | AA-/Aa3 | 1,245,000 | 1,389,968 | |||||||
Palo Alto USD GO, 0% due 8/1/2019 | AAA/Aa1 | 1,000,000 | 931,530 | |||||||
Palomar Community College District GO, 0% due 8/1/2021 | AA-/Aa2 | 2,560,000 | 2,194,714 | |||||||
Redding Electrical Systems COP, 5.00% due 6/1/2020 (Insured: AGM) | NR/A2 | 3,955,000 | 4,493,908 | |||||||
Regents of the University of California, 5.00% due 5/15/2019 (Higher Education Facilities; Insured: AGM) | AA/Aa2 | 4,245,000 | 4,414,758 | |||||||
Rocklin USD GO, 0% due 8/1/2022 (Insured: Natl-Re) | AA-/Aa2 | 3,910,000 | 3,221,840 | |||||||
Sacramento City Financing Authority, 0% due 12/1/2019 (Merged Downtown & Oak Park; Insured: Natl-Re) | AA-/A3 | 2,920,000 | 2,609,224 | |||||||
Sacramento City Financing Authority, 0% due 12/1/2021 (Merged Downtown & Oak Park; Insured: Natl-Re) | AA-/A3 | 1,600,000 | 1,280,064 | |||||||
Sacramento City USD GO, 5.00% due 7/1/2021 (Educational Facilities Improvements) | A+/A1 | 3,265,000 | 3,892,206 | |||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2017 (Procter & Gamble) | AA-/A1 | 750,000 | 837,113 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2017 (Insured: AMBAC) | BBB-/NR | $ | 8,290,000 | $ | 8,556,441 | |||||
Sacramento Municipal Utility District, 5.00% due 7/1/2016 (Cosumnes Project; Insured: Natl-Re) | AA-/A3 | 4,870,000 | 5,215,526 | |||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2019 (Cosumnes Project; Insured: Natl-Re) | AA-/A3 | 5,000,000 | 5,374,200 | |||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2020 (Cosumnes Project; Insured: Natl-Re) | AA-/A3 | 8,675,000 | 9,297,344 | |||||||
San Diego Convention Center Expansion Financing Authority, 5.00% due 4/15/2020 | AA-/NR | 4,000,000 | 4,667,840 | |||||||
San Diego Convention Center Expansion Financing Authority, 5.00% due 4/15/2021 | AA-/NR | 3,000,000 | 3,518,850 | |||||||
San Diego Convention Center Expansion Financing Authority, 5.00% due 4/15/2022 | AA-/NR | 8,000,000 | 9,431,360 | |||||||
San Diego Redevelopment Agency, 4.50% due 9/1/2019 (Centre City Redevelopment; Insured: AMBAC) | NR/Baa3 | 1,240,000 | 1,280,970 | |||||||
San Diego USD GO, 5.50% due 7/1/2020 (Educational System Capital Projects; Insured: Natl-Re) | AA-/Aa3 | 10,000,000 | 12,098,500 | |||||||
San Francisco Bay Area Rapid Transit District, 5.00% due 7/1/2022 (Insured: Natl-Re) | AA+/Aa2 | 1,220,000 | 1,262,749 | |||||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: AGM) | AA/Aa2 | 7,600,000 | 6,851,172 | |||||||
San Jose Redevelopment Agency, 6.00% due 8/1/2015 (Insured: Natl-Re) | AA-/A3 | 2,780,000 | 2,904,461 | |||||||
San Juan USD GO, 0% due 8/1/2015 (Sacramento County Educational Facilities; Insured: AGM) | AA/Aa2 | 760,000 | 757,902 | |||||||
Santa Ana Financing Authority, 6.25% due 7/1/2018 (Police Administration & Holding Facility; Insured: Natl-Re) (ETM) | AA-/A3 | 2,017,500 | 2,406,635 | |||||||
Santa Ana Financing Authority, 6.25% due 7/1/2018 (Police Administration & Holding Facility; Insured: Natl-Re) | AA-/A3 | 2,017,500 | 2,365,055 | |||||||
Santa Ana USD GO, 0% due 8/1/2019 (Insured: Natl-Re) | AA-/A3 | 3,425,000 | 3,146,410 | |||||||
Santa Fe Springs Community Development Commission, 0% due 9/1/2024 (Consolidated Redevelopment Project; Insured: Natl-Re) | AA-/A3 | 7,000,000 | 4,899,090 | |||||||
Solano County COP, 5.00% due 11/15/2017 | AA-/A1 | 1,580,000 | 1,777,342 | |||||||
South San Francisco USD GO, 4.00% due 6/15/2018 (Educational Facilities) | SP-1+/NR | 5,130,000 | 5,707,843 | |||||||
Southeast Resource Recovery Facilities Authority, 5.25% due 12/1/2017 (Insured: AMBAC) | A+/A2 | 2,000,000 | 2,008,200 | |||||||
State of California GO, 4.75% due 4/1/2018 (Various Purposes) | A/Aa3 | 1,250,000 | 1,419,063 | |||||||
State of California GO, 5.00% due 9/1/2020 (Various Purposes) | A/Aa3 | 10,000,000 | 11,966,700 | |||||||
State of California GO, 5.00% due 9/1/2021 (Various Purposes) | A/Aa3 | 5,000,000 | 6,036,450 | |||||||
State of California GO, 0.03% due 5/1/2033 put 10/1/2014 (School Improvements; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 3,800,000 | 3,800,000 | |||||||
State of California GO, 0.01% due 5/1/2034 put 10/1/2014 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa1 | 10,650,000 | 10,650,000 | |||||||
State of California GO, 0.02% due 5/1/2034 put 10/1/2014 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa1 | 8,250,000 | 8,250,000 | |||||||
State of California GO, 0.03% due 5/1/2034 put 10/1/2014 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa1 | 2,100,000 | 2,100,000 | |||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2018 | AA-/A2 | 2,000,000 | 2,258,120 | |||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2019 | AA-/A2 | 2,000,000 | 2,306,060 | |||||||
Tustin Community Redevelopment Agency, 4.00% due 9/1/2017 (Tustin Redevelopment) | A/NR | 935,000 | 1,012,577 | |||||||
Tustin Community Redevelopment Agency, 4.00% due 9/1/2019 (Tustin Redevelopment) | A/NR | 1,010,000 | 1,116,999 | |||||||
Tustin Community Redevelopment Agency, 4.00% due 9/1/2020 (Tustin Redevelopment) | A/NR | 1,050,000 | 1,148,595 | |||||||
Ventura County COP, 5.00% due 8/15/2016 | AA+/Aa3 | 1,520,000 | 1,644,579 | |||||||
Ventura County COP, 5.25% due 8/15/2017 | AA+/Aa3 | 1,635,000 | 1,839,146 | |||||||
West Contra Costa USD GO, 0% due 8/1/2022 (Educational Facilities Projects; Insured: AGM) | AA/Aa3 | 4,000,000 | 3,265,560 | |||||||
West Covina Redevelopment Agency, 6.00% due 9/1/2022 (Fashion Plaza) | AA+/NR | 6,180,000 | 7,337,947 | |||||||
COLORADO — 2.59% | ||||||||||
Adams County Platte Valley Medical Center, 5.00% due 2/1/2015 (Brighton Community Hospital Association; Insured: Natl-Re/FHA) (ETM) | AA-/NR | 1,475,000 | 1,498,851 | |||||||
Adams County Platte Valley Medical Center, 5.00% due 8/1/2015 (Brighton Community Hospital Association; Insured: Natl-Re/FHA) (ETM) | AA-/NR | 1,505,000 | 1,565,230 | |||||||
Beacon Point Metropolitan District, 4.375% due 12/1/2015 (LOC: Compass Bank) | BBB/NR | 70,000 | 70,270 | |||||||
Castle Oaks Metropolitan District GO, 6.125% due 12/1/2035 pre-refunded 12/1/2015 | NR/NR | 1,428,000 | 1,522,205 | |||||||
City & County of Denver Airport System, 5.00% due 11/15/2016 (Insured: Natl-Re) | AA-/A1 | 1,725,000 | 1,887,236 | |||||||
City & County of Denver Airport System, 5.00% due 11/15/2017 (Insured: Natl-Re) | AA-/A1 | 1,000,000 | 1,129,200 | |||||||
City & County of Denver Airport System, 0.20% due 11/15/2025 put 10/1/2014 (Denver International Airport; Insured: AGM; SPA: Morgan Stanley Bank) (daily demand notes) | AA/A1 | 11,710,000 | 11,710,000 | |||||||
City & County of Denver Airport System, 0.20% due 11/15/2025 put 10/1/2014 (Denver International Airport; Insured: AGM; SPA: Morgan Stanley Bank) (daily demand notes) | AA/A1 | 700,000 | 700,000 | |||||||
City & County of Denver COP, 5.00% due 12/1/2020 (Buell Theatre Property) | AA+/Aa1 | 3,065,000 | 3,609,375 | |||||||
City & County of Denver COP, 5.00% due 12/1/2021 (Buell Theatre Property) | AA+/Aa1 | 3,825,000 | 4,525,319 | |||||||
City & County of Denver COP, 5.00% due 12/1/2023 (Buell Theatre Property) | AA+/Aa1 | 1,720,000 | 2,055,933 | |||||||
City & County of Denver COP, 0.04% due 12/1/2029 put 10/1/2014 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 25,340,000 | 25,340,000 | |||||||
City & County of Denver COP, 0.04% due 12/1/2029 put 10/1/2014 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 3,745,000 | 3,745,000 | |||||||
City & County of Denver COP, 0.04% due 12/1/2031 put 10/1/2014 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 37,895,000 | 37,895,000 | |||||||
City & County of Denver GO, 3.00% due 8/1/2015 (Civic Facilities and Denver Zoological Gardens Improvements) | AAA/Aaa | 720,000 | 737,237 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
City & County of Denver School District No. 1 COP, 4.00% due 12/15/2016 (Eastbridge Elementary and Conservatory Green K-8 Schools) | NR/Aa3 | $ | 350,000 | $ | 375,554 | |||||
City & County of Denver School District No. 1 COP, 4.00% due 12/15/2019 (Eastbridge Elementary and Conservatory Green K-8 Schools) | NR/Aa3 | 400,000 | 445,500 | |||||||
City & County of Denver School District No. 1 COP, 4.00% due 12/15/2020 (Eastbridge Elementary and Conservatory Green K-8 Schools) | NR/Aa3 | 600,000 | 668,220 | |||||||
City & County of Denver School District No. 1 COP, 5.00% due 12/15/2021 (Eastbridge Elementary and Conservatory Green K-8 Schools) | NR/Aa3 | 1,000,000 | 1,173,870 | |||||||
City & County of Denver School District No. 1 COP, 5.00% due 12/15/2022 (Eastbridge Elementary and Conservatory Green K-8 Schools) | NR/Aa3 | 1,030,000 | 1,211,414 | |||||||
City & County of Denver School District No. 1 COP, 5.00% due 12/15/2023 (Eastbridge Elementary and Conservatory Green K-8 Schools) | NR/Aa3 | 1,180,000 | 1,396,023 | |||||||
City of Longmont, 6.00% due 5/15/2019 | AA+/NR | 3,215,000 | 3,858,032 | |||||||
Colorado Department of Corrections COP, 5.00% due 3/1/2016 (Colorado Penitentiary II Project) (ETM) | AA-/Aa2 | 2,000,000 | 2,131,960 | |||||||
Colorado Department of Corrections COP, 5.00% due 3/1/2017 (Colorado Penitentiary II Project) (ETM) | AA-/Aa2 | 2,000,000 | 2,213,820 | |||||||
Colorado Department of Corrections COP, 5.00% due 3/1/2018 (Colorado Penitentiary II Project) (ETM) | AA-/Aa2 | 1,590,000 | 1,814,460 | |||||||
Colorado Department of Corrections COP, 5.00% due 3/1/2019 pre-refunded 3/1/2016 (Colorado Penitentiary II Project; Insured: AMBAC) | AA-/Aa2 | 4,930,000 | 5,255,281 | |||||||
Colorado Educational & Cultural Facilities Authority, 5.00% due 6/1/2016 (National Conference of State Legislatures) | A/A3 | 1,475,000 | 1,568,441 | |||||||
Colorado Educational & Cultural Facilities Authority, 5.00% due 6/1/2018 (National Conference of State Legislatures) | A/A3 | 1,625,000 | 1,813,711 | |||||||
Colorado Educational & Cultural Facilities Authority, 5.00% due 6/1/2020 (National Conference of State Legislatures) | A/A3 | 1,805,000 | 2,067,176 | |||||||
Colorado Educational & Cultural Facilities Authority, 5.00% due 6/1/2021 (National Conference of State Legislatures) | A/A3 | 1,000,000 | 1,144,810 | |||||||
Colorado HFA, 5.00% due 11/15/2015 (Adventist Health/Sunbelt Group) | AA-/Aa2 | 2,365,000 | 2,489,044 | |||||||
Colorado HFA, 5.25% due 5/15/2017 (Northern Colorado Medical Center; Insured: AGM) | AA/NR | 1,185,000 | 1,323,218 | |||||||
Colorado HFA, 5.25% due 5/15/2019 (Northern Colorado Medical Center; Insured: AGM) | AA/NR | 2,225,000 | 2,608,813 | |||||||
Colorado HFA, 5.50% due 10/1/2038 put 11/12/2015 (Catholic Health Initiatives) | A+/A1 | 1,000,000 | 1,057,510 | |||||||
Colorado HFA, 5.00% due 7/1/2039 put 11/11/2014 (Catholic Health Initiatives) | A+/A1 | 3,000,000 | 3,016,260 | |||||||
Denver Convention Center Hotel Authority, 5.25% due 12/1/2014 (Insured: Syncora) | BBB-/Baa3 | 3,450,000 | 3,475,633 | |||||||
Denver Convention Center Hotel Authority, 5.25% due 12/1/2021 (Insured: Syncora) | BBB-/Baa3 | 3,700,000 | 3,890,402 | |||||||
Denver Convention Center Hotel Authority, 5.25% due 12/1/2022 (Insured: Syncora) | BBB-/Baa3 | 1,100,000 | 1,151,986 | |||||||
Denver West Metropolitan District GO, 5.00% due 12/1/2021 (Insured: AGM) | AA/NR | 2,175,000 | 2,539,878 | |||||||
El Paso County COP, 4.00% due 12/1/2021 (Pikes Peak Regional Development Center) | AA-/Aa2 | 1,000,000 | 1,106,510 | |||||||
El Paso County COP, 5.00% due 12/1/2023 (Pikes Peak Regional Development Center) | AA-/Aa2 | 1,330,000 | 1,565,809 | |||||||
Park Creek Metropolitan District, 5.00% due 12/1/2015 (Insured: AGM) | AA/NR | 1,000,000 | 1,047,450 | |||||||
Park Creek Metropolitan District, 5.00% due 12/1/2016 (Insured: AGM) | AA/NR | 1,035,000 | 1,118,525 | |||||||
Park Creek Metropolitan District, 5.00% due 12/1/2017 (Insured: AGM) | AA/NR | 1,525,000 | 1,681,907 | |||||||
Park Creek Metropolitan District, 5.50% due 12/1/2018 (Insured: AGM) | AA/NR | 1,200,000 | 1,370,172 | |||||||
Park Creek Metropolitan District, 5.50% due 12/1/2019 (Insured: AGM) | AA/NR | 1,000,000 | 1,153,490 | |||||||
Regents of the University of Colorado COP, 5.00% due 11/1/2016 (UCDHSC Fitzsimons Academic Facilities) | AA-/Aa2 | 700,000 | 765,639 | |||||||
Regents of the University of Colorado COP, 5.00% due 11/1/2017 (UCDHSC Fitzsimons Academic Facilities) | AA-/Aa2 | 850,000 | 960,628 | |||||||
Regional Transportation District COP, 5.00% due 6/1/2018 (FasTracks Transportation System) | A/Aa3 | 1,750,000 | 1,990,013 | |||||||
Regional Transportation District COP, 5.00% due 6/1/2019 (FasTracks Transportation System) | A/Aa3 | 4,730,000 | 5,464,522 | |||||||
Regional Transportation District COP, 5.00% due 6/1/2020 (FasTracks Transportation System) | A/Aa3 | 3,655,000 | 4,246,233 | |||||||
Regional Transportation District COP, 5.50% due 6/1/2021 (FasTracks Transportation System) | A/Aa3 | 2,370,000 | 2,789,537 | |||||||
Regional Transportation District COP, 5.00% due 6/1/2023 (North Metro Rail Line) | A/Aa3 | 4,000,000 | 4,751,880 | |||||||
Regional Transportation District COP, 5.00% due 6/1/2024 (North Metro Rail Line) | A/Aa3 | 4,000,000 | 4,712,400 | |||||||
Southlands Metropolitan District GO, 6.75% due 12/1/2016 pre-refunded 12/1/2014 | AA+/NR | 500,000 | 505,260 | |||||||
CONNECTICUT — 0.70% | ||||||||||
Capital City EDA, 5.00% due 6/15/2015 (Adriaen’s Landing Convention Center; Insured: AGM) | AA/A2 | 1,705,000 | 1,711,906 | |||||||
City of West Haven GO, 4.00% due 8/1/2018 (Insured: AGM) | AA/A2 | 2,080,000 | 2,267,387 | |||||||
Connecticut Health & Educational Facilities Authority, 0.02% due 7/1/2036 put 10/1/2014 (Yale University) (daily demand notes) | AAA/Aaa | 7,975,000 | 7,975,000 | |||||||
Connecticut Health & Educational Facilities Authority, 0.02% due 7/1/2036 put 10/1/2014 (Yale University) (daily demand notes) | AAA/Aaa | 800,000 | 800,000 | |||||||
Connecticut Housing Finance Authority, 0.04% due 11/15/2036 put 10/1/2014 (Multifamily Residential Housing; SPA: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aaa | 3,995,000 | 3,995,000 | |||||||
Connecticut Housing Finance Authority, 0.04% due 5/15/2039 put 10/1/2014 (Mutifamily Residential Housing; SPA: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aaa | 18,630,000 | 18,630,000 | |||||||
State of Connecticut GO, 5.00% due 6/1/2019 (General State Capital Projects; Insured: AGM) | AA/Aa3 | 2,865,000 | 3,083,972 | |||||||
State of Connecticut GO Floating Rate Note, 0.81% due 9/15/2018 (General State Capital Projects) | AA/Aa3 | 725,000 | 734,722 | |||||||
State of Connecticut GO Floating Rate Note, 0.69% due 9/15/2024 (Education Capital Projects) | AA/Aa3 | 10,000,000 | 10,097,100 | |||||||
DISTRICT OF COLUMBIA — 0.65% | ||||||||||
District of Columbia, 4.00% due 4/1/2015 (National Public Radio) (ETM) | AA-/Aa3 | 1,000,000 | 1,019,160 | |||||||
District of Columbia, 5.00% due 4/1/2016 (National Public Radio) (ETM) | AA-/Aa3 | 685,000 | 732,327 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
District of Columbia, 4.00% due 4/1/2017 (National Public Radio) | AA-/Aa3 | $ | 1,830,000 | $ | 1,979,584 | |||||
District of Columbia, 5.00% due 4/1/2018 (National Public Radio) | AA-/Aa3 | 1,745,000 | 1,984,048 | |||||||
District of Columbia, 5.00% due 4/1/2019 (National Public Radio) | AA-/Aa3 | 805,000 | 932,770 | |||||||
District of Columbia, 5.00% due 4/1/2020 (National Public Radio) | AA-/Aa3 | 1,890,000 | 2,219,332 | |||||||
District of Columbia COP, 5.25% due 1/1/2015 (St. Elizabeth Hospital Lease; Insured: Natl-Re) (ETM) | AA-/Aa3 | 3,125,000 | 3,165,406 | |||||||
District of Columbia COP, 5.25% due 1/1/2016 (St. Elizabeth Hospital Lease; Insured: Natl-Re) (ETM) | AA-/Aa3 | 4,700,000 | 4,991,306 | |||||||
District of Columbia COP, 5.00% due 1/1/2018 pre-refunded 1/1/2016 (St. Elizabeth Hospital Lease; Insured: Natl-Re) | AA-/Aa3 | 5,000,000 | 5,294,250 | |||||||
District of Columbia COP, 5.00% due 1/1/2019 pre-refunded 1/1/2016 (St. Elizabeth Hospital Lease; Insured: Natl-Re) | AA-/Aa3 | 5,000,000 | 5,294,250 | |||||||
District of Columbia COP, 4.50% due 1/1/2021 pre-refunded 1/1/2016 (St. Elizabeth Hospital Lease; Insured: Natl-Re) | AA-/Aa3 | 1,100,000 | 1,157,860 | |||||||
District of Columbia GO, 6.00% due 6/1/2018 (Insured: Natl-Re) | AA/Aa2 | 5,000,000 | 5,903,050 | |||||||
District of Columbia GO, 5.25% due 6/1/2020 (Insured: Syncora) | AA/Aa2 | 3,005,000 | 3,598,638 | |||||||
District of Columbia Housing Finance Agency, 5.00% due 7/1/2015 (Housing Authority Modernization Program; Insured: AGM) | AA/A2 | 1,480,000 | 1,529,846 | |||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2014 (Dulles Toll Road; Insured: AGM) | AA/A3 | 2,000,000 | 1,999,980 | |||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2016 (Dulles Toll Road; Insured: AGM) | AA/A3 | 4,000,000 | 3,883,960 | |||||||
FLORIDA — 6.77% | ||||||||||
Broward County, 5.00% due 10/1/2014 (Airport, Marina & Port Improvements; Insured: AMBAC) (ETM) | NR/A1 | 1,625,000 | 1,625,211 | |||||||
Broward County, 5.00% due 10/1/2014 (Airport, Marina & Port Improvements; Insured: AMBAC) | A+/A1 | 2,375,000 | 2,375,332 | |||||||
Broward County, 5.00% due 9/1/2017 (Port Facilities) | A-/A2 | 2,820,000 | 3,104,792 | |||||||
Broward County, 4.00% due 10/1/2017 (Airport, Marina & Port Improvements) | A+/A1 | 500,000 | 547,530 | |||||||
Broward County, 5.00% due 10/1/2017 (Airport, Marina & Port Improvements) | A+/A1 | 1,000,000 | 1,124,680 | |||||||
Broward County, 5.50% due 9/1/2018 (Port Facilities) | A-/A2 | 3,500,000 | 3,996,370 | |||||||
Broward County, 4.00% due 10/1/2018 (Airport, Marina & Port Improvements) | A+/A1 | 425,000 | 472,422 | |||||||
Broward County, 5.00% due 10/1/2018 (Airport, Marina & Port Improvements) | A+/A1 | 500,000 | 575,300 | |||||||
Broward County, 5.50% due 9/1/2019 (Port Facilities) | A-/A2 | 2,800,000 | 3,255,392 | |||||||
Broward County, 5.00% due 10/1/2019 (Airport, Marina & Port Improvements) | A+/A1 | 1,000,000 | 1,168,060 | |||||||
Broward County, 4.00% due 10/1/2020 (Airport, Marina & Port Improvements) | A+/A1 | 1,660,000 | 1,851,381 | |||||||
Broward County, 5.00% due 10/1/2020 (Airport, Marina & Port Improvements) | A+/A1 | 2,000,000 | 2,364,140 | |||||||
Broward County School Board COP, 5.25% due 7/1/2015 (Insured: AGM) | AA/A1 | 3,035,000 | 3,150,209 | |||||||
Broward County School Board COP, 5.00% due 7/1/2016 (Insured: AGM) | AA/A1 | 1,495,000 | 1,611,700 | |||||||
Broward County School Board COP, 5.25% due 7/1/2016 (Insured: AGM) | AA/A1 | 7,630,000 | 8,258,788 | |||||||
Broward County School Board COP, 5.25% due 7/1/2016 (Insured: AGM) | AA/A1 | 3,715,000 | 4,021,153 | |||||||
Broward County School Board COP, 5.00% due 7/1/2017 (Insured: Natl-Re) | AA-/A1 | 1,000,000 | 1,116,150 | |||||||
Broward County School Board COP, 5.00% due 7/1/2021 | A/A1 | 4,000,000 | 4,715,760 | |||||||
Broward County School Board COP, 5.00% due 7/1/2022 | A/A1 | 4,580,000 | 5,433,849 | |||||||
Capital Projects Finance Authority, 5.50% due 10/1/2015 (University of Central Florida Apartment Student Housing; Insured: Natl-Re) | AA-/A3 | 2,660,000 | 2,660,878 | |||||||
City of Fort Myers, 5.00% due 12/1/2018 (Gulf Breeze Loan Program; Insured: Natl-Re) | AA-/Aa3 | 2,195,000 | 2,450,542 | |||||||
City of Fort Myers, 5.00% due 10/1/2023 (Utility Systems Capital Projects) | A/Aa3 | 3,360,000 | 3,912,989 | |||||||
City of Hollywood, 5.00% due 10/1/2014 (Water and Sewer Improvements; Insured: AGM) | NR/Aa2 | 1,300,000 | 1,300,182 | |||||||
City of Hollywood Community Redevelopment Agency, 5.00% due 3/1/2016 (Beach Community Redevelopment Project; Insured: Syncora) | NR/A3 | 2,000,000 | 2,101,900 | |||||||
City of Hollywood Community Redevelopment Agency, 5.00% due 3/1/2017 (Beach Community Redevelopment Project; Insured: Syncora) | NR/A3 | 2,000,000 | 2,154,180 | |||||||
City of Hollywood Community Redevelopment Agency, 5.00% due 3/1/2024 (Beach Community Redevelopment Project; Insured: Syncora) | NR/A3 | 4,850,000 | 5,091,627 | |||||||
City of Jacksonville, 5.00% due 10/1/2017 | AA-/Aa3 | 1,000,000 | 1,127,860 | |||||||
City of Jacksonville, 5.00% due 10/1/2018 | AA-/Aa3 | 1,050,000 | 1,213,264 | |||||||
City of Jacksonville, 5.00% due 10/1/2019 | AA-/Aa3 | 500,000 | 588,255 | |||||||
City of Jacksonville, 5.00% due 10/1/2020 | AA-/Aa3 | 1,000,000 | 1,188,970 | |||||||
City of Jacksonville, 5.00% due 10/1/2023 | AA-/Aa3 | 1,105,000 | 1,326,221 | |||||||
City of Lakeland, 6.05% due 10/1/2014 (Energy System; Insured: AGM) | AA/Aa3 | 3,750,000 | 3,750,600 | |||||||
City of Lakeland, 4.00% due 11/15/2014 (Lakeland Regional Health Systems) | NR/A2 | 1,000,000 | 1,004,680 | |||||||
City of Lakeland, 5.00% due 10/1/2016 (Energy System; Insured: AGM) | AA/Aa3 | 9,780,000 | 10,644,552 | |||||||
City of Lakeland, 5.00% due 10/1/2017 (Energy System; Insured: AGM) | AA/Aa3 | 7,105,000 | 7,981,828 | |||||||
City of Lakeland, 5.00% due 10/1/2019 (Energy System; Insured: AGM) | AA/Aa3 | 5,000,000 | 5,852,150 | |||||||
City of Lakeland, 5.00% due 11/15/2019 (Lakeland Regional Health Systems) | NR/A2 | 5,655,000 | 6,365,777 | |||||||
City of Lakeland, 5.00% due 10/1/2020 (Energy System; Insured: AGM) | AA/Aa3 | 1,695,000 | 2,003,609 | |||||||
City of Miami, 5.00% due 1/1/2018 (Street & Sidewalk Improvement Program; Insured: Natl-Re) | AA-/A2 | 1,970,000 | 2,195,368 | |||||||
City of North Miami Beach, 5.00% due 8/1/2017 (North Miami Beach Water Project) | A+/NR | 750,000 | 833,070 | |||||||
City of North Miami Beach, 3.00% due 8/1/2018 (North Miami Beach Water Project) | A+/NR | 1,280,000 | 1,358,925 | |||||||
City of North Miami Beach, 5.00% due 8/1/2019 (North Miami Beach Water Project) | A+/NR | 1,650,000 | 1,901,014 | |||||||
City of North Miami Beach, 5.00% due 8/1/2020 (North Miami Beach Water Project) | A+/NR | 780,000 | 906,204 | |||||||
City of North Miami Beach, 5.00% due 8/1/2021 (North Miami Beach Water Project) | A+/NR | 1,000,000 | 1,167,470 | |||||||
City of Port St. Lucie, 5.00% due 9/1/2015 (Tesoro Special Assessment District; Insured: Natl-Re) | NR/A1 | 250,000 | 260,360 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
City of Port St. Lucie, 1.70% due 7/1/2016 (Tesoro Special Assessment District) | NR/A1 | $ | 2,140,000 | $ | 2,163,048 | |||||
City of Port St. Lucie, 1.875% due 7/1/2017 (Tesoro Special Assessment District; Insured: AGM) | NR/A1 | 2,175,000 | 2,200,056 | |||||||
City of Port St. Lucie, 2.00% due 7/1/2018 (Tesoro Special Assessment District; Insured: AGM) | NR/A1 | 2,215,000 | 2,239,033 | |||||||
City of Tampa, 5.00% due 11/15/2016 (BayCare Health System) | NR/Aa2 | 2,855,000 | 3,129,423 | |||||||
City of Tampa, 5.00% due 11/15/2017 (BayCare Health System) | NR/Aa2 | 1,215,000 | 1,370,775 | |||||||
Collier County, 4.00% due 10/1/2014 | AA/Aa2 | 1,410,000 | 1,410,155 | |||||||
Escambia County HFA, 5.25% due 11/15/2014 (Ascension Health Credit) | AA+/Aa2 | 1,835,000 | 1,846,689 | |||||||
Flagler County School Board COP, 5.00% due 8/1/2015 (Insured: AGM) | AA/A2 | 1,500,000 | 1,557,090 | |||||||
Florida Atlantic University Financing Corp., 5.00% due 7/1/2015 (Innovation Village Capital Improvements) | A/A1 | 2,395,000 | 2,479,184 | |||||||
Florida Atlantic University Financing Corp., 5.00% due 7/1/2016 (Innovation Village Capital Improvements) | A/A1 | 2,275,000 | 2,444,260 | |||||||
Florida Department of Management Services, 5.25% due 9/1/2016 (Insured: AGM) | AA+/Aa2 | 3,500,000 | 3,809,855 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2015 (Nova Southeastern University) | BBB/Baa1 | 2,150,000 | 2,193,688 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2016 (Nova Southeastern University) | BBB/Baa1 | 2,345,000 | 2,475,874 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.25% due 4/1/2017 (Nova Southeastern University) | BBB/Baa1 | 1,325,000 | 1,444,727 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.25% due 4/1/2018 (Nova Southeastern University) | BBB/Baa1 | 2,630,000 | 2,933,397 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2019 (University of Tampa) | BBB+/NR | 1,225,000 | 1,375,209 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2019 (Nova Southeastern University) | BBB/Baa1 | 1,035,000 | 1,161,912 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.50% due 4/1/2019 (Nova Southeastern University) | BBB/Baa1 | 1,705,000 | 1,950,486 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2020 (Nova Southeastern University) | BBB/Baa1 | 1,030,000 | 1,166,156 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2022 (University of Tampa) | BBB+/NR | 620,000 | 706,118 | |||||||
Florida State Board of Governors, 4.00% due 7/1/2020 (University System Capital Improvements) | AA/Aa2 | 4,055,000 | 4,587,827 | |||||||
Florida State Board of Governors, 4.00% due 7/1/2021 (University System Capital Improvements) | AA/Aa2 | 4,215,000 | 4,780,695 | |||||||
Florida State Board of Governors, 4.00% due 7/1/2022 (University System Capital Improvements) | AA/Aa2 | 4,385,000 | 4,969,871 | |||||||
Florida State Correctional Privatization Commission COP, 5.00% due 8/1/2015 (Insured: AMBAC) | AA+/Aa2 | 2,000,000 | 2,008,260 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2014 | AA+/NR | 905,000 | 905,109 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2015 | AA+/NR | 925,000 | 963,387 | |||||||
Florida State Department of Transportation GO, 5.00% due 7/1/2018 | AAA/Aa1 | 3,000,000 | 3,365,550 | |||||||
Highlands County HFA, 5.00% due 11/15/2015 (Adventist Health System Sunbelt Group) | AA-/Aa2 | 1,000,000 | 1,052,740 | |||||||
Highlands County HFA, 5.00% due 11/15/2016 (Adventist Health System Sunbelt Group) | AA-/Aa2 | 1,000,000 | 1,095,220 | |||||||
Highlands County HFA, 5.00% due 11/15/2017 (Adventist Health System Sunbelt Group) | AA-/Aa2 | 3,200,000 | 3,610,272 | |||||||
Highlands County HFA, 5.00% due 11/15/2017 (Adventist Health System Sunbelt Group) | AA-/Aa2 | 1,000,000 | 1,052,700 | |||||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health System Sunbelt Group) | AA-/Aa2 | 3,000,000 | 3,505,170 | |||||||
Highlands County HFA, 5.00% due 11/15/2035 pre-refunded 11/15/2015 (Adventist Health System Sunbelt Group) | AA-/Aa2 | 1,225,000 | 1,290,758 | |||||||
Hillsborough County, 5.00% due 3/1/2015 (Water and Wastewater System Capital Improvements; Insured: Natl-Re) | AA-/A1 | 5,000,000 | 5,092,000 | |||||||
Hillsborough County, 5.00% due 11/1/2016 (Transportation Related Capital Improvements; Insured: AMBAC) | AA/A1 | 1,000,000 | 1,091,800 | |||||||
Hillsborough County, 5.00% due 11/1/2018 (Court Facilities) | AA/A1 | 4,210,000 | 4,838,048 | |||||||
Hillsborough County, 5.00% due 11/1/2019 (Court Facilities) | AA/A1 | 4,420,000 | 5,154,162 | |||||||
Hillsborough County, 5.00% due 11/1/2020 (Court Facilities) | AA/A1 | 4,645,000 | 5,448,260 | |||||||
Hillsborough County, 5.00% due 11/1/2021 (Jail and Storm Water Projects) | AA/A1 | 2,300,000 | 2,701,074 | |||||||
Hillsborough County, 5.00% due 11/1/2021 (Court Facilities) | AA/A1 | 4,880,000 | 5,730,974 | |||||||
Hillsborough County, 5.00% due 11/1/2022 (Jail and Storm Water Projects) | AA/A1 | 3,005,000 | 3,539,349 | |||||||
Hillsborough County IDA, 5.65% due 5/15/2018 (Tampa Electric Co.) | BBB+/A2 | 3,200,000 | 3,670,272 | |||||||
Hillsborough County School Board COP, 5.25% due 7/1/2017 (Educational Facilities; Insured: Natl-Re) | AA-/Aa2 | 1,300,000 | 1,456,039 | |||||||
Hillsborough County School Board COP, 0.04% due 7/1/2030 put 10/1/2014 (Educational Facilities and Equipment; Insured: Natl-Re; LOC: Wells Fargo Bank N.A.) (daily demand notes) | AA-/Aa2 | 500,000 | 500,000 | |||||||
Jacksonville Economic Development Commission, 6.00% due 9/1/2017 (Florida Proton Therapy Institute) | NR/NR | 2,885,000 | 3,236,826 | |||||||
JEA, 4.00% due 10/1/2016 (Electric System) | A+/Aa3 | 3,540,000 | 3,795,057 | |||||||
JEA, 5.00% due 10/1/2018 (Water and Sewer Systems) | AA/Aa2 | 1,500,000 | 1,732,905 | |||||||
JEA, 5.00% due 10/1/2023 (Electric System) | A+/Aa3 | 1,395,000 | 1,675,521 | |||||||
JEA, 5.00% due 10/1/2024 (Electric System) | A+/Aa3 | 1,200,000 | 1,437,828 | |||||||
Kissimmee Utility Authority, 5.25% due 10/1/2016 (Electrical Systems; Insured: AGM) | NR/A1 | 1,700,000 | 1,851,249 | |||||||
Manatee County, 5.00% due 10/1/2016 (County Capital Projects) | NR/Aa2 | 1,000,000 | 1,091,240 | |||||||
Manatee County, 5.00% due 10/1/2018 (County Capital Projects) | NR/Aa2 | 2,400,000 | 2,773,176 | |||||||
Manatee County, 5.00% due 10/1/2021 (County Capital Projects) | NR/Aa2 | 2,775,000 | 3,331,027 | |||||||
Marion County Hospital District, 5.00% due 10/1/2015 (Munroe Regional Health Systems) (ETM) | NR/NR | 1,000,000 | 1,047,650 | |||||||
Miami Beach GO, 4.00% due 9/1/2019 | AA+/Aa2 | 2,745,000 | 3,069,624 | |||||||
Miami Beach GO, 5.00% due 9/1/2020 | AA+/Aa2 | 3,720,000 | 4,383,127 | |||||||
Miami Beach GO, 4.00% due 9/1/2021 | AA+/Aa2 | 1,015,000 | 1,137,876 | |||||||
Miami Beach GO, 5.00% due 9/1/2022 | AA+/Aa2 | 1,000,000 | 1,168,060 | |||||||
Miami-Dade County, 5.00% due 10/1/2014 (Water and Sewer System; Insured: BHAC) | AA+/Aa1 | 1,070,000 | 1,070,139 | |||||||
Miami-Dade County, 0% due 10/1/2015 (Professional Sports Franchise Facilities; Insured: AGM) | AA/A1 | 3,845,000 | 3,814,125 | |||||||
Miami-Dade County, 0% due 10/1/2016 (Professional Sports Franchise Facilities; Insured: AGM) | AA/A1 | 3,535,000 | 3,437,894 | |||||||
Miami-Dade County, 0% due 10/1/2017 (Professional Sports Franchise Facilities; Insured: AGM) | AA/A1 | 2,435,000 | 2,304,679 | |||||||
Miami-Dade County, 0% due 10/1/2018 (Professional Sports Franchise Facilities; Insured: AGM) | AA/A1 | 5,385,000 | 4,958,831 | |||||||
Miami-Dade County, 0% due 10/1/2019 (Professional Sports Franchise Facilities; Insured: AGM) | AA/A1 | 2,170,000 | 1,921,557 | |||||||
Miami-Dade County Educational Facilities Authority GO, 5.00% due 4/1/2016 (University of Miami; Insured: AMBAC) | A-/A3 | 3,000,000 | 3,188,310 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Miami-Dade County Expressway Authority, 5.00% due 7/1/2019 (Toll System; Insured: AGM) | AA/A2 | $ | 7,530,000 | $ | 8,726,969 | |||||
b Miami-Dade County Expressway Authority, 5.00% due 7/1/2024 (Toll System) | A-/A3 | 2,000,000 | 2,388,260 | |||||||
b Miami-Dade County Expressway Authority, 5.00% due 7/1/2025 (Toll System) | A-/A3 | 2,000,000 | 2,371,320 | |||||||
Miami-Dade County GO, 5.25% due 7/1/2018 (Building Better Communities) | AA/Aa2 | 5,040,000 | 5,796,756 | |||||||
Miami-Dade County School Board COP, 5.00% due 10/1/2015 (Insured: AMBAC) | A/A1 | 1,000,000 | 1,047,280 | |||||||
Miami-Dade County School Board COP, 5.00% due 5/1/2016 (Insured: Natl-Re) | AA-/A1 | 4,065,000 | 4,351,176 | |||||||
Miami-Dade County School Board COP, 5.00% due 10/1/2016 (Insured: AMBAC) | A/A1 | 1,000,000 | 1,087,150 | |||||||
Miami-Dade County School Board COP, 5.00% due 5/1/2031 put 5/1/2024 (Educational Facilities Improvements) | A/A1 | 2,425,000 | 2,821,318 | |||||||
Miami-Dade County School Board COP, 5.00% due 5/1/2032 put 5/1/2016 (Educational Facilities Improvements) | A/A1 | 6,000,000 | 6,405,900 | |||||||
Miami-Dade County School District GO, 5.375% due 8/1/2015 (Insured: AGM) | AA/Aa3 | 5,130,000 | 5,353,206 | |||||||
Orange County HFA, 5.00% due 10/1/2014 (Orlando Health, Inc.) | A/A3 | 2,790,000 | 2,790,363 | |||||||
Orange County HFA, 5.00% due 10/1/2015 (Orlando Health, Inc.) | A/A3 | 500,000 | 523,410 | |||||||
Orange County HFA, 6.25% due 10/1/2016 (Orlando Health, Inc.; Insured: Natl-Re) | AA-/A3 | 1,585,000 | 1,660,398 | |||||||
Orange County HFA, 5.00% due 10/1/2017 (Orlando Health, Inc.) | A/A3 | 1,980,000 | 2,209,324 | |||||||
Orange County HFA, 5.25% due 10/1/2019 (Orlando Health, Inc.) | A/A3 | 6,050,000 | 7,030,039 | |||||||
Orange County HFA, 6.25% due 10/1/2021 (Orlando Health, Inc.; Insured: Natl-Re) | AA-/A3 | 1,870,000 | 2,203,197 | |||||||
Orange County HFA, 5.375% due 10/1/2023 (Orlando Health, Inc.) | A/A3 | 4,150,000 | 4,738,719 | |||||||
Orlando and Orange County Expressway Authority, 8.25% due 7/1/2016 (Insured: Natl-Re/FGIC/IBC) | AA-/A2 | 3,000,000 | 3,400,230 | |||||||
Palm Beach County HFA, 5.00% due 12/1/2020 (Boca Raton Regional Hospital) | BBB/NR | 600,000 | 688,350 | |||||||
Palm Beach County School Board COP, 5.00% due 8/1/2018 (Educational Facilities Master Lease Program) | NR/Aa3 | 800,000 | 918,272 | |||||||
Palm Beach County School Board COP, 4.00% due 8/1/2019 (Educational Facilities Master Lease Program) | NR/Aa3 | 940,000 | 1,054,332 | |||||||
Palm Beach County School Board COP, 5.00% due 8/1/2020 (Educational Facilities Master Lease Program) | NR/Aa3 | 1,090,000 | 1,288,631 | |||||||
Palm Beach County School Board COP, 4.00% due 8/1/2021 (Educational Facilities Master Lease Program) | NR/Aa3 | 3,835,000 | 4,309,926 | |||||||
Palm Beach County School Board COP, 5.00% due 8/1/2022 (Educational Facilities Master Lease Program) | NR/Aa3 | 1,660,000 | 1,985,045 | |||||||
Palm Beach County School Board COP, 5.00% due 8/1/2023 (Educational Facilities Master Lease Program) | NR/Aa3 | 3,500,000 | 4,215,435 | |||||||
Palm Beach County School Board COP, 5.00% due 8/1/2024 (Educational Facilities Master Lease Program) | NR/Aa3 | 3,595,000 | 4,372,563 | |||||||
Palm Beach County School Board COP, 5.00% due 8/1/2032 put 8/1/2016 (Educational Facilities Master Lease Program) | NR/Aa3 | 1,300,000 | 1,401,660 | |||||||
Polk County, 4.00% due 10/1/2020 (Water and Wastewater Utility Systems; Insured: AGM) | A+/Aa3 | 3,100,000 | 3,484,493 | |||||||
Polk County, 3.00% due 10/1/2021 (Water and Wastewater Utility Systems; Insured: AGM) | A+/Aa3 | 3,125,000 | 3,295,781 | |||||||
Polk County, 5.00% due 10/1/2023 (Water and Wastewater Utility Systems) | A+/Aa3 | 1,420,000 | 1,679,434 | |||||||
Putnam County Development Authority PCR, 5.35% due 3/15/2042 put 5/1/2018 (Seminole Project; Insured: AMBAC) | A-/A3 | 10,000,000 | 11,422,200 | |||||||
Putnam County Development Authority PCR, 5.35% due 3/15/2042 put 5/1/2018 (Seminole Project; Insured: AMBAC) | A-/A3 | 4,165,000 | 4,744,768 | |||||||
Reedy Creek Improvement District, 5.00% due 10/1/2014 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 460,000 | 460,060 | |||||||
Reedy Creek Improvement District, 5.00% due 10/1/2017 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 400,000 | 448,160 | |||||||
Reedy Creek Improvement District, 5.00% due 10/1/2018 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 755,000 | 864,082 | |||||||
Reedy Creek Improvement District, 5.00% due 10/1/2021 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 1,200,000 | 1,402,956 | |||||||
Reedy Creek Improvement District, 5.00% due 10/1/2022 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 625,000 | 728,450 | |||||||
Reedy Creek Improvement District, 5.00% due 6/1/2023 (Buena Vista Drive Corridor Improvements) | A+/Aa3 | 1,940,000 | 2,332,074 | |||||||
Reedy Creek Improvement District, 5.00% due 10/1/2023 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 750,000 | 875,790 | |||||||
School Board of Alachua County COP, 5.00% due 7/1/2022 (Educational Facilities) | A+/Aa3 | 1,600,000 | 1,863,760 | |||||||
School Board of Alachua County COP, 5.00% due 7/1/2023 (Educational Facilities) | A+/Aa3 | 2,250,000 | 2,636,617 | |||||||
School Board of Lake County COP, 5.25% due 6/1/2017 (Insured: AMBAC) | A/NR | 2,000,000 | 2,232,600 | |||||||
School Board of Lake County COP, 5.25% due 6/1/2018 (Insured: AMBAC) | A/NR | 1,475,000 | 1,690,512 | |||||||
South Broward Hospital District, 5.00% due 5/1/2020 (Insured: Natl-Re) | AA-/Aa3 | 7,260,000 | 7,740,249 | |||||||
South Florida Water Management District COP, 5.00% due 10/1/2015 (Everglades Restoration Plan; Insured: AMBAC) | AA/Aa3 | 1,000,000 | 1,045,470 | |||||||
South Florida Water Management District COP, 5.00% due 10/1/2023 (Everglades Restoration Plan; Insured: AMBAC) | AA/Aa3 | 500,000 | 542,030 | |||||||
South Miami HFA, 5.00% due 8/15/2016 (Baptist Health) | AA/Aa2 | 4,985,000 | 5,408,027 | |||||||
South Miami HFA, 5.00% due 8/15/2017 (Baptist Health) | AA/Aa2 | 4,610,000 | 5,164,168 | |||||||
St. Petersburg HFA, 5.50% due 11/15/2015 (All Children’s Hospital; Insured: AMBAC) | NR/A1 | 1,995,000 | 2,003,818 | |||||||
St. Petersburg HFA, 5.50% due 11/15/2016 (All Children’s Hospital; Insured: AMBAC) | NR/A1 | 1,980,000 | 1,988,752 | |||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2021 (Insured: AGM) | AA/Aa3 | 5,000,000 | 5,806,800 | |||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2021 (Miami-Dade County Program) | AA-/Aa3 | 1,450,000 | 1,704,141 | |||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2022 (Miami-Dade County Program) | AA-/Aa3 | 2,000,000 | 2,363,460 | |||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2023 (Miami-Dade County Program) | AA-/Aa3 | 2,100,000 | 2,500,701 | |||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2024 (Miami-Dade County Program) | AA-/Aa3 | 1,725,000 | 2,031,084 | |||||||
Tampa Bay Regional Water Supply Authority, 5.00% due 10/1/2017 | AA+/Aa2 | 5,615,000 | 6,331,137 | |||||||
Tampa Bay Regional Water Supply Authority, 5.00% due 10/1/2018 | AA+/Aa2 | 2,890,000 | 3,341,823 | |||||||
Tampa Bay Regional Water Supply Authority, 5.00% due 10/1/2019 | AA+/Aa2 | 3,000,000 | 3,535,110 | |||||||
Tampa Sports Authority, 5.75% due 10/1/2015 (Tampa Bay Arena; Insured: Natl-Re) | AA-/A3 | 335,000 | 340,752 | |||||||
University of Central Florida Athletics Association, Inc. COP, 5.00% due 10/1/2016 (Insured: Natl-Re) | AA-/A3 | 1,640,000 | 1,696,252 | |||||||
University of North Florida Foundation, Inc., 0.04% due 5/1/2028 put 10/1/2014 (Parking System; LOC: Wachovia Bank N.A.) (daily demand notes) | AA-/NR | 400,000 | 400,000 | |||||||
Volusia County Educational Facility Authority, 5.00% due 10/15/2016 (Embry-Riddle; Insured: AGM) | AA/A2 | 2,320,000 | 2,522,327 | |||||||
Volusia County Educational Facility Authority, 4.00% due 10/15/2017 (Embry-Riddle; Insured: AGM) | AA/A2 | 1,030,000 | 1,123,060 | |||||||
Volusia County Educational Facility Authority, 5.00% due 10/15/2018 (Embry-Riddle; Insured: AGM) | AA/A2 | 2,075,000 | 2,375,107 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Volusia County Educational Facility Authority, 5.00% due 10/15/2019 (Embry-Riddle; Insured: AGM) | AA/A2 | $ | 2,350,000 | $ | 2,724,049 | |||||
Volusia County School Board COP, 5.00% due 8/1/2024 (Master Lease Program) | NR/Aa3 | 1,000,000 | 1,185,610 | |||||||
GEORGIA — 2.03% | ||||||||||
Athens-Clarke County Unified Government Development Authority, 3.00% due 6/15/2015 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 3,575,000 | 3,641,781 | |||||||
Athens-Clarke County Unified Government Development Authority, 3.00% due 12/15/2015 (UGAREF Coverdell Building, LLC) | NR/Aa2 | 670,000 | 690,703 | |||||||
Athens-Clarke County Unified Government Development Authority, 3.00% due 6/15/2016 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 300,000 | 311,745 | |||||||
Athens-Clarke County Unified Government Development Authority, 4.00% due 6/15/2017 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 495,000 | 535,531 | |||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2019 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 400,000 | 459,880 | |||||||
Athens-Clarke County Unified Government Development Authority, 4.00% due 6/15/2020 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 395,000 | 437,079 | |||||||
Athens-Clarke County Unified Government Development Authority, 0.04% due 8/1/2033 put 10/1/2014 (University of Georgia Athletic Association; LOC: Wells Fargo Bank N.A.) (daily demand notes) | NR/Aa3 | 700,000 | 700,000 | |||||||
City of Atlanta, 5.50% due 11/1/2014 (Water & Wastewater System; Insured: Natl-Re) | AA-/Aa3 | 3,000,000 | 3,013,980 | |||||||
City of Atlanta, 5.50% due 11/1/2015 (Water & Wastewater System; Insured: Natl-Re) | AA-/Aa3 | 4,000,000 | 4,229,880 | |||||||
City of Atlanta, 5.00% due 1/1/2016 (Hartsfield-Jackson Atlanta International Airport) | NR/A1 | 1,495,000 | 1,583,564 | |||||||
City of Atlanta, 5.00% due 11/1/2016 (Water & Wastewater System; Insured: AGM) | AA/Aa3 | 3,215,000 | 3,516,471 | |||||||
City of Atlanta, 5.50% due 11/1/2016 (Water & Wastewater System; Insured: Natl-Re) | AA-/Aa3 | 8,215,000 | 9,070,510 | |||||||
City of Atlanta, 5.25% due 12/1/2016 (Atlantic Station Project; Insured: AGM) | AA/A3 | 3,650,000 | 3,967,331 | |||||||
City of Atlanta, 5.00% due 11/1/2017 (Water & Wastewater System; Insured: AGM) | AA/Aa3 | 4,745,000 | 5,362,562 | |||||||
City of Atlanta, 5.00% due 1/1/2018 (Hartsfield-Jackson Atlanta International Airport) | NR/A1 | 2,100,000 | 2,381,883 | |||||||
City of Atlanta, 5.00% due 1/1/2019 (Hartsfield-Jackson Atlanta International Airport) | NR/Aa3 | 3,145,000 | 3,641,816 | |||||||
City of Atlanta, 6.00% due 11/1/2019 (Water & Wastewater System) | A+/Aa3 | 5,650,000 | 6,915,091 | |||||||
City of Atlanta, 5.00% due 1/1/2020 (Hartsfield-Jackson Atlanta International Airport) | NR/A1 | 6,000,000 | 7,060,140 | |||||||
City of Atlanta, 5.25% due 1/1/2020 (Hartsfield-Jackson Atlanta International Airport) | NR/Aa3 | 5,000,000 | 5,926,900 | |||||||
City of Atlanta, 5.00% due 1/1/2021 (Hartsfield-Jackson Atlanta International Airport) | NR/A1 | 7,000,000 | 8,202,040 | |||||||
City of Atlanta, 5.50% due 1/1/2021 (Hartsfield-Jackson Atlanta International Airport) | NR/Aa3 | 3,525,000 | 4,265,074 | |||||||
City of Atlanta, 5.00% due 1/1/2023 (Airport Passenger Facility) | A+/Aa3 | 1,000,000 | 1,191,100 | |||||||
City of Atlanta, 5.00% due 1/1/2024 (Airport Passenger Facility) | A+/A1 | 1,350,000 | 1,637,145 | |||||||
City of Atlanta, 5.00% due 1/1/2025 (Airport Passenger Facility) | A+/Aa3 | 1,645,000 | 1,967,765 | |||||||
City of Atlanta, 5.00% due 1/1/2025 (Airport Passenger Facility) | A+/A1 | 2,500,000 | 2,985,975 | |||||||
Development Authority of Bartow County, 2.70% due 8/1/2043 put 8/23/2018 (Georgia Power Co. Plant Bowen Project) | A/A3 | 6,000,000 | 6,225,120 | |||||||
Fulton County Development Authority, 5.00% due 10/1/2022 (Georgia Tech Athletic Association) | NR/A2 | 4,550,000 | 5,389,429 | |||||||
Fulton County Facilities Corp. COP, 5.00% due 11/1/2017 (Public Purpose Project) | AA-/Aa3 | 8,400,000 | 9,405,648 | |||||||
Fulton County Facilities Corp. COP, 5.00% due 11/1/2019 (Public Purpose Project) | AA-/Aa3 | 6,600,000 | 7,654,218 | |||||||
Georgia Municipal Electric Authority, 6.50% due 1/1/2017 | A+/A1 | 905,000 | 961,680 | |||||||
Gwinnett County Hospital Authority, 5.00% due 7/1/2023 (Gwinnett Hospital System, Inc.; Insured: AGM) | NR/A2 | 5,000,000 | 5,584,100 | |||||||
Gwinnett County School District GO, 4.00% due 10/1/2015 (Educational Capital Building Program) | AAA/Aaa | 10,000,000 | 10,384,600 | |||||||
LaGrange-Troup County Hospital Authority, 5.00% due 7/1/2018 (West Georgia Health Foundation, Inc.) | A+/Aa2 | 2,045,000 | 2,178,866 | |||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2015 (Georgia Gas) | A-/Baa2 | 2,000,000 | 2,037,220 | |||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2018 (Georgia Gas) | A-/Baa2 | 5,000,000 | 5,511,100 | |||||||
Municipal Electric Authority of Georgia, 6.60% due 1/1/2018 (Insured: Natl-Re) | AA-/A1 | 1,635,000 | 1,758,802 | |||||||
Valdosta and Lowndes County Hospital Authority, 5.00% due 10/1/2022 (South Medical Center) | AA-/Aa2 | 1,500,000 | 1,750,020 | |||||||
GUAM — 0.36% | ||||||||||
Government of Guam, 5.25% due 12/1/2016 | BBB+/NR | 5,610,000 | 6,089,992 | |||||||
Government of Guam, 5.25% due 12/1/2017 | BBB+/NR | 2,000,000 | 2,244,480 | |||||||
Government of Guam, 5.50% due 12/1/2018 | BBB+/NR | 3,000,000 | 3,463,470 | |||||||
Government of Guam, 5.50% due 12/1/2019 | BBB+/NR | 2,000,000 | 2,348,360 | |||||||
Guam Government Waterworks Authority, 5.25% due 7/1/2020 (Water & Wastewater System Improvements) | A-/Ba1 | 300,000 | 344,292 | |||||||
Guam Government Waterworks Authority, 5.25% due 7/1/2022 (Water & Wastewater System Improvements) | A-/Ba1 | 1,050,000 | 1,209,968 | |||||||
Guam Government Waterworks Authority, 5.25% due 7/1/2023 (Water & Wastewater System Improvements) | A-/Ba1 | 645,000 | 746,826 | |||||||
Guam Power Authority, 5.00% due 10/1/2019 (Electric Power System; Insured: AGM) | AA/A2 | 1,000,000 | 1,167,010 | |||||||
Guam Power Authority, 5.00% due 10/1/2020 (Electric Power System; Insured: AGM) | AA/A2 | 1,500,000 | 1,769,130 | |||||||
Guam Power Authority, 5.00% due 10/1/2022 (Electric Power System; Insured: AGM) | AA/A2 | 5,015,000 | 5,968,301 | |||||||
HAWAII — 1.13% | ||||||||||
City and County of Honolulu GO, 5.00% due 11/1/2019 (Capital Improvement Projects) | NR/Aa1 | 3,620,000 | 4,283,474 | |||||||
City and County of Honolulu GO, 5.00% due 11/1/2020 (Capital Improvement Projects) | NR/Aa1 | 8,265,000 | 9,880,973 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
City and County of Honolulu GO, 5.00% due 11/1/2021 (Capital Improvement Projects) | NR/Aa1 | $ | 2,770,000 | $ | 3,339,734 | |||||
City and County of Honolulu GO, 5.00% due 11/1/2022 (Capital Improvement Projects) | NR/Aa1 | 1,750,000 | 2,123,362 | |||||||
City and County of Honolulu GO, 5.00% due 11/1/2022 (Capital Improvement Projects) | NR/Aa1 | 6,695,000 | 8,123,378 | |||||||
State of Hawaii GO, 5.00% due 11/1/2017 (Hawaiian Home Lands Settlement) | AA/Aa2 | 12,000,000 | 13,590,840 | |||||||
State of Hawaii GO, 5.00% due 11/1/2018 (Hawaiian Home Lands Settlement) | AA/Aa2 | 20,000,000 | 23,244,000 | |||||||
State of Hawaii GO, 5.00% due 12/1/2019 (Hawaiian Home Lands Settlement) | AA/Aa2 | 3,000,000 | 3,559,980 | |||||||
State of Hawaii GO, 5.00% due 12/1/2020 (Hawaiian Home Lands Settlement) | AA/Aa2 | 2,500,000 | 3,005,225 | |||||||
State of Hawaii GO, 5.00% due 12/1/2021 (Hawaiian Home Lands Settlement) | AA/Aa2 | 3,000,000 | 3,633,330 | |||||||
State of Hawaii GO, 5.00% due 12/1/2022 (Hawaiian Home Lands Settlement) | AA/Aa2 | 4,000,000 | 4,891,840 | |||||||
IDAHO — 0.26% | ||||||||||
Idaho Housing & Finance Association, 3.00% due 8/15/2015 | NR/NR | 650,000 | 665,990 | |||||||
Twin Falls Urban Renewal Agency, 5.15% due 8/1/2017 | NR/NR | 1,455,000 | 1,471,179 | |||||||
University of Idaho, 5.25% due 4/1/2041 put 4/1/2021 | A+/Aa3 | 13,665,000 | 16,055,692 | |||||||
ILLINOIS — 5.95% | ||||||||||
Board of Education of the City of Chicago GO, 5.00% due 12/1/2018 (School District Capital Improvement Program) (State Aid Withholding) | A+/Baa1 | 3,000,000 | 3,322,260 | |||||||
Board of Education of the City of Chicago GO, 5.00% due 12/1/2019 (School District Capital Improvement Program) (State Aid Withholding) | A+/Baa1 | 2,000,000 | 2,209,740 | |||||||
Board of Education of the City of Chicago GO, 0% due 12/1/2020 (Educational Facilities; Insured: BHAC) | AA+/Aa1 | 12,000,000 | 10,221,600 | |||||||
Board of Education of the City of Chicago GO, 5.00% due 12/1/2020 (School District Capital Improvement Program) (State Aid Withholding) | A+/Baa1 | 2,500,000 | 2,741,650 | |||||||
Chicago Housing Authority, 5.00% due 7/1/2015 (Housing Transformation Capital Program; Insured: AGM) (ETM) | AA/A2 | 8,460,000 | 8,766,590 | |||||||
Chicago Housing Authority, 5.00% due 7/1/2016 (Housing Transformation Capital Program; Insured: AGM) (ETM) | AA/A2 | 2,000,000 | 2,161,620 | |||||||
Chicago Midway International Airport, 5.00% due 1/1/2022 | A-/A3 | 800,000 | 940,000 | |||||||
Chicago Midway International Airport, 5.00% due 1/1/2023 | A-/A3 | 1,700,000 | 1,994,321 | |||||||
Chicago Midway International Airport, 5.00% due 1/1/2024 | A-/A3 | 1,000,000 | 1,178,200 | |||||||
Chicago Park District GO, 5.00% due 1/1/2018 (Park District Capital Improvement Plan) | AA+/A3 | 1,150,000 | 1,293,693 | |||||||
Chicago Park District GO, 5.00% due 1/1/2018 (Park District Capital Improvement Plan; Insured: Natl-Re) | AA+/A3 | 700,000 | 735,035 | |||||||
Chicago School Reform Board of Trustees of the Board of Education GO, 5.25% due 12/1/2021 (School District Capital Improvement Program; Insured: Natl-Re) | AA-/A3 | 1,500,000 | 1,695,180 | |||||||
Chicago Transit Authority, 5.25% due 6/1/2017 (Federal Transit Program-Rail Systems; Insured: AGM) | A/A3 | 3,000,000 | 3,304,980 | |||||||
Chicago Transit Authority, 5.50% due 6/1/2018 (Federal Transit Program-Rail Systems; Insured: AGM) | A/A3 | 2,500,000 | 2,838,075 | |||||||
City of Chicago, 5.00% due 11/1/2015 (Water System Extensions & Improvements; Insured: AGM) | AA/A2 | 1,050,000 | 1,103,582 | |||||||
City of Chicago, 4.00% due 1/1/2018 (Wastewater Transmission System) | AA-/A3 | 1,475,000 | 1,617,249 | |||||||
City of Chicago, 5.00% due 1/1/2020 (Insured: AGM) | AAA/A2 | 1,320,000 | 1,363,903 | |||||||
City of Chicago, 5.50% due 1/1/2020 (Wastewater Transmission System; Insured: BHAC) | AA+/Aa1 | 1,250,000 | 1,402,613 | |||||||
City of Chicago, 5.00% due 1/1/2021 (Riverwalk Expansion Project; Insured: AGM) | AA+/Baa1 | 1,410,000 | 1,617,214 | |||||||
City of Chicago, 6.75% due 6/1/2022 (Pilsen Redevelopment) | NR/NR | 4,705,000 | 4,722,173 | |||||||
City of Chicago, 5.00% due 1/1/2023 (Chicago Midway Airport) | A-/A3 | 6,215,000 | 7,291,003 | |||||||
City of Chicago, 5.00% due 1/1/2023 (Riverwalk Expansion Project; Insured: AGM) | AA+/Baa1 | 1,000,000 | 1,144,420 | |||||||
City of Chicago, 5.25% due 1/1/2023 (O’Hare International Airport; Insured: AGM) | AA/A2 | 2,000,000 | 2,110,700 | |||||||
City of Chicago, 5.00% due 1/1/2024 (Chicago Midway Airport) | A-/A3 | 16,060,000 | 18,736,881 | |||||||
City of Chicago, 0.19% due 1/1/2034 put 10/1/2014 (Liquidity Facility; SPA: JPMorgan Chase Bank) (daily demand notes) | AAA/Baa1 | 68,335,000 | 68,335,000 | |||||||
City of Chicago Board of Education GO, 6.25% due 1/1/2015 (Insured: Natl-Re) | AA-/A3 | 465,000 | 471,882 | |||||||
City of Chicago Board of Education GO, 5.25% due 12/1/2017 (Chicago School Reform Board; Insured: Natl-Re) | AA-/A3 | 4,100,000 | 4,558,052 | |||||||
City of Chicago Board of Education GO, 5.00% due 12/1/2018 (Insured: Natl-Re) | AA-/A3 | 1,000,000 | 1,111,120 | |||||||
City of Chicago Building Acquisition Certificates GO, 5.40% due 1/1/2018 (Parking Facility Improvements; Insured: AGM) | AA/A2 | 2,105,000 | 2,113,188 | |||||||
City of Chicago GO, 0% due 1/1/2016 (City Colleges; Insured: Natl-Re) | AA-/A3 | 2,670,000 | 2,634,863 | |||||||
City of Chicago GO, 5.44% due 1/1/2018 (Transportation Infrastructure Capital Projects; Insured: Natl-Re) | AA-/A3 | 3,050,000 | 3,250,629 | |||||||
City of Chicago GO, 5.25% due 1/1/2021 (Public Infrastructure and Facility Improvements) | A+/Baa1 | 500,000 | 530,290 | |||||||
City of Chicago O’Hare International Airport, 5.00% due 1/1/2022 (O’Hare Modernization Program) | A-/A2 | 5,835,000 | 6,740,125 | |||||||
City of Mount Vernon GO, 4.00% due 12/15/2019 (Various Municipal Capital Improvements; Insured: AGM) | AA/A2 | 1,000,000 | 1,110,150 | |||||||
City of Mount Vernon GO, 4.00% due 12/15/2020 (Various Municipal Capital Improvements; Insured: AGM) | AA/A2 | 785,000 | 870,871 | |||||||
City of Mount Vernon GO, 4.00% due 12/15/2021 (Various Municipal Capital Improvements; Insured: AGM) | AA/A2 | 1,640,000 | 1,783,352 | |||||||
City of Quincy, 5.00% due 11/15/2014 (Blessing Hospital) | A-/A3 | 1,000,000 | 1,005,050 | |||||||
City of Quincy, 5.00% due 11/15/2016 (Blessing Hospital) | A-/A3 | 1,750,000 | 1,880,847 | |||||||
City of Quincy, 5.00% due 11/15/2017 (Blessing Hospital) | A-/A3 | 500,000 | 549,440 | |||||||
City of Waukegan GO, 5.00% due 12/30/2019 (Lakehurst Redevelopment Project; Insured: AGM) | NR/A2 | 1,935,000 | 2,210,505 | |||||||
City of Waukegan GO, 5.00% due 12/30/2020 (Lakehurst Redevelopment Project; Insured: AGM) | NR/A2 | 1,000,000 | 1,146,320 | |||||||
City of Waukegan GO, 5.00% due 12/30/2021 (Lakehurst Redevelopment Project; Insured: AGM) | NR/A2 | 2,100,000 | 2,401,245 | |||||||
City of Waukegan GO, 5.00% due 12/30/2022 (Lakehurst Redevelopment Project; Insured: AGM) | NR/A2 | 1,000,000 | 1,143,620 | |||||||
Community College District No. 516 GO, 4.50% due 12/15/2020 (Waubonsee Community College) | NR/Aa1 | 1,325,000 | 1,529,977 |
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Community College District No. 516 GO, 5.00% due 12/15/2021 (Waubonsee Community College) | NR/Aa1 | $ | 6,175,000 | $ | 7,357,451 | |||||
Community Consolidated School District No. 146 GO, 9.00% due 12/1/2016 (Tinley Park; Insured: Natl-Re) | NR/Aa2 | 2,500,000 | 2,810,150 | |||||||
Community Consolidated School District No. 158 GO, 0% due 1/1/2017 (McHenry and Kane Counties; Insured: Natl- Re) (ETM) | NR/A3 | 95,000 | 93,537 | |||||||
Community Consolidated School District No. 158 GO, 0% due 1/1/2017 (McHenry and Kane Counties; Insured: Natl-Re) | NR/A3 | 1,090,000 | 1,042,443 | |||||||
Community Consolidated School District No. 93 GO, 2.00% due 1/1/2017 (Village of Carol Stream) | AA+/NR | 370,000 | 380,227 | |||||||
Community High School District No. 127 GO, 9.00% due 2/1/2015 (Lake County-Grayslake School Bldg.; Insured: AGM) | AAA/A2 | 1,610,000 | 1,654,178 | |||||||
Community High School District No. 127 GO, 9.00% due 2/1/2016 (Lake County-Grayslake School Bldg.; Insured: AGM) | AAA/A2 | 1,890,000 | 2,090,756 | |||||||
Community High School District No. 127 GO, 9.00% due 2/1/2017 (Lake County-Grayslake School Bldg.; Insured: AGM) | AAA/A2 | 2,025,000 | 2,386,766 | |||||||
Community Unit School District No. 200 GO, 5.25% due 10/1/2023 (DuPage County Educational Facilities; Insured: FSA) | AA/Aa3 | 1,000,000 | 1,137,600 | |||||||
Community Unit School District No. 302 GO, 0% due 2/1/2021 (Kane & DeKalb Counties; Insured: Natl-Re) | NR/Aa3 | 3,165,000 | 2,699,713 | |||||||
Community Unit School District No. 428 GO, 0% due 1/1/2021 (DeKalb County) | AA-/Aa2 | 6,140,000 | 5,297,224 | |||||||
Cook County Community College District No. 508 GO, 5.00% due 12/1/2020 (City Colleges of Chicago) | AA/NR | 720,000 | 838,836 | |||||||
Cook County Community College District No. 508 GO, 5.00% due 12/1/2021 (City Colleges of Chicago) | AA/NR | 1,000,000 | 1,163,470 | |||||||
Cook County Community College District No. 508 GO, 5.00% due 12/1/2022 (City Colleges of Chicago) | AA/NR | 1,250,000 | 1,444,737 | |||||||
Cook County Community College District No. 508 GO, 5.00% due 12/1/2023 (City Colleges of Chicago) | AA/NR | 1,250,000 | 1,458,512 | |||||||
Cook County Township High School District No. 227 GO, 5.00% due 12/1/2018 (Rich Township Educational Facilities; Insured: AGM) | NR/Aa3 | 190,000 | 206,568 | |||||||
County of Cook GO, 5.00% due 11/15/2015 (Capital Improvement Plan; Insured: Natl-Re) | AA/A1 | 2,000,000 | 2,103,440 | |||||||
County of Cook GO, 5.00% due 11/15/2019 (Capital Improvement Plan) | AA/A1 | 3,690,000 | 4,238,260 | |||||||
County of Cook GO, 4.00% due 11/15/2020 (Capital Improvement Plan) | AA/A1 | 925,000 | 1,008,833 | |||||||
County of Cook GO, 5.00% due 11/15/2020 (Capital Improvement Plan) | AA/A1 | 2,000,000 | 2,294,540 | |||||||
County of Cook GO, 5.00% due 11/15/2020 (Capital Improvement Plan) | AA/A1 | 3,590,000 | 4,067,183 | |||||||
County of Cook GO, 4.00% due 11/15/2021 (Capital Improvement Plan) | AA/A1 | 2,000,000 | 2,201,880 | |||||||
County of Cook GO, 5.00% due 11/15/2021 (Capital Improvement Plan) | AA/A1 | 2,105,000 | 2,454,325 | |||||||
County of Cook GO, 5.00% due 11/15/2021 (Capital Improvement Plan) | AA/A1 | 5,000,000 | 5,801,400 | |||||||
County of Cook GO, 4.00% due 11/15/2022 (Capital Improvement Plan) | AA/A1 | 1,000,000 | 1,094,930 | |||||||
County of Cook GO, 5.00% due 11/15/2022 (Capital Improvement Plan) | AA/A1 | 1,500,000 | 1,751,205 | |||||||
County of McHenry, 4.50% due 1/15/2016 (Highway Improvement Plan) | NR/Aaa | 1,000,000 | 1,011,880 | |||||||
County of Winnebago GO, 3.00% due 12/30/2015 (Public Safety) | NR/Aa2 | 1,035,000 | 1,069,714 | |||||||
Forest Preserve District of Cook County GO, 5.00% due 11/15/2021 | AA/A1 | 1,500,000 | 1,766,100 | |||||||
Forest Preserve District of Kane County GO, 5.00% due 12/15/2015 (Insured: Natl-Re) | AA+/A3 | 2,780,000 | 2,934,457 | |||||||
Illinois Educational Facilities Authority, 4.75% due 3/1/2030 put 3/1/2017 (Art Institute of Chicago) | AA-/NR | 3,030,000 | 3,252,402 | |||||||
Illinois Educational Facilities Authority, 5.00% due 3/1/2030 put 3/1/2017 (Art Institute of Chicago) | NR/A1 | 3,000,000 | 3,237,930 | |||||||
Illinois Educational Facilities Authority, 5.25% due 3/1/2034 put 3/1/2018 (Art Institute of Chicago) | NR/NR | 3,500,000 | 3,871,770 | |||||||
Illinois Educational Facilities Authority, 3.40% due 11/1/2036 put 11/1/2017 (Field Museum of Natural History) | A/NR | 1,300,000 | 1,357,083 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2014 (Central DuPage Health) | AA/NR | 5,000,000 | 5,019,900 | |||||||
Illinois Finance Authority, 4.00% due 4/1/2015 (Advocate Health Care) | AA/Aa2 | 3,000,000 | 3,057,120 | |||||||
Illinois Finance Authority, 5.25% due 5/15/2015 (Resurrection Health Care Corp.) | BBB+/Baa2 | 1,000,000 | 1,025,730 | |||||||
Illinois Finance Authority, 5.00% due 10/1/2015 (DePaul University) | NR/A2 | 1,000,000 | 1,046,760 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2015 (Central DuPage Health) | AA/NR | 5,000,000 | 5,235,850 | |||||||
Illinois Finance Authority, 5.25% due 12/1/2015 (Columbia College) | BBB+/NR | 1,620,000 | 1,694,407 | |||||||
Illinois Finance Authority, 5.00% due 4/1/2016 (Advocate Health Care) | AA/Aa2 | 1,250,000 | 1,334,788 | |||||||
Illinois Finance Authority, 5.00% due 12/1/2016 (Columbia College) | BBB+/NR | 1,710,000 | 1,835,839 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2017 (Rush University Medical Center; Insured: Natl-Re) | AA-/A2 | 1,000,000 | 1,096,980 | |||||||
Illinois Finance Authority, 5.00% due 12/1/2017 (Columbia College) | BBB+/NR | 1,395,000 | 1,524,205 | |||||||
Illinois Finance Authority, 5.50% due 11/1/2018 (Advocate Health Care) | AA/Aa2 | 1,000,000 | 1,157,630 | |||||||
Illinois Finance Authority, 5.25% due 5/1/2019 (Educational Advancement Fund, Inc.) | NR/Baa3 | 4,675,000 | 4,949,329 | |||||||
Illinois Finance Authority, 5.00% due 4/1/2020 (Advocate Health Care) | AA/Aa2 | 1,315,000 | 1,506,030 | |||||||
Illinois Finance Authority, 4.00% due 12/1/2021 (Trinity Health) | AA-/Aa2 | 1,000,000 | 1,100,450 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2030 put 1/15/2020 (Advocate Health Care) | AA/Aa2 | 1,250,000 | 1,455,337 | |||||||
Illinois Finance Authority, 2.625% due 2/1/2033 put 8/1/2015 (Peoples Gas Light & Coke Co.) | A/Aa3 | 9,500,000 | 9,671,950 | |||||||
Illinois Finance Authority, 4.30% due 6/1/2035 put 6/1/2016 (Peoples Gas Light & Coke Co.; Insured: AMBAC) | A/Aa3 | 2,350,000 | 2,483,738 | |||||||
Illinois Toll Highway Authority, 5.50% due 1/1/2015 (Insured: AGM) | AA/Aa3 | 5,000,000 | 5,067,950 | |||||||
Kane McHenry Cook & DeKalb Counties USD No. 300 GO, 0% due 12/1/2021 (Insured: AMBAC) (ETM) | NR/Aa3 | 765,000 | 668,235 | |||||||
Kane McHenry Cook & DeKalb Counties USD No. 300 GO, 0% due 12/1/2021 (Insured: AMBAC) | NR/Aa3 | 1,235,000 | 1,025,828 | |||||||
Lake County Community High School District No. 127 GO, 7.375% due 2/1/2020 (Grayslake; Insured: Syncora) | AAA/NR | 1,000,000 | 1,274,870 | |||||||
Metropolitan Pier & Exposition Authority, 0% due 6/15/2016 (McCormick Place Expansion; Insured: Natl-Re) (ETM) | AA-/NR | 3,475,000 | 3,456,443 | |||||||
Metropolitan Pier & Exposition Authority, 0% due 6/15/2016 (McCormick Place Expansion; Insured: Natl-Re) | AA-/Baa1 | 8,245,000 | 8,091,643 | |||||||
Metropolitan Pier & Exposition Authority, 5.00% due 12/15/2020 (McCormick Place Expansion) | AAA/NR | 4,000,000 | 4,709,800 | |||||||
Metropolitan Water Reclamation District of Greater Chicago GO, 4.00% due 12/1/2014 (Capital Improvements) | AAA/Aa1 | 2,500,000 | 2,516,525 | |||||||
Peoria Tazewell Etc. Counties Community College District No. 514 GO, 4.25% due 12/1/2015 (ETM) | NR/NR | 490,000 | 513,265 |
Certified Annual Report 23
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Peoria Tazewell Etc. Counties Community College District No. 514 GO, 4.25% due 12/1/2015 | AA+/Aa2 | $ | 1,870,000 | $ | 1,955,590 | |||||
Railsplitter Tobacco Settlement Authority, 5.00% due 6/1/2019 | A/NR | 22,000,000 | 25,266,340 | |||||||
Railsplitter Tobacco Settlement Authority, 5.125% due 6/1/2019 | A/NR | 6,780,000 | 7,824,527 | |||||||
Sangamon County Community USD No. 5 Ball-Chatham GO, 5.00% due 1/1/2015 (Insured: AGM) (ETM) | AA/NR | 170,000 | 172,091 | |||||||
Sangamon County Community USD No. 5 Ball-Chatham GO, 5.00% due 1/1/2015 (Insured: AGM) | AA/NR | 2,040,000 | 2,063,725 | |||||||
School District No. 122 GO, 0% due 1/1/2016 (Winnebago County-Harlem-Loves Park; Insured: AGM) | NR/A2 | 2,000,000 | 1,979,600 | |||||||
School District No. 97 GO, 9.00% due 12/1/2018 (Village of Oak Park; Insured: Natl-Re) | NR/Aa2 | 4,000,000 | 5,193,800 | |||||||
Southwestern Illinois Development Authority, 5.125% due 8/15/2016 (Anderson Hospital) | BBB-/Baa3 | 625,000 | 658,156 | |||||||
State of Illinois, 5.00% due 6/15/2016 (Build Illinois Bond Retirement & Interest Fund) | AAA/NR | 3,500,000 | 3,770,655 | |||||||
Town of Cicero Cook County GO, 5.00% due 1/1/2018 (Cicero and Laramie Development Areas; Insured: AGM) | AA/A2 | 2,375,000 | 2,633,875 | |||||||
Town of Cicero Cook County GO, 5.00% due 1/1/2019 (Cicero and Laramie Development Areas; Insured: AGM) | AA/A2 | 2,000,000 | 2,241,660 | |||||||
Town of Cicero Cook County GO, 5.25% due 1/1/2019 pre-refunded 1/1/2015 (Economic Redevelopment; Insured: Syncora) | NR/NR | 6,140,000 | 6,218,592 | |||||||
Town of Cicero Cook County GO, 5.00% due 12/1/2019 (Economic Redevelopment) | A+/NR | 1,070,000 | 1,198,454 | |||||||
Town of Cicero Cook County GO, 5.00% due 1/1/2020 (Cicero and Laramie Development Areas; Insured: AGM) | AA/A2 | 1,250,000 | 1,406,163 | |||||||
Town of Cicero Cook County GO, 5.00% due 1/1/2021 (Cicero and Laramie Development Areas; Insured: AGM) | AA/A2 | 1,250,000 | 1,405,163 | |||||||
University of Illinois Board of Trustees COP, 5.00% due 10/1/2019 (Insured: AGM) | AA/Aa3 | 2,000,000 | 2,230,300 | |||||||
Village of Bolingbrook, DuPage and Will Counties GO, 0% due 1/1/2016 (Insured: Natl-Re) | NR/A1 | 1,500,000 | 1,426,455 | |||||||
Village of Bolingbrook, DuPage and Will Counties GO, 0% due 1/1/2017 pre-refunded 1/1/2015 (Insured: Natl-Re) | NR/A1 | 85,000 | 77,263 | |||||||
Village of Bolingbrook, DuPage and Will Counties GO, 0% due 1/1/2017 (Insured: Natl-Re) | NR/A1 | 1,915,000 | 1,733,305 | |||||||
Village of Broadview, 5.375% due 7/1/2015 | NR/NR | 1,195,000 | 1,198,131 | |||||||
Village of Downers Grove GO, 3.00% due 1/1/2017 | AAA/NR | 970,000 | 1,013,990 | |||||||
Village of Melrose Park, 5.20% due 7/1/2018 (Insured: Natl-Re) | AA-/A3 | 1,190,000 | 1,203,947 | |||||||
Village of Skokie GO, 5.00% due 12/1/2014 | NR/Aaa | 565,000 | 569,396 | |||||||
Village of Tinley Park GO, 4.00% due 12/1/2022 | AA+/NR | 625,000 | 693,006 | |||||||
Will County Community High School District No. 210 GO, 5.00% due 1/1/2015 (Lincoln-Way School Building; Insured: Natl-Re/FGIC) | NR/Aa3 | 250,000 | 253,055 | |||||||
Will County Community High School District No. 210 GO, 5.00% due 1/1/2015 (Lincoln-Way School Building; Insured: Natl-Re) (ETM) | NR/Aa3 | 750,000 | 759,225 | |||||||
Will County Valley View Community Unit School District No. 365 GO, 0% due 11/1/2018 (Insured: AGM) | AA/Aa2 | 3,370,000 | 3,152,332 | |||||||
INDIANA — 3.38% | ||||||||||
Allen County Jail Building Corp., 5.00% due 10/1/2014 (Insured: Syncora) | NR/Aa2 | 500,000 | 500,065 | |||||||
Allen County Jail Building Corp., 5.00% due 10/1/2015 (Insured: Syncora) | NR/Aa2 | 1,480,000 | 1,529,521 | |||||||
Allen County Jail Building Corp., 5.00% due 10/1/2016 (Insured: Syncora) | NR/Aa2 | 1,520,000 | 1,615,760 | |||||||
Allen County Redevelopment District, 5.00% due 11/15/2016 | NR/A2 | 1,000,000 | 1,049,530 | |||||||
Avon Community School Building Corp., 5.00% due 7/15/2017 (Insured: AMBAC) (State Aid Withholding) | A/NR | 2,500,000 | 2,778,425 | |||||||
Board of Trustees for the Vincennes University, 3.00% due 6/1/2015 | NR/Aa3 | 1,000,000 | 1,016,670 | |||||||
Board of Trustees for the Vincennes University, 4.00% due 6/1/2018 | NR/Aa3 | 1,000,000 | 1,096,420 | |||||||
Board of Trustees for the Vincennes University, 5.00% due 6/1/2020 | NR/Aa3 | 1,000,000 | 1,178,800 | |||||||
Brownsburg 1999 School Building Corp., 5.00% due 8/1/2017 (Cardinal, Delaware Trail, White Lick Elementary & Brownsburg Junior High Schools; Insured: AGM) (State Aid Withholding) | AA+/A2 | 1,000,000 | 1,039,310 | |||||||
Brownsburg 1999 School Building Corp., 5.00% due 7/15/2018 (Harris Education Center and East Middle School; Insured: AGM) (State Aid Withholding) | AA+/NR | 3,430,000 | 3,559,139 | |||||||
Brownsburg 1999 School Building Corp., 5.00% due 8/1/2018 (Cardinal, Delaware Trail, White Lick Elementary & Brownsburg Junior High Schools; Insured: AGM) (State Aid Withholding) | AA+/A2 | 1,475,000 | 1,532,702 | |||||||
City of Carmel Redevelopment Authority, 0% due 2/1/2015 (Performing Arts Center) | AA+/Aa1 | 1,575,000 | 1,573,299 | |||||||
City of Carmel Redevelopment Authority, 4.00% due 2/1/2015 (Road and Intersection Improvements) | AA+/NR | 990,000 | 1,002,712 | |||||||
City of Carmel Redevelopment Authority, 4.00% due 8/1/2015 (Road and Intersection Improvements) | AA+/NR | 975,000 | 1,005,839 | |||||||
City of Carmel Redevelopment Authority, 5.00% due 8/1/2021 (Road and Intersection Improvements) | AA+/NR | 2,405,000 | 2,858,872 | |||||||
City of Carmel Redevelopment Authority, 5.00% due 8/1/2022 (Road and Intersection Improvements) | AA+/NR | 2,510,000 | 2,996,664 | |||||||
City of Carmel Redevelopment District COP, 5.75% due 7/15/2022 (CFP Energy Center, LLC Installment Purchase Agreement) | NR/NR | 3,760,000 | 4,244,175 | |||||||
City of Fort Wayne, 2.00% due 12/1/2014 (Waterworks Utility Improvements) | NR/Aa3 | 925,000 | 927,914 | |||||||
City of Fort Wayne, 4.25% due 8/1/2015 (Sewer Works Improvements) | NR/Aa3 | 1,780,000 | 1,838,669 | |||||||
City of Fort Wayne, 2.00% due 12/1/2015 (Waterworks Utility Improvements) | NR/Aa3 | 1,145,000 | 1,168,129 | |||||||
City of Fort Wayne, 2.00% due 12/1/2016 (Waterworks Utility Improvements) | NR/Aa3 | 1,160,000 | 1,192,700 | |||||||
City of Fort Wayne, 2.00% due 12/1/2017 (Waterworks Utility Improvements) | NR/Aa3 | 1,175,000 | 1,211,425 | |||||||
City of Whiting, 5.00% due 1/1/2016 (BP Products North America, Inc.) | A/A2 | 5,375,000 | 5,687,825 | |||||||
Clay Multiple School Building Corp., 4.00% due 7/15/2015 (State Aid Withholding) | AA+/NR | 1,000,000 | 1,026,600 | |||||||
Clay Multiple School Building Corp., 5.00% due 7/15/2016 (State Aid Withholding) | AA+/NR | 1,295,000 | 1,392,177 | |||||||
Clay Multiple School Building Corp., 5.00% due 1/15/2017 (State Aid Withholding) | AA+/NR | 1,000,000 | 1,089,270 | |||||||
Crown Point Multi-School Building Corp., 0% due 1/15/2016 (Crown Point Community School Corp.; Insured: Natl-Re) (State Aid Withholding) | AA-/A3 | 5,685,000 | 5,653,960 | |||||||
Duneland School Building Corp., 0% due 2/1/2020 (State Aid Withholding) | A/NR | 2,970,000 | 2,595,275 | |||||||
Duneland School Building Corp., 0% due 8/1/2020 (State Aid Withholding) | A/NR | 3,470,000 | 2,980,383 |
24 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Duneland School Building Corp., 0% due 2/1/2021 (State Aid Withholding) | A/NR | $ | 2,770,000 | $ | 2,319,016 | |||||
Duneland School Building Corp., 0% due 8/1/2021 (State Aid Withholding) | A/NR | 3,270,000 | 2,684,147 | |||||||
Evansville Vanderburgh Public Library Leasing Corp., 5.00% due 7/15/2015 (Insured: AMBAC) (ETM) | A+/NR | 1,000,000 | 1,038,090 | |||||||
Fort Wayne Community Schools GO, 1.00% due 1/15/2015 (Renewal, Restoration & Safety Project) (State Aid Withholding) | AA+/NR | 1,500,000 | 1,503,405 | |||||||
Indiana Bond Bank, 5.25% due 10/15/2016 (Special Gas Program) | NR/A3 | 1,545,000 | 1,673,436 | |||||||
Indiana Bond Bank, 5.00% due 10/15/2017 (Special Gas Program) | NR/A3 | 5,000,000 | 5,523,100 | |||||||
Indiana Bond Bank, 5.00% due 8/1/2021 (Columbus Learning Center) | AA/NR | 1,300,000 | 1,522,183 | |||||||
Indiana Finance Authority, 5.00% due 11/1/2014 (Sisters of St. Francis Health Services, Inc.) | NR/Aa3 | 1,000,000 | 1,004,180 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2015 (Parkview Health Systems) | A+/A1 | 1,500,000 | 1,540,830 | |||||||
Indiana Finance Authority, 4.90% due 1/1/2016 (Indiana Power & Light Co.) | BBB+/A2 | 11,650,000 | 12,280,265 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2016 (Parkview Health Systems) | A+/A1 | 3,090,000 | 3,312,820 | |||||||
Indiana Finance Authority, 5.00% due 7/1/2016 (Forensic & Health Science; Insured: Natl-Re) (ETM) | AA+/Aa1 | 1,030,000 | 1,112,482 | |||||||
Indiana Finance Authority, 5.00% due 9/15/2016 (Marian University Health Sciences) | BBB-/NR | 1,500,000 | 1,556,910 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2017 (Parkview Health Systems) | A+/A1 | 1,000,000 | 1,100,700 | |||||||
Indiana Finance Authority, 5.00% due 9/15/2017 (Marian University Health Sciences) | BBB-/NR | 1,940,000 | 2,038,358 | |||||||
Indiana Finance Authority, 4.00% due 5/1/2018 (Community Health Network) | A/A2 | 2,820,000 | 3,065,255 | |||||||
Indiana Finance Authority, 5.25% due 7/1/2018 (Wabash Correctional Facilities) | AA+/Aa1 | 1,000,000 | 1,154,540 | |||||||
Indiana Finance Authority, 5.25% due 7/1/2018 (Rockville Correctional Facilities) (ETM) | AA+/Aa1 | 2,150,000 | 2,497,784 | |||||||
Indiana Finance Authority, 5.00% due 9/15/2018 (Marian University Health Sciences) | BBB-/NR | 1,790,000 | 1,895,896 | |||||||
Indiana Finance Authority, 5.00% due 11/1/2018 (Sisters of St. Francis Health Services, Inc.) | NR/Aa3 | 1,250,000 | 1,431,988 | |||||||
Indiana Finance Authority, 5.00% due 11/1/2018 (Indianapolis Airport) | AA+/Aa2 | 2,750,000 | 3,164,975 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2019 (Community Health Network) | A/A2 | 1,385,000 | 1,595,091 | |||||||
Indiana Finance Authority, 5.00% due 9/15/2019 (Marian University Health Sciences) | BBB-/NR | 1,250,000 | 1,330,550 | |||||||
Indiana Finance Authority, 5.00% due 3/1/2020 (Indiana University Health System) | AA-/Aa3 | 5,000,000 | 5,867,850 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2020 (Community Health Network) | A/A2 | 860,000 | 1,001,324 | |||||||
Indiana Finance Authority, 5.00% due 9/15/2020 (Marian University Health Sciences) | BBB-/NR | 2,245,000 | 2,387,400 | |||||||
Indiana Finance Authority, 5.00% due 3/1/2021 (Indiana University Health System) | AA-/Aa3 | 9,880,000 | 11,660,672 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2021 (Community Health Network) | A/A2 | 2,250,000 | 2,637,877 | |||||||
Indiana Finance Authority, 5.00% due 9/15/2021 (Marian University Health Sciences) | BBB-/NR | 2,320,000 | 2,452,449 | |||||||
Indiana Finance Authority, 5.00% due 10/1/2021 (CWA Authority, Inc. Wastewater System Project) | AA/NR | 500,000 | 595,585 | |||||||
Indiana Finance Authority, 5.00% due 3/1/2022 (Indiana University Health System) | AA-/Aa3 | 3,240,000 | 3,758,627 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2022 (Community Health Network) | A/A2 | 1,230,000 | 1,444,094 | |||||||
Indiana Finance Authority, 5.00% due 5/1/2022 (Parkview Regional Medical Center) | A+/A1 | 1,135,000 | 1,319,767 | |||||||
Indiana Finance Authority, 5.00% due 10/1/2023 (CWA Authority, Inc. Wastewater System Project) | AA/NR | 1,000,000 | 1,201,090 | |||||||
Indiana Finance Authority, 5.00% due 10/1/2024 (CWA Authority, Inc. Wastewater System Project) | AA/NR | 500,000 | 605,955 | |||||||
Indiana Finance Authority, 0.03% due 2/1/2037 put 10/1/2014 (Stadium Project; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa2 | 33,050,000 | 33,050,000 | |||||||
Indiana HFFA, 5.00% due 10/1/2027 put 6/1/2017 (Ascension Health) | NR/Aa3 | 7,100,000 | 7,911,601 | |||||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 1/1/2015 (Waterworks System; Insured: Natl-Re) | AA-/A2 | 1,000,000 | 1,011,840 | |||||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 7/1/2015 (Waterworks System; Insured: Natl-Re) | AA-/A2 | 1,000,000 | 1,035,000 | |||||||
Indianapolis Local Public Improvement Bond Bank, 5.00% due 7/1/2016 (Wishard Complex-Myers Special Care Center Building; Insured: Natl-Re) | AA+/Aa1 | 1,030,000 | 1,065,010 | |||||||
IPS (Indianapolis Public Schools) Multi-School Building Corp., 5.50% due 7/15/2015 (Insured: Natl-Re) | AA/A3 | 1,690,000 | 1,760,050 | |||||||
IPS (Indianapolis Public Schools) Multi-School Building Corp., 5.00% due 7/15/2016 (Insured: Natl-Re) | AA/A3 | 5,000,000 | 5,398,500 | |||||||
Knox Middle School Building Corp., 0% due 1/15/2020 (Insured: Natl-Re) (State Aid Withholding) | AA-/A3 | 1,295,000 | 1,133,319 | |||||||
Lake Central Multi-District School Building Corp., 4.00% due 1/15/2019 (Educational Facilities) (State Aid Withholding) | AA+/A2 | 1,000,000 | 1,104,900 | |||||||
Lake Central Multi-District School Building Corp., 5.00% due 7/15/2019 (Educational Facilities) (State Aid Withholding) | AA+/A2 | 1,680,000 | 1,950,850 | |||||||
Lake Central Multi-District School Building Corp., 4.00% due 1/15/2020 (Educational Facilities) (State Aid Withholding) | AA+/A2 | 1,345,000 | 1,490,933 | |||||||
Lake Central Multi-District School Building Corp., 5.00% due 7/15/2020 (Educational Facilities) (State Aid Withholding) | AA+/A2 | 1,170,000 | 1,373,311 | |||||||
Lake Central Multi-District School Building Corp., 4.00% due 1/15/2021 (Educational Facilities) (State Aid Withholding) | AA+/A2 | 1,250,000 | 1,380,963 | |||||||
Lake Central Multi-District School Building Corp., 5.00% due 7/15/2021 (Educational Facilities) (State Aid Withholding) | AA+/A2 | 1,250,000 | 1,472,538 | |||||||
Lake Central Multi-District School Building Corp., 4.00% due 1/15/2022 (Educational Facilities) (State Aid Withholding) | AA+/A2 | 1,455,000 | 1,596,906 | |||||||
Lake Central Multi-District School Building Corp., 5.00% due 7/15/2022 (Educational Facilities) (State Aid Withholding) | AA+/A2 | 1,000,000 | 1,182,870 | |||||||
Madison Schools Lydia Middleton Building Corp., 5.00% due 7/15/2015 (Insured: Natl-Re) (State Aid Withholding) (ETM) | AA+/A3 | 1,250,000 | 1,281,988 | |||||||
Metropolitan School District of Pike Township GO, 3.00% due 1/15/2017 (College Park Ancillary Rooms) (State Aid Withholding) | AA+/NR | 2,115,000 | 2,231,346 | |||||||
Mount Vernon of Hancock County Multi-School Building Corp., 5.00% due 7/15/2015 (Insured: Natl-Re) (State Aid Withholding) (ETM) | AA-/A3 | 870,000 | 903,138 | |||||||
Mount Vernon of Hancock County Multi-School Building Corp., 5.00% due 7/15/2015 (Insured: Natl-Re) (State Aid Withholding) | AA-/A3 | 270,000 | 276,874 | |||||||
MSD of Warren Township Vision 2005 School Building Corp., 5.00% due 7/10/2015 pre-refunded 1/10/2015 (Insured: Natl-Re) (State Aid Withholding) | AA+/A3 | 2,895,000 | 2,934,227 | |||||||
Noblesville Multi-School Building Corp., 5.00% due 7/15/2015 pre-refunded 1/15/2015 (Insured: Natl-Re) (State Aid Withholding) | AA+/A3 | 1,760,000 | 1,784,974 | |||||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2016 (146th Street Extension A) (ETM) | AA/NR | 1,660,000 | 1,779,902 |
Certified Annual Report 25
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Perry Township Multischool Building Corp., 4.00% due 1/15/2018 (Educational Facilities) (State Aid Withholding) | AA+/NR | $ | 1,000,000 | $ | 1,094,530 | |||||
Perry Township Multischool Building Corp., 3.00% due 1/10/2019 (Educational Facilities) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,063,350 | |||||||
Perry Township Multischool Building Corp., 4.00% due 7/10/2019 (Educational Facilities) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,110,100 | |||||||
Perry Township Multischool Building Corp., 5.00% due 7/10/2020 (Educational Facilities) (State Aid Withholding) | AA+/NR | 2,090,000 | 2,471,111 | |||||||
Perry Township Multischool Building Corp., 5.00% due 7/10/2021 (Educational Facilities) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,192,400 | |||||||
Pike Township Multi-School Building Corp., 4.00% due 1/15/2017 (Metropolitan School District of Pike Township) (State Aid Withholding) | AA+/NR | 1,080,000 | 1,163,959 | |||||||
Plainfield Community High School Building Corp., 5.00% due 1/15/2015 (Insured: Natl-Re) (ETM) | AA+/A3 | 1,445,000 | 1,465,505 | |||||||
South Bend Community School Building Corp., 5.00% due 7/15/2016 (Insured: Natl-Re) (State Aid Withholding) | AA+/A3 | 1,785,000 | 1,928,228 | |||||||
Westfield Washington Multi-School Building Corp., 5.00% due 7/15/2015 pre-refunded 1/15/2015 (Insured: AGM) (State Aid Withholding) | AA/A2 | 540,000 | 547,630 | |||||||
Westfield Washington Multi-School Building Corp., 5.00% due 7/15/2015 (Insured: AGM) (State Aid Withholding) | AA/A2 | 370,000 | 374,936 | |||||||
Zionsville Community Schools Building Corp., 5.00% due 7/15/2019 (Insured: AGM) (State Aid Withholding) | AA/A2 | 1,100,000 | 1,292,423 | |||||||
IOWA — 0.47% | ||||||||||
Des Moines Independent Community School District, 4.00% due 6/1/2019 (School Infrastructure; Insured: AGM) | AA/A2 | 3,870,000 | 4,305,259 | |||||||
Des Moines Independent Community School District, 4.00% due 6/1/2020 (School Infrastructure; Insured: AGM) | AA/A2 | 3,990,000 | 4,457,788 | |||||||
Des Moines Independent Community School District, 4.00% due 6/1/2021 (School Infrastructure; Insured: AGM) | AA/A2 | 4,125,000 | 4,521,206 | |||||||
Des Moines Independent Community School District, 4.00% due 6/1/2022 (School Infrastructure; Insured: AGM) | AA/A2 | 2,140,000 | 2,316,828 | |||||||
Iowa Finance Authority, 5.00% due 2/15/2015 (Iowa Health System; Insured: AGM) | NR/Aa3 | 2,100,000 | 2,135,637 | |||||||
Iowa Finance Authority, 5.00% due 2/15/2016 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,600,000 | 1,695,504 | |||||||
Iowa Finance Authority, 5.00% due 8/15/2016 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,500,000 | 1,620,225 | |||||||
Iowa Finance Authority, 5.00% due 2/15/2017 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,600,000 | 1,752,016 | |||||||
Iowa Finance Authority, 5.00% due 8/15/2017 (Iowa Health System; Insured: AGM) | NR/Aa3 | 990,000 | 1,101,811 | |||||||
Iowa Finance Authority, 5.00% due 2/15/2018 (Iowa Health System; Insured: AGM) | NR/Aa3 | 1,405,000 | 1,581,060 | |||||||
Iowa Finance Authority, 5.00% due 7/1/2022 (Genesis Health System) | NR/A1 | 1,735,000 | 2,040,291 | |||||||
Iowa Finance Authority, 5.00% due 7/1/2023 (Genesis Health System) | NR/A1 | 2,000,000 | 2,361,560 | |||||||
Iowa Finance Authority, 5.00% due 7/1/2024 (Genesis Health System) | NR/A1 | 2,350,000 | 2,755,751 | |||||||
Iowa Finance Authority, 0.04% due 2/15/2035 put 10/1/2014 (Iowa Health System; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | NR/Aa1 | 750,000 | 750,000 | |||||||
KANSAS — 0.14% | ||||||||||
Kansas Development Finance Authority, 5.00% due 11/1/2015 (State Capitol, School of Pharmacy and Wildlife & Parks Projects) | AA-/Aa3 | 2,605,000 | 2,737,438 | |||||||
Kansas Development Finance Authority, 5.00% due 5/1/2018 pre-refunded 5/1/2015 (University of Kansas Housing System Project; Insured: AMBAC) | AA-/A1 | 1,400,000 | 1,439,676 | |||||||
Kansas Development Finance Authority, 5.00% due 12/1/2020 (New Jobs Training; Insured: BAM) | AA/NR | 1,500,000 | 1,724,475 | |||||||
Leavenworth County GO, 4.00% due 3/1/2015 (KTA and KDOT Loans) | AA-/NR | 1,040,000 | 1,056,058 | |||||||
Wyandotte County-Kansas City Unified Government, 5.00% due 9/1/2022 (Utility Systems Improvement) | A+/A3 | 1,000,000 | 1,184,630 | |||||||
Wyandotte County-Kansas City Unified Government, 5.00% due 9/1/2023 (Utility Systems Improvement) | A+/A3 | 1,000,000 | 1,187,890 | |||||||
Wyandotte County-Kansas City Unified Government, 5.00% due 9/1/2024 (Utility Systems Improvement) | A+/A3 | 600,000 | 715,338 | |||||||
KENTUCKY — 0.51% | ||||||||||
Jefferson County School District Finance Corp., 5.25% due 1/1/2016 (Insured: AGM) | AA/Aa2 | 2,145,000 | 2,277,368 | |||||||
Kentucky Economic DFA, 0% due 10/1/2019 (Norton Healthcare, Inc.; Insured: Natl-Re) | AA-/A3 | 5,000,000 | 4,405,750 | |||||||
Kentucky Economic DFA, 0% due 10/1/2020 (Norton Healthcare, Inc.; Insured: Natl-Re) | AA-/A3 | 9,600,000 | 8,162,784 | |||||||
Kentucky Economic DFA, 0% due 10/1/2021 (Norton Healthcare, Inc.; Insured: Natl-Re) | AA-/A3 | 2,885,000 | 2,340,774 | |||||||
Kentucky Economic DFA, 0% due 10/1/2023 (Norton Healthcare, Inc.; Insured: Natl-Re) | AA-/A3 | 4,195,000 | 3,105,726 | |||||||
Kentucky Economic DFA, 5.00% due 5/1/2039 put 11/11/2014 (Catholic Health Initiatives) | A+/A1 | 5,500,000 | 5,529,810 | |||||||
Kentucky Municipal Power Agency, 4.00% due 9/1/2015 (Insured: AGM) | AA/A2 | 2,955,000 | 3,052,042 | |||||||
Lexington-Fayette Urban County Government Public Facilities Corp., 5.00% due 6/1/2022 (Eastern State Hospital) | A+/Aa3 | 6,165,000 | 7,133,583 | |||||||
LOUISIANA — 2.82% | ||||||||||
City of Bossier, 4.00% due 12/1/2018 (Public Improvements; Insured: AGM) | AA/Aa3 | 2,020,000 | 2,248,422 | |||||||
City of Bossier, 4.50% due 12/1/2021 (Public Improvements; Insured: AGM) | AA/Aa3 | 2,240,000 | 2,586,058 | |||||||
City of Lafayette, 4.00% due 11/1/2016 (Utilities System Improvements) | A+/A1 | 1,395,000 | 1,498,104 | |||||||
City of Lafayette, 5.00% due 11/1/2019 (Utilities System Improvements) | A+/A1 | 1,000,000 | 1,177,170 | |||||||
City of Monroe, 5.00% due 3/1/2017 pre-refunded 3/1/2015 (Garrett Road Economic Development; Insured: Radian) | NR/NR | 1,155,000 | 1,175,178 | |||||||
City of New Orleans GO, 5.00% due 10/1/2016 (Audubon Park Aquarium) | A/NR | 2,380,000 | 2,566,306 | |||||||
City of New Orleans GO, 4.00% due 10/1/2018 (Audubon Park Aquarium; Insured: AGM) | AA/NR | 1,110,000 | 1,202,319 | |||||||
City of New Orleans GO, 5.00% due 12/1/2019 (Public Improvements; Insured: AGM) | BBB+/A3 | 3,080,000 | 3,533,160 | |||||||
City of New Orleans GO, 5.00% due 12/1/2020 (Public Improvements; Insured: AGM) | BBB+/A3 | 3,250,000 | 3,737,760 | |||||||
City of New Orleans GO, 5.00% due 12/1/2021 (Public Improvements; Insured: AGM) | BBB+/A3 | 5,700,000 | 6,551,067 | |||||||
Consolidated Sales Tax District A of the Parish of LaFourche, 4.00% due 3/1/2021 (Roads, Bridges & Drainage Works) | A/NR | 1,990,000 | 2,167,767 | |||||||
Consolidated Sales Tax District A of the Parish of LaFourche, 4.00% due 3/1/2022 (Roads, Bridges & Drainage Works) | A/NR | 1,545,000 | 1,665,788 |
26 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
East Baton Rouge Sewer Commission, 5.00% due 2/1/2018 (Wastewater System Improvements; Insured: AGM) | AA/Aa3 | $ | 3,000,000 | $ | 3,182,400 | |||||
Ernest N. Morial New Orleans Exhibition Hall Authority, 5.00% due 7/15/2020 (Convention Center) | NR/A2 | 1,000,000 | 1,156,220 | |||||||
Ernest N. Morial New Orleans Exhibition Hall Authority, 5.00% due 7/15/2021 (Convention Center) | NR/A2 | 780,000 | 900,744 | |||||||
Ernest N. Morial New Orleans Exhibition Hall Authority, 5.00% due 7/15/2022 (Convention Center) | NR/A2 | 1,000,000 | 1,153,390 | |||||||
Jefferson Sales Tax District Parish of Jefferson, 5.00% due 12/1/2018 (Sewerage Capital Project; Insured: AGM) | AA/A2 | 2,000,000 | 2,316,960 | |||||||
Louisiana Citizens Property Insurance Corp., 5.00% due 6/1/2015 (Insured: AMBAC) | A-/A3 | 10,265,000 | 10,589,887 | |||||||
Louisiana Energy & Power Authority, 5.00% due 1/1/2020 (Rodemacher Unit No. 2 Power) | A-/A3 | 1,000,000 | 1,163,490 | |||||||
Louisiana Energy & Power Authority, 5.00% due 1/1/2021 (Rodemacher Unit No. 2 Power) | A-/A3 | 1,000,000 | 1,169,070 | |||||||
Louisiana Energy & Power Authority, 5.00% due 6/1/2022 (LEPA Unit No. 1 Power; Insured: AGM) | AA/A2 | 1,000,000 | 1,195,760 | |||||||
Louisiana Energy & Power Authority, 5.00% due 1/1/2023 (Rodemacher Unit No. 2 Power) | A-/A3 | 1,415,000 | 1,657,701 | |||||||
Louisiana Energy & Power Authority, 5.00% due 6/1/2023 (LEPA Unit No. 1 Power; Insured: AGM) | AA/A2 | 750,000 | 902,228 | |||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.00% due 10/1/2014 (Community and Technical Colleges Facilities and SIS System; Insured: AGM) | AA-/A1 | 1,500,000 | 1,500,150 | |||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 3/1/2015 (Independence Stadium) | A/NR | 1,000,000 | 1,017,180 | |||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 3/1/2016 (Independence Stadium) | A/NR | 1,000,000 | 1,054,870 | |||||||
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 | 1,054,830 | |||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 3/1/2017 (Independence Stadium) | A/NR | 1,265,000 | 1,371,184 | |||||||
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 | 1,072,820 | |||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 3/1/2018 (Independence Stadium) | A/NR | 1,000,000 | 1,108,950 | |||||||
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 | 1,105,440 | |||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.00% due 12/1/2018 (Bossier Parish Community College - Campus Facilities, Inc. Project) | AA-/NR | 2,655,000 | 2,942,483 | |||||||
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 | 1,112,640 | |||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.00% due 12/1/2019 (Bossier Parish Community College - Campus Facilities, Inc. Project) | AA-/NR | 1,310,000 | 1,457,427 | |||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 12/1/2020 (Bossier Parish Community College - Campus Facilities, Inc. Project) | AA-/NR | 1,200,000 | 1,419,444 | |||||||
Louisiana Offshore Terminal Authority, 5.00% due 10/1/2018 (Deepwater Oil Port-Loop LLC) | BBB/NR | 22,000,000 | 24,647,920 | |||||||
Louisiana Offshore Terminal Authority, 2.125% due 10/1/2037 put 10/1/2015 (Deepwater Oil Port-Loop LLC) | BBB/A3 | 5,000,000 | 5,060,500 | |||||||
Louisiana Offshore Terminal Authority, 2.20% due 10/1/2040 put 10/1/2017 (Deepwater Oil Port-Loop LLC) | BBB/NR | 6,000,000 | 6,036,480 | |||||||
Louisiana Public Facilities Authority, 5.00% due 5/15/2015 (Ochsner Clinic Foundation) | NR/Baa1 | 1,825,000 | 1,868,672 | |||||||
Louisiana Public Facilities Authority, 5.75% due 7/1/2015 (Franciscan Missionaries of Our Lady Health System; Insured: AGM) | AA/A2 | 1,325,000 | 1,374,104 | |||||||
Louisiana Public Facilities Authority, 2.875% due 11/1/2015 (Entergy Gulf States) | A-/A2 | 2,500,000 | 2,547,125 | |||||||
Louisiana Public Facilities Authority, 5.00% due 5/15/2016 (Ochsner Clinic Foundation) | NR/Baa1 | 1,000,000 | 1,057,140 | |||||||
Louisiana Public Facilities Authority, 5.00% due 5/15/2017 (Ochsner Clinic Foundation) | NR/Baa1 | 1,035,000 | 1,121,702 | |||||||
Louisiana Public Facilities Authority, 5.00% due 5/15/2018 (Ochsner Clinic Foundation) | NR/Baa1 | 2,000,000 | 2,172,540 | |||||||
Louisiana Public Facilities Authority, 5.00% due 6/1/2022 (Hurricane Recovery Program) | NR/Aa3 | 2,945,000 | 3,521,513 | |||||||
Louisiana Public Facilities Authority, 5.00% due 6/1/2023 (Hurricane Recovery Program) | NR/Aa3 | 5,000,000 | 6,019,200 | |||||||
Louisiana State Office Facilities Corp., 3.75% due 3/1/2015 (State Capitol) | AA-/Aa3 | 5,000,000 | 5,073,550 | |||||||
Louisiana State Office Facilities Corp., 5.00% due 5/1/2015 (State Capitol) | NR/Aa3 | 2,830,000 | 2,908,674 | |||||||
Louisiana State Office Facilities Corp., 5.00% due 5/1/2016 (State Capitol) | NR/Aa3 | 1,000,000 | 1,069,130 | |||||||
Louisiana State Office Facilities Corp., 5.00% due 5/1/2018 (State Capitol) | NR/Aa3 | 2,500,000 | 2,836,900 | |||||||
Louisiana State Office Facilities Corp., 5.00% due 5/1/2021 (State Capitol) | NR/Aa3 | 4,595,000 | 5,249,742 | |||||||
Parish of LaFourche, 5.00% due 1/1/2019 (Roads, Highways & Bridges) | AA-/NR | 595,000 | 686,321 | |||||||
Parish of LaFourche, 5.00% due 1/1/2022 (Roads, Highways & Bridges) | AA-/NR | 415,000 | 493,103 | |||||||
Parish of LaFourche, 5.00% due 1/1/2023 (Roads, Highways & Bridges) | AA-/NR | 515,000 | 614,689 | |||||||
Parish of Orleans School District GO, 5.00% due 9/1/2016 (Insured: AGM) | AA/Aa3 | 4,500,000 | 4,855,320 | |||||||
Parish of Orleans School District GO, 5.00% due 9/1/2018 (Insured: AGM) | AA/Aa3 | 4,800,000 | 5,446,800 | |||||||
Parish of Orleans School District GO, 5.00% due 9/1/2020 (Insured: AGM) | AA/Aa3 | 3,840,000 | 4,455,898 | |||||||
Parish of Plaquemines Law Enforcement District GO, 5.00% due 9/1/2019 | BBB+/NR | 1,005,000 | 1,124,535 | |||||||
Parish of Plaquemines Law Enforcement District GO, 5.00% due 9/1/2021 | BBB+/NR | 1,115,000 | 1,220,167 | |||||||
Parish of St. Charles, 4.00% due 12/1/2040 put 6/1/2022 (Valero Energy Corp. Refinery) | BBB/Baa2 | 14,000,000 | 14,932,540 | |||||||
Parish of St. Tammany Sales Tax District No. 3, 5.00% due 6/1/2017 pre-refunded 6/1/2016 (Public Works, Improvements and Facilities; Insured: CIFG) | AA-/NR | 1,405,000 | 1,529,061 | |||||||
Parish of Terrebonne Hospital Service District No. 1, 4.00% due 4/1/2015 (Terrebonne General Medical Center) | A+/A2 | 575,000 | 583,573 | |||||||
Parish of Terrebonne Hospital Service District No. 1, 4.00% due 4/1/2017 (Terrebonne General Medical Center) | A+/A2 | 1,000,000 | 1,061,320 | |||||||
Parish of Terrebonne Hospital Service District No. 1, 5.00% due 4/1/2018 (Terrebonne General Medical Center) | A+/A2 | 1,000,000 | 1,108,890 |
Certified Annual Report 27
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Parish of Terrebonne Hospital Service District No. 1, 5.00% due 4/1/2019 (Terrebonne General Medical Center) | A+/A2 | $ | 1,810,000 | $ | 2,033,589 | |||||
Parish of Terrebonne Hospital Service District No. 1, 5.00% due 4/1/2021 (Terrebonne General Medical Center) | A+/A2 | 2,320,000 | 2,613,642 | |||||||
Regional Transit Authority, 0% due 12/1/2015 (Streetcar Rail Lines; Insured: Natl-Re) | AA-/NR | 3,085,000 | 2,931,151 | |||||||
Regional Transit Authority, 5.00% due 12/1/2017 (Streetcar Rail Lines; Insured: AGM) | AA/Aa3 | 755,000 | 848,884 | |||||||
Regional Transit Authority, 5.00% due 12/1/2019 (Streetcar Rail Lines; Insured: AGM) | AA/Aa3 | 1,000,000 | 1,164,760 | |||||||
Regional Transit Authority, 5.00% due 12/1/2021 (Streetcar Rail Lines; Insured: AGM) | AA/Aa3 | 1,000,000 | 1,154,170 | |||||||
Regional Transit Authority, 5.00% due 12/1/2022 (Streetcar Rail Lines; Insured: AGM) | AA/Aa3 | 1,110,000 | 1,265,256 | |||||||
State of Louisiana GO, 5.00% due 8/1/2017 (Insured: Natl-Re) | AA/Aa2 | 4,000,000 | 4,161,760 | |||||||
MAINE — 0.21% | ||||||||||
Maine Finance Authority, 3.80% due 11/1/2015 (Waste Management, Inc.) | A-/NR | 3,440,000 | 3,565,285 | |||||||
Maine Governmental Facilities Authority, 5.00% due 10/1/2020 (Augusta and Machias Courthouses) | AA-/Aa3 | 1,245,000 | 1,471,677 | |||||||
Maine Governmental Facilities Authority, 5.00% due 10/1/2021 (Augusta and Machias Courthouses) | AA-/Aa3 | 1,315,000 | 1,563,311 | |||||||
Maine Governmental Facilities Authority, 5.00% due 10/1/2022 (Augusta and Machias Courthouses) | AA-/Aa3 | 1,175,000 | 1,403,079 | |||||||
Maine Governmental Facilities Authority, 5.00% due 10/1/2023 (Augusta and Machias Courthouses) | AA-/Aa3 | 1,445,000 | 1,736,876 | |||||||
Maine Health & Higher Educational Facilities Authority, 5.00% due 7/1/2035 pre-refunded 7/1/2015 (Bowdoin College) (State Aid Withholding) | NR/A1 | 5,175,000 | 5,361,714 | |||||||
MARYLAND — 0.63% | ||||||||||
Howard County GO, 5.00% due 8/15/2015 (Consolidated Public Improvements) | AAA/Aaa | 6,000,000 | 6,254,940 | |||||||
Maryland Economic Development Corp., 5.00% due 6/1/2021 (Public Health Laboratory) | AA+/Aa1 | 8,725,000 | 10,437,456 | |||||||
Maryland Economic Development Corp., 4.00% due 6/1/2022 (Public Health Laboratory) | AA+/Aa1 | 8,245,000 | 9,159,535 | |||||||
Montgomery County GO, 4.00% due 11/1/2015 (Consolidated Public Improvements) | AAA/Aaa | 5,160,000 | 5,374,140 | |||||||
State of Maryland GO, 4.00% due 8/1/2015 (Public and Educational Facilities) | AAA/Aaa | 1,000,000 | 1,032,300 | |||||||
Washington Suburban Sanitary District GO, 5.00% due 6/1/2015 (Water and Sewer System Projects) | AAA/Aaa | 11,500,000 | 11,875,705 | |||||||
MASSACHUSETTS — 1.32% | ||||||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2017 | A-/NR | 2,540,000 | 2,770,886 | |||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2018 | A-/NR | 2,825,000 | 3,141,767 | |||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2019 | A-/NR | 2,765,000 | 3,103,187 | |||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2020 | A-/NR | 2,965,000 | 3,316,086 | |||||||
City of Northampton GO, 5.125% due 10/15/2016 (Insured: Natl-Re) | NR/Aa2 | 1,585,000 | 1,607,333 | |||||||
Massachusetts Development Finance Agency, 3.45% due 12/1/2015 (Carleton-Willard Village) | A-/NR | 1,160,000 | 1,172,679 | |||||||
Massachusetts Development Finance Agency, 5.25% due 10/1/2023 (Simmons College) | BBB+/Baa1 | 595,000 | 690,260 | |||||||
Massachusetts Development Finance Agency, 5.75% due 12/1/2042 pre-refunded 5/1/2019 (Dominion Energy Brayton Point Station Units 1 and 2) | BBB+/Baa2 | 2,000,000 | 2,416,840 | |||||||
Massachusetts DFA, 0.03% due 10/1/2042 put 10/1/2014 (Boston University; LOC: TD Bank, N.A.) (daily demand notes) | AAA/Aa1 | 420,000 | 420,000 | |||||||
Massachusetts Educational Financing Authority, 5.25% due 1/1/2016 | AA/NR | 2,450,000 | 2,590,042 | |||||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2017 | AA/NR | 1,800,000 | 1,982,088 | |||||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2018 | AA/NR | 11,170,000 | 12,662,982 | |||||||
Massachusetts Educational Financing Authority, 5.75% due 1/1/2020 | AA/NR | 7,500,000 | 8,850,375 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 7/1/2015 (UMass Memorial Health Care) | BBB+/Ba1 | 2,625,000 | 2,700,495 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 7/1/2018 (UMass Memorial Health Care) | BBB+/Ba1 | 4,290,000 | 4,660,527 | |||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 10/1/2019 (Berkshire Health Systems; Insured: AGM) | AA/A3 | 1,750,000 | 1,817,830 | |||||||
Massachusetts Health & Educational Facilities Authority, 0.04% due 7/1/2044 put 10/1/2014 (Baystate Medical Center; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 600,000 | 600,000 | |||||||
Massachusetts School Building Authority, 5.00% due 8/15/2027 pre-refunded 8/15/2015 (SMART Fund; Insured: Natl-Re) | AA+/Aa2 | 9,350,000 | 9,745,505 | |||||||
Massachusetts School Building Authority, 5.00% due 8/15/2030 pre-refunded 8/15/2015 (SMART Fund; Insured: AGM) | AA/Aa2 | 25,000,000 | 26,057,500 | |||||||
The Commonwealth of Massachusetts, 5.00% due 12/15/2014 (Federal Highway Grant Anticipation Trust Fund; Insured: AGM) | AAA/Aa1 | 2,325,000 | 2,348,831 | |||||||
MICHIGAN — 3.58% | ||||||||||
Byron Center Michigan Public Schools, 4.00% due 5/1/2015 (Insured: Q-SBLF) | AA-/NR | 1,985,000 | 2,027,459 | |||||||
Byron Center Michigan Public Schools, 4.00% due 5/1/2017 (Insured: AGM/Q-SBLF) | AA/NR | 1,305,000 | 1,414,372 | |||||||
Byron Center Michigan Public Schools, 4.00% due 5/1/2018 (Insured: AGM/Q-SBLF) | AA/NR | 1,935,000 | 2,138,755 | |||||||
Byron Center Michigan Public Schools, 4.00% due 5/1/2020 (Insured: AGM/Q-SBLF) | AA/NR | 1,000,000 | 1,123,220 | |||||||
City of Battle Creek County of Calhoun GO, 5.00% due 5/1/2020 (Downtown Development; Insured: AMBAC) | AA/Aa3 | 3,200,000 | 3,527,488 | |||||||
City of Grand Haven, 5.50% due 7/1/2016 (Electric System; Insured: Natl-Re) | AA-/A3 | 3,890,000 | 4,129,468 | |||||||
County of Genesee GO, 3.00% due 11/1/2016 (Water Supply System; Insured: BAM) | AA/A2 | 615,000 | 641,402 | |||||||
County of Genesee GO, 5.00% due 11/1/2022 (Water Supply System; Insured: BAM) | AA/A2 | 600,000 | 682,488 | |||||||
Forest Hills Public Schools GO, 5.00% due 5/1/2020 (Insured: AGM) | AA/Aa2 | 7,490,000 | 7,691,032 |
28 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Fraser Public School District GO, 5.00% due 5/1/2021 (School Building & Site; Insured: AGM/Q-SBLF) | AA/Aa2 | $ | 1,000,000 | $ | 1,026,400 | |||||
Kalamazoo Hospital Finance Authority, 4.00% due 5/15/2015 (Bronson Methodist Hospital; Insured: AGM) | NR/A2 | 1,735,000 | 1,770,359 | |||||||
Kalamazoo Hospital Finance Authority, 4.00% due 5/15/2016 (Bronson Methodist Hospital; Insured: AGM) | NR/A2 | 1,850,000 | 1,942,629 | |||||||
Kalamazoo Hospital Finance Authority, 4.50% due 5/15/2017 (Bronson Methodist Hospital; Insured: AGM) | NR/A2 | 1,830,000 | 1,993,456 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2018 (Bronson Methodist Hospital; Insured: AGM) | AA/A2 | 1,520,000 | 1,714,666 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2018 (Bronson Methodist Hospital; Insured: AGM) | AA/A2 | 2,500,000 | 2,820,175 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2020 (Bronson Methodist Hospital; Insured: AGM) | NR/A2 | 1,735,000 | 2,024,346 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2021 (Bronson Methodist Hospital; Insured: AGM) | NR/A2 | 2,350,000 | 2,706,683 | |||||||
Livingston County GO, 4.00% due 5/1/2018 (Howell Public Schools; Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,100,470 | |||||||
Livingston County GO, 4.00% due 5/1/2020 (Howell Public Schools; Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,116,430 | |||||||
Livingston County GO, 4.00% due 5/1/2021 (Howell Public Schools; Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,111,350 | |||||||
Livonia Public Schools School District GO, 4.00% due 5/1/2020 (School Building & Site) | A/A2 | 800,000 | 872,672 | |||||||
Livonia Public Schools School District GO, 5.00% due 5/1/2021 (School Building & Site) | A/A2 | 900,000 | 1,042,380 | |||||||
Michigan Finance Authority, 5.00% due 8/1/2019 (Ypsilanti Community Schools) | A+/NR | 1,460,000 | 1,653,085 | |||||||
Michigan Finance Authority, 5.00% due 8/1/2020 (Ypsilanti Community Schools) | A+/NR | 1,530,000 | 1,745,378 | |||||||
Michigan Finance Authority, 5.00% due 8/1/2021 (Ypsilanti Community Schools) | A+/NR | 1,610,000 | 1,842,404 | |||||||
Michigan Finance Authority, 5.00% due 8/1/2022 (Ypsilanti Community Schools) | A+/NR | 1,690,000 | 1,936,165 | |||||||
Michigan Municipal Bond Authority, 5.00% due 10/1/2020 (Clean Water Fund) | AAA/Aaa | 505,000 | 528,745 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2015 (Oakwood Hospital) | A/A2 | 2,500,000 | 2,586,425 | |||||||
Michigan State Hospital Finance Authority, 5.50% due 11/15/2015 (Henry Ford Health System) | A-/A3 | 2,300,000 | 2,409,020 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2016 (Oakwood Hospital) | A/A2 | 1,205,000 | 1,295,110 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2016 (Ascension Health) | AA+/Aa2 | 3,330,000 | 3,642,620 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2017 (Sparrow Memorial Hospital) | A+/A1 | 1,500,000 | 1,649,280 | |||||||
Michigan State Hospital Finance Authority, 5.50% due 11/15/2017 (Henry Ford Health System) | A-/A3 | 1,530,000 | 1,697,550 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2018 (Oakwood Hospital) | A/A2 | 1,000,000 | 1,099,980 | |||||||
Michigan State Hospital Finance Authority, 5.50% due 11/15/2018 (Henry Ford Health System) | A-/A3 | 3,500,000 | 3,958,185 | |||||||
Michigan State Hospital Finance Authority, 6.00% due 12/1/2018 (Trinity Health) | AA-/Aa2 | 2,000,000 | 2,375,880 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2019 (Oakwood Hospital) | A/A2 | 2,000,000 | 2,181,500 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 10/1/2026 put 6/1/2017 (Ascension Health) | NR/Aa3 | 12,140,000 | 13,510,606 | |||||||
Michigan State Hospital Finance Authority, 5.75% due 12/1/2034 put 12/1/2015 (Trinity Health) | AA-/Aa2 | 9,800,000 | 10,417,596 | |||||||
Michigan State Housing Development Authority, 5.00% due 4/1/2016 (Multi-Family Mtg Loan Financing) | AA/NR | 655,000 | 664,137 | |||||||
Michigan State Housing Development Authority, 4.00% due 10/1/2016 (Multi-Family Mtg Loan Financing) | AA/NR | 1,715,000 | 1,821,347 | |||||||
Michigan Strategic Fund, 5.00% due 10/15/2017 (Michigan House of Representatives Facilities; Insured: AGM) | AA/A1 | 2,000,000 | 2,212,420 | |||||||
Michigan Strategic Fund, 5.25% due 10/15/2019 (Michigan House of Representatives Facilities; Insured: AGM) | AA/A1 | 2,550,000 | 2,927,910 | |||||||
Michigan Strategic Fund, 5.25% due 10/15/2020 (Michigan House of Representatives Facilities; Insured: AGM) | AA/A1 | 4,025,000 | 4,614,703 | |||||||
Michigan Strategic Fund, 5.50% due 8/1/2029 put 8/1/2016 (Detroit Edison Co. Exempt Facilities Project) | A/Aa3 | 5,160,000 | 5,544,472 | |||||||
Plymouth-Canton Community Schools GO, 4.00% due 5/1/2018 (Insured: Q-SBLF) | NR/Aa2 | 1,500,000 | 1,650,705 | |||||||
Plymouth-Canton Community Schools GO, 4.00% due 5/1/2019 (Insured: Q-SBLF) | NR/Aa2 | 1,000,000 | 1,112,450 | |||||||
Plymouth-Canton Community Schools GO, 5.00% due 5/1/2020 (Insured: Q-SBLF) | NR/Aa2 | 1,000,000 | 1,169,350 | |||||||
Romeo Community School District GO, 5.00% due 5/1/2018 (Insured: Natl-Re/Q-SBLF) | AA-/Aa2 | 3,050,000 | 3,131,862 | |||||||
Royal Oak Hospital Finance Authority, 5.25% due 8/1/2017 (William Beaumont Hospital Obligated Group) | A/A1 | 5,855,000 | 6,570,598 | |||||||
Royal Oak Hospital Finance Authority, 5.00% due 9/1/2020 (William Beaumont Hospital Obligated Group) | A/A1 | 1,200,000 | 1,411,464 | |||||||
Royal Oak Hospital Finance Authority, 5.00% due 9/1/2021 (William Beaumont Hospital Obligated Group) | A/A1 | 2,500,000 | 2,951,650 | |||||||
Royal Oak Hospital Finance Authority, 5.00% due 9/1/2023 (William Beaumont Hospital Obligated Group) | A/A1 | 1,240,000 | 1,470,454 | |||||||
Royal Oak Hospital Finance Authority, 5.00% due 9/1/2024 (William Beaumont Hospital Obligated Group) | A/A1 | 2,000,000 | 2,366,260 | |||||||
School District of the City of Dearborn GO, 3.00% due 5/1/2015 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa2 | 435,000 | 441,760 | |||||||
School District of the City of Dearborn GO, 3.00% due 5/1/2019 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa2 | 445,000 | 475,167 | |||||||
School District of the City of Dearborn GO, 4.00% due 5/1/2020 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa2 | 350,000 | 390,751 | |||||||
School District of the City of Dearborn GO, 4.00% due 5/1/2021 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa2 | 570,000 | 633,470 | |||||||
School District of the City of Dearborn GO, 4.00% due 5/1/2022 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa2 | 535,000 | 591,459 | |||||||
School District of the City of Dearborn GO, 4.00% due 5/1/2023 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa2 | 625,000 | 687,906 | |||||||
School District of the City of Detroit GO, 5.00% due 5/1/2020 (Wayne County School Building & Site; Insured: Q-SBLF) | AA-/Aa2 | 2,200,000 | 2,514,688 | |||||||
School District of the City of Detroit GO, 5.00% due 5/1/2021 (Wayne County School Building & Site; Insured: Q-SBLF) | AA-/Aa2 | 4,000,000 | 4,569,920 | |||||||
School District of the City of Detroit GO, 5.00% due 5/1/2022 (Wayne County School Building & Site; Insured: Q-SBLF) | AA-/Aa2 | 3,000,000 | 3,422,640 | |||||||
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 | 1,050,820 | |||||||
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 | 1,193,185 | |||||||
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 | 1,448,658 | |||||||
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 | 1,552,592 | |||||||
St. Johns Public Schools GO, 5.00% due 5/1/2021 (Insured: Natl-Re/FGIC/Q-SBLF) | AA-/Aa3 | 1,000,000 | 1,172,390 | |||||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2015 (Higher Education Facilities Program) | A+/Aa3 | 4,000,000 | 4,196,640 | |||||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2015 (Higher Education Facilities Program; Insured: AMBAC) | A+/Aa3 | 6,000,000 | 6,294,960 | |||||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2016 (Higher Education Facilities Program) | A+/Aa3 | 6,305,000 | 6,867,595 | |||||||
State Building Authority of the State of Michigan, 5.50% due 10/15/2017 (Various Correctional Institutions, Higher Education and Other State Facilities) | A+/Aa3 | 4,150,000 | 4,730,958 | |||||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2020 (Higher Education Facilities Program) | A+/Aa3 | 1,000,000 | 1,167,350 |
Certified Annual Report 29
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2021 (Higher Education Facilities Program) | A+/Aa3 | $ | 1,000,000 | $ | 1,173,750 | |||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2022 (Higher Education Facilities Program) | A+/Aa3 | 3,000,000 | 3,534,120 | |||||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2023 (Higher Education Facilities Program) | A+/Aa3 | 7,715,000 | 9,156,625 | |||||||
Utica Community Schools County of Macomb GO, 4.00% due 5/1/2018 (Technology Infrastructure Improvements; | ||||||||||
Insured: Q-SBLF) | AA-/NR | 1,725,000 | 1,898,311 | |||||||
Utica Community Schools County of Macomb GO, 4.00% due 5/1/2019 (Technology Infrastructure Improvements; | ||||||||||
Insured: Q-SBLF) | AA-/NR | 9,925,000 | 11,041,066 | |||||||
Warren Consolidated School District GO, 4.00% due 5/1/2015 (Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,021,390 | |||||||
Warren Consolidated School District GO, 4.00% due 5/1/2017 (Insured: Q-SBLF) | AA-/NR | 1,035,000 | 1,118,038 | |||||||
Warren Consolidated School District GO, 5.00% due 5/1/2018 (Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,135,510 | |||||||
Warren Consolidated School District GO, 5.00% due 5/1/2020 (Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,169,350 | |||||||
Warren Consolidated School District GO, 5.00% due 5/1/2021 (Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,172,390 | |||||||
Wayne County Airport Authority, 5.00% due 12/1/2017 (Detroit Metropolitan Airport; Insured: Natl-Re) | AA-/A2 | 1,000,000 | 1,123,400 | |||||||
Wayne County Airport Authority, 5.00% due 12/1/2017 (Detroit Metropolitan Airport) | A/A2 | 2,420,000 | 2,718,628 | |||||||
Wayne County Airport Authority, 5.00% due 12/1/2019 (Detroit Metropolitan Airport) | A/A2 | 12,645,000 | 14,653,658 | |||||||
Wayne County Airport Authority, 5.50% due 12/1/2019 (Detroit Metropolitan Airport) | A/A2 | 2,600,000 | 3,076,944 | |||||||
Wayne County Airport Authority, 5.50% due 12/1/2020 (Detroit Metropolitan Airport) | A/A2 | 4,395,000 | 5,263,452 | |||||||
Wayne County Airport Authority, 5.50% due 12/1/2020 (Detroit Metropolitan Airport) | A/A2 | 3,115,000 | 3,730,524 | |||||||
Western Townships Utilities Authority GO, 5.00% due 1/1/2015 (Sewage Disposal System) | AA/NR | 1,870,000 | 1,891,935 | |||||||
Western Townships Utilities Authority GO, 5.00% due 1/1/2016 (Sewage Disposal System) | AA/NR | 1,670,000 | 1,764,155 | |||||||
Western Townships Utilities Authority GO, 5.00% due 1/1/2017 (Sewage Disposal System) | AA/NR | 1,500,000 | 1,643,190 | |||||||
Western Townships Utilities Authority GO, 5.00% due 1/1/2018 (Sewage Disposal System) | AA/NR | 1,500,000 | 1,691,535 | |||||||
MINNESOTA — 1.21% | ||||||||||
Cities of Minneapolis-St. Paul Metropolitan Airports Commission, 5.00% due 1/1/2017 (Insured: AMBAC) | AA-/NR | 8,005,000 | 8,812,785 | |||||||
City of St. Cloud, 5.00% due 5/1/2015 (CentraCare Health System) | NR/A1 | 1,000,000 | 1,027,820 | |||||||
City of St. Cloud, 5.00% due 5/1/2016 (CentraCare Health System) | NR/A1 | 1,250,000 | 1,339,713 | |||||||
City of St. Cloud, 5.00% due 5/1/2017 (CentraCare Health System) | NR/A1 | 2,920,000 | 3,241,784 | |||||||
City of St. Cloud, 5.00% due 5/1/2017 (CentraCare Health System) | NR/A1 | 1,000,000 | 1,110,200 | |||||||
City of St. Cloud, 5.00% due 5/1/2018 (CentraCare Health System) | NR/A1 | 3,105,000 | 3,523,026 | |||||||
City of St. Cloud, 5.00% due 5/1/2019 (CentraCare Health System) | NR/A1 | 3,495,000 | 4,035,222 | |||||||
City of St. Cloud, 5.00% due 5/1/2020 (CentraCare Health System) | NR/A1 | 3,310,000 | 3,869,224 | |||||||
City of St. Paul Housing & Redevelopment Authority, 5.00% due 2/1/2018 (Gillette Children’s Specialty Healthcare Project) | A-/NR | 1,255,000 | 1,381,416 | |||||||
City of St. Paul Housing & Redevelopment Authority, 5.25% due 2/1/2020 (Gillette Children’s Specialty Healthcare Project) | A-/NR | 2,010,000 | 2,237,110 | |||||||
City of St. Paul Housing & Redevelopment Authority, 5.25% due 5/15/2021 (Regions Hospital) | A/A2 | 1,070,000 | 1,144,675 | |||||||
County of Clay GO, 3.00% due 4/1/2018 (State-Aid Road Improvements) | AA/NR | 1,225,000 | 1,315,283 | |||||||
Eden Prairie ISD No. 272 GO, 4.00% due 2/1/2015 (Minnesota School District Credit Enhancement Program) | NR/Aa2 | 7,170,000 | 7,263,138 | |||||||
Le Sueur-Henderson ISD No. 2397 GO, 3.00% due 4/1/2021 (Minnesota School District Credit Enhancement Program) | AA+/NR | 1,125,000 | 1,205,933 | |||||||
Minnesota Agricultural & Economic Development Board, 5.00% due 2/15/2015 (Essential Health; Insured: AGM) | AA/NR | 1,335,000 | 1,357,134 | |||||||
Minnesota Agricultural & Economic Development Board, 5.00% due 2/15/2017 (Essential Health; Insured: AGM) | AA/NR | 2,500,000 | 2,739,225 | |||||||
Minnesota Public Facilities Authority PCR, 5.25% due 3/1/2015 | AAA/Aaa | 1,000,000 | 1,021,560 | |||||||
Northern Municipal Power Agency, 5.00% due 1/1/2019 (Electric System) | A-/A3 | 5,000,000 | 5,769,650 | |||||||
Northern Municipal Power Agency, 5.00% due 1/1/2020 (Electric System) | A-/A3 | 3,500,000 | 4,099,095 | |||||||
Port Authority of the City of St. Paul, 5.00% due 12/1/2017 (Minnesota Andersen Office Building) | AA/Aa2 | 4,945,000 | 5,599,421 | |||||||
Port Authority of the City of St. Paul, 4.00% due 12/1/2018 (Minnesota Freeman Office Building) | AA/Aa2 | 3,925,000 | 4,394,351 | |||||||
Port Authority of the City of St. Paul, 5.00% due 12/1/2019 (Minnesota Freeman Office Building) | AA/Aa2 | 2,000,000 | 2,357,040 | |||||||
Port Authority of the City of St. Paul, 5.00% due 12/1/2020 (Minnesota Freeman Office Building) | AA/Aa2 | 2,675,000 | 3,191,275 | |||||||
Port Authority of the City of St. Paul, 5.00% due 12/1/2021 (Minnesota Andersen Office Building) | AA/Aa2 | 965,000 | 1,160,162 | |||||||
Port Authority of the City of St. Paul, 5.00% due 12/1/2022 (Minnesota Andersen Office Building) | AA/Aa2 | 1,250,000 | 1,517,988 | |||||||
State of Minnesota GO, 5.00% due 8/1/2015 (Educational and Recreational Facilities Improvements) (ETM) | NR/NR | 165,000 | 171,674 | |||||||
State of Minnesota GO, 5.00% due 8/1/2015 (Educational and Recreational Facilities Improvements) | AA+/Aa1 | 9,835,000 | 10,234,793 | |||||||
MISSISSIPPI — 0.45% | ||||||||||
City of Jackson GO, 5.00% due 10/1/2016 (Insured: AMBAC) | AA-/Aa2 | 1,500,000 | 1,564,875 | |||||||
Lamar County School District GO, 3.00% due 6/1/2016 (Educational and Performing Arts Capital Projects) | A/NR | 1,800,000 | 1,870,974 | |||||||
Lamar County School District GO, 3.50% due 6/1/2017 (Educational and Performing Arts Capital Projects) | A/NR | 1,700,000 | 1,818,014 | |||||||
Medical Center Educational Building, 4.00% due 6/1/2015 (University of Mississippi Medical Center) | AA-/Aa2 | 2,325,000 | 2,381,288 | |||||||
Medical Center Educational Building, 4.00% due 6/1/2016 (University of Mississippi Medical Center) | AA-/Aa2 | 3,300,000 | 3,480,873 | |||||||
Mississippi Development Bank, 5.00% due 1/1/2020 (MDOT-Madison County Highway) | AA-/Aa3 | 1,000,000 | 1,175,580 | |||||||
Mississippi Development Bank, 5.00% due 1/1/2020 (MDOT-Harrison County Highway) | AA-/Aa3 | 1,500,000 | 1,763,370 | |||||||
Mississippi Development Bank, 5.00% due 1/1/2021 (MDOT-Madison County Highway) | AA-/Aa3 | 2,000,000 | 2,371,620 | |||||||
Mississippi Development Bank, 5.00% due 1/1/2021 (MDOT-Harrison County Highway) | AA-/Aa3 | 2,500,000 | 2,964,525 | |||||||
Mississippi Development Bank, 5.00% due 1/1/2022 (MDOT-Harrison County Highway) | AA-/Aa3 | 1,000,000 | 1,192,640 | |||||||
Mississippi Development Bank, 5.00% due 1/1/2022 (MDOT-Madison County Highway) | AA-/Aa3 | 1,000,000 | 1,192,640 |
30 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Mississippi Development Bank, 5.00% due 1/1/2023 (MDOT-Harrison County Highway) | AA-/Aa3 | $ | 1,500,000 | $ | 1,794,075 | |||||
Mississippi Development Bank, 5.00% due 1/1/2023 (MDOT-Madison County Highway) | AA-/Aa3 | 1,250,000 | 1,495,063 | |||||||
Mississippi Development Bank, 4.75% due 7/1/2017 (Canton GO Public Improvement Project) | NR/NR | 880,000 | 922,742 | |||||||
Mississippi Development Bank, 5.00% due 8/1/2018 (Department of Corrections) | AA-/NR | 4,910,000 | 5,586,205 | |||||||
MISSOURI — 1.61% | ||||||||||
Cass County COP, 4.00% due 5/1/2015 | A/NR | 1,000,000 | 1,018,730 | |||||||
Cass County COP, 4.00% due 5/1/2018 | A/NR | 2,255,000 | 2,429,537 | |||||||
Cass County COP, 4.50% due 5/1/2019 | A/NR | 1,270,000 | 1,403,198 | |||||||
Cass County COP, 5.00% due 5/1/2020 | A/NR | 2,255,000 | 2,567,408 | |||||||
Cass County COP, 5.00% due 5/1/2021 | A/NR | 1,750,000 | 1,960,980 | |||||||
City of Lee’s Summit GO, 3.00% due 4/1/2015 | NR/Aa1 | 1,275,000 | 1,293,449 | |||||||
Jackson County, 4.00% due 12/1/2014 (Truman Sports Complex) | NR/A1 | 2,580,000 | 2,596,873 | |||||||
Jackson County, 5.00% due 12/1/2014 (Truman Sports Complex; Insured: AMBAC) | A/Aa3 | 7,900,000 | 7,965,017 | |||||||
Jackson County, 4.00% due 12/1/2016 (Parking Facility Projects) | NR/Aa3 | 500,000 | 536,715 | |||||||
Jackson County, 4.00% due 12/1/2017 (Parking Facility Projects) | NR/Aa3 | 500,000 | 547,575 | |||||||
Jackson County, 4.00% due 12/1/2019 (Parking Facility Projects) | NR/Aa3 | 500,000 | 555,135 | |||||||
Jackson County, 4.00% due 12/1/2021 (Parking Facility Projects) | NR/Aa3 | 1,000,000 | 1,106,510 | |||||||
Kansas City IDA, 5.00% due 9/1/2018 (Kansas City Redevelopment District) (ETM) | NR/NR | 695,000 | 803,309 | |||||||
Kansas City IDA, 5.00% due 9/1/2018 (Kansas City Redevelopment District) | AA-/A1 | 1,305,000 | 1,487,635 | |||||||
Kansas City Municipal Assistance Corp., 5.00% due 4/15/2018 (Bartle Music Hall and Municipal Auditorium Parking Garage; Insured: Natl-Re) | AA/A1 | 1,000,000 | 1,125,110 | |||||||
Kansas City Municipal Assistance Corp., 0% due 4/15/2021 (H. Roe Bartle Convention Center & Infrastructure Project; Insured: AMBAC) | AA-/A1 | 10,055,000 | 8,551,375 | |||||||
Kansas City Municipal Assistance Corp., 0% due 4/15/2022 (H. Roe Bartle Convention Center & Infrastructure Project; Insured: AMBAC) | AA-/A1 | 5,040,000 | 4,121,006 | |||||||
Missouri Development Finance Board, 4.00% due 6/1/2015 (City of Independence Electric System Projects) | A/NR | 1,000,000 | 1,022,440 | |||||||
Missouri Development Finance Board, 4.00% due 6/1/2016 (City of Independence Electric System Projects) | A/NR | 1,560,000 | 1,639,310 | |||||||
Missouri Development Finance Board, 5.00% due 6/1/2017 (City of Independence Electric System Projects) | A/NR | 1,525,000 | 1,670,500 | |||||||
Missouri Development Finance Board, 5.00% due 6/1/2018 (City of Independence Electric System Projects) | A/NR | 1,705,000 | 1,908,696 | |||||||
Missouri Development Finance Board, 4.00% due 6/1/2019 (City of Independence Electric System Projects) | A/NR | 1,000,000 | 1,087,310 | |||||||
Missouri Development Finance Board, 5.00% due 6/1/2019 (City of Independence Electric System Projects) | A/NR | 1,790,000 | 2,025,636 | |||||||
Missouri Development Finance Board, 4.00% due 6/1/2020 (City of Independence Electric System Projects) | A/NR | 1,265,000 | 1,371,665 | |||||||
Missouri Development Finance Board, 5.00% due 6/1/2020 (City of Independence Electric System Projects) | A/NR | 1,000,000 | 1,137,020 | |||||||
Missouri Development Finance Board, 4.00% due 6/1/2021 (City of Independence Electric System Projects) | A/NR | 2,465,000 | 2,662,619 | |||||||
Missouri Development Finance Board, 4.00% due 6/1/2022 (City of Independence Electric System Projects) | A/NR | 3,155,000 | 3,391,120 | |||||||
Missouri Development Finance Board, 0.04% due 12/1/2033 put 10/1/2014 (The Nelson Gallery Foundation; SPA: Northern Trust Co.) (daily demand notes) | AAA/Aaa | 13,180,000 | 13,180,000 | |||||||
Missouri State Health & Educational Facilities Authority, 4.00% due 4/1/2015 (Webster University) | NR/A2 | 2,155,000 | 2,196,635 | |||||||
Missouri State Health & Educational Facilities Authority, 4.00% due 4/1/2016 (Webster University) | NR/A2 | 1,685,000 | 1,775,147 | |||||||
Missouri State Health & Educational Facilities Authority, 5.00% due 5/15/2017 (Children’s Mercy Hospital) | A+/NR | 1,000,000 | 1,094,860 | |||||||
Missouri State Health & Educational Facilities Authority, 5.00% due 5/15/2019 (Children’s Mercy Hospital) | A+/NR | 1,000,000 | 1,135,240 | |||||||
Missouri State Health & Educational Facilities Authority, 5.00% due 5/15/2020 (Children’s Mercy Hospital) | A+/NR | 1,000,000 | 1,136,950 | |||||||
Platte County, 4.00% due 4/1/2017 (Community & Resource Centers) | NR/A1 | 1,500,000 | 1,591,785 | |||||||
Platte County, 4.00% due 4/1/2018 (Community & Resource Centers) | NR/A1 | 2,110,000 | 2,268,039 | |||||||
Platte County, 5.00% due 4/1/2019 (Community & Resource Centers) | NR/A1 | 2,000,000 | 2,250,740 | |||||||
Platte County, 5.00% due 4/1/2021 (Community & Resource Centers) | NR/A1 | 2,440,000 | 2,780,917 | |||||||
Southeast Missouri State University, 4.00% due 4/1/2015 (City of Cape Girardeau Campus System Facilities) | A/NR | 600,000 | 611,286 | |||||||
Southeast Missouri State University, 5.00% due 4/1/2016 (City of Cape Girardeau Campus System Facilities) | A/NR | 750,000 | 799,237 | |||||||
Southeast Missouri State University, 5.00% due 4/1/2018 (City of Cape Girardeau Campus System Facilities) | A/NR | 1,165,000 | 1,317,289 | |||||||
Southeast Missouri State University, 5.00% due 4/1/2020 (City of Cape Girardeau Campus System Facilities) | A/NR | 2,825,000 | 3,282,961 | |||||||
Special Administrative Board of the Transitional School District of the City of St. Louis GO, 4.00% due 4/1/2019 (State Aid Withholding) | AA+/NR | 1,615,000 | 1,802,501 | |||||||
Special Administrative Board of the Transitional School District of the City of St. Louis GO, 4.00% due 4/1/2020 (State Aid Withholding) | AA+/NR | 1,600,000 | 1,799,264 | |||||||
Special Administrative Board of the Transitional School District of the City of St. Louis GO, 4.00% due 4/1/2021 (State Aid Withholding) | AA+/NR | 2,055,000 | 2,318,554 | |||||||
Special Administrative Board of the Transitional School District of the City of St. Louis GO, 4.00% due 4/1/2022 (State Aid Withholding) | AA+/NR | 3,300,000 | 3,728,340 | |||||||
St. Louis Municipal Finance Corp., 5.00% due 2/15/2015 (City Justice Center) | A/A1 | 1,250,000 | 1,270,625 | |||||||
St. Louis Municipal Finance Corp., 5.00% due 2/15/2016 (City Justice Center) | A/A1 | 2,065,000 | 2,180,289 | |||||||
St. Louis Municipal Finance Corp., 5.00% due 2/15/2017 (City Justice Center) | A/A1 | 2,000,000 | 2,171,880 | |||||||
St. Louis Municipal Finance Corp., 5.00% due 2/15/2018 (City Justice Center) | A/A1 | 3,865,000 | 4,288,643 |
Certified Annual Report 31
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
MONTANA — 0.25% | ||||||||||
City of Forsyth PCR, 0.06% due 1/1/2018 put 10/1/2014 (PacifiCorp; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | A+/Aa3 | $ | 17,475,000 | $ | 17,475,000 | |||||
NEVADA — 1.26% | ||||||||||
Carson City, 4.00% due 9/1/2015 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 1,000,000 | 1,026,010 | |||||||
Carson City, 4.00% due 9/1/2016 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 1,045,000 | 1,098,640 | |||||||
Carson City, 5.00% due 9/1/2019 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 1,000,000 | 1,129,330 | |||||||
Carson City, 5.00% due 9/1/2020 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 1,000,000 | 1,138,890 | |||||||
Carson City, 5.00% due 9/1/2022 (Carson Tahoe Regional Healthcare Project) | BBB+/NR | 2,450,000 | 2,796,748 | |||||||
City of Las Vegas COP, 5.00% due 9/1/2016 (City Hall) | AA-/Aa3 | 4,000,000 | 4,306,280 | |||||||
City of Las Vegas COP, 5.00% due 9/1/2017 (City Hall) | AA-/Aa3 | 4,300,000 | 4,757,692 | |||||||
City of Las Vegas COP, 5.00% due 9/1/2018 (City Hall) | AA-/Aa3 | 4,000,000 | 4,499,960 | |||||||
City of Las Vegas GO, 7.00% due 4/1/2017 (Performing Arts Center) | AA/Aa2 | 1,825,000 | 2,108,787 | |||||||
City of Las Vegas GO, 7.00% due 4/1/2018 (Performing Arts Center) | AA/Aa2 | 2,095,000 | 2,526,235 | |||||||
City of Reno, 5.25% due 6/1/2016 (Washoe Medical Center; Insured: AGM) | AA/A2 | 1,100,000 | 1,178,771 | |||||||
City of Reno, 5.25% due 6/1/2018 (Washoe Medical Center; Insured: AGM) | AA/A2 | 1,000,000 | 1,134,270 | |||||||
Clark County GO, 5.00% due 11/1/2014 (Flood Control) | AA/Aa1 | 4,000,000 | 4,016,960 | |||||||
Clark County GO, 5.00% due 11/1/2017 (Southern Nevada Water Authority; Insured: AMBAC) | AA/Aa1 | 1,310,000 | 1,430,245 | |||||||
Clark County GO, 5.00% due 3/1/2019 (University Medical Center of Southern Nevada; Insured: Natl-Re) | AA/Aa1 | 1,850,000 | 1,886,667 | |||||||
Clark County GO, 5.00% due 3/1/2020 (University Medical Center of Southern Nevada; Insured: Natl-Re) | AA/Aa1 | 2,130,000 | 2,171,727 | |||||||
Clark County Improvement District, 5.00% due 12/1/2015 (Insured: AMBAC) | BBB+/NR | 1,635,000 | 1,701,021 | |||||||
Las Vegas Clark County Library District GO, 5.00% due 1/1/2018 | AA/Aa2 | 6,535,000 | 7,385,138 | |||||||
Las Vegas Clark County Library District GO, 5.00% due 1/1/2019 | AA/Aa2 | 3,000,000 | 3,464,460 | |||||||
Las Vegas Convention & Visitors Authority, 5.25% due 7/1/2015 (Insured: AMBAC) | A+/A1 | 4,845,000 | 5,017,676 | |||||||
Las Vegas Convention & Visitors Authority, 5.00% due 7/1/2019 (Insured: AMBAC) | A+/A1 | 6,000,000 | 6,210,960 | |||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2016 | AA+/Aa2 | 1,000,000 | 1,076,250 | |||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2017 | AA+/Aa2 | 1,050,000 | 1,170,865 | |||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2019 | AA+/Aa2 | 1,000,000 | 1,165,110 | |||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2020 | AA+/Aa2 | 4,255,000 | 5,019,794 | |||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2020 | AA+/Aa2 | 5,080,000 | 5,993,079 | |||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2021 | AA+/Aa2 | 5,000,000 | 5,935,350 | |||||||
State of Nevada GO, 5.00% due 2/1/2017 pre-refunded 2/1/2015 (Cultural Affairs and Capital Improvement) | AA/Aa2 | 700,000 | 711,473 | |||||||
State of Nevada GO, 5.00% due 12/1/2021 (Municipal Bond Bank Project Nos. R-9A through R-13F; Insured: AGM) | AA/Aa2 | 1,095,000 | 1,129,909 | |||||||
University and Community College System of Nevada, 5.00% due 7/1/2016 pre-refunded 7/1/2015 (Reno Campus Library Facility; Insured: AGM) | AA/Aa2 | 370,000 | 383,468 | |||||||
Washoe County GO, 5.00% due 7/1/2021 (Reno-Sparks Convention & Visitors Authority) | AA/Aa2 | 1,700,000 | 1,989,629 | |||||||
Washoe County GO, 5.00% due 7/1/2022 (Reno-Sparks Convention & Visitors Authority) | AA/Aa2 | 2,500,000 | 2,885,275 | |||||||
NEW HAMPSHIRE — 0.42% | ||||||||||
New Hampshire Health and Education Facilities Authority, 5.00% due 10/1/2016 (Southern New Hampshire Medical Center) | A-/NR | 1,260,000 | 1,357,070 | |||||||
New Hampshire Health and Education Facilities Authority, 5.00% due 10/1/2017 (Southern New Hampshire Medical Center) | A-/NR | 1,000,000 | 1,105,800 | |||||||
New Hampshire Health and Education Facilities Authority, 0.04% due 6/1/2031 put 10/1/2014 (Dartmouth College; SPA: JPMorgan Chase Bank N.A.) (daily demand notes) | AA+/Aa1 | 4,230,000 | 4,230,000 | |||||||
New Hampshire Health and Education Facilities Authority, 0.09% due 7/1/2033 put 10/1/2014 (University System of New Hampshire; SPA: Wells Fargo Bank N.A.) (daily demand notes) | NR/Aa3 | 880,000 | 880,000 | |||||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2016 (Insured: Natl-Re) | AA-/A1 | 2,985,000 | 3,242,695 | |||||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2017 (Insured: Natl-Re) | AA-/A1 | 3,130,000 | 3,517,181 | |||||||
New Hampshire Municipal Bond Bank, 5.25% due 8/15/2020 | AA/Aa3 | 1,000,000 | 1,204,690 | |||||||
New Hampshire Municipal Bond Bank, 5.25% due 8/15/2022 | AA/Aa3 | 2,770,000 | 3,388,264 | |||||||
New Hampshire Turnpike System, 5.00% due 2/1/2016 | A+/A1 | 3,000,000 | 3,185,400 | |||||||
New Hampshire Turnpike System, 5.00% due 2/1/2017 | A+/A1 | 2,425,000 | 2,672,302 | |||||||
New Hampshire Turnpike System, 5.00% due 2/1/2018 | A+/A1 | 1,295,000 | 1,468,919 | |||||||
New Hampshire Turnpike System, 5.00% due 2/1/2020 | A+/A1 | 1,000,000 | 1,174,260 | |||||||
New Hampshire Turnpike System, 5.00% due 2/1/2021 | A+/A1 | 1,260,000 | 1,487,606 | |||||||
State of New Hampshire, 5.00% due 9/1/2015 (I-93 Salem to Manchester Project) | AA/A2 | 825,000 | 861,275 | |||||||
NEW JERSEY — 1.89% | ||||||||||
Burlington County Bridge Commission, 2.00% due 12/1/2014 (County Governmental Loan Program) | AA/Aa2 | 2,140,000 | 2,146,698 | |||||||
Burlington County Bridge Commission, 3.00% due 12/1/2015 (County Governmental Loan Program) | AA/Aa2 | 1,245,000 | 1,284,803 | |||||||
Burlington County Bridge Commission, 3.00% due 12/1/2016 (County Governmental Loan Program) | AA/Aa2 | 1,000,000 | 1,053,830 | |||||||
Burlington County Bridge Commission, 5.00% due 12/1/2018 (County Governmental Loan Program) | AA/Aa2 | 1,000,000 | 1,158,410 | |||||||
Camden County Improvement Authority, 5.00% due 7/1/2015 (Cooper Medical School) | A+/A2 | 2,990,000 | 3,092,108 |
32 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Camden County Improvement Authority, 5.00% due 7/1/2016 (Cooper Medical School) | A+/A2 | $ | 3,040,000 | $ | 3,262,315 | |||||
City of Paterson, 4.25% due 6/15/2015 (City Capital Projects; Insured: AGM) (State Aid Withholding) (ETM) | NR/A2 | 1,275,000 | 1,312,192 | |||||||
City of Paterson GO, 3.50% due 3/15/2017 (Debt Restructuring & City Capital Projects) (State Aid Withholding) | NR/A2 | 950,000 | 997,937 | |||||||
County of Bergen GO, 3.25% due 11/1/2014 (General Improvement, Special Services, Vocational School Projects) | NR/Aaa | 920,000 | 922,493 | |||||||
County of Essex GO, 4.00% due 6/1/2016 | NR/Aa2 | 500,000 | 530,710 | |||||||
County of Hudson COP, 6.25% due 12/1/2014 (Correctional Facility Lease-Purchase; Insured: Natl-Re) | AA-/A3 | 1,500,000 | 1,513,620 | |||||||
County of Hudson COP, 6.25% due 12/1/2016 (Correctional Facility Lease-Purchase; Insured: Natl-Re) | AA-/A3 | 550,000 | 606,705 | |||||||
Essex County Improvement Authority, 5.125% due 10/1/2016 (Insured: Natl-Re) | NR/Aa2 | 2,545,000 | 2,555,511 | |||||||
Gloucester County Improvement Authority, 2.125% due 12/1/2029 put 12/1/2017 (Waste Management, Inc. Project) | A-/NR | 2,000,000 | 2,079,880 | |||||||
Hudson County Improvement Authority, 5.25% due 10/1/2014 (Hudson County Lease Project; Insured: AGM) | AA/Aa3 | 3,000,000 | 3,000,390 | |||||||
Hudson County Improvement Authority, 4.75% due 10/1/2015 (Hudson County Lease Project; Insured: AGM) | AA/Aa3 | 2,000,000 | 2,081,720 | |||||||
a Hudson County Improvement Authority, 4.75% due 10/1/2016 (Hudson County Lease Project; Insured: AGM) | AA/Aa3 | 3,155,000 | 3,392,256 | |||||||
Hudson County Improvement Authority, 4.75% due 10/1/2017 (Hudson County Lease Project; Insured: AGM) | AA/Aa3 | 4,065,000 | 4,477,272 | |||||||
Hudson County Improvement Authority, 4.75% due 10/1/2018 (Hudson County Lease Project; Insured: AGM) | AA/Aa3 | 2,000,000 | 2,242,480 | |||||||
Hudson County Improvement Authority, 4.75% due 10/1/2019 (Hudson County Lease Project; Insured: AGM) | AA/Aa3 | 4,390,000 | 4,970,885 | |||||||
Hudson County Improvement Authority, 5.375% due 10/1/2020 (Hudson County Lease Project; Insured: AGM) | AA/Aa3 | 2,020,000 | 2,371,339 | |||||||
Middlesex County Improvement Authority, 5.00% due 9/15/2015 (Parks, Open Space, Playgrounds for Public Recreation) | AAA/Aa2 | 500,000 | 523,140 | |||||||
Monmouth County Improvement Authority, 5.00% due 12/1/2016 (Insured: AMBAC) | NR/NR | 1,000,000 | 1,083,170 | |||||||
New Jersey EDA, 5.00% due 11/15/2014 (Seabrook Village) | NR/NR | 1,000,000 | 1,004,480 | |||||||
New Jersey EDA, 5.00% due 12/15/2016 (School Facilities Construction) | A-/A2 | 10,950,000 | 11,961,232 | |||||||
New Jersey EDA, 5.00% due 9/1/2018 pre-refunded 9/1/2015 (School Facilities Construction; Insured: Natl-Re) | AA+/A2 | 3,000,000 | 3,133,830 | |||||||
New Jersey EDA, 5.50% due 12/15/2019 (School Facilities Construction; Insured: AMBAC) | A-/A2 | 5,525,000 | 6,438,006 | |||||||
New Jersey EDA, 5.00% due 9/1/2020 (School Facilities Construction) | A-/A2 | 500,000 | 571,415 | |||||||
New Jersey EDA, 5.00% due 3/1/2023 (School Facilities Construction) | A-/A2 | 4,000,000 | 4,571,080 | |||||||
New Jersey EDA, 5.75% due 9/1/2023 (School Facilities Construction) | A-/A2 | 5,505,000 | 6,394,443 | |||||||
New Jersey EDA, 5.00% due 3/1/2025 (School Facilities Construction) | A-/A2 | 4,575,000 | 5,188,828 | |||||||
New Jersey Educational Facilities Authority, 5.00% due 9/1/2016 (Higher Education Capital Improvement; Insured: AGM) | AA/A2 | 675,000 | 703,890 | |||||||
New Jersey Health Care Facilities Financing Authority, 5.00% due 7/1/2015 (St. Peter’s University Hospital) | BB+/Ba1 | 3,520,000 | 3,611,802 | |||||||
New Jersey Health Care Facilities Financing Authority, 5.00% due 7/1/2023 (Virtua Health Issue) | A+/NR | 535,000 | 635,853 | |||||||
New Jersey Health Care Facilities Financing Authority, 5.00% due 7/1/2024 (Virtua Health Issue) | A+/NR | 1,000,000 | 1,189,420 | |||||||
New Jersey Higher Educational Assistance Authority, 5.00% due 12/1/2017 | AA/Aa2 | 1,910,000 | 2,140,289 | |||||||
New Jersey Higher Educational Assistance Authority, 5.00% due 12/1/2018 | AA/Aa2 | 3,000,000 | 3,403,230 | |||||||
New Jersey Higher Educational Assistance Authority, 5.25% due 12/1/2019 | AA/Aa2 | 5,650,000 | 6,571,458 | |||||||
New Jersey Transit Corp., 5.00% due 9/15/2021 (Urban Public Transportation Capital Improvement) | A/A3 | 3,395,000 | 3,879,806 | |||||||
New Jersey Transit Corp. COP, 5.00% due 9/15/2019 pre-refunded 9/15/2015 (Multi-Level Rail Cars and Parts; Insured: Natl-Re) | AA-/A3 | 975,000 | 1,020,299 | |||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2019 (State Transportation System) | A-/A2 | 1,000,000 | 1,133,200 | |||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2019 pre-refunded 6/15/2015 (State Transportation System; Insured: AGM) | AA+/NR | 1,450,000 | 1,499,982 | |||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2020 (State Transportation System) | A-/A2 | 1,000,000 | 1,140,750 | |||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2021 (State Transportation System) | A-/A2 | 2,360,000 | 2,694,931 | |||||||
New Jersey Transportation Trust Fund Authority, 5.25% due 12/15/2023 (State Transportation System; Insured: AMBAC) | A-/A2 | 3,545,000 | 4,143,148 | |||||||
Ocean Township Municipal Utility Authority, 6.00% due 8/1/2017 (Insured: Natl-Re) | AA-/A3 | 2,065,000 | 2,222,704 | |||||||
Passaic Valley Sewer Commissioners GO, 5.625% due 12/1/2018 (Sewer System) | NR/A2 | 1,210,000 | 1,405,100 | |||||||
Passaic Valley Sewer Commissioners GO, 5.75% due 12/1/2019 (Sewer System) | NR/A2 | 2,000,000 | 2,366,500 | |||||||
Passaic Valley Sewer Commissioners GO, 5.75% due 12/1/2020 (Sewer System) | NR/A2 | 2,800,000 | 3,352,524 | |||||||
Passaic Valley Sewer Commissioners GO, 5.75% due 12/1/2021 (Sewer System) | NR/A2 | 1,000,000 | 1,208,780 | |||||||
Township of Plainsboro GO, 4.00% due 5/1/2015 (General Improvement) | NR/Aa1 | 1,000,000 | 1,021,890 | |||||||
Township of Wayne GO, 2.00% due 2/15/2018 (General Improvements and Water Utility System) | AA+/Aaa | 1,295,000 | 1,343,355 | |||||||
NEW MEXICO — 0.93% | ||||||||||
Albuquerque Bernalillo County Water Utility Authority, 5.00% due 7/1/2016 pre-refunded 7/1/2015 (San Juan-Chama Drinking Water Project; Insured: AMBAC) | AA+/Aa2 | 1,800,000 | 1,865,520 | |||||||
Albuquerque Municipal School District No. 12 GO, 5.00% due 8/1/2019 (Bernalillo and Sandoval Counties School Facilities) (State Aid Withholding) | AA/Aa1 | 2,300,000 | 2,709,170 | |||||||
Albuquerque Municipal School District No. 12 GO, 5.00% due 8/1/2021 pre-refunded 8/1/2016 (Educational Facilities) (State Aid Withholding) | AA/Aa1 | 2,425,000 | 2,631,804 | |||||||
City of Farmington PCR, 1.875% due 6/1/2032 put 9/1/2017 (El Paso Electric Co.-Four Corners Project) | BBB/Baa1 | 3,000,000 | 3,034,260 | |||||||
City of Gallup PCR, 5.00% due 8/15/2016 (Tri-State Generation and Transmission Assoc., Inc.; Insured: AMBAC) | A/A3 | 2,500,000 | 2,591,575 | |||||||
City of Santa Fe, 4.50% due 5/15/2022 (El Castillo Retirement Residences) | BBB-/NR | 2,585,000 | 2,678,241 | |||||||
Incorporated County of Los Alamos, 5.50% due 6/1/2017 | AA+/A1 | 2,365,000 | 2,665,237 | |||||||
Incorporated County of Los Alamos, 5.50% due 6/1/2018 | AA+/A1 | 2,205,000 | 2,560,711 | |||||||
New Mexico Educational Assistance Foundation, 4.00% due 9/1/2017 (Student Loans) | NR/Aaa | 6,000,000 | 6,568,620 |
Certified Annual Report 33
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2018 (Student Loans) | AAA/Aaa | $ | 5,000,000 | $ | 5,791,700 | |||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2021 (Student Loans) | AAA/Aaa | 3,000,000 | 3,509,220 | |||||||
New Mexico Finance Authority, 3.00% due 6/15/2015 (State Highway Infrastructure Projects) | AAA/Aa1 | 900,000 | 918,360 | |||||||
Regents of New Mexico State University, 5.00% due 4/1/2020 (Corbett Center Student Union & NMSU Golf Course) | AA/Aa3 | 3,095,000 | 3,658,847 | |||||||
Regents of New Mexico State University, 5.00% due 4/1/2021 (Corbett Center Student Union & NMSU Golf Course) | AA/Aa3 | 1,845,000 | 2,205,531 | |||||||
Regents of New Mexico State University, 5.00% due 4/1/2022 (Corbett Center Student Union & NMSU Golf Course) | AA/Aa3 | 1,250,000 | 1,503,588 | |||||||
Santa Fe Public School District GO, 3.00% due 8/1/2015 (District School Building and Renovation Program) (State Aid Withholding) | AA/Aa1 | 1,000,000 | 1,023,720 | |||||||
State of New Mexico, 5.00% due 7/1/2015 (Statewide Capital Project Funding) | AA/Aa1 | 8,200,000 | 8,499,710 | |||||||
State of New Mexico, 5.00% due 7/1/2016 (Statewide Capital Project Funding) | AA/Aa1 | 10,265,000 | 11,100,160 | |||||||
NEW YORK — 9.91% | ||||||||||
Amherst Development Corp., 5.00% due 10/1/2015 (Student Housing; Insured: AGM) | AA/A2 | 2,035,000 | 2,126,901 | |||||||
City of Long Beach School District GO, 3.50% due 5/1/2022 (Insured: AGM) (State Aid Withholding) | AA/Aa2 | 1,600,000 | 1,712,000 | |||||||
City of New York GO, 5.00% due 8/1/2017 pre-refunded 8/1/2015 (City Budget Financial Management) | NR/NR | 990,000 | 1,030,214 | |||||||
City of New York GO, 5.00% due 8/1/2017 (City Budget Financial Management) | NR/Aa2 | 10,000 | 10,400 | |||||||
City of New York GO, 0.04% due 8/1/2021 put 10/1/2014 (City Budget Financial Management; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 2,900,000 | 2,900,000 | |||||||
City of New York GO, 5.00% due 8/1/2021 (City Budget Financial Management) | AA/Aa2 | 3,000,000 | 3,576,540 | |||||||
City of New York GO, 5.00% due 8/1/2021 (City Budget Financial Management) | AA/Aa2 | 9,000,000 | 10,729,620 | |||||||
City of New York GO, 5.00% due 8/1/2021 (City Budget Financial Management) | AA/Aa2 | 7,350,000 | 8,762,523 | |||||||
City of New York GO, 5.00% due 8/1/2021 (City Budget Financial Management) | AA/Aa2 | 7,775,000 | 9,269,200 | |||||||
City of New York GO, 5.00% due 8/1/2022 (City Budget Financial Management) | AA/Aa2 | 3,000,000 | 3,594,750 | |||||||
City of New York GO, 5.00% due 8/1/2022 (City Budget Financial Management) | AA/Aa2 | 6,625,000 | 7,938,406 | |||||||
City of New York GO, 5.00% due 8/1/2022 (City Budget Financial Management) | AA/Aa2 | 20,000,000 | 23,965,000 | |||||||
City of New York GO, 5.00% due 8/1/2022 (City Budget Financial Management) | AA/Aa2 | 13,075,000 | 15,667,119 | |||||||
City of New York GO, 5.00% due 4/1/2023 pre-refunded 4/1/2015 (City Budget Financial Management) | NR/NR | 6,090,000 | 6,239,327 | |||||||
City of New York GO, 5.00% due 8/1/2023 (City Budget Financial Management) | AA/Aa2 | 9,520,000 | 11,477,883 | |||||||
City of New York GO, 5.00% due 8/1/2023 (City Budget Financial Management) | AA/Aa2 | 12,985,000 | 15,655,495 | |||||||
City of New York GO, 5.00% due 8/1/2024 (City Budget Financial Management) | AA/Aa2 | 40,145,000 | 48,860,479 | |||||||
City School District of the City of Rome GO, 5.00% due 6/15/2017 (Insured: Natl-Re) (State Aid Withholding) | NR/Aa3 | 1,635,000 | 1,689,135 | |||||||
Erie County Individual Development Agency, 5.00% due 5/1/2015 (Buffalo School District) (ETM) | NR/NR | 1,395,000 | 1,434,841 | |||||||
Erie County Individual Development Agency, 5.00% due 5/1/2015 (Buffalo School District) | AA/Aa2 | 1,605,000 | 1,650,871 | |||||||
Erie County Individual Development Agency, 5.00% due 5/1/2016 (Buffalo School District) (ETM) | NR/NR | 4,090,000 | 4,395,768 | |||||||
Erie County Individual Development Agency, 5.00% due 5/1/2016 (Buffalo School District) | AA/Aa2 | 4,705,000 | 5,052,041 | |||||||
Erie County Individual Development Agency, 5.00% due 5/1/2017 (Buffalo School District) | AA/Aa2 | 7,265,000 | 8,086,744 | |||||||
Erie County Individual Development Agency, 5.00% due 5/1/2018 (Buffalo School District) | AA/Aa2 | 5,000,000 | 5,721,850 | |||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2020 | AA-/A2 | 12,955,000 | 15,366,573 | |||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2020 | AA/NR | 2,000,000 | 2,384,440 | |||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2021 | AA-/A2 | 24,325,000 | 29,043,807 | |||||||
Monroe County Industrial Development Corp., 5.00% due 6/1/2018 (St. John Fisher College) | BBB+/NR | 1,425,000 | 1,577,532 | |||||||
Monroe County Industrial Development Corp., 5.00% due 6/1/2019 (St. John Fisher College) | BBB+/NR | 1,030,000 | 1,155,330 | |||||||
Monroe County Industrial Development Corp., 5.00% due 6/1/2022 (St. John Fisher College) | BBB+/NR | 2,000,000 | 2,245,960 | |||||||
Nassau County IDA, 5.25% due 3/1/2018 (New York Institute of Technology) | BBB+/Baa2 | 1,260,000 | 1,398,827 | |||||||
Nassau County IDA, 5.25% due 3/1/2020 (New York Institute of Technology) | BBB+/Baa2 | 1,715,000 | 1,954,380 | |||||||
New York City Health and Hospital Corp. GO, 5.00% due 2/15/2019 (Healthcare Facilities Improvements) | A+/Aa3 | 2,700,000 | 3,111,696 | |||||||
New York City Health and Hospital Corp. GO, 5.00% due 2/15/2020 (Healthcare Facilities Improvements) | A+/Aa3 | 10,000,000 | 11,664,500 | |||||||
New York City Health and Hospital Corp. GO, 5.00% due 2/15/2021 (Healthcare Facilities Improvements) | A+/Aa3 | 2,615,000 | 3,006,936 | |||||||
New York City Housing Development Corp., 0.80% due 11/1/2015 (Multi-Family Housing) | AA+/Aa2 | 1,820,000 | 1,820,801 | |||||||
New York City Municipal Water Finance Authority, 0.04% due 6/15/2043 put 10/1/2014 (Water and Sewer System; SPA: JPMorgan Chase Bank N.A.) (daily demand notes) | AA+/Aa2 | 3,400,000 | 3,400,000 | |||||||
New York City Municipal Water Finance Authority, 0.03% due 6/15/2035 put 10/1/2014 (Water and Sewer System; SPA: Bayerische Landesbank) (daily demand notes) | AAA/Aa1 | 46,115,000 | 46,115,000 | |||||||
New York City Municipal Water Finance Authority, 0.03% due 6/15/2045 put 10/1/2014 (Water and Sewer System) (daily demand notes) | AAA/Aa1 | 500,000 | 500,000 | |||||||
New York City Municipal Water Finance Authority, 0.03% due 6/15/2045 put 10/1/2014 (Water and Sewer System; SPA: Northern Trust Company) (daily demand notes) | AAA/Aa1 | 1,450,000 | 1,450,000 | |||||||
New York City Municipal Water Finance Authority, 0.03% due 6/15/2050 put 10/1/2014 (Water and Sewer System) (daily demand notes) | AA+/Aa2 | 5,000,000 | 5,000,000 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2014 (City Capital Projects) | AAA/Aa1 | 2,275,000 | 2,284,578 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2014 (World Trade Center Recovery Costs) (State Aid Withholding) | AAA/Aaa | 2,000,000 | 2,008,420 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2014 (City Capital Projects) | AAA/Aa1 | 10,595,000 | 10,639,605 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2015 (City Capital Projects) | AAA/Aa1 | 5,000,000 | 5,262,300 | |||||||
New York City Transitional Finance Authority, 5.00% due 7/15/2016 (School Financing Act) (State Aid Withholding) | AA-/Aa2 | 3,155,000 | 3,409,325 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2016 (City Capital Projects) | AAA/Aa1 | 12,680,000 | 13,900,577 |
34 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2016 (City Capital Projects) | AAA/Aa1 | $ | 5,000,000 | $ | 5,481,300 | |||||
New York City Transitional Finance Authority, 5.00% due 11/1/2017 (World Trade Center Recovery Costs) | AAA/Aa1 | 1,000,000 | 1,052,440 | |||||||
New York City Transitional Finance Authority, 5.00% due 1/15/2018 (School Financing Act) (State Aid Withholding) | AA-/Aa2 | 4,865,000 | 5,512,288 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects) | AAA/Aa1 | 1,645,000 | 1,910,141 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects) | AAA/Aa1 | 12,725,000 | 14,776,015 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects) | AAA/Aa1 | 1,500,000 | 1,741,770 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects) | AAA/Aa1 | 11,730,000 | 13,620,641 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects) | AAA/Aa1 | 3,075,000 | 3,570,629 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects) | AAA/Aa1 | 2,000,000 | 2,322,360 | |||||||
New York City Transitional Finance Authority, 0.03% due 5/1/2028 put 10/1/2014 (LOC: Morgan Stanley Bank) (daily demand notes) | AAA/Aaa | 8,000,000 | 8,000,000 | |||||||
New York City Transitional Finance Authority, 0.05% due 8/1/2031 put 10/1/2014 (SPA: Bank of America) (daily demand notes) | AAA/Aaa | 5,050,000 | 5,050,000 | |||||||
New York State Dormitory Authority, 5.00% due 11/1/2014 (AIDS Long-Term Health Care Facilities; Insured: SONYMA) | NR/Aa1 | 500,000 | 502,040 | |||||||
New York State Dormitory Authority, 5.25% due 5/15/2015 (State University of New York Educational Facilities; Insured: Natl-Re/IBC) | AA-/Aa2 | 3,580,000 | 3,693,737 | |||||||
New York State Dormitory Authority, 5.25% due 8/15/2015 (Presbyterian Hospital; Insured: AGM/FHA) | AA/A2 | 1,780,000 | 1,799,989 | |||||||
New York State Dormitory Authority, 5.50% due 2/15/2017 (Mental Health Services Facilities) | AA/NR | 5,000,000 | 5,582,550 | |||||||
New York State Dormitory Authority, 5.25% due 5/15/2017 (Court Facilities Lease; Insured: AMBAC) | AA-/Aa2 | 4,945,000 | 5,519,362 | |||||||
New York State Dormitory Authority, 5.50% due 2/15/2018 (Mental Health Services Facilities) | AA/NR | 5,280,000 | 6,084,619 | |||||||
New York State Dormitory Authority, 2.25% due 4/1/2018 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 4,800,000 | 5,006,064 | |||||||
New York State Dormitory Authority, 5.00% due 4/1/2018 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 325,000 | 370,971 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2018 (School Districts Financing Program) (State Aid Withholding) | NR/Aa3 | 1,395,000 | 1,604,208 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2018 (School Districts Financing Program) (State Aid Withholding) | AA-/NR | 2,520,000 | 2,901,125 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2018 (School Districts Financing Program; Insured: AGM) (State Aid Withholding) | AA/A2 | 2,500,000 | 2,890,325 | |||||||
New York State Dormitory Authority, 5.00% due 4/1/2019 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 610,000 | 711,028 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2019 (New York Department of Health Projects; Insured: Natl-Re) | AA/Aa2 | 6,975,000 | 7,002,203 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2019 (School Districts Financing Program) (State Aid Withholding) | NR/Aa3 | 1,585,000 | 1,853,879 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2019 (School Districts Financing Program) (State Aid Withholding) | AA-/NR | 2,645,000 | 3,097,189 | |||||||
a New York State Dormitory Authority, 5.00% due 10/1/2019 (School Districts Financing Program; Insured: AGM) (State Aid Withholding) | AA/A2 | 2,100,000 | 2,471,784 | |||||||
New York State Dormitory Authority, 5.00% due 12/15/2019 (Metropolitan Transportation Authority Service Contract) | AAA/Aa1 | 60,000,000 | 71,054,400 | |||||||
New York State Dormitory Authority, 5.00% due 4/1/2020 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,179,860 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2020 (NYSARC, Inc. Developmental Disability Programs) | NR/Aa2 | 1,000,000 | 1,165,200 | |||||||
New York State Dormitory Authority, 5.00% due 8/15/2020 pre-refunded 2/15/2015 (Mental Health Services Facilities; Insured: Natl-Re) (State Aid Withholding) | AA-/A3 | 10,000 | 10,183 | |||||||
New York State Dormitory Authority, 5.00% due 8/15/2020 (Mental Health Services Facilities; Insured: Natl-Re) (State Aid Withholding) | AA/A3 | 2,095,000 | 2,132,040 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2020 (School Districts Financing Program; Insured: AGM) | AA/NR | 1,250,000 | 1,485,625 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2020 (School Districts Financing Program) (State Aid Withholding) | NR/Aa3 | 1,000,000 | 1,181,450 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2020 (School Districts Financing Program) (State Aid Withholding) | AA-/NR | 2,775,000 | 3,280,244 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2020 (School Districts Financing Program; Insured: AGM) (State Aid Withholding) | AA/A2 | 2,100,000 | 2,495,850 | |||||||
New York State Dormitory Authority, 5.00% due 4/1/2021 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 450,000 | 535,194 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2021 (School Districts Financing Program; Insured: AGM) | AA/NR | 1,100,000 | 1,316,425 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2021 (School Districts Financing Program; Insured: AGM) (State Aid Withholding) | AA/A2 | 1,250,000 | 1,495,938 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2021 (School Districts Financing Program) (State Aid Withholding) | NR/Aa3 | 750,000 | 891,090 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2022 (School Districts Financing Program; Insured: AGM) | AA/NR | 1,800,000 | 2,165,418 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2022 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 300,000 | 360,903 | |||||||
New York State Dormitory Authority, 5.00% due 2/15/2023 (Mental Health Services Facilities; Insured: Natl-Re) (State Aid Withholding) | AA/A3 | 2,000,000 | 2,034,800 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2023 (School Districts Financing Program; Insured: AGM) | AA/NR | 2,500,000 | 3,032,500 | |||||||
New York State Dormitory Authority, 5.25% due 10/1/2023 (School Districts Financing Program; Insured: AGM) (State Aid Withholding) | AA/A1 | 2,000,000 | 2,389,600 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2024 (School Districts Financing Program; Insured: AGM) | AA/NR | 2,000,000 | 2,451,000 | |||||||
New York State Energy Research & Development Authority, 2.25% due 12/1/2015 (New York Electric & Gas Corp.) | BBB+/A3 | 5,000,000 | 5,078,300 | |||||||
New York State Environmental Facilities Corp., 4.00% due 11/15/2017 (Water Pollution Control & Drinking Water Projects) | AAA/Aaa | 2,095,000 | 2,140,168 | |||||||
New York State Environmental Facilities Corp., 4.00% due 11/15/2018 (Water Pollution Control & Drinking Water Projects) | AAA/Aaa | 2,170,000 | 2,212,163 |
Certified Annual Report 35
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
New York State Housing Finance Agency, 0.75% due 5/1/2015 (2012 Affordable Housing Projects; Insured: SONYMA) | NR/Aa2 | $ | 2,000,000 | $ | 2,006,920 | |||||
New York State Housing Finance Agency, 0.80% due 11/1/2015 (2012 Affordable Housing Projects; Insured: SONYMA) | NR/Aa2 | 1,700,000 | 1,707,820 | |||||||
New York State Housing Finance Agency, 0.875% due 11/1/2015 (2012 Affordable Housing Projects; Insured: SONYMA) | NR/Aa2 | 3,100,000 | 3,116,771 | |||||||
New York State Housing Finance Agency, 0.95% due 5/1/2016 (2012 Affordable Housing Projects; Insured: SONYMA) | NR/Aa2 | 2,700,000 | 2,723,463 | |||||||
New York State Thruway Authority, 4.00% due 3/15/2015 (Highway, Bridge, Multi-Modal and MTA Projects) | AAA/Aa1 | 2,000,000 | 2,035,220 | |||||||
New York State Thruway Authority, 5.00% due 4/1/2017 pre-refunded 10/1/2015 (Second General Highway & Bridge Trust; Insured: Natl-Re) | AA-/A3 | 345,000 | 361,760 | |||||||
New York State Thruway Authority, 5.00% due 4/1/2017 (Second General Highway & Bridge Trust; Insured: Natl-Re) | AA/A3 | 2,255,000 | 2,364,029 | |||||||
New York State Thruway Authority, 5.00% due 5/1/2019 (Multi-Year Highway and Bridge Capital Program) | A-/A3 | 5,000,000 | 5,816,200 | |||||||
New York State Thruway Authority, 5.00% due 1/1/2020 (Governor Thomas E. Dewey Thruway) | A/A2 | 2,000,000 | 2,340,140 | |||||||
New York State Thruway Authority, 5.00% due 1/1/2021 (Governor Thomas E. Dewey Thruway) | A/A2 | 2,500,000 | 2,949,950 | |||||||
New York State Thruway Authority, 5.00% due 1/1/2022 (Governor Thomas E. Dewey Thruway) | A/A2 | 3,000,000 | 3,566,820 | |||||||
New York State Thruway Authority, 5.00% due 3/15/2024 (Highway, Bridge, Multi-Modal and MTA Projects) | AAA/Aa1 | 18,300,000 | 21,547,335 | |||||||
Patchogue-Medford Union Free School District GO, 4.25% due 10/1/2015 (Insured: MBIA) (State Aid Withholding) | AA-/A3 | 1,000,000 | 1,037,510 | |||||||
Port Authority 148th GO, 5.00% due 8/15/2017 (Insured: AGM) | AA/Aa3 | 4,725,000 | 5,312,412 | |||||||
Port Authority of New York and New Jersey GO, 5.00% due 12/1/2019 (Port Authority Facilities Capital Projects; Insured: AGM) | AA/Aa3 | 1,000,000 | 1,041,390 | |||||||
Suffolk County Economic Development Corp., 5.00% due 7/1/2020 (Catholic Health Services) | BBB+/Baa1 | 5,000,000 | 5,748,150 | |||||||
Suffolk County Economic Development Corp., 5.00% due 7/1/2021 (Catholic Health Services) | BBB+/Baa1 | 5,000,000 | 5,773,900 | |||||||
Suffolk County Economic Development Corp., 5.00% due 7/1/2022 (Catholic Health Services) | BBB+/Baa1 | 5,000,000 | 5,688,900 | |||||||
Suffolk County IDA Civic Facilities GO, 5.25% due 3/1/2019 (New York Institute of Technology) | BBB+/Baa2 | 1,400,000 | 1,427,384 | |||||||
Tobacco Settlement Financing Corp., 5.00% due 6/1/2018 | AA/NR | 3,725,000 | 4,276,449 | |||||||
Triborough Bridge and Tunnel Authority, 5.00% due 11/15/2021 (MTA Bridges & Tunnels) | AA-/Aa3 | 5,140,000 | 6,202,798 | |||||||
Triborough Bridge and Tunnel Authority, 0.03% due 1/1/2032 put 10/1/2014 (MTA Bridges & Tunnels; LOC: U.S. Bank N.A.) (daily demand notes) | AA-/Aa1 | 550,000 | 550,000 | |||||||
Triborough Bridge and Tunnel Authority, 0.04% due 1/1/2032 put 10/1/2014 (MTA Bridges and Tunnels; LOC: California State Teachers’ Retirement System) (daily demand notes) | AA-/Aa1 | 1,030,000 | 1,030,000 | |||||||
Triborough Bridge and Tunnel Authority, 0.03% due 1/1/2033 put 10/1/2014 (MTA Bridges & Tunnels; LOC: U.S. Bank N.A.) (daily demand notes) | AA-/Aa1 | 1,200,000 | 1,200,000 | |||||||
United Nations Development Corp., 5.00% due 7/1/2016 (One, Two and Three U.N. Plaza Project) | NR/A1 | 3,400,000 | 3,669,756 | |||||||
United Nations Development Corp., 5.00% due 7/1/2017 (One, Two and Three U.N. Plaza Project) | NR/A1 | 3,000,000 | 3,344,100 | |||||||
United Nations Development Corp., 5.00% due 7/1/2019 (One, Two and Three U.N. Plaza Project) | NR/A1 | 4,000,000 | 4,655,800 | |||||||
West Seneca Central School District GO, 5.00% due 11/15/2022 (Insured: BAM) (State Aid Withholding) | AA/A1 | 1,000,000 | 1,181,980 | |||||||
NORTH CAROLINA — 1.99% | ||||||||||
Catawba County, 4.00% due 10/1/2015 | AA-/Aa2 | 1,620,000 | 1,681,884 | |||||||
Catawba County, 4.00% due 10/1/2016 | AA-/Aa2 | 1,000,000 | 1,069,970 | |||||||
Catawba County, 4.00% due 10/1/2017 | AA-/Aa2 | 1,000,000 | 1,096,940 | |||||||
Charlotte-Mecklenburg Hospital Authority, 5.00% due 1/15/2016 (Carolinas HealthCare System) | AA-/Aa3 | 3,520,000 | 3,726,730 | |||||||
Charlotte-Mecklenburg Hospital Authority, 5.00% due 1/15/2017 (Carolinas HealthCare System) | AA-/Aa3 | 2,000,000 | 2,195,600 | |||||||
Charlotte-Mecklenburg Hospital Authority, 4.00% due 1/15/2019 (Carolinas HealthCare System) | AA-/Aa3 | 600,000 | 666,582 | |||||||
Charlotte-Mecklenburg Hospital Authority, 3.00% due 1/15/2021 (Carolinas HealthCare System) | AA-/Aa3 | 1,595,000 | 1,681,720 | |||||||
Charlotte-Mecklenburg Hospital Authority, 4.00% due 1/15/2022 (Carolinas HealthCare System) | AA-/Aa3 | 845,000 | 938,322 | |||||||
Charlotte-Mecklenburg Hospital Authority, 5.00% due 1/15/2023 (Carolinas HealthCare System) | AA-/Aa3 | 1,400,000 | 1,664,894 | |||||||
Charlotte-Mecklenburg Hospital Authority, 5.00% due 1/15/2024 (Carolinas HealthCare System) | AA-/Aa3 | 2,855,000 | 3,358,165 | |||||||
Charlotte-Mecklenburg Hospital Authority, 0.04% due 1/15/2045 put 10/1/2014 (Carolinas HealthCare System; LOC: Wells Fargo Bank N.A.) (daily demand notes) | AAA/Aa1 | 8,170,000 | 8,170,000 | |||||||
County of Buncombe, 5.00% due 6/1/2022 (Primary, Middle School & Community College Facilities) | AA+/Aa2 | 1,000,000 | 1,205,020 | |||||||
County of Buncombe, 5.00% due 6/1/2023 (Primary, Middle School & Community College Facilities) | AA+/Aa2 | 750,000 | 909,802 | |||||||
County of Buncombe, 5.00% due 6/1/2024 (Primary, Middle School & Community College Facilities) | AA+/Aa2 | 600,000 | 735,438 | |||||||
County of Dare, 4.00% due 6/1/2016 (Educational Facility Capital Projects) | AA-/Aa3 | 500,000 | 529,385 | |||||||
County of Dare, 4.00% due 6/1/2017 (Educational Facility Capital Projects) | AA-/Aa3 | 400,000 | 434,584 | |||||||
County of Dare, 4.00% due 6/1/2018 (Educational Facility Capital Projects) | AA-/Aa3 | 425,000 | 469,578 | |||||||
County of Dare, 4.00% due 6/1/2019 (Educational Facility Capital Projects) | AA-/Aa3 | 500,000 | 557,635 | |||||||
County of Dare, 4.00% due 6/1/2020 (Educational Facility Capital Projects) | AA-/Aa3 | 765,000 | 856,624 | |||||||
County of Dare, 5.00% due 6/1/2021 (Educational Facility Capital Projects) | AA-/Aa3 | 1,225,000 | 1,452,470 | |||||||
County of Dare, 4.00% due 6/1/2022 (Educational Facility Capital Projects) | AA-/Aa3 | 490,000 | 542,778 | |||||||
County of Dare, 5.00% due 6/1/2024 (Educational Facility Capital Projects) | AA-/Aa3 | 700,000 | 830,620 | |||||||
County of Mecklenburg GO, 4.00% due 8/1/2015 | AAA/Aaa | 3,135,000 | 3,236,260 | |||||||
County of Randolph, 5.00% due 10/1/2020 | A+/Aa3 | 500,000 | 589,090 | |||||||
County of Randolph, 5.00% due 10/1/2021 | A+/Aa3 | 1,065,000 | 1,260,971 | |||||||
County of Randolph, 5.00% due 10/1/2021 | A+/Aa3 | 500,000 | 592,005 | |||||||
County of Randolph, 5.00% due 10/1/2022 | A+/Aa3 | 1,945,000 | 2,313,169 | |||||||
County of Randolph, 5.00% due 10/1/2023 | A+/Aa3 | 550,000 | 658,152 | |||||||
County of Randolph, 5.00% due 10/1/2023 | A+/Aa3 | 400,000 | 478,656 |
36 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
County of Wake, 5.00% due 6/1/2015 (Hammond Road Detention Center) | AA+/Aa1 | $ | 1,135,000 | $ | 1,170,900 | |||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2016 (Insured: AMBAC) | A-/NR | 1,700,000 | 1,798,056 | |||||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: BHAC/AMBAC) | AA+/Aa1 | 5,965,000 | 6,940,039 | |||||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: AMBAC) | NR/Baa1 | 7,500,000 | 8,694,450 | |||||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2019 (Insured: AGM) | AA/A3 | 3,105,000 | 3,520,915 | |||||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2021 | A-/Baa1 | 5,000,000 | 5,858,150 | |||||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2022 | A-/Baa1 | 4,715,000 | 5,553,893 | |||||||
North Carolina Municipal Power Agency, 5.25% due 1/1/2017 (Catawba Electric) | A/A2 | 3,120,000 | 3,441,142 | |||||||
North Carolina Municipal Power Agency, 4.00% due 1/1/2018 (Catawba Electric) | A/A2 | 15,000,000 | 16,471,950 | |||||||
North Carolina Municipal Power Agency, 5.00% due 1/1/2019 (Catawba Electric) | A/A2 | 4,500,000 | 5,190,660 | |||||||
North Carolina Municipal Power Agency, 4.00% due 1/1/2020 (Catawba Electric) | A/A2 | 1,550,000 | 1,736,666 | |||||||
North Carolina Municipal Power Agency, 5.00% due 1/1/2020 (Catawba Electric) | A/A2 | 1,000,000 | 1,170,620 | |||||||
North Carolina Municipal Power Agency, 4.00% due 1/1/2022 (Catawba Electric) | A/A2 | 1,000,000 | 1,118,610 | |||||||
State of North Carolina, 4.00% due 11/1/2014 (State Capital Projects and Correctional Facilities) | AA+/Aa1 | 2,000,000 | 2,006,780 | |||||||
State of North Carolina, 5.00% due 11/1/2019 (State Capital Projects and Correctional Facilities) | AA+/Aa1 | 23,635,000 | 27,928,534 | |||||||
Winston-Salem State University, 4.00% due 4/1/2016 (Student Housing and Student Services Facilities) | A-/A3 | 640,000 | 668,467 | |||||||
Winston-Salem State University, 4.00% due 4/1/2017 (Student Housing and Student Services Facilities) | A-/A3 | 645,000 | 686,274 | |||||||
Winston-Salem State University, 5.00% due 4/1/2019 (Student Housing and Student Services Facilities) | A-/A3 | 815,000 | 912,327 | |||||||
Winston-Salem State University, 5.00% due 4/1/2022 (Student Housing and Student Services Facilities) | A-/A3 | 945,000 | 1,071,498 | |||||||
NORTH DAKOTA — 0.06% | ||||||||||
County of Ward, 4.00% due 4/1/2020 (Insured: AGM) | AA/A2 | 2,445,000 | 2,692,263 | |||||||
North Dakota Public Finance Authority, 4.00% due 6/1/2017 (City of Fargo Flood Mitigation Projects) | AA/NR | 1,460,000 | 1,589,896 | |||||||
OHIO — 3.85% | ||||||||||
Akron, Bath & Copley Joint Township Hospital District, 5.00% due 11/15/2021 (Children’s Hospital Medical Center) | NR/A1 | 1,000,000 | 1,178,750 | |||||||
Allen County Hospital Facilities, 5.00% due 9/1/2015 (Catholic Healthcare Partners) | AA-/A1 | 10,000,000 | 10,421,300 | |||||||
Allen County Hospital Facilities, 5.00% due 9/1/2016 (Catholic Healthcare Partners) | AA-/A1 | 10,000,000 | 10,831,000 | |||||||
American Municipal Power, Inc., 5.25% due 2/15/2018 (AMP Combined Hydroelectric Projects) | A/A3 | 5,500,000 | 6,268,900 | |||||||
American Municipal Power, Inc., 5.25% due 2/15/2019 (AMP Combined Hydroelectric Projects) | A/A3 | 5,595,000 | 6,518,287 | |||||||
American Municipal Power, Inc., 5.00% due 2/15/2020 (AMP Fremont Energy Center) | A/A1 | 1,865,000 | 2,189,174 | |||||||
American Municipal Power, Inc., 5.00% due 2/15/2021 (AMP Fremont Energy Center) | A/A1 | 1,300,000 | 1,533,077 | |||||||
American Municipal Power, Inc., 5.00% due 2/15/2022 (AMP Fremont Energy Center) | A/A1 | 2,750,000 | 3,258,942 | |||||||
Cincinnati City School District Board of Education GO, 5.25% due 12/1/2023 (Educational Facilities; Insured: Natl-Re) | AA-/Aa2 | 2,690,000 | 3,327,503 | |||||||
City of Akron, 5.00% due 12/1/2021 (Community Learning Centers) | AA+/NR | 4,120,000 | 4,934,689 | |||||||
City of Akron COP, 5.00% due 12/1/2014 (Canal Park Baseball Stadium; Insured: AGM) (ETM) | AA/NR | 2,000,000 | 2,016,460 | |||||||
City of Akron GO, 5.00% due 12/1/2018 pre-refunded 12/1/2015 (Various Municipal Capital Projects; Insured: AMBAC) | AA+/Aa3 | 2,425,000 | 2,561,964 | |||||||
City of Akron GO, 5.00% due 12/1/2019 (Various Municipal Capital Projects) | AA-/NR | 1,685,000 | 1,983,043 | |||||||
City of Cleveland, 2.00% due 10/1/2014 (Public Facilities) | AA/A1 | 855,000 | 855,043 | |||||||
City of Cleveland, 3.00% due 10/1/2016 (Public Facilities) | AA/A1 | 690,000 | 723,341 | |||||||
City of Cleveland, 4.00% due 10/1/2018 (Parks & Recreation Facilities) | AA/A1 | 500,000 | 555,375 | |||||||
City of Cleveland, 4.00% due 10/1/2019 (Public Facilities) | AA/A1 | 600,000 | 672,330 | |||||||
City of Cleveland, 4.00% due 10/1/2019 (Parks & Recreation Facilities) | AA/A1 | 520,000 | 582,686 | |||||||
City of Cleveland, 5.00% due 10/1/2020 (Public Facilities) | AA/A1 | 510,000 | 602,621 | |||||||
City of Cleveland, 5.00% due 10/1/2020 (Parks & Recreation Facilities) | AA/A1 | 545,000 | 643,977 | |||||||
City of Cleveland, 5.00% due 10/1/2021 (Parks & Recreation Facilities) | AA/A1 | 570,000 | 678,557 | |||||||
City of Cleveland, 5.00% due 10/1/2022 (Public Facilities) | AA/A1 | 905,000 | 1,082,679 | |||||||
City of Cleveland, 5.00% due 10/1/2022 (Parks & Recreation Facilities) | AA/A1 | 600,000 | 717,798 | |||||||
City of Cleveland, 5.00% due 11/15/2022 (Parks & Recreation Facilities) | AA/A1 | 1,030,000 | 1,233,332 | |||||||
City of Cleveland, 5.00% due 10/1/2023 (Parks & Recreation Facilities) | AA/A1 | 630,000 | 759,648 | |||||||
City of Cleveland, 5.00% due 10/1/2023 (Public Facilities) | AA/A1 | 1,155,000 | 1,392,687 | |||||||
City of Cleveland COP, 5.00% due 11/15/2016 (Cleveland Stadium) | A/A2 | 2,200,000 | 2,394,546 | |||||||
City of Cleveland COP, 4.75% due 11/15/2020 (Cleveland Stadium) | A/A2 | 2,000,000 | 2,266,220 | |||||||
City of Cleveland GO, 5.50% due 10/1/2019 (City Capital Projects; Insured: AMBAC) | AA/A1 | 1,260,000 | 1,507,729 | |||||||
City of Toledo, 5.00% due 11/15/2018 (Water System Improvements) | AA-/Aa3 | 1,175,000 | 1,360,850 | |||||||
City of Toledo, 5.00% due 11/15/2019 (Water System Improvements) | AA-/Aa3 | 2,260,000 | 2,662,212 | |||||||
City of Toledo, 5.00% due 11/15/2020 (Water System Improvements) | AA-/Aa3 | 2,000,000 | 2,375,960 | |||||||
City of Toledo, 5.00% due 11/15/2021 (Water System Improvements) | AA-/Aa3 | 2,000,000 | 2,389,440 | |||||||
City of Toledo, 5.00% due 11/15/2022 (Water System Improvements) | AA-/Aa3 | 3,255,000 | 3,892,231 | |||||||
City of Toledo, 5.00% due 11/15/2023 (Water System Improvements) | AA-/Aa3 | 1,750,000 | 2,087,137 | |||||||
Cleveland Package Facilities, 5.25% due 9/15/2021 (Insured: AGM) (ETM) | AA/A2 | 965,000 | 1,189,536 | |||||||
Cleveland Package Facilities, 5.25% due 9/15/2021 (Insured: AGM) | AA/A2 | 2,035,000 | 2,368,191 | |||||||
Cleveland State University, 5.00% due 6/1/2019 (Campus Capital Projects) | A+/A1 | 1,000,000 | 1,154,960 | |||||||
Cleveland State University, 5.00% due 6/1/2020 (Campus Capital Projects) | A+/A1 | 700,000 | 825,405 | |||||||
Cleveland State University, 5.00% due 6/1/2021 (Campus Capital Projects) | A+/A1 | 1,000,000 | 1,186,380 |
Certified Annual Report 37
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Cleveland State University, 5.00% due 6/1/2022 (Campus Capital Projects) | A+/A1 | $ | 2,000,000 | $ | 2,363,600 | |||||
Cleveland-Cuyahoga County Port Authority, 5.00% due 10/1/2019 (Cleveland Museum of Art) | AA+/NR | 2,000,000 | 2,338,760 | |||||||
County of Clermont, 2.00% due 8/1/2016 (Sanitary Sewer System) | NR/Aa3 | 1,325,000 | 1,355,343 | |||||||
County of Clermont, 2.00% due 8/1/2016 (Water System ) | NR/Aa3 | 1,855,000 | 1,897,813 | |||||||
County of Clermont, 4.00% due 8/1/2019 (Sanitary Sewer System) | NR/Aa3 | 1,420,000 | 1,560,736 | |||||||
County of Cuyahoga COP, 5.00% due 12/1/2022 (Convention Hotel Project) | AA-/Aa3 | 9,725,000 | 11,585,587 | |||||||
County of Cuyahoga COP, 5.00% due 12/1/2023 (Convention Hotel Project) | AA-/Aa3 | 5,645,000 | 6,746,735 | |||||||
County of Cuyahoga COP, 5.00% due 12/1/2024 (Convention Hotel Project) | AA-/Aa3 | 11,515,000 | 13,674,293 | |||||||
County of Franklin, 4.00% due 11/15/2033 put 8/1/2016 (OhioHealth Corp. Hospital Facilities) | AA+/Aa2 | 3,235,000 | 3,440,131 | |||||||
County of Montgomery, 6.00% due 11/15/2028 pre-refunded 11/15/2014 (Miami Valley Hospital) | NR/Aa3 | 2,030,000 | 2,044,799 | |||||||
County of Montgomery, 6.25% due 11/15/2039 pre-refunded 11/15/2014 (Miami Valley Hospital) | NR/Aa3 | 2,250,000 | 2,267,122 | |||||||
Deerfield Township, 5.00% due 12/1/2017 | NR/A1 | 1,000,000 | 1,101,590 | |||||||
Franklin County Convention Facilities Authority, 4.50% due 12/1/2021 (Greater Columbus Convention Center; Insured: AMBAC) | AA/Aaa | 1,000,000 | 1,046,790 | |||||||
Garfield Heights City School District GO, 5.375% due 12/15/2016 (School Improvements; Insured: Natl-Re) | NR/A2 | 1,625,000 | 1,778,319 | |||||||
Greater Cleveland Regional Transportation Authority GO, 5.00% due 12/1/2015 (Insured: Natl-Re) | NR/Aa2 | 1,000,000 | 1,053,000 | |||||||
Kent State University, 5.00% due 5/1/2020 (Insured: AGM) | AA/Aa3 | 1,000,000 | 1,159,210 | |||||||
Ohio State Air Quality Development Authority, 5.625% due 6/1/2018 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa2 | 5,000,000 | 5,596,600 | |||||||
Ohio State Air Quality Development Authority, 5.75% due 6/1/2033 put 12/1/2011 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa2 | 5,800,000 | 6,199,794 | |||||||
Ohio State Air Quality Development Authority, 3.375% due 1/1/2034 put 7/1/2015 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa3 | 7,200,000 | 7,314,192 | |||||||
Ohio State Building Authority, 5.00% due 10/1/2015 (Insured: Natl-Re) | AA/Aa2 | 4,600,000 | 4,820,340 | |||||||
Ohio State Building Authority, 5.00% due 10/1/2020 | AA/Aa2 | 1,700,000 | 1,988,405 | |||||||
Ohio State Department Administrative Services COP, 5.00% due 9/1/2015 pre-refunded 3/1/2015 (Insured: Natl-Re) | AA/Aa2 | 1,950,000 | 1,989,858 | |||||||
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 | 5,936,645 | |||||||
Ohio State Water Development Authority PCR, 3.625% due 10/1/2033 put 4/1/2020 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa3 | 2,000,000 | 2,051,720 | |||||||
Ohio State Water Development Authority PCR, 3.375% due 1/1/2034 put 7/1/2015 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa3 | 24,400,000 | 24,694,752 | |||||||
Penta Career Center COP, 4.00% due 4/1/2017 (School District Facilities Project) | NR/Aa3 | 1,550,000 | 1,665,057 | |||||||
RiverSouth Authority, 5.00% due 12/1/2016 pre-refunded 12/1/2015 (RiverSouth Area Redevelopment) | AA+/Aa2 | 2,380,000 | 2,513,851 | |||||||
RiverSouth Authority, 5.00% due 12/1/2019 (RiverSouth Area Redevelopment) | AA+/Aa2 | 2,500,000 | 2,926,550 | |||||||
State of Ohio, 4.00% due 12/15/2018 (Major New Street Infrastructure Project) | AA/Aa2 | 1,000,000 | 1,119,390 | |||||||
State of Ohio, 4.00% due 12/15/2019 (Major New Street Infrastructure Project) | AA/Aa2 | 1,000,000 | 1,127,580 | |||||||
State of Ohio, 5.00% due 10/1/2020 (Cultural and Sports Capital Facilities) | AA/Aa2 | 3,845,000 | 4,513,992 | |||||||
State of Ohio, 5.00% due 12/15/2020 (Major New Street Infrastructure Project) | AA/Aa2 | 1,000,000 | 1,191,660 | |||||||
State of Ohio, 5.00% due 12/15/2021 (Major New Street Infrastructure Project) | AA/Aa2 | 2,500,000 | 2,999,150 | |||||||
State of Ohio GO, 4.00% due 10/1/2014 (Revitalization Project) (ETM) | AA-/NR | 2,075,000 | 2,075,228 | |||||||
State of Ohio GO, 5.00% due 8/1/2015 (Educational Facilities Projects) | AA+/Aa1 | 5,000,000 | 5,202,950 | |||||||
State of Ohio GO, 5.00% due 8/1/2015 (Higher Education Facility Projects) | AA+/Aa1 | 6,010,000 | 6,253,946 | |||||||
State of Ohio GO, 5.50% due 9/15/2019 (Common Schools Capital Facilities) | AA+/Aa1 | 4,150,000 | 4,985,644 | |||||||
State of Ohio Higher Educational Facility Commission, 5.05% due 7/1/2037 pre-refunded 7/1/2016 (Kenyon College) | A+/A1 | 3,500,000 | 3,787,175 | |||||||
University of Akron Ohio, 5.00% due 1/1/2018 (Insured: AGM) | AA/A1 | 3,415,000 | 3,868,683 | |||||||
Youngstown City School District GO, 3.00% due 12/1/2015 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,000,000 | 1,028,630 | |||||||
Youngstown City School District GO, 3.00% due 12/1/2016 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,440,000 | 1,511,064 | |||||||
Youngstown City School District GO, 4.00% due 12/1/2017 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,480,000 | 1,617,832 | |||||||
Youngstown City School District GO, 4.00% due 12/1/2018 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,545,000 | 1,715,599 | |||||||
Youngstown City School District GO, 4.00% due 12/1/2019 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,605,000 | 1,796,316 | |||||||
Youngstown City School District GO, 4.00% due 12/1/2020 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,670,000 | 1,874,057 | |||||||
Youngstown City School District GO, 4.00% due 12/1/2021 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,735,000 | 1,911,814 | |||||||
Youngstown City School District GO, 4.00% due 12/1/2022 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,805,000 | 1,959,111 | |||||||
Youngstown City School District GO, 4.00% due 12/1/2023 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,700,000 | 1,824,508 | |||||||
OKLAHOMA — 1.56% | ||||||||||
Canadian County Educational Facilities Authority, 4.00% due 9/1/2019 (Mustang Public Schools) | A+/NR | 1,410,000 | 1,547,221 | |||||||
Canadian County Educational Facilities Authority, 4.50% due 9/1/2020 (Mustang Public Schools) | A+/NR | 2,690,000 | 3,027,272 | |||||||
Canadian County Educational Facilities Authority, 4.50% due 9/1/2021 (Mustang Public Schools) | A+/NR | 2,290,000 | 2,572,586 | |||||||
Cleveland County ISD No. 29 GO, 1.50% due 3/1/2017 (Norman School District) | NR/Aa2 | 3,630,000 | 3,703,725 | |||||||
Comanche County Hospital Authority, 5.25% due 7/1/2015 (Insured: Radian) | BBB-/NR | 1,340,000 | 1,378,981 | |||||||
Oklahoma County Finance Authority, 3.00% due 9/1/2015 (Western Heights Public Schools) | A+/NR | 375,000 | 383,295 | |||||||
Oklahoma County Finance Authority, 5.00% due 9/1/2016 (Western Heights Public Schools) | A+/NR | 3,000,000 | 3,240,870 | |||||||
Oklahoma County Finance Authority, 5.00% due 9/1/2017 (Western Heights Public Schools) | A+/NR | 4,075,000 | 4,530,666 | |||||||
Oklahoma County Finance Authority, 4.00% due 9/1/2018 (Western Heights Public Schools) | A+/NR | 250,000 | 272,100 | |||||||
Oklahoma County Finance Authority, 5.00% due 9/1/2018 (Western Heights Public Schools) | A+/NR | 2,120,000 | 2,404,504 |
38 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Oklahoma County Finance Authority, 5.00% due 9/1/2020 (Western Heights Public Schools) | A+/NR | $ | 2,000,000 | $ | 2,324,800 | |||||
Oklahoma County ISD No. 1 GO, 1.00% due 1/1/2016 | A+/NR | 4,075,000 | 4,108,578 | |||||||
Oklahoma DFA, 5.00% due 8/15/2017 (INTEGRIS Health) | AA-/Aa3 | 4,375,000 | 4,888,975 | |||||||
Oklahoma DFA, 5.00% due 8/15/2018 (INTEGRIS Health) | AA-/Aa3 | 500,000 | 571,275 | |||||||
Oklahoma DFA, 0.04% due 8/15/2033 put 10/1/2014 (INTEGRIS Health; Insured: AGM; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa3 | 47,900,000 | 47,900,000 | |||||||
Oklahoma State Industrial Authority, 5.00% due 7/1/2016 (Medical Research Foundation) | NR/A1 | 1,165,000 | 1,249,765 | |||||||
Oklahoma State Industrial Authority, 5.25% due 7/1/2017 (Medical Research Foundation) | NR/A1 | 1,075,000 | 1,194,691 | |||||||
Oklahoma Turnpike Authority, 0.04% due 1/1/2028 put 10/1/2014 (Turnpike System; SPA: JPMorgan Chase Bank N.A.) (daily demand notes) | AA-/Aa3 | 7,100,000 | 7,100,000 | |||||||
Tulsa County Industrial Authority, 4.50% due 9/1/2020 (Broken Arrow Public Schools) | AA-/NR | 1,585,000 | 1,827,410 | |||||||
Tulsa County Industrial Authority, 4.50% due 9/1/2021 (Broken Arrow Public Schools) | AA-/NR | 8,775,000 | 10,134,686 | |||||||
Tulsa County ISD No. 3 GO, 2.00% due 4/1/2015 (Broken Arrow School District) | AA/NR | 2,000,000 | 2,018,840 | |||||||
Tulsa County ISD No. 3 GO, 2.00% due 4/1/2016 (Broken Arrow School District) | AA/NR | 1,725,000 | 1,766,573 | |||||||
Tulsa Parking Authority, 3.00% due 7/1/2017 | AA-/NR | 1,470,000 | 1,551,262 | |||||||
OREGON — 0.07% | ||||||||||
Oregon Facilities Authority, 5.00% due 3/15/2015 (Legacy Health System) | A+/A1 | 1,635,000 | 1,668,272 | |||||||
Oregon Facilities Authority, 5.00% due 3/15/2016 (Legacy Health System) | A+/A1 | 1,000,000 | 1,062,540 | |||||||
Oregon Facilities Authority, 4.50% due 3/15/2018 (Legacy Health System) | A+/A1 | 1,100,000 | 1,214,081 | |||||||
Oregon State Department of Administrative Services COP, 5.00% due 11/1/2014 (Insured: Natl-Re) | AA/Aa2 | 1,000,000 | 1,004,220 | |||||||
PENNSYLVANIA — 3.36% | ||||||||||
Adams County IDA, 5.00% due 8/15/2016 (Gettysburg College) | A/A2 | 1,250,000 | 1,349,275 | |||||||
Adams County IDA, 5.00% due 8/15/2017 (Gettysburg College) | A/A2 | �� | 1,340,000 | 1,493,765 | ||||||
Adams County IDA, 5.00% due 8/15/2019 (Gettysburg College) | A/A2 | 1,765,000 | 2,045,141 | |||||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2017 (University of Pittsburgh Medical Center) | A+/Aa3 | 3,000,000 | 3,344,640 | |||||||
Allegheny County Hospital Development Authority, 5.00% due 9/1/2017 (University of Pittsburgh Medical Center) | A+/Aa3 | 1,875,000 | 2,103,862 | |||||||
Allegheny County Hospital Development Authority, 5.00% due 5/15/2018 (University of Pittsburgh Medical Center) | A+/Aa3 | 5,915,000 | 6,750,908 | |||||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2018 (University of Pittsburgh Medical Center) | A+/Aa3 | 3,310,000 | 3,785,647 | |||||||
Allegheny County Hospital Development Authority, 5.00% due 9/1/2018 (University of Pittsburgh Medical Center) | A+/Aa3 | 2,100,000 | 2,413,257 | |||||||
Altoona Area School District GO, 3.25% due 12/1/2016 (Insured: AGM) (State Aid Withholding) | AA/NR | 1,475,000 | 1,554,517 | |||||||
Altoona Area School District GO, 3.00% due 12/1/2022 (Insured: AGM) (State Aid Withholding) | AA/NR | 1,335,000 | 1,381,338 | |||||||
Athens Area School District GO, 2.00% due 4/15/2016 (Insured: AGM) (State Aid Withholding) | NR/A2 | 470,000 | 480,707 | |||||||
Athens Area School District GO, 3.00% due 4/15/2018 (Insured: AGM) (State Aid Withholding) | NR/A2 | 2,600,000 | 2,764,684 | |||||||
Athens Area School District GO, 3.00% due 4/15/2019 (Insured: AGM) (State Aid Withholding) | NR/A2 | 2,680,000 | 2,812,285 | |||||||
Chester County School Authority, 5.00% due 4/1/2016 pre-refunded 10/1/2015 (Intermediate School; Insured: AMBAC) | A+/NR | 1,915,000 | 2,007,035 | |||||||
City of Philadelphia, 5.00% due 6/15/2017 (Water and Wastewater System; Insured: AGM) | AA/A1 | 5,570,000 | 6,219,183 | |||||||
City of Philadelphia, 5.00% due 7/1/2022 pre-refunded 7/1/2015 (Water and Wastewater System; Insured: AGM) | AA/A1 | 1,155,000 | 1,197,123 | |||||||
City of Philadelphia Gas Works, 5.00% due 10/1/2014 (Insured: AMBAC) | BBB+/Baa2 | 1,925,000 | 1,925,250 | |||||||
City of Philadelphia Gas Works, 5.00% due 9/1/2015 (Insured: AGM) | AA/A2 | 3,315,000 | 3,327,464 | |||||||
City of Philadelphia Gas Works, 5.00% due 10/1/2017 (Insured: AMBAC) | BBB+/Baa2 | 400,000 | 443,128 | |||||||
City of Philadelphia Gas Works, 5.00% due 7/1/2018 (Insured: AGM) | AA/A2 | 1,395,000 | 1,577,940 | |||||||
City of Pittsburgh GO, 5.25% due 9/1/2016 (Insured: AGM) | AA/A1 | 3,030,000 | 3,301,912 | |||||||
City of Pittsburgh GO, 5.25% due 9/1/2017 (Insured: AGM) | AA/A1 | 2,210,000 | 2,410,823 | |||||||
City of Pittsburgh GO, 5.25% due 9/1/2018 (Insured: AGM) | AA/A1 | 3,240,000 | 3,531,697 | |||||||
City of Pittsburgh GO, 5.00% due 9/1/2022 (Insured: BAM) | AA/A1 | 1,100,000 | 1,309,198 | |||||||
Commonwealth of Pennsylvania GO, 5.00% due 10/1/2022 | AA-/Aa3 | 575,000 | 624,778 | |||||||
Commonwealth of Pennsylvania State Public School Building Authority, 5.00% due 10/1/2016 (Harrisburg Area Community College Project) | A/NR | 1,390,000 | 1,502,715 | |||||||
County of Lehigh GO, 4.00% due 11/15/2014 | NR/Aa1 | 3,190,000 | 3,205,663 | |||||||
Cumberland Valley School District GO, 5.00% due 11/15/2018 (Insured: AGM) (State Aid Withholding) | NR/Aa3 | 3,590,000 | 3,779,193 | |||||||
Economy Borough Municipal Authority, 3.00% due 12/15/2014 (Beaver County Sewer System; Insured: BAM) | AA/NR | 330,000 | 331,835 | |||||||
Economy Borough Municipal Authority, 3.00% due 12/15/2016 (Beaver County Sewer System; Insured: BAM) | AA/NR | 505,000 | 529,336 | |||||||
Economy Borough Municipal Authority, 3.00% due 12/15/2018 (Beaver County Sewer System; Insured: BAM) | AA/NR | 435,000 | 463,688 | |||||||
Economy Borough Municipal Authority, 4.00% due 12/15/2020 (Beaver County Sewer System; Insured: BAM) | AA/NR | 605,000 | 673,044 | |||||||
Economy Borough Municipal Authority, 4.00% due 12/15/2022 (Beaver County Sewer System; Insured: BAM) | AA/NR | 1,180,000 | 1,299,298 | |||||||
Hospitals & Higher Education Facilities Authority of Philadelphia, 0.04% due 2/15/2021 put 10/1/2014 (The Children’s Hospital of Philadelphia; SPA: Wells Fargo Bank N.A.) (daily demand notes) | AA/Aa2 | 6,720,000 | 6,720,000 | |||||||
Hospitals & Higher Education Facilities Authority of Philadelphia, 0.04% due 7/1/2041 put 10/1/2014 (The Children’s Hospital of Philadelphia; SPA: Wells Fargo Bank N.A.) (daily demand notes) | AA/Aa2 | 2,600,000 | 2,600,000 | |||||||
Lancaster County Solid Waste Management Authority, 5.00% due 12/15/2023 (Harrisburg Resource Recovery Facility) | AA-/NR | 2,680,000 | 3,151,734 | |||||||
Lancaster County Solid Waste Management Authority, 5.25% due 12/15/2024 (Harrisburg Resource Recovery Facility) | AA-/NR | 4,000,000 | 4,748,840 | |||||||
Monroeville Finance Authority, 5.00% due 2/15/2021 (University of Pittsburgh Medical Center) | A+/Aa3 | 2,400,000 | 2,842,896 | |||||||
Monroeville Finance Authority, 5.00% due 2/15/2022 (University of Pittsburgh Medical Center) | A+/Aa3 | 1,250,000 | 1,481,437 |
Certified Annual Report 39
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Montgomery County Higher Education & Health Authority, 5.00% due 6/1/2022 (Abington Memorial Hospital) | A/NR | $ | 3,000,000 | $ | 3,486,330 | |||||
Northampton Borough Municipal Authority, 4.00% due 5/15/2021 (Water System; Insured: AGM) | NR/A1 | 500,000 | 542,825 | |||||||
Northampton Borough Municipal Authority, 4.00% due 5/15/2022 (Water System; Insured: AGM) | NR/A1 | 1,185,000 | 1,277,335 | |||||||
Northampton Borough Municipal Authority, 3.00% due 5/15/2023 (Water System; Insured: AGM) | NR/A1 | 1,255,000 | 1,259,593 | |||||||
Norwin School District GO, 4.00% due 4/1/2018 (Insured: AGM) (State Aid Withholding) | AA/A1 | 1,835,000 | 2,011,417 | |||||||
Pennsylvania Economic Development Financing Authority, 5.00% due 7/1/2016 (Pennsylvania Dept. of Labor and Industry) | AA+/Aaa | 10,000,000 | 10,817,300 | |||||||
Pennsylvania Economic Development Financing Authority, 3.70% due 11/1/2021 put 5/1/2015 (Waste Management, Inc.) | A-/NR | 7,750,000 | 7,910,890 | |||||||
Pennsylvania Economic Development Financing Authority, 1.75% due 12/1/2033 put 12/1/2015 (Waste Management, Inc.) | A-/NR | 2,000,000 | 2,032,860 | |||||||
Pennsylvania Economic Development Financing Authority, 3.00% due 12/1/2037 put 9/1/2015 (PPL Energy Supply) | BB/Ba1 | 14,000,000 | 14,213,920 | |||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 5/15/2019 (University of Pittsburgh Medical Center) | A+/Aa3 | 5,600,000 | 6,455,960 | |||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 5/15/2020 (University of Pittsburgh Medical Center) | A+/Aa3 | 5,100,000 | 5,943,540 | |||||||
Pennsylvania Higher Educational Facilities Authority, 4.00% due 10/1/2022 (Shippensburg University Student Services, Inc. Student Housing) | BBB-/Baa3 | 1,825,000 | 1,857,558 | |||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 11/1/2023 (Saint Joseph’s University) | A-/NR | 1,075,000 | 1,204,011 | |||||||
Pennsylvania Higher Educational Facilities Authority, 0.04% due 5/1/2030 put 10/1/2014 (Drexel University; LOC: TD Bank, N.A.) (daily demand notes) | NR/Aa3 | 755,000 | 755,000 | |||||||
Philadelphia Authority for Industrial Development, 5.00% due 8/1/2020 (Mast Charter School) | BBB+/NR | 605,000 | 643,073 | |||||||
Philadelphia Parking Authority, 5.00% due 9/1/2016 | A/A1 | 1,500,000 | 1,616,055 | |||||||
Philadelphia Parking Authority, 5.00% due 9/1/2017 | A/A1 | 1,020,000 | 1,130,119 | |||||||
Philadelphia School District GO, 4.50% due 9/1/2017 (State Aid Withholding) | A+/A1 | 2,270,000 | 2,497,045 | |||||||
Philadelphia School District GO, 5.00% due 9/1/2019 (State Aid Withholding) | A+/A1 | 4,210,000 | 4,848,489 | |||||||
Philadelphia School District GO, 5.00% due 9/1/2019 (State Aid Withholding) | A+/A1 | 18,410,000 | 21,202,061 | |||||||
Philadelphia School District GO, 5.25% due 9/1/2021 (State Aid Withholding) | A+/A1 | 2,265,000 | 2,590,933 | |||||||
Pittsburgh Water & Sewer Authority, 5.00% due 9/1/2023 | A/A2 | 2,520,000 | 2,972,995 | |||||||
Pittsburgh Water & Sewer Authority, 5.00% due 9/1/2024 | A/A2 | 7,365,000 | 8,686,797 | |||||||
Pittsburgh Water & Sewer Authority, 5.00% due 9/1/2024 | A/A2 | 2,395,000 | 2,824,831 | |||||||
Plum Borough School District GO, 2.00% due 9/15/2015 (Insured: BAM) (State Aid Withholding) | AA/NR | 850,000 | 862,886 | |||||||
Plum Borough School District GO, 3.00% due 9/15/2016 (Insured: BAM) (State Aid Withholding) | AA/NR | 750,000 | 782,910 | |||||||
Plum Borough School District GO, 3.00% due 9/15/2017 (Insured: BAM) (State Aid Withholding) | AA/NR | 240,000 | 254,378 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2018 (Insured: BAM) (State Aid Withholding) | AA/NR | 740,000 | 816,967 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2019 (Insured: BAM) (State Aid Withholding) | AA/NR | 390,000 | 433,415 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2019 (Insured: BAM) (State Aid Withholding) | AA/NR | 395,000 | 438,971 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2019 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,205,000 | 1,339,141 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2020 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,455,000 | 1,620,055 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2021 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,610,000 | 1,786,005 | |||||||
Plum Borough School District GO, 5.00% due 9/15/2022 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,410,000 | 1,656,271 | |||||||
Plum Borough School District GO, 5.00% due 9/15/2023 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,495,000 | 1,756,640 | |||||||
Plum Borough School District GO, 5.00% due 9/15/2023 (Insured: BAM) (State Aid Withholding) | AA/NR | 470,000 | 552,255 | |||||||
Plum Borough School District GO, 5.00% due 9/15/2024 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,885,000 | 2,198,155 | |||||||
Saint Mary Hospital Authority, 5.00% due 11/15/2021 (Catholic Health East Issue) | AA-/Aa2 | 2,900,000 | 2,916,356 | |||||||
School District of Pittsburgh GO, 5.50% due 9/1/2016 (Insured: AGM) (State Aid Withholding) | AA/Aa3 | 4,000,000 | 4,369,960 | |||||||
The Hospitals and Higher Educational Facilities Authority of Philadelphia, 0.04% due 7/1/2022 put 10/1/2014 (The Children’s Hospital of Philadelphia; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 6,320,000 | 6,320,000 | |||||||
Wayne County Hospital and HFA, 2.00% due 7/1/2016 (Wayne Memorial Hospital; Insured: AGM) | AA/NR | 500,000 | 512,715 | |||||||
Wayne County Hospital and HFA, 2.00% due 7/1/2017 (Wayne Memorial Hospital; Insured: AGM) | AA/NR | 1,000,000 | 1,030,940 | |||||||
Wayne County Hospital and HFA, 2.00% due 7/1/2018 (Wayne Memorial Hospital; Insured: AGM) | AA/NR | 625,000 | 644,688 | |||||||
Wayne County Hospital and HFA, 3.00% due 7/1/2019 (Wayne Memorial Hospital; Insured: AGM) | AA/NR | 1,185,000 | 1,250,945 | |||||||
West Mifflin Area School District GO, 3.70% due 10/1/2015 (Insured: AGM) (State Aid Withholding) | AA/A2 | 2,210,000 | 2,285,516 | |||||||
RHODE ISLAND — 1.66% | ||||||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2018 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 870,000 | 1,005,459 | |||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2019 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 1,250,000 | 1,472,288 | |||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2020 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 1,300,000 | 1,553,851 | |||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2021 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 2,000,000 | 2,412,380 | |||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2022 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 2,280,000 | 2,768,011 | |||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2023 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 2,380,000 | 2,906,908 | |||||||
Rhode Island Convention Center Authority, 5.25% due 5/15/2015 (Convention Center and Parking Projects; Insured: Natl-Re) | AA-/A3 | 390,000 | 395,780 | |||||||
Rhode Island Convention Center Authority, 5.00% due 5/15/2018 (Convention Center and Parking Projects) | AA-/Aa3 | 5,365,000 | 6,083,213 | |||||||
Rhode Island Convention Center Authority, 5.00% due 5/15/2019 (Convention Center and Parking Projects) | AA-/Aa3 | 7,310,000 | 8,415,857 | |||||||
Rhode Island Convention Center Authority, 5.00% due 5/15/2020 (Convention Center and Parking Projects) | AA-/Aa3 | 5,890,000 | 6,849,775 | |||||||
Rhode Island Convention Center Authority, 5.00% due 5/15/2021 (Convention Center and Parking Projects; Insured: AGM) | AA/Aa3 | 2,000,000 | 2,057,700 |
40 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Rhode Island Convention Center Authority, 5.00% due 5/15/2022 (Convention Center and Parking Projects; Insured: AGM) | AA/Aa3 | $ | 125,000 | $ | 128,606 | |||||
Rhode Island Health & Educational Building Corp., 4.00% due 9/15/2015 (University of Rhode Island Auxiliary Enterprise) | A+/A1 | 500,000 | 517,085 | |||||||
Rhode Island Health & Educational Building Corp., 5.00% due 9/15/2020 (University of Rhode Island Auxiliary Enterprise) | A+/A1 | 750,000 | 875,340 | |||||||
Rhode Island Health & Educational Building Corp., 5.00% due 9/15/2023 (University of Rhode Island Auxiliary Enterprise) | A+/A1 | 1,400,000 | 1,642,592 | |||||||
State of Rhode Island and Providence Plantations, 5.00% due 10/1/2014 (Department of Children, Youth, and Families; Insured: MBIA) (ETM) | AA-/Aa3 | 1,000,000 | 1,000,130 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2015 (Shepard’s Building; Insured: AGM) | AA/Aa3 | 800,000 | 836,872 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2019 (Kent County Courthouse) | AA-/Aa3 | 600,000 | 693,468 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2019 (Training School Project) | AA-/Aa3 | 1,575,000 | 1,820,354 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2020 (Kent County Courthouse) | AA-/Aa3 | 1,375,000 | 1,596,045 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2020 (Training School Project) | AA-/Aa3 | 1,405,000 | 1,630,868 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2021 (Kent County Courthouse) | AA-/Aa3 | 2,000,000 | 2,331,260 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2021 (Training School Project) | AA-/Aa3 | 3,540,000 | 4,126,330 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 4/1/2022 (Energy Conservation Project) | AA-/Aa3 | 2,020,000 | 2,351,219 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2022 (Kent County Courthouse) | AA-/Aa3 | 2,100,000 | 2,450,889 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2022 (Training School Project) | AA-/Aa3 | 3,620,000 | 4,224,866 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2023 (Kent County Courthouse) | AA-/Aa3 | 1,500,000 | 1,756,770 | |||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2023 (Training School Project) | AA-/Aa3 | 1,705,000 | 1,996,862 | |||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 10/1/2019 (Consolidated Capital Development Loan) | AA/Aa2 | 5,000,000 | 5,906,450 | |||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 8/1/2020 (Consolidated Capital Development Loan) | AA/Aa2 | 8,365,000 | 9,908,510 | |||||||
State of Rhode Island and Providence Plantations GO, 4.00% due 10/15/2020 (Consolidated Capital Development Loan) | AA/Aa2 | 1,200,000 | 1,369,404 | |||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 8/1/2021 (Consolidated Capital Development Loan) | AA/Aa2 | 16,535,000 | 19,756,514 | |||||||
State of Rhode Island and Providence Plantations GO, 4.00% due 10/15/2021 (Consolidated Capital Development Loan) | AA/Aa2 | 1,000,000 | 1,143,210 | |||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 8/1/2022 (Consolidated Capital Development Loan) | AA/Aa2 | 9,825,000 | 11,750,110 | |||||||
State of Rhode Island and Providence Plantations GO, 4.00% due 10/15/2022 (Consolidated Capital Development Loan) | AA/Aa2 | 1,000,000 | 1,147,390 | |||||||
SOUTH CAROLINA — 0.44% | ||||||||||
Berkeley County School District, 5.00% due 12/1/2020 (School Facility Equipment Acquisition) | A+/NR | 550,000 | 641,097 | |||||||
Berkeley County School District, 5.00% due 12/1/2021 (School Facility Equipment Acquisition) | A+/NR | 1,000,000 | 1,167,760 | |||||||
Berkeley County School District, 5.00% due 12/1/2024 (School Facility Equipment Acquisition) | A+/NR | 2,000,000 | 2,347,140 | |||||||
City of North Charleston Public Facilities Corp. COP, 5.00% due 10/1/2016 (Convention Center Complex) | AA-/NR | 1,560,000 | 1,686,828 | |||||||
City of North Charleston Public Facilities Corp. COP, 5.00% due 10/1/2017 (Convention Center Complex) | AA-/NR | 710,000 | 788,441 | |||||||
County of Charleston, 5.00% due 12/1/2022 (South Aviation Ave. Construction) | AA+/NR | 1,810,000 | 2,167,909 | |||||||
County of Charleston, 5.00% due 12/1/2023 (South Aviation Ave. Construction) | AA+/NR | 2,460,000 | 2,967,227 | |||||||
Greenville County School District, 5.50% due 12/1/2016 (Building Equity Sooner for Tomorrow) | AA/Aa2 | 3,500,000 | 3,878,840 | |||||||
Greenwood County, 5.00% due 10/1/2022 (Self Regional Healthcare) | A+/A1 | 1,000,000 | 1,161,160 | |||||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2015 (Insured: AGM) | AA/A1 | 1,000,000 | 1,052,800 | |||||||
Greenwood Fifty Facilities School District, 5.00% due 12/1/2016 (Insured: AGM) | AA/A1 | 1,000,000 | 1,090,400 | |||||||
Lexington One School Facilities Corp., 5.00% due 12/1/2015 (Lexington County School District No. 1) (ETM) | NR/Aa3 | 1,000,000 | 1,056,120 | |||||||
Piedmont Municipal Power Agency, 6.75% due 1/1/2019 (Insured: Natl-Re) | NR/A3 | 3,800,000 | 4,619,280 | |||||||
School District of Beaufort County GO, 5.00% due 3/1/2015 (Educational Capital Improvements; Insured: SCSDE) | AA/Aa1 | 1,000,000 | 1,020,400 | |||||||
South Carolina Jobs Economic Development Authority, 5.00% due 8/15/2015 (CareAlliance Health Services; Insured: AGM) (ETM) | NR/A2 | 3,000,000 | 3,105,000 | |||||||
State of South Carolina GO, 5.00% due 4/1/2015 (Transportation Infrastructure) (State Aid Withholding) | AA+/Aaa | 2,070,000 | 2,120,860 | |||||||
SOUTH DAKOTA — 0.37% | ||||||||||
South Dakota Building Authority, 4.50% due 6/1/2016 (Insured: Natl-Re) | AA/A3 | 2,000,000 | 2,136,920 | |||||||
South Dakota Building Authority, 5.00% due 6/1/2022 | AA/Aa2 | 500,000 | 599,050 | |||||||
South Dakota Building Authority, 5.00% due 6/1/2024 | AA/Aa2 | 1,000,000 | 1,196,760 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2015 (Regional Health) | NR/A1 | 1,390,000 | 1,452,397 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 11/1/2015 (Sanford Health) | A+/A1 | 1,310,000 | 1,375,526 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2016 (Regional Health) | NR/A1 | 1,000,000 | 1,082,760 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 4/1/2017 (Prairie Lakes Health) | A+/NR | 2,215,000 | 2,397,073 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2017 (Regional Health) | NR/A1 | 1,100,000 | 1,226,148 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 4/1/2018 (Prairie Lakes Health) | A+/NR | 2,290,000 | 2,527,862 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2018 (Regional Health) | NR/A1 | 1,000,000 | 1,133,530 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2018 (Regional Health) | NR/A1 | 1,275,000 | 1,452,735 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 4/1/2019 (Prairie Lakes Health) | A+/NR | 2,440,000 | 2,723,064 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2020 (Regional Health) | NR/A1 | 1,000,000 | 1,170,710 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 7/1/2021 (Avera Health) | AA-/A1 | 1,670,000 | 1,976,311 | |||||||
South Dakota Housing Development Authority, 4.00% due 11/1/2016 (Single Family Mtg) | NR/Aa3 | 1,040,000 | 1,106,321 | |||||||
South Dakota Housing Development Authority, 4.00% due 11/1/2017 (Single Family Mtg) | NR/Aa3 | 1,055,000 | 1,143,979 |
Certified Annual Report 41
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
South Dakota Housing Development Authority, 4.00% due 11/1/2018 (Single Family Mtg) | NR/Aa3 | $ | 1,165,000 | $ | 1,280,953 | |||||
TENNESSEE — 0.62% | ||||||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2014 | NR/Baa2 | 3,200,000 | 3,227,744 | |||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2015 | NR/Baa2 | 3,500,000 | 3,671,150 | |||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2019 | NR/Baa2 | 6,000,000 | 6,834,960 | |||||||
Hallsdale-Powell Utility District, 3.00% due 4/1/2016 | AA/NR | 500,000 | 519,075 | |||||||
Metropolitan Government of Nashville & Davidson County, 6.50% due 12/1/2014 (Water and Sewer Systems) (ETM) | AA-/Aaa | 1,545,000 | 1,561,686 | |||||||
Tennessee Energy Acquisition Corp., 5.00% due 9/1/2015 | A-/Baa2 | 3,000,000 | 3,109,260 | |||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2017 | A-/Baa1 | 5,000,000 | 5,384,600 | |||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2017 | A-/Baa2 | 11,000,000 | 12,130,690 | |||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2018 | A-/Baa2 | 5,000,000 | 5,611,600 | |||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2020 | A-/Baa2 | 1,190,000 | 1,365,477 | |||||||
TEXAS — 9.97% | ||||||||||
Amarillo Health Facilities Corp., 5.50% due 1/1/2015 (Baptist St. Anthony’s Hospital Corp.; Insured: AGM) (ETM) | NR/A2 | 1,065,000 | 1,076,694 | |||||||
Amarillo ISD GO, 3.00% due 2/1/2015 (Guaranty: PSF) | AAA/Aaa | 1,110,000 | 1,120,601 | |||||||
Austin Community College Public Facilities Corp., 5.25% due 8/1/2017 (Round Rock Campus) | AA/Aa2 | 1,500,000 | 1,685,205 | |||||||
Bexar Metropolitan Water District, 4.50% due 5/1/2021 (Waterworks System; Insured: Natl-Re) | AA-/A1 | 1,200,000 | 1,269,948 | |||||||
Brazos River Authority, 4.90% due 10/1/2015 (Center Point Energy; Insured: Natl-Re) | AA-/A3 | 4,685,000 | 4,878,631 | |||||||
Brownwood ISD GO, 5.25% due 2/15/2017 (Educational Facilities; Insured: Natl-Re) | NR/A1 | 1,310,000 | 1,334,327 | |||||||
Capital Area Cultural Education Facilities Finance Corp., 5.00% due 4/1/2015 (Roman Catholic Diocese of Austin) | NR/Baa1 | 1,100,000 | 1,121,615 | |||||||
Capital Area Cultural Education Facilities Finance Corp., 5.00% due 4/1/2018 (Roman Catholic Diocese of Austin) | NR/Baa1 | 1,370,000 | 1,510,096 | |||||||
Cities of Dallas and Fort Worth, 5.00% due 11/1/2014 (DFW International Airport Development Plan) | A+/A2 | 1,300,000 | 1,305,499 | |||||||
Cities of Dallas and Fort Worth, 5.00% due 11/1/2015 (DFW International Airport Development Plan) | A+/A2 | 3,370,000 | 3,543,858 | |||||||
Cities of Dallas and Fort Worth, 5.25% due 11/1/2023 (DFW International Airport Terminal Renewal & Improvement Program) | A+/A2 | 3,000,000 | 3,627,120 | |||||||
City of Austin, 5.00% due 5/15/2015 (Water and Wastewater System; Insured: AMBAC) | AA/Aa2 | 1,520,000 | 1,566,162 | |||||||
City of Austin, 5.00% due 5/15/2016 (Water and Wastewater System; Insured: Natl-Re) | AA/Aa2 | 1,500,000 | 1,581,570 | |||||||
City of Austin, 5.00% due 11/15/2022 (Water and Wastewater System) | AA/Aa2 | 2,640,000 | 3,190,255 | |||||||
City of Beaumont, 5.00% due 9/1/2023 (Waterworks & Sewer System Improvements; Insured: AGM) | AA/A2 | 5,000,000 | 5,929,250 | |||||||
City of Beaumont, 5.00% due 9/1/2024 (Waterworks & Sewer System Improvements; Insured: AGM) | AA/A2 | 2,500,000 | 2,979,950 | |||||||
City of Brownsville, 5.00% due 9/1/2020 (Water, Wastewater & Electric Utilities Systems) | A+/A2 | 1,500,000 | 1,758,195 | |||||||
City of Brownsville, 5.00% due 9/1/2022 (Water, Wastewater & Electric Utilities Systems) | A+/A2 | 1,520,000 | 1,782,702 | |||||||
City of Brownsville, 5.00% due 9/1/2023 (Water, Wastewater & Electric Utilities Systems) | A+/A2 | 2,380,000 | 2,814,731 | |||||||
City of Bryan, 5.00% due 7/1/2015 (Electric System) | A+/A2 | 1,150,000 | 1,190,779 | |||||||
City of Bryan, 5.00% due 7/1/2019 (Electric System) | A+/A2 | 8,000,000 | 8,768,080 | |||||||
City of Dallas GO, 5.00% due 2/15/2018 pre-refunded 2/15/2015 | AA+/Aa1 | 3,375,000 | 3,436,526 | |||||||
City of Denton GO, 4.00% due 2/15/2015 | AA/Aa2 | 3,445,000 | 3,494,539 | |||||||
City of Denton GO, 4.00% due 2/15/2016 | AA/Aa2 | 3,535,000 | 3,712,316 | |||||||
City of Denton GO, 5.00% due 2/15/2017 | AA/Aa2 | 3,675,000 | 4,057,347 | |||||||
City of Denton GO, 5.00% due 2/15/2019 | AA/Aa2 | 3,990,000 | 4,636,619 | |||||||
City of Denton GO, 5.00% due 2/15/2020 | AA/Aa2 | 4,195,000 | 4,822,656 | |||||||
City of Houston, 5.00% due 7/1/2015 (Airport System) | AA-/Aa3 | 2,600,000 | 2,694,432 | |||||||
City of Houston, 5.00% due 7/1/2017 (Airport System) | AA-/Aa3 | 1,600,000 | 1,782,112 | |||||||
City of Houston, 5.00% due 7/1/2018 (Airport System) | AA-/Aa3 | 1,000,000 | 1,142,180 | |||||||
City of Houston, 0% due 9/1/2020 (Insured: AGM/AMBAC) | AA/A2 | 3,650,000 | 3,112,939 | |||||||
City of Houston, 5.00% due 5/15/2022 (Combined Utility System) | AA/Aa2 | 3,000,000 | 3,615,780 | |||||||
City of Houston, 5.00% due 11/15/2022 (Combined Utility System) | AA/Aa2 | 5,000,000 | 6,056,600 | |||||||
City of Houston, 5.00% due 5/15/2023 (Combined Utility System) | AA/Aa2 | 4,445,000 | 5,393,252 | |||||||
City of Houston, 5.00% due 11/15/2023 (Combined Utility System) | AA/Aa2 | 5,000,000 | 6,087,600 | |||||||
City of Houston, 5.00% due 5/15/2024 (Combined Utility System) | AA/Aa2 | 7,250,000 | 8,854,570 | |||||||
City of Houston, 5.00% due 11/15/2024 (Combined Utility System) | AA/Aa2 | 5,000,000 | 6,142,100 | |||||||
City of Houston COP, 6.25% due 12/15/2014 (Water Conveyance System; Insured: AMBAC) | NR/NR | 2,850,000 | 2,877,018 | |||||||
City of Laredo, 5.00% due 3/15/2015 (Sports Venue Improvement; Insured: AMBAC) | A+/A1 | 1,930,000 | 1,969,140 | |||||||
City of Laredo GO, 5.00% due 2/15/2018 (Streets, Sidewalks, Drainage, Signals, Lighting; Insured: Natl-Re) | AA/Aa2 | 2,000,000 | 2,202,280 | |||||||
City of Olmos Park Higher Education Facilities Corp., 5.00% due 12/1/2020 (University of the Incarnate Word Project) | NR/A3 | 3,620,000 | 4,239,961 | |||||||
City of Olmos Park Higher Education Facilities Corp., 5.00% due 12/1/2021 (University of the Incarnate Word Project) | NR/A3 | 1,000,000 | 1,174,290 | |||||||
City of San Antonio, 5.00% due 2/1/2022 (CPS Energy) | AA/Aa1 | 20,000,000 | 24,070,400 | |||||||
City of San Antonio, 5.25% due 2/1/2024 (CPS Energy) | AA/Aa1 | 7,000,000 | 8,748,040 | |||||||
City of San Antonio GO, 4.00% due 2/1/2015 (City Public Facility Improvements) | AAA/Aaa | 1,000,000 | 1,013,060 | |||||||
City of San Antonio Public Facilities Corp., 5.00% due 9/15/2022 (Convention Center Refinancing & Expansion) | AA+/Aa2 | 1,450,000 | 1,726,254 | |||||||
City of Weslaco GO, 5.25% due 2/15/2019 (Waterworks and Sewer System; Insured: Natl-Re) | AA-/A3 | 2,835,000 | 3,082,609 | |||||||
Clifton Higher Education Finance Corp., 5.00% due 8/15/2016 (IDEA Public Schools) | BBB/NR | 225,000 | 240,586 | |||||||
Clifton Higher Education Finance Corp., 5.00% due 8/15/2017 (IDEA Public Schools) | BBB/NR | 315,000 | 346,091 | |||||||
Clifton Higher Education Finance Corp., 5.00% due 8/15/2018 (IDEA Public Schools) | BBB/NR | 325,000 | 365,050 |
42 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Clifton Higher Education Finance Corp., 5.00% due 8/15/2019 (IDEA Public Schools) | BBB/NR | $ | 445,000 | $ | 507,149 | |||||
Clifton Higher Education Finance Corp., 5.00% due 8/15/2023 (IDEA Public Schools) | BBB/NR | 1,100,000 | 1,248,247 | |||||||
Collin County GO, 5.00% due 2/15/2016 (Road and Highway Construction) | AAA/Aaa | 1,465,000 | 1,560,196 | |||||||
Corpus Christi Business & Job Development Corp., 5.00% due 3/1/2021 (Seawall Project) | A+/A1 | 625,000 | 728,444 | |||||||
Dallas Convention Center Hotel Development Corp., 0% due 1/1/2018 | A+/A1 | 5,240,000 | 4,906,788 | |||||||
Dallas Convention Center Hotel Development Corp., 5.00% due 1/1/2019 | A+/A1 | 5,200,000 | 5,889,572 | |||||||
Dallas County Utility & Reclamation District, 5.00% due 2/15/2017 (Insured: AMBAC) | A-/A3 | 1,260,000 | 1,387,071 | |||||||
Dallas County Utility & Reclamation District, 5.00% due 2/15/2017 (Insured: AMBAC) | A-/A3 | 1,160,000 | 1,276,986 | |||||||
Dallas County Utility & Reclamation District, 5.00% due 2/15/2018 (Insured: AMBAC) | A-/A3 | 2,035,000 | 2,222,627 | |||||||
Dallas County Utility & Reclamation District, 5.00% due 2/15/2018 (Insured: AMBAC) | A-/A3 | 1,935,000 | 2,113,407 | |||||||
Dallas County Utility & Reclamation District, 5.00% due 2/15/2019 (Insured: AMBAC) | A-/A3 | 2,175,000 | 2,365,334 | |||||||
Decatur ISD GO, 3.00% due 8/15/2015 (Wise County; Guaranty: PSF) | AAA/NR | 1,710,000 | 1,751,912 | |||||||
Grayson County GO, 1.625% due 1/1/2017 (State Highway Toll System) | AA/Aa2 | 1,200,000 | 1,227,480 | |||||||
Grayson County GO, 4.00% due 1/1/2020 (State Highway Toll System) | AA/Aa2 | 2,000,000 | 2,246,240 | |||||||
Grayson County GO, 5.00% due 1/1/2022 (State Highway Toll System) | AA/Aa2 | 3,000,000 | 3,580,140 | |||||||
Guadalupe-Blanco River Authority PCR, 5.625% due 10/1/2017 (AEP Texas Central Co.) | BBB/Baa1 | 5,000,000 | 5,608,050 | |||||||
Gulf Coast Waste Disposal Authority, 3.00% due 10/1/2014 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/A2 | 210,000 | 210,015 | |||||||
Gulf Coast Waste Disposal Authority, 4.00% due 10/1/2016 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/A2 | 500,000 | 532,500 | |||||||
Gulf Coast Waste Disposal Authority, 4.00% due 10/1/2017 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/A2 | 800,000 | 871,312 | |||||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2019 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/A2 | 1,000,000 | 1,156,830 | |||||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2020 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/A2 | 2,000,000 | 2,322,740 | |||||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2022 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/A2 | 1,635,000 | 1,899,232 | |||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 11/15/2015 (Texas Medical Center Central Heating and Cooling Services Corp.) | AA/Aa3 | 1,450,000 | 1,526,778 | |||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 11/15/2018 (Texas Medical Center Central Heating and Cooling Services Corp.) | AA/Aa3 | 1,365,000 | 1,579,100 | |||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 11/15/2019 (Texas Medical Center Central Heating and Cooling Services Corp.) | AA/Aa3 | 1,000,000 | 1,174,460 | |||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 12/1/2022 (Memorial Hermann Health) | A+/A1 | 200,000 | 238,850 | |||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 12/1/2023 (Memorial Hermann Health) | A+/A1 | 400,000 | 479,240 | |||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 12/1/2024 (Memorial Hermann Health) | A+/A1 | 3,000,000 | 3,626,460 | |||||||
Harris County Cultural Education Facilities Finance Corp., 0.04% due 9/1/2031 put 10/1/2014 (Texas Medical Center; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 3,480,000 | 3,480,000 | |||||||
Harris County Cultural Education Facilities Finance Corp., 0.04% due 9/1/2031 put 10/1/2014 (Texas Medical Center; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 6,200,000 | 6,200,000 | |||||||
Harris County GO, 4.00% due 10/1/2015 (County Permanent Improvements) | AA+/NR | 2,995,000 | 3,110,188 | |||||||
Harris County GO, 5.00% due 10/1/2015 (County Permanent Improvements) | AA+/NR | 4,000,000 | 4,193,880 | |||||||
Harris County Health Facilities Development Corp., 5.00% due 7/1/2016 (CHRISTUS Health System; Insured: AGM) | AA/A1 | 6,260,000 | 6,752,099 | |||||||
Harris County Health Facilities Development Corp., 7.00% due 12/1/2027 pre-refunded 12/1/2018 (Memorial Hermann Healthcare System; LOC: JPMorgan Chase Bank) | NR/A1 | 1,245,000 | 1,550,324 | |||||||
Harris County Health Facilities Development Corp., 0.04% due 10/1/2041 put 10/1/2014 (Texas Children’s Hospital; SPA: Wells Fargo Bank N.A.) (daily demand notes) | AA/Aa2 | 29,855,000 | 29,855,000 | |||||||
Harris County Hospital District, 5.00% due 2/15/2017 (Insured: | AA-/A2 | 1,500,000 | 1,624,680 | |||||||
Houston Higher Education Finance Corp., 5.875% due 5/15/2021 (Cosmos Foundation, Inc.) | BBB/NR | 1,865,000 | 2,124,813 | |||||||
Houston ISD GO, 5.00% due 2/15/2015 (Harris County School Buildings) | AA+/Aaa | 2,450,000 | 2,494,418 | |||||||
Houston ISD GO, 3.00% due 7/15/2015 (Harris County School Buildings) | AA+/Aaa | 2,000,000 | 2,045,160 | |||||||
Houston ISD GO, 1.50% due 6/1/2036 put 6/1/2015 (Harris County School Buildings; Guaranty: PSF) | AAA/Aaa | 10,000,000 | 10,081,800 | |||||||
Houston ISD GO, 2.00% due 6/1/2037 put 6/1/2016 (Harris County School Buildings; Guaranty: PSF) | AAA/Aaa | 10,000,000 | 10,247,600 | |||||||
Hutto ISD GO, 0% due 8/1/2017 (Guaranty: PSF) | AAA/NR | 2,170,000 | 2,041,883 | |||||||
Irving ISD GO, 0% due 2/15/2017 (Guaranty: PSF) | AAA/Aaa | 1,000,000 | 942,340 | |||||||
Kerrville Health Facilities Development Corp., 5.25% due 8/15/2021 (Sid Peterson Memorial Hospital) | BBB/NR | 4,000,000 | 4,094,880 | |||||||
Laredo Community College District GO, 5.00% due 8/1/2019 (School Facilities Improvements) | AA-/Aa3 | 880,000 | 1,030,304 | |||||||
Laredo Community College District GO, 5.00% due 8/1/2020 (School Facilities Improvements) | AA-/Aa3 | 1,360,000 | 1,609,492 | |||||||
Laredo Community College District GO, 5.00% due 8/1/2022 (School Facilities Improvements) | AA-/Aa3 | 655,000 | 783,256 | |||||||
Laredo Community College District GO, 5.00% due 8/1/2023 (School Facilities Improvements) | AA-/Aa3 | 610,000 | 734,690 | |||||||
Laredo Community College District GO, 5.00% due 8/1/2024 (School Facilities Improvements) | AA-/Aa3 | 715,000 | 869,647 | |||||||
Lower Colorado River Authority, 5.875% due 5/15/2016 (Insured: BHAC/FSA) | NR/Aa1 | 2,210,000 | 2,220,431 | |||||||
Lower Colorado River Authority, 5.00% due 5/15/2025 pre-refunded 5/15/2022 | NR/NR | 55,000 | 66,895 | |||||||
Lower Colorado River Authority, 5.00% due 5/15/2025 | A/A1 | 8,020,000 | 9,345,866 | |||||||
Mission Economic Development Corp., 3.75% due 12/1/2018 put 5/1/2015 (Waste Management, Inc.) | A-/NR | 8,500,000 | 8,704,340 |
Certified Annual Report 43
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
New Caney ISD GO, 5.00% due 2/15/2024 (Guaranty: PSF) | AAA/Aaa | $ | 865,000 | $ | 1,044,877 | |||||
North East ISD GO, 5.00% due 8/1/2016 (Guaranty: PSF) | AAA/Aaa | 2,000,000 | 2,169,480 | |||||||
North East ISD GO, 2.00% due 8/1/2043 put 8/1/2015 (Educational Facilities; Guaranty: PSF) | AAA/Aaa | 44,745,000 | 45,321,763 | |||||||
North Texas University, 5.00% due 4/15/2016 | NR/Aa2 | 2,250,000 | 2,408,692 | |||||||
Northside ISD GO, 2.00% due 6/1/2039 put 6/1/2019 (Educational Facilities; Guaranty: PSF) | NR/Aaa | 2,230,000 | 2,275,180 | |||||||
Nueces River Authority, 5.00% due 7/15/2015 (City of Corpus Christi Lake Texana Project; Insured: AGM) | AA/Aa3 | 1,000,000 | 1,037,910 | |||||||
Sam Rayburn Municipal Power Agency, 5.00% due 10/1/2017 | BBB+/NR | 1,000,000 | 1,110,170 | |||||||
Sam Rayburn Municipal Power Agency, 5.00% due 10/1/2019 | BBB+/NR | 2,565,000 | 2,955,957 | |||||||
Sam Rayburn Municipal Power Agency, 5.00% due 10/1/2020 | BBB+/NR | 1,620,000 | 1,883,639 | |||||||
San Antonio Public Facilities Corp., 5.00% due 9/15/2020 (Convention Center Refinancing & Expansion) | AA+/Aa2 | 915,000 | 1,078,611 | |||||||
San Juan Higher Education Finance Authority, 5.125% due 8/15/2020 (IDEA Public Schools) | BBB/NR | 1,600,000 | 1,772,752 | |||||||
State of Texas GO, 1.50% due 8/31/2015 (Cash Flow Management) | SP-1+/Mig1 | 195,000,000 | 197,437,500 | |||||||
Tarrant County Cultural Education Facilities Finance Corp., 5.00% due 8/15/2016 (Scott & White Memorial Hospital) | A+/Aa3 | 2,280,000 | 2,462,537 | |||||||
Tarrant County Cultural Education Facilities Finance Corp., 5.00% due 8/15/2017 (Scott & White Memorial Hospital) | A+/Aa3 | 2,000,000 | 2,227,080 | |||||||
Tarrant County Cultural Education Facilities Finance Corp., 0.02% due 10/1/2041 put 10/1/2014 (Methodist Hospitals of Dallas; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 49,110,000 | 49,110,000 | |||||||
Texas Municipal Power Agency, 5.00% due 9/1/2017 (Insured: AGM) | AA/A2 | 10,000,000 | 11,209,300 | |||||||
Texas Public Finance Authority, 5.00% due 10/15/2014 (Stephen F. Austin University; Insured: Natl-Re) | NR/A1 | 1,305,000 | 1,307,610 | |||||||
Texas Public Finance Authority, 5.00% due 10/15/2015 (Stephen F. Austin University; Insured: Natl-Re) | NR/A1 | 1,450,000 | 1,520,006 | |||||||
Texas Public Finance Authority, 5.00% due 7/1/2017 pre-refunded 1/1/2016 (Unemployment Compensation) | AAA/Aaa | 15,500,000 | 16,420,235 | |||||||
Tyler Junior College District GO, 4.00% due 2/15/2015 (Higher Education Building Projects) | AA+/NR | 1,300,000 | 1,318,538 | |||||||
Uptown Development Authority, 5.00% due 9/1/2015 (Infrastructure Improvements) | BBB/NR | 1,370,000 | 1,423,704 | |||||||
Uptown Development Authority, 5.00% due 9/1/2017 (Infrastructure Improvements) | BBB/NR | 1,580,000 | 1,739,564 | |||||||
Uptown Development Authority, 5.00% due 9/1/2018 (Infrastructure Improvements) | BBB/NR | 1,870,000 | 2,100,440 | |||||||
Uptown Development Authority, 5.00% due 9/1/2019 (Infrastructure Improvements) | BBB/NR | 1,945,000 | 2,215,705 | |||||||
West Harris County Regional Water Authority, 5.00% due 12/15/2020 (Insured: Natl-Re) | AA-/A1 | 2,140,000 | 2,362,132 | |||||||
U.S. VIRGIN ISLANDS — 0.13% | ||||||||||
Virgin Islands Public Finance Authority, 6.75% due 10/1/2019 (Matching Fund Loan Diageo Project) | NR/Baa3 | 7,690,000 | 8,845,346 | |||||||
UTAH — 0.96% | ||||||||||
Murray City, 0.04% due 5/15/2037 put 10/1/2014 (IHC Health Services, Inc.; SPA: JPMorgan Chase Bank) (daily demand notes) | AA+/Aa1 | 37,390,000 | 37,390,000 | |||||||
South Valley Water Reclamation Facility, 5.00% due 8/15/2024 pre-refunded 8/15/2015 (Sewer Treatment Facility Improvements; Insured: AMBAC) | A+/NR | 2,110,000 | 2,198,683 | |||||||
Weber County, 0.04% due 2/15/2031 put 10/1/2014 (IHC Health Services, Inc.; SPA: The Bank of New York Mellon) (daily demand notes) | AA+/Aa1 | 18,400,000 | 18,400,000 | |||||||
Weber County, 0.04% due 2/15/2035 put 10/1/2014 (IHC Health Services, Inc.; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA+/Aa1 | 9,600,000 | 9,600,000 | |||||||
VERMONT — 0.32% | ||||||||||
Vermont Colleges GO, 4.00% due 7/1/2017 | A/NR | 5,375,000 | 5,702,176 | |||||||
Vermont EDA, 5.00% due 12/15/2020 (Vermont Public Service Corp.) | NR/NR | 14,250,000 | 16,543,110 | |||||||
VIRGINIA — 0.32% | ||||||||||
Fairfax County EDA, 5.00% due 8/1/2016 (Wiehle Avenue Metrorail Station Parking Project) | AA+/Aa2 | 2,600,000 | 2,816,216 | |||||||
Fairfax County GO, 4.00% due 10/1/2015 (Public Facilities and Improvements) (State Aid Withholding) | AAA/Aaa | 5,000,000 | 5,192,300 | |||||||
Fairfax County GO, 5.00% due 10/1/2016 (Public Facilities and Improvements) (State Aid Withholding) | AAA/Aaa | 1,100,000 | 1,201,761 | |||||||
Fairfax County IDA, 4.00% due 5/15/2022 (Inova Health System) | AA+/Aa2 | 5,500,000 | 6,146,525 | |||||||
Fairfax County IDA, 5.00% due 5/15/2022 (Inova Health System) | AA+/Aa2 | 5,000,000 | 5,939,300 | |||||||
Northwestern Regional Jail Authority, 5.00% due 7/1/2033 pre-refunded 7/1/2015 (Community Corrections Center; Insured: Natl-Re) | AA-/Aa2 | 900,000 | 932,895 | |||||||
WASHINGTON — 1.95% | ||||||||||
Bremerton School District No. 100C GO, 0% due 12/1/2015 (Insured: AGM) | NR/Aa1 | 1,270,000 | 1,263,091 | |||||||
Central Puget Sound Regional Transit Authority, 4.00% due 2/1/2015 | AAA/Aa1 | 840,000 | 850,945 | |||||||
Energy Northwest, 5.00% due 7/1/2017 (Bonneville Power Administration Project 3) | AA-/Aa1 | 5,470,000 | 6,119,672 | |||||||
Energy Northwest, 5.00% due 7/1/2017 (Bonneville Power Administration Project 1) | AA-/Aa1 | 5,000,000 | 5,593,850 | |||||||
Energy Northwest, 5.00% due 7/1/2018 (Bonneville Power Administration Project 3) | AA-/Aa1 | 475,000 | 526,951 | |||||||
Energy Northwest, 5.00% due 7/1/2018 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 1,000,000 | 1,139,020 | |||||||
Energy Northwest, 5.00% due 7/1/2019 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 2,000,000 | 2,317,920 | |||||||
Energy Northwest, 5.00% due 7/1/2020 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 2,000,000 | 2,344,080 | |||||||
Energy Northwest, 5.00% due 7/1/2021 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 2,000,000 | 2,353,740 | |||||||
Energy Northwest, 5.00% due 7/1/2022 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 1,000,000 | 1,182,540 | |||||||
Energy Northwest, 5.00% due 7/1/2023 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 1,000,000 | 1,188,070 |
44 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
King County Federal Way School District No. 210 GO, 4.125% due 12/1/2019 (Insured: Natl-Re) | AA+/Aa1 | $ | 2,000,000 | $ | 2,170,300 | |||||
Marysville School District No. 25 GO, 4.00% due 12/1/2017 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,000,000 | 1,102,360 | |||||||
Marysville School District No. 25 GO, 4.00% due 12/1/2018 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,100,000 | 1,231,934 | |||||||
Marysville School District No. 25 GO, 5.00% due 12/1/2019 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,390,000 | 1,641,812 | |||||||
Marysville School District No. 25 GO, 5.00% due 12/1/2020 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,625,000 | 1,938,625 | |||||||
Marysville School District No. 25 GO, 5.00% due 12/1/2021 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,750,000 | 2,103,815 | |||||||
Marysville School District No. 25 GO, 5.00% due 12/1/2022 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 2,620,000 | 3,168,418 | |||||||
Marysville School District No. 25 GO, 5.00% due 12/1/2023 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,700,000 | 2,046,613 | |||||||
Port of Seattle, 5.50% due 9/1/2018 (Insured: Natl-Re) | AA-/A2 | 5,000,000 | 5,837,350 | |||||||
Seattle Municipal Light & Power, 5.00% due 2/1/2016 | AA/Aa2 | 800,000 | 850,392 | |||||||
Seattle Municipal Light & Power, 5.00% due 2/1/2017 | AA/Aa2 | 2,000,000 | 2,207,160 | |||||||
Skagit County Public Hospital District No. 1, 4.00% due 12/1/2016 (Skagit Regional Health) | NR/Baa2 | 1,000,000 | 1,053,290 | |||||||
Skagit County Public Hospital District No. 1, 5.00% due 12/1/2018 (Skagit Regional Health) | NR/Baa2 | 800,000 | 883,304 | |||||||
Skagit County Public Hospital District No. 1, 5.00% due 12/1/2019 (Skagit Regional Health) | NR/Baa2 | 835,000 | 925,831 | |||||||
Skagit County Public Hospital District No. 1, 5.00% due 12/1/2021 (Skagit Regional Health) | NR/Baa2 | 1,160,000 | 1,304,954 | |||||||
Skagit County Public Hospital District No. 1, 5.00% due 12/1/2022 (Skagit Regional Health) | NR/Baa2 | 500,000 | 555,865 | |||||||
Skagit County Public Hospital District No. 1, 5.375% due 12/1/2022 (Skagit Valley Hospital) | NR/Baa2 | 500,000 | 512,245 | |||||||
Skagit County Public Hospital District No. 1, 5.00% due 12/1/2023 (Skagit Regional Health) | NR/Baa2 | 750,000 | 825,698 | |||||||
Skagit County Public Hospital District No. 1 GO, 4.00% due 12/1/2017 (Skagit Regional Health) | NR/A1 | 1,000,000 | 1,091,920 | |||||||
Skagit County Public Hospital District No. 1 GO, 4.00% due 12/1/2018 (Skagit Regional Health) | NR/A1 | 1,270,000 | 1,404,785 | |||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2019 (Skagit Regional Health) | NR/A1 | 1,695,000 | 1,970,624 | |||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2020 (Skagit Regional Health) | NR/A1 | 1,570,000 | 1,843,447 | |||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2021 (Skagit Regional Health) | NR/A1 | 3,135,000 | 3,696,886 | |||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2022 (Skagit Regional Health) | NR/A1 | 3,635,000 | 4,290,790 | |||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2018 (Island Hospital) | NR/A1 | 1,000,000 | 1,103,140 | |||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2019 (Island Hospital) | NR/A1 | 1,000,000 | 1,109,660 | |||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2020 (Island Hospital) | NR/A1 | 1,000,000 | 1,110,240 | |||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2021 (Island Hospital) | NR/A1 | 1,000,000 | 1,105,060 | |||||||
Skagit County Public Hospital District No. 2 GO, 5.00% due 12/1/2022 (Island Hospital) | NR/A1 | 1,700,000 | 1,993,012 | |||||||
State of Washington COP, 5.00% due 7/1/2016 (State Agency Real Property Projects) (State Aid Withholding) | NR/Aa2 | 2,415,000 | 2,609,721 | |||||||
State of Washington COP, 5.00% due 7/1/2017 (State Agency Real Property Projects) (State Aid Withholding) | NR/Aa2 | 2,555,000 | 2,858,457 | |||||||
State of Washington COP, 5.00% due 7/1/2018 (State Agency Real Property Projects) (State Aid Withholding) | NR/Aa2 | 2,670,000 | 3,065,560 | |||||||
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 | 1,170,480 | |||||||
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 | 3,894,472 | |||||||
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 | 3,733,000 | |||||||
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 | 3,599,280 | |||||||
State of Washington GO, 5.00% due 7/1/2015 (Public Highway, Bridge, Ferry Capital and Operating Costs) | AA+/Aa1 | 5,355,000 | 5,551,154 | |||||||
State of Washington GO, 0% due 1/1/2018 (Stadium and Exhibition Center; Insured: Natl-Re) | AA+/Aa1 | 4,000,000 | 3,889,880 | |||||||
State of Washington GO, 0% due 1/1/2019 (Stadium and Exhibition Center; Insured: Natl-Re) | AA+/Aa1 | 3,000,000 | 2,837,940 | |||||||
State of Washington GO, 0% due 12/1/2019 (Public Highway, Bridge, Ferry Capital and Operating Costs; Insured: Natl- Re) | AA+/Aa1 | 3,030,000 | 2,802,053 | |||||||
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 | 2,993,250 | |||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2015 (Multicare Health Systems) | AA-/Aa3 | 2,000,000 | 2,079,640 | |||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2016 (Multicare Health Systems) | AA-/Aa3 | 2,075,000 | 2,242,951 | |||||||
Washington Health Care Facilities Authority, 5.375% due 12/1/2016 (Group Health Cooperative of Puget Sound; Insured: AMBAC) | BB+/NR | 2,000,000 | 2,005,140 | |||||||
Washington Health Care Facilities Authority, 5.00% due 7/1/2017 (Overlake Hospital Medical Center) | A/A2 | 1,245,000 | 1,388,885 | |||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2017 (Multicare Health Systems) | AA-/Aa3 | 1,000,000 | 1,113,840 | |||||||
Washington Health Care Facilities Authority, 5.25% due 8/1/2018 (Highline Medical Center; Insured: FHA 242) (ETM) | NR/NR | 7,935,000 | 8,753,892 | |||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2018 (Multicare Health Systems) | AA-/Aa3 | 2,000,000 | 2,275,320 | |||||||
Washington Health Care Facilities Authority, 5.00% due 7/1/2019 (Overlake Hospital Medical Center) | A/A2 | 1,050,000 | 1,220,048 | |||||||
Washington Health Care Facilities Authority, 4.75% due 7/1/2020 (Overlake Hospital Medical Center) | A/A2 | 1,000,000 | 1,121,840 | �� | ||||||
WEST VIRGINIA — 0.15% | ||||||||||
b Mason County PCR, 1.625% due 10/1/2022 put 10/1/2018 (Appalachian Power Company Project) | BBB/NR | 3,300,000 | 3,309,504 |
Certified Annual Report 45
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Monongalia County Building Commission, 5.25% due 7/1/2020 (Monongalia General Hospital) | A-/NR | $ | 3,185,000 | $ | 3,256,408 | |||||
West Virginia Higher Education Policy Commission, 5.00% due 4/1/2020 (Higher Education Facilities) | A+/Aa3 | 1,000,000 | 1,173,240 | |||||||
West Virginia Higher Education Policy Commission, 5.00% due 4/1/2021 (Higher Education Facilities) | A+/Aa3 | 1,000,000 | 1,180,610 | |||||||
West Virginia Higher Education Policy Commission, 5.00% due 4/1/2022 (Higher Education Facilities) | A+/Aa3 | 1,500,000 | 1,777,395 | |||||||
WISCONSIN — 0.94% | ||||||||||
Fox Valley Technical College District GO, 2.00% due 12/1/2014 (Higher Education Facility Projects) | NR/Aaa | 4,520,000 | 4,534,600 | |||||||
Fox Valley Technical College District GO, 3.00% due 12/1/2015 (Higher Education Facility Projects) | NR/Aaa | 4,515,000 | 4,662,595 | |||||||
State of Wisconsin, 5.00% due 7/1/2015 (Petroleum Environmental Cleanup Fund Award Program) | AA/Aa2 | 4,000,000 | 4,145,280 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/15/2015 (Aurora Health Care, Inc.) | NR/A3 | 4,100,000 | 4,243,418 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/15/2016 (Aurora Health Care, Inc.) | NR/A3 | 3,695,000 | 3,965,807 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 4/15/2017 (Aurora Health Care, Inc.) | NR/A3 | 1,295,000 | 1,414,632 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2017 (Agnesian Healthcare, Inc.) | A-/A3 | 1,000,000 | 1,100,000 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/15/2017 (Aurora Health Care, Inc.) | NR/A3 | 5,025,000 | 5,526,093 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2018 (Agnesian Healthcare, Inc.) | A-/A3 | 1,855,000 | 2,083,072 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2019 (Agnesian Healthcare, Inc.) | A-/A3 | 1,000,000 | 1,140,210 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2020 (Agnesian Healthcare, Inc.) | A-/A3 | 2,110,000 | 2,431,881 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2020 (ProHealth Care, Inc.) | A+/A1 | 1,075,000 | 1,254,471 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2021 (ProHealth Care, Inc.) | A+/A1 | 2,575,000 | 3,017,282 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2022 (ProHealth Care, Inc.) | A+/A1 | 1,600,000 | 1,850,688 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 12/1/2022 (UnityPoint Health) | NR/Aa3 | 1,000,000 | 1,179,340 | |||||||
Wisconsin Health & Educational Facilities Authority, 1.25% due 8/15/2025 put 8/15/2017 (Aurora Health Care, Inc.) | NR/A3 | 1,800,000 | 1,811,970 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.125% due 8/15/2027 put 8/15/2016 (Aurora Health Care, Inc.) | NR/A3 | 4,500,000 | 4,881,285 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 11/15/2043 put 6/1/2021 (Ascension Health Alliance System) | AA+/Aa2 | 10,000,000 | 11,830,000 | |||||||
WPPI Energy, 5.00% due 7/1/2021 (Power Supply System) | A/A1 | 4,100,000 | 4,871,907 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 93.38% (Cost $6,325,088,961) | $ | 6,566,685,131 | ||||||||
OTHER ASSETS LESS LIABILITIES — 6.62% | 465,722,847 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 7,032,407,978 | ||||||||
|
|
46 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
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:
AGM | Insured by Assured Guaranty Municipal Corp. | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
BAM | Insured by Build America Mutual Insurance Co. | |
BHAC | Insured by Berkshire Hathaway Assurance Corp. | |
CIFG | Insured by CIFG Assurance North America Inc. | |
COP | Certificates of Participation | |
DFA | Development Finance Authority | |
EDA | Economic Development Authority | |
ETM | Escrowed to Maturity | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
FHA | Insured by Federal Housing Administration | |
FSA | Insured by Financial Security Assurance Co. | |
GNMA | Collateralized 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 | |
MBIA | Insured by Municipal Bond Investors Assurance | |
Mtg | Mortgage | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
PSF | Guaranteed by Permanent School Fund | |
Q-SBLF | Insured by Qualified School Bond Loan Fund | |
Radian | Insured by Radian Asset Assurance | |
SCSDE | Insured by South Carolina Department of Education | |
SONYMA | State of New York Mortgage Authority | |
Syncora | Insured by Syncora Guarantee Inc. | |
USD | Unified School District |
See notes to financial statements.
Certified Annual Report 47
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $6,325,088,961) (Note 2) | $ | 6,566,685,131 | ||
Cash | 351,313,779 | |||
Receivable for investments sold | 49,448,944 | |||
Receivable for fund shares sold | 19,480,256 | |||
Interest receivable | 70,572,548 | |||
Prepaid expenses and other assets | 96,625 | |||
|
| |||
Total Assets | 7,057,597,283 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 12,223,558 | |||
Payable for fund shares redeemed | 8,823,915 | |||
Payable to investment advisor and other affiliates (Note 3) | 2,664,539 | |||
Accounts payable and accrued expenses | 530,242 | |||
Dividends payable | 947,051 | |||
|
| |||
Total Liabilities | 25,189,305 | |||
|
| |||
NET ASSETS | $ | 7,032,407,978 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Distribution in excess of net investment income | $ | (947,051 | ) | |
Net unrealized appreciation on investments | 241,596,170 | |||
Accumulated net realized gain (loss) | (2,425,967 | ) | ||
Net capital paid in on shares of beneficial interest | 6,794,184,826 | |||
|
| |||
$ | 7,032,407,978 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($1,865,212,769 applicable to 127,964,579 shares of beneficial interest outstanding - Note 4) | $ | 14.58 | ||
Maximum sales charge, 1.50% of offering price | 0.22 | |||
|
| |||
Maximum offering price per share | $ | 14.80 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($749,648,045 applicable to 51,336,227 shares of beneficial interest outstanding - Note 4) | $ | 14.60 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($4,417,547,164 applicable to 303,027,166 shares of beneficial interest outstanding - Note 4) | $ | 14.58 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
48 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg Limited Term Municipal Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $90,785,515) | $ | 165,664,334 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 17,743,842 | |||
Administration fees (Note 3) | ||||
Class A Shares | 2,665,232 | |||
Class C Shares | 952,968 | |||
Class I Shares | 1,884,685 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 5,330,464 | |||
Class C Shares | 3,810,357 | |||
Transfer agent fees | ||||
Class A Shares | 992,810 | |||
Class C Shares | 347,980 | |||
Class I Shares | 1,974,615 | |||
Registration and filing fees | ||||
Class A Shares | 78,429 | |||
Class C Shares | 40,657 | |||
Class I Shares | 250,044 | |||
Custodian fees (Note 3) | 622,584 | |||
Professional fees | 104,275 | |||
Accounting fees | 235,900 | |||
Trustee fees | 220,980 | |||
Other expenses | 457,860 | |||
|
| |||
Total Expenses | 37,713,682 | |||
Less: | ||||
Fees paid indirectly (Note 3) | (180,824 | ) | ||
|
| |||
Net Expenses | 37,532,858 | |||
|
| |||
Net Investment Income | 128,131,476 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (22,996 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 89,178,704 | |||
Net Realized and Unrealized Gain | 89,155,708 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 217,287,184 | ||
|
|
See notes to financial statements.
Certified Annual Report 49
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Limited Term Municipal Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 128,131,476 | $ | 126,117,448 | ||||
Net realized gain (loss) on investments | (22,996 | ) | 689,473 | |||||
Net unrealized appreciation (depreciation) on investments | 89,178,704 | (146,825,824 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 217,287,184 | (20,018,903 | ) | |||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | (37,884,453 | ) | (40,405,210 | ) | ||||
Class C Shares | (11,622,218 | ) | (12,785,802 | ) | ||||
Class I Shares | (78,624,805 | ) | (72,926,436 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (341,940,499 | ) | 96,586,210 | |||||
Class C Shares | (55,692,515 | ) | 36,889,825 | |||||
Class I Shares | 864,935,978 | 495,171,312 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 556,458,672 | 482,510,996 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 6,475,949,306 | 5,993,438,310 | ||||||
|
|
|
| |||||
End of Year | $ | 7,032,407,978 | $ | 6,475,949,306 | ||||
|
|
|
| |||||
Distributions in excess of net investment income | $ | (947,051 | ) | $ | (1,051,028 | ) |
See notes to financial statements.
50 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
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 eighteen separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary investment objective is to obtain as high a level of current income exempt from federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary objective is to reduce expected changes in its share price compared to longer intermediate and long-term bond portfolios.
The Fund currently offers three classes of shares of beneficial interest: Class A, Class C, and Institutional Class (“Class I”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, (iii) Class I shares are sold at net asset value without a sales charge at the time of purchase and 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 allocable 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 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. 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Certified Annual Report 51
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
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).
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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 6,566,685,131 | $ | — | $ | 6,566,685,131 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 6,566,685,131 | $ | — | $ | 6,566,685,131 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014.
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, 2014, 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: 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
52 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, these fees were payable at annual rates ranging from .50 of 1% to .225 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $6,761 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $53,956 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, 2014, 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 and shareholder services.
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, 2014, 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, 2014, fees paid indirectly were $180,824.
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 and is included as Trustee Fees on the Statement of Operations.
The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended September 30, 2014, the Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $11,421,169 in purchases and $10,171,927 in sales.
Certified Annual Report 53
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 36,108,479 | $ | 522,536,121 | 49,484,325 | $ | 722,735,868 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 2,381,396 | 34,534,840 | 2,462,968 | 35,875,356 | ||||||||||||
Shares repurchased | (62,000,850 | ) | (899,011,460 | ) | (45,505,738 | ) | (662,025,014 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (23,510,975 | ) | $ | (341,940,499 | ) | 6,441,555 | $ | 96,586,210 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 7,940,555 | $ | 115,293,887 | 14,778,549 | $ | 216,826,246 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 677,717 | 9,847,834 | 722,140 | 10,538,739 | ||||||||||||
Shares repurchased | (12,467,177 | ) | (180,834,236 | ) | (13,088,746 | ) | (190,475,160 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (3,848,905 | ) | $ | (55,692,515 | ) | 2,411,943 | $ | 36,889,825 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 128,853,171 | $ | 1,869,230,997 | 107,226,983 | $ | 1,565,881,920 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 4,847,211 | 70,339,213 | 4,478,918 | 65,237,854 | ||||||||||||
Shares repurchased | (74,200,163 | ) | (1,074,634,232 | ) | (78,049,845 | ) | (1,135,948,462 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 59,500,219 | $ | 864,935,978 | 33,656,056 | $ | 495,171,312 | ||||||||||
|
|
|
|
|
|
|
|
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $873,115,769 and $953,592,798, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 6,325,088,961 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 245,377,753 | ||
Gross unrealized depreciation on a tax basis | (3,781,583 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 241,596,170 | ||
|
|
At September 30, 2014, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2013, of $117,573. For tax purposes, such losses will be reflected in the year ending September 30, 2015.
At September 30, 2014, the Fund had cumulative tax basis capital losses of $212,116, (of which $212,116 is short-term and $0 is long-term) generated after September 30, 2011, 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.
At September 30, 2014, the Fund had cumulative tax basis capital losses generated prior to October 1, 2011, 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.
54 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 |
Such capital loss carryforwards expire as follows:
2015 | $ | 1,903,834 | ||
2016 | 192,444 | |||
|
| |||
$ | 2,096,278 | |||
|
|
In order to account for permanent book/tax differences, the Fund decreased distribution in excess of net investment income by $103,977 and decreased net capital paid in on shares of beneficial interest by $103,977. This reclassification has no impact on the net asset value of the Fund. The reclassification resulted primarily from a return of capital distribution paid by the Fund.
At September 30, 2014, the Fund did not have any undistributed tax basis net tax-exempt income, undistributed tax basis net ordinary investment income, or undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2014 and September 30, 2013 are excludable by shareholders from gross income for federal income tax purposes.
The tax character of distributions paid during the years ended September 30, 2014 and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 127,862,872 | $ | 125,793,229 | ||||
Ordinary income | 164,627 | 324,219 | ||||||
Return of capital | 103,977 | — | ||||||
|
|
|
| |||||
Total | $ | 128,131,476 | $ | 126,117,448 | ||||
|
|
|
|
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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Certified Annual Report 55
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 | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS | 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 (%)(a) | NET ASSETS AT END OF YEAR (THOUSANDS) | |||||||||||||||||||||||||||||||||||||
CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 14.38 | 0.26 | 0.20 | 0.46 | (0.26 | ) | — | (0.26 | ) | $14.58 | 1.78 | 0.72 | 0.71 | 0.72 | 3.20 | 14.46 | $ | 1,865,213 | |||||||||||||||||||||||||||||||||
2013(b) | $ | 14.70 | 0.26 | (0.32 | ) | (0.06 | ) | (0.26 | ) | — | (0.26 | ) | $14.38 | 1.81 | 0.71 | 0.71 | 0.71 | (0.39 | ) | 17.47 | $ | 2,178,317 | ||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 14.41 | 0.22 | 0.19 | 0.41 | (0.22 | ) | — | (0.22 | ) | $14.60 | 1.52 | 0.97 | 0.96 | 0.97 | 2.87 | 14.46 | $ | 749,648 | |||||||||||||||||||||||||||||||||
2013 | $ | 14.72 | 0.23 | (0.31 | ) | (0.08 | ) | (0.23 | ) | — | (0.23 | ) | $14.41 | 1.55 | 0.97 | 0.97 | 0.97 | (0.58 | ) | 17.47 | $ | 795,052 | ||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 14.38 | 0.30 | 0.20 | 0.50 | (0.30 | ) | — | (0.30 | ) | $14.58 | 2.09 | 0.40 | 0.40 | 0.40 | 3.53 | 14.46 | $ | 4,417,547 | |||||||||||||||||||||||||||||||||
2013 | $ | 14.70 | 0.31 | (0.32 | ) | (0.01 | ) | (0.31 | ) | — | (0.31 | ) | $14.38 | 2.15 | 0.37 | 0.37 | 0.37 | (0.05 | ) | 17.47 | $ | 3,502,580 | ||||||||||||||||||||||||||||||
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 |
(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.
56 Certified Annual Report | Certified Annual Report 57 |
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, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
58 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.60 | $ | 3.69 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.41 | $ | 3.70 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.40 | $ | 4.86 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.25 | $ | 4.87 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,019.20 | $ | 2.15 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.94 | $ | 2.15 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.73%; C: 0.96%; I: 0.42%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 59
INDEX COMPARISON | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 5 YRS | 10 YRS | SINCE INCEPTION | |||||||||||||
A Shares (Incep: 9/28/84) | 1.65 | % | 2.74 | % | 3.19 | % | 5.16 | % | ||||||||
C Shares (Incep: 9/1/94) | 2.37 | % | 2.77 | % | 3.06 | % | 3.63 | % | ||||||||
I Shares (Incep: 7/5/96) | 3.53 | % | 3.39 | % | 3.69 | % | 4.26 | % |
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 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.
60 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 61
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES) (1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
62 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 63
OTHER INFORMATION | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 (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.
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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Fund of $127,862,872 (or the maximum allowed) are tax exempt dividends, $164,627 are taxable ordinary investment income dividends, and $103,977 are return of capital 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of 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 under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
64 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the most recent ten calendar years, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year, comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of correlation to equity indices, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year was comparable to the return of the securities index and the average return of the fund category considered, that the Fund’s returns for the preceding nine calendar years exceeded or were comparable to the returns of the index in seven of the nine years, and that the Fund’s returns exceeded or were comparable to the average returns of the fund category in all nine years. Noted quantitative data further showed that the Fund’s annualized investment returns fell in the top decile of investment performance of the first of two fund categories for the one-year, three-year, five-year and ten-year periods ended with the second quarter of the current year, and that the Fund’s annualized investment returns fell in the top quartile of investment performance of the second fund category for the one-year and three-year periods ended with the second quarter and fell in the top decile of performance for the five-year and ten-year periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection, considered other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Funds.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectus. Data considered included comparisons of the advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the advisory fee for the Fund was comparable to the median and average fee levels for the fund category, and that the level of total expense for a representative share class of the Fund was comparable to the median and average levels for the category. Peer group data showed that the Fund’s advisory fee level was comparable to the median fee level for the fund peer group and the total expenses for a representative share class were comparable to the median total expenses for the group.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract
Certified Annual Report 65
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by the Fund and other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
66 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 67
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
68 This page is not part of the Annual Report
This page is not part of the Annual Report 69
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
70 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 71
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH858 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2014. 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. Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. 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 |
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.
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.
Personal Consumption Expenditure (PCE) Price Index – One measure of U.S. inflation that assesses the percentage change in prices of goods and services purchased by consumers throughout the economy. Of all the measures of consumer price inflation, the PCE price index covers the broadest set of goods and services.
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 (bp) – 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.
Credit Spread/Quality Spread – The difference between the yields of securities with different credit qualities.
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.
Fiscal Cliff – A combination of expiring tax cuts and across-the-board government spending cuts that were scheduled to become effective at the end of 2012. The idea behind the fiscal cliff was that if the federal government allowed these two events to proceed as planned, they would have a detrimental effect on an already shaky economy. At the same time, it was predicted that going over the fiscal cliff would significantly reduce the federal budget deficit.
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.
Participation Rate – The number of people who are either employed or are actively looking for work. The people who are no longer actively searching for work would not be included in the participation rate. During an economic recession, many workers often get discouraged and stop looking for employment, and as a result, the participation rate decreases.
Revenue Bond – A bond on which the debt service is payable solely from the revenue generated from the operation of the project being financed or a category of facilities, or from other non-tax sources.
SEC Yield – SEC yield is computed in accordance with SEC standards measuring the net investment income per share over a specified 30-day period expressed as a percentage of the maximum offering price of the Fund’s shares at the end of the period.
Yield Curve – A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.
This page is not part of the Annual Report 3
THORNBURG INTERMEDIATE MUNICIPAL FUND
Laddering – an All Weather Strategy
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 these techniques to manage risk and pursue attractive returns:
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment and interest-rate risk. |
• | 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. |
• | Investing on a cash-only basis without using leverage. |
Portfolio Managers
Josh Gonze Chris Ryon, CFA
Objectives and Strategies
The Fund’s primary investment goal is to obtain as high a level of current income exempt from federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital (may be subject to Alternative Minimum Tax).
The secondary goal of the Fund is to reduce expected changes in its share price compared to long-term bond portfolios.
This Fund is a laddered portfolio of municipal bonds with an average maturity of normally three to ten years. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year. Cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. We regard the strategy as a good compromise for managing different types of risk.
Long-Term Stability of Principal
Net Asset Value History of A Shares from July 22, 1991 through September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
A Shares (Incep: 7/22/91) | ||||||||||||||||||||
Without sales charge | 5.95 | % | 4.18 | % | 4.28 | % | 4.06 | % | 5.10 | % | ||||||||||
With sales charge | 3.84 | % | 3.47 | % | 3.86 | % | 3.85 | % | 5.01 | % |
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 0.92%, as disclosed in the most recent Prospectus.
30-Day Yields, A Shares
As of September 30, 2014
Annualized Distribution Yield | 2.23 | % | ||
SEC Yield | 1.08 | % |
Key Portfolio Attributes
As of September 30, 2014
Number of Bonds | 491 | |||
Effective Duration | 4.8 Yrs | |||
Average Maturity | 7.8 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 12.
4 This page is not part of the Annual Report
THORNBURG’S SUITE OF MUNICIPAL FUNDS
Municipal Funds for a Range of Interest-Rate Scenarios
At Thornburg, we often say that predicting interest rates is a fool’s game. And with the Federal Reserve still heavily involved in the markets, it’s even more difficult to forecast how rates may rise than when they may rise. Will long rates rise first and short rates follow? Will long and short rates climb simultaneously?
A traditional strategy to protect oneself against interest-rate risk is to move into shorter-duration bond strategies. But the seemingly counterintuitive response of moving to longer-duration strategies can sometimes yield better results.
Diversify Across the Yield Curve
This uncertainty points to why it’s important for investors to match their investment horizon to the duration of the strategy in which they’re invested, and to diversify assets across the yield curve.
For any interest-rate scenario, Thornburg’s comprehensive suite of municipal funds gives prudent investors the ability to diversify across the yield curve.
Diversify Across the Yield Curve with Thornburg Municipal Funds AAA General Obligation Municipal Yield Curve, as of September 30, 2014
| ![]() |
This page is not part of the Annual Report 5
Thornburg Intermediate Municipal Fund
September 30, 2014
7 | ||||
12 | ||||
23 | ||||
24 | ||||
25 | ||||
26 | ||||
32 | ||||
34 | ||||
35 | ||||
36 | ||||
37 | ||||
40 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semi-annual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
October 17, 2014
Dear Fellow Shareholder:
We are pleased to present the annual report for the Thornburg Intermediate Municipal Fund (the Fund). The net asset value (NAV) of the Class A shares increased by 47 cents to $14.23 per share during the fiscal year ended September 30, 2014. If you were with us for the entire period, you received dividends of 33.9 cents per share. If you reinvested your dividends, you received 34.3 cents per share. Dividends were lower for Class C shares and higher for Class I shares, to account for varying class-specific expenses. The Class A shares underperformed the Fund’s benchmark index, with a 5.95% total return at NAV for the fiscal year ended September 30, 2014, compared to the 6.13% total return for the BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index. The Fund generated 1.73% more price return and 1.91% less income than its benchmark.
The market’s positive returns were driven primarily by falling interest rates. Another driver was narrowing credit spreads. In general, investors received smaller and smaller levels of yield for securities of lower credit quality with shorter maturity dates. Chart I shows credit spreads for various maturities of municipal bonds.
Drivers of the Fund’s price return relative to its benchmark are as follows: Interest-rate sensitivity, as measured by the Fund’s duration and differing allocations along the yield curve, added 0.63% of price performance; sector allocations subtracted 0.90% of relative price performance; and the Fund’s overweight to lower-credit-quality securities added 0.77% of price performance versus the benchmark. Other risk factors accounted for another 1.23% of relative price performance.
Interest-Rate Changes
As of the end of fiscal year 2013, many market observers predicted increasing interest rates. The fear of the Federal Reserve (the Fed) curtailing purchases of Treasury and mortgage-backed securities had roiled the markets, though the eventual fact of tapering did not begin until December 18, 2013. This was the backdrop against which rates rose through the end of December 2013. Chart II illustrates the changes in rates by maturity for each quarter of fiscal 2014.
Chart I | Quality Spreads: BBB Municipal Revenue Yields over AAA General Obligation Yields
as of 9/30/2014
Chart II | Changes in AAA General Obligation Municipal Yield Curve
9/30/2013 – 9/30/2014
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
This chart highlights a few interesting phenomena:
1. | Interest rates changed by varying amounts for different maturities, highlighting the potential benefits of a portfolio that is diversified by maturity. We believe investors benefit by owning several funds that provide different exposures to various maturity segments of the market. |
2. | In the quarter ended December 31, 2013, short and long interest rates declined and intermediate rates continued to rise. The fall in short-term rates was a market reaction to the fear of rising rates and investor desire to shed duration or interest-rate risk. The decline in long-term rates was driven by opportunistic investors who wished to take advantage of a significant difference between short- and long-term rates. |
3. | In the quarter ended March 31, 2014, short-term interest rates rose as long-term rates continued to decline. This was doubtless a reaction to the risk of possible Fed tightening and increases in short-term rates. |
4. | In the six-month period ended September 30, 2014, interest rates all along the yield curve declined, and longer-term rates continued to slide more than short-term rates. |
Table I shows selected changes in rates for the last two fiscal years. The table highlights that although interest rates have declined in fiscal 2014, they have yet to retrace the upswing seen in fiscal 2013. It is noteworthy that rates on the short end (one to five years) of the market have been virtually unchanged, depressed by the Fed’s delay in normalizing benchmark short-term rates.
Table I Yield Changes for the Last Two Fiscal Years
MATURITY | FISCAL YEAR ENDING 9/30/2013 | FISCAL YEAR ENDING 9/30/2014 | ||||||
1-Year | -0.02 | % | -0.03 | % | ||||
5-Year | +0.62 | % | -0.03 | % | ||||
10-Year | +0.83 | % | -0.32 | % | ||||
30-Year | +1.43 | % | -1.08 | % |
Source: Bloomberg
The Economy and the Federal Reserve Board
The U.S. economy has recently grown at an average rate of 2.0% as measured by gross domestic product (GDP), which is defined as the monetary value of all finished goods and services produced within a country’s borders over a specific time period. Many market participants believe that 2.0% GDP growth is suboptimal compared to rates in past recoveries, but the quarter ended December 31, 2013, produced a 3.5% growth rate and the quarter ended June 30, 2014, a 4.6% rate. Growth in the quarter ended March 31, 2014, was negative 2.1%; this anomaly has been attributed to weather effects.
Employment growth is another useful measure for gauging the health of the economy. The financial press highlights this as an area of focus for Fed Chair Janet Yellen. The economy has added approximately 220,000 jobs per month for the fiscal year. This growth has not come without volatility; only 84,000 jobs were added in December 2013 and 304,000 in April 2014. The unemployment rate has declined from 7.2% for the year ended September 30, 2013, to 5.9% as of September 30, 2014. This should make investors feel good about the economy, but other measures paint a mixed picture. One indicator is the U.S. labor force participation rate, which measures the size of the labor force as a percent of the working-age population. Since January 1990, this long-term average has been at 65.9%, but as of September 2014, the participation rate had declined to 62.7%. For fiscal year 2014, this measure has averaged 62.9%. Some economists and demographers attempt to explain the decline in the participation rate by the retirement of Baby Boomers, who have changed every demographic category they have passed through and have been referred to as “the pig in the python.” The thought that Baby Boomers would impact the labor force participation rate significantly enough to cause this decline is plausible, but we have seen no estimates of the effect.
The Fed began reducing purchases of U.S. Treasury and mortgage securities in December 2013 and will complete the process by October 2014. During 2013, the market’s anticipation of the Fed’s tapering its asset purchases sent long-term municipal yields up 1.43%. But in 2014, the reality of tapering (and other factors) sent long-term municipal yields down 1.08%. In its September 17, 2014, release, the Federal Open Market Committee (FOMC) stated:
8 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
Later, in a press conference, Chair Yellen added more color to the policy statement:
“Let me reiterate, however, that the Committee’s expectations for the path of the federal funds rate are contingent on the economic outlook. If the economy proves to be stronger than anticipated by the Committee, resulting in a more rapid convergence of employment and inflation to the FOMC’s objectives, then increases in the federal funds rate are likely to occur sooner and to be more rapid than currently envisaged. Conversely, if economic performance disappoints, increases in the federal funds rate are likely to take place later and to be more gradual.”
It is clear guidance like this that makes one long for Harry Truman’s “one-handed economist.” From all this, one can glean that the Fed will be “data dependent” (another term being thrown around in the financial press) in determining the future path of the federal funds rate (currently near zero).
Finally, let’s look at inflation. It is important to fixed-income investors because it is the primary determinant of future purchasing power. If inflation increases, the semi-annual coupon payment of most bonds carries less value in the economy. Inflation, as measured by core PCE (the Core Personal Consumption Expenditures Index, which is the Fed’s favored inflation measure) excludes volatile food and energy prices. Since September 2013, core PCE has increased from 1.33% to 1.47%, but this is still materially below the Fed’s inflation target of 2.00%. As 2014 prices of municipal bonds have risen and yields have declined, their after-inflation purchasing power has fallen. Chart III illustrates this point for a 10-year AAA-rated general obligation bond.
Chart III shows that as of August 31, 2014, an investor in a 10-year AAA general obligation bond received a real yield (the yield on a security after inflation is taken into account) of 0.70%. The yield was in excess of inflation but well below its 2.08% average since June 1994. On August 31, a 10-year AAA general obligation bond yielded 2.17%, with core PCE at 1.47%. As of September 30, 2014, a 10-year AAA general obligation bond yielded 2.22%, with a real yield of 0.75%. These extremely low real yields are an important effect of the Fed’s keeping short-term rates very low.
Chart III | 10-Year AAA GO Real Yield (using Core PCE)
6/1/1994 – 8/31/2014
The Municipal Bond Market Credit Picture
The health of municipal market credit has generally been good, helped by GDP growth and increasing employment. But there have been some red flags recently. An August 2014 report from the Nelson A. Rockefeller Institute of Government at the State University of New York, “After Four Years of Uninterrupted Growth, Tax Revenues Decline in the First Quarter, and Preliminary Figures for the Second Quarter of 2014 Signal Further Declines in Personal Income Tax,” sums up certain observations:
• | “State tax revenues declined by 0.3% in the first quarter of 2014. This is the first time state revenues declined after four years of uninterrupted growth.” |
Certified Annual Report 9
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
• | “Personal income tax collections showed a decline of 1.2% in the first quarter of 2014. The decline in personal income tax collections appear to be primarily due to the mirror-image effect of the initial impact of the fiscal cliff on taxpayer behavior, which had driven tax collections upward a year ago.” |
• | “Year-to-date figures show 2.8% growth in overall state tax collections in the first three quarters of fiscal 2014 compared to the same period of 2013.” |
• | “Local property tax revenues grew by 1.9% in the first quarter, marking the eighth consecutive quarter of growth in nominal terms.” |
This data source tells us that overall state revenue is up but that there has been some decline in personal income tax collections that may be explained by individuals pushing income into last year to take advantage of lower personal income tax rates. We would raise a yellow flag at this indicator; this trend bears watching. The point about local property taxes growing should come as no surprise, as the real estate market has improved in many places. This is a very good development for local governments, because property taxes are their primary source of revenues. Not surprisingly, employment also shows positive growth. Only Alaska (off 0.95%) shows a decline for the period from August 2013 through August 2014 (the latest data available at this writing). The three states with the largest increases in employment are North Dakota (up 4.47%), Utah (up 3.53%), and Texas (up 3.63%).
One of the highest hurdles to the health of the state economies is the funding levels of their pension plans. For too long, elected officials have over-promised and under-delivered (especially when it came to making payments to pensions) to their employees, and until recently, markets have proven more of a headwind. On October 9, 2014, Bloomberg reported, “State Pension Gaps Shrink for the First Time Since 2007.” Let us caution all readers: the shrinkage is barely perceptible, but even that is better than a poke in the eye with a sharp stick.
“The median state system last year had 69.3% of the assets needed to meet promised benefits, up from 68.7% in 2012, according to data compiled by Bloomberg.”
This sounds like great news until one realizes the industrywide minimum acceptable funding level is said to be 80%. Thirteen states met or exceeded this; the state with the lowest (some would say worst) level is Illinois with a funding level of 39.3%, down from 40.4% in 2012. We continue to avoid purchase of the general obligation bonds of the State of Illinois for this and other reasons, although we do own certain other credits within the state.
Overall, the state of the states’ economies and their respective credit pictures is healthy, but there are some exceptions. Illinois is one. Exceptions at other levels are the City of Detroit (in the process of exiting Chapter 9 protection) and Puerto Rico, which by all reports doesn’t know what it is doing. We do not own either credit!
The long and short of the Puerto Rico story:
• | In March 2014, the island issued $3.5 billion of general obligation bonds, mostly sold to hedge funds that “only wanted to help the island.” At the time, the island’s officials said this would give them enough cash to last for 18 months. |
• | In June 2014, the governor signed legislation allowing the island’s public corporations to “restructure” their debt, the Puerto Rico Electric Power Authority (PREPA) being the best known among them. |
• | Later in 2014, PREPA reached “forbearance” agreements with its creditors, calling for, among other things, a “Chief Restructuring Officer” (for an engagement fee of around $10 million, which is not bad work if you can get it). |
• | In September, the island’s financial officials announced a $900 million “tax and revenue anticipation” note deal that would be placed with banks who were forced to hold the vast majority of it and could not sell it. That figure was later raised to $1.2 billion. This was six months after the March sale! The yield on these securities is 7.75%; California issued a similar security earlier in the summer for 0.10%. Think there is a difference in the credit? |
10 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
Conclusion
We do not believe that the fixed income markets and municipal bonds particularly, represent any great value at present; real yields are negative in some segments of the market, and very low in others. But we do not believe shareholders should undertake a wholesale rebalancing of portfolios either. It is important to re-evaluate why we own fixed-income products and municipal bonds: as part of a well-balanced, diversified portfolio. Recent volatility certainly demonstrates the potential benefits of these investments. Diversification is one of the best ways for shareholders to manage risk, not only between asset classes but in positioning within markets. And we believe municipal bond investors may benefit from diversifying along the municipal bond yield curve.
Many shareholders may soon ask themselves “what should I do if interest rates begin to rise?” We would suggest having faith in the structure of your portfolio. A portion of your intermediate laddered portfolio’s bonds mature each year, and become available for reinvestment at higher yields; this has the potential to increase income to shareholders. When interest rates do rise, prices will generally decline, but the remaining bonds in the portfolio will move closer to maturity and should increase in price over time. We advise being patient when interest rates start to rise, lengthening your anticipated holding period.
We will continue to strive to manage your assets to fulfill the Fund’s objectives as set out in the prospectus.
Sincerely,
![]() | ![]() | |||
Christopher Ryon, CFA | Josh Gonze | |||
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 11
SCHEDULE OF INVESTMENTS | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
Summary of Security Credit Ratings†
We have used ratings from Standard & Poor’s (S&P). Where S&P ratings are not available, we have used Moody’s Investors Service. Where neither rating is available, we have used ratings from Fitch Ratings. The category of investments identified as “AAA” in this graph includes investments which are pre-refunded or escrowed to maturity. Such investments are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities to satisfy the timely payment of principal and interest and, therefore, are normally deemed to be equivalent to AAA-rated securities.
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
ALABAMA — 1.98% | ||||||||||
Alabama Capital Region Solid Waste Disposal Authority, 4.00% due 6/15/2016 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | $ | 160,000 | $ | 168,770 | |||||
Alabama Capital Region Solid Waste Disposal Authority, 4.00% due 6/15/2017 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | 750,000 | 808,095 | |||||||
Alabama Capital Region Solid Waste Disposal Authority, 4.00% due 6/15/2019 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | 815,000 | 895,734 | |||||||
Alabama Capital Region Solid Waste Disposal Authority, 5.00% due 6/15/2020 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | 845,000 | 974,944 | |||||||
Alabama Capital Region Solid Waste Disposal Authority, 5.00% due 6/15/2021 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | 890,000 | 1,030,397 | |||||||
Alabama Capital Region Solid Waste Disposal Authority, 5.00% due 6/15/2022 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | 930,000 | 1,080,093 | |||||||
Alabama Capital Region Solid Waste Disposal Authority, 5.00% due 6/15/2023 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | 980,000 | 1,125,246 | |||||||
Alabama Drinking Water Finance Authority, 5.25% due 8/15/2015 (Insured: AMBAC) | NR/NR | 1,200,000 | 1,244,844 | |||||||
Alabama Public School & College Authority, 5.00% due 5/1/2016 (Educational Facilities) | NR/Aa1 | 2,000,000 | 2,147,860 | |||||||
Alabama Public School & College Authority, 5.00% due 6/1/2021 (Educational Facilities) | AA/Aa1 | 775,000 | 930,341 | |||||||
Alabama Public School & College Authority, 5.00% due 6/1/2026 (Educational Facilities) | AA/Aa1 | 4,380,000 | 5,194,549 | |||||||
City of Mobile Industrial Development Board PCR, 1.65% due 6/1/2034 put 3/20/2017 (Alabama Power Company Barry Plant Project) | A/A1 | 2,000,000 | 2,042,220 | |||||||
East Alabama Health Care Authority GO, 5.00% due 9/1/2027 (Health Care Facilities Capital Improvements) | A/NR | 1,250,000 | 1,375,837 | |||||||
Montgomery Water Works & Sanitary Sewer Board, 5.00% due 9/1/2017 | AAA/Aa1 | 2,185,000 | 2,453,296 | |||||||
University of Alabama at Birmingham Hospital, 5.25% due 9/1/2025 | A+/A1 | 2,000,000 | 2,201,200 | |||||||
ALASKA — 0.46% | ||||||||||
Alaska Housing Finance Corp. GO, 5.00% due 12/1/2021 (State Capital Project) | AA+/Aa2 | 500,000 | 586,450 | |||||||
Alaska Municipal Bond Bank, 5.00% due 10/1/2017 (Insured: Natl-Re) | AA+/Aa2 | 2,470,000 | 2,527,922 | |||||||
City of Valdez, 5.00% due 1/1/2021 (BP Pipelines (Alaska), Inc. Project) | A/A2 | 2,000,000 | 2,348,380 | |||||||
ARIZONA — 2.03% | ||||||||||
Arizona Board of Regents for the Benefit of the University of Arizona, 5.00% due 8/1/2024 (Stimulus Plan for Economic and Educational Development) | A+/Aa3 | 1,635,000 | 1,892,938 | |||||||
Arizona HFA, 5.00% due 7/1/2017 (Catholic Healthcare West) | A/A3 | 1,450,000 | 1,595,000 | |||||||
Arizona State University Energy Management LLC, 5.00% due 7/1/2017 (Tempe Campus Project) | AA-/A1 | 465,000 | 516,582 | |||||||
City of Flagstaff GO, 1.75% due 7/1/2015 (Urban Trail, Street and Utilities Improvements) | AA/Aa2 | 165,000 | 166,897 | |||||||
City of Flagstaff GO, 1.75% due 7/1/2016 (Urban Trail, Street and Utilities Improvements) | AA/Aa2 | 200,000 | 204,534 | |||||||
City of Flagstaff GO, 3.00% due 7/1/2020 (Urban Trail, Street and Utilities Improvements) | AA/Aa2 | 700,000 | 749,672 | |||||||
City of Flagstaff GO, 4.00% due 7/1/2022 (Urban Trail, Street and Utilities Improvements) | AA/Aa2 | 420,000 | 472,500 | |||||||
City of Flagstaff GO, 4.00% due 7/1/2023 (Urban Trail, Street and Utilities Improvements) | AA/Aa2 | 200,000 | 224,874 | |||||||
Mohave County IDA, 7.25% due 5/1/2015 (Mohave Prison LLC) | BBB+/NR | 2,395,000 | 2,452,911 | |||||||
Phoenix Civic Improvement Corp., 5.00% due 7/1/2017 (Insured: Natl-Re) | AA/Aa3 | 1,000,000 | 1,113,530 | |||||||
Pima County IDA, 5.00% due 12/1/2030 (Providence Day School Project) | BBB+/NR | 2,000,000 | 2,125,140 | |||||||
Salt Verde Financial Corp., 5.25% due 12/1/2022 (Salt River Project Agricultural Improvement and Power District) | A-/Baa2 | 2,000,000 | 2,345,960 | |||||||
Salt Verde Financial Corp., 5.25% due 12/1/2028 (Salt River Project Agricultural Improvement and Power District) | A-/Baa2 | 770,000 | 903,449 | |||||||
State of Arizona, 5.00% due 7/1/2019 (Insured: AGM) | AA/A1 | 7,280,000 | 8,451,716 | |||||||
University Medical Center Corp. GO, 5.00% due 7/1/2015 (UMCC Health Care Facilities) | BBB/ Baa2 | 1,000,000 | 1,029,370 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
CALIFORNIA — 8.77% | ||||||||||
Alameda County Joint Powers Authority, 5.25% due 12/1/2027 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | $ | 1,000,000 | $ | 1,191,010 | |||||
Alameda County Joint Powers Authority, 5.25% due 12/1/2028 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | 1,150,000 | 1,363,130 | |||||||
Alameda County Joint Powers Authority, 5.25% due 12/1/2029 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | 1,500,000 | 1,768,740 | |||||||
Brentwood Infrastructure Financing Authority, 5.00% due 11/1/2026 (Insured: AGM) | AA/NR | 2,000,000 | 2,210,540 | |||||||
California Educational Facilities Authority, 5.50% due 4/1/2029 (Pitzer College) | NR/A2 | 3,000,000 | 3,487,950 | |||||||
California HFFA, 5.00% due 11/15/2022 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,000,000 | 1,132,070 | |||||||
California HFFA, 5.00% due 3/1/2026 (Adventist Health System/West) | A/NR | 3,020,000 | 3,498,096 | |||||||
California HFFA, 5.25% due 3/1/2027 (Catholic Healthcare West) | A/A3 | 5,250,000 | 5,912,130 | |||||||
California Infrastructure & Economic Development Bank, 5.75% due 8/15/2029 (King City Joint Union High School District) | A/NR | 1,500,000 | 1,715,310 | |||||||
California Pollution Control Financing Authority, 5.25% due 6/1/2023 put 12/1/2017 (Solid Waste Disposal-Republic Services, Inc.) (AMT) | BBB+/Baa3 | 2,000,000 | 2,179,280 | |||||||
California State Housing Finance Agency, 4.55% due 2/1/2015 (Low-Moderate Income Mortgage Financing Program; Insured: FGIC) (AMT) | A-/Baa2 | 2,640,000 | 2,662,968 | |||||||
California State Public Works Board, 5.00% due 6/1/2017 (University of California Multiple Campus Capital Projects; Insured: Natl-Re) (ETM) | AA+/Aaa | 2,000,000 | 2,235,980 | |||||||
California State Public Works Board, 5.00% due 4/1/2028 (Corrections & Rehabilitation and Judicial Council) | A-/A1 | 2,500,000 | 2,856,700 | |||||||
California Statewide Community Development Authority, 6.25% due 8/15/2028 (Enloe Medical Center; Insured: California Mtg Insurance) | A/NR | 1,050,000 | 1,228,049 | |||||||
California Statewide Community Development Authority, 6.00% due 7/1/2030 (Aspire Public Schools) | NR/NR | 7,015,000 | 7,253,019 | |||||||
Carson Redevelopment Agency, 6.25% due 10/1/2022 (Redevelopment Project Area No. 1) | A-/NR | 1,620,000 | 1,925,613 | |||||||
Carson Redevelopment Agency, 6.375% due 10/1/2024 (Redevelopment Project Area No. 1) | A-/NR | 1,300,000 | 1,532,778 | |||||||
Chico Redevelopment Agency, 5.00% due 4/1/2030 (Chico Amended & Merged Redevelopment; Insured: AMBAC) | A+/NR | 5,500,000 | 5,692,500 | |||||||
Corona-Norco USD COP, 5.00% due 4/15/2018 (Insured: AGM) | AA/A1 | 1,245,000 | 1,397,089 | |||||||
Corona-Norco USD COP, 5.00% due 4/15/2021 (Insured: AGM) | AA/A1 | 1,000,000 | 1,161,830 | |||||||
Delano Financing Authority, 5.00% due 12/1/2025 (City of Delano Police Station and Woollomes Avenue Bridge) | A-/NR | 2,555,000 | 2,796,294 | |||||||
El Camino Hospital District, 6.25% due 8/15/2017 (Insured: AMBAC) (ETM) | NR/NR | 435,000 | 475,425 | |||||||
Franklin-McKinley School District GO, 5.25% due 8/1/2027 (Insured: Natl-Re) | NR/A1 | 1,000,000 | 1,202,950 | |||||||
Fresno USD GO, 6.00% due 8/1/2026 (Educational Facilities and Improvements; Insured: Natl-Re) | AA-/A3 | 1,165,000 | 1,401,413 | |||||||
Jurupa Public Financing Authority, 5.50% due 9/1/2025 (Eastvale Community Services; Insured: AGM) | AA/NR | 1,195,000 | 1,432,757 | |||||||
Jurupa Public Financing Authority, 5.50% due 9/1/2027 (Eastvale Community Services; Insured: AGM) | AA/NR | 1,335,000 | 1,578,397 | |||||||
Los Angeles Regional Airport Improvement Corp., 5.00% due 1/1/2017 (LAX Fuel Corp.; Insured: AGM) (AMT) | AA/A2 | 1,120,000 | 1,133,317 | |||||||
M-S-R Energy Authority, 6.125% due 11/1/2029 | A-/NR | 2,500,000 | 3,165,950 | |||||||
Mojave USD COP, 0% due 9/1/2021 (Insured: AGM) | AA/NR | 1,095,000 | 859,728 | |||||||
Mojave USD COP, 0% due 9/1/2023 (Insured: AGM) | AA/NR | 1,100,000 | 764,907 | |||||||
North City West School Facilities Financing Authority, 5.00% due 9/1/2024 (Carmel Valley Schools; Insured: AGM) | AA/NR | 1,080,000 | 1,239,149 | |||||||
Redwood City Redevelopment Agency, 0% due 7/15/2023 (Redevelopment Area A-2; Insured: AMBAC) | A-/NR | 2,060,000 | 1,468,368 | |||||||
San Jose Redevelopment Agency, 5.25% due 8/1/2027 (Merged Area Redevelopment Project) | A/Ba1 | 2,400,000 | 2,654,544 | |||||||
San Jose Redevelopment Agency, 5.375% due 8/1/2028 (Merged Area Redevelopment Project) | A/Ba1 | 1,175,000 | 1,305,390 | |||||||
San Mateo Union High School District GO, 0% due 9/1/2019 (Educational Facilities; Insured: Natl-Re) | AA+/Aa1 | 3,000,000 | 2,811,420 | |||||||
Saratoga Union School District GO, 0% due 9/1/2023 (Insured: Natl-Re) | AA+/Aa2 | 900,000 | 701,694 | |||||||
State of California GO, 5.25% due 9/1/2026 (Kindergarten University Facilities) | A/Aa3 | 5,000,000 | 5,963,150 | |||||||
State of California GO, 0.02% due 5/1/2034 put 10/1/2014 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa1 | 15,000,000 | 15,000,000 | |||||||
Tuolumne Wind Project Authority, 5.875% due 1/1/2029 (Tuolumne Co.) | AA-/A2 | 3,000,000 | 3,567,360 | |||||||
Turlock Irrigation District, 5.00% due 1/1/2021 | AA-/A2 | 1,750,000 | 2,023,735 | |||||||
William S. Hart Union High School District GO, 0% due 9/1/2021 (Educational Facilities) | AA/A2 | 800,000 | 667,224 | |||||||
COLORADO — 1.19% | ||||||||||
City & County of Denver Airport System, 0.20% due 11/15/2025 put 10/1/2014 (Denver International Airport; Insured: AGM; SPA: Morgan Stanley Bank) (daily demand notes) | AA/A1 | 750,000 | 750,000 | |||||||
Denver Convention Center Hotel Authority, 5.25% due 12/1/2023 (Insured: Syncora) | BBB-/Baa3 | 2,530,000 | 2,644,027 | |||||||
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) (AMT) | NR/Aaa | 1,220,000 | 1,383,285 | |||||||
Housing Authority of the City and County of Denver, 5.20% due 11/1/2027 (Three Towers Rehabilitation; Insured: AGM) (AMT) | NR/A2 | 1,335,000 | 1,455,884 | |||||||
Park Creek Metropolitan District, 5.25% due 12/1/2020 (Insured: AGM) | AA/NR | 1,120,000 | 1,260,907 | |||||||
Regional Transportation District COP, 5.50% due 6/1/2022 (FasTracks Transportation System) | A/Aa3 | 3,000,000 | 3,493,170 | |||||||
Regional Transportation District COP, 5.00% due 6/1/2028 (North Metro Rail Line) | A/Aa3 | 1,550,000 | 1,771,046 | |||||||
Southlands Metropolitan District GO, 7.00% due 12/1/2024 pre-refunded 12/1/2014 | AA+/NR | 1,370,000 | 1,385,933 | |||||||
CONNECTICUT — 0.37% | ||||||||||
Connecticut Health & Educational Facilities Authority, 5.75% due 7/1/2029 (Ethel Walker School) | BBB/NR | 1,350,000 | 1,433,835 | |||||||
Connecticut Health & Educational Facilities Authority, 0.02% due 7/1/2036 put 10/1/2014 (Yale University) (daily demand notes) | AAA/Aaa | 915,000 | 915,000 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
State of Connecticut GO Floating Rate Note, 0.56% due 9/15/2017 (Public Facility Improvements) | AA/Aa3 | $ | 2,000,000 | $ | 2,012,360 | |||||
DELAWARE — 0.10% | ||||||||||
Delaware River & Bay Authority, 5.00% due 1/1/2018 pre-refunded 1/1/2015 (Insured: Natl-Re) | AA-/A1 | 165,000 | 167,034 | |||||||
Delaware River & Bay Authority, 5.00% due 1/1/2018 pre-refunded 1/1/2015 (Insured: Natl-Re) | AA-/A1 | 335,000 | 339,054 | |||||||
Delaware Solid Waste Authority, 5.00% due 6/1/2021 (Capital Improvement Program; Insured: Natl-Re) | AA+/A2 | 615,000 | 658,191 | |||||||
DISTRICT OF COLUMBIA — 1.29% | ||||||||||
District of Columbia Association of American Medical Colleges, 5.00% due 2/15/2017 (Insured: AMBAC) (ETM) | NR/NR | 1,000,000 | 1,098,670 | |||||||
District of Columbia COP, 5.00% due 1/1/2020 pre-refunded 1/1/16 (Insured: Natl-Re) | AA-/Aa3 | 3,900,000 | 4,129,515 | |||||||
District of Columbia GO, 6.00% due 6/1/2015 (Insured: Natl-Re) | AA/Aa2 | 3,000,000 | 3,116,370 | |||||||
Metropolitan Airports Authority, 0% due 10/1/2023 (Dulles Toll Road; Insured: AGM) | AA/A3 | 4,890,000 | 3,597,915 | |||||||
Metropolitan Airports Authority, 0% due 10/1/2024 (Dulles Toll Road; Insured: AGM) | AA/A3 | 5,000,000 | 3,474,350 | |||||||
FLORIDA — 6.35% | ||||||||||
City of Hollywood Community Redevelopment Agency, 5.00% due 3/1/2021 (Beach Community Redevelopment Project; Insured: Syncora) | NR/A3 | 3,000,000 | 3,188,100 | |||||||
City of Jacksonville, 5.00% due 10/1/2026 (Better Jacksonville Plan) | A/A1 | 2,075,000 | 2,392,620 | |||||||
City of Lakeland, 5.00% due 10/1/2018 (Electric Power System Smart Grid Project; Insured: AGM) | AA/Aa3 | 2,000,000 | 2,300,780 | |||||||
City of Lakeland, 5.25% due 10/1/2027 (Electric Power System Smart Grid Project; Insured: AGM) | AA/Aa3 | 3,680,000 | 4,505,902 | |||||||
City of Lakeland, 5.25% due 10/1/2036 (Electric Power System Smart Grid Project; Insured: AGM) | AA/Aa3 | 2,770,000 | 3,422,003 | |||||||
City of Miami GO, 5.375% due 9/1/2015 (Insured: Natl-Re) | AA-/A2 | 1,000,000 | 1,003,820 | |||||||
Correctional Privatization Commission COP, 5.00% due 8/1/2017 (Insured: AMBAC) | AA+/Aa2 | 1,000,000 | 1,004,110 | |||||||
Escambia County HFA, 5.95% due 7/1/2020 (Florida Health Care Facility Loan; Insured: AMBAC) | NR/NR | 1,835,000 | 1,950,880 | |||||||
Flagler County School Board COP, 5.00% due 8/1/2020 pre-refunded 8/1/2015 (Insured: AGM) | AA/A2 | 2,560,000 | 2,662,144 | |||||||
Florida Department of Management Services, 5.00% due 9/1/2018 (Financing or Acquisition of State-Owned Office Buildings; Insured: AMBAC) | AA+/Aa2 | 500,000 | 526,960 | |||||||
Florida Department of Management Services COP, 3.50% due 8/1/2016 (Correctional Facilities Construction and Improvements; Insured: AGM) | AA+/Aa2 | 500,000 | 527,175 | |||||||
Florida Municipal Loan Council, 5.00% due 10/1/2020 (Insured: Natl-Re) | AA-/A3 | 1,000,000 | 1,080,620 | |||||||
Florida Municipal Loan Council, 5.00% due 10/1/2024 (Insured: Natl-Re) | AA-/A3 | 2,235,000 | 2,378,979 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2018 (South Florida Evaluation Treatment) | AA+/NR | 2,090,000 | 2,184,656 | |||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2019 (South Florida Evaluation Treatment) | AA+/NR | 2,255,000 | 2,357,129 | |||||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | AA-/Aa2 | 1,100,000 | 1,157,376 | |||||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health Hospital) | AA-/Aa2 | 1,750,000 | 1,841,280 | |||||||
Hillsborough County, 5.00% due 3/1/2017 (Water & Wastewater System; Insured: Natl-Re) | AA-/A1 | 5,630,000 | 5,906,546 | |||||||
Lake County School Board Master Lease Program COP, 5.00% due 6/1/2026 (School District Facility Projects) | A/NR | 1,210,000 | 1,365,896 | |||||||
Manatee County, 5.00% due 10/1/2015 (Various County Capital Projects) | NR/Aa2 | 500,000 | 524,030 | |||||||
Miami-Dade County Educational Facilities Authority, 5.25% due 4/1/2018 (University of Miami) | A-/A3 | 250,000 | 267,285 | |||||||
Miami-Dade County Educational Facilities Authority, 5.25% due 4/1/2024 (University of Miami; Insured: AMBAC) | A-/A3 | 1,000,000 | 1,201,330 | |||||||
Miami-Dade County GO, 5.00% due 10/1/2023 (Seaport Properties) | AA/Aa2 | 1,040,000 | 1,214,803 | |||||||
Miami-Dade County GO, 6.25% due 7/1/2026 (Building Better Communities) | AA/Aa2 | 2,130,000 | 2,493,037 | |||||||
Miami-Dade County School Board COP, 5.00% due 10/1/2021 (Insured: AMBAC) | A/A1 | 3,035,000 | 3,535,563 | |||||||
Miami-Dade County School Board COP, 5.25% due 5/1/2022 (Insured: AGM) | AA/A1 | 2,600,000 | 2,933,268 | |||||||
Orange County HFA, 6.25% due 10/1/2016 (Orlando Regional Hospital; Insured: Natl-Re) | AA-/A3 | 1,695,000 | 1,775,631 | |||||||
Orange County HFA, 5.125% due 10/1/2026 (Orlando Health, Inc.) | A/A3 | 2,000,000 | 2,233,980 | |||||||
Palm Beach County HFA, 5.00% due 12/1/2025 (Boca Raton Regional Hospital) | BBB/NR | 500,000 | 571,740 | |||||||
Palm Beach County School Board COP, 5.00% due 8/1/2032 put 8/1/2016 | NR/Aa3 | 1,500,000 | 1,617,300 | |||||||
Sarasota County Public Hospital Board, 8.953% due 10/1/2021 (Sarasota Memorial Hospital; Insured: Natl-Re) | AA-/A1 | 2,000,000 | 2,058,620 | |||||||
School Board of Broward County COP, 5.00% due 7/1/2020 (Educational Facilities and Equipment; Insured: AGM) | AA/A1 | 1,000,000 | 1,072,550 | |||||||
School Board of Broward County COP, 5.00% due 7/1/2026 (Educational Facilities and Equipment) | A/A1 | 3,000,000 | 3,424,470 | |||||||
School Board of Broward County COP, 5.00% due 7/1/2027 (Educational Facilities and Equipment) | A/A1 | 2,000,000 | 2,268,880 | |||||||
South Miami HFA, 5.00% due 8/15/2022 (Baptist Health Group) | AA/Aa2 | 1,500,000 | 1,665,450 | |||||||
Sunshine State Governmental Finance Commission, 5.00% due 9/1/2028 (Miami-Dade County Program) | AA-/Aa3 | 3,500,000 | 4,002,915 | |||||||
University of Central Florida COP Convocation Corp., 5.00% due 10/1/2019 (Insured: Natl-Re) | AA-/A3 | 1,135,000 | 1,170,821 | |||||||
GEORGIA — 1.87% | ||||||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2024 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 485,000 | 578,426 | |||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2025 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 510,000 | 604,304 | |||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2027 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 735,000 | 855,297 | |||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2028 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 590,000 | 682,264 | |||||||
City of Atlanta, 5.50% due 11/1/2022 (Water & Wastewater System; Insured: Natl-Re) | AA-/Aa3 | 530,000 | 625,623 | |||||||
City of Atlanta, 5.50% due 11/1/2024 (Water & Wastewater System; Insured: AGM) | AA/Aa3 | 5,000,000 | 5,793,500 | |||||||
Clarke County Hospital Authority, 5.00% due 1/1/2023 (Athens Regional Medical Center) | AA/Aa1 | 2,060,000 | 2,420,500 | |||||||
Clarke County Hospital Authority, 5.00% due 1/1/2024 (Athens Regional Medical Center) | AA/Aa1 | 2,310,000 | 2,680,847 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Clarke County Hospital Authority, 5.00% due 1/1/2025 (Athens Regional Medical Center) | AA/Aa1 | $ | 525,000 | $ | 602,915 | |||||
Clarke County Hospital Authority, 5.00% due 1/1/2026 (Athens Regional Medical Center) | AA/Aa1 | 725,000 | 830,031 | |||||||
Development Authority of Fulton County, 5.00% due 10/1/2019 (Georgia Tech Athletic Assoc.) | NR/A2 | 3,000,000 | 3,509,700 | |||||||
Municipal Electric Authority of Georgia, 6.60% due 1/1/2018 (Insured: Natl-Re) | AA-/A1 | 1,655,000 | 1,780,317 | |||||||
Valdosta and Lowndes County Hospital Authority, 5.00% due 10/1/2024 (South Medical Center) | AA-/Aa2 | 1,200,000 | 1,385,376 | |||||||
GUAM — 0.74% | ||||||||||
Guam Power Authority, 5.00% due 10/1/2023 (Electric Power System; Insured: AGM) | AA/A2 | 2,000,000 | 2,355,460 | |||||||
Guam Power Authority, 5.00% due 10/1/2024 (Electric Power System; Insured: AGM) | AA/A2 | 2,000,000 | 2,358,220 | |||||||
Guam Power Authority, 5.00% due 10/1/2025 (Electric Power System; Insured: AGM) | AA/A2 | 2,500,000 | 2,930,500 | |||||||
Guam Waterworks Authority, 5.25% due 7/1/2024 (Water and Wastewater System) | A-/Ba1 | 1,000,000 | 1,150,020 | |||||||
HAWAII — 1.09% | ||||||||||
City and County of Honolulu GO, 5.00% due 7/1/2016 (Insured: Natl-Re) | NR/Aa1 | 1,000,000 | 1,035,150 | |||||||
State of Hawaii GO, 5.00% due 12/1/2027 | AA/Aa2 | 10,000,000 | 11,944,900 | |||||||
ILLINOIS — 6.13% | ||||||||||
Board of Trustees of Southern Illinois University, 5.25% due 4/1/2019 (Housing & Auxiliary Facilities; Insured: Natl-Re) | AA-/A3 | 1,000,000 | 1,145,790 | |||||||
Chicago Housing Authority, 5.00% due 7/1/2018 pre-refunded 7/01/2016 (Low-Income Public Housing Program; Insured: AGM) | AA/A2 | 5,295,000 | 5,709,281 | |||||||
Chicago Transit Authority, 5.00% due 12/1/2018 (Bombardier Transit Rail System) | AA/A1 | 1,500,000 | 1,713,015 | |||||||
City of Chicago, 0% due 11/15/2014 (Near South Redevelopment; Insured: ACA) (ETM) | NR/NR | 1,510,000 | 1,509,517 | |||||||
City of Chicago, 5.00% due 1/1/2019 (Midway Airport; Insured: AMBAC) (AMT) | A-/A3 | 1,210,000 | 1,223,661 | |||||||
City of Chicago, 5.75% due 11/1/2030 (Water System; Insured: AMBAC) | AA+/Aa1 | 1,270,000 | 1,527,238 | |||||||
City of Chicago, 5.00% due 1/1/2032 (Midway Airport) | A-/A3 | 4,805,000 | 5,362,188 | |||||||
City of Chicago, 5.00% due 1/1/2033 (Midway Airport) | A-/A3 | 5,000,000 | 5,567,250 | |||||||
City of Chicago, 5.25% due 1/1/2034 (Midway Airport) | A-/A3 | 4,700,000 | 5,252,720 | |||||||
City of Chicago GO, 5.00% due 1/1/2020 (Municipal Facilities Projects; Insured: AMBAC) | A+/Baa1 | 1,000,000 | 1,059,140 | |||||||
City of Chicago GO, 5.00% due 12/1/2022 (Modern Schools Across Chicago Program; Insured: AMBAC) | A+/Baa1 | 415,000 | 438,713 | |||||||
City of Chicago GO, 5.00% due 12/1/2024 (Modern Schools Across Chicago Program; Insured: AMBAC) | A+/Baa1 | 500,000 | 524,315 | |||||||
City of Mount Vernon GO, 4.00% due 12/15/2025 (Various Municipal Capital Improvements; Insured: AGM) | AA/A2 | 1,900,000 | 1,988,502 | |||||||
City of Waukegan GO, 4.00% due 12/30/2015 (Insured: AGM) | NR/A2 | 500,000 | 520,440 | |||||||
City of Waukegan GO, 5.00% due 12/30/2016 (Insured: AGM) | NR/A2 | 1,500,000 | 1,629,645 | |||||||
City of Waukegan GO, 5.00% due 12/30/2017 (Insured: AGM) | NR/A2 | 1,680,000 | 1,868,093 | |||||||
City of Waukegan GO, 5.00% due 12/30/2018 (Insured: AGM) | NR/A2 | 2,000,000 | 2,262,460 | |||||||
Community College District No. 525 GO, 6.25% due 6/1/2024 (Joliet Junior College) | AA/NR | 500,000 | 561,530 | |||||||
Cook County Community College District No. 508 GO, 5.25% due 12/1/2026 (City Colleges of Chicago) | AA/NR | 1,000,000 | 1,156,220 | |||||||
Cook County GO, 5.25% due 11/15/2024 | AA/A1 | 3,000,000 | 3,383,970 | |||||||
Cook County School District No. 104 GO, 0% due 12/1/2022 (Argo Summit Elementary School Facilities; Insured: AGM) (ETM) | NR/NR | 2,000,000 | 1,683,580 | |||||||
DuPage County Community Consolidated School District No. 93 GO, 2.00% due 1/1/2015 (Carol Stream Educational Facilities) (State Aid Withholding) | AA+/NR | 465,000 | 466,934 | |||||||
DuPage County Community Consolidated School District No. 93 GO, 2.00% due 1/1/2016 (Carol Stream Educational Facilities) (State Aid Withholding) | AA+/NR | 485,000 | 494,196 | |||||||
Forest Preserve District of DuPage County GO, 4.00% due 11/1/2022 (Land Acquisition and Development) | AAA/NR | 750,000 | 843,855 | |||||||
Illinois Educational Facilities Authority, 5.00% due 11/1/2016 (Rush University Medical Center) | AA-/A2 | 1,000,000 | 1,073,590 | |||||||
Illinois Educational Facilities Authority, 5.75% due 11/1/2028 (Rush University Medical Center) | AA-/A2 | 1,000,000 | 1,120,510 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2016 (Central DuPage Health) | AA/NR | 2,000,000 | 2,173,260 | |||||||
Illinois Finance Authority, 5.00% due 11/1/2017 (Central DuPage Health) | AA/NR | 2,000,000 | 2,233,160 | |||||||
Illinois Finance Authority, 5.00% due 8/1/2022 (Bradley University; Insured: Syncora) | A/NR | 1,000,000 | 1,052,790 | |||||||
Illinois Finance Authority, 6.125% due 11/1/2023 (Advocate Health Care Network) | AA/Aa2 | 5,175,000 | 6,156,956 | |||||||
Illinois HFA, 5.70% due 2/20/2021 (Midwest Care Center I, Inc.; Collateralized: GNMA) | NR/Aa1 | 565,000 | 566,898 | |||||||
Illinois Toll Highway Authority, 5.00% due 1/1/2021 pre-refunded 7/1/2015 (Congestion-Relief Plan; Insured: AGM) | AA/Aa3 | 350,000 | 362,684 | |||||||
McHenry & Lake Counties Community Consolidated School District No. 15 GO, 0% due 1/1/2017 (Insured: AGM) (ETM) | NR/Aa2 | 45,000 | 44,387 | |||||||
McHenry & Lake Counties Community Consolidated School District No. 15 GO, 0% due 1/1/2017 (Insured: AGM) | NR/Aa2 | 955,000 | 927,735 | |||||||
Metropolitan Pier & Exposition Authority, 5.00% due 12/15/2022 (McCormick Place Expansion Project) | AAA/NR | 1,000,000 | 1,190,710 | |||||||
Niles Park District GO, 2.00% due 12/1/2014 (Parks and Recreation Projects) | NR/Aa2 | 315,000 | 315,832 | |||||||
Niles Park District GO, 2.00% due 12/1/2015 (Parks and Recreation Projects) | NR/Aa2 | 325,000 | 330,528 | |||||||
Niles Park District GO, 2.00% due 12/1/2016 (Parks and Recreation Projects) | NR/Aa2 | 330,000 | 338,666 | |||||||
Niles Park District GO, 3.00% due 12/1/2017 (Parks and Recreation Projects) | NR/Aa2 | 340,000 | 359,169 | |||||||
Niles Park District GO, 3.00% due 12/1/2018 (Parks and Recreation Projects) | NR/Aa2 | 350,000 | 371,035 | |||||||
Niles Park District GO, 3.00% due 12/1/2019 (Parks and Recreation Projects) | NR/Aa2 | 360,000 | 381,161 | |||||||
Niles Park District GO, 3.00% due 12/1/2020 (Parks and Recreation Projects) | NR/Aa2 | 370,000 | 390,920 | |||||||
State of Illinois, 5.00% due 6/15/2018 | AAA/NR | 2,000,000 | 2,287,540 | |||||||
Tazewell County School District GO, 9.00% due 12/1/2024 (Insured: Natl-Re) | NR/Aa3 | 1,205,000 | 1,818,827 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Village of Tinley Park GO, 4.00% due 12/1/2021 | AA+/NR | $ | 585,000 | $ | 650,672 | |||||
Village of Tinley Park GO, 5.00% due 12/1/2024 | AA+/NR | 870,000 | 1,018,935 | |||||||
INDIANA — 3.68% | ||||||||||
Allen County Jail Building Corp., 5.00% due 4/1/2018 (Insured: Syncora) | NR/Aa2 | 2,495,000 | 2,660,518 | |||||||
Allen County Redevelopment District, 5.00% due 11/15/2018 | NR/A2 | 1,560,000 | 1,625,738 | |||||||
Board of Trustees for the Vincennes University, 5.375% due 6/1/2022 | NR/Aa3 | 895,000 | 1,077,321 | |||||||
City of Carmel Redevelopment Authority, 0% due 2/1/2016 (Performing Arts Center) | AA+/Aa1 | 1,730,000 | 1,718,028 | |||||||
City of Carmel Redevelopment Authority, 0% due 2/1/2021 (Performing Arts Center) | AA+/Aa1 | 2,000,000 | 1,742,700 | |||||||
City of Carmel Redevelopment District COP, 6.50% due 7/15/2035 (Performing Arts Center) | NR/NR | 2,730,000 | 3,001,580 | |||||||
City of Petersburg, 5.40% due 8/1/2017 (Indianapolis Power and Light Company; Insured: Natl-Re/IBC) | AA-/A2 | 1,325,000 | 1,479,416 | |||||||
Clay Multi-School Building Corp., 5.00% due 1/15/2018 (State Aid Withholding) | AA+/NR | 1,735,000 | 1,943,599 | |||||||
Fort Wayne Redevelopment Authority, 5.00% due 8/1/2023 (Harrison Square; Insured: AGM) | NR/Aa2 | 2,290,000 | 2,495,413 | |||||||
Franklin Township Multi-School Building Corp., 5.00% due 7/10/2017 (Franklin Central High School) (State Aid Withholding) | AA+/NR | 630,000 | 704,850 | |||||||
Hobart Building Corp., 6.50% due 7/15/2019 (Insured: Natl-Re) (State Aid Withholding) | AA+/A3 | 1,000,000 | 1,223,010 | |||||||
Indiana Bond Bank, 5.25% due 2/1/2015 (Safe Drinking Water & Wastewater Programs) | AAA/NR | 500,000 | 508,545 | |||||||
Indiana Bond Bank, 5.25% due 10/15/2020 (Natural Gas Utility Improvements) | NR/A3 | 5,340,000 | 6,279,787 | |||||||
Indiana Bond Bank, 5.25% due 4/1/2023 (Hendricks Regional Health Financing Program; Insured: AMBAC) | AA/NR | 2,000,000 | 2,361,880 | |||||||
Indiana Finance Authority, 5.00% due 3/1/2019 (University Health) | AA-/Aa3 | 5,000,000 | 5,791,450 | |||||||
Indiana Finance Authority, 5.00% due 11/1/2021 (Sisters of St. Francis Health Services, Inc.) | NR/Aa3 | 605,000 | 683,287 | |||||||
Indiana Finance Authority, 5.25% due 9/15/2022 (Marian University) | BBB-/NR | 2,480,000 | 2,644,920 | |||||||
Indiana Finance Authority, 5.25% due 9/15/2023 (Marian University) | BBB-/NR | 2,605,000 | 2,754,032 | |||||||
Indiana Finance Authority, 4.10% due 11/15/2046 put 11/3/2016 (Ascension Health) | AA+/Aa2 | 1,000,000 | 1,074,340 | |||||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2017 pre-refunded 8/1/2016 (146th Street Extension) | AA/NR | 1,000,000 | 1,084,890 | |||||||
Noblesville Redevelopment Authority, 5.00% due 8/1/2020 (146th Street Extension) | AA/NR | 1,000,000 | 1,084,890 | |||||||
IOWA — 0.39% | ||||||||||
Iowa Finance Authority, 5.00% due 2/15/2030 (UnityPoint Health) | NR/Aa3 | 2,250,000 | 2,577,667 | |||||||
Iowa Finance Authority, 5.00% due 2/15/2032 (UnityPoint Health) | NR/Aa3 | 1,850,000 | 2,098,363 | |||||||
KANSAS — 0.06% | ||||||||||
Kansas Development Finance Authority, 5.00% due 6/1/2020 (Wichita State University) | NR/Aa3 | 575,000 | 676,988 | |||||||
KENTUCKY — 0.28% | ||||||||||
Louisville/Jefferson County Metro Government, 5.25% due 10/1/2026 (Norton Suburban Hospital and Kosair Children’s Hospital) | A-/NR | 2,320,000 | 2,630,254 | |||||||
Turnpike Authority of Kentucky, 5.00% due 7/1/2017 pre-refunded 7/1/2015 (Revitalization Projects-Highway Capital Planning; Insured: AMBAC) | AA+/Aa2 | 650,000 | 673,705 | |||||||
LOUISIANA — 2.77% | ||||||||||
City of New Orleans, 6.00% due 6/1/2024 pre-refunded 6/1/2019 (Sewerage System; Insured: AGM) | AA/A3 | 750,000 | 916,545 | |||||||
Law Enforcement District of the Parish of Plaquemines, 5.00% due 9/1/2023 | BBB+/NR | 1,230,000 | 1,324,587 | |||||||
Law Enforcement District of the Parish of Plaquemines, 5.00% due 9/1/2025 | BBB+/NR | 1,350,000 | 1,439,491 | |||||||
Law Enforcement District of the Parish of Plaquemines, 5.15% due 9/1/2027 | BBB+/NR | 1,490,000 | 1,590,456 | |||||||
Law Enforcement District of the Parish of Plaquemines, 5.30% due 9/1/2029 | BBB+/NR | 1,650,000 | 1,766,160 | |||||||
Louisiana Energy and Power Authority, 5.25% due 6/1/2029 (LEPA Unit No. 1; Insured: AGM) | AA/A2 | 1,000,000 | 1,159,010 | |||||||
Louisiana Energy and Power Authority, 5.25% due 6/1/2030 (LEPA Unit No. 1; Insured: AGM) | AA/A2 | 2,955,000 | 3,400,673 | |||||||
Louisiana Energy and Power Authority, 5.25% due 6/1/2031 (LEPA Unit No. 1; Insured: AGM) | AA/A2 | 2,145,000 | 2,454,545 | |||||||
Louisiana Offshore Terminal Authority, 2.125% due 10/1/2037 put 10/1/2015 (Deepwater Oil Port-Loop LLC) | BBB/A3 | 2,500,000 | 2,530,250 | |||||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2022 (Black & Gold Facilities; Insured: CIFG) | AA/A3 | 1,590,000 | 1,733,005 | |||||||
New Orleans Aviation Board, 5.25% due 1/1/2018 (Insured: AGM) (AMT) | AA/A2 | 1,000,000 | 1,116,900 | |||||||
New Orleans Aviation Board, 5.25% due 1/1/2020 (Insured: AGM) | AA/A2 | 2,000,000 | 2,212,320 | |||||||
New Orleans Regional Transit Authority, 5.00% due 12/1/2023 (Insured: AGM) | AA/Aa3 | 1,000,000 | 1,132,040 | |||||||
New Orleans Regional Transit Authority, 5.00% due 12/1/2024 (Insured: AGM) | AA/Aa3 | 1,000,000 | 1,127,140 | |||||||
Office Facilities Corp., 5.00% due 3/1/2019 (State Capitol Complex Program) | AA-/Aa3 | 255,000 | 294,176 | |||||||
Parish of Lafourche, 5.00% due 1/1/2024 (Roads, Highways and Bridges) | AA-/NR | 1,065,000 | 1,278,809 | |||||||
Parish of Lafourche, 5.00% due 1/1/2025 (Roads, Highways and Bridges) | AA-/NR | 2,620,000 | 3,153,851 | |||||||
St. Tammany Parish, 5.00% due 6/1/2019 pre-refunded 6/1/2016 (Insured: CIFG) | AA-/NR | 1,300,000 | 1,414,790 | |||||||
St. Tammany Parish, 5.00% due 6/1/2020 pre-refunded 6/1/2016 (Insured: CIFG) | AA-/NR | 1,000,000 | 1,088,300 | |||||||
State of Louisiana GO, 5.00% due 8/1/2018 (Insured: AGM) | AAA/Aa3 | 300,000 | 312,132 | |||||||
Terrebonne Parish Hospital Service District 1, 5.00% due 4/1/2028 (General Medical Center) | A+/A2 | 1,500,000 | 1,616,400 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
MARYLAND — 0.05% | ||||||||||
County of Montgomery GO, 0.04% due 6/1/2026 put 10/1/2014 (Consolidated Public Improvements; SPA: Wells Fargo Bank N.A.) (daily demand notes) | AAA/Aaa | $ | 615,000 | $ | 615,000 | |||||
MASSACHUSETTS — 1.31% | ||||||||||
Commonwealth of Massachusetts GO, 4.00% due 6/1/2015 (Commonwealth Capital Investment Plan) | AA+/Aa1 | 525,000 | 538,634 | |||||||
Massachusetts Bay Transportation Authority, 5.25% due 7/1/2030 (Transportation Capital Program) | AAA/Aa1 | 1,000,000 | 1,270,620 | |||||||
Massachusetts Development Finance Agency, 5.50% due 10/1/2025 (Simmons College) | BBB+/Baa1 | 460,000 | 535,831 | |||||||
Massachusetts Development Finance Agency, 5.50% due 10/1/2028 (Simmons College) | BBB+/Baa1 | 1,330,000 | 1,523,954 | |||||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2022 (Higher Education Student Loans) | AA/NR | 1,130,000 | 1,289,884 | |||||||
Massachusetts School Building Authority, 5.00% due 8/15/2030 pre-refunded 8/15/2015 (SMART Fund; Insured: AGM) | AA/Aa2 | 10,000,000 | 10,423,000 | |||||||
MICHIGAN — 3.93% | ||||||||||
Brighton Area Schools GO, 5.00% due 5/1/2016 (Livingston County School Building and Site; Insured: Q-SBLF) | NR/Aa2 | 370,000 | 395,763 | |||||||
City of Troy GO, 5.00% due 10/1/2016 (Public Safety Facilities and City Hall) | AAA/NR | 1,060,000 | 1,146,061 | |||||||
City of Troy GO, 5.00% due 11/1/2025 (Downtown Development Authority-Community Center Facilities) | AAA/NR | 300,000 | 347,820 | |||||||
County of Genesee, 5.00% due 11/1/2024 (Water Supply System; Insured: BAM) | AA/A2 | 610,000 | 683,810 | |||||||
County of Genesee, 5.00% due 11/1/2025 (Water Supply System; Insured: BAM) | AA/A2 | 345,000 | 384,751 | |||||||
County of Genesee, 5.25% due 11/1/2026 (Water Supply System; Insured: BAM) | AA/A2 | 900,000 | 1,011,753 | |||||||
County of Genesee, 5.25% due 11/1/2027 (Water Supply System; Insured: BAM) | AA/A2 | 1,375,000 | 1,541,238 | |||||||
County of Genesee, 5.25% due 11/1/2028 (Water Supply System; Insured: BAM) | AA/A2 | 645,000 | 721,471 | |||||||
County of Genesee, 5.00% due 11/1/2029 (Water Supply System; Insured: BAM) | AA/A2 | 1,210,000 | 1,334,122 | |||||||
County of Genesee, 5.00% due 11/1/2030 (Water Supply System; Insured: BAM) | AA/A2 | 1,195,000 | 1,314,811 | |||||||
County of Genesee, 5.125% due 11/1/2032 (Water Supply System; Insured: BAM) | AA/A2 | 750,000 | 824,220 | |||||||
Detroit City School District GO, 5.25% due 5/1/2026 (School Building & Site Improvement; Insured: AGM/Q-SBLF) | AA/Aa2 | 3,150,000 | 3,674,601 | |||||||
Detroit City School District GO, 5.25% due 5/1/2027 (School Building & Site Improvement; Insured: AGM/Q-SBLF) | AA/Aa2 | 1,100,000 | 1,288,056 | |||||||
Fraser Public School District GO, 5.00% due 5/1/2018 (School Building & Site Improvement; Insured: AGM/Q-SBLF) | AA/Aa2 | 910,000 | 934,424 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2019 (Bronson Hospital; Insured: AGM) | AA/A2 | 2,000,000 | 2,256,900 | |||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2022 (Bronson Hospital; Insured: AGM) | NR/A2 | 2,470,000 | 2,812,367 | |||||||
Kalamazoo Hospital Finance Authority, 5.25% due 5/15/2026 (Bronson Hospital) | NR/A2 | 1,285,000 | 1,430,077 | |||||||
Michigan Finance Authority, 5.00% due 4/1/2026 (Government Loan Program) | A+/NR | 1,580,000 | 1,744,920 | |||||||
Michigan Public Educational Facilities Authority, 5.50% due 9/1/2022 (Black River School) | NR/NR | 1,110,000 | 1,102,918 | |||||||
Michigan Public School Academy, 8.00% due 8/1/2035 (Will Carleton Charter School) | NR/NR | 945,000 | 1,011,830 | |||||||
Michigan State Building Authority, 0% due 10/15/2025 (Insured: Natl-Re) | AA-/Aa3 | 5,000,000 | 3,028,750 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2024 (Sparrow Health System) | A+/A1 | 2,140,000 | 2,301,977 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Health System) | A/A2 | 3,000,000 | 3,197,940 | |||||||
Michigan State Hospital Finance Authority, 5.625% due 11/15/2029 (Henry Ford Health System) | A-/A3 | 2,500,000 | 2,800,675 | |||||||
Michigan Strategic Fund, 5.25% due 10/15/2023 (Michigan House of Representatives Facilities; Insured: AGM) | AA/A1 | 1,000,000 | 1,136,400 | |||||||
Royal Oak Hospital Finance Authority, 5.25% due 8/1/2016 (William Beaumont Hospital) | A/A1 | 2,000,000 | 2,171,080 | |||||||
Royal Oak Hospital Finance Authority, 8.00% due 9/1/2029 pre-refunded 9/1/2018 (William Beaumont Hospital) | A/Aaa | 2,540,000 | 3,234,385 | |||||||
South Lyon Community Schools GO, 4.00% due 5/1/2019 (School Buildings and Sites; Insured: Natl-Re) | AA-/Aa2 | 450,000 | 472,320 | |||||||
State of Michigan Trunk Line Fund, 5.50% due 11/1/2020 (Insured: AGM) | AA+/Aa2 | 1,500,000 | 1,833,840 | |||||||
Warren Consolidated Schools District GO, 4.00% due 5/1/2018 (School Buildings and Sites; Insured: AGM) | AA/A2 | 750,000 | 786,225 | |||||||
MINNESOTA — 1.14% | ||||||||||
Housing & Redevelopment Authority of the City of St. Paul, 5.25% due 5/15/2020 (HealthPartners Health System) | A/A2 | 1,965,000 | 2,101,725 | |||||||
Minneapolis-St. Paul Metropolitan Airports Commission, 5.00% due 1/1/2023 pre-refunded 1/1/2015 (Airport, Marina & Port Improvements; Insured: BHAC) (AMT) | AA+/Aa1 | 3,885,000 | 3,931,697 | |||||||
Minnesota Agriculture & Economic Development Board, 5.50% due 2/15/2025 (Essentia Health; Insured: AGM) | AA/NR | 2,500,000 | 2,855,025 | |||||||
State of Minnesota GO, 5.00% due 8/1/2015 (Educational and Recreational Facilities Improvements) | AA+/Aa1 | 4,425,000 | 4,604,876 | |||||||
State of Minnesota GO, 5.00% due 8/1/2015 (Educational and Recreational Facilities Improvements) (ETM) | NR/NR | 75,000 | 78,034 | |||||||
MISSISSIPPI — 0.95% | ||||||||||
Mississippi Development Bank, 5.00% due 3/1/2018 (Municipal Energy Agency Power Supply; Insured: Syncora) | NR/Baa1 | 1,920,000 | 2,011,622 | |||||||
Mississippi Development Bank, 5.00% due 7/1/2022 (City of Canton Parking Facilities) | NR/NR | 1,935,000 | 2,092,412 | |||||||
Mississippi Development Bank, 5.25% due 8/1/2027 (Department of Corrections) | AA-/NR | 3,415,000 | 3,855,603 | |||||||
Mississippi Development Bank GO, 5.00% due 3/1/2025 (Capital City Convention Center) | AA-/Aa2 | 2,850,000 | 3,409,940 | |||||||
MISSOURI — 1.43% | ||||||||||
Kansas City Metropolitan Community Colleges Building Corp., 5.00% due 7/1/2017 (Junior College District; Insured: Natl-Re) | NR/Aa2 | 1,000,000 | 1,077,480 | |||||||
Missouri Development Finance Board, 5.00% due 4/1/2019 (Eastland Center) | A-/NR | 1,000,000 | 1,069,850 | |||||||
Missouri Development Finance Board, 5.00% due 4/1/2021 (Eastland Center) | A-/NR | 2,000,000 | 2,102,700 | |||||||
Missouri Development Finance Board, 5.125% due 4/1/2022 (Eastland Center) | A-/NR | 2,000,000 | 2,131,940 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Missouri Development Finance Board, 0.17% due 12/1/2033 put 10/1/2014 (The Nelson Gallery Foundation; SPA: Northern Trust Co.) (daily demand notes) | AAA/Aaa | $ | 500,000 | $ | 500,000 | |||||
Missouri Health and Educational Facilities Authority, 5.00% due 4/1/2019 (Webster University) | NR/A2 | 2,235,000 | 2,579,145 | |||||||
Missouri Health and Educational Facilities Authority, 5.00% due 4/1/2021 (Webster University) | NR/A2 | 2,520,000 | 2,945,452 | |||||||
Tax Increment Financing Commission of Kansas City, 5.25% due 3/1/2018 (Maincor Project-Public Improvements) (ETM) | NR/NR | 810,000 | 881,798 | |||||||
Tax Increment Financing Commission of Kansas City, 5.00% due 5/1/2022 (Union Hill Redevelopment Project) | NR/NR | 3,570,000 | 3,750,928 | |||||||
NEVADA — 1.08% | ||||||||||
Carson City, 5.00% due 9/1/2027 (Carson Tahoe Regional Medical Center) | BBB+/NR | 2,450,000 | 2,696,862 | |||||||
Washoe County GO, 5.00% due 7/1/2026 (Reno Sparks Convention & Visitors Authority) | AA/Aa2 | 5,000,000 | 5,677,350 | |||||||
Washoe County GO, 5.00% due 7/1/2029 (Reno Sparks Convention & Visitors Authority) | AA/Aa2 | 2,000,000 | 2,247,980 | |||||||
Washoe County GO, 5.00% due 7/1/2032 (Reno Sparks Convention & Visitors Authority) | AA/Aa2 | 2,000,000 | 2,233,700 | |||||||
NEW HAMPSHIRE — 1.06% | ||||||||||
Manchester Housing & Redevelopment Authority, 0% due 1/1/2016 (Insured: Radian/ACA) | NR/Caa1 | 4,990,000 | 4,695,241 | |||||||
New Hampshire Health & Education Facilities Authority, 5.25% due 10/1/2023 (Southern New Hampshire Medical Center) | A-/NR | 1,000,000 | 1,077,720 | |||||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2026 | AA/Aa3 | 1,860,000 | 2,206,685 | |||||||
State of New Hampshire, 5.00% due 2/1/2022 (Turnpike System) | A+/A1 | 2,250,000 | 2,673,990 | |||||||
State of New Hampshire, 5.00% due 2/1/2024 (Turnpike System) | A+/A1 | 1,755,000 | 2,044,049 | |||||||
NEW JERSEY — 2.74% | ||||||||||
Burlington County Bridge Commission, 4.00% due 12/1/2017 (County Governmental Loan Program) | AA/Aa2 | 850,000 | 934,192 | |||||||
Cape May County Industrial Pollution Control Financing Authority, 6.80% due 3/1/2021 (Atlantic City Electric Company; Insured: Natl-Re) | AA-/A3 | 560,000 | 688,453 | |||||||
Essex County Improvement Authority, 5.50% due 10/1/2024 (County Correctional Facilities & State Court Facilities; Insured: Natl-Re) | NR/Aa2 | 2,500,000 | 3,132,450 | |||||||
New Jersey EDA, 5.50% due 9/1/2026 (School Facilities Construction; Insured: AMBAC) | A-/A2 | 3,000,000 | 3,620,700 | |||||||
New Jersey EDA, 5.50% due 9/1/2027 (School Facilities Construction; Insured: Natl-Re) | AA-/A2 | 1,700,000 | 2,116,483 | |||||||
New Jersey EDA, 5.00% due 6/15/2029 (School Facilities Construction) | A-/A2 | 12,890,000 | 14,390,396 | |||||||
New Jersey State Health Care Facilities Financing Authority, 5.00% due 7/1/2027 (Virtua Health) | A+/NR | 2,000,000 | 2,322,760 | |||||||
New Jersey State Health Care Facilities Financing Authority, 5.00% due 7/1/2028 (Virtua Health) | A+/NR | 1,000,000 | 1,155,260 | |||||||
New Jersey Water Supply Authority, 5.00% due 8/1/2019 (Manasquan Reservoir Water Supply System; Insured: Natl-Re) | AA/Aa3 | 635,000 | 659,759 | |||||||
Passaic Valley Sewage Commissioners GO, 5.75% due 12/1/2022 | NR/A2 | 3,000,000 | 3,654,960 | |||||||
NEW MEXICO — 0.79% | ||||||||||
City of Farmington PCR, 4.70% due 9/1/2024 (Arizona Public Service Co.-Four Corners Project) | A-/A3 | 3,000,000 | 3,204,180 | |||||||
City of Las Cruces GRT, 5.00% due 6/1/2030 (NMFA Loan) | NR/Aa3 | 2,040,000 | 2,245,591 | |||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2032 (Haverland Carter Lifestyle Group) | NR/NR | 2,130,000 | 2,175,135 | |||||||
Rio Rancho Public School District No. 94, 5.00% due 8/1/2015 (State Aid Withholding) | NR/Aa1 | 1,715,000 | 1,783,257 | |||||||
NEW YORK — 5.54% | ||||||||||
City of New York GO, 5.00% due 8/1/2019 pre-refunded 8/1/2015 (Financial Emergency Act; Insured: Natl-Re) | AA-/Aa2 | 465,000 | 483,888 | |||||||
City of New York GO, 5.00% due 8/1/2019 (Financial Emergency Act; Insured: Natl-Re) | AA/Aa2 | 140,000 | 145,576 | |||||||
City of New York GO, 0.04% due 8/1/2020 put 10/1/2014 (City Budget Financial Management; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 1,300,000 | 1,300,000 | |||||||
City of New York GO, 0.42% due 8/1/2021 (Capital Projects) | AA/Aa2 | 2,700,000 | 2,700,513 | |||||||
City of New York GO, 5.00% due 8/1/2027 (Financial Emergency Act) | AA/Aa2 | 4,530,000 | 5,360,983 | |||||||
City of New York GO, 5.00% due 8/1/2030 (Financial Emergency Act) | AA/Aa2 | 5,000,000 | 5,860,050 | |||||||
City of New York GO, 5.00% due 8/1/2031 (City Budget Financial Management) | AA/Aa2 | 4,000,000 | 4,665,760 | |||||||
City of New York GO, 0.04% due 1/1/2036 put 10/1/2014 (Gowanus Canal Site; SPA: JPMorgan Chase Bank N.A) (daily demand notes) | AA/Aa2 | 4,800,000 | 4,800,000 | |||||||
County of Nassau GO, 5.00% due 4/1/2026 (Insured: BAM) | AA/NR | 1,300,000 | 1,486,797 | |||||||
Erie County Industrial Development Agency, 5.00% due 5/1/2019 (City of Buffalo School District) | AA/Aa2 | 3,000,000 | 3,504,330 | |||||||
Erie County Industrial Development Agency, 5.00% due 5/1/2027 (City of Buffalo School District) (State Aid Withholding) | AA/Aa2 | 5,000,000 | 5,852,350 | |||||||
Lake Placid Central School District GO, 5.00% due 6/15/2017 (Elementary, Middle/High School Projects; Insured: Natl-Re) (State Aid Withholding) | NR/Aa3 | 305,000 | 335,692 | |||||||
New York City Municipal Water Finance Authority, 0.03% due 6/15/2035 put 10/1/2014 (Water and Sewer System; SPA: Bayerische Landesbank) (daily demand notes) | AAA/Aa1 | 20,000,000 | 20,000,000 | |||||||
New York State Dormitory Authority, 5.625% due 7/1/2016 (City University System) | AA/Aa2 | 710,000 | 750,733 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2017 (Bishop Henry B. Hucles Nursing Home; Insured: SONYMA) | NR/Aa1 | 850,000 | 910,767 | |||||||
New York State Dormitory Authority, 5.25% due 5/15/2021 (State University Educational Facilities) | AA/Aa2 | 500,000 | 588,200 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2023 (Miriam Osborn Memorial Home Assoc.) | NR/NR | 2,180,000 | 2,369,704 | |||||||
New York State Dormitory Authority, 5.00% due 12/15/2027 (State Educational & Medical Facilities) | AAA/Aa1 | 2,500,000 | 2,977,925 | |||||||
United Nations Development Corp., 5.00% due 7/1/2025 (One, Two and Three U.N. Plaza Project) | NR/A1 | 1,700,000 | 1,923,754 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
NORTH CAROLINA — 0.28% | ||||||||||
Charlotte-Mecklenburg Hospital Authority, 3.00% due 1/15/2018 (Carolinas HealthCare System) | AA-/Aa3 | $ | 600,000 | $ | 639,312 | |||||
Charlotte-Mecklenburg Hospital Authority, 5.00% due 1/15/2028 (Carolinas HealthCare System) | AA-/Aa3 | 2,190,000 | 2,509,324 | |||||||
County of Henderson COP, 5.25% due 5/1/2017 pre-refunded 5/1/2015 (Dana Elementary School and Depts. of Social | AA/Aa3 | 230,000 | 236,902 | |||||||
NORTH DAKOTA — 0.18% | ||||||||||
County of Ward, 5.125% due 7/1/2021 (Trinity Health System) | BBB-/NR | 1,000,000 | 1,029,670 | |||||||
North Dakota Building Authority, 4.25% due 12/1/2015 (Various State Agency Capital Projects; Insured: Natl-Re) | AA+/Aa2 | 1,105,000 | 1,157,222 | |||||||
OHIO — 5.94% | ||||||||||
Akron, Bath and Copley Joint Township Hospital District, 5.00% due 11/15/2024 (Children’s Hospital Medical Center of Akron) | NR/A1 | 1,000,000 | 1,154,440 | |||||||
American Municipal Power, Inc., 5.25% due 2/15/2028 (AMP Fremont Energy Center) | A/A1 | 4,000,000 | 4,557,280 | |||||||
City of Cleveland, 2.00% due 10/1/2014 (Parks and Recreation Facilities) | AA/A1 | 470,000 | 470,024 | |||||||
City of Cleveland, 2.00% due 10/1/2015 (Public Safety, Health and Welfare Facilities) | AA/A1 | 375,000 | 381,206 | |||||||
City of Cleveland, 2.00% due 10/1/2015 (Parks and Recreation Facilities) | AA/A1 | 475,000 | 482,861 | |||||||
City of Cleveland, 3.00% due 10/1/2017 (Parks and Recreation Facilities) | AA/A1 | 490,000 | 520,939 | |||||||
City of Cleveland, 5.00% due 11/15/2027 (Public Facilities Improvements) | AA/A1 | 1,285,000 | 1,494,082 | |||||||
City of Cleveland, 5.00% due 10/1/2028 (Bridges and Roadways) | AA/A1 | 2,420,000 | 2,799,892 | |||||||
City of Cleveland, 5.00% due 11/15/2028 (Public Facilities Improvements) | AA/A1 | 1,000,000 | 1,158,690 | |||||||
City of Cleveland, 5.00% due 10/1/2029 (Bridges and Roadways) | AA/A1 | 100,000 | 115,251 | |||||||
City of Cleveland, 5.00% due 11/15/2029 (Public Facilities Improvements) | AA/A1 | 1,415,000 | 1,633,292 | |||||||
City of Cleveland, 5.00% due 11/15/2030 (Public Facilities Improvements) | AA/A1 | 1,485,000 | 1,700,087 | |||||||
City of Cleveland GO, 5.00% due 12/1/2016 (Various Municipal Capital Improvements) | AA/A1 | 1,000,000 | 1,096,430 | |||||||
City of Cleveland GO, 5.00% due 12/1/2024 (Various Municipal Capital Improvements) | AA/A1 | 1,000,000 | 1,183,380 | |||||||
City of Cleveland GO, 5.00% due 12/1/2026 (Various Municipal Capital Improvements) | AA/A1 | 1,230,000 | 1,439,469 | |||||||
City of Hamilton, 5.25% due 10/1/2017 (Wastewater System; Insured: AGM) | NR/A1 | 1,500,000 | 1,574,595 | |||||||
Cleveland-Cuyahoga County Port Authority, 6.25% due 5/15/2016 (Council for Economic Opportunities in Greater Cleveland; LOC: FifthThird Bank) | BBB+/NR | 410,000 | 410,677 | |||||||
Cleveland-Cuyahoga County Port Authority, 5.00% due 10/1/2021 (Cleveland Museum of Art) | AA+/NR | 1,330,000 | 1,555,661 | |||||||
Cleveland-Cuyahoga County Port Authority, 5.00% due 7/1/2025 (County Administration Offices) | AA-/Aa2 | 1,780,000 | 2,126,780 | |||||||
County of Allen, 5.00% due 5/1/2025 (Catholic Health Partners-Mercy Health West Facility) | AA-/A1 | 4,470,000 | 5,103,935 | |||||||
County of Allen, 5.00% due 5/1/2026 (Catholic Health Partners-Mercy Health West Facility) | AA-/A1 | 3,855,000 | 4,372,688 | |||||||
County of Hamilton, 5.00% due 5/15/2028 (Cincinnati Children’s Hospital Medical Center) | AA/Aa2 | 2,665,000 | 3,107,630 | |||||||
County of Hamilton, 5.00% due 5/15/2029 (Cincinnati Children’s Hospital Medical Center) | AA/Aa2 | 1,000,000 | 1,160,080 | |||||||
County of Hamilton, 5.00% due 5/15/2031 (Cincinnati Children’s Hospital Medical Center) | AA/Aa2 | 4,420,000 | 5,094,227 | |||||||
Deerfield Township, 5.00% due 12/1/2016 | NR/A1 | 1,035,000 | 1,115,057 | |||||||
Deerfield Township, 5.00% due 12/1/2025 | NR/A1 | 1,000,000 | 1,045,810 | |||||||
Lucas County Health Care Facility, 5.00% due 8/15/2021 (Sunset Retirement Community) | NR/NR | 1,400,000 | 1,502,522 | |||||||
Lucas County Health Care Facility, 5.125% due 8/15/2025 (Sunset Retirement Community) | NR/NR | 1,250,000 | 1,369,337 | |||||||
Ohio Air Quality Development Authority PCR, 5.70% due 8/1/2020 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa3 | 3,000,000 | 3,479,310 | |||||||
Ohio Air Quality Development Authority PCR, 3.625% due 12/1/2033 put 6/1/2020 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa3 | 1,000,000 | 1,023,930 | |||||||
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 | 1,079,390 | |||||||
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 | 3,045,540 | |||||||
State of Ohio GO, 5.00% due 8/1/2015 (Educational Facilities Projects) | AA+/Aa1 | 10,775,000 | 11,212,357 | |||||||
State of Ohio Higher Educational Facility Commission, 5.05% due 7/1/2037 pre-refunded 7/1/2016 (Kenyon College) | A+/A1 | 1,200,000 | 1,298,460 | |||||||
OKLAHOMA — 0.55% | ||||||||||
Oklahoma State Industries Authority, 5.50% due 7/1/2023 (Oklahoma Medical Research Foundation) | NR/A1 | 3,730,000 | 4,148,879 | |||||||
Oklahoma State Power Authority, 5.00% due 1/1/2018 (Insured: AGM) | AA/A2 | 1,000,000 | 1,130,440 | |||||||
Tulsa County Industrial Authority, 5.00% due 12/15/2024 (St. Francis Health System, Inc.) | AA+/Aa2 | 1,130,000 | 1,229,090 | |||||||
PENNSYLVANIA — 5.64% | ||||||||||
Allegheny County Hospital Development Authority, 5.00% due 5/15/2019 (University of Pittsburgh Medical Center) | A+/Aa3 | 2,500,000 | 2,910,650 | |||||||
Allegheny County IDA, 5.90% due 8/15/2026 (Propel Charter School-McKeesport) | BBB-/NR | 1,035,000 | 1,102,751 | |||||||
Allegheny County IDA, 6.375% due 8/15/2035 (Propel Charter School-McKeesport) | BBB-/NR | 1,130,000 | 1,219,801 | |||||||
Bethlehem Area School District GO, 5.00% due 10/15/2020 (Educational Facilities; Insured: AGM) (State Aid Withholding) | AA/NR | 475,000 | 534,555 | |||||||
Bradford County IDA, 5.20% due 12/1/2019 (International Paper Company) (AMT) | BBB/Baa2 | 2,620,000 | 2,712,958 | |||||||
Chartiers Valley Industrial & Commercial Development Authority, 5.75% due 12/1/2022 (Asbury Health Center) | NR/NR | 900,000 | 927,828 | |||||||
County of Lehigh GO, 5.00% due 11/15/2016 | NR/Aa1 | 5,725,000 | 6,278,493 | |||||||
Dallastown Area School District GO, 4.00% due 5/1/2021 (State Aid Withholding) | AA/NR | 460,000 | 512,316 | |||||||
Lancaster County Solid Waste Management Authority, 5.25% due 12/15/2030 (Acquisition of Susquehanna Resource Management Facility) | AA-/NR | 3,000,000 | 3,443,160 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Monroeville Financing Authority, 5.00% due 2/15/2026 (University of Pittsburgh Medical Center) | A+/Aa3 | $ | 3,490,000 | $ | 4,209,812 | |||||
Pennsylvania Economic Development Financing Authority, 4.625% due 12/1/2018 (Colver Project; Insured: AMBAC) (AMT) | BBB-/Ba1 | 7,470,000 | 7,671,690 | |||||||
Pennsylvania Higher Education Facilities Authority, 0% due 7/1/2020 (Insured: AMBAC) | NR/NR | 2,032,839 | 1,334,742 | |||||||
Pennsylvania State Public School Building Authority GO, 5.00% due 6/1/2027 (Philadelphia District; Insured: AGM) (State Aid Withholding) | AA/A1 | 5,000,000 | 5,831,800 | |||||||
Pennsylvania Turnpike Commission Step Up Coupon, 0% due 12/1/2030 (PennDOT-Mass Transit Agencies) | A-/A3 | 4,000,000 | 4,185,160 | |||||||
Pittsburgh Water & Sewer Authority, 5.00% due 9/1/2030 (Water and Sewer System; Insured: AGM) | A/A2 | 5,000,000 | 5,660,250 | |||||||
Pittsburgh Water & Sewer Authority, 5.00% due 9/1/2031 (Water and Sewer System; Insured: AGM) | A/A2 | 3,740,000 | 4,209,220 | |||||||
Pittsburgh Water & Sewer Authority, 5.00% due 9/1/2031 (Water and Sewer System; Insured: AGM) | A/A2 | 3,665,000 | 4,124,811 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2020 (Insured: BAM) (State Aid Withholding) | AA/NR | 405,000 | 450,943 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2017 (Insured: BAM) (State Aid Withholding) | AA/NR | 365,000 | 397,270 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2018 (Insured: BAM) (State Aid Withholding) | AA/NR | 355,000 | 391,924 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2020 (Insured: BAM) (State Aid Withholding) | AA/NR | 385,000 | 428,674 | |||||||
Plum Borough School District GO, 4.00% due 9/15/2021 (Insured: BAM) (State Aid Withholding) | AA/NR | 425,000 | 471,461 | |||||||
Plum Borough School District GO, 5.00% due 9/15/2021 (Insured: BAM) (State Aid Withholding) | AA/NR | 430,000 | 504,519 | |||||||
School District of Philadelphia GO, 5.00% due 9/1/2018 (School Reform Commission) (State Aid Withholding) | A+/A1 | 5,250,000 | 5,971,035 | |||||||
The Hospitals and Higher Educational Facilities Authority of Philadelphia, 0.04% due 7/1/2022 put 10/1/2014 (The Children’s Hospital of Philadelphia; SPA: JPMorgan Chase Bank) (daily demand notes) | AA/Aa2 | 1,805,000 | 1,805,000 | |||||||
RHODE ISLAND — 0.43% | ||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2024 (Training School Project) | AA-/Aa3 | 3,595,000 | 4,184,760 | |||||||
State of Rhode Island and Providence Plantations GO, 4.00% due 10/15/2023 (Consolidated Capital Development Loan) | AA/Aa2 | 800,000 | 907,200 | |||||||
SOUTH CAROLINA — 1.61% | ||||||||||
City of Myrtle Beach, 5.00% due 6/1/2028 (Municipal Sports Complex) | AA-/A1 | 1,000,000 | 1,152,240 | |||||||
City of Myrtle Beach, 5.00% due 6/1/2030 (Municipal Sports Complex) | AA-/A1 | 1,000,000 | 1,140,600 | |||||||
Greenwood Fifty School Facilities, Inc., 5.00% due 12/1/2025 (School District No. 50 Project; Insured: AGM) | AA/A1 | 2,400,000 | 2,669,256 | |||||||
Lexington County Health Services District, Inc., 5.00% due 11/1/2016 (Lexington Medical Center) | AA-/A1 | 250,000 | 273,078 | |||||||
Lexington One School Facilities Corp., 5.00% due 12/1/2019 (School District No. 1 Project) | NR/Aa3 | 1,000,000 | 1,089,230 | |||||||
Lexington One School Facilities Corp., 5.25% due 12/1/2021 pre-refunded 12/1/2015 (School District No. 1 Project) | NR/Aa3 | 1,700,000 | 1,799,943 | |||||||
Scago Educational Facilities Corp., 5.00% due 12/1/2017 (Colleton School District; Insured: AGM) | AA/A3 | 1,000,000 | 1,090,370 | |||||||
Scago Educational Facilities Corp., 5.00% due 4/1/2019 pre-refunded 10/1/2015 (Spartanburg School District; Insured: AGM) | AA/Aa3 | 2,740,000 | 2,871,109 | |||||||
Scago Educational Facilities Corp., 5.00% due 4/1/2021 pre-refunded 10/1/2015 (Spartanburg School District; Insured: AGM) | AA/Aa3 | 1,000,000 | 1,047,850 | |||||||
Securing Assets For Education, 5.00% due 12/1/2019 (School District of Berkeley County Project) | A+/Aa3 | 2,000,000 | 2,178,460 | |||||||
South Carolina Housing Finance & Development Authority, 5.30% due 7/1/2023 (AMT) | NR/Aa1 | 805,000 | 833,779 | |||||||
Sumter Two School Facilities, Inc., 5.00% due 12/1/2021 (School District No. 2 Project; Insured: AGM) | AA/A3 | 2,855,000 | 3,079,688 | |||||||
SOUTH DAKOTA — 0.31% | ||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 7/1/2023 (Avera Health) | AA-/A1 | 1,575,000 | 1,830,449 | |||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 11/1/2024 (Sanford Health) | A+/A1 | 1,700,000 | 1,902,045 | |||||||
TENNESSEE — 1.00% | ||||||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2014 | NR/Baa2 | 1,000,000 | 1,008,670 | |||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2023 (Prepaid Gas Purchase Agreement) | A-/Baa1 | 2,500,000 | 2,817,125 | |||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2023 (Prepaid Gas Purchase Agreement) | A-/Baa2 | 7,000,000 | 8,076,320 | |||||||
TEXAS — 10.83% | ||||||||||
Arlington ISD GO, 5.00% due 2/15/2018 pre-refunded 2/15/2015 (Tarrant County Educational Facilities; Guaranty: PSF) | NR/Aaa | 300,000 | 305,469 | |||||||
Austin Community College District, 5.50% due 8/1/2023 (Round Rock Campus) | AA/Aa2 | 2,180,000 | 2,503,948 | |||||||
Bexar County Health Facilities Development Corp., 5.00% due 7/1/2027 (Army Retirement Residence) | BBB/NR | 1,730,000 | 1,775,482 | |||||||
Bexar Metropolitan Water District, 5.00% due 5/1/2021 (Waterworks System; Insured: Syncora) | A+/A1 | 1,300,000 | 1,430,468 | |||||||
Bexar Metropolitan Water District, 5.00% due 5/1/2022 (Waterworks System; Insured: Syncora) | A+/A1 | 2,300,000 | 2,530,828 | |||||||
Board of Regents of the Texas A&M University System, 5.25% due 5/15/2017 (Revenue Financing System and Capital Plan Projects) | AA+/Aaa | 200,000 | 206,324 | |||||||
Cities of Dallas and Fort Worth, 5.00% due 11/1/2015 (DFW International Airport Development Plan) | A+/A2 | 1,000,000 | 1,051,590 | |||||||
City of Arlington GO, 5.00% due 8/15/2019 (Insured: AGM) | AAA/Aa1 | 600,000 | 625,194 | |||||||
City of Dallas, 5.00% due 10/1/2031 pre-refunded 10/1/2015 (Waterworks & Sewer System; Insured: AGM) | AAA/Aa1 | 4,710,000 | 4,937,352 | |||||||
City of Galveston, 5.00% due 9/1/2021 (Galveston Island Convention Center; Insured: AGM) | NR/A2 | 545,000 | 627,448 | |||||||
City of Galveston, 5.00% due 9/1/2024 (Galveston Island Convention Center; Insured: AGM) | NR/A2 | 1,115,000 | 1,271,680 | |||||||
City of Houston, 5.00% due 9/1/2032 (Convention & Entertainment Facilities) | A-/A2 | 3,560,000 | 4,068,332 | |||||||
City of Laredo, 5.00% due 3/15/2018 (Sports Venue Improvements; Insured: AMBAC) | A+/A1 | 2,040,000 | 2,072,905 | |||||||
City of Laredo GO, 5.00% due 8/15/2017 (Waterworks and Sewer System; Insured: AMBAC) | AA/Aa2 | 315,000 | 327,953 | |||||||
City of Laredo GO, 5.00% due 8/15/2017 pre-refunded 8/15/2015 (Waterworks and Sewer System; Insured: AMBAC) | NR/Aa2 | 185,000 | 192,826 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
City of Pharr Higher Education Finance Authority, 5.75% due 8/15/2024 (IDEA Public Schools) | BBB/NR | $ | 5,050,000 | $ | 5,593,127 | |||||
City of San Antonio, 5.00% due 7/1/2024 (Airport System/Passenger Facility Improvements) (AMT) | A-/A2 | 2,065,000 | 2,364,074 | |||||||
City of San Antonio, 5.00% due 7/1/2025 (Airport System/Passenger Facility Improvements) (AMT) | A-/A2 | 1,160,000 | 1,317,667 | |||||||
City of Texas City Industrial Development Corp., 7.375% due 10/1/2020 (ARCO Pipe Line Co. Project) | A/A2 | 2,705,000 | 3,525,318 | |||||||
Dallas County Utilities & Reclamation District, 5.15% due 2/15/2022 (Insured: AMBAC) | A-/A3 | 3,000,000 | 3,232,680 | |||||||
Grapevine-Colleyville ISD GO, 5.25% due 8/15/2023 pre-refunded 8/15/2015 (Educational Facilities; Insured: Natl-Re) | AA-/Aa2 | 545,000 | 569,247 | |||||||
Grapevine-Colleyville ISD GO, 5.25% due 8/15/2023 (Educational Facilities; Insured: Natl-Re) | AA/Aa2 | 20,000 | 20,873 | |||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 12/1/2028 (Memorial Hermann Health System) | A+/A1 | 3,000,000 | 3,505,200 | |||||||
Harris County Hospital District, 5.00% due 2/15/2015 (Insured: Natl-Re) | AA-/A2 | 2,075,000 | 2,107,245 | |||||||
Houston Higher Education Finance Corp., 6.50% due 5/15/2031 (Cosmos Foundation, Inc.) | BBB/NR | 775,000 | 927,838 | |||||||
Kimble County Hospital District GO, 5.00% due 8/15/2017 | NR/NR | 510,000 | 552,723 | |||||||
Kimble County Hospital District GO, 5.00% due 8/15/2018 | NR/NR | 525,000 | 577,878 | |||||||
La Vernia Higher Education Finance Corp., 5.75% due 8/15/2024 (Kipp, Inc.) | BBB/NR | 3,000,000 | 3,367,110 | |||||||
Lower Colorado River Authority, 5.00% due 5/15/2026 | A/A1 | 9,415,000 | 10,900,969 | |||||||
Lower Colorado River Authority, 5.00% due 5/15/2026 pre-refunded 5/15/2022 | NR/NR | 55,000 | 66,895 | |||||||
North Central Texas Health Facilities Development Corp., 5.00% due 8/15/2019 (Children’s Medical Center of Dallas) | NR/Aa2 | 270,000 | 310,905 | |||||||
North East ISD GO, 2.00% due 8/1/2043 put 8/1/2015 (Educational Facilities; Guaranty: PSF) | AAA/Aaa | 7,130,000 | 7,221,906 | |||||||
North Texas Tollway Authority, 5.00% due 9/1/2017 (DOT-President George Bush Turnpike Western Extension) | AA+/NR | 450,000 | 505,719 | |||||||
Nueces River Authority, 5.00% due 7/15/2020 (Corpus Christi Lake Texana Water Supply Facilities; Insured: AGM) | AA/Aa3 | 1,000,000 | 1,036,410 | |||||||
San Juan Higher Education Finance Authority, 5.75% due 8/15/2024 (IDEA Public Schools) | BBB/NR | 1,590,000 | 1,793,711 | |||||||
Stafford Economic Development Corp., 6.00% due 9/1/2017 pre-refunded 9/1/2015 (Convention Center-Performing Arts Center Theater Complex; Insured: Natl-Re) | AA-/A1 | 1,775,000 | 1,869,625 | |||||||
State of Texas GO, 1.50% due 8/31/2015 (Cash Flow Management) | SP-1+/Mig1 | 44,500,000 | 45,056,250 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2023 (IDEA Public Schools; Insured: ACA) | BBB/NR | 3,000,000 | 3,318,270 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 6.00% due 2/15/2030 (Cosmos Foundation, Inc.) | BBB/NR | 1,750,000 | 1,965,320 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2030 pre-refunded 8/15/2017 (IDEA Public Schools; Insured: ACA) | BBB/NR | 2,000,000 | 2,212,180 | |||||||
Uptown Development Authority, 5.50% due 9/1/2029 (Infrastructure Improvements) | BBB/NR | 1,250,000 | 1,362,637 | |||||||
U.S. VIRGIN ISLANDS — 0.48% | ||||||||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 | NR/Baa3 | 5,000,000 | 5,715,100 | |||||||
UTAH — 0.56% | ||||||||||
City of Herriman, 5.75% due 11/1/2027 (Towne Center Assessment Area) | AA-/NR | 480,000 | 480,024 | |||||||
Local Building Authority of Salt Lake Valley Fire Service Area, 5.25% due 4/1/2020 | NR/Aa2 | 1,250,000 | 1,401,987 | |||||||
Weber County, 0.17% due 2/15/2035 put 10/1/2014 (IHC Health Services, Inc.; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA+/Aa1 | 4,750,000 | 4,750,000 | |||||||
VIRGINIA — 0.90% | ||||||||||
County of Hanover IDA, 6.00% due 10/1/2021 (FirstHealth Richmond Memorial Hospital) (ETM) | AA-/NR | 785,000 | 850,901 | |||||||
Fairfax County GO, 4.00% due 10/1/2015 (Public Facilities and Improvements) (State Aid Withholding) | AAA/Aaa | 2,850,000 | 2,959,611 | |||||||
Pittsylvania County GO, 3.00% due 7/15/2017 (Educational Capital Projects) (State Aid Withholding) | AA-/Aa3 | 280,000 | 280,557 | |||||||
Virginia Housing Development Authority GO, 4.85% due 4/1/2019 (Multi-Family Housing Development) (AMT) | AAA/Aaa | 3,100,000 | 3,327,478 | |||||||
Virginia Housing Development Authority GO, 4.85% due 10/1/2019 (Multi-Family Housing Development) (AMT) | AAA/Aaa | 3,100,000 | 3,329,834 | |||||||
WASHINGTON — 2.15% | ||||||||||
City of Seattle, 5.00% due 2/1/2019 (Light and Power Improvements) | AA/Aa2 | 3,000,000 | 3,490,050 | |||||||
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 | 2,001,973 | |||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2025 (Skagit Regional Health) | NR/A1 | 4,860,000 | 5,649,215 | |||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2028 (Skagit Regional Health) | NR/A1 | 3,000,000 | 3,417,750 | |||||||
Skagit County Public Hospital District No. 2 GO, 5.00% due 12/1/2027 (Island Hospital) | NR/A1 | 2,445,000 | 2,764,708 | |||||||
Skagit County Public Hospital District No. 2 GO, 5.00% due 12/1/2028 (Island Hospital) | NR/A1 | 2,195,000 | 2,468,563 | |||||||
Washington Health Care Facilities Authority, 5.25% due 8/15/2024 (Multi-Care Systems; Insured: AGM) | AA/Aa3 | 1,000,000 | 1,102,390 | |||||||
Washington Health Care Facilities Authority, 6.25% due 8/1/2028 pre-refunded 8/1/2018 (Highline Medical Centers; Insured: FHA 242) | NR/NR | 3,985,000 | 4,772,795 | |||||||
WEST VIRGINIA — 0.22% | ||||||||||
State of West Virginia GO, 5.00% due 6/1/2022 (Division of Highways State Road Fund; Insured: Natl-Re) | AA/Aa1 | 1,000,000 | 1,031,950 | |||||||
West Virginia Hospital Finance Authority, 5.00% due 6/1/2020 (United Hospital Center; Insured: AMBAC) | A/A2 | 1,530,000 | 1,607,510 | |||||||
WISCONSIN — 1.72% | ||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2021 (Agnesian Healthcare, Inc.) | A-/A3 | 2,170,000 | 2,465,836 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2023 (ProHealth Care, Inc.) | A+/A1 | 1,980,000 | 2,266,328 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2024 (ProHealth Care, Inc.) | A+/A1 | 2,460,000 | 2,800,612 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Wisconsin Health & Educational Facilities Authority, 5.50% due 7/1/2025 (Agnesian Healthcare, Inc.) | A-/A3 | $ | 5,000,000 | $ | 5,630,450 | |||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2025 (ProHealth Care, Inc.) | A+/A1 | 3,180,000 | 3,602,495 | |||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2026 (ProHealth Care, Inc.) | A+/A1 | 3,305,000 | 3,724,305 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 92.37% (Cost $1,036,830,896) | $ | 1,101,762,690 | ||||||||
OTHER ASSETS LESS LIABILITIES — 7.63% | 91,012,229 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 1,192,774,919 | ||||||||
|
|
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. |
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 | |
BAM | Insured by Build America Mutual Insurance Co. | |
BHAC | Insured by Berkshire Hathaway Assurance Corp. | |
CIFG | Insured by 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 | Collateralized by Government National Mortgage Association | |
GO | General Obligation |
GRT | Gross Receipts Tax | |
HFA | Health Facilities Authority | |
HFFA | Health Facilities Financing Authority | |
IBC | Insured Bond Certificate | |
IDA | Industrial Development Authority | |
ISD | Independent School District | |
Mtg | Mortgage | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
PSF | Guaranteed by Permanent School Fund | |
Q-SBLF | Insured by Qualified School Bond Loan Fund | |
Radian | Insured by Radian Asset Assurance | |
SONYMA | State of New York Mortgage Authority | |
Syncora | Insured by Syncora Guarantee Inc. | |
USD | Unified School District |
See notes to financial statements.
22 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $1,036,830,896) (Note 2) | $ | 1,101,762,690 | ||
Cash | 62,679,663 | |||
Receivable for investments sold | 11,691,553 | |||
Receivable for fund shares sold | 6,437,619 | |||
Interest receivable | 12,874,733 | |||
Prepaid expenses and other assets | 43,999 | |||
|
| |||
Total Assets | 1,195,490,257 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 1,661,797 | |||
Payable to investment advisor and other affiliates (Note 3) | 690,922 | |||
Accounts payable and accrued expenses | 113,255 | |||
Dividends payable | 249,364 | |||
|
| |||
Total Liabilities | 2,715,338 | |||
|
| |||
NET ASSETS | $ | 1,192,774,919 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Distribution in excess of net investment income | $ | (3,781 | ) | |
Net unrealized appreciation on investments | 64,931,794 | |||
Accumulated net realized gain (loss) | 32,272 | |||
Net capital paid in on shares of beneficial interest | 1,127,814,634 | |||
|
| |||
$ | 1,192,774,919 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($417,368,724 applicable to 29,320,964 shares of beneficial interest outstanding - Note 4) | $ | 14.23 | ||
Maximum sales charge, 2.00% of offering price | 0.29 | |||
|
| |||
Maximum offering price per share | $ | 14.52 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($157,126,372 applicable to 11,024,343 shares of beneficial interest outstanding - Note 4) | $ | 14.25 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($618,279,823 applicable to 43,492,035 shares of beneficial interest outstanding - Note 4) | $ | 14.22 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 23
STATEMENT OF OPERATIONS | ||
Thornburg Intermediate Municipal Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $9,894,998) | $ | 36,626,927 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 5,126,265 | |||
Administration fees (Note 3) | ||||
Class A Shares | 530,217 | |||
Class C Shares | 191,930 | |||
Class I Shares | 258,175 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,060,434 | |||
Class C Shares | 921,135 | |||
Transfer agent fees | ||||
Class A Shares | 172,112 | |||
Class C Shares | 75,082 | |||
Class I Shares | 283,091 | |||
Registration and filing fees | ||||
Class A Shares | 36,555 | |||
Class C Shares | 22,293 | |||
Class I Shares | 56,664 | |||
Custodian fees (Note 3) | 150,607 | |||
Professional fees | 48,738 | |||
Accounting fees | 37,140 | |||
Trustee fees | 35,580 | |||
Other expenses | 76,909 | |||
|
| |||
Total Expenses | 9,082,927 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (71,851 | ) | ||
Fees paid indirectly (Note 3) | (27,530 | ) | ||
|
| |||
Net Expenses | 8,983,546 | |||
|
| |||
Net Investment Income | 27,643,381 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 778,096 | |||
Net change in unrealized appreciation (depreciation) on investments | 36,212,520 | |||
|
| |||
Net Realized and Unrealized Gain | 36,990,616 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 64,633,997 | ||
|
|
See notes to financial statements.
24 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Intermediate Municipal Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 27,643,381 | $ | 25,499,159 | ||||
Net realized gain (loss) on investments | 778,096 | 1,075,284 | ||||||
Net unrealized appreciation (depreciation) on investments | 36,212,520 | (36,445,474 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 64,633,997 | (9,871,031 | ) | |||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | (10,299,388 | ) | (10,928,600 | ) | ||||
Class C Shares | (3,239,656 | ) | (3,566,005 | ) | ||||
Class I Shares | (14,104,337 | ) | (11,004,554 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (26,755,780 | ) | (11,257,015 | ) | ||||
Class C Shares | (7,732,072 | ) | (4,502,452 | ) | ||||
Class I Shares | 151,102,715 | 98,257,908 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 153,605,479 | 47,128,251 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 1,039,169,440 | 992,041,189 | ||||||
|
|
|
| |||||
End of Year | $ | 1,192,774,919 | $ | 1,039,169,440 | ||||
|
|
|
| |||||
Distribution in excess of net investment income | $ | (3,781 | ) | $ | (3,781 | ) |
See notes to financial statements.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
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 eighteen separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary investment objective is to obtain as high a level of current income exempt from federal individual income taxes as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary objective is to reduce expected changes in its share price compared to long-term bond portfolios.
The Fund currently offers three classes of shares of beneficial interest: Class A, Class C, and Institutional Class (“Class I”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, (iii) Class I shares are sold at net asset value without a sales charge at the time of purchase and 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 allocable 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 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. 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
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).
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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 1,101,762,690 | $ | — | $ | 1,101,762,690 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 1,101,762,690 | $ | — | $ | 1,101,762,690 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014.
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, 2014, 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: 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
Certified Annual Report 27
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, these fees were payable at annual rates ranging from .50 of 1% to .275 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2014, the Distributor has advised the Fund that it earned no commissions from the sale of Class A shares, and collected contingent deferred sales charges aggregating $9,359 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, 2014, 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 and shareholder services.
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, 2014, are set forth in the Statement of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class C expenses do not exceed 1.24%. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $71,851 for Class C shares.
The Trust has an agreement with the custodian bank to indirectly pay a portion of the custodian’s fees through credits earned by the Fund’s cash on deposit with the bank. This deposit agreement is an alternative to overnight investments. Custodial fees 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, 2014, fees paid indirectly were $27,530.
28 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
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 and is included as Trustee Fees on the Statement of Operations.
The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended September 30, 2014, the Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $14,921,332 in sales.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 5,171,963 | $ | 72,039,550 | 5,965,417 | $ | 84,404,539 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 672,690 | 9,418,779 | 669,580 | 9,424,691 | ||||||||||||
Shares repurchased | (7,761,608 | ) | (108,214,109 | ) | (7,502,932 | ) | (105,086,245 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (1,916,955 | ) | $ | (26,755,780 | ) | (867,935 | ) | $ | (11,257,015 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 1,721,415 | $ | 24,111,270 | 2,531,450 | $ | 35,950,972 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 195,955 | 2,747,333 | 207,139 | 2,919,971 | ||||||||||||
Shares repurchased | (2,483,360 | ) | (34,590,675 | ) | (3,093,344 | ) | (43,373,395 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (565,990 | ) | $ | (7,732,072 | ) | (354,755 | ) | $ | (4,502,452 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 22,132,781 | $ | 308,646,550 | 17,143,818 | $ | 240,924,202 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 846,289 | 11,848,035 | 580,482 | 8,138,676 | ||||||||||||
Shares repurchased | (12,188,664 | ) | (169,391,870 | ) | (10,756,211 | ) | (150,804,970 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 10,790,406 | $ | 151,102,715 | 6,968,089 | $ | 98,257,908 | ||||||||||
|
|
|
|
|
|
|
|
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $206,803,868 and $150,472,787, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 1,036,830,896 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 65,061,439 | ||
Gross unrealized depreciation on a tax basis | (129,645 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 64,931,794 | ||
|
|
Certified Annual Report 29
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 |
The Fund utilized $745,825 of capital loss carryforwards during the year ended September 30, 2014.
At September 30, 2014, the Fund had $245,583 of undistributed tax basis net tax-exempt income, no undistributed tax basis net ordinary income, and $32,271 of undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2014, and September 30, 2013, are excludable by shareholders from gross income for federal income tax purposes.
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 27,511,901 | $ | 25,374,964 | ||||
Ordinary income | 131,480 | 124,195 | ||||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 27,643,381 | $ | 25,499,159 | ||||
|
|
|
|
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, 2014, and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
30 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 31
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 | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS | TOTAL DIVIDENDS | NET | NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | EXPENSES, AFTER REDUCTIONS NET OF CREDITS (%) | EXPENSES, BEFORE EXPENSE REDUCTIONS (%) | TOTAL RETURN (%)(a) | PORTFOLIO TURNOVER RATE (%)(a) | NET (THOUSANDS) | |||||||||||||||||||||||||||||||||||
CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 13.76 | 0.34 | 0.47 | 0.81 | (0.34 | ) | — | (0.34 | ) | $14.23 | 2.43 | 0.92 | 0.92 | 0.92 | 5.95 | 14.85 | $417,369 | ||||||||||||||||||||||||||||||||
2013(b) | $ | 14.22 | 0.33 | (0.46 | ) | (0.13 | ) | (0.33 | ) | — | (0.33 | ) | $13.76 | 2.37 | 0.92 | 0.92 | 0.92 | (0.91 | ) | 29.18 | $429,941 | |||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.78 | 0.30 | 0.47 | 0.77 | (0.30 | ) | — | (0.30 | ) | $14.25 | 2.11 | 1.24 | 1.24 | 1.29 | 5.61 | 14.85 | $157,126 | ||||||||||||||||||||||||||||||||
2013 | $ | 14.24 | 0.29 | (0.46 | ) | (0.17 | ) | (0.29 | ) | — | (0.29 | ) | $13.78 | 2.05 | 1.24 | 1.24 | 1.30 | (1.22 | ) | 29.18 | $159,727 | |||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.75 | 0.38 | 0.47 | 0.85 | (0.38 | ) | — | (0.38 | ) | $14.22 | 2.73 | 0.62 | 0.61 | 0.62 | 6.28 | 14.85 | $618,280 | ||||||||||||||||||||||||||||||||
2013 | $ | 14.20 | 0.38 | (0.45 | ) | (0.07 | ) | (0.38 | ) | — | (0.38 | ) | $13.75 | 2.68 | 0.61 | 0.61 | 0.61 | (0.53 | ) | 29.18 | $449,501 | |||||||||||||||||||||||||||||
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 |
(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.
32 Certified Annual Report | Certified Annual Report 33 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Intermediate Municipal Fund
To the Trustees and Shareholders of
Thornburg Intermediate Municipal Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Intermediate Municipal Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
34 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,032.10 | $ | 4.72 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.42 | $ | 4.69 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,030.50 | $ | 6.31 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.85 | $ | 6.28 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,034.40 | $ | 3.22 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.90 | $ | 3.20 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.93%; C: 1.24%; I: 0.63%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 5 YRS | 10 YRS | SINCE INCEPTION | |||||||||||||
A Shares (Incep: 7/22/91) | 3.84 | % | 3.86 | % | 3.85 | % | 5.01 | % | ||||||||
C Shares (Incep: 9/1/94) | 5.01 | % | 3.97 | % | 3.77 | % | 4.27 | % | ||||||||
I Shares (Incep: 7/5/96) | 6.28 | % | 4.61 | % | 4.40 | % | 4.82 | % |
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.
36 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 37
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES) (1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
38 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 Intermediate Municipal Fund | September 30, 2014 (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.
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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Fund of $27,511,901 (or the maximum allowed) are tax exempt dividends and $131,480 are taxable ordinary investment income 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of 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 under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
40 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the most recent ten calendar years, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year, comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of correlation to equity indices, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year was comparable to the return of the index and higher than the average return for the fund category considered, that the Fund’s returns for the preceding nine calendar years exceeded or were comparable to the returns of the index in seven of the nine years, and that the Fund’s returns 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 annualized investment returns fell in the second quartile of performance of the first fund category for the one-year period ended with the second quarter of the current year, and fell in the first quartile of performance for the three-year, five-year and ten-year periods. The data also showed that the Fund’s annualized returns fell in the second quartile of performance of the second fund category for the one-year period ended with the second quarter and fell in or near the top decile of performance of the category for the three-year, five-year and ten-year periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection, considered certain factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Funds.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectus. Data considered included comparisons of the Fund’s advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the Fund’s advisory fee was slightly higher than the median and average fee levels for the fund category and that the level of total expense for a representative share class was slightly higher than the median and comparable to the average expense levels for the category. Peer group data showed that the Fund’s advisory fee level and the Fund’s total expense level for the representative share class fell above the median of the fund peer group and within the range of levels for the group. The Trustees did not view the differences as significant in view of the other factors considered.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other
Certified Annual Report 41
OTHER INFORMATION, CONTINUED | ||
Thornburg Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by the Fund and other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
42 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 43
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
44 This page is not part of the Annual Report
This page is not part of the Annual Report 45
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
46 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 47
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH079 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages is current as of September 30, 2014. 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. Diversification 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 | TSSAX | 885-216-101 | ||
Class C | TSSCX | 885-216-200 | ||
Class I | TSSIX | 885-216-309 |
Glossary
BofA Merrill Lynch Municipal Master Index – This index tracks the performance of the investment-grade U.S. tax-exempt bond market. Qualifying bonds must have at least one year remaining term to maturity, a fixed coupon schedule, and an investment grade rating (based on an average of Moody’s, S&P, and Fitch).
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.
Personal Consumption Expenditure (PCE) Price Index – One measure of U.S. inflation that assesses the percentage change in prices of goods and services purchased by consumers throughout the economy. Of all the measures of consumer price inflation, the PCE price index covers the broadest set of goods and services.
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 (bp) – 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.
Credit Spread/Quality Spread – The difference between the yields of securities with different credit qualities.
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.
Fiscal Cliff – A combination of expiring tax cuts and across-the-board government spending cuts that were scheduled to become effective at the end of 2012. The idea behind the fiscal cliff was that if the federal government allowed these two events to proceed as planned, they would have a detrimental effect on an already shaky economy. At the same time, it was predicted that going over the fiscal cliff would significantly reduce the federal budget deficit.
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.
Participation Rate – The number of people who are either employed or are actively looking for work. The people who are no longer actively searching for work would not be included in the participation rate. During an economic recession, many workers often get discouraged and stop looking for employment, as a result, the participation rate decreases.
Revenue Bond – A bond on which the debt service is payable solely from the revenue generated from the operation of the project being financed or a category of facilities, or from other non-tax sources.
SEC Yield – SEC yield is computed in accordance with SEC standards measuring the net investment income per share over a specified 30-day period expressed as a percentage of the maximum offering price of the Fund’s shares at the end of the period.
Yield Curve – A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.
This page is not part of the Annual Report 3
THORNBURG STRATEGIC MUNICIPAL INCOME FUND
The Thornburg Strategic Municipal Income Fund differentiates itself in four ways from other general municipal funds.
• | 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. |
• | Second, we don’t have a legacy of bonds purchased prior to the credit meltdown of 2007–2008. |
• | Third, the Fund does not use leverage, as do many high-yield muni funds. |
• | 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
Objectives and Strategies
The Fund seeks a high level of current income exempt from federal individual income tax (may be subject to AMT).
Not more than 50% of the portfolio is invested in bonds rated below investment grade (or of equivalent quality as determined in accordance with the Prospectus) at the time of purchase. Also, the portfolio is typically diversified among sectors, issuers, credit qualities, geographic regions, and segments of the yield curve. The flexible nature of the Fund allows the team to adapt the portfolio’s duration and credit quality to our perception of future market conditions.
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | SINCE INCEPTION | ||||||||||
A Shares (Incep: 4/1/09) | ||||||||||||
Without sales charge | 8.93 | % | 5.97 | % | 8.68 | % | ||||||
With sales charge | 6.78 | % | 5.25 | % | 8.29 | % |
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 1.31%, as disclosed in the most recent Prospectus. Thornburg Investment Management and Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses until at least February 1, 2015, so that actual expenses for Class A shares do not exceed 1.25%.
30-Day Yields, A Shares
As of September 30, 2014
Annualized Distribution Yield | 2.35 | % | ||
SEC Yield | 1.40 | % |
Without fee waivers and expense reimbursements, the 30-day SEC Yield would have been 1.31% and the Annualized Distribution Yield would have been 2.26%.
Key Portfolio Attributes
As of September 30, 2014
Number of Bonds | 189 | |||
Effective Duration | 5.6 Yrs | |||
Average Maturity | 11.9 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 12.
4 This page is not part of the Annual Report
THORNBURG’S SUITE OF MUNICIPAL FUNDS
Municipal Funds for a Range of Interest-Rate Scenarios
At Thornburg, we often say that predicting interest rates is a fool’s game. And with the Federal Reserve still heavily involved in the markets, it’s even more difficult to forecast how rates may rise than when they may rise. Will long rates rise first and short rates follow? Will long and short rates climb simultaneously?
A traditional strategy to protect oneself against interest-rate risk is to move into shorter-duration bond strategies. But the seemingly counterintuitive response of moving to longer-duration strategies can sometimes yield better results.
Diversify Across the Yield Curve
This uncertainty points to why it’s important for investors to match their investment horizon to the duration of the strategy in which they’re invested, and to diversify assets across the yield curve.
For any interest-rate scenario, Thornburg’s comprehensive suite of municipal funds gives prudent investors the ability to diversify across the yield curve.
Diversify Across the Yield Curve With Thornburg Municipal Funds AAA General Obligation Municipal Yield Curve, as of September 30, 2014
| ![]() |
This page is not part of the Annual Report 5
Thornburg Strategic Municipal Income Fund
September 30, 2014
7 | ||||
12 | ||||
18 | ||||
19 | ||||
20 | ||||
21 | ||||
26 | ||||
28 | ||||
29 | ||||
30 | ||||
31 | ||||
34 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
Thornburg Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
October 17, 2014
Dear Fellow Shareholder:
We are pleased to present the annual report for the Thornburg Strategic Municipal Income Fund (the Fund). The net asset value (NAV) of the Class A shares increased by 79 cents to $15.19 per share during the fiscal year ended September 30, 2014. If you were with us for the entire period, you received dividends of 41.9 cents per share. If you reinvested your dividends, you received 42.4 cents per share. Dividends were lower for Class C shares and higher for Class I shares, to account for varying class-specific expenses. The Class A shares outperformed the Fund’s benchmark index, with a 8.93% total return at NAV for the fiscal year ended September 30, 2014, compared to the 8.73% total return for the BofA Merrill Lynch U.S. Municipal Master Index. The Fund generated 1.54% more price return and 1.34% less income than its benchmark.
The market’s positive returns were primarily driven by falling interest rates. Another driver of the Fund’s positive total return was a narrowing of credit spreads. Investors received smaller and smaller levels of incremental yield for securities of inferior credit quality with shorter maturity dates. Chart I illustrates this effect.
Drivers of the Fund’s price return relative to its benchmark are as follows: Interest-rate sensitivity, as measured by the Fund’s duration and differing allocations along the yield curve subtracted 0.94% of price performance; sector allocations added 0.93% of relative price performance; the Fund’s overweight to lower-credit-quality securities added 0.91%; and our allocation to securities with prices below par subtracted 0.55% of price performance versus the benchmark. Other risk factors accounted for another 1.19% of relative price performance.
Interest-Rate Changes
As of the end of fiscal year 2013, many market observers predicted increasing interest rates. The fear of the Federal Reserve (the Fed) curtailing purchases of Treasury and mortgage-backed securities had roiled the markets, though the eventual fact of tapering did not begin until December 18, 2013. This was the backdrop against which rates rose through the end of December 2013. Chart II illustrates the changes in rates by maturity for each quarter of fiscal 2014.
Chart I | Quality Spreads: BBB Municipal Revenue Yields over AAA General Obligation Yields | |||||||
as of 9/30/2014 |
Chart II | Changes in AAA General Obligation Municipal Yield Curve | |||||
9/30/2013 – 9/30/2014 |
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
This chart highlights a few interesting phenomena:
1. | Interest rates changed by varying amounts for different maturities, highlighting the potential benefits of a portfolio that is diversified by maturity. We believe investors benefit by owning several funds that provide different exposures to various maturity segments of the market. |
2. | In the quarter ended December 31, 2013, short and long interest rates declined and intermediate rates continued to rise. The fall in short-term rates was a market reaction to the fear of rising rates and investor desire to shed duration or interest-rate risk. The decline in long-term rates was driven by opportunistic investors who wished to take advantage of a significant difference between short- and long-term rates. |
3. | In the quarter ended March 31, 2014, short-term interest rates rose as long-term rates continued to decline. This was doubtless a reaction to the risk of possible Fed tightening and increases in short-term rates. |
4. | In the six-month period ended September 30, 2014, interest rates all along the yield curve declined, and longer-term rates continued to slide more than short-term rates. |
Table I shows selected changes in rates for the last two fiscal years. The table highlights that although interest rates have declined in fiscal 2014, they have yet to retrace the upswing seen in fiscal 2013. It is noteworthy that rates on the short end (one to five years) of the market have been virtually unchanged, depressed by the Fed’s delay in normalizing benchmark short-term rates.
Table I | Yield Changes for the Last Two Fiscal Years |
MATURITY | FISCAL YEAR ENDING 9/30/2013 | FISCAL YEAR ENDING 9/30/2014 | ||||||
1-Year | -0.02 | % | -0.03 | % | ||||
5-Year | +0.62 | % | -0.03 | % | ||||
10-Year | +0.83 | % | -0.32 | % | ||||
30-Year | +1.43 | % | -1.08 | % |
Source: Bloomberg
The Economy and the Federal Reserve Board
The U.S. economy has recently grown at an average rate of 2.0% as measured by gross domestic product (GDP), which is defined as the monetary value of all finished goods and services produced within a country’s borders over a specific time period. Many market participants believe that 2.0% GDP growth is suboptimal compared to rates in past recoveries, but the quarter ended December 31, 2013, produced a 3.5% growth rate and the quarter ended June 30, 2014, a 4.6% rate. Growth in the quarter ended March 31, 2014, was negative 2.1%; this anomaly has been attributed to weather effects.
Employment growth is another useful measure for gauging the health of the economy. The financial press highlights this as an area of focus for Fed Chair Janet Yellen. The economy has added approximately 220,000 jobs per month for the fiscal year. This growth has not come without volatility; only 84,000 jobs were added in December 2013 and 304,000 in April 2014. The unemployment rate has declined from 7.2% for the year ended September 30, 2013, to 5.9% as of September 30, 2014. This should make investors feel good about the economy, but other measures paint a mixed picture. One indicator is the U.S. labor force participation rate, which measures the size of the labor force as a percent of the working-age population. Since January 1990, this long-term average has been at 65.9%, but as of September 2014, the participation rate had declined to 62.7%. For fiscal year 2014, this measure has averaged 62.9%. Some economists and demographers attempt to explain the decline in the participation rate by the retirement of Baby Boomers, who have changed every demographic category they have passed through and have been referred to as “the pig in the python.” The thought that Baby Boomers would impact the labor force participation rate significantly enough to cause this decline is plausible, but we have seen no estimates of the effect.
The Fed began reducing purchases of U.S. Treasury and mortgage securities in December 2013 and will complete the process by October 2014. During 2013, the market’s anticipation of the Fed’s tapering of asset purchases sent long-term municipal yields up 1.43%. But in 2014, the reality of tapering (and other factors) sent long-term municipal yields down 1.08%. In its September 17, 2014, release, the Federal Open Market Committee (FOMC) stated:
“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
Later, in a press conference, Chair Yellen added more color to the policy statement:
8 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
“Let me reiterate, however, that the Committee’s expectations for the path of the federal funds rate are contingent on the economic outlook. If the economy proves to be stronger than anticipated by the Committee, resulting in a more rapid convergence of employment and inflation to the FOMC’s objectives, then increases in the federal funds rate are likely to occur sooner and to be more rapid than currently envisaged. Conversely, if economic performance disappoints, increases in the federal funds rate are likely to take place later and to be more gradual.”
It is clear guidance like this that makes one long for Harry Truman’s “one-handed economist.” From all this, one can glean that the Fed will be “data dependent” (another term being thrown around in the financial press) in determining the future path of the federal funds rate (currently near zero).
Finally, let’s look at inflation. It is important to fixed-income investors because it is the primary determinant of future purchasing power. If inflation increases, the semi-annual coupon payment of most bonds carries less value in the economy. Inflation, as measured by core PCE (the Core Personal Consumption Expenditures Index, which is the Fed’s favored inflation measure) excludes volatile food and energy prices. Since September 2013, core PCE has increased from 1.33% to 1.47%, but this is still materially below the Fed’s inflation target of 2.00%. As 2014 prices of municipal bonds have risen and yields have declined, their after-inflation purchasing power has fallen. Chart III illustrates this point for a 30-year AAA-rated general obligation bond.
Chart III shows that as of August 31, 2014, an investor in a 30-year AAA general obligation bond received a real yield (the yield on a security after inflation is taken into account) of 1.68%. The yield was in excess of inflation but well below the 3.00% average since June 1994. On August 31, a 30-year AAA general obligation bond yielded 3.15%, with core PCE at 1.47%. As of September 30, 2014, a 10-year AAA general obligation bond yielded 3.23%, with a real yield of 1.76%. These low real yields are the most important impact of the Fed’s keeping short-term rates very low.
Chart III | 30-Year AAA GO Real Yield (using Core PCE) | |||
6/1/1994 – 8/31/2014 |
The Municipal Bond Market Credit Picture
The health of municipal market credit has generally been good, helped by GDP growth and increasing employment. But there have been some red flags recently. An August 2014 report from the Nelson A. Rockefeller Institute of Government at the State University of New York, “After Four Years of Uninterrupted Growth, Tax Revenues Decline in the First Quarter, and Preliminary Figures for the Second Quarter of 2014 Signal Further Declines in Personal Income Tax,” sums up certain observations:
• | “State tax revenues declined by 0.3% in the first quarter of 2014. This is the first time state revenues declined after four years of uninterrupted growth.” |
Certified Annual Report 9
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
• | “Personal income tax collections showed a decline of 1.2% in the first quarter of 2014. The decline in personal income tax collections appear to be primarily due to the mirror-image effect of the initial impact of the fiscal cliff on taxpayer behavior, which had driven tax collections upward a year ago.” |
• | “Year-to-date figures show 2.8% growth in overall state tax collections in the first three quarters of fiscal 2014 compared to the same period of 2013.” |
• | “Local property tax revenues grew by 1.9% in the first quarter, marking the eighth consecutive quarter of growth in nominal terms.” |
This data source tells us that overall state revenue is up but that there has been some decline in personal income tax collections that may be explained by individuals pushing income into last year to take advantage of lower personal income tax rates. We would raise a yellow flag at this indicator; this trend bears watching. The point about local property taxes growing should come as no surprise, as the real estate market has improved in many places. This is a very good development for local governments, because property taxes are their primary source of revenues. Not surprisingly, employment also shows positive growth. Only Alaska (off 0.95%) shows a decline for the period from August 2013 through August 2014 (the latest data available at this writing). The three states with the largest increases in employment are North Dakota (up 4.47%), Utah (up 3.53%), and Texas (up 3.63%).
One of the highest hurdles to the health of the state economies is the funding levels of their pension plans. For too long, elected officials have over-promised and under-delivered (especially when it came to making payments to pensions) to their employees, and until recently, markets have proven more of a headwind. On October 9, 2014, Bloomberg reported, “State Pension Gaps Shrink for the First Time Since 2007.” Let us caution all readers: the shrinkage is barely perceptible, but even that is better than a poke in the eye with a sharp stick.
“The median state system last year had 69.3% of the assets needed to meet promised benefits, up from 68.7% in 2012, according to data compiled by Bloomberg.”
This sounds like great news until one realizes the industrywide minimum acceptable funding level is said to be 80%. Thirteen states met or exceeded this; the state with the lowest (some would say worst) level is Illinois with a funding level of 39.3%, down from 40.4% in 2012. We continue to avoid purchase of the general obligation bonds of the State of Illinois for this and other reasons, although we do own certain other credits within the state.
Overall, the state of the states’ economies and their respective credit pictures is healthy, but there are some exceptions. Illinois is one. Exceptions at other levels are the City of Detroit (in the process of exiting Chapter 9 protection) and Puerto Rico, which by all reports doesn’t know what it is doing. We do not own either credit!
The long and short of the Puerto Rico story:
• | In March 2014, the island issued $3.5 billion of general obligation bonds, mostly sold to hedge funds that “only wanted to help the island.” At the time, the island’s officials said this would give them enough cash to last for 18 months. |
• | In June 2014, the governor signed legislation allowing the island’s public corporations to “restructure” their debt, the Puerto Rico Electric Power Authority (PREPA) being the best known among them. |
• | Later in 2014, PREPA reached “forbearance” agreements with its creditors, calling for, among other things, a “Chief Restructuring Officer” (for an engagement fee of around $10 million, which is not bad work if you can get it). |
• | In September, the island’s financial officials announced a $900 million “tax and revenue anticipation” note deal that would be placed with banks who were forced to hold the vast majority of it and could not sell it. That figure was later raised to $1.2 billion. This was six months after the March sale! The yield on these securities is 7.75%; California issued a similar security earlier in the summer for 0.10%. Think there is a difference in the credit? |
The Puerto Rico saga will continue to play out, and we will continue to watch it. For concerned shareholders: we have been in the business long enough never to say never, but at this point, we cannot see circumstances under which we would purchase Puerto Rico securities for your Fund.
10 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
Conclusion
We do not believe that the fixed income markets, and municipal bonds particularly, represent any great value at present; real yields are negative in some segments of the market, and very low in others. But we do not believe shareholders should undertake a wholesale rebalancing of portfolios either. It is important to re-evaluate why we own fixed-income products and municipal bonds: as part of a well-balanced, diversified portfolio. Recent volatility certainly demonstrates the potential benefits of these investments. Diversification is one of the best ways for shareholders to manage risk, not only between asset classes but in positioning within markets. And we believe municipal bond investors may benefit from diversifying along the municipal bond yield curve.
Yields can change by varying amounts along the yield curve, as illustrated by Chart II. We have also seen that the Fed’s accommodative interest-rate policy has kept short-term interest rates artificially low. The big question is what will happen when the Fed begins to normalize those rates. Owning funds with different concentrations along the yield curve is one of the most effective ways to ensure this type of diversification. We advise being patient when interest rates start to rise, lengthening your anticipated holding period.
We will continue to strive to manage your assets to fulfill the Fund’s objectives as set out in the prospectus.
Sincerely,
![]() | ![]() | |||
Christopher Ryon, CFA | Josh Gonze | |||
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 11
SCHEDULE OF INVESTMENTS | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
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 — 0.46% | ||||||||||
City of Mobile Industrial Development Board PCR, 1.65% due 6/1/2034 put 3/20/2017 (Alabama Power Company Barry Plant Project) | A/A1 | $ | 1,000,000 | $ | 1,021,110 | |||||
ARIZONA — 0.50% | ||||||||||
Pima County IDA, 5.875% due 4/1/2022 (Cambridge Academy) | NR/NR | 370,000 | 372,154 | |||||||
Pima County IDA, 5.125% due 12/1/2040 (Providence Day School) | BBB+/NR | 710,000 | 745,720 | |||||||
CALIFORNIA — 17.49% | ||||||||||
ABAG Finance Authority for Nonprofit Corporations, 5.00% due 7/1/2047 (Episcopal Senior Communities) | NR/NR | 1,635,000 | 1,748,583 | |||||||
Benicia USD GO, 0% due 8/1/2026 (Benicia High School; Insured: AGM) | AA/A2 | 830,000 | 545,576 | |||||||
California HFFA, 6.25% due 2/1/2026 (Community Program Developmental Disabilities; Insured: California Mtg Insurance) | A/NR | 1,500,000 | 1,859,250 | |||||||
California HFFA, 5.00% due 11/15/2034 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 420,000 | 444,688 | |||||||
California Housing Finance Agency, 4.625% due 8/1/2016 (Low-Moderate Income Housing Loans; Insured: FGIC) (AMT) | A-/Baa2 | 1,175,000 | 1,223,010 | |||||||
California Housing Finance Agency, 4.625% due 8/1/2026 (Low-Moderate Income Housing Loans; Insured: FGIC) (AMT) | A-/Baa2 | 560,000 | 569,665 | |||||||
California Municipal Finance Authority, 8.50% due 11/1/2039 (Harbor Regional Center) | NR/A3 | 1,000,000 | 1,213,910 | |||||||
California Pollution Control Financing Authority, 5.00% due 11/21/2045 (Poseidon Resources (Channelside) LP Desalination Project) (AMT) | NR/Baa3 | 3,000,000 | 3,169,410 | |||||||
California State Public Works Board, 5.00% due 4/1/2028 (Corrections & Rehabilitation and Judicial Council) | A-/A1 | 1,000,000 | 1,142,680 | |||||||
California State Public Works Board, 6.25% due 4/1/2034 (Department of General Services-Offices Renovation) | A-/A1 | 100,000 | 120,452 | |||||||
California Statewide Communities Development Authority, 5.00% due 7/1/2020 (Aspire Public Schools; LOC: PCSD Guaranty Pool I, LLC) | NR/NR | 175,000 | 181,701 | |||||||
California Statewide Communities Development Authority, 6.125% due 7/1/2046 (Aspire Public Schools) | NR/NR | 995,000 | 1,021,606 | |||||||
Calipatria USD GO, 0% due 8/1/2025 (Educational Facilities; Insured: ACA) | NR/NR | 2,425,000 | 1,396,485 | |||||||
Carson Redevelopment Agency, 7.00% due 10/1/2036 (Project Area 1) | A-/NR | 500,000 | 596,175 | |||||||
Chico Redevelopment Agency, 5.00% due 4/1/2030 (Chico Amended & Merged Redevelopment; Insured: AMBAC) | A+/NR | 1,500,000 | 1,552,500 | |||||||
City of Moorpark Mobile Home Park, 6.15% due 5/15/2031 (Villa Del Arroyo) | A/NR | 1,000,000 | 1,114,140 | |||||||
City of Palm Springs Financing Authority, 5.25% due 6/1/2027 (Downtown Revitilization Project) | AA/NR | 1,620,000 | 1,871,019 | |||||||
Corona-Norco USD COP, 5.00% due 4/15/2031 (Insured: AGM) | AA/A1 | 1,750,000 | 1,909,705 | |||||||
County of El Dorado, 5.00% due 9/1/2026 (El Dorado Hills Development-Community Facilities) | A/NR | 630,000 | 713,154 | |||||||
Daly County Housing Development Finance Agency, 5.25% due 12/15/2023 (Franciscan Country Club Mobile Home Park Acquisition) | A/NR | 650,000 | 685,295 | |||||||
Los Angeles County Public Works Financing Authority, 4.00% due 9/1/2015 (Lynwood Regional Justice Center and Central Jail Expansion; Insured: Natl-Re) | AA-/NR | 50,000 | 51,512 | |||||||
Los Angeles County Public Works Financing Authority, 3.625% due 9/1/2016 (Lynwood Regional Justice Center and Central Jail Expansion; Insured: Natl-Re) | AA-/A3 | 200,000 | 209,596 | |||||||
M-S-R Energy Authority, 6.50% due 11/1/2039 | A-/NR | 1,000,000 | 1,348,820 | |||||||
Redwood City Redevelopment Agency, 0% due 7/15/2021 (Redevelopment Project Area 2; Insured: AMBAC) | A-/NR | 1,285,000 | 1,015,831 | |||||||
Riverside Community College District GO, 5.00% due 8/1/2021 pre-refunded 8/1/2015 (Insured: AGM) | AA/Aa2 | 150,000 | 156,097 | |||||||
Riverside County Asset Leasing Corp., 0% due 6/1/2021 (Riverside County Hospital; Insured: Natl-Re) | AA-/A2 | 535,000 | 446,479 | |||||||
San Francisco City & County Redevelopment Financing Authority, 0% due 8/1/2023 (Redevelopment Project; Insured: Natl-Re) | AA-/A3 | 1,025,000 | 775,464 | |||||||
San Francisco City & County Redevelopment Financing Authority, 6.50% due 8/1/2039 (Mission Bay North Redevelopment) | A-/NR | 250,000 | 293,090 | |||||||
San Francisco City & County Redevelopment Financing Authority, 6.75% due 8/1/2041 (Mission Bay North Redevelopment) | A-/NR | 500,000 | 613,585 | |||||||
San Jose Redevelopment Agency, 5.50% due 8/1/2035 (Merged Area Redevelopment) | A/Ba1 | 1,000,000 | 1,109,150 | |||||||
Sonoma County Community Redevelopment Agency, 6.50% due 8/1/2034 (The Springs Redevelopment; Insured: AGM) | AA/NR | 100,000 | 100,465 | |||||||
Southeast Resource Recovery Facilities Authority, 5.25% due 12/1/2016 (Insured: AMBAC) | A+/A2 | 500,000 | 502,065 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
State of California GO, 0.02% due 5/1/2034 put 10/1/2014 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa1 | $ | 9,000,000 | $ | 9,000,000 | |||||
Union Elementary School District, 0% due 9/1/2027 (Santa Clara County District Schools; Insured: Natl-Re) | AA+/NR | 905,000 | 585,689 | |||||||
COLORADO — 3.15% | ||||||||||
Denver Convention Center Hotel Authority, 5.125% due 12/1/2026 (Insured: Syncora) | BBB-/Baa3 | 2,450,000 | 2,537,146 | |||||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2030 (Insured: Syncora) | BBB-/Baa3 | 450,000 | 462,537 | |||||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2035 (Insured: Syncora) | BBB-/Baa3 | 605,000 | 618,431 | |||||||
Eagle Bend Metropolitan District GO, 5.00% due 12/1/2020 (Insured: Radian) | A-/NR | 825,000 | 836,732 | |||||||
Eagle River Fire District, 6.625% due 12/1/2024 | NR/NR | 225,000 | 243,333 | |||||||
Eagle River Fire District, 6.875% due 12/1/2030 | NR/NR | 400,000 | 430,368 | |||||||
Public Authority for Colorado Energy, 5.75% due 11/15/2018 (Natural Gas Purchase) | A-/Baa2 | 615,000 | 685,700 | |||||||
Public Authority for Colorado Energy, 6.50% due 11/15/2038 (Natural Gas Purchase) | A-/Baa2 | 260,000 | 357,981 | |||||||
Regional Transportation District COP, 4.50% due 6/1/2016 pre-refunded 6/1/2015 (Transit Vehicles Project; Insured: AMBAC) | A/Aa3 | 350,000 | 360,171 | |||||||
Regional Transportation District COP, 5.375% due 6/1/2031 (FasTracks Transportation System) | A/Aa3 | 500,000 | 553,495 | |||||||
CONNECTICUT — 1.81% | ||||||||||
Connecticut Health & Educational Facilities Authority, 0.02% due 7/1/2036 put 10/1/2014 (Yale University) (daily demand notes) | AAA/Aaa | 2,000,000 | 2,000,000 | |||||||
Connecticut Health & Educational Facilities Authority, 6.00% due 7/1/2039 (Ethel Walker School) | BBB/NR | 1,000,000 | 1,064,340 | |||||||
State of Connecticut GO Floating Rate Note, 0.56% due 9/15/2017 (Public Facility Improvements) | AA/Aa3 | 1,000,000 | 1,006,180 | |||||||
DELAWARE — 0.49% | ||||||||||
Delaware HFA, 5.00% due 7/1/2021 (Nanticoke Memorial Hospital) | BBB-/NR | 1,000,000 | 1,097,030 | |||||||
DISTRICT OF COLUMBIA — 0.39% | ||||||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2027 (Dulles Toll Road; Insured: AGM) | AA/A3 | 1,500,000 | 880,425 | |||||||
FLORIDA — 5.32% | ||||||||||
City of Hollywood Community Redevelopment Agency, 5.625% due 3/1/2024 (Beach Community Redevelopment Project) | NR/A3 | 340,000 | 340,697 | |||||||
City of Miami GO, 5.00% due 1/1/2017 (Homeland Defense/Neighborhood Capital Improvements) | BBB-/A3 | 1,245,000 | 1,335,113 | |||||||
City of Miami GO, 5.00% due 1/1/2018 (Homeland Defense/Neighborhood Capital Improvements) | BBB-/A3 | 1,790,000 | 1,955,289 | |||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2027 (Nova Southeastern University) | BBB/Baa1 | 1,000,000 | 1,099,620 | |||||||
Miami-Dade County Expressway Authority, 5.00% due 7/1/2022 (Toll System Five-Year Work Program) | A-/A3 | 625,000 | 741,519 | |||||||
Miami-Dade County Expressway Authority, 5.00% due 7/1/2024 (Toll System Five-Year Work Program) | A-/A3 | 625,000 | 750,781 | |||||||
Miami-Dade County School Board COP, 5.00% due 8/1/2027 (District School Facilities and Infrastructure) | A/A1 | 1,100,000 | 1,230,977 | |||||||
Orange County, 0% due 10/1/2016 (County Correctional Facilities and Communications System; Insured: AMBAC) | NR/NR | 410,000 | 397,946 | |||||||
Pinellas County Educational Facilities Authority, 5.25% due 10/1/2030 (Barry University) | BBB/NR | 500,000 | 548,900 | |||||||
Sarasota County Public Hospital Board, 8.953% due 10/1/2021 (Sarasota Memorial Hospital; Insured: Natl-Re) | AA-/A1 | 1,000,000 | 1,029,310 | |||||||
School Board of Marion County COP, 5.25% due 6/1/2022 pre-refunded 6/1/2015 (Educational Facilities; Insured: AMBAC) | NR/A2 | 1,000,000 | 1,033,710 | |||||||
Tampa Sports Authority, 5.75% due 10/1/2020 (Tampa Bay Arena; Insured: Natl-Re) | AA-/A3 | 1,000,000 | 1,102,750 | |||||||
University of Southern Florida Financing Corp. COP, 5.00% due 7/1/2021 (Student Housing & Parking Facilities; Insured: AMBAC) | A+/A1 | 375,000 | 388,185 | |||||||
GEORGIA — 1.39% | ||||||||||
City of Atlanta, 6.25% due 11/1/2034 (Water and Wastewater Capital Improvement Program) | A+/Aa3 | 500,000 | 597,230 | |||||||
Development Authority of Fulton County, 5.00% due 10/1/2019 (Georgia Tech Athletic Assoc.) | NR/A2 | 1,000,000 | 1,169,900 | |||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2018 (Georgia Gas) | A/A3 | 515,000 | 569,281 | |||||||
Main Street Natural Gas, Inc., 5.50% due 9/15/2023 (Georgia Gas) | A-/Baa2 | 350,000 | 413,459 | |||||||
Municipal Gas Authority of Georgia GO, 5.00% due 4/1/2016 (Public Gas Partners, Inc.-Gas Portfolio III Project) | AA-/A1 | 350,000 | 374,290 | |||||||
GUAM — 2.02% | ||||||||||
Guam Government, 5.75% due 12/1/2034 (Layon Solid Waste Disposal Facility) | BBB+/NR | 500,000 | 551,505 | |||||||
Guam Government Department of Education COP, 6.875% due 12/1/2040 (John F. Kennedy High School) | B+/NR | 1,000,000 | 1,115,230 | |||||||
Guam Government GO, 7.00% due 11/15/2039 | BB-/NR | 520,000 | 588,676 | |||||||
Guam Power Authority, 5.00% due 10/1/2027 (Electric Power System; Insured: AGM) | AA/A2 | 1,000,000 | 1,156,360 | |||||||
Guam Waterworks Authority, 5.25% due 7/1/2024 (Water and Wastewater System) | A-/Ba1 | 500,000 | 575,010 | |||||||
Guam Waterworks Authority, 5.00% due 7/1/2028 (Water and Wastewater System) | A-/Ba1 | 500,000 | 555,700 | |||||||
ILLINOIS — 3.69% | ||||||||||
Board of Education of the City of Chicago GO, 5.00% due 12/1/2020 (Education Capital Improvement Program; Insured: AGM) | AA/A2 | 365,000 | 392,324 | |||||||
City of Chicago, 6.75% due 6/1/2022 (Pilsen Redevelopment) | NR/NR | 940,000 | 943,431 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
City of Chicago, 5.00% due 1/1/2031 (Riverwalk Expansion Project; Insured: AGM) | AA+/A2 | $ | 500,000 | $ | 549,685 | |||||
City of Chicago GO, 5.00% due 1/1/2020 (Insured: AGM) | AA/A2 | 475,000 | 479,237 | |||||||
Cook County GO, 5.25% due 11/15/2033 | AA/A1 | 1,000,000 | 1,089,930 | |||||||
Illinois Finance Authority, 5.75% due 11/15/2037 (OSF Healthcare System) | A/A3 | 330,000 | 356,661 | |||||||
Illinois Finance Authority, 6.00% due 5/15/2039 (OSF Healthcare System) | A/A3 | 1,545,000 | 1,748,183 | |||||||
Metropolitan Pier & Exposition Authority, 5.00% due 6/15/2050 (McCormick Place) | AAA/Baa1 | 1,500,000 | 1,568,775 | |||||||
Village of Melrose Park GO, 6.75% due 12/15/2016 (Redevelopment Project Costs; Insured: Natl-Re) | NR/A3 | 250,000 | 262,602 | |||||||
Village of Melrose Park GO, 6.75% due 12/15/2021 (Redevelopment Project Costs; Insured: Natl-Re) | NR/A3 | 410,000 | 498,556 | |||||||
Will County School District No. 114 GO, 0% due 12/1/2023 (Educational Facilities; Insured: Natl-Re) | NR/A3 | 570,000 | 395,204 | |||||||
INDIANA — 2.44% | ||||||||||
City of Carmel Redevelopment District COP, 6.50% due 7/15/2035 (Performing Arts Center) | NR/NR | 1,000,000 | 1,099,480 | |||||||
Indiana Finance Authority, 6.00% due 12/1/2019 (U.S. Steel Corp.) | BB-/B1 | 3,000,000 | 3,287,640 | |||||||
Indiana Finance Authority, 6.375% due 9/15/2041 (Marian University) | BBB-/NR | 1,000,000 | 1,092,520 | |||||||
IOWA — 0.77% | ||||||||||
Iowa Finance Authority Midwestern Disaster Area, 5.25% due 12/1/2025 (Iowa Fertilizer Company Project) | BB-/NR | 1,615,000 | 1,725,095 | |||||||
KANSAS — 1.54% | ||||||||||
City of Wichita, 5.90% due 12/1/2016 (Brentwood Apartments) | B/NR | 255,000 | 252,529 | |||||||
City of Wichita, 5.85% due 12/1/2025 (Brentwood Apartments) | B/NR | 895,000 | 793,176 | |||||||
Kansas City Community College COP, 3.00% due 4/1/2016 (Higher Education Campus Facilities) | AA-/NR | 150,000 | 155,229 | |||||||
Unified Government of Wyandotte County/Kansas City, 5.00% due 9/1/2031 (Utility System Improvement) | A+/A3 | 1,000,000 | 1,132,840 | |||||||
Unified Government of Wyandotte County/Kansas City, 5.00% due 9/1/2032 (Utility System Improvement) | A+/A3 | 1,000,000 | 1,127,450 | |||||||
KENTUCKY — 1.45% | ||||||||||
County of Owen, 6.25% due 6/1/2039 (Kentucky-American Water Co. Project) | A-/Baa1 | 540,000 | 620,125 | |||||||
Kentucky Economic DFA, 0% due 10/1/2021 (Norton Healthcare, Inc.; Insured: Natl-Re) | AA-/A3 | 715,000 | 580,122 | |||||||
Kentucky Economic DFA, 0% due 10/1/2022 (Norton Healthcare, Inc.; Insured: Natl-Re) | AA-/A3 | 2,650,000 | 2,054,254 | |||||||
LOUISIANA — 2.56% | ||||||||||
City of New Orleans, 5.00% due 12/1/2034 (Water System Facilities Improvement) | BBB+/NR | 400,000 | 442,644 | |||||||
Louisiana Energy and Power Authority, 5.25% due 6/1/2038 (LEPA Unit No. 1; Insured: AGM) | AA/A2 | 2,000,000 | 2,253,300 | |||||||
Louisiana Public Facilities Authority, 5.00% due 7/1/2032 (Black & Gold Facilities; Insured: CIFG) | AA/A3 | 120,000 | 125,095 | |||||||
Louisiana Public Facilities Authority, 5.375% due 5/15/2043 (Ochsner Clinic Foundation) | NR/Baa1 | 500,000 | 523,555 | |||||||
Parish of St. Charles, 4.00% due 12/1/2040 put 6/1/2022 (Valero Energy Corp. Refinery) | BBB/Baa2 | 2,250,000 | 2,399,873 | |||||||
MASSACHUSETTS — 0.15% | ||||||||||
Massachusetts Educational Financing Authority, 6.00% due 1/1/2028 | AA/NR | 320,000 | 341,181 | |||||||
MICHIGAN — 7.20% | ||||||||||
City of Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2036 (Bronson Methodist Hospital) | NR/A2 | 1,000,000 | 1,053,490 | |||||||
City of Kalamazoo Hospital Finance Authority, 5.25% due 5/15/2041 (Bronson Nursing and Rehabilitation Center) | NR/A2 | 1,000,000 | 1,081,740 | |||||||
City of Troy GO, 5.25% due 11/1/2032 (Downtown Development Authority-Community Center Facilities) | AAA/NR | 1,025,000 | 1,178,975 | |||||||
County of Genesee GO, 5.375% due 11/1/2038 (Water Supply System; Insured: BAM) | AA/A2 | 1,000,000 | 1,117,930 | |||||||
Detroit City School District, 5.00% due 5/1/2025 (School Building & Site; Insured: Q-SBLF) | AA-/Aa2 | 1,000,000 | 1,110,890 | |||||||
Detroit City School District GO, 5.25% due 5/1/2027 (School Building & Site; Insured: AGM) | AA/Aa2 | 1,000,000 | 1,170,960 | |||||||
Livonia Public School District GO, 5.00% due 5/1/2036 (School Building & Site) | AA/A2 | 225,000 | 244,787 | |||||||
Michigan Finance Authority, 5.00% due 4/1/2031 (State Dept. of Human Services Office Buildings) | A+/NR | 1,000,000 | 1,075,720 | |||||||
Michigan Finance Authority, 8.125% due 4/1/2041 (Hope Academy Project) | NR/NR | 980,000 | 1,110,193 | |||||||
Michigan Housing Development Authority, 3.375% due 11/1/2016 (AMT) | AA/NR | 655,000 | 662,683 | |||||||
Michigan Public School Academy, 8.00% due 8/1/2035 (Will Carleton Charter School) | NR/NR | 1,035,000 | 1,108,195 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2015 (Edward W. Sparrow Hospital Assoc.) | A+/A1 | 200,000 | 209,070 | |||||||
Michigan State Hospital Finance Authority, 5.00% due 7/15/2025 (Oakwood Southshore Medical Center) | A/A2 | 650,000 | 692,887 | |||||||
Michigan State Hospital Finance Authority, 5.75% due 11/15/2039 (Henry Ford Health System) | A-/A3 | 1,000,000 | 1,097,790 | |||||||
Michigan Strategic Fund, 7.00% due 5/1/2021 (Detroit Edison Company; Insured: Natl-Re/AMBAC) | NR/NR | 250,000 | 318,453 | |||||||
Wayne County Airport Authority, 5.00% due 12/1/2031 (Detroit Metropolitan Wayne County Airport) | A/A2 | 650,000 | 736,957 | |||||||
Wayne County Airport Authority, 5.00% due 12/1/2033 (Detroit Metropolitan Wayne County Airport) | A/A2 | 825,000 | 928,579 | |||||||
Wayne County Airport Authority, 5.00% due 12/1/2034 (Detroit Metropolitan Wayne County Airport) | A/A2 | 1,140,000 | 1,277,951 | |||||||
MINNESOTA — 0.69% | ||||||||||
Minneapolis-St. Paul Metropolitan Airports Commission, 5.00% due 1/1/2023 pre-refunded 1/1/2015 (Airport, Marina & Port Improvements; Insured: BHAC) (AMT) | AA+/Aa1 | 1,000,000 | 1,012,020 | |||||||
St. Paul Housing & Redevelopment Authority, 5.25% due 5/15/2023 | A/A2 | 115,000 | 122,029 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Washington County Housing Redevelopment Authority, 5.625% due 6/1/2037 (Birchwood and Woodbury Healthcare Facility Projects) | NR/NR | $ | 415,000 | $ | 422,387 | |||||
MISSISSIPPI — 0.06% | ||||||||||
Jackson Public School District, 4.00% due 2/1/2018 (District Long Range Capital Expenditure Program; Insured: AGM) (State Aid Withholding) | NR/Aa3 | 140,000 | 143,534 | |||||||
MISSOURI — 1.67% | ||||||||||
Tax Increment Financing Commission of Kansas City, 5.25% due 3/1/2018 (Maincor Project-Public Improvements) (ETM) | NR/NR | 1,025,000 | 1,115,856 | |||||||
Tax Increment Financing Commission of Kansas City, 6.00% due 5/1/2030 (Union Hill Redevelopment Project) | NR/NR | 2,505,000 | 2,627,244 | |||||||
NEW JERSEY — 3.42% | ||||||||||
Higher Education Student Assistance Authority, 5.75% due 12/1/2039 (NJCLASS Student Loan Program) (AMT) | A/A2 | 750,000 | 805,492 | |||||||
New Jersey EDA, 5.50% due 9/1/2027 (School Facilities Construction; Insured: Natl-Re) | AA-/A2 | 1,000,000 | 1,244,990 | |||||||
New Jersey EDA, 5.00% due 6/15/2029 (School Facilities Construction) | A-/A2 | 2,000,000 | 2,232,800 | |||||||
New Jersey Transit Corp., 5.00% due 9/15/2020 (Federal Transit Administration Section 5307 Urbanized Area Formula Funds) | A/A3 | 1,000,000 | 1,154,790 | |||||||
Salem County Pollution Control Financing Authority, 5.00% due 12/1/2023 (Chambers Project) (AMT) | BBB/Baa3 | 2,000,000 | 2,241,860 | |||||||
NEW MEXICO — 1.61% | ||||||||||
City of Farmington PCR, 4.70% due 9/1/2024 (Arizona Public Service Co.-Four Corners Project) | A-/A3 | 1,000,000 | 1,068,060 | |||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2032 (Haverland Carter Lifestyle Group) | NR/NR | 2,500,000 | 2,552,975 | |||||||
NEW YORK — 5.39% | ||||||||||
City of New York GO, 0.04% due 8/1/2021 put 10/1/2014 (City Budget Financial Management; LOC: JPMorgan Chase Bank N.A) (daily demand notes) | A+/Aa1 | 1,500,000 | 1,500,000 | |||||||
City of New York GO, 5.00% due 8/1/2023 (City Budget Financial Management) | AA/Aa2 | 3,000,000 | 3,616,980 | |||||||
City of New York GO, 5.00% due 8/1/2031 (City Budget Financial Management) | AA/Aa2 | 2,000,000 | 2,332,880 | |||||||
City of New York GO, 0.04% due 1/1/2036 put 10/1/2014 (Gowanus Canal Site; SPA: JPMorgan Chase Bank N.A) (daily demand notes) | AA/Aa2 | 4,250,000 | 4,250,000 | |||||||
City of Syracuse, 5.00% due 8/1/2017 (City Public and School Building Capital Projects; Insured: AGM) (State Aid Withholding) | AA/A1 | 400,000 | 415,080 | |||||||
NORTH CAROLINA — 0.19% | ||||||||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2020 (Progress Energy Carolinas, Inc. Initial Project Acquisition; Insured: AMBAC) | A-/NR | 410,000 | 433,169 | |||||||
OHIO — 2.84% | ||||||||||
American Municipal Power, Inc., 5.25% due 2/15/2018 (AMP Combined Hydroelectric Projects) | A/A3 | 500,000 | 569,900 | |||||||
City of Akron, 5.00% due 12/1/2031 (Community Learning Centers) | AA+/NR | 625,000 | 710,506 | |||||||
Cleveland-Cuyahoga County Port Authority, 6.25% due 5/15/2016 (Council for Economic Opportunities in Greater Cleveland Project; LOC: FifthThird Bank) | BBB+/NR | 155,000 | 155,256 | |||||||
Cleveland-Cuyahoga County Port Authority, 7.00% due 5/15/2040 (Flats East Development Project; LOC: FifthThird Bank) | BBB+/NR | 1,000,000 | 1,110,450 | |||||||
Ohio State Air Quality Development Authority PCR, 3.375% due 7/1/2033 put 7/1/2015 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa3 | 100,000 | 101,586 | |||||||
Ohio State Air Quality Development Authority PCR, 3.625% due 10/1/2033 put 4/1/2020 (FirstEnergy Nuclear Generation Corp.) | BBB-/Baa3 | 1,000,000 | 1,025,860 | |||||||
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 | 1,079,390 | |||||||
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 | 1,370,493 | |||||||
Wyoming City School District GO, 5.00% due 12/1/2018 (Educational Facilities; Insured: AGM) | NR/A2 | 250,000 | 263,102 | |||||||
OREGON — 0.45% | ||||||||||
Western Generation Agency, 5.00% due 1/1/2016 (Wauna Cogeneration Project; Insured: ACA) | NR/NR | 1,000,000 | 1,016,080 | |||||||
PENNSYLVANIA — 3.89% | ||||||||||
Allegheny County IDA, 6.75% due 8/15/2035 (Propel Charter School) | BBB-/NR | 950,000 | 1,043,499 | |||||||
City of Philadelphia, 5.00% due 6/15/2027 (Philadelphia International and Northeast Philadelphia Airports) (AMT) | A+/A2 | 2,000,000 | 2,218,720 | |||||||
Pennsylvania Economic Development Financing Authority, 5.00% due 12/1/2014 (Colver Project; Insured: AMBAC) (AMT) | BBB-/Ba1 | 450,000 | 452,425 | |||||||
Pennsylvania Economic Development Financing Authority, 4.625% due 12/1/2018 (Colver Project; Insured: AMBAC) (AMT) | BBB-/Ba1 | 1,800,000 | 1,848,600 | |||||||
Pennsylvania Turnpike Commission Step Up Coupon, 0% due 12/1/2030 (PennDOT-Mass Transit Agencies) | A-/A3 | 2,000,000 | 2,092,580 | |||||||
Philadelphia IDA, 6.00% due 8/1/2035 (Mast Charter School) | BBB+/NR | 1,000,000 | 1,087,930 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
RHODE ISLAND — 0.35% | ||||||||||
Housing Authority of the City of Pawtucket, 5.50% due 9/1/2022 (Public Housing Development) | A+/NR | $ | 315,000 | $ | 376,718 | |||||
Housing Authority of the City of Pawtucket, 5.50% due 9/1/2024 (Public Housing Development) | A+/NR | 350,000 | 413,220 | |||||||
SOUTH DAKOTA — 0.57% | ||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 7/1/2027 (Avera Health) | AA-/A1 | 400,000 | 450,116 | |||||||
South Dakota Health & Educational Facilities Authority, 5.50% due 11/1/2040 (Sanford Health) | A+/A1 | 750,000 | 834,075 | |||||||
TENNESSEE — 0.30% | ||||||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2015 | A-/Baa1 | 100,000 | 101,334 | |||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2024 | A-/Baa2 | 500,000 | 578,685 | |||||||
TEXAS — 13.72% | ||||||||||
Austin Convention Enterprises, Inc., 5.25% due 1/1/2024 (Austin Convention Center; Insured: Syncora) | BBB-/Ba1 | 720,000 | 745,841 | |||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2034 (Austin Convention Center; Insured: Syncora) | BBB-/Ba1 | 795,000 | 806,432 | |||||||
City of Houston, 5.00% due 11/15/2028 (Combined Utility System) | AA/Aa2 | 2,500,000 | 3,004,200 | |||||||
City of Houston, 5.00% due 9/1/2034 (Convention & Entertainment Facilities Department) | A-/A2 | 1,550,000 | 1,757,297 | |||||||
City of Kerrville Health Facilities Development Corp., 5.45% due 8/15/2035 (Sid Peterson Memorial Hospital) | BBB/NR | 2,600,000 | 2,621,008 | |||||||
City of Texas City Industrial Development Corp., 7.375% due 10/1/2020 (ARCO Pipe Line Co. Project) | A/A2 | 1,165,000 | 1,518,298 | |||||||
Commissioners Court of Bexar County, 5.00% due 6/15/2018 pre-refunded 6/15/2015 (County Highway Construction and Maintenance) | AA+/Aaa | 200,000 | 206,866 | |||||||
Kimble County Hospital District, 6.25% due 8/15/2033 | NR/NR | 500,000 | 550,050 | |||||||
La Vernia Higher Education Finance Corp., 6.25% due 8/15/2039 (Kipp, Inc.) | BBB/NR | 1,000,000 | 1,126,990 | |||||||
Lower Colorado River Authority, 5.00% due 5/15/2026 pre-refunded 5/15/2022 | NR/NR | 20,000 | 24,325 | |||||||
Lower Colorado River Authority, 5.00% due 5/15/2026 | A/A1 | 2,980,000 | 3,450,333 | |||||||
San Antonio Energy Acquisition Public Facilities Corp., 5.50% due 8/1/2021 | A-/Baa3 | 40,000 | 46,676 | |||||||
San Juan Higher Education Finance Authority, 6.70% due 8/15/2040 (IDEA Public Schools) | BBB/NR | 1,000,000 | 1,170,290 | |||||||
State of Texas GO, 1.50% due 8/31/2015 (Cash Flow Management) | SP-1+/Mig1 | 10,000,000 | 10,125,000 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 4.15% due 8/15/2016 (IDEA Public Schools; Insured: ACA) | BBB/NR | 100,000 | 105,452 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 2/15/2018 pre-refunded 2/15/2015 (Cosmos Foundation, Inc.) | BBB/NR | 550,000 | 559,856 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2023 pre-refunded 8/15/2017 (IDEA Public Schools; Insured: ACA) | BBB/NR | 155,000 | 171,444 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 5.00% due 8/15/2030 pre-refunded 8/15/2017 (IDEA Public Schools; Insured: ACA) | BBB/NR | 1,550,000 | 1,714,440 | |||||||
Texas Public Finance Authority Charter School Finance Corp., 6.20% due 2/15/2040 (Cosmos Foundation, Inc.) | BBB/NR | 1,000,000 | 1,130,150 | |||||||
U.S. VIRGIN ISLANDS — 0.26% | ||||||||||
Virgin Islands Public Finance Authority, 6.75% due 10/1/2037 | NR/Baa3 | 500,000 | 573,640 | |||||||
UTAH — 2.68% | ||||||||||
Herriman City, 4.75% due 11/1/2022 (Towne Center Access and Utility Improvements) | AA-/NR | 1,000,000 | 1,129,210 | |||||||
Weber County, 0.04% due 2/15/2031 put 10/1/2014 (IHC Health Services, Inc.; SPA: The Bank of New York Mellon) (daily demand notes) | AA+/Aa1 | 4,900,000 | 4,900,000 | |||||||
VIRGINIA — 1.13% | ||||||||||
City of Lexington IDA, 5.25% due 1/1/2021 (Kendal at Lexington Residential Care Facility) | NR/NR | 395,000 | 411,918 | |||||||
City of Lexington IDA, 5.375% due 1/1/2022 (Kendal at Lexington Residential Care Facility) | NR/NR | 630,000 | 655,338 | |||||||
City of Lexington IDA, 5.375% due 1/1/2023 (Kendal at Lexington Residential Care Facility) | NR/NR | 425,000 | 440,317 | |||||||
City of Lexington IDA, 5.375% due 1/1/2028 (Kendal at Lexington Residential Care Facility) | NR/NR | 1,000,000 | 1,025,800 | |||||||
WASHINGTON — 2.24% | ||||||||||
Skagit County Public Hospital District No. 1, 5.75% due 12/1/2028 (Skagit Valley Hospital) | NR/Baa2 | 1,510,000 | 1,647,501 | |||||||
Washington Health Care Facilities Authority, 5.70% due 7/1/2038 (Overlake Hospital Medical Center) | A/A2 | 1,000,000 | 1,097,610 | |||||||
Washington Health Care Facilities Authority, 5.75% due 1/1/2045 (Catholic Health Initiatives) | A+/A1 | 2,000,000 | 2,292,240 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
WISCONSIN — 0.45% | ||||||||||
Wisconsin Health & Educational Facilities Authority, 1.25% due 8/15/2025 put 8/15/2017 (Aurora Health Care, Inc.) | NR/A3 | $ | 1,000,000 | $ | 1,006,650 | |||||
|
| |||||||||
TOTAL INVESTMENTS — 94.73% (Cost $197,457,856) | $ | 212,856,927 | ||||||||
OTHER ASSETS LESS LIABILITIES — 5.27% | 11,843,897 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 224,700,824 | ||||||||
|
|
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. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ABAG | Association of Bay Area Governments | |
ACA | Insured by American Capital Access | |
AGM | Insured by Assured Guaranty Municipal Corp. | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
AMT | Alternative Minimum Tax | |
BAM | Insured by Build America Mutual Insurance Co. | |
BHAC | Insured by Berkshire Hathaway Assurance Corp. | |
CIFG | Insured by CIFG Assurance North America Inc. | |
COP | Certificates of Participation | |
DFA | Development Finance Authority | |
EDA | Economic Development Authority | |
ETM | Escrowed to Maturity |
FGIC | Insured by Financial Guaranty Insurance Co. | |
GO | General Obligation | |
HFA | Health Facilities Authority | |
HFFA | Health Facilities Financing Authority | |
IDA | Industrial Development Authority | |
Mtg | Mortgage | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
Q-SBLF | Insured by Qualified School Bond Loan Fund | |
Radian | Insured by Radian Asset Assurance | |
Syncora | Insured by Syncora Guarantee Inc. | |
USD | Unified School District |
See notes to financial statements.
Certified Annual Report 17
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $197,457,856) (Note 2) | $ | 212,856,927 | ||
Cash | 8,212,934 | |||
Receivable for investments sold | 1,055,000 | |||
Receivable for fund shares sold | 618,591 | |||
Interest receivable | 2,440,381 | |||
Prepaid expenses and other assets | 21,783 | |||
|
| |||
Total Assets | 225,205,616 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 234,944 | |||
Payable to investment advisor and other affiliates (Note 3) | 168,677 | |||
Accounts payable and accrued expenses | 58,688 | |||
Dividends payable | 42,483 | |||
|
| |||
Total Liabilities | 504,792 | |||
|
| |||
NET ASSETS | $ | 224,700,824 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 3,622 | ||
Net unrealized appreciation on investments | 15,399,071 | |||
Accumulated net realized gain (loss) | 174,165 | |||
Net capital paid in on shares of beneficial interest | 209,123,966 | |||
|
| |||
$ | 224,700,824 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($61,424,218 applicable to 4,044,454 shares of beneficial interest outstanding - Note 4) | $ | 15.19 | ||
Maximum sales charge, 2.00% of offering price | 0.31 | |||
|
| |||
Maximum offering price per share | $ | 15.50 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($26,168,089 applicable to 1,721,337 shares of beneficial interest outstanding - Note 4) | $ | 15.20 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($137,108,517 applicable to 9,019,638 shares of beneficial interest outstanding - Note 4) | $ | 15.20 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
18 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg Strategic Municipal Income Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Dividend income | $ | 46,213 | ||
Interest income (net of premium amortized of $807,237) | 7,377,672 | |||
|
| |||
Total Income | 7,423,885 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 1,371,252 | |||
Administration fees (Note 3) | ||||
Class A Shares | 70,276 | |||
Class C Shares | 28,122 | |||
Class I Shares | 52,057 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 140,553 | |||
Class C Shares | 135,178 | |||
Transfer agent fees | ||||
Class A Shares | 39,789 | |||
Class C Shares | 17,066 | |||
Class I Shares | 48,669 | |||
Registration and filing fees | ||||
Class A Shares | 20,825 | |||
Class C Shares | 20,918 | |||
Class I Shares | 20,781 | |||
Custodian fees (Note 3) | 56,312 | |||
Professional fees | 40,415 | |||
Accounting fees | 5,994 | |||
Trustee fees | 5,439 | |||
Other expenses | 23,690 | |||
|
| |||
Total Expenses | 2,097,336 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (65,784 | ) | ||
Fees paid indirectly (Note 3) | (7,662 | ) | ||
|
| |||
Net Expenses | 2,023,890 | |||
|
| |||
Net Investment Income | 5,399,995 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 174,212 | |||
Net change in unrealized appreciation (depreciation) on investments | 10,351,044 | |||
|
| |||
Net Realized and Unrealized Gain | 10,525,256 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 15,925,251 | ||
|
|
See notes to financial statements.
Certified Annual Report 19
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Strategic Municipal Income Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 5,399,995 | $ | 5,198,489 | ||||
Net realized gain (loss) on investments | 174,212 | 610,582 | ||||||
Net unrealized appreciation (depreciation) on investments | 10,351,044 | (9,694,162 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 15,925,251 | (3,885,091 | ) | |||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | (1,584,898 | ) | (1,710,530 | ) | ||||
Class C Shares | (568,645 | ) | (600,810 | ) | ||||
Class I Shares | (3,246,452 | ) | (2,887,149 | ) | ||||
From realized gains | ||||||||
Class A Shares | (189,519 | ) | (158,051 | ) | ||||
Class C Shares | (79,000 | ) | (57,504 | ) | ||||
Class I Shares | (342,071 | ) | (215,913 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | 6,109,965 | (10,039,182 | ) | |||||
Class C Shares | 3,609,685 | (880,639 | ) | |||||
Class I Shares | 42,182,323 | 1,965,732 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 61,816,639 | (18,469,137 | ) | |||||
NET ASSETS | ||||||||
Beginning of Year | 162,884,185 | 181,353,322 | ||||||
|
|
|
| |||||
End of Year | $ | 224,700,824 | $ | 162,884,185 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 3,622 | $ | 3,622 |
See notes to financial statements.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
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 eighteen 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 investment objective is to seek a high level of current income exempt from federal individual income tax.
The Fund currently offers three classes of shares of beneficial interest 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 allocable 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 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. 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
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).
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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 212,856,927 | $ | — | $ | 212,856,927 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 212,856,927 | $ | — | $ | 212,856,927 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014.
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, 2014, 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: 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
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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.
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, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $1,033 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $1,597 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, 2014, 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 and shareholder services.
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, 2014, are set forth in the Statement of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class A and Class C expenses do not exceed 1.25% and 1.55% respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $28,953 for Class A shares and $36,831 for Class C shares.
The Trust has an agreement with the custodian bank to indirectly pay a portion of the custodian’s fees through credits earned by the Fund’s cash on deposit with the bank. This deposit agreement is an alternative to overnight investments. Custodial fees 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, 2014, fees paid indirectly were $7,662.
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 and is included as Trustee Fees on the Statement of Operations.
The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended September 30, 2014, the Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $3,565,848 in sales.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 2,214,705 | $ | 32,669,985 | 1,268,566 | $ | 19,218,808 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 115,738 | 1,703,678 | 112,412 | 1,684,533 | ||||||||||||
Shares repurchased | (1,917,594 | ) | (28,263,698 | ) | (2,064,383 | ) | (30,942,523 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 412,849 | $ | 6,109,965 | (683,405 | ) | $ | (10,039,182 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 584,844 | $ | 8,670,364 | 466,350 | $ | 7,039,591 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 39,009 | 573,997 | 36,935 | 553,550 | ||||||||||||
Shares repurchased | (383,694 | ) | (5,634,676 | ) | (571,287 | ) | (8,473,780 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 240,159 | $ | 3,609,685 | (68,002 | ) | $ | (880,639 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 4,322,972 | $ | 64,055,109 | 2,115,021 | $ | 31,792,973 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 225,879 | 3,331,595 | 186,468 | 2,792,658 | ||||||||||||
Shares repurchased | (1,724,127 | ) | (25,204,381 | ) | (2,192,296 | ) | (32,619,899 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 2,824,724 | $ | 42,182,323 | 109,193 | $ | 1,965,732 | ||||||||||
|
|
|
|
|
|
|
|
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $66,509,713 and $35,521,149, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 197,457,856 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 15,405,518 | ||
Gross unrealized depreciation on a tax basis | (6,447 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 15,399,071 | ||
|
|
At September 30, 2014, the Fund had $46,105 of undistributed tax basis net tax-exempt income, $58,464 of undistributed tax basis net ordinary investment income, and $115,701 of undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2014, and September 30, 2013, are excludable by shareholders from gross income for federal income tax purposes.
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 |
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 5,304,242 | $ | 5,112,447 | ||||
Ordinary income | 95,753 | 474,043 | ||||||
Capital gains | 610,590 | 43,467 | ||||||
|
|
|
| |||||
Total | $ | 6,010,585 | $ | 5,629,957 | ||||
|
|
|
|
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 in below investment grade securities and derivatives. 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, 2014, and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Certified Annual Report 25
Thornburg Strategic Municipal 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 | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS | 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 (%)(a) | NET ASSETS AT END OF YEAR (THOUSANDS) | |||||||||||||||||||||||||||||||||||||
CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 14.40 | 0.41 | 0.85 | 1.26 | (0.42 | ) | (0.05) | (0.47 | ) | $15.19 | 2.82 | 1.25 | 1.25 | 1.31 | 8.93 | 21.89 | $ | 61,424 | |||||||||||||||||||||||||||||||||
2013(b) | $ | 15.17 | 0.41 | (0.74 | ) | (0.33 | ) | (0.41 | ) | (0.03) | (0.44 | ) | $14.40 | 2.74 | 1.25 | 1.25 | 1.31 | (2.21 | ) | 37.42 | $ | 52,278 | ||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 14.41 | 0.37 | 0.84 | 1.21 | (0.37 | ) | (0.05) | (0.42 | ) | $15.20 | 2.53 | 1.55 | 1.55 | 1.72 | 8.60 | 21.89 | $ | 26,168 | |||||||||||||||||||||||||||||||||
2013 | $ | 15.18 | 0.37 | (0.74 | ) | (0.37 | ) | (0.37 | ) | (0.03) | (0.40 | ) | $14.41 | 2.44 | 1.55 | 1.55 | 1.73 | (2.50 | ) | 37.42 | $ | 21,344 | ||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 14.41 | 0.46 | 0.85 | 1.31 | (0.47 | ) | (0.05) | (0.52 | ) | $15.20 | 3.12 | 0.94 | 0.93 | 0.94 | 9.27 | 21.89 | $ | 137,109 | |||||||||||||||||||||||||||||||||
2013 | $ | 15.18 | 0.45 | (0.73 | ) | (0.28 | ) | (0.46 | ) | (0.03) | (0.49 | ) | $14.41 | 3.04 | 0.95 | 0.95 | 0.96 | (1.92 | ) | 37.42 | $ | 89,262 | ||||||||||||||||||||||||||||||
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 |
(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.
26 Certified Annual Report | Certified Annual Report 27 |
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, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
28 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,045.90 | $ | 6.41 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,043.60 | $ | 7.94 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.30 | $ | 7.84 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,046.90 | $ | 4.78 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.40 | $ | 4.72 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.25%; C: 1.55%; I: 0.93%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURNS
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 5 YRS | SINCE INCEPTION | ||||||||||
A Shares (Incep: 4/1/09) | 6.78 | % | 5.48 | % | 8.29 | % | ||||||
C Shares (Incep: 4/1/09) | 8.00 | % | 5.59 | % | 8.38 | % | ||||||
I Shares (Incep: 4/1/09) | 9.27 | % | 6.21 | % | 9.00 | % |
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.
30 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 Trustee since 1996, Member of Audit Committee & Operations Risk Oversight | 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 31
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES) (1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
32 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 Strategic Municipal Income Fund | September 30, 2014 (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.
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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Fund of $5,304,242 (or the maximum allowed) are tax exempt dividends, $95,753 are taxable ordinary investment income dividends, and $610,590 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of 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 under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
34 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the four calendar years since the inception of the Fund’s investment operations, comparing the Fund’s annual investment returns to a fund category composed by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year and five-year periods ending with the second quarter of the current year, comparing the Fund’s annualized returns to two mutual fund categories composed by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of correlation to equity indices, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year was higher than the return for the fund category and comparable to the securities index considered, that the Fund’s returns for the preceding three calendar years exceeded the returns of the index in all three years, and that the Fund’s returns exceeded or were comparable to the average returns of the fund category in two of the three years. Noted quantitative data further showed that the Fund’s annualized investment returns fell near the midpoint of performance of the first fund category for the one-year and three-year periods ended with the second quarter of the current year, and fell in the third quartile of performance for the five-year period. Noted data also showed that the Fund’s annualized investment returns fell in the second quartile of performance of the second fund category for the one-year period ended with the second quarter and fell in the top decile of performance for the three-year and five-year periods.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection, considered certain factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectus. Data considered included comparisons of the advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the advisory fee for the Fund was somewhat higher than the median and average fee levels for the fund category, and that the level of total expense for a representative share class was somewhat higher than the median and average levels for the category. Peer group data showed that the advisory fee level and total expense level for a representative share class fell above the median figures for the fund peer group and at the top of the range of levels for the group. The Trustees did not view the differences as significant in view of the other factors considered.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract
Certified Annual Report 35
OTHER INFORMATION, CONTINUED | ||
Thornburg Strategic Municipal Income Fund | September 30, 2014 (Unaudited) |
necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
36 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 37
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
38 This page is not part of the Annual Report
This page is not part of the Annual Report 39
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
40 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 41
This page intentionally left blank.
42 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 43
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH1978 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages is current as of September 30, 2014. 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. Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. 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 |
Glossary
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.
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.
Personal Consumption Expenditure (PCE) Price Index – One measure of U.S. inflation that assesses the percentage change in prices of goods and services purchased by consumers throughout the economy. Of all the measures of consumer price inflation, the PCE price index covers the broadest set of goods and services.
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 (bp) – 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.
Credit Spread/Quality Spread – The difference between the yields of securities with different credit qualities.
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.
Fiscal Cliff – A combination of expiring tax cuts and across-the-board government spending cuts that were scheduled to become effective at the end of 2012. The idea behind the fiscal cliff was that if the federal government allowed these two events to proceed as planned, they would have a detrimental effect on an already shaky economy. At the same time, it was predicted that going over the fiscal cliff would significantly reduce the federal budget deficit.
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.
Participation Rate – The number of people who are either employed or are actively looking for work. The people who are no longer actively searching for work would not be included in the participation rate. During an economic recession, many workers often get discouraged and stop looking for employment, and as a result, the participation rate decreases.
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.
Yield Curve – A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.
This page is not part of the Annual Report 3
THORNBURG CALIFORNIA LIMITED TERM MUNICIPAL FUND
Laddering – an All Weather Strategy
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 these techniques to manage risk and pursue attractive returns:
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment and interest rate risk. |
• | 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. |
• | Investing on a cash-only basis without using leverage. |
Portfolio Managers
Josh Gonze Chris Ryon, CFA
Objectives and Strategies
The Fund’s primary investment objective is to obtain as high a level of current income exempt from federal and California state individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital.
The secondary goal of the Fund is to reduce expected changes in its share price compared to longer intermediate and long-term bond portfolios.
The Fund offers California investors double tax-free yields (may be subject to Alternative Minimum Tax) in a laddered municipal bond portfolio with an average maturity of normally less than five years. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year. Cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. We regard this strategy as a good compromise for managing different types of risk.
Long-term Stability of Principal
Net Asset Value History of A Shares from February 19, 1987 through September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
A Shares (Incep: 2/19/87) | ||||||||||||||||||||
Without sales charge | 3.93 | % | 2.98 | % | 3.44 | % | 3.41 | % | 4.58 | % | ||||||||||
With sales charge | 2.34 | % | 2.47 | % | 3.12 | % | 3.25 | % | 4.52 | % |
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 0.94%, as disclosed in the most recent Prospectus.
30-Day Yields, A Shares
As of September 30, 2014
Annualized Distribution Yield | 1.43 | % | ||
SEC Yield | 0.36 | % |
Key Portfolio Attributes
As of September 30, 2014
Number of Bonds | 315 | |||
Effective Duration | 3.6 Yrs | |||
Average Maturity | 4.9 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 12.
4 This page is not part of the Annual Report
THORNBURG’S SUITE OF MUNICIPAL FUNDS
Municipal Funds for a Range of Interest-Rate Scenarios
At Thornburg, we often say that predicting interest rates is a fool’s game. And with the Federal Reserve still heavily involved in the markets, it’s even more difficult to forecast how rates may rise than when they may rise. Will long rates rise first and short rates follow? Will long and short rates climb simultaneously?
A traditional strategy to protect oneself against interest-rate risk is to move into shorter-duration bond strategies. But the seemingly counterintuitive response of moving to longer-duration strategies can sometimes yield better results.
Diversify Across the Yield Curve
This uncertainty points to why it’s important for investors to match their investment horizon to the duration of the strategy in which they’re invested, and to diversify assets across the yield curve.
For any interest-rate scenario, Thornburg’s comprehensive suite of municipal funds gives prudent investors the ability to diversify across the yield curve.
Diversify Across the Yield Curve with Thornburg Municipal Funds AAA General Obligation Municipal Yield Curve, as of September 30, 2014
| ![]() |
This page is not part of the Annual Report 5
Thornburg California Limited Term Municipal Fund
September 30, 2014
7 | ||||
12 | ||||
18 | ||||
19 | ||||
20 | ||||
21 | ||||
26 | ||||
28 | ||||
29 | ||||
30 | ||||
31 | ||||
34 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
October 17, 2014
Dear Shareholder:
We are pleased to present the annual report for the Thornburg California Limited Term Municipal Fund (the Fund). The net asset value (NAV) of the Class A shares increased by 30 cents to $13.84 per share during the fiscal year ended September 30, 2014. If you were with us for the entire period, you received dividends of 22.8 cents per share. If you reinvested your dividends, you received 23.0 cents per share. Dividends were lower for Class C shares and higher for Class I shares, to account for varying class-specific expenses. The Class A shares outperformed the Fund’s benchmark index, with a 3.93% total return at NAV for the fiscal year ended September 30, 2014, compared to the 3.67% total return for the BofA Merrill Lynch 1-10 Year U.S. Municipal Securities Index. The Fund generated 2.90% more price return and 2.64% less income than its benchmark.
The market’s positive returns were driven primarily by falling interest rates. Another driver was narrowing credit spreads. In general, investors received smaller and smaller levels of yield for securities of lower credit quality with shorter maturity dates. Chart I shows credit spreads for various maturities of municipal bonds.
Drivers of the Fund’s price return relative to its benchmark are as follows: Interest-rate sensitivity, as measured by the Fund’s duration and differing allocations along the yield curve, added 0.34% of price performance; sector allocations added 2.18% of relative price performance; and the Fund’s overweight to lower-credit-quality securities subtracted 0.79% of price performance versus the benchmark. Other risk factors accounted for another 1.16% of relative price performance.
Interest-Rate Changes
As of the end of fiscal year 2013, many market observers predicted increasing interest rates. The fear of the Federal Reserve (the Fed) curtailing purchases of Treasury and mortgage-backed securities had roiled the markets, though the eventual fact of tapering did not begin until December 18, 2013. This was the backdrop against which rates rose through the end of December 2013. Chart II illustrates the changes in rates by maturity for each quarter of fiscal 2014.
This chart highlights a few interesting phenomena:
1. | Interest rates changed by varying amounts for different maturities, highlighting the potential benefits of a portfolio that is diversified by maturity. We believe investors benefit by owning several funds that provide different exposures to various maturity segments of the market. |
Chart I | Quality Spreads: BBB Municipal Revenue Yields over AAA General Obligation Yields
as of 9/30/2014
Chart II | Changes in AAA General Obligation Municipal Yield Curve
9/30/2013 – 9/30/2014
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
2. | In the quarter ended December 31, 2013, short and long interest rates declined and intermediate rates continued to rise. The fall in short-term rates was a market reaction to the fear of rising rates and investor desire to shed duration or interest-rate risk. The decline in long-term rates was driven by opportunistic investors who wished to take advantage of a significant difference between short- and long-term rates. |
3. | In the quarter ended March 31, 2014, short-term interest rates rose as long-term rates continued to decline. This was doubtless a reaction to the risk of possible Fed tightening and increases in short-term rates. |
4. | In the six-month period ended September 30, 2014, interest rates all along the yield curve declined, and longer-term rates continued to slide more than short-term rates. |
Table I shows selected changes in rates for the last two fiscal years. The table highlights that although interest rates have declined in fiscal 2014, they have yet to retrace the upswing seen in fiscal 2013. It is noteworthy that rates on the short end (one to five years) of the market have been virtually unchanged, depressed by the Fed’s delay in normalizing benchmark short-term rates.
Table I | Yield Changes for the Last Two Fiscal Years
MATURITY | FISCAL YEAR ENDING 9/30/2013 | FISCAL YEAR ENDING 9/30/2014 | ||||||
1-Year | -0.02 | % | -0.03 | % | ||||
5-Year | +0.62 | % | -0.03 | % | ||||
10-Year | +0.83 | % | -0.32 | % | ||||
30-Year | +1.43 | % | -1.08 | % |
Source: Bloomberg
The Economy and the Federal Reserve Board
The U.S. economy has recently grown at an average rate of 2.0% as measured by gross domestic product (GDP), which is defined as the monetary value of all finished goods and services produced within a country’s borders over a specific time period. Many market participants believe that 2.0% GDP growth is suboptimal compared to rates in past recoveries, but the quarter ended December 31, 2013, produced a 3.5% growth rate and the quarter ended June 30, 2014, a 4.6% rate. Growth in the quarter ended March 31, 2014, was negative 2.1%; this anomaly has been attributed to weather effects.
Employment growth is another useful measure for gauging the health of the economy. The financial press highlights this as an area of focus for Fed Chair Janet Yellen. The economy has added approximately 220,000 jobs per month for the fiscal year. This growth has not come without volatility; only 84,000 jobs were added in December 2013 and 304,000 in April 2014. The unemployment rate has declined from 7.2% for the year ended September 30, 2013, to 5.9% as of September 30, 2014. This should make investors feel good about the economy, but other measures paint a mixed picture. One indicator is the U.S. labor force participation rate, which measures the size of the labor force as a percent of the working-age population. Since January 1990, this long-term average has been at 65.9%, but as of September 2014, the participation rate had declined to 62.7%. For fiscal year 2014, this measure has averaged 62.9%. Some economists and demographers attempt to explain the decline in the participation rate by the retirement of Baby Boomers, who have changed every demographic category they have passed through and have been referred to as “the pig in the python.” The thought that Baby Boomers would impact the labor force participation rate significantly enough to cause this decline is plausible, but we have seen no estimates of the effect.
The Federal Reserve (the Fed) began reducing purchases of U.S. Treasury and mortgage securities in December 2013 and will complete the process by October 2014. During 2013, the market’s anticipation of the Fed’s tapering its asset purchases sent long-term municipal yields up 1.43%. But in 2014, the reality of tapering (and other factors) sent long-term municipal yields down 1.08%. In its September 17, 2014, release, the Federal Open Market Committee (FOMC) stated:
“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
Later, in a press conference, Chair Yellen added more color to the policy statement:
“Let me reiterate, however, that the Committee’s expectations for the path of the federal funds rate are contingent on the economic outlook. If the economy proves to be stronger than anticipated by the Committee, resulting in a more rapid convergence of employment and inflation to the FOMC’s objectives, then increases in the federal funds rate are likely to occur sooner and to be more rapid than currently envisaged. Conversely, if economic performance disappoints, increases in the federal funds rate are likely to take place later and to be more gradual.”
8 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
It is clear guidance like this that makes one long for Harry Truman’s “one-handed economist.” From all this, one can glean that the Fed will be “data dependent” (another term being thrown around in the financial press) in determining the future path of the federal funds rate (currently near zero).
Finally, let’s look at inflation. It is important to fixed-income investors because it is the primary determinant of future purchasing power. If inflation increases, the semi-annual coupon payment of most bonds carries less value in the economy. Inflation, as measured by core PCE (the Core Personal Consumption Expenditures Index, which is the Fed’s favored inflation measure) excludes volatile food and energy prices. Since September 2013, core PCE has increased from 1.33% to 1.47%, but this is still materially below the Fed’s inflation target of 2.00%. As 2014 prices of municipal bonds have risen and yields have declined, their after-inflation purchasing power has fallen. Chart III illustrates this point for a five-year AAA-rated general obligation bond.
Chart III shows that as of August 31, 2014, an investor in a five-year AAA general obligation bond received a real yield (the yield on a security after inflation is taken into account) of negative 0.33%. The yield failed to keep up with inflation, and the investor lost purchasing power. On August 31, a five-year AAA general obligation bond yielded 1.14%, with core PCE at 1.47%. As of September 30, 2014, a five-year AAA general obligation bond yielded 1.24%, with a real yield of negative 0.23%. The long-term average real yield of a five-year AAA general obligation bond is a mere 1.32%. These extremely low real yields are an important effect of the Fed’s keeping short-term rates very low.
Chart III | Five-Year AAA GO Real Yield (using Core PCE)
6/1/1994 – 8/31/2014
The Municipal Bond Market Credit Picture
The health of municipal market credit has generally been good, helped by GDP growth and increasing employment. But there have been some red flags recently. An August 2014 report from the Nelson A. Rockefeller Institute of Government at the State University of New York, “After Four Years of Uninterrupted Growth, Tax Revenues Decline in the First Quarter, and Preliminary Figures for the Second Quarter of 2014 Signal Further Declines in Personal Income Tax,” sums up certain observations:
• | “State tax revenues declined by 0.3% in the first quarter of 2014. This is the first time state revenues declined after four years of uninterrupted growth.” |
• | “Personal income tax collections showed a decline of 1.2% in the first quarter of 2014. The decline in personal income tax collections appear to be primarily due to the mirror-image effect of the initial impact of the fiscal cliff on taxpayer behavior, which had driven tax collections upward a year ago.” |
• | “Year-to-date figures show 2.8% growth in overall state tax collections in the first three quarters of fiscal 2014 compared to the same period of 2013.” |
• | “Local property tax revenues grew by 1.9% in the first quarter, marking the eighth consecutive quarter of growth in nominal terms.” |
Certified Annual Report 9
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
This data source tells us that overall state revenue is up but that there has been some decline in personal income tax collections that may be explained by individuals pushing income into last year to take advantage of lower personal income tax rates. We would raise a yellow flag at this indicator; this trend bears watching. The point about local property taxes growing should come as no surprise, as the real estate market has improved in many places. This is a very good development for local governments, because property taxes are their primary source of revenues. Not surprisingly, employment also shows positive growth. Only Alaska (off 0.95%) shows a decline for the period from August 2013 through August 2014 (the latest data available at this writing). The three states with the largest increases in employment are North Dakota (up 4.47%), Utah (up 3.53%), and Texas (up 3.63%). California showed an increase of 2.07%.
Other factors that influence the relative performance between one state and another is the supply of new-issue bonds available for sale from that state, coupled with demand for those bonds. The supply of new-issue bonds available for sale in California declined by 12.9% in first nine months of 2014. Nationally the decline in bond sales in the new-issue market is 9.6%. Demand for these securities has been consistently positive throughout the fiscal year. We believe that the state of the states’ economies and their respective credit pictures are healthy.
One of the highest hurdles to the health of the state economies is the funding levels of their pension plans. For too long, elected officials have over-promised and under-delivered (especially when it came to making payments to pensions) to their employees, and until recently, markets have proven more of a headwind. On October 9, 2014, Bloomberg reported, “State Pension Gaps Shrink for the First Time Since 2007.” Let us caution all readers: the shrinkage is barely perceptible, but even that is better than a poke in the eye with a sharp stick.
“The median state system last year had 69.3% of the assets needed to meet promised benefits, up from 68.7% in 2012, according to data compiled by Bloomberg.”
This sounds like great news until one realizes that the industrywide, minimum acceptable funding level is said to be 80%. Thirteen states met or exceeded this level; California was close to meeting this bar with a 2013 pension funding level of 76.9%, down from 2012’s 77.4%. The state with the lowest (some would say worst) level is Illinois with a funding level of 39.3%, down from 40.4% in 2012.
Nationally, there have been some high-profile credit concerns in the municipal bond market: the City of Detroit, which is in the process of exiting Chapter 9 protection, and Puerto Rico, which by all reports doesn’t know what it is doing. We do not own either credit!
The long and short of the Puerto Rico story:
• | In March 2014, the island issued $3.5 billion of general obligation bonds, mostly sold to hedge funds that “only wanted to help the island.” At the time, the island’s officials said this would give them enough cash to last for 18 months. |
• | In June 2014, the governor signed legislation allowing the island’s public corporations to “restructure” their debt, the Puerto Rico Electric Power Authority (PREPA) being the best known among them. |
• | Later in 2014, PREPA reached “forbearance” agreements with its creditors, calling for, among other things, a “Chief Restructuring Officer” (for an engagement fee of around $10 million, which is not bad work if you can get it). |
• | In September, the island’s financial officials announced a $900 million “tax and revenue anticipation” note deal that would be placed with banks who were forced to hold the vast majority of it and could not sell it. That figure was later raised to $1.2 billion. This was six months after the March sale! The yield on these securities is 7.75%; California issued a similar security earlier in the summer for 0.10%. Think there is a difference in the credit? |
The Stockton bankruptcy continues to wind its way through the courts. On October 1, 2014, a U.S. Bankruptcy Judge Christopher Klein handed down an interesting ruling. The Associated Press reported it as follows:
“Striking at the sanctity of public pensions in California, a federal judge ruled Wednesday that U.S. bankruptcy law allows the city of Stockton to treat pension fund obligations like other debts, meaning the city could trim benefits.”
This ruling could certainly change the dynamic between bondholders and local employees; as the question of potential Chapter 9 actions arises, both parties now stand an equal chance of significant loss.
10 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
Conclusion
We do not believe that the fixed income markets, and municipal bonds particularly, represent any great value at present; real yields are negative in some segments of the market, and very low in others. But we do not believe shareholders should undertake a wholesale rebalancing of portfolios either. It is important to re-evaluate why we own fixed-income products and municipal bonds: as part of a well-balanced, diversified portfolio. Recent volatility certainly demonstrates the potential benefits of these investments. Diversification is one of the best ways for shareholders to manage risk, not only between asset classes but in positioning within markets. And we believe municipal bond investors may benefit from diversifying along the municipal bond yield curve.
Many shareholders may soon ask themselves “what should I do if interest rates begin to rise?” We would suggest having faith in the structure of your portfolio. A portion of your limited-term laddered portfolio’s bonds mature each year and become available for reinvestment at higher yields (see Chart IV); this has the potential to increase income to shareholders. When interest rates do rise, prices will generally decline, but the remaining bonds in the portfolio will move closer to maturity and should increase in price over time. We advise being patient when interest rates start to rise, lengthening your anticipated holding period.
Chart IV | Percent of Portfolio Maturing
We will continue to strive to manage your assets to fulfill the Fund’s objectives as set out in the prospectus.
Sincerely,
![]() | ![]() | |
Christopher Ryon, CFA | Josh Gonze | |
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 11
SCHEDULE OF INVESTMENTS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
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 | |||||||
Alameda County COP, 5.625% due 12/1/2016 (Santa Rita Jail; Insured: AMBAC) | AA/NR | $ | 1,830,000 | $ | 2,025,224 | |||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2018 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | 400,000 | 464,192 | |||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2019 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | 750,000 | 884,708 | |||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2020 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | 725,000 | 864,106 | |||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2021 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | 1,000,000 | 1,183,760 | |||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2024 (Alameda County Medical Center Highland Hospital) | AA/Aa3 | 2,500,000 | 3,012,825 | |||||||
Anaheim Public Financing Authority, 5.00% due 10/1/2018 (Electric System Distribution Facilities; Insured: AMBAC) | NR/NR | 780,000 | 811,528 | |||||||
Anaheim Public Financing Authority, 5.00% due 10/1/2020 (Electric System Distribution Facilities; Insured: AMBAC) | NR/NR | 445,000 | 460,045 | |||||||
Anaheim Public Financing Authority, 5.00% due 10/1/2021 (Electric System Distribution Facilities; Insured: AMBAC) | NR/NR | 820,000 | 844,961 | |||||||
Anaheim Public Financing Authority, 0% due 9/1/2022 (Public Improvements Project; Insured: AGM) | AA/A2 | 3,000,000 | 2,411,430 | |||||||
Bay Area Toll Authority, 5.00% due 4/1/2016 (San Francisco Bay Area Toll Bridge) | AA/Aa3 | 2,075,000 | 2,223,072 | |||||||
Bay Area Toll Authority, 0.74% due 4/1/2047 put 10/1/2019 (San Francisco Bay Area Toll Bridge) | AA/Aa3 | 5,000,000 | 5,002,000 | |||||||
Bay Area Toll Authority, 1.50% due 4/1/2047 (San Francisco Bay Area Toll Bridge) | AA/Aa3 | 1,000,000 | 1,011,470 | |||||||
Bay Area Water Supply & Conservation Agency, 1.00% due 10/1/2014 (Regional Water System Improvements) | AA-/Aa3 | 1,000,000 | 1,000,030 | |||||||
Bay Area Water Supply & Conservation Agency, 2.00% due 10/1/2015 (Regional Water System Improvements) | AA-/Aa3 | 1,000,000 | 1,018,580 | |||||||
Bay Area Water Supply & Conservation Agency, 3.00% due 10/1/2016 (Regional Water System Improvements) | AA-/Aa3 | 3,965,000 | 4,174,074 | |||||||
Bonita USD GO, 5.00% due 8/1/2024 (Educational Facilities) | AA-/NR | 1,000,000 | 1,190,190 | |||||||
a Brentwood Infrastructure Financing Authority, 3.00% due 9/2/2016 (Residential Single Family Development; Insured: AGM) | AA/NR | 315,000 | 329,896 | |||||||
a Brentwood Infrastructure Financing Authority, 4.00% due 9/2/2017 (Residential Single Family Development; Insured: AGM) | AA/NR | 920,000 | 1,006,508 | |||||||
a Brentwood Infrastructure Financing Authority, 5.00% due 9/2/2020 (Residential Single Family Development; Insured: AGM) | AA/NR | 1,760,000 | 2,076,325 | |||||||
a Brentwood Infrastructure Financing Authority, 5.00% due 9/2/2021 (Residential Single Family Development; Insured: AGM) | AA/NR | 925,000 | 1,097,577 | |||||||
a Brentwood Infrastructure Financing Authority, 5.00% due 9/2/2022 (Residential Single Family Development; Insured: AGM) | AA/NR | 850,000 | 1,010,318 | |||||||
a Brentwood Infrastructure Financing Authority, 5.00% due 9/2/2023 (Residential Single Family Development; Insured: AGM) | AA/NR | 1,850,000 | 2,202,517 | |||||||
Calexico USD COP, 6.75% due 9/1/2017 | A-/NR | 2,370,000 | 2,538,294 | |||||||
California Educational Facilities Authority, 5.00% due 4/1/2018 (Pitzer College) | NR/A2 | 1,540,000 | 1,748,116 | |||||||
California Educational Facilities Authority, 0% due 10/1/2019 (Loyola Marymount University; Insured: Natl-Re) | NR/A2 | 2,025,000 | 1,833,536 | |||||||
California Educational Facilities Authority, 5.00% due 4/1/2020 (Pitzer College) | NR/A2 | 1,445,000 | 1,689,740 | |||||||
California Educational Facilities Authority, 5.00% due 4/1/2022 (Chapman University) | NR/A2 | 2,000,000 | 2,332,040 | |||||||
California HFFA, 4.00% due 2/1/2016 (Community Program Developmental Disabilities; Insured: California Mtg Insurance) | A/NR | 2,475,000 | 2,588,726 | |||||||
California HFFA, 5.50% due 10/1/2017 (Providence Health and Services) (ETM) | AA-/Aa3 | 1,100,000 | 1,256,607 | |||||||
California HFFA, 5.50% due 2/1/2018 (Community Program Developmental Disabilities; Insured: California Mtg Insurance) | A/NR | 2,715,000 | 3,077,425 | |||||||
California HFFA, 6.00% due 10/1/2018 (Providence Health and Services) (ETM) | AA-/Aa3 | 1,000,000 | 1,193,740 | |||||||
California HFFA, 5.00% due 11/15/2018 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,235,000 | 1,378,643 | |||||||
California HFFA, 5.10% due 2/1/2019 (Episcopal Home; Insured: California Mtg Insurance) (ETM) | A/NR | 1,230,000 | 1,353,430 | |||||||
California HFFA, 5.00% due 11/15/2020 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,190,000 | 1,350,091 | |||||||
California HFFA, 5.25% due 3/1/2022 (Dignity Health) | A/A3 | 1,000,000 | 1,187,610 | |||||||
California HFFA, 5.125% due 7/1/2022 (Dignity Health) | A/A3 | 1,420,000 | 1,467,243 | |||||||
California HFFA, 1.45% due 8/15/2023 put 3/15/2017 (Lucile Salter Packard Children’s Hospital) | AA-/Aa3 | 3,000,000 | 3,062,820 | |||||||
California HFFA, 5.00% due 11/15/2023 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,000,000 | 1,121,970 | |||||||
California HFFA, 5.00% due 7/1/2024 (St. Joseph Health System) | AA-/A1 | 1,000,000 | 1,190,210 | |||||||
California HFFA, 5.00% due 7/1/2043 put 10/17/2017 (St. Joseph Health System) | AA-/A1 | 3,000,000 | 3,394,980 | |||||||
California HFFA, 5.00% due 7/1/2043 put 10/15/2020 (St. Joseph Health System) | AA-/A1 | 5,000,000 | 5,946,750 | |||||||
California Infrastructure & Economic Development Bank, 0.03% due 9/1/2037 put 10/1/2014 (Los Angeles County Museum of Natural History Foundation; LOC: Wells Fargo Bank N.A.) (daily demand notes) | AA-/Aa1 | 800,000 | 800,000 | |||||||
California Municipal Finance Authority, 5.00% due 10/1/2021 (Biola University Residential Hall and Parking Structure) | NR/Baa1 | 150,000 | 171,750 | |||||||
California Municipal Finance Authority, 5.00% due 10/1/2022 (Biola University Residential Hall and Parking Structure) | NR/Baa1 | 160,000 | 183,906 | |||||||
California Municipal Finance Authority, 5.00% due 10/1/2023 (Biola University Residential Hall and Parking Structure) | NR/Baa1 | 125,000 | 144,276 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
California Pollution Control Financing Authority, 5.25% due 6/1/2023 put 12/1/2017 (Solid Waste Disposal-Republic Services, Inc.) (AMT) | BBB+/Baa3 | $ | 2,820,000 | $ | 3,072,785 | |||||
California Pollution Control Financing Authority, 0.02% due 11/1/2026 put 10/1/2014 (Pacific Gas & Electric Co.; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AA+/NR | 24,600,000 | 24,600,000 | |||||||
California State Department of Transportation COP, 5.25% due 3/1/2016 (Insured: Natl-Re) | AA-/A1 | 1,130,000 | 1,134,825 | |||||||
California State Department of Veterans Affairs, 2.75% due 12/1/2018 (Farm and Home Purchase Program) | AA/Aa3 | 1,000,000 | 1,062,690 | |||||||
California State Department of Veterans Affairs, 3.00% due 12/1/2019 (Farm and Home Purchase Program) | AA/Aa3 | 500,000 | 537,590 | |||||||
California State Department of Veterans Affairs GO, 4.40% due 12/1/2022 (Farm and Home Purchase Program) (AMT) | AA/Aa2 | 550,000 | 563,382 | |||||||
California State Department of Water Resources, 5.00% due 5/1/2015 (DWR Power Supply Program) | AA-/Aa2 | 3,400,000 | 3,497,036 | |||||||
California State Department of Water Resources, 5.00% due 5/1/2015 (DWR Power Supply Program) | AA-/Aa2 | 5,000,000 | 5,142,700 | |||||||
California State Economic Recovery GO, 5.00% due 7/1/2018 | AA/Aa2 | 3,000,000 | 3,470,910 | |||||||
California State Housing Finance Agency, 5.00% due 8/1/2017 (Single Family Housing; Insured: AGM) (AMT) | AA/A2 | 360,000 | 361,465 | |||||||
California State Housing Finance Agency, 5.125% due 8/1/2018 (Single Family Housing; Insured: AGM) (AMT) | AA/A2 | 1,000,000 | 1,029,990 | |||||||
California State Housing Finance Agency, 3.05% due 12/1/2019 (Multi-Family Housing; Insured: FHA) | NR/Aa1 | 735,000 | 745,753 | |||||||
California State Infrastructure & Economic Development Bank, 5.25% due 8/15/2020 (King City High School) | A/NR | 1,000,000 | 1,165,970 | |||||||
California State Public Works Board, 5.25% due 11/1/2014 (University of California; Insured: Natl-Re) (ETM) | AA+/Aaa | 1,000,000 | 1,004,410 | |||||||
California State Public Works Board, 5.25% due 12/1/2014 (California Community Colleges) | A-/A1 | 1,525,000 | 1,531,359 | |||||||
California State Public Works Board, 5.00% due 1/1/2015 (Correctional Facilities Improvements; Insured: AMBAC) | A-/A1 | 2,000,000 | 2,024,660 | |||||||
California State Public Works Board, 5.00% due 11/1/2016 (California State University-J. Paul Leonard & Sutro Library) | A-/Aa3 | 1,000,000 | 1,096,630 | |||||||
California State Public Works Board, 5.00% due 6/1/2020 (University of California; Insured: Natl-Re) (ETM) | AA+/Aaa | 1,185,000 | 1,425,484 | |||||||
California State Public Works Board, 5.125% due 3/1/2021 (Various State Participating Agency Capital Projects) | A-/A1 | 1,635,000 | 1,918,247 | |||||||
California State Public Works Board, 5.00% due 12/1/2021 (Judicial Council Projects) | A-/A1 | 3,100,000 | 3,742,320 | |||||||
California State Public Works Board, 5.00% due 4/1/2022 (California School for the Deaf Riverside Campus) | A-/A1 | 565,000 | 677,661 | |||||||
California State Public Works Board, 5.00% due 6/1/2022 (Yuba City Courthouse) | A-/A1 | 1,950,000 | 2,343,412 | |||||||
California State Public Works Board, 5.00% due 9/1/2022 (Correctional and Rehabilitation Facilities) | A-/A1 | 3,250,000 | 3,916,705 | |||||||
California State Public Works Board, 5.00% due 11/1/2022 (Correctional and Rehabilitation Facilities) | A-/A1 | 1,500,000 | 1,810,950 | |||||||
California State Public Works Board, 5.00% due 12/1/2022 (Judicial Council Projects) | A-/A1 | 1,200,000 | 1,421,760 | |||||||
California State Public Works Board, 5.00% due 3/1/2023 (Judicial Council Projects) | A-/A1 | 1,400,000 | 1,685,698 | |||||||
California State Public Works Board, 5.00% due 6/1/2023 (Coalinga State Hospital) | A-/A1 | 7,200,000 | 8,691,120 | |||||||
California State Public Works Board, 5.00% due 9/1/2023 (Correctional and Rehabilitation Facilities) | A-/A1 | 3,600,000 | 4,356,000 | |||||||
California State Public Works Board, 5.00% due 11/1/2023 (Laboratory Facility and San Diego Courthouse) | A-/A1 | 3,000,000 | 3,635,520 | |||||||
California State Public Works Board, 5.00% due 3/1/2024 (Judicial Council Projects) | A-/A1 | 1,000,000 | 1,194,060 | |||||||
California State Public Works Board, 5.00% due 4/1/2024 (Correctional and Rehabilitation Facilities) | A-/A1 | 3,350,000 | 3,933,503 | |||||||
California State Public Works Board, 5.00% due 9/1/2024 (Correctional and Rehabilitation Facilities) | A-/A1 | 3,580,000 | 4,366,526 | |||||||
California State Public Works Board, 5.00% due 11/1/2024 (Laboratory Facility and San Diego Courthouse) | A-/A1 | 4,000,000 | 4,806,960 | |||||||
California Statewide Communities Development Authority, 0.02% due 8/15/2027 put 10/1/2014 (St. John Muir Health; LOC: Wells Fargo Bank N.A.) (daily demand notes) | AAA/Aa3 | 2,500,000 | 2,500,000 | |||||||
California Statewide Communities Development Authority, 5.00% due 4/1/2019 (Kaiser Foundation Hospitals) | A+/NR | 3,715,000 | 4,332,916 | |||||||
California Statewide Communities Development Authority, 5.00% due 7/1/2020 (Aspire Public Schools; LOC: PCSD Guaranty Pool I, LLC) | NR/NR | 1,270,000 | 1,318,628 | |||||||
California Statewide Communities Development Authority, 0.03% due 8/15/2027 put 10/1/2014 (St. John Muir Health; LOC: Wells Fargo Bank N.A.) (daily demand notes) | AAA/Aa3 | 300,000 | 300,000 | |||||||
Calipatria USD GO, 0% due 8/1/2025 (Educational Facilities; Insured: ACA) | NR/NR | 5,000,000 | 2,879,350 | |||||||
Carson Redevelopment Agency, 6.00% due 10/1/2019 (Project Area 1) | A-/NR | 1,050,000 | 1,263,958 | |||||||
Castaic USD GO, 0% due 5/1/2018 (Insured: Natl-Re) | AA-/NR | 2,295,000 | 2,022,216 | |||||||
Central Valley Financing Authority, 5.00% due 7/1/2015 (Carson Ice) | AA-/A1 | 1,000,000 | 1,035,460 | |||||||
Central Valley Financing Authority, 5.25% due 7/1/2020 (Carson Ice) | AA-/A1 | 500,000 | 597,790 | |||||||
Cerritos Public Financing Authority, 5.00% due 11/1/2014 (Insured: AMBAC) | A-/NR | 1,260,000 | 1,264,927 | |||||||
b Chabot-Las Positas Community College District GO, 0.01% due 8/1/2018 (Capital Improvements; Insured: AMBAC) | A+/Aa3 | 2,465,000 | 2,202,897 | |||||||
City and County of San Francisco COP, 5.00% due 11/1/2016 (525 Golden Gate Avenue-Public Utilities Commission Office Project) | AA/Aa3 | 200,000 | 219,018 | |||||||
City and County of San Francisco COP, 5.00% due 9/1/2018 (City Office Buildings-Multiple Properties Project; Insured: Natl- Re) | AA/Aa3 | 300,000 | 301,185 | |||||||
City and County of San Francisco COP, 5.00% due 11/1/2022 (525 Golden Gate Avenue-Public Utilities Commission Office Project) | AA/Aa3 | 700,000 | 804,510 | |||||||
City and County of San Francisco Redevelopment Agency, 5.00% due 6/1/2020 (San Francisco Redevelopment Project; Insured: AGM) | AA/A1 | 1,730,000 | 2,013,893 | |||||||
City of Burbank, 5.00% due 6/1/2015 (Burbank Water and Power System) | AA-/A1 | 750,000 | 773,768 | |||||||
City of Burbank, 5.00% due 6/1/2016 (Burbank Water and Power System) | AA-/A1 | 500,000 | 537,735 | |||||||
b City of Burbank, 5.00% due 6/1/2017 (Burbank Water and Power System) | AA-/A1 | 1,000,000 | 1,113,420 | |||||||
City of Burbank, 5.00% due 6/1/2018 (Burbank Water and Power System) | AA-/A1 | 360,000 | 412,031 | |||||||
City of Burbank, 5.00% due 6/1/2020 (Burbank Water and Power System) | AA-/A1 | 625,000 | 743,550 | |||||||
City of Chula Vista, 1.65% due 7/1/2018 (San Diego Gas & Electric Co.) | A+/Aa2 | 3,300,000 | 3,323,166 | |||||||
City of Chula Vista COP, 5.25% due 3/1/2020 (Capital Facilities Project) | AA-/NR | 1,300,000 | 1,537,250 | |||||||
City of Chula Vista COP, 5.00% due 10/1/2024 (Police Facility Project) | AA-/A1 | 1,700,000 | 2,045,695 | |||||||
City of Clovis, 5.00% due 3/1/2021 (Water System Facilities; Insured: BAM) | AA/A2 | 550,000 | 644,259 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
City of Clovis, 5.00% due 3/1/2022 (Water System Facilities; Insured: BAM) | AA/A2 | $ | 720,000 | $ | 847,894 | |||||
City of Clovis, 5.00% due 3/1/2023 (Water System Facilities; Insured: BAM) | AA/A2 | 1,000,000 | 1,185,010 | |||||||
City of Folsom, 4.00% due 12/1/2014 (Community Facilities District No. 2) | A+/NR | 755,000 | 759,402 | |||||||
b City of Folsom, 5.00% due 12/1/2016 (Community Facilities District No. 2) | A+/NR | 1,100,000 | 1,196,536 | |||||||
City of Folsom, 5.00% due 12/1/2018 (Community Facilities District No. 2) | A+/NR | 965,000 | 1,098,469 | |||||||
City of Los Angeles Community Facilities District No. 4, 3.00% due 9/1/2015 (Playa Vista - Phase 1) | BBB/NR | 1,270,000 | 1,301,534 | |||||||
City of Los Angeles Community Facilities District No. 4, 4.00% due 9/1/2016 (Playa Vista - Phase 1) | BBB/NR | 650,000 | 691,763 | |||||||
City of Los Angeles Community Facilities District No. 4, 4.00% due 9/1/2017 (Playa Vista - Phase 1) | BBB/NR | 500,000 | 544,900 | |||||||
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/Aa3 | 2,755,000 | 2,865,999 | |||||||
City of Manteca, 3.00% due 12/1/2015 (Wastewater and Sewer System) | AA-/Aa3 | 280,000 | 288,767 | |||||||
City of Manteca, 4.00% due 7/1/2016 (Water Supply System) | AA-/A1 | 300,000 | 319,062 | |||||||
City of Manteca, 3.00% due 12/1/2016 (Wastewater and Sewer System) | AA-/Aa3 | 520,000 | 547,336 | |||||||
City of Manteca, 4.00% due 7/1/2018 (Water Supply System) | AA-/A1 | 550,000 | 610,616 | |||||||
City of Manteca, 4.00% due 12/1/2018 (Wastewater and Sewer System) | AA-/Aa3 | 375,000 | 417,701 | |||||||
City of Manteca, 5.00% due 7/1/2019 (Water Supply System) | AA-/A1 | 400,000 | 468,392 | |||||||
City of Manteca, 5.00% due 7/1/2021 (Water Supply System) | AA-/A1 | 1,000,000 | 1,192,450 | |||||||
City of Manteca, 5.00% due 7/1/2023 (Water Supply System) | AA-/A1 | 650,000 | 768,138 | |||||||
City of Moorpark Mobile Home Park, 4.90% due 5/15/2017 (Villa Del Arroyo) | A/NR | 605,000 | 639,667 | |||||||
City of Porterville COP, 6.30% due 10/1/2018 (Public Service Capital Projects; Insured: AMBAC) | NR/NR | 885,000 | 932,675 | |||||||
a City of Riverside Successor Agency to the Redevelopment Agency, 5.00% due 9/1/2023 | AA-/NR | 1,735,000 | 2,084,932 | |||||||
a City of Riverside Successor Agency to the Redevelopment Agency, 5.00% due 9/1/2024 | AA-/NR | 1,250,000 | 1,516,062 | |||||||
City of Roseville COP, 5.00% due 2/1/2019 pre-refunded 2/1/2015 (Electric System; Insured: Natl-Re) | AA-/A2 | 850,000 | 863,932 | |||||||
City of San Jose Financing Authority, 5.00% due 6/1/2019 (Civic Center Project) | AA/Aa3 | 650,000 | 760,533 | |||||||
City of San Jose Financing Authority, 5.00% due 6/1/2020 (Civic Center Project) | AA/Aa3 | 600,000 | 710,340 | |||||||
City of San Jose Financing Authority, 4.00% due 6/1/2021 (Civic Center Project) | AA/Aa3 | 1,000,000 | 1,128,900 | |||||||
City of San Jose Financing Authority, 5.00% due 6/1/2022 (Civic Center Project) | AA/Aa3 | 745,000 | 892,585 | |||||||
City of San Jose Financing Authority, 5.00% due 6/1/2023 (Civic Center Project) | AA/Aa3 | 1,000,000 | 1,204,200 | |||||||
City of San Jose Financing Authority, 5.00% due 6/1/2024 (Civic Center Project) | AA/Aa3 | 750,000 | 897,945 | |||||||
City of Torrance, 5.00% due 9/1/2020 (Torrance Memorial Medical Center) | A/A3 | 1,155,000 | 1,341,648 | |||||||
City of Torrance, 6.00% due 6/1/2022 (Torrance Memorial Medical Center) | A/A3 | 2,600,000 | 2,611,674 | |||||||
City of Vallejo, 5.00% due 5/1/2017 (Water Improvement Project; Insured: Natl-Re) | AA-/A3 | 1,240,000 | 1,321,084 | |||||||
Colton Public Financing Authority, 4.00% due 4/1/2017 (Electric Generation Facility Project) | NR/A2 | 530,000 | 572,495 | |||||||
Colton Public Financing Authority, 4.00% due 4/1/2018 (Electric Generation Facility Project) | NR/A2 | 550,000 | 605,666 | |||||||
b Colton Public Financing Authority, 4.00% due 4/1/2019 (Electric Generation Facility Project) | NR/A2 | 400,000 | 445,608 | |||||||
Colton Public Financing Authority, 5.00% due 4/1/2020 (Electric Generation Facility Project) | NR/A2 | 410,000 | 479,852 | |||||||
Colton Public Financing Authority, 5.00% due 4/1/2021 (Electric Generation Facility Project) | NR/A2 | 650,000 | 764,907 | |||||||
Colton Public Financing Authority, 5.00% due 4/1/2022 (Electric Generation Facility Project) | NR/A2 | 970,000 | 1,147,180 | |||||||
Community Development Commission of the City of Santa Fe Springs, 5.00% due 9/1/2018 (Redevelopment Project; Insured: Natl-Re) | AA-/A3 | 1,235,000 | 1,371,220 | |||||||
Community Redevelopment Agency of the City of Union City, 4.50% due 10/1/2020 (Community Redevelopment Project; Insured: AMBAC) | NR/Ba1 | 460,000 | 460,515 | |||||||
Corona-Norco USD GO, 0% due 9/1/2017 (Insured: AGM) | AA/Aa2 | 1,595,000 | 1,547,852 | |||||||
Coronado Community Development Agency, 0% due 9/1/2016 (Insured: AGM) | AA/A2 | 225,000 | 222,269 | |||||||
County of El Dorado Community Facilities District, 5.00% due 9/1/2019 (El Dorado Hills Development) | A/NR | 1,700,000 | 1,957,533 | |||||||
County of Monterey COP, 5.25% due 8/1/2021 (Natividad Medical Center; Insured: AGM) | AA/A1 | 3,700,000 | 4,248,081 | |||||||
County of Orange Community Facilities District No. 86-1 of the Irvine USD, 5.25% due 9/1/2017 (Educational Facilities; Insured: AGM) | AA/NR | 250,000 | 279,695 | |||||||
County of Stanislaus, 5.75% due 5/1/2015 (Insured: Natl-Re) | AA-/A3 | 1,815,000 | 1,868,942 | |||||||
Delano Financing Authority, 5.00% due 12/1/2017 (Police Station and Capital Improvements) | A-/NR | 1,085,000 | 1,203,449 | |||||||
Delano Financing Authority, 5.00% due 12/1/2018 (Police Station and Capital Improvements) | A-/NR | 1,135,000 | 1,282,164 | |||||||
Delano Financing Authority, 5.00% due 12/1/2019 (Police Station and Capital Improvements) | A-/NR | 1,195,000 | 1,364,821 | |||||||
Emeryville Redevelopment Agency, 5.00% due 9/1/2022 (Emeryville and Shellmound Park Projects; Insured: AGM) | AA/NR | 2,775,000 | 3,329,362 | |||||||
Emeryville Redevelopment Agency, 5.00% due 9/1/2023 (Emeryville and Shellmound Park Projects; Insured: AGM) | AA/NR | 2,420,000 | 2,920,287 | |||||||
Emeryville Redevelopment Agency, 5.00% due 9/1/2024 (Emeryville and Shellmound Park Projects; Insured: AGM) | AA/NR | 3,900,000 | 4,737,720 | |||||||
Fillmore Public Financing Authority, 5.00% due 5/1/2016 (Water Recycling Financing Project; Insured: CIFG) | AA/A3 | 735,000 | 782,466 | |||||||
Fresno County USD GO, 5.90% due 8/1/2017 (Educational Facilities; Insured: Natl-Re) | AA-/A3 | 590,000 | 672,588 | |||||||
Fresno County USD GO, 5.90% due 8/1/2018 (Educational Facilities; Insured: Natl-Re) | AA-/A3 | 630,000 | 741,441 | |||||||
Fresno County USD GO, 5.90% due 8/1/2019 (Educational Facilities; Insured: Natl-Re) | AA-/A3 | 675,000 | 803,756 | |||||||
Fresno County USD GO, 5.00% due 2/1/2020 (Educational Facilities; Insured: Natl-Re) | AA-/A3 | 2,510,000 | 2,897,017 | |||||||
Fresno County USD GO, 5.90% due 8/1/2020 (Educational Facilities; Insured: Natl-Re) | AA-/A3 | 720,000 | 875,549 | |||||||
Fullerton Public Financing Authority, 5.00% due 9/1/2016 (Insured: AMBAC) | A/NR | 1,775,000 | 1,845,308 | |||||||
Guam Power Authority, 5.00% due 10/1/2021 (Electric Power System; Insured: AGM) | AA/A2 | 1,275,000 | 1,510,518 | |||||||
Hemet USD GO, 4.00% due 8/1/2018 (Insured: AGM) | AA/NR | 1,335,000 | 1,473,386 | |||||||
Irvine Public Facilities & Infrastructure Authority, 3.00% due 9/2/2015 | BBB+/NR | 565,000 | 575,272 | |||||||
Irvine Public Facilities & Infrastructure Authority, 3.00% due 9/2/2016 | BBB+/NR | 1,290,000 | 1,332,892 |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Irvine Ranch Water District, 0.03% due 10/1/2041 put 10/1/2014 (Water and Sewer System Improvements; Insured: U.S. Bank N.A.) (daily demand notes) | AA-/Aa3 | $ | 5,400,000 | $ | 5,400,000 | |||||
Jurupa Public Financing Authority, 4.50% due 9/1/2018 (Community Services District-Eastvale Area; Insured: AGM) | AA/NR | 870,000 | 971,773 | |||||||
Jurupa Public Financing Authority, 4.50% due 9/1/2019 (Community Services District-Eastvale Area; Insured: AGM) | AA/NR | 905,000 | 1,024,523 | |||||||
Jurupa Public Financing Authority, 4.50% due 9/1/2020 (Community Services District-Eastvale Area; Insured: AGM) | AA/NR | 945,000 | 1,076,799 | |||||||
Kern High School District GO, 3.00% due 8/1/2015 (Insured: AGM) | A+/Aa2 | 500,000 | 511,640 | |||||||
Kern High School District GO, 4.00% due 8/1/2016 (Insured: AGM) | A+/Aa2 | 500,000 | 533,065 | |||||||
Kern High School District GO, 4.00% due 8/1/2017 (Insured: AGM) | A+/Aa2 | 500,000 | 547,305 | |||||||
Kern High School District GO, 4.00% due 8/1/2018 (Insured: AGM) | A+/Aa2 | 500,000 | 556,970 | |||||||
La Quinta Redevelopment Agency, 5.00% due 9/1/2021 (Redevelopment Project Areas No. 1 and 2) | A+/NR | 1,000,000 | 1,174,570 | |||||||
La Quinta Redevelopment Agency, 5.00% due 9/1/2022 (Redevelopment Project Areas No. 1 and 2) | A+/NR | 2,000,000 | 2,358,740 | |||||||
La Quinta Redevelopment Agency, 5.00% due 9/1/2023 (Redevelopment Project Areas No. 1 and 2) | A+/NR | 1,500,000 | 1,767,465 | |||||||
Lodi Public Financing Authority, 3.00% due 10/1/2016 (City Police Building and Jail) | A/NR | 830,000 | 863,590 | |||||||
b Lodi Public Financing Authority, 5.00% due 10/1/2020 (City Police Building and Jail) | A/NR | 965,000 | 1,113,224 | |||||||
Lodi Public Financing Authority, 5.00% due 10/1/2021 (City Police Building and Jail) | A/NR | 1,020,000 | 1,181,282 | |||||||
Lodi Public Financing Authority, 5.00% due 10/1/2022 (City Police Building and Jail) | A/NR | 1,040,000 | 1,198,038 | |||||||
Lodi Public Financing Authority, 5.00% due 10/1/2023 (City Police Building and Jail) | A/NR | 1,120,000 | 1,279,387 | |||||||
Los Alamitos USD GO, 0% due 9/1/2016 (Educational Facilities) (ETM) | SP-1+/Aa2 | 2,000,000 | 1,991,160 | |||||||
Los Angeles Convention & Exhibition Center Authority, 5.00% due 8/15/2016 | A+/A2 | 2,100,000 | 2,274,888 | |||||||
Los Angeles Convention & Exhibition Center Authority, 5.00% due 8/15/2017 | A+/A2 | 1,660,000 | 1,860,926 | |||||||
Los Angeles County Public Works Financing Authority, 4.25% due 6/1/2016 (Calabasas Landfill; Insured: AMBAC) | AA/A1 | 1,000,000 | 1,022,300 | |||||||
Los Angeles County Public Works Financing Authority, 5.00% due 8/1/2018 (Multiple Capital Projects) | AA/A1 | 2,060,000 | 2,370,566 | |||||||
Los Angeles County Schools Regionalized Business Services Corp. COP, 0% due 8/1/2021 (Insured: AMBAC) | NR/NR | 2,135,000 | 1,709,857 | |||||||
b Los Angeles Department of Airports, 5.50% due 5/15/2018 (Los Angeles International Airport) (AMT) | AA/Aa3 | 2,000,000 | 2,323,200 | |||||||
Los Angeles Department of Water & Power, 0.01% due 7/1/2034 put 10/1/2014 (SPA: Royal Bank of Canada) (daily demand notes) | AA-/Aa3 | 1,500,000 | 1,500,000 | |||||||
Los Angeles Department of Water & Power, 0.02% due 7/1/2035 put 10/1/2014 (SPA: Royal Bank of Canada) (daily demand notes) | AA/Aa2 | 4,100,000 | 4,100,000 | |||||||
Los Angeles Municipal Improvement Corp., 5.00% due 11/1/2017 (Capital Improvements) | A+/A3 | 3,235,000 | 3,668,425 | |||||||
Los Angeles Municipal Improvement Corp., 5.00% due 3/1/2018 (Capital Improvements) | A+/A3 | 4,765,000 | 5,435,960 | |||||||
Los Angeles USD COP, 5.00% due 10/1/2014 (Educational Facilities and Information Technology Infrastructure; Insured: AMBAC) | A+/A1 | 725,000 | 725,102 | |||||||
Los Angeles USD COP, 5.00% due 10/1/2015 (Educational Facilities and Information Technology Infrastructure; Insured: AMBAC) | A+/A1 | 2,000,000 | 2,096,940 | |||||||
Los Angeles USD COP, 5.00% due 10/1/2016 (Educational Facilities and Information Technology Infrastructure; Insured: AMBAC) | A+/A1 | 425,000 | 463,645 | |||||||
Los Angeles USD COP, 5.50% due 12/1/2018 (Educational Facilities and Information Technology Infrastructure) | A+/A1 | 2,000,000 | 2,360,000 | |||||||
Los Angeles USD GO, 5.00% due 7/1/2022 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 2,750,000 | 3,340,865 | |||||||
Los Angeles USD GO, 5.00% due 7/1/2023 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 3,000,000 | 3,665,430 | |||||||
Los Angeles USD GO, 5.00% due 7/1/2024 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 3,000,000 | 3,698,070 | |||||||
Lynwood USD GO, 5.00% due 8/1/2023 (Insured: AGM) | AA/A2 | 1,000,000 | 1,165,810 | |||||||
Manteca USD Community Facilities District No. 1989-2, 3.00% due 9/1/2016 (Educational Facilities; Insured: AGM) | AA/A2 | 410,000 | 427,249 | |||||||
Manteca USD Community Facilities District No. 1989-2, 4.00% due 9/1/2018 (Educational Facilities; Insured: AGM) | AA/A2 | 500,000 | 548,995 | |||||||
Manteca USD Community Facilities District No. 1989-2, 4.00% due 9/1/2019 (Educational Facilities; Insured: AGM) | AA/A2 | 870,000 | 964,447 | |||||||
b Manteca USD Community Facilities District No. 1989-2, 5.00% due 9/1/2020 (Educational Facilities; Insured: AGM) | AA/A2 | 1,425,000 | 1,663,331 | |||||||
Manteca USD Community Facilities District No. 1989-2, 5.00% due 9/1/2021 (Educational Facilities; Insured: AGM) | AA/A2 | 750,000 | 880,928 | |||||||
Manteca USD Community Facilities District No. 1989-2, 5.00% due 9/1/2023 (Educational Facilities; Insured: AGM) | AA/A2 | 500,000 | 593,655 | |||||||
Mark West Union School District GO, 4.125% due 8/1/2020 (Educational Facilities; Insured: Natl-Re) | AA/A3 | 1,275,000 | 1,279,003 | |||||||
b Milpitas Redevelopment Agency, 5.00% due 9/1/2015 (Insured: Natl-Re) | AA-/A3 | 2,200,000 | 2,208,800 | |||||||
Modesto Irrigation District, 5.00% due 7/1/2022 (San Joaquin Valley Electric System) | A+/A2 | 1,000,000 | 1,205,300 | |||||||
Mojave USD COP, 0% due 9/1/2017 (Educational Facilities; Insured: AGM) | AA/NR | 1,045,000 | 1,001,737 | |||||||
Mojave USD COP, 0% due 9/1/2018 (Educational Facilities; Insured: AGM) | AA/NR | 1,095,000 | 1,025,478 | |||||||
Murrieta Valley USD Public Financing Authority GO, 5.00% due 9/1/2023 (Educational Facilities; Insured: BAM) | AA/NR | 1,080,000 | 1,259,863 | |||||||
North City West School Facilities Financing Authority, 5.00% due 9/1/2021 (Carmel Valley; Insured: AGM) | AA/NR | 2,155,000 | 2,488,896 | |||||||
North City West School Facilities Financing Authority, 5.00% due 9/1/2022 (Carmel Valley; Insured: AGM) | AA/NR | 2,260,000 | 2,610,888 | |||||||
Northern California Power Agency, 4.00% due 7/1/2015 (Hydroelectric Project) | A+/A1 | 500,000 | 514,630 | |||||||
Northern California Power Agency, 5.00% due 7/1/2016 (Hydroelectric Project) | A+/A1 | 500,000 | 541,325 | |||||||
Northern California Power Agency, 5.00% due 7/1/2017 (Hydroelectric Project) | A+/A1 | 100,000 | 112,199 | |||||||
Northern California Power Agency, 5.00% due 7/1/2018 (Hydroelectric Project) | A+/A1 | 1,250,000 | 1,440,687 | |||||||
Northern California Power Agency, 5.00% due 6/1/2019 (Lodi Energy Center) | A-/A2 | 2,340,000 | 2,747,207 | |||||||
Norwalk Redevelopment Agency, 5.00% due 10/1/2014 (Insured: Natl-Re) | AA-/A3 | 625,000 | 625,069 | |||||||
Palomar Pomerado Health GO, 0% due 8/1/2019 (Insured: AGM) | AA/A2 | 2,000,000 | 1,827,660 | |||||||
Palomar Pomerado Health GO, 0% due 8/1/2021 (Insured: Natl-Re) | AA-/A2 | 2,850,000 | 2,408,905 | |||||||
Pasadena USD GO, 5.00% due 11/1/2018 pre-refunded 11/1/2015 (Insured: AGM) | NR/Aa2 | 1,200,000 | 1,287,192 | |||||||
Pomona USD GO, 6.10% due 2/1/2020 (Educational Facilities; Insured: Natl-Re) | AA-/A3 | 465,000 | 562,506 | |||||||
Rancho Cucamonga Redevelopment Successor Agency, 5.00% due 9/1/2023 (Insured: AGM) | AA/NR | 1,000,000 | 1,209,110 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Rancho Cucamonga Redevelopment Successor Agency, 5.00% due 9/1/2024 (Insured: AGM) | AA/NR | $ | 2,000,000 | $ | 2,443,340 | |||||
Redding Electrical Systems COP, 5.00% due 6/1/2020 (Insured: AGM) | NR/A2 | 2,500,000 | 2,840,650 | |||||||
Redevelopment Agency of the City of Rialto, 5.00% due 9/1/2023 (Merged Project Area; Insured: BAM) | AA/NR | 550,000 | 654,946 | |||||||
Redevelopment Agency of the City of Rialto, 5.00% due 9/1/2024 (Merged Project Area; Insured: BAM) | AA/NR | 500,000 | 599,795 | |||||||
Redevelopment Agency of the City of San Mateo, 4.00% due 8/1/2020 (Downtown and Shoreline Area Redevelopment Projects; Insured: Syncora) | A/NR | 400,000 | 406,692 | |||||||
Regents of the University of California, 4.00% due 5/15/2017 (Campus Housing and Facilities) | AA-/Aa3 | 1,250,000 | 1,363,462 | |||||||
Ridgecrest Redevelopment Agency, 5.00% due 6/30/2016 (Redevelopment Project) | A-/NR | 1,055,000 | 1,132,606 | |||||||
Ridgecrest Redevelopment Agency, 5.00% due 6/30/2017 (Redevelopment Project) | A-/NR | 1,055,000 | 1,167,357 | |||||||
Ridgecrest Redevelopment Agency, 5.25% due 6/30/2018 (Redevelopment Project) | A-/NR | 1,050,000 | 1,198,008 | |||||||
Ridgecrest Redevelopment Agency, 5.50% due 6/30/2019 (Redevelopment Project) | A-/NR | 1,050,000 | 1,233,960 | |||||||
Ridgecrest Redevelopment Agency, 5.50% due 6/30/2020 (Redevelopment Project) | A-/NR | 1,040,000 | 1,239,930 | |||||||
Riverside County Palm Desert Financing Authority, 6.00% due 5/1/2022 (Palm Desert Sheriff’s Station Facilities) | AA-/A2 | 2,600,000 | 3,013,842 | |||||||
Rosemead Community Development Commission, 5.00% due 10/1/2015 (Redevelopment Project Area No. 1; Insured: AMBAC) | A+/NR | 1,015,000 | 1,059,893 | |||||||
Rosemead Community Development Commission, 5.00% due 10/1/2016 (Redevelopment Project Area No. 1; Insured: AMBAC) | A+/NR | 700,000 | 758,296 | |||||||
Roseville Natural Gas Financing Authority, 5.00% due 2/15/2017 | A-/Baa2 | 1,390,000 | 1,496,307 | |||||||
Sacramento City Financing Authority, 0% due 11/1/2014 (Redevelopment Project Areas; Insured: Natl-Re) | AA-/A3 | 3,495,000 | 3,493,218 | |||||||
Sacramento City Schools Joint Power Financing Authority, 5.00% due 3/1/2021 (Sacramento City USD Educational Facility Sublease; Insured: BAM) | AA/NR | 830,000 | 965,755 | |||||||
Sacramento City Schools Joint Power Financing Authority, 5.00% due 3/1/2022 (Sacramento City USD Educational Facility Sublease; Insured: BAM) | AA/NR | 775,000 | 905,773 | |||||||
Sacramento City Schools Joint Power Financing Authority, 5.00% due 3/1/2023 (Sacramento City USD Educational Facility Sublease; Insured: BAM) | AA/NR | 815,000 | 957,902 | |||||||
Sacramento City Schools Joint Power Financing Authority, 5.00% due 3/1/2024 (Sacramento City USD Educational Facility Sublease; Insured: BAM) | AA/NR | 765,000 | 903,848 | |||||||
Sacramento City Schools Joint Power Financing Authority, 5.00% due 3/1/2025 (Sacramento City USD Educational Facility Sublease; Insured: BAM) | AA/NR | 2,175,000 | 2,546,860 | |||||||
Sacramento City USD GO, 4.00% due 7/1/2019 (Educational Facilities Improvements) | A+/A1 | 5,455,000 | 6,104,854 | |||||||
Sacramento City USD GO, 5.00% due 7/1/2021 (Educational Facilities Improvements) | A+/A1 | 3,600,000 | 4,291,560 | |||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2015 (Procter & Gamble Project) | AA-/A1 | 1,100,000 | 1,139,006 | |||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2019 (Procter & Gamble Project) | AA-/A1 | 625,000 | 729,663 | |||||||
Sacramento Municipal Utility District, 5.00% due 7/1/2020 (Cosumnes Project; Insured: Natl-Re) | AA-/A3 | 3,000,000 | 3,215,220 | |||||||
Salinas Valley Solid Waste Authority, 5.00% due 8/1/2023 (Insured: AGM) (AMT) | AA/A2 | 1,530,000 | 1,773,316 | |||||||
San Diego Redevelopment Agency, 5.25% due 9/1/2015 (Centre City Redevelopment; Insured: AGM) | AA/A2 | 1,375,000 | 1,380,789 | |||||||
San Diego Redevelopment Agency, 5.00% due 9/1/2018 (Centre City Redevelopment; Insured: AMBAC) | NR/Baa3 | 3,215,000 | 3,390,250 | |||||||
San Diego Redevelopment Agency, 0% due 9/1/2019 (Centre City Redevelopment; Insured: AGM) | AA/A2 | 1,910,000 | 1,734,070 | |||||||
San Diego Redevelopment Agency, 5.80% due 11/1/2021 (Horton Plaza) | A-/Baa3 | 2,635,000 | 2,642,562 | |||||||
San Diego USD GO, 5.50% due 7/1/2020 (Educational System Capital Projects; Insured: Natl-Re) | AA-/Aa3 | 1,390,000 | 1,681,691 | |||||||
San Diego USD GO, 5.00% due 7/1/2023 (Educational System Capital Projects) | AA-/Aa3 | 5,000,000 | 6,171,800 | |||||||
San Diego USD GO, 5.00% due 7/1/2024 (Educational System Capital Projects) | AA-/Aa3 | 3,000,000 | 3,682,800 | |||||||
San Francisco Bay Area Rapid Transit District, 5.00% due 7/1/2024 (Insured: Natl-Re) | AA+/Aa2 | 5,675,000 | 5,873,852 | |||||||
San Francisco City & County Airports Commission, 5.00% due 5/1/2024 (San Francisco International Airport; Insured: Natl- Re) | AA-/A1 | 5,000,000 | 5,340,950 | |||||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: AGM) | AA/Aa2 | 5,000,000 | 4,507,350 | |||||||
San Mateo County Joint Powers Financing Authority, 5.00% due 6/15/2017 (Maple Street Correctional Center) | AA+/Aa2 | 750,000 | 840,863 | |||||||
San Mateo County Joint Powers Financing Authority, 5.00% due 7/15/2018 (County Capital Projects) | AA+/Aa2 | 800,000 | 914,312 | |||||||
San Mateo County Joint Powers Financing Authority, 5.00% due 6/15/2021 (Maple Street Correctional Center) | AA+/Aa2 | 410,000 | 492,631 | |||||||
San Mateo County Joint Powers Financing Authority, 5.00% due 6/15/2022 (Maple Street Correctional Center) | AA+/Aa2 | 1,000,000 | 1,209,550 | |||||||
San Mateo County Joint Powers Financing Authority, 5.00% due 6/15/2023 (Maple Street Correctional Center) | AA+/Aa2 | 585,000 | 712,787 | |||||||
San Mateo County Transit District, 4.50% due 6/1/2022 (Transit Services; Insured: Natl-Re) | AA/Aa2 | 400,000 | 410,976 | |||||||
San Mateo Flood Control District COP, 5.25% due 8/1/2017 (Colma Creek; Insured: Natl-Re) | AA-/A3 | 630,000 | 631,789 | |||||||
San Mateo Union High School District GO, 0% due 9/1/2019 (Educational Facilities; Insured: Natl-Re) | AA+/Aa1 | 2,000,000 | 1,874,280 | |||||||
Santa Ana Financing Authority, 6.25% due 7/1/2018 (Police Administration & Holding Facility; Insured: Natl-Re) (ETM) | AA-/A3 | 1,000,000 | 1,192,880 | |||||||
Santa Ana Financing Authority, 6.25% due 7/1/2018 (Police Administration & Holding Facility; Insured: Natl-Re) | AA-/A3 | 1,000,000 | 1,172,270 | |||||||
Santa Ana USD GO, 0% due 8/1/2020 (Insured: Natl-Re) | AA-/A3 | 2,035,000 | 1,801,077 | |||||||
Santa Clara County Financing Authority, 4.00% due 5/15/2017 (Multiple Facilities) | AA+/A1 | 1,000,000 | 1,089,400 | |||||||
Santa Monica Community College District GO, 0% due 8/1/2018 pre-refunded 8/1/2015 (College District Capital Improvements; Insured: MBIA) | AA/Aa2 | 1,320,000 | 1,148,453 | |||||||
Solano County COP, 5.00% due 11/15/2016 (Health & Social Services Headquarters) | AA-/A1 | 1,000,000 | 1,091,430 | |||||||
South San Francisco USD GO, 4.00% due 6/15/2018 (Educational Facilities) | SP-1+/NR | 5,000,000 | 5,563,200 | |||||||
Southeast Resource Recovery Facilities Authority, 5.25% due 12/1/2017 (Insured: AMBAC) | A+/A2 | 1,000,000 | 1,004,100 | |||||||
Southeast Resource Recovery Facilities Authority, 5.375% due 12/1/2018 (Insured: AMBAC) (AMT) | A+/A2 | 2,000,000 | 2,008,420 | |||||||
Southern California Public Power Authority, 0% due 7/1/2015 (Multiple Transmission Projects; Insured: Natl-Re) | AA-/Aa3 | 1,500,000 | 1,496,505 | |||||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Mead-Adelanto Project; Insured: AMBAC) | NR/Aa3 | 450,000 | 463,410 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Southern California Public Power Authority, 5.15% due 7/1/2015 (Mead-Phoenix Project; Insured: AMBAC) | NR/Aa3 | $ | 275,000 | $ | 283,195 | |||||
Southern California Public Power Authority, 5.00% due 7/1/2016 (Southern Transmission Project) | AA-/NR | 2,000,000 | 2,163,460 | |||||||
State of California, 1.50% due 6/22/2015 (Cash Management Plan) | SP-1+/Mig1 | 10,000,000 | 10,099,400 | |||||||
State of California GO, 4.00% due 8/1/2016 (Kindergarten University Facilities) | A/Aa3 | 500,000 | 533,895 | |||||||
State of California GO, 5.00% due 3/1/2017 (Various Capital Projects; Insured: Syncora) | A/Aa3 | 2,860,000 | 3,050,848 | |||||||
State of California GO, 4.75% due 9/1/2018 (Various Capital Projects; Insured: AGM) | AA/Aa3 | 295,000 | 300,537 | |||||||
State of California GO, 5.00% due 9/1/2020 (Kindergarten University Facilities) | A/Aa3 | 2,000,000 | 2,393,340 | |||||||
State of California GO, 0.03% due 5/1/2033 put 10/1/2014 (Kindergarten University Facilities; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 1,800,000 | 1,800,000 | |||||||
State of California GO, 0.01% due 5/1/2034 put 10/1/2014 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa1 | 700,000 | 700,000 | |||||||
State of California GO, 0.01% due 5/1/2034 put 10/1/2014 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa1 | 14,500,000 | 14,500,000 | |||||||
State of California GO, 0.02% due 5/1/2034 put 10/1/2014 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa1 | 7,500,000 | 7,500,000 | |||||||
State of California GO, 0.03% due 5/1/2034 put 10/1/2014 (Kindergarten University Facilities; LOC: Citibank N.A.) (daily demand notes) | AAA/Aa1 | 1,700,000 | 1,700,000 | |||||||
Successor Agency to the Richmond County Redevelopment Agency, 5.00% due 9/1/2022 (Insured: BAM) | AA/NR | 400,000 | 471,748 | |||||||
Successor Agency to the Richmond County Redevelopment Agency, 5.00% due 9/1/2023 (Insured: BAM) | AA/NR | 400,000 | 471,324 | |||||||
Successor Agency to the Richmond County Redevelopment Agency, 5.00% due 9/1/2024 (Insured: BAM) | AA/NR | 450,000 | 527,972 | |||||||
Tracy Area Public Facilities Financing Agency, 5.875% due 10/1/2019 (Community Facilities District No. 87) | AA-/A3 | 490,000 | 500,148 | |||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2015 | AA-/A2 | 500,000 | 505,970 | |||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2018 | AA-/A2 | 1,690,000 | 1,908,111 | |||||||
Turlock Irrigation District, 5.00% due 1/1/2015 | AA-/A2 | 1,125,000 | 1,138,871 | |||||||
Turlock Irrigation District, 5.00% due 1/1/2019 | AA-/A2 | 1,000,000 | 1,158,430 | |||||||
Ukiah USD GO, 0% due 8/1/2019 (Insured: Natl-Re) | AA-/A1 | 2,000,000 | 1,804,760 | |||||||
Upper Lake Union High School District GO, 0% due 8/1/2020 (Insured: Natl-Re) | NR/A3 | 1,050,000 | 853,881 | |||||||
Ventura County Public Financing Authority, 5.00% due 11/1/2023 (Office Building Purchase and Improvements) | AA+/Aa3 | 500,000 | 600,195 | |||||||
Ventura County Public Financing Authority, 5.00% due 11/1/2024 (Office Building Purchase and Improvements) | AA+/Aa3 | 1,060,000 | 1,271,618 | |||||||
Virgin Islands Public Finance Authority, 5.00% due 10/1/2017 | BBB-/Baa2 | 1,440,000 | 1,567,915 | |||||||
Walnut Improvement Agency, 4.00% due 3/1/2015 (City of Walnut Improvement Plan; Insured: BAM) | AA/NR | 500,000 | 507,300 | |||||||
Walnut Improvement Agency, 4.00% due 3/1/2016 (City of Walnut Improvement Plan; Insured: BAM) | AA/NR | 500,000 | 523,120 | |||||||
Walnut Improvement Agency, 4.00% due 3/1/2017 (City of Walnut Improvement Plan; Insured: BAM) | AA/NR | 1,000,000 | 1,071,380 | |||||||
Walnut Improvement Agency, 4.00% due 3/1/2018 (City of Walnut Improvement Plan; Insured: BAM) | AA/NR | 1,000,000 | 1,089,800 | |||||||
Walnut Improvement Agency, 5.00% due 3/1/2019 (City of Walnut Improvement Plan; Insured: BAM) | AA/NR | 400,000 | 458,244 | |||||||
Washington USD Yolo County COP, 5.00% due 8/1/2017 (West Sacramento High School; Insured: AMBAC) | A/NR | 725,000 | 815,654 | |||||||
Washington USD Yolo County COP, 5.00% due 8/1/2021 (West Sacramento High School; Insured: AMBAC) | A/NR | 910,000 | 989,598 | |||||||
Washington USD Yolo County COP, 5.00% due 8/1/2022 (West Sacramento High School; Insured: AMBAC) | A/NR | 2,010,000 | 2,170,438 | |||||||
Westminster Redevelopment Agency, 5.00% due 8/1/2024 (Commercial Redevelopment Project No. 1; Insured: AGM) | AA/A3 | 1,205,000 | 1,349,238 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 96.66% (Cost $541,776,273) | $ | 564,510,370 | ||||||||
OTHER ASSETS LESS LIABILITIES — 3.34% | 19,514,216 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 584,024,586 | ||||||||
|
|
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 | |
BAM | Insured by Build America Mutual Insurance Co. | |
CIFG | Insured by CIFG Assurance North America Inc. | |
COP | Certificates of Participation | |
ETM | Escrowed to Maturity |
FHA | Insured by Federal Housing Administration | |
GO | General Obligation | |
HFFA | Health Facilities Financing Authority | |
MBIA | Insured by Municipal Bond Investors Assurance | |
Mtg | Mortgage | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
Syncora | Insured by Syncora Guarantee Inc. | |
USD | Unified School District |
See notes to financial statements.
Certified Annual Report 17
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $541,776,273) (Note 2) | $ | 564,510,370 | ||
Cash | 23,089,993 | |||
Receivable for investments sold | 2,280,000 | |||
Receivable for fund shares sold | 1,333,176 | |||
Interest receivable | 5,019,741 | |||
|
| |||
Total Assets | 596,233,280 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 11,298,059 | |||
Payable for fund shares redeemed | 323,488 | |||
Payable to investment advisor and other affiliates (Note 3) | 325,449 | |||
Accounts payable and accrued expenses | 65,313 | |||
Dividends payable | 196,385 | |||
|
| |||
Total Liabilities | 12,208,694 | |||
|
| |||
NET ASSETS | $ | 584,024,586 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 2,404 | ||
Net unrealized appreciation on investments | 22,734,097 | |||
Accumulated net realized gain (loss) | (103,688 | ) | ||
Net capital paid in on shares of beneficial interest | 561,391,773 | |||
|
| |||
$ | 584,024,586 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($160,150,795 applicable to 11,573,509 shares of beneficial interest outstanding - Note 4) | $ | 13.84 | ||
Maximum sales charge, 1.50% of offering price | 0.21 | |||
|
| |||
Maximum offering price per share | $ | 14.05 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($62,858,442 applicable to 4,538,788 shares of beneficial interest outstanding - Note 4) | $ | 13.85 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($361,015,349 applicable to 26,064,046 shares of beneficial interest outstanding - Note 4) | $ | 13.85 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
18 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg California Limited Term Municipal Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $5,952,302) | $ | 13,554,537 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 2,573,322 | |||
Administration fees (Note 3) | ||||
Class A Shares | 204,254 | |||
Class C Shares | 75,046 | |||
Class I Shares | 148,123 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 408,508 | |||
Class C Shares | 300,558 | |||
Transfer agent fees | ||||
Class A Shares | 62,551 | |||
Class C Shares | 27,380 | |||
Class I Shares | 103,125 | |||
Registration and filing fees | ||||
Class A Shares | 949 | |||
Class C Shares | 949 | |||
Class I Shares | 949 | |||
Custodian fees (Note 3) | 89,428 | |||
Professional fees | 40,227 | |||
Accounting fees | 18,170 | |||
Trustee fees | 14,924 | |||
Other expenses | 39,251 | |||
|
| |||
Total Expenses | 4,107,714 | |||
Less: | ||||
Fees paid indirectly (Note 3) | (18,887 | ) | ||
|
| |||
Net Expenses | 4,088,827 | |||
|
| |||
Net Investment Income | 9,465,710 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (13,106 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 11,340,158 | |||
|
| |||
Net Realized and Unrealized Gain | 11,327,052 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 20,792,762 | ||
|
|
See notes to financial statements.
Certified Annual Report 19
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg California Limited Term Municipal Fund |
YEAR ENDED | YEAR ENDED | |||||||
SEPTEMBER 30, 2014 | SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 9,465,710 | $ | 8,366,485 | ||||
Net realized gain (loss) on investments | (13,106 | ) | (90,096 | ) | ||||
Net unrealized appreciation (depreciation) on investments | 11,340,158 | (7,001,914 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 20,792,762 | 1,274,475 | ||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | (2,723,413 | ) | (2,769,894 | ) | ||||
Class C Shares | (844,479 | ) | (921,476 | ) | ||||
Class I Shares | (5,897,818 | ) | (4,675,115 | ) | ||||
From realized gains | ||||||||
Class A Shares | — | (106,242 | ) | |||||
Class C Shares | — | (43,151 | ) | |||||
Class I Shares | — | (144,116 | ) | |||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (2,493,202 | ) | 11,413,740 | |||||
Class C Shares | 1,968,650 | 1,026,904 | ||||||
Class I Shares | 99,709,790 | 62,667,864 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 110,512,290 | 67,722,989 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 473,512,296 | 405,789,307 | ||||||
|
|
|
| |||||
End of Year | $ | 584,024,586 | $ | 473,512,296 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 2,404 | $ | 2,404 |
See notes to financial statements.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
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 eighteen separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary investment objective is to obtain as high a level of current income exempt from federal and California state individual income tax as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary objective is to reduce expected changes in its share price compared to longer intermediate and long-term bond portfolios.
The Fund currently offers three classes of shares of beneficial interest: Class A, Class C, and Institutional Class (“Class I”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, (iii) Class I shares are sold at net asset value without a sales charge at the time of purchase and 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 allocable 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 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. 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
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).
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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 564,510,370 | $ | — | $ | 564,510,370 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 564,510,370 | $ | — | $ | 564,510,370 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014.
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, 2014, 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: 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.
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, these fees were payable at annual rates ranging from .50 of 1% to .225 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2014, the Distributor has advised the Fund that it earned net commissions of $4,378 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $6,019 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, 2014, 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 and shareholder services.
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, 2014, 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, 2014, fees paid indirectly were $18,887.
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 and is included as Trustee Fees on the Statement of Operations.
The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended September 30, 2014, the Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $12,538,779 in purchases.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 4,298,157 | $ | 58,771,859 | 3,878,340 | $ | 53,027,648 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 166,312 | 2,280,039 | 168,324 | 2,301,198 | ||||||||||||
Shares repurchased | (4,639,726 | ) | (63,545,100 | ) | (3,219,888 | ) | (43,915,106 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (175,257 | ) | $ | (2,493,202 | ) | 826,776 | $ | 11,413,740 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 987,026 | $ | 13,537,477 | 1,232,884 | $ | 16,912,368 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 47,999 | 658,735 | 53,455 | 731,838 | ||||||||||||
Shares repurchased | (893,839 | ) | (12,227,562 | ) | (1,217,594 | ) | (16,617,302 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 141,186 | $ | 1,968,650 | 68,745 | $ | 1,026,904 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 12,907,105 | $ | 177,105,776 | 11,597,326 | $ | 158,667,124 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 288,996 | 3,969,249 | 229,955 | 3,146,002 | ||||||||||||
Shares repurchased | (5,939,982 | ) | (81,365,235 | ) | (7,267,821 | ) | (99,145,262 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 7,256,119 | $ | 99,709,790 | 4,559,460 | $ | 62,667,864 | ||||||||||
|
|
|
|
|
|
|
|
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $127,756,693 and $77,698,983, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 541,776,273 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 22,826,468 | ||
Gross unrealized depreciation on a tax basis | (92,371 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 22,734,097 | ||
|
|
At September 30, 2014, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2013, of $13,507. For tax purposes, such losses will be reflected in the year ending September 30, 2015.
At September 30, 2014, the Fund had cumulative tax basis capital losses of $90,182, (of which $30,538 is short-term and $59,644 is long-term) generated after September 30, 2011, which may be carried forward to offset future capital gains. To the extent such carry-forwards are used, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards do not expire.
At September 30, 2014, the Fund had $198,789 of tax basis undistributed net tax-exempt income, no tax basis undistributed net ordinary income or tax basis undistributed capital gains.
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 |
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2014, and September 30, 2013, are excludable by shareholders from gross income for federal income tax purposes.
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 9,465,697 | $ | 8,366,472 | ||||
Ordinary income | 13 | 13 | ||||||
Capital gains | — | 293,509 | ||||||
|
|
|
| |||||
Total | $ | 9,465,710 | $ | 8,659,994 | ||||
|
|
|
|
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, 2014, and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Certified Annual Report 25
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 (%)(a) | NET ASSETS AT END OF YEAR (THOUSANDS) | |||||||||||||||||||||||||||||||||||||||||||||
CLASS A SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 13.54 | 0.23 | 0.30 | 0.53 | (0.23 | ) | — | (0.23 | ) | $ | 13.84 | 1.67 | 0.95 | 0.94 | 0.95 | 3.93 | 16.85 | $ | 160,151 | ||||||||||||||||||||||||||||||||||||||||
2013(b) | $ | 13.75 | 0.24 | (0.20 | ) | 0.04 | (0.24 | ) | (0.01 | ) | (0.25 | ) | $ | 13.54 | 1.75 | 0.94 | 0.94 | 0.94 | 0.28 | 17.57 | $ | 159,058 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
CLASS C SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.55 | 0.19 | 0.30 | 0.49 | (0.19 | ) | — | (0.19 | ) | $ | 13.85 | 1.41 | 1.21 | 1.20 | 1.21 | 3.66 | 16.85 | $ | 62,858 | ||||||||||||||||||||||||||||||||||||||||
2013 | $ | 13.76 | 0.20 | (0.20 | ) | — | (0.20 | ) | (0.01 | ) | (0.21 | ) | $ | 13.55 | 1.48 | 1.21 | 1.21 | 1.21 | 0.02 | 17.57 | $ | 59,585 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
CLASS I SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.55 | 0.27 | 0.30 | 0.57 | (0.27 | ) | — | (0.27 | ) | $ | 13.85 | 1.99 | 0.62 | 0.62 | 0.62 | 4.27 | 16.85 | $ | 361,015 | ||||||||||||||||||||||||||||||||||||||||
2013 | $ | 13.76 | 0.28 | (0.19 | ) | 0.09 | (0.29 | ) | (0.01 | ) | (0.30 | ) | $ | 13.55 | 2.08 | 0.61 | 0.61 | 0.61 | 0.62 | 17.57 | $ | 254,869 | ||||||||||||||||||||||||||||||||||||||
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 |
(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.
26 Certified Annual Report | Certified Annual Report 27 |
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, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
28 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,022.10 | $ | 4.82 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.30 | $ | 4.82 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,020.80 | $ | 6.08 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.05 | $ | 6.08 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,023.80 | $ | 3.17 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.94 | $ | 3.17 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.95%; C: 1.20%; I: 0.62%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 5 YRS | 10 YRS | SINCE INCEPTION | |||||||||||||
A Shares (Incep: 2/19/87) | 2.34 | % | 3.12 | % | 3.25 | % | 4.52 | % | ||||||||
C Shares (Incep: 9/1/94) | 3.15 | % | 3.16 | % | 3.14 | % | 3.56 | % | ||||||||
I Shares (Incep: 4/1/97) | 4.27 | % | 3.78 | % | 3.75 | % | 4.09 | % |
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.
30 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 31
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
32 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 California Limited Term Municipal Fund | September 30, 2014 (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.
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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Fund of $9,465,697 (or the maximum allowed) are tax exempt dividends, and $13 are being reported as taxable ordinary investment income 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of 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 under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
34 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the most recent ten calendar years, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year, comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of correlation to equity indices, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year was comparable to the return of the securities index and higher than the average return for the fund category considered, that the Fund’s returns for the preceding nine calendar years exceeded or were comparable to the returns of the index in six of the nine years, and that the Fund’s returns exceeded or were comparable to the average returns of the fund category in all nine years. Noted quantitative data showed that the Fund’s annualized investment returns fell in or near the top decile of investment performance of the first of two fund categories for the one-year, three-year, five-year and ten-year periods ended with the second quarter of the current year, and that the Fund’s annualized investment returns fell in the top decile of investment performance of the second fund category for the one-year period ended with the second quarter and fell in the top quartile of performance for the three-year, five-year and ten-year periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection considered a number of factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectus. Data considered included comparisons of the advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the Fund’s advisory fee was comparable to the median fee level and slightly higher than the average fee level for the fund category, and that the level of total expense for a representative share class was somewhat higher than the median and slightly higher than the average level for the category. Peer group data showed that the advisory fee level and total expense level for a representative share class fell above the median figures for the fund peer group and at the top of the range of levels for the group. The Trustees did not view the differences as significant in view of the other factors considered.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services for the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost man-
Certified Annual Report 35
OTHER INFORMATION, CONTINUED | ||
Thornburg California Limited Term Municipal Fund | September 30, 2014 (Unaudited) |
agement to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
36 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 37
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
38 This page is not part of the Annual Report
This page is not part of the Annual Report 39
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
40 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 41
This page intentionally left blank.
42 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 43
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH859 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2014. 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. Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. 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 |
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.
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.
Personal Consumption Expenditure (PCE) Price Index – One measure of U.S. inflation that assesses the percentage change in prices of goods and services purchased by consumers throughout the economy. Of all the measures of consumer price inflation, the PCE price index covers the broadest set of goods and services.
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 (bp) – 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.
Credit Spread/Quality Spread – The difference between the yields of securities with different credit qualities.
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.
Fiscal Cliff – A combination of expiring tax cuts and across-the-board government spending cuts that were scheduled to become effective at the end of 2012. The idea behind the fiscal cliff was that if the federal government allowed these two events to proceed as planned, they would have a detrimental effect on an already shaky economy. At the same time, it was predicted that going over the fiscal cliff would significantly reduce the federal budget deficit.
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.
Participation Rate – The number of people who are either employed or are actively looking for work. The people who are no longer actively searching for work would not be included in the participation rate. During an economic recession, many workers often get discouraged and stop looking for employment, and as a result, the participation rate decreases.
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.
Yield Curve – A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.
This page is not part of the Annual Report 3
THORNBURG NEW MEXICO INTERMEDIATE MUNICIPAL FUND
Laddering – an All Weather Strategy
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 these techniques to manage risk and pursue attractive returns:
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment and interest rate risk. |
• | 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. |
• | Investing on a cash-only basis without using leverage. |
Portfolio Managers
Josh Gonze Chris Ryon, CFA
Objectives And Strategies
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 taxes as is consistent, in the view of the investment advisor, with preservation of capital.
The secondary goal of the Fund is to reduce expected changes in its share price compared to long-term bond portfolios.
This Fund offers New Mexico investors double tax-free yields (may be subject to Alternative Minimum Tax) in a laddered municipal bond portfolio with an average maturity of normally three to ten years. Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year. Cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. We regard the strategy as a good compromise for managing different types of risk.
Long-term Stability Of Principal
Net Asset Value History of A Shares from June 18, 1991 through September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
A Shares (Incep: 6/18/91) | ||||||||||||||||||||
Without sales charge | 4.83 | % | 2.62 | % | 3.03 | % | 3.46 | % | 4.65 | % | ||||||||||
With sales charge | 2.75 | % | 1.94 | % | 2.62 | % | 3.25 | % | 4.56 | % |
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.
30-day Yields, A Shares
As of September 30, 2014
Annualized Distribution Yield | 2.78 | % | ||
SEC Yield | 1.13 | % |
Key Portfolio Attributes
As of September 30, 2014
Number of Bonds | 110 | |||
Effective Duration | 4.9 Yrs | |||
Average Maturity | 8.8 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 12.
4 This page is not part of the Annual Report
THORNBURG’S SUITE OF MUNICIPAL FUNDS
Municipal Funds for A Range of Interest-Rate Scenarios
At Thornburg, we often say that predicting interest rates is a fool’s game. And with the Federal Reserve still heavily involved in the markets, it’s even more difficult to forecast how rates may rise than when they may rise. Will long rates rise first and short rates follow? Will long and short rates climb simultaneously?
A traditional strategy to protect oneself against interest-rate risk is to move into shorter-duration bond strategies. But the seemingly counterintuitive response of moving to longer-duration strategies can sometimes yield better results.
Diversify Across the Yield Curve
This uncertainty points to why it’s important for investors to match their investment horizon to the duration of the strategy in which they’re invested, and to diversify assets across the yield curve.
For any interest-rate scenario, Thornburg’s comprehensive suite of municipal funds gives prudent investors the ability to diversify across the yield curve.
Diversify Across the Yield Curve with Thornburg Municipal Funds AAA General Obligation Municipal Yield Curve, as of September 30, 2014
| ![]() |
This page is not part of the Annual Report 5
Thornburg New Mexico Intermediate Municipal Fund
September 30, 2014
Table of Contents | ||||
7 | ||||
12 | ||||
15 | ||||
16 | ||||
17 | ||||
18 | ||||
24 | ||||
26 | ||||
27 | ||||
28 | ||||
29 | ||||
32 |
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 and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
October 21, 2014
Dear Fellow Shareholder:
We are pleased to present the annual report for the Thornburg New Mexico Intermediate Municipal Fund (the Fund). The net asset value (NAV) of the Class A shares increased by 25 cents to $13.60 per share during the fiscal year ended September 30, 2014. If you were with us for the entire period, you received dividends of 38.6 cents per share. If you reinvested your dividends, you received 39.1 cents per share. Dividends were lower for Class D shares and higher for Class I shares, to account for varying class-specific expenses. The Class A shares underperformed the Fund’s benchmark index, with a 4.83% total return at NAV for the fiscal year ended September 30, 2014, compared to the 6.13% total return for the BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index. The Fund generated 0.19% more price return and 1.49% less income than its benchmark.
The market’s positive returns were driven primarily by falling interest rates. Another driver was narrowing credit spreads. In general, investors received smaller and smaller levels of yield for securities of lower credit quality with shorter maturity dates. Chart I shows credit spreads for various maturities of municipal bonds.
Drivers of the Fund’s price return relative to its benchmark are as follows: Interest-rate sensitivity, as measured by the Fund’s duration and differing allocations along the yield curve, added 0.43% of price performance; sector allocations subtracted 0.84% of relative price performance; and credit quality selections added 0.05% of price performance versus the benchmark. Other risk factors accounted for another 0.55% of relative price performance.
Interest-Rate Changes
As of the end of fiscal year 2013, many market observers predicted increasing interest rates. The fear of the Federal Reserve (the Fed) curtailing purchases of Treasury and mortgage-backed securities had roiled the markets, though the eventual fact of tapering did not begin until December 18, 2013. This was the backdrop against which rates rose through the end of December 2013. Chart II illustrates the changes in rates by maturity for each quarter of fiscal 2014.
Chart I | Quality Spreads: BBB Municipal Revenue Yields over AAA General Obligation Yields
as of 9/30/2014
Chart II | Changes in AAA General Obligation Municipal Yield Curve
9/30/2013 – 9/30/2014
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
This chart highlights a few interesting phenomena:
1. | Interest rates changed by varying amounts for different maturities, highlighting the potential benefits of a portfolio that is diversified by maturity. We believe investors benefit by owning several funds that provide different exposures to various maturity segments of the market. |
2. | In the quarter ended December 31, 2013, short and long interest rates declined and intermediate rates continued to rise. The fall in short-term rates was a market reaction to the fear of rising rates and investor desire to shed duration or interest-rate risk. The decline in long-term rates was driven by opportunistic investors who wished to take advantage of a significant difference between short- and long-term rates. |
3. | In the quarter ended March 31, 2014, short-term interest rates rose as long-term rates continued to decline. This was doubtless a reaction to the risk of possible Fed tightening and increases in short-term rates. |
4. | In the six-month period ended September 30, 2014, interest rates all along the yield curve declined, and longer-term rates continued to slide more than short-term rates. |
Table I shows selected changes in rates for the last two fiscal years. The table highlights that although interest rates have declined in fiscal 2014, they have yet to retrace the upswing seen in fiscal 2013. It is noteworthy that rates on the short end (one to five years) of the market have been virtually unchanged, depressed by the Fed’s delay in normalizing bench-mark short-term rates.
Table I | Yield Changes for the Last Two Fiscal Years
FISCAL YEAR ENDING | FISCAL YEAR ENDING | |||||||
MATURITY | 9/30/2013 | 9/30/2014 | ||||||
1-Year | -0.02 | % | -0.03 | % | ||||
5-Year | +0.62 | % | -0.03 | % | ||||
10-Year | +0.83 | % | -0.32 | % | ||||
30-Year | +1.43 | % | -1.08 | % |
Source: Bloomberg
The Economy And The Federal Reserve Board
The U.S. economy has recently grown at an average rate of 2.0% as measured by gross domestic product (GDP), which is defined as the monetary value of all finished goods and services produced within a country’s borders over a specific time period. Many market participants believe that 2.0% GDP growth is suboptimal compared to rates in past recoveries, but the quarter ended December 31, 2013, produced a 3.5% growth rate and the quarter ended June 30, 2014, a 4.6% rate. Growth in the quarter ended March 31, 2014, was negative 2.1%; this anomaly has been attributed to weather effects.
Employment growth is another useful measure for gauging the health of the economy. The financial press highlights this as an area of focus for Fed Chair Janet Yellen. The economy has added approximately 220,000 jobs per month for the fiscal year. This growth has not come without volatility; only 84,000 jobs were added in December 2013 and 304,000 in April 2014. The unemployment rate has declined from 7.2% for the year ended September 30, 2013, to 5.9% as of September 30, 2014. This should make investors feel good about the economy, but other measures paint a mixed picture. One indicator is the U.S. labor force participation rate, which measures the size of the labor force as a percent of the working-age population. Since January 1990, this long-term average has been at 65.9%, but as of September 2014, the participation rate had declined to 62.7%. For fiscal year 2014, this measure has averaged 62.9%. Some economists and demographers attempt to explain the decline in the participation rate by the retirement of Baby Boomers, who have changed every demographic category they have passed through and have been referred to as “the pig in the python.” The thought that Baby Boomers would impact the labor force participation rate significantly enough to cause this decline is plausible, but we have seen no estimates of the effect.
The Fed began reducing purchases of U.S. Treasury and mortgage securities in December 2013 and will complete the process by October 2014. During 2013, the market’s anticipation of the Fed’s tapering its asset purchases sent long-term municipal yields up 1.43%. But in 2014, the reality of tapering (and other factors) sent long-term municipal yields down 1.08%. In its September 17, 2014, release, the Federal Open Market Committee (FOMC) stated:
8 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
Later, in a press conference, Chair Yellen added more color to the policy statement:
“Let me reiterate, however, that the Committee’s expectations for the path of the federal funds rate are contingent on the economic outlook. If the economy proves to be stronger than anticipated by the Committee, resulting in a more rapid convergence of employment and inflation to the FOMC’s objectives, then increases in the federal funds rate are likely to occur sooner and to be more rapid than currently envisaged. Conversely, if economic performance disappoints, increases in the federal funds rate are likely to take place later and to be more gradual.”
It is clear guidance like this that makes one long for Harry Truman’s “one-handed economist.” From all this, one can glean that the Fed will be “data dependent” (another term being thrown around in the financial press) in determining the future path of the federal funds rate (currently near zero).
Finally, let’s look at inflation. It is important to fixed-income investors because it is the primary determinant of future purchasing power. If inflation increases, the semi-annual coupon payment of most bonds carries less value in the economy. Inflation, as measured by core PCE (the Core Personal Consumption Expenditures Index, which is the Fed’s favored inflation measure) excludes volatile food and energy prices. Since September 2013, core PCE has increased from 1.33% to 1.47%, but this is still materially below the Fed’s inflation target of 2.00%. As 2014 prices of municipal bonds have risen and yields have declined, their after-inflation purchasing power has fallen. Chart III illustrates this point for a 10-year AAA-rated general obligation bond.
Chart III | 10-Year AAA GO Real Yield (using Core PCE)
6/1/1994 – 8/31/2014
Chart III shows that as of August 31, 2014, an investor in a 10-year AAA general obligation bond received a real yield (the yield on a security after inflation is taken into account) of 0.70%. The yield was in excess of inflation but well below its 2.08% average since June 1994. On August 31, a 10-year AAA general obligation bond yielded 2.17%, with core PCE at 1.47%. As of September 30, 2014, a 10-year AAA general obligation bond yielded 2.22%, with a real yield of 0.75%. These extremely low real yields are an important effect of the Fed’s keeping short-term rates very low.
The Municipal Bond Market Credit Picture
The health of municipal market credit has generally been good, helped by GDP growth and increasing employment. But there have been some red flags recently. An August 2014 report from the Nelson A. Rockefeller Institute of Government at the State University of New York, “After Four Years of Uninterrupted Growth, Tax Revenues Decline in the First Quarter, and Preliminary Figures for the Second Quarter of 2014 Signal Further Declines in Personal Income Tax,” sums up certain observations:
Certified Annual Report 9
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
• | “State tax revenues declined by 0.3% in the first quarter of 2014. This is the first time state revenues declined after four years of uninterrupted growth.” |
• | “Personal income tax collections showed a decline of 1.2% in the first quarter of 2014. The decline in personal income tax collections appear to be primarily due to the mirror-image effect of the initial impact of the fiscal cliff on taxpayer behavior, which had driven tax collections upward a year ago.” |
• | “Year-to-date figures show 2.8% growth in overall state tax collections in the first three quarters of fiscal 2014 compared to the same period of 2013.” |
• | “Local property tax revenues grew by 1.9% in the first quarter, marking the eighth consecutive quarter of growth in nominal terms.” |
This data source tells us that overall state revenue is up but that there has been some decline in personal income tax collections that may be explained by individuals pushing income into last year to take advantage of lower personal income tax rates. We would raise a yellow flag at this indicator; this trend bears watching. The point about local property taxes growing should come as no surprise, as the real estate market has improved in many places. This is a very good development for local governments, because property taxes are their primary source of revenues. Not surprisingly, employment also shows positive growth. Only Alaska (off 0.95%) shows a decline for the period from August 2013 through August 2014 (the latest data available at this writing). The three states with the largest increases in employment are North Dakota (up 4.47%), Utah (up 3.53%), and Texas (up 3.63%). New Mexico had a 0.71% increase in employment for the same period, which has flowed through to increased personal income.
One of the highest hurdles to the health of the state economies is the funding levels of their pension plans. For too long, elected officials have over-promised and under-delivered (especially when it came to making payments to pensions) to their employees, and until recently, markets have proven more of a headwind. On October 9, 2014, Bloomberg reported, “State Pension Gaps Shrink for the First Time Since 2007.” Let us caution all readers: the shrinkage is barely perceptible, but even that is better than a poke in the eye with a sharp stick.
“The median state system last year had 69.3% of the assets needed to meet promised benefits, up from 68.7% in 2012, according to data compiled by Bloomberg.”
This sounds like great news until one realizes the industrywide, minimum acceptable funding level is said to be 80%. Thirteen states met or exceeded this; the state with the lowest (some would say worst) level is Illinois with a funding level of 39.3%, down from 40.4% in 2012. New Mexico’s funding level of 2013 was 66.7%, up from 63.1% in 2012. Overall, we believe that the state of New Mexico’s economy is slowly improving.
The business press has been highlighting certain high-profile credit issues in the municipal bond market: the City of Detroit, which is in the process of exiting Chapter 9 protection, and Puerto Rico, which by all reports doesn’t know what it is doing. We do not own either credit!
The long and short of the Puerto Rico story:
• | In March 2014, the island issued $3.5 billion of general obligation bonds, mostly sold to hedge funds that “only wanted to help the island.” At the time, the island’s officials said this would give them enough cash to last for 18 months. |
• | In June 2014, the governor signed legislation allowing the island’s public corporations to “restructure” their debt, the Puerto Rico Electric Power Authority (PREPA) being the best known among them. |
• | Later in 2014, PREPA reached “forbearance” agreements with its creditors, calling for, among other things, a “Chief Restructuring Officer” (for an engagement fee of around $10 million, which is not bad work if you can get it). |
• | In September, the island’s financial officials announced a $900 million “tax and revenue anticipation” note deal that would be placed with banks who were forced to hold the vast majority of it and could not sell it. That figure was later raised to $1.2 billion. This was six months after the March sale! The yield on these securities is 7.75%; California issued a similar |
10 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
security earlier in the summer for 0.10%. Think there is a difference in the credit? |
Conclusion
We do not believe that the fixed income markets, and municipal bonds particularly, represent any great value at present; real yields are negative in some segments of the market, and very low in others. But we do not believe shareholders should undertake a wholesale rebalancing of portfolios either. It is important to re-evaluate why we own fixed-income products and municipal bonds: as part of a well-balanced, diversified portfolio. Recent volatility certainly demonstrates the potential benefits of these investments. Diversification is one of the best ways for shareholders to manage risk, not only between asset classes but in positioning within markets. And we believe municipal bond investors may benefit from diversifying along the municipal bond yield curve.
Many shareholders may soon ask themselves “what should I do if interest rates begin to increase?” We would suggest having faith in the structure of your portfolio. As an intermediate term laddered portfolio, approximately 5% of your Fund matures each year and is available to be reinvested at higher yields (see Chart IV); this has the potential to increase income to shareholders. When interest rates do rise, prices will generally decline, but the remaining bonds in the portfolio will move closer to maturity and should increase in price over time. We advise being patient when interest rates start to rise, lengthening your anticipated holding period.
Chart IV | Percent of Portfolio Maturing
We will continue to strive to manage your assets to fulfill the Fund’s objectives as set out in the prospectus.
Sincerely,
![]() | ![]() | |||
Christopher Ryon, CFA | Josh Gonze | |||
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 11
SCHEDULE OF INVESTMENTS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 |
SUMMARY OF SECURITY CREDIT RATING†
We have used ratings from Standard & Poor’s (S&P). Where S&P ratings are not available, we have used Moody’s Investors Service. Where neither rating is available, we have used ratings from Fitch Ratings. The category of investments identified as “AAA” in this graph includes investments which are pre-refunded or escrowed to maturity. Such investments are backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities to satisfy the timely payment of principal and interest and, therefore, are normally deemed to be equivalent to AAA-rated securities.
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Albuquerque Bernalillo County Water Utility Authority, 5.00% due 7/1/2021 (New Mexico Utilities, Inc. Water System) | AA+/Aa2 | $ | 1,760,000 | $ | 2,032,589 | |||||
Albuquerque Bernalillo County Water Utility Authority, 5.50% due 7/1/2025 (New Mexico Utilities, Inc. Water System) | AA+/Aa2 | 1,000,000 | 1,170,440 | |||||||
Albuquerque Bernalillo County Water Utility Authority, 5.00% due 7/1/2026 (2005 NMFA Loan and Joint Water and Sewer System Improvements) | AA+/Aa2 | 2,000,000 | 2,421,640 | |||||||
Albuquerque Bernalillo County Water Utility Authority, 5.00% due 7/1/2026 (San Juan-Chama Drinking Water Project) | AA+/Aa2 | 1,420,000 | 1,609,797 | |||||||
Albuquerque Municipal School District No. 12 GO, 5.00% due 8/1/2019 (Bernalillo and Sandoval Counties School Facilities) (State Aid Withholding) | AA/Aa1 | 3,585,000 | 4,222,771 | |||||||
Albuquerque Municipal School District No. 12 GO, 4.00% due 8/1/2029 (Bernalillo and Sandoval Counties School Facilities) (State Aid Withholding) | AA/Aa1 | 1,300,000 | 1,403,350 | |||||||
Bernalillo County GRT, 5.00% due 4/1/2021 (Government Services; Insured: Natl-Re) | AAA/Aa2 | 3,000,000 | 3,416,370 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2022 (Government Services; Insured: AMBAC) | AAA/Aa2 | 3,170,000 | 3,920,466 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2023 (Government Services; Insured: AMBAC) | AAA/Aa2 | 1,275,000 | 1,596,950 | |||||||
Bernalillo County GRT, 5.25% due 10/1/2025 (Government Services; Insured: AMBAC) | AAA/Aa2 | 3,850,000 | 4,723,565 | |||||||
Bernalillo County GRT, 5.25% due 4/1/2027 (Government Services) | AAA/Aa2 | 300,000 | 364,575 | |||||||
Bernalillo County GRT, 5.70% due 4/1/2027 (Government Services) | AAA/Aa2 | 3,000,000 | 3,742,320 | |||||||
Bernalillo County GRT, 5.70% due 4/1/2027 (Government Services; Insured: Natl-Re) | AAA/Aa2 | 815,000 | 1,016,664 | |||||||
Central New Mexico Community College GO, 5.00% due 8/15/2020 (Campus Buildings Acquisition & Improvements) | AA+/Aa1 | 1,375,000 | 1,643,207 | |||||||
Central New Mexico Community College GO, 5.00% due 8/15/2021 (Campus Buildings Acquisition & Improvements) | AA+/Aa1 | 1,435,000 | 1,733,724 | |||||||
Central New Mexico Community College GO, 5.00% due 8/15/2022 (Campus Buildings Acquisition & Improvements) | AA+/Aa1 | 1,100,000 | 1,338,139 | |||||||
Central New Mexico Community College GO, 4.00% due 8/15/2023 (Campus Buildings Acquisition & Improvements) | AA+/Aa1 | 1,920,000 | 2,121,811 | |||||||
City of Albuquerque GRT, 5.00% due 7/1/2021 | AAA/Aa2 | 1,340,000 | 1,545,234 | |||||||
City of Albuquerque GRT, 5.00% due 7/1/2021 | AAA/Aa2 | 3,000,000 | 3,459,480 | |||||||
City of Albuquerque GRT, 5.00% due 7/1/2025 (I-25/Paseo del Norte Interchange) | AAA/Aa2 | 540,000 | 651,418 | |||||||
City of Farmington, 5.00% due 6/1/2017 (San Juan Regional Medical Center) | NR/A3 | 1,035,000 | 1,126,318 | |||||||
City of Farmington, 5.125% due 6/1/2018 (San Juan Regional Medical Center) | NR/A3 | 570,000 | 572,172 | |||||||
City of Farmington, 5.125% due 6/1/2019 (San Juan Regional Medical Center) | NR/A3 | 645,000 | 647,303 | |||||||
City of Farmington, 5.00% due 6/1/2022 (San Juan Regional Medical Center) | NR/A3 | 2,825,000 | 2,996,421 | |||||||
City of Farmington PCR, 4.70% due 5/1/2024 (Arizona Public Service Co.-Four Corners Project) | A-/A3 | 965,000 | 1,032,328 | |||||||
City of Farmington PCR, 4.70% due 9/1/2024 (Arizona Public Service Co.-Four Corners Project) | A-/A3 | 4,000,000 | 4,272,240 | |||||||
City of Gallup PCR, 5.00% due 8/15/2017 (Tri-State Generation & Transmission Assoc., Inc. Project; Insured: AMBAC) | A/A3 | 3,540,000 | 3,657,422 | |||||||
City of Las Cruces, 4.00% due 6/1/2021 (Joint Utility System) | NR/Aa2 | 100,000 | 113,651 | |||||||
City of Las Cruces, 4.00% due 6/1/2022 (Joint Utility System) | NR/Aa2 | 670,000 | 761,140 | |||||||
City of Las Cruces, 4.00% due 6/1/2023 (Joint Utility System) | NR/Aa2 | 695,000 | 789,277 | |||||||
City of Las Cruces, 4.00% due 6/1/2025 (Joint Utility System) | NR/Aa2 | 750,000 | 851,827 | |||||||
City of Las Cruces GRT, 5.00% due 6/1/2021 (NMFA Loan) | NR/Aa3 | 730,000 | 847,355 | |||||||
City of Las Cruces GRT, 5.00% due 6/1/2022 (NMFA Loan) | NR/Aa3 | 765,000 | 876,705 | |||||||
City of Las Cruces GRT, 5.00% due 6/1/2023 (NMFA Loan) | NR/Aa3 | 800,000 | 908,824 | |||||||
City of Las Cruces GRT, 5.00% due 6/1/2024 (NMFA Loan) | NR/Aa3 | 840,000 | 949,704 | |||||||
City of Las Cruces GRT, 5.00% due 6/1/2030 (NMFA Loan) | NR/Aa3 | 2,000,000 | 2,201,560 | |||||||
City of Las Cruces GRT, 5.00% due 6/1/2037 (NMFA Loan) | NR/Aa3 | 5,000,000 | 5,401,100 | |||||||
City of Rio Rancho GRT, 5.00% due 6/1/2016 pre-refunded 6/1/2015 (Public Service Facility Projects; Insured: Natl-Re) | AA-/Aa3 | 555,000 | 572,827 | |||||||
City of Rio Rancho GRT, 5.00% due 6/1/2022 pre-refunded 6/1/2015 (Public Service Facility Projects; Insured: Natl-Re) | AA-/Aa3 | 1,000,000 | 1,032,120 | |||||||
City of Santa Fe, 4.50% due 5/15/2027 (El Castillo Retirement Residences) | BBB-/NR | 3,275,000 | 3,357,759 | |||||||
City of Santa Fe, 5.00% due 5/15/2034 (El Castillo Retirement Residences) | BBB-/NR | 1,465,000 | 1,495,633 | |||||||
Colfax County GRT, 5.00% due 9/1/2019 (Government Center Facility) | A-/NR | 570,000 | 639,762 | |||||||
Colfax County GRT, 5.50% due 9/1/2029 (Government Center Facility) | A-/NR | 2,510,000 | 2,753,997 | |||||||
County of Los Alamos GRT, 5.75% due 6/1/2016 (Public Facilities Projects) | AA+/A1 | 1,315,000 | 1,431,154 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
County of Los Alamos GRT, 5.625% due 6/1/2023 pre-refunded 6/1/2018 (Public Facilities Projects) | AA+/A1 | $ | 1,000,000 | $ | 1,172,460 | |||||
County of Los Alamos GRT, 5.75% due 6/1/2024 pre-refunded 6/1/2018 (Public Facilities Projects) | AA+/A1 | 3,000,000 | 3,530,910 | |||||||
County of Los Alamos GRT, 5.75% due 6/1/2025 pre-refunded 6/1/2018 (Public Facilities Projects) | AA+/A1 | 1,000,000 | 1,176,970 | |||||||
Dona Ana County, 5.50% due 12/1/2014 (County Administrative Facilities; Insured: Radian) | A/NR | 460,000 | 464,034 | |||||||
Government of Guam, 5.375% due 12/1/2024 | BBB+/NR | 2,000,000 | 2,204,640 | |||||||
Grant County, 5.50% due 7/1/2020 (State Dept. of Health-Ft. Bayard Project) | AA/Aa1 | 1,565,000 | 1,793,443 | |||||||
Grant County, 5.50% due 7/1/2021 (State Dept. of Health-Ft. Bayard Project) | AA/Aa1 | 1,655,000 | 1,896,580 | |||||||
Grant County, 5.50% due 7/1/2022 (State Dept. of Health-Ft. Bayard Project) | AA/Aa1 | 1,745,000 | 1,999,718 | |||||||
Guam Power Authority, 5.00% due 10/1/2026 (Electric Power System; Insured: AGM) | AA/A2 | 2,000,000 | 2,328,700 | |||||||
New Mexico Educational Assistance Foundation, 4.10% due 9/1/2015 (Student Loans; LOC: Royal Bank of Canada) (AMT) | NR/Aaa | 2,000,000 | 2,059,380 | |||||||
New Mexico Educational Assistance Foundation, 4.00% due 9/1/2016 (Student Loans) | NR/Aaa | 690,000 | 736,437 | |||||||
New Mexico Educational Assistance Foundation, 4.00% due 9/1/2017 (Student Loans) | NR/Aaa | 1,150,000 | 1,258,985 | |||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2019 (Student Loans) | AAA/Aaa | 1,000,000 | 1,177,250 | |||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2022 (Student Loans) | AAA/Aaa | 3,000,000 | 3,464,070 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2018 (Bernalillo County Metropolitan Court; Insured: AMBAC) | NR/Aa2 | 2,915,000 | 3,011,516 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2019 (UNM Health Sciences Center; Insured: Natl-Re) | NR/Aa2 | 1,215,000 | 1,254,998 | |||||||
New Mexico Finance Authority, 5.00% due 6/1/2020 (The Public Project Revolving Fund Program; Insured: AMBAC) | AAA/Aa1 | 365,000 | 391,455 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2022 (The Public Project Revolving Fund Program; Insured: Natl-Re) | AA+/Aa2 | 1,300,000 | 1,431,820 | |||||||
New Mexico Finance Authority, 5.00% due 6/1/2024 (The Public Project Revolving Fund Program) | AAA/Aa1 | 4,185,000 | 5,178,603 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2024 (The Public Project Revolving Fund Program; Insured: Natl-Re) | AA+/Aa2 | 7,000,000 | 7,709,800 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2026 (State Highway Infrastructure) | AA/Aa2 | 1,220,000 | 1,479,933 | |||||||
New Mexico Finance Authority, 5.00% due 6/15/2027 (State Highway Infrastructure) | AA/Aa2 | 1,195,000 | 1,440,465 | |||||||
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 | 1,788,543 | |||||||
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 | 1,033,840 | |||||||
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 | 1,225,100 | |||||||
New Mexico Hospital Equipment Loan Council, 6.00% due 8/1/2023 (Presbyterian Healthcare Services) | AA/Aa3 | 6,000,000 | 6,947,040 | |||||||
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 | 1,035,710 | |||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2032 (Haverland Carter Lifestyle Group) | NR/NR | 2,000,000 | 2,042,380 | |||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 8/1/2039 (Presbyterian Healthcare Services) | AA/Aa3 | 3,000,000 | 3,279,420 | |||||||
New Mexico Housing Authority, 5.30% due 12/1/2022 (El Paseo Apartments; Insured: AMBAC) (AMT) | NR/NR | 735,000 | 735,294 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2015 | A+/A1 | 490,000 | 506,694 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2020 | A+/A1 | 590,000 | 680,524 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2023 | A+/A1 | 685,000 | 769,276 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2024 | A+/A1 | 525,000 | 587,538 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2025 | A+/A1 | 505,000 | 562,550 | |||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2028 | A+/A1 | 1,500,000 | 1,644,600 | |||||||
New Mexico MFA, 5.25% due 7/1/2023 (HERO SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 410,000 | 433,280 | |||||||
New Mexico MFA, 5.375% due 7/1/2023 (Saver SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 340,000 | 342,584 | |||||||
New Mexico MFA, 4.625% due 3/1/2028 (NIBP SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) | AA+/NR | 1,495,000 | 1,590,127 | |||||||
New Mexico MFA, 5.50% due 7/1/2028 (HERO SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 900,000 | 945,504 | |||||||
New Mexico MFA, 5.60% due 7/1/2028 (Saver SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 300,000 | 316,941 | |||||||
New Mexico MFA, 5.40% due 9/1/2029 (Saver SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) | AA+/NR | 515,000 | 554,949 | |||||||
Regents of the University of New Mexico, 5.00% due 6/1/2015 (Campus Improvements; Insured: AMBAC) | AA/Aa2 | 1,590,000 | 1,640,944 | |||||||
Regents of the University of New Mexico, 5.25% due 6/1/2015 (UNM Hospital Capital Improvements) | AA/Aa2 | 1,195,000 | 1,200,043 | |||||||
Regents of the University of New Mexico, 5.00% due 1/1/2016 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/ FHA) | AA/A2 | 2,920,000 | 2,930,979 | |||||||
Regents of the University of New Mexico, 5.00% due 1/1/2018 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/ FHA) | AA/A2 | 2,000,000 | 2,037,020 | |||||||
Regents of the University of New Mexico, 5.25% due 6/1/2018 (UNM Hospital Capital Improvements) | AA/Aa2 | 1,200,000 | 1,205,052 | |||||||
Regents of the University of New Mexico, 5.00% due 1/1/2019 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/ FHA) | AA/A2 | 3,000,000 | 3,055,530 | |||||||
Regents of the University of New Mexico, 5.00% due 7/1/2019 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/ FHA) | AA/A2 | 3,000,000 | 3,055,530 | |||||||
Regents of the University of New Mexico, 5.00% due 1/1/2020 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/ FHA) | AA/A2 | 2,310,000 | 2,352,758 | |||||||
Regents of the University of New Mexico, 5.00% due 7/1/2020 (Children’s Hospital and Critical Care Pavilion; Insured: AGM/ FHA) | AA/A2 | 500,000 | 509,255 | |||||||
Regents of the University of New Mexico, 6.00% due 6/1/2021 (Campus Buildings Acquisition & Improvements) | AA/Aa2 | 495,000 | 570,022 | |||||||
Sandoval County, 4.00% due 6/1/2015 (Intel Corp.) (ETM) | A+/NR | 215,000 | 220,470 | |||||||
Sandoval County, 5.00% due 6/1/2020 pre-refunded 6/1/2015 (Intel Corp.) | A+/NR | 6,440,000 | 6,647,819 | |||||||
Santa Fe County, 5.00% due 2/1/2018 (County Correctional System; Insured: AGM) | AA/A2 | 755,000 | 804,921 | |||||||
Santa Fe County, 6.00% due 2/1/2027 (County Correctional System; Insured: AGM) | AA/A2 | 1,520,000 | 1,839,367 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Santa Fe County GO, 4.00% due 7/1/2019 (County Road and Water System Improvement Projects; Insured: Natl-Re) | NR/Aaa | $ | 750,000 | $ | 794,062 | |||||
Santa Fe County GRT, 5.00% due 6/1/2025 (County Courthouse and Other Public Facilities) | AA+/Aa2 | 1,400,000 | 1,583,750 | |||||||
Santa Fe County GRT, 5.00% due 6/1/2026 (County Courthouse and Other Public Facilities) | AA+/Aa2 | 1,535,000 | 1,712,492 | |||||||
Santa Fe Public School District GO, 5.00% due 8/1/2022 (Santa Fe County School Facilities) (State Aid Withholding) | AA/Aa1 | 2,205,000 | 2,681,214 | |||||||
Town of Silver City GRT, 4.00% due 6/1/2029 (Public Facility Capital Projects) | A+/NR | 1,000,000 | 1,058,150 | |||||||
Town of Silver City GRT, 4.25% due 6/1/2032 (Public Facility Capital Projects) | A+/NR | 1,050,000 | 1,105,377 | |||||||
Ventana West Public Improvement District, 6.625% due 8/1/2023 | NR/NR | 1,635,000 | 1,637,829 | |||||||
Village of Los Ranchos de Albuquerque, 4.50% due 9/1/2040 (Albuquerque Academy) | A/NR | 3,000,000 | 3,132,960 | |||||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 | NR/Baa3 | 2,500,000 | 2,857,550 | |||||||
Zuni Public School District, 5.00% due 8/1/2028 (Teacher Housing Projects) | A/NR | 1,600,000 | 1,765,952 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 97.23% (Cost $192,047,289) | $ | 204,006,216 | ||||||||
OTHER ASSETS LESS LIABILITIES — 2.77% | 5,805,479 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 209,811,695 | ||||||||
|
|
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. |
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 | |
FHA | Insured by Federal Housing Administration | |
FHLMC | Insured by Federal Home Loan Mortgage Corp. | |
FNMA | Collateralized by Federal National Mortgage Association |
GNMA | Collateralized by Government National Mortgage Association | |
GO | General Obligation | |
GRT | Gross Receipts Tax | |
MFA | Mortgage Finance Authority | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
PCR | Pollution Control Revenue Bond | |
Radian | Insured by Radian Asset Assurance |
See notes to financial statements.
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $192,047,289) (Note 2) | $ | 204,006,216 | ||
Cash | 3,867,310 | |||
Receivable for fund shares sold | 81,030 | |||
Interest receivable | 2,622,348 | |||
|
| |||
Total Assets | 210,576,904 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 517,572 | |||
Payable to investment advisor and other affiliates (Note 3) | 146,463 | |||
Accounts payable and accrued expenses | 52,709 | |||
Dividends payable | 48,465 | |||
|
| |||
Total Liabilities | 765,209 | |||
|
| |||
NET ASSETS | $ | 209,811,695 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Distribution in excess of net investment income | $ | (25,896 | ) | |
Net unrealized appreciation on investments | 11,958,927 | |||
Accumulated net realized gain (loss) | (1,136,309 | ) | ||
Net capital paid in on shares of beneficial interest | 199,014,973 | |||
|
| |||
$ | 209,811,695 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($143,994,184 applicable to 10,588,295 shares of beneficial interest outstanding - Note 4) | $ | 13.60 | ||
Maximum sales charge, 2.00% of offering price | 0.28 | |||
|
| |||
Maximum offering price per share | $ | 13.88 | ||
|
| |||
Class D Shares: | ||||
Net asset value, offering and redemption price per share ($28,437,567 applicable to 2,090,070 shares of beneficial interest outstanding - Note 4) | $ | 13.61 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($37,379,944 applicable to 2,749,892 shares of beneficial interest outstanding - Note 4) | $ | 13.59 | ||
|
|
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF OPERATIONS | ||
Thornburg New Mexico Intermediate Municipal Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $1,232,486) | $ | 7,998,483 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 1,043,698 | |||
Administration fees (Note 3) | ||||
Class A Shares | 188,334 | |||
Class D Shares | 35,651 | |||
Class I Shares | 14,776 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 376,668 | |||
Class D Shares | 141,776 | |||
Transfer agent fees | ||||
Class A Shares | 54,311 | |||
Class D Shares | 11,830 | |||
Class I Shares | 7,938 | |||
Registration and filing fees | ||||
Class A Shares | 1,569 | |||
Class D Shares | 3,650 | |||
Class I Shares | 3,650 | |||
Custodian fees (Note 3) | 46,129 | |||
Professional fees | 35,960 | |||
Accounting fees | 6,903 | |||
Trustee fees | 6,680 | |||
Other expenses | 20,992 | |||
|
| |||
Total Expenses | 2,000,515 | |||
Less: | ||||
Fees paid indirectly (Note 3) | (4,410 | ) | ||
|
| |||
Net Expenses | 1,996,105 | |||
|
| |||
Net Investment Income | 6,002,378 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (113,232 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 3,934,421 | |||
|
| |||
Net Realized and Unrealized Gain | 3,821,189 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 9,823,567 | ||
|
|
See notes to financial statements.
16 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg New Mexico Intermediate Municipal Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 6,002,378 | $ | 6,759,638 | ||||
Net realized gain (loss) on investments | (113,232 | ) | 139,966 | |||||
Net unrealized appreciation (depreciation) on investments | 3,934,421 | (10,844,544 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 9,823,567 | (3,944,940 | ) | |||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | (4,318,586 | ) | (4,927,135 | ) | ||||
Class D Shares | (741,974 | ) | (796,491 | ) | ||||
Class I Shares | (941,818 | ) | (1,036,012 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (17,279,143 | ) | (21,162,302 | ) | ||||
Class D Shares | (943,388 | ) | (1,677,868 | ) | ||||
Class I Shares | 11,265,574 | (11,168,790 | ) | |||||
|
|
|
| |||||
Net Decrease in Net Assets | (3,135,768 | ) | (44,713,538 | ) | ||||
NET ASSETS | ||||||||
Beginning of Year | 212,947,463 | 257,661,001 | ||||||
|
|
|
| |||||
End of Year | $ | 209,811,695 | $ | 212,947,463 | ||||
|
|
|
| |||||
Distribution in excess of net investment income | $ | (25,896 | ) | $ | (25,896 | ) |
See notes to financial statements.
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 |
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 eighteen separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary investment objective is to obtain as high a level of current income exempt from federal and New Mexico state individual income tax as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary objective is to reduce expected changes in its share price compared to long-term bond portfolios.
The Fund currently offers three classes of shares of beneficial interest: Class A, Class D, and Institutional Class (“Class I”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class D shares are sold at net asset value without a sales charge at the time of purchase or redemption, and bear both a service fee and a distribution fee, (iii) Class I shares are sold at net asset value without a sales charge at the time of purchase and 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 allocable 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 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. 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 |
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).
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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 204,006,216 | $ | — | $ | 204,006,216 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 204,006,216 | $ | — | $ | 204,006,216 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014.
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, 2014, 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: 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
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 |
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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, these fees were payable at annual rates ranging from .50 of 1% to .275 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $1,523 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, 2014, 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 and shareholder services.
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, 2014, 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, 2014, fees paid indirectly were $4,410.
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 and is included as Trustee Fees on the Statement of Operations.
The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended September 30, 2014, the Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $2,761,252 in sales.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 597,314 | $ | 8,041,850 | 895,379 | $ | 12,378,090 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 278,451 | 3,754,060 | 301,157 | 4,121,844 | ||||||||||||
Shares repurchased | (2,159,552 | ) | (29,075,053 | ) | (2,766,936 | ) | (37,662,236 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (1,283,787 | ) | $ | (17,279,143 | ) | (1,570,400 | ) | $ | (21,162,302 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class D Shares | ||||||||||||||||
Shares sold | 209,729 | $ | 2,824,940 | 415,691 | $ | 5,764,194 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 54,490 | 735,025 | 56,544 | 774,236 | ||||||||||||
Shares repurchased | (334,633 | ) | (4,503,353 | ) | (602,543 | ) | (8,216,298 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (70,414 | ) | $ | (943,388 | ) | (130,308 | ) | $ | (1,677,868 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 1,102,218 | $ | 14,871,619 | 259,542 | $ | 3,566,466 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 61,670 | 831,948 | 67,264 | 922,972 | ||||||||||||
Shares repurchased | (331,495 | ) | (4,437,993 | ) | (1,141,246 | ) | (15,658,228 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 832,393 | $ | 11,265,574 | (814,440 | ) | $ | (11,168,790 | ) | ||||||||
|
|
|
|
|
|
|
|
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $21,764,143 and $23,438,103, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 192,047,289 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 12,184,306 | ||
Gross unrealized depreciation on a tax basis | (225,379 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 11,958,927 | ||
|
|
At September 30, 2014, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2013, of $113,055. For tax purposes such losses will be reflected in the year ending September 30, 2015.
At September 30, 2014, the Fund had cumulative tax basis capital losses of $1,023,254, (of which $87,413 is short-term and $935,841 is long-term) generated after September 30, 2011, which may be carried forward to offset future capital gains. To the extent such carry-forwards are used, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards do not expire.
At September 30, 2014, the Fund had $22,569 of tax basis undistributed net tax-exempt income and no tax basis undistributed net ordinary investment income or tax basis undistributed capital gains.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 |
Distributions from tax exempt income paid by the Fund for the years ended September 30, 2014, and September 30, 2013, are excludable by shareholders from gross income for federal income tax purposes.
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 6,002,378 | $ | 6,757,492 | ||||
Ordinary income | — | 2,146 | ||||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 6,002,378 | $ | 6,759,638 | ||||
|
|
|
|
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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
22 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 23
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 (%)(a) | NET ASSETS AT END OF YEAR (THOUSANDS) | |||||||||||||||||||||||||||||||||
CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 13.35 | 0.39 | 0.25 | 0.64 | (0.39 | ) | — | (0.39 | ) | $13.60 | 2.87 | 0.97 | 0.97 | 0.97 | 4.83 | 10.79 | $ | 143,994 | |||||||||||||||||||||||||||||
2013(b) | $ | 13.95 | 0.38 | (0.60 | ) | (0.22) | (0.38 | ) | — | (0.38 | ) | $13.35 | 2.76 | 0.96 | 0.95 | 0.96 | (1.61) | 11.78 | $ | 148,499 | ||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
CLASS D SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.36 | 0.35 | 0.25 | 0.60 | (0.35 | ) | — | (0.35 | ) | $13.61 | 2.60 | 1.23 | 1.23 | 1.23 | 4.55 | 10.79 | $ | 28,438 | |||||||||||||||||||||||||||||
2013 | $ | 13.96 | 0.34 | (0.59 | ) | (0.25) | (0.35 | ) | — | (0.35 | ) | $13.36 | 2.51 | 1.21 | 1.21 | 1.22 | (1.85) | 11.78 | $ | 28,858 | ||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.35 | 0.43 | 0.24 | 0.67 | (0.43 | ) | — | (0.43 | ) | $13.59 | 3.19 | 0.65 | 0.64 | 0.65 | 5.09 | 10.79 | $ | 37,380 | |||||||||||||||||||||||||||||
2013 | $ | 13.95 | 0.43 | (0.61 | ) | (0.18) | (0.42 | ) | — | (0.42 | ) | $13.35 | 3.09 | 0.61 | 0.61 | 0.61 | (1.29) | 11.78 | $ | 25,590 | ||||||||||||||||||||||||||||
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 |
(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.
24 Certified Annual Report | Certified Annual Report 25 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg New Mexico Intermediate Municipal Fund
To the Trustees and Shareholders of
Thornburg New Mexico Intermediate Municipal Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg New Mexico Intermediate Municipal Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
26 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
CLASS A SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,027.00 | $ | 4.94 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.19 | $ | 4.92 | ||||||
CLASS D SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,026.40 | $ | 6.28 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.87 | $ | 6.26 | ||||||
CLASS I SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,028.70 | $ | 3.31 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.80 | $ | 3.30 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.97%; D: 1.24%; I: 0.65%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 27
INDEX COMPARISON | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 5 YRS | 10 YRS | SINCE INCEPTION | |||||||||||||
A Shares (Incep: 6/18/91) | 2.75 | % | 2.62 | % | 3.25 | % | 4.56 | % | ||||||||
D Shares (Incep: 6/1/99) | 4.55 | % | 2.79 | % | 3.19 | % | 3.54 | % | ||||||||
I Shares (Incep: 2/1/07) | 5.09 | % | 3.38 | % | — | 4.13 | % |
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%. There is no sales charge for Class D and Class I shares.
28 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 29
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES) (1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
30 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 31
OTHER INFORMATION | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (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.
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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Fund of $6,002,378 (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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of 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 under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
32 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the most recent ten calendar years, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year, comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of correlation to equity indices, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year was comparable to the return of the index and higher than the average return for the fund category considered, that the Fund’s returns for the preceding nine calendar years were comparable to the returns of the index in four of the nine years, and that the Fund’s returns exceeded or were comparable to the average returns of the fund category in seven of nine years. Noted quantitative data further showed that the Fund’s annualized investment returns fell in the third or fourth quartile of investment performance of both fund categories for the one-year, three-year, five-year and ten-year periods ended with the second quarter of the current year. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection considered certain factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectus. Data considered included comparisons of the advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the advisory fee for the Fund was slightly higher than the median and average fee levels for the fund category, and that the level of total expense for a representative share class was slightly higher than the median and comparable to the average expense levels for the category. Peer group data showed that the Fund’s advisory fee level and total expense level for the representative share class fell above the median figures for the fund peer group and within the range of levels for the group. The Trustees did not consider the differences significant in view of the other factors taken into account.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Certified Annual Report 33
OTHER INFORMATION, CONTINUED | ||
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
34 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 35
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
36 This page is not part of the Annual Report
This page is not part of the Annual Report 37
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
38 This page is not part of the Annual Report.
This page intentionally left blank.
This page is not part of the Annual Report 39
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH080 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
Best New York 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). In 2014, Class I shares won for the three-year period ended 11/30/2013 among 31 funds. The Fund did not win the award for other time periods.
The information presented on the following pages was current as of September 30, 2014. 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. Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. 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 |
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.
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.
Personal Consumption Expenditure (PCE) Price Index – One measure of U.S. inflation that assesses the percentage change in prices of goods and services purchased by consumers throughout the economy. Of all the measures of consumer price inflation, the PCE price index covers the broadest set of goods and services.
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 (bp) – 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.
Credit Spread/Quality Spread – The difference between the yields of securities with different credit qualities.
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.
Fiscal Cliff – A combination of expiring tax cuts and across-the-board government spending cuts that were scheduled to become effective at the end of 2012. The idea behind the fiscal cliff was that if the federal government allowed these two events to proceed as planned, they would have a detrimental effect on an already shaky economy. At the same time, it was predicted that going over the fiscal cliff would significantly reduce the federal budget deficit.
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.
Participation Rate – The number of people who are either employed or are actively looking for work. The people who are no longer actively searching for work would not be included in the participation rate. During an economic recession, many workers often get discouraged and stop looking for employment, and as a result, the participation rate decreases.
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.
Yield Curve – A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.
This page is not part of the Annual Report 3
THORNBURG NEW YORK INTERMEDIATE MUNICIPAL FUND
Laddering – an All Weather Strategy
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 these techniques to manage risk and pursue attractive returns:
• | Building a laddered portfolio. Laddering has been shown over time to mitigate reinvestment and interest rate risk. |
• | 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. |
• | Investing on a cash-only basis without using leverage. |
Portfolio Managers
Josh Gonze Chris Ryon, CFA
Objectives and Strategies
The Fund’s primary investment objective is to obtain as high a level of current income exempt from federal, New York State and New York City individual income taxes as is consistent, in the view of the Fund’s investment advisor, with preservation of capital.
The secondary goal of the Fund is to reduce expected changes in its share price compared to long-term bond portfolios.
The Fund offers New York investors double (or for New York City residents triple) tax-free yields in a laddered municipal bond portfolio with an average maturity of normally three to ten years (may be subject to Alternative Minimum Tax). Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio matures each year. Cash from maturing bonds, if not needed for other purposes, is invested in bonds with longer maturities at the far end of the ladder. We regard the strategy as a good compromise for managing different types of risk.
Long-Term Stability of Principal
Net Asset Value History of A Shares from September 5, 1997 through September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
A Shares (Incep: 9/5/97) | ||||||||||||||||||||
Without sales charge | 4.59 | % | 3.33 | % | 3.58 | % | 3.74 | % | 4.19 | % | ||||||||||
With sales charge | 2.53 | % | 2.65 | % | 3.16 | % | 3.53 | % | 4.06 | % |
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 1.05%, as disclosed in the most recent Prospectus. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses until at least February 1, 2015, resulting in a net expense ratio of 0.99%. For more detailed information, please see the Fund’s prospectus.
30-Day Yields, A Shares
As of September 30, 2014
Annualized Distribution Yield | 2.11 | % | ||
SEC Yield | 0.82 | % |
Without fee waivers and expense reimbursements, the 30-day SEC Yield would have been 0.56% and the Annualized Distribution Yield would have been 1.86%.
Key Portfolio Attributes
As of September 30, 2014
Number of Bonds | 83 | |||
Effective Duration | 5.1 Yrs | |||
Average Maturity | 8.1 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 12.
4 This page is not part of the Annual Report
THORNBURG’S SUITE OF MUNICIPAL FUNDS
Municipal Funds for a Range of Interest-Rate Scenarios
At Thornburg, we often say that predicting interest rates is a fool’s game. And with the Federal Reserve still heavily involved in the markets, it’s even more difficult to forecast how rates may rise than when they may rise. Will long rates rise first and short rates follow? Will long and short rates climb simultaneously?
A traditional strategy to protect oneself against interest-rate risk is to move into shorter-duration bond strategies. But the seemingly counterintuitive response of moving to longer-duration strategies can sometimes yield better results.
Diversify Across the Yield Curve
This uncertainty points to why it’s important for investors to match their investment horizon to the duration of the strategy in which they’re invested, and to diversify assets across the yield curve.
For any interest-rate scenario, Thornburg’s comprehensive suite of municipal funds gives prudent investors the ability to diversify across the yield curve.
Diversify Across the Yield Curve with Thornburg Municipal Funds AAA General Obligation Municipal Yield Curve, as of September 30, 2014
| ![]() |
This page is not part of the Annual Report 5
Thornburg New York Intermediate Municipal Fund
September 30, 2014
7 | ||||
12 | ||||
15 | ||||
16 | ||||
17 | ||||
18 | ||||
24 | ||||
26 | ||||
27 | ||||
28 | ||||
29 | ||||
32 |
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 and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
October 15, 2014
Dear Shareholder:
We are pleased to present the annual report for the Thornburg New York Intermediate Municipal Fund (the Fund). The net asset value (NAV) of the Class A shares increased by 29 cents to $13.22 per share during the fiscal year ended September 30, 2014. If you were with us for the entire period, you received dividends of 29.6 cents per share. If you reinvested your dividends, you received 29.9 cents per share. Dividends were higher for Class I shares, to account for varying class-specific expenses. The Class A shares underperformed the Fund’s benchmark index, with a 4.59% total return at NAV for the fiscal year ended September 30, 2014, compared to the 6.13% total return for the BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index. The Fund generated 0.56% more price return and 2.10% less income than its benchmark.
The market’s positive returns were driven primarily by falling interest rates. Another driver was narrowing credit spreads. In general, investors received smaller and smaller levels of yield for securities of lower credit quality with shorter maturity dates. Chart I shows credit spreads for various maturities of municipal bonds.
Drivers of the Fund’s price return relative to its benchmark are as follows: Interest-rate sensitivity, as measured by the Fund’s duration and differing allocations along the yield curve, added 0.40% of price performance; sector allocations subtracted 0.96% of relative price performance; and our Fund’s credit-quality selections added 0.31% of price performance versus the benchmark. Other risk factors accounted for another 0.81% of relative price performance.
Interest-Rate Changes
As of the end of fiscal year 2013, many market observers predicted increasing interest rates. The fear of the Federal Reserve (the Fed) curtailing purchases of Treasury and mortgage-backed securities had roiled the markets, though the eventual fact of tapering did not begin until December 18, 2013. This was the backdrop against which rates rose through the end of December 2013. Chart II illustrates the changes in rates by maturity for each quarter of fiscal 2014.
Chart I | Quality Spreads: BBB Municipal Revenue Yields over AAA General Obligation Yields
as of 9/30/2014
Chart II | Changes in AAA General Obligation Municipal Yield Curve
9/30/2013 – 9/30/2014
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
This chart highlights a few interesting phenomena:
1. | Interest rates changed by varying amounts for different maturities, highlighting the potential benefits of a portfolio that is diversified by maturity. We believe investors benefit by owning several funds that provide different exposures to various maturity segments of the market. |
2. | In the quarter ended December 31, 2013, short and long interest rates declined and intermediate rates continued to rise. The fall in short-term rates was a market reaction to the fear of rising rates and investor desire to shed duration or interest-rate risk. The decline in long-term rates was driven by opportunistic investors who wished to take advantage of a significant difference between short- and long-term rates. |
3. | In the quarter ended March 31, 2014, short-term interest rates rose as long-term rates continued to decline. This was doubtless a reaction to the risk of possible Fed tightening and increases in short-term rates. |
4. | In the six-month period ended September 30, 2014, interest rates all along the yield curve declined, and longer-term rates continued to slide more than short-term rates. |
Table I shows selected changes in rates for the last two fiscal years. The table highlights that although interest rates have declined in fiscal 2014, they have yet to retrace the upswing seen in fiscal 2013. It is noteworthy that rates on the short end (one to five years) of the market have been virtually unchanged, depressed by the Fed’s delay in normalizing benchmark short-term rates.
Table I | Yield Changes for the Last Two Fiscal Years
MATURITY | FISCAL YEAR ENDING 9/30/2013 | FISCAL YEAR ENDING 9/30/2014 | ||
1 Year | -0.02% | -0.03% | ||
5 Year | +0.62% | -0.03% | ||
10 Year | +0.83% | -0.32% | ||
30 Year | +1.43% | -1.08% | ||
Source: Bloomberg |
The Economy and the Federal Reserve Board
The U.S. economy has recently grown at an average rate of 2.0% as measured by gross domestic product (GDP), which is defined as the monetary value of all finished goods and services produced within a country’s borders over a specific time period. Many market participants believe that 2.0% GDP growth is suboptimal compared to rates in past recoveries, but the quarter ended December 31, 2013, produced a 3.5% growth rate and the quarter ended June 30, 2014, a 4.6% rate. Growth in the quarter ended March 31, 2014, was negative 2.1%; this anomaly has been attributed to weather effects.
Employment growth is another useful measure for gauging the health of the economy. The financial press highlights this as an area of focus for Fed Chair Janet Yellen. The economy has added approximately 220,000 jobs per month for the fiscal year. This growth has not come without volatility; only 84,000 jobs were added in December 2013 and 304,000 in April 2014. The unemployment rate has declined from 7.2% for the year ended September 30, 2013, to 5.9% as of September 30, 2014. This should make investors feel good about the economy, but other measures paint a mixed picture. One indicator is the U.S. labor force participation rate, which measures the size of the labor force as a percent of the working-age population. Since January 1990, this long-term average has been at 65.9%, but as of September 2014, the participation rate had declined to 62.7%. For fiscal year 2014, this measure has averaged 62.9%. Some economists and demographers attempt to explain the decline in the participation rate by the retirement of Baby Boomers, who have changed every demographic category they have passed through and have been referred to as “the pig in the python.” The thought that Baby Boomers would impact the labor force participation rate significantly enough to cause this decline is plausible, but we have seen no estimates of the effect.
The Fed began reducing purchases of U.S. Treasury and mortgage securities in December 2013 and will complete the process by October 2014. During 2013, the market’s anticipation of the Fed’s tapering its asset purchases sent long-term municipal yields up 1.43%. But in 2014, the reality of tapering (and other factors) sent long-term municipal yields down 1.08%. In its September 17, 2014, release, the Federal Open Market Committee (FOMC) stated:
8 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
Later, in a press conference, Chair Yellen added more color to the policy statement:
“Let me reiterate, however, that the Committee’s expectations for the path of the federal funds rate are contingent on the economic outlook. If the economy proves to be stronger than anticipated by the Committee, resulting in a more rapid convergence of employment and inflation to the FOMC’s objectives, then increases in the federal funds rate are likely to occur sooner and to be more rapid than currently envisaged. Conversely, if economic performance disappoints, increases in the federal funds rate are likely to take place later and to be more gradual.”
It is clear guidance like this that makes one long for Harry Truman’s “one-handed economist.” From all this, one can glean that the Fed will be “data dependent” (another term being thrown around in the financial press) in determining the future path of the federal funds rate (currently near zero).
Finally, let’s look at inflation. It is important to fixed-income investors because it is the primary determinant of future purchasing power. If inflation increases, the semi-annual coupon payment of most bonds carries less value in the economy. Inflation, as measured by core PCE (the Core Personal Consumption Expenditures Index, which is the Fed’s favored inflation measure) excludes volatile food and energy prices. Since September 2013, core PCE has increased from 1.33% to 1.47%, but this is still materially below the Fed’s inflation target of 2.00%. As 2014 prices of municipal bonds have risen and yields have declined, their after-inflation purchasing power has fallen. Chart III illustrates this point for a 10-year AAA-rated general obligation bond.
Chart III shows that as of August 31, 2014, an investor in a 10-year AAA general obligation bond received a real yield (the yield on a security after inflation is taken into account) of 0.70%. The yield was in excess of inflation but well below its 2.08% average since June 1994. On August 31, a 10-year AAA general obligation bond yielded 2.17%, with core PCE at 1.47%. As of September 30, 2014, a 10-year AAA general obligation bond yielded 2.22%, with a real yield of 0.75%. These extremely low real yields are an important effect of the Fed’s keeping short-term rates very low.
Chart III | 10-Year AAA GO Real Yield (using Core PCE)
6/1/1994 – 8/31/2014
The Municipal Bond Market Credit Picture
The health of municipal market credit has generally been good, helped by GDP growth and increasing employment. But there have been some red flags recently. An August 2014 report from the Nelson A. Rockefeller Institute of Government at the State University of New York, “After Four Years of Uninterrupted Growth, Tax Revenues Decline in the First Quarter, and Preliminary Figures for the Second Quarter of 2014 Signal Further Declines in Personal Income Tax,” sums up certain observations:
Certified Annual Report 9
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
• | “State tax revenues declined by 0.3% in the first quarter of 2014. This is the first time state revenues declined after four years of uninterrupted growth.” |
• | “Personal income tax collections showed a decline of 1.2% in the first quarter of 2014. The decline in personal income tax collections appear to be primarily due to the mirror-image effect of the initial impact of the fiscal cliff on taxpayer behavior, which had driven tax collections upward a year ago.” |
• | “Year-to-date figures show 2.8% growth in overall state tax collections in the first three quarters of fiscal 2014 compared to the same period of 2013.” |
• | “Local property tax revenues grew by 1.9% in the first quarter, marking the eighth consecutive quarter of growth in nominal terms.” |
This data source tells us that overall state revenue is up but that there has been some decline in personal income tax collections that may be explained by individuals pushing income into last year to take advantage of lower personal income tax rates. We would raise a yellow flag at this indicator; this trend bears watching. The point about local property taxes growing should come as no surprise, as the real estate market has improved in many places. This is a very good development for local governments, because property taxes are their primary source of revenues. Not surprisingly, employment also shows positive growth. Only Alaska (off 0.95%) shows a decline for the period from August 2013 through August 2014 (the latest data available at this writing). The three states with the largest increases in employment are North Dakota (up 4.47%), Utah (up 3.53%), and Texas (up 3.63%). New York showed a 1.29% increase in employment for the same period, which has flowed through to increased personal income.
One of the highest hurdles to the health of the state economies is the funding levels of their pension plans. For too long, elected officials have over-promised and under-delivered (especially when it came to making payments to pensions) to their employees, and until recently, markets have proven more of a headwind. On October 9, 2014, Bloomberg reported, “State Pension Gaps Shrink for the First Time Since 2007.” Let us caution all readers: the shrinkage is barely perceptible, but even that is better than a poke in the eye with a sharp stick.
“The median state system last year had 69.3% of the assets needed to meet promised benefits, up from 68.7% in 2012, according to data compiled by Bloomberg.”
This sounds like great news until one realizes the industrywide, minimum acceptable funding level is said to be 80%. Thirteen states met or exceeded this; the state with the lowest (some would say worst) level is Illinois with a funding level of 39.3%, down from 40.4% in 2012. New York’s 2013 funding level was 87.3%, down from 2012’s 90.5%. New York has consistently been above the 80% level since 2008. Overall, we believe that New York’s economy is doing well.
The business press has been highlighting certain high-profile credit issues in the municipal bond market: the City of Detroit, which is in the process of exiting Chapter-9 protection, and Puerto Rico, which by all reports doesn’t know what it is doing. We do not own either credit!
The long and short of the Puerto Rico story:
• | In March 2014, the island issued $3.5 billion of general obligation bonds, mostly sold to hedge funds that “only wanted to help the island.” At the time, the island’s officials said this would give them enough cash to last for 18 months. |
• | In June 2014, the governor signed legislation allowing the island’s public corporations to “restructure” their debt, the Puerto Rico Electric Power Authority (PREPA) being the best known among them. |
• | Later in 2014, PREPA reached “forbearance” agreements with its creditors, calling for, among other things, a “Chief Restructuring Officer” (for an engagement fee of around $10 million, which is not bad work if you can get it). |
• | In September, the island’s financial officials announced a $900 million “tax and revenue anticipation” note deal that would be placed with banks who were forced to hold the vast majority of it and could not sell it. That figure was later raised to |
10 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
$1.2 billion. This was six months after the March sale! The yield on these securities is 7.75%; California issued a similar security earlier in the summer for 0.10%. Think there is a difference in the credit? |
Conclusion
We do not believe that the fixed income markets, and municipal bonds particularly, represent any great value at present; real yields are negative in some segments of the market, and very low in others. But we do not believe shareholders should undertake a wholesale rebalancing of portfolios either. It is important to re-evaluate why we own fixed-income products and municipal bonds: as part of a well-balanced, diversified portfolio. Recent volatility certainly demonstrates the potential benefits of these investments. Diversification is one of the best ways for shareholders to manage risk, not only between asset classes but in positioning within markets. And we believe municipal bond investors may benefit from diversifying along the municipal bond yield curve.
Many shareholders may soon ask themselves “what should I do if interest rates begin to rise?” We would suggest having faith in the structure of your portfolio. A portion of your intermediate laddered portfolio’s bonds mature each year and become available for reinvestment at higher yields (see Chart IV); this has the potential to increase income to shareholders. When interest rates do rise, prices will generally decline, but the remaining bonds in the portfolio will move closer to maturity and should increase in price over time. We advise being patient when interest rates start to rise, lengthening your anticipated holding period.
Chart IV | Percent of Portfolio Maturing
We will continue to strive to manage your assets to fulfill the Fund’s objectives as set out in the prospectus.
Sincerely,
![]() | ![]() | |||
Christopher Ryon, CFA | Josh Gonze | |||
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 11
SCHEDULE OF INVESTMENTS | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 |
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 | |||||||
City of New York GO, 5.00% due 6/1/2019 pre-refunded 6/1/2016 (City Budget Financial Management; Insured: AGM) | AA/Aa2 | $ | 255,000 | $ | 274,933 | |||||
City of New York GO, 5.00% due 8/1/2019 (City Budget Financial Management) | AA/Aa2 | 1,000,000 | 1,170,120 | |||||||
City of New York GO, 0.03% due 8/1/2020 put 10/1/2014 (City Budget Financial Management; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | A+/Aa1 | 100,000 | 100,000 | |||||||
City of New York GO, 0.04% due 8/1/2021 put 10/1/2014 (City Budget Financial Management; LOC: JPMorgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 1,400,000 | 1,400,000 | |||||||
City of New York GO, 5.00% due 8/1/2023 (City Budget Financial Management) | AA/Aa2 | 1,000,000 | 1,205,660 | |||||||
City of New York GO, 5.00% due 8/1/2025 (City Budget Financial Management) | AA/Aa2 | 400,000 | 443,280 | |||||||
City of New York GO, 5.00% due 8/1/2030 (City Budget Financial Management) | AA/Aa2 | 1,000,000 | 1,164,420 | |||||||
City of New York GO, 0.05% due 8/1/2035 put 10/1/2014 (City Budget Financial Management) (daily demand notes) | AA/Aa2 | 1,125,000 | 1,125,000 | |||||||
County of Nassau GO, 5.00% due 4/1/2026 (Insured: BAM) | AA/NR | 1,000,000 | 1,143,690 | |||||||
Dutchess County Local Development Corp., 5.00% due 7/1/2021 (Health Quest Systems, Inc.; Insured: AGM) | AA/A2 | 535,000 | 618,187 | |||||||
Dutchess County Local Development Corp., 5.00% due 7/1/2022 (Health Quest Systems, Inc.; Insured: AGM) | AA/A2 | 510,000 | 581,726 | |||||||
Erie County Industrial Development Agency, 5.25% due 5/1/2025 (Buffalo City School District) | AA/Aa2 | 1,000,000 | 1,139,490 | |||||||
Government of Guam, 5.375% due 12/1/2024 | BBB+/NR | 1,000,000 | 1,102,320 | |||||||
Guam Waterworks Authority, 5.00% due 7/1/2028 (Water and Wastewater System) | A-/Ba1 | 500,000 | 555,700 | |||||||
Hempstead Town Local Development Corp., 5.00% due 7/1/2028 (Hofstra University) | A/A3 | 500,000 | 558,425 | |||||||
Long Island Power Authority, 5.25% due 9/1/2029 | NR/Baa1 | 645,000 | 783,707 | |||||||
Monroe County Industrial Development Corp., 4.00% due 6/1/2016 (St. John Fisher College) | BBB+/NR | 880,000 | 918,553 | |||||||
Monroe County Industrial Development Corp., 5.00% due 1/15/2028 (Monroe Community College Association, Inc.; Insured: AGM) | AA/A2 | 250,000 | 280,145 | |||||||
Monroe County Industrial Development Corp., 5.00% due 1/15/2029 (Monroe Community College Association, Inc.; Insured: AGM) | AA/A2 | 300,000 | 334,410 | |||||||
Nassau County IDA, 4.75% due 3/1/2026 (New York Institute of Technology) | BBB+/Baa2 | 1,000,000 | 1,054,050 | |||||||
New York City Health and Hospitals Corp. GO, 5.00% due 2/15/2020 (Healthcare Facilities Improvements) | A+/Aa3 | 770,000 | 898,167 | |||||||
New York City Health and Hospitals Corp. GO, 5.00% due 2/15/2025 (Healthcare Facilities Improvements) | A+/Aa3 | 1,000,000 | 1,134,060 | |||||||
New York City Metropolitan Transportation Authority, 6.25% due 11/15/2023 | AA-/A2 | 1,000,000 | 1,198,910 | |||||||
New York City Municipal Water Finance Authority, 0.03% due 6/15/2043 put 10/1/2014 (Water and Sewer System; SPA: JPMorgan Chase Bank N.A.) (daily demand notes) | AA+/Aa2 | 100,000 | 100,000 | |||||||
New York City Municipal Water Finance Authority, 0.04% due 6/15/2035 put 10/1/2014 (Water and Sewer System; SPA: Bayerische Landesbank) (daily demand notes) | AAA/Aa1 | 3,500,000 | 3,500,000 | |||||||
New York City Municipal Water Finance Authority, 0.04% due 6/15/2050 put 10/1/2014 (Water and Sewer System; SPA: JPMorgan Chase Bank N.A.) (daily demand notes) | AA+/Aa2 | 300,000 | 300,000 | |||||||
New York City Transitional Finance Authority, 5.00% due 1/15/2020 (World Trade Center Recovery) (State Aid Withholding) | AA-/Aa2 | 1,000,000 | 1,158,620 | |||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2020 (World Trade Center Recovery) | AAA/Aaa | 1,000,000 | 1,052,120 | |||||||
New York City Transitional Finance Authority, 0.04% due 11/1/2036 put 10/1/2014 (World Trade Center Recovery; SPA: JP Morgan Chase Bank N.A.) (daily demand notes) | AAA/Aa1 | 900,000 | 900,000 | |||||||
New York City Transitional Finance Authority, 0.04% due 11/1/2042 put 10/1/2014 (World Trade Center Recovery; SPA: Barclays Bank plc) (daily demand notes) | AAA/Aa1 | 1,700,000 | 1,700,000 | |||||||
New York City Trust for Cultural Resources, 5.25% due 12/1/2018 (Lincoln Center for the Performing Arts) | A+/A2 | 175,000 | 201,243 | |||||||
New York Convention Center Development Corp., 5.00% due 11/15/2017 (Hotel Unit Fee; Insured: AMBAC) | NR/A1 | 1,000,000 | 1,050,610 | |||||||
New York Municipal Bond Bank Agency, 5.00% due 4/15/2018 (Insured: AGM) | AA/A2 | 1,000,000 | 1,131,940 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2023 (School District Financing Program; Insured: AGM) (State Aid Withholding) | AA/A2 | 400,000 | 449,056 | |||||||
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 | 1,000,140 | |||||||
New York State Dormitory Authority, 5.00% due 2/15/2015 (Mental Health Services Facilities; Insured: AMBAC) | AA/NR | 1,000,000 | 1,018,110 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2016 (Bishop Henry B. Hucles Nursing Home; Insured: SONYMA) | NR/Aa1 | 600,000 | 646,506 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2018 (School District Financing Program; Insured: AGM) | AA/Aa3 | $ | 1,000,000 | $ | 1,100,310 | |||||
New York State Dormitory Authority, 5.25% due 10/1/2018 (School District Financing Program; Insured: AGM) | AA/Aa3 | 775,000 | 903,580 | |||||||
New York State Dormitory Authority, 5.00% due 3/15/2019 pre-refunded 3/15/2015 (University & College Improvements; Insured: AGM) | AA/Aa1 | 950,000 | 971,242 | |||||||
New York State Dormitory Authority, 5.00% due 3/15/2019 pre-refunded 3/15/2015 (University & College Improvements; Insured: AGM) | AAA/Aa1 | 50,000 | 51,118 | |||||||
a New York State Dormitory Authority, 5.00% due 7/1/2020 (NYSARC, Inc. Developmental Disability Programs) | NR/Aa2 | 1,175,000 | 1,369,110 | |||||||
New York State Dormitory Authority, 4.00% due 10/1/2020 (School District Financing Program; Insured: AGM) (State Aid Withholding) | AA/A1 | 325,000 | 365,508 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2021 (State University of New York; Insured: Natl-Re) | AA-/NR | 300,000 | 310,548 | |||||||
New York State Dormitory Authority, 5.25% due 7/1/2022 (St. John’s University; Insured: Natl-Re) | AA-/A3 | 1,000,000 | 1,197,780 | |||||||
New York State Dormitory Authority, 5.00% due 1/15/2023 (Municipal Health Facilities) | AA-/Aa3 | 1,000,000 | 1,117,590 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2023 (School District Financing Program) (State Aid Withholding) | AA-/NR | 575,000 | 687,556 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2024 (Bishop Henry B. Hucles Nursing Home; Insured: SONYMA) | NR/Aa1 | 1,000,000 | 1,039,430 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2024 (Miriam Osborn Memorial Home Assoc.) | NR/NR | 1,540,000 | 1,681,480 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2024 (School District Financing Program; Insured: AGM) (State Aid Withholding) | AA/Aa3 | 1,000,000 | 1,172,650 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2025 (Miriam Osborn Memorial Home Assoc.) | NR/NR | 1,105,000 | 1,197,080 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2027 (Interagency Council Pooled Loan Program) | NR/Aa2 | 1,000,000 | 1,101,510 | |||||||
New York State Dormitory Authority, 5.00% due 7/1/2027 (Columbia University Teachers College) | A+/A1 | 750,000 | 866,228 | |||||||
New York State Dormitory Authority, 5.25% due 7/1/2027 (Health Quest Systems; Insured: AGM) | AA/A3 | 500,000 | 550,170 | |||||||
New York State Dormitory Authority, 5.00% due 12/15/2027 (State Educational & Medical Facilities) | AAA/Aa1 | 2,500,000 | 2,977,925 | |||||||
New York State Dormitory Authority, 5.00% due 10/1/2028 (School District Financing Program; Insured: AGM) | AA/NR | 200,000 | 235,860 | |||||||
New York State Dormitory Authority, 5.25% due 5/1/2030 (North Shore Long Island Jewish Medical) | A-/A3 | 1,000,000 | 1,108,820 | |||||||
New York State Energy Research & Development Authority, 2.25% due 12/1/2015 (New York Electric & Gas Corp.) | BBB+/A3 | 1,000,000 | 1,015,660 | |||||||
New York State Thruway Authority, 5.00% due 4/1/2018 pre-refunded 10/1/2015 (Insured: AMBAC) | NR/NR | 60,000 | 62,915 | |||||||
a New York State Thruway Authority, 5.00% due 4/1/2018 (Insured: AMBAC) | AA/NR | 385,000 | 403,542 | |||||||
New York State Thruway Authority, 5.00% due 4/1/2019 (Multi-Year Highway and Bridge Capital Program; Insured: AMBAC) | AA/A2 | 235,000 | 246,362 | |||||||
New York State Thruway Authority, 5.00% due 5/1/2019 (Multi-Year Highway and Bridge Capital Program) | A-/A3 | 2,000,000 | 2,326,480 | |||||||
New York State Thruway Authority, 5.00% due 4/1/2022 (Multi-Year Highway and Bridge Capital Program) | AA/NR | 1,000,000 | 1,114,520 | |||||||
New York State Urban Development Corp., 5.25% due 1/1/2021 | AA/NR | 1,000,000 | 1,149,900 | |||||||
Oneida County IDA, 6.10% due 6/1/2020 (Presbyterian Home for Central New York; LOC: HSBC Bank USA) | NR/A1 | 450,000 | 451,566 | |||||||
Onondaga Civic Development Corp., 5.00% due 7/1/2021 (Le Moyne College) | NR/Baa2 | 1,000,000 | 1,105,220 | |||||||
Onondaga Civic Development Corp., 5.50% due 12/1/2031 (Upstate Properties Development) | A+/NR | 1,000,000 | 1,123,770 | |||||||
Port Authority New York & New Jersey, 5.00% due 8/15/2022 (Insured: AGM) | AA/Aa3 | 1,000,000 | 1,116,640 | |||||||
b Sales Tax Asset Receivable Corp., 5.00% due 10/15/2029 (New York Local Government Assistance Corp.) | AAA/Aa1 | 250,000 | 302,725 | |||||||
b Sales Tax Asset Receivable Corp., 5.00% due 10/15/2030 (New York Local Government Assistance Corp.) | AAA/Aa1 | 1,000,000 | 1,204,030 | |||||||
b Sales Tax Asset Receivable Corp., 5.00% due 10/15/2031 (New York Local Government Assistance Corp.) | AAA/Aa1 | 1,000,000 | 1,199,160 | |||||||
Syracuse Industrial Development Agency, 5.25% due 5/1/2026 (Syracuse City School District) | AA-/Aa2 | 2,150,000 | 2,472,242 | |||||||
Town of Amherst Development Corp., 5.00% due 10/1/2020 (University at Buffalo Foundation Facility-Student Housing; Insured: AGM) | AA/A2 | 1,000,000 | 1,164,430 | |||||||
Town of Babylon GO, 5.00% due 9/1/2015 (Insured: AMBAC) | NR/NR | 25,000 | 25,100 | |||||||
Triborough Bridge & Tunnel Authority GO, 5.00% due 11/15/2025 pre-refunded 11/15/2017 (MTA Bridges and Tunnels) | AA-/Aa3 | 1,410,000 | 1,600,843 | |||||||
Triborough Bridge & Tunnel Authority GO, 5.00% due 11/15/2028 (MTA Bridges and Tunnels) | AA-/Aa3 | 1,000,000 | 1,190,270 | |||||||
Triborough Bridge & Tunnel Authority GO, 5.00% due 11/15/2029 (MTA Bridges and Tunnels) | AA-/Aa3 | 1,000,000 | 1,184,460 | |||||||
Triborough Bridge and Tunnel Authority, 0.04% due 1/1/2032 put 10/1/2014 (MTA Bridges and Tunnels; LOC: California State Teachers’ Retirement System) (daily demand notes) | AA-/Aa1 | 400,000 | 400,000 | |||||||
United Nations Development Corp., 5.00% due 7/1/2019 (One, Two and Three U.N. Plaza Project) | NR/A1 | 230,000 | 267,709 | |||||||
United Nations Development Corp., 5.00% due 7/1/2025 (One, Two and Three U.N. Plaza Project) | NR/A1 | 710,000 | 803,450 | |||||||
Utility Debt Securitization Authority, 5.00% due 12/15/2029 (Long Island Power Authority-Electric Service) | AAA/Aaa | 1,000,000 | 1,191,760 | |||||||
Utility Debt Securitization Authority, 5.00% due 12/15/2030 (Long Island Power Authority-Electric Service) | AAA/Aaa | 1,000,000 | 1,183,680 | |||||||
a West Seneca Central School District GO, 5.00% due 11/15/2023 (Facilities Improvements; Insured: BAM) (State Aid Withholding) | AA/A1 | 1,300,000 | 1,547,325 | |||||||
|
| |||||||||
TOTAL INVESTMENTS — 101.32% (Cost $74,777,883) | $ | 79,252,552 | ||||||||
LIABILITIES NET OF OTHER ASSETS — (1.32)% | (1,029,946 | ) | ||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 78,222,606 | ||||||||
|
|
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 |
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:
AGM | Insured by Assured Guaranty Municipal Corp. | |
AMBAC | Insured by American Municipal Bond Assurance Corp. | |
BAM | Insured by Build America Mutual Insurance Co. | |
GO | General Obligation |
IDA | Industrial Development Authority | |
Natl-Re | Insured by National Public Finance Guarantee Corp. | |
SONYMA | State of New York Mortgage Authority |
See notes to financial statements.
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $74,777,883) (Note 2) | $ | 79,252,552 | ||
Cash | 706,173 | |||
Receivable for fund shares sold | 173,228 | |||
Interest receivable | 994,977 | |||
|
| |||
Total Assets | 81,126,930 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 2,676,990 | |||
Payable for fund shares redeemed | 134,723 | |||
Payable to investment advisor and other affiliates (Note 3) | 32,894 | |||
Accounts payable and accrued expenses | 39,639 | |||
Dividends payable | 20,078 | |||
|
| |||
Total Liabilities | 2,904,324 | |||
|
| |||
NET ASSETS | $ | 78,222,606 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Distribution in excess of net investment income | $ | (16,847 | ) | |
Net unrealized appreciation on investments | 4,474,669 | |||
Accumulated net realized gain (loss) | (427,903 | ) | ||
Net capital paid in on shares of beneficial interest | 74,192,687 | |||
|
| |||
$ | 78,222,606 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($54,301,025 applicable to 4,108,281 shares of beneficial interest outstanding - Note 4) | $ | 13.22 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
|
| |||
Maximum offering price per share | $ | 13.49 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($23,921,581 applicable to 1,809,853 shares of beneficial interest outstanding - Note 4) | $ | 13.22 | ||
|
|
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF OPERATIONS | ||
Thornburg New York Intermediate Municipal Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $530,527) | $ | 2,357,648 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 361,908 | |||
Administration fees (Note 3) | ||||
Class A Shares | 70,903 | |||
Class I Shares | 7,830 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 141,806 | |||
Transfer agent fees | ||||
Class A Shares | 33,827 | |||
Class I Shares | 10,617 | |||
Registration and filing fees | ||||
Class A Shares | 4,461 | |||
Custodian fees (Note 3) | 27,689 | |||
Professional fees | 35,170 | |||
Accounting fees | 2,335 | |||
Trustee fees | 1,970 | |||
Other expenses | 13,090 | |||
|
| |||
Total Expenses | 711,606 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (42,678 | ) | ||
Fees paid indirectly (Note 3) | (3,054 | ) | ||
|
| |||
Net Expenses | 665,874 | |||
|
| |||
Net Investment Income | 1,691,774 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (249,977 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 1,999,926 | |||
|
| |||
Net Realized and Unrealized Gain | 1,749,949 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 3,441,723 | ||
|
|
See notes to financial statements.
16 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg New York Intermediate Municipal Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 1,691,774 | $ | 1,593,330 | ||||
Net realized gain (loss) on investments | (249,977 | ) | (77,545 | ) | ||||
Net unrealized appreciation (depreciation) on investments | 1,999,926 | (2,373,054 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,441,723 | (857,269 | ) | |||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | (1,289,806 | ) | (1,431,117 | ) | ||||
Class I Shares | (401,968 | ) | (162,213 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (1,094,618 | ) | 415,288 | |||||
Class I Shares | 16,446,386 | 2,587,250 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 17,101,717 | 551,939 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 61,120,889 | 60,568,950 | ||||||
|
|
|
| |||||
End of Year | $ | 78,222,606 | $ | 61,120,889 | ||||
|
|
|
| |||||
Distribution in excess of net investment income | $ | (16,847 | ) | $ | (16,847 | ) |
See notes to financial statements.
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 |
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 eighteen separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary investment objective is to obtain as high a level of current income exempt from federal, New York State, and New York City individual income tax as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. The Fund’s secondary objective is to reduce expected changes in its share price compared to long-term bond portfolios. The Fund will invest primarily in municipal obligations within the state of New York.
The Fund currently offers two classes of shares of beneficial interest: Class A and Institutional Class (“Class I”) 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 allocable 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 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. 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 |
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).
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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
Municipal Bonds | $ | 79,252,552 | $ | — | $ | 79,252,552 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 79,252,552 | $ | — | $ | 79,252,552 | $ | — |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014.
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, 2014, 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: 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
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 |
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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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.
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, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $373 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, 2014, 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 and shareholder services.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class A and Class I expenses do not exceed 0.99% and 0.67%, respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $33,133 for Class A shares and $9,545 or Class I 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, 2014, fees paid indirectly were $3,054.
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 and is included as Trustee Fees on the Statement of Operations.
The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended September 30, 2014, the Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $2,753,278 in purchases.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,643,317 | $ | 21,214,647 | 901,050 | $ | 11,922,513 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 80,732 | 1,052,930 | 80,325 | 1,062,658 | ||||||||||||
Shares repurchased | (1,797,961 | ) | (23,362,195 | ) | (954,983 | ) | (12,569,883 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (73,912 | ) | $ | (1,094,618 | ) | 26,392 | $ | 415,288 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 1,745,619 | $ | 22,738,797 | 456,801 | $ | 6,000,154 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 29,671 | 388,253 | 11,720 | 154,702 | ||||||||||||
Shares repurchased | (511,478 | ) | (6,680,664 | ) | (272,677 | ) | (3,567,606 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,263,812 | $ | 16,446,386 | 195,844 | $ | 2,587,250 | ||||||||||
|
|
|
|
|
|
|
|
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $22,703,355 and $9,041,099, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 74,777,883 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 4,496,114 | ||
Gross unrealized depreciation on a tax basis | (21,445 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 4,474,669 | ||
|
|
At September 30, 2014, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2013, of $249,977. For tax purposes, such losses will be reflected in the year ending September 30, 2015.
At September 30, 2014, the Fund had cumulative tax basis capital losses of $177,925, (of which $127,505 is short-term and $50,420 is long-term) generated after September 30, 2011, 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.
The Fund had tax basis capital losses of $32,830 generated prior to October 1, 2011, that expired on September 30, 2014.
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized losses by $32,830 and decreased net capital paid in on shares of beneficial interest by $32,830. This reclassification has no impact on the net asset value of the Fund. The reclassification resulted from expired loss carryforwards.
At September 30, 2014, the Fund had $3,231 of tax basis undistributed net tax-exempt income. The Fund had no tax basis undistributed net ordinary investment income, or tax basis undistributed capital gains.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 |
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Tax exempt income | $ | 1,691,774 | $ | 1,593,330 | ||||
Ordinary income | — | — | ||||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 1,691,774 | $ | 1,593,330 | ||||
|
|
|
|
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, the risks of investing primarily in the obligations of a single state, and the risks of investing in a nondiversified investment company. 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, 2014, and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
22 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 23
Thornburg New York Intermediate Municipal Fund
PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||
UNLESS | NET ASSET VALUE BEGINNING OF PERIOD | NET | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS | 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 | PORTFOLIO | NET ASSETS AT END OF PERIOD (THOUSANDS) | |||||||||||||||||||||||||||||||||
CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 12.93 | 0.30 | 0.29 | 0.59 | (0.30 | ) | — | (0.30 | ) | $13.22 | 2.27 | 0.99 | 0.99 | 1.05 | 4.59 | 14.12 | $ | 54,301 | |||||||||||||||||||||||||||||
2013(b) | $ | 13.44 | 0.34 | (0.51 | ) | (0.17) | (0.34 | ) | — | (0.34 | ) | $12.93 | 2.54 | 0.99 | 0.99 | 1.05 | (1.32) | 11.31 | $ | 54,061 | ||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 12.93 | 0.33 | 0.30 | 0.63 | (0.34 | ) | — | (0.34 | ) | $13.22 | 2.57 | 0.67 | 0.67 | 0.73 | 4.93 | 14.12 | $ | 23,922 | |||||||||||||||||||||||||||||
2013 | $ | 13.44 | 0.38 | (0.51 | ) | (0.13) | (0.38 | ) | — | (0.38 | ) | $12.93 | 2.86 | 0.67 | 0.67 | 0.74 | (1.00) | 11.31 | $ | 7,060 | ||||||||||||||||||||||||||||
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.
24 Certified Annual Report | Certified Annual Report 25 |
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, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
26 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,029.60 | $ | 5.04 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,031.30 | $ | 3.40 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.72 | $ | 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 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 27
INDEX COMPARISON | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 5 YRS | 10 YRS | SINCE INCEPTION | |||||||||||||
A Shares (Incep: 9/5/97) | 2.53 | % | 3.16 | % | 3.53 | % | 4.06 | % | ||||||||
I Shares (Incep: 2/1/10) | 4.93 | % | — | — | 4.46 | % |
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%. There is no sales charge for Class I shares.
28 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 29
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES) (1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
30 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 31
OTHER INFORMATION | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (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.
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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Fund of $1,691,774 (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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of 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 under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
32 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the most recent ten calendar years, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year, comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of correlation to equity indices, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year was comparable to the return of the index and the average return for the fund category considered, that the Fund’s returns for the preceding nine calendar years were comparable to the returns of the index in five of the nine years, and that the Fund’s returns exceeded or were comparable to the average returns of the fund category in eight of nine years. Noted quantitative data showed that the Fund’s annualized investment returns fell in the third quartile of investment performance of the first of two fund categories for the one-year period ended with the second quarter of the current year, fell in the second quartile of performance of the category for the three-year and five-year periods and fell at the first quartile of performance of the category for the ten-year period. Noted data further showed that the Fund’s annualized investment returns fell in the third quartile of performance of the second fund category for the one-year period ended with the second quarter, fell in the second quartile of performance for the three-year and five-year periods and fell in the top quartile of performance of the category for the ten-year period. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection, considered certain factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Funds.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectus. Data considered included comparisons of the Fund’s advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the Fund’s advisory fee was comparable to the median and average fee levels for the fund category, and that the level of total expense for a representative share class of the Fund was somewhat higher than the median and comparable to the average expense levels for the category. Peer group data showed that the Fund’s advisory fee level and total expense level for the representative share class fell above the median figures for the fund peer group and at the top of the range of levels for the group. The Trustees did not consider the differences significant in view of the other factors taken into account.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
Certified Annual Report 33
OTHER INFORMATION, CONTINUED | ||
Thornburg New York Intermediate Municipal Fund | September 30, 2014 (Unaudited) |
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
34 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 35
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
36 This page is not part of the Annual Report
This page is not part of the Annual Report 37
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
38 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 39
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH860 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2014. 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 | TLDAX | 885-216-812 | ||
Class I | TLDIX | 885-216-796 |
Glossary
Barclays U.S. 1-3 Yr Aggregate Bond Index – Index that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market with maturities between 1 and 3 years, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS.
Barclays U.S. Credit Index – Index composed of the U.S. Corporate Index and a non-corporate component that includes foreign agencies, sovereigns, supranationals and local authorities. The U.S. Credit Index is a subset of the U.S. Government/Credit Index and the U.S. Aggregate Index.
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.
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.
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.
Asset-Backed Security – A security whose value and income payments are derived from and collateralized (or “backed”) by a specified pool of underlying assets. The pool of assets is typically a group of small and illiquid assets that are unable to be sold individually. Pooling the assets into financial instruments allows them to be sold to general investors, a process called securitization, and allows the risk of investing in the underlying assets to be diversified because each security will represent a fraction of the total value of the diverse pool of underlying assets.
Basis Point (bp) – 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.
Credit Spread/Quality Spread – The difference between the yields of securities with different credit qualities.
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
Mortgage-backed Security – A type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must be grouped in one of the top two ratings as determined by a accredited credit rating agency and usually pay periodic payments that are similar to coupon payments. The mortgage must have originated from a regulated and authorized financial institution.
OAS (Option Adjusted Spread) – The flat spread over the treasury yield curve required to discount a security payment to match its market price.
Risk-Free Asset – An asset which has a virtually certain future return. Treasury bills are typically used to represent risk-free assets because they are backed by the U.S. government and have short maturities. Every investment carries some type of risk.
SEC Yield – SEC Yield is computed in accordance with SEC standards measuring the net investment income per share over a specified 30-day period expressed as a percentage of the maximum offering price of the Fund’s shares at the end of the period.
S&P 500 Index – An unmanaged broad measure of the U.S. stock market.
Treasuries – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
Yield Curve – A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.
This page is not part of the Annual Report 3
THORNBURG LOW DURATION INCOME FUND
A High-Quality Bond Portfolio with Low Interest-Rate Exposure
Thornburg Low Duration Income Fund is an actively managed, laddered portfolio of debt obligations that are rated investment grade, or if no credit rating is available, are judged by the Fund’s advisor to be of comparable quality. The Fund seeks to reduce changes in its share value compared to longer duration fixed income portfolios by maintaining a portfolio of investments with a dollar-weighted average duration of normally no more than three years. The Fund’s investments are determined by individual security analysis.
Portfolio Managers
Jason Brady,CFA Lon Erickson,CFA
Objectives and Strategies
The Fund’s objective is to seek current income, consistent with preservation of capital. There is no guarantee that the Fund will meet its objectives.
The Fund seeks to reduce changes in its share value compared to longer duration fixed income portfolios by maintaining a portfolio of investments with a dollar-weighted average duration of normally no more than three years.
Average Annual Total Returns
For Period Ended September 30, 2014
Since Inception | ||||
A Shares (Incep: 12/30/13) | ||||
Without sales charge | 1.33 | % | ||
With sales charge | -0.21 | % |
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 1.73%, as disclosed in the most recent Prospectus. Thornburg Investment Management and Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses until at least February 1, 2015, so that actual expenses for Class A shares do not exceed 0.70%.
Portfolio Ladder
As of September 30, 2014
30-Day Yields, A Shares
As of September 30, 2014
Annualized Distribution Yield | 0.71 | % | ||
SEC Yield | 0.52 | % |
Without fee waivers and expense reimbursements, the SEC Yield would have been negative 1.94% and the Annualized Distribution Yield would have been negative 1.76% Unsubsidized yields may be disproportionately negative due to the size of net assets and fixed expenses.
Key Portfolio Attributes
As of September 30, 2014
Number of Bonds | 88 | |||
Effective Duration | �� | 1.6 Yrs | ||
Average Maturity | 3.6 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 9.
4 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 5
Thornburg Low Duration Income Fund
September 30, 2014
Contents | ||||
7 | ||||
9 | ||||
14 | ||||
15 | ||||
16 | ||||
17 | ||||
22 | ||||
24 | ||||
25 | ||||
26 | ||||
27 | ||||
30 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semi-annual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg Low Duration Income Fund | September 30, 2014 (Unaudited) |
October 14, 2014
Dear Fellow Shareholders:
We are pleased to present the annual report for the Thornburg Low Duration Income Fund for the period from the Fund’s inception on December 30, 2013, through September 30, 2014. The net asset value (NAV) of a Class A share of the Thornburg Low Duration Income Fund increased 7 cents in the period to $12.38. If you were invested for the entire period, you received dividends of 9.29 cents per share. If you reinvested your dividends, you received 9.32 cents per share. Dividends per share were higher for Class I shares as a percentage of NAV to account for varying class-specific expenses. Please examine the accompanying exhibits for more detailed information.
For most of the period, financial-market volatility, at least as expressed by traditional industry metrics, was quite low despite several major economic and world events. The markets largely powered through the U.S. federal-government shutdown, the Federal Reserve’s (the Fed) reducing of asset purchases, a first-quarter GDP decline, Russia’s annexing Crimea and aiding eastern Ukraine separatists, the emergence of ISIS in the Middle East, and an Ebola outbreak. Even several weeks of outflows from high-yield and bank-loan funds negatively impacted only those markets, not other asset classes. Equities and investment-grade fixed income remained strong. However, just as the fiscal period ended, financial markets began to crack a little and volatility increased markedly. Weakening European economies and the threat of deflation on the continent, along with slowing Chinese growth and Ebola arriving in the U.S. and Europe, finally drove U.S. stocks (a decline of 4.8% for the month to date in the S&P 500 Index) and U.S. Treasury yields (with the 10-year Treasury yield down 0.30% for the month-to-date) lower. That said, let’s take a step back and look at the fiscal period just ended.
The U.S. Treasury yield curve flattened over the period. The two-year Treasury yield increased from 0.32% on September 30, 2013 to 0.57% on September 30, 2014. The 10-year U.S. Treasury yield declined from 2.61% to 2.49% over the same period. Why? The Fed began tapering its purchases of U.S. Treasuries and U.S. government agency mortgage-backed securities and continued to decrease the amount purchased throughout the period, such that all purchase activity is scheduled to have ended in October 2014. In addition, the Fed began discussing, at least in concept, when it might raise short-term interest rates for the first time this cycle. Both of those events caused short-term rates to rise as expected, but perhaps unexpectedly, longer-term rates fell.
There are an infinite number of potential reasons long rates may have fallen, but let’s look at two. First, the U.S. economy is growing and prices are rising, but neither is particularly robust compared to past cycles. Higher rates could cause the economy to slow and inflation to fall. Long-term rates reflect expected future short-term rates and expected inflation. If the economy slows, then both future short rates and inflation might fall. Today’s long-term rates could be anticipating such an outcome. Second, global economies appear to be weakening and at such junctures, investors tend to migrate to U.S. assets (particularly so called “risk-free” assets) as a safe haven. And while low relative to itself historically, a 10-year U.S. Treasury yield in the 2–2.5% range appears quite attractive relative to the 10-year German Bund at about 1% or the Japanese 10-year bond at about 0.50%. Global investor demand could be driving longer-term U.S. Treasury rates lower.
Meanwhile, credit spreads ground tighter for most of the period. The Barclays U.S. Credit Index Option-Adjusted Spread declined from 135 basis points on September 30, 2013 to 107 basis points on September 30, 2014. Investors’ continued search for income drove most fixed-income sectors tighter/lower in spread and yield. In addition, corporate balance sheets, while marginally weaker year-over-year, are quite strong and supported by robust cash flow generation. Household financial health is also reasonably stable given the improvement in the labor market. Credit spreads did begin to weaken in late summer in sympathy with high yield and bank loans. Those asset classes experienced outflows, driving their spreads and yields markedly wider and higher. Investment-grade credit spreads widened about 10 basis points during this period.
During the period, we kept the Fund’s duration relatively short in the context of its 5-year maturity ladder, believing the greater risk to be a sudden rise in rates. Short-term rates did rise, but long rates fell, which means this duration position had a negative impact on total return. We maintained our credit overweight, albeit it with somewhat of a shift towards structured products (asset-backed securities of one type or another) from corporate bonds, believing a general move up in quality presented a better risk-reward opportunity. Tighter credit spreads meant the Fund benefited from this asset allocation, and moreover, it benefited from the move up in quality, as BBB spreads, in general, increased more than higher-rated bond spreads. Overall, we believe the Fund performed reasonably well in this environment, and more specifically, performed like a core bond fund should.
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Low Duration Income Fund | September 30, 2014 (Unaudited) |
The Class A shares of the Thornburg Low Duration Income Fund produced a total return of 1.33% at NAV during the period covered in this report. The Barclays U.S. 1-3 Yr Aggregate Bond Index produced a 0.63% total return over the same time period. The Barclays index reflects no deduction for fees, expenses, or taxes.
As we look forward, we believe significant price increases in high-quality fixed income are unlikely. Benchmark U.S. Treasuries are trading at low yields, and even with their recent backup, credit spreads are still a bit on the tight side. Furthermore, with the global economy, especially those of Europe and China, looking increasingly shaky, market volatility may increase further in the coming months, resulting in a bumpy ride for investors. Nevertheless, we believe your Fund is well positioned to achieve its longer-term goals of capital preservation and a reasonably attractive income stream, no matter what environment we may be entering. The Fund is a laddered portfolio. The maturity ladder strategy balances duration and yield in a manner designed to provide the best risk-adjusted returns over time. We believe that the Thornburg Low Duration Income Fund continues to be an appropriate vehicle for investors looking for a core bond investment.
Thank you very much for investing in the Fund.
Sincerely,
![]() | ![]() | |||
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.
8 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
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.
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
U.S. TREASURY SECURITIES — 24.11% | ||||||||||
United States Treasury Notes, 0.25% due 7/15/2015 | NR/Aaa | $ | 635,000 | $ | 635,847 | |||||
United States Treasury Notes, 0.25% due 10/31/2015 | NR/NR | 100,000 | 100,108 | |||||||
United States Treasury Notes, 0.25% due 12/31/2015 | NR/NR | 100,000 | 100,034 | |||||||
United States Treasury Notes, 0.375% due 4/30/2016 | NR/NR | 100,000 | 99,958 | |||||||
United States Treasury Notes, 0.375% due 5/31/2016 | NR/NR | 565,000 | 564,412 | |||||||
United States Treasury Notes, 0.50% due 6/15/2016 | NR/Aaa | 100,000 | 100,091 | |||||||
United States Treasury Notes, 0.625% due 12/15/2016 | NR/NR | 100,000 | 99,793 | |||||||
United States Treasury Notes, 2.75% due 5/31/2017 | NR/Aaa | 100,000 | 104,710 | |||||||
United States Treasury Notes, 0.875% due 6/15/2017 | NR/NR | 100,000 | 99,758 | |||||||
United States Treasury Notes, 0.50% due 7/31/2017 | NR/Aaa | 400,000 | 393,902 | |||||||
United States Treasury Notes, 0.75% due 12/31/2017 | NR/Aaa | 100,000 | 98,407 | |||||||
United States Treasury Notes, 2.625% due 4/30/2018 | NR/Aaa | 100,000 | 104,376 | |||||||
|
| |||||||||
TOTAL U.S. TREASURY SECURITIES (Cost $2,501,353) | 2,501,396 | |||||||||
|
| |||||||||
U.S. GOVERNMENT AGENCIES — 3.49% | ||||||||||
Export Leasing (2009) LLC, (Guaranty: Export-Import Bank of the United States), 1.859% due 8/28/2021 | NR/NR | 90,807 | 90,454 | |||||||
a Micron Semiconductor Ltd., (Guaranty: Export-Import Bank of the United States), 1.258% due 1/15/2019 | NR/NR | 90,000 | 89,885 | |||||||
SLMA Student Loan Trust 2013-4 Class A, 0.705% due 6/25/2027 | NR/Aaa | 87,991 | 88,100 | |||||||
Small Business Administration Participation Certificates, Series 2005-20K Class 1, 5.36% due 11/1/2025 | NR/NR | 85,864 | 93,930 | |||||||
|
| |||||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $360,688) | 362,369 | |||||||||
|
| |||||||||
OTHER GOVERNMENT — 2.97% | ||||||||||
a Corp Andina de Fomento, 3.75% due 1/15/2016 | AA-/Aa3 | 100,000 | 103,500 | |||||||
a Export-Import Bank of Korea, 5.875% due 1/14/2015 | A+/Aa3 | 100,000 | 101,422 | |||||||
a,b Turks and Caicos Islands, 3.20% due 2/22/2016 | AAA/NR | 100,000 | 103,138 | |||||||
|
| |||||||||
TOTAL OTHER GOVERNMENT (Cost $306,955) | 308,060 | |||||||||
|
| |||||||||
MORTGAGE BACKED — 0.98% | ||||||||||
Federal Home Loan Mtg Corp., CMO Series K716 Class A1, 2.413% due 1/25/2021 | NR/Aaa | 100,000 | 101,796 | |||||||
|
| |||||||||
TOTAL MORTGAGE BACKED (Cost $101,992) | 101,796 | |||||||||
|
| |||||||||
ASSET BACKED SECURITIES — 20.09% | ||||||||||
ADVANCE RECEIVABLES — 3.38% | ||||||||||
b HLSS Servicer Advance Receivables Trust, Series 2013-T5 Class AT5, 1.979% due 8/15/2046 | AAA/NR | 100,000 | 100,456 | |||||||
b HLSS Servicer Advance Receivables Trust, Series 2013-T7 Class A7, 1.981% due 11/15/2046 | AAA/NR | 100,000 | 100,190 | |||||||
b HLSS Servicer Advance Receivables Trust, Series 2014-T2 Class AT2, 2.217% due 1/15/2047 | AAA/NR | 100,000 | 100,568 | |||||||
b New Residential Advance Receivables Trust, Series 2014-T1 Class A1, 1.274% due 3/15/2045 | AAA/NR | 50,000 | 50,055 | |||||||
|
| |||||||||
351,269 | ||||||||||
|
|
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
AUTO RECEIVABLES — 3.54% | ||||||||||
b Exeter Automobile Receivables Trust, Series 2014-1A Class A, 1.29% due 5/15/2018 | AA/NR | $ | 67,188 | $ | 67,310 | |||||
b GM Financial Automobile Leasing Trust, Series 2014-2A Class A4, 1.62% due 2/20/2018 | NR/Aaa | 100,000 | 99,864 | |||||||
b,c Oscar US Funding Trust, Series 2014-1A Class A3, 1.72% due 3/15/2015 | AAA/Aaa | 100,000 | 99,976 | |||||||
Santander Drive Auto Receivables Trust, Series 2013-2 Class B, 1.33% due 3/15/2018 | AA/Aaa | 100,000 | 100,287 | |||||||
|
| |||||||||
367,437 | ||||||||||
|
| |||||||||
COMMERCIAL MTG TRUST — 6.57% | ||||||||||
b BAMLL-DB Trust, Series 2012-OSI Class A2FX, 3.352% due 4/13/2029 | NR/Aaa | 99,953 | 102,699 | |||||||
b DBUBS Mtg Trust CMO, Series 2011-LC1A Class A1, 3.742% due 11/10/2046 | NR/Aaa | 89,966 | 92,902 | |||||||
b FREMF Mtg Trust, Series 2013-KF02 Class B Floating Rate Note, 2.821% due 12/25/2045 | NR/Baa3 | 84,605 | 87,431 | |||||||
b JPMorgan Chase Commercial Mtg, Series 2013-JWRZ Class B Floating Rate Note, 1.304% due 4/15/2030 | AA-/Aa3 | 100,000 | 99,812 | |||||||
b JPMorgan Chase Commercial Mtg, Series 2014-BXH Class A Floating Rate Note, 1.054% due 4/15/2027 | AAA/NR | 100,000 | 100,056 | |||||||
b Motel 6 Trust, Series 2012-MTL6 Class A2, 1.948% due 10/5/2025 | AAA/NR | 100,000 | 98,808 | |||||||
WFRBS Commercial Mtg Trust, Series 2014-C22 Class A1, 1.479% due 9/15/2057 | NR/Aaa | 100,000 | 99,603 | |||||||
|
| |||||||||
681,311 | ||||||||||
|
| |||||||||
OTHER ASSET BACKED — 5.73% | ||||||||||
b Alterna Funding I, LLC, Series 2014-1A, 1.639% due 2/15/2021 | NR/NR | 97,476 | 97,232 | |||||||
b CLI Funding, LLC, Series 2014-1A Class A, 3.29% due 6/18/2029 | A/NR | 97,328 | 96,659 | |||||||
b,c Concord Funding Co., LLC, Series 2013-1 Class A, 2.42% due 2/15/2015 | A/NR | 100,000 | 100,000 | |||||||
b PFS Financing Corp., Series 2013-AA Class A Floating Rate Note, 0.704% due 2/15/2018 | AAA/Aaa | 100,000 | 100,003 | |||||||
b PFS Tax Lien Trust, Series 2014-1, 1.44% due 5/15/2029 | AAA/NR | 84,628 | 84,697 | |||||||
b Sierra Receivables Funding Co., LLC, Series 2012-1A Class A, 2.84% due 11/20/2028 | A+/NR | 40,921 | 41,623 | |||||||
b Sierra Receivables Funding Co., LLC, Series 2014-1A Class A, 2.07% due 3/20/2030 | A/NR | 74,007 | 73,997 | |||||||
|
| |||||||||
594,211 | ||||||||||
|
| |||||||||
STUDENT LOAN — 0.87% | ||||||||||
b Pennsylvania Higher Education Assistance Agency, Series 2012-1A Class A1 Floating Rate Note, 0.706% due 5/25/2027 | AA+/NR | 89,807 | 90,294 | |||||||
|
| |||||||||
90,294 | ||||||||||
|
| |||||||||
TOTAL ASSET BACKED SECURITIES (Cost $2,081,933) | 2,084,522 | |||||||||
|
| |||||||||
CORPORATE BONDS — 33.16% | ||||||||||
AUTOMOBILES & COMPONENTS — 1.97% | ||||||||||
Automobiles — 1.97% | ||||||||||
a,b Hyundai Capital Services, Inc., 6.00% due 5/5/2015 | BBB+/Baa1 | 100,000 | 103,024 | |||||||
b Nissan Motor Acceptance Corp., 1.95% due 9/12/2017 | A-/A3 | 100,000 | 101,005 | |||||||
|
| |||||||||
204,029 | ||||||||||
|
| |||||||||
BANKS — 3.76% | ||||||||||
Banks — 2.69% | ||||||||||
Bank of America Corp. Floating Rate Note, 1.274% due 1/15/2019 | A-/Baa2 | 100,000 | 101,426 | |||||||
Citigroup, Inc., 2.50% due 7/29/2019 | A-/Baa2 | 75,000 | 74,332 | |||||||
a,b Standard Chartered plc, 3.20% due 5/12/2016 | A+/A2 | 100,000 | 103,528 | |||||||
Thrifts & Mortgage Finance — 1.07% | ||||||||||
a,b Northern Rock Covered Bond LLP, 5.625% due 6/22/2017 | AAA/Aaa | 100,000 | 110,644 | |||||||
|
| |||||||||
389,930 | ||||||||||
|
| |||||||||
CAPITAL GOODS — 1.98% | ||||||||||
Construction & Engineering — 0.99% | ||||||||||
URS Corp., 3.85% due 4/1/2017 | BBB-/Baa3 | 100,000 | 103,211 | |||||||
Machinery — 0.99% | ||||||||||
a,b Volvo Treasury AB, 5.95% due 4/1/2015 | BBB/Baa2 | 100,000 | 102,587 | |||||||
|
| |||||||||
205,798 | ||||||||||
|
| |||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.99% | ||||||||||
Commercial Services & Supplies — 0.99% | ||||||||||
Cintas Corp. No. 2, 2.85% due 6/1/2016 | BBB+/A2 | 100,000 | 102,962 | |||||||
|
| |||||||||
102,962 | ||||||||||
|
|
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
Issuer-Description | Credit Rating† S&P/ Moody’s | Principal Amount | Value | |||||||
CONSUMER DURABLES & APPAREL — 0.97% | ||||||||||
Household Durables — 0.97% | ||||||||||
Newell Rubbermaid, Inc., 2.00% due 6/15/2015 | BBB-/Baa3 | $ | 100,000 | $ | 100,952 | |||||
|
| |||||||||
100,952 | ||||||||||
|
| |||||||||
CONSUMER SERVICES — 1.01% | ||||||||||
Diversified Consumer Services — 1.01% | ||||||||||
George Washington University, 4.411% due 9/15/2017 | A+/A1 | 100,000 | 104,396 | |||||||
|
| |||||||||
104,396 | ||||||||||
|
| |||||||||
DIVERSIFIED FINANCIALS — 5.11% | ||||||||||
Capital Markets — 3.66% | ||||||||||
a Deutsche Bank AG London, 2.50% due 2/13/2019 | A/A3 | 75,000 | 75,395 | |||||||
Goldman Sachs Group, Inc. Floating Rate Note, 1.334% due 11/15/2018 | A-/Baa1 | 100,000 | 101,736 | |||||||
Legg Mason, Inc., 2.70% due 7/15/2019 | BBB/Baa1 | 100,000 | 100,297 | |||||||
a,b Macquarie Bank Ltd., 3.45% due 7/27/2015 | A/A2 | 100,000 | 102,336 | |||||||
Consumer Finance — 0.97% | ||||||||||
Synchrony Financial, 1.875% due 8/15/2017 | BBB-/NR | 50,000 | 50,069 | |||||||
Synchrony Financial, 3.00% due 8/15/2019 | BBB-/NR | 50,000 | 50,137 | |||||||
Diversified Financial Services — 0.48% | ||||||||||
Moody’s Corp., 2.75% due 7/15/2019 | BBB+/NR | 50,000 | 50,263 | |||||||
|
| |||||||||
530,233 | ||||||||||
|
| |||||||||
ENERGY — 1.94% | ||||||||||
Oil, Gas & Consumable Fuels — 1.94% | ||||||||||
a,b Delek & Avner Tamar Bond Ltd., 2.803% due 12/30/2016 | BBB-/Baa3 | 100,000 | 100,000 | |||||||
a Petrobras Global Finance B.V. Floating Rate Note, 2.595% due 3/17/2017 | BBB-/Baa1 | 100,000 | 101,116 | |||||||
|
| |||||||||
201,116 | ||||||||||
|
| |||||||||
FOOD & STAPLES RETAILING — 0.89% | ||||||||||
Food & Staples Retailing — 0.89% | ||||||||||
Smith’s 1994-A3 Pass Through Trust, 9.20% due 7/2/2018 | BBB/A3 | 80,850 | 92,376 | |||||||
|
| |||||||||
92,376 | ||||||||||
|
| |||||||||
FOOD, BEVERAGE & TOBACCO — 1.97% | ||||||||||
Beverages — 1.00% | ||||||||||
a Coca Cola HBC Finance B.V., 5.50% due 9/17/2015 | BBB/Baa1 | 100,000 | 104,018 | |||||||
Food Products — 0.97% | ||||||||||
Ingredion, Inc., 1.80% due 9/25/2017 | BBB/Baa2 | 100,000 | 100,408 | |||||||
|
| |||||||||
204,426 | ||||||||||
|
| |||||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.97% | ||||||||||
Health Care Providers & Services — 0.97% | ||||||||||
Catholic Health Initiatives, 1.60% due 11/1/2017 | A+/NR | 100,000 | 100,438 | |||||||
|
| |||||||||
100,438 | ||||||||||
|
| |||||||||
INSURANCE — 1.93% | ||||||||||
Insurance — 1.93% | ||||||||||
b Principal Life Global Funding II, 2.375% due 9/11/2019 | A+/A1 | 50,000 | 49,753 | |||||||
b Principal Life Global Funding II, 1.50% due 9/11/2017 | A+/A1 | 50,000 | 49,973 | |||||||
b Reliance Standard Life Insurance Co., 2.50% due 4/24/2019 | A+/A2 | 100,000 | 100,034 | |||||||
|
| |||||||||
199,760 | ||||||||||
|
| |||||||||
MATERIALS — 0.97% | ||||||||||
Metals & Mining — 0.97% | ||||||||||
b Glencore Funding, LLC Floating Rate Note, 1.594% due 1/15/2019 | BBB/Baa2 | 100,000 | 100,748 | |||||||
|
| |||||||||
100,748 | ||||||||||
|
|
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
Issuer-Description | Credit Rating† S&P/Moody’s | Principal Amount | Value | |||||||
SOFTWARE & SERVICES — 0.96% | ||||||||||
Information Technology Services — 0.96% | ||||||||||
Total System Services, Inc., 2.375% due 6/1/2018 | BBB+/Baa3 | $ | 100,000 | $ | 99,297 | |||||
|
| |||||||||
99,297 | ||||||||||
|
| |||||||||
TELECOMMUNICATION SERVICES — 4.07% | ||||||||||
Diversified Telecommunication Services — 3.04% | ||||||||||
AT&T, Inc. Floating Rate Note, 1.148% due 11/27/2018 | A-/A3 | 100,000 | 101,756 | |||||||
a Telefonica Emisiones SAU, 6.421% due 6/20/2016 | BBB/Baa2 | 100,000 | 108,680 | |||||||
Verizon Communications, Inc. Floating Rate Note, 1.984% due 9/14/2018 | BBB+/Baa1 | 100,000 | 105,342 | |||||||
Wireless Telecommunication Services — 1.03% | ||||||||||
b Crown Castle Towers, LLC, 5.495% due 1/15/2037 | NR/A2 | 100,000 | 107,044 | |||||||
|
| |||||||||
422,822 | ||||||||||
|
| |||||||||
TRANSPORTATION — 1.75% | ||||||||||
Air Freight & Logistics — 0.77% | ||||||||||
b FedEx Corp. 2012 Pass Through Trust, 2.625% due 1/15/2018 | BBB/A3 | 78,050 | 79,390 | |||||||
Road & Rail — 0.98% | ||||||||||
a,b Asciano Finance Ltd., 3.125% due 9/23/2015 | BBB-/Baa2 | 100,000 | 101,843 | |||||||
|
| |||||||||
181,233 | ||||||||||
|
| |||||||||
UTILITIES — 1.92% | ||||||||||
Electric Utilities — 0.96% | ||||||||||
a,b Electricite de France S.A., 2.15% due 1/22/2019 | NR/NR | 100,000 | 99,722 | |||||||
Gas Utilities — 0.96% | ||||||||||
The Laclede Group, Inc. Floating Rate Note, 0.979% due 8/15/2017 | BBB+/Baa2 | 100,000 | 99,971 | |||||||
|
| |||||||||
199,693 | ||||||||||
|
| |||||||||
TOTAL CORPORATE BONDS (Cost $3,425,594) | 3,440,209 | |||||||||
|
| |||||||||
CONVERTIBLE BONDS — 0.46% | ||||||||||
REAL ESTATE — 0.46% | ||||||||||
Real Estate Investment Trusts — 0.46% | ||||||||||
b IAS Operating Partnership LP, 5.00% due 3/15/2018 | NR/NR | 50,000 | 48,000 | |||||||
|
| |||||||||
48,000 | ||||||||||
|
| |||||||||
TOTAL CONVERTIBLE BONDS (Cost $46,550) | 48,000 | |||||||||
|
| |||||||||
MUNICIPAL BONDS — 5.93% | ||||||||||
City & County of Denver Airport System, 0.20% due 11/15/2025 put 10/1/2014 (Denver International Airport; Insured: | ||||||||||
AGM; SPA: Morgan Stanley Bank) (daily demand notes) | AA/A1 | 115,000 | 115,000 | |||||||
JobsOhio Beverage System, 2.217% due 1/1/2019 (State Liquor Enterprise) | AA/Aa3 | 100,000 | 99,543 | |||||||
Louisiana Local Government Environmental Facilities and Community Development Authority, 1.66% due 2/1/2022 (Louisiana Utilities Restoration) | AAA/Aaa | 100,000 | 99,694 | |||||||
Massachusetts Housing Finance Agency, 1.45% due 12/1/2015 (Multi-Family Residential Development) | A+/Aa3 | 100,000 | 100,470 | |||||||
Sandoval County New Mexico, 1.452% due 6/1/2017 | A+/NR | 100,000 | 100,589 | |||||||
State of New York Mortgage Agency, 0.42% due 10/1/2014 | NR/Aa1 | 50,000 | 50,000 | |||||||
State of New York Mortgage Agency, 0.52% due 4/1/2015 | NR/Aa1 | 50,000 | 49,975 | |||||||
|
| |||||||||
TOTAL MUNICIPAL BONDS (Cost $611,161) | 615,271 | |||||||||
|
| |||||||||
TOTAL INVESTMENTS — 91.19% (Cost $9,436,226) | $ | 9,461,623 | ||||||||
OTHER ASSETS LESS LIABILITIES — 8.81% | 914,616 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 10,376,239 | ||||||||
|
|
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
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 | Yankee Bond-Denominated in U.S. dollars and is issued in the U.S. by foreign banks and corporations. |
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. Most of these securities have been deemed to be liquid for purposes of the Fund’s limitation on investment in illiquid securities. As of September 30, 2014, the aggregate value of these securities in the Fund’s portfolio was $3,447,401, representing 33.22% of the Fund’s net assets. |
c | 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:
CMO | Collateralized Mortgage Obligation | |
Mtg | Mortgage |
See notes to financial statements.
Certified Annual Report 13
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $9,436,226) (Note 2) | $ | 9,461,623 | ||
Cash | 969,729 | |||
Receivable for fund shares sold | 32 | |||
Receivable from investment advisor | 17,757 | |||
Interest receivable | 37,384 | |||
Prepaid expenses and other assets | 14,242 | |||
|
| |||
Total Assets | 10,500,767 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 100,610 | |||
Accounts payable and accrued expenses | 23,581 | |||
Dividends payable | 337 | |||
|
| |||
Total Liabilities | 124,528 | |||
|
| |||
NET ASSETS | $ | 10,376,239 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 1,386 | ||
Net unrealized appreciation on investments | 25,397 | |||
Accumulated net realized gain (loss) | (864 | ) | ||
Net capital paid in on shares of beneficial interest | 10,350,320 | |||
|
| |||
$ | 10,376,239 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($6,678,251 applicable to 539,601 shares of beneficial interest outstanding - Note 4) | $ | 12.38 | ||
Maximum sales charge, 1.50% of offering price | 0.19 | |||
|
| |||
Maximum offering price per share | $ | 12.57 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($3,697,988 applicable to 298,791 shares of beneficial interest outstanding - Note 4) | $ | 12.38 | ||
|
|
See notes to financial statements.
14 Certified Annual Report
STATEMENT OF OPERATIONS | ||
Thornburg Low Duration Income Fund | Period Ended September 30, 2014* |
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $41,503) | $ | 86,480 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 22,167 | |||
Administration fees (Note 3) | ||||
Class A Shares | 3,911 | |||
Class I Shares | 1,207 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 6,257 | |||
Transfer agent fees | ||||
Class A Shares | 5,030 | |||
Class I Shares | 5,800 | |||
Registration and filing fees | ||||
Class A Shares | 26,926 | |||
Class I Shares | 26,964 | |||
Custodian fees (Note 3) | 17,960 | |||
Professional fees | 46,004 | |||
Accounting fees | 275 | |||
Trustee fees | 245 | |||
Other expenses | 12,332 | |||
|
| |||
Total Expenses | 175,078 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (112,394 | ) | ||
Investment advisory and other fund level fees waived by investment advisor (Note 3) | (33,542 | ) | ||
Fees paid indirectly (Note 3) | (225 | ) | ||
|
| |||
Net Expenses | 28,917 | |||
|
| |||
Net Investment Income | 57,563 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | 522 | |||
Net change in unrealized appreciation (depreciation) of investments | 25,397 | |||
|
| |||
Net Realized and Unrealized Gain | 25,919 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 83,482 | ||
|
|
* | For the period from commencement of operations on December 30, 2013 through September 30, 2014. |
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF CHANGES IN NET ASSETS | ||
Thornburg Low Duration Income Fund |
Period Ended* September 30, 2014 | ||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||
OPERATIONS | ||||
Net investment income | $ | 57,563 | ||
Net realized gain (loss) on investments | 522 | |||
Net unrealized appreciation (depreciation) on investments | 25,397 | |||
|
| |||
Net Increase (Decrease) in Net Assets Resulting from Operations | 83,482 | |||
DIVIDENDS TO SHAREHOLDERS | ||||
From net investment income | ||||
Class A Shares | (28,921 | ) | ||
Class I Shares | (28,642 | ) | ||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||
Class A Shares | 6,667,167 | |||
Class I Shares | 3,683,153 | |||
|
| |||
Net Increase in Net Assets | 10,376,239 | |||
NET ASSETS | ||||
Beginning of Period | — | |||
|
| |||
End of Period | $ | 10,376,239 | ||
|
| |||
Undistributed net investment income | $ | 1,386 |
* | For the period from commencement of operations on December 30, 2013 through September 30, 2014. |
See notes to financial statements.
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
NOTE 1 – ORGANIZATION
Thornburg Low Duration 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 eighteen 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 investment objective is to seek current income consistent with the preservation of capital.
The Fund currently offers two classes of shares of beneficial interest: Class A and Institutional Class (“Class I”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (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 allocable 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 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. 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
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).
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, last available transactions, and other relevant information. Valuations may also be based upon current market prices of securities that are comarable in coupon, rating, maturity and industry. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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, 2014 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3(a) | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
U.S. Treasury Securities | $ | 2,501,396 | $ | 2,501,396 | $ | — | $ | — | ||||||||
U.S. Government Agencies | 362,369 | — | 362,369 | — | ||||||||||||
Mortgage Backed | 101,796 | — | 101,796 | — | ||||||||||||
Other Government | 308,060 | — | 308,060 | — | ||||||||||||
Asset Backed Securities | 2,084,522 | — | 1,984,522 | 100,000 | ||||||||||||
Corporate Bonds | 3,440,209 | — | 3,440,209 | — | ||||||||||||
Convertible Bonds | 48,000 | — | 48,000 | — | ||||||||||||
Municipal Bonds | 615,271 | — | 615,271 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 9,461,623 | $ | 2,501,396 | $ | 6,860,227 | $ | 100,000 |
(a) | In accordance with the guidance prescribed in Accounting Standard Update No. 2011-14 (“ASU No. 2011-04”), a portfolio security characterized as a Level 3 investment representing $100,000 market value in Asset Backed Securities at September 30, 2014, was fair valued by the Committee using an income approach based upon the present value of anticipated future cash flows and a discounted 2.4% internal rate of return provided by a third-party expert provider. |
In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the period ended September 30, 2014.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the period ended September 30, 2014 is as follows:
Asset Backed Securities | Total(b) | |||||||
Beginning Balance 9/30/2013 | $ | — | $ | — | ||||
Accrued Discounts (Premiums) | 1,436 | 1,436 | ||||||
Net Realized Gain (Loss) | — | — | ||||||
Gross Purchases | 97,750 | 97,750 | ||||||
Gross Sales | — | — | ||||||
Net Change in Unrealized | ||||||||
Appreciation (Depreciation)(a)(c) | 814 | 814 | ||||||
Transfers into Level 3 | — | — | ||||||
Transfers out of Level 3 | — | — | ||||||
|
|
|
| |||||
Ending Balance 9/30/2014 | $ | 100,000 | $ | 100,000 |
(a) | Total amount of Net Change in Unrealized Appreciation (Depreciation) recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the period ended September 30, 2014. |
(b) | Level 3 investments represent 0.96% of total Net Assets at the period ended September 30, 2014. 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. |
(c) | The Net Change in Unrealized Appreciation (Depreciation) attributable to securities held at September 30, 2014, which were fair valued using significant unobservable inputs (Level 3) was $814. This is included within the net change in unrealized appreciation (depreciation) on investments in the Fund’s Statement of Operations. |
Deferred Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these 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, 2014, 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: 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.
Repurchase Agreements: The Fund may invest excess cash by entering into repurchase agreements under which the Fund delivers cash to a counterparty, the counterparty delivers securities as collateral, and the Fund is obligated to resell that collateral to the counterparty at an agreed upon price at the maturity date of the repurchase agreement. Securities pledged as collateral under repurchase agreements are held in custody with a third party custodian 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 counterparty’s obligations. Under certain circumstances, in the event of default or bankruptcy by the counterparty 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 securities purchased are amortized over the life of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. The Fund may invest in various mortgage-backed securities. Such securities pay interest and a portion of principal each month, which is then available for investment in securities at prevailing prices. Paydown gains and
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
losses on these securities are included in interest income. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of shares at the beginning of the day (after adjusting for the current share activity of the respective class). Expenses common to all Funds are allocated among the Funds comprising the Trust based upon their relative net asset values or other appropriate allocation methods.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the period ended September 30, 2014, these fees were payable at annual rates ranging from .40 of 1% to .225 of 1% per annum of the average daily net assets of the Fund depending on the Fund’s asset size. The Trust also has entered into administrative services agreements with the Advisor, whereby the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the period ended September 30, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $18 from the sale of Class A 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 .20 of 1% per annum of the average daily net assets attributable to each Class of shares of the Fund for payments made by the Advisor to securities dealers and other financial institutions to obtain various shareholder and distribution related services. For the period ended September 30, 2014, 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 and shareholder services.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class A and Class I expenses do not exceed 0.70% and 0.50%, respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal period.
For the period ended September 30, 2014, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $56,138 for Class A shares and $56,256 for Class I shares, and voluntarily waived investment advisory and other fund level fees of $33,542.
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 period ended September 30, 2014, fees paid indirectly were $225.
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 and is included as Trustee Fees on the Statement of Operations.
The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the period ended September 30, 2014, the Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $4,726,141 in purchases and $705,441 in sales.
The percentages of direct investments by affiliated Trustees, officers, and the Advisor in the Fund are approximately 51.3%.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
Period Ended September 30, 2014* | ||||||||
Shares | Amount | |||||||
Class A Shares | ||||||||
Shares sold | 548,858 | $ | 6,781,755 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,224 | 27,529 | ||||||
Shares repurchased | (11,481 | ) | (142,117 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 539,601 | $ | 6,667,167 | |||||
|
|
|
| |||||
Class I Shares | ||||||||
Shares sold | 342,617 | $ | 4,225,814 | |||||
Shares issued to shareholders in reinvestment of dividends | 2,304 | 28,523 | ||||||
Shares repurchased | (46,130 | ) | (571,184 | ) | ||||
|
|
|
| |||||
Net increase (decrease) | 298,791 | $ | 3,683,153 | |||||
|
|
|
|
* | Fund commenced operations on December 30, 2013. |
NOTE 5 – INVESTMENT TRANSACTIONS
For the period ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments and U. S. Government obligations) of $8,091,579 and $1,530,657, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 9,436,226 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 35,433 | ||
Gross unrealized depreciation on a tax basis | (10,036 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 25,397 | ||
|
|
At September 30, 2014, the Fund had tax basis undistributed net ordinary investment income of $1,723.
At September 30, 2014, the Fund had cumulative tax basis capital losses of $864, (of which $864 is short-term and $0 is long-term) generated after September 30, 2011, 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.
The tax character of distributions paid during the period ended September 30, 2014, was $57,563 from ordinary income.
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized gain (loss) on investments by $1,386 and increased undistributed net realized investment income by $1,386. This reclassification has no impact on the net asset value of the Fund. This reclassification resulted from paydown gain (loss) tax adjustments.
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, and the risks associated with investments in non-U.S. issuers. 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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Certified Annual Report 21
Thornburg Low Duration Income Fund
PER SHARE PERFORMANCE (for a Share Outstanding Throughout the Period)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||
Unless Periods | Net Asset Value Beginning of Period | Net | Net Realized & Unrealized Gain (loss) on Investments | Total From | Dividends From Net Investment Income | Dividends | Total Dividends | Net Value End | Net Investment Income (Loss) (%) | Expenses, After Expense Reductions (%) | Expenses, After Expense Reductions and Net of Custody Credits (%) | Expenses, Before Expense Reductions (%) | Total Return | Portfolio | Net Assets at End of Period (Thousands) | |||||||||||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||||||||||||||||||||||||||
2014(b)(c) | $ | 12.31 | 0.08 | 0.08 | 0.16 | (0.09 | ) | — | (0.09 | ) | $12.38 | 0.92 | (d) | 0.62 | (d) | 0.61 | (d) | 3.14 | (d) | 1.33 | 23.70 | $ | 6,678 | |||||||||||||||||||||||||
Class I Shares | ||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 12.31 | 0.11 | 0.07 | 0.18 | (0.11 | ) | — | (0.11 | ) | $12.38 | 1.19 | (d) | 0.41 | (d) | 0.41 | (d) | 3.19 | (d) | 1.48 | 23.70 | $ | 3,698 |
(a) | Not annualized for periods less than one year. |
(b) | Fund commenced operations on December 30, 2013. |
(c) | Sales loads are not reflected in computing total return. |
(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.
22 Certified Annual Report | Certified Annual Report 23 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Low Duration Income Fund
To the Trustees and Shareholders of
Thornburg Low Duration 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 Low Duration Income Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2014, the results of its operations, the changes in its net assets and the financial highlights for the period of December 30, 2013, (commencement of operations) through September 30, 2014, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at September 30, 2014 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
24 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Low Duration Income Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
Beginning Account Value 4/1/14 | Ending Account Value 9/30/14 | Expenses Paid During Period† 4/1/14–9/30/14 | ||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,006.30 | $ | 2.97 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.11 | $ | 2.99 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,007.30 | $ | 1.85 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,023.23 | $ | 1.86 |
† | Expenses are equal to the annualized expense ratio for each class (A: 0.59%; I: 0.37%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 25
INDEX COMPARISON | ||
Thornburg Low Duration Income Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
Since Inception | ||||
A Shares (Incep: 12/30/13) | -0.21 | % | ||
I Shares (Incep: 12/30/13) | 1.48 | % |
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%. There is no sales charge for Class I shares.
26 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Low Duration Income Fund | September 30, 2014 (Unaudited) |
Name, Age, Year Elected, Position Held with Fund | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 27
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 (Unaudited) |
Name, Age, Year Elected, Position Held with Fund | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
28 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 (Unaudited) |
Name, Age, Year Elected, | Principal Occupation(s) During Past Five Years | Other Directorships Held by Trustee | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 29
OTHER INFORMATION | ||
Thornburg Low Duration Income Fund | September 30, 2014 (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.
No proxy voting information is currently available because the Fund commenced operations on December 30, 2013. The Fund expects to begin making annual proxy voting information available in accordance with applicable regulations commencing on or before August 31, 2014. 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.
TAX INFORMATION
For the tax period ended September 30, 2014, dividends paid by the Thornburg Low Duration Income Fund of $57,563 are being reported as ordinary investment income 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Low Duration Income Fund pursuant to an investment advisory agreement. The Trustees considered the renewal of this agreement for the first time since its initial approval in 2013, and determined to renew the agreement, on September 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of 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 under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
30 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 (Unaudited) |
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including (among other information) quantitative measures of the Fund’s absolute and relative investment performance.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data considered by the Trustees in their evaluation showed that the Fund’s annualized investment returns fell near the midpoint of performance of a mutual fund category in the three-month period ending with the second quarter of the current year and fell in the second quartile of performance of the category in the year-to-date period, and that the Fund’s annualized investment returns fell in the second quartile of performance of a second fund category in the three-month period ending with the second quarter and fell in the top quartile of performance of the second category for the year-to-date period.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection considered certain factors, including other fees and expenses charged to the Fund, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectus. Data considered included comparisons of the Fund’s advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the advisory fee for the Fund, before fee waivers, was comparable to the median and average fee levels for the fund category, and that the level of total expense for a representative share class, after fee waivers and expense reimbursements, was lower than the median and average expense levels for the category. Data for the peer group showed that the Fund’s advisory fee level before waivers was comparable to the peer group median, and that the total expense level for the Fund, after fee waivers and reimbursements, fell below the median level for the group.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
The Trustees did not consider the profitability of the Fund to the Advisor because of the Fund’s recent inception and absence of profitability to the Advisor.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its receipt of certain research services from broker dealers, and the benefits to both the Fund and the Advisor of the Advisor’s expansion of its staffing, compliance and systems capabilities and other resources to serve a broader variety of investment management clients. No unusual or unfair benefits to the Advisor from its relationship to the Fund were identified by the Trustees.
Certified Annual Report 31
OTHER INFORMATION, CONTINUED | ||
Thornburg Low Duration Income Fund | September 30, 2014 (Unaudited) |
The Trustees concluded, based upon their consideration of the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
32 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report (Unaudited)
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 33
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
34 This page is not part of the Annual Report
This page is not part of the Annual Report 35
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
36 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 37
This page intentionally left blank.
38 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 39
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH3171 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2014. 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.
Diversification 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 maybe higher than those for other classes. Class I, R3, R4, and R5 shares may not be available to all investors.
LIMITED TERM U.S. GOVERNMENT FUND | NASDAQ 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 R4 | LTUGX | 885-216-747 | ||
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 R4 | THRIX | 885-216-762 | ||
Class R5 | THRRX | 885-216-853 |
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 its instrumentalities having maturities from one up to ten years.
Barclays U.S. Credit Index – An index composed of the U.S. Corporate Index and a non-corporate component that includes foreign agencies, sovereigns, supranationals, and local authorities. The U.S. Credit Index is a subset of the U.S. Government/Credit Index and the U.S. Aggregate Index.
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.
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 (bp) – 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 Bloomberg Market Data and are a combination of ratings from Standard and Poor’s, Moody’s Investors Service, and/or 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.
Credit Spread/Quality Spread – The difference between the yields of securities with different credit qualities.
Duration – A bond’s sensitivity to interest rates. Bonds with longer durations experience greater price volatility than bonds with shorter durations.
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.
Mortgage-Backed Security – A type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must be grouped in one of the top two ratings as determined by a accredited credit rating agency and usually pay periodic payments that are similar to coupon payments. The mortgage must have originated from a regulated and authorized financial institution.
OAS (Option Adjusted Spread) – The flat spread over the treasury yield curve required to discount a security payment to match its market price.
Risk-Free Asset – An asset which has a virtually certain future return. Treasury bills are typically used to represent risk-free assets because they are backed by the U.S. government and have short maturities. Every investment carries some type of risk.
SEC Yield – SEC yield is computed in accordance with SEC standards measuring the net investment income per share over a specified 30-day period expressed as a percentage of the maximum offering price of the Fund’s shares at the end of the period.
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.
Yield Curve – A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates.
This page is not part of the Annual Report 3
THORNBURG LIMITED TERM U.S. GOVERNMENT FUND
At Thornburg, our approach to management of the Thornburg Limited Term U.S. Government 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 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. |
Portfolio Manager
Jason Brady, CFA
Objectives and Strategies
The Fund’s primary objective is to obtain as high a level of current income as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. As a secondary goal, the Fund seeks to reduce changes in its share price compared to longer term portfolios.
This Fund is a laddered portfolio primarily composed of short/intermediate debt obligations at least 80% of which are issued by the U.S. Government, its agencies, or its instrumentalities, with an average maturity of normally less than five years.
Long-Term Stability of Principal
Net Asset Value History of A Shares from November 16, 1987 through September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
A Shares (Incep: 11/16/87) | ||||||||||||||||||||
Without sales charge | 1.30 | % | 0.72 | % | 1.89 | % | 3.08 | % | 5.26 | % | ||||||||||
With sales charge | -0.20 | % | 0.22 | % | 1.59 | % | 2.92 | % | 5.20 | % |
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 maximum sales charge for the 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, 2014
30-Day Yields, A Shares
As of September 30, 2014
Annualized Distribution Yield | 1.98 | % | ||
SEC Yield | 0.94 | % |
Key Portfolio Attributes
As of September 30, 2014
Number of Bonds | 137 | |||
Effective Duration | 2.7 Yrs | |||
Average Maturity | 3.4 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 9.
4 This page is not part of the Annual Report
THORNBURG LIMITED TERM INCOME FUND
The Thornburg Limited Term Income Fund takes the laddering strategy to the broader fixed-income market. Expanding beyond government and agency securities brings additional risks-as well as potentially higher returns. Our team addresses these uncertainties by employing a comprehensive approach to risk management. While utilizing the ladder to balance interest-rate and reinvestment risk, the team also:
• | Invests on a cash-only basis. While leveraged strategies may enhance returns when market conditions are favorable, they can quickly compound losses when sentiment shifts. |
• | Conducts in-depth fundamental research on each credit issue under consideration. The goal of this research is identification of bonds which provide a reasonable return for their given level of risk. |
• | Maintains a portfolio of high-quality bonds and diversifies among a large number of bonds to minimize the potential impact of default by any single issuer. |
Portfolio Managers
Jason Brady, CFA Lon Erickson, CFA
Objectives and Strategies
The Fund’s primary objective is to obtain as high a level of current income as is consistent, in the view of the Fund’s investment advisor, with the preservation of capital. As a secondary goal, the Fund seeks to reduce changes in its share price compared to longer term portfolios.
This Fund is a laddered portfolio primarily composed of short/intermediate debt obligations which are investment grade or judged by the advisor to be of equivalent quality, with an average maturity of normally less than five years.
Long-Term Stability of Principal
Net Asset Value History of A Shares from October 1, 1992 through September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
A Shares (Incep: 10/1/92) | ||||||||||||||||||||
Without sales charge | 3.61 | % | 3.75 | % | 4.65 | % | 4.51 | % | 5.39 | % | ||||||||||
With sales charge | 2.09 | % | 3.23 | % | 4.32 | % | 4.35 | % | 5.32 | % |
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 Class A shares is 1.50%. The total annual operating expenses of Class A shares are 0.88% as disclosed in the most recent Prospectus.
Portfolio Ladder
As of September 30, 2014
30-Day Yields, A Shares
As of September 30, 2014
Annualized Distribution Yield | 1.91 | % | ||
SEC Yield | 1.48 | % |
Key Portfolio Attributes
As of September 30, 2014
Number of Bonds | 461 | |||
Effective Duration | 2.8 Yrs | |||
Average Maturity | 5.2 Yrs |
See the entire portfolio in the Schedule of Investments beginning on page 12.
This page is not part of the Annual Report 5
Thornburg Limited Term Income Funds
September 30, 2014
7 | ||||
9 | ||||
12 | ||||
24 | ||||
26 | ||||
28 | ||||
29 | ||||
30 | ||||
40 | ||||
42 | ||||
44 | ||||
45 | ||||
46 | ||||
47 | ||||
48 | ||||
51 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semi-annual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg Limited Term Income Funds | September 30, 2014 (Unaudited) |
October 14, 2014
Dear Fellow Shareholders:
We are pleased to present the annual report for the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund for the year ended September 30, 2014. The net asset value (NAV) of a Class A share of the Limited Term U.S. Government Fund decreased 9 cents in the period to $13.27. If you were invested for the entire period, you received dividends of 26.2 cents per share. If you reinvested your dividends, you received 26.4 cents per share. The NAV of a Class A share of the Thornburg Limited Term Income Fund increased 7 cents in the period to $13.49. If you were invested for the entire period, you received dividends of 29.7 cents per share. If you reinvested your dividends, you received 30.0 cents per share. Dividends per share were lower or higher depending on the share class expenses as a percentage of NAV to account for varying class-specific expenses. Please examine the accompanying exhibits for more detailed information.
For most of the year, financial-market volatility, at least as expressed by traditional industry metrics, was quite low despite several major economic and world events. The markets largely powered through the U.S. federal-government shutdown, the Federal Reserve’s (the Fed) reduction of asset purchases, a first-quarter GDP decline, Russia’s annexing Crimea and aiding eastern Ukraine separatists, the emergence of ISIS in the Middle East, and an Ebola outbreak. Even several weeks of outflows from high-yield and bank-loan funds negatively impacted only those markets, not other asset classes. Equities and investment-grade fixed income remained strong. However, just as the fiscal year ended, financial markets began to crack a little and volatility increased markedly. Weakening European economies, the threat of deflation on the continent, coupled with slowing Chinese growth and Ebola arriving in the U.S. and Europe, finally drove U.S. stocks (a decline of 4.8% for the month to date in the S&P 500 Index) and U.S. Treasury yields (with the 10-year Treasury yield down 0.30% for the month to date) lower. That said, let’s take a step back and look at the fiscal year just ended.
The U.S. Treasury yield curve flattened over the year. The two-year Treasury yield increased from 0.32% on September 30, 2013, to 0.57% on September 30, 2014. The 10-year U.S. Treasury yield declined from 2.61% to 2.49% over the same period. Why? The Fed began tapering purchases of U.S. Treasuries and U.S. government agency mortgage-backed securities and continued to decrease the amount purchased throughout the year, such that all purchase activity is scheduled to have ended in October 2014. In addition, the Fed began discussing, at least in concept, when it might raise short-term interest rates for the first time this cycle. Both of those events caused short-term rates to rise as expected, but perhaps unexpectedly, longer-term rates fell.
There are an infinite number of potential reasons long rates may have fallen, but let’s look at two. First, the U.S. economy is growing and prices are rising, but neither is particularly robust compared to past cycles. Higher rates could cause the economy to slow and inflation to fall. Long-term rates reflect expected future short-term rates and expected inflation. If the economy slows, then both future short rates and inflation might fall. Today’s long-term rates could be anticipating such an outcome. Second, global economies appear to be weakening and at such junctures, investors tend to migrate to U.S. assets (particularly so called risk-free assets) as a safe haven. So while low relative to itself historically, a U.S. Treasury yield in the 2-2.5% range appears quite attractive relative to the 10-year German Bund at about 1% or the Japanese 10-year bond at about 0.50%. Global investor demand could be driving longer-term U.S. Treasury rates lower.
Meanwhile, credit spreads ground tighter for most of the year. The Barclays U.S. Credit Index Option-Adjusted Spread declined from 135 basis points on September 30, 2013 to 107 basis points on September 30, 2014. Investors’ continued search for income drove most fixed-income sectors tighter/lower in spread and yield. In addition, corporate balance sheets, while marginally weaker year-over-year, are quite strong and supported by robust cash flow generation. Household financial health is also reasonably stable given the improvement in the labor market. Credit spreads did begin to weaken in late summer in sympathy with high yield and bank loans. Those asset classes experienced outflows, driving their spreads and yields markedly wider and higher. Investment-grade credit spreads widened about 10 basis points during this period.
During the fiscal year, we kept the Funds’ durations on the shorter end of their historic ranges, believing the greater risk to be a sudden rise in rates. Short-term rates did rise, but long rates fell, which means this duration position had a negative impact on total return. We maintained our credit overweight, albeit with somewhat of a shift towards structured products (asset-backed securities of one type or another) from corporate bonds, believing a general move up in quality presented a better risk-reward opportunity. Tighter credit spreads meant the Funds benefited from this asset allocation, and moreover, they benefited from the
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 (Unaudited) |
move up in quality, as BBB spreads, in general, increased more than higher-rated bond spreads. Overall, we believe the Funds performed reasonably well in this environment, and more specifically, performed like core bond funds should.
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 1.30% at NAV over the twelve-month period. The Barclays Intermediate Government Bond Index produced a 1.14% total return over the same time period. The average return for the Lipper Short-Intermediate U.S. Government Bond category was 1.07%. The Class A shares of the Thornburg Limited Term Income Fund produced a total return 3.61% at NAV over the twelve-month period. The Barclays Intermediate Government/Credit Bond Index produced a 2.20% total return over the same time period. The return for the Lipper Short-Intermediate Investment Grade Debt category was 1.88%. Both indices reflect no deduction for fees, expenses, or taxes.
As we look forward, we believe significant price increases in high-quality fixed income are unlikely. Benchmark U.S. Treasuries are trading at low yields, and even with their recent backup, credit spreads are still a bit on the tight side. Furthermore, with the global economy, especially those of Europe and China, looking increasingly shaky, market volatility may increase further in the coming months, resulting in a bumpy ride for investors. Nevertheless, we believe your Funds are well positioned to achieve their longer-term goals of price stability and a reasonably attractive income stream, no matter what environment we may be entering. Both Funds are laddered portfolios. The laddering strategy balances duration and yield in a manner designed to provide the best risk-adjusted returns over time. We believe that the Thornburg Limited Term U.S. Government Fund and the Thornburg Limited Term Income Fund continue to be appropriate vehicles for investors looking for core bond investments.
Thank you very much for investing in our Funds.
Sincerely,
![]() | ![]() | |||
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.
8 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
September 30, 2014 |
Summary of Types of Holdings
ISSUER-DESCRIPTION | PRINCIPAL AMOUNT | VALUE | ||||||
U.S. TREASURY SECURITIES — 11.98% | ||||||||
United States Treasury Notes, 2.625%, 12/31/2014 | $ | 2,000,000 | $ | 2,012,744 | ||||
United States Treasury Notes, 1.375%, 11/30/2015 | 2,500,000 | 2,533,887 | ||||||
United States Treasury Notes, 2.625%, 2/29/2016 | 2,000,000 | 2,065,479 | ||||||
United States Treasury Notes, 4.875%, 8/15/2016 | 5,000,000 | 5,400,024 | ||||||
United States Treasury Notes, 4.625%, 2/15/2017 | 4,000,000 | 4,358,516 | ||||||
United States Treasury Notes, 2.25%, 11/30/2017 | 3,500,000 | 3,613,442 | ||||||
United States Treasury Notes, 3.625%, 2/15/2020 | 1,000,000 | 1,090,078 | ||||||
United States Treasury Notes Inflationary Index, 1.875%, 7/15/2015 | 4,899,560 | 5,007,312 | ||||||
United States Treasury Notes Inflationary Index, 2.00%, 1/15/2016 | 6,002,000 | 6,213,703 | ||||||
|
| |||||||
TOTAL U.S. TREASURY SECURITIES (Cost $31,018,695) | 32,295,185 | |||||||
|
| |||||||
U.S. GOVERNMENT AGENCIES — 20.00% | ||||||||
Federal Farm Credit Bank, 3.98%, 1/22/2015 | 1,000,000 | 1,011,736 | ||||||
Federal Home Loan Bank, 5.00%, 12/8/2017 | 3,000,000 | 3,350,217 | ||||||
Federal Home Loan Bank Step Up Coupon, 1.50%, 10/25/2022 | 3,700,000 | 3,537,803 | ||||||
Federal Home Loan Mtg Corp., 4.875%, 6/13/2018 | 3,000,000 | 3,371,875 | ||||||
Federal National Mtg Assoc., 4.40%, 2/19/2015 | 1,585,000 | 1,610,731 | ||||||
a Government of Tunisia, (Guaranty: U.S. Agency for International Development), 1.686%, 7/16/2019 | 5,000,000 | 4,975,000 | ||||||
Mtg-Linked Amortizing Notes, Series 2012-1 Class A10, 2.06%, 1/15/2022 | 922,566 | 933,616 | ||||||
New Valley Generation I, Tennessee Valley Authority, 7.299%, 3/15/2019 | 2,078,774 | 2,357,087 | ||||||
a Petroleos Mexicanos, (Guaranty: Export-Import Bank of the United States), 1.70%, 12/20/2022 | 2,635,000 | 2,580,202 | ||||||
Private Export Funding Corp., (Guaranty: Export-Import Bank of the United States), 5.45%, 9/15/2017 | 3,000,000 | 3,364,116 | ||||||
Small Business Administration Participation Certificates, Series 2001-20D Class 1, 6.35%, 4/1/2021 | 1,851,690 | 2,005,095 | ||||||
Small Business Administration Participation Certificates, Series 2001-20F Class 1, 6.44%, 6/1/2021 | 1,107,574 | 1,208,593 | ||||||
Small Business Administration Participation Certificates, Series 2002-20A Class 1, 6.14%, 1/1/2022 | 659,618 | 713,022 | ||||||
Small Business Administration Participation Certificates, Series 2002-20K Class 1, 5.08%, 11/1/2022 | 726,745 | 779,244 | ||||||
Small Business Administration Participation Certificates, Series 2005-20H Class 1, 5.11%, 8/1/2025 | 570,210 | 616,064 | ||||||
Small Business Administration Participation Certificates, Series 2007-20D Class 1, 5.32%, 4/1/2027 | 1,198,132 | 1,327,408 | ||||||
Small Business Administration Participation Certificates, Series 2007-20F Class 1, 5.71%, 6/1/2027 | 691,325 | 770,176 | ||||||
Small Business Administration Participation Certificates, Series 2007-20I Class 1, 5.56%, 9/1/2027 | 2,267,296 | 2,526,445 | ||||||
Small Business Administration Participation Certificates, Series 2007-20K Class 1, 5.51%, 11/1/2027 | 1,356,173 | 1,508,590 | ||||||
Small Business Administration Participation Certificates, Series 2008-20G Class 1, 5.87%, 7/1/2028 | 3,379,268 | 3,792,389 | ||||||
Small Business Administration Participation Certificates, Series 2011-20G Class 1, 3.74%, 7/1/2031 | 3,195,416 | 3,365,198 | ||||||
Small Business Administration Participation Certificates, Series 2011-20K Class 1, 2.87%, 11/1/2031 | 3,390,017 | 3,425,890 | ||||||
b,c U.S. Department of Transportation, 5.594%, 12/7/2021 | 2,151,720 | 2,356,134 | ||||||
Union 13 Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.87%, 6/28/2024 | 2,488,144 | 2,419,218 | ||||||
|
| |||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $52,600,712) | 53,905,849 | |||||||
|
| |||||||
MORTGAGE BACKED — 59.03% | ||||||||
Federal Home Loan Mtg Corp., CMO Series 1321 Class TE, 7.00%, 8/15/2022 | 217,516 | 239,123 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2420 Class MC, 6.00%, 2/15/2017 | 127,675 | 133,505 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2527 Class BP, 5.00%, 11/15/2017 | 329,136 | 346,419 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2529 Class MB, 5.00%, 11/15/2017 | 352,895 | 370,568 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2553 Class GB, 5.00%, 1/15/2018 | 269,765 | 284,324 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2558 Class BD, 5.00%, 1/15/2018 | 1,209,333 | 1,275,097 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2622 Class PE, 4.50%, 5/15/2018 | 616,241 | 648,878 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2641 Class WE, 4.50%, 1/15/2033 | 133,161 | 139,949 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2642 Class JE, 5.00%, 9/15/2032 | 847,540 | 879,946 |
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2014 |
ISSUER-DESCRIPTION | PRINCIPAL AMOUNT | VALUE | ||||||
Federal Home Loan Mtg Corp., CMO Series 2649 Class QH, 4.50%, 7/15/2018 | $ | 329,525 | $ | 347,360 | ||||
Federal Home Loan Mtg Corp., CMO Series 2692 Class QD, 5.00%, 12/15/2022 | 258,671 | 262,099 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2808 Class VA, 5.50%, 5/15/2015 | 914,435 | 921,516 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00%, 6/15/2019 | 94,945 | 97,201 | ||||||
Federal Home Loan Mtg Corp., CMO Series 2827 Class BU, 3.50%, 7/15/2019 | 1,082,252 | 1,129,893 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3291 Class BY, 4.50%, 3/15/2022 | 1,786,680 | 1,911,465 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3480 Class VA, 6.00%, 6/15/2019 | 1,046,856 | 1,063,869 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3589 Class CA, 4.00%, 10/15/2021 | 372,188 | 388,880 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3640 Class EL, 4.00%, 3/15/2020 | 1,155,204 | 1,215,308 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3678 Class AL, 4.50%, 10/15/2027 | 111,074 | 112,493 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3704 Class DC, 4.00%, 11/15/2036 | 735,590 | 793,642 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3867 Class VA, 4.50%, 3/15/2024 | 2,270,448 | 2,495,730 | ||||||
Federal Home Loan Mtg Corp., CMO Series 3922 Class PQ, 2.00%, 4/15/2041 | 2,011,415 | 2,030,528 | ||||||
Federal Home Loan Mtg Corp., CMO Series 4050 Class MV, 3.50%, 8/15/2023 | 2,883,193 | 3,043,742 | ||||||
Federal Home Loan Mtg Corp., CMO Series 4097 Class TE, 1.75%, 5/15/2039 | 3,376,226 | 3,270,232 | ||||||
Federal Home Loan Mtg Corp., CMO Series 4120 Class TC, 1.50%, 10/15/2027 | 3,946,923 | 3,818,770 | ||||||
Federal Home Loan Mtg Corp., CMO Series 4120 Class UE, 2.00%, 10/15/2027 | 3,893,774 | 3,842,770 | ||||||
Federal Home Loan Mtg Corp., CMO Series K035 Class A1, 2.615%, 3/25/2023 | 3,751,279 | 3,813,107 | ||||||
Federal Home Loan Mtg Corp., CMO Series K037 Class A1, 2.592%, 4/25/2023 | 1,944,120 | 1,973,629 | ||||||
Federal Home Loan Mtg Corp., CMO Series K038 Class A1, 2.604%, 10/25/2023 | 5,930,270 | 6,007,325 | ||||||
Federal Home Loan Mtg Corp., CMO Series K039 Class A1, 2.683%, 12/25/2023 | 2,650,000 | 2,690,199 | ||||||
Federal Home Loan Mtg Corp., CMO Series K709 Class A2, 2.086%, 3/25/2019 | 3,000,000 | 3,013,627 | ||||||
Federal Home Loan Mtg Corp., CMO Series K716 Class A1, 2.413%, 1/25/2021 | 2,000,000 | 2,035,913 | ||||||
Federal Home Loan Mtg Corp., Pool AK6768, 3.00%, 3/1/2027 | 3,133,980 | 3,238,282 | ||||||
Federal Home Loan Mtg Corp., Pool B14155, 3.50%, 5/1/2019 | 239,409 | 251,426 | ||||||
Federal Home Loan Mtg Corp., Pool D37120, 7.00%, 7/1/2023 | 6,915 | 7,744 | ||||||
Federal Home Loan Mtg Corp., Pool D98887, 3.50%, 1/1/2032 | 2,079,872 | 2,164,773 | ||||||
Federal Home Loan Mtg Corp., Pool E96575, 4.50%, 6/1/2018 | 615,321 | 648,851 | ||||||
Federal Home Loan Mtg Corp., Pool G12079, 4.50%, 4/1/2019 | 645,321 | 680,486 | ||||||
Federal Home Loan Mtg Corp., Pool G12140, 4.00%, 2/1/2020 | 176,430 | 186,533 | ||||||
Federal Home Loan Mtg Corp., Pool G13804, 5.00%, 3/1/2025 | 921,794 | 993,714 | ||||||
Federal Home Loan Mtg Corp., Pool J11371, 4.50%, 12/1/2024 | 959,254 | 1,026,514 | ||||||
Federal Home Loan Mtg Corp., Pool J13583, 3.50%, 11/1/2025 | 1,483,224 | 1,564,628 | ||||||
Federal Home Loan Mtg Corp., Pool J14888, 3.50%, 4/1/2026 | 1,476,884 | 1,553,785 | ||||||
Federal Home Loan Mtg Corp., REMIC Series 4072 Class VA, 3.50%, 10/15/2023 | 2,509,558 | 2,648,166 | ||||||
Federal National Mtg Assoc., CMO Series 1993-32 Class H, 6.00%, 3/25/2023 | 26,882 | 29,548 | ||||||
Federal National Mtg Assoc., CMO Series 2003-15 Class CY, 5.00%, 3/25/2018 | 220,115 | 231,801 | ||||||
Federal National Mtg Assoc., CMO Series 2003-4 Class PE, 5.00%, 2/25/2018 | 567,525 | 598,668 | ||||||
Federal National Mtg Assoc., CMO Series 2003-49 Class YD, 5.50%, 6/25/2023 | 249,667 | 256,353 | ||||||
Federal National Mtg Assoc., CMO Series 2003-9 Class DB, 5.00%, 2/25/2018 | 253,273 | 266,996 | ||||||
Federal National Mtg Assoc., CMO Series 2004-33 Class MW, 4.50%, 1/25/2030 | 387,296 | 393,802 | ||||||
Federal National Mtg Assoc., CMO Series 2005-26 Class G, 5.00%, 6/25/2032 | 92,809 | 93,687 | ||||||
Federal National Mtg Assoc., CMO Series 2005-99 Class VA, 5.50%, 11/25/2016 | 549,496 | 556,588 | ||||||
Federal National Mtg Assoc., CMO Series 2009-17 Class AH, 1.532%, 3/25/2039 | 527,419 | 527,622 | ||||||
Federal National Mtg Assoc., CMO Series 2009-49 Class KA, 5.00%, 2/25/2024 | 166,715 | 173,837 | ||||||
Federal National Mtg Assoc., CMO Series 2009-52 Class AJ, 4.00%, 7/25/2024 | 496,932 | 523,798 | ||||||
Federal National Mtg Assoc., CMO Series 2009-70 Class NK, 4.50%, 8/25/2019 | 292,823 | 308,076 | ||||||
Federal National Mtg Assoc., CMO Series 2009-78 Class A, 4.50%, 8/25/2019 | 412,833 | 435,785 | ||||||
Federal National Mtg Assoc., CMO Series 2010-46 Class VM, 5.00%, 5/25/2021 | 1,041,584 | 1,055,250 | ||||||
Federal National Mtg Assoc., CMO Series 2010-6 Class VA, 5.00%, 2/25/2021 | 2,196,467 | 2,268,074 | ||||||
Federal National Mtg Assoc., CMO Series 2010-69 Class EJ, 2.50%, 7/25/2024 | 177,494 | 179,939 | ||||||
Federal National Mtg Assoc., CMO Series 2011-103 Class VA, 4.00%, 12/25/2022 | 2,316,543 | 2,440,629 | ||||||
Federal National Mtg Assoc., CMO Series 2011-110 Class JV, 4.00%, 1/25/2023 | 2,586,577 | 2,724,679 | ||||||
Federal National Mtg Assoc., CMO Series 2011-118 Class V, 4.00%, 10/25/2029 | 2,814,411 | 2,921,248 | ||||||
Federal National Mtg Assoc., CMO Series 2011-124 Class QA, 2.00%, 12/25/2041 | 3,523,500 | 3,322,499 | ||||||
Federal National Mtg Assoc., CMO Series 2011-45 Class VA, 4.00%, 3/25/2024 | 3,126,088 | 3,375,559 | ||||||
Federal National Mtg Assoc., CMO Series 2011-63 Class MV, 3.50%, 7/25/2024 | 3,159,455 | 3,351,279 | ||||||
Federal National Mtg Assoc., CMO Series 2011-70 Class CA, 3.00%, 8/25/2026 | 5,740,027 | 5,743,675 | ||||||
Federal National Mtg Assoc., CMO Series 2011-72 Class KV, 3.50%, 11/25/2022 | 1,808,030 | 1,911,792 | ||||||
Federal National Mtg Assoc., CMO Series 2012-36 Class CV, 4.00%, 6/25/2023 | 3,247,672 | 3,450,046 | ||||||
Federal National Mtg Assoc., Pool 044003, 8.00%, 6/1/2017 | 2,114 | 2,257 | ||||||
Federal National Mtg Assoc., Pool 076388, 9.25%, 9/1/2018 | 9,752 | 10,494 | ||||||
Federal National Mtg Assoc., Pool 252648, 6.50%, 5/1/2022 | 35,586 | 39,747 | ||||||
Federal National Mtg Assoc., Pool 342947, 7.25%, 4/1/2024 | 78,502 | 89,525 | ||||||
Federal National Mtg Assoc., Pool 443909, 6.50%, 9/1/2018 | 18,286 | 19,826 | ||||||
Federal National Mtg Assoc., Pool 555207, 7.00%, 11/1/2017 | 8,150 | 8,966 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term U.S. Government Fund | September 30, 2014 |
ISSUER-DESCRIPTION | PRINCIPAL AMOUNT | VALUE | ||||||
Federal National Mtg Assoc., Pool 726308, 4.00%, 7/1/2018 | $ | 337,817 | $ | 357,585 | ||||
Federal National Mtg Assoc., Pool 889906, 4.00%, 7/1/2023 | 362,132 | 385,020 | ||||||
Federal National Mtg Assoc., Pool 895572, 2.445%, 6/1/2036 | 439,456 | 470,524 | ||||||
Federal National Mtg Assoc., Pool 930986, 4.50%, 4/1/2019 | 630,751 | 666,822 | ||||||
Federal National Mtg Assoc., Pool AA2870, 4.00%, 3/1/2024 | 931,777 | 992,416 | ||||||
Federal National Mtg Assoc., Pool AB7997, 2.50%, 2/1/2023 | 1,773,965 | 1,814,918 | ||||||
Federal National Mtg Assoc., Pool AD8191, 4.00%, 9/1/2025 | 1,366,190 | 1,459,155 | ||||||
Federal National Mtg Assoc., Pool AJ1752, 3.50%, 9/1/2026 | 3,165,659 | 3,346,819 | ||||||
Federal National Mtg Assoc., Pool AK6518, 3.00%, 3/1/2027 | 3,097,945 | 3,208,793 | ||||||
Federal National Mtg Assoc., Pool MA0045, 4.00%, 4/1/2019 | 451,121 | 477,519 | ||||||
Federal National Mtg Assoc., Pool MA0071, 4.50%, 5/1/2019 | 325,315 | 343,919 | ||||||
Federal National Mtg Assoc., Pool MA0125, 4.50%, 7/1/2019 | 265,213 | 280,380 | ||||||
Federal National Mtg Assoc., Pool MA0380, 4.00%, 4/1/2020 | 651,619 | 690,201 | ||||||
Federal National Mtg Assoc., Pool MA1582, 3.50%, 9/1/2043 | 5,680,114 | 5,794,825 | ||||||
Federal National Mtg Assoc., Pool MA1585, 2.00%, 9/1/2023 | 3,452,715 | 3,464,989 | ||||||
Federal National Mtg Assoc., Pool MA1625, 3.00%, 10/1/2023 | 4,209,139 | 4,370,928 | ||||||
Government National Mtg Assoc., CMO Series 2004-45 Class C, 4.905%, 10/16/2033 | 232,213 | 234,629 | ||||||
Government National Mtg Assoc., CMO Series 2005-67 Class C, 4.907%, 3/16/2035 | 741,570 | 771,653 | ||||||
Government National Mtg Assoc., CMO Series 2009-92 Class VA, 5.00%, 10/20/2020 | 972,604 | 1,022,030 | ||||||
Government National Mtg Assoc., CMO Series 2010-160 Class VY, 4.50%, 1/20/2022 | 714,167 | 778,954 | ||||||
Government National Mtg Assoc., Pool 000623, 8.00%, 9/20/2016 | 2,759 | 2,884 | ||||||
Government National Mtg Assoc., Pool 003550, 5.00%, 5/20/2019 | 286,498 | 304,756 | ||||||
Government National Mtg Assoc., Pool 714631, 5.691%, 10/20/2059 | 1,411,474 | 1,495,833 | ||||||
Government National Mtg Assoc., Pool 721652, 5.044%, 5/20/2061 | 4,066,217 | 4,424,690 | ||||||
Government National Mtg Assoc., Pool 751388, 5.307%, 1/20/2061 | 3,027,931 | 3,327,312 | ||||||
Government National Mtg Assoc., Pool 751392, 5.00%, 2/20/2061 | 4,781,456 | 5,329,052 | ||||||
Government National Mtg Assoc., Pool 757313, 4.307%, 12/20/2060 | 6,060,827 | 6,404,918 | ||||||
Government National Mtg Assoc., Pool 894205, 4.00%, 8/20/2039 | 982,219 | 1,030,179 | ||||||
Government National Mtg Assoc., Pool MA0100, 2.50%, 5/20/2042 | 2,900,300 | 2,991,762 | ||||||
|
| |||||||
TOTAL MORTGAGE BACKED (Cost $158,922,163) | 159,117,519 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 4.82% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.15% dated 9/30/2014 due 10/1/2014, repurchase price $13,000,054 collateralized by 19 U.S. Government debt securities, having an average coupon of 3.08%, a minimum credit rating of BBB-, maturity dates from 4/25/2022 to 8/15/2043, and having an aggregate market value of $13,249,436 at 9/30/2014 | 13,000,000 | 13,000,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $13,000,000) | 13,000,000 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 95.83% (Cost $255,541,570) | $ | 258,318,553 | ||||||
OTHER ASSETS LESS LIABILITIES — 4.17% | 11,243,755 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 269,562,308 | ||||||
|
|
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. Most of these securities have been deemed to be liquid for purposes of the Fund’s limitation on investment in illiquid securities. As of September 30, 2014, the aggregate value of these securities in the Fund’s portfolio was $2,356,134, representing 0.87% 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 11
SCHEDULE OF INVESTMENTS | ||
September 30, 2014 |
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.
ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
U.S. TREASURY SECURITIES — 2.06% | ||||||||||
United States Treasury Notes, 2.50% due 3/31/2015 | NR/Aaa | $ | 6,500,000 | $ | 6,578,933 | |||||
United States Treasury Notes, 5.125% due 5/15/2016 | NR/Aaa | 1,000,000 | 1,075,859 | |||||||
United States Treasury Notes, 4.875% due 8/15/2016 | NR/Aaa | 2,000,000 | 2,160,010 | |||||||
United States Treasury Notes, 3.00% due 2/28/2017 | NR/Aaa | 2,000,000 | 2,103,965 | |||||||
United States Treasury Notes, 0.875% due 6/15/2017 | NR/NR | 14,900,000 | 14,863,914 | |||||||
United States Treasury Notes, 1.625% due 3/31/2019 | NR/NR | 15,000,000 | 14,956,641 | |||||||
United States Treasury Notes, 1.50% due 5/31/2019 | NR/NR | 15,000,000 | 14,843,409 | |||||||
United States Treasury Notes, 1.375% due 5/31/2020 | NR/Aaa | 5,000,000 | 4,841,944 | |||||||
United States Treasury Notes, 2.125% due 8/15/2021 | NR/Aaa | 5,000,000 | 4,974,951 | |||||||
|
| |||||||||
TOTAL U.S. TREASURY SECURITIES (Cost $65,900,724) | 66,399,626 | |||||||||
|
| |||||||||
U.S. GOVERNMENT AGENCIES — 9.43% | ||||||||||
a Agribank FCB, 9.125% due 7/15/2019 | A-/NR | 14,185,000 | 18,043,859 | |||||||
Alex Alpha LLC, (Guaranty: Export-Import Bank of the United States), 1.617% due 8/15/2024 | NR/NR | 4,347,826 | 4,186,739 | |||||||
Altitude Investments 12 LLC, (Guaranty: Export-Import Bank of the United States), 2.454% due 12/9/2025 | NR/NR | 6,640,734 | 6,577,507 | |||||||
a CoBank ACB Floating Rate Note (Farm Credit Banks), 0.834% due 6/15/2022 | A-/NR | 26,200,000 | 24,497,000 | |||||||
b Durrah MSN 35603, (Guaranty: Export-Import Bank of the United States), 1.684% due 1/22/2025 | NR/NR | 13,269,029 | 12,741,572 | |||||||
DY8 Leasing LLC, (Guaranty: Export-Import Bank of the United States), 2.627% due 4/29/2026 | NR/NR | 5,018,229 | 5,023,744 | |||||||
Export Leasing (2009) LLC, (Guaranty: Export-Import Bank of the United States), 1.859% due 8/28/2021 | NR/NR | 6,265,702 | 6,241,348 | |||||||
Federal Home Loan Bank Step Up Coupon, 1.50% due 10/25/2022 | AA+/Aaa | 16,000,000 | 15,298,606 | |||||||
b Gate Capital Cayman One Ltd., (Guaranty: Export-Import Bank of the United States), 1.839% due 3/27/2021 | NR/NR | 10,498,432 | 10,519,429 | |||||||
b Government of Tunisia, (Guaranty: U.S. Agency for International Development), 1.686% due 7/16/2019 | NR/NR | 10,000,000 | 9,950,000 | |||||||
Helios Leasing I LLC, (Guaranty: Export-Import Bank of the United States), 1.562% due 9/28/2024 | NR/NR | 5,080,487 | 4,854,619 | |||||||
b Micron Semiconductor Ltd., (Guaranty: Export-Import Bank of the United States), 1.258% due 1/15/2019 | NR/NR | 3,870,000 | 3,865,066 | |||||||
b MSN 41079 and 41084 Ltd., (Guaranty: Export-Import Bank of the United States), 1.717% due 7/13/2024 | NR/NR | 10,179,932 | 9,833,173 | |||||||
Mtg-Linked Amortizing Notes, Series 2012-1 Class A10, 2.06% due 1/15/2022 | AA+/NR | 1,268,528 | 1,283,721 | |||||||
b Petroleos Mexicanos, (Guaranty: Export-Import Bank of the United States), 1.70% due 12/20/2022 | NR/NR | 5,100,000 | 4,993,940 | |||||||
Private Export Funding Corp., (Guaranty: Export-Import Bank of the United States), 3.55% due 1/15/2024 | AA+/Aaa | 10,000,000 | 10,452,780 | |||||||
Private Export Funding Corp., (Guaranty: Export-Import Bank of the United States), 5.45% due 9/15/2017 | AA+/Aaa | 3,000,000 | 3,364,116 | |||||||
Sandalwood 2013 LLC, (Guaranty: Export-Import Bank of the United States), 2.821% due 2/12/2026 | NR/NR | 6,723,775 | 6,780,692 | |||||||
Santa Rosa Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.693% due 8/15/2024 | NR/NR | 5,073,116 | 4,897,612 | |||||||
Santa Rosa Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.472% due 11/3/2024 | NR/NR | 13,855,439 | 13,184,101 | |||||||
Small Business Administration Participation Certificates, Series 2001-20J Class 1, 5.76% due 10/1/2021 | NR/NR | 597,922 | 642,922 | |||||||
Small Business Administration Participation Certificates, Series 2008-20D Class 1, 5.37% due 4/1/2028 | NR/NR | 1,994,581 | 2,196,637 | |||||||
Small Business Administration Participation Certificates, Series 2009-20E Class 1, 4.43% due 5/1/2029 | NR/NR | 1,543,058 | 1,662,225 | |||||||
Small Business Administration Participation Certificates, Series 2009-20K Class 1, 4.09% due 11/1/2029 | NR/NR | 9,154,820 | 9,701,311 | |||||||
Small Business Administration Participation Certificates, Series 2011-20E Class 1, 3.79% due 5/1/2031 | NR/NR | 12,136,862 | 12,807,353 | |||||||
Small Business Administration Participation Certificates, Series 2011-20F Class 1, 3.67% due 6/1/2031 | NR/NR | 1,992,217 | 2,081,051 | |||||||
Small Business Administration Participation Certificates, Series 2011-20G Class 1, 3.74% due 7/1/2031 | NR/NR | 12,781,665 | 13,460,793 | |||||||
Small Business Administration Participation Certificates, Series 2011-20I Class 1, 2.85% due 9/1/2031 | NR/NR | 17,020,853 | 17,111,265 | |||||||
Small Business Administration Participation Certificates, Series 2011-20K Class 1, 2.87% due 11/1/2031 | NR/NR | 13,195,642 | 13,335,278 | |||||||
Small Business Administration Participation Certificates, Series 2012-20D Class 1, 2.67% due 4/1/2032 | NR/NR | 13,257,279 | 13,248,826 | |||||||
Small Business Administration Participation Certificates, Series 2012-20J Class 1, 2.18% due 10/1/2032 | NR/NR | 10,197,075 | 9,843,295 | |||||||
Small Business Administration Participation Certificates, Series 2012-20K Class 1, 2.09% due 11/1/2032 | NR/NR | 6,051,311 | 5,769,482 | |||||||
Small Business Administration, Series 2005-P10A Class 1, 4.638% due 2/10/2015 | NR/NR | 539,607 | 547,163 | |||||||
Southaven Combined Cycle Generation LLC (Tennessee Valley Authority), 3.846% due 8/15/2033 | AA-/Aaa | 6,004,359 | 6,180,064 | |||||||
a,c U.S. Department of Transportation, 5.594% due 12/7/2021 | NR/NR | 1,972,410 | 2,159,789 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
a,c U.S. Department of Transportation, 6.001% due 12/7/2021 | NR/NR | $ | 3,000,000 | $ | 3,360,000 | |||||
Union 13 Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.682% due 12/19/2024 | NR/NR | 12,979,074 | 12,545,538 | |||||||
|
| |||||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $306,924,476) | 303,242,616 | |||||||||
|
| |||||||||
OTHER GOVERNMENT — 3.57% | ||||||||||
a,b Brazilian Development Bank (BNDES), 3.375% due 9/26/2016 | BBB-/Baa2 | 6,000,000 | 6,141,000 | |||||||
a,b Carpintero Finance Ltd., (Guaranty: Export Credits Guarantee Department of the United Kingdom), 2.004% due 9/18/2024 | NR/NR | 9,720,968 | 9,495,860 | |||||||
a,b Carpintero Finance Ltd., (Guaranty: Export Credits Guarantee Department of the United Kingdom), 2.581% due 11/11/2024 | NR/NR | 13,585,188 | 13,809,312 | |||||||
b Corp Andina de Fomento, 3.75% due 1/15/2016 | AA-/Aa3 | 10,900,000 | 11,281,500 | |||||||
a,b Eurasian Development Bank, 5.00% due 9/26/2020 | BBB/A3 | 8,000,000 | 8,100,000 | |||||||
b Export-Import Bank of Korea, 5.875% due 1/14/2015 | A+/Aa3 | 2,900,000 | 2,941,231 | |||||||
a,b Government of Bermuda, 5.603% due 7/20/2020 | AA-/A1 | 3,000,000 | 3,284,273 | |||||||
a,b Government of Bermuda, 4.138% due 1/3/2023 | AA-/A1 | 4,000,000 | 3,936,775 | |||||||
a,b Korea National Oil Corp., 2.75% due 1/23/2019 | A+/A1 | 5,000,000 | 5,054,795 | |||||||
b North American Development Bank, 4.375% due 2/11/2020 | NR/Aa1 | 15,500,000 | 16,609,149 | |||||||
a,b Republic of Iceland, 4.875% due 6/16/2016 | BBB-/Baa3 | 4,375,000 | 4,553,850 | |||||||
a,b Seven and Seven Ltd. Floating Rate Note, (Guaranty: Export-Import Bank of Korea), 1.395% due 9/11/2019 | NR/NR | 22,300,000 | 22,278,704 | |||||||
a,b State of Qatar, 3.125% due 1/20/2017 | AA/Aa2 | 4,000,000 | 4,170,000 | |||||||
a,b Turks and Caicos Islands, 3.20% due 2/22/2016 | NR/NR | 2,930,000 | 3,021,943 | |||||||
|
| |||||||||
TOTAL OTHER GOVERNMENT (Cost $113,855,705) | 114,678,392 | |||||||||
|
| |||||||||
MORTGAGE BACKED — 6.68% | ||||||||||
Federal Home Loan Mtg Corp., CMO Interest Only Series K008 Class X1, 1.814% due 6/25/2020 | NR/NR | 38,040,098 | 2,727,296 | |||||||
Federal Home Loan Mtg Corp., CMO Interest Only Series K710 Class X1, 1.91% due 5/25/2019 | NR/NR | 49,270,651 | 3,411,746 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2528 Class HN, 5.00% due 11/15/2017 | NR/NR | 212,912 | 224,136 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2627 Class GY, 4.50% due 6/15/2018 | NR/NR | 1,235,549 | 1,300,435 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2628 Class AB, 4.50% due 6/15/2018 | NR/NR | 292,084 | 302,146 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2682 Class JG, 4.50% due 10/15/2023 | NR/NR | 1,243,792 | 1,325,685 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2778 Class JD, 5.00% due 12/15/2032 | NR/NR | 56,832 | 57,033 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2808 Class VA, 5.50% due 5/15/2015 | NR/NR | 410,834 | 414,016 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | NR/NR | 94,945 | 97,201 | |||||||
Federal Home Loan Mtg Corp., CMO Series 2827 Class BU, 3.50% due 7/15/2019 | NR/NR | 1,298,702 | 1,355,872 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3195 Class PD, 6.50% due 7/15/2036 | NR/NR | 1,929,697 | 2,137,612 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3291 Class BY, 4.50% due 3/15/2022 | NR/NR | 2,382,240 | 2,548,621 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3504 Class PC, 4.00% due 1/15/2039 | NR/NR | 269,887 | 282,630 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3589 Class CA, 4.00% due 10/15/2021 | NR/NR | 558,283 | 583,320 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3919 Class VB, 4.00% due 8/15/2024 | NR/NR | 4,864,632 | 5,268,887 | |||||||
Federal Home Loan Mtg Corp., CMO Series 3922 Class PQ, 2.00% due 4/15/2041 | NR/NR | 3,017,123 | 3,045,792 | |||||||
Federal Home Loan Mtg Corp., CMO Series 4050 Class MV, 3.50% due 8/15/2023 | NR/NR | 3,294,136 | 3,477,569 | |||||||
Federal Home Loan Mtg Corp., CMO Series 4079 Class WV, 3.50% due 3/15/2027 | NR/NR | 3,348,900 | 3,466,062 | |||||||
Federal Home Loan Mtg Corp., CMO Series 4097 Class TE, 1.75% due 5/15/2039 | NR/NR | 10,128,678 | 9,810,696 | |||||||
Federal Home Loan Mtg Corp., CMO Series 4120 Class TC, 1.50% due 10/15/2027 | NR/NR | 5,125,113 | 4,958,706 | |||||||
Federal Home Loan Mtg Corp., CMO Series K038 Class A1, 2.604% due 10/25/2023 | NR/NR | 13,837,296 | 14,017,092 | |||||||
Federal Home Loan Mtg Corp., CMO Series K039 Class A1, 2.683% due 12/25/2023 | NR/NR | 7,000,000 | 7,106,187 | |||||||
Federal Home Loan Mtg Corp., CMO Series K716 Class A1, 2.413% due 1/25/2021 | NR/Aaa | 6,150,000 | 6,260,431 | |||||||
Federal Home Loan Mtg Corp., Pool D98887, 3.50% due 1/1/2032 | NR/NR | 6,962,362 | �� | 7,246,567 | ||||||
Federal Home Loan Mtg Corp., Pool J17504, 3.00% due 12/1/2026 | NR/NR | 3,317,379 | 3,437,634 | |||||||
Federal Home Loan Mtg Corp., REMIC Series 3838 Class GV, 4.00% due 3/15/2024 | NR/NR | 9,545,574 | 10,195,330 | |||||||
Federal Home Loan Mtg Corp., REMIC Series 4072 Class VA, 3.50% due 10/15/2023 | NR/NR | 2,525,304 | 2,664,781 | |||||||
Federal National Mtg Assoc., CMO Series 2003-4 Class PE, 5.00% due 2/25/2018 | NR/NR | 571,910 | 603,293 | |||||||
Federal National Mtg Assoc., CMO Series 2003-74 Class KN, 4.50% due 8/25/2018 | NR/NR | 234,096 | 247,203 | |||||||
Federal National Mtg Assoc., CMO Series 2004-33 Class MW, 4.50% due 1/25/2030 | NR/NR | 401,066 | 407,803 | |||||||
Federal National Mtg Assoc., CMO Series 2005-48 Class AR, 5.50% due 2/25/2035 | NR/NR | 597,127 | 647,113 | |||||||
Federal National Mtg Assoc., CMO Series 2007-42 Class PA, 5.50% due 4/25/2037 | NR/NR | 800,832 | 862,125 | |||||||
Federal National Mtg Assoc., CMO Series 2009-17 Class AH, 1.532% due 3/25/2039 | NR/NR | 879,032 | 879,369 | |||||||
Federal National Mtg Assoc., CMO Series 2009-49 Class KA, 5.00% due 2/25/2024 | NR/NR | 389,002 | 405,619 | |||||||
Federal National Mtg Assoc., CMO Series 2009-5 Class A, 4.50% due 12/25/2023 | NR/NR | 1,246,074 | 1,317,058 | |||||||
Federal National Mtg Assoc., CMO Series 2009-52 Class AJ, 4.00% due 7/25/2024 | NR/NR | 828,220 | 872,996 | |||||||
Federal National Mtg Assoc., CMO Series 2009-65 Class GA, 4.50% due 11/25/2023 | NR/NR | 162,221 | 166,231 | |||||||
Federal National Mtg Assoc., CMO Series 2009-70 Class NK, 4.50% due 8/25/2019 | NR/NR | 732,057 | 770,191 | |||||||
Federal National Mtg Assoc., CMO Series 2011-103 Class VA, 4.00% due 12/25/2022 | NR/NR | 2,294,922 | 2,417,850 | |||||||
Federal National Mtg Assoc., CMO Series 2011-15 Class VA, 4.00% due 4/25/2022 | NR/NR | 1,446,581 | 1,553,663 | |||||||
Federal National Mtg Assoc., CMO Series 2011-89 Class VA, 4.00% due 9/25/2023 | NR/NR | 4,534,100 | 4,579,445 | |||||||
Federal National Mtg Assoc., CMO Series 2012-129 Class LA, 3.50% due 12/25/2042 | NR/NR | 13,714,909 | 14,175,736 | |||||||
Federal National Mtg Assoc., CMO Series 2012-36 Class CV, 4.00% due 6/25/2023 | NR/NR | 2,962,689 | 3,147,304 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Federal National Mtg Assoc., Pool 357384, 4.50% due 5/1/2018 | NR/NR | $ | 187,314 | $ | 198,026 | |||||
Federal National Mtg Assoc., Pool 897936, 5.50% due 8/1/2021 | NR/NR | 942,088 | 1,018,431 | |||||||
Federal National Mtg Assoc., Pool AB7997, 2.50% due 2/1/2023 | NR/NR | 9,657,837 | 9,880,797 | |||||||
Federal National Mtg Assoc., Pool AK6518, 3.00% due 3/1/2027 | NR/NR | 4,321,239 | 4,475,858 | |||||||
Federal National Mtg Assoc., Pool MA1278, 2.50% due 12/1/2022 | NR/NR | 11,702,235 | 11,972,392 | |||||||
Federal National Mtg Assoc., Pool MA1585, 2.00% due 9/1/2023 | NR/NR | 13,077,160 | 13,123,645 | |||||||
Federal National Mtg Assoc., Pool MA1691, 3.00% due 12/1/2023 | NR/NR | 12,621,909 | 13,107,064 | |||||||
Government National Mtg Assoc., CMO Series 2009-35 Class KV, 4.50% due 6/20/2020 | NR/NR | 2,891,222 | 2,958,837 | |||||||
Government National Mtg Assoc., CMO Series 2009-68 Class DP, 4.50% due 11/16/2038 | NR/NR | 792,798 | 846,641 | |||||||
Government National Mtg Assoc., Pool 003007, 8.50% due 11/20/2015 | NR/NR | 3,180 | 3,253 | |||||||
Government National Mtg Assoc., Pool 714631, 5.691% due 10/20/2059 | NR/NR | 3,810,981 | 4,038,748 | |||||||
Government National Mtg Assoc., Pool 721652, 5.044% due 5/20/2061 | NR/NR | 5,928,359 | 6,450,997 | |||||||
Government National Mtg Assoc., Pool 731491, 5.156% due 12/20/2060 | NR/NR | 3,643,056 | 4,001,128 | |||||||
Government National Mtg Assoc., Pool 751388, 5.307% due 1/20/2061 | NR/NR | 4,758,178 | 5,228,633 | |||||||
Government National Mtg Assoc., Pool 783299, 4.50% due 2/15/2022 | NR/NR | 3,548,204 | 3,762,020 | |||||||
Government National Mtg Assoc., Pool 827148, 1.625% due 2/20/2024 | NR/NR | 23,949 | 24,479 | |||||||
Government National Mtg Assoc., Pool MA0100, 2.50% due 5/20/2042 | NR/NR | 2,929,596 | 3,021,981 | |||||||
|
| |||||||||
TOTAL MORTGAGE BACKED (Cost $214,947,771) | 214,889,412 | |||||||||
|
| |||||||||
ASSET BACKED SECURITIES — 16.17% | ||||||||||
ADVANCE RECEIVABLES — 2.20% | ||||||||||
a HLSS Servicer Advance Receivables Trust, Series 2013-T1 Class A2, 1.495% due 1/16/2046 | AAA/NR | 5,000,000 | 5,000,000 | |||||||
a HLSS Servicer Advance Receivables Trust, Series 2013-T1 Class A3, 2.289% due 1/15/2048 | AAA/NR | 10,000,000 | 9,913,000 | |||||||
a HLSS Servicer Advance Receivables Trust, Series 2013-T3 Class A3, 1.793% due 5/15/2046 | AAA/NR | 8,500,000 | 8,423,721 | |||||||
a HLSS Servicer Advance Receivables Trust, Series 2013-T5 Class AT5, 1.979% due 8/15/2046 | AAA/NR | 10,500,000 | 10,547,880 | |||||||
a HLSS Servicer Advance Receivables Trust, Series 2013-T7 Class A7, 1.981% due 11/15/2046 | AAA/NR | 19,900,000 | 19,937,810 | |||||||
a HLSS Servicer Advance Receivables Trust, Series 2014-T2 Class AT2, 2.217% due 1/15/2047 | AAA/NR | 11,900,000 | 11,967,623 | |||||||
a New Residential Advance Receivables Trust, Series 2014-T1 Class A1, 1.274% due 3/15/2045 | AAA/NR | 4,950,000 | 4,955,445 | |||||||
|
| |||||||||
70,745,479 | ||||||||||
|
| |||||||||
AUTO RECEIVABLES — 1.33% | ||||||||||
a CFC LLC, Series 2013-1A Class A, 1.65% due 7/17/2017 | NR/Aa3 | 555,098 | 556,236 | |||||||
a Exeter Automobile Receivables Trust, Series 2014-1A Class A, 1.29% due 5/15/2018 | AA/NR | 4,971,926 | 4,980,948 | |||||||
Ford Credit Auto Owner Trust, Series 2013-C Class A4, 1.25% due 10/15/2018 | AAA/NR | 1,200,000 | 1,204,014 | |||||||
a GM Financial Automobile Leasing Trust, Series 2014-2A Class A4, 1.62% due 2/20/2018 | NR/Aaa | 13,400,000 | 13,381,709 | |||||||
a,c Oscar US Funding Trust, Series 2014-1A Class A3, 1.72% due 4/15/2019 | AAA/Aaa | 9,900,000 | 9,897,582 | |||||||
Santander Drive Auto Receivables Trust, Series 2012-1 Class B, 2.72% due 5/16/2016 | AA+/Aaa | 653,952 | 654,897 | |||||||
Santander Drive Auto Receivables Trust, Series 2013-2 Class B, 1.33% due 3/15/2018 | AA/Aaa | 7,835,000 | 7,857,501 | |||||||
Santander Drive Auto Receivables Trust, Series 2013-4 Class B, 2.16% due 1/15/2020 | AA/Aaa | 4,000,000 | 4,062,268 | |||||||
|
| |||||||||
42,595,155 | ||||||||||
|
| |||||||||
COMMERCIAL MTG TRUST — 5.92% | ||||||||||
a BAMLL-DB Trust, Series 2012-OSI Class A2FX, 3.352% due 4/13/2029 | NR/Aaa | 14,893,068 | 15,302,121 | |||||||
Banc of America Commercial Mtg Inc., Series 2006-6 Class A3, 5.369% due 10/10/2045 | AAA/Aaa | 3,000,000 | 3,056,521 | |||||||
a BHMS Mtg Trust, Series 2014-ATLS Class AFL Floating Rate Note, 1.656% due 7/5/2033 | NR/NR | 10,000,000 | 9,999,999 | |||||||
a CFCRE Commercial Mtg Trust, Series 2011-C1 Class A4, 4.961% due 4/15/2044 | NR/Aaa | 11,877,000 | 13,209,813 | |||||||
Citigroup Commercial Mtg Trust, Series 2004-HYB2 Class B1, 2.63% due 3/25/2034 | CCC/Caa2 | 300,646 | 244,312 | |||||||
a COMM Mtg Trust, Series 2012-MVP Class A Floating Rate Note, 2.093% due 11/17/2026 | AAA/NR | 15,079,387 | 15,131,742 | |||||||
Credit Suisse Commercial Mtg Capital Certificates, Series 2007-C2 Class A2, 5.448% due 1/15/2049 | AAA/Aaa | 8,184 | 8,166 | |||||||
a DBUBS Mtg Trust CMO, Series 2011-LC1A Class A1, 3.742% due 11/10/2046 | NR/Aaa | 4,858,160 | 5,016,701 | |||||||
a DBUBS Mtg Trust CMO, Series 2011-LC2A Class A1FL, 1.504% due 7/12/2044 | NR/Aaa | 1,047,000 | 1,034,243 | |||||||
a Extended Stay America Trust, Series 2013-ESH7 Class B7, 3.604% due 12/5/2031 | AA-/NR | 11,380,000 | 11,533,503 | |||||||
a FREMF Mtg Trust, Series 2012-KF01 Class B Floating Rate Note, 2.756% due 10/25/2044 | NR/A1 | 4,000,000 | 4,106,515 | |||||||
a FREMF Mtg Trust, Series 2013-KF02 Class B Floating Rate Note, 2.82% due 12/25/2045 | NR/Baa3 | 4,864,792 | 5,027,303 | |||||||
a Hilton USA Trust, Series 2013-HLT Class BFX, 3.367% due 11/5/2030 | AA-/Aa3 | 18,500,000 | 18,797,745 | |||||||
JPMorgan Chase Commercial Mtg, Series 2004-C3 Class A5, 4.878% due 1/15/2042 | NR/Aaa | 4,157,005 | 4,172,893 | |||||||
a JPMorgan Chase Commercial Mtg, Series 2013-JWRZ Class B Floating Rate Note, 1.304% due 4/15/2030 | AA-/Aa3 | 14,900,000 | 14,872,036 | |||||||
a JPMorgan Chase Commercial Mtg, Series 2014-BXH Class A Floating Rate Note, 1.054% due 4/15/2027 | AAA/NR | 19,900,000 | 19,911,232 | |||||||
a Madison Avenue Trust, Series 2013-650M Class A, 3.843% due 10/12/2032 | NR/Aaa | 6,000,000 | 6,308,220 | |||||||
a Morgan Stanley Re-REMIC Trust, Series 2009-GG10 Class A4A, 5.991% due 8/12/2045 | NR/Aaa | 2,468,371 | 2,684,487 | |||||||
a Motel 6 Trust, Series 2012-MTL6 Class A2, 1.948% due 10/5/2025 | AAA/NR | 6,900,000 | 6,817,731 | |||||||
a Motel 6 Trust, Series 2012-MTL6 Class C, 3.139% due 10/5/2025 | A-/NR | 12,000,000 | 11,960,503 | |||||||
a Wells Fargo Commercial Mtg Trust, Series 2013-120B Class A, 2.80% due 3/18/2028 | AAA/NR | 15,000,000 | 14,905,395 | |||||||
WFRBS Commercial Mtg Trust, Series 2014-C22 Class A1, 1.479% due 9/15/2057 | NR/Aaa | 6,140,000 | 6,115,613 | |||||||
|
| |||||||||
190,216,794 | ||||||||||
|
|
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
CREDIT CARD — 0.31% | ||||||||||
a,b Turquoise Card Backed Securities plc, Series 2012-1A Class A Floating Rate Note, 0.954% due 6/17/2019 | NR/Aaa | $ | 10,000,000 | $ | 10,098,330 | |||||
|
| |||||||||
10,098,330 | ||||||||||
|
| |||||||||
OTHER ASSET BACKED — 4.34% | ||||||||||
a 321 Henderson Receivables LLC, Series 2014-1A Class A, 3.96% due 3/15/2063 | NR/Aaa | 6,443,581 | 6,661,575 | |||||||
a Alterna Funding I, LLC, Series 2014-1A, 1.639% due 2/15/2021 | NR/NR | 6,725,836 | 6,709,022 | |||||||
Appalachian Consumer Rate Relief Funding LLC, Series 2013-1 Class A1, 2.008% due 2/1/2024 | AAA/Aaa | 14,307,044 | 14,119,664 | |||||||
a Ascentium Equipment Receivables LLC, Series 2012-1A Class A, 1.83% due 9/15/2019 | NR/NR | 1,272,857 | 1,273,194 | |||||||
a,c Concord Funding Co. LLC, Series 2013-1 Class A, 2.42% due 2/15/2015 | A/NR | 9,900,000 | 9,900,000 | |||||||
a,c Concord Funding Co., LLC, Series 2013-1 Class B, 3.92% due 2/15/2015 | BBB/NR | 4,000,000 | 4,000,000 | |||||||
a,b Cronos Containers Program Ltd., Series 2012-2A Class A, 3.81% due 9/18/2027 | A/NR | 5,360,000 | 5,365,397 | |||||||
a,b Cronos Containers Program Ltd., Series 2013-1A Class A, 3.08% due 4/18/2028 | A/NR | 8,583,333 | 8,517,325 | |||||||
a Dominos Pizza Master Issuer, LLC, Series 2012-1A Class A2, 5.216% due 1/25/2042 | BBB+/Baa1 | 12,435,638 | 13,100,419 | |||||||
a Fairway Outdoor Funding LLC, Series 2012-1A Class A2, 4.212% due 10/15/2042 | NR/NR | 6,628,916 | 6,617,522 | |||||||
a GTP Cellular Sites LLC, 3.721% due 3/15/2042 | NR/NR | 9,312,220 | 9,721,958 | |||||||
Northwest Airlines, Inc., 7.027% due 5/1/2021 | A-/Baa1 | 4,426,669 | 5,073,848 | |||||||
a,c Northwind Holdings, LLC, Series 2007-1A Class A1 Floating Rate Note, 1.014% due 12/1/2037 | A/Baa1 | 3,542,380 | 3,188,142 | |||||||
a PFS Financing Corp., Series 2013-AA Class A Floating Rate Note, 0.704% due 2/15/2018 | AAA/Aaa | 9,345,000 | 9,345,298 | |||||||
a PFS Tax Lien Trust, Series 2014-1, 1.44% due 5/15/2029 | AAA/NR | 4,146,750 | 4,150,117 | |||||||
a Sierra Receivables Funding Co., LLC, Series 2012-2A Class A, 2.05% due 6/20/2031 | A/NR | 5,920,254 | 5,880,585 | |||||||
a Sierra Receivables Funding Co., LLC, Series 2012-1A Class A, 2.84% due 11/20/2028 | A+/NR | 2,687,152 | 2,733,214 | |||||||
a Sierra Receivables Funding Co., LLC, Series 2014-1A Class A, 2.07% due 3/20/2030 | A/NR | 12,433,210 | 12,431,533 | |||||||
a Sonic Capital LLC, Series 2011-1A Class A2, 5.438% due 5/20/2041 | BBB/Baa2 | 4,502,800 | 4,798,440 | |||||||
a,b Trafigura Securitisation Finance plc, Series 2012-1A Class A Floating Rate Note, 2.554% due 10/15/2015 | AAA/Aaa | 6,000,000 | 6,045,756 | |||||||
|
| |||||||||
139,633,009 | ||||||||||
|
| |||||||||
RESIDENTIAL MTG TRUST — 1.11% | ||||||||||
Banc of America Mtg Securities, Inc., Series 2004-4 Class 1A2, 5.50% due 5/25/2034 | A+/NR | 167,057 | 167,421 | |||||||
a Citigroup Mtg Loan Trust, Inc., Series 2014-A Class A, 4.00% due 1/25/2035 | AA/NR | 8,213,244 | 8,466,541 | |||||||
Countrywide Home Loan, Series 2004-HYB2 Class 1A, 2.552% due 7/20/2034 | A/B1 | 420,791 | 426,578 | |||||||
a FDIC Trust, Series 2013-R1 Class A, 1.15% due 3/25/2033 | NR/NR | 5,134,401 | 5,065,668 | |||||||
Merrill Lynch Mtg Investors Trust, Series 2003-E Class B3, 2.405% due 10/25/2028 | CCC/Caa2 | 984,217 | 596,896 | |||||||
Merrill Lynch Mtg Investors Trust, Series 2004-A4 Class M1, 2.461% due 8/25/2034 | CCC/NR | 735,948 | 674,223 | |||||||
Option One Mtg Loan Trust, Series 2005-5 Class A3 Floating Rate Note, 0.365% due 12/25/2035 | AA+/Baa2 | 1,013,294 | 993,860 | |||||||
Popular ABS Mtg Pass-Through Trust, Series 2005-4 Class AF5, 5.537% due 9/25/2035 | BB+/A3 | 3,845,240 | 3,938,857 | |||||||
Residential Asset Mtg Products, Inc., Series 2003-SL1 Class A31, 7.125% due 4/25/2031 | AA+/NR | 1,931,261 | 2,007,014 | |||||||
Residential Asset Mtg Products, Inc., Series 2005-RS3 Class AIA3, 0.455% due 3/25/2035 | NR/Aa3 | 6,768 | 6,752 | |||||||
a Shellpoint Asset Funding Trust, Series 2013-1 Class A1, 3.75% due 7/25/2043 | AAA/NR | 9,839,838 | 9,863,024 | |||||||
Structured Asset Securities Corp., Series 2003-9A Class 2A2, 2.352% due 3/25/2033 | AA+/Baa3 | 2,240,419 | 2,212,531 | |||||||
Structured Asset Securities Corp., Series 2004-3 Class 3A1, 5.50% due 3/25/2019 | A+/Ba2 | 543,309 | 551,047 | |||||||
Washington Mutual Mtg, Series 2003-S13 Class 21A1, 4.50% due 12/25/2018 | A+/NR | 497,255 | 497,175 | |||||||
Wells Fargo Asset Securities Corp., Series 2005-AR1 Class 1B1, 2.615% due 2/25/2035 | D/C | 591,824 | 141,391 | |||||||
|
| |||||||||
35,608,978 | ||||||||||
|
| |||||||||
STUDENT LOAN — 0.96% | ||||||||||
Navient Student Loan Trust, Series 2014-1 Class A3 Floating Rate Note, 0.665% due 6/25/2031 | NR/Aaa | 6,750,000 | 6,750,215 | |||||||
a Nelnet Student Loan Trust, Series 2013-1A Class A Floating Rate Note, 0.755% due 6/25/2041 | NR/Aaa | 12,023,788 | 12,038,566 | |||||||
a Pennsylvania Higher Education Assistance Agency, Series 2012-1A Class A1 Floating Rate Note, 0.706% due 5/25/2027 | AA+/NR | 4,939,381 | 4,966,178 | |||||||
SLM Student Loan Trust, Series 2003-C Class A2 Floating Rate Note, 0.624% due 9/15/2020 | A-/Aaa | 2,022,492 | 2,009,329 | |||||||
a SLM Student Loan Trust, Series 2011-B Class A2, 3.74% due 2/15/2029 | AAA/Aaa | 5,000,000 | 5,248,379 | |||||||
|
| |||||||||
31,012,667 | ||||||||||
|
| |||||||||
TOTAL ASSET BACKED SECURITIES (Cost $518,904,735) | 519,910,412 | |||||||||
|
| |||||||||
CORPORATE BONDS — 45.63% | ||||||||||
AUTOMOBILES & COMPONENTS — 1.35% | ||||||||||
Automobiles — 1.35% | ||||||||||
a American Honda Finance Corp., 2.60% due 9/20/2016 | A+/A1 | 5,000,000 | 5,169,255 | |||||||
a American Honda Finance Corp., 1.00% due 8/11/2015 | A+/A1 | 3,000,000 | 3,015,858 | |||||||
a Daimler Finance North America LLC, 1.25% due 1/11/2016 | A-/A3 | 7,000,000 | 7,047,390 | |||||||
a,b Hyundai Capital Services, Inc., 6.00% due 5/5/2015 | BBB+/Baa1 | 7,900,000 | 8,138,896 | |||||||
a,b Hyundai Capital Services, Inc. Floating Rate Note, 1.034% due 3/18/2017 | BBB+/Baa1 | 5,000,000 | 5,018,165 | |||||||
a Nissan Motor Acceptance Corp., 1.95% due 9/12/2017 | A-/A3 | 14,900,000 | 15,049,730 | |||||||
|
| |||||||||
43,439,294 | ||||||||||
|
|
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
BANKS — 7.46% | ||||||||||
Banks — 6.77% | ||||||||||
a,b ANZ National International Ltd., 3.125% due 8/10/2015 | AA-/Aa3 | $ | 4,000,000 | $ | 4,089,096 | |||||
a,b Banco Bradesco, 4.50% due 1/12/2017 | BBB-/Baa1 | 2,500,000 | 2,621,875 | |||||||
a,b Banco BTG Pactual SA/Cayman Islands N.A., 4.00% due 1/16/2020 | NR/Baa3 | 7,000,000 | 6,597,500 | |||||||
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 Chile Floating Rate Note, 2.108% due 6/7/2018 | A/Aa3 | 21,000,000 | 21,341,250 | |||||||
Bank of America Corp. Floating Rate Note, 1.105% due 4/1/2019 | A-/Baa2 | 8,000,000 | 8,042,152 | |||||||
Bank of America Corp. Floating Rate Note, 1.274% due 1/15/2019 | A-/Baa2 | 4,225,000 | 4,285,253 | |||||||
a,b Bank of China Hong Kong, 3.75% due 11/8/2016 | A+/Aa3 | 4,000,000 | 4,170,684 | |||||||
a,b Barclays Bank plc, 2.50% due 9/21/2015 | AAA/Aaa | 14,650,000 | 14,938,371 | |||||||
a,b Caixa Economica Federal, 4.50% due 10/3/2018 | BBB-/Baa2 | 15,000,000 | 15,307,500 | |||||||
Citigroup, Inc., 2.50% due 7/29/2019 | A-/Baa2 | 2,925,000 | 2,898,935 | |||||||
a,b Danske Bank A/S, 3.75% due 4/1/2015 | A/Baa1 | 4,000,000 | 4,059,100 | |||||||
a,b DNB Bank ASA, 3.20% due 4/3/2017 | A+/A1 | 10,000,000 | 10,439,750 | |||||||
Fifth Third Bank, 2.875% due 10/1/2021 | A-/A3 | 11,600,000 | 11,418,866 | |||||||
a,b HSBC Bank plc, 3.50% due 6/28/2015 | AA-/Aa3 | 2,000,000 | 2,044,982 | |||||||
Manufacturers & Traders Trust Co., 2.30% due 1/30/2019 | A/A2 | 10,000,000 | 10,031,440 | |||||||
a,b Mizuho Bank, Ltd., 2.45% due 4/16/2019 | A+/A1 | 7,000,000 | 6,984,488 | |||||||
National City Bank Floating Rate Note, 0.603% due 6/7/2017 | A-/A3 | 4,000,000 | 3,984,576 | |||||||
a,b Oversea-Chinese Banking Corp. Ltd., 3.15% due 3/11/2023 | A+/Aa3 | 29,650,000 | 29,882,960 | |||||||
b Royal Bank of Scotland Group plc, 9.50% due 3/16/2022 | BB+/NR | 12,000,000 | 13,680,000 | |||||||
a,b Sberbank of Russia, 5.50% due 2/26/2024 | NR/NR | 13,300,000 | 12,003,250 | |||||||
a Sovereign Bank, 12.18% due 6/30/2020 | BBB/A2 | 5,920,404 | 8,045,829 | |||||||
a,b Standard Chartered plc, 3.20% due 5/12/2016 | A+/A2 | 4,900,000 | 5,072,877 | |||||||
Wells Fargo Bank N.A., 0.441% due 5/16/2016 | A+/A1 | 4,629,000 | 4,625,051 | |||||||
b Westpac Banking Corp., 3.00% due 8/4/2015 | AA-/Aa2 | 2,000,000 | 2,043,456 | |||||||
a,b Westpac Banking Corp. Floating Rate Note, 1.033% due 7/17/2015 | NR/Aaa | 5,000,000 | 5,029,545 | |||||||
Thrifts & Mortgage Finance — 0.69% | ||||||||||
a,b Northern Rock Asset Management plc, 5.625% due 6/22/2017 | AAA/Aaa | 19,900,000 | 22,018,156 | |||||||
|
| |||||||||
239,806,942 | ||||||||||
|
| |||||||||
CAPITAL GOODS — 1.76% | ||||||||||
Aerospace & Defense — 0.37% | ||||||||||
Exelis, Inc., 5.55% due 10/1/2021 | BBB-/Ba1 | 11,338,000 | 12,068,111 | |||||||
Construction & Engineering — 0.29% | ||||||||||
URS Corp., 3.85% due 4/1/2017 | BBB-/Baa3 | 8,895,000 | 9,180,627 | |||||||
Industrial Conglomerates — 0.27% | ||||||||||
a,b Hutchison Whampoa Ltd., 3.50% due 1/13/2017 | A-/A3 | 5,000,000 | 5,234,195 | |||||||
a,b Smiths Group plc, 7.20% due 5/15/2019 | BBB+/Baa2 | 3,000,000 | 3,494,295 | |||||||
Machinery — 0.58% | ||||||||||
Aeroquip Vickers, Inc., 6.875% due 4/9/2018 | A-/NR | 1,500,000 | 1,670,368 | |||||||
Ingersoll Rand Co., 6.391% due 11/15/2027 | BBB/Baa2 | 3,000,000 | 3,576,099 | |||||||
a,b Volvo Treasury AB, 5.95% due 4/1/2015 | BBB/Baa2 | 13,000,000 | 13,336,310 | |||||||
Trading Companies & Distributors — 0.25% | ||||||||||
a Aviation Capital Group Corp., 6.75% due 4/6/2021 | BBB-/NR | 3,000,000 | 3,405,000 | |||||||
a Aviation Capital Group Corp., 7.125% due 10/15/2020 | BBB-/NR | 3,912,000 | 4,534,736 | |||||||
|
| |||||||||
56,499,741 | ||||||||||
|
| |||||||||
CONSUMER DURABLES & APPAREL — 0.17% | ||||||||||
Household Durables — 0.09% | ||||||||||
Newell Rubbermaid, Inc., 2.00% due 6/15/2015 | BBB-/Baa3 | 2,900,000 | 2,927,596 | |||||||
Textiles, Apparel & Luxury Goods — 0.08% | ||||||||||
Nike, Inc., 5.15% due 10/15/2015 | AA-/A1 | 2,315,000 | 2,429,012 | |||||||
|
| |||||||||
5,356,608 | ||||||||||
|
| |||||||||
CONSUMER SERVICES — 0.49% | ||||||||||
Diversified Consumer Services — 0.49% | ||||||||||
George Washington University, 4.411% due 9/15/2017 | A+/A1 | 1,650,000 | 1,722,540 | |||||||
Rensselaer Polytechnic I, 5.60% due 9/1/2020 | A-/A3 | 10,925,000 | 12,341,798 | |||||||
University of Chicago, 3.065% due 10/1/2024 | AA/Aa2 | 1,611,000 | 1,608,297 | |||||||
|
| |||||||||
15,672,635 | ||||||||||
|
|
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
DIVERSIFIED FINANCIALS — 7.87% | ||||||||||
Capital Markets — 4.23% | ||||||||||
Ares Capital Corp., 4.875% due 11/30/2018 | BBB/NR | $ | 18,000,000 | $ | 19,007,892 | |||||
a,b BTG Investments LP, 4.50% due 4/17/2018 | NR/NR | 20,000,000 | 19,250,000 | |||||||
a,b Credit Suisse Group AG—Guernsey, 1.625% due 3/6/2015 | NR/Aaa | 13,000,000 | 13,067,210 | |||||||
b Deutsche Bank AG/London, 2.50% due 2/13/2019 | A/A3 | 8,600,000 | 8,645,322 | |||||||
Deutsche Bank Financial LLC, 5.375% due 3/2/2015 | BBB-/Ba1 | 5,000,000 | 5,095,770 | |||||||
FS Investment Corp., 4.00% due 7/15/2019 | BBB/NR | 12,000,000 | 11,988,108 | |||||||
Goldman Sachs Group, Inc. Floating Rate Note, 1.436% due 4/30/2018 | A-/Baa1 | 15,610,000 | 15,951,125 | |||||||
Goldman Sachs Group, Inc. Floating Rate Note, 1.334% due 11/15/2018 | A-/Baa1 | 14,900,000 | 15,158,694 | |||||||
a,b IPIC GMTN Ltd., 3.75% due 3/1/2017 | AA/Aa2 | 3,000,000 | 3,135,000 | |||||||
a,b IPIC GMTN Ltd., 5.50% due 3/1/2022 | AA/Aa2 | 3,500,000 | 4,003,125 | |||||||
a,b IPIC GMTN Ltd., 3.125% due 11/15/2015 | AA/Aa2 | 1,000,000 | 1,019,060 | |||||||
a,b IPIC GMTN Ltd., 5.00% due 11/15/2020 | AA/Aa2 | 1,000,000 | 1,112,500 | |||||||
Legg Mason, Inc., 2.70% due 7/15/2019 | BBB/Baa1 | 1,660,000 | 1,664,924 | |||||||
a,b Macquarie Bank Ltd., 3.45% due 7/27/2015 | A/A2 | 1,900,000 | 1,944,388 | |||||||
a,b Macquarie Bank Ltd., 2.60% due 6/24/2019 | A/A2 | 3,000,000 | 2,997,567 | |||||||
Merrill Lynch & Co., 0.789% due 5/2/2017 | BBB+/Baa3 | 2,500,000 | 2,490,425 | |||||||
b UBS AG Stamford, 2.375% due 8/14/2019 | NR/NR | 9,500,000 | 9,416,571 | |||||||
Consumer Finance — 1.42% | ||||||||||
American Express Credit Co., 2.80% due 9/19/2016 | A-/A2 | 8,000,000 | 8,264,264 | |||||||
Capital One Bank (USA), N.A., 2.30% due 6/5/2019 | BBB+/A3 | 3,000,000 | 2,976,672 | |||||||
Capital One Bank (USA), N.A., 2.95% due 7/23/2021 | BBB+/A3 | 10,000,000 | 9,834,730 | |||||||
a,b Cie Financement Foncier, 2.50% due 9/16/2015 | AAA/Aaa | 6,000,000 | 6,110,838 | |||||||
Synchrony Financial, 1.875% due 8/15/2017 | BBB-/NR | 950,000 | 951,310 | |||||||
Synchrony Financial, 3.00% due 8/15/2019 | BBB-/NR | 1,950,000 | 1,955,345 | |||||||
Synchrony Financial, 3.75% due 8/15/2021 | BBB-/NR | 2,000,000 | 2,018,066 | |||||||
Western Union Co., 3.35% due 5/22/2019 | BBB/Baa2 | 11,350,000 | 11,661,001 | |||||||
Western Union Co., 3.65% due 8/22/2018 | BBB/Baa2 | 2,000,000 | 2,083,108 | |||||||
Diversified Financial Services — 2.22% | ||||||||||
b Barclays Bank plc, 2.50% due 2/20/2019 | A/A2 | 3,000,000 | 3,003,936 | |||||||
a CME Group Index Services, 4.40% due 3/15/2018 | AA-/Aa3 | 4,530,000 | 4,896,957 | |||||||
General Electric Capital Corp. Floating Rate Note, 0.383% due 12/28/2018 | AA+/A1 | 4,850,000 | 4,762,070 | |||||||
General Electric Capital Corp. Floating Rate Note, 1.234% due 3/15/2023 | AA+/A1 | 7,725,000 | 7,756,132 | |||||||
JPMorgan Chase Bank N.A. Floating Rate Note, 0.564% due 6/13/2016 | A/A2 | 16,875,000 | 16,867,946 | |||||||
Moody’s Corp., 4.875% due 2/15/2024 | BBB+/NR | 17,000,000 | 18,333,973 | |||||||
Moody’s Corp., 2.75% due 7/15/2019 | BBB+/NR | 4,875,000 | 4,900,647 | |||||||
National Rural Utilities CFC, 10.375% due 11/1/2018 | A+/A1 | 2,000,000 | 2,633,608 | |||||||
a USAA Capital Corp., 2.25% due 12/13/2016 | AA+/Aa1 | 8,000,000 | 8,219,416 | |||||||
|
| |||||||||
253,177,700 | ||||||||||
|
| |||||||||
ENERGY — 4.68% | ||||||||||
Energy Equipment & Services — 0.12% | ||||||||||
a,b Schahin II Finance Co. (SPV) Ltd., 5.875% due 9/25/2023 | BBB-/Baa3 | 4,226,867 | 4,004,956 | |||||||
Oil, Gas & Consumable Fuels — 4.56% | ||||||||||
a,b BG Energy Capital plc, 2.875% due 10/15/2016 | A-/A2 | 5,000,000 | 5,174,055 | |||||||
b BP Capital Markets plc, 3.875% due 3/10/2015 | A/A2 | 2,000,000 | 2,030,952 | |||||||
Buckeye Partners LP, 4.15% due 7/1/2023 | BBB-/Baa3 | 7,000,000 | 7,020,902 | |||||||
a,b CNPC General Capital Ltd., 1.45% due 4/16/2016 | A+/A1 | 3,000,000 | 2,999,073 | |||||||
a,b CNPC General Capital Ltd., 2.75% due 4/19/2017 | A+/A1 | 5,000,000 | 5,084,975 | |||||||
a,b CNPC General Capital Ltd., 2.75% due 5/14/2019 | A+/A1 | 5,000,000 | 4,979,645 | |||||||
a,b CNPC General Capital Ltd. Floating Rate Note, 1.133% due 5/14/2017 | A+/A1 | 5,000,000 | 5,011,500 | |||||||
Energen Corp., 4.625% due 9/1/2021 | BB/Ba2 | 10,000,000 | 9,802,230 | |||||||
a Florida Gas Transmission Co. LLC, 4.00% due 7/15/2015 | BBB/Baa2 | 2,000,000 | 2,049,558 | |||||||
a,b Gazprom, 4.95% due 5/23/2016 | BBB-/Baa1 | 4,000,000 | 4,050,520 | |||||||
a,b Gazprom Neft OAO, 6.00% due 11/27/2023 | BBB-/Baa2 | 7,000,000 | 6,615,714 | |||||||
Gulf South Pipeline Co. LP, 4.00% due 6/15/2022 | BBB-/Baa1 | 4,000,000 | 4,031,328 | |||||||
a,b Harvest Operations Corp., 2.125% due 5/14/2018 | A+/A1 | 7,000,000 | 6,949,397 | |||||||
a,b Korea National Oil Corp., 4.00% due 10/27/2016 | A+/A1 | 2,000,000 | 2,102,540 | |||||||
a Northern Natural Gas Co., 5.75% due 7/15/2018 | A-/A2 | 50,000 | 56,838 | |||||||
NuStar Logistics LP, 4.75% due 2/1/2022 | BB+/Ba1 | 5,000,000 | 4,875,000 | |||||||
a,b Odebrecht Offshore Drilling Finance Ltd., 6.75% due 10/1/2022 | BBB-/Baa3 | 19,074,000 | 19,789,275 | |||||||
b Petrobras Global Finance B.V. Floating Rate Note, 2.595% due 3/17/2017 | BBB-/Baa1 | 5,750,000 | 5,814,170 | |||||||
b Petroleos Mexicanos Floating Rate Note, 2.254% due 7/18/2018 | BBB+/A3 | 10,000,000 | 10,450,000 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
b Sasol Financing International plc, 4.50% due 11/14/2022 | BBB/Baa1 | $ | 4,000,000 | $ | 4,070,400 | |||||
a Semco Energy, Inc., 5.15% due 4/21/2020 | A-/A2 | 3,000,000 | 3,369,726 | |||||||
a,b Sinopec Capital (2013) Ltd., 1.875% due 4/24/2018 | AA-/Aa3 | 20,000,000 | 19,518,920 | |||||||
a,b Sinopec Group Overseas Development Ltd., 2.75% due 5/17/2017 | AA-/Aa3 | 6,000,000 | 6,149,400 | |||||||
a Texas Gas Transmission LLC, 4.50% due 2/1/2021 | BBB-/Baa1 | 4,480,000 | 4,639,963 | |||||||
|
| |||||||||
150,641,037 | ||||||||||
|
| |||||||||
FOOD, BEVERAGE & TOBACCO — 1.57% | ||||||||||
Beverages — 0.54% | ||||||||||
Coca Cola Enterprises, Inc., 5.71% due 3/18/2037 | AA/NR | 3,380,000 | 3,821,263 | |||||||
b Coca Cola HBC Finance B.V., 5.50% due 9/17/2015 | BBB/Baa1 | 7,885,000 | 8,201,819 | |||||||
a,b Coca Cola Icecek Uretim A.S., 4.75% due 10/1/2018 | NR/Baa3 | 5,000,000 | 5,220,250 | |||||||
Food Products — 0.41% | ||||||||||
Corn Products International, Inc., 3.20% due 11/1/2015 | BBB/Baa2 | 1,000,000 | 1,023,164 | |||||||
Ingredion Inc., 1.80% due 9/25/2017 | BBB/Baa2 | 12,150,000 | 12,199,633 | |||||||
Tobacco — 0.62% | ||||||||||
a,b B.A.T International Finance plc, 2.125% due 6/7/2017 | A-/A3 | 8,000,000 | 8,130,064 | |||||||
Lorillard Tobacco Co., 6.875% due 5/1/2020 | BBB-/Baa2 | 5,000,000 | 5,862,575 | |||||||
Lorillard Tobacco Co., 3.75% due 5/20/2023 | BBB-/Baa2 | 6,230,000 | 6,126,968 | |||||||
|
| |||||||||
50,585,736 | ||||||||||
|
| |||||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.58% | ||||||||||
Health Care Providers & Services — 0.58% | ||||||||||
Catholic Health Initiatives, 1.60% due 11/1/2017 | A+/NR | 1,900,000 | 1,908,324 | |||||||
Catholic Health Initiatives, 2.95% due 11/1/2022 | A+/A1 | 7,000,000 | 6,794,557 | |||||||
Wellpoint, Inc., 2.25% due 8/15/2019 | A-/Baa2 | 10,000,000 | 9,846,270 | |||||||
|
| |||||||||
18,549,151 | ||||||||||
|
| |||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.06% | ||||||||||
Household Products — 0.06% | ||||||||||
Energizer Holdings, Inc., 4.70% due 5/24/2022 | BBB-/Baa3 | 2,000,000 | 2,059,710 | |||||||
|
| |||||||||
2,059,710 | ||||||||||
|
| |||||||||
INSURANCE — 3.04% | ||||||||||
Insurance — 3.04% | ||||||||||
a Forethought Financial Group, Inc., 8.625% due 4/15/2021 | BBB-/Ba1 | 2,600,000 | 2,955,654 | |||||||
Hanover Insurance Group, Inc., 6.375% due 6/15/2021 | BBB-/Baa3 | 2,480,000 | 2,845,316 | |||||||
Infinity Property & Casualty Corp., 5.00% due 9/19/2022 | BBB/Baa2 | 3,000,000 | 3,154,557 | |||||||
a,b Lancashire Holdings Ltd., 5.70% due 10/1/2022 | BBB/Baa2 | 10,000,000 | 10,760,000 | |||||||
Marsh & McLennan Companies, Inc., 3.50% due 3/10/2025 | A-/Baa1 | 5,000,000 | 4,917,055 | |||||||
a MassMutual Global Funding LLC, 2.00% due 4/5/2017 | AA+/Aa2 | 8,000,000 | 8,120,984 | |||||||
a MetLife Institutional Funding II, 1.625% due 4/2/2015 | AA-/Aa3 | 5,000,000 | 5,031,430 | |||||||
a Metropolitan Life Global Funding I, 1.70% due 6/29/2015 | AA-/Aa3 | 4,000,000 | 4,039,052 | |||||||
b Montpelier Re Holdings Ltd., 4.70% due 10/15/2022 | BBB/NR | 5,000,000 | 5,183,535 | |||||||
a Pricoa Global Funding 1, 1.35% due 8/18/2017 | AA-/A1 | 10,000,000 | 9,949,850 | |||||||
a Principal Life Global Funding II, 2.375% due 9/11/2019 | A+/A1 | 2,450,000 | 2,437,882 | |||||||
a Principal Life Global Funding II, 1.50% due 9/11/2017 | A+/A1 | 6,950,000 | 6,946,303 | |||||||
a Principal Life Global Funding II, 1.00% due 12/11/2015 | A+/A1 | 7,000,000 | 7,029,974 | |||||||
a Prudential Covered Trust Co., 2.997% due 9/30/2015 | A/Baa1 | 2,250,000 | 2,296,782 | |||||||
a Reliance Standard Life Insurance Co., 2.50% due 4/24/2019 | A+/A2 | 9,900,000 | 9,903,386 | |||||||
Unitrin, Inc., 6.00% due 11/30/2015 | BBB-/Baa3 | 5,000,000 | 5,263,545 | |||||||
a,b White Mountains Re Group Ltd., 6.375% due 3/20/2017 | BBB/Baa3 | 6,335,000 | 7,022,246 | |||||||
|
| |||||||||
97,857,551 | ||||||||||
|
| |||||||||
MATERIALS — 3.18% | ||||||||||
Chemicals — 0.69% | ||||||||||
a Incitec Pivot Finance LLC, 6.00% due 12/10/2019 | BBB/Baa3 | 4,538,000 | 5,102,305 | |||||||
a,b Incitec Pivot Ltd., 4.00% due 12/7/2015 | BBB/Baa3 | 4,325,000 | 4,461,025 | |||||||
a,b Office Cherifien des Phosphates, 5.625% due 4/25/2024 | BBB-/NR | 12,010,000 | 12,492,802 | |||||||
Construction Materials — 0.02% | ||||||||||
CRH America, Inc., 8.125% due 7/15/2018 | BBB+/Baa2 | 650,000 | 784,745 |
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Metals & Mining — 2.47% | ||||||||||
a,b Anglo American Capital plc, 2.625% due 9/27/2017 | BBB/Baa2 | $ | 9,700,000 | $ | 9,868,615 | |||||
b Anglogold Holdings plc, 5.125% due 8/1/2022 | BB+/Baa3 | 7,000,000 | 6,753,327 | |||||||
b Anglogold Holdings plc, 5.375% due 4/15/2020 | BB+/Baa3 | 9,100,000 | 9,137,401 | |||||||
b ArcelorMittal, 4.25% due 8/5/2015 | BB+/Ba1 | 3,000,000 | 3,048,750 | |||||||
b ArcelorMittal, 5.00% due 2/25/2017 | BB+/Ba1 | 3,000,000 | 3,104,700 | |||||||
a Glencore Funding, LLC Floating Rate Note, 1.594% due 1/15/2019 | BBB/Baa2 | 17,600,000 | 17,731,578 | |||||||
b Kinross Gold Corp., 3.625% due 9/1/2016 | NR/Baa3 | 7,000,000 | 7,244,608 | |||||||
a,b Newcrest Finance Property Ltd., 4.20% due 10/1/2022 | BBB-/Baa3 | 10,459,000 | 9,603,088 | |||||||
a,b Samarco Mineracao S.A., 4.125% due 11/1/2022 | BBB-/NR | 8,000,000 | 7,449,600 | |||||||
a,b Xstrata Finance Canada Ltd., 4.95% due 11/15/2021 | BBB/Baa2 | 5,000,000 | 5,320,825 | |||||||
|
| |||||||||
102,103,369 | ||||||||||
|
| |||||||||
MEDIA — 0.51% | ||||||||||
Media — 0.51% | ||||||||||
DirecTV Holdings LLC/Financing Co., Inc., 4.45% due 4/1/2024 | BBB/Baa2 | 10,000,000 | 10,414,550 | |||||||
The Washington Post Co., 7.25% due 2/1/2019 | BBB/Baa3 | 5,000,000 | 5,793,485 | |||||||
Time Warner Cable, Inc., 8.05% due 1/15/2016 | BBB/Baa2 | 200,000 | 217,517 | |||||||
|
| |||||||||
16,425,552 | ||||||||||
|
| |||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.10% |
| |||||||||
Biotechnology — 0.10% | ||||||||||
Genzyme Corp., 3.625% due 6/15/2015 | AA/A1 | 3,000,000 | 3,068,100 | |||||||
|
| |||||||||
3,068,100 | ||||||||||
|
| |||||||||
REAL ESTATE — 1.55% | ||||||||||
Real Estate Investment Trusts — 1.14% | ||||||||||
Alexandria Real Estate Equities, Inc., 3.90% due 6/15/2023 | BBB-/Baa2 | 11,700,000 | 11,658,641 | |||||||
Commonwealth REIT (HRPT Properties), 6.25% due 6/15/2017 | BBB-/Baa3 | 4,000,000 | 4,357,288 | |||||||
Washington REIT, 4.95% due 10/1/2020 | BBB/Baa2 | 19,100,000 | 20,670,459 | |||||||
Real Estate Management & Development — 0.41% | ||||||||||
a,b Deutsche Annington Finance B.V., 3.20% due 10/2/2017 | BBB/NR | 10,000,000 | 10,243,500 | |||||||
Jones Lang LaSalle, Inc., 4.40% due 11/15/2022 | BBB-/Baa2 | 3,000,000 | 3,064,497 | |||||||
|
| |||||||||
49,994,385 | ||||||||||
|
| |||||||||
RETAILING — 0.96% | ||||||||||
Multiline Retail — 0.75% | ||||||||||
Family Dollar Stores, Inc., 5.00% due 2/1/2021 | BBB-/Baa3 | 23,225,000 | 24,105,808 | |||||||
Specialty Retail — 0.21% | ||||||||||
Advance Auto Parts, Inc., 4.50% due 1/15/2022 | BBB-/Baa3 | 6,400,000 | 6,725,472 | |||||||
|
| |||||||||
30,831,280 | ||||||||||
|
| |||||||||
SOFTWARE & SERVICES — 1.32% | ||||||||||
Information Technology Services — 0.67% | ||||||||||
Broadridge Financial Solutions, Inc., 3.95% due 9/1/2020 | BBB+/Baa1 | 8,000,000 | 8,313,432 | |||||||
SAIC, Inc., 4.45% due 12/1/2020 | BBB-/Baa3 | 2,000,000 | 2,035,178 | |||||||
Total System Services, Inc., 2.375% due 6/1/2018 | BBB+/Baa3 | 11,045,000 | 10,967,365 | |||||||
Internet Software & Services — 0.56% | ||||||||||
Lender Processing Services, Inc./Black Knight Lending Solutions, Inc., 5.75% due 4/15/2023 | BBB-/Baa3 | 12,469,000 | 13,030,105 | |||||||
a,b Tencent Holdings Ltd., 2.00% due 5/2/2017 | A-/A3 | 5,000,000 | 5,002,370 | |||||||
Software — 0.09% | ||||||||||
CA Technologies, Inc., 2.875% due 8/15/2018 | BBB+/Baa2 | 2,925,000 | 2,964,973 | |||||||
|
| |||||||||
42,313,423 | ||||||||||
|
| |||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.92% | ||||||||||
Communications Equipment — 0.46% | ||||||||||
b Ericsson LM, 4.125% due 5/15/2022 | BBB+/Baa1 | 14,300,000 | 14,923,923 | |||||||
Computers & Peripherals — 0.46% | ||||||||||
Hewlett-Packard Co., 3.30% due 12/9/2016 | BBB+/Baa1 | 2,000,000 | 2,086,788 | |||||||
Lexmark International, Inc., 5.125% due 3/15/2020 | BBB-/Baa3 | 12,000,000 | 12,632,208 | |||||||
|
| |||||||||
29,642,919 | ||||||||||
|
|
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
TELECOMMUNICATION SERVICES — 2.34% | ||||||||||
Diversified Telecommunication Services — 1.41% | ||||||||||
AT&T, Inc. Floating Rate Note, 1.148% due 11/27/2018 | A-/A3 | $ | 16,250,000 | $ | 16,535,334 | |||||
a,c Hidden Ridge Facility, 5.65% due 1/1/2022 | NR/Baa2 | 3,284,541 | 3,522,670 | |||||||
Michigan Bell Telephone Co., 7.85% due 1/15/2022 | A-/NR | 3,000,000 | 3,756,117 | |||||||
a,b Qtel International Finance Ltd., 3.375% due 10/14/2016 | A-/A2 | 500,000 | 517,500 | |||||||
Qwest Corp., 6.75% due 12/1/2021 | BBB-/Baa3 | 3,000,000 | 3,439,167 | |||||||
b Telefonica Emisiones SAU, 6.421% due 6/20/2016 | BBB/Baa2 | 9,900,000 | 10,759,350 | |||||||
a Verizon Communications, Inc., 2.625% due 2/21/2020 | BBB+/Baa1 | 4,997,000 | 4,934,313 | |||||||
Verizon Communications, Inc. Floating Rate Note, 1.984% due 9/14/2018 | BBB+/Baa1 | 1,825,000 | 1,922,491 | |||||||
Wireless Telecommunication Services — 0.93% | ||||||||||
a Crown Castle Towers, LLC, 5.495% due 1/15/2037 | NR/A2 | 8,120,000 | 8,691,989 | |||||||
a Crown Castle Towers, LLC, 6.113% due 1/15/2040 | NR/A2 | 4,395,000 | 5,084,026 | |||||||
a SBA Tower Trust, 5.101% due 4/15/2042 | NR/A2 | 2,305,000 | 2,438,745 | |||||||
a Unison Ground Lease Funding LLC, 5.349% due 4/15/2040 | NR/NR | 2,470,000 | 2,628,621 | |||||||
a Unison Ground Lease Funding LLC, 6.392% due 4/15/2040 | NR/NR | 9,640,000 | 10,972,952 | |||||||
|
| |||||||||
75,203,275 | ||||||||||
|
| |||||||||
TRANSPORTATION — 1.26% | ||||||||||
Air Freight & Logistics — 0.10% | ||||||||||
FedEx Corp., 8.76% due 5/22/2015 | BBB/A3 | 43,544 | 44,850 | |||||||
a FedEx Corp., 2.625% due 1/15/2018 | BBB/A3 | 3,043,932 | 3,096,194 | |||||||
Airlines — 0.69% | ||||||||||
American Airlines, 4.95% due 7/15/2024 | A-/NR | 6,873,977 | 7,372,340 | |||||||
a,b BAA Funding Ltd., 2.50% due 6/25/2017 | A-/NR | 5,000,000 | 5,062,490 | |||||||
b,c Iberbond plc, 4.826% due 12/24/2017 | NR/Baa3 | 579,359 | 582,980 | |||||||
US Airways, 6.25% due 10/22/2024 | A-/Baa1 | 6,057,913 | 6,830,297 | |||||||
a,b Virgin Australia, 5.00% due 4/23/2025 | NR/Baa2 | 2,326,221 | 2,425,085 | |||||||
Road & Rail — 0.47% | ||||||||||
a,b Asciano Finance Ltd., 3.125% due 9/23/2015 | BBB-/Baa2 | 2,900,000 | 2,953,453 | |||||||
a,b Asciano Finance Ltd., 5.00% due 4/7/2018 | BBB-/Baa2 | 2,000,000 | 2,154,640 | |||||||
a,b LeasePlan Corp. NV, 2.50% due 5/16/2018 | BBB+/Baa2 | 10,000,000 | 10,030,270 | |||||||
|
| |||||||||
40,552,599 | ||||||||||
|
| |||||||||
UTILITIES — 4.46% | ||||||||||
Electric Utilities — 2.58% | ||||||||||
a,b Electricite de France S.A., 2.15% due 1/22/2019 | NR/NR | 4,900,000 | 4,886,349 | |||||||
a,b Enel Finance International S.A., 6.25% due 9/15/2017 | BBB/Baa2 | 9,500,000 | 10,667,104 | |||||||
Entergy Louisiana LLC, 4.80% due 5/1/2021 | A-/A2 | 4,300,000 | 4,833,187 | |||||||
Entergy Texas, Inc., 7.125% due 2/1/2019 | A-/Baa1 | 2,000,000 | 2,388,052 | |||||||
Entergy Texas, Inc., 3.60% due 6/1/2015 | A-/Baa1 | 3,000,000 | 3,063,402 | |||||||
Idaho Power Corp., 6.025% due 7/15/2018 | A-/A1 | 1,000,000 | 1,130,802 | |||||||
a,b Korea Western Power Co., Ltd., 2.875% due 10/10/2018 | A+/Aa3 | 10,000,000 | 10,135,670 | |||||||
a Monongahela Power Co., 4.10% due 4/15/2024 | BBB+/A3 | 5,000,000 | 5,279,655 | |||||||
a Monongahela Power Co., 5.70% due 3/15/2017 | BBB+/A3 | 4,785,000 | 5,243,757 | |||||||
Public Service Co. of New Mexico, 5.35% due 10/1/2021 | BBB/Baa2 | 3,000,000 | 3,283,719 | |||||||
a Rochester Gas & Electric, 5.90% due 7/15/2019 | A/A2 | 11,732,000 | 13,298,902 | |||||||
a,b State Grid Overseas Investment (2014) Ltd., 2.75% due 5/7/2019 | AA-/Aa3 | 9,000,000 | 9,018,711 | |||||||
a Steelriver Transmission Co. LLC, 4.71% due 6/30/2017 | NR/Baa2 | 3,319,638 | 3,481,148 | |||||||
Toledo Edison Co., 7.25% due 5/1/2020 | BBB/Baa1 | 167,000 | 198,764 | |||||||
a,b Transelec S.A., 4.25% due 1/14/2025 | BBB/Baa1 | 6,000,000 | 5,954,556 | |||||||
Gas Utilities — 0.88% | ||||||||||
a,b APT Pipelines Ltd., 3.875% due 10/11/2022 | BBB/Baa2 | 5,500,000 | 5,506,435 | |||||||
a Southern Star Central Gas Pipeline, Inc., 6.00% due 6/1/2016 | BBB-/Baa3 | 5,715,000 | 6,060,489 | |||||||
The Laclede Group, Inc. Floating Rate Note, 0.982% due 8/15/2017 | BBB+/Baa2 | 16,900,000 | 16,895,116 | |||||||
Independent Power & Renewable Electricity Producers — 0.24% | ||||||||||
a Midland Cogeneration Venture, 6.00% due 3/15/2025 | BBB-/NR | 7,224,576 | 7,745,923 | |||||||
Multi-Utilities — 0.76% | ||||||||||
a Enogex, LLC, 6.25% due 3/15/2020 | BBB-/Baa3 | 3,640,000 | 4,157,779 | |||||||
a,b Korea Hydro & Nuclear Power Co. Ltd., 2.875% due 10/2/2018 | A+/Aa3 | 7,000,000 | 7,103,544 |
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
a Niagara Mohawk Power Corp., 4.881% due 8/15/2019 | A-/A2 | $ | 10,000,000 | $ | 11,085,400 | |||||
SCANA Corp., 4.125% due 2/1/2022 | BBB/Baa3 | 2,000,000 | 2,063,404 | |||||||
|
| |||||||||
143,481,868 | ||||||||||
|
| |||||||||
TOTAL CORPORATE BONDS (Cost $1,432,902,569) | 1,467,262,875 | |||||||||
|
| |||||||||
CONVERTIBLE BONDS — 0.60% | ||||||||||
REAL ESTATE — 0.60% | ||||||||||
Real Estate Investment Trusts — 0.60% | ||||||||||
a IAS Operating Partnership LP, 5.00% due 3/15/2018 | NR/NR | 19,950,000 | 19,152,000 | |||||||
|
| |||||||||
TOTAL CONVERTIBLE BONDS (Cost $19,950,000) | 19,152,000 | |||||||||
|
| |||||||||
MUNICIPAL BONDS — 5.14% | ||||||||||
American Municipal Power Ohio, Inc., 5.072% due 2/15/2018 (Meldahl Hydroelectric) | A/A3 | 5,000,000 | 5,473,500 | |||||||
Anaheim California Public Financing Authority, 5.316% due 9/1/2017 (Anaheim Public Improvements; Insured: Natl-Re/FGIC) | AA-/A1 | 1,440,000 | 1,510,790 | |||||||
Anaheim California Public Financing Authority, 5.486% due 9/1/2020 (Anaheim Public Improvements; Insured: Natl-Re) | AA-/A1 | 3,270,000 | 3,490,006 | |||||||
Brentwood California Infrastructure Financing Authority, 6.16% due 10/1/2019 (Civic Center) | AA-/NR | 2,110,000 | 2,381,072 | |||||||
California Health Facilities Financing Authority, 6.76% due 2/1/2019 (Community Program for Persons with Developmental | ||||||||||
Disabilities) | A/NR | 3,905,000 | 4,233,371 | |||||||
California School Finance Authority, 5.041% due 7/1/2020 (LOC: City National Bank) | AA+/NR | 4,000,000 | 4,153,520 | |||||||
Camden County Improvement Authority, 5.47% due 7/1/2018 (Cooper Medical School of Rowan University) | A+/A2 | 2,140,000 | 2,380,857 | |||||||
Camden County Improvement Authority, 5.62% due 7/1/2019 (Cooper Medical School of Rowan University) | A+/A2 | 3,025,000 | 3,367,793 | |||||||
Carson Redevelopment Agency, 4.511% due 10/1/2016 (Low and Moderate Income Housing) | A-/NR | 2,695,000 | 2,758,548 | |||||||
City and County of San Francisco Redevelopment Financing Authority, 8.00% due 8/1/2019 (San Francisco Redevelopment Projects) | A/Ba1 | 6,500,000 | 7,485,725 | |||||||
City of Fort Collins, Colorado Electric Utility Enterprise, 4.92% due 12/1/2020 (Fort Collins Smart Grid) | AA-/NR | 2,250,000 | 2,468,408 | |||||||
City of North Little Rock, Arkansas, 3.562% due 7/1/2022 (Electric System; Insured: AGM) | AA/NR | 8,185,000 | 8,189,174 | |||||||
City of Riverside, California, 5.61% due 8/1/2017 (City Sewer System) | A/A1 | 2,000,000 | 2,206,940 | |||||||
City of Wilkes-Barre Pennsylvania GO, 4.82% due 11/15/2014 (Insured: AMBAC) | NR/NR | 425,000 | 426,815 | |||||||
Connecticut Housing Finance Authority, 5.071% due 11/15/2019 (Housing Mtg Finance Program) | AAA/Aaa | 2,680,000 | 2,685,923 | |||||||
Denver Public Schools COP, 2.018% due 12/15/2019 (School District No. 1 Educational Facilities) | NR/Aa3 | 3,000,000 | 2,955,810 | |||||||
Finance Authority of Maine, 4.55% due 10/1/2014 (Waste Motor Oil Disposal Site Remediation Program) | A/NR | 365,000 | 365,029 | |||||||
Florida Hurricane Catastrophe Fund Finance Corp., 1.298% due 7/1/2016 (Reimbursement Contracts for Covered Event Losses) | AA-/Aa3 | 7,500,000 | 7,564,875 | |||||||
Florida State Board of Education, 3.60% due 6/1/2015 (Public Education Capital Outlay) | AAA/Aa1 | 3,000,000 | 3,065,730 | |||||||
Illinois Finance Authority, 5.629% due 7/1/2016 (Theory and Computing Sciences Building; Insured: Syncora) | AA-/NR | 755,000 | 786,808 | |||||||
JobsOhio Beverage System, 2.217% due 1/1/2019 (State Liquor Enterprise) | AA/Aa3 | 11,245,000 | 11,193,610 | |||||||
Kentucky Asset/Liability Commission, 2.099% due 4/1/2019 (Commonwealth of Kentucky and Teachers’ Retirement System Funding Obligations) | A+/Aa3 | 3,000,000 | 2,919,720 | |||||||
Los Angeles County California Public Works Financing Authority, 5.591% due 8/1/2020 (Los Angeles County & USC Medical Center Projects) | AA/A1 | 3,000,000 | 3,415,050 | |||||||
Louisiana Local Government Environmental Facilities and Community Development Authority, 1.66% due 2/1/2022 (Louisiana Utilities Restoration) | AAA/Aaa | 8,350,000 | 8,324,449 | |||||||
Louisiana Public Facilities Authority, 5.72% due 7/1/2015 (Black & Gold Facilities Project; Insured: CIFG) | AA/A3 | 300,000 | 298,251 | |||||||
Massachusetts Housing Finance Agency, 1.45% due 12/1/2015 (Multi-Family Residential Development) | A+/Aa3 | 8,550,000 | 8,590,185 | |||||||
a Midwest Family Housing, 5.168% due 7/1/2016 (Insured: CIFG) | AA-/Baa1 | 515,000 | 536,235 | |||||||
Municipal Improvement Corp. of Los Angeles, 6.165% due 11/1/2020 (Public Improvements) | A+/A3 | 10,000,000 | 11,013,400 | |||||||
New York City Transitional Finance Authority, 4.075% due 11/1/2020 (World Trade Center Recovery) | AAA/Aa1 | 2,500,000 | 2,713,850 | |||||||
Oklahoma Development Finance Authority, 8.00% due 5/1/2020 (Cleveland County Industrial Authority (CCIA)—Hitachi Norman, Oklahoma Project) | NR/NR | 6,705,000 | 6,818,449 | |||||||
Orleans Parish School Board GO, 4.40% due 2/1/2021 (Educational Facilities Improvements; Insured: AGM) | AA/A2 | 10,000,000 | 10,680,400 | |||||||
Redevelopment Agency of the City of Oakland, 8.00% due 9/1/2016 (Central District Redevelopment Project) | A-/NR | 4,200,000 | 4,660,572 | |||||||
Redevelopment Agency of the City of Redlands, 5.818% due 8/1/2022 (Redlands Redevelopment Project; Insured: AMBAC) | A-/NR | 1,895,000 | 1,887,534 | |||||||
Redevelopment Agency of the County of San Benardino, 7.135% due 9/1/2020 (San Sevaine Redevelopment Project) | BBB/NR | 1,470,000 | 1,498,445 | |||||||
Rutgers State University GO, 2.342% due 5/1/2019 (New Brunswick, Newark and Camden Campus Facilities ) | AA-/Aa3 | 3,485,000 | 3,437,499 | |||||||
Rutgers State University GO, 3.028% due 5/1/2021 (New Brunswick, Newark and Camden Campus Facilities) | AA-/Aa3 | 1,500,000 | 1,489,470 | |||||||
Sandoval County, New Mexico, 1.452% due 6/1/2017 | A+/NR | 1,000,000 | 1,005,890 | |||||||
Tampa-Hillsborough County Florida Expressway Authority, 2.22% due 7/1/2018 (Electronic Tolling Program) | A/A3 | 2,000,000 | 2,001,400 | |||||||
Tampa-Hillsborough County Florida Expressway Authority, 2.49% due 7/1/2019 (Electronic Tolling Program) | A/A3 | 2,500,000 | 2,452,550 | |||||||
Tampa-Hillsborough County Florida Expressway Authority, 2.84% due 7/1/2020 (Electronic Tolling Program) | A/A3 | 1,750,000 | 1,732,990 | |||||||
Village of Menomonee Falls, Wisconsin GO, 4.25% due 11/1/2014 (Redevelopment TID No. 6) | NR/Aa2 | 3,350,000 | 3,361,055 | |||||||
Wallenpaupack Area School District GO, 3.80% due 9/1/2019 (Pike and Wayne Counties Educational Facilities) (State Aid Withholding) | AA/NR | 3,000,000 | 3,004,800 |
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Limited Term Income Fund | September 30, 2014 |
ISSUER-DESCRIPTION | CREDIT RATING† S&P/ MOODY’S | PRINCIPAL AMOUNT | VALUE | |||||||
Wallenpaupack Area School District GO, 4.00% due 9/1/2020 (Pike and Wayne Counties Educational Facilities) (State Aid Withholding) | AA/NR | $ | 2,750,000 | $ | 2,749,917 | |||||
Wisconsin Health & Educational Facilities Authority, 7.08% due 6/1/2016 (Richland Hospital, Inc. Project) | NR/NR | 535,000 | 527,558 | |||||||
Yuba Levee Financing Authority, 6.375% due 9/1/2021 (Yuba County Levee Financing Project) | AA/NR | 1,000,000 | 1,076,410 | |||||||
|
| |||||||||
TOTAL MUNICIPAL BONDS (Cost $159,040,204) | 165,340,383 | |||||||||
|
| |||||||||
OTHER SECURITIES — 0.59% | ||||||||||
LOAN PARTICIPATIONS — 0.59% | ||||||||||
Freeport-McMoRan Copper & Gold, Inc., 1.66% due 5/31/2018 | NR/NR | 19,000,000 | 18,867,000 | |||||||
|
| |||||||||
TOTAL OTHER SECURITIES (Cost $18,919,951) | 18,867,000 | |||||||||
|
| |||||||||
SHORT TERM INVESTMENTS — 3.39% | ||||||||||
Bank of New York Tri-Party Repurchase Agreement 0.23% dated 9/30/2014 due 10/1/2014, repurchase price $94,000,601 collateralized by 69 corporate debt securities, having an average coupon of 4.76%, a minimum credit rating of BBB-, maturity dates from 2/15/2016 to 6/15/2045, and having an aggregate market value of $100,473,811 at 9/30/2014 | NR/NR | 94,000,000 | 94,000,000 | |||||||
Brown-Forman Corp., 0.13% due 10/1/2014 | NR/NR | 15,000,000 | 15,000,000 | |||||||
|
| |||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $109,000,000) | 109,000,000 | |||||||||
|
| |||||||||
TOTAL INVESTMENTS — 93.26% (Cost $2,960,346,135) | $ | 2,998,742,716 | ||||||||
OTHER ASSETS LESS LIABILITIES — 6.74% | 216,675,846 | |||||||||
|
| |||||||||
NET ASSETS — 100.00% | $ | 3,215,418,562 | ||||||||
|
|
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. Most of these securities have been deemed to be liquid for purposes of the Fund’s limitation on investment in illiquid securities. As of September 30, 2014, the aggregate value of these securities in the Fund’s portfolio was $1,375,763,915, representing 42.79% 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. |
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. | |
CIFG | Insured by CIFG Assurance North America Inc. | |
CMO | Collateralized Mortgage Obligation | |
COP | Certificates of Participation | |
FCB | Farm Credit Bank | |
FGIC | Insured by Financial Guaranty Insurance Co. | |
GO | General Obligation |
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 | |
SPV | Special Purpose Vehicle | |
Syncora | Insured by Syncora Guarantee Inc. | |
VA | Veterans Affairs |
See notes to financial statements.
22 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 23
STATEMENTS OF ASSETS AND LIABILITIES | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
THORNBURG LIMITED TERM U.S. GOVERNMENT FUND | THORNBURG LIMITED TERM INCOME FUND | |||||||
ASSETS | ||||||||
Investments at value (cost $255,541,570 and $2,960,346,135) (Note 2) | $ | 258,318,553 | $ | 2,998,742,716 | ||||
Cash | 10,537,017 | 171,492,228 | ||||||
Receivable for investments sold | – | 1,396,000 | ||||||
Receivable for fund shares sold | 358,321 | 32,094,652 | ||||||
Interest receivable | 1,123,429 | 19,893,548 | ||||||
Prepaid expenses and other assets | 39,245 | 41,718 | ||||||
|
|
|
| |||||
Total Assets | 270,376,565 | 3,223,660,862 | ||||||
|
|
|
| |||||
LIABILITIES | ||||||||
Payable for fund shares redeemed | 471,245 | 5,292,280 | ||||||
Payable to investment advisor and other affiliates (Note 3) | 150,744 | 1,649,961 | ||||||
Accounts payable and accrued expenses | 92,152 | 566,702 | ||||||
Dividends payable | 100,116 | 733,357 | ||||||
|
|
|
| |||||
Total Liabilities | 814,257 | 8,242,300 | ||||||
|
|
|
| |||||
NET ASSETS | $ | 269,562,308 | $ | 3,215,418,562 | ||||
|
|
|
| |||||
NET ASSETS CONSIST OF | ||||||||
Undistributed (distribution in excess of) net investment income | $ | 64,362 | $ | (141,972 | ) | |||
Net unrealized appreciation on investments | 2,776,983 | 38,396,581 | ||||||
Accumulated net realized gain (loss) | (7,574,719 | ) | 17,232,594 | |||||
Net capital paid in on shares of beneficial interest | 274,295,682 | 3,159,931,359 | ||||||
|
|
|
| |||||
$ | 269,562,308 | $ | 3,215,418,562 | |||||
|
|
|
|
24 Certified Annual Report
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
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 ($132,915,796 and $906,708,018 applicable to 10,015,130 and 67,225,365 shares of beneficial interest outstanding - Note 4) | $ | 13.27 | $ | 13.49 | ||||
Maximum sales charge, 1.50% of offering price | 0.20 | 0.21 | ||||||
|
|
|
| |||||
Maximum offering price per share | $ | 13.47 | $ | 13.70 | ||||
|
|
|
| |||||
Class B Shares: | ||||||||
Net asset value per share ($713,817 applicable to 53,907 shares of beneficial interest outstanding - Note 4) | $ | 13.24 | $ | — | ||||
|
|
|
| |||||
Class C Shares: | ||||||||
Net asset value and offering price per share* ($51,001,502 and $593,657,475 applicable to 3,819,741 and 44,085,990 shares of beneficial interest outstanding - Note 4) | $ | 13.35 | $ | 13.47 | ||||
|
|
|
| |||||
Class I Shares: | ||||||||
Net asset value, offering and redemption price per share ($69,309,049 and $1,578,167,947 applicable to 5,222,455 and 116,989,726 shares of beneficial interest outstanding - Note 4) | $ | 13.27 | $ | 13.49 | ||||
|
|
|
| |||||
Class R3 Shares: | ||||||||
Net asset value, offering and redemption price per share ($13,748,419 and $120,012,980 applicable to 1,035,268 and 8,891,588 shares of beneficial interest outstanding - Note 4) | $ | 13.28 | $ | 13.50 | ||||
|
|
|
| |||||
Class R4 Shares: | ||||||||
Net asset value, offering and redemption price per share ($15,112 and $46,699 applicable to 1,139 and 3,464 shares of beneficial interest outstanding - Note 4) | $ | 13.27 | $ | 13.48 | ||||
|
|
|
| |||||
Class R5 Shares: | ||||||||
Net asset value, offering and redemption price per share ($1,858,613 and $16,825,443 applicable to 140,012 and 1,247,458 shares of beneficial interest outstanding - Note 4) | $ | 13.27 | $ | 13.49 | ||||
|
|
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 25
STATEMENTS OF OPERATIONS | ||
Thornburg Limited Term Income Funds | Year Ended September 30, 2014 |
THORNBURG LIMITED TERM U.S. GOVERNMENT FUND | THORNBURG LIMITED TERM INCOME FUND | |||||||
INVESTMENT INCOME | ||||||||
Interest income (net of premium amortized of $1,054,365 and $8,073,897 and net of paydown losses of $1,993,189 and $2,278,027, respectively) | $ | 6,764,514 | $ | 91,760,163 | ||||
|
|
|
| |||||
EXPENSES | ||||||||
Investment advisory fees (Note 3) | 1,085,240 | 11,318,690 | ||||||
Administration fees (Note 3) | ||||||||
Class A Shares | 180,425 | 1,177,924 | ||||||
Class B Shares | 1,311 | — | ||||||
Class C Shares | 75,954 | 750,321 | ||||||
Class I Shares | 33,724 | 682,230 | ||||||
Class R3 Shares | 18,468 | 132,285 | ||||||
Class R4 Shares | 12 | 13 | ||||||
Class R5 Shares | 506 | 6,042 | ||||||
Distribution and service fees (Note 3) | ||||||||
Class A Shares | 360,850 | 2,355,848 | ||||||
Class B Shares | 10,436 | — | ||||||
Class C Shares | 302,751 | 3,000,509 | ||||||
Class R3 Shares | 73,808 | 529,214 | ||||||
Class R4 Shares | 25 | 26 | ||||||
Transfer agent fees | ||||||||
Class A Shares | 133,500 | 988,470 | ||||||
Class B Shares | 5,579 | — | ||||||
Class C Shares | 62,857 | 472,292 | ||||||
Class I Shares | 60,302 | 1,067,260 | ||||||
Class R3 Shares | 19,057 | 80,835 | ||||||
Class R4 Shares | 2,813 | 2,876 | ||||||
Class R5 Shares | 2,776 | 8,623 | ||||||
Registration and filing fees | ||||||||
Class A Shares | 43,600 | 62,482 | ||||||
Class B Shares | 15,752 | — | ||||||
Class C Shares | 17,878 | 33,073 | ||||||
Class I Shares | 20,925 | 80,733 | ||||||
Class R3 Shares | 17,256 | 19,473 | ||||||
Class R4 Shares | 3,540 | 3,540 | ||||||
Class R5 Shares | 21,246 | 23,024 | ||||||
Custodian fees (Note 3) | 88,073 | 305,716 | ||||||
Professional fees | 51,259 | 99,330 | ||||||
Accounting fees | 10,680 | 107,950 | ||||||
Trustee fees | 11,313 | 104,380 | ||||||
Other expenses | 35,071 | 284,738 | ||||||
|
|
|
| |||||
Total Expenses | 2,766,987 | 23,697,897 | ||||||
Less: | ||||||||
Expenses reimbursed by investment advisor (Note 3) | (110,117 | ) | (156,737 | ) | ||||
Fees paid indirectly (Note 3) | (3,939 | ) | (5,676 | ) | ||||
|
|
|
| |||||
Net Expenses | 2,652,931 | 23,535,484 | ||||||
|
|
|
| |||||
Net Investment Income | $ | 4,111,583 | $ | 68,224,679 | ||||
|
|
|
|
26 Certified Annual Report
STATEMENTS OF OPERATIONS, CONTINUED | ||
Thornburg Limited Term Income Funds | Year Ended September 30, 2014 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||
Net realized gain (loss) on investments | $ | (263,393 | ) | $ | 22,349,977 | |||
Net change in unrealized appreciation (depreciation) of investments | (219,886 | ) | 19,198,183 | |||||
|
|
|
| |||||
Net Realized and Unrealized Gain (Loss) | (483,279 | ) | 41,548,160 | |||||
|
|
|
| |||||
Net Increase in Net Assets Resulting from Operations | $ | 3,628,304 | $ | 109,772,839 | ||||
|
|
|
|
See notes to financial statements.
Certified Annual Report 27
STATEMENTS OF CHANGES IN NET ASSETS | ||
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 4,111,583 | $ | 5,697,395 | ||||
Net realized gain (loss) on investments | (263,393 | ) | 626,725 | |||||
Net unrealized appreciation (depreciation) on investments | (219,886 | ) | (11,595,653 | ) | ||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,628,304 | (5,271,533 | ) | |||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | (2,819,935 | ) | (4,531,628 | ) | ||||
Class B Shares | (4,853 | ) | (24,774 | ) | ||||
Class C Shares | (1,014,665 | ) | (1,885,254 | ) | ||||
Class I Shares | (1,533,758 | ) | (2,383,641 | ) | ||||
Class R3 Shares | (280,108 | ) | (347,980 | ) | ||||
Class R4 Shares | (219 | ) | — | |||||
Class R5 Shares | (22,390 | ) | (7,818 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (25,279,558 | ) | (48,398,759 | ) | ||||
Class B Shares | (663,906 | ) | (1,982,954 | ) | ||||
Class C Shares | (22,460,082 | ) | (25,554,347 | ) | ||||
Class I Shares | (3,849,985 | ) | (21,174,045 | ) | ||||
Class R3 Shares | (1,502,345 | ) | 446,203 | |||||
Class R4 Shares | 15,217 | — | ||||||
Class R5 Shares | 989,013 | 589,772 | ||||||
|
|
|
| |||||
Net Decrease in Net Assets | (54,799,270 | ) | (110,526,758 | ) | ||||
NET ASSETS | ||||||||
Beginning of Year | 324,361,578 | 434,888,336 | ||||||
|
|
|
| |||||
End of Year | $ | 269,562,308 | $ | 324,361,578 | ||||
|
|
|
| |||||
Undistributed (distribution in excess of) net investment income | $ | 64,362 | $ | (39,963 | ) |
See notes to financial statements.
28 Certified Annual Report
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Limited Term Income Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 68,224,679 | $ | 72,638,282 | ||||
Net realized gain (loss) on investments | 22,349,977 | 28,225,169 | ||||||
Net unrealized appreciation (depreciation) on investments | 19,198,183 | (83,862,744 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 109,772,839 | 17,000,707 | ||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | (20,844,311 | ) | (27,240,915 | ) | ||||
Class C Shares | (11,944,153 | ) | (14,464,450 | ) | ||||
Class I Shares | (34,874,369 | ) | (32,980,072 | ) | ||||
Class R3 Shares | (2,227,898 | ) | (1,861,254 | ) | ||||
Class R4 Shares | (219 | ) | — | |||||
Class R5 Shares | (295,723 | ) | (125,608 | ) | ||||
From realized gains | ||||||||
Class A Shares | (8,162,458 | ) | (4,830,257 | ) | ||||
Class C Shares | (5,067,874 | ) | (2,753,549 | ) | ||||
Class I Shares | (10,507,616 | ) | (4,644,607 | ) | ||||
Class R3 Shares | (758,459 | ) | (328,154 | ) | ||||
Class R5 Shares | (61,655 | ) | (7,863 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (127,630,504 | ) | 6,646,964 | |||||
Class C Shares | (42,344,263 | ) | 44,122,175 | |||||
Class I Shares | 311,080,157 | 276,724,852 | ||||||
Class R3 Shares | 37,870,291 | 10,072,568 | ||||||
Class R4 Shares | 46,653 | — | ||||||
Class R5 Shares | 8,559,767 | 6,994,597 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 202,610,205 | 272,325,134 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 3,012,808,357 | 2,740,483,223 | ||||||
|
|
|
| |||||
End of Year | $ | 3,215,418,562 | $ | 3,012,808,357 | ||||
|
|
|
| |||||
Distribution in excess of net investment income | $ | (141,972 | ) | $ | (673,030 | ) |
See notes to financial statements.
Certified Annual Report 29
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
NOTE 1 – ORGANIZATION
Thornburg Limited Term U.S. Government Fund (the “Government Fund”) and Thornburg Limited Term Income Fund (the “Income Fund”), collectively 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 eighteen 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 seven classes of shares of beneficial interest: Class A, Class B, Class C, Institutional Class (“Class I”), and Retirement Classes (“Class R3,” “Class R4,” and “Class R5”). The Government Fund no longer offers Class B shares for sale. The Income 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 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 and Class R5 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 R4 shares are sold at net asset value without sales charge at the time of purchase, but bear a service fee, 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 allocable 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 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. 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.
Valuation of Investments: Debt obligations held by the Funds have a primary over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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, which may include the use of a price obtained from a different independent pricing service. Additionally, in any case when 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 use an alternative method to determine a fair value for the debt obligation.
30 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
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 from 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 the 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 (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).
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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Funds may receive a price that is lower than the valuation when it sells the investment.
GOVERNMENT FUND
The following table displays a summary of the fair value hierarchy measurements of the Government Fund’s net investments as of September 30, 2014. 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, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3(a) | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
U.S. Treasury Securities | $ | 32,295,185 | $ | 32,295,185 | $ | — | $ | — | ||||||||
U.S. Government Agencies | 53,905,849 | — | 51,549,715 | 2,356,134 | ||||||||||||
Mortgage Backed | 159,117,519 | — | 159,117,519 | — | ||||||||||||
Short Term Investments | 13,000,000 | — | 13,000,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 258,318,553 | $ | 32,295,185 | $ | 223,667,234 | $ | 2,356,134 |
(a) | In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04 (“ASU No. 2011-04”), a portfolio security characterized as a Level 3 investment representing $2,356,134 market value in U.S. Government Agencies was fair valued by the Committee based upon current market prices/yield of comparable securities using a yield of 3.074%. |
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 the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014.
Certified Annual Report 31
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2014 is as follows:
U.S. GOVERNMENT AGENCIES | TOTAL(d) | |||||||||
Beginning Balance 9/30/2013 | $ | 2,604,074 | $ | 2,604,074 | ||||||
Accrued Discounts (Premiums) | 3,132 | 3,132 | ||||||||
Net Realized Gain (Loss)(a) | 2,070 | 2,070 | ||||||||
Gross Purchases | — | — | ||||||||
Gross Sales | (179,247 | ) | (179,247 | ) | ||||||
Net Change in Unrealized | ||||||||||
Appreciation (Depreciation)(b)(c) | (73,895 | ) | (73,895 | ) | ||||||
Transfers into Level 3 | — | — | ||||||||
Transfers out of Level 3 | — | — | ||||||||
|
|
|
| |||||||
Ending Balance 9/30/2014 | $ | 2,356,134 | $ | 2,356,134 |
(a) | Amount of Net Realized Gain (Loss) recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2014. |
(b) | Amount of Net Change in Unrealized Appreciation (Depreciation) recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2014. |
(c) | The Net Change in Unrealized Appreciation (Depreciation) attributable to securities held at September 30, 2014, which were fair valued using significant unobservable inputs (Level 3) was negative $73,895. This is included within the net change in unrealized appreciation (depreciation) on investments in the Fund’s Statement of Operations. |
(d) | Level 3 investments represent 0.87% of total Net Assets at the year ended September 30, 2014. 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. |
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, 2014. 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, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3(a) | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities | ||||||||||||||||
U.S. Treasury Securities | $ | 66,399,626 | $ | 66,399,626 | $ | — | $ | — | ||||||||
U.S. Government Agencies | 303,242,616 | — | 297,722,827 | 5,519,789 | ||||||||||||
Other Government | 114,678,392 | — | 100,869,080 | 13,809,312 | ||||||||||||
Mortgage Backed | 214,889,412 | — | 214,889,412 | — | ||||||||||||
Asset Backed Securities | 519,910,412 | — | 497,756,602 | 22,153,810 | ||||||||||||
Corporate Bonds | 1,467,262,875 | — | 1,463,157,225 | 4,105,650 | ||||||||||||
Convertible Bonds | 19,152,000 | — | 19,152,000 | — | ||||||||||||
Municipal Bonds | 165,340,383 | — | 165,340,383 | — | ||||||||||||
Other Securities | 18,867,000 | — | 18,867,000 | — | ||||||||||||
Short Term Investments | 109,000,000 | — | 109,000,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 2,998,742,716 | $ | 66,399,626 | $ | 2,886,754,529 | $ | 45,588,561 |
(a) | In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04 (“ASU No. 2011-04”), unadjusted broker quotes and vendor prices were applied to portfolio securities characterized as Level 3 investments at September 30, 2014. Portfolio securities characterized as Level 3 investments representing $5,519,789 market value in U.S. Government Agencies were fair valued by the Committee using yields at a range of 3.074%-4.107% (weighted average of 3.591%) based upon current market prices/yields of comparable securities. Investments representing $13,900,000 market value in Asset Backed Securities were fair valued by the Committee using an income approach based upon the present value of anticipated future cash flows with discounted internal rates of return at 2.4% and 4.2% (weighted average of 3.3%) provided by a third party expert provider. |
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 the underlying events which caused the movement. The Fund recognized no transfers between Levels 1 and 2 for the year ended September 30, 2014.
32 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2014 is as follows:
ASSET BACKED SECURITIES | CORPORATE BONDS | U.S. & OTHER GOVERNMENT | TOTAL(e) | |||||||||||||
Beginning Balance 9/30/2013 | $ | 17,301,500 | $ | 7,169,575 | $ | 46,112,272 | $ | 70,583,347 | ||||||||
Accrued Discounts (Premiums) | 23,340 | 10,164 | (33,785 | ) | (281 | ) | ||||||||||
Net Realized Gain (Loss)(a) | 63,368 | 47,006 | 2,078 | 112,452 | ||||||||||||
Gross Purchases | — | — | — | — | ||||||||||||
Gross Sales | (1,518,021 | ) | (2,925,145 | ) | (1,299,954 | ) | (5,743,120 | ) | ||||||||
Net Change in Unrealized | ||||||||||||||||
Appreciation (Depreciation)(b)(c) | 181,302 | (195,950 | ) | 351,854 | 337,206 | |||||||||||
Transfers into Level 3(d) | 6,102,321 | — | — | 6,102,321 | ||||||||||||
Transfers out of Level 3(d) | — | — | (25,803,364 | ) | (25,803,364 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending Balance 9/30/2014 | $ | 22,153,810 | $ | 4,105,650 | $ | 19,329,101 | $ | 45,588,561 |
(a) | Amount of Net Realized Gain (Loss) recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2014. |
(b) | Amount of Net Change in Unrealized Appreciation (Depreciation) recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2014. |
(c) | The Net Change in Unrealized Appreciation (Depreciation) attributable to securities held at September 30, 2014, which were fair valued using significant unobservable inputs (Level 3) was $337,206. This is included within the net change in unrealized appreciation (depreciation) on investments in the Fund’s Statement of Operations. |
(d) | Transfers into or out of Level 3 were out of or into Level 2, and were due to changes in other significant observable inputs available during the year ended September 30, 2014. Transfers into or out of Level 3 are based on the beginning market value of the period in which they occurred. |
(e) | Level 3 investments represent 1.42% of total Net Assets at the year ended September 30, 2014. 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. |
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, 2014, management has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities. The Funds’ tax returns remain subject to examination for three years after filing.
When-Issued and Delayed Delivery Transactions: The Funds may engage in when-issued or delayed delivery transactions. To the extent a Fund engages in such transactions, it will do so for the purpose of acquiring portfolio securities consistent with the Fund’s investment objectives and not for the purpose of investment leverage or to speculate on interest rate and/or market changes. At the time a Fund makes a commitment to purchase a security on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining the Fund’s net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio securities to be purchased will be segregated on the Fund’s records at the trade date. Securities purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date.
Dividends: Net investment income of the Funds 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 by entering into repurchase agreements under which the Funds deliver cash to a counterparty, the counterparty delivers securities as collateral, and the Funds are obligated to resell that collateral to the counterparty at an agreed upon price at the maturity date of the repurchase agreement. Securities pledged as collateral under repurchase agreements are held in custody with a third party custodian 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 counterparty’s obligations. Under certain circumstances, in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
Certified Annual Report 33
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
General: Investment transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and discounts on securities purchased are amortized over the life of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. The Funds invest in various mortgage-backed securities. Such securities pay interest and a portion of principal each month, which is then available for investment in securities at prevailing prices. Paydown gains and losses on these securities are included in interest income. Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of shares at the beginning of the day (after adjusting for the current share activity of the respective class). Expenses common to all Funds are allocated among the Funds comprising the Trust based upon their relative net asset values or other appropriate allocation methods.
Foreign Currency Translation: With respect to the Income Fund, portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of portfolio securities and interest denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. 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 securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of interest recorded on the Income Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid.
Guarantees and Indemnifications: Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. Additionally, in the normal course of business the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown. However, based on experience, the Trust expects the risk of loss to be remote.
Use of Estimates: The preparation of financial statements, in conformity with 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 for the Funds for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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, Class R3, and Class R4 shares, and up to .05 of 1% per annum of the average daily net assets attributable to Class I and 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 each Fund’s shares. For the year ended September 30, 2014, the Distributor has advised the Funds that they earned no net commissions from the sale of Class A shares of the Government Fund and earned $4,220 from the sale of Class A shares of the Income Fund, and collected contingent deferred sales charges aggregating $2,880 and $46,535 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 applicable Class A, Class B, Class C, Class I, Class R3, and Class R4 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, 2014, there were no 12b-1 service plan fees charged for Class I or Class R5 shares. The Advisor may pay out of its own resources additional expenses for distribution of each Fund’s shares and shareholder services.
The Trust has also adopted distribution plans pursuant to Rule 12b-1, applicable to each Fund’s Class C and Class R3 shares, 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
34 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
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, 2014, are set forth in the Statements of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Funds so that actual Class B, Class R3, Class R4, and Class R5 of the Government Fund do not exceed 2.50%, 0.99%, 0.99%, and 0.67% respectively and the Class R3, Class R4, and Class R5 of the Income Fund do not exceed 0.99%, 0.99%, and 0.67% respectively. The agreements may be terminated by the Funds at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Funds or the Distributor ceases to be the distributor of the Funds prior to that date. The Advisor and Distributor retain the right to be repaid by the Funds for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually reimbursed certain class specific expenses and administrative fees of $12,575 for the Class B shares, $47,552 for the Class R3 shares, $6,336 for the Class R4 shares, and $22,274 for the Class R5 shares of the Government Fund and $141,384 for the Class R3 shares, $6,394 for the Class R4 shares, and $8,959 for the Class R5 shares of the Income Fund and voluntarily reimbursed $18,077 for Class A shares and $3,303 for Class C shares of the Government Fund.
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, 2014, fees paid indirectly were $3,939 for the Government Fund and $5,676 for the Income Fund.
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 and is included as Trustee Fees on the Statement of Operations.
The Funds may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended September 30, 2014, the Income Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $50,704,607 in purchases and $4,726,141 in sales.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
GOVERNMENT FUND
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,714,063 | $ | 22,865,234 | 3,744,649 | $ | 51,296,981 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 156,283 | 2,082,416 | 262,627 | 3,580,624 | ||||||||||||
Shares repurchased | (3,769,364 | ) | (50,227,208 | ) | (7,590,101 | ) | (103,276,364 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (1,899,018 | ) | $ | (25,279,558 | ) | (3,582,825 | ) | $ | (48,398,759 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class B Shares | ||||||||||||||||
Shares sold | 18,991 | $ | 252,210 | 30,862 | $ | 424,973 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 355 | 4,713 | 1,752 | 23,978 | ||||||||||||
Shares repurchased | (69,262 | ) | (920,829 | ) | (178,491 | ) | (2,431,905 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (49,916 | ) | $ | (663,906 | ) | (145,877 | ) | $ | (1,982,954 | ) | ||||||
|
|
|
|
|
|
|
|
Certified Annual Report 35
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 336,942 | $ | 4,519,939 | 1,186,290 | $ | 16,337,002 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 65,687 | 880,540 | 114,069 | 1,565,457 | ||||||||||||
Shares repurchased | (2,077,467 | ) | (27,860,561 | ) | (3,178,713 | ) | (43,456,806 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (1,674,838 | ) | $ | (22,460,082 | ) | (1,878,354 | ) | $ | (25,554,347 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 1,813,462 | $ | 24,164,635 | 2,977,369 | $ | 40,549,972 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 97,347 | 1,297,025 | 138,069 | 1,880,884 | ||||||||||||
Shares repurchased | (2,199,111 | ) | (29,311,645 | ) | (4,685,090 | ) | (63,604,901 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (288,302 | ) | $ | (3,849,985 | ) | (1,569,652 | ) | $ | (21,174,045 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 375,179 | $ | 5,003,670 | 547,714 | $ | 7,478,100 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 19,348 | 257,965 | 24,107 | 328,636 | ||||||||||||
Shares repurchased | (507,115 | ) | (6,763,980 | ) | (540,789 | ) | (7,360,533 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (112,588 | ) | $ | (1,502,345 | ) | 31,032 | $ | 446,203 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares* | ||||||||||||||||
Shares sold | 1,142 | $ | 15,250 | |||||||||||||
Shares issued to shareholders in reinvestment of dividends | 16 | 219 | ||||||||||||||
Shares repurchased | (19 | ) | (252 | ) | ||||||||||||
|
|
|
| |||||||||||||
Net increase (decrease) | 1,139 | $ | 15,217 | |||||||||||||
|
|
|
| |||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 161,398 | $ | 2,151,422 | 58,893 | $ | 787,254 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 817 | 10,878 | 576 | 7,824 | ||||||||||||
Shares repurchased | (88,161 | ) | (1,173,287 | ) | (15,074 | ) | (205,306 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 74,054 | $ | 989,013 | 44,395 | $ | 589,772 | ||||||||||
|
|
|
|
|
|
|
|
* | Inception date for Class R4 Shares was February 1, 2014. |
36 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
INCOME FUND
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 20,658,936 | $ | 278,069,724 | 37,040,545 | $ | 506,158,188 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,935,680 | 25,992,765 | 2,050,915 | 27,969,306 | ||||||||||||
Shares repurchased | (32,121,123 | ) | (431,692,993 | ) | (38,779,444 | ) | (527,480,530 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (9,526,507 | ) | $ | (127,630,504 | ) | 312,016 | $ | 6,646,964 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 8,103,867 | $ | 108,884,838 | 15,246,681 | $ | 208,208,645 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,113,293 | 14,926,284 | 1,069,512 | 14,558,205 | ||||||||||||
Shares repurchased | (12,383,560 | ) | (166,155,385 | ) | (13,169,974 | ) | (178,644,675 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (3,166,400 | ) | $ | (42,344,263 | ) | 3,146,219 | $ | 44,122,175 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 53,437,378 | $ | 719,454,550 | 54,510,358 | $ | 743,141,237 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 2,874,558 | 38,631,611 | 2,278,660 | 31,052,491 | ||||||||||||
Shares repurchased | (33,255,810 | ) | (447,006,004 | ) | (36,614,391 | ) | (497,468,876 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 23,056,126 | $ | 311,080,157 | 20,174,627 | $ | 276,724,852 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 5,189,231 | $ | 69,801,833 | 3,482,197 | $ | 47,470,330 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 214,137 | 2,879,405 | 155,223 | 2,117,877 | ||||||||||||
Shares repurchased | (2,588,440 | ) | (34,810,947 | ) | (2,903,508 | ) | (39,515,639 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 2,814,928 | $ | 37,870,291 | 733,912 | $ | 10,072,568 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares* | ||||||||||||||||
Shares sold | 3,467 | $ | 46,690 | |||||||||||||
Shares issued to shareholders in reinvestment of dividends | 16 | 218 | ||||||||||||||
Shares repurchased | (19 | ) | (255 | ) | ||||||||||||
|
|
|
| |||||||||||||
Net increase (decrease) | 3,464 | $ | 46,653 | |||||||||||||
|
|
|
| |||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 913,728 | $ | 12,254,923 | 594,497 | $ | 8,102,764 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 26,437 | 355,574 | 9,774 | 132,548 | ||||||||||||
Shares repurchased | (301,211 | ) | (4,050,730 | ) | (92,096 | ) | (1,240,715 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 638,954 | $ | 8,559,767 | 512,175 | $ | 6,994,597 | ||||||||||
|
|
|
|
|
|
|
|
* | Inception date for Class R4 Shares was February 1, 2014. |
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Government Fund had purchase and sale transactions of investments (excluding short-term investments) of $21,974,296 and $37,575,668, respectively, while the Income Fund had purchase and sale transactions of investments (excluding short-term investments and U.S. Government obligations) of $795,397,036 and $729,914,789, respectively.
Certified Annual Report 37
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
GOVERNMENT FUND | INCOME FUND | |||||||
Cost of investments for tax purposes | $ | 255,541,570 | $ | 2,960,379,721 | ||||
|
|
|
| |||||
Gross unrealized appreciation on a tax basis | $ | 4,871,144 | $ | 58,479,796 | ||||
Gross unrealized depreciation on a tax basis | (2,094,161 | ) | (20,116,801 | ) | ||||
|
|
|
| |||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 2,776,983 | $ | 38,362,995 | ||||
|
|
|
|
At September 30, 2014, the Government Fund had deferred tax basis capital losses occurring subsequent to October 31, 2013, of $1,820,325. For tax purposes, such losses will be reflected in the year ending September 30, 2015.
At September 30, 2014, the Government Fund had cumulative tax basis capital losses of $5,630,929, (of which $2,155,138 is short-term and $3,475,791 is long-term) generated after September 30, 2011, 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.
At September 30, 2014, the Government Fund had tax basis capital losses generated prior to October 1, 2011, 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 book/tax differences, the Government Fund decreased distribution in excess of net investment income by $1,668,670 and increased accumulated net realized loss by $1,668,670. The Income Fund decreased distribution in excess of net investment income by $2,493,052 and decreased accumulated net realized gain by $2,493,052. These reclassifications have no impact on the net asset value of the Funds. These reclassifications result from paydown loss tax adjustments.
At September 30, 2014, the Government Fund had $164,480 of undistributed tax basis net ordinary investment income and no undistributed tax basis capital gains.
At September 30, 2014, the Income Fund had undistributed tax basis net ordinary investment income of $3,668,651 and undistributed tax basis capital gains of $14,188,915.
The tax character of distributions paid by the Government Fund during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 5,675,928 | $ | 9,181,095 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 5,675,928 | $ | 9,181,095 | ||||
|
|
|
|
The tax character of the distributions paid by the Income Fund for the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 78,131,592 | $ | 84,058,814 | ||||
Capital gains | 16,613,143 | 5,177,915 | ||||||
|
|
|
| |||||
Total | $ | 94,744,735 | $ | 89,236,729 | ||||
|
|
|
|
38 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 |
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, 2014, and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Certified Annual Report 39
Thornburg Limited Term U.S. Government Fund
PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UNLESS | NET ASSET VALUE BEGINNING OF PERIOD | NET INVESTMENT INCOME (LOSS) | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS FROM NET REALIZED GAINS | TOTAL DIVIDENDS | NET ASSET VALUE END OF PERIOD | NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | EXPENSES, AFTER EXPENSE REDUCTIONS AND NET OF CUSTODY CREDITS (%) | EXPENSES, BEFORE EXPENSE REDUCTIONS (%) | TOTAL RETURN (%)(a) | PORTFOLIO TURNOVER RATE (%)(a) | NET ASSETS AT END OF PERIOD (THOUSANDS) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS A SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 13.36 | 0.19 | (0.02 | ) | 0.17 | (0.26 | ) | — | (0.26 | ) | $ | 13.27 | 1.41 | 0.93 | 0.93 | 0.94 | 1.30 | 8.14 | $ | 132,916 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013(b) | $ | 13.86 | 0.20 | (0.39 | ) | (0.19 | ) | (0.31 | ) | — | (0.31 | ) | $ | 13.36 | 1.45 | 0.89 | 0.89 | 0.89 | (1.38 | ) | 12.18 | $ | 159,225 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS B SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.33 | (0.01 | ) | (0.02 | ) | (0.03 | ) | (0.06 | ) | — | (0.06 | ) | $ | 13.24 | (0.06 | ) | 2.40 | 2.40 | 3.60 | (0.19 | ) | 8.14 | $ | 714 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 13.83 | 0.01 | (0.39 | ) | (0.38 | ) | (0.12 | ) | — | (0.12 | ) | $ | 13.33 | 0.07 | 2.29 | 2.29 | 2.57 | (2.75 | ) | 12.18 | $ | 1,384 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS C SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.45 | 0.15 | (0.02 | ) | 0.13 | (0.23 | ) | — | (0.23 | ) | $ | 13.35 | 1.14 | 1.19 | 1.19 | 1.20 | 0.96 | 8.14 | $ | 51,001 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 13.94 | 0.16 | (0.37 | ) | (0.21 | ) | (0.28 | ) | — | (0.28 | ) | $ | 13.45 | 1.17 | 1.17 | 1.17 | 1.17 | (1.56 | ) | 12.18 | $ | 73,877 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS I SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.36 | 0.23 | (0.02 | ) | 0.21 | (0.30 | ) | — | (0.30 | ) | $ | 13.27 | 1.73 | 0.61 | 0.61 | 0.61 | 1.62 | 8.14 | $ | 69,309 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 13.86 | 0.24 | (0.38 | ) | (0.14 | ) | (0.36 | ) | — | (0.36 | ) | $ | 13.36 | 1.78 | 0.56 | 0.56 | 0.56 | (1.05 | ) | 12.18 | $ | 73,645 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS R3 SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.37 | 0.18 | (0.02 | ) | 0.16 | (0.25 | ) | — | (0.25 | ) | $ | 13.28 | 1.35 | 0.99 | 0.99 | 1.31 | 1.23 | 8.14 | $ | 13,748 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 13.87 | 0.18 | (0.38 | ) | (0.20 | ) | (0.30 | ) | — | (0.30 | ) | $ | 13.37 | 1.35 | 0.99 | 0.99 | 1.27 | (1.47 | ) | 12.18 | $ | 15,350 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS R4 SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(c) | $ | 13.36 | 0.14 | (0.03 | ) | 0.11 | (0.20 | ) | — | (0.20 | ) | $ | 13.27 | 1.57 | (d) | 0.99 | (d) | 0.99 | (d) | 64.66 | (d)(f) | 0.78 | 8.14 | $ | 15 | ||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS R5 SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.36 | 0.21 | — | (e) | 0.21 | (0.30 | ) | — | (0.30 | ) | $ | 13.27 | 1.59 | 0.67 | 0.67 | 2.87 | 1.56 | 8.14 | $ | 1,859 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 13.85 | 0.24 | (0.39 | ) | (0.15 | ) | (0.34 | ) | — | (0.34 | ) | $ | 13.36 | 1.83 | 0.67 | 0.67 | 7.28 | (f) | (1.09 | ) | 12.18 | $ | 881 | |||||||||||||||||||||||||||||||||||||||||||||||||||
2012(g) | $ | 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)(f) | 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 February 1, 2014. |
(d) | Annualized. |
(e) | Net Realized & Unrealized Gain (Loss) on Investments was less than $0.01 per share. |
(f) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
(g) | Effective date of this class of shares was May 1, 2012. |
+ | 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.
40 Certified Annual Report | Certified Annual Report 41 |
FINANCIAL HIGHLIGHTS
Thornburg Limited Term Income Fund
PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||
UNLESS | NET ASSET VALUE BEGINNING OF PERIOD | NET INVESTMENT INCOME (LOSS) | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS FROM NET REALIZED GAINS | TOTAL DIVIDENDS | NET ASSET VALUE END OF PERIOD | NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | EXPENSES, AFTER EXPENSE REDUCTIONS AND NET OF CUSTODY CREDITS (%) | EXPENSES, BEFORE EXPENSE REDUCTIONS (%) | TOTAL RETURN (%)(a) | PORTFOLIO TURNOVER RATE (%)(a) | NET ASSETS AT END OF PERIOD (THOUSANDS) | |||||||||||||||||||||||||||||||||||
CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 13.42 | 0.29 | 0.19 | 0.48 | (0.30 | ) | (0.11) | (0.41 | ) | $ | 13.49 | 2.15 | 0.89 | 0.89 | 0.89 | 3.61 | 29.41 | $ | 906,708 | ||||||||||||||||||||||||||||||
2013(b) | $ | 13.72 | 0.32 | (0.22 | ) | 0.10 | (0.34 | ) | (0.06) | (0.40 | ) | $ | 13.42 | 2.33 | 0.88 | 0.88 | 0.88 | 0.69 | 36.66 | $ | 1,029,692 | |||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||
CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.39 | 0.26 | 0.20 | 0.46 | (0.27 | ) | (0.11) | (0.38 | ) | $ | 13.47 | 1.92 | 1.11 | 1.11 | 1.11 | 3.46 | 29.41 | $ | 593,658 | ||||||||||||||||||||||||||||||
2013 | $ | 13.70 | 0.28 | (0.23 | ) | 0.05 | (0.30 | ) | (0.06) | (0.36 | ) | $ | 13.39 | 2.09 | 1.12 | 1.12 | 1.12 | 0.38 | 36.66 | $ | 632,918 | |||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||
CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.42 | 0.33 | 0.20 | 0.53 | (0.35 | ) | (0.11) | (0.46 | ) | $ | 13.49 | 2.49 | 0.54 | 0.54 | 0.54 | 3.98 | 29.41 | $ | 1,578,168 | ||||||||||||||||||||||||||||||
2013 | $ | 13.73 | 0.36 | (0.23 | ) | 0.13 | (0.38 | ) | (0.06) | (0.44 | ) | $ | 13.42 | 2.68 | 0.53 | 0.53 | 0.53 | 0.98 | 36.66 | $ | 1,260,449 | |||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||
CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.43 | 0.27 | 0.19 | 0.46 | (0.28 | ) | (0.11) | (0.39 | ) | $ | 13.50 | 2.04 | 0.99 | 0.99 | 1.12 | 3.51 | 29.41 | $ | 120,013 | ||||||||||||||||||||||||||||||
2013 | $ | 13.73 | 0.30 | (0.22 | ) | 0.08 | (0.32 | ) | (0.06) | (0.38 | ) | $ | 13.43 | 2.22 | 0.99 | 0.99 | 1.14 | 0.59 | 36.66 | $ | 81,585 | |||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||
CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||
2014(c) | $ | 13.42 | 0.18 | 0.07 | 0.25 | (0.19 | ) | — | (0.19 | ) | $ | 13.48 | 1.99 | (d) | 0.99 | (d) | 0.99 | (d) | 61.75 | (d)(f) | 1.84 | 29.41 | $ | 47 | ||||||||||||||||||||||||||
CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 13.42 | 0.32 | 0.19 | 0.51 | (0.33 | ) | (0.11) | (0.44 | ) | $ | 13.49 | 2.38 | 0.64 | 0.64 | 0.72 | 3.86 | 29.41 | $ | 16,825 | ||||||||||||||||||||||||||||||
2013 | $ | 13.72 | 0.34 | (0.21 | ) | 0.13 | (0.37 | ) | (0.06) | (0.43 | ) | $ | 13.42 | 2.52 | 0.65 | 0.65 | 1.01 | 0.92 | 36.66 | $ | 8,164 | |||||||||||||||||||||||||||||
2012(e) | $ | 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)(f) | 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 February 1, 2014. |
(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.
42 Certified Annual Report | Certified Annual Report 43 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Limited Term Income Funds
To the Trustees and Shareholders of
Thornburg Limited Term Income Funds
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 Income Funds (comprised of the Thornburg Limited Term U.S. Government Fund and Thornburg Limited Term Income Fund, two of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Funds”) at September 30, 2014, the results of each of their 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 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
44 Certified Annual Report
EXPENSE EXAMPLES | ||
Thornburg Limited Term Income Funds | September 30, 2014 (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, 2014, and held until September 30, 2014.
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table for each class of shares is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
LIMITED TERM U.S. GOVERNMENT FUND | ||||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,009.10 | $ | 4.67 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.42 | $ | 4.70 | ||||||
Class B Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,001.20 | $ | 12.50 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,012.58 | $ | 12.57 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,007.80 | $ | 6.00 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.09 | $ | 6.04 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,010.50 | $ | 3.23 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.85 | $ | 3.25 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,008.80 | $ | 4.99 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,009.50 | $ | 4.99 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.02 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,010.40 | $ | 3.37 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.71 | $ | 3.39 | ||||||
LIMITED TERM INCOME FUND | ||||||||||||
Class A Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.90 | $ | 4.52 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.58 | $ | 4.53 | ||||||
Class C Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,014.80 | $ | 5.61 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.50 | $ | 5.63 | ||||||
Class I Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.70 | $ | 2.80 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.30 | $ | 2.80 | ||||||
Class R3 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.40 | $ | 5.00 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
Class R4 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.40 | $ | 5.00 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
Class R5 Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.30 | $ | 3.14 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.95 | $ | 3.15 |
† | Thornburg Limited Term U.S. Government Fund expenses are equal to the annualized expense ratio for each class (A: 0.93%; B: 2.49%; C: 1.19%; I: 0.64%; R3: 0.99% R4: 0.99% R5: 0.67%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
† | Thornburg Limited Term Income Fund expenses are equal to the annualized expense ratio for each class (A: 0.89%; C:1.11%; I: 0.55%; R3: 0.99%; R4: 0.99%; R5: 0.62%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
Certified Annual Report 45
INDEX COMPARISON | ||
September 30, 2014 (Unaudited) |
Growth of A Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 5 YRS | 10 YRS | SINCE INCEPTION | |||||||||||||
A Shares (Incep: 11/16/87) | -0.20 | % | 1.59 | % | 2.92 | % | 5.20 | % | ||||||||
B Shares (Incep: 11/1/02) | -5.15 | % | 0.15 | % | 1.99 | % | 2.17 | % | ||||||||
C Shares (Incep: 9/1/94) | 0.46 | % | 1.60 | % | 2.80 | % | 4.18 | % | ||||||||
I Shares (Incep: 7/5/96) | 1.62 | % | 2.22 | % | 3.40 | % | 4.68 | % | ||||||||
R3 Shares (Incep: 7/1/03) | 1.23 | % | 1.81 | % | 3.03 | % | 2.82 | % | ||||||||
R4 Shares (Incep: 2/1/14) | — | — | — | 0.78 | % | |||||||||||
R5 Shares (Incep: 5/1/12) | 1.56 | % | — | — | 0.68 | % |
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, Class R4, and Class R5 shares.
46 Certified Annual Report
INDEX COMPARISON | ||
September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 5 YRS | 10 YRS | SINCE INCEPTION | |||||||||||||
A Shares (Incep: 10/1/92) | 2.09 | % | 4.32 | % | 4.35 | % | 5.32 | % | ||||||||
C Shares (Incep: 9/1/94) | 2.96 | % | 4.40 | % | 4.26 | % | 5.10 | % | ||||||||
I Shares (Incep: 7/5/96) | 3.98 | % | 5.00 | % | 4.86 | % | 5.66 | % | ||||||||
R3 Shares (Incep: 7/1/03) | 3.51 | % | 4.59 | % | 4.48 | % | 4.21 | % | ||||||||
R4 Shares (Incep: 2/1/14) | — | — | — | 1.84 | % | |||||||||||
R5 Shares (Incep: 5/1/12) | 3.86 | % | — | — | 3.30 | % |
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 are sold with a maximum sales charge of 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, Class, R4, and Class R5 shares.
Certified Annual Report 47
TRUSTEES AND OFFICERS | ||
Thornburg Limited Term Income Funds | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
48 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES) (1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
Certified Annual Report 49
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED, | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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.
50 Certified Annual Report
OTHER INFORMATION | ||
Thornburg Limited Term Income Funds | September 30, 2014 (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.
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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Thornburg Limited Term Income Fund of $16,613,143 are being reported as long-term capital gain dividends and $78,131,592 are taxable ordinary investment income dividends. Dividends paid by the Thornburg Limited Term U.S. Government Fund of $5,675,928 are being reported as taxable ordinary investment income 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of 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 under the advisory agreement, the Advisor’s implementation of systems and practices to
Certified Annual Report 51
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 (Unaudited) |
enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the most recent ten calendar years, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year, comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of correlation to equity indices, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the ten most recent calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year was comparable to the return of the broad-based securities index and the average return for the fund category considered, that the Fund’s returns for the preceding nine calendar years exceeded or were comparable to the returns of the index in five of the nine years, and that the Fund’s returns exceeded or were comparable to the average returns of the fund category in all of the nine years. Noted quantitative data further showed that the Fund’s annualized investment returns fell in or near the top decile of investment performance of a mutual fund category for the one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year. Noted data also showed that the Fund’s annualized investment returns fell in the top quartile of investment performance of a second mutual fund category for the same periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection, considered certain factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Funds.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses. Data considered included comparisons of the advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the advisory fee for the Fund was comparable to the median and average fee levels for the fund category, and that the level of total expense for a representative share class of the Fund was slightly higher than the median and comparable to the average expense levels for the category. Data for the peer group showed that the Fund’s advisory fee level was comparable to the median of the peer group and the total expense level fell at the top of the range for the peer group. The Trustees did not find the differences significant in view of the other factors considered.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
52 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 (Unaudited) |
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT FOR THORNBURG LIMITED TERM INCOME FUND
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Limited Term Income Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of 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 under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written
Certified Annual Report 53
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 (Unaudited) |
explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the most recent ten calendar years, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year, comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of correlation to equity indices, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the ten most recent calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year exceeded the return of a broad-based securities index and was comparable to the average return for the mutual fund category considered, that the Fund’s returns for the preceding nine calendar years exceeded or were comparable to the returns of the index in eight of the nine years, and that the Fund’s returns exceeded or were comparable to the average returns of the fund category in all of the nine years. Noted quantitative data further showed that the Fund’s annualized investment returns fell in the top decile of investment performance of a mutual fund category for the one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year. Noted data also showed that the Fund’s annualized investment returns fell in the top quartile of investment performance of a second mutual fund category for the five-year period ended with the second quarter, and fell in or near the top decile of performance for the one-year, three-year and ten-year periods. Measures of portfolio volatility, risk and relative return considered by the Trustees demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection, considered certain factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Funds.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses. Data considered included comparisons of advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the advisory fee for the Fund was comparable to the median and average fee levels for the fund category, and that the level of total expense for a representative share class of the Fund was slightly higher than the median and comparable to the average expense levels for the category. Data for the peer group showed that the Fund’s advisory fee fell below the median of the peer group and the total expense level fell above the median of the peer group, and that the Fund’s advisory fee and total expense levels fell within the range of fee and expense levels for the peer group. The Trustees did not find the differences significant in view of the other factors considered.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract
54 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Limited Term Income Funds | September 30, 2014 (Unaudited) |
necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by the Fund and other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
Certified Annual Report 55
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
56 This page is not part of the Annual Report
RETIREMENT AND EDUCATION ACCOUNTS
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1⁄2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our 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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
This page is not part of the Annual Report 57
58 This page is not part of the Annual Report
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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 59
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: Thornburg Investment Management® 800.847.0200 | Distributor: Thornburg Securities Corporation® 800.847.0200 | TH076 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2014. 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, volatility, and political and economic risks. 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.
Diversification 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.
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 | TSIAX | 885-215-228 | ||
Class C | TSICX | 885-215-210 | ||
Class I | TSIIX | 885-215-194 | ||
Class R3 | TSIRX | 885-216-887 | ||
Class R4 | TSRIX | 885-216-754 | ||
Class R5 | TSRRX | 885-216-879 |
Glossary
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.
Blended Index – The Blended Index is composed of 80% Barclays U.S. Aggregate Bond Index and 20% MSCI World Index, rebalanced monthly. The Barclays U.S. 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.
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.
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.
Riskless (or risk-free) Interest Rate – The theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest that an investor would expect from an absolutely risk-free investment over a given period of time. Though a truly risk-free asset exists only in theory, in practice most professionals and academics use short-dated government bonds, such as a three-month U.S. Treasury bill.
SEC Yield – SEC yield is computed in accordance with SEC standards measuring the net investment income per share over a specified 30-day period expressed as a percentage of the maximum offering price of the Fund’s shares at the end of the period.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from treasury securities is exempt from state and local, but not federal income taxes.
This page is not part of the Annual Report 3
Portfolio Manager
Jason Brady, CFA
Objectives and Strategies
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 pursues its investment goals by investing in a broad range of income producing investments throughout the world, primarily including debt obligations and income producing stocks. The Fund expects, under normal conditions, to invest a majority of its assets in debt obligations, but the relative proportions of the Fund’s investments in debt obligations and in income producing stocks can be expected to vary over time.
Harvesting a Sustainable Yield
Many investors are in need of significant income and typically turn to “high-yield” funds to find notable dividends. But the simple measure of yield is potentially misleading. At Thornburg Investment Management, we believe we have developed a better income-generation mousetrap in the form of the Strategic Income Fund, which has a goal of high income, without having to resort solely to the below-investment-grade segment of the taxable fixed income universe.
The idea behind this fund is that high yield, in the context of a fund type, represents not an investment goal, but merely a type of asset. Why? 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 a variety of investment climates. Keep in mind that below-investment-grade corporate bonds represent less than 2% of the total taxable investment universe. There is simply no compelling reason to ignore vast swathes of income-producing markets merely because they do not have a very low credit quality! In fact, quite the opposite is true. By sifting through the available choices across many sub-asset classes, we seek to generate an interesting income stream from a variety of different sources. We believe this diversification is likely to lead to a more stable fund with a robust yield.
This is the reason the Thornburg Strategic Income Fund has a much broader purview than a typical high-yield fund. The Fund may invest in corporate bonds (both investment-grade and high-yield), asset-backed securities, mortgages, non-U.S. dollar securities, emerging-markets bonds, convertible securities, and more.
The Fund typically has a smaller allocation to equity securities. As such, the occasional “bond-like” equity, which typically exhibits little growth but relatively strong income generation, can be attractive. While adding equities to what is primarily a bond fund can add volatility, which we work hard to mitigate, we simply can find no good reason to ignore an asset class that can serve as another source of income for the Fund. Thornburg Investment Management seeks to go where the value is, regardless of the asset classes in which we invest.
4 This page is not part of the Annual Report
30-Day Yields, A Shares
As of September 30, 2014
SEC Yield | 4.49 | % | ||
Annualized Distribution Yield | 3.53 | % |
Without fee waivers and expense reimbursements, the 30-day SEC Yield would have been 4.38% and the Annualized Distribution Yield would have been 3.42%.
Key Portfolio Attributes
As of September 30, 2014
Fixed Income Statistics
Weighted Average Coupon | 4.7 | % | ||
Effective Duration | 3.1 Yrs | |||
Average Maturity | 6.1 Yrs | |||
Bond Holdings | 268 |
Equity Statistics
Portfolio P/E (12-mo. trailing) | 16 | |||
Median Market Cap | $ | 2.7 B | ||
Equity & Pref. Equity Holdings | 21 |
Credit Quality Summary
As of September 30, 2014
Portfolio Composition
As of September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | SINCE INCEPTION | |||||
A Shares (Incep: 12/19/07) | ||||||||
Without sales charge | 6.79% | 8.39% | 8.77% | 7.92% | ||||
With sales charge | 2.02% | 6.74% | 7.77% | 7.19% | ||||
Barclays U.S. Universal Index | 4.39% | 3.23% | 4.65% | 5.01% | ||||
Blended Index | 5.62% | 5.49% | 5.63% | 4.78% |
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 1.27%, as disclosed in the most recent prospectus. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses until at least February 1, 2015, resulting in a net expense ratio of 1.25%. For more detailed information, please see the Fund’s prospectus.
This page is not part of the Annual Report 5
Thornburg Strategic Income Fund
September 30, 2014
7 | ||||
9 | ||||
20 | ||||
22 | ||||
24 | ||||
25 | ||||
34 | ||||
36 | ||||
37 | ||||
38 | ||||
39 | ||||
42 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semi-annual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg Strategic Income Fund | September 30, 2014 (Unaudited) |
October 15, 2014
Dear Fellow Shareholder:
We are happy to present the annual report for the Thornburg Strategic Income Fund (the Fund) for the year ended September 30, 2014. The net asset value (NAV) of a Class A share of the Fund decreased $0.01 to $12.18 over the course of the past year. If you were invested for the entire period, you received dividends of 54.3 cents per share. If you reinvested your dividends, you received 55.4 cents per share. Dividends per share were higher or lower for other share classes as a percentage of NAV to account for varying class-specific expenses.
Since the Fund’s inception in late 2007, we have been navigating an environment of very high volatility in both the global fixed-income and equity marketplaces, though some complacency began to set in with calmer markets through the middle of 2014. More recently, volatility has reared its head again. Through changing market environments, the Fund has continued to achieve its primary goal: a high and sustainable income stream (income being the primary driver of total return in most fixed-income market environments). Going forward, we will continue to strive to achieve that goal through our investments in a diverse variety of assets across the globe brought together in a portfolio designed to succeed over a reasonable time frame in a variety of different macroeconomic conditions.
Investors’ concerns a year ago centered on the possibility of further significant rises in high-quality sovereign interest rates. When the U.S. Treasury 10-year note closed at 3.03% at the end of calendar year 2013, most market participants expected a significantly higher yield by the end of 2014. Thus far, the opposite has occurred. At the end of September, the 10-year Treasury’s yield was 2.49%, and as of the date of this letter the closing price was 2.14%. Instead of a challenged high-quality market, riskier credit positions recently began to unravel. Over the course of the third quarter of 2014, the Barclays U.S. Corporate High Yield Index moved up in yield from 4.91% to 6.13%. For reference, that index stood at a 6.23% yield on September 30, 2013 and 5.64% on December 31, 2013. Over the course of the first half of the fiscal year, we built up fairly significant cash positions in the portfolio, and we have been able to deploy that effectively in the past month or so as a number of interesting bonds moved notably lower. We continue to proceed cautiously, but with a somewhat richer opportunity set. The significant market moves cited above were less prevalent in other sub-asset classes such as riskier asset-backed and mortgage structures, so we were less active in adding in those markets. In general, we are happy that the global marketplace provides plenty of diversity, including the extremes of the high yield and the U.S. Treasury markets, so we don’t have to resort to complex and perhaps unproductive derivative strategies. We still try to invest the old fashioned way by buying and holding good assets (with the occasional currency hedge).
Putting income and price change together, the Class A shares of the Thornburg Strategic Income Fund produced a total return of 6.79% at NAV over the course of the past year. A blended index of 80% of the Barclays U.S. Aggregate Bond Index and 20% of the MSCI World Index produced a 5.62% total return over the same time period. The Barclays U.S. Universal Index and the Barclays U.S. Corporate High-Yield Index produced 4.39% and 7.20% total return respectively. These indices reflect no deduction for fees, expenses, or taxes.
Looking forward, global economic data continues to disappoint, and as a group we are particularly concerned about both a slowing China and a slowing Europe. Given this weaker picture and concomitant lower energy prices, some of the dazzling stories coming out of the domestic exploration and production sector have lost luster. The U.S. dollar remains a safe haven and while we have positioned well for its strength, we will nevertheless be on the lookout for market dislocations that give us a chance to invest opportunistically in non-dollar assets. Overall, we remain more concerned about credit events than a dramatic rise in interest rates, but note that the portfolio’s performance in the rising “risk-free” rate environment of 2013, as well as the rising “risky” rate environment of 2014, has thus far been similar. Recent significant moves lower in high quality sovereign debt yields make finding income returns generally more challenging, but this issue will likely be with us for some time, even in the context of any later move to somewhat higher “risk-free” rates.
A year ago we believed that spread (the yield difference between securities with different credit qualities) tightening was largely at an end, but as is often the case, the market overshot to even tighter levels. The past quarter has brought us full circle to levels seen approximately this time last year, but with perhaps more broad economic challenges on the horizon. We believe that income-producing assets will continue to be in high demand going forward, though, and we are happy to be in a position to provide that income. The Fund’s objective, to achieve income from a variety of different sources, should be a source of strength and total return over time. In short, selectively investing in a range of interesting global assets while keeping an eye on income production is this Fund’s goal, and a mindset that we believe will serve shareholders well.
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 (Unaudited) |
A note on the machinations of global central banks: We are particularly concerned that all market participants have spent time examining how quickly, how often, and with what exotic process these saviors will continue to stimulate economies/credit creation/market prices. What is becoming clearer is that solving secular, long-term issues with tools more appropriate to cyclical challenges has diminishing returns and increasing second- and third-order effects. Market instability due to a reach for yield is one of those effects for which we’ve been positioning, and even if we find value in the current environment of somewhat higher yields/lower prices for riskier fixed income, we expect an elevated level of volatility going forward. If we can no longer depend on central banks to wave a magic wand to as great an effect, we’ll have to rely upon the recently neglected art of balancing risk and reward judiciously.
Thank you very much for investing in the Fund. We believe that the Thornburg Strategic Income Fund continues to be an appropriate investment for those looking for an attractive, sustainable yield from a variety of instruments.
Sincerely,
Jason H. Brady, CFA
Portfolio Manager
Managing Director
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
8 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Strategic Income Fund | September 30, 2014 |
Summary of Industry Group Exposure
As of 9/30/14
Energy | 9.9 | % | ||
Diversified Financials | 7.2 | % | ||
Materials | 5.9 | % | ||
Telecommunication Services | 4.5 | % | ||
Capital Goods | 4.0 | % | ||
Banks | 4.0 | % | ||
Transportation | 3.7 | % | ||
Food, Beverage & Tobacco | 3.7 | % | ||
Media | 3.3 | % | ||
Commercial & Professional Services | 3.0 | % | ||
Utilities | 2.8 | % | ||
Software & Services | 2.6 | % | ||
Retailing | 2.5 | % | ||
Consumer Services | 2.5 | % | ||
Health Care Equipment & Services | 2.0 | % | ||
Real Estate | 1.8 | % | ||
Food & Staples Retailing | 1.4 | % | ||
Technology Hardware & Equipment | 1.4 | % | ||
Miscellaneous | 1.1 | % | ||
Insurance | 1.0 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 0.7 | % | ||
Commercial Services & Supplies | 0.4 | % | ||
Consumer Durables & Apparel | 0.3 | % | ||
Other Non-Classified Securities: | ||||
Asset Backed Securities | 9.5 | % | ||
Other Government | 3.7 | % | ||
U.S. Treasury Securities | 1.1 | % | ||
U.S. Government Agencies | 0.9 | % | ||
Municipal Bonds | 0.7 | % | ||
Mortgage Backed | 0.1 | % | ||
Other Assets & Liabilities | 14.3 | % |
Summary of Country Exposure*
As of 9/30/14
United States | 55.0 | % | ||
Brazil | 3.6 | % | ||
Mexico | 3.4 | % | ||
Canada | 2.4 | % | ||
Australia | 2.2 | % | ||
United Kingdom | 2.2 | % | ||
Cayman Islands | 1.9 | % | ||
Russia | 1.9 | % | ||
Netherlands | 1.5 | % | ||
Spain | 1.4 | % | ||
Ireland | 1.3 | % | ||
Sweden | 1.1 | % | ||
Israel | 0.6 | % | ||
Aruba | 0.6 | % | ||
Chile | 0.6 | % | ||
South Korea | 0.5 | % | ||
Norway | 0.4 | % | ||
France | 0.4 | % | ||
South Africa | 0.4 | % | ||
Romania | 0.4 | % | ||
Peru | 0.4 | % | ||
Japan | 0.4 | % | ||
Argentina | 0.4 | % | ||
Germany | 0.4 | % | ||
Barbados | 0.4 | % | ||
Nigeria | 0.3 | % | ||
Switzerland | 0.3 | % | ||
Italy | 0.3 | % | ||
Panama | 0.3 | % | ||
New Zealand | 0.2 | % | ||
Indonesia | 0.2 | % | ||
Luxembourg | 0.1 | % | ||
Czech Republic | 0.1 | % | ||
Iceland | 0.1 | % | ||
Other Assets & Liabilities | 14.3 | % |
* | The country exposure of each holding is determined by the Fund’s Advisor based on various factors, including the location of the issuer’s head office, the issuer’s jurisdiction of incorporation and the country from which a majority of the issuer’s revenue is derived. |
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
COMMON STOCK — 2.20% | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.30% | ||||||||
Commercial Services & Supplies — 0.30% | ||||||||
Republic Services, Inc. | 100,000 | $ | 3,902,000 | |||||
|
| |||||||
3,902,000 | ||||||||
|
| |||||||
ENERGY — 1.31% | ||||||||
Oil, Gas & Consumable Fuels — 1.31% | ||||||||
Eni S.p.A. | 147,400 | 3,513,096 | ||||||
a Halcon Resources Corp. | 12,383 | 49,037 | ||||||
Kinder Morgan, Inc. | 87,000 | 3,335,580 | ||||||
Linn Co., LLC | 167,800 | 4,857,810 | ||||||
b ROMGAZ SA-GDR | 531,954 | 5,330,179 | ||||||
a,c TPT Acquisition, Inc. | 20,480 | 0 | ||||||
|
| |||||||
17,085,702 | ||||||||
|
| |||||||
MATERIALS — 0.01% | ||||||||
Metals & Mining — 0.01% | ||||||||
a Jaguar Mining, Inc. | 144,927 | 71,884 | ||||||
|
| |||||||
71,884 | ||||||||
|
| |||||||
REAL ESTATE — 0.42% | ||||||||
Real Estate Investment Trusts — 0.42% | ||||||||
Annaly Capital Management, Inc. | 212,700 | 2,271,636 | ||||||
Capstead Mortgage Corp. | 259,027 | 3,170,491 | ||||||
|
| |||||||
5,442,127 | ||||||||
|
| |||||||
RETAILING — 0.16% | ||||||||
Internet & Catalog Retail — 0.16% | ||||||||
Trade Me Ltd. | 748,335 | 2,044,239 | ||||||
|
| |||||||
2,044,239 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $32,456,223) | 28,545,952 | |||||||
|
| |||||||
PREFERRED STOCK — 2.06% | ||||||||
BANKS — 0.33% | ||||||||
Banks — 0.33% | ||||||||
First Niagara Financial Group Pfd, 8.625% | 17,732 | 501,816 | ||||||
GMAC Capital Trust I Pfd, 8.125% | 140,000 | 3,725,400 | ||||||
|
| |||||||
4,227,216 | ||||||||
|
| |||||||
ENERGY — 0.29% | ||||||||
Oil, Gas & Consumable Fuels — 0.29% | ||||||||
Halcon Resources Corp. Pfd, 5.75% | 4,441 | 3,774,850 | ||||||
|
| |||||||
3,774,850 | ||||||||
|
| |||||||
MISCELLANEOUS — 1.07% | ||||||||
U.S. Government Agencies — 1.07% | ||||||||
Farm Credit Bank of Texas Pfd, 10.00% | 1,000 | 1,250,313 | ||||||
b Cobank, ACB Pfd, 6.25% | 50,000 | 5,300,000 | ||||||
b AgriBank, FCB Pfd, 6.875% | 40,000 | 4,272,500 | ||||||
b Falcons Funding Trust I Pfd, 8.875% | 3,000 | 3,113,437 | ||||||
|
| |||||||
13,936,250 | ||||||||
|
| |||||||
REAL ESTATE — 0.15% | ||||||||
Real Estate Investment Trusts — 0.15% | ||||||||
Alexandria Real Estate Pfd, 7.00% | 50,000 | 1,349,000 | ||||||
American Realty Capital Properties, Inc. Pfd, 6.70% | 25,857 | 597,814 | ||||||
|
| |||||||
1,946,814 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 0.22% | ||||||||
Wireless Telecommunication Services — 0.22% | ||||||||
b,d Centaur Funding Corp. Pfd, 9.08% | 2,330 | 2,913,956 | ||||||
|
| |||||||
2,913,956 | ||||||||
|
| |||||||
TOTAL PREFERRED STOCK (Cost $25,254,806) | 26,799,086 | |||||||
|
|
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
ASSET BACKED SECURITIES — 9.46% | ||||||||
COMMERCIAL MTG TRUST — 1.60% | ||||||||
b Capital Automotive REIT, Series 2012-1A Class A, 4.70%, 7/15/2042 | $ | 2,905,468 | $ | 2,972,294 | ||||
Citigroup Commercial Mtg Trust, Series 2004-HYB2 Class B1, 2.63%, 3/25/2034 | 135,426 | 110,050 | ||||||
b Commercial Mtg Pass-Through Certificates, Series 2011-FL1 Class B, 3.288%, 7/17/2028 | 645,827 | 645,294 | ||||||
b CVS Pass-Through Trust, 9.35%, 1/10/2023 | 4,605,000 | 5,417,617 | ||||||
b FREMF Mtg Trust, Series 2012-KF01 Class B Floating Rate Note, 2.756%, 10/25/2044 | 2,000,000 | 2,053,258 | ||||||
b FREMF Mtg Trust, Series 2013-KF02 Class B Floating Rate Note, 2.82%, 12/25/2045 | 2,538,152 | 2,622,941 | ||||||
b JP Morgan Chase Commercial Mtg Trust, Series 2013-JWRZ Class D Floating Rate Note, 3.144%, 4/15/2030 | 4,000,000 | 4,010,470 | ||||||
b Motel 6 Trust, Series 2012-MTL6 Class C, 3.139%, 10/5/2025 | 3,000,000 | 2,990,126 | ||||||
|
| |||||||
20,822,050 | ||||||||
|
| |||||||
OTHER ASSET BACKED — 4.96% | ||||||||
b,c Aircraft Certificate Owner Trust, Series 2003-1A Class E, 7.001%, 9/20/2022 | 5,224,002 | 5,406,842 | ||||||
b American Credit Acceptance, Series 2014-2 Class B, 2.26%, 3/10/2020 | 6,850,000 | 6,838,771 | ||||||
b CLI Funding, LLC, Series 2014-1A Class A, 3.29%, 6/18/2029 | 4,769,070 | 4,736,301 | ||||||
b,c Concord Funding Co., LLC, Series 2012-2 Class B, 4.145%, 1/15/2017 | 4,000,000 | 4,000,000 | ||||||
b,c Concord Funding Co., LLC, Series 2013-1 Class B, 3.92%, 2/15/2015 | 5,675,000 | 5,675,000 | ||||||
b Dominos Pizza Master Issuer, LLC, Series 2012-1A Class A2, 5.216%, 1/25/2042 | 9,710,813 | 10,229,931 | ||||||
b Fairway Outdoor Funding, LLC, Series 2012-1 Class B, 8.835%, 10/15/2042 | 3,000,000 | 2,945,374 | ||||||
b,d Global SC Finance SRL, Series 2014-1A Class A1, 3.19%, 7/17/2029 | 4,670,833 | 4,637,480 | ||||||
b JPR Royalty, LLC, 14.00%, 9/1/2020 | 2,000,000 | 1,327,778 | ||||||
b,c Northwind Holdings, LLC, Series 2007-1A Class A1 Floating Rate Note, 1.014%, 12/1/2037 | 1,012,109 | 910,898 | ||||||
b,c Progreso Receivables Funding I, LLC. Series 2013-A Class A, 4.00%, 7/9/2018 | 8,025,000 | 8,045,063 | ||||||
b SolarCity LMC, LLC, Series 2013-1 Class A, 4.80%, 11/20/2038 | 3,535,523 | 3,677,506 | ||||||
b SolarCity LMC, LLC, Series 2014-1 Class A, 4.59%, 4/20/2044 | 3,457,537 | 3,566,162 | ||||||
b,d Trafigura Securitisation Finance plc, Series 2012-1A Class B, 4.154%, 10/15/2015 | 2,000,000 | 2,012,029 | ||||||
b Westgate Resorts, Series 2012-1 Class C, 11.00%, 9/20/2025 | 361,498 | 368,164 | ||||||
|
| |||||||
64,377,299 | ||||||||
|
| |||||||
RESIDENTIAL MTG TRUST — 2.61% | ||||||||
Banc of America Funding Corp., Series 2006-I Class SB1, 2.269%, 12/20/2036 | 883,463 | 220,993 | ||||||
Bear Stearns ARM Mtg, Series 2003-6 Class 2B-1, 2.487%, 8/25/2033 | 287,416 | 282,632 | ||||||
b CIT Mtg Loan Trust, Series 2007-1 Class 2A2, 1.405%, 10/25/2037 | 1,482,310 | 1,479,635 | ||||||
b Citigroup Mtg Loan Trust, Inc., Series 2014-A Class A, 4.00%, 1/25/2035 | 6,324,198 | 6,519,237 | ||||||
Countrywide, Series 2005-11 Class AF3, 4.778%, 2/25/2036 | 628,440 | 637,407 | ||||||
b CS First Boston Mtg Securities Co., Series 2005-CF1 Class M1, 0.855%, 3/25/2045 | 1,900,770 | 1,812,135 | ||||||
FBR Securitization Trust, Series 2005-2 Class M1, 0.875%, 9/25/2035 | 3,000,000 | 2,887,541 | ||||||
JP Morgan Mtg Acquisition Corp., Series 2006-CH1 Class A4, 0.295%, 7/25/2036 | 1,104,347 | 1,096,466 | ||||||
Merrill Lynch Mtg Investors Trust, Series 2004-A4 Class M1, 2.461%, 8/25/2034 | 294,379 | 269,689 | ||||||
Morgan Stanley Capital, Inc., Series 2005-HE7 Class A2C, 0.475%, 11/25/2035 | 1,052,086 | 1,033,668 | ||||||
New Century Home Equity Loan Trust, Series 2005-2 Class M1, 0.585%, 6/25/2035 | 1,875,611 | 1,826,105 | ||||||
Park Place Securities, Inc., Series 2004-MHQ1 Class M2, 1.28%, 12/25/2034 | 2,218,925 | 2,175,670 | ||||||
Residential Asset Securities Corp., Series 2006-KS4 Class A3, 0.305%, 6/25/2036 | 462,666 | 458,044 | ||||||
b,c SHAP, Series 2013-RM1 Class A, 4.00%, 5/26/2053 | 3,782,537 | 3,703,482 | ||||||
Structured Asset Securities Corp., Series 2004-20 Class 7A1, 5.25%, 11/25/2034 | 1,128,345 | 1,132,856 | ||||||
b TAL Advantage, LLC, Series 2014-1A Class A, 3.51%, 2/22/2039 | 8,239,583 | 8,313,168 | ||||||
Wells Fargo Asset Securities Corp., Series 2005-AR1 Class 1B1, 2.615%, 2/25/2035 | 236,730 | 56,557 | ||||||
|
| |||||||
33,905,285 | ||||||||
|
| |||||||
STUDENT LOAN — 0.29% | ||||||||
Access Group, Inc., Series 2005-A Class A3, 0.634%, 7/25/2034 | 4,000,000 | 3,711,365 | ||||||
|
| |||||||
3,711,365 | ||||||||
|
| |||||||
TOTAL ASSET BACKED SECURITIES (Cost $120,903,430) | 122,815,999 | |||||||
|
| |||||||
CORPORATE BONDS — 56.28% | ||||||||
BANKS — 3.64% | ||||||||
Banks — 3.64% | ||||||||
b Banco Santander Brasil S.A. (BRL), 8.00%, 3/18/2016 | 5,300,000 | 2,067,817 | ||||||
b,d Banco Santander Chile Floating Rate Note, 2.108%, 6/7/2018 | 4,000,000 | 4,065,000 | ||||||
Bank of America Corp., 4.20%, 8/26/2024 | 3,200,000 | 3,172,330 | ||||||
b,d Caixa Economica Federal, 4.50%, 10/3/2018 | 7,700,000 | 7,857,850 | ||||||
DEPFA Bank plc (EUR), 0.784%, 12/15/2015 | 5,800,000 | 6,960,229 | ||||||
a,b,d,e Islandsbanki, 4.41%, 10/15/2008 | 60,000 | 19,200 | ||||||
b,d Mizuho Financial Group, 4.60%, 3/27/2024 | 5,000,000 | 5,199,635 | ||||||
f National City Bank Floating Rate Note, 0.603%, 6/7/2017 | 1,000,000 | 996,144 | ||||||
d Royal Bank of Scotland Group plc, 9.50%, 3/16/2022 | 2,000,000 | 2,280,000 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
d Royal Bank of Scotland Group plc, 6.125%, 12/15/2022 | $ | 2,000,000 | $ | 2,116,876 | ||||
b,d Sberbank of Russia, 5.50%, 2/26/2024 | 9,000,000 | 8,122,500 | ||||||
b,d Zenith Bank plc, 6.25%, 4/22/2019 | 4,400,000 | 4,400,000 | ||||||
|
| |||||||
47,257,581 | ||||||||
|
| |||||||
CAPITAL GOODS — 3.98% | ||||||||
Construction & Engineering — 1.34% | ||||||||
b,d Abengoa Greenfield, S.A., 6.50%, 10/1/2019 | 6,400,000 | 6,368,000 | ||||||
b,g AECOM Technology Corp., 5.875%, 10/15/2024 | 4,835,000 | 4,865,219 | ||||||
b,d Ausdrill Finance Pty Ltd., 6.875%, 11/1/2019 | 6,750,000 | 6,226,875 | ||||||
Industrial Conglomerates — 0.54% | ||||||||
b,d Alfa S.A., 5.25%, 3/25/2024 | 2,300,000 | 2,452,950 | ||||||
Otter Tail Corp., 9.00%, 12/15/2016 | 4,000,000 | 4,597,928 | ||||||
Machinery — 0.06% | ||||||||
b Waterjet Holdings, Inc., 7.625%, 2/1/2020 | 750,000 | 776,250 | ||||||
Trading Companies & Distributors — 2.04% | ||||||||
b Aviation Capital Group Corp., 6.75%, 4/6/2021 | 2,500,000 | 2,837,500 | ||||||
b Aviation Capital Group Corp., 7.125%, 10/15/2020 | 1,881,000 | 2,180,429 | ||||||
d Fly Leasing Ltd., 6.75%, 12/15/2020 | 7,500,000 | 7,800,000 | ||||||
b International Lease Finance Corp., 7.125%, 9/1/2018 | 8,000,000 | 9,000,000 | ||||||
b Wajax Corp. (CAD), 6.125%, 10/23/2020 | 5,000,000 | 4,647,529 | ||||||
|
| |||||||
51,752,680 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 1.73% | ||||||||
Commercial Services & Supplies — 1.26% | ||||||||
b GFL Environmental Corp. (CAD), 7.50%, 6/18/2018 | 5,460,000 | 4,899,594 | ||||||
Iron Mountain, Inc., 6.00%, 8/15/2023 | 3,000,000 | 3,075,000 | ||||||
RR Donnelley & Sons Co., 7.875%, 3/15/2021 | 3,000,000 | 3,292,500 | ||||||
RR Donnelley & Sons Co., 8.875%, 4/15/2021 | 4,500,000 | 5,085,000 | ||||||
Professional Services — 0.47% | ||||||||
b Nielsen Finance, LLC, 5.00%, 4/15/2022 | 6,200,000 | 6,060,500 | ||||||
|
| |||||||
22,412,594 | ||||||||
|
| |||||||
COMMERCIAL SERVICES & SUPPLIES — 0.38% | ||||||||
Diversified Support Services — 0.38% | ||||||||
c Lavare Holding AB (SEK), 5.737%, 4/4/2019 | 35,000,000 | 4,874,584 | ||||||
|
| |||||||
4,874,584 | ||||||||
|
| |||||||
CONSUMER SERVICES — 1.78% | ||||||||
Diversified Consumer Services — 0.38% | ||||||||
Coinstar, Inc., 6.00%, 3/15/2019 | 5,000,000 | 4,912,500 | ||||||
Hotels, Restaurants & Leisure — 1.40% | ||||||||
Aramark Services, Inc., 5.75%, 3/15/2020 | 4,600,000 | 4,715,000 | ||||||
b,d Arcos Dorados Holdings I, 6.625%, 9/27/2023 | 9,000,000 | 8,932,500 | ||||||
b Arcos Dorados Holdings, Inc. (BRL), 10.25%, 7/13/2016 | 8,000,000 | 3,055,868 | ||||||
b Cedar Fair L.P., 5.375%, 6/1/2024 | 1,560,000 | 1,513,200 | ||||||
|
| |||||||
23,129,068 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 5.28% | ||||||||
Capital Markets — 1.68% | ||||||||
Ares Capital Corp., 4.875%, 11/30/2018 | 7,000,000 | 7,391,958 | ||||||
b,d BTG Investments LP, 4.50%, 4/17/2018 | 5,000,000 | 4,812,500 | ||||||
FS Investment Corp., 4.00%, 7/15/2019 | 6,286,000 | 6,279,771 | ||||||
Merrill Lynch & Co., 0.789%, 5/2/2017 | 2,500,000 | 2,490,425 | ||||||
Oppenheimer Holdings, Inc., 8.75%, 4/15/2018 | 775,000 | 819,562 | ||||||
Consumer Finance — 1.58% | ||||||||
Ally Financial, Inc., 4.75%, 9/10/2018 | 4,000,000 | 4,100,000 | ||||||
Capital One Bank (USA), N.A., 2.95%, 7/23/2021 | 3,800,000 | 3,737,197 | ||||||
b,c Cash Store Financial (CAD), 0%, 1/31/2017 | 1,700,000 | 311,023 | ||||||
First Cash Financial Services, Inc., 6.75%, 4/1/2021 | 8,550,000 | 8,892,000 | ||||||
b Lowell Group Financing plc (GBP), 10.75%, 4/1/2019 | 2,000,000 | 3,521,949 | ||||||
Diversified Financial Services — 2.02% | ||||||||
b,d CFG Holdings Ltd./CFG Finance, LLC, 11.50%, 11/15/2019 | 6,000,000 | 6,465,000 | ||||||
b Citicorp, 8.04%, 12/15/2019 | 250,000 | 296,069 |
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
c Counts Trust, Series 1998 II-A, 6.67%, 2/15/2018 | $ | 364,999 | $ | 376,985 | ||||
JP Morgan Chase & Co., 6.75%, 1/29/2049 | 7,500,000 | 7,878,750 | ||||||
KFW (BRL), 5.375%, 9/14/2015 | 12,000,000 | 4,689,842 | ||||||
b TMX Finance, LLC/Titlemax Finance, 8.50%, 9/15/2018 | 6,550,000 | 6,517,250 | ||||||
|
| |||||||
68,580,281 | ||||||||
|
| |||||||
ENERGY — 8.31% | ||||||||
Energy Equipment & Services — 1.50% | ||||||||
b,d Anton Oilfield Services Group, 7.50%, 11/6/2018 | 7,000,000 | 7,175,000 | ||||||
b Compressco Partners, LP, 7.25%, 8/15/2022 | 4,800,000 | 4,812,000 | ||||||
b,d Schahin II Finance Co. (SPV) Ltd., 5.875%, 9/25/2023 | 7,824,200 | 7,413,430 | ||||||
Oil, Gas & Consumable Fuels — 6.81% | ||||||||
Atlas Energy Holdings Operating Co., LLC, 7.75%, 1/15/2021 | 3,000,000 | 2,955,000 | ||||||
b,d Delek & Avner Tamar Bond Ltd., 3.839%, 12/30/2018 | 2,250,000 | 2,265,363 | ||||||
b,d Delek & Avner Tamar Bond Ltd., 2.803%, 12/30/2016 | 6,145,000 | 6,145,000 | ||||||
Energy Transfer Partners LP, 3.257%, 11/1/2066 | 1,200,000 | 1,123,500 | ||||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 1,400,000 | 1,582,000 | ||||||
Gastar Exploration USA, Inc., 8.625%, 5/15/2018 | 4,236,000 | 4,363,080 | ||||||
b,d Gazprom Neft OAO, 6.00%, 11/27/2023 | 3,000,000 | 2,835,306 | ||||||
b Global Partners LP/GLP Finance Corp., 6.25%, 7/15/2022 | 5,975,000 | 5,945,125 | ||||||
b Linc Energy, 12.50%, 10/31/2017 | 6,185,000 | 6,447,862 | ||||||
b Linc Energy, 9.625%, 10/31/2017 | 1,324,000 | 1,376,960 | ||||||
b NGL Energy Partners LP, 6.875%, 10/15/2021 | 6,000,000 | 6,240,000 | ||||||
b Northern Tier Energy, LLC, 7.125%, 11/15/2020 | 6,450,000 | 6,804,750 | ||||||
b,d Odebrecht Offshore Drilling Finance Ltd., 6.75%, 10/1/2022 | 8,344,875 | 8,657,808 | ||||||
d,f Petrobras Global Finance B.V., 3.00%, 1/15/2019 | 1,000,000 | 974,010 | ||||||
d Petrobras Global Finance B.V. Floating Rate Note, 2.595%, 3/17/2017 | 3,650,000 | 3,690,734 | ||||||
Plains All American Pipeline LP, 8.75%, 5/1/2019 | 1,000,000 | 1,266,310 | ||||||
b,d QGOG Atlantic/Alaskan Rigs Ltd., 5.25%, 7/30/2019 | 1,213,600 | 1,259,110 | ||||||
RAAM Global Energy Co., 12.50%, 10/1/2015 | 2,000,000 | 1,540,000 | ||||||
b Rockies Express Pipeline, LLC, 3.90%, 4/15/2015 | 2,000,000 | 1,995,000 | ||||||
b Rockies Express Pipeline, LLC, 6.85%, 7/15/2018 | 2,000,000 | 2,130,000 | ||||||
Summit Midstream Holdings, LLC, 5.50%, 8/15/2022 | 8,360,000 | 8,192,800 | ||||||
Tennessee Gas Pipeline Co., 8.00%, 2/1/2016 | 1,000,000 | 1,087,992 | ||||||
Tesoro Logistics LP, 6.125%, 10/15/2021 | 2,000,000 | 2,065,000 | ||||||
b,d Tullow Oil plc, 6.25%, 4/15/2022 | 7,700,000 | 7,526,750 | ||||||
|
| |||||||
107,869,890 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 1.38% | ||||||||
Food & Staples Retailing — 1.38% | ||||||||
b Bakkavor Finance 2 plc (GBP), 8.75%, 6/15/2020 | 7,275,000 | 12,442,530 | ||||||
b C&S Group Enterprises, LLC, 5.375%, 7/15/2022 | 5,800,000 | 5,510,000 | ||||||
|
| |||||||
17,952,530 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 2.90% | ||||||||
Beverages — 0.54% | ||||||||
Ambev International Finance Co., Ltd. (BRL), 9.50%, 7/24/2017 | 2,000,000 | 794,608 | ||||||
Anheuser-Busch InBev (BRL), 9.75%, 11/17/2015 | 2,000,000 | 808,906 | ||||||
b,d Central America Bottling Corp., 6.75%, 2/9/2022 | 5,000,000 | 5,400,000 | ||||||
Food Products — 1.93% | ||||||||
b,d Alicorp S.A.A., 3.875%, 3/20/2023 | 5,425,000 | 5,262,250 | ||||||
B&G Foods, Inc., 4.625%, 6/1/2021 | 3,200,000 | 3,048,000 | ||||||
b,d Barry Callebaut Services NV, 5.50%, 6/15/2023 | 4,000,000 | 4,242,360 | ||||||
b,d BRF S.A., 4.75%, 5/22/2024 | 4,650,000 | 4,580,250 | ||||||
Bunge Ltd. Finance Co., 5.10%, 7/15/2015 | 321,000 | 331,852 | ||||||
b,d Comfeed Finance B.V., 6.00%, 5/2/2018 | 2,000,000 | 1,990,000 | ||||||
b Southern States Cooperative, Inc., 10.00%, 8/15/2021 | 4,000,000 | 3,920,000 | ||||||
WhiteWave Foods Co., 5.375%, 10/1/2022 | 1,600,000 | 1,616,000 | ||||||
Tobacco — 0.43% | ||||||||
Vector Group Ltd., 7.75%, 2/15/2021 | 5,330,000 | 5,609,825 | ||||||
|
| |||||||
37,604,051 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 2.04% | ||||||||
Health Care Equipment & Supplies — 0.13% | ||||||||
b Teleflex, Inc., 5.25%, 6/15/2024 | 1,715,000 | 1,680,700 |
Certified Annual Report 13
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
Health Care Providers & Services — 1.19% | ||||||||
b Covenant Surgical Partners, Inc., 8.75%, 8/1/2019 | $ | 5,990,000 | $ | 5,960,050 | ||||
DaVita Healthcare Partners, 5.125%, 7/15/2024 | 5,975,000 | 5,870,437 | ||||||
Tenet Healthcare Corp., 6.00%, 10/1/2020 | 3,500,000 | 3,701,250 | ||||||
Health Care Services — 0.72% | ||||||||
d Catamaran Corp., 4.75%, 3/15/2021 | 9,715,000 | 9,344,616 | ||||||
|
| |||||||
26,557,053 | ||||||||
|
| |||||||
INSURANCE — 0.95% | ||||||||
Insurance — 0.95% | ||||||||
ELM B.V. (AUD), 3.89%, 4/29/2049 | 1,000,000 | 851,225 | ||||||
ELM B.V. (AUD), 7.635%, 12/29/2049 | 1,000,000 | 930,316 | ||||||
b Forethought Financial Group, Inc., 8.625%, 4/15/2021 | 1,330,000 | 1,511,931 | ||||||
b,d Lancashire Holdings Ltd., 5.70%, 10/1/2022 | 4,900,000 | 5,272,400 | ||||||
b National Life Insurance of Vermont, 10.50%, 9/15/2039 | 1,000,000 | 1,519,529 | ||||||
b Prudential Holdings, LLC, 8.695%, 12/18/2023 | 559,929 | 707,958 | ||||||
b ZFS Finance USA Trust II, 6.45%, 12/15/2065 | 1,460,000 | 1,562,200 | ||||||
|
| |||||||
12,355,559 | ||||||||
|
| |||||||
MATERIALS — 5.17% | ||||||||
Chemicals — 1.21% | ||||||||
b Iracore International Holdings, Inc., 9.50%, 6/1/2018 | 3,250,000 | 2,957,500 | ||||||
b,d Kissner Milling Co. Ltd., 7.25%, 6/1/2019 | 2,300,000 | 2,357,500 | ||||||
b,d Office Cherifien des Phosphates, 5.625%, 4/25/2024 | 10,000,000 | 10,402,000 | ||||||
Construction Materials — 0.08% | ||||||||
f Wesco Distribution, Inc., 5.375%, 12/15/2021 | 1,000,000 | 992,500 | ||||||
Metals & Mining — 3.42% | ||||||||
d Anglogold Holdings, 8.50%, 7/30/2020 | 5,000,000 | 5,503,000 | ||||||
Coeur d’Alene Mines Corp., 7.875%, 2/1/2021 | 3,138,000 | 2,941,875 | ||||||
b Compass Minerals International, 4.875%, 7/15/2024 | 1,525,000 | 1,456,375 | ||||||
b Glencore Funding, LLC Floating Rate Note, 1.594%, 1/15/2019 | 11,000,000 | 11,082,236 | ||||||
b,d Newcrest Finance Property Ltd., 4.20%, 10/1/2022 | 7,000,000 | 6,427,155 | ||||||
b,d OJSC Novolipetsk Steel, 4.45%, 2/19/2018 | 6,000,000 | 5,805,000 | ||||||
d Rio Tinto Alcan, Inc., 5.00%, 6/1/2015 | 50,000 | 51,459 | ||||||
b,d Samarco Mineracao S.A., 4.125%, 11/1/2022 | 12,000,000 | 11,174,400 | ||||||
Paper & Forest Products — 0.46% | ||||||||
b Neenah Paper, Inc., 5.25%, 5/15/2021 | 6,000,000 | 6,052,500 | ||||||
|
| |||||||
67,203,500 | ||||||||
|
| |||||||
MEDIA — 2.27% | ||||||||
Media — 2.27% | ||||||||
b,g CBS Outdoor Americas Capital LLC, 5.875%, 3/15/2025 | 700,000 | 703,500 | ||||||
b,g CBS Outdoor Americas Capital LLC, 5.25%, 2/15/2022 | 3,220,000 | 3,215,975 | ||||||
b CET 21 SPOL S.R.O. (EUR), 9.00%, 11/1/2017 | 1,000,000 | 1,307,257 | ||||||
Comcast Holdings Corp., 2.00%, 10/15/2029 | 15,500,000 | 7,973,200 | ||||||
b,d Numericable Group S.A., 4.875%, 5/15/2019 | 3,100,000 | 3,061,250 | ||||||
b,d Numericable Group S.A., 6.00%, 5/15/2022 | 2,500,000 | 2,518,750 | ||||||
The Washington Post Co., 7.25%, 2/1/2019 | 500,000 | 579,349 | ||||||
d TV Azteca SAB de CV, 7.50%, 5/25/2018 | 5,000,000 | 5,250,000 | ||||||
b,d Virgin Media, Inc., 5.375%, 4/15/2021 | 4,805,000 | 4,841,037 | ||||||
|
| |||||||
29,450,318 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.66% | ||||||||
Pharmaceuticals — 0.66% | ||||||||
b,c Atlas U.S. Royalty, LLC, 12.25%, 3/15/2027 | 5,450,000 | 5,346,450 | ||||||
b,d CFR International SpA Co., 5.125%, 12/6/2022 | 3,000,000 | 3,220,623 | ||||||
|
| |||||||
8,567,073 | ||||||||
|
| |||||||
REAL ESTATE — 0.53% | ||||||||
Real Estate Investment Trusts — 0.53% | ||||||||
EPR Properties, 5.25%, 7/15/2023 | 5,000,000 | 5,256,760 | ||||||
Retail Opportunity Investments Corp., 5.00%, 12/15/2023 | 1,500,000 | 1,597,049 | ||||||
|
| |||||||
6,853,809 | ||||||||
|
|
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
RETAILING — 2.12% | ||||||||
Distributors — 0.46% | ||||||||
LKQ Corp., Inc., 4.75%, 5/15/2023 | $ | 6,254,000 | $ | 6,035,110 | ||||
Internet & Catalog Retail — 0.58% | ||||||||
b QVC, Inc., 4.45%, 2/15/2025 | 7,567,000 | 7,469,189 | ||||||
Multiline Retail — 0.38% | ||||||||
b,d Grupo Famsa S.A.B. de C.V., 7.25%, 6/1/2020 | 5,000,000 | 5,000,000 | ||||||
Specialty Retail — 0.70% | ||||||||
b Guitar Center, Inc., 6.50%, 4/15/2019 | 3,100,000 | 2,790,000 | ||||||
b Outerwall, Inc., 5.875%, 6/15/2021 | 6,675,000 | 6,291,187 | ||||||
|
| |||||||
27,585,486 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 1.96% | ||||||||
Information Technology Services — 1.02% | ||||||||
b iGATE Corp., 4.75%, 4/15/2019 | 5,775,000 | 5,601,750 | ||||||
Neustar, Inc., 4.50%, 1/15/2023 | 8,660,000 | 7,664,100 | ||||||
Internet Software & Services — 0.94% | ||||||||
Lender Processing Services, Inc./Black Knight Lending Solutions, Inc., 5.75%, 4/15/2023 | 7,500,000 | 7,837,500 | ||||||
Verisign, Inc., 4.625%, 5/1/2023 | 4,550,000 | 4,390,750 | ||||||
|
| |||||||
25,494,100 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 1.37% | ||||||||
Computers & Peripherals — 0.24% | ||||||||
Lexmark International, Inc., 5.125%, 3/15/2020 | 3,000,000 | 3,158,052 | ||||||
Electronic Equipment, Instruments & Components — 1.13% | ||||||||
Anixter, Inc., 5.125%, 10/1/2021 | 6,450,000 | 6,369,375 | ||||||
CDW, LLC/CDW Finance Corp., 6.00%, 8/15/2022 | 7,950,000 | 8,248,125 | ||||||
|
| |||||||
17,775,552 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 4.27% | ||||||||
Diversified Telecommunication Services — 1.71% | ||||||||
b,f GTP Acquisition Partners I, LLC, 4.704%, 5/15/2043 | 4,750,000 | 4,706,879 | ||||||
Level 3 Communications, Inc., 11.875%, 2/1/2019 | 1,000,000 | 1,080,000 | ||||||
Level 3 Communications, Inc., 8.875%, 6/1/2019 | 1,000,000 | 1,067,500 | ||||||
d Telefonica Emisiones SAU, 5.134%, 4/27/2020 | 1,000,000 | 1,099,163 | ||||||
d Telefonica Emisiones SAU, 3.992%, 2/16/2016 | 1,000,000 | 1,040,591 | ||||||
d Telefonica Emisiones SAU, 6.221%, 7/3/2017 | 2,000,000 | 2,231,340 | ||||||
d Telefonica Emisiones SAU, 6.421%, 6/20/2016 | 1,000,000 | 1,086,803 | ||||||
b,d Videotron Ltd. Co., 5.375%, 6/15/2024 | 10,050,000 | 9,949,500 | ||||||
Wireless Telecommunication Services — 2.56% | ||||||||
America Movil Sab de CV (MXN), 6.45%, 12/5/2022 | 120,000,000 | 8,647,979 | ||||||
b,d Bharti Airtel International, 5.125%, 3/11/2023 | 6,000,000 | 6,308,160 | ||||||
b,d MTS International Funding Ltd., 5.00%, 5/30/2023 | 6,000,000 | 5,145,000 | ||||||
b,d VimpelCom (UBS SA), 8.25%, 5/23/2016 | 500,000 | 522,500 | ||||||
b,d VimpelCom Holdings B.V., 7.504%, 3/1/2022 | 2,000,000 | 2,037,500 | ||||||
b WCP Issuer, LLC, 7.143%, 8/15/2043 | 6,000,000 | 6,172,500 | ||||||
b WCP Wireless Site Fund, 6.829%, 11/15/2040 | 4,240,000 | 4,382,761 | ||||||
|
| |||||||
55,478,176 | ||||||||
|
| |||||||
TRANSPORTATION — 3.49% | ||||||||
Airlines — 3.13% | ||||||||
b American Airlines, 5.60%, 1/15/2022 | 13,229,845 | 13,626,740 | ||||||
American Airlines, 4.95%, 7/15/2024 | 2,831,905 | 3,037,218 | ||||||
b,c Delta Airlines A330, 7.132%, 5/13/2025 | 9,649,928 | 9,649,928 | ||||||
c Iberbond 2004 plc (EUR), 4.235%, 12/24/2017 | 4,749,686 | 6,053,084 | ||||||
US Airways, 7.076%, 9/20/2022 | 1,874,469 | 2,047,857 | ||||||
US Airways, 5.90%, 4/1/2026 | 1,854,198 | 2,076,702 | ||||||
US Airways, 6.25%, 10/22/2024 | 1,612,648 | 1,818,261 | ||||||
b,d Virgin Australia, 5.00%, 4/23/2025 | 2,326,221 | 2,425,085 | ||||||
Marine — 0.36% | ||||||||
b,d Stena International SA, 5.75%, 3/1/2024 | 4,650,000 | 4,650,000 | ||||||
|
| |||||||
45,384,875 | ||||||||
|
|
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
UTILITIES — 2.07% | ||||||||
Electric Utilities — 1.01% | ||||||||
Alabama Power Capital Trust V, 3.335%, 10/1/2042 | $ | 700,000 | $ | 654,543 | ||||
b Duquesne Light Holdings, 6.40%, 9/15/2020 | 2,000,000 | 2,338,234 | ||||||
b,d Enel Finance International S.A., 6.25%, 9/15/2017 | 1,500,000 | 1,684,280 | ||||||
PNM Resources, Inc., 9.25%, 5/15/2015 | 3,070,000 | 3,220,792 | ||||||
Puget Energy, Inc., 5.625%, 7/15/2022 | 2,500,000 | 2,868,655 | ||||||
Puget Energy, Inc., 6.50%, 12/15/2020 | 2,000,000 | 2,367,072 | ||||||
Gas Utilities — 0.27% | ||||||||
b Source Gas, LLC., 5.90%, 4/1/2017 | 1,250,000 | 1,349,197 | ||||||
b Southern Star Central Gas Pipeline, Inc., 6.00%, 6/1/2016 | 2,000,000 | 2,120,906 | ||||||
Independent Power & Renewable Electricity Producers — 0.35% | ||||||||
Ipalco Enterprises, Inc., 5.00%, 5/1/2018 | 2,500,000 | 2,634,375 | ||||||
b Midland Cogeneration Venture, 6.00%, 3/15/2025 | 1,806,144 | 1,936,481 | ||||||
Multi-Utilities — 0.44% | ||||||||
CMS Energy Corp., 8.75%, 6/15/2019 | 2,000,000 | 2,539,332 | ||||||
b Topaz Solar Farms, LLC, 4.875%, 9/30/2039 | 3,000,000 | 3,110,499 | ||||||
|
| |||||||
26,824,366 | ||||||||
|
| |||||||
TOTAL CORPORATE BONDS (Cost $724,925,691) | 730,963,126 | |||||||
|
| |||||||
CONVERTIBLE BONDS — 1.06% | ||||||||
DIVERSIFIED FINANCIALS — 0.26% | ||||||||
Consumer Finance — 0.26% | ||||||||
b EZCORP, Inc., 2.125%, 6/15/2019 | 3,877,000 | 3,414,183 | ||||||
|
| |||||||
3,414,183 | ||||||||
|
| |||||||
REAL ESTATE — 0.67% | ||||||||
Real Estate Investment Trusts — 0.67% | ||||||||
American Realty Capital Properties Inc., 3.00%, 8/1/2018 | 3,890,000 | 3,865,687 | ||||||
b IAS Operating Partnership LP, 5.00%, 3/15/2018 | 5,040,000 | 4,838,400 | ||||||
|
| |||||||
8,704,087 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 0.13% | ||||||||
Internet Software & Services — 0.13% | ||||||||
b Mercadolibre, Inc., 2.25%, 7/1/2019 | 1,510,000 | 1,635,519 | ||||||
|
| |||||||
1,635,519 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 0.00% | ||||||||
Diversified Telecommunication Services — 0.00% | ||||||||
Alaska Communication Systems Group, Inc., 6.25%, 5/1/2018 | 69,000 | 55,200 | ||||||
|
| |||||||
55,200 | ||||||||
|
| |||||||
TOTAL CONVERTIBLE BONDS (Cost $14,152,703) | 13,808,989 | |||||||
|
| |||||||
WARRANTS — 0.01% | ||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.01% | ||||||||
Pharmaceuticals — 0.01% | ||||||||
a,b Alexza Pharmaceuticals, Inc. | 41,863 | 97,541 | ||||||
|
| |||||||
TOTAL WARRANTS (Cost $213,640) | 97,541 | |||||||
|
| |||||||
MUNICIPAL BONDS — 0.72% | ||||||||
California Health Facilities Financing Authority (Developmental Disabilities), 7.875%, 2/1/2026 | 1,940,000 | 2,177,980 | ||||||
Los Angeles California Municipal Improvement Corp. (Build America Bonds), 6.165%, 11/1/2020 | 1,885,000 | 2,076,026 | ||||||
b Midwest Family Housing, 5.168%, 7/1/2016 | 335,000 | 348,813 | ||||||
Oakland California Redevelopment Agency, 8.00%, 9/1/2016 | 1,000,000 | 1,109,660 | ||||||
Oklahoma Development Finance Authority, 8.00%, 5/1/2020 | 1,185,000 | 1,205,050 | ||||||
San Bernardino County California Redevelopment Agency (San Sevaine), 8.45%, 9/1/2030 | 2,000,000 | 2,277,220 | ||||||
Wisconsin State Health & Educational Facilities (Richland Hospital), 7.08%, 6/1/2016 | 150,000 | 147,913 | ||||||
|
| |||||||
TOTAL MUNICIPAL BONDS (Cost $8,404,685) | 9,342,662 | |||||||
|
|
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
U.S. TREASURY SECURITIES — 1.07% | ||||||||
U.S. Treasury, 2.25%, 1/31/2015 | $ | 2,000,000 | $ | 2,014,541 | ||||
U.S. Treasury, 1.625%, 6/30/2019 | 11,880,000 | 11,816,887 | ||||||
|
| |||||||
TOTAL U.S. TREASURY SECURITIES (Cost $13,834,068) | 13,831,428 | |||||||
|
| |||||||
U.S. GOVERNMENT AGENCIES — 0.91% | ||||||||
b CoBank ACB Floating Rate Note (Farm Credit Banks), 0.834%, 6/15/2022 | 12,700,000 | 11,874,500 | ||||||
|
| |||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $12,069,860) | 11,874,500 | |||||||
|
| |||||||
OTHER GOVERNMENT — 3.75% | ||||||||
Australian Government (AUD), 2.75%, 4/21/2024 | 8,200,000 | 6,751,110 | ||||||
BK Nederlandse Gemeenten N.V. (NOK), 4.00%, 5/15/2015 | 5,000,000 | 788,824 | ||||||
b,d Brazilian Development Bank, 3.375%, 9/26/2016 | 2,000,000 | 2,047,000 | ||||||
b,d Eurasian Development Bank, 5.00%, 9/26/2020 | 2,000,000 | 2,025,000 | ||||||
Federative Republic of Brazil (BRL), 12.50%, 1/5/2016 | 3,475,000 | 1,439,192 | ||||||
b,d Government of Aruba, 4.625%, 9/14/2023 | 7,700,000 | 7,713,719 | ||||||
Kommunalbanken AS (NOK), 4.00%, 1/26/2015 | 5,000,000 | 783,565 | ||||||
Mexican Bonos (MXN), 5.00%, 6/15/2017 | 130,000,000 | 9,829,753 | ||||||
Mexico Bonos de Desarrollo (MXN), 4.75%, 6/14/2018 | 87,500,000 | 6,471,098 | ||||||
Norwegian Government (NOK), 4.25%, 5/19/2017 | 25,000,000 | 4,161,835 | ||||||
b,d Republic of Iceland, 4.875%, 6/16/2016 | 625,000 | 650,550 | ||||||
b,d Seven and Seven Ltd. Floating Rate Note, (Guaranty: Export-Import Bank of Korea), 1.395%, 9/11/2019 | 6,000,000 | 5,994,270 | ||||||
|
| |||||||
TOTAL OTHER GOVERNMENT (Cost $49,252,951) | 48,655,916 | |||||||
|
| |||||||
MORTGAGE BACKED — 0.06% | ||||||||
Federal National Mtg Assoc., CMO Series 1994-37 Class L, 6.50%, 3/25/2024 | 4,437 | 4,951 | ||||||
c Reilly FHA 1997-A Mtg, 6.896%, 7/1/2020 | 790,906 | 806,724 | ||||||
|
| |||||||
TOTAL MORTGAGE BACKED (Cost $815,754) | 811,675 | |||||||
|
| |||||||
LOAN PARTICIPATIONS — 8.03% | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.97% | ||||||||
Commercial Services & Supplies — 0.12% | ||||||||
SourceHov, LLC, 8.75%, 4/30/2019 | 1,500,000 | 1,530,000 | ||||||
Professional Services — 0.85% | ||||||||
Extreme Reach, Inc., 6.75%, 2/7/2020 | 5,238,000 | 5,238,000 | ||||||
Academi Holdings, LLC, 11.00%, 7/24/2020 | 6,000,000 | 5,880,000 | ||||||
|
| |||||||
12,648,000 | ||||||||
|
| |||||||
CONSUMER DURABLES & APPAREL — 0.32% | ||||||||
Leisure Equipment & Products — 0.15% | ||||||||
Topps Co, Inc., 7.25%, 10/2/2018 | 1,985,000 | 1,945,300 | ||||||
Textiles, Apparel & Luxury Goods — 0.17% | ||||||||
5.11, Inc., 6.00%, 2/28/2020 | 2,238,750 | 2,233,153 | ||||||
|
| |||||||
4,178,453 | ||||||||
|
| |||||||
CONSUMER SERVICES — 0.74% | ||||||||
Diversified Consumer Services — 0.51% | ||||||||
Laureate Education, Inc., 5.00%, 6/15/2018 | 6,986,632 | 6,678,032 | ||||||
Hotels, Restaurants & Leisure — 0.23% | ||||||||
c Private Restaurants Properties, Inc., 9.00%, 4/10/2017 | 2,924,385 | 2,944,856 | ||||||
|
| |||||||
9,622,888 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 1.68% | ||||||||
Capital Markets — 0.18% | ||||||||
RCS Capital Corp., 10.50%, 4/29/2021 | 2,300,000 | 2,334,500 | ||||||
Diversified Financial Services — 1.50% | ||||||||
d Stena International S.A., 4.00%, 3/3/2021 | 5,356,575 | 5,209,269 | ||||||
NCP Finance LP, 11.00%, 9/30/2018 | 4,257,007 | 4,235,722 | ||||||
ABG Intermediate Holdings, LLC, 9.00%, 5/27/2022 | 10,100,000 | 10,049,500 | ||||||
|
| |||||||
21,828,991 | ||||||||
|
|
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
FOOD, BEVERAGE & TOBACCO — 0.79% | ||||||||
Food Products — 0.21% | ||||||||
Del Monte Foods, Inc., 8.25%, 8/18/2021 | $ | 3,020,000 | $ | 2,718,000 | ||||
Tobacco — 0.58% | ||||||||
North Atlantic Trading Co., Inc., 7.75%-8.75%, 12/30/2019 | 7,445,404 | 7,464,018 | ||||||
|
| |||||||
10,182,018 | ||||||||
|
| |||||||
MATERIALS — 0.74% | ||||||||
Chemicals — 0.74% | ||||||||
PeroxyChem, LLC, 7.50%, 2/13/2020 | 4,975,000 | 5,037,188 | ||||||
OCI Beaumont, LLC, 5.00%, 8/20/2019 | 4,609,890 | 4,609,890 | ||||||
|
| |||||||
9,647,078 | ||||||||
|
| |||||||
MEDIA — 1.07% | ||||||||
Media — 1.07% | ||||||||
Baker & Taylor Acquisitions Corp., 12.00%, 9/28/2016 | 5,000,000 | 5,050,000 | ||||||
d Mood Media Corp., 7.00%, 4/25/2019 | 8,773,481 | 8,773,481 | ||||||
|
| |||||||
13,823,481 | ||||||||
|
| |||||||
RETAILING — 0.24% | ||||||||
Specialty Retail — 0.24% | ||||||||
Rue21, Inc., 5.625%, 10/7/2020 | 3,696,332 | 3,141,882 | ||||||
|
| |||||||
3,141,882 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 0.47% | ||||||||
Information Technology Services — 0.47% | ||||||||
b,c,h Valores Corporativos Softtek, S.A. de C.V., 6.902%, 8/27/2019 | 6,181,818 | 6,150,909 | ||||||
|
| |||||||
6,150,909 | ||||||||
|
| |||||||
TRANSPORTATION — 0.26% | ||||||||
Airlines — 0.26% | ||||||||
c Synergy Aerospace Corp., 7.50%, 3/3/2015 | 3,313,181 | 3,313,181 | ||||||
|
| |||||||
3,313,181 | ||||||||
|
| |||||||
UTILITIES — 0.75% | ||||||||
Electric Utilities — 0.75% | ||||||||
FirstEnergy Corp., 1.983%, 3/31/2019 | �� | 10,000,000 | 9,750,000 | |||||
|
| |||||||
9,750,000 | ||||||||
|
| |||||||
TOTAL LOAN PARTICIPATIONS (Cost $104,299,373) | 104,286,881 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 14.34% | ||||||||
AGL Capital Corp., 0.21%, 10/1/2014 | 14,300,000 | 14,300,000 | ||||||
Airgas, Inc., 0.20%, 10/1/2014 | 10,600,000 | 10,600,000 | ||||||
Ameren Illinois Co., 0.20%, 10/1/2014 | 8,600,000 | 8,600,000 | ||||||
Apache Corp., 0.25%, 10/6/2014 | 15,200,000 | 15,199,472 | ||||||
Atmos Energy Corp., 0.19%, 10/6/2014 | 14,250,000 | 14,249,624 | ||||||
Bank of New York Tri-Party Repurchase Agreement 0.23% dated 9/30/2014 due 10/1/2014, repurchase price $19,000,121 collateralized by 18 corporate debt securities, having an average coupon of 4.16%, a minimum credit rating of BBB-, maturity dates from 11/6/2017 to 5/15/2042, and having an aggregate market value of $20,344,160 at 9/30/2014 | 19,000,000 | 19,000,000 | ||||||
CenterPoint Energy, Inc., 0.20%, 10/1/2014 | 17,300,000 | 17,300,000 | ||||||
Hitachi International Treasury Ltd., 0.32%, 10/3/2014 | 19,000,000 | 18,999,662 | ||||||
Kansas City Power & Light, 0.22%, 10/1/2014 | 19,000,000 | 19,000,000 | ||||||
National Grid USA, 0.24%, 10/2/2014 | 19,000,000 | 18,999,874 | ||||||
Plains All American Pipeline, LP, 0.28%, 10/6/2014 | 11,000,000 | 10,999,572 | ||||||
Spectra Energy Partners, 0.25%, 10/6/2014 | 19,000,000 | 18,999,340 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $186,247,544) | 186,247,544 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 99.95% (Cost $1,292,830,728) | $ | 1,298,081,299 | ||||||
OTHER ASSETS LESS LIABILITIES — 0.05% | 668,959 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 1,298,750,258 | ||||||
|
|
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
Footnote Legend
† | Share/principal amount in U.S. Dollars unless otherwise noted in the security description. |
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. Most of these securities have been deemed to be liquid for purposes of the Fund’s limitation on investment in illiquid securities. As of September 30, 2014, the aggregate value of these securities in the Fund’s portfolio was $623,899,045, representing 48.04% 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 | Segregated as collateral for a when-issued security. |
g | When-issued security. |
h | Loan facility with an unfunded liability of $1,181,182 (see Note 2). |
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 | |
CHL | Denominated in Chilean Peso | |
CMO | Collateralized Mortgage Obligation | |
EUR | Denominated in Euros | |
FCB | Farm Credit Bank | |
FHA | Insured by Federal Housing Administration |
GBP | Denominated in Great Britain Pounds | |
Mtg | Mortgage | |
MXN | Denominated in Mexican Pesos | |
NOK | Denominated in Norwegian Kroner | |
Pfd | Preferred Stock | |
REIT | Real Estate Investment Trust | |
SEK | Denominated in Swedish Kronor | |
SPA | Standby Purchase Agreement | |
SPV | Special Purpose Vehicle |
See notes to financial statements.
Certified Annual Report 19
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Strategic Income Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $1,292,830,728) (Note 2) | $ | 1,298,081,299 | ||
Cash | 11,317,681 | |||
Cash denominated in foreign currency (cost $8,027,314) | 8,013,352 | |||
Receivable for investments sold | 1,482,071 | |||
Receivable for fund shares sold | 9,647,782 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 1,238,619 | |||
Dividends receivable | 348,458 | |||
Dividend and interest reclaim receivable | 50,472 | |||
Interest receivable | 13,093,554 | |||
Prepaid expenses and other assets | 33,600 | |||
|
| |||
Total Assets | 1,343,306,888 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 40,266,348 | |||
Payable for fund shares redeemed | 2,377,271 | |||
Payable to investment advisor and other affiliates (Note 3) | 1,082,120 | |||
Accounts payable and accrued expenses | 224,423 | |||
Dividends payable | 606,468 | |||
|
| |||
Total Liabilities | 44,556,630 | |||
|
| |||
NET ASSETS | $ | 1,298,750,258 | ||
|
| |||
NET ASSETS CONSIST OF: | ||||
Distribution in excess of net investment income | $ | (551,723 | ) | |
Net unrealized appreciation on investments and foreign currency translations | 6,459,652 | |||
Accumulated net realized gain (loss) | 15,264,078 | |||
Net capital paid in on shares of beneficial interest | 1,277,578,251 | |||
|
| |||
$ | 1,298,750,258 | |||
|
|
20 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
NET ASSET VALUE: | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($392,604,113 applicable to 32,221,356 shares of beneficial interest outstanding - Note 4) | $ | 12.18 | ||
Maximum sales charge, 4.50% of offering price | 0.57 | |||
|
| |||
Maximum offering price per share | $ | 12.75 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($348,334,117 applicable to 28,629,986 shares of beneficial interest outstanding - Note 4) | $ | 12.17 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($552,182,149 applicable to 45,419,224 shares of beneficial interest outstanding - Note 4) | $ | 12.16 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($3,048,764 applicable to 250,382 shares of beneficial interest outstanding - Note 4) | $ | 12.18 | ||
|
| |||
Class R4 Shares:** | ||||
Net asset value, offering and redemption price per share ($15,647 applicable to 1,285 shares of beneficial interest outstanding - Note 4) | $ | 12.18 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($2,565,468 applicable to 211,075 shares of beneficial interest outstanding - Note 4) | $ | 12.15 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
** | Inception date of Class R4 shares was February 1, 2014. |
See notes to financial statements.
Certified Annual Report 21
STATEMENT OF OPERATIONS | ||
Thornburg Strategic Income Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Dividend income (net of foreign taxes withheld of $167,547) | $ | 4,281,990 | ||
Interest income (net of premium amortized of $1,061,608) | 49,572,048 | |||
Other income | 1,238,634 | |||
|
| |||
Total Income | 55,092,672 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 7,076,436 | |||
Administration fees (Note 3) | ||||
Class A Shares | 403,087 | |||
Class C Shares | 359,245 | |||
Class I Shares | 192,606 | |||
Class R3 Shares | 1,759 | |||
Class R4 Shares | 12 | |||
Class R5 Shares | 949 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 810,467 | |||
Class C Shares | 2,873,958 | |||
Class R3 Shares | 7,036 | |||
Class R4 Shares | 26 | |||
Transfer agent fees | ||||
Class A Shares | 269,879 | |||
Class C Shares | 239,196 | |||
Class I Shares | 272,337 | |||
Class R3 Shares | 2,290 | |||
Class R4 Shares | 2,565 | |||
Class R5 Shares | 2,804 | |||
Registration and filing fees | ||||
Class A Shares | 59,805 | |||
Class C Shares | 37,674 | |||
Class I Shares | 57,384 | |||
Class R3 Shares | 21,929 | |||
Class R4 Shares | 3,540 | |||
Class R5 Shares | 21,907 | |||
Custodian fees (Note 3) | 250,577 | |||
Professional fees | 95,325 | |||
Accounting fees | 31,575 | |||
Trustee fees | 30,370 | |||
Other expenses | 134,646 | |||
|
| |||
Total Expenses | 13,259,384 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (638,957 | ) | ||
Fees paid indirectly (Note 3) | (1,002 | ) | ||
|
| |||
Net Expenses | 12,619,425 | |||
|
| |||
Net Investment Income | $ | 42,473,247 | ||
|
|
22 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Strategic Income Fund | Year Ended September 30, 2014 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 19,202,147 | ||
Forward currency contracts (Note 7) | (322,784 | ) | ||
Foreign currency transactions | (175,608 | ) | ||
|
| |||
18,703,755 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (3,872,325 | ) | ||
Foreign currency translations | (49,682 | ) | ||
Forward currency contracts (Note 7) | 1,656,612 | |||
|
| |||
(2,265,395 | ) | |||
|
| |||
Net Realized and Unrealized Gain | 16,438,360 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 58,911,607 | ||
|
|
See notes to financial statements.
Certified Annual Report 23
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Strategic Income Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 42,473,247 | $ | 35,737,760 | ||||
Net realized gain (loss) on investments, forward currency contracts and foreign currency transactions | 18,703,755 | 14,102,145 | ||||||
Net unrealized appreciation (depreciation) on investments, foreign currency contracts, and foreign currency translations | (2,265,395 | ) | (15,073,927 | ) | ||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 58,911,607 | 34,765,978 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (14,111,314 | ) | (11,912,656 | ) | ||||
Class C Shares | (10,955,909 | ) | (10,107,088 | ) | ||||
Class I Shares | (17,925,535 | ) | (12,484,393 | ) | ||||
Class R3 Shares | (56,962 | ) | (4,342 | ) | ||||
Class R4 Shares | (423 | ) | — | |||||
Class R5 Shares | (85,256 | ) | (611 | ) | ||||
From realized gains | ||||||||
Class A Shares | (5,900,030 | ) | (2,285,280 | ) | ||||
Class C Shares | (5,473,946 | ) | (2,208,844 | ) | ||||
Class I Shares | (5,939,705 | ) | (2,229,497 | ) | ||||
Class R3 Shares | (2,935 | ) | (396 | ) | ||||
Class R5 Shares | (19,145 | ) | (120 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | 141,841,186 | 53,440,558 | ||||||
Class C Shares | 111,635,825 | 50,193,875 | ||||||
Class I Shares | 306,584,478 | 57,806,097 | ||||||
Class R3 Shares | 2,887,855 | 159,687 | ||||||
Class R4 Shares | 15,412 | — | ||||||
Class R5 Shares | 2,547,850 | 730 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 563,953,053 | 155,133,698 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 734,797,205 | 579,663,507 | ||||||
|
|
|
| |||||
End of Year | $ | 1,298,750,258 | $ | 734,797,205 | ||||
|
|
|
| |||||
Undistributed (distribution in excess of) net investment income | $ | (551,723 | ) | $ | 1,117,622 |
See notes to financial statements.
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Strategic Income Fund | September 30, 2014 |
NOTE 1 – ORGANIZATION
Thornburg Strategic Income Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on December 19, 2007. The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of eighteen 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 six classes of shares of beneficial interest: Class A, Class C, Institutional Class (“Class I”) and Retirement Classes (“Class R3”, “Class R4”, and “Class R5”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, (iii) Class I shares are sold at net asset value without a sales charge at the time of purchase 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 may bear a service fee, 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 allocable 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 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. 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 reported by NASDAQ are valued at the NASDAQ official closing price. 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. 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 when 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, 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
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
of a market quotation, create a question about the reliability of the investment’s market value. For example, 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of 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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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:
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
FAIR VALUE MEASUREMENTS AT SEPTEMBER 30, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3(B) | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 28,545,952 | $ | 23,215,773 | $ | 5,330,179 | $ | — | ||||||||
Preferred Stock(a) | 26,799,086 | 9,948,880 | 16,850,206 | — | ||||||||||||
Asset Backed Securities | 122,815,999 | — | 95,074,715 | 27,741,284 | ||||||||||||
Corporate Bonds | 730,963,126 | — | 714,312,022 | 16,651,104 | ||||||||||||
Convertible Bonds | 13,808,989 | — | 13,808,989 | — | ||||||||||||
Warrants | 97,541 | — | 97,541 | — | ||||||||||||
Municipal Bonds | 9,342,662 | — | 9,342,662 | — | ||||||||||||
U.S. Treasury Securities | 13,831,428 | 13,831,428 | — | — | ||||||||||||
U.S. Government Agencies | 11,874,500 | — | 11,874,500 | — | ||||||||||||
Other Government | 48,655,916 | — | 48,655,916 | — | ||||||||||||
Mortgage Backed | 811,675 | — | 4,951 | 806,724 | ||||||||||||
Loan Participations | 104,286,881 | — | 86,840,747 | 17,446,134 | ||||||||||||
Short Term Investments | 186,247,544 | — | 186,247,544 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 1,298,081,299 | $ | 46,996,081 | $ | 1,188,439,972 | $ | 62,645,246 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 1,238,619 | $ | — | $ | 1,238,619 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Spot Currency | $ | (31,429 | ) | $ | (31,429 | ) | $ | — | $ | — |
(a) | At September 30, 2014, industry classifications for Preferred Stock in Level 2 consist of $13,936,250 in Miscellaneous, and $2,913,956 in Telecommunication Services. |
(b) | In accordance with the guidance prescribed in Accounting Standards Update No. 2011-04 (“ASU No. 2011-04”), unadjusted broker quotes and vendor prices were applied to portfolio securities characterized as Level 3 investments at September 30, 2014. A portfolio security characterized as a Level 3 investment representing $0 market value in Common Stock was fair valued by the Committee based on the inability to derive a fair value given no market activity after a restructuring event. A spread of 337 basis points to comparable securities was applied to a portfolio security characterized as a Level 3 investment representing $8,045,063 market value in Asset Backed Securities. Portfolio securities characterized as Level 3 investments representing $9,675,000 market value in Asset Backed Securities were fair valued by the Committee using an income approach based upon the present value of anticipated future cash flows with discounted internal rates of return at a range of 2.4%–4.2% (weighted average of 3.3%) derived from a third party expert provider. A portfolio security characterized as a Level 3 investment representing $4,874,584 market value in Corporate Bonds was fair valued by the Committee using cost. A portfolio security characterized as a Level 3 investment representing $6,053,084 market value in Corporate Bonds was fair valued by the Committee using an income approach based upon the present value of anticipated future cash flows and a discounted internal rate of return of 4.0%. Portfolio securities characterized as Level 3 investments representing $6,258,037 market value in Loan Participations were fair valued by the Committee using an income approach based upon the present value of anticipated future cash flows with discounted internal rates of return at a range of 7.9%–9.0% (weighted average of 8.45%) derived from a third party expert provider. |
* | 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, which may include futures, forwards and swap contracts, which are valued at the unrealized appreciation (depreciation) on the investment. |
In accordance with the guidance prescribed in ASU No. 2011-04, it is the policy of the Fund to recognize transfers between levels and those underlying events which caused the movement. The Fund recognized no transfers between Levels 1 and 2 for the year ended September 30, 2014, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
Certified Annual Report 27
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2014 is as follows:
PREFERRED STOCK | ASSET BACKED SECURITIES | COMMON STOCK | CORPORATE BONDS | MORTGAGE BACKED | OTHER SECURITIES | TOTAL(d) | ||||||||||||||||||||||
Beginning Balance 9/30/2013 | $ | 4,850,000 | $ | 27,667,476 | $ | — | $ | 14,611,418 | $ | 1,033,463 | $ | 6,937,996 | $ | 55,100,353 | ||||||||||||||
Accrued Discounts (Premiums) | — | 12,074 | — | 79,868 | (3,342 | ) | 10,393 | 98,993 | ||||||||||||||||||||
Net Realized Gain | 157,650 | 26,640 | — | 2,258 | (5,748 | ) | 462 | 181,262 | ||||||||||||||||||||
Gross Purchases | — | 3,033,547 | 153,600 | 10,634,637 | — | 11,050,910 | 24,872,694 | |||||||||||||||||||||
Gross Sales | (5,000,000 | ) | (1,942,509 | ) | — | (89,792 | ) | (211,924 | ) | (745,430 | ) | (7,989,655 | ) | |||||||||||||||
Net Change in Unrealized Appreciation (Depreciation)(b)(e) | (7,650 | ) | 344,056 | (153,600 | ) | (807,285 | ) | (5,725 | ) | 191,803 | (438,401 | ) | ||||||||||||||||
Transfers into Level 3(c) | — | — | — | — | — | — | — | |||||||||||||||||||||
Transfers out of Level 3(c) | — | (1,400,000 | ) | — | (7,780,000 | ) | — | — | (9,180,000 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Ending Balance 9/30/2014 | $ | — | $ | 27,741,284 | $ | — | $ | 16,651,104 | $ | 806,724 | $ | 17,446,134 | $ | 62,645,246 |
(a) | Amount of Net Realized Gain (Loss) recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2014. |
(b) | Amount of Net Change in Unrealized Appreciation (Depreciation) recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2014. |
(c) | Transfers into or out of Level 3 were out of or into Level 2, and were due to changes in other significant observable inputs available during the year ended September 30, 2014. 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 4.82% of total Net Assets at the year ended September 30, 2014. 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. |
(e) | The Net Change in Unrealized Appreciation (Depreciation) attributable to securities owned at September 30, 2104, which were valued using significant unobservable inputs is negative $430,751. This is included within net change in unrealized appreciation (depreciation) on investments within the Statement of Operations. |
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 of securities 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, 2014, 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
28 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
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 Fund may invest excess cash by entering into repurchase agreements under which the Fund delivers cash to a counterparty, the counterparty delivers securities as collateral, and the Fund is obligated to resell that collateral to the counterparty at an agreed upon price at the maturity date of the repurchase agreement. Securities pledged as collateral under repurchase agreements are held in custody with a third party custodian 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 counterparty’s obligations. Under certain circumstances, in the event of default or bankruptcy by the counterparty 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.
Unfunded Loan Commitments: The Fund has entered into a loan commitment with Valores Corporativos Softek, of which at September 30, 2014, $6,181,818 of the $8,000,000 par commitment had been funded and maturity date is 8/27/2019.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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.
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, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $183,873 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $29,691 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, 2014, there were no 12b-1 service plan fees charged for Class I or Class R5 shares. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares and for shareholder services.
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 and Class R3 shares of the Fund at an annual rate of
Certified Annual Report 29
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
up to .75 of 1% per annum of the average daily net assets attributable to Class C shares and an annual rate of .25 of 1% 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, 2014, are set forth in the Statement of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class A, Class C, Class R3, Class R4, and Class R5 expenses do not exceed 1.25%, 1.80%, 1.25%, 1.25%, and 0.99%, respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $54,996 for Class A shares, $530,453 for Class C shares, $26,099 for Class R3 shares, $6,093 for Class R4 shares, and $21,316 for Class R5 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, 2014, fees paid indirectly were $1,002.
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 and is included as Trustee Fees on the Statement of Operations.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 18,515,650 | $ | 225,983,883 | 10,058,431 | $ | 123,667,059 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,512,030 | 18,371,710 | 1,022,523 | 12,513,293 | ||||||||||||
Shares repurchased | (8,402,986 | ) | (102,514,407 | ) | (6,752,417 | ) | (82,739,794 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 11,624,694 | $ | 141,841,186 | 4,328,537 | $ | 53,440,558 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 12,164,015 | $ | 148,392,875 | 7,166,676 | $ | 87,947,122 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,169,485 | 14,180,200 | 847,660 | 10,357,063 | ||||||||||||
Shares repurchased | (4,185,267 | ) | (50,937,250 | ) | (3,928,127 | ) | (48,110,310 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 9,148,233 | $ | 111,635,825 | 4,086,209 | $ | 50,193,875 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 31,367,129 | $ | 382,209,495 | 12,270,363 | $ | 150,879,431 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,530,876 | 18,590,355 | 903,587 | 11,036,909 | ||||||||||||
Shares repurchased | (7,726,042 | ) | (94,215,372 | ) | (8,520,072 | ) | (104,110,243 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 25,171,963 | $ | 306,584,478 | 4,653,878 | $ | 57,806,097 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 252,491 | $ | 3,086,494 | 18,755 | $ | 228,019 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 4,631 | 56,871 | 387 | 4,710 | ||||||||||||
Shares repurchased | (20,759 | ) | (255,510 | ) | (5,992 | ) | (73,042 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 236,363 | $ | 2,887,855 | 13,150 | $ | 159,687 | ||||||||||
|
|
|
|
|
|
|
|
30 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class R4 Shares* | ||||||||||||||||
Shares sold | 1,271 | $ | 15,250 | |||||||||||||
Shares issued to shareholders in reinvestment of dividends | 35 | 423 | ||||||||||||||
Shares repurchased | (21 | ) | (261 | ) | ||||||||||||
|
|
|
| |||||||||||||
Net increase (decrease) | 1,285 | $ | 15,412 | |||||||||||||
|
|
|
| |||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 226,485 | $ | 2,747,416 | — | $ | — | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 8,572 | 104,180 | 60 | 730 | ||||||||||||
Shares repurchased | (24,914 | ) | (303,746 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 210,143 | $ | 2,547,850 | 60 | $ | 730 | ||||||||||
|
|
|
|
|
|
|
|
* | Inception date of the Class R4 shares was February 1, 2014. |
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments and U. S. Government obligations) of $835,251,594 and $445,004,939, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 1,292,815,869 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 29,791,973 | ||
Gross unrealized depreciation on a tax basis | (24,526,543 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 5,265,430 | ||
|
|
At September 30, 2014, the Fund had $6,171,429 and $10,339,505 of undistributed tax basis ordinary income and tax basis capital gains, respectively.
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 50,575,019 | $ | 37,834,272 | ||||
Capital gains | 9,896,141 | 3,398,955 | ||||||
|
|
|
| |||||
Total | $ | 60,471,160 | $ | 41,233,227 | ||||
|
|
|
|
In order to account for permanent book/tax differences, the Fund increased accumulated net realized gain by $1,064,308, decreased net paid in capital on shares of beneficial interest by $57,115, and decreased undistributed net investment income by $1,007,193. This reclassification has no impact on the net asset value of the Fund. This reclassification results from foreign currency gains (losses), pay down security losses, and real estate investment trust (REIT) capital gain tax adjustments.
Certified Annual Report 31
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
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 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, 2014, 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’s 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 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, 2014 in the normal course of pursuing its investment objectives, with the objective 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 average value of open sell currency contracts for the year ended September 30, 2014, was $27,099,364. 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 the open sell currency contracts to which they relate.
The following table displays the outstanding forward currency contracts at September 30, 2014:
OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2014 | ||||||||||||||||||||||||
CONTRACT DESCRIPTION | BUY/SELL | CONTRACT AMOUNT | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | ||||||||||||||||||
Euro | Sell | 14,076,000 | 02/17/2015 | 17,797,354 | $ | 1,014,797 | $ | — | ||||||||||||||||
Great Britain Pound | Sell | 3,570,600 | 12/11/2014 | 5,784,942 | 203,847 | — | ||||||||||||||||||
Great Britain Pound | Sell | 1,567,800 | 12/11/2014 | 2,540,086 | 19,975 | — | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total | $ | 1,238,619 | $ | — | ||||||||||||||||||||
|
|
|
|
The foregoing forward currency contracts were entered into pursuant to an International Swaps and Derivatives Association (ISDA) Master Agreement. In the event of a default or termination under the ISDA Master Agreement, the non-defaulting party has the right to close out all outstanding forward currency contracts between the parties and to net any payment amounts under those contracts, resulting in a single net amount payable by one party to the other. Because the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Fund’s Statement of Assets and Liabilities unless there has been an event of default or termination event under that agreement, the Fund does not net its outstanding forward currency contracts for purposes of the disclosure in the Fund’s Statement of Assets and Liabilities. Instead the Fund recognizes the unrealized appreciation or depreciation on those forward currency contracts on a gross basis in the Fund’s Statement of Assets and Liabilities. At September 30, 2014, those recognized amounts are disclosed in the following table:
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2014 | ||||||
ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $1,238,619 |
Because the Fund does not currently receive or post cash collateral in connection with its currency forward contracts, and because all of the Fund’s outstanding currency forward contracts are with State Street Bank and Trust Company, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2014 can be determined by offsetting the dollar amounts shown in the preceding table. Based on those amounts, the net amount of the Fund’s assets which is attributable to its outstanding forward currency contracts at September 30, 2014 is $1,238,619, and the net amount of the Fund’s liabilities which is
32 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 |
attributable to those contracts at that date is $0. The Fund’s forward currency contracts are valued each day, and the net amounts of the Fund’s assets and liabilities which are attributable to those contracts are expected to vary over time.
The net realized gain (loss) 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, 2014 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, 2014 | ||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||
Foreign exchange contracts | $(322,784) | $(322,784) |
AMOUNT OF NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2014 | ||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||
Foreign exchange contracts | $1,656,612 | $1,656,612 |
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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Certified Annual Report 33
Thornburg Strategic Income Fund
PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UNLESS | NET ASSET VALUE BEGINNING OF PERIOD | NET INVESTMENT INCOME (LOSS) | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS FROM NET REALIZED GAINS | TOTAL DIVIDENDS | NET ASSET VALUE END OF PERIOD | NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | EXPENSES, AFTER EXPENSE REDUCTIONS AND NET OF CUSTODY CREDITS (%) | EXPENSES, BEFORE EXPENSE REDUCTIONS (%) | TOTAL RETURN (%)(a) | PORTFOLIO TURNOVER RATE (%)(a) | NET ASSETS AT END OF PERIOD (THOUSANDS) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS A SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 12.19 | 0.52 | 0.28 | 0.80 | (0.54 | ) | (0.27 | ) | (0.81 | ) | $ | 12.18 | 4.30 | 1.22 | 1.22 | 1.24 | 6.79 | 51.20 | $ | 392,604 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013(b) | $ | 12.28 | 0.67 | 0.03 | 0.70 | (0.65 | ) | (0.14 | ) | (0.79 | ) | $ | 12.19 | 5.44 | 1.25 | 1.25 | 1.27 | 5.79 | 76.47 | $ | 251,106 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS C SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 12.17 | 0.45 | 0.29 | 0.74 | (0.47 | ) | (0.27 | ) | (0.74 | ) | $ | 12.17 | 3.73 | 1.80 | 1.80 | 1.98 | 6.27 | 51.20 | $ | 348,334 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 12.26 | 0.60 | 0.03 | 0.63 | (0.58 | ) | (0.14 | ) | (0.72 | ) | $ | 12.17 | 4.88 | 1.80 | 1.80 | 2.02 | 5.21 | 76.47 | $ | 237,177 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS I SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 12.17 | 0.56 | 0.28 | 0.84 | (0.58 | ) | (0.27 | ) | (0.85 | ) | $ | 12.16 | 4.60 | 0.90 | 0.90 | 0.90 | 7.15 | 51.20 | $ | 552,182 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 12.25 | 0.70 | 0.04 | 0.74 | (0.68 | ) | (0.14 | ) | (0.82 | ) | $ | 12.17 | 5.75 | 0.94 | 0.94 | 0.94 | 6.21 | 76.47 | $ | 246,332 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS R3 SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 12.19 | 0.49 | 0.31 | 0.80 | (0.54 | ) | (0.27 | ) | (0.81 | ) | $ | 12.18 | 4.10 | 1.25 | 1.25 | 3.10 | 6.76 | 51.20 | $ | 3,049 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 12.28 | 0.63 | 0.06 | 0.69 | (0.64 | ) | (0.14 | ) | (0.78 | ) | $ | 12.19 | 5.19 | 1.25 | 1.25 | 32.64 | (c) | 5.78 | 76.47 | $ | 171 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(d) | $ | 12.03 | 0.30 | 0.25 | 0.55 | (0.30 | ) | — | (0.30 | ) | $ | 12.28 | 5.93 | (e) | 1.22 | (e) | 1.22 | (e) | 373.07 | (c)(e) | 4.63 | 34.54 | $ | 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS R4 SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(f) | $ | 12.00 | 0.35 | 0.17 | 0.52 | (0.34 | ) | — | (0.34 | ) | $ | 12.18 | 4.25 | (e) | 1.25 | (e) | 1.25 | (e) | 60.66 | (c)(e) | 4.29 | 51.20 | $ | 16 | |||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS R5 SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 12.16 | 0.55 | 0.28 | 0.83 | (0.57 | ) | (0.27 | ) | (0.84 | ) | $ | 12.15 | 4.51 | 0.99 | 0.99 | 2.11 | 7.05 | 51.20 | $ | 2,565 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 12.25 | 0.70 | 0.03 | 0.73 | (0.68 | ) | (0.14 | ) | (0.82 | ) | $ | 12.16 | 5.68 | 0.99 | 0.99 | 227.33 | (c) | 6.07 | 76.47 | $ | 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2012(d) | $ | 12.00 | 0.31 | 0.25 | 0.56 | (0.31 | ) | — | (0.31 | ) | $ | 12.25 | 6.22 | (e) | 0.97 | (e) | 0.97 | (e) | 372.35 | (c)(e) | 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) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
(d) | Effective date of this class of shares was May 1, 2012. |
(e) | Annualized. |
(f) | Effective date of this class of shares was February 1, 2014. |
+ | 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.
34 Certified Annual Report | Certified Annual Report 35 |
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, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
36 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Strategic Income Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
CLASS A SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,022.20 | $ | 6.20 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.93 | $ | 6.19 | ||||||
CLASS C SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,019.20 | $ | 9.11 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,016.04 | $ | 9.10 | ||||||
CLASS I SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,023.80 | $ | 4.62 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.50 | $ | 4.61 | ||||||
CLASS R3 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,021.20 | $ | 6.33 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | ||||||
CLASS R4 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,022.00 | $ | 6.34 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | ||||||
CLASS R5 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,023.40 | $ | 5.02 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.22%; C: 1.80%; I: 0.91% R3: 1.25% R4: 1.25% R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the accompanying table 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 37
INDEX COMPARISON | ||
Thornburg Strategic Income Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 3 YRS | 5 YRS | SINCE INCEPTION | |||||||||||||
Class A Shares (Incep: 12/19/07) | 2.02 | % | 6.74 | % | 7.77 | % | 7.19 | % | ||||||||
Class C Shares (Incep: 12/19/07) | 5.27 | % | 7.83 | % | 8.18 | % | 7.32 | % | ||||||||
Class I Shares (Incep: 12/19/07) | 7.15 | % | 8.76 | % | 9.11 | % | 8.25 | % | ||||||||
Class R3 Shares (Incep: 5/1/12) | 6.76 | % | — | — | 7.15 | % | ||||||||||
Class R4 Shares (Incep: 2/1/14)* | — | — | — | 4.29 | % | |||||||||||
Class R5 Shares (Incep: 5/1/12) | 7.05 | % | — | — | 7.44 | % |
* | 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. 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.
38 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Strategic Income Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 39
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES) (1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
40 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 41
OTHER INFORMATION | ||
Thornburg Strategic Income Fund | September 30, 2014 (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.
TAX INFORMATION
For the tax year ended September 30, 2014, the Thornburg Strategic Income Fund is reporting 7.96% (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 4.80% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the year ended September 30, 2014 as qualified for the corporate dividends received deduction.
For the tax year ended September 30, 2014, dividends paid by the Thornburg Strategic Income Fund of $9,896,141 are being reported as long-term capital gain dividends and $50,575,019 are being reported as ordinary investment income 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
42 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 (Unaudited) |
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of 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 under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the six calendar years since the Fund’s inception, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index and blended performance benchmark, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year and five-year periods ending with the second quarter of the current year, comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index and blended performance benchmark, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of correlation to equity indices, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the six calendar years since the Fund’s inception considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year exceeded the returns of the broad based securities index and the Fund’s blended performance benchmark, and also exceeded the average return of the mutual fund category considered. The data further showed that the Fund’s returns for the preceding five calendar years exceeded the returns of the index in three of the five years, the Fund’s returns exceeded or were comparable to returns of the blended performance benchmark in four of the five years, and that the Fund’s returns exceeded the average returns of the fund category in four of the five years. Noted quantitative data further showed that the Fund’s annualized investment returns fell in the top quartile of investment performance of a mutual fund category for the one-year, three-year and five-year periods ended with the second quarter of the current year. Noted data also showed that the Fund’s annualized investment returns fell in the top quartile of investment performance of a second mutual fund category for the same periods.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection, considered certain factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Funds.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses. Data considered included comparisons of the advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the advisory fee for the Fund was somewhat higher than the median and average fee levels for the fund category, and that the level of total expense for a representative share class of the Fund was somewhat higher than the median and slightly higher than the average expense levels for the category. Data for the peer group showed that the Fund’s advisory fee level and total expense level fell above the median levels for the peer group and within the range of levels for the peer group. The Trustees did not find the differences significant in view of the other factors considered.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the
Certified Annual Report 43
OTHER INFORMATION, CONTINUED | ||
Thornburg Strategic Income Fund | September 30, 2014 (Unaudited) |
requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
44 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 45
This page intentionally left blank.
46 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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income 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 47
48 This page is not part of the Annual Report
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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 49
This page intentionally left blank.
50 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 51
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH1784 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2014. 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, volatility, and political and economic risks. 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.
Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
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 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 | 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 400 MidCap Index – The S&P 400 MidCap Index is designed to measure the performance of 400 mid-sized companies in the U.S., reflecting this market segment’s distinctive risk and return characteristics. To be included in the index, a stock must have an unadjusted market capitalization that ranges from $1.4 billion to $5.9 billion.
S&P 500 Index – The S&P 500 Index is a broad measure of the U.S. stock market.
S&P 600 SmallCap Index – The S&P 600 SmallCap Index is designed to measure the performance of 600 small-size companies in the U.S., reflecting this market segment’s distinctive risk and return characteristics. To be included in the index, a stock must have an unadjusted market capitalization that ranges from $400 million to $1.8 billion.
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.
Forward P/E – Price to earnings ratio, using earnings estimates for the next four quarters.
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.
Intrinsic Value – A term that reflects Thornburg’s estimate of a company’s value, encompassing our collective investment judgment.
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.
Multiple – A term that measures some aspect of a company’s financial well-being, determined by dividing one metric by another metric. The metric in the numerator is typically larger than the one in the denominator, because the top metric is usually supposed to be many times larger than the bottom metric.
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.
Treasuries – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from Treasury securities is exempt from state and local, but not federal, taxes.
This page is not part of the Annual Report 3
Portfolio Manager
Connor Browne, CFA
Objectives and Strategies
The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types. As a secondary consideration, the Fund also seeks some current income.
The Fund expects to invest primarily in domestic equity securities (primarily common stocks) selected on a value basis. However, the Fund may own a variety of securities, including foreign equity securities, partnership interests, and foreign and domestic debt obligations which, in the opinion of the Fund’s investment advisor, offer prospects for meeting the Fund’s investment goals.
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 what we believe is 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, often including on-site visits. The focus of the analysis is on what’s behind the numbers, its revenue and cash-generating model. We make an effort to get to know the company’s reputation in the industry, its people and its corporate culture.
The current posture is to maintain a portfolio of 35–65 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.
4 This page is not part of the Annual Report
Key Portfolio Attributes
As of September 30, 2014
Portfolio P/E Trailing 12-months* | 22.6x | |||
Portfolio Price to Cash Flow* | 11.7x | |||
Portfolio Price to Book Value* | 2.5x | |||
Median Market Cap* | $ | 12.2 B | ||
7-Year Beta (A Shares vs. S&P 500)* | 1.14 | |||
Number of Companies | 61 |
* Source: FactSet
Market Capitalization Exposure
As of September 30, 2014
Basket Structure
As of September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
A Shares (Incep: 10/2/95) | ||||||||||||||||||||
Without sales charge | 18.40 | % | 20.39 | % | 10.39 | % | 7.54 | % | 9.89 | % | ||||||||||
With sales charge | 13.08 | % | 18.55 | % | 9.38 | % | 7.05 | % | 9.63 | % | ||||||||||
S&P 500 Index (Since 10/2/95) | 19.73 | % | 22.99 | % | 15.70 | % | 8.11 | % | 8.64 | % |
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 1.40%, as disclosed in the most recent Prospectus.
Stocks Contributing and Detracting
For the Year Ended September 30, 2014
TOP CONTRIBUTORS | TOP DETRACTORS | |
Gilead Sciences, Inc. | NMI Holdings, Inc. | |
Level 3 Communications, Inc. | ADT Corp. | |
Thermo Fisher Scientific, Inc. | Frank’s International NV | |
Google, Inc. | Galaxy Entertainment Group Ltd. | |
Gogo, Inc. | Cumulus Media, Inc. |
Source: FactSet
This page is not part of the Annual Report 5
Thornburg Value Fund
September 30, 2014
7 | ||||
10 | ||||
14 | ||||
16 | ||||
18 | ||||
19 | ||||
28 | ||||
30 | ||||
31 | ||||
32 | ||||
33 | ||||
36 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semi-annual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
Thornburg Value Fund | September 30, 2014 (Unaudited) |
October 27, 2014
Dear Fellow Shareholders,
In this letter we will update you on our progress in the management of the Thornburg Value Fund (the Fund) and take a look at drivers of performance for the fiscal year.
To summarize our approach: we are fundamental, bottom-up investors; we invest in a limited number of stocks; we have the flexibility to seek value broadly (employing a three-basket diversification construct in which we categorize companies as basic values, consistent earners, and emerging franchises); and we seek to invest in promising companies trading at a discount to their intrinsic values.
We remain encouraged by the Fund’s results since we began our work to bolster the consistent earning characteristics of the portfolio in mid-2012. Since then, the downside capture and beta of the portfolio have improved markedly compared to the year and a half prior to June 30, 2012. Happily, we’ve also outpaced broad equity market returns over the period, Class A shares returning 24.5% at NAV annualized over the two years and three months through September 30, 2014, versus the S&P 500’s 20.4% over the same period. Over this period, the Fund’s beta versus the S&P 500 Index was 1.04, indicating the Fund’s volatility was very similar to the index, and we have exhibited 94% downside capture, meaning on average the Fund performed 6% better than the index during down markets. We believe that we are back on the path to success paved during the first 15 years of the Fund’s history – from 1995 through 2010.
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 1.40%, as disclosed in the most recent Prospectus.
The Fund faced a bit of a headwind during the fiscal year for two reasons. As highlighted above, we have worked hard to mitigate the downside risk of the portfolio. While we don’t claim to know what will happen in the future, ideally, we’d like to position the Fund so that it has a tougher time keeping up in strong markets and an easier time protecting in tough environments. The last 12 months have been a better environment for more aggressive strategies. For the year ended September 30, 2014, the Fund’s Class A shares returned 18.4% at NAV, versus 19.7% for the benchmark S&P 500 Index. Fund investments in initial public offerings contributed 1.2% to performance for the fiscal year ended September 30, 2014.
The Thornburg Value Fund is, and always has been, a multi-cap offering. While most of our holdings are large-capitalization companies, the Fund also invests in mid- and small-cap companies. Chart I shows investment exposure by market cap for the Fund at the end of fiscal years 2013 and 2014.
The last 12 months (ended September 30, 2014) saw a significant (and unusual) divergence between large-cap and small-cap performance. A comparison of the S&P 500 (large cap) Index, the S&P 400 MidCap Index, and the S&P 600 SmallCap Index return is shown in Table I.
This performance divergence also helps to explain why the Fund’s total return during the fiscal year ranks in the top fifth of Lipper’s Multi-Cap Core category (among 755 funds), despite its having trailed the S&P 500 Index1. Fund Performance mirrored the overall performance of the market by capitalization for the fiscal year, with the Fund’s large caps outpacing its mid caps, which in turn outpaced its small caps. It is worth noting that from mid-2012 through early April 2014, small caps had significantly outperformed large caps. This served as a tailwind for the Fund during that period. We won’t make too explicit a prediction on which will outperform going forward. However, in the (relative) small-cap carnage of late, we’ve found a number of investments that look much too cheap to us, perhaps simply because they are
Chart I | Market-Capitalization Breakdown
Table I | Capitalization Comparison
12-Month Total Returns as of 9/30/14
S&P 500 Index | 17.8 | % | ||
S&P 400 MidCap Index | 11.7 | % | ||
S&P 600 SmallCap Index | 6.2 | % |
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Value Fund | September 30, 2014 (Unaudited) |
small (i.e. undercovered, underfollowed, or out of fashion). From Chart I, you can see that we have added a bit to our mid-and small-cap exposure over the year.
On a sector basis, our overweight position in the health care sector helped performance, while our underweight in information technology (IT) hurt. Within IT, we had success with our exposure to software and services companies. We missed out on a big rally in hardware and technology companies, with many of these “old tech” businesses performing very well during the year. Our average 6% cash position was also a drag on relative performance.
Our worst-performing stocks during the fiscal year were NMI Holdings, ADT, Frank’s International, Galaxy Entertainment, and Cumulus Media. NMI is a private mortgage insurance company; we initially invested in it when it was a private company, during its formation. We believed the business opportunity to be sound and the investment relatively safe; investors (us included) gave a seasoned management team cash to start up a new mortgage insurer in an environment where the Federal Housing Authority was (and remains) the largest participant in the market and is interested in pulling back. Many of the public competitors in the mortgage-insurance space had come under significant capital constraints in the wake of the great financial crisis. So far, management has had a harder time launching than anticipated, and expenses that proved greater than revenues have begun to eat into book value. That said, most of the invested capital remains on NMI’s balance sheet. Should management demonstrate an ability to generate a return on that capital, the stock price should improve.
ADT is a home-security company, spun off from Tyco. We underestimated the competitive pressures in the marketplace from telecom and cable providers (such as AT&T and Comcast). After suffering a loss, we sold this position.
Frank’s International is a niche oilfield-service company specializing in the deepwater offshore market. As the price of oil declines, energy companies reduce offshore exploration and production activity. While oil-price movements are hard to predict, we think Frank’s is a high quality business, and that energy companies will continue to depend upon businesses like it in the future.
During the fiscal year, we successfully invested in the U.S. company MGM, which operates casinos principally in Las Vegas, Nevada and Macau, China. MGM’s Macau business trades publicly on the Hong Kong stock exchange. We were excited about the prospects for both of MGM’s main businesses and so we invested. Interestingly, MGM’s stock performed well, even as its large investment in Macau performed poorly in the marketplace. This meant that the implied value of the U.S. business grew substantially. As the U.S. business valuation reached our price target, we decided to swap our position in MGM for our favorite out-of-favor Macau casino operator, Galaxy. Since then, Galaxy and the entire Macau casino sector have come under additional pressure. We believe the long-term secular story remains strong: many more Chinese people will gamble in Macau over the coming years and decades. That said, the Chinese government’s crackdown on corruption has and will likely continue to weigh on market growth in the near term.
Cumulus Media was a small investment for the Fund, though not small enough. The company operates terrestrial radio stations across the U.S., and produces national content. We were excited about the very cheap valuation of the business, and saw promise based on radio’s continued strong reach (many of us still turn that radio dial in the car) and Cumulus’ new content and online product developments. Unfortunately, the business deteriorated quickly after investment and high fixed costs and a high debt load magnified the impact on the stock. We have trimmed our exposure significantly.
Our best-performing stocks included Gilead Sciences, Level 3 Communications, Thermo Fisher Scientific, Google, and Gogo, Inc. Gilead launched its all-oral hepatitis C virus (HCV) treatment during the fiscal year and saw tremendous demand for the product. This new all-oral combination pill was approved just after the end of the fiscal year. That said, we have high hopes for this product’s performance as well. Level 3 has been a long-time Fund holding. Strong execution and recent consolidation (the company purchased Time Warner Telecom during the period) helped the stock. Thermo Fisher Scientific, which manufactures equipment and consumables for research labs, remains a top holding in the portfolio. Its recent acquisition of Life Technologies seems to be working out well for the company.
During the fiscal year, Google solidified its position as a leader in online advertising. Google’s search advertising revenues continue to grow, especially outside of the United States. In the U.S., growth was boosted, in particular by strong advertising sales on Google’s YouTube site. Video ads on YouTube are ground-zero in the battle for brand advertising dollars. Recently, the television brand advertising ecosystem has started to fray and online leaders such as Google stand to benefit. Gogo, the provider of Wi-Fi internet services to airline customers, proved to be a volatile stock during the year. We took advantage of this volatility and added to Fund positions when the stock was low and sold as the stock appreciated.
8 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Value Fund | September 30, 2014 (Unaudited) |
By continuing to employ our bottom-up investment approach, our goal is to position the Thornburg Value Fund to have the opportunity to outperform in any market environment. We hope to continue to execute on the approach that has worked over the long term. We invite you to visit our website at www.thornburg.com, where you will find useful information on the Thornburg Value Fund and on other Thornburg funds and investment topics.
Thank you for your continued trust.
Sincerely,
Connor Browne,CFA
Portfolio Manager
Managing Director
1 | Lipper percentile rankings, based on total returns as of September 30, 2014, for Thornburg Value Fund, Class A, versus Multi-Cap Core funds were 19% out of 755 funds for the one-year period, 72% out of 679 funds for the three-year period, 94% out of 581 funds for the five-year period, and 59% out of 375 funds for the 10-year period. |
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, 2014 |
Top Ten Equity Holdings
As of 9/30/14
Gilead Sciences, Inc. | 4.1 | % | ||
Thermo Fisher Scientific, Inc. | 3.4 | % | ||
JPMorgan Chase & Co. | 3.3 | % | ||
Express Scripts Holding Co. | 3.2 | % | ||
Mead Johnson Nutrition Co. | 2.6 | % | ||
Target Corp. | 2.5 | % | ||
IMS Health Holdings, Inc. | 2.4 | % | ||
Zoetis, Inc. | 2.3 | % | ||
Phibro Animal Health Corp. | 2.2 | % | ||
Mondelez International, Inc. | 2.1 | % | ||
Summary of Industry Group Exposure | ||||
As of 9/30/14 | ||||
Pharmaceuticals, Biotechnology & Life Sciences | 15.6 | % | ||
Energy | 10.8 | % | ||
Banks | 9.8 | % | ||
Consumer Services | 9.3 | % | ||
Software & Services | 9.2 | % | ||
Retailing | 6.0 | % | ||
Health Care Equipment & Services | 5.6 | % | ||
Food, Beverage & Tobacco | 4.6 | % | ||
Commercial & Professional Services | 3.5 | % | ||
Telecommunication Services | 3.4 | % | ||
Capital Goods | 2.9 | % | ||
Diversified Financials | 2.6 | % | ||
Materials | 2.4 | % | ||
Consumer Durables & Apparel | 2.4 | % | ||
Real Estate | 2.1 | % | ||
Utilities | 1.6 | % | ||
Technology Hardware & Equipment | 1.0 | % | ||
Food & Staples Retailing | 0.9 | % | ||
Transportation | 0.7 | % | ||
Semiconductors & Semiconductor Equipment | 0.5 | % | ||
Media | 0.2 | % | ||
Other Assets & Liabilities | 4.9 | % |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
COMMON STOCK — 95.05% | ||||||||
BANKS — 9.77% | ||||||||
Banks — 8.49% | ||||||||
Citigroup, Inc. | 214,400 | $ | 11,110,208 | |||||
a Citizens Financial Group, Inc. | 613,010 | 14,356,694 | ||||||
First Republic Bank | 286,300 | 14,137,494 | ||||||
JPMorgan Chase & Co. | 539,040 | 32,471,770 | ||||||
Umpqua Holdings Corp. | 729,774 | 12,019,378 | ||||||
Thrifts & Mortgage Finance — 1.28% | ||||||||
a NMI Holdings, Inc. | 1,469,000 | 12,706,850 | ||||||
|
| |||||||
96,802,394 | ||||||||
|
| |||||||
CAPITAL GOODS — 2.92% | ||||||||
Building Products — 0.54% | ||||||||
a Continental Building Products, Inc. | 366,200 | 5,346,520 | ||||||
Construction & Engineering — 1.63% | ||||||||
a Mastec, Inc. | 527,411 | 16,149,325 | ||||||
Trading Companies & Distributors — 0.75% | ||||||||
Fly Leasing Ltd. ADR | 581,340 | 7,446,965 | ||||||
|
| |||||||
28,942,810 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 3.52% | ||||||||
Commercial Services & Supplies — 2.49% | ||||||||
Covanta Holding Corp. | 704,400 | 14,947,368 | ||||||
Rentokil Initial plc | 5,099,098 | 9,737,823 | ||||||
Professional Services — 1.03% | ||||||||
Nielsen Holdings N.V. | 230,533 | 10,219,528 | ||||||
|
| |||||||
34,904,719 | ||||||||
|
|
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
CONSUMER DURABLES & APPAREL — 2.37% | ||||||||
Household Durables — 2.37% | ||||||||
a Helen of Troy Ltd. | 186,700 | $ | 9,805,484 | |||||
a TRI Pointe Homes, Inc. | 1,058,582 | 13,698,051 | ||||||
|
| |||||||
23,503,535 | ||||||||
|
| |||||||
CONSUMER SERVICES — 9.27% | ||||||||
Diversified Consumer Services — 1.56% | ||||||||
a Nord Anglia Education, Inc. | 911,294 | 15,491,998 | ||||||
Hotels, Restaurants & Leisure — 7.71% | ||||||||
Aramark Holdings Corp. | 728,948 | 19,171,332 | ||||||
Galaxy Entertainment Group Ltd. | 1,997,400 | 11,601,350 | ||||||
a Norwegian Cruise Line Holdings Ltd. | 474,500 | 17,091,490 | ||||||
a Panera Bread Co. | 68,740 | 11,185,373 | ||||||
Starbucks Corp. | 229,190 | 17,294,677 | ||||||
|
| |||||||
91,836,220 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 2.57% | ||||||||
Capital Markets — 2.57% | ||||||||
Oaktree Capital Group LLC | 203,728 | 10,410,501 | ||||||
The Blackstone Group LP | 476,957 | 15,014,606 | ||||||
|
| |||||||
25,425,107 | ||||||||
|
| |||||||
ENERGY — 10.76% | ||||||||
Energy Equipment & Services — 4.30% | ||||||||
a Dresser-Rand Group, Inc. | 163,500 | 13,449,510 | ||||||
Frank’s International N.V. | 561,091 | 10,492,402 | ||||||
a Weatherford International Ltd. | 898,300 | 18,684,640 | ||||||
Oil, Gas & Consumable Fuels — 6.46% | ||||||||
a Bankers Petroleum Ltd. | 1,370,287 | 6,594,800 | ||||||
Chevron Corp. | 165,800 | 19,783,256 | ||||||
INPEX Corp. | 1,318,136 | 18,622,765 | ||||||
Total SA | 291,400 | 18,936,322 | ||||||
|
| |||||||
106,563,695 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 0.86% | ||||||||
Food & Staples Retailing — 0.86% | ||||||||
Walgreen Co. | 144,016 | 8,535,828 | ||||||
|
| |||||||
8,535,828 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 4.61% | ||||||||
Food Products — 4.61% | ||||||||
Mead Johnson Nutrition Co. | 263,700 | 25,373,214 | ||||||
Mondelez International, Inc. | 593,000 | 20,319,145 | ||||||
|
| |||||||
45,692,359 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 5.62% | ||||||||
Health Care Providers & Services — 3.21% | ||||||||
a Express Scripts Holding Company | 450,480 | 31,817,403 | ||||||
Health Care Technology — 2.41% | ||||||||
a IMS Health Holdings, Inc. | 910,659 | 23,850,159 | ||||||
|
| |||||||
55,667,562 | ||||||||
|
| |||||||
MATERIALS — 2.40% | ||||||||
Chemicals — 1.31% | ||||||||
a Orion Engineered Carbons S.A. | 737,154 | 12,988,654 | ||||||
Metals & Mining — 1.09% | ||||||||
a Horsehead Holding Corp. | 650,400 | 10,751,112 | ||||||
|
| |||||||
23,739,766 | ||||||||
|
| |||||||
MEDIA — 0.21% | ||||||||
Media — 0.21% | ||||||||
a Cumulus Media, Inc. | 524,206 | 2,112,550 | ||||||
|
| |||||||
2,112,550 | ||||||||
|
|
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 15.58% | ||||||||
Biotechnology — 4.11% | ||||||||
a Gilead Sciences, Inc. | 382,776 | $ | 40,746,505 | |||||
Life Sciences Tools & Services — 3.37% | ||||||||
Thermo Fisher Scientific, Inc. | 273,800 | 33,321,460 | ||||||
Pharmaceuticals — 8.10% | ||||||||
GlaxoSmithKline plc | 753,585 | 17,262,260 | ||||||
Perrigo Co. plc | 117,499 | 17,647,175 | ||||||
b Phibro Animal Health Corp. | 990,148 | 22,189,216 | ||||||
Zoetis, Inc. | 627,550 | 23,187,972 | ||||||
|
| |||||||
154,354,588 | ||||||||
|
| |||||||
REAL ESTATE — 2.05% | ||||||||
Real Estate Investment Trusts — 2.05% | ||||||||
Invesco Mortgage Capital, Inc. | 648,100 | 10,188,132 | ||||||
Two Harbors Investment Corp. | 1,048,400 | 10,138,028 | ||||||
|
| |||||||
20,326,160 | ||||||||
|
| |||||||
RETAILING — 6.00% | ||||||||
Internet & Catalog Retail — 2.33% | ||||||||
a Amazon.com, Inc. | 31,108 | 10,030,463 | ||||||
a Netflix, Inc. | 28,910 | 13,043,614 | ||||||
Multiline Retail — 2.46% | ||||||||
Target Corp. | 388,500 | 24,351,180 | ||||||
Specialty Retail — 1.21% | ||||||||
a AutoZone, Inc. | 23,649 | 12,052,950 | ||||||
|
| |||||||
59,478,207 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.55% | ||||||||
Semiconductors & Semiconductor Equipment — 0.55% | ||||||||
a Micron Technology, Inc. | 158,790 | 5,440,145 | ||||||
|
| |||||||
5,440,145 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 9.19% | ||||||||
Internet Software & Services — 7.56% | ||||||||
a Alibaba Group Holding Ltd. ADR | 201,380 | 17,892,613 | ||||||
a Google, Inc. Class C | 34,377 | 19,847,905 | ||||||
a Marin Software, Inc. | 908,014 | 7,808,920 | ||||||
a VeriSign, Inc. | 268,800 | 14,816,256 | ||||||
a Yahoo!, Inc. | 355,371 | 14,481,368 | ||||||
Software — 1.63% | ||||||||
Activision Blizzard, Inc. | 778,400 | 16,182,936 | ||||||
|
| |||||||
91,029,998 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 1.03% | ||||||||
Electronic Equipment, Instruments & Components — 1.03% | ||||||||
CDW Corp. | 328,590 | 10,202,720 | ||||||
|
| |||||||
10,202,720 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 3.41% | ||||||||
Diversified Telecommunication Services — 1.41% | ||||||||
a Level 3 Communications, Inc. | 306,856 | 14,032,525 | ||||||
Wireless Telecommunication Services — 2.00% | ||||||||
China Mobile Ltd. | 1,714,797 | 19,798,393 | ||||||
|
| |||||||
33,830,918 | ||||||||
|
| |||||||
TRANSPORTATION — 0.71% | ||||||||
Airlines — 0.71% | ||||||||
American Airlines Group, Inc. | 198,860 | 7,055,553 | ||||||
|
| |||||||
7,055,553 | ||||||||
|
|
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
SHARES/ | ||||||||
PRINCIPAL AMOUNT | VALUE | |||||||
UTILITIES — 1.65% | ||||||||
Electric Utilities — 1.65% | ||||||||
ITC Holdings Corp. | 458,100 | $ | 16,322,104 | |||||
|
| |||||||
16,322,104 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $753,706,526) | 941,766,938 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 4.70% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.23% dated 9/30/2014 due 10/1/2014, repurchase price $14,000,089 collateralized by 16 corporate debt securities, having an average coupon of 4.68%, a minimum credit rating of BBB-, maturity dates from 11/6/2017 to 10/15/2040, and having an aggregate market value of $14,938,521 at 9/30/2014 | $ | 14,000,000 | 14,000,000 | |||||
CenterPoint Energy, Inc., 0.20%, 10/1/2014 | 5,200,000 | 5,200,000 | ||||||
Kroger Co., 0.20%, 10/1/2014 | 14,000,000 | 14,000,000 | ||||||
Plains All American Pipeline, LP, 0.23%, 10/1/2014 | 13,400,000 | 13,400,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $46,600,000) | 46,600,000 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 99.75% (Cost $800,306,526) | $ | 988,366,938 | ||||||
OTHER ASSETS LESS LIABILITIES — 0.25% | 2,471,526 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 990,838,464 | ||||||
|
|
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: |
SHARES/ PRINCIPAL | SHARES/ PRINCIPAL | MARKET VALUE | ||||||||||||||||||||||||||
SEPTEMBER 30, | GROSS | GROSS | SEPTEMBER 30, | SEPTEMBER 30, | INVESTMENT | REALIZED | ||||||||||||||||||||||
ISSUER | 2013 | ADDITIONS | REDUCTIONS | 2014 | 2014 | INCOME | GAIN (LOSS) | |||||||||||||||||||||
Phibro Animal Health Corp.* | — | 990,148 | — | 990,148 | $ | 22,189,216 | $ | 99,015 | $ | — | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Total non-controlled affiliated issuers - 2.24% of net assets |
| $ | 22,189,216 | $ | 99,015 | $ | — | |||||||||||||||||||||
|
|
|
|
|
|
* | Issuer not affiliated at September 30, 2013. |
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 Value Fund | September 30, 2014 |
ASSETS | ||||
Investments at value | ||||
Non-affiliated issuers (cost $784,640,633) (Note 2) | $ | 966,177,722 | ||
Non-controlled affiliated issuers (cost $15,665,893) (Note 2) | 22,189,216 | |||
Cash | 100,854 | |||
Receivable for fund shares sold | 410,829 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 4,787,837 | |||
Dividends receivable | 1,552,024 | |||
Dividend and interest reclaim receivable | 344,599 | |||
Interest receivable | 89 | |||
Prepaid expenses and other assets | 46,350 | |||
|
| |||
Total Assets | 995,609,520 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 1,800,480 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 1,524,949 | |||
Payable to investment advisor and other affiliates (Note 3) | 968,502 | |||
Accounts payable and accrued expenses | 477,125 | |||
|
| |||
Total Liabilities | 4,771,056 | |||
|
| |||
NET ASSETS | $ | 990,838,464 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Distribution in excess of net investment income | $ | (1,021,188 | ) | |
Net unrealized appreciation on investments and foreign currency translations | 191,298,609 | |||
Accumulated net realized gain (loss) | (541,332,452 | ) | ||
Net capital paid in on shares of beneficial interest | 1,341,893,495 | |||
|
| |||
$ | 990,838,464 | |||
|
|
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($395,216,545 applicable to 8,217,890 shares of beneficial interest outstanding - Note 4) | $ | 48.09 | ||
Maximum sales charge, 4.50% of offering price | 2.27 | |||
|
| |||
Maximum offering price per share | $ | 50.36 | ||
|
| |||
Class B Shares: | ||||
Net asset value per share* ($3,974,075 applicable to 90,222 shares of beneficial interest outstanding - Note 4) | $ | 44.05 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($175,495,367 applicable to 3,903,979 shares of beneficial interest outstanding - Note 4) | $ | 44.95 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($299,568,238 applicable to 6,078,441 shares of beneficial interest outstanding - Note 4) | $ | 49.28 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($74,578,836 applicable to 1,560,595 shares of beneficial interest outstanding - Note 4) | $ | 47.79 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($11,329,752 applicable to 234,873 shares of beneficial interest outstanding - Note 4) | $ | 48.24 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($30,675,651 applicable to 623,372 shares of beneficial interest outstanding - Note 4) | $ | 49.21 | ||
|
|
* | 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, 2014 |
INVESTMENT INCOME | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $582,880) | $ | 15,808,292 | ||
Non-controlled affiliated issuers | 99,015 | |||
Interest income | 251,283 | |||
|
| |||
Total Income | 16,158,590 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 8,636,348 | |||
Administration fees (Note 3) | ||||
Class A Shares | 523,023 | |||
Class B Shares | 7,443 | |||
Class C Shares | 221,599 | |||
Class I Shares | 144,190 | |||
Class R3 Shares | 99,469 | |||
Class R4 Shares | 16,026 | |||
Class R5 Shares | 17,629 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,046,062 | |||
Class B Shares | 59,505 | |||
Class C Shares | 1,773,464 | |||
Class R3 Shares | 397,836 | |||
Class R4 Shares | 30,894 | |||
Transfer agent fees | ||||
Class A Shares | 442,200 | |||
Class B Shares | 14,489 | |||
Class C Shares | 214,047 | |||
Class I Shares | 321,235 | |||
Class R3 Shares | 189,045 | |||
Class R4 Shares | 30,757 | |||
Class R5 Shares | 146,294 | |||
Registration and filing fees | ||||
Class A Shares | 28,166 | |||
Class B Shares | 17,471 | |||
Class C Shares | 21,470 | |||
Class I Shares | 48,814 | |||
Class R3 Shares | 17,838 | |||
Class R4 Shares | 25,795 | |||
Class R5 Shares | 23,022 | |||
Custodian fees (Note 3) | 154,553 | |||
Professional fees | 57,791 | |||
Accounting fees | 13,280 | |||
Trustee fees | 30,580 | |||
Other expenses | 122,998 | |||
|
| |||
Total Expenses | 14,893,333 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (776,575 | ) | ||
Fees paid indirectly (Note 3) | (1,618 | ) | ||
|
| |||
Net Expenses | 14,115,140 | |||
|
| |||
Net Investment Income | $ | 2,043,450 | ||
|
|
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Value Fund | Year Ended September 30, 2014 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | ||||
Non-affiliated issuers | $ | 214,269,634 | ||
Forward currency contracts (Note 7) | 746,625 | |||
Foreign currency transactions | (7,585 | ) | ||
|
| |||
215,008,674 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | ||||
Non-affiliated issuers | (56,925,984 | ) | ||
Non-controlled affiliated issuers | 6,523,323 | |||
Foreign currency translations | (54,208 | ) | ||
Forward currency contracts (Note 7) | 5,023,387 | |||
|
| |||
(45,433,482 | ) | |||
|
| |||
Net Realized and Unrealized Gain | 169,575,192 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 171,618,642 | ||
|
|
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Value Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 2,043,450 | $ | 3,718,506 | ||||
Net realized gain (loss) on investments, forward currency contracts, and foreign currency transactions | 215,008,674 | 331,336,839 | ||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, and foreign currency translations | (45,433,482 | ) | (27,191,377 | ) | ||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 171,618,642 | 307,863,968 | ||||||
DIVIDENDS TO SHAREHOLDERS: | ||||||||
From net investment income | ||||||||
Class A Shares | (2,231,878 | ) | — | |||||
Class I Shares | (3,575,743 | ) | — | |||||
Class R3 Shares | (406,915 | ) | — | |||||
Class R4 Shares | (56,789 | ) | — | |||||
Class R5 Shares | (413,785 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (73,662,024 | ) | (172,341,686 | ) | ||||
Class B Shares | (4,547,295 | ) | (3,907,108 | ) | ||||
Class C Shares | (19,769,894 | ) | (59,014,808 | ) | ||||
Class I Shares | (18,265,855 | ) | (946,785,706 | ) | ||||
Class R3 Shares | (19,341,373 | ) | (73,825,363 | ) | ||||
Class R4 Shares | (4,192,893 | ) | (38,506,401 | ) | ||||
Class R5 Shares | (22,564,831 | ) | (101,143,356 | ) | ||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | 2,589,367 | (1,087,660,460 | ) | |||||
NET ASSETS | ||||||||
Beginning of Year | 988,249,097 | 2,075,909,557 | ||||||
|
|
|
| |||||
End of Year | $ | 990,838,464 | $ | 988,249,097 | ||||
|
|
|
| |||||
Undistributed (distribution in excess of) net investment income | $ | (1,021,188 | ) | $ | 2,509,446 |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Value Fund | September 30, 2014 |
NOTE 1 – ORGANIZATION
Thornburg Value Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Trust is organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of eighteen 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: 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 and Class R5 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, 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 allocable 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 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. 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 reported by NASDAQ are valued at the NASDAQ official closing price. 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. 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 when 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, 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
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
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. For example, 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of 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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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:
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
FAIR VALUE MEASUREMENTS AT SEPTEMBER 30, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 941,766,938 | $ | 941,766,938 | $ | — | $ | — | ||||||||
Short Term Investments | 46,600,000 | — | 46,600,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 988,366,938 | $ | 941,766,938 | $ | 46,600,000 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 4,787,837 | $ | — | $ | 4,787,837 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (1,524,949 | ) | $ | — | $ | (1,524,949 | ) | $ | — |
* | 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, which may include 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, 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, 2014, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2014 is as follows:
COMMON STOCK | TOTAL | |||||||
Beginning Balance 9/30/2013 | $ | 19,006,875 | $ | 19,006,875 | ||||
Accrued Discounts (Premiums) | — | — | ||||||
Net Realized Gain (Loss)(a) | 654,835 | 654,835 | ||||||
Gross Purchases | — | — | ||||||
Gross Sales | (17,549,835 | ) | (17,549,835 | ) | ||||
Net Change in Unrealized Appreciation (Depreciation)(b) | (2,111,875 | ) | (2,111,875 | ) | ||||
|
|
|
| |||||
Ending Balance 9/30/2014(c) | $ | — | $ | — | ||||
|
|
|
|
(a) | Amount of Net Realized Gain (Loss) recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2014. |
(b) | Amount of Net Change in Unrealized Appreciation (Depreciation) recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2014. |
(c) | Level 3 investments represent 0.00% of total Net Assets at the year ended September 30, 2014. 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. |
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, 2014, 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.
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
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
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.
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 by entering into repurchase agreements under which the Fund delivers cash to a counterparty, the counterparty delivers securities as collateral, and the Fund is obligated to resell that collateral to the coun-terparty at an agreed upon price at the maturity date of the repurchase agreement. Securities pledged as collateral under repurchase agreements are held in custody with a third party custodian 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 counterparty’s obligations. Under certain circumstances, in the event of default or bankruptcy by the counterparty 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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
the Advisor will perform certain administrative services for the shareholders of each class of the Fund’s shares, and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $22,583 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $2,481 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, 2014, 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 and shareholder services.
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, 2014, are set forth in the Statement of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class B, Class I, Class R3, Class R4, and Class R5 expenses do not exceed 2.38%, 0.99%, 1.35%, 1.25%, and 0.99%, respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $13,414 for Class B shares, $217,120 for Class I shares, $334,774 for Class R3 shares, $57,878 for Class R4 Shares, and $153,389 for Class R5 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, 2014, fees paid indirectly were $1,618.
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 and is included as Trustee Fees on the Statement of Operations.
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 730,300 | $ | 32,369,874 | 990,544 | $ | 35,429,228 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 44,964 | 2,140,804 | — | — | ||||||||||||
Shares repurchased | (2,359,346 | ) | (108,172,702 | ) | (6,108,915 | ) | (207,770,914 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (1,584,082 | ) | $ | (73,662,024 | ) | (5,118,371 | ) | $ | (172,341,686 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class B Shares | ||||||||||||||||
Shares sold | 5,477 | $ | 229,285 | 11,596 | $ | 373,198 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (113,589 | ) | (4,776,580 | ) | (132,662 | ) | (4,280,306 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (108,112 | ) | $ | (4,547,295 | ) | (121,066 | ) | $ | (3,907,108 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 186,376 | $ | 7,896,358 | 145,246 | $ | 4,955,724 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (646,930 | ) | (27,666,252 | ) | (2,009,306 | ) | (63,970,532 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (460,554 | ) | $ | (19,769,894 | ) | (1,864,060 | ) | $ | (59,014,808 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 947,805 | $ | 45,196,302 | 1,635,597 | $ | 56,615,433 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 71,848 | 3,462,876 | — | — | ||||||||||||
Shares repurchased | (1,434,646 | ) | (66,925,033 | ) | (29,391,044 | ) | (1,003,401,139 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (414,993 | ) | $ | (18,265,855 | ) | (27,755,447 | ) | $ | (946,785,706 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 248,804 | $ | 11,260,106 | 357,157 | $ | 12,317,281 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 8,348 | 397,261 | — | — | ||||||||||||
Shares repurchased | (685,352 | ) | (30,998,740 | ) | (2,557,083 | ) | (86,142,644 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (428,200 | ) | $ | (19,341,373 | ) | (2,199,926 | ) | $ | (73,825,363 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 50,333 | $ | 2,278,220 | 206,484 | $ | 7,178,924 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 920 | 44,944 | — | — | ||||||||||||
Shares repurchased | (142,648 | ) | (6,516,057 | ) | (1,340,402 | ) | (45,685,325 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (91,395 | ) | $ | (4,192,893 | ) | (1,133,918 | ) | $ | (38,506,401 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 111,612 | $ | 5,242,431 | 292,466 | $ | 10,395,703 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 7,886 | 376,859 | — | — | ||||||||||||
Shares repurchased | (619,985 | ) | (28,184,121 | ) | (3,207,257 | ) | (111,539,059 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (500,487 | ) | $ | (22,564,831 | ) | (2,914,791 | ) | $ | (101,143,356 | ) | ||||||
|
|
|
|
|
|
|
|
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $693,592,098 and $856,635,852, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 804,256,416 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 206,803,238 | ||
Gross unrealized depreciation on a tax basis | (22,692,716 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 184,110,522 | ||
|
|
At September 30, 2014, the Fund had undistributed tax basis ordinary income of $612,094 and no undistributed tax basis capital gains.
The Fund utilized $219,430,828 of capital loss carryforwards during the year ended September 30, 2014.
At September 30, 2014, the Fund had cumulative tax basis capital losses of $88,973,265, (of which $88,973,265 is short-term and $0 is long-term) generated after September 30, 2011, 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.
At September 30, 2014, the Fund had cumulative tax basis capital losses generated prior to October 1, 2011, 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 to tax differences, the Fund decreased distribution in excess of net investment income by $1,111,026, increased net accumulated realized loss by $1,094,593, and decreased net capital paid in on shares of beneficial interest by $16,433. This reclassification has no impact on the net asset value of the Fund. This reclassification results from foreign currency gains, non-deductible expenses, and passive foreign investment company (PFIC) ordinary income tax adjustments.
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 6,685,110 | $ | — | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 6,685,110 | $ | — | ||||
|
|
|
|
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 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, 2014, 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
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
an agreed upon future date. Foreign exchange contracts involve risks to the Fund, including the risk that a contract’s 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 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, 2014 in the normal course of pursuing its investment objectives, with the objective 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 average value of open sell currency contracts for the year ended September 30, 2014 was $84,252,035. 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 the open sell currency contracts to which they relate.
The following table displays the outstanding forward currency contracts at September 30, 2014:
OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2014 | ||||||||||||||||||||
CONTRACT DESCRIPTION | BUY/SELL | CONTRACT AMOUNT | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | ||||||||||||||
Euro | Sell | 30,173,100 | 11/28/2014 | 38,125,276 | $ | 2,970,788 | $ | — | ||||||||||||
Euro | Buy | 7,323,500 | 11/28/2014 | 9,253,622 | — | (691,764 | ) | |||||||||||||
Euro | Buy | 7,446,200 | 11/28/2014 | 9,408,660 | — | (711,769 | ) | |||||||||||||
Japanese Yen | Sell | 3,498,335,100 | 02/26/2015 | 31,946,753 | 1,817,049 | — | ||||||||||||||
Japanese Yen | Buy | 1,530,358,100 | 02/26/2015 | 13,975,211 | — | (121,416 | ) | |||||||||||||
|
|
|
| |||||||||||||||||
Total | $ | 4,787,837 | $ | (1,524,949 | ) | |||||||||||||||
|
|
|
|
The foregoing forward currency contracts were entered into pursuant to an International Swaps and Derivatives Association (ISDA) Master Agreement. In the event of a default or termination under the ISDA Master Agreement, the non-defaulting party has the right to close out all outstanding forward currency contracts between the parties and to net any payment amounts under those contracts, resulting in a single net amount payable by one party to the other. Because the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Fund’s Statement of Assets and Liabilities unless there has been an event of default or termination event under that agreement, the Fund does not net its outstanding forward currency contracts for purposes of the disclosure in the Fund’s Statement of Assets and Liabilities. Instead the Fund recognizes the unrealized appreciation or depreciation on those forward currency contracts on a gross basis in the Fund’s Statement of Assets and Liabilities. At September 30, 2014, those recognized amounts are disclosed in the following table:
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2014 | ||||
ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $4,787,837 | ||
LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $(1,524,949) |
Because the Fund does not currently receive or post cash collateral in connection with its currency forward contracts, and because all of the Fund’s outstanding currency forward contracts are with State Street Bank and Trust Company, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2014 can be determined by offsetting the dollar amounts shown in the preceding table. Based on those amounts, the net amount of the Fund’s assets which is attributable to its outstanding forward currency contracts at September 30, 2014 is $3,262,888, and the net amount of the Fund’s liabilities which is
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 |
attributable to those contracts at that date is $0. The Fund’s forward currency contracts are valued each day, and the net amounts of the Fund’s assets and liabilities which are attributable to those contracts are expected to vary over time.
The net realized gain (loss) 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, 2014 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, 2014 | ||||||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | 746,625 | $ | 746,625 |
AMOUNT OF NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2014 | ||||||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | 5,023,387 | $ | 5,023,387 |
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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Certified Annual Report 27
Thornburg Value 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 | DIVIDENDS | TOTAL | NET ASSET VALUE END OF YEAR | NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, | EXPENSES, AND NET OF (%) | EXPENSES, | TOTAL RETURN (%)(a) | PORTFOLIO (%)(a) | NET ASSETS AT END OF YEAR (THOUSANDS) | |||||||||||||||||||||||||||||||
CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 40.84 | 0.10 | 7.41 | 7.51 | (0.26) | — | (0.26) | $ | 48.09 | 0.22 | 1.37 | 1.37 | 1.37 | 18.40 | 72.43 | $ | 395,216 | ||||||||||||||||||||||||||||
2013(b) | $ | 31.51 | 0.08 | 9.25 | 9.33 | — | — | — | $ | 40.84 | 0.23 | 1.40 | 1.40 | 1.40 | 29.61 | 61.50 | $ | 400,275 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
CLASS B SHARES | ||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 37.55 | (0.31 | ) | 6.81 | 6.50 | — | — | — | $ | 44.05 | (0.74 | ) | 2.32 | 2.32 | 2.55 | 17.31 | 72.43 | $ | 3,974 | ||||||||||||||||||||||||||
2013 | $ | 29.25 | (0.24 | ) | 8.54 | 8.30 | — | — | — | $ | 37.55 | (0.74 | ) | 2.37 | 2.37 | 2.47 | 28.38 | 61.50 | $ | 7,448 | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||
CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 38.26 | (0.24 | ) | 6.93 | 6.69 | — | — | — | $ | 44.95 | (0.55 | ) | 2.14 | 2.14 | 2.14 | 17.49 | 72.43 | $ | 175,495 | ||||||||||||||||||||||||||
2013 | $ | 29.75 | (0.18 | ) | 8.69 | 8.51 | — | — | — | $ | 38.26 | (0.55 | ) | 2.18 | 2.18 | 2.18 | 28.60 | 61.50 | $ | 166,971 | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||
CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 41.96 | 0.28 | 7.62 | 7.90 | (0.58) | — | (0.58) | $ | 49.28 | 0.60 | 0.99 | 0.99 | 1.06 | 18.86 | 72.43 | $ | 299,568 | ||||||||||||||||||||||||||||
2013 | $ | 32.24 | 0.20 | 9.52 | 9.72 | — | — | — | $ | 41.96 | 0.59 | 0.98 | 0.98 | 1.01 | 30.15 | 61.50 | $ | 272,468 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 40.56 | 0.11 | 7.37 | 7.48 | (0.25) | — | (0.25) | $ | 47.79 | 0.23 | 1.35 | 1.35 | 1.77 | 18.45 | 72.43 | $ | 74,579 | ||||||||||||||||||||||||||||
2013 | $ | 31.28 | 0.10 | 9.18 | 9.28 | — | — | — | $ | 40.56 | 0.29 | 1.34 | 1.34 | 1.78 | 29.67 | 61.50 | $ | 80,671 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 40.89 | 0.16 | 7.43 | 7.59 | (0.24) | — | (0.24) | $ | 48.24 | 0.36 | 1.24 | 1.24 | 1.69 | 18.56 | 72.43 | $ | 11,330 | ||||||||||||||||||||||||||||
2013 | $ | 31.50 | 0.13 | 9.26 | 9.39 | — | — | — | $ | 40.89 | 0.39 | 1.25 | 1.25 | 1.67 | 29.81 | 61.50 | $ | 13,340 | ||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||
CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 41.89 | 0.28 | 7.61 | 7.89 | (0.57) | — | (0.57) | $ | 49.21 | 0.59 | 0.98 | 0.98 | 1.42 | 18.88 | 72.43 | $ | 30,676 | ||||||||||||||||||||||||||||
2013 | $ | 32.19 | 0.22 | 9.48 | 9.70 | — | — | — | $ | 41.89 | 0.63 | 0.99 | 0.99 | 1.37 | 30.13 | 61.50 | $ | 47,076 | ||||||||||||||||||||||||||||
2012 | $ | 28.22 | — | (c) | 3.98 | 3.98 | (0.01) | — | (0.01) | $ | 32.19 | — | (d) | 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 |
(a) | Not annualized for periods less than one year. |
(b) | Sales loads are not reflected in computing total return. |
(c) | Net Investment Income (Loss) was less than $0.01 per share. |
(d) | Net Investment Income (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.
28 Certified Annual Report | Certified Annual Report 29 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Value Fund
To the Trustees and Shareholders of
Thornburg Value Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Value Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
30 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Value Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
CLASS A SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,042.90 | $ | 7.05 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.17 | $ | 6.96 | ||||||
CLASS B SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,038.20 | $ | 11.73 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.56 | $ | 11.59 | ||||||
CLASS C SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,039.10 | $ | 10.86 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.41 | $ | 10.73 | ||||||
CLASS I SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,044.90 | $ | 5.07 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 | ||||||
CLASS R3 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,043.20 | $ | 6.91 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.30 | $ | 6.83 | ||||||
CLASS R4 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,043.70 | $ | 6.35 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.85 | $ | 6.28 | ||||||
CLASS R5 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,045.20 | $ | 5.02 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.16 | $ | 4.96 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.38%; B: 2.30%; C: 2.13%; I: 0.99%; R3: 1.35%; R4: 1.24%; R5: 0.98%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 Value Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
Class A Shares (Incep: 10/2/95) | 13.08 | % | 18.55 | % | 9.38 | % | 7.05 | % | 9.63 | % | ||||||||||
Class B Shares (Incep: 4/3/00) | 12.31 | % | 18.40 | % | 9.08 | % | 6.81 | % | 3.75 | % | ||||||||||
Class C Shares (Incep: 10/2/95) | 16.49 | % | 19.47 | % | 9.55 | % | 6.73 | % | 9.05 | % | ||||||||||
Class I Shares (Incep: 11/2/98) | 18.86 | % | 20.88 | % | 10.83 | % | 7.95 | % | 7.28 | % | ||||||||||
Class R3 Shares (Incep: 7/1/03) | 18.45 | % | 20.42 | % | 10.38 | % | 7.52 | % | 7.52 | % | ||||||||||
Class R4 Shares (Incep: 2/1/07) | 18.56 | % | 20.54 | % | 10.50 | % | — | 4.02 | % | |||||||||||
Class R5 Shares (Incep: 2/1/05) | 18.88 | % | 20.85 | % | 10.78 | % | — | 7.31 | % |
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.
32 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Value Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 (Unaudited) |
NAME, AGE, POSITION HELD WITH FUND YEAR ELECTED | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 Value Fund | September 30, 2014 (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.
TAX INFORMATION
For the tax year ended September 30, 2014, 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 tax year ended September 30, 2014 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2014, dividends paid by the Fund of $6,685,110 are being reported as taxable ordinary investment income 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
36 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 (Unaudited) |
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the quality of portfolio trade execution, the Advisor’s performance of accounting and other services under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the ten most recent calendar years, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to two broad-based securities indices, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to two broad-based securities indices, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of estimated earnings growth, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the ten most recent calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year was higher than the return for the fund category and the two securities indices considered, that the Fund’s returns for the preceding nine calendar years exceeded or were comparable to the returns of the two indices in four of the nine years, and exceeded or were comparable to the average returns of the fund category in four of nine years. Noted quantitative data further showed that the Fund’s annualized investment returns fell in the top decile of performance of a mutual fund category for the one-year period ended with the second quarter of the current year, fell in the fourth quartile of the category for the three-year and the five-year periods, and fell in the second quartile for the ten-year period. Noted data also showed that the Fund’s annualized investment returns fell in the top decile of investment performance of a second fund category for the one-year period ended with the second quarter, fell in the fourth quartile of the category for the three-year and five-year periods, and fell at the midpoint of performance of the category for the ten-year period. Data presented to the Trustees also showed that the Fund’s annualized total return (net of expenses) since inception exceeded the annualized total return of its benchmark index.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the level of the advisory fee charged by the Advisor to the Fund, and in this connection, considered a number of factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses. Data considered included comparisons of the advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Comparative fee and expense data considered by the Trustees showed that the Fund’s advisory fee was somewhat higher than the median and average fee levels for the fund category, and that the level of total expense for the representative share class was somewhat higher than the median and average levels for the category. Peer group data showed that the advisory fee level and total expense level for the share class fell above the median figures for the fund peer group and near the top of the range of levels for the group. The Trustees did not view the differences as significant in view of the other factors considered.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the
Certified Annual Report 37
OTHER INFORMATION, CONTINUED | ||
Thornburg Value Fund | September 30, 2014 (Unaudited) |
requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that the shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
38 Certified Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 39
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. 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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income 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
42 This page is not part of the Annual Report
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH077 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2014. 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, volatility, and political and economic risks. 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.
Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
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 |
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-US Index – A market capitalization weighted index representative of the market structure of 45 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.
Intrinsic Value – A term that reflects Thornburg’s estimate of a company’s value, encompassing our collective investment judgment.
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 – 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
Portfolio Managers
Lei Wang, CFA Bill Fries, CFA
Objectives and Strategies
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 or depository receipts of foreign securities. The Fund may invest in developing countries.
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 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 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.
The current posture is to maintain a portfolio 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, 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.
4 This page is not part of the Annual Report
Key Portfolio Attributes
As of September 30, 2014
Portfolio P/E Trailing 12-months* | 17.2x | |||
Portfolio Price to Cash Flow* | 9.2x | |||
Portfolio Price to Book Value* | 1.9x | |||
Median Market Cap* | $ | 55.0 B | ||
7-Year Beta (A Shares vs. MSCI EAFE)* | 0.88 | |||
Number of Companies | 62 |
* Source: FactSet
Market Capitalization Exposure
As of September 30, 2014
Basket Structure
As of September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
A Shares (Incep: 5/28/98) | ||||||||||||||||||||
Without sales charge | -0.14 | % | 9.87 | % | 5.46 | % | 7.40 | % | 7.95 | % | ||||||||||
With sales charge | -4.64 | % | 8.20 | % | 4.49 | % | 6.90 | % | 7.65 | % | ||||||||||
MSCI EAFE Index (Since 5/28/98) | 4.25 | % | 13.65 | % | 6.56 | % | 6.32 | % | 4.31 | % | ||||||||||
MSCI AC World ex-U.S. Index (Since 5/28/98) | 5.22 | % | 12.29 | % | 6.50 | % | 7.54 | % | 5.36 | % |
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.
Stocks Contributing and Detracting
For the Year Ended September 30, 2014
TOP CONTRIBUTORS | TOP DETRACTORS | |
Novo Nordisk A/S | Lululemon Athletica, Inc. | |
Hong Kong Exchanges & Clearing Ltd. | adidas AG | |
Baidu, Inc. ADR | Sands China Ltd. | |
Novartis AG | Deutsche Bank AG | |
Canadian National Railway Co. | Mitsubishi UFJ Financial Group, Inc. |
Source: FactSet
This page is not part of the Annual Report 5
Thornburg International Value Fund
September 30, 2014
7 | ||||
9 | ||||
14 | ||||
16 | ||||
18 | ||||
19 | ||||
28 | ||||
30 | ||||
31 | ||||
32 | ||||
33 | ||||
36 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semi-annual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
Thornburg International Value Fund | September 30, 2014 (Unaudited) |
October 23, 2014
Dear Fellow Shareholder,
The fiscal year ended September 30, 2014, has been a volatile one in global stock markets. The twelve-month period started out solidly enough, as a December 2013 rally capped off positive results for the calendar year. However, profit-taking among some of the best performing stocks of 2013 commenced early in 2014. Japanese, emerging-market, internet, Russian-related and consumer stocks were among the hardest hit. For the twelve months ended September 30, 2014, the total return for the Class A shares was negative 0.14% at net asset value (NAV), trailing the benchmark MSCI EAFE Index’s total return of 4.25% and the MSCI All Country World ex-U.S. Index’s return of 5.22%. These results are disappointing, yet there is some reason for encouragement; the Fund finished the year with relative improvement. The fourth quarter return of negative 1.52% compared favorably with that of the MSCI EAFE Index at negative 5.88%, and with the MSCI All Country World ex-U.S. Index, at negative 5.19%. In a way, it reminds us of an adage from sports: “We didn’t lose, we just ran out of time.” The recovery of some of the weak stocks of the first quarter was satisfying.
Despite a negative total return, the portfolio had materially positive performance from a number of important positions including holdings in the health care sector (Novo Nordisk and Novartis) and telecommunications sector (China Mobile) and in China-related issues (Hong Kong Exchange & Clearing and Baidu). Detractors from performance included a number of stocks in the consumer discretionary sector, where we were significantly overweighted (Lululemon and adidas) and in the financial sector (Deutsche Bank and Sumitomo Mitsui Trust). Certain detractors have been reduced or eliminated. The conflict between Russia and Ukraine put a damper on the global economy, especially Europe. Continued steady expansion of the U.S. economy and the strengthening dollar has worked to make our partial hedges on the euro, pound sterling, and Japanese yen effective in offsetting some of the devaluation of these important currency exposures.
In this volatile environment, we have initiated positions in a diverse set of new ideas we consider attractive. Some of these new names are in the process of restructuring and reducing costs to generate more free cash flow for shareholders through dividend increases and share repurchases. This strategy is sometimes referred to as “self help.” Svenska Cellulosa in the consumer space, Aviva in insurance, and Saint Gobain in building materials are examples. Industry leaders in segments of the internet, mobile communication and content were also added as we continue to see growth of the internet and demand for mobile data speed and content globally. Alibaba Group, China Mobile, and Liberty Global are examples. We also initiated positions in a number of cyclical companies, such as Rio Tinto and Saint Gobain, based on what we believe are attractive valuations and industry leadership positions. As a result of our pursuit of a broad set of new investment opportunities, portfolio characteristics have changed significantly from the beginning of the fiscal year. For example, our consumer discretionary sector weighting has decreased materially and our telecommunication sector weighting has increased. Even though we are bottom-up investors, the end results of sector positioning appear to have been positive. Portfolio activity grew higher than the past couple of years. Importantly, to date, the changes have been effective in making portfolio volatility characteristics more in line with past levels, especially in weak markets.
Going forward, we see continued strength in the U.S. economy relative to its global peers, and China is expected to continue to be an important driver of the global economy. Though China’s economic growth may be slowing, we believe these two economies will likely work to help the global economy reaccelerate. Lower energy prices are supportive. There are potential risks in both economies and markets. In the U.S., productivity growth has been weak, housing data is in flux, and a contingent of people who have dropped out of the workforce don’t seem to be returning. Nonetheless, with unemployment levels diminished, the Federal Reserve appears set to become one of the first developed-world central banks to raise interest rates, which will likely prompt higher yields on dollar-denominated assets. In China, exports have diminished, the anti-corruption campaign has tempered consumer spending, and the property market has cooled. A possible offset to these negative influences is the recently announced Shanghai-Hong Kong Stock Connect agreement, facilitating cross-trading of shares between Shanghai and Hong Kong. This may prove important in opening the Chinese financial system and economy further. All things considered — including valuation — if the Japanese and European central banks continue accommodative monetary policies, global economies should support opportunities in equity markets, even in the face of developments such as armed conflicts in the Middle East and Ukraine, and the Ebola outbreak.
We are encouraged by the Fund’s recent performance. While some of the trends and stock performance that benefitted the Fund recently may continue, others may not. We are sensitive to this risk, especially where material holdings are involved. We believe our core approach of investing in promising companies at a discount and diversifying and evaluating holdings in three categories (basic value, consistent earners and emerging franchises) remains a sound philosophy. We are working hard on our execution to achieve more satisfactory results in the future.
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg International Value Fund | September 30, 2014 (Unaudited) |
In August, our long time co-portfolio manager, Wendy Trevisani, announced her desire to spend more time with her family, and will leave Thornburg Investment Management effective March 1, 2015. Wendy has made a great contribution to the firm and the portfolios she has managed during her 14-year career here. We wish her well.
Thank you for investing with us in the Thornburg International Value Fund.
Sincerely,
![]() | ![]() | |||
William V. Fries, CFA Portfolio Manager Managing Director | Lei Wang, CFA Portfolio Manager Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
8 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg International Value Fund | September 30, 2014 |
Top Ten Equity Holdings
As of 9/30/14
ING Groep N.V. | 3.1 | % | ||
Total SA | 3.0 | % | ||
Novartis AG | 2.9 | % | ||
Roche Holding AG | 2.9 | % | ||
China Mobile Ltd. | 2.8 | % | ||
Hong Kong Exchanges & Clearing Ltd. | 2.8 | % | ||
Intesa Sanpaolo S.p.A. | 2.8 | % | ||
Sumitomo Mitsui Trust Holdings, Inc. | 2.7 | % | ||
Mitsubishi UFJ Financial Group, Inc. | 2.7 | % | ||
UBS AG | 2.7 | % |
Summary of Industry Group Exposure
As of 9/30/14
Banks | 14.9 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 11.7 | % | ||
Telecommunication Services | 10.3 | % | ||
Software & Services | 8.7 | % | ||
Diversified Financials | 7.5 | % | ||
Energy | 6.1 | % | ||
Semiconductors & Semiconductor Equipment | 5.1 | % | ||
Consumer Durables & Apparel | 4.5 | % | ||
Food, Beverage & Tobacco | 4.3 | % | ||
Capital Goods | 3.7 | % | ||
Automobiles & Components | 3.1 | % | ||
Media | 2.6 | % | ||
Insurance | 2.2 | % | ||
Household & Personal Products | 1.8 | % | ||
Materials | 1.8 | % | ||
Commercial & Professional Services | 1.5 | % | ||
Transportation | 1.3 | % | ||
Consumer Services | 1.3 | % | ||
Utilities | 0.8 | % | ||
Other Assets & Liabilities | 6.8 | % |
Summary of Country Exposure*
As of 9/30/14 (percent of equity holdings)
United Kingdom | 16.5 | % | ||
Japan | 16.1 | % | ||
Switzerland | 10.8 | % | ||
China | 10.0 | % | ||
France | 8.0 | % | ||
Netherlands | 7.4 | % | ||
Spain | 4.4 | % | ||
Ireland | 4.2 | % | ||
Hong Kong | 4.1 | % | ||
United States | 4.1 | % | ||
Germany | 3.9 | % | ||
Italy | 3.0 | % | ||
Denmark | 2.2 | % | ||
Taiwan | 1.9 | % | ||
Mexico | 1.6 | % | ||
Canada | 1.4 | % | ||
Sweden | 0.3 | % | ||
Macao | 0.1 | % |
* | The country exposure of each equity holding is determined by the Fund’s Advisor based on various factors, including the location of the issuer’s head office, the issuer’s jurisdiction of incorporation and the country from which a majority of the issuer’s revenue is derived. |
SHARES/ | ||||||||
PRINCIPAL AMOUNT | VALUE | |||||||
COMMON STOCK — 93.16% | ||||||||
AUTOMOBILES & COMPONENTS — 3.11% | ||||||||
Auto Components — 0.64% | ||||||||
Compagnie Generale des Establissements Michelin | 1,073,540 | $ | 101,261,241 | |||||
Automobiles — 2.47% | ||||||||
Bayerische Motoren Werke AG | 1,369,002 | 147,009,665 | ||||||
Toyota Motor Corp. | 4,109,521 | 242,168,536 | ||||||
|
| |||||||
490,439,442 | ||||||||
|
|
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
SHARES/ | ||||||||
PRINCIPAL AMOUNT | VALUE | |||||||
BANKS — 14.93% | ||||||||
Banks — 14.93% | ||||||||
Banco Bilbao Vizcaya Argentaria, S.A. | 26,943,162 | $ | 325,026,007 | |||||
Industrial and Commercial Bank of China Ltd. | 399,104,088 | 248,256,276 | ||||||
a ING Groep N.V. | 34,195,914 | 488,492,079 | ||||||
Intesa Sanpaolo S.p.A. | 145,541,919 | 442,287,254 | ||||||
Mitsubishi UFJ Financial Group, Inc. | 74,173,628 | 419,443,666 | ||||||
Sumitomo Mitsui Trust Holdings, Inc. | 103,343,940 | 430,148,243 | ||||||
|
| |||||||
2,353,653,525 | ||||||||
|
| |||||||
CAPITAL GOODS — 3.66% | ||||||||
Building Products — 1.03% | ||||||||
Compagnie de Saint-Gobain | 3,542,832 | 162,143,495 | ||||||
Construction & Engineering — 0.80% | ||||||||
Vinci S.A. | 2,167,759 | 125,961,185 | ||||||
Machinery — 1.83% | ||||||||
Fanuc Ltd. | 218,879 | 39,534,926 | ||||||
Kubota Corp. | 6,646,617 | 104,994,428 | ||||||
Pentair Ltd. | 2,211,563 | 144,835,261 | ||||||
|
| |||||||
577,469,295 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 1.48% | ||||||||
Professional Services — 1.48% | ||||||||
Experian plc | 14,618,907 | 233,084,028 | ||||||
|
| |||||||
233,084,028 | ||||||||
|
| |||||||
CONSUMER DURABLES & APPAREL — 4.48% | ||||||||
Household Durables — 2.31% | ||||||||
Sony Corp. | 20,066,352 | 364,277,245 | ||||||
Textiles, Apparel & Luxury Goods — 2.17% | ||||||||
adidas AG | 1,300,396 | 97,316,097 | ||||||
LVMH Moet Hennessy Louis Vuitton SA | 1,503,315 | 244,370,762 | ||||||
|
| |||||||
705,964,104 | ||||||||
|
| |||||||
CONSUMER SERVICES — 1.26% | ||||||||
Hotels, Restaurants & Leisure — 1.26% | ||||||||
Sands China Ltd. | 4,068,133 | 21,218,618 | ||||||
Yum! Brands, Inc. | 2,473,912 | 178,072,186 | ||||||
|
| |||||||
199,290,804 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 7.51% | ||||||||
Capital Markets — 4.69% | ||||||||
Deutsche Bank AG | 9,156,592 | 321,224,480 | ||||||
UBS AG | 23,938,458 | 417,738,253 | ||||||
Diversified Financial Services — 2.82% | ||||||||
Hong Kong Exchanges & Clearing Ltd. | 20,656,305 | 445,056,869 | ||||||
|
| |||||||
1,184,019,602 | ||||||||
|
| |||||||
ENERGY — 6.10% | ||||||||
Energy Equipment & Services — 1.85% | ||||||||
Schlumberger Ltd. | 2,876,674 | 292,528,979 | ||||||
Oil, Gas & Consumable Fuels — 4.25% | ||||||||
BG Group plc | 11,004,191 | 203,369,686 | ||||||
Total SA | 7,178,814 | 466,507,666 | ||||||
|
| |||||||
962,406,331 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 4.31% | ||||||||
Beverages — 1.10% | ||||||||
SABMiller plc | 3,116,221 | 173,177,837 | ||||||
Food Products — 1.44% | ||||||||
Nestle SA | 3,094,112 | 227,675,047 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
SHARES/ | ||||||||
PRINCIPAL AMOUNT | VALUE | |||||||
Tobacco — 1.77% | ||||||||
Japan Tobacco, Inc. | 8,591,744 | $ | 279,432,422 | |||||
|
| |||||||
680,285,306 | ||||||||
|
| |||||||
HOUSEHOLD & PERSONAL PRODUCTS — 1.81% | ||||||||
Household Products — 1.81% | ||||||||
Reckitt Benckiser plc | 2,734,803 | 237,193,660 | ||||||
Svenska Cellulosa AB SCA-B | 2,000,000 | 47,699,557 | ||||||
|
| |||||||
284,893,217 | ||||||||
|
| |||||||
INSURANCE — 2.20% | ||||||||
Insurance — 2.20% | ||||||||
AIA Group Ltd. | 29,483,418 | 152,451,011 | ||||||
Aviva plc | 22,823,409 | 193,695,908 | ||||||
|
| |||||||
346,146,919 | ||||||||
|
| |||||||
MATERIALS — 1.77% | ||||||||
Construction Materials — 0.17% | ||||||||
Holcim Ltd. | 354,410 | 25,855,930 | ||||||
Metals & Mining — 1.60% | ||||||||
Rio Tinto plc | 5,142,139 | 252,711,283 | ||||||
|
| |||||||
278,567,213 | ||||||||
|
| |||||||
MEDIA — 2.56% | ||||||||
Media — 2.56% | ||||||||
Grupo Televisa, S.A.B. | 1,213,669 | 41,119,106 | ||||||
a Liberty Global plc | 6,988,434 | 286,630,620 | ||||||
Publicis Groupe | 1,103,733 | 75,795,612 | ||||||
|
| |||||||
403,545,338 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 11.43% |
| |||||||
Biotechnology — 2.01% | ||||||||
a Gilead Sciences, Inc. | 2,590,303 | 275,737,754 | ||||||
Grifols, S.A. | 988,000 | 40,481,677 | ||||||
|
| |||||||
316,219,431 | ||||||||
|
| |||||||
Pharmaceuticals — 9.68% | ||||||||
a Actavis plc | 577,300 | 139,290,944 | ||||||
Novartis AG | 4,866,516 | 459,533,275 | ||||||
Novo Nordisk A/S | 6,703,138 | 320,737,911 | ||||||
Perrigo Co. plc | 1,037,556 | 155,830,536 | ||||||
Roche Holding AG | 1,520,890 | 450,993,986 | ||||||
|
| |||||||
1,802,124,406 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 5.07% | ||||||||
Semiconductors & Semiconductor Equipment — 5.07% | ||||||||
ARM Holdings plc | 14,994,324 | 220,230,942 | ||||||
a NXP Semiconductors N.V. | 4,402,635 | 301,272,313 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd. ADR | 13,736,700 | 277,206,606 | ||||||
|
| |||||||
798,709,861 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 8.75% | ||||||||
Information Technology Services — 3.89% | ||||||||
Accenture plc | 2,217,439 | 180,322,139 | ||||||
Amadeus IT Holding SA | 7,552,926 | 282,566,706 | ||||||
MasterCard, Inc. | 2,032,700 | 150,257,184 | ||||||
Internet Software & Services — 4.86% | ||||||||
a Alibaba Group Holding Ltd. ADR | 3,065,925 | 272,407,436 | ||||||
a Baidu, Inc. ADR | 1,037,815 | 226,482,367 | ||||||
Tencent Holdings Ltd. | 17,971,510 | 266,858,356 | ||||||
|
| |||||||
1,378,894,188 | ||||||||
|
|
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
SHARES/ | ||||||||
PRINCIPAL AMOUNT | VALUE | |||||||
TELECOMMUNICATION SERVICES — 10.29% | ||||||||
Diversified Telecommunication Services — 3.00% | ||||||||
BT Group plc | 30,076,405 | $ | 185,086,770 | |||||
Nippon Telegraph & Telephone Corp. | 4,629,001 | 287,890,730 | ||||||
Wireless Telecommunication Services — 7.29% | ||||||||
America Movil SAB de C.V. ADR | 7,418,095 | 186,935,994 | ||||||
China Mobile Ltd. | 38,806,792 | 448,048,436 | ||||||
SoftBank Corp. | 2,886,336 | 202,352,747 | ||||||
Vodafone Group plc ADR | 9,458,773 | 311,099,044 | ||||||
|
| |||||||
1,621,413,721 | ||||||||
|
| |||||||
TRANSPORTATION — 1.35% | ||||||||
Road & Rail — 1.35% | ||||||||
Canadian National Railway Co. | 2,996,145 | 212,709,040 | ||||||
|
| |||||||
212,709,040 | ||||||||
|
| |||||||
UTILITIES — 0.83% | ||||||||
Multi-Utilities — 0.83% | ||||||||
National Grid plc | 9,061,128 | 130,442,309 | ||||||
130,442,309 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $12,208,066,066) | 14,684,540,326 | |||||||
|
| |||||||
RIGHTS — 0.02% | ||||||||
Banco Bilbao Vizcaya Argentaria, S.A. Rights | 26,943,162 | 2,688,415 | ||||||
|
| |||||||
TOTAL RIGHTS (Cost $2,734,517) | 2,688,415 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 2.92% | ||||||||
AGL Capital Corp., 0.21%, 10/1/2014 | $ | 25,700,000 | 25,700,000 | |||||
Apache Corp., 0.26%, 10/6/2014 | 22,000,000 | 21,999,206 | ||||||
Arizona Public Service Co., 0.17%, 10/1/2014 | 19,150,000 | 19,150,000 | ||||||
Atmos Energy Corp., 0.16%, 10/1/2014 | 20,000,000 | 20,000,000 | ||||||
Autozone, Inc., 0.20%, 10/1/2014 | 7,500,000 | 7,500,000 | ||||||
Avery Dennison Corp., 0.18%, 10/1/2014 | 20,600,000 | 20,600,000 | ||||||
Bank of New York Tri-Party Repurchase Agreement 0.23% dated 9/30/2014 due 10/1/2014, repurchase price $35,000,224 collateralized by 25 corporate debt securities, having an average coupon of 5.24%, a minimum credit rating of BBB-, maturity dates from 1/15/2018 to 7/15/2043, and having an aggregate market value of $37,420,664 at 9/30/2014 | 35,000,000 | 35,000,000 | ||||||
CenterPoint Energy, Inc., 0.20%, 10/1/2014 | 40,000,000 | 40,000,000 | ||||||
Hitachi International Treasury Ltd., 0.31%, 10/3/2014 | 29,800,000 | 29,799,487 | ||||||
Hitachi International Treasury Ltd., 0.32%, 10/7/2014 | 70,000,000 | 69,996,267 | ||||||
Kansas City Power & Light, 0.22%, 10/1/2014 | 60,000,000 | 60,000,000 | ||||||
Kroger Co., 0.20%, 10/1/2014 | 50,000,000 | 50,000,000 | ||||||
Plains All American Pipeline, LP, 0.23%, 10/1/2014 | 12,300,000 | 12,300,000 | ||||||
Public Service Co. of Colorado, 0.23%, 10/3/2014 | 22,500,000 | 22,499,712 | ||||||
Union Electric Co., 0.20%, 10/1/2014 | 25,000,000 | 25,000,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $459,544,672) | 459,544,672 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 96.10% (Cost $12,670,345,255) | $ | 15,146,773,413 | ||||||
OTHER ASSETS LESS LIABILITIES — 3.90% | 615,184,311 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 15,761,957,724 | ||||||
|
|
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
Footnote Legend
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:
SHARES/ PRINCIPAL | SHARES/ PRINCIPAL | MARKET VALUE | ||||||||||||||||||||||
SEPTEMBER 30, | GROSS | GROSS | SEPTEMBER 30, | SEPTEMBER 30, | INVESTMENT | |||||||||||||||||||
ISSUER | 2013 | ADDITIONS | REDUCTIONS | 2014 | 2014 | INCOME | ||||||||||||||||||
Carnival plc* | 10,379,403 | — | — | — | $ | — | $ | — | ||||||||||||||||
Lululemon Athletica, Inc.* | 6,333,152 | — | — | — | — | — | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||
$ | — | $ | — | |||||||||||||||||||||
|
|
|
|
* | Issuers not affiliated at September 30, 2014. |
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 Value Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $12,670,345,255) (Note 2) | $ | 15,146,773,413 | ||
Cash | 358,995,435 | |||
Cash denominated in foreign currency (cost $789,418) | 787,727 | |||
Receivable for investments sold | 162,484,939 | |||
Receivable for fund shares sold | 13,957,149 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 342,448,090 | |||
Dividends receivable | 24,568,130 | |||
Dividend and interest reclaim receivable | 34,355,523 | |||
Interest receivable | 224 | |||
Prepaid expenses and other assets | 116,110 | |||
|
| |||
Total Assets | 16,084,486,740 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 85,815,374 | |||
Payable for fund shares redeemed | 135,498,921 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 81,576,202 | |||
Payable to investment advisor and other affiliates (Note 3) | 10,415,691 | |||
Accounts payable and accrued expenses | 9,222,828 | |||
|
| |||
Total Liabilities | 322,529,016 | |||
|
| |||
NET ASSETS | $ | 15,761,957,724 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 5,201,570 | ||
Net unrealized appreciation on investments and foreign currency translations | 2,735,615,339 | |||
Accumulated net realized gain (loss) | 798,700,526 | |||
Net capital paid in on shares of beneficial interest | 12,222,440,289 | |||
|
| |||
$ | 15,761,957,724 | |||
|
|
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($2,601,688,963 applicable to 87,177,991 shares of beneficial interest outstanding - Note 4) | $ | 29.84 | ||
Maximum sales charge, 4.50% of offering price | 1.41 | |||
|
| |||
Maximum offering price per share | $ | 31.25 | ||
|
| |||
Class B Shares: | ||||
Net asset value per share* ($16,287,528 applicable to 588,380 shares of beneficial interest | $ | 27.68 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($874,357,964 applicable to 31,388,478 shares of beneficial interest outstanding - Note 4) | $ | 27.86 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($7,748,950,402 applicable to 254,623,731 shares of beneficial interest outstanding - Note 4) | $ | 30.43 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($754,138,812 applicable to 25,254,492 shares of beneficial interest outstanding - Note 4) | $ | 29.86 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($722,349,003 applicable to 24,329,599 shares of beneficial interest outstanding - Note 4) | $ | 29.69 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($2,171,673,410 applicable to 71,413,679 shares of beneficial interest outstanding - Note 4) | $ | 30.41 | ||
|
| |||
Class R6 Shares: | ||||
Net asset value, offering and redemption price per share ($872,511,642 applicable to 28,737,521 shares of beneficial interest outstanding - Note 4) | $ | 30.36 | ||
|
|
* | 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 Value Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Dividend income (net of foreign taxes withheld of $45,983,772) | $ | 460,403,884 | ||
Interest income | 1,233,472 | |||
|
| |||
Total Income | 461,637,356 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 163,013,124 | |||
Administration fees (Note 3) | ||||
Class A Shares | 5,185,707 | |||
Class B Shares | 30,873 | |||
Class C Shares | 1,318,245 | |||
Class I Shares | 5,746,721 | |||
Class R3 Shares | 1,209,533 | |||
Class R4 Shares | 1,350,696 | |||
Class R5 Shares | 1,766,188 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 10,291,829 | |||
Class B Shares | 246,798 | |||
Class C Shares | 10,536,288 | |||
Class R3 Shares | 4,820,464 | |||
Class R4 Shares | 2,715,803 | |||
Transfer agent fees | ||||
Class A Shares | 6,566,193 | |||
Class B Shares | 51,841 | |||
Class C Shares | 1,437,755 | |||
Class I Shares | 11,947,100 | |||
Class R3 Shares | 2,482,568 | |||
Class R4 Shares | 4,096,265 | |||
Class R5 Shares | 12,181,101 | |||
Class R6 Shares | 8,665 | |||
Registration and filing fees | ||||
Class A Shares | 50,863 | |||
Class B Shares | 16,363 | |||
Class C Shares | 22,936 | |||
Class I Shares | 306,395 | |||
Class R3 Shares | 23,084 | |||
Class R4 Shares | 37,187 | |||
Class R5 Shares | 37,356 | |||
Class R6 Shares | 42,172 | |||
Custodian fees (Note 3) | 5,603,989 | |||
Professional fees | 350,475 | |||
Accounting fees | 946,000 | |||
Trustee fees | 773,650 | |||
Other expenses | 2,283,433 | |||
|
| |||
Total Expenses | 257,497,660 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (8,794,711 | ) | ||
Fees paid indirectly (Note 3) | (79,189 | ) | ||
|
| |||
Net Expenses | 248,623,760 | |||
|
| |||
Net Investment Income | $ | 213,013,596 | ||
|
|
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg International Value Fund | Year Ended September 30, 2014 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 4,421,712,944 | ||
Forward currency contracts (Note 7) | (98,212,727 | ) | ||
Foreign currency transactions | (7,459,084 | ) | ||
|
| |||
4,316,041,133 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (4,813,117,318 | ) | ||
Foreign currency translations | (2,446,623 | ) | ||
Forward currency contracts (Note 7) | 360,856,755 | |||
|
| |||
(4,454,707,186 | ) | |||
|
| |||
Net Realized and Unrealized Loss | (138,666,053 | ) | ||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 74,347,543 | ||
|
|
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN ASSETS | ||
Thornburg International Value Fund |
YEAR ENDED | YEAR ENDED | |||||||
SEPTEMBER 30, 2014 | SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 213,013,596 | $ | 323,515,655 | ||||
Net realized gain (loss) on investments, forward currency contracts, and foreign currency transactions | 4,316,041,133 | 1,613,463,236 | ||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, and foreign currency transactions | (4,454,707,186 | ) | 2,423,863,558 | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 74,347,543 | 4,360,842,449 | ||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | (24,836,500 | ) | (43,423,103 | ) | ||||
Class B Shares | (41,872 | ) | (135,243 | ) | ||||
Class C Shares | (2,410,852 | ) | (5,193,481 | ) | ||||
Class I Shares | (122,938,549 | ) | (182,275,885 | ) | ||||
Class R3 Shares | (5,130,641 | ) | (7,770,990 | ) | ||||
Class R4 Shares | (7,356,292 | ) | (11,150,837 | ) | ||||
Class R5 Shares | (32,599,485 | ) | (51,989,824 | ) | ||||
Class R6 Shares | (19,861,092 | ) | (16,473,662 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (2,591,843,528 | ) | (987,000,465 | ) | ||||
Class B Shares | (17,031,740 | ) | (15,869,634 | ) | ||||
Class C Shares | (296,649,398 | ) | (243,715,095 | ) | ||||
Class I Shares | (6,778,761,004 | ) | 162,757,464 | |||||
Class R3 Shares | (392,504,894 | ) | (351,918,980 | ) | ||||
Class R4 Shares | (616,127,795 | ) | (350,116,790 | ) | ||||
Class R5 Shares | (2,191,585,826 | ) | (789,848,411 | ) | ||||
Class R6 Shares | (460,324,600 | ) | 737,341,228 | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets | (13,485,656,525 | ) | 2,204,058,741 | |||||
NET ASSETS | ||||||||
Beginning of Year | 29,247,614,249 | 27,043,555,508 | ||||||
|
|
|
| |||||
End of Year | $ | 15,761,957,724 | $ | 29,247,614,249 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 5,201,570 | $ | 14,822,341 |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg International Value Fund | September 30, 2014 |
NOTE 1 – ORGANIZATION
Thornburg International Value Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of eighteen 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: 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 Class R5 shares may be subject to a service fee, 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 allocable 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 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. 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 reported by NASDAQ are valued at the NASDAQ official closing price. 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. 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 when 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, 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,
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
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. For example, 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of 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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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:
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
FAIR VALUE MEASUREMENTS AT SEPTEMBER 30, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 14,684,540,326 | $ | 14,684,540,326 | $ | — | $ | — | ||||||||
Rights | 2,688,415 | 2,688,415 | — | — | ||||||||||||
Short Term Investments | 459,544,672 | — | 459,544,672 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 15,146,773,413 | $ | 14,687,228,741 | $ | 459,544,672 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 342,448,090 | $ | — | $ | 342,448,090 | $ | — | ||||||||
Spot Currency | $ | 130,179 | $ | 130,179 | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (81,576,202 | ) | $ | — | $ | (81,576,202 | ) | $ | — | ||||||
Spot Currency | $ | (56,826 | ) | $ | (56,826 | ) | $ | — | $ | — |
* | 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, which may include 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, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
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 of securities 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, 2014, 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
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
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 by entering into repurchase agreements under which the Fund delivers cash to a counterparty, the counterparty delivers securities as collateral, and the Fund is obligated to resell that collateral to the counterparty at an agreed upon price at the maturity date of the repurchase agreement. Securities pledged as collateral under repurchase agreements are held in custody with a third party custodian 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 counterparty’s obligations. Under certain circumstances, in the event of default or bankruptcy by the counterparty 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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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 (except for Class R6 shares, which do not have an administrative services agreement) and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $89,665 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $52,250 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 (except for Class R6 shares, which do not have a Rule 12b-1 service plan) 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, 2014, 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 and for shareholder services.
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
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
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, 2014, are set forth in the Statement of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class R3, Class R4, and Class R5 do not exceed 1.45%, 1.25%, and 0.99%, respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually waived or reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,546,535 for Class R3 shares, $2,549,245 for Class R4 shares, and $4,698,931 for Class R5 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, 2014, fees paid indirectly were $79,189.
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 and is included as Trustee Fees on the Statement of Operations.
The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended September 30, 2014, the Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $49,999,000 in sales.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 17,448,628 | $ | 527,252,760 | 33,281,289 | $ | 934,420,102 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 751,233 | 22,755,421 | 1,439,461 | 39,862,622 | ||||||||||||
Shares repurchased | (104,116,072 | ) | (3,141,851,709 | ) | (69,820,089 | ) | (1,961,283,189 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (85,916,211 | ) | $ | (2,591,843,528 | ) | (35,099,339 | ) | $ | (987,000,465 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class B Shares | ||||||||||||||||
Shares sold | 2,583 | $ | 72,727 | 11,496 | $ | 294,911 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,079 | 30,247 | 3,696 | 92,758 | ||||||||||||
Shares repurchased | (612,869 | ) | (17,134,714 | ) | (623,836 | ) | (16,257,303 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (609,207 | ) | $ | (17,031,740 | ) | (608,644 | ) | $ | (15,869,634 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 1,825,885 | $ | 51,520,849 | 2,906,313 | $ | 76,626,452 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 64,864 | 1,829,821 | 151,395 | 3,840,256 | ||||||||||||
Shares repurchased | (12,442,806 | ) | (350,000,068 | ) | (12,367,528 | ) | (324,181,803 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (10,552,057 | ) | $ | (296,649,398 | ) | (9,309,820 | ) | $ | (243,715,095 | ) | ||||||
|
|
|
|
|
|
|
|
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 103,474,293 | $ | 3,194,619,827 | 157,447,422 | $ | 4,532,061,713 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 3,353,409 | 103,806,502 | 5,248,430 | 149,632,653 | ||||||||||||
Shares repurchased | (326,972,110 | ) | (10,077,187,333 | ) | (157,064,440 | ) | (4,518,936,902 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (220,144,408 | ) | $ | (6,778,761,004 | ) | 5,631,412 | $ | 162,757,464 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 5,588,730 | $ | 168,961,744 | 8,044,211 | $ | 225,644,378 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 158,988 | 4,816,635 | 264,385 | 7,292,297 | ||||||||||||
Shares repurchased | (18,738,646 | ) | (566,283,273 | ) | (20,769,217 | ) | (584,855,655 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (12,990,928 | ) | $ | (392,504,894 | ) | (12,460,621 | ) | $ | (351,918,980 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 8,521,096 | $ | 256,157,143 | 13,283,270 | $ | 371,895,750 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 183,905 | 5,543,050 | 323,914 | 8,936,132 | ||||||||||||
Shares repurchased | (29,175,509 | ) | (877,827,988 | ) | (26,439,756 | ) | (730,948,672 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (20,470,508 | ) | $ | (616,127,795 | ) | (12,832,572 | ) | $ | (350,116,790 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 19,469,855 | $ | 600,262,418 | 35,326,999 | $ | 1,001,908,594 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 989,545 | 30,588,240 | 1,744,635 | 49,503,898 | ||||||||||||
Shares repurchased | (91,535,480 | ) | (2,822,436,484 | ) | (64,140,808 | ) | (1,841,260,903 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (71,076,080 | ) | $ | (2,191,585,826 | ) | (27,069,174 | ) | $ | (789,848,411 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R6 Shares | ||||||||||||||||
Shares sold | 20,980,274 | $ | 647,021,016 | 30,928,332 | $ | 885,306,945 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 642,244 | 19,836,878 | 572,781 | 16,354,593 | ||||||||||||
Shares repurchased | (36,713,336 | ) | (1,127,182,494 | ) | (5,631,004 | ) | (164,320,310 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (15,090,818 | ) | $ | (460,324,600 | ) | 25,870,109 | $ | 737,341,228 | ||||||||
|
|
|
|
|
|
|
|
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $8,525,524,089 and $21,870,177,874, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 12,675,249,179 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 2,975,733,969 | ||
Gross unrealized depreciation on a tax basis | (504,209,735 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 2,471,524,234 | ||
|
|
The fund utilized $3,459,245,748 of capital loss carryforwards during the year ended September 30, 2014.
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
In order to account for permanent book/tax differences, the Fund decreased undistributed net investment income by $7,459,084, decreased accumulated net realized investment gain by $101,468,216, and increased net capital paid in on shares of beneficial interest by $108,927,300. This reclassification has no impact on the net asset value of the Fund. This reclassification resulted from currency gains (losses) and equalization of undistributed capital gains to shareholders.
At September 30, 2014, the Fund had undistributed tax basis ordinary investment income of $5,272,950 and undistributed tax basis capital gains of $1,064,476,337.
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 215,175,283 | $ | 318,413,025 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 215,175,283 | $ | 318,413,025 | ||||
|
|
|
|
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 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, 2014, 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’s 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 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, 2014 in the normal course of pursuing its investment objectives, with the objective 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 average value of open sell currency contracts for the year ended September 30, 2014 was $6,233,061,417. 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 the open sell currency contracts to which they relate.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
The following table displays the outstanding forward currency contracts at September 30, 2014:
OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2014 | ||||||||||||||||||||||||
CONTRACT | BUY/SELL | CONTRACT AMOUNT | COUNTER PARTY(a) | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | |||||||||||||||||
Euro | Sell | 1,287,814,600 | SSB | 10/28/2014 | 1,626,846,876 | $ | 151,489,866 | $ | — | |||||||||||||||
Euro | Sell | 305,285,200 | SSB | 10/28/2014 | 385,655,104 | 18,359,329 | — | |||||||||||||||||
Euro | Sell | 106,925,800 | SSB | 10/28/2014 | 135,075,269 | 3,253,569 | — | |||||||||||||||||
Euro | Buy | 252,970,500 | SSB | 10/28/2014 | 319,567,947 | — | (25,577,414 | ) | ||||||||||||||||
Great Britain Pound | Sell | 331,865,800 | BBH | 12/24/2014 | 537,612,903 | 4,695,638 | — | |||||||||||||||||
Japanese Yen | Sell | 162,929,554,700 | SSB | 10/02/2014 | 1,485,566,945 | 124,488,440 | — | |||||||||||||||||
Japanese Yen | Sell | 77,293,913,500 | SSB | 10/02/2014 | 704,754,169 | 40,161,248 | — | |||||||||||||||||
Japanese Yen | Buy | 82,516,243,600 | SSB | 10/02/2014 | 752,370,582 | — | (55,998,788 | ) | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total | $ | 342,448,090 | $ | (81,576,202 | ) | |||||||||||||||||||
|
|
|
|
(a) | Counterparties include State Street Bank and Trust Company (SSB) and Brown Brothers Harriman & Co. (BBH). |
The foregoing forward currency contracts with State Street Bank and Trust Company (SSB) were entered into pursuant to an International Swaps and Derivatives Association (ISDA) Master Agreement. The foregoing forward curency contracts with Brown Brothers Harriman & Co. (BBH) were entered into pursuant to a written agreement with BBH. In the event of a default or termination under either the ISDA Master Agreement with SSB or the Agreement with BBH, the non-defaulting party has the right to close out all outstanding forward currency contracts between the parties and to net any payment amounts under those contracts, resulting in a single net amount payable by one party to the other. Because the ISDA Master Agreement and the Agreement with BBH do not result in an offset of reported amounts of financial assets and financial liabilities in the Fund’s Statement of Assets and Liabilities unless there has been an event of default or termination event under such agreements, the Fund does not net its outstanding forward currency contracts for purposes of the disclosure in the Fund’s Statement of Assets and Liabilities. Instead the Fund recognizes the unrealized appreciation or depreciation on those forward currency contracts on a gross basis in the Fund’s Statement of Assets and Liabilities. At September 30, 2014, those recognized amounts are disclosed in the following table:
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2014 | ||||||
ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 342,448,090 | |||
LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (81,576,202 | ) |
Because the Fund does not currently receive or post cash collateral in connection with its currency forward contracts, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2014 can be determined by offsetting the dollar amounts shown in the preceding table. Based on those amounts, the net amount of the Fund’s assets which is attributable to its outstanding forward currency contracts at September 30, 2014, is $260,871,888 ($256,176,250 attributable to the Fund’s contracts with SSB, and $4,695,638 attributable to the Fund’s contracts with BBH), and the net amount of the Fund’s liabilities which is attributable to those contracts at that date is $0. The Fund’s forward currency contracts are valued each day, and the net amounts of the Fund’s assets and liabilities which are attributable to those contracts are expected to vary over time.
26 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 |
The net realized gain (loss) 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, 2014 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, 2014 | ||||||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (98,212,727 | ) | $ | (98,212,727 | ) |
AMOUNT OF NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2014 | ||||||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | 360,856,755 | $ | 360,856,755 |
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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Certified Annual Report 27
Thornburg International Value Fund
PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||
UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPT. 30, | NET ASSET VALUE BEGINNING OF PERIOD | NET INVESTMENT INCOME (LOSS) | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS | DIVIDENDS | TOTAL | NET ASSET VALUE END OF PERIOD | NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | EXPENSES, AFTER EXPENSE REDUCTIONS AND NET OF CUSTODY CREDITS (%) | EXPENSES, BEFORE EXPENSE REDUCTIONS (%) | TOTAL RETURN (%)(a) | PORTFOLIO (%)(a) | NET ASSETS AT END OF PERIOD (THOUSANDS) | |||||||||||||||||||||||||||||||||||||
CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 30.12 | 0.19 | (0.23 | ) | (0.04 | ) | (0.24) | — | (0.24) | $ | 29.84 | 0.63 | 1.26 | 1.26 | 1.26 | (0.14 | ) | 37.25 | $ | 2,601,689 | |||||||||||||||||||||||||||||||
2013(b) | $ | 26.08 | 0.26 | 4.02 | 4.28 | (0.24) | — | (0.24) | $ | 30.12 | 0.92 | 1.25 | 1.25 | 1.25 | 16.49 | 34.67 | $ | 5,212,813 | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
CLASS B SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 28.02 | (0.07 | ) | (0.20 | ) | (0.27 | ) | (0.07) | — | (0.07) | $ | 27.68 | (0.24 | ) | 2.13 | 2.13 | 2.13 | (0.96 | ) | 37.25 | $ | 16,288 | |||||||||||||||||||||||||||||
2013 | $ | 24.37 | 0.01 | 3.74 | 3.75 | (0.10) | — | (0.10) | $ | 28.02 | 0.02 | 2.10 | 2.10 | 2.10 | 15.45 | 34.67 | $ | 33,562 | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 28.17 | — | (c) | (0.23 | ) | (0.23 | ) | (0.08) | — | (0.08) | $ | 27.86 | — | (d) | 1.99 | 1.99 | 1.99 | (0.83 | ) | 37.25 | $ | 874,358 | |||||||||||||||||||||||||||||
2013 | $ | 24.48 | 0.04 | 3.77 | 3.81 | (0.12) | — | (0.12) | $ | 28.17 | 0.15 | 2.01 | 2.01 | 2.01 | 15.62 | 34.67 | $ | 1,181,438 | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||
CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 30.76 | 0.33 | (0.25 | ) | 0.08 | (0.41) | — | (0.41) | $ | 30.43 | 1.05 | 0.88 | 0.88 | 0.88 | 0.23 | 37.25 | $ | 7,748,950 | |||||||||||||||||||||||||||||||||
2013 | $ | 26.66 | 0.38 | 4.10 | 4.48 | (0.38) | — | (0.38) | $ | 30.76 | 1.34 | 0.86 | 0.86 | 0.86 | 16.94 | 34.67 | $ | 14,601,876 | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 30.14 | 0.15 | (0.24 | ) | (0.09 | ) | (0.19) | — | (0.19) | $ | 29.86 | 0.51 | 1.45 | 1.45 | 1.61 | (0.30 | ) | 37.25 | $ | 754,139 | |||||||||||||||||||||||||||||||
2013 | $ | 26.11 | 0.20 | 4.02 | 4.22 | (0.19) | — | (0.19) | $ | 30.14 | 0.71 | 1.45 | 1.45 | 1.57 | 16.23 | 34.67 | $ | 1,152,795 | ||||||||||||||||||||||||||||||||||
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 | $ | 1,323,765 | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 29.98 | 0.21 | (0.24 | ) | (0.03 | ) | (0.26) | — | (0.26) | $ | 29.69 | 0.70 | 1.25 | 1.25 | 1.49 | (0.12 | ) | 37.25 | $ | 722,349 | |||||||||||||||||||||||||||||||
2013 | $ | 25.96 | 0.25 | 4.01 | 4.26 | (0.24) | — | (0.24) | $ | 29.98 | 0.91 | 1.25 | 1.25 | 1.38 | 16.49 | 34.67 | $ | 1,342,883 | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 30.71 | 0.30 | (0.24 | ) | 0.06 | (0.36) | — | (0.36) | $ | 30.41 | 0.97 | 0.99 | 0.99 | 1.12 | 0.17 | 37.25 | $ | 2,171,673 | |||||||||||||||||||||||||||||||||
2013 | $ | 26.61 | 0.34 | 4.10 | 4.44 | (0.34) | — | (0.34) | $ | 30.71 | 1.20 | 0.96 | 0.96 | 1.00 | 16.80 | 34.67 | $ | 4,376,567 | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
CLASS R6 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 30.70 | 0.40 | (0.26 | ) | 0.14 | (0.48) | — | (0.48) | $ | 30.36 | 1.28 | 0.73 | 0.73 | 0.73 | 0.42 | 37.25 | $ | 872,512 | |||||||||||||||||||||||||||||||||
2013 | $ | 26.62 | 0.46 | 4.05 | 4.51 | (0.43) | — | (0.43) | $ | 30.70 | 1.59 | 0.74 | 0.74 | 0.74 | 17.07 | 34.67 | $ | 1,345,680 | ||||||||||||||||||||||||||||||||||
2012(e) | $ | 27.14 | 0.15 | (0.38 | ) | (0.23 | ) | (0.29) | — | (0.29) | $ | 26.62 | 1.35 | (f) | 0.76 | (f) | 0.76 | (f) | 0.76 | (f) | (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) | Net Investment Income was less than $0.01 per share. |
(d) | Net Investment Income Percentage was less than 0.01% |
(e) | Effective date of this class of shares was May 1, 2012. |
(f) | 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 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, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
30 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg International Value Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
CLASS A SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,005.90 | $ | 6.41 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.68 | $ | 6.45 | ||||||
CLASS B SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,001.40 | $ | 10.63 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.44 | $ | 10.70 | ||||||
CLASS C SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,002.40 | $ | 10.01 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,015.08 | $ | 10.07 | ||||||
CLASS I SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,007.40 | $ | 4.63 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.46 | $ | 4.66 | ||||||
CLASS R3 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,005.00 | $ | 7.29 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.80 | $ | 7.33 | ||||||
CLASS R4 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,005.80 | $ | 6.29 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.80 | $ | 6.33 | ||||||
CLASS R5 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,007.10 | $ | 4.98 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
CLASS R6 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,008.60 | $ | 3.69 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.40 | $ | 3.71 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.27%; B: 2.12%; C: 1.99%; I: 0.92%; R3: 1.45%; R4: 1.25%; R5: 0.99%; R6: 0.73%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 Value Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
Class A Shares (Incep: 5/28/98) | -4.64 | % | 8.20 | % | 4.49 | % | 6.90 | % | 7.65 | % | ||||||||||
Class B Shares (Incep: 4/3/00) | -5.90 | % | 7.95 | % | 4.27 | % | 6.72 | % | 5.38 | % | ||||||||||
Class C Shares (Incep: 5/28/98) | -1.82 | % | 9.06 | % | 4.69 | % | 6.62 | % | 7.10 | % | ||||||||||
Class I Shares (Incep: 3/30/01) | 0.23 | % | 10.30 | % | 5.88 | % | 7.83 | % | 7.66 | % | ||||||||||
Class R3 Shares (Incep: 7/1/03) | -0.30 | % | 9.66 | % | 5.28 | % | 7.25 | % | 9.26 | % | ||||||||||
Class R4 Shares (Incep: 2/1/07) | -0.12 | % | 9.89 | % | 5.49 | % | — | 2.57 | % | |||||||||||
Class R5 Shares (Incep: 2/1/05) | 0.17 | % | 10.18 | % | 5.78 | % | — | 6.90 | % | |||||||||||
Class R6 Shares (Incep: 5/1/12) | 0.42 | % | — | — | — | 6.58 | % |
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 C, I, R3, R4, R5, and R6 shares.
32 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg International Value Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 Value Fund | September 30, 2014 (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, 2014, 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.
The Fund is reporting 3.64% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2014 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2014, foreign source income and foreign taxes paid are $496,909,986 and $45,983,772, respectively.
For the tax year ended September 30, 2014, dividends paid by the Fund of $215,175,283 are being reported as ordinary investment income and dividends deemed paid by the Fund of $108,927,298 are designated 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, 2014. Complete information will be reported in conjunction with your 2014 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 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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
36 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 (Unaudited) |
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the quality of portfolio trade execution, the Advisor’s performance of accounting and other services under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the ten most recent calendar years, comparing the Fund’s investment performance to a fund category selected by an independent mutual fund analyst firm, and to two broad-based securities indices, (4) performance data for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year comparing the Fund’s annualized returns to two mutual fund categories and to two broad-based securities indices, and assigning a ranking to the Fund’s performance for each period relative to the two fund categories, and (5) comparative measures of estimated earnings growth, portfolio volatility, risk and return.
Comparative performance data for the ten most recent calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year was lower than the return for a mutual fund category and one of two broad-based securities indices considered, and was comparable to the return for a second index, and that the Fund’s returns for the preceding nine calendar years exceeded or were comparable to the returns of one index in seven of nine years, exceeded or were comparable to the returns of the second index in five of nine years, and exceeded or were comparable to the average returns of the fund category in seven of nine years. Noted quantitative data further showed that the Fund’s annualized investment returns fell in the fourth quartile of investment performance of each of two mutual fund categories considered for the one-year, three-year and five-year periods ended with the second quarter of the current year, and fell in the second quartile of performance of both categories for the ten-year period. Data presented to the Trustees also showed that the Fund’s annualized total return for the period since inception exceeded the annualized returns of the two indices considered. The Trustees received explanations respecting the Advisor’s investment selections and implementation of measures to enhance the Fund’s investment performance, and in this regard noted improvements in the Fund’s recent investment performance relative to the two securities indices.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection considered a number of factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses. Data considered included comparisons of the advisory fee and overall Fund expenses to median and average fees and expenses charged to a category of mutual funds selected by a mutual fund analyst firm and to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, comparative expense data for a second representative share class, and related data. Comparative fee and expense data considered by the Trustees showed that the Fund’s advisory fee level was slightly lower than the median and comparable to the average fee level for the fund category and that the level of total expense for a representative share class was slightly lower than the category median and somewhat lower than its average. Peer group data showed that the Fund’s advisory fee level was comparable to the peer group median, and that the total expense level for a representative share class of the Fund was comparable to the peer group median. Data for a second representative share class showed that the Fund’s total expense ratio was comparable to or lower than competing funds for which data was available.
Certified Annual Report 37
OTHER INFORMATION, CONTINUED | ||
Thornburg International Value Fund | September 30, 2014 (Unaudited) |
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels of these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by the Fund and other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
38 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 39
This page intentionally left blank.
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income 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
42 This page is not part of the Annual Report
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH078 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
Best Multi-Cap Growth 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 11/30/13. In 2014, Class R5 shares won for the three-year period ended 11/30/13 among 432 funds. The Fund did not win the award for other time periods.
The information presented on the following pages was current as of September 30, 2014. 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, volatility, and political and economic risks. 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 objective. 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 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 1000 Index – This index 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 – This index 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.
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.
Multiple – A valuation multiple reflects an investment’s market value relative to some key metric. Price to earnings ratio (P/E) is a commonly used multiple. It’s calculated by dividing a stock’s price by the company’s earnings per share.
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
Portfolio Managers
Tim Cunningham, CFA Greg Dunn
The Fund seeks long-term growth of capital by investing in equity securities selected for their growth potential.
The Fund expects to invest primarily in domestic equity securities (primarily common stocks) selected for their growth potential. However, the Fund may own a variety of securities, including foreign equity securities, partnership interests, and domestic and foreign debt obligations. The Fund may also invest in developing countries.
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 typically invests in a limited number of stocks and diversifies those investments among three segments of the growth fund universe: consistent growth companies, growth industry leaders, and emerging growth companies. By limiting the number of securities, the Fund’s managers can evaluate each stock in greater depth. We believe that diversifying among three growth baskets further mitigates risk because each of these segments typically reacts differently than the equity markets as a whole.
How does the stock selection process work? Before adding a stock to the Fund’s portfolio, 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 we have access to the best of Wall Street’s analysis, we 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.
4 This page is not part of the Annual Report
Key Portfolio Attributes
As of September 30, 2014
Portfolio P/E Trailing 12-months* | 30.7x | |||
Portfolio Price to Cash Flow* | 19.7x | |||
Portfolio Price to Book Value* | 4.8x | |||
Median Market Cap* | $ | 7.6 B | ||
7-Year Beta (A Shares vs. Russell 3k G Index)* | 1.15 | |||
Number of Companies | 55 |
* Source: FactSet
Market Capitalization Exposure As of September 30, 2014 |
Basket Structure
As of September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
A Shares (Incep: 12/27/00) | ||||||||||||||||||||
Without sales charge | 8.58 | % | 25.64 | % | 14.20 | % | 9.48 | % | 6.08 | % | ||||||||||
With sales charge | 3.69 | % | 23.73 | % | 13.16 | % | 8.98 | % | 5.73 | % | ||||||||||
Russell 3000 Growth Index (Since: 12/27/00) | 17.87 | % | 22.41 | % | 16.43 | % | 8.95 | % | 4.00 | % |
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.
Stocks Contributing and Detracting
For the Year Ended September 30, 2014
TOP CONTRIBUTORS | TOP DETRACTORS | |
Gilead Sciences, Inc. | CommVault Systems, Inc. | |
Monster Beverage Corp. | Gigamon, Inc. | |
Alexion Pharmaceuticals, Inc. | Financial Engines, Inc. | |
Google, Inc. | RetailMeNot, Inc. | |
Charles Schwab Corp. | J.G. Wentworth Co. | |
Source: FactSet |
This page is not part of the Annual Report 5
Thornburg Core Growth Fund
September 30, 2014
7 | ||||
9 | ||||
12 | ||||
14 | ||||
16 | ||||
17 | ||||
24 | ||||
26 | ||||
27 | ||||
28 | ||||
29 | ||||
32 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semi-annual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg Core Growth Fund | September 30, 2014 (Unaudited) |
October 21, 2014
Dear Fellow Shareholder,
For the fiscal year ended September 30, 2014, the Thornburg Core Growth Fund returned 8.58% for the Class A shares, at net asset value (NAV), underperforming its benchmark, the Russell 3000 Growth Index, which returned 17.87%. On September 30, 2014, the NAV per share of the Class A shares was $26.44.
After several very strong years for equities and in particular for the Thornburg Core Growth Fund, we are disappointed to say the Fund struggled through a difficult fiscal year 2014. Although the broad market indices have pushed higher this year in a linear fashion, volatility and risk aversion have crept into the small-cap and mid-cap growth universe of stocks. This is evident when one compares indices over the period. Large caps outperformed small caps by a wide margin, with the Russell 1000 Growth Index returning 19.2%, compared to the Russell 2000 Growth Index’s return of only 3.8%. This is a 15.4% difference between small-cap and large-cap growth stocks! This has been by far the worst 12-month period (on a quarterly rolling basis) for small-cap growth stocks relative to large-cap growth stocks since the Core Growth Fund was launched 14 years ago, creating a headwind for our multi-cap strategy. Fund investments in initial public offerings contributed 1.7% to performance for the fiscal year ended September 30, 2014.
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.
As a concentrated active portfolio, the Fund has been through periods where its approach seems out of favor. And we have made more stock picking mistakes than we would like. Since inception, the Fund has recorded 52 trailing twelve-month periods on a quarterly basis. It has underperformed the benchmark index 15 periods and outperformed 37 periods. During tough times such as these, we are reminded of an old traders’ quote: “It’s ok to be wrong; it’s unforgivable to stay wrong.” We try to avoid “staying wrong” by quickly moving on from our mistakes, and upgrading the portfolio with fresh, new ideas. We like to manage the portfolio with a sense of urgency, which gets heightened during tough periods, and this time has been no different. The majority of our underperformance occurred during the March to May 2014 time period. That was the period of highest activity, as we moved on from stocks about which we were wrong and aggressively took advantage of the dislocation in growth stocks to buy high-quality companies when they were out of favor.
As always, stock selection drives performance. On a stock-by-stock basis, the Fund’s top contributors included Gilead Sciences, Monster Beverage Corporation, Alexion Pharmaceutical, Google Inc., and Charles Schwab Corp.
Gilead Sciences is a long-term portfolio holding (12 years!) and once again had a great year. Gilead is a research-based biopharmaceutical company that discovers, develops, and commercializes drugs. Its primary focus historically has been on HIV/AIDS, where it has developed and commercialized the leading HIV treatment. The more recent driver of performance has been the emergence of their Hepatitis C treatment, Sovaldi. The drug has represented a step change in Hepatitis C treatment, essentially curing patients. Gilead has been an amazing story, growing from our original purchase price of $4.60 (adjusted to account for stock-splits), to over $100 today.
Monster Beverage sells energy drinks and other beverages globally. It received a boost in August 2014 when Coke acquired a 17% position in the company and the two exchanged some businesses. Monster took over Coke’s energy-drink business, and Coke got Monster’s non-energy-drink business. We like the deal because it will allow Monster to utilize Coke’s world-class distribution system, particularly outside the U.S., where Monster has struggled. The deal also seems to position Coke as a likely acquirer of Monster at some point in the future, creating a valuation floor for the stock.
Alexion Pharmaceuticals researches and commercializes treatments for life-threatening and ultra-rare ‘Orphan’ diseases. Alexion’s primary product is Soliris (Eculizumab), a first-in-class terminal complement inhibitor currently approved in more than 40 countries as a treatment for patients with PNH (paroxysmal nocturnal hemoglobinuria). Alexion is working to investigate Soliris and additional product candidates as treatments for patients with other rare and severe diseases. Over the past year, Alexion has consistently exceeded consensus growth expectations for both revenues and earnings per share.
During the fiscal year, Google solidified its position as a leader in online advertising. Google’s search advertising revenues continue to grow, especially outside the United States. In the U.S., growth was boosted, in particular, by strong advertising sales on Google’s YouTube site. Video ads on YouTube are ground zero in the battle for brand advertising dollars. Recently, the television brand-advertising ecosystem has started to fray, and online leaders such as Google stand to benefit.
Charles Schwab has become an attractive investment on increasing short- to medium-term interest rates. Schwab has a money market fund business, mainly managing the cash portion of brokerage accounts. Short-term yields have dropped well below Schwab’s fee level, forcing Schwab to waive their fees to ensure that investors don’t earn a negative return. This revenue is essentially pure margin, so it has
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED
Thornburg Core Growth Fund | September 30, 2014 (Unaudited) |
an outsized impact on earnings. When interest rates eventually rise, it will be a great earnings tailwind. In the meantime, Schwab has been delivering strong results, leading to positive earnings revisions and support for a higher-valuation multiple from investors.
Top detractors from performance included Commvault Systems, Gigamon, Inc., Financial Engines, and J.G. Wentworth Company.
Commvault Systems is a software company whose product is designed to protect, manage and access data throughout its lifecycle. We liked the secular positive influences of data growth, cloud adoption, and growth of virtual environments, but we underestimated competition and their ability to maintain a high growth rate as their company grew and they expanded distribution. Growth rates quickly slowed and it became apparent that the opportunity was not what we thought it would be. We sold our position.
Gigamon, Inc. is a technology hardware company whose products are utilized within a network to help manage traffic. This was a high-risk emerging-growth stock, and we sized it accordingly. But growth deteriorated significantly, causing the stock to gap down. We sold immediately. The stock has continued to trade lower.
Financial Engines acts as an automated financial advisor to help its clients manage their employer-sponsored 401(k) plans. Financial Engines helps to manage its clients’ money in a very efficient but individual way by using computer algorithms, not relying on many people to tailor the individual portfolios. High valuation, market worries, and a slight deceleration in the company’s growth rate have caused the shares to underperform versus comparable index returns. We continue to believe in our investment thesis; Financial Engines provides customers a unique and valuable service, it is the dominant player in its market at more than twice the size of the next largest competitor, and has ample room to grow share within the expanding 401(k) management marketplace.
RetailMeNot operates websites and mobile applications that consumers use to search for coupons to leading retailers. A search algorithm change by Google negatively impacted the amount of traffic to RetailMeNot’s website. This caused the company to reduce earnings guidance for the full year, and we sold the stock, given the fundamental deterioration in growth prospects.
J.G. Wentworth was a recent initial public offering we purchased at very cheap levels. The company had carved out a very nice niche business as the largest purchaser of structured settlements. However, the company’s first two public-company quarterly reports concerned us. Total payments purchased saw a significant deceleration. And the company announced the Consumer Financial Protection Bureau had launched a broad investigation of their business. That led us to sell the stock.
In March 2014, we were proud to have accepted a Lipper Award for delivering the best risk-adjusted return over a trailing three-year period in the Fund’s multi-cap growth category. During the most recent few months, when near-term results have disappointed, the award is a nice reminder of the long-term focus of our strategy and the results that the consistent application of our process and philosophy has delivered over the years. We will continue to strive to construct a portfolio of growth stocks with strong businesses, attractive growth prospects, and reasonable valuations.
Thank you for investing alongside us in the 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.
8 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Core Growth Fund | September 30, 2014 |
Top Ten Equity Holdings
As of 9/30/14
Visa, Inc. | 3.2 | % | ||
Amazon.com, Inc. | 3.0 | % | ||
Las Vegas Sands Corp. | 2.8 | % | ||
Affiliated Managers Group, Inc. | 2.7 | % | ||
Gilead Sciences, Inc. | 2.5 | % | ||
Catamaran Corp. | 2.4 | % | ||
Charles Schwab Corp. | 2.4 | % | ||
Perrigo Co. plc | 2.3 | % | ||
Stericycle, Inc. | 2.1 | % | ||
Alexion Pharmaceuticals, Inc. | 2.1 | % |
Summary of Industry Group Exposure
As of 9/30/14
Software & Services | 23.0 | % | ||
Retailing | 13.8 | % | ||
Diversified Financials | 11.8 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 10.1 | % | ||
Consumer Services | 7.9 | % | ||
Health Care Equipment & Services | 4.0 | % | ||
Commercial & Professional Services | 3.8 | % | ||
Technology Hardware & Equipment | 3.8 | % | ||
Automobiles & Components | 2.8 | % | ||
Capital Goods | 2.8 | % | ||
Food & Staples Retailing | 2.0 | % | ||
Food, Beverage & Tobacco | 2.0 | % | ||
Media | 1.8 | % | ||
Energy | 1.3 | % | ||
Other Assets & Liabilities | 9.1 | % |
Summary of Country Exposure*
As of 9/30/14 (percent of equity holdings)
United States | 90.4 | % | ||
Ireland | 5.8 | % | ||
United Kingdom | 1.5 | % | ||
Israel | 1.3 | % | ||
Canada | 1.0 | % |
* | The country exposure of each equity holding is determined by the Fund’s Advisor based on various factors, including the location of the issuer’s head office, the issuer’s jurisdiction of incorporation and the country from which a majority of the issuer’s revenue is derived. |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
COMMON STOCK — 90.93% | ||||||||
AUTOMOBILES & COMPONENTS — 2.82% | ||||||||
Auto Components — 2.82% | ||||||||
Delphi Automotive plc | 203,000 | $ | 12,452,020 | |||||
Gentex Corp. | 475,000 | 12,715,750 | ||||||
|
| |||||||
25,167,770 | ||||||||
|
| |||||||
CAPITAL GOODS — 2.82% | ||||||||
Electrical Equipment — 1.60% | ||||||||
Acuity Brands, Inc. | 121,528 | 14,305,061 | ||||||
Machinery — 1.22% | ||||||||
a Proto Labs, Inc. | 156,908 | 10,826,652 | ||||||
|
| |||||||
25,131,713 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 3.84% | ||||||||
Commercial Services & Supplies — 2.14% | ||||||||
a Stericycle, Inc. | 163,922 | 19,106,749 | ||||||
Professional Services — 1.70% | ||||||||
a Verisk Analytics, Inc. | 249,871 | 15,214,645 | ||||||
|
| |||||||
34,321,394 | ||||||||
|
| |||||||
CONSUMER SERVICES — 7.87% | ||||||||
Diversified Consumer Services — 1.78% | ||||||||
a LifeLock, Inc. | 1,110,200 | 15,864,758 | ||||||
Hotels, Restaurants & Leisure — 6.09% | ||||||||
Las Vegas Sands Corp. | 399,398 | 24,846,549 | ||||||
a MGM Resorts International | 608,200 | 13,854,796 |
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
a Norwegian Cruise Line Holdings Ltd. | 434,641 | $ | 15,655,769 | |||||
|
| |||||||
70,221,872 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 11.86% | ||||||||
Capital Markets — 10.32% | ||||||||
a Affiliated Managers Group, Inc. | 118,474 | 23,737,451 | ||||||
Charles Schwab Corp. | 719,594 | 21,148,868 | ||||||
Financial Engines, Inc. | 401,727 | 13,745,089 | ||||||
a Northstar Asset Management Group, Inc. | 624,762 | 11,508,116 | ||||||
Virtus Investment Partners, Inc. | 49,756 | 8,642,617 | ||||||
a WisdomTree Investments, Inc. | 1,173,063 | 13,349,457 | ||||||
Consumer Finance — 1.54% | ||||||||
a Portfolio Recovery Associates, Inc. | 263,903 | 13,783,653 | ||||||
|
| |||||||
105,915,251 | ||||||||
|
| |||||||
ENERGY — 1.27% | ||||||||
Oil, Gas & Consumable Fuels — 1.27% | ||||||||
a Oasis Petroleum, Inc. | 272,175 | 11,379,637 | ||||||
|
| |||||||
11,379,637 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 2.03% | ||||||||
Food & Staples Retailing — 2.03% | ||||||||
a Sprouts Farmers Market, Inc. | 622,138 | 18,085,552 | ||||||
|
| |||||||
18,085,552 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 2.01% | ||||||||
Beverages — 2.01% | ||||||||
a Monster Beverage Corp. | 195,700 | 17,939,819 | ||||||
|
| |||||||
17,939,819 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 3.96% | ||||||||
Health Care Equipment & Supplies — 0.94% | ||||||||
a Novadaq Technologies, Inc. | 663,135 | 8,415,183 | ||||||
Health Care Providers & Services — 2.43% | ||||||||
a Catamaran Corp. | 513,200 | 21,631,380 | ||||||
Health Care Technology — 0.59% | ||||||||
a HMS Holdings Corp. | 279,773 | 5,273,721 | ||||||
|
| |||||||
35,320,284 | ||||||||
|
| |||||||
MEDIA — 1.81% | ||||||||
Media — 1.81% | ||||||||
a Sirius XM Holdings, Inc. | 4,635,400 | 16,177,546 | ||||||
|
| |||||||
16,177,546 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 10.06% | ||||||||
Biotechnology — 6.19% | ||||||||
a Alexion Pharmaceuticals, Inc. | 111,704 | 18,522,757 | ||||||
a Biogen Idec, Inc. | 42,369 | 14,016,089 | ||||||
a Gilead Sciences, Inc. | 213,256 | 22,701,101 | ||||||
Pharmaceuticals — 3.87% | ||||||||
a Actavis plc | 59,693 | 14,402,727 | ||||||
Perrigo Co. plc | 134,000 | 20,125,460 | ||||||
|
| |||||||
89,768,134 | ||||||||
|
| |||||||
RETAILING — 13.84% | ||||||||
Distributors — 2.01% | ||||||||
a LKQ Corp. | 675,459 | 17,960,455 | ||||||
Internet & Catalog Retail — 7.13% | ||||||||
a Amazon.com, Inc. | 84,331 | 27,191,687 | ||||||
a Netflix, Inc. | 24,179 | 10,909,081 | ||||||
a priceline.com, Inc. | 13,272 | 15,376,674 | ||||||
a Tripadvisor, Inc. | 111,042 | 10,151,460 | ||||||
Multiline Retail — 2.04% | ||||||||
a Dollar Tree, Inc. | 325,198 | 18,233,852 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
Specialty Retail — 2.66% | ||||||||
American Eagle Outfitters, Inc. | 755,375 | $ | 10,968,045 | |||||
a Ulta Salon, Cosmetics & Fragrance, Inc. | 107,994 | 12,761,651 | ||||||
|
| |||||||
123,552,905 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 22.97% | ||||||||
Information Technology Services — 6.35% | ||||||||
a Cardtronics, Inc. | 411,164 | 14,472,973 | ||||||
a Vantiv, Inc. Class A | 443,837 | 13,714,563 | ||||||
Visa, Inc. | 133,746 | 28,537,384 | ||||||
Internet Software & Services — 8.27% | ||||||||
a eBay, Inc. | 255,004 | 14,440,877 | ||||||
a Google, Inc. Class A | 19,376 | 11,401,032 | ||||||
a Google, Inc. Class C | 22,566 | 13,028,706 | ||||||
a LinkedIn Corp. | 54,277 | 11,278,218 | ||||||
a VeriSign, Inc. | 244,749 | 13,490,565 | ||||||
a Yelp, Inc. | 149,969 | 10,235,384 | ||||||
Software — 8.35% | ||||||||
a ANSYS, Inc. | 238,200 | 18,024,594 | ||||||
a Bottomline Technologies (DE), Inc. | 195,892 | 5,404,660 | ||||||
a Fleetmatics Group plc | 404,643 | 12,341,612 | ||||||
Solera Holdings, Inc. | 303,739 | 17,118,730 | ||||||
a Splunk, Inc. | 203,129 | 11,245,221 | ||||||
a Workday, Inc. | 125,800 | 10,378,500 | ||||||
|
| |||||||
205,113,019 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 3.77% | ||||||||
Communications Equipment — 0.95% | ||||||||
a CalAmp Corp. | 482,381 | 8,499,553 | ||||||
Electronic Equipment, Instruments & Components — 1.66% | ||||||||
a IPG Photonics Corp. | 215,652 | 14,832,544 | ||||||
Technology, Hardware, Storage & Peripherals — 1.16% | ||||||||
a Stratasys Ltd. | 85,770 | 10,359,301 | ||||||
|
| |||||||
33,691,398 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $643,893,981) | 811,786,294 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 8.06% | ||||||||
Ameren Illinois Co., 0.20%, 10/1/2014 | $ | 10,000,000 | 10,000,000 | |||||
Bank of New York Tri-Party Repurchase Agreement 0.23% dated 9/30/2014 due 10/1/2014, repurchase price $13,000,083 collateralized by 17 corporate debt securities, having an average coupon of 5.08%, a minimum credit rating of BBB-, maturity dates from 9/15/2016 to 5/15/2042, and having an aggregate market value of $13,890,936 at 9/30/2014 | 13,000,000 | 13,000,000 | ||||||
Hitachi America, Ltd., 0.32%, 10/6/2014 | 13,000,000 | 12,999,422 | ||||||
Kansas City Power & Light, 0.22%, 10/1/2014 | 10,000,000 | 10,000,000 | ||||||
Kroger Co., 0.20%, 10/1/2014 | 13,000,000 | 13,000,000 | ||||||
Spectra Energy Partners, 0.25%, 10/6/2014 | 13,000,000 | 12,999,549 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $71,998,971) | 71,998,971 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 98.99% (Cost $715,892,952) | $ | 883,785,265 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.01% | 9,011,807 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 892,797,072 | ||||||
|
|
Footnote Legend
a | Non-income producing. |
See notes to financial statements.
Certified Annual Report 11
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Core Growth Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $715,892,952) (Note 2) | $ | 883,785,265 | ||
Cash | 53,154 | |||
Receivable for investments sold | 4,943,991 | |||
Receivable for fund shares sold | 7,465,001 | |||
Dividends receivable | 126,118 | |||
Interest receivable | 83 | |||
Prepaid expenses and other assets | 17,094 | |||
|
| |||
Total Assets | 896,390,706 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 1,447,961 | |||
Payable for fund shares redeemed | 1,030,151 | |||
Payable to investment advisor and other affiliates (Note 3) | 819,485 | |||
Accounts payable and accrued expenses | 296,037 | |||
|
| |||
Total Liabilities | 3,593,634 | |||
|
| |||
NET ASSETS | $ | 892,797,072 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Net Investment Loss | $ | (15,975,980 | ) | |
Net unrealized appreciation on investments | 167,892,313 | |||
Accumulated net realized gain (loss) | (324,202,143 | ) | ||
Net capital paid in on shares of beneficial interest | 1,065,082,882 | |||
|
| |||
$ | 892,797,072 | |||
|
|
12 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 |
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($277,098,945 applicable to 10,481,481 shares of beneficial interest outstanding - Note 4) | $ | 26.44 | ||
Maximum sales charge, 4.50% of offering price | 1.25 | |||
|
| |||
Maximum offering price per share | $ | 27.69 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($200,663,948 applicable to 8,471,558 shares of beneficial interest outstanding - Note 4) | $ | 23.69 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($251,122,497 applicable to 9,001,888 shares of beneficial interest outstanding - Note 4) | $ | 27.90 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($90,788,318 applicable to 3,440,434 shares of beneficial interest outstanding - Note 4) | $ | 26.39 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($11,305,514 applicable to 425,927 shares of beneficial interest outstanding - Note 4) | $ | 26.54 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($61,817,850 applicable to 2,218,316 shares of beneficial interest outstanding - Note 4) | $ | 27.87 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 13
STATEMENT OF OPERATIONS | ||
Thornburg Core Growth Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Dividend income | $ | 2,969,710 | ||
Interest income | 127,816 | |||
|
| |||
Total Income | 3,097,526 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 7,801,845 | |||
Administration fees (Note 3) | ||||
Class A Shares | 389,511 | |||
Class C Shares | 254,565 | |||
Class I Shares | 112,300 | |||
Class R3 Shares | 124,059 | |||
Class R4 Shares | 13,962 | |||
Class R5 Shares | 32,572 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 779,068 | |||
Class C Shares | 2,037,055 | |||
Class R3 Shares | 496,173 | |||
Class R4 Shares | 27,692 | |||
Transfer agent fees | ||||
Class A Shares | 408,732 | |||
Class C Shares | 238,409 | |||
Class I Shares | 166,555 | |||
Class R3 Shares | 260,415 | |||
Class R4 Shares | 37,054 | |||
Class R5 Shares | 209,148 | |||
Registration and filing fees | ||||
Class A Shares | 3,650 | |||
Class C Shares | 24,060 | |||
Class I Shares | 25,150 | |||
Class R3 Shares | 19,351 | |||
Class R4 Shares | 19,738 | |||
Class R5 Shares | 13,427 | |||
Custodian fees (Note 3) | 111,205 | |||
Professional fees | 63,440 | |||
Accounting fees | 22,615 | |||
Trustee fees | 28,212 | |||
Other expenses | 121,260 | |||
|
| |||
Total Expenses | 13,841,223 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (613,994 | ) | ||
|
| |||
Net Expenses | 13,227,229 | |||
|
| |||
Net Investment Loss | $ | (10,129,703 | ) | |
|
|
14 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Core Growth Fund | Year Ended September 30, 2014 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | $ | 140,640,435 | ||
Net change in unrealized appreciation (depreciation) of investments | (63,137,038 | ) | ||
|
| |||
Net Realized and Unrealized Gain | 77,503,397 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 67,373,694 | ||
|
|
See notes to financial statements.
Certified Annual Report 15
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Core Growth Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income (loss) | $ | (10,129,703 | ) | $ | (7,467,201 | ) | ||
Net realized gain (loss) on investments | 140,640,435 | 89,533,234 | ||||||
Net unrealized appreciation (depreciation) on investments | (63,137,038 | ) | 91,899,455 | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 67,373,694 | 173,965,488 | ||||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (25,983,897 | ) | (4,076,655 | ) | ||||
Class C Shares | 3,863,171 | (11,865,291 | ) | |||||
Class I Shares | 43,839,713 | 35,348,688 | ||||||
Class R3 Shares | (12,906,695 | ) | (33,481,490 | ) | ||||
Class R4 Shares | 71,357 | (1,324,992 | ) | |||||
Class R5 Shares | (5,268,662 | ) | (12,974,765 | ) | ||||
|
|
|
| |||||
Net Increase in Net Assets | 70,988,681 | 145,590,983 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 821,808,391 | 676,217,408 | ||||||
|
|
|
| |||||
End of Year | $ | 892,797,072 | $ | 821,808,391 | ||||
|
|
|
|
See notes to financial statements.
16 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Core Growth Fund | September 30, 2014 |
NOTE 1 – ORGANIZATION
Thornburg Core Growth Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of eighteen separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund seeks long-term capital appreciation by investing in equity securities selected for their growth potential.
The Fund currently offers six classes of shares of beneficial interest: Class A, Class C, Institutional Class (“Class I”), and Retirement Classes (“Class R3,” “Class R4,” and “Class R5”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, (iii) Class I shares are sold at net asset value without a sales charge at the time of purchase 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 may bear a service fee, 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 allocable 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 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. 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 reported by NASDAQ are valued at the NASDAQ official closing price. 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. 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 when 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, 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. For example, on days when market volatility
Certified Annual Report 17
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 |
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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of 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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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:
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 |
FAIR VALUE MEASUREMENTS AT SEPTEMBER 30, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 811,786,294 | $ | 811,786,294 | $ | — | $ | — | ||||||||
Short Term Investments | 71,998,971 | — | 71,998,971 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 883,785,265 | $ | 811,786,294 | $ | 71,998,971 | $ | — |
* | 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 Accounting Standards Update No. 2011-04, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
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 of securities 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, 2014, 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 by entering into repurchase agreements under which the Fund delivers cash to a counterparty, the counterparty delivers securities as collateral, and the Fund is obligated to resell that collateral to the counterparty at an agreed upon price at the maturity date of the repurchase agreement. Securities pledged as collateral under repurchase agreements are held in custody with a third party custodian until maturity of the repurchase agreement. Provisions in the agreements
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 |
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 counterparty’s obligations. Under certain circumstances, in the event of default or bankruptcy by the counterparty 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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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.
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, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $92,120 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $16,533 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, 2014, 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 and for shareholder services.
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, 2014, are set forth in the Statement of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class I, Class R3, Class R4, and Class R5 expenses do not exceed 0.99%, 1.50%, 1.40%, and 0.99%, respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually waived or reimbursed certain class specific expenses, administrative fees, and distribution fees of $86,225 for Class I shares, $294,568 for Class R3 shares, $41,572 for Class R4 shares, and $191,629 for Class R5 shares.
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 |
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, 2014, 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 and is included as Trustee Fees on the Statement of Operations.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 2,726,720 | $ | 72,039,092 | 2,284,279 | $ | 50,203,570 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (3,724,292 | ) | (98,022,989 | ) | (2,627,034 | ) | (54,280,225 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (997,572 | ) | $ | (25,983,897 | ) | (342,755 | ) | $ | (4,076,655 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 1,473,844 | $ | 35,295,012 | 860,568 | $ | 16,907,911 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (1,329,377 | ) | (31,431,841 | ) | (1,543,834 | ) | (28,773,202 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 144,467 | $ | 3,863,171 | (683,266 | ) | $ | (11,865,291 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 4,103,740 | $ | 115,390,413 | 3,194,049 | $ | 69,306,485 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (2,581,075 | ) | (71,550,700 | ) | (1,545,666 | ) | (33,957,797 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,522,665 | $ | 43,839,713 | 1,648,383 | $ | 35,348,688 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 1,118,230 | $ | 29,400,891 | 1,081,265 | $ | 22,913,573 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (1,605,481 | ) | (42,307,586 | ) | (2,720,256 | ) | (56,395,063 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (487,251 | ) | $ | (12,906,695 | ) | (1,638,991 | ) | $ | (33,481,490 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 206,135 | $ | 5,433,989 | 227,815 | $ | 4,772,964 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (200,662 | ) | (5,362,632 | ) | (294,538 | ) | (6,097,956 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 5,473 | $ | 71,357 | (66,723 | ) | $ | (1,324,992 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 821,533 | $ | 22,904,484 | 669,413 | $ | 14,671,998 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (1,034,832 | ) | (28,173,146 | ) | (1,312,898 | ) | (27,646,763 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | (213,299 | ) | $ | (5,268,662 | ) | (643,485 | ) | $ | (12,974,765 | ) | ||||||
|
|
|
|
|
|
|
|
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 |
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $860,289,379 and $869,109,901, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 716,426,152 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 193,333,422 | ||
Gross unrealized depreciation on a tax basis | (25,974,309 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 167,359,113 | ||
|
|
At September 30, 2014, the Fund had deferred tax basis late-year ordinary investment losses of $7,626,606. For tax purposes such losses will be reflected in the year ending September 30, 2015.
At September 30, 2014, the Fund did not have any undistributed tax basis net ordinary investment income or undistributed tax basis capital gains.
The Fund utilized $141,106,497 of capital loss carryforwards during the year ended September 30, 2014.
At September 30, 2014, 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 | $ | 78,659,907 | ||
2018 | 253,358,410 | |||
|
| |||
$ | 332,018,317 | |||
|
|
In order to account for permanent book/tax differences, the Fund decreased net capital paid in on shares of beneficial interest by $8,349,374 and decreased distribution in excess of net investment income by $8,349,374. This reclassification has no impact on the net asset value of the Fund. This reclassification resulted from nondeductible net operating losses.
The Fund did not pay any distributions during the years ended September 30, 2014 and September 30, 2013.
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, 2014, 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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
22 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 23
Thornburg Core Growth 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 (LOSS) | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS | 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 (%)(a) | PORTFOLIO (%)(a) | NET ASSETS AT END OF YEAR (THOUSANDS) | |||||||||||||||||||||||||||||||||||||
CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 24.35 | (0.28) | 2.37 | 2.09 | — | — | — | $ | 26.44 | (1.06 | ) | 1.40 | 1.40 | 1.40 | 8.58 | 100.62 | $ | 277,099 | |||||||||||||||||||||||||||||||||
2013(b) | $ | 19.11 | (0.21) | 5.45 | 5.24 | — | — | — | $ | 24.35 | (1.01 | ) | 1.45 | 1.45 | 1.45 | 27.42 | 91.92 | $ | 279,483 | |||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 21.98 | (0.43) | 2.14 | 1.71 | — | — | — | $ | 23.69 | (1.81 | ) | 2.14 | 2.14 | 2.14 | 7.78 | 100.62 | $ | 200,664 | |||||||||||||||||||||||||||||||||
2013 | $ | 17.38 | (0.34) | 4.94 | 4.60 | — | — | — | $ | 21.98 | (1.76 | ) | 2.20 | 2.20 | 2.20 | 26.47 | 91.92 | $ | 182,999 | |||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 25.59 | (0.18) | 2.49 | 2.31 | — | — | — | $ | 27.90 | (0.65 | ) | 0.99 | 0.99 | 1.03 | 9.03 | 100.62 | $ | 251,122 | |||||||||||||||||||||||||||||||||
2013 | $ | 19.99 | (0.12) | 5.72 | 5.60 | — | — | — | $ | 25.59 | (0.55 | ) | 0.99 | 0.99 | 1.02 | 28.01 | 91.92 | $ | 191,358 | |||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 24.33 | (0.31) | 2.37 | 2.06 | — | — | — | $ | 26.39 | (1.16 | ) | 1.50 | 1.50 | 1.80 | 8.47 | 100.62 | $ | 90,788 | |||||||||||||||||||||||||||||||||
2013 | $ | 19.11 | (0.22) | 5.44 | 5.22 | — | — | — | $ | 24.33 | (1.06 | ) | 1.50 | 1.50 | 1.79 | 27.32 | 91.92 | $ | 95,545 | |||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 24.44 | (0.28) | 2.38 | 2.10 | — | — | — | $ | 26.54 | (1.06 | ) | 1.40 | 1.40 | 1.77 | 8.59 | 100.62 | $ | 11,306 | |||||||||||||||||||||||||||||||||
2013 | $ | 19.18 | (0.20) | 5.46 | 5.26 | — | — | — | $ | 24.44 | (0.96 | ) | 1.40 | 1.40 | 1.79 | 27.42 | 91.92 | $ | 10,277 | |||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 25.56 | (0.18) | 2.49 | 2.31 | — | — | — | $ | 27.87 | (0.65 | ) | 0.99 | 0.99 | 1.28 | 9.04 | 100.62 | $ | 61,818 | |||||||||||||||||||||||||||||||||
2013 | $ | 19.97 | (0.12) | 5.71 | 5.59 | — | — | — | $ | 25.56 | (0.55 | ) | 0.99 | 0.99 | 1.12 | 27.99 | 91.92 | $ | 62,146 | |||||||||||||||||||||||||||||||||
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 |
(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.
24 Certified Annual Report | Certified Annual Report 25 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Core Growth Fund
To the Trustees and Shareholders of
Thornburg Core Growth Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Core Growth Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
26 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Core Growth Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
CLASS A SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 991.70 | $ | 7.15 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.89 | $ | 7.24 | ||||||
CLASS C SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 987.90 | $ | 10.73 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.28 | $ | 10.87 | ||||||
CLASS I SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 993.90 | $ | 4.95 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
CLASS R3 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 991.40 | $ | 7.49 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.59 | ||||||
CLASS R4 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 991.40 | $ | 6.99 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.05 | $ | 7.08 | ||||||
CLASS R5 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 993.90 | $ | 4.95 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.43%; C: 2.15%; I: 0.99%; R3: 1.50%; R4: 1.40%; R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 27
INDEX COMPARISON | ||
Thornburg Core Growth Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
Class A Shares (Incep: 12/27/00) | 3.69 | % | 23.73 | % | 13.16 | % | 8.98 | % | 5.73 | % | ||||||||||
Class C Shares (Incep: 12/27/00) | 6.78 | % | 24.69 | % | 13.35 | % | 8.66 | % | 5.24 | % | ||||||||||
Class I Shares (Incep: 11/3/03) | 9.03 | % | 26.20 | % | 14.72 | % | 10.01 | % | 9.19 | % | ||||||||||
Class R3 Shares (Incep: 7/1/03) | 8.47 | % | 25.57 | % | 14.14 | % | 9.43 | % | 9.58 | % | ||||||||||
Class R4 Shares (Incep: 2/1/07) | 8.59 | % | 25.68 | % | 14.26 | % | — | 4.54 | % | |||||||||||
Class R5 Shares (Incep: 10/3/05) | 9.04 | % | 26.22 | % | 14.73 | % | — | 7.80 | % | |||||||||||
Russell 3000G Index (Since: 12/27/00) | 17.87 | % | 22.41 | % | 16.43 | % | 8.95 | % | 4.00 | % |
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 C, I, R3, R4, and R5 shares.
28 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Core Growth Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 29
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
30 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 31
OTHER INFORMATION | ||
Thornburg Core Growth Fund | September 30, 2014 (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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the quality of portfolio trade execution, the Advisor’s performance of accounting and other services under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the ten most recent calendar years, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to two broad-based securities indices, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year, comparing the Fund’s annualized returns to two mutual fund categories selected by independent
32 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 (Unaudited) |
mutual fund analyst firms and to two broad-based securities indices, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of estimated earnings growth, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the ten most recent calendar years considered by the Trustees in their evaluation showed that the Fund’s investment return for the most recent calendar year was higher than the return for the fund category and the two securities indices considered, that the Fund’s returns for the preceding nine calendar years exceeded or were comparable to the returns for each of the two indices in seven of the nine years, and that the Fund’s returns exceeded or were comparable to the average returns of the fund category in six of nine years. Noted quantitative data further showed that the Fund’s annualized investment returns fell in the fourth quartile of investment performance of the two fund categories for the one-year period ended with the second quarter of the current year, fell in the top decile of performance of the two fund categories for the three-year period, fell in the second quartile of performance of the first fund category for the five-year period and in the third quartile of performance of the second fund category for the five-year period, and fell in or near the top decile of performance of both categories for the ten-year period. Data presented to the Trustees also showed that the Fund’s annualized total return (net of expenses) since the Fund’s inception exceeded the annualized return of 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 performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection considered a number of factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses. Data considered included comparisons of the advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and other data. Comparative fee and expense data considered by the Trustees showed that the Fund’s advisory fee level was somewhat higher than the median and average fee levels for the fund category and that the level of total expense for a representative share class was somewhat higher than the median level and slightly higher than the average level for the category. Peer group data showed that the Fund’s advisory fee level and total expense level for the share class fell above the median figures for the fund peer group and within the range of levels for the group. The Trustees did not view the differences as significant in view of the other factors considered.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other
Certified Annual Report 33
OTHER INFORMATION, CONTINUED | ||
Thornburg Core Growth Fund | September 30, 2014 (Unaudited) |
funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
34 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 35
This page intentionally left blank.
36 This page is not part of the Annual Report
RETIREMENT AND EDUCATION ACCOUNTS
Thornburg Investment Management offers retirement and education savings accounts that can help you meet a variety of planning challenges. For account applications or further information on any of the accounts below, please call 1-800-847-0200 or go to www.thornburg.com/ira. Your financial advisor can help you determine which plan is right for you.
Individual Retirement Accounts
Individual Retirement Accounts (IRAs) provide a tax-advantaged means to save money for the future. For a detailed outline of the difference between retirement accounts, see www.thornburg.com/ira. Rollovers are available. Call 1-800-847-0200 for more information.
Traditional IRAs – Contributions to Traditional IRAs are tax deductible for eligible individuals, and withdrawals are taxed as additional ordinary income. You may contribute to an IRA if you receive compensation and are under 70 1⁄2, even if you are covered by an employer retirement plan. Deductible contributions are subject to certain qualifications. Please consult your tax advisor.
Roth IRAs – Under a Roth IRA, there is no tax deduction for contributions, but there is no income tax on qualified withdrawals. For a more detailed comparison of Traditional and Roth IRAs, please see our 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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
This page is not part of the Annual Report 37
38 This page is not part of the Annual Report
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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 39
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH082 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
Best International Multi-Cap Growth Fund
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). In 2014, Class I shares won for the three- and five-year periods ended 11/30/2013, among 312 and 276 funds, respectively. The fund was not eligible for other time periods.
The information presented on the following pages was current as of September 30, 2014. 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, volatility, and political and economic risks. 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, 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.
Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
From time to time, the Fund may invest in shares of companies through initial public offerings (IPOs). IPOs have the potential to produce substantial gains for the Fund. There is no assurance that the Fund will have continued access to profitable IPOs and, as the Fund’s assets grow, the impact of IPO investments may decline. Therefore, investors should not rely on these past gains as an indication of future performance.
Impact to performance of IPOs, as disclosed in the following letter to shareholders, is calculated using the performance on the first day of the IPO, assuming that the acquired shares are held to the end of the first day.
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 | ||
Class R6 | THGIX | 885-216-820 |
Glossary
MSCI All Country (AC) World ex-U.S. Growth Index – A market capitalization weighted index that includes growth companies in developed and emerging markets throughout the world, excluding the United States.
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 23 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
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.
Intrinsic Value – Intrinsic value reflects Thornburg’s estimate of a company’s value, encompassing our collective investment judgment.
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.
Multiple – A valuation multiple reflects an investment’s market value relative to some key metric. Price to earnings ratio (P/E) is a commonly used multiple. It’s calculated by dividing a stock’s price by the company’s earnings per share.
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
Portfolio Managers
Tim Cunningham, CFA Greg Dunn
The Fund seeks long-term growth of capital by investing in equity securities selected for their growth potential.
The Fund normally invests at least 75% of its assets in foreign securities or depository receipts of foreign securities. However, the Fund may own a variety of securities, including domestic equity securities, partnership interests, and debt obligations. The Fund may also invest in developing countries and in smaller companies with market capitalizations of less than $500 million.
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 well under 100 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, 2014
1 YR | 3 YRS | 5 YRS | SINCE INCEPTION | |||||||||||||
A Shares (Incep: 2/1/07) | ||||||||||||||||
Without sales charge | -4.46 | % | 13.65 | % | 13.80 | % | 7.38 | % | ||||||||
With sales charge | -8.77 | % | 11.92 | % | 12.75 | % | 6.74 | % | ||||||||
MSCI AC World ex-U.S. Growth Index (Since 2/1/07) | 4.29 | % | 11.81 | % | 6.78 | % | 2.20 | % |
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 maximum sales charge for Class A shares is 4.50%. The total annual fund operating expense of Class A shares is 1.41%, as disclosed in the most recent Prospectus.
4 This page is not part of the Annual Report
Key Portfolio Attributes
As of September 30, 2014
Portfolio P/E Trailing 12-months* | 21.7x | |||
Portfolio Price to Cash Flow* | 15.1x | |||
Portfolio Price to Book Value* | 4.0x | |||
Median Market Cap* | $ | 5.8 B | ||
5-Year Beta (A Shares vs. MSCI ACWI ex-US G)* | 0.80 | |||
Number of Companies | 57 |
* | Source: FactSet |
Market Capitalization Exposure
As of September 30, 2014
Basket Structure
As of September 30, 2014
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 All Country (AC) World ex-U.S. Growth Index or the competition. All of this is done with a goal of providing attractive returns over the long term.
Stocks Contributing and Detracting
For the Year Ended September 30, 2014
TOP CONTRIBUTORS | TOP DETRACTORS | |
Constellation Software, Inc. Valeant Pharmaceuticals International, Inc. Optimal Payments plc Baidu, Inc. Sponsored ADR Gildan Activewear, Inc. | Galaxy Entertainment Group Ltd. AVEVA Group plc boohoo.com plc F@N Communications, Inc. Foxtons Group plc |
Source: FactSet
This page is not part of the Annual Report 5
Thornburg International Growth Fund
September 30, 2014
TABLE OF CONTENTS | ||||
7 | ||||
9 | ||||
14 | ||||
16 | ||||
18 | ||||
19 | ||||
28 | ||||
30 | ||||
31 | ||||
32 | ||||
33 | ||||
36 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semi-annual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg International Growth Fund | September 30, 2014 (Unaudited) |
October 22, 2014
Dear Fellow Shareholder,
For the fiscal year ended September 30, 2014, the Thornburg International Growth Fund returned negative 4.46% (for the Class A shares, without inclusion of the sales charge), underperforming its benchmark, the MSCI All Country World ex-U.S. Growth Index, which returned 4.29%. On September 30, 2014, the net asset value (NAV) per share of the Class A shares was $19.10.
After several very strong years for equities and several years of marked outperformance by the Thornburg International Growth Fund, we are disappointed that the Fund has struggled through a tough fiscal 2014 significantly underperforming the benchmark. Starting roughly in March 2014 we saw significant pullbacks in a number of areas in the market including higher-growth stocks, software companies, Internet and e-commerce related names, and smaller capitalization stocks. These are all areas in which the Fund has significant exposure: areas we like that drove strong performance in the past.
Going into 2014 we realized that valuation multiples had expanded, as often happens during long-duration bull markets. We trimmed and sold a number of names, but clearly in hindsight we should have been more aggressive.
Now, after what we have labeled a “growth” correction, while there could still be some potential downside, many growth stocks have returned to attractive valuation levels, not on a relative basis, but on an absolute basis. We have used this opportunity to add to a number of existing holdings and establish several new positions at what we believe are attractive valuations. Two stocks we recently purchased on meaningful pullbacks are Grifols and Edenred.
Grifols is a global company, headquartered in Spain, that produces blood plasma derivatives. This is an oligopoly business with higher barriers to entry, strong margins, and high cash flow. We have owned this stock in the past and were happy to buy it again as it pulled back due to a combination of the broader market pullback and an operating hiccup.
Edenred is a French payments company primarily focused on issuing meal vouchers that employers provide to employees as a standard perquisite in many parts of the world. The company has negative working capital, as it collects payment from employers well ahead of the time at which employees actually spend the vouchers. We have liked the company and business model for years, but just found an entry point as the stock pulled back when key foreign currencies moved against it.
Turning back to the fiscal year, the key drivers of underperformance during the period in sector terms were in consumer discretionary, financials, and industrials. In all three areas, our stocks simply underperformed. The Fund outperformed in materials and energy. We were underweight in both sectors, which performed poorly during the period and the stocks we did own performed substantially better.
On a stock-by-stock basis, the Fund’s top contributors included Constellation Software, Valeant Pharmaceuticals, Optimal Payments, Baidu, and Gildan Activewear.
Constellation Software is the combination of a large number of small, diverse software companies mainly built via acquisition. They target mission-critical software providers, but often with small addressable markets. Typically these companies are too small for larger software companies or private equity to be interested in leaving the founders with no exit strategy other than to sell to Constellation at an attractive valuation. Given the diversification, Constellation tends to deliver steady growth.
Valeant is a multi-national specialty pharmaceutical company based in Montreal, Canada. Valeant develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of eye health, dermatology, branded generics and over the counter (OTC) drugs. Rather than focus on expensive and risky new drug development, Valeant acquires undermanaged businesses and drugs and drives operational efficiencies through cost cutting and revenue optimization.
Optimal Payments is an online payments processer based in the United Kingdom. During the period Optimal has posted strong growth driven by the shift from offline retail to online e-commerce. The company also acquired Meritas, a U.S.-based payments processor, giving them a better foothold in the U.S. from which to build.
Baidu is China’s largest search engine (much like Google in the United States). It has dominant share in traditional desktop computer search and has been building a stronger position in mobile (smartphones and tablets). As search continues to move from traditional PCs to mobile (tablets and smartphones), Baidu has found its sales accelerating from very fast mobile growth combined with increasing monetization of mobile uses (mobile rates are still well below desktop). We continue to think Baidu will see leading market share and better monetization of mobile uses.
Certified Annual Report 7 |
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 (Unaudited) |
Gildan manufacturers and markets activewear including basics and branded sportswear. Gildan’s outperformance has been driven by the company’s continued move into branded apparel as well as strength in their core business.
Top detractors from performance during the period included Galaxy Entertainment, AVEVA Group, boohoo.com, F@N Communications, and Foxtons Group.
Galaxy performed poorly during the quarter as the company’s casinos saw a noticeable slowdown in gaming revenues. The slowdown was likely driven by China’s lackluster economy and the continued crackdown on corruption which has reduced conspicuous consumption. We continue to believe in the long-term growth potential of gaming in Asia and particularly like Macau where the government has limited supply to six companies.
AVEVA provides engineering software for large, complex projects like oil rigs, ships, and refineries. AVEVA pre-announced weaker than expected results. This was particularly unexpected as AVEVA was in the process of rolling out a new, upgraded product. We sold the stock during the quarter.
boohoo is a U.K.-based online apparel retailer focused on fashion-forward 16-24 year olds, offering exclusive yet affordable apparel. boohoo sells clothing that is entirely its own label and its supply chain expertise allows it to have very short lead times, in some cases just six weeks from design to product. The company had its initial public offering in March and has underperformed as e-commerce names have come under pressure.
F@N Communications operates one of the largest affiliate advertising networks in Japan. During the period the company saw a deceleration of growth, and we sold the position.
Foxtons Group is a real estate broker based in the U.K., with a specific focus on London. The company does both home/apartment sales and rental. The stock has been weak with concerns about the U.K. housing market.
While we would certainly like to beat our benchmark every year and even every quarter, we strive to maintain outperformance over the long run. For us, successful investing is a marathon, not a sprint. The Fund was awarded two Lipper Fund Awards during the period for best risk-adjusted three- and five-year returns in the International Multicap Growth category, bringing the total number of Lipper Awards the Fund has won to four.
Thank you for investing alongside us in the 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.
8 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg International Growth Fund | September 30, 2014 |
Top Ten Equity Holdings
As of 9/30/14
MasterCard, Inc. | 3.5 | % | ||
Constellation Software, Inc. | 3.0 | % | ||
Wirecard AG | 2.8 | % | ||
Perrigo Co. plc | 2.8 | % | ||
Catamaran Corp. | 2.7 | % | ||
Optimal Payments plc | 2.5 | % | ||
Sands China Ltd. | 2.5 | % | ||
Valeant Pharmaceuticals International, Inc. | 2.5 | % | ||
Partners Group Holding AG | 2.5 | % | ||
Galaxy Entertainment Group Ltd. | 2.4 | % |
Summary of Industry Group Exposure
As of 9/30/14
Software & Services | 20.3 | % | ||
Diversified Financials | 13.3 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 11.3 | % | ||
Consumer Services | 7.0 | % | ||
Technology Hardware & Equipment | 6.1 | % | ||
Retailing | 5.8 | % | ||
Commercial & Professional Services | 4.7 | % | ||
Health Care Equipment & Services | 4.3 | % | ||
Consumer Durables & Apparel | 3.4 | % | ||
Media | 3.2 | % | ||
Food & Staples Retailing | 2.8 | % | ||
Semiconductors & Semiconductor Equipment | 1.8 | % | ||
Automobiles & Components | 1.7 | % | ||
Food, Beverage & Tobacco | 1.6 | % | ||
Telecommunication Services | 1.5 | % | ||
Real Estate | 1.5 | % | ||
Materials | 1.2 | % | ||
Energy | 1.2 | % | ||
Capital Goods | 1.1 | % | ||
Insurance | 1.0 | % | ||
Transportation | 0.3 | % | ||
Other Assets & Liabilities | 4.9 | % |
Summary of Country Exposure*
As of 9/30/14 (percent of equity holdings)
United Kingdom | 25.0 | % | ||
United States | 12.7 | % | ||
Canada | 12.1 | % | ||
China | 7.2 | % | ||
Sweden | 5.5 | % | ||
Australia | 3.9 | % | ||
Germany | 3.6 | % | ||
Ireland | 3.4 | % | ||
Denmark | 3.0 | % | ||
Hong Kong | 2.6 | % | ||
Switzerland | 2.6 | % | ||
Japan | 2.2 | % | ||
Russia | 2.2 | % | ||
Spain | 2.1 | % | ||
Taiwan | 1.8 | % | ||
India | 1.7 | % | ||
Mexico | 1.7 | % | ||
South Korea | 1.6 | % | ||
Israel | 1.4 | % | ||
Brazil | 1.3 | % | ||
Costa Rica | 1.2 | % | ||
France | 1.2 | % |
* | The country exposure of each equity holding is determined by the Fund’s Advisor based on various factors, including the location of the issuer’s head office, the issuer’s jurisdiction of incorporation and the country from which a majority of the issuer’s revenue is derived. |
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
COMMON STOCK — 95.02% | ||||||||
AUTOMOBILES & COMPONENTS — 1.74% | ||||||||
Auto Components — 1.74% | ||||||||
Delphi Automotive plc | 556,300 | $ | 34,123,442 | |||||
|
| |||||||
34,123,442 | ||||||||
|
| |||||||
CAPITAL GOODS — 1.08% | ||||||||
Machinery — 1.08% | ||||||||
a Arcam AB | 903,016 | 21,211,365 | ||||||
|
| |||||||
21,211,365 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 4.69% | ||||||||
Commercial Services & Supplies — 1.44% | ||||||||
Mineral Resources Ltd. | 3,698,518 | 28,172,672 | ||||||
Professional Services — 3.25% | ||||||||
Intertek Group plc | 942,802 | 40,059,983 | ||||||
Stantec, Inc. | 361,100 | 23,627,312 | ||||||
|
| |||||||
91,859,967 | ||||||||
|
| |||||||
CONSUMER DURABLES & APPAREL — 3.41% | ||||||||
Textiles, Apparel & Luxury Goods — 3.41% | ||||||||
Eclat Textile Co. Ltd. | 3,652,081 | 33,195,825 | ||||||
Gildan Activewear, Inc. | 614,793 | 33,641,473 | ||||||
|
| |||||||
66,837,298 | ||||||||
|
| |||||||
CONSUMER SERVICES — 6.97% | ||||||||
Hotels, Restaurants & Leisure — 6.97% | ||||||||
Domino’s Pizza Group plc | 4,267,199 | 39,292,936 | ||||||
Galaxy Entertainment Group Ltd. | 8,260,420 | 47,978,382 | ||||||
Sands China Ltd. | 9,449,575 | 49,287,210 | ||||||
|
| |||||||
136,558,528 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 13.34% | ||||||||
Capital Markets — 7.97% | ||||||||
Hargreaves Lansdown plc | 2,246,286 | 34,412,807 | ||||||
Nomura Holdings, Inc. | 6,745,814 | 40,213,478 | ||||||
Partners Group Holding AG | 185,259 | 48,803,434 | ||||||
Schroders plc | 847,804 | 32,862,325 | ||||||
Consumer Finance — 1.84% | ||||||||
a First Cash Financial Services, Inc. | 642,586 | 35,971,964 | ||||||
Diversified Financial Services — 3.53% | ||||||||
IG Group Holdings plc | 2,650,808 | 25,547,793 | ||||||
Investment AB Kinnevik | 558,719 | 20,185,427 | ||||||
OzForex Group Ltd. | 11,485,509 | 23,430,805 | ||||||
|
| |||||||
261,428,033 | ||||||||
|
| |||||||
ENERGY — 1.22% | ||||||||
Oil, Gas & Consumable Fuels — 1.22% | ||||||||
CNOOC Ltd. | 13,990,468 | 23,963,531 | ||||||
|
| |||||||
23,963,531 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 2.80% | ||||||||
Food & Staples Retailing — 2.80% | ||||||||
PriceSmart, Inc. | 269,010 | 23,038,016 | ||||||
Wal-Mart de Mexico SAB de C.V. | 12,636,321 | 31,801,322 | ||||||
|
| |||||||
54,839,338 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 1.62% | ||||||||
Tobacco — 1.62% | ||||||||
ITC Ltd. | 5,270,841 | 31,662,597 | ||||||
|
| |||||||
31,662,597 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 4.29% | ||||||||
Health Care Equipment & Supplies — 1.56% | ||||||||
GN Store Nord A/S | 1,389,529 | 30,650,248 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
SHARES/ | ||||||||
PRINCIPAL AMOUNT | VALUE | |||||||
Health Care Providers & Services — 2.73% | ||||||||
a Catamaran Corp. | 1,266,957 | $ | 53,402,238 | |||||
|
| |||||||
84,052,486 | ||||||||
|
| |||||||
INSURANCE — 0.99% | ||||||||
Insurance — 0.99% | ||||||||
St. James’s Place plc | 1,643,064 | 19,444,671 | ||||||
|
| |||||||
19,444,671 | ||||||||
|
| |||||||
MATERIALS — 1.24% | ||||||||
Chemicals — 1.24% | ||||||||
Christian Hansen Holding AS | 627,031 | 24,236,269 | ||||||
|
| |||||||
24,236,269 | ||||||||
|
| |||||||
MEDIA — 3.17% | ||||||||
Media — 3.17% | ||||||||
REA Group Ltd. | 564,140 | 21,377,415 | ||||||
Rightmove plc | 1,167,989 | 40,747,809 | ||||||
|
| |||||||
62,125,224 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 11.28% | ||||||||
Biotechnology — 3.18% | ||||||||
Abcam plc | 3,522,310 | 22,969,253 | ||||||
Grifols, S.A. | 960,699 | 39,363,063 | ||||||
Life Sciences Tools & Services — 1.18% | ||||||||
Eurofins Scientific | 89,347 | 23,134,203 | ||||||
Pharmaceuticals — 6.92% | ||||||||
GlaxoSmithKline plc | 1,352,005 | 30,970,178 | ||||||
Perrigo Co. plc | 371,756 | 55,834,034 | ||||||
a Valeant Pharmaceuticals International, Inc. | 372,438 | 48,863,866 | ||||||
|
| |||||||
221,134,597 | ||||||||
|
| |||||||
REAL ESTATE — 1.47% | ||||||||
Real Estate Management & Development — 1.47% | ||||||||
Foxtons Group plc | 8,236,150 | 28,706,877 | ||||||
|
| |||||||
28,706,877 | ||||||||
|
| |||||||
RETAILING — 5.76% | ||||||||
Internet & Catalog Retail — 4.34% | ||||||||
a boohoo.com plc | 40,700,601 | 31,506,303 | ||||||
a Priceline Group, Inc. | 35,905 | 41,598,815 | ||||||
a,b Zalando SE | 439,392 | 11,931,947 | ||||||
Multiline Retail — 1.42% | ||||||||
Dollarama, Inc. | 328,580 | 27,871,869 | ||||||
|
| |||||||
112,908,934 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.76% | ||||||||
Semiconductors & Semiconductor Equipment — 1.76% | ||||||||
ARM Holdings plc | 2,354,218 | 34,577,861 | ||||||
|
| |||||||
34,577,861 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 20.33% | ||||||||
Information Technology Services — 9.91% | ||||||||
MasterCard, Inc. | 937,548 | 69,303,548 | ||||||
a Optimal Payments plc | 5,988,733 | 49,853,844 | ||||||
QIWI plc ADR | 607,653 | 19,195,758 | ||||||
Wirecard AG | 1,511,415 | 55,847,603 | ||||||
Internet Software & Services — 5.22% | ||||||||
a Alibaba Group Holding Ltd. ADR | 357,980 | 31,806,523 | ||||||
a Baidu, Inc. ADR | 136,686 | 29,828,986 | ||||||
MercadoLibre, Inc. | 182,985 | 19,881,320 | ||||||
a Yandex NV | 749,194 | 20,823,847 | ||||||
Software — 5.20% | ||||||||
Constellation Software, Inc. | 231,850 | 58,273,545 | ||||||
a Fleetmatics Group plc | 268,540 | 8,190,470 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
SHARES/ | ||||||||
PRINCIPAL AMOUNT | VALUE | |||||||
Solera Holdings, Inc. | 627,509 | $ | 35,366,407 | |||||
|
| |||||||
398,371,851 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 6.08% | ||||||||
Electronic Equipment, Instruments & Components — 3.23% | ||||||||
a Avigilon Corp. | 1,951,802 | 32,537,295 | ||||||
Hexagon AB | 973,010 | 30,878,504 | ||||||
Technology, Hardware, Storage & Periphals — 2.85% | ||||||||
Samsung Electronics Co. Ltd. | 27,166 | 30,480,497 | ||||||
a Stratasys Ltd. | 209,841 | 25,344,596 | ||||||
|
| |||||||
119,240,892 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 1.53% | ||||||||
Diversified Telecommunication Services — 1.53% | ||||||||
a Com Hem Holdings AB | 4,128,080 | 30,062,445 | ||||||
|
| |||||||
30,062,445 | ||||||||
|
| |||||||
TRANSPORTATION — 0.25% | ||||||||
Road & Rail — 0.25% | ||||||||
Localiza Rent a Car S.A. | 342,693 | 4,968,715 | ||||||
|
| |||||||
4,968,715 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $1,778,250,843) | 1,862,314,921 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 5.56% | ||||||||
Airgas, Inc., 0.20%, 10/1/2014 | $ | 14,400,000 | 14,400,000 | |||||
Ameren Illinois Co., 0.20%, 10/1/2014 | 29,000,000 | 29,000,000 | ||||||
Bank of New York Tri-Party Repurchase Agreement 0.23% dated 9/30/2014 due 10/1/2014, repurchase price $29,000,185 collateralized by 26 corporate debt securities, having an average coupon of 4.37%, a minimum credit rating of BBB-, maturity dates from 3/1/2016 to 9/15/2043, and having an aggregate market value of $31,036,579 at 9/30/2014 | 29,000,000 | 29,000,000 | ||||||
CenterPoint Energy, Inc., 0.20%, 10/1/2014 | 29,000,000 | 29,000,000 | ||||||
Kansas City Power & Light, 0.22%, 10/1/2014 | 7,600,000 | 7,600,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $109,000,000) | 109,000,000 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 100.58% (Cost $1,887,250,843) | $ | 1,971,314,921 | ||||||
LIABILITIES NET OF OTHER ASSETS — (0.58)% | (11,359,058 | ) | ||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 1,959,955,863 | ||||||
|
|
Footnote Legend
a | Non-income producing. |
b | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt | |
ARM | Adjustable Rate Mortgage |
See notes to financial statements.
12 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 13
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg International Growth Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $1,887,250,843) (Note 2) | $ | 1,971,314,921 | ||
Cash | 165,454 | |||
Cash denominated in foreign currency (cost $9,451) | 9,318 | |||
Receivable for investments sold | 14,686,322 | |||
Receivable for fund shares sold | 4,999,204 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 11,875,079 | |||
Dividends receivable | 2,566,133 | |||
Dividend and interest reclaim receivable | 539,597 | |||
Interest receivable | 185 | |||
Prepaid expenses and other assets | 114,346 | |||
|
| |||
Total Assets | 2,006,270,559 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 35,945,975 | |||
Payable for fund shares redeemed | 6,983,065 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 700,376 | |||
Payable to investment advisor and other affiliates (Note 3) | 1,736,978 | |||
Deferred taxes payable | 389,723 | |||
Accounts payable and accrued expenses | 557,272 | |||
Dividends payable | 1,307 | |||
|
| |||
Total Liabilities | 46,314,696 | |||
|
| |||
NET ASSETS | $ | 1,959,955,863 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 332,302 | ||
Net unrealized appreciation on investments and foreign currency translations | 94,748,757 | |||
Accumulated net realized gain (loss) | 33,355,558 | |||
Net capital paid in on shares of beneficial interest | 1,831,519,246 | |||
|
| |||
$ | 1,959,955,863 | |||
|
|
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($508,044,186 applicable to 26,600,438 shares of beneficial interest outstanding - Note 4) | $ | 19.10 | ||
Maximum sales charge, 4.50% of offering price | 0.90 | |||
|
| |||
Maximum offering price per share | $ | 20.00 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($146,398,952 applicable to 7,933,268 shares of beneficial interest outstanding - Note 4) | $ | 18.45 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($1,171,031,936 applicable to 60,033,475 shares of beneficial interest outstanding - Note 4) | $ | 19.51 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($22,739,042 applicable to 1,197,114 shares of beneficial interest outstanding - Note 4) | $ | 18.99 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($38,575,110 applicable to 2,030,376 shares of beneficial interest outstanding - Note 4) | $ | 19.00 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($69,217,045 applicable to 3,539,946 shares of beneficial interest outstanding - Note 4) | $ | 19.55 | ||
|
| |||
Class R6 Shares: | ||||
Net asset value, offering and redemption price per share ($3,949,592 applicable to 201,573 shares of beneficial interest outstanding - Note 4) | $ | 19.59 | ||
|
|
* | 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, 2014 |
INVESTMENT INCOME | ||||
Dividend income (net of foreign taxes withheld of $1,665,782) | $ | 29,643,329 | ||
Interest income | 298,512 | |||
|
| |||
Total Income | 29,941,841 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 16,545,284 | |||
Administration fees (Note 3) | ||||
Class A Shares | 895,921 | |||
Class C Shares | 193,892 | |||
Class I Shares | 538,725 | |||
Class R3 Shares | 24,791 | |||
Class R4 Shares | 48,959 | |||
Class R5 Shares | 36,864 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,723,293 | |||
Class C Shares | 1,552,196 | |||
Class R3 Shares | 99,298 | |||
Class R4 Shares | 97,346 | |||
Transfer agent fees | ||||
Class A Shares | 804,306 | |||
Class C Shares | 169,906 | |||
Class I Shares | 714,971 | |||
Class R3 Shares | 57,632 | |||
Class R4 Shares | 143,454 | |||
Class R5 Shares | 184,068 | |||
Class R6 Shares | 1,555 | |||
Registration and filing fees | ||||
Class A Shares | 52,923 | |||
Class C Shares | 3,650 | |||
Class I Shares | 101,903 | |||
Class R3 Shares | 18,494 | |||
Class R4 Shares | 17,695 | |||
Class R5 Shares | 21,446 | |||
Class R6 Shares | 16,913 | |||
Custodian fees (Note 3) | 587,969 | |||
Professional fees | 68,699 | |||
Accounting fees | 77,515 | |||
Trustee fees | 67,525 | |||
Other expenses | 385,873 | |||
|
| |||
Total Expenses | 25,253,066 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (324,120 | ) | ||
Fees paid indirectly (Note 3) | (889 | ) | ||
|
| |||
Net Expenses | 24,928,057 | |||
|
| |||
Net Investment Income | $ | 5,013,784 | ||
|
|
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg International Growth Fund | Year Ended September 30, 2014 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments (net of realized capital gain taxes paid of $297,724) | $ | 77,904,622 | ||
Forward currency contracts (Note 7) | (11,752,447 | ) | ||
Foreign currency transactions | (55,188 | ) | ||
|
| |||
66,096,987 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of change in deferred taxes payable of $39,448) | (211,240,677 | ) | ||
Foreign currency translations | (116,844 | ) | ||
Forward currency contracts (Note 7) | 16,712,912 | |||
|
| |||
(194,644,609 | ) | |||
|
| |||
Net Realized and Unrealized Loss | (128,547,622 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (123,533,838 | ) | |
|
|
See notes to financial statements.
Certified Annual Report 17
STATEMENT OF CHANGES IN NET ASSETS | ||
Thornburg International Growth Fund |
YEAR ENDED | YEAR ENDED | |||||||
SEPTEMBER 30, 2014 | SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 5,013,784 | $ | 774,113 | ||||
Net realized gain (loss) on investments, forward currency contracts, foreign currency transactions, and capital gains tax | 66,096,987 | 39,755,422 | ||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations, and deferred taxes | (194,644,609 | ) | 221,261,446 | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (123,533,838 | ) | 261,790,981 | |||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class I Shares | (4,077,687 | ) | — | |||||
Class R5 Shares | (236,274 | ) | — | |||||
Class R6 Shares | (16,448 | ) | — | |||||
From realized gains | ||||||||
Class A Shares | (17,999,580 | ) | — | |||||
Class C Shares | (3,700,916 | ) | — | |||||
Class I Shares | (22,590,256 | ) | — | |||||
Class R3 Shares | (398,754 | ) | — | |||||
Class R4 Shares | (774,775 | ) | — | |||||
Class R5 Shares | (1,254,132 | ) | — | |||||
Class R6 Shares | (76,351 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | (23,243,109 | ) | 219,316,525 | |||||
Class C Shares | 43,629,520 | 39,396,378 | ||||||
Class I Shares | 533,515,434 | 420,392,597 | ||||||
Class R3 Shares | 10,404,825 | 5,686,471 | ||||||
Class R4 Shares | 15,436,358 | 11,731,139 | ||||||
Class R5 Shares | 32,771,453 | 15,049,318 | ||||||
Class R6 Shares | 1,732,060 | 2,399,571 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 439,587,530 | 975,762,980 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 1,520,368,333 | 544,605,353 | ||||||
|
|
|
| |||||
End of Year | $ | 1,959,955,863 | $ | 1,520,368,333 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 332,302 | $ | 1,840 |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg International Growth Fund | September 30, 2014 |
NOTE 1 – ORGANIZATION
Thornburg International Growth Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on February 1, 2007. The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of eighteen 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 growth of capital by investing in equity securities selected for their growth potential.
The Fund currently offers seven classes of shares of beneficial interest: Class A, Class C, Institutional Class (“Class I”), and Retirement Classes (“Class R3,” “Class R4,” “Class R5,” and “Class R6”). 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 and Class R5 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 R6 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 allocable 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 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. 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 reported by NASDAQ are valued at the NASDAQ official closing price. 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. 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 when 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, 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. For example, on days when market volatility
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of 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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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:
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
FAIR VALUE MEASUREMENTS AT SEPTEMBER 30, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 1,862,314,921 | $ | 1,850,382,974 | $ | 11,931,947 | $ | — | ||||||||
Short Term Investments | 109,000,000 | — | 109,000,000 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 1,971,314,921 | $ | 1,850,382,974 | $ | 120,931,947 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 11,875,079 | $ | — | $ | 11,875,079 | $ | — | ||||||||
Spot Currency | $ | 3,347 | $ | 3,347 | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (700,376 | ) | $ | — | $ | (700,376 | ) | $ | — | ||||||
Spot Currency | $ | (31,807 | ) | $ | (31,807 | ) | $ | — | $ | — |
* | 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, which may include 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, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
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 of securities 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, 2014, 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
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
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 by entering into repurchase agreements under which the Fund delivers cash to a counterparty, the counterparty delivers securities as collateral, and the Fund is obligated to resell that collateral to the counterparty at an agreed upon price at the maturity date of the repurchase agreement. Securities pledged as collateral under repurchase agreements are held in custody with a third party custodian 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 counterparty’s obligations. Under certain circumstances, in the event of default or bankruptcy by the counterparty 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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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 (except for Class R6 shares, which do not have an administrative services agreement) and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $113,154 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $46,333 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 (except for Class R6 shares, which do not have a Rule 12b-1 service plan) 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, 2014, 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 and shareholder services.
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
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
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, 2014, are set forth in the Statement of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class I, Class R3, Class R4, Class R5, and Class R6 expenses do not exceed 0.99%, 1.50%, 1.40%, 0.99%, and 0.89%, respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually waived or reimbursed certain class specific expenses, administrative fees, and distribution fees of $71,655 for Class R3 shares, $95,424 for Class R4 shares, $140,056 for Class R5 shares, and $16,985 for Class R6 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, 2014, fees paid indirectly were $889.
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 and is included as Trustee Fees on the Statement of Operations.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED | YEAR ENDED | |||||||||||||||
SEPTEMBER 30, 2014 | SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 19,478,383 | $ | 406,362,238 | 18,072,733 | $ | 325,534,070 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 810,018 | 16,767,379 | — | — | ||||||||||||
Shares repurchased | (21,931,930 | ) | (446,372,726 | ) | (6,034,639 | ) | (106,217,545 | ) | ||||||||
|
|
|
| �� |
|
|
|
| ||||||||
Net increase (decrease) | (1,643,529 | ) | $ | (23,243,109 | ) | 12,038,094 | $ | 219,316,525 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 3,773,764 | $ | 76,464,884 | 2,888,564 | $ | 50,987,977 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 158,203 | 3,184,629 | — | — | ||||||||||||
Shares repurchased | (1,817,777 | ) | (36,019,993 | ) | (663,227 | ) | (11,591,599 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 2,114,190 | $ | 43,629,520 | 2,225,337 | $ | 39,396,378 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 44,346,455 | $ | 939,821,434 | 27,208,099 | $ | 501,442,073 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,114,267 | 23,322,178 | — | — | ||||||||||||
Shares repurchased | (20,611,781 | ) | (429,628,178 | ) | (4,429,838 | ) | (81,049,476 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 24,848,941 | $ | 533,515,434 | 22,778,261 | $ | 420,392,597 | ||||||||||
|
|
|
|
|
|
|
|
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
YEAR ENDED | YEAR ENDED | |||||||||||||||
SEPTEMBER 30, 2014 | SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 869,661 | $ | 17,646,641 | 467,014 | $ | 8,214,767 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 15,665 | 323,012 | — | — | ||||||||||||
Shares repurchased | (371,512 | ) | (7,564,828 | ) | (146,581 | ) | (2,528,296 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 513,814 | $ | 10,404,825 | 320,433 | $ | 5,686,471 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 1,507,249 | $ | 31,205,477 | 1,044,260 | $ | 17,883,776 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 27,047 | 557,168 | — | �� | — | |||||||||||
Shares repurchased | (797,079 | ) | (16,326,287 | ) | (344,989 | ) | (6,152,637 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 737,217 | $ | 15,436,358 | 699,271 | $ | 11,731,139 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 2,818,225 | $ | 60,515,504 | 1,964,624 | $ | 34,202,940 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 70,939 | 1,488,221 | — | — | ||||||||||||
Shares repurchased | (1,405,797 | ) | (29,232,272 | ) | (1,105,700 | ) | (19,153,622 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,483,367 | $ | 32,771,453 | 858,924 | $ | 15,049,318 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R6 Shares | ||||||||||||||||
Shares sold | 138,776 | $ | 2,965,917 | 121,272 | $ | 2,399,571 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 4,421 | 92,799 | — | — | ||||||||||||
Shares repurchased | (62,896 | ) | (1,326,656 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 80,301 | $ | 1,732,060 | 121,272 | $ | 2,399,571 | ||||||||||
|
|
|
|
|
|
|
|
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $2,672,107,776 and $2,042,731,756, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 1,893,843,669 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 203,710,334 | ||
Gross unrealized depreciation on a tax basis | (126,239,082 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 77,471,252 | ||
|
|
At September 30, 2014, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2013 of $39,761,517. For tax purposes, such losses will be reflected in the year ending September 30, 2015.
In order to account for permanent book/tax differences, the Fund increased accumulated net realized gains by $352,913 and decreased undistributed net investment income by $352,913. This reclassification has no impact on the net asset value of the Fund. This reclassification results from foreign currency gain (loss) and foreign capital gain tax adjustments.
At September 30, 2014, the Fund had $298,118 of undistributed tax basis ordinary investment income and $90,884,467 of undistributed tax basis capital gains.
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 22,440,924 | $ | — | ||||
Capital gains | 28,684,249 | — | ||||||
|
|
|
| |||||
Total | $ | 51,125,173 | $ | — | ||||
|
|
|
|
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 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, 2014, 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’s 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 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, 2014 in the normal course of pursuing its investment objectives, with the objective 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 average value of open sell currency contracts for the year ended September 30, 2014 was $277,496,537. 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 the open sell currency contracts to which they relate.
The following table displays the outstanding forward currency contracts at September 30, 2014:
OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2014 | ||||||||||||||||||||||
CONTRACT | CONTRACT | CONTRACT | VALUE | UNREALIZED | UNREALIZED | |||||||||||||||||
DESCRIPTION | BUY/SELL | AMOUNT | VALUE DATE | USD | APPRECIATION | DEPRECIATION | ||||||||||||||||
Euro | Sell | 46,456,900 | 03/12/2015 | 58,750,263 | $ | 1,394,233 | $ | — | ||||||||||||||
Great Britain Pound | Sell | 69,914,600 | 01/21/2015 | 113,224,922 | 6,057,776 | — | ||||||||||||||||
Japanese Yen | Sell | 5,989,724,300 | 11/20/2014 | 54,631,464 | 4,423,070 | — | ||||||||||||||||
Japanese Yen | Buy | 1,030,282,100 | 11/20/2014 | 9,397,064 | — | (700,376 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||
Total | $ | 11,875,079 | $ | (700,376 | ) | |||||||||||||||||
|
|
|
|
The foregoing forward currency contracts were entered into pursuant to an International Swaps and Derivatives Association (ISDA) Master Agreement. In the event of a default or termination under the ISDA Master Agreement, the non-defaulting party has the right to close out all outstanding forward currency contracts between the parties and to net any payment amounts under those contracts, resulting in a single net amount payable by one party to the other. Because the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Fund’s Statement of Assets and Liabilities unless there has been an event of default or termination event under that agreement, the Fund does not net its outstanding forward currency contracts for purposes of the disclosure in the Fund’s Statement of Assets and Liabilities. Instead the Fund recognizes the unrealized appreciation or depreciation on those forward currency contracts on a gross basis in the Fund’s Statement of Assets and Liabilities. At September 30, 2014, those recognized amounts are disclosed in the following table:
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 |
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2014 | ||||||
ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 11,875,079 | |||
LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (700,376 | ) |
Because the Fund does not currently receive or post cash collateral in connection with its currency forward contracts, and because all of the Fund’s outstanding currency forward contracts are with State Street Bank and Trust Company, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2014 can be determined by offsetting the dollar amounts shown in the preceding table. Based on those amounts, the net amount of the Fund’s assets which is attributable to its outstanding forward currency contracts at September 30, 2014 is $11,174,703, and the net amount of the Fund’s liabilities which is attributable to those contracts at that date is $0. The Fund’s forward currency contracts are valued each day, and the net amounts of the Fund’s assets and liabilities which are attributable to those contracts are expected to vary over time.
The net realized gain(loss) 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, 2014 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, 2014 | ||||||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (11,752,447 | ) | $ | (11,752,447 | ) | ||
AMOUNT OF NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS | ||||||||
RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2014 | ||||||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | 16,712,913 | $ | 16,712,913 |
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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
26 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 27
Thornburg International Growth Fund
PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||||
UNLESS | NET ASSET VALUE BEGINNING OF PERIOD | NET INVEST- MENT INCOME (LOSS) | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS | TOTAL | NET ASSET VALUE END OF PERIOD | NET INVEST- MENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | EXPENSES, AFTER EXPENSE REDUCTIONS AND NET OF CUSTODY CREDITS (%) | EXPENSES, BEFORE EXPENSE REDUCTIONS (%) | TOTAL RETURN (%)(a) | PORTFOLIO (%)(a) | NET ASSETS AT END OF PERIOD (THOUSANDS) | |||||||||||||||||||||||||||||||||||||||
CLASS A SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 20.54 | 0.02 | (0.89 | ) | (0.87 | ) | — | (0.57) | (0.57) | $ | 19.10 | 0.07 | 1.33 | 1.33 | 1.33 | (4.46 | ) | 106.18 | $ | 508,044 | |||||||||||||||||||||||||||||||||
2013(b) | $ | 15.78 | (0.01 | ) | 4.77 | 4.76 | — | — | — | $ | 20.54 | (0.06 | ) | 1.41 | 1.41 | 1.42 | 30.16 | 89.17 | $ | 580,194 | ||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
CLASS C SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 20.01 | (0.13 | ) | (0.86 | ) | (0.99 | ) | — | (0.57) | (0.57) | $ | 18.45 | (0.65 | ) | 2.09 | 2.09 | 2.09 | (5.19 | ) | 106.18 | $ | 146,399 | |||||||||||||||||||||||||||||||
2013 | $ | 15.49 | (0.14 | ) | 4.66 | 4.52 | — | — | — | $ | 20.01 | (0.81 | ) | 2.15 | 2.15 | 2.17 | 29.18 | 89.17 | $ | 116,453 | ||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
CLASS I SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 20.96 | 0.10 | (0.91 | ) | (0.81 | ) | (0.07 | ) | (0.57) | (0.64) | $ | 19.51 | 0.47 | 0.98 | 0.98 | 0.98 | (4.09 | ) | 106.18 | $ | 1,171,032 | ||||||||||||||||||||||||||||||||
2013 | $ | 16.04 | 0.07 | 4.85 | 4.92 | — | — | — | $ | 20.96 | 0.38 | 0.99 | 0.99 | 1.04 | 30.67 | 89.17 | $ | 737,536 | ||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
CLASS R3 SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 20.46 | — | (d) | (0.90 | ) | (0.90 | ) | — | (0.57) | (0.57) | $ | 18.99 | — | (e) | 1.50 | 1.50 | 1.86 | (4.63 | ) | 106.18 | $ | 22,739 | |||||||||||||||||||||||||||||||
2013 | $ | 15.73 | (0.03 | ) | 4.76 | 4.73 | — | — | — | $ | 20.46 | (0.15 | ) | �� | 1.50 | 1.50 | 2.01 | 30.07 | 89.17 | $ | 13,982 | |||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||
CLASS R4 SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 20.45 | 0.01 | (0.89 | ) | (0.88 | ) | — | (0.57) | (0.57) | $ | 19.00 | 0.04 | 1.39 | 1.39 | 1.63 | (4.53 | ) | 106.18 | $ | 38,575 | |||||||||||||||||||||||||||||||||
2013 | $ | 15.70 | (0.01 | ) | 4.76 | 4.75 | — | — | — | $ | 20.45 | (0.04 | ) | 1.38 | 1.38 | 1.68 | 30.25 | 89.17 | $ | 26,441 | ||||||||||||||||||||||||||||||||||
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 | (f) | 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 | (f) | 19.11 | 128.86 | $ | 3 | ||||||||||||||||||||||||||||||||||
CLASS R5 SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 21.01 | 0.10 | (0.93 | ) | (0.83 | ) | (0.06 | ) | (0.57) | (0.63) | $ | 19.55 | 0.46 | 0.99 | 0.99 | 1.18 | (4.15 | ) | 106.18 | $ | 69,217 | ||||||||||||||||||||||||||||||||
2013 | $ | 16.07 | 0.07 | 4.87 | 4.94 | — | — | — | $ | 21.01 | 0.35 | 0.99 | 0.99 | 1.22 | 30.74 | 89.17 | $ | 43,209 | ||||||||||||||||||||||||||||||||||||
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 | (f) | 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 | (f) | 19.56 | 128.86 | $ | 171 | ||||||||||||||||||||||||||||||||
CLASS R6 SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 21.05 | 0.12 | (0.93 | ) | (0.81 | ) | (0.08 | ) | (0.57) | (0.65) | $ | 19.59 | 0.58 | 0.89 | 0.89 | 1.34 | (4.05 | ) | 106.18 | $ | 3,950 | ||||||||||||||||||||||||||||||||
2013(g) | $ | 17.54 | 0.46 | 3.05 | 3.51 | — | — | — | $ | 21.05 | 2.21 | (h) | 0.89 | (h) | 0.89 | (h) | 11.83 | (f)(h) | 20.01 | 89.17 | $ | 2,553 |
(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) | Net Investment Income Percentage was less than 0.01% |
(f) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
(g) | Effective date of this class of shares was February 1, 2013. |
(h) | 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, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
30 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg International Growth Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
CLASS A SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 929.90 | $ | 6.67 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.15 | $ | 6.98 | ||||||
CLASS C SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 926.70 | $ | 10.23 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.44 | $ | 10.70 | ||||||
CLASS I SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 932.20 | $ | 4.90 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.00 | $ | 5.12 | ||||||
CLASS R3 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 929.50 | $ | 7.26 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.59 | ||||||
CLASS R4 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 930.00 | $ | 6.77 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.05 | $ | 7.08 | ||||||
CLASS R5 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 931.70 | $ | 4.79 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
CLASS R6 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 932.30 | $ | 4.31 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.61 | $ | 4.51 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.38%; C: 2.12%; I: 1.01%; R3: 1.50%; R4: 1.40%; R5: 0.99%; R6: 0.89%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the accompanying table 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, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 3 YRS | 5 YRS | SINCE INCEPTION | |||||||||||||
Class A Shares (Incep: 2/1/07) | -8.77 | % | 11.92 | % | 12.75 | % | 6.74 | % | ||||||||
Class C Shares (Incep: 2/1/07) | -6.12 | % | 12.77 | % | 12.93 | % | 6.65 | % | ||||||||
Class I Shares (Incep: 2/1/07) | -4.09 | % | 14.12 | % | 14.36 | % | 7.97 | % | ||||||||
Class R3 Shares (Incep: 2/1/08) | -4.63 | % | 13.52 | % | 13.76 | % | 5.69 | % | ||||||||
Class R4 Shares (Incep: 2/1/08) | -4.53 | % | 13.69 | % | 13.92 | % | 5.80 | % | ||||||||
Class R5 Shares (Incep: 2/1/08) | -4.15 | % | 14.10 | % | 14.35 | % | 6.22 | % | ||||||||
Class R6 Shares (Incep: 2/1/13) | -4.05 | % | — | — | 8.87 | % |
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, R5, and R6 shares.
32 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg International Growth Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES(1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES)(1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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, 2014 (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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Thornburg International Growth Fund of $28,684,249 are being reported as long term capital gain dividends and $22,440,924 are taxable ordinary investment income dividends for federal income tax purposes.
For the tax year ended September 30, 2014, the 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 4.78% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2014 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2014, foreign source income and foreign taxes paid is $30,114,788 and $1,963,506, 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
36 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 (Unaudited) |
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the quality of portfolio trade execution, the Advisor’s performance of accounting and other services under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the six calendar years since the Fund’s inception, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year and five-year periods ending with the second quarter of the current year comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of estimated earnings growth, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the six calendar years since the Fund’s inception showed that the Fund’s investment return for the most recent calendar year exceeded the returns for the fund category and the securities index, that the Fund’s returns for the preceding five calendar years exceeded the returns for the index in four of five years, and that the Fund’s returns exceeded the average returns of the fund category in three of five years. Noted quantitative data showed that the Fund’s annualized investment returns fell in the fourth quartile of performance of the first fund category for the one-year period ended with the second quarter of the current year, and that the Fund’s returns fell in the first quartile of performance for the three-year period and in the first decile for the five-year period. The data similarly showed that the Fund’s annualized investment returns fell in the fourth quartile of performance of the second fund category for the one-year period ended with the second quarter, and fell within the top decile of performance of the category for the three-year and five-year periods. Data presented to the Trustees showed that the Fund’s annualized total return (net of expenses) over the period since the Fund’s inception exceeded the annualized return for 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 performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection considered a number of factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses. Data considered included comparisons of the Fund’s advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Data showed that the Fund’s advisory fee level was slightly lower than the median and slightly higher than the average fee levels for the fund category, and that the level of total expense for a representative share class of the Fund was comparable to the median expense level for the category and slightly lower than the average expense level for the category. Peer group data showed that the Fund’s advisory fee level was slightly lower than the median of the fund peer group and the total expense level for a representative share class of the Fund was slightly lower than the median for the peer group, and these levels for the Fund fell within the range of levels for the peer group.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and
Certified Annual Report 37
OTHER INFORMATION, CONTINUED | ||
Thornburg International Growth Fund | September 30, 2014 (Unaudited) |
the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain adequate service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
38 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 39
This page intentionally left blank.
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income 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
42 This page is not part of the Annual Report
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH1539 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2014. 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, volatility, and political and economic risks. 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
Barclays U.S. Aggregate Bond Index – An index 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.
Blended Index – The Blended Index is composed of 25% Barclays U.S. Aggregate Bond Index and 75% MSCI World Index. The Barclays U.S. 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.
FlNRA-Bloomberg Active Investment Grade U.S. Corporate Bond Index – This index is comprised of the “active” (most frequently traded) fixed-coupon, investment-grade bonds represented by FINRA TRACE, FINRA’s transaction reporting facility that disseminates all over-the-counter secondary market transactions in these public bonds.
FlNRA-Bloomberg Active High Yield U.S. Corporate Bond Index – This index is comprised of the “active” (most frequently traded) fixed-coupon, high-yield bonds represented by FINRA TRACE, FINRA’s transaction reporting facility that disseminates all over-the-counter secondary market transactions in these public bonds.
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 EM (Emerging Markets) Latin America Index – A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets in Latin America. The index consists of the following 5 emerging market country indices: Brazil, Chile, Colombia, Mexico, and Peru.
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 direct investments into any index. The performance of any index is not indicative of the performance of any particular investment.
Basis Point (bp) – 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 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.
Dividend Payout Ratio – The percentage of earnings paid to shareholders in dividends calculated as yearly dividend per share over earnings per share.
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.
Intrinsic Value – A term that reflects Thornburg’s estimate of a company’s value, encompassing our collective investment judgment.
Median Market Capitalization – Market capitalization (market cap) is the total value of a company’s stock, calculated by multiplying the number of outstanding common shares by the current share price. The company whose market cap is in the middle of the portfolio is the median market cap. Half the companies in the portfolio have values greater than the median, and half have values that are less.
Price to Earnings Ratio (P/E) – A valuation ratio equaling a company’s market value per share divided by earnings per share.
U.S. Treasury Securities – U.S. Treasury securities, such as bills, notes and bonds, are negotiable debt obligations of the U.S. government. These debt obligations are backed by the “full faith and credit” of the government and issued at various schedules and maturities. Income from treasury securities is exempt from state and local, but not federal income taxes.
This page is not part of the Annual Report 3
The Dividend Landscape
To appreciate the investment environment in which Thornburg Investment Income Builder Fund operates, you may wish to review these highlights of the “dividend landscape.”
The S&P 500 Index Payout Ratio – A Historical Perspective
The dividend payout ratio is a fraction that expresses dividend payments as a percentage of per-share earnings. As the economy slowed in the recent downturn, earnings-per-share on average declined, causing the payout ratio to climb, even as dividends paid by the S&P 500 portfolio declined by more than 10% 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
Rising Dividend Payments Despite Decreasing Dividend Yields
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.
S&P 500 Index Average Yield vs. Annual Dividends from a Hypothetical $10,000 Investment (Dividends not Reinvested)
4 This page is not part of the Annual Report
The Top 100 Dividend Yields
RUSSELL 1000 INDEX | RUSSELL 2000 INDEX | |||||||
Financials | 51 | % | 69 | % | ||||
Utilities | 19 | % | 1 | % | ||||
Consumer Discretionary | 9 | % | 7 | % | ||||
Energy | 7 | % | 6 | % | ||||
Telecommunication Services | 5 | % | 1 | % | ||||
Consumer Staples | 4 | % | 3 | % | ||||
Materials | 3 | % | 1 | % | ||||
Industrials | 2 | % | 7 | % | ||||
Health Care | 0 | % | 3 | % | ||||
Information Technology | 0 | % | 2 | % |
Source: FactSet as of September 30, 2014.
Past performance does not guarantee future results.
Average Dividend Yields (MSCI Indices) of Markets Around the Globe
A Truly Diversified Dividend-Paying Portfolio Must Look Beyond the Obvious High-Yield Stocks!
In the (large cap) Russell 1000 Index, 70% of the top 100 dividend payers are in the financials and utilities sectors. In the (small cap) Russell 2000 Index, 69% 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.
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.
Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
Dividends are not guaranteed.
This page is not part of the Annual Report 5
Portfolio Managers
Jason Brady, CFA Brian McMahon Ben Kirby, CFA
Objectives and Strategies
The Fund seeks to provide a level of current income which exceeds the average yield on U.S. stocks generally, and which will generally grow, subject to periodic fluctuations, over the years on a per share basis. The Fund’s secondary investment objective is long-term capital appreciation.
The Fund may invest in any domestic or foreign equity or debt security which Thornburg Investment Management believes may assist the Fund in pursuing its investment goals, although the Fund expects that equity securities in its portfolio will normally be weighted in favor of companies that pay dividends or other current income.
A Global Search for Growing Income & Price Appreciation
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 top ten industry tables on the opposite page, the percentage industry allocations of your Fund evolve to reflect these changing conditions.
Key Portfolio Attributes
As of September 30, 2014
Equity Statistics | ||||
Portfolio P/E (12-mo. trailing) | 13.9x | |||
Median Market Cap | $ | 16.0 B | ||
Equity & Pref. Equity Holdings | 126 | |||
Fixed Income Statistics | ||||
Weighted Avg. Coupon | 7.66 | % | ||
Average Maturity | 10.98 yrs | |||
Effective Duration | 3.49 yrs | |||
Bond Holdings | 116 |
Portfolio Composition
As of September 30, 2014
6 This page is not part of the Annual Report
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 | ¢ | 102.5 | ¢ | ||||||||||
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 | ¢ | 36.0 | ¢ | 112.0 | ¢ | ||||||||||
2013 | 21.5 | ¢ | 25.3 | ¢ | 25.0 | ¢ | 24.5 | ¢ | 96.3 | ¢ | ||||||||||
2014 | 22.5 | ¢ | 24.0 | ¢ | 27.0 | ¢ |
30-day SEC Yield as of 9/30/14 (A Shares): 3.16%
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.
Average Annual Total Returns
For Periods Ended September 30, 2014
A Shares (Incep: 12/24/02) | 1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | |||||||||||||||
Without sales charge | 11.19 | % | 13.30 | % | 10.36 | % | 9.51 | % | 11.08 | % | ||||||||||
With sales charge | 6.18 | % | 11.58 | % | 9.34 | % | 9.01 | % | 10.65 | % | ||||||||||
Blended Index (Since 12/24/02) | 10.16 | % | 14.01 | % | 9.37 | % | 6.76 | % | 7.99 | % | ||||||||||
S&P 500 Index (Since 12/24/02) | 19.73 | % | 22.99 | % | 15.70 | % | 8.11 | % | 9.18 | % |
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 1.39%, as disclosed in the most recent Prospectus.
Top Ten Industry Groups
As of 9/30/14
Telecommunication Services | 19.5 | % | ||
Energy | 10.4 | % | ||
Diversified Financials | 7.7 | % | ||
Banks | 7.0 | % | ||
Utilities | 6.9 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 6.6 | % | ||
Real Estate | 5.6 | % | ||
Food, Beverage & Tobacco | 4.7 | % | ||
Insurance | 3.9 | % | ||
Materials | 3.1 | % |
As of 3/31/14
Telecommunication Services | 18.4 | % | ||
Energy | 11.4 | % | ||
Utilities | 10.5 | % | ||
Diversified Financials | 9.0 | % | ||
Real Estate | 6.8 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 6.4 | % | ||
Food, Beverage & Tobacco | 4.6 | % | ||
Banks | 3.8 | % | ||
Consumer Services | 3.6 | % | ||
Materials | 3.6 | % |
As of 6/30/14
Telecommunication Services | 18.6 | % | ||
Energy | 11.5 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 7.2 | % | ||
Banks | 7.2 | % | ||
Real Estate | 6.7 | % | ||
Utilities | 6.6 | % | ||
Diversified Financials | 6.1 | % | ||
Food, Beverage & Tobacco | 5.6 | % | ||
Food & Staples Retailing | 3.7 | % | ||
Materials | 3.7 | % |
As of 12/31/13
Telecommunication Services | 18.7 | % | ||
Energy | 10.4 | % | ||
Diversified Financials | 9.5 | % | ||
Utilities | 8.8 | % | ||
Real Estate | 7.2 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 6.9 | % | ||
Food, Beverage & Tobacco | 5.7 | % | ||
Banks | 3.8 | % | ||
Materials | 3.8 | % | ||
Consumer Services | 3.7 | % |
This page is not part of the Annual Report 7
Thornburg Investment Income Builder Fund
September 30, 2014
9 | ||||
14 | ||||
24 | ||||
26 | ||||
28 | ||||
29 | ||||
38 | ||||
40 | ||||
41 | ||||
42 | ||||
43 | ||||
46 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semi-annual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
8 Certified Annual Report
| ||
Thornburg Investment Income Builder Fund | September 30, 2014 (Unaudited) |
October 22, 2014
Dear Fellow Shareholder,
This letter will highlight the basic results of your Thornburg Investment Income Builder Fund’s (the Fund) investment activities for the six- and 12-month periods ended September 30, 2014. In addition, we will comment on the overall investment landscape, which continues to evolve.
The Fund paid dividends of $0.98 per Class A share in the twelve months ended September 30, 2014, down 9.1% from the $1.07 per share paid in the comparable prior year period. The dividends per share were higher for Class I and Class R5 shares, and lower on the Class C, R3, and R4 shares, to account for varying class specific expenses. The net asset value (NAV) per Class A share increased by $1.25 per share during the period, from $20.13 to $21.38, giving a total return including dividends of 11.19% at NAV.
For the fiscal year ended September 30, 2014 the Fund (total return of 11.19%) outperformed the blended index of 75% MSCI World Index/25% Barclays U.S. Aggregate Bond Index (total return of 10.16%) and underperformed the S&P 500 Index (total return of 19.73%). While we would like to outperform benchmark returns in all market conditions, it is not unusual for Investment Income Builder to lag these benchmarks over shorter trailing measurement periods, especially when annualized benchmark returns are greater than 10%.
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 1.39%, as disclosed in the most recent prospectus.
For the trailing 10-year time period and since inception, your Fund has outperformed both indices, as noted on page 7 of the accompanying informational brochure. Performance relative to indices for all share classes over various periods can be found on page 42. The quarter ended September 30, 2014, was the 47th full calendar quarter since the inception of Thornburg Investment Income Builder in December 2002. In 35 of these quarters, the Fund delivered a positive total return. It has delivered positive total returns in 10 of its 11 calendar years of existence. As of September 30, 2014, Thornburg Investment Income Builder, Class A shares, delivered tax-efficient average annual total returns in excess of 11% since inception.
We do not expect to pay any capital gain dividend for 2014. At September 30, 2014, the Fund had realized capital losses of more than $400 million, which may be carried forward to offset future capital gains to the extent permitted by regulations.
Interest income earned by your Fund dropped by approximately $26 million, almost four cents per share, in the year ended September 30, 2014. Other factors that contributed to the year-over-year drop in dividends were individually smaller, but together created a meaningful headwind:
• | A portion of the cash distributions that the Fund received from its investments in pass-through entities (business development companies and asset managers) during 2013, were later characterized as capital gains, rather than ordinary income dividends. (Schedule K-1s disclosing tax information from pass-through entities generally arrive in March or April. We know the taxable character of the dividends received in the prior calendar year only after we receive these. We must estimate, and distribute, virtually all of the taxable income of the Fund by calendar year end. For 2013, we overestimated the ordinary income percentage of cash received from these entities, versus capital gains). In the interest of tax efficiency, we have accumulated a significant backlog of tax-loss carryforwards sufficient to offset these capital gains. Our accumulated capital loss carryforwards offset the capital gain distribution portion of the cash received for the fiscal year ended September 30th, shielding these cash receipts from the Fund’s income stream. |
• | We reduced the percentage of the portfolio invested in our highest-yielding investments, the publicly traded mortgage real estate investment trusts (REITs) and business development companies. Some of these cut their dividends in 2014 from prior-year levels. |
• | We increased the percentage of the portfolio invested in equities with yields below the average dividend yield of the overall Fund portfolio. We believe these investments will deliver higher dividend payments in the future. |
• | Appreciation of the U.S. dollar vis-à-vis certain currencies (Brazilian real and Australian dollar, for example) on a year- over-year basis reduced the U.S. dollar value of dividends received on some of the Fund’s foreign equities. We may hedge a portion of the principal invested in non-U.S. equities by executing contracts to buy dollars in the future; however, we do not normally hedge expected income distributions from these investments. |
Certified Annual Report 9
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 (Unaudited) |
Most of the common stocks currently held in the Thornburg Investment Income Builder portfolio increased their ordinary dividends in 2014, by an average of approximately 4%. Collectively, these increases were insufficient to overcome the headwinds described above.
In assessing the overall fiscal year 2014 performance of the Thornburg Investment Income Builder Fund, it is instructive to consider the performance in U.S. dollars of the sector components of the MSCI World Index over the 12 months ended September 30, 2014. The MSCI World Index comprises 75%, and the entire equity portion, of the Fund’s global performance benchmark (75% MSCI World Index and 25% Barclays U.S. Aggregate Bond Index):
1. | All 10 index sectors showed positive total returns for the 12 months ended September 30, 2014, ranging from approximately 4% (materials) to more than 25% (health care). Stocks of firms in the utilities, health care, and information technology sectors delivered index-beating returns for the period, while stocks of firms in the energy, consumer discretionary, industrials, consumer staples, financial, materials, and telecommunications sectors underperformed the index. |
2. | Income Builder Fund investments in firms in the financials (23% Fund weighting), telecommunications (18%), energy (10%), consumer staples (10%), utilities (8%), and health care (7%) sectors comprised the largest sector weightings in the Fund portfolio during fiscal 2014. The Fund’s performance relative to the MSCI World Index was hurt by comparative underperformance from our holdings in the telecommunications, health care, and consumer discretionary sectors, and by low allocations to investments in the stronger performing health care and information technology sectors. Our stock selection among financials, energy, utilities, and consumer staples equities had positive impacts on relative performance. |
3. | In the Income Builder portfolio, 63 equity investments contributed positive returns of at least .05% to the portfolio during fiscal 2014. Twenty of the Fund’s equity investments contributed negative returns of .05% or worse for the fiscal year. |
Investment Income Builder’s bond holdings delivered modestly positive returns during the fiscal year, as lower rates on U.S. government bonds were augmented by narrowing credit spreads on corporate and asset backed bonds.
Your Fund’s average return from its investments in the financial sector exceeded the performance of the equities in the finance sector of the MSCI World Free Equity Index in fiscal 2014. Fund investments in JPMorgan Chase, MFA Financial, Chimera Investment, Blackstone Group, Norwegian insurer Gjensidige Forsikring, and Zurich Insurance Group were among the strongest performers in the portfolio. U.S. business development company Solar Capital and international banking giant Standard Chartered were detractors. During the third quarter of 2013, many investors expected U.S. interest rate increases to threaten the earnings power and valuations of many of these firms. The interest rate increases have not yet arrived. Expectations about the impact of future increases have evolved in a more positive manner, supporting valuations of these stocks. As of the date of this letter, we still hold investments in each of these.
Your Fund’s significant holdings in the telecommunications sector delivered positive absolute returns this year; however, they were the largest detractor from relative performance vis-à-vis the index. Swisscom, America Movil, and China Mobile Ltd. each delivered strong returns during the period. Negative results from modest-sized positions in Russian operators MegaFon and Mobile Telesystems, Telefonica Brasil, Turkcell, and Korea’s KT Corporation weighed on the overall contribution of your Fund’s telecommunications holdings. We sold KT Corporation early in the year and have generally reduced our position sizes in the other negative contributors, pending additional evaluation.
Among Investment Income Builder’s investments in the energy sector, French integrated hydrocarbon producer Total SA and Royal Dutch Shell each delivered good portfolio performance in fiscal 2014. Both of these have seen share price declines in recent months and into October. A smaller investment in offshore drill ship operator Ensco was a negative performer in fiscal 2014. Oil prices were surprisingly steady over most of the fiscal year as speculative demand in the face of geopolitical tensions was offset by tepid global demand growth and plentiful supply from North American and Middle Eastern producers. The fiscal year ended with a weak tone and a sharp drop of more than 20% in October 2014 oil prices relative to June 2014 levels.
Returns from the Fund’s holdings in the utilities sector exceeded market returns from this sector, led by Spanish gas transmission line operator Enagas, Italian gas pipeline operator SNAM, and U.S. utilities Duke Energy and Sempra Energy. Brazilian electric generation firm EDP Energias Do Brasil was a negative contributor to overall performance, as weak hydroelectric generation attributable to a drought distorted electricity markets there.
Among Fund investments in the consumer staples sector, Walgreen’s delivered strong performance during the fiscal year; however, its share price declined in the last quarter of the year due to disappointment with a perceived failure to optimize its tax status by moving its domicile from the United States and a costly mistake on generic drug pricing for wholesale clients. Netherlands-based household products giant Reckitt Benckiser again delivered a strong return. Tobacco companies Lorillard and Korea’s KT&G Corporation each delivered positive contributions in fiscal 2014, while Latin American beverage giant Ambev was a negative
10 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 (Unaudited) |
contributor. In the two years prior to October 1, 2013, investors bid up prices of most dividend-paying firms in the consumer staples sector. We sold the Fund’s long-held positions in Coca-Cola and McDonalds on concerns about future growth potential, relative to valuation.
Investment Income Builder’s holdings in the health care sector lagged those of the MSCI World Index during the fiscal year, as modest contributions from Pfizer, Roche, and France’s Sanofi held back the better performance of Switzerland’s Novartis. We have reduced the Fund’s weighting in health care sector equities over the last year. Share price increases have reduced dividend yields and our perception of future price appreciation potential.
Among other portfolio holdings, notable contributors included semiconductor producer Intel, casino operator Wynn Resorts, chemicals producer LyondellBasell Industries, technology giants Apple, Microsoft, and Qualcomm, Italian infrastructure operator Atlantia, and Home Depot. We were pleased that data center operator Digital Realty Trust, one of our underperformers from the prior year, made a strong comeback in fiscal 2014. Negative contributors included port operators Santos Brazil and China Merchants Holdings, casino operators Wynn Macau and SJM Holdings, U.S. specialty retailers Coach and Staples, and Russian internet portal Mail.ru Group. We sold our small position in Mail.ru Group.
The euro, Australian dollar, and Swiss franc each depreciated vis-à-vis the U.S. dollar during the fiscal year, while the British pound was approximately flat. We hedged a majority of the currency exposure to the Australian dollar, Japanese yen, euro and other European currencies tied to it. We are more focused on risk management than on reaping possible currency gains from exposure to assets denominated in these currencies. Currency hedges modestly contributed to our performance relative to the MSCI World Index during the fiscal year.
Within its bond portfolio, Investment Income Builder owned significantly fewer U.S. government and agency bonds than the Barclays U.S. Aggregate Bond Index. This fact was helpful in fiscal 2014, mostly due to the yield increment of the corporate bonds. Yield spreads of corporate credits over government bond yields were little changed during the year covered by this report. As in the prior two years, we continued to allocate most of Investment Income Builder’s incoming cash flows to equities in fiscal 2014. You can expect us to increase the portfolio’s allocation to bonds if rising yields lead to significantly lower bond prices. Readers of this commentary who are long-time shareholders of Investment Income Builder will recall that the interest-bearing debt portion of the Fund’s portfolio has varied over time, ranging from less than 10% currently to 45% at June 30, 2009.
As of September 30th, the Fund portfolio included more than 100 bonds and hybrid securities.
Chart I | Interest Bearing Investments as a Percentage of Total Portfolio as of September 30, 2014
Certified Annual Report 11
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 (Unaudited) |
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 six-year period beginning shortly after the failure of Lehman Brothers in September 2008 to September 30th, 2014. Owners of approximately 580 million shares of Thornburg Investment Income Builder sold their shares at an average price of $18.77 between October 1, 2008 and September 30, 2014. We have no idea how these investors redeployed the funds redeemed from Income Builder. The fact that the Fund achieved a net asset value of $21.38 per share on September 30, 2014 and paid dividends totaling $6.52 per share over this period sets a relatively high bar for the opportunity cost of having sold Fund shares, so far.
We do not expect to know clear answers to the most important macroeconomic questions impacting financial asset prices 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. Recently, we have faced a barrage of concerns about Russian aggression in Eastern Europe, the human and economic costs associated with the spread of Ebola, ISIS and Middle East stability, economic slowdown in Europe, and the rapid collapse of oil prices from mid-August to mid-October 2014. Prices of virtually every stock in the Income Builder portfolio have declined in recent weeks, even if they have business realities that are quite removed from these issues. We are making ongoing portfolio adjustments to try to take advantage of the price volatility.
Since 2009, we have become use to Federal Reserve monetary policies that kept short-term interest rates near zero and featured bond purchases totaling more than $3.5 trillion by the central bank, funded by newly created money. For the record, total assets of all U.S. taxable and municipal bond funds combined are just under $3.5 trillion. The Federal Reserve’s bond buying spree has had the deliberate effects of (i) reducing interest rates by substantially increasing the demand for bonds; and (ii) forcing saver/investors into riskier assets to the extent they want positive investment income after taxes and inflation. Certain other central banks around the world have pursued similar policies. These accommodative monetary policies have had a positive impact on prices of most financial assets, here and abroad. We cannot be certain how long they will be continued, or what consequences will result from any changes in course. For now, the U.S. economy appears to be weathering the “tapering” of Federal Reserve bond purchases reasonably well.
Global economic growth, while positive in 2014, has been below prior expectations. Recent U.S economic data, while not perfect, have been encouraging. One example: new weekly claims for unemployment benefits, which have averaged about 365,000 per week since 1967, have been below 300,000 in recent months and hit 264,000 during the week we are composing this letter. The size of the U.S. non-farm labor force, now around 140 million, averaged 108 million over the last 47 years. The recent levels of new claims for unemployment benefits, relative to the current size of the U.S. labor force, provide evidence of strong economic performance. The 9% year-over-year increase in government receipts for the U.S. government budget year ended September 30, 2014 provides additional evidence. At some point in the future we expect U.S. monetary policy to normalize, since our economy has already done so.
Much of the rest of the world is muddling along with barely positive year-to-date economic growth. It grows increasingly difficult for firms to generate significant revenue growth, but corporate balance sheets are generally in good shape and managements are improving profitability metrics via lower interest expense, aggressive tax management, share repurchases, and labor efficiencies. Earnings expectations for the MSCI All Country World Index portfolio have been reduced for 2014 and 2015 in recent quarters, but not dramatically.
Yields available to investors in the U.S. bond market were mixed in the 12-month period ended September 30, 2014:
• | 10-year U.S. Government bond yields moved approximately 0.12% lower. |
• | Investment-grade corporate bond yields decreased, as indicated by the 0.29% decline in the FINRA-Bloomberg Index of Active Investment Grade U.S. Corporate Bond Yields, from 3.96% at September 30, 2013 to 3.67% at September 30, 2014. This corporate yield index hit a 12-month low of 3.39% in August. |
• | High yield (“junk”) corporate bond yields also declined, as indicated by the 0.16% decrease in the FINRA-Bloomberg Index of Active High Yield U.S. Corporate Bond Yields, from 6.36% on September 30, 2013 to 6.20% on September 30, 2014. This high-yield corporate index reached a 12-month low of 5.29% in June 2014, indicating a significant change in recent months. |
While lower interest rates are good news for borrowers, they have negative consequences for conservative savers and income-seeking investors.
Investors must consider other options. Yields on taxable and tax-exempt money funds remain below 1/5 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
12 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 (Unaudited) |
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.thornburginvestments.com/Funds. Best wishes for a wonderful holiday season, and a happy 2015.
Sincerely,
![]() | ![]() | ![]() | ||
Brian McMahon | Jason Brady, CFA | Ben Kirby, CFA | ||
Portfolio Manager | Portfolio Manager | Portfolio Manager | ||
CEO & Chief Investment Officer | Managing Director | Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 13
SCHEDULE OF INVESTMENTS | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
Summary of Industry Group Exposure
As of 9/30/14
Telecommunication Services | 19.5 | % | ||
Energy | 10.4 | % | ||
Diversified Financials | 7.7 | % | ||
Banks | 7.0 | % | ||
Utilities | 6.9 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 6.6 | % | ||
Real Estate | 5.6 | % | ||
Food, Beverage & Tobacco | 4.7 | % | ||
Insurance | 3.9 | % | ||
Materials | 3.1 | % | ||
Technology Hardware & Equipment | 2.7 | % | ||
Transportation | 2.6 | % | ||
Capital Goods | 2.6 | % | ||
Retailing | 2.4 | % | ||
Food & Staples Retailing | 2.3 | % | ||
Semiconductors & Semiconductor Equipment | 2.3 | % | ||
Consumer Services | 2.2 | % | ||
Household & Personal Products | 1.1 | % | ||
Software & Services | 0.9 | % | ||
Automobiles & Components | 0.8 | % | ||
Media | 0.6 | % | ||
Miscellaneous | 0.4 | % | ||
Consumer Durables & Apparel | 0.4 | % | ||
Commercial & Professional Services | 0.1 | % | ||
Other Non-Classified Securities: | ||||
Asset Backed Securities | 0.4 | % | ||
U.S. Government Agencies* | 0.0 | % | ||
Municipal Bonds* | 0.0 | % | ||
Other Assets & Liabilities | 2.8 | % |
* | Percentage was less than 0.1%. |
Top Ten Equity Holdings
As of 9/30/14
JPMorgan Chase & Co. | 3.4 | % | ||
China Mobile Ltd. | 2.8 | % | ||
Royal Dutch Shell plc ADR | 2.4 | % | ||
Novartis AG | 2.0 | % | ||
Roche Holding AG | 1.8 | % | ||
Sanofi | 1.6 | % | ||
CME Group, Inc. | 1.6 | % | ||
Intel Corp. | 1.5 | % | ||
Vodafone Group plc | 1.5 | % | ||
Total SA | 1.4 | % |
Summary of Country Exposure*
As of 9/30/14 (percent of equity holdings)
United States | 40.6 | % | ||
Switzerland | 8.3 | % | ||
France | 6.3 | % | ||
China | 5.6 | % | ||
United Kingdom | 5.1 | % | ||
Netherlands | 4.0 | % | ||
Brazil | 2.6 | % | ||
Singapore | 2.4 | % | ||
Norway | 2.4 | % | ||
Canada | 2.3 | % | ||
Italy | 2.0 | % | ||
Spain | 1.9 | % | ||
Hong Kong | 1.7 | % | ||
Mexico | 1.4 | % | ||
Denmark | 1.4 | % | ||
Australia | 1.2 | % | ||
Russia | 1.1 | % | ||
Saudi Arabia | 1.1 | % | ||
Germany | 1.0 | % | ||
Japan | 0.9 | % | ||
South Korea | 0.8 | % | ||
Taiwan | 0.7 | % | ||
Turkey | 0.5 | % | ||
Philippines | 0.3 | % | ||
New Zealand | 0.3 | % | ||
Cayman Islands | 0.3 | % | ||
Bermuda | 0.3 | % | ||
Luxembourg | 0.2 | % | ||
Argentina | 0.2 | % | ||
South Africa | 0.1 | % | ||
Panama | 0.1 | % | ||
Ireland | 0.1 | % | ||
Trinidad and Tobago** | 0.0 | % | ||
Other Assets & Liabilities | 2.8 | % |
* | The country exposure of each holding is determined by the Fund’s Advisor based on various factors, including the location of the issuer’s head office, the issuer’s jurisdiction of incorporation and the country from which a majority of the issuer’s revenue is derived. |
** | Country percentage was less than 0.01%. |
14 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
COMMON STOCK — 88.93% | ||||||||
AUTOMOBILES & COMPONENTS — 0.79% | ||||||||
Automobiles — 0.79% | ||||||||
Toyota Motor Corp. | 2,472,000 | $ | 145,671,630 | |||||
|
| |||||||
145,671,630 | ||||||||
|
| |||||||
BANKS — 6.53% | ||||||||
Banks — 6.53% | ||||||||
Bank of China Ltd. | 174,998,000 | 78,204,094 | ||||||
Banque Cantonale Vaudoise | 44,400 | 23,811,459 | ||||||
DBS Group Holdings Ltd. | 14,878,900 | 214,838,393 | ||||||
Industrial and Commercial Bank of China Ltd. | 144,238,000 | 89,720,927 | ||||||
JPMorgan Chase & Co. | 10,354,000 | 623,724,960 | ||||||
Liechtensteinische Landesbank AG | 1,150,000 | 46,375,825 | ||||||
St. Galler Kantonalbank AG | 78,741 | 28,681,453 | ||||||
Standard Chartered plc | 5,540,000 | 102,430,266 | ||||||
|
| |||||||
1,207,787,377 | ||||||||
|
| |||||||
CAPITAL GOODS — 2.45% | ||||||||
Construction & Engineering — 1.38% | ||||||||
Vinci S.A. | 4,409,154 | 256,201,110 | ||||||
Industrial Conglomerates — 1.07% | ||||||||
Hopewell Holdings Ltd. | 36,952,340 | 129,442,764 | ||||||
NWS Holdings Ltd. | 38,000,000 | 68,513,880 | ||||||
|
| |||||||
454,157,754 | ||||||||
|
| |||||||
CONSUMER DURABLES & APPAREL — 0.35% | ||||||||
Textiles, Apparel & Luxury Goods — 0.35% | ||||||||
Coach, Inc. | 1,837,100 | 65,419,131 | ||||||
|
| |||||||
65,419,131 | ||||||||
|
| |||||||
CONSUMER SERVICES — 1.92% | ||||||||
Hotels, Restaurants & Leisure — 1.92% | ||||||||
Sands China Ltd. | 12,374,000 | 64,540,461 | ||||||
SJM Holdings Ltd. | 30,803,000 | 58,711,295 | ||||||
Wynn Macau Ltd. | 20,015,600 | 63,669,655 | ||||||
Wynn Resorts Ltd. | 900,000 | 168,372,000 | ||||||
|
| |||||||
355,293,411 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 6.72% | ||||||||
Capital Markets — 5.15% | ||||||||
Apollo Global Management, LLC | 4,250,000 | 101,320,000 | ||||||
a Apollo Investment Corp. | 13,590,000 | 111,030,300 | ||||||
Ares Capital Corp. | 10,125,300 | 163,624,848 | ||||||
GAM Holding AG | 4,865,982 | 84,098,359 | ||||||
KKR & Co. LP | 8,025,000 | 178,957,500 | ||||||
Och-Ziff Capital Management Group, LLC | 8,400,000 | 89,964,000 | ||||||
a Solar Capital Ltd. | 4,607,900 | 86,075,572 | ||||||
The Blackstone Group LP | 4,334,000 | 136,434,320 | ||||||
Diversified Financial Services — 1.57% | ||||||||
CME Group, Inc. | 3,640,350 | 291,064,184 | ||||||
|
| |||||||
1,242,569,083 | ||||||||
|
| |||||||
ENERGY — 9.33% | ||||||||
Energy Equipment & Services — 0.48% | ||||||||
Ensco plc | 2,140,000 | 88,403,400 | ||||||
Oil, Gas & Consumable Fuels — 8.85% | ||||||||
Canadian Oil Sands Ltd. | 8,994,000 | 165,914,585 | ||||||
b Halcon Resources Corp. | 52,485 | 207,841 | ||||||
HollyFrontier Corp. | 3,204,700 | 139,981,296 | ||||||
Husky Energy, Inc. | 9,322,100 | 255,869,775 | ||||||
Kinder Morgan, Inc. | 4,525,000 | 173,488,500 | ||||||
Linn Co., LLC | 3,060,000 | 88,587,000 | ||||||
Royal Dutch Shell plc ADR | 5,872,500 | 447,073,425 |
Certified Annual Report 15
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
Statoil ASA | 3,664,700 | $ | 99,934,696 | |||||
Total SA | 4,100,700 | 266,479,670 | ||||||
b,c TPT Acquisition, Inc. | 163,790 | 0 | ||||||
|
| |||||||
1,725,940,188 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 2.17% | ||||||||
Food & Staples Retailing — 2.17% | ||||||||
Koninklijke Ahold NV | 9,076,838 | 146,974,947 | ||||||
Walgreen Co. | 4,289,406 | 254,233,094 | ||||||
|
| |||||||
401,208,041 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 4.52% | ||||||||
Beverages — 0.60% | ||||||||
Ambev SA ADR | 16,986,000 | 111,258,300 | ||||||
Food Products — 1.28% | ||||||||
Nestle SA | 3,204,600 | 235,805,122 | ||||||
Tobacco — 2.64% | ||||||||
British American Tobacco plc | 1,090,600 | 61,562,679 | ||||||
Korea Tobacco & Ginseng Corp. | 1,576,601 | 141,188,149 | ||||||
Lorillard, Inc. | 3,591,100 | 215,142,801 | ||||||
Philip Morris International | 855,000 | 71,307,000 | ||||||
|
| |||||||
836,264,051 | ||||||||
|
| |||||||
HOUSEHOLD & PERSONAL PRODUCTS — 1.07% | ||||||||
Household Products — 0.95% | ||||||||
Reckitt Benckiser plc | 2,013,500 | 174,633,944 | ||||||
Personal Products — 0.12% | ||||||||
Hengan International Group Co. Ltd. | 2,304,500 | 22,629,945 | ||||||
|
| |||||||
197,263,889 | ||||||||
|
| |||||||
INSURANCE — 2.73% | ||||||||
Insurance — 2.73% | ||||||||
Allianz SE | 451,070 | 73,124,098 | ||||||
Gjensidige Forsikring ASA | 5,520,476 | 116,772,277 | ||||||
Munich Re | 497,615 | 98,393,688 | ||||||
Scor SE | 1,627,282 | 50,838,817 | ||||||
Zurich Financial Services AG | 554,293 | 165,353,144 | ||||||
|
| |||||||
504,482,024 | ||||||||
|
| |||||||
MATERIALS — 2.85% | ||||||||
Chemicals — 1.59% | ||||||||
LyondellBasell Industries NV | 1,659,300 | 180,299,538 | ||||||
Saudi Basic Industries Corp. | 2,056,248 | 71,923,461 | ||||||
Yanbu National Petrochemical Co. | 2,218,322 | 42,580,667 | ||||||
Metals & Mining — 1.26% | ||||||||
b Jaguar Mining, Inc. | 797,101 | 395,362 | ||||||
Nucor Corp. | 3,431,600 | 186,267,248 | ||||||
Southern Copper Corp. | 1,536,000 | 45,542,400 | ||||||
|
| |||||||
527,008,676 | ||||||||
|
| |||||||
MEDIA — 0.41% | ||||||||
Media — 0.41% | ||||||||
Wolters Kluwer N.V. | 2,845,800 | 75,913,496 | ||||||
|
| |||||||
75,913,496 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 6.63% | ||||||||
Pharmaceuticals — 6.63% | ||||||||
Novartis AG | 3,936,800 | 371,742,453 | ||||||
Pfizer, Inc. | 7,558,600 | 223,507,802 | ||||||
Roche Holding AG | 1,117,200 | 331,286,603 | ||||||
Sanofi | 2,650,900 | 299,866,627 | ||||||
|
| |||||||
1,226,403,485 | ||||||||
|
| |||||||
REAL ESTATE — 5.58% | ||||||||
Real Estate Investment Trusts — 5.58% | ||||||||
Capstead Mortgage Corp. | 3,250,000 | 39,780,000 |
16 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
Chimera Investment Corp. | 47,850,000 | $ | 145,464,000 | |||||
Digital Realty Trust, Inc. | 1,423,700 | 88,810,406 | ||||||
a Dynex Capital, Inc. | 5,062,000 | 40,900,960 | ||||||
a Invesco Mortgage Capital, Inc. | 8,350,000 | 131,262,000 | ||||||
a MFA Financial, Inc. | 25,500,000 | 198,390,000 | ||||||
Senior Housing Properties Trust | 4,670,000 | 97,696,400 | ||||||
Two Harbors Investment Corp. | 14,900,000 | 144,083,000 | ||||||
a Washington REIT | 5,721,000 | 145,198,980 | ||||||
|
| |||||||
1,031,585,746 | ||||||||
|
| |||||||
RETAILING — 2.33% | ||||||||
Specialty Retail — 2.33% | ||||||||
Staples, Inc. | 16,100,000 | 194,810,000 | ||||||
The Home Depot, Inc. | 2,571,500 | 235,909,410 | ||||||
|
| |||||||
430,719,410 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.19% | ||||||||
Semiconductors & Semiconductor Equipment — 2.19% | ||||||||
Intel Corp. | 8,175,000 | 284,653,500 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 30,649,000 | 120,905,340 | ||||||
|
| |||||||
405,558,840 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 0.81% | ||||||||
Internet Software & Services — 0.02% | ||||||||
b Mail.ru Group Ltd. | 174,128 | 4,894,738 | ||||||
Software — 0.79% | ||||||||
Microsoft Corp. | 3,150,000 | 146,034,000 | ||||||
|
| |||||||
150,928,738 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.67% | ||||||||
Communications Equipment — 1.35% | ||||||||
Qualcomm, Inc. | 3,351,000 | 250,554,270 | ||||||
Technology, Hardware, Storage & Periphals — 1.32% | ||||||||
Apple, Inc. | 2,416,000 | 243,412,000 | ||||||
|
| |||||||
493,966,270 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 18.29% | ||||||||
Diversified Telecommunication Services — 10.32% | ||||||||
AT&T, Inc. | 5,054,000 | 178,102,960 | ||||||
BT Group plc | 29,032,284 | 178,661,368 | ||||||
Singapore Telecommunications Ltd. | 79,489,600 | 238,649,501 | ||||||
Swisscom AG | 448,100 | 254,628,941 | ||||||
TDC A/S | 33,047,600 | 250,988,042 | ||||||
Telefonica Brasil SA ADR | 9,300,000 | 183,024,000 | ||||||
Telefonica S.A. | 7,253,465 | 112,274,089 | ||||||
Telenor ASA | 10,016,800 | 219,832,491 | ||||||
Telstra Corp. Ltd. | 25,141,000 | 116,664,697 | ||||||
Vivendi | 7,313,668 | 176,621,608 | ||||||
Wireless Telecommunication Services — 7.97% | ||||||||
America Movil SAB de C.V. ADR | 9,410,000 | 237,132,000 | ||||||
China Mobile Ltd. | 45,258,070 | 522,532,435 | ||||||
Etihad Etisalat Co. | 3,380,000 | 81,267,760 | ||||||
MegaFon OAO | 3,278,300 | 83,203,254 | ||||||
MegaFon OAO GDR | 2,035,900 | 51,671,142 | ||||||
Mobile TeleSystems ADR | 4,387,000 | 65,541,780 | ||||||
Philippine Long Distance Telephone Co. | 852,400 | 58,843,189 | ||||||
b Turkcell Iletisim Hizmetleri AS | 19,068,300 | 99,673,967 | ||||||
Vodafone Group plc | 82,427,924 | 273,135,720 | ||||||
|
| |||||||
3,382,448,944 | ||||||||
|
| |||||||
TRANSPORTATION — 2.53% | ||||||||
Transportation Infrastructure — 2.53% | ||||||||
Atlantia S.p.A. | 9,547,625 | 235,756,035 | ||||||
China Merchants Holdings International Co., Ltd. | 26,370,830 | 81,508,326 | ||||||
Jiangsu Express Co., Ltd. | 45,798,000 | 48,069,660 | ||||||
Santos Brasil Participacoes S.A. | 5,159,650 | 34,949,238 |
Certified Annual Report 17
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
Sydney Airport | 17,927,254 | $ | 67,022,818 | |||||
|
| |||||||
467,306,077 | ||||||||
|
| |||||||
UTILITIES — 6.06% | ||||||||
Electric Utilities — 3.25% | ||||||||
Duke Energy Corp. | 3,132,000 | 234,179,640 | ||||||
EDP—Energias do Brasil SA | 14,054,100 | 57,416,403 | ||||||
Electricite de France SA | 2,942,585 | 96,520,968 | ||||||
Entergy Corp. | 1,057,200 | 81,753,276 | ||||||
Mighty River Power Ltd. | 28,397,100 | 56,861,414 | ||||||
Terna Rete Elettrica Nazionale S.p.A. | 14,799,121 | 74,431,690 | ||||||
Gas Utilities — 0.86% | ||||||||
Enagas SA | 3,195,600 | 103,044,290 | ||||||
Snam S.p.A. | 10,278,104 | 56,860,127 | ||||||
Independent Power & Renewable Electricity Producers — 0.63% | ||||||||
China Resources Power Holdings Co. | 13,184,000 | 35,571,170 | ||||||
Huaneng Power International, Inc. | 74,257,000 | 81,096,140 | ||||||
Multi-Utilities — 1.32% | ||||||||
Dominion Resources, Inc. | 1,770,000 | 122,289,300 | ||||||
Sempra Energy | 1,150,000 | 121,187,000 | ||||||
|
| |||||||
1,121,211,418 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $14,531,925,609) | 16,449,107,679 | |||||||
|
| |||||||
PREFERRED STOCK — 0.78% | ||||||||
BANKS — 0.19% | ||||||||
Banks — 0.19% | ||||||||
Barclays Bank plc Pfd, 7.10% | 200,000 | 5,148,000 | ||||||
First Niagara Financial Group Pfd, 8.625% | 143,295 | 4,055,248 | ||||||
First Tennessee Bank Pfd, 3.75% | 12,000 | 8,720,250 | ||||||
GMAC Capital Trust I Pfd, 8.125% | 628,126 | 16,714,433 | ||||||
|
| |||||||
34,637,931 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 0.15% | ||||||||
Capital Markets — 0.01% | ||||||||
Morgan Stanley Pfd, 4.00% | 120,000 | 2,386,800 | ||||||
Consumer Finance — 0.14% | ||||||||
Ally Financial, Inc. Pfd, 8.50% | 930,495 | 25,058,230 | ||||||
|
| |||||||
27,445,030 | ||||||||
|
| |||||||
ENERGY — 0.08% | ||||||||
Oil, Gas & Consumable Fuels — 0.08% | ||||||||
Halcon Resources Corp. Pfd, 5.75% | 18,822 | 15,998,700 | ||||||
|
| |||||||
15,998,700 | ||||||||
|
| |||||||
INSURANCE — 0.13% | ||||||||
Insurance — 0.13% | ||||||||
Principal Financial Group Pfd, 5.563% | 234,400 | 24,047,987 | ||||||
|
| |||||||
24,047,987 | ||||||||
|
| |||||||
MISCELLANEOUS — 0.06% | ||||||||
U.S. Government Agencies — 0.06% | ||||||||
Farm Credit Bank of Texas Pfd, 10.00% | 9,000 | 11,252,813 | ||||||
|
| |||||||
11,252,813 | ||||||||
|
| |||||||
REAL ESTATE — 0.07% | ||||||||
Real Estate Investment Trusts — 0.07% | ||||||||
Alexandria Real Estate Pfd, 7.00% | 463,500 | 12,505,230 | ||||||
|
| |||||||
12,505,230 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 0.10% | ||||||||
Wireless Telecommunication Services — 0.10% | ||||||||
Centaur Funding Corp. Pfd, 9.08% | 15,000 | 18,759,375 | ||||||
|
| |||||||
18,759,375 | ||||||||
|
| |||||||
TOTAL PREFERRED STOCK (Cost $138,650,528) | 144,647,066 | |||||||
|
|
18 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
ASSET BACKED SECURITIES — 0.36% | ||||||||
COMMERCIAL MTG TRUST — 0.10% | ||||||||
Citigroup Commercial Mtg Trust, Series 2004-HYB2 Class B1, 2.63%, 3/25/2034 | $ | 1,083,409 | $ | 880,403 | ||||
d CVS Pass-Through Trust, 9.35%, 1/10/2023 | 15,000,000 | 17,646,960 | ||||||
|
| |||||||
18,527,363 | ||||||||
|
| |||||||
OTHER ASSET BACKED — 0.07% | ||||||||
d Fairway Outdoor Funding, LLC, Series 2012-1 Class B, 8.835%, 10/15/2042 | 7,000,000 | 6,872,540 | ||||||
d JPR Royalty, LLC, 14.00%, 9/1/2020 | 5,000,000 | 3,319,445 | ||||||
c,d Northwind Holdings, LLC, Series 2007-1A Class A1 Floating Rate Note, 1.014%, 12/1/2037 | 3,542,380 | 3,188,142 | ||||||
|
| |||||||
13,380,127 | ||||||||
|
| |||||||
RESIDENTIAL MTG TRUST — 0.19% | ||||||||
Banc of America Funding Corp., Series 2006-I Class SB1, 2.269%, 12/20/2036 | 2,967,993 | 742,427 | ||||||
Bear Stearns ARM Mtg, Series 2003-6 Class 2B-1, 2.487%, 8/25/2033 | 287,417 | 282,632 | ||||||
FBR Securitization Trust, Series 2005-2 Class M1, 0.875%, 9/25/2035 | 20,100,000 | 19,346,525 | ||||||
Merrill Lynch Mortgage Investors Trust, Series 2004-A4 Class M1, 2.461%, 8/25/2034 | 5,416,575 | 4,962,281 | ||||||
Morgan Stanley Capital, Inc., Series 2005-HE7 Class A2C, 0.475%, 11/25/2035 | 5,602,163 | 5,504,094 | ||||||
Residential Asset Securities Corp., Series 2006-KS4 Class A3, 0.305%, 6/25/2036 | 1,874,853 | 1,856,125 | ||||||
Wells Fargo Asset Securities Corp., Series 2005-AR1 Class 1B1, 2.615%, 2/25/2035 | 6,279,252 | 1,500,160 | ||||||
|
| |||||||
34,194,244 | ||||||||
|
| |||||||
TOTAL ASSET BACKED SECURITIES (Cost $67,228,453) | 66,101,734 | |||||||
|
| |||||||
CORPORATE BONDS — 6.41% | ||||||||
BANKS — 0.29% | ||||||||
Banks — 0.29% | ||||||||
d Banco Santander Brasil S.A. (BRL), 8.00%, 3/18/2016 | 42,200,000 | 16,464,508 | ||||||
DEPFA Bank plc (EUR), 0.784%, 12/15/2015 | 7,500,000 | 9,000,296 | ||||||
d,e Groupe BPCE, 12.50%, 8/29/2049 | 10,211,000 | 13,861,433 | ||||||
d Itau Unibanco Holding S.A. (BRL), 10.50%, 11/23/2015 | 10,000,000 | 4,039,628 | ||||||
PNC Financial Services Group, Inc., 4.454%, 5/29/2049 | 10,000,000 | 10,000,000 | ||||||
|
| |||||||
53,365,865 | ||||||||
|
| |||||||
CAPITAL GOODS — 0.11% | ||||||||
Industrial Conglomerates — 0.11% | ||||||||
Otter Tail Corp., 9.00%, 12/15/2016 | 17,000,000 | 19,541,194 | ||||||
|
| |||||||
19,541,194 | ||||||||
|
| |||||||
CONSUMER SERVICES — 0.15% | ||||||||
Hotels, Restaurants & Leisure — 0.15% | ||||||||
d,e Arcos Dorados Holdings I, 6.625%, 9/27/2023 | 3,000,000 | 2,977,500 | ||||||
d Arcos Dorados Holdings, Inc. (BRL), 10.25%, 7/13/2016 | 66,000,000 | 25,210,908 | ||||||
|
| |||||||
28,188,408 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 0.76% | ||||||||
Capital Markets — 0.06% | ||||||||
Goldman Sachs Group, Inc., 5.625%, 1/15/2017 | 8,000,000 | 8,688,088 | ||||||
Morgan Stanley (BRL), 10.09%, 5/3/2017 | 4,560,000 | 1,818,225 | ||||||
Consumer Finance — 0.27% | ||||||||
Capital One Bank, 6.15%, 9/1/2016 | 25,000,000 | 27,316,525 | ||||||
d,f Cash Store Financial (CAD), 0%, 1/31/2017 | 10,000,000 | 1,829,546 | ||||||
d Lowell Group Financing plc (GBP), 10.75%, 4/1/2019 | 12,000,000 | 21,131,693 | ||||||
Diversified Financial Services — 0.43% | ||||||||
Bank of America Corp. (BRL), 10.00%, 11/19/2014 | 6,500,000 | 2,620,739 | ||||||
c Bank of America Corp. (BRL), 10.75%, 8/20/2018 | 5,000,000 | 1,981,412 | ||||||
d,e CFG Holdings Ltd./CFG Finance, LLC, 11.50%, 11/15/2019 | 22,780,000 | 24,545,450 | ||||||
JPMorgan Chase & Co., 7.90%, 4/29/2049 | 15,000,000 | 16,237,500 | ||||||
KFW (BRL), 5.375%, 9/14/2015 | 53,000,000 | 20,713,467 | ||||||
National Rural Utilities CFC, 10.375%, 11/1/2018 | 5,000,000 | 6,584,020 | ||||||
d TMX Finance, LLC/Titlemax Finance, 8.50%, 9/15/2018 | 8,000,000 | 7,960,000 | ||||||
|
| |||||||
141,426,665 | ||||||||
|
| |||||||
ENERGY — 0.97% | ||||||||
Oil, Gas & Consumable Fuels — 0.97% | ||||||||
d DCP Midstream, LLC, 9.75%, 3/15/2019 | 5,000,000 | 6,402,530 | ||||||
Enbridge Energy Partners LP, 9.875%, 3/1/2019 | 9,750,000 | 12,631,924 |
Certified Annual Report 19
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
Energy Transfer Partners LP, 3.257%, 11/1/2066 | $ | 13,820,000 | $ | 12,938,975 | ||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 14,480,000 | 16,362,400 | ||||||
Gastar Exploration USA, Inc., 8.625%, 5/15/2018 | 17,292,000 | 17,810,760 | ||||||
d,e Gaz Capital SA, 8.146%, 4/11/2018 | 2,000,000 | 2,190,280 | ||||||
Kinder Morgan Energy Partners LP, 9.00%, 2/1/2019 | 8,000,000 | 9,967,656 | ||||||
d Linc Energy, 9.625%, 10/31/2017 | 19,433,000 | 20,210,320 | ||||||
d Linc Energy, 12.50%, 10/31/2017 | 21,300,000 | 22,205,250 | ||||||
NuStar Logistics LP, 8.15%, 4/15/2018 | 18,000,000 | �� | 20,475,000 | |||||
Oneok Partners LP, 8.625%, 3/1/2019 | 8,000,000 | 9,959,192 | ||||||
d,e Petro Co., Trinidad Tobago Ltd., 9.75%, 8/14/2019 | 4,000,000 | 5,030,000 | ||||||
e Petrobras Global Finance B.V., 3.00%, 1/15/2019 | 4,000,000 | 3,896,040 | ||||||
RAAM Global Energy Co., 12.50%, 10/1/2015 | 15,000,000 | 11,550,000 | ||||||
Teppco Partners LP, 7.00%, 6/1/2067 | 7,000,000 | 7,105,000 | ||||||
|
| |||||||
178,735,327 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 0.13% | ||||||||
Food & Staples Retailing — 0.13% | ||||||||
d Bakkavor Finance 2 plc (GBP), 8.75%, 6/15/2020 | 14,132,000 | 24,170,149 | ||||||
|
| |||||||
24,170,149 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 0.17% | ||||||||
Beverages — 0.09% | ||||||||
Ambev International Finance Co., Ltd. (BRL), 9.50%, 7/24/2017 | 21,669,000 | 8,609,173 | ||||||
Anheuser-Busch InBev (BRL), 9.75%, 11/17/2015 | 20,000,000 | 8,089,061 | ||||||
Food Products — 0.03% | ||||||||
d,e BRF S.A., 4.75%, 5/22/2024 | 6,000,000 | 5,910,000 | ||||||
Tobacco — 0.05% | ||||||||
Altria Group, Inc., 9.70%, 11/10/2018 | 2,376,000 | 3,060,766 | ||||||
d,e B.A.T. International Finance, plc, 9.50%, 11/15/2018 | 5,000,000 | 6,395,205 | ||||||
|
| |||||||
32,064,205 | ||||||||
|
| |||||||
INSURANCE — 1.01% | ||||||||
Insurance — 1.01% | ||||||||
d,e Dai Ichi Mutual Life Insurance Co., Ltd., 7.25%, 12/29/2049 | 9,000,000 | 10,552,500 | ||||||
ELM B.V. (AUD), 7.635%, 12/29/2049 | 10,500,000 | 9,768,316 | ||||||
ELM B.V. (AUD), 3.89%, 4/29/2049 | 8,000,000 | 6,809,798 | ||||||
Hartford Financial Services Group, 8.125%, 6/15/2068 | 9,650,000 | 11,314,625 | ||||||
d MetLife Capital Trust X, 9.25%, 4/8/2068 | 12,000,000 | 17,310,000 | ||||||
MetLife, Inc., 6.817%, 8/15/2018 | 4,000,000 | 4,690,920 | ||||||
d National Life Insurance of Vermont, 10.50%, 9/15/2039 | 2,000,000 | 3,039,058 | ||||||
d Prudential Holdings, LLC, 8.695%, 12/18/2023 | 4,307,143 | 5,445,835 | ||||||
d,e QBE Capital Funding III Ltd., 7.25%, 5/24/2041 | 40,000,000 | 43,600,000 | ||||||
Transatlantic Holdings, Inc., 5.75%, 12/14/2015 | 14,647,000 | 15,493,582 | ||||||
d,e White Mountains Re Group Ltd., 7.506%, 5/29/2049 | 28,590,000 | 30,019,500 | ||||||
d ZFS Finance USA Trust II, 6.45%, 12/15/2065 | 25,748,000 | 27,550,360 | ||||||
d ZFS Finance USA Trust V, 6.50%, 5/9/2067 | 1,260,000 | 1,354,500 | ||||||
|
| |||||||
186,948,994 | ||||||||
|
| |||||||
MATERIALS — 0.25% | ||||||||
Construction Materials — 0.09% | ||||||||
d,e CEMEX Espana Luxembourg, 9.875%, 4/30/2019 | 1,460,000 | 1,620,600 | ||||||
CRH America, Inc., 8.125%, 7/15/2018 | 12,000,000 | 14,487,600 | ||||||
Metals & Mining — 0.16% | ||||||||
e Anglogold Holdings, 8.50%, 7/30/2020 | 20,000,000 | 22,012,000 | ||||||
Coeur d’Alene Mines Corp., 7.875%, 2/1/2021 | 7,687,000 | 7,206,563 | ||||||
|
| |||||||
45,326,763 | ||||||||
|
| |||||||
MEDIA — 0.22% | ||||||||
Media — 0.22% | ||||||||
Comcast Cable Communications, LLC, 8.875%, 5/1/2017 | 5,000,000 | 5,952,245 | ||||||
d,e Nara Cable Funding Ltd., 8.875%, 12/1/2018 | 8,985,000 | 9,434,250 | ||||||
Time Warner Cable, Inc., 8.75%, 2/14/2019 | 14,000,000 | 17,623,354 | ||||||
WMG Holdings Corp., 13.75%, 10/1/2019 | 6,000,000 | 6,960,000 | ||||||
|
| |||||||
39,969,849 | ||||||||
|
|
20 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT† | VALUE | |||||||
MISCELLANEOUS — 0.29% | ||||||||
Miscellaneous — 0.29% | ||||||||
Federative Republic of Brazil (BRL), 12.50%, 1/5/2016 | $ | 109,401,000 | $ | 45,309,065 | ||||
Federative Republic of Brazil (BRL), 12.50%, 1/5/2022 | 20,000,000 | 9,192,115 | ||||||
|
| |||||||
54,501,180 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.06% | ||||||||
Semiconductors & Semiconductor Equipment — 0.06% | ||||||||
KLA Tencor Corp., 6.90%, 5/1/2018 | 10,000,000 | 11,590,430 | ||||||
|
| |||||||
11,590,430 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 0.11% | ||||||||
Internet Software & Services — 0.11% | ||||||||
d,e eAccess Ltd., 8.25%, 4/1/2018 | 5,600,000 | 5,908,000 | ||||||
d eAccess Ltd. (EUR), 8.375%, 4/1/2018 | 4,600,000 | 6,202,209 | ||||||
c Yahoo!, Inc., 6.65%, 8/10/2026 | 7,502,270 | 8,252,497 | ||||||
|
| |||||||
20,362,706 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 1.07% | ||||||||
Diversified Telecommunication Services — 1.00% | ||||||||
e Deutsche Telekom International Finance BV, 8.75%, 6/15/2030 | 26,150,000 | 38,021,525 | ||||||
Level 3 Communications, Inc., 8.875%, 6/1/2019 | 9,000,000 | 9,607,500 | ||||||
Level 3 Communications, Inc., 11.875%, 2/1/2019 | 6,000,000 | 6,480,000 | ||||||
Qwest Corp., 6.75%, 12/1/2021 | 9,000,000 | 10,317,501 | ||||||
e Telefonica Emisiones SAU, 6.221%, 7/3/2017 | 2,770,000 | 3,090,406 | ||||||
e Telefonica Emisiones SAU, 7.045%, 6/20/2036 | 85,390,000 | 108,165,989 | ||||||
d,e Telemar Norte Leste SA, 5.50%, 10/23/2020 | 9,065,000 | 8,804,835 | ||||||
Wireless Telecommunication Services — 0.07% | ||||||||
d,e VimpelCom (UBS SA), 8.25%, 5/23/2016 | 4,500,000 | 4,702,500 | ||||||
d,e VimpelCom Holdings B.V., 7.504%, 3/1/2022 | 8,735,000 | 8,898,781 | ||||||
|
| |||||||
198,089,037 | ||||||||
|
| |||||||
TRANSPORTATION — 0.10% | ||||||||
Airlines — 0.10% | ||||||||
American Airlines, 4.95%, 7/15/2024 | 5,026,631 | 5,391,062 | ||||||
c Iberbond 2004 plc (EUR), 4.235%, 12/24/2017 | 7,599,497 | 9,684,935 | ||||||
US Airways, 6.25%, 10/22/2024 | 2,418,972 | 2,727,391 | ||||||
|
| |||||||
17,803,388 | ||||||||
|
| |||||||
UTILITIES — 0.72% | ||||||||
Electric Utilities — 0.39% | ||||||||
Alabama Power Capital Trust V, 3.335%, 10/1/2042 | 4,000,000 | 3,740,248 | ||||||
Arizona Public Service Co., 8.75%, 3/1/2019 | 6,500,000 | 8,257,191 | ||||||
Cia de Eletricidade do Estado da Bahia (BRL), 11.75%, 4/27/2016 | 12,000,000 | 4,804,412 | ||||||
d,e Enel Finance International S.A., 6.25%, 9/15/2017 | 40,000,000 | 44,914,120 | ||||||
Entergy Gulf States Louisiana, LLC, 6.00%, 5/1/2018 | 8,000,000 | 9,074,184 | ||||||
d Great River Energy, 5.829%, 7/1/2017 | 764,327 | 822,473 | ||||||
Independent Power & Renewable Electricity Producers — 0.10% | ||||||||
d,e Inkia Energy Ltd., 8.375%, 4/4/2021 | 18,000,000 | 19,737,000 | ||||||
Multi-Utilities — 0.23% | ||||||||
Ameren Illinois Co., 9.75%, 11/15/2018 | 5,000,000 | 6,464,545 | ||||||
d Enogex, LLC, 6.25%, 3/15/2020 | 2,500,000 | 2,855,618 | ||||||
NiSource Finance Corp., 6.40%, 3/15/2018 | 20,000,000 | 22,827,380 | ||||||
Sempra Energy, 9.80%, 2/15/2019 | 7,750,000 | 10,099,381 | ||||||
|
| |||||||
133,596,552 | ||||||||
|
| |||||||
TOTAL CORPORATE BONDS (Cost $1,063,878,783) | 1,185,680,712 | |||||||
|
| |||||||
CONVERTIBLE BONDS — 0.03% | ||||||||
TELECOMMUNICATION SERVICES — 0.03% | ||||||||
Diversified Telecommunication Services — 0.03% | ||||||||
Alaska Communication Systems Group, Inc., 6.25%, 5/1/2018 | 2,535,000 | 2,028,000 | ||||||
Level 3 Communications, Inc., 7.00%, 3/15/2015 | 2,000,000 | 3,411,250 | ||||||
|
| |||||||
5,439,250 | ||||||||
|
| |||||||
TOTAL CONVERTIBLE BONDS (Cost $4,067,978) | 5,439,250 | |||||||
|
|
Certified Annual Report 21
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
MUNICIPAL BONDS — 0.01% | ||||||||
San Bernardino County California Redevelopment Agency (San Sevaine), 8.45%, 9/1/2030 | $ | 2,555,000 | $ | 2,909,149 | ||||
|
| |||||||
TOTAL MUNICIPAL BONDS (Cost $2,504,274) | 2,909,149 | |||||||
|
| |||||||
U.S. GOVERNMENT AGENCIES — 0.05% | ||||||||
d Agribank FCB, 9.125%, 7/15/2019 | 6,750,000 | 8,586,257 | ||||||
|
| |||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $6,750,000) | 8,586,257 | |||||||
|
| |||||||
LOAN PARTICIPATIONS — 0.67% | ||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.14% | ||||||||
Professional Services — 0.14% | ||||||||
Academi Holdings, LLC, 11.00%, 7/24/2020 | 26,000,000 | 25,480,000 | ||||||
CONSUMER SERVICES — 0.08% | ||||||||
Hotels, Restaurants & Leisure — 0.08% | ||||||||
c Private Restaurants Properties, Inc., 9.00%, 4/10/2017 | 15,206,802 | 15,313,249 | ||||||
DIVERSIFIED FINANCIALS — 0.08% | ||||||||
Diversified Financial Services — 0.08% | ||||||||
NCP Finance LP, 11.00%, 9/25/2018 | 14,162,031 | 14,091,221 | ||||||
FOOD, BEVERAGE & TOBACCO — 0.05% | ||||||||
Tobacco — 0.05% | ||||||||
North Atlantic Trading Co., Inc., 7.75%-8.75%, 12/30/2019 | 9,927,206 | 9,952,024 | ||||||
MATERIALS — 0.02% | ||||||||
Construction Materials — 0.02% | ||||||||
CEMEX S.A.B. de C.V., 4.654%, 2/17/2017 | 3,089,965 | 3,072,599 | ||||||
MEDIA — 0.07% | ||||||||
Media — 0.07% | ||||||||
Baker & Taylor Acquisitions Corp., 12.00%, 9/28/2016 | 13,000,000 | 13,130,000 | ||||||
RETAILING — 0.03% | ||||||||
Specialty Retail — 0.03% | ||||||||
Rue21, Inc., 5.625%, 10/7/2020 | 6,930,000 | 5,890,500 | ||||||
TRANSPORTATION — 0.12% | ||||||||
Airlines — 0.12% | ||||||||
c Synergy Aerospace Corp., 7.50%, 3/3/2015 | 21,535,674 | 21,535,674 | ||||||
UTILITIES — 0.08% | ||||||||
Electric Utilities — 0.08% | ||||||||
Texas Competitive Electric Holdings Co., LLC, 4.65%, 10/10/2015 | 20,669,860 | 15,175,191 | ||||||
|
| |||||||
TOTAL LOAN PARTICIPATIONS (Cost $128,163,081) | 123,640,458 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 1.10% | ||||||||
Bank of New York Tri-Party Repurchase Agreement 0.23% dated 9/30/2014 due 10/1/2014, repurchase price $35,000,224 collateralized by 18 corporate debt securities, having an average coupon of 4.87%, a minimum credit rating of BBB-, maturity dates from 9/15/2016 to 6/15/2044, and having an aggregate market value of $37,394,548 at 9/30/2014 | 35,000,000 | 35,000,000 | ||||||
CenterPoint Energy, Inc., 0.20%, 10/1/2014 | 40,700,000 | 40,700,000 | ||||||
Hitachi America, Ltd., 0.32%, 10/6/2014 | 54,000,000 | 53,997,600 | ||||||
Hitachi International Treasury Ltd., 0.32%, 10/3/2014 | 51,200,000 | 51,199,090 | ||||||
Kroger Co., 0.20%, 10/1/2014 | 23,000,000 | 23,000,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $203,896,690) | 203,896,690 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 98.34% (Cost $16,147,065,396) | $ | 18,190,008,995 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.66% | 306,878,105 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 18,496,887,100 | ||||||
|
|
22 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
Footnote Legend
† | Share/principal amount in U.S. Dollars unless otherwise noted in the security description. |
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, 2013 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2014 | MARKET VALUE SEPTEMBER 30, 2014 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | |||||||||||||||||||||
Apollo Investment Corp. | 13,316,000 | 1,090,000 | 816,000 | 13,590,000 | $ | 111,030,300 | $ | 10,381,200 | $ | (2,465,737 | ) | |||||||||||||||||
Dynex Capital, Inc. | 4,562,000 | 500,000 | — | 5,062,000 | 40,900,960 | 5,129,480 | — | |||||||||||||||||||||
Invesco Mortgage Capital, Inc. | 9,970,000 | 550,000 | 2,170,000 | 8,350,000 | 131,262,000 | 18,054,150 | (12,226,686 | ) | ||||||||||||||||||||
KKR Financial Holdings, LLC | 12,530,000 | — | 12,530,000 | — | — | 5,330,600 | 35,479,378 | |||||||||||||||||||||
MFA Financial, Inc. | 23,250,000 | 2,250,000 | — | 25,500,000 | 198,390,000 | 25,515,000 | — | |||||||||||||||||||||
Och-Ziff Capital Management Group, LLC* | 7,835,000 | |||||||||||||||||||||||||||
Solar Capital Ltd. | 4,607,900 | — | — | 4,607,900 | 86,075,572 | 7,372,640 | — | |||||||||||||||||||||
Washington REIT | 5,170,000 | 551,000 | — | 5,721,000 | 145,198,980 | 2,684,370 | — | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
Total non-controlled affiliated issuers - 3.85% of net assets | $ | 712,857,812 | $ | 74,467,440 | $ | 20,786,955 | ||||||||||||||||||||||
|
|
|
|
|
|
* | Issuers not affiliated at September 30, 2014. |
b | Non-income producing. |
c | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees. |
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. Most of these securities have been deemed to be liquid for purposes of the Fund’s limitation on investment in illiquid securities. As of September 30, 2014, the aggregate value of these securities in the Fund’s portfolio was $502,919,883, representing 2.72% of the Fund’s net assets. |
e | Yankee Bond—Denominated in U.S. dollars and is issued in the U.S. by foreign banks and corporations. |
f | Bond in default. |
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 | |
EUR | Denominated in Euros |
FCB | Farm Credit Bank | |
GBP | Denominated in Great Britain Pounds | |
GDR | Global Depository Receipt | |
MFA | Mortgage Finance Authority | |
Mtg | Mortgage | |
Pfd | Preferred Stock | |
REIT | Real Estate Investment Trust |
See notes to financial statements.
Certified Annual Report 23
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
ASSETS | ||||
Investments at value | ||||
Non-affiliated issuers (cost $15,415,200,281) (Note 2) | $ | 17,477,151,183 | ||
Non-controlled affiliated issuers (cost $731,865,115) (Note 2) | 712,857,812 | |||
Cash | 3,464,138 | |||
Cash denominated in foreign currency (cost $6,474,556) | 6,474,012 | |||
Receivable for investments sold | 111,426,449 | |||
Receivable for fund shares sold | 43,761,954 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 155,566,406 | |||
Dividends receivable | 40,962,506 | |||
Dividend and interest reclaim receivable | 25,953,822 | |||
Interest receivable | 25,747,699 | |||
Prepaid expenses and other assets | 18,235 | |||
|
| |||
Total Assets | 18,603,384,216 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 55,894,849 | |||
Payable for fund shares redeemed | 14,016,962 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 3,942,852 | |||
Payable to investment advisor and other affiliates (Note 3) | 17,838,064 | |||
Accounts payable and accrued expenses | 2,740,590 | |||
Dividends payable | 12,063,799 | |||
|
| |||
Total Liabilities | 106,497,116 | |||
|
| |||
NET ASSETS | $ | 18,496,887,100 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 113,393,754 | ||
Net unrealized appreciation on investments and foreign currency translations | 2,192,336,991 | |||
Accumulated net realized gain (loss) | (651,756,998 | ) | ||
Net capital paid in on shares of beneficial interest | 16,842,913,353 | |||
|
| |||
$ | 18,496,887,100 | |||
|
|
24 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($4,588,032,922 applicable to 214,629,355 shares of beneficial interest outstanding - Note 4) | $ | 21.38 | ||
Maximum sales charge, 4.50% of offering price | 1.01 | |||
|
| |||
Maximum offering price per share | $ | 22.39 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($6,266,270,008 applicable to 293,231,135 shares of beneficial interest outstanding - Note 4) | $ | 21.37 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($7,454,275,238 applicable to 346,275,767 shares of beneficial interest outstanding - Note 4) | $ | 21.53 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($83,670,445 applicable to 3,914,954 shares of beneficial interest outstanding - Note 4) | $ | 21.37 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($39,890,287 applicable to 1,862,707 shares of beneficial interest outstanding - Note 4) | $ | 21.42 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($64,748,200 applicable to 3,009,406 shares of beneficial interest outstanding - Note 4) | $ | 21.52 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 25
STATEMENT OF OPERATIONS | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $58,017,590) | $ | 902,763,694 | ||
Non-controlled affiliated issuers | 74,467,440 | |||
Interest income (net of premium amortized of $2,864,848) | 115,050,240 | |||
|
| |||
Total Income | 1,092,281,374 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 118,827,801 | |||
Administration fees (Note 3) | ||||
Class A Shares | 5,894,963 | |||
Class C Shares | 7,326,210 | |||
Class I Shares | 3,250,761 | |||
Class R3 Shares | 91,876 | |||
Class R4 Shares | 40,350 | |||
Class R5 Shares | 24,753 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 11,803,620 | |||
Class C Shares | 58,739,626 | |||
Class R3 Shares | 367,997 | |||
Class R4 Shares | 79,448 | |||
Transfer agent fees | ||||
Class A Shares | 3,421,200 | |||
Class C Shares | 4,053,411 | |||
Class I Shares | 4,981,350 | |||
Class R3 Shares | 139,180 | |||
Class R4 Shares | 81,866 | |||
Class R5 Shares | 135,697 | |||
Registration and filing fees | ||||
Class A Shares | 145,735 | |||
Class C Shares | 119,899 | |||
Class I Shares | 141,560 | |||
Class R3 Shares | 3,650 | |||
Class R4 Shares | 15,703 | |||
Class R5 Shares | 21,694 | |||
Custodian fees (Note 3) | 3,287,945 | |||
Professional fees | 307,130 | |||
Accounting fees | 608,350 | |||
Trustee fees | 541,300 | |||
Other expenses | 1,665,956 | |||
|
| |||
Total Expenses | 226,119,031 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (1,580,799 | ) | ||
Fees paid indirectly (Note 3) | (3,085 | ) | ||
|
| |||
Net Expenses | 224,535,147 | |||
|
| |||
Net Investment Income | $ | 867,746,227 | ||
|
|
26 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Investment Income Builder Fund | Year Ended September 30, 2014 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | ||||
Non-affiliated issuers | $ | 392,738,347 | ||
Non-controlled affiliated issuers | 20,786,955 | |||
Forward currency contracts (Note 7) | (15,734,294 | ) | ||
Foreign currency transactions | (2,301,832 | ) | ||
|
| |||
395,489,176 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | ||||
Non-affiliated issuers | 276,697,585 | |||
Non-controlled affiliated issuers | (11,848,932 | ) | ||
Foreign currency translations | (2,243,717 | ) | ||
Forward currency contracts (Note 7) | 205,108,851 | |||
|
| |||
467,713,787 | ||||
|
| |||
Net Realized and Unrealized Gain | 863,202,963 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 1,730,949,190 | ||
|
|
See notes to financial statements.
Certified Annual Report 27
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Investment Income Builder Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 867,746,227 | $ | 667,325,892 | ||||
Net realized gain (loss) on investments, forward currency contracts, and foreign currency transactions | 395,489,176 | (32,591,869 | ) | |||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, and foreign currency translations | 467,713,787 | 849,681,070 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,730,949,190 | 1,484,415,093 | ||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | (217,737,169 | ) | (205,343,348 | ) | ||||
Class C Shares | (229,272,611 | ) | (213,857,190 | ) | ||||
Class I Shares | (321,305,859 | ) | (265,016,275 | ) | ||||
Class R3 Shares | (3,172,949 | ) | (2,752,237 | ) | ||||
Class R4 Shares | (1,442,451 | ) | (1,115,335 | ) | ||||
Class R5 Shares | (2,394,204 | ) | (1,318,893 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | 27,382,304 | 629,134,038 | ||||||
Class C Shares | 778,778,530 | 831,493,667 | ||||||
Class I Shares | 1,544,961,767 | 1,305,774,533 | ||||||
Class R3 Shares | 18,411,872 | 10,859,379 | ||||||
Class R4 Shares | 13,430,799 | 4,113,121 | ||||||
Class R5 Shares | 22,689,436 | 23,739,677 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 3,361,278,655 | 3,600,126,230 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 15,135,608,445 | 11,535,482,215 | ||||||
|
|
|
| |||||
End of Year | $ | 18,496,887,100 | $ | 15,135,608,445 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 113,393,754 | $ | 22,151,818 |
See notes to financial statements.
28 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
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 eighteen separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary investment goal is to provide a level of current income which exceeds the average yield on U.S. stocks generally, and which will generally grow, subject to periodic fluctuations, over the years on a per share basis. The Fund’s secondary investment goal is long-term capital appreciation.
The Fund currently offers six classes of shares of beneficial interest: Class A, Class C, Institutional Class (“Class I”), and Retirement Classes (“Class R3,” “Class R4,” and “Class R5”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, (iii) Class I shares are sold at net asset value without a sales charge at the time of purchase 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 may bear a service fee, 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 allocable 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 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. 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 reported by NASDAQ are valued at the NASDAQ official closing price. 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. 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 when 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, 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
Certified Annual Report 29
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
of a market quotation, create a question about the reliability of the investment’s market value. For example, 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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of 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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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:
30 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
FAIR VALUE MEASUREMENTS AT SEPTEMBER 30, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3(b) | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 16,449,107,679 | $ | 16,314,233,283 | $ | 134,874,396 | $ | — | ||||||||
Preferred Stock(a) | 144,647,066 | 105,914,628 | 38,732,438 | — | ||||||||||||
Asset Backed Securities | 66,101,734 | — | 62,913,592 | 3,188,142 | ||||||||||||
Corporate Bonds | 1,185,680,712 | — | 1,165,761,868 | 19,918,844 | ||||||||||||
Convertible Bonds | 5,439,250 | — | 5,439,250 | — | ||||||||||||
Municipal Bonds | 2,909,149 | — | 2,909,149 | — | ||||||||||||
U.S. Government Agencies | 8,586,257 | — | 8,586,257 | — | ||||||||||||
Loan Participations | 123,640,458 | — | 86,791,535 | 36,848,923 | ||||||||||||
Short Term Investments | 203,896,690 | — | 203,896,690 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 18,190,008,995 | $ | 16,420,147,911 | $ | 1,709,905,175 | $ | 59,955,909 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 155,566,406 | $ | — | $ | 155,566,406 | $ | — | ||||||||
Spot Currency | $ | 110,978 | $ | 110,978 | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (3,942,852 | ) | $ | — | $ | (3,942,852 | ) | $ | — | ||||||
Spot Currency | $ | (1,133 | ) | $ | (1,133 | ) | $ | — | $ | — |
(a) | At September 30, 2014, industry classifications for Preferred Stock in Level 2 consist of $8,720,250 in Banks, $11,252,813 in Miscellaneous and $18,759,375 in Telecommunication Services. |
(b) | In accordance with the guidance prescribed in Accounting Standards Update (“ASU No. 2011-04”), unadjusted broker quotes were applied to certain portfolio securities characterized as Level 3 investments at September 30, 2014. In addition, one portfolio security characterized as a Level 3 investment representing $0 market value in Common Stock was fair valued by the Committee based on the inability to derive a fair value given no market activity after a restructuring event. One portfolio security characterized as a Level 3 investment representing $9,684,935 market value in Corporate Bonds was fair valued by the committee using an income approach based upon the present value of anticipated future cash flows and a discounted 4% internal rate of return derived from a third party expert provider. Securities characterized as level 3 investments representing $36,848,923 market value in Loan Participations were fair valued by the Committee using an income approach based upon the present value of anticipated future cash flows and discounted internal rates of return of 7.9% and 9.0% (weighted average of 8.45%) derived from a third party expert provider. |
* | 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, which may include futures, forwards and swap contracts, which are valued at the unrealized appreciation (depreciation) on the investment. |
In accordance with the guidance prescribed in ASU No. 2011-04, it is the policy of the Fund to recognize transfers between levels and those underlying events which caused the movement. The Fund recognized no material transfers between Levels 1 and 2 for the year ended September 30, 2014, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2014 is as follows:
COMMON STOCK | PREFERRED STOCK | ASSET BACKED SECURITIES | CORPORATE BONDS | LOAN PARTICIPATIONS | TOTAL(d) | |||||||||||||||||||
Beginning Balance 9/30/2013 | $ | — | $ | 33,950,000 | $ | 7,162,750 | $ | 21,008,003 | $ | 41,251,578 | $ | 103,372,331 | ||||||||||||
Accrued Discounts (Premiums) | — | — | 23,230 | 196,232 | — | 219,462 | ||||||||||||||||||
Net Realized Gain (Loss)(a) | — | 1,103,550 | 64,486 | 19,044 | — | 1,187,080 | ||||||||||||||||||
Gross Purchases | 1,228,425 | — | — | — | — | 1,228,425 | ||||||||||||||||||
Gross Sales | — | (35,000,000 | ) | (438,870 | ) | (242,215 | ) | (4,639,103 | ) | (40,320,188 | ) | |||||||||||||
Net Change in Unrealized Appreciation | (1,228,425 | ) | (53,550 | ) | (123,454 | ) | (1,062,220 | ) | 236,448 | (2,231,201 | ) | |||||||||||||
Transfers into Level 3(c) | — | — | — | — | — | — | ||||||||||||||||||
Transfers out of Level 3(c) | — | — | (3,500,000 | ) | — | — | (3,500,000 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ending Balance 9/30/2014 | $ | — | $ | — | $ | 3,188,142 | $ | 19,918,844 | $ | 36,848,923 | $ | 59,955,909 |
(a) | Total amount of Net Realized Gain (Loss) recognized in the net increase in net assets resulting from operations is included in the Fund’s Statement of Operations for the year ended September 30, 2014. |
Certified Annual Report 31
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
(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 September 30, 2014. |
(c) | Transfers into or out of Level 3 were out of or into Level 2, and were due to changes in other significant observable inputs available during the year ended September 30, 2014. Transfers into or out of Level 3 would be indicative of pricing by an independent pricing service or increased market activity. Transfers are based upon the beginning market value of the period in which they occurred. |
(d) | Level 3 investments represent 0.32% of total Net Assets at the year ended September 30, 2014. 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. |
(e) | The Net Changes in Unrealized Appreciation (Depreciation) attributable to securities held at September 30, 2014, which were valued using significant unobservable inputs (Level 3) was negative $2,177,651. This is included within net change in unrealized appreciation (depreciation) on investments on the Statement of Operations. |
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 of securities 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, 2014, 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: 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 Fund may invest excess cash by entering into repurchase agreements under which the Fund delivers cash to a counterparty, the counterparty delivers securities as collateral, and the Fund is obligated to resell that collateral to the coun-terparty at an agreed upon price at the maturity date of the repurchase agreement. Securities pledged as collateral under repurchase agreements are held in custody with a third party custodian 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 counterparty’s obligations. Under certain circumstances, in the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
32 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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.
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, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $1,978,892 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $444,628 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, 2014, 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 and for shareholder services.
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, 2014, are set forth in the Statement of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class C, Class R3, Class R4, and Class R5 expenses do not exceed 1.90%, 1.50%, 1.40%, and 0.99%, respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually waived or reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,470,417 for Class C shares, $41,035 for Class R3 shares, $16,280 for Class R4 shares, and $53,067 for Class R5 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, 2014, fees paid indirectly were $3,085.
Certified Annual Report 33
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
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 and is included as Trustee Fees on the Statement of Operations.
The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the year ended September 30, 2014, the Fund had transactions with affiliated funds in compliance with Rule 17a-7 under the 1940 Act of $49,999,000 in purchases and $49,999,167 in sales.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 48,612,162 | $ | 1,028,388,480 | 56,970,888 | $ | 1,125,365,545 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 9,375,792 | 200,214,215 | 9,381,689 | 182,426,914 | ||||||||||||
Shares repurchased | (55,979,046 | ) | (1,201,220,391 | ) | (34,776,902 | ) | (678,658,421 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 2,008,908 | $ | 27,382,304 | 31,575,675 | $ | 629,134,038 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 56,872,819 | $ | 1,202,445,858 | 62,020,435 | $ | 1,225,172,608 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 8,976,982 | 191,699,714 | 8,853,712 | 172,055,086 | ||||||||||||
Shares repurchased | (28,974,490 | ) | (615,367,042 | ) | (28,937,060 | ) | (565,734,027 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 36,875,311 | $ | 778,778,530 | 41,937,087 | $ | 831,493,667 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 118,183,924 | $ | 2,536,009,530 | 105,352,628 | $ | 2,095,655,160 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 12,871,189 | 277,002,806 | 11,370,112 | 222,794,617 | ||||||||||||
Shares repurchased | (59,386,156 | ) | (1,268,050,569 | ) | (51,415,753 | ) | (1,012,675,244 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 71,668,957 | $ | 1,544,961,767 | 65,306,987 | $ | 1,305,774,533 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 1,473,125 | $ | 31,281,547 | 1,295,541 | $ | 25,313,825 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 132,598 | 2,834,610 | 127,777 | 2,482,674 | ||||||||||||
Shares repurchased | (737,624 | ) | (15,704,285 | ) | (865,614 | ) | (16,937,120 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 868,099 | $ | 18,411,872 | 557,704 | $ | 10,859,379 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 1,061,369 | $ | 22,674,871 | 613,261 | $ | 12,094,390 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 39,714 | 851,725 | 32,911 | 640,829 | ||||||||||||
Shares repurchased | (473,144 | ) | (10,095,797 | ) | (439,983 | ) | (8,622,098 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 627,939 | $ | 13,430,799 | 206,189 | $ | 4,113,121 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 1,791,210 | $ | 38,729,499 | 1,478,004 | $ | 29,474,397 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 98,278 | 2,118,145 | 60,502 | 1,187,546 | ||||||||||||
Shares repurchased | (853,331 | ) | (18,158,208 | ) | (349,610 | ) | (6,922,266 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,036,157 | $ | 22,689,436 | 1,188,896 | $ | 23,739,677 | ||||||||||
|
|
|
|
|
|
|
|
34 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments and U. S. Government obligations) of $9,024,097,654 and $6,585,102,204, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 16,149,636,079 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 2,605,833,619 | ||
Gross unrealized depreciation on a tax basis | (565,460,703 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) of Investments on a tax basis | $ | 2,040,372,916 | ||
|
|
At September 30, 2014, the Fund had $73,215,117 of undistributed tax basis ordinary investment income and no undistributed tax basis capital gains.
The Fund utilized $253,394,886 of capital loss carryforwards generated after September 30, 2011, during the year ended September 30, 2014.
The Fund utilized $277,855,916 of capital loss carryforwards generated prior to October 1, 2011, during the year ended September 30, 2014.
At September 30, 2014, the Fund had cumulative tax basis capital losses generated prior to October 1, 2011, 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 of $445,145,452 expire in 2018.
In order to account for permanent book to tax differences, the Fund increased undistributed net investment income by $13,670,564 and decreased accumulated net realized loss by $7,503,476 and decreased net capital paid in on shares of beneficial interest by $6,167,088. This reclassification has no impact on the net asset value of the Fund. This reclassification results from foreign currency gains (losses), real estate investment trust (REIT), partnership and other investment tax adjustments.
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 775,325,243 | $ | 689,403,278 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 775,325,243 | $ | 689,403,278 |
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 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, 2014, 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’s 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 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.
Certified Annual Report 35
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
The Fund entered into forward currency contracts during the year ended September 30, 2014 in the normal course of pursuing its investment objectives, with the objective 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 average value of open sell currency contracts for the year ended September 30, 2014 was $3,344,744,540. 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 the open sell currency contracts to which they relate.
The following table displays the outstanding forward currency contracts at September 30, 2014:
OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2014 | ||||||||||||||||||||||||||||
CONTRACT | BUY/SELL | CONTRACT AMOUNT | COUNTER PARTY(a) | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | |||||||||||||||||||||
Australian Dollar | Sell | 248,239,700 | SSB | 11/10/2014 | 216,746,172 | $ | 11,904,933 | $ | — | |||||||||||||||||||
Australian Dollar | Buy | 33,240,700 | SSB | 11/10/2014 | 29,023,538 | — | (984,171 | ) | ||||||||||||||||||||
Australian Dollar | Buy | 50,725,400 | SSB | 11/10/2014 | 44,290,000 | — | (2,958,681 | ) | ||||||||||||||||||||
Euro | Sell | 1,619,073,400 | SSB | 02/27/2015 | 2,047,288,221 | 90,779,157 | — | |||||||||||||||||||||
Great Britain Pound | Sell | 316,609,900 | SSB | 10/08/2014 | 513,245,474 | 11,187,164 | — | |||||||||||||||||||||
Great Britain Pound | Sell | 54,653,200 | SSB | 10/08/2014 | 88,596,432 | 3,280,516 | — | |||||||||||||||||||||
Japanese Yen | Sell | 9,541,372,500 | BBH | 12/09/2014 | 87,043,916 | 3,987,554 | — | |||||||||||||||||||||
Japanese Yen | Sell | 4,902,133,300 | BBH | 12/09/2014 | 44,721,122 | 1,233,650 | — | |||||||||||||||||||||
Swiss Franc | Sell | 320,503,400 | SSB | 10/07/2014 | 335,724,850 | 25,723,409 | — | |||||||||||||||||||||
Swiss Franc | Sell | 57,867,700 | SSB | 10/07/2014 | 60,615,971 | 5,303,833 | — | |||||||||||||||||||||
Swiss Franc | Sell | 38,403,100 | SSB | 10/07/2014 | 40,226,952 | 2,166,190 | — | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Total | $ | 155,566,406 | $ | (3,942,852 | ) | |||||||||||||||||||||||
|
|
|
|
(a) | Counterparties include State Street Bank and Trust Company (SSB) and Brown Brothers Harriman & Co. (BBH). |
The foregoing forward currency contracts with State Street Bank and Trust Company (SSB) were entered into pursuant to an International Swaps and Derivatives Association (ISDA) Master Agreement. The foregoing forward currency contracts with Brown Brothers Harriman & Co. (BBH) were entered into pursuant to a written agreement with BBH. In the event of a default or termination under either the ISDA Master Agreement with SSB or the Agreement with BBH, the non-defaulting party has the right to close out all outstanding forward currency contracts between the parties and to net any payment amounts under those contracts, resulting in a single net amount payable by one party to the other. Because the ISDA Master Agreement and the Agreement with BBH do not result in an offset of reported amounts of financial assets and financial liabilities in the Fund’s Statement of Assets and Liabilities unless there has been an event of default or termination event under such agreements, the Fund does not net its outstanding forward currency contracts for purposes of the disclosure in the Fund’s Statement of Assets and Liabilities. Instead the Fund recognizes the unrealized appreciation or depreciation on those forward currency contracts on a gross basis in the Fund’s Statement of Assets and Liabilities. At September 30, 2014, those recognized amounts are disclosed in the following table:
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2014 |
ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 155,566,406 |
LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||||
Foreign exchange contracts | Liabilities - Unrealized depreciation | |||||||
on forward currency contracts | $ | (3,942,852 | ) |
36 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 |
Because the Fund does not currently receive or post cash collateral in connection with its currency forward contracts, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2014 can be determined by offsetting the dollar amounts shown in the preceding table. Based on those amounts, the net amount of the Fund’s assets which is attributable to its outstanding forward currency contracts at September 30, 2014 is $151,623,554 ($146,402,350 attributable to the Fund’s contracts with SSB, and $5,221,204 attributable to the Fund’s contracts with BBH), and the net amount of the Fund’s liabilities which is attributable to those contracts at that date is $0. The Fund’s forward currency contracts are valued each day, and the net amounts of the Fund’s assets and liabilities which are attributable to those contracts are expected to vary over time.
The net realized gain (loss) 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, 2014 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, 2014 | ||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||
Foreign exchange contracts | $(15,734,294) | $(15,734,294) | ||
AMOUNT OF NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2014 | ||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||
Foreign exchange contracts | $205,108,851 | $205,108,851 |
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, high yield 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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Certified Annual Report 37
Thornburg Investment Income Builder 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 | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS | 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 | PORTFOLIO | NET ASSETS AT END OF YEAR (THOUSANDS) | |||||||||||||||||||||||||||||||||
CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 20.13 | 1.10 | 1.13 | 2.23 | (0.98 | ) | — | (0.98 | ) | $21.38 | 5.21 | 1.18 | 1.18 | 1.18 | 11.19 | 38.81 | $ | 4,588,033 | |||||||||||||||||||||||||||||
2013(b) | $ | 18.90 | 1.03 | 1.27 | 2.30 | (1.07 | ) | — | (1.07 | ) | $20.13 | 5.26 | 1.18 | 1.18 | 1.18 | 12.51 | 46.14 | $ | 4,281,060 | |||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 20.13 | 0.94 | 1.13 | 2.07 | (0.83 | ) | — | (0.83 | ) | $21.37 | 4.44 | 1.90 | 1.90 | 1.93 | 10.36 | 38.81 | $ | 6,266,270 | |||||||||||||||||||||||||||||
2013 | $ | 18.89 | 0.89 | 1.28 | 2.17 | (0.93 | ) | — | (0.93 | ) | $20.13 | 4.55 | 1.90 | 1.90 | 1.94 | 11.78 | 46.14 | $ | 5,160,706 | |||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 20.27 | 1.16 | 1.15 | 2.31 | (1.05 | ) | — | (1.05 | ) | $21.53 | 5.45 | 0.86 | 0.86 | 0.86 | 11.54 | 38.81 | $ | 7,454,275 | |||||||||||||||||||||||||||||
2013 | $ | 19.03 | 1.10 | 1.28 | 2.38 | (1.14 | ) | — | (1.14 | ) | $20.27 | 5.58 | 0.85 | 0.85 | 0.85 | 12.94 | 46.14 | $ | 5,567,617 | |||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 20.13 | 1.03 | 1.12 | 2.15 | (0.91 | ) | — | (0.91 | ) | $21.37 | 4.84 | 1.49 | 1.49 | 1.55 | 10.80 | 38.81 | $ | 83,671 | |||||||||||||||||||||||||||||
2013 | $ | 18.89 | 0.97 | 1.28 | 2.25 | (1.01 | ) | — | (1.01 | ) | $20.13 | 4.96 | 1.49 | 1.49 | 1.70 | 12.23 | 46.14 | $ | 61,334 | |||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 20.17 | 1.04 | 1.16 | 2.20 | (0.95 | ) | — | (0.95 | ) | $21.42 | 4.88 | 1.35 | 1.35 | 1.40 | 11.00 | 38.81 | $ | 39,890 | |||||||||||||||||||||||||||||
2013 | $ | 18.93 | 0.99 | 1.29 | 2.28 | (1.04 | ) | — | (1.04 | ) | $20.17 | 5.05 | 1.37 | 1.37 | 1.41 | 12.35 | 46.14 | $ | 24,906 | |||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||
CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 20.26 | 1.10 | 1.19 | 2.29 | (1.03 | ) | — | (1.03 | ) | $21.52 | 5.15 | 0.99 | 0.99 | 1.10 | 11.40 | 38.81 | $ | 64,748 | |||||||||||||||||||||||||||||
2013 | $ | 19.01 | 1.07 | 1.30 | 2.37 | (1.12 | ) | — | (1.12 | ) | $20.26 | 5.37 | 0.99 | 0.98 | 1.05 | 12.80 | 46.14 | $ | 39,985 | |||||||||||||||||||||||||||||
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 |
(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.
38 Certified Annual Report | Certified Annual Report 39 |
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, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
40 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Investment Income Builder Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
CLASS A SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,026.90 | $ | 6.05 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.10 | $ | 6.03 | ||||||
CLASS C SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,023.30 | $ | 9.64 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,015.54 | $ | 9.60 | ||||||
CLASS I SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,028.50 | $ | 4.47 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.66 | $ | 4.45 | ||||||
CLASS R3 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,025.30 | $ | 7.60 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.56 | $ | 7.57 | ||||||
CLASS R4 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,026.00 | $ | 7.00 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.16 | $ | 6.97 | ||||||
CLASS R5 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,027.90 | $ | 5.03 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.19%; C: 1.90%; I: 0.88%; R3: 1.50%; R4: 1.38%; R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of shares, the second line of the accompanying table 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 Investment Income Builder Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 3 YRS | 5 YRS | 10 YRS | SINCE INCEPTION | ||||||||||||||||
Class A Shares (Incep: 12/24/02) | 6.18 | % | 11.58 | % | 9.34 | % | 9.01 | % | 10.65 | % | ||||||||||
Class C Shares (Incep: 12/24/02) | 9.36 | % | 12.50 | % | 9.60 | % | 8.82 | % | 10.43 | % | ||||||||||
Class I Shares (Incep: 11/3/03) | 11.54 | % | 13.68 | % | 10.71 | % | 9.89 | % | 10.19 | % | ||||||||||
Class R3 Shares (Incep: 2/1/05) | 10.80 | % | 12.97 | % | 10.04 | % | — | 8.46 | % | |||||||||||
Class R4 Shares (Incep: 2/1/08) | 11.00 | % | 13.12 | % | 10.10 | % | — | 6.00 | % | |||||||||||
Class R5 Shares (Incep: 2/1/07) | 11.40 | % | 13.52 | % | 10.59 | % | — | 6.85 | % |
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 C, I, R3, R4, and R5 shares.
42 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Investment Income Builder Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 43
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES) (1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
44 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 Investment Income Builder Fund | September 30, 2014 (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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Thornburg Investment Income Builder Fund of $775,325,243 are being reported as ordinary investment income for federal income tax purposes.
For the tax year ended September 30, 2014, the Fund is reporting 72.34% (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 18.49% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2014 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2014, foreign source income and foreign taxes paid are $605,423,458 and $57,650,248, 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
46 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 (Unaudited) |
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the quality of portfolio trade execution, the Advisor’s performance of accounting and other services under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the ten most recent calendar years, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, a blended performance benchmark and a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year, five-year and ten-year periods ending with the second quarter of the current year comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms, a broad-based securities index and a blended performance benchmark, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, (5) comparative measures of estimated earnings growth, portfolio volatility, risk and return, and (6) dividend distributions by the Fund.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the ten most recent calendar years since the Fund’s inception showed that the Fund’s investment return for the most recent calendar year was lower than the returns for the securities index and the blended benchmark, and was higher than the average return for the fund category, and that the returns for the Fund exceeded the returns of the index in six of the preceding nine years, exceeded the returns of the blended benchmark in seven of the nine years, and exceeded or were comparable to the average returns of the fund category in eight of the nine years. Noted quantitative data showed that the Fund’s annualized investment returns fell near the top quartile of performance of the first fund category for the one-year period ended with second quarter of the current year and fell in the top decile of performance of the category for the three-year, five-year and ten-year periods. Noted data also showed that the Fund’s annualized investment returns fell at the midpoint of performance of the second fund category for the one-year and three-year periods ended with the second quarter, fell at the top quartile for the five-year period and fell in the top decile of performance of the second category for the ten-year period. Data presented to the Trustees showed that the Fund’s annualized total return (net of expenses) over the period since the Fund’s inception exceeded the annualized returns for the securities index and the blended performance benchmark. Dividends paid with respect to shares of the Fund were noted as consistent with expectations and prevailing conditions.
The Trustees concluded, based upon these and other considerations, that the nature, extent and quality of the Advisor’s services performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection considered a number of factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses. Data considered included comparisons of the Fund’s advisory 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, comparisons of the Fund’s advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, comparative expense data for a second representative share class, and related data. Data showed that the Fund’s advisory fee level was comparable to the median and slightly higher than the average levels for the fund category and that the level of total expense for a representative share class of the Fund was comparable to the median and slightly lower than the average expense level for the category. Peer group data showed the Fund’s advisory fee level was comparable to the median for the peer group, and that the total expense level for a representative share class of the Fund was comparable to the median for the fund peer group. Data for a second representative share class showed that the Fund’s total expense ratio was comparable to competing funds for which data was presented.
Certified Annual Report 47
OTHER INFORMATION, CONTINUED | ||
Thornburg Investment Income Builder Fund | September 30, 2014 (Unaudited) |
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain adequate service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by the Fund and other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
48 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 49
This page intentionally left blank.
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income 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
52 This page is not part of the Annual Report
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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 53
This page intentionally left blank.
54 This page is not part of the Annual Report
This page intentionally left blank.
This page is not part of the Annual Report 55
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: Thornburg Investment Management® 800.847.0200 | Distributor: Thornburg Securities Corporation® 800.847.0200 | TH857 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2014. 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, volatility, and political and economic risks. 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.
Diversification 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.
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 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 | 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 46 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 Emerging Markets Index – 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 23 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index. The performance of any index is not indicative of the performance of any particular investment.
Basis Point (bp) – A unit equal to 1/100th of 1%. 1% = 100 basis points (bps).
Beta – A measure of market-related risk. Less than one means the portfolio is less volatile than the index, while greater than one indicates more volatility than the index.
Earnings Per Share (EPS) – The total earnings divided by the number of shares outstanding.
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.
Multiple – A term that measures some aspect of a company’s financial well-being, determined by dividing one metric by another metric. The metric in the numerator is typically larger than the one in the denominator, because the top metric is usually supposed to be many times larger than the bottom metric.
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. Forward P/E is not intended to be a forecast of the Fund’s future performance.
This page is not part of the Annual Report 3
Portfolio Managers
W. Vinson Walden, CFA Brian McMahon
Objectives and Strategies
The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types from issuers around the world.
The Fund pursues its investment goals by investing primarily in a broad range of equity securities, including common stocks, preferred stocks, real estate investment trusts, other equity trusts, and partnership interests. The Fund may invest in any stock or other equity security which the investment advisor believes may assist the Fund in pursuing its goals, including smaller companies with market capitalizations of less than $500 million. The Fund may also invest in debt obligations of any kind.
Focused Global Value Investing
At Thornburg Investment Management, we believe that the soundest long-term investments are conceptually simple and grounded in common sense. We created the Thornburg Global Opportunities Fund to pursue that philosophy over eight years ago, in 2006. We attempt to capitalize on what Thornburg is best known for: fundamentally oriented, bottom-up research based on a flexible approach to uncovering value. The Fund is well diversified, yet focused on a limited number of holdings which the management team believes are undervalued by the market.
The strategy is straightforward — to maintain a globally diversified, focused portfolio of value-oriented holdings. Each stock is analyzed on its own merits, and the team then combines those selected into a portfolio with, in their view, attractive long-term prospects. The result: the Fund looks quite unlike either the MSCI All Country World Index (ACWI) or its global-stock-fund peers. The management team has been constant since the inception of the Fund, and the results have been satisfying. Now in its ninth year of operations, the Fund has added significant value over the long term versus world equity benchmarks.
The Thornburg Global Opportunities Fund is distinctive in the marketplace. Currently, assets in the global stock fund universe are concentrated in a small number of very large funds. Because they are so large, these funds ordinarily invest in the largest companies in the world, and/or spread their assets across many holdings. About 63% of assets in the world stock fund category are concentrated in just ten funds, and the average world stock fund holds approximately 176 stocks (as of 9/30/14). In contrast, the Thornburg Global Opportunities Fund is typically focused on 30 to 40 stocks that the management team believes have a compelling combination of quality, promise, and value characteristics
4 This page is not part of the Annual Report
Key Portfolio Attributes
As of September 30, 2014
Portfolio P/E Trailing 12-months* | 23.4x | |||
Portfolio Price to Cash Flow* | 9.9x | |||
Portfolio Price to Book Value* | 2.1x | |||
Median Market Cap* | $ | 22.7 B | ||
7-Year Beta (A Shares vs. MSCI ACWI)* | 1.11 | |||
Number of Companies | 36 |
* | Source: FactSet |
Market Capitalization Exposure
As of September 30, 2014
Asset Structure
As of September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | 5 YRS | SINCE INCEPTION | |||||||||||||
A Shares (Incep: 7/28/06) | ||||||||||||||||
Without sales charge | 20.85 | % | 22.85 | % | 13.76 | % | 10.84 | % | ||||||||
With sales charge | 15.40 | % | 20.97 | % | 12.72 | % | 10.22 | % | ||||||||
MSCI All Country World Index (Since: 7/28/06) | 11.32 | % | 16.61 | % | 10.07 | % | 5.24 | % |
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.
Stocks Contributing and Detracting
For the Year Ended September 30, 2014
TOP CONTRIBUTORS | TOP DETRACTORS | |
Level 3 Communications, Inc. | PDG Realty SA | |
Numericable Group SA | Frank’s International NV | |
Valeant Pharmaceuticals International, Inc. | General Motors Co. | |
Paradise Co., Ltd. | Mineral Resources Ltd. | |
Ryman Hospitality Properties, Inc. | Gaming and Leisure Properties, Inc. |
Source: FactSet
This page is not part of the Annual Report 5
Thornburg Global Opportunities Fund
September 30, 2014
7 | ||||
10 | ||||
14 | ||||
16 | ||||
18 | ||||
19 | ||||
28 | ||||
30 | ||||
31 | ||||
32 | ||||
33 | ||||
36 |
This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semi-annual shareholder reports fully and fairly represents their financial position and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg Global Opportunities Fund | September 30, 2014 (Unaudited) |
October 21, 2014
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, 2014.
For the fiscal year ended September 30, 2014, the Fund’s net asset value (NAV) per share increased by $4.02, or 20.38%. Total return for the Class A shares for the fiscal year was 20.85%, versus 11.32% for the benchmark MSCI All Country World Index. The Fund’s total return includes reinvestment of dividends paid of 8¢ per Class A share. 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, 2014, the Fund’s NAV per Class A share increased 7.18% from $22.15 to $23.74.
Performance comparisons of the Fund to the MSCI All Country World Index over various time periods are shown on page 5 of the information accompanying this report and on our website, thornburg.com. The performance of the Fund has compared well to its benchmark over most time periods since inception in July 2006. It outperformed the MSCI All Country World Index by 9.53% for the 12-month period ended September 30, 2014, following outperformance of 6.77% for the prior fiscal year ended September 30, 2013. Fund investments in initial public offerings contributed 1.85% to performance for the fiscal year ended September 30, 2014. From inception on July 28, 2006 through September 30, 2014, the Fund outperformed the same index by an average margin of approximately 5% per year, as shown on page 5. Cumulative total return since inception is 131.93% (for the A shares without sales charge) versus 51.82% for the index. Over this same period, the Fund exhibited share-price volatility, as measured by weekly beta, nominally lower than that of the index.1
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.
In addition to its performance relative to its benchmark, the Fund also ranks favorably compared to its peers. Table 1 displays the Fund’s ranking by performance percentile relative to the Morningstar World Stock category (lower numbers represent higher ranking).
Table I Thornburg Global Opportunities Fund
Percent Rank in Category
1-YEAR | 3-YEAR | 5-YEAR | SINCE INCEPTION | |||||||||||||
Class A | 4 | % | 2 | % | 7 | % | 1 | % | ||||||||
Class I | 3 | % | 1 | % | 6 | % | 1 | % | ||||||||
Funds in Category | 1,150 | 901 | 780 | 590 |
Based on total returns as of September 30, 2014.
We urge fellow shareholders to maintain a long-term investment perspective. Recent years have been notably rewarding for equity investors: the MSCI AC World Index has returned over 15% per annum in the trailing three-year period ended September 30, 2014. However, there have been significant short-term declines along the way, and we continue to expect periods of volatility and disappointment. Despite its long-term performance advantage, the Fund has underperformed the index in 10 out of 32 calendar quarters since inception.
We do not expect to pay any capital gain distribution for 2014. As of September 30, 2014, the Fund had tax-basis realized capital losses of approximately $108 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 our benchmark, the MSCI All Country World Index, over the fiscal year ended September 30, 2014:
1. | For the index, all ten sectors showed positive total returns, with a range of 2% (materials) to more than 25% (health care). The Fund had no investments in utilities and only one modest sized investment in a basic materials firm during the period under review, which aided relative performance. Our investments in each of the other eight sectors produced positive returns for the Fund. |
2. | On average over the course of the year, the Fund’s investments in the following sectors comprised the largest weightings in the portfolio: information technology (23% weight), financials (17%), and consumer discretionary (16%). |
3. | Holdings in the information technology and financials sectors were the strongest contributors to the Fund’s absolute performance during the fiscal year. Relative to the index, our strongest sectors were information technology, telecommunication services, and consumer discretionary. |
4. | Our results in information technology were led by investments in Apple and Micron Technology, which each produced returns above 40%. Apple benefited from strong product launches throughout the year while Micron’s valuation reflected improving profitability compared to its own history, due to consolidation of the memory chip industry. |
5. | The appreciation of Level 3 Communications, which posted a 71% return for the year, drove the Fund’s outperformance in the telecommunication services sector. Level 3 owns and operates a global fiber-optic communications network from its headquarters |
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 (Unaudited) |
in Colorado. This year the company has reported notable improvements in efficiency and balance-sheet strength; in addition, its operations in Latin America continue to grow at a healthy pace. |
6. | In consumer discretionary, our investments in the newly listed French cable company Numericable Group SA and the South Korean-based casino operator Paradise Co. drove the Fund’s outperformance vis-à-vis the MSCI AC World Index consumer discretionary sector as a whole. Numericable, which generated a return of 69%, announced a large acquisition during the year which could generate significant synergies and improve its product offering. Paradise produced a 45% return as it continued to benefit from increasing demand from Northern China, an underpenetrated gaming region. |
7. | In financials, our holdings in hotel owner Ryman Hospitalities and Dutch financial group ING were standouts, each producing a return of over 35% during the year, as compared with about 8.9% for that sector in the index. |
Among our other investments, significant positive contributors to the Fund’s fiscal year performance included Bank of America, Brasil Foods, Capital One, Google, and Valeant Pharmaceuticals. Lately, Valeant has been in the news as a result of its proposed acquisition of U.S. pharmaceutical firm Allergan, which is being contested.
Several holdings from various industries also detracted from overall results. These included PDG Realty, Franks International, General Motors, Mineral Resources, Eurobank Ergasias, and Galaxy Entertainment Group. During the year, we sold PDG Realty and Franks International due to doubts about our original investment thesis; we continue to closely follow developments among these other investments.
Some of the detractors listed above (Franks International, Galaxy Entertainment, and Mineral Resources) were affected by a common denominator: slowing growth in China. Growth expectations for the Chinese economy, which is a big driver of demand for these companies, have continued to drift down over the course of 2014. As recently as 2011, the Beijing government was still targeting a GDP growth rate in the 9% area, whereas the actual growth for 2014 looks to be closer to 7.5%.2 Much of this is linked to the real estate sector, where investment has inevitably slowed. In the meantime numerous policy reforms are ongoing (e.g. of state-owned enterprises, the mortgage finance market, and the “hukou” migration regulations), to promote the rebalancing of China’s economy. We continue to monitor this situation.3
Softening demand for industrial commodities this year, following many years of supply growth, has led to price weakness for most producers. Our investment in Bankers Petroleum, though a strong contributor over the fiscal year, has been negatively impacted by oil price declines in recent months. See Chart I.
At September 30, 2014, domestic stocks comprised approximately 38% of your portfolio; foreign stocks around 52%; and cash the remaining 10%. We have hedged more than 50% of the currency risk associated with your Fund’s euro equity holdings (~14% of the portfolio is invested in companies based in European Monetary Union countries). For now, we do not hedge the currency risk of our Canadian dollar or non-yen Asian currency-denominated 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 36 stocks in the portfolio as of September 30, 2014, was 16.3x on a forward basis, using estimates provided by portfolio and market data providers FactSet and IBES. For comparative reference, the forward price/earnings multiple of the MSCI AC World Index at September 30, 2014 was approximately 15.3x, also using estimates compiled by FactSet and IBES.
Chart I | Industrial Commodities: Recent Price Performance*
Top equity holdings, and other portfolio data about Global Opportunities Fund are summarized on page 10 of this report.
Among the world’s large economies, a divergence of macroeconomic trends this year makes for a more varied outlook, and a likely separation of monetary policies and other macro factors over the medium term. We do not expect to have clear answers to the important macro-economic questions in 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 significantly. Recently, we have faced a barrage of concerns about Russian aggression in Eastern Europe, the human and economic costs associated with Ebola, Middle East stability, economic slowdown in Europe, and the rapid collapse of oil prices from mid-August to mid-October. Prices of many stocks in the Global Opportunities Fund have declined in recent weeks, even if they have business realities that are quite removed from these issues. We have made portfolio adjustments to try to take advantage of this volatility.
8 Certified Annual Report
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 (Unaudited) |
Since 2009, the market has become accustomed to Federal Reserve monetary policies that have kept short-term interest rates near zero and have featured bond purchases totaling more than $3.5 trillion by the U.S. central bank (funded by newly created money). For the record, total assets of all U.S. taxable and municipal bond funds combined are just under $3.5 trillion, so the incremental demand for U.S. bonds by the Fed in the last five years exceeds that of millions of mutual fund investors over several generations. The Federal Reserve bond buying spree has had the deliberate effects of (i) reducing interest rates by substantially increasing the demand for bonds; and (ii) forcing saver/investors into riskier assets to the extent they want positive investment income after taxes and inflation. Some other central banks have pursued similar policies. These accommodative monetary policies have had a positive impact on the prices of most financial assets, here and abroad.
For now, the U.S. economy appears to be weathering the “tapering” of Federal Reserve bond purchases reasonably well. Recent U.S. economic data have been encouraging. One example: new weekly claims for unemployment benefits, which have averaged about 365,000 per week since 1967, have been below 300,000 in recent months and hit 264,000 during the week of this writing. The size of the U.S. non-farm labor force, now around 140 million, averaged 108 million over the last 47 years. The recent levels of new claims for unemployment benefits, relative to the current size of the U.S. labor force, provide evidence of strong economic performance. The 9% annual increase in government receipts for the U.S. government budget year ended September 30, 2014 provides additional evidence. At some point we expect U.S. monetary policy to normalize, since our economy has already done so.
Much of the rest of the world is muddling along with barely positive economic growth. Global economic expansion, while positive in 2014, has been below prior expectations. Thus it has become increasingly difficult for firms to report revenue improvement, but corporate balance sheets are generally in good shape and managements are improving profitability via tax management, share repurchases, and labor efficiencies. Earnings expectations for the MSCI All Country World Index portfolio have been reduced for 2014 and 2015 in recent quarters, but not dramatically.
It’s important to note that, since inception of the Thornburg Global Opportunities Fund in 2006, our strategy has been based on fundamental analysis of individual businesses, not macroeconomic forecasts. We construct the portfolio, as always, on a diversified basis with risk management in mind. We have managed the Fund through a wide variety of macroeconomic settings over its 8+ year life. Looking forward, we believe the confluence of economic and other forces will continue to create opportunities for long-term investors.
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 great holiday season and New Year.
Sincerely,
![]() | ![]() | |||
Brian McMahon | W. Vinson Walden, CFA | |||
Portfolio Manager | Portfolio Manager | |||
CEO & Chief Investment Officer | Managing Director |
1 | Beta measurement of 0.98 provided by Bloomberg; a measure greater than one is more volatile than the index against which the Fund is compared; a measure lower than one is less volatile. |
2 | “ADB sees China meeting 2014 GDP target,” South China Morning Post, http://www.scmp.com/business/economy/article/1600180/adb-sees-china-meeting-2014-gdp-target-cuts-view-hk. |
3 | For more discussion of Galaxy Entertainment and other Fund holdings, see this recent interview: “Paths to Success, an interview with portfolio managers of Thornburg Global Opportunities Fund,” Value Investor Insight, August 29, 2014, http://www.thornburg.com/articles. |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
Certified Annual Report 9
SCHEDULE OF INVESTMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
Top Ten Equity Holdings
As of 9/30/14
Valeant Pharmaceuticals International, Inc. | 5.4 | % | ||
Level 3 Communications, Inc. | 4.8 | % | ||
Barratt Developments plc | 4.6 | % | ||
Citigroup, Inc. | 4.4 | % | ||
InterXion Holding NV | 4.3 | % | ||
Numericable SAS | 4.3 | % | ||
EchoStar Corp. | 3.9 | % | ||
Express Scripts Holding Company | 3.7 | % | ||
Micron Technology, Inc. | 3.4 | % | ||
Ryman Hospitality Properties, Inc. | 3.4 | % |
Summary of Industry Group Exposure
As of 9/30/14
Software & Services | 12.1 | % | ||
Banks | 11.1 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 9.5 | % | ||
Technology Hardware & Equipment | 7.0 | % | ||
Real Estate | 5.1 | % | ||
Consumer Services | 5.1 | % | ||
Telecommunication Services | 4.8 | % | ||
Consumer Durables & Apparel | 4.6 | % | ||
Media | 4.3 | % | ||
Health Care Equipment & Services | 3.7 | % | ||
Automobiles & Components | 3.4 | % | ||
Semiconductors & Semiconductor Equipment | 3.4 | % | ||
Commercial & Professional Services | 2.9 | % | ||
Transportation | 2.4 | % | ||
Household & Personal Products | 2.3 | % | ||
Diversified Financials | 2.2 | % | ||
Energy | 2.1 | % | ||
Capital Goods | 1.7 | % | ||
Food, Beverage & Tobacco | 1.3 | % | ||
Food & Staples Retailing | 1.1 | % | ||
Other Assets & Liabilities | 9.9 | % |
Summary of Country Exposure*
As of 9/30/14 (percent of equity holdings)
United States | 42.4 | % | ||
Canada | 11.8 | % | ||
China | 8.0 | % | ||
United Kingdom | 7.9 | % | ||
Netherlands | 7.6 | % | ||
France | 4.8 | % | ||
South Korea | 3.9 | % | ||
Australia | 3.2 | % | ||
Belgium | 2.6 | % | ||
Ireland | 1.9 | % | ||
Greece | 1.8 | % | ||
Switzerland | 1.7 | % | ||
Brazil | 1.4 | % | ||
Italy | 1.0 | % |
* | The country exposure of each equity holding is determined by the Fund’s Advisor based on various factors, including the location of the issuer’s head office, the issuer’s jurisdiction of incorporation and the country from which a majority of the issuer’s revenue is derived. |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
COMMON STOCK — 90.07% | ||||||||
AUTOMOBILES & COMPONENTS — 3.41% | ||||||||
Auto Components — 2.47% | ||||||||
Delphi Automotive plc | 356,442 | $ | 21,864,152 | |||||
Automobiles — 0.94% | ||||||||
General Motors Co. | 260,586 | 8,323,117 | ||||||
|
| |||||||
30,187,269 | ||||||||
|
| |||||||
BANKS — 11.08% | ||||||||
Banks — 11.08% | ||||||||
Citigroup, Inc. | 747,761 | 38,748,975 | ||||||
a Citizens Financial Group, Inc. | 982,486 | 23,009,822 | ||||||
a Eurobank Ergasias SA | 35,465,756 | 13,976,053 | ||||||
a ING Groep N.V. | 1,563,244 | 22,331,098 | ||||||
|
| |||||||
98,065,948 | ||||||||
|
| |||||||
CAPITAL GOODS — 1.75% | ||||||||
Trading Companies & Distributors — 1.75% | ||||||||
Fly Leasing Ltd. ADR | 1,206,813 | 15,459,275 | ||||||
|
| |||||||
15,459,275 | ||||||||
|
| |||||||
COMMERCIAL & PROFESSIONAL SERVICES — 2.89% | ||||||||
Commercial Services & Supplies — 2.89% | ||||||||
Mineral Resources Ltd. | 3,354,843 | 25,554,800 | ||||||
|
| |||||||
25,554,800 | ||||||||
|
| |||||||
CONSUMER DURABLES & APPAREL — 4.63% | ||||||||
Household Durables — 4.63% | ||||||||
Barratt Developments plc | 6,385,602 | 41,004,350 | ||||||
|
| |||||||
41,004,350 | ||||||||
|
| |||||||
CONSUMER SERVICES — 5.07% | ||||||||
Hotels, Restaurants & Leisure — 5.07% | ||||||||
Galaxy Entertainment Group Ltd. | 3,886,185 | 22,571,839 | ||||||
Paradise Co. Ltd. | 682,174 | 22,335,098 | ||||||
|
| |||||||
44,906,937 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 2.15% | ||||||||
Capital Markets — 0.68% | ||||||||
UBS AG | 343,138 | 5,987,932 | ||||||
Consumer Finance — 1.47% | ||||||||
Capital One Financial Corp. | 159,767 | 13,040,183 | ||||||
|
| |||||||
19,028,115 | ||||||||
|
| |||||||
ENERGY — 2.07% | ||||||||
Oil, Gas & Consumable Fuels — 2.07% | ||||||||
a Bankers Petroleum Ltd. | 3,800,904 | 18,292,667 | ||||||
|
| |||||||
18,292,667 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 1.14% | ||||||||
Food & Staples Retailing — 1.14% | ||||||||
Walgreen Co. | 169,980 | 10,074,715 | ||||||
|
| |||||||
10,074,715 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 1.26% | ||||||||
Food Products — 1.26% | ||||||||
BRF SA | 469,671 | 11,175,013 | ||||||
|
| |||||||
11,175,013 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 3.69% | ||||||||
Health Care Providers & Services — 3.69% | ||||||||
a Express Scripts Holding Company | 462,002 | 32,631,201 | ||||||
|
| |||||||
32,631,201 | ||||||||
|
|
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
HOUSEHOLD & PERSONAL PRODUCTS — 2.33% | ||||||||
Personal Products — 2.33% | ||||||||
a Ontex Group N.V. | 827,619 | $ | 20,587,667 | |||||
|
| |||||||
20,587,667 | ||||||||
|
| |||||||
MEDIA — 4.32% | ||||||||
Media — 4.32% | ||||||||
a Numericable Group SAS | 716,520 | 38,236,289 | ||||||
|
| |||||||
38,236,289 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 9.45% | ||||||||
Pharmaceuticals — 9.45% | ||||||||
Concordia Healthcare Corp. | 856,041 | 28,220,040 | ||||||
Roche Holding AG | 26,580 | 7,881,845 | ||||||
a Valeant Pharmaceuticals International, Inc. | 362,679 | 47,583,485 | ||||||
|
| |||||||
83,685,370 | ||||||||
|
| |||||||
REAL ESTATE — 5.12% | ||||||||
Real Estate Investment Trusts — 5.12% | ||||||||
Ryman Hospitality Properties, Inc. | 627,021 | 29,658,093 | ||||||
Gaming and Leisure Properties, Inc. | 506,884 | 15,662,716 | ||||||
|
| |||||||
45,320,809 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.35% | ||||||||
Semiconductors & Semiconductor Equipment — 3.35% | ||||||||
a Micron Technology, Inc. | 866,335 | 29,680,637 | ||||||
|
| |||||||
29,680,637 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 12.14% | ||||||||
Information Technology Services — 4.33% | ||||||||
a InterXion Holding NV | 1,383,087 | 38,297,679 | ||||||
Internet Software & Services — 7.81% | ||||||||
a Alibaba Group Holding Ltd. ADR | 151,740 | 13,482,099 | ||||||
a Baidu, Inc. ADR | 125,643 | 27,419,072 | ||||||
a Google, Inc. Class A | 25,156 | 14,802,042 | ||||||
a Google, Inc. Class C | 23,238 | 13,416,692 | ||||||
|
| |||||||
107,417,584 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 7.05% | ||||||||
Communications Equipment — 4.77% | ||||||||
a EchoStar Corp. | 708,856 | 34,563,819 | ||||||
a EI Towers SpA | 144,842 | 7,685,425 | ||||||
Technology, Hardware, Storage & Periphals — 2.28% | ||||||||
Apple, Inc. | 109,642 | 11,046,431 | ||||||
Samsung Electronics Co. Ltd. | 8,107 | 9,096,127 | ||||||
|
| |||||||
62,391,802 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 4.79% | ||||||||
Diversified Telecommunication Services — 4.79% | ||||||||
a Level 3 Communications, Inc. | 926,505 | 42,369,074 | ||||||
|
| |||||||
42,369,074 | ||||||||
|
| |||||||
TRANSPORTATION — 2.38% | ||||||||
Airlines — 2.38% | ||||||||
American Airlines Group, Inc. | 595,000 | 21,110,600 | ||||||
|
| |||||||
21,110,600 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $642,220,443) | 797,180,122 | |||||||
|
|
12 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
SHORT TERM INVESTMENTS — 8.63% | ||||||||
Ameren Illinois Co., 0.20%, 10/1/2014 | $ | 11,400,000 | $ | 11,400,000 | ||||
Apache Corp., 0.26%, 10/6/2014 | 13,000,000 | 12,999,531 | ||||||
Bank of New York Tri-Party Repurchase Agreement 0.23% dated 9/30/2014 due 10/1/2014, repurchase price $13,000,083 collateralized by 13 corporate debt securities, having an average coupon of 4.24%, a minimum credit rating of BBB-, maturity dates from 9/15/2017 to 4/1/2044, and having an aggregate market value of $13,956,749 at 9/30/2014 | 13,000,000 | 13,000,000 | ||||||
CenterPoint Energy, Inc., 0.20%, 10/1/2014 | 13,000,000 | 13,000,000 | ||||||
Hitachi America, Ltd., 0.32%, 10/6/2014 | 13,000,000 | 12,999,422 | ||||||
Kansas City Power & Light, 0.22%, 10/1/2014 | 13,000,000 | 13,000,000 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $76,398,953) | 76,398,953 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 98.70% (Cost $718,619,396) | $ | 873,579,075 | ||||||
OTHER ASSETS LESS LIABILITIES — 1.30% | 11,521,264 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 885,100,339 | ||||||
|
|
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 | |
SPA | Standby Purchase Agreement |
See notes to financial statements.
Certified Annual Report 13
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $718,619,396) (Note 2) | $ | 873,579,075 | ||
Cash | 77,828 | |||
Receivable for investments sold | 2,590,486 | |||
Receivable for fund shares sold | 6,882,894 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 6,910,287 | |||
Dividends receivable | 1,167,795 | |||
Dividend and interest reclaim receivable | 154,823 | |||
Interest receivable | 83 | |||
Prepaid expenses and other assets | 52,923 | |||
|
| |||
Total Assets | 891,416,194 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 4,847,718 | |||
Payable for fund shares redeemed | 535,440 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 53,576 | |||
Payable to investment advisor and other affiliates (Note 3) | 724,637 | |||
Accounts payable and accrued expenses | 154,340 | |||
Dividends payable | 144 | |||
|
| |||
Total Liabilities | 6,315,855 | |||
|
| |||
NET ASSETS | $ | 885,100,339 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Distribution in excess of net investment income | $ | (997,444 | ) | |
Net unrealized appreciation on investments and foreign currency translations | 161,868,547 | |||
Accumulated net realized gain (loss) | (111,949,097 | ) | ||
Net capital paid in on shares of beneficial interest | 836,178,333 | |||
|
| |||
$ | 885,100,339 | |||
|
|
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($207,227,271 applicable to 8,728,487 shares of beneficial interest outstanding - Note 4) | $ | 23.74 | ||
Maximum sales charge, 4.50% of offering price | 1.12 | |||
|
| |||
Maximum offering price per share | $ | 24.86 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($143,506,314 applicable to 6,178,153 shares of beneficial interest outstanding - Note 4) | $ | 23.23 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($453,511,260 applicable to 19,065,312 shares of beneficial interest outstanding - Note 4) | $ | 23.79 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share ($2,181,605 applicable to 92,621 shares of beneficial interest outstanding - Note 4) | $ | 23.55 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share ($4,461,939 applicable to 189,299 shares of beneficial interest outstanding - Note 4) | $ | 23.57 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($74,211,950 applicable to 3,117,433 shares of beneficial interest outstanding - Note 4) | $ | 23.81 | ||
|
|
* | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
See notes to financial statements.
Certified Annual Report 15
STATEMENT OF OPERATIONS | ||
Thornburg Global Opportunities Fund | Year Ended September 30, 2014 |
INVESTMENT INCOME | ||||
Dividend income (net of foreign taxes withheld of $247,564) | $ | 8,201,187 | ||
Interest income | 122,901 | |||
|
| |||
Total Income | 8,324,088 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 5,742,330 | |||
Administration fees (Note 3) | ||||
Class A Shares | 181,498 | |||
Class C Shares | 140,140 | |||
Class I Shares | 170,963 | |||
Class R3 Shares | 2,491 | |||
Class R4 Shares | 3,780 | |||
Class R5 Shares | 30,750 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 363,827 | |||
Class C Shares | 1,123,108 | |||
Class R3 Shares | 9,975 | |||
Class R4 Shares | 7,569 | |||
Transfer agent fees | ||||
Class A Shares | 137,451 | |||
Class C Shares | 119,957 | |||
Class I Shares | 338,832 | |||
Class R3 Shares | 5,974 | |||
Class R4 Shares | 10,711 | |||
Class R5 Shares | 63,908 | |||
Registration and filing fees | ||||
Class A Shares | 26,145 | |||
Class C Shares | 19,428 | |||
Class I Shares | 31,709 | |||
Class R3 Shares | 14,939 | |||
Class R4 Shares | 17,493 | |||
Class R5 Shares | 17,580 | |||
Custodian fees (Note 3) | 167,432 | |||
Professional fees | 65,130 | |||
Accounting fees | 21,332 | |||
Trustee fees | 20,087 | |||
Other expenses | 95,252 | |||
|
| |||
Total Expenses | 8,949,791 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (410,182 | ) | ||
|
| |||
Net Expenses | 8,539,609 | |||
|
| |||
Net Investment Loss | $ | (215,521 | ) | |
|
|
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Global Opportunities Fund | Year Ended September 30, 2014 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | 42,536,571 | ||
Forward currency contracts (Note 7) | 486,910 | |||
Foreign currency transactions | (61,787 | ) | ||
|
| |||
42,961,694 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 61,269,346 | |||
Foreign currency translations | 15,443 | |||
Forward currency contracts (Note 7) | 7,455,702 | |||
|
| |||
68,740,491 | ||||
|
| |||
Net Realized and Unrealized Gain | 111,702,185 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 111,486,664 | ||
|
|
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Global Opportunities Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income (loss) | $ | (215,521 | ) | $ | 3,028,820 | |||||
Net realized gain (loss) on investments, forward currency contracts, and foreign currency transactions | 42,961,694 | 34,117,989 | ||||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, and foreign currency translations | 68,740,491 | 55,095,058 | ||||||||
|
|
|
| |||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 111,486,664 | 92,241,867 | ||||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (535,375 | ) | (718,838 | ) | ||||||
Class C Shares | (72,787 | ) | — | |||||||
Class I Shares | (2,665,731 | ) | (3,552,432 | ) | ||||||
Class R3 Shares | (4,336 | ) | (15,293 | ) | ||||||
Class R4 Shares | (13,693 | ) | (18,722 | ) | ||||||
Class R5 Shares | (428,753 | ) | (880,174 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||||
Class A Shares | 88,026,299 | 1,325,826 | ||||||||
Class C Shares | 37,592,422 | (6,075,308 | ) | |||||||
Class I Shares | 148,583,481 | 38,975,631 | ||||||||
Class R3 Shares | 174,028 | 481,465 | ||||||||
Class R4 Shares | 1,826,623 | 460,617 | ||||||||
Class R5 Shares | 14,348,287 | (11,216,085 | ) | |||||||
|
|
|
| |||||||
Net Increase in Net Assets | 398,317,129 | 111,008,554 | ||||||||
NET ASSETS | ||||||||||
Beginning of Year | 486,783,210 | 375,774,656 | ||||||||
|
|
|
| |||||||
End of Year | $ | 885,100,339 | $ | 486,783,210 | ||||||
|
|
|
| |||||||
Distribution in excess of net investment income | $ | (997,444 | ) | $ | (1,505,544 | ) |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
NOTE 1 – ORGANIZATION
Thornburg Global Opportunities Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of eighteen separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types from issuers around the world.
The Fund currently offers six classes of shares of beneficial interest: Class A, Class C, Institutional Class (“Class I”), and Retirement Classes (“Class R3,” “Class R4,” and “Class R5”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, (iii) Class I and Class R5 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, 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 allocable 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 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. 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 reported by NASDAQ are valued at the NASDAQ official closing price. 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. 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 when 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, 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. For example, 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
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
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 over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of 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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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:
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
FAIR VALUE MEASUREMENTS AT SEPTEMBER 30, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 797,180,122 | $ | 797,180,122 | $ | — | $ | — | ||||||||
Short Term Investments | 76,398,953 | — | 76,398,953 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 873,579,075 | $ | 797,180,122 | $ | 76,398,953 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 6,910,287 | $ | — | $ | 6,910,287 | $ | — | ||||||||
Spot Currency | $ | 12,018 | $ | 12,018 | $ | — | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (53,576 | ) | $ | — | $ | (53,576 | ) | $ | — |
* | 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, which may include 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, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
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 of securities 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, 2014, 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.
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
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 by entering into repurchase agreements under which the Fund delivers cash to a counterparty, the counterparty delivers securities as collateral, and the Fund is obligated to resell that collateral to the coun-terparty at an agreed upon price at the maturity date of the repurchase agreement. Securities pledged as collateral under repurchase agreements are held in custody with a third party custodian 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 counterparty’s obligations. Under certain circumstances, in the event of default or bankruptcy by the counterparty 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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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.
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, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $71,020 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $8,706 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, 2014, 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 and shareholder services.
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, 2014, are set forth in the Statement of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class I, Class R3, Class R4, and Class R5 expenses do not exceed 0.99%, 1.50%, 1.40%, and 0.99%, respectively. The agreement may be
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually waived or reimbursed certain class specific expenses, administrative fees, and distribution fees of $295,645 for Class I shares, $21,783 for Class R3 shares, $25,001 for Class R4 shares, and $67,753 for Class R5 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, 2014, 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 and is included as Trustee Fees on the Statement of Operations.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 5,052,565 | $ | 116,337,625 | 1,046,884 | $ | 18,540,353 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 22,873 | 511,661 | 37,924 | 680,864 | ||||||||||||
Shares repurchased | (1,258,744 | ) | (28,822,987 | ) | (1,001,012 | ) | (17,895,391 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 3,816,694 | $ | 88,026,299 | 83,796 | $ | 1,325,826 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 2,075,521 | $ | 46,986,621 | 428,607 | $ | 7,505,412 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 3,176 | 65,901 | — | — | ||||||||||||
Shares repurchased | (431,040 | ) | (9,460,100 | ) | (789,625 | ) | (13,580,720 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 1,647,657 | $ | 37,592,422 | (361,018 | ) | $ | (6,075,308 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 9,089,512 | $ | 208,338,592 | 4,300,906 | $ | 78,134,818 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 101,301 | 2,305,745 | 184,266 | 3,302,095 | ||||||||||||
Shares repurchased | (2,751,982 | ) | (62,060,856 | ) | (2,403,672 | ) | (42,461,282 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 6,438,831 | $ | 148,583,481 | 2,081,500 | $ | 38,975,631 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 19,984 | $ | 453,631 | 36,597 | $ | 621,846 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 96 | 2,008 | 359 | 6,326 | ||||||||||||
Shares repurchased | (11,991 | ) | (281,611 | ) | (8,663 | ) | (146,707 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 8,089 | $ | 174,028 | 28,293 | $ | 481,465 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 107,381 | $ | 2,461,793 | 54,964 | $ | 960,249 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 525 | 11,587 | 1,032 | 18,376 | ||||||||||||
Shares repurchased | (28,952 | ) | (646,757 | ) | (29,237 | ) | (518,008 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 78,954 | $ | 1,826,623 | 26,759 | $ | 460,617 | ||||||||||
|
|
|
|
|
|
|
|
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 1,105,718 | $ | 24,997,109 | 134,426 | $ | 2,354,735 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 18,870 | 428,753 | 49,731 | 880,175 | ||||||||||||
Shares repurchased | (488,449 | ) | (11,077,575 | ) | (833,812 | ) | (14,450,995 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 636,139 | $ | 14,348,287 | (649,655 | ) | $ | (11,216,085 | ) | ||||||||
|
|
|
|
|
|
|
|
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $605,027,282 and $368,296,944, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 721,498,749 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 164,423,560 | ||
Gross unrealized depreciation on a tax basis | (12,343,234 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 152,080,326 | ||
|
|
The Fund utilized $46,310,823 of capital loss carryforwards during the year ended September 30, 2014.
At September 30, 2014, the Fund had cumulative tax basis capital losses of $103,590,213 generated prior to October 1, 2011, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards expire September 30, 2018.
In order to account for permanent book/tax differences, the Fund decreased distribution in excess of net investment income by $4,477,265, increased accumulated net realized loss by $4,377,649 and decreased net capital paid in on shares of beneficial interest by $99,616. This reclassification has no impact on the net asset value of the Fund. This reclassification is due primarily to passive foreign investment company ordinary income, foreign currency gains, and return of capital tax adjustments.
At September 30, 2014, the Fund had undistributable tax basis ordinary income of $391,754 and no undistributed tax basis capital gains.
The tax character of distributions paid during the years ended September 30, 2014, and September 30, 2013, was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 3,720,675 | $ | 5,185,459 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 3,720,675 | $ | 5,185,459 | ||||
|
|
|
|
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 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, 2014, 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’s counterparty
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
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 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, 2014 in the normal course of pursuing its investment objectives, with the objective 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 average value of open sell currency contracts for the year ended September 30, 2014 was $83,009,009. 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 the open sell currency contracts to which they relate.
The following table displays the outstanding forward currency contracts at September 30, 2014:
OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2014 | ||||||||||||||||||||||
CONTRACT DESCRIPTION | BUY/SELL | CONTRACT AMOUNT | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | ||||||||||||||||
Australian Dollar | Sell | 10,780,200 | 11/10/2014 | 9,412,544 | $ | 563,992 | $ | — | ||||||||||||||
Australian Dollar | Sell | 5,564,700 | 11/10/2014 | 4,858,721 | 266,869 | — | ||||||||||||||||
Australian Dollar | Sell | 2,985,900 | 11/10/2014 | 2,607,087 | 152,094 | — | ||||||||||||||||
Australian Dollar | Sell | 3,426,600 | 11/10/2014 | 2,991,876 | 37,273 | — | ||||||||||||||||
Euro | Sell | 54,948,600 | 02/11/2015 | 69,472,203 | 4,014,406 | — | ||||||||||||||||
Euro | Sell | 12,813,300 | 02/11/2015 | 16,200,016 | 812,203 | — | ||||||||||||||||
Euro | Sell | 18,045,900 | 02/11/2015 | 22,815,657 | 515,941 | — | ||||||||||||||||
Swiss Franc | Sell | 4,658,000 | 10/03/2014 | 4,879,060 | 409,315 | — | ||||||||||||||||
Swiss Franc | Sell | 1,506,700 | 10/03/2014 | 1,578,205 | 138,194 | — | ||||||||||||||||
Swiss Franc | Buy | 1,233,900 | 10/03/2014 | 1,292,458 | — | (14,435 | ) | |||||||||||||||
Swiss Franc | Buy | 2,082,800 | 10/03/2014 | 2,181,646 | — | (39,141 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||
Total | $ | 6,910,287 | $ | (53,576 | ) | |||||||||||||||||
|
|
|
|
The foregoing forward currency contracts were entered into pursuant to an International Swaps and Derivatives Association (ISDA) Master Agreement. In the event of a default or termination under the ISDA Master Agreement, the non-defaulting party has the right to close out all outstanding forward currency contracts between the parties and to net any payment amounts under those contracts, resulting in a single net amount payable by one party to the other. Because the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Fund’s Statement of Assets and Liabilities unless there has been an event of default or termination event under that agreement, the Fund does not net its outstanding forward currency contracts for purposes of the disclosure in the Fund’s Statement of Assets and Liabilities. Instead the Fund recognizes the unrealized appreciation or depreciation on those forward currency contracts on a gross basis in the Fund’s Statement of Assets and Liabilities. At September 30, 2014, those recognized amounts are disclosed in the following table:
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2014 | ||||||
ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 6,910,287 | |||
LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (53,576 | ) |
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 |
Because the Fund does not currently receive or post cash collateral in connection with its currency forward contracts, and because all of the Fund’s outstanding currency forward contracts are with State Street Bank and Trust Company, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2014 can be determined by offsetting the dollar amounts shown in the preceding table. Based on those amounts, the net amount of the Fund’s assets which is attributable to its outstanding forward currency contracts at September 30, 2014 is $6,856,711, and the net amount of the Fund’s liabilities which is attributable to those contracts at that date is $0. The Fund’s forward currency contracts are valued each day, and the net amounts of the Fund’s assets and liabilities which are attributable to those contracts are expected to vary over time.
The net realized gain (loss) 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, 2014 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, 2014 | ||||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||||
Foreign exchange contracts | $486,910 | $ | 486,910 |
AMOUNT OF NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2014 | ||||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||||
Foreign exchange contracts | $7,455,702 | $ | 7,455,702 |
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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
26 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 27
Thornburg Global Opportunities 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 (%)(a) | NET ASSETS AT END OF YEAR (THOUSANDS) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS A SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 19.72 | (0.03 | ) | 4.13 | 4.10 | (0.08 | ) | — | (0.08 | ) | $ | 23.74 | (0.15 | ) | 1.41 | 1.41 | 1.41 | 20.85 | 60.29 | $ | 207,227 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2013(b) | $ | 15.97 | 0.11 | 3.79 | 3.90 | (0.15 | ) | — | (0.15 | ) | $ | 19.72 | 0.60 | 1.46 | 1.46 | 1.46 | 24.50 | 66.12 | $ | 96,855 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS C SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 19.38 | (0.20 | ) | 4.07 | 3.87 | (0.02 | ) | — | (0.02 | ) | $ | 23.23 | (0.92 | ) | 2.17 | 2.17 | 2.17 | 19.96 | 60.29 | $ | 143,506 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 15.69 | (0.03 | ) | 3.72 | 3.69 | — | — | — | $ | 19.38 | (0.18 | ) | 2.22 | 2.22 | 2.22 | 23.52 | 66.12 | $ | 87,808 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS I SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 19.74 | 0.06 | 4.15 | 4.21 | (0.16 | ) | — | (0.16 | ) | $ | 23.79 | 0.26 | 0.99 | 0.99 | 1.08 | 21.39 | 60.29 | $ | 453,511 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 16.06 | 0.19 | 3.80 | 3.99 | (0.31 | ) | — | (0.31 | ) | $ | 19.74 | 1.07 | 0.99 | 0.99 | 1.11 | 25.08 | 66.12 | $ | 249,283 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS R3 SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 19.55 | (0.06 | ) | 4.11 | 4.05 | (0.05 | ) | — | (0.05 | ) | $ | 23.55 | (0.26 | ) | 1.50 | 1.50 | 2.59 | 20.75 | 60.29 | $ | 2,182 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 15.91 | 0.11 | 3.74 | 3.85 | (0.21 | ) | — | (0.21 | ) | $ | 19.55 | 0.60 | 1.49 | 1.49 | 3.41 | 24.37 | 66.12 | $ | 1,653 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS R4 SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 19.59 | (0.03 | ) | 4.10 | 4.07 | (0.09 | ) | — | (0.09 | ) | $ | 23.57 | (0.14 | ) | 1.40 | 1.40 | 2.23 | 20.82 | 60.29 | $ | 4,462 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 15.90 | 0.12 | 3.76 | 3.88 | (0.19 | ) | — | (0.19 | ) | $ | 19.59 | 0.68 | 1.40 | 1.40 | 2.76 | 24.57 | 66.12 | $ | 2,161 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
CLASS R5 SHARES |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 19.76 | 0.06 | 4.15 | 4.21 | (0.16 | ) | — | (0.16 | ) | $ | 23.81 | 0.26 | 0.99 | 0.99 | 1.10 | 21.36 | 60.29 | $ | 74,212 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 16.07 | 0.18 | 3.82 | 4.00 | (0.31 | ) | — | (0.31 | ) | $ | 19.76 | 1.03 | 0.99 | 0.99 | 1.15 | 25.13 | 66.12 | $ | 49,023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 |
(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. |
+ | 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 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, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
30 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Global Opportunities Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | ||||||||||
CLASS A SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,073.10 | $ | 7.34 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.99 | $ | 7.14 | ||||||
CLASS C SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,069.00 | $ | 11.23 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.21 | $ | 10.94 | ||||||
CLASS I SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,075.50 | $ | 5.15 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | ||||||
CLASS R3 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,072.40 | $ | 7.79 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.59 | ||||||
CLASS R4 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,073.00 | $ | 7.28 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.05 | $ | 7.08 | ||||||
CLASS R5 SHARES | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,075.40 | $ | 5.15 | ||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.41%; C: 2.17%; I: 0.99%; R3: 1.50%; R4: 1.40%; R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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 Global Opportunities Fund | September 30, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 3 YRS | 5 YRS | SINCE INCEPTION | |||||||||||||
Class A Shares (Incep: 7/28/06) | 15.40 | % | 20.97 | % | 12.72 | % | 10.22 | % | ||||||||
Class C Shares (Incep: 7/28/06) | 18.96 | % | 21.89 | % | 12.89 | % | 9.98 | % | ||||||||
Class I Shares (Incep: 7/28/06) | 21.39 | % | 23.42 | % | 14.31 | % | 11.38 | % | ||||||||
Class R3 Shares (Incep: 2/1/08) | 20.75 | % | 22.77 | % | 13.73 | % | 6.09 | % | ||||||||
Class R4 Shares (Incep: 2/1/08) | 20.82 | % | 22.91 | % | 13.83 | % | 6.19 | % | ||||||||
Class R5 Shares (Incep: 2/1/08) | 21.36 | % | 23.42 | % | 14.29 | % | 6.65 | % |
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 C, I, R3, R4, and R5 shares.
32 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Global Opportunities Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES) (1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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 Global Opportunities Fund | September 30, 2014 (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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Thornburg Global Opportunities Fund of $3,720,675 are being reported as ordinary investment income for federal income tax purposes.
For the tax year ended September 30, 2014, the 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 44.74% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2014 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2014, foreign source income and foreign taxes paid are $4,789,596 and $247,564, 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, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing
36 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 (Unaudited) |
a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the quality of portfolio trade execution, the Advisor’s performance of accounting and other services under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the seven calendar years since the Fund’s inception, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year, three-year and five-year periods ending with the second quarter of the current year comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of estimated earnings growth, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the seven calendar years since the Fund’s inception showed that the Fund’s investment return for the most recent calendar year was higher than the returns for the fund category and the securities index, that the Fund’s returns for the preceding six calendar years exceeded or were comparable to the returns for the index in five of the six years, and that the Fund’s returns exceeded or were comparable to the average returns of the fund category in five of six years. Noted quantitative data showed that the Fund’s annualized investment returns fell in the top decile of performance of the first fund category for the one-year, three-year and five-year periods ending with the second quarter of the current year. Noted data also showed that the Fund’s annualized investment returns fell in the top decile of performance of the second fund category for the same periods. Data presented to the Trustees showed that the Fund’s annualized total returns (net of expenses) over the period since the Fund’s inception exceeded the annualized returns for 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 performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection considered a number of factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses. Data considered included comparisons of the advisory 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, comparisons of the Fund’s advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Data showed that the Fund’s advisory fee level was slightly higher than the median and average levels for the fund category and that the level of total expense for a representative share class of the Fund was comparable to the median and average expense levels for the category. Peer group data showed the Fund’s advisory fee level was comparable to the median for the peer group, the total expense level for a representative share class of the Fund exceeded the median for the fund peer group, and the advisory fee and total expense levels fell within the range of levels for the group. The Trustees did not view the differences as significant in view of the other factors considered.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an
Certified Annual Report 37
OTHER INFORMATION, CONTINUED | ||
Thornburg Global Opportunities Fund | September 30, 2014 (Unaudited) |
investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain adequate service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized by the Fund as its assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
38 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 39
This page intentionally left blank.
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income 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
42 This page is not part of the Annual Report
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | TH1245 |
2 This page is not part of the Annual Report
IMPORTANT INFORMATION
The information presented on the following pages was current as of September 30, 2014. 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 emerging markets, including currency fluctuations, illiquidity, volatility, and political and economic risks. 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 objective. 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, 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.
From time to time, the Fund may invest in shares of companies through initial public offerings (IPOs). IPOs have the potential to produce substantial gains for the Fund. There is no assurance that the Fund will have continued access to profitable IPOs and, as the Fund’s assets grow, the impact of IPO investments may decline. Therefore, investors should not rely on these past gains as an indication of future performance.
Impact to performance of IPOs, as disclosed in the following letter to shareholders, is calculated using the performance on the first day of the IPO, assuming that the acquired shares are held to the end of the first day.
SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||
Class A | THDAX | 885-216-408 | ||
Class C | THDCX | 885-216-507 | ||
Class I | THDIX | 885-216-606 | ||
Class R5 | THDRX | 885-216-846 | ||
Class R6 | TDWRX | 885-216-838 |
Glossary
MSCI Country Indices (Brazil, South Africa, and Russia) – Free float-adjusted market capitalization indices that are designed to measure equity market performance in that specific country.
MSCI Emerging Markets Index – 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 23 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
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.
Basis Point (bp) – A unit equal to 1/100th of 1%. 1% = 100 basis points (bps).
Carry Trade – A strategy in which an investor sells a certain financial instrument with a relatively low interest rate and uses the funds to purchase a different financial instrument yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used.
Consumer Price Index (CPI) – An 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.
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.
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.
Multiple – A valuation multiple reflects an investment’s market value relative to some key metric. Price to earnings ratio (P/E) is a commonly used multiple. It’s calculated by dividing a stock’s price by the company’s earnings per share.
Price to Book Ratio (P/B ratio) – 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 per share.
Price to Cash Flow – The measure of the market’s expectations regarding a firm’s future financial health. It is calculated by dividing price per share by cash flow per share.
Price to Earnings Ratio (P/E) – A valuation ratio of a company’s current share price compared to its per-share earnings. P/E equals a company’s market value per share divided by earnings per share.
This page is not part of the Annual Report 3
Portfolio Manager
Lewis Kaufman, CFA
Objectives and Strategies
The Fund seeks long-term capital appreciation. Under normal market conditions the Fund invests at least 80% of its assets in equity securities and debt obligations of developing country issuers. A developing country issuer is a company or sovereign entity that is domiciled or otherwise tied economically to one or more developing countries. The Fund expects that investment in the Fund’s portfolio normally will be weighted in favor of equity securities.
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/ gross domestic product (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. |
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. |
4 This page is not part of the Annual Report
Key Portfolio Attributes
As of September 30, 2014
Portfolio P/E Trailing 12-months* | 20.6x | |||
Portfolio Price to Cash Flow* | 14.7x | |||
Portfolio Price to Book Value* | 3.9x | |||
Median Market Cap* | $ | 4.8 B | ||
Number of Companies | 78 |
* | Source: FactSet |
Market Capitalization Exposure
As of September 30, 2014
Basket Structure
As of September 30, 2014
Average Annual Total Returns
For Periods Ended September 30, 2014
1 YR | 3 YRS | SINCE INCEPTION | ||||||||||
A Shares (Incep: 12/16/09) | ||||||||||||
Without sales charge | 4.73 | % | 14.21 | % | 9.75 | % | ||||||
With sales charge | 0.00 | % | 12.47 | % | 8.71 | % | ||||||
MSCI Emerging Markets Index (Since 12/16/09) | 4.30 | % | 7.19 | % | 3.21 | % |
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 1.59%, as disclosed in the most recent Prospectus.
Stocks Contributing and Detracting
For the Year Ended September 30, 2014
TOP CONTRIBUTORS | TOP DETRACTORS | |
Kroton Educacional S.A. | Kolao Holdings Co., Ltd. | |
Al Tayyar Travel Group | Jeronimo Martins, SGPS S.A. | |
Facebook, Inc. | Sberbank Russia OJSC ADR | |
HDFC Bank ADR | Greek Organisation of Football Prognostics SA OPAP | |
China Medical System Holdings Ltd. | Anton Oilfield Services Group |
Source: FactSet
This page is not part of the Annual Report 5
Thornburg Developing World Fund
September 30, 2014
7 | ||||
9 | ||||
14 | ||||
16 | ||||
18 | ||||
19 | ||||
28 | ||||
30 | ||||
31 | ||||
32 | ||||
33 | ||||
36 |
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 and the results of their operations for the period presented.
6 Certified Annual Report
LETTER TO SHAREHOLDERS | ||
Thornburg Developing World Fund | September 30, 2014 (Unaudited) |
October 21, 2014
Dear Fellow Shareholder:
We are pleased to present the fifth annual report for the Thornburg Developing World Fund (the Fund) for the period ended September 30, 2014. The net asset value (NAV) of a Class A share of the Fund increased $0.84 to $18.61 per share in the past 12 months, representing a total return of 4.73%, compared to 4.30% for the benchmark MSCI Emerging Markets Index. Since inception of December 16, 2009, the Class A shares of the Thornburg Developing World Fund produced a total return of 56.14% (at NAV), compared to 16.32% for the MSCI Emerging Markets Index.
The twelve-month period ended September 30, 2014 embeds three distinct phases. Between October 22, 2013 and February 5, 2014, the MSCI Emerging Markets Index declined 11.87%, punctuating a multi-year period of relative underperformance. This period was defined by continued deterioration in current account balances across emerging markets and capital flight as investors began to anticipate the potential for U.S. monetary policy normalization. Then, between February 5, 2014 and September 3, 2014, markets staged a 22.56% recovery as disappointing first-quarter 2014 U.S. economic growth and deflationary pressures in Europe placed downward pressure on the global interest rate environment, reigniting the “carry trade.” Emerging-market indices then proceeded to decline 8.51% between September 3, 2014 and September 30, 2014, as dollar strength emerged to reflect the growing policy disparity between U.S. and European monetary authorities.
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 1.59%, as disclosed in the most recent prospectus.
While the direction of market movements has proven difficult to predict, their underlying driver has remained constant: perceptions about the sustainability of imbalances, which we would define as current account deficits that must be funded by foreign capital. In good times (i.e., from February 5 through September 3, 2014), these imbalances are often ignored by market participants, because foreign capital is readily available to fund them. In bad times, current account deficits can lead to currency depreciation, which results in inflation and lost purchasing power for countries with imbalances. This dynamic eventually forces central banks to respond by increasing interest rates or tightening liquidity, which stems those imbalances at the expense of growth. Such deterioration has been palpable for emerging-markets constituents such as Brazil, Russia, and in recent months, South Africa. On February 5, 2014 (i.e., the 2014 trough for the MSCI Emerging Markets Index), consensus 2014 gross domestic product (GDP) estimates for these three countries were 2.10%, 2.10%, and 2.75%, respectively, compared to 0.30%, 0.30%, and 1.50% today.
As illustrated by this example, it seems reasonable to conclude that developed market monetary accommodation is unlikely to prove a sufficient condition for sustained emerging markets returns – even if the current interest rate environment persists for an extended period. Moreover, even without policy-induced growth headwinds, cyclical and structural pressures abound to varying degrees in the U.S., Europe, and Japan, all of which dampen optimism for a broad improvement in EM fundamentals. In addition, China’s gradual deleveraging and rebalancing process should also serve to cap emerging markets growth rates and the global recovery in GDP growth. While we would certainly prefer a more fertile ground for absolute returns and overall corporate earnings delivery, our approach is intended to transcend these challenges to some degree. For example, those of you invested with us for some time will note our longtime focus on financially sound, free cash flow generative companies. We adhere to this approach not only because it can help to mitigate volatility, but because we remain focused on delivering a portfolio that can create per share value over a market cycle.
On a more sanguine note, there are some reasons for optimism. For example, India, Mexico, and Thailand all have the potential to transcend many of the challenges posed by a strengthening dollar. India was emerging from its own period of imbalances in early 2014 due to gold import curbs, fuel subsidy reductions, and interest rate increases. Since that time, Prime Minister Modi’s arrival has infused India with promise, which we expect to translate into improved business confidence and accelerating GDP
Certified Annual Report 7
LETTER TO SHAREHOLDERS,
CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 (Unaudited) |
growth. Mexico also represents the potential for accelerating GDP growth and improved earnings delivery as energy reforms begin to take shape and North American industrial activity capitalizes on low labor costs in Mexico and low energy costs in the United States. Thailand also stands out for its cyclical recovery potential, as the military government begins to disburse public funds for stalled investment programs. We also note that dollar strength and declining oil prices can be beneficial for select emerging markets, including India, which has a substantial fuel import bill due to subsidies. It is also worth noting that real interest rate differentials in Brazil are among the highest in the world suggesting that the country is at least on its way toward addressing still-sizeable imbalances, while Chinese policy makers seem more focused on fiscal discipline than in the past.
We invite you to visit our website at www.thornburg.com, where you will find additional information about the Thornburg Developing World Fund. We thank you for your trust and confidence.
Sincerely,
![]() | ||||
Lewis Kaufman, CFA | ||||
Portfolio Manager | ||||
Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
8 Certified Annual Report
SCHEDULE OF INVESTMENTS | ||
Thornburg Developing World Fund | September 30, 2014 |
Top Ten Equity Holdings
As of 9/30/14
Siam Commercial Bank plc | 2.8 | % | ||
Visa, Inc. | 2.8 | % | ||
Al Tayyar Travel Group | 2.6 | % | ||
HDFC Bank Ltd. ADR | 2.5 | % | ||
Facebook, Inc. | 2.5 | % | ||
Zee Entertainment Enterprises Ltd. | 2.3 | % | ||
Mediatek, Inc. | 2.2 | % | ||
Qualicorp SA | 2.2 | % | ||
Airports of Thailand Public Company Ltd. | 2.2 | % | ||
PT Bank Mandiri | 2.2 | % |
Summary Of Industry Group Exposure
As of 9/30/14
Software & Services | 15.5 | % | ||
Consumer Services | 14.2 | % | ||
Banks | 13.8 | % | ||
Food & Staples Retailing | 5.4 | % | ||
Food, Beverage & Tobacco | 5.1 | % | ||
Transportation | 5.1 | % | ||
Energy | 4.6 | % | ||
Consumer Durables & Apparel | 4.2 | % | ||
Retailing | 3.9 | % | ||
Diversified Financials | 3.5 | % | ||
Semiconductors & Semiconductor Equipment | 3.2 | % | ||
Health Care Equipment & Services | 2.9 | % | ||
Pharmaceuticals, Biotechnology & Life Sciences | 2.4 | % | ||
Media | 2.3 | % | ||
Household & Personal Products | 1.7 | % | ||
Insurance | 1.6 | % | ||
Telecommunication Services | 1.0 | % | ||
Materials | 0.9 | % | ||
Capital Goods | 0.9 | % | ||
Technology Hardware & Equipment | 0.9 | % | ||
Real Estate | 0.4 | % | ||
Other Assets & Liabilities | 6.5 | % |
Summary Of Country Exposure*
As of 9/30/14 (percent of equity holdings)
China | 15.1 | % | ||
Brazil | 11.9 | % | ||
United States | 11.9 | % | ||
India | 8.2 | % | ||
Taiwan | 6.0 | % | ||
Thailand | 5.4 | % | ||
Mexico | 5.2 | % | ||
Philippines | 5.0 | % | ||
Indonesia | 4.1 | % | ||
Russia | 4.0 | % | ||
Saudi Arabia | 2.7 | % | ||
Peru | 2.0 | % | ||
Greece | 1.9 | % | ||
Switzerland | 1.7 | % | ||
Colombia | 1.6 | % | ||
Panama | 1.5 | % | ||
Cambodia | 1.4 | % | ||
Hong Kong | 1.4 | % | ||
South Africa | 1.4 | % | ||
United Arab Emirates | 1.1 | % | ||
Norway | 1.1 | % | ||
Nigeria | 1.0 | % | ||
Romania | 1.0 | % | ||
Canada | 0.9 | % | ||
Lao People’s Democratic Republic | 0.9 | % | ||
Poland | 0.8 | % | ||
Turkey | 0.8 | % |
* | The country exposure of each equity holding is determined by the Fund’s Advisor based on various factors, including the location of the issuer’s head office, the issuer’s jurisdiction of incorporation and the country from which a majority of the issuer’s revenue is derived. The Advisor may deem certain issuers to be developing country issuers, as defined in the Fund’s prospectus, even if those issuers have country exposure in a developed country. |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
COMMON STOCK — 93.50% | ||||||||
BANKS — 13.82% | ||||||||
Banks — 13.82% | ||||||||
Credicorp Ltd. | 375,929 | $ | 57,663,749 | |||||
First Gulf Bank | 3,552,781 | 18,136,551 | ||||||
Guaranty Trust Bank plc | 164,318,533 | 29,714,728 | ||||||
HDFC Bank Ltd. ADR | 1,670,197 | 77,797,776 |
Certified Annual Report 9
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
Industrial and Commercial Bank of China Ltd. | 96,527,561 | $ | 60,043,416 | |||||
Itau Unibanco Holding SA ADR | 2,169,549 | 30,113,340 | ||||||
PT Bank Mandiri | 81,133,305 | 67,083,960 | ||||||
Siam Commercial Bank plc | 15,603,649 | 87,582,548 | ||||||
|
| |||||||
428,136,068 | ||||||||
|
| |||||||
CAPITAL GOODS — 0.92% | ||||||||
Industrial Conglomerates — 0.92% | ||||||||
Alliance Global Group, Inc. | 48,970,277 | 28,371,170 | ||||||
|
| |||||||
28,371,170 | ||||||||
|
| |||||||
CONSUMER DURABLES & APPAREL — 4.24% | ||||||||
Household Durables — 0.99% | ||||||||
TTK Prestige Ltd. | 459,865 | 30,454,143 | ||||||
Textiles, Apparel & Luxury Goods — 3.25% | ||||||||
Compagnie Financiere Richemont SA | 588,248 | 48,276,140 | ||||||
Eclat Textile Co. Ltd. | 5,776,137 | 52,502,568 | ||||||
|
| |||||||
131,232,851 | ||||||||
|
| |||||||
CONSUMER SERVICES — 14.24% | ||||||||
Diversified Consumer Services — 3.26% | ||||||||
Fu Shou Yuan International Group Ltd. | 50,661,316 | 26,619,725 | ||||||
Kroton Educacional S.A. | 10,586,931 | 66,521,090 | ||||||
a New Oriental Education & Technology Group, Inc. ADR | 336,564 | 7,808,285 | ||||||
Hotels, Restaurants & Leisure — 10.98% | ||||||||
Al Tayyar Travel Group | 2,067,067 | 79,530,976 | ||||||
a Alsea S.A.B. de C.V. | 9,639,449 | 30,438,854 | ||||||
a Bloomberry Resorts Corp. | 88,972,867 | 26,725,068 | ||||||
Galaxy Entertainment Group Ltd. | 10,960,731 | 63,662,398 | ||||||
International Meal Company Holdings S.A. | 3,244,223 | 23,591,939 | ||||||
a Jubilant FoodWorks Ltd. | 1,075,336 | 21,294,299 | ||||||
NagaCorp Ltd. | 56,862,130 | 40,862,436 | ||||||
OPAP SA | 4,138,436 | 54,100,004 | ||||||
|
| |||||||
441,155,074 | ||||||||
|
| |||||||
DIVERSIFIED FINANCIALS — 3.55% | ||||||||
Consumer Finance — 1.90% | ||||||||
a First Cash Financial Services, Inc. | 1,052,168 | 58,900,365 | ||||||
Diversified Financial Services — 1.65% | ||||||||
FirstRand Ltd. | 2,651,952 | 10,111,628 | ||||||
Hong Kong Exchanges & Clearing Ltd. | 1,902,581 | 40,992,653 | ||||||
|
| |||||||
110,004,646 | ||||||||
|
| |||||||
ENERGY — 4.63% | ||||||||
Energy Equipment & Services — 0.35% | ||||||||
Anton Oilfield Services Group | 36,805,439 | 10,854,615 | ||||||
Oil, Gas & Consumable Fuels — 4.28% | ||||||||
a Bankers Petroleum Ltd. | 5,366,279 | 25,826,371 | ||||||
a DNO International ASA | 9,867,927 | 30,872,070 | ||||||
a Gran Tierra Energy, Inc. | 5,568,018 | 30,774,616 | ||||||
a Parex Resources, Inc. | 1,497,952 | 16,652,085 | ||||||
b ROMGAZ SA-GDR | 1,984,965 | 19,889,349 | ||||||
ROMGAZ SA-GDR REGS | 868,500 | 8,702,370 | ||||||
|
| |||||||
143,571,476 | ||||||||
|
| |||||||
FOOD & STAPLES RETAILING — 5.41% | ||||||||
Food & Staples Retailing — 5.41% | ||||||||
Clicks Group Ltd. | 5,008,495 | 29,741,789 | ||||||
Jeronimo Martins SGPS SA | 2,039,236 | 22,454,586 | ||||||
Magnit OJCS GDR | 1,059,543 | 61,199,204 | ||||||
PriceSmart, Inc. | 286,604 | 24,544,766 | ||||||
Puregold Price Club, Inc. | 38,347,860 | 29,651,178 | ||||||
|
| |||||||
167,591,523 | ||||||||
|
| |||||||
FOOD, BEVERAGE & TOBACCO — 5.08% | ||||||||
Beverages — 1.18% | ||||||||
Fomento Economico Mexicano SAB de CV ADR | 397,083 | 36,551,490 |
10 Certified Annual Report
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
Food Products — 3.90% | ||||||||
a Amira Nature Foods Ltd. | 576,428 | $ | 9,026,862 | |||||
Grupo Lala, S.A.B. de C.V. | 22,467,290 | 55,036,956 | ||||||
Ulker Biskuvi Sanayi A.S. | 3,462,868 | 22,968,662 | ||||||
Universal Robina Corp. | 8,078,613 | 33,662,763 | ||||||
|
| |||||||
157,246,733 | ||||||||
|
| |||||||
HEALTH CARE EQUIPMENT & SERVICES — 2.89% | ||||||||
Health Care Equipment & Supplies — 0.70% | ||||||||
St. Shine Optical Co. Ltd. | 1,011,403 | 21,611,530 | ||||||
Health Care Providers & Services — 2.19% | ||||||||
a Qualicorp SA | 6,873,722 | 68,014,114 | ||||||
|
| |||||||
89,625,644 | ||||||||
|
| |||||||
HOUSEHOLD & PERSONAL PRODUCTS — 1.69% | ||||||||
Household Products — 1.69% | ||||||||
Colgate Palmolive Co. | 804,936 | 52,497,926 | ||||||
|
| |||||||
52,497,926 | ||||||||
|
| |||||||
INSURANCE — 1.57% | ||||||||
Insurance — 1.57% | ||||||||
BB Seguridade Participacoes S.A. | 3,692,807 | 48,578,648 | ||||||
|
| |||||||
48,578,648 | ||||||||
|
| |||||||
MATERIALS — 0.95% | ||||||||
Metals & Mining — 0.95% | ||||||||
Southern Copper Corp. | 989,158 | 29,328,535 | ||||||
|
| |||||||
29,328,535 | ||||||||
|
| |||||||
MEDIA — 2.25% | ||||||||
Media — 2.25% | ||||||||
Zee Entertainment Enterprises Ltd. | 13,735,033 | 69,831,612 | ||||||
|
| |||||||
69,831,612 | ||||||||
|
| |||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 2.42% | ||||||||
Pharmaceuticals — 2.42% | ||||||||
China Animal Healthcare Ltd. | 39,480,062 | 30,557,599 | ||||||
China Medical System Holdings Ltd. | 19,415,475 | 33,255,738 | ||||||
a Luye Pharma Group Ltd. | 8,642,770 | 11,119,503 | ||||||
|
| |||||||
74,932,840 | ||||||||
|
| |||||||
REAL ESTATE — 0.42% | ||||||||
Real Estate Management & Development — 0.42% | ||||||||
a Emaar Malls Group PJSC | 16,480,356 | 13,012,165 | ||||||
|
| |||||||
13,012,165 | ||||||||
|
| |||||||
RETAILING — 3.87% | ||||||||
Internet & Catalog Retail — 0.45% | ||||||||
a JD.com, Inc. ADR | 257,653 | 6,652,600 | ||||||
a Vipshop Holdings Ltd. ADR | 38,486 | 7,274,239 | ||||||
Multiline Retail — 2.58% | ||||||||
Matahari Department Store Tbk | 39,272,566 | 52,293,589 | ||||||
Robinsons Retail Holdings, Inc. | 19,569,563 | 27,602,993 | ||||||
Specialty Retail — 0.84% | ||||||||
Kolao Holdings | 1,646,709 | 26,216,263 | ||||||
|
| |||||||
120,039,684 | ||||||||
|
| |||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.21% | ||||||||
Semiconductors & Semiconductor Equipment — 3.21% | ||||||||
Hermes Microvision, Inc. | 739,909 | 30,890,857 | ||||||
Mediatek, Inc. | 4,630,589 | 68,577,076 | ||||||
|
| |||||||
99,467,933 | ||||||||
|
| |||||||
SOFTWARE & SERVICES — 15.47% | ||||||||
Information Technology Services — 5.24% | ||||||||
Cielo SA | 2,966,682 | 48,480,147 | ||||||
QIWI plc ADR | 890,540 | 28,132,159 |
Certified Annual Report 11
SCHEDULE OF INVESTMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||
Visa, Inc. | 401,343 | $ | 85,634,556 | |||||
Internet Software & Services — 9.20% | ||||||||
a Alibaba Group Holding Ltd. ADR | 546,910 | 48,592,953 | ||||||
a Facebook, Inc. | 981,782 | 77,600,049 | ||||||
a Just Dial Ltd. | 1,082,322 | 28,635,268 | ||||||
MercadoLibre, Inc. | 241,297 | 26,216,919 | ||||||
a Qihoo 360 Technology Co. Ltd. ADR | 89,848 | 6,062,045 | ||||||
a SINA Corp. | 173,717 | 7,146,717 | ||||||
Tencent Holdings Ltd. | 3,682,660 | 54,683,696 | ||||||
a Yandex NV | 996,802 | 27,706,112 | ||||||
a YY, Inc. ADR | 111,356 | 8,339,451 | ||||||
Software — 1.03% | ||||||||
Linx S.A. | 1,526,385 | 31,927,653 | ||||||
|
| |||||||
479,157,725 | ||||||||
|
| |||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.85% | ||||||||
Technology, Hardware, Storage & Periphals — 0.85% | ||||||||
Goldpac Group Ltd. | 29,679,133 | 26,373,467 | ||||||
|
| |||||||
26,373,467 | ||||||||
|
| |||||||
TELECOMMUNICATION SERVICES — 0.96% | ||||||||
Wireless Telecommunication Services — 0.96% | ||||||||
China Mobile Ltd. | 2,588,434 | 29,885,073 | ||||||
|
| |||||||
29,885,073 | ||||||||
|
| |||||||
TRANSPORTATION — 5.06% | ||||||||
Airlines — 1.39% | ||||||||
Copa Holdings SA | 401,466 | 43,073,287 | ||||||
Road & Rail — 1.48% | ||||||||
Kansas City Southern | 377,799 | 45,789,239 | ||||||
Transportation Infrastructure — 2.19% | ||||||||
Airports of Thailand Public Company Ltd. | 9,220,257 | 67,961,185 | ||||||
|
| |||||||
156,823,711 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $2,739,542,296) | 2,896,864,504 | |||||||
|
| |||||||
SHORT TERM INVESTMENTS — 7.43% | ||||||||
Atlantic City Electric, 0.22%, 10/7/2014 | $ | 40,000,000 | 39,998,533 | |||||
Bank of New York Tri-Party Repurchase Agreement 0.23% dated 9/30/2014 due 10/1/2014, repurchase price $35,000,224 collateralized by 29 corporate debt securities, having an average coupon of 4.72%, a minimum credit rating of BBB-, maturity dates from 9/15/2016 to 11/15/2042, and having an aggregate market value of $37,397,313 at 9/30/2014 | 35,000,000 | 35,000,000 | ||||||
CenterPoint Energy, Inc., 0.20%, 10/1/2014 | 45,000,000 | 45,000,000 | ||||||
Kansas City Power & Light, 0.22%, 10/1/2014 | 46,000,000 | 46,000,000 | ||||||
National Grid USA, 0.24%, 10/2/2014 | 18,000,000 | 17,999,880 | ||||||
Plains All American Pipeline, LP, 0.23%, 10/1/2014 | 28,300,000 | 28,300,000 | ||||||
Public Service Co. of Colorado, 0.23%, 10/7/2014 | 18,000,000 | 17,999,310 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $230,297,723) | 230,297,723 | |||||||
|
| |||||||
TOTAL INVESTMENTS — 100.93% (Cost $2,969,840,019) | $ | 3,127,162,227 | ||||||
LIABILITIES NET OF OTHER ASSETS — (0.93)% | (28,968,085 | ) | ||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 3,098,194,142 | ||||||
|
|
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, 2014, the aggregate value of these securities in the Fund’s portfolio was $19,889,349, representing 0.64% of the Fund’s net assets. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
ADR | American Depository Receipt | |
GDR | Global Depository Receipt |
See notes to financial statements.
12 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 13
STATEMENT OF ASSETS AND LIABILITIES | ||
Thornburg Developing World Fund | September 30, 2014 |
ASSETS | ||||
Investments at value (cost $2,969,840,019) (Note 2) | $ | 3,127,162,227 | ||
Cash | 200,241 | |||
Cash denominated in foreign currency (cost $706,376) | 706,604 | |||
Receivable for investments sold | 21,596,385 | |||
Receivable for fund shares sold | 10,056,331 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 11,028,068 | |||
Dividends receivable | 772,502 | |||
Dividend and interest reclaim receivable | 388,181 | |||
Interest receivable | 224 | |||
Prepaid expenses and other assets | 49,993 | |||
|
| |||
Total Assets | 3,171,960,756 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 63,552,826 | |||
Payable for fund shares redeemed | 3,990,543 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 1,111,088 | |||
Payable to investment advisor and other affiliates (Note 3) | 2,724,736 | |||
Deferred taxes payable | 1,941,241 | |||
Accounts payable and accrued expenses | 446,180 | |||
|
| |||
Total Liabilities | 73,766,614 | |||
|
| |||
NET ASSETS | $ | 3,098,194,142 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 975,260 | ||
Net unrealized appreciation on investments and foreign currency translations | 165,288,969 | |||
Accumulated net realized gain (loss) | (76,828,398 | ) | ||
Net capital paid in on shares of beneficial interest | 3,008,758,311 | |||
|
| |||
$ | 3,098,194,142 | |||
|
|
14 Certified Annual Report
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share ($459,120,889 applicable to 24,665,155 shares of beneficial interest outstanding - Note 4) | $ | 18.61 | ||
Maximum sales charge, 4.50% of offering price | 0.88 | |||
|
| |||
Maximum offering price per share | $ | 19.49 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* ($232,493,278 applicable to 12,894,467 shares of beneficial interest outstanding - Note 4) | $ | 18.03 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share ($2,376,419,985 applicable to 125,604,664 shares of beneficial interest outstanding - Note 4) | $ | 18.92 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share ($7,433,162 applicable to 394,055 shares of beneficial interest outstanding - Note 4) | $ | 18.86 | ||
|
| |||
Class R6 Shares: | ||||
Net asset value, offering and redemption price per share ($22,726,828 applicable to 1,201,533 shares of beneficial interest outstanding - Note 4) | $ | 18.91 | ||
|
|
* | 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, 2014 |
INVESTMENT INCOME | ||||
Dividend income (net of foreign taxes withheld of $3,018,717) | $ | 39,384,247 | ||
Interest income | 395,733 | |||
|
| |||
Total Income | 39,779,980 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 3) | 21,445,471 | |||
Administration fees (Note 3) | ||||
Class A Shares | 697,006 | |||
Class C Shares | 231,392 | |||
Class I Shares | 843,411 | |||
Class R5 Shares | 1,915 | |||
Distribution and service fees (Note 3) | ||||
Class A Shares | 1,361,582 | |||
Class C Shares | 1,851,139 | |||
Transfer agent fees | ||||
Class A Shares | 599,425 | |||
Class C Shares | 235,425 | |||
Class I Shares | 1,136,780 | |||
Class R5 Shares | 8,320 | |||
Class R6 Shares | 6,270 | |||
Registration and filing fees | ||||
Class A Shares | 89,245 | |||
Class C Shares | 31,234 | |||
Class I Shares | 121,673 | |||
Class R5 Shares | 25,681 | |||
Class R6 Shares | 17,948 | |||
Custodian fees (Note 3) | 1,478,065 | |||
Professional fees | 80,311 | |||
Accounting fees | 85,625 | |||
Trustee fees | 75,590 | |||
Other expenses | 473,067 | |||
|
| |||
Total Expenses | 30,896,575 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 3) | (57,293 | ) | ||
Fees paid indirectly (Note 3) | (3,574 | ) | ||
|
| |||
Net Expenses | 30,835,708 | |||
|
| |||
Net Investment Income | $ | 8,944,272 | ||
|
|
16 Certified Annual Report
STATEMENT OF OPERATIONS, CONTINUED | ||
Thornburg Developing World Fund | Year Ended September 30, 2014 |
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) from: | ||||
Investments | $ | (51,791,325 | ) | |
Forward currency contracts (Note 7) | (3,265,072 | ) | ||
Foreign currency transactions | (899,635 | ) | ||
|
| |||
(55,956,032 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of deferred taxes payable of $1,941,241) | 93,491,833 | |||
Foreign currency translations | (6,140 | ) | ||
Forward currency contracts (Note 7) | 12,708,064 | |||
|
| |||
106,193,757 | ||||
|
| |||
Net Realized and Unrealized Gain | 50,237,725 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 59,181,997 | ||
|
|
See notes to financial statements.
Certified Annual Report 17
STATEMENTS OF CHANGES IN NET ASSETS | ||
Thornburg Developing World Fund |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||
OPERATIONS | ||||||||
Net investment income | $ | 8,944,272 | $ | 1,396,670 | ||||
Net realized gain (loss) on investments, forward currency contracts, and foreign currency transactions | (55,956,032 | ) | (15,988,371 | ) | ||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations, and deferred taxes | 106,193,757 | 46,005,009 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 59,181,997 | 31,413,308 | ||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||
From net investment income | ||||||||
Class A Shares | — | (30,996 | ) | |||||
Class I Shares | (8,251,450 | ) | (445,713 | ) | ||||
Class R5 Shares | (30,897 | ) | — | |||||
Class R6 Shares | (125,833 | ) | — | |||||
FUND SHARE TRANSACTIONS (NOTE 4) | ||||||||
Class A Shares | 82,624,988 | 297,364,931 | ||||||
Class C Shares | 123,568,782 | 94,374,393 | ||||||
Class I Shares | 1,529,968,464 | 756,746,811 | ||||||
Class R5 Shares | 6,846,989 | 683,542 | ||||||
Class R6 Shares | 7,904,266 | 13,901,372 | ||||||
|
|
|
| |||||
Net Increase in Net Assets | 1,801,687,306 | 1,194,007,648 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 1,296,506,836 | 102,499,188 | ||||||
|
|
|
| |||||
End of Year | $ | 3,098,194,142 | $ | 1,296,506,836 | ||||
|
|
|
| |||||
Undistributed net investment income | $ | 975,260 | $ | 465,891 |
See notes to financial statements.
18 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS | ||
Thornburg Developing World Fund | September 30, 2014 |
NOTE 1 – ORGANIZATION
Thornburg Developing World Fund, hereinafter referred to as the “Fund,” is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on December 16, 2009. The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of eighteen 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 five classes of shares of beneficial interest: Class A, Class C, Institutional Class (“Class I”) and Retirement Classes (“Class R5” and “Class R6”). 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 and Class R5 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 R6 shares are sold at net asset value without a sales charge at the time of purchase, and (v) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allocable 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 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. 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 reported by NASDAQ are valued at the NASDAQ official closing price. 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. 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 when 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, 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. For example, 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.
Certified Annual Report 19
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
Debt obligations held by the Fund have a primary over-the-counter market and are valued by an independent pricing service approved by the Trustees. The pricing service ordinarily values debt obligations using quoted bid prices and other 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.
In any case when 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 when 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 from 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.
Level 3: Significant unobservable inputs, (including the Committee’s own assumptions in determining the fair value of 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, last available 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. 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. Valuations based upon the use of inputs from Levels 1, 2, or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation when it sells the investment.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2014. 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:
20 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
FAIR VALUE MEASUREMENTS AT SEPTEMBER 30, 2014 | ||||||||||||||||
TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||
Assets | ||||||||||||||||
Investments in Securities* | ||||||||||||||||
Common Stock | $ | 2,896,864,504 | $ | 2,708,419,256 | $ | 188,445,248 | $ | — | ||||||||
Short Term Investments | 230,297,723 | — | 230,297,723 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 3,127,162,227 | $ | 2,708,419,256 | $ | 418,742,971 | $ | — | ||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | 11,028,068 | $ | — | $ | 11,028,068 | $ | — | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments** | ||||||||||||||||
Forward Currency Contracts | $ | (1,111,088 | ) | $ | — | $ | (1,111,088 | ) | $ | — | ||||||
Spot Currency | $ | (18,211 | ) | $ | (18,211 | ) | $ | — | $ | — |
* | 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, which may include 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, it is the policy of the Fund to recognize transfers between levels and the underlying events which caused the movement. The Fund recognized no transfers between levels for the year ended September 30, 2014, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
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 of securities 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, 2014, 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 pay-
Certified Annual Report 21
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
ment 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 by entering into repurchase agreements under which the Fund delivers cash to a counterparty, the counterparty delivers securities as collateral, and the Fund is obligated to resell that collateral to the coun-terparty at an agreed upon price at the maturity date of the repurchase agreement. Securities pledged as collateral under repurchase agreements are held in custody with a third party custodian 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 counterparty’s obligations. Under certain circumstances, in the event of default or bankruptcy by the counterparty 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 separate agreements with the independent 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 for the Fund for which the fees are payable at the end of each month. For the year ended September 30, 2014, 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. 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 (except for Class R6 shares, which do not have an administrative services agreement) and for which fees will be payable at an annual rate of up to .125 of 1% per annum of the average daily net assets attributable to each class of shares.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor,” an affiliate of the Advisor), which acts as the distributor of the Fund’s shares. For the year ended September 30, 2014, the Distributor has advised the Fund that it earned net commissions aggregating $181,760 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $75,857 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 (except for Class R6 shares, which do not have a Rule 12b-1 service plan) 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, 2014, there were no 12b-1 service plan fees charged for Class I or Class R5 shares. The Advisor may pay out of its own resources additional expenses for distribution of the Fund’s shares and shareholder services.
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%
22 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
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, 2014, are set forth in the Statement of Operations.
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual Class C, Class I, Class R5, and Class R6 do not exceed 2.38%, 1.09%, 1.09%, and 0.99%, respectively. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2015, unless the Advisor ceases to be the investment advisor to the Fund or the Distributor ceases to be the distributor of the Fund prior to that date. The Advisor and Distributor retain the right to be repaid by the Fund for fee waivers and expense reimbursements if expenses fall below the contractual limit prior to the end of the fiscal year.
For the year ended September 30, 2014, the Advisor contractually waived or reimbursed certain class specific expenses, administrative fees, and distribution fees of $5,895 for Class C shares, $31,197 for Class R5 shares, and $20,201 for Class R6 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, 2014, fees paid indirectly were $3,574.
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 and is included as Trustee Fees on the Statement of Operations.
NOTE 4 – SHARES OF BENEFICIAL INTEREST
At September 30, 2014, there were an unlimited number of shares with no par value of beneficial interest authorized. Transactions in shares of beneficial interest were as follows:
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 26,633,924 | $ | 496,153,221 | 19,453,529 | $ | 338,888,450 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | 1,867 | 29,767 | ||||||||||||
Shares repurchased | (21,504,634 | ) | (413,528,233 | ) | (2,427,380 | ) | (41,553,286 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 5,129,290 | $ | 82,624,988 | 17,028,016 | $ | 297,364,931 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C Shares | ||||||||||||||||
Shares sold | 8,033,799 | $ | 146,627,479 | 5,727,322 | $ | 98,637,056 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | — | — | — | — | ||||||||||||
Shares repurchased | (1,261,929 | ) | (23,058,697 | ) | (252,716 | ) | (4,262,663 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 6,771,870 | $ | 123,568,782 | 5,474,606 | $ | 94,374,393 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I Shares | ||||||||||||||||
Shares sold | 97,016,008 | $ | 1,859,284,051 | 49,361,214 | $ | 874,895,509 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 380,810 | 7,330,398 | 21,647 | 349,371 | ||||||||||||
Shares repurchased | (17,664,136 | ) | (336,645,985 | ) | (6,837,358 | ) | (118,498,069 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 79,732,682 | $ | 1,529,968,464 | 42,545,503 | $ | 756,746,811 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 404,809 | $ | 7,802,660 | 39,400 | $ | 696,856 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 1,613 | 30,897 | — | — | ||||||||||||
Shares repurchased | (51,015 | ) | (986,568 | ) | (752 | ) | (13,314 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 355,407 | $ | 6,846,989 | 38,648 | $ | 683,542 | ||||||||||
|
|
|
|
|
|
|
|
Certified Annual Report 23
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
YEAR ENDED SEPTEMBER 30, 2014 | YEAR ENDED SEPTEMBER 30, 2013 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class R6 Shares | ||||||||||||||||
Shares sold | 941,731 | $ | 18,097,326 | 841,101 | $ | 14,680,898 | ||||||||||
Shares issued to shareholders in reinvestment of dividends | 4,651 | 89,174 | — | — | ||||||||||||
Shares repurchased | (542,356 | ) | (10,282,234 | ) | (43,594 | ) | (779,526 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) | 404,026 | $ | 7,904,266 | 797,507 | $ | 13,901,372 | ||||||||||
|
|
|
|
|
|
|
|
NOTE 5 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2014, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $3,034,609,054 and $1,370,326,272, respectively.
NOTE 6 – INCOME TAXES
At September 30, 2014, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 2,981,935,306 | ||
|
| |||
Gross unrealized appreciation on a tax basis | $ | 309,726,784 | ||
Gross unrealized depreciation on a tax basis | (164,499,863 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 145,226,921 | ||
|
|
At September 30, 2014, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2013 of $42,072,586. For tax purposes, such losses will be reflected in the year ending September 30, 2015.
At September 30, 2014, the Fund had cumulative tax basis capital losses of $12,743,545, (of which $12,743,545 is short-term and $0 is long-term) generated after September 30, 2011, which may be carried forward to offset future capital gains. To the extent such carryfor-wards are used, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards do not expire.
At September 30, 2014, the Fund had $970,622 of undistributed tax basis net ordinary income and no undistributed tax basis capital gains.
In order to account for permanent book/tax differences, the Fund decreased accumulated net realized investment losses by $26,723, and decreased undistributed net investment income by $26,723. This reclassification has no impact on the net asset value of the Fund. This reclassification resulted from foreign currency gains (losses), passive foreign investment company (PFIC) realized gains, and foreign capital gain refunds.
The tax character of distributions paid during the years ended September 30, 2014 and September 30, 2013 was as follows:
2014 | 2013 | |||||||
Distributions from: | ||||||||
Ordinary income | $ | 8,408,180 | $ | 476,709 | ||||
Capital gains | — | — | ||||||
|
|
|
| |||||
Total | $ | 8,408,180 | $ | 476,709 | ||||
|
|
|
|
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 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
24 Certified Annual Report
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
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, 2014, 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’s 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 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, 2014 in the normal course of pursuing its investment objectives, with the objective 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 average value of open sell currency contracts for the year ended September 30, 2014 was $116,487,462. 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 the open sell currency contracts to which they relate.
The following table displays the outstanding forward currency contracts at September 30, 2014:
OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2014 | ||||||||||||||||||||||
CONTRACT DESCRIPTION | BUY/SELL | CONTRACT AMOUNT | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | ||||||||||||||||
Euro | Sell | 114,004,000 | 01/12/2015 | 144,100,595 | $ | 11,028,068 | $ | — | ||||||||||||||
Euro | Buy | 14,062,500 | 01/12/2015 | 17,774,943 | — | (434,040 | ) | |||||||||||||||
Euro | Buy | 8,929,200 | 01/12/2015 | 11,286,473 | — | (677,048 | ) | |||||||||||||||
|
|
|
| |||||||||||||||||||
Total | $ | 11,028,068 | $ | (1,111,088 | ) | |||||||||||||||||
|
|
|
|
The foregoing forward currency contracts were entered into pursuant to an International Swaps and Derivatives Association (ISDA) Master Agreement. In the event of a default or termination under the ISDA Master Agreement, the non-defaulting party has the right to close out all outstanding forward currency contracts between the parties and to net any payment amounts under those contracts, resulting in a single net amount payable by one party to the other. Because the ISDA Master Agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Fund’s Statement of Assets and Liabilities unless there has been an event of default or termination event under that agreement, the Fund does not net its outstanding forward currency contracts for purposes of the disclosure in the Fund’s Statement of Assets and Liabilities. Instead the Fund recognizes the unrealized appreciation or depreciation on those forward currency contracts on a gross basis in the Fund’s Statement of Assets and Liabilities. At September 30, 2014, those recognized amounts are disclosed in the following table:
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2014 | ||||||
ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets – Unrealized appreciation on forward currency contracts | $ | 11,028,068 | |||
LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Liabilities – Unrealized depreciation on forward currency contracts | $ | (1,111,088 | ) |
Because the Fund does not currently receive or post cash collateral in connection with its currency forward contracts, and because all of the Fund’s outstanding currency forward contracts are with State Street Bank and Trust Company, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2014 can be determined by offsetting the dollar amounts shown in the preceding table. Based on those amounts, the net amount of the Fund’s assets which is attributable to its outstanding forward currency contracts at September 30, 2014 is $9,916,980, and the net amount of the Fund’s liabilities which is attributable to those contracts at that date is $0. The Fund’s forward currency contracts are valued each day, and the net amounts of the Fund’s assets and liabilities which are attributable to those contracts are expected to vary over time.
Certified Annual Report 25
NOTES TO FINANCIAL STATEMENTS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 |
The net realized gain (loss) 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, 2014 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, 2014 | ||||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||||
Foreign exchange contracts | $(3,265,072) | $ | (3,265,072 | ) | ||
RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2014 | ||||||
TOTAL | FORWARD CURRENCY CONTRACTS | |||||
Foreign exchange contracts | $12,708,064 | $ | 12,708,064 |
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, 2014 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
26 Certified Annual Report
This page intentionally left blank.
Certified Annual Report 27
Thornburg Developing World Fund
PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)+ | RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | ||||||||||||||||||||||||||||||||||||||||||||||||||
UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPT. 30, | NET ASSET VALUE BEGINNING OF PERIOD | NET | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM | DIVIDENDS FROM NET INVESTMENT INCOME | DIVIDENDS | 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 (%)(a) | NET ASSETS AT END OF PERIOD (THOUSANDS) | |||||||||||||||||||||||||||||||||||||
CLASS A SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2014(b) | $ | 17.77 | 0.03 | 0.81 | 0.84 | — | — | — | $18.61 | 0.15 | 1.45 | 1.45 | 1.45 | 4.73 | 61.46 | $ | 459,121 | |||||||||||||||||||||||||||||||||||
2013(b) | $ | 15.71 | 0.01 | 2.06 | 2.07 | (0.01 | ) | — | (0.01 | ) | $17.77 | 0.05 | 1.48 | 1.48 | 1.59 | 13.19 | 61.67 | $ | 347,073 | |||||||||||||||||||||||||||||||||
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 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 17.34 | (0.11) | 0.80 | 0.69 | — | — | — | $18.03 | (0.62 | ) | 2.23 | 2.23 | 2.23 | 3.98 | 61.46 | $ | 232,493 | ||||||||||||||||||||||||||||||||||
2013 | $ | 15.44 | (0.12) | 2.02 | 1.90 | — | — | — | $17.34 | (0.71 | ) | 2.26 | 2.26 | 2.40 | 12.31 | 61.67 | $ | 106,168 | ||||||||||||||||||||||||||||||||||
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 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 18.05 | 0.10 | 0.84 | 0.94 | (0.07 | ) | — | (0.07 | ) | $18.92 | 0.54 | 1.09 | 1.09 | 1.09 | 5.20 | 61.46 | $ | 2,376,420 | |||||||||||||||||||||||||||||||||
2013 | $ | 15.96 | 0.09 | 2.09 | 2.18 | (0.09 | ) | — | (0.09 | ) | $18.05 | 0.52 | 1.04 | 1.04 | 1.22 | 13.74 | 61.67 | $ | 828,147 | |||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||
CLASS R5 SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 18.04 | 0.13 | 0.80 | 0.93 | (0.11 | ) | — | (0.11 | ) | $18.86 | 0.67 | 1.09 | 1.09 | 1.90 | 5.17 | 61.46 | $ | 7,433 | |||||||||||||||||||||||||||||||||
2013(e) | $ | 17.49 | 0.08 | 0.47 | 0.55 | — | — | — | $18.04 | 0.47 | (d) | 1.07 | (d) | 1.07 | (d) | 17.45 | (d)(f) | 3.14 | 61.67 | $ | 697 | |||||||||||||||||||||||||||||||
CLASS R6 SHARES |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | $ | 18.08 | 0.11 | 0.84 | 0.95 | (0.12 | ) | — | (0.12 | ) | $18.91 | 0.57 | 0.99 | 0.99 | 1.10 | 5.26 | 61.46 | $ | 22,727 | |||||||||||||||||||||||||||||||||
2013(e) | $ | 17.51 | 0.04 | 0.53 | 0.57 | — | — | — | $18.08 | 0.20 | (d) | 0.98 | (d) | 0.98 | (d) | 1.99 | (d) | 3.26 | 61.67 | $ | 14,422 |
(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. |
(e) | Effective date of this class of shares was February 1, 2013. |
(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.
28 Certified Annual Report | Certified Annual Report 29 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Thornburg Developing World Fund
To the Trustees and Shareholders of
Thornburg Developing World Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Thornburg Developing World Fund (one of the portfolios constituting Thornburg Investment Trust, hereafter referred to as the “Fund”) at September 30, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2014
30 Certified Annual Report
EXPENSE EXAMPLE | ||
Thornburg Developing World Fund | September 30, 2014 (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, 2014, and held until September 30, 2014.
BEGINNING ACCOUNT VALUE 4/1/14 | ENDING ACCOUNT VALUE 9/30/14 | EXPENSES PAID DURING PERIOD† 4/1/14–9/30/14 | |||||||||||||
CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 996.80 | $ | 7.46 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.59 | $ | 7.54 | |||||||||
CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 993.40 | $ | 11.25 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.78 | $ | 11.36 | |||||||||
CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 999.00 | $ | 5.58 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.48 | $ | 5.64 | |||||||||
CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 999.20 | $ | 5.46 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.60 | $ | 5.52 | |||||||||
CLASS R6 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 999.70 | $ | 4.96 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 |
† | Expenses are equal to the annualized expense ratio for each class (A: 1.49%; C: 2.25%; I: 1.11%; R5: 1.09%; R6: 0.99%;) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
* | Hypothetical assumes a rate of return of 5% per year before expenses. |
ACTUAL EXPENSES
For each class of shares, the first line of the accompanying table 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 accompanying table 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, 2014 (Unaudited) |
Growth of a Hypothetical $10,000 Investment
Average Annual Total Returns
For Periods Ended September 30, 2014 (with sales charge)
1 YR | 3 YRS | SINCE INCEPTION | ||||||||||
Class A Shares (Incep: 12/16/09) | 0.00 | % | 12.47 | % | 8.71 | % | ||||||
Class C Shares (Incep: 12/16/09) | 2.98 | % | 13.38 | % | 9.01 | % | ||||||
Class I Shares (Incep: 12/16/09) | 5.20 | % | 14.80 | % | 10.35 | % | ||||||
Class R5 Shares (Incep: 2/1/13) | 5.17 | % | — | 5.02 | % | |||||||
Class R6 Shares (Incep: 2/1/13) | 5.26 | % | — | 5.15 | % |
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, R5, and R6 shares.
32 Certified Annual Report
TRUSTEES AND OFFICERS | ||
Thornburg Developing World Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
INTERESTED TRUSTEES (1)(2)(4) | ||||
Garrett Thornburg, 69 Trustee since 1987, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman, controlling shareholder, and until 2010, CEO of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit) | None | ||
Brian J. McMahon, 59 Trustee since 2001, Member of Governance & Nominating Committee & Operations Risk Oversight Committee, President since 1997(5)(6) | CEO, President, Managing Director, Chief Investment Officer, and Portfolio Manager of Thornburg Investment Management, Inc. | None | ||
INDEPENDENT TRUSTEES (1)(2)(4) | ||||
David A. Ater, 69 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, 73 Trustee since 2000, Chairman of Audit Committee | Managing Member of CS Group, LLC, Santa Fe, NM (private investment fund – family office). | None | ||
Sally Corning, 53 Trustee since 2012, Member of Audit Committee and Operations Risk Oversight Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity and venture capital investment firm). | None | ||
Susan H. Dubin, 65 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 | ||
Owen D. Van Essen, 60 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 | ||
James W. Weyhrauch, 55 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, 68 Emeritus Trustee since 2012 | Chairman, MaineAsia LLC; Principal, Chamisa Energy, LLC; Senior Counsel until 2012 and Partner until 2009 in Akin, Gump, Strauss, Hauer & Feld, LLP (law firm), Washington, D.C. and Beijing, China.(7) | Not Applicable |
Certified Annual Report 33
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
OFFICERS OF THE FUND (WHO ARE NOT TRUSTEES) (1)(8) | ||||
Jason Brady, 40 Vice President since 2007 Treasurer since 2013(6) | Vice President since 2011, Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Kathleen Brady, 54 Vice President since 2008 | Senior Fund Tax Accountant of Thornburg Investment Management, Inc. | Not applicable | ||
Connor Browne, 35 Vice President since 2006 | Portfolio Manager, Vice President since 2013, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Tim Cunningham, 39 Vice President since 2014 | Managing Director since 2011, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Michael Doorley, 58 Vice President since 2013 | Executive Vice President and Chief Operating Officer since 2013, and Managing Director since 2014 of Thornburg Investment Management, Inc.; Principal, MGD Associates since 2011 (consulting business), Executive Vice President of Fidelity Investments 2008 to 2010. | Not applicable | ||
Randy Dry, 40 Vice President since 2014 | Vice President and Managing Director, and since 2014 Director of Institutional Group, of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 38 Vice President since 2014 | Managing Director since 2010, Portfolio Manager since 2012, and Associate Portfolio Manager from 2009–2012 of Thornburg Investment Management, Inc. | Not applicable | ||
Lon Erickson, 39 Vice President since 2008 | Portfolio Manager and Managing Director since 2010 and Associate Portfolio Manager from 2008–2010 of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 75 Vice President since 1995 | Portfolio Manager, Vice President, and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 43 Vice President since 2006 | Vice President since 2011, Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Joshua Gonze, 51 Vice President since 1999 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lewis Kaufman, 38 Vice President since 2007 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 34 Vice President since 2014 | Portfolio Manager and Managing Director since 2013, Associate Portfolio Manager from 2011–2013, and Equity Research Analyst from 2008–2011 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 47 Vice President since 2001 | Vice President, Managing Director, and Director of Marketing of Thornburg Investment Management, Inc. | Not applicable | ||
Christopher Ryon, 58 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Leon Sandersfeld, 48 Vice President since 2003 | Managing Director and Fund Accounting Director of Thornburg Investment Management, Inc. | Not applicable | ||
Vinson Walden, 44 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable |
34 Certified Annual Report
TRUSTEES AND OFFICERS, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 (Unaudited) |
NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Lei Wang, 43 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 40 Vice President since 2003 Secretary since 2007(6) | Managing Director, Director of Mutual Fund Operations, and Vice President 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 eighteen 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 eighteen Funds of the Trust. Each Trustee oversees the eighteen 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 eighteen 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, 2014 (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.
TAX INFORMATION
For the tax year ended September 30, 2014, dividends paid by the Thornburg Developing World Fund of $8,408,180 are being reported as ordinary investment income for federal income tax purposes.
For the tax year ended September 30, 2014, the Thornburg Developing World 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 27.76% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2014, as qualified for the corporate dividends received deduction.
For the tax year ended September 30, 2014, foreign source income and foreign taxes paid are $39,358,441 and $2,956,274, respectively.
The information and distributions reported herein may differ from the information and distributions reported to shareholders for the calendar year ending December 31, 2014. Complete information will be reported in conjunction with your 2014 Form 1099.
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 16, 2014.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in independent sessions in May and July 2014 to consider aspects of their annual evaluation of the Advisor’s service to all of the funds of Thornburg Investment Trust, 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 independent Trustees met again in independent session in September to consider portions of the information submitted by the Advisor. The Advisor’s chief investment officer subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees 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.
Nature, Extent and Quality of Services; Fund Investment Performance. The Trustees evaluated the nature, extent and quality of services provided by the Advisor under the advisory agreement for the Fund, and evaluated the investment performance of the Fund.
36 Certified Annual Report
OTHER INFORMATION, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 (Unaudited) |
In connection with their general oversight of the Advisor, and as an important element of their annual consideration of a renewal of the advisory agreement, the Trustees and their committees receive and consider reports from the Advisor throughout the year addressing a wide variety of topics. Information noted by the Trustees in their evaluation as having been considered included the Fund’s investment performance, the Advisor’s selection of investments and execution of the Fund’s investment strategies, Trustees’ perceptions of personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing and other resources, the quality of portfolio trade execution, the Advisor’s performance of accounting and other services under the advisory agreement, the Advisor’s implementation of systems and practices to enhance the quality of its services, the Advisor’s observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, and other factors.
In addition, the Trustees received information provided to them at their request in anticipation of their annual evaluation of the Advisor’s services, including the following items of information respecting the investment performance of the Fund which the Trustees noted in their evaluation: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written explanations and commentary on the Fund’s performance in the context of the Fund’s objectives and reasonable expectations, and business, market and economic conditions, (3) performance data for the four calendar years since the Fund’s inception, comparing the Fund’s annual investment returns to a fund category selected by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the three-month, year-to-date, one-year and three-year periods ending with the second quarter of the current year comparing the Fund’s annualized returns to two mutual fund categories selected by independent mutual fund analyst firms and to a broad-based securities index, and assigning a percentage rank to the Fund’s performance for each period relative to each of the fund categories, and (5) comparative measures of estimated earnings growth, portfolio volatility, risk and return.
The Trustees noted that quarterly reports during the year and other information presented to them confirmed the Advisor’s continued conformity to the Fund’s stated investment objectives and policies.
Comparative performance data for the four calendar years since the Fund’s inception showed that the Fund’s investment return for the most recent calendar year was higher than the returns for the fund category and the securities index, and that the Fund’s returns for the preceding three calendar years exceeded the returns for the index and the category in all years. Noted quantitative data showed that the Fund’s annualized investment returns fell near the first quartile of performance for the first fund category for the one-year period ended with the second quarter of the current year and fell in the top decile of performance for the three-year period. Data for the second fund category showed that the Fund’s annualized investment returns fell in the second quartile of performance of the category for the one-year period, and fell in the top decile of performance for the three-year period. Data presented to the Trustees showed that the Fund’s annualized total returns (net of expenses) over the period since the Fund’s inception exceeded the annualized returns for 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 performed under the advisory agreement remain sufficient, and that the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies.
Comparisons of Fee and Expense Levels; Profitability of Advisor; Economies of Scale; Ancillary Benefits. The Trustees evaluated a variety of information respecting the levels of the advisory fee charged by the Advisor to the Fund, and in this connection considered a number of factors, including other fees and expenses charged to the Fund, the costs and profitability of the Advisor, economies of scale potentially available to the Fund, and the significance of any ancillary benefits realized by the Advisor from its relationship with the Fund.
In evaluating information respecting the levels of advisory fees charged to the Fund, the Trustees noted their consideration of the fees charged by the Advisor and the other expenses charged to the Fund in light of the nature, extent and quality of services provided and the investment performance of the Fund. The Trustees considered comparisons of the actual Advisor’s fees and Fund expenses to the statement of fees and expenses in the Fund’s prospectuses. Data considered included comparisons of the Fund’s advisory 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, comparisons of the advisory fee and other Fund expenses to the fee levels and expenses for a representative share class of a fund peer group selected from the category by a second independent mutual fund analyst firm, and related data. Data showed that the Fund’s advisory fee level was comparable to the median and average levels for the fund category and that the level of total expense for a representative share class of the Fund was comparable to the median expense level for the category and slightly lower than the average expense level for the category. Peer group data showed the Fund’s advisory fee level was comparable to the median for the peer group, the total expense level for a representative share class of the Fund fell below the median for the fund peer group, and the advisory fee and total expense levels fell within the range of levels for the group.
The Trustees noted their consideration of information respecting the advisory fees charged by the Advisor to other investment management clients, including sub-advised mutual funds, together with information about fees charged by other advisors to different clients, analysis of the differences between the requirements of institutional clients and mutual funds, analysis of the differences between the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, and the consequently different investment management services provided to the different categories of clients and the differing contexts in which the fee levels for these arrangements are established. 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 an
Certified Annual Report 37
OTHER INFORMATION, CONTINUED | ||
Thornburg Developing World Fund | September 30, 2014 (Unaudited) |
investment advisor to different categories of clients had limited relevance to the evaluation of the fee rate charged by that advisor to mutual funds as to which it is the primary advisor and sponsor.
In reviewing the profitability to the Advisor of its services to the Fund, the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services for the Fund together with data respecting the overall profitability of a selection of other investment management firms. The Trustees also considered in this regard the relationship of the Advisor’s efficiency and cost management to its profitability, and the contribution of the Advisor’s cost management, profitability and financial resources to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain adequate service levels for the Fund. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
In reviewing the extent to which economies of scale would be realized as the Fund’s assets increase and whether fee levels reflect any economies of scale, the Trustees considered the breakpoint structure for advisory fees chargeable to the Fund, comparisons of the fee breakpoint structure for the Fund with breakpoint structures (or the absence of such structures) for other funds in a peer group selected by an independent mutual fund analyst firm, and the effects of the breakpoint structure and other expense factors realized by other funds of the Trust as their asset levels had increased. The information provided demonstrated to the Trustees that the Fund’s advisory fee breakpoint structure is reasonable in relation to the structures observed in the other funds in its peer group, and that shareholders may be expected to benefit from any economies of scale, 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 noted disclosures by the Advisor of its 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 the foregoing factors and other information, that the level of the advisory fee charged to the Fund by the Advisor is reasonable in relation to the services provided by the Advisor in view of the nature, extent and quality of those services, the clear disclosure of fees and expenses in the Fund’s prospectuses, the investment performance of the Fund, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered.
38 Certified Annual Report
TRUSTEES’ STATEMENT TO SHAREHOLDERS
Not part of the Certified Annual Report
Revised and Readopted September 15, 2014
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, we are conscious of costs and the effect that costs have on shareholders’ returns. We try to make sure that your Fund’s fees and costs are reasonable in relationship to the services rendered and that they are generally in line with those charged by other expert investment advisors, consistent with our belief that the Fund’s investors searched for and expect that expertise and attention and have decided to pay a reasonable price for it. We do not put the management contract “out to bid” as a matter of course, and we would not do so unless we had concluded that the advisor materially had failed to pursue the Fund’s objectives in accordance with its policies, or for other equally important reasons. We believe that any other approach would be inconsistent with your interests and contrary to your expectations when you bought shares of the Fund in the first place.
Finally, because we believe that most Thornburg Fund shareholders have invested with a long-term perspective, we try not to focus too much on the fashions of the moment and on short-term performance. The market will not favor any specific investment objective or set of policies at all times and under all economic circumstances. A fund will experience periods of both high and low returns relative to other funds and other investments. Even if one of our Funds is not favored by the market at a particular time, we believe that the advisor is nonetheless obliged to remain true to the Fund’s objective and policies, and we watch to see that it does so.
This page is not part of the Annual Report 39
This page intentionally left blank.
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 Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities Fund |
• | Thornburg Low Duration Income 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
42 This page is not part of the Annual Report
THORNBURG FUND FAMILY
Thornburg Equity Funds
Thornburg’s equity research uses a fundamentally driven, bottom-up, comprehensive analytical approach. Thornburg equity funds generally focus on a limited number of securities so that each holding can impact performance. The team searches for firms believed to have a promising future and seeks to buy shares of those companies at a discount to their intrinsic or long-term value.
• | Thornburg Value Fund |
• | Thornburg Core Growth Fund |
• | Thornburg International Value Fund |
• | Thornburg International Growth Fund |
• | Thornburg Developing World Fund |
• | Thornburg Investment Income Builder Fund |
• | Thornburg Global Opportunities 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 30 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 avoid leverage or complex strategies which could backfire in periods of market uncertainty.
• | Thornburg Low Duration Income Fund |
• | Thornburg Limited Term U.S. Government Fund |
• | Thornburg Limited Term Income Fund |
• | Thornburg Strategic Income Fund |
• | Thornburg Low Duration Municipal Fund |
• | 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 |
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary 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
This Annual Report is submitted for the general information of shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
Investment Advisor: | Distributor: | |||
Thornburg Investment Management® | Thornburg Securities Corporation® | |||
800.847.0200 | 800.847.0200 | 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 three members of the Trust’s audit committee, David A. Ater, David D. Chase and Sally Corning, are each audit committee financial experts as defined in Item 3 of Form N-CSR. Mr. Ater, Mr. Chase and Ms. Corning 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 September 30, 2013 | Year Ended September 30, 2014 | |||
Thornburg Investment Trust | $651,600 | $679,000 |
Audit-Related Fees
The fees billed to Thornburg Investment Trust by PWC in each of the last two fiscal years for assurance and related services that are reasonably related to the audit or review of the Trust’s financial statements (and that are not reflected in “Audit Fees,” above) are set out below.
Year Ended September 30, 2013 | Year Ended September 30, 2014 | |||
Thornburg Investment Trust | $-0- | $5,000 |
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 September 30, 2013 | Year Ended September 30, 2014 | |||
Thornburg Investment Trust | $352,563 | $326,304 |
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 September 30, 2013 | Year Ended September 30, 2014 | |||
Thornburg Investment Trust | $22,242 | $7,902 |
The figure shown under All Other Fees for the year ended September 30, 2013 includes amounts from out of pocket expenses during the 2012 annual audit. The figure shown under All Other Fees for the year ended September 30, 2014 includes amounts from out of pocket expenses during the 2013 annual audit.
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, 2014, 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: Low Duration Municipal Fund, Limited Term Municipal Fund, California Limited Term Municipal Fund, Intermediate Municipal Fund, New Mexico Intermediate Municipal Fund, New York Intermediate Municipal Fund, Low Duration Income 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 25, | 2014 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Brian J. McMahon |
Brian J. McMahon
President and principal executive officer
Date: November 25, | 2014 |
By: | /s/ Jason H. Brady |
Jason H. Brady
Treasurer and principal financial officer
Date: November 25, | 2014 |