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, 2017
Date of reporting period: September 30, 2017
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 Limited Term U.S. Government Fund
Thornburg Limited Term Income Fund
Thornburg Low Duration Income Fund
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
Thornburg Better World International Fund
Thornburg Capital Management Fund
Thornburg Long/Short Equity Fund
Annual Report September 30, 2017 THORNBURG LOW DURATION MUNICIPAL FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Low Duration Municipal Fund
Annual Report | September 30, 2017
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class A | TLMAX | 885-216-788 | ||||||||
| Class I | TLMIX | 885-216-770 | ||||||||
Minimum investments for Class I shares may be higher than those for Class A shares. Class I shares may not be available to all investors.
Investments carry risks, including possible loss of principal. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The 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 bank deposits or guaranteed by a bank or any other entity.
Annual Report | 3
Thornburg Low Duration Municipal Fund | September 30, 2017 (Unaudited)
October 12, 2017
Dear Fellow Shareholder:
We are pleased to present the annual report for Thornburg Low Duration Municipal Fund. The net asset value (NAV) of the Class A shares increased by 4 cents to $12.38 per share during the fiscal year ended September 30, 2017. If you were with us for the entire period, you received dividends of 8 cents per share. Dividends were higher for the Class I shares to account for varying class-specific expenses. The Class A shares of your Fund underperformed the index with a 0.98% total return (without sales charge) for the fiscal year ended September 30, 2017, compared to the 1.10% total return for the BofA Merrill Lynch 1-3 Year U.S. Municipal Securities Index.
The drivers of the Fund’s total return relative to its benchmark include its interest rate sensitivity, as measured by the Fund’s duration, differing credit quality allocations, and other risk factors. The Fund underperformed its benchmark by 0.12%. The impact from the Fund’s 0.65 years shorter duration added 0.09%, while credit quality allocations added 0.17%. Other risk factors detracted 0.27%, while the Fund’s expenses and residuals accounted for the remainder of the performance differential.
The fiscal year was a unique period for funds of this type; in normal markets, as interest rates increase fixed-income fund prices decline. Short-term interest rates on variable rate demand note (VRDNs) and one-year fixed rate notes increased. These securities have little or no price volatility and the remainder of the securities in the Fund rolled down a positively sloped yield curve. Consequently, the Fund increased in yield about 0.25% and increased in NAV by 4 cents. It is a very unique environment indeed.
The New Administration’s Agenda, U.S. Economy, and Fed Policy
The Trump administration took office in January of 2017 with an aggressive agenda. It promised to repeal and replace the Affordable Care Act (ACA), known also as Obamacare, increase infrastructure spending, scale back federal regulatory constraints on businesses, and reform the federal tax code. Initially, the promise of this pro-growth agenda caused interest rates to increase substantially upon Trump’s election in November. This was followed by further increases in December as investors sold municipal bonds to capture losses that appeared to be more valuable in 2016 than 2017. Some nine months later, the repeal and replacement of the ACA has failed to become a reality — tripped up in both the U.S. House and Senate.
Meanwhile, the silence around increased infrastructure spending is deafening. Federal regulatory constraints have been eased only through executive orders. The process for tax reform has just begun, but the administration’s initial measure appears to be
hitting a rough patch as the proposed removal of the federal deduction for state and local taxes (SALT) has generated some blowback. The president’s framework for tax reform was mute with regard to continuation of the tax exemption for municipal bonds, although several sources have attributed the administration to stating that the municipal bond tax exemption is safe. The president’s proposal does call for the repeal of the alternative minimum tax. All that said, this is Washington, D.C., and with tax reform a major piece of the president’s agenda, watching this sausage get made will be interesting.
After a rather punk showing for the first two quarters of fiscal 2017, in which gross domestic product (GDP) growth was 1.8% and 1.2%, respectively, the economy generated a 3.1% GDP growth rate in the third fiscal quarter. The fiscal fourth quarter estimates of GDP have varied greatly as the impact of three devastating hurricanes (Harvey, Irma and Maria) are taken into consideration. After considering the impacts of Harvey and Irma alone, Goldman Sachs lowered its third-quarter GDP estimate by 0.8% to 2.0%.
Nonfarm payrolls have been a bright spot for the economy, averaging 168,000 new jobs per month for the first 11 months of fiscal 2017. This is a little lower than the 219,000 average monthly jobs generated in fiscal 2016. This all translates to an unemployment rate of 4.4% as of the end of August 2017 versus 4.9% at the end of fiscal 2016. One explanation for this slowdown is that employers cannot find qualified workers. This theory is substantiated by another significant economic indicator, the U.S. Job Openings and Labor Turnover Summary (JOLTS), which measures either newly created or unoccupied positions where an employer is taking specific actions to fill these positions. In July, this measure registered a reading of about 6.2 million, which is the highest since the time series began in December of 2000.
The Phillips Curve, an economic theory posed by A.W. Phillips, states that inflation and unemployment have a stable and inverse relationship. As unemployment decreases, inflation is supposed to increase. As of yet, this theory has not manifested itself. In fact, the Federal Reserve Board’s (Fed) favorite inflation measure, the Core Personal Consumption Expenditures Index (Core PCE) — which measures prices paid by consumers for goods and services without the volatility from movements in food and energy prices — has declined throughout the year. The last available reading at the end of August 2017 (1.30%) is much lower than the one at the end of September 2017 (1.80%).
On September 20, 2017 Bloomberg reported, “Federal Reserve Chair Janet Yellen acknowledged that the fall in inflation this year was a bit of a ‘mystery’ but suggested that the central bank was on course to raise interest rates again in 2017 nonetheless.” Any increase would be on top of the three hikes in the Federal Funds
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017 (Unaudited)
rate in fiscal 2017, bringing the range for the Federal Funds rate from 0.50% — 0.75% at the beginning of the year to 1.00% — 1.25% on June 14, 2017.
In addition, the Fed will begin reducing its $4.5 trillion balance sheet in October, by slowly unwinding the stimulus program it engaged a decade ago to combat the Great Recession. Its plan is to reduce its holdings of U.S. Treasury and mortgage-backed securities by $10 billion in October of 2017 and gradually raise the reduction amount in the months ahead. Essentially, this reduces the demand for these securities from a purchaser that was not altogether economically motivated in the traditional sense. The Fed believes that the economy is strong enough that this gradual reduction of its balance sheet will not be disruptive, although some do not share this opinion. CNBC reported in August 2017, in an interview with JPMorgan Chase CEO Jamie Dimon, that he;
“stopped short of saying the bond market is on the cusp of a collapse, but said he wouldn’t personally buy any long-term government debt. ‘I’m not going to call it a bubble, but I personally wouldn’t be buying a 10-year sovereign debt anywhere in the world...my view is the Fed is doing the right things, raising rates, telling people we’re going to start reducing the balance sheet,’ Dimon added.”
The Municipal Bond Market
The municipal bond market suffered a setback in November and December of 2016. The surprise U.S. election results and the new administration’s pro-growth and pro-infrastructure agenda caused interest rates to initially rise and the tax loss harvesting caused rates to rise higher in December of 2016.
The municipal bond market’s returns were a result of rising rates across the yield curve — with long-term rates increasing more than short-term rates as shown in Figure 1.
| Figure 1 | | | 12-Month Change in Rates for AAA Rated General Obligation Municipal Bonds (as of September 29, 2017) |
Source: Bloomberg
President Trump’s goal of tax reform in particular led investors to believe that losses taken in 2016 were of greater value than losses taken in 2017. After this uptick in rates, yields moved steadily lower, and 10-year AAA general obligation bond yields decreased by about 0.30% between December 31, 2016 and September 30, 2017. Quality spreads continue to be extremely narrow, as income-starved investors extended out the yield curve or accepted lower credit quality in search of meeting an income bogey.
Cash flows into municipal bond mutual funds have been positive but nothing like the levels we experienced in fiscal year 2016. Foreign institutional investors have shown an increased interest in the municipal bond markets throughout the U.S., exhibiting some of the same characteristics as domestic retail investors by trying to quench a thirst for income.
Credit quality in the municipal bond market has been pretty stable except for some idiosyncratic disturbances. Illinois, for example, went down to the wire to pass its first budget in three years. The rating agencies threatened to drop the state’s credit rating to below investment grade, which would have seriously limited its bonds’ marketability. These antics caused the price of Illinois debt to go dramatically lower prior to the ultimate passage of the budget, after which it rallied considerably.
Elsewhere, several prominent high-yield securities came to market and were very well received. One was a mall in New Jersey across from the Meadowlands, which has been mothballed for approximately 15 years. Originally called Xanadu and referred to as the “ugliest building in New Jersey” by the Governor, it is
now called “The American Dream Mall” in its recent incarnation. The fact that this and other non-rated, high-yield projects are so well received is more evidence of how income-starved investors have become in an overly accommodative central bank world. By the way, we did not purchase this bond issue, because visitation needs to be 2x that of Disney World just to break even. And, when Amazon is disrupting everything from retail goods to groceries, we felt the last thing New Jersey needed was another mall.
Current Portfolio Positioning
We have positioned this portfolio, like our others, at the bottom end of its risk spectrum. If this sounds familiar, it is, as we said the same thing last year. We have lower durations, higher credit quality and higher reserve positions (to hedge against increased market illiquidity).
We believe that investors are not currently being compensated to take much risk. Real yields (yield less inflation) are low by historic standards (off the bottom but still low). Credit spreads are very narrow, back to pre-crisis levels, when 50% or more of the new issue market was insured by AAA municipal bond insurers. This is particularly concerning, as today only about 7%
Annual Report | 5
Letter to Shareholders, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017 (Unaudited)
to 8% of the new issue market is insured and the municipal bond insurers are no longer rated AAA. A few desperate municipal market issuers, like Hartford, CT, are openly discussing debt restructuring and the president is making comments like the following with regard to Puerto Rico’s debt: “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out.” The precedents set by the recent municipal Chapter 9 proceedings of Detroit, MI and San Bernardino, CA have in effect placed bondholders in a subordinated position to pensioners. Sometimes investors are motivated more by greed than fear and vice versa. Greed seems to be the current primary motivating factor, and it is in such an environment that caution should be exercised. That is exactly what we are doing — relying on value-oriented, bottom-up fundamental analysis in portfolio construction.
Why Own Municipal Bonds
Fixed income assets are an important part of a well-diversified portfolio, as they can provide a stabilizing force to the potential swings of the equity portion of the portfolio. These asset classes are not always positively correlated and can therefore dampen the over-all portfolio’s volatility.
Thank you for your continued trust in us, and please know that the co-managers of this Fund are invested alongside you.
Sincerely,
Christopher Ryon,CFA
Portfolio Manager
Managing Director
Nicholos Venditti,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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
6 | Annual Report
Thornburg Low Duration Municipal Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | SINCE INCEP. | |||||||||||||
A Shares (Incep: 12/30/13) | |||||||||||||||
Without sales charge | 0.98% | 0.45% | 0.47% | ||||||||||||
With sales charge | -0.55% | -0.06% | 0.06% | ||||||||||||
I Shares (Incep: 12/30/13) | 1.09% | 0.61% | 0.64% | ||||||||||||
30-DAY YIELDS, A SHARES
(with sales charge)
Annualized Distribution Yield | 0.87% | ||||
SEC Yield | 0.51% |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. Class A shares are sold with a maximum sales charge of 1.50%. There is no sales charge for Class I shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses before fee waivers and expense reimbursements are as follows: A shares, 2.19%; I shares, 0.72%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: A shares, 0.70%; I shares, 0.50%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus. Without the fee waivers and expense reimbursements, the Annualized Distribution yield would have been 0.32%, and the SEC yield would have been (0.04%).
Glossary
The BofA Merrill Lynch 1–3 Year U.S. Municipal Securities 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 1 year and less than 3 years.
The performance of any index is not indicative of the performance of any particular investment. 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 or net asset value.
Bond Credit Ratings (Credit Quality) – 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.
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 incorporates a bond’s embedded option features, such as call provisions.
General Obligation Bond (GO) – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Insured Bonds – Individual bonds are sometimes insured by private companies. The insurance guarantees the payment of principal and interest on a bond issue if the issuer defaults. Mutual funds are not insured, even if the underlying bonds are insured.
Variable Rate Demand Note (VRDN) – VRDNs are long-term, floating-rate municipal securities. These highly liquid securities are payable on demand, typically either daily or weekly, meaning the investor can request repayment of the entire debt amount. The coupon rate will adjust on a periodic basis, either daily or weekly.
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.
Annual Report | 7
Thornburg Low Duration Municipal Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
The Fund seeks current income exempt from federal income tax, consistent with preservation of capital (may be subject to Alternative Minimum Tax).
This Fund invests principally in a laddered portfolio of municipal bonds with a dollar-weighted average duration of normally no more than three 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 typically 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.
PORTFOLIO LADDER
Percent of portfolio maturing in each year. Cash includes cash equivalents and other.
There is no guarantee that the Fund will meet its investment objectives.
All data is subject to change. Charts may not add up to 100% due to rounding.
SECURITY 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. Credit quality ratings for Thornburg’s municipal portfolios used the highest rating available from either Standard & Poor’s or Moody’s Investors Service.
Unrated pre-refunded and escrowed-to-maturity bonds are included in the not rated category.
KEY PORTFOLIO ATTRIBUTES
| Number of Bonds | 96 | ||||
| Effective Duration | 1.2 Yrs | ||||
| Average Maturity | 1.4 Yrs |
8 | Annual Report
Thornburg Low Duration Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
ALABAMA — 1.43% | |||||||||||||||||
City of Mobile Industrial Development Board, 1.85% due 6/1/2034 (Alabama Power Company Barry Plant) | A-/A1 | $ | 1,000,000 | $ | 1,007,560 | ||||||||||||
ARKANSAS — 0.43% | |||||||||||||||||
Board of Trustees of the University of Arkansas, 4.00% due 11/1/2018 (Fayetteville Campus) | NR/Aa2 | 295,000 | 304,331 | ||||||||||||||
CALIFORNIA — 9.12% | |||||||||||||||||
California School Cash Reserve Program Authority, 3.00% due 6/29/2018 | SP-1+/NR | 1,500,000 | 1,525,695 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 5/15/2019 (Irvine East Campus Apartments) | NR/Baa1 | 655,000 | 696,567 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 5/15/2020 (Irvine East Campus Apartments) | NR/Baa1 | 565,000 | 620,720 | ||||||||||||||
City of Chula Vista, 1.65% due 7/1/2018 (San Diego Gas & Electric Co.) | A+/Aa2 | 1,000,000 | 1,000,590 | ||||||||||||||
City of Los Angeles GO, 5.00% due 6/28/2018 (Cash Flow Management) | SP-1+/Mig1 | 500,000 | 515,140 | ||||||||||||||
County of Los Angeles GO, 5.00% due 6/29/2018 (Fiscal Year 2017-2018 Expenditures) | SP-1+/Mig1 | 1,000,000 | 1,030,390 | ||||||||||||||
County of Riverside, 2.00% due 6/29/2018 (Fiscal Year 2017-2018 Expenditures) | SP-1+/NR | 1,000,000 | 1,009,070 | ||||||||||||||
COLORADO — 0.56% | |||||||||||||||||
City of Aurora COP, 5.00% due 12/1/2019 (Sports Park and E-911 Projects) | AA/Aa2 | 365,000 | 395,452 | ||||||||||||||
CONNECTICUT — 3.93% | |||||||||||||||||
State of Connecticut GO Floating Rate Note, 1.63% due 6/15/2018 (Various Capital Projects) | A+/A1 | 1,000,000 | 1,002,630 | ||||||||||||||
State of Connecticut Health and Educational Facilities Authority, 1.65% due 11/15/2029 (Ascension Health Credit Group) | AA+/Aa2 | 1,750,000 | 1,754,410 | ||||||||||||||
FLORIDA — 1.54% | |||||||||||||||||
City of Cape Coral, 1.40% due 9/1/2018 (Utility Improvement; Insured: AGM) | AA/A2 | 495,000 | 495,871 | ||||||||||||||
County of Osceola, 5.00% due 10/1/2017 (Transportation Capital Improvements; Insured: AMBAC) | A+/A1 | 150,000 | 150,034 | ||||||||||||||
Hillsborough County IDA, 5.65% due 5/15/2018 (Tampa Electric Co.) | BBB+/A3 | 200,000 | 205,412 | ||||||||||||||
Volusia County Educational Facilities Authority, 3.00% due 10/15/2017 (Embry-Riddle Aeronautical University, Inc.) | NR/A3 | 105,000 | 105,096 | ||||||||||||||
Volusia County Educational Facilities Authority, 3.00% due 10/15/2018 (Embry-Riddle Aeronautical University, Inc.) | NR/A3 | 120,000 | 122,219 | ||||||||||||||
GEORGIA — 1.34% | |||||||||||||||||
City of Atlanta, 3.00% due 1/1/2018 (BeltLine Project) | NR/A2 | 340,000 | 341,588 | ||||||||||||||
City of Atlanta, 4.00% due 1/1/2019 (BeltLine Project) | NR/A2 | 580,000 | 599,430 | ||||||||||||||
GUAM — 3.37% | |||||||||||||||||
Government of Guam, 3.00% due 11/15/2017 (Economic Development) | A/NR | 300,000 | 300,522 | ||||||||||||||
Government of Guam, 4.00% due 11/15/2018 (Economic Development) | A/NR | 275,000 | 281,424 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2018 (Economic Development) | A/NR | 400,000 | 413,784 | ||||||||||||||
Government of Guam, 5.00% due 1/1/2019 (Economic Development) | A/NR | 1,000,000 | 1,038,000 | ||||||||||||||
Guam Power Authority, 5.00% due 10/1/2020 (Electric Power System; Insured: AGM) | AA/A2 | 300,000 | 329,211 | ||||||||||||||
HAWAII — 1.42% | |||||||||||||||||
City and County of Honolulu GO Floating Rate Note, 1.20% due 9/1/2028 (Rail Transit Project) | NR/Aa1 | 1,000,000 | 1,000,300 | ||||||||||||||
IDAHO — 0.73% | |||||||||||||||||
State of Idaho GO, 4.00% due 6/29/2018 (Cash Flow Management) | SP-1+/Mig1 | 500,000 | 511,285 | ||||||||||||||
ILLINOIS — 12.25% | |||||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2018 (2016 Airport Projects) | A/NR | 500,000 | 505,175 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2019 (2016 Airport Projects) | A/NR | 500,000 | 524,500 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2020 (Capital Improvement Plan) | AA+/Ba1 | 500,000 | 536,000 | ||||||||||||||
Chicago Transit Authority, 5.50% due 6/1/2019 pre-refunded 12/1/2018 (Rail Car and Rail System Improvements) | A+/A3 | 815,000 | 858,537 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2020 | AA/NR | 600,000 | 638,940 | ||||||||||||||
County of Cook GO, 5.00% due 11/15/2019 (Capital Improvement Plan) | AA-/A2 | 615,000 | 657,392 | ||||||||||||||
Du Page County High School District No. 88, 3.00% due 1/15/2020 (Addison Trail and Willowbrook High Schools) | NR/Aa1 | 1,245,000 | 1,291,463 | ||||||||||||||
Illinois Finance Authority, 5.00% due 8/15/2018 (Silver Cross Hospital and Medical Centers) | NR/Baa1 | 500,000 | 514,650 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/15/2018 (Rush University Medical Center) | A+/A1 | 500,000 | 520,840 | ||||||||||||||
Illinois Finance Authority, 0.90% due 8/15/2038 put 10/2/2017 (Northwestern Memorial Hospital; SPA: Northern Trust Co.) (daily demand notes) | AA+/Aa2 | 675,000 | 675,000 | ||||||||||||||
State of Illinois, 4.00% due 6/15/2019 (Build Illinois Program) | AA-/Baa3 | 520,000 | 542,370 | ||||||||||||||
State of Illinois, 5.00% due 6/15/2020 (Build Illinois Program) | AA-/NR | 535,000 | 581,797 | ||||||||||||||
State of Illinois GO, 5.00% due 3/1/2022 (State Facilities Improvements) | BBB-/Baa3 | 575,000 | 622,961 | ||||||||||||||
Town of Cicero GO, 5.00% due 1/1/2018 (Cicero and Laramie Development Areas; Insured: AGM) | AA/A2 | 125,000 | 126,186 | ||||||||||||||
INDIANA — 1.17% | |||||||||||||||||
City of Evansville, 5.00% due 1/1/2018 (Waterworks District; Insured: BAM) | AA/NR | 810,000 | 818,124 | ||||||||||||||
KANSAS — 3.32% | |||||||||||||||||
Kansas DFA, 5.00% due 12/1/2018 (Department of Commerce Impact Program) | A+/A1 | 1,250,000 | 1,301,788 | ||||||||||||||
Topeka Public Building Commission, 5.00% due 6/1/2018 (10th and Jackson Projects; Insured: Natl-Re) | A+/A3 | 1,000,000 | 1,025,830 | ||||||||||||||
KENTUCKY — 2.96% | |||||||||||||||||
Commonwealth of Kentucky State Property and Buildings Commission, 5.00% due 11/1/2019 (Project No. 112) | A/A1 | 1,000,000 | 1,074,630 | ||||||||||||||
Louisville/Jefferson County Metropolitan Government, 1.50% due 10/1/2033 (Louisville Gas and Electric Company) | A/A1 | 1,000,000 | 1,002,080 | ||||||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
LOUISIANA — 0.14% | |||||||||||||||||
City of New Orleans, 5.00% due 12/1/2017 (Water System Facilities Improvement Program) | A-/NR | $ | 100,000 | $ | 100,678 | ||||||||||||
MASSACHUSETTS — 2.86% | |||||||||||||||||
Commonwealth of Massachusetts GO, 0.94% due 3/1/2026 put 10/2/2017 (SPA: Barclays Bank plc) (daily demand notes) | AA/Aa1 | 500,000 | 500,000 | ||||||||||||||
Massachusetts Housing Finance Agency, 2.00% due 6/1/2019 (Low and Moderate Income Housing) | AA-/Aa3 | 1,500,000 | 1,508,955 | ||||||||||||||
MICHIGAN — 2.91% | |||||||||||||||||
Berkley School District GO, 4.00% due 5/1/2018 (Educational Facilities; Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,017,070 | ||||||||||||||
Charles Stewart Mott Community College GO, 5.00% due 5/1/2018 (Higher Education Facilities) | A+/NR | 750,000 | 767,340 | ||||||||||||||
Michigan Finance Authority, 5.00% due 5/1/2018 (School District of the City of Detroit; Insured: Q-SBLF) | AA-/NR | 250,000 | 255,585 | ||||||||||||||
MISSOURI — 0.72% | |||||||||||||||||
City of St. Louis GO, 3.00% due 6/1/2018 (Cash Flow Management) | SP-1+/NR | 500,000 | 507,000 | ||||||||||||||
NEW JERSEY — 9.46% | |||||||||||||||||
City of Trenton GO, 5.00% due 7/15/2020 (Various Capital Improvements; Insured: AGM) (State Aid Withholding) | AA/A3 | 500,000 | 549,830 | ||||||||||||||
Essex County Improvement Authority GO, 4.00% due 10/1/2017 (County Correctional Facility) | NR/Aa1 | 545,000 | 545,098 | ||||||||||||||
New Jersey EDA, 5.00% due 6/15/2019 (Cigarette Tax) | BBB+/Baa1 | 550,000 | 578,484 | ||||||||||||||
New Jersey EDA, 5.50% due 12/15/2019 (School Facilities Construction; Insured: AMBAC) | BBB+/Baa1 | 200,000 | 214,300 | ||||||||||||||
New Jersey Health Care Facilities Financing Authority, 5.00% due 1/1/2018 (Hackensack University Medical Center; Insured: AGM) (ETM) | AA/NR | 150,000 | 151,560 | ||||||||||||||
New Jersey Higher Educational Assistance Authority, 5.00% due 12/1/2017 (Student Loans) | AA/Aaa | 515,000 | 518,420 | ||||||||||||||
New Jersey Transit Corp., 5.00% due 9/15/2019 (Urban Public Transportation Capital Improvement) | A/A3 | 1,250,000 | 1,325,925 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2020 (State Transportation System Improvements) | A+/Baa1 | 500,000 | 538,685 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.50% due 12/15/2020 (State Transportation System Improvements; Insured: Natl-Re) | A/A3 | 2,000,000 | 2,215,560 | ||||||||||||||
NEW MEXICO — 1.43% | |||||||||||||||||
County of Taos, 3.00% due 4/1/2018 (County Educational Improvements; Insured: BAM) | AA/NR | 1,000,000 | 1,007,220 | ||||||||||||||
NEW YORK — 7.48% | |||||||||||||||||
City of New York GO, 5.00% due 8/1/2019 (Capital Projects) | AA/Aa2 | 450,000 | 482,238 | ||||||||||||||
City of New York GO, 0.92% due 3/1/2040 put 10/2/2017 (Capital Projects) (daily demand notes) | AA/Aa2 | 500,000 | 500,000 | ||||||||||||||
Monroe County Industrial Development Corp., 4.00% due 1/15/2018 (Monroe Community College Association; Insured: AGM) | AA/A2 | 200,000 | 201,658 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.93% due 6/15/2048 put 10/2/2017 (Water & Sewer System; SPA: Mizuho Bank, Ltd.) (daily demand notes) | AA+/Aa1 | 800,000 | 800,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.91% due 11/1/2042 put 10/2/2017 (City Capital Projects; SPA: Barclays Bank plc) (daily demand notes) | AAA/Aa1 | 1,000,000 | 1,000,000 | ||||||||||||||
New York State Housing Finance Agency, 0.92% due 11/1/2046 put 10/2/2017 (160 Madison Avenue Housing Development; LOC: PNC Bank, N.A.) (daily demand notes) | NR/A1 | 500,000 | 500,000 | ||||||||||||||
Tobacco Settlement Asset Securitization Corp., 5.00% due 6/1/2021 | A/NR | 1,000,000 | 1,115,570 | ||||||||||||||
Town of Oyster Bay GO, 2.50% due 6/1/2018 (Plainview, Locust Valley, South Farmingdale, Jericho, Bethpage, Oyster Bay Water Districts) | NR/NR | 645,000 | 647,561 | ||||||||||||||
NORTH CAROLINA — 1.07% | |||||||||||||||||
Charlotte-Mecklenburg Hospital Authority, 0.89% due 1/15/2037 put 10/2/2017 (Carolinas HealthCare System; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA-/Aa3 | 750,000 | 750,000 | ||||||||||||||
OKLAHOMA — 1.88% | |||||||||||||||||
Oklahoma DFA, 5.00% due 8/15/2018 (INTEGRIS Health) | AA-/Aa3 | 270,000 | 279,601 | ||||||||||||||
Tulsa County Industrial Authority, 5.50% due 9/1/2018 (Jenks Public Schools) | AA-/NR | 1,000,000 | 1,040,630 | ||||||||||||||
OREGON — 1.48% | |||||||||||||||||
| a | State of Oregon GO, 5.00% due 9/28/2018 (Cash Management) | NR/NR | 1,000,000 | 1,038,970 | |||||||||||||
PENNSYLVANIA — 6.20% | |||||||||||||||||
City of Philadelphia, 5.00% due 10/1/2017 (Pennsylvania Gas Works) (ETM) | A/A3 | 200,000 | 200,048 | ||||||||||||||
City of Philadelphia, 5.00% due 7/1/2018 (Pennsylvania Gas Works) (ETM) | AA/A2 | 350,000 | 360,777 | ||||||||||||||
City of Philadelphia, 5.00% due 10/1/2020 (Pennsylvania Gas Works) | A/A3 | 500,000 | 554,355 | ||||||||||||||
Coatesville Area School District GO, 5.00% due 8/1/2021 (Insured: AGM) (State Aid Withholding) | AA/A2 | 1,000,000 | 1,122,040 | ||||||||||||||
East Penn School District GO, 2.00% due 9/15/2020 (State Aid Withholding) | NR/Aa2 | 555,000 | 555,266 | ||||||||||||||
Lancaster County Hospital Authority, 5.00% due 11/1/2018 (Masonic Villages Project) | A/NR | 1,500,000 | 1,557,075 | ||||||||||||||
SOUTH CAROLINA — 2.41% | |||||||||||||||||
City of North Charleston Public Facilities Corp. COP, 5.00% due 10/1/2017 (Convention Center Complex) | AA-/NR | 300,000 | 300,069 | ||||||||||||||
Kershaw County Public Schools Foundation, 4.00% due 12/1/2017 (Kershaw County School District) | A-/A1 | 500,000 | 502,670 | ||||||||||||||
Piedmont Municipal Power Agency, 5.00% due 1/1/2018 (Catawba Project) | AA/A3 | 300,000 | 303,066 | ||||||||||||||
South Carolina Public Service Authority, 5.00% due 12/1/2021 (Capital Improvement) | A+/A1 | 515,000 | 582,527 | ||||||||||||||
10 | Annual Report
Schedule of Investments, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
TEXAS — 10.74% | |||||||||||||||||
City of Dallas GO, 5.00% due 2/15/2021 (Trinity River Corridor Infrastructure) | AA-/A1 | $ | 1,000,000 | $ | 1,112,390 | ||||||||||||
City of Houston, 4.00% due 9/1/2018 (Convention & Entertainment Facilities Department) | A-/A2 | 675,000 | 692,442 | ||||||||||||||
City of Houston Higher Education Finance Corp., 5.00% due 8/15/2018 (KIPP Program; Guaranty: PSF) | AAA/NR | 970,000 | 1,003,358 | ||||||||||||||
City of San Antonio, 2.25% due 2/1/2033 (Electric and Gas Systems) | AA-/NR | 1,000,000 | 1,020,670 | ||||||||||||||
City of Texas City Industrial Development Corp., 7.375% due 10/1/2020 (ARCO Pipe Line Co. Project) | A-/A1 | 1,000,000 | 1,169,770 | ||||||||||||||
Coastal Water Authority, 4.00% due 12/15/2017 (City of Houston Projects) | AA/NR | 905,000 | 911,054 | ||||||||||||||
Dallas Independent School District GO, 5.00% due 2/15/2036 put 2/15/2020 (School District Buildings Renovations; Insured: PSF-GTD) | AAA/Aaa | 325,000 | 351,608 | ||||||||||||||
| b | State of Texas, 4.00% due 8/30/2018 (Cash Flow Management) | SP-1+/Mig1 | 1,240,000 | 1,273,691 | |||||||||||||
UTAH — 1.85% | |||||||||||||||||
City of Murray, 0.92% due 5/15/2036 put 10/2/2017 (IHC Health Services, Inc.) (daily demand notes) | AA+/Aa1 | 1,300,000 | 1,300,000 | ||||||||||||||
WASHINGTON — 1.67% | |||||||||||||||||
King County Public Hospital District No. 2 GO, 5.00% due 12/1/2018 (Evergreen Health) | NR/Aa3 | 835,000 | 872,859 | ||||||||||||||
Ocean Beach School District No. 101 GO, 4.00% due 12/1/2017 (Educational Facilities) | NR/A1 | 300,000 | 301,551 | ||||||||||||||
WEST VIRGINIA — 0.29% | |||||||||||||||||
Mason County, 1.625% due 10/1/2022 put 10/1/2018 (Appalachian Power Company) | A-/Baa1 | 200,000 | 201,156 | ||||||||||||||
|
| ||||||||||||||||
| TOTAL INVESTMENTS — 96.16% (Cost $67,136,700) | $ | 67,481,374 | |||||||||||||||
| OTHER ASSETS LESS LIABILITIES — 3.84% | 2,695,641 | ||||||||||||||||
|
| ||||||||||||||||
| NET ASSETS — 100.00% | $ | 70,177,015 | |||||||||||||||
|
| ||||||||||||||||
Footnote Legend
| † | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. Bonds issued with a maturity of one year or less are assigned Moody’s ratings from MIG-1 to MIG-4 and Standard and Poor’s ratings from SP-1+ to SP-3 with MIG-1 and SP-1+ being the strongest ratings. |
| a | When-issued security. |
| b | Segregated as collateral for a when-issued security. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| AGM | Insured by Assured Guaranty Municipal Corp. | ETM | Escrowed to Maturity | |||
| AMBAC | Insured by American Municipal Bond Assurance Corp. | GO | General Obligation | |||
| BAM | Insured by Build America Mutual Insurance Co. | IDA | Industrial Development Authority | |||
| COP | Certificates of Participation | Natl-Re | Insured by National Public Finance Guarantee Corp. | |||
| DFA | Development Finance Authority | PSF | Guaranteed by Permanent School Fund | |||
| EDA | Economic Development Authority | Q-SBLF | Insured by Qualified School Bond Loan Fund |
See notes to financial statements.
��
Annual Report | 11
Statement of Assets and Liabilities
Thornburg Low Duration Municipal Fund | September 30, 2017
ASSETS | ||||
Investments at value (cost $67,136,700) (Note 3) | $ | 67,481,374 | ||
Cash | 139,369 | |||
Receivable for fund shares sold | 3,050,000 | |||
Interest receivable | 676,742 | |||
Prepaid expenses and other assets | 11,916 | |||
|
| |||
Total Assets | 71,359,401 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 1,039,360 | |||
Payable for fund shares redeemed | 72,559 | |||
Payable to investment advisor and other affiliates (Note 4) | 10,515 | |||
Accounts payable and accrued expenses | 57,500 | |||
Dividends payable | 2,452 | |||
|
| |||
Total Liabilities | 1,182,386 | |||
|
| |||
NET ASSETS | $ | 70,177,015 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Net unrealized appreciation on investments | $ | 344,674 | ||
Accumulated net realized gain (loss) | (41,207 | ) | ||
Net capital paid in on shares of beneficial interest | 69,873,548 | |||
|
| |||
| $ | 70,177,015 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 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 | $ | 12.37 | ||
|
| |||
See notes to financial statements.
12 | Annual Report
Thornburg Low Duration Municipal Fund | Year Ended September 30, 2017
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $1,323,380) | $ | 883,866 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 260,697 | |||
Administration fees (Note 4) | ||||
Class A Shares | 21,913 | |||
Class I Shares | 23,822 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 35,414 | |||
Transfer agent fees | ||||
Class A Shares | 28,605 | |||
Class I Shares | 15,891 | |||
Registration and filing fees | ||||
Class A Shares | 24,864 | |||
Class I Shares | 26,032 | |||
Custodian fees (Note 2) | 31,708 | |||
Professional fees | 36,724 | |||
Accounting fees (Note 4) | 2,286 | |||
Trustee fees | 2,487 | |||
Other expenses | 13,488 | |||
|
| |||
Total Expenses | 523,931 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (144,847 | ) | ||
Investment advisory fees waived by investment advisor (Note 4) | (26,545 | ) | ||
|
| |||
Net Expenses | 352,539 | |||
|
| |||
Net Investment Income | 531,327 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (17,874 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 303,247 | |||
|
| |||
Net Realized and Unrealized Gain | 285,373 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 816,700 | ||
|
| |||
See notes to financial statements.
Annual Report | 13
Statements of Changes in Net Assets
Thornburg Low Duration Municipal Fund
YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 531,327 | $ | 189,076 | ||||||
Net realized gain (loss) on investments | (17,874 | ) | (18,130 | ) | ||||||
Net unrealized appreciation (depreciation) on investments | 303,247 | (17,236 | ) | |||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 816,700 | 153,710 | ||||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (125,749 | ) | (9,876 | ) | ||||||
Class I Shares | (405,578 | ) | (179,200 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class A Shares | 12,051,896 | 971,622 | ||||||||
Class I Shares | 15,026,270 | (3,150,597 | ) | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | 27,363,539 | (2,214,341 | ) | |||||||
NET ASSETS | ||||||||||
Beginning of Year | 42,813,476 | 45,027,817 | ||||||||
|
| |||||||||
End of Year | $ | 70,177,015 | $ | 42,813,476 | ||||||
|
| |||||||||
See notes to financial statements.
14 | Annual Report
Thornburg Low Duration Municipal Fund | September 30, 2017
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 twenty-one 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, as is consistent, in the view of Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”), with 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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by the Advisor. Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
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 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.
Annual Report | 15
Notes to Financial Statements, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 67,136,700 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 351,990 | |||
Gross unrealized depreciation on a tax basis | (7,316 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 344,674 | |||
|
|
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $17,873. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $23,333 (of which $1,073 are short-term and $22,260 are 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.
At September 30, 2017, the Fund had $2,452 of undistributed net tax-exempt income, no undistributed tax basis net ordinary income and no undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the year ended September 30, 2017 and September 30, 2016 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Tax exempt income | $ | 531,170 | $ | 189,076 | ||||||
Ordinary income | 157 | – | ||||||||
|
| |||||||||
Total | $ | 531,327 | $ | 189,076 | ||||||
|
| |||||||||
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining
16 | Annual Report
Notes to Financial Statements, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017
fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from the FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs when it sells the investment.
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
Municipal Bonds | $ | 67,481,374 | $ | – | $ | 67,481,374 | $ | – | ||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 67,481,374 | $ | – | $ | 67,481,374 | $ | – | ||||||||||||
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, 2017.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| MANAGEMENT FEE SCHEDULE | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $1 billion | 0.400 | % | |||
Next $500 million | 0.300 | ||||
Next $500 million | 0.250 | ||||
Over $2 billion | 0.225 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.40% of the Fund’s average net assets (before applicable management fee waiver of $26,545).
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $2,286 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $131 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I shares. The Advisor and Distributor each 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor voluntarily waived Fund level investment advisory fees of $26,545. The Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $79,102 for Class A shares and $65,745 for Class I shares.
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.
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 51.7%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had transactions with affiliated funds of $11,958,907 in purchases and $9,808,739 in sales generating realized gains of $813.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 2,922,719 | $ | 35,953,976 | 179,515 | $ | 2,217,348 | ||||||||||
Shares issued to shareholders in | 9,827 | 121,339 | 796 | 9,845 | ||||||||||||
Shares repurchased | (1,950,171 | ) | (24,023,419 | ) | (101,677 | ) | (1,255,571 | ) | ||||||||
|
| |||||||||||||||
Net increase | 982,375 | $ | 12,051,896 | 78,634 | $ | 971,622 | ||||||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 2,760,039 | $ | 34,004,864 | 1,018,022 | $ | 12,579,199 | ||||||||||
Shares issued to shareholders in | 31,595 | 390,018 | 14,105 | 174,307 | ||||||||||||
Shares repurchased | (1,571,733 | ) | (19,368,612 | ) | (1,287,521 | ) | (15,904,103 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | 1,219,901 | $ | 15,026,270 | (255,394 | ) | $ | (3,150,597 | ) | ||||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $45,716,163 and $23,626,423, respectively.
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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 19
Thornburg Low Duration Municipal Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 12.34 | 0.08 | 0.04 | 0.12 | (0.08 | ) | – | (0.08 | ) | $ | 12.38 | ||||||||||||||||||||||||||||
2016(b) | $ | 12.35 | 0.03 | (0.01 | ) | 0.02 | (0.03 | ) | – | (0.03 | ) | $ | 12.34 | |||||||||||||||||||||||||||
2015(b) | $ | 12.34 | 0.02 | 0.01 | 0.03 | (0.02 | ) | – | (0.02 | ) | $ | 12.35 | ||||||||||||||||||||||||||||
2014(b)(c) | $ | 12.31 | 0.02 | 0.03 | 0.05 | (0.02 | ) | – | (0.02 | ) | $ | 12.34 | ||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 12.34 | 0.10 | 0.03 | 0.13 | (0.10 | ) | – | (0.10 | ) | $ | 12.37 | ||||||||||||||||||||||||||||
2016 | $ | 12.35 | 0.05 | (0.01 | ) | 0.04 | (0.05 | ) | – | (0.05 | ) | $ | 12.34 | |||||||||||||||||||||||||||
2015 | $ | 12.34 | 0.04 | 0.01 | 0.05 | (0.04 | ) | – | (0.04 | ) | $ | 12.35 | ||||||||||||||||||||||||||||
2014(c) | $ | 12.31 | 0.04 | 0.03 | 0.07 | (0.04 | ) | – | (0.04 | ) | $ | 12.34 | ||||||||||||||||||||||||||||
| (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 30, 2013. |
| (d) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
20 | Annual Report
Financial Highlights, Continued
Thornburg Low Duration Municipal Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 0.72 | 0.67 | 0.67 | 1.16 | 0.98 | 42.94 | $ | 16,412 | |||||||||||||||||||||||
| 0.24 | 0.70 | 0.70 | 2.19 | 0.15 | 21.17 | $ | 4,241 | |||||||||||||||||||||||
| 0.15 | 0.67 | 0.67 | 2.85 | 0.22 | 15.75 | $ | 3,273 | |||||||||||||||||||||||
| 0.20 | (d) | 0.66 | (d) | 0.65 | (d) | 3.14 | (d) | 0.40 | 4.54 | $ | 2,751 | |||||||||||||||||||
| 0.85 | 0.49 | 0.49 | 0.67 | 1.09 | 42.94 | $ | 53,765 | |||||||||||||||||||||||
| 0.43 | 0.50 | 0.50 | 0.72 | 0.36 | 21.17 | $ | 38,572 | |||||||||||||||||||||||
| 0.32 | 0.50 | 0.50 | 0.82 | 0.40 | 15.75 | $ | 41,755 | |||||||||||||||||||||||
| 0.42 | (d) | 0.44 | (d) | 0.44 | (d) | 1.77 | (d) | 0.56 | 4.54 | $ | 12,672 | |||||||||||||||||||
Annual Report | 21
Report of Independent Registered Public Accounting Firm
Thornburg Low Duration Municipal Fund
To the Trustees and Shareholders of the
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 the Thornburg Low Duration Municipal Fund (the “Fund”) as of September 30, 2017, 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 indicated, 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 as of September 30, 2017 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
22 | Annual Report
Thornburg Low Duration Municipal Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
| BEGINNING ACCOUNT VALUE 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,008.10 | $ | 3.52 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.56 | $ | 3.55 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,008.30 | $ | 2.52 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.56 | $ | 2.54 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.70%; I: 0.50%) 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.
Annual Report | 23
Thornburg Low Duration Municipal Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
24 | Annual Report
Trustees and Officers, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 25
Trustees and Officers, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries 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.
26 | Annual Report
Thornburg Low Duration Municipal Fund | September 30, 2017 (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 tax year ended September 30, 2017, dividends paid by the Fund of $531,170 (or the maximum allowed) are tax exempt dividends and $157 are taxable ordinary investment income dividends for federal tax purposes. The information and the distributions reported herein may differ from information and distributions reported to shareholders for the calendar year ending December 31, 2017. Completed information will be reported in conjunction with your 2017 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 Low Duration Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Annual Report | 27
Other Information, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017 (Unaudited)
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (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 three calendar years since the Fund’s inception, comparing the Fund’s annual investment returns to a fund category created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Measures of risk and relative return demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions. The Trustees noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the objectives of the Fund. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and overall Fund expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for the Fund’s two share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. The Trustees noted that the Advisor has agreed to certain fee waivers and expense reimbursements for the current period. Comparative fee and expense data noted as having been considered by the Trustees showed that, after fee waivers and expense reimbursements, the level of total expense for one share class of the Fund was comparable to the median and average levels of total expenses for the category, and that the level of total expense for a second share class was comparable to the median level and lower than the average level for the category. Peer group data showed that the Fund’s stated advisory fee was comparable to the stated median level for the two peer groups, and that the total expense levels of the Fund’s two share classes were comparable to the median levels of their respective peer groups after waivers of fees and reimbursement of expenses.
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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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
28 | Annual Report
Other Information, Continued
Thornburg Low Duration Municipal Fund | September 30, 2017 (Unaudited)
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.
Costs and Profitability of Advisor. The Trustees noted the costs incurred by the Advisor in initiating and managing the Fund and the Advisor’s waivers of fees and reimbursements of expenses for the Fund, and further noted that the Fund has only recently begun to provide nominal profits for the Advisor. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 29
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
30 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 31
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
THORNBURG LIMITED TERM MUNICIPAL FUND ANNUAL REPORT SEPTEMBER 30, 2017
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Limited Term Municipal Fund
Annual Report | September 30, 2017
Table of Contents
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class A | LTMFX | 885-215-459 | ||||||||
| Class C | LTMCX | 885-215-442 | ||||||||
| Class I | LTMIX | 885-215-434 | ||||||||
Minimum investments for Class I shares may be higher than those for other classes. Class I shares may not be available to all investors.
Investments carry risks, including possible loss of principal. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The 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 Funds are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.
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.
Annual Report | 3
Thornburg Limited Term Municipal Fund | September 30, 2017 (Unaudited)
October 12, 2017
Dear Fellow Shareholder:
We are pleased to present the annual report for Thornburg Limited Term Municipal Fund. The net asset value (NAV) of the Class A shares decreased by 20 cents to $14.43 per share during the fiscal year ended September 30, 2017. If you were with us for the entire period, you received dividends of 23.3 cents per share. Dividends were lower for the Class C shares and higher for the Class I shares to account for varying class-specific expenses. The Class A shares of your Fund underperformed the index with a 0.24% total return (without sales charge) for the fiscal year ended September 30, 2017, compared to the 0.98% total return for the BofA Merrill Lynch 1-10 Year U.S. Municipal Securities Index.
The drivers of the Fund’s total return relative to its benchmark include its interest rate sensitivity, as measured by the Fund’s duration, differing credit quality allocations, and other risk factors. The Fund underperformed its benchmark by 0.74%. The impact from the Fund’s 0.24 years shorter duration detracted 0.05%, while credit quality allocations added 0.01%. Other risk factors detracted 0.27%, while the Fund’s expenses and residuals accounted for the remainder of the performance differential.
The New Administration’s Agenda, U.S. Economy, and Fed Policy
The Trump administration took office in January of 2017 with an aggressive agenda. It promised to repeal and replace the Affordable Care Act (ACA), known also as Obamacare, increase infrastructure spending, scale back federal regulatory constraints on businesses, and reform the federal tax code. Initially, the promise of this pro-growth agenda caused interest rates to increase substantially upon Trump’s election in November. This was followed by further increases in December as investors sold municipal bonds to capture losses that appeared to be more valuable in 2016 than 2017. Some nine months later, the repeal and replacement of the ACA has failed to become a reality—tripped up in both the U.S. House and Senate.
Meanwhile, the silence around increased infrastructure spending is deafening. Federal regulatory constraints have been eased only through executive orders. The process for tax reform has just begun, but the administration’s initial measure appears to be hitting a rough patch as the proposed removal of the federal deduction for state and local taxes (SALT) has generated some blowback. The president’s framework for tax reform was mute with regard to continuation of the tax exemption for municipal bonds, although several sources have attributed the administration to stating that the municipal bond tax exemption is safe. The president’s proposal does call for the repeal of the alternative minimum tax. All that said, this is Washington, DC, and
with tax reform a major piece of the president’s agenda, watching this sausage get made will be interesting.
After a rather punk showing for the first two quarters of fiscal 2017, in which gross domestic product (GDP) growth was 1.8% and 1.2%, respectively, the economy generated a 3.1% GDP growth rate in the third fiscal quarter. The fiscal fourth quarter estimates of GDP have varied greatly as the impact of three devastating hurricanes (Harvey, Irma and Maria) are taken into consideration. After considering the impacts of Harvey and Irma alone, Goldman Sachs lowered its third-quarter GDP estimate by 0.8% to 2.0%.
Nonfarm payrolls have been a bright spot for the economy, averaging 168,000 new jobs per month for the first 11 months of fiscal 2017. This is a little lower than the 219,000 average monthly jobs generated in fiscal 2016. This all translates to an unemployment rate of 4.4% as of the end of August 2017 versus 4.9% at the end of fiscal 2016. One explanation for this slowdown is that employers cannot find qualified workers. This theory is substantiated by another significant economic indicator, the U.S. Job Openings and Labor Turnover Summary (JOLTS), which measures either newly created or unoccupied positions where an employer is taking specific actions to fill these positions. In July, this measure registered a reading of about 6.2 million, which is the highest since the time series began in December of 2000.
The Phillips Curve, an economic theory posed by A.W. Phillips, states that inflation and unemployment have a stable and inverse relationship. As unemployment decreases, inflation is supposed to increase. As of yet, this theory has not manifested itself. In fact, the Federal Reserve Board’s (Fed) favorite inflation measure, the Core Personal Consumption Expenditures Index (Core PCE)—which measures prices paid by consumers for goods and services without the volatility from movements in food and energy prices—has declined throughout the year. The last available reading at the end of August 2017 (1.30%) is much lower than the one at the end of September 2017 (1.80%).
On September 20, 2017, Bloomberg reported, “Federal Reserve Chair Janet Yellen acknowledged that the fall in inflation this year was a bit of a ‘mystery’ but suggested that the central bank was on course to raise interest rates again in 2017 nonetheless.” Any increase would be on top of the three hikes in the Federal Funds rate in fiscal 2017, bringing the range for the Federal Funds rate from 0.50% – 0.75% at the beginning of the year to 1.00% – 1.25% on June 14, 2017.
In addition, the Fed will begin reducing its $4.5 trillion balance sheet in October, by slowly unwinding the stimulus program it engaged a decade ago to combat the Great Recession. Its plan is to reduce its holdings of U.S. Treasury and mortgage-backed
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017 (Unaudited)
securities by $10 billion in October of 2017 and gradually raise the reduction amount in the months ahead. Essentially, this reduces the demand for these securities from a purchaser that was not altogether economically motivated in the traditional sense. The Fed believes that the economy is strong enough that this gradual reduction of its balance sheet will not be disruptive, although some do not share this opinion. CNBC reported in August 2017, in an interview with JPMorgan Chase CEO Jamie Dimon, that he;
“stopped short of saying the bond market is on the cusp of a collapse, but said he wouldn’t personally buy any long-term government debt. ‘I’m not going to call it a bubble, but I personally wouldn’t be buying a 10-year sovereign debt anywhere in the world…my view is the Fed is doing the right things, raising rates, telling people we’re going to start reducing the balance sheet,’ Dimon added.”
The Municipal Bond Market
The municipal bond market suffered a setback in November and December of 2016. The surprise U.S. election results and the new administration’s pro-growth and pro-infrastructure agenda caused interest rates to initially rise and the tax loss harvesting caused rates to rise higher in December of 2016.
The municipal bond market’s returns were a result of rising rates across the yield curve—with long-term rates increasing more than short-term rates as shown in Figure 1.
| Figure I | | | 12-Month Change in Rates for AAA Rated General Obligation Municipal Bonds (as of September 29, 2017) |
Source: Bloomberg
President Trump’s goal of tax reform in particular led investors to believe that losses taken in 2016 were of greater value than
losses taken in 2017. After this uptick in rates, yields moved steadily lower, and 10-year AAA general obligation bond yields decreased by about 0.30% between December 31, 2016 and September 30, 2017. Quality spreads continue to be extremely narrow, as income-starved investors extended out the yield curve or accepted lower credit quality in search of meeting an income bogey.
Cash flows into municipal bond mutual funds have been positive but nothing like the levels we experienced in fiscal year 2016. Foreign institutional investors have shown an increased interest in the municipal bond markets throughout the U.S., exhibiting some of the same characteristics as domestic retail investors by trying to quench a thirst for income.
Credit quality in the municipal bond market has been pretty stable except for some idiosyncratic disturbances. Illinois, for example, went down to the wire to pass its first budget in three years. The rating agencies threatened to drop the state’s credit rating to below investment grade, which would have seriously limited its bonds’ marketability. These antics caused the price of Illinois debt to go dramatically lower prior to the ultimate passage of the budget, after which it rallied considerably.
Elsewhere, several prominent high-yield securities came to market and were very well received. One was a mall in New Jersey across from the Meadowlands, which has been mothballed for approximately 15 years. Originally called Xanadu and referred to as the “ugliest building in New Jersey” by the Governor, it is now called “The American Dream Mall” in its recent incarnation. The fact that this and other non-rated, high-yield projects are so well received is more evidence of how income-starved investors have become in an overly accommodative central bank world. By the way, we did not purchase this bond issue, because visitation needs to be 2x that of Disney World just to break even. And, when Amazon is disrupting everything from retail goods to groceries, we felt the last thing New Jersey needed was another mall.
Current Portfolio Positioning
We have positioned this portfolio, like our others, at the bottom end of its risk spectrum. If this sounds familiar, it is, as we said the same thing last year. We have lower durations, higher credit quality and higher reserve positions (to hedge against increased market illiquidity).
We believe that investors are not currently being compensated to take much risk. Real yields (yield less inflation) are low by historic standards (off the bottom but still low). Credit spreads are very narrow, back to pre-crisis levels, when 50% or more of the new issue market was insured by AAA municipal bond insurers. This is particularly concerning, as today only about 7% to 8% of the new issue market is insured and the municipal bond insurers are no longer rated AAA. A few desperate
Annual Report | 5
Letter to Shareholders, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017 (Unaudited)
municipal market issuers, like Hartford, CT, are openly discussing debt restructuring and the president is making comments like the following with regard to Puerto Rico’s debt: “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out.” The precedents set by the recent municipal Chapter 9 proceedings of Detroit, MI and San Bernardino, CA have in effect placed bondholders in a subordinated position to pensioners. Sometimes investors are motivated more by greed than fear and vice versa. Greed seems to be the current primary motivating factor, and it is in such an environment that caution should be exercised. That is exactly what we are doing—relying on value-oriented, bottom-up fundamental analysis in portfolio construction.
Why Own Municipal Bonds
Fixed income assets are an important part of a well-diversified portfolio, as they can provide a stabilizing force to the potential swings of the equity portion of the portfolio. These asset classes are not always positively correlated and can therefore dampen the over-all portfolio’s volatility.
Thank you for your continued trust in us, and please know that the co-managers of this Fund are invested alongside you.
Sincerely,
Christopher Ryon,CFA
Portfolio Manager
Managing Director
Nicholos Venditti,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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
6 | Annual Report
Thornburg Limited Term Municipal Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
A Shares (Incep: 9/28/84) | |||||||||||||||||||||||||
Without sales charge | 0.24% | 1.23% | 1.30% | 2.99% | 4.84% | ||||||||||||||||||||
With sales charge | -1.24% | 0.73% | 1.00% | 2.83% | 4.79% | ||||||||||||||||||||
C Shares (Incep: 9/1/94) | |||||||||||||||||||||||||
Without sales charge | 0.01% | 1.02% | 1.06% | 2.73% | 3.29% | ||||||||||||||||||||
With sales charge | -0.48% | 1.02% | 1.06% | 2.73% | 3.29% | ||||||||||||||||||||
I Shares (Incep: 7/5/96) | 0.49% | 1.55% | 1.62% | 3.32% | 3.87% | ||||||||||||||||||||
30-DAY YIELDS, A SHARES
(with sales charge)
Annualized Distribution Yield | 1.59% | ||||
SEC Yield | 0.68% |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. Class A shares are sold with a maximum sales charge of 1.50%. Class C shares include a 0.50% CDSC for the first year only. There is no sales charge for Class I shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses are as follows: A shares, 0.72%; C shares, 0.96%; I shares, 0.41%.
Glossary
The BofA Merrill Lynch 1-10 Year Municipal Securities Index is a subset of the BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity less than 10 years.
The performance of any index is not indicative of the performance of any particular investment. 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 or net asset value.
Bond Credit Ratings (Credit Quality) – 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.
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 incorporates a bond’s embedded option features, such as call provisions.
General Obligation Bond (GO) – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Insured Bonds – Individual bonds are sometimes insured by private companies. The insurance guarantees the payment of principal and interest on a bond issue if the issuer defaults. Mutual funds are not insured, even if the underlying bonds are insured.
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.
Annual Report | 7
Thornburg Limited Term Municipal Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
The Fund’s primary investment objective is to obtain as high a level of current income exempt from federal individual income tax 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 a dollar-weighted 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 typically 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
Lipper Best Short-Intermediate Municipal Debt Fund (Class I Shares) 10-year period ended 11/30/16, among 41 funds.
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 and without sales charge). Fund Classification Awards are given for three-year, five-year, and ten-year periods. Thornburg did not win the award for any other time period. Past performance does not guarantee future results. From Thomson Reuters Lipper Awards, © 2017 Thomson Reuters. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution or retransmission of this Content without express permission is prohibited.
There is no guarantee that the Fund will meet its investment objectives.
All data is subject to change. Charts may not add up to 100% due to rounding.
SECURITY 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. Credit quality ratings for Thornburg’s municipal portfolios used the highest rating available from either Standard & Poor’s or Moody’s Investors Service.
Unrated pre-refunded and escrowed-to-maturity bonds are included in the not rated category.
PORTFOLIO LADDER
Percent of portfolio maturing in each year. Cash includes cash equivalents and other.
KEY PORTFOLIO ATTRIBUTES
| Number of Bonds | 1,867 | ||||
| Effective Duration | 3.2 Yrs | ||||
| Average Maturity | 3.7 Yrs |
8 | Annual Report
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
ALABAMA — 1.05% | |||||||||||||||||
Alabama Public School & College Authority, 5.00% due 6/1/2019 (Education System Capital Improvements) | AA/Aa1 | $ | 4,840,000 | $ | 5,156,439 | ||||||||||||
Alabama Public School & College Authority, 5.00% due 6/1/2019 (Education System Capital Improvements) | AA/Aa1 | 770,000 | 820,343 | ||||||||||||||
Alabama Public School & College Authority, 5.00% due 6/1/2020 (Education System Capital Improvements) | AA/Aa1 | 5,085,000 | 5,592,280 | ||||||||||||||
Alabama Public School & College Authority, 5.00% due 6/1/2021 (Education System Capital Improvements) | AA/Aa1 | 5,335,000 | 6,037,780 | ||||||||||||||
Alabama Public School & College Authority, 5.00% due 6/1/2022 (Education System Capital Improvements) | AA/Aa1 | 5,605,000 | 6,487,395 | ||||||||||||||
Alabama Public School & College Authority, 5.00% due 6/1/2023 (Education System Capital Improvements) | AA/Aa1 | 735,000 | 866,594 | ||||||||||||||
Alabama State Board of Education, 3.00% due 5/1/2018 (Calhoun Community College) | NR/A1 | 2,130,000 | 2,152,301 | ||||||||||||||
Alabama State Board of Education, 4.00% due 5/1/2019 (Calhoun Community College) | NR/A1 | 2,195,000 | 2,286,949 | ||||||||||||||
Alabama State Board of Education, 4.00% due 5/1/2020 (Calhoun Community College) | NR/A1 | 1,000,000 | 1,064,120 | ||||||||||||||
Alabama State Board of Education, 4.00% due 5/1/2021 (Calhoun Community College) | NR/A1 | 1,000,000 | 1,084,350 | ||||||||||||||
Alabama State Board of Education, 4.00% due 5/1/2022 (Calhoun Community College) | NR/A1 | 1,230,000 | 1,351,536 | ||||||||||||||
City of Birmingham GO, 5.00% due 2/1/2018 (Government Services) | AA/Aa2 | 2,000,000 | 2,027,580 | ||||||||||||||
City of Mobile GO, 5.00% due 2/15/2019 pre-refunded 2/15/2018 | NR/NR | 1,205,000 | 1,223,605 | ||||||||||||||
City of Mobile GO, 5.00% due 2/15/2019 | AA-/Aa2 | 795,000 | 807,036 | ||||||||||||||
City of Mobile Industrial Development Board, 1.85% due 6/1/2034 (Alabama Power Company Barry Plant) | A-/A1 | 20,000,000 | 20,151,200 | ||||||||||||||
East Alabama Health Care Authority GO, 5.00% due 9/1/2021 | A/NR | 1,245,000 | 1,394,512 | ||||||||||||||
East Alabama Health Care Authority GO, 5.00% due 9/1/2022 | A/NR | 800,000 | 901,680 | ||||||||||||||
Montgomery Waterworks and Sanitation, 5.00% due 9/1/2019 | AAA/Aa1 | 3,375,000 | 3,496,028 | ||||||||||||||
UAB Medicine Finance Authority, 5.00% due 9/1/2025 (University Hospital) | AA-/A1 | 1,670,000 | 2,014,053 | ||||||||||||||
UAB Medicine Finance Authority, 5.00% due 9/1/2026 (University Hospital) | AA-/A1 | 4,940,000 | 6,002,792 | ||||||||||||||
UAB Medicine Finance Authority, 5.00% due 9/1/2027 (University Hospital) | AA-/A1 | 2,305,000 | 2,787,828 | ||||||||||||||
University of Alabama at Birmingham Hospital, 5.00% due 9/1/2018 (ETM) | NR/A1 | 1,700,000 | 1,763,274 | ||||||||||||||
ALASKA — 0.33% | |||||||||||||||||
Alaska Energy Authority, 6.00% due 7/1/2020 (Bradley Lake Hydroelectric Project; Insured: AGM) | AA/A2 | 1,790,000 | 2,014,359 | ||||||||||||||
Alaska Housing Finance Corp., 5.00% due 12/1/2018 pre-refunded 12/1/2017 (State Capital Project; Insured: Natl-Re) | A/Aa2 | 1,610,000 | 1,621,689 | ||||||||||||||
Alaska Housing Finance Corp., 5.00% due 12/1/2018 (State Capital Project; Insured: Natl-Re) | AA+/Aa2 | 390,000 | 392,831 | ||||||||||||||
Alaska Industrial Development & Export Authority GO, 5.00% due 4/1/2018 (DeLong Mountain Transportation Project) | AA+/Aa3 | 2,455,000 | 2,504,149 | ||||||||||||||
City of Valdez, 5.00% due 1/1/2021 (BP Pipelines (Alaska), Inc. Project) | A-/A1 | 12,000,000 | 13,309,080 | ||||||||||||||
City of Valdez, 5.00% due 1/1/2021 (BP Pipelines (Alaska), Inc. Project) | A-/A1 | 3,700,000 | 4,103,633 | ||||||||||||||
ARIZONA — 2.06% | |||||||||||||||||
Arizona Board of Regents, 5.00% due 8/1/2020 (University of Arizona SPEED) | A+/Aa3 | 575,000 | 635,145 | ||||||||||||||
Arizona Board of Regents, 5.00% due 8/1/2023 (University of Arizona SPEED) | A+/Aa3 | 800,000 | 942,040 | ||||||||||||||
Arizona Board of Regents, 5.00% due 8/1/2024 (University of Arizona SPEED) | A+/Aa3 | 550,000 | 658,163 | ||||||||||||||
Arizona Board of Regents COP, 3.00% due 9/1/2018 (Northern Arizona University Projects) | A/A2 | 1,000,000 | 1,016,170 | ||||||||||||||
Arizona Board of Regents COP, 3.00% due 9/1/2019 (Northern Arizona University Projects) | A/A2 | 2,525,000 | 2,602,619 | ||||||||||||||
Arizona Board of Regents COP, 5.00% due 9/1/2019 (Arizona State University) | AA-/A1 | 1,085,000 | 1,161,091 | ||||||||||||||
Arizona Board of Regents COP, 5.00% due 9/1/2020 (Northern Arizona University Projects) | A/A2 | 1,000,000 | 1,096,470 | ||||||||||||||
Arizona Board of Regents COP, 5.00% due 9/1/2020 (Arizona State University) | AA-/A1 | 3,170,000 | 3,493,023 | ||||||||||||||
Arizona Board of Regents COP, 5.00% due 9/1/2021 (Arizona State University) | AA-/A1 | 4,020,000 | 4,546,781 | ||||||||||||||
Arizona Board of Regents COP, 5.00% due 6/1/2022 (Arizona State University) | A+/Aa3 | 6,080,000 | 6,976,739 | ||||||||||||||
Arizona Board of Regents COP, 5.00% due 9/1/2022 (Northern Arizona University Projects) | A/A2 | 2,500,000 | 2,865,025 | ||||||||||||||
Arizona Board of Regents COP, 5.00% due 9/1/2022 (Arizona State University) | AA-/A1 | 4,380,000 | 5,047,731 | ||||||||||||||
Arizona Board of Regents COP, 5.00% due 9/1/2023 (Northern Arizona University Projects) | A/A2 | 3,325,000 | 3,802,071 | ||||||||||||||
Arizona Board of Regents COP, 5.00% due 9/1/2023 (Arizona State University) | AA-/A1 | 5,580,000 | 6,547,851 | ||||||||||||||
Arizona HFA, 5.25% due 1/1/2018 (Banner Health) | AA-/NR | 3,500,000 | 3,538,360 | ||||||||||||||
Arizona HFA, 5.00% due 7/1/2018 (Dignity Health) | A/A3 | 1,470,000 | 1,512,542 | ||||||||||||||
Arizona HFA, 5.00% due 7/1/2019 (Dignity Health) | A/A3 | 1,365,000 | 1,456,046 | ||||||||||||||
Arizona HFA, 5.00% due 7/1/2020 (Dignity Health) | A/A3 | 1,290,000 | 1,373,489 | ||||||||||||||
Arizona HFA, 5.00% due 12/1/2022 (Scottsdale Lincoln Hospitals) | NR/A2 | 1,600,000 | 1,851,024 | ||||||||||||||
Arizona HFA, 5.00% due 12/1/2024 (Scottsdale Lincoln Hospitals) | NR/A2 | 1,500,000 | 1,790,565 | ||||||||||||||
Arizona School Facilities Board, 5.00% due 7/1/2018 (State School Land Trust; Insured: AMBAC) | NR/NR | 4,540,000 | 4,672,795 | ||||||||||||||
Arizona School Facilities Board COP, 5.25% due 9/1/2023 pre-refunded 9/1/2018 (School Site and Building Projects) | AA-/Aa3 | 1,315,000 | 1,366,666 | ||||||||||||||
Arizona Transportation Board, 5.00% due 7/1/2019 | AA+/Aa2 | 3,510,000 | 3,751,137 | ||||||||||||||
Arizona Transportation Board, 5.00% due 7/1/2021 | AA+/Aa2 | 7,465,000 | 8,491,736 | ||||||||||||||
Arizona Transportation Board, 5.00% due 7/1/2022 | AA+/Aa2 | 5,000,000 | 5,669,950 | ||||||||||||||
City of Phoenix Civic Improvement Corp., 5.00% due 7/1/2022 | AA+/Aa2 | 1,250,000 | 1,453,825 | ||||||||||||||
City of Phoenix Civic Improvement Corp., 5.00% due 7/1/2023 | AA+/Aa2 | 1,830,000 | 2,170,252 | ||||||||||||||
City of Phoenix Civic Improvement Corp., 5.00% due 7/1/2024 | AA+/Aa2 | 2,000,000 | 2,414,540 | ||||||||||||||
City of Phoenix Civic Improvement Corp., 5.00% due 7/1/2025 | AA+/Aa2 | 3,500,000 | 4,274,760 | ||||||||||||||
City of Tucson, 5.00% due 7/1/2022 (Street and Highway Projects) | AA+/A1 | 2,135,000 | 2,453,969 | ||||||||||||||
Pima County, 3.00% due 7/1/2018 (Ina & Roger Road Wastewater Reclamation Facilities) | AA/NR | 500,000 | 507,580 | ||||||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Pima County, 5.00% due 7/1/2018 (Ina & Roger Road Wastewater Reclamation Facilities; Insured: AGM) | AA/A2 | $ | 5,000,000 | $ | 5,150,850 | ||||||||||||
Pima County, 5.00% due 7/1/2018 (Ina & Roger Road Wastewater Reclamation Facilities) | AA/NR | 2,000,000 | 2,060,340 | ||||||||||||||
Pima County, 5.00% due 7/1/2018 (Ina & Roger Road Wastewater Reclamation Facilities) | AA/NR | 700,000 | 721,119 | ||||||||||||||
Pima County, 5.00% due 7/1/2020 (Ina & Roger Road Wastewater Reclamation Facilities) | AA/NR | 500,000 | 552,345 | ||||||||||||||
Pima County, 3.00% due 7/1/2021 (Ina & Roger Road Wastewater Reclamation Facilities) | AA/NR | 1,200,000 | 1,274,520 | ||||||||||||||
Pima County, 5.00% due 7/1/2021 (Ina & Roger Road Wastewater Reclamation Facilities) | AA/NR | 400,000 | 455,016 | ||||||||||||||
Pima County, 3.00% due 7/1/2022 (Ina & Roger Road Wastewater Reclamation Facilities) | AA/NR | 1,325,000 | 1,417,154 | ||||||||||||||
Pima County, 5.00% due 7/1/2022 (Ina & Roger Road Wastewater Reclamation Facilities) | AA/NR | 500,000 | 582,030 | ||||||||||||||
Pima County COP, 5.00% due 12/1/2017 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 1,395,000 | 1,404,932 | ||||||||||||||
Pima County COP, 5.00% due 12/1/2018 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 2,700,000 | 2,823,066 | ||||||||||||||
Pima County COP, 5.00% due 12/1/2019 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 1,500,000 | 1,618,020 | ||||||||||||||
Pima County COP, 5.00% due 12/1/2020 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 765,000 | 849,219 | ||||||||||||||
Pima County COP, 5.00% due 12/1/2021 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 1,220,000 | 1,387,884 | ||||||||||||||
Pima County COP, 5.00% due 12/1/2022 (Sewer System & Fleet Services Facilities Expansion) | A+/NR | 1,275,000 | 1,476,399 | ||||||||||||||
Pinal County, 5.00% due 8/1/2019 (Detention and Training Facilities) | AA-/NR | 1,115,000 | 1,190,619 | ||||||||||||||
Pinal County, 5.00% due 8/1/2021 (Detention and Training Facilities) | AA-/NR | 1,775,000 | 2,003,620 | ||||||||||||||
Pinal County, 5.00% due 8/1/2023 (Detention and Training Facilities) | AA-/NR | 1,100,000 | 1,288,925 | ||||||||||||||
Pinal County, 5.00% due 8/1/2024 (Detention and Training Facilities) | AA-/NR | 700,000 | 832,230 | ||||||||||||||
Pinal County, 5.00% due 8/1/2025 (Hunt Highway (Phases III-V), Ironwood Drive, Public Safety Radio & Court Buildings) | AA-/NR | 3,000,000 | 3,557,430 | ||||||||||||||
Pinal County, 5.00% due 8/1/2025 (Detention and Training Facilities) | AA-/NR | 1,500,000 | 1,800,660 | ||||||||||||||
Scottsdale IDA, 5.00% due 9/1/2019 (Scottsdale Healthcare) | NR/A2 | 6,885,000 | 7,133,204 | ||||||||||||||
State of Arizona Department of Administration, 5.00% due 7/1/2018 (State Lottery; Insured: AGM) | AA/A1 | 8,370,000 | 8,622,523 | ||||||||||||||
State of Arizona Department of Administration, 5.00% due 7/1/2020 (State Lottery; Insured: AGM) | AA/A1 | 8,705,000 | 9,603,791 | ||||||||||||||
ARKANSAS — 0.26% | |||||||||||||||||
Board of Trustees of the University of Arkansas, 3.00% due 11/1/2023 (Fayetteville Campus Athletic Facilities) | NR/Aa2 | 615,000 | 659,206 | ||||||||||||||
City of Fort Smith, 3.50% due 10/1/2017 (Water and Sewer System Construction; Insured: AGM) | AA/NR | 1,930,000 | 1,930,270 | ||||||||||||||
City of Fort Smith, 4.00% due 10/1/2018 (Water and Sewer System Construction; Insured: AGM) | AA/NR | 1,000,000 | 1,028,210 | ||||||||||||||
City of Fort Smith, 4.00% due 10/1/2019 (Water and Sewer System Construction; Insured: AGM) | AA/NR | 1,670,000 | 1,756,757 | ||||||||||||||
Jefferson County, 1.55% due 10/1/2017 (Entergy Arkansas, Inc. Project) | A/A2 | 10,000,000 | 10,000,400 | ||||||||||||||
Jefferson County, 4.50% due 6/1/2018 (Jefferson Regional Medical Center; Insured: AGM) | AA/NR | 1,495,000 | 1,527,785 | ||||||||||||||
Jefferson County, 4.50% due 6/1/2019 (Jefferson Regional Medical Center; Insured: AGM) | AA/NR | 1,580,000 | 1,661,591 | ||||||||||||||
CALIFORNIA — 9.01% | |||||||||||||||||
Alameda County COP, 5.00% due 12/1/2017 (Santa Rita Jail; Insured: AMBAC) | AA/NR | 1,220,000 | 1,228,882 | ||||||||||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2021 (Alameda County Medical Center Highland Hospital) | AA/Aa1 | 1,000,000 | 1,157,330 | ||||||||||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2022 (Alameda County Medical Center Highland Hospital) | AA/Aa1 | 2,000,000 | 2,368,040 | ||||||||||||||
| a | Alameda County Joint Powers Authority, 5.00% due 12/1/2023 (Alameda County Medical Center Highland Hospital) | AA/Aa1 | 3,200,000 | 3,864,096 | |||||||||||||
Anaheim Public Financing Authority, 0.00% due 9/1/2022 (Public Improvements; Insured: AGM) | AA/A2 | 3,250,000 | 2,967,380 | ||||||||||||||
Brentwood Infrastructure Financing Authority, 5.00% due 11/1/2017 (Redevelopment Agency of the City of Brentwood; Insured: AGM) | AA/NR | 965,000 | 968,561 | ||||||||||||||
Brentwood Infrastructure Financing Authority, 5.25% due 11/1/2018 (Redevelopment Agency of the City of Brentwood: Insured: AGM) | AA/NR | 1,020,000 | 1,067,124 | ||||||||||||||
Brentwood Infrastructure Financing Authority, 5.25% due 11/1/2019 (Redevelopment Agency of the City of Brentwood; Insured: AGM) | AA/NR | 725,000 | 787,742 | ||||||||||||||
Cabrillo USD GO, 0% due 8/1/2021 (Educational Facilities; Insured: AMBAC) | NR/NR | 1,000,000 | 940,110 | ||||||||||||||
California Educational Facilities Authority, 5.00% due 4/1/2021 (Chapman University) | NR/A2 | 4,870,000 | 5,490,925 | ||||||||||||||
California HFFA, 5.50% due 2/1/2019 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | AA-/NR | 2,865,000 | 3,031,428 | ||||||||||||||
California HFFA, 5.75% due 2/1/2020 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | AA-/NR | 1,975,000 | 2,182,158 | ||||||||||||||
California HFFA, 5.00% due 3/1/2020 (Dignity Health) | A/A3 | 4,400,000 | 4,791,688 | ||||||||||||||
California HFFA, 5.75% due 2/1/2021 (Community Developmental Disabilities Program; Insured: California Mtg Insurance) | AA-/NR | 1,695,000 | 1,940,724 | ||||||||||||||
California HFFA, 5.00% due 3/1/2021 (Dignity Health) | A/A3 | 3,450,000 | 3,866,484 | ||||||||||||||
California HFFA, 5.25% due 3/1/2022 (Dignity Health) | A/A3 | 7,020,000 | 7,905,011 | ||||||||||||||
California HFFA, 5.00% due 7/1/2043 put 10/15/2020 (St. Joseph Health System) | AA-/Aa3 | 5,000,000 | 5,534,800 | ||||||||||||||
California School Cash Reserve Program Authority, 3.00% due 6/29/2018 | SP-1+/NR | 20,300,000 | 20,647,739 | ||||||||||||||
California State Economic Recovery GO, 5.00% due 7/1/2020 pre-refunded 7/1/2019 | AA+/Aaa | 4,200,000 | 4,496,898 | ||||||||||||||
California State Housing Finance Agency, 2.50% due 12/1/2017 (One Santa Fe Apartments Multi-Family Housing; Collateralized: GNMA) | NR/Aa1 | 290,000 | 290,345 | ||||||||||||||
California State Public Works Board, 5.00% due 11/1/2017 (California State University) (ETM) | A+/Aaa | 3,000,000 | 3,011,340 | ||||||||||||||
California State Public Works Board, 5.00% due 11/1/2018 (California State University) (ETM) | A+/Aaa | 2,700,000 | 2,821,554 | ||||||||||||||
California State Public Works Board, 5.00% due 4/1/2020 (California School for the Deaf Riverside Campus) | A+/A1 | 1,585,000 | 1,738,587 | ||||||||||||||
California State Public Works Board, 5.00% due 6/1/2020 (Coalinga State Hospital) | A+/A1 | 5,685,000 | 6,268,736 | ||||||||||||||
California State Public Works Board, 5.00% due 10/1/2020 (California State University) | A+/A1 | 1,000,000 | 1,114,360 | ||||||||||||||
California State Public Works Board, 5.00% due 11/1/2020 (Various Capital Projects) | A+/A1 | 1,500,000 | 1,675,860 | ||||||||||||||
California State Public Works Board, 5.00% due 4/1/2021 (California School for the Deaf Riverside Campus) | A+/A1 | 890,000 | 1,005,602 | ||||||||||||||
10 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
California State Public Works Board, 5.00% due 6/1/2021 (Coalinga State Hospital) | A+/A1 | $ | 5,000,000 | $ | 5,676,300 | ||||||||||||
California State Public Works Board, 5.00% due 10/1/2021 (Various Capital Projects) | A+/A1 | 1,000,000 | 1,145,420 | ||||||||||||||
California State Public Works Board, 5.00% due 11/1/2021 (Various Capital Projects) | A+/A1 | 1,750,000 | 2,008,737 | ||||||||||||||
California State Public Works Board, 5.00% due 11/1/2021 (Laboratory Facility and San Diego Courthouse) | A+/A1 | 750,000 | 860,888 | ||||||||||||||
California State Public Works Board, 5.00% due 6/1/2022 (Coalinga State Hospital) | A+/A1 | 11,555,000 | 13,419,515 | ||||||||||||||
California State Public Works Board, 5.00% due 11/1/2022 (Laboratory Facility and San Diego Courthouse) | A+/A1 | 10,075,000 | 11,808,807 | ||||||||||||||
California State Public Works Board, 5.00% due 6/1/2023 (Yuba City Courthouse) | A+/A1 | 1,900,000 | 2,251,215 | ||||||||||||||
California State Public Works Board, 5.00% due 6/1/2023 (Coalinga State Hospital) | A+/A1 | 7,200,000 | 8,530,920 | ||||||||||||||
California State Public Works Board, 5.00% due 11/1/2024 (Laboratory Facility and San Diego Courthouse) | A+/A1 | 2,050,000 | 2,458,278 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 4/1/2019 (Kaiser Foundation Hospitals) | AA-/NR | 27,000,000 | 28,611,900 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 7/1/2020 pre-refunded 1/1/2019 (Aspire Public Schools; LOC: PCSD Guaranty Pool I, LLC) | NR/NR | 985,000 | 1,019,800 | ||||||||||||||
Castaic Lake Water Agency COP, 0% due 8/1/2023 (Water System Improvement; Insured: AMBAC) | AA+/NR | 10,125,000 | 9,041,321 | ||||||||||||||
Castaic USD GO, 0% due 5/1/2018 (Insured: Natl-Re) | A/NR | 1,300,000 | 1,291,095 | ||||||||||||||
Central Valley Financing Authority, 5.00% due 7/1/2019 (Carson Ice) | AA-/Aa3 | 1,750,000 | 1,871,170 | ||||||||||||||
Chula Vista COP, 5.25% due 3/1/2018 (ETM) | AA-/NR | 1,170,000 | 1,191,949 | ||||||||||||||
Chula Vista COP, 5.25% due 3/1/2019 (ETM) | AA-/NR | 1,235,000 | 1,311,051 | ||||||||||||||
City of Los Angeles GO, 5.00% due 6/28/2018 (Cash Flow Management) | SP-1+/Mig1 | 45,745,000 | 47,130,159 | ||||||||||||||
City of Redding COP, 5.00% due 6/1/2020 pre-refunded 6/1/2018 (City Electric System; Insured: AGM) | NR/A2 | 2,290,000 | 2,354,097 | ||||||||||||||
City of Redding COP, 5.00% due 6/1/2020 (City Electric System; Insured: AGM) | NR/A2 | 1,665,000 | 1,709,972 | ||||||||||||||
Clovis USD GO, 0.00% due 8/1/2019 (Insured: Natl-Re) | AA/A3 | 2,685,000 | 2,625,688 | ||||||||||||||
Community Facilities District No. 86-1 of the Irvine USD, 5.25% due 9/1/2018 (Educational Facilities; Insured: AGM) | AA/NR | 3,000,000 | 3,116,160 | ||||||||||||||
Community Facilities District No. 86-1 of the Irvine USD, 5.25% due 9/1/2019 (Educational Facilities; Insured: AGM) | AA/NR | 3,000,000 | 3,234,720 | ||||||||||||||
County of Los Angeles GO, 5.00% due 6/29/2018 (Fiscal Year 2017-2018 Expenditures) | SP-1+/Mig1 | 4,435,000 | 4,569,780 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 6/1/2020 (Bunker Hill Project) | AA/NR | 1,730,000 | 1,901,789 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 12/1/2020 (Bunker Hill Project) | AA/NR | 3,805,000 | 4,249,043 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 6/1/2021 (Bunker Hill Project) | AA/NR | 360,000 | 407,837 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 12/1/2021 (Bunker Hill Project) | AA/NR | 5,805,000 | 6,662,050 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 6/1/2022 (Bunker Hill Project) | AA/NR | 1,645,000 | 1,904,926 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 12/1/2022 (Bunker Hill Project) | AA/NR | 5,000,000 | 5,849,550 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 6/1/2023 (Bunker Hill Project) | AA/NR | 450,000 | 531,036 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 12/1/2023 (Bunker Hill Project) | AA/NR | 6,875,000 | 8,189,912 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 6/1/2024 (Bunker Hill Project) | AA/NR | 4,775,000 | 5,715,484 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 12/1/2024 (Bunker Hill Project) | AA/NR | 5,150,000 | 6,208,531 | ||||||||||||||
County of Monterey COP, 5.00% due 8/1/2018 (2009 Refinancing Project; Insured: AGM) | AA/Aa3 | 2,260,000 | 2,337,721 | ||||||||||||||
County of Riverside, 3.00% due 10/11/2017 | NR/Mig1 | 4,050,000 | 4,052,916 | ||||||||||||||
County of Riverside, 2.00% due 6/29/2018 (Fiscal Year 2017-2018 Expenditures) | SP-1+/NR | 71,000,000 | 71,643,970 | ||||||||||||||
County of Solano COP, 5.00% due 11/15/2017 (1999 Capital Improvement Program) | AA/Aa3 | 1,580,000 | 1,588,564 | ||||||||||||||
Escondido Union High School District GO, 0% due 11/1/2020 (Insured: Natl-Re) | A/A3 | 2,655,000 | 2,542,747 | ||||||||||||||
Los Angeles Convention and Exhibition Center Authority, 5.00% due 8/15/2018 (ETM) | AA-/NR | 2,295,000 | 2,378,928 | ||||||||||||||
Los Angeles County Public Works Financing Authority, 5.00% due 8/1/2018 (Multiple Capital Projects) | AA/Aa2 | 4,000,000 | 4,137,560 | ||||||||||||||
Los Angeles County Public Works Financing Authority, 5.00% due 8/1/2019 (Multiple Capital Projects) | AA/Aa2 | 17,935,000 | 19,266,494 | ||||||||||||||
Los Angeles USD COP, 5.00% due 10/1/2017 (Educational Facilities and Information Technology Infrastructure; Insured: AMBAC) | A+/A1 | 2,445,000 | 2,445,562 | ||||||||||||||
Los Angeles USD COP, 5.50% due 12/1/2018 (Educational Facilities and Information Technology Infrastructure) | A+/A1 | 4,600,000 | 4,839,154 | ||||||||||||||
Los Angeles USD COP, 5.50% due 12/1/2019 (Educational Facilities and Information Technology Infrastructure) | A+/A1 | 7,040,000 | 7,700,845 | ||||||||||||||
Los Angeles USD GO, 5.00% due 7/1/2022 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 12,260,000 | 14,376,076 | ||||||||||||||
Los Angeles USD GO, 5.00% due 7/1/2023 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 11,950,000 | 14,306,301 | ||||||||||||||
Los Angeles USD GO, 5.00% due 7/1/2024 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 10,640,000 | 12,985,694 | ||||||||||||||
Needles USD GO, 0% due 8/1/2023 | A/A3 | 1,005,000 | 893,204 | ||||||||||||||
North City West School Facilities Financing Authority, 5.00% due 9/1/2023 (Carmel Valley Educational Facilities; Insured: AGM) | AA/NR | 4,545,000 | 5,294,652 | ||||||||||||||
Northern California Power Agency, 5.00% due 6/1/2018 (Lodi Energy Center) | A-/A2 | 4,480,000 | 4,601,542 | ||||||||||||||
Northern California Power Agency, 5.00% due 7/1/2019 (Hydroelectric Project) | A+/A1 | 1,000,000 | 1,068,150 | ||||||||||||||
Northern California Power Agency, 5.00% due 7/1/2020 (Hydroelectric Project) | A+/A1 | 1,325,000 | 1,416,505 | ||||||||||||||
Oakland State Building Authority, 5.00% due 12/1/2018 (Elihu M. Harris State Office Building) | A+/A1 | 7,240,000 | 7,578,760 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2022 (Construction & Modernization Project; Insured: AGM) | AA/Aa3 | 2,240,000 | 2,632,426 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2023 (Construction & Modernization Project; Insured: AGM) | AA/Aa3 | 1,290,000 | 1,547,084 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2024 (Construction & Modernization Project; Insured: AGM) | AA/Aa3 | 1,500,000 | 1,831,455 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2025 (Construction & Modernization Project; Insured: AGM) | AA/Aa3 | 1,750,000 | 2,167,777 | ||||||||||||||
Palo Alto USD GO, 0.00% due 8/1/2019 | AAA/Aaa | 1,000,000 | 979,160 | ||||||||||||||
Palomar Community College District GO, 0.01% due 8/1/2021 | AA/Aa1 | 2,560,000 | 2,416,026 | ||||||||||||||
Rocklin USD GO, 0% due 8/1/2022 (Insured: Natl-Re) | AA-/Aa2 | 3,910,000 | 3,594,033 | ||||||||||||||
Annual Report | 11
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Sacramento City Financing Authority, 0% due 12/1/2019 (Merged Downtown & Oak Park; Insured: Natl-Re) | A/A3 | $ | 2,920,000 | $ | 2,815,493 | ||||||||||||
Sacramento City Financing Authority, 0% due 12/1/2021 (Merged Downtown & Oak Park; Insured: Natl-Re) | A/A3 | 1,600,000 | 1,471,392 | ||||||||||||||
Sacramento City USD GO, 5.00% due 7/1/2021 (Educational Facilities Improvements) | A+/Aa3 | 3,265,000 | 3,725,691 | ||||||||||||||
San Diego Convention Center Expansion Financing Authority, 5.00% due 4/15/2020 | AA-/NR | 4,000,000 | 4,393,200 | ||||||||||||||
San Diego Convention Center Expansion Financing Authority, 5.00% due 4/15/2021 | AA-/NR | 3,000,000 | 3,402,870 | ||||||||||||||
San Diego Convention Center Expansion Financing Authority, 5.00% due 4/15/2022 | AA-/NR | 8,000,000 | 9,254,960 | ||||||||||||||
San Diego USD GO, 5.50% due 7/1/2020 (Educational System Capital Projects; Insured: Natl-Re) | AA-/Aa2 | 10,000,000 | 11,219,900 | ||||||||||||||
San Francisco Building Authority, 5.00% due 12/1/2018 (San Francisco Civic Center Complex) | A+/A1 | 13,130,000 | 13,755,644 | ||||||||||||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: AGM) | AA/Aa2 | 7,600,000 | 7,149,624 | ||||||||||||||
Santa Ana Financing Authority, 6.25% due 7/1/2018 (Police Administration & Holding Facility; Insured: Natl-Re) (ETM) | A/A3 | 2,017,500 | 2,099,653 | ||||||||||||||
Santa Ana Financing Authority, 6.25% due 7/1/2018 (Police Administration & Holding Facility; Insured: Natl-Re) | A/A3 | 2,017,500 | 2,092,289 | ||||||||||||||
| a | Santa Ana USD GO, 0.00% due 8/1/2019 (Insured: Natl-Re) | A+/A3 | 3,425,000 | 3,349,342 | |||||||||||||
Santa Fe Springs Community Development Commission, 0% due 9/1/2024 (Consolidated Redevelopment Project; Insured: Natl-Re) | A+/A3 | 7,000,000 | 6,014,680 | ||||||||||||||
South San Francisco USD GO, 4.00% due 6/15/2018 (Educational Facilities) (ETM) | SP-1+/NR | 5,130,000 | 5,243,629 | ||||||||||||||
Southeast Resource Recovery Facilities Authority, 5.25% due 12/1/2017 (Insured: AMBAC) | AA-/Aa3 | 2,000,000 | 2,013,300 | ||||||||||||||
State of California Economic Recovery GO, 5.00% due 7/1/2018 (ETM) | AA+/Aaa | 3,105,000 | 3,202,528 | ||||||||||||||
State of California Economic Recovery GO, 5.00% due 7/1/2018 (ETM) | AA+/Aaa | 895,000 | 923,112 | ||||||||||||||
State of California GO, 4.75% due 4/1/2018 (Various Purposes) | AA-/Aa3 | 1,250,000 | 1,274,313 | ||||||||||||||
State of California GO, 5.00% due 9/1/2020 (Various Purposes) | AA-/Aa3 | 10,000,000 | 11,120,400 | ||||||||||||||
State of California GO, 5.00% due 9/1/2021 (Various Purposes) | AA-/Aa3 | 5,000,000 | 5,722,950 | ||||||||||||||
State of California GO, 5.00% due 8/1/2026 (Various Purposes) | AA-/Aa3 | 17,850,000 | 22,129,002 | ||||||||||||||
State of California GO, 5.00% due 8/1/2027 (Various Purposes) | AA-/Aa3 | 12,445,000 | 15,321,662 | ||||||||||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2018 | AA-/A2 | 2,000,000 | 2,021,520 | ||||||||||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2019 | AA-/A2 | 2,000,000 | 2,103,160 | ||||||||||||||
Tustin Community Redevelopment Agency, 4.00% due 9/1/2019 pre-refunded 9/1/2018 (Tustin Redevelopment) | NR/NR | 1,010,000 | 1,058,682 | ||||||||||||||
Tustin Community Redevelopment Agency, 4.00% due 9/1/2020 pre-refunded 9/1/2018 (Tustin Redevelopment) | NR/NR | 1,050,000 | 1,100,610 | ||||||||||||||
West Contra Costa USD GO, 0% due 8/1/2022 (Educational Facilities; Insured: AGM) | AA/Aa3 | 4,000,000 | 3,679,240 | ||||||||||||||
West Covina Redevelopment Agency, 6.00% due 9/1/2022 (Fashion Plaza) | NR/NR | 6,135,000 | 6,868,194 | ||||||||||||||
COLORADO — 1.00% | |||||||||||||||||
City & County of Denver, 5.00% due 11/15/2017 (Airport System Capital Improvements; Insured: Natl-Re) | A+/A1 | 1,000,000 | 1,005,240 | ||||||||||||||
City & County of Denver COP, 5.00% due 12/1/2020 (Buell Theatre Property) | AA+/Aa2 | 3,065,000 | 3,411,008 | ||||||||||||||
City & County of Denver COP, 5.00% due 12/1/2021 (Buell Theatre Property) | AA+/Aa2 | 3,825,000 | 4,366,046 | ||||||||||||||
City & County of Denver COP, 5.00% due 12/1/2023 (Buell Theatre Property) | AA+/Aa2 | 1,720,000 | 2,036,704 | ||||||||||||||
City & County of Denver COP, 0.90% due 12/1/2029 put 10/2/2017 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 6,500,000 | 6,500,000 | ||||||||||||||
City & County of Denver COP, 0.90% due 12/1/2029 put 10/2/2017 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 700,000 | 700,000 | ||||||||||||||
City & County of Denver COP, 0.90% due 12/1/2031 put 10/2/2017 (Wellington E. Webb Municipal Office Building; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 3,325,000 | 3,325,000 | ||||||||||||||
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 | 423,308 | ||||||||||||||
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 | 648,054 | ||||||||||||||
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 | 1,138,610 | ||||||||||||||
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 | 1,193,564 | ||||||||||||||
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 | 1,391,444 | ||||||||||||||
City of Longmont, 6.00% due 5/15/2019 | AA+/NR | 3,215,000 | 3,458,118 | ||||||||||||||
Colorado Department of Corrections COP, 5.00% due 3/1/2018 (Colorado Penitentiary II) (ETM) | AA-/Aa2 | 1,590,000 | 1,617,348 | ||||||||||||||
Colorado Educational & Cultural Facilities Authority, 5.00% due 6/1/2018 (National Conference of State Legislatures) | A/A3 | 835,000 | 856,234 | ||||||||||||||
Colorado Educational & Cultural Facilities Authority, 5.00% due 6/1/2020 (National Conference of State Legislatures) | A/A3 | 1,805,000 | 1,943,119 | ||||||||||||||
Colorado Educational & Cultural Facilities Authority, 5.00% due 6/1/2021 (National Conference of State Legislatures) | A/A3 | 1,000,000 | 1,098,290 | ||||||||||||||
Colorado HFA, 5.25% due 5/15/2019 (Northern Colorado Medical Center; Insured: AGM) (ETM) | AA/NR | 2,225,000 | 2,376,166 | ||||||||||||||
Colorado HFA, 5.00% due 5/15/2025 (Northern Colorado Medical Center) | A+/NR | 565,000 | 675,452 | ||||||||||||||
Colorado HFA, 5.00% due 5/15/2026 (Northern Colorado Medical Center) | A+/NR | 740,000 | 890,834 | ||||||||||||||
El Paso County COP, 4.00% due 12/1/2021 (Pikes Peak Regional Development Center) | AA/Aa2 | 1,000,000 | 1,097,390 | ||||||||||||||
El Paso County COP, 5.00% due 12/1/2023 (Pikes Peak Regional Development Center) | AA/Aa2 | 1,330,000 | 1,567,312 | ||||||||||||||
El Paso County Falcon School District No. 49 COP, 5.00% due 12/15/2020 | NR/Aa3 | 350,000 | 388,976 | ||||||||||||||
El Paso County Falcon School District No. 49 COP, 5.00% due 12/15/2023 | NR/Aa3 | 945,000 | 1,114,335 | ||||||||||||||
El Paso County Falcon School District No. 49 COP, 5.00% due 12/15/2024 | NR/Aa3 | 655,000 | 781,284 | ||||||||||||||
12 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Park Creek Metropolitan District, 5.00% due 12/1/2017 (Insured: AGM) (ETM) | AA/NR | $ | 1,525,000 | $ | 1,535,843 | ||||||||||||
Park Creek Metropolitan District, 5.50% due 12/1/2018 (Insured: AGM) (ETM) | AA/NR | 1,200,000 | 1,262,244 | ||||||||||||||
Park Creek Metropolitan District, 5.50% due 12/1/2019 (Insured: AGM) (ETM) | AA/NR | 1,000,000 | 1,092,550 | ||||||||||||||
Regents of the University of Colorado COP, 5.00% due 11/1/2017 (UCDHSC Fitzsimons Academic Facilities) | AA-/Aa2 | 850,000 | 853,120 | ||||||||||||||
Regional Transportation District COP, 5.00% due 6/1/2018 (FasTracks Transportation System) | A/Aa3 | 1,750,000 | 1,796,165 | ||||||||||||||
Regional Transportation District COP, 5.00% due 6/1/2019 (FasTracks Transportation System) | A/Aa3 | 4,730,000 | 5,034,186 | ||||||||||||||
Regional Transportation District COP, 5.00% due 6/1/2020 (FasTracks Transportation System) | A/Aa3 | 3,655,000 | 4,016,589 | ||||||||||||||
Regional Transportation District COP, 5.50% due 6/1/2021 pre-refunded 6/1/2020 | NR/NR | 2,165,000 | 2,415,339 | ||||||||||||||
Regional Transportation District COP, 5.50% due 6/1/2021 | A/Aa3 | 205,000 | 228,042 | ||||||||||||||
Regional Transportation District COP, 5.00% due 6/1/2023 (North Metro Rail Line) | A/Aa3 | 4,000,000 | 4,697,640 | ||||||||||||||
Regional Transportation District COP, 5.00% due 6/1/2024 (North Metro Rail Line) | A/Aa3 | 4,000,000 | 4,720,080 | ||||||||||||||
CONNECTICUT — 1.39% | |||||||||||||||||
City of Hartford GO, 5.00% due 10/1/2022 (Various Public Improvements; Insured: AGM) | AA/A2 | 1,765,000 | 1,972,935 | ||||||||||||||
City of Hartford GO, 5.00% due 7/1/2024 (Various Public Improvements; Insured: AGM) | AA/A2 | 800,000 | 906,040 | ||||||||||||||
City of Hartford GO, 5.00% due 7/1/2025 (Various Public Improvements; Insured: AGM) | AA/A2 | 1,020,000 | 1,154,171 | ||||||||||||||
City of West Haven GO, 4.00% due 8/1/2018 (Insured: AGM) | AA/A2 | 2,080,000 | 2,125,698 | ||||||||||||||
Connecticut Housing Finance Authority, 0.91% due 11/15/2036 put 10/2/2017 (Housing Mortgage Financing Program; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AAA/Aaa | 1,755,000 | 1,755,000 | ||||||||||||||
State of Connecticut GO, 1.80% due 9/15/2019 (Various Capital Projects) | A+/A1 | 1,000,000 | 1,001,920 | ||||||||||||||
State of Connecticut GO, 5.00% due 9/1/2023 (Educational Facilities) | A+/A1 | 5,550,000 | 6,415,023 | ||||||||||||||
State of Connecticut GO, 5.00% due 5/15/2024 (Various Capital Projects) | A+/A1 | 20,000,000 | 23,283,800 | ||||||||||||||
State of Connecticut GO, 5.00% due 6/15/2024 (Educational Facilities) | A+/A1 | 19,385,000 | 22,594,574 | ||||||||||||||
State of Connecticut GO, 5.00% due 8/15/2024 (Various Capital Projects) | A+/A1 | 1,845,000 | 2,114,407 | ||||||||||||||
State of Connecticut GO, 5.00% due 5/15/2025 (Various Capital Projects) | A+/A1 | 12,500,000 | 14,655,125 | ||||||||||||||
State of Connecticut GO, 5.00% due 6/15/2025 (Educational Facilities) | A+/A1 | 11,015,000 | 12,920,595 | ||||||||||||||
State of Connecticut GO, 5.00% due 5/15/2026 (Various Capital Projects) | A+/A1 | 7,000,000 | 8,259,230 | ||||||||||||||
State of Connecticut GO Floating Rate Note, 1.65% due 9/15/2018 (Various Capital Projects) | A+/A1 | 725,000 | 726,486 | ||||||||||||||
DELAWARE — 0.03% | |||||||||||||||||
Delaware Transportation Authority, 5.00% due 7/1/2020 (Transportation System) | AA+/Aa2 | 500,000 | 552,630 | ||||||||||||||
Delaware Transportation Authority, 5.00% due 7/1/2022 (Transportation System) | AA+/Aa2 | 1,440,000 | 1,677,686 | ||||||||||||||
DISTRICT OF COLUMBIA — 0.18% | |||||||||||||||||
District of Columbia, 5.00% due 4/1/2018 (National Public Radio) (ETM) | NR/NR | 750,000 | 765,473 | ||||||||||||||
District of Columbia, 5.00% due 4/1/2018 (National Public Radio) | A+/A2 | 995,000 | 1,014,920 | ||||||||||||||
District of Columbia, 5.00% due 4/1/2019 (National Public Radio) | A+/A2 | 805,000 | 850,136 | ||||||||||||||
District of Columbia, 5.00% due 4/1/2020 (National Public Radio) | A+/A2 | 1,890,000 | 2,058,909 | ||||||||||||||
District of Columbia GO, 6.00% due 6/1/2018 (Insured: Natl-Re) | AA/Aa1 | 5,000,000 | 5,167,350 | ||||||||||||||
District of Columbia GO, 5.25% due 6/1/2020 (Insured: Syncora) | AA/Aa1 | 3,005,000 | 3,332,725 | ||||||||||||||
FLORIDA — 6.79% | |||||||||||||||||
Alachua County School Board COP, 5.00% due 7/1/2022 (Educational Facilities) | A+/Aa3 | 1,600,000 | 1,822,144 | ||||||||||||||
Alachua County School Board COP, 5.00% due 7/1/2023 (Educational Facilities) | A+/Aa3 | 2,250,000 | 2,605,950 | ||||||||||||||
Broward County, 4.00% due 10/1/2017 (Airport, Marina & Port Improvements) | A+/A1 | 500,000 | 500,090 | ||||||||||||||
Broward County, 5.00% due 10/1/2017 (Airport, Marina & Port Improvements) | A+/A1 | 1,000,000 | 1,000,230 | ||||||||||||||
Broward County, 5.50% due 9/1/2018 (Port Facilities) | A-/A1 | 3,500,000 | 3,627,470 | ||||||||||||||
Broward County, 4.00% due 10/1/2018 (Airport, Marina & Port Improvements) | A+/A1 | 425,000 | 437,423 | ||||||||||||||
Broward County, 5.00% due 10/1/2018 (Airport, Marina & Port Improvements) | A+/A1 | 500,000 | 519,600 | ||||||||||||||
Broward County, 5.50% due 9/1/2019 (Port Facilities) | A-/A1 | 2,800,000 | 3,005,856 | ||||||||||||||
Broward County, 5.00% due 10/1/2019 (Airport, Marina & Port Improvements) | A+/A1 | 1,000,000 | 1,076,320 | ||||||||||||||
Broward County, 4.00% due 10/1/2020 (Airport, Marina & Port Improvements) | A+/A1 | 1,660,000 | 1,793,979 | ||||||||||||||
Broward County, 5.00% due 10/1/2020 (Airport, Marina & Port Improvements) | A+/A1 | 2,000,000 | 2,220,240 | ||||||||||||||
Broward County School Board COP, 5.00% due 7/1/2021 (Educational Facilities) | A+/Aa3 | 4,000,000 | 4,534,400 | ||||||||||||||
Broward County School Board COP, 5.00% due 7/1/2022 (Educational Facilities) | A+/Aa3 | 4,580,000 | 5,302,816 | ||||||||||||||
Broward County School Board COP, 5.00% due 7/1/2023 (Educational Facilities) | A+/Aa3 | 3,000,000 | 3,545,130 | ||||||||||||||
Broward County School Board COP, 5.00% due 7/1/2023 (Educational Facilities) | A+/Aa3 | 2,000,000 | 2,363,420 | ||||||||||||||
Broward County School Board COP, 5.00% due 7/1/2024 (Educational Facilities) | A+/Aa3 | 2,000,000 | 2,397,620 | ||||||||||||||
Broward County School Board COP, 5.00% due 7/1/2024 (Educational Facilities) | A+/Aa3 | 4,000,000 | 4,795,240 | ||||||||||||||
Broward County School Board COP, 5.00% due 7/1/2025 (Educational Facilities) | A+/Aa3 | 5,000,000 | 6,052,700 | ||||||||||||||
Broward County School Board COP, 5.00% due 7/1/2025 (Educational Facilities) | A+/Aa3 | 7,000,000 | 8,473,780 | ||||||||||||||
City of Fort Myers, 5.00% due 12/1/2018 (Gulf Breeze Loan Program; Insured: Natl-Re) | A+/Aa3 | 2,195,000 | 2,209,399 | ||||||||||||||
City of Fort Myers, 5.00% due 10/1/2023 (Utility Systems Capital Projects) | A+/Aa3 | 3,360,000 | 3,824,621 | ||||||||||||||
City of Gainesville, 0.88% due 10/1/2026 put 10/2/2017 (Utilities System; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA-/Aa3 | 17,510,000 | 17,510,000 | ||||||||||||||
Annual Report | 13
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
City of Gainesville, 0.91% due 10/1/2026 put 10/2/2017 (Utilities System; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA-/Aa3 | $ | 26,225,000 | $ | 26,225,000 | ||||||||||||
City of Jacksonville, 5.00% due 10/1/2017 | AA-/Aa3 | 1,000,000 | 1,000,230 | ||||||||||||||
City of Jacksonville, 5.00% due 10/1/2018 | AA-/Aa3 | 1,050,000 | 1,091,864 | ||||||||||||||
City of Jacksonville, 5.00% due 10/1/2019 | AA-/Aa3 | 500,000 | 538,675 | ||||||||||||||
City of Jacksonville, 5.00% due 10/1/2020 | AA-/Aa3 | 1,000,000 | 1,112,160 | ||||||||||||||
City of Jacksonville, 5.00% due 10/1/2023 | AA-/Aa3 | 1,105,000 | 1,313,038 | ||||||||||||||
City of Lakeland, 5.00% due 10/1/2017 (Energy System; Insured: AGM) | AA/Aa3 | 7,105,000 | 7,106,634 | ||||||||||||||
City of Lakeland, 5.00% due 10/1/2019 (Energy System; Insured: AGM) | AA/Aa3 | 5,000,000 | 5,385,750 | ||||||||||||||
City of Lakeland, 5.00% due 11/15/2019 (Lakeland Regional Health Systems) | NR/A2 | 5,655,000 | 6,066,345 | ||||||||||||||
City of Lakeland, 5.00% due 10/1/2020 (Energy System; Insured: AGM) | AA/Aa3 | 1,695,000 | 1,884,043 | ||||||||||||||
City of Lakeland, 5.00% due 11/15/2025 (Lakeland Regional Health Systems) | NR/A2 | 1,945,000 | 2,317,565 | ||||||||||||||
City of Lakeland, 5.00% due 11/15/2026 (Lakeland Regional Health Systems) | NR/A2 | 1,925,000 | 2,315,775 | ||||||||||||||
City of Miami, 5.00% due 1/1/2018 (Street & Sidewalk Improvement Program; Insured: Natl-Re) | A/A2 | 1,970,000 | 1,988,695 | ||||||||||||||
City of North Miami Beach, 3.00% due 8/1/2018 (North Miami Beach Water Project) | A+/NR | 1,280,000 | 1,300,723 | ||||||||||||||
City of North Miami Beach, 5.00% due 8/1/2019 (North Miami Beach Water Project) | A+/NR | 1,650,000 | 1,761,325 | ||||||||||||||
City of North Miami Beach, 5.00% due 8/1/2020 (North Miami Beach Water Project) | A+/NR | 780,000 | 857,563 | ||||||||||||||
City of North Miami Beach, 5.00% due 8/1/2021 (North Miami Beach Water Project) | A+/NR | 1,000,000 | 1,129,200 | ||||||||||||||
City of Orlando, 5.00% due 11/1/2023 (Senior Tourist Development; Insured: AGM) | AA/NR | 645,000 | 757,004 | ||||||||||||||
City of Orlando, 5.00% due 11/1/2024 (Senior Tourist Development; Insured: AGM) | AA/NR | 1,785,000 | 2,122,062 | ||||||||||||||
| a | City of Orlando, 5.00% due 11/1/2027 (Senior Tourist Development; Insured: AGM) | AA/NR | 1,100,000 | 1,340,185 | |||||||||||||
City of Tampa, 5.00% due 11/15/2017 (BayCare Health System) | NR/Aa2 | 1,215,000 | 1,221,391 | ||||||||||||||
Florida Higher Educational Facilities Financing Authority, 5.25% due 4/1/2018 (Nova Southeastern University) (ETM) | A-/Baa1 | 2,630,000 | 2,687,176 | ||||||||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2019 (University of Tampa) | A-/NR | 1,225,000 | 1,291,983 | ||||||||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2019 (Nova Southeastern University) | A-/Baa1 | 1,035,000 | 1,089,596 | ||||||||||||||
Florida Higher Educational Facilities Financing Authority, 5.50% due 4/1/2019 (Nova Southeastern University) (ETM) | A-/Baa1 | 1,705,000 | 1,818,962 | ||||||||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2020 (Nova Southeastern University) | A-/Baa1 | 1,190,000 | 1,289,282 | ||||||||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2022 (University of Tampa) | A-/NR | 620,000 | 707,234 | ||||||||||||||
Florida State Board of Governors, 4.00% due 7/1/2020 (University System Capital Improvements) | AA/Aa2 | 4,055,000 | 4,368,654 | ||||||||||||||
Florida State Board of Governors, 4.00% due 7/1/2021 (University System Capital Improvements) | AA/Aa2 | 4,215,000 | 4,634,013 | ||||||||||||||
Florida State Board of Governors, 4.00% due 7/1/2022 (University System Capital Improvements) | AA/Aa2 | 4,385,000 | 4,894,888 | ||||||||||||||
Highlands County HFA, 5.00% due 11/15/2017 (Adventist Health System Sunbelt Group) | AA/Aa2 | 3,200,000 | 3,216,896 | ||||||||||||||
Highlands County HFA, 5.00% due 11/15/2019 (Adventist Health System Sunbelt Group) | AA/Aa2 | 3,000,000 | 3,238,590 | ||||||||||||||
Hillsborough County, 5.00% due 11/1/2018 (Court Facilities) | AA/A1 | 4,210,000 | 4,390,609 | ||||||||||||||
Hillsborough County, 5.00% due 11/1/2019 (Court Facilities) | AA/A1 | 4,420,000 | 4,772,716 | ||||||||||||||
Hillsborough County, 5.00% due 11/1/2020 (Court Facilities) | AA/A1 | 4,645,000 | 5,168,584 | ||||||||||||||
Hillsborough County, 5.00% due 11/1/2021 (Court Facilities) | AA/A1 | 4,880,000 | 5,572,179 | ||||||||||||||
Hillsborough County, 5.00% due 11/1/2021 (Jail and Storm Water Projects) | AA/A1 | 2,300,000 | 2,626,232 | ||||||||||||||
Hillsborough County, 5.00% due 11/1/2022 (Jail and Storm Water Projects) | AA/A1 | 3,005,000 | 3,493,553 | ||||||||||||||
Hillsborough County IDA, 5.65% due 5/15/2018 (Tampa Electric Co.) | BBB+/A3 | 3,200,000 | 3,286,592 | ||||||||||||||
JEA, 5.00% due 10/1/2018 (Water and Sewer System) | AAA/Aa2 | 1,500,000 | 1,560,270 | ||||||||||||||
JEA, 5.00% due 10/1/2023 (Electric System) | A+/Aa3 | 1,395,000 | 1,652,391 | ||||||||||||||
JEA, 5.00% due 10/1/2024 (Electric System) | A+/Aa3 | 1,200,000 | 1,415,028 | ||||||||||||||
JEA, 0.90% due 10/1/2038 put 10/2/2017 (Water and Sewer System; SPA: U.S. Bank, N.A.) (daily demand notes) | AA+/Aa2 | 16,755,000 | 16,755,000 | ||||||||||||||
Lake County School Board COP, 5.25% due 6/1/2018 (Insured: AMBAC) | A/NR | 1,475,000 | 1,515,268 | ||||||||||||||
Lee County School Board COP, 5.00% due 8/1/2023 (School Facilities Improvements) | AA-/Aa3 | 1,000,000 | 1,178,410 | ||||||||||||||
Lee County School Board COP, 5.00% due 8/1/2024 (School Facilities Improvements) | AA-/Aa3 | 2,000,000 | 2,388,480 | ||||||||||||||
Manatee County, 4.00% due 10/1/2017 (Public Utilities Improvements) | NR/Aa2 | 1,000,000 | 1,000,180 | ||||||||||||||
Manatee County, 5.00% due 10/1/2018 (County Capital Projects) | NR/Aa2 | 2,400,000 | 2,494,440 | ||||||||||||||
Manatee County, 5.00% due 10/1/2021 (County Capital Projects) | NR/Aa2 | 2,775,000 | 3,166,303 | ||||||||||||||
Manatee County, 5.00% due 10/1/2024 (Public Utilities Improvements) | NR/Aa2 | 500,000 | 602,580 | ||||||||||||||
Manatee County, 5.00% due 10/1/2025 (Public Utilities Improvements) | NR/Aa2 | 470,000 | 565,363 | ||||||||||||||
Manatee County School District, 5.00% due 10/1/2025 (School Facilities Improvements; Insured: AGM) | AA/NR | 900,000 | 1,087,353 | ||||||||||||||
Manatee County School District, 5.00% due 10/1/2027 (School Facilities Improvements; Insured: AGM) | AA/NR | 2,000,000 | 2,438,180 | ||||||||||||||
Marion County School Board COP, 5.00% due 6/1/2018 (Insured: BAM) | AA/A2 | 2,500,000 | 2,563,025 | ||||||||||||||
Marion County School Board COP, 5.00% due 6/1/2019 (Insured: BAM) | AA/A2 | 2,635,000 | 2,793,759 | ||||||||||||||
Marion County School Board COP, 5.00% due 6/1/2020 (Insured: BAM) | AA/A2 | 2,760,000 | 3,007,738 | ||||||||||||||
| a | Marion County School Board COP, 5.00% due 6/1/2021 (Insured: BAM) | AA/A2 | 2,505,000 | 2,799,914 | |||||||||||||
Marion County School Board COP, 5.00% due 6/1/2024 (Insured: BAM) | AA/A2 | 3,065,000 | 3,590,280 | ||||||||||||||
Miami Beach GO, 4.00% due 9/1/2019 | AA+/Aa2 | 2,745,000 | 2,886,834 | ||||||||||||||
Miami Beach GO, 5.00% due 9/1/2020 | AA+/Aa2 | 3,720,000 | 4,103,569 | ||||||||||||||
Miami Beach GO, 4.00% due 9/1/2021 | AA+/Aa2 | 1,015,000 | 1,111,953 | ||||||||||||||
Miami Beach GO, 5.00% due 9/1/2022 | AA+/Aa2 | 1,000,000 | 1,129,150 | ||||||||||||||
14 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Miami-Dade County, 0% due 10/1/2017 (Professional Sports Franchise Facilities; Insured: AGM) | AA/A1 | $ | 2,435,000 | $ | 2,434,854 | ||||||||||||
Miami-Dade County, 0% due 10/1/2018 (Professional Sports Franchise Facilities; Insured: AGM) | AA/A1 | 5,385,000 | 5,304,925 | ||||||||||||||
Miami-Dade County, 0% due 10/1/2019 (Professional Sports Franchise Facilities; Insured: AGM) | AA/A1 | 2,170,000 | 2,088,191 | ||||||||||||||
Miami-Dade County, 5.00% due 7/1/2023 (Transit System) | AA/A1 | 1,000,000 | 1,170,630 | ||||||||||||||
Miami-Dade County, 5.00% due 7/1/2024 (Transit System) | AA/A1 | 5,565,000 | 6,599,533 | ||||||||||||||
Miami-Dade County, 5.00% due 7/1/2025 (Transit System) | AA/A1 | 3,650,000 | 4,377,883 | ||||||||||||||
Miami-Dade County, 5.00% due 10/1/2025 (Miami International Airport) | A/A2 | 2,500,000 | 2,951,275 | ||||||||||||||
Miami-Dade County Expressway Authority, 5.00% due 7/1/2019 (Toll System; Insured: AGM) | AA/A2 | 7,530,000 | 8,015,986 | ||||||||||||||
Miami-Dade County Expressway Authority, 5.00% due 7/1/2024 (Toll System) | A/A2 | 2,000,000 | 2,371,800 | ||||||||||||||
Miami-Dade County Expressway Authority, 5.00% due 7/1/2025 (Toll System) | A/A2 | 2,000,000 | 2,353,860 | ||||||||||||||
Miami-Dade County GO, 5.25% due 7/1/2018 (Building Better Communities) | AA/Aa2 | 5,040,000 | 5,203,094 | ||||||||||||||
Miami-Dade County School Board COP, 5.00% due 5/1/2022 (Educational Facilities Improvements) | A+/A1 | 3,405,000 | 3,914,763 | ||||||||||||||
| a | Miami-Dade County School Board COP, 5.00% due 5/1/2023 (Educational Facilities Improvements) | A+/A1 | 4,130,000 | 4,820,164 | |||||||||||||
Miami-Dade County School Board COP, 5.00% due 5/1/2024 (Educational Facilities Improvements) | A+/A1 | 8,000,000 | 9,465,680 | ||||||||||||||
Miami-Dade County School Board COP, 5.00% due 5/1/2025 (Educational Facilities Improvements) | A+/A1 | 15,000,000 | 17,959,650 | ||||||||||||||
Miami-Dade County School Board COP, 5.00% due 5/1/2031 put 5/1/2024 (Educational Facilities Improvements) | A+/A1 | 2,425,000 | 2,836,644 | ||||||||||||||
Orange County HFA, 5.00% due 10/1/2017 (Orlando Health, Inc.) | A/A2 | 1,980,000 | 1,980,455 | ||||||||||||||
Orange County HFA, 5.25% due 10/1/2019 (Orlando Health, Inc.) | A/A2 | 6,050,000 | 6,529,704 | ||||||||||||||
Orange County HFA, 6.25% due 10/1/2021 (Orlando Health, Inc.; Insured: Natl-Re) | A/A2 | 1,540,000 | 1,675,043 | ||||||||||||||
Orange County HFA, 5.375% due 10/1/2023 (Orlando Health, Inc.) | A/A2 | 4,150,000 | 4,484,573 | ||||||||||||||
Orange County School Board COP, 5.00% due 8/1/2019 (Educational Facilities) | NR/Aa2 | 1,000,000 | 1,070,910 | ||||||||||||||
Orange County School Board COP, 5.00% due 8/1/2020 (Educational Facilities) | NR/Aa2 | 1,695,000 | 1,874,382 | ||||||||||||||
Orange County School Board COP, 5.00% due 8/1/2021 (Educational Facilities) | NR/Aa2 | 2,100,000 | 2,386,461 | ||||||||||||||
Orange County School Board COP, 5.00% due 8/1/2022 (Educational Facilities) | NR/Aa2 | 1,825,000 | 2,114,865 | ||||||||||||||
Orange County School Board COP, 5.00% due 8/1/2023 (Educational Facilities) | NR/Aa2 | 1,540,000 | 1,817,570 | ||||||||||||||
Orange County School Board COP, 5.00% due 8/1/2024 (Educational Facilities) | NR/Aa2 | 1,445,000 | 1,730,792 | ||||||||||||||
Orange County School Board COP, 5.00% due 8/1/2025 (Educational Facilities) | NR/Aa2 | 1,190,000 | 1,440,364 | ||||||||||||||
Palm Beach County HFA, 5.00% due 12/1/2020 (Boca Raton Regional Hospital) | BBB+/NR | 600,000 | 658,278 | ||||||||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2018 (Educational Facilities) | NR/Aa3 | 800,000 | 826,816 | ||||||||||||||
Palm Beach County School Board COP, 4.00% due 8/1/2019 (Educational Facilities) | NR/Aa3 | 940,000 | 990,243 | ||||||||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2020 (Educational Facilities) | NR/Aa3 | 1,090,000 | 1,206,641 | ||||||||||||||
Palm Beach County School Board COP, 4.00% due 8/1/2021 (Educational Facilities) | NR/Aa3 | 3,835,000 | 4,215,125 | ||||||||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2022 (Educational Facilities) | NR/Aa3 | 1,660,000 | 1,929,551 | ||||||||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2022 (Educational Facilities) | NR/Aa3 | 1,000,000 | 1,162,380 | ||||||||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2023 (Educational Facilities) | NR/Aa3 | 3,500,000 | 4,143,650 | ||||||||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2023 (Educational Facilities) | NR/Aa3 | 1,000,000 | 1,183,900 | ||||||||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2024 (Educational Facilities) | NR/Aa3 | 3,595,000 | 4,321,370 | ||||||||||||||
Palm Beach County School Board COP, 5.00% due 8/1/2024 (Educational Facilities) | NR/Aa3 | 1,275,000 | 1,532,614 | ||||||||||||||
Polk County, 4.00% due 10/1/2020 (Water and Wastewater Utility Systems; Insured: AGM) | AA/Aa3 | 3,100,000 | 3,340,188 | ||||||||||||||
Polk County, 3.00% due 10/1/2021 (Water and Wastewater Utility Systems; Insured: AGM) | AA/Aa3 | 3,125,000 | 3,300,937 | ||||||||||||||
Polk County, 5.00% due 10/1/2023 (Water and Wastewater Utility Systems) | AA/Aa3 | 1,420,000 | 1,635,840 | ||||||||||||||
Putnam County Development Authority, 5.35% due 3/15/2042 put 5/1/2018 (Seminole Project; Insured: AMBAC) | A-/A3 | 10,375,000 | 10,623,896 | ||||||||||||||
Putnam County Development Authority, 5.35% due 3/15/2042 put 5/1/2018 (Seminole Project; Insured: AMBAC) | A-/A3 | 4,225,000 | 4,326,358 | ||||||||||||||
Reedy Creek Improvement District, 5.00% due 10/1/2017 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 400,000 | 400,092 | ||||||||||||||
Reedy Creek Improvement District, 5.00% due 10/1/2018 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 755,000 | 784,634 | ||||||||||||||
Reedy Creek Improvement District, 5.00% due 10/1/2021 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 1,200,000 | 1,360,428 | ||||||||||||||
Reedy Creek Improvement District, 5.00% due 10/1/2022 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 625,000 | 721,781 | ||||||||||||||
Reedy Creek Improvement District, 5.00% due 6/1/2023 (Buena Vista Drive Corridor Improvements) | AA-/Aa3 | 1,940,000 | 2,288,696 | ||||||||||||||
Reedy Creek Improvement District, 5.00% due 10/1/2023 (Walt Disney World Resort Complex Utility Systems) | A/A1 | 750,000 | 881,835 | ||||||||||||||
Reedy Creek Improvement District GO, 5.00% due 6/1/2021 (Walt Disney World Resort Complex Utility Systems) | AA-/Aa3 | 500,000 | 565,865 | ||||||||||||||
Reedy Creek Improvement District GO, 5.00% due 6/1/2023 (Walt Disney World Resort Complex Utility Systems) | AA-/Aa3 | 860,000 | 1,014,576 | ||||||||||||||
Reedy Creek Improvement District GO, 5.00% due 6/1/2024 (Walt Disney World Resort Complex Utility Systems) | AA-/Aa3 | 850,000 | 1,020,714 | ||||||||||||||
Reedy Creek Improvement District GO, 5.00% due 6/1/2025 (Walt Disney World Resort Complex Utility Systems) | AA-/Aa3 | 2,000,000 | 2,427,280 | ||||||||||||||
South Florida Water Management District COP, 5.00% due 10/1/2017 (Everglades Restoration Plan) | AA/Aa3 | 2,750,000 | 2,750,632 | ||||||||||||||
South Florida Water Management District COP, 5.00% due 10/1/2018 (Everglades Restoration Plan) | AA/Aa3 | 2,500,000 | 2,598,125 | ||||||||||||||
South Florida Water Management District COP, 5.00% due 10/1/2019 (Everglades Restoration Plan) | AA/Aa3 | 1,500,000 | 1,612,155 | ||||||||||||||
South Florida Water Management District COP, 5.00% due 10/1/2020 (Everglades Restoration Plan) | AA/Aa3 | 1,780,000 | 1,971,831 | ||||||||||||||
South Florida Water Management District COP, 5.00% due 10/1/2021 (Everglades Restoration Plan) | AA/Aa3 | 1,750,000 | 1,990,520 | ||||||||||||||
South Florida Water Management District COP, 5.00% due 10/1/2022 (Everglades Restoration Plan) | AA/Aa3 | 2,000,000 | 2,318,280 | ||||||||||||||
South Lake County Hospital District, 5.00% due 10/1/2025 | NR/A2 | 4,140,000 | 4,489,126 | ||||||||||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2021 (Miami-Dade County Program; Insured: AGM) | AA/Aa3 | 5,000,000 | 5,673,550 | ||||||||||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2021 (Miami-Dade County Program) | AA-/Aa3 | 1,450,000 | 1,644,750 | ||||||||||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2022 (Miami-Dade County Program) | AA-/Aa3 | 2,000,000 | 2,312,720 | ||||||||||||||
Annual Report | 15
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2023 (Miami-Dade County Program) | AA-/Aa3 | $ | 2,100,000 | $ | 2,473,275 | ||||||||||||
Sunshine State Governmental Financing Commission, 5.00% due 9/1/2024 (Miami-Dade County Program) | AA-/Aa3 | 1,725,000 | 2,020,665 | ||||||||||||||
Tampa Bay Regional Water Supply Authority, 5.00% due 10/1/2017 | AA+/Aa1 | 5,615,000 | 5,616,291 | ||||||||||||||
Tampa Bay Regional Water Supply Authority, 5.00% due 10/1/2018 | AA+/Aa1 | 2,890,000 | 3,006,120 | ||||||||||||||
Tampa Bay Regional Water Supply Authority, 5.00% due 10/1/2019 | AA+/Aa1 | 3,000,000 | 3,233,310 | ||||||||||||||
University of North Florida Foundation, Inc., 0.92% due 5/1/2028 put 10/2/2017 (Parking Facility; LOC: Wachovia Bank, N.A.) (daily demand notes) | AA-/NR | 500,000 | 500,000 | ||||||||||||||
Volusia County Educational Facilities Authority, 4.00% due 10/15/2017 (Embry-Riddle Aeronautical University, Inc.; Insured: AGM) (ETM) | AA/A2 | 1,030,000 | 1,031,452 | ||||||||||||||
Volusia County Educational Facilities Authority, 5.00% due 10/15/2018 (Embry-Riddle Aeronautical University, Inc.; Insured: AGM) (ETM) | AA/A2 | 2,075,000 | 2,162,316 | ||||||||||||||
Volusia County Educational Facilities Authority, 5.00% due 10/15/2019 (Embry-Riddle Aeronautical University, Inc.; Insured: AGM) (ETM) | AA/A2 | 2,350,000 | 2,538,799 | ||||||||||||||
Volusia County Educational Facilities Authority, 5.00% due 10/15/2023 (Embry-Riddle Aeronautical University, Inc.) | NR/A3 | 700,000 | 823,592 | ||||||||||||||
Volusia County Educational Facilities Authority, 5.00% due 10/15/2024 (Embry-Riddle Aeronautical University, Inc.) | NR/A3 | 650,000 | 774,781 | ||||||||||||||
Volusia County Educational Facilities Authority, 5.00% due 10/15/2025 (Embry-Riddle Aeronautical University, Inc.) | NR/A3 | 400,000 | 475,264 | ||||||||||||||
Volusia County School Board COP, 5.00% due 8/1/2024 (University High School, River Springs Middle School) | NR/Aa3 | 1,000,000 | 1,193,540 | ||||||||||||||
GEORGIA — 1.41% | |||||||||||||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2019 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 400,000 | 426,384 | ||||||||||||||
Athens-Clarke County Unified Government Development Authority, 4.00% due 6/15/2020 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 395,000 | 424,459 | ||||||||||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2022 (UGAREF Central Precinct, LLC) | NR/Aa2 | 800,000 | 923,016 | ||||||||||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2023 (UGAREF Central Precinct, LLC) | NR/Aa2 | 470,000 | 552,259 | ||||||||||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2024 (UGAREF Central Precinct, LLC) | NR/Aa2 | 520,000 | 619,887 | ||||||||||||||
Athens-Clarke County Unified Government Development Authority, 0.90% due 7/1/2035 put 10/2/2017 (University of Georgia Athletic Association; LOC: Wells Fargo Bank, N.A.) (daily demand notes) | NR/Aa1 | 2,550,000 | 2,550,000 | ||||||||||||||
City of Atlanta, 5.00% due 11/1/2017 (Water & Wastewater System; Insured: AGM) | AA/Aa2 | 4,745,000 | 4,762,794 | ||||||||||||||
City of Atlanta, 5.00% due 1/1/2018 (Hartsfield-Jackson Atlanta International Airport) | NR/Aa3 | 2,100,000 | 2,121,672 | ||||||||||||||
City of Atlanta, 5.00% due 1/1/2019 (Hartsfield-Jackson Atlanta International Airport) | NR/Aa3 | 3,145,000 | 3,301,527 | ||||||||||||||
| a | City of Atlanta, 6.00% due 11/1/2019 (Water & Wastewater System) | AA-/Aa2 | 5,650,000 | 6,220,085 | |||||||||||||
City of Atlanta, 5.00% due 1/1/2020 (Hartsfield-Jackson Atlanta International Airport) | NR/Aa3 | 6,000,000 | 6,512,760 | ||||||||||||||
City of Atlanta, 5.00% due 1/1/2020 (BeltLine Project) | NR/A2 | 410,000 | 442,460 | ||||||||||||||
City of Atlanta, 5.25% due 1/1/2020 (Hartsfield-Jackson Atlanta International Airport) | NR/Aa3 | 5,000,000 | 5,459,750 | ||||||||||||||
City of Atlanta, 5.00% due 1/1/2021 (Hartsfield-Jackson Atlanta International Airport) | NR/Aa3 | 7,000,000 | 7,585,130 | ||||||||||||||
City of Atlanta, 5.00% due 1/1/2021 (BeltLine Project) | NR/A2 | 175,000 | 189,263 | ||||||||||||||
City of Atlanta, 5.50% due 1/1/2021 (Hartsfield-Jackson Atlanta International Airport) | NR/Aa3 | 3,525,000 | 4,005,034 | ||||||||||||||
City of Atlanta, 5.00% due 11/1/2021 (Water & Wastewater System) | AA-/Aa2 | 2,500,000 | 2,867,125 | ||||||||||||||
City of Atlanta, 5.00% due 11/1/2022 (Water & Wastewater System) | AA-/Aa2 | 1,000,000 | 1,171,910 | ||||||||||||||
City of Atlanta, 5.00% due 1/1/2023 (Airport Passenger Facility) | AA-/Aa3 | 1,000,000 | 1,163,570 | ||||||||||||||
City of Atlanta, 5.00% due 11/1/2023 (Water & Wastewater System) | AA-/Aa2 | 1,130,000 | 1,349,005 | ||||||||||||||
City of Atlanta, 5.00% due 1/1/2024 (Airport Passenger Facility) | AA-/Aa3 | 1,350,000 | 1,609,753 | ||||||||||||||
City of Atlanta, 5.00% due 11/1/2024 (Water & Wastewater System) | AA-/Aa2 | 1,000,000 | 1,213,150 | ||||||||||||||
City of Atlanta, 5.00% due 1/1/2025 (Airport Passenger Facility) | AA-/Aa3 | 1,645,000 | 1,964,739 | ||||||||||||||
City of Atlanta, 5.00% due 1/1/2025 (Airport Passenger Facility) | AA-/Aa3 | 2,500,000 | 2,997,425 | ||||||||||||||
City of Atlanta, 5.00% due 11/1/2025 (Water & Wastewater System) | AA-/Aa2 | 1,000,000 | 1,222,170 | ||||||||||||||
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 | 6,053,280 | ||||||||||||||
Fulton County Development Authority, 5.00% due 10/1/2022 (Georgia Tech Athletic Association) | NR/A2 | 4,550,000 | 5,236,322 | ||||||||||||||
Fulton County Facilities Corp. COP, 5.00% due 11/1/2017 (Public Purpose Project) | AA/Aa2 | 8,400,000 | 8,430,744 | ||||||||||||||
Fulton County Facilities Corp. COP, 5.00% due 11/1/2019 (Public Purpose Project) | AA/Aa2 | 6,600,000 | 7,106,286 | ||||||||||||||
Hospital Authority of Gwinnett County, 5.00% due 7/1/2023 (Gwinnett Hospital System, Inc.; Insured: AGM) | NR/A2 | 5,000,000 | 5,313,700 | ||||||||||||||
LaGrange-Troup County Hospital Authority, 5.00% due 7/1/2018 (West Georgia Health Foundation, Inc.) (ETM) | A+/Aa2 | 550,000 | 566,934 | ||||||||||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2018 (Georgia Gas) | BBB+/Baa1 | 5,000,000 | 5,086,850 | ||||||||||||||
Municipal Electric Authority of Georgia, 6.60% due 1/1/2018 (Insured: Natl-Re) | A/A1 | 120,000 | 121,673 | ||||||||||||||
Valdosta and Lowndes County Hospital Authority, 5.00% due 10/1/2022 (South Medical Center) | AA-/Aa2 | 1,500,000 | 1,708,065 | ||||||||||||||
GUAM — 0.57% | |||||||||||||||||
Government of Guam, 5.25% due 12/1/2017 (Layon Solid Waste Disposal Facility) (ETM) | BBB+/NR | 2,000,000 | 2,015,360 | ||||||||||||||
Government of Guam, 5.50% due 12/1/2018 (Layon Solid Waste Disposal Facility) (ETM) | BBB+/NR | 3,000,000 | 3,158,820 | ||||||||||||||
Government of Guam, 5.00% due 1/1/2019 (Economic Development) | A/NR | 680,000 | 705,840 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2019 (Various Capital Projects) | A/NR | 1,000,000 | 1,062,760 | ||||||||||||||
Government of Guam, 5.50% due 12/1/2019 (Layon Solid Waste Disposal Facility) (ETM) | BBB+/NR | 2,000,000 | 2,188,260 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2020 (Various Capital Projects) | A/NR | 1,500,000 | 1,628,970 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2021 (Various Capital Projects) | A/NR | 2,210,000 | 2,440,437 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2022 (Various Capital Projects) | A/NR | 2,960,000 | 3,311,559 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2023 (Various Capital Projects) | A/NR | 6,280,000 | 7,084,908 | ||||||||||||||
16 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Government of Guam, 5.00% due 11/15/2024 (Various Capital Projects) | A/NR | $ | 4,500,000 | $ | 5,103,675 | ||||||||||||
Guam Government Waterworks Authority, 5.25% due 7/1/2020 (Water & Wastewater System Improvements) | A-/Baa2 | 300,000 | 324,996 | ||||||||||||||
Guam Government Waterworks Authority, 5.25% due 7/1/2022 (Water & Wastewater System Improvements) | A-/Baa2 | 1,050,000 | 1,186,227 | ||||||||||||||
Guam Government Waterworks Authority, 5.25% due 7/1/2023 (Water & Wastewater System Improvements) | A-/Baa2 | 645,000 | 739,892 | ||||||||||||||
Guam Power Authority, 5.00% due 10/1/2019 (Electric Power System; Insured: AGM) | AA/A2 | 1,000,000 | 1,068,890 | ||||||||||||||
Guam Power Authority, 5.00% due 10/1/2020 (Electric Power System; Insured: AGM) | AA/A2 | 1,500,000 | 1,646,055 | ||||||||||||||
Guam Power Authority, 5.00% due 10/1/2022 (Electric Power System; Insured: AGM) | AA/A2 | 6,340,000 | 7,247,381 | ||||||||||||||
HAWAII — 1.65% | |||||||||||||||||
City and County of Honolulu GO, 5.00% due 11/1/2019 (Capital Improvements) | NR/Aa1 | 3,620,000 | 3,911,482 | ||||||||||||||
City and County of Honolulu GO, 5.00% due 11/1/2020 (Capital Improvements) | NR/Aa1 | 8,265,000 | 9,221,508 | ||||||||||||||
City and County of Honolulu GO, 5.00% due 11/1/2021 (Capital Improvements) | NR/Aa1 | 2,770,000 | 3,176,774 | ||||||||||||||
City and County of Honolulu GO, 5.00% due 11/1/2022 (Capital Improvements) (ETM) | NR/Aa1 | 1,750,000 | 2,055,393 | ||||||||||||||
City and County of Honolulu GO, 5.00% due 11/1/2022 (Capital Improvements) | NR/Aa1 | 6,695,000 | 7,845,937 | ||||||||||||||
City and County of Honolulu GO Floating Rate Note, 1.20% due 9/1/2025 (Rail Transit Project) | NR/Aa1 | 5,250,000 | 5,251,575 | ||||||||||||||
City and County of Honolulu GO Floating Rate Note, 1.20% due 9/1/2026 (Rail Transit Project) | NR/Aa1 | 7,000,000 | 7,002,100 | ||||||||||||||
City and County of Honolulu GO Floating Rate Note, 1.20% due 9/1/2028 (Rail Transit Project) | NR/Aa1 | 4,825,000 | 4,826,447 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2021 (Capital Improvements) | AA-/Aa2 | 1,500,000 | 1,712,760 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2021 (Capital Improvements) | AA-/Aa2 | 2,165,000 | 2,472,084 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2022 (Capital Improvements) | AA-/Aa2 | 1,250,000 | 1,459,413 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2022 (Capital Improvements) | AA-/Aa2 | 1,000,000 | 1,167,530 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2023 (Capital Improvements) | AA-/Aa2 | 800,000 | 951,928 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2023 (Capital Improvements) | AA-/Aa2 | 1,500,000 | 1,784,865 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2023 (Capital Improvements) | AA-/Aa2 | 1,000,000 | 1,189,910 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2023 (Capital Improvements) | AA-/Aa2 | 1,000,000 | 1,189,910 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2023 (Capital Improvements) | AA-/Aa2 | 1,000,000 | 1,189,910 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2024 (Capital Improvements) | AA-/Aa2 | 2,000,000 | 2,420,500 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2024 (Capital Improvements) | AA-/Aa2 | 1,430,000 | 1,730,658 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2024 (Capital Improvements) | AA-/Aa2 | 1,515,000 | 1,833,529 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2025 (Capital Improvements) | AA-/Aa2 | 2,000,000 | 2,447,920 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2025 (Capital Improvements) | AA-/Aa2 | 1,255,000 | 1,536,070 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2026 (Capital Improvements) | AA-/Aa2 | 500,000 | 612,250 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2026 (Capital Improvements) | AA-/Aa2 | 1,500,000 | 1,836,750 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2026 (Capital Improvements) | AA-/Aa2 | 2,085,000 | 2,553,082 | ||||||||||||||
State of Hawaii GO, 5.00% due 11/1/2017 (Hawaiian Home Lands Settlement) | AA+/Aa1 | 12,000,000 | 12,045,120 | ||||||||||||||
State of Hawaii GO, 5.00% due 11/1/2018 (Hawaiian Home Lands Settlement) | AA+/Aa1 | 20,000,000 | 20,870,000 | ||||||||||||||
State of Hawaii GO, 5.00% due 12/1/2019 (Hawaiian Home Lands Settlement) (ETM) | NR/NR | 1,545,000 | 1,675,645 | ||||||||||||||
State of Hawaii GO, 5.00% due 12/1/2019 (Hawaiian Home Lands Settlement) (ETM) | NR/NR | 60,000 | 65,060 | ||||||||||||||
State of Hawaii GO, 5.00% due 12/1/2019 (Hawaiian Home Lands Settlement) | AA+/Aa1 | 1,395,000 | 1,511,748 | ||||||||||||||
State of Hawaii GO, 5.00% due 12/1/2020 (Hawaiian Home Lands Settlement) | AA+/Aa1 | 2,500,000 | 2,797,125 | ||||||||||||||
State of Hawaii GO, 5.00% due 12/1/2021 (Hawaiian Home Lands Settlement) | AA+/Aa1 | 3,000,000 | 3,447,960 | ||||||||||||||
State of Hawaii GO, 5.00% due 12/1/2022 pre-refunded 12/1/2021 (Hawaiian Home Lands Settlement) | NR/NR | 3,060,000 | 3,524,569 | ||||||||||||||
State of Hawaii GO, 5.00% due 12/1/2022 pre-refunded 12/1/2021 (Hawaiian Home Lands Settlement) | AA+/Aa1 | 940,000 | 1,082,711 | ||||||||||||||
IDAHO — 0.71% | |||||||||||||||||
Idaho HFA, 5.00% due 12/1/2022 (Trinity Health Credit Group) | AA-/Aa3 | 1,000,000 | 1,168,190 | ||||||||||||||
Idaho HFA, 5.00% due 12/1/2023 (Trinity Health Credit Group) | AA-/Aa3 | 2,200,000 | 2,619,364 | ||||||||||||||
Idaho HFA, 5.00% due 12/1/2024 (Trinity Health Credit Group) | AA-/Aa3 | 1,000,000 | 1,206,280 | ||||||||||||||
Regents of the University of Idaho, 5.25% due 4/1/2041 put 4/1/2021 | A+/Aa3 | 12,890,000 | 14,419,914 | ||||||||||||||
State of Idaho GO, 4.00% due 6/29/2018 (Cash Flow Management) | SP-1+/Mig1 | 30,760,000 | 31,454,253 | ||||||||||||||
ILLINOIS — 6.63% | |||||||||||||||||
Board of Education of the City of Chicago GO, 0.00% due 12/1/2020 (Educational Facilities; Insured: BHAC) | AA+/Aa1 | 12,000,000 | 11,107,320 | ||||||||||||||
Board of Trustees of Southern Illinois University, 5.25% due 4/1/2020 (Housing & Auxiliary Facilities; Insured: Natl-re) | A/A3 | 1,000,000 | 1,083,770 | ||||||||||||||
Chicago Midway International Airport, 5.00% due 1/1/2022 | A/A3 | 800,000 | 914,288 | ||||||||||||||
Chicago Midway International Airport, 5.00% due 1/1/2023 | A/A3 | 1,900,000 | 2,219,124 | ||||||||||||||
Chicago Midway International Airport, 5.00% due 1/1/2024 | A/A3 | 1,000,000 | 1,186,540 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2018 (2016 Airport Projects) | A/NR | 6,750,000 | 6,819,862 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2019 (2016 Airport Projects) | A/NR | 8,500,000 | 8,916,500 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2019 (2015 Airport Projects) | A/NR | 3,000,000 | 3,147,000 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2020 (2015 Airport Projects) | A/NR | 2,350,000 | 2,549,726 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2021 (2015 Airport Projects) | A/NR | 3,000,000 | 3,351,630 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2022 pre-refunded 1/1/2021 (Capital Development Programs) | A/A2 | 5,835,000 | 6,536,775 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2027 (2016 Airport Projects) | A/NR | 1,750,000 | 2,099,003 | ||||||||||||||
Chicago Park District GO, 4.00% due 1/1/2018 (Capital Improvement Plan) | AA+/NR | 1,250,000 | 1,258,038 | ||||||||||||||
Annual Report | 17
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Chicago Park District GO, 4.00% due 1/1/2018 (Capital Improvement Plan) | AA+/NR | $ | 1,420,000 | $ | 1,429,131 | ||||||||||||
Chicago Park District GO, 4.00% due 1/1/2018 (Capital Improvement Plan) | AA+/NR | 945,000 | 951,076 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2018 (Capital Improvement Plan) | AA+/Ba1 | 1,150,000 | 1,160,316 | ||||||||||||||
Chicago Park District GO, 4.00% due 1/1/2019 (Capital Improvement Plan) | AA+/NR | 1,745,000 | 1,796,827 | ||||||||||||||
Chicago Park District GO, 4.00% due 1/1/2019 (Capital Improvement Plan) | AA+/NR | 820,000 | 844,354 | ||||||||||||||
Chicago Park District GO, 4.00% due 1/1/2020 (Capital Improvement Plan) | AA+/NR | 2,730,000 | 2,866,445 | ||||||||||||||
Chicago Park District GO, 4.00% due 1/1/2020 (Capital Improvement Plan) | AA+/NR | 815,000 | 855,734 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2020 (Capital Improvement Plan) | AA+/Ba1 | 530,000 | 568,160 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2021 (Capital Improvement Plan) | AA+/NR | 2,840,000 | 3,123,205 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2022 (Capital Improvement Plan) | AA+/NR | 1,485,000 | 1,667,120 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2022 (Capital Improvement Plan) | AA+/NR | 1,940,000 | 2,177,922 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2023 (Capital Improvement Plan) | AA+/NR | 1,605,000 | 1,831,979 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2023 (Capital Improvement Plan) | AA+/NR | 3,215,000 | 3,669,665 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2023 (Capital Improvement Plan) | AA+/NR | 1,675,000 | 1,911,879 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2024 (Capital Improvement Plan) | AA+/NR | 1,305,000 | 1,512,456 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2024 (Capital Improvement Plan) | AA+/NR | 1,340,000 | 1,553,020 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2024 (Capital Improvement Plan) | AA+/NR | 1,760,000 | 2,039,787 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2025 (Capital Improvement Plan) | AA+/NR | 610,000 | 713,682 | ||||||||||||||
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) | A/A3 | 1,500,000 | 1,639,995 | ||||||||||||||
Chicago Transit Authority, 5.00% due 12/1/2017 (Rail Car and Rail System Improvements) | AA/A3 | 1,165,000 | 1,172,433 | ||||||||||||||
Chicago Transit Authority, 5.50% due 6/1/2018 (Federal Transit Program-Rail Systems; Insured: AGM) | A+/A3 | 2,500,000 | 2,571,025 | ||||||||||||||
City of Chicago, 4.00% due 1/1/2018 (Wastewater Transmission System) | A/Baa3 | 1,475,000 | 1,485,251 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2018 (Wastewater Transmission System) | A/NR | 2,500,000 | 2,523,725 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2019 (Wastewater Transmission System) | A/NR | 1,750,000 | 1,828,540 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2020 (Project Fund; Insured: AGM) | AA/A2 | 1,320,000 | 1,333,504 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2020 (Wastewater Transmission System) | A/NR | 1,000,000 | 1,076,160 | ||||||||||||||
City of Chicago, 5.50% due 1/1/2020 (Wastewater Transmission System; Insured: BHAC) | AA+/Aa1 | 1,400,000 | 1,415,204 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2021 (Riverwalk Expansion Project; Insured: AGM) | BB+/Ba1 | 1,410,000 | 1,505,372 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2021 (Wastewater Transmission System) | A/NR | 1,000,000 | 1,103,050 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2022 (Wastewater Transmission System) | A/NR | 2,000,000 | 2,251,380 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2023 (Chicago Midway Airport) | A/A3 | 6,215,000 | 7,258,871 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2023 (Riverwalk Expansion Project; Insured: AGM) | BB+/Ba1 | 1,000,000 | 1,088,410 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2023 (Wastewater Transmission System) | A/NR | 3,000,000 | 3,430,680 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2024 (Chicago Midway Airport) | A/A3 | 16,060,000 | 18,599,407 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2024 (Wastewater Transmission System) | A/NR | 6,250,000 | 7,267,312 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2024 (Project Fund) | AA/Ba1 | 5,510,000 | 5,798,889 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2025 (Wastewater Transmission System) | A/NR | 4,500,000 | 5,274,675 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2026 (Project Fund) | AA/Ba1 | 6,030,000 | 6,297,551 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2027 (Project Fund) | AA/Ba1 | 6,310,000 | 6,599,818 | ||||||||||||||
City of Chicago, 5.00% due 11/1/2027 (Water System Improvements) | A/NR | 6,250,000 | 7,311,750 | ||||||||||||||
City of Chicago Board of Education GO, 5.00% due 12/1/2018 (Insured: Natl-Re) | A/A3 | 1,000,000 | 1,028,670 | ||||||||||||||
City of Chicago Building Acquisition Certificates GO, 5.40% due 1/1/2018 (Parking Facility Improvements; Insured: AGM) | AA/A2 | 570,000 | 572,428 | ||||||||||||||
City of Chicago School Reform Board of Trustees GO, 5.25% due 12/1/2017 (Insured: Natl-Re) | A/A3 | 4,100,000 | 4,119,229 | ||||||||||||||
City of Mount Vernon GO, 4.00% due 12/15/2019 (Various Municipal Capital Improvements; Insured: AGM) | AA/A2 | 1,000,000 | 1,057,600 | ||||||||||||||
City of Mount Vernon GO, 4.00% due 12/15/2020 (Various Municipal Capital Improvements; Insured: AGM) | AA/A2 | 785,000 | 847,101 | ||||||||||||||
City of Mount Vernon GO, 4.00% due 12/15/2021 (Various Municipal Capital Improvements; Insured: AGM) | AA/A2 | 1,640,000 | 1,761,950 | ||||||||||||||
City of Quincy, 5.00% due 11/15/2017 (Blessing Hospital) | A/A2 | 500,000 | 502,495 | ||||||||||||||
City of Waukegan GO, 5.00% due 12/30/2019 (Lakehurst Redevelopment Project; Insured: AGM) | NR/A2 | 1,935,000 | 2,070,605 | ||||||||||||||
City of Waukegan GO, 5.00% due 12/30/2020 (Lakehurst Redevelopment Project; Insured: AGM) | NR/A2 | 1,000,000 | 1,096,320 | ||||||||||||||
City of Waukegan GO, 5.00% due 12/30/2021 (Lakehurst Redevelopment Project; Insured: AGM) | NR/A2 | 2,100,000 | 2,350,131 | ||||||||||||||
City of Waukegan GO, 5.00% due 12/30/2022 (Lakehurst Redevelopment Project; Insured: AGM) | NR/A2 | 1,000,000 | 1,134,450 | ||||||||||||||
Community College District No. 503 GO, 5.00% due 12/1/2021 (Black Hawk College; Insured: AGM) | AA/NR | 3,365,000 | 3,823,649 | ||||||||||||||
Community College District No. 503 GO, 5.00% due 12/1/2023 (Black Hawk College; Insured: AGM) | AA/NR | 4,155,000 | 4,885,823 | ||||||||||||||
Community College District No. 503 GO, 5.00% due 12/1/2024 (Black Hawk College; Insured: AGM) | AA/NR | 3,415,000 | 4,058,967 | ||||||||||||||
Community College District No. 516 GO, 4.50% due 12/15/2020 (Waubonsee Community College) | NR/Aa1 | 1,325,000 | 1,457,248 | ||||||||||||||
Community College District No. 516 GO, 5.00% due 12/15/2021 (Waubonsee Community College) | NR/Aa1 | 6,175,000 | 7,063,212 | ||||||||||||||
Community High School District No. 127 GO, 7.375% due 2/1/2020 (Lake County-Grayslake Educational Facilities.; Insured: Syncora) | AA+/NR | 1,000,000 | 1,134,900 | ||||||||||||||
Community Unit School District No. 200 GO, 5.25% due 10/1/2023 (DuPage County Educational Facilities; Insured: FSA) | AA/Aa3 | 1,000,000 | 1,077,480 | ||||||||||||||
Community Unit School District No. 302 GO, 0.00% due 2/1/2021 (Kane & DeKalb County Educational Facilities; Insured: Natl-Re) | NR/Aa3 | 3,165,000 | 2,973,454 | ||||||||||||||
Community Unit School District No. 428 GO, 0% due 1/1/2021 (DeKalb County Educational Facilities) | AA-/Aa2 | 6,140,000 | 5,735,190 | ||||||||||||||
18 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Community Unit School District No. 5 GO, 5.00% due 4/15/2024 (Insured: BAM) | AA/Aa3 | $ | 450,000 | $ | 530,600 | ||||||||||||
Community Unit School District No. 5 GO, 5.00% due 4/15/2025 (Insured: BAM) | AA/Aa3 | 600,000 | 715,734 | ||||||||||||||
Community Unit School District No. 5 GO, 5.00% due 4/15/2026 (Insured: BAM) | AA/Aa3 | 600,000 | 721,842 | ||||||||||||||
Cook County Community College District No. 508 GO, 5.00% due 12/1/2020 (City Colleges of Chicago) | BBB/NR | 1,220,000 | 1,320,699 | ||||||||||||||
Cook County Community College District No. 508 GO, 5.00% due 12/1/2021 (City Colleges of Chicago) | BBB/NR | 1,125,000 | 1,233,000 | ||||||||||||||
Cook County Community College District No. 508 GO, 5.00% due 12/1/2022 (City Colleges of Chicago) | BBB/NR | 1,250,000 | 1,393,563 | ||||||||||||||
Cook County Community College District No. 508 GO, 5.00% due 12/1/2023 (City Colleges of Chicago) | BBB/NR | 3,425,000 | 3,849,392 | ||||||||||||||
Cook County Community College District No. 508 GO, 5.00% due 12/1/2024 (City Colleges of Chicago) | BBB/NR | 1,000,000 | 1,114,910 | ||||||||||||||
Cook County Community College District No. 508 GO, 5.25% due 12/1/2025 (City Colleges of Chicago) | BBB/NR | 1,625,000 | 1,814,166 | ||||||||||||||
Cook County Community College District No. 508 GO, 5.25% due 12/1/2026 (City Colleges of Chicago) | BBB/NR | 1,690,000 | 1,877,066 | ||||||||||||||
Cook County School District No. 97 GO, 9.00% due 12/1/2018 (Village of Oak Park; Insured: Natl-Re) | NR/Aa2 | 4,000,000 | 4,357,840 | ||||||||||||||
County of Cook GO, 5.00% due 11/15/2019 (Capital Improvement Plan) | AA-/A2 | 3,690,000 | 3,944,352 | ||||||||||||||
County of Cook GO, 4.00% due 11/15/2020 (Capital Improvement Plan) | AA-/A2 | 925,000 | 984,357 | ||||||||||||||
County of Cook GO, 5.00% due 11/15/2020 (Capital Improvement Plan) | AA-/A2 | 3,590,000 | 3,830,458 | ||||||||||||||
County of Cook GO, 5.00% due 11/15/2020 (Capital Improvement Plan) | AA-/A2 | 2,000,000 | 2,188,800 | ||||||||||||||
County of Cook GO, 4.00% due 11/15/2021 (Capital Improvement Plan) | AA-/A2 | 2,000,000 | 2,156,660 | ||||||||||||||
County of Cook GO, 5.00% due 11/15/2021 (Capital Improvement Plan) | AA-/A2 | 5,000,000 | 5,588,750 | ||||||||||||||
County of Cook GO, 5.00% due 11/15/2021 (Capital Improvement Plan) | AA-/A2 | 2,105,000 | 2,352,864 | ||||||||||||||
County of Cook GO, 4.00% due 11/15/2022 (Capital Improvement Plan) | AA-/A2 | 1,000,000 | 1,088,970 | ||||||||||||||
County of Cook GO, 5.00% due 11/15/2022 (Capital Improvement Plan) | AA-/A2 | 1,500,000 | 1,705,905 | ||||||||||||||
Du Page County High School District No. 88, 3.00% due 1/15/2020 (Addison Trail and Willowbrook High Schools) | NR/Aa1 | 2,630,000 | 2,728,152 | ||||||||||||||
Forest Preserve District of Cook County GO, 5.00% due 11/15/2021 | AA-/A2 | 1,500,000 | 1,633,710 | ||||||||||||||
Forest Preserve District of DuPage County GO, 5.00% due 11/1/2020 | AAA/Aaa | 500,000 | 555,340 | ||||||||||||||
Forest Preserve District of DuPage County GO, 5.00% due 11/1/2021 | AAA/Aaa | 1,425,000 | 1,623,260 | ||||||||||||||
Forest Preserve District of DuPage County GO, 5.00% due 11/1/2022 | AAA/Aaa | 900,000 | 1,043,226 | ||||||||||||||
Forest Preserve District of DuPage County GO, 5.00% due 11/1/2023 | AAA/Aaa | 1,300,000 | 1,531,335 | ||||||||||||||
Forest Preserve District of DuPage County GO, 5.00% due 11/1/2024 | AAA/Aaa | 5,000,000 | 5,973,850 | ||||||||||||||
Illinois DFA, 0.92% due 5/1/2031 put 10/2/2017 (Evanston Northwestern Healthcare Corp.; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa2 | 4,335,000 | 4,335,000 | ||||||||||||||
Illinois Educational Facilities Authority, 5.25% due 3/1/2034 put 3/1/2018 (Art Institute of Chicago) | NR/NR | 3,600,000 | 3,651,804 | ||||||||||||||
Illinois Educational Facilities Authority, 3.40% due 11/1/2036 put 11/1/2017 (Field Museum of Natural History) | A/NR | 1,300,000 | 1,302,041 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/1/2017 (Rush University Medical Center; Insured: Natl-Re) (ETM) | A/Aaa | 1,000,000 | 1,003,720 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/15/2017 (Rush University Medical Center) | A+/A1 | 1,000,000 | 1,005,070 | ||||||||||||||
Illinois Finance Authority, 5.00% due 12/1/2017 (Columbia College) (ETM) | BBB+/NR | 1,395,000 | 1,404,918 | ||||||||||||||
Illinois Finance Authority, 5.50% due 11/1/2018 (Advocate Health Care) | AA+/Aa2 | 1,000,000 | 1,023,700 | ||||||||||||||
Illinois Finance Authority, 5.00% due 4/1/2020 pre-refunded 4/1/2019 (Advocate Health Care) | AA+/Aa2 | 1,315,000 | 1,389,442 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/15/2020 (Rush University Medical Center) | A+/A1 | 290,000 | 320,897 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/15/2021 (Rush University Medical Center) | A+/A1 | 250,000 | 283,470 | ||||||||||||||
Illinois Finance Authority, 4.00% due 12/1/2021 (Trinity Health) | AA-/Aa3 | 1,000,000 | 1,092,860 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/15/2022 (Rush University Medical Center) | A+/A1 | 250,000 | 288,320 | ||||||||||||||
Illinois Finance Authority, 5.00% due 8/1/2023 (Advocate Health Care) | AA+/Aa2 | 565,000 | 663,948 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/15/2023 (Rush University Medical Center) | A+/A1 | 1,000,000 | 1,169,990 | ||||||||||||||
Illinois Finance Authority, 5.00% due 8/1/2024 (Advocate Health Care) | AA+/Aa2 | 800,000 | 955,064 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/15/2024 (Rush University Medical Center) | A+/A1 | 575,000 | 679,731 | ||||||||||||||
Illinois Finance Authority, 5.00% due 8/1/2025 (Advocate Health Care) | AA+/Aa2 | 1,400,000 | 1,662,094 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/15/2025 (Rush University Medical Center) | A+/A1 | 1,655,000 | 1,955,498 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/1/2030 put 1/15/2020 (Advocate Health Care) | AA+/Aa2 | 1,250,000 | 1,354,375 | ||||||||||||||
Illinois Finance Authority, 0.90% due 8/15/2038 put 10/2/2017 (Northwestern Memorial Hospital; SPA: Northern Trust Co.) (daily demand notes) | AA+/Aa2 | 26,140,000 | 26,140,000 | ||||||||||||||
Illinois Finance Authority, 0.90% due 8/1/2043 put 10/2/2017 (University of Chicago Medical Center; LOC: Wells Fargo Bank, N.A.) (daily demand notes) | AAA/Aa1 | 1,850,000 | 1,850,000 | ||||||||||||||
Illinois State Toll Highway Authority, 5.00% due 1/1/2023 | AA-/Aa3 | 4,000,000 | 4,660,840 | ||||||||||||||
Illinois State Toll Highway Authority, 5.00% due 1/1/2024 | AA-/Aa3 | 6,500,000 | 7,699,835 | ||||||||||||||
Illinois State Toll Highway Authority, 5.00% due 1/1/2025 | AA-/Aa3 | 6,500,000 | 7,014,605 | ||||||||||||||
Kane McHenry Cook & DeKalb Counties Unit School District No. 300 GO, 0% due 12/1/2021 (Insured: AMBAC) (ETM) | NR/Aa3 | 765,000 | 714,059 | ||||||||||||||
Kane McHenry Cook & DeKalb Counties Unit School District No. 300 GO, 0% due 12/1/2021 (Insured: AMBAC) | NR/Aa3 | 1,235,000 | 1,137,608 | ||||||||||||||
Kane McHenry Cook & DeKalb Counties Unit School District No. 300 GO, 5.00% due 1/1/2024 | AA/NR | 7,150,000 | 8,395,959 | ||||||||||||||
McHenry County Conservation District GO, 5.00% due 2/1/2021 | AA+/Aa1 | 2,325,000 | 2,601,210 | ||||||||||||||
McHenry County Conservation District GO, 5.00% due 2/1/2025 | AA+/Aa1 | 2,000,000 | 2,395,100 | ||||||||||||||
Metropolitan Pier & Exposition Authority, 5.00% due 12/15/2020 (McCormick Place Expansion) | BB+/NR | 4,000,000 | 4,228,400 | ||||||||||||||
Railsplitter Tobacco Settlement Authority, 5.00% due 6/1/2019 | A/NR | 22,000,000 | 23,336,720 | ||||||||||||||
Railsplitter Tobacco Settlement Authority, 5.125% due 6/1/2019 | A/NR | 6,780,000 | 7,205,920 | ||||||||||||||
State of Illinois, 5.00% due 6/15/2021 pre-refunded 6/15/2019 (Build Illinois) | AA-/Baa3 | 9,945,000 | 10,611,613 | ||||||||||||||
Annual Report | 19
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
State of Illinois, 5.00% due 6/15/2023 (Build Illinois) | AA-/NR | $ | 5,825,000 | $ | 6,775,698 | ||||||||||||
State of Illinois, 5.00% due 6/15/2025 (Build Illinois) | AA-/NR | 8,825,000 | 10,232,234 | ||||||||||||||
State of Illinois, 6.00% due 6/15/2026 (Insured: BAM-TCRS National) | AA/Baa3 | 3,455,000 | 4,427,375 | ||||||||||||||
State of Illinois GO, 5.00% due 4/1/2026 (Build Illinois) | BBB-/Baa3 | 5,000,000 | 5,012,400 | ||||||||||||||
Town of Cicero Cook County GO, 5.00% due 1/1/2019 (Cicero and Laramie Development Areas; Insured: AGM) | AA/A2 | 2,000,000 | 2,089,000 | ||||||||||||||
Town of Cicero Cook County GO, 5.00% due 12/1/2019 (Cicero and Laramie Development Areas) | A+/NR | 1,070,000 | 1,141,840 | ||||||||||||||
Town of Cicero Cook County GO, 5.00% due 1/1/2020 (Cicero and Laramie Development Areas; Insured: AGM) | AA/A2 | 1,450,000 | 1,560,432 | ||||||||||||||
Town of Cicero Cook County GO, 5.00% due 1/1/2021 (Cicero and Laramie Development Areas; Insured: AGM) | AA/A2 | 1,250,000 | 1,378,813 | ||||||||||||||
Town of Cicero GO, 5.00% due 1/1/2018 (Cicero and Laramie Development Areas; Insured: AGM) | AA/A2 | 2,375,000 | 2,397,539 | ||||||||||||||
University of Illinois Board of Trustees COP, 5.00% due 10/1/2019 (Insured: AGM) | AA/NR | 955,000 | 978,321 | ||||||||||||||
Village of Melrose Park, 5.20% due 7/1/2018 (Insured: Natl-Re) | A/A3 | 580,000 | 586,067 | ||||||||||||||
| a | Village of Tinley Park GO, 4.00% due 12/1/2022 | AA+/NR | 625,000 | 691,300 | |||||||||||||
Will & Kendall Counties Plainfield Community Consolidated School District 202 GO, 5.00% due 1/1/2023 (Capital Improvements; Insured: BAM) | AA/Aa2 | 8,050,000 | 9,314,172 | ||||||||||||||
Will & Kendall Counties Plainfield Community Consolidated School District 202 GO, 5.00% due 1/1/2024 (Capital Improvements; Insured: BAM) | AA/Aa2 | 4,580,000 | 5,378,111 | ||||||||||||||
Will & Kendall Counties Plainfield Community Consolidated School District 202 GO, 5.00% due 1/1/2025 (Capital Improvements; Insured: BAM) | AA/Aa2 | 8,495,000 | 10,100,555 | ||||||||||||||
Will County Valley View Community Unit School District No. 365 GO, 0.00% due 11/1/2018 (Insured: AGM) | AA/Aa2 | 3,370,000 | 3,319,012 | ||||||||||||||
INDIANA — 1.64% | |||||||||||||||||
Avon Community School Building Corp., 4.00% due 7/15/2018 | AA+/NR | 1,000,000 | 1,023,250 | ||||||||||||||
Avon Community School Building Corp., 4.00% due 7/15/2019 | AA+/NR | 1,000,000 | 1,049,490 | ||||||||||||||
Avon Community School Building Corp., 5.00% due 7/15/2021 | AA+/NR | 2,200,000 | 2,484,130 | ||||||||||||||
Avon Community School Building Corp., 5.00% due 7/15/2022 | AA+/NR | 1,000,000 | 1,153,010 | ||||||||||||||
Avon Community School Building Corp., 5.00% due 7/15/2023 | AA+/NR | 600,000 | 704,670 | ||||||||||||||
Avon Community School Building Corp., 5.00% due 7/15/2024 | AA+/NR | 285,000 | 338,953 | ||||||||||||||
Avon Community School Building Corp., 5.00% due 7/15/2025 | AA+/NR | 600,000 | 721,854 | ||||||||||||||
Avon Community School Building Corp., 5.00% due 7/15/2026 | AA+/NR | 700,000 | 847,889 | ||||||||||||||
Avon Community School Building Corp., 5.00% due 7/15/2027 | AA+/NR | 1,345,000 | 1,644,155 | ||||||||||||||
Board of Trustees for the Vincennes University, 4.00% due 6/1/2018 | NR/Aa3 | 1,000,000 | 1,018,820 | ||||||||||||||
Board of Trustees for the Vincennes University, 5.00% due 6/1/2020 | NR/Aa3 | 1,000,000 | 1,099,020 | ||||||||||||||
City of Carmel Redevelopment Authority, 5.00% due 8/1/2021 (Road and Intersection Improvements) | AA+/NR | 2,405,000 | 2,714,764 | ||||||||||||||
City of Carmel Redevelopment Authority, 5.00% due 8/1/2022 (Road and Intersection Improvements) | AA+/NR | 2,510,000 | 2,887,906 | ||||||||||||||
City of Carmel Redevelopment District COP, 5.75% due 7/15/2022 pre-refunded 1/15/2021 (CFP Energy Center, LLC Installment Purchase Agreement) | NR/NR | 2,545,000 | 2,800,238 | ||||||||||||||
City of Fort Wayne, 2.00% due 12/1/2017 (Waterworks Utility Improvements) | NR/Aa3 | 1,175,000 | 1,177,244 | ||||||||||||||
Duneland School Building Corp., 0% due 2/1/2020 (State Aid Withholding) | A/NR | 2,970,000 | 2,869,733 | ||||||||||||||
Duneland School Building Corp., 0% due 8/1/2020 (State Aid Withholding) | A/NR | 3,470,000 | 3,321,033 | ||||||||||||||
Duneland School Building Corp., 0% due 2/1/2021 (State Aid Withholding) | A/NR | 2,770,000 | 2,623,107 | ||||||||||||||
Duneland School Building Corp., 0% due 8/1/2021 (State Aid Withholding) | A/NR | 3,270,000 | 3,065,200 | ||||||||||||||
Hamilton Southeastern Consolidated School Building Corp., 5.00% due 7/15/2021 (Educational Facilities; Insured: State Intercept) | AA+/NR | 1,230,000 | 1,396,210 | ||||||||||||||
Hamilton Southeastern Consolidated School Building Corp., 5.00% due 7/15/2022 (Educational Facilities; Insured: State Intercept) | AA+/NR | 885,000 | 1,025,963 | ||||||||||||||
Hamilton Southeastern Consolidated School Building Corp., 5.00% due 7/15/2023 (Educational Facilities; Insured: State Intercept) | AA+/NR | 570,000 | 673,563 | ||||||||||||||
Hamilton Southeastern Consolidated School Building Corp., 5.00% due 1/15/2024 (Educational Facilities; Insured: State Intercept) | AA+/NR | 525,000 | 626,078 | ||||||||||||||
Indiana Bond Bank, 5.00% due 10/15/2017 (Special Gas Program) | NR/A3 | 5,000,000 | 5,008,750 | ||||||||||||||
Indiana Bond Bank, 5.00% due 8/1/2021 (Columbus Learning Center) | AA/NR | 1,300,000 | 1,467,440 | ||||||||||||||
Indiana Finance Authority, 4.00% due 5/1/2018 (Community Health Network) | A/A2 | 2,820,000 | 2,867,461 | ||||||||||||||
Indiana Finance Authority, 5.25% due 7/1/2018 (Wabash Correctional Facilities) | AA+/Aa1 | 1,000,000 | 1,031,510 | ||||||||||||||
Indiana Finance Authority, 5.25% due 7/1/2018 (Rockville Correctional Facilities) (ETM) | AA+/Aa1 | 2,150,000 | 2,220,391 | ||||||||||||||
Indiana Finance Authority, 5.00% due 9/15/2018 (Marian University Health Sciences) | BBB-/NR | 1,790,000 | 1,828,610 | ||||||||||||||
Indiana Finance Authority, 5.00% due 11/1/2018 (Indianapolis Airport) | AA+/Aa2 | 2,750,000 | 2,866,655 | ||||||||||||||
Indiana Finance Authority, 5.00% due 11/1/2018 (Sisters of St. Francis Health Services, Inc.) | NR/Aa3 | 1,250,000 | 1,300,938 | ||||||||||||||
Indiana Finance Authority, 5.00% due 5/1/2019 (Community Health Network) | A/A2 | 1,790,000 | 1,893,211 | ||||||||||||||
Indiana Finance Authority, 5.00% due 9/15/2019 (Marian University Health Sciences) | BBB-/NR | 1,250,000 | 1,300,400 | ||||||||||||||
Indiana Finance Authority, 5.00% due 3/1/2020 (Indiana University Health System) | AA/Aa2 | 5,000,000 | 5,464,800 | ||||||||||||||
Indiana Finance Authority, 5.00% due 5/1/2020 (Community Health Network) | A/A2 | 860,000 | 938,363 | ||||||||||||||
Indiana Finance Authority, 5.00% due 9/15/2020 (Marian University Health Sciences) | BBB-/NR | 2,245,000 | 2,371,932 | ||||||||||||||
Indiana Finance Authority, 5.00% due 3/1/2021 (Indiana University Health System) | AA/Aa2 | 9,880,000 | 11,115,099 | ||||||||||||||
Indiana Finance Authority, 5.00% due 5/1/2021 (Community Health Network) | A/A2 | 2,250,000 | 2,523,015 | ||||||||||||||
20 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Indiana Finance Authority, 5.00% due 9/15/2021 (Marian University Health Sciences) | BBB-/NR | $ | 2,320,000 | $ | 2,478,618 | ||||||||||||
Indiana Finance Authority, 5.00% due 10/1/2021 (CWA Authority, Inc. Wastewater System Project) | AA/NR | 500,000 | 568,095 | ||||||||||||||
Indiana Finance Authority, 5.00% due 3/1/2022 (Indiana University Health System) | AA/Aa2 | 3,240,000 | 3,653,586 | ||||||||||||||
Indiana Finance Authority, 5.00% due 5/1/2022 (Parkview Regional Medical Center) | AA-/Aa3 | 1,135,000 | 1,306,907 | ||||||||||||||
Indiana Finance Authority, 5.00% due 5/1/2022 (Community Health Network) | A/A2 | 1,230,000 | 1,409,838 | ||||||||||||||
Indiana Finance Authority, 5.00% due 10/1/2023 (CWA Authority, Inc. Wastewater System Project) | AA/NR | 1,000,000 | 1,178,890 | ||||||||||||||
Indiana Finance Authority, 5.00% due 10/1/2024 (CWA Authority, Inc. Wastewater System Project) | AA/NR | 500,000 | 598,135 | ||||||||||||||
Indiana Finance Authority, 0.91% due 2/1/2037 put 10/2/2017 (Stadium Project; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa2 | 4,100,000 | 4,100,000 | ||||||||||||||
Knox Middle School Building Corp., 0.00% due 1/15/2020 (Insured: Natl-Re) (State Aid Withholding) | A/A3 | 1,295,000 | 1,238,188 | ||||||||||||||
Lake Central Multi-District School Building Corp., 4.00% due 1/15/2019 (Educational Facilities) (State Aid Withholding) | AA+/A1 | 1,000,000 | 1,035,760 | ||||||||||||||
Lake Central Multi-District School Building Corp., 5.00% due 7/15/2019 (Educational Facilities) (State Aid Withholding) | AA+/A1 | 1,680,000 | 1,790,393 | ||||||||||||||
Lake Central Multi-District School Building Corp., 4.00% due 1/15/2020 (Educational Facilities) (State Aid Withholding) | AA+/A1 | 1,345,000 | 1,424,785 | ||||||||||||||
Lake Central Multi-District School Building Corp., 5.00% due 7/15/2020 (Educational Facilities) (State Aid Withholding) | AA+/A1 | 1,170,000 | 1,284,286 | ||||||||||||||
Lake Central Multi-District School Building Corp., 4.00% due 1/15/2021 (Educational Facilities) (State Aid Withholding) | AA+/A1 | 1,250,000 | 1,351,938 | ||||||||||||||
Lake Central Multi-District School Building Corp., 5.00% due 7/15/2021 (Educational Facilities) (State Aid Withholding) | AA+/A1 | 1,250,000 | 1,409,513 | ||||||||||||||
Lake Central Multi-District School Building Corp., 4.00% due 1/15/2022 (Educational Facilities) (State Aid Withholding) | AA+/A1 | 1,455,000 | 1,595,189 | ||||||||||||||
Lake Central Multi-District School Building Corp., 5.00% due 7/15/2022 (Educational Facilities) (State Aid Withholding) | AA+/A1 | 1,000,000 | 1,149,560 | ||||||||||||||
Perry Township Multischool Building Corp., 4.00% due 1/15/2018 (Educational Facilities) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,008,800 | ||||||||||||||
Perry Township Multischool Building Corp., 3.00% due 1/10/2019 (Educational Facilities) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,022,740 | ||||||||||||||
Perry Township Multischool Building Corp., 4.00% due 7/10/2019 (Educational Facilities) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,047,680 | ||||||||||||||
Perry Township Multischool Building Corp., 5.00% due 7/10/2020 (Educational Facilities) (State Aid Withholding) | AA+/NR | 2,090,000 | 2,293,190 | ||||||||||||||
Perry Township Multischool Building Corp., 5.00% due 7/10/2021 (Educational Facilities) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,127,230 | ||||||||||||||
Whitko High School Building Corp., 4.00% due 7/15/2018 (School Corp. Capital Improvements) (State Aid Withholding) | AA+/NR | 1,025,000 | 1,048,831 | ||||||||||||||
Zionsville Community Schools Building Corp., 5.00% due 7/15/2019 (Insured: AGM) (State Aid Withholding) | AA/A2 | 1,100,000 | 1,175,955 | ||||||||||||||
IOWA — 0.33% | |||||||||||||||||
Des Moines Independent Community School District, 4.00% due 6/1/2019 (School Infrastructure; Insured: AGM) | AA/A2 | 3,870,000 | 4,045,737 | ||||||||||||||
Des Moines Independent Community School District, 4.00% due 6/1/2020 (School Infrastructure; Insured: AGM) | AA/A2 | 3,990,000 | 4,262,158 | ||||||||||||||
Des Moines Independent Community School District, 4.00% due 6/1/2021 (School Infrastructure; Insured: AGM) | AA/A2 | 4,125,000 | 4,423,072 | ||||||||||||||
Des Moines Independent Community School District, 4.00% due 6/1/2022 (School Infrastructure; Insured: AGM) | AA/A2 | 2,140,000 | 2,289,971 | ||||||||||||||
Iowa Finance Authority, 5.00% due 2/15/2018 (Iowa Health System; Insured: AGM) | NR/A1 | 1,405,000 | 1,424,825 | ||||||||||||||
Iowa Finance Authority, 5.00% due 7/1/2022 (Genesis Health System) | NR/A1 | 1,735,000 | 2,004,931 | ||||||||||||||
Iowa Finance Authority, 5.00% due 7/1/2023 (Genesis Health System) | NR/A1 | 2,000,000 | 2,356,800 | ||||||||||||||
Iowa Finance Authority, 5.00% due 7/1/2024 (Genesis Health System) | NR/A1 | 2,350,000 | 2,750,957 | ||||||||||||||
KANSAS — 0.90% | |||||||||||||||||
Johnson County USD No. 512 GO, 4.00% due 10/1/2017 (Shawnee Mission School District) | NR/Aaa | 6,700,000 | 6,701,206 | ||||||||||||||
Kansas DFA, 5.00% due 4/1/2020 (National Bio and Agro-Defense Facility) | A+/Aa3 | 6,980,000 | 7,600,173 | ||||||||||||||
Kansas DFA, 5.00% due 12/1/2020 (New Jobs Training; Insured: BAM) | AA/NR | 1,500,000 | 1,618,020 | ||||||||||||||
Kansas DFA, 5.00% due 4/1/2021 (National Bio and Agro-Defense Facility) | A+/Aa3 | 5,075,000 | 5,684,051 | ||||||||||||||
Kansas DFA, 5.00% due 4/1/2022 (National Bio and Agro-Defense Facility) | A+/Aa3 | 2,730,000 | 3,121,127 | ||||||||||||||
Kansas DFA, 5.00% due 4/1/2023 (National Bio and Agro-Defense Facility) | A+/Aa3 | 8,110,000 | 9,450,745 | ||||||||||||||
Kansas DFA, 5.00% due 4/1/2024 (National Bio and Agro-Defense Facility) | A+/Aa3 | 9,275,000 | 10,805,560 | ||||||||||||||
Kansas DFA, 5.00% due 4/1/2025 (National Bio and Agro-Defense Facility) | A+/Aa3 | 7,280,000 | 8,426,746 | ||||||||||||||
Unified Government of Wyandotte County-Kansas City, 5.00% due 9/1/2022 (Utility Systems Improvement) | A+/A3 | 2,000,000 | 2,315,460 | ||||||||||||||
Unified Government of Wyandotte County-Kansas City, 5.00% due 9/1/2023 (Utility Systems Improvement) | A+/A3 | 1,000,000 | 1,178,980 | ||||||||||||||
Unified Government of Wyandotte County-Kansas City, 5.00% due 9/1/2024 (Utility Systems Improvement) | A+/A3 | 600,000 | 717,372 | ||||||||||||||
Wyandotte County USD No. 500 GO, 5.00% due 9/1/2025 (General Improvement) | AA-/Aa2 | 3,300,000 | 3,978,084 | ||||||||||||||
Wyandotte County USD No. 500 GO, 5.00% due 9/1/2026 (General Improvement) | AA-/Aa2 | 2,375,000 | 2,890,945 | ||||||||||||||
KENTUCKY — 1.97% | |||||||||||||||||
Commonwealth of Kentucky State Property and Buildings Commission, 5.00% due 11/1/2021 (Project No. 112) | A/A1 | 10,000,000 | 11,292,200 | ||||||||||||||
Commonwealth of Kentucky State Property and Buildings Commission, 5.00% due 11/1/2023 (Project No. 112) | A/A1 | 20,000,000 | 23,460,600 | ||||||||||||||
Commonwealth of Kentucky State Property and Buildings Commission, 5.00% due 11/1/2025 (Project No. 112) | A/A1 | 25,000,000 | 29,897,500 | ||||||||||||||
Commonwealth of Kentucky State Property and Buildings Commission, 5.00% due 11/1/2026 (Project No. 112) | A/A1 | 20,000,000 | 23,919,200 | ||||||||||||||
Kentucky Economic DFA, 0.00% due 10/1/2019 (Norton Healthcare, Inc.; Insured: Natl-Re) | A/A3 | 5,000,000 | 4,809,600 | ||||||||||||||
Kentucky Economic DFA, 0.00% due 10/1/2020 (Norton Healthcare, Inc.; Insured: Natl-Re) | A/A3 | 9,600,000 | 9,011,712 | ||||||||||||||
Kentucky Economic DFA, 0.00% due 10/1/2021 (Norton Healthcare, Inc.; Insured: Natl-Re) | A/A3 | 2,885,000 | 2,644,477 | ||||||||||||||
Kentucky Economic DFA, 0% due 10/1/2023 (Norton Healthcare, Inc.; Insured: Natl-Re) | A/A3 | 4,195,000 | 3,598,555 | ||||||||||||||
Lexington-Fayette Urban County Government Public Facilities Corp., 5.00% due 6/1/2022 (Eastern State Hospital) | A/A1 | 6,165,000 | 6,917,007 | ||||||||||||||
Louisville/Jefferson County Metropolitan Government, 5.00% due 10/1/2024 (Norton Healthcare, Inc.) | A-/NR | 1,000,000 | 1,181,930 | ||||||||||||||
Louisville/Jefferson County Metropolitan Government, 5.00% due 10/1/2025 (Norton Healthcare, Inc.) | A-/NR | 1,200,000 | 1,432,284 | ||||||||||||||
Louisville/Jefferson County Metropolitan Government, 5.00% due 10/1/2026 (Norton Healthcare, Inc.) | A-/NR | 3,000,000 | 3,615,540 | ||||||||||||||
Louisville/Jefferson County Metropolitan Government, 1.50% due 10/1/2033 (Louisville Gas and Electric Company) | A/A1 | 12,725,000 | 12,751,468 | ||||||||||||||
Annual Report | 21
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Turnpike Authority of Kentucky, 5.00% due 7/1/2025 (Revitalization Projects) | AA-/Aa3 | $ | 2,435,000 | $ | 2,921,562 | ||||||||||||
Turnpike Authority of Kentucky, 5.00% due 7/1/2026 (Revitalization Projects) | AA-/Aa3 | 3,180,000 | 3,848,945 | ||||||||||||||
LOUISIANA — 2.64% | |||||||||||||||||
City of Bossier, 4.00% due 12/1/2018 (Public Improvements; Insured: AGM) | AA/Aa3 | 2,020,000 | 2,086,458 | ||||||||||||||
City of Bossier, 4.50% due 12/1/2021 (Public Improvements; Insured: AGM) | AA/Aa3 | 2,240,000 | 2,503,200 | ||||||||||||||
City of Lafayette, 5.00% due 11/1/2019 (Utilities System Improvements) | AA-/A1 | 1,000,000 | 1,080,090 | ||||||||||||||
City of New Orleans GO, 4.00% due 12/1/2017 (Public Improvements) | AA-/A3 | 750,000 | 753,975 | ||||||||||||||
City of New Orleans GO, 4.00% due 10/1/2018 (Audubon Park Aquarium; Insured: AGM) | AA/NR | 1,110,000 | 1,136,696 | ||||||||||||||
City of New Orleans GO, 4.00% due 12/1/2018 (Public Improvements) | AA-/A3 | 700,000 | 723,030 | ||||||||||||||
City of New Orleans GO, 4.00% due 12/1/2019 (Public Improvements) | AA-/A3 | 750,000 | 793,223 | ||||||||||||||
City of New Orleans GO, 5.00% due 12/1/2019 (Public Improvements; Insured: AGM) | AA-/A3 | 3,080,000 | 3,323,228 | ||||||||||||||
City of New Orleans GO, 5.00% due 12/1/2020 (Public Improvements; Insured: AGM) | AA-/A3 | 3,250,000 | 3,606,200 | ||||||||||||||
City of New Orleans GO, 5.00% due 12/1/2020 (Public Improvements) | AA-/A3 | 1,315,000 | 1,459,124 | ||||||||||||||
City of New Orleans GO, 5.00% due 12/1/2021 (Public Improvements; Insured: AGM) | AA-/A3 | 5,700,000 | 6,485,175 | ||||||||||||||
City of New Orleans GO, 5.00% due 12/1/2021 (Public Improvements) | AA-/A3 | 1,200,000 | 1,365,300 | ||||||||||||||
City of Shreveport, 5.00% due 12/1/2020 (Water and Sewer System; Insured: BAM) | AA/A3 | 7,770,000 | 8,610,481 | ||||||||||||||
City of Shreveport, 5.00% due 12/1/2021 (Water and Sewer System; Insured: BAM) | AA/A3 | 8,185,000 | 9,289,975 | ||||||||||||||
City of Shreveport, 5.00% due 12/1/2022 (Water and Sewer System; Insured: BAM) | AA/A3 | 6,460,000 | 7,463,432 | ||||||||||||||
City of Shreveport, 5.00% due 12/1/2023 (Water and Sewer System; Insured: BAM) | AA/A3 | 4,245,000 | 4,991,653 | ||||||||||||||
City of Shreveport, 5.00% due 12/1/2024 (Water and Sewer System; Insured: BAM) | AA/A3 | 4,490,000 | 5,349,835 | ||||||||||||||
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 | 2,148,444 | ||||||||||||||
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 | 1,688,654 | ||||||||||||||
East Baton Rouge Sewerage Commission, 5.00% due 2/1/2023 (Wastewater System Improvements) | AA-/Aa3 | 450,000 | 523,494 | ||||||||||||||
East Baton Rouge Sewerage Commission, 5.00% due 2/1/2024 (Wastewater System Improvements) | AA-/Aa3 | 1,000,000 | 1,181,540 | ||||||||||||||
East Baton Rouge Sewerage Commission, 5.00% due 2/1/2025 (Wastewater System Improvements) | AA-/Aa3 | 700,000 | 836,752 | ||||||||||||||
Ernest N. Morial - New Orleans Exhibition Hall Authority, 5.00% due 7/15/2020 (Convention Center) | NR/A1 | 1,000,000 | 1,100,240 | ||||||||||||||
Ernest N. Morial - New Orleans Exhibition Hall Authority, 5.00% due 7/15/2021 (Convention Center) | NR/A1 | 780,000 | 880,737 | ||||||||||||||
Ernest N. Morial - New Orleans Exhibition Hall Authority, 5.00% due 7/15/2022 (Convention Center) | NR/A1 | 1,000,000 | 1,149,560 | ||||||||||||||
Ernest N. Morial - New Orleans Exhibition Hall Authority, 5.00% due 7/15/2023 (Convention Center) | NR/A1 | 1,000,000 | 1,142,660 | ||||||||||||||
Jefferson Sales Tax District Parish of Jefferson, 5.00% due 12/1/2018 (Sewerage Capital Project; Insured: AGM) | AA/A2 | 2,000,000 | 2,091,160 | ||||||||||||||
Louisiana Energy & Power Authority, 5.00% due 1/1/2020 (Rodemacher Unit No. 2 Power) | A-/Baa1 | 1,000,000 | 1,078,940 | ||||||||||||||
Louisiana Energy & Power Authority, 5.00% due 1/1/2021 (Rodemacher Unit No. 2 Power) | A-/Baa1 | 1,000,000 | 1,109,770 | ||||||||||||||
Louisiana Energy & Power Authority, 5.00% due 6/1/2022 (LEPA Unit No. 1 Power; Insured: AGM) | AA/A2 | 1,000,000 | 1,155,270 | ||||||||||||||
Louisiana Energy & Power Authority, 5.00% due 1/1/2023 (Rodemacher Unit No. 2 Power) | A-/Baa1 | 1,740,000 | 2,000,078 | ||||||||||||||
Louisiana Energy & Power Authority, 5.00% due 6/1/2023 (LEPA Unit No. 1 Power; Insured: AGM) | AA/A2 | 750,000 | 882,840 | ||||||||||||||
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 | 1,000,150 | ||||||||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 3/1/2018 (Independence Stadium) (ETM) | A/NR | 1,000,000 | 1,017,160 | ||||||||||||||
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 | 1,029,880 | ||||||||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.00% due 12/1/2018 (Bossier Parish Community College - Campus Facilities Project, Inc.) | A+/NR | 2,655,000 | 2,745,190 | ||||||||||||||
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 | 1,055,590 | ||||||||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 4.00% due 12/1/2019 (Bossier Parish Community College - Campus Facilities, Inc. Project) | A+/NR | 1,310,000 | 1,385,102 | ||||||||||||||
Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 12/1/2020 (Bossier Parish Community College - Campus Facilities, Inc. Project) | A+/NR | 1,200,000 | 1,332,108 | ||||||||||||||
| b | Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 10/1/2022 (LCTCS Act 391 Project; Insured: BAM) | AA/NR | 2,525,000 | 2,920,162 | |||||||||||||
| b | Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 10/1/2023 (LCTCS Act 391 Project; Insured: BAM) | AA/NR | 3,440,000 | 4,035,911 | |||||||||||||
| b | Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 10/1/2024 (LCTCS Act 391 Project; Insured: BAM) | AA/NR | 3,450,000 | 4,091,355 | |||||||||||||
| b | Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 10/1/2025 (LCTCS Act 391 Project; Insured: BAM) | AA/NR | 2,660,000 | 3,177,157 | |||||||||||||
| b | Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 10/1/2026 (LCTCS Act 391 Project; Insured: BAM) | AA/NR | 2,550,000 | 3,063,876 | |||||||||||||
| b | Louisiana Local Govt Environmental Facilities & Community Development Authority, 5.00% due 10/1/2027 (LCTCS Act 391 Project; Insured: BAM) | AA/NR | 4,390,000 | 5,321,207 | |||||||||||||
Louisiana Offshore Terminal Authority, 5.00% due 10/1/2018 (Deepwater Oil Port-Loop LLC) | BBB+/NR | 22,140,000 | 22,887,889 | ||||||||||||||
Louisiana Public Facilities Authority, 5.00% due 6/1/2022 (Hurricane Recovery Program) | NR/A1 | 2,945,000 | 3,377,090 | ||||||||||||||
22 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Louisiana Public Facilities Authority, 5.00% due 6/1/2023 (Hurricane Recovery Program) | NR/A1 | $ | 5,000,000 | $ | 5,841,400 | ||||||||||||
Louisiana State Office Facilities Corp., 5.00% due 5/1/2018 (State Capitol) | NR/A1 | 2,500,000 | 2,558,100 | ||||||||||||||
Louisiana State Office Facilities Corp., 5.00% due 5/1/2021 (State Capitol) | NR/A1 | 4,595,000 | 5,007,585 | ||||||||||||||
| a | New Orleans Regional Transit Authority, 5.00% due 12/1/2017 (Streetcar Rail Lines; Insured: AGM) | AA/Aa3 | 755,000 | 760,323 | |||||||||||||
New Orleans Regional Transit Authority, 5.00% due 12/1/2019 (Streetcar Rail Lines; Insured: AGM) | AA/Aa3 | 1,000,000 | 1,079,570 | ||||||||||||||
New Orleans Regional Transit Authority, 5.00% due 12/1/2021 (Streetcar Rail Lines; Insured: AGM) | AA/Aa3 | 1,000,000 | 1,105,440 | ||||||||||||||
New Orleans Regional Transit Authority, 5.00% due 12/1/2022 (Streetcar Rail Lines; Insured: AGM) | AA/Aa3 | 1,110,000 | 1,231,223 | ||||||||||||||
Parish of LaFourche, 5.00% due 1/1/2019 (Roads, Highways & Bridges) | AA-/NR | 595,000 | 623,078 | ||||||||||||||
Parish of LaFourche, 5.00% due 1/1/2022 (Roads, Highways & Bridges) | AA-/NR | 415,000 | 471,714 | ||||||||||||||
Parish of LaFourche, 5.00% due 1/1/2023 (Roads, Highways & Bridges) | AA-/NR | 515,000 | 596,993 | ||||||||||||||
Parish of Orleans School District GO, 5.00% due 9/1/2018 (Insured: AGM) | AA/Aa3 | 4,800,000 | 4,969,008 | ||||||||||||||
Parish of Orleans School District GO, 5.00% due 9/1/2020 (Insured: AGM) | AA/Aa3 | 3,840,000 | 4,231,296 | ||||||||||||||
Parish of Plaquemines Law Enforcement District GO, 5.00% due 9/1/2019 | A+/NR | 1,005,000 | 1,056,446 | ||||||||||||||
Parish of Plaquemines Law Enforcement District GO, 5.00% due 9/1/2021 pre-refunded 9/1/2019 | A+/NR | 1,115,000 | 1,199,316 | ||||||||||||||
Parish of St. Charles, 4.00% due 12/1/2040 put 6/1/2022 (Valero Energy Corp. Refinery) | BBB/Baa2 | 14,195,000 | 15,000,708 | ||||||||||||||
Parish of Terrebonne Hospital Service District No. 1, 5.00% due 4/1/2018 (Terrebonne General Medical Center) | A/A3 | 1,000,000 | 1,019,330 | ||||||||||||||
Parish of Terrebonne Hospital Service District No. 1, 5.00% due 4/1/2019 (Terrebonne General Medical Center) | A/A3 | 1,810,000 | 1,909,116 | ||||||||||||||
Parish of Terrebonne Hospital Service District No. 1, 5.00% due 4/1/2021 (Terrebonne General Medical Center) | A/A3 | 2,320,000 | 2,518,662 | ||||||||||||||
MAINE — 0.08% | |||||||||||||||||
Maine Governmental Facilities Authority, 5.00% due 10/1/2020 (Augusta & Machias Courthouses) | AA-/Aa3 | 1,245,000 | 1,381,900 | ||||||||||||||
Maine Governmental Facilities Authority, 5.00% due 10/1/2021 (Augusta & Machias Courthouses) | AA-/Aa3 | 1,315,000 | 1,498,495 | ||||||||||||||
Maine Governmental Facilities Authority, 5.00% due 10/1/2022 (Augusta & Machias Courthouses) | AA-/Aa3 | 1,175,000 | 1,365,057 | ||||||||||||||
Maine Governmental Facilities Authority, 5.00% due 10/1/2023 (Augusta & Machias Courthouses) | AA-/Aa3 | 1,445,000 | 1,706,198 | ||||||||||||||
MARYLAND — 0.43% | |||||||||||||||||
County of Montgomery GO, 0.88% due 6/1/2026 put 10/2/2017 (Consolidated Public Improvements; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AAA/Aaa | 11,765,000 | 11,765,000 | ||||||||||||||
Maryland Economic Development Corp., 5.00% due 6/1/2021 (Public Health Laboratory) | AA+/Aa1 | 8,725,000 | 9,881,062 | ||||||||||||||
Maryland Economic Development Corp., 4.00% due 6/1/2022 (Public Health Laboratory) | AA+/Aa1 | 8,245,000 | 8,944,836 | ||||||||||||||
MASSACHUSETTS — 1.79% | |||||||||||||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2018 | A/NR | 2,825,000 | 2,904,806 | ||||||||||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2019 | A/NR | 2,765,000 | 2,939,942 | ||||||||||||||
Berkshire Wind Power Cooperative Corp., 5.00% due 7/1/2020 | A/NR | 2,965,000 | 3,219,782 | ||||||||||||||
Commonwealth of Massachusetts GO, 0.94% due 3/1/2026 put 10/2/2017 (SPA: Barclays Bank plc) (daily demand notes) | AA/Aa1 | 48,580,000 | 48,580,000 | ||||||||||||||
Massachusetts Development Finance Agency, 3.00% due 7/1/2018 (Mount Auburn Hospital Health Records System) | A-/A3 | 1,000,000 | 1,014,320 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2022 (Mount Auburn Hospital Health Records System) | A-/A3 | 2,750,000 | 3,169,678 | ||||||||||||||
| a | Massachusetts Development Finance Agency, 5.00% due 7/1/2023 (Mount Auburn Hospital Health Records System) | A-/A3 | 4,000,000 | 4,687,280 | |||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2023 (CareGroup Healthcare) | A-/A3 | 2,500,000 | 2,929,550 | ||||||||||||||
Massachusetts Development Finance Agency, 5.25% due 10/1/2023 (Simmons College) | BBB+/Baa1 | 595,000 | 701,701 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2024 (Mount Auburn Hospital Health Records System) | A-/A3 | 6,050,000 | 7,183,044 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2024 (CareGroup Healthcare) | A-/A3 | 3,020,000 | 3,585,586 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2025 (Mount Auburn Hospital Health Records System) | A-/A3 | 2,465,000 | 2,960,465 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2025 (CareGroup Healthcare) | A-/A3 | 2,500,000 | 2,994,625 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2026 (CareGroup Healthcare) | A-/A3 | 3,000,000 | 3,629,730 | ||||||||||||||
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 | 2,148,260 | ||||||||||||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2018 | AA/NR | 11,170,000 | 11,288,960 | ||||||||||||||
Massachusetts Educational Financing Authority, 5.75% due 1/1/2020 | AA/NR | 7,500,000 | 8,188,350 | ||||||||||||||
Massachusetts Health & Educational Facilities Authority, 5.00% due 7/1/2018 (UMass Memorial Health Care) | BBB+/Baa3 | 4,290,000 | 4,404,586 | ||||||||||||||
Massachusetts Housing Finance Agency, 2.00% due 6/1/2019 (Low and Moderate Income Housing) | AA-/Aa3 | 11,915,000 | 11,986,133 | ||||||||||||||
MICHIGAN — 3.09% | |||||||||||||||||
Board of Governors of Wayne State University, 5.00% due 11/15/2022 (Educational Facilities and Equipment) | A+/Aa3 | 425,000 | 491,045 | ||||||||||||||
Board of Governors of Wayne State University, 5.00% due 11/15/2023 (Educational Facilities and Equipment) | A+/Aa3 | 305,000 | 358,576 | ||||||||||||||
Board of Governors of Wayne State University, 5.00% due 11/15/2024 (Educational Facilities and Equipment) | A+/Aa3 | 515,000 | 612,541 | ||||||||||||||
Board of Governors of Wayne State University, 5.00% due 11/15/2025 (Educational Facilities and Equipment) | A+/Aa3 | 625,000 | 737,487 | ||||||||||||||
Byron Center Michigan Public Schools, 4.00% due 5/1/2018 (Insured: AGM/Q-SBLF) | AA/NR | 1,935,000 | 1,969,056 | ||||||||||||||
Byron Center Michigan Public Schools, 4.00% due 5/1/2020 (Insured: AGM/Q-SBLF) | AA/NR | 1,000,000 | 1,070,360 | ||||||||||||||
City of Battle Creek GO, 5.00% due 5/1/2020 pre-refunded 5/01/2018 (Downtown Development; Insured: AMBAC) | NR/NR | 2,240,000 | 2,293,760 | ||||||||||||||
City of Battle Creek GO, 5.00% due 5/1/2020 (Downtown Development; Insured: AMBAC) | AA/NR | 960,000 | 981,946 | ||||||||||||||
County of Genesee GO, 5.00% due 11/1/2022 (Water Supply System; Insured: BAM) | AA/A2 | 600,000 | 692,316 | ||||||||||||||
County of Livingston GO, 4.00% due 5/1/2018 (Howell Public Schools; Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,017,130 | ||||||||||||||
County of Livingston GO, 4.00% due 5/1/2020 (Howell Public Schools; Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,067,450 | ||||||||||||||
County of Livingston GO, 4.00% due 5/1/2021 (Howell Public Schools; Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,090,080 | ||||||||||||||
Annual Report | 23
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2018 (Bronson Methodist Hospital; Insured: AGM) | AA/A2 | $ | 1,520,000 | $ | 1,555,538 | ||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2018 (Bronson Methodist Hospital; Insured: AGM) | AA/A2 | 2,500,000 | 2,558,450 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2020 (Bronson Methodist Hospital; Insured: AGM) | NR/A2 | 1,735,000 | 1,895,713 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2021 pre-refunded 5/15/2020 (Bronson Methodist Hospital; Insured: AGM) | NR/A2 | 1,300,000 | 1,427,933 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2021 (Bronson Methodist Hospital; Insured: AGM) | NR/A2 | 1,050,000 | 1,145,833 | ||||||||||||||
Livonia Public Schools School District GO, 4.00% due 5/1/2020 (School Building & Site) | A/A3 | 800,000 | 845,912 | ||||||||||||||
Livonia Public Schools School District GO, 5.00% due 5/1/2021 (School Building & Site) | A/A3 | 900,000 | 1,002,969 | ||||||||||||||
Michigan Finance Authority, 4.00% due 8/1/2018 (Beaumont Health Credit Group) | A/A1 | 500,000 | 511,900 | ||||||||||||||
Michigan Finance Authority, 5.00% due 8/1/2019 (Ypsilanti Community Schools) | A+/NR | 1,150,000 | 1,223,462 | ||||||||||||||
Michigan Finance Authority, 5.00% due 8/1/2020 (Ypsilanti Community Schools) | A+/NR | 1,220,000 | 1,332,923 | ||||||||||||||
Michigan Finance Authority, 5.00% due 8/1/2021 (Ypsilanti Community Schools) | A+/NR | 1,295,000 | 1,449,455 | ||||||||||||||
Michigan Finance Authority, 5.00% due 8/1/2022 (Ypsilanti Community Schools) | A+/NR | 1,375,000 | 1,567,734 | ||||||||||||||
Michigan Finance Authority, 5.00% due 12/1/2022 (Trinity Health Credit Group) | AA-/Aa3 | 1,000,000 | 1,164,950 | ||||||||||||||
Michigan Finance Authority, 5.00% due 8/1/2023 (Beaumont Health Credit Group) | A/A1 | 3,800,000 | 4,461,846 | ||||||||||||||
Michigan Finance Authority, 5.00% due 12/1/2023 (Trinity Health Credit Group) | AA-/Aa3 | 2,500,000 | 2,968,225 | ||||||||||||||
Michigan Finance Authority, 5.00% due 8/1/2024 (Beaumont Health Credit Group) | A/A1 | 7,000,000 | 8,325,170 | ||||||||||||||
Michigan Finance Authority, 5.00% due 12/1/2024 (Trinity Health Credit Group) | AA-/Aa3 | 1,000,000 | 1,201,890 | ||||||||||||||
Michigan Finance Authority, 5.00% due 8/1/2025 (Beaumont Health Credit Group) | A/A1 | 8,000,000 | 9,430,640 | ||||||||||||||
Michigan Finance Authority, 5.00% due 11/15/2027 (Henry Ford Health System) | A/A3 | 1,000,000 | 1,193,210 | ||||||||||||||
Michigan Municipal Bond Authority, 5.00% due 10/1/2020 (Clean Water Fund) | AAA/Aaa | 35,000 | 36,292 | ||||||||||||||
Michigan State Building Authority, 5.50% due 10/15/2017 (ETM) | NR/NR | 525,000 | 526,108 | ||||||||||||||
Michigan State Building Authority, 5.50% due 10/15/2017 (Facilities Program) (ETM) | NR/NR | 165,000 | 165,348 | ||||||||||||||
Michigan State Building Authority, 5.50% due 10/15/2017 (Facilities Program) | A+/Aa2 | 3,460,000 | 3,467,128 | ||||||||||||||
Michigan State Building Authority, 5.00% due 4/15/2023 (Facilities Program) | A+/Aa2 | 1,000,000 | 1,176,540 | ||||||||||||||
Michigan State Building Authority, 5.00% due 4/15/2024 (Facilities Program) | A+/Aa2 | 1,000,000 | 1,195,330 | ||||||||||||||
Michigan State Building Authority, 5.00% due 4/15/2025 (Facilities Program) | A+/Aa2 | 1,555,000 | 1,876,543 | ||||||||||||||
Michigan State Building Authority, 5.00% due 4/15/2026 (Facilities Program) | A+/Aa2 | 750,000 | 911,362 | ||||||||||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2017 (Sparrow Memorial Hospital) | A+/A1 | 1,500,000 | 1,507,860 | ||||||||||||||
Michigan State Hospital Finance Authority, 5.50% due 11/15/2017 (Henry Ford Health System) (ETM) | A/A3 | 1,530,000 | 1,539,211 | ||||||||||||||
Michigan State Hospital Finance Authority, 5.50% due 11/15/2018 (Henry Ford Health System) (ETM) | A/A3 | 3,500,000 | 3,677,660 | ||||||||||||||
Michigan State Hospital Finance Authority, 6.00% due 12/1/2018 (Trinity Health) | AA-/Aa3 | 2,000,000 | 2,113,180 | ||||||||||||||
Michigan State Hospital Finance Authority, 1.90% due 11/15/2047 (Ascension Health) | AA+/Aa2 | 2,900,000 | 2,921,837 | ||||||||||||||
Michigan Strategic Fund, 5.00% due 10/15/2017 (Michigan House of Representatives Facilities; Insured: AGM) | AA/Aa2 | 2,000,000 | 2,003,660 | ||||||||||||||
Michigan Strategic Fund, 5.25% due 10/15/2019 pre-refunded 10/15/2018 (Michigan House of Representatives Facilities; Insured: AGM) | AA/Aa2 | 2,550,000 | 2,663,908 | ||||||||||||||
Michigan Strategic Fund, 5.25% due 10/15/2020 pre-refunded 10/15/2018 (Michigan House of Representatives Facilities; Insured: AGM) | AA/Aa2 | 4,025,000 | 4,204,797 | ||||||||||||||
Novi Community School District GO, 5.00% due 5/1/2018 (Michigan School Bond Qualification and Loan Program; Insured: Q-SBLF) | NR/Aa1 | 1,000,000 | 1,022,980 | ||||||||||||||
Novi Community School District GO, 5.00% due 5/1/2019 (Michigan School Bond Qualification and Loan Program; Insured: Q-SBLF) | NR/Aa1 | 800,000 | 847,440 | ||||||||||||||
Plymouth-Canton Community Schools GO, 4.00% due 5/1/2018 (Insured: Q-SBLF) | NR/Aa1 | 1,500,000 | 1,525,695 | ||||||||||||||
Plymouth-Canton Community Schools GO, 4.00% due 5/1/2019 (Insured: Q-SBLF) | NR/Aa1 | 1,000,000 | 1,043,610 | ||||||||||||||
Plymouth-Canton Community Schools GO, 5.00% due 5/1/2020 (Insured: Q-SBLF) | NR/Aa1 | 1,000,000 | 1,092,810 | ||||||||||||||
Royal Oak Hospital Finance Authority, 5.00% due 9/1/2020 (William Beaumont Hospital) | A/A1 | 1,200,000 | 1,324,584 | ||||||||||||||
Royal Oak Hospital Finance Authority, 5.00% due 9/1/2021 (William Beaumont Hospital) | A/A1 | 2,500,000 | 2,827,600 | ||||||||||||||
Royal Oak Hospital Finance Authority, 5.00% due 9/1/2023 (William Beaumont Hospital) | A/A1 | 1,240,000 | 1,454,322 | ||||||||||||||
Royal Oak Hospital Finance Authority, 5.00% due 9/1/2024 (William Beaumont Hospital) | A/A1 | 2,000,000 | 2,348,880 | ||||||||||||||
School District of the City of Dearborn GO, 3.00% due 5/1/2019 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa1 | 445,000 | 457,424 | ||||||||||||||
School District of the City of Dearborn GO, 4.00% due 5/1/2020 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa1 | 350,000 | 373,607 | ||||||||||||||
School District of the City of Dearborn GO, 4.00% due 5/1/2021 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa1 | 570,000 | 621,346 | ||||||||||||||
School District of the City of Dearborn GO, 4.00% due 5/1/2022 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa1 | 535,000 | 591,849 | ||||||||||||||
School District of the City of Dearborn GO, 4.00% due 5/1/2023 (Insured: Q-SBLF) (State Aid Withholding) | NR/Aa1 | 625,000 | 699,925 | ||||||||||||||
School District of the City of Detroit GO, 5.00% due 5/1/2020 (Wayne County School Building & Site; Insured: Q-SBLF) | AA-/Aa1 | 2,200,000 | 2,405,766 | ||||||||||||||
School District of the City of Detroit GO, 5.00% due 5/1/2021 (Wayne County School Building & Site; Insured: Q-SBLF) | AA-/Aa1 | 4,000,000 | 4,487,840 | ||||||||||||||
School District of the City of Detroit GO, 5.00% due 5/1/2022 (Wayne County School Building & Site; Insured: Q-SBLF) | AA-/Aa1 | 3,000,000 | 3,431,490 | ||||||||||||||
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 | 1,313,630 | ||||||||||||||
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 | 1,460,223 | ||||||||||||||
St. Johns Public Schools GO, 5.00% due 5/1/2021 (Insured: Natl-Re/FGIC/Q-SBLF) | AA-/Aa2 | 1,000,000 | 1,124,950 | ||||||||||||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2020 (Higher Education Facilities Program) | A+/Aa2 | 1,000,000 | 1,113,480 | ||||||||||||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2021 (Higher Education Facilities Program) | A+/Aa2 | 1,000,000 | 1,144,190 | ||||||||||||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2022 (Higher Education Facilities Program) | A+/Aa2 | 3,000,000 | 3,503,430 | ||||||||||||||
24 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
State Building Authority of the State of Michigan, 5.00% due 10/15/2023 (Higher Education Facilities Program) | A+/Aa2 | $ | 7,715,000 | $ | 9,164,417 | ||||||||||||
State of Michigan, 5.00% due 3/15/2025 (Jobs Today Highway Program & Governor’s Economic Stimulus Program) | AA/A2 | 19,000,000 | 22,952,760 | ||||||||||||||
Utica Community Schools County of Macomb GO, 4.00% due 5/1/2018 (Technology Infrastructure Improvements; Insured: Q-SBLF) | AA-/NR | 1,725,000 | 1,754,549 | ||||||||||||||
Utica Community Schools County of Macomb GO, 4.00% due 5/1/2019 (Technology Infrastructure Improvements; Insured: Q-SBLF) | AA-/NR | 9,925,000 | 10,357,829 | ||||||||||||||
Warren Consolidated School District GO, 5.00% due 5/1/2018 (Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,023,020 | ||||||||||||||
Warren Consolidated School District GO, 5.00% due 5/1/2020 (Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,093,530 | ||||||||||||||
Warren Consolidated School District GO, 5.00% due 5/1/2021 (Insured: Q-SBLF) | AA-/NR | 1,000,000 | 1,125,080 | ||||||||||||||
Wayne County Airport Authority, 5.00% due 12/1/2017 (Detroit Metropolitan Airport; Insured: Natl-Re) | A/A2 | 1,000,000 | 1,007,110 | ||||||||||||||
Wayne County Airport Authority, 5.00% due 12/1/2017 (Detroit Metropolitan Airport) | A/A2 | 2,420,000 | 2,437,206 | ||||||||||||||
Wayne County Airport Authority, 5.00% due 12/1/2019 (Detroit Metropolitan Airport) | A/A2 | 12,645,000 | 13,697,570 | ||||||||||||||
Wayne County Airport Authority, 5.50% due 12/1/2019 (Detroit Metropolitan Airport) | A/A2 | 2,600,000 | 2,844,244 | ||||||||||||||
Wayne County Airport Authority, 5.50% due 12/1/2020 (Detroit Metropolitan Airport) | A/A2 | 4,395,000 | 4,976,502 | ||||||||||||||
Wayne County Airport Authority, 5.50% due 12/1/2020 (Detroit Metropolitan Airport) | A/A2 | 3,115,000 | 3,527,146 | ||||||||||||||
Wayne State University, 5.00% due 11/15/2023 | A+/Aa3 | 3,865,000 | 4,543,926 | ||||||||||||||
Wayne State University, 5.00% due 11/15/2024 | A+/Aa3 | 4,840,000 | 5,756,696 | ||||||||||||||
Wayne State University, 5.00% due 11/15/2025 | A+/Aa3 | 5,775,000 | 6,937,912 | ||||||||||||||
Wayne State University, 5.00% due 11/15/2026 | A+/Aa3 | 3,000,000 | 3,605,520 | ||||||||||||||
Western Townships Utilities Authority GO, 5.00% due 1/1/2018 (Sewage Disposal System) | AA/NR | 1,500,000 | 1,514,700 | ||||||||||||||
MINNESOTA — 0.64% | |||||||||||||||||
City of Rochester, 4.00% due 11/15/2030 (Mayo Clinic) | AA/Aa2 | 1,450,000 | 1,497,734 | ||||||||||||||
City of St. Cloud, 5.00% due 5/1/2018 (CentraCare Health System) | NR/A1 | 3,105,000 | 3,178,588 | ||||||||||||||
City of St. Cloud, 5.00% due 5/1/2019 (CentraCare Health System) | NR/A1 | 3,495,000 | 3,710,222 | ||||||||||||||
City of St. Cloud, 5.00% due 5/1/2020 (CentraCare Health System) | NR/A1 | 3,310,000 | 3,626,701 | ||||||||||||||
City of St. Paul Housing & Redevelopment Authority, 5.00% due 2/1/2018 (Gillette Children’s Specialty Healthcare Project) (ETM) | A/NR | 1,255,000 | 1,272,294 | ||||||||||||||
City of St. Paul Housing & Redevelopment Authority, 5.25% due 2/1/2020 pre-refunded 2/1/2019 (Gillette Children’s Specialty Healthcare Project) | A/NR | 2,010,000 | 2,123,103 | ||||||||||||||
County of Clay GO, 3.00% due 4/1/2018 (State-Aid Road Improvements) | AA/NR | 1,225,000 | 1,237,826 | ||||||||||||||
Le Sueur-Henderson ISD No. 2397 GO, 3.00% due 4/1/2021 (Minnesota School District Credit Enhancement Program) | AA+/NR | 1,125,000 | 1,186,369 | ||||||||||||||
Northern Municipal Power Agency, 5.00% due 1/1/2019 (Electric System) | A-/A3 | 5,000,000 | 5,241,100 | ||||||||||||||
Northern Municipal Power Agency, 5.00% due 1/1/2020 (Electric System) | A-/A3 | 3,500,000 | 3,791,760 | ||||||||||||||
Port Authority of the City of St. Paul, 5.00% due 12/1/2017 (Minnesota Andersen Office Building) | AA/Aa2 | 4,945,000 | 4,979,516 | ||||||||||||||
Port Authority of the City of St. Paul, 4.00% due 12/1/2018 (Minnesota Freeman Office Building) | AA/Aa2 | 3,925,000 | 4,053,818 | ||||||||||||||
Port Authority of the City of St. Paul, 5.00% due 12/1/2019 (Minnesota Freeman Office Building) | AA/Aa2 | 2,000,000 | 2,158,840 | ||||||||||||||
Port Authority of the City of St. Paul, 5.00% due 12/1/2020 (Minnesota Freeman Office Building) | AA/Aa2 | 2,675,000 | 2,976,847 | ||||||||||||||
Port Authority of the City of St. Paul, 5.00% due 12/1/2021 (Minnesota Andersen Office Building) | AA/Aa2 | 965,000 | 1,101,914 | ||||||||||||||
Port Authority of the City of St. Paul, 5.00% due 12/1/2022 (Minnesota Andersen Office Building) | AA/Aa2 | 1,250,000 | 1,455,400 | ||||||||||||||
St. Paul Housing and Redevelopment Authority, 5.00% due 7/1/2023 (HealthPartners) | A/A2 | 1,000,000 | 1,172,420 | ||||||||||||||
St. Paul Housing and Redevelopment Authority, 5.00% due 7/1/2024 (HealthPartners) | A/A2 | 600,000 | 714,876 | ||||||||||||||
St. Paul Housing and Redevelopment Authority, 5.00% due 7/1/2025 (HealthPartners) | A/A2 | 250,000 | 300,450 | ||||||||||||||
MISSISSIPPI — 0.25% | |||||||||||||||||
Mississippi Development Bank, 5.00% due 8/1/2018 (Department of Corrections) | AA-/NR | 4,910,000 | 5,071,294 | ||||||||||||||
Mississippi Development Bank, 5.00% due 1/1/2020 (MDOT-Harrison County Highway) | AA-/Aa3 | 1,500,000 | 1,621,890 | ||||||||||||||
Mississippi Development Bank, 5.00% due 1/1/2020 (MDOT-Madison County Highway) | AA-/Aa3 | 1,000,000 | 1,081,260 | ||||||||||||||
Mississippi Development Bank, 5.00% due 1/1/2021 (MDOT-Harrison County Highway) | AA-/Aa3 | 2,500,000 | 2,783,700 | ||||||||||||||
Mississippi Development Bank, 5.00% due 1/1/2021 (MDOT-Madison County Highway) | AA-/Aa3 | 2,000,000 | 2,226,960 | ||||||||||||||
Mississippi Development Bank, 5.00% due 1/1/2022 (MDOT-Harrison County Highway) | AA-/Aa3 | 1,000,000 | 1,138,870 | ||||||||||||||
Mississippi Development Bank, 5.00% due 1/1/2022 (MDOT-Madison County Highway) | AA-/Aa3 | 1,000,000 | 1,138,870 | ||||||||||||||
Mississippi Development Bank, 5.00% due 1/1/2023 (MDOT-Harrison County Highway) | AA-/Aa3 | 1,500,000 | 1,743,720 | ||||||||||||||
Mississippi Development Bank, 5.00% due 1/1/2023 (MDOT-Madison County Highway) | AA-/Aa3 | 1,250,000 | 1,453,100 | ||||||||||||||
MISSOURI — 1.28% | |||||||||||||||||
Cass County COP, 4.00% due 5/1/2018 | A/NR | 2,255,000 | 2,287,427 | ||||||||||||||
Cass County COP, 4.50% due 5/1/2019 | A/NR | 1,270,000 | 1,325,969 | ||||||||||||||
Cass County COP, 5.00% due 5/1/2020 | A/NR | 2,255,000 | 2,438,106 | ||||||||||||||
Cass County COP, 5.00% due 5/1/2021 | A/NR | 1,750,000 | 1,887,165 | ||||||||||||||
City of St. Louis GO, 3.00% due 6/1/2018 (Cash Flow Management) | SP-1+/NR | 4,500,000 | 4,563,000 | ||||||||||||||
Jackson County, 4.00% due 12/1/2017 (Parking Facility Projects) | NR/Aa3 | 500,000 | 502,695 | ||||||||||||||
Jackson County, 4.00% due 12/1/2019 (Parking Facility Projects) | NR/Aa3 | 500,000 | 529,330 | ||||||||||||||
Jackson County, 4.00% due 12/1/2021 (Parking Facility Projects) | NR/Aa3 | 1,000,000 | 1,101,220 | ||||||||||||||
Kansas City IDA, 5.00% due 9/1/2018 (Kansas City Redevelopment District) (ETM) | NR/NR | 695,000 | 720,993 | ||||||||||||||
Annual Report | 25
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Kansas City IDA, 5.00% due 9/1/2018 (Kansas City Redevelopment District) | AA-/A1 | $ | 1,305,000 | $ | 1,352,045 | ||||||||||||
Kansas City Municipal Assistance Corp., 5.00% due 4/15/2018 (H. Roe Bartle Convention Center & Infrastructure Project; Insured: Natl-Re) | AA/A1 | 1,000,000 | 1,021,100 | ||||||||||||||
Kansas City Municipal Assistance Corp., 0% due 4/15/2021 (H. Roe Bartle Convention Center & Infrastructure Project; Insured: AMBAC) | AA-/A1 | 10,055,000 | 9,331,241 | ||||||||||||||
Kansas City Municipal Assistance Corp., 0.00% due 4/15/2022 (H. Roe Bartle Convention Center & Infrastructure Project; Insured: AMBAC) | AA-/A1 | 5,040,000 | 4,541,343 | ||||||||||||||
Missouri Development Finance Board, 5.00% due 6/1/2018 (City of Independence Electric System) | A/NR | 1,705,000 | 1,745,733 | ||||||||||||||
Missouri Development Finance Board, 4.00% due 6/1/2019 (City of Independence Electric System) | A/NR | 1,000,000 | 1,039,170 | ||||||||||||||
Missouri Development Finance Board, 5.00% due 6/1/2019 (City of Independence Electric System) | A/NR | 1,790,000 | 1,889,524 | ||||||||||||||
Missouri Development Finance Board, 4.00% due 6/1/2020 (City of Independence Electric System) | A/NR | 1,265,000 | 1,338,446 | ||||||||||||||
Missouri Development Finance Board, 5.00% due 6/1/2020 (City of Independence Electric System) | A/NR | 1,000,000 | 1,084,050 | ||||||||||||||
Missouri Development Finance Board, 4.00% due 6/1/2021 (City of Independence Electric System) | A/NR | 2,465,000 | 2,648,470 | ||||||||||||||
Missouri Development Finance Board, 4.00% due 6/1/2022 (City of Independence Electric System) | A/NR | 3,155,000 | 3,426,015 | ||||||||||||||
Missouri Development Finance Board, 0.90% due 12/1/2033 put 10/2/2017 (The Nelson Gallery Foundation; SPA: Northern Trust Co.) (daily demand notes) | AAA/Aaa | 9,015,000 | 9,015,000 | ||||||||||||||
Missouri Health and Educational Facilities Authority, 5.00% due 5/15/2019 (Children’s Mercy Hospital) | A+/NR | 1,000,000 | 1,060,860 | ||||||||||||||
Missouri Health and Educational Facilities Authority, 5.00% due 5/15/2020 pre-refunded 5/15/2019 (Children’s Mercy Hospital) | NR/NR | 830,000 | 882,630 | ||||||||||||||
Missouri Health and Educational Facilities Authority, 5.00% due 5/15/2020 (Children’s Mercy Hospital) | A+/NR | 170,000 | 181,244 | ||||||||||||||
Missouri Health and Educational Facilities Authority, 0.90% due 9/1/2030 put 10/2/2017 (Washington University; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 1,700,000 | 1,700,000 | ||||||||||||||
Missouri Health and Educational Facilities Authority, 0.90% due 9/1/2030 put 10/2/2017 (Washington University; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 7,700,000 | 7,700,000 | ||||||||||||||
Missouri Health and Educational Facilities Authority, 0.90% due 9/1/2030 put 10/2/2017 (Washington University; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA+/Aa1 | 1,900,000 | 1,900,000 | ||||||||||||||
Missouri Health and Educational Facilities Authority, 0.90% due 3/1/2040 put 10/2/2017 (Washington University; SPA: U.S. Bank, N.A.) (daily demand notes) | AA+/Aa1 | 600,000 | 600,000 | ||||||||||||||
Platte County, 4.00% due 4/1/2018 (Community & Resource Centers) | NR/A1 | 2,110,000 | 2,138,295 | ||||||||||||||
Platte County, 5.00% due 4/1/2019 (Community & Resource Centers) | NR/A1 | 2,000,000 | 2,106,440 | ||||||||||||||
Platte County, 5.00% due 4/1/2021 (Community & Resource Centers) | NR/A1 | 2,440,000 | 2,713,792 | ||||||||||||||
Southeast Missouri State University, 5.00% due 4/1/2018 (City of Cape Girardeau Campus System Facilities) | A/NR | 1,165,000 | 1,188,766 | ||||||||||||||
Southeast Missouri State University, 5.00% due 4/1/2020 (City of Cape Girardeau Campus System Facilities) | A/NR | 2,825,000 | 3,093,234 | ||||||||||||||
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 | 1,680,181 | ||||||||||||||
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 | 1,700,640 | ||||||||||||||
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 | 2,224,681 | ||||||||||||||
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 | 3,621,882 | ||||||||||||||
St. Louis Municipal Finance Corp., 5.00% due 2/15/2018 (City Justice Center) | A/Baa1 | 3,865,000 | 3,920,308 | ||||||||||||||
MONTANA — 0.18% | |||||||||||||||||
City of Forsyth, 0.92% due 1/1/2018 put 10/2/2017 (PacifiCorp; LOC: Bank of Nova Scotia) (daily demand notes) | A+/Aa3 | 13,250,000 | 13,250,000 | ||||||||||||||
NEBRASKA — 0.11% | |||||||||||||||||
Douglas County Hospital Authority No. 3, 5.00% due 11/1/2022 (Nebraska Methodist Health System) | A-/NR | 1,670,000 | 1,912,367 | ||||||||||||||
Douglas County Hospital Authority No. 3, 5.00% due 11/1/2023 (Nebraska Methodist Health System) | A-/NR | 1,905,000 | 2,216,791 | ||||||||||||||
Douglas County Hospital Authority No. 3, 5.00% due 11/1/2024 (Nebraska Methodist Health System) | A-/NR | 1,400,000 | 1,650,236 | ||||||||||||||
Douglas County Hospital Authority No. 3, 5.00% due 11/1/2025 (Nebraska Methodist Health System) | A-/NR | 2,005,000 | 2,385,028 | ||||||||||||||
NEVADA — 3.58% | |||||||||||||||||
Carson City, 5.00% due 9/1/2019 (Carson Tahoe Regional Healthcare) | BBB+/NR | 1,000,000 | 1,063,110 | ||||||||||||||
Carson City, 5.00% due 9/1/2020 (Carson Tahoe Regional Healthcare) | BBB+/NR | 1,000,000 | 1,091,470 | ||||||||||||||
Carson City, 5.00% due 9/1/2022 (Carson Tahoe Regional Healthcare) | BBB+/NR | 2,450,000 | 2,785,062 | ||||||||||||||
City of Las Vegas COP, 5.00% due 9/1/2018 (City Hall) | NR/NR | 720,000 | 747,043 | ||||||||||||||
City of Las Vegas COP, 5.00% due 9/1/2018 (City Hall) | AA-/Aa3 | 3,280,000 | 3,395,489 | ||||||||||||||
City of Las Vegas GO, 7.00% due 4/1/2018 (Performing Arts Center) | AA/Aa2 | 2,095,000 | 2,157,955 | ||||||||||||||
City of Reno, 5.25% due 6/1/2018 (Washoe Medical Center; Insured: AGM) | AA/A2 | 1,000,000 | 1,026,460 | ||||||||||||||
Clark County School District GO, 5.00% due 6/15/2021 (Acquisition of Transportation & Technology Equipment) | AA-/A1 | 20,000,000 | 22,590,200 | ||||||||||||||
Clark County School District GO, 5.00% due 6/15/2021 (Acquisition of Transportation & Technology Equipment) | AA-/A1 | 21,405,000 | 24,177,161 | ||||||||||||||
Clark County School District GO, 5.00% due 6/15/2022 (Acquisition of Transportation & Technology Equipment) | AA-/A1 | 2,560,000 | 2,952,397 | ||||||||||||||
Clark County School District GO, 5.00% due 6/15/2022 (Acquisition of Transportation & Technology Equipment) | AA-/A1 | 27,150,000 | 31,311,552 | ||||||||||||||
Clark County School District GO, 5.00% due 6/15/2025 (School Facilities Improvements) | AA-/A1 | 15,685,000 | 18,977,438 | ||||||||||||||
26 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Clark County School District GO, 5.00% due 6/15/2026 (Acquisition of Transportation & Technology Equipment) | AA-/A1 | $ | 12,180,000 | $ | 14,837,554 | ||||||||||||
Las Vegas Clark County Library District GO, 5.00% due 1/1/2018 | AA/Aa2 | 6,535,000 | 6,601,592 | ||||||||||||||
Las Vegas Clark County Library District GO, 5.00% due 1/1/2019 | AA/Aa2 | 3,000,000 | 3,144,660 | ||||||||||||||
Las Vegas Convention and Visitors Authority, 5.00% due 7/1/2023 | A+/A1 | 800,000 | 936,504 | ||||||||||||||
| a | Las Vegas Convention and Visitors Authority, 5.00% due 7/1/2024 | A+/A1 | 3,155,000 | 3,746,973 | |||||||||||||
Las Vegas Convention and Visitors Authority, 5.00% due 7/1/2025 | A+/A1 | 1,250,000 | 1,496,337 | ||||||||||||||
Las Vegas Convention and Visitors Authority, 5.00% due 7/1/2026 | A+/A1 | 1,000,000 | 1,205,080 | ||||||||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2019 | AA/Aa1 | 1,000,000 | 1,065,030 | ||||||||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2020 | AA/Aa1 | 4,255,000 | 4,684,202 | ||||||||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2020 | AA/Aa1 | 5,080,000 | 5,592,420 | ||||||||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2021 | AA/Aa1 | 5,000,000 | 5,666,350 | ||||||||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2023 | AA/Aa1 | 15,995,000 | 18,907,849 | ||||||||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2024 | AA/Aa1 | 13,825,000 | 16,601,613 | ||||||||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2025 | AA/Aa1 | 7,505,000 | 9,102,439 | ||||||||||||||
Las Vegas Valley Water District GO, 5.00% due 12/1/2025 | AA/Aa1 | 20,000,000 | 24,232,600 | ||||||||||||||
Las Vegas Valley Water District GO, 5.00% due 6/1/2026 | AA/Aa1 | 18,630,000 | 22,513,051 | ||||||||||||||
Washoe County GO, 5.00% due 7/1/2021 (Reno-Sparks Convention & Visitors Authority) | AA/Aa2 | 1,700,000 | 1,931,132 | ||||||||||||||
Washoe County GO, 5.00% due 7/1/2022 (Reno-Sparks Convention & Visitors Authority) | AA/Aa2 | 2,500,000 | 2,818,350 | ||||||||||||||
NEW HAMPSHIRE — 0.43% | |||||||||||||||||
New Hampshire Health and Education Facilities Authority, 5.00% due 10/1/2017 (Southern New Hampshire Medical Center) | A-/NR | 1,000,000 | 1,000,210 | ||||||||||||||
New Hampshire Health and Education Facilities Authority, 0.89% due 7/1/2033 put 10/2/2017 (University System of New Hampshire; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA-/Aa3 | 5,295,000 | 5,295,000 | ||||||||||||||
New Hampshire Health and Education Facilities Authority, 0.90% due 7/1/2033 put 10/2/2017 (University System of New Hampshire; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA-/Aa3 | 15,580,000 | 15,580,000 | ||||||||||||||
New Hampshire Health and Education Facilities Authority, 0.90% due 7/1/2035 put 10/2/2017 (University System of New Hampshire; SPA: State Street Bank & Trust Co.) (daily demand notes) | AA-/Aa3 | 885,000 | 885,000 | ||||||||||||||
New Hampshire Municipal Bond Bank, 5.25% due 8/15/2020 | AA+/Aa2 | 1,000,000 | 1,116,250 | ||||||||||||||
New Hampshire Municipal Bond Bank, 5.25% due 8/15/2022 | AA+/Aa2 | 2,770,000 | 3,267,575 | ||||||||||||||
New Hampshire Turnpike System, 5.00% due 2/1/2018 | A+/A1 | 1,295,000 | 1,312,457 | ||||||||||||||
New Hampshire Turnpike System, 5.00% due 2/1/2020 | A+/A1 | 1,000,000 | 1,085,670 | ||||||||||||||
New Hampshire Turnpike System, 5.00% due 2/1/2021 | A+/A1 | 1,260,000 | 1,407,067 | ||||||||||||||
NEW JERSEY — 2.61% | |||||||||||||||||
Burlington County Bridge Commission, 5.00% due 12/1/2018 (County Governmental Loan Program) | AA/Aa2 | 1,000,000 | 1,046,100 | ||||||||||||||
City of Jersey City GO, 4.00% due 8/1/2020 (Qualified General Improvement; Insured: BAM) (State Aid Withholding) | AA/Aa3 | 2,650,000 | 2,845,782 | ||||||||||||||
City of Jersey City GO, 4.00% due 8/1/2021 (Qualified General Improvement; Insured: BAM) (State Aid Withholding) | AA/Aa3 | 2,805,000 | 3,075,486 | ||||||||||||||
City of Jersey City GO, 5.00% due 8/1/2022 (Qualified General Improvement; Insured: BAM) (State Aid Withholding) | AA/Aa3 | 2,530,000 | 2,920,025 | ||||||||||||||
City of Jersey City GO, 5.00% due 8/1/2023 (Qualified General Improvement; Insured: BAM) (State Aid Withholding) | AA/Aa3 | 2,455,000 | 2,889,388 | ||||||||||||||
Essex County Improvement Authority, 5.50% due 10/1/2024 (County Correctional Facilities & Gibraltar Facilities; Insured: Natl-Re) | NR/Aa1 | 5,000,000 | 6,174,500 | ||||||||||||||
Gloucester County Improvement Authority, 2.125% due 12/1/2029 put 12/1/2017 (Waste Management) | A-/NR | 2,000,000 | 2,003,120 | ||||||||||||||
Hudson County Improvement Authority, 4.75% due 10/1/2017 (Hudson County Lease; Insured: AGM) | AA/Aa3 | 4,065,000 | 4,065,854 | ||||||||||||||
Hudson County Improvement Authority, 4.75% due 10/1/2018 (Hudson County Lease; Insured: AGM) | AA/Aa3 | 2,000,000 | 2,069,620 | ||||||||||||||
Hudson County Improvement Authority, 4.75% due 10/1/2019 (Hudson County Lease; Insured: AGM) | AA/Aa3 | 4,390,000 | 4,681,189 | ||||||||||||||
Hudson County Improvement Authority, 5.375% due 10/1/2020 (Hudson County Lease; Insured: AGM) | AA/Aa3 | 2,020,000 | 2,248,563 | ||||||||||||||
New Jersey EDA, 5.50% due 12/15/2019 (School Facilities Construction; Insured: AMBAC) | BBB+/Baa1 | 5,525,000 | 5,920,038 | ||||||||||||||
New Jersey EDA, 5.00% due 9/1/2020 (School Facilities Construction) (ETM) | NR/NR | 365,000 | 405,340 | ||||||||||||||
New Jersey EDA, 5.00% due 9/1/2020 (School Facilities Construction) | BBB+/Baa1 | 135,000 | 146,236 | ||||||||||||||
New Jersey EDA, 5.75% due 9/1/2023 pre-refunded 3/1/2021 (School Facilities Construction) | NR/Baa1 | 4,955,000 | 5,712,322 | ||||||||||||||
New Jersey EDA, 5.75% due 9/1/2023 (School Facilities Construction) | BBB+/Baa1 | 550,000 | 604,472 | ||||||||||||||
New Jersey EDA, 5.00% due 11/1/2024 (New Jersey Transit Corporation) | BBB+/Baa1 | 8,000,000 | 9,022,640 | ||||||||||||||
New Jersey EDA, 5.00% due 3/1/2026 (School Facilities Construction) | BBB+/Baa1 | 11,150,000 | 12,199,884 | ||||||||||||||
New Jersey EDA, 5.00% due 11/1/2026 (New Jersey Transit Corporation) | BBB+/Baa1 | 8,000,000 | 9,066,800 | ||||||||||||||
New Jersey Health Care Facilities Financing Authority, 5.00% due 7/1/2023 (Virtua Health Issue) | AA-/NR | 535,000 | 629,160 | ||||||||||||||
New Jersey Health Care Facilities Financing Authority, 5.00% due 7/1/2024 (Virtua Health Issue) | AA-/NR | 1,000,000 | 1,181,690 | ||||||||||||||
New Jersey Higher Educational Assistance Authority, 5.00% due 12/1/2017 (Student Loans) | AA/Aaa | 1,910,000 | 1,922,682 | ||||||||||||||
New Jersey Higher Educational Assistance Authority, 5.00% due 12/1/2018 | AA/Aaa | 3,000,000 | 3,122,850 | ||||||||||||||
New Jersey Higher Educational Assistance Authority, 5.25% due 12/1/2019 | AA/Aaa | 5,650,000 | 6,093,412 | ||||||||||||||
New Jersey Transit Corp., 5.00% due 9/15/2021 (Urban Public Transportation Capital Improvement) | A/A3 | 3,395,000 | 3,730,799 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2019 (State Transportation System Improvements) | BBB+/Baa1 | 1,000,000 | 1,052,830 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2020 (State Transportation System Improvements) | BBB+/Baa1 | 1,000,000 | 1,079,380 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2020 (State Transportation System Improvements) | A+/Baa1 | 2,500,000 | 2,693,425 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2021 (State Transportation System Improvements) | BBB+/Baa1 | 2,570,000 | 2,820,883 | ||||||||||||||
Annual Report | 27
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.25% due 12/15/2022 (State Transportation System Improvements) | BBB+/Baa1 | $ | 2,000,000 | $ | 2,256,260 | ||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2023 (State Transportation System Improvements) | A+/Baa1 | 4,500,000 | 4,610,250 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2023 (State Transportation System Improvements) | A+/Baa1 | 3,000,000 | 3,360,390 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.25% due 12/15/2023 (State Transportation System Improvements; Insured: AMBAC) | BBB+/Baa1 | 3,545,000 | 4,051,013 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2024 (State Transportation System Improvements) | BBB+/Baa1 | 1,710,000 | 1,925,973 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2024 (State Transportation System Improvements) | A+/Baa1 | 5,500,000 | 5,627,985 | ||||||||||||||
| a | New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2024 (State Transportation System Improvements) | A+/Baa1 | 3,000,000 | 3,380,850 | |||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2025 (State Transportation System Improvements) | A+/Baa1 | 500,000 | 566,030 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2027 (State Transportation System Improvements) | A+/Baa1 | 30,285,000 | 34,200,850 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2028 (Federal Highway) | A+/Baa1 | 7,330,000 | 7,488,475 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 2.08% due 6/15/2034 (State Transportation System Improvements) | BBB+/Baa1 | 4,000,000 | 3,963,520 | ||||||||||||||
Passaic Valley Sewer Commissioners GO, 5.625% due 12/1/2018 (Sewer System) | NR/A3 | 1,210,000 | 1,271,456 | ||||||||||||||
Passaic Valley Sewer Commissioners GO, 5.75% due 12/1/2019 (Sewer System) | NR/A3 | 2,000,000 | 2,185,660 | ||||||||||||||
Passaic Valley Sewer Commissioners GO, 5.75% due 12/1/2020 (Sewer System) | NR/A3 | 4,250,000 | 4,800,120 | ||||||||||||||
Passaic Valley Sewer Commissioners GO, 5.75% due 12/1/2021 (Sewer System) | NR/A3 | 4,500,000 | 5,221,350 | ||||||||||||||
Township of Wayne GO, 2.00% due 2/15/2018 (General Improvements and Water Utility System) | AA+/Aaa | 1,295,000 | 1,300,478 | ||||||||||||||
NEW MEXICO — 0.58% | |||||||||||||||||
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 | 2,463,691 | ||||||||||||||
City of Santa Fe, 4.50% due 5/15/2022 (El Castillo Retirement Residences) | BBB-/NR | 2,585,000 | 2,692,381 | ||||||||||||||
County of Los Alamos, 5.50% due 6/1/2018 (Public Facilities) | AA+/A1 | 1,205,000 | 1,240,885 | ||||||||||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2018 (Student Loans) | AAA/Aaa | 5,000,000 | 5,224,300 | ||||||||||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2021 (Student Loans) | AAA/Aaa | 3,000,000 | 3,333,060 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 8/1/2024 (Presbyterian Healthcare Services) | AA/Aa3 | 1,030,000 | 1,235,485 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 8/1/2025 (Presbyterian Healthcare Services) | AA/Aa3 | 750,000 | 907,440 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 0.90% due 8/1/2034 put 10/2/2017 (Presbyterian Healthcare Services; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa3 | 12,845,000 | 12,845,000 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 0.90% due 8/1/2034 put 10/2/2017 (Presbyterian Healthcare Services; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa3 | 800,000 | 800,000 | ||||||||||||||
Regents of New Mexico State University, 5.00% due 4/1/2020 (Corbett Center Student Union & NMSU Golf Course) | AA-/A1 | 3,095,000 | 3,378,409 | ||||||||||||||
Regents of New Mexico State University, 5.00% due 4/1/2021 (Corbett Center Student Union & NMSU Golf Course) | AA-/A1 | 1,845,000 | 2,070,108 | ||||||||||||||
Regents of New Mexico State University, 5.00% due 4/1/2022 (Corbett Center Student Union & NMSU Golf Course) | AA-/A1 | 1,250,000 | 1,434,638 | ||||||||||||||
Rio Rancho Public School District No. 94 GO, 4.00% due 8/1/2018 (State Aid Withholding) | NR/Aa2 | 3,940,000 | 4,037,515 | ||||||||||||||
NEW YORK — 12.45% | |||||||||||||||||
City of Long Beach School District GO, 3.50% due 5/1/2022 (Insured: AGM) (State Aid Withholding) | AA/Aa2 | 1,600,000 | 1,684,448 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2021 (City Budget Financial Management) | AA/Aa2 | 9,000,000 | 10,256,760 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2021 (City Budget Financial Management) | AA/Aa2 | 7,350,000 | 8,376,354 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2021 (City Budget Financial Management) | AA/Aa2 | 7,775,000 | 8,860,701 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2021 (City Budget Financial Management) | AA/Aa2 | 3,000,000 | 3,418,920 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2022 (City Budget Financial Management) | AA/Aa2 | 6,625,000 | 7,726,340 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2022 (City Budget Financial Management) | AA/Aa2 | 20,000,000 | 23,324,800 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2022 (City Budget Financial Management) | AA/Aa2 | 13,075,000 | 15,248,588 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2022 (City Budget Financial Management) | AA/Aa2 | 3,000,000 | 3,498,720 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2023 (City Budget Financial Management) | AA/Aa2 | 9,520,000 | 11,334,893 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2023 (City Budget Financial Management) | AA/Aa2 | 12,985,000 | 15,460,460 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2024 (City Budget Financial Management) | AA/Aa2 | 40,145,000 | 48,658,149 | ||||||||||||||
City of New York GO, 0.92% due 8/1/2038 put 10/2/2017 (City Budget Financial Management; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA/Aa2 | 5,800,000 | 5,800,000 | ||||||||||||||
City of New York GO, 0.92% due 3/1/2040 put 10/2/2017 (Capital Projects) (daily demand notes) | AA/Aa2 | 11,100,000 | 11,100,000 | ||||||||||||||
Erie County Individual Development Agency, 5.00% due 5/1/2018 (Buffalo School District) | AA/Aa2 | 5,000,000 | 5,120,300 | ||||||||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2020 | AA-/A1 | 12,955,000 | 14,478,638 | ||||||||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2020 | AA/NR | 2,000,000 | 2,241,120 | ||||||||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2021 | AA-/A1 | 24,325,000 | 27,896,153 | ||||||||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2025 | AA-/A1 | 10,480,000 | 12,782,561 | ||||||||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2026 | AA-/A1 | 21,400,000 | 26,377,854 | ||||||||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2027 | AA-/A1 | 12,640,000 | 15,575,261 | ||||||||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2034 | AA-/A1 | 550,000 | 597,724 | ||||||||||||||
Monroe County Industrial Development Corp., 5.00% due 6/1/2018 (St. John Fisher College) | A-/NR | 1,425,000 | 1,462,506 | ||||||||||||||
Monroe County Industrial Development Corp., 5.00% due 6/1/2019 (St. John Fisher College) | A-/NR | 1,030,000 | 1,095,271 | ||||||||||||||
Monroe County Industrial Development Corp., 5.00% due 6/1/2022 (St. John Fisher College) | A-/NR | 2,000,000 | 2,307,280 | ||||||||||||||
Nassau County IDA, 5.25% due 3/1/2018 (New York Institute of Technology) (ETM) | BBB+/Baa2 | 1,260,000 | 1,283,058 | ||||||||||||||
Nassau County IDA, 5.25% due 3/1/2020 (New York Institute of Technology) (ETM) | BBB+/Baa2 | 1,715,000 | 1,884,356 | ||||||||||||||
28 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
New York City Health and Hospital Corp. GO, 5.00% due 2/15/2019 (Healthcare Facilities Improvements) | A+/Aa3 | $ | 2,700,000 | $ | 2,844,990 | ||||||||||||
New York City Health and Hospital Corp. GO, 5.00% due 2/15/2020 (Healthcare Facilities Improvements) | A+/Aa3 | 10,000,000 | 10,909,700 | ||||||||||||||
New York City Health and Hospital Corp. GO, 5.00% due 2/15/2021 (Healthcare Facilities Improvements) | A+/Aa3 | 2,615,000 | 2,853,514 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.91% due 6/15/2035 put 10/2/2017 (Water & Sewer System; LOC: Citibank, N.A.) (daily demand notes) | AAA/Aa1 | 34,895,000 | 34,895,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.92% due 6/15/2043 put 10/2/2017 (Water and Sewer System; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 24,500,000 | 24,500,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.91% due 6/15/2044 put 10/2/2017 (Water & Sewer System; SPA: Mizuho Bank, Ltd.) (daily demand notes) | AAA/Aa1 | 19,795,000 | 19,795,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.93% due 6/15/2048 put 10/2/2017 (Water & Sewer System; SPA: Mizuho Bank, Ltd.) (daily demand notes) | AA+/Aa1 | 14,500,000 | 14,500,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.93% due 6/15/2048 put 10/2/2017 (Water & Sewer System; SPA: Mizuho Bank, Ltd.) (daily demand notes) | AA+/Aa1 | 12,975,000 | 12,975,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.92% due 6/15/2050 put 10/2/2017 (Water & Sewer System; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 12,900,000 | 12,900,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.92% due 6/15/2050 put 10/2/2017 (Water and Sewer System; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 76,550,000 | 76,550,000 | ||||||||||||||
New York City Transitional Finance Authority, 5.00% due 1/15/2018 (School Financing Act) (State Aid Withholding) | AA/Aa2 | 4,865,000 | 4,922,504 | ||||||||||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects & WTC Recovery Costs) | AAA/Aa1 | 1,500,000 | 1,564,635 | ||||||||||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects & WTC Recovery Costs) | AAA/Aa1 | 11,730,000 | 12,235,446 | ||||||||||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects & WTC Recovery Costs) | AAA/Aa1 | 3,075,000 | 3,207,502 | ||||||||||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects & WTC Recovery Costs) | AAA/Aa1 | 1,645,000 | 1,715,883 | ||||||||||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects & WTC Recovery Costs) | AAA/Aa1 | 12,725,000 | 13,273,320 | ||||||||||||||
New York City Transitional Finance Authority, 5.00% due 11/1/2018 (City Capital Projects & WTC Recovery Costs) | AAA/Aa1 | 2,000,000 | 2,086,180 | ||||||||||||||
New York City Transitional Finance Authority, 0.93% due 11/1/2022 put 10/2/2017 (WTC Recovery; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AAA/Aa1 | 15,750,000 | 15,750,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.93% due 8/1/2031 put 10/2/2017 (City Capital Projects; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AAA/Aaa | 3,700,000 | 3,700,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.92% due 11/1/2036 put 10/2/2017 (City Capital Projects; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AAA/Aa1 | 24,450,000 | 24,450,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.91% due 8/1/2039 put 10/2/2017 (City Capital Projects; SPA: State Street Bank & Trust Co.) (daily demand notes) | AAA/Aa1 | 15,545,000 | 15,545,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.91% due 8/1/2039 put 10/2/2017 (City Capital Projects; SPA: U.S. Bank, N.A.) (daily demand notes) | AAA/Aa1 | 2,500,000 | 2,500,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.91% due 11/1/2042 put 10/2/2017 (City Capital Projects; SPA: Barclays Bank plc) (daily demand notes) | AAA/Aa1 | 600,000 | 600,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.92% due 2/1/2045 put 10/2/2017 (City Capital Projects; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AAA/Aa1 | 46,110,000 | 46,110,000 | ||||||||||||||
New York City Trust for Cultural Resources, 5.00% due 12/1/2026 (Lincoln Center for the Performing Arts, Inc.) | A+/A2 | 2,500,000 | 3,089,775 | ||||||||||||||
New York State Dormitory Authority, 5.50% due 2/15/2018 (Mental Health Services Facilities) | AA/NR | 5,280,000 | 5,371,238 | ||||||||||||||
New York State Dormitory Authority, 2.25% due 4/1/2018 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 4,800,000 | 4,830,912 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 4/1/2018 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 325,000 | 331,624 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2018 (School Districts Financing Program) (State Aid Withholding) | NR/Aa3 | 1,395,000 | 1,450,758 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2018 (School Districts Financing Program) (State Aid Withholding) | AA-/NR | 2,520,000 | 2,621,380 | ||||||||||||||
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 | 2,600,575 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 4/1/2019 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 610,000 | 646,039 | ||||||||||||||
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 | 2,263,527 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2019 (School Districts Financing Program) (State Aid Withholding) | NR/Aa3 | 1,585,000 | 1,708,424 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2019 (School Districts Financing Program) (State Aid Withholding) | AA-/NR | 2,645,000 | 2,850,966 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 12/15/2019 (Metropolitan Transportation Authority Service Contract) | AAA/Aa1 | 60,000,000 | 65,224,200 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 4/1/2020 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 1,000,000 | 1,095,730 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 7/1/2020 (NYSARC, Inc. Developmental Disability Programs) | NR/Aa2 | 1,000,000 | 1,099,240 | ||||||||||||||
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 | 2,338,161 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2020 (School Districts Financing Program) (State Aid Withholding) | NR/Aa3 | 1,000,000 | 1,113,410 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2020 (School Districts Financing Program) (State Aid Withholding) | AA-/NR | 2,775,000 | 3,087,964 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2020 (School Districts Financing Program; Insured: AGM) | AA/NR | 1,250,000 | 1,391,762 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 4/1/2021 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 450,000 | 507,456 | ||||||||||||||
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 | 1,430,462 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2021 (School Districts Financing Program) (State Aid Withholding) | NR/Aa3 | 750,000 | 854,655 | ||||||||||||||
Annual Report | 29
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2021 (School Districts Financing Program; Insured: AGM) | AA/NR | $ | 1,100,000 | $ | 1,258,807 | ||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2022 (School Districts Financing Program) (State Aid Withholding) | AA+/NR | 300,000 | 349,938 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2022 (School Districts Financing Program; Insured: AGM) | AA/NR | 1,800,000 | 2,103,426 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2023 (School Districts Financing Program; Insured: AGM) | AA/NR | 2,500,000 | 2,978,550 | ||||||||||||||
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 | 2,301,020 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2024 (School Districts Financing Program; Insured: AGM) | AA/NR | 2,000,000 | 2,418,720 | ||||||||||||||
New York State Dormitory Authority, 0.92% due 7/1/2033 put 10/2/2017 (University of Rochester; LOC: HSBC Bank USA, N.A.) (daily demand notes) | AAA/Aa1 | 4,900,000 | 4,900,000 | ||||||||||||||
New York State Housing Finance Agency, 0.92% due 11/1/2046 put 10/2/2017 (160 Madison Avenue Housing Development; LOC: PNC Bank, N.A.) (daily demand notes) | NR/A1 | 16,750,000 | 16,750,000 | ||||||||||||||
New York State Housing Finance Agency, 0.92% due 11/1/2046 put 10/2/2017 (160 Madison Avenue Housing Development; LOC: PNC Bank, N.A.) (daily demand notes) | NR/A1 | 38,980,000 | 38,980,000 | ||||||||||||||
New York State Thruway Authority, 5.00% due 5/1/2019 (New NY Bridge) | A-/A3 | 5,000,000 | 5,301,350 | ||||||||||||||
New York State Thruway Authority, 5.00% due 1/1/2020 (Governor Thomas E. Dewey Thruway) | A/A2 | 2,000,000 | 2,168,120 | ||||||||||||||
New York State Thruway Authority, 5.00% due 1/1/2021 (Governor Thomas E. Dewey Thruway) | A/A2 | 2,500,000 | 2,793,025 | ||||||||||||||
New York State Thruway Authority, 5.00% due 1/1/2022 (Governor Thomas E. Dewey Thruway) | A/A2 | 3,000,000 | 3,436,590 | ||||||||||||||
New York State Thruway Authority, 5.00% due 1/1/2024 (Governor Thomas E. Dewey Thruway) | A/A2 | 1,000,000 | 1,190,450 | ||||||||||||||
New York State Thruway Authority, 5.00% due 3/15/2024 (Highway, Bridge, Multi-Modal and MTA Projects) | AAA/Aa1 | 18,300,000 | 20,623,917 | ||||||||||||||
New York State Thruway Authority, 5.00% due 1/1/2025 (Governor Thomas E. Dewey Thruway) | A/A2 | 2,000,000 | 2,410,780 | ||||||||||||||
Suffolk County Economic Development Corp., 5.00% due 7/1/2020 (Catholic Health Services) | A-/Baa1 | 5,000,000 | 5,477,650 | ||||||||||||||
Suffolk County Economic Development Corp., 5.00% due 7/1/2021 (Catholic Health Services) | A-/Baa1 | 5,000,000 | 5,622,950 | ||||||||||||||
Suffolk County Economic Development Corp., 5.00% due 7/1/2022 (Catholic Health Services) | A-/Baa1 | 5,000,000 | 5,597,800 | ||||||||||||||
Triborough Bridge & Tunnel Authority, 4.00% due 11/15/2017 (MTA Bridges & Tunnels) | AA-/Aa3 | 750,000 | 753,075 | ||||||||||||||
Triborough Bridge & Tunnel Authority, 5.00% due 11/15/2021 (MTA Bridges & Tunnels) | AA-/Aa3 | 5,140,000 | 5,903,547 | ||||||||||||||
Triborough Bridge & Tunnel Authority, 0.90% due 1/1/2032 put 10/2/2017 (MTA Bridges & Tunnels; LOC: Wells Fargo Bank, N.A.) (daily demand notes) | AA-/Aa1 | 850,000 | 850,000 | ||||||||||||||
Triborough Bridge & Tunnel Authority, 0.90% due 1/1/2033 put 10/2/2017 (MTA Bridges & Tunnels; LOC: Wells Fargo Bank, N.A.) (daily demand notes) | AA-/Aa1 | 1,045,000 | 1,045,000 | ||||||||||||||
United Nations Development Corp., 5.00% due 7/1/2019 (One, Two and Three U.N. Plaza) | NR/A1 | 4,000,000 | 4,262,480 | ||||||||||||||
West Seneca Central School District GO, 5.00% due 11/15/2022 (Insured: BAM) (State Aid Withholding) | AA/A2 | 1,000,000 | 1,167,680 | ||||||||||||||
NORTH CAROLINA — 2.99% | |||||||||||||||||
Charlotte-Mecklenburg Hospital Authority, 4.00% due 1/15/2019 (Carolinas HealthCare System) | AA-/Aa3 | 600,000 | 622,200 | ||||||||||||||
Charlotte-Mecklenburg Hospital Authority, 3.00% due 1/15/2021 (Carolinas HealthCare System) | AA-/Aa3 | 1,595,000 | 1,681,943 | ||||||||||||||
Charlotte-Mecklenburg Hospital Authority, 4.00% due 1/15/2022 (Carolinas HealthCare System) | AA-/Aa3 | 845,000 | 933,438 | ||||||||||||||
Charlotte-Mecklenburg Hospital Authority, 5.00% due 1/15/2023 (Carolinas HealthCare System) | AA-/Aa3 | 1,400,000 | 1,634,192 | ||||||||||||||
Charlotte-Mecklenburg Hospital Authority, 5.00% due 1/15/2024 (Carolinas HealthCare System) | AA-/Aa3 | 2,855,000 | 3,337,124 | ||||||||||||||
Charlotte-Mecklenburg Hospital Authority, 0.89% due 1/15/2037 put 10/2/2017 (Carolinas HealthCare System; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA-/Aa3 | 55,240,000 | 55,240,000 | ||||||||||||||
Charlotte-Mecklenburg Hospital Authority, 0.89% due 1/15/2038 put 10/2/2017 (Carolinas HealthCare System; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA-/Aa3 | 25,530,000 | 25,530,000 | ||||||||||||||
City of Charlotte COP, 5.00% due 12/1/2020 (Equipment Acquisition & Public Facilities) | AA+/Aa1 | 1,000,000 | 1,116,530 | ||||||||||||||
City of Charlotte COP, 5.00% due 12/1/2021 (Equipment Acquisition & Public Facilities) | AA+/Aa1 | 1,100,000 | 1,261,359 | ||||||||||||||
City of Charlotte COP, 5.00% due 12/1/2022 (Equipment Acquisition & Public Facilities) | AA+/Aa1 | 2,405,000 | 2,815,798 | ||||||||||||||
City of Charlotte COP, 5.00% due 12/1/2023 (Equipment Acquisition & Public Facilities) | AA+/Aa1 | 2,145,000 | 2,555,145 | ||||||||||||||
City of Charlotte COP, 5.00% due 12/1/2025 (Equipment Acquisition & Public Facilities) | AA+/Aa1 | 2,290,000 | 2,801,792 | ||||||||||||||
County of Buncombe, 5.00% due 6/1/2022 (Primary, Middle School & Community College Facilities) | AA+/Aa1 | 1,000,000 | 1,158,820 | ||||||||||||||
County of Buncombe, 5.00% due 6/1/2023 (Primary, Middle School & Community College Facilities) | AA+/Aa1 | 750,000 | 884,805 | ||||||||||||||
County of Buncombe, 5.00% due 6/1/2024 (Primary, Middle School & Community College Facilities) | AA+/Aa1 | 600,000 | 720,924 | ||||||||||||||
County of Catawba, 4.00% due 10/1/2017 | AA-/Aa2 | 1,000,000 | 1,000,170 | ||||||||||||||
County of Dare, 4.00% due 6/1/2018 (Educational Facility Capital Projects) | AA/Aa3 | 425,000 | 433,402 | ||||||||||||||
County of Dare, 4.00% due 6/1/2019 (Educational Facility Capital Projects) | AA/Aa3 | 500,000 | 523,540 | ||||||||||||||
County of Dare, 4.00% due 6/1/2020 (Educational Facility Capital Projects) | AA/Aa3 | 765,000 | 818,856 | ||||||||||||||
County of Dare, 5.00% due 6/1/2021 (Educational Facility Capital Projects) | AA/Aa3 | 1,225,000 | 1,381,273 | ||||||||||||||
County of Dare, 4.00% due 6/1/2022 (Educational Facility Capital Projects) | AA/Aa3 | 490,000 | 541,749 | ||||||||||||||
County of Dare, 5.00% due 6/1/2024 (Educational Facility Capital Projects) | AA/Aa3 | 700,000 | 814,576 | ||||||||||||||
County of Mecklenburg GO, 5.00% due 12/1/2018 (County Debt Restructuring) | AAA/Aaa | 3,015,000 | 3,156,856 | ||||||||||||||
County of Randolph, 5.00% due 10/1/2020 | A+/Aa3 | 500,000 | 552,330 | ||||||||||||||
County of Randolph, 5.00% due 10/1/2021 | A+/Aa3 | 1,065,000 | 1,206,933 | ||||||||||||||
County of Randolph, 5.00% due 10/1/2021 | A+/Aa3 | 500,000 | 566,635 | ||||||||||||||
County of Randolph, 5.00% due 10/1/2022 | A+/Aa3 | 1,945,000 | 2,245,172 | ||||||||||||||
County of Randolph, 5.00% due 10/1/2023 | A+/Aa3 | 550,000 | 646,338 | ||||||||||||||
County of Randolph, 5.00% due 10/1/2023 | A+/Aa3 | 400,000 | 470,064 | ||||||||||||||
30 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: AMBAC) (ETM) | NR/NR | $ | 7,500,000 | $ | 7,599,075 | ||||||||||||
North Carolina Eastern Municipal Power Agency, 6.00% due 1/1/2018 (Insured: BHAC/AMBAC) (ETM) | AA+/Aa1 | 5,965,000 | 6,043,619 | ||||||||||||||
North Carolina Eastern Municipal Power Agency, 5.25% due 1/1/2019 pre-refunded 1/1/2018 (Insured: AGM) | AA/A3 | 3,105,000 | 3,139,434 | ||||||||||||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2021 (ETM) | NR/NR | 5,000,000 | 5,618,400 | ||||||||||||||
North Carolina Eastern Municipal Power Agency, 5.00% due 1/1/2022 (ETM) | NR/NR | 4,715,000 | 5,424,325 | ||||||||||||||
North Carolina Municipal Power Agency, 4.00% due 1/1/2018 (Catawba Electric) (ETM) | NR/NR | 3,250,000 | 3,276,293 | ||||||||||||||
North Carolina Municipal Power Agency, 4.00% due 1/1/2018 (Catawba Electric) | A/A2 | 11,750,000 | 11,841,650 | ||||||||||||||
North Carolina Municipal Power Agency, 5.00% due 1/1/2019 (Catawba Electric) (ETM) | NR/NR | 1,220,000 | 1,281,195 | ||||||||||||||
North Carolina Municipal Power Agency, 5.00% due 1/1/2019 (Catawba Electric) | A/A2 | 3,280,000 | 3,440,294 | ||||||||||||||
North Carolina Municipal Power Agency, 4.00% due 1/1/2020 (Catawba Electric) (ETM) | NR/NR | 945,000 | 1,005,215 | ||||||||||||||
North Carolina Municipal Power Agency, 4.00% due 1/1/2020 (Catawba Electric) | A/A2 | 605,000 | 643,272 | ||||||||||||||
North Carolina Municipal Power Agency, 5.00% due 1/1/2020 (Catawba Electric) (ETM) | NR/NR | 280,000 | 304,452 | ||||||||||||||
North Carolina Municipal Power Agency, 5.00% due 1/1/2020 (Catawba Electric) | A/A2 | 720,000 | 781,531 | ||||||||||||||
North Carolina Municipal Power Agency, 4.00% due 1/1/2022 (Catawba Electric) | A/A2 | 1,000,000 | 1,104,850 | ||||||||||||||
State of North Carolina, 5.00% due 11/1/2019 (State Capital Projects and Correctional Facilities) | AA+/Aa1 | 23,635,000 | 25,543,290 | ||||||||||||||
University of North Carolina at Chapel Hill, 0.90% due 2/15/2031 put 10/2/2017 (University of North Carolina Hospitals; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA/Aa3 | 19,175,000 | 19,175,000 | ||||||||||||||
Winston-Salem State University, 5.00% due 4/1/2019 (Student Housing and Student Services Facilities) | A-/A3 | 815,000 | 857,991 | ||||||||||||||
Winston-Salem State University, 5.00% due 4/1/2022 (Student Housing and Student Services Facilities) | A-/A3 | 945,000 | 1,071,810 | ||||||||||||||
NORTH DAKOTA — 0.04% | |||||||||||||||||
County of Ward, 4.00% due 4/1/2020 (Insured: AGM) | AA/A2 | 2,445,000 | 2,596,614 | ||||||||||||||
OHIO — 3.48% | |||||||||||||||||
Akron, Bath & Copley Joint Township Hospital District, 5.00% due 11/15/2021 (Children’s Hospital Medical Center) | NR/A1 | 1,000,000 | 1,136,020 | ||||||||||||||
American Municipal Power, Inc., 5.25% due 2/15/2018 (AMP Combined Hydroelectric Projects) | A/A2 | 5,500,000 | 5,587,010 | ||||||||||||||
American Municipal Power, Inc., 5.25% due 2/15/2019 (AMP Combined Hydroelectric Projects) | A/A2 | 5,595,000 | 5,907,033 | ||||||||||||||
American Municipal Power, Inc., 5.00% due 2/15/2020 (AMP Fremont Energy Center) | A/A1 | 1,865,000 | 2,027,180 | ||||||||||||||
American Municipal Power, Inc., 5.00% due 2/15/2021 (AMP Fremont Energy Center) | A/A1 | 1,300,000 | 1,454,206 | ||||||||||||||
American Municipal Power, Inc., 5.00% due 2/15/2022 (AMP Fremont Energy Center) | A/A1 | 2,750,000 | 3,146,440 | ||||||||||||||
Cincinnati City School District Board of Education GO, 5.25% due 12/1/2023 (Educational Facilities; Insured: Natl-Re) | AA-/Aa2 | 2,690,000 | 3,241,961 | ||||||||||||||
City of Akron, 5.00% due 12/1/2021 (Community Learning Centers) | AA+/NR | 4,120,000 | 4,704,546 | ||||||||||||||
City of Akron GO, 5.00% due 12/1/2019 (Various Municipal Capital Projects) | AA-/NR | 1,685,000 | 1,824,703 | ||||||||||||||
City of Cleveland, 4.00% due 10/1/2018 (Parks & Recreation Facilities) | AA+/A1 | 500,000 | 514,690 | ||||||||||||||
City of Cleveland, 5.00% due 5/15/2019 (Police & Fire Pension Payment) | AA+/A1 | 1,750,000 | 1,859,287 | ||||||||||||||
City of Cleveland, 4.00% due 10/1/2019 (Public Facilities) | AA+/A1 | 600,000 | 633,864 | ||||||||||||||
City of Cleveland, 4.00% due 10/1/2019 (Parks & Recreation Facilities) | AA+/A1 | 520,000 | 549,349 | ||||||||||||||
City of Cleveland, 5.00% due 5/15/2020 (Police & Fire Pension Payment) | AA+/A1 | 1,605,000 | 1,760,653 | ||||||||||||||
City of Cleveland, 5.00% due 10/1/2020 (Public Facilities) | AA+/A1 | 510,000 | 565,921 | ||||||||||||||
City of Cleveland, 5.00% due 10/1/2020 (Parks & Recreation Facilities) | AA+/A1 | 545,000 | 604,759 | ||||||||||||||
City of Cleveland, 5.00% due 5/15/2021 (Police & Fire Pension Payment) | AA+/A1 | 750,000 | 845,820 | ||||||||||||||
City of Cleveland, 5.00% due 10/1/2021 (Parks & Recreation Facilities) | AA+/A1 | 570,000 | 649,059 | ||||||||||||||
City of Cleveland, 5.00% due 10/1/2022 (Public Facilities) | AA+/A1 | 905,000 | 1,050,433 | ||||||||||||||
City of Cleveland, 5.00% due 10/1/2022 (Parks & Recreation Facilities) | AA+/A1 | 600,000 | 696,420 | ||||||||||||||
City of Cleveland, 5.00% due 11/15/2022 (Parks & Recreation Facilities) | AA+/A1 | 1,030,000 | 1,198,364 | ||||||||||||||
City of Cleveland, 5.00% due 10/1/2023 (Public Facilities) | AA+/A1 | 1,155,000 | 1,362,334 | ||||||||||||||
City of Cleveland, 5.00% due 10/1/2023 (Parks & Recreation Facilities) | AA+/A1 | 630,000 | 743,091 | ||||||||||||||
City of Cleveland COP, 4.75% due 11/15/2020 (Cleveland Stadium) | A/A3 | 2,000,000 | 2,177,500 | ||||||||||||||
City of Cleveland GO, 2.00% due 12/1/2018 (City Capital Projects) | AA+/A1 | 700,000 | 707,791 | ||||||||||||||
| a | City of Cleveland GO, 5.50% due 10/1/2019 (City Capital Projects; Insured: AMBAC) | AA+/A1 | 1,260,000 | 1,367,831 | |||||||||||||
City of Cleveland GO, 3.00% due 12/1/2020 (Municipal Street System Improvements) | AA+/A1 | 675,000 | 710,930 | ||||||||||||||
City of Cleveland GO, 3.00% due 12/1/2021 (Municipal Street System Improvements) | AA+/A1 | 2,305,000 | 2,443,323 | ||||||||||||||
City of Cleveland GO, 4.00% due 12/1/2022 (Municipal Street System Improvements) | AA+/A1 | 3,330,000 | 3,721,608 | ||||||||||||||
City of Cleveland GO, 4.00% due 12/1/2023 (Municipal Street System Improvements) | AA+/A1 | 3,395,000 | 3,835,569 | ||||||||||||||
City of Cleveland GO, 5.00% due 12/1/2024 (Municipal Street System Improvements) | AA+/A1 | 3,730,000 | 4,494,090 | ||||||||||||||
City of Cleveland GO, 5.00% due 12/1/2025 (Municipal Street System Improvements) | AA+/A1 | 3,555,000 | 4,298,884 | ||||||||||||||
City of Cleveland GO, 5.00% due 12/1/2026 (Municipal Street System Improvements) | AA+/A1 | 3,610,000 | 4,323,336 | ||||||||||||||
City of Toledo, 5.00% due 11/15/2018 (Water System Improvements) | AA-/Aa3 | 1,175,000 | 1,227,593 | ||||||||||||||
City of Toledo, 5.00% due 11/15/2019 (Water System Improvements) | AA-/Aa3 | 2,260,000 | 2,445,094 | ||||||||||||||
City of Toledo, 5.00% due 11/15/2020 (Water System Improvements) | AA-/Aa3 | 2,000,000 | 2,234,060 | ||||||||||||||
City of Toledo, 5.00% due 11/15/2021 (Water System Improvements) | AA-/Aa3 | 2,000,000 | 2,296,000 | ||||||||||||||
City of Toledo, 5.00% due 11/15/2022 (Water System Improvements) | AA-/Aa3 | 3,255,000 | 3,817,855 | ||||||||||||||
City of Toledo, 5.00% due 11/15/2023 (Water System Improvements) | AA-/Aa3 | 1,750,000 | 2,076,620 | ||||||||||||||
Cleveland Package Facilities, 5.25% due 9/15/2021 (Insured: AGM) (ETM) | AA/A2 | 965,000 | 1,115,472 | ||||||||||||||
| a | Cleveland Package Facilities, 5.25% due 9/15/2021 (Insured: AGM) | AA/A2 | 2,035,000 | 2,298,166 | |||||||||||||
Annual Report | 31
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Cleveland State University, 5.00% due 6/1/2019 (Campus Capital Projects) | A+/A1 | $ | 1,000,000 | $ | 1,062,740 | ||||||||||||
Cleveland State University, 5.00% due 6/1/2020 (Campus Capital Projects) | A+/A1 | 700,000 | 767,599 | ||||||||||||||
Cleveland State University, 5.00% due 6/1/2021 (Campus Capital Projects) | A+/A1 | 1,000,000 | 1,126,800 | ||||||||||||||
Cleveland State University, 5.00% due 6/1/2022 (Campus Capital Projects) | A+/A1 | 2,000,000 | 2,286,560 | ||||||||||||||
Cleveland-Cuyahoga County Port Authority, 5.00% due 10/1/2019 (Cleveland Museum of Art) | AA+/NR | 2,000,000 | 2,147,260 | ||||||||||||||
County of Clermont, 4.00% due 8/1/2019 (Sanitary Sewer System) | NR/Aa3 | 1,420,000 | 1,453,966 | ||||||||||||||
County of Cuyahoga COP, 5.00% due 12/1/2019 (Convention Hotel Project) | AA-/A1 | 2,585,000 | 2,795,522 | ||||||||||||||
County of Cuyahoga COP, 5.00% due 12/1/2022 (Convention Hotel Project) | AA-/A1 | 9,725,000 | 11,317,371 | ||||||||||||||
County of Cuyahoga COP, 5.00% due 12/1/2023 (Convention Hotel Project) | AA-/A1 | 5,645,000 | 6,666,689 | ||||||||||||||
County of Cuyahoga COP, 5.00% due 12/1/2024 (Convention Hotel Project) | AA-/A1 | 11,515,000 | 13,601,173 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2018 | AA-/A1 | 1,900,000 | 1,988,236 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2019 | AA-/A1 | 3,000,000 | 3,250,290 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2020 | AA-/A1 | 1,200,000 | 1,341,360 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2022 | AA-/A1 | 2,250,000 | 2,633,400 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2023 | AA-/A1 | 2,200,000 | 2,623,632 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2024 | AA-/A1 | 3,200,000 | 3,869,632 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2025 | AA-/A1 | 3,400,000 | 4,140,078 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2026 | AA-/A1 | 3,000,000 | 3,679,950 | ||||||||||||||
County of Montgomery, 0.90% due 11/15/2045 put 10/2/2017 (Premier Health Partners; LOC: Barclays Bank plc) (daily demand notes) | NR/Aa2 | 18,025,000 | 18,025,000 | ||||||||||||||
County of Montgomery, 0.90% due 11/15/2045 put 10/2/2017 (Premier Health Partners; LOC: Barclays Bank plc) (daily demand notes) | NR/Aa2 | 17,220,000 | 17,220,000 | ||||||||||||||
County of Scioto, 5.00% due 2/15/2022 | NR/A2 | 1,110,000 | 1,264,024 | ||||||||||||||
County of Scioto, 5.00% due 2/15/2023 | NR/A2 | 2,020,000 | 2,339,221 | ||||||||||||||
County of Scioto, 5.00% due 2/15/2024 | NR/A2 | 1,640,000 | 1,931,330 | ||||||||||||||
County of Scioto, 5.00% due 2/15/2025 | NR/A2 | 1,695,000 | 2,015,609 | ||||||||||||||
Deerfield Township, 5.00% due 12/1/2017 | NR/A1 | 1,000,000 | 1,006,000 | ||||||||||||||
Franklin County Convention Facilities Authority, 5.00% due 12/1/2021 (Greater Columbus Convention Center) | AA/Aa1 | 1,000,000 | 1,141,450 | ||||||||||||||
Franklin County Convention Facilities Authority, 5.00% due 12/1/2022 (Greater Columbus Convention Center) | AA/Aa1 | 500,000 | 581,620 | ||||||||||||||
Franklin County Convention Facilities Authority, 5.00% due 12/1/2024 (Greater Columbus Convention Center) | AA/Aa1 | 1,000,000 | 1,195,240 | ||||||||||||||
Kent State University, 5.00% due 5/1/2020 pre-refunded 5/1/2019 (Insured: AGC) | AA/Aa3 | 915,000 | 973,597 | ||||||||||||||
Kent State University, 5.00% due 5/1/2020 (Insured: AGC) | AA/Aa3 | 85,000 | 90,244 | ||||||||||||||
Ohio Higher Educational Facility Commission, 0.82% due 1/1/2039 put 10/2/2017 (Cleveland Clinic Health System) (daily demand notes) | AA/Aa2 | 770,000 | 770,000 | ||||||||||||||
Ohio Higher Educational Facility Commission, 0.90% due 1/1/2039 put 10/2/2017 (Cleveland Clinic Health System) (daily demand notes) | AA/Aa2 | 3,320,000 | 3,320,000 | ||||||||||||||
Ohio Higher Educational Facility Commission, 0.90% due 1/1/2043 put 10/2/2017 (Cleveland Clinic Health System; SPA: Barclays Bank plc) (daily demand notes) | AA/Aa2 | 630,000 | 630,000 | ||||||||||||||
Ohio State Building Authority, 5.00% due 10/1/2020 | AA/Aa2 | 1,700,000 | 1,834,334 | ||||||||||||||
RiverSouth Authority, 5.00% due 12/1/2019 (RiverSouth Area Redevelopment) | AA+/Aa2 | 2,500,000 | 2,701,725 | ||||||||||||||
State of Ohio, 4.00% due 12/15/2018 (Major New Street Infrastructure Project) | AA/Aa2 | 1,000,000 | 1,035,940 | ||||||||||||||
State of Ohio, 4.00% due 12/15/2019 (Major New Street Infrastructure Project) | AA/Aa2 | 1,000,000 | 1,063,060 | ||||||||||||||
State of Ohio, 5.00% due 10/1/2020 (Cultural and Sports Capital Facilities) | AA/Aa2 | 3,845,000 | 4,247,418 | ||||||||||||||
State of Ohio, 5.00% due 12/15/2020 (Major New Street Infrastructure Project) | AA/Aa2 | 1,000,000 | 1,117,800 | ||||||||||||||
State of Ohio, 5.00% due 12/15/2020 (Major New Street Infrastructure Project) | AA/Aa2 | 1,000,000 | 1,117,800 | ||||||||||||||
State of Ohio, 5.00% due 12/15/2021 (Major New Street Infrastructure Project) | AA/Aa2 | 2,500,000 | 2,869,525 | ||||||||||||||
State of Ohio, 5.00% due 12/15/2024 (Major New Street Infrastructure Project) | AA/Aa2 | 2,000,000 | 2,416,900 | ||||||||||||||
State of Ohio, 5.00% due 12/15/2025 (Major New Street Infrastructure Project) | AA/Aa2 | 3,000,000 | 3,661,980 | ||||||||||||||
State of Ohio, 5.00% due 12/15/2026 (Major New Street Infrastructure Project) | AA/Aa2 | 1,000,000 | 1,225,740 | ||||||||||||||
State of Ohio GO, 5.50% due 9/15/2019 (Common Schools Capital Facilities) | AA+/Aa1 | 4,150,000 | 4,506,236 | ||||||||||||||
University of Akron Ohio, 5.00% due 1/1/2018 (Insured: AGM) | AA/A1 | 3,415,000 | 3,449,970 | ||||||||||||||
Youngstown City School District GO, 4.00% due 12/1/2017 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,480,000 | 1,487,415 | ||||||||||||||
Youngstown City School District GO, 4.00% due 12/1/2018 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,545,000 | 1,594,425 | ||||||||||||||
Youngstown City School District GO, 4.00% due 12/1/2019 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,605,000 | 1,695,361 | ||||||||||||||
Youngstown City School District GO, 4.00% due 12/1/2020 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,670,000 | 1,800,895 | ||||||||||||||
Youngstown City School District GO, 4.00% due 12/1/2021 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,735,000 | 1,864,934 | ||||||||||||||
Youngstown City School District GO, 4.00% due 12/1/2022 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,805,000 | 1,929,744 | ||||||||||||||
Youngstown City School District GO, 4.00% due 12/1/2023 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,700,000 | 1,802,306 | ||||||||||||||
OKLAHOMA — 0.59% | |||||||||||||||||
Canadian County Educational Facilities Authority, 4.00% due 9/1/2019 (Mustang Public Schools) | A+/NR | 1,410,000 | 1,482,488 | ||||||||||||||
Canadian County Educational Facilities Authority, 4.50% due 9/1/2020 (Mustang Public Schools) | A+/NR | 2,690,000 | 2,926,559 | ||||||||||||||
Canadian County Educational Facilities Authority, 4.50% due 9/1/2021 (Mustang Public Schools) | A+/NR | 2,290,000 | 2,547,579 | ||||||||||||||
Cleveland County Educational Facilities Authority, 5.00% due 6/1/2023 (Moore Public Schools) | A+/NR | 5,355,000 | 6,259,299 | ||||||||||||||
32 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Oklahoma Capitol Improvement Authority, 5.00% due 7/1/2023 (State Highway Capital Improvement) | AA-/NR | $ | 325,000 | $ | 383,273 | ||||||||||||
Oklahoma Capitol Improvement Authority, 5.00% due 7/1/2024 (State Highway Capital Improvement) | AA-/NR | 800,000 | 957,368 | ||||||||||||||
Oklahoma County Finance Authority, 4.00% due 9/1/2018 (Western Heights Public Schools) | A+/NR | 250,000 | 256,290 | ||||||||||||||
Oklahoma County Finance Authority, 5.00% due 9/1/2018 (Western Heights Public Schools) | A+/NR | 2,120,000 | 2,190,850 | ||||||||||||||
Oklahoma County Finance Authority, 5.00% due 9/1/2020 (Western Heights Public Schools) | A+/NR | 2,000,000 | 2,196,160 | ||||||||||||||
Oklahoma DFA, 5.00% due 8/15/2018 (INTEGRIS Health) (ETM) | NR/NR | 500,000 | 517,665 | ||||||||||||||
Oklahoma DFA, 5.00% due 8/15/2022 (INTEGRIS Health) | AA-/Aa3 | 1,000,000 | 1,158,560 | ||||||||||||||
Oklahoma DFA, 5.00% due 8/15/2023 (INTEGRIS Health) | AA-/Aa3 | 1,500,000 | 1,767,060 | ||||||||||||||
Oklahoma DFA, 5.00% due 8/15/2024 (INTEGRIS Health) | AA-/Aa3 | 1,225,000 | 1,464,083 | ||||||||||||||
Oklahoma DFA, 5.00% due 8/15/2025 (INTEGRIS Health) | AA-/Aa3 | 1,000,000 | 1,204,750 | ||||||||||||||
Oklahoma Turnpike Authority, 0.90% due 1/1/2028 put 10/2/2017 (Oklahoma Turnpike System; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA-/Aa3 | 1,125,000 | 1,125,000 | ||||||||||||||
Tulsa County Industrial Authority, 5.50% due 9/1/2018 (Jenks Public Schools) | AA-/NR | 4,210,000 | 4,381,052 | ||||||||||||||
Tulsa County Industrial Authority, 4.50% due 9/1/2020 (Broken Arrow Public Schools) | AA-/NR | 1,585,000 | 1,724,385 | ||||||||||||||
Tulsa County Industrial Authority, 4.50% due 9/1/2021 (Broken Arrow Public Schools) | AA-/NR | 8,775,000 | 9,762,012 | ||||||||||||||
OREGON — 0.50% | |||||||||||||||||
Oregon Facilities Authority, 4.50% due 3/15/2018 (Legacy Health System) | AA-/A1 | 1,100,000 | 1,117,380 | ||||||||||||||
Polk County Dallas School District No. 2 GO, 0% due 6/15/2019 (Capital Improvements) | AA+/NR | 515,000 | 501,960 | ||||||||||||||
Polk County Dallas School District No. 2 GO, 0% due 6/15/2021 (Capital Improvements) | AA+/NR | 1,475,000 | 1,385,453 | ||||||||||||||
| b | State of Oregon GO, 5.00% due 9/28/2018 (Cash Management) | NR/NR | 31,500,000 | 32,727,555 | |||||||||||||
PENNSYLVANIA — 5.08% | |||||||||||||||||
Adams County IDA, 5.00% due 8/15/2019 (Gettysburg College) | A/A2 | 1,765,000 | 1,888,815 | ||||||||||||||
Allegheny County Higher Education Building Authority, 5.00% due 3/1/2020 (Duquesne University of the Holy Spirit) | A/A2 | 250,000 | 271,278 | ||||||||||||||
Allegheny County Higher Education Building Authority, 5.00% due 3/1/2023 (Duquesne University of the Holy Spirit) | A/A2 | 300,000 | 347,229 | ||||||||||||||
Allegheny County Higher Education Building Authority, 5.00% due 3/1/2024 (Duquesne University of the Holy Spirit) | A/A2 | 500,000 | 589,160 | ||||||||||||||
Allegheny County Higher Education Building Authority, 5.00% due 3/1/2025 (Duquesne University of the Holy Spirit) | A/A2 | 1,145,000 | 1,363,489 | ||||||||||||||
Allegheny County Hospital Development Authority, 5.00% due 5/15/2018 (University of Pittsburgh Medical Center) | A+/A1 | 5,915,000 | 6,063,526 | ||||||||||||||
Allegheny County Hospital Development Authority, 5.00% due 6/15/2018 (University of Pittsburgh Medical Center) | A+/A1 | 3,310,000 | 3,403,872 | ||||||||||||||
Allegheny County Hospital Development Authority, 5.00% due 9/1/2018 (University of Pittsburgh Medical Center) | A+/A1 | 3,100,000 | 3,211,755 | ||||||||||||||
Allegheny County Sanitary Authority, 4.00% due 12/1/2018 (2015 Capital Project) | A/A1 | 650,000 | 672,081 | ||||||||||||||
Allegheny County Sanitary Authority, 5.00% due 12/1/2023 (2015 Capital Project) | A/A1 | 14,500,000 | 17,087,235 | ||||||||||||||
Allegheny County Sanitary Authority, 5.00% due 12/1/2024 (2015 Capital Project) | A/A1 | 4,650,000 | 5,543,916 | ||||||||||||||
Allegheny County Sanitary Authority, 5.00% due 12/1/2025 (2015 Capital Project; Insured: BAM) | AA/A1 | 1,000,000 | 1,205,990 | ||||||||||||||
Altoona Area School District GO, 3.00% due 12/1/2022 (Insured: AGM) (State Aid Withholding) | AA/NR | 1,335,000 | 1,414,606 | ||||||||||||||
Athens Area School District GO, 3.00% due 4/15/2018 (Insured: AGM) (State Aid Withholding) | NR/A2 | 2,600,000 | 2,624,882 | ||||||||||||||
Athens Area School District GO, 3.00% due 4/15/2019 (Insured: AGM) (State Aid Withholding) | NR/A2 | 2,680,000 | 2,703,798 | ||||||||||||||
City of Philadelphia, 5.00% due 10/1/2017 (Pennsylvania Gas Works) (ETM) | A/A3 | 400,000 | 400,096 | ||||||||||||||
City of Philadelphia, 5.00% due 7/1/2018 (Pennsylvania Gas Works) (ETM) | AA/A2 | 1,395,000 | 1,437,952 | ||||||||||||||
City of Philadelphia, 2.00% due 8/1/2018 (Philadelphia Gas Works) | NR/NR | 4,765,000 | 4,804,931 | ||||||||||||||
City of Philadelphia, 5.00% due 10/1/2020 (Pennsylvania Gas Works) | A/A3 | 1,500,000 | 1,663,065 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2023 (Pennsylvania Gas Works) | A/A3 | 3,750,000 | 4,415,812 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2024 (Pennsylvania Gas Works) | A/A3 | 4,000,000 | 4,769,200 | ||||||||||||||
City of Philadelphia, 5.00% due 10/1/2024 (Water and Wastewater System) | A+/A1 | 3,385,000 | 4,066,536 | ||||||||||||||
City of Philadelphia, 5.00% due 10/1/2024 (Pennsylvania Gas Works) | A/A3 | 1,000,000 | 1,193,750 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2025 (Pennsylvania Gas Works) | A/A3 | 1,900,000 | 2,283,629 | ||||||||||||||
City of Philadelphia, 5.00% due 10/1/2025 (Water and Wastewater System) | A+/A1 | 4,430,000 | 5,367,609 | ||||||||||||||
City of Philadelphia, 5.00% due 10/1/2026 (Water and Wastewater System) | A+/A1 | 2,070,000 | 2,531,237 | ||||||||||||||
City of Philadelphia GO, 5.00% due 8/1/2025 (Insured: AGM) | AA/A2 | 7,965,000 | 9,561,505 | ||||||||||||||
City of Philadelphia GO, 5.00% due 8/1/2025 | A+/A2 | 10,710,000 | 12,676,249 | ||||||||||||||
City of Philadelphia GO, 5.00% due 8/1/2026 (Insured: AGM) | AA/A2 | 14,715,000 | 17,831,343 | ||||||||||||||
City of Philadelphia GO, 5.00% due 8/1/2026 | A+/A2 | 14,420,000 | 17,158,791 | ||||||||||||||
City of Philadelphia GO, 5.00% due 8/1/2027 (Insured: AGM) | AA/A2 | 6,005,000 | 7,331,504 | ||||||||||||||
City of Pittsburgh GO, 5.00% due 9/1/2022 (Insured: BAM) | AA/A1 | 1,100,000 | 1,267,882 | ||||||||||||||
Commonwealth of Pennsylvania GO, 5.00% due 8/15/2023 (Capital Facilities) | A+/Aa3 | 19,125,000 | 22,293,247 | ||||||||||||||
Commonwealth of Pennsylvania GO, 5.00% due 8/15/2024 (Capital Facilities) | A+/Aa3 | 15,500,000 | 18,328,130 | ||||||||||||||
Commonwealth of Pennsylvania GO, 5.00% due 8/15/2025 (Capital Facilities) | A+/Aa3 | 14,825,000 | 17,681,036 | ||||||||||||||
Economy Borough Municipal Authority, 3.00% due 12/15/2018 (Beaver County Sewer System; Insured: BAM) | AA/NR | 435,000 | 444,553 | ||||||||||||||
Economy Borough Municipal Authority, 4.00% due 12/15/2020 (Beaver County Sewer System; Insured: BAM) | AA/NR | 605,000 | 653,454 | ||||||||||||||
Economy Borough Municipal Authority, 4.00% due 12/15/2022 (Beaver County Sewer System; Insured: BAM) | AA/NR | 1,180,000 | 1,308,962 | ||||||||||||||
Geisinger Authority, 0.88% due 6/1/2041 put 10/2/2017 (Geisinger Health System; SPA: U.S. Bank, N.A.) (daily demand notes) | AA/Aa2 | 1,800,000 | 1,800,000 | ||||||||||||||
Hospitals & Higher Education Facilities Authority of Philadelphia, 0.90% due 2/15/2021 put 10/2/2017 (The Children’s Hospital of Philadelphia; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa2 | 2,865,000 | 2,865,000 | ||||||||||||||
Annual Report | 33
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Hospitals & Higher Education Facilities Authority of Philadelphia, 0.90% due 7/1/2022 put 10/2/2017 (The Children’s Hospital of Philadelphia; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa2 | $ | 800,000 | $ | 800,000 | ||||||||||||
Hospitals & Higher Education Facilities Authority of Philadelphia, 0.90% due 7/1/2025 put 10/2/2017 (The Children’s Hospital of Philadelphia; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa2 | 3,300,000 | 3,300,000 | ||||||||||||||
Hospitals & Higher Education Facilities Authority of Philadelphia, 0.90% due 7/1/2041 put 10/2/2017 (The Children’s Hospital of Philadelphia; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa2 | 7,070,000 | 7,070,000 | ||||||||||||||
Hospitals & Higher Education Facilities Authority of Philadelphia, 0.90% due 7/1/2041 put 10/2/2017 (The Children’s Hospital of Philadelphia; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa2 | 1,700,000 | 1,700,000 | ||||||||||||||
Lancaster County Hospital Authority, 4.00% due 11/1/2017 (Masonic Villages Project) | A/NR | 865,000 | 867,163 | ||||||||||||||
Lancaster County Hospital Authority, 5.00% due 11/1/2018 (Masonic Villages Project) | A/NR | 1,105,000 | 1,147,045 | ||||||||||||||
Lancaster County Solid Waste Management Authority, 5.00% due 12/15/2023 (Harrisburg Resource Recovery Facility) | AA-/NR | 2,680,000 | 3,126,086 | ||||||||||||||
Lancaster County Solid Waste Management Authority, 5.25% due 12/15/2024 (Harrisburg Resource Recovery Facility) | AA-/NR | 4,770,000 | 5,627,312 | ||||||||||||||
Luzerne County GO, 5.00% due 11/15/2021 (Insured: AGM) | AA/NR | 2,680,000 | 2,996,696 | ||||||||||||||
Luzerne County GO, 5.00% due 11/15/2022 (Insured: AGM) | AA/NR | 2,560,000 | 2,904,755 | ||||||||||||||
Luzerne County GO, 5.00% due 11/15/2023 (Insured: AGM) | AA/NR | 2,600,000 | 2,985,424 | ||||||||||||||
Luzerne County GO, 5.00% due 11/15/2024 (Insured: AGM) | AA/NR | 4,000,000 | 4,639,560 | ||||||||||||||
Monroeville Finance Authority, 5.00% due 2/15/2021 (University of Pittsburgh Medical Center) | A+/A1 | 2,400,000 | 2,690,592 | ||||||||||||||
Monroeville Finance Authority, 5.00% due 2/15/2022 (University of Pittsburgh Medical Center) | A+/A1 | 1,250,000 | 1,435,412 | ||||||||||||||
Montgomery County Higher Education & Health Authority, 5.00% due 6/1/2022 (Abington Memorial Hospital) | A+/NR | 3,000,000 | 3,444,510 | ||||||||||||||
Northampton Borough Municipal Authority, 4.00% due 5/15/2021 (Water System; Insured: AGM) | NR/A1 | 500,000 | 543,935 | ||||||||||||||
Northampton Borough Municipal Authority, 4.00% due 5/15/2022 (Water System; Insured: AGM) | NR/A1 | 1,185,000 | 1,305,491 | ||||||||||||||
Northampton Borough Municipal Authority, 3.00% due 5/15/2023 (Water System; Insured: AGM) | NR/A1 | 1,255,000 | 1,318,478 | ||||||||||||||
Norwin School District GO, 4.00% due 4/1/2018 (Insured: AGM) (State Aid Withholding) | AA/A1 | 1,835,000 | 1,862,507 | ||||||||||||||
| b | Pennsylvania Economic Development Financing Authority, 5.00% due 11/15/2026 | A+/A1 | 2,310,000 | 2,819,701 | |||||||||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 5/15/2019 (University of Pittsburgh Medical Center) | A+/A1 | 5,600,000 | 5,949,216 | ||||||||||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 5/15/2020 (University of Pittsburgh Medical Center) | A+/A1 | 5,100,000 | 5,597,403 | ||||||||||||||
Pennsylvania Higher Educational Facilities Authority, 4.00% due 10/1/2022 (Shippensburg University Student Services, Inc. Student Housing) | BBB-/Baa3 | 2,075,000 | 2,178,667 | ||||||||||||||
Pennsylvania Higher Educational Facilities Authority, 5.00% due 11/1/2023 (Saint Joseph’s University) | A-/NR | 1,075,000 | 1,190,648 | ||||||||||||||
Pennsylvania Higher Educational Facilities Authority, 0.90% due 5/1/2030 put 10/2/2017 (Drexel University; LOC: TD Bank, N.A.) (daily demand notes) | NR/Aa3 | 12,500,000 | 12,500,000 | ||||||||||||||
| b | Pennsylvania Turnpike Commission, 5.00% due 12/1/2022 | NR/A1 | 500,000 | 580,385 | |||||||||||||
| b | Pennsylvania Turnpike Commission, 5.00% due 12/1/2023 | NR/A1 | 550,000 | 650,084 | |||||||||||||
| b | Pennsylvania Turnpike Commission, 5.00% due 12/1/2024 | NR/A1 | 1,675,000 | 2,007,889 | |||||||||||||
| b | Pennsylvania Turnpike Commission, 5.00% due 12/1/2025 | NR/A1 | 1,000,000 | 1,207,710 | |||||||||||||
| b | Pennsylvania Turnpike Commission, 5.00% due 12/1/2026 | NR/A1 | 2,000,000 | 2,435,200 | |||||||||||||
| b | Pennsylvania Turnpike Commission, 5.00% due 12/1/2027 | NR/A1 | 1,000,000 | 1,225,480 | |||||||||||||
Philadelphia Authority for Industrial Development, 5.00% due 8/1/2020 (Mast Charter School) (ETM) | BBB/NR | 325,000 | 345,160 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2021 (Juvenile Justice Services Center) | A+/A2 | 830,000 | 926,139 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2022 (Juvenile Justice Services Center) | A+/A2 | 895,000 | 1,019,987 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2023 (Juvenile Justice Services Center) | A+/A2 | 1,210,000 | 1,400,418 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2024 (Juvenile Justice Services Center) | A+/A2 | 1,550,000 | 1,819,948 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2025 (Juvenile Justice Services Center) | A+/A2 | 1,325,000 | 1,561,870 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2026 (Juvenile Justice Services Center) | A+/A2 | 675,000 | 799,477 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2027 (Juvenile Justice Services Center) | A+/A2 | 1,365,000 | 1,625,114 | ||||||||||||||
Philadelphia School District GO, 5.00% due 9/1/2019 (State Aid Withholding) | NR/A2 | 18,410,000 | 19,503,370 | ||||||||||||||
Philadelphia School District GO, 5.00% due 9/1/2019 (State Aid Withholding) | NR/A2 | 4,210,000 | 4,460,032 | ||||||||||||||
Philadelphia School District GO, 5.25% due 9/1/2021 (State Aid Withholding) | NR/A2 | 2,265,000 | 2,472,655 | ||||||||||||||
Pittsburgh Water and Sewer Authority, 5.00% due 9/1/2023 | A/A2 | 2,520,000 | 2,954,020 | ||||||||||||||
Pittsburgh Water and Sewer Authority, 5.00% due 9/1/2024 | A/A2 | 7,365,000 | 8,636,420 | ||||||||||||||
Pittsburgh Water and Sewer Authority, 5.00% due 9/1/2024 | A/A2 | 2,395,000 | 2,808,449 | ||||||||||||||
Plum Borough School District GO, 4.00% due 9/15/2018 (Insured: BAM) (State Aid Withholding) | AA/NR | 740,000 | 759,462 | ||||||||||||||
Plum Borough School District GO, 4.00% due 9/15/2019 (Insured: BAM) (State Aid Withholding) | AA/NR | 390,000 | 409,418 | ||||||||||||||
Plum Borough School District GO, 4.00% due 9/15/2019 (Insured: BAM) (State Aid Withholding) | AA/NR | 395,000 | 414,667 | ||||||||||||||
Plum Borough School District GO, 4.00% due 9/15/2019 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,205,000 | 1,264,997 | ||||||||||||||
Plum Borough School District GO, 4.00% due 9/15/2020 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,455,000 | 1,560,109 | ||||||||||||||
Plum Borough School District GO, 4.00% due 9/15/2021 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,610,000 | 1,756,220 | ||||||||||||||
Plum Borough School District GO, 5.00% due 9/15/2022 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,410,000 | 1,612,913 | ||||||||||||||
Plum Borough School District GO, 5.00% due 9/15/2023 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,495,000 | 1,749,987 | ||||||||||||||
Plum Borough School District GO, 5.00% due 9/15/2023 (Insured: BAM) (State Aid Withholding) | AA/NR | 470,000 | 550,163 | ||||||||||||||
Plum Borough School District GO, 5.00% due 9/15/2024 (Insured: BAM) (State Aid Withholding) | AA/NR | 1,885,000 | 2,207,184 | ||||||||||||||
Wayne County Hospital and HFA, 2.00% due 7/1/2018 (Wayne Memorial Hospital; Insured: AGM) | AA/NR | 625,000 | 629,219 | ||||||||||||||
Wayne County Hospital and HFA, 3.00% due 7/1/2019 (Wayne Memorial Hospital; Insured: AGM) | AA/NR | 1,185,000 | 1,201,246 | ||||||||||||||
34 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
RHODE ISLAND — 1.56% | |||||||||||||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2018 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | $ | 870,000 | $ | 904,730 | ||||||||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2019 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 1,250,000 | 1,347,088 | ||||||||||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2020 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 1,300,000 | 1,447,030 | ||||||||||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2021 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 2,000,000 | 2,288,740 | ||||||||||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2022 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 2,280,000 | 2,668,831 | ||||||||||||||
Rhode Island Clean Water Finance Agency, 5.00% due 10/1/2023 (Public Drinking Water Supply or Treatment Facilities) | AAA/NR | 2,380,000 | 2,838,578 | ||||||||||||||
Rhode Island Convention Center Authority, 5.00% due 5/15/2018 (Convention Center and Parking Projects) | AA-/A1 | 5,890,000 | 6,035,306 | ||||||||||||||
Rhode Island Convention Center Authority, 5.00% due 5/15/2019 (Convention Center and Parking Projects) | AA-/A1 | 7,310,000 | 7,747,869 | ||||||||||||||
Rhode Island Convention Center Authority, 5.00% due 5/15/2020 (Convention Center and Parking Projects) | AA-/A1 | 5,890,000 | 6,432,764 | ||||||||||||||
Rhode Island Health and Educational Building Corp., 5.00% due 9/15/2020 (University of Rhode Island Auxiliary Enterprise) | A+/A1 | 750,000 | 830,655 | ||||||||||||||
Rhode Island Health and Educational Building Corp., 5.00% due 9/15/2020 (University of Rhode Island) | A+/A1 | 355,000 | 393,177 | ||||||||||||||
Rhode Island Health and Educational Building Corp., 5.00% due 9/15/2022 (University of Rhode Island) | A+/A1 | 465,000 | 539,488 | ||||||||||||||
Rhode Island Health and Educational Building Corp., 5.00% due 9/15/2023 (University of Rhode Island Auxiliary Enterprise) | A+/A1 | 1,400,000 | 1,650,866 | ||||||||||||||
Rhode Island Health and Educational Building Corp., 5.00% due 9/15/2025 (University of Rhode Island) | A+/A1 | 500,000 | 604,205 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2019 (Kent County Courthouse) | AA-/Aa3 | 600,000 | 645,168 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2019 (Training School) | AA-/Aa3 | 1,575,000 | 1,693,566 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2020 (Kent County Courthouse) | AA-/Aa3 | 1,375,000 | 1,525,123 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2020 (Training School) | AA-/Aa3 | 1,405,000 | 1,558,398 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2021 (Kent County Courthouse) | AA-/Aa3 | 2,000,000 | 2,277,820 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2021 (Training School) | AA-/Aa3 | 3,540,000 | 4,031,741 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 4/1/2022 (Energy Conservation) | AA-/Aa3 | 2,020,000 | 2,294,336 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2022 (Kent County Courthouse) | AA-/Aa3 | 2,100,000 | 2,436,651 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2022 (Training School) | AA-/Aa3 | 3,620,000 | 4,200,322 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2023 (Kent County Courthouse) | AA-/Aa3 | 1,500,000 | 1,770,900 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2023 (Training School) | AA-/Aa3 | 1,705,000 | 2,012,923 | ||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 11/1/2024 (Information Technology) | AA-/Aa3 | 3,010,000 | 3,607,214 | ||||||||||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 10/1/2019 (Consolidated Capital Development Loan) | AA/Aa2 | 5,000,000 | 5,384,700 | ||||||||||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 8/1/2020 (Consolidated Capital Development Loan) | AA/Aa2 | 8,365,000 | 9,257,295 | ||||||||||||||
State of Rhode Island and Providence Plantations GO, 4.00% due 10/15/2020 (Consolidated Capital Development Loan) | AA/Aa2 | 1,200,000 | 1,299,432 | ||||||||||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 8/1/2021 (Consolidated Capital Development Loan) | AA/Aa2 | 16,535,000 | 18,798,311 | ||||||||||||||
State of Rhode Island and Providence Plantations GO, 4.00% due 10/15/2021 (Consolidated Capital Development Loan) | AA/Aa2 | 1,000,000 | 1,104,180 | ||||||||||||||
State of Rhode Island and Providence Plantations GO, 5.00% due 8/1/2022 (Consolidated Capital Development Loan) | AA/Aa2 | 9,825,000 | 11,364,381 | ||||||||||||||
State of Rhode Island and Providence Plantations GO, 4.00% due 10/15/2022 (Consolidated Capital Development Loan) | AA/Aa2 | 1,000,000 | 1,119,230 | ||||||||||||||
SOUTH CAROLINA — 0.47% | |||||||||||||||||
Beaufort-Jasper Water & Sewer Authority, 5.00% due 3/1/2019 (Waterworks & Sewer System) | AA/Aa1 | 1,000,000 | 1,055,900 | ||||||||||||||
Beaufort-Jasper Water & Sewer Authority, 5.00% due 3/1/2021 (Waterworks & Sewer System) | AA/Aa1 | 750,000 | 844,380 | ||||||||||||||
Beaufort-Jasper Water & Sewer Authority, 5.00% due 3/1/2022 (Waterworks & Sewer System) | AA/Aa1 | 1,000,000 | 1,153,860 | ||||||||||||||
Beaufort-Jasper Water & Sewer Authority, 5.00% due 3/1/2023 (Waterworks & Sewer System) | AA/Aa1 | 1,000,000 | 1,177,730 | ||||||||||||||
Beaufort-Jasper Water & Sewer Authority, 5.00% due 3/1/2024 (Waterworks & Sewer System) | AA/Aa1 | 1,000,000 | 1,200,990 | ||||||||||||||
Beaufort-Jasper Water & Sewer Authority, 5.00% due 3/1/2025 (Waterworks & Sewer System) | AA/Aa1 | 1,000,000 | 1,215,880 | ||||||||||||||
Berkeley County School District, 5.00% due 12/1/2020 (School Facility Equipment Acquisition) | AA-/NR | 550,000 | 610,550 | ||||||||||||||
Berkeley County School District, 5.00% due 12/1/2021 (School Facility Equipment Acquisition) | AA-/NR | 1,000,000 | 1,137,610 | ||||||||||||||
Berkeley County School District, 5.00% due 12/1/2024 (School Facility Equipment Acquisition) | AA-/NR | 2,000,000 | 2,384,480 | ||||||||||||||
Charleston County, 5.00% due 12/1/2022 (South Aviation Ave. Construction) | AA+/NR | 1,810,000 | 2,119,166 | ||||||||||||||
Charleston County, 5.00% due 12/1/2023 (South Aviation Ave. Construction) | AA+/NR | 2,460,000 | 2,930,377 | ||||||||||||||
City of Charleston Public Facilities Corp., 5.00% due 9/1/2019 (City of Charleston Project) | AA+/Aa1 | 390,000 | 418,302 | ||||||||||||||
City of Charleston Public Facilities Corp., 5.00% due 9/1/2020 (City of Charleston Project) | AA+/Aa1 | 700,000 | 772,814 | ||||||||||||||
City of Charleston Public Facilities Corp., 5.00% due 9/1/2021 (City of Charleston Project) | AA+/Aa1 | 460,000 | 520,904 | ||||||||||||||
City of Charleston Public Facilities Corp., 5.00% due 9/1/2022 (City of Charleston Project) | AA+/Aa1 | 425,000 | 491,164 | ||||||||||||||
City of Charleston Public Facilities Corp., 5.00% due 9/1/2023 (City of Charleston Project) | AA+/Aa1 | 345,000 | 405,617 | ||||||||||||||
City of Charleston Public Facilities Corp., 5.00% due 9/1/2025 (City of Charleston Project) | AA+/Aa1 | 930,000 | 1,119,348 | ||||||||||||||
City of North Charleston Public Facilities Corp. COP, 5.00% due 10/1/2017 (Convention Center Complex) | AA-/NR | 710,000 | 710,163 | ||||||||||||||
Greenwood County, 5.00% due 10/1/2022 (Self Regional Healthcare) | A+/A1 | 1,000,000 | 1,143,250 | ||||||||||||||
Piedmont Municipal Power Agency, 6.75% due 1/1/2019 (Insured: Natl-Re) | NR/A3 | 3,800,000 | 4,056,120 | ||||||||||||||
SCAGO Educational Facilities Corp., 5.00% due 12/1/2021 (School District of Pickens County) | A/A1 | 1,810,000 | 2,060,902 | ||||||||||||||
SCAGO Educational Facilities Corp., 5.00% due 12/1/2022 (School District of Pickens County) | A/A1 | 500,000 | 579,245 | ||||||||||||||
SCAGO Educational Facilities Corp., 5.00% due 12/1/2023 (School District of Pickens County) | A/A1 | 1,000,000 | 1,175,830 | ||||||||||||||
SCAGO Educational Facilities Corp., 5.00% due 12/1/2024 (School District of Pickens County) | A/A1 | 1,010,000 | 1,202,738 | ||||||||||||||
SCAGO Educational Facilities Corp., 5.00% due 12/1/2025 (School District of Pickens County) | A/A1 | 1,000,000 | 1,186,930 | ||||||||||||||
South Carolina Public Service Authority, 5.00% due 12/1/2026 | A+/A1 | 1,000,000 | 1,179,980 | ||||||||||||||
South Carolina Public Service Authority, 5.00% due 12/1/2027 | A+/A1 | 580,000 | 668,438 | ||||||||||||||
Annual Report | 35
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
SOUTH DAKOTA — 0.26% | |||||||||||||||||
South Dakota Building Authority, 5.00% due 6/1/2022 | AA+/Aa1 | $ | 500,000 | $ | 579,105 | ||||||||||||
South Dakota Building Authority, 5.00% due 6/1/2024 | AA+/Aa1 | 1,000,000 | 1,173,070 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 3.00% due 11/1/2017 (Sanford Health) | A+/A1 | 450,000 | 450,891 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 4/1/2018 (Prairie Lakes Health) | A+/NR | 2,290,000 | 2,324,785 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2018 (Regional Health) (ETM) | NR/A1 | 1,275,000 | 1,322,455 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2018 (Regional Health) (ETM) | NR/A1 | 1,000,000 | 1,037,220 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 4.00% due 11/1/2018 (Sanford Health) | A+/A1 | 800,000 | 825,208 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 4/1/2019 (Prairie Lakes Health) | A+/NR | 2,440,000 | 2,543,578 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 9/1/2020 (Regional Health) (ETM) | NR/A1 | 1,000,000 | 1,111,130 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 7/1/2021 (Avera Health) | AA-/A1 | 1,670,000 | 1,887,200 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 11/1/2021 (Sanford Health) | A+/A1 | 350,000 | 398,745 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 11/1/2022 (Sanford Health) | A+/A1 | 1,070,000 | 1,241,596 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 11/1/2024 (Sanford Health) | A+/A1 | 400,000 | 479,904 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 11/1/2025 (Sanford Health) | A+/A1 | 965,000 | 1,166,830 | ||||||||||||||
South Dakota Housing Development Authority, 4.00% due 11/1/2017 (Single Family Mtg) | NR/Aa2 | 1,055,000 | 1,057,933 | ||||||||||||||
South Dakota Housing Development Authority, 4.00% due 11/1/2018 (Single Family Mtg) | NR/Aa2 | 1,165,000 | 1,201,849 | ||||||||||||||
TENNESSEE — 0.49% | |||||||||||||||||
Clarksville Natural Gas Acquisition Corp., 5.00% due 12/15/2019 | NR/Baa1 | 6,000,000 | 6,414,180 | ||||||||||||||
Metropolitan Government of Nashville and Davidson County GO, 5.00% due 1/1/2024 | AA/Aa2 | 7,000,000 | 8,415,820 | ||||||||||||||
State of Tennessee GO, 4.00% due 8/1/2018 | AAA/Aaa | 2,000,000 | 2,051,400 | ||||||||||||||
State of Tennessee GO, 5.00% due 8/1/2018 | AAA/Aaa | 2,000,000 | 2,068,060 | ||||||||||||||
State of Tennessee GO, 5.00% due 8/1/2019 | AAA/Aaa | 3,000,000 | 3,218,340 | ||||||||||||||
State of Tennessee GO, 5.00% due 8/1/2019 | AAA/Aaa | 2,000,000 | 2,145,560 | ||||||||||||||
State of Tennessee GO, 5.00% due 8/1/2020 | AAA/Aaa | 2,000,000 | 2,218,180 | ||||||||||||||
State of Tennessee GO, 5.00% due 8/1/2020 | AAA/Aaa | 2,000,000 | 2,218,180 | ||||||||||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2018 | BBB+/A3 | 5,000,000 | 5,189,350 | ||||||||||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2020 | BBB+/A3 | 1,190,000 | 1,313,867 | ||||||||||||||
TEXAS — 11.99% | |||||||||||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2021 (Convention Center Hotel First Tier) | BBB+/NR | 500,000 | 553,200 | ||||||||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2022 (Convention Center Hotel First Tier) | BBB+/NR | 300,000 | 338,886 | ||||||||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2023 (Convention Center Hotel First Tier) | BBB+/NR | 500,000 | 574,195 | ||||||||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2024 (Convention Center Hotel First Tier) | BBB+/NR | 500,000 | 582,655 | ||||||||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2025 (Convention Center Hotel First Tier) | BBB+/NR | 500,000 | 588,260 | ||||||||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2026 (Convention Center Hotel First Tier) | BBB+/NR | 600,000 | 709,770 | ||||||||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2027 (Convention Center Hotel First Tier) | BBB+/NR | 780,000 | 931,663 | ||||||||||||||
Bexar County Hospital District GO, 5.00% due 2/15/2022 (University Health System) | AA+/Aa1 | 1,250,000 | 1,426,787 | ||||||||||||||
Bexar County Hospital District GO, 5.00% due 2/15/2023 (University Health System) | AA+/Aa1 | 1,250,000 | 1,452,400 | ||||||||||||||
Bexar County Hospital District GO, 5.00% due 2/15/2024 (University Health System) | AA+/Aa1 | 1,500,000 | 1,769,415 | ||||||||||||||
Bexar County Hospital District GO, 5.00% due 2/15/2025 (University Health System) | AA+/Aa1 | 2,355,000 | 2,812,836 | ||||||||||||||
Bexar County Hospital District GO, 5.00% due 2/15/2026 (University Health System) | AA+/Aa1 | 1,500,000 | 1,809,060 | ||||||||||||||
Bexar County Hospital District GO, 5.00% due 2/15/2027 (University Health System) | AA+/Aa1 | 1,500,000 | 1,795,305 | ||||||||||||||
Capital Area Cultural Education Facilities Finance Corp., 5.00% due 4/1/2018 (Roman Catholic Diocese of Austin) | NR/Baa1 | 1,370,000 | 1,392,797 | ||||||||||||||
Cities of Dallas and Fort Worth, 5.25% due 11/1/2023 (DFW International Airport Terminal Renewal & Improvement Program) | A+/A1 | 3,000,000 | 3,451,350 | ||||||||||||||
City of Austin, 5.00% due 11/15/2022 (Water and Wastewater System) | AA/Aa2 | 2,640,000 | 3,021,850 | ||||||||||||||
City of Austin, 5.00% due 11/15/2025 (Water and Wastewater System) | AA/Aa2 | 2,485,000 | 3,049,244 | ||||||||||||||
City of Austin, 5.00% due 11/15/2026 (Water and Wastewater System) | AA/Aa2 | 3,330,000 | 4,126,736 | ||||||||||||||
City of Beaumont, 5.00% due 9/1/2023 (Waterworks & Sewer System Improvements; Insured: AGM) | AA/A2 | 5,000,000 | 5,870,300 | ||||||||||||||
City of Beaumont, 5.00% due 9/1/2024 (Waterworks & Sewer System Improvements; Insured: AGM) | AA/A2 | 2,500,000 | 2,925,450 | ||||||||||||||
City of Beaumont GO, 5.00% due 3/1/2022 | AA-/Aa2 | 1,000,000 | 1,144,610 | ||||||||||||||
City of Beaumont GO, 5.00% due 3/1/2023 | AA-/Aa2 | 1,000,000 | 1,166,400 | ||||||||||||||
City of Beaumont GO, 5.00% due 3/1/2024 | AA-/Aa2 | 1,500,000 | 1,781,385 | ||||||||||||||
City of Beaumont GO, 5.00% due 3/1/2025 | AA-/Aa2 | 3,060,000 | 3,673,622 | ||||||||||||||
City of Beaumont GO, 5.00% due 3/1/2026 | AA-/Aa2 | 1,930,000 | 2,338,504 | ||||||||||||||
City of Brownsville, 5.00% due 9/1/2020 (Water, Wastewater & Electric Utilities Systems) | A+/A2 | 1,500,000 | 1,655,130 | ||||||||||||||
City of Brownsville, 5.00% due 9/1/2022 (Water, Wastewater & Electric Utilities Systems) | A+/A2 | 1,300,000 | 1,498,185 | ||||||||||||||
City of Brownsville, 5.00% due 9/1/2022 (Water, Wastewater & Electric Utilities Systems) | A+/A2 | 1,520,000 | 1,751,724 | ||||||||||||||
City of Brownsville, 5.00% due 9/1/2023 (Water, Wastewater & Electric Utilities Systems) | A+/A2 | 2,380,000 | 2,792,811 | ||||||||||||||
City of Bryan, 5.00% due 7/1/2019 (Electric System Improvements) | A+/A2 | 8,000,000 | 8,025,840 | ||||||||||||||
City of Bryan, 5.00% due 7/1/2026 (Electric System Improvements) | A+/NR | 535,000 | 648,249 | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2021 (Trinity River Corridor Infrastructure) | AA-/A1 | 1,965,000 | 2,185,846 | ||||||||||||||
36 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2022 | AA-/A1 | $ | 13,955,000 | $ | 15,836,134 | ||||||||||||
City of Dallas GO, 5.00% due 2/15/2022 (Public Improvements) | AA-/A1 | 2,500,000 | 2,837,000 | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2023 | AA-/A1 | 5,000,000 | 5,694,650 | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2024 (Trinity River Corridor Infrastructure) | AA-/A1 | 2,705,000 | 3,171,180 | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2024 (Trinity River Corridor Infrastructure) | AA-/A1 | 10,235,000 | 11,924,389 | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2025 (Trinity River Corridor Infrastructure) | AA-/A1 | 9,350,000 | 10,950,626 | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2025 (Public Improvements) | AA-/NR | 3,000,000 | 3,538,650 | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2026 (Trinity River Corridor Infrastructure) | AA-/A1 | 8,585,000 | 9,982,981 | ||||||||||||||
City of Denton GO, 5.00% due 2/15/2019 | AA+/Aa2 | 3,990,000 | 4,206,817 | ||||||||||||||
City of Denton GO, 5.00% due 2/15/2020 | AA+/Aa2 | 4,195,000 | 4,417,629 | ||||||||||||||
City of Houston, 5.00% due 7/1/2018 (Airport System) | AA-/Aa3 | 1,000,000 | 1,029,630 | ||||||||||||||
City of Houston, 0% due 9/1/2020 (Convention & Entertainment Facilities; Insured: AGM/AMBAC) | AA/A2 | 3,650,000 | 3,460,090 | ||||||||||||||
City of Houston, 5.00% due 9/1/2020 (Convention & Entertainment Facilities) | A-/A2 | 650,000 | 715,650 | ||||||||||||||
City of Houston, 5.00% due 9/1/2021 (Convention & Entertainment Facilities) | A-/A2 | 1,500,000 | 1,689,030 | ||||||||||||||
City of Houston, 5.00% due 11/15/2021 (Combined Utility System) | NR/Aa2 | 5,455,000 | 6,257,649 | ||||||||||||||
City of Houston, 5.00% due 5/15/2022 (Combined Utility System) | AA/Aa2 | 3,000,000 | 3,468,540 | ||||||||||||||
City of Houston, 5.00% due 9/1/2022 (Convention & Entertainment Facilities) | A-/A2 | 600,000 | 685,278 | ||||||||||||||
City of Houston, 5.00% due 11/15/2022 (Combined Utility System) | AA/Aa2 | 7,535,000 | 8,809,545 | ||||||||||||||
City of Houston, 5.00% due 11/15/2022 (Combined Utility System) | NR/Aa2 | 7,110,000 | 8,331,782 | ||||||||||||||
City of Houston, 5.00% due 5/15/2023 (Combined Utility System) | AA/Aa2 | 4,445,000 | 5,236,699 | ||||||||||||||
City of Houston, 5.00% due 11/15/2023 (Combined Utility System) | AA/Aa2 | 5,000,000 | 5,947,900 | ||||||||||||||
City of Houston, 5.00% due 11/15/2023 (Combined Utility System) | NR/Aa2 | 7,400,000 | 8,826,572 | ||||||||||||||
City of Houston, 5.00% due 5/15/2024 (Combined Utility System) | AA/Aa2 | 7,250,000 | 8,695,505 | ||||||||||||||
City of Houston, 5.00% due 9/1/2024 (Convention & Entertainment Facilities) | A-/A2 | 1,215,000 | 1,426,896 | ||||||||||||||
City of Houston, 5.00% due 11/15/2024 (Combined Utility System) | AA/Aa2 | 5,000,000 | 6,039,300 | ||||||||||||||
City of Houston GO, 5.00% due 3/1/2020 (Public Improvements) | AA/Aa3 | 4,000,000 | 4,360,760 | ||||||||||||||
City of Houston GO, 5.00% due 3/1/2025 (Public Improvements) | AA/Aa3 | 23,570,000 | 28,422,592 | ||||||||||||||
City of Houston GO, 5.00% due 3/1/2026 (Public Improvements) | AA/Aa3 | 10,455,000 | 12,712,653 | ||||||||||||||
City of Laredo, 5.00% due 3/15/2021 (Sports Venues; Insured: AGM) | AA/A1 | 600,000 | 671,034 | ||||||||||||||
City of Laredo, 5.00% due 3/15/2022 (Sports Venues; Insured: AGM) | AA/A1 | 2,000,000 | 2,284,220 | ||||||||||||||
City of Laredo, 5.00% due 3/15/2023 (Sports Venues; Insured: AGM) | AA/A1 | 1,500,000 | 1,745,700 | ||||||||||||||
City of Laredo, 5.00% due 3/15/2024 (Sports Venues; Insured: AGM) | AA/A1 | 300,000 | 354,324 | ||||||||||||||
City of Laredo GO, 4.00% due 2/15/2018 (City Infrastructure Improvements) | AA/Aa2 | 175,000 | 177,002 | ||||||||||||||
City of Laredo GO, 4.00% due 2/15/2018 (Acquire & Purchase Personal Property) | AA/Aa2 | 675,000 | 682,722 | ||||||||||||||
City of Laredo GO, 4.00% due 2/15/2019 (City Infrastructure Improvements) | AA/Aa2 | 65,000 | 67,590 | ||||||||||||||
City of Laredo GO, 4.00% due 2/15/2019 (Acquire & Purchase Personal Property) | AA/Aa2 | 305,000 | 317,154 | ||||||||||||||
City of Laredo GO, 4.00% due 2/15/2020 (City Infrastructure Improvements) | AA/Aa2 | 110,000 | 117,258 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2020 (Acquire & Purchase Personal Property) | AA/Aa2 | 735,000 | 800,680 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2021 (City Infrastructure Improvements) | AA/Aa2 | 125,000 | 140,279 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2021 (Acquire & Purchase Personal Property) | AA/Aa2 | 775,000 | 869,728 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2022 (City Infrastructure Improvements) | AA/Aa2 | 150,000 | 172,473 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2022 (Acquire & Purchase Personal Property) | AA/Aa2 | 810,000 | 931,354 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2023 (City Infrastructure Improvements) | AA/Aa2 | 275,000 | 322,471 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2023 (Acquire & Purchase Personal Property) | AA/Aa2 | 855,000 | 1,002,590 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2024 (City Infrastructure Improvements) | AA/Aa2 | 445,000 | 531,953 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2024 (Acquire & Purchase Personal Property) | AA/Aa2 | 900,000 | 1,075,860 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2025 (City Infrastructure Improvements) | AA/Aa2 | 380,000 | 459,678 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2025 (Acquire & Purchase Personal Property) | AA/Aa2 | 945,000 | 1,143,148 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2026 (City Infrastructure Improvements) | AA/Aa2 | 1,000,000 | 1,223,000 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2026 (Acquire & Purchase Personal Property) | AA/Aa2 | 995,000 | 1,216,885 | ||||||||||||||
City of Laredo GO, 5.00% due 2/15/2027 (City Infrastructure Improvements) | AA/Aa2 | 500,000 | 606,575 | ||||||||||||||
City of Lubbock GO, 5.00% due 2/15/2020 (Waterworks System) | AA+/Aa2 | 2,325,000 | 2,532,762 | ||||||||||||||
City of Lubbock GO, 5.00% due 2/15/2020 (Waterworks System) | AA+/Aa2 | 2,000,000 | 2,178,720 | ||||||||||||||
City of Lubbock GO, 5.00% due 2/15/2021 (Waterworks System) | AA+/Aa2 | 7,490,000 | 8,400,185 | ||||||||||||||
City of Lubbock GO, 5.00% due 2/15/2022 (Waterworks System) | AA+/Aa2 | 2,895,000 | 3,327,397 | ||||||||||||||
City of Lubbock GO, 5.00% due 2/15/2023 (Waterworks System) | AA+/Aa2 | 500,000 | 586,590 | ||||||||||||||
City of Lubbock GO, 5.00% due 2/15/2023 (Waterworks System) | AA+/Aa2 | 4,180,000 | 4,903,892 | ||||||||||||||
City of Lubbock GO, 5.00% due 2/15/2024 (Waterworks System) | AA+/Aa2 | 4,460,000 | 5,334,472 | ||||||||||||||
City of Lubbock GO, 5.00% due 2/15/2024 (Waterworks System) | AA+/Aa2 | 4,440,000 | 5,310,551 | ||||||||||||||
City of Lubbock GO, 5.00% due 2/15/2025 (Waterworks System) | AA+/Aa2 | 7,735,000 | 9,350,996 | ||||||||||||||
City of Lubbock GO, 5.00% due 2/15/2025 (Waterworks System) | AA+/Aa2 | 5,725,000 | 6,921,067 | ||||||||||||||
City of McAllen, 5.00% due 3/1/2024 (International Toll Bridge System; Insured: AGM) | AA/NR | 1,000,000 | 1,180,410 | ||||||||||||||
City of McAllen, 5.00% due 3/1/2025 (International Toll Bridge System; Insured: AGM) | AA/NR | 890,000 | 1,063,630 | ||||||||||||||
Annual Report | 37
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
City of McAllen, 5.00% due 3/1/2027 (International Toll Bridge System; Insured: AGM) | AA/NR | $ | 1,125,000 | $ | 1,345,298 | ||||||||||||
City of Olmos Park Higher Education Facilities Corp., 5.00% due 12/1/2020 (University of the Incarnate Word) | NR/A3 | 3,620,000 | 3,995,973 | ||||||||||||||
City of Olmos Park Higher Education Facilities Corp., 5.00% due 12/1/2021 (University of the Incarnate Word) | NR/A3 | 1,000,000 | 1,128,960 | ||||||||||||||
City of San Antonio, 5.00% due 5/15/2023 (San Antonio Water System) | AA/Aa2 | 1,500,000 | 1,768,050 | ||||||||||||||
City of San Antonio, 5.25% due 2/1/2024 (CPS Energy) | AA/Aa1 | 7,000,000 | 8,523,480 | ||||||||||||||
City of San Antonio, 5.00% due 5/15/2024 (San Antonio Water System) | AA/Aa2 | 1,500,000 | 1,799,070 | ||||||||||||||
City of San Antonio, 5.00% due 5/15/2025 (San Antonio Water System) | AA/Aa2 | 1,000,000 | 1,212,190 | ||||||||||||||
City of San Antonio, 5.00% due 5/15/2026 (San Antonio Water System) | AA/Aa2 | 1,200,000 | 1,467,540 | ||||||||||||||
| a | City of San Antonio, 3.00% due 12/1/2045 put 12/1/2020 (CPS Energy) | AA-/Aa2 | 36,000,000 | 37,730,880 | |||||||||||||
City of San Antonio GO, 5.00% due 2/1/2023 (San Antonio Water System) | AAA/Aaa | 13,880,000 | 16,317,050 | ||||||||||||||
City of San Antonio GO, 5.00% due 2/1/2024 (San Antonio Water System) | AAA/Aaa | 14,595,000 | 17,503,783 | ||||||||||||||
City of San Antonio GO, 5.00% due 2/1/2025 (San Antonio Water System) | AAA/Aaa | 15,340,000 | 18,628,436 | ||||||||||||||
City of San Antonio Public Facilities Corp., 5.00% due 9/15/2022 (Convention Center Refinancing & Expansion) | AA+/Aa2 | 1,450,000 | 1,677,244 | ||||||||||||||
City of Texas City Industrial Development Corp., 7.375% due 10/1/2020 (ARCO Pipe Line Co. Project) | A-/A1 | 4,000,000 | 4,679,080 | ||||||||||||||
Clifton Higher Education Finance Corp., 5.00% due 8/15/2018 (IDEA Public Schools) | BBB+/NR | 325,000 | 335,660 | ||||||||||||||
Clifton Higher Education Finance Corp., 5.00% due 8/15/2019 (IDEA Public Schools) | BBB+/NR | 445,000 | 474,668 | ||||||||||||||
Clifton Higher Education Finance Corp., 5.00% due 8/15/2023 (IDEA Public Schools) | BBB+/NR | 1,100,000 | 1,230,911 | ||||||||||||||
Corpus Christi Business and Job Development Corp., 5.00% due 3/1/2021 (Seawall Project) | A+/A1 | 625,000 | 698,300 | ||||||||||||||
Dallas Area Rapid Transit, 5.00% due 12/1/2026 | AA+/Aa2 | 2,245,000 | 2,729,606 | ||||||||||||||
Dallas Convention Center Hotel Development Corp., 0% due 1/1/2018 | A-/Baa1 | 5,240,000 | 5,225,695 | ||||||||||||||
Dallas Convention Center Hotel Development Corp., 5.00% due 1/1/2019 | A-/Baa1 | 5,200,000 | 5,433,376 | ||||||||||||||
Dallas County Utility & Reclamation District GO, 5.00% due 2/15/2019 | A/A2 | 1,050,000 | 1,103,424 | ||||||||||||||
Dallas County Utility & Reclamation District GO, 5.00% due 2/15/2020 | A/A2 | 1,050,000 | 1,139,177 | ||||||||||||||
Dallas County Utility & Reclamation District GO, 5.00% due 2/15/2021 | A/A2 | 3,000,000 | 3,342,180 | ||||||||||||||
Dallas County Utility & Reclamation District GO, 5.00% due 2/15/2022 | A/A2 | 2,430,000 | 2,764,149 | ||||||||||||||
Dallas County Utility & Reclamation District GO, 5.00% due 2/15/2023 | A/A2 | 510,000 | 590,631 | ||||||||||||||
Dallas County Utility & Reclamation District GO, 5.00% due 2/15/2024 | A/A2 | 950,000 | 1,118,682 | ||||||||||||||
Dallas County Utility & Reclamation District GO, 5.00% due 2/15/2025 | A/A2 | 2,920,000 | 3,475,618 | ||||||||||||||
Dallas County Utility & Reclamation District GO, 5.00% due 2/15/2027 | A/A2 | 5,625,000 | 6,803,156 | ||||||||||||||
Dallas ISD GO, 5.00% due 2/15/2036 put 2/15/2022 (Educational Facilities Improvements; Guaranty: PSF) | AAA/Aaa | 3,975,000 | 4,544,617 | ||||||||||||||
Grayson County GO, 4.00% due 1/1/2020 (State Highway Toll System) | AA/Aa2 | 2,000,000 | 2,120,540 | ||||||||||||||
Grayson County GO, 5.00% due 1/1/2022 (State Highway Toll System) | AA/Aa2 | 3,000,000 | 3,424,590 | ||||||||||||||
Guadalupe-Blanco River Authority, 5.625% due 10/1/2017 (AEP Texas Central Co.) | A-/Baa1 | 5,000,000 | 5,001,300 | ||||||||||||||
Gulf Coast Waste Disposal Authority, 4.00% due 10/1/2017 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/A2 | 800,000 | 800,136 | ||||||||||||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2019 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/A2 | 1,000,000 | 1,077,040 | ||||||||||||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2020 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/A2 | 2,000,000 | 2,209,320 | ||||||||||||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2022 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/A2 | 1,635,000 | 1,887,542 | ||||||||||||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2023 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/NR | 500,000 | 587,580 | ||||||||||||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2024 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/NR | 350,000 | 416,427 | ||||||||||||||
Gulf Coast Waste Disposal Authority, 5.00% due 10/1/2025 (Bayport Area Wastewater Treatment System; Insured: AGM) | AA/NR | 1,000,000 | 1,202,460 | ||||||||||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 11/15/2018 (Texas Medical Center Central Heating & Cooling Services Corp.) | AA/Aa3 | 2,365,000 | 2,465,962 | ||||||||||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 11/15/2019 (Texas Medical Center Central Heating & Cooling Services Corp.) | AA/Aa3 | 1,000,000 | 1,078,160 | ||||||||||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 12/1/2022 (Memorial Hermann Health) | A+/A1 | 200,000 | 233,098 | ||||||||||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 12/1/2023 (Memorial Hermann Health) | A+/A1 | 400,000 | 473,420 | ||||||||||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 12/1/2024 (Memorial Hermann Health) | A+/A1 | 3,000,000 | 3,603,240 | ||||||||||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 12/1/2025 (Memorial Hermann Health) | A+/A1 | 2,845,000 | 3,375,251 | ||||||||||||||
Harris County Cultural Education Facilities Finance Corp., 0.90% due 9/1/2031 put 10/2/2017 (Texas Medical Center; LOC: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 2,845,000 | 2,845,000 | ||||||||||||||
Harris County Cultural Education Facilities Finance Corp., 0.90% due 9/1/2031 put 10/2/2017 (Texas Medical Center; LOC: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 9,515,000 | 9,515,000 | ||||||||||||||
Harris County Cultural Education Facilities Finance Corp., 0.90% due 9/1/2031 put 10/2/2017 (Texas Medical Center; LOC: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 14,220,000 | 14,220,000 | ||||||||||||||
Harris County GO, 5.00% due 10/1/2017 (Texas Permanent Improvement) | AAA/Aaa | 3,500,000 | 3,500,805 | ||||||||||||||
Harris County GO, 5.00% due 10/1/2018 (Texas Permanent Improvement) | AAA/Aaa | 3,000,000 | 3,120,540 | ||||||||||||||
Harris County GO, 5.00% due 10/1/2019 (Texas Permanent Improvement) | AAA/Aaa | 700,000 | 754,726 | ||||||||||||||
Harris County GO, 5.00% due 10/1/2020 (Texas Permanent Improvement) | AAA/Aaa | 500,000 | 556,940 | ||||||||||||||
Harris County Health Facilities Development Corp., 7.00% due 12/1/2027 pre-refunded 12/1/2018 (Memorial Hermann Health; LOC: JPMorgan Chase Bank, N.A.) | NR/NR | 1,245,000 | 1,331,615 | ||||||||||||||
Harris County-Houston Sports Authority, 5.00% due 11/15/2022 (Insured: AGM) | AA/A2 | 5,410,000 | 6,316,013 | ||||||||||||||
Harris County-Houston Sports Authority, 5.00% due 11/15/2023 (Insured: AGM) | AA/A2 | 9,975,000 | 11,872,444 | ||||||||||||||
Harris County-Houston Sports Authority, 5.00% due 11/15/2024 (Insured: AGM) | AA/A2 | 7,930,000 | 9,550,495 | ||||||||||||||
38 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Hays County GO, 5.00% due 2/15/2022 | AA/NR | $ | 750,000 | $ | 862,365 | ||||||||||||
Hays County GO, 5.00% due 2/15/2023 | AA/NR | 1,500,000 | 1,762,305 | ||||||||||||||
Hays County GO, 5.00% due 2/15/2024 | AA/NR | 1,300,000 | 1,557,491 | ||||||||||||||
Hays County GO, 5.00% due 2/15/2025 | AA/NR | 500,000 | 606,375 | ||||||||||||||
Houston Higher Education Finance Corp., 5.00% due 8/15/2019 (KIPP, Inc.; Guaranty: PSF) | AAA/NR | 1,020,000 | 1,092,196 | ||||||||||||||
Houston Higher Education Finance Corp., 5.875% due 5/15/2021 (Cosmos Foundation, Inc.) (ETM) | BBB/NR | 1,160,000 | 1,250,898 | ||||||||||||||
Houston Higher Education Finance Corp., 5.00% due 8/15/2021 (KIPP, Inc.; Guaranty: PSF) | AAA/NR | 300,000 | 339,804 | ||||||||||||||
Houston Higher Education Finance Corp., 5.00% due 8/15/2022 (KIPP, Inc.; Guaranty: PSF) | AAA/NR | 1,185,000 | 1,369,481 | ||||||||||||||
Katy ISD GO, 5.00% due 2/15/2023 (Educational Facilities Improvements; Guaranty: PSF) | AAA/Aaa | 1,500,000 | 1,767,285 | ||||||||||||||
Katy ISD GO, 5.00% due 2/15/2024 (Educational Facilities Improvements; Guaranty: PSF) | AAA/Aaa | 2,385,000 | 2,868,988 | ||||||||||||||
Katy ISD GO, 5.00% due 2/15/2025 (Educational Facilities Improvements; Guaranty: PSF) | AAA/Aaa | 2,830,000 | 3,453,590 | ||||||||||||||
Katy ISD GO, 5.00% due 2/15/2026 (Educational Facilities Improvements; Guaranty: PSF) | AAA/Aaa | 2,955,000 | 3,647,209 | ||||||||||||||
Keller ISD GO, 5.00% due 8/15/2023 | AAA/Aaa | 1,715,000 | 2,033,613 | ||||||||||||||
Keller ISD GO, 5.00% due 8/15/2024 | AAA/Aaa | 3,250,000 | 3,933,150 | ||||||||||||||
Keller ISD GO, 5.00% due 8/15/2025 | AAA/Aaa | 7,140,000 | 8,740,074 | ||||||||||||||
Keller ISD GO, 5.00% due 8/15/2026 | AAA/Aaa | 8,425,000 | 10,265,104 | ||||||||||||||
Laredo Community College District GO, 5.00% due 8/1/2019 (School Facilities Improvements) | AA-/Aa3 | 880,000 | 939,180 | ||||||||||||||
Laredo Community College District GO, 5.00% due 8/1/2020 (School Facilities Improvements) | AA-/Aa3 | 1,360,000 | 1,494,844 | ||||||||||||||
Laredo Community College District GO, 5.00% due 8/1/2022 (School Facilities Improvements) | AA-/Aa3 | 655,000 | 753,617 | ||||||||||||||
Laredo Community College District GO, 5.00% due 8/1/2023 (School Facilities Improvements) | AA-/Aa3 | 610,000 | 714,768 | ||||||||||||||
Laredo Community College District GO, 5.00% due 8/1/2024 (School Facilities Improvements) | AA-/Aa3 | 715,000 | 848,848 | ||||||||||||||
Lower Colorado River Authority, 5.00% due 5/15/2025 pre-refunded 5/15/2022 | NR/NR | 55,000 | 63,787 | ||||||||||||||
Lower Colorado River Authority, 5.00% due 5/15/2025 | A/A2 | 8,020,000 | 9,214,820 | ||||||||||||||
Metropolitan Transit Authority of Harris County, 5.00% due 11/1/2019 | AA+/Aa2 | 2,960,000 | 3,198,339 | ||||||||||||||
Metropolitan Transit Authority of Harris County, 5.00% due 11/1/2020 | AA+/Aa2 | 1,565,000 | 1,745,116 | ||||||||||||||
Metropolitan Transit Authority of Harris County, 5.00% due 11/1/2021 | AA+/Aa2 | 1,000,000 | 1,144,270 | ||||||||||||||
Metropolitan Transit Authority of Harris County, 5.00% due 11/1/2022 | AA+/Aa2 | 1,750,000 | 2,043,370 | ||||||||||||||
Metropolitan Transit Authority of Harris County, 5.00% due 11/1/2023 | AA+/Aa2 | 1,125,000 | 1,337,299 | ||||||||||||||
Metropolitan Transit Authority of Harris County, 5.00% due 11/1/2024 | AA+/Aa2 | 1,140,000 | 1,375,399 | ||||||||||||||
Metropolitan Transit Authority of Harris County, 5.00% due 11/1/2025 | AA+/Aa2 | 1,220,000 | 1,487,131 | ||||||||||||||
Metropolitan Transit Authority of Harris County, 5.00% due 11/1/2026 | AA+/Aa2 | 1,000,000 | 1,230,410 | ||||||||||||||
Metropolitan Transit Authority of Harris County, 5.00% due 11/1/2027 | AA+/Aa2 | 1,120,000 | 1,369,110 | ||||||||||||||
New Caney ISD GO, 5.00% due 2/15/2024 (Guaranty: PSF) | AAA/Aaa | 865,000 | 1,006,497 | ||||||||||||||
North East ISD GO, 2.00% due 8/1/2044 put 8/1/2019 (Educational Facilities; Guaranty: PSF) | AAA/Aaa | 10,265,000 | 10,404,707 | ||||||||||||||
North Harris County Regional Water Authority, 5.00% due 12/15/2020 (Regional Water Production Design, Acquisition and Construction) | AA-/NR | 1,000,000 | 1,116,090 | ||||||||||||||
North Harris County Regional Water Authority, 5.00% due 12/15/2021 (Regional Water Production Design, Acquisition and Construction) | AA-/NR | 1,000,000 | 1,144,760 | ||||||||||||||
North Harris County Regional Water Authority, 5.00% due 12/15/2023 (Regional Water Production Design, Acquisition and Construction) | AA-/NR | 1,000,000 | 1,184,340 | ||||||||||||||
North Harris County Regional Water Authority, 5.00% due 12/15/2025 (Regional Water Production Design, Acquisition and Construction) | AA-/NR | 2,000,000 | 2,424,560 | ||||||||||||||
North Harris County Regional Water Authority, 5.00% due 12/15/2026 (Regional Water Production Design, Acquisition and Construction) | AA-/NR | 1,490,000 | 1,822,911 | ||||||||||||||
North Texas Tollway Authority, 5.00% due 1/1/2024 | A/A1 | 12,000,000 | 14,261,880 | ||||||||||||||
Northside ISD GO, 2.00% due 6/1/2039 put 6/1/2019 (Educational Facilities; Guaranty: PSF) | NR/Aaa | 2,085,000 | 2,103,640 | ||||||||||||||
Pasadena ISD GO, 3.00% due 2/15/2044 put 8/15/2019 (Educational Facilities; Guaranty: PSF) | AAA/Aaa | 9,155,000 | 9,447,502 | ||||||||||||||
Round Rock ISD GO, 5.00% due 8/1/2018 (Educational Facilities Improvements; Guaranty: PSF) | NR/Aaa | 1,075,000 | 1,111,367 | ||||||||||||||
Round Rock ISD GO, 5.00% due 8/1/2019 (Educational Facilities Improvements; Guaranty: PSF) | NR/Aaa | 1,500,000 | 1,607,325 | ||||||||||||||
Round Rock ISD GO, 5.00% due 8/1/2020 (Educational Facilities Improvements; Guaranty: PSF) | NR/Aaa | 1,000,000 | 1,107,260 | ||||||||||||||
Round Rock ISD GO, 5.00% due 8/1/2021 (Educational Facilities Improvements; Guaranty: PSF) | NR/Aaa | 2,000,000 | 2,279,400 | ||||||||||||||
Round Rock ISD GO, 5.00% due 8/1/2022 (Educational Facilities Improvements; Guaranty: PSF) | NR/Aaa | 670,000 | 781,093 | ||||||||||||||
Round Rock ISD GO, 5.00% due 8/1/2024 (Educational Facilities Improvements; Guaranty: PSF) | NR/Aaa | 2,305,000 | 2,787,874 | ||||||||||||||
Round Rock ISD GO, 5.00% due 8/1/2025 (Educational Facilities Improvements; Guaranty: PSF) | NR/Aaa | 1,000,000 | 1,223,480 | ||||||||||||||
Round Rock ISD GO, 5.00% due 8/1/2026 (Educational Facilities Improvements; Guaranty: PSF) | NR/Aaa | 1,575,000 | 1,911,325 | ||||||||||||||
Sam Rayburn Municipal Power Agency, 5.00% due 10/1/2017 | BBB+/NR | 1,000,000 | 1,000,220 | ||||||||||||||
Sam Rayburn Municipal Power Agency, 5.00% due 10/1/2019 | BBB+/NR | 2,620,000 | 2,806,701 | ||||||||||||||
Sam Rayburn Municipal Power Agency, 5.00% due 10/1/2020 | BBB+/NR | 1,770,000 | 1,948,097 | ||||||||||||||
San Antonio Public Facilities Corp., 5.00% due 9/15/2020 (Convention Center Refinancing & Expansion) | AA+/Aa2 | 915,000 | 1,011,999 | ||||||||||||||
San Juan Higher Education Finance Authority, 5.125% due 8/15/2020 (IDEA Public Schools) | BBB+/NR | 860,000 | 901,271 | ||||||||||||||
State of Texas, 4.00% due 8/30/2018 (Cash Flow Management) | SP-1+/Mig1 | 94,120,000 | 96,677,239 | ||||||||||||||
Tarrant Regional Water District, 2.00% due 3/1/2020 | AAA/NR | 800,000 | 816,776 | ||||||||||||||
Tarrant Regional Water District, 5.00% due 3/1/2021 | AAA/NR | 1,000,000 | 1,125,840 | ||||||||||||||
Annual Report | 39
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Tarrant Regional Water District, 5.00% due 3/1/2022 | AAA/NR | $ | 650,000 | $ | 750,009 | ||||||||||||
Tarrant Regional Water District, 5.00% due 3/1/2023 | AAA/NR | 700,000 | 824,411 | ||||||||||||||
Tarrant Regional Water District, 5.00% due 3/1/2024 | AAA/NR | 1,000,000 | 1,200,990 | ||||||||||||||
Tarrant Regional Water District, 5.00% due 3/1/2025 | AAA/NR | 1,500,000 | 1,823,820 | ||||||||||||||
Tarrant Regional Water District, 5.00% due 3/1/2026 | AAA/NR | 2,000,000 | 2,459,520 | ||||||||||||||
Tarrant Regional Water District, 5.00% due 3/1/2027 | AAA/NR | 2,000,000 | 2,426,120 | ||||||||||||||
Texas Transportation Commission, 5.00% due 8/15/2022 (Central Texas Turnpike System) | BBB+/Baa1 | 400,000 | 454,732 | ||||||||||||||
Texas Transportation Commission, 5.00% due 8/15/2023 (Central Texas Turnpike System) | BBB+/Baa1 | 730,000 | 843,486 | ||||||||||||||
Texas Transportation Commission, 5.00% due 8/15/2024 (Central Texas Turnpike System) | BBB+/Baa1 | 1,000,000 | 1,172,590 | ||||||||||||||
Texas Transportation Commission GO, 5.00% due 4/1/2022 (Highway Improvements) | AAA/Aaa | 2,880,000 | 3,335,328 | ||||||||||||||
Texas Transportation Commission GO, 5.00% due 4/1/2023 (Highway Improvements) | AAA/Aaa | 3,500,000 | 4,139,485 | ||||||||||||||
Texas Transportation Commission GO, 5.00% due 4/1/2024 (Highway Improvements) | AAA/Aaa | 4,000,000 | 4,826,840 | ||||||||||||||
University of Texas System, 5.00% due 8/15/2025 (Campus Improvements) | AAA/Aaa | 7,000,000 | 8,599,570 | ||||||||||||||
University of Texas System, 5.00% due 8/15/2026 (Campus Improvements) | AAA/Aaa | 3,750,000 | 4,656,712 | ||||||||||||||
Uptown Development Authority, 5.00% due 9/1/2018 (Infrastructure Improvements) | BBB/NR | 1,870,000 | 1,930,981 | ||||||||||||||
Uptown Development Authority, 5.00% due 9/1/2019 (Infrastructure Improvements) | BBB/NR | 1,945,000 | 2,071,172 | ||||||||||||||
Walnut Creek Special Utility District, 4.00% due 1/10/2020 (Water System Improvements; Insured: BAM) | AA/NR | 520,000 | 550,680 | ||||||||||||||
Walnut Creek Special Utility District, 4.00% due 1/10/2021 (Water System Improvements; Insured: BAM) | AA/NR | 445,000 | 481,165 | ||||||||||||||
Walnut Creek Special Utility District, 5.00% due 1/10/2022 (Water System Improvements; Insured: BAM) | AA/NR | 525,000 | 597,298 | ||||||||||||||
Walnut Creek Special Utility District, 5.00% due 1/10/2024 (Water System Improvements; Insured: BAM) | AA/NR | 750,000 | 883,440 | ||||||||||||||
West Harris County Regional Water Authority, 5.00% due 12/15/2020 (Insured: Natl-Re) | AA-/A1 | 2,140,000 | 2,157,398 | ||||||||||||||
U.S. VIRGIN ISLANDS — 0.04% | |||||||||||||||||
Virgin Islands Public Finance Authority, 6.75% due 10/1/2019 (Diageo Project) | NR/Caa2 | 3,390,000 | 3,069,001 | ||||||||||||||
UTAH — 0.82% | |||||||||||||||||
City of Murray, 0.92% due 5/15/2036 put 10/2/2017 (IHC Health Services, Inc.) (daily demand notes) | AA+/Aa1 | 13,290,000 | 13,290,000 | ||||||||||||||
City of Murray, 0.92% due 5/15/2036 put 10/2/2017 (IHC Health Services, Inc.) (daily demand notes) | AA+/Aa1 | 1,700,000 | 1,700,000 | ||||||||||||||
City of Murray, 0.90% due 5/15/2037 put 10/2/2017 (IHC Health Services, Inc.; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 12,700,000 | 12,700,000 | ||||||||||||||
City of Murray, 0.90% due 5/15/2037 put 10/2/2017 (IHC Health Services, Inc.; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA+/Aa1 | 19,000,000 | 19,000,000 | ||||||||||||||
Utah Transit Authority, 5.00% due 6/15/2022 (Integrated Mass Transit System) | A+/A1 | 710,000 | 817,281 | ||||||||||||||
Utah Transit Authority, 5.00% due 6/15/2023 (Integrated Mass Transit System) | A+/A1 | 775,000 | 906,053 | ||||||||||||||
Utah Transit Authority, 5.00% due 6/15/2024 (Integrated Mass Transit System) | A+/A1 | 825,000 | 979,481 | ||||||||||||||
Utah Transit Authority, 5.00% due 6/15/2025 (Integrated Mass Transit System) | A+/A1 | 1,235,000 | 1,480,592 | ||||||||||||||
Weber County, 0.90% due 2/15/2031 put 10/2/2017 (IHC Health Services, Inc.; SPA: The Bank of NY Mellon) (daily demand notes) | AA+/Aa1 | 6,600,000 | 6,600,000 | ||||||||||||||
Weber County, 0.90% due 2/15/2035 put 10/2/2017 (IHC Health Services, Inc.; SPA: The Bank of NY Mellon) (daily demand notes) | AA+/Aa1 | 1,800,000 | 1,800,000 | ||||||||||||||
VERMONT — 0.22% | |||||||||||||||||
Vermont EDA, 5.00% due 12/15/2020 (Vermont Public Service Corp.) | NR/NR | 14,250,000 | 15,768,765 | ||||||||||||||
VIRGINIA — 0.19% | |||||||||||||||||
Fairfax County IDA, 4.00% due 5/15/2022 (Inova Health System) | AA+/Aa2 | 5,500,000 | 6,138,165 | ||||||||||||||
Fairfax County IDA, 5.00% due 5/15/2022 (Inova Health System) | AA+/Aa2 | 5,000,000 | 5,810,700 | ||||||||||||||
Virginia College Building Authority, 0.90% due 11/1/2036 put 10/2/2017 (University of Richmond; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | NR/Aa1 | 1,700,000 | 1,700,000 | ||||||||||||||
WASHINGTON — 1.92% | |||||||||||||||||
Energy Northwest, 5.00% due 7/1/2018 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 1,000,000 | 1,028,550 | ||||||||||||||
Energy Northwest, 5.00% due 7/1/2019 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 2,000,000 | 2,127,980 | ||||||||||||||
Energy Northwest, 5.00% due 7/1/2020 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 2,000,000 | 2,187,660 | ||||||||||||||
Energy Northwest, 5.00% due 7/1/2021 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 2,000,000 | 2,244,520 | ||||||||||||||
Energy Northwest, 5.00% due 7/1/2022 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 1,000,000 | 1,145,460 | ||||||||||||||
Energy Northwest, 5.00% due 7/1/2023 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 1,000,000 | 1,164,390 | ||||||||||||||
Energy Northwest, 5.00% due 7/1/2025 (Nine Canyon Wind Project Phase I-III) | NR/A2 | 850,000 | 1,012,172 | ||||||||||||||
King County Federal Way School District No. 210 GO, 4.125% due 12/1/2019 pre-refunded 12/1/2017 (Insured: Natl-Re) | AA+/Aa1 | 2,000,000 | 2,011,400 | ||||||||||||||
Marysville School District No. 25 GO, 4.00% due 12/1/2017 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,000,000 | 1,005,440 | ||||||||||||||
Marysville School District No. 25 GO, 4.00% due 12/1/2018 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,100,000 | 1,137,543 | ||||||||||||||
Marysville School District No. 25 GO, 5.00% due 12/1/2019 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,390,000 | 1,504,147 | ||||||||||||||
40 | Annual Report
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Marysville School District No. 25 GO, 5.00% due 12/1/2020 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | $ | 1,625,000 | $ | 1,813,825 | ||||||||||||
Marysville School District No. 25 GO, 5.00% due 12/1/2021 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,750,000 | 2,003,645 | ||||||||||||||
Marysville School District No. 25 GO, 5.00% due 12/1/2022 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 2,620,000 | 3,059,007 | ||||||||||||||
Marysville School District No. 25 GO, 5.00% due 12/1/2023 (Snohomish County Educational Facilities) (State Aid Withholding) | NR/Aa1 | 1,700,000 | 2,031,534 | ||||||||||||||
Port of Seattle, 5.50% due 9/1/2018 (Insured: Natl-Re) | A+/A2 | 5,000,000 | 5,201,750 | ||||||||||||||
Skagit County Public Hospital District No. 1, 5.00% due 12/1/2018 (Skagit Regional Health) | NR/Baa2 | 800,000 | 827,504 | ||||||||||||||
Skagit County Public Hospital District No. 1, 5.00% due 12/1/2019 (Skagit Regional Health) | NR/Baa2 | 835,000 | 885,492 | ||||||||||||||
Skagit County Public Hospital District No. 1, 5.00% due 12/1/2021 (Skagit Regional Health) | NR/Baa2 | 1,160,000 | 1,277,636 | ||||||||||||||
Skagit County Public Hospital District No. 1, 5.00% due 12/1/2022 (Skagit Regional Health) | NR/Baa2 | 500,000 | 557,490 | ||||||||||||||
Skagit County Public Hospital District No. 1, 5.00% due 12/1/2023 (Skagit Regional Health) | NR/Baa2 | 750,000 | 845,618 | ||||||||||||||
Skagit County Public Hospital District No. 1 GO, 4.00% due 12/1/2017 (Skagit Regional Health) | NR/A1 | 1,000,000 | 1,005,310 | ||||||||||||||
Skagit County Public Hospital District No. 1 GO, 4.00% due 12/1/2018 (Skagit Regional Health) | NR/A1 | 1,270,000 | 1,312,151 | ||||||||||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2019 (Skagit Regional Health) | NR/A1 | 1,695,000 | 1,833,617 | ||||||||||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2020 (Skagit Regional Health) | NR/A1 | 1,570,000 | 1,750,267 | ||||||||||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2021 (Skagit Regional Health) | NR/A1 | 3,135,000 | 3,586,879 | ||||||||||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2022 (Skagit Regional Health) | NR/A1 | 3,635,000 | 4,246,371 | ||||||||||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2018 (Island Hospital) | NR/A1 | 1,000,000 | 1,031,650 | ||||||||||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2019 (Island Hospital) | NR/A1 | 1,000,000 | 1,055,530 | ||||||||||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2020 (Island Hospital) | NR/A1 | 1,000,000 | 1,076,070 | ||||||||||||||
Skagit County Public Hospital District No. 2 GO, 4.00% due 12/1/2021 (Island Hospital) | NR/A1 | 1,000,000 | 1,093,150 | ||||||||||||||
Skagit County Public Hospital District No. 2 GO, 5.00% due 12/1/2022 (Island Hospital) | NR/A1 | 1,700,000 | 1,962,157 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2018 (State Agency Real Property Projects) (State Aid Withholding) | NR/Aa2 | 2,670,000 | 2,749,940 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2019 (State and Local Agency Real and Personal Property Projects) (State Aid Withholding) | NR/Aa2 | 1,000,000 | 1,067,790 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2020 (State and Local Agency Real and Personal Property Projects) (State Aid Withholding) | NR/Aa2 | 3,290,000 | 3,629,693 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2021 (State and Local Agency Real and Personal Property Projects) (State Aid Withholding) | NR/Aa2 | 3,125,000 | 3,548,625 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2022 (State and Local Agency Real and Personal Property Projects) (State Aid Withholding) | NR/Aa2 | 3,000,000 | 3,484,680 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2024 (State and Local Agency Real and Personal Property Projects) | NR/Aa2 | 4,410,000 | 5,306,950 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2025 (State and Local Agency Real and Personal Property Projects) | NR/Aa2 | 3,650,000 | 4,453,547 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2026 (State and Local Agency Real and Personal Property Projects) | NR/Aa2 | 4,745,000 | 5,831,747 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2027 (State and Local Agency Real and Personal Property Projects) | NR/Aa2 | 4,970,000 | 6,168,515 | ||||||||||||||
State of Washington GO, 0.00% due 1/1/2018 (Stadium and Exhibition Center; Insured: Natl-Re) | AA+/Aa1 | 4,000,000 | 3,990,400 | ||||||||||||||
State of Washington GO, 0.00% due 1/1/2019 (Stadium and Exhibition Center; Insured: Natl-Re) | AA+/Aa1 | 3,000,000 | 2,956,380 | ||||||||||||||
State of Washington GO, 0.00% due 12/1/2019 (Public Highway, Bridge, Ferry Capital and Operating Costs; Insured: Natl-Re) | AA+/Aa1 | 3,030,000 | 2,950,675 | ||||||||||||||
State of Washington GO, 5.00% due 7/1/2025 (Capital Projects) | AA+/Aa1 | 10,475,000 | 12,741,371 | ||||||||||||||
Tacoma School District No.10 GO, 5.00% due 12/1/2017 (Pierce County Capital Projects) | AA+/Aa1 | 2,280,000 | 2,296,530 | ||||||||||||||
Tacoma School District No.10 GO, 5.00% due 12/1/2018 (Pierce County Capital Projects) | AA+/Aa1 | 4,000,000 | 4,185,840 | ||||||||||||||
Tacoma School District No.10 GO, 5.00% due 12/1/2019 (Pierce County Capital Projects) | AA+/Aa1 | 2,000,000 | 2,166,940 | ||||||||||||||
Tacoma School District No.10 GO, 5.00% due 12/1/2020 (Pierce County Capital Projects) | AA+/Aa1 | 2,500,000 | 2,796,300 | ||||||||||||||
Washington Health Care Facilities Authority, 5.25% due 8/1/2018 (Highline Medical Center; Insured: FHA 242) (ETM) | NR/NR | 7,935,000 | 8,116,156 | ||||||||||||||
Washington Health Care Facilities Authority, 5.00% due 8/15/2018 (MultiCare Health Systems) | AA-/Aa3 | 2,000,000 | 2,069,400 | ||||||||||||||
Washington Health Care Facilities Authority, 5.00% due 7/1/2019 (Overlake Hospital Medical Center) | A/A2 | 1,050,000 | 1,118,712 | ||||||||||||||
Washington Health Care Facilities Authority, 4.75% due 7/1/2020 (Overlake Hospital Medical Center) | A/A2 | 1,000,000 | 1,076,690 | ||||||||||||||
WEST VIRGINIA — 0.10% | |||||||||||||||||
Mason County, 1.625% due 10/1/2022 put 10/1/2018 (Appalachian Power Company) | A-/Baa1 | 3,300,000 | 3,319,074 | ||||||||||||||
West Virginia Higher Education Policy Commission, 5.00% due 4/1/2020 (Higher Education Facilities) | A+/Aa3 | 1,000,000 | 1,089,880 | ||||||||||||||
West Virginia Higher Education Policy Commission, 5.00% due 4/1/2021 (Higher Education Facilities) | A+/Aa3 | 1,000,000 | 1,120,000 | ||||||||||||||
West Virginia Higher Education Policy Commission, 5.00% due 4/1/2022 (Higher Education Facilities) | A+/Aa3 | 1,500,000 | 1,714,200 | ||||||||||||||
WISCONSIN — 0.46% | |||||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2018 (Agnesian Healthcare, Inc.) (ETM) | NR/NR | 620,000 | 638,947 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2018 (Agnesian Healthcare, Inc.) | A/A2 | 1,235,000 | 1,270,358 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2019 (Agnesian Healthcare, Inc.) (ETM) | NR/NR | 335,000 | 358,015 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2019 (Agnesian Healthcare, Inc.) | A/A2 | 665,000 | 706,237 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2020 (Agnesian Healthcare, Inc.) (ETM) | NR/NR | 730,000 | 806,635 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2020 (Agnesian Healthcare, Inc.) | A/A2 | 1,380,000 | 1,508,299 | ||||||||||||||
Annual Report | 41
Schedule of Investments, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2020 (ProHealth Care, Inc.) | A+/A1 | $ | 1,075,000 | $ | 1,184,413 | ||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2021 (ProHealth Care, Inc.) | A+/A1 | 2,575,000 | 2,913,535 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2022 (ProHealth Care, Inc.) | A+/A1 | 1,600,000 | 1,799,424 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 12/1/2022 (UnityPoint Health) | NR/A1 | 1,000,000 | 1,167,650 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 11/15/2024 (Ascension Health Alliance System) | AA+/Aa2 | 625,000 | 755,837 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 11/15/2025 (Ascension Health Alliance System) | AA+/Aa2 | 1,215,000 | 1,484,876 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 11/15/2026 (Ascension Health Alliance System) | AA+/Aa2 | 2,000,000 | 2,419,060 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 11/15/2043 put 6/1/2021 (Ascension Health Alliance System) | AA+/Aa2 | 10,000,000 | 11,298,700 | ||||||||||||||
WPPI Energy, 5.00% due 7/1/2021 (Power Supply System) | A/A1 | 4,100,000 | 4,630,048 | ||||||||||||||
|
| ||||||||||||||||
| TOTAL INVESTMENTS — 99.25% (Cost $6,958,657,006) | $ | 7,131,380,256 | |||||||||||||||
| OTHER ASSETS LESS LIABILITIES — 0.75% | 54,187,968 | ||||||||||||||||
|
| ||||||||||||||||
| NET ASSETS — 100.00% | $ | 7,185,568,224 | |||||||||||||||
|
| ||||||||||||||||
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:
| AGC | Insured by Associated General Contractors | GO | General Obligation | |||
| AGM | Insured by Assured Guaranty Municipal Corp. | HFA | Health Facilities Authority | |||
| AMBAC | Insured by American Municipal Bond Assurance Corp. | HFFA | Health Facilities Financing Authority | |||
| BAM | Insured by Build America Mutual Insurance Co. | IDA | Industrial Development Authority | |||
| BHAC | Insured by Berkshire Hathaway Assurance Corp. | ISD | Independent School District | |||
| COP | Certificates of Participation | JEA | Jacksonville Electric Authority | |||
| DFA | Development Finance Authority | Mtg | Mortgage | |||
| EDA | Economic Development Authority | Natl-Re | Insured by National Public Finance Guarantee Corp. | |||
| ETM | Escrowed to Maturity | PSF | Guaranteed by Permanent School Fund | |||
| FGIC | Insured by Financial Guaranty Insurance Co. | Q-SBLF | Insured by Qualified School Bond Loan Fund | |||
| FHA | Insured by Federal Housing Administration | Syncora | Insured by Syncora Guarantee Inc. | |||
| FSA | Insured by Financial Security Assurance Co. | USD | Unified School District | |||
| GNMA | Collateralized by Government National Mortgage Association |
See notes to financial statements.
42 | Annual Report
Statement of Assets and Liabilities
Thornburg Limited Term Municipal Fund | September 30, 2017
ASSETS |
| |||
Investments at value (cost $6,958,657,006) (Note 3) | $ | 7,131,380,256 | ||
Cash | 29,458,907 | |||
Receivable for investments sold | 10,055,000 | |||
Receivable for fund shares sold | 18,391,640 | |||
Interest receivable | 75,882,617 | |||
Prepaid expenses and other assets | 26,672 | |||
|
| |||
Total Assets | 7,265,195,092 | |||
|
| |||
LIABILITIES |
| |||
Payable for investments purchased | 66,484,909 | |||
Payable for fund shares redeemed | 8,555,348 | |||
Payable to investment advisor and other affiliates (Note 4) | 2,513,603 | |||
Accounts payable and accrued expenses | 1,169,737 | |||
Dividends payable | 903,271 | |||
|
| |||
Total Liabilities | 79,626,868 | |||
|
| |||
NET ASSETS | $ | 7,185,568,224 | ||
|
| |||
NET ASSETS CONSIST OF |
| |||
Distribution in excess of net investment income | $ | (903,271 | ) | |
Net unrealized appreciation on investments | 172,723,250 | |||
Accumulated net realized gain (loss) | (24,000,109 | ) | ||
Net capital paid in on shares of beneficial interest | 7,037,748,354 | |||
|
| |||
| $ | 7,185,568,224 | |||
|
| |||
NET ASSET VALUE |
| |||
Class A Shares: |
| |||
Net asset value and redemption price per share | $ | 14.43 | ||
Maximum sales charge, 1.50% of offering price | 0.22 | |||
|
| |||
Maximum offering price per share | $ | 14.65 | ||
|
| |||
Class C Shares: |
| |||
Net asset value and offering price per share* | $ | 14.46 | ||
|
| |||
Class I Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 14.43 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
Annual Report | 43
Thornburg Limited Term Municipal Fund | Year Ended September 30, 2017
INVESTMENT INCOME |
| |||
Interest income (net of premium amortized of $109,546,608) | $ | 171,639,668 | ||
|
| |||
EXPENSES |
| |||
Investment advisory fees (Note 4) | 19,195,346 | |||
Administration fees (Note 4) |
| |||
Class A Shares | 1,820,904 | |||
Class C Shares | 824,248 | |||
Class I Shares | 2,596,461 | |||
Distribution and service fees (Note 4) |
| |||
Class A Shares | 3,641,807 | |||
Class C Shares | 3,291,802 | |||
Transfer agent fees |
| |||
Class A Shares | 955,356 | |||
Class C Shares | 334,217 | |||
Class I Shares | 4,090,222 | |||
Registration and filing fees |
| |||
Class A Shares | 46,636 | |||
Class C Shares | 29,408 | |||
Class I Shares | 199,544 | |||
Custodian fees (Note 2) | 668,829 | |||
Professional fees | 138,035 | |||
Accounting fees (Note 4) | 261,365 | |||
Trustee fees | 311,445 | |||
Other expenses | 451,611 | |||
|
| |||
Total Expenses | 38,857,236 | |||
|
| |||
Net Investment Income | 132,782,432 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on investments | (21,832,872 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (97,990,138 | ) | ||
|
| |||
Net Realized and Unrealized Loss | (119,823,010 | ) | ||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 12,959,422 | ||
|
| |||
See notes to financial statements.
44 | Annual Report
Statements of Changes in Net Assets
Thornburg Limited Term Municipal Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM |
| |||||||||
OPERATIONS |
| |||||||||
Net investment income | $ | 132,782,432 | $ | 130,961,632 | ||||||
Net realized gain (loss) on investments | (21,832,872 | ) | (1,591,144 | ) | ||||||
Net unrealized appreciation (depreciation) on investments | (97,990,138 | ) | 56,431,868 | |||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 12,959,422 | 185,802,356 | ||||||||
DIVIDENDS TO SHAREHOLDERS |
| |||||||||
From net investment income |
| |||||||||
Class A Shares | (23,541,216 | ) | (26,222,114 | ) | ||||||
Class C Shares | (9,107,804 | ) | (9,606,259 | ) | ||||||
Class I Shares | (100,133,412 | ) | (95,133,259 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) |
| |||||||||
Class A Shares | (356,275,275 | ) | (15,604,952 | ) | ||||||
Class C Shares | (124,624,936 | ) | 5,714,401 | |||||||
Class I Shares | (158,840,121 | ) | 637,192,599 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | (759,563,342 | ) | 682,142,772 | |||||||
NET ASSETS |
| |||||||||
Beginning of Year | 7,945,131,566 | 7,262,988,794 | ||||||||
|
| |||||||||
End of Year | $ | 7,185,568,224 | $ | 7,945,131,566 | ||||||
|
| |||||||||
Distribution in excess of net investment income | $ | (903,271 | ) | $ | (947,051 | ) | ||||
See notes to financial statements.
Annual Report | 45
Thornburg Limited Term Municipal Fund | September 30, 2017
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 twenty-one 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 Thornburg Investment Management, Inc., the Trust’s investment advisor (the “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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by the Advisor. Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
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 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
46 | Annual Report
Notes to Financial Statements, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
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.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017 including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 6,958,657,006 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 180,898,914 | |||
Gross unrealized depreciation on a tax basis | (8,175,664 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 172,723,250 | |||
|
|
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $21,341,245. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $2,658,865, (of which $403,305 are short-term and $2,255,560 are 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.
In order to account for permanent book to tax differences, the Fund increased net investment income by $43,780 and decreased net capital paid in on shares of beneficial interest by $43,780. Reclassifications have no impact on the net asset value of the Fund and resulted primarily from certain overdistributions paid by the Fund.
At September 30, 2017, the Fund had no undistributed net tax-exempt income, no undistributed tax basis net ordinary income and no undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the year ended September 30, 2017 and September 30, 2016 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Tax exempt income | $ | 132,737,020 | $ | 130,923,029 | ||||||
Ordinary income | 45,412 | 38,603 | ||||||||
|
| |||||||||
Total | $ | 132,782,432 | $ | 130,961,632 | ||||||
|
| |||||||||
Annual Report | 47
Notes to Financial Statements, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from the FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts due to the nature or duration of any restrictions on the disposition of the investment.
48 | Annual Report
Notes to Financial Statements, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
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 based upon these inputs 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, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
Municipal Bonds | $ | 7,131,380,256 | $ | – | $ | 7,131,380,256 | $ | – | ||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 7,131,380,256 | $ | – | $ | 7,131,380,256 | $ | – | ||||||||||||
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, 2017.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| MANAGEMENT FEE SCHEDULE | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.500 | % | |||
Next $500 million | 0.400 | ||||
Next $500 million | 0.300 | ||||
Next $500 million | 0.250 | ||||
Over $2 billion | 0.225 | ||||
The Funds’s effective management fee for the year ended September 30, 2017 was 0.263% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $261,365 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $2,852 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $40,118 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A and Class C of shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I shares. The Advisor and Distributor each 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, 2017, are set forth in the Statement of Operations.
Annual Report | 49
Notes to Financial Statements, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 1.2%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had transactions with affiliated funds of $60,632,202 in purchases and $34,036,941 in sales generating realized gains of $39,034.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 15,208,492 | $ | 218,389,244 | 24,409,105 | $ | 356,976,557 | ||||||||||
Shares issued to shareholders in | 1,490,020 | 21,412,134 | 1,617,427 | 23,656,616 | ||||||||||||
Shares repurchased | (41,628,282 | ) | (596,076,653 | ) | (27,099,577 | ) | (396,238,125 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (24,929,770 | ) | $ | (356,275,275 | ) | (1,073,045 | ) | $ | (15,604,952 | ) | ||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 3,377,811 | $ | 48,659,522 | 7,967,832 | $ | 116,744,198 | ||||||||||
Shares issued to shareholders in | 551,982 | 7,947,573 | 565,864 | 8,292,917 | ||||||||||||
Shares repurchased | (12,609,555 | ) | (181,232,031 | ) | (8,145,288 | ) | (119,322,714 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (8,679,762 | ) | $ | (124,624,936 | ) | 388,408 | $ | 5,714,401 | ||||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 106,338,216 | $ | 1,527,896,825 | 114,131,595 | $ | 1,669,936,548 | ||||||||||
Shares issued to shareholders in | 6,364,932 | 91,492,526 | 5,957,028 | 87,156,964 | ||||||||||||
Shares repurchased | (124,099,454 | ) | (1,778,229,472 | ) | (76,565,919 | ) | (1,119,900,913 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (11,396,306 | ) | $ | (158,840,121 | ) | 43,522,704 | $ | 637,192,599 | ||||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $1,137,943,705 and $1,516,039,368, respectively.
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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
50 | Annual Report
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Annual Report | 51
Thornburg Limited Term Municipal Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 14.63 | 0.23 | (0.20 | ) | 0.03 | (0.23 | ) | – | (0.23 | ) | $ | 14.43 | |||||||||||||||||||||||||||
2016(b) | $ | 14.52 | 0.22 | 0.11 | 0.33 | (0.22 | ) | – | (0.22 | ) | $ | 14.63 | ||||||||||||||||||||||||||||
2015(b) | $ | 14.58 | 0.23 | (0.06 | ) | 0.17 | (0.23 | ) | – | (0.23 | ) | $ | 14.52 | |||||||||||||||||||||||||||
2014(b) | $ | 14.38 | 0.26 | 0.20 | 0.46 | (0.26 | ) | – | (0.26 | ) | $ | 14.58 | ||||||||||||||||||||||||||||
2013(b) | $ | 14.70 | 0.26 | (0.32 | ) | (0.06 | ) | (0.26 | ) | – | (0.26 | ) | $ | 14.38 | ||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 14.66 | 0.20 | (0.20 | ) | – | (0.20 | ) | – | (0.20 | ) | $ | 14.46 | |||||||||||||||||||||||||||
2016 | $ | 14.55 | 0.19 | 0.11 | 0.30 | (0.19 | ) | – | (0.19 | ) | $ | 14.66 | ||||||||||||||||||||||||||||
2015 | $ | 14.60 | 0.19 | (0.05 | ) | 0.14 | (0.19 | ) | – | (0.19 | ) | $ | 14.55 | |||||||||||||||||||||||||||
2014 | $ | 14.41 | 0.22 | 0.19 | 0.41 | (0.22 | ) | – | (0.22 | ) | $ | 14.60 | ||||||||||||||||||||||||||||
2013 | $ | 14.72 | 0.23 | (0.31 | ) | (0.08 | ) | (0.23 | ) | – | (0.23 | ) | $ | 14.41 | ||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 14.64 | 0.28 | (0.21 | ) | 0.07 | (0.28 | ) | – | (0.28 | ) | $ | 14.43 | |||||||||||||||||||||||||||
2016 | $ | 14.53 | 0.27 | 0.11 | 0.38 | (0.27 | ) | – | (0.27 | ) | $ | 14.64 | ||||||||||||||||||||||||||||
2015 | $ | 14.58 | 0.27 | (0.05 | ) | 0.22 | (0.27 | ) | – | (0.27 | ) | $ | 14.53 | |||||||||||||||||||||||||||
2014 | $ | 14.38 | 0.30 | 0.20 | 0.50 | (0.30 | ) | – | (0.30 | ) | $ | 14.58 | ||||||||||||||||||||||||||||
2013 | $ | 14.70 | 0.31 | (0.32 | ) | (0.01 | ) | (0.31 | ) | – | (0.31 | ) | $ | 14.38 | ||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
52 | Annual Report
Financial Highlights, Continued
Thornburg Limited Term Municipal Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 1.62 | 0.73 | 0.73 | 0.73 | 0.24 | 17.56 | $ | 1,314,094 | |||||||||||||||||||||||
| 1.54 | 0.72 | 0.72 | 0.72 | 2.32 | 14.53 | $ | 1,697,329 | |||||||||||||||||||||||
| 1.56 | 0.73 | 0.73 | 0.73 | 1.15 | 18.56 | $ | 1,700,127 | |||||||||||||||||||||||
| 1.78 | 0.72 | 0.71 | 0.72 | 3.20 | 14.46 | $ | 1,865,213 | |||||||||||||||||||||||
| 1.81 | 0.71 | 0.71 | 0.71 | (0.39 | ) | 17.47 | $ | 2,178,317 | ||||||||||||||||||||||
| 1.38 | 0.97 | 0.97 | 0.97 | 0.01 | 17.56 | $ | 605,898 | |||||||||||||||||||||||
| 1.30 | 0.96 | 0.96 | 0.96 | 2.07 | 14.53 | $ | 741,637 | |||||||||||||||||||||||
| 1.32 | 0.96 | 0.96 | 0.96 | 0.98 | 18.56 | $ | 730,395 | |||||||||||||||||||||||
| 1.52 | 0.97 | 0.96 | 0.97 | 2.87 | 14.46 | $ | 749,648 | |||||||||||||||||||||||
| 1.55 | 0.97 | 0.97 | 0.97 | (0.58 | ) | 17.47 | $ | 795,052 | ||||||||||||||||||||||
| 1.93 | 0.42 | 0.42 | 0.42 | 0.49 | 17.56 | $ | 5,265,576 | |||||||||||||||||||||||
| 1.85 | 0.41 | 0.41 | 0.41 | 2.64 | 14.53 | $ | 5,506,166 | |||||||||||||||||||||||
| 1.88 | 0.41 | 0.41 | 0.41 | 1.54 | 18.56 | $ | 4,832,467 | |||||||||||||||||||||||
| 2.09 | 0.40 | 0.40 | 0.40 | 3.53 | 14.46 | $ | 4,417,547 | |||||||||||||||||||||||
| 2.15 | 0.37 | 0.37 | 0.37 | (0.05 | ) | 17.47 | $ | 3,502,580 | ||||||||||||||||||||||
Annual Report | 53
Report of Independent Registered Public Accounting Firm
Thornburg Limited Term Municipal Fund
To the Trustees and Shareholders of the
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 the Thornburg Limited Term Municipal Fund (the “Fund”) as of September 30, 2017, 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 as of September 30, 2017 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
54 | Annual Report
Thornburg Limited Term Municipal Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
| BEGINNING ACCOUNT VALUE 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.60 | $ | 3.70 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.40 | $ | 3.70 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.40 | $ | 4.89 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.21 | $ | 4.91 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,018.20 | $ | 2.14 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.95 | $ | 2.14 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.73%; C: 0.97%; 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.
Annual Report | 55
Thornburg Limited Term Municipal Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
56 | Annual Report
Trustees and Officers, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 57
Trustees and Officers, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
58 | Annual Report
Thornburg Limited Term Municipal Fund | September 30, 2017 (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, 2017, dividends paid by the Fund of $132,737,020 (or the maximum allowed) are tax exempt dividends and $45,412 are taxable ordinary investment income dividends for federal income tax purposes. The information and the distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2017. Complete information will be reported in conjunction with your 2017 Form 1099.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Limited Term Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for
Annual Report | 59
Other Information, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017 (Unaudited)
consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 created 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 created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Information provided to the Trustees indicated that the comparability of indices and fund categories to the Fund may be limited for a number of reasons. Measures of risk and relative return demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions. The Trustees generally attach additional significance to the investment performance of the Fund from the perspective of longer term shareholders, and noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the objectives of the Fund. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and expenses in the Fund’s prospectus. Information also noted by the Trustees as having been considered included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total Fund expenses to median and average fees and expenses charged to a category of mutual funds created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for two Fund share classes to the fee levels and expenses for two fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been 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, the level of total expense for one share class of the Fund was higher than the median and comparable to the average levels for the category, and that the level of total expense for a second share class was lower than 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 levels for two fund peer groups and that the total expense levels for two share classes were comparable to the median total expense levels for their respective peer groups.
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
60 | Annual Report
Other Information, Continued
Thornburg Limited Term Municipal Fund | September 30, 2017 (Unaudited)
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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential 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, 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, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits to the Advisor. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 61
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
62 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 63
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
Annual Report September 30, 2017 THORNBURG INTERMEDIATE MUNICIPAL FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Intermediate Municipal Fund
Annual Report ^ September 30, 2017
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class A | THIMX | 885-215-202 | ||||||||
| Class C | THMCX | 885-215-780 | ||||||||
| Class I | THMIX | 885-215-673 | ||||||||
Minimum investments for Class I shares may be higher than those for other classes. Class I shares may not be available to all investors.
Investments carry risks, including possible loss of principal. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The 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 bank deposits or guaranteed by a bank or any other entity.
Annual Report | 3
Thornburg Intermediate Municipal Fund | September 30, 2017 (Unaudited)
October 12, 2017
Dear Fellow Shareholder:
We are pleased to present the annual report for Thornburg Intermediate Municipal Fund. The net asset value (NAV) of the Class A shares decreased by 32 cents to $14.15 per share during the fiscal year ended September 30, 2017. If you were with us for the entire period, you received dividends of 30.4 cents per share. Dividends were lower for the Class C shares and higher for the Class I shares to account for varying class-specific expenses. The Class A shares of your Fund underperformed the index with a negative 0.08% total return (without sales charge) for the fiscal year ended September 30, 2017, compared to the 1.00% total return for the BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index.
The drivers of the Fund’s total return relative to its benchmark include its interest rate sensitivity, as measured by the Fund’s duration, differing credit quality allocations, and other risk factors. The Fund underperformed its benchmark by 1.08%. The impact from the Fund’s 0.82 years shorter duration added 0.35%, while credit quality allocations detracted 0.24%. Other risk factors detracted 0.27%, while the Fund’s expenses and residuals accounted for the remainder of the performance differential.
The New Administration’s Agenda, U.S. Economy, and Fed Policy
The Trump administration took office in January of 2017 with an aggressive agenda. It promised to repeal and replace the Affordable Care Act (ACA), known also as Obamacare, increase infrastructure spending, scale back federal regulatory constraints on businesses, and reform the federal tax code. Initially, the promise of this pro-growth agenda caused interest rates to increase substantially upon Trump’s election in November. This was followed by further increases in December as investors sold municipal bonds to capture losses that appeared to be more valuable in 2016 than 2017. Some nine months later, the repeal and replacement of the ACA has failed to become a reality—tripped up in both the U.S. House and Senate.
Meanwhile, the silence around increased infrastructure spending is deafening. Federal regulatory constraints have been eased only through executive orders. The process for tax reform has just begun, but the administration’s initial measure appears to be hitting a rough patch as the proposed removal of the federal deduction for state and local taxes (SALT) has generated some blowback. The president’s framework for tax reform was mute with regard to continuation of the tax exemption for municipal bonds, although several sources have attributed the administration to stating that the municipal bond tax exemption is safe. The president’s proposal does call for the repeal of the alternative
minimum tax. All that said, this is Washington, DC, and with tax reform a major piece of the president’s agenda, watching this sausage get made will be interesting.
After a rather punk showing for the first two quarters of fiscal 2017, in which gross domestic product (GDP) growth was 1.8% and 1.2%, respectively, the economy generated a 3.1% GDP growth rate in the third fiscal quarter. The fiscal fourth quarter estimates of GDP have varied greatly as the impact of three devastating hurricanes (Harvey, Irma and Maria) are taken into consideration. After considering the impacts of Harvey and Irma alone, Goldman Sachs lowered its third-quarter GDP estimate by 0.8% to 2.0%.
Nonfarm payrolls have been a bright spot for the economy, averaging 168,000 new jobs per month for the first 11 months of fiscal 2017. This is a little lower than the 219,000 average monthly jobs generated in fiscal 2016. This all translates to an unemployment rate of 4.4% as of the end of August 2017 versus 4.9% at the end of fiscal 2016. One explanation for this slowdown is that employers cannot find qualified workers. This theory is substantiated by another significant economic indicator, the U.S. Job Openings and Labor Turnover Summary (JOLTS), which measures either newly created or unoccupied positions where an employer is taking specific actions to fill these positions. In July, this measure registered a reading of about 6.2 million, which is the highest since the time series began in December of 2000.
The Phillips Curve, an economic theory posed by A.W. Phillips, states that inflation and unemployment have a stable and inverse relationship. As unemployment decreases, inflation is supposed to increase. As of yet, this theory has not manifested itself. In fact, the Federal Reserve Board’s (Fed) favorite inflation measure, the Core Personal Consumption Expenditures Index (Core PCE)—which measures prices paid by consumers for goods and services without the volatility from movements in food and energy prices—has declined throughout the year. The last available reading at the end of August 2017 (1.30%) is much lower than the one at the end of September 2017 (1.80%).
On September 20, 2017 Bloomberg reported, “Federal Reserve Chair Janet Yellen acknowledged that the fall in inflation this year was a bit of a ‘mystery’ but suggested that the central bank was on course to raise interest rates again in 2017 nonetheless.” Any increase would be on top of the three hikes in the Federal Funds rate in fiscal 2017, bringing the range for the Federal Funds rate from 0.50% – 0.75% at the beginning of the year to 1.00% – 1.25% on June 14, 2017.
In addition, the Fed will begin reducing its $4.5 trillion balance sheet in October, by slowly unwinding the stimulus program it engaged a decade ago to combat the Great Recession. Its plan is
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017 (Unaudited)
to reduce its holdings of U.S. Treasury and mortgage-backed securities by $10 billion in October of 2017 and gradually raise the reduction amount in the months ahead. Essentially, this reduces the demand for these securities from a purchaser that was not altogether economically motivated in the traditional sense. The Fed believes that the economy is strong enough that this gradual reduction of its balance sheet will not be disruptive, although some do not share this opinion. CNBC reported in August 2017, in an interview with JPMorgan Chase CEO Jamie Dimon, that he;
“stopped short of saying the bond market is on the cusp of a collapse, but said he wouldn’t personally buy any long-term government debt. ‘I’m not going to call it a bubble, but I personally wouldn’t be buying a 10-year sovereign debt anywhere in the world…my view is the Fed is doing the right things, raising rates, telling people we’re going to start reducing the balance sheet,’ Dimon added.”
The Municipal Bond Market
The municipal bond market suffered a setback in November and December of 2016. The surprise U.S. election results and the new administration’s pro-growth and pro-infrastructure agenda caused interest rates to initially rise and the tax loss harvesting caused rates to rise higher in December of 2016.
The municipal bond market’s returns were a result of rising rates across the yield curve—with long-term rates increasing more than short-term rates as shown in Figure 1.
| Figure 1 | | | 12-Month Change in Rates for AAA Rated General Obligation Municipal Bonds (as of September 29, 2017) |
Source: Bloomberg
President Trump’s goal of tax reform in particular led investors to believe that losses taken in 2016 were of greater value than losses taken in 2017. After this uptick in rates, yields moved steadily lower, and 10-year AAA general obligation bond yields decreased by about 0.30% between December 31, 2016 and September 30, 2017. Quality spreads continue to be extremely narrow, as income-starved investors extended out the yield curve or accepted lower credit quality in search of meeting an income bogey.
Cash flows into municipal bond mutual funds have been positive but nothing like the levels we experienced in fiscal year 2016. Foreign institutional investors have shown an increased interest in the municipal bond markets throughout the U.S., exhibiting some of the same characteristics as domestic retail investors by trying to quench a thirst for income.
Credit quality in the municipal bond market has been pretty stable except for some idiosyncratic disturbances. Illinois, for example, went down to the wire to pass its first budget in three years. The rating agencies threatened to drop the state’s credit rating to below investment grade, which would have seriously limited its bonds’ marketability. These antics caused the price of Illinois debt to go dramatically lower prior to the ultimate passage of the budget, after which it rallied considerably.
Elsewhere, several prominent high-yield securities came to market and were very well received. One was a mall in New Jersey across from the Meadowlands, which has been mothballed for approximately 15 years. Originally called Xanadu and referred to as the “ugliest building in New Jersey” by the Governor, it is now called “The American Dream Mall” in its recent incarnation. The fact that this and other non-rated, high-yield projects are so well received is more evidence of how income-starved investors have become in an overly accommodative central bank world. By the way, we did not purchase this bond issue, because visitation needs to be 2x that of Disney World just to break even. And, when Amazon is disrupting everything from retail goods to groceries, we felt the last thing New Jersey needed was another mall.
Current Portfolio Positioning
We have positioned this portfolio, like our others, at the bottom end of its risk spectrum. If this sounds familiar, it is, as we said the same thing last year. We have lower durations, higher credit quality and higher reserve positions (to hedge against increased market illiquidity).
We believe that investors are not currently being compensated to take much risk. Real yields (yield less inflation) are low by historic standards (off the bottom but still low). Credit spreads are very narrow, back to pre-crisis levels, when 50% or more of the new issue market was insured by AAA municipal bond insurers. This is particularly concerning, as today only about 7%
Annual Report | 5
Letter to Shareholders, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017 (Unaudited)
to 8% of the new issue market is insured and the municipal bond insurers are no longer rated AAA. A few desperate municipal market issuers, like Hartford CT, are openly discussing debt restructuring and the president is making comments like the following with regard to Puerto Rico’s debt: “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out.” The precedents set by the recent municipal Chapter 9 proceedings of Detroit, MI and San Bernardino, CA have in effect placed bondholders in a subordinated position to pensioners. Sometimes investors are motivated more by greed than fear and vice versa. Greed seems to be the current primary motivating factor, and it is in such an environment that caution should be exercised. That is exactly what we are doing—relying on value-oriented, bottom-up fundamental analysis in portfolio construction.
Why Own Municipal Bonds
Fixed income assets are an important part of a well-diversified portfolio, as they can provide a stabilizing force to the potential swings of the equity portion of the portfolio. These asset classes are not always positively correlated and can therefore dampen the overall portfolio’s volatility.
Thank you for your continued trust in us, and please know that the co-managers of this Fund are invested alongside you.
Sincerely,
Christopher Ryon, CFA
Portfolio Manager
Managing Director
Nicholos Venditti, 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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
6 | Annual Report
Thornburg Intermediate Municipal Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
A Shares (Incep: 7/22/91) | |||||||||||||||||||||||||
Without sales charge | -0.08% | 1.91% | 2.13% | 3.74% | 4.73% | ||||||||||||||||||||
With sales charge | -2.11% | 1.23% | 1.72% | 3.53% | 4.65% | ||||||||||||||||||||
C Shares (Incep: 9/1/94) | |||||||||||||||||||||||||
Without sales charge | -0.40% | 1.58% | 1.80% | 3.44% | 3.91% | ||||||||||||||||||||
With sales charge | -0.98% | 1.58% | 1.80% | 3.44% | 3.91% | ||||||||||||||||||||
I Shares (Incep: 7/5/96) | 0.15% | 2.19% | 2.44% | 4.06% | 4.45% | ||||||||||||||||||||
30-DAY YIELDS, A SHARES
(with sales charge)
Annualized Distribution Yield | 2.14% | ||||
SEC Yield | 1.05% |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. Class A shares are sold with a maximum sales charge of 2.00%. Class C shares include a 0.60% CDSC for the first year only. There is no sales charge for Class I shares. As disclosed in the most recent prospectus, the total annual fund operating expenses before fee waivers and expense reimbursements are as follows: A shares, 0.92%; C shares, 1.27%; I shares, 0.61%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: C shares, 1.24%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus.
Glossary
The BofA Merrill Lynch 3-15 Year U.S. Municipal Securities 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.
The performance of any index is not indicative of the performance of any particular investment. 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 or net asset value.
Bond Credit Ratings (Credit Quality) – 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.
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 incorporates a bond’s embedded option features, such as call provisions.
General Obligation Bond (GO) – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Insured Bonds – Individual bonds are sometimes insured by private companies. The insurance guarantees the payment of principal and interest on a bond issue if the issuer defaults. Mutual funds are not insured, even if the underlying bonds are insured.
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.
Annual Report | 7
Thornburg Intermediate Municipal Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
The Fund’s primary investment goal is to obtain as high a level of current income exempt from federal individual income tax 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 invests principally in a laddered portfolio of municipal bonds with a dollar-weighted average maturity of normally three to 10 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 typically 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
There is no guarantee that the Fund will meet its investment objectives.
All data is subject to change. Charts may not add up to 100% due to rounding.
SECURITY 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. Credit quality ratings for Thornburg’s municipal portfolios used the highest rating available from either Standard & Poor’s or Moody’s Investors Service.
Unrated pre-refunded and escrowed-to-maturity bonds are included in the not rated category.
KEY PORTFOLIO ATTRIBUTES
| Number of Bonds | 547 | ||||
| Effective Duration | 4.9 Yrs | ||||
| Average Maturity | 8.0 Yrs |
PORTFOLIO LADDER
Percent of portfolio maturing in each year. Cash includes cash equivalents and other.
8 | Annual Report
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
ALABAMA — 1.81% |
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Alabama Capital Region Solid Waste Disposal Authority, 4.00% due 6/15/2019 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | $ | 815,000 | $ | 836,353 | ||||||||||||
Alabama Capital Region Solid Waste Disposal Authority, 5.00% due 6/15/2020 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | 845,000 | 897,382 | ||||||||||||||
Alabama Capital Region Solid Waste Disposal Authority, 5.00% due 6/15/2021 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | 890,000 | 954,783 | ||||||||||||||
Alabama Capital Region Solid Waste Disposal Authority, 5.00% due 6/15/2022 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | 930,000 | 1,010,473 | ||||||||||||||
Alabama Capital Region Solid Waste Disposal Authority, 5.00% due 6/15/2023 (Montgomery Materials Recovery Facility) (AMT) | AA/NR | 980,000 | 1,058,106 | ||||||||||||||
Alabama Public School & College Authority, 5.00% due 6/1/2021 (Educational Facilities) | AA/Aa1 | 775,000 | 877,091 | ||||||||||||||
Alabama Public School & College Authority, 5.00% due 6/1/2026 (Educational Facilities) | AA/Aa1 | 4,380,000 | 5,136,776 | ||||||||||||||
Board of Trustees of the University of Alabama, 5.25% due 9/1/2025 pre-refunded 9/1/2018 (Birmingham Hospital) | NR/A1 | 2,000,000 | 2,079,020 | ||||||||||||||
City of Mobile Industrial Development Board, 1.85% due 6/1/2034 (Alabama Power Company Barry Plant) | A-/A1 | 5,500,000 | 5,541,580 | ||||||||||||||
East Alabama Health Care Authority GO, 5.00% due 9/1/2027 (Health Care Facilities Capital Improvements) | A/NR | 1,250,000 | 1,368,687 | ||||||||||||||
UAB Medicine Finance Authority, 5.00% due 9/1/2032 (University Hospital) | AA-/A1 | 6,000,000 | 7,015,020 | ||||||||||||||
ALASKA — 0.19% |
| ||||||||||||||||
Alaska Housing Finance Corp. GO, 5.00% due 12/1/2021 pre-refunded 12/1/2020 (State Capital Project) | AA+/Aa2 | 500,000 | 557,820 | ||||||||||||||
City of Valdez, 5.00% due 1/1/2021 (BP Pipelines (Alaska), Inc. Project) | A-/A1 | 2,000,000 | 2,218,180 | ||||||||||||||
ARIZONA — 1.38% |
| ||||||||||||||||
Arizona Board of Regents, 5.00% due 8/1/2024 (University of Arizona SPEED) | A+/Aa3 | 1,635,000 | 1,852,128 | ||||||||||||||
Arizona Board of Regents, 5.00% due 8/1/2029 (University of Arizona SPEED) | A+/Aa3 | 1,000,000 | 1,182,600 | ||||||||||||||
Arizona HFA, 5.00% due 12/1/2031 (Scottsdale Lincoln Hospitals) | NR/A2 | 2,500,000 | 2,865,550 | ||||||||||||||
City of Flagstaff GO, 3.00% due 7/1/2020 (Urban Trail, Street and Utilities Improvements) | AA/Aa2 | 700,000 | 732,683 | ||||||||||||||
City of Flagstaff GO, 4.00% due 7/1/2022 (Urban Trail, Street and Utilities Improvements) | AA/Aa2 | 420,000 | 468,430 | ||||||||||||||
City of Flagstaff GO, 4.00% due 7/1/2023 (Urban Trail, Street and Utilities Improvements) | AA/Aa2 | 200,000 | 225,764 | ||||||||||||||
County of Pima IDA, 5.00% due 12/1/2030 (Providence Day School Project) | BBB+/NR | 2,000,000 | 2,109,800 | ||||||||||||||
Salt Verde Financial Corp., 5.25% due 12/1/2022 (Salt River Project Agricultural Improvement and Power District) | BBB+/Baa1 | 2,000,000 | 2,259,000 | ||||||||||||||
Salt Verde Financial Corp., 5.25% due 12/1/2028 (Salt River Project Agricultural Improvement and Power District) | BBB+/Baa1 | 770,000 | 927,711 | ||||||||||||||
State of Arizona, 5.00% due 7/1/2019 (Insured: AGM) | AA/A1 | 7,280,000 | 7,774,822 | ||||||||||||||
ARKANSAS — 0.29% |
| ||||||||||||||||
Board of Trustees of the University of Arkansas, 5.00% due 11/1/2031 (Fayetteville Campus) | NR/Aa2 | 1,000,000 | 1,165,700 | ||||||||||||||
Board of Trustees of the University of Arkansas, 5.00% due 11/1/2032 (Fayetteville Campus) | NR/Aa2 | 655,000 | 765,859 | ||||||||||||||
Board of Trustees of the University of Arkansas, 5.00% due 11/1/2033 (Fayetteville Campus) | NR/Aa2 | 1,000,000 | 1,163,580 | ||||||||||||||
Board of Trustees of the University of Arkansas, 5.00% due 11/1/2034 (Fayetteville Campus) | NR/Aa2 | 1,000,000 | 1,160,050 | ||||||||||||||
CALIFORNIA — 9.03% | |||||||||||||||||
Alameda County Joint Powers Authority, 5.25% due 12/1/2027 (Alameda County Medical Center Highland Hospital) | AA/Aa1 | 1,000,000 | 1,203,140 | ||||||||||||||
Alameda County Joint Powers Authority, 5.25% due 12/1/2028 (Alameda County Medical Center Highland Hospital) | AA/Aa1 | 1,150,000 | 1,380,138 | ||||||||||||||
Alameda County Joint Powers Authority, 5.25% due 12/1/2029 (Alameda County Medical Center Highland Hospital) | AA/Aa1 | 1,500,000 | 1,795,650 | ||||||||||||||
Brentwood Infrastructure Financing Authority, 5.00% due 11/1/2026 (Insured: AGM) | AA/NR | 2,000,000 | 2,228,140 | ||||||||||||||
California Educational Facilities Authority, 5.50% due 4/1/2029 (Pitzer College) | NR/A2 | 3,000,000 | 3,286,230 | ||||||||||||||
California HFFA, 5.00% due 11/15/2022 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,000,000 | 1,154,870 | ||||||||||||||
California HFFA, 5.00% due 3/1/2026 (Adventist Health System/West) | A/NR | 3,020,000 | 3,464,151 | ||||||||||||||
California HFFA, 5.25% due 3/1/2027 (Dignity Health) | A/A3 | 5,250,000 | 5,905,305 | ||||||||||||||
California HFFA, 5.00% due 8/15/2032 (Childrens Hospital Los Angeles) | BBB+/Baa2 | 350,000 | 404,908 | ||||||||||||||
California HFFA, 5.00% due 8/15/2033 (Childrens Hospital Los Angeles) | BBB+/Baa2 | 600,000 | 690,276 | ||||||||||||||
California Infrastructure & Economic Development Bank, 5.75% due 8/15/2029 (King City Joint Union High School District) | AA-/NR | 1,500,000 | 1,659,495 | ||||||||||||||
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 | 2,012,020 | ||||||||||||||
California School Cash Reserve Program Authority, 3.00% due 6/29/2018 | SP-1+/NR | 7,000,000 | 7,119,910 | ||||||||||||||
California State Public Works Board, 5.00% due 4/1/2028 (Corrections, Rehabilitation and Judicial Council) | A+/A1 | 2,500,000 | 2,857,250 | ||||||||||||||
California Statewide Community Development Authority, 6.25% due 8/15/2028 pre-refunded 8/15/2018 (Enloe Medical Center; Insured: California Mtg Insurance) | AA-/NR | 1,050,000 | 1,099,759 | ||||||||||||||
California Statewide Community Development Authority, 6.00% due 7/1/2030 pre-refunded 1/1/2019 (Aspire Public Schools) | NR/NR | 7,015,000 | 7,461,435 | ||||||||||||||
Carson Redevelopment Agency, 6.25% due 10/1/2022 pre-refunded 10/1/2019 (Redevelopment Project Area No. 1) | A-/NR | 1,620,000 | 1,790,327 | ||||||||||||||
Carson Redevelopment Agency, 6.375% due 10/1/2024 pre-refunded 10/1/2019 (Redevelopment Project Area No. 1) | A-/NR | 1,300,000 | 1,439,906 | ||||||||||||||
Chico Redevelopment Agency, 5.00% due 4/1/2030 (Chico Amended & Merged Redevelopment; Insured: AMBAC) | A+/NR | 5,500,000 | 5,513,805 | ||||||||||||||
City of Los Angeles GO, 5.00% due 6/28/2018 (Cash Flow Management) | SP-1+/Mig1 | 10,000,000 | 10,302,800 | ||||||||||||||
Corona-Norco USD COP, 5.00% due 4/15/2018 (Insured: AGM) | AA/A1 | 1,245,000 | 1,272,104 | ||||||||||||||
Corona-Norco USD COP, 5.00% due 4/15/2021 (Insured: AGM) | AA/A1 | 1,000,000 | �� | 1,093,020 | |||||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
County of Los Angeles GO, 5.00% due 6/29/2018 (Fiscal Year 2017-2018 Expenditures) | SP-1+/Mig1 | $ | 5,000,000 | $ | 5,151,950 | ||||||||||||
County of Riverside, 2.00% due 6/29/2018 (Fiscal Year 2017-2018 Expenditures) | SP-1+/NR | 15,000,000 | 15,136,050 | ||||||||||||||
Delano Financing Authority, 5.00% due 12/1/2025 (City of Delano Police Station and Woollomes Avenue Bridge) | A-/NR | 2,555,000 | 2,802,733 | ||||||||||||||
Franklin-McKinley School District GO, 5.25% due 8/1/2027 (Insured: Natl-Re) | NR/Aa3 | 1,000,000 | 1,251,570 | ||||||||||||||
Fresno USD GO, 6.00% due 8/1/2026 (Educational Facilities and Improvements; Insured: Natl-Re) | A+/A3 | 1,165,000 | 1,440,185 | ||||||||||||||
Jurupa Public Financing Authority, 5.50% due 9/1/2025 (Eastvale Community Services; Insured: AGM) | AA/NR | 1,195,000 | 1,418,656 | ||||||||||||||
Jurupa Public Financing Authority, 5.50% due 9/1/2027 (Eastvale Community Services; Insured: AGM) | AA/NR | 1,335,000 | 1,564,847 | ||||||||||||||
M-S-R Energy Authority, 6.125% due 11/1/2029 | BBB+/NR | 2,500,000 | 3,170,600 | ||||||||||||||
North City West School Facilities Financing Authority, 5.00% due 9/1/2024 (Carmel Valley Schools; Insured: AGM) | AA/NR | 1,080,000 | 1,257,941 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2032 (County of Alameda Educational Facilities) | AA-/Aa3 | 1,000,000 | 1,179,270 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2033 (County of Alameda Educational Facilities) | AA-/Aa3 | 1,000,000 | 1,172,270 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2034 (County of Alameda Educational Facilities) | AA-/Aa3 | 1,000,000 | 1,166,090 | ||||||||||||||
Redwood City Redevelopment Agency, 0% due 7/15/2023 (Redevelopment Area A-2; Insured: AMBAC) | A/NR | 2,065,000 | 1,786,741 | ||||||||||||||
San Jose Redevelopment Agency, 5.25% due 8/1/2027 (Merged Area Redevelopment Project) | AA-/A1 | 2,400,000 | 2,658,000 | ||||||||||||||
San Jose Redevelopment Agency, 5.375% due 8/1/2028 (Merged Area Redevelopment Project) | AA-/A1 | 1,175,000 | 1,304,696 | ||||||||||||||
San Mateo Union High School District GO, 0% due 9/1/2019 (Educational Facilities; Insured: Natl-Re) | AA+/Aaa | 3,000,000 | 2,934,210 | ||||||||||||||
Saratoga Union School District GO, 0% due 9/1/2023 (Insured: Natl-Re) | AA+/Aa1 | 900,000 | 806,058 | ||||||||||||||
State of California GO, 5.25% due 9/1/2026 (Kindergarten-University Facilities) | AA-/Aa3 | 5,000,000 | 5,786,000 | ||||||||||||||
State of California GO, 5.00% due 8/1/2034 (Kindergarten-University Facilities) | AA-/Aa3 | 5,000,000 | 5,916,000 | ||||||||||||||
State of California GO, 5.00% due 8/1/2035 (Kindergarten-University Facilities) | AA-/Aa3 | 4,000,000 | 4,719,000 | ||||||||||||||
Tuolumne Wind Project Authority, 5.875% due 1/1/2029 pre-refunded 1/1/2019 | AA-/A2 | 3,000,000 | 3,186,270 | ||||||||||||||
Turlock Irrigation District, 5.00% due 1/1/2021 pre-refunded 1/1/2020 | NR/NR | 745,000 | 811,290 | ||||||||||||||
Turlock Irrigation District, 5.00% due 1/1/2021 | AA-/A2 | 1,005,000 | 1,090,887 | ||||||||||||||
William S. Hart Union High School District GO, 0% due 9/1/2021 (Educational Facilities) | AA/A2 | 800,000 | 752,784 | ||||||||||||||
COLORADO — 0.52% | |||||||||||||||||
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 | 1,339,499 | ||||||||||||||
Park Creek Metropolitan District, 5.25% due 12/1/2020 pre-refunded 12/1/2019 (Insured: AGM) | AA/NR | 1,120,000 | 1,219,176 | ||||||||||||||
Regional Transportation District COP, 5.50% due 6/1/2022 pre-refunded 6/1/2020 (Public Mass Transportation System) | NR/NR | 2,740,000 | 3,056,826 | ||||||||||||||
Regional Transportation District COP, 5.50% due 6/1/2022 (Public Mass Transportation System) | A/Aa3 | 260,000 | 288,933 | ||||||||||||||
Regional Transportation District COP, 5.00% due 6/1/2028 (North Metro Rail Line) | A/Aa3 | 1,550,000 | 1,801,673 | ||||||||||||||
CONNECTICUT — 1.08% | |||||||||||||||||
City of Hartford GO, 5.00% due 7/1/2031 (Various Public Improvements; Insured: AGM) | AA/A2 | 1,700,000 | 1,851,317 | ||||||||||||||
Connecticut Health & Educational Facilities Authority, 5.75% due 7/1/2029 pre-refunded 7/1/2019 (Ethel Walker School) | NR/NR | 1,350,000 | 1,461,051 | ||||||||||||||
State of Connecticut GO, 5.00% due 5/15/2027 (Various Capital Projects) | A+/A1 | 5,000,000 | 5,860,900 | ||||||||||||||
State of Connecticut GO Floating Rate Note, 1.63% due 6/15/2018 (Various Capital Projects) | A+/A1 | 6,820,000 | 6,837,937 | ||||||||||||||
DISTRICT OF COLUMBIA — 0.56% | |||||||||||||||||
Metropolitan Airports Authority, 0% due 10/1/2023 (Dulles Toll Road; Insured: AGM) | AA/A3 | 4,890,000 | 4,194,740 | ||||||||||||||
| a | Metropolitan Airports Authority, 0% due 10/1/2024 (Dulles Toll Road; Insured: AGM) | AA/A3 | 5,000,000 | 4,142,100 | |||||||||||||
FLORIDA — 5.60% | |||||||||||||||||
Broward County School Board COP, 5.00% due 7/1/2030 (Educational Facilities) | A+/Aa3 | 1,250,000 | 1,453,250 | ||||||||||||||
Broward County School Board COP, 5.00% due 7/1/2032 (Educational Facilities) | A+/Aa3 | 2,000,000 | 2,307,760 | ||||||||||||||
City of Gainesville, 0.88% due 10/1/2026 put 10/2/2017 (Utilities System; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AA-/Aa3 | 900,000 | 900,000 | ||||||||||||||
City of Jacksonville, 5.00% due 10/1/2026 (Better Jacksonville Plan) | A+/A1 | 2,075,000 | 2,373,302 | ||||||||||||||
City of Lakeland, 5.00% due 10/1/2018 (Electric Power System Smart Grid Project; Insured: AGM) | AA/Aa3 | 2,000,000 | 2,079,420 | ||||||||||||||
City of Lakeland, 5.25% due 10/1/2027 (Electric Power System Smart Grid Project; Insured: AGM) | AA/Aa3 | 3,680,000 | 4,668,890 | ||||||||||||||
City of Lakeland, 5.00% due 11/15/2028 (Lakeland Regional Health Systems) | NR/A2 | 2,775,000 | 3,287,903 | ||||||||||||||
City of Lakeland, 5.25% due 10/1/2036 (Electric Power System Smart Grid Project; Insured: AGM) | AA/Aa3 | 2,770,000 | 3,583,161 | ||||||||||||||
City of Orlando, 5.00% due 11/1/2032 (Senior Tourist Development; Insured: AGM) | AA/NR | 1,095,000 | 1,286,483 | ||||||||||||||
City of Orlando, 5.00% due 11/1/2036 (Senior Tourist Development; Insured: AGM) | AA/NR | 935,000 | 1,077,372 | ||||||||||||||
City of Orlando, 5.00% due 11/1/2037 (Senior Tourist Development; Insured: AGM) | AA/NR | 1,400,000 | 1,610,574 | ||||||||||||||
Escambia County HFA, 5.95% due 7/1/2020 (Florida Health Care Facility Loan Program; Insured: AMBAC) (ETM) | NR/NR | 260,000 | 293,826 | ||||||||||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2018 (South Florida Evaluation Treatment Center) | AA+/NR | 2,090,000 | 2,096,876 | ||||||||||||||
Florida State Department of Children & Families COP, 5.00% due 10/1/2019 (South Florida Evaluation Treatment Center) | AA+/NR | 2,255,000 | 2,262,419 | ||||||||||||||
Lake County School Board COP, 5.00% due 6/1/2026 (School District Facility Projects) | A/NR | 1,210,000 | 1,375,964 | ||||||||||||||
Manatee County, 5.00% due 10/1/2026 (Public Utilities System Improvements) | NR/Aa2 | 370,000 | 439,345 | ||||||||||||||
Manatee County, 5.00% due 10/1/2027 (Public Utilities System Improvements) | NR/Aa2 | 470,000 | 554,534 | ||||||||||||||
Manatee County, 5.00% due 10/1/2028 (Public Utilities System Improvements) | NR/Aa2 | 1,030,000 | 1,206,563 | ||||||||||||||
Manatee County, 5.00% due 10/1/2031 (Public Utilities System Improvements) | NR/Aa2 | 2,675,000 | 3,086,549 | ||||||||||||||
Manatee County, 5.00% due 10/1/2033 (Public Utilities System Improvements) | NR/Aa2 | 1,535,000 | 1,755,472 | ||||||||||||||
Miami-Dade County, 5.00% due 10/1/2028 (Miami International Airport) | A/A2 | 1,000,000 | 1,174,300 | ||||||||||||||
10 | Annual Report
Schedule of Investments, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Miami-Dade County, 5.00% due 10/1/2029 (Miami International Airport) | A/A2 | $ | 1,335,000 | $ | 1,559,000 | ||||||||||||
Miami-Dade County, 5.00% due 10/1/2030 (Miami International Airport) | A/A2 | 1,000,000 | 1,165,510 | ||||||||||||||
Miami-Dade County, 5.00% due 10/1/2031 (Miami International Airport) | A/A2 | 2,000,000 | 2,323,680 | ||||||||||||||
Miami-Dade County Educational Facilities Authority, 5.25% due 4/1/2024 (University of Miami; Insured: AMBAC) | A-/A3 | 1,000,000 | 1,190,950 | ||||||||||||||
Miami-Dade County GO, 5.00% due 10/1/2023 (Seaport Properties) | AA/Aa2 | 1,040,000 | 1,184,685 | ||||||||||||||
Miami-Dade County GO, 6.25% due 7/1/2026 pre-refunded 7/1/2018 (Building Better Communities) | AA/Aa2 | 2,130,000 | 2,215,072 | ||||||||||||||
Miami-Dade County Health Facilities Authority, 5.00% due 8/1/2035 (Nicklaus Children’s Hospital) | A+/NR | 1,020,000 | 1,175,744 | ||||||||||||||
Miami-Dade County Health Facilities Authority, 5.00% due 8/1/2036 (Nicklaus Children’s Hospital) | A+/NR | 885,000 | 1,016,095 | ||||||||||||||
Miami-Dade County Health Facilities Authority, 5.00% due 8/1/2037 (Nicklaus Children’s Hospital) | A+/NR | 1,000,000 | 1,144,500 | ||||||||||||||
Miami-Dade County School Board COP, 5.00% due 10/1/2021 (Insured: AMBAC) | A+/A1 | 3,035,000 | 3,452,130 | ||||||||||||||
Miami-Dade County School Board COP, 5.25% due 5/1/2022 pre-refunded 5/1/2018 (Insured: AGM) | AA/A1 | 2,600,000 | 2,665,260 | ||||||||||||||
Miami-Dade County School Board COP, 5.00% due 5/1/2030 | A+/A1 | 3,250,000 | 3,816,637 | ||||||||||||||
Orange County, 5.00% due 10/1/2031 (Tourist Development) | AA-/Aa3 | 2,000,000 | 2,370,820 | ||||||||||||||
Orange County HFA, 5.125% due 10/1/2026 (Orlando Health, Inc.) | A/A2 | 2,000,000 | 2,151,160 | ||||||||||||||
Palm Beach County HFA, 5.00% due 12/1/2025 (Boca Raton Regional Hospital) | BBB+/NR | 500,000 | 576,680 | ||||||||||||||
Sarasota County Public Hospital Board, 3.619% due 10/1/2021 (Sarasota Memorial Hospital; Insured: Natl-Re) | A/A1 | 2,000,000 | 2,079,340 | ||||||||||||||
School Board of Broward County COP, 5.00% due 7/1/2026 (Educational Facilities and Equipment) | A+/Aa3 | 3,000,000 | 3,417,240 | ||||||||||||||
School Board of Broward County COP, 5.00% due 7/1/2027 (Educational Facilities and Equipment) | A+/Aa3 | 2,000,000 | 2,267,940 | ||||||||||||||
School District of Manatee County, 5.00% due 10/1/2032 (School Facilities Improvement; Insured: AGM) | AA/NR | 2,250,000 | 2,666,790 | ||||||||||||||
South Miami HFA, 5.00% due 8/15/2022 (Baptist Health Group) | AA-/Aa3 | 1,500,000 | 1,505,025 | ||||||||||||||
Sunshine State Governmental Finance Commission, 5.00% due 9/1/2028 (Miami-Dade County Program) | AA-/Aa3 | 3,500,000 | 4,041,975 | ||||||||||||||
GEORGIA — 1.92% | |||||||||||||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2024 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 485,000 | 566,174 | ||||||||||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2025 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 510,000 | 591,931 | ||||||||||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2027 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 735,000 | 842,082 | ||||||||||||||
Athens-Clarke County Unified Government Development Authority, 5.00% due 6/15/2028 (UGAREF Bolton Commons, LLC) | NR/Aa2 | 590,000 | 675,739 | ||||||||||||||
Athens-Clarke County Unified Government Development Authority, 0.90% due 7/1/2035 put 10/2/2017 (University of Georgia Athletic Association; LOC: Wells Fargo Bank, N.A.) (daily demand notes) | NR/Aa1 | 1,445,000 | 1,445,000 | ||||||||||||||
City of Atlanta, 5.50% due 11/1/2022 (Water & Wastewater System; Insured: Natl-Re) | AA-/Aa2 | 530,000 | 615,129 | ||||||||||||||
City of Atlanta, 5.50% due 11/1/2024 pre-refunded 11/1/2019 (Water & Wastewater System; Insured: AGM) | NR/Aa2 | 3,260,000 | 3,561,778 | ||||||||||||||
City of Atlanta, 5.50% due 11/1/2024 (Water & Wastewater System; Insured: AGM) | NR/Aa2 | 1,740,000 | 1,895,817 | ||||||||||||||
Clarke County Hospital Authority, 5.00% due 1/1/2023 pre-refunded 1/1/2022 (Athens Regional Medical Center) | AA/Aa1 | 2,060,000 | 2,370,813 | ||||||||||||||
Clarke County Hospital Authority, 5.00% due 1/1/2024 pre-refunded 1/1/2022 (Athens Regional Medical Center) | AA/Aa1 | 2,310,000 | 2,658,533 | ||||||||||||||
Clarke County Hospital Authority, 5.00% due 1/1/2025 pre-refunded 1/1/2022 (Athens Regional Medical Center) | AA/Aa1 | 525,000 | 604,212 | ||||||||||||||
Clarke County Hospital Authority, 5.00% due 1/1/2026 pre-refunded 1/1/2022 (Athens Regional Medical Center) | AA/Aa1 | 725,000 | 834,388 | ||||||||||||||
Development Authority of Fulton County, 5.00% due 10/1/2019 (Georgia Tech Athletic Assoc.) | NR/A2 | 3,000,000 | 3,221,520 | ||||||||||||||
Gwinnett County School District GO, 4.50% due 10/1/2017 (ETM) | NR/NR | 690,000 | 690,145 | ||||||||||||||
Gwinnett County School District GO, 4.50% due 10/1/2017 | AAA/Aaa | 6,310,000 | 6,311,325 | ||||||||||||||
Municipal Electric Authority of Georgia, 6.60% due 1/1/2018 (Insured: Natl-Re) | A/A1 | 125,000 | 126,743 | ||||||||||||||
Valdosta and Lowndes County Hospital Authority, 5.00% due 10/1/2024 (South Medical Center) | AA-/Aa2 | 1,200,000 | 1,357,308 | ||||||||||||||
GUAM — 2.62% | |||||||||||||||||
Government of Guam, 5.00% due 11/15/2031 (Various Capital Projects) | A/NR | 5,500,000 | 5,985,650 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2032 (Various Capital Projects) | A/NR | 12,000,000 | 13,007,040 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2033 (Various Capital Projects) | A/NR | 10,500,000 | 11,312,595 | ||||||||||||||
Guam Power Authority, 5.00% due 10/1/2023 (Electric Power System; Insured: AGM) | AA/A2 | 2,000,000 | 2,273,200 | ||||||||||||||
Guam Power Authority, 5.00% due 10/1/2024 (Electric Power System; Insured: AGM) | AA/A2 | 2,000,000 | 2,261,520 | ||||||||||||||
Guam Power Authority, 5.00% due 10/1/2025 (Electric Power System; Insured: AGM) | AA/A2 | 2,500,000 | 2,851,375 | ||||||||||||||
Guam Waterworks Authority, 5.25% due 7/1/2024 (Water and Wastewater System) | A-/Baa2 | 1,000,000 | 1,139,350 | ||||||||||||||
HAWAII — 1.15% | |||||||||||||||||
City and County of Honolulu GO Floating Rate Note, 1.20% due 9/1/2027 (Rail Transit Project) | NR/Aa1 | 4,000,000 | 4,001,200 | ||||||||||||||
County of Hawaii GO, 5.00% due 9/1/2033 | AA-/Aa2 | 1,250,000 | 1,470,412 | ||||||||||||||
State of Hawaii GO, 5.00% due 12/1/2027 pre-refunded 12/1/2021 | NR/NR | 3,635,000 | 4,186,866 | ||||||||||||||
State of Hawaii GO, 5.00% due 12/1/2027 pre-refunded 12/1/2021 | NR/NR | 2,550,000 | 2,937,141 | ||||||||||||||
State of Hawaii GO, 5.00% due 12/1/2027 pre-refunded 12/1/2021 | AA+/Aa1 | 3,815,000 | 4,394,193 | ||||||||||||||
IDAHO — 0.42% | |||||||||||||||||
State of Idaho GO, 4.00% due 6/29/2018 (Cash Flow Management) | SP-1+/Mig1 | 6,000,000 | 6,135,420 | ||||||||||||||
Annual Report | 11
Schedule of Investments, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
ILLINOIS — 7.36% | |||||||||||||||||
Board of Trustees of Southern Illinois University, 5.25% due 4/1/2019 (Housing & Auxiliary Facilities; Insured: Natl-Re) | A/A3 | $ | 1,000,000 | $ | 1,053,550 | ||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2019 (2015 Airport Projects) | A/NR | 1,000,000 | 1,049,000 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2020 (2015 Airport Projects) | A/NR | 1,000,000 | 1,084,990 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2021 (2015 Airport Projects) | A/NR | 1,000,000 | 1,117,210 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2029 (2016 Airport Projects) | A/NR | 1,000,000 | 1,182,130 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2030 (2016 Airport Projects) | A/NR | 765,000 | 899,969 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2034 (2017 Airport Projects) | A/NR | 2,000,000 | 2,333,400 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2035 (2017 Airport Projects) | A/NR | 2,700,000 | 3,140,586 | ||||||||||||||
Chicago O’Hare International Airport, 5.00% due 1/1/2037 (2017 Airport Projects) | A/NR | 3,460,000 | 3,985,263 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2025 (Capital Improvement Plan) | AA+/NR | 1,000,000 | 1,148,270 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2027 (Capital Improvement Plan) | AA+/NR | 1,945,000 | 2,198,433 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2028 (Capital Improvement Plan) | AA+/NR | 3,450,000 | 3,876,316 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2029 (Capital Improvement Plan) | AA+/NR | 1,995,000 | 2,230,590 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2030 (Capital Improvement Plan) | AA+/NR | 3,500,000 | 3,898,510 | ||||||||||||||
Chicago Transit Authority, 5.00% due 12/1/2018 (Bombardier Transit Rail System) | AA/A3 | 1,500,000 | 1,558,725 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2028 (Wastewater Transmission System) | A/NR | 5,365,000 | 6,055,958 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2029 (Wastewater Transmission System) | A/NR | 2,500,000 | 2,804,675 | ||||||||||||||
City of Chicago, 5.75% due 11/1/2030 (Water System; Insured: AMBAC) | AA+/Aa1 | 1,270,000 | 1,567,650 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2032 (Midway Airport) | A/A3 | 4,805,000 | 5,469,628 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2033 (Midway Airport) | A/A3 | 5,000,000 | 5,669,950 | ||||||||||||||
City of Chicago, 5.25% due 1/1/2034 (Midway Airport) | A/A3 | 4,700,000 | 5,300,566 | ||||||||||||||
City of Chicago GO, 5.00% due 1/1/2020 (Municipal Facilities Projects; Insured: AMBAC) | BBB+/Ba1 | 75,000 | 75,249 | ||||||||||||||
City of Chicago GO, 5.00% due 12/1/2022 (Modern Schools Across Chicago Program; Insured: AMBAC) | BBB+/Ba1 | 415,000 | 416,369 | ||||||||||||||
City of Chicago GO, 5.00% due 12/1/2024 (Modern Schools Across Chicago Program; Insured: AMBAC) | BBB+/Ba1 | 450,000 | 451,471 | ||||||||||||||
City of Mount Vernon GO, 4.00% due 12/15/2025 (Various Municipal Capital Improvements; Insured: AGM) | AA/A2 | 1,900,000 | 1,999,142 | ||||||||||||||
City of Waukegan GO, 5.00% due 12/30/2017 (Insured: AGM) | NR/A2 | 1,680,000 | 1,695,221 | ||||||||||||||
City of Waukegan GO, 5.00% due 12/30/2018 (Insured: AGM) | NR/A2 | 2,000,000 | 2,081,920 | ||||||||||||||
Community College District No. 525 GO, 6.25% due 6/1/2024 (Joliet Junior College) | AA/NR | 500,000 | 517,000 | ||||||||||||||
Cook County Community College District No. 508 GO, 5.25% due 12/1/2026 (City Colleges of Chicago) | BBB/NR | 1,000,000 | 1,110,690 | ||||||||||||||
Cook County GO, 5.25% due 11/15/2024 | AA-/A2 | 3,000,000 | 3,270,510 | ||||||||||||||
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 | 1,820,300 | ||||||||||||||
Forest Preserve District of DuPage County GO, 4.00% due 11/1/2022 (Land Acquisition and Development) | AAA/NR | 750,000 | 838,005 | ||||||||||||||
Illinois Educational Facilities Authority, 5.75% due 11/1/2028 pre-refunded 11/1/2018 (Rush University Medical Center) | A/Aaa | 1,000,000 | 1,050,850 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/1/2017 (Central DuPage Health) | AA+/Aa2 | 2,000,000 | 2,007,080 | ||||||||||||||
Illinois Finance Authority, 6.125% due 11/1/2023 pre-refunded 11/1/2018 (Advocate Health Care Network) | AA+/Aa2 | 5,175,000 | 5,459,107 | ||||||||||||||
Illinois Finance Authority, 5.00% due 8/15/2024 (Silver Cross Hospital and Medical Centers) | NR/Baa1 | 1,000,000 | 1,153,830 | ||||||||||||||
Illinois Finance Authority, 5.00% due 11/15/2033 (Rush University Medical Center) | A+/A1 | 1,000,000 | 1,121,660 | ||||||||||||||
Illinois Finance Authority, 0.90% due 8/1/2043 put 10/2/2017 (University of Chicago Medical Center; LOC: Wells Fargo Bank, N.A.) (daily demand notes) | AAA/Aa1 | 4,200,000 | 4,200,000 | ||||||||||||||
Illinois HFA, 5.70% due 2/20/2021 (Midwest Care Center I, Inc.; Collateralized: GNMA) | NR/Aa1 | 355,000 | 356,498 | ||||||||||||||
Illinois Toll Highway Authority, 5.00% due 1/1/2037 (Move Illinois Program) | AA-/Aa3 | 5,550,000 | 6,349,866 | ||||||||||||||
Metropolitan Pier & Exposition Authority, 5.00% due 12/15/2022 (McCormick Place Expansion Project) | BB+/NR | 1,000,000 | 1,074,140 | ||||||||||||||
Monroe and St. Clair Counties GO, 5.00% due 4/15/2027 (Community Unit School District No. 5; Insured: BAM) | AA/Aa3 | 325,000 | 387,472 | ||||||||||||||
Monroe and St. Clair Counties GO, 5.00% due 4/15/2028 (Community Unit School District No. 5; Insured: BAM) | AA/Aa3 | 1,415,000 | 1,673,662 | ||||||||||||||
Monroe and St. Clair Counties GO, 5.00% due 4/15/2029 (Community Unit School District No. 5; Insured: BAM) | AA/Aa3 | 1,630,000 | 1,909,300 | ||||||||||||||
Monroe and St. Clair Counties GO, 5.00% due 4/15/2030 (Community Unit School District No. 5; Insured: BAM) | AA/Aa3 | 1,800,000 | 2,098,422 | ||||||||||||||
| a | Monroe and St. Clair Counties GO, 5.00% due 4/15/2031 (Community Unit School District No. 5; Insured: BAM) | AA/Aa3 | 1,115,000 | 1,291,984 | |||||||||||||
Niles Park District GO, 3.00% due 12/1/2017 (Parks and Recreation Projects) | NR/Aa2 | 340,000 | 341,040 | ||||||||||||||
Niles Park District GO, 3.00% due 12/1/2018 (Parks and Recreation Projects) | NR/Aa2 | 350,000 | 356,423 | ||||||||||||||
Niles Park District GO, 3.00% due 12/1/2019 (Parks and Recreation Projects) | NR/Aa2 | 360,000 | 371,297 | ||||||||||||||
Niles Park District GO, 3.00% due 12/1/2020 (Parks and Recreation Projects) | NR/Aa2 | 370,000 | 385,448 | ||||||||||||||
State of Illinois, 5.00% due 6/15/2018 | AA-/NR | 2,000,000 | 2,054,160 | ||||||||||||||
Tazewell County School District GO, 9.00% due 12/1/2024 (Insured: Natl-Re) | NR/Aa3 | 1,205,000 | 1,748,009 | ||||||||||||||
Village of Tinley Park GO, 4.00% due 12/1/2021 | AA+/NR | 585,000 | 640,195 | ||||||||||||||
Village of Tinley Park GO, 5.00% due 12/1/2024 | AA+/NR | 870,000 | 1,015,447 | ||||||||||||||
INDIANA — 2.57% | |||||||||||||||||
| a | Board of Trustees for the Vincennes University, 5.375% due 6/1/2022 | NR/Aa3 | 895,000 | 997,630 | |||||||||||||
City of Carmel Redevelopment Authority, 0% due 2/1/2021 (Performing Arts Center) | AA+/Aa3 | 2,000,000 | 1,891,440 | ||||||||||||||
City of Carmel Redevelopment District COP, 6.50% due 7/15/2035 pre-refunded 1/15/2021 (Performing Arts Center) | NR/NR | 2,730,000 | 3,181,023 | ||||||||||||||
Clay Multi-School Building Corp., 5.00% due 1/15/2018 (State Aid Withholding) | AA+/NR | 1,735,000 | 1,754,623 | ||||||||||||||
Hobart Building Corp., 6.50% due 7/15/2019 (Insured: Natl-Re) (State Aid Withholding) (ETM) | AA+/A3 | 1,000,000 | 1,078,320 | ||||||||||||||
12 | Annual Report
Schedule of Investments, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Indiana Bond Bank, 5.25% due 10/15/2020 (Natural Gas Utility Improvements) | NR/A3 | $ | 5,340,000 | $ | 5,925,317 | ||||||||||||
Indiana Bond Bank, 5.25% due 4/1/2023 (Hendricks Regional Health Financing Program; Insured: AMBAC) | AA/NR | 2,000,000 | 2,339,580 | ||||||||||||||
Indiana Finance Authority, 5.00% due 3/1/2019 (Indiana University Health) | AA/Aa2 | 5,000,000 | 5,280,750 | ||||||||||||||
Indiana Finance Authority, 5.00% due 11/1/2021 (Sisters of St. Francis Health Services, Inc.) | NR/Aa3 | 605,000 | 630,664 | ||||||||||||||
Indiana Finance Authority, 5.25% due 9/15/2022 (Marian University) | BBB-/NR | 2,480,000 | 2,662,925 | ||||||||||||||
Indiana Finance Authority, 5.25% due 9/15/2023 (Marian University) | BBB-/NR | 2,605,000 | 2,791,127 | ||||||||||||||
Indiana HFFA, 5.00% due 11/15/2034 (Ascension Health Credit Group) | NR/Aa2 | 1,325,000 | 1,521,021 | ||||||||||||||
Indiana HFFA, 5.00% due 11/15/2035 (Ascension Health Credit Group) | NR/Aa2 | 5,000,000 | 5,724,100 | ||||||||||||||
Indiana HFFA, 5.00% due 11/15/2036 (Ascension Health Credit Group) | NR/Aa2 | 2,000,000 | 2,280,360 | ||||||||||||||
IOWA — 0.31% | |||||||||||||||||
Iowa Finance Authority, 5.00% due 2/15/2030 (UnityPoint Health) | NR/A1 | 2,250,000 | 2,550,398 | ||||||||||||||
Iowa Finance Authority, 5.00% due 2/15/2032 (UnityPoint Health) | NR/A1 | 1,850,000 | 2,076,958 | ||||||||||||||
KANSAS — 0.04% | |||||||||||||||||
Kansas DFA, 5.00% due 6/1/2020 (Wichita State University) | NR/Aa3 | 575,000 | 629,573 | ||||||||||||||
KENTUCKY — 1.97% | |||||||||||||||||
Commonwealth of Kentucky State Property and Buildings Commission, 5.00% due 11/1/2020 (Project No. 112) | A/A1 | 4,385,000 | 4,844,154 | ||||||||||||||
Commonwealth of Kentucky State Property and Buildings Commission, 5.00% due 11/1/2021 (Project No. 112) | A/A1 | 5,990,000 | 6,764,028 | ||||||||||||||
Commonwealth of Kentucky State Property and Buildings Commission, 5.00% due 11/1/2022 (Project No. 112) | A/A1 | 6,960,000 | 8,018,059 | ||||||||||||||
Commonwealth of Kentucky State Property and Buildings Commission, 5.00% due 11/1/2023 (Project No. 112) | A/A1 | 2,440,000 | 2,862,193 | ||||||||||||||
Louisville/Jefferson County Metropolitan Government, 5.25% due 10/1/2026 (Norton Suburban Hospital and Kosair Children’s Hospital) | A-/NR | 2,320,000 | 2,709,644 | ||||||||||||||
Louisville/Jefferson County Metropolitan Government, 1.50% due 10/1/2033 (Louisville Gas and Electric Company) | A/A1 | 4,000,000 | 4,008,320 | ||||||||||||||
LOUISIANA — 2.58% | |||||||||||||||||
City of New Orleans, 6.00% due 6/1/2024 pre-refunded 6/1/2019 (Sewerage System; Insured: AGM) | AA/A3 | 750,000 | 811,980 | ||||||||||||||
East Baton Rouge Sewerage Commission, 5.00% due 2/1/2030 | AA-/Aa3 | 1,170,000 | 1,370,597 | ||||||||||||||
East Baton Rouge Sewerage Commission, 5.00% due 2/1/2031 | AA-/Aa3 | 2,655,000 | 3,093,579 | ||||||||||||||
East Baton Rouge Sewerage Commission, 5.00% due 2/1/2032 | AA-/Aa3 | 3,000,000 | 3,478,140 | ||||||||||||||
Jefferson Sales Tax District, 5.00% due 12/1/2034 (Insured: AGM) | AA/A2 | 1,000,000 | 1,171,310 | ||||||||||||||
Law Enforcement District of the Parish of Plaquemines, 5.00% due 9/1/2023 pre-refunded 9/1/2019 | A+/NR | 1,230,000 | 1,323,013 | ||||||||||||||
Law Enforcement District of the Parish of Plaquemines, 5.00% due 9/1/2025 pre-refunded 9/1/2019 | A+/NR | 1,350,000 | 1,452,087 | ||||||||||||||
Law Enforcement District of the Parish of Plaquemines, 5.15% due 9/1/2027 pre-refunded 9/1/2019 | A+/NR | 1,490,000 | 1,606,920 | ||||||||||||||
Law Enforcement District of the Parish of Plaquemines, 5.30% due 9/1/2029 pre-refunded 9/1/2019 | A+/NR | 1,650,000 | 1,784,178 | ||||||||||||||
Louisiana Energy and Power Authority, 5.25% due 6/1/2029 (LEPA Unit No. 1; Insured: AGM) | AA/A2 | 1,000,000 | 1,157,450 | ||||||||||||||
Louisiana Energy and Power Authority, 5.25% due 6/1/2030 (LEPA Unit No. 1; Insured: AGM) | AA/A2 | 2,955,000 | 3,409,065 | ||||||||||||||
Louisiana Energy and Power Authority, 5.25% due 6/1/2031 (LEPA Unit No. 1; Insured: AGM) | AA/A2 | 2,145,000 | 2,467,308 | ||||||||||||||
| b | Louisiana Local Government Environmental Facilities and Community Development Authority, 5.00% due 10/1/2028 (Louisiana Community and Technical College System; Insured: BAM) | AA/NR | 2,875,000 | 3,492,924 | |||||||||||||
New Orleans Aviation Board, 5.25% due 1/1/2018 (Insured: AGM) (AMT) | AA/A2 | 1,000,000 | 1,011,040 | ||||||||||||||
New Orleans Aviation Board, 5.25% due 1/1/2020 (Insured: AGM) | AA/A2 | 2,000,000 | 2,022,080 | ||||||||||||||
New Orleans Regional Transit Authority, 5.00% due 12/1/2023 (Insured: AGM) | AA/Aa3 | 1,000,000 | 1,108,230 | ||||||||||||||
New Orleans Regional Transit Authority, 5.00% due 12/1/2024 (Insured: AGM) | AA/Aa3 | 1,000,000 | 1,095,990 | ||||||||||||||
Office Facilities Corp., 5.00% due 3/1/2019 (Louisiana State Capitol Complex Program) | A+/A1 | 390,000 | 410,686 | ||||||||||||||
Parish of Lafourche, 5.00% due 1/1/2024 (Roads, Highways and Bridges) | AA-/NR | 1,065,000 | 1,254,016 | ||||||||||||||
Parish of Lafourche, 5.00% due 1/1/2025 (Roads, Highways and Bridges) | AA-/NR | 2,620,000 | 3,124,900 | ||||||||||||||
Terrebonne Parish Hospital Service District 1, 5.00% due 4/1/2028 (General Medical Center) | A/A3 | 1,500,000 | 1,601,085 | ||||||||||||||
MASSACHUSETTS — 2.88% | |||||||||||||||||
Commonwealth of Massachusetts GO, 0.94% due 3/1/2026 put 10/2/2017 (SPA: Barclays Bank plc) (daily demand notes) | AA/Aa1 | 16,500,000 | 16,500,000 | ||||||||||||||
Massachusetts Bay Transportation Authority, 5.25% due 7/1/2030 (Transportation Capital Program) | AAA/Aa1 | 1,000,000 | 1,289,880 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2019 (CareGroup Healthcare System) | A-/A3 | 2,800,000 | 2,982,728 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2020 (CareGroup Healthcare System) | A-/A3 | 5,000,000 | 5,496,200 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2021 (CareGroup Healthcare System) | A-/A3 | 2,330,000 | 2,633,040 | ||||||||||||||
Massachusetts Development Finance Agency, 5.50% due 10/1/2025 (Simmons College) | BBB+/Baa1 | 460,000 | 538,048 | ||||||||||||||
Massachusetts Development Finance Agency, 5.50% due 10/1/2028 (Simmons College) | BBB+/Baa1 | 1,330,000 | 1,535,179 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2033 (CareGroup Healthcare System) | A-/A3 | 5,000,000 | 5,781,450 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2034 (CareGroup Healthcare System) | A-/A3 | 2,320,000 | 2,672,918 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2036 (CareGroup Healthcare System) | A-/A3 | 1,750,000 | 2,003,172 | ||||||||||||||
Massachusetts Educational Financing Authority, 5.50% due 1/1/2022 (Higher Education Student Loans) | AA/NR | 1,130,000 | 1,219,101 | ||||||||||||||
MICHIGAN — 3.91% | |||||||||||||||||
Board of Governors of Wayne State University, 5.00% due 11/15/2031 (Educational Facilities and Equipment) | A+/Aa3 | 1,010,000 | 1,173,893 | ||||||||||||||
City of Troy GO, 5.00% due 11/1/2025 (Downtown Development Authority-Community Center Facilities) | AAA/NR | 300,000 | 342,039 | ||||||||||||||
County of Genesee, 5.00% due 11/1/2024 (Water Supply System; Insured: BAM) | AA/A2 | 610,000 | 700,841 | ||||||||||||||
Annual Report | 13
Schedule of Investments, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
County of Genesee, 5.00% due 11/1/2025 (Water Supply System; Insured: BAM) | AA/A2 | $ | 345,000 | $ | 392,607 | ||||||||||||
County of Genesee, 5.25% due 11/1/2026 (Water Supply System; Insured: BAM) | AA/A2 | 900,000 | 1,029,078 | ||||||||||||||
County of Genesee, 5.25% due 11/1/2027 (Water Supply System; Insured: BAM) | AA/A2 | 1,375,000 | 1,565,396 | ||||||||||||||
County of Genesee, 5.25% due 11/1/2028 (Water Supply System; Insured: BAM) | AA/A2 | 645,000 | 731,624 | ||||||||||||||
County of Genesee, 5.00% due 11/1/2029 (Water Supply System; Insured: BAM) | AA/A2 | 1,210,000 | 1,350,783 | ||||||||||||||
County of Genesee, 5.00% due 11/1/2030 (Water Supply System; Insured: BAM) | AA/A2 | 1,195,000 | 1,329,999 | ||||||||||||||
County of Genesee, 5.125% due 11/1/2032 (Water Supply System; Insured: BAM) | AA/A2 | 750,000 | 836,738 | ||||||||||||||
Detroit City School District GO, 5.25% due 5/1/2026 (School Building & Site Improvement; Insured: AGM/Q-SBLF) | AA/Aa1 | 3,150,000 | 3,749,665 | ||||||||||||||
Detroit City School District GO, 5.25% due 5/1/2027 (School Building & Site Improvement; Insured: AGM/Q-SBLF) | AA/Aa1 | 1,100,000 | 1,321,859 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2019 (Bronson Healthcare; Insured: AGM) | AA/A2 | 2,000,000 | 2,050,560 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2022 pre-refunded 5/15/2020 (Bronson Healthcare; Insured: AGM) | NR/A2 | 1,365,000 | 1,499,330 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2022 (Bronson Healthcare; Insured: AGM) | NR/A2 | 1,105,000 | 1,202,428 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.25% due 5/15/2026 (Bronson Healthcare) | NR/A2 | 175,000 | 194,409 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.25% due 5/15/2026 pre-refunded 5/15/2021 (Bronson Healthcare) | NR/NR | 1,110,000 | 1,265,100 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2029 (Bronson Healthcare) | NR/A2 | 2,150,000 | 2,489,098 | ||||||||||||||
Michigan Finance Authority, 5.00% due 4/1/2026 (Government Loan Program) | A+/NR | 1,580,000 | 1,726,687 | ||||||||||||||
Michigan Finance Authority, 5.00% due 8/1/2031 (Beaumont Health Credit Group) | A/A1 | 19,080,000 | 21,650,076 | ||||||||||||||
Michigan Public School Academy, 8.00% due 8/1/2035 (Will Carleton Charter School) | NR/NR | 890,000 | 922,316 | ||||||||||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2024 pre-refunded 11/15/2017 (Edward W. Sparrow Hospital Association) | NR/NR | 1,520,000 | 1,528,026 | ||||||||||||||
Michigan State Hospital Finance Authority, 5.00% due 11/15/2024 (Edward W. Sparrow Hospital Association) | A+/A1 | 620,000 | 622,790 | ||||||||||||||
Michigan State Hospital Finance Authority, 5.625% due 11/15/2029 pre-refunded 11/15/2019 (Henry Ford Health System) | A/A3 | 2,500,000 | 2,737,925 | ||||||||||||||
Michigan Strategic Fund, 5.25% due 10/15/2023 pre-refunded 10/15/2018 (Michigan House of Representatives Facilities; Insured: AGM) | AA/Aa2 | 1,000,000 | 1,044,670 | ||||||||||||||
Royal Oak Hospital Finance Authority, 8.00% due 9/1/2029 pre-refunded 9/1/2018 (William Beaumont Hospital) | NR/Aaa | 2,540,000 | 2,703,601 | ||||||||||||||
State of Michigan, 5.50% due 11/1/2020 (Trunk Line Fund; Insured: AGM) | AA+/Aa2 | 1,500,000 | 1,696,290 | ||||||||||||||
MINNESOTA — 0.18% | |||||||||||||||||
Minnesota Agriculture & Economic Development Board, 5.50% due 2/15/2025 (Essentia Health; Insured: AGM) | AA/NR | 2,500,000 | 2,719,350 | ||||||||||||||
MISSISSIPPI — 0.48% | |||||||||||||||||
Mississippi Development Bank, 5.25% due 8/1/2027 pre-refunded 8/1/2020 (Department of Corrections) | AA-/NR | 3,415,000 | 3,810,833 | ||||||||||||||
Mississippi Development Bank GO, 5.00% due 3/1/2025 (Capital City Convention Center) | A+/Baa2 | 2,850,000 | 3,313,923 | ||||||||||||||
MISSOURI — 1.09% | |||||||||||||||||
Missouri Development Finance Board, 5.125% due 4/1/2022 pre-refunded 4/1/2018 (Eastland Center) | A-/NR | 2,000,000 | 2,042,420 | ||||||||||||||
Missouri Development Finance Board, 0.90% due 12/1/2033 put 10/2/2017 (The Nelson Gallery Foundation; SPA: Northern Trust Co.) (daily demand notes) | AAA/Aaa | 5,500,000 | 5,500,000 | ||||||||||||||
Missouri Health and Educational Facilities Authority, 5.00% due 4/1/2019 (Webster University) (ETM) | NR/A2 | 2,235,000 | 2,368,251 | ||||||||||||||
Missouri Health and Educational Facilities Authority, 5.00% due 4/1/2021 (Webster University) (ETM) | NR/A2 | 2,520,000 | 2,849,641 | ||||||||||||||
Missouri Health and Educational Facilities Authority, 0.90% due 9/1/2030 put 10/2/2017 (Washington University; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA+/Aa1 | 500,000 | 500,000 | ||||||||||||||
Tax Increment Financing Commission of Kansas City, 5.25% due 3/1/2018 (Maincor Public Improvements) (ETM) | NR/NR | 335,000 | 340,182 | ||||||||||||||
Tax Increment Financing Commission of Kansas City, 5.00% due 5/1/2022 (Union Hill Redevelopment Project) | NR/NR | 2,495,000 | 2,584,271 | ||||||||||||||
NEVADA — 0.87% | |||||||||||||||||
Carson City, 5.00% due 9/1/2027 (Carson Tahoe Regional Medical Center) | BBB+/NR | 2,450,000 | 2,702,497 | ||||||||||||||
Washoe County GO, 5.00% due 7/1/2026 (Reno Sparks Convention & Visitors Authority) | AA/Aa2 | 5,000,000 | 5,650,300 | ||||||||||||||
Washoe County GO, 5.00% due 7/1/2029 (Reno Sparks Convention & Visitors Authority) | AA/Aa2 | 2,000,000 | 2,257,780 | ||||||||||||||
Washoe County GO, 5.00% due 7/1/2032 (Reno Sparks Convention & Visitors Authority) | AA/Aa2 | 2,000,000 | 2,237,560 | ||||||||||||||
NEW HAMPSHIRE — 0.46% | |||||||||||||||||
New Hampshire Municipal Bond Bank, 5.00% due 8/15/2026 | AA+/Aa2 | 1,860,000 | 2,191,694 | ||||||||||||||
State of New Hampshire, 5.00% due 2/1/2022 (Turnpike System) | A+/A1 | 2,250,000 | 2,570,040 | ||||||||||||||
State of New Hampshire, 5.00% due 2/1/2024 (Turnpike System) | A+/A1 | 1,755,000 | 1,994,487 | ||||||||||||||
NEW JERSEY — 2.75% | |||||||||||||||||
Burlington County Bridge Commission, 4.00% due 12/1/2017 (County Governmental Loan Program) | AA/Aa2 | 850,000 | 854,616 | ||||||||||||||
Cape May County Industrial Pollution Control Financing Authority, 6.80% due 3/1/2021 (Atlantic City Electric Company; Insured: Natl-Re) | A/A3 | 560,000 | 645,534 | ||||||||||||||
Essex County Improvement Authority, 5.50% due 10/1/2024 (County Correctional Facilities & Gibraltar Facilities; Insured: Natl-Re) | NR/Aa1 | 2,500,000 | 3,087,250 | ||||||||||||||
New Jersey EDA, 5.00% due 3/1/2026 (School Facilities Construction) | BBB+/Baa1 | 2,000,000 | 2,188,320 | ||||||||||||||
New Jersey EDA, 5.50% due 9/1/2026 (School Facilities Construction; Insured: AMBAC) | BBB+/Baa1 | 3,000,000 | 3,541,140 | ||||||||||||||
New Jersey EDA, 5.50% due 9/1/2027 (School Facilities Construction; Insured: Natl-Re) | A/A3 | 1,700,000 | 2,060,162 | ||||||||||||||
New Jersey State Health Care Facilities Financing Authority, 5.00% due 7/1/2027 (Virtua Health) | AA-/NR | 2,000,000 | 2,297,200 | ||||||||||||||
14 | Annual Report
Schedule of Investments, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
New Jersey State Health Care Facilities Financing Authority, 5.00% due 7/1/2028 (Virtua Health) | AA-/NR | $ | 1,000,000 | $ | 1,138,630 | ||||||||||||
New Jersey Transportation Trust Fund Authority, 5.50% due 12/15/2020 (State Transportation System Improvements; Insured: Natl-Re) | A/A3 | 3,185,000 | 3,528,279 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2023 (State Transportation System Improvements) | A+/Baa1 | 1,000,000 | 1,024,500 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2023 (State Transportation System Improvements) | A+/Baa1 | 1,500,000 | 1,680,195 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2024 (State Transportation System Improvements) | A+/Baa1 | 1,000,000 | 1,023,270 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2024 (State Transportation System Improvements) | A+/Baa1 | 1,000,000 | 1,126,950 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2027 (State Transportation System Improvements) | A+/Baa1 | 9,750,000 | 11,010,675 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 2.08% due 6/15/2034 (State Transportation System Improvements) | BBB+/Baa1 | 2,000,000 | 1,981,760 | ||||||||||||||
Passaic Valley Sewage Commissioners GO, 5.75% due 12/1/2022 | NR/A3 | 3,000,000 | 3,561,420 | ||||||||||||||
NEW MEXICO — 1.00% | |||||||||||||||||
City of Farmington, 4.70% due 9/1/2024 (Arizona Public Service Co.-Four Corners Project) | A-/A2 | 3,000,000 | 3,230,790 | ||||||||||||||
City of Las Cruces, 5.00% due 6/1/2030 (NMFA Loan) | NR/Aa3 | 2,040,000 | 2,218,826 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2032 (Haverland Carter Lifestyle Group) | NR/NR | 2,130,000 | 2,248,662 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 0.90% due 8/1/2034 put 10/2/2017 (Presbyterian Healthcare Services; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa3 | 5,000,000 | 5,000,000 | ||||||||||||||
Regents of New Mexico State University, 5.00% due 4/1/2034 (Campus Buildings Acquisition & Improvements) | AA-/A1 | 1,810,000 | 2,104,216 | ||||||||||||||
NEW YORK — 9.38% | |||||||||||||||||
City of New York GO, 5.00% due 8/1/2027 (City Budget Financial Management) | AA/Aa2 | 4,530,000 | 5,341,368 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2030 (City Budget Financial Management) | AA/Aa2 | 5,000,000 | 5,915,600 | ||||||||||||||
City of New York GO, 5.00% due 8/1/2031 (City Budget Financial Management) | AA/Aa2 | 4,000,000 | 4,729,680 | ||||||||||||||
City of New York GO, 0.91% due 8/1/2035 put 10/2/2017 (City Budget Financial Management) (daily demand notes) | AA/Aa2 | 1,200,000 | 1,200,000 | ||||||||||||||
City of New York GO, 0.92% due 1/1/2036 put 10/2/2017 (Gowanus Canal Site; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA/Aa2 | 13,400,000 | 13,400,000 | ||||||||||||||
City of New York GO, 0.92% due 8/1/2038 put 10/2/2017 (City Budget Financial Management; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA/Aa2 | 1,300,000 | 1,300,000 | ||||||||||||||
County of Nassau GO, 5.00% due 4/1/2026 (Insured: BAM) | AA/NR | 1,300,000 | 1,519,180 | ||||||||||||||
Erie County Industrial Development Agency, 5.00% due 5/1/2019 (City of Buffalo School District) (State Aid Withholding) (ETM) | NR/NR | 1,190,000 | 1,265,613 | ||||||||||||||
Erie County Industrial Development Agency, 5.00% due 5/1/2019 (City of Buffalo School District) (State Aid Withholding) | AA/Aa2 | 1,810,000 | 1,924,121 | ||||||||||||||
Erie County Industrial Development Agency, 5.00% due 5/1/2027 (City of Buffalo School District) (State Aid Withholding) | AA/Aa2 | 5,000,000 | 5,860,650 | ||||||||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2024 (Transit and Commuter System) | AA-/A1 | 5,435,000 | 6,552,110 | ||||||||||||||
Metropolitan Transportation Authority, 5.00% due 11/15/2025 | AA-/A1 | 10,000,000 | 12,197,100 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.91% due 6/15/2035 put 10/2/2017 (Water & Sewer System; LOC: Citibank, N.A.) (daily demand notes) | AAA/Aa1 | 1,800,000 | 1,800,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.92% due 6/15/2043 put 10/2/2017 (Water & Sewer System; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 8,100,000 | 8,100,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.91% due 6/15/2045 put 10/2/2017 (Water & Sewer System; SPA: U.S. Bank, N.A.) (daily demand notes) | AAA/Aa1 | 500,000 | 500,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.93% due 6/15/2048 put 10/2/2017 (Water & Sewer System; SPA: Mizuho Bank, Ltd.) (daily demand notes) | AA+/Aa1 | 1,600,000 | 1,600,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.93% due 6/15/2048 put 10/2/2017 (Water & Sewer System; SPA: Mizuho Bank, Ltd.) (daily demand notes) | AA+/Aa1 | 500,000 | 500,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.92% due 6/15/2050 put 10/2/2017 (Water & Sewer System; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AA+/Aa1 | 19,000,000 | 19,000,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.93% due 8/1/2031 put 10/2/2017 (City Capital Projects; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AAA/Aaa | 26,250,000 | 26,250,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.92% due 11/1/2036 put 10/2/2017 (City Capital Projects; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AAA/Aa1 | 1,700,000 | 1,700,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.91% due 8/1/2039 put 10/2/2017 (City Capital Projects; SPA: U.S. Bank, N.A.) (daily demand notes) | AAA/Aa1 | 700,000 | 700,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.92% due 2/1/2045 put 10/2/2017 (City Capital Projects; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AAA/Aa1 | 1,000,000 | 1,000,000 | ||||||||||||||
New York State Dormitory Authority, 5.25% due 5/15/2021 (State University Educational Facilities) | AA/Aa2 | 500,000 | 559,760 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 7/1/2023 (Miriam Osborn Memorial Home Assoc.) | NR/NR | 2,180,000 | 2,288,738 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 12/15/2027 (Metropolitan Transportation Authority & State Urban Development Corp.) | AAA/Aa1 | 2,500,000 | 2,918,750 | ||||||||||||||
New York State Thruway Authority, 5.00% due 1/1/2030 (Multi-Year Highway and Bridge Capital Program) | A/A2 | 7,480,000 | 8,827,746 | ||||||||||||||
United Nations Development Corp., 5.00% due 7/1/2025 (One, Two and Three U.N. Plaza) | NR/A1 | 1,700,000 | 1,810,789 | ||||||||||||||
NORTH CAROLINA — 0.45% | |||||||||||||||||
Charlotte-Mecklenburg Hospital Authority, 3.00% due 1/15/2018 (Carolinas HealthCare System) | AA-/Aa3 | 600,000 | 603,504 | ||||||||||||||
Charlotte-Mecklenburg Hospital Authority, 5.00% due 1/15/2028 (Carolinas HealthCare System) | AA-/Aa3 | 2,190,000 | 2,509,959 | ||||||||||||||
North Carolina Medical Care Commission, 5.00% due 6/1/2030 (Vidant Health) | A+/A1 | 3,000,000 | 3,479,490 | ||||||||||||||
Annual Report | 15
Schedule of Investments, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
OHIO — 3.99% | |||||||||||||||||
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 | $ | 1,133,260 | ||||||||||||
American Municipal Power, Inc., 5.25% due 2/15/2028 (AMP Fremont Energy Center) | A/A1 | 4,000,000 | 4,554,160 | ||||||||||||||
Cincinnati City School District COP, 5.00% due 12/15/2031 (School Improvement Project) | A+/Aa3 | 3,075,000 | 3,566,077 | ||||||||||||||
City of Cleveland, 3.00% due 10/1/2017 (Parks and Recreation Facilities) | AA+/A1 | 490,000 | 490,059 | ||||||||||||||
City of Cleveland, 5.00% due 11/15/2027 (Public Facilities Improvements) | AA+/A1 | 1,285,000 | 1,518,754 | ||||||||||||||
City of Cleveland, 5.00% due 10/1/2028 (Bridges and Roadways) | AA+/A1 | 2,420,000 | 2,844,637 | ||||||||||||||
City of Cleveland, 5.00% due 11/15/2028 (Public Facilities Improvements) | AA+/A1 | 1,000,000 | 1,178,660 | ||||||||||||||
City of Cleveland, 5.00% due 10/1/2029 (Bridges and Roadways) | AA+/A1 | 100,000 | 117,345 | ||||||||||||||
City of Cleveland, 5.00% due 11/15/2029 (Public Facilities Improvements) | AA+/A1 | 1,415,000 | 1,664,564 | ||||||||||||||
City of Cleveland, 5.00% due 11/15/2030 (Public Facilities Improvements) | AA+/A1 | 1,485,000 | 1,741,044 | ||||||||||||||
City of Cleveland GO, 5.00% due 12/1/2024 (Various Municipal Capital Improvements) | AA+/A1 | 1,000,000 | 1,176,490 | ||||||||||||||
City of Cleveland GO, 5.00% due 12/1/2026 (Various Municipal Capital Improvements) | AA+/A1 | 1,230,000 | 1,443,786 | ||||||||||||||
Cleveland-Cuyahoga County Port Authority, 5.00% due 10/1/2021 (Cleveland Museum of Art) | AA+/NR | 2,040,000 | 2,262,727 | ||||||||||||||
Cleveland-Cuyahoga County Port Authority, 5.00% due 7/1/2025 (County Administration Offices) | AA-/Aa3 | 1,780,000 | 2,123,789 | ||||||||||||||
County of Allen, 5.00% due 5/1/2025 (Catholic Health Partners-Mercy Health West Facility) | A+/A2 | 4,470,000 | 5,054,542 | ||||||||||||||
County of Allen, 5.00% due 5/1/2026 (Catholic Health Partners-Mercy Health West Facility) | A+/A2 | 3,855,000 | 4,328,471 | ||||||||||||||
County of Cuyahoga COP, 5.00% due 12/1/2026 (Convention Center Hotel) | AA-/A1 | 2,910,000 | 3,369,256 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2018 | AA-/A1 | 1,000,000 | 1,046,440 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2021 | AA-/A1 | 1,100,000 | 1,261,997 | ||||||||||||||
County of Hamilton, 5.00% due 12/1/2023 | AA-/A1 | 1,000,000 | 1,192,560 | ||||||||||||||
County of Hamilton, 5.00% due 5/15/2028 (Cincinnati Children’s Hospital Medical Center) | AA/Aa2 | 2,665,000 | 3,112,800 | ||||||||||||||
County of Hamilton, 5.00% due 5/15/2029 (Cincinnati Children’s Hospital Medical Center) | AA/Aa2 | 1,000,000 | 1,162,930 | ||||||||||||||
County of Hamilton, 5.00% due 5/15/2031 (Cincinnati Children’s Hospital Medical Center) | AA/Aa2 | 4,420,000 | 5,099,708 | ||||||||||||||
County of Scioto, 5.00% due 2/15/2030 (Southern Ohio Medical Center) | NR/A2 | 1,690,000 | 1,963,662 | ||||||||||||||
County of Scioto, 5.00% due 2/15/2032 (Southern Ohio Medical Center) | NR/A2 | 925,000 | 1,062,594 | ||||||||||||||
County of Scioto, 5.00% due 2/15/2033 (Southern Ohio Medical Center) | NR/A2 | 1,000,000 | 1,140,000 | ||||||||||||||
Deerfield Township, 5.00% due 12/1/2025 (Public Street Improvements-Wilkens Blvd.) | NR/A1 | 1,000,000 | 1,006,230 | ||||||||||||||
Lucas County Health Care Facility, 5.00% due 8/15/2021 (Sunset Retirement Community) | NR/NR | 970,000 | 1,015,512 | ||||||||||||||
Lucas County Health Care Facility, 5.125% due 8/15/2025 (Sunset Retirement Community) | NR/NR | 1,250,000 | 1,379,913 | ||||||||||||||
OKLAHOMA — 0.49% | |||||||||||||||||
Oklahoma DFA, 5.00% due 8/15/2026 (INTEGRIS Health) | AA-/Aa3 | 1,000,000 | 1,191,750 | ||||||||||||||
Oklahoma DFA, 5.00% due 8/15/2027 (INTEGRIS Health) | AA-/Aa3 | 1,000,000 | 1,180,410 | ||||||||||||||
Oklahoma Industries Authority, 5.50% due 7/1/2023 pre-refunded 7/1/2018 (Oklahoma Medical Research Foundation) | NR/A2 | 3,730,000 | 3,857,417 | ||||||||||||||
Oklahoma Municipal Power Authority, 5.00% due 1/1/2018 (Power Supply System Capital Projects; Insured: AGM) | AA/A2 | 1,000,000 | 1,010,140 | ||||||||||||||
OREGON — 0.70% | |||||||||||||||||
| b | State of Oregon GO, 5.00% due 9/28/2018 (Cash Management) | NR/NR | 10,000,000 | 10,389,700 | |||||||||||||
PENNSYLVANIA — 8.16% | |||||||||||||||||
Allegheny County Hospital Development Authority, 5.00% due 5/15/2019 (University of Pittsburgh Medical Center) | A+/A1 | 2,500,000 | 2,658,850 | ||||||||||||||
Allegheny County IDA, 5.90% due 8/15/2026 (Propel Charter School-McKeesport) | BBB-/NR | 835,000 | 892,824 | ||||||||||||||
Allegheny County IDA, 6.375% due 8/15/2035 (Propel Charter School-McKeesport) | BBB-/NR | 1,130,000 | 1,211,902 | ||||||||||||||
Bethlehem Area School District GO, 5.00% due 10/15/2020 pre-refunded 04/15/2019 (Northampton and Lehigh Counties District; Insured: AGM) (State Aid Withholding) | AA/NR | 95,000 | 100,805 | ||||||||||||||
Bethlehem Area School District GO, 5.00% due 10/15/2020 (Northampton and Lehigh Counties District; Insured: AGM) (State Aid Withholding) | AA/NR | 380,000 | 399,167 | ||||||||||||||
City of Philadelphia, 5.00% due 10/1/2029 (Water and Wastewater System) | A+/A1 | 1,100,000 | 1,302,510 | ||||||||||||||
City of Philadelphia, 5.00% due 10/1/2030 (Water and Wastewater System) | A+/A1 | 2,410,000 | 2,840,474 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2032 (Pennsylvania Gas Works) | A/A3 | 1,000,000 | 1,153,080 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2033 (Pennsylvania Gas Works) | A/A3 | 800,000 | 918,224 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2034 (Pennsylvania Gas Works) | A/A3 | 500,000 | 572,000 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2034 (Philadelphia Gas Works) | NR/NR | 2,000,000 | 2,312,700 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2035 (Philadelphia Gas Works) | NR/NR | 3,500,000 | 4,056,850 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2036 (Philadelphia Gas Works) | NR/NR | 2,485,000 | 2,871,244 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2037 (Philadelphia Gas Works) | NR/NR | 3,000,000 | 3,449,850 | ||||||||||||||
City of Pittsburgh GO, 5.00% due 9/1/2024 (Capital Projects) | A+/A1 | 500,000 | 594,245 | ||||||||||||||
City of Pittsburgh GO, 5.00% due 9/1/2035 (Capital Projects) | A+/A1 | 515,000 | 599,450 | ||||||||||||||
City of Pittsburgh GO, 5.00% due 9/1/2036 (Capital Projects) | A+/A1 | 700,000 | 811,538 | ||||||||||||||
| a | Commonwealth of Pennsylvania GO, 5.00% due 3/15/2022 (Capital Facilities Projects) | A+/Aa3 | 12,485,000 | 14,222,288 | |||||||||||||
County of Luzerne GO, 5.00% due 11/15/2029 (Insured: AGM) | AA/NR | 3,000,000 | 3,378,540 | ||||||||||||||
Dallastown Area School District GO, 4.00% due 5/1/2021 (State Aid Withholding) | AA/NR | 460,000 | 502,619 | ||||||||||||||
Hospitals & Higher Education Facilities Authority of Philadelphia, 0.90% due 2/15/2021 put 10/2/2017 (The Children’s Hospital of Philadelphia; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa2 | 4,010,000 | 4,010,000 | ||||||||||||||
16 | Annual Report
Schedule of Investments, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Hospitals & Higher Education Facilities Authority of Philadelphia, 0.90% due 7/1/2041 put 10/2/2017 (The Children’s Hospital of Philadelphia; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa2 | $ | 4,300,000 | $ | 4,300,000 | ||||||||||||
Lancaster County Solid Waste Management Authority, 5.25% due 12/15/2030 (Acquisition of Susquehanna Resource Management Facility) | AA-/NR | 3,000,000 | 3,427,650 | ||||||||||||||
Monroeville Financing Authority, 5.00% due 2/15/2026 (University of Pittsburgh Medical Center) | A+/A1 | 3,490,000 | 4,284,080 | ||||||||||||||
Pennsylvania Economic DFA, 4.625% due 12/1/2018 (Colver Project; Insured: AMBAC) (AMT) | BBB-/Ba1 | 4,755,000 | 4,784,576 | ||||||||||||||
Pennsylvania Higher Education Facilities Authority, 0% due 7/1/2020 (Insured: AMBAC) | NR/NR | 2,032,839 | 1,666,095 | ||||||||||||||
Pennsylvania State Public School Building Authority GO, 5.00% due 6/1/2027 (Philadelphia School District; Insured: AGM) (State Aid Withholding) | AA/A2 | 5,000,000 | 5,835,950 | ||||||||||||||
Pennsylvania Turnpike Commission, 5.35% due 12/1/2030 pre-refunded 12/1/2020 (Highway Improvements) | NR/NR | 1,540,000 | 1,742,002 | ||||||||||||||
Pennsylvania Turnpike Commission, 5.35% due 12/1/2030 (Highway Improvements) | A-/A3 | 1,070,000 | 1,174,988 | ||||||||||||||
Pennsylvania Turnpike Commission, 5.35% due 12/1/2030 pre-refunded 12/1/2020 (Highway Improvements) | NR/NR | 1,390,000 | 1,573,730 | ||||||||||||||
| b | Pennsylvania Turnpike Commission, 5.00% due 12/1/2035 (Highway Improvements) | NR/A1 | 750,000 | 876,697 | |||||||||||||
| b | Pennsylvania Turnpike Commission, 5.00% due 12/1/2036 (Highway Improvements) | NR/A1 | 1,000,000 | 1,164,180 | |||||||||||||
Philadelphia Authority for Industrial Development, 5.00% due 9/1/2032 (Thomas Jefferson University) | A+/A2 | 3,685,000 | 4,279,354 | ||||||||||||||
Philadelphia Authority for Industrial Development, 5.00% due 9/1/2034 (Thomas Jefferson University) | A+/A2 | 2,000,000 | 2,301,340 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2032 (Juvenile Justice Services Center) | A+/A2 | 3,695,000 | 4,242,932 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2033 (Juvenile Justice Services Center) | A+/A2 | 2,155,000 | 2,455,601 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2034 (Juvenile Justice Services Center) | A+/A2 | 1,765,000 | 2,001,934 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2035 (Juvenile Justice Services Center) | A+/A2 | 1,750,000 | 1,978,847 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2036 (Juvenile Justice Services Center) | A+/A2 | 1,760,000 | 1,984,048 | ||||||||||||||
Pittsburgh Water & Sewer Authority, 5.00% due 9/1/2030 (Water and Sewer System; Insured: AGM) | A/A2 | 5,000,000 | 5,745,350 | ||||||||||||||
Pittsburgh Water & Sewer Authority, 5.00% due 9/1/2031 (Water and Sewer System; Insured: AGM) | A/A2 | 3,740,000 | 4,284,881 | ||||||||||||||
Pittsburgh Water & Sewer Authority, 5.00% due 9/1/2031 (Water and Sewer System; Insured: AGM) | A/A2 | 3,665,000 | 4,198,954 | ||||||||||||||
Plum Borough School District GO, 4.00% due 9/15/2018 (Insured: BAM) (State Aid Withholding) | AA/NR | 355,000 | 364,336 | ||||||||||||||
Plum Borough School District GO, 4.00% due 9/15/2020 (Insured: BAM) (State Aid Withholding) | AA/NR | 405,000 | 434,257 | ||||||||||||||
Plum Borough School District GO, 4.00% due 9/15/2020 (Insured: BAM) (State Aid Withholding) | AA/NR | 385,000 | 412,812 | ||||||||||||||
Plum Borough School District GO, 4.00% due 9/15/2021 (Insured: BAM) (State Aid Withholding) | AA/NR | 425,000 | 463,598 | ||||||||||||||
Plum Borough School District GO, 5.00% due 9/15/2021 (Insured: BAM) (State Aid Withholding) | AA/NR | 430,000 | 485,483 | ||||||||||||||
School District of Philadelphia GO, 5.00% due 9/1/2018 (School Reform Commission) (State Aid Withholding) | NR/A2 | 5,250,000 | 5,403,877 | ||||||||||||||
RHODE ISLAND — 0.34% | |||||||||||||||||
State of Rhode Island and Providence Plantations COP, 5.00% due 10/1/2024 (Training School Project) | AA-/Aa3 | 3,595,000 | 4,195,221 | ||||||||||||||
State of Rhode Island and Providence Plantations GO, 4.00% due 10/15/2023 (Consolidated Capital Development Loan) | AA/Aa2 | 800,000 | 885,040 | ||||||||||||||
SOUTH CAROLINA — 0.81% | |||||||||||||||||
City of Myrtle Beach, 5.00% due 6/1/2028 (Municipal Sports Complex) | AA-/A1 | 1,000,000 | 1,144,850 | ||||||||||||||
City of Myrtle Beach, 5.00% due 6/1/2030 (Municipal Sports Complex) | AA-/A1 | 1,000,000 | 1,134,910 | ||||||||||||||
Greenwood Fifty School Facilities, Inc., 5.00% due 12/1/2025 pre-refunded 12/1/2017 (School District No. 50; Insured: AGM) | AA/A1 | 2,400,000 | 2,417,232 | ||||||||||||||
South Carolina Public Service Authority, 5.00% due 12/1/2031 (Capital Improvement Program) | A+/A1 | 2,385,000 | 2,679,071 | ||||||||||||||
South Carolina Public Service Authority, 5.00% due 12/1/2031 (Capital Improvement Program) | A+/A1 | 1,515,000 | 1,756,324 | ||||||||||||||
Sumter Two School Facilities, Inc., 5.00% due 12/1/2021 pre-refunded 12/1/2017 (School District No. 2; Insured: AGM) | AA/A3 | 2,855,000 | 2,875,784 | ||||||||||||||
SOUTH DAKOTA — 0.39% | |||||||||||||||||
South Dakota Health and Educational Facilities Authority, 5.00% due 7/1/2023 (Avera Health) | AA-/A1 | 1,575,000 | 1,768,804 | ||||||||||||||
South Dakota Health and Educational Facilities Authority, 5.00% due 11/1/2024 (Sanford Health) | A+/A1 | 1,700,000 | 1,819,459 | ||||||||||||||
South Dakota Health and Educational Facilities Authority, 5.00% due 11/1/2028 (Sanford Health) | A+/A1 | 800,000 | 944,448 | ||||||||||||||
South Dakota Health and Educational Facilities Authority, 5.00% due 11/1/2029 (Sanford Health) | A+/A1 | 1,000,000 | 1,174,030 | ||||||||||||||
TENNESSEE — 1.03% | |||||||||||||||||
County of Shelby Health, Educational and Housing Facility Board, 5.00% due 5/1/2027 (Methodist Le Bonheur Healthcare) | AA-/A1 | 635,000 | 773,652 | ||||||||||||||
County of Shelby Health, Educational and Housing Facility Board, 5.00% due 5/1/2031 (Methodist Le Bonheur Healthcare) | AA-/A1 | 1,260,000 | 1,492,836 | ||||||||||||||
County of Shelby Health, Educational and Housing Facility Board, 5.00% due 5/1/2035 (Methodist Le Bonheur Healthcare) | AA-/A1 | 1,665,000 | 1,931,633 | ||||||||||||||
Tennessee Energy Acquisition Corp., 5.00% due 2/1/2023 (The Gas Project) | BBB+/A3 | 2,500,000 | 2,845,325 | ||||||||||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2023 (The Gas Project) | BBB+/A3 | 7,000,000 | 8,162,350 | ||||||||||||||
TEXAS — 12.71% | |||||||||||||||||
Austin Community College District, 5.50% due 8/1/2023 pre-refunded 8/1/2018 (Round Rock Campus) | AA/Aa2 | 2,180,000 | 2,262,709 | ||||||||||||||
Bexar County Health Facilities Development Corp., 5.00% due 7/1/2027 (Army Retirement Residence) | BBB/NR | 1,165,000 | 1,167,260 | ||||||||||||||
City of Austin (Travis, Williamson and Hays Counties), 5.00% due 11/15/2033 (Water and Wastewater System) | AA/Aa2 | 4,000,000 | 4,750,440 | ||||||||||||||
City of Austin (Travis, Williamson and Hays Counties), 5.00% due 11/15/2035 (Water and Wastewater System) | AA/Aa2 | 8,185,000 | 9,647,987 | ||||||||||||||
City of Austin (Travis, Williamson and Hays Counties), 5.00% due 11/15/2036 (Water and Wastewater System) | AA/Aa2 | 6,985,000 | 8,202,695 | ||||||||||||||
City of Brownsville, 5.00% due 9/1/2020 (Water, Wastewater & Electric Utilities Systems) | A+/A2 | 1,000,000 | 1,103,420 | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2025 (Public Improvements) | AA-/NR | 1,000,000 | 1,179,550 | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2028 (Trinity River Corridor Infrastructure) | AA-/A1 | 1,000,000 | 1,148,500 | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2028 (Public Improvements) | AA-/NR | 3,635,000 | 4,222,779 | ||||||||||||||
Annual Report | 17
Schedule of Investments, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2030 (Public Improvements) | AA-/NR | $ | 3,585,000 | $ | 4,114,074 | ||||||||||||
City of Dallas GO, 5.00% due 2/15/2034 (Public Improvements) | AA-/NR | 1,500,000 | 1,684,515 | ||||||||||||||
City of Galveston, 5.00% due 9/1/2021 (Galveston Island Convention Center; Insured: AGM) | NR/A2 | 545,000 | 607,822 | ||||||||||||||
City of Galveston, 5.00% due 9/1/2024 (Galveston Island Convention Center; Insured: AGM) | NR/A2 | 1,115,000 | 1,281,559 | ||||||||||||||
City of Houston, 5.00% due 9/1/2032 (Convention & Entertainment Facilities) | A-/A2 | 3,560,000 | 4,052,063 | ||||||||||||||
City of Houston GO, 5.00% due 3/1/2020 (Public Improvements) | AA/Aa3 | 5,000,000 | 5,450,950 | ||||||||||||||
City of Houston GO, 5.00% due 3/1/2021 (Public Improvements) | AA/Aa3 | 5,000,000 | 5,613,100 | ||||||||||||||
City of Houston GO, 5.00% due 3/1/2023 (Public Improvements) | AA/Aa3 | 5,000,000 | 5,863,100 | ||||||||||||||
City of Houston GO, 5.00% due 3/1/2027 (Public Improvements) | AA/Aa3 | 1,175,000 | 1,409,366 | ||||||||||||||
City of McAllen, 5.00% due 3/1/2028 (International Toll Bridge; Insured: AGM) | AA/NR | 1,390,000 | 1,648,762 | ||||||||||||||
City of McAllen, 5.00% due 3/1/2029 (International Toll Bridge; Insured: AGM) | AA/NR | 590,000 | 693,073 | ||||||||||||||
City of McAllen, 5.00% due 3/1/2030 (International Toll Bridge; Insured: AGM) | AA/NR | 1,530,000 | 1,788,692 | ||||||||||||||
City of McAllen, 5.00% due 3/1/2031 (International Toll Bridge; Insured: AGM) | AA/NR | 1,610,000 | 1,870,144 | ||||||||||||||
City of McAllen, 5.00% due 3/1/2032 (International Toll Bridge; Insured: AGM) | AA/NR | 1,000,000 | 1,155,900 | ||||||||||||||
City of Pharr Higher Education Finance Authority, 5.75% due 8/15/2024 pre-refunded 8/15/2019 (IDEA Public Schools) | BBB+/NR | 5,050,000 | 5,397,187 | ||||||||||||||
City of San Antonio, 5.00% due 7/1/2024 (Airport System Capital Improvements) (AMT) | A/A2 | 2,065,000 | 2,305,366 | ||||||||||||||
City of San Antonio, 5.00% due 7/1/2025 (Airport System Capital Improvements) (AMT) | A/A2 | 1,160,000 | 1,285,396 | ||||||||||||||
City of San Antonio, 2.25% due 2/1/2033 (Electric and Gas Systems) | AA-/NR | 4,655,000 | 4,751,219 | ||||||||||||||
City of San Antonio, 5.00% due 5/15/2033 (Water System) | AA/Aa2 | 1,500,000 | 1,765,170 | ||||||||||||||
City of San Antonio, 5.00% due 5/15/2034 (Water System) | AA/Aa2 | 1,575,000 | 1,842,845 | ||||||||||||||
City of San Antonio, 3.00% due 12/1/2045 put 12/1/2019 (Electric and Gas Systems) | AA-/Aa2 | 5,200,000 | 5,382,988 | ||||||||||||||
City of Texas City Industrial Development Corp., 7.375% due 10/1/2020 (ARCO Pipe Line Co. Project) | A-/A1 | 2,705,000 | 3,164,228 | ||||||||||||||
Dallas Area Rapid Transit, 5.00% due 12/1/2034 | AA+/Aa2 | 5,475,000 | 6,401,479 | ||||||||||||||
Dallas Area Rapid Transit, 5.00% due 12/1/2035 | AA+/Aa2 | 4,000,000 | 4,667,280 | ||||||||||||||
Dallas Area Rapid Transit, 5.00% due 12/1/2036 | AA+/Aa2 | 3,000,000 | 3,488,520 | ||||||||||||||
Dallas County Utility & Reclamation District GO, 5.00% due 2/15/2027 | A/A2 | 1,905,000 | 2,304,002 | ||||||||||||||
Harris County Cultural Education Facilities Finance Corp., 5.00% due 12/1/2028 (Memorial Hermann Health System) | A+/A1 | 3,000,000 | 3,495,060 | ||||||||||||||
Houston Higher Education Finance Corp., 6.50% due 5/15/2031 pre-refunded 5/15/2021 (Cosmos Foundation, Inc.) | NR/NR | 415,000 | 492,285 | ||||||||||||||
Houston Higher Education Finance Corp., 6.50% due 5/15/2031 pre-refunded 5/15/2021 (Cosmos Foundation, Inc.) | BBB/NR | 360,000 | 425,495 | ||||||||||||||
Katy ISD GO, 5.00% due 2/15/2034 (Educational Facilities Improvements; Guaranty: PSF) | AAA/Aaa | 7,560,000 | 8,868,107 | ||||||||||||||
Kimble County Hospital District GO, 5.00% due 8/15/2018 (Medical Facilities Improvements) (ETM) | NR/NR | 525,000 | 543,785 | ||||||||||||||
La Vernia Higher Education Finance Corp., 5.75% due 8/15/2024 pre-refunded 8/15/2019 (Kipp, Inc.) | BBB/NR | 3,000,000 | 3,256,050 | ||||||||||||||
Lower Colorado River Authority, 5.00% due 5/15/2026 pre-refunded 5/15/2022 | NR/NR | 55,000 | 63,787 | ||||||||||||||
Lower Colorado River Authority, 5.00% due 5/15/2026 | A/A2 | 9,415,000 | 10,776,974 | ||||||||||||||
North Central Texas Health Facilities Development Corp., 5.00% due 8/15/2019 (Children’s Medical Center of Dallas) | NR/Aa2 | 270,000 | 288,325 | ||||||||||||||
North Texas Tollway Authority, 5.00% due 1/1/2020 (NTTA System) | A/A1 | 2,000,000 | 2,169,520 | ||||||||||||||
Round Rock ISD GO, 5.00% due 8/1/2028 (Educational Facilities Improvements; Guaranty: PSF) | NR/Aaa | 2,840,000 | 3,436,911 | ||||||||||||||
Round Rock ISD GO, 5.00% due 8/1/2029 (Educational Facilities Improvements; Guaranty: PSF) | NR/Aaa | 2,980,000 | 3,587,622 | ||||||||||||||
San Juan Higher Education Finance Authority, 5.75% due 8/15/2024 pre-refunded 8/15/2020 (IDEA Public Schools) | BBB+/NR | 1,590,000 | 1,792,439 | ||||||||||||||
State of Texas, 4.00% due 8/30/2018 (Cash Flow Management) | SP-1+/Mig1 | 20,000,000 | 20,543,400 | ||||||||||||||
Tarrant Regional Water District, 5.00% due 3/1/2028 (Water Control and Improvement) | AAA/NR | 2,000,000 | 2,414,440 | ||||||||||||||
Tarrant Regional Water District, 5.00% due 3/1/2029 (Water Control and Improvement) | AAA/NR | 1,650,000 | 1,977,937 | ||||||||||||||
Texas Public Finance Authority Charter School Finance Corp., 6.00% due 2/15/2030 pre-refunded 2/15/2020 (Cosmos Foundation, Inc.) | BBB/NR | 1,750,000 | 1,943,463 | ||||||||||||||
Texas Transportation Commission, 5.00% due 8/15/2024 (Central Texas Turnpike System) | BBB+/Baa1 | 1,500,000 | 1,758,885 | ||||||||||||||
Texas Transportation Commission, 5.00% due 8/15/2025 (Central Texas Turnpike System) | BBB+/Baa1 | 750,000 | 876,990 | ||||||||||||||
Texas Transportation Commission GO, 5.00% due 4/1/2022 (Highway Improvements) | AAA/Aaa | 1,000,000 | 1,158,100 | ||||||||||||||
Texas Transportation Commission GO, 5.00% due 4/1/2023 (Highway Improvements) | AAA/Aaa | 1,000,000 | 1,182,710 | ||||||||||||||
Texas Transportation Commission GO, 5.00% due 4/1/2024 (Highway Improvements) | AAA/Aaa | 1,000,000 | 1,206,710 | ||||||||||||||
Trinity River Authority, 5.00% due 2/1/2025 (Red Oak Creek System) | AA-/NR | 625,000 | 750,394 | ||||||||||||||
Uptown Development Authority, 5.50% due 9/1/2029 pre-refunded 9/1/2019 (Infrastructure Improvements) | BBB/NR | 1,250,000 | 1,354,888 | ||||||||||||||
U.S. VIRGIN ISLANDS — 0.23% | |||||||||||||||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 | NR/Caa2 | 5,000,000 | 3,365,600 | ||||||||||||||
UTAH — 0.32% | |||||||||||||||||
City of Murray, 0.92% due 5/15/2036 put 10/2/2017 (IHC Health Services, Inc.) (daily demand notes) | AA+/Aa1 | 2,000,000 | 2,000,000 | ||||||||||||||
Local Building Authority of Salt Lake Valley Fire Service Area, 5.25% due 4/1/2020 pre-refunded 4/1/2018 | NR/Aa2 | 1,250,000 | 1,277,425 | ||||||||||||||
Weber County, 0.90% due 2/15/2031 put 10/2/2017 (IHC Health Services, Inc.; SPA: The Bank of NY Mellon) (daily demand notes) | AA+/Aa1 | 1,500,000 | 1,500,000 | ||||||||||||||
VIRGINIA — 0.04% | |||||||||||||||||
County of Hanover IDA, 6.00% due 10/1/2021 (FirstHealth Richmond Memorial Hospital) (ETM) | A/NR | 490,000 | 523,080 | ||||||||||||||
18 | Annual Report
Schedule of Investments, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
WASHINGTON — 2.92% | |||||||||||||||||
City of Seattle, 5.00% due 2/1/2019 (Light and Power Improvements) | AA/Aa2 | $ | 3,000,000 | $ | 3,159,030 | ||||||||||||
King County Public Hospital District No. 2 GO, 5.00% due 12/1/2028 (EvergreenHealth Medical Center) | NR/Aa3 | 1,015,000 | 1,180,323 | ||||||||||||||
King County Public Hospital District No. 2 GO, 5.00% due 12/1/2029 (EvergreenHealth Medical Center) | NR/Aa3 | 2,930,000 | 3,390,420 | ||||||||||||||
King County Public Hospital District No. 2 GO, 5.00% due 12/1/2030 (EvergreenHealth Medical Center) | NR/Aa3 | 600,000 | 691,278 | ||||||||||||||
King County Public Hospital District No. 2 GO, 5.00% due 12/1/2031 (EvergreenHealth Medical Center) | NR/Aa3 | 2,040,000 | 2,342,573 | ||||||||||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2025 (Skagit Regional Health) | NR/A1 | 4,860,000 | 5,617,285 | ||||||||||||||
Skagit County Public Hospital District No. 1 GO, 5.00% due 12/1/2028 (Skagit Regional Health) | NR/A1 | 3,000,000 | 3,440,970 | ||||||||||||||
Skagit County Public Hospital District No. 2 GO, 5.00% due 12/1/2027 (Island Hospital) | NR/A1 | 2,445,000 | 2,740,796 | ||||||||||||||
Skagit County Public Hospital District No. 2 GO, 5.00% due 12/1/2028 (Island Hospital) | NR/A1 | 2,195,000 | 2,451,223 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2030 (Acquisition and Improvements of Real and Personal Property) | NR/Aa2 | 4,415,000 | 5,299,545 | ||||||||||||||
State of Washington COP, 5.00% due 7/1/2031 (Acquisition and Improvements of Real and Personal Property) | NR/Aa2 | 4,635,000 | 5,534,978 | ||||||||||||||
Tacoma School District No.10 GO, 5.00% due 12/1/2019 (Pierce County Capital Projects) | AA+/Aa1 | 1,000,000 | 1,083,470 | ||||||||||||||
Tacoma School District No.10 GO, 5.00% due 12/1/2020 (Pierce County Capital Projects) | AA+/Aa1 | 1,000,000 | 1,118,520 | ||||||||||||||
Washington Health Care Facilities Authority, 5.25% due 8/15/2024 pre-refunded 8/15/2018 (MultiCare Systems; Insured: AGM) | AA/Aa3 | 1,000,000 | 1,037,240 | ||||||||||||||
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 | 4,160,141 | ||||||||||||||
WISCONSIN — 2.36% | |||||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2021 pre-refunded 7/1/2020 (Agnesian Healthcare) | NR/NR | 770,000 | 850,835 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 7/1/2021 (Agnesian Healthcare) | A/A2 | 1,400,000 | 1,525,398 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2023 (ProHealth Care, Inc.) | A+/A1 | 1,980,000 | 2,220,629 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2024 (ProHealth Care, Inc.) | A+/A1 | 2,460,000 | 2,750,870 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.50% due 7/1/2025 (Agnesian Healthcare, Inc.) | A/A2 | 5,000,000 | 5,478,100 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2025 (ProHealth Care, Inc.) | A+/A1 | 3,180,000 | 3,546,400 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 8/15/2026 (ProHealth Care, Inc.) | A+/A1 | 3,305,000 | 3,665,014 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 11/15/2035 (Ascension Health) | AA+/Aa2 | 10,000,000 | 11,493,700 | ||||||||||||||
Wisconsin Health & Educational Facilities Authority, 5.00% due 11/15/2036 (Ascension Health) | AA+/Aa2 | 3,000,000 | 3,433,380 | ||||||||||||||
|
| ||||||||||||||||
| TOTAL INVESTMENTS — 99.34% (Cost $1,412,415,167) | $ | 1,470,093,584 | |||||||||||||||
| OTHER ASSETS LESS LIABILITIES — 0.66% | 9,760,460 | ||||||||||||||||
|
| ||||||||||||||||
| NET ASSETS — 100.00% | $ | 1,479,854,044 | |||||||||||||||
|
| ||||||||||||||||
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. | GO | General Obligation | |||
| AMBAC | Insured by American Municipal Bond Assurance Corp. | HFA | Health Facilities Authority | |||
| AMT | Alternative Minimum Tax | HFFA | Health Facilities Financing Authority | |||
| BAM | Insured by Build America Mutual Insurance Co. | IDA | Industrial Development Authority | |||
| COP | Certificates of Participation | ISD | Independent School District | |||
| DFA | Development Finance Authority | Mtg | Mortgage | |||
| EDA | Economic Development Authority | Natl-Re | Insured by National Public Finance Guarantee Corp. | |||
| ETM | Escrowed to Maturity | PSF | Guaranteed by Permanent School Fund | |||
| FHA | Insured by Federal Housing Administration | Q-SBLF | Insured by Qualified School Bond Loan Fund | |||
| GNMA | Collateralized by Government National Mortgage Association | USD | Unified School District |
See notes to financial statements.
Annual Report | 19
Statement of Assets and Liabilities
Thornburg Intermediate Municipal Fund | September 30, 2017
ASSETS |
| |||
Investments at value (cost $1,412,415,167) (Note 3) | $ | 1,470,093,584 | ||
Cash | 4,454,898 | |||
Receivable for investments sold | 5,555,000 | |||
Receivable for fund shares sold | 2,089,235 | |||
Interest receivable | 16,657,024 | |||
Prepaid expenses and other assets | 23,510 | |||
|
| |||
Total Assets | 1,498,873,251 | |||
|
| |||
LIABILITIES |
| |||
Payable for investments purchased | 15,971,994 | |||
Payable for fund shares redeemed | 1,691,541 | |||
Payable to investment advisor and other affiliates (Note 4) | 791,959 | |||
Accounts payable and accrued expenses | 272,163 | |||
Dividends payable | 291,550 | |||
|
| |||
Total Liabilities | 19,019,207 | |||
|
| |||
NET ASSETS | $ | 1,479,854,044 | ||
|
| |||
NET ASSETS CONSIST OF |
| |||
Distribution in excess of net investment income | $ | (3,657 | ) | |
Net unrealized appreciation on investments | 57,678,417 | |||
Accumulated net realized gain (loss) | (7,436,420 | ) | ||
Net capital paid in on shares of beneficial interest | 1,429,615,704 | |||
|
| |||
| $ | 1,479,854,044 | |||
|
| |||
NET ASSET VALUE |
| |||
Class A Shares: |
| |||
Net asset value and redemption price per share | $ | 14.15 | ||
Maximum sales charge, 2.00% of offering price | 0.29 | |||
|
| |||
Maximum offering price per share | $ | 14.44 | ||
|
| |||
Class C Shares: |
| |||
Net asset value and offering price per share* | $ | 14.17 | ||
|
| |||
Class I Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 14.13 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
20 | Annual Report
Thornburg Intermediate Municipal Fund | Year Ended September 30, 2017
INVESTMENT INCOME |
| |||
Interest income (net of premium amortized of $14,509,587) | $ | 45,711,670 | ||
|
| |||
EXPENSES |
| |||
Investment advisory fees (Note 4) | 6,697,134 | |||
Administration fees (Note 4) |
| |||
Class A Shares | 520,708 | |||
Class C Shares | 192,039 | |||
Class I Shares | 459,071 | |||
Distribution and service fees (Note 4) |
| |||
Class A Shares | 1,041,416 | |||
Class C Shares | 920,429 | |||
Transfer agent fees |
| |||
Class A Shares | 231,600 | |||
Class C Shares | 80,157 | |||
Class I Shares | 756,146 | |||
Registration and filing fees |
| |||
Class A Shares | 23,034 | |||
Class C Shares | 20,312 | |||
Class I Shares | 62,236 | |||
Custodian fees (Note 2) | 172,566 | |||
Professional fees | 57,073 | |||
Accounting fees (Note 4) | 53,545 | |||
Trustee fees | 63,300 | |||
Other expenses | 97,370 | |||
|
| |||
Total Expenses | 11,448,136 | |||
Less: |
| |||
Expenses reimbursed by investment advisor (Note 4) | (47,514 | ) | ||
|
| |||
Net Expenses | 11,400,622 | |||
|
| |||
Net Investment Income | 34,311,048 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on investments | (7,345,009 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (30,486,170 | ) | ||
|
| |||
Net Realized and Unrealized Loss | (37,831,179 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (3,520,131 | ) | |
|
| |||
See notes to financial statements.
Annual Report | 21
Statements of Changes in Net Assets
Thornburg Intermediate Municipal Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM |
| |||||||||
OPERATIONS |
| |||||||||
Net investment income | $ | 34,311,048 | $ | 31,582,883 | ||||||
Net realized gain (loss) on investments | (7,345,009 | ) | 87,293 | |||||||
Net unrealized appreciation (depreciation) on investments | (30,486,170 | ) | 29,544,061 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (3,520,131 | ) | 61,214,237 | |||||||
DIVIDENDS TO SHAREHOLDERS |
| |||||||||
From net investment income |
| |||||||||
Class A Shares | (8,971,652 | ) | (8,992,508 | ) | ||||||
Class C Shares | (2,814,365 | ) | (2,806,252 | ) | ||||||
Class I Shares | (22,525,031 | ) | (19,784,123 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) |
| |||||||||
Class A Shares | (68,147,256 | ) | 35,033,185 | |||||||
Class C Shares | (25,962,271 | ) | 6,640,373 | |||||||
Class I Shares | 15,637,165 | 190,211,712 | ||||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | (116,303,541 | ) | 261,516,624 | |||||||
NET ASSETS |
| |||||||||
Beginning of Year | 1,596,157,585 | 1,334,640,961 | ||||||||
|
| |||||||||
End of Year | $ | 1,479,854,044 | $ | 1,596,157,585 | ||||||
|
| |||||||||
Distribution in excess of net investment income | $ | (3,657 | ) | $ | (3,781 | ) | ||||
See notes to financial statements.
22 | Annual Report
Thornburg Intermediate Municipal Fund | September 30, 2017
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 twenty-one 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 Thornburg Investment Management, Inc., the Trust’s investment advisor (the “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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by the Advisor. Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
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 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
Annual Report | 23
Notes to Financial Statements, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
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.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 1,412,415,167 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 61,176,840 | |||
Gross unrealized depreciation on a tax basis | (3,498,423 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 57,678,417 | |||
|
|
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $7,436,422. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
During the year ended September 30, 2017, the Fund utilized $91,303 of long-term capital loss carryforwards generated after September 30, 2011.
In order to account for permanent book to tax differences, the Fund decreased distribution in excess of net investment income by $124 and decreased net capital paid in on shares of beneficial interest by $124. Reclassifications have no impact upon the net asset value of the Fund and result primarily from a nondeductible excise tax liability.
At September 30, 2017, the Fund had $287,892 of undistributed net tax-exempt income, no undistributed tax basis net ordinary income and no undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the year ended September 30, 2017 and September 30, 2016 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Tax exempt income | $ | 34,185,578 | $ | 31,504,595 | ||||||
Ordinary income | 125,470 | 78,288 | ||||||||
|
| |||||||||
Total | $ | 34,311,048 | $ | 31,582,883 | ||||||
|
| |||||||||
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
24 | Annual Report
Notes to Financial Statements, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from the FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs when it sells the investment.
Annual Report | 25
Notes to Financial Statements, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
Municipal Bonds | $ | 1,470,093,584 | $ | – | $ | 1,470,093,584 | $ | – | ||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 1,470,093,584 | $ | – | $ | 1,470,093,584 | $ | – | ||||||||||||
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, 2017.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| MANAGEMENT FEE SCHEDULE | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.500 | % | |||
Next $500 million | 0.450 | ||||
Next $500 million | 0.400 | ||||
Next $500 million | 0.350 | ||||
Over $2 billion | 0.275 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.45% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $53,545 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $1,818 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $3,871 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A and Class C of shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I shares. The Advisor and Distributor each 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, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
26 | Annual Report
Notes to Financial Statements, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017
For the year ended September 30, 2017, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $47,514 for Class C shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 0.3%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had transactions with affiliated funds of $33,910,000 in purchases and $15,380,000 in sales generating no realized gains or losses.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 3,977,534 | $ | 55,804,317 | 9,279,089 | $ | 133,413,786 | ||||||||||
Shares issued to shareholders in | 590,411 | 8,305,921 | 574,357 | 8,275,394 | ||||||||||||
Shares repurchased | (9,443,471 | ) | (132,257,494 | ) | (7,420,820 | ) | (106,655,995 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (4,875,526 | ) | $ | (68,147,256 | ) | 2,432,626 | $ | 35,033,185 | ||||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 802,423 | $ | 11,309,603 | 1,913,796 | $ | 27,572,239 | ||||||||||
Shares issued to shareholders in | 170,880 | 2,407,180 | 165,842 | 2,392,143 | ||||||||||||
Shares repurchased | (2,817,438 | ) | (39,679,054 | ) | (1,617,751 | ) | (23,324,009 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (1,844,135 | ) | $ | (25,962,271 | ) | 461,887 | $ | 6,640,373 | ||||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 24,690,644 | $ | 345,934,491 | 25,331,370 | $ | 364,312,426 | ||||||||||
Shares issued to shareholders in | 1,412,131 | 19,847,563 | 1,211,588 | 17,444,423 | ||||||||||||
Shares repurchased | (25,049,596 | ) | (350,144,889 | ) | (13,320,008 | ) | (191,545,137 | ) | ||||||||
|
| |||||||||||||||
Net increase | 1,053,179 | $ | 15,637,165 | 13,222,950 | $ | 190,211,712 | ||||||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $320,344,377 and $322,858,001, respectively.
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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 27
Thornburg Intermediate Municipal Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 14.47 | 0.30 | (0.32 | ) | (0.02 | ) | (0.30 | ) | – | (0.30 | ) | $ | 14.15 | ||||||||||||||||||||||||||
2016(b) | $ | 14.17 | 0.29 | 0.30 | 0.59 | (0.29 | ) | – | (0.29 | ) | $ | 14.47 | ||||||||||||||||||||||||||||
2015(b) | $ | 14.23 | 0.30 | (0.06 | ) | 0.24 | (0.30 | ) | – | (0.30 | ) | $ | 14.17 | |||||||||||||||||||||||||||
2014(b) | $ | 13.76 | 0.34 | 0.47 | 0.81 | (0.34 | ) | – | (0.34 | ) | $ | 14.23 | ||||||||||||||||||||||||||||
2013(b) | $ | 14.22 | 0.33 | (0.46 | ) | (0.13 | ) | (0.33 | ) | – | (0.33 | ) | $ | 13.76 | ||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 14.49 | 0.26 | (0.32 | ) | (0.06 | ) | (0.26 | ) | – | (0.26 | ) | $ | 14.17 | ||||||||||||||||||||||||||
2016 | $ | 14.19 | 0.24 | 0.30 | 0.54 | (0.24 | ) | – | (0.24 | ) | $ | 14.49 | ||||||||||||||||||||||||||||
2015 | $ | 14.25 | 0.25 | (0.06 | ) | 0.19 | (0.25 | ) | – | (0.25 | ) | $ | 14.19 | |||||||||||||||||||||||||||
2014 | $ | 13.78 | 0.30 | 0.47 | 0.77 | (0.30 | ) | – | (0.30 | ) | $ | 14.25 | ||||||||||||||||||||||||||||
2013 | $ | 14.24 | 0.29 | (0.46 | ) | (0.17 | ) | (0.29 | ) | – | (0.29 | ) | $ | 13.78 | ||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 14.46 | 0.35 | (0.33 | ) | 0.02 | (0.35 | ) | – | (0.35 | ) | $ | 14.13 | |||||||||||||||||||||||||||
2016 | $ | 14.15 | 0.33 | 0.31 | 0.64 | (0.33 | ) | – | (0.33 | ) | $ | 14.46 | ||||||||||||||||||||||||||||
2015 | $ | 14.22 | 0.34 | (0.07 | ) | 0.27 | (0.34 | ) | – | (0.34 | ) | $ | 14.15 | |||||||||||||||||||||||||||
2014 | $ | 13.75 | 0.38 | 0.47 | 0.85 | (0.38 | ) | – | (0.38 | ) | $ | 14.22 | ||||||||||||||||||||||||||||
2013 | $ | 14.20 | 0.38 | (0.45 | ) | (0.07 | ) | (0.38 | ) | – | (0.38 | ) | $ | 13.75 | ||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
28 | Annual Report
Financial Highlights, Continued
Thornburg Intermediate Municipal Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 2.15 | 0.92 | 0.92 | 0.92 | (0.08 | ) | 24.04 | $ | 387,790 | ||||||||||||||||||||||
| 2.00 | 0.92 | 0.92 | 0.92 | 4.17 | 10.80 | $ | 467,335 | |||||||||||||||||||||||
| 2.09 | 0.92 | 0.92 | 0.92 | 1.68 | 13.49 | $ | 423,113 | |||||||||||||||||||||||
| 2.43 | 0.92 | 0.92 | 0.92 | 5.95 | 14.85 | $ | 417,369 | |||||||||||||||||||||||
| 2.37 | 0.92 | 0.92 | 0.92 | (0.91 | ) | 29.18 | $ | 429,941 | ||||||||||||||||||||||
| 1.83 | 1.24 | 1.24 | 1.27 | (0.40 | ) | 24.04 | $ | 140,176 | ||||||||||||||||||||||
| 1.68 | 1.24 | 1.24 | 1.27 | 3.84 | 10.80 | $ | 170,149 | |||||||||||||||||||||||
| 1.77 | 1.24 | 1.24 | 1.28 | 1.35 | 13.49 | $ | 160,042 | |||||||||||||||||||||||
| 2.11 | 1.24 | 1.24 | 1.29 | 5.61 | 14.85 | $ | 157,126 | |||||||||||||||||||||||
| 2.05 | 1.24 | 1.24 | 1.30 | (1.22 | ) | 29.18 | $ | 159,727 | ||||||||||||||||||||||
| 2.45 | 0.62 | 0.62 | 0.62 | 0.15 | 24.04 | $ | 951,888 | |||||||||||||||||||||||
| 2.30 | 0.61 | 0.61 | 0.61 | 4.57 | 10.80 | $ | 958,674 | |||||||||||||||||||||||
| 2.39 | 0.62 | 0.62 | 0.62 | 1.91 | 13.49 | $ | 751,486 | |||||||||||||||||||||||
| 2.73 | 0.62 | 0.61 | 0.62 | 6.28 | 14.85 | $ | 618,280 | |||||||||||||||||||||||
| 2.68 | 0.61 | 0.61 | 0.61 | (0.53 | ) | 29.18 | $ | 449,501 | ||||||||||||||||||||||
Annual Report | 29
Report of Independent Registered Public Accounting Firm
Thornburg Intermediate Municipal Fund
To the Trustees and Shareholders of the
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 the Thornburg Intermediate Municipal Fund (the “Fund”) as of September 30, 2017, 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 as of September 30, 2017 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
30 | Annual Report
Thornburg Intermediate Municipal Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
| BEGINNING ACCOUNT VALUE 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,024.10 | $ | 4.65 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.47 | $ | 4.65 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,022.40 | $ | 6.27 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.86 | $ | 6.26 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,025.60 | $ | 3.13 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.98 | $ | 3.12 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.92%; C: 1.24%; 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.
Annual Report | 31
Thornburg Intermediate Municipal Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
32 | Annual Report
Trustees and Officers, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 33
Trustees and Officers, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries 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.
34 | Annual Report
Thornburg Intermediate Municipal Fund | September 30, 2017 (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, 2017, dividends paid by the Fund of $34,185,578 (or the maximum allowed) are tax exempt dividends and $125,470 are taxable ordinary investment income dividends for federal income tax purposes. The information and the distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2017. Complete information will be reported in conjunction with your 2017 Form 1099.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Intermediate Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for
Annual Report | 35
Other Information, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017 (Unaudited)
consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 created by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the 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 created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Information provided to the Trustees indicated that the comparability of indices and fund categories to the Fund may be limited for a number of reasons. Measures of risk and relative return demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions. The Trustees generally attach additional significance to the investment performance of the Fund from the perspective of longer term shareholders, and noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the objectives of the Fund. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees observed the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and overall Fund expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total Fund expenses for two Fund share classes to the fee levels and expenses of fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been considered by the Trustees showed that the Fund’s advisory fee was higher than the median and average fee levels for the fund category, the level of total expense for one representative share class was higher than the median and average expense levels for the category, and that the total level of expense for a second share class was comparable to the median and lower than the average levels for the category. Peer group data showed that the Fund’s advisory fee level for one share class was higher than the peer group median but comparable to other funds in the group, and that the advisory fee level for the second share class was comparable to the median fee level for its peer group. The data further showed that the total expense level for one of the Fund share classes was higher than the median of its peer group but was comparable to other funds in the peer group, while the total expense level for the second share class was comparable to the median of its peer group. The Trustees did not find the differences significant in view of their findings and conclusions respecting the other factors considered.
36 | Annual Report
Other Information, Continued
Thornburg Intermediate Municipal Fund | September 30, 2017 (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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by the Fund and certain other funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 37
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
38 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 39
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
Annual Report September 30, 2017 THORNBURG STRATEGIC MUNICIPAL INCOME FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Strategic Municipal Income Fund
Annual Report ^ September 30, 2017
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class A | TSSAX | 885-216-101 | ||||||||
| Class C | TSSCX | 885-216-200 | ||||||||
| Class I | TSSIX | 885-216-309 | ||||||||
Minimum investments for Class I shares may be higher than those for other classes. Class I shares may not be available to all investors.
Investments carry risks, including possible loss of principal. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The value of bonds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. This effect is more pronounced for longer-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. Investments in lower rated and unrated bonds may be more sensitive to default, downgrades, and market volatility; these investments may also be less liquid than higher rated bonds. Investments in derivatives are subject to the risks associated with the securities or other assets underlying the pool of securities, including illiquidity and difficulty in valuation. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund. Investments in the Fund are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.
Annual Report | 3
Thornburg Strategic Municipal Income Fund | September 30, 2017 (Unaudited)
October 12, 2017
Dear Fellow Shareholder:
We are pleased to present the annual report for Thornburg Strategic Municipal Income Fund. The net asset value (NAV) of the Class A shares decreased by 39 cents to $15.14 per share during the fiscal year ended September 30, 2017. If you were with us for the entire period, you received dividends of 34.8 cents per share. Dividends were lower for the Class C shares and higher for the Class I shares to account for varying class-specific expenses. The Class A shares of your Fund underperformed the index with a negative 0.23% total return (without sales charge) for the fiscal year ended September 30, 2017, compared to the 0.97% total return for the BofA Merrill Lynch Municipal Master Index.
The drivers of the Fund’s total return relative to its benchmark include its interest rate sensitivity, as measured by the Fund’s duration, differing credit quality allocations, and other risk factors. The Fund underperformed its benchmark by 1.20%. The impact from the Fund’s 1.76 years shorter duration added 0.25%, while credit quality allocations detracted 0.07%. Other risk factors detracted 0.27%, while the Fund’s expenses and residuals accounted for the remainder of the performance
differential.
The New Administration’s Agenda, U.S. Economy, and Fed Policy
The Trump administration took office in January of 2017 with an aggressive agenda. It promised to repeal and replace the Affordable Care Act (ACA), known also as Obamacare, increase infrastructure spending, scale back federal regulatory constraints on businesses, and reform the federal tax code. Initially, the promise of this pro-growth agenda caused interest rates to increase substantially upon Trump’s election in November. This was followed by further increases in December as investors sold municipal bonds to capture losses that appeared to be more valuable in 2016 than 2017. Some nine months later, the repeal and replacement of the ACA has failed to become a reality—tripped up in both the U.S. House and Senate.
Meanwhile, the silence around increased infrastructure spending is deafening. Federal regulatory constraints have been eased only through executive orders. The process for tax reform has just begun, but the administration’s initial measure appears to be hitting a rough patch as the proposed removal of the federal deduction for state and local taxes (SALT) has generated some blowback. The president’s framework for tax reform was mute with regard to continuation of the tax exemption for municipal bonds, although several sources have attributed the administration to stating that the municipal bond tax exemption is safe. The president’s proposal does call for the repeal of the alternative
minimum tax. All that said, this is Washington, DC, and with tax reform a major piece of the president’s agenda, watching this sausage get made will be interesting.
After a rather punk showing for the first two quarters of fiscal 2017, in which gross domestic product (GDP) growth was 1.8% and 1.2%, respectively, the economy generated a 3.1% GDP growth rate in the third fiscal quarter. The fiscal fourth quarter estimates of GDP have varied greatly as the impact of three devastating hurricanes (Harvey, Irma and Maria) are taken into consideration. After considering the impacts of Harvey and Irma alone, Goldman Sachs lowered its third-quarter GDP estimate by 0.8% to 2.0%.
Nonfarm payrolls have been a bright spot for the economy, averaging 168,000 new jobs per month for the first 11 months of fiscal 2017. This is a little lower than the 219,000 average monthly jobs generated in fiscal 2016. This all translates to an unemployment rate of 4.4% as of the end of August 2017 versus 4.9% at the end of fiscal 2016. One explanation for this slowdown is that employers cannot find qualified workers. This theory is substantiated by another significant economic indicator, the U.S. Job Openings and Labor Turnover Summary (JOLTS), which measures either newly created or unoccupied positions where an employer is taking specific actions to fill these positions. In July, this measure registered a reading of about 6.2 million, which is the highest since the time series began in December of 2000.
The Phillips Curve, an economic theory posed by A.W. Phillips, states that inflation and unemployment have a stable and inverse relationship. As unemployment decreases, inflation is supposed to increase. As of yet, this theory has not manifested itself. In fact, the Federal Reserve Board’s (Fed) favorite inflation measure, the Core Personal Consumption Expenditures Index (Core PCE)—which measures prices paid by consumers for goods and services without the volatility from movements in food and energy prices—has declined throughout the year. The last available reading at the end of August 2017 (1.30%) is much lower than the one at the end of September 2017 (1.80%).
On September 20, 2017 Bloomberg reported, “Federal Reserve Chair Janet Yellen acknowledged that the fall in inflation this year was a bit of a ‘mystery’ but suggested that the central bank was on course to raise interest rates again in 2017 nonetheless.” Any increase would be on top of the three hikes in the Federal Funds rate in fiscal 2017, bringing the range for the Federal Funds rate from 0.50%—0.75% at the beginning of the year to 1.00%—1.25% on June 14, 2017.
In addition, the Fed will begin reducing its $4.5 trillion balance sheet in October, by slowly unwinding the stimulus program it engaged a decade ago to combat the Great Recession. Its plan is
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017 (Unaudited)
to reduce its holdings of U.S. Treasury and mortgage-backed securities by $10 billion in October of 2017 and gradually raise the reduction amount in the months ahead. Essentially, this reduces the demand for these securities from a purchaser that was not altogether economically motivated in the traditional sense. The Fed believes that the economy is strong enough that this gradual reduction of its balance sheet will not be disruptive, although some do not share this opinion. CNBC reported in August 2017, in an interview with JPMorgan Chase CEO Jamie Dimon, that he;
“stopped short of saying the bond market is on the cusp of a collapse, but said he wouldn’t personally buy any long-term government debt. ‘I’m not going to call it a bubble, but I personally wouldn’t be buying a 10-year sovereign debt anywhere in the world…my view is the Fed is doing the right things, raising rates, telling people we’re going to start reducing the balance sheet,’ Dimon added.”
The Municipal Bond Market
The municipal bond market suffered a setback in November and December of 2016. The surprise U.S. election results and the new administration’s pro-growth and pro-infrastructure agenda caused interest rates to initially rise and the tax loss harvesting caused rates to rise higher in December of 2016.
The municipal bond market’s returns were a result of rising rates across the yield curve—with long-term rates increasing more than short-term rates as shown in Figure 1.
| Figure 1 | | | 12-Month Change in Rates for AAA Rated General Obligation Municipal Bonds (as of September 29, 2017) |
Source: Bloomberg
President Trump’s goal of tax reform in particular led investors to believe that losses taken in 2016 were of greater value than losses taken in 2017. After this uptick in rates, yields moved steadily lower, and 10-year AAA general obligation bond yields decreased by about 0.30% between December 31, 2016 and September 30, 2017. Quality spreads continue to be extremely narrow, as income-starved investors extended out the yield curve or accepted lower credit quality in search of meeting an income bogey.
Cash flows into municipal bond mutual funds have been positive but nothing like the levels we experienced in fiscal year 2016. Foreign institutional investors have shown an increased interest in the municipal bond markets throughout the U.S., exhibiting some of the same characteristics as domestic retail investors by trying to quench a thirst for income.
Credit quality in the municipal bond market has been pretty stable except for some idiosyncratic disturbances. Illinois, for example, went down to the wire to pass its first budget in three years. The rating agencies threatened to drop the state’s credit rating to below investment grade, which would have seriously limited its bonds’ marketability. These antics caused the price of Illinois debt to go dramatically lower prior to the ultimate passage of the budget, after which it rallied considerably.
Elsewhere, several prominent high-yield securities came to market and were very well received. One was a mall in New Jersey across from the Meadowlands, which has been mothballed for approximately 15 years. Originally called Xanadu and referred to as the “ugliest building in New Jersey” by the Governor, it is now called “The American Dream Mall” in its recent incarnation. The fact that this and other non-rated, high-yield projects are so well received is more evidence of how income-starved investors have become in an overly accommodative central bank world. By the way, we did not purchase this bond issue, because visitation needs to be 2x that of Disney World just to break even. And, when Amazon is disrupting everything from retail goods to groceries, we felt the last thing New Jersey needed was another mall.
Current Portfolio Positioning
We have positioned this portfolio, like our others, at the bottom end of its risk spectrum. If this sounds familiar, it is, as we said the same thing last year. We have lower durations, higher credit quality and higher reserve positions (to hedge against increased market illiquidity).
We believe that investors are not currently being compensated to take much risk. Real yields (yield less inflation) are low by historic standards (off the bottom but still low). Credit spreads are very narrow, back to pre-crisis levels, when 50% or more of the new issue market was insured by AAA municipal bond
Annual Report | 5
Letter to Shareholders, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017 (Unaudited)
insurers. This is particularly concerning, as today only about 7% to 8% of the new issue market is insured and the municipal bond insurers are no longer rated AAA. A few desperate municipal market issuers, like Hartford, CT, are openly discussing debt restructuring and the president is making comments like the following with regard to Puerto Rico’s debt: “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out.” The precedents set by the recent municipal Chapter 9 proceedings of Detroit, MI and San Bernardino, CA have in effect placed bondholders in a subordinated position to pensioners. Sometimes investors are motivated more by greed than fear and vice versa. Greed seems to be the current primary motivating factor, and it is in such an environment that caution should be exercised. That is exactly what we are doing—relying on value-oriented, bottom-up fundamental analysis in portfolio construction.
Why Own Municipal Bonds
Fixed income assets are an important part of a well-diversified portfolio, as they can provide a stabilizing force to the potential swings of the equity portion of the portfolio.
These asset classes are not always positively correlated and can therefore dampen the overall portfolio’s volatility.
Thank you for your continued trust is us, and please know that the co-managers of this Fund are invested alongside you.
Sincerely,
Christopher Ryon, CFA
Portfolio Manager
Managing Director
Nicholos Venditti, 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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
6 | Annual Report
Thornburg Strategic Municipal Income Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | SINCE INCEP. | |||||||||||||||||
A Shares (Incep: 4/1/09) | ||||||||||||||||||||
Without sales charge | -0.23% | 2.17% | 2.59% | 6.34% | ||||||||||||||||
With sales charge | -2.24% | 1.49% | 2.17% | 6.09% | ||||||||||||||||
C Shares (Incep: 4/1/09) | ||||||||||||||||||||
Without sales charge | -0.59% | 1.85% | 2.27% | 6.02% | ||||||||||||||||
With sales charge | -1.18% | 1.85% | 2.27% | 6.02% | ||||||||||||||||
I Shares (Incep: 4/1/09) | 0.09% | 2.50% | 2.91% | 6.66% | ||||||||||||||||
30-DAY YIELDS, A SHARES
(with sales charge)
Annualized Distribution Yield | 2.41% | ||||
SEC Yield | 1.25% |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. Class A shares are sold with a maximum sales charge of 2.00%. Class C shares include a 0.60% CDSC for the first year only. There is no sales charge for Class I shares. As disclosed in the most recent prospectus, the total annual fund operating expenses before fee waivers and expense reimbursements are as follows: A shares, 1.29%; C shares, 1.66%; I shares, 0.93%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: A shares, 1.00%; C shares, 1.51%; I shares, 0.78%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus. Without the fee waivers and expense reimbursements, the Annualized Distribution yield would have been 2.23%, and the SEC yield would have been 1.07%.
Glossary
The BofA Merrill Lynch Municipal Master Index tracks the performance of the investment-grade U.S. tax-exempt bond market. Qualifying bonds must have at least one year remaining term to maturity, a fixed coupon schedule, and an investment grade rating (based on average of Moody’s, S&P, and Fitch).
The performance of any index is not indicative of the performance of any particular investment. 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 or net asset value.
Bond Credit Ratings (Credit Quality) – 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.
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 incorporates a bond’s embedded option features, such as call provisions.
General Obligation Bond (GO) – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Insured Bonds – Individual bonds are sometimes insured by private companies. The insurance guarantees the payment of principal and interest on a bond issue if the issuer defaults. Mutual funds are not insured, even if the underlying bonds are insured.
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.
Annual Report | 7
Thornburg Strategic Municipal Income Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
The Fund seeks a high level of current income exempt from federal individual income tax (may be subject to Alternative Minimum Tax).
The Fund invests principally in a portfolio of municipal bonds issued by states and state agencies, local governments and their agencies, and by U.S. territories and possessions.
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.
KEY PORTFOLIO ATTRIBUTES
| Number of Bonds | 215 | ||||
| Effective Duration | 5.1 Yrs | ||||
| Average Maturity | 9.5 Yrs |
There is no guarantee that the Fund will meet its investment objectives.
All data is subject to change. Charts may not add up to 100% due to rounding.
SECURITY 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. Credit quality ratings for Thornburg’s municipal portfolios used the highest rating available from either Standard & Poor’s or Moody’s Investors Service.
Unrated pre-refunded and escrowed-to-maturity bonds are included in the not rated category.
8 | Annual Report
Thornburg Strategic Municipal Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
ARIZONA — 1.34% | |||||||||||||||||
Arizona HFA, 5.00% due 12/1/2031 (Scottsdale Lincoln Hospitals) | NR/A2 | $ | 2,500,000 | $ | 2,865,550 | ||||||||||||
Pima County IDA, 5.125% due 12/1/2040 (Providence Day School) | BBB+/NR | 710,000 | 741,062 | ||||||||||||||
ARKANSAS — 0.43% | |||||||||||||||||
University of Arkansas Board of Trustees, 5.00% due 11/1/2036 (Fayetteville Campus) | NR/Aa2 | 1,000,000 | 1,162,870 | ||||||||||||||
CALIFORNIA — 16.55% | |||||||||||||||||
ABAG Finance Authority for Nonprofit Corporations, 5.00% due 7/1/2047 (Episcopal Senior Communities) | NR/NR | 1,635,000 | 1,753,341 | ||||||||||||||
Benicia USD GO, 0% due 8/1/2026 (Benicia High School; Insured: AGM) | AA/A2 | 830,000 | 662,398 | ||||||||||||||
California HFFA, 6.25% due 2/1/2026 (Community Program Developmental Disabilities; Insured: California Mtg Insurance) | AA-/NR | 1,500,000 | 1,719,600 | ||||||||||||||
California HFFA, 5.00% due 11/15/2034 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 420,000 | 460,261 | ||||||||||||||
California HFFA, 5.00% due 8/15/2036 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 500,000 | 568,875 | ||||||||||||||
California Municipal Finance Authority, 8.50% due 11/1/2039 pre-refunded 11/1/2019 (Harbor Regional Center) | NR/A3 | 1,000,000 | 1,153,740 | ||||||||||||||
California Pollution Control Financing Authority, 5.00% due 11/21/2045 (Poseidon Resources (Channelside) LP Desalination Project) (AMT) | NR/Baa3 | 1,000,000 | 1,073,700 | ||||||||||||||
California School Cash Reserve Program Authority, 3.00% due 6/29/2018 | SP-1+/NR | 2,000,000 | 2,034,260 | ||||||||||||||
California State Public Works Board, 5.00% due 4/1/2028 (Corrections, Rehabilitation and Judicial Council) | A+/A1 | 1,000,000 | 1,142,900 | ||||||||||||||
California State Public Works Board, 6.25% due 4/1/2034 pre-refunded 4/1/2019 (Department of General Services-Office Buildings 8 and 9 Renovation) | A+/Aaa | 100,000 | 107,951 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 7/1/2020 pre-refunded 1/1/2019 (Aspire Public Schools; LOC: PCSD Guaranty Pool I, LLC) | NR/NR | 95,000 | 98,356 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 5/15/2035 (Irvine East Campus Apartments) | NR/Baa1 | 2,975,000 | 3,416,936 | ||||||||||||||
California Statewide Communities Development Authority, 6.125% due 7/1/2046 pre-refunded 1/1/2019 (Aspire Public Schools) | NR/NR | 995,000 | 1,059,874 | ||||||||||||||
Calipatria USD GO, 0% due 8/1/2025 (Educational Facilities; Insured: ACA) | NR/NR | 2,115,000 | 1,557,909 | ||||||||||||||
Carson Redevelopment Agency, 7.00% due 10/1/2036 pre-refunded 10/1/2019 (Project Area 1) | A-/NR | 500,000 | 559,790 | ||||||||||||||
Chico Redevelopment Agency, 5.00% due 4/1/2030 (Chico Amended & Merged Redevelopment; Insured: AMBAC) | A+/NR | 1,500,000 | 1,503,765 | ||||||||||||||
City of Los Angeles GO, 5.00% due 6/28/2018 (Cash Flow Management) | SP-1+/Mig1 | 2,000,000 | 2,060,560 | ||||||||||||||
City of Moorpark Mobile Home Park, 6.15% due 5/15/2031 (Villa Del Arroyo) | A+/NR | 1,000,000 | 1,111,110 | ||||||||||||||
City of Palm Springs Financing Authority, 5.25% due 6/1/2027 (Downtown Revitalization Project) | AA/NR | 1,620,000 | 1,876,705 | ||||||||||||||
Corona-Norco USD COP, 5.00% due 4/15/2031 (Insured: AGM) | AA/A1 | 1,750,000 | 1,895,793 | ||||||||||||||
County of El Dorado, 5.00% due 9/1/2026 (El Dorado Hills Development-Community Facilities) | A/NR | 630,000 | 711,541 | ||||||||||||||
County of Los Angeles GO, 5.00% due 6/29/2018 (Fiscal Year 2017-2018 Expenditures) | SP-1+/Mig1 | 1,000,000 | 1,030,390 | ||||||||||||||
County of Riverside, 2.00% due 6/29/2018 (Fiscal Year 2017-2018 Expenditures) | SP-1+/NR | 3,000,000 | 3,027,210 | ||||||||||||||
Daly County Housing Development Finance Agency, 5.25% due 12/15/2023 (Franciscan Country Club Mobile Home Park Acquisition) | A+/NR | 650,000 | 654,778 | ||||||||||||||
M-S-R Energy Authority, 6.50% due 11/1/2039 | BBB+/NR | 1,000,000 | 1,408,630 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2035 (County of Alameda Educational Facilities) | AA-/Aa3 | 1,000,000 | 1,163,010 | ||||||||||||||
Redwood City Redevelopment Agency, 0% due 7/15/2021 (Redevelopment Project Area 2; Insured: AMBAC) | A/NR | 1,285,000 | 1,181,943 | ||||||||||||||
Riverside County Asset Leasing Corp., 0% due 6/1/2021 (Riverside County Hospital; Insured: Natl-Re) | A/A1 | 535,000 | 502,360 | ||||||||||||||
San Francisco City & County Redevelopment Financing Authority, 0% due 8/1/2023 (Redevelopment Project; Insured: Natl-Re) | A/A2 | 1,025,000 | 908,437 | ||||||||||||||
San Francisco City & County Redevelopment Financing Authority, 6.50% due 8/1/2039 pre-refunded 8/1/2019 (Mission Bay North Redevelopment) | A-/NR | 250,000 | 275,303 | ||||||||||||||
San Francisco City & County Redevelopment Financing Authority, 6.75% due 8/1/2041 pre-refunded 2/1/2021 (Mission Bay North Redevelopment) | A-/NR | 500,000 | 593,075 | ||||||||||||||
San Jose Redevelopment Agency, 5.50% due 8/1/2035 (Merged Area Redevelopment) | AA-/A1 | 1,000,000 | 1,092,300 | ||||||||||||||
State of California GO, 5.00% due 8/1/2032 (Kindergarten-University Facilities) | AA-/Aa3 | 4,600,000 | 5,502,750 | ||||||||||||||
Union Elementary School District, 0% due 9/1/2027 (Santa Clara County District Schools; Insured: Natl-Re) | AA+/NR | 905,000 | 702,660 | ||||||||||||||
COLORADO — 1.38% | |||||||||||||||||
Denver Convention Center Hotel Authority, 5.00% due 12/1/2028 | BBB-/Baa2 | 1,000,000 | 1,178,310 | ||||||||||||||
Eagle River Fire District, 6.625% due 12/1/2024 pre-refunded 12/1/2019 | NR/NR | 225,000 | 251,570 | ||||||||||||||
Eagle River Fire District, 6.875% due 12/1/2030 pre-refunded 12/1/2019 | NR/NR | 400,000 | 449,284 | ||||||||||||||
Public Authority for Colorado Energy, 5.75% due 11/15/2018 (Natural Gas Purchase) | BBB+/Baa1 | 285,000 | 292,259 | ||||||||||||||
Public Authority for Colorado Energy, 6.50% due 11/15/2038 (Natural Gas Purchase) | BBB+/Baa1 | 260,000 | 364,156 | ||||||||||||||
Regional Transportation District COP, 5.375% due 6/1/2031 (FasTracks Transportation System) | A/Aa3 | 500,000 | 545,960 | ||||||||||||||
Regional Transportation District COP, 5.00% due 6/1/2044 (FasTracks Transportation System) | A/Aa3 | 565,000 | 635,111 | ||||||||||||||
CONNECTICUT — 1.52% | |||||||||||||||||
Connecticut Health & Educational Facilities Authority, 6.00% due 7/1/2039 pre-refunded 7/1/2019 (Ethel Walker School) | NR/NR | 1,000,000 | 1,086,590 | ||||||||||||||
State of Connecticut GO Floating Rate Note, 1.63% due 6/15/2018 (Various Capital Projects) | A+/A1 | 3,000,000 | 3,007,890 | ||||||||||||||
DELAWARE — 0.40% | |||||||||||||||||
Delaware HFA, 5.00% due 7/1/2021 (Nanticoke Memorial Hospital) | BBB/NR | 1,000,000 | 1,087,170 | ||||||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
DISTRICT OF COLUMBIA — 0.41% | |||||||||||||||||
Metropolitan Washington Airports Authority, 0% due 10/1/2027 (Dulles Toll Road; Insured: AGM) | AA/A3 | $ | 1,500,000 | $ | 1,106,415 | ||||||||||||
FLORIDA — 4.55% | |||||||||||||||||
City of Miami GO, 5.00% due 1/1/2018 (Homeland Defense/Neighborhood Capital Improvements) | AA-/A1 | 1,790,000 | 1,806,611 | ||||||||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2027 (Nova Southeastern University) | A-/Baa1 | 1,000,000 | 1,101,540 | ||||||||||||||
Florida Higher Educational Facilities Financing Authority, 5.00% due 4/1/2028 (Nova Southeastern University) | A-/Baa1 | 1,250,000 | 1,464,087 | ||||||||||||||
Miami-Dade County Expressway Authority, 5.00% due 7/1/2022 (Toll System Five-Year Work Program) | A/A2 | 625,000 | 723,638 | ||||||||||||||
Miami-Dade County Expressway Authority, 5.00% due 7/1/2024 (Toll System Five-Year Work Program) | A/A2 | 625,000 | 745,319 | ||||||||||||||
Miami-Dade County School Board COP, 5.00% due 8/1/2027 (District School Facilities and Infrastructure) | A+/A1 | 1,100,000 | 1,246,113 | ||||||||||||||
Orange County, 5.00% due 10/1/2031 (Tourist Development) | AA-/Aa3 | 1,000,000 | 1,185,410 | ||||||||||||||
Pinellas County Educational Facilities Authority, 5.25% due 10/1/2030 (Barry University) | BBB/NR | 500,000 | 540,455 | ||||||||||||||
Sarasota County Public Hospital Board, 3.619% due 10/1/2021 (Sarasota Memorial Hospital; Insured: Natl-Re) | A/A1 | 1,000,000 | 1,039,670 | ||||||||||||||
Tampa Sports Authority, 5.75% due 10/1/2020 (Tampa Bay Arena; Insured: Natl-Re) | A/NR | 630,000 | 672,286 | ||||||||||||||
Volusia County Educational Facilities Authority, 5.00% due 10/15/2030 (Embry-Riddle Aeronautical University, Inc.) | NR/A3 | 1,500,000 | 1,725,270 | ||||||||||||||
GEORGIA — 1.33% | |||||||||||||||||
Atlanta Development Authority, 6.50% due 1/1/2029 (Georgia Proton Treatment Center) | NR/NR | 1,000,000 | 1,030,200 | ||||||||||||||
City of Atlanta, 6.25% due 11/1/2034 pre-refunded 11/1/2019 (Water and Wastewater Capital Improvement Program) | AA-/Aa2 | 500,000 | 554,015 | ||||||||||||||
Development Authority of Fulton County, 5.00% due 10/1/2019 (Georgia Tech Athletic Assoc.) | NR/A2 | 1,000,000 | 1,073,840 | ||||||||||||||
Main Street Natural Gas, Inc., 5.00% due 3/15/2018 (Georgia Gas) | A-/A3 | 515,000 | 524,115 | ||||||||||||||
Main Street Natural Gas, Inc., 5.50% due 9/15/2023 (Georgia Gas) | BBB+/NR | 350,000 | 404,040 | ||||||||||||||
GUAM — 3.66% | |||||||||||||||||
Government of Guam, 5.00% due 11/15/2031 (Economic Development) | A/NR | 2,000,000 | 2,176,600 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2032 (Various Capital Projects) | A/NR | 3,000,000 | 3,251,760 | ||||||||||||||
Government of Guam, 5.75% due 12/1/2034 pre-refunded 12/1/2019 (Layon Solid Waste Disposal Facility) | BBB+/NR | 500,000 | 549,970 | ||||||||||||||
Government of Guam Department of Education COP, 6.875% due 12/1/2040 (John F. Kennedy High School) | B+/NR | 1,000,000 | 1,051,290 | ||||||||||||||
Government of Guam GO, 7.00% due 11/15/2039 pre-refunded 11/15/2019 (Economic Development) | NR/NR | 520,000 | 583,783 | ||||||||||||||
Guam Power Authority, 5.00% due 10/1/2027 (Electric Power System; Insured: AGM) | AA/A2 | 1,000,000 | 1,124,580 | ||||||||||||||
Guam Waterworks Authority, 5.25% due 7/1/2024 (Water and Wastewater System) | A-/Baa2 | 500,000 | 569,675 | ||||||||||||||
Guam Waterworks Authority, 5.00% due 7/1/2028 (Water and Wastewater System) | A-/Baa2 | 500,000 | 544,615 | ||||||||||||||
HAWAII — 0.37% | |||||||||||||||||
| a | City and County of Honolulu GO Floating Rate Note, 1.20% due 9/1/2028 (Rail Transit Project) | NR/Aa1 | 1,000,000 | 1,000,300 | |||||||||||||
IDAHO — 0.57% | |||||||||||||||||
State of Idaho GO, 4.00% due 6/29/2018 (Cash Flow Management) | SP-1+/Mig1 | 1,500,000 | 1,533,855 | ||||||||||||||
ILLINOIS — 8.42% | |||||||||||||||||
Chicago Park District, 5.00% due 1/1/2027 | AA+/NR | 825,000 | 963,212 | ||||||||||||||
Chicago Park District GO, 5.00% due 1/1/2035 (Various Capital Projects) | AA+/NR | 2,000,000 | 2,185,920 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2018 | BB+/Ba1 | 500,000 | 503,525 | ||||||||||||||
City of Chicago, 0% due 11/1/2018 (Water System Improvements; Insured: AMBAC) | A+/Baa1 | 305,000 | 300,126 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2022 | BB+/Ba1 | 1,195,000 | 1,289,262 | ||||||||||||||
City of Chicago, 5.00% due 11/1/2029 (Water System Improvements) | A/Baa2 | 200,000 | 218,430 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2030 (Wastewater Transmission System) | A/NR | 1,500,000 | 1,674,540 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2031 (Riverwalk Expansion Project; Insured: AGM) | AA/A2 | 500,000 | 544,420 | ||||||||||||||
City of Chicago, 5.00% due 1/1/2031 (Chicago O’Hare International Airport) | A/NR | 500,000 | 585,380 | ||||||||||||||
Cook County GO, 5.25% due 11/15/2033 | AA-/A2 | 1,000,000 | 1,072,230 | ||||||||||||||
Illinois Finance Authority, 5.00% due 3/1/2027 (Southern Illinois Healthcare) | A+/NR | 500,000 | 593,900 | ||||||||||||||
Illinois Finance Authority, 5.00% due 8/1/2029 (Advocate Health Care Network) | AA+/Aa2 | 2,195,000 | 2,534,194 | ||||||||||||||
Illinois Finance Authority, 5.00% due 3/1/2032 (Southern Illinois Healthcare) | A+/NR | 500,000 | 572,700 | ||||||||||||||
Illinois Finance Authority, 5.00% due 3/1/2034 (Southern Illinois Healthcare) | A+/NR | 200,000 | 226,816 | ||||||||||||||
Illinois Finance Authority, 5.00% due 8/15/2035 (Silver Cross Hospital & Medical Centers) | NR/Baa1 | 2,355,000 | 2,570,859 | ||||||||||||||
Illinois Finance Authority, 5.75% due 11/15/2037 pre-refunded 11/15/2017 (OSF Healthcare System) | A/A2 | 330,000 | 332,089 | ||||||||||||||
Illinois Finance Authority, 6.00% due 5/15/2039 pre-refunded 5/15/2020 (OSF Healthcare System) | NR/NR | 990,000 | 1,111,859 | ||||||||||||||
Illinois Toll Highway Authority, 5.00% due 1/1/2037 (Move Illinois Program) | AA-/Aa3 | 1,000,000 | 1,144,120 | ||||||||||||||
Kane, Cook, & DuPage Counties School District No. 46 GO, 5.00% due 1/1/2028 | AA-/NR | 1,000,000 | 1,156,440 | ||||||||||||||
Kane, Cook, & DuPage Counties School District No. 46 GO, 5.00% due 1/1/2031 | AA-/NR | 2,255,000 | 2,575,300 | ||||||||||||||
Metropolitan Water Reclamation District of Greater Chicago GO, 5.25% due 12/1/2032 (Various Capital Improvement Projects) | AA+/Aa2 | 40,000 | 49,196 | ||||||||||||||
Will County School District No. 114 GO, 0% due 12/1/2023 (Educational Facilities; Insured: Natl-Re) | NR/A3 | 570,000 | 481,570 | ||||||||||||||
INDIANA — 1.90% | |||||||||||||||||
City of Carmel Redevelopment District COP, 6.50% due 7/15/2035 pre-refunded 1/15/2021 (Performing Arts Center) | NR/NR | 1,000,000 | 1,165,210 | ||||||||||||||
City of Whiting Environmental Facilities, 5.00% due 3/1/2046 (BP Products North America Inc. Project) (AMT) | A-/A1 | 2,500,000 | 2,860,475 | ||||||||||||||
Indiana Finance Authority, 6.375% due 9/15/2041 (Marian University) | BBB-/NR | 1,000,000 | 1,095,770 | ||||||||||||||
10 | Annual Report
Schedule of Investments, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
KANSAS — 1.19% | |||||||||||||||||
City of Wichita, 5.85% due 12/1/2025 (Brentwood Apartments) | B/NR | $ | 895,000 | $ | 866,163 | ||||||||||||
Unified Government of Wyandotte County/Kansas City, 5.00% due 9/1/2031 (Utility System Improvement) | A+/A3 | 1,000,000 | 1,160,740 | ||||||||||||||
Unified Government of Wyandotte County/Kansas City, 5.00% due 9/1/2032 (Utility System Improvement) | A+/A3 | 1,000,000 | 1,164,200 | ||||||||||||||
KENTUCKY — 2.30% | |||||||||||||||||
Commonwealth of Kentucky State Property and Buildings Commission, 5.00% due 11/1/2020 pre-refunded 11/1/2018 (Project No. 89; Insured: AGM) | AA/A1 | 2,500,000 | 2,610,800 | ||||||||||||||
County of Owen, 6.25% due 6/1/2039 (Kentucky-American Water Co. Project) | A/A3 | 540,000 | 576,121 | ||||||||||||||
Kentucky Economic DFA, 0% due 10/1/2021 (Norton Healthcare, Inc.; Insured: Natl-Re) | A/A3 | 715,000 | 655,390 | ||||||||||||||
Kentucky Economic DFA, 0% due 10/1/2022 (Norton Healthcare, Inc.; Insured: Natl-Re) | A/A3 | 2,650,000 | 2,350,259 | ||||||||||||||
LOUISIANA — 1.90% | |||||||||||||||||
City of New Orleans, 5.00% due 12/1/2034 (Water System Facilities Improvement) | A-/NR | 400,000 | 452,368 | ||||||||||||||
Louisiana Energy and Power Authority, 5.25% due 6/1/2038 (LEPA Unit No. 1; Insured: AGM) | AA/A2 | 2,000,000 | 2,289,100 | ||||||||||||||
Parish of St. Charles, 4.00% due 12/1/2040 put 6/1/2022 (Valero Energy Corp. Refinery) | BBB/Baa2 | 2,250,000 | 2,377,710 | ||||||||||||||
MASSACHUSETTS — 0.77% | |||||||||||||||||
Commonwealth of Massachusetts GO, 0.94% due 3/1/2026 put 10/2/2017 (SPA: Barclays Bank plc) (daily demand notes) | AA/Aa1 | 1,000,000 | 1,000,000 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2032 (Jordan Hospital and Milton Hospital) | A-/A3 | 355,000 | 404,579 | ||||||||||||||
Massachusetts Development Finance Agency, 5.00% due 7/1/2033 (Jordan Hospital and Milton Hospital) | A-/A3 | 200,000 | 226,894 | ||||||||||||||
Massachusetts Educational Financing Authority, 5.10% due 1/1/2018 (MEFA Loan Program) (AMT) | AA/NR | 240,000 | 242,153 | ||||||||||||||
Massachusetts Educational Financing Authority, 6.00% due 1/1/2028 (MEFA Loan Program) | AA/NR | 195,000 | 206,277 | ||||||||||||||
MICHIGAN — 5.58% | |||||||||||||||||
Board of Governors of Wayne State University, 5.00% due 11/15/2033 (Educational Facilities and Equipment) | A+/Aa3 | 1,250,000 | 1,450,175 | ||||||||||||||
City of Troy GO, 5.25% due 11/1/2032 (Downtown Development Authority-Community Center Facilities) | AAA/NR | 1,025,000 | 1,169,720 | ||||||||||||||
County of Genesee GO, 5.375% due 11/1/2038 (Water Supply System; Insured: BAM) | AA/A2 | 1,000,000 | 1,119,430 | ||||||||||||||
Detroit City School District, 5.00% due 5/1/2025 (School Building & Site; Insured: Q-SBLF) | AA-/Aa1 | 1,000,000 | 1,128,430 | ||||||||||||||
Detroit City School District GO, 5.25% due 5/1/2027 (School Building & Site; Insured: AGM) | AA/Aa1 | 1,000,000 | 1,201,690 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2036 pre-refunded 5/15/2020 (Bronson Methodist Hospital) | NR/NR | 550,000 | 604,126 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.00% due 5/15/2036 (Bronson Methodist Hospital) | NR/A2 | 450,000 | 482,346 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.25% due 5/15/2041 pre-refunded 5/15/2021 (Bronson Methodist Hospital) | NR/NR | 860,000 | 980,168 | ||||||||||||||
Kalamazoo Hospital Finance Authority, 5.25% due 5/15/2041 (Bronson Methodist Hospital) | NR/A2 | 140,000 | 151,648 | ||||||||||||||
Livonia Public School District GO, 5.00% due 5/1/2036 (School Building & Site) | AA/A2 | 225,000 | 253,665 | ||||||||||||||
Michigan Finance Authority, 5.00% due 4/1/2031 (State Dept. of Human Services Office Buildings) | A+/NR | 1,000,000 | 1,080,840 | ||||||||||||||
Michigan Public School Academy, 8.00% due 8/1/2035 (Will Carleton Charter School) | NR/NR | 975,000 | 1,010,402 | ||||||||||||||
Michigan State Hospital Finance Authority, 5.75% due 11/15/2039 pre-refunded 11/15/2019 (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 | 296,965 | ||||||||||||||
Wayne County Airport Authority, 5.00% due 12/1/2031 (Detroit Metropolitan Wayne County Airport) | A/A2 | 650,000 | 748,696 | ||||||||||||||
Wayne County Airport Authority, 5.00% due 12/1/2033 (Detroit Metropolitan Wayne County Airport) | A/A2 | 825,000 | 943,321 | ||||||||||||||
Wayne County Airport Authority, 5.00% due 12/1/2034 (Detroit Metropolitan Wayne County Airport) | A/A2 | 1,140,000 | 1,298,722 | ||||||||||||||
MISSOURI — 1.12% | |||||||||||||||||
Tax Increment Financing Commission of Kansas City, 5.25% due 3/1/2018 (Maincor Public Improvements) (ETM) | NR/NR | 420,000 | 426,497 | ||||||||||||||
Tax Increment Financing Commission of Kansas City, 6.00% due 5/1/2030 (Union Hill Redevelopment Project) | NR/NR | 2,505,000 | 2,589,143 | ||||||||||||||
NEBRASKA — 0.75% | |||||||||||||||||
Douglas County Health Facilities, 5.00% due 11/1/2029 (Nebraska Methodist Health System) | A-/NR | 950,000 | 1,100,309 | ||||||||||||||
Douglas County Health Facilities, 5.00% due 11/1/2030 (Nebraska Methodist Health System) | A-/NR | 800,000 | 922,096 | ||||||||||||||
NEW JERSEY — 3.63% | |||||||||||||||||
Higher Education Student Assistance Authority, 5.75% due 12/1/2039 (NJCLASS Student Loan Program) (AMT) | A/Aaa | 750,000 | 816,577 | ||||||||||||||
New Jersey Economic Development Authority, 5.50% due 6/15/2030 (School Facilities Construction) | BBB+/Baa1 | 1,000,000 | 1,180,200 | ||||||||||||||
New Jersey EDA, 5.00% due 3/1/2026 (School Facilities Construction) | BBB+/Baa1 | 1,000,000 | 1,094,160 | ||||||||||||||
New Jersey EDA, 5.50% due 9/1/2027 (School Facilities Construction; Insured: Natl-Re) | A/A3 | 1,000,000 | 1,211,860 | ||||||||||||||
New Jersey Transit Corp., 5.00% due 9/15/2020 (Federal Transit Administration Section 5307 Urbanized Area Formula Funds) | A/A3 | 1,000,000 | 1,083,530 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 5.00% due 6/15/2027 (State Transportation System Improvements) | A+/Baa1 | 3,000,000 | 3,387,900 | ||||||||||||||
New Jersey Transportation Trust Fund Authority, 2.08% due 6/15/2034 (State Transportation System Improvements) | BBB+/Baa1 | 1,000,000 | 990,880 | ||||||||||||||
NEW MEXICO — 1.38% | |||||||||||||||||
City of Farmington, 4.70% due 9/1/2024 (Arizona Public Service Co.-Four Corners Project) | A-/A2 | 1,000,000 | 1,076,930 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2032 (Haverland Carter Lifestyle Group) | NR/NR | 2,500,000 | 2,639,275 | ||||||||||||||
NEW YORK — 11.69% | |||||||||||||||||
City of New York GO, 0.90% due 8/1/2022 put 10/2/2017 (Capital Projects; Insured: AGM; SPA: State Street Bank & Trust Co.) (daily demand notes) | AA/Aa2 | 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 | 3,571,920 | ||||||||||||||
Annual Report | 11
Schedule of Investments, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
City of New York GO, 5.00% due 8/1/2031 (City Budget Financial Management) | AA/Aa2 | $ | 2,000,000 | $ | 2,364,840 | ||||||||||||
City of New York GO, 0.92% due 4/1/2042 put 10/2/2017 (City Budget Financial Management; LOC: Mizuho Bank, Ltd.) (daily demand notes) | AA+/Aa1 | 3,845,000 | 3,845,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.93% due 6/15/2048 put 10/2/2017 (Water & Sewer System; SPA: Mizuho Bank, Ltd.) (daily demand notes) | AA+/Aa1 | 1,000,000 | 1,000,000 | ||||||||||||||
New York City Municipal Water Finance Authority, 0.93% due 6/15/2048 put 10/2/2017 (Water & Sewer System; SPA: Mizuho Bank, Ltd.) (daily demand notes) | AA+/Aa1 | 9,600,000 | 9,600,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.93% due 11/1/2022 put 10/2/2017 (WTC Recovery; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AAA/Aa1 | 1,905,000 | 1,905,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.93% due 8/1/2031 put 10/2/2017 (City Capital Projects; SPA: Landesbank Hessen-Thuringen) (daily demand notes) | AAA/Aaa | 2,250,000 | 2,250,000 | ||||||||||||||
New York City Transitional Finance Authority, 0.91% due 11/1/2042 put 10/2/2017 (City Capital Projects; SPA: Barclays Bank plc) (daily demand notes) | AAA/Aa1 | 700,000 | 700,000 | ||||||||||||||
New York State Housing Finance Agency, 0.92% due 11/1/2046 put 10/2/2017 (160 Madison Avenue Housing Development; LOC: PNC Bank, N.A.) (daily demand notes) | NR/A1 | 600,000 | 600,000 | ||||||||||||||
Tobacco Settlement Asset Securitization Corp., 5.00% due 6/1/2022 | A/NR | 1,000,000 | 1,138,420 | ||||||||||||||
Town of Oyster Bay GO, 3.50% due 2/2/2018 | NR/NR | 1,000,000 | 1,006,050 | ||||||||||||||
Town of Oyster Bay GO, 2.50% due 6/1/2018 (Plainview, Locust Valley, South Farmingdale, Jericho, Bethpage, Oyster Bay Water Districts) | NR/NR | 1,985,000 | 1,992,880 | ||||||||||||||
NORTH CAROLINA — 0.65% | |||||||||||||||||
North Carolina Medical Care Commission, 5.00% due 6/1/2029 (Vidant Health) | A+/A1 | 1,500,000 | 1,749,465 | ||||||||||||||
OHIO — 1.45% | |||||||||||||||||
Akron, Bath and Copley Joint Hospital District, 5.25% due 11/15/2030 (Summa Health) | NR/Baa1 | 1,420,000 | 1,647,129 | ||||||||||||||
American Municipal Power, Inc., 5.25% due 2/15/2018 (AMP Combined Hydroelectric Projects) | A/A2 | 500,000 | 507,910 | ||||||||||||||
City of Akron, 5.00% due 12/1/2031 (Community Learning Centers) | AA+/NR | 625,000 | 719,981 | ||||||||||||||
Cleveland-Cuyahoga County Port Authority, 7.00% due 5/15/2040 (Flats East Development Project; LOC: Fifth Third Bank) | BBB+/NR | 945,000 | 1,029,493 | ||||||||||||||
OREGON — 0.96% | |||||||||||||||||
| b | State of Oregon GO, 5.00% due 9/28/2018 (Cash Management) | SP-1+/MIG1 | 2,500,000 | 2,597,425 | |||||||||||||
PENNSYLVANIA — 6.35% | |||||||||||||||||
Allegheny County IDA, 6.75% due 8/15/2035 (Propel Charter School) | BBB-/NR | 895,000 | 965,383 | ||||||||||||||
City of Philadelphia, 5.00% due 8/1/2036 (Philadelphia Gas Works) | NR/NR | 1,000,000 | 1,155,430 | ||||||||||||||
Coatesville Area School District GO, 5.00% due 8/1/2024 (Insured: AGM) (State Aid Withholding) | AA/A2 | 975,000 | 1,155,472 | ||||||||||||||
Coatesville Area School District GO, 5.00% due 8/1/2025 (Insured: AGM) (State Aid Withholding) | AA/A2 | 500,000 | 599,030 | ||||||||||||||
County of Luzerne GO, 5.00% due 11/15/2029 (Insured: AGM) | AA/NR | 1,000,000 | 1,126,180 | ||||||||||||||
Cumberland County Municipal Authority, 5.00% due 1/1/2018 (Diakon Lutheran Social Ministries) | NR/NR | 580,000 | 585,203 | ||||||||||||||
Lancaster County Hospital Authority, 5.00% due 11/1/2019 (Masonic Villages Project) | A/NR | 2,675,000 | 2,862,196 | ||||||||||||||
Pennsylvania Economic DFA, 4.625% due 12/1/2018 (Colver Project; Insured: AMBAC) (AMT) | BBB-/Ba1 | 1,145,000 | 1,152,122 | ||||||||||||||
Pennsylvania Turnpike Commission, 5.35% due 12/1/2030 pre-refunded 12/1/2020 (Highway Improvements) | NR/NR | 770,000 | 871,001 | ||||||||||||||
Pennsylvania Turnpike Commission, 5.35% due 12/1/2030 (Highway Improvements) | A-/A3 | 535,000 | 587,494 | ||||||||||||||
Pennsylvania Turnpike Commission, 5.35% due 12/1/2030 pre-refunded 12/1/2020 (Highway Improvements) | NR/NR | 695,000 | 786,865 | ||||||||||||||
| b | Pennsylvania Turnpike Commission, 5.00% due 12/1/2037 | NR/A1 | 750,000 | 871,013 | |||||||||||||
Philadelphia Authority for Industrial Development, 5.00% due 9/1/2035 (Thomas Jefferson University) | A+/A2 | 1,500,000 | 1,718,100 | ||||||||||||||
Philadelphia IDA, 6.00% due 8/1/2035 pre-refunded 8/1/2020 (Mast Charter School) | BBB/NR | 1,000,000 | 1,135,310 | ||||||||||||||
Philadelphia Municipal Authority, 5.00% due 4/1/2038 (Juvenile Justice Services Center) | A+/A2 | 1,360,000 | 1,529,606 | ||||||||||||||
RHODE ISLAND — 0.28% | |||||||||||||||||
Pawtucket Housing Authority, 5.50% due 9/1/2022 pre-refunded 9/1/2020 | NR/NR | 90,000 | 103,933 | ||||||||||||||
Pawtucket Housing Authority, 5.50% due 9/1/2022 | A+/NR | 225,000 | 255,251 | ||||||||||||||
Pawtucket Housing Authority, 5.50% due 9/1/2024 pre-refunded 9/1/2020 | NR/NR | 100,000 | 115,481 | ||||||||||||||
Pawtucket Housing Authority, 5.50% due 9/1/2024 | A+/NR | 250,000 | 283,148 | ||||||||||||||
SOUTH CAROLINA — 0.73% | |||||||||||||||||
South Carolina Public Service Authority, 5.00% due 12/1/2034 (Summer Nuclear Units 2 and 3) | A+/A1 | 1,780,000 | 1,968,805 | ||||||||||||||
SOUTH DAKOTA — 0.46% | |||||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.00% due 7/1/2027 (Avera Health) | AA-/A1 | 400,000 | 440,376 | ||||||||||||||
South Dakota Health & Educational Facilities Authority, 5.50% due 11/1/2040 (Sanford Health) | A+/A1 | 750,000 | 798,975 | ||||||||||||||
TENNESSEE — 0.65% | |||||||||||||||||
Shelby County Health, Educational and Housing Facility, 5.00% due 5/1/2036 (Methodist Le Bonheur Healthcare) | AA-/A1 | 1,000,000 | 1,155,640 | ||||||||||||||
Tennessee Energy Acquisition Corp., 5.25% due 9/1/2024 | BBB+/A3 | 500,000 | 591,425 | ||||||||||||||
TEXAS — 10.94% | |||||||||||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2032 (Convention Center Hotel First Tier) | BBB+/NR | 500,000 | 576,340 | ||||||||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2033 (Convention Center Hotel First Tier) | BBB+/NR | 600,000 | 686,934 | ||||||||||||||
Austin Convention Enterprises, Inc., 5.00% due 1/1/2034 (Convention Center Hotel First Tier) | BBB+/NR | 500,000 | 569,860 | ||||||||||||||
12 | Annual Report
Schedule of Investments, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
City of Dallas GO, 5.00% due 2/15/2031 (Public Improvements) | AA-/NR | $ | 1,930,000 | $ | 2,201,532 | ||||||||||||
City of Houston, 5.00% due 9/1/2025 (Convention & Entertainment Facilities Department) | A-/A2 | 1,000,000 | 1,177,910 | ||||||||||||||
City of Houston, 5.00% due 9/1/2028 (Convention & Entertainment Facilities Department) | A-/A2 | 325,000 | 375,524 | ||||||||||||||
| a | City of Houston, 5.00% due 11/15/2028 (Combined Utility System) | AA/Aa2 | 2,500,000 | 2,955,575 | |||||||||||||
City of Houston, 5.00% due 9/1/2034 (Convention & Entertainment Facilities Department) | A-/A2 | 1,550,000 | 1,749,671 | ||||||||||||||
City of Houston GO, 5.00% due 3/1/2032 (Public Improvements) | AA/Aa3 | 3,000,000 | 3,511,710 | ||||||||||||||
City of Texas City Industrial Development Corp., 7.375% due 10/1/2020 (ARCO Pipe Line Co. Project) | A-/A1 | 1,165,000 | 1,362,782 | ||||||||||||||
Harris County-Houston Sports Authority, 5.00% due 11/15/2030 | A-/A2 | 2,000,000 | 2,302,860 | ||||||||||||||
Kimble County Hospital District, 6.25% due 8/15/2033 pre-refunded 8/15/2019 | NR/NR | 500,000 | 547,695 | ||||||||||||||
La Vernia Higher Education Finance Corp., 6.25% due 8/15/2039 pre-refunded 8/15/2019 (Kipp, Inc.) | BBB/NR | 1,000,000 | 1,094,610 | ||||||||||||||
Lower Colorado River Authority, 5.00% due 5/15/2026 pre-refunded 5/15/2022 | NR/NR | 20,000 | 23,195 | ||||||||||||||
Lower Colorado River Authority, 5.00% due 5/15/2026 | A/A2 | 2,980,000 | 3,411,087 | ||||||||||||||
San Antonio Energy Acquisition Public Facilities Corp., 5.50% due 8/1/2021 (Natural Gas Supply Agreement) | BBB+/A3 | 40,000 | 45,385 | ||||||||||||||
San Juan Higher Education Finance Authority, 6.70% due 8/15/2040 pre-refunded 8/15/2020 (IDEA Public Schools) | BBB+/NR | 1,000,000 | 1,156,630 | ||||||||||||||
State of Texas, 4.00% due 8/30/2018 (Cash Flow Management) | SP-1+/Mig1 | 3,400,000 | 3,492,378 | ||||||||||||||
Texas Public Finance Authority Charter School Finance Corp., 6.20% due 2/15/2040 pre-refunded 2/15/2020 (Cosmos Foundation, Inc.) | BBB/NR | 1,000,000 | 1,115,220 | ||||||||||||||
Texas Transportation Commission, 5.00% due 8/15/2034 (Central Texas Turnpike System) | BBB+/Baa1 | 1,000,000 | 1,118,150 | ||||||||||||||
U.S. VIRGIN ISLANDS — 0.38% | |||||||||||||||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 (Diageo Project) | NR/Caa2 | 1,500,000 | 1,009,680 | ||||||||||||||
UTAH — 2.43% | |||||||||||||||||
City of Murray, 0.92% due 5/15/2036 put 10/2/2017 (IHC Health Services, Inc.) (daily demand notes) | AA+/Aa1 | 2,800,000 | 2,800,000 | ||||||||||||||
City of Murray, 0.92% due 5/15/2036 put 10/2/2017 (IHC Health Services, Inc.) (daily demand notes) | AA+/Aa1 | 1,500,000 | 1,500,000 | ||||||||||||||
Herriman City, 4.75% due 11/1/2022 pre-refunded 5/1/2020 (Towne Center Access and Utility Improvements) | AA-/NR | 1,000,000 | 1,092,810 | ||||||||||||||
Utah Transit Authority, 5.00% due 6/15/2033 (Integrated Mass Transit System) | A+/A1 | 1,000,000 | 1,160,620 | ||||||||||||||
WASHINGTON — 1.78% | |||||||||||||||||
Skagit County Public Hospital District No. 1, 5.75% due 12/1/2028 pre-refunded 12/1/2017 (Skagit Valley Hospital) | NR/Baa2 | 1,510,000 | 1,522,563 | ||||||||||||||
Washington Health Care Facilities Authority, 5.70% due 7/1/2038 (Overlake Hospital Medical Center) | A/A2 | 1,000,000 | 1,092,370 | ||||||||||||||
Washington Health Care Facilities Authority, 5.75% due 1/1/2045 (Catholic Health Initiatives) | BBB+/Baa1 | 2,000,000 | 2,186,080 | ||||||||||||||
|
| ||||||||||||||||
| TOTAL INVESTMENTS — 100.20% (Cost $255,143,878) | $ | 269,875,356 | |||||||||||||||
| LIABILITIES NET OF OTHER ASSETS — (0.20)% | (532,668 | ) | |||||||||||||||
|
| ||||||||||||||||
| NET ASSETS — 100.00% | $ | 269,342,688 | |||||||||||||||
|
| ||||||||||||||||
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:
| ABAG | Association of Bay Area Governments | ETM | Escrowed to Maturity | |||
| ACA | Insured by American Capital Access | GO | General Obligation | |||
| AGM | Insured by Assured Guaranty Municipal Corp. | HFA | Health Facilities Authority | |||
| AMBAC | Insured by American Municipal Bond Assurance Corp. | HFFA | Health Facilities Financing Authority | |||
| AMT | Alternative Minimum Tax | IDA | Industrial Development Authority | |||
| BAM | Insured by Build America Mutual Insurance Co. | Mtg | Mortgage | |||
| COP | Certificates of Participation | Natl-Re | Insured by National Public Finance Guarantee Corp. | |||
| DFA | Development Finance Authority | Q-SBLF | Insured by Qualified School Bond Loan Fund | |||
| EDA | Economic Development Authority | USD | Unified School District |
See notes to financial statements.
Annual Report | 13
Statement of Assets and Liabilities
Thornburg Strategic Municipal Income Fund | September 30, 2017
ASSETS |
| |||
Investments at value (cost $255,143,878) (Note 3) | $ | 269,875,356 | ||
Cash | 676,225 | |||
Receivable for investments sold | 95,000 | |||
Receivable for fund shares sold | 268,975 | |||
Interest receivable | 3,026,932 | |||
Prepaid expenses and other assets | 21,440 | |||
|
| |||
Total Assets | 273,963,928 | |||
|
| |||
LIABILITIES |
| |||
Payable for investments purchased | 3,470,118 | |||
Payable for fund shares redeemed | 853,114 | |||
Payable to investment advisor and other affiliates (Note 4) | 162,050 | |||
Accounts payable and accrued expenses | 96,980 | |||
Dividends payable | 38,978 | |||
|
| |||
Total Liabilities | 4,621,240 | |||
|
| |||
NET ASSETS | $ | 269,342,688 | ||
|
| |||
NET ASSETS CONSIST OF |
| |||
Undistributed net investment income | $ | 3,111 | ||
Net unrealized appreciation on investments | 14,731,478 | |||
Accumulated net realized gain (loss) | (1,410,396 | ) | ||
Net capital paid in on shares of beneficial interest | 256,018,495 | |||
|
| |||
| $ | 269,342,688 | |||
|
| |||
NET ASSET VALUE |
| |||
Class A Shares: |
| |||
Net asset value and redemption price per share | $ | 15.14 | ||
Maximum sales charge, 2.00% of offering price | 0.31 | |||
|
| |||
Maximum offering price per share | $ | 15.45 | ||
|
| |||
Class C Shares: |
| |||
Net asset value and offering price per share* | $ | 15.16 | ||
|
| |||
Class I Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 15.16 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
14 | Annual Report
Thornburg Strategic Municipal Income Fund | Year Ended September 30, 2017
INVESTMENT INCOME |
| |||
Interest income (net of premium amortized of $2,028,051) | $ | 9,686,919 | ||
|
| |||
EXPENSES |
| |||
Investment advisory fees (Note 4) | 2,141,091 | |||
Administration fees (Note 4) |
| |||
Class A Shares | 84,723 | |||
Class C Shares | 44,791 | |||
Class I Shares | 90,934 | |||
Distribution and service fees (Note 4) |
| |||
Class A Shares | 169,446 | |||
Class C Shares | 213,999 | |||
Transfer agent fees |
| |||
Class A Shares | 60,743 | |||
Class C Shares | 26,624 | |||
Class I Shares | 132,632 | |||
Registration and filing fees |
| |||
Class A Shares | 22,708 | |||
Class C Shares | 20,261 | |||
Class I Shares | 19,877 | |||
Custodian fees (Note 2) | 65,422 | |||
Professional fees | 41,941 | |||
Accounting fees (Note 4) | 10,559 | |||
Trustee fees | 12,128 | |||
Other expenses | 31,798 | |||
|
| |||
Total Expenses | 3,189,677 | |||
Less: |
| |||
Expenses reimbursed by investment advisor (Note 4) | (112,852 | ) | ||
Investment advisory fees waived by investment advisor (Note 4) | (277,740 | ) | ||
|
| |||
Net Expenses | 2,799,085 | |||
|
| |||
Net Investment Income | 6,887,834 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on investments | (1,331,206 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (6,558,226 | ) | ||
|
| |||
Net Realized and Unrealized Loss | (7,889,432 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (1,001,598 | ) | |
|
| |||
See notes to financial statements.
Annual Report | 15
Statements of Changes in Net Assets
Thornburg Strategic Municipal Income Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM |
| |||||||||
OPERATIONS |
| |||||||||
Net investment income | $ | 6,887,834 | $ | 6,298,959 | ||||||
Net realized gain (loss) on investments | (1,331,206 | ) | (14,740 | ) | ||||||
Net unrealized appreciation (depreciation) on investments | (6,558,226 | ) | 6,349,988 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (1,001,598 | ) | 12,634,207 | |||||||
DIVIDENDS TO SHAREHOLDERS |
| |||||||||
From net investment income |
| |||||||||
Class A Shares | (1,557,265 | ) | (1,518,969 | ) | ||||||
Class C Shares | (672,205 | ) | (621,799 | ) | ||||||
Class I Shares | (4,658,606 | ) | (4,158,191 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) |
| |||||||||
Class A Shares | (15,311,985 | ) | 10,728,657 | |||||||
Class C Shares | (4,851,450 | ) | 8,907,855 | |||||||
Class I Shares | (11,093,234 | ) | 34,729,848 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | (39,146,343 | ) | 60,701,608 | |||||||
NET ASSETS |
| |||||||||
Beginning of Year | 308,489,031 | 247,787,423 | ||||||||
|
| |||||||||
End of Year | $ | 269,342,688 | $ | 308,489,031 | ||||||
|
| |||||||||
Undistributed net investment income | $ | 3,111 | $ | 3,353 | ||||||
See notes to financial statements.
16 | Annual Report
Thornburg Strategic Municipal Income Fund | September 30, 2017
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 twenty-one separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund’s primary investment objective is to seek a high level of current income exempt from federal individual income tax, as is consistent in the view of Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”).
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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by the Advisor. Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
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 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.
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 255,143,878 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 14,952,652 | |||
Gross unrealized depreciation on a tax basis | (221,174 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 14,731,478 | |||
|
|
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $1,331,205. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $79,190 (of which $0 are short-term and $79,190 are 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.
During the year ended September 30, 2017 the Fund utilized $10,848 of short-term capital loss carryforward generated after September 30, 2011.
At September 30, 2017, the Fund had $42,089 of undistributed net tax-exempt income, no undistributed tax basis net ordinary income and no of undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the year ended September 30, 2017 and September 30, 2016 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Tax exempt income | $ | 6,755,009 | $ | 6,207,463 | ||||||
Ordinary income | 133,067 | 91,496 | ||||||||
|
| |||||||||
Total | $ | 6,888,076 | $ | 6,298,959 | ||||||
|
| |||||||||
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017
The Trustees of the Trust have appointed the Advisor to assist the Trustees in obtaining market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from the FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs when it sells the investment.
Annual Report | 19
Notes to Financial Statements, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
Municipal Bonds | $ | 269,875,356 | $ | – | $ | 269,875,356 | $ | – | ||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 269,875,356 | $ | – | $ | 269,875,356 | $ | – | ||||||||||||
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, 2017.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| MANAGEMENT FEE SCHEDULE | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.750 | % | |||
Next $500 million | 0.675 | ||||
Next $500 million | 0.625 | ||||
Next $500 million | 0.575 | ||||
Over $2 billion | 0.500 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.75% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $10,559 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $859 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $2,225 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A and Class C of shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I shares. The Advisor and Distributor each 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, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, unless the Advisor ceases
20 | Annual Report
Notes to Financial Statements, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017
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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor contractually waived Fund level investment advisory fees of $277,740. The Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $79,820 for Class A shares, $16,429 for Class C shares, $16,603 for Class I shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 8.5%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had transactions with affiliated funds of $2,200,000 in purchases and $6,895,000 in sales generating no realized gains or losses.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,322,804 | $ | 19,909,384 | 1,882,295 | $ | 29,048,882 | ||||||||||
Shares issued to shareholders in | 100,078 | 1,505,509 | 91,530 | 1,411,031 | ||||||||||||
Shares repurchased | (2,451,992 | ) | (36,726,878 | ) | (1,283,224 | ) | (19,731,256 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (1,029,110 | ) | $ | (15,311,985) | 690,601 | $ | 10,728,657 | |||||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 493,092 | $ | 7,406,382 | 1,073,899 | $ | 16,569,930 | ||||||||||
Shares issued to shareholders in | 41,235 | 620,979 | 36,232 | 559,203 | ||||||||||||
Shares repurchased | (856,940 | ) | (12,878,811 | ) | (531,309 | ) | (8,221,278 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (322,613 | ) | $ | (4,851,450 | ) | 578,822 | $ | 8,907,855 | ||||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 5,124,506 | $ | 76,773,451 | 5,173,837 | $ | 79,887,572 | ||||||||||
Shares issued to shareholders in | 284,146 | 4,280,377 | 235,073 | 3,628,305 | ||||||||||||
Shares repurchased | (6,138,227 | ) | (92,147,062 | ) | (3,157,683 | ) | (48,786,029 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (729,575 | ) | $ | (11,093,234 | ) | 2,251,227 | $ | 34,729,848 | ||||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $69,754,544 and $92,122,351, respectively.
OTHER NOTES
Risks: The Fund’s investments subject it to risks including, but not limited to, credit risk, interest rate risk, high yield risk, management risk, derivatives 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 21
Thornburg Strategic Municipal Income Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 15.53 | 0.35 | (0.39 | ) | (0.04 | ) | (0.35 | ) | – | (0.35 | ) | $ | 15.14 | ||||||||||||||||||||||||||
2016(b) | $ | 15.16 | 0.33 | 0.37 | 0.70 | (0.33 | ) | – | (0.33 | ) | $ | 15.53 | ||||||||||||||||||||||||||||
2015(b) | $ | 15.19 | 0.35 | (0.02 | ) | 0.33 | (0.35 | ) | (0.01 | ) | (0.36 | ) | $ | 15.16 | ||||||||||||||||||||||||||
2014(b) | $ | 14.40 | 0.41 | 0.85 | 1.26 | (0.42 | ) | (0.05 | ) | (0.47 | ) | $ | 15.19 | |||||||||||||||||||||||||||
2013(b) | $ | 15.17 | 0.41 | (0.74 | ) | (0.33 | ) | (0.41 | ) | (0.03 | ) | (0.44 | ) | $ | 14.40 | |||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 15.54 | 0.28 | (0.38 | ) | (0.10 | ) | (0.28 | ) | – | (0.28 | ) | $ | 15.16 | ||||||||||||||||||||||||||
2016 | $ | 15.17 | 0.28 | 0.37 | 0.65 | (0.28 | ) | – | (0.28 | ) | $ | 15.54 | ||||||||||||||||||||||||||||
2015 | $ | 15.20 | 0.30 | (0.02 | ) | 0.28 | (0.30 | ) | (0.01 | ) | (0.31 | ) | $ | 15.17 | ||||||||||||||||||||||||||
2014 | $ | 14.41 | 0.37 | 0.84 | 1.21 | (0.37 | ) | (0.05 | ) | (0.42 | ) | $ | 15.20 | |||||||||||||||||||||||||||
2013 | $ | 15.18 | 0.37 | (0.74 | ) | (0.37 | ) | (0.37 | ) | (0.03 | ) | (0.40 | ) | $ | 14.41 | |||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 15.54 | 0.39 | (0.38 | ) | 0.01 | (0.39 | ) | – | (0.39 | ) | $ | 15.16 | |||||||||||||||||||||||||||
2016 | $ | 15.17 | 0.38 | 0.37 | 0.75 | (0.38 | ) | – | (0.38 | ) | $ | 15.54 | ||||||||||||||||||||||||||||
2015 | $ | 15.20 | 0.39 | (0.01 | ) | 0.38 | (0.40 | ) | (0.01 | ) | (0.41 | ) | $ | 15.17 | ||||||||||||||||||||||||||
2014 | $ | 14.41 | 0.46 | 0.85 | 1.31 | (0.47 | ) | (0.05 | ) | (0.52 | ) | $ | 15.20 | |||||||||||||||||||||||||||
2013 | $ | 15.18 | 0.45 | (0.73 | ) | (0.28 | ) | (0.46 | ) | (0.03 | ) | (0.49 | ) | $ | 14.41 | |||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
22 | Annual Report
Financial Highlights, Continued
Thornburg Strategic Municipal Income Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 2.30 | 1.09 | 1.09 | 1.30 | (0.23 | ) | 27.35 | $ | 61,525 | ||||||||||||||||||||||
| 2.11 | 1.25 | 1.25 | 1.29 | 4.63 | 11.24 | $ | 79,058 | |||||||||||||||||||||||
| 2.28 | 1.25 | 1.25 | 1.31 | 2.18 | 12.13 | $ | 66,722 | |||||||||||||||||||||||
| 2.82 | 1.25 | 1.25 | 1.31 | 8.93 | 21.89 | $ | 61,424 | |||||||||||||||||||||||
| 2.74 | 1.25 | 1.25 | 1.31 | (2.21 | ) | 37.42 | $ | 52,278 | ||||||||||||||||||||||
| 1.88 | 1.52 | 1.52 | 1.66 | (0.59 | ) | 27.35 | $ | 32,926 | ||||||||||||||||||||||
| 1.80 | 1.55 | 1.55 | 1.66 | 4.32 | 11.24 | $ | 38,773 | |||||||||||||||||||||||
| 1.98 | 1.55 | 1.55 | 1.70 | 1.87 | 12.13 | $ | 29,073 | |||||||||||||||||||||||
| 2.53 | 1.55 | 1.55 | 1.72 | 8.60 | 21.89 | $ | 26,168 | |||||||||||||||||||||||
| 2.44 | 1.55 | 1.55 | 1.73 | (2.50 | ) | 37.42 | $ | 21,344 | ||||||||||||||||||||||
| 2.56 | 0.83 | 0.83 | 0.94 | 0.09 | 27.35 | $ | 174,892 | |||||||||||||||||||||||
| 2.42 | 0.93 | 0.93 | 0.93 | 4.96 | 11.24 | $ | 190,658 | |||||||||||||||||||||||
| 2.60 | 0.93 | 0.93 | 0.93 | 2.50 | 12.13 | $ | 151,992 | |||||||||||||||||||||||
| 3.12 | 0.94 | 0.93 | 0.94 | 9.27 | 21.89 | $ | 137,109 | |||||||||||||||||||||||
| 3.04 | 0.95 | 0.95 | 0.96 | (1.92 | ) | 37.42 | $ | 89,262 | ||||||||||||||||||||||
Annual Report | 23
Report of Independent Registered Public Accounting Firm
Thornburg Strategic Municipal Income Fund
To the Trustees and Shareholders of the 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 the Thornburg Strategic Municipal Income Fund (the “Fund”) as of September 30, 2017, 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 as of September 30, 2017 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
24 | Annual Report
Thornburg Strategic Municipal Income Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
| BEGINNING ACCOUNT VALUE 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,026.50 | $ | 5.84 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.31 | $ | 5.82 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,024.60 | $ | 8.41 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,016.76 | $ | 8.38 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,028.30 | $ | 4.72 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.41 | $ | 4.70 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.15%; C: 1.66%; 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.
Annual Report | 25
Thornburg Strategic Municipal Income Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
26 | Annual Report
Trustees and Officers, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2017 and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 27
Trustees and Officers, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
28 | Annual Report
Thornburg Strategic Municipal Income Fund | September 30, 2017 (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, 2017, dividends paid by the Fund of $6,755,009 (or the maximum allowed) are tax exempt dividends and $133,067 are taxable ordinary investment income dividends for federal income tax purposes. The information and the distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2017. Complete information will be reported in conjunction with your 2017 Form 1099.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg. com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Strategic Municipal Income Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Annual Report | 29
Other Information, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017 (Unaudited)
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Information provided to the Trustees indicated that the comparability of indices and fund categories to the Fund may be limited for a number of reasons. Measures of risk and relative return demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions. The Trustees generally attach additional significance to the investment performance of the Fund from the perspective of longer term shareholders, and noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the objectives of the Fund. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and overall Fund expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and other Fund expenses for two share classes to fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. The Trustees noted that the Advisor has agreed to certain fee waivers and expense reimbursements for the current period. Comparative fee and expense data noted as having been considered by the Trustees showed that the advisory fee for the Fund after a contractual waiver was higher than the median and average levels for the fund category, the level of total expense for a representative share class of the Fund was higher than the median and average expense levels for the category, and that the level of total expense for a second representative share class was comparable to the median and average levels for the category. Peer group data showed that the Fund’s advisory fee after a contractual waiver was higher than the median levels of the two peer groups considered but comparable to other funds in the peer groups, and that the total expense levels of two representative share classes were higher than the medians of their respective peer groups but comparable to other funds in the peer groups. The Trustees did not find the differences significant in view of their findings and conclusions respecting 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
30 | Annual Report
Other Information, Continued
Thornburg Strategic Municipal Income Fund | September 30, 2017 (Unaudited)
the requirements of a sub-advised mutual fund and a fund as to which the investment advisor is the primary advisor and sponsor, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staffing competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation their consideration of 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, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The information provided demonstrated 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 31
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
32 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
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| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
Annual Report September 30, 2017 THORNBURG CALIFORNIA LIMITED TERM MUNICIPAL FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg California Limited Term Municipal Fund
Annual Report ^ September 30, 2017
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class A | LTCAX | 885-215-426 | ||||||||
| Class C | LTCCX | 885-215-418 | ||||||||
| Class I | LTCIX | 885-215-392 | ||||||||
Minimum investments for Class I shares may be higher than those for other classes. Class I shares may not be available to all investors.
Investments carry risks, including possible loss of principal. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The 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 Funds are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.
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.
Annual Report | 3
Thornburg California Limited Term Municipal Fund | September 30, 2017 (Unaudited)
October 12, 2017
Dear Shareholder:
We are pleased to present the annual report for Thornburg California Limited Term Municipal Fund. The net asset value (NAV) of the Class A shares decreased by 20 cents to $13.78 per share during the fiscal year ended September 30, 2017. If you were with us for the entire period, you received dividends of 18.3 cents per share. Dividends were lower for the Class C shares and higher for the Class I shares to account for varying class-specific expenses. The Class A shares of your Fund underperformed the index with a negative 0.11% total return (without sales charge) for the fiscal year ended September 30, 2017, compared to the 0.98% total return for the BofA Merrill Lynch 1-10 Year U.S. Municipal Securities Index.
The drivers of the Fund’s total return relative to its benchmark include its interest rate sensitivity, as measured by the Fund’s duration, differing credit quality allocations, and other risk factors. The Fund underperformed its benchmark by 1.09%. The impact from the Fund’s 0.36 years shorter duration detracted 0.08%, while credit quality allocations subtracted 0.04%. Other risk factors added 0.02%, while the Fund’s expenses and residuals accounted for the remainder of the performance differential.
The New Administration’s Agenda, U.S. Economy, and Fed Policy
The Trump administration took office in January of 2017 with an aggressive agenda. It promised to repeal and replace the Affordable Care Act (ACA), known also as Obamacare, increase infrastructure spending, scale back federal regulatory constraints on businesses, and reform the federal tax code. Initially, the promise of this pro-growth agenda caused interest rates to increase substantially upon Trump’s election in November. This was followed by further increases in December as investors sold municipal bonds to capture losses that appeared to be more valuable in 2016 than 2017. Some nine months later, the repeal and replacement of the ACA has failed to become a reality—tripped up in both the U.S. House and Senate.
Meanwhile, the silence around increased infrastructure spending is deafening. Federal regulatory constraints have been eased only through executive orders. The process for tax reform has just begun, but the administration’s initial measure appears to be hitting a rough patch as the proposed removal of the federal deduction for state and local taxes (SALT) has generated some blowback. The president’s framework for tax reform was mute with regard to continuation of the tax exemption for municipal bonds, although several sources have attributed the administration to stating that that municipal bond tax exemption is safe. The president’s proposal does call for the repeal of the alterna-
tive minimum tax. All that said, this is Washington, DC, and with tax reform a major piece of the president’s agenda, watching this sausage get made will be interesting.
After a rather punk showing for the first two quarters of fiscal 2017, in which gross domestic product (GDP) growth was 1.8% and 1.2%, respectively, the economy generated a 3.1% GDP growth rate in the third fiscal quarter. The fiscal fourth quarter estimates of GDP have varied greatly as the impact of three devastating hurricanes (Harvey, Irma and Maria) are taken into consideration. After considering the impacts of Harvey and Irma alone, Goldman Sachs lowered its third-quarter GDP estimate by 0.8% to 2.0%.
Nonfarm payrolls have been a bright spot for the economy, averaging 168,000 new jobs per month for the first 11 months of fiscal 2017. This is a little lower than the 219,000 average monthly jobs generated in fiscal 2016. This all translates to an unemployment rate of 4.4% as of the end of August 2017 versus 4.9% at the end of fiscal 2016. One explanation for this slowdown is that employers cannot find qualified workers. This theory is substantiated by another significant economic indicator, the U.S. Job Openings and Labor Turnover Summary (JOLTS), which measures either newly created or unoccupied positions where an employer is taking specific actions to fill these positions. In July, this measure registered a reading of about 6.2 million, which is the highest since the time series began in December of 2000.
The Phillips Curve, an economic theory posed by A.W. Phillips, states that inflation and unemployment have a stable and inverse relationship. As unemployment decreases, inflation is supposed to increase. As of yet, this theory has not manifested itself. In fact, the Federal Reserve Board’s (Fed) favorite inflation measure, the Core Personal Consumption Expenditures Index (Core PCE)—which measures prices paid by consumers for goods and services without the volatility from movements in food and energy prices—has declined throughout the year. The last available reading at the end of August 2017 (1.30%) is much lower than the one at the end of September 2017 (1.80%).
On September 20, 2017, Bloomberg reported, “Federal Reserve Chair Janet Yellen acknowledged that the fall in inflation this year was a bit of a ‘mystery’ but suggested that the central bank was on course to raise interest rates again in 2017 nonetheless.” Any increase would be on top of the three hikes in the Federal Funds rate in fiscal 2017, bringing the range for the Federal Funds rate from 0.50%—0.75% at the beginning of the year to 1.00%—1.25% on June 14, 2017.
In addition, the Fed will begin reducing its $4.5 trillion balance sheet in October, by slowly unwinding the stimulus program it engaged a decade ago to combat the Great Recession. Its plan is to reduce its holdings of U.S. Treasury and mortgage-backed
4 | Annual Report
Letter to Shareholders, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017 (Unaudited)
securities by $10 billion in October of 2017 and gradually raise the reduction amount in the months ahead. Essentially, this reduces the demand for these securities from a purchaser that was not altogether economically motivated in the traditional sense. The Fed believes that the economy is strong enough that this gradual reduction of its balance sheet will not be disruptive, although some do not share this opinion. CNBC reported in August 2017, in an interview with JPMorgan Chase CEO Jamie Dimon, that he;
“stopped short of saying the bond market is on the cusp of a collapse, but said he wouldn’t personally buy any long-term government debt. ‘I’m not going to call it a bubble, but I personally wouldn’t be buying a 10-year sovereign debt anywhere in the world…my view is the Fed is doing the right things, raising rates, telling people we’re going to start reducing the balance sheet,’ Dimon added.”
The Municipal Bond Market
The municipal bond market suffered a setback in November and December of 2016. The surprise U.S. election results and the new administration’s pro-growth and pro-infrastructure agenda caused interest rates to initially rise and the tax loss harvesting caused rates to rise higher in December of 2016.
In California, personal income rose 3.41% between the second quarter of 2016 and the second quarter of 2017 (most recent data available). This is a significant driver of demand for California municipal bonds. This increase in demand for in-state municipal bonds has driven prices of these securities to extreme levels. The Bureau of Labor Statistics reported a steady unemployment rate of 5.1% in August from 4.8% in July. This is a preliminary reading and subject to revision. Compare this to the national unemployment rate, which was 4.4% in August and 4.2% in September. State tax revenues are up 2.93% on an annual basis from the second quarter of 2016 through the second quarter of 2017. Equity prices for in-state domiciled companies are up 25.67% from June 30, 2016 through June 30, 2017 (here too, the latest data available). By contrast, the S&P 500 Index is up 17.89% (with reinvested dividends). California’s tax revenues are highly dependent on the capital gains that rising equity prices generate. The state economy seems stable and demand is strong for California’s debt.
California is one of the states that would be significantly impacted by the repeal of the SALT deduction. If this were to pass, it could positively affect the valuations of in-state municipal bonds as demand grows from investors looking to reduce their overall tax burden.
The municipal bond market’s returns were a result of rising rates across the yield curve—with long-term rates increasing more than short-term rates as shown in Figure 1.
| Figure 1 | | | 12-Month Change in Rates for AAA Rated General Obligation Municipal Bonds (as of September 29, 2017) |
Source: Bloomberg
President Trump’s goal of tax reform in particular led investors to believe that losses taken in 2016 were of greater value than losses taken in 2017. After this uptick in rates, yields moved steadily lower, and 10-year AAA general obligation bond yields decreased by about 0.30% between December 31, 2016 and September 30, 2017. Quality spreads continue to be extremely narrow, as income-starved investors extended out the yield curve or accepted lower credit quality in search of meeting an income bogey.
Cash flows into municipal bond mutual funds have been positive but nothing like the levels we experienced in fiscal year 2016. Foreign institutional investors have shown an increased interest in the municipal bond markets throughout the U.S., exhibiting some of the same characteristics as domestic retail investors by trying to quench a thirst for income.
Credit quality in the municipal bond market has been pretty stable except for some idiosyncratic disturbances. Illinois, for example, went down to the wire to pass its first budget in three years. The rating agencies threatened to drop the state’s credit rating to below investment grade, which would have seriously limited its bonds’ marketability. These antics caused the price of Illinois debt to go dramatically lower prior to the ultimate passage of the budget, after which it rallied considerably.
Elsewhere, several prominent high-yield securities came to market and were very well received. One was a mall in New Jersey across from the Meadowlands, which has been mothballed for approximately 15 years. Originally called Xanadu and referred to as the “ugliest building in New Jersey” by the Governor, it is
Annual Report | 5
Letter to Shareholders, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017 (Unaudited)
now called “The American Dream Mall” in its recent incarnation. The fact that this and other non-rated, high-yield projects are so well received is more evidence of how income-starved investors have become in an overly accommodative central bank world. By the way, we did not purchase this bond issue, because visitation needs to be 2x that of Disney World just to break even. And, when Amazon is disrupting everything from retail goods to groceries, we felt the last thing New Jersey needed was another mall.
Current Portfolio Positioning
We have positioned this portfolio, like our others, at the bottom end of its risk spectrum. If this sounds familiar, it is, as we said the same thing last year. We have lower durations, higher credit quality and higher reserve positions (to hedge against increased market illiquidity).
We believe that investors are not currently being compensated to take much risk. Real yields (yield less inflation) are low by historic standards (off the bottom but still low). Credit spreads are very narrow, back to pre-crisis levels, when 50% or more of the new issue market was insured by AAA municipal bond insurers. This is particularly concerning, as today only about 7% to 8% of the new issue market is insured and the municipal bond insurers are no longer rated AAA. A few desperate municipal market issuers, like Hartford, CT, are openly discussing debt restructuring and the president is making comments like the following with regard to Puerto Rico’s debt: “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out.” The precedents set by the recent municipal Chapter 9 proceedings of Detroit, MI and San Bernardino, CA have in effect placed bondholders in a
subordinated position to pensioners. Sometimes investors are motivated more by greed than fear and vice versa. Greed seems to be the current primary motivating factor, and it is in such an environment that caution should be exercised. That is exactly what we are doing—relying on value-oriented, bottom-up fundamental analysis in portfolio construction.
Why Own Municipal Bonds
Fixed income assets are an important part of a well-diversified portfolio, as they can provide a stabilizing force to the potential swings of the equity portion of the portfolio. These asset classes are not always positively correlated and can therefore dampen the overall portfolio’s volatility.
Thank you for your continued trust in us.
Sincerely,
Christopher Ryon,CFA
Portfolio Manager
Managing Director
Nicholos Venditti,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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
6 | Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
A Shares (Incep: 2/19/87) | |||||||||||||||||||||||||
Without sales charge | -0.11% | 1.20% | 1.55% | 3.05% | 4.24% | ||||||||||||||||||||
With sales charge | -1.59% | 0.69% | 1.25% | 2.90% | 4.19% | ||||||||||||||||||||
C Shares (Incep: 9/1/94) | |||||||||||||||||||||||||
Without sales charge | -0.36% | 0.95% | 1.30% | 2.78% | 3.22% | ||||||||||||||||||||
With sales charge | -0.85% | 0.95% | 1.30% | 2.78% | 3.22% | ||||||||||||||||||||
I Shares (Incep: 4/1/97) | 0.19% | 1.51% | 1.88% | 3.38% | 3.71% | ||||||||||||||||||||
30-DAY YIELDS, A SHARES
(with sales charge)
Annualized Distribution Yield | 1.35% | ||||
SEC Yield | 0.37% |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. Class A shares are sold with a maximum sales charge of 1.50%. Class C shares include a 0.50% CDSC for the first year only. There is no sales charge for Class I shares. As disclosed in the most recent prospectus, the total annual fund operating expenses are as follows: A shares, 0.93%; C shares, 1.18%; I shares, 0.62%.
Glossary
The BofA Merrill Lynch 1-10 Year Municipal Securities Index is a subset of the BofA Merrill Lynch U.S. Municipal Securities Index including all securities with a remaining term to final maturity less than 10 years.
The S&P 500 Index is an unmanaged broad measure of the U.S. stock market.
The performance of any index is not indicative of the performance of any particular investment. 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 or net asset value.
Bond Credit Ratings (Credit Quality) – 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.
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 incorporates a bond’s embedded option features, such as call provisions.
General Obligation Bond (GO) – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Insured Bonds – Individual bonds are sometimes insured by private companies. The insurance guarantees the payment of principal and interest on a bond issue if the issuer defaults. Mutual funds are not insured, even if the underlying bonds are insured.
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.
Annual Report | 7
Thornburg California Limited Term Municipal Fund | September 30, 2017 (Unaudited)
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.
As described in the Fund’s prospectus, the Fund offers California investors double tax-free yields (may be subject to Alternative Minimum Tax) in a laddered municipal bond portfolio with a dollar-weighted 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 typically 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
KEY PORTFOLIO ATTRIBUTES
| Number of Bonds | 383 | ||||
| Effective Duration | 3.1 Yrs | ||||
| Average Maturity | 3.8 Yrs |
There is no guarantee that the Fund will meet its investment objectives.
All data is subject to change. Charts may not add up to 100% due to rounding.
SECURITY 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. Credit quality ratings for Thornburg’s municipal portfolios used the highest rating available from either Standard & Poor’s or Moody’s Investors Service.
Unrated pre-refunded and escrowed-to-maturity bonds are included in the not rated category.
PORTFOLIO LADDER
Percent of portfolio maturing in each year. Cash includes cash equivalents and other.
8 | Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2018 (Alameda County Medical Center Highland Hospital) | AA/Aa1 | $ | 400,000 | $ | 419,204 | ||||||||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2019 (Alameda County Medical Center Highland Hospital) | AA/Aa1 | 750,000 | 815,595 | ||||||||||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2019 (Juvenile Justice) | AA/Aa1 | 3,010,000 | 3,273,255 | ||||||||||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2020 (Alameda County Medical Center Highland Hospital) | AA/Aa1 | 725,000 | 815,277 | ||||||||||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2020 (Juvenile Justice) | AA/Aa1 | 3,200,000 | 3,598,464 | ||||||||||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2021 (Public Facilities Capital Projects) | AA/Aa1 | 1,000,000 | 1,157,330 | ||||||||||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2021 (Juvenile Justice) | AA/Aa1 | 500,000 | 578,665 | ||||||||||||||
Alameda County Joint Powers Authority, 5.00% due 12/1/2024 (Alameda County Medical Center Highland Hospital) | AA/Aa1 | 2,500,000 | 2,991,375 | ||||||||||||||
Anaheim Public Financing Authority, 0% due 9/1/2022 (Public Improvements; Insured: AGM) | AA/A2 | 3,000,000 | 2,739,120 | ||||||||||||||
Bay Area Toll Authority, 2.95% due 4/1/2047 (San Francisco Bay Area Toll Bridge) | AA/Aa3 | 4,775,000 | 5,014,705 | ||||||||||||||
Bay Area Toll Authority Floating Rate Note, 1.58% due 4/1/2047 put 10/1/2019 (San Francisco Bay Area Toll Bridge) | AA/Aa3 | 5,000,000 | 5,025,300 | ||||||||||||||
Bonita USD GO, 5.00% due 8/1/2024 (Educational Facilities) | AA-/NR | 1,000,000 | 1,166,700 | ||||||||||||||
Brea Redevelopment Agency, 5.00% due 8/1/2019 (Redevelopment Project AB) | AA-/NR | 2,000,000 | 2,148,560 | ||||||||||||||
Brentwood Infrastructure Financing Authority, 5.00% due 9/2/2020 (Residential Single Family Development; Insured: AGM) | AA/NR | 1,760,000 | 1,961,678 | ||||||||||||||
Brentwood Infrastructure Financing Authority, 5.00% due 9/2/2021 (Residential Single Family Development; Insured: AGM) | AA/NR | 925,000 | 1,062,140 | ||||||||||||||
Brentwood Infrastructure Financing Authority, 5.00% due 9/2/2022 (Residential Single Family Development; Insured: AGM) | AA/NR | 850,000 | 989,519 | ||||||||||||||
Brentwood Infrastructure Financing Authority, 5.00% due 9/2/2023 (Residential Single Family Development; Insured: AGM) | AA/NR | 2,690,000 | 3,189,883 | ||||||||||||||
California Educational Facilities Authority, 5.00% due 4/1/2018 (Pitzer College) | NR/A2 | 1,540,000 | 1,571,185 | ||||||||||||||
California Educational Facilities Authority, 0% due 10/1/2019 (Loyola Marymount University; Insured: Natl-Re) | NR/A2 | 2,025,000 | 1,975,610 | ||||||||||||||
California Educational Facilities Authority, 5.00% due 4/1/2020 (Pitzer College) | NR/A2 | 1,445,000 | 1,580,324 | ||||||||||||||
California Educational Facilities Authority, 5.00% due 4/1/2022 (Chapman University) | NR/A2 | 2,000,000 | 2,250,040 | ||||||||||||||
California HFFA, 5.50% due 10/1/2017 (Providence Health and Services) | AA-/Aa3 | 1,100,000 | 1,100,286 | ||||||||||||||
California HFFA, 5.50% due 2/1/2018 (Community Program Developmental Disabilities; Insured: California Mtg Insurance) | AA-/NR | 2,715,000 | 2,756,485 | ||||||||||||||
California HFFA, 6.00% due 10/1/2018 (Providence Health and Services) | AA-/Aa3 | 1,000,000 | 1,050,260 | ||||||||||||||
California HFFA, 5.00% due 11/15/2018 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,235,000 | 1,286,611 | ||||||||||||||
California HFFA, 5.10% due 2/1/2019 (Episcopal Home; Insured: California Mtg Insurance) (ETM) | AA-/NR | 530,000 | 547,962 | ||||||||||||||
California HFFA, 5.00% due 11/15/2020 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,190,000 | 1,317,163 | ||||||||||||||
California HFFA, 5.25% due 3/1/2022 (Dignity Health) | A/A3 | 1,000,000 | 1,126,070 | ||||||||||||||
California HFFA, 5.00% due 11/15/2023 (Children’s Hospital Los Angeles) | BBB+/Baa2 | 1,000,000 | 1,146,820 | ||||||||||||||
California HFFA, 5.00% due 7/1/2024 (St. Joseph Health System) | AA-/Aa3 | 1,000,000 | 1,182,300 | ||||||||||||||
California HFFA, 5.00% due 11/1/2027 (Kaiser Permanente) | AA-/NR | 3,000,000 | 3,770,100 | ||||||||||||||
California HFFA, 0.78% due 9/1/2028 put 10/2/2017 (Adventist Health System/West; LOC: U.S. Bank, N.A.) (daily demand notes) | AA-/Aa2 | 1,600,000 | 1,600,000 | ||||||||||||||
California HFFA, 5.00% due 7/1/2034 put 10/18/2022 (St. Joseph Health System) | AA-/Aa3 | 2,000,000 | 2,325,460 | ||||||||||||||
California HFFA, 5.00% due 7/1/2043 put 10/17/2017 (St. Joseph Health System) | AA-/Aa3 | 3,000,000 | 3,006,210 | ||||||||||||||
California HFFA, 5.00% due 7/1/2043 put 10/15/2020 (St. Joseph Health System) | AA-/Aa3 | 5,000,000 | 5,534,800 | ||||||||||||||
California Infrastructure and Economic Development Bank, 5.00% due 7/1/2018 (The Scripps Research Institute) | NR/A1 | 200,000 | 206,080 | ||||||||||||||
California Infrastructure and Economic Development Bank, 5.00% due 7/1/2019 (The Scripps Research Institute) | NR/A1 | 200,000 | 213,414 | ||||||||||||||
California Infrastructure and Economic Development Bank, 5.00% due 7/1/2020 (The Scripps Research Institute) | NR/A1 | 200,000 | 220,306 | ||||||||||||||
California Infrastructure and Economic Development Bank, 5.00% due 7/1/2021 (The Scripps Research Institute) | NR/A1 | 200,000 | 227,112 | ||||||||||||||
California Infrastructure and Economic Development Bank, 5.00% due 7/1/2022 (The Scripps Research Institute) | NR/A1 | 200,000 | 232,014 | ||||||||||||||
California Infrastructure and Economic Development Bank, 5.00% due 7/1/2023 (The Scripps Research Institute) | NR/A1 | 175,000 | 206,852 | ||||||||||||||
California Infrastructure and Economic Development Bank, 5.00% due 7/1/2024 (The Scripps Research Institute) | NR/A1 | 200,000 | 239,692 | ||||||||||||||
California Infrastructure and Economic Development Bank, 5.00% due 7/1/2025 (The Scripps Research Institute) | NR/A1 | 200,000 | 242,426 | ||||||||||||||
California Infrastructure and Economic Development Bank, 5.00% due 7/1/2026 (The Scripps Research Institute) | NR/A1 | 200,000 | 244,822 | ||||||||||||||
| a | California Infrastructure and Economic Development Bank, 5.00% due 7/1/2027 (The Scripps Research Institute) | NR/A1 | 250,000 | 303,030 | |||||||||||||
California Municipal Finance Authority, 4.00% due 10/1/2019 (Biola University) | NR/Baa1 | 405,000 | 427,571 | ||||||||||||||
California Municipal Finance Authority, 5.00% due 10/1/2020 (Biola University) | NR/Baa1 | 605,000 | 670,110 | ||||||||||||||
California Municipal Finance Authority, 5.00% due 10/1/2021 (Biola University Residential Hall and Parking Structure) | NR/Baa1 | 150,000 | 170,178 | ||||||||||||||
California Municipal Finance Authority, 5.00% due 10/1/2021 (Biola University) | NR/Baa1 | 370,000 | 419,772 | ||||||||||||||
California Municipal Finance Authority, 5.00% due 10/1/2022 (Biola University Residential Hall and Parking Structure) | NR/Baa1 | 160,000 | 185,005 | ||||||||||||||
California Municipal Finance Authority, 5.00% due 10/1/2023 (Biola University Residential Hall and Parking Structure) | NR/Baa1 | 125,000 | 146,953 | ||||||||||||||
California Municipal Finance Authority, 5.00% due 10/1/2023 (Biola University) | NR/Baa1 | 410,000 | 482,004 | ||||||||||||||
California Municipal Finance Authority, 5.00% due 10/1/2024 (Biola University) | NR/Baa1 | 740,000 | 883,109 | ||||||||||||||
California Municipal Finance Authority, 5.00% due 10/1/2025 (Biola University) | NR/Baa1 | 300,000 | 360,984 | ||||||||||||||
| a | California Municipal Finance Authority, 5.00% due 10/1/2027 (Biola University) | NR/Baa1 | 430,000 | 524,854 | |||||||||||||
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 | 2,836,948 | ||||||||||||||
California Pollution Control Financing Authority, 0.95% due 8/1/2024 (Republic Services, Inc. Project) | BBB+/NR | 3,000,000 | 3,000,000 | ||||||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
California Pollution Control Financing Authority, 0.87% due 11/1/2026 put 10/2/2017 (Pacific Gas & Electric Co.; LOC: Mizuho Bank Ltd.) (daily demand notes) | AA/NR | $ | 14,400,000 | $ | 14,400,000 | ||||||||||||
California School Cash Reserve Program Authority, 3.00% due 6/29/2018 | SP-1+/NR | 6,000,000 | 6,102,780 | ||||||||||||||
California State Housing Finance Agency, 3.05% due 12/1/2019 (Multi-Family Housing; Insured: FHA) | NR/Aa1 | 735,000 | 736,007 | ||||||||||||||
California State Infrastructure & Economic Development Bank, 5.25% due 8/15/2020 (King City High School) | AA-/NR | 1,000,000 | 1,095,640 | ||||||||||||||
California State Infrastructure & Economic Development Bank, 1.75% due 11/1/2026 (Pacific Gas and Electric Company) | A-/A2 | 3,500,000 | 3,517,535 | ||||||||||||||
California State Infrastructure & Economic Development Bank, 1.75% due 11/1/2026 (Pacific Gas and Electric Company) | A-/A2 | 3,500,000 | 3,514,385 | ||||||||||||||
California State Public Works Board, 5.00% due 6/1/2020 (University of California; Insured: Natl-Re) (ETM) | AA+/Aaa | 1,185,000 | 1,310,326 | ||||||||||||||
California State Public Works Board, 5.125% due 3/1/2021 pre-refunded 3/1/2020 (Various State Participating Agency Capital Projects) | A+/Aaa | 1,635,000 | 1,795,982 | ||||||||||||||
California State Public Works Board, 5.00% due 12/1/2021 (Judicial Council Projects) | A+/A1 | 3,100,000 | 3,565,837 | ||||||||||||||
California State Public Works Board, 5.00% due 4/1/2022 (California School for the Deaf Riverside Campus) | A+/A1 | 565,000 | 653,654 | ||||||||||||||
California State Public Works Board, 5.00% due 6/1/2022 (Yuba City Courthouse) | A+/A1 | 1,950,000 | 2,264,652 | ||||||||||||||
California State Public Works Board, 5.00% due 9/1/2022 (Correctional and Rehabilitation Facilities) | A+/A1 | 3,250,000 | 3,795,577 | ||||||||||||||
California State Public Works Board, 5.00% due 11/1/2022 (Correctional and Rehabilitation Facilities) | A+/A1 | 1,500,000 | 1,758,135 | ||||||||||||||
California State Public Works Board, 5.00% due 12/1/2022 (Judicial Council Projects) | A+/A1 | 1,200,000 | 1,369,824 | ||||||||||||||
California State Public Works Board, 5.00% due 3/1/2023 (Judicial Council Projects) | A+/A1 | 1,400,000 | 1,650,292 | ||||||||||||||
California State Public Works Board, 5.00% due 9/1/2023 (Correctional and Rehabilitation Facilities) | A+/A1 | 3,600,000 | 4,286,664 | ||||||||||||||
California State Public Works Board, 5.00% due 11/1/2023 (Laboratory Facility and San Diego Courthouse) | A+/A1 | 3,000,000 | 3,583,680 | ||||||||||||||
California State Public Works Board, 5.00% due 3/1/2024 (Judicial Council Projects) | A+/A1 | 1,000,000 | 1,170,630 | ||||||||||||||
California State Public Works Board, 5.00% due 4/1/2024 (Correctional and Rehabilitation Facilities) | A+/A1 | 3,350,000 | 3,876,385 | ||||||||||||||
California State Public Works Board, 5.00% due 9/1/2024 (Correctional and Rehabilitation Facilities) | A+/A1 | 3,580,000 | 4,331,836 | ||||||||||||||
California State Public Works Board, 5.00% due 11/1/2024 (Laboratory Facility and San Diego Courthouse) | A+/A1 | 4,000,000 | 4,796,640 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 4/1/2019 (Kaiser Foundation Hospitals) | AA-/NR | 3,715,000 | 3,936,785 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 7/1/2020 pre-refunded 1/1/2019 (Aspire Public Schools; LOC: PCSD Guaranty Pool I, LLC) | NR/NR | 685,000 | 709,201 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 11/1/2020 (Cottage Health System) | A+/NR | 100,000 | 111,111 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 5/15/2021 (Irvine East Campus Apartments) | NR/Baa1 | 760,000 | 859,476 | ||||||||||||||
California Statewide Communities Development Authority, 4.00% due 11/1/2021 (Cottage Health System) | A+/NR | 150,000 | 165,087 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 11/1/2022 (Cottage Health System) | A+/NR | 125,000 | 145,910 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 11/1/2023 (Cottage Health System) | A+/NR | 150,000 | 178,800 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 5/15/2024 (Irvine East Campus Apartments) | NR/Baa1 | 1,000,000 | 1,192,480 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 11/1/2024 (Cottage Health System) | A+/NR | 200,000 | 240,686 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 11/1/2025 (Cottage Health System) | A+/NR | 135,000 | 160,983 | ||||||||||||||
California Statewide Communities Development Authority, 5.00% due 5/15/2027 (Irvine East Campus Apartments) | NR/Baa1 | 500,000 | 600,030 | ||||||||||||||
California Statewide Communities Development Authority, 2.625% due 11/1/2033 (Southern California Edison Company) | A/Aa3 | 4,195,000 | 4,312,166 | ||||||||||||||
Calipatria USD GO, 0% due 8/1/2025 (Educational Facilities; Insured: ACA) | NR/NR | 4,360,000 | 3,211,576 | ||||||||||||||
Carson Redevelopment Agency, 6.00% due 10/1/2019 (Project Area 1) (ETM) | A-/NR | 1,050,000 | 1,129,096 | ||||||||||||||
Castaic USD GO, 0% due 5/1/2018 (Insured: Natl-Re) | A/NR | 615,000 | 610,787 | ||||||||||||||
CDC Successor Agency of the City of Santee, 5.00% due 8/1/2023 (Redevelopment and Low and Moderate Income Housing; Insured: BAM) | AA/NR | 500,000 | 594,885 | ||||||||||||||
CDC Successor Agency of the City of Santee, 5.00% due 8/1/2025 (Redevelopment and Low and Moderate Income Housing; Insured: BAM) | AA/NR | 550,000 | 670,791 | ||||||||||||||
CDC Successor Agency of the City of Santee, 5.00% due 8/1/2027 (Redevelopment and Low and Moderate Income Housing; Insured: BAM) | AA/NR | 1,000,000 | 1,219,440 | ||||||||||||||
Central Valley Financing Authority, 5.25% due 7/1/2020 (Carson Ice) | AA-/Aa3 | 500,000 | 556,160 | ||||||||||||||
Chabot-Las Positas Community College District GO, 4.00% due 8/1/2019 (Educational Facilities) | AA/Aa2 | 360,000 | 380,336 | ||||||||||||||
Chabot-Las Positas Community College District GO, 5.00% due 8/1/2020 (Educational Facilities) | AA/Aa2 | 485,000 | 539,519 | ||||||||||||||
Chabot-Las Positas Community College District GO, 5.00% due 8/1/2021 (Educational Facilities) | AA/Aa2 | 400,000 | 459,344 | ||||||||||||||
City and County of San Francisco COP, 5.00% due 11/1/2022 (525 Golden Gate Avenue-Public Utilities Commission Office Project) | AA/Aa2 | 700,000 | 756,189 | ||||||||||||||
City of Antioch Public Financing Authority, 5.00% due 5/1/2022 (Municipal Facilities Project) | AA-/NR | 500,000 | 577,975 | ||||||||||||||
City of Antioch Public Financing Authority, 5.00% due 5/1/2024 (Municipal Facilities Project) | AA-/NR | 900,000 | 1,075,923 | ||||||||||||||
City of Burbank, 5.00% due 6/1/2018 (Burbank Water and Power System) | AA-/Aa3 | 360,000 | 369,950 | ||||||||||||||
City of Burbank, 5.00% due 6/1/2020 (Burbank Water and Power System) | AA-/Aa3 | 625,000 | 690,519 | ||||||||||||||
City of Chula Vista, 1.65% due 7/1/2018 (San Diego Gas & Electric Co.) | A+/Aa2 | 3,500,000 | 3,502,065 | ||||||||||||||
City of Chula Vista COP, 5.25% due 3/1/2020 (Capital Facilities Project) (ETM) | AA-/NR | 1,300,000 | 1,432,210 | ||||||||||||||
City of Chula Vista COP, 5.00% due 10/1/2024 (Police Facility Project) | AA-/Aa3 | 1,700,000 | 2,064,327 | ||||||||||||||
City of Chula Vista Financing Authority, 5.00% due 5/1/2026 (Infrastructure, Facilities and Equipment) | AA-/NR | 2,500,000 | 3,068,550 | ||||||||||||||
City of Chula Vista Financing Authority, 5.00% due 5/1/2027 (Infrastructure, Facilities and Equipment) | AA-/NR | 1,000,000 | 1,238,930 | ||||||||||||||
City of Clovis, 5.00% due 3/1/2021 (Water System Facilities; Insured: BAM) | AA/A1 | 550,000 | 619,476 | ||||||||||||||
City of Clovis, 5.00% due 3/1/2022 (Water System Facilities; Insured: BAM) | AA/A1 | 720,000 | 830,506 | ||||||||||||||
City of Clovis, 5.00% due 3/1/2023 (Water System Facilities; Insured: BAM) | AA/A1 | 1,000,000 | 1,179,440 | ||||||||||||||
10 | Annual Report
Schedule of Investments, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
City of Folsom, 5.00% due 12/1/2018 (Community Facilities District No. 2) | A+/NR | $ | 965,000 | $ | 1,010,133 | ||||||||||||
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 | 2,370,000 | 2,381,305 | ||||||||||||||
City of Los Angeles GO, 5.00% due 6/28/2018 (Cash Flow Management) | SP-1+/Mig1 | 7,500,000 | 7,727,100 | ||||||||||||||
City of Manteca, 4.00% due 7/1/2018 (Water Supply System) | AA-/A1 | 550,000 | 562,595 | ||||||||||||||
City of Manteca, 4.00% due 12/1/2018 (Wastewater Quality Control Facility) | AA/Aa3 | 375,000 | 388,185 | ||||||||||||||
City of Manteca, 5.00% due 7/1/2019 (Water Supply System) | AA-/A1 | 400,000 | 427,696 | ||||||||||||||
City of Manteca, 5.00% due 7/1/2021 (Water Supply System) | AA-/A1 | 1,000,000 | 1,138,720 | ||||||||||||||
City of Manteca, 5.00% due 7/1/2023 (Water Supply System) | AA-/A1 | 650,000 | 751,452 | ||||||||||||||
City of Porterville COP, 6.30% due 10/1/2018 (Public Service Capital Projects; Insured: AMBAC) (ETM) | NR/NR | 245,000 | 251,333 | ||||||||||||||
City of Redding COP, 5.00% due 6/1/2020 pre-refunded 6/1/2018 (City Electric System; Insured: AGM) | NR/A2 | 1,445,000 | 1,485,446 | ||||||||||||||
City of Redding COP, 5.00% due 6/1/2020 (City Electric System; Insured: AGM) | NR/A2 | 1,055,000 | 1,083,496 | ||||||||||||||
City of San Jose Financing Authority, 5.00% due 6/1/2019 (Civic Center Project) | AA/Aa2 | 650,000 | 693,134 | ||||||||||||||
City of San Jose Financing Authority, 5.00% due 6/1/2020 (Civic Center Project) | AA/Aa2 | 600,000 | 660,414 | ||||||||||||||
City of San Jose Financing Authority, 4.00% due 6/1/2021 (Civic Center Project) | AA/Aa2 | 1,000,000 | 1,097,130 | ||||||||||||||
| a | City of San Jose Financing Authority, 5.00% due 6/1/2022 (Civic Center Project) | AA/Aa2 | 745,000 | 862,717 | |||||||||||||
City of San Jose Financing Authority, 5.00% due 6/1/2023 (Civic Center Project) | AA/Aa2 | 1,000,000 | 1,180,080 | ||||||||||||||
City of San Jose Financing Authority, 5.00% due 6/1/2024 (Civic Center Project) | AA/Aa2 | 750,000 | 887,805 | ||||||||||||||
City of Torrance, 5.00% due 9/1/2020 (Torrance Memorial Medical Center) | BBB+/A3 | 1,155,000 | 1,271,066 | ||||||||||||||
Community Development Commission of the City of Santa Fe Springs, 5.00% due 9/1/2018 (Redevelopment Project; Insured: Natl-Re) | A+/A3 | 1,235,000 | 1,239,125 | ||||||||||||||
County of El Dorado Community Facilities District, 5.00% due 9/1/2019 (El Dorado Hills Development) | A/NR | 1,700,000 | 1,828,095 | ||||||||||||||
County of Los Angeles GO, 5.00% due 6/29/2018 (Fiscal Year 2017-2018 Expenditures) | SP-1+/Mig1 | 7,000,000 | 7,212,730 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 6/1/2020 (Bunker Hill Project) | AA/NR | 1,000,000 | 1,099,300 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 6/1/2021 (Bunker Hill Project) | AA/NR | 2,500,000 | 2,832,200 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 6/1/2022 (Bunker Hill Project) | AA/NR | 1,000,000 | 1,158,010 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 6/1/2023 (Bunker Hill Project) | AA/NR | 1,000,000 | 1,180,080 | ||||||||||||||
County of Los Angeles Redevelopment Refunding Authority, 5.00% due 6/1/2024 (Bunker Hill Project) | AA/NR | 500,000 | 598,480 | ||||||||||||||
County of Monterey COP, 5.25% due 8/1/2021 (Natividad Medical Center; Insured: AGM) | AA/Aa3 | 3,700,000 | 4,052,314 | ||||||||||||||
County of Riverside, 3.00% due 10/11/2017 | NR/Mig1 | 15,000,000 | 15,010,800 | ||||||||||||||
Delano Financing Authority, 5.00% due 12/1/2017 (Police Station and Capital Improvements) | A-/NR | 1,085,000 | 1,092,085 | ||||||||||||||
Delano Financing Authority, 5.00% due 12/1/2018 (Police Station and Capital Improvements) | A-/NR | 1,135,000 | 1,181,569 | ||||||||||||||
Delano Financing Authority, 5.00% due 12/1/2019 (Police Station and Capital Improvements) | A-/NR | 1,195,000 | 1,281,769 | ||||||||||||||
Desert Sands USD COP, 4.00% due 3/1/2019 (Educational Facilities; Insured: BAM) | AA/A1 | 1,000,000 | 1,041,390 | ||||||||||||||
Desert Sands USD COP, 5.00% due 3/1/2020 (Educational Facilities; Insured: BAM) | AA/A1 | 700,000 | 764,134 | ||||||||||||||
Desert Sands USD COP, 5.00% due 3/1/2021 (Educational Facilities; Insured: BAM) | AA/A1 | 1,080,000 | 1,215,140 | ||||||||||||||
El Dorado Irrigation District COP, 5.00% due 3/1/2025 (Water System Capital Improvements) | AA-/Aa3 | 1,200,000 | 1,471,164 | ||||||||||||||
El Dorado Irrigation District COP, 5.00% due 3/1/2026 (Water System Capital Improvements) | AA-/Aa3 | 1,500,000 | 1,861,695 | ||||||||||||||
Elk Grove Finance Authority, 4.00% due 9/1/2020 (Poppy Ridge CFD No. 2003-1 and East Franklin CFD No. 2002-1) | A-/NR | 575,000 | 621,029 | ||||||||||||||
Elk Grove Finance Authority, 5.00% due 9/1/2021 (Poppy Ridge CFD No. 2003-1 and East Franklin CFD No. 2002-1) | A-/NR | 450,000 | 512,775 | ||||||||||||||
Elk Grove Finance Authority, 5.00% due 9/1/2025 (Poppy Ridge CFD No. 2003-1 and East Franklin CFD No. 2002-1) | A-/NR | 750,000 | 906,735 | ||||||||||||||
Emeryville Redevelopment Agency, 5.00% due 9/1/2022 (Emeryville and Shellmound Park Projects; Insured: AGM) | AA/NR | 2,775,000 | 3,244,197 | ||||||||||||||
Emeryville Redevelopment Agency, 5.00% due 9/1/2023 (Emeryville and Shellmound Park Projects; Insured: AGM) | AA/NR | 2,420,000 | 2,880,090 | ||||||||||||||
Emeryville Redevelopment Agency, 5.00% due 9/1/2024 (Emeryville and Shellmound Park Projects; Insured: AGM) | AA/NR | 3,900,000 | 4,713,384 | ||||||||||||||
Folsom Cordova USD COP, 5.00% due 4/1/2021 (Educational Facilities; Insured: AGM) | AA/NR | 1,000,000 | 1,127,500 | ||||||||||||||
Fresno County USD GO, 5.90% due 8/1/2018 (Educational Facilities; Insured: Natl-Re) | A+/A3 | 630,000 | 655,635 | ||||||||||||||
Fresno County USD GO, 5.90% due 8/1/2019 (Educational Facilities; Insured: Natl-Re) | A+/A3 | 675,000 | 733,354 | ||||||||||||||
Fresno County USD GO, 5.00% due 2/1/2020 (Educational Facilities; Insured: Natl-Re) | A+/A3 | 2,510,000 | 2,731,809 | ||||||||||||||
Fresno County USD GO, 5.90% due 8/1/2020 (Educational Facilities; Insured: Natl-Re) | A+/A3 | 720,000 | 814,010 | ||||||||||||||
Government of Guam, 3.00% due 11/15/2017 (Economic Development) | A/NR | 300,000 | 300,522 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2017 (Educational Facilities Improvements) | A/NR | 1,720,000 | 1,727,344 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2023 (Various Capital Projects) | A/NR | 1,250,000 | 1,410,212 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2025 (Various Capital Projects) | A/NR | 4,175,000 | 4,736,955 | ||||||||||||||
Guam Power Authority, 5.00% due 10/1/2021 (Electric Power System; Insured: AGM) | AA/A2 | 1,275,000 | 1,433,291 | ||||||||||||||
Hacienda La Puente USD COP, 4.00% due 6/1/2018 (Educational Facilities; Insured: AGM) | AA/A1 | 705,000 | 719,192 | ||||||||||||||
Hacienda La Puente USD COP, 5.00% due 6/1/2019 (Educational Facilities; Insured: AGM) | AA/A1 | 875,000 | 931,752 | ||||||||||||||
Hacienda La Puente USD COP, 5.00% due 6/1/2020 (Educational Facilities; Insured: AGM) | AA/A1 | 740,000 | 814,266 | ||||||||||||||
Hacienda La Puente USD COP, 5.00% due 6/1/2022 (Educational Facilities; Insured: AGM) | AA/A1 | 575,000 | 665,971 | ||||||||||||||
Hacienda La Puente USD COP, 5.00% due 6/1/2023 (Educational Facilities; Insured: AGM) | AA/A1 | 1,535,000 | 1,811,423 | ||||||||||||||
Hacienda La Puente USD COP, 5.00% due 6/1/2024 (Educational Facilities; Insured: AGM) | AA/A1 | 880,000 | 1,055,771 | ||||||||||||||
Hacienda La Puente USD COP, 5.00% due 6/1/2025 (Educational Facilities; Insured: AGM) | AA/A1 | 1,300,000 | 1,574,222 | ||||||||||||||
Hemet USD GO, 4.00% due 8/1/2018 (Insured: AGM) | AA/NR | 1,335,000 | 1,368,188 | ||||||||||||||
Irvine Ranch Water District, 0.78% due 10/1/2041 put 10/2/2017 (Water and Sewer System Improvements; LOC: U.S. Bank, N.A.) (daily demand notes) | AA-/Aa2 | 2,455,000 | 2,455,000 | ||||||||||||||
Annual Report | 11
Schedule of Investments, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Irvine USD, 0.78% due 9/1/2056 put 10/2/2017 (Community Facilities District No. 09-1; LOC: U.S. Bank, N.A.) (daily demand notes) | AA-/Aa2 | $ | 15,295,000 | $ | 15,295,000 | ||||||||||||
Jurupa Public Financing Authority, 4.00% due 9/1/2018 (Community Services District-Eastvale Area; Insured: AGM) | AA/NR | 320,000 | 328,890 | ||||||||||||||
Jurupa Public Financing Authority, 4.50% due 9/1/2018 (Community Services District-Eastvale Area; Insured: AGM) | AA/NR | 870,000 | 898,145 | ||||||||||||||
Jurupa Public Financing Authority, 4.50% due 9/1/2019 (Community Services District-Eastvale Area; Insured: AGM) | AA/NR | 905,000 | 964,603 | ||||||||||||||
Jurupa Public Financing Authority, 4.50% due 9/1/2020 (Community Services District-Eastvale Area; Insured: AGM) | AA/NR | 945,000 | 1,034,180 | ||||||||||||||
Kern High School District GO, 4.00% due 8/1/2018 (Insured: AGM) | AA-/Aa2 | 500,000 | 513,060 | ||||||||||||||
La Quinta Redevelopment Agency, 5.00% due 9/1/2021 (Redevelopment Project Areas No. 1 and 2) | AA-/NR | 1,000,000 | 1,146,100 | ||||||||||||||
La Quinta Redevelopment Agency, 5.00% due 9/1/2022 (Redevelopment Project Areas No. 1 and 2) | AA-/NR | 2,000,000 | 2,344,060 | ||||||||||||||
La Quinta Redevelopment Agency, 5.00% due 9/1/2023 (Redevelopment Project Areas No. 1 and 2) | AA-/NR | 1,500,000 | 1,793,280 | ||||||||||||||
Lodi Public Financing Authority, 5.00% due 10/1/2020 (City Police Building and Jail) | A+/NR | 965,000 | 1,072,626 | ||||||||||||||
Lodi Public Financing Authority, 5.00% due 10/1/2021 (City Police Building and Jail) | A+/NR | 1,020,000 | 1,164,677 | ||||||||||||||
Lodi Public Financing Authority, 5.00% due 10/1/2022 (City Police Building and Jail) | A+/NR | 1,040,000 | 1,194,950 | ||||||||||||||
Lodi Public Financing Authority, 5.00% due 10/1/2023 (City Police Building and Jail) | A+/NR | 1,120,000 | 1,279,522 | ||||||||||||||
Los Angeles County Public Works Financing Authority, 5.00% due 8/1/2018 (Multiple Capital Projects) | AA/Aa2 | 2,060,000 | 2,130,843 | ||||||||||||||
Los Angeles County Schools Pooled Financing Program COP, 5.00% due 6/1/2022 (Compton USD; Insured: AGM) | AA/A2 | 1,500,000 | 1,734,120 | ||||||||||||||
Los Angeles County Schools Regionalized Business Services Corp. COP, 0% due 8/1/2021 (Insured: AMBAC) | NR/NR | 2,135,000 | 1,997,997 | ||||||||||||||
Los Angeles Department of Airports, 5.50% due 5/15/2018 (Los Angeles International Airport) (AMT) | AA/Aa3 | 2,000,000 | 2,056,060 | ||||||||||||||
Los Angeles Department of Water and Power, 5.00% due 7/1/2024 (Power System Capital Improvements) | AA-/Aa2 | 1,000,000 | 1,222,970 | ||||||||||||||
Los Angeles Department of Water and Power, 5.00% due 7/1/2025 (Power System Capital Improvements) | AA-/Aa2 | 500,000 | 620,445 | ||||||||||||||
Los Angeles Department of Water and Power, 5.00% due 7/1/2026 (Power System Capital Improvements) | AA-/Aa2 | 300,000 | 369,975 | ||||||||||||||
Los Angeles Department of Water and Power, 0.83% due 7/1/2035 put 10/2/2017 (Power System Capital Improvements; SPA: Bank of America, N.A.) (daily demand notes) | AA-/Aa2 | 5,300,000 | 5,300,000 | ||||||||||||||
Los Angeles Department of Water and Power, 0.83% due 7/1/2035 put 10/2/2017 (Power System Capital Improvements; SPA: Citibank, N.A.) (daily demand notes) | AA-/Aa2 | 18,900,000 | 18,900,000 | ||||||||||||||
Los Angeles USD COP, 5.50% due 12/1/2018 (Educational Facilities and Information Technology Infrastructure) | A+/A1 | 2,000,000 | 2,103,980 | ||||||||||||||
Los Angeles USD GO, 5.00% due 7/1/2022 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 2,750,000 | 3,224,650 | ||||||||||||||
Los Angeles USD GO, 5.00% due 7/1/2023 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 3,000,000 | 3,591,540 | ||||||||||||||
Los Angeles USD GO, 5.00% due 7/1/2024 (Educational Facilities and Information Technology Infrastructure) | AA-/Aa2 | 3,000,000 | 3,661,380 | ||||||||||||||
Lynwood USD GO, 5.00% due 8/1/2023 (Insured: AGM) | AA/A2 | 1,000,000 | 1,185,120 | ||||||||||||||
Manteca USD Community Facilities District No. 1989-2, 4.00% due 9/1/2018 (Educational Facilities; Insured: AGM) | AA/A2 | 500,000 | 513,640 | ||||||||||||||
Manteca USD Community Facilities District No. 1989-2, 4.00% due 9/1/2019 (Educational Facilities; Insured: AGM) | AA/A2 | 870,000 | 917,450 | ||||||||||||||
Manteca USD Community Facilities District No. 1989-2, 5.00% due 9/1/2020 (Educational Facilities; Insured: AGM) | AA/A2 | 1,425,000 | 1,578,857 | ||||||||||||||
Manteca USD Community Facilities District No. 1989-2, 5.00% due 9/1/2021 (Educational Facilities; Insured: AGM) | AA/A2 | 750,000 | 855,345 | ||||||||||||||
Manteca USD Community Facilities District No. 1989-2, 5.00% due 9/1/2023 (Educational Facilities; Insured: AGM) | AA/A2 | 500,000 | 592,885 | ||||||||||||||
Mark West Union School District GO, 4.125% due 8/1/2020 (Educational Facilities; Insured: Natl-Re) | AA/A3 | 1,275,000 | 1,278,302 | ||||||||||||||
Milpitas Redevelopment Agency, 5.00% due 9/1/2025 (Redevelopment Project Area No. 1) | AA-/NR | 2,300,000 | 2,818,880 | ||||||||||||||
Modesto Irrigation District, 5.00% due 7/1/2022 (San Joaquin Valley Electric System) | A+/A2 | 1,000,000 | 1,164,310 | ||||||||||||||
Moreno Valley Public Financing Authority, 5.00% due 11/1/2024 (Public Improvements) | A+/NR | 1,455,000 | 1,749,201 | ||||||||||||||
Municipal Improvement Corp. of Los Angeles, 5.00% due 11/1/2017 (Capital Equipment) | AA-/Aa3 | 3,235,000 | 3,247,196 | ||||||||||||||
Municipal Improvement Corp. of Los Angeles, 5.00% due 3/1/2018 (Capital Equipment) | AA-/Aa3 | 4,765,000 | 4,848,530 | ||||||||||||||
Murrieta Valley USD Public Financing Authority GO, 5.00% due 9/1/2023 (Educational Facilities; Insured: BAM) | AA/NR | 1,080,000 | 1,281,971 | ||||||||||||||
Natomas USD GO, 5.00% due 8/1/2024 (Insured: BAM) | AA/A1 | 2,425,000 | 2,873,649 | ||||||||||||||
North City West School Facilities Financing Authority, 5.00% due 9/1/2021 (Carmel Valley; Insured: AGM) | AA/NR | 2,155,000 | 2,457,691 | ||||||||||||||
North City West School Facilities Financing Authority, 5.00% due 9/1/2022 (Carmel Valley; Insured: AGM) | AA/NR | 2,260,000 | 2,630,821 | ||||||||||||||
Northern California Power Agency, 5.00% due 7/1/2018 (Hydroelectric Project) | A+/A1 | 1,250,000 | 1,288,000 | ||||||||||||||
Northern California Power Agency, 5.00% due 6/1/2019 (Lodi Energy Center) | A-/A2 | 2,340,000 | 2,494,534 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2022 (County of Alameda Educational Facilities) | AA-/Aa3 | 745,000 | 875,517 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2023 (County of Alameda Educational Facilities) | AA-/Aa3 | 700,000 | 838,635 | ||||||||||||||
Oakland USD GO, 5.00% due 8/1/2025 (County of Alameda Educational Facilities) | AA-/Aa3 | 1,300,000 | 1,608,204 | ||||||||||||||
Palomar Pomerado Health GO, 0% due 8/1/2019 (Insured: AGM) | AA/A2 | 2,000,000 | 1,947,740 | ||||||||||||||
Palomar Pomerado Health GO, 0% due 8/1/2021 (Insured: Natl-Re) | A/A2 | 2,850,000 | 2,652,267 | ||||||||||||||
Pasadena USD GO, 5.00% due 8/1/2024 (Educational Facilities Improvements) | A+/Aa2 | 250,000 | 304,880 | ||||||||||||||
Pasadena USD GO, 5.00% due 8/1/2024 (2019 Crossover) | A+/Aa2 | 800,000 | 975,616 | ||||||||||||||
Pasadena USD GO, 5.00% due 8/1/2025 (Educational Facilities Improvements) | A+/Aa2 | 365,000 | 450,633 | ||||||||||||||
Pasadena USD GO, 5.00% due 8/1/2025 (2019 Crossover) | A+/Aa2 | 1,000,000 | 1,234,610 | ||||||||||||||
| a | Pasadena USD GO, 5.00% due 8/1/2026 (Educational Facilities Improvements) | A+/Aa2 | 500,000 | 625,175 | |||||||||||||
Pasadena USD GO, 5.00% due 8/1/2026 (2019 Crossover) | A+/Aa2 | 1,000,000 | 1,250,350 | ||||||||||||||
Pomona Public Financing Authority, 2.00% due 6/1/2018 (Facilities Improvements) | A+/NR | 500,000 | 503,505 | ||||||||||||||
Pomona Public Financing Authority, 3.00% due 6/1/2020 (Facilities Improvements) | A+/NR | 250,000 | 261,920 | ||||||||||||||
Pomona Public Financing Authority, 4.00% due 6/1/2024 (Facilities Improvements; Insured: AGM) | AA/NR | 450,000 | 510,507 | ||||||||||||||
Pomona Public Financing Authority, 4.00% due 6/1/2026 (Facilities Improvements; Insured: AGM) | AA/NR | 275,000 | 314,449 | ||||||||||||||
Pomona USD GO, 6.10% due 2/1/2020 (Educational Facilities Improvements; Insured: Natl-Re) | A/A3 | 465,000 | 517,861 | ||||||||||||||
12 | Annual Report
Schedule of Investments, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Rancho Santa Fe Community Services District Financing Authority, 3.00% due 9/1/2018 | A-/NR | $ | 1,055,000 | $ | 1,074,644 | ||||||||||||
Rancho Santa Fe Community Services District Financing Authority, 3.00% due 9/1/2019 | A-/NR | 750,000 | 778,043 | ||||||||||||||
Rancho Santa Fe Community Services District Financing Authority, 4.00% due 9/1/2020 | A-/NR | 1,000,000 | 1,080,050 | ||||||||||||||
Rancho Santa Fe Community Services District Financing Authority, 4.00% due 9/1/2021 | A-/NR | 550,000 | 605,776 | ||||||||||||||
Rancho Santa Fe Community Services District Financing Authority, 4.00% due 9/1/2022 | A-/NR | 475,000 | 529,863 | ||||||||||||||
Rancho Santa Fe Community Services District Financing Authority, 4.00% due 9/1/2023 | A-/NR | 650,000 | 734,136 | ||||||||||||||
Rancho Santa Fe Community Services District Financing Authority, 5.00% due 9/1/2024 | A-/NR | 750,000 | 899,753 | ||||||||||||||
Rancho Santa Fe Community Services District Financing Authority, 5.00% due 9/1/2025 | A-/NR | 1,745,000 | 2,109,670 | ||||||||||||||
Rancho Santa Fe Community Services District Financing Authority, 5.00% due 9/1/2026 | A-/NR | 915,000 | 1,108,568 | ||||||||||||||
Redevelopment Agency of the City and County of San Francisco, 5.00% due 6/1/2020 (Yerba Buena Center Redevelopment Project Area; Insured: AGM) | AA/A1 | 1,730,000 | 1,905,958 | ||||||||||||||
Redevelopment Agency of the City of Rialto, 5.00% due 9/1/2023 (Merged Project Area; Insured: BAM) | AA/NR | 550,000 | 655,479 | ||||||||||||||
Redevelopment Agency of the City of Rialto, 5.00% due 9/1/2024 (Merged Project Area; Insured: BAM) | AA/NR | 500,000 | 604,280 | ||||||||||||||
Ridgecrest Redevelopment Agency, 5.25% due 6/30/2018 (Redevelopment Project) | A-/NR | 1,050,000 | 1,083,694 | ||||||||||||||
Ridgecrest Redevelopment Agency, 5.50% due 6/30/2019 (Redevelopment Project) | A-/NR | 1,050,000 | 1,131,690 | ||||||||||||||
Ridgecrest Redevelopment Agency, 5.50% due 6/30/2020 (Redevelopment Project) | A-/NR | 1,040,000 | 1,161,025 | ||||||||||||||
Riverside County Infrastructure Financing Authority, 3.00% due 11/1/2017 (Capital Improvement Projects) | AA-/NR | 1,000,000 | 1,001,980 | ||||||||||||||
Riverside County Infrastructure Financing Authority, 4.00% due 11/1/2018 (Capital Improvement Projects) | AA-/NR | 1,000,000 | 1,032,730 | ||||||||||||||
Riverside County Infrastructure Financing Authority, 4.00% due 11/1/2019 (Capital Improvement Projects) | AA-/NR | 1,700,000 | 1,804,414 | ||||||||||||||
Riverside County Infrastructure Financing Authority, 5.00% due 11/1/2020 (Capital Improvement Projects) | AA-/NR | 605,000 | 676,130 | ||||||||||||||
Riverside County Infrastructure Financing Authority, 5.00% due 11/1/2021 (Capital Improvement Projects) | AA-/NR | 500,000 | 574,570 | ||||||||||||||
Riverside County Palm Desert Financing Authority, 6.00% due 5/1/2022 pre-refunded 5/1/2018 (Palm Desert Sheriff’s Station Facilities) | AA-/A1 | 2,600,000 | 2,679,560 | ||||||||||||||
Riverside County Public Financing Authority, 4.00% due 11/1/2017 (Capital Facilities Project) | AA-/NR | 550,000 | 551,551 | ||||||||||||||
Riverside County Public Financing Authority, 5.00% due 11/1/2019 (Capital Facilities Project) | AA-/NR | 2,000,000 | 2,167,700 | ||||||||||||||
Riverside County Public Financing Authority, 4.00% due 11/1/2020 (Capital Facilities Project) | AA-/NR | 465,000 | 505,590 | ||||||||||||||
Riverside County Public Financing Authority, 5.00% due 11/1/2021 (Capital Facilities Project) | AA-/NR | 1,000,000 | 1,151,010 | ||||||||||||||
Riverside County Public Financing Authority, 5.00% due 11/1/2025 (Capital Facilities Project) | AA-/NR | 1,000,000 | 1,227,730 | ||||||||||||||
Riverside USD Financing Authority, 5.00% due 9/1/2019 (Educational Facilities; Insured: BAM) | AA/NR | 950,000 | 1,019,825 | ||||||||||||||
| a | Riverside USD Financing Authority, 5.00% due 9/1/2022 (Educational Facilities; Insured: BAM) | AA/NR | 215,000 | 250,277 | |||||||||||||
Riverside USD Financing Authority, 5.00% due 9/1/2024 (Educational Facilities; Insured: BAM) | AA/NR | 680,000 | 816,918 | ||||||||||||||
Riverside USD Financing Authority, 5.00% due 9/1/2025 (Educational Facilities; Insured: BAM) | AA/NR | 350,000 | 420,655 | ||||||||||||||
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 | 934,846 | ||||||||||||||
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 | 893,947 | ||||||||||||||
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 | 961,244 | ||||||||||||||
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 | 918,076 | ||||||||||||||
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 | 2,581,377 | ||||||||||||||
Sacramento City USD GO, 5.00% due 7/1/2018 (Educational Facilities Improvements; Insured: AGM) | AA/NR | 360,000 | 371,113 | ||||||||||||||
Sacramento City USD GO, 4.00% due 7/1/2019 (Educational Facilities Improvements) | A+/Aa3 | 5,455,000 | 5,743,897 | ||||||||||||||
Sacramento City USD GO, 5.00% due 7/1/2019 (Educational Facilities Improvements; Insured: AGM) | AA/NR | 635,000 | 679,660 | ||||||||||||||
Sacramento City USD GO, 5.00% due 7/1/2020 (Educational Facilities Improvements; Insured: AGM) | AA/NR | 500,000 | 553,640 | ||||||||||||||
Sacramento City USD GO, 5.00% due 7/1/2021 (Educational Facilities Improvements; Insured: AGM) | AA/NR | 400,000 | 456,440 | ||||||||||||||
Sacramento City USD GO, 5.00% due 7/1/2021 (Educational Facilities Improvements) | A+/Aa3 | 3,600,000 | 4,107,960 | ||||||||||||||
Sacramento City USD GO, 5.00% due 7/1/2022 (Educational Facilities Improvements; Insured: AGM) | AA/NR | 700,000 | 817,124 | ||||||||||||||
Sacramento Cogeneration Authority, 5.00% due 7/1/2019 (Procter & Gamble Project) | AA-/Aa3 | 625,000 | 668,275 | ||||||||||||||
Salinas Valley Solid Waste Authority, 5.00% due 8/1/2023 (Insured: AGM) (AMT) | AA/A2 | 1,530,000 | 1,785,479 | ||||||||||||||
San Diego Redevelopment Agency, 0% due 9/1/2019 (Centre City Redevelopment; Insured: AGM) | AA/A2 | 1,910,000 | 1,860,034 | ||||||||||||||
San Diego USD GO, 5.50% due 7/1/2020 (Educational System Capital Projects; Insured: Natl-Re) | AA-/Aa2 | 1,390,000 | 1,559,566 | ||||||||||||||
San Diego USD GO, 5.00% due 7/1/2023 (Educational System Capital Projects) | AA-/Aa2 | 5,000,000 | 5,985,900 | ||||||||||||||
San Diego USD GO, 5.00% due 7/1/2024 (Educational System Capital Projects) | AA-/Aa2 | 3,000,000 | 3,610,770 | ||||||||||||||
San Francisco City and County Airports Commission, 5.00% due 5/1/2026 (San Francisco International Airport) | A+/A1 | 5,000,000 | 6,221,550 | ||||||||||||||
San Joaquin Delta Community College District GO, 0% due 8/1/2019 (Insured: AGM) | AA/Aa2 | 5,000,000 | 4,703,700 | ||||||||||||||
San Mateo County Joint Powers Financing Authority, 5.00% due 7/15/2018 (County Capital Projects) | AA+/Aa1 | 800,000 | 825,560 | ||||||||||||||
San Mateo County Joint Powers Financing Authority, 5.00% due 6/15/2021 (Maple Street Correctional Center) | AA+/Aa1 | 410,000 | 466,916 | ||||||||||||||
San Mateo County Joint Powers Financing Authority, 5.00% due 6/15/2022 (Maple Street Correctional Center) | AA+/Aa1 | 1,000,000 | 1,165,140 | ||||||||||||||
San Mateo County Joint Powers Financing Authority, 5.00% due 6/15/2023 (Maple Street Correctional Center) | AA+/Aa1 | 585,000 | 694,383 | ||||||||||||||
San Mateo Union High School District GO, 0% due 9/1/2019 (Educational Facilities; Insured: Natl-Re) | AA+/Aaa | 2,000,000 | 1,956,140 | ||||||||||||||
Santa Ana Financing Authority, 6.25% due 7/1/2018 (Police Administration & Holding Facility; Insured: Natl-Re) (ETM) | A/A3 | 1,000,000 | 1,040,720 | ||||||||||||||
Annual Report | 13
Schedule of Investments, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Santa Ana Financing Authority, 6.25% due 7/1/2018 (Police Administration & Holding Facility; Insured: Natl-Re) | A/A3 | $ | 1,000,000 | $ | 1,037,070 | ||||||||||||
Santa Ana USD GO, 0% due 8/1/2020 (Insured: Natl-Re) | A+/A3 | 2,035,000 | 1,957,711 | ||||||||||||||
Santa Clara County Financing Authority, 5.00% due 5/15/2025 (Multiple Facilities Projects) | AA+/NR | 6,755,000 | 8,341,006 | ||||||||||||||
Santa Margarita Water District, 5.00% due 9/1/2026 (Talega Community Facilities) | A/NR | 450,000 | 552,240 | ||||||||||||||
Santa Margarita Water District, 5.00% due 9/1/2027 (Talega Community Facilities) | A/NR | 600,000 | 742,974 | ||||||||||||||
| b | Semitropic Water Storage Improvement District, 5.00% due 12/1/2019 (Irrigation Water System; Insured: AGM) | AA/NR | 700,000 | 759,234 | |||||||||||||
Semitropic Water Storage Improvement District, 5.00% due 12/1/2022 (Irrigation Water System; Insured: AGM) | AA/A2 | 400,000 | 471,212 | ||||||||||||||
Semitropic Water Storage Improvement District, 5.00% due 12/1/2023 (Irrigation Water System; Insured: AGM) | AA/A2 | 500,000 | 600,170 | ||||||||||||||
| b | Semitropic Water Storage Improvement District, 5.00% due 12/1/2024 (Irrigation Water System; Insured: AGM) | AA/NR | 120,000 | 145,930 | |||||||||||||
Semitropic Water Storage Improvement District, 5.00% due 12/1/2024 (Irrigation Water System; Insured: AGM) | AA/A2 | 500,000 | 608,750 | ||||||||||||||
| b | Semitropic Water Storage Improvement District, 5.00% due 12/1/2025 (Irrigation Water System; Insured: AGM) | AA/NR | 165,000 | 202,930 | |||||||||||||
Semitropic Water Storage Improvement District, 5.00% due 12/1/2025 (Irrigation Water System; Insured: AGM) | AA/A2 | 1,110,000 | 1,366,610 | ||||||||||||||
| b | Semitropic Water Storage Improvement District, 5.00% due 12/1/2026 (Irrigation Water System; Insured: AGM) | AA/NR | 340,000 | 423,001 | |||||||||||||
| b | Semitropic Water Storage Improvement District, 5.00% due 12/1/2027 (Irrigation Water System; Insured: AGM) | AA/NR | 225,000 | 282,290 | |||||||||||||
South San Francisco USD GO, 4.00% due 6/15/2018 (Educational Facilities) (ETM) | SP-1+/NR | 5,000,000 | 5,110,750 | ||||||||||||||
Southeast Resource Recovery Facilities Authority, 5.25% due 12/1/2017 (Insured: AMBAC) | AA-/Aa3 | 1,000,000 | 1,006,650 | ||||||||||||||
Southeast Resource Recovery Facilities Authority, 5.375% due 12/1/2018 (Insured: AMBAC) (AMT) | AA-/Aa3 | 2,000,000 | 2,037,740 | ||||||||||||||
Southern California Public Power Authority, 2.00% due 7/1/2036 (Magnolia Power Project A) | AA-/NR | 3,000,000 | 3,062,790 | ||||||||||||||
Southwestern Community College District GO, 4.00% due 8/1/2022 | AA-/Aa2 | 265,000 | 299,023 | ||||||||||||||
Southwestern Community College District GO, 4.00% due 8/1/2023 | AA-/Aa2 | 280,000 | 320,172 | ||||||||||||||
Southwestern Community College District GO, 4.00% due 8/1/2024 | AA-/Aa2 | 390,000 | 451,538 | ||||||||||||||
Southwestern Community College District GO, 4.00% due 8/1/2025 | AA-/Aa2 | 325,000 | 378,862 | ||||||||||||||
Southwestern Community College District GO, 4.00% due 8/1/2026 | AA-/Aa2 | 410,000 | 480,901 | ||||||||||||||
State of California Economic Recovery GO, 5.00% due 7/1/2018 (ETM) | AA+/Aaa | 2,330,000 | 2,403,185 | ||||||||||||||
State of California Economic Recovery GO, 5.00% due 7/1/2018 (ETM) | AA+/Aaa | 670,000 | 691,045 | ||||||||||||||
State of California GO, 4.75% due 9/1/2018 (Various Capital Projects; Insured: AGM) | AA/Aa3 | 70,000 | 71,145 | ||||||||||||||
State of California GO, 5.00% due 9/1/2020 (Various Capital Projects) | AA-/Aa3 | 2,000,000 | 2,224,080 | ||||||||||||||
State of California GO, 0.84% due 5/1/2040 put 10/2/2017 (K-12 Public School Facilities; LOC: MUFG Union Bank, N.A.) (daily demand notes) | AA+/Aa1 | 25,940,000 | 25,940,000 | ||||||||||||||
Successor Agency to the City of Colton Redevelopment Agency, 5.00% due 8/1/2021 (Multiple Redevelopment Project Areas; Insured: BAM) | AA/NR | 940,000 | 1,071,638 | ||||||||||||||
Successor Agency to the City of Colton Redevelopment Agency, 5.00% due 8/1/2023 (Multiple Redevelopment Project Areas; Insured: BAM) | AA/NR | 925,000 | 1,100,537 | ||||||||||||||
Successor Agency to the City of Colton Redevelopment Agency, 5.00% due 8/1/2025 (Multiple Redevelopment Project Areas; Insured: BAM) | AA/NR | 950,000 | 1,158,639 | ||||||||||||||
Successor Agency to the City of Riverside Redevelopment Agency, 5.00% due 9/1/2023 (Multiple Redevelopment Project Areas) | AA-/NR | 1,735,000 | 2,065,934 | ||||||||||||||
Successor Agency to the City of Riverside Redevelopment Agency, 5.00% due 9/1/2024 (Multiple Redevelopment Project Areas) | AA-/NR | 1,250,000 | 1,507,987 | ||||||||||||||
Successor Agency to the City of Sacramento Redevelopment Agency, 3.00% due 12/1/2017 (Multiple Redevelopment Project Areas) | A/NR | 1,315,000 | 1,319,813 | ||||||||||||||
Successor Agency to the City of San Diego Redevelopment Agency, 5.00% due 9/1/2025 (Multiple Redevelopment Project Areas) | AA/NR | 2,745,000 | 3,385,463 | ||||||||||||||
Successor Agency to the City of San Diego Redevelopment Agency, 5.00% due 9/1/2026 (Multiple Redevelopment Project Areas) | AA/NR | 1,500,000 | 1,842,525 | ||||||||||||||
Successor Agency to the Commerce Community Development Commission, 5.00% due 8/1/2027 (Multiple Redevelopment Project Areas; Insured: AGM) | AA/NR | 1,760,000 | 2,135,214 | ||||||||||||||
Successor Agency to the Community Development Agency of the City of Menlo Park, 3.00% due 10/1/2017 (Las Pulgas Community Development Project) | A+/NR | 655,000 | 655,079 | ||||||||||||||
Successor Agency to the Community Development Agency of the City of Menlo Park, 5.00% due 10/1/2019 (Las Pulgas Community Development Project) | A+/NR | 400,000 | 430,612 | ||||||||||||||
Successor Agency to the Community Development Agency of the City of Menlo Park, 5.00% due 10/1/2020 (Las Pulgas Community Development Project) | A+/NR | 325,000 | 361,043 | ||||||||||||||
Successor Agency to the Community Development Agency of the City of Menlo Park, 5.00% due 10/1/2021 (Las Pulgas Community Development Project; Insured: AGM) | AA/NR | 1,250,000 | 1,429,150 | ||||||||||||||
Successor Agency to the Community Development Agency of the City of Menlo Park, 5.00% due 10/1/2022 (Las Pulgas Community Development Project; Insured: AGM) | AA/NR | 900,000 | 1,049,463 | ||||||||||||||
Successor Agency to the Community Development Agency of the City of Menlo Park, 5.00% due 10/1/2025 (Las Pulgas Community Development Project; Insured: AGM) | AA/NR | 500,000 | 607,775 | ||||||||||||||
Successor Agency to the Community Redevelopment Agency of the City of Palmdale, 5.00% due 9/1/2024 (Merged Redevelopment Project Areas) | A+/NR | 600,000 | 720,810 | ||||||||||||||
Successor Agency to the Community Redevelopment Agency of the City of Palmdale, 5.00% due 9/1/2025 (Merged Redevelopment Project Areas) | A+/NR | 450,000 | 546,480 | ||||||||||||||
14 | Annual Report
Schedule of Investments, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Successor Agency to the Community Redevelopment Agency of the City of Palmdale, 5.00% due 9/1/2026 (Merged Redevelopment Project Areas) | A+/NR | $ | 550,000 | $ | 674,460 | ||||||||||||
Successor Agency to the Poway Redevelopment Agency, 5.00% due 6/15/2025 (Paguay Redevelopment Project) | AA-/NR | 4,665,000 | 5,636,813 | ||||||||||||||
Successor Agency to the Rancho Cucamonga Redevelopment Project, 5.00% due 9/1/2023 (Rancho Redevelopment Project Area; Insured: AGM) | AA/NR | 1,000,000 | 1,185,770 | ||||||||||||||
Successor Agency to the Rancho Cucamonga Redevelopment Project, 5.00% due 9/1/2024 (Rancho Redevelopment Project Area: Insured: AGM) | AA/NR | 2,000,000 | 2,408,460 | ||||||||||||||
Successor Agency to the Redevelopment Agency of the City and County of San Francisco, 5.00% due 8/1/2019 (San Francisco Redevelopment Projects) | A+/NR | 2,050,000 | 2,196,021 | ||||||||||||||
Successor Agency to the Redevelopment Agency of the City and County of San Francisco, 5.00% due 8/1/2020 (San Francisco Redevelopment Projects) | A+/NR | 1,685,000 | 1,864,318 | ||||||||||||||
Successor Agency to the Redevelopment Agency of the City and County of San Francisco, 5.00% due 8/1/2021 (San Francisco Redevelopment Projects) | A+/NR | 1,000,000 | 1,138,830 | ||||||||||||||
| b | Successor Agency to the Redevelopment Agency of the City of San Mateo, 5.00% due 8/1/2025 (Multiple Redevelopment Project Areas) | AA-/NR | 425,000 | 524,811 | |||||||||||||
Successor Agency to the Redevelopment Agency of the City of Stockton, 5.00% due 9/1/2025 (Redevelopment of Midtown, North and South Stockton and Waterfront Areas; Insured: AGM) | AA/NR | 1,900,000 | 2,297,062 | ||||||||||||||
Successor Agency to the Redevelopment Agency of the City of Stockton, 5.00% due 9/1/2026 (Redevelopment of Midtown, North and South Stockton and Waterfront Areas; Insured: AGM) | AA/NR | 1,000,000 | 1,211,550 | ||||||||||||||
Successor Agency to the Redevelopment Agency of the City of Stockton, 5.00% due 9/1/2027 (Redevelopment of Midtown, North and South Stockton and Waterfront Areas; Insured: AGM) | AA/NR | 1,000,000 | 1,202,630 | ||||||||||||||
Successor Agency to the Richmond County Redevelopment Agency, 5.00% due 9/1/2022 (Joint Powers Financing Authority & Harbour Redevelopment Project; Insured: BAM) | AA/NR | 400,000 | 465,080 | ||||||||||||||
Successor Agency to the Richmond County Redevelopment Agency, 5.00% due 9/1/2023 (Joint Powers Financing Authority & Harbour Redevelopment Project; Insured: BAM) | AA/NR | 400,000 | 474,224 | ||||||||||||||
Successor Agency to the Richmond County Redevelopment Agency, 5.00% due 9/1/2024 (Joint Powers Financing Authority & Harbour Redevelopment Project; Insured: BAM) | AA/NR | 450,000 | 539,852 | ||||||||||||||
Successor Agency to the Rosemead Community Development Commission, 5.00% due 10/1/2020 (Rosemead Merged Project Area; Insured: BAM) | AA/NR | 745,000 | 829,371 | ||||||||||||||
Successor Agency to the Rosemead Community Development Commission, 5.00% due 10/1/2021 (Rosemead Merged Project Area; Insured: BAM) | AA/NR | 680,000 | 778,600 | ||||||||||||||
Successor Agency to the Rosemead Community Development Commission, 5.00% due 10/1/2022 (Rosemead Merged Project Area; Insured: BAM) | AA/NR | 1,190,000 | 1,391,848 | ||||||||||||||
Successor Agency to the Rosemead Community Development Commission, 5.00% due 10/1/2023 (Rosemead Merged Project Area; Insured: BAM) | AA/NR | 450,000 | 537,206 | ||||||||||||||
Successor Agency to the Rosemead Community Development Commission, 5.00% due 10/1/2024 (Rosemead Merged Project Area; Insured: BAM) | AA/NR | 620,000 | 750,144 | ||||||||||||||
Successor Agency to the Rosemead Community Development Commission, 5.00% due 10/1/2025 (Rosemead Merged Project Area; Insured: BAM) | AA/NR | 405,000 | 494,805 | ||||||||||||||
Successor Agency to the Rosemead Community Development Commission, 5.00% due 10/1/2026 (Rosemead Merged Project Area; Insured: BAM) | AA/NR | 745,000 | 919,539 | ||||||||||||||
Temecula Valley USD Financing Authority, 5.00% due 9/1/2018 (Educational Facilities; Insured: BAM) | AA/NR | 325,000 | 336,840 | ||||||||||||||
Temecula Valley USD Financing Authority, 5.00% due 9/1/2019 (Educational Facilities; Insured: BAM) | AA/NR | 375,000 | 402,563 | ||||||||||||||
Temecula Valley USD Financing Authority, 5.00% due 9/1/2020 (Educational Facilities; Insured: BAM) | AA/NR | 400,000 | 443,188 | ||||||||||||||
Temecula Valley USD Financing Authority, 5.00% due 9/1/2021 (Educational Facilities; Insured: BAM) | AA/NR | 515,000 | 587,337 | ||||||||||||||
Temecula Valley USD Financing Authority, 5.00% due 9/1/2022 (Educational Facilities; Insured: BAM) | AA/NR | 275,000 | 320,122 | ||||||||||||||
Temecula Valley USD Financing Authority, 5.00% due 9/1/2023 (Educational Facilities; Insured: BAM) | AA/NR | 300,000 | 355,731 | ||||||||||||||
Temecula Valley USD Financing Authority, 5.00% due 9/1/2024 (Educational Facilities; Insured: BAM) | AA/NR | 300,000 | 360,405 | ||||||||||||||
Temecula Valley USD Financing Authority, 5.00% due 9/1/2025 (Educational Facilities; Insured: BAM) | AA/NR | 300,000 | 360,561 | ||||||||||||||
Town of Hillsborough COP, 0.92% due 6/1/2030 put 10/6/2017 (Water and Sewer Systems; SPA: Bank of the West) (weekly demand notes) | NR/NR | 500,000 | 500,000 | ||||||||||||||
Trustees of the California State University, 5.00% due 11/1/2026 (Educational Facilities Improvements) | AA-/Aa2 | 1,000,000 | 1,243,660 | ||||||||||||||
Tuolumne Wind Project Authority, 5.00% due 1/1/2018 | AA-/A2 | 1,690,000 | 1,708,184 | ||||||||||||||
Turlock Irrigation District, 5.00% due 1/1/2019 | AA-/A2 | 1,000,000 | 1,050,930 | ||||||||||||||
Turlock Irrigation District, 5.00% due 1/1/2025 | A+/NR | 1,000,000 | 1,223,570 | ||||||||||||||
Turlock Irrigation District, 5.00% due 1/1/2026 | A+/NR | 1,000,000 | 1,233,220 | ||||||||||||||
Ukiah USD GO, 0% due 8/1/2019 (Insured: Natl-Re) | A/A1 | 2,000,000 | 1,955,580 | ||||||||||||||
Upper Lake Union High School District GO, 0% due 8/1/2020 (Insured: Natl-Re) | NR/A3 | 1,050,000 | 949,588 | ||||||||||||||
Ventura County Public Financing Authority, 5.00% due 11/1/2023 (Office Building Purchase and Improvements) | AA+/Aa1 | 500,000 | 600,655 | ||||||||||||||
Ventura County Public Financing Authority, 5.00% due 11/1/2024 (Office Building Purchase and Improvements) | AA+/Aa1 | 1,060,000 | 1,271,788 | ||||||||||||||
Virgin Islands Public Finance Authority, 5.00% due 10/1/2017 | CCC+/Caa1 | 1,440,000 | 1,439,971 | ||||||||||||||
Vista Redevelopment Agency, 5.00% due 9/1/2019 (Vista Redevelopment Project; Insured: AGM) | AA/NR | 300,000 | 322,605 | ||||||||||||||
Vista Redevelopment Agency, 5.00% due 9/1/2020 (Vista Redevelopment Project; Insured: AGM) | AA/NR | 275,000 | 305,363 | ||||||||||||||
Annual Report | 15
Schedule of Investments, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Vista Redevelopment Agency, 5.00% due 9/1/2021 (Vista Redevelopment Project; Insured: AGM) | AA/NR | $ | 265,000 | $ | 302,768 | ||||||||||||
| a | Vista Redevelopment Agency, 5.00% due 9/1/2022 (Vista Redevelopment Project; Insured: AGM) | AA/NR | 335,000 | 391,062 | |||||||||||||
Vista Redevelopment Agency, 5.00% due 9/1/2023 (Vista Redevelopment Project; Insured: AGM) | AA/NR | 400,000 | 476,712 | ||||||||||||||
Walnut Improvement Agency, 4.00% due 3/1/2018 (City of Walnut Improvement Plan; Insured: BAM) | AA/NR | 1,000,000 | 1,012,940 | ||||||||||||||
Walnut Improvement Agency, 5.00% due 3/1/2019 (City of Walnut Improvement Plan; Insured: BAM) | AA/NR | 400,000 | 422,556 | ||||||||||||||
Westminster Redevelopment Agency, 5.00% due 8/1/2024 (Commercial Redevelopment Project No. 1; Insured: AGM) | AA/A2 | 1,205,000 | 1,242,680 | ||||||||||||||
|
| ||||||||||||||||
| TOTAL INVESTMENTS — 98.90% (Cost $623,276,713) | $ | 642,606,550 | |||||||||||||||
| OTHER ASSETS LESS LIABILITIES — 1.10% | 7,131,849 | ||||||||||||||||
|
| ||||||||||||||||
| NET ASSETS — 100.00% | $ | 649,738,399 | |||||||||||||||
|
| ||||||||||||||||
Footnote Legend
| † | Credit ratings are unaudited. Rating changes may have occurred subsequent to the reporting period end. Bonds issued with a maturity of one year or less are assigned Moody’s ratings from MIG-1 to MIG-4 and Standard and Poor’s ratings from SP-1+ to SP-3 with MIG-1 and SP-1+ being the strongest ratings. |
| a | Segregated as collateral for a when-issued security. |
| b | When-issued security. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ACA | Insured by American Capital Access | |
| 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. | |
| COP | Certificates of Participation | |
| ETM | Escrowed to Maturity | |
| FHA | Insured by Federal Housing Administration | |
| GO | General Obligation | |
| HFFA | Health Facilities Financing Authority | |
| Mtg | Mortgage | |
| Natl-Re | Insured by National Public Finance Guarantee Corp. | |
| USD | Unified School District |
See notes to financial statements.
16 | Annual Report
Statement of Assets and Liabilities
Thornburg California Limited Term Municipal Fund | September 30, 2017
ASSETS | ||||
Investments at value (cost $623,276,713) (Note 3) | $ | 642,606,550 | ||
Cash | 179,903 | |||
Receivable for investments sold | 3,390,000 | |||
Receivable for fund shares sold | 1,209,564 | |||
Interest receivable | 6,014,771 | |||
Prepaid expenses and other assets | 10,949 | |||
|
| |||
Total Assets | 653,411,737 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 2,349,247 | |||
Payable for fund shares redeemed | 653,625 | |||
Payable to investment advisor and other affiliates (Note 4) | 353,157 | |||
Accounts payable and accrued expenses | 156,364 | |||
Dividends payable | 160,945 | |||
|
| |||
Total Liabilities | 3,673,338 | |||
|
| |||
NET ASSETS | $ | 649,738,399 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 2,404 | ||
Net unrealized appreciation on investments | 19,329,837 | |||
Accumulated net realized gain (loss) | (1,868,436 | ) | ||
Net capital paid in on shares of beneficial interest | 632,274,594 | |||
|
| |||
| $ | 649,738,399 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 13.78 | ||
Maximum sales charge, 1.50% of offering price | 0.21 | |||
|
| |||
Maximum offering price per share | $ | 13.99 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* | $ | 13.79 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 13.79 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
Annual Report | 17
Thornburg California Limited Term Municipal Fund | Year Ended September 30, 2017
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $9,630,759) | $ | 15,330,588 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 3,206,867 | |||
Administration fees (Note 4) | ||||
Class A Shares | 205,938 | |||
Class C Shares | 76,642 | |||
Class I Shares | 225,327 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 411,875 | |||
Class C Shares | 306,202 | |||
Transfer agent fees | ||||
Class A Shares | 76,197 | |||
Class C Shares | 29,579 | |||
Class I Shares | 361,226 | |||
Registration and filing fees | ||||
Class A Shares | 3,927 | |||
Class C Shares | 1,384 | |||
Class I Shares | 4,202 | |||
Custodian fees (Note 2) | 109,508 | |||
Professional fees | 45,691 | |||
Accounting fees (Note 4) | 24,626 | |||
Trustee fees | 28,639 | |||
Other expenses | 44,475 | |||
|
| |||
Total Expenses | 5,162,305 | |||
|
| |||
Net Investment Income | 10,168,283 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (1,852,646 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (9,948,197 | ) | ||
|
| |||
Net Realized and Unrealized Loss | (11,800,843 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (1,632,560 | ) | |
|
| |||
See notes to financial statements.
18 | Annual Report
Statements of Changes in Net Assets
Thornburg California Limited Term Municipal Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 10,168,283 | $ | 10,039,681 | ||||||
Net realized gain (loss) on investments | (1,852,646 | ) | 190,349 | |||||||
Net unrealized appreciation (depreciation) on investments | (9,948,197 | ) | 6,449,717 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (1,632,560 | ) | 16,679,747 | |||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (2,189,461 | ) | (2,354,052 | ) | ||||||
Class C Shares | (661,782 | ) | (694,054 | ) | ||||||
Class I Shares | (7,317,040 | ) | (6,991,575 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class A Shares | (31,828,772 | ) | 20,188,735 | |||||||
Class C Shares | (10,448,138 | ) | 3,358,067 | |||||||
Class I Shares | (34,098,001 | ) | 64,610,015 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | (88,175,754 | ) | 94,796,883 | |||||||
NET ASSETS | ||||||||||
Beginning of Year | 737,914,153 | 643,117,270 | ||||||||
|
| |||||||||
End of Year | $ | 649,738,399 | $ | 737,914,153 | ||||||
|
| |||||||||
Undistributed net investment income | $ | 2,404 | $ | 2,404 | ||||||
See notes to financial statements.
Annual Report | 19
Thornburg California Limited Term Municipal Fund | September 30, 2017
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 twenty-one 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 Thornburg Investment Management, Inc., the Trust’s investment advisor (the “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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by the Advisor. Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
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 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
20 | Annual Report
Notes to Financial Statements, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
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.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 623,276,713 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 19,789,748 | |||
Gross unrealized depreciation on a tax basis | (459,911 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 19,329,837 | |||
|
|
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $1,853,735. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $14,699 (of which $14,699 are short-term and $0 are 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.
During the year ended September 30, 2017, the Fund utilized $1,090 of short-term capital loss carryforwards generated after September 30, 2011.
At September 30, 2017, the Fund had $163,349 of undistributed net tax-exempt income, no undistributed tax basis net ordinary income and no undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the year ended September 30, 2017 and September 30, 2016 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Tax exempt income | $ | 10,167,748 | $ | 10,039,668 | ||||||
Ordinary income | 535 | 13 | ||||||||
|
| |||||||||
Total | $ | 10,168,283 | $ | 10,039,681 | ||||||
|
| |||||||||
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining
Annual Report | 21
Notes to Financial Statements, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from the FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs when it sells the investment.
22 | Annual Report
Notes to Financial Statements, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
Municipal Bonds | $ | 642,606,550 | $ | – | $ | 642,606,550 | $ | – | ||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 642,606,550 | $ | – | $ | 642,606,550 | $ | – | ||||||||||||
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, 2017.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| MANAGEMENT FEE SCHEDULE | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.500 | % | |||
Next $500 million | 0.400 | ||||
Next $500 million | 0.300 | ||||
Next $500 million | 0.250 | ||||
Over $2 billion | 0.225 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.474% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $24,626 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $2,470 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $2,766 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A and Class C of shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I shares. The Advisor and Distributor each 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, 2017, are set forth in the Statement of Operations.
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.
Annual Report | 23
Notes to Financial Statements, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had transactions with affiliated funds of $15,077,358 in sales generating realized gains of $396,639.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 2,739,756 | $ | 37,595,214 | 3,545,788 | $ | 49,447,106 | ||||||||||
Shares issued to shareholders in | 138,354 | 1,897,094 | 142,013 | 1,981,364 | ||||||||||||
Shares repurchased | (5,230,354 | ) | (71,321,080 | ) | (2,238,533 | ) | (31,239,735 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (2,352,244 | ) | $ | (31,828,772 | ) | 1,449,268 | $ | 20,188,735 | ||||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 357,233 | $ | 4,900,123 | 1,011,365 | $ | 14,117,934 | ||||||||||
Shares issued to shareholders in | 38,241 | 524,749 | 38,417 | 536,374 | ||||||||||||
Shares repurchased | (1,157,958 | ) | (15,873,010 | ) | (808,902 | ) | (11,296,241 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (762,484 | ) | $ | (10,448,138 | ) | 240,880 | $ | 3,358,067 | ||||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 16,070,560 | $ | 220,028,391 | 12,762,501 | $ | 178,298,927 | ||||||||||
Shares issued to shareholders in | 425,235 | 5,835,381 | 381,818 | 5,333,769 | ||||||||||||
Shares repurchased | (19,010,492 | ) | (259,961,773 | ) | (8,518,649 | ) | (119,022,681 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (2,514,697 | ) | $ | (34,098,001 | ) | 4,625,670 | $ | 64,610,015 | ||||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $109,841,586 and $191,985,064, respectively.
OTHER NOTES
Risks: The Fund’s investments subject it to risks including, but not limited to, management risk, interest rate risk, credit risk, market and economic risk, liquidity risk, and the risk of investing mainly in the obligations primarily originating in 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
24 | Annual Report
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Annual Report | 25
Thornburg California Limited Term Municipal Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 13.98 | 0.18 | (0.20 | ) | (0.02 | ) | (0.18 | ) | – | (0.18 | ) | $ | 13.78 | ||||||||||||||||||||||||||
2016(b) | $ | 13.84 | 0.18 | 0.14 | 0.32 | (0.18 | ) | – | (0.18 | ) | $ | 13.98 | ||||||||||||||||||||||||||||
2015(b) | $ | 13.84 | 0.19 | – | (c) | 0.19 | (0.19 | ) | – | (0.19 | ) | $ | 13.84 | |||||||||||||||||||||||||||
2014(b) | $ | 13.54 | 0.23 | 0.30 | 0.53 | (0.23 | ) | – | (0.23 | ) | $ | 13.84 | ||||||||||||||||||||||||||||
2013(b) | $ | 13.75 | 0.24 | (0.20 | ) | 0.04 | (0.24 | ) | (0.01 | ) | (0.25 | ) | $ | 13.54 | ||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.99 | 0.15 | (0.20 | ) | (0.05 | ) | (0.15 | ) | – | (0.15 | ) | $ | 13.79 | ||||||||||||||||||||||||||
2016 | $ | 13.85 | 0.14 | 0.14 | 0.28 | (0.14 | ) | ��� | (0.14 | ) | $ | 13.99 | ||||||||||||||||||||||||||||
2015 | $ | 13.85 | 0.16 | – | (c) | 0.16 | (0.16 | ) | – | (0.16 | ) | $ | 13.85 | |||||||||||||||||||||||||||
2014 | $ | 13.55 | 0.19 | 0.30 | 0.49 | (0.19 | ) | – | (0.19 | ) | $ | 13.85 | ||||||||||||||||||||||||||||
2013 | $ | 13.76 | 0.20 | (0.20 | ) | – | (0.20 | ) | (0.01 | ) | (0.21 | ) | $ | 13.55 | ||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.99 | 0.22 | (0.20 | ) | 0.02 | (0.22 | ) | – | (0.22 | ) | $ | 13.79 | |||||||||||||||||||||||||||
2016 | $ | 13.85 | 0.22 | 0.14 | 0.36 | (0.22 | ) | – | (0.22 | ) | $ | 13.99 | ||||||||||||||||||||||||||||
2015 | $ | 13.85 | 0.24 | – | (c) | 0.24 | (0.24 | ) | – | (0.24 | ) | $ | 13.85 | |||||||||||||||||||||||||||
2014 | $ | 13.55 | 0.27 | 0.30 | 0.57 | (0.27 | ) | – | (0.27 | ) | $ | 13.85 | ||||||||||||||||||||||||||||
2013 | $ | 13.76 | 0.28 | (0.19 | ) | 0.09 | (0.29 | ) | (0.01 | ) | (0.30 | ) | $ | 13.55 | ||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Net realized and unrealized gain (loss) on investments was less than $0.01 per share. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
26 | Annual Report
Financial Highlights, Continued
Thornburg California Limited Term Municipal Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 1.33 | 0.93 | 0.93 | 0.93 | (0.11 | ) | 18.25 | $ | 158,142 | ||||||||||||||||||||||
| 1.28 | 0.93 | 0.93 | 0.93 | 2.32 | 16.47 | $ | 193,321 | |||||||||||||||||||||||
| 1.39 | 0.94 | 0.94 | 0.94 | 1.40 | 14.43 | $ | 171,344 | |||||||||||||||||||||||
| 1.67 | 0.95 | 0.94 | 0.95 | 3.93 | 16.85 | $ | 160,151 | |||||||||||||||||||||||
| 1.75 | 0.94 | 0.94 | 0.94 | 0.28 | 17.57 | $ | 159,058 | |||||||||||||||||||||||
| 1.08 | 1.19 | 1.19 | 1.19 | (0.36 | ) | 18.25 | $ | 56,737 | ||||||||||||||||||||||
| 1.04 | 1.18 | 1.18 | 1.18 | 2.06 | 16.47 | $ | 68,229 | |||||||||||||||||||||||
| 1.15 | 1.18 | 1.18 | 1.18 | 1.15 | 14.43 | $ | 64,216 | |||||||||||||||||||||||
| 1.41 | 1.21 | 1.20 | 1.21 | 3.66 | 16.85 | $ | 62,858 | |||||||||||||||||||||||
| 1.48 | 1.21 | 1.21 | 1.21 | 0.02 | 17.57 | $ | 59,585 | |||||||||||||||||||||||
| 1.62 | 0.64 | 0.64 | 0.64 | 0.19 | 18.25 | $ | 434,859 | |||||||||||||||||||||||
| 1.60 | 0.62 | 0.62 | 0.62 | 2.64 | 16.47 | $ | 476,364 | |||||||||||||||||||||||
| 1.70 | 0.63 | 0.63 | 0.63 | 1.72 | 14.43 | $ | 407,557 | |||||||||||||||||||||||
| 1.99 | 0.62 | 0.62 | 0.62 | 4.27 | 16.85 | $ | 361,015 | |||||||||||||||||||||||
| 2.08 | 0.61 | 0.61 | 0.61 | 0.62 | 17.57 | $ | 254,869 | |||||||||||||||||||||||
Annual Report | 27
Report of Independent Registered Public Accounting Firm
Thornburg California Limited Term Municipal Fund
To the Trustees and Shareholders of the
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 the Thornburg California Limited Term Municipal Fund (the “Fund”) as of September 30, 2017, 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 as of September 30, 2017 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
28 | Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
| BEGINNING ACCOUNT VALUE 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.40 | $ | 4.70 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.40 | $ | 4.71 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.10 | $ | 6.02 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.09 | $ | 6.04 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.90 | $ | 3.28 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.82 | $ | 3.28 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.93%; C: 1.19%; 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.
Annual Report | 29
Thornburg California Limited Term Municipal Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
30 | Annual Report
Trustees and Officers, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 31
Trustees and Officers, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries 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.
32 | Annual Report
Thornburg California Limited Term Municipal Fund | September 30, 2017 (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, 2017, dividends paid by the Fund of $10,167,748 (or the maximum allowed) are tax exempt dividends and $535 are taxable ordinary investment income dividends for federal income tax purposes. The information and the distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2017. Complete information will be reported in conjunction with your 2017 Form 1099.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg. com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg California Limited Term Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Annual Report | 33
Other Information, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017 (Unaudited)
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 created 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 created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Information provided to the Trustees indicated that the comparability of indices and fund categories to the Fund may be limited for a number of reasons. Measures of risk and relative return demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions. The Trustees generally attach additional significance to the investment performance of the Fund from the perspective of longer term shareholders, and noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the objectives of the Fund. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectus. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and overall Fund expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for two Fund share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been considered by the Trustees showed that the Fund’s advisory fee was comparable to the median and higher than the average fee levels for the fund category, that the level of total expense for one share class was higher than the median and comparable to the average levels for the category, and that the level of total expense for a second share class was comparable to the median and lower than the average levels for the category. Peer group data showed that the advisory fee level was higher than the medians of the two peer groups considered, and that the total expense levels of the two Fund share classes were comparable to the medians of their respective peer groups. The Trustees did not find the differences significant in view of their findings and conclusions respecting 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, and the consequently different investment
34 | Annual Report
Other Information, Continued
Thornburg California Limited Term Municipal Fund | September 30, 2017 (Unaudited)
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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 35
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
36 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
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| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
Annual Report September 30, 2017 THORNBURG NEW MEXICO INTERMEDIATE MUNICIPAL FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg New Mexico Intermediate Municipal Fund
Annual Report ^ September 30, 2017
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class A | THNMX | 885-215-301 | ||||||||
| Class D | THNDX | 885-215-624 | ||||||||
| Class I | THNIX | 885-215-285 | ||||||||
Minimum investments for Class I shares may be higher than those for other classes. Class I shares may not be available to all investors.
Investments carry risks, including possible loss of principal. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The 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 Funds are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.
Annual Report | 3
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (Unaudited)
October 12, 2017
Dear Fellow Shareholder:
We are pleased to present the annual report for Thornburg New Mexico Intermediate Municipal Fund. The net asset value (NAV) of the Class A shares decreased by 37 cents to $13.30 per share during the fiscal year ended September 30, 2017. If you were with us for the entire period, you received dividends of 31.5 cents per share. Dividends were lower for the Class D shares and higher for the Class I shares to account for varying class-specific expenses. The Class A shares of your Fund underperformed the index with a negative 0.38% total return (without sales charge) for the fiscal year ended September 30, 2017, compared to the 1.00% total return for the BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index.
The drivers of the Fund’s total return relative to its benchmark include its interest rate sensitivity, as measured by the Fund’s duration, differing credit quality allocations, and other risk factors. The Fund underperformed its benchmark by 1.38%. The impact from the Fund’s 1.39 years shorter duration added 0.45%, while credit quality allocations detracted 0.44%. Other risk factors detracted 0.44%, while the Fund’s expenses and residuals accounted for the remainder of the performance differential.
The New Administration’s Agenda, U.S. Economy, and Fed Policy
The Trump administration took office in January of 2017 with an aggressive agenda. It promised to repeal and replace the Affordable Care Act (ACA), known also as Obamacare, increase infrastructure spending, scale back federal regulatory constraints on businesses, and reform the federal tax code. Initially, the promise of this pro-growth agenda caused interest rates to increase substantially upon Trump’s election in November. This was followed by further increases in December as investors sold municipal bonds to capture losses that appeared to be more valuable in 2016 than 2017. Some nine months later, the repeal and replacement of the ACA has failed to become a reality—tripped up in both the U.S. House and Senate.
Meanwhile, the silence around increased infrastructure spending is deafening. Federal regulatory constraints have been eased only through executive orders. The process for tax reform has just begun, but the administration’s initial measure appears to be hitting a rough patch as the proposed removal of the federal deduction for state and local taxes (SALT) has generated some blowback. The president’s framework for tax reform was mute with regard to continuation of the tax exemption for municipal bonds, although several sources have attributed the administration to stating that the municipal bond tax exemption is safe. The president’s proposal does call for the repeal of the
alternative minimum tax. All that said, this is Washington, DC, and with tax reform a major piece of the president’s agenda, watching this sausage get made will be interesting.
After a rather punk showing for the first two quarters of fiscal 2017, in which gross domestic product (GDP) growth was 1.8% and 1.2%, respectively, the economy generated a 3.1% GDP growth rate in the third fiscal quarter. The fiscal fourth quarter estimates of GDP have varied greatly as the impact of three devastating hurricanes (Harvey, Irma and Maria) are taken into consideration. After considering the impacts of Harvey and Irma alone, Goldman Sachs lowered its third-quarter GDP estimate by 0.8% to 2.0%.
Nonfarm payrolls have been a bright spot for the economy, averaging 168,000 new jobs per month for the first 11 months of fiscal 2017. This is a little lower than the 219,000 average monthly jobs generated in fiscal 2016. This all translates to an unemployment rate of 4.4% as of the end of August 2017 versus 4.9% at the end of fiscal 2016. One explanation for this slowdown is that employers cannot find qualified workers. This theory is substantiated by another significant economic indicator, the U.S. Job Openings and Labor Turnover Summary (JOLTS), which measures either newly created or unoccupied positions where an employer is taking specific actions to fill these positions. In July, this measure registered a reading of about 6.2 million, which is the highest since the time series began in December of 2000.
The Phillips Curve, an economic theory posed by A.W. Phillips, states that inflation and unemployment have a stable and inverse relationship. As unemployment decreases, inflation is supposed to increase. As of yet, this theory has not manifested itself. In fact, the Federal Reserve Board’s (Fed) favorite inflation measure, the Core Personal Consumption Expenditures Index (Core PCE)—which measures prices paid by consumers for goods and services without the volatility from movements in food and energy prices—has declined throughout the year. The last available reading at the end of August 2017 (1.30%) is much lower than the one at the end of September 2017 (1.80%).
On September 20, 2017 Bloomberg reported, “Federal Reserve Chair Janet Yellen acknowledged that the fall in inflation this year was a bit of a ‘mystery’ but suggested that the central bank was on course to raise interest rates again in 2017 nonetheless.” Any increase would be on top of the three hikes in the Federal Funds rate in fiscal 2017, bringing the range for the Federal Funds rate from 0.50% – 0.75% at the beginning of the year to 1.00% – 1.25% on June 14, 2017.
In addition, the Fed will begin reducing its $4.5 trillion balance sheet in October, by slowly unwinding the stimulus program it engaged a decade ago to combat the Great Recession. Its plan is
4 | Annual Report
Letter to Shareholders, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (Unaudited)
to reduce its holdings of U.S. Treasury and mortgage-backed securities by $10 billion in October of 2017 and gradually raise the reduction amount in the months ahead. Essentially, this reduces the demand for these securities from a purchaser that was not altogether economically motivated in the traditional sense. The Fed believes that the economy is strong enough that this gradual reduction of its balance sheet will not be disruptive, although some do not share this opinion. CNBC reported in August 2017, in an interview with JPMorgan Chase CEO Jamie Dimon, that he;
“stopped short of saying the bond market is on the cusp of a collapse, but said he wouldn’t personally buy any long-term government debt. ‘I’m not going to call it a bubble, but I personally wouldn’t be buying a 10-year sovereign debt anywhere in the world…my view is the Fed is doing the right things, raising rates, telling people we’re going to start reducing the balance sheet,’ Dimon added.”
The Municipal Bond Market
The municipal bond market suffered a setback in November and December of 2016. The surprise U.S. election results and the new administration’s pro-growth and pro-infrastructure agenda caused interest rates to initially rise and the tax loss harvesting caused rates to rise higher in December of 2016.
In New Mexico, personal income rose 1.88% between the second quarter of 2016 and the second quarter of 2017 (most recent data available). The Bureau of Labor Statistics reported a steady unemployment rate of 6.3% in August, unchanged from July. This is a preliminary reading and subject to revision. Compare this to the national unemployment rate, which was 4.4% in August and 4.2% in September. New Mexico state tax revenues are down 6.88% on an annual basis from the second quarter of 2016 through the second quarter of 2017 due to the state’s reliance on energy. New Mexico did make some headlines, at least in the public finance trade press, when it tried to refinance some of its non-callable bonds. Most underwriters and municipal advisors learn this is not allowable in Finance 101. The problem was fixed at some cost to the citizens of New Mexico.
The municipal bond market’s returns were a result of rising rates across the yield curve—with long-term rates increasing more than short-term rates as shown in Figure 1.
| Figure 1 | | | 12-Month Change in Rates for AAA Rated General Obligation Municipal Bonds |
Source: Bloomberg
President Trump’s goal of tax reform in particular led investors to believe that losses taken in 2016 were of greater value than losses taken in 2017. After this uptick in rates, yields moved steadily lower, and 10-year AAA general obligation bond yields decreased by about 0.30% between December 31, 2016 and September 30, 2017. Quality spreads continue to be extremely narrow, as income-starved investors extended out the yield curve or accepted lower credit quality in search of meeting an income bogey.
Cash flows into municipal bond mutual funds have been positive but nothing like the levels we experienced in fiscal year 2016. Foreign institutional investors have shown an increased interest in the municipal bond markets throughout the U.S., exhibiting some of the same characteristics as domestic retail investors by trying to quench a thirst for income.
Credit quality in the municipal bond market has been pretty stable except for some idiosyncratic disturbances. Illinois, for example, went down to the wire to pass its first budget in three years. The rating agencies threatened to drop the state’s credit rating to below investment grade, which would have seriously limited its bonds’ marketability. These antics caused the price of Illinois debt to go dramatically lower prior to the ultimate passage of the budget, after which it rallied considerably.
Elsewhere, several prominent high-yield securities came to market and were very well received. One was a mall in New Jersey across from the Meadowlands, which has been mothballed for approximately 15 years. Originally called Xanadu and referred to as the “ugliest building in New Jersey” by the Governor, it is
Annual Report | 5
Letter to Shareholders, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (Unaudited)
now called “The American Dream Mall” in its recent incarnation. The fact that this and other non-rated, high-yield projects are so well received is more evidence of how income-starved investors have become in an overly accommodative central bank world. By the way, we did not purchase this bond issue, because visitation needs to be 2x that of Disney World just to break even. And, when Amazon is disrupting everything from retail goods to groceries, we felt the last thing New Jersey needed was another mall.
Current Portfolio Positioning
We have positioned this portfolio, like our others, at the bottom end of its risk spectrum. If this sounds familiar, it is, as we said the same thing last year. We have lower durations, higher credit quality and higher reserve positions (to hedge against increased market illiquidity).
We believe that investors are not currently being compensated to take much risk. Real yields (yield less inflation) are low by historic standards (off the bottom but still low). Credit spreads are very narrow, back to pre-crisis levels, when 50% or more of the new issue market was insured by AAA municipal bond insurers. This is particularly concerning, as today only about 7% to 8% of the new issue market is insured and the municipal bond insurers are no longer rated AAA. A few desperate municipal market issuers, like Hartford, CT, are openly discussing debt restructuring and the president is making comments like the following with regard to Puerto Rico’s debt: “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out.” The precedents set by the recent municipal Chapter 9 proceedings of Detroit, MI and San Bernardino, CA have in effect placed bondholders in a subordi-
nated position to pensioners. Sometimes investors are motivated more by greed than fear and vice versa. Greed seems to be the current primary motivating factor, and it is in such an environment that caution should be exercised. That is exactly what we are doing—relying on value-oriented, bottom-up fundamental analysis in portfolio construction.
Why Own Municipal Bonds
Fixed income assets are an important part of a well-diversified portfolio, as they can provide a stabilizing force to the potential swings of the equity portion of the portfolio. These asset classes are not always positively correlated and can therefore dampen the overall portfolio’s volatility.
Thank you for your continued trust in us, and please know that the co-managers of this Fund are invested alongside you.
Sincerely,
Christopher Ryon,CFA
Portfolio Manager
Managing Director
Nicholos Venditti,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.
The views expressed by the portfolio managers reflect their professional opinions and are subject to change. Under no circumstances does the information contained within represent a recommendation to buy or sell any security.
6 | Annual Report
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
A Shares (Incep: 6/18/91) | |||||||||||||||||||||||||
Without sales charge | -0.38% | 1.62% | 1.59% | 3.14% | 4.30% | ||||||||||||||||||||
With sales charge | -2.38% | 0.93% | 1.19% | 2.93% | 4.22% | ||||||||||||||||||||
D Shares (Incep: 6/1/99) | |||||||||||||||||||||||||
Without sales charge | -0.61% | 1.38% | 1.35% | 2.88% | 3.18% | ||||||||||||||||||||
I Shares (Incep: 2/1/07) | -0.13% | 1.95% | 1.91% | 3.48% | 3.51% | ||||||||||||||||||||
30-DAY YIELDS, A SHARES
(with sales charge)
Annualized Distribution Yield | 2.31% | ||||
SEC Yield | 0.91% |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. 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. As disclosed in the most recent prospectus, the total annual fund operating expenses are as follows: A shares, 0.97%; D shares, 1.21%; I shares, 0.63%.
Glossary
The BofA Merrill Lynch 3-15 Year U.S. Municipal Securities 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.
The performance of any index is not indicative of the performance of any particular investment. 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 or net asset value.
Bond Credit Ratings (Credit Quality) – 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.
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 incorporates a bond’s embedded option features, such as call provisions.
General Obligation Bond (GO) – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Insured Bonds – Individual bonds are sometimes insured by private companies. The insurance guarantees the payment of principal and interest on a bond issue if the issuer defaults. Mutual funds are not insured, even if the underlying bonds are insured.
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.
Annual Report | 7
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017
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 a dollar-weighted average maturity of normally three to 10 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 typically 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.
KEY PORTFOLIO ATTRIBUTES
| Number of Bonds | 125 | ||||
| Effective Duration | 4.1 Yrs | ||||
| Average Maturity | 7.3 Yrs |
LONG-TERM STABILITY OF PRINCIPAL
Net Asset Value History of A Shares
There is no guarantee that the Fund will meet its investment objectives.
All data is subject to change. Charts may not add up to 100% due to rounding.
SECURITY 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. Credit quality ratings for Thornburg’s municipal portfolios used the highest rating available from either Standard & Poor’s or Moody’s Investors Service.
Unrated pre-refunded and escrowed-to-maturity bonds are included in the not rated category.
PORTFOLIO LADDER
Percent of portfolio maturing in each year. Cash includes cash equivalents and other.
8 | Annual Report
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
MUNICIPAL BONDS — 98.51% | |||||||||||||||||
Albuquerque Bernalillo County Water Utility Authority, 5.00% due 7/1/2021 pre-refunded 7/1/2019 (New Mexico Utilities, Inc. Water System) | AA+/Aa2 | $ | 1,760,000 | $ | 1,881,862 | ||||||||||||
Albuquerque Bernalillo County Water Utility Authority, 5.50% due 7/1/2025 pre-refunded 7/1/2019 (New Mexico Utilities, Inc. Water System) | AA+/Aa2 | 1,000,000 | 1,077,920 | ||||||||||||||
Albuquerque Bernalillo County Water Utility Authority, 5.00% due 7/1/2026 pre-refunded 7/1/2018 (San Juan-Chama Drinking Water Project) | AA+/Aa2 | 1,420,000 | 1,463,722 | ||||||||||||||
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 | 2,401,140 | ||||||||||||||
Albuquerque Bernalillo County Water Utility Authority, 5.00% due 7/1/2031 (2007 NMFA Loan and Joint Water and Sewer System Improvements) | AA+/Aa2 | 500,000 | 587,225 | ||||||||||||||
Albuquerque Bernalillo County Water Utility Authority, 5.00% due 7/1/2032 (2007 NMFA Loan and Joint Water and Sewer System Improvements) | AA+/Aa2 | 1,000,000 | 1,172,910 | ||||||||||||||
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 | 3,840,144 | ||||||||||||||
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 | 1,404,507 | ||||||||||||||
Albuquerque Municipal School District No. 12 GO, 5.00% due 8/1/2031 (Bernalillo and Sandoval Counties School Facilities) (State Aid Withholding) | AA/Aa1 | 1,000,000 | 1,194,500 | ||||||||||||||
Bernalillo County, 5.00% due 4/1/2021 (Government Services; Insured: Natl-Re) | AAA/Aa2 | 2,455,000 | 2,633,429 | ||||||||||||||
Bernalillo County, 5.25% due 10/1/2022 (Government Services; Insured: AMBAC) | AAA/Aa2 | 3,170,000 | 3,746,211 | ||||||||||||||
Bernalillo County, 5.25% due 10/1/2023 (Government Services; Insured: AMBAC) | AAA/Aa2 | 1,275,000 | 1,533,787 | ||||||||||||||
Bernalillo County, 5.25% due 10/1/2025 (Government Services; Insured: AMBAC) | AAA/Aa2 | 3,850,000 | 4,714,748 | ||||||||||||||
Bernalillo County, 5.25% due 4/1/2027 (Government Services) | AAA/Aa2 | 300,000 | 364,314 | ||||||||||||||
Bernalillo County, 5.70% due 4/1/2027 (Government Services) | AAA/Aa2 | 3,000,000 | 3,730,140 | ||||||||||||||
Bernalillo County, 5.70% due 4/1/2027 (Government Services; Insured: Natl-Re) | AAA/Aa2 | 815,000 | 1,008,383 | ||||||||||||||
Carlsbad Municipal School District GO, 5.00% due 8/1/2018 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,000,000 | 1,033,760 | ||||||||||||||
Carlsbad Municipal School District GO, 5.00% due 8/1/2023 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 1,650,000 | 1,960,085 | ||||||||||||||
Central New Mexico Community College GO, 5.00% due 8/15/2020 (Campus Buildings Acquisition & Improvements) | AA+/Aa1 | 1,375,000 | 1,524,311 | ||||||||||||||
Central New Mexico Community College GO, 5.00% due 8/15/2021 (Campus Buildings Acquisition & Improvements) | AA+/Aa1 | 1,435,000 | 1,636,603 | ||||||||||||||
Central New Mexico Community College GO, 5.00% due 8/15/2022 (Campus Buildings Acquisition & Improvements) | AA+/Aa1 | 1,100,000 | 1,282,985 | ||||||||||||||
Central New Mexico Community College GO, 4.00% due 8/15/2023 (Campus Buildings Acquisition & Improvements) | AA+/Aa1 | 1,920,000 | 2,103,322 | ||||||||||||||
Cibola County, 5.00% due 6/1/2025 (County Building Improvements) | NR/NR | 360,000 | 421,380 | ||||||||||||||
Cibola County, 5.00% due 6/1/2025 (County Building Improvements) | NR/NR | 355,000 | 415,528 | ||||||||||||||
City of Albuquerque, 5.00% due 7/1/2021 (Lodgers’ Tax Obligation Reserve Fund) | AAA/Aa2 | 1,340,000 | 1,428,534 | ||||||||||||||
City of Albuquerque, 5.00% due 7/1/2021 (Lodgers’ Tax Obligation Reserve Fund) | AAA/Aa2 | 3,000,000 | 3,198,210 | ||||||||||||||
City of Albuquerque, 5.00% due 7/1/2025 (I-25/Paseo del Norte Interchange) | AAA/Aa2 | 540,000 | 637,465 | ||||||||||||||
City of Albuquerque, 5.00% due 7/1/2027 (I-25/Paseo del Norte Interchange) | AAA/Aa2 | 555,000 | 650,188 | ||||||||||||||
City of Albuquerque, 5.00% due 7/1/2033 (City Infrastructure Improvements) | AAA/Aa2 | 1,100,000 | 1,283,458 | ||||||||||||||
City of Albuquerque, 5.00% due 7/1/2034 (City Infrastructure Improvements) | AAA/Aa2 | 1,200,000 | 1,393,740 | ||||||||||||||
City of Albuquerque GO, 5.00% due 7/1/2023 (City Infrastructure Improvements) | AAA/Aa1 | 1,360,000 | 1,616,986 | ||||||||||||||
City of Albuquerque GO, 5.00% due 7/1/2026 (City Infrastructure Improvements) | AAA/Aa1 | 870,000 | 1,084,211 | ||||||||||||||
City of Farmington, 5.125% due 6/1/2018 (San Juan Regional Medical Center) | NR/A3 | 570,000 | 572,052 | ||||||||||||||
City of Farmington, 5.125% due 6/1/2019 (San Juan Regional Medical Center) | NR/A3 | 645,000 | 647,296 | ||||||||||||||
City of Farmington, 5.00% due 6/1/2022 (San Juan Regional Medical Center) | NR/A3 | 2,825,000 | 2,833,927 | ||||||||||||||
City of Farmington, 4.70% due 5/1/2024 (Arizona Public Service Co.-Four Corners Project) | A-/A2 | 965,000 | 1,039,450 | ||||||||||||||
City of Farmington, 4.70% due 9/1/2024 (Arizona Public Service Co.-Four Corners Project) | A-/A2 | 4,000,000 | 4,307,720 | ||||||||||||||
City of Farmington, 1.875% due 4/1/2029 put 4/1/2020 (Southern California Edison Co.-Four Corners Project) | A/Aa3 | 3,000,000 | 3,037,200 | ||||||||||||||
City of Gallup, 5.125% due 6/1/2019 (City Infrastructure Improvements) | NR/NR | 310,000 | 324,728 | ||||||||||||||
City of Las Cruces, 4.00% due 6/1/2021 (Joint Utility System) | NR/Aa2 | 100,000 | 109,826 | ||||||||||||||
City of Las Cruces, 5.00% due 6/1/2021 (NMFA Loan) | NR/Aa3 | 730,000 | 796,999 | ||||||||||||||
City of Las Cruces, 4.00% due 6/1/2022 (Joint Utility System) | NR/Aa2 | 670,000 | 747,231 | ||||||||||||||
City of Las Cruces, 5.00% due 6/1/2022 (NMFA Loan) | NR/Aa3 | 765,000 | 838,624 | ||||||||||||||
City of Las Cruces, 4.00% due 6/1/2023 (Joint Utility System) | NR/Aa2 | 695,000 | 784,057 | ||||||||||||||
City of Las Cruces, 5.00% due 6/1/2023 (NMFA Loan) | NR/Aa3 | 800,000 | 876,552 | ||||||||||||||
City of Las Cruces, 5.00% due 6/1/2024 (NMFA Loan) | NR/Aa3 | 840,000 | 919,783 | ||||||||||||||
City of Las Cruces, 4.00% due 6/1/2025 (Joint Utility System) | NR/Aa2 | 750,000 | 859,403 | ||||||||||||||
City of Las Cruces, 5.00% due 6/1/2030 (NMFA Loan) | NR/Aa3 | 2,000,000 | 2,175,320 | ||||||||||||||
City of Las Cruces, 5.00% due 6/1/2037 (NMFA Loan) | NR/Aa3 | 5,000,000 | 5,422,100 | ||||||||||||||
City of Roswell, 5.00% due 6/1/2026 (Joint Water and Sewer Improvement; Insured: BAM) | AA/A1 | 830,000 | 1,002,250 | ||||||||||||||
City of Roswell, 5.00% due 6/1/2035 (Joint Water and Sewer Improvement; lnsured: BAM) | AA/A1 | 580,000 | 665,115 | ||||||||||||||
City of Roswell, 5.00% due 6/1/2036 (Joint Water and Sewer Improvement; Insured: BAM) | AA/A1 | 640,000 | 731,821 | ||||||||||||||
City of Santa Fe, 4.50% due 5/15/2027 (El Castillo Retirement Residences) | BBB-/NR | 3,275,000 | 3,408,980 | ||||||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
City of Santa Fe, 5.00% due 5/15/2034 (El Castillo Retirement Residences) | BBB-/NR | $ | 1,465,000 | $ | 1,519,996 | ||||||||||||
City of Santa Fe GRT, 5.00% due 6/1/2028 (Public Facilities) | AA+/NR | 930,000 | 1,104,022 | ||||||||||||||
City of Santa Fe GRT, 5.00% due 6/1/2029 (Public Facilities) | AA+/NR | 950,000 | 1,128,961 | ||||||||||||||
Colfax County, 5.00% due 9/1/2019 (Government Center Facility) (ETM) | A-/NR | 240,000 | 252,353 | ||||||||||||||
Colfax County, 5.50% due 9/1/2029 pre-refunded 9/1/2019 (Government Center Facility) | A-/NR | 2,510,000 | 2,721,618 | ||||||||||||||
County of Los Alamos, 4.875% due 6/1/2018 (Public Facilities) | AA+/A1 | 500,000 | 512,805 | ||||||||||||||
County of Los Alamos, 5.50% due 6/1/2018 (Public Facilities) | AA+/A1 | 1,000,000 | 1,029,780 | ||||||||||||||
County of Los Alamos, 5.625% due 6/1/2023 pre-refunded 6/1/2018 (Public Facilities) | AA+/A1 | 1,000,000 | 1,031,540 | ||||||||||||||
County of Los Alamos, 5.75% due 6/1/2024 pre-refunded 6/1/2018 (Public Facilities) | AA+/A1 | 3,000,000 | 3,097,110 | ||||||||||||||
County of Los Alamos, 5.75% due 6/1/2025 pre-refunded 6/1/2018 (Public Facilities) | AA+/A1 | 1,000,000 | 1,032,370 | ||||||||||||||
Farmington Municipal School District No. 5 GO, 5.00% due 9/1/2019 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 600,000 | 644,856 | ||||||||||||||
Government of Guam, 5.375% due 12/1/2024 pre-refunded 12/1/2019 (Layon Solid Waste Disposal Facility) | BBB+/NR | 2,000,000 | 2,183,820 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2031 (Various Capital Projects) | A/NR | 2,500,000 | 2,720,750 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2033 (Various Capital Projects) | A/NR | 2,500,000 | 2,693,475 | ||||||||||||||
Grant County, 5.50% due 7/1/2020 (State Dept. of Health-Ft. Bayard Project) | AA-/Aa2 | 1,565,000 | 1,616,645 | ||||||||||||||
Grant County, 5.50% due 7/1/2021 (State Dept. of Health-Ft. Bayard Project) | AA-/Aa2 | 1,655,000 | 1,709,615 | ||||||||||||||
Grant County, 5.50% due 7/1/2022 (State Dept. of Health-Ft. Bayard Project) | AA-/Aa2 | 1,745,000 | 1,802,585 | ||||||||||||||
Guam Power Authority, 5.00% due 10/1/2026 (Electric Power System; Insured: AGM) | AA/A2 | 2,000,000 | 2,268,620 | ||||||||||||||
Las Cruces School District No. 2 GO, 2.00% due 8/1/2018 (New Mexico SD Credit Enhancement Program) (State Aid Withholding) | NR/Aa2 | 630,000 | 635,147 | ||||||||||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2019 (Student Loans) | AAA/Aaa | 1,000,000 | 1,080,020 | ||||||||||||||
New Mexico Educational Assistance Foundation, 5.00% due 12/1/2022 (Student Loans) | AAA/Aaa | 3,000,000 | 3,327,630 | ||||||||||||||
New Mexico Finance Authority, 5.00% due 12/15/2017 (State Highway Infrastructure) | AA/Aa2 | 250,000 | 252,218 | ||||||||||||||
New Mexico Finance Authority, 5.00% due 6/15/2026 (State Highway Infrastructure) | AA/Aa2 | 1,220,000 | 1,452,825 | ||||||||||||||
New Mexico Finance Authority, 5.00% due 6/15/2027 (State Highway Infrastructure) | AA/Aa2 | 1,195,000 | 1,417,724 | ||||||||||||||
New Mexico Finance Authority, 5.00% due 6/15/2031 (The Public Project Revolving Fund Program) | AAA/Aa2 | 1,000,000 | 1,173,550 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 6.00% due 8/1/2023 pre-refunded 8/1/2018 (Presbyterian Healthcare Services) | AA/Aa3 | 6,000,000 | 6,249,120 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 8/1/2031 (Presbyterian Healthcare Services) | AA/Aa3 | 600,000 | 695,970 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 8/1/2031 (Presbyterian Healthcare Services) | AA/Aa3 | 1,150,000 | 1,379,954 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 7/1/2032 (Haverland Carter Lifestyle Group) | NR/NR | 2,000,000 | 2,111,420 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 0.90% due 8/1/2034 put 10/2/2017 (Presbyterian Healthcare Services; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa3 | 3,200,000 | 3,200,000 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 0.90% due 8/1/2034 put 10/2/2017 (Presbyterian Healthcare Services; SPA: Wells Fargo Bank, N.A.) (daily demand notes) | AA/Aa3 | 9,635,000 | 9,635,000 | ||||||||||||||
New Mexico Hospital Equipment Loan Council, 5.00% due 8/1/2039 pre-refunded 8/1/2019 (Presbyterian Healthcare Services) | AA/Aa3 | 3,000,000 | 3,214,170 | ||||||||||||||
New Mexico Housing Authority, 5.30% due 12/1/2022 (El Paseo Apartments; Insured: AMBAC) (AMT) | NR/NR | 525,000 | 525,446 | ||||||||||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2020 (Campus Buildings Acquisition & Improvements) | A+/A1 | 590,000 | 646,870 | ||||||||||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2023 (Campus Buildings Acquisition & Improvements) | A+/A1 | 685,000 | 769,289 | ||||||||||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2024 (Campus Buildings Acquisition & Improvements) | A+/A1 | 525,000 | 588,578 | ||||||||||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2025 (Campus Buildings Acquisition & Improvements) | A+/A1 | 505,000 | 564,782 | ||||||||||||||
New Mexico Institute of Mining and Technology, 5.00% due 7/1/2028 (Campus Buildings Acquisition & Improvements) | A+/A1 | 1,500,000 | 1,673,520 | ||||||||||||||
New Mexico Mortgage Finance Authority, 5.25% due 7/1/2023 (HERO SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 410,000 | 412,837 | ||||||||||||||
New Mexico Mortgage Finance Authority, 5.375% due 7/1/2023 (Saver SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 175,000 | 175,565 | ||||||||||||||
New Mexico Mortgage Finance Authority, 4.625% due 3/1/2028 (NIBP SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) | AA+/NR | 870,000 | 918,015 | ||||||||||||||
New Mexico Mortgage Finance Authority, 5.50% due 7/1/2028 (HERO SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 900,000 | 904,932 | ||||||||||||||
New Mexico Mortgage Finance Authority, 5.60% due 7/1/2028 (Saver SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) (AMT) | AA+/NR | 160,000 | 160,952 | ||||||||||||||
New Mexico Mortgage Finance Authority, 5.40% due 9/1/2029 (Saver SFM Loan Program; Collateralized: GNMA/FNMA/FHLMC) | AA+/NR | 465,000 | 479,847 | ||||||||||||||
Regents of New Mexico State University, 5.00% due 4/1/2035 (Campus Buildings Acquisition & Improvements) | AA-/A1 | 1,900,000 | 2,203,734 | ||||||||||||||
Regents of New Mexico State University, 5.00% due 4/1/2036 (Campus Buildings Acquisition & Improvements) | AA-/A1 | 1,995,000 | 2,312,125 | ||||||||||||||
Regents of the University of New Mexico, 6.00% due 6/1/2021 (Campus Buildings Acquisition & Improvements) | AA/Aa2 | 300,000 | 325,971 | ||||||||||||||
Regents of the University of New Mexico, 0.87% due 6/1/2026 put 10/6/2017 (Campus Buildings Acquisition & Improvements; SPA: U.S. Bank, N.A.) (weekly demand notes) | AA/Aa2 | 1,200,000 | 1,200,000 | ||||||||||||||
Regents of the University of New Mexico, 4.50% due 6/1/2034 (Campus Buildings Acquisition & Improvements) | AA/Aa2 | 1,500,000 | 1,685,250 | ||||||||||||||
Regents of the University of New Mexico, 4.50% due 6/1/2035 (Campus Buildings Acquisition & Improvements) | AA/Aa2 | 1,500,000 | 1,681,590 | ||||||||||||||
Regents of the University of New Mexico, 4.50% due 6/1/2036 (Campus Buildings Acquisition & Improvements) | AA/Aa2 | 1,500,000 | 1,675,485 | ||||||||||||||
10 | Annual Report
Schedule of Investments, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
San Juan County, 5.00% due 6/15/2028 (County Capital Improvements) | A+/A1 | $ | 1,280,000 | $ | 1,496,179 | ||||||||||||
San Juan County, 5.00% due 6/15/2030 (County Capital Improvements) | A+/A1 | 1,365,000 | 1,583,482 | ||||||||||||||
Santa Fe County, 5.00% due 2/1/2018 (County Correctional System; Insured: AGM) | AA/A2 | 205,000 | 207,187 | ||||||||||||||
Santa Fe County, 5.00% due 6/1/2025 pre-refunded 6/1/2018 (County Courthouse and Other Public Facilities) | AA+/Aa2 | 1,400,000 | 1,438,206 | ||||||||||||||
Santa Fe County, 5.00% due 6/1/2026 pre-refunded 6/1/2018 (County Courthouse and Other Public Facilities) | AA+/Aa2 | 1,535,000 | 1,576,890 | ||||||||||||||
Santa Fe County, 6.00% due 2/1/2027 (County Correctional System; Insured: AGM) | AA/A2 | 1,520,000 | 1,841,237 | ||||||||||||||
Santa Fe County GO, 5.00% due 7/1/2018 (Road and Various Other Public Facilities Improvements) | NR/NR | 625,000 | 643,956 | ||||||||||||||
Santa Fe County GRT, 5.00% due 6/1/2025 (County Buildings & Facilities) | AA+/NR | 1,250,000 | 1,523,013 | ||||||||||||||
Santa Fe County GRT, 5.00% due 6/1/2026 (County Buildings & Facilities) | AA+/NR | 640,000 | 773,395 | ||||||||||||||
Santa Fe County GRT, 5.00% due 6/1/2027 (County Buildings & Facilities) | AA+/NR | 275,000 | 327,726 | ||||||||||||||
State of New Mexico, 5.00% due 7/1/2020 (Educational Facilities) | AA-/Aa2 | 4,000,000 | 4,417,600 | ||||||||||||||
State of New Mexico, 5.00% due 7/1/2022 pre-refunded 7/1/2019 (Capital Improvements) | AA-/Aa2 | 350,000 | 374,234 | ||||||||||||||
State of New Mexico, 5.00% due 7/1/2025 (Educational Facilities) | AA-/Aa2 | 2,000,000 | 2,436,280 | ||||||||||||||
Taos Municipal School District No. 1 GO, 5.00% due 9/1/2021 (Educational Facilities) (State Aid Withholding) | NR/Aa2 | 520,000 | 593,757 | ||||||||||||||
Town of Silver City, 2.00% due 12/1/2018 (Joint Utility System Improvement; Insured: BAM) | AA/NR | 260,000 | 262,519 | ||||||||||||||
Town of Silver City, 2.00% due 12/1/2019 (Joint Utility System Improvement; Insured: BAM) | AA/NR | 265,000 | 269,961 | ||||||||||||||
Town of Silver City, 4.00% due 6/1/2029 (Public Facility Capital Projects) | A+/NR | 1,000,000 | 1,040,420 | ||||||||||||||
Town of Silver City, 4.25% due 6/1/2032 (Public Facility Capital Projects) | A+/NR | 1,050,000 | 1,091,570 | ||||||||||||||
Village of Los Ranchos de Albuquerque, 4.50% due 9/1/2040 (Albuquerque Academy) | A-/NR | 3,000,000 | 3,120,660 | ||||||||||||||
Virgin Islands Public Finance Authority, 6.625% due 10/1/2029 (Diageo Project) | NR/Caa2 | 2,500,000 | 1,682,800 | ||||||||||||||
Zuni Public School District, 5.00% due 8/1/2028 (Teacher Housing Projects) | A/NR | 1,600,000 | 1,780,352 | ||||||||||||||
|
| ||||||||||||||||
| TOTAL INVESTMENTS — 98.51% (Cost $ 191,926,946) | 198,808,023 | ||||||||||||||||
| OTHER ASSETS LESS LIABILITIES — 1.49% | 3,016,210 | ||||||||||||||||
|
| ||||||||||||||||
| NET ASSETS — 100.00% | 201,824,233 | ||||||||||||||||
|
| ||||||||||||||||
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. | FNMA | Collateralized by Federal National Mortgage Association | |||
| AMBAC | Insured by American Municipal Bond Assurance Corp. | GNMA | Collateralized by Government National Mortgage Association | |||
| AMT | Alternative Minimum Tax | GO | General Obligation | |||
| BAM | Insured by Build America Mutual Insurance Co. | GRT | Gross Receipts Tax | |||
| ETM | Escrowed to Maturity | Natl-Re | Insured by National Public Finance Guarantee Corp. | |||
| FHLMC | Insured by Federal Home Loan Mortgage Corp. |
See notes to financial statements.
Annual Report | 11
Statement of Assets and Liabilities
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017
ASSETS | ||||
Investments at value (cost $191,926,946) (Note 3) | $ | 198,808,023 | ||
Cash | 700,907 | |||
Receivable for fund shares sold | 313,944 | |||
Interest receivable | 2,531,431 | |||
Prepaid expenses and other assets | 8,308 | |||
|
| |||
Total Assets | 202,362,613 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 297,587 | |||
Payable to investment advisor and other affiliates (Note 4) | 135,582 | |||
Accounts payable and accrued expenses | 70,882 | |||
Dividends payable | 34,329 | |||
|
| |||
Total Liabilities | 538,380 | |||
|
| |||
NET ASSETS | $ | 201,824,233 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Distribution in excess of net investment income | $ | (25,896 | ) | |
Net unrealized appreciation on investments | 6,881,077 | |||
Accumulated net realized gain (loss) | (1,254,573 | ) | ||
Net capital paid in on shares of beneficial interest | 196,223,625 | |||
|
| |||
| $ | 201,824,233 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 13.30 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
|
| |||
Maximum offering price per share | $ | 13.57 | ||
|
| |||
Class D Shares: | ||||
Net asset value, offering and redemption price per share | $ | 13.31 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 13.29 | ||
|
| |||
See notes to financial statements.
12 | Annual Report
Thornburg New Mexico Intermediate Municipal Fund | Year Ended September 30, 2017
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $1,929,351) | $ | 6,971,090 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 1,043,238 | |||
Administration fees (Note 4) | ||||
Class A Shares | 155,301 | |||
Class D Shares | 30,728 | |||
Class I Shares | 29,912 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 310,602 | |||
Class D Shares | 118,189 | |||
Transfer agent fees | ||||
Class A Shares | 58,780 | |||
Class D Shares | 10,386 | |||
Class I Shares | 25,273 | |||
Registration and filing fees | ||||
Class A Shares | 1,650 | |||
Class D Shares | 1,047 | |||
Class I Shares | 3,608 | |||
Custodian fees (Note 2) | 47,992 | |||
Professional fees | 40,824 | |||
Accounting fees (Note 4) | 7,244 | |||
Trustee fees | 8,729 | |||
Other expenses | 22,612 | |||
|
| |||
Total Expenses | 1,916,115 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (666 | ) | ||
|
| |||
Net Expenses | 1,915,449 | |||
|
| |||
Net Investment Income | 5,055,641 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (100,189 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (6,289,705 | ) | ||
|
| |||
Net Realized and Unrealized Loss | (6,389,894 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (1,334,253 | ) | |
|
| |||
See notes to financial statements.
Annual Report | 13
Statements of Changes in Net Assets
Thornburg New Mexico Intermediate Municipal Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 5,055,641 | $ | 5,145,164 | ||||||
Net realized gain (loss) on investments | (100,189 | ) | (8,510 | ) | ||||||
Net unrealized appreciation (depreciation) on investments | (6,289,705 | ) | 2,102,714 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (1,334,253 | ) | 7,239,368 | |||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (2,929,452 | ) | (3,030,645 | ) | ||||||
Class D Shares | (522,688 | ) | (560,708 | ) | ||||||
Class I Shares | (1,603,501 | ) | (1,553,811 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class A Shares | (16,089,076 | ) | (4,494,643 | ) | ||||||
Class D Shares | (5,032,358 | ) | (727,598 | ) | ||||||
Class I Shares | (1,739,640 | ) | 7,352,843 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | (29,250,968 | ) | 4,224,806 | |||||||
NET ASSETS | ||||||||||
Beginning of Year | 231,075,201 | 226,850,395 | ||||||||
|
| |||||||||
End of Year | $ | 201,824,233 | $ | 231,075,201 | ||||||
|
| |||||||||
Distribution in excess of net investment income | $ | (25,896 | ) | $ | (25,896 | ) | ||||
See notes to financial statements.
14 | Annual Report
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017
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 twenty-one 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 Thornburg Investment Management, Inc., the Trust’s investment advisor (the “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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by the Advisor. Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
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 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
Annual Report | 15
Notes to Financial Statements, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017
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.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 191,926,946 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 7,829,830 | |||
Gross unrealized depreciation on a tax basis | (948,753 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 6,881,077 | |||
|
|
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $100,189. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $1,154,384 (of which $87,413 are short-term and $1,066,971 are 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.
At September 30, 2017, the Fund had $8,433 of undistributed net tax-exempt income, no undistributed tax basis net ordinary income and no undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the year ended September 30, 2017 and September 30, 2016 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Tax exempt income | $ | 5,055,641 | $ | 5,145,148 | ||||||
Ordinary income | – | 16 | ||||||||
|
| |||||||||
Total | $ | 5,055,641 | $ | 5,145,164 | ||||||
|
| |||||||||
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining
16 | Annual Report
Notes to Financial Statements, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017
fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from the FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs when it sells the investment.
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
Municipal Bonds | $ | 198,808,023 | $ | – | $ | 198,808,023 | $ | – | ||||||||||||
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Total Investments in Securities | $ | 198,808,023 | $ | – | $ | 198,808,023 | $ | – | ||||||||||||
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, 2017.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| MANAGEMENT FEE SCHEDULE | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.500 | % | |||
Next $500 million | 0.450 | ||||
Next $500 million | 0.400 | ||||
Next $500 million | 0.350 | ||||
Over $2 billion | 0.275 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.50% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $7,244 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $4,855 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A and Class D of shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I shares. The Advisor and Distributor each 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, 2017, are set forth in the Statement of Operations.
For the year ended September 30, 2017, the Advisor reimbursed certain class specific expenses, administrative fees, and distribution fees of $666 for Class A shares.
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.
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 10.6%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had transactions with affiliated funds of $3,631,941 in purchases and $5,508,794 in sales generating realized losses of $14,953.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 542,204 | $ | 7,240,912 | 915,431 | $ | 12,528,291 | ||||||||||
Shares issued to shareholders in | 190,890 | 2,543,123 | 188,232 | 2,574,787 | ||||||||||||
Shares repurchased | (1,943,296 | ) | (25,873,111 | ) | (1,432,981 | ) | (19,597,721 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (1,210,202 | ) | $ | (16,089,076 | ) | (329,318 | ) | $ | (4,494,643 | ) | ||||||
|
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Class D Shares | ||||||||||||||||
Shares sold | 262,935 | $ | 3,500,603 | 309,896 | $ | 4,243,840 | ||||||||||
Shares issued to shareholders in | 36,187 | 482,399 | 38,634 | 528,742 | ||||||||||||
Shares repurchased | (678,301 | ) | (9,015,360 | ) | (402,304 | ) | (5,500,180 | ) | ||||||||
|
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Net decrease | (379,179 | ) | $ | (5,032,358 | ) | (53,774 | ) | $ | (727,598 | ) | ||||||
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Class I Shares | ||||||||||||||||
Shares sold | 1,135,137 | $ | 15,113,318 | 673,041 | $ | 9,199,727 | ||||||||||
Shares issued to shareholders in | 111,415 | 1,483,821 | 105,479 | 1,442,583 | ||||||||||||
Shares repurchased | (1,382,452 | ) | (18,336,779 | ) | (241,095 | ) | (3,289,467 | ) | ||||||||
|
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Net increase (decrease) | (135,900 | ) | $ | (1,739,640 | ) | 537,425 | $ | 7,352,843 | ||||||||
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NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $16,769,788 and $37,467,375, respectively.
OTHER NOTES
Risks: The Fund’s investments subject it to risks including, but not limited to, management risk, interest rate risk, credit risk, market and economic risk, liquidity risk, and the risk of investing mainly in the obligations primarily originating in 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 19
Thornburg New Mexico Intermediate Municipal Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 13.67 | 0.31 | (0.37 | ) | (0.06 | ) | (0.31 | ) | – | (0.31 | ) | $ | 13.30 | ||||||||||||||||||||||||||
2016(b) | $ | 13.55 | 0.30 | 0.12 | 0.42 | (0.30 | ) | – | (0.30 | ) | $ | 13.67 | ||||||||||||||||||||||||||||
2015(b) | $ | 13.60 | 0.34 | (0.05 | ) | 0.29 | (0.34 | ) | – | (0.34 | ) | $ | 13.55 | |||||||||||||||||||||||||||
2014(b) | $ | 13.35 | 0.39 | 0.25 | 0.64 | (0.39 | ) | – | (0.39 | ) | $ | 13.60 | ||||||||||||||||||||||||||||
2013(b) | $ | 13.95 | 0.38 | (0.60 | ) | (0.22 | ) | (0.38 | ) | – | (0.38 | ) | $ | 13.35 | ||||||||||||||||||||||||||
| CLASS D SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.68 | 0.28 | (0.37 | ) | (0.09 | ) | (0.28 | ) | – | (0.28 | ) | $ | 13.31 | ||||||||||||||||||||||||||
2016 | $ | 13.55 | 0.28 | 0.12 | 0.40 | (0.27 | ) | – | (0.27 | ) | $ | 13.68 | ||||||||||||||||||||||||||||
2015 | $ | 13.61 | 0.31 | (0.06 | ) | 0.25 | (0.31 | ) | – | (0.31 | ) | $ | 13.55 | |||||||||||||||||||||||||||
2014 | $ | 13.36 | 0.35 | 0.25 | 0.60 | (0.35 | ) | – | (0.35 | ) | $ | 13.61 | ||||||||||||||||||||||||||||
2013 | $ | 13.96 | 0.34 | (0.59 | ) | (0.25 | ) | (0.35 | ) | – | (0.35 | ) | $ | 13.36 | ||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.67 | 0.36 | (0.38 | ) | (0.02 | ) | (0.36 | ) | – | (0.36 | ) | $ | 13.29 | ||||||||||||||||||||||||||
2016 | $ | 13.54 | 0.35 | 0.12 | 0.47 | (0.34 | ) | – | (0.34 | ) | $ | 13.67 | ||||||||||||||||||||||||||||
2015 | $ | 13.59 | 0.38 | (0.05 | ) | 0.33 | (0.38 | ) | – | (0.38 | ) | $ | 13.54 | |||||||||||||||||||||||||||
2014 | $ | 13.35 | 0.43 | 0.24 | 0.67 | (0.43 | ) | – | (0.43 | ) | $ | 13.59 | ||||||||||||||||||||||||||||
2013 | $ | 13.95 | 0.43 | (0.61 | ) | (0.18 | ) | (0.42 | ) | – | (0.42 | ) | $ | 13.35 | ||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
20 | Annual Report
Financial Highlights, Continued
Thornburg New Mexico Intermediate Municipal Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 2.36 | 0.98 | 0.98 | 0.98 | (0.38 | ) | 8.61 | $ | 116,915 | ||||||||||||||||||||||
| 2.18 | 0.97 | 0.97 | 0.97 | 3.11 | 6.80 | $ | 136,743 | |||||||||||||||||||||||
| 2.50 | 0.98 | 0.98 | 0.98 | 2.15 | 19.01 | $ | 139,939 | |||||||||||||||||||||||
| 2.87 | 0.97 | 0.97 | 0.97 | 4.83 | 10.79 | $ | 143,994 | |||||||||||||||||||||||
| 2.76 | 0.96 | 0.95 | 0.96 | (1.61 | ) | 11.78 | $ | 148,499 | ||||||||||||||||||||||
| 2.13 | 1.21 | 1.21 | 1.21 | (0.61 | ) | 8.61 | $ | 22,666 | ||||||||||||||||||||||
| 1.94 | 1.21 | 1.21 | 1.21 | 2.94 | 6.80 | $ | 28,489 | |||||||||||||||||||||||
| 2.27 | 1.20 | 1.20 | 1.20 | 1.84 | 19.01 | $ | 28,953 | |||||||||||||||||||||||
| 2.60 | 1.23 | 1.23 | 1.23 | 4.55 | 10.79 | $ | 28,438 | |||||||||||||||||||||||
| 2.51 | 1.21 | 1.21 | 1.22 | (1.85 | ) | 11.78 | $ | 28,858 | ||||||||||||||||||||||
| 2.68 | 0.66 | 0.66 | 0.66 | (0.13 | ) | 8.61 | $ | 62,243 | ||||||||||||||||||||||
| 2.52 | 0.63 | 0.63 | 0.63 | 3.53 | 6.80 | $ | 65,843 | |||||||||||||||||||||||
| 2.80 | 0.65 | 0.65 | 0.65 | 2.48 | 19.01 | $ | 57,958 | |||||||||||||||||||||||
| 3.19 | 0.65 | 0.64 | 0.65 | 5.09 | 10.79 | $ | 37,380 | |||||||||||||||||||||||
| 3.09 | 0.61 | 0.61 | 0.61 | (1.29 | ) | 11.78 | $ | 25,590 | ||||||||||||||||||||||
Annual Report | 21
Report of Independent Registered Public Accounting Firm
Thornburg New Mexico Intermediate Municipal Fund
To the Trustees and Shareholders of the 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 the Thornburg New Mexico Intermediate Municipal Fund (the “Fund”) as of September 30, 2017, 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 as of September 30, 2017 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
22 | Annual Report
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
| BEGINNING ACCOUNT VALUE 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,014.90 | $ | 4.95 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.16 | $ | 4.96 | |||||||||
| CLASS D SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,013.70 | $ | 6.15 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.96 | $ | 6.17 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.80 | $ | 3.32 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.78 | $ | 3.33 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.98%; D: 1.22%; I: 0.66%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
| * | Hypothetical assumes a rate of return of 5% per year before expenses. |
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.
Annual Report | 23
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
24 | Annual Report
Trustees and Officers, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 25
Trustees and Officers, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries 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.
26 | Annual Report
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (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, 2017, dividends paid by the Fund of $5,055,641 (or the maximum allowed) are tax exempt dividends and $0 are taxable ordinary investment income dividends for federal income tax purposes. The information and the distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2017. Complete information will be reported in conjunction with your 2017 Form 1099.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg.com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg New Mexico Intermediate Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed other portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for
Annual Report | 27
Other Information, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (Unaudited)
consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 created 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 created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Information provided to the Trustees indicated that the comparability of indices and fund categories to the Fund may be limited for a number of reasons, including the characteristics of investments available to a fund investing primarily in New Mexico. Measures of risk and relative return demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions. The Trustees generally attach additional significance to investment performance from the perspective of longer term shareholders, and noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the objectives of the Fund. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and overall Fund expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and other Fund expenses for two Fund share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been considered by the Trustees showed that the advisory fee for the Fund was higher than the median and average fee levels for the fund category, the level of total expense for one share class was higher than the median and comparable to the average expense levels for the category, and that the level of total expense for a second share class was lower than the median and average total expense levels for the category. Peer group data showed that the Fund’s advisory fee level for two share classes was higher than the median levels of the peer groups but comparable to the fee levels for other funds in the peer groups, the total expense level for one of the share classes was higher than the median of its peer group but comparable to other funds in the group, and the total expense level for the second share class was comparable to the median of its peer group. The Trustees did not find the differences significant in view of their findings and conclusions respecting the other factors considered.
28 | Annual Report
Other Information, Continued
Thornburg New Mexico Intermediate Municipal Fund | September 30, 2017 (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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 29
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
30 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 31
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
Annual Report September 30, 2017 THORNBURG NEW YORK INTERMEDIATE MUNICIPAL FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg New York Intermediate Municipal Fund
Annual Report ^ September 30, 2017
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class A | THNYX | 885-215-665 | ||||||||
| Class I | TNYIX | 885-216-705 | ||||||||
Minimum investments for Class I shares may be higher than those for Class A. Class I shares may not be available to all investors.
Investments carry risks, including possible loss of principal. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The 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 Funds are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.
The laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
Annual Report | 3
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (Unaudited)
October 12, 2017
Dear Fellow Shareholder:
We are pleased to present the annual report for Thornburg New York Intermediate Municipal Fund. The net asset value (NAV) of the Class A shares decreased by 40 cents to $13.00 per share during the fiscal year ended September 30, 2017. If you were with us for the entire period, you received dividends of 32.7 cents per share. Dividends were higher for the Class I shares to account for varying class-specific expenses. The Class A shares of your Fund underperformed the index with a negative 0.52% total return (without sales charge) for the fiscal year ended September 30, 2017, compared to the 1.00% total return for the BofA Merrill Lynch 3-15 Year U.S. Municipal Securities Index.
The drivers of the Fund’s total return relative to its benchmark include its interest rate sensitivity, as measured by the Fund’s duration, differing credit quality allocations, and other risk factors. The Fund underperformed its benchmark by 1.52%. The impact from the Fund’s 1.39 years shorter duration added 0.45%, while credit quality allocations detracted 0.44%. Other risk factors detracted 0.44%, while the Fund’s expenses and residuals accounted for the remainder of the performance differential.
The New Administration’s Agenda, U.S. Economy, and Fed Policy
The Trump administration took office in January of 2017 with an aggressive agenda. It promised to repeal and replace the Affordable Care Act (ACA), known also as Obamacare, increase infrastructure spending, scale back federal regulatory constraints on businesses, and reform the federal tax code. Initially, the promise of this pro-growth agenda caused interest rates to increase substantially upon Trump’s election in November. This was followed by further increases in December as investors sold municipal bonds to capture losses that appeared to be more valuable in 2016 than 2017. Some nine months later, the repeal and replacement of the ACA has failed to become a reality—tripped up in both the U.S. House and Senate.
Meanwhile, the silence around increased infrastructure spending is deafening. Federal regulatory constraints have been eased only through executive orders. The process for tax reform has just begun, but the administration’s initial measure appears to be hitting a rough patch as the proposed removal of the federal deduction for state and local taxes (SALT) has generated some blowback. The president’s framework for tax reform was mute with regard to continuation of the tax exemption for municipal bonds, although several sources have attributed the administration to stating that the municipal bond tax exemption is safe. The president’s proposal does call for the repeal of the alternative minimum tax. All that said, this is Washington, DC, and with tax reform a major piece of the president’s agenda, watching this sausage get made will be interesting.
After a rather punk showing for the first two quarters of fiscal 2017, in which gross domestic product (GDP) growth was 1.8% and 1.2%, respectively, the economy generated a 3.1% GDP growth rate in the third fiscal quarter. The fiscal fourth quarter estimates of GDP have varied greatly as the impact of three devastating hurricanes (Harvey, Irma and Maria) are taken into consideration. After considering the impacts of Harvey and Irma alone, Goldman Sachs lowered its third-quarter GDP estimate by 0.8% to 2.0%.
Nonfarm payrolls have been a bright spot for the economy, averaging 168,000 new jobs per month for the first 11 months of fiscal 2017. This is a little lower than the 219,000 average monthly jobs generated in fiscal 2016. This all translates to an unemployment rate of 4.4% as of the end of August 2017 versus 4.9% at the end of fiscal 2016. One explanation for this slowdown is that employers cannot find qualified workers. This theory is substantiated by another significant economic indicator, the U.S. Job Openings and Labor Turnover Summary (JOLTS), which measures either newly created or unoccupied positions where an employer is taking specific actions to fill these positions. In July, this measure registered a reading of about 6.2 million, which is the highest since the time series began in December of 2000.
The Phillips Curve, an economic theory posed by A.W. Phillips, states that inflation and unemployment have a stable and inverse relationship. As unemployment decreases, inflation is supposed to increase. As of yet, this theory has not manifested itself. In fact, the Federal Reserve Board’s (Fed) favorite inflation measure, the Core Personal Consumption Expenditures Index (Core PCE)—which measures prices paid by consumers for goods and services without the volatility from movements in food and energy prices—has declined throughout the year. The last available reading at the end of August 2017 (1.30%) is much lower than the one at the end of September 2017 (1.80%).
On September 20, 2017 Bloomberg reported, “Federal Reserve Chair Janet Yellen acknowledged that the fall in inflation this year was a bit of a ‘mystery’ but suggested that the central bank was on course to raise interest rates again in 2017 nonetheless.” Any increase would be on top of the three hikes in the Federal Funds rate in fiscal 2017, bringing the range for the Federal Funds rate from 0.50% – 0.75% at the beginning of the year to 1.00% – 1.25% on June 14, 2017.
In addition, the Fed will begin reducing its $4.5 trillion balance sheet in October, by slowly unwinding the stimulus program it engaged a decade ago to combat the Great Recession. Its plan is to reduce its holdings of U.S. Treasury and mortgage-backed securities by $10 billion in October of 2017 and gradually raise the reduction amount in the months ahead. Essentially, this
4 | Annual Report
Letter to Shareholders, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (Unaudited)
reduces the demand for these securities from a purchaser that was not altogether economically motivated in the traditional sense. The Fed believes that the economy is strong enough that this gradual reduction of its balance sheet will not be disruptive, although some do not share this opinion. CNBC reported in August 2017, in an interview with JPMorgan Chase CEO Jamie Dimon, that he;
“stopped short of saying the bond market is on the cusp of a collapse, but said he wouldn’t personally buy any long-term government debt. ‘I’m not going to call it a bubble, but I personally wouldn’t be buying a 10-year sovereign debt anywhere in the world…my view is the Fed is doing the right things, raising rates, telling people we’re going to start reducing the balance sheet,’ Dimon added.”
The Municipal Bond Market
The municipal bond market suffered a setback in November and December of 2016. The surprise U.S. election results and the new administration’s pro-growth and pro-infrastructure agenda caused interest rates to initially rise and the tax loss harvesting caused rates to rise higher in December of 2016.
In New York, personal income rose 2.29% between the second quarter of 2016 and the second quarter of 2017 (most recent data available). The Bureau of Labor Statistics reported a steady unemployment rate of 4.8% in August from 4.7% in July. This is a preliminary reading and subject to revision. Compare this to the national unemployment rate for August, which was 4.4% and 4.2% in September. New York state tax revenues are down 4.61% on an annual basis from the second quarter of 2016 through the second quarter of 2017 due to the state’s reliance on energy. E.J. McMahon, president of the fiscal watchdog the Empire Center for Public Policy stated, “There’s speculation high-income taxpayers and employers are anticipating a federal tax cut as soon as this year … which has prompted a good number of them to delay deal-making and to shift potential capital gains income to a year later.” New York is one of the states that would be significantly impacted by the repeal of the SALT deduction. If this were to pass, it could positively affect the valuations of in-state municipal bonds as demand grows from investors looking to reduce their overall tax burden.
The municipal bond market’s returns were a result of rising rates across the yield curve – with long-term rates increasing more than short-term rates as shown in Figure 1.
| Figure I | | | 12-Month Change in Rates for AAA Rated General Obligation Municipal Bonds (as of September 29, 2017) |
Source: Bloomberg
President Trump’s goal of tax reform in particular led investors to believe that losses taken in 2016 were of greater value than losses taken in 2017. After this uptick in rates, yields moved steadily lower, and 10-year AAA general obligation bond yields decreased by about 0.30% between December 31, 2016 and September 30, 2017. Quality spreads continue to be extremely narrow, as income-starved investors extended out the yield curve or accepted lower credit quality in search of meeting an income bogey.
Cash flows into municipal bond mutual funds have been positive but nothing like the levels we experienced in fiscal year 2016. Foreign institutional investors have shown an increased interest in the municipal bond markets throughout the U.S., exhibiting some of the same characteristics as domestic retail investors by trying to quench a thirst for income.
Credit quality in the municipal bond market has been pretty stable except for some idiosyncratic disturbances. Illinois, for example, went down to the wire to pass its first budget in three years. The rating agencies threatened to drop the state’s credit rating to below investment grade, which would have seriously limited its bonds’ marketability. These antics caused the price of Illinois debt to go dramatically lower prior to the ultimate passage of the budget, after which it rallied considerably.
Elsewhere, several prominent high-yield securities came to market and were very well received. One was a mall in New Jersey across from the Meadowlands, which has been mothballed for approximately 15 years. Originally called Xanadu and referred to as the “ugliest building in New Jersey” by the Governor, it is
Annual Report | 5
Letter to Shareholders, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (Unaudited)
now called “The American Dream Mall” in its recent incarnation. The fact that this and other non-rated, high-yield projects are so well received is more evidence of how income-starved investors have become in an overly accommodative central bank world. By the way, we did not purchase this bond issue, because visitation needs to be 2x that of Disney World just to break even. And, when Amazon is disrupting everything from retail goods to groceries, we felt the last thing New Jersey needed was another mall.
Current Portfolio Positioning
We have positioned this portfolio, like our others, at the bottom end of its risk spectrum. If this sounds familiar, it is, as we said the same thing last year. We have lower durations, higher credit quality and higher reserve positions (to hedge against increased market illiquidity).
We believe that investors are not currently being compensated to take much risk. Real yields (yield less inflation) are low by historic standards (off the bottom but still low). Credit spreads are very narrow, back to pre-crisis levels, when 50% or more of the new issue market was insured by AAA municipal bond insurers. This is particularly concerning, as today only about 7% to 8% of the new issue market is insured and the municipal bond insurers are no longer rated AAA. A few desperate municipal market issuers, like Hartford, CT, are openly discussing debt restructuring and the president is making comments like the following with regard to Puerto Rico’s debt: “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out.” The precedents set by the recent municipal Chapter 9 proceedings of Detroit, MI and San Bernardino, CA have in effect placed bondholders in a subordinated position to pensioners. Sometimes investors are motivated
more by greed than fear and vice versa. Greed seems to be the current primary motivating factor, and it is in such an environment that caution should be exercised. That is exactly what we are doing—relying on value-oriented, bottom-up fundamental analysis in portfolio construction.
Why Own Municipal Bonds
Fixed income assets are an important part of a well-diversified portfolio, as they can provide a stabilizing force to the potential swings of the equity portion of the portfolio. These asset classes are not always positively correlated and can therefore dampen the overall portfolio’s volatility.
Thank you for your continued trust in us.
Sincerely,
Christopher Ryon,CFA
Portfolio Manager
Managing Director
Nicholos Venditti,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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
6 | Annual Report
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
A Shares (Incep: 9/5/97) | |||||||||||||||||||||||||
Without sales charge | -0.52% | 1.74% | 1.68% | 3.45% | 3.82% | ||||||||||||||||||||
With sales charge | -2.48% | 1.06% | 1.28% | 3.24% | 3.71% | ||||||||||||||||||||
I Shares (Incep: 2/1/10) | -0.20% | 2.06% | 2.01% | – | 3.51% | ||||||||||||||||||||
30-DAY YIELDS, A SHARES
(with sales charge)
Annualized Distribution Yield | 2.41% | ||||
SEC Yield | 0.77% |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. Class A shares are sold with a maximum sales charge of 2.00%. There is no sales charge for Class I shares. As disclosed in the most recent prospectus, the total annual fund operating expenses before fee waivers and expense reimbursements are as follows: A shares, 1.03%; I shares, 0.72%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for all share classes, resulting in net expense ratios of the following: A shares, 0.99%; I shares, 0.67%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus. Without the fee waivers and expense reimbursements, the Annualized Distribution yield would have been 2.26%, and the SEC yield would have been 0.63%.
Glossary
The BofA Merrill Lynch 3-15 Year U.S. Municipal Securities 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.
The performance of any index is not indicative of the performance of any particular investment. 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 or net asset value.
Bond Credit Ratings (Credit Quality) – 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.
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 incorporates a bond’s embedded option features, such as call provisions.
General Obligation Bond (GO) – A municipal bond backed by the credit and “taxing power” of the issuing jurisdiction rather than the revenue from a given project.
Insured Bonds – Individual bonds are sometimes insured by private companies. The insurance guarantees the payment of principal and interest on a bond issue if the issuer defaults. Mutual funds are not insured, even if the underlying bonds are insured.
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.
Annual Report | 7
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (Unaudited)
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 a dollar-weighted average maturity of normally three to 10 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 typically 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.
KEY PORTFOLIO ATTRIBUTES
| Number of Bonds | 65 | ||||
| Effective Duration | 4.1 Yrs | ||||
| Average Maturity | 7.3 Yrs |
LONG-TERM STABILITY OF PRINCIPAL
Net Asset Value History of A Shares
There is no guarantee that the Fund will meet its investment objectives.
All data is subject to change. Charts may not add up to 100% due to rounding.
SECURITY 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. Credit quality ratings for Thornburg’s municipal portfolios used the highest rating available from either Standard & Poor’s or Moody’s Investors Service. Unrated pre-refunded and escrowed-to-maturity bonds are included in the not rated category.
PORTFOLIO LADDER
Percent of portfolio maturing in each year. Cash includes cash equivalents and other.
8 | Annual Report
Thornburg New York Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
City of New York GO, 0.90% due 8/1/2020 put 10/2/2017 (Capital Projects; Insured: AGM; SPA: State Street Bank & Trust Co.) (daily demand notes) | AA/Aa2 | $ | 500,000 | $ | 500,000 | ||||||||||||
City of New York GO, 5.00% due 8/1/2030 (City Budget Financial Management) | AA/Aa2 | 1,000,000 | 1,170,600 | ||||||||||||||
City of New York GO, 0.92% due 4/1/2042 put 10/2/2017 (City Budget Financial Management; LOC: Mizuho Bank, Ltd.) (daily demand notes) | AA+/Aa1 | 1,000,000 | 1,000,000 | ||||||||||||||
County of Nassau GO, 5.00% due 4/1/2026 (Insured: BAM) | AA/NR | 1,000,000 | 1,168,600 | ||||||||||||||
Dutchess County Local Development Corp., 5.00% due 7/1/2021 (Health Quest Systems, Inc.; Insured: AGM) | AA/A2 | 535,000 | 586,414 | ||||||||||||||
Dutchess County Local Development Corp., 5.00% due 7/1/2022 (Health Quest Systems, Inc.; Insured: AGM) | AA/A2 | 510,000 | 557,420 | ||||||||||||||
Erie County Fiscal Stability Authority, 5.00% due 9/1/2034 | NR/Aa1 | 850,000 | 1,022,439 | ||||||||||||||
Erie County Industrial Development Agency, 5.25% due 5/1/2025 pre-refunded 5/1/2019 (Buffalo City School District) | AA/Aa2 | 1,000,000 | 1,067,310 | ||||||||||||||
Government of Guam, 5.375% due 12/1/2024 pre-refunded 12/1/2019 (Layon Solid Waste Disposal Facility) | BBB+/NR | 1,000,000 | 1,091,910 | ||||||||||||||
Government of Guam, 5.00% due 11/15/2033 (Various Capital Projects) | A/NR | 2,000,000 | 2,154,780 | ||||||||||||||
Guam Waterworks Authority, 5.00% due 7/1/2028 (Water and Wastewater System) | A-/Baa2 | 500,000 | 544,615 | ||||||||||||||
Hempstead Town Local Development Corp., 5.00% due 7/1/2028 (Hofstra University) | A/A2 | 500,000 | 560,740 | ||||||||||||||
Hudson Yards Infrastructure Corp., 5.00% due 2/15/2035 (Hudson Yards Subway Station) | A+/Aa3 | 1,000,000 | 1,181,220 | ||||||||||||||
Long Island Power Authority, 5.25% due 9/1/2029 (Electric System Capital Improvements) | AA/A3 | 645,000 | 794,640 | ||||||||||||||
Metropolitan Transportation Authority, 6.25% due 11/15/2023 pre-refunded 11/15/2018 | NR/NR | 800,000 | 848,232 | ||||||||||||||
Metropolitan Transportation Authority, 6.25% due 11/15/2023 pre-refunded 11/15/2018 | NR/NR | 10,000 | 10,603 | ||||||||||||||
Metropolitan Transportation Authority, 6.25% due 11/15/2023 | AA-/A1 | 190,000 | 201,280 | ||||||||||||||
Monroe County Industrial Development Corp., 5.00% due 1/15/2028 (Monroe Community College Association, Inc.; Insured: AGM) | AA/A2 | 250,000 | 285,823 | ||||||||||||||
Monroe County Industrial Development Corp., 5.00% due 1/15/2029 (Monroe Community College Association, Inc.; Insured: AGM) | AA/A2 | 300,000 | 341,316 | ||||||||||||||
Nassau County IDA, 4.75% due 3/1/2026 pre-refunded 3/1/2020 (New York Institute of Technology) | BBB+/Baa2 | 1,000,000 | 1,086,830 | ||||||||||||||
Nassau County Sewer & Storm Water Finance Authority, 5.00% due 10/1/2021 (Sewerage and Storm Water Resource Facilities) | AAA/Aa3 | 275,000 | 316,038 | ||||||||||||||
| a | Nassau County Sewer & Storm Water Finance Authority, 5.00% due 10/1/2028 (Sewerage and Storm Water Resource Facilities) | AAA/Aa3 | 400,000 | 477,860 | |||||||||||||
Nassau County Sewer & Storm Water Finance Authority, 5.00% due 10/1/2031 (Sewerage and Storm Water Resource Facilities) | AAA/Aa3 | 1,000,000 | 1,188,720 | ||||||||||||||
New York City Health and Hospitals Corp. GO, 5.00% due 2/15/2020 (Healthcare Facilities Improvements) | A+/Aa3 | 770,000 | 840,047 | ||||||||||||||
New York City Health and Hospitals Corp. GO, 5.00% due 2/15/2025 (Healthcare Facilities Improvements) | A+/Aa3 | 1,000,000 | 1,083,430 | ||||||||||||||
| b | New York City Municipal Water Finance Authority, 5.00% due 6/15/2032 (Water & Sewer System) | AA+/Aa1 | 250,000 | 303,648 | |||||||||||||
New York City Municipal Water Finance Authority, 0.93% due 6/15/2048 put 10/2/2017 (Water & Sewer System; SPA: Mizuho Bank, Ltd.) (daily demand notes) | AA+/Aa1 | 700,000 | 700,000 | ||||||||||||||
New York City Transitional Finance Authority, 5.00% due 1/15/2020 (Educational Facilities) (State Aid Withholding) | AA/Aa2 | 1,000,000 | 1,050,190 | ||||||||||||||
New York City Transitional Finance Authority, 0.92% due 2/1/2045 put 10/2/2017 (City Capital Projects; SPA: JPMorgan Chase Bank, N.A.) (daily demand notes) | AAA/Aa1 | 1,000,000 | 1,000,000 | ||||||||||||||
New York City Trust for Cultural Resources, 5.25% due 12/1/2018 (Lincoln Center for the Performing Arts) (ETM) | A+/A2 | 175,000 | 183,925 | ||||||||||||||
New York Municipal Bond Bank Agency, 5.00% due 4/15/2018 (Insured: AGM) | AA/A2 | 1,000,000 | 1,021,370 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2018 (School District Financing Program; Insured: AGM) | AA/Aa3 | 345,000 | 351,759 | ||||||||||||||
New York State Dormitory Authority, 5.25% due 10/1/2018 (School District Financing Program; Insured: AGM) | AA/Aa3 | 775,000 | 807,751 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 7/1/2020 (NYSARC, Inc. Developmental Disability Programs) | NR/Aa2 | 1,175,000 | 1,291,607 | ||||||||||||||
New York State Dormitory Authority, 5.25% due 7/1/2022 (St. John’s University; Insured: Natl-Re) | A/A3 | 1,000,000 | 1,173,760 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 1/15/2023 (Municipal Health Facilities) | AA-/Aa2 | 1,000,000 | 1,011,580 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2023 (School District Financing Program) (State Aid Withholding) | AA-/NR | 575,000 | 684,342 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 7/1/2024 (Miriam Osborn Memorial Home Assoc.) | NR/NR | 1,540,000 | 1,617,631 | ||||||||||||||
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 | 1,142,060 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 7/1/2025 (Miriam Osborn Memorial Home Assoc.) | NR/NR | 1,105,000 | 1,156,206 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 7/1/2027 (Columbia University Teachers College) | A+/A1 | 750,000 | 851,212 | ||||||||||||||
New York State Dormitory Authority, 5.25% due 7/1/2027 (Health Quest Systems; Insured: AGM) | AA/A3 | 500,000 | 501,720 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 12/15/2027 (Metropolitan Transportation Authority & State Urban Development Corp.) | AAA/Aa1 | 2,500,000 | 2,918,750 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 10/1/2028 (School District Financing Program; Insured: AGM) | AA/NR | 200,000 | 236,138 | ||||||||||||||
New York State Dormitory Authority, 5.25% due 5/1/2030 pre-refunded 5/1/2019 (North Shore Long Island Jewish Medical) | A-/A3 | 1,000,000 | 1,066,650 | ||||||||||||||
New York State Dormitory Authority, 5.00% due 2/15/2032 | AAA/Aa1 | 1,000,000 | 1,197,640 | ||||||||||||||
New York State Urban Development Corp., 5.25% due 1/1/2021 | AA/NR | 1,000,000 | 1,052,490 | ||||||||||||||
Onondaga Civic Development Corp., 5.00% due 7/1/2021 (Le Moyne College) | NR/Baa2 | 1,000,000 | 1,090,710 | ||||||||||||||
Onondaga Civic Development Corp., 5.50% due 12/1/2031 (State University of New York Upstate Medical University) | A+/NR | 1,000,000 | 1,147,970 | ||||||||||||||
Rensselaer City School District COP, 5.00% due 6/1/2023 (Unified School Campus Project; Insured: AGM) (State Aid Withholding) | AA/A2 | 1,000,000 | 1,168,870 | ||||||||||||||
Sales Tax Asset Receivable Corp., 5.00% due 10/15/2029 (New York Local Government Assistance Corp.) | AAA/Aa1 | 250,000 | 301,835 | ||||||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Sales Tax Asset Receivable Corp., 5.00% due 10/15/2030 (New York Local Government Assistance Corp.) | AAA/Aa1 | $ | 1,000,000 | $ | 1,202,790 | ||||||||||||
Sales Tax Asset Receivable Corp., 5.00% due 10/15/2031 (New York Local Government Assistance Corp.) | AAA/Aa1 | 1,000,000 | 1,198,380 | ||||||||||||||
Syracuse Industrial Development Agency, 5.25% due 5/1/2026 (Syracuse City School District) | AA/Aa2 | 2,150,000 | 2,438,465 | ||||||||||||||
Tobacco Settlement Asset Securitization Corp., 5.00% due 6/1/2022 | A/NR | 1,000,000 | 1,138,420 | ||||||||||||||
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 | 1,111,530 | ||||||||||||||
Town of Oyster Bay GO, 2.50% due 6/1/2018 (Plainview, Locust Valley, South Farmingdale, Jericho, Bethpage, Oyster Bay Water Districts) | NR/NR | 620,000 | 622,461 | ||||||||||||||
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 | 1,417,656 | ||||||||||||||
Triborough Bridge & Tunnel Authority GO, 5.00% due 11/15/2028 (MTA Bridges and Tunnels) | AA-/Aa3 | 1,000,000 | 1,172,370 | ||||||||||||||
Triborough Bridge & Tunnel Authority GO, 5.00% due 11/15/2029 (MTA Bridges and Tunnels) | AA-/Aa3 | 1,000,000 | 1,170,270 | ||||||||||||||
United Nations Development Corp., 5.00% due 7/1/2019 (One, Two and Three U.N. Plaza) | NR/A1 | 230,000 | 245,093 | ||||||||||||||
United Nations Development Corp., 5.00% due 7/1/2025 (One, Two and Three U.N. Plaza) | NR/A1 | 710,000 | 756,271 | ||||||||||||||
Utility Debt Securitization Authority, 5.00% due 12/15/2029 (Long Island Power Authority-Electric Service) | AAA/Aaa | 1,000,000 | 1,194,450 | ||||||||||||||
Utility Debt Securitization Authority, 5.00% due 12/15/2030 (Long Island Power Authority-Electric Service) | AAA/Aaa | 1,000,000 | 1,191,900 | ||||||||||||||
West Seneca Central School District GO, 5.00% due 11/15/2023 (Facilities Improvements; Insured: BAM) (State Aid Withholding) | AA/A2 | 1,300,000 | 1,545,726 | ||||||||||||||
|
| ||||||||||||||||
| TOTAL INVESTMENTS — 96.43% (Cost $58,174,240) | $ | 61,516,463 | |||||||||||||||
| OTHER ASSETS LESS LIABILITIES — 3.57% | 2,277,280 | ||||||||||||||||
|
| ||||||||||||||||
| NET ASSETS — 100.00% | $ | 63,793,743 | |||||||||||||||
|
| ||||||||||||||||
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. | GO | General Obligation | |||
| BAM | Insured by Build America Mutual Insurance Co. | IDA | Industrial Development Authority | |||
| COP | Certificates of Participation | Natl-Re | Insured by National Public Finance Guarantee Corp. | |||
| ETM | Escrowed to Maturity |
See notes to financial statements.
10 | Annual Report
Statement of Assets and Liabilities
Thornburg New York Intermediate Municipal Fund | September 30, 2017
ASSETS | ||||
Investments at value (cost $58,174,240) (Note 3) | $ | 61,516,463 | ||
Cash | 314,794 | |||
Receivable for investments sold | 1,530,000 | |||
Receivable for fund shares sold | 17,399 | |||
Interest receivable | 876,844 | |||
Prepaid expenses and other assets | 6,153 | |||
|
| |||
Total Assets | 64,261,653 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 303,888 | |||
Payable for fund shares redeemed | 54,790 | |||
Payable to investment advisor and other affiliates (Note 4) | 32,289 | |||
Accounts payable and accrued expenses | 58,475 | |||
Dividends payable | 18,468 | |||
|
| |||
Total Liabilities | 467,910 | |||
|
| |||
NET ASSETS | $ | 63,793,743 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Distribution in excess of net investment income | $ | (16,847 | ) | |
Net unrealized appreciation on investments | 3,342,223 | |||
Accumulated net realized gain (loss) | (616,659 | ) | ||
Net capital paid in on shares of beneficial interest | 61,085,026 | |||
|
| |||
| $ | 63,793,743 | |||
|
| |||
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 13.00 | ||
Maximum sales charge, 2.00% of offering price | 0.27 | |||
|
| |||
Maximum offering price per share | $ | 13.27 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 13.00 | ||
|
| |||
See notes to financial statements.
Annual Report | 11
Thornburg New York Intermediate Municipal Fund | Year Ended September 30, 2017
INVESTMENT INCOME | ||||
Interest income (net of premium amortized of $557,044) | $ | 2,253,483 | ||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 322,932 | |||
Administration fees (Note 4) | ||||
Class A Shares | 48,891 | |||
Class I Shares | 12,737 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 97,783 | |||
Transfer agent fees | ||||
Class A Shares | 28,051 | |||
Class I Shares | 23,293 | |||
Registration and filing fees | ||||
Class A Shares | 3,868 | |||
Class I Shares | 1,067 | |||
Custodian fees (Note 2) | 26,096 | |||
Professional fees | 36,873 | |||
Accounting fees (Note 4) | 2,282 | |||
Trustee fees | 2,704 | |||
Other expenses | 15,546 | |||
|
| |||
Total Expenses | 622,123 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (64,507 | ) | ||
|
| |||
Net Expenses | 557,616 | |||
|
| |||
Net Investment Income | 1,695,867 | |||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on investments | (123,791 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (2,289,319 | ) | ||
|
| |||
Net Realized and Unrealized Loss | (2,413,110) | |||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (717,243) | ||
|
| |||
See notes to financial statements.
12 | Annual Report
Statements of Changes in Net Assets
Thornburg New York Intermediate Municipal Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 1,695,867 | $ | 1,815,241 | ||||||
Net realized gain (loss) on investments | (123,791 | ) | (13,529 | ) | ||||||
Net unrealized appreciation (depreciation) on investments | (2,289,319 | ) | 1,336,245 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (717,243 | ) | 3,137,957 | |||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (979,082 | ) | (1,033,774 | ) | ||||||
Class I Shares | (716,785 | ) | (781,467 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class A Shares | (7,051,787 | ) | (5,647,817 | ) | ||||||
Class I Shares | (3,248,623 | ) | 745,159 | |||||||
|
| |||||||||
Net Decrease in Net Assets | (12,713,520 | ) | (3,579,942 | ) | ||||||
NET ASSETS | ||||||||||
Beginning of Year | 76,507,263 | 80,087,205 | ||||||||
|
| |||||||||
End of Year | $ | 63,793,743 | $ | 76,507,263 | ||||||
|
| |||||||||
Distribution in excess of investment income | $ | (16,847 | ) | $ | (16,847 | ) | ||||
See notes to financial statements.
Annual Report | 13
Thornburg New York Intermediate Municipal Fund | September 30, 2017
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 twenty-one 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 Thornburg Investment Management, Inc., the Trust’s investment advisor (the “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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by the Advisor. Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
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 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
14 | Annual Report
Notes to Financial Statements, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017
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.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 58,174,240 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 3,366,407 | |||
Gross unrealized depreciation on a tax basis | (24,184 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 3,342,223 | |||
|
|
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $241,886. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $374,772 (of which $127,505 are short-term and $247,267 are 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.
During the year ended September 30, 2017, the Fund utilized $104,566 of long-term capital loss carry towards generated after September 30, 2011.
At September 30, 2017, the Fund had $1,621 of undistributed net tax-exempt income, no undistributed tax basis net ordinary income and no undistributed tax basis capital gains.
Distributions from tax exempt income paid by the Fund for the year ended September 30, 2017 and September 30, 2016 are excludable by shareholders from gross income for Federal income tax purposes.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Tax exempt income | $ | 1,694,416 | $ | 1,815,241 | ||||||
Ordinary income | 1,451 | – | ||||||||
|
| |||||||||
Total | $ | 1,695,867 | $ | 1,815,241 | ||||||
|
| |||||||||
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
Annual Report | 15
Notes to Financial Statements, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from the FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs when it sells the investment.
16 | Annual Report
Notes to Financial Statements, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
Municipal Bonds | $ | 61,516,463 | $ | – | $ | 61,516,463 | $ | – | ||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 61,516,463 | $ | – | $ | 61,516,463 | $ | – | ||||||||||||
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, 2017.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| MANAGEMENT FEE SCHEDULE | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.500 | % | |||
Next $500 million | 0.450 | ||||
Next $500 million | 0.400 | ||||
Next $500 million | 0.350 | ||||
Over $2 billion | 0.275 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.50% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $2,282 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $45 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I shares. The Advisor and Distributor each 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $37,709 for Class A shares and $26,798 for Class I shares.
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.
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had transactions with affiliated funds of $1,626,217 in sales generating realized losses of $534.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 273,384 | $ | 3,551,462 | 249,737 | $ | 3,332,694 | ||||||||||
Shares issued to shareholders in | 58,019 | 754,362 | 60,467 | 808,135 | ||||||||||||
Shares repurchased | (876,328 | ) | (11,357,611 | ) | (733,326 | ) | (9,788,646 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (544,925 | ) | $ | (7,051,787 | ) | (423,122 | ) | $ | (5,647,817 | ) | ||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 739,573 | $ | 9,621,219 | 602,854 | $ | 8,053,470 | ||||||||||
Shares issued to shareholders in | 54,399 | 707,544 | 58,096 | 776,695 | ||||||||||||
Shares repurchased | (1,050,573 | ) | (13,577,386 | ) | (605,034 | ) | (8,085,006 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (256,601 | ) | $ | (3,248,623 | ) | 55,916 | $ | 745,159 | ||||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $6,832,310 and $17,359,706, respectively.
OTHER NOTES
Risks: The Fund’s investments subject it to risks including, but not limited to, management risk, interest rate risk, credit risk, market and economic risk, liquidity risk, and the risk of investing mainly in the obligations primarily originating in 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
18 | Annual Report
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Annual Report | 19
Thornburg New York Intermediate Municipal Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 13.40 | 0.33 | (0.40 | ) | (0.07 | ) | (0.33 | ) | – | (0.33 | ) | $ | 13.00 | ||||||||||||||||||||||||||
2016(b) | $ | 13.18 | 0.29 | 0.22 | 0.51 | (0.29 | ) | – | (0.29 | ) | $ | 13.40 | ||||||||||||||||||||||||||||
2015(b) | $ | 13.22 | 0.29 | (0.04 | ) | 0.25 | (0.29 | ) | – | (0.29 | ) | $ | 13.18 | |||||||||||||||||||||||||||
2014(b) | $ | 12.93 | 0.30 | 0.29 | 0.59 | (0.30 | ) | – | (0.30 | ) | $ | 13.22 | ||||||||||||||||||||||||||||
2013(b) | $ | 13.44 | 0.34 | (0.51 | ) | (0.17 | ) | (0.34 | ) | – | (0.34 | ) | $ | 12.93 | ||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.40 | 0.37 | (0.40 | ) | (0.03 | ) | (0.37 | ) | – | (0.37 | ) | $ | 13.00 | ||||||||||||||||||||||||||
2016 | $ | 13.18 | 0.33 | 0.22 | 0.55 | (0.33 | ) | – | (0.33 | ) | $ | 13.40 | ||||||||||||||||||||||||||||
2015 | $ | 13.22 | 0.33 | (0.04 | ) | 0.29 | (0.33 | ) | – | (0.33 | ) | $ | 13.18 | |||||||||||||||||||||||||||
2014 | $ | 12.93 | 0.33 | 0.30 | 0.63 | (0.34 | ) | – | (0.34 | ) | $ | 13.22 | ||||||||||||||||||||||||||||
2013 | $ | 13.44 | 0.38 | (0.51 | ) | (0.13 | ) | (0.38 | ) | – | (0.38 | ) | $ | 12.93 | ||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
20 | Annual Report
Financial Highlights, Continued
Thornburg New York Intermediate Municipal Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 2.50 | 0.99 | 0.99 | 1.09 | (0.52 | ) | 11.11 | $ | 36,576 | ||||||||||||||||||||||
| 2.18 | 0.96 | 0.96 | 1.03 | 3.91 | 7.02 | $ | 45,009 | |||||||||||||||||||||||
| 2.16 | 0.98 | 0.98 | 1.05 | 1.87 | 7.72 | $ | 49,845 | |||||||||||||||||||||||
| 2.27 | 0.99 | 0.99 | 1.05 | 4.59 | 14.12 | $ | 54,301 | |||||||||||||||||||||||
| 2.54 | 0.99 | 0.99 | 1.05 | (1.32 | ) | 11.31 | $ | 54,061 | ||||||||||||||||||||||
| 2.81 | 0.67 | 0.67 | 0.77 | (0.20 | ) | 11.11 | $ | 27,217 | ||||||||||||||||||||||
| 2.51 | 0.63 | 0.63 | 0.72 | 4.25 | 7.02 | $ | 31,498 | |||||||||||||||||||||||
| 2.47 | 0.67 | 0.67 | 0.76 | 2.19 | 7.72 | $ | 30,242 | |||||||||||||||||||||||
| 2.57 | 0.67 | 0.67 | 0.73 | 4.93 | 14.12 | $ | 23,922 | |||||||||||||||||||||||
| 2.86 | 0.67 | 0.67 | 0.74 | (1.00 | ) | 11.31 | $ | 7,060 | ||||||||||||||||||||||
Annual Report | 21
Report of Independent Registered Public Accounting Firm
Thornburg New York Intermediate Municipal Fund
To the Trustees and Shareholders of the
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 the Thornburg New York Intermediate Municipal Fund (the “Fund”) as of September 30, 2017, 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 as of September 30, 2017 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
22 | Annual Report
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
| BEGINNING ACCOUNT VALUE 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.50 | $ | 5.01 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,019.10 | $ | 3.39 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.71 | $ | 3.39 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 0.99%; C: 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.
Annual Report | 23
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
24 | Annual Report
Trustees and Officers, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 25
Trustees and Officers, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries 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.
26 | Annual Report
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (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, 2017, dividends paid by the Fund of $1,694,416 (or the maximum allowed) are tax exempt dividends for federal income tax purposes and $1,451 are taxable ordinary income dividends. The information and the distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2017. Complete information will be reported in conjunction with your 2017 Form 1099.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg. com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg New York Intermediate Municipal Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for
Annual Report | 27
Other Information, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (Unaudited)
consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 created 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 created 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, (5) comparative performance data for two fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Information provided to the Trustees indicated that the comparability of indices and fund categories to the Fund may be limited for a number of reasons. Measures of risk and relative return demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions. The Trustees generally attach additional significance to the investment performance of the Fund from the perspective of longer term shareholders, and noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the objectives of the Fund. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectus. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and overall Fund expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and other Fund expenses for the Fund’s two share classes to the fee levels and expenses of fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been considered by the Trustees showed that the Fund’s advisory fee was comparable to the median and average fee levels for the fund category, the level of total expense for one share class of the Fund was higher than the median and average expense levels for the category, and that the level of total expense for the second share class was lower than the median and average expense levels for the category. Peer group data showed that the Fund’s advisory fee level for one share class was higher than the median of its peer group but comparable to other funds in the group and that the advisory fee level for the second share class was comparable to the median fee level for its peer group. The data further showed that the total expense level for one of the share classes fell at the top of the range of its peer group but was comparable to expense levels for other funds in the peer group, while the total expense level for the second share class was comparable to the median of its peer group. The Trustees did not find the differences significant in view of their findings and conclusions respecting the other factors considered.
28 | Annual Report
Other Information, Continued
Thornburg New York Intermediate Municipal Fund | September 30, 2017 (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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and enhance staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and enhance staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 29
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
30 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 31
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
Annual Reports
September 30, 2017
THORNBURG LIMITED TERM U.S. GOVERNMENT FUND
THORNBURG LIMITED TERM INCOME FUND
THORNBURG LOW DURATION INCOME FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Reports
Thornburg Limited Term U.S. Government Fund
Thornburg Limited Term Income Fund
Thornburg Low Duration Income Fund
Annual Reports | September 30, 2017
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Fund Summary and Schedule of Investments | ||||
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| 37 | ||||
Statements of Changes in Net Assets | ||||
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Financial Highlights | ||||
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| LIMITED TERM U.S. GOVERNMENT FUND | NASDAQ SYMBOLS | CUSIPS | ||||||||
| Class A | LTUSX | 885-215-103 | ||||||||
| 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 | ||||||||
| Class R6 | THRLX | 885-216-671 | ||||||||
| LOW DURATION INCOME FUND | ||||||||||
| Class A | TLDAX | 885-216-812 | ||||||||
| Class I | TLDIX | 885-216-796 | ||||||||
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.
Investments carry risks, including possible loss of principal. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The value of bonds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Investments in mortgage backed securities (MBS) may bear additional risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund. Investments in the Funds are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.
The laddering strategy does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
Annual Reports | 3
September 30, 2017 (Unaudited)
October 12, 2017
Dear Fellow Shareholder:
We are pleased to present the annual report for Thornburg Limited Term U.S. Government Fund, Thornburg Limited Term Income Fund, and Thornburg Low Duration Income Fund for the year ended September 30, 2017. The net asset value (NAV) of a Class A share of Limited Term U.S. Government Fund decreased by $0.24 in the period to $13.01, and if you were invested for the entire period, you received dividends of 18.2 cents per share. If you reinvested your dividends, you received 18.3 cents per share. The NAV of a Class A share of Limited Term Income Fund decreased $0.07 in the period to $13.44. If you were invested for the entire period, you received dividends of 24.4 cents per share. If you reinvested your dividends, you received 24.6 cents per share. The NAV of a Class A share of Low Duration Income Fund decreased $0.04 to $12.42 per share. If you were invested for the entire period, you received dividends of 16.7 cents per share. If you reinvested your dividends, you received 16.8 cents per share. Dividends per share varied for other share classes to account for varying class-specific expenses.
Combining income and change in price, Class A shares of Thornburg Limited Term U.S. Government Fund produced a total return of negative 0.43% (without sales charge) over the year. The Bloomberg Barclays Intermediate Government Bond Index produced a total return of negative 0.66% over the same period. Class A shares of Thornburg Limited Term Income Fund produced a total return of 1.31% (without sales charge) over the year ended September 30, 2017. The Bloomberg Barclays Intermediate Government/Credit Bond Index produced a 0.23% total return over the same time period. Class A shares of Thornburg Low Duration Income Fund produced a total return of 1.03% (without sales charge) over the year ended September 30, 2017. The Bloomberg Barclays U.S. 1-3 Year Aggregate Bond Index produced a 0.69% total return over the same time period.
Over the last year, and the first six months in particular, markets continued to remind investors that low probability events sometimes occur, and that the general consensus can be quite wrong. However, even if investors had foreseen a Trump victory, could anyone have effectively repositioned their portfolios to address the equally surprising reaction to it across domestic and global markets? Market gloom lasted only hours before President-elect Trump gave a conciliatory speech, igniting market enthusiasm. Stocks rallied and bonds sold off as investors became confident Trump’s pro-growth policies would be implemented by the Republican-dominated legislative branch.
After yields backed-up post-election, we added a bit of duration to the portfolios via U.S. Treasuries and Treasury Inflation Protected Securities as the risk-reward tradeoff became more favorable. As always, we remained consistent in our philosophy of
taking on incremental risk only when we believe that risk offers proper compensation. Given the move in Treasuries, one might have expected that corporate spreads widened as well, leading to a broader opportunity set in which to deploy capital. However, given Trump’s proposed fiscal agenda and the potential effects on growth, corporate spreads remained tight. Despite yields having bottomed in July 2016, many investors’ portfolios were caught off-guard as yields rose faster than most expected. The Funds, while not immune to the rise in rates during this time, ultimately outperformed their respective benchmarks. Why? We do not make large bets on singular events. We take a balanced risk approach; regardless of the election outcome, we didn’t believe Treasury curve pricing compensated appropriately for risk (low real return, low/negative term premium in 10-year Treasury, etc.).
Fast forward to the second half of the period, and as time has progressed, markets have come to discount the possibility of meaningful fiscal stimulus and, therefore, a resulting reflation trade. Ten-year U.S. Treasury yields have declined meaningfully since their peak, and the two- versus 10-year curve has flattened, suggesting that the market is suspicious with respect to potential future inflationary policy. Throughout the year and most recent quarter in particular, administrative gridlock caused market participants to doubt the administration’s ability to meaningfully implement its agenda.
Closer to the end of the period, the Federal Reserve Board (Fed) recently announced the when, how, and why of its balance sheet reduction. The passive, maturity roll-off approach, has been well received by markets so far. Most investors will agree, however, that quantitative easing (QE) from central banks around the world has both depressed risk-free yields and compressed risk-asset spreads. What then, will be the ultimate result of the unwinding? The truth is no one knows, and while we believe it can be completed in an orderly fashion—that is to say we are unlikely to repeat taper tantrums—perhaps it is wise to be skeptical that the unwinding will go off without a hitch.
In general, we remain disciplined and defensive regarding interest-rate and credit risk. As a result, we continue to hold high levels of cash, which we are ready to deploy as meaningful opportunities present themselves without reaching for yield. Depending upon the mandate, we added modest exposure to relatively short-term investment-grade floating-rate bonds in the earlier part of the year. Where appropriate, given each portfolio’s guidelines, these additions came by way of various structures, including asset-backed securities and corporates—the common link being that, regardless of structure, they were backed by high-quality assets. But while neither interest rate nor credit risk is well compensated in the market today, we still are finding select opportunities to add interesting securities to the portfolios. For example, as mentioned in our most recent commentary, across the portfolios we added modest mortgage-backed securities exposure. In all instances these were high-quality, short-term bonds. Additionally, they were structured to
4 | Annual Reports
Letter to Shareholders, Continued
September 30, 2017 (Unaudited)
limit the potential range of pre-payment or extension risk outcomes, giving us confidence in their likely weighted average life.
We also continue to take advantage of the occasional market pullback to add attractively priced risk assets, though as suggested, these pullbacks have been fewer in number in recent months. We continue to follow our central tenant of investing—seeking the best relative value in terms of risk and reward—and for now that continues to point to higher-quality instruments for the portfolio and a general posture of caution.
Thank you for your continued trust in us. We look forward to working hard to add value to your holdings.
Sincerely,
Jason Brady,CFA
Portfolio Manager
President, CEO, and Managing Director
Lon R. Erickson,CFA
Portfolio Manager
Managing Director
Jeff Klingelhofer,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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
Annual Reports | 5
September 30, 2017 (Unaudited)
AVERAGE ANNUAL RETURNS
| LIMITED TERM U.S. GOVERNMENT FUND | 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | ||||||||||||||||||||
Class A Shares (Incep: 11/16/87) | |||||||||||||||||||||||||
Without sales charge | -0.43% | 0.86% | 0.50% | 2.48% | 4.81% | ||||||||||||||||||||
With sales charge | -1.92% | 0.36% | 0.19% | 2.32% | 4.75% | ||||||||||||||||||||
Class C Shares (Incep: 9/1/94) | |||||||||||||||||||||||||
Without sales charge | -0.72% | 0.58% | 0.22% | 2.20% | 3.70% | ||||||||||||||||||||
With sales charge | -1.22% | 0.58% | 0.22% | 2.20% | 3.70% | ||||||||||||||||||||
Class I Shares (Incep: 7/5/96) | -0.18% | 1.19% | 0.82% | 2.80% | 4.18% | ||||||||||||||||||||
Class R3 Shares (Incep: 7/1/03) | -0.47% | 0.80% | 0.43% | 2.42% | 2.39% | ||||||||||||||||||||
Class R4 Shares (Incep: 2/1/14) | -0.49% | 0.79% | - | - | 0.86% | ||||||||||||||||||||
Class R5 Shares (Incep: 5/1/12) | -0.23% | 1.17% | 0.79% | - | 0.95% | ||||||||||||||||||||
| LIMITED TERM INCOME FUND | |||||||||||||||||||||||||
Class A Shares (Incep: 10/1/92) | |||||||||||||||||||||||||
Without sales charge | 1.31% | 1.98% | 2.04% | 4.22% | 4.98% | ||||||||||||||||||||
With sales charge | -0.24% | 1.45% | 1.73% | 4.06% | 4.91% | ||||||||||||||||||||
Class C Shares (Incep: 9/1/94) | |||||||||||||||||||||||||
Without sales charge | 1.10% | 1.75% | 1.82% | 3.97% | 4.66% | ||||||||||||||||||||
With sales charge | 0.60% | 1.75% | 1.82% | 3.97% | 4.66% | ||||||||||||||||||||
Class I Shares (Incep: 7/5/96) | 1.61% | 2.34% | 2.39% | 4.58% | 5.18% | ||||||||||||||||||||
Class R3 Shares (Incep: 7/1/03) | 1.19% | 1.86% | 1.93% | 4.16% | 3.71% | ||||||||||||||||||||
Class R4 Shares (Incep: 2/1/14) | 1.11% | 1.85% | - | - | 2.03% | ||||||||||||||||||||
Class R5 Shares (Incep: 5/1/12) | 1.53% | 2.21% | 2.28% | - | 2.69% | ||||||||||||||||||||
Class R6 Shares (Incep: 4/10/17) | - | - | - | - | 1.92% | ||||||||||||||||||||
| LOW DURATION INCOME FUND | |||||||||||||||||||||||||
Class A Shares (Incep: 12/30/13) | |||||||||||||||||||||||||
Without sales charge | 1.03% | 1.10% | - | - | 1.24% | ||||||||||||||||||||
With sales charge | -0.48% | 0.59% | - | - | 0.82% | ||||||||||||||||||||
Class I Shares (Incep: 12/30/13) | 1.19% | 1.26% | - | - | 1.41% | ||||||||||||||||||||
30-DAY YIELDS
Thornburg Limited Term U.S. Government Fund, A Shares | |||||
Annualized Distribution Yield | �� | 1.11% | |||
SEC Yield | 0.89% | ||||
Thornburg Limited Term Income Fund, A Shares | |||||
Annualized Distribution Yield | 1.88% | ||||
SEC Yield | 1.49% | ||||
Thornburg Low Duration Income Fund, A Shares | |||||
Annualized Distribution Yield | 1.56% | ||||
SEC Yield | 0.98% | ||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. Class A shares are sold with a maximum sales charge of 1.50%. 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. As disclosed in the most recent prospectus, the total annual fund operating expenses before waivers and expense reimbursements are as follows: Limited Term U.S. Government Fund A shares, 0.91%; C shares, 1.20%; I shares, 0.57%; R3 shares, 1.30%; R4 shares, 2.71%; R5 shares, 2.05%; Limited Term Income Fund A shares, 0.86%, and Class R6; C shares, 1.08%; I shares, 0.50%; R3 shares, 1.10%; R4 shares, 1.97%; R5 shares, 0.72%; R6 shares, 0.54%; and Low Duration Income Fund A shares, 1.74%; I shares, 1.18%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: For Limited Term U.S. Government Fund R3 shares, 0.99%; R4 shares, 0.99%; R5 shares, 0.67%. Limited Term Income Fund R3 shares, 0.99%; R4 shares, 0.99%; R5 shares, 0.67%; R6 shares 0.45%. Low Duration Income Fund A shares, 0.70%; I shares, 0.50%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus. Without the fee waivers and expense reimbursements, the Annualized Distribution yield for Low Duration Income Fund A shares would have been 0.29%, and the SEC yield would have been (0.29%).
6 | Annual Reports
Glossary
September 30, 2017 (Unaudited)
The Bloomberg Barclays Intermediate Government Bond Index is an unmanaged, market-weighted index generally representative of all public obligations of the U.S. Government, its agencies and instrumentalities having maturities from one up to ten years.
The Bloomberg Barclays Intermediate Government/Credit Bond Index is an unmanaged, market-weighted index generally representative of intermediate government and investment-grade corporate debt securities having maturities from one up to ten years.
The Bloomberg Barclays U.S. 1-3 Yr Aggregate Bond Index 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.
The performance of any index is not indicative of the performance of any particular investment. 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 or net asset value.
Bond Credit Ratings (Credit Quality) – 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.
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. Effective duration incorporates a bond’s embedded option features, such as call provisions.
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.
Term Premium – The excess yield that investors require to commit to holding a long-term bond instead of a series of shorter-term bonds.
Treasury Inflation Protected Securities (TIPS) – A U.S. Treasury note or bond that offers protection from the effects of inflation. Using the Consumer Price Index as a guide, the value of the principal is adjusted to reflect the effects of inflation. A fixed interest rate is paid semi-annually on the adjusted amount. At maturity, if inflation has increased the value of the principal, the investor receives the higher value. If deflation has decreased the value, the investor receives the original face amount of the security.
Quantitative Easing (QE) – An unconventional monetary policy in which a central bank purchases financial assets from the market in order to lower interest rates and increase the money supply.
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.
Annual Reports | 7
Thornburg Limited Term U.S. Government Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
The Fund’s primary objective is to provide as high a level of current income as is consistent, in the view of the Fund’s investment advisor, with the safety 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 a dollar-weighted average maturity of normally less than five years.
LONG-TERM STABILITY OF PRINCIPAL
Net Asset Value History of A Shares
KEY PORTFOLIO ATTRIBUTION - US GOV
| Number of Bonds | 163 | ||||
| Effective Duration | 2.6 Yrs | ||||
| Average Maturity | 3.5 Yrs |
Lipper Best Short-Intermediate U.S. Government Fund (Class I Shares) 3-year period ended 11/30/16, among 25 funds.
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 and without sales charge). Fund Classification Awards are given for three-year, five-year, and ten-year periods. Thornburg did not win the award for any other time period. Past performance does not guarantee future results. From Thomson Reuters Lipper Awards, © 2017 Thomson Reuters. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution or retransmission of this Content without express permission is prohibited.
There is no guarantee that the Fund will meet its investment objectives.
All data is subject to change. Charts may not add up to 100% due to rounding.
TYPES OF HOLDINGS
PORTFOLIO LADDER
Percent of portfolio maturing in each year. Cash includes cash equivalents.
8 | Annual Reports
Schedule of Investments
Thornburg Limited Term U.S. Government Fund | September 30, 2017
| ISSUER-DESCRIPTION | PRINCIPAL AMOUNT | VALUE | ||||||||||
| U.S. TREASURY SECURITIES — 24.18% | ||||||||||||
United States Treasury Notes, 2.25%, 11/30/2017 | $ | 2,000,000 | $ | 2,003,515 | ||||||||
United States Treasury Notes, 2.625%, 1/31/2018 | 6,700,000 | 6,732,061 | ||||||||||
United States Treasury Notes, 0.75%, 4/30/2018 | 4,750,000 | 4,736,919 | ||||||||||
United States Treasury Notes, 1.125%, 6/15/2018 | 4,000,000 | 3,995,781 | ||||||||||
United States Treasury Notes, 1.25%, 8/31/2019 | 1,480,000 | 1,473,663 | ||||||||||
United States Treasury Notes, 3.625%, 2/15/2020 | 1,000,000 | 1,048,516 | ||||||||||
United States Treasury Notes, 1.375%, 2/29/2020 | 2,500,000 | 2,489,551 | ||||||||||
United States Treasury Notes, 1.625%, 6/30/2020 | 4,000,000 | 4,003,125 | ||||||||||
United States Treasury Notes, 0.375%, 10/31/2020 | 1,480,000 | 1,467,744 | ||||||||||
United States Treasury Notes, 0.125%, 4/15/2021 | 2,995,265 | 3,004,124 | ||||||||||
United States Treasury Notes, 2.25%, 4/30/2021 | 6,000,000 | 6,106,406 | ||||||||||
United States Treasury Notes, 1.875%, 10/31/2022 | 1,470,000 | 1,464,889 | ||||||||||
United States Treasury Notes, 1.875%, 8/31/2024 | 1,485,000 | 1,458,203 | ||||||||||
United States Treasury Notes, 2.25%, 11/15/2024 | 1,500,000 | 1,507,383 | ||||||||||
United States Treasury Notes, 1.50%, 8/15/2026 | 1,500,000 | 1,404,609 | ||||||||||
United States Treasury Notes, 2.25%, 8/15/2027 | 1,465,000 | 1,455,157 | ||||||||||
United States Treasury Notes Inflationary Index, 0.125%, 4/15/2020 | 3,125,477 | 3,140,415 | ||||||||||
United States Treasury Notes Inflationary Index, 0.625%, 7/15/2021 | 2,715,275 | 2,789,870 | ||||||||||
United States Treasury Notes Inflationary Index, 0.125%, 7/15/2022 | 5,322,400 | 5,347,631 | ||||||||||
United States Treasury Notes Inflationary Index, 0.125%, 1/15/2023 | 2,651,300 | 2,644,395 | ||||||||||
United States Treasury Notes Inflationary Index, 0.375%, 7/15/2025 | 5,935,438 | 5,935,438 | ||||||||||
United States Treasury Notes Inflationary Index, 0.625%, 1/15/2026 | 3,245,193 | 3,288,799 | ||||||||||
United States Treasury Notes Inflationary Index, 0.125%, 7/15/2026 | 1,531,860 | 1,489,825 | ||||||||||
|
| |||||||||||
TOTAL U.S. TREASURY SECURITIES (Cost $68,942,527) | 68,988,019 | |||||||||||
|
| |||||||||||
| U.S. GOVERNMENT AGENCIES — 18.05% | ||||||||||||
Federal Home Loan Bank, 5.00%, 12/8/2017 | 3,000,000 | 3,020,984 | ||||||||||
Federal Home Loan Mtg Corp., 4.875%, 6/13/2018 | 3,000,000 | 3,074,224 | ||||||||||
Federal National Mtg Assoc., 1.875%, 12/28/2020 | 2,000,000 | 2,010,724 | ||||||||||
HNA Group 2015 LLC, (Guaranty: Export-Import Bank of the United States), 2.291%, 6/30/2027 | 2,543,941 | 2,533,627 | ||||||||||
Mortgage-Linked Amortizing Notes, Series 2012-1 Class A10, 2.06%, 1/15/2022 | 600,564 | 602,023 | ||||||||||
New Valley Generation I, Tennessee Valley Authority, 7.299%, 3/15/2019 | 845,228 | 874,747 | ||||||||||
| a | Petroleos Mexicanos Floating Rate Note, (Guaranty: Export-Import Bank of the United States), 1.654%, 4/15/2025 | 2,712,500 | 2,679,275 | |||||||||
| a | Petroleos Mexicanos, (Guaranty: Export-Import Bank of the United States), 1.70%, 12/20/2022 | 2,873,750 | 2,839,149 | |||||||||
| a | Petroleos Mexicanos, (Guaranty: Export-Import Bank of the United States), 2.46%, 12/15/2025 | 2,125,000 | 2,136,307 | |||||||||
| a | Reliance Industries Ltd., (Guaranty: Export-Import Bank of the United States), 2.512%, 1/15/2026 | 2,975,000 | 2,996,816 | |||||||||
| a | Reliance Industries Ltd., (Guaranty: Export-Import Bank of the United States), 2.06%, 1/15/2026 | 2,975,000 | 2,942,344 | |||||||||
| a | Reliance Industries Ltd., (Guaranty: Export-Import Bank of the United States), 1.87%, 1/15/2026 | 2,013,158 | 1,975,566 | |||||||||
Small Business Administration Participation Certificates, Series 2001-20D Class 1, 6.35%, 4/1/2021 | 421,579 | 441,785 | ||||||||||
Small Business Administration Participation Certificates, Series 2001-20F Class 1, 6.44%, 6/1/2021 | 354,013 | 370,693 | ||||||||||
Small Business Administration Participation Certificates, Series 2002-20A Class 1, 6.14%, 1/1/2022 | 205,754 | 217,372 | ||||||||||
Small Business Administration Participation Certificates, Series 2002-20K Class 1, 5.08%, 11/1/2022 | 217,860 | 228,813 | ||||||||||
Small Business Administration Participation Certificates, Series 2005-20H Class 1, 5.11%, 8/1/2025 | 190,852 | 201,504 | ||||||||||
Small Business Administration Participation Certificates, Series 2007-20D Class 1, 5.32%, 4/1/2027 | 533,812 | 571,282 | ||||||||||
Small Business Administration Participation Certificates, Series 2007-20F Class 1, 5.71%, 6/1/2027 | 313,898 | 337,374 | ||||||||||
Small Business Administration Participation Certificates, Series 2007-20I Class 1, 5.56%, 9/1/2027 | 996,867 | 1,065,851 | ||||||||||
Small Business Administration Participation Certificates, Series 2007-20K Class 1, 5.51%, 11/1/2027 | 673,045 | 717,478 | ||||||||||
Small Business Administration Participation Certificates, Series 2008-20G Class 1, 5.87%, 7/1/2028 | 1,695,369 | 1,848,493 | ||||||||||
Small Business Administration Participation Certificates, Series 2011-20G Class 1, 3.74%, 7/1/2031 | 1,913,789 | 2,001,169 | ||||||||||
Small Business Administration Participation Certificates, Series 2011-20K Class 1, 2.87%, 11/1/2031 | 2,311,550 | 2,347,805 | ||||||||||
Small Business Administration Participation Certificates, Series 2015-20G Class 1, 2.88%, 7/1/2035 | 2,154,245 | 2,183,022 | ||||||||||
Small Business Administration Participation Certificates, Series 2015-20I Class 1, 2.82%, 9/1/2035 | 2,425,664 | 2,451,329 | ||||||||||
Ulani MSN 35940 LLC, (Guaranty: Export-Import Bank of the United States), 2.227%, 5/16/2025 | 3,229,167 | 3,219,713 | ||||||||||
Union 13 Leasing LLC, (Guaranty: Export-Import Bank of the United States), 1.87%, 6/28/2024 | 1,774,683 | 1,750,916 | ||||||||||
| a | Washington Aircraft 2 Co. Ltd. Floating Rate Note, (Guaranty: Export-Import Bank of the United States), 1.759%, 6/26/2024 | 3,922,461 | 3,868,974 | |||||||||
|
| |||||||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $51,441,808) | 51,509,359 | |||||||||||
|
| |||||||||||
| MORTGAGE BACKED — 51.30% | ||||||||||||
Federal Home Loan Mtg Corp. Multi-Family Structured Pass Through, Series KLH3 Class A Floating Rate Note, 1.932%, 11/25/2022 | 2,998,695 | 3,010,889 | ||||||||||
Federal Home Loan Mtg Corp. Whole Loan Securities, Series 2016-SC01 Class 2A, 3.50%, 7/25/2046 | 2,047,165 | 2,029,326 | ||||||||||
Federal Home Loan Mtg Corp. Whole Loan Securities, Series 2016-SC02 Class 2A, 3.50%, 10/25/2046 | 1,633,952 | 1,671,245 | ||||||||||
Annual Reports | 9
Schedule of Investments, Continued
Thornburg Limited Term U.S. Government Fund | September 30, 2017
| ISSUER-DESCRIPTION | PRINCIPAL AMOUNT | VALUE | ||||||||||
Federal Home Loan Mtg Corp. Whole Loan Securities, Series 2017-SC02 Class 2A1, 3.50%, 5/25/2047 | $ | 945,691 | $ | 964,506 | ||||||||
Federal Home Loan Mtg Corp., CMO Series 1321 Class TE, 7.00%, 8/15/2022 | 103,059 | 108,382 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 2527 Class BP, 5.00%, 11/15/2017 | 4,825 | 4,831 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 2529 Class MB, 5.00%, 11/15/2017 | 7,762 | 7,777 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 2553 Class GB, 5.00%, 1/15/2018 | 9,869 | 9,900 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 2558 Class BD, 5.00%, 1/15/2018 | 52,213 | 52,417 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 2622 Class PE, 4.50%, 5/15/2018 | 46,569 | 46,929 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 2641 Class WE, 4.50%, 1/15/2033 | 19,074 | 19,236 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 2649 Class QH, 4.50%, 7/15/2018 | 28,306 | 28,545 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00%, 6/15/2019 | 17,919 | 18,030 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 2827 Class BU, 3.50%, 7/15/2019 | 119,942 | 120,668 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 3291 Class BY, 4.50%, 3/15/2022 | 468,057 | 480,922 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 3640 Class EL, 4.00%, 3/15/2020 | 299,924 | 306,190 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 3704 Class DC, 4.00%, 11/15/2036 | 456,840 | 476,404 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 3867 Class VA, 4.50%, 3/15/2024 | 1,648,487 | 1,764,105 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 3922 Class PQ, 2.00%, 4/15/2041 | 846,617 | 844,156 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 4050 Class MV, 3.50%, 8/15/2023 | 2,011,123 | 2,089,981 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 4097 Class TE, 1.75%, 5/15/2039 | 1,731,320 | 1,701,031 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 4105 Class FG, 1.634%, 9/15/2042 | 1,840,283 | 1,846,312 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 4120 Class TC, 1.50%, 10/15/2027 | 2,229,403 | 2,175,224 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series 4120 Class UE, 2.00%, 10/15/2027 | 2,287,742 | 2,266,616 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series K018 Class A1, 1.781%, 10/25/2020 | 1,014,769 | 1,013,748 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series K035 Class A1, 2.615%, 3/25/2023 | 2,632,073 | 2,663,237 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series K037 Class A1, 2.592%, 4/25/2023 | 1,501,212 | 1,522,248 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series K038 Class A1, 2.604%, 10/25/2023 | 4,651,541 | 4,720,270 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series K042 Class A1, 2.267%, 6/25/2024 | 2,111,180 | 2,111,908 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series K709 Class A2, 2.086%, 3/25/2019 | 3,000,000 | 3,010,155 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series K716 Class A1, 2.413%, 8/25/2047 | 1,282,844 | 1,293,636 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series KF15 Class A, 1.902%, 2/25/2023 | 2,504,539 | 2,513,955 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series KLH1 Class A, 1.932%, 11/25/2022 | 2,000,000 | 2,008,136 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series KP02 Class A2, 2.355%, 4/25/2021 | 2,975,635 | 2,998,430 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series KS03 Class A2, 2.79%, 6/25/2022 | 2,500,000 | 2,522,435 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series SC02 Class 2A, 3.50%, 9/25/2045 | 1,744,615 | 1,762,178 | ||||||||||
Federal Home Loan Mtg Corp., Pool AK6768, 3.00%, 3/1/2027 | 1,789,696 | 1,843,597 | ||||||||||
Federal Home Loan Mtg Corp., Pool B14155, 3.50%, 5/1/2019 | 80,630 | 84,252 | ||||||||||
Federal Home Loan Mtg Corp., Pool D98887, 3.50%, 1/1/2032 | 1,051,293 | 1,099,669 | ||||||||||
Federal Home Loan Mtg Corp., Pool E96575, 4.50%, 6/1/2018 | 47,739 | 48,119 | ||||||||||
Federal Home Loan Mtg Corp., Pool G12079, 4.50%, 4/1/2019 | 99,091 | 100,613 | ||||||||||
Federal Home Loan Mtg Corp., Pool G12140, 4.00%, 2/1/2020 | 29,258 | 30,204 | ||||||||||
Federal Home Loan Mtg Corp., Pool G13804, 5.00%, 3/1/2025 | 407,136 | 432,639 | ||||||||||
Federal Home Loan Mtg Corp., Pool G18435, 2.50%, 5/1/2027 | 2,191,118 | 2,219,963 | ||||||||||
Federal Home Loan Mtg Corp., Pool J11371, 4.50%, 12/1/2024 | 404,751 | 426,710 | ||||||||||
Federal Home Loan Mtg Corp., Pool J13583, 3.50%, 11/1/2025 | 692,311 | 724,709 | ||||||||||
Federal Home Loan Mtg Corp., Pool J14888, 3.50%, 4/1/2026 | 767,635 | 803,798 | ||||||||||
Federal Home Loan Mtg Corp., Pool T61943, 3.50%, 8/1/2045 | 835,286 | 851,731 | ||||||||||
Federal Home Loan Mtg Corp., REMIC Series 4072 Class VA, 3.50%, 10/15/2023 | 1,766,160 | 1,836,620 | ||||||||||
Federal National Mtg Assoc., CMO Series 1993-32 Class H, 6.00%, 3/25/2023 | 12,656 | 13,405 | ||||||||||
Federal National Mtg Assoc., CMO Series 2003-15 Class CY, 5.00%, 3/25/2018 | 7,730 | 7,763 | ||||||||||
Federal National Mtg Assoc., CMO Series 2003-4 Class PE, 5.00%, 2/25/2018 | 17,430 | 17,493 | ||||||||||
Federal National Mtg Assoc., CMO Series 2003-9 Class DB, 5.00%, 2/25/2018 | 8,764 | 8,794 | ||||||||||
Federal National Mtg Assoc., CMO Series 2009-17 Class AH, 0.812%, 3/25/2039 | 404,314 | 349,865 | ||||||||||
Federal National Mtg Assoc., CMO Series 2009-52 Class AJ, 4.00%, 7/25/2024 | 102,607 | 104,326 | ||||||||||
Federal National Mtg Assoc., CMO Series 2009-70 Class NK, 4.50%, 8/25/2019 | 24,377 | 24,573 | ||||||||||
Federal National Mtg Assoc., CMO Series 2009-78 Class A, 4.50%, 8/25/2019 | 41,944 | 42,384 | ||||||||||
Federal National Mtg Assoc., CMO Series 2011-124 Class QA, 2.00%, 12/25/2041 | 217,112 | 216,764 | ||||||||||
Federal National Mtg Assoc., CMO Series 2011-45 Class VA, 4.00%, 3/25/2024 | 2,254,018 | 2,315,544 | ||||||||||
Federal National Mtg Assoc., CMO Series 2011-63 Class MV, 3.50%, 7/25/2024 | 2,294,096 | 2,337,780 | ||||||||||
Federal National Mtg Assoc., CMO Series 2011-70 Class CA, 3.00%, 8/25/2026 | 4,032,259 | 4,023,815 | ||||||||||
Federal National Mtg Assoc., CMO Series 2011-72 Class KV, 3.50%, 11/25/2022 | 1,190,643 | 1,205,323 | ||||||||||
Federal National Mtg Assoc., CMO Series 2012-20 Class VT, 3.50%, 3/25/2025 | 3,117,976 | 3,245,222 | ||||||||||
Federal National Mtg Assoc., CMO Series 2012-36 Class CV, 4.00%, 6/25/2023 | 2,239,904 | 2,323,066 | ||||||||||
Federal National Mtg Assoc., CMO Series 2013-81 Class FW Floating Rate Note, 1.537%, 1/25/2043 | 3,025,428 | 3,015,249 | ||||||||||
Federal National Mtg Assoc., CMO Series 2013-92 Class FA, 1.787%, 9/25/2043 | 2,154,820 | 2,166,453 | ||||||||||
10 | Annual Reports
Schedule of Investments, Continued
Thornburg Limited Term U.S. Government Fund | September 30, 2017
| ISSUER-DESCRIPTION | PRINCIPAL AMOUNT | VALUE | ||||||||||
Federal National Mtg Assoc., CMO Series 2015-AB5 Class A10, 3.15%, 9/25/2035 | $ | 2,338,241 | $ | 2,380,617 | ||||||||
Federal National Mtg Assoc., Pool 252648, 6.50%, 5/1/2022 | 19,941 | 21,343 | ||||||||||
Federal National Mtg Assoc., Pool 342947, 7.25%, 4/1/2024 | 47,766 | 52,666 | ||||||||||
Federal National Mtg Assoc., Pool 443909, 6.50%, 9/1/2018 | 2,519 | 2,568 | ||||||||||
Federal National Mtg Assoc., Pool 726308, 4.00%, 7/1/2018 | 40,737 | 41,097 | ||||||||||
Federal National Mtg Assoc., Pool 889906, 4.00%, 7/1/2023 | 140,001 | 145,809 | ||||||||||
Federal National Mtg Assoc., Pool 895572, 3.691%, 6/1/2036 | 260,911 | 276,876 | ||||||||||
Federal National Mtg Assoc., Pool 930986, 4.50%, 4/1/2019 | 104,338 | 106,099 | ||||||||||
Federal National Mtg Assoc., Pool AA2870, 4.00%, 3/1/2024 | 382,791 | 400,688 | ||||||||||
Federal National Mtg Assoc., Pool AB7997, 2.50%, 2/1/2023 | 665,200 | 673,979 | ||||||||||
Federal National Mtg Assoc., Pool AB8447, 2.50%, 2/1/2028 | 1,837,348 | 1,860,961 | ||||||||||
Federal National Mtg Assoc., Pool AD8191, 4.00%, 9/1/2025 | 648,217 | 680,400 | ||||||||||
Federal National Mtg Assoc., Pool AE0704, 4.00%, 1/1/2026 | 2,511,123 | 2,635,797 | ||||||||||
Federal National Mtg Assoc., Pool AH3487, 3.50%, 2/1/2026 | 2,852,548 | 2,981,916 | ||||||||||
Federal National Mtg Assoc., Pool AI9821, 2.50%, 1/1/2032 | 6,008,429 | 6,064,054 | ||||||||||
Federal National Mtg Assoc., Pool AJ1752, 3.50%, 9/1/2026 | 1,898,063 | 1,984,736 | ||||||||||
Federal National Mtg Assoc., Pool AK6518, 3.00%, 3/1/2027 | 1,624,310 | 1,673,991 | ||||||||||
Federal National Mtg Assoc., Pool AS9749, 4.00%, 6/1/2047 | 2,573,587 | 2,712,823 | ||||||||||
Federal National Mtg Assoc., Pool AU2669, 2.50%, 10/1/2028 | 1,888,075 | 1,912,340 | ||||||||||
Federal National Mtg Assoc., Pool MA0045, 4.00%, 4/1/2019 | 69,529 | 71,808 | ||||||||||
Federal National Mtg Assoc., Pool MA0071, 4.50%, 5/1/2019 | 56,958 | 57,919 | ||||||||||
Federal National Mtg Assoc., Pool MA0125, 4.50%, 7/1/2019 | 47,867 | 48,660 | ||||||||||
Federal National Mtg Assoc., Pool MA0380, 4.00%, 4/1/2020 | 149,823 | 154,733 | ||||||||||
Federal National Mtg Assoc., Pool MA1582, 3.50%, 9/1/2043 | 4,423,904 | 4,577,704 | ||||||||||
Federal National Mtg Assoc., Pool MA1585, 2.00%, 9/1/2023 | 1,759,646 | 1,756,209 | ||||||||||
Federal National Mtg Assoc., Pool MA1625, 3.00%, 10/1/2023 | 1,868,341 | 1,920,815 | ||||||||||
Federal National Mtg Assoc., Pool MA2322, 2.50%, 7/1/2025 | 1,548,081 | 1,568,944 | ||||||||||
Federal National Mtg Assoc., Pool MA2353, 3.00%, 8/1/2035 | 2,511,871 | 2,568,389 | ||||||||||
Federal National Mtg Assoc., Pool MA2480, 4.00%, 12/1/2035 | 2,603,117 | 2,766,117 | ||||||||||
Federal National Mtg Assoc., Pool MA2499, 2.50%, 1/1/2026 | 2,542,192 | 2,576,452 | ||||||||||
Federal National Mtg Assoc., Pool MA2612, 2.50%, 5/1/2026 | 1,782,494 | 1,806,516 | ||||||||||
Federal National Mtg Assoc., Pool MA2815, 3.00%, 11/1/2026 | 2,536,595 | 2,609,423 | ||||||||||
Federal National Mtg Assoc., Series 2017-T1, Class A, 2.898%, 6/25/2027 | 999,786 | 994,663 | ||||||||||
Government National Mtg Assoc., CMO Series 2010-160 Class VY, 4.50%, 1/20/2022 | 448,184 | 470,547 | ||||||||||
Government National Mtg Assoc., Pool 003550, 5.00%, 5/20/2019 | 53,403 | 54,491 | ||||||||||
Government National Mtg Assoc., Pool 714631, 5.797%, 10/20/2059 | 91,792 | 93,302 | ||||||||||
Government National Mtg Assoc., Pool 721652, 5.052%, 5/20/2061 | 1,842,458 | 1,885,715 | ||||||||||
Government National Mtg Assoc., Pool 751388, 5.305%, 1/20/2061 | 1,810,696 | 1,887,667 | ||||||||||
Government National Mtg Assoc., Pool 751392, 5.00%, 2/20/2061 | 4,180,711 | 4,495,297 | ||||||||||
Government National Mtg Assoc., Pool 757313, 4.293%, 12/20/2060 | 1,336,008 | 1,347,517 | ||||||||||
Government National Mtg Assoc., Pool 894205, 2.125%, 8/20/2039 | 353,592 | 363,692 | ||||||||||
Government National Mtg Assoc., Pool MA0100, 2.625%, 5/20/2042 | 987,555 | 1,010,377 | ||||||||||
Government National Mtg Assoc., Pool MA0907, 2.00%, 4/20/2028 | 2,608,684 | 2,568,739 | ||||||||||
|
| |||||||||||
TOTAL MORTGAGE BACKED (Cost $146,845,035) | 146,368,857 | |||||||||||
|
| |||||||||||
| SHORT TERM INVESTMENTS — 6.05% | ||||||||||||
Bank of New York Tri-Party Repurchase Agreement 1.28% dated 9/29/2017 due 10/2/2017, repurchase price | 13,000,000 | 13,000,000 | ||||||||||
Federal Home Loan Bank Discount Note, 0%, 10/2/2017 | 4,250,000 | 4,249,917 | ||||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $17,249,917) | 17,249,917 | |||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 99.58% (Cost $284,479,287) | $ | 284,116,152 | ||||||||||
| OTHER ASSETS LESS LIABILITIES — 0.42% | 1,209,655 | |||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 285,325,807 | ||||||||||
|
| |||||||||||
Footnote Legend
| a | Yankee bond denominated in U.S. dollars and is issued in the U.S. by foreign banks and corporations. |
Annual Reports | 11
Schedule of Investments, Continued
Thornburg Limited Term U.S. Government Fund | September 30, 2017
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| CMO | Collateralized Mortgage Obligation | REMIC | Real Estate Mortgage Investment Conduit | |||
| Mtg | Mortgage | VA | Veterans Affairs |
See notes to financial statements.
12 | Annual Reports
Thornburg Limited Term Income Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
The Fund’s primary objective is to provide 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 a dollar-weighted average maturity of normally less than five years.
LONG-TERM STABILITY OF PRINCIPAL
Net Asset Value History of A Shares
KEY PORTFOLIO ATTRIBUTES - LT INCOME
| Number of Bonds | 608 | ||||
| Effective Duration | 2.5 Yrs | ||||
| Average Maturity | 3.4 Yrs |
There is no guarantee that the Fund will meet its investment objectives.
All data is subject to change. Charts may not add up to 100% due to rounding.
SECURITY CREDIT RATINGS
Credit quality ratings for Thornburg’s global fixed income portfolios 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 other nationally recognized statistical rating organizations (NRSROs).
PORTFOLIO LADDER
Percent of portfolio maturing in each year. Cash includes cash equivalents.
Annual Reports | 13
Schedule of Investments
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
| U.S. TREASURY SECURITIES — 5.39% | |||||||||||||||||
United States Treasury Notes, 0.75% due 4/30/2018 | NR/Aaa | $ | 6,875,000 | $ | 6,856,067 | ||||||||||||
United States Treasury Notes, 1.625% due 3/31/2019 | NR/Aaa | 15,000,000 | 15,044,238 | ||||||||||||||
United States Treasury Notes, 1.50% due 5/31/2019 | NR/Aaa | 10,000,000 | 10,009,766 | ||||||||||||||
United States Treasury Notes, 2.75% due 11/15/2023 | NR/Aaa | 5,500,000 | 5,716,563 | ||||||||||||||
United States Treasury Notes, 2.00% due 8/15/2025 | NR/Aaa | 52,500,000 | 51,597,656 | ||||||||||||||
United States Treasury Notes, 1.625% due 2/15/2026 | NR/Aaa | 25,200,000 | 23,956,735 | ||||||||||||||
United States Treasury Notes, 1.50% due 8/15/2026 | NR/Aaa | 23,000,000 | 21,537,345 | ||||||||||||||
United States Treasury Notes, 2.00% due 11/15/2026 | NR/Aaa | 22,633,000 | 22,055,682 | ||||||||||||||
United States Treasury Notes, 2.25% due 2/15/2027 | NR/Aaa | 13,000,000 | 12,922,304 | ||||||||||||||
United States Treasury Notes, 2.25% due 8/15/2027 | NR/Aaa | 27,200,000 | 27,017,249 | ||||||||||||||
United States Treasury Notes Inflationary Index, 0.125% due 4/15/2020 | NR/Aaa | 17,308,243 | 17,390,966 | ||||||||||||||
United States Treasury Notes Inflationary Index, 0.25% due 1/15/2025 | NR/Aaa | 5,684,305 | 5,627,954 | ||||||||||||||
United States Treasury Notes Inflationary Index, 0.375% due 7/15/2027 | NR/Aaa | 44,732,631 | 44,300,013 | ||||||||||||||
|
| ||||||||||||||||
TOTAL U.S. TREASURY SECURITIES (Cost $264,206,823) | 264,032,538 | ||||||||||||||||
|
| ||||||||||||||||
| U.S. GOVERNMENT AGENCIES — 3.88% | |||||||||||||||||
Alex Alpha, LLC, (Guaranty: Export-Import Bank of the United States), 1.617% due 8/15/2024 | NR/NR | 3,043,478 | 2,977,431 | ||||||||||||||
Altitude Investments 12, LLC, (Guaranty: Export-Import Bank of the United States), 2.454% due 12/9/2025 | NR/NR | 5,024,816 | 5,049,882 | ||||||||||||||
| a | Durrah MSN 35603, (Guaranty: Export-Import Bank of the United States), 1.684% due 1/22/2025 | NR/NR | 9,688,254 | 9,474,523 | |||||||||||||
DY8 Leasing, LLC, (Guaranty: Export-Import Bank of the United States), 2.627% due 4/29/2026 | NR/NR | 3,736,979 | 3,782,020 | ||||||||||||||
Export Leasing (2009), LLC, (Guaranty: Export-Import Bank of the United States), 1.859% due 8/28/2021 | NR/NR | 3,634,655 | 3,627,005 | ||||||||||||||
| a | Gate Capital Cayman One Ltd., (Guaranty: Export-Import Bank of the United States), 1.839% due 3/27/2021 | NR/NR | 5,816,116 | 5,796,888 | |||||||||||||
Helios Leasing I, LLC, (Guaranty: Export-Import Bank of the United States), 1.562% due 9/28/2024 | NR/NR | 3,643,174 | 3,545,472 | ||||||||||||||
| a | Micron Semiconductor Ltd., (Guaranty: Export-Import Bank of the United States), 1.258% due 1/15/2019 | NR/NR | 1,290,000 | 1,283,437 | |||||||||||||
Mortgage-Linked Amortizing Notes, Series 2012-1 Class A10, 2.06% due 1/15/2022 | AA+/NR | 508,169 | 509,404 | ||||||||||||||
| a | MSN 41079 and 41084 Ltd., (Guaranty: Export-Import Bank of the United States), 1.717% due 7/13/2024 | NR/NR | 7,320,699 | 7,179,204 | |||||||||||||
| a | Petroleos Mexicanos Floating Rate Note, (Guaranty: Export-Import Bank of the United States), 1.654% due 4/15/2025 | NR/NR | 8,029,000 | 7,930,653 | |||||||||||||
| a | Petroleos Mexicanos, (Guaranty: Export-Import Bank of the United States), 1.70% due 12/20/2022 | NR/NR | 5,720,000 | 5,651,129 | |||||||||||||
| a | Petroleos Mexicanos, (Guaranty: Export-Import Bank of the United States), 2.46% due 12/15/2025 | NR/NR | 6,375,000 | 6,408,920 | |||||||||||||
Private Export Funding Corp., (Guaranty: Export-Import Bank of the United States), 3.55% due 1/15/2024 | NR/Aaa | 10,000,000 | 10,716,490 | ||||||||||||||
| a | Reliance Industries Ltd., (Guaranty: Export-Import Bank of the United States), 2.512% due 1/15/2026 | NR/NR | 5,525,000 | 5,565,516 | |||||||||||||
| a | Reliance Industries Ltd., (Guaranty: Export-Import Bank of the United States), 2.06% due 1/15/2026 | NR/NR | 1,275,000 | 1,261,005 | |||||||||||||
| a | Reliance Industries Ltd., (Guaranty: Export-Import Bank of the United States), 1.87% due 1/15/2026 | NR/NR | 6,102,105 | 5,988,159 | |||||||||||||
Sandalwood 2013, LLC, (Guaranty: Export-Import Bank of the United States), 2.821% due 2/12/2026 | NR/NR | 5,176,151 | 5,280,528 | ||||||||||||||
Santa Rosa Leasing, LLC, (Guaranty: Export-Import Bank of the United States), 1.693% due 8/15/2024 | NR/NR | 3,618,845 | 3,549,873 | ||||||||||||||
Santa Rosa Leasing, LLC, (Guaranty: Export-Import Bank of the United States), 1.472% due 11/3/2024 | NR/NR | 10,033,591 | 9,744,377 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2001-20J Class 1, 5.76% due 10/1/2021 | NR/NR | 166,773 | 174,987 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2008-20D Class 1, 5.37% due 4/1/2028 | NR/NR | 1,595,486 | 1,711,125 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2009-20E Class 1, 4.43% due 5/1/2029 | NR/NR | 961,270 | 1,020,807 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2009-20K Class 1, 4.09% due 11/1/2029 | NR/NR | 5,595,042 | 5,895,435 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2011-20E Class 1, 3.79% due 5/1/2031 | NR/NR | 7,062,183 | 7,393,377 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2011-20F Class 1, 3.67% due 6/1/2031 | NR/NR | 1,094,849 | 1,143,935 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2011-20G Class 1, 3.74% due 7/1/2031 | NR/NR | 7,655,157 | 8,004,676 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2011-20I Class 1, 2.85% due 9/1/2031 | NR/NR | 10,611,829 | 10,762,730 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2011-20K Class 1, 2.87% due 11/1/2031 | NR/NR | 8,997,708 | 9,138,830 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2012-20D Class 1, 2.67% due 4/1/2032 | NR/NR | 8,893,065 | 8,991,643 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2012-20J Class 1, 2.18% due 10/1/2032 | NR/NR | 6,950,257 | 6,854,206 | ||||||||||||||
Small Business Administration Participation Certificates, Series 2012-20K Class 1, 2.09% due 11/1/2032 | NR/NR | 4,392,738 | 4,318,381 | ||||||||||||||
| b,c | U.S. Department of Transportation, 6.001% due 12/7/2021 | NR/NR | 3,000,000 | 3,347,400 | |||||||||||||
Union 13 Leasing, LLC, (Guaranty: Export-Import Bank of the United States), 1.682% due 12/19/2024 | NR/NR | 9,407,588 | 9,196,683 | ||||||||||||||
| a | Washington Aircraft 2 Co. Ltd. Floating Rate Note, (Guaranty: Export-Import Bank of the United States), 1.759% due 6/26/2024 | NR/NR | 6,935,150 | 6,840,581 | |||||||||||||
|
| ||||||||||||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $191,847,817) | 190,116,712 | ||||||||||||||||
|
| ||||||||||||||||
| OTHER GOVERNMENT — 1.52% | |||||||||||||||||
| a,b | Carpintero Finance Ltd., (Guaranty: Export Credits Guarantee Department of the United Kingdom), 2.004% due 9/18/2024 | NR/NR | 7,029,991 | 6,957,681 | |||||||||||||
| a,b | Carpintero Finance Ltd., (Guaranty: Export Credits Guarantee Department of the United Kingdom), 2.581% due 11/11/2024 | NR/NR | 9,989,008 | 10,089,265 | |||||||||||||
| a,b | Government of Bermuda, 5.603% due 7/20/2020 | A+/A2 | 3,000,000 | 3,262,500 | |||||||||||||
| a,b | Government of Bermuda, 4.138% due 1/3/2023 | A+/A2 | 4,000,000 | 4,213,540 | |||||||||||||
14 | Annual Reports
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
| a,b | Khadrawy Ltd., (Guaranty: Export Credit Guarantee Department of the United Kingdom), 2.471% due 3/31/2025 | NR/NR | $ | 4,811,090 | $ | 4,772,601 | |||||||||||
| a,b | Korea Expressway Corp. Floating Rate Note, 2.007% due 4/20/2020 | AA/Aa2 | 14,800,000 | 14,781,944 | |||||||||||||
| a,b | Korea National Oil Corp., 2.75% due 1/23/2019 | AA/Aa2 | 5,000,000 | 5,021,447 | |||||||||||||
| a | North American Development Bank, 4.375% due 2/11/2020 | NR/Aa1 | 15,500,000 | 16,345,106 | |||||||||||||
| a,b | Seven and Seven Ltd. Floating Rate Note, (Guaranty: Export-Import Bank of Korea), 2.452% due 9/11/2019 | NR/NR | 8,920,000 | 8,870,781 | |||||||||||||
|
| ||||||||||||||||
TOTAL OTHER GOVERNMENT (Cost $73,802,548) | 74,314,865 | ||||||||||||||||
|
| ||||||||||||||||
| MORTGAGE BACKED — 7.11% | |||||||||||||||||
Federal Home Loan Mtg Corp. Multi-Family Structured Pass Through, Series K725 Class A1, 2.666% due 5/25/2023 | AAA/NR | 7,924,557 | 8,063,341 | ||||||||||||||
Federal Home Loan Mtg Corp. Multi-Family Structured Pass Through, Series KLH3 Class A Floating Rate Note, 1.932% due 11/25/2022 | NR/NR | 17,617,333 | 17,688,973 | ||||||||||||||
Federal Home Loan Mtg Corp. Whole Loan Securities, Series 2016-SC01 Class 2A, 3.50% due 7/25/2046 | NR/NR | 7,847,464 | 7,779,084 | ||||||||||||||
Federal Home Loan Mtg Corp. Whole Loan Securities, Series 2017-SC02 Class 2A1, 3.50% due 5/25/2047 | NR/NR | 7,518,246 | 7,667,825 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Interest Only Series K008 Class X1, 1.693% due 6/25/2020 | NR/NR | 31,098,060 | 1,075,856 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Interest Only Series K710 Class X1, 1.866% due 5/25/2019 | NR/NR | 45,050,485 | 1,018,127 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 2528 Class HN, 5.00% due 11/15/2017 | NR/NR | 4,173 | 4,179 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 2627 Class GY, 4.50% due 6/15/2018 | NR/NR | 102,660 | 103,471 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 2628 Class AB, 4.50% due 6/15/2018 | NR/NR | 24,897 | 25,077 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 2682 Class JG, 4.50% due 10/15/2023 | NR/NR | 523,701 | 544,679 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 2814 Class GB, 5.00% due 6/15/2019 | NR/NR | 17,919 | 18,030 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 2827 Class BU, 3.50% due 7/15/2019 | NR/NR | 143,930 | 144,802 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 3195 Class PD, 6.50% due 7/15/2036 | NR/NR | 813,968 | 886,824 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 3291 Class BY, 4.50% due 3/15/2022 | NR/NR | 624,077 | 641,230 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 3504 Class PC, 4.00% due 1/15/2039 | NR/NR | 55,095 | 56,296 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 3919 Class VB, 4.00% due 8/15/2024 | NR/NR | 3,584,763 | 3,799,067 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 3922 Class PQ, 2.00% due 4/15/2041 | NR/NR | 1,269,925 | 1,266,233 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 4050 Class MV, 3.50% due 8/15/2023 | NR/NR | 2,297,770 | 2,387,868 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 4079 Class WV, 3.50% due 3/15/2027 | NR/NR | 2,669,681 | 2,776,038 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 4097 Class TE, 1.75% due 5/15/2039 | NR/NR | 5,193,961 | 5,103,092 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series 4120 Class TC, 1.50% due 10/15/2027 | NR/NR | 2,894,899 | 2,824,547 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series K038 Class A1, 2.604% due 10/25/2023 | NR/NR | 10,911,739 | 11,072,966 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series K039 Class A1, 2.683% due 12/25/2023 | NR/NR | 5,542,746 | 5,625,226 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series K716 Class A1, 2.413% due 8/25/2047 | NR/Aaa | 3,944,744 | 3,977,930 | ||||||||||||||
Federal Home Loan Mtg Corp., Multi-Family Structured Pass Through, Series K030 Class A1, 2.779% due 9/25/2022 | NR/Aaa | 3,828,239 | 3,891,290 | ||||||||||||||
Federal Home Loan Mtg Corp., Multi-Family Structured Pass Through, Series K031 Class A2, 3.30% due 4/25/2023 | NR/Aaa | 9,200,000 | 9,634,176 | ||||||||||||||
Federal Home Loan Mtg Corp., Multi-Family Structured Pass Through, Series K710 Class A2, 1.883% due 5/25/2019 | NR/NR | 7,605,000 | 7,600,179 | ||||||||||||||
Federal Home Loan Mtg Corp., Multi-Family Structured Pass Through, Series K717 Class A2, 2.991% due 9/25/2021 | NR/NR | 4,700,000 | 4,845,686 | ||||||||||||||
Federal Home Loan Mtg Corp., Multi-Family Structured Pass Through, Series K719 Class A2, 2.731% due 6/25/2022 | NR/NR | 6,355,000 | 6,484,016 | ||||||||||||||
Federal Home Loan Mtg Corp., Multi-Family Structured Pass Through, Series K722 Class A2, 2.406% due 3/25/2023 | AAA/NR | 4,800,000 | 4,823,407 | ||||||||||||||
Federal Home Loan Mtg Corp., Pool D98887, 3.50% due 1/1/2032 | NR/NR | 3,519,198 | 3,681,136 | ||||||||||||||
Federal Home Loan Mtg Corp., Pool G15523, 2.50% due 8/1/2025 | NR/NR | 3,158,547 | 3,200,126 | ||||||||||||||
Federal Home Loan Mtg Corp., Pool J17504, 3.00% due 12/1/2026 | NR/NR | 1,734,288 | 1,787,333 | ||||||||||||||
Federal Home Loan Mtg Corp., REMIC Series 3838 Class GV, 4.00% due 3/15/2024 | NR/NR | 6,898,627 | 7,265,395 | ||||||||||||||
Federal Home Loan Mtg Corp., REMIC Series 4072 Class VA, 3.50% due 10/15/2023 | NR/NR | 1,777,241 | 1,848,144 | ||||||||||||||
Federal Home Loan Mtg Corp., Series 2017-SCO1 Class 1A, 3.00% due 12/25/2046 | NR/NR | 26,226,370 | 26,010,212 | ||||||||||||||
Federal Home Long Mtg Corp. Seasoned Credit Risk Transfer, Series 2017-1 Class HA Step-Up Bond, 2.00% due 1/25/2056 | NR/NR | 11,431,990 | 11,416,941 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2003-4 Class PE, 5.00% due 2/25/2018 | NR/NR | 17,565 | 17,628 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2003-74 Class KN, 4.50% due 8/25/2018 | NR/NR | 16,647 | 16,773 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2005-48 Class AR, 5.50% due 2/25/2035 | NR/NR | 147,473 | 151,832 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2007-42 Class PA, 5.50% due 4/25/2037 | NR/NR | 254,808 | 266,617 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2009-17 Class AH, 0.812% due 3/25/2039 | NR/NR | 673,856 | 583,108 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2009-5 Class A, 4.50% due 12/25/2023 | NR/NR | 131,449 | 132,269 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2009-52 Class AJ, 4.00% due 7/25/2024 | NR/NR | 171,012 | 173,877 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2009-70 Class NK, 4.50% due 8/25/2019 | NR/NR | 60,941 | 61,433 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2011-15 Class VA, 4.00% due 4/25/2022 | NR/NR | 918,301 | 932,432 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2012-129 Class LA, 3.50% due 12/25/2042 | NR/NR | 8,163,216 | 8,355,251 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2012-36 Class CV, 4.00% due 6/25/2023 | NR/NR | 2,043,352 | 2,119,217 | ||||||||||||||
Federal National Mtg Assoc., CMO Series 2013-81 Class FW Floating Rate Note, 1.537% due 1/25/2043 | NR/NR | 10,992,796 | 10,955,814 | ||||||||||||||
Federal National Mtg Assoc., Pool 357384, 4.50% due 5/1/2018 | NR/NR | 10,214 | 10,279 | ||||||||||||||
Federal National Mtg Assoc., Pool 897936, 5.50% due 8/1/2021 | NR/NR | 311,985 | 327,379 | ||||||||||||||
Federal National Mtg Assoc., Pool AB7997, 2.50% due 2/1/2023 | NR/NR | 3,621,488 | 3,669,284 | ||||||||||||||
Federal National Mtg Assoc., Pool AE0704, 4.00% due 1/1/2026 | NR/NR | 6,531,375 | 6,855,647 | ||||||||||||||
Annual Reports | 15
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Federal National Mtg Assoc., Pool AK6518, 3.00% due 3/1/2027 | NR/NR | $ | 2,265,706 | $ | 2,335,005 | ||||||||||||
Federal National Mtg Assoc., Pool AL9612, 3.50% due 11/1/2043 | NR/NR | 8,873,044 | 9,206,476 | ||||||||||||||
Federal National Mtg Assoc., Pool AS9733, 4.00% due 6/1/2047 | NR/NR | 32,380,181 | 34,620,232 | ||||||||||||||
Federal National Mtg Assoc., Pool AS9749, 4.00% due 6/1/2047 | NR/NR | 21,848,889 | 23,030,949 | ||||||||||||||
Federal National Mtg Assoc., Pool MA1278, 2.50% due 12/1/2022 | NR/NR | 5,063,526 | 5,129,214 | ||||||||||||||
Federal National Mtg Assoc., Pool MA1585, 2.00% due 9/1/2023 | NR/NR | 6,664,659 | 6,651,642 | ||||||||||||||
Federal National Mtg Assoc., Pool MA1691, 3.00% due 12/1/2023 | NR/NR | 5,759,092 | 5,920,841 | ||||||||||||||
Federal National Mtg Assoc., Pool MA2612, 2.50% due 5/1/2026 | NR/NR | 17,326,126 | 17,559,623 | ||||||||||||||
Federal National Mtg Assoc., Pool MA2815, 3.00% due 11/1/2026 | NR/NR | 3,921,440 | 4,034,029 | ||||||||||||||
Federal National Mtg Assoc., Series 2017-T1, Class A, 2.898% due 6/25/2027 | NR/NR | 17,996,147 | 17,903,941 | ||||||||||||||
Government National Mtg Assoc., CMO Series 2009-68 Class DP, 4.50% due 11/16/2038 | NR/NR | 295,541 | 306,975 | ||||||||||||||
Government National Mtg Assoc., Pool 714631, 5.797% due 10/20/2059 | NR/NR | 247,838 | 251,916 | ||||||||||||||
Government National Mtg Assoc., Pool 721652, 5.052% due 5/20/2061 | NR/NR | 2,686,220 | 2,749,287 | ||||||||||||||
Government National Mtg Assoc., Pool 731491, 5.155% due 12/20/2060 | NR/NR | 2,155,535 | 2,242,731 | ||||||||||||||
Government National Mtg Assoc., Pool 751388, 5.305% due 1/20/2061 | NR/NR | 2,845,379 | 2,966,334 | ||||||||||||||
Government National Mtg Assoc., Pool 783299, 4.50% due 2/15/2022 | NR/NR | 465,463 | 473,568 | ||||||||||||||
Government National Mtg Assoc., Pool MA0100, 2.625% due 5/20/2042 | NR/NR | 997,530 | 1,020,583 | ||||||||||||||
|
| ||||||||||||||||
TOTAL MORTGAGE BACKED (Cost $348,099,929) | 348,070,988 | ||||||||||||||||
|
| ||||||||||||||||
| ASSET BACKED SECURITIES — 21.89% | |||||||||||||||||
ADVANCE RECEIVABLES — 0.70% | |||||||||||||||||
| b | New Residential Advance Receivables Trust, Series 2016-T2 Class AT2, 2.575% due 10/15/2049 | AAA/NR | 22,700,000 | 22,531,484 | |||||||||||||
| b | SPS Servicer Advance Receivables Trust, Series 2016-T1 Class AT1, 2.53% due 11/16/2048 | AAA/NR | 12,000,000 | 11,903,232 | |||||||||||||
|
| ||||||||||||||||
| 34,434,716 | |||||||||||||||||
|
| ||||||||||||||||
AUTO RECEIVABLES — 3.53% | |||||||||||||||||
| b | American Credit Acceptance Receivables Trust, Series 2016-4 Class C, 2.91% due 2/13/2023 | A/NR | 2,375,000 | 2,381,745 | |||||||||||||
| b | American Credit Acceptance Receivables Trust, Series 2017-3 Class A, 1.82% due 3/10/2020 | AAA/NR | 12,400,000 | 12,401,815 | |||||||||||||
| b | Avis Budget Rental Car Funding AESOP, LLC, Series 2012-3A Class A, 2.10% due 3/20/2019 | NR/Aaa | 10,200,000 | 10,206,498 | |||||||||||||
| b | Avis Budget Rental Car Funding AESOP, LLC, Series 2015-2A Class A, 2.63% due 12/20/2021 | NR/Aaa | 6,000,000 | 5,997,500 | |||||||||||||
Capital Auto Receivables Asset Trust, Series 2016-3 Class A2A, 1.36% due 4/22/2019 | AAA/Aaa | 1,171,507 | 1,171,285 | ||||||||||||||
| b | Chesapeake Funding II, LLC, Series 2016-1A Class A1, 2.11% due 3/15/2028 | NR/Aaa | 10,187,655 | 10,210,847 | |||||||||||||
| b | Drive Auto Receivables Trust, Series 2017-AA Class B, 2.51% due 1/15/2021 | AA/Aaa | 8,875,000 | 8,896,705 | |||||||||||||
| b | Enterprise Fleet Financing, LLC, Series 2017-1 Class A2, 2.13% due 7/20/2022 | AAA/NR | 6,000,000 | 6,012,385 | |||||||||||||
| b | Exeter Automobile Receivables Trust, Series 2015-1A Class B, 2.84% due 3/16/2020 | AA-/NR | 9,133,359 | 9,156,708 | |||||||||||||
| b | Ford Credit Auto Owner Trust, Series 2014-2 Class A, 2.31% due 4/15/2026 | NR/Aaa | 18,000,000 | 18,138,026 | |||||||||||||
| b | Ford Credit Auto Owner Trust, Series 2015-1 Class A, 2.12% due 7/15/2026 | AAA/NR | 9,900,000 | 9,932,496 | |||||||||||||
| b | Foursight Capital Automobile Receivables Trust, Series 2016-1 Class A2, 2.87% due 10/15/2021 | A/NR | 14,255,117 | 14,306,054 | |||||||||||||
| b | Hertz Vehicle Financing, LLC, Series 2013-1A Class A2, 1.83% due 8/25/2019 | NR/Aaa | 10,400,000 | 10,373,652 | |||||||||||||
| b | Hertz Vehicle Financing, LLC, Series 2015-2A Class A, 2.02% due 9/25/2019 | NR/Aaa | 15,047,000 | 14,995,726 | |||||||||||||
Nissan Auto Receivables Owner Trust, Series 2016-B Class A2B Floating Rate Note, 1.534% due 4/15/2019 | NR/Aaa | 4,603,483 | 4,606,362 | ||||||||||||||
| a,b | OSCAR US Funding Trust, Series 2014-1A Class A3, 1.72% due 4/15/2019 | AAA/Aaa | 2,138,400 | 2,135,359 | |||||||||||||
| a,b,c | OSCAR US Funding Trust, Series 2016-2A Class A3, 2.73% due 12/15/2020 | AAA/Aaa | 7,430,000 | 7,459,720 | |||||||||||||
| a,b | OSCAR US Funding Trust, Series 2017-2A Class A2B Floating Rate Note, 1.884% due 11/10/2020 | NR/Aaa | 4,670,000 | 4,669,995 | |||||||||||||
Toyota Motor Credit Corp., 1.50% due 2/13/2020 | AA-/Aa3 | 20,090,000 | 20,018,692 | ||||||||||||||
|
| ||||||||||||||||
| 173,071,570 | |||||||||||||||||
|
| ||||||||||||||||
COMMERCIAL MTG TRUST — 2.02% | |||||||||||||||||
| b | Barclays Commercial Mortgage Securities, LLC, Series 2015-STP Class A, 3.323% due 9/10/2028 | AAA/NR | 5,877,109 | 6,026,482 | |||||||||||||
| b | Bayview Commercial Asset Trust, Series 2004-3 Class A2 Floating Rate Note, 1.657% due 1/25/2035 | NR/A1 | 2,436,183 | 2,320,273 | |||||||||||||
| b | BHMS Mtg Trust, Series 2014-ATLS Class AFL Floating Rate Note, 2.731% due 7/5/2033 | NR/NR | 10,000,000 | 9,999,997 | |||||||||||||
| b | CFCRE Commercial Mtg Trust, Series 2011-C1 Class A4, 4.961% due 4/15/2044 | NR/Aaa | 11,877,000 | 12,629,071 | |||||||||||||
Citigroup Commercial Mortgage Trust, Series 2004-HYB2 Class B1, 3.399% due 3/25/2034 | CCC/Caa2 | 151,121 | 123,547 | ||||||||||||||
COMM Mortgage Trust, Series 2016-DC2 Class A1, 1.82% due 2/10/2049 | NR/Aaa | 19,660,344 | 19,599,018 | ||||||||||||||
| b | DBUBS Mortgage Trust CMO, Series 2011-LC2A Class A1FL, 2.587% due 7/12/2044 | NR/Aaa | 3,519,774 | 3,559,366 | |||||||||||||
| b | FREMF Mortgage Trust, Series 2013-KF02 Class B Floating Rate Note, 4.232% due 12/25/2045 | NR/Baa1 | 1,146,838 | 1,160,755 | |||||||||||||
| b | GAHR Commercial Mortgage Trust, Series 2015-NRF Class BFX, 3.495% due 12/15/2034 | AA-/NR | 25,010,000 | 25,431,891 | |||||||||||||
| b | Wells Fargo Commercial Mtg Trust, Series 2013-120B Class A, 2.80% due 3/18/2028 | AAA/NR | 15,000,000 | 15,130,056 | |||||||||||||
WFRBS Commercial Mortgage Trust, Series 2014-C22 Class A1, 1.479% due 9/15/2057 | NR/Aaa | 2,956,734 | 2,943,996 | ||||||||||||||
|
| ||||||||||||||||
| 98,924,452 | |||||||||||||||||
|
| ||||||||||||||||
16 | Annual Reports
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
CREDIT CARD — 2.34% | |||||||||||||||||
Barclays Dryrock Issuance Trust, Series 2015-4 Class A, 1.72% due 8/16/2021 | AAA/NR | $ | 13,630,000 | $ | 13,640,920 | ||||||||||||
Barclays Dryrock Issuance Trust, Series 2016-1 Class A, 1.52% due 5/16/2022 | AAA/NR | 10,365,000 | 10,300,734 | ||||||||||||||
Cabela’s Master Credit Card Trust, Series 2015-1A Class A2 Floating Rate Note, 1.774% due 3/15/2023 | AAA/NR | 15,665,000 | 15,768,145 | ||||||||||||||
Cabela’s Master Credit Card Trust, Series 2016-1 Class A2 Floating Rate Note, 2.084% due 6/15/2022 | AAA/NR | 15,000,000 | 15,153,686 | ||||||||||||||
Capital One Multi-Asset Execution Trust, Series 2016-A1 Class A1 Floating Rate Note, 1.684% due 2/15/2022 | AAA/NR | 29,280,000 | 29,433,342 | ||||||||||||||
Synchrony Credit Card Master Note Trust, Series 2014-1 Class A, 1.61% due 11/15/2020 | AAA/Aaa | 14,613,000 | 14,616,079 | ||||||||||||||
Synchrony Credit Card Master Note Trust, Series 2015-2 Class A, 1.60% due 4/15/2021 | AAA/NR | 7,400,000 | 7,402,449 | ||||||||||||||
Synchrony Credit Card Master Note Trust, Series 2016-1 Class A, 2.04% due 3/15/2022 | NR/Aaa | 8,500,000 | 8,529,914 | ||||||||||||||
|
| ||||||||||||||||
| 114,845,269 | |||||||||||||||||
|
| ||||||||||||||||
OTHER ASSET BACKED — 7.76% | |||||||||||||||||
| b | AMSR Trust, Series 2016-SFR1 Class A Floating Rate Note, 2.634% due 11/17/2033 | NR/Aaa | 15,900,000 | 15,993,777 | |||||||||||||
Appalachian Consumer Rate Relief Funding, LLC, Series 2013-1 Class A1, 2.008% due 2/1/2024 | AAA/Aaa | 9,450,776 | 9,359,221 | ||||||||||||||
| b | Ascentium Equipment Receivables, LLC, Series 2015-1A Class B, 2.26% due 6/10/2021 | NR/Aaa | 1,938,258 | 1,939,425 | |||||||||||||
| b | BRE Grand Islander Timeshare Issuer, Series 2017-1A Class A, 2.94% due 5/25/2029 | A+/NR | 5,616,577 | 5,603,824 | |||||||||||||
| b | CLI Funding V, LLC, Series 2014-2A Class A, 3.38% due 10/18/2029 | A/NR | 6,990,896 | 6,972,736 | |||||||||||||
| b | Consumer Loan Underlying Bond Credit Trust, Series 2017-NP1 Class A, 2.39% due 4/17/2023 | NR/NR | 2,522,525 | 2,521,725 | |||||||||||||
| b | Consumer Loan Underlying Bond Credit Trust, Series 2017-P1 Class A, 2.42% due 9/15/2023 | NR/NR | 14,400,000 | 14,399,565 | |||||||||||||
| a,b | Cronos Containers Program Ltd., Series 2013-1A Class A, 3.08% due 4/18/2028 | A+/NR | 5,583,333 | 5,558,676 | |||||||||||||
| a,b | Cronos Containers Program Ltd., Series 2014-2A Class A, 3.27% due 11/18/2029 | A+/NR | 1,754,074 | 1,751,819 | |||||||||||||
| b | Dell Equipment Finance Trust, Series 2015-2 Class A3, 1.72% due 9/22/2020 | AAA/Aaa | 4,908,291 | 4,909,881 | |||||||||||||
| b | Dell Equipment Finance Trust, Series 2016-1 Class A3, 1.65% due 7/22/2021 | AAA/Aaa | 7,000,000 | 6,984,672 | |||||||||||||
| b | Dell Equipment Finance Trust, Series 2017-1 Class A2, 1.86% due 6/24/2019 | AAA/NR | 6,750,000 | 6,751,991 | |||||||||||||
| b | Diamond Resorts Owner Trust, Series 2014-1 Class A, 2.54% due 5/20/2027 | A+/NR | 12,965,366 | 12,954,531 | |||||||||||||
| a,b | ECAF Ltd., Series 2015-1A Class A2, 4.947% due 6/15/2040 | A-/NR | 4,663,870 | 4,681,359 | |||||||||||||
Entergy New Orleans Storm Recovery Funding I, LLC, Series 2015-1 Class A, 2.67% due 6/1/2027 | AAA/Aa1 | 12,487,629 | 12,578,330 | ||||||||||||||
| b | Fairway Outdoor Funding, LLC, Series 2012-1A Class A2, 4.212% due 10/15/2042 | NR/NR | 6,021,687 | 6,043,611 | |||||||||||||
| b | Global SC Finance SRL, Class 2017-1A Series A, 3.85% due 4/15/2037 | A/NR | 8,193,884 | 8,277,558 | |||||||||||||
| b | GTP Acquisition Partners I, LLC, Series 2015-1 Class A, 2.35% due 6/15/2045 | NR/Aaa | 10,000,000 | 9,985,190 | |||||||||||||
Harley-Davidson Motorcycle Trust, Series 2015-2 Class A4, 1.66% due 12/15/2022 | AAA/Aaa | 22,544,000 | 22,506,780 | ||||||||||||||
| b | HERO Funding Trust, Series 2015-1A Class A, 3.84% due 9/21/2040 | NR/NR | 11,939,782 | 12,402,449 | |||||||||||||
| b | HERO Funding Trust, Series 2017-2A Class A1, 3.28% due 9/20/2048 | NR/NR | 1,976,479 | 1,988,753 | |||||||||||||
| b | Hertz Fleet Lease Funding LP, Series 2016-1 Class A1 Floating Rate Note, 2.335% due 4/10/2030 | NR/Aaa | 17,279,523 | 17,325,551 | |||||||||||||
| b | Marlette Funding Trust, Series 2017-2A Class A, 2.39% due 7/15/2024 | NR/NR | 11,053,281 | 11,064,045 | |||||||||||||
| b | Navitas Equipment Receivables, LLC, Series 2015-1 Class A2, 2.12% due 11/15/2018 | NR/A1 | 1,496,454 | 1,495,611 | |||||||||||||
Northwest Airlines, Inc., 7.027% due 5/1/2021 | A/A2 | 3,679,673 | 4,014,891 | ||||||||||||||
| b,c | Northwind Holdings, LLC, Series 2007-1A Class A1 Floating Rate Note, 2.096% due 12/1/2037 | A/Baa1 | 1,881,250 | 1,774,019 | |||||||||||||
| b | OnDeck Asset Securitization Trust II, LLC, Series 2016-1A Class A, 4.21% due 5/17/2020 | BBB+/NR | 6,700,000 | 6,671,246 | |||||||||||||
| b | OneMain Financial Issuance Trust, Series 2016-2A Class A, 4.10% due 3/20/2028 | A+/NR | 12,900,000 | 13,122,418 | |||||||||||||
| b | Oportun Funding LLC, Series 2017-A Class A, 3.23% due 6/8/2023 | NR/NR | 5,500,000 | 5,539,312 | |||||||||||||
| b | PFS Financing Corp., Series 2014-BA Class A Floating Rate Note, 1.834% due 10/15/2019 | AAA/Aaa | 6,000,000 | 6,007,683 | |||||||||||||
| b | PFS Financing Corp., Series 2015-AA Class A Floating Rate Note, 1.854% due 4/15/2020 | AAA/Aaa | 7,400,000 | 7,408,172 | |||||||||||||
| b | PFS Financing Corp., Series 2016-BA Class A, 1.87% due 10/15/2021 | AAA/Aaa | 5,610,000 | 5,567,626 | |||||||||||||
| b | PFS Financing Corp., Series 2017-BA Class A1 Floating Rate Note, 1.834% due 7/15/2022 | AAA/Aaa | 16,900,000 | 16,898,310 | |||||||||||||
| b | Prosper Marketplace Issuance Trust, Series 2017-1A Class A, 2.56% due 6/15/2023 | NR/NR | 8,524,762 | 8,543,440 | |||||||||||||
| b | Prosper Marketplace Issuance Trust, Series 2017-2A Class A, 2.41% due 9/15/2023 | NR/NR | 10,400,000 | 10,410,020 | |||||||||||||
| b | SBA Tower Trust, Series 2014-1A Class C, 2.898% due 10/15/2044 | NR/A2 | 17,900,000 | 18,010,822 | |||||||||||||
| b | SBA Tower Trust, Series 2015-1 Class C, 3.156% due 10/10/2045 | NR/A2 | 5,000,000 | 5,032,946 | |||||||||||||
| b | SBA Tower Trust, Series 2016-1 Class C, 2.877% due 7/10/2046 | NR/A2 | 9,500,000 | 9,625,400 | |||||||||||||
| b | Sierra Receivables Funding Co., LLC, Series 2012-2A Class A, 2.05% due 6/20/2031 | A/NR | 1,261,703 | 1,259,122 | |||||||||||||
| b | Sierra Receivables Funding Co., LLC, Series 2014-1A Class A, 2.07% due 3/20/2030 | A/NR | 2,642,585 | 2,621,236 | |||||||||||||
| b | Sierra Receivables Funding Co., LLC, Series 2015-1A Class A, 2.40% due 3/22/2032 | A/NR | 2,841,890 | 2,834,740 | |||||||||||||
| b | Sierra Receivables Funding Co., LLC, Series 2015-2A Class A, 2.43% due 6/20/2032 | A/NR | 1,995,636 | 1,991,235 | |||||||||||||
| b | Sierra Receivables Funding Co., LLC, Series 2015-3A Class A, 2.58% due 9/20/2032 | A/NR | 5,482,617 | 5,483,340 | |||||||||||||
| b | SoFi Consumer Loan Program Trust, Series 2017-3 Class A, 2.77% due 5/25/2026 | AA/NR | 3,865,178 | 3,882,254 | |||||||||||||
| b | Sonic Capital, LLC, Series 2016-1A Class A2, 4.472% due 5/20/2046 | BBB/NR | 9,345,167 | 9,413,952 | |||||||||||||
| b | Springleaf Funding Trust, Series 2015-AA Class A, 3.16% due 11/15/2024 | A+/NR | 13,000,000 | 13,089,475 | |||||||||||||
| b | Tax Ease Funding, LLC, Series 2016-1A Class A, 3.131% due 6/15/2028 | NR/NR | 8,446,373 | 8,497,620 | |||||||||||||
| b | Westgate Resorts, Series 2016-1A Class A, 3.50% due 12/20/2028 | NR/NR | 8,140,192 | 8,150,655 | |||||||||||||
|
| ||||||||||||||||
| 379,901,014 | |||||||||||||||||
|
| ||||||||||||||||
Annual Reports | 17
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
RESIDENTIAL MTG TRUST — 3.11% | |||||||||||||||||
| b | Angel Oak Mortgage Trust, LLC, Series 2017-1 Class A2, 3.085% due 1/25/2047 | NR/NR | $ | 5,472,381 | $ | 5,494,965 | |||||||||||
| b | Bayview Opportunity Master Fund, Series 2017-RT1 Class A1, 3.00% due 3/28/2057 | NR/NR | 5,009,474 | 5,080,483 | |||||||||||||
| b | Citigroup Mortgage Loan Trust, Inc., Series 2014-A Class A, 4.00% due 1/25/2035 | AAA/NR | 2,694,295 | 2,782,008 | |||||||||||||
Countrywide Home Loan, Series 2004-HYB2 Class 1A, 3.545% due 7/20/2034 | A/B1 | 160,794 | 166,356 | ||||||||||||||
| b | FDIC Trust, Series 2013-R1 Class A, 1.15% due 3/25/2033 | NR/NR | 2,115,774 | 2,098,812 | |||||||||||||
| b | Flagstar Mortgage Trust, Series 2017-1 Class 2A2, 3.00% due 3/25/2047 | NR/Aaa | 12,514,816 | 12,624,472 | |||||||||||||
Merrill Lynch Mortgage Investors Trust, Series 2004-A4 Class M1, 3.28% due 8/25/2034 | CCC/NR | 557,703 | 502,739 | ||||||||||||||
| b,c | Nationstar HECM Loan Trust, Series 2017-2A Class A1, 2.038% due 9/25/2027 | NR/Aaa | 11,300,000 | 11,299,999 | |||||||||||||
| b | New Residential Mortgage Loan Trust, Series 2017-2A Class A3, 4.00% due 3/25/2057 | AAA/NR | 11,746,227 | 12,237,568 | |||||||||||||
| b | New Residential Mortgage Loan Trust, Series 2017-3A Class A1, 4.00% due 4/25/2057 | AAA/NR | 14,691,040 | 15,263,395 | |||||||||||||
| b | New Residential Mortgage Loan Trust, Series 2017-4A Class A1, 4.00% due 5/25/2057 | NR/Aaa | 19,506,721 | 20,310,958 | |||||||||||||
| b | New Residential Mortgage Loan Trust, Series 2017-5A Class A1, 2.737% due 7/25/2056 | NR/Aaa | 1,821,463 | 1,863,831 | |||||||||||||
Option One Mortgage Loan Trust, Series 2005-5 Class A3 Floating Rate Note, 1.447% due 12/25/2035 | AA+/Aaa | 207,592 | 207,741 | ||||||||||||||
Residential Asset Mortgage Products, Inc., Series 2003-SL1 Class A31, 7.125% due 4/25/2031 | AA+/NR | 1,189,942 | 1,229,865 | ||||||||||||||
| b | Sequoia Mortgage Trust, Series 2017-4 Class A4, 3.50% due 7/25/2047 | NR/Aaa | 4,592,781 | 4,704,012 | |||||||||||||
| b | Sequoia Mortgage Trust, Series 2017-5 Class A4, 3.50% due 8/25/2047 | NR/Aaa | 10,733,915 | 10,983,811 | |||||||||||||
| b | Shellpoint Asset Funding Trust, Series 2013-1 Class A1, 3.75% due 7/25/2043 | AAA/NR | 5,860,663 | 5,949,169 | |||||||||||||
Structured Asset Securities Corp., Series 2003-9A Class 2A2, 3.266% due 3/25/2033 | AA+/NR | 1,322,542 | 1,355,153 | ||||||||||||||
| b | Towd Point Mortgage Trust, Series 2016-5 Class A1, 2.50% due 10/25/2056 | NR/Aaa | 12,885,736 | 12,871,448 | |||||||||||||
| b | Towd Point Mortgage Trust, Series 2017-1 Class A1, 2.75% due 10/25/2056 | NR/Aaa | 6,942,544 | 6,977,517 | |||||||||||||
| b | Verus Securitization Trust, Series 2017-2A Class A1 Step-Up Bond, 2.485% due 7/25/2047 | AAA/NR | 18,016,046 | 18,029,660 | |||||||||||||
Washington Mutual Mortgage, Series 2003-S13 Class 21A1, 4.50% due 12/25/2018 | AA+/NR | 73,362 | 73,323 | ||||||||||||||
|
| ||||||||||||||||
| 152,107,285 | |||||||||||||||||
|
| ||||||||||||||||
STUDENT LOAN — 2.43% | |||||||||||||||||
Navient Student Loan Trust, Series 2014-1 Class A3 Floating Rate Note, 1.744% due 6/25/2031 | NR/A1 | 10,750,000 | 10,678,063 | ||||||||||||||
| b | Navient Student Loan Trust, Series 2015-AA Class A2B Floating Rate Note, 2.434% due 12/15/2028 | NR/Aaa | 6,541,466 | 6,624,634 | |||||||||||||
| b | Navient Student Loan Trust, Series 2016-6A Class A2 Floating Rate Note, 1.987% due 3/25/2066 | AAA/Aaa | 13,900,000 | 13,971,511 | |||||||||||||
| b | Nelnet Student Loan Trust, Series 2013-1A Class A Floating Rate Note, 1.834% due 6/25/2041 | NR/Aaa | 7,756,824 | 7,731,580 | |||||||||||||
| b | Nelnet Student Loan Trust, Series 2016-A Class A1A, 2.987% due 12/26/2040 | NR/NR | 13,519,848 | 13,546,306 | |||||||||||||
| b | Pennsylvania Higher Education Assistance Agency, Series 2012-1A Class A1 Floating Rate Note, 1.787% due 5/25/2057 | AA+/NR | 2,397,597 | 2,377,463 | |||||||||||||
SLM Student Loan Trust, Series 2003-C Class A2 Floating Rate Note, 1.71% due 9/15/2020 | AAA/Aaa | 225,087 | 224,206 | ||||||||||||||
| b | SLM Student Loan Trust, Series 2011-A Class A3 Floating Rate Note, 3.734% due 1/15/2043 | AAA/Aaa | 13,650,000 | 14,154,224 | |||||||||||||
| b | SLM Student Loan Trust, Series 2011-B Class A2, 3.74% due 2/15/2029 | AAA/Aaa | 3,024,958 | 3,073,411 | |||||||||||||
SLM Student Loan Trust, Series 2013-6 Class A2 Floating Rate Note, 1.737% due 2/25/2021 | NR/Aaa | 5,339 | 5,339 | ||||||||||||||
SLM Student Loan Trust, Series 2013-6 Class A3 Floating Rate Note, 1.887% due 6/25/2055 | NR/Aaa | 24,700,000 | 24,872,273 | ||||||||||||||
| b | SMB Private Education Loan Trust, Series 2015-A Class A3 Floating Rate Note, 2.734% due 2/17/2032 | AAA/Aaa | 10,000,000 | 10,300,574 | |||||||||||||
| b | Social Professional Loan Program, LLC, Series 2014-A Class A1 Floating Rate Note, 2.832% due 6/25/2025 | AAA/NR | 1,353,562 | 1,370,333 | |||||||||||||
| b | Social Professional Loan Program, LLC, Series 2014-A Class A2, 3.02% due 10/25/2027 | AAA/NR | 7,111,811 | 7,183,468 | |||||||||||||
| b | Social Professional Loan Program, LLC, Series 2014-B Class A1 Floating Rate Note, 2.482% due 8/25/2032 | AAA/Aa3 | 2,093,316 | 2,117,933 | |||||||||||||
| b | Social Professional Loan Program, LLC, Series 2014-B Class A2, 2.55% due 8/27/2029 | AAA/Aa1 | 655,725 | 658,065 | |||||||||||||
|
| ||||||||||||||||
| 118,889,383 | |||||||||||||||||
|
| ||||||||||||||||
TOTAL ASSET BACKED SECURITIES (Cost $1,068,928,868) | 1,072,173,689 | ||||||||||||||||
|
| ||||||||||||||||
| CORPORATE BONDS — 46.85% | |||||||||||||||||
AUTOMOBILES & COMPONENTS — 1.32% | |||||||||||||||||
Automobiles — 1.32% | |||||||||||||||||
| b | Daimler Finance North America, LLC, 2.45% due 5/18/2020 | A/A2 | 9,850,000 | 9,919,185 | |||||||||||||
| b | Daimler Finance North America, LLC, 3.875% due 9/15/2021 | A/A2 | 5,000,000 | 5,253,238 | |||||||||||||
| b | Daimler Finance North America, LLC Floating Rate Note, 1.842% due 5/5/2020 | A/A2 | 6,850,000 | 6,876,482 | |||||||||||||
| b | Hyundai Capital America, 2.125% due 10/2/2017 | A-/NR | 6,410,000 | 6,410,000 | |||||||||||||
| b | Hyundai Capital America, 2.00% due 3/19/2018 | A-/Baa1 | 4,950,000 | 4,951,805 | |||||||||||||
| b | Hyundai Capital America, 2.40% due 10/30/2018 | A-/Baa1 | 9,950,000 | 9,986,094 | |||||||||||||
| a,b | Hyundai Capital America, 3.00% due 8/29/2022 | A-/Baa1 | 4,500,000 | 4,439,160 | |||||||||||||
| b | Nissan Motor Acceptance Corp., 1.694% due 7/13/2020 | A/A2 | 6,900,000 | 6,904,072 | |||||||||||||
| b | Volkswagen Group of America, Inc., 1.65% due 5/22/2018 | BBB+/A3 | 10,000,000 | 9,990,051 | |||||||||||||
|
| ||||||||||||||||
| 64,730,087 | |||||||||||||||||
|
| ||||||||||||||||
18 | Annual Reports
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
BANKS — 3.67% | |||||||||||||||||
Banks — 3.67% | |||||||||||||||||
| a,b | Banco BTG Pactual SA/Cayman Islands N.A., 4.00% due 1/16/2020 | NR/Ba3 | $ | 7,000,000 | $ | 6,806,450 | |||||||||||
Bank of America Corp. Floating Rate Note, 2.169% due 4/1/2019 | BBB+/Baa1 | 8,000,000 | 8,071,960 | ||||||||||||||
Bank of America Corp. Floating Rate Note, 2.344% due 1/15/2019 | BBB+/Baa1 | 4,225,000 | 4,266,519 | ||||||||||||||
| a | Barclays plc, 3.684% due 1/10/2023 | BBB/Baa2 | 10,000,000 | 10,255,733 | |||||||||||||
| a | Barclays plc Floating Rate Note, 2.929% due 1/10/2023 | BBB/Baa2 | 11,000,000 | 11,237,490 | |||||||||||||
Capital One Bank (USA), N.A., 2.30% due 6/5/2019 | BBB+/Baa1 | 3,000,000 | 3,008,441 | ||||||||||||||
Capital One Bank (USA), N.A. Floating Rate Note, 2.132% due 8/8/2022 | BBB+/Baa1 | 12,000,000 | 11,956,204 | ||||||||||||||
Citigroup, Inc., 2.50% due 7/29/2019 | BBB+/Baa1 | 2,925,000 | 2,949,492 | ||||||||||||||
Citigroup, Inc. Floating Rate Note, 2.746% due 9/1/2023 | BBB+/Baa1 | 14,000,000 | 14,358,016 | ||||||||||||||
Citizens Bank N.A., 2.25% due 3/2/2020 | A-/Baa1 | 5,000,000 | 5,006,614 | ||||||||||||||
Fifth Third Bank, 2.30% due 3/15/2019 | A-/A3 | 3,800,000 | 3,826,967 | ||||||||||||||
First Tennessee Bank, 2.95% due 12/1/2019 | BBB/Baa3 | 7,000,000 | 7,072,468 | ||||||||||||||
JPMorgan Chase & Co. Floating Rate Note, 2.796% due 3/1/2021 | A-/A3 | 7,000,000 | 7,223,998 | ||||||||||||||
Manufacturers and Traders Trust Co., 2.30% due 1/30/2019 | A/A3 | 10,000,000 | 10,052,910 | ||||||||||||||
| a | Mitsubishi UFJ Financial Group, Inc. Floating Rate Note, 3.196% due 3/1/2021 | A/A1 | 9,500,000 | 9,884,005 | |||||||||||||
| a,b | Mizuho Bank Ltd., 2.45% due 4/16/2019 | A/A1 | 7,000,000 | 7,046,136 | |||||||||||||
| a,b | Mizuho Bank Ltd. Floating Rate Note, 2.497% due 10/20/2018 | A/A1 | 5,000,000 | 5,050,114 | |||||||||||||
| a | Santander UK plc Floating Rate Note, 2.799% due 3/14/2019 | A/Aa3 | 9,900,000 | 10,061,809 | |||||||||||||
| a,b | Sberbank of Russia, 5.50% due 2/26/2024 | NR/NR | 1,030,000 | 1,050,827 | |||||||||||||
| b | Sovereign Bank, 12.18% due 6/30/2020 | BBB+/A3 | 2,840,823 | 3,432,169 | |||||||||||||
| a | Sumitomo Mitsui Banking Corp. Floating Rate Note, 2.053% due 7/23/2018 | A/A1 | 14,700,000 | 14,766,425 | |||||||||||||
| a | Sumitomo Mitsui Banking Corp. Floating Rate Note, 1.976% due 10/19/2018 | A/A1 | 7,000,000 | 7,032,095 | |||||||||||||
| a | Sumitomo Mitsui Banking Corp. Floating Rate Note, 2.084% due 7/12/2022 | A-/A1 | 6,000,000 | 6,002,496 | |||||||||||||
Wells Fargo & Co., 2.625% due 7/22/2022 | A/A2 | 4,962,000 | 4,970,301 | ||||||||||||||
Wells Fargo & Co. Floating Rate Note, 2.327% due 12/7/2020 | A/A2 | 4,400,000 | 4,482,803 | ||||||||||||||
|
| ||||||||||||||||
| 179,872,442 | |||||||||||||||||
|
| ||||||||||||||||
CAPITAL GOODS — 1.22% | |||||||||||||||||
Industrial Conglomerates — 0.65% | |||||||||||||||||
Roper Technologies, Inc., 3.125% due 11/15/2022 | BBB/Baa3 | 6,000,000 | 6,074,629 | ||||||||||||||
Roper Technologies, Inc., 3.00% due 12/15/2020 | BBB/Baa3 | 4,870,000 | 4,968,660 | ||||||||||||||
| a,b | Siemens Financieringsmaatschappij N.V., 1.931% due 3/16/2022 | A+/A1 | 5,000,000 | 5,034,808 | |||||||||||||
| a,b | Siemens Financieringsmaatschappij N.V., 2.90% due 5/27/2022 | A+/A1 | 12,000,000 | 12,259,024 | |||||||||||||
| a,b | Smiths Group plc, 7.20% due 5/15/2019 | BBB+/Baa2 | 3,000,000 | 3,217,878 | |||||||||||||
Machinery — 0.57% | |||||||||||||||||
Aeroquip Vickers, Inc., 6.875% due 4/9/2018 | A-/NR | 1,500,000 | 1,527,623 | ||||||||||||||
Ingersoll Rand Co., 6.391% due 11/15/2027 | BBB/Baa2 | 3,000,000 | 3,561,300 | ||||||||||||||
Stanley Black & Decker, Inc., 2.451% due 11/17/2018 | A-/Baa2 | 6,900,000 | 6,943,625 | ||||||||||||||
Wabtec Corp., 4.375% due 8/15/2023 | BBB/Baa3 | 10,590,000 | 11,048,058 | ||||||||||||||
Wabtec Corp., 3.45% due 11/15/2026 | BBB/Baa3 | 5,000,000 | 4,916,897 | ||||||||||||||
|
| ||||||||||||||||
| 59,552,502 | |||||||||||||||||
|
| ||||||||||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.35% | |||||||||||||||||
Commercial Services & Supplies — 0.05% | |||||||||||||||||
Cintas Corp. No. 2, 2.90% due 4/1/2022 | BBB+/A3 | 2,622,000 | 2,671,094 | ||||||||||||||
Professional Services — 0.30% | |||||||||||||||||
Dun & Bradstreet, Inc., 4.25% due 6/15/2020 | BB+/NR | 7,175,000 | 7,385,941 | ||||||||||||||
Verisk Analytics, Inc., 4.00% due 6/15/2025 | BBB-/Baa3 | 6,930,000 | 7,209,482 | ||||||||||||||
|
| ||||||||||||||||
| 17,266,517 | |||||||||||||||||
|
| ||||||||||||||||
CONSUMER DURABLES & APPAREL — 0.31% | |||||||||||||||||
Household Durables — 0.21% | |||||||||||||||||
Tupperware Brands Corp., 4.75% due 6/1/2021 | BBB-/Baa3 | 10,000,000 | 10,566,011 | ||||||||||||||
Leisure Products — 0.10% | |||||||||||||||||
Hasbro, Inc., 3.50% due 9/15/2027 | BBB/Baa1 | 4,736,000 | 4,693,771 | ||||||||||||||
|
| ||||||||||||||||
| 15,259,782 | |||||||||||||||||
|
| ||||||||||||||||
Annual Reports | 19
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
CONSUMER SERVICES — 0.26% | |||||||||||||||||
Diversified Consumer Services — 0.26% | |||||||||||||||||
Rensselaer Polytechnic I, 5.60% due 9/1/2020 | BBB+/A3 | $ | 10,925,000 | $ | 11,760,420 | ||||||||||||
University of Chicago, 3.065% due 10/1/2024 | AA-/Aa2 | 1,174,000 | 1,154,721 | ||||||||||||||
|
| ||||||||||||||||
| 12,915,141 | |||||||||||||||||
|
| ||||||||||||||||
DIVERSIFIED FINANCIALS — 7.82% | |||||||||||||||||
Capital Markets — 5.76% | |||||||||||||||||
Ares Capital Corp., 4.875% due 11/30/2018 | BBB/NR | 18,000,000 | 18,511,693 | ||||||||||||||
| b | Ares Finance Co., LLC, 4.00% due 10/8/2024 | BBB+/NR | 5,000,000 | 4,799,436 | |||||||||||||
| a,b | BTG Investments LP, 4.50% due 4/17/2018 | NR/NR | 18,500,000 | 18,268,750 | |||||||||||||
CBOE Holdings, Inc., 3.65% due 1/12/2027 | BBB+/Baa1 | 6,824,000 | 6,987,647 | ||||||||||||||
CBOE Holdings, Inc., 1.95% due 6/28/2019 | BBB+/Baa1 | 1,745,000 | 1,743,254 | ||||||||||||||
| a | Credit Suisse Group AG - New York, 1.70% due 4/27/2018 | A/A1 | 9,325,000 | 9,332,341 | |||||||||||||
| a | Credit Suisse Group Funding (Guernsey) Ltd., 4.55% due 4/17/2026 | BBB+/Baa2 | 7,000,000 | 7,504,021 | |||||||||||||
| a | Credit Suisse Group Funding (Guernsey) Ltd., 3.80% due 9/15/2022 | BBB+/Baa2 | 7,000,000 | 7,265,679 | |||||||||||||
| a | Credit Suisse Group Funding (Guernsey) Ltd., 3.125% due 12/10/2020 | BBB+/Baa2 | 10,000,000 | 10,200,633 | |||||||||||||
FS Investment Corp., 4.00% due 7/15/2019 | BBB/NR | 12,000,000 | 12,237,379 | ||||||||||||||
Goldman Sachs Group, Inc. Floating Rate Note, 2.485% due 11/15/2021 | BBB+/A3 | 3,255,000 | 3,299,659 | ||||||||||||||
Goldman Sachs Group, Inc. Floating Rate Note, 2.333% due 10/23/2019 | BBB+/A3 | 11,517,000 | 11,658,822 | ||||||||||||||
Goldman Sachs Group, Inc. Floating Rate Note, 2.52% due 9/15/2020 | BBB+/A3 | 17,900,000 | 18,238,941 | ||||||||||||||
| a,b | IPIC GMTN Ltd., 5.00% due 11/15/2020 | AA/Aa2 | 1,000,000 | 1,079,500 | |||||||||||||
| a,b | IPIC GMTN Ltd., 5.50% due 3/1/2022 | AA/Aa2 | 3,500,000 | 3,902,178 | |||||||||||||
Legg Mason, Inc., 2.70% due 7/15/2019 | BBB/Baa1 | 1,660,000 | 1,679,630 | ||||||||||||||
Legg Mason, Inc., 4.75% due 3/15/2026 | BBB/Baa1 | 5,000,000 | 5,311,742 | ||||||||||||||
| a,b | Macquarie Bank Ltd., 1.60% due 10/27/2017 | A/A2 | 5,000,000 | 5,000,675 | |||||||||||||
Moody’s Corp., 4.875% due 2/15/2024 | BBB+/NR | 17,000,000 | 18,779,946 | ||||||||||||||
Moody’s Corp., 2.75% due 7/15/2019 | BBB+/NR | 14,850,000 | 15,056,251 | ||||||||||||||
Moody’s Corp. Floating Rate Note, 1.666% due 9/4/2018 | BBB+/NR | 6,950,000 | 6,962,263 | ||||||||||||||
Morgan Stanley, 2.80% due 6/16/2020 | BBB+/A3 | 1,350,000 | 1,372,518 | ||||||||||||||
Morgan Stanley Floating Rate Note, 2.457% due 1/27/2020 | BBB+/A3 | 925,000 | 939,268 | ||||||||||||||
Morgan Stanley Floating Rate Note, 2.713% due 10/24/2023 | BBB+/A3 | 19,900,000 | 20,352,345 | ||||||||||||||
State Street Corp. Floating Rate Note, 2.217% due 8/18/2020 | A/A1 | 9,475,000 | 9,667,856 | ||||||||||||||
| a,b | SumitG Guaranteed Secured Obligation Issuer D.A.C, 2.251% due 11/2/2020 | NR/Aa2 | 15,000,000 | 14,891,704 | |||||||||||||
TD Ameritrade Holding Corp., 2.95% due 4/1/2022 | A/A2 | 2,550,000 | 2,602,449 | ||||||||||||||
The Bank of New York Mellon Corp. Floating Rate Note, 2.184% due 8/17/2020 | A/A1 | 4,525,000 | 4,604,347 | ||||||||||||||
The Bank of New York Mellon Corp. Floating Rate Note, 2.361% due 10/30/2023 | A/A1 | 11,835,000 | 12,089,328 | ||||||||||||||
| a,b | UBS AG Jersey Floating Rate Note, 2.768% due 9/24/2020 | A-/Baa1 | 10,800,000 | 11,018,594 | |||||||||||||
| a | UBS AG Stamford, 2.375% due 8/14/2019 | A+/A1 | 9,500,000 | 9,580,342 | |||||||||||||
| a | UBS AG Stamford, 1.80% due 3/26/2018 | A+/A1 | 3,000,000 | 3,004,865 | |||||||||||||
| a,b | UBS Group Funding Switzerland AG Floating Rate Note, 2.265% due 8/15/2023 | A-/Baa1 | 4,000,000 | 3,998,832 | |||||||||||||
Consumer Finance — 0.43% | |||||||||||||||||
Synchrony Financial, 3.00% due 8/15/2019 | BBB-/NR | 1,950,000 | 1,981,875 | ||||||||||||||
Western Union Co., 3.65% due 8/22/2018 | BBB/Baa2 | 2,000,000 | 2,033,925 | ||||||||||||||
Western Union Co., 3.35% due 5/22/2019 | BBB/Baa2 | 11,350,000 | 11,535,261 | ||||||||||||||
Western Union Co. Floating Rate Note, 2.115% due 5/22/2019 | NR/Baa2 | 5,410,000 | 5,412,591 | ||||||||||||||
Diversified Financial Services — 1.49% | |||||||||||||||||
| b | Athene Global Funding, 2.875% due 10/23/2018 | A-/NR | 13,925,000 | 14,057,071 | |||||||||||||
General Electric Capital Corp. Floating Rate Note, 1.475% due 12/28/2018 | AA-/A1 | 4,850,000 | 4,834,941 | ||||||||||||||
General Electric Capital Corp. Floating Rate Note, 2.32% due 3/15/2023 | AA-/A1 | 7,725,000 | 7,911,544 | ||||||||||||||
Intercontinental Exchange, Inc., 4.00% due 10/15/2023 | A/A2 | 11,257,000 | 12,078,906 | ||||||||||||||
| b | Jackson National Life Global Funding, 3.25% due 1/30/2024 | AA/A1 | 10,000,000 | 10,145,150 | |||||||||||||
| b | Jackson National Life Global Funding, 2.20% due 1/30/2020 | AA/A1 | 8,000,000 | 8,006,095 | |||||||||||||
National Rural Utilities Cooperative Finance Corp., 10.375% due 11/1/2018 | A/A1 | 2,000,000 | 2,184,299 | ||||||||||||||
S&P Global, Inc., 4.00% due 6/15/2025 | NR/Baa1 | 8,000,000 | 8,406,123 | ||||||||||||||
S&P Global, Inc., 2.50% due 8/15/2018 | NR/Baa1 | 2,950,000 | 2,970,130 | ||||||||||||||
S&P Global, Inc., 3.30% due 8/14/2020 | NR/Baa1 | 2,450,000 | 2,513,256 | ||||||||||||||
Insurance — 0.06% | |||||||||||||||||
| b | AIG Global Funding, 1.781% due 7/2/2020 | A+/A2 | 3,000,000 | 3,004,705 | |||||||||||||
20 | Annual Reports
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Mortgage Real Estate Investment Trusts — 0.08% | |||||||||||||||||
Healthcare Trust of America, Inc., 2.95% due 7/1/2022 | BBB/Baa2 | $ | 3,920,000 | $ | 3,945,878 | ||||||||||||
|
| ||||||||||||||||
| 382,964,638 | |||||||||||||||||
|
| ||||||||||||||||
ENERGY — 5.00% | |||||||||||||||||
Energy Equipment & Services — 0.26% | |||||||||||||||||
| a | Ensco plc, 8.00% due 1/31/2024 | BB/NR | 2,425,000 | 2,382,563 | |||||||||||||
Oceaneering International, Inc., 4.65% due 11/15/2024 | BBB/Baa3 | 10,000,000 | 9,945,337 | ||||||||||||||
| a,b,d | Schahin II Finance Co. (SPV) Ltd., 5.875% due 9/25/2023 | NR/NR | 4,082,733 | 408,273 | |||||||||||||
Oil, Gas & Consumable Fuels — 4.74% | |||||||||||||||||
| a | BP Capital Markets plc Floating Rate Note, 1.659% due 8/14/2018 | A-/A1 | 11,380,000 | 11,407,629 | |||||||||||||
Buckeye Partners LP, 4.15% due 7/1/2023 | BBB-/Baa3 | 7,000,000 | 7,250,544 | ||||||||||||||
| a,b | CNPC General Capital Ltd., 2.75% due 5/14/2019 | A/A2 | 5,000,000 | 5,031,221 | |||||||||||||
| b | Colorado Interstate Gas Co., LLC/Colorado Interstate Issuing Corp., 4.15% due 8/15/2026 | BBB-/Baa3 | 26,000,000 | 25,851,498 | |||||||||||||
Energen Corp., 4.625% due 9/1/2021 | BB/B2 | 10,000,000 | 10,150,000 | ||||||||||||||
Exxon Mobil Corp., 2.222% due 3/1/2021 | AA+/Aaa | 4,925,000 | 4,962,206 | ||||||||||||||
Exxon Mobil Corp. Floating Rate Note, 2.096% due 3/1/2019 | AA+/Aaa | 6,625,000 | 6,693,594 | ||||||||||||||
Exxon Mobil Corp. Floating Rate Note, 1.917% due 2/28/2018 | AA+/Aaa | 6,950,000 | 6,968,445 | ||||||||||||||
| b | Florida Gas Transmission Co., LLC, 3.875% due 7/15/2022 | BBB/Baa2 | 10,435,000 | 10,873,464 | |||||||||||||
Gulf South Pipeline Co., LP, 4.00% due 6/15/2022 | BBB-/Baa2 | 13,690,000 | 14,100,957 | ||||||||||||||
| b | Gulfstream Natural Gas System, LLC, 4.60% due 9/15/2025 | BBB/Baa2 | 5,069,000 | 5,468,572 | |||||||||||||
| a,b | Harvest Operations Corp., 2.125% due 5/14/2018 | AA/Aa2 | 7,000,000 | 6,993,515 | |||||||||||||
HollyFrontier Corp., 5.875% due 4/1/2026 | BBB-/Baa3 | 25,000,000 | 27,208,506 | ||||||||||||||
Marathon Petroleum Corp., 2.70% due 12/14/2018 | BBB/Baa2 | 8,000,000 | 8,055,061 | ||||||||||||||
| b | Northern Natural Gas Co., 5.75% due 7/15/2018 | A/A2 | 50,000 | 51,604 | |||||||||||||
| b | Northwest Pipeline, LLC, 4.00% due 4/1/2027 | BBB/Baa2 | 10,000,000 | 10,149,273 | |||||||||||||
NuStar Logistics LP, 4.75% due 2/1/2022 | BB+/Ba1 | 5,000,000 | 5,062,500 | ||||||||||||||
| a | Petroleos Mexicanos Floating Rate Note, 3.324% due 7/18/2018 | BBB+/Baa3 | 10,000,000 | 10,097,800 | |||||||||||||
| b | Phillips 66 Co. Floating Rate Note, 1.954% due 4/15/2019 | BBB+/A3 | 6,925,000 | 6,933,720 | |||||||||||||
| a | Sasol Financing International plc, 4.50% due 11/14/2022 | BBB-/Baa3 | 4,000,000 | 4,134,000 | |||||||||||||
| b | Semco Energy, Inc., 5.15% due 4/21/2020 | A-/A2 | 3,000,000 | 3,175,755 | |||||||||||||
| a,b | Sinopec Group Overseas Development 2017 Ltd., 2.25% due 9/13/2020 | A+/A1 | 16,000,000 | 15,955,056 | |||||||||||||
| b | Texas Gas Transmission, LLC, 4.50% due 2/1/2021 | BBB-/Baa2 | 11,015,000 | 11,473,954 | |||||||||||||
Transcontinental Gas Pipe Line Co., LLC, 7.85% due 2/1/2026 | BBB/Baa2 | 11,000,000 | 14,209,222 | ||||||||||||||
|
| ||||||||||||||||
| 244,994,269 | |||||||||||||||||
|
| ||||||||||||||||
FOOD & STAPLES RETAILING — 0.59% | |||||||||||||||||
Food & Staples Retailing — 0.59% | |||||||||||||||||
| a,b | Alimentation Couche-Tard, Inc., 2.70% due 7/26/2022 | BBB/Baa2 | 7,900,000 | 7,925,591 | |||||||||||||
Whole Foods Market, Inc., 5.20% due 12/3/2025 | A+/Baa1 | 18,175,000 | 20,867,700 | ||||||||||||||
|
| ||||||||||||||||
| 28,793,291 | |||||||||||||||||
|
| ||||||||||||||||
FOOD, BEVERAGE & TOBACCO — 2.61% | |||||||||||||||||
Beverages — 1.15% | |||||||||||||||||
Anheuser-Busch InBev Finance Inc., 3.30% due 2/1/2023 | A-/A3 | 9,650,000 | 10,004,872 | ||||||||||||||
Anheuser-Busch InBev Finance Inc. Floating Rate Note, 2.571% due 2/1/2021 | A-/A3 | 7,550,000 | 7,803,370 | ||||||||||||||
| a,b | Coca Cola Icecek Uretim A.S., 4.75% due 10/1/2018 | NR/Baa3 | 5,000,000 | 5,110,450 | |||||||||||||
| a,b | JB y Compania, S.A. de C.V., 3.75% due 5/13/2025 | BBB/NR | 13,750,000 | 13,861,008 | |||||||||||||
PepsiCo, Inc. Floating Rate Note, 1.832% due 10/6/2021 | A+/A1 | 19,230,000 | 19,491,273 | ||||||||||||||
Food Products — 0.87% | |||||||||||||||||
General Mills, Inc., 1.40% due 10/20/2017 | BBB+/A3 | 4,600,000 | 4,600,153 | ||||||||||||||
Kraft Heinz Foods Co. Floating Rate Note, 1.729% due 8/9/2019 | BBB-/Baa3 | 14,925,000 | 14,937,142 | ||||||||||||||
Kraft Heinz Foods Co. Floating Rate Note, 1.879% due 2/10/2021 | BBB-/Baa3 | 14,815,000 | 14,828,317 | ||||||||||||||
Mead Johnson Nutrition Co., 4.125% due 11/15/2025 | A-/A3 | 3,000,000 | 3,238,895 | ||||||||||||||
Mead Johnson Nutrition Co., 3.00% due 11/15/2020 | A-/A3 | 1,900,000 | 1,951,985 | ||||||||||||||
Tyson Foods, Inc. Floating Rate Note, 1.868% due 6/2/2020 | BBB/Baa2 | 2,850,000 | 2,863,556 | ||||||||||||||
Tobacco — 0.59% | |||||||||||||||||
Altria Group, Inc., 2.625% due 1/14/2020 | A-/A3 | 4,900,000 | 4,975,692 | ||||||||||||||
| b | B.A.T. Capital Corp., 2.195% due 8/15/2022 | BBB+/Baa2 | 5,000,000 | 5,016,323 | |||||||||||||
| b | B.A.T. Capital Corp., 3.22% due 8/15/2024 | BBB+/Baa2 | 2,980,000 | 2,987,342 | |||||||||||||
| b | B.A.T. Capital Corp. Floating Rate Note, 1.905% due 8/14/2020 | BBB+/Baa2 | 7,370,000 | 7,383,238 | |||||||||||||
Annual Reports | 21
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
| a,b | B.A.T. International Finance plc, 3.95% due 6/15/2025 | BBB+/Baa2 | $ | 3,000,000 | $ | 3,125,854 | |||||||||||
Reynolds American, Inc., 6.875% due 5/1/2020 | BBB+/Baa2 | 5,000,000 | 5,571,197 | ||||||||||||||
|
| ||||||||||||||||
| 127,750,667 | |||||||||||||||||
|
| ||||||||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.84% | |||||||||||||||||
Health Care Equipment & Supplies — 0.45% | |||||||||||||||||
Abbott Laboratories, 2.35% due 11/22/2019 | BBB/Baa3 | 14,825,000 | 14,945,734 | ||||||||||||||
Abbott Laboratories, 3.40% due 11/30/2023 | BBB/Baa3 | 6,860,000 | 7,073,712 | ||||||||||||||
Health Care Providers & Services — 0.39% | |||||||||||||||||
Catholic Health Initiatives, 1.60% due 11/1/2017 | BBB+/Baa1 | 1,900,000 | 1,899,921 | ||||||||||||||
Catholic Health Initiatives, 2.95% due 11/1/2022 | BBB+/Baa1 | 7,000,000 | 6,896,343 | ||||||||||||||
Wellpoint, Inc., 2.25% due 8/15/2019 | A/Baa2 | 10,000,000 | 10,043,796 | ||||||||||||||
|
| ||||||||||||||||
| 40,859,506 | |||||||||||||||||
|
| ||||||||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.20% | |||||||||||||||||
Household Products — 0.20% | |||||||||||||||||
Church & Dwight Co, Inc., 2.45% due 8/1/2022 | BBB+/Baa1 | 4,716,000 | 4,698,375 | ||||||||||||||
Edgewell Personal Care, 4.70% due 5/24/2022 | BB+/Ba2 | 2,000,000 | 2,145,000 | ||||||||||||||
| a,b | Kimberly-Clark de Mexico, 3.80% due 4/8/2024 | A-/NR | 3,000,000 | 3,021,046 | |||||||||||||
|
| ||||||||||||||||
| 9,864,421 | |||||||||||||||||
|
| ||||||||||||||||
INSURANCE — 3.66% | |||||||||||||||||
Insurance — 3.66% | |||||||||||||||||
| a,b | DaVinciRe Holdings Ltd., 4.75% due 5/1/2025 | A/Baa2 | 10,260,000 | 10,178,164 | |||||||||||||
| a | Enstar Group Ltd., 4.50% due 3/10/2022 | BBB-/NR | 1,950,000 | 2,017,337 | |||||||||||||
| b | Forethought Financial Group, Inc., 8.625% due 4/15/2021 | BBB-/Baa3 | 2,270,000 | 2,593,484 | |||||||||||||
Hanover Insurance Group, Inc., 4.50% due 4/15/2026 | BBB/Baa3 | 10,000,000 | 10,466,923 | ||||||||||||||
Horace Mann Educators Corp., 4.50% due 12/1/2025 | BBB/Baa3 | 4,800,000 | 4,980,709 | ||||||||||||||
Infinity Property & Casualty Corp., 5.00% due 9/19/2022 | BBB/Baa2 | 3,000,000 | 3,186,479 | ||||||||||||||
| b | Jackson National Life Global Co., 2.06% due 6/27/2022 | AA/A1 | 7,900,000 | 7,947,092 | |||||||||||||
Kemper Corp., 4.35% due 2/15/2025 | BBB-/Baa3 | 20,020,000 | 20,294,816 | ||||||||||||||
| a,b | Lancashire Holdings Ltd., 5.70% due 10/1/2022 | BBB/Baa2 | 11,000,000 | 11,671,473 | |||||||||||||
Mercury General Corp., 4.40% due 3/15/2027 | NR/Baa2 | 16,000,000 | 16,457,954 | ||||||||||||||
| b | Metropolitan Life Global Funding I, 1.71% due 6/12/2020 | AA-/Aa3 | 8,000,000 | 8,037,305 | |||||||||||||
| a | Montpelier Re Holdings Ltd., 4.70% due 10/15/2022 | BBB+/NR | 5,000,000 | 5,329,399 | |||||||||||||
| b | Principal Life Global Funding II, 2.375% due 9/11/2019 | A+/A1 | 2,450,000 | 2,467,482 | |||||||||||||
| b | Principal Life Global Funding II, 2.20% due 4/8/2020 | A+/A1 | 7,000,000 | 7,014,656 | |||||||||||||
| b | Protective Life Global Funding, 2.615% due 8/22/2022 | AA-/A2 | 15,000,000 | 14,978,132 | |||||||||||||
Reinsurance Group of America, Inc., 3.95% due 9/15/2026 | A-/Baa1 | 3,765,000 | 3,812,887 | ||||||||||||||
| b | Reliance Standard Life Insurance Co., 2.50% due 4/24/2019 | A/A2 | 9,900,000 | 9,962,049 | |||||||||||||
| b | Reliance Standard Life Insurance Co., 2.50% due 1/15/2020 | A/A2 | 15,000,000 | 15,069,002 | |||||||||||||
| b | Reliance Standard Life Insurance Co., 3.05% due 1/20/2021 | A/A2 | 3,975,000 | 4,036,722 | |||||||||||||
| b | Sammons Financial Group, 4.45% due 5/12/2027 | BBB+/NR | 7,950,000 | 8,174,246 | |||||||||||||
| a | Trinity Acquisition plc, 4.40% due 3/15/2026 | BBB/Baa3 | 9,815,000 | 10,406,138 | |||||||||||||
|
| ||||||||||||||||
| 179,082,449 | |||||||||||||||||
|
| ||||||||||||||||
MATERIALS — 1.67% | |||||||||||||||||
Chemicals — 1.11% | |||||||||||||||||
Airgas, Inc., 3.05% due 8/1/2020 | A-/A3 | 4,950,000 | 5,063,040 | ||||||||||||||
| b | Chevron Phillips Chemical Co., LLC, Floating Rate Note, 2.061% due 5/1/2020 | A-/A2 | 29,900,000 | 30,030,471 | |||||||||||||
| b | Incitec Pivot Finance, LLC, 6.00% due 12/10/2019 | BBB/Baa2 | 4,538,000 | 4,864,276 | |||||||||||||
| a,b | Office Cherifien des Phosphates, 5.625% due 4/25/2024 | BBB-/NR | 8,555,000 | 9,216,301 | |||||||||||||
| a,b | Yara International ASA, 3.80% due 6/6/2026 | BBB/Baa2 | 5,000,000 | 4,928,054 | |||||||||||||
Metals & Mining — 0.56% | |||||||||||||||||
| a | Anglogold Holdings plc, 5.375% due 4/15/2020 | BB+/Baa3 | 9,100,000 | 9,563,190 | |||||||||||||
| a | Anglogold Holdings plc, 5.125% due 8/1/2022 | BB+/Baa3 | 6,500,000 | 6,851,000 | |||||||||||||
| a,b | Newcrest Finance Property Ltd., 4.20% due 10/1/2022 | BBB-/Baa3 | 10,459,000 | 11,002,594 | |||||||||||||
|
| ||||||||||||||||
| 81,518,926 | |||||||||||||||||
|
| ||||||||||||||||
22 | Annual Reports
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
MEDIA — 0.27% | |||||||||||||||||
Media — 0.27% | |||||||||||||||||
| b | Cox Communications, Inc., 3.15% due 8/15/2024 | BBB/Baa2 | $ | 8,000,000 | $ | 7,949,802 | |||||||||||
The Washington Post Co., 7.25% due 2/1/2019 | BB+/Ba1 | 5,000,000 | 5,306,250 | ||||||||||||||
|
| ||||||||||||||||
| 13,256,052 | |||||||||||||||||
|
| ||||||||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 1.08% | |||||||||||||||||
Biotechnology — 0.54% | |||||||||||||||||
Biogen, Inc., 3.625% due 9/15/2022 | A-/Baa1 | 5,000,000 | 5,255,388 | ||||||||||||||
Gilead Sciences, Inc., 1.85% due 9/20/2019 | A/A3 | 6,900,000 | 6,905,444 | ||||||||||||||
Gilead Sciences, Inc., 2.55% due 9/1/2020 | A/A3 | 4,820,000 | 4,905,699 | ||||||||||||||
Gilead Sciences, Inc., 3.25% due 9/1/2022 | A/A3 | 4,650,000 | 4,802,770 | ||||||||||||||
Gilead Sciences, Inc., 2.50% due 9/1/2023 | A/A3 | 4,695,000 | 4,647,663 | ||||||||||||||
Pharmaceuticals — 0.54% | |||||||||||||||||
| a | Allergan Funding SCS, 2.35% due 3/12/2018 | BBB/Baa3 | 1,720,000 | 1,725,010 | |||||||||||||
| a | Allergan Funding SCS, 3.45% due 3/15/2022 | BBB/Baa3 | 5,000,000 | 5,184,567 | |||||||||||||
| a | Allergan Funding SCS, 3.80% due 3/15/2025 | BBB/Baa3 | 5,000,000 | 5,192,547 | |||||||||||||
| a | Allergan Funding SCS Floating Rate Note, 2.565% due 3/12/2020 | BBB/Baa3 | 5,000,000 | 5,093,083 | |||||||||||||
| b | Bayer U.S. Finance, LLC, 1.50% due 10/6/2017 | A-/A3 | 1,975,000 | 1,975,000 | |||||||||||||
| a | Mylan N.V., 3.00% due 12/15/2018 | BBB-/Baa3 | 4,900,000 | 4,955,321 | |||||||||||||
Zoetis, Inc., 3.45% due 11/13/2020 | BBB/Baa1 | 2,000,000 | 2,067,804 | ||||||||||||||
|
| ||||||||||||||||
| 52,710,296 | |||||||||||||||||
|
| ||||||||||||||||
REAL ESTATE — 1.22% | |||||||||||||||||
Equity Real Estate Investment Trusts — 0.95% | |||||||||||||||||
Alexandria Real Estate Equities, Inc., 3.90% due 6/15/2023 | BBB/Baa2 | 11,700,000 | 12,162,092 | ||||||||||||||
Alexandria Real Estate Equities, Inc., 3.95% due 1/15/2027 | BBB/Baa2 | 3,975,000 | 4,057,621 | ||||||||||||||
Crown Castle International Corp., 3.20% due 9/1/2024 | BBB-/Baa3 | 3,870,000 | 3,851,631 | ||||||||||||||
EPR Properties, 5.25% due 7/15/2023 | BBB-/Baa2 | 4,041,000 | 4,337,238 | ||||||||||||||
Hospitality Properties Trust, 4.95% due 2/15/2027 | BBB-/Baa2 | 2,000,000 | 2,095,299 | ||||||||||||||
Washington REIT, 4.95% due 10/1/2020 | BBB/Baa2 | 19,100,000 | 20,172,487 | ||||||||||||||
Real Estate Management & Development — 0.27% | |||||||||||||||||
Jones Lang LaSalle, Inc., 4.40% due 11/15/2022 | BBB/Baa1 | 3,000,000 | 3,145,644 | ||||||||||||||
| a,b | Vonovia Finance B.V., 3.20% due 10/2/2017 | BBB+/NR | 10,000,000 | 10,000,000 | |||||||||||||
|
| ||||||||||||||||
| 59,822,012 | |||||||||||||||||
|
| ||||||||||||||||
RETAILING — 0.57% | |||||||||||||||||
Internet & Direct Marketing Retail — 0.16% | |||||||||||||||||
The Priceline Group, Inc., 2.75% due 3/15/2023 | BBB+/Baa1 | 7,925,000 | 7,916,934 | ||||||||||||||
Multiline Retail — 0.41% | |||||||||||||||||
Family Dollar Stores, Inc., 5.00% due 2/1/2021 | BBB-/Baa3 | 18,475,000 | 19,814,438 | ||||||||||||||
|
| ||||||||||||||||
| 27,731,372 | |||||||||||||||||
|
| ||||||||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.79% | |||||||||||||||||
Semiconductors & Semiconductor Equipment — 0.79% | |||||||||||||||||
| b | Broadcom Corp./Broadcom Cayman Finance Ltd., 2.375% due 1/15/2020 | BBB-/Baa2 | 8,875,000 | 8,924,026 | |||||||||||||
| b | Broadcom Corp./Broadcom Cayman Finance Ltd., 3.00% due 1/15/2022 | BBB-/Baa2 | 9,000,000 | 9,150,139 | |||||||||||||
| b | Broadcom Corp./Broadcom Cayman Finance Ltd., 3.625% due 1/15/2024 | BBB-/Baa2 | 9,000,000 | 9,246,393 | |||||||||||||
Qualcomm, Inc. Floating Rate Note, 1.676% due 5/20/2019 | A/A1 | 6,583,000 | 6,608,303 | ||||||||||||||
Qualcomm, Inc. Floating Rate Note, 1.766% due 5/20/2020 | A/A1 | 4,747,000 | 4,777,066 | ||||||||||||||
|
| ||||||||||||||||
| 38,705,927 | |||||||||||||||||
|
| ||||||||||||||||
SOFTWARE & SERVICES — 2.66% | |||||||||||||||||
Information Technology Services — 1.05% | |||||||||||||||||
Broadridge Financial Solutions, Inc., 3.95% due 9/1/2020 | BBB+/Baa1 | 8,000,000 | 8,375,173 | ||||||||||||||
Fidelity National Information Services, Inc., 2.85% due 10/15/2018 | BBB/Baa2 | 4,850,000 | 4,906,654 | ||||||||||||||
Fiserv, Inc., 2.70% due 6/1/2020 | BBB/Baa2 | 6,900,000 | 6,979,784 | ||||||||||||||
SAIC, Inc., 4.45% due 12/1/2020 | BBB-/Ba1 | 2,000,000 | 2,103,000 | ||||||||||||||
Total System Services, Inc., 2.375% due 6/1/2018 | BBB-/Baa3 | 20,915,000 | 20,986,012 | ||||||||||||||
Annual Reports | 23
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Total System Services, Inc., 3.75% due 6/1/2023 | BBB-/Baa3 | $ | 5,000,000 | $ | 5,168,427 | ||||||||||||
Total System Services, Inc., 3.80% due 4/1/2021 | BBB-/Baa3 | 3,000,000 | 3,119,100 | ||||||||||||||
Internet Software & Services — 0.10% | |||||||||||||||||
eBay, Inc., 2.50% due 3/9/2018 | BBB+/Baa1 | 4,885,000 | 4,903,922 | ||||||||||||||
Software — 1.51% | |||||||||||||||||
Autodesk, Inc., 3.125% due 6/15/2020 | BBB/Baa2 | 1,945,000 | 1,978,276 | ||||||||||||||
CA Technologies, Inc., 2.875% due 8/15/2018 | BBB+/Baa2 | 4,082,000 | 4,119,493 | ||||||||||||||
CA Technologies, Inc., 3.60% due 8/1/2020 | BBB+/Baa2 | 13,905,000 | 14,313,485 | ||||||||||||||
CA, Inc., 3.60% due 8/15/2022 | BBB+/Baa2 | 3,000,000 | 3,074,945 | ||||||||||||||
CDK Global, Inc., 3.80% due 10/15/2019 | BB+/Ba1 | 5,000,000 | 5,143,750 | ||||||||||||||
Microsoft Corp., 2.875% due 2/6/2024 | AAA/Aaa | 9,216,000 | 9,418,010 | ||||||||||||||
Oracle Corp., 2.50% due 5/15/2022 | AA-/A1 | 4,400,000 | 4,464,660 | ||||||||||||||
Oracle Corp., 1.90% due 9/15/2021 | AA-/A1 | 11,825,000 | 11,738,711 | ||||||||||||||
Oracle Corp., 2.40% due 9/15/2023 | AA-/A1 | 11,650,000 | 11,584,038 | ||||||||||||||
VMware, Inc., 2.30% due 8/21/2020 | BBB-/Baa2 | 7,925,000 | 7,948,203 | ||||||||||||||
|
| ||||||||||||||||
| 130,325,643 | |||||||||||||||||
|
| ||||||||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.31% | |||||||||||||||||
Communications Equipment — 0.94% | |||||||||||||||||
Cisco Systems, Inc. Floating Rate Note, 1.916% due 2/21/2018 | AA-/A1 | 9,850,000 | 9,873,242 | ||||||||||||||
Juniper Networks, Inc., 3.30% due 6/15/2020 | BBB/Baa2 | 4,825,000 | 4,946,489 | ||||||||||||||
Juniper Networks, Inc., 3.125% due 2/26/2019 | BBB/Baa2 | 10,000,000 | 10,156,011 | ||||||||||||||
| a | LM Ericsson, 4.125% due 5/15/2022 | BB+/Ba1 | 21,215,000 | 21,047,761 | |||||||||||||
Computers & Peripherals — 0.11% | |||||||||||||||||
Lexmark International, Inc., 6.375% due 3/15/2020 | BB-/Ba3 | 5,375,000 | 5,604,813 | ||||||||||||||
Electronic Equipment, Instruments & Components — 0.62% | |||||||||||||||||
Ingram Micro, Inc., 5.45% due 12/15/2024 | NR/Ba1 | 5,596,000 | 5,743,667 | ||||||||||||||
Tech Data Corp., 4.95% due 2/15/2027 | BBB-/Baa3 | 6,000,000 | 6,188,695 | ||||||||||||||
Trimble Navigation, Ltd., 4.75% due 12/1/2024 | BBB-/Baa2 | 17,000,000 | 18,266,889 | ||||||||||||||
Technology, Hardware, Storage & Peripherals — 0.64% | |||||||||||||||||
Apple, Inc. Floating Rate Note, 1.811% due 2/9/2022 | AA+/Aa1 | 11,975,000 | 12,139,307 | ||||||||||||||
Apple, Inc. Floating Rate Note, 2.134% due 2/22/2019 | AA+/Aa1 | 4,950,000 | 5,003,915 | ||||||||||||||
Apple, Inc. Floating Rate Note, 2.444% due 2/23/2021 | AA+/Aa1 | 9,050,000 | 9,327,473 | ||||||||||||||
Hewlett Packard Enterprise Co. Floating Rate Note, 3.231% due 10/5/2018 | BBB/Baa2 | 4,900,000 | 4,975,653 | ||||||||||||||
|
| ||||||||||||||||
| 113,273,915 | |||||||||||||||||
|
| ||||||||||||||||
TELECOMMUNICATION SERVICES — 1.89% | |||||||||||||||||
Diversified Telecommunication Services — 1.56% | |||||||||||||||||
AT&T, Inc., 2.227% due 11/27/2018 | BBB+/Baa1 | 11,350,000 | 11,440,235 | ||||||||||||||
AT&T, Inc., 2.263% due 6/30/2020 | BBB+/Baa1 | 4,950,000 | 5,017,023 | ||||||||||||||
AT&T, Inc., 3.60% due 2/17/2023 | BBB+/Baa1 | 8,000,000 | 8,231,088 | ||||||||||||||
AT&T, Inc., 4.45% due 4/1/2024 | BBB+/Baa1 | 10,000,000 | 10,610,374 | ||||||||||||||
AT&T, Inc., 3.00% due 6/30/2022 | BBB+/Baa1 | 4,500,000 | 4,543,813 | ||||||||||||||
Michigan Bell Telephone Co., 7.85% due 1/15/2022 | BBB+/NR | 3,000,000 | 3,583,095 | ||||||||||||||
Qwest Corp., 6.75% due 12/1/2021 | BBB-/Ba1 | 3,000,000 | 3,275,950 | ||||||||||||||
Verizon Communications, Inc., 4.125% due 3/16/2027 | BBB+/Baa1 | 7,000,000 | 7,303,895 | ||||||||||||||
Verizon Communications, Inc., 3.50% due 11/1/2024 | BBB+/Baa1 | 4,683,000 | 4,768,219 | ||||||||||||||
| b | Verizon Communications, Inc., 3.376% due 2/15/2025 | BBB+/Baa1 | 10,074,000 | 10,109,021 | |||||||||||||
Verizon Communications, Inc. Floating Rate Note, 2.321% due 3/16/2022 | BBB+/Baa1 | 7,500,000 | 7,608,585 | ||||||||||||||
Wireless Telecommunication Services — 0.33% | |||||||||||||||||
| b | Crown Castle Towers, LLC, 6.113% due 1/15/2040 | NR/A2 | 6,970,000 | 7,447,342 | |||||||||||||
| a | Telefonica Emisiones S.A.U., 4.103% due 3/8/2027 | BBB/Baa3 | 8,500,000 | 8,794,204 | |||||||||||||
|
| ||||||||||||||||
| 92,732,844 | |||||||||||||||||
|
| ||||||||||||||||
TRANSPORTATION — 1.55% | |||||||||||||||||
Air Freight & Logistics — 0.01% | |||||||||||||||||
| b | FedEx Corp. 2012 Pass-Through Trust, 2.625% due 1/15/2018 | BBB/Baa1 | 281,189 | 281,058 | |||||||||||||
Airlines — 0.42% | |||||||||||||||||
American Airlines Group, Inc., 4.95% due 7/15/2024 | A-/NR | 5,457,968 | 5,847,285 | ||||||||||||||
American Airlines Group, Inc., 3.60% due 3/22/2029 | AA/Aa3 | 9,289,786 | 9,578,234 | ||||||||||||||
24 | Annual Reports
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
US Airways, 6.25% due 10/22/2024 | A+/A3 | $ | 4,602,808 | $ | 5,166,652 | ||||||||||||
Road & Rail — 0.94% | |||||||||||||||||
| a,b | Asciano Finance Ltd., 5.00% due 4/7/2018 | BBB-/Baa3 | 2,000,000 | 2,028,067 | |||||||||||||
| b | BNSF Railway Co., 3.442% due 6/16/2028 | AA/Aa2 | 13,871,611 | 14,182,196 | |||||||||||||
| a,b | LeasePlan Corp. NV, 2.50% due 5/16/2018 | BBB-/Baa1 | 10,000,000 | 10,012,457 | |||||||||||||
| b | Penske Truck Leasing Co., LP/PTL Finance Corp., 4.25% due 1/17/2023 | BBB/Baa2 | 5,000,000 | 5,328,326 | |||||||||||||
| b | TTX Co., 4.15% due 1/15/2024 | A/Baa1 | 6,000,000 | 6,304,477 | |||||||||||||
| b | TTX Co., 5.453% due 1/2/2022 | NR/NR | 3,267,992 | 3,406,555 | |||||||||||||
| b | TTX Co., 2.25% due 2/1/2019 | A/Baa1 | 5,000,000 | 5,009,745 | |||||||||||||
Transportation Infrastructure — 0.18% | |||||||||||||||||
| a,b | Mexico City Airport Trust, 3.875% due 4/30/2028 | BBB+/NR | 5,000,000 | 4,982,500 | |||||||||||||
| a,b | Mexico City Airport Trust, 4.25% due 10/31/2026 | BBB+/Baa1 | 3,750,000 | 3,853,125 | |||||||||||||
|
| ||||||||||||||||
| 75,980,677 | |||||||||||||||||
|
| ||||||||||||||||
UTILITIES — 4.99% | |||||||||||||||||
Electric Utilities — 3.95% | |||||||||||||||||
Appalachian Power Co., 3.40% due 6/1/2025 | A-/Baa1 | 7,000,000 | 7,176,686 | ||||||||||||||
Cleveland Electric Illuminating Co., 7.88% due 11/1/2017 | BBB+/Baa1 | 15,359,000 | 15,427,112 | ||||||||||||||
Duke Energy Florida Project Finance, LLC, 1.196% due 3/1/2022 | AAA/Aaa | 14,626,639 | 14,512,329 | ||||||||||||||
Edison International, 2.40% due 9/15/2022 | BBB/A3 | 4,900,000 | 4,861,760 | ||||||||||||||
| a,b | Electricite de France S.A., 2.15% due 1/22/2019 | A-/A3 | 4,900,000 | 4,919,077 | |||||||||||||
| a,b | Enel Finance International S.A., 2.875% due 5/25/2022 | BBB/Baa2 | 7,000,000 | 7,045,348 | |||||||||||||
Entergy Louisiana, LLC, 4.80% due 5/1/2021 | A/A2 | 4,300,000 | 4,550,488 | ||||||||||||||
Entergy Texas, Inc., 7.125% due 2/1/2019 | A/Baa1 | 2,000,000 | 2,132,803 | ||||||||||||||
Exelon Corp., 2.85% due 6/15/2020 | BBB-/Baa2 | 2,950,000 | 3,008,645 | ||||||||||||||
| b | Jersey Central Power & Light Co., 4.30% due 1/15/2026 | BBB-/Baa2 | 15,000,000 | 15,698,733 | |||||||||||||
| a,b | Korea Western Power Co., Ltd., 2.875% due 10/10/2018 | NR/Aa2 | 10,000,000 | 10,054,603 | |||||||||||||
| b | Monongahela Power Co., 4.10% due 4/15/2024 | BBB+/A3 | 12,500,000 | 13,315,712 | |||||||||||||
Northern States Power Company-Wisconsin, 3.30% due 6/15/2024 | A/Aa3 | 10,000,000 | 10,278,695 | ||||||||||||||
Public Service Co. of New Mexico, 5.35% due 10/1/2021 | BBB+/Baa2 | 3,000,000 | 3,224,593 | ||||||||||||||
| b | Rochester Gas & Electric, 5.90% due 7/15/2019 | A/A1 | 11,732,000 | 12,470,328 | |||||||||||||
Southern Power Co., 1.85% due 12/1/2017 | BBB+/Baa1 | 5,000,000 | 5,001,936 | ||||||||||||||
Southern Power Co., 2.375% due 6/1/2020 | BBB+/Baa1 | 9,793,000 | 9,812,830 | ||||||||||||||
| a,b | State Grid Overseas Investment (2014) Ltd., 2.75% due 5/7/2019 | A+/A1 | 14,800,000 | 14,942,670 | |||||||||||||
| a,b | State Grid Overseas Investment (2016) Ltd., 2.25% due 5/4/2020 | A+/A1 | 10,000,000 | 9,975,371 | |||||||||||||
The Southern Co., 2.45% due 9/1/2018 | BBB+/Baa2 | 4,825,000 | 4,858,697 | ||||||||||||||
Toledo Edison Co., 7.25% due 5/1/2020 | BBB+/Baa1 | 167,000 | 184,392 | ||||||||||||||
| a,b | Transelec S.A., 4.25% due 1/14/2025 | BBB/Baa1 | 6,000,000 | 6,237,127 | |||||||||||||
UIL Holdings Corp., 4.625% due 10/1/2020 | BBB/Baa1 | 13,110,000 | 13,877,177 | ||||||||||||||
Gas Utilities — 0.26% | |||||||||||||||||
AGL Capital Corp., 3.50% due 9/15/2021 | A-/Baa1 | 9,925,000 | 10,249,563 | ||||||||||||||
Spire, Inc., 2.55% due 8/15/2019 | BBB+/Baa2 | 2,350,000 | 2,354,469 | ||||||||||||||
Independent Power & Renewable Electricity Producers — 0.12% | |||||||||||||||||
| b | Midland Cogeneration Venture, 6.00% due 3/15/2025 | BBB-/NR | 5,695,152 | 5,910,938 | |||||||||||||
Multi-Utilities — 0.66% | |||||||||||||||||
Dominion Gas Holdings, LLC, 2.50% due 12/15/2019 | BBB+/A2 | 3,900,000 | 3,932,385 | ||||||||||||||
Dominion Gas Holdings, LLC, 2.80% due 11/15/2020 | BBB+/A2 | 5,000,000 | 5,082,296 | ||||||||||||||
| b | Enable Oklahoma Intrastate Transmission, LLC, 6.25% due 3/15/2020 | BB+/Baa3 | 3,640,000 | 3,879,433 | |||||||||||||
| a,b | Korea Hydro & Nuclear Power Co. Ltd., 2.875% due 10/2/2018 | AA/Aa2 | 7,000,000 | 7,036,510 | |||||||||||||
| b | Niagara Mohawk Power Corp., 4.881% due 8/15/2019 | A-/A2 | 10,000,000 | 10,497,474 | |||||||||||||
SCANA Corp., 4.125% due 2/1/2022 | BBB-/Baa3 | 2,000,000 | 2,060,381 | ||||||||||||||
|
| ||||||||||||||||
| 244,570,561 | |||||||||||||||||
|
| ||||||||||||||||
TOTAL CORPORATE BONDS (Cost $2,247,031,033) | 2,294,533,937 | ||||||||||||||||
|
| ||||||||||||||||
| CONVERTIBLE BONDS — 0.41% | |||||||||||||||||
REAL ESTATE — 0.41% | |||||||||||||||||
Equity Real Estate Investment Trusts — 0.41% | |||||||||||||||||
| b | IAS Operating Partnership LP, 5.00% due 3/15/2018 | NR/NR | 19,950,000 | 20,149,500 | |||||||||||||
|
| ||||||||||||||||
| 20,149,500 | |||||||||||||||||
|
| ||||||||||||||||
TOTAL CONVERTIBLE BONDS (Cost $19,950,000) | 20,149,500 | ||||||||||||||||
|
| ||||||||||||||||
Annual Reports | 25
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
| MUNICIPAL BONDS — 2.20% | |||||||||||||||||
American Municipal Power Ohio, Inc., 5.072% due 2/15/2018 (Meldahl Hydroelectric) | A/A3 | $ | 5,000,000 | $ | 5,059,150 | ||||||||||||
Anaheim California Public Financing Authority, 5.486% due 9/1/2020 (Anaheim Public Improvements; Insured: Natl-Re) | A/A1 | 3,270,000 | 3,381,900 | ||||||||||||||
Brentwood California Infrastructure Financing Authority, 6.16% due 10/1/2019 (Civic Center) | AA/NR | 1,435,000 | 1,484,967 | ||||||||||||||
California HFFA, 6.76% due 2/1/2019 (Community Program for Persons with Developmental Disabilities) | AA-/NR | 3,905,000 | 4,032,616 | ||||||||||||||
California School Finance Authority, 5.041% due 7/1/2020 (LOC: City National Bank) | AA+/NR | 4,000,000 | 4,254,040 | ||||||||||||||
Camden County Improvement Authority, 5.47% due 7/1/2018 (Cooper Medical School of Rowan University) | A/A2 | 2,140,000 | 2,188,492 | ||||||||||||||
Camden County Improvement Authority, 5.62% due 7/1/2019 (Cooper Medical School of Rowan University) | A/A2 | 3,025,000 | 3,168,415 | ||||||||||||||
City and County of San Francisco Redevelopment Financing Authority, 8.00% due 8/1/2019 (San Francisco Redevelopment Projects) | AA-/A2 | 4,790,000 | 5,166,350 | ||||||||||||||
City of Fort Collins Colorado Electric Utility Enterprise, 4.92% due 12/1/2020 (Fort Collins Smart Grid) | AA-/NR | 2,250,000 | 2,370,848 | ||||||||||||||
Colorado Educational and Cultural Facilities Authority, 2.244% due 3/1/2021 (University of Denver Project) | NR/A1 | 450,000 | 447,588 | ||||||||||||||
Colorado Educational and Cultural Facilities Authority, 2.474% due 3/1/2022 (University of Denver Project) | NR/A1 | 600,000 | 598,356 | ||||||||||||||
Colorado Educational and Cultural Facilities Authority, 2.691% due 3/1/2023 (University of Denver Project) | NR/A1 | 580,000 | 578,486 | ||||||||||||||
Connecticut Housing Finance Authority, 5.071% due 11/15/2019 (Housing Mtg Finance Program) | AAA/Aaa | 1,340,000 | 1,376,260 | ||||||||||||||
Denver Public Schools COP, 2.018% due 12/15/2019 (School District No. 1 Educational Facilities) | NR/Aa3 | 3,000,000 | 2,993,310 | ||||||||||||||
JobsOhio Beverage System, 2.217% due 1/1/2019 (State Liquor Enterprise) | AA/Aa3 | 11,245,000 | 11,304,261 | ||||||||||||||
Kentucky Asset/Liability Commission, 2.099% due 4/1/2019 (Commonwealth of Kentucky and Teachers’ Retirement System Funding Obligations) | A/A1 | 3,000,000 | 3,000,840 | ||||||||||||||
Los Angeles County Public Works Financing Authority, 5.591% due 8/1/2020 (Los Angeles County & USC Medical Center Projects) | AA/Aa2 | 3,350,000 | 3,659,406 | ||||||||||||||
Louisiana Local Government Environmental Facilities and Community Development Authority, 1.66% due 2/1/2022 (Louisiana Utilities Restoration) | AAA/Aaa | 3,791,450 | 3,772,834 | ||||||||||||||
Municipal Improvement Corp. of Los Angeles, 6.165% due 11/1/2020 (Recovery Zone Economic Development) | AA-/Aa3 | 11,885,000 | 12,914,003 | ||||||||||||||
New York City Transitional Finance Authority, 4.075% due 11/1/2020 (World Trade Center Recovery) | AAA/Aa1 | 2,500,000 | 2,656,900 | ||||||||||||||
Oklahoma Development Finance Authority, 8.00% due 5/1/2020 (Cleveland County Industrial Authority (CCIA) - Hitachi Norman, Oklahoma Project) | NR/NR | 3,355,000 | 3,382,041 | ||||||||||||||
Orleans Parish School Board GO, 4.40% due 2/1/2021 (Educational Facilities Improvements; Insured: AGM) | AA/A2 | 10,000,000 | 10,614,300 | ||||||||||||||
Redevelopment Agency of the City of Redlands, 5.818% due 8/1/2022 (Redlands Redevelopment; Insured: AMBAC) (ETM) | NR/NR | 1,275,000 | 1,377,089 | ||||||||||||||
Redevelopment Agency of the County of San Bernardino, 7.135% due 9/1/2020 (San Sevaine Redevelopment Project) | BBB/NR | 810,000 | 848,435 | ||||||||||||||
Rutgers State University GO, 2.342% due 5/1/2019 (New Brunswick, Newark and Camden Campus Facilities) | A+/Aa3 | 3,485,000 | 3,488,868 | ||||||||||||||
Rutgers State University GO, 3.028% due 5/1/2021 (New Brunswick, Newark and Camden Campus Facilities) | A+/Aa3 | 1,500,000 | 1,508,715 | ||||||||||||||
Tampa-Hillsborough County Florida Expressway Authority, 2.22% due 7/1/2018 (Electronic Tolling Program) | A+/A2 | 2,000,000 | 1,998,480 | ||||||||||||||
Tampa-Hillsborough County Florida Expressway Authority, 2.49% due 7/1/2019 (Electronic Tolling Program) | A+/A2 | 2,500,000 | 2,493,975 | ||||||||||||||
Tampa-Hillsborough County Florida Expressway Authority, 2.84% due 7/1/2020 (Electronic Tolling Program) | A+/A2 | 1,750,000 | 1,750,420 | ||||||||||||||
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 | 3,073,710 | ||||||||||||||
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 | 2,853,675 | ||||||||||||||
|
| ||||||||||||||||
TOTAL MUNICIPAL BONDS (Cost $104,117,579) | 107,798,730 | ||||||||||||||||
|
| ||||||||||||||||
| SHORT TERM INVESTMENTS — 10.32% | |||||||||||||||||
Bank of New York Tri-Party Repurchase Agreement 1.36% dated 9/29/2017 due 10/2/2017, repurchase price $115,013,033 collateralized by 48 corporate debt securities, having an average coupon of 4.18%, a minimum credit rating of BBB-, maturity dates from 10/2/2017 to 2/14/2050, and having an aggregate market value of $123,375,947 at 9/29/2017 | NR/NR | 115,000,000 | 115,000,000 | ||||||||||||||
Caterpillar Financial Services Corp., 1.20% due 10/10/2017 | NR/NR | 22,000,000 | 21,993,400 | ||||||||||||||
| b | Colgate-Palmolive Co., 1.06% due 10/16/2017 | NR/NR | 12,000,000 | 11,994,700 | |||||||||||||
| b | Diageo Capital plc, 1.25% due 10/2/2017 | NR/NR | 14,000,000 | 13,999,514 | |||||||||||||
Farmer Mac Discount Note, 0.70% due 10/2/2017 | NR/NR | 25,000,000 | 24,999,514 | ||||||||||||||
Federal Home Loan Bank Discount Note, 0.97% due 10/11/2017 | NR/NR | 8,900,000 | 8,897,602 | ||||||||||||||
Federal Home Loan Bank Discount Note, 0.70% due 10/2/2017 | NR/NR | 27,000,000 | 26,999,550 | ||||||||||||||
Federal Home Loan Bank Discount Note, 0.60% due 10/2/2017 | NR/NR | 25,000,000 | 24,999,514 | ||||||||||||||
| b | Intercontinental Exchange, Inc., 1.11% due 10/5/2017 | NR/NR | 11,000,000 | 10,998,643 | |||||||||||||
| a | International Bank for Reconstruction & Development Discount Note, 1.00% due 10/25/2017 | NR/NR | 5,000,000 | 4,996,667 | |||||||||||||
| b | Louisville Gas & Electric Co., 1.32% due 10/2/2017 | NR/NR | 20,000,000 | 19,999,267 | |||||||||||||
| b | Louisville Gas & Electric Co., 1.32% due 10/3/2017 | NR/NR | 2,000,000 | 1,999,853 | |||||||||||||
| b | Nike, Inc., 1.07% due 10/4/2017 | NR/NR | 22,000,000 | 21,998,038 | |||||||||||||
| b | Roche Holding, Inc., 1.00% due 10/2/2017 | NR/NR | 22,000,000 | 21,999,352 | |||||||||||||
| b | San Diego Gas & Electric Co., 0.81% due 10/2/2017 | NR/NR | 20,000,000 | 19,999,400 | |||||||||||||
| b | Snap-on, Inc., 1.16% due 10/3/2017 | NR/NR | 22,000,000 | 21,998,582 | |||||||||||||
| b | Unilever Capital Corp., 1.04% due 10/3/2017 | NR/NR | 22,000,000 | 21,998,729 | |||||||||||||
26 | Annual Reports
Schedule of Investments, Continued
Thornburg Limited Term Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
United States Treasury Bill, 0.951% due 10/26/2017 | NR/NR | $ | 33,500,000 | $ | 33,477,876 | ||||||||||||
United States Treasury Bill, 0.79% due 10/12/2017 | NR/NR | 9,000,000 | 8,997,828 | ||||||||||||||
United States Treasury Bill, 0.65% due 10/5/2017 | NR/NR | 50,000,000 | 49,996,222 | ||||||||||||||
United States Treasury Notes, 0.875% due 10/15/2017 | NR/Aaa | 18,200,000 | 18,198,926 | ||||||||||||||
|
| ||||||||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $505,543,177) | 505,543,177 | ||||||||||||||||
|
| ||||||||||||||||
| TOTAL INVESTMENTS — 99.57% (Cost $4,823,527,774) | $ | 4,876,734,136 | |||||||||||||||
| OTHER ASSETS LESS LIABILITIES — 0.43% | 21,078,367 | ||||||||||||||||
|
| ||||||||||||||||
| NET ASSETS — 100.00% | $ | 4,897,812,503 | |||||||||||||||
|
| ||||||||||||||||
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. As of September 30, 2017, the aggregate value of these securities in the Fund’s portfolio was $1,831,485,973, representing 37.39% of the Fund’s net assets. |
| c | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees’ Audit Committee. |
| d | Bond in default. |
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| AGM | Insured by Assured Guaranty Municipal Corp. | Mtg | Mortgage | |||
| AMBAC | Insured by American Municipal Bond Assurance Corp. | Natl-Re | Insured by National Public Finance Guarantee Corp. | |||
| CMO | Collateralized Mortgage Obligation | REIT | Real Estate Investment Trust | |||
| COP | Certificates of Participation | REMIC | Real Estate Mortgage Investment Conduit | |||
| ETM | Escrowed to Maturity | SBA | Small Business Administration | |||
| GO | General Obligation | SPV | Special Purpose Vehicle | |||
| HFFA | Health Facilities Financing Authority | VA | Veterans Affairs |
See notes to financial statements.
Annual Reports | 27
Thornburg Low Duration Income Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
The Fund’s objective is to seek current income, consistent with preservation of capital.
The Fund invests in debt obligations issued by the U.S. Government, its agencies, or its instrumentalities, and in debt obligations rated at the time of purchase in one of the four highest credit ratings categories or, if no credit rating is available, judged to be of comparable quality by the Fund’s advisor. The Fund aims to reduce changes in its share value compared to longer duration fixed income portfolios by maintaining a laddered portfolio of investments with a dollar-weighted average duration of normally no more than three years.
LONG-TERM STABILITY OF PRINCIPAL
Net Asset Value History of A Shares
KEY PORTFOLIO - LOW DURATION INCOME
| Number of Bonds | 174 | ||||
| Effective Duration | 1.1 Yrs | ||||
| Average Maturity | 1.9 Yrs |
There is no guarantee that the Fund will meet its investment objective.
All data is subject to change. Charts may not add up to 100% due to rounding.
SECURITY CREDIT RATINGS
Credit quality ratings for Thornburg’s global fixed income portfolios 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 other nationally recognized statistical rating organizations (NRSROs).
PORTFOLIO LADDER
Percent of portfolio maturing in each year. Cash includes cash equivalents.
28 | Annual Reports
Schedule of Investments
Thornburg Low Duration Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
| U.S. TREASURY SECURITIES — 6.87% | |||||||||||||||||
United States Treasury Notes, 0.75% due 12/31/2017 | NR/Aaa | $ | 400,000 | $ | 399,609 | ||||||||||||
United States Treasury Notes, 0.125% due 4/15/2019 | NR/Aaa | 235,055 | 235,890 | ||||||||||||||
United States Treasury Notes Inflationary Index, 0.125% due 4/15/2020 | NR/Aaa | 391,991 | 393,865 | ||||||||||||||
United States Treasury Notes Inflationary Index, 0.125% due 4/15/2022 | NR/Aaa | 301,968 | 302,006 | ||||||||||||||
|
| ||||||||||||||||
TOTAL U.S. TREASURY SECURITIES (Cost $1,328,398) | 1,331,370 | ||||||||||||||||
|
| ||||||||||||||||
| U.S. GOVERNMENT AGENCIES — 3.19% | |||||||||||||||||
Export Leasing (2009), LLC, (Guaranty: Export-Import Bank of the United States), 1.859% due 8/28/2021 | NR/NR | 52,676 | 52,565 | ||||||||||||||
| a | Micron Semiconductor Ltd., (Guaranty: Export-Import Bank of the United States), 1.258% due 1/15/2019 | NR/NR | 150,000 | 149,237 | |||||||||||||
| a | Petroleos Mexicanos Floating Rate Note, (Guaranty: Export-Import Bank of the United States), 1.654% due 4/15/2025 | NR/NR | 77,500 | 76,551 | |||||||||||||
| a | Petroleos Mexicanos, (Guaranty: Export-Import Bank of the United States), 1.70% due 12/20/2022 | NR/NR | 55,000 | 54,338 | |||||||||||||
| a | Reliance Industries Ltd., (Guaranty: Export-Import Bank of the United States), 1.87% due 1/15/2026 | NR/NR | 111,842 | 109,754 | |||||||||||||
Small Business Administration Participation Certificates, Series 2005-20K Class 1, 5.36% due 11/1/2025 | NR/NR | 26,858 | 28,589 | ||||||||||||||
| a | Washington Aircraft 2 Co. Ltd. Floating Rate Note, (Guaranty: Export-Import Bank of the United States), 1.759% due 6/26/2024 | NR/NR | 149,143 | 147,109 | |||||||||||||
|
| ||||||||||||||||
TOTAL U.S. GOVERNMENT AGENCIES (Cost $622,788) | 618,143 | ||||||||||||||||
|
| ||||||||||||||||
| OTHER GOVERNMENT — 1.03% | |||||||||||||||||
| a,b | Korea Expressway Corp. Floating Rate Note, 2.007% due 4/20/2020 | AA/Aa2 | 200,000 | 199,756 | |||||||||||||
|
| ||||||||||||||||
TOTAL OTHER GOVERNMENT (Cost $200,000) | 199,756 | ||||||||||||||||
|
| ||||||||||||||||
| MORTGAGE BACKED — 5.42% | |||||||||||||||||
Federal Home Loan Mtg Corp. Whole Loan Securities, Series 2017-SC02 Class 2A1, 3.50% due 5/25/2047 | NR/NR | 47,285 | 48,225 | ||||||||||||||
Federal Home Loan Mtg Corp., CMO Series K716 Class A1, 2.413% due 8/25/2047 | NR/Aaa | 64,142 | 64,682 | ||||||||||||||
Federal Home Loan Mtg Corp., Multi-Family Structured Pass Through, Series K030 Class A1, 2.779% due 9/25/2022 | NR/Aaa | 96,594 | 98,184 | ||||||||||||||
Federal Home Loan Mtg Corp., Multi-Family Structured Pass Through, Series K036 Class A1, 2.777% due 4/25/2023 | NR/Aaa | 194,149 | 198,004 | ||||||||||||||
Federal Home Loan Mtg Corp., Multi-Family Structured Pass Through, Series K710 Class A2, 1.883% due 5/25/2019 | NR/NR | 275,000 | 274,826 | ||||||||||||||
Federal Home Loan Mtg Corp., Multi-Family Structured Pass Through, Series K717 Class A2, 2.991% due 9/25/2021 | NR/NR | 100,000 | 103,100 | ||||||||||||||
Federal Home Loan Mtg Corp., Pool G15523, 2.50% due 8/1/2025 | NR/NR | 131,606 | 133,339 | ||||||||||||||
Federal Home Loan Mtg Corp., Series 2586 Class AF, 5.00% due 3/15/2018 | NR/NR | 48,141 | 48,426 | ||||||||||||||
Federal National Mtg Assoc. Pool AS3705, 2.50% due 11/1/2024 | NR/NR | 81,457 | 82,555 | ||||||||||||||
|
| ||||||||||||||||
TOTAL MORTGAGE BACKED (Cost $1,056,283) | 1,051,341 | ||||||||||||||||
|
| ||||||||||||||||
| ASSET BACKED SECURITIES — 25.69% | |||||||||||||||||
ADVANCE RECEIVABLES — 0.51% | |||||||||||||||||
| b | New Residential Advance Receivables Trust, Series 2016-T2 Class AT2, 2.575% due 10/15/2049 | AAA/NR | 100,000 | 99,258 | |||||||||||||
|
| ||||||||||||||||
| 99,258 | |||||||||||||||||
|
| ||||||||||||||||
AUTO RECEIVABLES — 5.12% | |||||||||||||||||
Ally Auto Receivables Trust, Series 15-1 Class A3, 1.39% due 9/16/2019 | AAA/Aaa | 73,692 | 73,666 | ||||||||||||||
Ally Auto Receivables Trust, Series 15-2 Class A3, 1.49% due 11/15/2019 | AAA/Aaa | 55,426 | 55,424 | ||||||||||||||
| b | American Credit Acceptance Receivables Trust, Series 2017-3 Class A, 1.82% due 3/10/2020 | AAA/NR | 100,000 | 100,015 | |||||||||||||
| b | Avis Budget Rental Car Funding AESOP, LLC, Series 2012-3A Class A, 2.10% due 3/20/2019 | NR/Aaa | 100,000 | 100,064 | |||||||||||||
Capital Auto Receivables Asset Trust, Series 2016-3 Class A2A, 1.36% due 4/22/2019 | AAA/Aaa | 32,317 | 32,311 | ||||||||||||||
| b | Chesapeake Funding II, LLC, Series 2016-1A Class A1, 2.11% due 3/15/2028 | NR/Aaa | 147,647 | 147,983 | |||||||||||||
| b | Drive Auto Receivables Trust, Series 2017-AA Class B, 2.51% due 1/15/2021 | AA/Aaa | 125,000 | 125,306 | |||||||||||||
| b | Ford Credit Auto Owner Trust, Series 2015-1 Class A, 2.12% due 7/15/2026 | AAA/NR | 100,000 | 100,328 | |||||||||||||
| b | Foursight Capital Automobile Receivables Trust, Series 2016-1 Class A2, 2.87% due 10/15/2021 | A/NR | 65,390 | 65,624 | |||||||||||||
| a,b | OSCAR US Funding Trust, Series 2014-1A Class A3, 1.72% due 4/15/2019 | AAA/Aaa | 21,600 | 21,569 | |||||||||||||
| a,b,c | OSCAR US Funding Trust, Series 2016-2A Class A3, 2.73% due 12/15/2020 | AAA/Aaa | 70,000 | 70,280 | |||||||||||||
Toyota Motor Credit Corp., 1.50% due 2/13/2020 | AA-/Aa3 | 100,000 | 99,645 | ||||||||||||||
|
| ||||||||||||||||
| 992,215 | |||||||||||||||||
|
| ||||||||||||||||
COMMERCIAL MTG TRUST — 1.76% | |||||||||||||||||
| b | Barclays Commercial Mortgage Securities, LLC, Series 2015-STP Class A, 3.323% due 9/10/2028 | AAA/NR | 99,612 | 102,144 | |||||||||||||
COMM Mortgage Trust, Series 2016-DC2 Class A1, 1.82% due 2/10/2049 | NR/Aaa | 103,833 | 103,509 | ||||||||||||||
| b | DBUBS Mortgage Trust CMO, Series 2011-LC2A Class A1FL, 2.587% due 7/12/2044 | NR/Aaa | 35,825 | 36,228 | |||||||||||||
| b | FREMF Mortgage Trust, Series 2013-KF02 Class B Floating Rate Note, 4.232% due 12/25/2045 | NR/Baa1 | 19,945 | 20,187 | |||||||||||||
Morgan Stanley BAML Trust, Series 2012-C6 Class A2, 1.868% due 11/15/2045 | NR/Aaa | 442 | 441 | ||||||||||||||
WFRBS Commercial Mortgage Trust, Series 2014-C22 Class A1, 1.479% due 9/15/2057 | NR/Aaa | 79,456 | 79,114 | ||||||||||||||
|
| ||||||||||||||||
| 341,623 | |||||||||||||||||
|
| ||||||||||||||||
Annual Reports | 29
Schedule of Investments, Continued
Thornburg Low Duration Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
CREDIT CARD — 2.50% | |||||||||||||||||
Barclays Dryrock Issuance Trust, Series 2015-4 Class A, 1.72% due 8/16/2021 | AAA/NR | $ | 100,000 | $ | 100,080 | ||||||||||||
Barclays Dryrock Issuance Trust, Series 2016-1 Class A, 1.52% due 5/16/2022 | AAA/NR | 135,000 | 134,163 | ||||||||||||||
| b | Cabela’s Master Credit Card Trust, Series 2013-2A Class A1, 2.17% due 8/16/2021 | AAA/NR | 150,000 | 150,608 | |||||||||||||
Synchrony Credit Card Master Note Trust, Series 2014-1 Class A, 1.61% due 11/15/2020 | AAA/Aaa | 100,000 | 100,021 | ||||||||||||||
|
| ||||||||||||||||
| 484,872 | |||||||||||||||||
|
| ||||||||||||||||
OTHER ASSET BACKED — 8.32% | |||||||||||||||||
| b | AMSR Trust, Series 2016-SFR1 Class A Floating Rate Note, 2.634% due 11/17/2033 | NR/Aaa | 100,000 | 100,590 | |||||||||||||
| b | BRE Grand Islander Timeshare Issuer, Series 2017-1A Class A, 2.94% due 5/25/2029 | A+/NR | 87,759 | 87,560 | |||||||||||||
| b | CLI Funding, LLC, Series 2014-1A Class A, 3.29% due 6/18/2029 | A/NR | 67,367 | 67,231 | |||||||||||||
| b | Consumer Loan Underlying Bond Credit Trust, Series 2017-NP1 Class A, 2.39% due 4/17/2023 | NR/NR | 72,072 | 72,049 | |||||||||||||
| b | Consumer Loan Underlying Bond Credit Trust, Series 2017-P1 Class A, 2.42% due 9/15/2023 | NR/NR | 100,000 | 99,997 | |||||||||||||
| b | Dell Equipment Finance Trust, Series 2015-2 Class A3, 1.72% due 9/22/2020 | AAA/Aaa | 62,130 | 62,150 | |||||||||||||
| b | Diamond Resorts Owner Trust, Series 2014-1 Class A, 2.54% due 5/20/2027 | A+/NR | 90,558 | 90,483 | |||||||||||||
| b | GTP Acquisition Partners I, LLC, Series 2015-1 Class A, 2.35% due 6/15/2045 | NR/Aaa | 100,000 | 99,852 | |||||||||||||
Harley-Davidson Motorcycle Trust, Series 2015-2 Class A4, 1.66% due 12/15/2022 | AAA/Aaa | 100,000 | 99,835 | ||||||||||||||
| b | Hertz Fleet Lease Funding LP, Series 2016-1 Class A1 Floating Rate Note, 2.335% due 4/10/2030 | NR/Aaa | 174,541 | 175,006 | |||||||||||||
MVW Owner Trust, Series 2013-1X Class A, 2.15% due 4/22/2030 | A+/NR | 26,358 | 26,211 | ||||||||||||||
| b | OnDeck Asset Securitization Trust II, LLC, Series 2016-1A Class A, 4.21% due 5/17/2020 | BBB+/NR | 100,000 | 99,571 | |||||||||||||
| b | OneMain Financial Issuance Trust, Series 2016-2A Class A, 4.10% due 3/20/2028 | A+/NR | 100,000 | 101,724 | |||||||||||||
| b | PFS Financing Corp., Series 2015-AA Class A Floating Rate Note, 1.854% due 4/15/2020 | AAA/Aaa | 100,000 | 100,110 | |||||||||||||
| b | SBA Tower Trust, Series 2014-1A Class C, 2.898% due 10/15/2044 | NR/A2 | 100,000 | 100,619 | |||||||||||||
| b | Sierra Receivables Funding Co., LLC, Series 2014-1A Class A, 2.07% due 3/20/2030 | A/NR | 15,545 | 15,419 | |||||||||||||
| b | Sierra Receivables Funding Co., LLC, Series 2015-1A Class A, 2.40% due 3/22/2032 | A/NR | 80,836 | 80,633 | |||||||||||||
| b | Sierra Receivables Funding Co., LLC, Series 2015-3A Class A, 2.58% due 9/20/2032 | A/NR | 34,482 | 34,486 | |||||||||||||
| b | Tax Ease Funding, LLC, Series 2016-1A Class A, 3.131% due 6/15/2028 | NR/NR | 98,596 | 99,194 | |||||||||||||
|
| ||||||||||||||||
| 1,612,720 | |||||||||||||||||
|
| ||||||||||||||||
RESIDENTIAL MTG TRUST — 3.85% | |||||||||||||||||
| b | Angel Oak Mortgage Trust LLC, Series 2017-1 Class A2, 3.085% due 1/25/2047 | NR/NR | 73,102 | 73,403 | |||||||||||||
| b | Flagstar Mortgage Trust, Series 2017-1 Class 2A2, 3.00% due 3/25/2047 | NR/Aaa | 97,014 | 97,864 | |||||||||||||
| b,c | Nationstar HECM Loan Trust, Series 2017-2A Class A1, 2.038% due 9/25/2027 | NR/Aaa | 100,000 | 100,000 | |||||||||||||
| b | New Residential Mortgage Loan Trust, Series 2017-2A Class A3, 4.00% due 3/25/2057 | AAA/NR | 87,658 | 91,325 | |||||||||||||
| b | New Residential Mortgage Loan Trust, Series 2017-5A Class A1, 2.737% due 7/25/2056 | NR/Aaa | 95,866 | 98,096 | |||||||||||||
| b | Towd Point Mortgage Trust, Series 2016-5 Class A1, 2.50% due 10/25/2056 | NR/Aaa | 86,481 | 86,386 | |||||||||||||
| b | WinWater Mortgage Loan Trust, Series 2014-3 Class A7, 3.00% due 11/20/2044 | AAA/NR | 197,062 | 199,008 | |||||||||||||
|
| ||||||||||||||||
| 746,082 | |||||||||||||||||
|
| ||||||||||||||||
STUDENT LOAN — 3.63% | |||||||||||||||||
| b | Navient Student Loan Trust, Series 2016-6A Class A2 Floating Rate Note, 1.987% due 3/25/2066 | AAA/Aaa | 100,000 | 100,514 | |||||||||||||
| b | Nelnet Student Loan Trust, Series 2016-A Class A1A, 2.987% due 12/26/2040 | NR/NR | 113,093 | 113,314 | |||||||||||||
| b | Pennsylvania Higher Education Assistance Agency, Series 2012-1A Class A1 Floating Rate Note, 1.787% due 5/25/2057 | AA+/NR | 43,593 | 43,227 | |||||||||||||
| b | SLM Student Loan Trust, Series 2011-A Class A3 Floating Rate Note, 3.734% due 1/15/2043 | AAA/Aaa | 100,000 | 103,694 | |||||||||||||
SLM Student Loan Trust, Series 2013-4 Class A Floating Rate Note, 1.787% due 6/25/2043 | NR/Aaa | 51,928 | 52,284 | ||||||||||||||
SLM Student Loan Trust, Series 2013-6 Class A2 Floating Rate Note, 1.737% due 2/25/2021 | NR/Aaa | 232 | 232 | ||||||||||||||
| b | SLM Student Loan Trust, Series 2013-B Class A2B Floating Rate Note, 2.334% due 6/17/2030 | AAA/NR | 194,822 | 196,254 | |||||||||||||
| b | Social Professional Loan Program, LLC, Series 2014-A Class A1 Floating Rate Note, 2.832% due 6/25/2025 | AAA/NR | 65,361 | 66,171 | |||||||||||||
| b | Social Professional Loan Program, LLC, Series 2014-B Class A2, 2.55% due 8/27/2029 | AAA/Aa1 | 27,322 | 27,419 | |||||||||||||
|
| ||||||||||||||||
| 703,109 | |||||||||||||||||
|
| ||||||||||||||||
TOTAL ASSET BACKED SECURITIES (Cost $4,971,899) | 4,979,879 | ||||||||||||||||
|
| ||||||||||||||||
| CORPORATE BONDS — 43.29% | |||||||||||||||||
AUTOMOBILES & COMPONENTS — 1.81% | |||||||||||||||||
Automobiles — 1.81% | |||||||||||||||||
| b | Daimler Finance North America, LLC Floating Rate Note, 1.842% due 5/5/2020 | A/A2 | 150,000 | 150,580 | |||||||||||||
| b | Hyundai Capital America, 2.00% due 3/19/2018 | A-/Baa1 | 50,000 | 50,018 | |||||||||||||
| b | Hyundai Capital America, 2.40% due 10/30/2018 | A-/Baa1 | 50,000 | 50,182 | |||||||||||||
| b | Nissan Motor Acceptance Corp., 1.694% due 7/13/2020 | A/A2 | 100,000 | 100,059 | |||||||||||||
|
| ||||||||||||||||
| 350,839 | |||||||||||||||||
|
| ||||||||||||||||
30 | Annual Reports
Schedule of Investments, Continued
Thornburg Low Duration Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
BANKS — 4.73% | |||||||||||||||||
Banks — 4.73% | |||||||||||||||||
Bank of America Corp. Floating Rate Note, 2.344% due 1/15/2019 | BBB+/Baa1 | $ | 100,000 | $ | 100,983 | ||||||||||||
Citigroup, Inc., 1.70% due 4/27/2018 | BBB+/Baa1 | 75,000 | 74,993 | ||||||||||||||
Fifth Third Bank, 2.30% due 3/15/2019 | A-/A3 | 200,000 | 201,419 | ||||||||||||||
JPMorgan Chase & Co., 2.516% due 10/29/2020 | A-/A3 | 125,000 | 127,935 | ||||||||||||||
| a | Mitsubishi UFJ Financial Group, Inc. Floating Rate Note, 3.196% due 3/1/2021 | A/A1 | 200,000 | 208,084 | |||||||||||||
| a | Santander UK plc Floating Rate Note, 2.799% due 3/14/2019 | A/Aa3 | 100,000 | 101,634 | |||||||||||||
Wells Fargo & Co. Floating Rate Note, 2.327% due 12/7/2020 | A/A2 | 100,000 | 101,882 | ||||||||||||||
|
| ||||||||||||||||
| 916,930 | |||||||||||||||||
|
| ||||||||||||||||
CAPITAL GOODS — 0.52% | |||||||||||||||||
Machinery — 0.52% | |||||||||||||||||
Stanley Black & Decker, Inc., 2.451% due 11/17/2018 | A-/Baa2 | 100,000 | 100,632 | ||||||||||||||
|
| ||||||||||||||||
| 100,632 | |||||||||||||||||
|
| ||||||||||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.92% | |||||||||||||||||
Commercial Services & Supplies — 0.52% | |||||||||||||||||
Cintas Corp. No. 2, 2.90% due 4/1/2022 | BBB+/A3 | 100,000 | 101,872 | ||||||||||||||
Professional Services — 0.40% | |||||||||||||||||
Dun & Bradstreet, Inc., 4.25% due 6/15/2020 | BB+/NR | 75,000 | 77,205 | ||||||||||||||
|
| ||||||||||||||||
| 179,077 | |||||||||||||||||
|
| ||||||||||||||||
CONSUMER DURABLES & APPAREL — 1.27% | |||||||||||||||||
Leisure Products — 1.27% | |||||||||||||||||
Mattel, Inc., 2.35% due 8/15/2021 | BBB-/Baa2 | 125,000 | 121,531 | ||||||||||||||
Mattel, Inc., 1.70% due 3/15/2018 | BBB-/Baa2 | 125,000 | 124,817 | ||||||||||||||
|
| ||||||||||||||||
| 246,348 | |||||||||||||||||
|
| ||||||||||||||||
DIVERSIFIED FINANCIALS — 6.19% | |||||||||||||||||
Capital Markets — 4.45% | |||||||||||||||||
CBOE Holdings, Inc., 1.95% due 6/28/2019 | BBB+/Baa1 | 100,000 | 99,900 | ||||||||||||||
Goldman Sachs Group, Inc. Floating Rate Note, 2.52% due 9/15/2020 | BBB+/A3 | 100,000 | 101,893 | ||||||||||||||
Legg Mason, Inc., 2.70% due 7/15/2019 | BBB/Baa1 | 100,000 | 101,183 | ||||||||||||||
Moody’s Corp., 2.75% due 7/15/2019 | BBB+/NR | 75,000 | 76,042 | ||||||||||||||
Moody’s Corp. Floating Rate Note, 1.666% due 9/4/2018 | BBB+/NR | 50,000 | 50,088 | ||||||||||||||
Morgan Stanley, 2.80% due 6/16/2020 | BBB+/A3 | 50,000 | 50,834 | ||||||||||||||
Morgan Stanley Floating Rate Note, 2.457% due 1/27/2020 | BBB+/A3 | 75,000 | 76,157 | ||||||||||||||
State Street Corp. Floating Rate Note, 2.217% due 8/18/2020 | A/A1 | 100,000 | 102,035 | ||||||||||||||
| a,b | UBS AG Jersey Floating Rate Note, 2.768% due 9/24/2020 | A-/Baa1 | 200,000 | 204,048 | |||||||||||||
Consumer Finance — 0.57% | |||||||||||||||||
Synchrony Financial, 3.00% due 8/15/2019 | BBB-/NR | 50,000 | 50,817 | ||||||||||||||
Western Union Co. Floating Rate Note, 2.115% due 5/22/2019 | NR/Baa2 | 60,000 | 60,029 | ||||||||||||||
Diversified Financial Services — 0.91% | |||||||||||||||||
| b | Athene Global Funding, 2.875% due 10/23/2018 | A-/NR | 75,000 | 75,712 | |||||||||||||
S&P Global, Inc., 2.50% due 8/15/2018 | NR/Baa1 | 50,000 | 50,341 | ||||||||||||||
S&P Global, Inc., 3.30% due 8/14/2020 | NR/Baa1 | 50,000 | 51,291 | ||||||||||||||
Mortgage Real Estate Investment Trusts — 0.26% | |||||||||||||||||
Healthcare Trust of America, Inc., 2.95% due 7/1/2022 | BBB/Baa2 | 50,000 | 50,330 | ||||||||||||||
|
| ||||||||||||||||
| 1,200,700 | |||||||||||||||||
|
| ||||||||||||||||
ENERGY — 1.81% | |||||||||||||||||
Oil, Gas & Consumable Fuels — 1.81% | |||||||||||||||||
| a | BP Capital Markets plc Floating Rate Note, 1.659% due 8/14/2018 | A-/A1 | 150,000 | 150,364 | |||||||||||||
Exxon Mobil Corp. Floating Rate Note, 2.096% due 3/1/2019 | AA+/Aaa | 75,000 | 75,777 | ||||||||||||||
Exxon Mobil Corp. Floating Rate Note, 1.917% due 2/28/2018 | AA+/Aaa | 50,000 | 50,133 | ||||||||||||||
| b | Phillips 66 Co. Floating Rate Note, 1.954% due 4/15/2019 | BBB+/A3 | 75,000 | 75,094 | |||||||||||||
|
| ||||||||||||||||
| 351,368 | |||||||||||||||||
|
| ||||||||||||||||
Annual Reports | 31
Schedule of Investments, Continued
Thornburg Low Duration Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
FOOD & STAPLES RETAILING — 0.39% | |||||||||||||||||
Food & Staples Retailing — 0.39% | |||||||||||||||||
| a,b | Alimentation Couche-Tard, Inc., 2.70% due 7/26/2022 | BBB/Baa2 | $ | 50,000 | $ | 50,162 | |||||||||||
Smith’s 1994-A3 Pass Through Trust, 9.20% due 7/2/2018 | BBB/A2 | 24,121 | 25,004 | ||||||||||||||
|
| ||||||||||||||||
| 75,166 | |||||||||||||||||
|
| ||||||||||||||||
FOOD, BEVERAGE & TOBACCO — 5.47% | |||||||||||||||||
Beverages — 2.61% | |||||||||||||||||
Anheuser-Busch InBev Finance Inc. Floating Rate Note, 2.571% due 2/1/2021 | A-/A3 | 150,000 | 155,034 | ||||||||||||||
Molson Coors Brewing Co., 2.10% due 7/15/2021 | BBB-/Baa3 | 150,000 | 147,903 | ||||||||||||||
PepsiCo, Inc. Floating Rate Note, 1.832% due 10/6/2021 | A+/A1 | 200,000 | 202,717 | ||||||||||||||
Food Products — 1.82% | |||||||||||||||||
General Mills, Inc., 1.40% due 10/20/2017 | BBB+/A3 | 50,000 | 50,002 | ||||||||||||||
Kraft Heinz Foods Co. Floating Rate Note, 1.729% due 8/9/2019 | BBB-/Baa3 | 50,000 | 50,041 | ||||||||||||||
Kraft Heinz Foods Co. Floating Rate Note, 1.879% due 2/10/2021 | BBB-/Baa3 | 50,000 | 50,045 | ||||||||||||||
Mead Johnson Nutrition Co., 3.00% due 11/15/2020 | A-/A3 | 100,000 | 102,736 | ||||||||||||||
Tyson Foods, Inc. Floating Rate Note, 1.868% due 6/2/2020 | BBB/Baa2 | 100,000 | 100,475 | ||||||||||||||
Tobacco — 1.04% | |||||||||||||||||
Altria Group, Inc., 2.625% due 1/14/2020 | A-/A3 | 100,000 | 101,545 | ||||||||||||||
| b | B.A.T. Capital Corp. Floating Rate Note, 1.905% due 8/14/2020 | BBB+/Baa2 | 100,000 | 100,179 | |||||||||||||
|
| ||||||||||||||||
| 1,060,677 | |||||||||||||||||
|
| ||||||||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 2.33% | |||||||||||||||||
Health Care Equipment & Supplies — 0.78% | |||||||||||||||||
Abbott Laboratories, 2.35% due 11/22/2019 | BBB/Baa3 | 150,000 | 151,222 | ||||||||||||||
Health Care Providers & Services — 1.55% | |||||||||||||||||
Catholic Health Initiatives, 1.60% due 11/1/2017 | BBB+/Baa1 | 100,000 | 99,996 | ||||||||||||||
| b | Roche Holding, Inc. Floating Rate Note, 1.636% due 9/30/2019 | AA/A1 | 200,000 | 200,813 | |||||||||||||
|
| ||||||||||||||||
| 452,031 | |||||||||||||||||
|
| ||||||||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.26% | |||||||||||||||||
Household Products — 0.26% | |||||||||||||||||
Church & Dwight Co, Inc., 2.45% due 8/1/2022 | BBB+/Baa1 | 50,000 | 49,813 | ||||||||||||||
|
| ||||||||||||||||
| 49,813 | |||||||||||||||||
|
| ||||||||||||||||
INSURANCE — 1.69% | |||||||||||||||||
Insurance — 1.69% | |||||||||||||||||
| a | Enstar Group Ltd., 4.50% due 3/10/2022 | BBB-/NR | 50,000 | 51,727 | |||||||||||||
| b | Jackson National Life Global Co., 2.06% due 6/27/2022 | AA/A1 | 100,000 | 100,596 | |||||||||||||
| b | Principal Life Global Funding II, 2.375% due 9/11/2019 | A+/A1 | 50,000 | 50,357 | |||||||||||||
| b | Reliance Standard Life Insurance Co., 2.50% due 4/24/2019 | A/A2 | 100,000 | 100,627 | |||||||||||||
| b | Reliance Standard Life Insurance Co., 3.05% due 1/20/2021 | A/A2 | 25,000 | 25,388 | |||||||||||||
|
| ||||||||||||||||
| 328,695 | |||||||||||||||||
|
| ||||||||||||||||
MATERIALS — 0.52% | |||||||||||||||||
Chemicals — 0.52% | |||||||||||||||||
| b | Chevron Phillips Chemical Co., LLC, Floating Rate Note, 2.061% due 5/1/2020 | A-/A2 | 100,000 | 100,436 | |||||||||||||
|
| ||||||||||||||||
| 100,436 | |||||||||||||||||
|
| ||||||||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 1.35% | |||||||||||||||||
Biotechnology — 0.52% | |||||||||||||||||
Gilead Sciences, Inc., 1.85% due 9/20/2019 | A/A3 | 100,000 | 100,079 | ||||||||||||||
Pharmaceuticals — 0.83% | |||||||||||||||||
| a | Allergan Funding SCS, 2.35% due 3/12/2018 | BBB/Baa3 | 60,000 | 60,175 | |||||||||||||
| a | Mylan N.V., 3.00% due 12/15/2018 | BBB-/Baa3 | 100,000 | 101,129 | |||||||||||||
|
| ||||||||||||||||
| 261,383 | |||||||||||||||||
|
| ||||||||||||||||
32 | Annual Reports
Schedule of Investments, Continued
Thornburg Low Duration Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
REAL ESTATE — 0.52% | |||||||||||||||||
Equity Real Estate Investment Trusts — 0.52% | |||||||||||||||||
Select Income REIT, 2.85% due 2/1/2018 | BBB-/Baa2 | $ | 100,000 | $ | 100,228 | ||||||||||||
|
| ||||||||||||||||
| 100,228 | |||||||||||||||||
|
| ||||||||||||||||
RETAILING — 0.26% | |||||||||||||||||
Internet & Direct Marketing Retail — 0.26% | |||||||||||||||||
The Priceline Group, Inc., 2.75% due 3/15/2023 | BBB+/Baa1 | 50,000 | 49,949 | ||||||||||||||
|
| ||||||||||||||||
| 49,949 | |||||||||||||||||
|
| ||||||||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.17% | |||||||||||||||||
Semiconductors & Semiconductor Equipment — 1.17% | |||||||||||||||||
| b | Broadcom Corp./Broadcom Cayman Finance Ltd., 2.375% due 1/15/2020 | BBB-/Baa2 | 125,000 | 125,690 | |||||||||||||
Qualcomm, Inc. Floating Rate Note, 1.676% due 5/20/2019 | A/A1 | 50,000 | 50,192 | ||||||||||||||
Qualcomm, Inc. Floating Rate Note, 1.766% due 5/20/2020 | A/A1 | 50,000 | 50,317 | ||||||||||||||
|
| ||||||||||||||||
| 226,199 | |||||||||||||||||
|
| ||||||||||||||||
SOFTWARE & SERVICES — 3.33% | |||||||||||||||||
Information Technology Services — 1.30% | |||||||||||||||||
Fidelity National Information Services, Inc., 2.85% due 10/15/2018 | BBB/Baa2 | 150,000 | 151,752 | ||||||||||||||
Total System Services, Inc., 2.375% due 6/1/2018 | BBB-/Baa3 | 100,000 | 100,340 | ||||||||||||||
Internet Software & Services — 0.60% | |||||||||||||||||
eBay, Inc., 2.50% due 3/9/2018 | BBB+/Baa1 | 115,000 | 115,446 | ||||||||||||||
Software — 1.43% | |||||||||||||||||
Autodesk, Inc., 3.125% due 6/15/2020 | BBB/Baa2 | 100,000 | 101,711 | ||||||||||||||
CA Technologies, Inc., 2.875% due 8/15/2018 | BBB+/Baa2 | 125,000 | 126,148 | ||||||||||||||
VMware, Inc., 2.30% due 8/21/2020 | BBB-/Baa2 | 50,000 | 50,146 | ||||||||||||||
|
| ||||||||||||||||
| 645,543 | |||||||||||||||||
|
| ||||||||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.48% | |||||||||||||||||
Communications Equipment — 1.30% | |||||||||||||||||
Cisco Systems, Inc. Floating Rate Note, 1.916% due 2/21/2018 | AA-/A1 | 150,000 | 150,354 | ||||||||||||||
Juniper Networks, Inc., 3.30% due 6/15/2020 | BBB/Baa2 | 100,000 | 102,518 | ||||||||||||||
Technology, Hardware, Storage & Peripherals — 1.18% | |||||||||||||||||
Apple, Inc. Floating Rate Note, 2.134% due 2/22/2019 | AA+/Aa1 | 50,000 | 50,544 | ||||||||||||||
Apple, Inc. Floating Rate Note, 2.444% due 2/23/2021 | AA+/Aa1 | 50,000 | 51,533 | ||||||||||||||
Apple, Inc. Floating Rate Note, 1.811% due 2/9/2022 | AA+/Aa1 | 25,000 | 25,343 | ||||||||||||||
Hewlett Packard Enterprise Co. Floating Rate Note, 3.231% due 10/5/2018 | BBB/Baa2 | 100,000 | 101,544 | ||||||||||||||
|
| ||||||||||||||||
| 481,836 | |||||||||||||||||
|
| ||||||||||||||||
TELECOMMUNICATION SERVICES — 1.04% | |||||||||||||||||
Diversified Telecommunication Services — 1.04% | |||||||||||||||||
AT&T, Inc., 2.227% due 11/27/2018 | BBB+/Baa1 | 50,000 | 50,397 | ||||||||||||||
AT&T, Inc., 2.45% due 6/30/2020 | BBB+/Baa1 | 100,000 | 100,713 | ||||||||||||||
AT&T, Inc., 2.263% due 6/30/2020 | BBB+/Baa1 | 50,000 | 50,677 | ||||||||||||||
|
| ||||||||||||||||
| 201,787 | |||||||||||||||||
|
| ||||||||||||||||
TRANSPORTATION — 0.57% | |||||||||||||||||
Air Freight & Logistics — 0.04% | |||||||||||||||||
| b | FedEx Corp. 2012 Pass-Through Trust, 2.625% due 1/15/2018 | BBB/Baa1 | 7,210 | 7,207 | |||||||||||||
Road & Rail — 0.53% | |||||||||||||||||
| b | Penske Truck Leasing Co. LP/PTL Finance Corp., 3.20% due 7/15/2020 | BBB/Baa2 | 100,000 | 102,479 | |||||||||||||
|
| ||||||||||||||||
| 109,686 | |||||||||||||||||
|
| ||||||||||||||||
UTILITIES — 4.66% | |||||||||||||||||
Electric Utilities — 4.14% | |||||||||||||||||
Cleveland Electric Illuminating Co., 7.88% due 11/1/2017 | BBB+/Baa1 | 185,000 | 185,821 | ||||||||||||||
Duke Energy Florida Project Finance, LLC, 1.196% due 3/1/2022 | AAA/Aaa | 164,344 | 163,060 | ||||||||||||||
| a,b | Electricite de France S.A., 2.15% due 1/22/2019 | A-/A3 | 100,000 | 100,389 | |||||||||||||
Annual Reports | 33
Schedule of Investments, Continued
Thornburg Low Duration Income Fund | September 30, 2017
| ISSUER-DESCRIPTION | CREDIT RATING† S&P/MOODY’S | PRINCIPAL AMOUNT | VALUE | ||||||||||||||
Exelon Corp., 2.85% due 6/15/2020 | BBB-/Baa2 | $ | 50,000 | $ | 50,994 | ||||||||||||
| a,b | State Grid Overseas Investment (2014) Ltd., 2.75% due 5/7/2019 | A+/A1 | 200,000 | 201,928 | |||||||||||||
The Southern Co., 2.45% due 9/1/2018 | BBB+/Baa2 | 100,000 | 100,698 | ||||||||||||||
Multi-Utilities — 0.52% | |||||||||||||||||
Dominion Gas Holdings, LLC, 2.50% due 12/15/2019 | BBB+/A2 | 100,000 | 100,830 | ||||||||||||||
|
| ||||||||||||||||
| 903,720 | |||||||||||||||||
|
| ||||||||||||||||
TOTAL CORPORATE BONDS (Cost $8,318,966) | 8,393,043 | ||||||||||||||||
|
| ||||||||||||||||
| CONVERTIBLE BONDS — 0.26% | |||||||||||||||||
REAL ESTATE — 0.26% | |||||||||||||||||
Equity Real Estate Investment Trusts — 0.26% | |||||||||||||||||
| b | IAS Operating Partnership LP, 5.00% due 3/15/2018 | NR/NR | 50,000 | 50,500 | |||||||||||||
|
| ||||||||||||||||
| 50,500 | |||||||||||||||||
|
| ||||||||||||||||
TOTAL CONVERTIBLE BONDS (Cost $49,495) | 50,500 | ||||||||||||||||
|
| ||||||||||||||||
| MUNICIPAL BONDS — 1.83% | |||||||||||||||||
Colorado Educational and Cultural Facilities Authority, 2.244% due 3/1/2021 (University of Denver Project) | NR/A1 | 50,000 | 49,732 | ||||||||||||||
Colorado Educational and Cultural Facilities Authority, 2.474% due 3/1/2022 (University of Denver Project) | NR/A1 | 50,000 | 49,863 | ||||||||||||||
JobsOhio Beverage System, 2.217% due 1/1/2019 (State Liquor Enterprise) | AA/Aa3 | 100,000 | 100,527 | ||||||||||||||
Los Angeles County Public Works Financing Authority, 5.591% due 8/1/2020 (Los Angeles County & USC Medical Center Projects) | AA/Aa2 | 100,000 | 109,236 | ||||||||||||||
Louisiana Local Government Environmental Facilities and Community Development Authority, 1.66% due 2/1/2022 (Louisiana Utilities Restoration) | AAA/Aaa | 45,407 | 45,183 | ||||||||||||||
|
| ||||||||||||||||
TOTAL MUNICIPAL BONDS (Cost $353,988) | 354,541 | ||||||||||||||||
|
| ||||||||||||||||
| SHORT TERM INVESTMENTS — 12.56% | |||||||||||||||||
| d | Thornburg Capital Management Fund | 243,503 | 2,435,027 | ||||||||||||||
|
| ||||||||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $2,435,027) | 2,435,027 | ||||||||||||||||
|
| ||||||||||||||||
| TOTAL INVESTMENTS — 100.14% (Cost $19,336,844) | $ | 19,413,600 | |||||||||||||||
| LIABILITIES NET OF OTHER ASSETS — (0.14)% | (27,642 | ) | |||||||||||||||
|
| ||||||||||||||||
| NET ASSETS — 100.00% | $ | 19,385,958 | |||||||||||||||
|
| ||||||||||||||||
|
| ||||||||||||||||
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. As of September 30, 2017, the aggregate value of these securities in the Fund’s portfolio was $6,245,143, representing 32.21% of the Fund’s net assets. |
| c | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees’ Audit Committee. |
| d | Investment in Affiliates - Shown below are holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940, including companies for which the Fund’s holding represented 5% or more of the company’s voting securities, and a series of the Thornburg Investment Trust in which the Fund invested for cash management purposes during the period: |
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2017 | MARKET VALUE SEPTEMBER 30, 2017 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | |||||||||||||||||||||||||||||||||
Thornburg Capital Management Fund | 136,327 | 1,474,101 | 1,366,925 | 243,503 | $ | 2,435,027 | $ | 14,128 | $ | – | $ | – | |||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 12.56% of net assets | $ | 2,435,027 | $ | 14,128 | $ | – | $ | – | |||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| CMO | Collateralized Mortgage Obligation | |||||
| Mtg | Mortgage | |||||
| REIT | Real Estate Investment Trust | |||||
| SBA | Small Business Administration |
See notes to financial statements.
34 | Annual Reports
Statements of Assets and Liabilities
September 30, 2017
| THORNBURG LIMITED TERM U.S. GOVERNMENT FUND | THORNBURG LIMITED TERM INCOME FUND | THORNBURG LOW DURATION INCOME FUND | |||||||||||||
ASSETS |
| ||||||||||||||
Investments at value (Note 3) | |||||||||||||||
Non-affiliated issuers (cost $284,479,287, $4,823,527,774 and $16,901,817, respectively) | $ | 284,116,152 | $ | 4,876,734,136 | $ | 16,978,573 | |||||||||
Non-controlled affiliated issuer (cost $0, $0, and $2,435,027 respectively) | – | – | 2,435,027 | ||||||||||||
Cash | 82,471 | 27,512,728 | – | ||||||||||||
Receivable for investments sold | 1,304,063 | 18,836,077 | – | ||||||||||||
Receivable for fund shares sold | 203,005 | 13,449,346 | 106,953 | ||||||||||||
Receivable from investment advisor | – | – | 4,479 | ||||||||||||
Dividends receivable | – | – | 2,608 | ||||||||||||
Dividend and interest reclaim receivable | – | 4,050 | – | ||||||||||||
Interest receivable | 927,167 | 25,664,050 | 58,777 | ||||||||||||
Prepaid expenses and other assets | 36,800 | 50,398 | 11,830 | ||||||||||||
|
| ||||||||||||||
Total Assets | 286,669,658 | 4,962,250,785 | 19,598,247 | ||||||||||||
|
| ||||||||||||||
LIABILITIES |
| ||||||||||||||
Payable for investments purchased | – | 52,940,673 | 103,244 | ||||||||||||
Payable for fund shares redeemed | 1,003,623 | 7,500,967 | 51,523 | ||||||||||||
Payable to investment advisor and other affiliates (Note 4) | 141,297 | 2,122,117 | – | ||||||||||||
Accounts payable and accrued expenses | 128,607 | 981,631 | 56,062 | ||||||||||||
Dividends payable | 70,324 | 892,894 | 1,460 | ||||||||||||
|
| ||||||||||||||
Total Liabilities | 1,343,851 | 64,438,282 | 212,289 | ||||||||||||
|
| ||||||||||||||
NET ASSETS | $ | 285,325,807 | $ | 4,897,812,503 | $ | 19,385,958 | |||||||||
|
| ||||||||||||||
NET ASSETS CONSIST OF |
| ||||||||||||||
Undistributed (distribution in excess) net investment income | $ | (43,412 | ) | $ | (551,953 | ) | $ | 6,262 | |||||||
Net unrealized appreciation (depreciation) on investments | (363,135 | ) | 53,206,362 | 76,756 | |||||||||||
Accumulated net realized gain (loss) | (10,695,357 | ) | (1,106,741 | ) | (4,238 | ) | |||||||||
Net capital paid in on shares of beneficial interest | 296,427,711 | 4,846,264,835 | 19,307,178 | ||||||||||||
|
| ||||||||||||||
| $ | 285,325,807 | $ | 4,897,812,503 | $ | 19,385,958 | ||||||||||
|
| ||||||||||||||
Annual Reports | 35
Statements of Assets and Liabilities, Continued
September 30, 2017
| THORNBURG LIMITED TERM U.S. GOVERNMENT FUND | THORNBURG LIMITED TERM INCOME FUND | THORNBURG LOW DURATION INCOME FUND | |||||||||||||
NET ASSET VALUE |
| ||||||||||||||
Class A Shares: |
| ||||||||||||||
Net asset value and redemption price per share | $ | 13.01 | $ | 13.44 | $ | 12.42 | |||||||||
Maximum sales charge, 1.50% of offering price | 0.20 | 0.20 | 0.19 | ||||||||||||
|
| ||||||||||||||
Maximum offering price per share | $ | 13.21 | $ | 13.64 | $ | 12.61 | |||||||||
|
| ||||||||||||||
Class C Shares: |
| ||||||||||||||
Net asset value and redemption price per share | $ | 13.09 | $ | 13.42 | $ | – | |||||||||
|
| ||||||||||||||
Class I Shares: |
| ||||||||||||||
Net asset value and redemption price per share* | $ | 13.01 | $ | 13.44 | $ | 12.41 | |||||||||
|
| ||||||||||||||
Class R3 Shares: |
| ||||||||||||||
Net asset value and redemption price per share | $ | 13.02 | $ | 13.45 | $ | – | |||||||||
|
| ||||||||||||||
Class R4 Shares: |
| ||||||||||||||
Net asset value and redemption price per share | $ | 13.01 | $ | 13.43 | $ | – | |||||||||
|
| ||||||||||||||
Class R5 Shares: |
| ||||||||||||||
Net asset value and redemption price per share | $ | 13.02 | $ | 13.44 | $ | – | |||||||||
|
| ||||||||||||||
Class R6 Shares: |
| ||||||||||||||
Net asset value and redemption price per share | $ | – | $ | 13.46 | $ | – | |||||||||
|
| ||||||||||||||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
36 | Annual Reports
Year Ended September 30, 2017
| THORNBURG LIMITED TERM U.S. GOVERNMENT FUND | THORNBURG LIMITED TERM INCOME FUND | THORNBURG LOW DURATION INCOME FUND | |||||||||||||
INVESTMENT INCOME | |||||||||||||||
Dividend income non-controlled affiliated issuer | $ | – | $ | – | $ | 14,128 | |||||||||
Interest income (net of premium amortized of $799,421, $7,491,028, | 5,880,024 | 126,965,049 | 413,936 | ||||||||||||
|
| ||||||||||||||
Total Income | 5,880,024 | 126,965,049 | 428,064 | ||||||||||||
EXPENSES | |||||||||||||||
Investment advisory fees (Note 4) | 1,122,419 | 16,240,770 | 87,657 | ||||||||||||
Administration fees (Note 4) | |||||||||||||||
Class A Shares | 126,537 | 1,244,188 | 9,539 | ||||||||||||
Class C Shares | 51,898 | 774,309 | – | ||||||||||||
Class I Shares | 66,694 | 1,503,171 | 7,142 | ||||||||||||
Class R3 Shares | 20,932 | 125,459 | – | ||||||||||||
Class R4 Shares | 3,200 | 9,316 | – | ||||||||||||
Class R5 Shares | 1,935 | 42,882 | – | ||||||||||||
Class R6 Shares* | – | 51 | – | ||||||||||||
Distribution and service fees (Note 4) | |||||||||||||||
Class A Shares | 253,074 | 2,488,377 | 15,271 | ||||||||||||
Class C Shares | 207,480 | 3,094,822 | – | ||||||||||||
Class R3 Shares | 82,946 | 501,285 | – | ||||||||||||
Class R4 Shares | 6,401 | 18,660 | – | ||||||||||||
Transfer agent fees | |||||||||||||||
Class A Shares | 88,204 | 1,250,430 | 29,601 | ||||||||||||
Class C Shares | 49,658 | 507,136 | – | ||||||||||||
Class I Shares | 110,582 | 2,463,191 | 9,544 | ||||||||||||
Class R3 Shares | 40,361 | 112,742 | – | ||||||||||||
Class R4 Shares | 8,349 | 40,136 | – | ||||||||||||
Class R5 Shares | 8,805 | 200,178 | – | ||||||||||||
Class R6 Shares* | – | 4,425 | – | ||||||||||||
Registration and filing fees | |||||||||||||||
Class A Shares | 24,085 | 52,147 | 24,739 | ||||||||||||
Class C Shares | 18,180 | 31,270 | – | ||||||||||||
Class I Shares | 27,601 | 127,719 | 24,857 | ||||||||||||
Class R3 Shares | 15,105 | 17,597 | – | ||||||||||||
Class R4 Shares | 20,673 | 20,703 | – | ||||||||||||
Class R5 Shares | 18,700 | 19,734 | – | ||||||||||||
Class R6 Shares* | – | 20,059 | – | ||||||||||||
Custodian fees (Note 2) | 111,023 | 460,569 | 41,058 | ||||||||||||
Professional fees | 37,124 | 82,600 | 19,512 | ||||||||||||
Accounting fees (Note 4) | 11,106 | 174,285 | 973 | ||||||||||||
Trustee fees | 12,645 | 203,897 | 1,003 | ||||||||||||
Other expenses | 42,733 | 434,201 | 11,211 | ||||||||||||
|
| ||||||||||||||
Total Expenses | 2,588,450 | 32,266,309 | 282,107 | ||||||||||||
Less: | |||||||||||||||
Expenses reimbursed by investment advisor (Note 4) | (120,893 | ) | (213,889 | ) | (109,382 | ) | |||||||||
Investment advisory fees waived by investment advisor (Note 4) | – | – | (51,621 | ) | |||||||||||
|
| ||||||||||||||
Net Expenses | 2,467,557 | 32,052,420 | 121,104 | ||||||||||||
|
| ||||||||||||||
Net Investment Income | $ | 3,412,467 | $ | 94,912,629 | $ | 306,960 | |||||||||
|
| ||||||||||||||
* Class R6 shares commenced operations on April 10, 2017.
Annual Reports | 37
Statements of Operations, Continued
Year Ended September 30, 2017
| THORNBURG LIMITED TERM U.S. GOVERNMENT FUND | THORNBURG LIMITED TERM INCOME FUND | THORNBURG LOW DURATION INCOME FUND | |||||||||||||
REALIZED AND UNREALIZED GAIN (LOSS) | |||||||||||||||
Net realized gain (loss) on investments | $ | (141,703 | ) | $ | 4,118,291 | $ | 15,683 | ||||||||
Net change in unrealized appreciation (depreciation) on investments | (4,990,963 | ) | (26,512,951 | ) | (100,999 | ) | |||||||||
|
| ||||||||||||||
Net Realized and Unrealized Gain (Loss) | (5,132,666 | ) | (22,394,660 | ) | (85,316 | ) | |||||||||
|
| ||||||||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (1,720,199 | ) | $ | 72,517,969 | $ | 221,644 | ||||||||
|
| ||||||||||||||
See notes to financial statements.
38 | Annual Reports
Statements of Changes in Net Assets
Thornburg Limited Term U.S. Government Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM |
| |||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 3,412,467 | $ | 3,717,056 | ||||||
Net realized gain (loss) on investments | (141,703 | ) | 431,056 | |||||||
Net unrealized appreciation (depreciation) on investments | (4,990,963 | ) | 624,568 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | (1,720,199 | ) | 4,772,680 | |||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (1,410,540 | ) | (1,621,961 | ) | ||||||
Class B Shares | – | (213 | ) | |||||||
Class C Shares | (453,387 | ) | (599,665 | ) | ||||||
Class I Shares | (2,295,862 | ) | (2,370,502 | ) | ||||||
Class R3 Shares | (224,875 | ) | (314,773 | ) | ||||||
Class R4 Shares | (33,868 | ) | (20,171 | ) | ||||||
Class R5 Shares | (68,706 | ) | (31,611 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) |
| |||||||||
Class A Shares | (25,179,028 | ) | 6,979,231 | |||||||
Class B Shares* | – | (146,065 | ) | |||||||
Class C Shares | (12,696,392 | ) | 1,598,490 | |||||||
Class I Shares | 5,699,193 | 31,721,059 | ||||||||
Class R3 Shares | (16,613,329 | ) | 11,722,796 | |||||||
Class R4 Shares | 1,309,741 | 1,392,817 | ||||||||
Class R5 Shares | 3,629,750 | (1,602,542 | ) | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | (50,057,502 | ) | 51,479,570 | |||||||
NET ASSETS |
| |||||||||
Beginning of Year | 335,383,309 | 283,903,739 | ||||||||
|
| |||||||||
End of Year | $ | 285,325,807 | $ | 335,383,309 | ||||||
|
| |||||||||
Distribution in excess of net investment income | $ | (43,412 | ) | $ | (72,544 | ) | ||||
* Class B shares converted to Class A shares on August 29, 2016.
See notes to financial statements.
Annual Reports | 39
Statements of Changes in Net Assets
Thornburg Limited Term Income Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM |
| |||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 94,912,629 | $ | 83,440,137 | ||||||
Net realized gain (loss) on investments | 4,118,291 | 368,703 | ||||||||
Net unrealized appreciation (depreciation) on investments | (26,512,951 | ) | 67,630,273 | |||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 72,517,969 | 151,439,113 | ||||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income |
| |||||||||
Class A Shares | (18,084,025 | ) | (20,118,725 | ) | ||||||
Class C Shares | (9,988,539 | ) | (10,624,842 | ) | ||||||
Class I Shares | (65,949,540 | ) | (52,073,916 | ) | ||||||
Class R3 Shares | (1,708,910 | ) | (2,231,397 | ) | ||||||
Class R4 Shares | (127,206 | ) | (92,837 | ) | ||||||
Class R5 Shares | (1,755,011 | ) | (1,551,920 | ) | ||||||
Class R6 Shares* | (2,397 | ) | – | |||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class A Shares | (213,573,151 | ) | 117,352,214 | |||||||
Class C Shares | (96,012,073 | ) | 46,797,603 | |||||||
Class I Shares | 453,482,010 | 773,360,293 | ||||||||
Class R3 Shares | (7,046,773 | ) | (70,153,200 | ) | ||||||
Class R4 Shares | 1,803,524 | 2,318,125 | ||||||||
Class R5 Shares | 29,614,902 | (25,337,098 | ) | |||||||
Class R6 Shares* | 770,866 | – | ||||||||
|
| |||||||||
Net Increase in Net Assets | 143,941,646 | 909,083,413 | ||||||||
NET ASSETS | ||||||||||
Beginning of Year | 4,753,870,857 | 3,844,787,444 | ||||||||
|
| |||||||||
End of Year | $ | 4,897,812,503 | $ | 4,753,870,857 | ||||||
|
| |||||||||
Distribution in excess of net investment income | $ | (551,953 | ) | $ | (502,475 | ) | ||||
* Class R6 shares commenced operations on April 10, 2017.
See notes to financial statements.
40 | Annual Reports
Statements of Changes in Net Assets
Thornburg Low Duration Income Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 306,960 | $ | 235,375 | ||||||
Net realized gain (loss) on investments | 15,683 | 3,535 | ||||||||
Net unrealized appreciation (depreciation) on investments | (100,999 | ) | 163,252 | |||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 221,644 | 402,162 | ||||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (101,667 | ) | (98,936 | ) | ||||||
Class I Shares | (213,139 | ) | (145,144 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class A Shares | (3,672,037 | ) | 230,729 | |||||||
Class I Shares | (4,189,755 | ) | 8,956,507 | |||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | (7,954,954 | ) | 9,345,318 | |||||||
NET ASSETS | ||||||||||
Beginning of Year | 27,340,912 | 17,995,594 | ||||||||
|
| |||||||||
End of Year | $ | 19,385,958 | $ | 27,340,912 | ||||||
|
| |||||||||
Undistributed net investment income | $ | 6,262 | $ | 1,695 | ||||||
See notes to financial statements.
Annual Reports | 41
September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg Limited Term U.S. Government Fund (the “Government Fund”), Thornburg Limited Term Income Fund (the “Income Fund”) and Thornburg Low Duration Income Fund (the “Low Duration 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 three of twenty-one 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 Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”), with the preservation of capital. As a secondary objective, the Government Fund and the Income Fund seek to reduce changes in their share prices compared to longer term portfolios.
The Government Fund currently has six classes of shares of beneficial interest: Class A, Class C, Institutional Class (“Class I”), and Retirement Classes (“Class R3,” “Class R4,” and “Class R5”).
The Income Fund currently offers seven classes of shares of beneficial interest outstanding, Class A, Class C, Institutional Class (“Class I”), and Retirement Classes (“Class R3,” “Class R4,” “Class R5,” and “Class R6”).
The Low Duration Fund currently offers two classes of shares of beneficial interest outstanding, Class A and Institutional Class (“Class I”).
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 were subject to a contingent deferred sales charge upon redemption and bear both a service fee and distribution fee, (iii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, (iv) Class I shares are sold at net asset value without a sales charge at the time of purchase and may be subject to a service fee, (v) Class R3 shares are sold at net asset value without a sales charge, but bear both a service fee and a distribution fee, (vi) Class R4 shares are sold at net asset value without a sales charge at the time of purchase but bear a service fee, (vii) Class R5 shares are sold at net asset value without a sales charge at the time of purchase and may be subject to a service fee, (viii) Class R6 shares are sold at net asset value without a sales charge at the time of purchase, and (ix) 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.
The following is a summary of significant accounting policies followed by the Funds in the preparation of its financial statements. Each Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by the Advisor. Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations. Dividend income is recorded on the ex-dividend date.
42 | Annual Reports
Notes to Financial Statements, Continued
September 30, 2017
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
Repurchase Agreements: The Funds may invest excess cash in repurchase agreements whereby the Funds purchase investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
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 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.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017 including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
| GOVERNMENT FUND | INCOME FUND | LOW DURATION FUND | ||||||||||||||||||||||||||||
Cost of investments for tax purposes | $ | 284,479,888 | $ | 4,823,535,595 | $ | 19,336,852 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Gross unrealized appreciation on a tax basis | $ | 1,480,120 | $ | 67,031,074 | $ | 102,858 | ||||||||||||||||||||||||
Gross unrealized depreciation on a tax basis | (1,843,856 | ) | (13,832,533 | ) | (26,110 | ) | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | (363,736 | ) | $ | 53,198,541 | $ | 76,748 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Temporary book to tax adjustments to the cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of outstanding wash sale losses and outstanding Treasury Inflation-Protected Securities (“TIPS”) deflation adjustments.
At September 30, 2017, the Funds had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 as follows. For tax purposes, such losses will be recognized in the year ending September 30, 2018:
| GOVERNMENT FUND | INCOME FUND | LOW DURATION FUND | ||||||||||||||||||||||||||||
Deferred tax basis capital losses | $ | 1,148,202 | $ | – | $ | 4,239 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Annual Reports | 43
Notes to Financial Statements, Continued
September 30, 2017
At September 30, 2017, the Government Fund had cumulative tax basis capital losses of $9,423,085, (of which $2,067,255 are short-term and $7,355,830 are 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 generated prior to October 1, 2011 which may expire prior to utilization.
During the year ended September 30, 2017, the Government Fund utilized $24,008 of short-term capital loss carryforwards generated after September 30, 2011.
Capital loss carryforwards generated prior to October 31, 2011 expire as follows:
2018 | $ | 17,316 | |||
2019 | 106,151 | ||||
|
| ||||
| $ | 123,467 | ||||
|
|
At September 30, 2017, the Income Fund had cumulative tax basis capital losses of $1,098,922, (of which $1,098,922 are short-term and $0 are 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.
During the year ended September 30, 2017, the Income Fund utilized $2,252,409 of long-term capital loss carryforwards generated after September 30, 2011.
During the year ended September 30, 2017, the Low Duration Fund utilized $3,471 of long-term capital loss carryforwards generated after September 30, 2011.
In order to account for permanent book to tax differences, the Government Fund decreased distribution in excess of net investment income by $1,103,903, increased accumulated net realized loss by $1,109,324, and increased net capital paid in on shares of beneficial interest by $5,421. The Income Fund decreased distribution in excess of net investment income by $2,653,521 and decreased accumulated net realized loss by $2,653,521. The Low Duration Fund increased undistributed net investment income by $12,413, decreased accumulated net realized gain (loss) by $12,400, and decreased net capital paid in on shares of beneficial interest by $13. Reclassifications have no impact upon the net asset value of the Funds and result primarily from mortgage-backed securities (“MBS”) losses and a nondeductible excise tax liability.
At September 30, 2017, the Funds had undistributed tax basis ordinary investment income and undistributed tax basis capital gains
as follows:
| GOVERNMENT FUND | INCOME FUND | LOW DURATION FUND | ||||||||||||||||||||||||||||
Undistributed tax basis ordinary investment income | $ | 26,914 | $ | 340,940 | $ | 7,732 | ||||||||||||||||||||||||
Undistributed tax basis capital gains | $ | – | $ | – | $ | – | ||||||||||||||||||||||||
The tax character of distributions paid for the Funds during the years ended September 30, 2017, and September 30, 2016, was as follows:
| GOVERNMENT FUND | INCOME FUND | LOW DURATION FUND | ||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
Distributions from: |
| |||||||||||||||||||||||
Ordinary income | $ | 4,487,238 | $ | 4,940,293 | $ | 97,615,628 | $ | 86,693,637 | $ | 314,806 | $ | 244,080 | ||||||||||||
Return of capital | – | 18,603 | – | – | – | – | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total | $ | 4,487,238 | $ | 4,958,896 | $ | 97,615,628 | $ | 86,693,637 | $ | 314,806 | $ | 244,080 | ||||||||||||
|
| |||||||||||||||||||||||
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining
44 | Annual Reports
Notes to Financial Statements, Continued
September 30, 2017
fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Debt obligations held by the Funds which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Funds, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Valuation Hierarchy: The Funds categorize investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from the FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for a 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 calculating the fair values of investments).
Valuations for debt obligations held by a Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment and application of discounts 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 a Fund may receive a price that is lower than the valuation based upon these inputs when it sells the investment.
Annual Reports | 45
Notes to Financial Statements, Continued
September 30, 2017
GOVERNMENT FUND
The following table displays a summary of the fair value hierarchy measurements of the Government Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
U.S. Treasury Securities | $ | 68,988,019 | $ | 68,988,019 | $ | – | $ | – | ||||||||||||
U.S. Government Agencies | 51,509,359 | – | 51,509,359 | – | ||||||||||||||||
Mortgage Backed | 146,368,857 | – | 146,368,857 | – | ||||||||||||||||
Short Term Investments | 17,249,917 | – | 17,249,917 | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 284,116,152 | $ | 68,988,019 | $ | 215,128,133 | $ | – | ||||||||||||
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, 2017.
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2017 is as follows:
| U.S. GOVERNMENT AGENCIES | TOTAL(b) | |||||||||
Beginning Balance 9/30/2016 | $ | 2,863,421 | $ | 2,863,421 | ||||||
Accrued Discounts (Premiums) | – | – | ||||||||
Net Realized Gain (Loss) | – | – | ||||||||
Gross Purchases | – | – | ||||||||
Gross Sales | – | – | ||||||||
Net Change in Unrealized | – | – | ||||||||
Transfers into Level 3(a) | – | – | ||||||||
Transfers out of Level 3(a) | (2,863,421 | ) | (2,863,421 | ) | ||||||
|
| |||||||||
Ending Balance 9/30/2017 | $ | – | $ | – | ||||||
| (a) | 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, 2017. Transfers into or out of Level 3 are based on the beginning market value of the period in which they occurred. |
| (b) | Level 3 investments represent 0.00% of total net assets at the year ended September 30, 2017. Significant fluctuations of the unobservable inputs applied to portfolio securities characterized as Level 3 investments could be expected to increase or decrease the fair value of these portfolio securities. |
INCOME FUND
The following table displays a summary of the fair value hierarchy measurements of the Income Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3(a) | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
U.S. Treasury Securities | $ | 264,032,538 | $ | 264,032,538 | $ | – | $ | – | ||||||||||||
U.S. Government Agencies | 190,116,712 | – | 186,769,312 | 3,347,400 | ||||||||||||||||
Other Government | 74,314,865 | – | 74,314,865 | – | ||||||||||||||||
Mortgage Backed | 348,070,988 | – | 348,070,988 | – | ||||||||||||||||
Asset Backed Securities | 1,072,173,689 | – | 1,051,639,951 | 20,533,738 | ||||||||||||||||
Corporate Bonds | 2,294,533,937 | – | 2,294,533,937 | – | ||||||||||||||||
Convertible Bonds | 20,149,500 | – | 20,149,500 | – | ||||||||||||||||
Municipal Bonds | 107,798,730 | – | 107,798,730 | – | ||||||||||||||||
Short Term Investments | 505,543,177 | – | 505,543,177 | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 4,876,734,136 | $ | 264,032,538 | $ | 4,588,820,460 | $ | 23,881,138 | ||||||||||||
46 | Annual Reports
Notes to Financial Statements, Continued
September 30, 2017
| (a) | In accordance with the guidance prescribed in Accounting Standards Update (“ASU”) No. 2011-04, no unadjusted broker quotes were applied to portfolio securities characterized as Level 3 investments at September 30, 2017. The following table displays a summary of the valuation techniques and unobservable inputs used to value portfolio securities characterized as Level 3 investments, where no unadjusted broker quotes were available at September 30, 2017: |
| FAIR VALUE AT SEPTEMBER 30, 2017 | VALUATION TECHNIQUE(S) | UNOBSERVABLE INPUT | RANGE/ (WEIGHTED AVERAGE) | |||||||||
U.S. Government Agencies | �� | 3,347,400 | Market comparable securities yield method | Yields of comparable securities | 3.06%/ | (N/A) | ||||||
Asset-Backed Securities | 9,233,739 | Discounted cash flows | Third party vendor projection of discounted cash flows | 2.50% – 5.0%/ | (2.98%) | |||||||
| 11,299,999 | Cost basis | Cost basis | $ | 100.00/ | (N/A) | |||||||
Total | $ | 23,881,138 | ||||||||||
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, 2017.
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2017 is as follows:
| ASSET BACKED SECURITIES | U.S. GOVERNMENT AGENCIES | TOTAL(d) | |||||||||||||
Beginning Balance 9/30/2016 | $ | 9,667,174 | $ | 3,540,000 | $ | 13,207,174 | |||||||||
Accrued Discounts (Premiums) | 13,565 | (41,441 | ) | (27,876 | ) | ||||||||||
Net Realized Gain (Loss)(a) | 67,144 | – | 67,144 | ||||||||||||
Gross Purchases | 11,299,999 | – | 11,299,999 | ||||||||||||
Gross Sales | (525,000 | ) | – | (525,000 | ) | ||||||||||
Net Change in Unrealized | 10,856 | (151,159 | ) | (140,303 | ) | ||||||||||
Transfers into Level 3 | – | – | – | ||||||||||||
Transfers out of Level 3 | – | – | – | ||||||||||||
|
| ||||||||||||||
Ending Balance 9/30/2017 | $ | 20,533,738 | $ | 3,347,400 | $ | 23,881,138 | |||||||||
| (a) | Amount of net realized gain (loss) from investments recognized in income is included in the Fund’s Statement of Operations for the year ended September 30, 2017. |
| (b) | Amount of net change in unrealized appreciation (depreciation) on investments recognized in income is included in the Fund’s Statement of Operations for the year ended September 30, 2017. |
| (c) | The net change in unrealized appreciation (depreciation) attributable to securities owned at September 30, 2017, which were valued using significant unobservable inputs, was ($140,303). This is included within net change in unrealized appreciation (depreciation) on investments in the Fund’s the Statement of Operations for the year ended September 30, 2017. |
| (d) | Level 3 investments represent 0.49% of total net assets at the year ended September 30, 2017. Significant fluctuations of the unobservable inputs applied to portfolio securities characterized as Level 3 investments could be expected to increase or decrease the fair value of these portfolio securities. |
LOW DURATION FUND
The following table displays a summary of the fair value hierarchy measurements of the Low Duration Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3(a) | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
U.S. Treasury Securities | $ | 1,331,370 | $ | 1,331,370 | $ | – | $ | – | ||||||||||||
U.S. Government Agencies | 618,143 | – | 618,143 | – | ||||||||||||||||
Other Government | 199,756 | – | 199,756 | – | ||||||||||||||||
Mortgage Backed | 1,051,341 | – | 1,051,341 | – | ||||||||||||||||
Asset Backed Securities | 4,979,879 | – | 4,809,599 | 170,280 | ||||||||||||||||
Corporate Bonds | 8,393,043 | – | 8,393,043 | – | ||||||||||||||||
Convertible Bonds | 50,500 | – | 50,500 | – | ||||||||||||||||
Municipal Bonds | 354,541 | – | 354,541 | – | ||||||||||||||||
Short Term Investments | 2,435,027 | 2,435,027 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 19,413,600 | $ | 3,766,397 | $ | 15,476,923 | $ | 170,280 | ||||||||||||
Annual Reports | 47
Notes to Financial Statements, Continued
September 30, 2017
| (a) | In accordance with the guidance prescribed in Accounting Standards Update (“ASU”) No. 2011-04, no unadjusted broker quotes were applied to portfolio securities characterized as Level 3 investments at September 30, 2017. The following table displays a summary of the valuation techniques and unobservable inputs used to value portfolio securities characterized as Level 3 investments, where no unadjusted broker quotes were available at September 30, 2017: |
| FAIR VALUE AT SEPTEMBER 30, 2017 | VALUATION TECHNIQUE(S) | UNOBSERVABLE INPUT | RANGE/ (WEIGHTED AVERAGE) | |||||||||
Asset-Backed Securities | 70,280 | Discounted cash flows | Third party vendor projection of discounted cash flows | 2.50%/(N/A | ) | |||||||
| 100,000 | Cost basis | Cost basis | $ | 100.00/(N/A | ) | |||||||
Total | $ | 170,280 | ||||||||||
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, 2017.
A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the year ended September 30, 2017 is as follows:
| ASSET BACKED SECURITIES | TOTAL(c) | |||||||||
Beginning Balance 9/30/2016 | $ | 69,994 | $ | 69,994 | ||||||
Accrued Discounts (Premiums) | 1 | 1 | ||||||||
Net Realized Gain (Loss) | – | – | ||||||||
Gross Purchases | 100,000 | 100,000 | ||||||||
Gross Sales | – | – | ||||||||
Net Change in Unrealized | 285 | 285 | ||||||||
Transfers into Level 3 | – | – | ||||||||
Transfers out of Level 3 | – | – | ||||||||
|
|
|
| |||||||
Ending Balance 9/30/2017 | $ | 170,280 | $ | 170,280 | ||||||
| (a) | Amount of net change in unrealized appreciation (depreciation) on investments recognized in income is included in the Fund’s Statement of Operations for the year ended September 30, 2017. |
| (b) | The net change in unrealized appreciation (depreciation) attributable to securities owned at September 30, 2017, which were valued using significant unobservable inputs, was $285. This is included within net change in unrealized appreciation (depreciation) on investments in the Fund’s the Statement of Operations for the year ended September 30, 2017. |
| (c) | Level 3 investments represent 0.88% of total net assets at the year ended September 30, 2017. Significant fluctuations of the unobservable inputs applied to portfolio securities characterized as Level 3 investments could be expected to increase or decrease the fair value of these portfolio securities. |
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, a Fund pays the Advisor a management fee based on the daily net assets of a Fund at an annual rate as shown in the following table:
| MANAGEMENT FEE SCHEDULE | |||||||||||||||||||||
| GOVERNMENT FUND | INCOME FUND | LOW DURATION FUND | |||||||||||||||||||
| DAILY NET ASSETS | FEE RATE | DAILY NET ASSETS | FEE RATE | DAILY NET ASSETS | FEE RATE | ||||||||||||||||
Up to $1 billion | 0.375 | % | Up to $500 million | 0.500 | % | Up to $1 Billion | 0.400 | % | |||||||||||||
Next $1 billion | 0.325 | Next $500 million | 0.450 | Next $500 million | 0.300 | ||||||||||||||||
Over $2 billion | 0.275 | Next $500 million | 0.400 | Next $500 million | 0.250 | ||||||||||||||||
Next $500 million | 0.350 | Over $2 billion | 0.225 | ||||||||||||||||||
Over $2 billion | 0.275 | ||||||||||||||||||||
The Government Fund’s effective management fee for the year ended September 30, 2017 was 0.375% of the Fund’s average net assets.
The Income Fund’s effective management fee for the year ended September 30, 2017 was 0.337% of the Fund’s average net assets.
48 | Annual Reports
Notes to Financial Statements, Continued
September 30, 2017
The Low Duration Fund’s effective management fee for the year ended September 30, 2017 was 0.400% of the Fund’s average net assets, (before applicable management fee waiver of $51,621).
The Funds pay the Advisor the costs of personnel who perform certain accounting services for the Funds. For the year ended September 30, 2017 the the Government Fund, Income Fund, and Low Duration Fund incurred $11,106, $174,285, and $973 for these accounting services, respectively. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to each class of the Funds’ 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 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, Class R5, and Class R6 shares. Total administrative service fees incurred by each class of shares of the Funds for the year ended September 30, 2017, are set forth in the Statement of Operations.
The Trust has an underwriting agreement with Thornburg Securities Corporation (the “Distributor”), an affiliate of the Advisor, which acts as the distributor of the Funds’ shares. For the year ended September 30, 2017, the Distributor has advised the Funds that they earned net commissions from the sale of Class A shares and collected contingent deferred sales charges (CDSC fees) from redemptions of Class C shares as follows:
| GOVERNMENT FUND | INCOME FUND | LOW DURATION FUND | |||||||||||||
Commissions | $ | 373 | $ | 667 | $ | 1,919 | |||||||||
CDSC fees | $ | 1,478 | $ | 33,742 | $ | – | |||||||||
Pursuant to a service plan under Rule 12b-1 of the Investment Company Act of 1940, the Funds may reimburse to the Distributor an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to the applicable Class A, Class C, Class I, Class R3, Class R4, and Class R5 shares of the Funds for payments made by the Distributor to securities dealers and other financial institutions to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I or Class R5. Class R6 shares are not subject to a service plan. The Advisor and Distributor each 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 under which the Funds compensate the Distributor for services in promoting the sale of Class C and R3 shares of the Funds at 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, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Funds at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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, 2017, the Advisor contractually reimbursed certain class specific expenses, administration fees, distribution fees and voluntarily waived Fund level investment advisory fees as follows:
| GOVERNMENT FUND | INCOME FUND | LOW DURATION FUND | |||||||||||||
Contractual: | |||||||||||||||
Class A | $ | – | $ | – | $ | 67,839 | |||||||||
Class C | $ | 173 | $ | – | $ | – | |||||||||
Class I | $ | – | $ | – | $ | 41,543 | |||||||||
Class R3 | $ | 71,709 | $ | 131,122 | $ | – | |||||||||
Class R4 | $ | 24,648 | $ | 42,246 | $ | – | |||||||||
Class R5 | $ | 24,363 | $ | 16,073 | $ | – | |||||||||
Class R6 | $ | – | $ | 24,448 | $ | – | |||||||||
| GOVERNMENT FUND | INCOME FUND | LOW DURATION FUND | |||||||||||||
Voluntary: | |||||||||||||||
Class A | $ | – | $ | – | $ | 17,975 | |||||||||
Class I | $ | – | $ | – | $ | 33,646 | |||||||||
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.
Annual Reports | 49
Notes to Financial Statements, Continued
September 30, 2017
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately is approximately 7.1%, 0.0% and 33.3% for the Government Fund, Income Fund and Low Duration Fund, respectively.
The Funds may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Government Fund had no such transactions with affiliated funds. The Income Fund had transactions of $3,955,216 in purchases. The Low Duration Fund had transactions of $1,921,393 in sales resulting in net realized gains of $9,487.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,043,182 | $ | 13,641,984 | 3,244,060 | $ | 42,920,650 | ||||||||||
Shares converted from Class B shares | – | – | 3,192 | 42,268 | ||||||||||||
Shares issued to shareholders in | 98,647 | 1,287,783 | 107,867 | 1,428,746 | ||||||||||||
Shares repurchased | (3,072,808 | ) | (40,108,795 | ) | (2,825,799 | ) | (37,412,433 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (1,930,979 | ) | (25,179,028 | ) | 529,320 | 6,979,231 | ||||||||||
|
| |||||||||||||||
Class B Shares* | ||||||||||||||||
Shares sold | – | $ | – | 13,171 | $ | 173,000 | ||||||||||
Shares issued to shareholders in | – | – | 15 | 201 | ||||||||||||
Shares converted to Class A shares | – | – | (3,201 | ) | (42,268 | ) | ||||||||||
Shares repurchased | – | – | (20,937 | ) | (276,998 | ) | ||||||||||
|
| |||||||||||||||
Net decrease | – | – | (10,952 | ) | (146,065 | ) | ||||||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 340,307 | $ | 4,480,824 | 1,382,885 | $ | 18,381,110 | ||||||||||
Shares issued to shareholders in | 30,959 | 406,592 | 39,396 | 524,936 | ||||||||||||
Shares repurchased | (1,337,648 | ) | (17,583,808 | ) | (1,300,183 | ) | (17,307,556 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (966,382 | ) | (12,696,392 | ) | 122,098 | 1,598,490 | ||||||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 6,118,960 | $ | 79,886,935 | 6,846,168 | $ | 90,628,309 | ||||||||||
Shares issued to shareholders in | 119,832 | 1,564,295 | 109,182 | 1,446,413 | ||||||||||||
Shares repurchased | (5,799,169 | ) | (75,752,037 | ) | (4,567,281 | ) | (60,353,663 | ) | ||||||||
|
| |||||||||||||||
Net increase | 439,623 | 5,699,193 | 2,388,069 | 31,721,059 | ||||||||||||
|
| |||||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 466,176 | $ | 6,115,277 | 1,457,239 | $ | 19,307,025 | ||||||||||
Shares issued to shareholders in | 14,207 | 185,714 | 21,503 | 284,976 | ||||||||||||
Shares repurchased | (1,759,168 | ) | (22,914,320 | ) | (594,414 | ) | (7,869,205 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (1,278,785 | ) | (16,613,329 | ) | 884,328 | 11,722,796 | ||||||||||
|
| |||||||||||||||
50 | Annual Reports
Notes to Financial Statements, Continued
September 30, 2017
GOVERNMENT FUND (continued)
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 169,933 | $ | 2,216,399 | 120,688 | $ | 1,601,055 | ||||||||||
Shares issued to shareholders in | 2,394 | 31,240 | 1,452 | 19,238 | ||||||||||||
Shares repurchased | (71,845 | ) | (937,898 | ) | (17,154 | ) | (227,476 | ) | ||||||||
|
| |||||||||||||||
Net increase | 100,482 | 1,309,741 | 104,986 | 1,392,817 | ||||||||||||
|
| |||||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 329,217 | $ | 4,347,313 | 64,811 | $ | 858,427 | ||||||||||
Shares issued to shareholders in | 5,220 | 68,160 | 535 | 7,096 | ||||||||||||
Shares repurchased | (60,176 | ) | (785,723 | ) | (185,977 | ) | (2,468,065 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | 274,261 | 3,629,750 | (120,631 | ) | (1,602,542 | ) | ||||||||||
|
| |||||||||||||||
| *Class | B shares converted to Class A shares on August 29, 2016. |
INCOME FUND
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 16,198,382 | $ | 217,089,363 | 32,795,693 | $ | 437,429,823 | ||||||||||
Shares issued to shareholders in | 1,221,584 | 16,387,209 | 1,328,847 | 17,770,838 | ||||||||||||
Shares repurchased | (33,369,740 | ) | (447,049,723 | ) | (25,246,243 | ) | (337,848,447 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (15,949,774 | ) | (213,573,151 | ) | 8,878,297 | 117,352,214 | ||||||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 5,961,821 | $ | 79,804,114 | 12,728,067 | $ | 169,641,470 | ||||||||||
Shares issued to shareholders in | 673,533 | 9,021,184 | 711,677 | 9,500,564 | ||||||||||||
Shares repurchased | (13,809,256 | ) | (184,837,371 | ) | (9,928,440 | ) | (132,344,431 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (7,173,902 | ) | (96,012,073 | ) | 3,511,304 | 46,797,603 | ||||||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 108,211,987 | $ | 1,450,721,919 | 104,313,980 | $ | 1,394,443,302 | ||||||||||
Shares issued to shareholders in | 4,372,629 | 58,676,460 | 3,427,302 | 45,859,108 | ||||||||||||
Shares repurchased | (78,719,123 | ) | (1,055,916,369 | ) | (49,935,769 | ) | (666,942,117 | ) | ||||||||
|
| |||||||||||||||
Net increase | 33,865,493 | 453,482,010 | 57,805,513 | 773,360,293 | ||||||||||||
|
| |||||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 2,932,660 | $ | 39,309,579 | 5,362,451 | $ | 71,387,699 | ||||||||||
Shares issued to shareholders in | 114,540 | 1,538,044 | 156,543 | 2,091,489 | ||||||||||||
Shares repurchased | (3,569,214 | ) | (47,894,396 | ) | (10,779,842 | ) | (143,632,388 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (522,014 | ) | (7,046,773 | ) | (5,260,848 | ) | (70,153,200 | ) | ||||||||
|
| |||||||||||||||
Annual Reports | 51
Notes to Financial Statements, Continued
September 30, 2017
INCOME FUND (continued)
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 331,345 | $ | 4,441,374 | 363,454 | $ | 4,853,487 | ||||||||||
Shares issued to shareholders in | 4,271 | 57,281 | 1,985 | 26,613 | ||||||||||||
Shares repurchased | (201,080 | ) | (2,695,131 | ) | (190,459 | ) | (2,561,975 | ) | ||||||||
|
| |||||||||||||||
Net increase | 134,536 | 1,803,524 | 174,980 | 2,318,125 | ||||||||||||
|
| |||||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 4,583,147 | $ | 61,386,517 | 4,605,721 | $ | 61,328,527 | ||||||||||
Shares issued to shareholders in | 128,065 | 1,718,641 | 115,762 | 1,545,596 | ||||||||||||
Shares repurchased | (2,499,758 | ) | (33,490,256 | ) | (6,632,663 | ) | (88,211,221 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | 2,211,454 | 29,614,902 | (1,911,180 | ) | (25,337,098 | ) | ||||||||||
|
| |||||||||||||||
Class R6 Shares** | ||||||||||||||||
Shares sold | 56,985 | 768,647 | – | $ | – | |||||||||||
Shares issued to shareholders in | 174 | 2,348 | – | – | ||||||||||||
Shares repurchased | (9 | ) | (129 | ) | – | – | ||||||||||
|
| |||||||||||||||
Net increase | 57,150 | 770,866 | – | – | ||||||||||||
|
| |||||||||||||||
| ** | The effective date of this class of shares was April 10, 2017. |
LOW DURATION INCOME FUND
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | �� | |||||||||||||||
Shares sold | 444,814 | $ | 5,522,323 | 418,546 | $ | 5,189,601 | ||||||||||
Shares issued to shareholders in | 8,111 | 100,709 | 7,788 | 96,596 | ||||||||||||
Shares repurchased | (748,676 | ) | (9,295,069 | ) | (407,683 | ) | (5,055,468 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (295,751 | ) | (3,672,037 | ) | 18,651 | 230,729 | ||||||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 269,260 | $ | 3,343,267 | 968,154 | $ | 12,006,139 | ||||||||||
Shares issued to shareholders in | 16,170 | 200,711 | 11,204 | 139,078 | ||||||||||||
Shares repurchased | (623,427 | ) | (7,733,733 | ) | (256,766 | ) | (3,188,710 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (337,997 | ) | (4,189,755 | ) | 722,592 | 8,956,507 | ||||||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Government Fund had purchase and sale transactions of investments (excluding short-term investments) of $44,526,228 and $30,789,788, respectively
The Income Fund had purchase and sale transactions of investments (excluding short-term investments and U.S. Government obligations) of $1,226,892,896 and $981,935,034, respectively.
The Low Duration Fund had purchase and sale transactions of investments (excluding short-term investments and U.S. Government obligations) of $5,911,988 and $8,096,570, respectively.
52 | Annual Reports
Notes to Financial Statements, Continued
September 30, 2017
OTHER NOTES
Risks: Each Fund’s investments subject it to risks including, but not limited to, management risk, interest rate risk, credit risk, prepayment risk, market and economic risk, liquidity risk, structured products risk and, in the case of Income Fund and Low Duration Fund, the risks associated with investments in non-U.S. issuers. Please see each Fund’s 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Reports | 53
Thornburg Limited Term U.S. Government Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 13.25 | 0.14 | (0.20 | ) | (0.06 | ) | (0.18 | ) | – | (0.18 | ) | $ | 13.01 | ||||||||||||||||||||||||||
2016(b)(c) | $ | 13.26 | 0.14 | 0.05 | 0.19 | (0.20 | ) | – | (0.20 | ) | $ | 13.25 | ||||||||||||||||||||||||||||
2015(b) | $ | 13.27 | 0.15 | 0.06 | 0.21 | (0.22 | ) | – | (0.22 | ) | $ | 13.26 | ||||||||||||||||||||||||||||
2014(b) | $ | 13.36 | 0.19 | (0.02 | ) | 0.17 | (0.26 | ) | – | (0.26 | ) | $ | 13.27 | |||||||||||||||||||||||||||
2013(b) | $ | 13.86 | 0.20 | (0.39 | ) | (0.19 | ) | (0.31 | ) | – | (0.31 | ) | $ | 13.36 | ||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.33 | 0.10 | (0.20 | ) | (0.10 | ) | (0.14 | ) | – | (0.14 | ) | $ | 13.09 | ||||||||||||||||||||||||||
2016 | $ | 13.34 | 0.11 | 0.04 | 0.15 | (0.16 | ) | – | (0.16 | ) | $ | 13.33 | ||||||||||||||||||||||||||||
2015 | $ | 13.35 | 0.12 | 0.06 | 0.18 | (0.19 | ) | – | (0.19 | ) | $ | 13.34 | ||||||||||||||||||||||||||||
2014 | $ | 13.45 | 0.15 | (0.02 | ) | 0.13 | (0.23 | ) | – | (0.23 | ) | $ | 13.35 | |||||||||||||||||||||||||||
2013 | $ | 13.94 | 0.16 | (0.37 | ) | (0.21 | ) | (0.28 | ) | – | (0.28 | ) | $ | 13.45 | ||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.26 | 0.18 | (0.20 | ) | (0.02 | ) | (0.23 | ) | – | (0.23 | ) | $ | 13.01 | ||||||||||||||||||||||||||
2016 | $ | 13.26 | 0.19 | 0.05 | 0.24 | (0.24 | ) | – | (0.24 | ) | $ | 13.26 | ||||||||||||||||||||||||||||
2015 | $ | 13.27 | 0.19 | 0.06 | 0.25 | (0.26 | ) | – | (0.26 | ) | $ | 13.26 | ||||||||||||||||||||||||||||
2014 | $ | 13.36 | 0.23 | (0.02 | ) | 0.21 | (0.30 | ) | – | (0.30 | ) | $ | 13.27 | |||||||||||||||||||||||||||
2013 | $ | 13.86 | 0.24 | (0.38 | ) | (0.14 | ) | (0.36 | ) | – | (0.36 | ) | $ | 13.36 | ||||||||||||||||||||||||||
| CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.26 | 0.13 | (0.19 | ) | (0.06 | ) | (0.18 | ) | – | (0.18 | ) | $ | 13.02 | ||||||||||||||||||||||||||
2016 | $ | 13.27 | 0.14 | 0.04 | 0.18 | (0.19 | ) | – | (0.19 | ) | $ | 13.26 | ||||||||||||||||||||||||||||
2015 | $ | 13.28 | 0.14 | 0.06 | 0.20 | (0.21 | ) | – | (0.21 | ) | $ | 13.27 | ||||||||||||||||||||||||||||
2014 | $ | 13.37 | 0.18 | (0.02 | ) | 0.16 | (0.25 | ) | – | (0.25 | ) | $ | 13.28 | |||||||||||||||||||||||||||
2013 | $ | 13.87 | 0.18 | (0.38 | ) | (0.20 | ) | (0.30 | ) | – | (0.30 | ) | $ | 13.37 | ||||||||||||||||||||||||||
| CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.25 | 0.12 | (0.19 | ) | (0.07 | ) | (0.17 | ) | – | (0.17 | ) | $ | 13.01 | ||||||||||||||||||||||||||
2016 | $ | 13.26 | 0.14 | 0.04 | 0.18 | (0.19 | ) | – | (0.19 | ) | $ | 13.25 | ||||||||||||||||||||||||||||
2015 | $ | 13.27 | 0.13 | 0.08 | 0.21 | (0.22 | ) | – | (0.22 | ) | $ | 13.26 | ||||||||||||||||||||||||||||
2014(e) | $ | 13.36 | 0.14 | (0.03 | ) | 0.11 | (0.20 | ) | – | (0.20 | ) | $ | 13.27 | |||||||||||||||||||||||||||
| CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.28 | 0.18 | (0.21 | ) | (0.03 | ) | (0.23 | ) | – | (0.23 | ) | $ | 13.02 | ||||||||||||||||||||||||||
2016 | $ | 13.27 | 0.17 | 0.07 | 0.24 | (0.23 | ) | – | (0.23 | ) | $ | 13.28 | ||||||||||||||||||||||||||||
2015 | $ | 13.27 | 0.19 | 0.07 | 0.26 | (0.26 | ) | – | (0.26 | ) | $ | 13.27 | ||||||||||||||||||||||||||||
2014 | $ | 13.36 | 0.21 | – | (g) | 0.21 | (0.30 | ) | – | (0.30 | ) | $ | 13.27 | |||||||||||||||||||||||||||
2013 | $ | 13.85 | 0.24 | (0.39 | ) | (0.15 | ) | (0.34 | ) | – | (0.34 | ) | $ | 13.36 | ||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Class B shares converted to Class A shares on August 29, 2016. |
| (d) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| (e) | Effective date of this class of shares was February 1, 2014. |
| (f) | Annualized. |
| (g) | Net realized and unrealized gain (loss) on investments was less than $0.01 per share. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
54 | Annual Reports
Financial Highlights, Continued
Thornburg Limited Term U.S. Government Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 1.03 | 0.93 | 0.93 | 0.93 | (0.43 | ) | 11.05 | $ | 84,674 | ||||||||||||||||||||||
| 1.08 | 0.91 | 0.91 | 0.91 | 1.41 | 9.78 | $ | 111,874 | |||||||||||||||||||||||
| 1.15 | 0.92 | 0.92 | 0.92 | 1.62 | 14.15 | $ | 104,933 | |||||||||||||||||||||||
| 1.41 | 0.93 | 0.93 | 0.94 | 1.30 | 8.14 | $ | 132,916 | |||||||||||||||||||||||
| 1.45 | 0.89 | 0.89 | 0.89 | (1.38 | ) | 12.18 | $ | 159,225 | ||||||||||||||||||||||
| 0.73 | 1.23 | 1.23 | 1.24 | (0.72 | ) | 11.05 | $ | 34,821 | ||||||||||||||||||||||
| 0.81 | 1.19 | 1.19 | 1.20 | 1.13 | 9.78 | $ | 48,369 | |||||||||||||||||||||||
| 0.88 | 1.20 | 1.20 | 1.21 | 1.34 | 14.15 | $ | 46,777 | |||||||||||||||||||||||
| 1.14 | 1.19 | 1.19 | 1.20 | 0.96 | 8.14 | $ | 51,001 | |||||||||||||||||||||||
| 1.17 | 1.17 | 1.17 | 1.17 | (1.56 | ) | 12.18 | $ | 73,877 | ||||||||||||||||||||||
| 1.36 | 0.60 | 0.60 | 0.60 | (0.18 | ) | 11.05 | $ | 147,464 | ||||||||||||||||||||||
| 1.43 | 0.57 | 0.57 | 0.57 | 1.83 | 9.78 | $ | 144,437 | |||||||||||||||||||||||
| 1.45 | 0.62 | 0.62 | 0.62 | 1.93 | 14.15 | $ | 112,853 | |||||||||||||||||||||||
| 1.73 | 0.61 | 0.61 | 0.61 | 1.62 | 8.14 | $ | 69,309 | |||||||||||||||||||||||
| 1.78 | 0.56 | 0.56 | 0.56 | (1.05 | ) | 12.18 | $ | 73,645 | ||||||||||||||||||||||
| 1.00 | 0.97 | 0.97 | 1.40 | (0.47 | ) | 11.05 | $ | 10,871 | ||||||||||||||||||||||
| 1.03 | 0.98 | 0.98 | 1.30 | 1.34 | 9.78 | $ | 28,036 | |||||||||||||||||||||||
| 1.09 | 0.99 | 0.99 | 1.35 | 1.55 | 14.15 | $ | 16,320 | |||||||||||||||||||||||
| 1.35 | 0.99 | 0.99 | 1.31 | 1.23 | 8.14 | $ | 13,748 | |||||||||||||||||||||||
| 1.35 | 0.99 | 0.99 | 1.27 | (1.47 | ) | 12.18 | $ | 15,350 | ||||||||||||||||||||||
| 0.96 | 0.99 | 0.99 | 1.95 | (0.49 | ) | 11.05 | $ | 3,365 | ||||||||||||||||||||||
| 1.04 | 0.99 | 0.99 | 2.71 | 1.33 | 9.78 | $ | 2,097 | |||||||||||||||||||||||
| 1.00 | 0.99 | 0.99 | 17.30 | (d) | 1.55 | 14.15 | $ | 706 | ||||||||||||||||||||||
| 1.57 | (f) | 0.99 | (f) | 0.99 | (f) | 64.66 | (d)(f) | 0.78 | 8.14 | $ | 15 | |||||||||||||||||||
| 1.40 | 0.58 | 0.58 | 1.21 | (0.23 | ) | 11.05 | $ | 4,131 | ||||||||||||||||||||||
| 1.30 | 0.67 | 0.67 | 2.05 | 1.80 | 9.78 | $ | 570 | |||||||||||||||||||||||
| 1.40 | 0.67 | 0.67 | 2.02 | 1.95 | 14.15 | $ | 2,170 | |||||||||||||||||||||||
| 1.59 | 0.67 | 0.67 | 2.87 | 1.56 | 8.14 | $ | 1,859 | |||||||||||||||||||||||
| 1.83 | 0.67 | 0.67 | 7.28 | (d) | (1.09 | ) | 12.18 | $ | 881 | |||||||||||||||||||||
Annual Reports | 55
Thornburg Limited Term Income Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 13.51 | 0.24 | (0.07 | ) | 0.17 | (0.24 | ) | – | (0.24 | ) | $ | 13.44 | |||||||||||||||||||||||||||
2016(b) | $ | 13.32 | 0.24 | 0.20 | 0.44 | (0.25 | ) | – | (0.25 | ) | $ | 13.51 | ||||||||||||||||||||||||||||
2015(b) | $ | 13.49 | 0.26 | (0.09 | ) | 0.17 | (0.27 | ) | (0.07 | ) | (0.34 | ) | $ | 13.32 | ||||||||||||||||||||||||||
2014(b) | $ | 13.42 | 0.29 | 0.19 | 0.48 | (0.30 | ) | (0.11 | ) | (0.41 | ) | $ | 13.49 | |||||||||||||||||||||||||||
2013(b) | $ | 13.72 | 0.32 | (0.22 | ) | 0.10 | (0.34 | ) | (0.06 | ) | (0.40 | ) | $ | 13.42 | ||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.49 | 0.21 | (0.06 | ) | 0.15 | (0.22 | ) | – | (0.22 | ) | $ | 13.42 | |||||||||||||||||||||||||||
2016 | $ | 13.30 | 0.21 | 0.20 | 0.41 | (0.22 | ) | – | (0.22 | ) | $ | 13.49 | ||||||||||||||||||||||||||||
2015 | $ | 13.47 | 0.23 | (0.09 | ) | 0.14 | (0.24 | ) | (0.07 | ) | (0.31 | ) | $ | 13.30 | ||||||||||||||||||||||||||
2014 | $ | 13.39 | 0.26 | 0.20 | 0.46 | (0.27 | ) | (0.11 | ) | (0.38 | ) | $ | 13.47 | |||||||||||||||||||||||||||
2013 | $ | 13.70 | 0.28 | (0.23 | ) | 0.05 | (0.30 | ) | (0.06 | ) | (0.36 | ) | $ | 13.39 | ||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.52 | 0.29 | (0.08 | ) | 0.21 | (0.29 | ) | – | (0.29 | ) | $ | 13.44 | |||||||||||||||||||||||||||
2016 | $ | 13.33 | 0.29 | 0.20 | 0.49 | (0.30 | ) | – | (0.30 | ) | $ | 13.52 | ||||||||||||||||||||||||||||
2015 | $ | 13.49 | 0.31 | (0.08 | ) | 0.23 | (0.32 | ) | (0.07 | ) | (0.39 | ) | $ | 13.33 | ||||||||||||||||||||||||||
2014 | $ | 13.42 | 0.33 | 0.20 | 0.53 | (0.35 | ) | (0.11 | ) | (0.46 | ) | $ | 13.49 | |||||||||||||||||||||||||||
2013 | $ | 13.73 | 0.36 | (0.23 | ) | 0.13 | (0.38 | ) | (0.06 | ) | (0.44 | ) | $ | 13.42 | ||||||||||||||||||||||||||
| CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.52 | 0.22 | (0.06 | ) | 0.16 | (0.23 | ) | – | (0.23 | ) | $ | 13.45 | |||||||||||||||||||||||||||
2016 | $ | 13.33 | 0.23 | 0.20 | 0.43 | (0.24 | ) | – | (0.24 | ) | $ | 13.52 | ||||||||||||||||||||||||||||
2015 | $ | 13.50 | 0.24 | (0.09 | ) | 0.15 | (0.25 | ) | (0.07 | ) | (0.32 | ) | $ | 13.33 | ||||||||||||||||||||||||||
2014 | $ | 13.43 | 0.27 | 0.19 | 0.46 | (0.28 | ) | (0.11 | ) | (0.39 | ) | $ | 13.50 | |||||||||||||||||||||||||||
2013 | $ | 13.73 | 0.30 | (0.22 | ) | 0.08 | (0.32 | ) | (0.06 | ) | (0.38 | ) | $ | 13.43 | ||||||||||||||||||||||||||
| CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.51 | 0.22 | (0.07 | ) | 0.15 | (0.23 | ) | – | (0.23 | ) | $ | 13.43 | |||||||||||||||||||||||||||
2016 | $ | 13.32 | 0.23 | 0.20 | 0.43 | (0.24 | ) | – | (0.24 | ) | $ | 13.51 | ||||||||||||||||||||||||||||
2015 | $ | 13.48 | 0.24 | (0.08 | ) | 0.16 | (0.25 | ) | (0.07 | ) | (0.32 | ) | $ | 13.32 | ||||||||||||||||||||||||||
2014(c) | $ | 13.42 | 0.18 | 0.07 | 0.25 | (0.19 | ) | – | (0.19 | ) | $ | 13.48 | ||||||||||||||||||||||||||||
| CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.51 | 0.27 | (0.07 | ) | 0.20 | (0.27 | ) | – | (0.27 | ) | $ | 13.44 | |||||||||||||||||||||||||||
2016 | $ | 13.32 | 0.27 | 0.20 | 0.47 | (0.28 | ) | – | (0.28 | ) | $ | 13.51 | ||||||||||||||||||||||||||||
2015 | $ | 13.49 | 0.29 | (0.09 | ) | 0.20 | (0.30 | ) | (0.07 | ) | (0.37 | ) | $ | 13.32 | ||||||||||||||||||||||||||
2014 | $ | 13.42 | 0.32 | 0.19 | 0.51 | (0.33 | ) | (0.11 | ) | (0.44 | ) | $ | 13.49 | |||||||||||||||||||||||||||
2013 | $ | 13.72 | 0.34 | (0.21 | ) | 0.13 | (0.37 | ) | (0.06 | ) | (0.43 | ) | $ | 13.42 | ||||||||||||||||||||||||||
| CLASS R6 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(f) | $ | 13.40 | 0.15 | 0.11 | 0.26 | (0.20 | ) | – | (0.20 | ) | $ | 13.46 | ||||||||||||||||||||||||||||
| (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) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| (f) | Effective date of this class of shares was April 10, 2017. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
56 | Annual Reports
Financial Highlights, Continued
Thornburg Limited Term Income Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 1.76 | 0.87 | 0.87 | 0.87 | 1.31 | 26.90 | $ | 890,990 | |||||||||||||||||||||||
| 1.82 | 0.86 | 0.86 | 0.86 | 3.36 | 20.56 | $ | 1,111,441 | |||||||||||||||||||||||
| 1.94 | 0.87 | 0.87 | 0.87 | 1.27 | 18.71 | $ | 977,470 | |||||||||||||||||||||||
| 2.15 | 0.89 | 0.89 | 0.89 | 3.61 | 29.41 | $ | 906,708 | |||||||||||||||||||||||
| 2.33 | 0.88 | 0.88 | 0.88 | 0.69 | 36.66 | $ | 1,029,692 | |||||||||||||||||||||||
| 1.56 | 1.08 | 1.08 | 1.08 | 1.10 | 26.90 | $ | 567,771 | |||||||||||||||||||||||
| 1.59 | 1.08 | 1.08 | 1.08 | 3.13 | 20.56 | $ | 667,680 | |||||||||||||||||||||||
| 1.71 | 1.10 | 1.10 | 1.10 | 1.04 | 18.71 | $ | 611,555 | |||||||||||||||||||||||
| 1.92 | 1.11 | 1.11 | 1.11 | 3.46 | 29.41 | $ | 593,658 | |||||||||||||||||||||||
| 2.09 | 1.12 | 1.12 | 1.12 | 0.38 | 36.66 | $ | 632,918 | |||||||||||||||||||||||
| 2.14 | 0.50 | 0.50 | 0.50 | 1.61 | 26.90 | $ | 3,232,277 | |||||||||||||||||||||||
| 2.17 | 0.50 | 0.50 | 0.50 | 3.73 | 20.56 | $ | 2,792,249 | |||||||||||||||||||||||
| 2.29 | 0.52 | 0.52 | 0.52 | 1.71 | 18.71 | $ | 1,982,536 | |||||||||||||||||||||||
| 2.49 | 0.54 | 0.54 | 0.54 | 3.98 | 29.41 | $ | 1,578,168 | |||||||||||||||||||||||
| 2.68 | 0.53 | 0.53 | 0.53 | 0.98 | 36.66 | $ | 1,260,449 | |||||||||||||||||||||||
| 1.65 | 0.99 | 0.99 | 1.12 | 1.19 | 26.90 | $ | 96,715 | |||||||||||||||||||||||
| 1.69 | 0.98 | 0.98 | 1.10 | 3.23 | 20.56 | $ | 104,309 | |||||||||||||||||||||||
| 1.82 | 0.99 | 0.99 | 1.11 | 1.16 | 18.71 | $ | 172,992 | |||||||||||||||||||||||
| 2.04 | 0.99 | 0.99 | 1.12 | 3.51 | 29.41 | $ | 120,013 | |||||||||||||||||||||||
| 2.22 | 0.99 | 0.99 | 1.14 | 0.59 | 36.66 | $ | 81,585 | |||||||||||||||||||||||
| 1.65 | 0.99 | 0.99 | 1.56 | 1.11 | 26.90 | $ | 8,101 | |||||||||||||||||||||||
| 1.70 | 0.99 | 0.99 | 1.97 | 3.23 | 20.56 | $ | 6,328 | |||||||||||||||||||||||
| 1.82 | 0.98 | 0.98 | 1.66 | 1.24 | 18.71 | $ | 3,908 | |||||||||||||||||||||||
| 1.99 | (d) | 0.99 | (d) | 0.99 | (d) | 61.75 | (d)(e) | 1.84 | 29.41 | $ | 47 | |||||||||||||||||||
| 1.99 | 0.65 | 0.65 | 0.67 | 1.53 | 26.90 | $ | 101,189 | |||||||||||||||||||||||
| 2.05 | 0.62 | 0.62 | 0.72 | 3.60 | 20.56 | $ | 71,864 | |||||||||||||||||||||||
| 2.17 | 0.64 | 0.64 | 0.67 | 1.50 | 18.71 | $ | 96,326 | |||||||||||||||||||||||
| 2.38 | 0.64 | 0.64 | 0.72 | 3.86 | 29.41 | $ | 16,825 | |||||||||||||||||||||||
| 2.52 | 0.65 | 0.65 | 1.01 | 0.92 | 36.66 | $ | 8,164 | |||||||||||||||||||||||
| 2.28 | (d) | 0.45 | (d) | 0.45 | (d) | 24.38 | (d)(e) | 1.92 | 26.90 | $ | 770 | |||||||||||||||||||
Annual Reports | 57
Thornburg Low Duration Income Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 12.46 | 0.16 | (0.03 | ) | 0.13 | (0.17 | ) | – | (0.17 | ) | $ | 12.42 | |||||||||||||||||||||||||||
2016(b) | $ | 12.38 | 0.11 | 0.09 | 0.20 | (0.12 | ) | – | (0.12 | ) | $ | 12.46 | ||||||||||||||||||||||||||||
2015(b) | $ | 12.38 | 0.08 | – | (c) | 0.08 | (0.08 | ) | – | (0.08 | ) | $ | 12.38 | |||||||||||||||||||||||||||
2014(b)(d) | $ | 12.31 | 0.08 | 0.08 | 0.16 | (0.09 | ) | – | (0.09 | ) | $ | 12.38 | ||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 12.45 | 0.18 | (0.03 | ) | 0.15 | (0.19 | ) | – | (0.19 | ) | $ | 12.41 | |||||||||||||||||||||||||||
2016 | $ | 12.37 | 0.14 | 0.08 | 0.22 | (0.14 | ) | – | (0.14 | ) | $ | 12.45 | ||||||||||||||||||||||||||||
2015 | $ | 12.38 | 0.11 | (0.01 | ) | 0.10 | (0.11 | ) | – | (0.11 | ) | $ | 12.37 | |||||||||||||||||||||||||||
2014(d) | $ | 12.31 | 0.11 | 0.07 | 0.18 | (0.11 | ) | – | (0.11 | ) | $ | 12.38 | ||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Net realized and unrealized gain (loss) on investments was less than $0.01 per share. |
| (d) | Fund commenced operations on December 30, 2013. |
| (e) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
58 | Annual Reports
Financial Highlights, Continued
Thornburg Low Duration Income Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 1.30 | 0.65 | 0.65 | 1.77 | 1.03 | 34.79 | $ | 6,532 | |||||||||||||||||||||||
| 0.89 | 0.69 | 0.69 | 1.74 | 1.60 | 42.99 | $ | 10,235 | |||||||||||||||||||||||
| 0.67 | 0.70 | 0.70 | 2.10 | 0.68 | 29.22 | $ | 9,940 | |||||||||||||||||||||||
| 0.92 | (e) | 0.62 | (e) | 0.61 | (e) | 3.14 | (e) | 1.33 | 23.70 | $ | 6,678 | |||||||||||||||||||
| 1.46 | 0.50 | 0.50 | 1.03 | 1.19 | 34.79 | $ | 12,854 | |||||||||||||||||||||||
| 1.15 | 0.48 | 0.48 | 1.18 | 1.81 | 42.99 | $ | 17,106 | |||||||||||||||||||||||
| 0.87 | 0.50 | 0.50 | 1.89 | 0.80 | 29.22 | $ | 8,056 | |||||||||||||||||||||||
| 1.19 | (e) | 0.41 | (e) | 0.41 | (e) | 3.19 | (e) | 1.48 | 23.70 | $ | 3,698 | |||||||||||||||||||
Annual Reports | 59
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders of the
Thornburg Limited Term U.S. Government Fund,
Thornburg Limited Term Income Fund, and
Thornburg Low Duration Income Fund
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Thornburg Limited Term U.S. Government Fund, Thornburg Limited Term Income Fund, and Thornburg Low Duration Income Fund, (hereafter referred to as the Funds), as of September 30, 2017, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated 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 as of September 30, 2017 by correspondence with the custodian, brokers, and transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
60 | Annual Reports
September 30, 2017 (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, 2017, and held until September 30, 2017.
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 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| LIMITED TERM U.S. GOVERNMENT FUND | |||||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,006.20 | $ | 4.67 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.41 | $ | 4.70 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,004.60 | $ | 6.23 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.85 | $ | 6.28 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,007.80 | $ | 3.05 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.03 | $ | 3.07 | |||||||||
| CLASS R3 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,006.10 | $ | 4.77 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.31 | $ | 4.80 | |||||||||
| CLASS R4 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,005.90 | $ | 4.97 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 | |||||||||
| CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,007.60 | $ | 2.52 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.56 | $ | 2.54 | |||||||||
| LIMITED TERM INCOME FUND | |||||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,013.90 | $ | 4.42 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.68 | $ | 4.43 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,012.90 | $ | 5.44 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.66 | $ | 5.46 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.80 | $ | 2.55 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.53 | $ | 2.56 | |||||||||
| CLASS R3 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,013.30 | $ | 4.99 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.12 | $ | 5.00 | |||||||||
| CLASS R4 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,013.30 | $ | 4.99 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $ | 5.01 | |||||||||
| CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.00 | $ | 3.30 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.79 | $ | 3.31 | |||||||||
| CLASS R6 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,019.20 | $ | 2.28 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.81 | $ | 2.28 | |||||||||
| LOW DURATION INCOME FUND | |||||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,007.20 | $ | 3.52 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.56 | $ | 3.55 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,008.20 | $ | 2.52 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,022.56 | $ | 2.54 | |||||||||
| † | Thornburg Limited Term U.S. Government Fund expenses are equal to the annualized expense ratio for each class (A: 0.93%; C: 1.24%; I: 0.61%; R3: 0.95%; R4: 0.99%; R5: 0.50%) 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: 0.87%; C: 1.08%; I: 0.51%; R3: 0.99%; R4: 0.99%; R5: 0.65%; R6: 0.45%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
| † | Thornburg Low Duration Income Fund expenses are equal to the the annualized expense ratio for each class (A: 0.70%; I: 0.50%) 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. |
Annual Reports | 61
September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
62 | Annual Reports
Trustees and Officers, Continued
September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Reports | 63
Trustees and Officers, Continued
September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries 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.
64 | Annual Reports
September 30, 2017 (Unaudited)
TAX INFORMATION
For the tax year ended September 30, 2017, dividends paid by the Thornburg Limited Term U.S. Government Fund of $4,487,238 are taxable ordinary investment income dividends for federal income tax purposes. Dividends paid by the Thornburg Limited Term Income Fund of $97,615,628 are being reported as taxable ordinary investment income dividends. Dividends paid by the Thornburg Low Duration Income Fund of $314,806 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, 2017. Complete information will be reported in conjunction with your 2017 Form 1099.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg. com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Limited Term U.S. Government Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain
Annual Reports | 65
Other Information, Continued
September 30, 2017 (Unaudited)
favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Fund Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (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 created 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 created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Information provided to the Trustees indicated that the comparability of indices and fund categories to the Fund may be limited for a number of reasons. Measures of risk and relative return demonstrated that the Fund’s performance relative to these measures continued to fulfill expectations in current conditions. The Trustees generally attach additional significance to the investment performance of the Fund from the perspective of longer term shareholders, and noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the objectives of the Fund. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for two Fund share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been considered by the Trustees showed that the advisory fee for the Fund was comparable to the median fee level and higher than the average level for the fund category, the level of total expense for one share class of the Fund was higher than the median and average expense levels for the category, and that the level of total expense for a second share class was lower than the median and average levels for the category. Information for the peer groups showed that the Fund’s advisory fee appeared comparable to the medians of the peer groups and was comparable to or lower than other funds in the groups, and that the total expense levels of the two share classes were comparable to the median levels of their peer groups. The Trustees did not find the differences significant in view of their findings and conclusions respecting 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, descriptions of distinguishing characteristics of the sub-advised mutual funds served by the Advisor, 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.
66 | Annual Reports
Other Information, Continued
September 30, 2017 (Unaudited)
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Limited Term Income Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Annual Reports | 67
Other Information, Continued
September 30, 2017 (Unaudited)
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a continuation of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 created 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, (5) comparative performance data for two fund peer groups selected by an independent mutual fund analyst firm, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Information provided to the Trustees indicated that the comparability of indices and fund categories to the Fund may be limited for a number of reasons. Measures of 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 generally attach additional significance to the investment performance of the Fund from the perspective of longer term shareholders, and noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the stated objectives of the Fund. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total 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 total expenses for two Fund share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been 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, the level of total expense for one share class of the Fund was higher than the median and comparable to the average expense levels for the category, and that the level of total expense for a second share class was lower than the median and average levels for the category. Data for the peer groups showed that the Fund’s advisory fee was comparable to the
68 | Annual Reports
Other Information, Continued
September 30, 2017 (Unaudited)
median levels for the two peer groups, and that the total expense levels of the representative share classes were similarly comparable to the median expense levels of their respective peer groups. The Trustees did not find the differences significant in view of their findings and conclusions respecting 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by the Fund and certain other Funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Low Duration Income Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by
Annual Reports | 69
Other Information, Continued
September 30, 2017 (Unaudited)
the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (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 three calendar years since the Fund’s inception, comparing the Fund’s annual investment returns to a fund category created 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, comparative performance data for two fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Measures of 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 noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the stated objectives of the Fund. Based upon their consideration of this and other
70 | Annual Reports
Other Information, Continued
September 30, 2017 (Unaudited)
information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for two Fund share classes to the fee level and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. The Trustees noted that the Advisor has agreed to certain fee waivers and expense reimbursements for the current period. Comparative fee and expense data noted as having been considered by the Trustees showed that, after fee waivers and expense reimbursements, the level of total expense for one share class of the Fund was comparable to the median and average levels of total expenses for the category, and that the level of total expense for a second share class was lower than the median and average levels for the category. Peer group data showed that the Fund’s stated advisory fee was comparable to the stated median level for the two peer groups, and that the total expense levels of the Fund’s two share classes were comparable to the median levels of their respective peer groups after waivers of fees and reimbursement of expenses.
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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. The Trustees noted the costs incurred by the Advisor in initiating and managing the Fund and the Advisor’s waivers of fees and reimbursements of expenses for the Fund, and further noted that the Fund is not currently profitable to the Advisor.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Reports | 71
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
72 | Annual Reports
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
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| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 | TH076 |
Annual Report
September 30, 2017
THORNBURG STRATEGIC INCOME FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Strategic Income Fund
Annual Report | September 30, 2017
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| 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 | ||||||||
| Class R6 | TSRSX | 885-216-648 | ||||||||
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.
Investments carry risks, including possible loss of principal. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The value of bonds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. This effect is more pronounced for longer-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. Investments in lower rated and unrated bonds may be more sensitive to default, downgrades, and market volatility; these investments may also be less liquid than higher rated bonds. Investments in derivatives are subject to the risks associated with the securities or other assets underlying the pool of securities, including illiquidity and difficulty in valuation. Investments in equity securities are subject to additional risks, such as greater market fluctuations. Additional 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 bank deposits or guaranteed by a bank or any other entity.
Annual Report | 3
Thornburg Strategic Income Fund | September 30, 2017 (Unaudited)
October 20, 2017
Dear Fellow Shareholder:
We are pleased to present the annual report for Thornburg Strategic Income Fund for the year ended September 30, 2017. The net asset value (NAV) of a Class A share of Thornburg Strategic Income Fund increased 26 cents in the period to $11.82. If you were invested for the entire period, you received dividends of 35.6 cents per share. If you reinvested your dividends, you received 36.1 cents per share. Dividends per share varied for other share classes to account for class-specific expenses. Combining income and change in price, Class A shares of Thornburg Strategic Income Fund produced a total return of 5.41% (without sales charge) over the year. The Bloomberg Barclays U.S. Universal Bond Index produced a return of 0.96%, and a blended index of 80% Bloomberg Barclays U.S. Aggregate Bond Index and 20% MSCI World Index produced a 3.49% total return over the same time period.
While U.S. Treasury yields had been climbing since bottoming in July of 2016, post the “Brexit” vote, many investors’ portfolios were still caught off guard as yields rose faster than most expected following the surprise election of Donald Trump. While not immune to the rise in rates during the first half of the period, Thornburg Strategic Income Fund ultimately outperformed its benchmarks during this time, delivering positive returns in a tumultuous period for fixed income investors. As the year progressed, markets began to discount the possibility of meaningful fiscal stimulus and, therefore, a resulting reflation trade. Ten-year U.S. Treasury yields have declined since their peak, and the two- versus 10-year curve has flattened, suggesting that the market is suspicious with respect to potential future inflationary pressures. Over the course of the year, the Trump administration’s foibles caused market participants to doubt its ability to meaningfully implement its agenda.
Meanwhile, the U.S. economy continues to grow, and unemployment continues to fall but, somewhat mysteriously, inflation has barely budged. The Federal Reserve Board (Fed) continues along the path of reiterating its belief that transitory factors are at play and will ultimately subside. However, certain members have publicly begun to question the broad understanding of inflation, suggesting traditional models, such as the Phillips Curve, may no longer apply. In some ways, this may be true. Today the Phillips curve, which states that inflation and unemployment have a stable and inverse relationship, might need to be looked at on a global basis as today’s workforce is more mobile than in any other time in history due to technological factors, such as the outsourcing of services. Given generally lax inflation, one might imagine the Fed, as well as other global central banks, having plenty of cover to keep rates lower for longer. However, the Fed continues to raise short-term rates, perhaps with an eye toward taming ever-increasing risk asset prices.
Despite a lack of political progress in the U.S. and tepid economic growth, most risk markets, including U.S. stock and credit markets, continue to be strong. Why? As mentioned in our previous notes, credit markets don’t require strong growth. Generally stable conditions are sufficient for decent performance. Meanwhile, low yields and muted volatility continue to entice investors to reach further
out on the risk spectrum to achieve incremental return. However, the further investors are from their natural risk habitat, the worse a potential unwind may be. For now, generally stable U.S. economic conditions have caused investors to grind credit spreads ever lower. This phenomenon can be observed across the board in investment-grade corporate bonds, asset-backed securities (ABS), high-yield bonds, and emerging markets debt.
Broadly speaking, we believe that credit valuations are stretched. However, there remains no clear catalyst for the downside. Ultimately, we prefer to focus a little higher up in quality, hold higher liquidity (cash), and focus on defensive income—the defensive portion being paramount to our thinking. Considering a lack of an immediate catalyst to the downside and the all-in extremely low yields on very high-quality instruments, we remain significantly invested in credit. However, we do so with a keen eye toward defensive balance sheets and counter, or less cyclical, cash flows than the market in general. One market truth today is that investors simply are not paid to take significant risk. Furthermore, a recently announced October start to the Fed balance sheet roll-off begs several questions: Will everything remain calm as is currently expected by market participants? Can global financial markets handle a Fed balance sheet unwind and a potential ECB QE reduction simultaneously? If quantitative easing (QE) initiation in some way helped economies and markets, then isn’t it reasonable to expect the withdrawal of QE to have marginally negative implications, even if implemented at a measured pace?
In our view, the market continues to feel awash in complacency, given both the known and unknown risks lurking beneath the surface. Debt expansion appears to have run its course, supporting growth, and this may be as good as it is going to get in terms of growth this cycle. All of this points to a high likelihood that we find ourselves in the later stages of the expansion, and, as such, investments need to reflect a balance of risks.
Throughout the period we expressed a defensive posture in multiple ways. Given our guiding philosophy of managing a diversified portfolio to be robust across many macro environments, we continued to build balanced risk exposures to avoid overdependence upon any singular outcome. We remained cautious around interest-rate risk and, as a result, the portfolio ended the period with an effective duration statistic towards the lower end of its historical range. During the period, we added floating-rate bond exposure, as well as high-quality investment-grade exposure on the front end of the curve.
Additionally, within our high-yield holdings, we continued to upgrade quality and reduce potential volatility. All high-yield bonds are not created equal. Focusing on shorter maturities, less cyclical cash flows, and companies linked to the stronger segments of the economy will generally lower volatility at the portfolio level in times of stress. To this end, we have added interesting opportunities at the front end of the curve and focused on more defensive names over time, continuing this trend during the period. Furthermore, we continued to upgrade the overall quality of this portion of the portfolio by taking advantage of the narrowing spread differentials between the higher- and lower-quality ends of the high-yield
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Strategic Income Fund | September 30, 2017 (Unaudited)
spectrum, thus swapping into higher-rated issues where appropriate. In aggregate, we feel that continuing to focus on balancing risk exposures, high grading the portfolio and remaining mindful of liquidity will serve our investors well, whatever the future may hold.
While portfolio objectives can range from managing yield within price volatility constraints to maximizing total returns, all investors must consider the risk/reward trade-offs inherent in various investments. Higher yields tend to come with higher price volatility, whether driven by credit, duration, or both. On the other hand, defensive products offer limited volatility but produce low yield returns. The key to a successful portfolio is balancing these competing variables into an optimal combination that meets overall objectives. The problem is most organizations aren’t structured to find relative value across the available spectrum of investment opportunities. The “risk bucket” methodologies utilized by the majority of players within the space, may be using a sub-optimal structure for the fixed income environment we are moving into. In contrast, we believe our unique approach and structure offers our investors an edge in this strange and tumultuous environment.
Thank you for investing alongside us.
Sincerely,
Jason H. Brady,CFA
Portfolio Manager
CEO, President, and Managing Director
Lon R. Erickson,CFA
Portfolio Manager
Managing Director
Jeff Klingelhofer,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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
Annual Report | 5
Thornburg Strategic Income Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | SINCE INCEP. | |||||||||||||||||
Class A Shares (Incep: 12/19/07) |
| |||||||||||||||||||
Without sales charge | 5.41% | 2.95% | 4.28% | 6.37% | ||||||||||||||||
With sales charge | 0.70% | 1.40% | 3.32% | 5.88% | ||||||||||||||||
Class C Shares (Incep: 12/19/07) |
| |||||||||||||||||||
Without sales charge | 4.76% | 2.36% | 3.70% | 5.78% | ||||||||||||||||
With sales charge | 3.76% | 2.36% | 3.70% | 5.78% | ||||||||||||||||
Class I Shares (Incep: 12/19/07) | 5.85% | 3.33% | 4.66% | 6.72% | ||||||||||||||||
Class R3 Shares (Incep: 5/1/12) | 5.49% | 2.94% | 4.26% | 4.80% | ||||||||||||||||
Class R4 Shares (Incep: 2/1/14) | 5.35% | 2.93% | - | 3.58% | ||||||||||||||||
Class R5 Shares (Incep: 5/1/12) | 5.84% | 3.29% | 4.59% | 5.12% | ||||||||||||||||
Class R6 Shares (Incep: 4/10/17) | - | - | - | 3.99% | ||||||||||||||||
Bloomberg Barclays U.S. Universal Bond Index (Since 12/19/07) | 0.96% | 3.11% | 2.53% | 4.42% | ||||||||||||||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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
30-Day Yields, A shares (with sales charge)
| SEC Yield | 2.56% | ||||
| Annualized Distribution Yield | 3.15% |
month end, visit thornburg.com or call 800-847-0200. The performance information does 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. 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 sales charge for Class I, R3, R4, R5, and R6 shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses before fee waivers and expense reimbursements are as follows: A shares, 1.24%; C shares, 1.99%; I shares, 0.91%; R3 shares, 3.09%; R4 shares, 2.50%; R5 shares, 1.37%; R6 shares, 1.89%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: A shares, 1.13%; C shares, 1.80%; I shares, 0.69%; R3 shares, 1.25%; R4 shares, 1.25%; R5 shares, 0.69%; R6 shares, 0.65%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus. Unsubsidized SEC Yield: 2.55%. Unsubsidized Annualized Distribution Yield: 3.14%.
Glossary
The Bloomberg 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 Bloomberg Barclays U.S. Universal Bond 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.
Thornburg Strategic Income Fund’s Blended Index is composed of 80% Bloomberg Barclays U.S. Aggregate Bond Index and 20% MSCI World Index, rebalanced monthly.
The MSCI World Index is an unmanaged market-weighted index that consists of securities traded in 23 of the world’s most developed countries. Securities are listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The index is calculated with net dividends reinvested in U.S. dollars.
The performance of any index is not indicative of the performance of any particular investment. 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.
Bond Credit Ratings (Credit Quality) – 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.
High yield bonds may offer higher yields in return for more risk exposure.
Credit Spread/Quality Spread – The difference between the yields of securities with different credit qualities.
Quantitative Easing (QE) – An unconventional monetary policy in which a central bank purchases financial assets from the market in order to lower interest rates and increase the money supply.
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.
6 | Annual Report
Thornburg Strategic Income Fund | September 30, 2017 (Unaudited)
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 from 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.
PORTFOLIO COMPOSITION
| Corporate/Convertible Bonds | 64.0% | ||||
| Asset-Backed Securities | 15.6% | ||||
| Bank Loans | 4.1% | ||||
| Common & Preferred Stock | 2.1% | ||||
| Other Fixed Income | 2.1% | ||||
| Other Assets & Liabilities | 12.2% |
FIXED INCOME CREDIT QUALITY*
| * | Excludes equity securities. |
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.
Credit quality ratings for Thornburg’s global fixed income portfolios 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 other nationally recognized statistical rating organizations (NRSROs). “NR” = not rated.
TOP TEN INDUSTRY GROUPS
| Diversified Financials | 9.5% | ||||
| Energy | 8.9% | ||||
| Telecommunication Services | 5.4% | ||||
| Materials | 4.6% | ||||
| Commercial & Professional Services | 3.7% | ||||
| Media | 3.6% | ||||
| Transportation | 3.3% | ||||
| Technology Hardware & Equipment | 3.3% | ||||
| Insurance | 3.0% | ||||
| Capital Goods | 2.9% |
COUNTRY EXPOSURE**
| United States | 67.8% | ||||
| Canada | 2.5% | ||||
| United Kingdom | 1.7% | ||||
| Luxembourg | 1.6% | ||||
| Brazil | 1.4% | ||||
| Mexico | 1.2% | ||||
| Sweden | 0.9% | ||||
| South Korea | 0.8% | ||||
| China | 0.7% | ||||
| Australia | 0.7% | ||||
| Cayman Islands | 0.6% | ||||
| Bermuda | 0.6% | ||||
| Netherlands | 0.6% | ||||
| France | 0.6% | ||||
| Japan | 0.5% | ||||
| Jamaica | 0.5% | ||||
| United Arab Emirates | 0.5% | ||||
| Guatemala | 0.5% | ||||
| Morocco | 0.5% | ||||
| Switzerland | 0.4% | ||||
| Belgium | 0.4% | ||||
| Chile | 0.4% | ||||
| Romania | 0.4% | ||||
| Mauritius | 0.4% | ||||
| South Africa | 0.3% | ||||
| Barbados | 0.3% | ||||
| Singapore | 0.3% | ||||
| Russia | 0.3% | ||||
| Hong Kong | 0.2% | ||||
| Turkey | 0.1% | ||||
| Panama*** | 0.0% | ||||
| Other Assets & Liabilities | 12.2% |
| ** | The country assignment 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 is less than 0.1%. |
There is no guarantee that the Fund will meet its investment objectives.
All portfolio information is subject to change. Charts may not add up to 100% due to rounding.
Annual Report | 7
Thornburg Strategic Income Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
| COMMON STOCK — 0.50% | ||||||||||||
DIVERSIFIED FINANCIALS — 0.11% | ||||||||||||
Diversified Financial Services — 0.11% | ||||||||||||
| a | EZCorp, Inc. | 120,000 | $ | 1,140,000 | ||||||||
|
| |||||||||||
| 1,140,000 | ||||||||||||
|
| |||||||||||
ENERGY — 0.39% | ||||||||||||
Oil, Gas & Consumable Fuels — 0.39% | ||||||||||||
| a,b | Malamute Energy, Inc. | 847 | 8,893 | |||||||||
| c | ROMGAZ SA-GDR | 531,954 | 4,175,839 | |||||||||
|
| |||||||||||
| 4,184,732 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCK (Cost $6,265,223) | 5,324,732 | |||||||||||
|
| |||||||||||
| PREFERRED STOCK — 1.59% | ||||||||||||
ENERGY — 0.24% | ||||||||||||
Oil, Gas & Consumable Fuels — 0.24% | ||||||||||||
| a,b | Crestwood Equity Partners LP, 9.25% | 267,979 | 2,543,121 | |||||||||
|
| |||||||||||
| 2,543,121 | ||||||||||||
|
| |||||||||||
MISCELLANEOUS — 1.03% | ||||||||||||
U.S. Government Agencies — 1.03% | ||||||||||||
Farm Credit Bank of Texas Pfd, 10.00% | 1,000 | 1,222,500 | ||||||||||
| c | Cobank, ACB Pfd, 6.25% | 50,000 | 5,385,940 | |||||||||
| c | AgriBank, FCB Pfd, 6.875% | 40,000 | 4,422,500 | |||||||||
|
| |||||||||||
| 11,030,940 | ||||||||||||
|
| |||||||||||
REAL ESTATE — 0.06% | ||||||||||||
Equity Real Estate Investment Trusts — 0.06% | ||||||||||||
VEREIT, Inc. Pfd, 6.70% | 25,857 | 665,300 | ||||||||||
|
| |||||||||||
| 665,300 | ||||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — 0.26% | ||||||||||||
Wireless Telecommunication Services — 0.26% | ||||||||||||
| c,d | Centaur Funding Corp. Pfd, 9.08% | 2,380 | 2,760,800 | |||||||||
| 2,760,800 | ||||||||||||
|
| |||||||||||
TOTAL PREFERRED STOCK (Cost $16,075,965) | 17,000,161 | |||||||||||
|
| |||||||||||
| ASSET BACKED SECURITIES — 15.63% | ||||||||||||
ADVANCE RECEIVABLES — 0.54% | ||||||||||||
| c | New Residential Advance Receivables Trust, Series 2016-T2 Class AT2, 2.575%, 10/15/2049 | $ | 5,000,000 | 4,962,882 | ||||||||
| c | SPS Servicer Advance Receivables Trust, Series 2016-T1 Class AT1, 2.53%, 11/16/2048 | 800,000 | 793,549 | |||||||||
|
| |||||||||||
| 5,756,431 | ||||||||||||
|
| |||||||||||
AUTO RECEIVABLES — 2.43% |
| |||||||||||
| c | American Credit Acceptance Receivables Trust, Series 2016-4 Class C, 2.91%, 2/13/2023 | 4,000,000 | 4,011,359 | |||||||||
| c | American Credit Acceptance Receivables Trust, Series 2017-3 Class A, 1.82%, 3/10/2020 | 3,000,000 | 3,000,439 | |||||||||
| c | Avis Budget Rental Car Funding (AESOP) LLC, Series 2015-1A Class A, 2.50%, 7/20/2021 | 2,900,000 | 2,892,803 | |||||||||
| c | DT Auto Owner Trust, Series 2016-4A Class A, 1.44%, 11/15/2019 | 547,433 | 547,234 | |||||||||
| c | Foursight Capital Automobile Receivables Trust, Series 2014-1 Class B, 3.56%, 11/22/2021 | 5,454,000 | 5,434,952 | |||||||||
| c | Foursight Capital Automobile Receivables Trust, Series 2016-1 Class A2, 2.87%, 10/15/2021 | 2,974,611 | 2,985,240 | |||||||||
| c | Hertz Vehicle Financing LLC, Series 2015-1A Class A, 2.73%, 3/25/2021 | 4,000,000 | 3,999,310 | |||||||||
| b,c | OSCAR US Funding Trust, Series 2016-2A Class A2A, 2.31%, 11/15/2019 | 1,402,527 | 1,403,930 | |||||||||
| c,d | OSCAR US Funding Trust, Series 2017-2A Class A2B Floating Rate Note, 1.884%, 11/10/2020 | 1,800,000 | 1,799,998 | |||||||||
|
| |||||||||||
| 26,075,265 | ||||||||||||
|
| |||||||||||
COMMERCIAL MTG TRUST — 1.15% | ||||||||||||
| c | CFCRE Commercial Mortgage Trust, Series 2011-C1 Class C, 6.281%, 4/15/2044 | 6,200,000 | 6,392,558 | |||||||||
Citigroup Commercial Mortgage Trust, Series 2004-HYB2 Class B1, 3.399%, 3/25/2034 | 68,073 | 55,652 | ||||||||||
| c | Credit Suisse Mortgage Trust, Series 2016-BDWN Class E, 12.734%, 2/15/2029 | 3,000,000 | 3,016,861 | |||||||||
| c | FREMF Mortgage Trust, Series 2013-KF02 Class B Floating Rate Note, 4.232%, 12/25/2045 | 598,350 | 605,611 | |||||||||
| c | FREMF Mortgage Trust, Series 2016-KF24 Class B Floating Rate Note, 6.232%, 10/25/2026 | 2,089,632 | 2,195,875 | |||||||||
|
| |||||||||||
| 12,266,557 | ||||||||||||
|
| |||||||||||
8 | Annual Report
Schedule of Investments, Continued
Thornburg Strategic Income Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
OTHER ASSET BACKED — 7.39% | ||||||||||||
| c | 321 Henderson Receivables, LLC, Series 2006-3A Class A1, 1.427%, 9/15/2041 | $ | 2,446,559 | $ | 2,312,878 | |||||||
| c | Aircraft Certificate Owner Trust, Series 2003-1A Class E, 7.001%, 9/20/2022 | 1,680,981 | 1,786,042 | |||||||||
| c | Consumer Loan Underlying Bond Club, Series 2017-NP1 Class A, 2.39%, 4/17/2023 | 2,450,453 | 2,449,676 | |||||||||
| c | Diamond Resorts Owner Trust, Series 2014-1 Class A, 2.54%, 5/20/2027 | 943,100 | 942,312 | |||||||||
| c,d | ECAF Ltd., Series 2015-1A Class B1, 5.802%, 6/15/2040 | 6,300,568 | 6,317,697 | |||||||||
| c | Fairway Outdoor Funding, LLC, Series 2012-1 Class B, 8.835%, 10/15/2042 | 3,000,000 | 3,043,968 | |||||||||
| c,d | Global SC Finance SRL, Series 2014-1A Class A1, 3.19%, 7/17/2029 | 3,245,833 | 3,179,277 | |||||||||
| c | HERO Funding Trust, Series 2017-2A Class A1, 3.28%, 9/20/2048 | 3,952,958 | 3,977,507 | |||||||||
| c | JPR Royalty, LLC, 10.50%, 9/1/2020 | 2,000,000 | 1,000,000 | |||||||||
| c | Marlette Funding Trust, Series 2017-2A Class A, 2.39%, 7/15/2024 | 3,449,300 | 3,452,659 | |||||||||
| c | Murray Hill Marketplace Trust, Series 2016-LC1 Class B, 6.15%, 11/25/2022 | 5,000,000 | 5,092,757 | |||||||||
| b,c | Northwind Holdings, LLC, Series 2007-1A Class A1 Floating Rate Note, 2.096%, 12/1/2037 | 537,500 | 506,863 | |||||||||
| c | OnDeck Asset Securitization Trust II, LLC, Series 2016-1A Class A, 4.21%, 5/17/2020 | 4,470,000 | 4,450,816 | |||||||||
| c | Oportun Funding LLC, Series 2017-A Class A, 3.23%, 6/8/2023 | 4,000,000 | 4,028,591 | |||||||||
| c | Prosper Marketplace Issuance Trust, Series 2017-1A Class A, 2.56%, 6/15/2023 | 2,223,851 | 2,228,723 | |||||||||
| c | SBA Tower Trust, 3.598%, 4/9/2043 | 1,080,000 | 1,079,141 | |||||||||
| c | SBA Tower Trust, Series 2015-1 Class C, 3.156%, 10/10/2045 | 3,750,000 | 3,774,710 | |||||||||
| c | SBA Tower Trust, Series 2016-1 Class C, 2.877%, 7/10/2046 | 2,275,000 | 2,305,030 | |||||||||
| b,c | Scala Funding Co., Series 2016-1 Class B, 5.21%, 2/15/2021 | 4,000,000 | 4,020,000 | |||||||||
| c | Sierra Receivables Funding Co., LLC, Series 2015-2A Class A, 2.43%, 6/20/2032 | 3,706,180 | 3,698,007 | |||||||||
| c | SoFi Consumer Loan Program Trust, Series 2017-3 Class A, 2.77%, 5/25/2026 | 1,202,500 | 1,207,813 | |||||||||
| c | SolarCity LMC, LLC, Series 2013-1 Class A, 4.80%, 11/20/2038 | 2,710,114 | 2,687,488 | |||||||||
| c | SolarCity LMC, LLC, Series 2014-1 Class A, 4.59%, 4/20/2044 | 2,914,860 | 2,892,063 | |||||||||
| c | Sonic Capital, LLC, Series 2016-1A Class A2, 4.472%, 5/20/2046 | 3,081,917 | 3,104,601 | |||||||||
| c,d | Textainer Marine Containers Ltd., Series 2017-1A Class A, 3.72%, 5/20/2042 | 4,469,115 | 4,522,832 | |||||||||
| c | VB-S1 Issuer LLC, Series 16-1A Class C, 3.065%, 6/15/2046 | 3,100,000 | 3,098,012 | |||||||||
| c | Westgate Resorts, Series 2016-1A Class A, 3.50%, 12/20/2028 | 1,946,417 | 1,948,918 | |||||||||
|
| |||||||||||
| 79,108,381 | ||||||||||||
|
| |||||||||||
RESIDENTIAL MTG TRUST — 2.54% | ||||||||||||
Bear Stearns ARM Mortgage, Series 2003-6 Class 2B-1, 3.364%, 8/25/2033 | 109,104 | 82,059 | ||||||||||
| c | Citigroup Mortgage Loan Trust, Inc., Series 2014-A Class A, 4.00%, 1/25/2035 | 2,074,607 | 2,142,146 | |||||||||
Countrywide, Series 2005-11 Class AF3, 4.657%, 2/25/2036 | 135,636 | 136,138 | ||||||||||
| c | CS First Boston Mortgage Securities Co., Series 2005-CF1 Class M1, 1.937%, 3/25/2045 | 581,270 | 575,726 | |||||||||
| c | Flagstar Mortgage Trust, Series 2017-1 Class 2A2, 3.00%, 3/25/2047 | 1,940,282 | 1,957,282 | |||||||||
Merrill Lynch Mortgage Investors Trust, Series 2004-A4 Class M1, 3.28%, 8/25/2034 | 223,081 | 201,096 | ||||||||||
Morgan Stanley Capital, Inc., Series 2005-HE7 Class A2C, 1.557%, 11/25/2035 | 274,242 | 274,615 | ||||||||||
| c | New Residential Mortgage Loan Trust, Series 2017-3A Class A1, 4.00%, 4/25/2057 | 3,695,859 | 3,839,848 | |||||||||
| c | New Residential Mortgage Loan Trust, Series 2017-4A Class A1, 4.00%, 5/25/2057 | 3,715,566 | 3,868,754 | |||||||||
| c | New Residential Mortgage Loan Trust, Series 2017-5A Class A1, 2.737%, 7/25/2056 | 2,875,994 | 2,942,891 | |||||||||
| b,c | Senior Homeowner Assistance Program, Series 2013-RM1 Class A, 4.00%, 5/26/2053 | 1,077,279 | 1,077,279 | |||||||||
| c | Sequoia Mortgage Trust, Series 2017-4 Class A4, 3.50%, 7/25/2047 | 1,874,605 | 1,920,005 | |||||||||
| c | Sequoia Mortgage Trust, Series 2017-5 Class A4, 3.50%, 8/25/2047 | 3,903,242 | 3,994,113 | |||||||||
Structured Asset Securities Corp., Series 2004-20 Class 7A1, 5.25%, 11/25/2034 | 430,959 | 443,898 | ||||||||||
| c | Verus Securitization Trust, Series 2017-2A Class A1 Step-Up Bond, 2.485%, 7/25/2047 | 3,792,852 | 3,795,718 | |||||||||
|
| |||||||||||
| 27,251,568 | ||||||||||||
|
| |||||||||||
STUDENT LOAN — 1.58% | ||||||||||||
| c | Earnest Student Loan Program, LLC, Series 2016-C Class A2, 2.68%, 7/25/2035 | 2,584,328 | 2,560,497 | |||||||||
| c | Nelnet Student Loan Trust, Series 2016-A Class A1A, 2.987%, 12/26/2040 | 3,392,779 | 3,399,419 | |||||||||
SLM Student Loan Trust, Series 2008-2 Class A3 Floating Rate Note, 2.064%, 4/25/2023 | 1,289,688 | 1,287,400 | ||||||||||
SLM Student Loan Trust, Series 2008-5 Class A4 Floating Rate Note, 3.014%, 7/25/2023 | 3,377,486 | 3,474,568 | ||||||||||
SLM Student Loan Trust, Series 2012-1 Class A3 Floating Rate Note, 2.184%, 9/25/2028 | 3,315,543 | 3,342,136 | ||||||||||
| c | Social Professional Loan Program, LLC, Series 2014-A Class A2, 3.02%, 10/25/2027 | 1,407,473 | 1,421,655 | |||||||||
| c | Social Professional Loan Program, LLC, Series 2014-B Class A1 Floating Rate Note, 2.482%, 8/25/2032 | 1,393,708 | 1,410,097 | |||||||||
|
| |||||||||||
| 16,895,772 | ||||||||||||
|
| |||||||||||
TOTAL ASSET BACKED SECURITIES (Cost $168,306,418) | 167,353,974 | |||||||||||
|
| |||||||||||
| CORPORATE BONDS — 61.04% | ||||||||||||
AUTOMOBILES & COMPONENTS — 0.42% | ||||||||||||
Auto Components — 0.19% | ||||||||||||
| c,d | Nexteer Automotive Group Ltd., 5.875%, 11/15/2021 | 2,000,000 | 2,080,000 | |||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Strategic Income Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
Automobiles — 0.23% | ||||||||||||
| c,d | Hyundai Capital America, 3.00%, 8/29/2022 | $ | 2,500,000 | $ | 2,466,200 | |||||||
|
| |||||||||||
| 4,546,200 | ||||||||||||
|
| |||||||||||
BANKS — 2.20% | ||||||||||||
Banks — 2.20% | ||||||||||||
Bank of America Corp., 4.20%, 8/26/2024 | 3,200,000 | 3,365,544 | ||||||||||
| d | Barclays plc, 4.836%, 5/9/2028 | 4,000,000 | 4,143,723 | |||||||||
| d | Barclays plc Floating Rate Note, 2.929%, 1/10/2023 | 4,000,000 | 4,086,360 | |||||||||
Capital One Bank (USA), N.A. Floating Rate Note, 2.132%, 8/8/2022 | 3,000,000 | 2,989,051 | ||||||||||
| d | Royal Bank of Scotland Group plc, 6.125%, 12/15/2022 | 2,000,000 | 2,200,092 | |||||||||
| c,d | Sberbank of Russia, 5.50%, 2/26/2024 | 2,750,000 | 2,805,605 | |||||||||
| d | Sumitomo Mitsui Banking Corp. Floating Rate Note, 2.084%, 7/12/2022 | 4,000,000 | 4,001,664 | |||||||||
|
| |||||||||||
| 23,592,039 | ||||||||||||
|
| |||||||||||
CAPITAL GOODS — 2.87% | ||||||||||||
Aerospace & Defense — 0.28% | ||||||||||||
| c | CBC Ammo, LLC, 7.25%, 11/15/2021 | 2,970,000 | 2,999,700 | |||||||||
Construction & Engineering — 0.61% | ||||||||||||
| c | Zachry Holdings, Inc., 7.50%, 2/1/2020 | 6,310,000 | 6,499,300 | |||||||||
Electrical Equipment — 0.36% | ||||||||||||
| c,d | Sensata Technologies UK Finance Co., 6.25%, 2/15/2026 | 3,550,000 | 3,887,250 | |||||||||
Machinery — 0.51% | ||||||||||||
| c,d | Automation Tooling Systems, 6.50%, 6/15/2023 | 3,125,000 | 3,269,531 | |||||||||
Mueller Industries, Inc., 6.00%, 3/1/2027 | 2,132,000 | 2,195,960 | ||||||||||
Trading Companies & Distributors — 1.11% | ||||||||||||
| c | International Lease Finance Corp., 7.125%, 9/1/2018 | 8,000,000 | 8,376,367 | |||||||||
| c | Wajax Corp. (CAD), 6.125%, 10/23/2020 | 4,210,000 | 3,479,513 | |||||||||
|
| |||||||||||
| 30,707,621 | ||||||||||||
|
| |||||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 3.49% | ||||||||||||
Commercial Services & Supplies — 1.67% | ||||||||||||
| c | ACCO Brands Corp., 5.25%, 12/15/2024 | 2,000,000 | 2,075,000 | |||||||||
Pitney Bowes, Inc., 3.625%, 9/15/2020 | 2,000,000 | 2,004,221 | ||||||||||
Pitney Bowes, Inc., 4.70%, 4/1/2023 | 4,000,000 | 3,933,136 | ||||||||||
Pitney Bowes, Inc., 3.875%, 5/15/2022 | 1,000,000 | 983,906 | ||||||||||
RR Donnelley & Sons Co., 7.875%, 3/15/2021 | 4,000,000 | 4,220,000 | ||||||||||
RR Donnelley & Sons Co., 8.875%, 4/15/2021 | 4,300,000 | 4,617,125 | ||||||||||
Professional Services — 1.82% | ||||||||||||
Dun & Bradstreet, Inc., 4.25%, 6/15/2020 | 4,185,000 | 4,308,037 | ||||||||||
| c | Nielsen Finance, LLC, 5.00%, 4/15/2022 | 7,420,000 | 7,688,975 | |||||||||
| c | ServiceMaster Co., LLC, 5.125%, 11/15/2024 | 3,330,000 | 3,421,575 | |||||||||
Verisk Analytics, Inc., 4.00%, 6/15/2025 | 3,920,000 | 4,078,091 | ||||||||||
|
| |||||||||||
| 37,330,066 | ||||||||||||
|
| |||||||||||
CONSUMER DURABLES & APPAREL — 1.39% | ||||||||||||
Leisure Products — 0.83% | ||||||||||||
Mattel, Inc., 1.70%, 3/15/2018 | 6,235,000 | 6,225,900 | ||||||||||
Vista Outdoor, Inc., 5.875%, 10/1/2023 | 2,530,000 | 2,602,737 | ||||||||||
Textiles, Apparel & Luxury Goods — 0.56% | ||||||||||||
| c | Hanesbrands, Inc., 4.625%, 5/15/2024 | 3,980,000 | 4,144,175 | |||||||||
Under Armour, Inc., 3.25%, 6/15/2026 | 2,000,000 | 1,859,458 | ||||||||||
|
| |||||||||||
| 14,832,270 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 0.86% | ||||||||||||
Diversified Consumer Services — 0.50% | ||||||||||||
| c | Laureate Education, Inc., 8.25%, 5/1/2025 | 5,000,000 | 5,387,500 | |||||||||
Hotels, Restaurants & Leisure — 0.36% | ||||||||||||
| c | Aramark International Finance (EUR), 3.125%, 4/1/2025 | 500,000 | 615,191 | |||||||||
| c | Aramark Services, Inc., 5.00%, 4/1/2025 | 3,000,000 | 3,191,250 | |||||||||
|
| |||||||||||
| 9,193,941 | ||||||||||||
|
| |||||||||||
10 | Annual Report
Schedule of Investments, Continued
Thornburg Strategic Income Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
DIVERSIFIED FINANCIALS — 8.24% | ||||||||||||
Capital Markets — 3.56% | ||||||||||||
Ares Capital Corp., 4.875%, 11/30/2018 | $ | 7,000,000 | $ | 7,198,992 | ||||||||
| c | Ares Finance Co., LLC, 4.00%, 10/8/2024 | 4,025,000 | 3,863,546 | |||||||||
| c,d | BTG Investments LP, 4.50%, 4/17/2018 | 4,750,000 | 4,690,625 | |||||||||
| d | Credit Suisse Group Funding (Guernsey) Ltd., 3.80%, 9/15/2022 | 2,450,000 | 2,542,988 | |||||||||
FS Investment Corp., 4.00%, 7/15/2019 | 6,286,000 | 6,410,347 | ||||||||||
Goldman Sachs Group, Inc. Floating Rate Note, 2.485%, 11/15/2021 | 5,895,000 | 5,975,879 | ||||||||||
Morgan Stanley, 2.243%, 7/22/2022 | 3,000,000 | 3,011,369 | ||||||||||
| c | MSCI, Inc., 4.75%, 8/1/2026 | 400,000 | 421,000 | |||||||||
| c,d | UBS Group Funding Switzerland AG Floating Rate Note, 2.265%, 8/15/2023 | 4,000,000 | 3,998,832 | |||||||||
Consumer Finance — 1.44% | ||||||||||||
Ally Financial, Inc., 4.75%, 9/10/2018 | 4,000,000 | 4,088,400 | ||||||||||
| c | FirstCash, Inc., 5.375%, 6/1/2024 | 7,500,000 | 7,818,750 | |||||||||
Western Union Co. Floating Rate Note, 2.115%, 5/22/2019 | 3,500,000 | 3,501,676 | ||||||||||
Diversified Financial Services — 2.77% | ||||||||||||
| c | Athene Global Funding, 2.875%, 10/23/2018 | 4,725,000 | 4,769,814 | |||||||||
| c,d | CFG Holdings Ltd./CFG Finance, LLC, 11.50%, 11/15/2019 | 4,000,000 | 4,060,000 | |||||||||
| c | Citicorp, 8.04%, 12/15/2019 | 186,087 | 208,101 | |||||||||
| d | Credit Suisse Group Ltd., 3.80%, 6/9/2023 | 400,000 | 414,061 | |||||||||
General Electric Capital Corp. (SEK), 2.625%, 1/16/2018 | 24,000,000 | 2,969,301 | ||||||||||
| c,d | Genpact Luxembourg S.a.r.l., 3.70%, 4/1/2022 | 3,000,000 | 3,034,676 | |||||||||
Morgan Stanley, 2.707%, 4/21/2021 | 3,000,000 | 3,080,937 | ||||||||||
| c | MSCI, Inc., 5.25%, 11/15/2024 | 1,625,000 | 1,730,625 | |||||||||
| c | MSCI, Inc., 5.75%, 8/15/2025 | 2,640,000 | 2,880,900 | |||||||||
S&P Global, Inc., 4.00%, 6/15/2025 | 1,590,000 | 1,670,717 | ||||||||||
S&P Global, Inc., 3.30%, 8/14/2020 | 1,975,000 | 2,025,992 | ||||||||||
| c | TMX Finance, LLC/Titlemax Finance, 8.50%, 9/15/2018 | 3,115,000 | 2,881,375 | |||||||||
Insurance — 0.19% | ||||||||||||
| c | AIG Global Funding, 1.781%, 7/2/2020 | 2,000,000 | 2,003,137 | |||||||||
Mortgage Real Estate Investment Trusts — 0.28% | ||||||||||||
Healthcare Trust of America, Inc., 2.95%, 7/1/2022 | 3,000,000 | 3,019,804 | ||||||||||
|
| |||||||||||
| 88,271,844 | ||||||||||||
|
| |||||||||||
ENERGY — 7.95% | ||||||||||||
Energy Equipment & Services — 1.08% | ||||||||||||
Compressco Partners, L.P., 7.25%, 8/15/2022 | 4,800,000 | 4,440,000 | ||||||||||
Enviva Partners, LP, 8.50%, 11/1/2021 | 1,900,000 | 2,023,500 | ||||||||||
Oceaneering International, Inc., 4.65%, 11/15/2024 | 4,075,000 | 4,052,725 | ||||||||||
| c,d,e | Schahin II Finance Co. (SPV) Ltd., 5.875%, 9/25/2023 | 10,684,600 | 1,068,460 | |||||||||
Oil, Gas & Consumable Fuels — 6.87% | ||||||||||||
| c | Citgo Holding, Inc., 10.75%, 2/15/2020 | 980,000 | 1,055,950 | |||||||||
| c | Citgo Petroleum Corp., 6.25%, 8/15/2022 | 450,000 | 463,500 | |||||||||
| c | Colorado Interstate Gas Co., LLC/Colorado Interstate Issuing Corp., 4.15%, 8/15/2026 | 4,500,000 | 4,474,298 | |||||||||
Energy Transfer Partners LP, 4.328%, 11/1/2066 | 1,200,000 | 1,083,000 | ||||||||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 1,400,000 | 1,414,000 | ||||||||||
| c | Florida Gas Transmission Co., LLC, 3.875%, 7/15/2022 | 4,765,000 | 4,965,219 | |||||||||
Global Partners LP/GLP Finance Corp., 6.25%, 7/15/2022 | 4,975,000 | 5,037,187 | ||||||||||
Gulf South Pipeline Co., LP, 4.00%, 6/15/2022 | 4,860,000 | 5,005,891 | ||||||||||
| c | Gulfstream Natural Gas System, LLC, 4.60%, 9/15/2025 | 5,000,000 | 5,394,133 | |||||||||
| c,d | Harvest Operations Corp., 3.00%, 9/21/2022 | 4,000,000 | 3,965,733 | |||||||||
HollyFrontier Corp., 5.875%, 4/1/2026 | 3,500,000 | 3,809,191 | ||||||||||
| b,c,e | Linc Energy, 9.625%, 10/31/2017 | 1,100,236 | 45,660 | |||||||||
Marathon Oil Corp., 3.85%, 6/1/2025 | 2,000,000 | 1,986,058 | ||||||||||
NGL Energy Partners LP, 6.875%, 10/15/2021 | 3,000,000 | 3,000,000 | ||||||||||
Northern Border Pipeline, 7.50%, 9/15/2021 | 2,150,000 | 2,460,071 | ||||||||||
| c | Northwest Pipeline, LLC, 4.00%, 4/1/2027 | 2,000,000 | 2,029,854 | |||||||||
| c,d,e | Odebrecht Offshore Drilling Finance Ltd., 6.75%, 10/1/2023 | 2,497,238 | 892,763 | |||||||||
Plains All American Pipeline LP, 8.75%, 5/1/2019 | 1,000,000 | 1,093,183 | ||||||||||
| c,d | QGOG Atlantic/Alaskan Rigs Ltd., 5.25%, 7/30/2019 | 448,740 | 439,765 | |||||||||
| a,e | RAAM Global Energy Co., 12.50%, 10/1/2015 | 2,000,000 | 20,000 | |||||||||
Annual Report | 11
Schedule of Investments, Continued
Thornburg Strategic Income Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
| c | Rockies Express Pipeline, LLC, 6.85%, 7/15/2018 | $ | 2,000,000 | $ | 2,065,000 | |||||||
| c,d | Sinopec Group Overseas Development 2017 Ltd., 2.25%, 9/13/2020 | 4,000,000 | 3,988,764 | |||||||||
Summit Midstream Holdings, LLC, 5.50%, 8/15/2022 | 7,010,000 | 7,045,050 | ||||||||||
Tennessee Gas Pipeline Co., LLC, 7.00%, 3/15/2027 | 2,251,000 | 2,665,893 | ||||||||||
Tesoro Logistics LP, 6.125%, 10/15/2021 | 3,375,000 | 3,480,469 | ||||||||||
| c | Texas Gas Transmission, LLC, 4.50%, 2/1/2021 | 940,000 | 979,166 | |||||||||
Transcontinental Gas Pipe Line Co., LLC, 7.85%, 2/1/2026 | 3,600,000 | 4,650,291 | ||||||||||
|
| |||||||||||
| 85,094,774 | ||||||||||||
|
| |||||||||||
FOOD & STAPLES RETAILING — 1.40% |
| |||||||||||
Food & Staples Retailing — 1.40% | ||||||||||||
| c,d | Alimentation Couche-Tard, Inc., 2.70%, 7/26/2022 | 2,000,000 | 2,006,479 | |||||||||
| c | C&S Group Enterprises, LLC, 5.375%, 7/15/2022 | 3,935,000 | 3,895,650 | |||||||||
Ingles Markets, Inc., 5.75%, 6/15/2023 | 3,598,000 | 3,517,045 | ||||||||||
Whole Foods Market, Inc., 5.20%, 12/3/2025 | 4,830,000 | 5,545,584 | ||||||||||
|
| |||||||||||
| 14,964,758 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 2.05% | ||||||||||||
Beverages — 0.59% | ||||||||||||
| c,d | Central America Bottling Corp., 5.75%, 1/31/2027 | 5,000,000 | 5,287,500 | |||||||||
| c,d | Coca-Cola Icecek A.S., 4.215%, 9/19/2024 | 1,000,000 | 1,011,979 | |||||||||
Food Products — 0.84% | ||||||||||||
| c,d | Barry Callebaut Services NV, 5.50%, 6/15/2023 | 4,000,000 | 4,316,000 | |||||||||
| c,d | BRF S.A., 4.75%, 5/22/2024 | 4,650,000 | 4,707,660 | |||||||||
Tobacco — 0.62% | ||||||||||||
| c | B.A.T. Capital Corp. Floating Rate Note, 1.905%, 8/14/2020 | 2,500,000 | 2,504,490 | |||||||||
| c | Vector Group Ltd., 6.125%, 2/1/2025 | 4,000,000 | 4,140,000 | |||||||||
|
| |||||||||||
| 21,967,629 | ||||||||||||
|
| |||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 1.57% | ||||||||||||
Health Care Providers & Services — 1.57% | ||||||||||||
DaVita Healthcare Partners, Inc., 5.00%, 5/1/2025 | 3,450,000 | 3,403,563 | ||||||||||
HCA, Inc., 4.75%, 5/1/2023 | 1,735,000 | 1,830,425 | ||||||||||
HCA, Inc., 4.50%, 2/15/2027 | 1,475,000 | 1,508,187 | ||||||||||
HCA, Inc., 5.25%, 4/15/2025 | 1,520,000 | 1,643,500 | ||||||||||
LifePoint Health, Inc., 5.375%, 5/1/2024 | 3,000,000 | 3,120,000 | ||||||||||
WellCare Health Plans, Inc., 5.25%, 4/1/2025 | 5,000,000 | 5,262,500 | ||||||||||
|
| |||||||||||
| 16,768,175 | ||||||||||||
|
| |||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.68% | ||||||||||||
Household Products — 0.68% | ||||||||||||
Edgewell Personal Care, 4.70%, 5/24/2022 | 4,000,000 | 4,290,000 | ||||||||||
| c | Energizer Holdings, Inc., 5.50%, 6/15/2025 | 2,850,000 | 2,999,625 | |||||||||
|
| |||||||||||
| 7,289,625 | ||||||||||||
|
| |||||||||||
INSURANCE — 3.04% | ||||||||||||
Insurance — 3.04% | ||||||||||||
| c,d | DaVinciRe Holdings Ltd., 4.75%, 5/1/2025 | 4,790,000 | 4,751,794 | |||||||||
| d | Enstar Group Ltd., 4.50%, 3/10/2022 | 2,000,000 | 2,069,064 | |||||||||
| c | Forethought Financial Group, Inc., 8.625%, 4/15/2021 | 1,160,000 | 1,325,305 | |||||||||
| c | Jackson National Life Global Co., 2.06%, 6/27/2022 | 4,000,000 | 4,023,844 | |||||||||
Kemper Corp., 4.35%, 2/15/2025 | 4,290,000 | 4,348,889 | ||||||||||
| c,d | Lancashire Holdings Ltd., 5.70%, 10/1/2022 | 4,900,000 | 5,199,111 | |||||||||
Mercury General Corp., 4.40%, 3/15/2027 | 4,000,000 | 4,114,489 | ||||||||||
| c | Metropolitan Life Global Funding I, 1.71%, 6/12/2020 | 2,000,000 | 2,009,326 | |||||||||
| c | National Life Insurance of Vermont, 10.50%, 9/15/2039 | 1,000,000 | 1,659,655 | |||||||||
Reinsurance Group of America, Inc., 3.95%, 9/15/2026 | 990,000 | 1,002,592 | ||||||||||
| c | Sammons Financial Group, 4.45%, 5/12/2027 | 2,000,000 | 2,056,414 | |||||||||
|
| |||||||||||
| 32,560,483 | ||||||||||||
|
| |||||||||||
12 | Annual Report
Schedule of Investments, Continued
Thornburg Strategic Income Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
MATERIALS — 4.58% | ||||||||||||
Chemicals — 2.64% | ||||||||||||
CF Industries Holdings, Inc., 6.875%, 5/1/2018 | $ | 2,975,000 | $ | 3,056,813 | ||||||||
| c | Chevron Phillips Chemical Co., LLC, Floating Rate Note, 2.061%, 5/1/2020 | 4,000,000 | 4,017,454 | |||||||||
| c,d | Consolidated Energy Finance S.A., 6.75%, 10/15/2019 | 5,194,000 | 5,284,895 | |||||||||
| c,d | Kissner Group Holdings, 8.375%, 12/1/2022 | 4,170,000 | 4,211,700 | |||||||||
| c,d | NOVA Chemicals Corp., 4.875%, 6/1/2024 | 3,500,000 | 3,543,750 | |||||||||
| c,d | NOVA Chemicals Corp., 5.25%, 6/1/2027 | 2,000,000 | 2,020,000 | |||||||||
| c,d | Office Cherifien des Phosphates, 5.625%, 4/25/2024 | 4,710,000 | 5,074,083 | |||||||||
| c | Valvoline, Inc., 4.375%, 8/15/2025 | 1,000,000 | 1,018,750 | |||||||||
Containers & Packaging — 0.31% | ||||||||||||
Graphic Packaging International, Inc., 4.125%, 8/15/2024 | 3,225,000 | 3,333,037 | ||||||||||
Metals & Mining — 0.96% | ||||||||||||
| c | International Wire Group, Inc., 10.75%, 8/1/2021 | 3,200,000 | 2,952,000 | |||||||||
| c,d | Newcrest Finance Property Ltd., 4.20%, 10/1/2022 | 7,000,000 | 7,363,817 | |||||||||
Paper & Forest Products — 0.67% | ||||||||||||
| c | Neenah Paper, Inc., 5.25%, 5/15/2021 | 7,075,000 | 7,172,281 | |||||||||
|
| |||||||||||
| 49,048,580 | ||||||||||||
|
| |||||||||||
MEDIA — 2.38% | ||||||||||||
Media — 2.38% | ||||||||||||
| c | Cable One, Inc., 5.75%, 6/15/2022 | 5,000,000 | 5,225,000 | |||||||||
| c | Cox Communications, Inc., 3.15%, 8/15/2024 | 1,950,000 | 1,937,764 | |||||||||
| c | CSC Holdings, LLC, 5.50%, 4/15/2027 | 1,825,000 | 1,898,000 | |||||||||
| b | Mood Media Corp. Floating Rate Payment-In-Kind Note, 14.00%, 7/1/2024 | 2,000,000 | 2,000,000 | |||||||||
| c,d | SFR Group SA, 7.375%, 5/1/2026 | 2,365,000 | 2,554,200 | |||||||||
| c,d | SFR Group SA, 6.00%, 5/15/2022 | 3,475,000 | 3,631,375 | |||||||||
| c | Sirius XM Radio, Inc., 3.875%, 8/1/2022 | 2,000,000 | 2,045,400 | |||||||||
The Washington Post Co., 7.25%, 2/1/2019 | 2,100,000 | 2,228,625 | ||||||||||
| c,d | Virgin Media, Inc., 5.50%, 8/15/2026 | 3,790,000 | 3,993,713 | |||||||||
|
| |||||||||||
| 25,514,077 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.00% | ||||||||||||
Pharmaceuticals — 0.00% | ||||||||||||
| a,b,e | Atlas U.S. Royalty, LLC Participation Rights, 0%, 3/15/2027 | 5,450,000 | 0 | |||||||||
|
| |||||||||||
| 0 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 0.38% | ||||||||||||
Pharmaceuticals — 0.38% | ||||||||||||
| d | Allergan Funding SCS, 2.35%, 3/12/2018 | 4,000,000 | 4,011,652 | |||||||||
|
| |||||||||||
| 4,011,652 | ||||||||||||
|
| |||||||||||
REAL ESTATE — 1.60% |
| |||||||||||
Equity Real Estate Investment Trusts — 1.50% | ||||||||||||
Crown Castle International Corp., 3.20%, 9/1/2024 | 1,000,000 | 995,253 | ||||||||||
EPR Properties, 5.25%, 7/15/2023 | 5,000,000 | 5,366,541 | ||||||||||
Hospitality Properties Trust, 4.95%, 2/15/2027 | 2,850,000 | 2,985,801 | ||||||||||
Retail Opportunity Investments Corp., 5.00%, 12/15/2023 | 1,500,000 | 1,561,816 | ||||||||||
Select Income REIT, 2.85%, 2/1/2018 | 5,100,000 | 5,111,628 | ||||||||||
Real Estate Management & Development — 0.10% | ||||||||||||
| c,d | Avison Young (Canada), Inc., 9.50%, 12/15/2021 | 1,105,000 | 1,117,431 | |||||||||
|
| |||||||||||
| 17,138,470 | ||||||||||||
|
| |||||||||||
RETAILING — 0.92% | ||||||||||||
Distributors — 0.58% | ||||||||||||
LKQ Corp., Inc., 4.75%, 5/15/2023 | 6,045,000 | 6,242,127 | ||||||||||
Internet & Direct Marketing Retail — 0.19% | ||||||||||||
The Priceline Group, Inc., 2.75%, 3/15/2023 | 2,000,000 | 1,997,965 | ||||||||||
Multiline Retail — 0.05% | ||||||||||||
| c,d | Grupo Famsa S.A.B. de C.V., 7.25%, 6/1/2020 | 560,000 | 557,200 | |||||||||
Annual Report | 13
Schedule of Investments, Continued
Thornburg Strategic Income Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
Specialty Retail — 0.10% | ||||||||||||
Penske Automotive Group, 3.75%, 8/15/2020 | $ | 1,000,000 | $ | 1,020,000 | ||||||||
|
| |||||||||||
| 9,817,292 | ||||||||||||
|
| |||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 0.53% | ||||||||||||
Semiconductors & Semiconductor Equipment — 0.53% | ||||||||||||
| c | Broadcom Corp./Broadcom Cayman Finance Ltd., 2.375%, 1/15/2020 | 1,000,000 | 1,005,524 | |||||||||
| c | Broadcom Corp./Broadcom Cayman Finance Ltd., 3.00%, 1/15/2022 | 1,000,000 | 1,016,682 | |||||||||
| c | Broadcom Corp./Broadcom Cayman Finance Ltd., 3.625%, 1/15/2024 | 1,000,000 | 1,027,377 | |||||||||
| c,d | Sensata Technologies B.V., 5.00%, 10/1/2025 | 2,530,000 | 2,666,747 | |||||||||
|
| |||||||||||
| 5,716,330 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 1.49% | ||||||||||||
Information Technology Services — 0.40% | ||||||||||||
| c | Alliance Data Systems Corp., 5.375%, 8/1/2022 | 4,190,000 | 4,315,700 | |||||||||
Internet Software & Services — 0.14% | ||||||||||||
Verisign, Inc., 4.75%, 7/15/2027 | 1,500,000 | 1,545,000 | ||||||||||
Software — 0.95% | ||||||||||||
Autodesk, Inc., 3.125%, 6/15/2020 | 2,350,000 | 2,390,205 | ||||||||||
| c | J2 Cloud LLC/Global, Inc., 6.00%, 7/15/2025 | 2,000,000 | 2,092,500 | |||||||||
| c,d | Open Text Corp., 5.875%, 6/1/2026 | 3,320,000 | 3,643,700 | |||||||||
VMware, Inc., 2.30%, 8/21/2020 | 2,000,000 | 2,005,856 | ||||||||||
|
| |||||||||||
| 15,992,961 | ||||||||||||
|
| |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 2.87% |
| |||||||||||
Communications Equipment — 0.32% | ||||||||||||
| d | LM Ericsson, 4.125%, 5/15/2022 | 3,490,000 | 3,462,488 | |||||||||
Computers & Peripherals — 0.10% | ||||||||||||
Lexmark International, Inc., 6.375%, 3/15/2020 | 1,038,000 | 1,082,381 | ||||||||||
Electronic Equipment, Instruments & Components — 1.87% | ||||||||||||
Anixter, Inc., 5.125%, 10/1/2021 | 6,395,000 | 6,874,625 | ||||||||||
Ingram Micro, Inc., 5.45%, 12/15/2024 | 1,951,000 | 2,002,483 | ||||||||||
Tech Data Corp., 4.95%, 2/15/2027 | 4,000,000 | 4,125,797 | ||||||||||
Trimble Navigation, Ltd., 4.75%, 12/1/2024 | 6,525,000 | 7,011,262 | ||||||||||
Technology, Hardware, Storage & Peripherals — 0.58% | ||||||||||||
CDW LLC/CDW Finance Corp., 5.00%, 9/1/2025 | 2,000,000 | 2,100,000 | ||||||||||
| c | Western Digital Corp., 7.375%, 4/1/2023 | 3,725,000 | 4,080,737 | |||||||||
|
| |||||||||||
| 30,739,773 | ||||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — 4.84% | ||||||||||||
Diversified Telecommunication Services — 1.82% | ||||||||||||
AT&T, Inc., 3.00%, 6/30/2022 | 2,395,000 | 2,418,318 | ||||||||||
Qwest Corp., 6.75%, 12/1/2021 | 3,700,000 | 4,040,338 | ||||||||||
| c | Unison Ground Lease Funding, 5.78%, 3/15/2043 | 1,920,000 | 1,816,848 | |||||||||
Verizon Communications, Inc. Floating Rate Note, 2.321%, 3/16/2022 | 2,500,000 | 2,536,195 | ||||||||||
| c,d | Videotron Ltd., Co., 5.375%, 6/15/2024 | 8,050,000 | 8,734,250 | |||||||||
Wireless Telecommunication Services — 3.02% | ||||||||||||
America Movil SAB de CV (MXN), 6.45%, 12/5/2022 | 120,000,000 | 6,268,138 | ||||||||||
| c,d | Digicel Ltd., 6.00%, 4/15/2021 | 5,750,000 | 5,612,805 | |||||||||
| c,d | Millicom International Cellular S.A., 6.00%, 3/15/2025 | 3,000,000 | 3,210,000 | |||||||||
| c,d | Millicom International Cellular S.A., 5.125%, 1/15/2028 | 2,500,000 | 2,521,250 | |||||||||
| c,d | MTN (Mauritius) Investments Ltd., 5.373%, 2/13/2022 | 3,450,000 | 3,574,338 | |||||||||
| c,d | MTN International (Mauritius) Ltd., 4.755%, 11/11/2024 | 4,125,000 | 4,098,188 | |||||||||
| c | WCP Issuer, LLC, 6.657%, 8/15/2043 | 386,000 | 420,416 | |||||||||
| c | WCP Issuer, LLC, 7.143%, 8/15/2043 | 6,000,000 | 6,599,400 | |||||||||
|
| |||||||||||
| 51,850,484 | ||||||||||||
|
| |||||||||||
TRANSPORTATION — 2.70% | ||||||||||||
Airlines — 2.41% | ||||||||||||
| c | American Airlines Group, Inc., 5.60%, 1/15/2022 | 10,724,863 | 11,234,292 | |||||||||
American Airlines Group, Inc., 4.95%, 7/15/2024 | 2,188,439 | 2,344,541 | ||||||||||
Continental Airlines, 9.798%, 10/1/2022 | 3,762,995 | 4,129,887 | ||||||||||
14 | Annual Report
Schedule of Investments, Continued
Thornburg Strategic Income Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
| c,d | Guanay Finance Ltd., 6.00%, 12/15/2020 | $ | 4,078,922 | $ | 4,180,895 | |||||||
US Airways, 7.076%, 9/20/2022 | 738,270 | 788,104 | ||||||||||
US Airways, 6.25%, 10/22/2024 | 1,225,292 | 1,375,390 | ||||||||||
US Airways, 5.90%, 4/1/2026 | 1,501,119 | 1,696,264 | ||||||||||
Marine — 0.12% | ||||||||||||
| c,d | Stena International SA, 5.75%, 3/1/2024 | 1,400,000 | 1,277,500 | |||||||||
Transportation Infrastructure — 0.17% | ||||||||||||
| c,d | Mexico City Airport Trust, 3.875%, 4/30/2028 | 1,000,000 | 996,500 | |||||||||
| c,d | Mexico City Airport Trust, 4.25%, 10/31/2026 | 842,000 | 865,155 | |||||||||
|
| |||||||||||
| 28,888,528 | ||||||||||||
|
| |||||||||||
UTILITIES — 2.59% | ||||||||||||
Electric Utilities — 2.09% | ||||||||||||
| c | Duquesne Light Holdings, Inc., 6.40%, 9/15/2020 | 2,000,000 | 2,222,406 | |||||||||
| c | Jersey Central Power & Light Co., 4.30%, 1/15/2026 | 3,965,000 | 4,149,698 | |||||||||
Puget Energy, Inc., 6.50%, 12/15/2020 | 2,000,000 | 2,234,396 | ||||||||||
Puget Energy, Inc., 5.625%, 7/15/2022 | 2,500,000 | 2,789,583 | ||||||||||
Southern Power Co., 1.85%, 12/1/2017 | 7,000,000 | 7,002,710 | ||||||||||
| c,d | State Grid Overseas Investment (2014) Ltd., 2.75%, 5/7/2019 | 4,000,000 | 4,038,560 | |||||||||
Independent Power & Renewable Electricity Producers — 0.29% | ||||||||||||
| c | Midland Cogeneration Venture, 6.00%, 3/15/2025 | 1,423,788 | 1,477,734 | |||||||||
| c | Pattern Energy Group, Inc., 5.875%, 2/1/2024 | 1,500,000 | 1,582,500 | |||||||||
Multi-Utilities — 0.21% | ||||||||||||
CMS Energy Corp., 8.75%, 6/15/2019 | 2,000,000 | 2,219,045 | ||||||||||
|
| |||||||||||
| 27,716,632 | ||||||||||||
|
| |||||||||||
TOTAL CORPORATE BONDS (Cost $646,468,631) | 653,554,204 | |||||||||||
|
| |||||||||||
| CONVERTIBLE BONDS — 2.96% | ||||||||||||
DIVERSIFIED FINANCIALS — 0.67% | ||||||||||||
Consumer Finance — 0.67% | ||||||||||||
EZCORP, Inc., 2.125%, 6/15/2019 | 7,404,000 | 7,209,645 | ||||||||||
|
| |||||||||||
| 7,209,645 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 0.24% | ||||||||||||
Tobacco — 0.24% | ||||||||||||
Vector Group Ltd., 1.75%, 4/15/2020 | 2,260,000 | 2,579,225 | ||||||||||
|
| |||||||||||
| 2,579,225 | ||||||||||||
|
| |||||||||||
MEDIA — 0.93% | ||||||||||||
Media — 0.93% | ||||||||||||
Comcast Holdings Corp., 2.00%, 10/15/2029 | 18,000,000 | 9,900,000 | ||||||||||
|
| |||||||||||
| 9,900,000 | ||||||||||||
|
| |||||||||||
REAL ESTATE — 0.84% | ||||||||||||
Equity Real Estate Investment Trusts — 0.84% | ||||||||||||
| c | IAS Operating Partnership LP, 5.00%, 3/15/2018 | 5,040,000 | 5,090,400 | |||||||||
VEREIT, Inc., 3.00%, 8/1/2018 | 3,890,000 | 3,914,313 | ||||||||||
|
| |||||||||||
| 9,004,713 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 0.28% | ||||||||||||
Internet Software & Services — 0.28% | ||||||||||||
Twitter, Inc., 0.25%, 9/15/2019 | 2,000,000 | 1,895,000 | ||||||||||
| c | Zillow, Inc., 2.00%, 12/1/2021 | 1,000,000 | 1,081,875 | |||||||||
|
| |||||||||||
| 2,976,875 | ||||||||||||
|
| |||||||||||
TOTAL CONVERTIBLE BONDS (Cost $29,959,720) | 31,670,458 | |||||||||||
|
| |||||||||||
| MUNICIPAL BONDS — 0.79% | ||||||||||||
California Health Facilities Financing Authority (Developmental Disabilities), 7.875%, 2/1/2026 | 1,940,000 | 2,157,882 | ||||||||||
City of Chicago GO, 7.045%, 1/1/2029 | 3,000,000 | 3,312,810 | ||||||||||
Oklahoma Development Finance Authority, 8.00%, 5/1/2020 | 590,000 | 594,755 | ||||||||||
San Bernardino County California Redevelopment Agency (San Sevaine), 8.45%, 9/1/2030 | 1,000,000 | 1,124,170 | ||||||||||
Town of Oyster Bay GO, 3.25%, 2/1/2018 | 1,220,000 | 1,219,585 | ||||||||||
|
| |||||||||||
TOTAL MUNICIPAL BONDS (Cost $7,718,018) | 8,409,202 | |||||||||||
|
| |||||||||||
Annual Report | 15
Schedule of Investments, Continued
Thornburg Strategic Income Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
| OTHER GOVERNMENT — 0.61% | ||||||||||||
Mexican Bonos de Desarrollo (MXN), 4.75%, 6/14/2018 | $ | 77,700,000 | $ | 4,199,768 | ||||||||
| c,d | Seven and Seven Ltd. Floating Rate Note, (Guaranty: Export-Import Bank of Korea), 2.452%, 9/11/2019 | 2,400,000 | 2,386,757 | |||||||||
|
| |||||||||||
TOTAL OTHER GOVERNMENT (Cost $7,702,419) | 6,586,525 | |||||||||||
|
| |||||||||||
| MORTGAGE BACKED — 0.65% | ||||||||||||
Federal Home Loan Mtg Corp. Whole Loan Securities, Series 2017-SC02 Class 2A1, 3.50%, 5/25/2047 | 945,691 | 964,506 | ||||||||||
Federal Home Loan Mtg Corp., CMO Series KIR1 Class X, Interest Only 1.229%, 3/25/2026 | 37,373,281 | 2,689,531 | ||||||||||
Federal National Mtg Assoc., CMO Series 1994-37 Class L, 6.50%, 3/25/2024 | 2,056 | 2,209 | ||||||||||
Federal National Mtg Assoc., Pool AS9733, 4.00%, 6/1/2047 | 2,948,120 | 3,152,070 | ||||||||||
| b | FHA 1997-A Mtg, 6.896%, 7/1/2020 | 188,343 | 188,343 | |||||||||
|
| |||||||||||
TOTAL MORTGAGE BACKED (Cost $6,906,403) | 6,996,659 | |||||||||||
|
| |||||||||||
| LOAN PARTICIPATIONS — 4.05% | ||||||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.25% | ||||||||||||
Professional Services — 0.25% | ||||||||||||
RGIS Services, LLC, 8.83%, 12/29/2017 | 2,986,247 | 2,721,217 | ||||||||||
|
| |||||||||||
| 2,721,217 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 0.43% | ||||||||||||
Diversified Financial Services — 0.43% | ||||||||||||
| d | Stena International S.A., 4.34%, 12/29/2017 | 5,182,050 | 4,635,344 | |||||||||
|
| |||||||||||
| 4,635,344 | ||||||||||||
|
| |||||||||||
ENERGY — 0.28% | ||||||||||||
Oil, Gas & Consumable Fuels — 0.28% | ||||||||||||
Citgo Holding, Inc., 9.80%, 5/12/2018 | 2,945,858 | 2,968,188 | ||||||||||
| b | Malamute Energy, Inc., 0.51%, 12/29/2017 | 14,479 | 14,479 | |||||||||
|
| |||||||||||
| 2,982,667 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 0.28% | ||||||||||||
Tobacco — 0.28% | ||||||||||||
North Atlantic Holding Co., Inc., 7.32%, 12/29/2017 | 2,985,000 | 2,962,613 | ||||||||||
|
| |||||||||||
| 2,962,613 | ||||||||||||
|
| |||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 0.35% | ||||||||||||
Health Care Providers & Services — 0.35% | ||||||||||||
Prospect Medical Holdings, Inc., 7.50%, 06/30/2022 | 3,653,750 | 3,699,422 | ||||||||||
|
| |||||||||||
| 3,699,422 | ||||||||||||
|
| |||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.23% | ||||||||||||
Household Products — 0.23% | ||||||||||||
Energizer Holdings, Inc., 3.25%, 6/30/2022 | 2,487,310 | 2,493,528 | ||||||||||
|
| |||||||||||
| 2,493,528 | ||||||||||||
|
| |||||||||||
MEDIA — 0.28% | ||||||||||||
Media — 0.28% | ||||||||||||
ABG Intermediate Holdings, 8.00%, 9/26/2025 | 3,000,000 | 3,015,000 | ||||||||||
|
| |||||||||||
| 3,015,000 | ||||||||||||
|
| |||||||||||
REAL ESTATE — 0.03% | ||||||||||||
Real Estate Management & Development — 0.03% | ||||||||||||
DTZ U.S. Borrower, LLC, 9.56%, 11/4/2022 | 318,298 | 318,298 | ||||||||||
|
| |||||||||||
| 318,298 | ||||||||||||
|
| |||||||||||
RETAILING — 0.25% | ||||||||||||
Specialty Retail — 0.25% | ||||||||||||
Redbox Automated Retail, LLC, 8.74%, 10/31/2017 | 2,660,000 | 2,673,300 | ||||||||||
|
| |||||||||||
| 2,673,300 | ||||||||||||
|
| |||||||||||
16 | Annual Report
Schedule of Investments, Continued
Thornburg Strategic Income Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
SOFTWARE & SERVICES — 0.36% | ||||||||||||
Information Technology Services — 0.18% | ||||||||||||
Neustar, Inc., 3.25%, 1/8/2020 | $ | 858,912 | $ | 865,354 | ||||||||
CCC Information Services, Inc., 7.99%, 3/31/2025 | 1,000,000 | 1,027,500 | ||||||||||
Internet Software & Services — 0.18% | ||||||||||||
CareerBuilder, LLC, 8.08%, 7/31/2023 | 2,000,000 | 1,950,000 | ||||||||||
|
| |||||||||||
| 3,842,854 | ||||||||||||
|
| |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.42% | ||||||||||||
Electronic Equipment, Instruments & Components — 0.42% | ||||||||||||
Harland Clarke Holdings Corp., 7.33%, 12/31/2021 | 3,216,722 | 3,232,805 | ||||||||||
Harland Clarke Holdings Corp., 5.50%, 2/9/2022 | 1,242,089 | 1,247,529 | ||||||||||
|
| |||||||||||
| 4,480,334 | ||||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — 0.28% | ||||||||||||
Diversified Telecommunication Services — 0.28% | ||||||||||||
Cyxtera Technologies, Inc., 8.57%, 5/1/2025 | 3,000,000 | 3,039,990 | ||||||||||
|
| |||||||||||
| 3,039,990 | ||||||||||||
|
| |||||||||||
TRANSPORTATION — 0.61% | ||||||||||||
Air Freight & Logistics — 0.33% | ||||||||||||
Hanjin International Corp., 3.00%, 9/20/2020 | 3,500,000 | 3,500,000 | ||||||||||
Airlines — 0.05% | ||||||||||||
| b,c,d | OS Two, LLC, 10.00%, 8/31/2020 | 673,208 | 531,161 | |||||||||
Road & Rail — 0.23% | ||||||||||||
Avolon Holdings Ltd., 3.99%, 4/3/2022 | 2,493,750 | 2,498,413 | ||||||||||
|
| |||||||||||
| 6,529,574 | ||||||||||||
|
| |||||||||||
TOTAL LOAN PARTICIPATIONS (Cost $43,562,502) | 43,394,141 | |||||||||||
|
| |||||||||||
| SHORT TERM INVESTMENTS — 11.12% | ||||||||||||
| f | Thornburg Capital Management Fund | 11,902,054 | 119,020,538 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $119,020,538) | 119,020,538 | |||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 98.94% (Cost $1,051,985,837) | $ | 1,059,310,594 | ||||||||||
| OTHER ASSETS LESS LIABILITIES — 1.06% | 11,385,089 | |||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 1,070,695,683 | ||||||||||
|
| |||||||||||
| OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2017 | |||||||||||||||||||||||||||||||||||
CONTRACT DESCRIPTION | CONTRACT PARTY | BUY/SELL | CONTRACT AMOUNT | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | ||||||||||||||||||||||||||||
Canadian Dollar | SSB | Sell | 4,165,800 | 12/1/2017 | 3,339,882 | $ | – | $ | (18,243 | ) | |||||||||||||||||||||||||
Euro | SSB | Sell | 503,900 | 3/21/2018 | 601,427 | 8,176 | – | ||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
Total | $ | 8,176 | $ | (18,243 | ) | ||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) | $ | (10,067 | ) | ||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
Footnote Legend
| a | Non-income producing. |
| b | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees’ Audit Committee. |
| c | Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of September 30, 2017, the aggregate value of these securities in the Fund’s portfolio was $526,443,809, representing 49.17% of the Fund’s net assets. |
| d | Yankee bond denominated in U.S. dollars and is issued in the U.S. by foreign banks and corporations. |
| e | Bond in default. |
Annual Report | 17
Schedule of Investments, Continued
Thornburg Strategic Income Fund | September 30, 2017
| f | Investment in Affiliates - Shown below are holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940, including companies for which the Fund’s holding represented 5% or more of the company’s voting securities, and a series of the Thornburg Investment Trust in which the Fund invested for cash management purposes during the period: |
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2017 | MARKET VALUE SEPTEMBER 30, 2017 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | |||||||||||||||||||||||||||||||||
Thornburg Capital Management Fund | 11,484,943 | 32,411,844 | 31,994,733 | 11,902,054 | $ | 119,020,538 | $ | 1,055,875 | $ | – | $ | – | |||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 11.12% of net assets |
| $ | 119,020,538 | $ | 1,055,875 | $ | – | $ | – | ||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ARM | Adjustable Rate Mortgage | |
| 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 | |
| GO | General Obligation | |
| Mtg | Mortgage | |
| MTN | Medium-Term Note | |
| MXN | Denominated in Mexican Pesos | |
| Pfd | Preferred Stock | |
| REIT | Real Estate Investment Trust | |
| SBA | Small Business Administration | |
| SEK | Denominated in Swedish Kronor | |
| SPV | Special Purpose Vehicle |
See notes to financial statements.
18 | Annual Report
Statement of Assets and Liabilities
Thornburg Strategic Income Fund | September 30, 2017
ASSETS | ||||
Investments at value (Note 3) | ||||
Non-affiliated issuers (cost $932,965,299) | $ | 940,290,056 | ||
Non-controlled affiliated issuer (cost $119,020,538) | 119,020,538 | |||
Cash | 6,045,022 | |||
Receivable for investments sold | 4,847,567 | |||
Receivable for fund shares sold | 2,014,526 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 8,176 | |||
Dividends receivable | 330,703 | |||
Dividend and interest reclaim receivable | 5,025 | |||
Interest receivable | 10,175,656 | |||
Prepaid expenses and other assets | 33,485 | |||
|
| |||
Total Assets | 1,082,770,754 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 8,583,253 | |||
Payable for fund shares redeemed | 1,946,460 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 18,243 | |||
Payable to investment advisor and other affiliates (Note 4) | 718,723 | |||
Accounts payable and accrued expenses | 406,231 | |||
Dividends payable | 402,161 | |||
|
| |||
Total Liabilities | 12,075,071 | |||
|
| |||
NET ASSETS | $ | 1,070,695,683 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Distribution in excess of net investment income | $ | (5,447,524 | ) | |
Net unrealized appreciation on investments | 7,317,274 | |||
Accumulated net realized gain (loss) | (34,426,132 | ) | ||
Net capital paid in on shares of beneficial interest | 1,103,252,065 | |||
|
| |||
| $ | 1,070,695,683 | |||
|
| |||
Annual Report | 19
Statement of Assets and Liabilities, Continued
Thornburg Strategic Income Fund | September 30, 2017
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 11.82 | ||
Maximum sales charge, 4.50% of offering price | 0.56 | |||
|
| |||
Maximum offering price per share | $ | 12.38 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* | $ | 11.81 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 11.80 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 11.82 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 11.82 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 11.80 | ||
|
| |||
Class R6 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 11.85 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
20 | Annual Report
Thornburg Strategic Income Fund | Year Ended September 30, 2017
INVESTMENT INCOME | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $23,290) | $ | 1,728,607 | ||
Non-controlled affiliated issuer | 1,055,875 | |||
Interest income (net of premium amortized of $1,835,902) | 47,444,231 | |||
|
| |||
Total Income | 50,228,713 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 7,451,635 | |||
Administration fees (Note 4) | ||||
Class A Shares | 317,870 | |||
Class C Shares | 295,388 | |||
Class I Shares | 274,948 | |||
Class R3 Shares | 3,515 | |||
Class R4 Shares | 3,595 | |||
Class R5 Shares | 3,035 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 634,464 | |||
Class C Shares | 2,357,762 | |||
Class R3 Shares | 14,094 | |||
Class R4 Shares | 7,186 | |||
Transfer agent fees | ||||
Class A Shares | 254,004 | |||
Class C Shares | 223,765 | |||
Class I Shares | 525,343 | |||
Class R3 Shares | 14,331 | |||
Class R4 Shares | 12,508 | |||
Class R5 Shares | 14,325 | |||
Class R6 Shares* | 4,425 | |||
Registration and filing fees | ||||
Class A Shares | 28,945 | |||
Class C Shares | 20,201 | |||
Class I Shares | 33,231 | |||
Class R3 Shares | 19,029 | |||
Class R4 Shares | 21,002 | |||
Class R5 Shares | 19,029 | |||
Class R6 Shares* | 19,838 | |||
Custodian fees (Note 2) | 317,068 | |||
Professional fees | 81,788 | |||
Accounting fees (Note 4) | 35,310 | |||
Trustee fees | 43,799 | |||
Other expenses | 114,258 | |||
|
| |||
Total Expenses | 13,165,691 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (879,353 | ) | ||
Investment advisory fees waived by investment advisor (Note 4) | (795,987 | ) | ||
|
| |||
Net Expenses | 11,490,351 | |||
|
| |||
Net Investment Income | $ | 38,738,362 | ||
|
| |||
* Class R6 shares commenced operations on April 10, 2017.
Annual Report | 21
Statement of Operations, Continued
Thornburg Strategic Income Fund | Year Ended September 30, 2017
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Non-affiliated issuer investments | $ | (8,254,874 | ) | |
Forward currency contracts (Note 7) | (22,694 | ) | ||
Foreign currency transactions | 194,082 | |||
|
| |||
| (8,083,486 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Non-affiliated issuer investments | 25,963,280 | |||
Forward currency contracts (Note 7) | (136,411 | ) | ||
Foreign currency translations | 41,365 | |||
|
| |||
| 25,868,234 | ||||
|
| |||
Net Realized and Unrealized Gain | 17,784,748 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 56,523,110 | ||
|
| |||
See notes to financial statements.
22 | Annual Report
Statements of Changes in Net Assets
Thornburg Strategic Income Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 38,738,362 | $ | 44,371,576 | ||||||
Net realized gain (loss) on investments, forward currency contracts, and foreign currency transactions | (8,083,486 | ) | (38,813,306 | ) | ||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, and foreign currency translations | 25,868,234 | 61,853,369 | ||||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 56,523,110 | 67,411,639 | ||||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (7,693,979 | ) | (9,880,040 | ) | ||||||
Class C Shares | (5,690,905 | ) | (7,668,653 | ) | ||||||
Class I Shares | (19,277,454 | ) | (17,002,116 | ) | ||||||
Class R3 Shares | (85,292 | ) | (59,729 | ) | ||||||
Class R4 Shares | (85,574 | ) | (84,997 | ) | ||||||
Class R5 Shares | (208,615 | ) | (239,592 | ) | ||||||
Class R6 Shares* | (5 | ) | – | |||||||
From realized gains | ||||||||||
Class A Shares | – | (816,703 | ) | |||||||
Class C Shares | – | (732,196 | ) | |||||||
Class I Shares | – | (1,265,868 | ) | |||||||
Class R3 Shares | – | (3,811 | ) | |||||||
Class R4 Shares | – | (5,676 | ) | |||||||
Class R5 Shares | – | (14,864 | ) | |||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class A Shares | (55,984,696 | ) | (63,035,022 | ) | ||||||
Class C Shares | (72,453,957 | ) | (41,609,027 | ) | ||||||
Class I Shares | 127,943,899 | (64,637,440 | ) | |||||||
Class R3 Shares | (215,525 | ) | 1,314,552 | |||||||
Class R4 Shares | (504,525 | ) | 1,018,779 | |||||||
Class R5 Shares | (1,030,788 | ) | 514,084 | |||||||
Class R6 Shares* | 255 | – | ||||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | 21,235,949 | (136,796,680 | ) | |||||||
NET ASSETS | ||||||||||
Beginning of Year | 1,049,459,734 | 1,186,256,414 | ||||||||
|
| |||||||||
End of Year | $ | 1,070,695,683 | $ | 1,049,459,734 | ||||||
|
| |||||||||
Distribution in excess of net investment income | $ | (5,447,524 | ) | $ | (4,723,241 | ) | ||||
* Class R6 shares commenced operations on April 10, 2017.
See notes to financial statements.
Annual Report | 23
Thornburg Strategic Income Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg Strategic Income Fund (the “Fund”) is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on December 19, 2007. The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of twenty-one 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 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 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 be subject to a service fee, (vii) Class R6 shares are sold at net asset value without a sales charge at the time of purchase, and (viii) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent 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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: 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. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
24 | Annual Report
Notes to Financial Statements, Continued
Thornburg Strategic Income Fund | September 30, 2017
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
Unfunded Loan Commitments: The Fund has entered into a loan commitment with Malamute Energy, Inc., of which at September 30, 2017, $14,479 of the $42,536 par commitment had been funded. The maturity date is December 29, 2017.
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 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.
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 (depreciation) from investments.
Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and 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 (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
Annual Report | 25
Notes to Financial Statements, Continued
Thornburg Strategic Income Fund | September 30, 2017
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 1,052,044,695 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 30,131,929 | |||
Gross unrealized depreciation on a tax basis | (22,876,097 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 7,255,832 | |||
|
|
Temporary book to tax adjustments to cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of outstanding wash sales, outstanding contingent payment debt instrument (“CPDI”) tax basis adjustments, markedto-market of foreign currency contracts, and tax adjustments due to 305(c) adjustments outstanding.
At September 30, 2017, the Fund had deferred tax basis late year specified ordinary losses occurring subsequent to October 31, 2016 through September 30, 2017 of $6,524,340. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $1,012,053. For tax purposes, such capital losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $33,422,715, (of which $0 are short-term and $33,422,715 are 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.
In order to account for permanent book to tax differences, the Fund increased distribution in excess of net investment income by $6,420,821 and decreased accumulated net realized gain (loss) by $6,420,821. Reclassifications have no impact upon the net asset value of the Fund and resulted primarily from foreign currency gains (losses), investments in foreign bonds, mortgagebacked securities (“MBS”) losses, and investments in real estate investment trusts (“REITs”).
At September 30, 2017, the Fund had $1,546,467 of undistributed tax basis ordinary investment income and no undistributed tax basis capital gains.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Ordinary income | $ | 33,041,824 | $ | 37,774,245 | ||||||
|
| |||||||||
Total | $ | 33,041,824 | $ | 37,774,245 | ||||||
|
| |||||||||
Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assesment of a jurisdiction’s legal obligtion to pay reclaims, the jurisdiction’s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain.
Deferred Foreign Capital Gain 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.
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other
26 | Annual Report
Notes to Financial Statements, Continued
Thornburg Strategic Income Fund | September 30, 2017
functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund’s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date.
In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment’s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data.
Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Quotations for foreign investments expressed in foreign currency amounts are converted to U.S. dollar equivalents using a foreign exchange quotation from a third party service provider at the time of valuation. Foreign investments held by the Fund may be traded on days and at times when the Fund is not open for business. Consequently, the value of Fund investments may be significantly affected on days when shareholders cannot purchase or sell Fund shares. Futures contracts and other financial and derivative instruments traded on an exchange are valued at the latest published price for the instrument on its primary exchange. Listed options are valued at the last bid price.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Annual Report | 27
Notes to Financial Statements, Continued
Thornburg Strategic Income Fund | September 30, 2017
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
On days when market volatility thresholds established by the Audit Committee are exceeded, foreign securities for which valuations are obtained from pricing service providers are fair valued. On these days, the foreign securities are characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs 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, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities* | ||||||||||||||||||||
Common Stock(a) | $ | 5,324,732 | $ | 1,140,000 | $ | 4,175,839 | $ | 8,893 | ||||||||||||
Preferred Stock(a) | 17,000,161 | 665,300 | 13,791,740 | 2,543,121 | ||||||||||||||||
Asset Backed Securities | 167,353,974 | – | 160,345,902 | 7,008,072 | ||||||||||||||||
Corporate Bonds | 653,554,204 | – | 651,508,544 | 2,045,660 | ||||||||||||||||
Convertible Bonds | 31,670,458 | – | 31,670,458 | – | ||||||||||||||||
Municipal Bonds | 8,409,202 | – | 8,409,202 | – | ||||||||||||||||
Other Government | 6,586,525 | – | 6,586,525 | – | ||||||||||||||||
Mortgage Backed | 6,996,659 | – | 6,808,316 | 188,343 | ||||||||||||||||
Loan Participations | 43,394,141 | – | 42,848,501 | 545,640 | ||||||||||||||||
Short Term Investments | 119,020,538 | 119,020,538 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 1,059,310,594 | $ | 120,825,838 | $ | 926,145,027 | $ | 12,339,729 | ||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Forward Currency Contracts | $ | 8,176 | $ | – | $ | 8,176 | $ | – | ||||||||||||
Liabilities | ||||||||||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Forward Currency Contracts | $ | (18,243 | ) | $ | – | $ | (18,243 | ) | $ | – | ||||||||||
| * | 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. |
| (a) | At September 30, 2017, industry classifications for Common Stock and Preferred Stock in Level 2 and Level 3 consist of $6,727,853 in Energy, $11,030,940 in Miscellaneous, and $2,760,800 in Telecommunication Services. |
28 | Annual Report
Notes to Financial Statements, Continued
Thornburg Strategic Income Fund | September 30, 2017
| (b) | In accordance with the guidance prescribed in Accounting Standards Update (“ASU”) No. 2011-04, unadjusted broker quotes were applied to $2,731,464 of portfolio securities characterized as Level 3 investments at September 30, 2017. The following table displays a summary of the valuation techniques and unobservable inputs used to value portfolio securities characterized as Level 3 investments, where no unadjusted broker quotes were available at September 30, 2017: |
| FAIR VALUE AT SEPTEMBER 30, 2017 | VALUATION TECHNIQUE(S) | UNOBSERVABLE INPUT | RANGE/ (WEIGHTED AVERAGE) | |||||||||
Common Stock | $ | 8,893 | Discount to valuation | Fair valued by the Committee due to halt in trading and lack of information and liquidity | $10.50/(N/A) | |||||||
Asset-Backed Securities | 7,008,072 | Discounted cash flows | Third party vendor projection of discounted cash flows | 2.10%-5.10%/(4.34%) | ||||||||
Corporate Bond | 45,660 | Discounted to valuation | Fair valued by the Committee due to halt in trading and lack of information and liquidity | $4.15/(N/A) | ||||||||
| 2,000,000 | Cost basis | Cost basis | $100.00/(N/A) | |||||||||
Loan Participations | 531,161 | Discounted cash flows | Third party vendor projection of discounted cash flows | (25%/NA) | ||||||||
| 14,479 | Discount to valuation | Fair valued by the Committee due to halt in trading and lack of information and liquidity | $100.00/(N/A) | |||||||||
Total | $ | 9,608,265 | ||||||||||
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, 2017, 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, 2017 is as follows:
COMMON STOCK | PREFERRED STOCK | ASSET BACKED SECURITIES | CORPORATE BONDS | MORTGAGE BACKED | LOAN PARTICIPATIONS | TOTAL(e) | |||||||||||||||||||||||||||||
Beginning Balance 9/30/2016 | $ | – | $ | – | $ | 10,975,294 | $ | 1,785,600 | $ | 331,595 | $ | 6,692,250 | $ | 19,784,739 | |||||||||||||||||||||
Accrued Discounts (Premiums) | – | – | 6,831 | – | (1,113 | ) | 1,669 | 7,387 | |||||||||||||||||||||||||||
Net Realized Gain (Loss)(a) | – | – | 34,113 | – | (2,265 | ) | (134,865 | ) | (103,017 | ) | |||||||||||||||||||||||||
Gross Purchases | 8,893 | 2,609,497 | 4,000,000 | 2,000,000 | – | 14,479 | 8,632,869 | ||||||||||||||||||||||||||||
Gross Sales | – | – | (5,898,478 | ) | (223,764 | ) | (143,252 | ) | (6,397,534 | ) | (12,663,028 | ) | |||||||||||||||||||||||
Net Change in Unrealized Appreciation (Depreciation)(b)(c) | – | (66,376 | ) | (9,793 | ) | 4,624 | 3,378 | 369,641 | 301,474 | ||||||||||||||||||||||||||
Transfers into Level 3(d) | – | – | – | 264,800 | – | – | 264,800 | ||||||||||||||||||||||||||||
Transfers out of Level 3(d) | – | – | (2,099,895 | ) | (1,785,600 | ) | – | – | (3,885,495 | ) | |||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
Ending Balance 9/30/2017 | $ | 8,893 | $ | 2,543,121 | $ | 7,008,072 | $ | 2,045,660 | $ | 188,343 | $ | 545,640 | $ | 12,339,729 | |||||||||||||||||||||
| (a) | Amount of net realized gain (loss) from investments recognized in income is included in the Fund’s Statement of Operations for the year ended September 30, 2017. |
| (b) | Amount of net change in unrealized appreciation (depreciation) on investments recognized in income is included in the Fund’s Statement of Operations for the year ended September 30, 2017. |
| (c) | The net change in unrealized appreciation (depreciation) attributable to securities owned at September 30, 2017, which were valued using significant unobservable inputs, was $117,334. This is included within net change in unrealized appreciation (depreciation) on investments in the Fund’s the Statement of Operations for the year ended September 30, 2017. |
| (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, 2017. 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 1.15% of total net assets at the year ended September 30, 2017. Significant fluctuations of the unobservable inputs applied to portfolio securities characterized as Level 3 investments could be expected to increase or decrease the fair value of these portfolio securities. |
Annual Report | 29
Notes to Financial Statements, Continued
Thornburg Strategic Income Fund | September 30, 2017
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
Management Fee Schedule |
| ||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.750 | % | |||
Next $500 million | 0.675 | ||||
Next $500 million | 0.625 | ||||
Next $500 million | 0.575 | ||||
Over $2 billion | 0.500 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.708% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $35,310 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $36,737 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $5,128 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A, Class C, Class I, Class R3, Class R4 and Class R5 shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I or Class R5. Class R6 shares are not subject to a service plan. The Advisor and Distributor each 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, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor contractually waived Fund level investment advisory fees of $795,987. The Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $19,155 for Class A shares, $283,085 for Class C shares, $452,297 for Class I shares, $38,760 for Class R3 shares, $28,225 for Class R4 shares, $33,567 for Class R5 shares, and $24,264 for Class R6 shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 1.5%.
30 | Annual Report
Notes to Financial Statements, Continued
Thornburg Strategic Income Fund | September 30, 2017
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had transactions with affiliated funds of $5,159,489 in sales resulting in net realized losses of ($30,219).
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 4,853,150 | $ | 56,589,297 | 4,582,152 | $ | 51,291,779 | ||||||||||
Shares issued to shareholders in | 608,305 | 7,110,704 | 871,540 | 9,760,425 | ||||||||||||
Shares repurchased | (10,269,851 | ) | (119,684,697 | ) | (11,109,168 | ) | (124,087,226 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (4,808,396 | ) | $ | (55,984,696 | ) | (5,655,476 | ) | $ | (63,035,022 | ) | ||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 1,477,872 | $ | 17,155,384 | 2,946,495 | $ | 32,860,557 | ||||||||||
Shares issued to shareholders in | 431,435 | 5,035,580 | 654,821 | 7,317,489 | ||||||||||||
Shares repurchased | (8,139,965 | ) | (94,644,921 | ) | (7,309,089 | ) | (81,787,073 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (6,230,658 | ) | $ | (72,453,957 | ) | (3,707,773 | ) | $ | (41,609,027 | ) | ||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 23,950,880 | $ | 278,540,691 | 13,499,402 | $ | 151,142,252 | ||||||||||
Shares issued to shareholders in | 1,399,591 | 16,342,095 | 1,377,570 | 15,401,708 | ||||||||||||
Shares repurchased | (14,342,119 | ) | (166,938,887 | ) | (20,779,133 | ) | (231,181,400 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | 11,008,352 | $ | 127,943,899 | (5,902,161 | ) | $ | (64,637,440 | ) | ||||||||
|
| |||||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 70,158 | $ | 814,706 | 185,212 | $ | 2,084,448 | ||||||||||
Shares issued to shareholders in | 3,015 | 35,213 | 3,115 | 34,849 | ||||||||||||
Shares repurchased | (91,558 | ) | (1,065,444 | ) | (71,853 | ) | (804,745 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (18,385 | ) | $ | (215,525 | ) | 116,474 | $ | 1,314,552 | ||||||||
|
| |||||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 73,696 | $ | 851,251 | 98,418 | $ | 1,108,245 | ||||||||||
Shares issued to shareholders in | 5,060 | 59,147 | 5,291 | 59,279 | ||||||||||||
Shares repurchased | (122,542 | ) | (1,414,923 | ) | (13,157 | ) | (148,745 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (43,786 | ) | $ | (504,525 | ) | 90,552 | $ | 1,018,779 | ||||||||
|
| |||||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 247,053 | $ | 2,875,564 | 537,061 | $ | 5,962,916 | ||||||||||
Shares issued to shareholders in | 15,463 | 180,494 | 14,404 | 161,108 | ||||||||||||
Shares repurchased | (353,105 | ) | (4,086,846 | ) | (499,950 | ) | (5,609,940 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (90,589 | ) | $ | (1,030,788 | ) | 51,515 | $ | 514,084 | ||||||||
|
| |||||||||||||||
Class R6 Shares* | ||||||||||||||||
Shares sold | 22 | $ | 250 | – | $ | – | ||||||||||
Shares issued to shareholders in | – | 5 | – | – | ||||||||||||
Shares repurchased | – | – | – | – | ||||||||||||
|
| |||||||||||||||
Net increase | 22 | $ | 255 | – | $ | – | ||||||||||
|
| |||||||||||||||
| * | The effective date of this class of shares was April 10, 2017. |
Annual Report | 31
Notes to Financial Statements, Continued
Thornburg Strategic Income Fund | September 30, 2017
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments and U.S. Government obligations) of $448,218,288 and $401,796,264, respectively.
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 the 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, 2017, 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 Fund’s Advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2017 in the normal course of pursuing its investment objectives, with the objective of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments from adverse changes in the relationship between the U.S. dollar and foreign currencies. In each case these contracts have been initiated in conjunction with foreign investment transactions. The quarterly average value of open sell currency contracts for the year ended September 30, 2017 was $12,584,876.
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 outstanding forward currency contracts table located in the Schedule of Investments were entered into with State Street Bank and Trust Company (“SSB”), pursuant to an International Swaps and Derivatives Association (“ISDA”) Master Agreement. In the event of a default or termination under the ISDA Master Agreement with SSB, 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 with SSB does not result in an offset of reported amounts of financial assets and 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.
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2017 is disclosed in the following table:
| FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2017 | ||||||
| ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 8,176 | |||
| FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2017 | ||||||
| LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (18,243 | ) | ||
32 | Annual Report
Notes to Financial Statements, Continued
Thornburg Strategic Income Fund | September 30, 2017
Because the Fund did not receive or post cash collateral in connection with its currency forward contracts during the period, and because all of the Fund’s outstanding currency forward contracts are with SSB, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2017 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, 2017 is $0, and the net amount of the Fund’s liabilities which is attributable to those contracts at that date is $10,067. 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) on outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2017 are disclosed in the following tables:
NET REALIZED GAIN (LOSS) ON DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (22,694 | ) | $ | (22,694 | ) | ||
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (136,411 | ) | $ | (136,411 | ) | ||
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, small- and mid-cap 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 33
Thornburg Strategic Income Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 11.56 | 0.42 | 0.20 | 0.62 | (0.36 | ) | – | (0.36 | ) | $ | 11.82 | ||||||||||||||||||||||||||||
2016(b) | $ | 11.22 | 0.46 | 0.28 | 0.74 | (0.37 | ) | (0.03 | ) | (0.40 | ) | $ | 11.56 | |||||||||||||||||||||||||||
2015(b) | $ | 12.18 | 0.47 | (0.82 | ) | (0.35 | ) | (0.46 | ) | (0.15 | ) | (0.61 | ) | $ | 11.22 | |||||||||||||||||||||||||
2014(b) | $ | 12.19 | 0.52 | 0.28 | 0.80 | (0.54 | ) | (0.27 | ) | (0.81 | ) | $ | 12.18 | |||||||||||||||||||||||||||
2013(b) | $ | 12.28 | 0.67 | 0.03 | 0.70 | (0.65 | ) | (0.14 | ) | (0.79 | ) | $ | 12.19 | |||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 11.55 | 0.35 | 0.19 | 0.54 | (0.28 | ) | – | (0.28 | ) | $ | 11.81 | ||||||||||||||||||||||||||||
2016 | $ | 11.20 | 0.40 | 0.28 | 0.68 | (0.30 | ) | (0.03 | ) | (0.33 | ) | $ | 11.55 | |||||||||||||||||||||||||||
2015 | $ | 12.17 | 0.41 | (0.83 | ) | (0.42 | ) | (0.40 | ) | (0.15 | ) | (0.55 | ) | $ | 11.20 | |||||||||||||||||||||||||
2014 | $ | 12.17 | 0.45 | 0.29 | 0.74 | (0.47 | ) | (0.27 | ) | (0.74 | ) | $ | 12.17 | |||||||||||||||||||||||||||
2013 | $ | 12.26 | 0.60 | 0.03 | 0.63 | (0.58 | ) | (0.14 | ) | (0.72 | ) | $ | 12.17 | |||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 11.54 | 0.47 | 0.19 | 0.66 | (0.40 | ) | – | (0.40 | ) | $ | 11.80 | ||||||||||||||||||||||||||||
2016 | $ | 11.19 | 0.50 | 0.28 | 0.78 | (0.40 | ) | (0.03 | ) | (0.43 | ) | $ | 11.54 | |||||||||||||||||||||||||||
2015 | $ | 12.16 | 0.51 | (0.83 | ) | (0.32 | ) | (0.50 | ) | (0.15 | ) | (0.65 | ) | $ | 11.19 | |||||||||||||||||||||||||
2014 | $ | 12.17 | 0.56 | 0.28 | 0.84 | (0.58 | ) | (0.27 | ) | (0.85 | ) | $ | 12.16 | |||||||||||||||||||||||||||
2013 | $ | 12.25 | 0.70 | 0.04 | 0.74 | (0.68 | ) | (0.14 | ) | (0.82 | ) | $ | 12.17 | |||||||||||||||||||||||||||
| CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 11.55 | 0.42 | 0.20 | 0.62 | (0.35 | ) | – | (0.35 | ) | $ | 11.82 | ||||||||||||||||||||||||||||
2016 | $ | 11.21 | 0.46 | 0.27 | 0.73 | (0.36 | ) | (0.03 | ) | (0.39 | ) | $ | 11.55 | |||||||||||||||||||||||||||
2015 | $ | 12.18 | 0.47 | (0.83 | ) | (0.36 | ) | (0.46 | ) | (0.15 | ) | (0.61 | ) | $ | 11.21 | |||||||||||||||||||||||||
2014 | $ | 12.19 | 0.49 | 0.31 | 0.80 | (0.54 | ) | (0.27 | ) | (0.81 | ) | $ | 12.18 | |||||||||||||||||||||||||||
2013 | $ | 12.28 | 0.63 | 0.06 | 0.69 | (0.64 | ) | (0.14 | ) | (0.78 | ) | $ | 12.19 | |||||||||||||||||||||||||||
| CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 11.56 | 0.41 | 0.20 | 0.61 | (0.35 | ) | – | (0.35 | ) | $ | 11.82 | ||||||||||||||||||||||||||||
2016 | $ | 11.21 | 0.46 | 0.28 | 0.74 | (0.36 | ) | (0.03 | ) | (0.39 | ) | $ | 11.56 | |||||||||||||||||||||||||||
2015 | $ | 12.18 | 0.48 | (0.84 | ) | (0.36 | ) | (0.46 | ) | (0.15 | ) | (0.61 | ) | $ | 11.21 | |||||||||||||||||||||||||
2014(d) | $ | 12.00 | 0.35 | 0.17 | 0.52 | (0.34 | ) | – | (0.34 | ) | $ | 12.18 | ||||||||||||||||||||||||||||
| CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 11.54 | 0.47 | 0.19 | 0.66 | (0.40 | ) | – | (0.40 | ) | $ | 11.80 | ||||||||||||||||||||||||||||
2016 | $ | 11.19 | 0.49 | 0.28 | 0.77 | (0.39 | ) | (0.03 | ) | (0.42 | ) | $ | 11.54 | |||||||||||||||||||||||||||
2015 | $ | 12.15 | 0.50 | (0.82 | ) | (0.32 | ) | (0.49 | ) | (0.15 | ) | (0.64 | ) | $ | 11.19 | |||||||||||||||||||||||||
2014 | $ | 12.16 | 0.55 | 0.28 | 0.83 | (0.57 | ) | (0.27 | ) | (0.84 | ) | $ | 12.15 | |||||||||||||||||||||||||||
2013 | $ | 12.25 | 0.70 | 0.03 | 0.73 | (0.68 | ) | (0.14 | ) | (0.82 | ) | $ | 12.16 | |||||||||||||||||||||||||||
| CLASS R6 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(f) | $ | 11.63 | 0.33 | 0.13 | 0.46 | (0.24 | ) | – | (0.24 | ) | $ | 11.85 | ||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| (d) | Effective date of this class of shares was February 1, 2014. |
| (e) | Annualized. |
| (f) | Effective date of this class of shares was April 10, 2017. |
| (g) | Net Assets at End of Year is less than $1,000 |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
34 | Annual Report
Financial Highlights, Continued
Thornburg Strategic Income Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 3.61 | 1.17 | 1.17 | 1.25 | 5.41 | 44.74 | $ | 232,938 | |||||||||||||||||||||||
| 4.12 | 1.24 | 1.24 | 1.24 | 6.70 | 29.48 | $ | 283,398 | |||||||||||||||||||||||
| 4.04 | 1.23 | 1.23 | 1.23 | (2.97 | ) | 38.40 | $ | 338,387 | ||||||||||||||||||||||
| 4.30 | 1.22 | 1.22 | 1.24 | 6.79 | 51.20 | $ | 392,604 | |||||||||||||||||||||||
| 5.44 | 1.25 | 1.25 | 1.27 | 5.79 | 76.47 | $ | 251,106 | |||||||||||||||||||||||
| 2.98 | 1.80 | 1.80 | 1.99 | 4.76 | 44.74 | $ | 205,253 | |||||||||||||||||||||||
| 3.56 | 1.80 | 1.80 | 1.99 | 6.20 | 29.48 | $ | 272,691 | |||||||||||||||||||||||
| 3.47 | 1.80 | 1.80 | 1.97 | (3.61 | ) | 38.40 | $ | 306,085 | ||||||||||||||||||||||
| 3.73 | 1.80 | 1.80 | 1.98 | 6.27 | 51.20 | $ | 348,334 | |||||||||||||||||||||||
| 4.88 | 1.80 | 1.80 | 2.02 | 5.21 | 76.47 | $ | 237,177 | |||||||||||||||||||||||
| 4.02 | 0.75 | 0.75 | 0.92 | 5.85 | 44.74 | $ | 620,780 | |||||||||||||||||||||||
| 4.45 | 0.91 | 0.91 | 0.91 | 7.15 | 29.48 | $ | 480,143 | |||||||||||||||||||||||
| 4.38 | 0.89 | 0.89 | 0.89 | (2.73 | ) | 38.40 | $ | 531,849 | ||||||||||||||||||||||
| 4.60 | 0.90 | 0.90 | 0.90 | 7.15 | 51.20 | $ | 552,182 | |||||||||||||||||||||||
| 5.75 | 0.94 | 0.94 | 0.94 | 6.21 | 76.47 | $ | 246,332 | |||||||||||||||||||||||
| 3.65 | 1.12 | 1.12 | 2.58 | 5.49 | 44.74 | $ | 2,667 | |||||||||||||||||||||||
| 4.07 | 1.25 | 1.25 | 3.09 | 6.69 | 29.48 | $ | 2,819 | |||||||||||||||||||||||
| 3.98 | 1.25 | 1.25 | 2.70 | (3.07 | ) | 38.40 | $ | 1,430 | ||||||||||||||||||||||
| 4.10 | 1.25 | 1.25 | 3.10 | 6.76 | 51.20 | $ | 3,049 | |||||||||||||||||||||||
| 5.19 | 1.25 | 1.25 | 32.64 | (c) | 5.78 | 76.47 | $ | 171 | ||||||||||||||||||||||
| 3.52 | 1.25 | 1.25 | 2.30 | 5.35 | 44.74 | $ | 2,772 | |||||||||||||||||||||||
| 4.10 | 1.25 | 1.25 | 2.50 | 6.79 | 29.48 | $ | 3,218 | |||||||||||||||||||||||
| 4.15 | 1.25 | 1.25 | 2.64 | (3.07 | ) | 38.40 | $ | 2,106 | ||||||||||||||||||||||
| 4.25 | (e) | 1.25 | (e) | 1.25 | (e) | 60.66 | (c)(e) | 4.29 | 51.20 | $ | 16 | |||||||||||||||||||
| 4.03 | 0.74 | 0.74 | 1.36 | 5.84 | 44.74 | $ | 6,286 | |||||||||||||||||||||||
| 4.34 | 0.99 | 0.99 | 1.37 | 7.07 | 29.48 | $ | 7,191 | |||||||||||||||||||||||
| 4.33 | 0.99 | 0.99 | 1.55 | (2.75 | ) | 38.40 | $ | 6,399 | ||||||||||||||||||||||
| 4.51 | 0.99 | 0.99 | 2.11 | 7.05 | 51.20 | $ | 2,565 | |||||||||||||||||||||||
| 5.68 | 0.99 | 0.99 | 227.33 | (c) | 6.07 | 76.47 | $ | 11 | ||||||||||||||||||||||
| 5.83 | (e) | 0.00 | (e) | 0.00 | (e) | 200.66 | (c)(e) | 3.99 | 44.74 | $ | – | (g) | ||||||||||||||||||
Annual Report | 35
Report of Independent Registered Public Accounting Firm
Thornburg Strategic Income Fund
To the Trustees and Shareholders of the
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 the Thornburg Strategic Income Fund (the “Fund”) as of September 30, 2017, 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 indicated, 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 as of September 30, 2017 by correspondence with the custodian, transfer agent, agent banks, and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
36 | Annual Report
Thornburg Strategic Income Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
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 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,031.50 | $ | 6.32 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.84 | $ | 6.29 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,028.90 | $ | 9.73 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,015.48 | $ | 9.66 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,034.70 | $ | 4.08 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.06 | $ | 4.05 | |||||||||
| CLASS R3 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,033.20 | $ | 5.63 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.53 | $ | 5.59 | |||||||||
| CLASS R4 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,031.80 | $ | 6.94 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.24 | $ | 6.89 | |||||||||
| CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,034.90 | $ | 3.49 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.64 | $ | 3.47 | |||||||||
| CLASS R6 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,039.90 | $ | 3.32 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.81 | $ | 3.29 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.24%; C: 1.91%; I: 0.80%; R3: 1.10%; R4: 1.36%; R5: 0.68%; R6: 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. |
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.
Annual Report | 37
Thornburg Strategic Income Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
38 | Annual Report
Trustees and Officers, Continued
Thornburg Strategic Income Fundx | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 39
Trustees and Officers, Continued
Thornburg Strategic Income Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
40 | Annual Report
Thornburg Strategic Income Fund | September 30, 2017 (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, 2017, dividends paid by the Thornburg Strategic Income Fund of $33,041,824 are being reported as ordinary investment income for federal income tax purposes.
For the tax year ended September 30, 2017, the Thornburg Strategic Income Fund is reporting 4.84% (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 3.26% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2017 as qualified for the corporate dividends received deduction.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2017. Complete information will be reported in conjunction with your 2017 Form 1099.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg. com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Strategic Income Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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.
Annual Report | 41
Other Information, Continued
Thornburg Strategic Income Fund | September 30, 2017 (Unaudited)
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the agreement, the Trustees considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 nine 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 created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, and (6) comparative measures of correlation to equity indices, and risk and return statistics. Information provided to the Trustees indicated that the comparability of indices and fund categories to the Fund may be limited for a number of reasons. Measures of 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 generally attach additional significance to the investment performance of the Fund from the perspective of longer term shareholders, and noted that the Fund’s recent relative investment performance reflected appropriate defensive measures by the Advisor in line with the objectives of the Fund. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for two Fund share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund
42 | Annual Report
Other Information, Continued
Thornburg Strategic Income Fund | September 30, 2017 (Unaudited)
analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. The Trustees noted that the Advisor has agreed to certain fee waivers and expense reimbursements for the current period. Comparative fee and expense data noted as having been considered by the Trustees showed that the advisory fee for the Fund after the contractual waiver by the Advisor was comparable to the median and higher than the average levels for the fund category, the level of total expense for one share class of the Fund was higher than the median and comparable to average expense levels for the category, and that the level of total expense for a second share class was lower than the median and average levels for the category. Peer group data showed that the Fund’s advisory fee after the fee waiver was comparable to the median levels of the two peer groups considered, and that the total expense levels for two share classes were comparable to the medians of their respective peer groups. The Trustees did not find the differences significant in view of their findings and conclusions respecting 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 43
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust1
44 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 45
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Annual Report | 47
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Value Fund
Annual Report ^ September 30, 2017
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class A | TVAFX | 885-215-731 | ||||||||
| 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 | ||||||||
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.
Investments carry risks, including possible loss of principal. Additional 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- and mid-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 bank deposits or guaranteed by a bank or any other entity.
Annual Report | 3
Thornburg Value Fund | September 30, 2017 (Unaudited)
October 16, 2017
Dear Fellow Shareholder:
Thornburg Value Fund’s 2017 fiscal year ended September 30, 2017 was strong in both absolute and relative terms. The Fund returned 20.72% (A shares without sales charge) vs. the S&P 500 Index return of 18.61%. We were excited to have accomplished these strong returns with a beta characteristic for the fund of less than 1 vs. our S&P 500 benchmark. Our trailing 1-, 3- and 5-year returns through September 30, 2017, have each outpaced our benchmark index and our peers. Thornburg Value Fund (I Shares) ranks in the top fifth in each period amongst both its Lipper and Morningstar peers. Over five years, the Fund’s I shares ranks within the top 3% and 1% amongst peers in our Lipper and Morningstar categories, respectively. Those results are shown in the tables below. We’re thrilled with our recent and medium-term results, though we know and expect that – as is typical to the cyclical nature of value investing – performance won’t be stellar over every short-term period in the future. We are confident, however, that our approach will be successful over the long term.
Lipper Multi-Cap Core Funds
as of September 30, 2017
| RANKINGS | ||||||||||||||||
| 1-YR | 3-Yr | 5-YR | 10-YR | |||||||||||||
A Shares | 16% | 10% | 5% | 73% | ||||||||||||
I Shares | 12% | 6% | 3% | 63% | ||||||||||||
# of Funds | 773 | 649 | 569 | 389 | ||||||||||||
| Source: | Lipper |
Morningstar Large Blend Category
as of September 30, 2017
| RANKINGS | ||||||||||||||||
| 1-YR | 3-Yr | 5-YR | 10-YR | |||||||||||||
A Shares | 12% | 12% | 2% | 86% | ||||||||||||
I Shares | 10% | 7% | 1% | 78% | ||||||||||||
# of Funds | 1396 | 1218 | 1083 | 799 | ||||||||||||
| Source: | Morningstar |
Percentile rankings are based on total returns, before sales charge.
Past performance does not guarantee future results.
Our Differentiated Investment Approach
We invest in promising companies selling at a discount, utilizing our distinctive research approach and portfolio construction tool. Our work can be broken down into two parts: 1) finding great investments and 2) building a balanced portfolio. Our approach gives us both the flexibility to seek out the best investment ideas and the appropriate tools to bundle them into a balanced portfolio.
Finding Great Investments
Our organizational structure and culture are designed to fit our distinctive research process. We don’t work in silos and instead emphasize collaboration and the entrepreneurial pursuit of investment opportunities. Investment ideas often cross industry and geographic boundaries, so we prevent barriers that might stop our analysts from following investment leads.
With all our analysts looking at many different industries, stock discussions involve a roomful of investment professionals skilled at comparing and contrasting different business models across industries and regions.
Instead of evaluating the best U.S. telecom stock, for example, we discuss which business model with a stable earnings profile is most attractively priced – comparing business models within the telecom, utilities, consumer staples, and health care industries and any other sector our research takes us.
While sector specialists with a narrow focus can be better able to pick up on slight changes within an industry, we think it’s a crowded, over-fished area most investors are looking at. Our wider focus allows us to see paradigm shifts and consequential changes within and across industries. Today, in view of the ways we search for information, the way we socially interact, and the way we buy goods are in flux, we believe that our wide lens is better suited to analyze which companies will be the winners and losers.
Building a Balanced Portfolio
After searching widely for the best investment opportunities, we apply our three baskets – basic value, consistent earners, and emerging franchises – to effectively bundle these ideas into a balanced portfolio. Our goal is to construct a portfolio with an appropriate exposure to cyclical, stable, and growth investments, which has the opportunity to outperform in any market environment.
Our baskets help to limit factor bets in the portfolio, while giving us the freedom to incorporate our best ideas. Our skill is in selecting individual stocks, not predicting which investment style will outperform in the near term. Our three-basket approach gives us flexibility in areas we are strong – individual stock research – while creating appropriate constraints in areas where we don’t have an edge.
We’ve been employing this approach in the Fund since 1995 – we believe it to be a durable and common-sense investment strategy.
Drivers of Results
The Fund trailed the S&P 500 Index through the end of the first quarter of the fiscal year (the December 2016 quarter). Especially following the election, our portfolio didn’t benefit to nearly the extent as the overall market did during the “Trump trade” into year end. These trends reversed quickly as we marked the new year and portfolio performance remained relatively strong through the remainder of the fiscal year.
For the full fiscal year, stock selection drove our strong relative results, while our sector allocation impact was a slight drag. Our stock selection was strongest in the consumer discretionary, financials, consumer staples, and information technology sectors. Our
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Value Fund | September 30, 2017 (Unaudited)
stock selection was weakest within the health care, industrials, and materials sectors. Our overweight financials, underweight energy and underweight real estate positioning all aided our relative returns for the year. Our large cash position of 9% was a drag on our relative results for the year. We are carrying a higher cash position, in part, to help dampen volatility of the overall portfolio.
Contributors
Grand Canyon Education, Inc. – Our investment in this for-profit college operator appreciated materially during the fiscal year. The stock valuation benefited from a combination of strong fundamental execution and a much friendlier perceived regulatory environment following the election. We have long believed that Grand Canyon is differentiated from its for-profit peers (a ground campus, NCAA Division I sports, for example). The rest of the market seems to be catching on.
JPMorgan Chase & Co. – JPMorgan’s stock performance was helped recently by talk in Washington, DC of a potential tax deal, which would lower its tax rate. Additionally, higher interest rates and potential deregulation helped money center banks in general during the year.
Apollo Global Management, LLC. – Business fundamentals at Apollo Global have progressed nicely over the last year. The company continues to grow permanent capital and show good investment returns. The company has the potential to grow both fee-related earnings and distributions over the coming years.
Citizens Financial Group, Inc. – Since we purchased Citizens Financial Group three years ago, the company has steadily improved returns towards its 10% Return on Tangible Current Equity (RoTCE) target. This most recent quarter, the company earned a 10% return for the first time as a public company. We look forward to the company setting new targets sometime next year.
Citigroup, Inc. – During the fiscal year, Citigroup outperformed its bank peers and the broader market as the company showed progress towards its capital return plan. Additionally, during their recent investor day, the company laid out its longer-term plan of generating 11% (RoTCE) by 2020 which, if achieved, would almost double company’s earnings per share over the next 4–5 years.
Detractors
Avinger – We participated in an equity capital raise for early-stage emerging franchise company Avinger in August of 2016. This was a small position and a unique opportunity – we had done our work on their newest approved technology (image guided atherectomy devices) and believed it offers better outcomes to patients that need blockages removed from their blood vessels. The stock initially responded well to the capital raise (we were able to trim our small position at a significant gain early on) – but slower than expected rollout of their new device eventually weighed on shares. A combination of poor quality control on initial manufacturing and longer setup time for use of their technique in the doctor’s office were the main culprits. As it became clear that Avinger would have a much tougher road to the free-cash-flow breakeven that we initially envisioned, we sold our shares on fundamental deterioration at a significant loss.
AutoZone, Inc. – AutoZone is experiencing a combination of revenue deceleration and margin compression as it struggles to overcome cyclical and structural changes within the auto parts retailer space. Weather and the auto sales cycle are weighing on near-term revenue growth across the space. Meanwhile, AutoZone has also had to make meaningful investments to its distribution network as it tries to shift its business to make itself more competitive in the more Amazon-insulated do-it-for-me professional garage portion of the industry, thus far without much success.
General Electric Co. – General Electric reported weak earnings, lowering expectations for its power segment earnings. The company is currently undergoing a management transition. We should know more about the company’s progress at its November investor meeting.
China Mobile, Ltd. – Underlying business at China Mobile was reasonably strong during the year, but stock price performance was not. We remain optimistic about the prospects for our investment in the company. Concerns surrounding future capital return plans as a Chinese “State Owned Entity” and upcoming investment to build out 5G wireless capabilities have weighed on investor sentiment.
Medtronic, plc – Medtronic underperformed during the fiscal year as recent organic growth has disappointed. While variance based on new product launches can affect near-term revenue results, the company continues to grow steadily as a leader in medical device technology.
Annual Report | 5
Letter to Shareholders, Continued
Thornburg Value Fund | September 30, 2017 (Unaudited)
Whatever lies ahead, we try to avoid larger distractions and focus on what we do well – active, fundamentals-based stock selection. While we like the portfolio’s current positioning, we will continue our methodical search for other, potentially overlooked opportunities as we have for some 20 years.
Thank you for investing alongside us in Thornburg Value Fund.
Sincerely,
 |  | |
| Connor Browne,CFA | Robert MacDonald,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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
6 | Annual Report
Thornburg Value Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
Class A Shares (Incep: 10/2/95) | |||||||||||||||||||||||||
Without sales charge | 20.72% | 10.86% | 15.89% | 5.42% | 10.03% | ||||||||||||||||||||
With sales charge | 15.28% | 9.16% | 14.83% | 4.93% | 9.80% | ||||||||||||||||||||
Class C Shares (Incep: 10/2/95) | |||||||||||||||||||||||||
Without sales charge | 19.81% | 10.03% | 15.01% | 4.62% | 9.18% | ||||||||||||||||||||
With sales charge | 18.81% | 10.03% | 15.01% | 4.62% | 9.18% | ||||||||||||||||||||
Class I Shares (Incep: 11/2/98) | 21.20% | 11.29% | 16.35% | 5.83% | 7.91% | ||||||||||||||||||||
Class R3 Shares (Incep: 7/1/03) | 20.75% | 10.89% | 15.93% | 5.41% | 8.22% | ||||||||||||||||||||
Class R4 Shares (Incep: 2/1/07) | 20.87% | 11.00% | 16.05% | 5.52% | 5.94% | ||||||||||||||||||||
Class R5 Shares (Incep: 2/1/05) | 21.21% | 11.29% | 16.35% | 5.80% | 8.24% | ||||||||||||||||||||
S&P 500 Index (Since 10/2/95) | 18.61% | 10.81% | 14.22% | 7.44% | 8.94% | ||||||||||||||||||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. 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 sales charge for Class I, R3, R4, and R5 shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses before any fee waivers or expense reimbursements are as follows: A shares, 1.39%; C shares, 2.14%; I shares, 1.07%; R3 shares, 1.81%; R4 shares, 1.75%; R5 shares, 1.46%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: I shares, 0.99%; R3 shares, 1.35%; R4 shares, 1.25%; R5 shares, 0.99%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus.
Due to the Fund’s relatively small asset base, performance was positively impacted by IPOs to a greater degree than it may be in the future. IPO investments are not an integral component of the Fund’s investment process and may not be utilized to the same extent in the future.
Glossary
The S&P 500 Index is an unmanaged broad measure of the U.S. stock market.
The performance of any index is not indicative of the performance of any particular investment. 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.
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.
ROTCE – Return on Tangible Common Equity (ROTCE) is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders’ equity. Tangible common equity is a measure of a company’s capital, which is used to evaluate a financial institution’s ability to deal with potential losses.
Annual Report | 7
Thornburg Value Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types. As a secondary goal, 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.
MARKET CAPITALIZATION EXPOSURE
BASKET STRUCTURE
TOP TEN EQUITY HOLDINGS
| Gilead Sciences, Inc. | 4.6% | ||||
| Thermo Fisher Scientific, Inc. | 4.5% | ||||
| JPMorgan Chase & Co. | 4.1% | ||||
| Facebook, Inc. | 3.7% | ||||
| Wal-Mart Stores, Inc. | 3.4% | ||||
| Citigroup, Inc. | 3.4% | ||||
| Alphabet, Inc. Class C | 3.3% | ||||
| Medtronic plc | 2.9% | ||||
| US Foods Holding Corp. | 2.9% | ||||
| International Flavors & Fragrances, Inc. | 2.9% |
There is no guarantee that the Fund will meet its investment objectives.
All portfolio information is subject to change.
SECTOR EXPOSURE
| Information Technology | 18.4% | ||||
| Financials | 16.6% | ||||
| Health Care | 15.1% | ||||
| Consumer Discretionary | 14.2% | ||||
| Consumer Staples | 8.5% | ||||
| Energy | 4.8% | ||||
| Industrials | 4.4% | ||||
| Materials | 4.0% | ||||
| Telecommunication Services | 2.8% | ||||
| Utilities | 1.5% | ||||
| Real Estate | 0.6% | ||||
| Other Assets Less Liabilities | 9.5% |
TOP TEN INDUSTRY GROUPS
| Pharma, Biotech & Life Sciences | 12.2% | ||||
| Software & Services | 9.7% | ||||
| Technology Hardware & Equipment | 8.7% | ||||
| Banks | 8.3% | ||||
| Food & Staples Retailing | 6.3% | ||||
| Diversified Financials | 6.1% | ||||
| Consumer Services | 4.9% | ||||
| Consumer Durables & Apparel | 4.8% | ||||
| Energy | 4.8% | ||||
| Retailing | 4.5% |
8 | Annual Report
Thornburg Value Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
| COMMON STOCK — 90.55% | ||||||||||||
BANKS — 8.32% | ||||||||||||
Banks — 8.32% | ||||||||||||
Citigroup, Inc. | 459,400 | $ | 33,416,756 | |||||||||
Citizens Financial Group, Inc. | 225,620 | 8,544,229 | ||||||||||
JPMorgan Chase & Co. | 419,409 | 40,057,754 | ||||||||||
|
| |||||||||||
| 82,018,739 | ||||||||||||
|
| |||||||||||
CAPITAL GOODS — 2.52% | ||||||||||||
Industrial Conglomerates — 2.52% | ||||||||||||
General Electric Co. | 1,024,900 | 24,782,082 | ||||||||||
|
| |||||||||||
| 24,782,082 | ||||||||||||
|
| |||||||||||
CONSUMER DURABLES & APPAREL — 4.76% | ||||||||||||
Household Durables — 2.14% | ||||||||||||
| a | TRI Pointe Homes, Inc. | 1,525,186 | 21,062,819 | |||||||||
Leisure Products — 2.62% | ||||||||||||
Acushnet Holdings Corp. | 911,800 | 16,193,568 | ||||||||||
Callaway Golf Co. | 669,908 | 9,666,772 | ||||||||||
|
| |||||||||||
| 46,923,159 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 4.91% | ||||||||||||
Diversified Consumer Services — 1.22% | ||||||||||||
| a | Grand Canyon Education, Inc. | 131,684 | 11,959,541 | |||||||||
Hotels, Restaurants & Leisure — 3.69% | ||||||||||||
Aramark Holdings Corp. | 610,976 | 24,811,735 | ||||||||||
Domino’s Pizza Group plc | 2,785,000 | 11,576,349 | ||||||||||
|
| |||||||||||
| 48,347,625 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 6.07% | ||||||||||||
Capital Markets — 3.94% | ||||||||||||
Apollo Global Management, LLC | 599,319 | 18,039,502 | ||||||||||
Oaktree Capital Group, LLC | 441,634 | 20,778,879 | ||||||||||
Mortgage Real Estate Investment Trusts — 2.13% | ||||||||||||
PennyMac Mortgage Investment Trust | 1,207,530 | 20,998,947 | ||||||||||
|
| |||||||||||
| 59,817,328 | ||||||||||||
|
| |||||||||||
ENERGY — 4.76% | ||||||||||||
Oil, Gas & Consumable Fuels — 4.76% | ||||||||||||
Devon Energy Corp. | 515,782 | 18,934,357 | ||||||||||
Enterprise Products Partners L.P. | 1,072,386 | 27,957,103 | ||||||||||
|
| |||||||||||
| 46,891,460 | ||||||||||||
|
| |||||||||||
FOOD & STAPLES RETAILING — 6.31% | ||||||||||||
Food & Staples Retailing — 6.31% | ||||||||||||
| a | US Foods Holding Corp. | 1,060,735 | 28,321,625 | |||||||||
Wal-Mart Stores, Inc. | 433,703 | 33,889,552 | ||||||||||
|
| |||||||||||
| 62,211,177 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 2.14% | ||||||||||||
Food Products — 2.14% | ||||||||||||
| a | Nomad Foods Ltd. | 1,449,782 | 21,123,324 | |||||||||
|
| |||||||||||
| 21,123,324 | ||||||||||||
|
| |||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 2.88% | ||||||||||||
Health Care Equipment & Supplies — 2.88% | ||||||||||||
Medtronic plc | 365,335 | 28,412,103 | ||||||||||
|
| |||||||||||
| 28,412,103 | ||||||||||||
|
| |||||||||||
INSURANCE — 2.18% | ||||||||||||
Insurance — 2.18% | ||||||||||||
Assured Guaranty Ltd. | 568,300 | 21,453,325 | ||||||||||
|
| |||||||||||
| 21,453,325 | ||||||||||||
|
| |||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Value Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
MATERIALS — 4.00% | ||||||||||||
Chemicals — 2.87% | ||||||||||||
International Flavors & Fragrances, Inc. | 197,749 | $ | 28,260,310 | |||||||||
Metals & Mining — 1.13% | ||||||||||||
Warrior Met Coal, Inc. | 474,300 | 11,179,251 | ||||||||||
|
| |||||||||||
| 39,439,561 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 12.17% | ||||||||||||
Biotechnology — 6.38% | ||||||||||||
| a | Alkermes plc | 337,198 | 17,143,146 | |||||||||
Gilead Sciences, Inc. | 564,466 | 45,733,036 | ||||||||||
Life Sciences Tools & Services — 4.47% | ||||||||||||
Thermo Fisher Scientific, Inc. | 232,786 | 44,043,111 | ||||||||||
Pharmaceuticals — 1.32% | ||||||||||||
| a | Akorn, Inc. | 165,574 | 5,495,401 | |||||||||
Phibro Animal Health Corp. | 202,587 | 7,505,848 | ||||||||||
|
| |||||||||||
| 119,920,542 | ||||||||||||
|
| |||||||||||
REAL ESTATE — 0.59% | ||||||||||||
Real Estate Management & Development — 0.59% | ||||||||||||
| a | CBRE Group, Inc. | 153,398 | 5,810,716 | |||||||||
|
| |||||||||||
| 5,810,716 | ||||||||||||
|
| |||||||||||
RETAILING — 4.50% | ||||||||||||
Internet & Direct Marketing Retail — 1.72% | ||||||||||||
Expedia, Inc. | 117,672 | 16,937,708 | ||||||||||
Specialty Retail — 2.78% | ||||||||||||
| a | O’ Reilly Automotive, Inc. | 104,162 | 22,433,370 | |||||||||
Office Depot, Inc. | 1,084,757 | 4,924,797 | ||||||||||
|
| |||||||||||
| 44,295,875 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 9.70% | ||||||||||||
Information Technology Services — 1.13% | ||||||||||||
Cognizant Tech Solutions Corp. | 153,844 | 11,159,844 | ||||||||||
Internet Software & Services — 7.00% | ||||||||||||
| a | Alphabet, Inc. Class C | 33,858 | 32,473,546 | |||||||||
| a | Facebook, Inc. | 213,800 | 36,532,006 | |||||||||
Software — 1.57% | ||||||||||||
Activision Blizzard, Inc. | 239,145 | 15,427,244 | ||||||||||
|
| |||||||||||
| 95,592,640 | ||||||||||||
|
| |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 8.67% | ||||||||||||
Communications Equipment — 3.11% | ||||||||||||
| a | ARRIS International plc | 352,600 | 10,045,574 | |||||||||
| a | EchoStar Corp. | 166,700 | 9,540,241 | |||||||||
| a | Palo Alto Networks, Inc. | 76,474 | 11,019,903 | |||||||||
Technology, Hardware, Storage & Peripherals — 5.56% | ||||||||||||
Apple, Inc. | 166,700 | 25,691,804 | ||||||||||
HP, Inc. | 867,177 | 17,308,853 | ||||||||||
| a | Pure Storage, Inc. | 737,400 | 11,791,026 | |||||||||
|
| |||||||||||
| 85,397,401 | ||||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — 2.75% | ||||||||||||
Wireless Telecommunication Services — 2.75% | ||||||||||||
China Mobile Ltd. | 2,674,772 | 27,101,772 | ||||||||||
|
| |||||||||||
| 27,101,772 | ||||||||||||
|
| |||||||||||
TRANSPORTATION — 1.84% | ||||||||||||
Air Freight & Logistics — 1.84% | ||||||||||||
United Parcel Service, Inc. | 151,101 | 18,145,719 | ||||||||||
|
| |||||||||||
| 18,145,719 | ||||||||||||
|
| |||||||||||
10 | Annual Report
Schedule of Investments, Continued
Thornburg Value Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
UTILITIES — 1.48% | ||||||||||||
Electric Utilities — 1.48% | ||||||||||||
Fortis, Inc. | 408,853 | $ | 14,624,672 | |||||||||
|
| |||||||||||
TOTAL COMMON STOCK (Cost $663,987,761) |
| 892,309,220 | ||||||||||
|
| |||||||||||
| SHORT TERM INVESTMENTS — 9.36% | ||||||||||||
| b | Thornburg Capital Management Fund | 9,222,030 | 92,220,297 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $92,220,297) |
| 92,220,297 | ||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 99.91% (Cost $756,208,058) | $ | 984,529,517 | ||||||||||
| OTHER ASSETS LESS LIABILITIES — 0.09% | 928,067 | |||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 985,457,584 | ||||||||||
|
| |||||||||||
| OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2017 | ||||||||||||||||||||||||||||
CONTRACT DESCRIPTION | CONTRACT PARTY | BUY/SELL | CONTRACT AMOUNT | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | |||||||||||||||||||||
Great Britain Pound | SSB | Sell | 17,408,600 | 11/7/2017 | 23,353,439 | $ | – | $ | (406,902 | ) | ||||||||||||||||||
Great Britain Pound | SSB | Sell | 3,371,700 | 11/7/2017 | 4,523,097 | – | (124,081 | ) | ||||||||||||||||||||
Great Britain Pound | SSB | Sell | 1,045,000 | 11/7/2017 | 1,401,856 | 4,351 | – | |||||||||||||||||||||
Great Britain Pound | SSB | Buy | 13,668,500 | 11/7/2017 | 18,336,138 | 673,702 | – | |||||||||||||||||||||
Euro | SSB | Sell | 9,124,600 | 11/27/2017 | 10,815,790 | 885 | – | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total | $ | 678,938 | $ | (530,983 | ) | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) |
| $ | 147,955 | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Footnote Legend
| a | Non-income producing. |
| b | Investment in Affiliates - Shown below are holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940, including companies for which the Fund’s holding represented 5% or more of the company’s voting securities, and a series of the Thornburg Investment Trust in which the Fund invested for cash management purposes during the period: |
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2017 | MARKET VALUE SEPTEMBER 30, 2017 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | ||||||||||||||||||||||||||
Avinger, Inc.* | 1,466,902 | 1,466,902 | $ | $ | – | $ | (2,070,750 | ) | $ | – | ||||||||||||||||||||||||
Thornburg Capital Management Fund | 7,337,220 | 24,884,358 | 22,999,548 | 9,222,030 | $ | 92,220,297 | $ | 720,263 | $ | – | $ | – | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 9.36% of net assets |
| $ | 92,220,297 | $ | 720,263 | $ | (2,070,750 | ) | $ | – | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||
| *Issuer | not affiliated at September 30, 2017. |
See notes to financial statements.
Annual Report | 11
Statement of Assets and Liabilities
Thornburg Value Fund | September 30, 2017
ASSETS |
| |||
Investments at value (Note 3) |
| |||
Non-affiliated issuers (cost $663,987,761) | $ | 892,309,220 | ||
Non-controlled affiliated issuer (cost $92,220,297) | 92,220,297 | |||
Receivable for investments sold | 285,520 | |||
Receivable for fund shares sold | 2,202,159 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 678,938 | |||
Dividends receivable | 785,897 | |||
Prepaid expenses and other assets | 32,079 | |||
|
| |||
Total Assets | 988,514,110 | |||
|
| |||
LIABILITIES |
| |||
Payable for fund shares redeemed | 1,271,286 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 530,983 | |||
Payable to investment advisor and other affiliates (Note 4) | 928,776 | |||
Accounts payable and accrued expenses | 325,481 | |||
|
| |||
Total Liabilities | 3,056,526 | |||
|
| |||
NET ASSETS | $ | 985,457,584 | ||
|
| |||
NET ASSETS CONSIST OF |
| |||
Distribution in excess of net investment income | $ | (1,269,141 | ) | |
Net unrealized appreciation on investments | 228,469,414 | |||
Accumulated net realized gain (loss) | (239,754,165 | ) | ||
Net capital paid in on shares of beneficial interest | 998,011,476 | |||
|
| |||
| $ | 985,457,584 | |||
|
| |||
12 | Annual Report
Statement of Assets and Liabilities, Continued
Thornburg Value Fund | September 30, 2017
NET ASSET VALUE |
| |||
Class A Shares: |
| |||
Net asset value and redemption price per share | $ | 65.26 | ||
Maximum sales charge, 4.50% of offering price | 3.08 | |||
|
| |||
Maximum offering price per share | $ | 68.34 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* | $ | 59.87 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 67.10 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 64.88 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 65.55 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 67.01 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
Annual Report | 13
Thornburg Value Fund | Year Ended September 30, 2017
INVESTMENT INCOME | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $319,319) | $ | 14,578,590 | ||
Non-controlled affiliated issuer | 720,263 | |||
|
| |||
Total Income | 15,298,853 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 7,847,448 | |||
Administration fees (Note 4) | ||||
Class A Shares | 456,900 | |||
Class C Shares | 204,747 | |||
Class I Shares | 159,312 | |||
Class R3 Shares | 59,375 | |||
Class R4 Shares | 12,071 | |||
Class R5 Shares | 7,903 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 913,113 | |||
Class C Shares | 1,636,175 | |||
Class R3 Shares | 237,584 | |||
Class R4 Shares | 23,054 | |||
Transfer agent fees | ||||
Class A Shares | 406,050 | |||
Class C Shares | 178,744 | |||
Class I Shares | 337,934 | |||
Class R3 Shares | 128,879 | |||
Class R4 Shares | 30,422 | |||
Class R5 Shares | 58,503 | |||
Registration and filing fees | ||||
Class A Shares | 34,421 | |||
Class C Shares | 21,234 | |||
Class I Shares | 34,765 | |||
Class R3 Shares | 16,295 | |||
Class R4 Shares | 20,138 | |||
Class R5 Shares | 17,630 | |||
Custodian fees (Note 2) | 107,247 | |||
Professional fees | 89,605 | |||
Accounting fees (Note 4) | 30,869 | |||
Trustee fees | 38,182 | |||
Other expenses | 98,278 | |||
|
| |||
Total Expenses | 13,206,878 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (561,891 | ) | ||
|
| |||
Net Expenses | 12,644,987 | |||
|
| |||
Net Investment Income | $ | 2,653,866 | ||
|
| |||
14 | Annual Report
Statement of Operations, Continued
Thornburg Value Fund | Year Ended September 30, 2017
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Investments | ||||
Non-affiliated issuer investments | $ | 100,227,603 | ||
Non-controlled affiliated issuers | (2,070,050 | ) | ||
Forward currency contracts (Note 7) | (184,003 | ) | ||
Foreign currency transactions | 68,680 | |||
|
| |||
| 98,042,230 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: |
| |||
Investments | ||||
Non-affiliated issuer investments | 73,890,643 | |||
Non-controlled affiliated issuers | (1,862,966 | ) | ||
Forward currency contracts (Note 7) | 217,359 | |||
Foreign currency translations | 74 | |||
|
| |||
| 72,245,110 | ||||
|
| |||
Net Realized and Unrealized Gain | 170,287,340 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 172,941,206 | ||
|
| |||
See notes to financial statements.
Annual Report | 15
Statements of Changes in Net Assets
Thornburg Value Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM |
| |||||||||
OPERATIONS |
| |||||||||
Net investment income | $ | 2,653,866 | $ | 5,651,412 | ||||||
Net realized gain (loss) on investments, forward currency contracts, and foreign currency transactions | 98,042,230 | (9,665,095 | ) | |||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, and foreign currency translations | 72,245,110 | 93,060,311 | ||||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 172,941,206 | 89,046,628 | ||||||||
DIVIDENDS TO SHAREHOLDERS |
| |||||||||
From net investment income |
| |||||||||
Class A Shares | (133,853 | ) | (1,158,420 | ) | ||||||
Class I Shares | (1,304,890 | ) | (1,940,838 | ) | ||||||
Class R3 Shares | (27,639 | ) | (169,459 | ) | ||||||
Class R4 Shares | (14,298 | ) | (40,361 | ) | ||||||
Class R5 Shares | (63,188 | ) | (101,418 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) |
| |||||||||
Class A Shares | (59,269,385 | ) | (38,733,979 | ) | ||||||
Class B Shares* | – | (1,613,193 | ) | |||||||
Class C Shares | (35,922,707 | ) | (16,405,080 | ) | ||||||
Class I Shares | 28,427,284 | (35,363,785 | ) | |||||||
Class R3 Shares | (13,321,472 | ) | (14,298,695 | ) | ||||||
Class R4 Shares | (1,188,133 | ) | (1,514,713 | ) | ||||||
Class R5 Shares | (659,441 | ) | (6,121,309 | ) | ||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | 89,463,484 | (28,414,622 | ) | |||||||
NET ASSETS |
| |||||||||
Beginning of Year | 895,994,100 | 924,408,722 | ||||||||
|
| |||||||||
End of Year | $ | 985,457,584 | $ | 895,994,100 | ||||||
|
| |||||||||
Distribution in excess of net investment income | $ | (1,269,141 | ) | $ | (510,337 | ) | ||||
* Class B shares converted to Class A shares on August 29, 2016.
See notes to financial statements.
16 | Annual Report
Thornburg Value Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg Value Fund (the “Fund”) is a diversified series of Thornburg Investment Trust (the “Trust”). The Trust is organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of twenty-one 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 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 be subject to 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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: 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. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg Value Fund | September 30, 2017
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
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 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.
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 (depreciation) from investments.
Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and 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 (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 755,608,763 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 248,210,622 | |||
Gross unrealized depreciation on a tax basis | (19,141,913 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 229,068,709 | |||
|
|
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg Value Fund | September 30, 2017
Temporary book to tax adjustments to the cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of outstanding wash sale losses, outstanding publicly traded partnership (“PTP”) and real estate investment trust (“REIT”) tax basis adjustments, and marked-to-market adjustments of outstanding forward currency contracts.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $242,353,997 generated prior to October 1, 2011 which may be carried forward to offset future capital gains. To the extent such carryforwards are utilized, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards expire September 30, 2018.
During the year ended September 30, 2017, the Fund utilized $82,216,602 of capital loss carryforwards generated prior to October 1, 2011.
At September 30, 2017, the Fund had $54,749,978 of capital loss carryforwards generated prior to September 30, 2011 which expired.
In order to account for permanent book to tax differences, the Fund increased distribution in excess of net investment income by $1,868,802, decreased accumulated net realized loss by $57,303,232 and decreased net capital paid in on shares of beneficial interest by $55,434,430. Reclassifications have no impact upon the net asset value of the Fund and resulted primarily from foreign currency gains (losses), investments in publicly traded partnerships (“PTPs”) and real estate investment trusts (“REITs”), and expired capital loss carryforward.
At September 30, 2017, the Fund had $731,396 of undistributed tax basis ordinary investment income and no undistributed tax basis capital gains.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: |
| |||||||||
Ordinary income | $ | 1,543,868 | $ | 3,410,496 | ||||||
Capital gains | – | – | ||||||||
|
| |||||||||
Total | $ | 1,543,868 | $ | 3,410,496 | ||||||
|
| |||||||||
Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assessment of a jurisdiction’s legal obligation to pay reclaims, the jurisdiction’s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain.
Deferred Foreign Capital Gain 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.
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also
Annual Report | 19
Notes to Financial Statements, Continued
Thornburg Value Fund | September 30, 2017
may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund’s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date.
In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment’s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data.
Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Quotations for foreign investments expressed in foreign currency amounts are converted to U.S. dollar equivalents using a foreign exchange quotation from a third party service provider at the time of valuation. Foreign investments held by the Fund may be traded on days and at times when the Fund is not open for business. Consequently, the value of Fund investments may be significantly affected on days when shareholders cannot purchase or sell Fund shares. Futures contracts and other financial and derivative instruments traded on an exchange are valued at the latest published price for the instrument on its primary exchange. Listed options are valued at the last bid price.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
20 | Annual Report
Notes to Financial Statements, Continued
Thornburg Value Fund | September 30, 2017
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
On days when market volatility thresholds established by the Audit Committee are exceeded, foreign securities for which valuations are obtained from pricing service providers are fair valued. On these days, the foreign securities are characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs 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, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities* | ||||||||||||||||||||
Common Stock | $ | 892,309,220 | $ | 892,309,220 | $ | – | $ | – | ||||||||||||
Short Term Investments | 92,220,297 | 92,220,297 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 984,529,517 | $ | 984,529,517 | $ | – | $ | – | ||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Forward Currency Contracts | $ | 678,938 | $ | – | $ | 678,938 | $ | – | ||||||||||||
Liabilities | ||||||||||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Forward Currency Contracts | $ | (530,983 | ) | $ | – | $ | (530,983 | ) | $ | – | ||||||||||
| * | 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, 2017, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| Management Fee Schedule | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.875 | % | |||
Next $500 million | 0.825 | ||||
Next $500 million | 0.775 | ||||
Next $500 million | 0.725 | ||||
Over $2 billion | 0.675 | ||||
Annual Report | 21
Notes to Financial Statements, Continued
Thornburg Value Fund | September 30, 2017
The Fund’s effective management fee for the year ended September 30, 2017 was 0.852% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $30,869 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $18,153 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $1,361 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A, Class C, Class R3, Class I, Class R4, and Class R5 shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I or Class R5 shares. The Advisor and Distributor each 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, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Funds at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $217,075 for Class I shares, $224,705 for Class R3 shares, $51,645 for Class R4 shares, and $68,466 for Class R5 shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 6.6%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had no such transactions with affiliated funds.
22 | Annual Report
Notes to Financial Statements, Continued
Thornburg Value Fund | September 30, 2017
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 444,285 | $ | 26,930,666 | 536,840 | $ | 27,382,909 | ||||||||||
Shares converted from Class B shares | – | – | 6,588 | 352,743 | ||||||||||||
Shares issued to shareholders in | 2,296 | 127,693 | 20,753 | 1,108,861 | ||||||||||||
Shares repurchased | (1,495,891 | ) | (86,327,744 | ) | (1,318,359 | ) | (67,578,492 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (1,049,310 | ) | $ | (59,269,385 | ) | (754,178 | ) | $ | (38,733,979 | ) | ||||||
|
| |||||||||||||||
Class B Shares* | ||||||||||||||||
Shares sold | – | – | 1,210 | $ | 56,199 | |||||||||||
Shares issued to shareholders in | — | — | ||||||||||||||
Shares converted to Class A shares | – | – | (7,328 | ) | (352,743 | ) | ||||||||||
Shares repurchased | – | – | (28,859 | ) | (1,316,649 | ) | ||||||||||
|
| |||||||||||||||
Net decrease | – | – | (34,977 | ) | $ | (1,613,193 | ) | |||||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 140,318 | $ | 7,533,627 | 292,210 | $ | 13,905,964 | ||||||||||
Shares issued to shareholders in | – | – | – | – | ||||||||||||
Shares repurchased | (795,262 | ) | (43,456,334 | ) | (642,811 | ) | (30,311,044 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (654,944 | ) | $ | (35,922,707 | ) | (350,601 | ) | $ | (16,405,080 | ) | ||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 1,473,850 | $ | 90,172,554 | 716,301 | $ | 37,689,763 | ||||||||||
Shares issued to shareholders in | 19,708 | 1,233,783 | 33,666 | 1,848,626 | ||||||||||||
Shares repurchased | (1,045,227 | ) | (62,979,053 | ) | (1,414,916 | ) | (74,902,174 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | 448,331 | $ | 28,427,284 | (664,949 | ) | $ | (35,363,785 | ) | ||||||||
|
| |||||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 102,105 | $ | 6,017,056 | 141,034 | $ | 7,131,504 | ||||||||||
Shares issued to shareholders in | 479 | 26,680 | 3,090 | 164,106 | ||||||||||||
Shares repurchased | (330,468 | ) | (19,365,208 | ) | (422,847 | ) | (21,594,305 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (227,884 | ) | $ | (13,321,472 | ) | (278,723 | ) | $ | (14,298,695 | ) | ||||||
|
| |||||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 25,776 | $ | 1,539,597 | 52,912 | $ | 2,743,429 | ||||||||||
Shares issued to shareholders in | 166 | 9,828 | 556 | 29,835 | ||||||||||||
Shares repurchased | (46,623 | ) | (2,737,558 | ) | (83,787 | ) | (4,287,977 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (20,681 | ) | $ | (1,188,133 | ) | (30,319 | ) | $ | (1,514,713 | ) | ||||||
|
| |||||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 60,187 | $ | 3,682,653 | 41,585 | $ | 2,160,843 | ||||||||||
Shares issued to shareholders in | 1,004 | 62,680 | 1,838 | 100,759 | ||||||||||||
Shares repurchased | (72,130 | ) | (4,404,774 | ) | (159,826 | ) | (8,382,911 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (10,939 | ) | $ | (659,441 | ) | (116,403 | ) | $ | (6,121,309 | ) | ||||||
|
| |||||||||||||||
* Class B shares converted to Class A shares on August 29, 2016
Annual Report | 23
Notes to Financial Statements, Continued
Thornburg Value Fund | September 30, 2017
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $366,351,466 and $462,385,127, respectively.
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 the 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, 2017, 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 Fund’s Advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2017 in the normal course of pursuing its investment objectives, with the objective of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments from adverse changes in the relationship between the U.S. dollar and foreign currencies. In each case these contracts have been initiated in conjunction with foreign investment transactions. The quarterly average value of open sell currency contracts for the year ended September 30, 2017 was $17,086,171.
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 outstanding forward currency contracts in the table located in the Schedule of Investments were entered into with State Street Bank and Trust Company (“SSB”), pursuant to an International Swaps and Derivatives Association (“ISDA”) Master Agreement. In the event of a default or termination under the ISDA Master Agreement with SSB, 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 with SSB does not result in an offset of reported amounts of financial assets and 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.
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2017 is disclosed in the following table:
| FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2017 | ||||||
| ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 678,938 | |||
| FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2017 | ||||||
| LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (530,983 | ) | ||
24 | Annual Report
Notes to Financial Statements, Continued
Thornburg Value Fund | September 30, 2017
Because the Fund did not receive or post cash collateral in connection with its currency forward contracts during the period, and because all of the Fund’s outstanding currency forward contracts are with SSB, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2017 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, 2017 is $147,955, 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) on outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2017 are disclosed in the following tables:
NET REALIZED GAIN (LOSS) ON DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (184,003 | ) | $ | (184,003 | ) | ||
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | 217,359 | $ | 217,359 | ||||
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 small- and mid-cap 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 25
Thornburg Value Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b)(c) | $ | 54.08 | 0.16 | 11.04 | 11.20 | (0.02 | ) | – | (0.02 | ) | $ | 65.26 | ||||||||||||||||||||||||||||
2016(b) | $ | 49.17 | 0.32 | 4.76 | 5.08 | (0.17 | ) | – | (0.17 | ) | $ | 54.08 | ||||||||||||||||||||||||||||
2015(b) | $ | 48.09 | 0.07 | 1.03 | 1.10 | (0.02 | ) | – | (0.02 | ) | $ | 49.17 | ||||||||||||||||||||||||||||
2014(b) | $ | 40.84 | 0.10 | 7.41 | 7.51 | (0.26 | ) | – | (0.26 | ) | $ | 48.09 | ||||||||||||||||||||||||||||
2013(b) | $ | 31.51 | 0.08 | 9.25 | 9.33 | – | – | – | $ | 40.84 | ||||||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 49.97 | (0.27 | ) | 10.17 | 9.90 | – | – | – | $ | 59.87 | |||||||||||||||||||||||||||||
2016 | $ | 45.63 | (0.06 | ) | 4.40 | 4.34 | – | – | – | $ | 49.97 | |||||||||||||||||||||||||||||
2015 | $ | 44.95 | (0.29 | ) | 0.97 | 0.68 | – | – | – | $ | 45.63 | |||||||||||||||||||||||||||||
2014 | $ | 38.26 | (0.24 | ) | 6.93 | 6.69 | – | – | – | $ | 44.95 | |||||||||||||||||||||||||||||
2013 | $ | 29.75 | (0.18 | ) | 8.69 | 8.51 | – | – | – | $ | 38.26 | |||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 55.58 | 0.42 | 11.35 | 11.77 | (0.25 | ) | – | (0.25 | ) | $ | 67.10 | ||||||||||||||||||||||||||||
2016 | $ | 50.53 | 0.54 | 4.90 | 5.44 | (0.39 | ) | – | (0.39 | ) | $ | 55.58 | ||||||||||||||||||||||||||||
2015 | $ | 49.28 | 0.28 | 1.04 | 1.32 | (0.07 | ) | – | (0.07 | ) | $ | 50.53 | ||||||||||||||||||||||||||||
2014 | $ | 41.96 | 0.28 | 7.62 | 7.90 | (0.58 | ) | – | (0.58 | ) | $ | 49.28 | ||||||||||||||||||||||||||||
2013 | $ | 32.24 | 0.20 | 9.52 | 9.72 | – | – | – | $ | 41.96 | ||||||||||||||||||||||||||||||
| CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 53.76 | 0.18 | 10.97 | 11.15 | (0.03 | ) | – | (0.03 | ) | $ | 64.88 | ||||||||||||||||||||||||||||
2016 | $ | 48.86 | 0.34 | 4.74 | 5.08 | (0.18 | ) | – | (0.18 | ) | $ | 53.76 | ||||||||||||||||||||||||||||
2015 | $ | 47.79 | 0.08 | 1.01 | 1.09 | (0.02 | ) | – | (0.02 | ) | $ | 48.86 | ||||||||||||||||||||||||||||
2014 | $ | 40.56 | 0.11 | 7.37 | 7.48 | (0.25 | ) | – | (0.25 | ) | $ | 47.79 | ||||||||||||||||||||||||||||
2013 | $ | 31.28 | 0.10 | 9.18 | 9.28 | – | – | – | $ | 40.56 | ||||||||||||||||||||||||||||||
| CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 54.31 | 0.25 | 11.08 | 11.33 | (0.09 | ) | – | (0.09 | ) | $ | 65.55 | ||||||||||||||||||||||||||||
2016 | $ | 49.36 | 0.40 | 4.78 | 5.18 | (0.23 | ) | – | (0.23 | ) | $ | 54.31 | ||||||||||||||||||||||||||||
2015 | $ | 48.24 | 0.14 | 1.01 | 1.15 | (0.03 | ) | – | (0.03 | ) | $ | 49.36 | ||||||||||||||||||||||||||||
2014 | $ | 40.89 | 0.16 | 7.43 | 7.59 | (0.24 | ) | – | (0.24 | ) | $ | 48.24 | ||||||||||||||||||||||||||||
2013 | $ | 31.50 | 0.13 | 9.26 | 9.39 | – | – | – | $ | 40.89 | ||||||||||||||||||||||||||||||
| CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 55.50 | 0.41 | 11.35 | 11.76 | (0.25 | ) | – | (0.25 | ) | $ | 67.01 | ||||||||||||||||||||||||||||
2016 | $ | 50.45 | 0.53 | 4.90 | 5.43 | (0.38 | ) | – | (0.38 | ) | $ | 55.50 | ||||||||||||||||||||||||||||
2015 | $ | 49.21 | 0.27 | 1.04 | 1.31 | (0.07 | ) | – | (0.07 | ) | $ | 50.45 | ||||||||||||||||||||||||||||
2014 | $ | 41.89 | 0.28 | 7.61 | 7.89 | (0.57 | ) | – | (0.57 | ) | $ | 49.21 | ||||||||||||||||||||||||||||
2013 | $ | 32.19 | 0.22 | 9.48 | 9.70 | – | – | – | $ | 41.89 | ||||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Class B shares converted to Class A shares on August 29, 2016. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
26 | Annual Report
Financial Highlights, Continued
Thornburg Value Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 0.27 | 1.39 | 1.39 | 1.39 | 20.72 | 43.53 | $ | 383,118 | |||||||||||||||||||||||
| 0.63 | 1.39 | 1.39 | 1.39 | 10.33 | 31.10 | $ | 374,237 | |||||||||||||||||||||||
| 0.14 | 1.37 | 1.37 | 1.37 | 2.28 | 59.70 | $ | 377,299 | |||||||||||||||||||||||
| 0.22 | 1.37 | 1.37 | 1.37 | 18.40 | 72.43 | $ | 395,216 | |||||||||||||||||||||||
| 0.23 | 1.40 | 1.40 | 1.40 | 29.61 | 61.50 | $ | 400,275 | |||||||||||||||||||||||
| (0.49 | ) | 2.14 | 2.14 | 2.14 | 19.81 | 43.53 | $ | 160,663 | ||||||||||||||||||||||
| (0.12 | ) | 2.14 | 2.14 | 2.14 | 9.51 | 31.10 | $ | 166,821 | ||||||||||||||||||||||
| (0.61 | ) | 2.12 | 2.12 | 2.12 | 1.51 | 59.70 | $ | 168,321 | ||||||||||||||||||||||
| (0.55 | ) | 2.14 | 2.14 | 2.14 | 17.49 | 72.43 | $ | 175,495 | ||||||||||||||||||||||
| (0.55 | ) | 2.18 | 2.18 | 2.18 | 28.60 | 61.50 | $ | 166,971 | ||||||||||||||||||||||
| 0.68 | 0.99 | 0.99 | 1.06 | 21.20 | 43.53 | $ | 368,790 | |||||||||||||||||||||||
| 1.02 | 0.99 | 0.99 | 1.07 | 10.77 | 31.10 | $ | 280,570 | |||||||||||||||||||||||
| 0.53 | 0.99 | 0.99 | 1.06 | 2.68 | 59.70 | $ | 288,642 | |||||||||||||||||||||||
| 0.60 | 0.99 | 0.99 | 1.06 | 18.86 | 72.43 | $ | 299,568 | |||||||||||||||||||||||
| 0.59 | 0.98 | 0.98 | 1.01 | 30.15 | 61.50 | $ | 272,468 | |||||||||||||||||||||||
| 0.30 | 1.35 | 1.35 | 1.82 | 20.75 | 43.53 | $ | 45,668 | |||||||||||||||||||||||
| 0.67 | 1.35 | 1.35 | 1.81 | 10.40 | 31.10 | $ | 50,089 | |||||||||||||||||||||||
| 0.16 | 1.35 | 1.35 | 1.77 | 2.28 | 59.70 | $ | 59,150 | |||||||||||||||||||||||
| 0.23 | 1.35 | 1.35 | 1.77 | 18.45 | 72.43 | $ | 74,579 | |||||||||||||||||||||||
| 0.29 | 1.34 | 1.34 | 1.78 | 29.67 | 61.50 | $ | 80,671 | |||||||||||||||||||||||
| 0.42 | 1.24 | 1.24 | 1.78 | 20.87 | 43.53 | $ | 10,159 | |||||||||||||||||||||||
| 0.78 | 1.25 | 1.25 | 1.75 | 10.50 | 31.10 | $ | 9,539 | |||||||||||||||||||||||
| 0.26 | 1.25 | 1.25 | 1.67 | 2.39 | 59.70 | $ | 10,167 | |||||||||||||||||||||||
| 0.36 | 1.24 | 1.24 | 1.69 | 18.56 | 72.43 | $ | 11,330 | |||||||||||||||||||||||
| 0.39 | 1.25 | 1.25 | 1.67 | 29.81 | 61.50 | $ | 13,340 | |||||||||||||||||||||||
| 0.68 | 0.99 | 0.99 | 1.42 | 21.21 | 43.53 | $ | 17,060 | |||||||||||||||||||||||
| 1.00 | 0.99 | 0.99 | 1.46 | 10.78 | 31.10 | $ | 14,738 | |||||||||||||||||||||||
| 0.51 | 0.99 | 0.99 | 1.20 | 2.65 | 59.70 | $ | 19,270 | |||||||||||||||||||||||
| 0.59 | 0.98 | 0.98 | 1.42 | 18.88 | 72.43 | $ | 30,676 | |||||||||||||||||||||||
| 0.63 | 0.99 | 0.99 | 1.37 | 30.13 | 61.50 | $ | 47,076 | |||||||||||||||||||||||
Annual Report | 27
Report of Independent Registered Public Accounting Firm
Thornburg Value Fund
To the Trustees and Shareholders of
the 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 the Thornburg Value Fund (the “Fund”) as of September 30, 2017, 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 as of September 30, 2017 by correspondence with the custodian, brokers, and transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
28 | Annual Report
Thornburg Value Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
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 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,099.40 | $ | 7.22 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.19 | $ | 6.94 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,095.10 | $ | 11.20 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.38 | $ | 10.77 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,101.50 | $ | 5.22 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | |||||||||
| CLASS R3 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,099.50 | $ | 7.10 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.31 | $ | 6.82 | |||||||||
| CLASS R4 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,100.00 | $ | 6.55 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.83 | $ | 6.30 | |||||||||
| CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,101.50 | $ | 5.22 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.37%; C: 2.13%; I: 0.99%; R3: 1.35%; R4: 1.25%; R5: 0.99%) multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. |
| * | Hypothetical assumes a rate of return of 5% per year before expenses. |
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.
Annual Report | 29
Thornburg Value Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
30 | Annual Report
Trustees and Officers, Continued
Thornburg Value Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 31
Trustees and Officers, Continued
Thornburg Value Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries 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.
32 | Annual Report
Thornburg Value Fund | September 30, 2017 (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, 2017, dividends paid by the Thornburg Value Fund of $1,543,868 are being reported as taxable ordinary investment income dividends for federal income tax purposes.
For the tax year ended September 30, 2017, 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 100.00% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2017 as qualified for the corporate dividends received deduction.
The information and distributions reported herein may differ from the information and distributions reported to the shareholders for the calendar year ending December 31, 2017. Complete information will be reported in conjunction with your 2017 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 Value Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Annual Report | 33
Other Information, Continued
Thornburg Value Fund | September 30, 2017 (Unaudited)
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 created 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 created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, (6) comparison of the Fund’s annualized return since inception to the Fund’s benchmark index, and (7) comparative measures of estimated earnings growth, and risk and return statistics. The Trustees generally attach additional significance to investment performance from the perspective of longer term shareholders. The Trustees also noted the improvement in the Fund’s investment performance and favorable results relative to comparatives. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees observed the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for two Fund share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been considered by the Trustees showed that the advisory fee for the Fund was higher than the median and average fee levels for the fund category, the level of total expense for a representative share class of the Fund was higher than the median and average expense levels for the category, and that the level of total expense for a second representative share class was comparable to the median and lower than the average levels for the category. Peer group data showed that the Fund’s advisory fee level for one share class was higher than the peer group’s median but comparable to other funds in the group, and the advisory feel level for a second representative share class was higher than the median for its peer group but lower than or comparable to other funds in its peer group. Peer group data further showed that the total expense level for one share class was the highest in its peer group, and that the total
34 | Annual Report
Other Information, Continued
Thornburg Value Fund | September 30, 2017 (Unaudited)
expense level for the second share class was lower than or comparable to other funds in its peer group. The Trustees did not find the differences significant in view of their findings and conclusions respecting 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential 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, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 35
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
36 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 37
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Annual Report | 39
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg International Value Fund
Annual Report ^ September 30, 2017
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class A | TGVAX | 885-215-657 | ||||||||
| 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 | ||||||||
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.
Investments carry risks, including possible loss of principal. Additional 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- and mid-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 bank deposits or guaranteed by a bank or any other entity.
Funds invested in a smaller number of holdings may expose an investor to greater volatility.
Annual Report | 3
Thornburg International Value Fund | September 30, 2017 (Unaudited)
October 13, 2017
Dear Fellow Shareholder:
International equity markets delivered strong performance for the fiscal year ended September 30, 2017, and Thornburg International Value Fund (Class A shares without sales charge) returned 18.78% compared to the MSCI EAFE Index with a 19.10% return and MSCI ACWI ex-U.S. Index at 19.61%.
Global economic growth is returning to its long-term average. In the past 12 months, we saw synchronized growth led by developed markets. The Eurozone recovery is exceeding expectations with real gross domestic product growth above its recent trend line. Meanwhile, employment is increasing, economic sentiment continues moving higher, bank lending is growing, and inflation is having little negative impact on real expenditure. As a result, international companies posted strong double-digit earnings growth during the period.
Contributors
European banks contributed positively to performance during the period. Early in the fiscal year, we built positions in European banks based on a conviction that many were trading at material discounts to our appraisal of intrinsic value. These stocks performed well as many of our theses have played out on a firming macroeconomic environment, credible self-help initiatives, and improving investor sentiment.
UniCredit, an Italian-headquartered, pan-European retail and commercial bank, continues to execute on its turnaround plan to increase its capital position and profitability. We continue to have confidence in management’s ability to execute its plan through better operating efficiency and improved asset quality. The stock remains attractive to us because we believe its valuation does not yet reflect that the company is on track to meet its cost of capital obligations – a key contributor to its future financial health.
French bank BNP Paribas reported high-quality earnings beats with profits above analyst expectations. BNP also benefited from decreased political uncertainty in France after Emmanuel Macron won the French presidential election coupled with subsequent legislative elections resulting in a commanding majority for Macron’s new party in the National Assembly. All this paved the way for market-friendly reforms.
Commerzbank, a banking and financial services company headquartered in Frankfurt, Germany, performed strongly as the competitiveness of German banking relative to the rest of Europe has improved. Looking forward, cost-saving initiatives should further improve profitability, and consolidation in the German banking market could drive topline growth. Meanwhile, its valuation is still well below European banking peers, at about half of reported book value.
Intesa Sanpaolo, a high-quality Italian bank with a healthy Tier 1 capital ratio and little concern over non-performing loans performed well thanks to a decreasing “Italian discount,” as the Italian government, regulators, and investors continue working to resolve the country’s financial challenges.
We exited both BNP Paribas and Intesa Sanpaolo later in the period and turned to companies bearing a more attractive risk-return profile.
Alibaba is one of the largest internet companies in China providing e-commerce, internet infrastructure, online financial, and internet content services. For Alibaba’s e-commerce business, gross merchandise volume (GMV) continues on a robust growth trajectory from increasing e-commerce penetration in the lower-tier cities that lack extensive brick-and-mortar retail infrastructure. With 450 million active buyers generating approximately $550 billion in GMV, Alibaba’s most valuable asset is arguably its extensive customer data. Utilizing its big data, Alibaba has runway to perfect its targeted advertisement algorithm and improve its monetization rate. The stock performed well during the period as Alibaba continues to deliver better-than-expected top- and bottom-line results on the back of better customer engagement and deployment of data analytics tools.
Detractors
Teva Pharmaceutical is the world’s largest generic pharmaceutical company. For example, 17% of generic prescriptions filled in the U.S. are Teva drugs. Shares of Teva came under material pressure following the quarterly results, as guidance was cut on generic drug pricing pressure, and the company reduced its dividend materially in order to meet its debt obligation. U.S. generic drugs have been under a lot of pricing pressure and it is unclear how long it will persist. Teva plans to divest a few of its businesses to help manage its debt load. On a positive note, Teva found a new CEO (Kare Schultz), who has a proven turnaround track record with another European pharmaceutical company.
Rakuten, Japan’s largest e-commerce website, came under pressure in late 2016 largely on increasing competitive pressures coupled with questionable capital allocation decisions. We sold Rakuten in favor of more compelling investments.
Seven & i Holdings Co., one of Japan’s largest retail conglomerates of convenience stores, superstores, department stores, supermarkets, restaurants, and banks, had undertaken actions to improve profitability and corporate governance such as divesting unprofitable business units. However, we are disappointed with the turnaround progress coupled with management’s lack of willingness to meaningfully change the organizational structure, resulting in our sale of the stock.
Shire is a market-leading global biotechnology company that markets, licenses, and develops prescription medicines specializing in rare diseases and specialized conditions. Its rare disease portfolio contains a number of products without generic competition on the horizon. The stock has come under pressure due to concerns around a competitor drug in clinical development, challenging its hemophilia franchise. Generally, when patients have had success with a hemophilia drug, they tend to stick with it; however, the competing drug represents a threat to Shire. Shire trades at a discount to peers, its portfolio and pipeline remain robust, and we believe the risks to the hemophilia franchise are more than reflected in the share price.
4 | Annual Report
Letter to Shareholders, Continued
Thornburg International Value Fund | September 30, 2017 (Unaudited)
ZTO Express, a Chinese express delivery company, should benefit from growth in e-commerce, especially on volume increases as value-per-shipment declines. ZTO Express’s business focuses on the middle segment in the logistics value chain, generating higher profit margins compared to the more labor intensive first and last mile delivery segments. The stock has been under pressure from negative investor sentiment from its IPO pricing coupled with additional concerns over competition.
Conclusion
While international equity markets posted robust returns over the first three quarters of the fiscal year, earnings growth and local currency appreciation – as opposed to international stocks becoming more expensive on price paid for a unit of earnings (P/E multiple) – are driving much of the performance. We also continue to find interesting stock ideas from our bottom-up process in all three of
our baskets: basic value, consistent earners, and emerging franchises. We are confident that our investment philosophy and process will continue to deliver attractive risk-adjusted returns over a full market cycle, as it has in the past.
Thank you for investing alongside us in Thornburg International Value Fund.
Sincerely,
|  | |||
Lei Wang,CFA Portfolio Manager Managing Director | | Di Zhou,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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
Annual Report | 5
Thornburg International Value Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
Class A Shares (Incep: 5/28/98) | |||||||||||||||||||||||||
Without sales charge | 18.78% | 7.01% | 7.35% | 1.66% | 7.80% | ||||||||||||||||||||
With sales charge | 13.45% | 5.38% | 6.36% | 1.19% | 7.55% | ||||||||||||||||||||
Class C Shares (Incep: 5/28/98) | |||||||||||||||||||||||||
Without sales charge | 17.94% | 6.23% | 6.57% | 0.92% | 6.97% | ||||||||||||||||||||
With sales charge | 16.94% | 6.23% | 6.57% | 0.92% | 6.97% | ||||||||||||||||||||
Class I Shares (Incep: 3/30/01) | 19.29% | 7.42% | 7.76% | 2.06% | 7.61% | ||||||||||||||||||||
Class R3 Shares (Incep: 7/1/03) | 18.63% | 6.83% | 7.16% | 1.49% | 8.74% | ||||||||||||||||||||
Class R4 Shares (Incep: 2/1/07) | 18.90% | 7.05% | 7.38% | 1.70% | 3.81% | ||||||||||||||||||||
Class R5 Shares (Incep: 2/1/05) | 19.17% | 7.34% | 7.67% | 1.97% | 7.00% | ||||||||||||||||||||
Class R6 Shares (Incep: 5/1/12) | 19.40% | 7.57% | 7.91% | - | 7.13% | ||||||||||||||||||||
MSCI EAFE Index (Since 5/28/98) | 19.10% | 5.04% | 8.38% | 1.34% | 4.42% | ||||||||||||||||||||
MSCI AC World ex-U.S. Index (Net) (Since 5/28/98) | 19.61% | 4.70% | 6.97% | 1.28% | 4.94% | ||||||||||||||||||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. 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 sales charge for Class I, R3, R4, R5 and R6 shares
As disclosed in the most recent prospectus, the total annual fund operating expenses before any fee waivers or expense reimbursements are as follows: A shares, 1.28%; C shares, 2.02%; I shares, 0.90%; R3 shares, 1.62%; R4 shares, 1.39%; R5 shares, 0.95%; R6 shares, 0.79%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: R3 shares, 1.45%; R4 shares, 1.25%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus.
Effective February 1, 2017, the Fund changed one of its benchmarks from the MSCI AC World ex-U.S. Index (gross) to the MSCI AC World ex-U.S. Index (net). While those two indices include the same securities, the calculation of returns for the “net” version of the index reflects the reinvestment of dividends after deduction of withholding taxes that apply to individuals who are not resident in the issuer’s country, while the calculation of returns for the “gross” version of the index reflects the reinvestment of dividends without any withholding tax deduction. Thornburg believes that the “net” version of the index better reflects how dividends paid to the Fund in respect of its foreign investments will be reinvested, since those dividends are generally subject to withholding tax when paid to the Fund.
Glossary
The MSCI All Country (AC) World ex-US Index is 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. Beginning in January 2001, the index is calculated with net dividends reinvested in U.S. dollars. Prior data is calculated with gross dividends.
The MSCI EAFE (Europe, Australasia, Far East) Index is an unmanaged index. It is a generally accepted benchmark for major overseas markets. Index weightings represent the relative capitalizations of the major overseas developed markets on a U.S. dollar adjusted basis. The index is calculated with net dividends reinvested in U.S. dollars.
The performance of any index is not indicative of the performance of any particular investment. 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.
Gross merchandise volume (GMV) – A term used in online retailing to indicate a total sales dollar value for merchandise sold through a particular marketplace over a certain time frame.
P/E – Price/Earnings ratio (P/E ratio) is 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. Forecasted P/E is not intended to be a forecast of the fund’s future performance.
Tier 1 Capital – The core measure of a bank’s financial strength. It is composed of core capital, which consists primarily of common stock and disclosed reserves (or retained earnings), but may also include non-redeemable non-cumulative preferred stock.
6 | Annual Report
Thornburg International Value Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
The Fund seeks long-term capital appreciation by investing in equity and debt securities of all types. As a secondary goal, the Fund also seeks some current income.
The Fund invests primarily in foreign securities or depositary receipts of foreign securities. The Fund may invest in developing countries.
MARKET CAPITALIZATION EXPOSURE
BASKET STRUCTURE
TOP TEN EQUITY HOLDINGS
| UniCredit S.p.A. | 5.5% | ||||
| Electricite de France SA | 3.4% | ||||
| Commerzbank AG | 3.3% | ||||
| Shin-Etsu Chemical Co., Ltd. | 3.2% | ||||
| Credit Suisse Group AG | 3.1% | ||||
| Canadian Pacific Railway Ltd. | 3.1% | ||||
| China Petroleum & Chemical Corp. | 3.1% | ||||
| SAP SE | 3.0% | ||||
| Infineon Technologies AG | 2.9% | ||||
| Ctrip.com International, Ltd. ADR | 2.9% |
There is no guarantee that the Fund will meet its investment objectives.
All portfolio information is subject to change. Charts may not add up to 100% due to rounding.
SECTOR EXPOSURE
| Financials | 16.6% | ||||
| Industrials | 13.1% | ||||
| Information Technology | 11.5% | ||||
| Utilities | 9.6% | ||||
| Consumer Discretionary | 9.4% | ||||
| Consumer Staples | 8.1% | ||||
| Health Care | 8.1% | ||||
| Energy | 7.9% | ||||
| Materials | 5.9% | ||||
| Telecommunication Services | 5.8% | ||||
| Other Assets Less Liabilities | 3.8% |
TOP TEN INDUSTRY GROUPS
| Utilities | 9.6% | ||||
| Capital Goods | 9.0% | ||||
| Banks | 8.8% | ||||
| Energy | 7.9% | ||||
| Software & Services | 6.8% | ||||
| Food, Beverage & Tobacco | 6.1% | ||||
| Materials | 5.9% | ||||
| Telecommunication Services | 5.8% | ||||
| Pharma, Biotech & Life Sciences | 4.3% | ||||
| Insurance | 4.2% |
COUNTRY EXPOSURE*
(percent of equity holdings)
| China | 18.2% | ||||
| Germany | 14.7% | ||||
| France | 9.8% | ||||
| United States | 9.3% | ||||
| United Kingdom | 8.6% | ||||
| Japan | 7.6% | ||||
| Switzerland | 6.1% | ||||
| Italy | 5.8% | ||||
| Spain | 4.7% | ||||
| Canada | 3.2% | ||||
| South Korea | 2.9% | ||||
| Hong Kong | 2.3% | ||||
| Netherlands | 2.3% | ||||
| India | 2.2% | ||||
| Brazil | 1.3% | ||||
| Ireland | 1.0% | ||||
| Israel | 0.1% |
| * | The country assignment 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. |
Annual Report | 7
Thornburg International Value Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
| COMMON STOCK — 96.21% | ||||||||||||
BANKS — 8.79% | ||||||||||||
Banks — 8.79% | ||||||||||||
| a | Commerzbank AG | 14,235,033 | $ | 193,648,739 | ||||||||
| a | UniCredit S.p.A. | 15,435,552 | 328,743,991 | |||||||||
|
| |||||||||||
| 522,392,730 | ||||||||||||
|
| |||||||||||
CAPITAL GOODS — 8.98% |
| |||||||||||
Building Products — 2.47% | ||||||||||||
Daikin Industries, Ltd. | 1,448,078 | 146,641,625 | ||||||||||
Construction & Engineering — 4.82% | ||||||||||||
Ferrovial SA | 6,902,866 | 151,952,061 | ||||||||||
Vinci S.A. | 1,414,001 | 134,365,149 | ||||||||||
Industrial Conglomerates — 1.69% | ||||||||||||
General Electric Co. | 4,167,091 | 100,760,260 | ||||||||||
|
| |||||||||||
| 533,719,095 | ||||||||||||
|
| |||||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 1.10% |
| |||||||||||
Professional Services — 1.10% | ||||||||||||
Nielsen Holdings plc | 1,575,394 | 65,300,081 | ||||||||||
|
| |||||||||||
| 65,300,081 | ||||||||||||
|
| |||||||||||
CONSUMER DURABLES & APPAREL — 1.59% |
| |||||||||||
Textiles, Apparel & Luxury Goods — 1.59% | ||||||||||||
Nike, Inc. | 1,824,962 | 94,624,280 | ||||||||||
|
| |||||||||||
| 94,624,280 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 3.65% |
| |||||||||||
Diversified Consumer Services — 1.61% | ||||||||||||
TAL Education Group ADR | 2,829,133 | 95,370,073 | ||||||||||
Hotels, Restaurants & Leisure — 2.04% | ||||||||||||
| a | Yum China Holdings, Inc. | 3,032,711 | 121,217,459 | |||||||||
|
| |||||||||||
| 216,587,532 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 3.65% |
| |||||||||||
Capital Markets — 3.65% | ||||||||||||
Credit Suisse Group AG | 11,715,595 | 185,470,203 | ||||||||||
Deutsche Bank AG | 1,796,445 | 31,062,695 | ||||||||||
|
| |||||||||||
| 216,532,898 | ||||||||||||
|
| |||||||||||
ENERGY — 7.91% |
| |||||||||||
Energy Equipment & Services — 2.72% | ||||||||||||
Halliburton Co. | 3,516,468 | 161,863,022 | ||||||||||
Oil, Gas & Consumable Fuels — 5.19% | ||||||||||||
China Petroleum & Chemical Corp. | 242,029,988 | 181,252,935 | ||||||||||
Reliance Industries Ltd. | 10,608,516 | 126,873,434 | ||||||||||
|
| |||||||||||
| 469,989,391 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 6.12% |
| |||||||||||
Food Products — 4.17% | ||||||||||||
| a | BRF SA | 5,057,384 | 72,926,994 | |||||||||
Danone SA | 1,407,812 | 110,432,614 | ||||||||||
Inner Mongolia Yili Industrial Group Co., Ltd. | 15,531,073 | 64,295,855 | ||||||||||
Tobacco — 1.95% | ||||||||||||
British American Tobacco plc ADR | 1,861,092 | 116,225,195 | ||||||||||
|
| |||||||||||
| 363,880,658 | ||||||||||||
|
| |||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 3.78% |
| |||||||||||
Health Care Equipment & Supplies — 1.46% | ||||||||||||
ConvaTec Ltd. | 23,717,108 | 87,047,913 | ||||||||||
8 | Annual Report
Schedule of Investments, Continued
Thornburg International Value Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
Health Care Providers & Services — 2.32% | ||||||||||||
Fresenius SE & Co. KGaA | 1,707,027 | $ | 137,696,822 | |||||||||
|
| |||||||||||
| 224,744,735 | ||||||||||||
|
| |||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 2.00% |
| |||||||||||
Household Products — 2.00% | ||||||||||||
Reckitt Benckiser plc | 1,302,098 | 118,873,941 | ||||||||||
|
| |||||||||||
| 118,873,941 | ||||||||||||
|
| |||||||||||
INSURANCE — 4.20% |
| |||||||||||
Insurance — 4.20% | ||||||||||||
ING Life Insurance Korea Ltd. | 2,142,816 | 88,773,405 | ||||||||||
NN Group NV | 3,105,471 | 129,967,354 | ||||||||||
| a | ZhongAn Online P&C Insurance Co. | 3,788,579 | 30,772,868 | |||||||||
|
| |||||||||||
| 249,513,627 | ||||||||||||
|
| |||||||||||
MATERIALS — 5.92% |
| |||||||||||
Chemicals — 3.15% | ||||||||||||
Shin-Etsu Chemical Co., Ltd. | 2,095,767 | 187,366,505 | ||||||||||
Construction Materials — 2.77% | ||||||||||||
LafargeHolcim Ltd. | 2,815,915 | 164,590,065 | ||||||||||
|
| |||||||||||
| 351,956,570 | ||||||||||||
|
| |||||||||||
MEDIA — 0.82% |
| |||||||||||
Media — 0.82% | ||||||||||||
| a | Liberty Global plc | 1,483,651 | 48,515,388 | |||||||||
|
| |||||||||||
| 48,515,388 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 4.27% |
| |||||||||||
Biotechnology — 1.43% | ||||||||||||
| a | Alkermes plc | 1,090,683 | 55,450,323 | |||||||||
Shire plc | 584,703 | 29,679,043 | ||||||||||
Pharmaceuticals — 2.84% | ||||||||||||
Dong-E-E-Jiao Co., Ltd. | 7,810,360 | 76,342,307 | ||||||||||
Teva Pharmaceutical Industries Ltd. ADR | 171,613 | 3,020,389 | ||||||||||
Yunnan Baiyao Group Co., Ltd. | 6,550,897 | 89,445,167 | ||||||||||
|
| |||||||||||
| 253,937,229 | ||||||||||||
|
| |||||||||||
RETAILING — 3.39% |
| |||||||||||
Internet & Direct Marketing Retail — 2.89% | ||||||||||||
| a | Ctrip.com International, Ltd. ADR | 3,261,663 | 172,020,106 | |||||||||
Specialty Retail — 0.50% | ||||||||||||
Kingfisher plc | 7,376,973 | 29,507,141 | ||||||||||
|
| |||||||||||
| 201,527,247 | ||||||||||||
|
| |||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.94% |
| |||||||||||
Semiconductors & Semiconductor Equipment — 2.94% | ||||||||||||
Infineon Technologies AG | 6,935,262 | 174,345,697 | ||||||||||
|
| |||||||||||
| 174,345,697 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 6.85% |
| |||||||||||
Internet Software & Services — 1.99% | ||||||||||||
| a | Alibaba Group Holding Ltd. ADR | 331,471 | 57,248,356 | |||||||||
Tencent Holdings Ltd. | 1,412,100 | 60,774,748 | ||||||||||
Software — 4.86% | ||||||||||||
| a | PTC, Inc. | 1,942,156 | 109,304,540 | |||||||||
SAP SE | 1,638,130 | 179,457,708 | ||||||||||
|
| |||||||||||
| 406,785,352 | ||||||||||||
|
| |||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg International Value Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 1.73% |
| |||||||||||
Electronic Equipment, Instruments & Components — 1.73% | ||||||||||||
OMRON Corporation | 2,023,516 | $ | 103,041,517 | |||||||||
|
| |||||||||||
| 103,041,517 | ||||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — 5.84% |
| |||||||||||
Diversified Telecommunication Services — 4.32% | ||||||||||||
| a | China Unicom (Hong Kong) Ltd. | 96,411,099 | 134,034,582 | |||||||||
Deutsche Telekom AG | 6,591,583 | 122,974,533 | ||||||||||
Wireless Telecommunication Services — 1.52% | ||||||||||||
China Mobile Ltd. | 8,898,208 | 90,159,911 | ||||||||||
|
| |||||||||||
| 347,169,026 | ||||||||||||
|
| |||||||||||
TRANSPORTATION — 3.07% |
| |||||||||||
Road & Rail — 3.07% | ||||||||||||
Canadian Pacific Railway Ltd. | 1,084,042 | 182,151,577 | ||||||||||
|
| |||||||||||
| 182,151,577 | ||||||||||||
|
| |||||||||||
UTILITIES — 9.61% | ||||||||||||
Electric Utilities — 6.70% | ||||||||||||
Electricite de France SA | 16,671,216 | 202,455,687 | ||||||||||
Iberdrola S.A. | 15,250,252 | 118,455,559 | ||||||||||
Korea Electric Power Corp. | 2,266,920 | 77,190,274 | ||||||||||
Multi-Utilities — 2.91% | ||||||||||||
National Grid plc | 4,847,285 | 60,056,088 | ||||||||||
Veolia Environnement SA | 4,894,284 | 113,088,072 | ||||||||||
|
| |||||||||||
| 571,245,680 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCK (Cost $4,872,989,907) | 5,716,834,251 | |||||||||||
|
| |||||||||||
| SHORT TERM INVESTMENTS — 4.12% | ||||||||||||
| b | Thornburg Capital Management Fund | 24,471,690 | 244,716,904 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $244,716,904) | 244,716,904 | |||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 100.33% (Cost $5,117,706,811) | $ | 5,961,551,155 | ||||||||||
| LIABILITIES NET OF OTHER ASSETS — (0.33)% | (19,676,354 | ) | ||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 5,941,874,801 | ||||||||||
|
| |||||||||||
OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2017 | |||||||||||||||||||||||||||||||||||
CONTRACT DESCRIPTION | CONTRACT PARTY | BUY/SELL | CONTRACT AMOUNT | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | ||||||||||||||||||||||||||||
Euro | SSB | Buy | 525,819,700 | 10/24/2017 | 622,162,970 | $ | 1,149,923 | $ | – | ||||||||||||||||||||||||||
Euro | SSB | Sell | 88,641,200 | 10/24/2017 | 104,882,476 | (1,347,782 | ) | ||||||||||||||||||||||||||||
Euro | SSB | Sell | 437,178,500 | 10/24/2017 | 517,280,493 | (11,202,662 | ) | ||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
Total | $ | 1,149,923 | $ | (12,550,444 | ) | ||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) | $ | (11,400,521 | ) | ||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
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 in the following table: |
10 | Annual Report
Schedule of Investments, Continued
Thornburg International Value Fund | September 30, 2017
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2017 | MARKET VALUE SEPTEMBER 30, 2017 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | ||||||||||||||||||||||||||
Thornburg Capital Management Fund | 60,637,324 | 287,828,046 | 323,993,680 | 24,471,690 | $ | 244,716,904 | $ | 2,698,897 | $ | – | $ | – | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 4.12% of net assets |
| $ | 244,716,904 | $ | 2,698,897 | $ | – | $ | – | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ADR | American Depositary Receipt |
See notes to financial statements.
Annual Report | 11
Statement of Assets and Liabilities
Thornburg International Value Fund | September 30, 2017
ASSETS |
| |||
Investments at value (Note 3) |
| |||
Non-affiliated issuers (cost $4,872,989,907) | $ | 5,716,834,251 | ||
Non-controlled affiliated issuer (cost $244,716,904) | 244,716,904 | |||
Cash denominated in foreign currency (cost $3,270,724) | 3,270,934 | |||
Receivable for fund shares sold | 8,818,582 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 1,149,923 | |||
Dividends receivable | 6,796,204 | |||
Dividend and interest reclaim receivable | 12,690,004 | |||
Prepaid expenses and other assets | 62,245 | |||
|
| |||
Total Assets | 5,994,339,047 | |||
|
| |||
LIABILITIES |
| |||
Payable for investments purchased | 17,240,276 | |||
Payable for fund shares redeemed | 11,383,039 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 12,550,444 | |||
Payable to investment advisor and other affiliates (Note 4) | 4,372,535 | |||
Deferred taxes payable (Note 2) | 3,781,227 | |||
Accounts payable and accrued expenses | 3,136,725 | |||
|
| |||
Total Liabilities | 52,464,246 | |||
|
| |||
NET ASSETS | $ | 5,941,874,801 | ||
|
| |||
NET ASSETS CONSIST OF |
| |||
Undistributed net investment income | $ | 1,630,986 | ||
Net unrealized appreciation on investments | 828,991,826 | |||
Accumulated net realized gain (loss) | 752,724,910 | |||
Net capital paid in on shares of beneficial interest | 4,358,527,079 | |||
|
| |||
| $ | 5,941,874,801 | |||
|
| |||
12 | Annual Report
Statement of Assets and Liabilities, Continued
Thornburg International Value Fund | September 30, 2017
NET ASSET VALUE |
| |||
Class A Shares: |
| |||
Net asset value and redemption price per share | $ | 27.63 | ||
Maximum sales charge, 4.50% of offering price | 1.30 | |||
|
| |||
Maximum offering price per share | $ | 28.93 | ||
|
| |||
Class C Shares: |
| |||
Net asset value and offering price per share* | $ | 25.00 | ||
|
| |||
Class I Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 28.37 | ||
|
| |||
Class R3 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 27.63 | ||
|
| |||
Class R4 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 27.45 | ||
|
| |||
Class R5 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 28.35 | ||
|
| |||
Class R6 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 28.27 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
Annual Report | 13
Thornburg International Value Fund | Year Ended September 30, 2017
INVESTMENT INCOME |
| |||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $10,995,233) | $ | 119,693,882 | ||
Non-controlled affiliated issuer | 2,698,897 | |||
Other income (net of foreign taxes withheld of $39) | 86,679 | |||
|
| |||
Total Income | 122,479,458 | |||
|
| |||
EXPENSES |
| |||
Investment advisory fees (Note 4) | 45,128,323 | |||
Administration fees (Note 4) | ||||
Class A Shares | 1,082,565 | |||
Class C Shares | 559,337 | |||
Class I Shares | 1,791,609 | |||
Class R3 Shares | 372,400 | |||
Class R4 Shares | 288,236 | |||
Class R5 Shares | 211,349 | |||
Class R6 Shares | 115,836 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 2,160,956 | |||
Class C Shares | 4,463,989 | |||
Class R3 Shares | 1,488,788 | |||
Class R4 Shares | 574,620 | |||
Transfer agent fees | ||||
Class A Shares | 1,501,780 | |||
Class C Shares | 662,862 | |||
Class I Shares | 3,975,310 | |||
Class R3 Shares | 741,276 | |||
Class R4 Shares | 734,834 | |||
Class R5 Shares | 1,402,113 | |||
Class R6 Shares | 9,710 | |||
Registration and filing fees | ||||
Class A Shares | 37,792 | |||
Class C Shares | 21,373 | |||
Class I Shares | 87,870 | |||
Class R3 Shares | 17,513 | |||
Class R4 Shares | 25,110 | |||
Class R5 Shares | 23,018 | |||
Class R6 Shares | 19,732 | |||
Custodian fees (Note 2) | 1,362,737 | |||
Professional fees | 240,775 | |||
Accounting fees (Note 4) | 204,925 | |||
Trustee fees | 249,090 | |||
Other expenses | 807,025 | |||
|
| |||
Total Expenses | 70,362,853 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (1,762,331 | ) | ||
|
| |||
Net Expenses | 68,600,522 | |||
|
| |||
Net Investment Income | $ | 53,878,936 | ||
|
| |||
14 | Annual Report
Statement of Operations, Continued
Thornburg International Value Fund | Year Ended September 30, 2017
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on: |
| |||
Non-affiliated issuer investments | $ | 817,859,358 | ||
Forward currency contracts (Note 7) | 91,224,120 | |||
Foreign currency transactions | (1,550,216 | ) | ||
|
| |||
| 907,533,262 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: |
| |||
Non-affiliated issuer investments (net of change in deferred taxes payable of $3,781,227) | 87,111,313 | |||
Forward currency contracts (Note 7) | (12,024,733 | ) | ||
Foreign currency translations | 440,772 | |||
|
| |||
| 75,527,352 | ||||
|
| |||
Net Realized and Unrealized Gain | 983,060,614 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 1,036,939,550 | ||
|
| |||
See notes to financial statements.
Annual Report | 15
Statements of Changes in Net Assets
Thornburg International Value Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM |
| |||||||||
OPERATIONS |
| |||||||||
Net investment income | $ | 53,878,936 | $ | 150,733,271 | ||||||
Net realized gain (loss) on investments, forward currency contracts, and foreign currency transactions | 907,533,262 | (43,733,165 | ) | |||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations, and deferred taxes | 75,527,352 | 67,937,358 | ||||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 1,036,939,550 | 174,937,464 | ||||||||
DIVIDENDS TO SHAREHOLDERS |
| |||||||||
From net investment income |
| |||||||||
Class A Shares | (6,065,117 | ) | (17,373,490 | ) | ||||||
Class B Shares* | – | (2,771 | ) | |||||||
Class C Shares | (1,766,237 | ) | (7,105,228 | ) | ||||||
Class I Shares | (33,169,653 | ) | (89,286,035 | ) | ||||||
Class R3 Shares | (1,862,018 | ) | (4,928,035 | ) | ||||||
Class R4 Shares | (1,676,630 | ) | (4,718,359 | ) | ||||||
Class R5 Shares | (3,189,993 | ) | (10,876,039 | ) | ||||||
Class R6 Shares | (5,709,079 | ) | (10,748,034 | ) | ||||||
From realized gains |
| |||||||||
Class A Shares | – | (206,189,949 | ) | |||||||
Class B Shares* | – | (1,033,957 | ) | |||||||
Class C Shares | – | (114,820,498 | ) | |||||||
Class I Shares | – | (855,268,178 | ) | |||||||
Class R3 Shares | – | (72,397,527 | ) | |||||||
Class R4 Shares | – | (50,071,447 | ) | |||||||
Class R5 Shares | – | (102,430,055 | ) | |||||||
Class R6 Shares | – | (63,967,908 | ) | |||||||
FUND SHARE TRANSACTIONS (NOTE 5) |
| |||||||||
Class A Shares | (286,423,403 | ) | (164,111,525 | ) | ||||||
Class B Shares* | – | (6,445,128 | ) | |||||||
Class C Shares | (203,047,421 | ) | (54,628,381 | ) | ||||||
Class I Shares | (1,555,349,057 | ) | (696,459,252 | ) | ||||||
Class R3 Shares | (87,487,739 | ) | (80,286,274 | ) | ||||||
Class R4 Shares | (95,176,715 | ) | (15,765,354 | ) | ||||||
Class R5 Shares | (297,802,637 | ) | (53,965,690 | ) | ||||||
Class R6 Shares | (13,685,709 | ) | 114,956,797 | |||||||
|
| |||||||||
Net Decrease in Net Assets | (1,555,417,858 | ) | (2,392,984,853 | ) | ||||||
NET ASSETS |
| |||||||||
Beginning of Year | 7,497,346,659 | 9,890,331,512 | ||||||||
|
| |||||||||
End of Year | $ | 5,941,874,801 | $ | 7,497,346,659 | ||||||
|
| |||||||||
Undistributed net investment income | $ | 1,630,986 | $ | 2,740,993 | ||||||
* Class B shares were converted to Class A shares on August 29, 2016.
See notes to financial statements.
16 | Annual Report
Thornburg International Value Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg International Value Fund (the “Fund”) is a diversified series of Thornburg Investment Trust (the “Trust”). The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of twenty-one 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 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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: 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. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg International Value Fund | September 30, 2017
agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
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 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.
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 (depreciation) from investments.
Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and 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 (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 5,106,306,305 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 883,689,765 | |||
Gross unrealized depreciation on a tax basis | (39,845,436 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 843,844,329 | |||
|
|
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg International Value Fund | September 30, 2017
Temporary book to tax adjustments to the cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of wash sale losses and marked-to-market adjustments of outstanding forward currency contracts.
In order to account for permanent book to tax differences, the Fund decreased undistributed net investment income by $1,550,216, decreased accumulated net realized gain (loss) by $115,144,330, and increased net capital paid in on shares of beneficial interest by $116,694,546. Reclassifications have no impact upon the net asset value of the Fund and resulted primarily from foreign currency gains (losses) and equalization of undistributed capital gains to shareholders.
At September 30, 2017, the Fund had $59,262,204 of undistributed tax basis ordinary investment income and $683,693,187 of undistributed tax basis capital gains.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Ordinary income | $ | 53,438,727 | $ | 145,038,271 | ||||||
Capital gains | – | 1,466,179,239 | ||||||||
|
| |||||||||
Total | $ | 53,438,727 | $ | 1,611,217,510 | ||||||
|
| |||||||||
Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assessment of a jurisdiction’s legal obligation to pay reclaims, the jurisdiction’s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain.
Deferred Foreign Capital Gain 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.
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment
Annual Report | 19
Notes to Financial Statements, Continued
Thornburg International Value Fund | September 30, 2017
on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund’s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date.
In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment’s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data.
Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Quotations for foreign investments expressed in foreign currency amounts are converted to U.S. dollar equivalents using a foreign exchange quotation from a third party service provider at the time of valuation. Foreign investments held by the Fund may be traded on days and at times when the Fund is not open for business. Consequently, the value of Fund investments may be significantly affected on days when shareholders cannot purchase or sell Fund shares. Futures contracts and other financial and derivative instruments traded on an exchange are valued at the latest published price for the instrument on its primary exchange. Listed options are valued at the last bid price.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
On days when market volatility thresholds established by the Audit Committee are exceeded, foreign securities for which valuations are obtained from pricing service providers are fair valued. On these days, the foreign securities are characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts due to the nature or duration of any restrictions on the disposition of the investment.
20 | Annual Report
Notes to Financial Statements, Continued
Thornburg International Value Fund | September 30, 2017
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 based upon these inputs 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, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities* | ||||||||||||||||||||
Common Stock | $ | 5,716,834,251 | $ | 5,716,834,251 | $ | – | $ | – | ||||||||||||
Short Term Investments | 244,716,904 | 244,716,904 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 5,961,551,155 | $ | 5,961,551,155 | $ | – | $ | – | ||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Forward Currency Contracts | $ | 1,149,923 | $ | – | $ | 1,149,923 | $ | – | ||||||||||||
Liabilities | ||||||||||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Forward Currency Contracts | $ | (12,550,444 | ) | $ | – | $ | (12,550,444 | ) | $ | – | ||||||||||
Spot Currency | $ | (214 | ) | $ | (214 | ) | $ | – | $ | – | ||||||||||
| * | 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, 2017, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
Management Fee Schedule
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.875 | % | |||
Next $500 million | 0.825 | ||||
Next $500 million | 0.775 | ||||
Next $500 million | 0.725 | ||||
Over $2 billion | 0.675 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.715% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $204,925 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $20,064 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $7,875 from redemptions of Class C shares of the Fund.
Annual Report | 21
Notes to Financial Statements, Continued
Thornburg International Value Fund | September 30, 2017
Pursuant to a service plan under Rule 12b-1 of the Investment Company Act of 1940, the Fund may pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A, Class C, Class I, Class R3, Class R4, and Class R5 shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I or Class R5 shares. Class R6 shares are not subject to a service plan. The Advisor and Distributor each 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, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $563,043 for Class R3 shares, $493,174 for Class R4 shares, $668,926 for Class R5 shares. The Advisor reimbursed certain class specific expenses, administrative fees, and distribution fees of $37,188 for Class R6 shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 0.8%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had no such transactions with affiliated funds.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 5,307,478 | $ | 132,239,213 | 6,663,995 | $ | 159,603,304 | ||||||||||
Shares converted to Class B shares | – | – | 75,049 | 1,748,646 | ||||||||||||
Shares issued to shareholders in | 198,635 | 5,389,356 | 8,432,658 | 205,155,554 | ||||||||||||
Shares repurchased | (17,364,628 | ) | (424,051,972 | ) | (22,493,529 | ) | (530,619,029 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (11,858,515 | ) | $ | (286,423,403 | ) | (7,321,827 | ) | $ | (164,111,525 | ) | ||||||
|
| |||||||||||||||
Class B Shares* | ||||||||||||||||
Shares sold | – | $ | – | 10,346 | $ | 225,076 | ||||||||||
Shares issued to shareholders in | 36,621 | 810,856 | ||||||||||||||
Shares converted to Class A shares | – | – | (83,044 | ) | (1,748,646 | ) | ||||||||||
Shares repurchased | – | – | (262,313 | ) | (5,732,414 | ) | ||||||||||
|
| |||||||||||||||
Net decrease | – | $ | – | (298,390 | ) | $ | (6,445,128 | ) | ||||||||
|
| |||||||||||||||
22 | Annual Report
Notes to Financial Statements, Continued
Thornburg International Value Fund | September 30, 2017
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 629,556 | $ | 14,380,219 | 2,344,411 | $ | 51,715,435 | ||||||||||
Shares issued to shareholders in | 63,092 | 1,548,644 | 4,231,136 | 93,936,821 | ||||||||||||
Shares repurchased | (9,797,675 | ) | (218,976,284 | ) | (9,254,631 | ) | (200,280,637 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (9,105,027 | ) | $ | (203,047,421 | ) | (2,679,084 | ) | $ | (54,628,381 | ) | ||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 21,729,602 | $ | 551,381,100 | 53,906,880 | $ | 1,294,025,547 | ||||||||||
Shares issued to shareholders in | 1,019,337 | 28,095,572 | 33,325,928 | 830,190,740 | ||||||||||||
Shares repurchased | (86,075,544 | ) | (2,134,825,729 | ) | (115,362,911 | ) | (2,820,675,539 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (63,326,605 | ) | $ | (1,555,349,057 | ) | (28,130,103 | ) | $ | (696,459,252 | ) | ||||||
|
| |||||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 1,663,868 | $ | 41,062,892 | 3,233,955 | $ | 76,543,365 | ||||||||||
Shares issued to shareholders in | 61,642 | 1,670,703 | 2,938,343 | 71,615,592 | ||||||||||||
Shares repurchased | (5,264,000 | ) | (130,221,334 | ) | (9,747,898 | ) | (228,445,231 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (3,538,490 | ) | $ | (87,487,739 | ) | (3,575,600 | ) | $ | (80,286,274 | ) | ||||||
|
| |||||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 1,650,790 | $ | 40,696,547 | 2,976,526 | $ | 70,234,604 | ||||||||||
Shares issued to shareholders in | 41,500 | 1,116,929 | 1,632,286 | 39,409,828 | ||||||||||||
Shares repurchased | (5,580,017 | ) | (136,990,191 | ) | (5,312,446 | ) | (125,409,786 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (3,887,727 | ) | $ | (95,176,715 | ) | (703,634 | ) | $ | (15,765,354 | ) | ||||||
|
| |||||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 2,773,059 | $ | 70,084,793 | 5,121,121 | $ | 125,836,118 | ||||||||||
Shares issued to shareholders in | 112,189 | 3,077,952 | 4,346,336 | 108,199,722 | ||||||||||||
Shares repurchased | (14,388,522 | ) | (370,965,382 | ) | (11,882,677 | ) | (288,001,530 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (11,503,274 | ) | $ | (297,802,637 | ) | (2,415,220 | ) | $ | (53,965,690 | ) | ||||||
|
| |||||||||||||||
Class R6 Shares | ||||||||||||||||
Shares sold | 3,806,317 | $ | 99,561,832 | 8,733,531 | $ | 205,874,135 | ||||||||||
Shares issued to shareholders in | 204,703 | 5,593,550 | 3,013,284 | 74,472,093 | ||||||||||||
Shares repurchased | (4,833,544 | ) | (118,841,091 | ) | (7,004,088 | ) | (165,389,431 | ) | ||||||||
|
| |||||||||||||||
Net increase/decrease | (822,524 | ) | $ | (13,685,709 | ) | 4,742,727 | $ | 114,956,797 | ||||||||
|
| |||||||||||||||
* Class B shares were converted to Class A shares on August 29, 2016.
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $5,223,510,933 and $7,495,287,307, respectively.
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 the 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
Annual Report | 23
Notes to Financial Statements, Continued
Thornburg International Value Fund | September 30, 2017
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, 2017, 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 Fund’s Advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2017 in the normal course of pursuing its investment objectives, with the objective of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments from adverse changes in the relationship between the U.S. dollar and foreign currencies. In each case these contracts have been initiated in conjunction with foreign investment transactions. The quarterly average value of open forward currency contracts for the year ended September 30, 2017 was $864,199,474.
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 outstanding forward currency contracts in the table located in the Schedule of Investments were entered into with State Street Bank and Trust Company (“SSB”), pursuant to an International Swaps and Derivatives Association (“ISDA”) Master Agreement. In the event of a default or termination under the ISDA Master Agreement with SSB, 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 with SSB does not result in an offset of reported amounts of financial assets and 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.
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2017 is disclosed in the following table:
| FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2017 | ||||||
| ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 1,149,923 | |||
| FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2017 | ||||||
| LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (12,550,444 | ) | ||
Because the Fund did not receive or post cash collateral in connection with its currency forward contracts during the period, and because all of the Fund’s outstanding currency forward contracts are with SSB, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2017 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, 2017 is $0, and the net amount of the Fund’s liabilities which is attributable to those contracts at that date is $11,400,521. 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.
24 | Annual Report
Notes to Financial Statements, Continued
Thornburg International Value Fund | September 30, 2017
The net realized gain (loss) from forward currency contracts and the net change in unrealized appreciation (depreciation) on outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2017 are disclosed in the following tables:
NET REALIZED GAIN (LOSS) ON DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | 91,224,120 | $ | 91,224,120 | ||||
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (12,024,733 | ) | $ | (12,024,733 | ) | ||
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 small- and mid-cap 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 25
Thornburg International Value Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 23.43 | 0.16 | 4.24 | 4.40 | (0.20 | ) | – | (0.20 | ) | $ | 27.63 | ||||||||||||||||||||||||||||
2016(b)c) | $ | 27.46 | 0.36 | 0.25 | 0.61 | (0.39 | ) | (4.25 | ) | (4.64 | ) | $ | 23.43 | |||||||||||||||||||||||||||
2015(b) | $ | 29.84 | 0.24 | 0.16 | 0.40 | (0.26 | ) | (2.52 | ) | (2.78 | ) | $ | 27.46 | |||||||||||||||||||||||||||
2014(b) | $ | 30.12 | 0.19 | (0.23 | ) | (0.04 | ) | (0.24 | ) | – | (0.24 | ) | $ | 29.84 | ||||||||||||||||||||||||||
2013(b) | $ | 26.08 | 0.26 | 4.02 | 4.28 | (0.24 | ) | – | (0.24 | ) | $ | 30.12 | ||||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 21.29 | (0.02 | ) | 3.84 | 3.82 | (0.11 | ) | – | (0.11 | ) | $ | 25.00 | |||||||||||||||||||||||||||
2016 | $ | 25.40 | 0.17 | 0.24 | 0.41 | (0.27 | ) | (4.25 | ) | (4.52 | ) | $ | 21.29 | |||||||||||||||||||||||||||
2015 | $ | 27.86 | 0.05 | 0.11 | 0.16 | (0.10 | ) | (2.52 | ) | (2.62 | ) | $ | 25.40 | |||||||||||||||||||||||||||
2014 | $ | 28.17 | – | (d) | (0.23 | ) | (0.23 | ) | (0.08 | ) | – | (0.08 | ) | $ | 27.86 | |||||||||||||||||||||||||
2013 | $ | 24.48 | 0.04 | 3.77 | 3.81 | (0.12 | ) | – | (0.12 | ) | $ | 28.17 | ||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 24.02 | 0.25 | 4.37 | 4.62 | (0.27 | ) | – | (0.27 | ) | $ | 28.37 | ||||||||||||||||||||||||||||
2016 | $ | 28.04 | 0.47 | 0.23 | 0.70 | (0.47 | ) | (4.25 | ) | (4.72 | ) | $ | 24.02 | |||||||||||||||||||||||||||
2015 | $ | 30.43 | 0.38 | 0.13 | 0.51 | (0.38 | ) | (2.52 | ) | (2.90 | ) | $ | 28.04 | |||||||||||||||||||||||||||
2014 | $ | 30.76 | 0.33 | (0.25 | ) | 0.08 | (0.41 | ) | – | (0.41 | ) | $ | 30.43 | |||||||||||||||||||||||||||
2013 | $ | 26.66 | 0.38 | 4.10 | 4.48 | (0.38 | ) | – | (0.38 | ) | $ | 30.76 | ||||||||||||||||||||||||||||
| CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 23.44 | 0.14 | 4.22 | 4.36 | (0.17 | ) | – | (0.17 | ) | $ | 27.63 | ||||||||||||||||||||||||||||
2016 | $ | 27.47 | 0.31 | 0.25 | 0.56 | (0.34 | ) | (4.25 | ) | (4.59 | ) | $ | 23.44 | |||||||||||||||||||||||||||
2015 | $ | 29.86 | 0.21 | 0.13 | 0.34 | (0.21 | ) | (2.52 | ) | (2.73 | ) | $ | 27.47 | |||||||||||||||||||||||||||
2014 | $ | 30.14 | 0.15 | (0.24 | ) | (0.09 | ) | (0.19 | ) | – | (0.19 | ) | $ | 29.86 | ||||||||||||||||||||||||||
2013 | $ | 26.11 | 0.20 | 4.02 | 4.22 | (0.19 | ) | – | (0.19 | ) | $ | 30.14 | ||||||||||||||||||||||||||||
| CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 23.26 | 0.18 | 4.21 | 4.39 | (0.20 | ) | – | (0.20 | ) | $ | 27.45 | ||||||||||||||||||||||||||||
2016 | $ | 27.30 | 0.37 | 0.23 | 0.60 | (0.39 | ) | (4.25 | ) | (4.64 | ) | $ | 23.26 | |||||||||||||||||||||||||||
2015 | $ | 29.69 | 0.25 | 0.15 | 0.40 | (0.27 | ) | (2.52 | ) | (2.79 | ) | $ | 27.30 | |||||||||||||||||||||||||||
2014 | $ | 29.98 | 0.21 | (0.24 | ) | (0.03 | ) | (0.26 | ) | – | (0.26 | ) | $ | 29.69 | ||||||||||||||||||||||||||
2013 | $ | 25.96 | 0.25 | 4.01 | 4.26 | (0.24 | ) | – | (0.24 | ) | $ | 29.98 | ||||||||||||||||||||||||||||
| CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 24.01 | 0.24 | 4.35 | 4.59 | (0.25 | ) | – | (0.25 | ) | $ | 28.35 | ||||||||||||||||||||||||||||
2016 | $ | 28.03 | 0.46 | 0.23 | 0.69 | (0.46 | ) | (4.25 | ) | (4.71 | ) | $ | 24.01 | |||||||||||||||||||||||||||
2015 | $ | 30.41 | 0.30 | 0.19 | 0.49 | (0.35 | ) | (2.52 | ) | (2.87 | ) | $ | 28.03 | |||||||||||||||||||||||||||
2014 | $ | 30.71 | 0.30 | (0.24 | ) | 0.06 | (0.36 | ) | – | (0.36 | ) | $ | 30.41 | |||||||||||||||||||||||||||
2013 | $ | 26.61 | 0.34 | 4.10 | 4.44 | (0.34 | ) | – | (0.34 | ) | $ | 30.71 | ||||||||||||||||||||||||||||
| CLASS R6 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 23.95 | 0.31 | 4.33 | 4.64 | (0.32 | ) | – | (0.32 | ) | $ | 28.27 | ||||||||||||||||||||||||||||
2016 | $ | 27.97 | 0.53 | 0.21 | 0.74 | (0.51 | ) | (4.25 | ) | (4.76 | ) | $ | 23.95 | |||||||||||||||||||||||||||
2015 | $ | 30.36 | 0.39 | 0.17 | 0.56 | (0.43 | ) | (2.52 | ) | (2.95 | ) | $ | 27.97 | |||||||||||||||||||||||||||
2014 | $ | 30.70 | 0.40 | (0.26 | ) | 0.14 | (0.48 | ) | – | (0.48 | ) | $ | 30.36 | |||||||||||||||||||||||||||
2013 | $ | 26.62 | 0.46 | 4.05 | 4.51 | (0.43 | ) | – | (0.43 | ) | $ | 30.70 | ||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Class B shares were converted to Class A shares on August 29, 2016. |
| (d) | Net investment income (loss) was less than $0.01 per share. |
| (e) | Net investment income (Loss) is less than 0.01%. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
26 | Annual Report
Financial Highlights, Continued
Thornburg International Value Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 0.65 | 1.31 | 1.31 | 1.31 | 18.78 | 86.88 | $ | 840,244 | |||||||||||||||||||||||
| 1.51 | 1.28 | 1.28 | 1.28 | 1.90 | 103.90 | $ | 990,194 | |||||||||||||||||||||||
| 0.82 | 1.27 | 1.27 | 1.27 | 1.25 | 70.88 | $ | 1,361,529 | |||||||||||||||||||||||
| 0.63 | 1.26 | 1.26 | 1.26 | (0.14 | ) | 37.25 | $ | 2,601,689 | ||||||||||||||||||||||
| 0.92 | 1.25 | 1.25 | 1.25 | 16.49 | 34.67 | $ | 5,212,813 | |||||||||||||||||||||||
| (0.08 | ) | 2.04 | 2.04 | 2.04 | 17.94 | 86.88 | $ | 400,859 | ||||||||||||||||||||||
| 0.77 | 2.02 | 2.02 | 2.02 | 1.12 | 103.90 | $ | 535,169 | |||||||||||||||||||||||
| 0.19 | 1.99 | 1.99 | 1.99 | 0.52 | 70.88 | $ | 706,606 | |||||||||||||||||||||||
| – | (e) | 1.99 | 1.99 | 1.99 | (0.83 | ) | 37.25 | $ | 874,358 | |||||||||||||||||||||
| 0.15 | 2.01 | 2.01 | 2.01 | 15.62 | 34.67 | $ | 1,181,438 | |||||||||||||||||||||||
| 0.99 | 0.92 | 0.92 | 0.92 | 19.29 | 86.88 | $ | 3,370,930 | |||||||||||||||||||||||
| 1.91 | 0.90 | 0.90 | 0.90 | 2.21 | 103.90 | $ | 4,375,955 | |||||||||||||||||||||||
| 1.27 | 0.90 | 0.90 | 0.90 | 1.65 | 70.88 | $ | 5,895,731 | |||||||||||||||||||||||
| 1.05 | 0.88 | 0.88 | 0.88 | 0.23 | 37.25 | $ | 7,748,950 | |||||||||||||||||||||||
| 1.34 | 0.86 | 0.86 | 0.86 | 16.94 | 34.67 | $ | 14,601,876 | |||||||||||||||||||||||
| 0.55 | 1.45 | 1.45 | 1.64 | 18.63 | 86.88 | $ | 285,510 | |||||||||||||||||||||||
| 1.31 | 1.45 | 1.45 | 1.62 | 1.67 | 103.90 | $ | 325,135 | |||||||||||||||||||||||
| 0.71 | 1.45 | 1.45 | 1.58 | 1.09 | 70.88 | $ | 479,223 | |||||||||||||||||||||||
| 0.51 | 1.45 | 1.45 | 1.61 | (0.30 | ) | 37.25 | $ | 754,139 | ||||||||||||||||||||||
| 0.71 | 1.45 | 1.45 | 1.57 | 16.23 | 34.67 | $ | 1,152,795 | |||||||||||||||||||||||
| 0.74 | 1.25 | 1.25 | 1.46 | 18.90 | 86.88 | $ | 209,066 | |||||||||||||||||||||||
| 1.55 | 1.25 | 1.25 | 1.39 | 1.87 | 103.90 | $ | 267,623 | |||||||||||||||||||||||
| 0.86 | 1.24 | 1.24 | 1.37 | 1.30 | 70.88 | $ | 333,247 | |||||||||||||||||||||||
| 0.70 | 1.25 | 1.25 | 1.49 | (0.12 | ) | 37.25 | $ | 722,349 | ||||||||||||||||||||||
| 0.91 | 1.25 | 1.25 | 1.38 | 16.49 | 34.67 | $ | 1,342,883 | |||||||||||||||||||||||
| 0.96 | 0.99 | 0.99 | 1.15 | 19.17 | 86.88 | $ | 298,970 | |||||||||||||||||||||||
| 1.88 | 0.95 | 0.95 | 0.95 | 2.19 | 103.90 | $ | 529,330 | |||||||||||||||||||||||
| 1.01 | 0.98 | 0.98 | 1.11 | 1.57 | 70.88 | $ | 685,617 | |||||||||||||||||||||||
| 0.97 | 0.99 | 0.99 | 1.12 | 0.17 | 37.25 | $ | 2,171,673 | |||||||||||||||||||||||
| 1.20 | 0.96 | 0.96 | 1.00 | 16.80 | 34.67 | $ | 4,376,567 | |||||||||||||||||||||||
| 1.23 | 0.78 | 0.78 | 0.79 | 19.40 | 86.88 | $ | 536,296 | |||||||||||||||||||||||
| 2.19 | 0.74 | 0.74 | 0.74 | 2.40 | 103.90 | $ | 473,941 | |||||||||||||||||||||||
| 1.33 | 0.74 | 0.74 | 0.74 | 1.81 | 70.88 | $ | 420,849 | |||||||||||||||||||||||
| 1.28 | 0.73 | 0.73 | 0.73 | 0.42 | 37.25 | $ | 872,512 | |||||||||||||||||||||||
| 1.59 | 0.74 | 0.74 | 0.74 | 17.07 | 34.67 | $ | 1,345,680 | |||||||||||||||||||||||
Annual Report | 27
Report of Independent Registered Public Accounting Firm
Thornburg International Value Fund | September 30, 2017
To the Trustees and Shareholders of
the 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 the Thornburg International Value Fund (the “Fund”) as of September 30, 2017, 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 as of September 30, 2017 by correspondence with the custodian, brokers, and transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
28 | Annual Report
Thornburg International Value Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
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 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,129.90 | $6.93 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.56 | $6.57 | ||||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,126.00 | $10.78 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.93 | $10.21 | ||||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,132.30 | $4.80 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.57 | $4.55 | ||||||||||
| CLASS R3 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,129.00 | $7.74 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.80 | $7.33 | ||||||||||
| CLASS R4 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,130.60 | $6.67 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.81 | $6.32 | ||||||||||
| CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,131.70 | $5.29 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $5.01 | ||||||||||
| CLASS R6 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,132.50 | $4.21 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.12 | $3.99 | ||||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.30%; C: 2.02%; I: 0.90%; R3: 1.45%; R4: 1.25%; R5: 0.99%; R6: 0.79%) 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.
Annual Report | 29
Thornburg International Value Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
30 | Annual Report
Trustees and Officers, Continued
Thornburg International Value Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 31
Trustees and Officers, Continued
Thornburg International Value Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries 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.
32 | Annual Report
Thornburg International Value Fund | September 30, 2017 (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 tax year ended September 30, 2017, dividends paid by Thornburg International Value Fund of $53,438,727 are being reported as taxable ordinary investment income dividends for federal income tax purposes.
For the tax year ended September 30, 2017, 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 2.52% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2017 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2017, foreign source income and foreign taxes paid is $128,051,976 and $11,031,227, 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, 2017. Complete information will be reported in conjunction with your 2017 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 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single
Annual Report | 33
Other Information, Continued
Thornburg International Value Fund | September 30, 2017 (Unaudited)
factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, (6) comparison of the Fund’s annualized return since inception to the Fund’s benchmark index, and (7) comparative measures of estimated earnings growth, and risk and return statistics. The Trustees generally attach additional significance to investment performance from the perspective of longer term shareholders. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectus. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total expenses to median and average fees and expenses charged to mutual fund categories created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses of two Fund share classes to the fee levels and expenses for fund peer groups selected by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been considered by the Trustees showed that the Fund’s advisory fee level was comparable to the median and average fee levels for the fund categories, the level of total expense for one share class was comparable to one category median and higher than the median of a second category, the same share class was comparable to the averages of both categories, and that the level of total expense for a second share class was lower than the median and average levels of total expense for both categories. Peer group data showed that the Fund’s advisory fee level was comparable to median levels for the peer groups, and that the total expense levels for both Fund share classes were comparable to the median levels for their respective peer groups.
34 | Annual Report
Other Information, Continued
Thornburg International Value Fund | September 30, 2017 (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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted their evaluation of 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 peer groups selected by an independent mutual fund analyst firm, the effects of the breakpoint structure and other expense factors realized by the Fund and certain other funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 the peer groups, and that shareholders may be expected to benefit from any economies of scale, due to the advisory agreement’s breakpoint fee structure for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 35
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
36 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 37
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38 | Annual Report
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Annual Report | 39
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
Annual Report September 30, 2017 THORNBURG CORE GROWTH FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Core Growth Fund
Annual Report ^ September 30, 2017
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| 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 | ||||||||
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.
Investments carry risks, including possible loss of principal. Additional 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- and mid-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 bank deposits or guaranteed by a bank or any other entity.
Funds invested in a limited number of holdings may expose an investor to greater volatility.
Annual Report | 3
Thornburg Core Growth Fund | September 30, 2017 (Unaudited)
October 13, 2017
Dear Fellow Shareholder:
For the year ended September 30, 2017, Thornburg Core Growth Fund returned 15.02% for Class A shares (without sales charge), underperforming its benchmark, the Russell 3000 Growth Index, which returned 21.87%. On September 30, 2017, the NAV per Class A share was $32.46.
The last year was an interesting one for the market and for the world. The beginning of the period was heavily influenced by the U.S. presidential election. Stocks drifted lower into the election and then posted a strong rally as investors embraced the possibilities of a business friendly administration and the potential for tax breaks, fiscal stimulus, and decreased regulation. The rally continued – despite U.S. government gridlock – due primarily to strong fundamentals in the U.S. and globally. A bit of a synchronized global expansion has taken hold and we are seeing the impact on company fundamentals. The result has been an earnings-driven rally.
Thornburg Core Growth Fund’s strongest performance came from our investments in the financials sector. We don’t currently own traditional banks or insurance companies, but we did have interest-rate-sensitive growth companies like SVB Financial Group, Charles Schwab, and asset manager Affiliated Managers Group. Consumer staples was also an area of strength for us, which is a bit unusual. It was a weak sector for the market but we had strong performance from stocks like Monster Beverage and Walmart. The biggest drags on the portfolio were our industrials and health care exposures. Both sectors’ challenges came down to a couple of stocks that were particularly weak. For industrials, it was industrial lighting company Acuity and, for health care, device maker Dexcom detracted.
Top contributors to performance included:
SVB Financial Group – Silicon Valley Bank primarily lends to companies pursuing high-growth opportunities and is a beneficiary of increased interest rates. Following the 2016 U.S. presidential election, interest rates rose as the market anticipated higher gross domestic product, inflation, and loan growth. SVB is very well positioned in this environment as it can earn a higher return on its large interest-free deposit base.
Apple, Inc. – Apple shares recovered as the market began to appreciate the potential of Apple’s latest iPhone to drive replacement cycle demand in developed markets and penetration gains in emerging markets. Apple demonstrated good execution throughout the year in its non-iPhone devices and software businesses. The combination confirmed our view that Apple shares were undervalued given the durability of its franchise and earnings power.
PayPal Holdings, Inc. – Paypal is a digital and mobile payments platform. The firm has established a very strong position for two secular trends: the shift from cash to digital payments and the move toward mobile payments. PayPal is also exposed to a strong network effect in its global payments platform, where accelerating growth drives increasing scale, and vice versa. The stock remains a top holding.
Visa, Inc. – Visa is the largest card network and payment processor in the world, and a long-time Thornburg Core Growth Fund holding. Visa reported consistent results during the year and showed a modest acceleration in volume growth, which led to a re-rating of the stock.
Facebook, Inc. – Facebook continued to monetize its 2 billion monthly active user base and 800 million monthly active Instagram user base, generating about 50% year-over-year revenue growth during the fiscal year. The potential remains for continued revenue growth, as Facebook’s value to advertising partners allowed them to increase ad prices by 24% from the prior year while their user base continues to grow.
Top detractors to performance included:
DexCom, Inc. – DexCom is a medical device maker focused on continuous glucose monitoring systems for diabetes patients. The stock was roughly flat for the majority of the period but declined significantly following the U.S. Food and Drug Administration’s announcement that it had approved a competitor device for broader use than analysts expected. This opened it up to compete with DexCom for Medicare reimbursement. Although this is a negative development for the stock, we felt the market reaction was too severe given the superiority of DexCom’s product compared to the new entrant. We used the decline as an opportunity to add to the stock.
Acuity Brands, Inc. – Acuity is the leader in lighting solutions for the commercial construction market in North America. For the year, Acuity’s primary market experienced a significant slowdown and growth rates were lower than expected across all industry players. The long-term thesis remains compelling as it is likely many years before LED lighting is fully penetrated.
Under Armour – Under Armour is one of the largest performance apparel and footwear makers globally. In the first quarter of 2017, management announced a consecutive reduction in profitability and also took down revenue growth expectations, coinciding with the departure of the Chief Financial Officer after less than a year in that role. The company continues to face headwinds in a challenging U.S. retail environment and slowing brand momentum. Consequently, we sold our position.
Newell Brands, Inc. – Newell is a consumer products conglomerate offering a broad range of brands from Rubbermaid plastic products to Yankee Candles. Investors lost confidence in light of the Toys R Us bankruptcy (Newell owns Graco, a Toys R Us supplier). We believe Newell has a strong collection of brands, the opportunity to cut costs in their business, and the benefit of being channel agnostic (online/offline). We continue to hold and find the valuation attractive at these levels.
Chipotle Mexican Grill, Inc. – Chipotle continued to experience food safety issues during the year, with the stock falling considerably following reports of a norovirus outbreak at one of its restaurants. Although the stock had shown signs of recovery, with restaurant-level margins improving and better cost management at the corporate level, same-store-sales comparisons continue to disappoint, likely due to once-loyal customers defecting to other chains amid food safety concerns.
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Core Growth Fund | September 30, 2017 (Unaudited)
Over the life of the Fund we have held true to our philosophy and process, which tends to favor quality growth stocks, smaller capitalization ranges, long-term secular themes, and idiosyncratic opportunities. We remain bullish about the prospects of the individual companies we have identified through our bottom-up process.
Thank you for investing alongside us in Thornburg Core Growth Fund.
Sincerely,
Greg Dunn
Managing Director
Portfolio Manager
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
Annual Report | 5
Thornburg Core Growth Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
Class A Shares (Incep: 12/27/00) | |||||||||||||||||||||||||
Without sales charge | 15.02% | 7.08% | 11.18% | 4.60% | 6.26% | ||||||||||||||||||||
With sales charge | 9.85% | 5.44% | 10.16% | 4.12% | 5.97% | ||||||||||||||||||||
Class C Shares (Incep: 12/27/00) | |||||||||||||||||||||||||
Without sales charge | 14.18% | 6.27% | 10.34% | 3.81% | 5.43% | ||||||||||||||||||||
With sales charge | 13.18% | 6.27% | 10.34% | 3.81% | 5.43% | ||||||||||||||||||||
Class I Shares (Incep: 11/3/03) | 15.53% | 7.51% | 11.64% | 5.07% | 8.83% | ||||||||||||||||||||
Class R3 Shares (Incep: 7/1/03) | 14.95% | 6.97% | 11.07% | 4.53% | 9.03% | ||||||||||||||||||||
Class R4 Shares (Incep: 2/1/07) | 15.04% | 7.08% | 11.19% | 4.63% | 5.25% | ||||||||||||||||||||
Class R5 Shares (Incep: 10/3/05) | 15.54% | 7.52% | 11.65% | 5.06% | 7.73% | ||||||||||||||||||||
Russell 3000 Growth Index (Since 12/27/00) | 21.87% | 12.65% | 15.18% | 9.03% | 5.50% | ||||||||||||||||||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. 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 sales charge for Class I, R3, R4, and R5 shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses before any fee waivers or expense reimbursements are as follows: A shares, 1.40%; C shares, 2.16%; I shares, 1.05%; R3 shares, 1.81%; R4 shares, 1.86%; R5 shares, 1.30%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: I shares, 0.99%, R3 shares, 1.50%; R4 shares, 1.40%; R5 shares, 0.99%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus.
Glossary
The Russell 3000 Growth Index is an unmanaged index comprised of those Russell 3000 companies with higher price-to-book ratios and higher forecasted growth values. The stocks in this index are also members of either the Russell 1000 Growth or the Russell 2000 Growth indices. Source: Frank Russell Company.
The performance of any index is not indicative of the performance of any particular investment. 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.
6 | Annual Report
Thornburg Core Growth Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
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 and partnership interests. The Fund may also invest in developing countries.
MARKET CAPITALIZATION EXPOSURE
BASKET STRUCTURE
TOP TEN EQUITY HOLDINGS
| Visa, Inc. | 4.0% | ||||
| FleetCor Technologies, Inc. | 3.8% | ||||
| Facebook, Inc. | 3.1% | ||||
| Alphabet, Inc. Class C | 3.1% | ||||
| Nevro Corp. | 3.0% | ||||
| Las Vegas Sands Corp. | 3.0% | ||||
| Apple, Inc. | 2.5% | ||||
| Affiliated Managers Group, Inc. | 2.5% | ||||
| Wal-Mart Stores, Inc. | 2.5% | ||||
| Nielsen Holdings plc | 2.5% |
There is no guarantee that the Fund will meet its investment objective.
All portfolio information is subject to change. Charts may not add up to 100% due to rounding.
SECTOR EXPOSURE
| Information Technology | 37.8% | ||||
| Consumer Discretionary | 20.1% | ||||
| Health Care | 14.9% | ||||
| Industrials | 6.7% | ||||
| Consumer Staples | 6.4% | ||||
| Financials | 4.6% | ||||
| Materials | 3.9% | ||||
| Energy | 3.1% | ||||
| Other Assets Less Liabilities | 2.5% |
TOP TEN INDUSTRY GROUPS
| Software & Services | 31.2% | ||||
| Retailing | 12.2% | ||||
| Health Care Equipment & Services | 7.9% | ||||
| Pharma, Biotech & Life Sciences | 7.1% | ||||
| Technology Hardware & Equipment | 4.4% | ||||
| Capital Goods | 4.3% | ||||
| Consumer Services | 4.1% | ||||
| Food, Beverage & Tobacco | 4.0% | ||||
| Materials | 3.9% | ||||
| Energy | 3.1% |
COUNTRY EXPOSURE*
(percent of equity holdings)
| United States | 90.5% | ||||
| Israel | 1.8% | ||||
| Germany | 1.7% | ||||
| United Kingdom | 1.6% | ||||
| Ireland | 1.6% | ||||
| France | 1.5% | ||||
| Argentina | 1.4% |
| * | The country assignment 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. |
Annual Report | 7
Thornburg Core Growth Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
| COMMON STOCK — 97.52% | ||||||||||||
BANKS — 2.14% | ||||||||||||
Banks — 2.14% | ||||||||||||
| a | SVB Financial Group | 72,713 | $ | 13,603,875 | ||||||||
|
| |||||||||||
| 13,603,875 | ||||||||||||
|
| |||||||||||
CAPITAL GOODS — 4.26% | ||||||||||||
Electrical Equipment — 2.22% | ||||||||||||
Acuity Brands, Inc. | 82,674 | 14,160,403 | ||||||||||
Industrial Conglomerates — 2.04% | ||||||||||||
General Electric Co. | 536,800 | 12,979,824 | ||||||||||
|
| |||||||||||
| 27,140,227 | ||||||||||||
|
| |||||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 2.46% | ||||||||||||
Professional Services — 2.46% | ||||||||||||
Nielsen Holdings plc | 377,700 | 15,655,665 | ||||||||||
|
| |||||||||||
| 15,655,665 | ||||||||||||
|
| |||||||||||
CONSUMER DURABLES & APPAREL — 2.01% | ||||||||||||
Household Durables — 2.01% | ||||||||||||
Newell Brands, Inc. | 300,523 | 12,823,316 | ||||||||||
|
| |||||||||||
| 12,823,316 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 4.07% | ||||||||||||
Hotels, Restaurants & Leisure — 4.07% | ||||||||||||
| a | Chipotle Mexican Grill, Inc. | 22,521 | 6,932,639 | |||||||||
Las Vegas Sands Corp. | 296,200 | 19,004,192 | ||||||||||
|
| |||||||||||
| 25,936,831 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 2.47% | ||||||||||||
Capital Markets — 2.47% | ||||||||||||
Affiliated Managers Group, Inc. | 82,971 | 15,750,385 | ||||||||||
|
| |||||||||||
| 15,750,385 | ||||||||||||
|
| |||||||||||
ENERGY — 3.13% | ||||||||||||
Oil, Gas & Consumable Fuels — 3.13% | ||||||||||||
| a | Concho Resources, Inc. | 77,309 | 10,183,141 | |||||||||
Pioneer Natural Resources Co. | 65,924 | 9,726,427 | ||||||||||
|
| |||||||||||
| 19,909,568 | ||||||||||||
|
| |||||||||||
FOOD & STAPLES RETAILING — 2.47% | ||||||||||||
Food & Staples Retailing — 2.47% | ||||||||||||
Wal-Mart Stores, Inc. | 200,947 | 15,701,999 | ||||||||||
|
| |||||||||||
| 15,701,999 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 3.96% | ||||||||||||
Beverages — 2.45% | ||||||||||||
| a | Monster Beverage Corp. | 282,313 | 15,597,793 | |||||||||
Food Products — 1.51% | ||||||||||||
| a | Blue Buffalo Pet Products | 339,800 | 9,633,330 | |||||||||
|
| |||||||||||
| 25,231,123 | ||||||||||||
|
| |||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 7.85% | ||||||||||||
Health Care Equipment & Supplies — 5.77% | ||||||||||||
| a | DexCom, Inc. | 255,928 | 12,521,278 | |||||||||
| a | Inogen, Inc. | 52,994 | 5,039,729 | |||||||||
| a | Nevro Corp. | 210,983 | 19,174,135 | |||||||||
Health Care Providers & Services — 2.08% | ||||||||||||
| a | DaVita, Inc. | 223,098 | 13,249,790 | |||||||||
|
| |||||||||||
| 49,984,932 | ||||||||||||
|
| |||||||||||
8 | Annual Report
Schedule of Investments, Continued
Thornburg Core Growth Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
MATERIALS — 3.85% | ||||||||||||
Chemicals — 3.85% | ||||||||||||
CF Industries Holdings, Inc. | 404,001 | $ | 14,204,675 | |||||||||
Monsanto Co. | 86,300 | 10,340,466 | ||||||||||
|
| |||||||||||
| 24,545,141 | ||||||||||||
|
| |||||||||||
MEDIA — 1.80% | ||||||||||||
Media — 1.80% | ||||||||||||
Comcast Corp. | 297,118 | 11,433,101 | ||||||||||
|
| |||||||||||
| 11,433,101 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 7.09% | ||||||||||||
Biotechnology — 5.45% | ||||||||||||
| a | Alexion Pharmaceuticals, Inc. | 99,946 | 14,021,425 | |||||||||
| a | Alkermes plc | 189,692 | 9,643,941 | |||||||||
Gilead Sciences, Inc. | 136,300 | 11,043,026 | ||||||||||
Pharmaceuticals — 1.64% | ||||||||||||
Bayer AG | 76,500 | 10,424,893 | ||||||||||
|
| |||||||||||
| 45,133,285 | ||||||||||||
|
| |||||||||||
RETAILING — 12.17% | ||||||||||||
Internet & Direct Marketing Retail — 6.91% | ||||||||||||
| a | Amazon.com, Inc. | 14,976 | 14,397,178 | |||||||||
Expedia, Inc. | 79,931 | 11,505,268 | ||||||||||
| a | Netflix, Inc. | 43,274 | 7,847,740 | |||||||||
| a | priceline.com, Inc. | 5,594 | 10,241,607 | |||||||||
Multiline Retail — 3.27% | ||||||||||||
Dollar General Corp. | 133,220 | 10,797,481 | ||||||||||
| a | Dollar Tree, Inc. | 115,300 | 10,010,346 | |||||||||
Specialty Retail — 1.99% | ||||||||||||
The TJX Companies, Inc. | 172,100 | 12,688,933 | ||||||||||
|
| |||||||||||
| 77,488,553 | ||||||||||||
|
| |||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 2.16% | ||||||||||||
Semiconductors & Semiconductor Equipment — 2.16% | ||||||||||||
| a | Cavium, Inc. | 208,418 | 13,743,083 | |||||||||
|
| |||||||||||
| 13,743,083 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 31.25% | ||||||||||||
Information Technology Services — 10.03% | ||||||||||||
| a | FleetCor Technologies, Inc. | 155,207 | 24,021,387 | |||||||||
| a | PayPal Holdings, Inc. | 223,430 | 14,306,223 | |||||||||
Visa, Inc. | 242,429 | 25,513,228 | ||||||||||
Internet Software & Services — 13.05% | ||||||||||||
| a | Alphabet, Inc. Class C | 20,392 | 19,558,171 | |||||||||
Auto Trader Group plc | 1,880,946 | 9,892,831 | ||||||||||
| a | Criteo SA ADR | 224,905 | 9,333,558 | |||||||||
| a | Facebook, Inc. | 114,662 | 19,592,296 | |||||||||
| a | Wix.com Ltd. | 153,000 | 10,993,050 | |||||||||
| a | Zillow Group, Inc. Class C | 341,854 | 13,745,949 | |||||||||
Software — 8.17% | ||||||||||||
| a | Globant S.A. | 220,936 | 8,852,905 | |||||||||
| a | Proofpoint, Inc. | 119,017 | 10,380,663 | |||||||||
| a | ServiceNow, Inc. | 102,694 | 12,069,626 | |||||||||
| a | Splunk, Inc. | 140,874 | 9,358,260 | |||||||||
| a | Workday, Inc. | 107,725 | 11,353,138 | |||||||||
|
| |||||||||||
| 198,971,285 | ||||||||||||
|
| |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 4.38% | ||||||||||||
Communications Equipment — 1.90% | ||||||||||||
| a | Palo Alto Networks, Inc. | 84,202 | 12,133,508 | |||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Core Growth Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
Technology, Hardware, Storage & Peripherals — 2.48% | ||||||||||||
Apple, Inc. | 102,350 | $ | 15,774,182 | |||||||||
|
| |||||||||||
| 27,907,690 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCK (Cost $457,420,948) | 620,960,059 | |||||||||||
|
| |||||||||||
| SHORT TERM INVESTMENTS — 2.37% | ||||||||||||
| b | Thornburg Capital Management Fund | 1,505,934 | 15,059,338 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $15,059,338) | 15,059,338 | |||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 99.89% (Cost $472,480,286) | $ | 636,019,397 | ||||||||||
| OTHER ASSETS LESS LIABILITIES — 0.11% | 720,804 | |||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 636,740,201 | ||||||||||
|
| |||||||||||
Footnote Legend
| a | Non-income producing. |
| b | Investment in Affiliates - Shown below are holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940, including companies for which the Fund’s holding represented 5% or more of the company’s voting securities, and a series of the Thornburg Investment Trust in which the Fund invested for cash management purposes during the period: |
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2017 | MARKET VALUE SEPTEMBER 30, 2017 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | |||||||||||||||||||||||||||||||||
Thornburg Capital Management Fund | 4,908,697 | 29,998,471 | 33,401,234 | 1,505,934 | $ | 15,059,338 | $ | 417,640 | $ | – | $ | – | |||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 2.37% of net assets | $ | 15,059,338 | $ | 417,640 | $ | – | $ | – | |||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ADR | American Depositary Receipt |
See notes to financial statements.
10 | Annual Report
Statement of Assets and Liabilities
Thornburg Core Growth Fund | September 30, 2017
ASSETS |
| |||
Investments at value (Note 3) |
| |||
Non-affiliated issuers (cost $457,420,948) | $ | 620,960,059 | ||
Non-controlled affiliated issuer (cost $15,059,338) | 15,059,338 | |||
Receivable for investments sold | 3,130,503 | |||
Receivable for fund shares sold | 1,943,203 | |||
Dividends receivable | 163,175 | |||
Dividend and interest reclaim receivable | 1,089 | |||
Prepaid expenses and other assets | 27,893 | |||
|
| |||
Total Assets | 641,285,260 | |||
|
| |||
LIABILITIES |
| |||
Payable for investments purchased | 3,189,385 | |||
Payable for fund shares redeemed | 498,747 | |||
Payable to investment advisor and other affiliates (Note 4) | 624,760 | |||
Accounts payable and accrued expenses | 232,167 | |||
|
| |||
Total Liabilities | 4,545,059 | |||
|
| |||
NET ASSETS | $ | 636,740,201 | ||
|
| |||
NET ASSETS CONSIST OF |
| |||
Accumulated net investment loss | $ | (3,468,659 | ) | |
Net unrealized appreciation on investments | 163,538,973 | |||
Accumulated net realized gain (loss) | (179,280,859 | ) | ||
Net capital paid in on shares of beneficial interest | 655,950,746 | |||
|
| |||
| $ | 636,740,201 | |||
|
| |||
Annual Report | 11
Statement of Assets and Liabilities, Continued
Thornburg Core Growth Fund | September 30, 2017
NET ASSET VALUE |
| |||
Class A Shares: |
| |||
Net asset value and redemption price per share | $ | 32.46 | ||
Maximum sales charge, 4.50% of offering price | 1.53 | |||
|
| |||
Maximum offering price per share | $ | 33.99 | ||
|
| |||
Class C Shares: |
| |||
Net asset value and offering price per share* | $ | 28.43 | ||
|
| |||
Class I Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 34.67 | ||
|
| |||
Class R3 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 32.30 | ||
|
| |||
Class R4 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 32.59 | ||
|
| |||
Class R5 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 34.64 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
12 | Annual Report
Thornburg Core Growth Fund | Year Ended September 30, 2017
INVESTMENT INCOME | ||||
Dividend income | ||||
Non-affiliated issuers | $ | 3,429,936 | ||
Non-controlled affiliated issuer | 417,640 | |||
|
| |||
Total Income | 3,847,576 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 5,441,393 | |||
Administration fees (Note 4) | ||||
Class A Shares | 235,276 | |||
Class C Shares | 175,721 | |||
Class I Shares | 105,537 | |||
Class R3 Shares | 62,567 | |||
Class R4 Shares | 6,974 | |||
Class R5 Shares | 16,877 | |||
Distribution and service fees (Note 4) |
| |||
Class A Shares | 469,995 | |||
Class C Shares | 1,403,762 | |||
Class R3 Shares | 249,983 | |||
Class R4 Shares | 13,813 | |||
Transfer agent fees |
| |||
Class A Shares | 206,232 | |||
Class C Shares | 170,728 | |||
Class I Shares | 172,502 | |||
Class R3 Shares | 139,930 | |||
Class R4 Shares | 20,886 | |||
Class R5 Shares | 110,169 | |||
Registration and filing fees |
| |||
Class A Shares | 17,800 | |||
Class C Shares | 17,449 | |||
Class I Shares | 28,792 | |||
Class R3 Shares | 16,196 | |||
Class R4 Shares | 19,375 | |||
Class R5 Shares | 18,506 | |||
Custodian fees (Note 2) | 82,739 | |||
Professional fees | 46,485 | |||
Accounting fees (Note 4) | 19,165 | |||
Trustee fees | 25,606 | |||
Other expenses | 78,705 | |||
|
| |||
Total Expenses | 9,373,163 | |||
Less: |
| |||
Expenses reimbursed by investment advisor (Note 4) | (447,970 | ) | ||
|
| |||
Net Expenses | 8,925,193 | |||
|
| |||
Net Investment Loss | $ | (5,077,617 | ) | |
|
| |||
Annual Report | 13
Statement of Operations, Continued
Thornburg Core Growth Fund | Year Ended September 30, 2017
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on: |
| |||
Non-affiliated issuer Investments | $ | 74,018,031 | ||
Foreign currency transactions | (7,876 | ) | ||
|
| |||
| 74,010,155 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: |
| |||
Non-affiliated issuer Investments | 18,445,647 | |||
Foreign currency translations | (138 | ) | ||
|
| |||
| 18,445,509 | ||||
|
| |||
Net Realized and Unrealized Gain | 92,455,664 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 87,378,047 | ||
|
| |||
See notes to financial statements.
14 | Annual Report
Statements of Changes in Net Assets
Thornburg Core Growth Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM |
| |||||||||
OPERATIONS |
| |||||||||
Net investment income (loss) | $ | (5,077,617 | ) | $ | (7,401,668 | ) | ||||
Net realized gain (loss) on investments and foreign currency transactions | 74,010,155 | 9,780,002 | ||||||||
Net unrealized appreciation (depreciation) on investments and foreign currency translations | 18,445,509 | 43,558,418 | ||||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 87,378,047 | 45,936,752 | ||||||||
FUND SHARE TRANSACTIONS (NOTE 5) |
| |||||||||
Class A Shares | (38,160,794 | ) | (50,041,105 | ) | ||||||
Class C Shares | (44,372,259 | ) | (30,801,495 | ) | ||||||
Class I Shares | 5,746,285 | (58,233,894 | ) | |||||||
Class R3 Shares | (15,580,646 | ) | (18,964,601 | ) | ||||||
Class R4 Shares | (2,258,476 | ) | (3,465,547 | ) | ||||||
Class R5 Shares | (11,221,929 | ) | (9,684,705 | ) | ||||||
|
| |||||||||
Net Decrease in Net Assets | (18,469,772 | ) | (125,254,595 | ) | ||||||
NET ASSETS |
| |||||||||
Beginning of Year | 655,209,973 | 780,464,568 | ||||||||
|
| |||||||||
End of Year | $ | 636,740,201 | $ | 655,209,973 | ||||||
|
| |||||||||
Accumulated net investment loss | $ | (3,468,659 | ) | $ | (5,729,963 | ) | ||||
See notes to financial statements.
Annual Report | 15
Thornburg Core Growth Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg Core Growth Fund (the “Fund”) is a diversified series of Thornburg Investment Trust (the “Trust”). The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of twenty-one 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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: 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. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase
16 | Annual Report
Notes to Financial Statements, Continued
Thornburg Core Growth Fund | September 30, 2017
agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
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 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.
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 (depreciation) from investments.
Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and 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 (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 474,630,587 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 174,505,736 | |||
Gross unrealized depreciation on a tax basis | (13,116,926 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 161,388,810 | |||
|
|
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg Core Growth Fund | September 30, 2017
Temporary book tax adjustments made to the cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of outstanding wash sale losses.
At September 30, 2017, the Fund had deferred tax basis late-year ordinary investment losses occurring subsequent to December 31, 2016 through September 30, 2017 of $3,460,783. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had deferred tax basis late-year specified ordinary losses occurring subsequent to October 31, 2016 through September 30, 2017 of $7,876. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $177,130,558 generated prior to October 1, 2011 which may be carried forward to offset future capital gains. To the extent such carryforwards are utilized, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards expire September 30, 2018.
During the year ended September 30, 2017, the Fund utilized $49,862,617 of capital loss carryforwards generated prior to October 1, 2011.
In order to account for permanent book to tax differences, the Fund decreased the accumulated net investment loss by $7,338,921, decreased the accumulated net realized gain (loss) by $7,876, and decreased the net capital paid in on shares of beneficial interest by $7,346,797. Reclassifications have no impact upon the net asset value of the Fund and result primarily from foreign currency gains (losses) and nondeductible operating losses.
At September 30, 2017, the Fund did not have any undistributed tax basis net ordinary investment income or undistributed tax basis capital gains.
Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assessment of a jurisdiction’s legal obligation to pay reclaims, the jurisdiction’s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain.
Deferred Foreign Capital Gain 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.
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg Core Growth Fund | September 30, 2017
NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund’s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date.
In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment’s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data.
Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Quotations for foreign investments expressed in foreign currency amounts are converted to U.S. dollar equivalents using a foreign exchange quotation from a third party service provider at the time of valuation. Foreign investments held by the Fund may be traded on days and at times when the Fund is not open for business. Consequently, the value of Fund investments may be significantly affected on days when shareholders cannot purchase or sell Fund shares. Futures contracts and other financial and derivative instruments traded on an exchange are valued at the latest published price for the instrument on its primary exchange. Listed options are valued at the last bid price.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
On days when market volatility thresholds established by the Audit Committee are exceeded, foreign securities for which valuations are obtained from pricing service providers are fair valued. On these days, the foreign securities are characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant
Annual Report | 19
Notes to Financial Statements, Continued
Thornburg Core Growth Fund | September 30, 2017
observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs 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, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities* | ||||||||||||||||||||
Common Stock | $ | 620,960,059 | $ | 620,960,059 | $ | – | $ | – | ||||||||||||
Short Term Investments | 15,059,338 | 15,059,338 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 636,019,397 | $ | 636,019,397 | $ | – | $ | – | ||||||||||||
| * | 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, 2017, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
Management Fee Schedule
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.875 | % | |||
Next $500 million | 0.825 | ||||
Next $500 million | 0.775 | ||||
Next $500 million | 0.725 | ||||
Over $2 billion | 0.675 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.865% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $19,165 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $11,270 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $1,847 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A, Class C, Class I, Class R3, Class R4, and Class R5 shares of the Fund to obtain various shareholder and
20 | Annual Report
Notes to Financial Statements, Continued
Thornburg Core Growth Fund | September 30, 2017
distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I or Class R5 shares. The Advisor and Distributor each 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, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $126,308 for Class I shares, $171,271 for Class R3 shares, $33,515 for Class R4 shares, and $116,876 for Class R5 shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 9.7%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had no such transactions with affiliated funds.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 528,036 | $ | 16,129,664 | 492,618 | $ | 13,190,882 | ||||||||||
Shares issued to shareholders in | – | – | – | – | ||||||||||||
Shares repurchased | (1,824,517 | ) | (54,290,458 | ) | (2,413,586 | ) | (63,231,987 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (1,296,481 | ) | $ | (38,160,794 | ) | (1,920,968 | ) | $ | (50,041,105 | ) | ||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 156,108 | $ | 4,025,557 | 406,148 | $ | 9,771,822 | ||||||||||
Shares issued to shareholders in | – | – | – | – | ||||||||||||
Shares repurchased | (1,847,158 | ) | (48,397,816 | ) | (1,741,483 | ) | (40,573,317 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (1,691,050 | ) | $ | (44,372,259 | ) | (1,335,335 | ) | $ | (30,801,495 | ) | ||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 1,507,646 | $ | 48,394,315 | 927,799 | $ | 26,349,638 | ||||||||||
Shares issued to shareholders in | – | – | – | – | ||||||||||||
Shares repurchased | (1,350,791 | ) | (42,648,030 | ) | (3,162,309 | ) | (84,583,532 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | 156,855 | $ | 5,746,285 | (2,234,510 | ) | $ | (58,233,894 | ) | ||||||||
|
| |||||||||||||||
Annual Report | 21
Notes to Financial Statements, Continued
Thornburg Core Growth Fund | September 30, 2017
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 208,990 | $ | 6,187,881 | 286,391 | $ | 7,559,165 | ||||||||||
Shares issued to shareholders in | – | – | – | – | ||||||||||||
Shares repurchased | (737,733 | ) | (21,768,527 | ) | (1,003,594 | ) | (26,523,766 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (528,743 | ) | $ | (15,580,646 | ) | (717,203 | ) | $ | (18,964,601) | |||||||
|
| |||||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 86,518 | $ | 2,612,583 | 203,623 | $ | 5,252,801 | ||||||||||
Shares issued to shareholders in | – | – | – | – | ||||||||||||
Shares repurchased | (163,743 | ) | (4,871,059 | ) | (330,597 | ) | (8,718,348 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (77,225 | ) | $ | (2,258,476 | ) | (126,974 | ) | $ | (3,465,547) | |||||||
|
| |||||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 170,920 | $ | 5,460,302 | 173,654 | $ | 4,899,966 | ||||||||||
Shares issued to shareholders in | – | – | – | – | ||||||||||||
Shares repurchased | (529,696 | ) | (16,682,231 | ) | (519,703 | ) | (14,584,671 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (358,776 | ) | $ | (11,221,929 | ) | (346,049 | ) | $ | (9,684,705) | |||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $418,410,690 and $493,906,816, respectively.
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, 2017, 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 small- and mid-cap 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
22 | Annual Report
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Annual Report | 23
Thornburg Core Growth Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 28.22 | (0.24 | ) | 4.48 | 4.24 | – | – | – | $ | 32.46 | |||||||||||||||||||||||||||||
2016(b) | $ | 26.09 | (0.27 | ) | 2.40 | 2.13 | – | – | – | $ | 28.22 | |||||||||||||||||||||||||||||
2015(b) | $ | 26.44 | (0.26 | ) | (0.09 | ) | (0.35 | ) | – | – | – | $ | 26.09 | |||||||||||||||||||||||||||
2014(b) | $ | 24.35 | (0.28 | ) | 2.37 | 2.09 | – | – | – | $ | 26.44 | |||||||||||||||||||||||||||||
2013(b) | $ | 19.11 | (0.21 | ) | 5.45 | 5.24 | – | – | – | $ | 24.35 | |||||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 24.90 | (0.41 | ) | 3.94 | 3.53 | – | – | – | $ | 28.43 | |||||||||||||||||||||||||||||
2016 | $ | 23.20 | (0.41 | ) | 2.11 | 1.70 | – | – | – | $ | 24.90 | |||||||||||||||||||||||||||||
2015 | $ | 23.69 | (0.42 | ) | (0.07 | ) | (0.49 | ) | – | – | – | $ | 23.20 | |||||||||||||||||||||||||||
2014 | $ | 21.98 | (0.43 | ) | 2.14 | 1.71 | – | – | – | $ | 23.69 | |||||||||||||||||||||||||||||
2013 | $ | 17.38 | (0.34 | ) | 4.94 | 4.60 | – | – | – | $ | 21.98 | |||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 30.01 | (0.12 | ) | 4.78 | 4.66 | – | – | – | $ | 34.67 | |||||||||||||||||||||||||||||
2016 | $ | 27.64 | (0.17 | ) | 2.54 | 2.37 | – | – | – | $ | 30.01 | |||||||||||||||||||||||||||||
2015 | $ | 27.90 | (0.16 | ) | (0.10 | ) | (0.26 | ) | – | – | – | $ | 27.64 | |||||||||||||||||||||||||||
2014 | $ | 25.59 | (0.18 | ) | 2.49 | 2.31 | – | – | – | $ | 27.90 | |||||||||||||||||||||||||||||
2013 | $ | 19.99 | (0.12 | ) | 5.72 | 5.60 | – | – | – | $ | 25.59 | |||||||||||||||||||||||||||||
| CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 28.10 | (0.27 | ) | 4.47 | 4.20 | – | – | – | $ | 32.30 | |||||||||||||||||||||||||||||
2016 | $ | 26.01 | (0.29 | ) | 2.38 | 2.09 | – | – | – | $ | 28.10 | |||||||||||||||||||||||||||||
2015 | $ | 26.39 | (0.29 | ) | (0.09 | ) | (0.38 | ) | – | – | – | $ | 26.01 | |||||||||||||||||||||||||||
2014 | $ | 24.33 | (0.31 | ) | 2.37 | 2.06 | – | – | – | $ | 26.39 | |||||||||||||||||||||||||||||
2013 | $ | 19.11 | (0.22 | ) | 5.44 | 5.22 | – | – | – | $ | 24.33 | |||||||||||||||||||||||||||||
| CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 28.33 | (0.24 | ) | 4.50 | 4.26 | – | – | – | $ | 32.59 | |||||||||||||||||||||||||||||
2016 | $ | 26.19 | (0.27 | ) | 2.41 | 2.14 | – | – | – | $ | 28.33 | |||||||||||||||||||||||||||||
2015 | $ | 26.54 | (0.26 | ) | (0.09 | ) | (0.35 | ) | – | – | – | $ | 26.19 | |||||||||||||||||||||||||||
2014 | $ | 24.44 | (0.28 | ) | 2.38 | 2.10 | – | – | – | $ | 26.54 | |||||||||||||||||||||||||||||
2013 | $ | 19.18 | (0.20 | ) | 5.46 | 5.26 | – | – | – | $ | 24.44 | |||||||||||||||||||||||||||||
| CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 29.98 | (0.12 | ) | 4.78 | 4.66 | – | – | – | $ | 34.64 | |||||||||||||||||||||||||||||
2016 | $ | 27.61 | (0.17 | ) | 2.54 | 2.37 | – | – | – | $ | 29.98 | |||||||||||||||||||||||||||||
2015 | $ | 27.87 | (0.16 | ) | (0.10 | ) | (0.26 | ) | – | – | – | $ | 27.61 | |||||||||||||||||||||||||||
2014 | $ | 25.56 | (0.18 | ) | 2.49 | 2.31 | – | – | – | $ | 27.87 | |||||||||||||||||||||||||||||
2013 | $ | 19.97 | (0.12 | ) | 5.71 | 5.59 | – | – | – | $ | 25.56 | |||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
24 | Annual Report
Financial Highlights, Continued
Thornburg Core Growth Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| (0.79 | ) | 1.40 | 1.40 | 1.40 | 15.02 | 72.03 | $ | 187,062 | ||||||||||||||||||||||
| (1.00 | ) | 1.40 | 1.40 | 1.40 | 8.16 | 86.24 | $ | 199,178 | ||||||||||||||||||||||
| (0.93 | ) | 1.39 | 1.39 | 1.39 | (1.32 | ) | 96.02 | $ | 234,284 | |||||||||||||||||||||
| (1.06 | ) | 1.40 | 1.40 | 1.40 | 8.58 | 100.62 | $ | 277,099 | ||||||||||||||||||||||
| (1.01 | ) | 1.45 | 1.45 | 1.45 | 27.42 | 91.92 | $ | 279,483 | ||||||||||||||||||||||
| (1.56 | ) | 2.16 | 2.16 | 2.16 | 14.18 | 72.03 | $ | 130,165 | ||||||||||||||||||||||
| (1.76 | ) | 2.16 | 2.16 | 2.16 | 7.33 | 86.24 | $ | 156,115 | ||||||||||||||||||||||
| (1.69 | ) | 2.15 | 2.15 | 2.15 | (2.07 | ) | 96.02 | $ | 176,422 | |||||||||||||||||||||
| (1.81 | ) | 2.14 | 2.14 | 2.14 | 7.78 | 100.62 | $ | 200,664 | ||||||||||||||||||||||
| (1.76 | ) | 2.20 | 2.20 | 2.20 | 26.47 | 91.92 | $ | 182,999 | ||||||||||||||||||||||
| (0.37 | ) | 0.99 | 0.99 | 1.05 | 15.53 | 72.03 | $ | 234,922 | ||||||||||||||||||||||
| (0.59 | ) | 0.99 | 0.99 | 1.05 | 8.57 | 86.24 | $ | 198,658 | ||||||||||||||||||||||
| (0.53 | ) | 0.99 | 0.99 | 1.05 | (0.93 | ) | 96.02 | $ | 244,691 | |||||||||||||||||||||
| (0.65 | ) | 0.99 | 0.99 | 1.03 | 9.03 | 100.62 | $ | 251,122 | ||||||||||||||||||||||
| (0.55 | ) | 0.99 | 0.99 | 1.02 | 28.01 | 91.92 | $ | 191,358 | ||||||||||||||||||||||
| (0.90 | ) | 1.50 | 1.50 | 1.84 | 14.95 | 72.03 | $ | 47,064 | ||||||||||||||||||||||
| (1.10 | ) | 1.50 | 1.50 | 1.81 | 8.04 | 86.24 | $ | 55,809 | ||||||||||||||||||||||
| (1.05 | ) | 1.50 | 1.50 | 1.79 | (1.44 | ) | 96.02 | $ | 70,310 | |||||||||||||||||||||
| (1.16 | ) | 1.50 | 1.50 | 1.80 | 8.47 | 100.62 | $ | 90,788 | ||||||||||||||||||||||
| (1.06 | ) | 1.50 | 1.50 | 1.79 | 27.32 | 91.92 | $ | 95,545 | ||||||||||||||||||||||
| (0.80 | ) | 1.40 | 1.40 | 2.00 | 15.04 | 72.03 | $ | 5,330 | ||||||||||||||||||||||
| (1.00 | ) | 1.40 | 1.40 | 1.86 | 8.17 | 86.24 | $ | 6,821 | ||||||||||||||||||||||
| (0.94 | ) | 1.40 | 1.40 | 1.82 | (1.32 | ) | 96.02 | $ | 9,632 | |||||||||||||||||||||
| (1.06 | ) | 1.40 | 1.40 | 1.77 | 8.59 | 100.62 | $ | 11,306 | ||||||||||||||||||||||
| (0.96 | ) | 1.40 | 1.40 | 1.79 | 27.42 | 91.92 | $ | 10,277 | ||||||||||||||||||||||
| (0.38 | ) | 0.99 | 0.99 | 1.34 | 15.54 | 72.03 | $ | 32,197 | ||||||||||||||||||||||
| (0.59 | ) | 0.99 | 0.99 | 1.30 | 8.58 | 86.24 | $ | 38,629 | ||||||||||||||||||||||
| (0.54 | ) | 0.99 | 0.99 | 1.24 | (0.93 | ) | 96.02 | $ | 45,126 | |||||||||||||||||||||
| (0.65 | ) | 0.99 | 0.99 | 1.28 | 9.04 | 100.62 | $ | 61,818 | ||||||||||||||||||||||
| (0.55 | ) | 0.99 | 0.99 | 1.12 | 27.99 | 91.92 | $ | 62,146 | ||||||||||||||||||||||
Annual Report | 25
Report of Independent Registered Public Accounting Firm
Thornburg Core Growth Fund | September 30, 2017
To the Trustees and Shareholders of
the 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 the Thornburg Core Growth Fund (the “Fund”) as of September 30, 2017, 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 as of September 30, 2017 by correspondence with the custodian, brokers, and transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
26 | Annual Report
Thornburg Core Growth Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
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 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,084.20 | $ | 7.28 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.08 | $ | 7.05 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,080.20 | $ | 11.25 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.26 | $ | 10.89 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,086.50 | $ | 5.18 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | |||||||||
| CLASS R3 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,083.90 | $ | 7.82 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.56 | $ | 7.57 | |||||||||
| CLASS R4 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,084.50 | $ | 7.30 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.06 | $ | 7.07 | |||||||||
| CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,086.60 | $ | 5.18 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.39%; C: 2.16%; 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. |
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.
Annual Report | 27
Thornburg Core Growth Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
28 | Annual Report
Trustees and Officers, Continued
Thornburg Core Growth Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 29
Trustees and Officers, Continued
Thornburg Core Growth Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
30 | Annual Report
Thornburg Core Growth Fund | September 30, 2017 (Unaudited)
PORTFOLIO PROXY VOTING
Policies and Procedures:
The Trust has delegated to Thornburg Investment Management, Inc. (the “Advisor”) voting decisions respecting proxies for the Fund’s voting securities. The Advisor makes voting decisions in accordance with its Proxy Voting Policy and Procedures. A description of the Policy and Procedures is available (i) without charge, upon request, by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg website at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.
Information regarding how proxies were voted is available on or before August 31 of each year for the twelve months ending the preceding June 30. This information is available (i) without charge, upon request by calling the Advisor toll-free at 1-800-847-0200, (ii) on the Thornburg website at www.thornburg.com, and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the Securities and Exchange Commission schedules of its portfolio holdings on Form N-Q for the first and third quarters of each fiscal year. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov, or may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund also makes this information available on its website at www.thornburg. com/download or upon request by calling 1-800-847-0200.
STATEMENT RESPECTING RENEWAL OF INVESTMENT ADVISORY AGREEMENT
Thornburg Investment Management, Inc. (the “Advisor”) provides investment management services to Thornburg Core Growth Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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 considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements,
Annual Report | 31
Other Information, Continued
Thornburg Core Growth Fund | September 30, 2017 (Unaudited)
the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 mutual fund category created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, (6) comparison of the Fund’s annualized return since inception to the Fund’s benchmark index, and (7) comparative measures of estimated earnings growth, and risk and return statistics. The Trustees generally attach additional significance to the performance from the perspective of longer term shareholders. The Trustees had previously asked for and received explanations from the Advisor respecting the reasons for the Fund’s underperformance relative to some measures in certain periods, and considered the Advisor’s past success in rectifying underperformance by other funds. The Trustees found the explanations satisfactory, and noted in this year’s evaluation the improvement in the Fund’s relative investment performance in the year since their receipt of those explanations. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole were satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for two Fund share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been considered by the Trustees showed that the Fund’s advisory fee level was higher than the median and average fee levels for the fund category, the level of total expense for one share class of the Fund was higher than the median and average expense levels for the category, and that the level of total expense for a second share class was comparable to the median and lower than the average levels for the category. Peer group data showed that the Fund’s advisory fee level was higher than the median of each of two peer groups but that this level was comparable to other funds in the peer groups. The total expense level of one share class was higher than the median of its peer group and at the top of its peer group, while a second share class was higher than the median of its peer group but comparable to other funds in the peer group. The Trustees did not find the differences significant in view of their findings and conclusions respecting 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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
32 | Annual Report
Other Information, Continued
Thornburg Core Growth Fund | September 30, 2017 (Unaudited)
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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The information provided to the Trustees demonstrated 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 33
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
34 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 35
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
Annual Report September 30, 2017 THORNBURG INTERNATIONAL GROWTH FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg International Growth Fund
Annual Report | September 30, 2017
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| 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 | ||||||||
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.
Investments carry risks, including possible loss of principal. Additional 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- and mid-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 bank deposits or guaranteed by a bank or any other entity.
Annual Report | 3
Thornburg International Growth Fund | September 30, 2017 (Unaudited)
October 16, 2017
Dear Fellow Shareholder:
For the fiscal year ended September 30, 2017, Thornburg International Growth Fund returned 24.12% for Class A shares (without sales charge), outperforming its benchmark, the MSCI All Country World ex-U.S. Growth Index, which returned 17.68%. On September 30, 2017, the net asset value per Class A share was $23.85.
We are pleased to deliver positive returns on both an absolute and relative basis this fiscal year. It has been an interesting year. It was marked by a surprising presidential election outcome in the U.S., rising U.S. interest rates, a technology selloff, concerns of rising global populism, a French election result that markets cheered and, more recently, the most synchronized period of global economic expansion we have seen since the financial crisis. A wide range of macro-economic indicators suggest a healthy backdrop for global growth, and we have seen this translate into improving growth prospects for many corporates as well. Both domestic and international indices have enjoyed positive returns, but with growth dynamics stronger internationally, we saw international equities outperform U.S. equities for the first time since 2012 and only the second time since 2009.
We are also pleased that during this period we marked the 10th anniversary of the Fund on February 1, 2017. Reflecting upon the past 10 years, it has been a period where domestic indices have considerably outperformed their international peers. Despite a less than favorable backdrop, as of September 30, 2017, Thornburg International Growth Fund has been able to deliver performance of 8.00% on an annualized basis since inception (A shares without sales charge), exceeding not only our benchmark’s return of 3.38% but also the 7.63% return for the S&P 500. As we have seen over long periods of time, leadership tends to ebb and flow between markets. With international economies in the midst of a broad-based upswing and perhaps the early phases of an extended expansion, we believe the portfolio is well positioned and remain excited about the long-term prospects of the stocks we own.
During the year, some of the top performing sectors for the Fund were information technology, consumer discretionary and health care. Technology was the best performing sector in the benchmark and the Fund saw a tailwind to returns from being overweight in it. Consumer staples was a relatively poor performing sector; however, we benefitted as we were not only underweight, but also realized positive underlying stock selection. Within health care, the Fund was about equal weight with the benchmark but effective stock selection helped drive favorable returns here as well. Conversely, one of our worst-performing sectors was industrials, but it was a relatively modest headwind. Geographically, we saw good results out of the United Kingdom and the Eurozone. Japan and Latin America were slight laggards for the period.
A weaker U.S. dollar over the period augmented the returns of our non-U.S. holdings. We were largely unhedged foreign currencies during the year, thus we captured nearly all of this positive benefit. We employ currency hedging as a risk mitigation tool rather than as a means to actively enhance returns. Generally our default
approach is not to hedge currencies, but we will engage in hedging if the cost is low and if we believe it serves to reduce portfolio risk.
Contributors and Detractors
Leading contributors to performance for the period included Paysafe Group plc, Wirecard AG, Worldpay Group plc, Galaxy Entertainment Group Ltd. and Tencent Holdings Ltd.
Paysafe is an online payments processor and mobile wallet operator. It recently accepted an all-cash offer from a consortium of private equity bidders (Blackstone Group and CVC Capital) to be acquired. The deal is pending customary approval conditions, but we anticipate closing within the next quarter or two.
Wirecard is a payments company based in Germany that focuses largely on online transactions. The stock has been a long-term holding of the Fund and continues to benefit from the secular tailwind of payments activity moving from offline toward online and digital forms. Recent consolidation in the European payments space has led to an upward re-rating of the valuation multiple over the past year.
Worldpay is a U.K.-based online payments processor. During the year, U.S. payments company Vantiv announced its intention to acquire Worldpay in a combined cash and stock deal at an approximately 30% premium.
Galaxy Entertainment is a leading casino operator in Macau. A resurgence in visitation to the region has led to an increase in gross gaming revenues. In recent years, Macanese operators added a number of new resorts and attractions to the market, including Galaxy. Chinese tourists were attracted to the variety and quality of Galaxy’s newest property, allowing it to realize gains in market share and strong earnings growth.
Tencent is the largest online gaming and social media platform in China. Solid execution on the gaming side of the business, including successful new game launches, as well as impressive advertising revenue growth, have resulted in strong stock performance. We see Tencent as a wide-moat business whose success is due to its highly integrated platform of online services and its ability to grow and monetize its user base by providing rich and tailored experiences.
Primary detractors to performance this period were Rakuten Inc., Line Corp., AmorePacific Corp., Allergan plc and Domino’s Pizza Enterprises Ltd.
Rakuten is an internet services company based in Japan with businesses spanning e-commerce, online video, mobile messaging and fintech. Rakuten reported a series of weaker-than-expected margins in their domestic e-commerce business, signifying increased competitive pressure. The worsening fundamental outlook for the company led us to exit the position.
Line is the leading mobile messaging platform in Japan, Thailand and Taiwan. The stock fell as revenues failed to meet consensus expectations for multiple quarters due to a combination of weakness in the games business and slower than expected monetization of the ads segment.
4 | Annual Report
Letter to Shareholders, Continued
Thornburg International Growth Fund | September 30, 2017 (Unaudited)
AmorePacific is a Korean cosmetics and skin care products company. At the beginning of the fiscal year, the Chinese government restricted tourism travel to South Korea as a retaliatory move for the deployment of a U.S.-backed THAAD missile system on South Korean soil. With the majority of its revenues generated from Chinese consumers, we believed the restriction would greatly reduce earnings power and sold the stock.
Allergan is an Ireland-domiciled, global pharmaceuticals company. More-rapid-than-expected volume erosion of some of their legacy products caused the company to miss earnings estimates. We decided to redeploy our capital elsewhere and exited the holding.
Domino’s Pizza Enterprises is based in Australia, but operates and franchises restaurants in a variety of other countries as well, including New Zealand, France, Japan and Germany. The stock declined as same-store-sales growth moderated, missing company guidance. Although disappointed by recent results, we believe the long-term opportunity remains attractive as Domino’s Pizza remains under penetrated in Europe with the potential to roughly triple the store base over time. We also like that the business is capital light, highly cash generative and online ordering initiatives that have been successful in boosting same-store-sales growth in other parts of the world have yet to be fully embraced by their consumers.
Over the life of the Fund we have managed through various market cycles and have consistently adhered to a repeatable process and philosophy that employs rigorous, bottom-up fundamental analysis and seeks to invest in great businesses that are undervalued by the markets for their long-term growth potential. This means we tend to favor quality growth stocks, smaller capitalization ranges, long-term secular themes and idiosyncratic opportunities. This approach results in a less correlated, high active share portfolio that has delivered in the past, and we believe can continue to deliver, compelling risk-adjusted returns.
We thank you for investing alongside us in Thornburg International Growth Fund.
Sincerely,
|  | |||
Greg Dunn Managing Director Portfolio Manager | | Sean Koung Sun,CFA Managing Director Portfolio Manager |
|
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
Annual Report | 5
Thornburg International Growth Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
Class A Shares (Incep: 2/1/07) | |||||||||||||||||||||||||
Without sales charge | 24.12% | 9.60% | 10.36% | 6.16% | 8.00% | ||||||||||||||||||||
With sales charge | 18.51% | 7.93% | 9.35% | 5.67% | 7.54% | ||||||||||||||||||||
Class C Shares (Incep: 2/1/07) | |||||||||||||||||||||||||
Without sales charge | 23.22% | 8.77% | 9.52% | 5.42% | 7.24% | ||||||||||||||||||||
With sales charge | 22.22% | 8.77% | 9.52% | 5.42% | 7.24% | ||||||||||||||||||||
Class I Shares (Incep: 2/1/07) | 24.66% | 10.05% | 10.80% | 6.68% | 8.55% | ||||||||||||||||||||
Class R3 Shares (Incep: 2/1/08) | 24.07% | 9.51% | 10.25% | - | 6.86% | ||||||||||||||||||||
Class R4 Shares (Incep: 2/1/08) | 24.19% | 9.61% | 10.37% | - | 6.97% | ||||||||||||||||||||
Class��R5 Shares (Incep: 2/1/08) | 24.68% | 10.05% | 10.80% | - | 7.39% | ||||||||||||||||||||
Class R6 Shares (Incep: 2/1/13) | 24.82% | 10.16% | - | - | 9.70% | ||||||||||||||||||||
MSCI AC World ex-U.S. Growth Index (Since 2/1/07) | 17.68% | 6.43% | 7.87% | 1.89% | 3.38% | ||||||||||||||||||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. 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 sales charge for Class I, R3, R4, R5, and R6 shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses before any fee waivers or expense reimbursements are as follows: A shares, 1.39%; C shares, 2.15%; I shares, 1.00%; R3 shares, 2.04%; R4 shares, 1.68%; R5 shares, 1.21%; R6 shares, 1.39%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: I shares, 0.99%; R3 shares, 1.50%; R4 shares, 1.40%; R5 shares, 0.99%; R6 shares, 0.89%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus.
Glossary
The MSCI All Country (AC) World ex-U.S. Growth Index is a market capitalization weighted index that includes growth companies in developed and emerging markets throughout the world, excluding the United States.
The S&P 500 Index is an unmanaged broad measure of the U.S. stock market.
The performance of any index is not indicative of the performance of any particular investment. 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.
Active Share – A measure of the percentage of stock holdings in a manager’s portfolio that differ from the benchmark index.
6 | Annual Report
Thornburg International Growth Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
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 depositary 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.
MARKET CAPITALIZATION EXPOSURE
BASKET STRUCTURE
TOP TEN EQUITY HOLDINGS
| Paysafe Group plc | 4.4% | ||||
| Bayer AG | 3.3% | ||||
| Worldpay Group plc | 3.0% | ||||
| Wirecard AG | 2.8% | ||||
| Galaxy Entertainment Group Ltd. | 2.8% | ||||
| MasterCard, Inc. | 2.8% | ||||
| Domino’s Pizza Group plc | 2.5% | ||||
| Fresenius Medical Care AG & Co. | 2.4% | ||||
| YOOX S.p.A | 2.3% | ||||
| Nielsen Holdings plc | 2.2% |
There is no guarantee that the Fund will meet its investment objectives.
All portfolio information is subject to change. Charts may not add up to 100% due to rounding.
SECTOR EXPOSURE
| Information Technology | 31.2% | ||||
| Consumer Discretionary | 22.8% | ||||
| Health Care | 13.3% | ||||
| Consumer Staples | 11.4% | ||||
| Financials | 5.9% | ||||
| Industrials | 5.4% | ||||
| Energy | 2.0% | ||||
| Other Assets Less Liabilities | 8.0% |
TOP TEN INDUSTRY GROUPS
| Software & Services | 30.2% | ||||
| Consumer Services | 12.0% | ||||
| Retailing | 10.7% | ||||
| Food, Beverage & Tobacco | 8.8% | ||||
| Pharma, Biotech & Life Sciences | 7.2% | ||||
| Health Care Equipment & Services | 6.0% | ||||
| Commercial & Professional Services | 5.4% | ||||
| Diversified Financials | 3.8% | ||||
| Banks | 2.1% | ||||
| Energy | 2.0% |
COUNTRY EXPOSURE*
(percent of equity holdings)
| United Kingdom | 26.0% | ||||
| China | 13.3% | ||||
| Germany | 11.4% | ||||
| France | 9.2% | ||||
| United States | 6.6% | ||||
| Japan | 3.6% | ||||
| Netherlands | 3.5% | ||||
| Ireland | 3.4% | ||||
| Mexico | 3.2% | ||||
| Sweden | 3.0% | ||||
| India | 2.8% | ||||
| Australia | 2.6% | ||||
| Italy | 2.6% | ||||
| Russia | 1.9% | ||||
| Brazil | 1.8% | ||||
| Spain | 1.8% | ||||
| Macao | 1.7% | ||||
| Denmark | 1.1% | ||||
| Costa Rica | 0.7% |
| * | The country assignment 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. |
Annual Report | 7
Thornburg International Growth Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
| COMMON STOCK — 91.75% | ||||||||||||
BANKS — 2.10% | ||||||||||||
Banks — 1.14% | ||||||||||||
ING Groep N.V. | 880,530 | $ | 16,234,900 | |||||||||
Thrifts & Mortgage Finance — 0.96% | ||||||||||||
Housing Development Finance Corp. Ltd. | 516,469 | 13,680,657 | ||||||||||
|
| |||||||||||
| 29,915,557 | ||||||||||||
|
| |||||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 5.41% | ||||||||||||
Commercial Services & Supplies — 1.89% | ||||||||||||
Edenred | 993,577 | 27,009,108 | ||||||||||
Professional Services — 3.52% | ||||||||||||
Bureau Veritas SA | 718,847 | 18,551,137 | ||||||||||
Nielsen Holdings plc | 763,800 | 31,659,510 | ||||||||||
|
| |||||||||||
| 77,219,755 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 12.01% | ||||||||||||
Hotels, Restaurants & Leisure — 12.01% | ||||||||||||
Alsea S.A.B. de C.V. | 3,337,630 | 12,313,124 | ||||||||||
Domino’s Pizza Enterprises Ltd. | 237,272 | 8,527,841 | ||||||||||
Domino’s Pizza Group plc | 8,488,756 | 35,285,026 | ||||||||||
Evolution Gaming Group AB | 196,407 | 12,515,222 | ||||||||||
Galaxy Entertainment Group Ltd. | 5,684,834 | 40,025,842 | ||||||||||
Merlin Entertainments plc | 3,064,462 | 18,293,910 | ||||||||||
MGM China Holdings Ltd. | 9,144,400 | 21,913,970 | ||||||||||
Sands China Ltd. | 4,319,400 | 22,477,292 | ||||||||||
|
| |||||||||||
| 171,352,227 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 3.80% | ||||||||||||
Capital Markets — 3.80% | ||||||||||||
Hargreaves Lansdown plc | 674,929 | 13,385,186 | ||||||||||
Japan Exchange Group, Inc. | 1,087,013 | 19,233,440 | ||||||||||
St. James’s Place plc | 1,406,706 | 21,601,930 | ||||||||||
|
| |||||||||||
| 54,220,556 | ||||||||||||
|
| |||||||||||
ENERGY — 2.03% | ||||||||||||
Oil, Gas & Consumable Fuels — 2.03% | ||||||||||||
Royal Dutch Shell plc | 957,900 | 28,948,880 | ||||||||||
|
| |||||||||||
| 28,948,880 | ||||||||||||
|
| |||||||||||
FOOD & STAPLES RETAILING — 0.66% | ||||||||||||
Food & Staples Retailing — 0.66% | ||||||||||||
PriceSmart, Inc. | 105,586 | 9,423,551 | ||||||||||
|
| |||||||||||
| 9,423,551 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 8.77% | ||||||||||||
Beverages — 2.03% | ||||||||||||
Fomento Economico Mexicano SAB de CV ADR | 304,033 | 29,044,272 | ||||||||||
Food Products — 3.28% | ||||||||||||
Danone SA | 272,601 | 21,383,566 | ||||||||||
Kerry Group plc | 264,034 | 25,367,511 | ||||||||||
Tobacco — 3.46% | ||||||||||||
British American Tobacco plc | 423,071 | 26,486,263 | ||||||||||
ITC Ltd. | 5,784,561 | 22,838,921 | ||||||||||
|
| |||||||||||
| 125,120,533 | ||||||||||||
|
| |||||||||||
8 | Annual Report
Schedule of Investments, Continued
Thornburg International Growth Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 6.03% | ||||||||||||
Health Care Equipment & Supplies — 3.68% | ||||||||||||
Coloplast A/S | 175,368 | $ | 14,232,765 | |||||||||
ConvaTec Ltd. | 4,872,206 | 17,882,254 | ||||||||||
Essilor International SA | 164,500 | 20,365,769 | ||||||||||
Health Care Providers & Services — 2.35% | ||||||||||||
Fresenius Medical Care AG & Co. | 343,373 | 33,590,771 | ||||||||||
|
| |||||||||||
| 86,071,559 | ||||||||||||
|
| |||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 1.93% | ||||||||||||
Personal Products — 1.93% | ||||||||||||
KOSE Corp. | 240,100 | 27,504,012 | ||||||||||
|
| |||||||||||
| 27,504,012 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 7.22% | ||||||||||||
Biotechnology — 3.00% | ||||||||||||
| a | Alkermes plc | 383,644 | 19,504,461 | |||||||||
Grifols S.A. | 803,110 | 23,397,682 | ||||||||||
Pharmaceuticals — 4.22% | ||||||||||||
Bayer AG | 345,827 | 47,126,922 | ||||||||||
Yunnan Baiyao Group Co., Ltd. | 958,969 | 13,093,648 | ||||||||||
|
| |||||||||||
| 103,122,713 | ||||||||||||
|
| |||||||||||
RETAILING — 10.72% | ||||||||||||
Internet & Direct Marketing Retail — 8.89% | ||||||||||||
| a | ASOS plc | 227,309 | 18,138,568 | |||||||||
| a | Boozt AB | 1,524,227 | 13,895,058 | |||||||||
| a | Ctrip.com International, Ltd. ADR | 345,331 | 18,212,757 | |||||||||
| a | priceline.com, Inc. | 8,364 | 15,312,978 | |||||||||
| a | YOOX S.p.A | 852,698 | 33,428,862 | |||||||||
| a | Zalando SE | 556,411 | 27,883,188 | |||||||||
Multiline Retail — 1.83% | ||||||||||||
B&M European Value Retail S.A. | 5,036,820 | 26,160,425 | ||||||||||
|
| |||||||||||
| 153,031,836 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 30.17% | ||||||||||||
Information Technology Services — 14.65% | ||||||||||||
Cielo S.A. | 3,373,806 | 23,414,191 | ||||||||||
MasterCard, Inc. | 282,534 | 39,893,801 | ||||||||||
| a | Paysafe Group plc | 7,980,596 | 62,292,514 | |||||||||
Wirecard AG | 442,606 | 40,494,425 | ||||||||||
Worldpay Group plc | 7,871,677 | 42,930,532 | ||||||||||
Internet Software & Services — 15.52% | ||||||||||||
| a | Alibaba Group Holding Ltd. ADR | 153,514 | 26,513,403 | |||||||||
Auto Trader Group plc | 5,868,976 | 30,867,865 | ||||||||||
| a | Baidu, Inc. ADR | 119,590 | 29,621,247 | |||||||||
carsales.com Ltd. | 2,572,600 | 25,890,261 | ||||||||||
| a | Criteo SA ADR | 480,057 | 19,922,366 | |||||||||
| a | Just Eat plc | 3,023,351 | 27,082,863 | |||||||||
| a | NetEnt AB | 1,619,085 | 12,563,220 | |||||||||
Tencent Holdings Ltd. | 548,000 | 23,585,130 | ||||||||||
| a | Yandex NV | 774,051 | 25,504,980 | |||||||||
|
| |||||||||||
| 430,576,798 | ||||||||||||
|
| |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.90% | ||||||||||||
Electronic Equipment, Instruments & Components — 0.90% | ||||||||||||
Ingenico S.A. | 135,068 | 12,802,881 | ||||||||||
|
| |||||||||||
| 12,802,881 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCK (Cost $977,622,388) | 1,309,310,858 | |||||||||||
|
| |||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg International Growth Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
| SHORT TERM INVESTMENTS — 7.95% | ||||||||||||
| b | Thornburg Capital Management Fund | 11,340,745 | $ | 113,407,454 | ||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $113,407,454) | 113,407,454 | |||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 99.70% (Cost $1,091,029,842) | $ | 1,422,718,312 | ||||||||||
| OTHER ASSETS LESS LIABILITIES — 0.30% | 4,340,338 | |||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 1,427,058,650 | ||||||||||
|
| |||||||||||
Footnote Legend
| a | Non-income producing. |
| b | Investment in Affiliates - Shown below are holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940, including companies for which the Fund’s holding represented 5% or more of the company’s voting securities, and a series of the Thornburg Investment Trust in which the Fund invested for cash management purposes during the period: |
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2017 | MARKET VALUE SEPTEMBER 30, 2017 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | ||||||||||||||||||||||||||||||||||||||
Thornburg Capital Management Fund | 14,196,332 | 60,329,012 | 63,184,599 | 11,340,745 | $ | 113,407,454 | $ | 540,076 | $ | – | $ | – | ||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 7.95% of net assets | $ | 113,407,454 | $ | 540,076 | $ | – | $ | – | ||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ADR | American Depositary Receipt |
See notes to financial statements.
10 | Annual Report
Statement of Assets and Liabilities
Thornburg International Growth Fund | September 30, 2017
ASSETS |
| |||
Investments at value (Note 3) |
| |||
Non-affiliated issuers (cost $977,622,388) | $ | 1,309,310,858 | ||
Non-controlled affiliated issuer (cost $113,407,454) | 113,407,454 | |||
Cash denominated in foreign currency (cost $1,047,691) | 1,048,836 | |||
Receivable for fund shares sold | 3,515,542 | |||
Dividends receivable | 1,499,491 | |||
Dividend and interest reclaim receivable | 857,656 | |||
Prepaid expenses and other assets | 41,310 | |||
|
| |||
Total Assets | 1,429,681,147 | |||
|
| |||
LIABILITIES |
| |||
Payable for investments purchased | 1,506 | |||
Payable for fund shares redeemed | 920,812 | |||
Payable to investment advisor and other affiliates (Note 4) | 1,068,146 | |||
Deferred taxes payable (Note 2) | 119,703 | |||
Accounts payable and accrued expenses | 511,013 | |||
Dividends payable | 1,317 | |||
|
| |||
Total Liabilities | 2,622,497 | |||
|
| |||
NET ASSETS | $ | 1,427,058,650 | ||
|
| |||
NET ASSETS CONSIST OF |
| |||
Undistributed net investment income | $ | 358,459 | ||
Net unrealized appreciation on investments | 331,596,127 | |||
Accumulated net realized gain (loss) | 38,243,819 | |||
Net capital paid in on shares of beneficial interest | 1,056,860,245 | |||
|
| |||
| $ | 1,427,058,650 | |||
|
| |||
Annual Report | 11
Statement of Assets and Liabilities, Continued
Thornburg International Growth Fund | September 30, 2017
NET ASSET VALUE |
| |||
Class A Shares: |
| |||
Net asset value and redemption price per share | $ | 23.85 | ||
Maximum sales charge, 4.50% of offering price | 1.12 | |||
|
| |||
Maximum offering price per share | $ | 24.97 | ||
|
| |||
Class C Shares: |
| |||
Net asset value and offering price per share* | $ | 22.50 | ||
|
| |||
Class I Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 24.48 | ||
|
| |||
Class R3 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 23.66 | ||
|
| |||
Class R4 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 23.73 | ||
|
| |||
Class R5 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 24.54 | ||
|
| |||
Class R6 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 24.59 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
12 | Annual Report
Thornburg International Growth Fund | Year Ended September 30, 2017
INVESTMENT INCOME |
| |||
Dividend income |
| |||
Non-affiliated issuers (net of foreign taxes withheld of $1,078,613) | $ | 18,195,003 | ||
Non-controlled affiliated issuer | 540,076 | |||
|
| |||
Total Income | 18,735,079 | |||
|
| |||
EXPENSES |
| |||
Investment advisory fees (Note 4) | 10,645,012 | |||
Administration fees (Note 4) | ||||
Class A Shares | 153,975 | |||
Class C Shares | 107,342 | |||
Class I Shares | 479,736 | |||
Class R3 Shares | 13,113 | |||
Class R4 Shares | 38,924 | |||
Class R5 Shares | 24,694 | |||
Class R6 Shares | 2,668 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 306,690 | |||
Class C Shares | 857,132 | |||
Class R3 Shares | 52,470 | |||
Class R4 Shares | 77,762 | |||
Transfer agent fees | ||||
Class A Shares | 177,050 | |||
Class C Shares | 107,225 | |||
Class I Shares | 808,568 | |||
Class R3 Shares | 42,252 | |||
Class R4 Shares | 161,047 | |||
Class R5 Shares | 153,206 | |||
Class R6 Shares | 2,891 | |||
Registration and filing fees | ||||
Class A Shares | 27,204 | |||
Class C Shares | 24,302 | |||
Class I Shares | 40,443 | |||
Class R3 Shares | 16,735 | |||
Class R4 Shares | 16,733 | |||
Class R5 Shares | 17,297 | |||
Class R6 Shares | 18,451 | |||
Custodian fees (Note 2) | 332,156 | |||
Professional fees | 93,545 | |||
Accounting fees (Note 4) | 40,184 | |||
Trustee fees | 51,794 | |||
Other expenses | 199,240 | |||
|
| |||
Total Expenses | 15,089,841 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (648,350 | ) | ||
Investment advisory fees waived by investment advisor (Note 4) | (98,031 | ) | ||
|
| |||
Net Expenses | 14,343,460 | |||
|
| |||
Net Investment Income | $ | 4,391,619 | ||
|
| |||
Annual Report | 13
Statement of Operations, Continued
Thornburg International Growth Fund | Year Ended September 30, 2017
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on: |
| |||
Non-affiliated issuer investments (net of realized capital gain taxes paid of $51,236) | $ | 53,728,596 | ||
Forward currency contracts (Note 7) | 1,370,067 | |||
Foreign currency transactions | (846,556 | ) | ||
|
| |||
| 54,252,107 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: |
| |||
Non-affiliated issuer investments (net of change in deferred taxes payable of $1,778,028) | 206,670,164 | |||
Forward currency contracts (Note 7) | 760,089 | |||
Foreign currency translations | 42,492 | |||
|
| |||
| 207,472,745 | ||||
|
| |||
Net Realized and Unrealized Gain | 261,724,852 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 266,116,471 | ||
|
| |||
See notes to financial statements.
14 | Annual Report
Statements of Changes in Net Assets
Thornburg International Growth Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM |
| |||||||||
OPERATIONS |
| |||||||||
Net investment income | $ | 4,391,619 | $ | 4,511,895 | ||||||
Net realized gain (loss) on investments, forward currency contracts, foreign currency transactions, and capital gain taxes | 54,252,107 | 24,307,955 | ||||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations, and deferred taxes | 207,472,745 | 86,211,614 | ||||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 266,116,471 | 115,031,464 | ||||||||
DIVIDENDS TO SHAREHOLDERS |
| |||||||||
From net investment income |
| |||||||||
Class A Shares | (33,259 | ) | (112,705 | ) | ||||||
Class I Shares | (2,772,232 | ) | (4,259,877 | ) | ||||||
Class R3 Shares | – | (5,726 | ) | |||||||
Class R4 Shares | (1,560 | ) | (31,291 | ) | ||||||
Class R5 Shares | (109,111 | ) | (283,521 | ) | ||||||
Class R6 Shares | (39,079 | ) | (28,260 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) |
| |||||||||
Class A Shares | (68,891,176 | ) | (65,549,535 | ) | ||||||
Class C Shares | (24,825,716 | ) | (16,163,708 | ) | ||||||
Class I Shares | (105,022,196 | ) | (128,357,590 | ) | ||||||
Class R3 Shares | (4,722,550 | ) | (3,755,415 | ) | ||||||
Class R4 Shares | (29,943,271 | ) | (146,856 | ) | ||||||
Class R5 Shares | (29,956,856 | ) | (6,042,851 | ) | ||||||
Class R6 Shares | 2,247,588 | 1,241,489 | ||||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | 2,047,053 | (108,464,382 | ) | |||||||
NET ASSETS |
| |||||||||
Beginning of Year | 1,425,011,597 | 1,533,475,979 | ||||||||
|
| |||||||||
End of Year | $ | 1,427,058,650 | $ | 1,425,011,597 | ||||||
|
| |||||||||
Undistributed (distribution in excess of) net investment income | $ | 358,459 | $ | (365,815 | ) | |||||
See notes to financial statements.
Annual Report | 15
Thornburg International Growth Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg International Growth Fund (the “Fund”) is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on February 1, 2007. The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of twenty-one 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 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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: 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. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
16 | Annual Report
Notes to Financial Statements, Continued
Thornburg International Growth Fund | September 30, 2017
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
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 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.
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 (depreciation) from investments.
Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and 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 (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 1,092,828,881 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 337,292,608 | |||
Gross unrealized depreciation on a tax basis | (7,403,177 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 329,889,431 | |||
|
|
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg International Growth Fund | September 30, 2017
Temporary book to tax adjustments to the cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of outstanding wash sale losses.
During the year ended September 30, 2017, the Fund utilized $8,924,572 of short-term capital loss carryforwards generated after September 30, 2011.
In order to account for permanent book to tax differences, the Fund decreased undistributed net investment income by $712,104, decreased accumulated net realized gain by $4,621,102, and increased net capital paid in on shares of beneficial interest by $5,333,206. Reclassifications have no impact upon the net asset value of the Fund and resulted primarily from foreign currency gains (losses), disposition of passive foreign investment company (“PFIC”) investment, foreign capital gain taxes, and equalization of undistributed capital gains to shareholders.
At September 30, 2017, the Fund had $358,459 of undistributed tax basis ordinary investment income and $40,042,858 of undistributed tax basis capital gains.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Ordinary income | $ | 2,955,241 | $ | 4,721,380 | ||||||
Capital gains | – | – | ||||||||
|
| |||||||||
Total | $ | 2,955,241 | $ | 4,721,380 | ||||||
|
| |||||||||
Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assessment of a jurisdiction’s legal obligation to pay reclaims, the jurisdiction’s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain.
Deferred Foreign Capital Gain 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.
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg International Growth Fund | September 30, 2017
that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund’s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date.
In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment’s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data.
Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Quotations for foreign investments expressed in foreign currency amounts are converted to U.S. dollar equivalents using a foreign exchange quotation from a third party service provider at the time of valuation. Foreign investments held by the Fund may be traded on days and at times when the Fund is not open for business. Consequently, the value of Fund investments may be significantly affected on days when shareholders cannot purchase or sell Fund shares. Futures contracts and other financial and derivative instruments traded on an exchange are valued at the latest published price for the instrument on its primary exchange. Listed options are valued at the last bid price.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
On days when market volatility thresholds established by the Audit Committee are exceeded, foreign securities for which valuations are obtained from pricing service providers are fair valued. On these days, the foreign securities are characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
Annual Report | 19
Notes to Financial Statements, Continued
Thornburg International Growth Fund | September 30, 2017
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs 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, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities* | ||||||||||||||||||||
Common Stock | $ | 1,309,310,858 | $ | 1,309,310,858 | $ | – | $ | – | ||||||||||||
Short Term Investments | 113,407,454 | 113,407,454 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 1,422,718,312 | $ | 1,422,718,312 | $ | – | $ | – | ||||||||||||
Liabilities | ||||||||||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Spot Currency | $ | (1,506 | ) | $ | (1,506 | ) | $ | – | $ | – | ||||||||||
| * | 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, 2017, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| Management Fee Schedule | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.875 | % | |||
Next $500 million | 0.825 | ||||
Next $500 million | 0.775 | ||||
Next $500 million | 0.725 | ||||
Over $2 billion | 0.675 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.834% of the Fund’s average net assets (before applicable management fee waiver of $98,031).
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $40,184 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
20 | Annual Report
Notes to Financial Statements, Continued
Thornburg International Growth Fund | September 30, 2017
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $21,672 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $3,588 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A, Class C, Class I, Class R3, Class R4, and Class R5 shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I or Class R5 shares, Class R6 shares are not subject to a service plan. The Advisor and Distributor each 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, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor voluntarily waived Fund level investment advisory fees of $98,031. The Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $3,022 for Class A shares, $1,877 for Class C shares, $284,185 for Class I shares, $59,660 for Class R3 shares, $133,929 for Class R4 shares, $141,666 for Class R5 shares, and $24,011 for Class R6 shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 3.0%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had no such transactions with affiliated funds.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,524,481 | $ | 32,559,158 | 2,522,328 | $ | 47,142,292 | ||||||||||
Shares issued to shareholders in | 1,301 | 30,926 | 5,384 | 103,750 | ||||||||||||
Shares repurchased | (5,218,623 | ) | (101,481,260 | ) | (6,144,717 | ) | (112,795,577 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (3,692,841 | ) | $ | (68,891,176 | ) | (3,617,005 | ) | $ | (65,549,535 | ) | ||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 476,447 | $ | 9,727,710 | 870,906 | $ | 15,660,814 | ||||||||||
Shares issued to shareholders in | – | – | – | – | ||||||||||||
Shares repurchased | (1,848,320 | ) | (34,553,426 | ) | (1,821,172 | ) | (31,824,522 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (1,371,873 | ) | $ | (24,825,716 | ) | (950,266 | ) | $ | (16,163,708 | ) | ||||||
|
| |||||||||||||||
Annual Report | 21
Notes to Financial Statements, Continued
Thornburg International Growth Fund | September 30, 2017
YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 14,858,952 | $ | 318,552,650 | 18,510,440 | $ | 347,208,152 | ||||||||||
Shares issued to shareholders in | 109,759 | 2,578,227 | 213,288 | 3,990,511 | ||||||||||||
Shares repurchased | (21,227,762 | ) | (426,153,073 | ) | (25,673,584 | ) | (479,556,253 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (6,259,051 | ) | $ | (105,022,196 | ) | (6,949,856 | ) | $ | (128,357,590 | ) | ||||||
|
| |||||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 134,140 | $ | 2,780,591 | 301,326 | $ | 5,450,951 | ||||||||||
Shares issued to shareholders in | – | – | 239 | 4,567 | ||||||||||||
Shares repurchased | (375,435 | ) | (7,503,141 | ) | (512,912 | ) | (9,210,933 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (241,295 | ) | $ | (4,722,550 | ) | (211,347 | ) | $ | (3,755,415 | ) | ||||||
|
| |||||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 371,414 | $ | 7,282,773 | 603,840 | $ | 10,997,045 | ||||||||||
Shares issued to shareholders in | 30 | 703 | 1,168 | 22,375 | ||||||||||||
Shares repurchased | (1,792,234 | ) | (37,226,747 | ) | (610,484 | ) | (11,166,276 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (1,420,790 | ) | $ | (29,943,271 | ) | (5,476 | ) | $ | (146,856 | ) | ||||||
|
| |||||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 618,222 | $ | 13,028,340 | 1,019,836 | $ | 19,060,679 | ||||||||||
Shares issued to shareholders in | 4,628 | 109,043 | 14,800 | 277,832 | ||||||||||||
Shares repurchased | (2,123,484 | ) | (43,094,239 | ) | (1,328,309 | ) | (25,381,362 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (1,500,634 | ) | $ | (29,956,856 | ) | (293,673 | ) | $ | (6,042,851 | ) | ||||||
|
| |||||||||||||||
Class R6 Shares | ||||||||||||||||
Shares sold | 1,356,236 | $ | 26,361,838 | 136,593 | $ | 2,564,302 | ||||||||||
Shares issued to shareholders in | 1,659 | 39,079 | 1,501 | 28,260 | ||||||||||||
Shares repurchased | (1,155,373 | ) | (24,153,329 | ) | (71,190 | ) | (1,351,073 | ) | ||||||||
|
| |||||||||||||||
Net increase | 202,522 | $ | 2,247,588 | 66,904 | $ | 1,241,489 | ||||||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $740,977,916 and $969,680,768, respectively.
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 the 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, 2017, 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 Fund’s Advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
22 | Annual Report
Notes to Financial Statements, Continued
Thornburg International Growth Fund | September 30, 2017
The Fund entered into forward currency contracts during the year ended September 30, 2017 in the normal course of pursuing its investment objectives, with the objective of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments from adverse changes in the relationship between the U.S. dollar and foreign currencies. In each case these contracts have been initiated in conjunction with foreign investment transactions. The quarterly average value of open sell currency contracts for the year ended September 30, 2017 was $97,721,951.
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.
As of September 30, 2017, the Fund did not have any outstanding forward currency contracts.
Forward currency contracts were entered into with State Street Bank and Trust Company (“SSB”), pursuant to an International Swaps and Derivatives Association (“ISDA”) Master Agreement. In the event of a default or termination under the ISDA Master Agreement with SSB, 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 with SSB does not result in an offset of reported amounts of financial assets and 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.
The net realized gain (loss) from forward currency contracts and the net change in unrealized appreciation (depreciation) on outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2017 are disclosed in the following tables:
NET REALIZED GAIN (LOSS) ON DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | 1,370,067 | $ | 1,370,067 | ||||
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | 760,089 | $ | 760,089 | ||||
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 small- and mid-cap 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 23
Thornburg International Growth Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 19.22 | (0.01 | ) | 4.65 | 4.64 | (0.01 | ) | – | (0.01 | ) | $ | 23.85 | |||||||||||||||||||||||||||
2016(b) | $ | 17.78 | – | (c) | 1.45 | 1.45 | (0.01 | ) | – | (0.01 | ) | $ | 19.22 | |||||||||||||||||||||||||||
2015(b) | $ | 19.10 | (0.01 | ) | (0.33 | ) | (0.34 | ) | – | (0.98 | ) | (0.98 | ) | $ | 17.78 | |||||||||||||||||||||||||
2014(b) | $ | 20.54 | 0.02 | (0.89 | ) | (0.87 | ) | – | (0.57 | ) | (0.57 | ) | $ | 19.10 | ||||||||||||||||||||||||||
2013(b) | $ | 15.78 | (0.01 | ) | 4.77 | 4.76 | – | – | – | $ | 20.54 | |||||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 18.26 | (0.13 | ) | 4.37 | 4.24 | – | – | – | $ | 22.50 | |||||||||||||||||||||||||||||
2016 | $ | 17.01 | (0.13 | ) | 1.38 | 1.25 | – | – | – | $ | 18.26 | |||||||||||||||||||||||||||||
2015 | $ | 18.45 | (0.14 | ) | (0.32 | ) | (0.46 | ) | – | (0.98 | ) | (0.98 | ) | $ | 17.01 | |||||||||||||||||||||||||
2014 | $ | 20.01 | (0.13 | ) | (0.86 | ) | (0.99 | ) | – | (0.57 | ) | (0.57 | ) | $ | 18.45 | |||||||||||||||||||||||||
2013 | $ | 15.49 | (0.14 | ) | 4.66 | 4.52 | – | – | – | $ | 20.01 | |||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 19.69 | 0.10 | 4.75 | 4.85 | (0.06 | ) | – | (0.06 | ) | $ | 24.48 | ||||||||||||||||||||||||||||
2016 | $ | 18.20 | 0.08 | 1.49 | 1.57 | (0.08 | ) | – | (0.08 | ) | $ | 19.69 | ||||||||||||||||||||||||||||
2015 | $ | 19.51 | 0.09 | (0.37 | ) | (0.28 | ) | (0.05 | ) | (0.98 | ) | (1.03 | ) | $ | 18.20 | |||||||||||||||||||||||||
2014 | $ | 20.96 | 0.10 | (0.91 | ) | (0.81 | ) | (0.07 | ) | (0.57 | ) | (0.64 | ) | $ | 19.51 | |||||||||||||||||||||||||
2013 | $ | 16.04 | 0.07 | 4.85 | 4.92 | – | – | – | $ | 20.96 | ||||||||||||||||||||||||||||||
| CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 19.07 | (0.01 | ) | 4.60 | 4.59 | – | – | – | $ | 23.66 | |||||||||||||||||||||||||||||
2016 | $ | 17.66 | – | (c) | 1.42 | 1.42 | (0.01 | ) | – | (0.01 | ) | $ | 19.07 | |||||||||||||||||||||||||||
2015 | $ | 18.99 | (0.02 | ) | (0.33 | ) | (0.35 | ) | – | (0.98 | ) | (0.98 | ) | $ | 17.66 | |||||||||||||||||||||||||
2014 | $ | 20.46 | – | (c) | (0.90 | ) | (0.90 | ) | – | (0.57 | ) | (0.57 | ) | $ | 18.99 | |||||||||||||||||||||||||
2013 | $ | 15.73 | (0.03 | ) | 4.76 | 4.73 | – | – | – | $ | 20.46 | |||||||||||||||||||||||||||||
| CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 19.11 | 0.01 | 4.61 | 4.62 | – | (e) | – | – | $ | 23.73 | |||||||||||||||||||||||||||||
2016 | $ | 17.68 | 0.01 | 1.43 | 1.44 | (0.01 | ) | – | (0.01 | ) | $ | 19.11 | ||||||||||||||||||||||||||||
2015 | $ | 19.00 | 0.02 | (0.36 | ) | (0.34 | ) | – | (0.98 | ) | (0.98 | ) | $ | 17.68 | ||||||||||||||||||||||||||
2014 | $ | 20.45 | 0.01 | (0.89 | ) | (0.88 | ) | – | (0.57 | ) | (0.57 | ) | $ | 19.00 | ||||||||||||||||||||||||||
2013 | $ | 15.70 | (0.01 | ) | 4.76 | 4.75 | – | – | – | $ | 20.45 | |||||||||||||||||||||||||||||
| CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 19.73 | 0.08 | 4.79 | 4.87 | (0.06 | ) | – | (0.06 | ) | $ | 24.54 | ||||||||||||||||||||||||||||
2016 | $ | 18.25 | 0.09 | 1.47 | 1.56 | (0.08 | ) | – | (0.08 | ) | $ | 19.73 | ||||||||||||||||||||||||||||
2015 | $ | 19.55 | 0.09 | (0.36 | ) | (0.27 | ) | (0.05 | ) | (0.98 | ) | (1.03 | ) | $ | 18.25 | |||||||||||||||||||||||||
2014 | $ | 21.01 | 0.10 | (0.93 | ) | (0.83 | ) | (0.06 | ) | (0.57 | ) | (0.63 | ) | $ | 19.55 | |||||||||||||||||||||||||
2013 | $ | 16.07 | 0.07 | 4.87 | 4.94 | – | – | – | $ | 21.01 | ||||||||||||||||||||||||||||||
| CLASS R6 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 19.77 | 0.09 | 4.81 | 4.90 | (0.08 | ) | – | (0.08 | ) | $ | 24.59 | ||||||||||||||||||||||||||||
2016 | $ | 18.29 | 0.11 | 1.47 | 1.58 | (0.10 | ) | – | (0.10 | ) | $ | 19.77 | ||||||||||||||||||||||||||||
2015 | $ | 19.59 | 0.13 | (0.38 | ) | (0.25 | ) | (0.07 | ) | (0.98 | ) | (1.05 | ) | $ | 18.29 | |||||||||||||||||||||||||
2014 | $ | 21.05 | 0.12 | (0.93 | ) | (0.81 | ) | (0.08 | ) | (0.57 | ) | (0.65 | ) | $ | 19.59 | |||||||||||||||||||||||||
2013(f) | $ | 17.54 | 0.46 | 3.05 | 3.51 | – | – | – | $ | 21.05 | ||||||||||||||||||||||||||||||
| (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) is less than 0.01%. |
| (e) | Dividends from net investment income per share were less than $(0.01). |
| (f) | Effective date of this class of shares was February 1, 2013. |
| (g) | Annualized. |
| (h) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
24 | Annual Report
Financial Highlights, Continued
Thornburg International Growth Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| (0.05 | ) | 1.42 | 1.42 | 1.43 | 24.12 | 60.88 | $ | 121,989 | ||||||||||||||||||||||
| 0.03 | 1.39 | 1.39 | 1.39 | 8.23 | 104.60 | $ | 169,248 | |||||||||||||||||||||||
| (0.06 | ) | 1.42 | 1.42 | 1.42 | (2.01 | ) | 92.01 | $ | 220,897 | |||||||||||||||||||||
| 0.07 | 1.33 | 1.33 | 1.33 | (4.46 | ) | 106.18 | $ | 508,044 | ||||||||||||||||||||||
| (0.06 | ) | 1.41 | 1.41 | 1.42 | 30.16 | 89.17 | $ | 580,194 | ||||||||||||||||||||||
| (0.69 | ) | 2.15 | 2.15 | 2.16 | 23.22 | 60.88 | $ | 90,689 | ||||||||||||||||||||||
| (0.73 | ) | 2.15 | 2.15 | 2.15 | 7.35 | 104.60 | $ | 98,633 | ||||||||||||||||||||||
| (0.77 | ) | 2.20 | 2.20 | 2.20 | (2.72 | ) | 92.01 | $ | 108,062 | |||||||||||||||||||||
| (0.65 | ) | 2.09 | 2.09 | 2.09 | (5.19 | ) | 106.18 | $ | 146,399 | |||||||||||||||||||||
| (0.81 | ) | 2.15 | 2.15 | 2.17 | 29.18 | 89.17 | $ | 116,453 | ||||||||||||||||||||||
| 0.50 | 0.99 | 0.99 | 1.03 | 24.66 | 60.88 | $ | 1,128,804 | |||||||||||||||||||||||
| 0.45 | 0.99 | 0.99 | 1.00 | 8.63 | 104.60 | $ | 1,030,921 | |||||||||||||||||||||||
| 0.47 | 0.99 | 0.99 | 1.01 | (1.58 | ) | 92.01 | $ | 1,079,791 | ||||||||||||||||||||||
| 0.47 | 0.98 | 0.98 | 0.98 | (4.09 | ) | 106.18 | $ | 1,171,032 | ||||||||||||||||||||||
| 0.38 | 0.99 | 0.99 | 1.04 | 30.67 | 89.17 | $ | 737,536 | |||||||||||||||||||||||
| (0.03 | ) | 1.50 | 1.50 | 2.08 | 24.07 | 60.88 | $ | 10,525 | ||||||||||||||||||||||
| (0.02 | ) | 1.50 | 1.50 | 2.04 | 8.03 | 104.60 | $ | 13,086 | ||||||||||||||||||||||
| (0.13 | ) | 1.50 | 1.50 | 1.98 | (2.03 | ) | 92.01 | $ | 15,851 | |||||||||||||||||||||
| – | (d) | 1.50 | 1.50 | 1.86 | (4.63 | ) | 106.18 | $ | 22,739 | |||||||||||||||||||||
| (0.15 | ) | 1.50 | 1.50 | 2.01 | 30.07 | 89.17 | $ | 13,982 | ||||||||||||||||||||||
| 0.07 | 1.40 | 1.40 | 1.84 | 24.19 | 60.88 | $ | 17,200 | |||||||||||||||||||||||
| 0.04 | 1.40 | 1.40 | 1.68 | 8.17 | 104.60 | $ | 40,999 | |||||||||||||||||||||||
| 0.10 | 1.40 | 1.40 | 1.65 | (1.97 | ) | 92.01 | $ | 38,038 | ||||||||||||||||||||||
| 0.04 | 1.39 | 1.39 | 1.63 | (4.53 | ) | 106.18 | $ | 38,575 | ||||||||||||||||||||||
| (0.04 | ) | 1.38 | 1.38 | 1.68 | 30.25 | 89.17 | $ | 26,441 | ||||||||||||||||||||||
| 0.40 | 0.99 | 0.99 | 1.28 | 24.68 | 60.88 | $ | 45,591 | |||||||||||||||||||||||
| 0.45 | 0.99 | 0.99 | 1.21 | 8.56 | 104.60 | $ | 66,271 | |||||||||||||||||||||||
| 0.46 | 0.99 | 0.99 | 1.20 | (1.53 | ) | 92.01 | $ | 66,646 | ||||||||||||||||||||||
| 0.46 | 0.99 | 0.99 | 1.18 | (4.15 | ) | 106.18 | $ | 69,217 | ||||||||||||||||||||||
| 0.35 | 0.99 | 0.99 | 1.22 | 30.74 | 89.17 | $ | 43,209 | |||||||||||||||||||||||
| 0.44 | 0.89 | 0.89 | 1.03 | 24.82 | 60.88 | $ | 12,261 | |||||||||||||||||||||||
| 0.60 | 0.89 | 0.89 | 1.34 | 8.65 | 104.60 | $ | 5,854 | |||||||||||||||||||||||
| 0.66 | 0.89 | 0.89 | 1.43 | (1.43 | ) | 92.01 | $ | 4,191 | ||||||||||||||||||||||
| 0.58 | 0.89 | 0.89 | 1.34 | (4.05 | ) | 106.18 | $ | 3,950 | ||||||||||||||||||||||
| 2.21 | (g) | 0.89 | (g) | 0.89 | (g) | 11.83 | (g)(h) | 20.01 | 89.17 | $ | 2,553 | |||||||||||||||||||
Annual Report | 25
Report of Independent Registered Public Accounting Firm
Thornburg International Growth Fund
To the Trustees and Shareholders of
the 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 the Thornburg International Growth Fund (the “Fund”) as of September 30, 2017, 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 indicated, 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 as of September 30, 2017 by correspondence with the custodian, brokers, and transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
26 | Annual Report
Thornburg International Growth Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
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 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,185.10 | $7.74 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.99 | $7.14 | ||||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,180.50 | $11.67 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.37 | $10.78 | ||||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,187.50 | $5.42 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.11 | $5.01 | ||||||||||
| CLASS R3 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,184.80 | $8.21 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $7.58 | ||||||||||
| CLASS R4 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,185.40 | $7.67 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.05 | $7.08 | ||||||||||
| CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,187.30 | $5.43 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $5.01 | ||||||||||
| CLASS R6 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,188.10 | $4.83 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.65 | $4.46 | ||||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.41%; C: 2.13%; I: 0.99%; R3: 1.50%; R4: 1.40%; R5: 0.99%; R6: 0.88%) 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.
Annual Report | 27
Thornburg International Growth Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
28 | Annual Report
Trustees and Officers, Continued
Thornburg International Growth Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014���2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 29
Trustees and Officers, Continued
Thornburg International Growth Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
30 | Annual Report
Thornburg International Growth Fund | September 30, 2017 (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, 2017, dividends paid by the Thornburg International Growth Fund of $2,955,241 are being reported as taxable ordinary investment income dividends for federal income tax purposes.
For the tax year ended September 30, 2017, 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 12.99% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2017 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2017, foreign source income and foreign taxes paid is $18,691,413 and $1,129,851, 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, 2017. Complete information will be reported in conjunction with your 2017 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 Growth Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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.
Annual Report | 31
Other Information, Continued
Thornburg International Growth Fund | September 30, 2017 (Unaudited)
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the agreement, the Trustees considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 nine 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, 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, (6) comparison of the Fund’s annualized return since inception to the Fund’s benchmark index, and (7) comparative measures of estimated earnings growth, and risk and return statistics. The Trustees generally attach additional significance to investment performance from the perspective of longer term shareholders. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectus. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for two Fund share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative data noted as having been considered by the Trustees showed that the Fund’s advisory fee level was comparable to the median and average fee levels for the fund category, the level of total expense for one share class of the Fund was comparable to the median and average levels for the category, and that the level of total expense for a second share class was lower than the median and average levels
32 | Annual Report
Other Information, Continued
Thornburg International Growth Fund | September 30, 2017 (Unaudited)
for the category. Peer group data showed that the Fund’s advisory fee level was at least comparable to the median levels of the two fund peer groups, the total expense level for one of the share classes was comparable to the median level of its peer group, and the total expense level of the second share class was lower than the median level for its 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by the Fund and certain other funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 33
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
34 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 35
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Investment Income Builder Fund
Annual Report | September 30, 2017
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| 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 | ||||||||
| Class R6 | TIBOX | 885-216-663 | ||||||||
Class I, R3, R4, R5, and Class R6 shares may not be available to all investors. Minimum investments for Class I shares may be higher than those for other classes.
Investments carry risks, including possible loss of principal. Additional 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- and mid-capitalization companies may increase the risk of greater price fluctuations. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The 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 FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity.
Annual Report | 3
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
October 27, 2017
Dear Fellow Shareholder of Thornburg Investment Income Builder:
This letter will highlight the basic results of your Fund’s investment activities for the six- and twelve-month periods ended September 30, 2017, which is the end of the Fund’s fiscal year. In addition, we will comment on the overall investment landscape, which continues to evolve.
Thornburg Investment Income Builder Fund paid dividends of $0.845 per Class A share in the twelve months ended September 30, 2017, up 5.3% from the $0.803 cents 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 $1.68 per share during the 12-month period, from $19.82 to $21.50, giving a total return including dividends of 13.01% at NAV. The Fund’s total return for the six-month period ended September 30, 2017 was 7.10%.
For the fiscal year ended September 30, 2017 Thornburg Investment Income Builder Fund underperformed the blended index of 75% MSCI World Index/25% Bloomberg Barclays U.S. Aggregate Bond Index (total return of 13.4%). Performance relative to indices for all share classes over various periods is set forth on page 9.
The quarter ended September 30, 2017 was the 59th full calendar quarter since the inception of Thornburg Investment Income Builder Fund in December 2002. In 44 of these quarters the Fund delivered a positive total return. Your Fund has delivered positive total returns in 12 of its 14 calendar years of existence. As of September 30, 2017, Thornburg Investment Income Builder has delivered tax-efficient average annual total returns in excess of 9.5% since its inception.
We do not expect to pay any capital gain dividend for 2017. At September 30, 2017 the Fund had realized capital losses of more than $700 million, which may be carried forward to offset future capital gains to the extent permitted by regulations.
Dividend increases from your Fund’s equity portfolio drove the year-over-year increase in the dividend paid by Thornburg Investment Income Builder, particularly a special dividend paid in the September quarter by China Mobile, the Fund’s largest single investment. The list below shows the year-over-year percentage changes in trailing 12-month dividends paid by the 10 largest equity positions in the Fund as of August 31, 2017:
| Equity Holding | Trailing 12-Month Dividend % Increase (Reporting FX) | ||||
| China Mobile | +126% | ||||
| Orange SA | no change | ||||
| JP Morgan Chase & co. | +9% | ||||
| Atlantia SpA | +10% | ||||
| CME Group | +12% | ||||
| Royal Dutch Shell, plc | no change | ||||
| NN Group N.V. | -5% | ||||
| Taiwan Semiconductor | +17% | ||||
| BT Group plc | +10% | ||||
| Home Depot | +26% | ||||
In assessing the fiscal year 2017 total return performance of Thornburg Investment Income Builder, 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, 2017. The MSCI World Index comprises 75%, and the entire equity portion, of the Fund’s global performance benchmark (75% MSCI World Index and 25% Bloomberg Barclays U.S. Aggregate Bond Index):
| 1. | The MSCI World Index showed a return of 18.17% for the 12 months ended September 30, 2017. All eleven index sectors showed positive total returns, with individual sector returns ranging from +33% (financials) to +2% (telecommunications). Stocks in the consumer discretionary, industrials, materials, and information technology sectors joined financials in outperforming the index. Stocks of firms in the energy, real estate, utilities, consumer staples and health care sectors joined telecommunications sector stocks in underperforming the index. |
| 2. | Income Builder Fund investments in firms in the following sectors comprised the largest average sector weightings in the Fund portfolio during fiscal 2017: |
| • | financials (27% average Fund equity weighting) |
| • | telecommunications (20% average Fund equity weighting) |
| • | energy (9% average Fund equity weighting) |
| • | industrials (9% average Fund equity weighting) |
| • | consumer staples (7% average Fund equity weighting) |
| • | health care (7% average Fund equity weighting) |
| • | consumer discretionary (6% average Fund equity weighting) |
| • | information technology (5% average Fund equity weighting) |
| 3. | The Fund’s performance relative to the MSCI World Index was hurt by comparative underperformance from our holdings in the telecommunications and information technology sectors, and helped by comparative outperformance from our holdings in the financial and energy sectors. |
| 4. | In the Income Builder portfolio, 64 equity investments contributed positive returns of at least 0.05% (5 basis points) to the portfolio during fiscal 2017, considering both portfolio weights and individual security returns. Eleven of the Fund’s equity investments contributed negative returns of -0.05% or worse for the fiscal year, and two of these have been sold to fund other investments. |
Investment Income Builder Fund’s bond holdings delivered positive returns during the fiscal year.
Your Fund’s average return from its investments in the financial sector significantly exceeded the performance of the equities in the finance sector of the MSCI World Index in fiscal 2017. Fund investments in JP Morgan Chase, CME Group, ING Group, NN Group, DBS Group Holdings, MFA Financial, and UBS Group were among the strongest performers in the portfolio. There were no significant detractors from fiscal 2017 portfolio performance among your Fund’s holdings in the financial sector. Why did these
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
financial sector investments perform well? There are company-specific reasons, but common underlying factors for most of these include gradual increases in short-term interest rates and improving operational efficiency.
Your Fund’s significant holdings in the telecommunications sector were the largest detractor from relative performance vis-à-vis the index. The U.K.’s BT Group, China Mobile, and CenturyLink in the U.S. delivered negative returns, accounting for most of the drag. Telenor, Africa’s MTN Group, and French multi-national Orange delivered positive returns, but these were insufficient to offset the performance laggards. We see expanding consumer and business demand for digital communications around the world, using both wireless and terrestrial networks. Your Fund’s communications services firms face varied competitive and regulatory landscapes. Each of these pay interesting dividends. You can expect us to focus on trying to hold our investments in those firms that we believe can grow their customer bases while managing operating expenses and capital budgets well enough to sustain and grow these dividends over time. In most geographies, there are a small number of competitors, relative to many other industries.
Your Fund’s investments in the industrials sector delivered strong performance in the year under review. Italian toll-road and airport operator Atlantia and French toll-road operator Vinci lead the way. Each of these was powered by improved levels of economic activity in Europe. French construction firm Bouygues and U.K. defense contractor BAE Systems also made positive contributions to portfolio performance.
Among Income Builder’s investments in the energy sector, Royal Dutch Shell, Canadian producer Suncor, refiner Valero Energy and Italy’s ENI each made significant positive contributions to portfolio performance in fiscal 2017. The price of oil rose by approximately 17% over the course of the fiscal year, providing a tailwind to share prices and dividend payment capacity for virtually all of your Fund’s energy sector investments. Global demand for oil and gas has increased, even as exploration and resource development budgets have been cut. We expect global oil prices to be sustained near current levels in the coming years unless investments to sustain aging fields and develop new resources are increased, or we see material improvements in new energy technologies.
The performance of Investment Income Builder’s holdings in the health care sector, while positive, lagged those of the health care sector of the index during the fiscal year. Novartis, Pfizer, Roche Holding, and Merck each generated positive returns and dividend growth, however, these returns lagged the sector and overall market averages. Political rhetoric has turned against for-profit health care firms. We have modestly reduced your Fund’s investment exposure to this sector.
Your Fund’s investments in the consumer discretionary sector lagged the performance contribution of this sector in the index portfolio in the fiscal year, entirely due to a lower portfolio weighting of equities from this sector. Home Depot, Las Vegas Sands, and media conglomerate Vivendi were solid positive contributors to portfolio performance. We sold the Vivendi position, as it de-emphasized the importance of dividend payments to shareholders. Target Corporation was a negative contributor to portfolio performance for the fiscal year. We sold the Fund’s entire position in this investment pending
further evaluation of its prospects for success in a rapidly evolving U.S. retailing landscape.
Income Builder investments in the consumer staples sector delivered disappointing performance for the fiscal year. Share prices of Korea’s KT&G Corporation, and Dutch grocer Royal Ahold Delhaize each declined in fiscal 2017. Modest positive contributions from Nestle and CVS Health were insufficient to offset the negatives. We sold the Fund’s position in Ahold, but have added to our investment in KT&G.
Among other portfolio holdings, notable contributors included European utilities Electricite de France and ENEL, chemicals producer LyondellBasell, miner Norilsk Nickel and semiconductor maker Taiwan Semiconductor Manufacturing. Negative contributors included semiconductor developer Qualcomm, U.K. electrical grid operator National Grid, and institutional real estate manager Colony NorthStar.
After a sharp rise of more than 5% during the December 2016 quarter, the value of the U.S. dollar generally declined vis-à-vis major world currencies during the 2017 fiscal year, ending -2.5% lower versus a basket of these currencies for the year. We hedged a majority of the currency exposure to the Australian dollar, Japanese yen, Chinese Yuan, the euro and other European currencies tied to the euro. We are more focused on risk control than on reaping possible currency gains from exposure to assets denominated in these currencies. Currency hedges hurt your Fund’s performance relative to the index during the fiscal year, since we did not fully participate in the appreciation of foreign currencies against the U.S. dollar.
Within its bond portfolio, Investment Income Builder owned significantly fewer U.S. government and agency bonds than the Bloomberg Barclays U.S. Aggregate Bond Index. Yields on U.S. government bonds with maturities between one and ten years rose by approximately 0.73% over the Fund’s fiscal year, with benchmark 10-year U.S. Treasury Note rates rising from 1.60% to 2.33%. Despite rising government bond yields, the FINRA-Bloomberg Index of Active High Yield U.S. Corporate Bond Yields declined by 0.91% during the fiscal year, from 6.30% to 5.39%, indicating much reduced compensation for taking credit risk. The Fund’s bond portfolio has an effective duration of approximately 4.4 years as of September 30, 2017.
Readers of this commentary who are long-time shareholders of Income Builder will recall that the interest bearing debt portion of the Fund’s portfolio has varied over time, ranging from around 10% currently to 45% at June 30, 2009.
Source: Bloomberg.
Annual Report | 5
Letter to Shareholders, Continued
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
As of September 30th, the Fund portfolio included more than 90 bonds and hybrid securities.
Looking forward to 2018, investors are debating the future direction of the economies of China, Europe, various emerging markets, and the U.S. They consider potential policy actions by the U.S. Federal Reserve, Congress, the Trump administration, and possible constructive policy actions following significant elections in France, Germany, and Japan. Many political and macroeconomic issues remain open. Importantly, overall global consumer spending is growing. Governmental spending is also growing. Most macroeconomic indicators around the world have positively surprised in the first three quarters of 2017, with the U.S. a relative laggard.
Owing to strong recent results, earnings expectations for the MSCI World Index for 2017 and 2018 have improved in most world markets, along with global economic growth expectations. These trends continue to support a rotation of investor preferences from more defensive debt and equity assets to more economically sensitive assets. It now appears that political gridlock will persist in Washington D.C., though the Fed has stepped up the pace of Federal funds target rate hikes. Most major central banks around the world continue to pursue very easy monetary conditions and extensive bond purchase programs, using money created from thin air to purchase these bonds. Offshore demand for U.S. dollar bonds remains strong, and the major central banks appear highly motivated to create additional inflation.
Easy money policies have increased the potential volatility of financial asset prices. Excess liquidity sloshes around from one theme to the next. We cannot be certain how long unconventional monetary policies will continue, or what consequences will result from any changes in course. We believe that our geographically diverse portfolio of cash generative equities and attractive yielding bonds with limited duration should prove resilient through changing conditions.
While low interest rates seen in recent years around the world are good news for borrowers, they have negative consequences for conservative savers. Interest income as a percentage of the aggregate adjusted gross income of U.S. households fell from 2.2% in 2009 to 0.7% in 2015, according to Statistics of Income published by the Internal Revenue Service.
Investors must consider other options. Banks have aggressively reduced yields on deposits, and money market fund yields remain well below 1%. 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 Thornburg Investment Income Builder Fund will experience sustainable popularity among investors as their intrinsic values for income production are recognized. A high percentage of investor funds belong to people over the age of 55, for whom income is an increasingly necessary and desirable attribute.
Thank you for being a shareholder of Thornburg Investment Income Builder Fund. Remember that you can review descriptions of many of the stocks in your portfolio at your leisure by going to our internet site, www.thornburg.com/IIB.
Best wishes for a wonderful holiday season and a happy 2018.
Sincerely,
Brian McMahon
Portfolio Manager
Chief Investment Officer and Managing Director
Jason Brady,CFA
Portfolio Manager
CEO, President, and Managing Director
Ben Kirby,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.
The views expressed by the portfolio managers reflect their professional opinions and are subject to change. Under no circumstances does the information contained within represent a recommendation to buy or sell any security.
6 | Annual Report
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
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 wake of the financial crisis, earnings-per-share on average declined, causing the payout ratio to spike, even as dividends paid by the S&P 500 portfolio declined. Earnings have since materially improved, bringing the payout ratio back in line with the overall trend in recent times.
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, from early 2010, the number steadily climbed back to around 70%.
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 dollar yield on an original investment made at a fixed point in time (say, 1970 or 1989) has increased, even without reinvestment of dividends.
S&P 500 Index Payout Ratio
Source: Bloomberg, beginning in 1999 (uses operating earnings); “Irrational Exuberance”
by Robert J. Shiller, through 1998 (uses reported earnings).
Percentage of Companies Paying Dividends in Russell 1000 Index
Source: CSFB Quantitative and Equity Derivatives Strategy, Baseline, and FactSet.
S&P 500 Index Average Yield vs. Annual Dividends from a Hypothetical $100,000 Investment (Dividends not Reinvested)
Source: Bloomberg and FactSet as of 12/31/16
Past performance does not guarantee future results.
Annual Report | 7
The Dividend Landscape, Continued
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
The Top 100 Dividend Yields
| RUSSELL 1000 INDEX | RUSSELL 2000 INDEX | |||||||||
| Real Estate | 43% | 32% | ||||||||
| Financials | 15% | 29% | ||||||||
| Consumer Discretionary | 14% | 16% | ||||||||
| Utilities | 8% | 3% | ||||||||
| Energy | 6% | 7% | ||||||||
| Industrials | 3% | 4% | ||||||||
| Materials | 3% | 0% | ||||||||
| Telecommunication Services | 3% | 3% | ||||||||
| Consumer Staples | 3% | 3% | ||||||||
| Information Technology | 2% | 1% | ||||||||
| Health Care | 0% | 2% | ||||||||
Source: FactSet as of September 30, 2017.
Estimated Average Dividend Yields (MSCI Indices) of Markets Around the Globe
Source: Bloomberg as of September 30, 2017.
A Truly Diversified Dividend-Paying Portfolio Must Look Beyond the Obvious High-Yield Stocks!
In the (large cap) Russell 1000 Index, 50% of the top 100 dividend payers are in the real estate and financials sectors. In the (small cap) Russell 2000 Index, 61% of the top 100 dividend-yielding stocks are real estate or financials companies. To construct a diversified portfolio of attractive yielding stocks, one must look beyond these sectors. We certainly 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 financial 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.
8 | Annual Report
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
Class A Shares (Incep: 12/24/02) | |||||||||||||||||||||||||
Without sales charge | 13.01% | 4.34% | 7.28% | 4.80% | 9.68% | ||||||||||||||||||||
With sales charge | 7.94% | 2.75% | 6.29% | 4.32% | 9.34% | ||||||||||||||||||||
Class C Shares (Incep: 12/24/02) | |||||||||||||||||||||||||
Without sales charge | 12.19% | 3.60% | 6.52% | 4.08% | 9.01% | ||||||||||||||||||||
With sales charge | 11.19% | 3.60% | 6.52% | 4.08% | 9.01% | ||||||||||||||||||||
Class I Shares (Incep: 11/3/03) | 13.30% | 4.67% | 7.63% | 5.14% | 8.97% | ||||||||||||||||||||
Class R3 Shares (Incep: 2/1/05) | 12.63% | 4.02% | 6.95% | 4.51% | 7.39% | ||||||||||||||||||||
Class R4 Shares (Incep: 2/1/08) | 12.72% | 4.10% | 7.06% | - | 5.40% | ||||||||||||||||||||
Class R5 Shares (Incep: 2/1/07) | 13.22% | 4.54% | 7.50% | 5.03% | 6.20% | ||||||||||||||||||||
Class R6 Shares (Incep: 4/10/17) | - | - | - | - | 7.65% | ||||||||||||||||||||
Blended Index (Since 12/24/02) | 13.40% | 6.54% | 8.80% | 4.50% | 7.69% | ||||||||||||||||||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. 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 sales charge for Class I, R3, R4, R5 and R6 shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses before fee waivers and expense reimbursements are as follows: A shares, 1.39%; C shares, 2.14%; I shares, 1.07%; R3 shares, 1.80%; R4 shares, 1.69%; R5 shares, 1.28%; R6 shares, 1.06%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: C shares, 2.11%; R3 shares, 1.71%; R4 shares, 1.61%; R5 shares, 1.20%; R6 shares, 1.01%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus.
30-day SEC Yield as of 9/30/17 (A Shares): 2.84%
Glossary
The Bloomberg 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 FlNRA-Bloomberg Active High Yield U.S. Corporate Bond 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.
The MSCI World Index is an unmanaged market-weighted index that consists of securities traded in 23 of the world’s most developed countries. Securities are listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. The index is calculated with net dividends reinvested in U.S. dollars.
The performance of any index is not indicative of the performance of any particular investment. 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.
Annual Report | 9
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
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.
PORTFOLIO COMPOSITION
TOP TEN EQUITY HOLDINGS
| China Mobile Ltd. | 4.0% | ||||
| CME Group, Inc. | 3.3% | ||||
| JPMorgan Chase & Co. | 3.2% | ||||
| Orange SA | 3.1% | ||||
| Royal Dutch Shell plc ADR | 3.0% | ||||
| Atlantia S.p.A. | 2.8% | ||||
| NN Group NV | 2.6% | ||||
| Taiwan Semiconductor Manufacturing Co., Ltd. | 2.4% | ||||
| Electricite de France SA | 2.0% | ||||
| The Home Depot, Inc. | 2.0% |
SECTOR EXPOSURE
(percent of equity holdings)
| Financials | 26.9% | ||||
| Telecommunication Services | 19.5% | ||||
| Energy | 12.0% | ||||
| Industrials | 7.4% | ||||
| Consumer Staples | 7.0% | ||||
| Health Care | 6.9% | ||||
| Information Technology | 4.9% | ||||
| Consumer Discretionary | 4.7% | ||||
| Utilities | 4.4% | ||||
| Real Estate | 3.6% | ||||
| Materials | 2.7% | ||||
| Other | 0.1% |
COUNTRY EXPOSURE*
(percent of Fund)
| United States | 38.2% | ||||
| France | 10.3% | ||||
| Netherlands | 8.5% | ||||
| Switzerland | 6.7% | ||||
| Italy | 6.6% | ||||
| United Kingdom | 5.8% | ||||
| China | 4.9% | ||||
| Taiwan | 2.9% | ||||
| Singapore | 2.2% | ||||
| Russia | 1.8% | ||||
| Norway | 1.7% | ||||
| South Korea | 1.1% | ||||
| Spain | �� | 1.1% | |||
| Hong Kong | 1.1% | ||||
| Canada | 1.0% | ||||
| Australia | 0.7% | ||||
| South Africa | 0.6% | ||||
| Germany | 0.5% | ||||
| Thailand | 0.4% | ||||
| Jamaica | 0.3% | ||||
| Brazil | 0.3% | ||||
| Cayman Islands | 0.3% | ||||
| Luxembourg | 0.3% | ||||
| Liechtenstein | 0.2% | ||||
| Ireland | 0.1% | ||||
| Chile | 0.1% | ||||
| Japan | 0.1% | ||||
| Trinidad and Tobago | 0.0% | ** | |||
| Panama | 0.0% | ** | |||
| Other Assets Less Liabilities | 2.1% |
| * | The country assignment 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 0.1%. |
There is no guarantee that the Fund will meet its investment objectives.
All portfolio information is subject to change. Charts may not add up to 100% due to rounding.
10 | Annual Report
Fund Summary, Continued
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
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¢ | 26.0¢ | 99.5¢ | |||||||||||||||
| 2015 | 16.5¢ | 20.0¢ | 20.0¢ | 25.3¢ | 81.8¢ | |||||||||||||||
| 2016 | 17.0¢ | 18.5¢ | 19.5¢ | 21.5¢ | 76.5¢ | |||||||||||||||
| 2017 | 17.0¢ | 20.0¢ | 26.0¢ | |||||||||||||||||
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.
EVOLUTION OF INDUSTRY GROUP EXPOSURE
Top 10 industry groups quarter by quarter (percent of equity holdings)
As of 9/30/17
| Telecommunication Services | 19.50% | ||||
| Diversified Financials | 12.90% | ||||
| Energy | 12.00% | ||||
| Banks | 9.10% | ||||
| Pharma, Biotech & Life Sciences | 6.90% | ||||
| Semiconductors & Equipment | 4.90% | ||||
| Insurance | 4.80% | ||||
| Utilities | 4.40% | ||||
| Transportation | 3.80% | ||||
| Food & Staples Retailing | 3.70% |
As of 3/31/17
| Telecommunication Services | 20.70% | ||||
| Diversified Financials | 13.70% | ||||
| Energy | 8.30% | ||||
| Pharma, Biotech & Life Sciences | 7.90% | ||||
| Banks | 7.50% | ||||
| Insurance | 5.00% | ||||
| Food & Staples Retailing | 4.70% | ||||
| Capital Goods | 4.50% | ||||
| Transportation | 4.20% | ||||
| Semiconductors & Equipment | 4.20% |
As of 6/30/17
| Telecommunication Services | 19.80% | ||||
| Diversified Financials | 13.40% | ||||
| Energy | 10.70% | ||||
| Banks | 10.30% | ||||
| Pharma, Biotech & Life Sciences | 6.70% | ||||
| Insurance | 4.70% | ||||
| Semiconductors & Equipment | 4.40% | ||||
| Utilities | 4.00% | ||||
| Food & Staples Retailing | 3.90% | ||||
| Transportation | 3.80% |
As of 12/31/16
| Telecommunication Services | 21.00% | ||||
| Diversified Financials | 16.90% | ||||
| Energy | 9.10% | ||||
| Banks | 8.10% | ||||
| Pharma, Biotech & Life Sciences | 7.10% | ||||
| Transportation | 4.40% | ||||
| Capital Goods | 4.20% | ||||
| Food & Staples Retailing | 4.10% | ||||
| Semiconductors & Equipment | 4.00% | ||||
| Retailing | 3.90% |
Annual Report | 11
Thornburg Investment Income Builder Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
| COMMON STOCK — 89.64% | ||||||||||||
AUTOMOBILES & COMPONENTS — 0.29% | ||||||||||||
Automobiles — 0.29% | ||||||||||||
Daimler AG | 579,200 | $ | 46,187,040 | |||||||||
|
| |||||||||||
| 46,187,040 | ||||||||||||
|
| |||||||||||
BANKS — 8.17% | ||||||||||||
Banks — 8.17% | ||||||||||||
BNP Paribas SA | 3,850,000 | 310,559,098 | ||||||||||
DBS Group Holdings Ltd. | 13,421,200 | 206,000,504 | ||||||||||
ING Groep N.V. | 14,117,500 | 260,293,466 | ||||||||||
JPMorgan Chase & Co. | 5,315,245 | 507,659,050 | ||||||||||
Liechtensteinische Landesbank AG | 615,947 | 30,945,238 | ||||||||||
|
| |||||||||||
| 1,315,457,356 | ||||||||||||
|
| |||||||||||
CAPITAL GOODS — 3.22% | ||||||||||||
Aerospace & Defense — 0.71% | ||||||||||||
BAE Systems plc | 13,559,800 | 114,744,331 | ||||||||||
Construction & Engineering — 1.46% | ||||||||||||
Ferrovial SA | 3,178,900 | 69,976,790 | ||||||||||
Vinci S.A. | 1,737,795 | 165,133,606 | ||||||||||
Industrial Conglomerates — 1.05% | ||||||||||||
Hopewell Holdings Ltd. | 30,726,340 | 119,969,452 | ||||||||||
NWS Holdings Ltd. | 25,000,000 | 48,709,611 | ||||||||||
|
| |||||||||||
| 518,533,790 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 1.63% | ||||||||||||
Hotels, Restaurants & Leisure — 1.63% | ||||||||||||
Las Vegas Sands Corp. | 4,085,000 | 262,093,600 | ||||||||||
|
| |||||||||||
| 262,093,600 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 11.58% | ||||||||||||
Capital Markets — 8.23% | ||||||||||||
| a | Apollo Investment Corp. | 24,800,000 | 151,528,000 | |||||||||
Ares Capital Corp. | 15,285,900 | 250,535,901 | ||||||||||
CME Group, Inc. | 3,900,000 | 529,152,000 | ||||||||||
| a | Solar Capital Ltd. | 4,607,900 | 99,714,956 | |||||||||
UBS Group AG | 17,237,325 | 294,601,878 | ||||||||||
Mortgage Real Estate Investment Trusts — 3.35% | ||||||||||||
Chimera Investment Corp. | 4,750,000 | 89,870,000 | ||||||||||
| a | MFA Financial, Inc. | 33,720,151 | 295,388,523 | |||||||||
| a | Two Harbors Investment Corp. | 15,285,000 | 154,072,800 | |||||||||
|
| |||||||||||
| 1,864,864,058 | ||||||||||||
|
| |||||||||||
ENERGY — 10.74% | ||||||||||||
Energy Equipment & Services — 0.22% | ||||||||||||
Baker Hughes, a GE Co. | 952,300 | 34,873,226 | ||||||||||
Oil, Gas & Consumable Fuels — 10.52% | ||||||||||||
China Petroleum & Chemical Corp. | 160,000,000 | 119,821,803 | ||||||||||
Eni S.p.A. | 17,075,400 | 282,539,904 | ||||||||||
Lukoil PJSC ADR | 1,726,300 | 91,545,689 | ||||||||||
| b,d | Malamute Energy, Inc. | 12,439 | 130,610 | |||||||||
ONEOK, Inc. | 3,604,400 | 199,719,804 | ||||||||||
Royal Dutch Shell plc ADR | 7,850,000 | 475,553,000 | ||||||||||
Suncor Energy, Inc. | 3,900,000 | 136,683,631 | ||||||||||
Total SA | 4,241,700 | 227,827,911 | ||||||||||
Valero Energy Corp. | 2,075,000 | 159,629,750 | ||||||||||
|
| |||||||||||
| 1,728,325,328 | ||||||||||||
|
| |||||||||||
FOOD & STAPLES RETAILING — 3.35% | ||||||||||||
Food & Staples Retailing — 3.35% | ||||||||||||
CVS Health Corp. | 3,218,400 | 261,720,288 | ||||||||||
Walgreens Boots Alliance, Inc. | 3,595,906 | 277,675,861 | ||||||||||
|
| |||||||||||
| 539,396,149 | ||||||||||||
|
| |||||||||||
12 | Annual Report
Schedule of Investments, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
FOOD, BEVERAGE & TOBACCO — 2.98% | ||||||||||||
Food Products — 1.20% | ||||||||||||
Nestle SA | 2,301,900 | $ | 192,785,759 | |||||||||
Tobacco — 1.78% | ||||||||||||
British American Tobacco plc | 1,632,300 | 102,189,768 | ||||||||||
KT&G Corp. | 2,008,000 | 184,960,056 | ||||||||||
|
| |||||||||||
| 479,935,583 | ||||||||||||
|
| |||||||||||
INSURANCE — 4.36% | ||||||||||||
Insurance — 4.36% | ||||||||||||
Assicurazioni Generali S.p.A. | 3,578,500 | 66,655,825 | ||||||||||
AXA S.A. | 1,328,400 | 40,177,233 | ||||||||||
Gjensidige Forsikring ASA | 1,610,476 | 28,025,861 | ||||||||||
Legal and General Group plc | 42,968,500 | 149,644,607 | ||||||||||
NN Group NV | 9,973,500 | 417,401,870 | ||||||||||
|
| |||||||||||
| 701,905,396 | ||||||||||||
|
| |||||||||||
MATERIALS — 2.44% | ||||||||||||
Chemicals — 1.28% | ||||||||||||
LyondellBasell Industries NV | 2,077,000 | 205,726,850 | ||||||||||
Metals & Mining — 1.16% | ||||||||||||
Mining and Metallurgical Co. Norilsk Nickel PJSC ADR | 6,740,000 | 116,029,100 | ||||||||||
Mining and Metallurgical Co. Norilsk Nickel PJSC ADR | 4,119,000 | 70,846,800 | ||||||||||
|
| |||||||||||
| 392,602,750 | ||||||||||||
|
| |||||||||||
MEDIA — 0.32% | ||||||||||||
Media — 0.32% | ||||||||||||
Vivendi S.A. | 2,062,268 | 52,209,008 | ||||||||||
|
| |||||||||||
| 52,209,008 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 6.20% | ||||||||||||
Pharmaceuticals — 6.20% | �� | |||||||||||
Merck & Co., Inc. | 4,687,687 | 300,152,598 | ||||||||||
Novartis AG | 3,478,400 | 297,784,231 | ||||||||||
Pfizer, Inc. | 2,786,517 | 99,478,657 | ||||||||||
Roche Holding AG | 1,175,400 | 300,055,641 | ||||||||||
|
| |||||||||||
| 997,471,127 | ||||||||||||
|
| |||||||||||
REAL ESTATE — 3.20% | ||||||||||||
Equity Real Estate Investment Trusts — 3.20% | ||||||||||||
Colony Northstar, Inc. | 7,462,000 | 93,722,720 | ||||||||||
Crown Castle International Corp. | 2,020,000 | 201,959,600 | ||||||||||
Lamar Advertising Co. | 1,658,220 | 113,637,817 | ||||||||||
| a | Washington REIT | 3,215,600 | 105,343,056 | |||||||||
|
| |||||||||||
| 514,663,193 | ||||||||||||
|
| |||||||||||
RETAILING — 2.03% | ||||||||||||
Specialty Retail — 2.03% | ||||||||||||
The Home Depot, Inc. | 2,000,000 | 327,120,000 | ||||||||||
|
| |||||||||||
| 327,120,000 | ||||||||||||
|
| |||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 4.37% | ||||||||||||
Semiconductors & Semiconductor Equipment — 4.37% | ||||||||||||
Advanced Semiconductor Engineering, Inc. | 62,862,954 | 76,909,893 | ||||||||||
Qualcomm, Inc. | 4,603,700 | 238,655,808 | ||||||||||
Taiwan Semiconductor Manufacturing Co., Ltd. | 54,341,000 | 387,970,799 | ||||||||||
|
| |||||||||||
| 703,536,500 | ||||||||||||
|
| |||||||||||
Annual Report | 13
Schedule of Investments, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
TELECOMMUNICATION SERVICES — 17.42% | ||||||||||||
Diversified Telecommunication Services — 11.54% | ||||||||||||
AT&T, Inc. | 6,104,800 | $ | 239,125,016 | |||||||||
BT Group plc | 82,279,884 | 313,013,928 | ||||||||||
CenturyLink, Inc. | 4,727,200 | 89,344,080 | ||||||||||
Jasmine Broadband Internet Infrastructure Fund | 183,724,000 | 63,353,103 | ||||||||||
Koninklijke KPN N.V. | 63,168,500 | 216,884,029 | ||||||||||
Orange SA | 30,211,900 | 494,905,340 | ||||||||||
Singapore Telecommunications Ltd. | 55,641,215 | 150,542,415 | ||||||||||
Telenor ASA | 11,600,200 | 245,272,607 | ||||||||||
Telstra Corp., Ltd. | 16,136,000 | 44,173,196 | ||||||||||
Wireless Telecommunication Services — 5.88% | ||||||||||||
China Mobile Ltd. | 63,038,574 | 638,729,983 | ||||||||||
MTN Group Ltd. | 10,663,810 | 97,968,032 | ||||||||||
Vodafone Group plc | 75,109,324 | 210,149,783 | ||||||||||
|
| |||||||||||
| 2,803,461,512 | ||||||||||||
|
| |||||||||||
TRANSPORTATION — 3.41% | ||||||||||||
Transportation Infrastructure — 3.41% | ||||||||||||
Atlantia S.p.A. | 14,346,202 | 452,888,925 | ||||||||||
China Merchants Holdings International Co. Ltd. | 7,464,830 | 23,030,161 | ||||||||||
Sydney Airport | 13,247,554 | 73,882,708 | ||||||||||
|
| |||||||||||
| 549,801,794 | ||||||||||||
|
| |||||||||||
UTILITIES — 3.93% | ||||||||||||
Electric Utilities — 3.66% | ||||||||||||
Electricite de France SA | 27,037,083 | 328,339,049 | ||||||||||
Enel S.p.A. | 32,639,400 | 196,547,365 | ||||||||||
Terna Rete Elettrica Nazionale S.p.A. | 10,874,721 | 63,518,720 | ||||||||||
Multi-Utilities — 0.27% | ||||||||||||
National Grid plc | 3,510,999 | 43,499,994 | ||||||||||
|
| |||||||||||
| 631,905,128 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCK (Cost $12,218,034,614) | 14,429,469,312 | |||||||||||
|
| |||||||||||
| PREFERRED STOCK — 0.34% | ||||||||||||
BANKS — 0.06% | ||||||||||||
Banks — 0.06% | ||||||||||||
| c | First Tennessee Bank Pfd, 3.75% | 12,000 | 9,661,126 | |||||||||
|
| |||||||||||
| 9,661,126 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 0.02% | ||||||||||||
Capital Markets — 0.02% | ||||||||||||
Morgan Stanley Pfd, 4.00% | 120,000 | 2,767,200 | ||||||||||
|
| |||||||||||
| 2,767,200 | ||||||||||||
|
| |||||||||||
ENERGY — 0.08% | ||||||||||||
Oil, Gas & Consumable Fuels — 0.08% | ||||||||||||
| b | Crestwood Equity Partners LP | 1,452,341 | 13,782,716 | |||||||||
|
| |||||||||||
| 13,782,716 | ||||||||||||
|
| |||||||||||
MISCELLANEOUS — 0.07% | ||||||||||||
U.S. Government Agencies — 0.07% | ||||||||||||
Farm Credit Bank of Texas Pfd, 10.00% | 9,000 | 11,002,500 | ||||||||||
|
| |||||||||||
| 11,002,500 | ||||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — 0.11% | ||||||||||||
Wireless Telecommunication Services — 0.11% | ||||||||||||
| c | Centaur Funding Corp. Pfd, 9.08% | 15,000 | 17,400,000 | |||||||||
|
| |||||||||||
| 17,400,000 | ||||||||||||
|
| |||||||||||
TOTAL PREFERRED STOCK (Cost $54,048,712) | 54,613,542 | |||||||||||
|
| |||||||||||
14 | Annual Report
Schedule of Investments, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
| ASSET BACKED SECURITIES — 0.15% | ||||||||||||
COMMERCIAL MTG TRUST — 0.01% | ||||||||||||
Citigroup Commercial Mortgage Trust, Series 2004-HYB2 Class B1, 3.399%, 3/25/2034 | $ | 544,581 | $ | 445,214 | ||||||||
| c | Credit Suisse Mortgage Trust, Series 2016-BDWN Class E, 12.734%, 2/15/2029 | 2,000,000 | 2,011,241 | |||||||||
|
| |||||||||||
| 2,456,455 | ||||||||||||
|
| |||||||||||
OTHER ASSET BACKED — 0.07% | ||||||||||||
| c | Fairway Outdoor Funding, LLC, Series 2012-1 Class B, 8.835%, 10/15/2042 | 7,000,000 | 7,102,592 | |||||||||
| c | JPR Royalty, LLC, 10.50%, 9/1/2020 | 5,000,000 | 2,500,000 | |||||||||
| c,d | Northwind Holdings, LLC, Series 2007-1A Class A1 Floating Rate Note, 2.096%, 12/1/2037 | 1,881,250 | 1,774,019 | |||||||||
|
| |||||||||||
| 11,376,611 | ||||||||||||
|
| |||||||||||
RESIDENTIAL MTG TRUST — 0.07% | ||||||||||||
Bear Stearns ARM Mortgage, Series 2003-6 Class 2B-1, 3.364%, 8/25/2033 | 109,104 | 82,059 | ||||||||||
FBR Securitization Trust, Series 2005-2 Class M1, 1.957%, 9/25/2035 | 5,748,555 | 5,751,958 | ||||||||||
Merrill Lynch Mortgage Investors Trust, Series 2004-A4 Class M1, 3.28%, 8/25/2034 | 4,104,693 | 3,700,162 | ||||||||||
Morgan Stanley Capital, Inc., Series 2005-HE7 Class A2C, 1.557%, 11/25/2035 | 1,460,288 | 1,462,274 | ||||||||||
|
| |||||||||||
| 10,996,453 | ||||||||||||
|
| |||||||||||
TOTAL ASSET BACKED SECURITIES (Cost $26,715,716) | 24,829,519 | |||||||||||
|
| |||||||||||
| CORPORATE BONDS — 7.06% | ||||||||||||
AUTOMOBILES & COMPONENTS — 0.03% | ||||||||||||
Auto Components — 0.03% | ||||||||||||
| c,e | Nexteer Automotive Group Ltd., 5.875%, 11/15/2021 | 4,300,000 | 4,472,000 | |||||||||
|
| |||||||||||
| 4,472,000 | ||||||||||||
|
| |||||||||||
BANKS — 0.07% | ||||||||||||
Banks — 0.07% | ||||||||||||
| c,e | Groupe BPCE, 12.50%, 8/29/2049 | 10,211,000 | 12,125,562 | |||||||||
|
| |||||||||||
| 12,125,562 | ||||||||||||
|
| |||||||||||
CAPITAL GOODS — 0.21% |
| |||||||||||
Aerospace & Defense — 0.06% | ||||||||||||
| c | CBC Ammo, LLC, 7.25%, 11/15/2021 | 9,265,000 | 9,357,650 | |||||||||
Construction & Engineering — 0.10% | ||||||||||||
| c | Zachry Holdings, Inc., 7.50%, 2/1/2020 | 15,420,000 | 15,882,600 | |||||||||
Machinery — 0.05% | ||||||||||||
Mueller Industries, Inc., 6.00%, 3/1/2027 | 7,679,000 | 7,909,370 | ||||||||||
|
| |||||||||||
| 33,149,620 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 0.17% | ||||||||||||
Diversified Consumer Services — 0.17% | ||||||||||||
| c | Laureate Education, Inc., 8.25%, 5/1/2025 | 25,000,000 | 26,937,500 | |||||||||
|
| |||||||||||
| 26,937,500 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 0.41% | ||||||||||||
Consumer Finance — 0.05% | ||||||||||||
| c | FirstCash, Inc., 5.375%, 6/1/2024 | 7,500,000 | 7,818,750 | |||||||||
Diversified Financial Services — 0.36% | ||||||||||||
Bank of America Corp. (BRL), 10.75%, 8/20/2018 | 5,000,000 | 1,640,213 | ||||||||||
| c,e | CFG Holdings Ltd./CFG Finance, LLC, 11.50%, 11/15/2019 | 30,634,000 | 31,093,510 | |||||||||
JPMorgan Chase & Co., 7.90%, 12/29/2049 | 15,000,000 | 15,450,000 | ||||||||||
National Rural Utilities Cooperative Finance Corp., 10.375%, 11/1/2018 | 5,000,000 | 5,460,746 | ||||||||||
| c | TMX Finance, LLC/Titlemax Finance, 8.50%, 9/15/2018 | 5,385,000 | 4,981,125 | |||||||||
|
| |||||||||||
| 66,444,344 | ||||||||||||
|
| |||||||||||
ENERGY — 2.37% | ||||||||||||
Energy Equipment & Services — 0.06% | ||||||||||||
Enviva Partners, LP, 8.50%, 11/1/2021 | 7,500,000 | 7,987,500 | ||||||||||
| c,e,f | Schahin II Finance Co. (SPV) Ltd., 5.875%, 9/25/2023 | 11,640,133 | 1,164,013 | |||||||||
Annual Report | 15
Schedule of Investments, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
Oil, Gas & Consumable Fuels — 2.31% | ||||||||||||
| c | Citgo Petroleum Corp., 6.25%, 8/15/2022 | $ | 27,000,000 | $ | 27,810,000 | |||||||
| c | DCP Midstream, LLC, 9.75%, 3/15/2019 | 5,000,000 | 5,462,500 | |||||||||
Enbridge Energy Partners LP, 9.875%, 3/1/2019 | 9,750,000 | 10,779,918 | ||||||||||
Energy Transfer Partners LP, 4.328%, 11/1/2066 | 13,820,000 | 12,472,550 | ||||||||||
Enterprise Products Operating LP, 7.034%, 1/15/2068 | 14,480,000 | 14,624,800 | ||||||||||
| c,e | Gaz Capital SA, 8.146%, 4/11/2018 | 2,000,000 | 2,060,400 | |||||||||
HollyFrontier Corp., 5.875%, 4/1/2026 | 25,000,000 | 27,208,506 | ||||||||||
Kinder Morgan Energy Partners LP, 5.00%, 3/1/2043 | 10,000,000 | 9,954,389 | ||||||||||
Kinder Morgan Energy Partners LP, 9.00%, 2/1/2019 | 8,000,000 | 8,690,708 | ||||||||||
Kinder Morgan Energy Partners LP, 5.80%, 3/15/2035 | 10,000,000 | 10,816,422 | ||||||||||
Kinder Morgan, Inc., 5.55%, 6/1/2045 | 5,000,000 | 5,387,096 | ||||||||||
Kinder Morgan, Inc., 5.30%, 12/1/2034 | 23,630,000 | 24,670,352 | ||||||||||
| c,f | Linc Energy, 9.625%, 10/31/2017 | 16,148,704 | 670,171 | |||||||||
NuStar Logistics LP, 8.15%, 4/15/2018 | 18,000,000 | 18,540,000 | ||||||||||
| c,e,f | Odebrecht Offshore Drilling Finance Ltd., 6.75%, 10/1/2023 | 19,146,870 | 6,845,006 | |||||||||
ONEOK Partners LP, 8.625%, 3/1/2019 | 8,000,000 | 8,687,028 | ||||||||||
| c,e | Petro Co., Trinidad Tobago Ltd., 9.75%, 8/14/2019 | 4,000,000 | 4,232,120 | |||||||||
| b,f | RAAM Global Energy Co., 12.50%, 10/1/2015 | 15,000,000 | 150,000 | |||||||||
Summit Midstream Holdings, LLC, 5.50%, 8/15/2022 | 8,172,000 | 8,212,860 | ||||||||||
Teppco Partners LP, 4.093%, 6/1/2067 | 7,000,000 | 6,794,133 | ||||||||||
The Williams Companies, Inc., 5.75%, 6/24/2044 | 14,198,000 | 15,014,385 | ||||||||||
The Williams Companies, Inc., 3.70%, 1/15/2023 | 29,129,000 | 28,983,355 | ||||||||||
The Williams Companies, Inc., 4.55%, 6/24/2024 | 69,318,000 | 71,744,130 | ||||||||||
Transcontinental Gas Pipe Line Co., LLC, 7.85%, 2/1/2026 | 32,700,000 | 42,240,143 | ||||||||||
|
| |||||||||||
| 381,202,485 | ||||||||||||
|
| |||||||||||
FOOD & STAPLES RETAILING — 0.05% | ||||||||||||
Food & Staples Retailing — 0.05% | ||||||||||||
| c | C&S Group Enterprises, LLC, 5.375%, 7/15/2022 | 7,860,000 | 7,781,400 | |||||||||
|
| |||||||||||
| 7,781,400 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 0.14% | ||||||||||||
Food Products — 0.04% | ||||||||||||
| c,e | BRF S.A., 4.75%, 5/22/2024 | 6,000,000 | 6,074,400 | |||||||||
Tobacco — 0.10% | ||||||||||||
| c | Vector Group Ltd., 6.125%, 2/1/2025 | 16,000,000 | 16,560,000 | |||||||||
|
| |||||||||||
| 22,634,400 | ||||||||||||
|
| |||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 0.05% | ||||||||||||
Household Products — 0.05% | ||||||||||||
| c | Energizer Holdings, Inc., 5.50%, 6/15/2025 | 7,500,000 | 7,893,750 | |||||||||
|
| |||||||||||
| 7,893,750 | ||||||||||||
|
| |||||||||||
INSURANCE — 0.57% | ||||||||||||
Insurance — 0.57% | ||||||||||||
| c,e | Dai Ichi Mutual Life Insurance Co., Ltd., 7.25%, 12/29/2049 | 9,000,000 | 10,260,000 | |||||||||
Hartford Financial Services Group, 8.125%, 6/15/2068 | 9,650,000 | 10,011,875 | ||||||||||
MetLife, Inc., 6.817%, 8/15/2018 | 4,000,000 | 4,175,950 | ||||||||||
| c | MetLife, Inc., 9.25%, 4/8/2038 | 12,000,000 | 17,820,000 | |||||||||
| c | National Life Insurance of Vermont, 10.50%, 9/15/2039 | 2,000,000 | 3,319,311 | |||||||||
| c,e | QBE Insurance Group Ltd., 7.50%, 11/24/2043 | 40,000,000 | 46,250,000 | |||||||||
|
| |||||||||||
| 91,837,136 | ||||||||||||
|
| |||||||||||
MATERIALS — 0.46% | ||||||||||||
Chemicals — 0.20% | ||||||||||||
| c,e | Consolidated Energy Finance S.A., 6.75%, 10/15/2019 | 4,330,000 | 4,405,775 | |||||||||
| c,e | Consolidated Energy Finance S.A., 6.875%, 6/15/2025 | 13,000,000 | 13,633,750 | |||||||||
| c,e | Kissner Group Holdings, 8.375%, 12/1/2022 | 14,520,000 | 14,665,200 | |||||||||
Construction Materials — 0.17% | ||||||||||||
| c,e | Cimpor Financial Operations B.V., 5.75%, 7/17/2024 | 15,855,000 | 14,923,519 | |||||||||
CRH America, Inc., 8.125%, 7/15/2018 | 12,000,000 | 12,573,580 | ||||||||||
16 | Annual Report
Schedule of Investments, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
Metals & Mining — 0.09% | ||||||||||||
| c | International Wire Group, Inc., 10.75%, 8/1/2021 | $ | 15,780,000 | $ | 14,557,050 | |||||||
|
| |||||||||||
| 74,758,874 | ||||||||||||
|
| |||||||||||
MEDIA — 0.29% | ||||||||||||
Media — 0.29% | ||||||||||||
| c | EMI Music Publishing Ltd., 7.625%, 6/15/2024 | 5,000,000 | 5,562,500 | |||||||||
| c,e | SFR Group SA, 7.375%, 5/1/2026 | 23,480,000 | 25,358,400 | |||||||||
Time Warner Cable, Inc., 8.75%, 2/14/2019 | 14,000,000 | 15,207,377 | ||||||||||
|
| |||||||||||
| 46,128,277 | ||||||||||||
|
| |||||||||||
REAL ESTATE — 0.07% | ||||||||||||
Real Estate Management & Development — 0.07% | ||||||||||||
| c,e | Avison Young (Canada), Inc., 9.50%, 12/15/2021 | 11,595,000 | 11,725,444 | |||||||||
|
| |||||||||||
| 11,725,444 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 0.11% | ||||||||||||
Information Technology Services — 0.06% | ||||||||||||
| c | Alliance Data Systems Corp., 5.375%, 8/1/2022 | 10,000,000 | 10,300,000 | |||||||||
Internet Software & Services — 0.05% | ||||||||||||
| c,d | Yahoo!, Inc., 6.65%, 8/10/2026 | 6,497,537 | 7,329,222 | |||||||||
|
| |||||||||||
| 17,629,222 | ||||||||||||
|
| |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.04% | ||||||||||||
Electronic Equipment, Instruments & Components — 0.04% | ||||||||||||
| c | Harland Clarke Holdings, 8.375%, 8/15/2022 | 6,500,000 | 6,955,000 | |||||||||
|
| |||||||||||
| 6,955,000 | ||||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — 1.59% | ||||||||||||
Diversified Telecommunication Services — 1.02% | ||||||||||||
| e | Deutsche Telekom International Finance BV, 8.75%, 6/15/2030 | 26,150,000 | 38,405,402 | |||||||||
Qwest Corp., 6.75%, 12/1/2021 | 9,000,000 | 9,827,850 | ||||||||||
| e | Telefonica Emisiones SAU, 7.045%, 6/20/2036 | 85,390,000 | 113,107,963 | |||||||||
| c,e,f | Telemar Norte Leste SA, 0%, 10/23/2020 | 9,065,000 | 3,127,425 | |||||||||
Wireless Telecommunication Services — 0.57% | ||||||||||||
| c,e | Digicel Ltd., 6.00%, 4/15/2021 | 51,737,000 | 50,502,555 | |||||||||
| c,e | Millicom International Cellular S.A., 6.00%, 3/15/2025 | 28,423,000 | 30,412,610 | |||||||||
| c,e | VimpelCom Holdings B.V., 7.504%, 3/1/2022 | 8,735,000 | 10,055,732 | |||||||||
|
| |||||||||||
| 255,439,537 | ||||||||||||
|
| |||||||||||
TRANSPORTATION — 0.11% | ||||||||||||
Airlines — 0.11% | ||||||||||||
American Airlines Group, Inc., 4.95%, 7/15/2024 | 3,884,480 | 4,161,560 | ||||||||||
| c,e | Guanay Finance Ltd., 6.00%, 12/15/2020 | 10,567,494 | 10,831,681 | |||||||||
US Airways, 6.25%, 10/22/2024 | 1,837,938 | 2,063,085 | ||||||||||
|
| |||||||||||
| 17,056,326 | ||||||||||||
|
| |||||||||||
UTILITIES — 0.32% | ||||||||||||
Electric Utilities — 0.09% | ||||||||||||
Arizona Public Service Co., 8.75%, 3/1/2019 | 6,500,000 | 7,100,361 | ||||||||||
Entergy Gulf States Louisiana, LLC, 6.00%, 5/1/2018 | 8,000,000 | 8,198,437 | ||||||||||
Multi-Utilities — 0.23% | ||||||||||||
Ameren Illinois Co., 9.75%, 11/15/2018 | 5,000,000 | 5,413,136 | ||||||||||
| c | Enable Oklahoma Intrastate Transmission, LLC, 6.25%, 3/15/2020 | 2,500,000 | 2,664,446 | |||||||||
NiSource Finance Corp., 6.40%, 3/15/2018 | 20,000,000 | 20,394,092 | ||||||||||
Sempra Energy, 9.80%, 2/15/2019 | 7,750,000 | 8,544,264 | ||||||||||
|
| |||||||||||
| 52,314,736 | ||||||||||||
|
| |||||||||||
TOTAL CORPORATE BONDS (Cost $1,015,262,529) | 1,136,485,613 | |||||||||||
|
| |||||||||||
Annual Report | 17
Schedule of Investments, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
| SHARES/ PRINCIPAL AMOUNT | VALUE | |||||||||||
| CONVERTIBLE BONDS — 0.04% | ||||||||||||
DIVERSIFIED FINANCIALS — 0.04% | ||||||||||||
Consumer Finance — 0.04% | ||||||||||||
EZCORP, Inc., 2.125%, 6/15/2019 | $ | 6,733,000 | $ | 6,556,259 | ||||||||
|
| |||||||||||
| 6,556,259 | ||||||||||||
|
| |||||||||||
TOTAL CONVERTIBLE BONDS (Cost $6,496,368) | 6,556,259 | |||||||||||
|
| |||||||||||
| MUNICIPAL BONDS — 0.02% | ||||||||||||
San Bernardino County California Redevelopment Agency (San Sevaine), 8.45%, 9/1/2030 | 2,555,000 | 2,872,254 | ||||||||||
|
| |||||||||||
TOTAL MUNICIPAL BONDS (Cost $2,509,411) | 2,872,254 | |||||||||||
|
| |||||||||||
| OTHER GOVERNMENT — 0.05% | ||||||||||||
Federative Republic of Brazil (BRL), 12.50%, 1/5/2022 | 20,000,000 | 7,183,430 | ||||||||||
|
| |||||||||||
TOTAL OTHER GOVERNMENT (Cost $12,711,127) | 7,183,430 | |||||||||||
|
| |||||||||||
| LOAN PARTICIPATIONS — 0.63% | ||||||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 0.07% | ||||||||||||
Professional Services — 0.07% | ||||||||||||
RGIS Services, LLC, 8.83%, 12/29/2017 | 11,951,222 | 10,890,551 | ||||||||||
ENERGY — 0.00% | ||||||||||||
Oil, Gas & Consumable Fuels — 0.00% | ||||||||||||
| d | Malamute Energy, Inc., 1.5%, 12/29/2017 | 212,641 | 212,641 | |||||||||
FOOD, BEVERAGE & TOBACCO — 0.04% | ||||||||||||
Tobacco — 0.04% | ||||||||||||
North Atlantic Holding Co., Inc., 7.32%, 12/19/2017 | 6,965,000 | 6,912,762 | ||||||||||
MEDIA — 0.09% | ||||||||||||
Media — 0.09% | ||||||||||||
ABG Intermediate Holdings, 8.00%, 9/26/2025 | 15,000,000 | 15,075,000 | ||||||||||
RETAILING — 0.15% | ||||||||||||
Specialty Retail — 0.15% | ||||||||||||
Redbox Automated Retail, LLC, 8.74%, 9/27/2021 | 24,500,000 | 24,622,500 | ||||||||||
SOFTWARE & SERVICES — 0.06% | ||||||||||||
Internet Software & Services — 0.06% | ||||||||||||
CareerBuilder, LLC, 8.08%, 7/26/2023 | 10,000,000 | 9,750,000 | ||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 0.11% | ||||||||||||
Electronic Equipment, Instruments & Components — 0.11% | ||||||||||||
Harland Clarke Holdings Corp., 7.33%, 12/31/2021 | 16,930,115 | 17,014,766 | ||||||||||
TRANSPORTATION — 0.11% | ||||||||||||
Airlines — 0.11% | ||||||||||||
| c,d,e | OS Two, LLC, 10.00%, 8/31/2020 | 4,375,591 | 3,452,342 | |||||||||
| c,d | WU Finance I, LLC, 7.82%, 12/1/2017 | 13,766,087 | 13,490,765 | |||||||||
|
| |||||||||||
TOTAL LOAN PARTICIPATIONS (Cost $100,409,320) | 101,421,327 | |||||||||||
|
| |||||||||||
| SHORT TERM INVESTMENTS — 1.70% | ||||||||||||
| a | Thornburg Capital Management Fund | 27,411,732 | 274,117,324 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $274,117,324) | 274,117,324 | |||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 99.63% (Cost $13,710,305,121) | $ | 16,037,548,580 | ||||||||||
| OTHER ASSETS LESS LIABILITIES — 0.37% | 59,934,856 | |||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 16,097,483,436 | ||||||||||
|
| |||||||||||
18 | Annual Report
Schedule of Investments, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
| OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2017 | |||||||||||||||||||||||||||||||||||
| CONTRACT DESCRIPTION | CONTRACT PARTY* | BUY/SELL | CONTRACT AMOUNT | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | ||||||||||||||||||||||||||||
Euro | SSB | Sell | 2,214,863,600 | 11/15/2017 | 2,623,720,174 | $ | 2,554,340 | $ | – | ||||||||||||||||||||||||||
Great Britain Pound | SSB | Sell | 560,984,900 | 10/10/2017 | 751,898,935 | – | (24,192,128 | ) | |||||||||||||||||||||||||||
Great Britain Pound | SSB | Sell | 100,254,200 | 10/10/2017 | 134,372,648 | 55,202 | – | ||||||||||||||||||||||||||||
Great Britain Pound | SSB | Buy | 73,440,000 | 10/10/2017 | 98,433,056 | 2,917,873 | – | ||||||||||||||||||||||||||||
South Korean Won | SSB | Sell | 113,954,000,000 | 11/10/2017 | 99,536,474 | 1,629,176 | – | ||||||||||||||||||||||||||||
South Korean Won | SSB | Buy | 12,048,000,000 | 11/10/2017 | 10,523,680 | – | (122,721 | ) | |||||||||||||||||||||||||||
Swiss Franc | SSB | Sell | 186,898,100 | 12/28/2017 | 194,155,234 | – | (395,120 | ) | |||||||||||||||||||||||||||
Thai Baht | BBH | Sell | 1,478,978,200 | 11/16/2017 | 44,366,827 | 176,684 | – | ||||||||||||||||||||||||||||
Chinese Yuan Renminbi | SSB | Sell | 5,343,485,800 | 10/24/2017 | 803,578,641 | – | (17,592,747 | ) | |||||||||||||||||||||||||||
Chinese Yuan Renminbi | SSB | Buy | 683,123,100 | 10/24/2017 | 102,731,279 | – | (161,102 | ) | |||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||
Total | $ | 7,333,275 | $ | (42,463,818 | ) | ||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) | $ | (35,130,543 | ) | ||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
* Counterparties include State Street Bank and Trust Company (“SSB”) and Brown Brothers Harriman & Co. (“BBH”).
Footnote Legend
| a | Investment in Affiliates - Shown below are holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940, including companies for which the Fund’s holding represented 5% or more of the company’s voting securities, and a series of the Thornburg Investment Trust in which the Fund invested for cash management purposes during the period: |
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2017 | MARKET VALUE SEPTEMBER 30, 2017 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | |||||||||||||||||||||||||||||||||
Apollo Investment Corp. | 24,800,000 | – | – | 24,800,000 | $ | 151,528,000 | $ | 10,416,000 | $ | – | $ | (16,962,247 | ) | ||||||||||||||||||||||||||||
Dynex Capital, Inc.* | 3,562,668 | – | 3,562,668 | 1,178,460 | (8,519,533 | ) | – | ||||||||||||||||||||||||||||||||||
Invesco Mortgage Capital, Inc.* | 13,839,800 | – | 13,839,800 | 10,521,452 | 7,582,150 | – | |||||||||||||||||||||||||||||||||||
MFA Financial, Inc. | 33,520,151 | 200,000 | – | 33,720,151 | 295,388,523 | 26,896,121 | – | 38,849,984 | |||||||||||||||||||||||||||||||||
Solar Capital Ltd. | 4,607,900 | – | – | 4,607,900 | 99,714,956 | 7,372,640 | – | (762,127 | ) | ||||||||||||||||||||||||||||||||
Thornburg Capital Management Fund | 23,399,287 | 327,565,045 | 323,552,600 | 27,411,732 | 274,117,324 | 2,310,993 | – | – | |||||||||||||||||||||||||||||||||
Two Harbors Investment Corp.* | 23,875,000 | – | 8,590,000 | 17,525,292 | (14,951,348 | ) | – | ||||||||||||||||||||||||||||||||||
Washington REIT* | 5,300,000 | – | 2,084,400 | 3,371,802 | 7,442,515 | – | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 6.71% of net assets | $ | 820,748,803 | $ | 79,592,760 | $ | (8,446,216 | ) | $ | 21,125,610 | ||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||
*Issuers not affiliated at September 30, 2017.
| b | Non-income producing. |
| c | Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. As of September 30, 2017, the aggregate value of these securities in the Fund’s portfolio was $571,274,162, representing 3.55% of the Fund’s net assets. |
| d | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees’ Audit Committee. |
| 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 Depositary Receipt | |
| ARM | Adjustable Rate Mortgage | |
| BRL | Denominated in Brazilian Real | |
| CHL | Denominated in Chilean Peso | |
| MFA | Mortgage Finance Authority | |
| MTN | Medium-Term Note | |
| Pfd | Preferred Stock | |
| REIT | Real Estate Investment Trust | |
| SPV | Special Purpose Vehicle |
See notes to financial statements.
Annual Report | 19
Statement of Assets and Liabilities
Thornburg Investment Income Builder Fund | September 30, 2017
ASSETS | ||||
Investments at value (Note 3) | ||||
Non-affiliated issuers (cost $12,910,681,929) | $ | 15,216,799,777 | ||
Non-controlled affiliated issuers (cost $799,623,192) | 820,748,803 | |||
Cash | 19,376,562 | |||
Cash denominated in foreign currency (cost $5,929,882) | 5,938,353 | |||
Receivable for investments sold | 31,054,559 | |||
Receivable for fund shares sold | 16,934,227 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 7,333,275 | |||
Dividends receivable | 30,298,063 | |||
Dividend and interest reclaim receivable | 38,713,690 | |||
Interest receivable | 20,637,896 | |||
Prepaid expenses and other assets | 39,120 | |||
|
| |||
Total Assets | 16,207,874,325 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 14,895,095 | |||
Payable for fund shares redeemed | 20,572,990 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 42,463,818 | |||
Payable to investment advisor and other affiliates (Note 4) | 14,669,944 | |||
Deferred taxes payable (Note 2) | 1,239,517 | |||
Accounts payable and accrued expenses | 3,879,837 | |||
Dividends payable | 12,669,688 | |||
|
| |||
Total Liabilities | 110,390,889 | |||
|
| |||
NET ASSETS | $ | 16,097,483,436 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 73,457,156 | ||
Net unrealized appreciation on investments | 2,291,872,088 | |||
Accumulated net realized gain (loss) | (965,303,396 | ) | ||
Net capital paid in on shares of beneficial interest | 14,697,457,588 | |||
|
| |||
| $ | 16,097,483,436 | |||
|
| |||
20 | Annual Report
Statement of Assets and Liabilities, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 21.50 | ||
Maximum sales charge, 4.50% of offering price | 1.01 | |||
|
| |||
Maximum offering price per share | $ | 22.51 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* | $ | 21.48 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 21.65 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 21.49 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 21.52 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 21.64 | ||
|
| |||
Class R6 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 21.58 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
Annual Report | 21
Thornburg Investment Income Builder Fund | Year Ended September 30, 2017
INVESTMENT INCOME | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $64,394,214) | $ | 718,541,538 | ||
Non-controlled affiliated issuers | 79,592,760 | |||
Interest income (net of premium amortized of $1,068,943) | 115,909,628 | |||
|
| |||
Total Income | 914,043,926 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 109,926,960 | |||
Administration fees (Note 4) | ||||
Class A Shares | 4,389,211 | |||
Class C Shares | 6,162,050 | |||
Class I Shares | 3,631,018 | |||
Class R3 Shares | 91,636 | |||
Class R4 Shares | 56,108 | |||
Class R5 Shares | 42,996 | |||
Class R6 Shares | 3,936 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 8,763,852 | |||
Class C Shares | 49,205,124 | |||
Class R3 Shares | 365,583 | |||
Class R4 Shares | 111,112 | |||
Transfer agent fees | ||||
Class A Shares | 2,779,135 | |||
Class C Shares | 3,708,040 | |||
Class I Shares | 5,999,200 | |||
Class R3 Shares | 168,062 | |||
Class R4 Shares | 166,415 | |||
Class R5 Shares | 241,704 | |||
Class R6 Shares* | 4,580 | |||
Registration and filing fees | ||||
Class A Shares | 54,477 | |||
Class C Shares | 38,904 | |||
Class I Shares | 109,857 | |||
Class R4 Shares | 16,877 | |||
Class R5 Shares | 21,283 | |||
Class R6 Shares* | 19,854 | |||
Custodian fees (Note 2) | 3,180,942 | |||
Professional fees | 493,900 | |||
Accounting fees (Note 4) | 539,315 | |||
Trustee fees | 658,590 | |||
Other expenses | 1,408,295 | |||
|
| |||
Total Expenses | 202,359,016 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (1,753,775 | ) | ||
|
| |||
Net Expenses | 200,605,241 | |||
|
| |||
Net Investment Income | $ | 713,438,685 | ||
|
| |||
* Class R6 Shares commenced operations on April 10, 2017.
22 | Annual Report
Statement of Operations, Continued
Thornburg Investment Income Builder Fund | Year Ended September 30, 2017
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on: | ||||
Investments | ||||
Non-affiliated issuers (net of realized capital gain taxes paid of $153,169) | $ | 185,948,281 | ||
Non-controlled affiliated issuers | (8,446,216 | ) | ||
Forward currency contracts (Note 7) | (102,372,550 | ) | ||
Foreign currency transactions | (172,771 | ) | ||
|
| |||
| 74,956,744 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | ||||
Non-affiliated issuers (net of change in deferred capital gain taxes of $274,469) | 1,145,236,476 | |||
Non-controlled affiliated issuers | 58,819,778 | |||
Forward currency contracts (Note 7) | (59,051,611 | ) | ||
Foreign currency translations | 1,107,771 | |||
|
| |||
| 1,146,112,414 | ||||
|
| |||
Net Realized and Unrealized Gain | 1,221,069,158 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 1,934,507,843 | ||
|
| |||
See notes to financial statements.
Annual Report | 23
Statements of Changes in Net Assets
Thornburg Investment Income Builder Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 713,438,685 | $ | 797,779,249 | ||||||
Net realized gain (loss) on investments, forward currency contracts, foreign currency transactions, and capital gain taxes | 74,956,744 | (918,976,358 | ) | |||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations, and deferred taxes | 1,146,112,414 | 1,416,784,014 | ||||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 1,934,507,843 | 1,295,586,905 | ||||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (145,807,664 | ) | (165,152,557 | ) | ||||||
Class C Shares | (169,819,712 | ) | (194,621,516 | ) | ||||||
Class I Shares | (326,276,247 | ) | (318,850,073 | ) | ||||||
Class R3 Shares | (2,817,410 | ) | (3,068,837 | ) | ||||||
Class R4 Shares | (1,773,997 | ) | (1,745,250 | ) | ||||||
Class R5 Shares | (3,754,769 | ) | (3,692,411 | ) | ||||||
Class R6 Shares* | (418,446 | ) | – | |||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class A Shares | (684,365,525 | ) | (621,247,635 | ) | ||||||
Class C Shares | (1,070,786,197 | ) | (754,505,642 | ) | ||||||
Class I Shares | 282,343,203 | (797,345,150 | ) | |||||||
Class R3 Shares | (16,459,277 | ) | (4,651,940 | ) | ||||||
Class R4 Shares | (5,515,961 | ) | 1,865,239 | |||||||
Class R5 Shares | (1,790,155 | ) | 4,254,268 | |||||||
Class R6 Shares* | 35,727,882 | – | ||||||||
|
| |||||||||
Net Decrease in Net Assets | (177,006,432 | ) | (1,563,174,599 | ) | ||||||
NET ASSETS | ||||||||||
Beginning of Year | 16,274,489,868 | 17,837,664,467 | ||||||||
|
| |||||||||
End of Year | $ | 16,097,483,436 | $ | 16,274,489,868 | ||||||
|
| |||||||||
Undistributed net investment income | $ | 73,457,156 | $ | 28,786,241 | ||||||
* Class R6 Shares commenced operations on April 10, 2017.
See notes to financial statements.
24 | Annual Report
Thornburg Investment Income Builder Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg Investment Income Builder 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 twenty-one 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 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 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 be subject to a service fee, (vii) Class R6 shares are sold at net asset value without a sales charge at the time of purchase, and (viii) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent 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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: 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. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
Annual Report | 25
Notes to Financial Statements, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
Unfunded Loan Commitments: The Fund has entered into a loan commitment with Malamute Energy, Inc., of which at September 30, 2017, $212,641 of the $624,683 par commitment had been funded. The maturity date is December 29, 2017.
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 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.
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 (depreciation) from investments.
Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and 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 (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
26 | Annual Report
Notes to Financial Statements, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 13,794,304,643 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 2,866,831,212 | |||
Gross unrealized depreciation on a tax basis | (658,717,818 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 2,208,113,394 | |||
|
|
Temporary book to tax adjustments to cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of outstanding wash sales, outstanding tax basis adjustments for publicly traded partnerships (“PTP”), passive foreign investment companies (“PFIC”), and real estate investment trusts (“REITs”), and marked-to-market of foreign currency contracts.
At September 30, 2017, the Fund had deferred tax basis late year specified ordinary losses subsequent to October 31, 2016 through September 30, 2017 of $7,868,551. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $93,840,885. For tax purposes, such capital losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $796,043,865, (of which $324,683,523 are short-term and $471,360,342 are 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.
In order to account for permanent book to tax differences, the Fund decreased undistributed net investment income $18,099,525, decreased accumulated net realized loss by $19,212,230, and decreased net capital paid in on shares of beneficial interest by $1,112,705. Reclassifications have no impact upon the net asset value of the Fund and resulted primarily from foreign investment transactions, investments in foreign bonds, publicly traded partnerships (“PTP”), and real estate investment trusts (“REITs”), and foreign capital gain taxes.
At September 30, 2017, the Fund had $102,576,269 of undistributed tax basis ordinary investment income and no undistributed tax basis capital gains.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Ordinary income | $ | 650,668,245 | $ | 687,130,644 | ||||||
|
| |||||||||
Total | $ | 650,668,245 | $ | 687,130,644 | ||||||
|
| |||||||||
Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assessment of a jurisdiction’s legal obligtion to pay reclaims, the jurisdiction’s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain.
Deferred Foreign Capital Gain 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.
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other
Annual Report | 27
Notes to Financial Statements, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund’s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date.
In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment’s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data.
Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3(b) | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities* | ||||||||||||||||||||
Common Stock(a) | $ | 14,429,469,312 | $ | 14,365,985,599 | $ | 63,353,103 | $ | 130,610 | ||||||||||||
Preferred Stock(a) | 54,613,542 | 2,767,200 | 38,063,626 | 13,782,716 | ||||||||||||||||
Asset Backed Securities | 24,829,519 | – | 23,055,500 | 1,774,019 | ||||||||||||||||
Corporate Bonds | 1,136,485,613 | – | 1,128,486,220 | 7,999,393 | ||||||||||||||||
Convertible Bonds | 6,556,259 | – | 6,556,259 | – | ||||||||||||||||
Municipal Bonds | 2,872,254 | – | 2,872,254 | – | ||||||||||||||||
Other Government | 7,183,430 | – | 7,183,430 | – | ||||||||||||||||
Loan Participations | 101,421,327 | – | 84,265,579 | 17,155,748 | ||||||||||||||||
Short Term Investments | 274,117,324 | 274,117,324 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 16,037,548,580 | $ | 14,642,870,123 | $ | 1,353,835,971 | $ | 40,842,486 | ||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Forward Currency Contracts | $ | 7,333,275 | $ | – | $ | 7,333,275 | $ | – | ||||||||||||
28 | Annual Report
Notes to Financial Statements, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
| FAIR VALUE MEASUREMENTS AT SEPTEMBER 30, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3(b) | |||||||||||||||||
Liabilities | ||||||||||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Forward Currency Contracts | $ | (42,463,818 | ) | $ | – | $ | (42,463,818 | ) | $ | – | ||||||||||
Spot Currency | $ | (7,595 | ) | $ | (7,595 | ) | $ | – | $ | – | ||||||||||
| * | 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. |
| (a) | At September 30, 2017, industry classifications for Common Stock and Preferred Stock in Level 2 and Level 3 consist of $9,661,126 in Banks, $13,913,326 in Energy, $11,002,500 in Miscellaneous, and $80,753,103 in Telecommunication Services. |
| (b) | In accordance with the guidance prescribed in Accounting Standards Update (“ASU”) No. 2011-04, unadjusted broker quotes were applied to $13,782,716 portfolio securities characterized as Level 3 investments at September 30, 2017. The following table displays a summary of the valuation techniques and unobservable inputs used to value portfolio securities characterized as Level 3 investments, where no unadjusted broker quotes were available at September 30, 2017: |
| FAIR VALUE AT SEPTEMBER 30, 2017 | VALUATION TECHNIQUE(S) | UNOBSERVABLE INPUT | RANGE/ (WEIGHTED AVERAGE) | |||||||||
Common Stock | $ | 130,610 | Discount to valuation | Fair valued by the Committee due to halt in trading and lack of information and liquidity | $10.50/(N/A) | |||||||
Asset-Backed Securities | 1,774,019 | Discounted cash flows | Third party vendor projection of discounted cash flows | 5.0%/(N/A) | ||||||||
Corporate Bond | 670,171 | Discounted to valuation | Fair valued by the Committee due to halt in trading and lack of information and liquidity | $4.15/(N/A%) | ||||||||
| 7,329,222 | Discounted cash flows | Third party vendor projection of discounted cash flows | 3.9%/(N/A) | |||||||||
Loan Participations | 16,943,107 | Discounted cash flows | Third party vendor projection of discounted cash flows | 9.5%-25.0%/(12.6%) | ||||||||
| 212,641 | Discount to valuation | Fair valued by the Committee due to halt in trading and lack of information and liquidity | $100.00/(N/A) | |||||||||
Total | $ | 27,059,770 | ||||||||||
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, 2017, 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, 2017 is as follows:
| PREFERRED STOCK | ASSET BACKED SECURITIES | COMMON STOCK | CORPORATE BONDS | LOAN PARTICIPATIONS | TOTAL(e) | |||||||||||||||||||||||||
Beginning Balance 9/30/2016 | $ | – | $ | 2,237,813 | $ | – | $ | 7,605,592 | $ | 18,137,761 | $ | 27,981,166 | ||||||||||||||||||
Accrued Discounts (Premiums) | – | 13,417 | – | 56,718 | 15,497 | 85,632 | ||||||||||||||||||||||||
Net Realized Gain (Loss)(a) | – | 67,144 | – | 48,355 | (967,796 | ) | (852,297 | ) | ||||||||||||||||||||||
Gross Purchases | 14,142,462 | – | 130,610 | – | 2,821,336 | 17,094,408 | ||||||||||||||||||||||||
Gross Sales | – | (525,000 | ) | – | (3,669,647 | ) | (4,720,332 | ) | (8,914,979 | ) | ||||||||||||||||||||
Net Change in Unrealized Appreciation (Depreciation)(b)(c) | (359,746 | ) | (19,355 | ) | – | 71,775 | 1,869,282 | 1,561,956 | ||||||||||||||||||||||
Transfers into Level 3(d) | – | – | – | 3,886,600 | – | 3,886,600 | ||||||||||||||||||||||||
Transfers out of Level 3(d) | – | – | – | – | – | – | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Ending Balance 9/30/2017 | $ | 13,782,716 | $ | 1,774,019 | $ | 130,610 | $ | 7,999,393 | $ | 17,155,748 | $ | 40,842,486 | ||||||||||||||||||
| (a) | Amount of net realized gain (loss) from investments recognized in income is included in the Fund’s Statement of Operations for the year ended September 30, 2017. |
| (b) | Amount of net change in unrealized appreciation (depreciation) on investments recognized in income is included in the Fund’s Statement of Operations for the year ended September 30, 2017. |
Annual Report | 29
Notes to Financial Statements, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
| (c) | The net change in unrealized appreciation (depreciation) attributable to securities owned at September 30, 2017, which were valued using significant unobservable inputs, was $672,705. This is included within net change in unrealized appreciation (depreciation) on investments in the Fund’s the Statement of Operations for the year ended September 30, 2017. |
| (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, 2017. 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 0.25% of total net assets at the year ended September 30, 2017. Significant fluctuations of the unobservable inputs applied to portfolio securities characterized as Level 3 investments could be expected to increase or decrease the fair value of these portfolio securities. |
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| Management Fee Schedule | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.875 | % | |||
Next $500 million | 0.825 | ||||
Next $500 million | 0.775 | ||||
Next $500 million | 0.725 | ||||
Over $2 billion | 0.675 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.69% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $539,315 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $318,290 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $74,588 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A, Class C, Class I, Class R3, Class R4, and Class R5 shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I or Class R5. Class R6 shares are not subject to a service plan. The Advisor and Distributor each 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, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
30 | Annual Report
Notes to Financial Statements, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
For the year ended September 30, 2017, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $1,532,328 for Class C shares, $65,723 for Class R3 shares, $50,613 for Class R4 shares, $82,590 for Class R5 shares, and $22,521 for Class R6 shares.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 1.05%.
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.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had transactions with affiliated funds of $3,125,667 in purchases.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 14,566,252 | $ | 298,469,059 | 19,832,477 | $ | 379,977,526 | ||||||||||
Shares issued to shareholders in | 6,515,771 | 134,786,562 | 8,070,888 | 153,998,830 | ||||||||||||
Shares repurchased | (54,700,491 | ) | (1,117,621,146 | ) | (60,535,763 | ) | (1,155,223,991 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (33,618,468 | ) | $ | (684,365,525 | ) | (32,632,398 | ) | $ | (621,247,635 | ) | ||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 9,304,338 | $ | 189,891,258 | 18,917,018 | $ | 362,084,120 | ||||||||||
Shares issued to shareholders in | 7,239,895 | 149,671,164 | 8,898,237 | 169,695,424 | ||||||||||||
Shares repurchased | (69,148,037 | ) | (1,410,348,619 | ) | (67,268,251 | ) | (1,286,285,186 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (52,603,804 | ) | $ | (1,070,786,197 | ) | (39,452,996 | ) | $ | (754,508,642 | ) | ||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 84,715,252 | $ | 1,745,294,495 | 72,402,003 | $ | 1,398,940,681 | ||||||||||
Shares issued to shareholders in | 13,469,392 | 281,043,982 | 14,573,749 | 280,115,894 | ||||||||||||
Shares repurchased | (84,709,982 | ) | (1,743,995,274 | ) | (128,987,422 | ) | (2,476,401,725 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | 13,474,662 | $ | 282,343,203 | (42,011,670 | ) | $ | (797,345,150 | ) | ||||||||
|
| |||||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 633,260 | $ | 12,952,555 | 861,058 | $ | 16,544,230 | ||||||||||
Shares issued to shareholders in | 119,475 | 2,470,331 | 142,700 | 2,722,374 | ||||||||||||
Shares repurchased | (1,551,779 | ) | (31,882,163 | ) | (1,245,253 | ) | (23,918,544 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (799,044 | ) | $ | (16,459,277 | ) | (241,495 | ) | $ | (4,651,940 | ) | ||||||
|
| |||||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 552,681 | $ | 11,378,772 | 727,487 | $ | 14,065,623 | ||||||||||
Shares issued to shareholders in | 54,770 | 1,134,615 | 61,508 | 1,175,805 | ||||||||||||
Shares repurchased | (875,534 | ) | (18,029,348 | ) | (692,777 | ) | (13,376,189 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (268,083 | ) | $ | (5,515,961 | ) | 96,218 | $ | 1,865,239 | ||||||||
|
| |||||||||||||||
Annual Report | 31
Notes to Financial Statements, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 1,192,147 | $ | 24,606,916 | 1,447,762 | $ | 27,879,490 | ||||||||||
Shares issued to shareholders in | 165,956 | 3,460,075 | 170,327 | 3,272,878 | ||||||||||||
Shares repurchased | (1,455,231 | ) | (29,857,146 | ) | (1,393,727 | ) | (26,898,100 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (97,128 | ) | $ | (1,790,155 | ) | 224,362 | $ | 4,254,268 | ||||||||
|
| |||||||||||||||
Class R6 Shares* | ||||||||||||||||
Shares sold | 1,698,497 | $ | 35,467,321 | – | $ | – | ||||||||||
Shares issued to shareholders in | 17,998 | 386,382 | – | – | ||||||||||||
Shares repurchased | (5,895 | ) | (125,821 | ) | – | – | ||||||||||
|
| |||||||||||||||
Net increase | 1,710,600 | $ | 35,727,882 | – | $ | – | ||||||||||
|
| |||||||||||||||
* The effective date of this class of shares was April 10, 2017.
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments and U.S. Government obligations) of $5,857,775,291 and $7,522,510,297, respectively.
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 the 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, 2017, 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 Fund’s Advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2017 in the normal course of pursuing its investment objectives, with the objective of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments from adverse changes in the relationship between the U.S. dollar and foreign currencies. In each case these contracts have been initiated in conjunction with foreign investment transactions.
These contracts are accounted for by the Fund under ASC 815. Unrealized appreciation and depreciation on outstanding contracts are reported in the Fund’s Statement of Assets and Liabilities, as measured by the difference between the forward exchange rates at the reporting date and the forward exchange rates at each contract’s inception date. Net realized gain (loss) on contracts closed during the period, and changes in net unrealized appreciation (depreciation) on outstanding contracts are recognized in the Fund’s Statement of Operations.
The quarterly average value of open sell currency contracts for the year ended September 30, 2017 was $5,077,659,669. 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 outstanding forward currency contracts table located in the Schedule Of Investments which were entered into with State Street Bank and Trust Company (“SSB”), were entered into pursuant to an International Swaps and Derivatives Association (“ISDA”) Master Agreement. Outstanding forward currency contracts which were entered into 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 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.
32 | Annual Report
Notes to Financial Statements, Continued
Thornburg Investment Income Builder Fund | September 30, 2017
Because the ISDA Master Agreement with SSB and the agreement with BBH does not result in an offset of reported amounts of financial assets and 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 the purpose of disclosure in the Fund’s Statement of Assets and Liabilities. Instead the Fund recognizes the unrealized appreciation (depreciation) on those forward currency contracts on a gross basis in the Fund’s Statement of Assets and Liabilities.
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2017 is disclosed in the following table:
| FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2017 | ||||||
| ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 7,333,275 | |||
| FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2017 | ||||||
| LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (42,463,818 | ) | ||
The Fund receives or posts cash collateral in connection with its currency forward contracts for non-deliverable currencies. The Fund does not currently receive or post cash collateral in connection with its currency forward contracts for deliverable currencies. The net amounts of the Fund’s assets and liabilities which are attributable to deliverable currency contracts at September 30, 2017 can be determined by offsetting the dollar amounts shown in the preceding table. Based on those amounts, the net amount of the Fund’s liabilities which is attributable to its outstanding forward currency contracts at September 30, 2017 is $35,307,227 attributable to the Fund’s contracts with SSB, and the net amount of the Fund’s assets which is attributable to those contracts at that date is $176,684 attributable to the Fund’s contracts with BBH. 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) on outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2017 are disclosed in the following tables:
| NET REALIZED GAIN (LOSS) ON DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (102,372,550 | ) | $ | (102,372,550 | ) | ||
| NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (59,051,610 | ) | $ | (59,051,610 | ) | ||
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, the risks associated with investments in small- and mid-cap companies, credit risk, interest rate risk, high-yield risk, prepayment risk, foreign investment and developing country risks, liquidity risk, and real estate investment trust 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 33
Thornburg Investment Income Builder Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 19.82 | 0.92 | 1.61 | 2.53 | (0.85 | ) | – | (0.85 | ) | $ | 21.50 | ||||||||||||||||||||||||||||
2016(b) | $ | 19.07 | 0.93 | 0.62 | 1.55 | (0.80 | ) | – | (0.80 | ) | $ | 19.82 | ||||||||||||||||||||||||||||
2015(b) | $ | 21.38 | 0.85 | (2.34 | ) | (1.49 | ) | (0.82 | ) | – | (0.82 | ) | $ | 19.07 | ||||||||||||||||||||||||||
2014(b) | $ | 20.13 | 1.10 | 1.13 | 2.23 | (0.98 | ) | – | (0.98 | ) | $ | 21.38 | ||||||||||||||||||||||||||||
2013(b) | $ | 18.90 | 1.03 | 1.27 | 2.30 | (1.07 | ) | – | (1.07 | ) | $ | 20.13 | ||||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 19.81 | 0.78 | 1.60 | 2.38 | (0.71 | ) | – | (0.71 | ) | $ | 21.48 | ||||||||||||||||||||||||||||
2016 | $ | 19.06 | 0.79 | 0.62 | 1.41 | (0.66 | ) | – | (0.66 | ) | $ | 19.81 | ||||||||||||||||||||||||||||
2015 | $ | 21.37 | 0.70 | (2.34 | ) | (1.64 | ) | (0.67 | ) | – | (0.67 | ) | $ | 19.06 | ||||||||||||||||||||||||||
2014 | $ | 20.13 | 0.94 | 1.13 | 2.07 | (0.83 | ) | – | (0.83 | ) | $ | 21.37 | ||||||||||||||||||||||||||||
2013 | $ | 18.89 | 0.89 | 1.28 | 2.17 | (0.93 | ) | – | (0.93 | ) | $ | 20.13 | ||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 19.97 | 1.02 | 1.59 | 2.61 | (0.93 | ) | – | (0.93 | ) | $ | 21.65 | ||||||||||||||||||||||||||||
2016 | $ | 19.21 | 1.00 | 0.62 | 1.62 | (0.86 | ) | – | (0.86 | ) | $ | 19.97 | ||||||||||||||||||||||||||||
2015 | $ | 21.53 | 0.93 | (2.35 | ) | (1.42 | ) | (0.90 | ) | – | (0.90 | ) | $ | 19.21 | ||||||||||||||||||||||||||
2014 | $ | 20.27 | 1.16 | 1.15 | 2.31 | (1.05 | ) | – | (1.05 | ) | $ | 21.53 | ||||||||||||||||||||||||||||
2013 | $ | 19.03 | 1.10 | 1.28 | 2.38 | (1.14 | ) | – | (1.14 | ) | $ | 20.27 | ||||||||||||||||||||||||||||
| CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 19.82 | 0.87 | 1.59 | 2.46 | (0.79 | ) | – | (0.79 | ) | $ | 21.49 | ||||||||||||||||||||||||||||
2016 | $ | 19.07 | 0.87 | 0.62 | 1.49 | (0.74 | ) | – | (0.74 | ) | $ | 19.82 | ||||||||||||||||||||||||||||
2015 | $ | 21.37 | 0.78 | (2.32 | ) | (1.54 | ) | (0.76 | ) | – | (0.76 | ) | $ | 19.07 | ||||||||||||||||||||||||||
2014 | $ | 20.13 | 1.03 | 1.12 | 2.15 | (0.91 | ) | – | (0.91 | ) | $ | 21.37 | ||||||||||||||||||||||||||||
2013 | $ | 18.89 | 0.97 | 1.28 | 2.25 | (1.01 | ) | – | (1.01 | ) | $ | 20.13 | ||||||||||||||||||||||||||||
| CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 19.85 | 0.89 | 1.59 | 2.48 | (0.81 | ) | – | (0.81 | ) | $ | 21.52 | ||||||||||||||||||||||||||||
2016 | $ | 19.10 | 0.89 | 0.62 | 1.51 | (0.76 | ) | – | (0.76 | ) | $ | 19.85 | ||||||||||||||||||||||||||||
2015 | $ | 21.42 | 0.81 | (2.35 | ) | (1.54 | ) | (0.78 | ) | – | (0.78 | ) | $ | 19.10 | ||||||||||||||||||||||||||
2014 | $ | 20.17 | 1.04 | 1.16 | 2.20 | (0.95 | ) | – | (0.95 | ) | $ | 21.42 | ||||||||||||||||||||||||||||
2013 | $ | 18.93 | 0.99 | 1.29 | 2.28 | (1.04 | ) | – | (1.04 | ) | $ | 20.17 | ||||||||||||||||||||||||||||
| CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 19.95 | 0.98 | 1.61 | 2.59 | (0.90 | ) | – | (0.90 | ) | $ | 21.64 | ||||||||||||||||||||||||||||
2016 | $ | 19.20 | 0.98 | 0.62 | 1.60 | (0.85 | ) | – | (0.85 | ) | $ | 19.95 | ||||||||||||||||||||||||||||
2015 | $ | 21.52 | 0.90 | (2.35 | ) | (1.45 | ) | (0.87 | ) | – | (0.87 | ) | $ | 19.20 | ||||||||||||||||||||||||||
2014 | $ | 20.26 | 1.10 | 1.19 | 2.29 | (1.03 | ) | – | (1.03 | ) | $ | 21.52 | ||||||||||||||||||||||||||||
2013 | $ | 19.01 | 1.07 | 1.30 | 2.37 | (1.12 | ) | – | (1.12 | ) | $ | 20.26 | ||||||||||||||||||||||||||||
| CLASS R6 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(c) | $ | 20.55 | 0.44 | 1.12 | 1.56 | (0.53 | ) | – | (0.53 | ) | $ | 21.58 | ||||||||||||||||||||||||||||
| (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 April 10, 2017. |
| (d) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
34 | Annual Report
Financial Highlights, Continued
Thornburg Investment Income Builder Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 4.52 | 1.19 | 1.19 | 1.19 | 13.01 | 37.37 | $ | 3,374,895 | |||||||||||||||||||||||
| 4.82 | 1.18 | 1.18 | 1.18 | 8.35 | 42.81 | $ | 3,778,863 | |||||||||||||||||||||||
| 4.02 | 1.17 | 1.17 | 1.17 | (7.27 | ) | 47.71 | $ | 4,257,943 | ||||||||||||||||||||||
| 5.21 | 1.18 | 1.18 | 1.18 | 11.19 | 38.81 | $ | 4,588,033 | |||||||||||||||||||||||
| 5.26 | 1.18 | 1.18 | 1.18 | 12.51 | 46.14 | $ | 4,281,060 | |||||||||||||||||||||||
| 3.80 | 1.90 | 1.90 | 1.93 | 12.19 | 37.37 | $ | 4,677,322 | |||||||||||||||||||||||
| 4.11 | 1.90 | 1.90 | 1.93 | 7.59 | 42.81 | $ | 5,356,153 | |||||||||||||||||||||||
| 3.30 | 1.90 | 1.90 | 1.92 | (7.93 | ) | 47.71 | $ | 5,906,206 | ||||||||||||||||||||||
| 4.44 | 1.90 | 1.90 | 1.93 | 10.36 | 38.81 | $ | 6,266,270 | |||||||||||||||||||||||
| 4.55 | 1.90 | 1.90 | 1.94 | 11.78 | 46.14 | $ | 5,160,706 | |||||||||||||||||||||||
| 4.93 | 0.86 | 0.86 | 0.86 | 13.30 | 37.37 | $ | 7,804,930 | |||||||||||||||||||||||
| 5.15 | 0.86 | 0.86 | 0.86 | 8.71 | 42.81 | $ | 6,928,783 | |||||||||||||||||||||||
| 4.35 | 0.85 | 0.85 | 0.85 | (6.94 | ) | 47.71 | $ | 7,472,344 | ||||||||||||||||||||||
| 5.45 | 0.86 | 0.86 | 0.86 | 11.54 | 38.81 | $ | 7,454,275 | |||||||||||||||||||||||
| 5.58 | 0.85 | 0.85 | 0.85 | 12.94 | 46.14 | $ | 5,567,617 | |||||||||||||||||||||||
| 4.24 | 1.47 | 1.47 | 1.56 | 12.63 | 37.37 | $ | 67,623 | |||||||||||||||||||||||
| 4.53 | 1.50 | 1.50 | 1.59 | 8.01 | 42.81 | $ | 78,188 | |||||||||||||||||||||||
| 3.70 | 1.50 | 1.50 | 1.55 | (7.52 | ) | 47.71 | $ | 79,834 | ||||||||||||||||||||||
| 4.84 | 1.49 | 1.49 | 1.55 | 10.80 | 38.81 | $ | 83,670 | |||||||||||||||||||||||
| 4.96 | 1.49 | 1.49 | 1.70 | 12.23 | 46.14 | $ | 61,334 | |||||||||||||||||||||||
| 4.35 | 1.40 | 1.40 | 1.51 | 12.72 | 37.37 | $ | 44,069 | |||||||||||||||||||||||
| 4.63 | 1.40 | 1.40 | 1.48 | 8.12 | 42.81 | $ | 45,968 | |||||||||||||||||||||||
| 3.81 | 1.40 | 1.40 | 1.46 | (7.48 | ) | 47.71 | $ | 42,392 | ||||||||||||||||||||||
| 4.88 | 1.35 | 1.35 | 1.40 | 11.00 | 38.81 | $ | 39,890 | |||||||||||||||||||||||
| 5.05 | 1.37 | 1.37 | 1.41 | 12.35 | 46.14 | $ | 24,906 | |||||||||||||||||||||||
| 4.76 | 0.99 | 0.99 | 1.09 | 13.22 | 37.37 | $ | 91,735 | |||||||||||||||||||||||
| 5.08 | 0.99 | 0.99 | 1.07 | 8.52 | 42.81 | $ | 86,535 | |||||||||||||||||||||||
| 4.23 | 0.98 | 0.98 | 1.07 | (7.06 | ) | 47.71 | $ | 78,945 | ||||||||||||||||||||||
| 5.15 | 0.99 | 0.99 | 1.10 | 11.40 | 38.81 | $ | 64,748 | |||||||||||||||||||||||
| 5.37 | 0.99 | 0.98 | 1.05 | 12.80 | 46.14 | $ | 39,985 | |||||||||||||||||||||||
| 4.37 | (d) | 0.80 | (d) | 0.80 | (d) | 1.09 | (d) | 7.65 | 37.37 | $ | 36,909 | |||||||||||||||||||
Annual Report | 35
Report of Independent Registered Public Accounting Firm
Thornburg Investment Income Builder Fund
To the Trustees and Shareholders of
the 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 the Thornburg Investment Income Builder Fund (the “Fund”) as of September 30, 2017, 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 indicated, 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 as of September 30, 2017 by correspondence with the custodian, transfer agent, agent banks, and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
36 | Annual Report
Thornburg Investment Income Builder Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
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 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,071.00 | $ | 6.14 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.14 | $ | 5.99 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,067.30 | $ | 9.84 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,015.55 | $ | 9.60 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,072.90 | $ | 4.48 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.75 | $ | 4.36 | |||||||||
| CLASS R3 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,069.50 | $ | 7.45 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.87 | $ | 7.26 | |||||||||
| CLASS R4 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,069.80 | $ | 7.25 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.06 | $ | 7.07 | |||||||||
| CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,072.20 | $ | 5.14 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | |||||||||
| CLASS R6 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,076.50 | $ | 4.16 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,021.06 | $ | 4.05 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.18%; C: 1.90%; I: 0.86%; R3: 1.44%; R4: 1.40%; R5: 0.99%; R6: 0.80%) 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.
Annual Report | 37
Thornburg Investment Income Builder Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
38 | Annual Report
Trustees and Officers, Continued
Thornburg Investment Income Builder Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 39
Trustees and Officers, Continued
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
40 | Annual Report
Thornburg Investment Income Builder Fund | September 30, 2017 (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, 2017, dividends paid by the Thornburg Investment Income Builder Fund of $650,668,245 are being reported as ordinary investment income for federal income tax purposes.
For the tax year ended September 30, 2017, the Fund is reporting 78.02% (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 19.59% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2016 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2017, foreign source income and foreign taxes paid are $566,233,536 and $63,619,200, 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, 2017. Complete information will be reported in conjunction with your 2017 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 Investment Income Builder Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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.
Annual Report | 41
Other Information, Continued
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the agreement, the Trustees considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 created 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 created 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 performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, (6) comparison of the Fund’s annualized investment return since inception to the Fund’s blended benchmark, (7) comparative measures of estimated earnings growth, and risk and return statistics, and (8) dividend distributions by the Fund. Dividends paid with respect to shares of the Fund were noted as consistent with expectations and prevailing conditions. The Trustees generally attach additional significance to investment performance from the perspective of longer term shareholders. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectus. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for three Fund share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative data noted as having been considered by the Trustees showed that the Fund’s advisory fee level was comparable to the median and
42 | Annual Report
Other Information, Continued
Thornburg Investment Income Builder Fund | September 30, 2017 (Unaudited)
higher than the average levels for the fund category, the level of total expense for one share class of the Fund was comparable to the median and average expense levels for the category, the level of total expense for a second share class was lower than the median and average levels for the category, and the level of total expense for a third share class was higher than the category median and average. Peer group data showed the Fund’s advisory fee level was comparable to the median levels for the peer groups, and that the total expense levels for the three share classes of the Fund were comparable to the median levels for their respective peer groups. The Trustees did not find the differences significant in view of their findings and conclusions respecting 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by the Fund and certain other funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 43
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
44 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 45
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Annual Report | 47
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 | TH857 |
Annual Report September 30, 2017 THORNBURG GLOBAL OPPORTUNITIES FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Global Opportunities Fund
Annual Report ^ September 30, 2017
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| 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 | ||||||||
| Class R6 | THOGX | 885-216-655 | ||||||||
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.
Investments carry risks, including possible loss of principal. Additional 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- and mid-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 bank deposits or guaranteed by a bank or any other entity.
Funds invested in a smaller number of holdings may expose an investor to greater volatility.
Annual Report | 3
Thornburg Global Opportunities Fund | September 30, 2017 (Unaudited)
October 18, 2017
Dear Fellow Shareholder:
This letter will highlight the results of Thornburg Global Opportunities Fund’s investment activities for the 12-month period ended September 30, 2017. In addition, we will comment on the overall investment landscape. Recall that Thornburg Global Opportunities Fund seeks capital appreciation from a portfolio of investments from around the world, and that the Fund has historically owned between 30–40 stocks. We believe that the structure of the Fund—built on our core investment principles of flexibility, focus, and value – gives us a durable framework for value-added investing.
The past fiscal year was a strong one for the Fund. The Fund’s total return for the fiscal year ended September 30, 2017 was 24.85% (Class A shares without sales charge), surpassing the 18.65% return of the benchmark MSCI All Country World Index (ACWI). The net asset value (NAV) per share increased from $24.90 to $30.98, and ended the period near an all-time high. In addition to the NAV increase, the Class A shares paid 9.6 cents per share in dividend income. Dividend amounts for other classes of Fund shares varied based on class-specific expenses.
We do not expect to pay any capital gain distribution to shareholders of Thornburg Global Opportunities Fund for 2017. As of September 30, 2017, the Fund had net realized capital losses of about $130 million, which may be carried forward to offset future capital gains, to the extent permitted by regulations.
Performance comparisons of the Fund to the MSCI ACWI over various time periods are shown on page seven of this report, and on our website, www.thornburg.com. July 2017 marked the 11th anniversary of the Fund’s inception. From its inception on July 28, 2006, through September 30, 2017, the A Shares of Thornburg Global Opportunities Fund have outperformed the MSCI ACWI by an average margin of roughly 470 basis points (or 4.7%) per year, resulting in a total cumulative return since inception of 205.4% (A shares without sales charge) versus 88.24% for the index. As of September 30, 2017, the Fund’s Class A and I shares are both rated four stars overall by Morningstar, and rank in the top 1% of World Large Stock Funds for the time period from July 31, 2006 to September 30, 2017 (based on total returns without sales charge, among 443 funds). Over this same period, the Fund exhibited share-price volatility, as measured by weekly beta, nominally lower than that of the index.1
Table 1 - Morningstar World Large Stock Ratings and Rankings
as of September 30, 2017
STAR RATINGS
| ||||||||||||||||
| Overall | 3-Yr | 5-YR | 10-YR | |||||||||||||
A Shares | 4 | 4 | 5 | 4 | ||||||||||||
I Shares | 4 | 4 | 5 | 4 | ||||||||||||
# of Funds | 703 | 703 | 583 | 320 | ||||||||||||
RANKINGS
| ||||||||||
| 1-YR | 3-Yr | 5-YR | 10-YR | SINCE INCEP. | ||||||
A Shares | 7% | 14% | 5% | 9% | 1% | |||||
I Shares | 7% | 12% | 4% | 7% | 1% | |||||
# of Funds | 842 | 703 | 583 | 320 | 443 | |||||
Source: Morningstar
Percentile rankings are based on total returns, without sales charge.
To determine a fund’s Morningstar Rating™, funds and other managed products with at least a three-year history are ranked in their categories by their Morningstar Risk-Adjusted Return scores. The top 10% receive five stars; the next 22.5%, four stars; the middle 35%, three stars; the next 22.5%, two stars; and the bottom 10% receive one star. The risk-adjusted return accounts for variation in a managed product’s monthly excess performance (excluding sales charges), placing more emphasis on downward variations and rewarding consistent performance. Other share classes may have different performance characteristics. © 2017 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Global Opportunities Fund - cumulative return since inception (07/28/06 - 9/30/17)
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit thornburg.com or call 877-215-1330.
In assessing the performance of the Fund over the fiscal year ended September 30, 2017, it is constructive to consider the performance in U.S. dollars of the sector components of our benchmark, the MSCI All Country World Index. For the index, sector returns ranged from 3% (telecommunication services) to 31% (financials) with all sectors showing positive results. The behavior of interest rates was an important factor influencing equities over the year. Cyclical industries such as banks and industrials outperformed sharply relative to defensive sectors like telecommunications and consumer staples. The Fund posted positive returns from its investments in seven of the 11 sectors, negative returns in three sectors, and had no investments in the utilities sector.
1. Source: Weekly beta as measured by Bloomberg.
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Global Opportunities Fund | September 30, 2017 (Unaudited)
| 1. | Twenty-three portfolio investments contributed at least 0.25% to portfolio performance during the fiscal year, while three investments contributed overall portfolio losses of more than 0.25%. |
| 2. | The Fund’s investments in the following sectors comprised the largest weightings in the portfolio: consumer discretionary (19% weight as of 9/30/17), information technology (18%), and financials (13%). |
| 3. | The Fund’s investments in the consumer discretionary sector delivered robust returns. Apart from cable operator Altice USA, all our holdings in this sector delivered positive results, collectively logging a 39% return versus 17% for the index. Gaming and leisure groups Galaxy Entertainment and Wynn Resorts were both standouts, buoyed by improving visitation trends and new property openings. |
| 4. | Our information technology investments also contributed markedly during the fiscal year. Internet leaders Alphabet and Baidu – both long-time holdings in the Fund – each reported good operating results and saw their shares rise to new highs. Additionally, Korea’s Samsung Electronics and satellite operator Echostar bolstered Fund results. |
| 5. | Our holdings in the financial sector rose sharply and outpaced the index in aggregate. Our investments in Citigroup and ING Groep in the Netherlands were exceptional, with each up more than 50% (in USD) during the year. Dutch insurer NN Group, Capital One Financial, and UBS Group also contributed strongly to portfolio performance. |
| 6. | We saw mixed results in the real estate sector. Appreciation from long-time holding Ryman Hospitality Properties, a U.S. hotel operator, was offset by a lackluster showing from Colony Northstar, a newly formed REIT and asset manager in California. |
| 7. | The Fund also enjoyed notable contributions from its two holdings in the materials sector. CF Industries, a nitrogen fertilizer producer, and Mineral Resources, an Australian mining group. Each returned over 50% during the fiscal year. |
Shares of our holding in Ryanair – a low-cost airline in Europe – continued their ascent this year. Ryanair is among the European investments we initiated in mid-2016, following the market’s Brexit turbulence. These investments have paid off handsomely. The company operates a low-cost, short-haul airline from its headquarters in Dublin, where it was founded by Tony Ryan in 1985. Following the example of low-cost pioneer Southwest Airlines, Ryanair has grown into Europe’s largest airline, carrying approximately ~120 million passengers per year throughout 34 countries.
Rebounding air traffic trends in Europe this year (shown above) have been a boon to Ryanair, and to our other aviation investments – Spanish airport operator Aena and U.K. airline easyJet.
European Airport Traffic Growth
(% YoY)
Souce: ACI Europe.
Other contributors to Fund performance included: 1) Telecom services provider Level 3 Communications, which accepted a takeover bid from competitor CenturyLink, 2) mobile telecommunications company T-Mobile U.S., which continued to post market share gains, and 3) Barratt Developments, a U.K. homebuilder we have owned since 2014.
At September 30, 2017, domestic stocks comprised approximately 39% of your portfolio, foreign stocks were 54%, and cash made up the remaining 8%. The average price/earnings multiple of the 32 stocks in the portfolio as of September 30, 2017, was 17.5x on a forward basis, using estimates from market data providers FactSet and the Institutional Brokers’ Estimate System (IBES). By comparison, the forward price/earnings multiple of the MSCI All Country World Index at September 30, 2017 was approximately 16.7x.
Top equity holdings and other portfolio data about Global Opportunities Fund are summarized on page eight of this report.
We pursue investment ideas based on fundamental analysis of individual businesses, not macroeconomic forecasts. That noted, political and macro-economic events on the horizon present both uncertainties and potential opportunities. Recently, investors debated the future economic direction of China, Europe, various emerging markets, and the U.S. They considered potential policy actions by the U.S. Federal Reserve, Congress, the Trump administration, and the implications of an economic recovery in Europe. Many political and macroeconomic issues remain open; importantly, however, overall global consumer spending is growing and most macroeconomic indicators around the world have positively surprised year to date, with the U.S. a relative laggard.
Earnings expectations for the MSCI All Country World Index portfolio for 2018 have improved following strong recent data in most markets, and global economic growth expectations have risen. These trends continue to support a rotation of investor funds from more defensive debt and equity assets to those more economically sensitive assets. Under the current administration, political gridlock seems likely to persist in Washington, D.C. While the Fed has stepped up the pace of Federal funds target rate hikes, other major central banks continue to pursue very easy monetary conditions.
Annual Report | 5
Letter to Shareholders, Continued
Thornburg Global Opportunities Fund | September 30, 2017 (Unaudited)
Patience and a long-term investment orientation have served Thornburg Global Opportunities Fund well over the past 11 years. Given the market’s extended strength, we remind fellow shareholders that we encourage a similar mindset in the years ahead. We continue to follow our core investment principles of flexibility, focus, and value, as we have through a wide variety of macroeconomic settings over the Fund’s life.
Thank you for your support of the Thornburg Global Opportunities Fund. Remember that you can review our periodic portfolio commentary, as well as descriptions of many of the stocks in your portfolio, at www.thornburg.com/global.
Best wishes for a great holiday season and new year.
Sincerely,
 |  | |
| Brian McMahon | W. Vinson Walden, CFA | |
| Portfolio Manager | Portfolio Manager | |
| Chief Investment Officer | Managing Director |
The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor’s or portfolio manager’s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
6 | Annual Report
Thornburg Global Opportunities Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | 10-YR | SINCE INCEP. | |||||||||||||||||||||
Class A Shares (Incep: 7/28/06) | |||||||||||||||||||||||||
Without sales charge | 24.85% | 9.60% | 14.65% | 6.04% | 10.51% | ||||||||||||||||||||
With sales charge | 19.25% | 7.93% | 13.60% | 5.55% | 10.05% | ||||||||||||||||||||
Class C Shares (Incep: 7/28/06) | |||||||||||||||||||||||||
Without sales charge | 23.88% | 8.77% | 13.78% | 5.23% | 9.65% | ||||||||||||||||||||
With sales charge | 22.88% | 8.77% | 13.78% | 5.23% | 9.65% | ||||||||||||||||||||
Class I Shares (Incep: 7/28/06) | 25.31% | 9.98% | 15.10% | 6.51% | 11.01% | ||||||||||||||||||||
Class R3 Shares (Incep: 2/1/08) | 24.66% | 9.43% | 14.50% | - | 7.12% | ||||||||||||||||||||
Class R4 Shares (Incep: 2/1/08) | 24.81% | 9.53% | 14.61% | - | 7.21% | ||||||||||||||||||||
Class R5 Shares (Incep: 2/1/08) | 25.29% | 9.98% | 15.10% | - | 7.67% | ||||||||||||||||||||
Class R6 Shares (Incep: 4/10/17) | - | - | - | - | 10.02% | ||||||||||||||||||||
MSCI AC World Index (Since 7/28/06) | 18.65% | 7.43% | 10.20% | 3.88% | 5.82% | ||||||||||||||||||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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 sales charge for Class I, R3, R4, R5 shares, and R6 shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses before fee waivers and expense reimbursements are as follows: A shares, 1.35%; C shares, 2.09%; I shares, 0.99%; R3 shares, 2.01%; R4 shares, 1.66%; R5 shares, 1.07% and R6, 1.21%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: R3 shares, 1.50%; R4 shares, 1.40%; R5 shares, 0.99%, and R6 shares, 0.85%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus.
Thornburg Global Opportunities Fund’s I shares earned the Investor’s Business Daily Best Mutual Funds 2017 Award, ranking first among 438 International Stock funds for 10-year average annual total returns. The awards recognize top-notch funds that beat benchmark indices (MSCI EAFE Index for Thornburg Global Opportunities Fund) in each of the one-, three-, five-, and 10-year periods, through December 31, 2016.
Glossary
The MSCI All Country (AC) World Index is 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.
The performance of any index is not indicative of the performance of any particular investment. 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.
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.
P/E – Price/Earnings ratio (P/E ratio) is 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. Forecasted P/E is not intended to be a forecast of the fund’s future performance.
Annual Report | 7
Thornburg Global Opportunities Fund | September 30, 2017 (Unaudited)
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.
MARKET CAPITALIZATION EXPOSURE
ASSET STRUCTURE
TOP TEN EQUITY HOLDINGS
| Aena S.A. | 5.2% | ||||
| Baidu, Inc. ADR | 4.9% | ||||
| Altice N.V. | 4.9% | ||||
| Alphabet, Inc. Class A | 4.6% | ||||
| Citigroup, Inc. | 4.1% | ||||
| CF Industries Holdings, Inc. | 4.0% | ||||
| T-Mobile US, Inc. | 3.8% | ||||
| Galaxy Entertainment Group Ltd. | 3.8% | ||||
| Wynn Resorts, Ltd. | 3.6% | ||||
| Ryanair Holdings plc ADR | 3.5% |
There is no guarantee that the Fund will meet its investment objective.
All portfolio information is subject to change. Charts may not add up to 100% due to rounding.
SECTOR EXPOSURE
| Consumer Discretionary | 18.5% | ||||
| Information Technology | 17.5% | ||||
| Financials | 13.2% | ||||
| Industrials | 12.1% | ||||
| Energy | 7.7% | ||||
| Materials | 5.7% | ||||
| Consumer Staples | 5.1% | ||||
| Real Estate | 4.8% | ||||
| Telecommunication Services | 4.8% | ||||
| Health Care | 2.7% | ||||
| Other Assets Less Liabilities | 7.8% |
TOP TEN INDUSTRY GROUPS
| Transportation | 12.1% | ||||
| Software & Services | 11.8% | ||||
| Energy | 7.7% | ||||
| Consumer Services | 7.4% | ||||
| Media | 6.7% | ||||
| Banks | 6.6% | ||||
| Materials | 5.7% | ||||
| Technology Hardware & Equipment | 5.7% | ||||
| Food, Beverage & Tobacco | 5.1% | ||||
| Real Estate | 4.8% |
COUNTRY EXPOSURE*
(percent of equity holdings)
| United States | 41.9% | ||||
| Netherlands | 11.7% | ||||
| China | 9.4% | ||||
| United Kingdom | 8.5% | ||||
| Spain | 5.6% | ||||
| Ireland | 5.1% | ||||
| South Korea | 3.5% | ||||
| India | 3.4% | ||||
| Hong Kong | 2.9% | ||||
| Brazil | 2.3% | ||||
| Australia | 1.9% | ||||
| Germany | 1.7% | ||||
| Canada | 1.4% | ||||
| Switzerland | 0.7% |
| * | The country assignment 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. |
8 | Annual Report
Thornburg Global Opportunities Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
| COMMON STOCK — 92.21% | ||||||||||||
AUTOMOBILES & COMPONENTS — 1.46% | ||||||||||||
Auto Components — 1.46% | ||||||||||||
Delphi Automotive plc | 365,356 | $ | 35,951,030 | |||||||||
|
| |||||||||||
| 35,951,030 | ||||||||||||
|
| |||||||||||
BANKS — 6.57% | ||||||||||||
Banks — 6.57% | ||||||||||||
Citigroup, Inc. | 1,396,099 | 101,552,241 | ||||||||||
ING Groep N.V. | 3,257,752 | 60,065,278 | ||||||||||
|
| |||||||||||
| 161,617,519 | ||||||||||||
|
| |||||||||||
CONSUMER DURABLES & APPAREL — 2.99% | ||||||||||||
Household Durables — 2.99% | ||||||||||||
Barratt Developments plc | 8,935,245 | 73,575,454 | ||||||||||
|
| |||||||||||
| 73,575,454 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 7.40% | ||||||||||||
Hotels, Restaurants & Leisure — 7.40% | ||||||||||||
Galaxy Entertainment Group Ltd. | 13,131,814 | 92,458,622 | ||||||||||
Wynn Resorts, Ltd. | 601,215 | 89,532,938 | ||||||||||
|
| |||||||||||
| 181,991,560 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 3.20% | ||||||||||||
Capital Markets — 0.61% | ||||||||||||
UBS Group AG | 875,012 | 14,954,767 | ||||||||||
Consumer Finance — 2.59% | ||||||||||||
Capital One Financial Corp. | 752,959 | 63,745,509 | ||||||||||
|
| |||||||||||
| 78,700,276 | ||||||||||||
|
| |||||||||||
ENERGY — 7.67% | ||||||||||||
Energy Equipment & Services — 3.24% | ||||||||||||
Helmerich & Payne, Inc. | 1,528,085 | 79,628,509 | ||||||||||
Oil, Gas & Consumable Fuels — 4.43% | ||||||||||||
Reliance Industries Ltd. | 6,454,964 | 77,198,681 | ||||||||||
| a | Seven Generations Energy Ltd. | 2,006,652 | 31,746,192 | |||||||||
|
| |||||||||||
| 188,573,382 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 5.14% | ||||||||||||
Food Products — 5.14% | ||||||||||||
| a | BRF SA | 3,560,316 | 51,339,416 | |||||||||
The Kraft Heinz Co. | 968,267 | 75,089,106 | ||||||||||
|
| |||||||||||
| 126,428,522 | ||||||||||||
|
| |||||||||||
INSURANCE — 3.44% | ||||||||||||
Insurance — 3.44% | ||||||||||||
NN Group NV | 2,023,563 | 84,688,322 | ||||||||||
|
| |||||||||||
| 84,688,322 | ||||||||||||
|
| |||||||||||
MATERIALS — 5.70% | ||||||||||||
Chemicals — 3.97% | ||||||||||||
CF Industries Holdings, Inc. | 2,779,011 | 97,710,027 | ||||||||||
Metals & Mining — 1.73% | ||||||||||||
Mineral Resources Ltd. | 3,327,941 | 42,445,696 | ||||||||||
|
| |||||||||||
| 140,155,723 | ||||||||||||
|
| |||||||||||
MEDIA — 6.69% | ||||||||||||
Media — 6.69% | ||||||||||||
| a | Altice N.V. | 6,003,036 | 120,224,614 | |||||||||
| a | Altice USA, Inc. | 1,619,104 | 44,217,730 | |||||||||
|
| |||||||||||
| 164,442,344 | ||||||||||||
|
| |||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Global Opportunities Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 1.17% | ||||||||||||
Pharmaceuticals — 1.17% | ||||||||||||
Allergan plc | 140,340 | $ | 28,762,683 | |||||||||
|
| |||||||||||
| 28,762,683 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 1.57% | ||||||||||||
Pharmaceuticals — 1.57% | ||||||||||||
Bayer AG | 282,810 | 38,539,399 | ||||||||||
|
| |||||||||||
| 38,539,399 | ||||||||||||
|
| |||||||||||
REAL ESTATE — 4.78% | ||||||||||||
Equity Real Estate Investment Trusts — 2.11% | ||||||||||||
Colony Northstar, Inc. | 4,127,682 | 51,843,686 | ||||||||||
Real Estate Management & Development — 2.67% | ||||||||||||
New World Development Co. Ltd. | 45,706,802 | 65,649,844 | ||||||||||
|
| |||||||||||
| 117,493,530 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 11.83% | ||||||||||||
Internet Software & Services — 11.83% | ||||||||||||
| a | Alphabet, Inc. Class A | 116,986 | 113,911,608 | |||||||||
| a | Baidu, Inc. ADR | 486,264 | 120,442,730 | |||||||||
| a | Facebook, Inc. | 331,368 | 56,620,850 | |||||||||
|
| |||||||||||
| 290,975,188 | ||||||||||||
|
| |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 5.70% | ||||||||||||
Communications Equipment — 2.43% | ||||||||||||
| a | EchoStar Corp. | 1,042,709 | 59,674,236 | |||||||||
Technology, Hardware, Storage & Peripherals — 3.27% | ||||||||||||
Samsung Electronics Co. Ltd. | 35,905 | 80,377,544 | ||||||||||
|
| |||||||||||
| 140,051,780 | ||||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — 4.77% | ||||||||||||
Diversified Telecommunication Services — 0.97% | ||||||||||||
| a | Zayo Group Holdings, Inc. | 696,024 | 23,957,146 | |||||||||
Wireless Telecommunication Services — 3.80% | ||||||||||||
| a | T-Mobile US, Inc. | 1,514,947 | 93,411,632 | |||||||||
|
| |||||||||||
| 117,368,778 | ||||||||||||
|
| |||||||||||
TRANSPORTATION — 12.13% | ||||||||||||
Airlines — 6.97% | ||||||||||||
easyJet plc | 5,161,172 | 84,167,322 | ||||||||||
| a | Ryanair Holdings plc ADR | 826,432 | 87,122,462 | |||||||||
Transportation Infrastructure — 5.16% | ||||||||||||
Aena S.A. | 702,724 | 126,866,476 | ||||||||||
|
| |||||||||||
| 298,156,260 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCK (Cost $1,731,239,924) |
| 2,267,471,750 | ||||||||||
|
| |||||||||||
| SHORT TERM INVESTMENTS — 7.87% | ||||||||||||
| b | Thornburg Capital Management Fund | 19,358,369 | 193,583,692 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $193,583,692) | 193,583,692 | |||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 100.08% (Cost $1,924,823,616) | $ | 2,461,055,442 | ||||||||||
| LIABILITIES NET OF OTHER ASSETS — (0.08)% | (2,048,123 | ) | ||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 2,459,007,319 | ||||||||||
|
| |||||||||||
10 | Annual Report
Schedule of Investments, Continued
Thornburg Global Opportunities Fund | September 30, 2017
| OUTSTANDING FORWARD CURRENCY CONTRACTS TO BUY OR SELL AT SEPTEMBER 30, 2017 | |||||||||||||||||||||||||||||||||||
CONTRACT DESCRIPTION | CONTRACT PARTY | BUY/SELL | CONTRACT AMOUNT | CONTRACT VALUE DATE | VALUE USD | UNREALIZED APPRECIATION | UNREALIZED DEPRECIATION | ||||||||||||||||||||||||||||
Australian Dollar | SSB | Buy | 4,261,400 | 10/26/2017 | 3,341,771 | $ | – | $ | (49,737 | ) | |||||||||||||||||||||||||
Australian Dollar | SSB | Sell | 39,848,500 | 10/26/2017 | 31,249,019 | 399,656 | – | ||||||||||||||||||||||||||||
Australian Dollar | SSB | Sell | 4,825,200 | 10/26/2017 | 3,783,901 | 40,143 | – | ||||||||||||||||||||||||||||
Australian Dollar | SSB | Sell | 4,235,400 | 10/26/2017 | 3,321,382 | 55,939 | – | ||||||||||||||||||||||||||||
Euro | SSB | Sell | 218,224,800 | 11/15/2017 | 258,508,384 | 251,673 | – | ||||||||||||||||||||||||||||
Great Britain Pound | SSB | Buy | 11,561,200 | 10/10/2017 | 15,495,700 | 154,450 | – | ||||||||||||||||||||||||||||
Great Britain Pound | SSB | Sell | 99,182,100 | 10/10/2017 | 132,935,691 | – | (4,277,167 | ) | |||||||||||||||||||||||||||
Great Britain Pound | SSB | Sell | 11,168,300 | 10/10/2017 | 14,969,089 | 6,149 | – | ||||||||||||||||||||||||||||
Swiss Franc | SSB | Sell | 7,127,000 | 12/28/2017 | 7,403,737 | – | (15,067 | ) | |||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
Total | $ | 908,010 | $ | (4,341,971 | ) | ||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) | $ | (3,433,961 | ) | ||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||
Footnote Legend
| a | Non-income producing. |
| b | Investment in Affiliates - Shown below are holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940, including companies for which the Fund’s holding represented 5% or more of the company’s voting securities, and a series of the Thornburg Investment Trust in which the Fund invested for cash management purposes during the period: |
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2017 | MARKET VALUE SEPTEMBER 30, 2017 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | |||||||||||||||||||||||||||||||||
Thornburg Capital Management Fund | 8,109,038 | 63,032,897 | 51,783,566 | 19,358,369 | $ | 193,583,692 | $ | 1,428,404 | $ | – | $ | – | |||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 7.87% of net assets | $ | 193,583,692 | $ | 1,428,404 | $ | – | $ | – | |||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ADR | American Depositary Receipt |
See notes to financial statements.
Annual Report | 11
Statement of Assets and Liabilities
Thornburg Global Opportunities Fund | September 30, 2017
ASSETS | ||||
Investments at value (Note 3) | ||||
Non-affiliated issuers (cost $1,731,239,924) | $ | 2,267,471,750 | ||
Non-controlled affiliated issuer (cost $193,583,692) | 193,583,692 | |||
Receivable for fund shares sold | 7,493,700 | |||
Unrealized appreciation on forward currency contracts (Note 7) | 908,010 | |||
Dividends receivable | 1,858,833 | |||
Prepaid expenses and other assets | 49,107 | |||
|
| |||
Total Assets | 2,471,365,092 | |||
|
| |||
LIABILITIES | ||||
Payable for fund shares redeemed | 1,629,370 | |||
Unrealized depreciation on forward currency contracts (Note 7) | 4,341,971 | |||
Payable to investment advisor and other affiliates (Note 4) | 2,081,996 | |||
Deferred taxes payable (Note 2) | 3,676,111 | |||
Accounts payable and accrued expenses | 628,179 | |||
Dividends payable | 146 | |||
|
| |||
Total Liabilities | 12,357,773 | |||
|
| |||
NET ASSETS | $ | 2,459,007,319 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 1,298,708 | ||
Net unrealized appreciation on investments | 529,121,900 | |||
Accumulated net realized gain (loss) | (127,536,761 | ) | ||
Net capital paid in on shares of beneficial interest | 2,056,123,472 | |||
|
| |||
| $ | 2,459,007,319 | |||
|
| |||
12 | Annual Report
Statement of Assets and Liabilities, Continued
Thornburg Global Opportunities Fund | September 30, 2017
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 30.98 | ||
Maximum sales charge, 4.50% of offering price | 1.46 | |||
|
| |||
Maximum offering price per share | $ | 32.44 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* | $ | 29.88 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 31.06 | ||
|
| |||
Class R3 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 30.66 | ||
|
| |||
Class R4 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 30.69 | ||
|
| |||
Class R5 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 31.10 | ||
|
| |||
Class R6 Shares: | ||||
Net asset value, offering and redemption price per share | $ | 31.16 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
Annual Report | 13
Thornburg Global Opportunities Fund | Year Ended September 30, 2017
INVESTMENT INCOME | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $1,538,534) | $ | 36,002,384 | ||
Non-controlled affiliated issuer | 1,428,404 | |||
|
| |||
Total Income | 37,430,788 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 16,705,153 | |||
Administration fees (Note 4) | ||||
Class A Shares | 528,685 | |||
Class C Shares | 457,018 | |||
Class I Shares | 606,423 | |||
Class R3 Shares | 13,812 | |||
Class R4 Shares | 31,077 | |||
Class R5 Shares | 34,799 | |||
Class R6 Shares* | 98 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 1,056,543 | |||
Class C Shares | 3,653,811 | |||
Class R3 Shares | 55,328 | |||
Class R4 Shares | 62,346 | |||
Transfer agent fees | ||||
Class A Shares | 451,740 | |||
Class C Shares | 416,079 | |||
Class I Shares | 1,146,303 | |||
Class R3 Shares | 39,003 | |||
Class R4 Shares | 91,035 | |||
Class R5 Shares | 175,647 | |||
Class R6 Shares* | 4,425 | |||
Registration and filing fees | ||||
Class A Shares | 35,163 | |||
Class C Shares | 25,622 | |||
Class I Shares | 68,545 | |||
Class R3 Shares | 16,922 | |||
Class R4 Shares | 17,783 | |||
Class R5 Shares | 18,785 | |||
Class R6 Shares* | 20,021 | |||
Custodian fees (Note 2) | 341,527 | |||
Professional fees | 93,497 | |||
Accounting fees (Note 4) | 62,730 | |||
Trustee fees | 87,086 | |||
Other expenses | 302,131 | |||
|
| |||
Total Expenses | 26,619,137 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (408,129 | ) | ||
|
| |||
Net Expenses | 26,211,008 | |||
|
| |||
Net Investment Income | $ | 11,219,780 | ||
|
| |||
* Class R6 shares commenced operations on April 10, 2017.
14 | Annual Report
Statement of Operations, Continued
Thornburg Global Opportunities Fund | Year Ended September 30, 2017
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Non-affiliated issuer investments | $ | 102,995,481 | ||
Forward currency contracts (Note 7) | (9,602,395 | ) | ||
Foreign currency transactions | (259,109 | ) | ||
|
| |||
| 93,133,977 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Non-affiliated issuer investments (net of change in deferred taxes payable of $3,676,111) | 355,320,862 | |||
Forward currency contracts (Note 7) | (2,320,837 | ) | ||
Foreign currency translations | (842 | ) | ||
|
| |||
| 352,999,183 | ||||
|
| |||
Net Realized and Unrealized Gain | 446,133,160 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 457,352,940 | ||
|
| |||
See notes to financial statements.
Annual Report | 15
Statements of Changes in Net Assets
Thornburg Global Opportunities Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 11,219,780 | $ | 24,603,881 | ||||||
Net realized gain (loss) on investments, forward currency contracts, and foreign currency transactions | 93,133,977 | (152,227,669 | ) | |||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations, and deferred taxes | 352,999,183 | 156,517,976 | ||||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 457,352,940 | 28,894,188 | ||||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (1,462,031 | ) | (3,010,113 | ) | ||||||
Class C Shares | (156,914 | ) | – | |||||||
Class I Shares | (8,363,693 | ) | (13,341,341 | ) | ||||||
Class R3 Shares | (28,856 | ) | (36,643 | ) | ||||||
Class R4 Shares | (80,474 | ) | (110,179 | ) | ||||||
Class R5 Shares | (464,031 | ) | (1,174,656 | ) | ||||||
Class R6 Shares* | (1,432 | ) | – | |||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class A Shares | (91,022,880 | ) | (110,083,884 | ) | ||||||
Class C Shares | (56,935,405 | ) | (7,662,535 | ) | ||||||
Class I Shares | 260,846,687 | (293,034,015 | ) | |||||||
Class R3 Shares | (975,984 | ) | 1,433,669 | |||||||
Class R4 Shares | 1,367,163 | 8,050,573 | ||||||||
Class R5 Shares | 5,598,085 | (48,461,226 | ) | |||||||
Class R6 Shares* | 1,554,205 | – | ||||||||
|
| |||||||||
Net Increase (Decrease) in Net Assets | 567,227,380 | (438,536,162 | ) | |||||||
NET ASSETS | ||||||||||
Beginning of Year | 1,891,779,939 | 2,330,316,101 | ||||||||
|
| |||||||||
End of Year | $ | 2,459,007,319 | $ | 1,891,779,939 | ||||||
|
| |||||||||
Undistributed net investment income | $ | 1,298,708 | $ | 1,186,466 | ||||||
* Class R6 shares commenced operations on April 10, 2017.
See notes to financial statements.
16 | Annual Report
Thornburg Global Opportunities Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg Global Opportunities Fund (the “Fund”) is a diversified series of Thornburg Investment Trust (the “Trust”). The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of twenty-one 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 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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: 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. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg Global Opportunities Fund | September 30, 2017
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
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 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.
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 (depreciation) from investments.
Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and 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 (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 1,922,354,515 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 575,167,385 | |||
Gross unrealized depreciation on a tax basis | (39,900,419 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 535,266,966 | |||
|
|
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg Global Opportunities Fund | September 30, 2017
Temporary book to tax adjustments to cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of outstanding wash sales, outstanding real estate investment trusts (“REITs”) tax basis adjustments, and marked-to-market of foreign currency contracts.
At September 30, 2017, the Fund had deferred tax basis late year specified ordinary losses occurring subsequent to October 31, 2016 through September 30, 2017 of $273,926. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $6,411,773. For tax purposes, such capital losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $58,578,031, (of which $58,578,031 are short-term and $0 are 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 generated prior to October 1, 2011.
At September 30, 2017, the Fund had tax basis capital losses of $65,016,060 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 to tax differences, the Fund decreased undistributed net investment income by $550,107, decreased accumulated net realized gain (loss) by $611,058, and decreased net capital paid in on shares of beneficial interest by $60,951. Reclassifications have no impact upon the net asset value of the Fund and resulted primarily from foreign currency gains (losses), investments in real estate investment trusts (“REITs”), and a nondeductible tax liability.
At September 30, 2017, the Fund had $1,572,635 undistributed tax basis ordinary investment income and no undistributed tax basis capital gains.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: |
| |||||||||
Ordinary income | $ | 10,557,431 | $ | 17,672,932 | ||||||
|
| |||||||||
Total | $ | 10,557,431 | $ | 17,672,932 | ||||||
|
| |||||||||
Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assessment of a jurisdiction’s legal obligation to pay reclaims, the jurisdiction’s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain.
Deferred Foreign Capital Gain 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.
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
Annual Report | 19
Notes to Financial Statements, Continued
Thornburg Global Opportunities Fund | September 30, 2017
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund’s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date.
In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment’s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data.
Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Quotations for foreign investments expressed in foreign currency amounts are converted to U.S. dollar equivalents using a foreign exchange quotation from a third party service provider at the time of valuation. Foreign investments held by the Fund may be traded on days and at times when the Fund is not open for business. Consequently, the value of Fund investments may be significantly affected on days when shareholders cannot purchase or sell Fund shares. Futures contracts and other financial and derivative instruments traded on an exchange are valued at the latest published price for the instrument on its primary exchange. Listed options are valued at the last bid price.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for the Fund’s investments. These inputs are generally summarized according to the three-level hierarchy below:
Level 1: Quoted prices in active markets for identical investments.
Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.).
20 | Annual Report
Notes to Financial Statements, Continued
Thornburg Global Opportunities Fund | September 30, 2017
Level 3: Significant unobservable inputs (including the Committee’s own assumptions in calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
On days when market volatility thresholds established by the Audit Committee are exceeded, foreign securities for which valuations are obtained from pricing service providers are fair valued. On these days, the foreign securities are characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs 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, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities* | ||||||||||||||||||||
Common Stock | $ | 2,267,471,750 | $ | 2,267,471,750 | $ | – | $ | – | ||||||||||||
Short Term Investments | 193,583,692 | 193,583,692 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 2,461,055,442 | $ | 2,461,055,442 | $ | – | $ | – | ||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Forward Currency Contracts | $ | 908,010 | $ | – | $ | 908,010 | $ | – | ||||||||||||
Liabilities | ||||||||||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Forward Currency Contracts | $ | (4,341,971 | ) | $ | – | $ | (4,341,971 | ) | $ | – | ||||||||||
| * | 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). |
| ** | 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, 2017, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
Management Fee Schedule
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.875 | % | |||
Next $500 million | 0.825 | ||||
Next $500 million | 0.775 | ||||
Next $500 million | 0.725 | ||||
Over $2 billion | 0.675 | ||||
Annual Report | 21
Notes to Financial Statements, Continued
Thornburg Global Opportunities Fund | September 30, 2017
The Fund’s effective management fee for the year ended September 30, 2017 was 0.793% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $62,730 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $73,724 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $18,159 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A, Class C, Class I, Class R3, Class R4, and Class R5 shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I or Class R5. Class R6 shares are not subject to a service plan. The Advisor and Distributor each 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, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $149,259 for Class I shares, $51,666 for Class R3 shares, $61,503 for Class R4 shares, $121,230 for Class R5 shares, and $24,471 for Class R6 shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 2.2%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had no such transactions with affiliated funds.
22 | Annual Report
Notes to Financial Statements, Continued
Thornburg Global Opportunities Fund | September 30, 2017
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 3,410,854 | $ | 96,747,081 | 8,325,065 | $ | 206,319,481 | ||||||||||
Shares issued to shareholders in | 49,429 | 1,369,463 | 110,072 | 2,763,766 | ||||||||||||
Shares repurchased | (6,971,985 | ) | (189,139,424 | ) | (13,183,729 | ) | (319,167,131 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (3,511,702 | ) | $ | (91,022,880 | ) | (4,748,592 | ) | $ | (110,083,884 | ) | ||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 2,099,252 | $ | 57,916,957 | 4,803,724 | $ | 115,763,249 | ||||||||||
Shares issued to shareholders in | 5,507 | 140,551 | – | – | ||||||||||||
Shares repurchased | (4,285,695 | ) | (114,992,913 | ) | (5,248,474 | ) | (123,425,784 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (2,180,936 | ) | $ | (56,935,405 | ) | (444,750 | ) | $ | (7,662,535 | ) | ||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 20,512,683 | $ | 586,229,870 | 18,934,040 | $ | 468,189,151 | ||||||||||
Shares issued to shareholders in | 253,500 | 7,177,381 | 471,633 | 11,765,280 | ||||||||||||
Shares repurchased | (11,963,671 | ) | (332,560,564 | ) | (31,876,944 | ) | (772,988,446 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | 8,802,512 | $ | 260,846,687 | (12,471,271 | ) | $ | (293,034,015 | ) | ||||||||
|
| |||||||||||||||
Class R3 Shares | ||||||||||||||||
Shares sold | 130,184 | $ | 3,659,868 | 305,984 | $ | 7,356,605 | ||||||||||
Shares issued to shareholders in | 580 | 15,790 | 773 | 19,074 | ||||||||||||
Shares repurchased | (169,108 | ) | (4,651,642 | ) | (244,734 | ) | (5,942,010 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (38,344 | ) | $ | (975,984 | ) | 62,023 | $ | 1,433,669 | ||||||||
|
| |||||||||||||||
Class R4 Shares | ||||||||||||||||
Shares sold | 515,867 | $ | 14,451,431 | 659,749 | $ | 16,156,222 | ||||||||||
Shares issued to shareholders in | 2,158 | 59,157 | 3,301 | 81,175 | ||||||||||||
Shares repurchased | (471,526 | ) | (13,143,425 | ) | (339,232 | ) | (8,186,824 | ) | ||||||||
|
| |||||||||||||||
Net increase | 46,499 | $ | 1,367,163 | 323,818 | $ | 8,050,573 | ||||||||||
|
| |||||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 852,553 | $ | 24,462,244 | 1,385,031 | $ | 34,352,393 | ||||||||||
Shares issued to shareholders in | 16,072 | 453,093 | 46,737 | 1,162,738 | ||||||||||||
Shares repurchased | (684,444 | ) | (19,317,252 | ) | (3,446,732 | ) | (83,976,357 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | 184,181 | $ | 5,598,085 | (2,014,964 | ) | $ | (48,461,226 | ) | ||||||||
|
| |||||||||||||||
Class R6 Shares* | ||||||||||||||||
Shares sold | 52,503 | $ | 1,613,563 | – | $ | – | ||||||||||
Shares issued to shareholders in | 46 | 1,432 | – | – | ||||||||||||
Shares repurchased | (1,962 | ) | (60,790 | ) | – | – | ||||||||||
|
| |||||||||||||||
Net increase | 50,587 | $ | 1,554,205 | – | $ | – | ||||||||||
|
| |||||||||||||||
| * | The effective date of this class of shares was April 10, 2017. |
Annual Report | 23
Notes to Financial Statements, Continued
Thornburg Global Opportunities Fund | September 30, 2017
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $857,901,006 and $862,529,977, respectively.
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 the 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, 2017, 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 Fund’s Advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2017 in the normal course of pursuing its investment objectives, with the objective of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments from adverse changes in the relationship between the U.S. dollar and foreign currencies. In each case these contracts have been initiated in conjunction with foreign investment transactions. The quarterly average value of open sell currency contracts for the year ended September 30, 2017 was $542,050,803.
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 outstanding forward currency contracts in the Schedule of Investments were entered into with State Street Bank and Trust Company (“SSB”), pursuant to an International Swaps and Derivatives Association (“ISDA”) Master Agreement. In the event of a default or termination under the ISDA Master Agreement with SSB, 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 with SSB does not result in an offset of reported amounts of financial assets and 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.
The unrealized appreciation (depreciation) of the outstanding forward currency contracts recognized in the Fund’s Statement of Assets and Liabilities at September 30, 2017 is disclosed in the following table:
| FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2017 | ||||||
| ASSET DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Assets - Unrealized appreciation on forward currency contracts | $ | 908,010 | |||
| FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2017 | ||||||
| LIABILITY DERIVATIVES | BALANCE SHEET LOCATION | FAIR VALUE | ||||
Foreign exchange contracts | Liabilities - Unrealized depreciation on forward currency contracts | $ | (4,341,971 | ) | ||
Because the Fund did not receive or post cash collateral in connection with its currency forward contracts during the period, and because all of the Fund’s outstanding currency forward contracts are with SSB, the net amounts of the Fund’s assets and liabilities which are attributable to those contracts at September 30, 2017 can be determined by offsetting the dollar amounts shown in the preceding table. Based
24 | Annual Report
Notes to Financial Statements, Continued
Thornburg Global Opportunities Fund | September 30, 2017
on those amounts, the net amount of the Fund’s assets which is attributable to its outstanding forward currency contracts at September 30, 2017 is $0, and the net amount of the Fund’s liabilities which is attributable to those contracts at that date is $3,433,961. 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) on outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2017 are disclosed in the following tables:
NET REALIZED GAIN (LOSS) ON DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (9,602,395 | ) | $ | (9,602,395 | ) | ||
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (2,320,837 | ) | $ | (2,320,837 | ) | ||
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 small- and mid-cap companies, non-U.S. issuers (including developing country issuers), real estate investment trusts, credit risk, and interest rate risk. Please see the Fund’s prospectus for a discussion of the risks associated with an investment in the Fund.
Subsequent Events: Fund management believes no events have occurred between September 30, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 25
Thornburg Global Opportunities Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 24.90 | 0.13 | 6.05 | 6.18 | (0.10 | ) | – | (0.10 | ) | $ | 30.98 | ||||||||||||||||||||||||||||
2016(b) | $ | 24.41 | 0.25 | 0.38 | 0.63 | (0.14 | ) | – | (0.14 | ) | $ | 24.90 | ||||||||||||||||||||||||||||
2015(b) | $ | 23.74 | (0.11 | ) | 0.78 | 0.67 | – | – | – | $ | 24.41 | |||||||||||||||||||||||||||||
2014(b) | $ | 19.72 | (0.03 | ) | 4.13 | 4.10 | (0.08 | ) | – | (0.08 | ) | $ | 23.74 | |||||||||||||||||||||||||||
2013(b) | $ | 15.97 | 0.11 | 3.79 | 3.90 | (0.15 | ) | – | (0.15 | ) | $ | 19.72 | ||||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 24.13 | (0.08 | ) | 5.84 | 5.76 | (0.01 | ) | – | (0.01 | ) | $ | 29.88 | |||||||||||||||||||||||||||
2016 | $ | 23.70 | 0.07 | 0.36 | 0.43 | – | – | – | $ | 24.13 | ||||||||||||||||||||||||||||||
2015 | $ | 23.23 | (0.31 | ) | 0.78 | 0.47 | – | – | – | $ | 23.70 | |||||||||||||||||||||||||||||
2014 | $ | 19.38 | (0.20 | ) | 4.07 | 3.87 | (0.02 | ) | – | (0.02 | ) | $ | 23.23 | |||||||||||||||||||||||||||
2013 | $ | 15.69 | (0.03 | ) | 3.72 | 3.69 | – | – | – | $ | 19.38 | |||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 24.96 | 0.23 | 6.07 | 6.30 | (0.20 | ) | – | (0.20 | ) | $ | 31.06 | ||||||||||||||||||||||||||||
2016 | $ | 24.53 | 0.34 | 0.37 | 0.71 | (0.28 | ) | – | (0.28 | ) | $ | 24.96 | ||||||||||||||||||||||||||||
2015 | $ | 23.79 | (0.02 | ) | 0.77 | 0.75 | (0.01 | ) | – | (0.01 | ) | $ | 24.53 | |||||||||||||||||||||||||||
2014 | $ | 19.74 | 0.06 | 4.15 | 4.21 | (0.16 | ) | – | (0.16 | ) | $ | 23.79 | ||||||||||||||||||||||||||||
2013 | $ | 16.06 | 0.19 | 3.80 | 3.99 | (0.31 | ) | – | (0.31 | ) | $ | 19.74 | ||||||||||||||||||||||||||||
| CLASS R3 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 24.66 | 0.08 | 5.99 | 6.07 | (0.07 | ) | – | (0.07 | ) | $ | 30.66 | ||||||||||||||||||||||||||||
2016 | $ | 24.18 | 0.20 | 0.38 | 0.58 | (0.10 | ) | – | (0.10 | ) | $ | 24.66 | ||||||||||||||||||||||||||||
2015 | $ | 23.55 | (0.15 | ) | 0.78 | 0.63 | – | – | – | $ | 24.18 | |||||||||||||||||||||||||||||
2014 | $ | 19.55 | (0.06 | ) | 4.11 | 4.05 | (0.05 | ) | – | (0.05 | ) | $ | 23.55 | |||||||||||||||||||||||||||
2013 | $ | 15.91 | 0.11 | 3.74 | 3.85 | (0.21 | ) | – | (0.21 | ) | $ | 19.55 | ||||||||||||||||||||||||||||
| CLASS R4 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 24.67 | 0.11 | 6.00 | 6.11 | (0.09 | ) | – | (0.09 | ) | $ | 30.69 | ||||||||||||||||||||||||||||
2016 | $ | 24.22 | 0.24 | 0.35 | 0.59 | (0.14 | ) | – | (0.14 | ) | $ | 24.67 | ||||||||||||||||||||||||||||
2015 | $ | 23.57 | (0.13 | ) | 0.78 | 0.65 | – | – | – | $ | 24.22 | |||||||||||||||||||||||||||||
2014 | $ | 19.59 | (0.03 | ) | 4.10 | 4.07 | (0.09 | ) | – | (0.09 | ) | $ | 23.57 | |||||||||||||||||||||||||||
2013 | $ | 15.90 | 0.12 | 3.76 | 3.88 | (0.19 | ) | – | (0.19 | ) | $ | 19.59 | ||||||||||||||||||||||||||||
| CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 24.99 | 0.22 | 6.08 | 6.30 | (0.19 | ) | – | (0.19 | ) | $ | 31.10 | ||||||||||||||||||||||||||||
2016 | $ | 24.55 | 0.34 | 0.37 | 0.71 | (0.27 | ) | – | (0.27 | ) | $ | 24.99 | ||||||||||||||||||||||||||||
2015 | $ | 23.81 | (0.03 | ) | 0.78 | 0.75 | (0.01 | ) | – | (0.01 | ) | $ | 24.55 | |||||||||||||||||||||||||||
2014 | $ | 19.76 | 0.06 | 4.15 | 4.21 | (0.16 | ) | – | (0.16 | ) | $ | 23.81 | ||||||||||||||||||||||||||||
2013 | $ | 16.07 | 0.18 | 3.82 | 4.00 | (0.31 | ) | – | (0.31 | ) | $ | 19.76 | ||||||||||||||||||||||||||||
| CLASS R6 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(c) | $ | 28.35 | 0.11 | 2.73 | 2.84 | (0.03 | ) | – | (0.03 | ) | $ | 31.16 | ||||||||||||||||||||||||||||
| (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 April 10, 2017. |
| (d) | Annualized. |
| (e) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
26 | Annual Report
Financial Highlights, Continued
Thornburg Global Opportunities Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 0.46 | 1.33 | 1.33 | 1.33 | 24.85 | 43.70 | $ | 442,522 | |||||||||||||||||||||||
| 1.02 | 1.35 | 1.35 | 1.35 | 2.57 | 37.11 | $ | 443,072 | |||||||||||||||||||||||
| (0.42 | ) | 1.32 | 1.32 | 1.32 | 2.82 | 45.41 | $ | 550,327 | ||||||||||||||||||||||
| (0.15 | ) | 1.41 | 1.41 | 1.41 | 20.85 | 60.29 | $ | 207,227 | ||||||||||||||||||||||
| 0.60 | 1.46 | 1.46 | 1.46 | 24.50 | 66.12 | $ | 96,855 | |||||||||||||||||||||||
| (0.30 | ) | 2.08 | 2.08 | 2.08 | 23.88 | 43.70 | $ | 380,046 | ||||||||||||||||||||||
| 0.29 | 2.09 | 2.09 | 2.09 | 1.81 | 37.11 | $ | 359,426 | |||||||||||||||||||||||
| (1.20 | ) | 2.10 | 2.10 | 2.10 | 2.02 | 45.41 | $ | 363,615 | ||||||||||||||||||||||
| (0.92 | ) | 2.17 | 2.17 | 2.17 | 19.96 | 60.29 | $ | 143,506 | ||||||||||||||||||||||
| (0.18 | ) | 2.22 | 2.22 | 2.22 | 23.52 | 66.12 | $ | 87,808 | ||||||||||||||||||||||
| 0.80 | 0.97 | 0.97 | 0.98 | 25.31 | 43.70 | $ | 1,514,039 | |||||||||||||||||||||||
| 1.39 | 0.99 | 0.99 | 0.99 | 2.91 | 37.11 | $ | 996,970 | |||||||||||||||||||||||
| (0.08 | ) | 0.97 | 0.97 | 0.98 | 3.17 | 45.41 | $ | 1,285,609 | ||||||||||||||||||||||
| 0.26 | 0.99 | 0.99 | 1.08 | 21.39 | 60.29 | $ | 453,511 | |||||||||||||||||||||||
| 1.07 | 0.99 | 0.99 | 1.11 | 25.08 | 66.12 | $ | 249,283 | |||||||||||||||||||||||
| 0.28 | 1.50 | 1.50 | 1.97 | 24.66 | 43.70 | $ | 12,059 | |||||||||||||||||||||||
| 0.84 | 1.50 | 1.50 | 2.01 | 2.38 | 37.11 | $ | 10,645 | |||||||||||||||||||||||
| (0.58 | ) | 1.50 | 1.50 | 2.15 | 2.68 | 45.41 | $ | 8,936 | ||||||||||||||||||||||
| (0.26 | ) | 1.50 | 1.50 | 2.59 | 20.75 | 60.29 | $ | 2,182 | ||||||||||||||||||||||
| 0.60 | 1.49 | 1.49 | 3.41 | 24.37 | 66.12 | $ | 1,653 | |||||||||||||||||||||||
| 0.38 | 1.40 | 1.40 | 1.65 | 24.81 | 43.70 | $ | 28,061 | |||||||||||||||||||||||
| 0.98 | 1.40 | 1.40 | 1.66 | 2.45 | 37.11 | $ | 21,415 | |||||||||||||||||||||||
| (0.51 | ) | 1.40 | 1.40 | 1.76 | 2.76 | 45.41 | $ | 13,175 | ||||||||||||||||||||||
| (0.14 | ) | 1.40 | 1.40 | 2.23 | 20.82 | 60.29 | $ | 4,462 | ||||||||||||||||||||||
| 0.68 | 1.40 | 1.40 | 2.76 | 24.57 | 66.12 | $ | 2,161 | |||||||||||||||||||||||
| 0.79 | 0.99 | 0.99 | 1.16 | 25.29 | 43.70 | $ | 80,704 | |||||||||||||||||||||||
| 1.38 | 0.99 | 0.99 | 1.07 | 2.91 | 37.11 | $ | 60,252 | |||||||||||||||||||||||
| (0.11 | ) | 0.98 | 0.98 | 1.02 | 3.17 | 45.41 | $ | 108,654 | ||||||||||||||||||||||
| 0.26 | 0.99 | 0.99 | 1.10 | 21.36 | 60.29 | $ | 74,212 | |||||||||||||||||||||||
| 1.03 | 0.99 | 0.99 | 1.15 | 25.13 | 66.12 | $ | 49,023 | |||||||||||||||||||||||
| 0.77 | (d) | 0.85 | (d) | 0.85 | (d) | 13.31 | (d)(e) | 10.02 | 43.70 | $ | 1,576 | |||||||||||||||||||
Annual Report | 27
Report of Independent Registered Public Accounting Firm
Thornburg Global Opportunities Fund | September 30, 2017
To the Trustees and Shareholders of the
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 the Thornburg Global Opportunities Fund (the “Fund”) as of September 30, 2017, 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 indicated, 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 as of September 30, 2017 by correspondence with the custodian, transfer agent, and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
28 | Annual Report
Thornburg Global Opportunities Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
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 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,103.90 | $ | 6.76 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.64 | $ | 6.49 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,099.30 | $ | 10.81 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,014.77 | $ | 10.37 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,105.60 | $ | 5.06 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.26 | $ | 4.85 | |||||||||
| CLASS R3 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,102.90 | $ | 7.90 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.58 | |||||||||
| CLASS R4 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,103.50 | $ | 7.39 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,018.04 | $ | 7.09 | |||||||||
| CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,105.60 | $ | 5.23 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.10 | $ | 5.01 | |||||||||
| CLASS R6 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,100.20 | $ | 4.48 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.81 | $ | 4.31 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.28%; C: 2.05%; I: 0.96%; R3: 1.50%; R4: 1.40%; R5: 0.99%; R6: 0.85%) 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.
Annual Report | 29
Thornburg Global Opportunities Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
30 | Annual Report
Trustees and Officers, Continued
Thornburg Global Opportunities Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 31
Trustees and Officers, Continued
Thornburg Global Opportunities Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries 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.
32 | Annual Report
Thornburg Global Opportunities Fund | September 30, 2017 (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, 2017, dividends paid by the Thornburg Global Opportunties Fund of $10,557,431 are being reported as taxable ordinary investment income dividends for federal income tax purposes.
For the tax year ended September 30, 2017, 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 85.91% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2017 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2017, foreign source income and foreign taxes paid is $23,233,231 and $1,538,534, 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, 2017. Complete information will be reported in conjunction with your 2017 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 Global Opportunities Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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.
Annual Report | 33
Other Information, Continued
Thornburg Global Opportunities Fund | September 30, 2017 (Unaudited)
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the agreement, the Trustees considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 calendar years since the Fund’s inception, comparing the Fund’s annual investment returns to a fund category created 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 created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, (6) comparison of the Fund’s annualized return since inception to the Fund’s benchmark index, and (7) comparative measures of estimated earnings, and risk and return statistics. The Trustees generally attach additional significance to the performance from the perspective of longer term shareholders. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and level and total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for two share classes of the Fund to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been considered by the Trustees showed that the Fund’s advisory fee level was comparable to the median and higher than the average levels for the fund category, the level of total expense for one share class of the Fund was higher than the median and comparable to the average expense levels for the category, and that the level of total expense for a
34 | Annual Report
Other Information, Continued
Thornburg Global Opportunities Fund | September 30, 2017 (Unaudited)
second share class was lower than the median and average expense levels for the category. Peer group data showed that the Fund’s advisory fee level was comparable to the medians of each of the peer groups, the total expense level of one share class of the Fund was higher than the median of its peer group and comparable to or lower than other funds in the group, and that the expense level of the second share class was comparable to the median of its peer group. The Trustees did not find the differences significant in view of their findings and conclusions respecting 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits is an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, 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, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The information provided to the Trustees demonstrated 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 35
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
36 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 37
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| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
Annual Report September 30, 2017 THORNBURG DEVELOPING WORLD FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Developing World Fund
Annual Report | September 30, 2017
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| 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 | ||||||||
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.
Investments carry risks, including possible loss of principal. Additional 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- and mid-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 bank deposits or guaranteed by a bank or any other entity.
Funds invested in a smaller number of holdings may expose an investor to greater volatility.
Annual Report | 3
Thornburg Developing World Fund | September 30, 2017 (Unaudited)
October 13, 2017
Dear Fellow Shareholder:
The end of the latest fiscal year marked the third straight quarter of strong, positive returns for the MSCI Emerging Markets (EM) Index. It was also a continuation of the emerging market recovery that kicked off in early 2016, leading to positive performance in six of the last seven quarters. The more recent index moves have been driven more by an increase in valuation as positive earnings revisions have slowed. However, at 12.5x 2018 earnings per share, valuations are still not stretched, especially considering the relative valuation compared to developed market indices — the S&P 500 Index at 17.8x and the MSCI EAFE Index at 14.8x 2018 earnings per share.
During the fiscal year completed September 30, 2017, Thornburg Developing World Fund delivered a total return of 17.58% (A shares without sales charge), which trailed the MSCI Emerging Markets Index return of 22.46%. While we are disappointed our return trailed that of the index, the Fund performed generally as expected considering our preference for companies that demonstrate stronger business fundamentals such as consistent free cash flow and low leverage. We believe stronger companies like those we tend to hold in the Fund should outperform the broader market over a long period but tend to underperform during strong up markets, such as that experienced for the last six to seven quarters. Typically, early market recoveries are led by companies with high debt levels and poor free cash flow, characteristics that we actively try to avoid in our investment process. After the start of the calendar year, leadership became more broad based and as a result our holdings have performed more favorably compared to the benchmark, especially in the last two quarters of the fiscal year.
Leading Chinese e-commerce company Alibaba Group was the top contributor for the period, with shares rising more than 60%. The firm is quickly becoming one of the dominant internet platforms in China, along with Tencent, covering major needs from entertainment to financial services. It continues to benefit from better-than-expected performance in its marketplace business, which Alibaba attributes to better customer engagement and effective deployment of data analytics tools, and has made significant gains in addressing concerns over counterfeit goods.
Longtime Fund investment Tencent Holdings provides internet and mobile services to almost a billion Chinese consumers. Similar to Alibaba, Tencent has ambitions to become the main provider of a range of consumer services, including streaming video, gaming, and banking. It continues to perform in excess of expectations as advertising revenue from its gaming and social media platforms grow, and adoption of its payments platforms continues to grow among offline merchants.
Samsung Electronics is a Korean technology firm that produces a wide array of consumer and industrial electronic equipment. Several factors helped drive Samsung’s return during the period, among them earnings upgrades amid undersupply in a strong electronic memory market, strong reception of a smartphone release in the second quarter, and demand for its world-class
organic light-emitting diode (OLED) screens. Investors have also become more optimistic that management is moving toward a more shareholder-friendly posture.
Baidu is the leading Chinese internet search firm. During the period it generally performed in line or slightly ahead of our expectations, with decent revenue growth and significant progress in managing costs from its loss-making offline-to-online segment. This cost management helped to drive margin and earnings upside compared to consensus expectations.
Hangzhou Hikvision Digital Technology Company is the largest video surveillance company in the world. Shares of the firm experienced significant price appreciation during the period, as its price multiple expanded to reflect optimism that the wider adoption of artificial intelligence (AI) technology would increase demand for its products. Additionally, it launched its own AI technology platform for “smart city” and factory automation applications.
Grape King Bio is principally engaged in the sale of health supplements that are a cross between traditional Chinese medicine and Western supplements. Near the end of 2016, news emerged that the company had sold expired product after changing the sell-by date. This caused the stock to decline. While the financial impacts of the scandal were small, the impacts on the brand equity were large. We exited the position due to concerns about future revenue growth, which could be impacted by the scandal.
GT Capital is an investment holding company based in the Philippines. A combination of Philippine peso depreciation and concerns around falling margins in its Toyota Motors subsidiary, which imports some parts from other markets, hurt the stock price. We have trimmed the position to fund higher conviction ideas considering the weaker near- to medium-term earnings outlook.
CT Environmental Group is a Chinese water supply services company that focuses on industrial wastewater treatment. In the fourth quarter of 2016, when the majority of underperformance occurred, the company was the target of a poorly understood short sale attack that was launched just prior to the Thanksgiving holiday and caused great confusion in the marketplace. The company defended itself, causing shares to re-rate slightly and giving us an opportunity to exit the position.
Liberty LiLAC Group is a Latin-American focused telecom and cable operator that is part of the Liberty Global group. In the final quarter of 2016 it reported much lower-than-expected earnings before interest, taxes, depreciation, and amortization after closing an acquisition. Concurrent with this announcement, the market became concerned that it had overpaid for an asset with limited growth. After disappointing performance from the acquired assets over multiple quarters, we decided to exit the position for better opportunities.
South Korean company Amorepacific Corp is a leading global cosmetics brand with significant opportunities to expand beyond the Korean market. The largest international opportunity would be its sales into the China market. Unfortunately, geopolitical tensions between China and South Korea following installation of an American-made missile defense system led to China imposing
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Developing World Fund | September 30, 2017 (Unaudited)
restrictions on travel to South Korea in addition to Korea cosmetics imports. Given the changes in the medium-term opportunity we decided to exit the position after it rebounded from its lows.
Looking forward, we see the fundamentals in many emerging markets continuing to strengthen. In particular, we are positive about the potential impact from the ongoing reform agendas in China and India. We remain optimistic about the opportunity for reform in Brazil, as well. We are also constructive about future returns for emerging market equities as we continue to find strong businesses at attractive valuations throughout emerging markets, although perhaps slightly fewer than we did at the beginning of 2016. We will continue to search for the highest-quality businesses at the best prices.
Thank you for investing alongside us in Thornburg Developing World Fund.
Sincerely,
Ben Kirby,CFA
Portfolio Manager
Managing Director
Charlie Wilson,PhD
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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
Annual Report | 5
Thornburg Developing World Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | SINCE INCEP. | |||||||||||||||||
Class A Shares (Incep: 12/16/09) | ||||||||||||||||||||
Without sales charge | 17.58% | 2.49% | 5.00% | 6.89% | ||||||||||||||||
With sales charge | 12.29% | 0.92% | 4.03% | 6.27% | ||||||||||||||||
Class C Shares (Incep: 12/16/09) | ||||||||||||||||||||
Without sales charge | 16.65% | 1.70% | 4.20% | 6.13% | ||||||||||||||||
With sales charge | 15.65% | 1.70% | 4.20% | 6.13% | ||||||||||||||||
Class I Shares (Incep: 12/16/09) | 18.06% | 2.93% | 5.46% | 7.43% | ||||||||||||||||
Class R5 Shares (Incep: 2/1/13) | 18.06% | 2.93% | - | 3.67% | ||||||||||||||||
Class R6 Shares (Incep: 2/1/13) | 18.16% | 3.03% | - | 3.78% | ||||||||||||||||
MSCI Emerging Markets Index (Since 12/16/09) | 22.46% | 4.90% | 3.99% | 3.86% | ||||||||||||||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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 sales charge for Class I, R5, and R6 shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses before any fee waivers or expense reimbursements are as follows: A shares, 1.57%; C shares, 2.34%; I shares, 1.16%; R5 shares, 1.75%; R6 shares, 1.17%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for some of the share classes, resulting in net expense ratios of the following: I shares, 1.09%; R5 shares, 1.09%; R6 shares, 0.99%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus.
Glossary
The MSCI EAFE (Europe, Australasia, Far East) Index is an unmanaged index. It is a generally accepted benchmark for major overseas markets. Index weightings represent the relative capitalizations of the major overseas developed markets on a U.S. dollar adjusted basis. The index is calculated with net dividends reinvested in U.S. dollars.
The MSCI Emerging Markets Index is 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.
The S&P 500 Index is an unmanaged broad measure of the U.S. stock market.
The performance of any index is not indicative of the performance of any particular investment. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.
Leverage – An investment strategy using borrowed money: specifically, the use of various financial instruments or borrowed capital to increase the potential return of an investment. Leverage can also refer to the amount of debt used to finance assets. When one refers to something (a company, a property or an investment) as “highly leveraged,” it typically means that item has more debt than equity.
6 | Annual Report
Thornburg Developing World Fund | September 30, 2017 (Unaudited)
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 investments in the Fund’s portfolio normally will be weighted in favor of equity securities.
MARKET CAPITALIZATION EXPOSURE
BASKET STRUCTURE
TOP TEN EQUITY HOLDINGS
| Alibaba Group Holding Ltd. ADR | 6.1% | ||||
| Tencent Holdings Ltd. | 5.3% | ||||
| Samsung Electronics Co. Ltd. | 4.0% | ||||
| Baidu, Inc. ADR | 3.6% | ||||
| Kroton Educacional S.A. | 3.0% | ||||
| HDFC Bank Ltd. | 3.0% | ||||
| Cielo S.A. | 2.9% | ||||
| Sberbank ADR | 2.7% | ||||
| AIA Group Ltd. | 2.7% | ||||
| British American Tobacco plc ADR | 2.6% |
There is no guarantee that the Fund will meet its investment objective.
All portfolio information is subject to change. Charts may not add up to 100% due to rounding.
SECTOR EXPOSURE
| Information Technology | 30.4% | ||||
| Financials | 26.8% | ||||
| Consumer Discretionary | 8.8% | ||||
| Consumer Staples | 6.7% | ||||
| Health Care | 5.4% | ||||
| Real Estate | 4.9% | ||||
| Energy | 4.8% | ||||
| Telecommunication Services | 3.6% | ||||
| Materials | 2.4% | ||||
| Industrials | 2.0% | ||||
| Other Assets Less Liabilities | 4.2% |
TOP TEN INDUSTRY GROUPS
| Software & Services | 20.6% | ||||
| Banks | 20.1% | ||||
| Consumer Services | 7.0% | ||||
| Technology Hardware & Equipment | 6.2% | ||||
| Insurance | 5.2% | ||||
| Food, Beverage & Tobacco | 5.1% | ||||
| Real Estate | 4.9% | ||||
| Energy | 4.8% | ||||
| Telecommunication Services | 3.6% | ||||
| Semiconductors & Equipment | 3.6% |
COUNTRY EXPOSURE*
(percent of equity holdings)
| China | 28.7% | ||||
| India | 9.1% | ||||
| South Korea | 7.9% | ||||
| United States | 7.3% | ||||
| Brazil | 7.1% | ||||
| United Kingdom | 6.2% | ||||
| Russia | 6.0% | ||||
| Hong Kong | 5.0% | ||||
| Mexico | 4.3% | ||||
| South Africa | 2.6% | ||||
| Argentina | 2.5% | ||||
| Macao | 2.4% | ||||
| Indonesia | 2.3% | ||||
| Switzerland | 2.2% | ||||
| Taiwan | 2.0% | ||||
| Philippines | 1.6% | ||||
| United Arab Emirates | 1.6% | ||||
| Peru | 1.0% |
| * | The country assignment 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. |
Annual Report | 7
Thornburg Developing World Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
| COMMON STOCK — 95.83% | ||||||||||||
BANKS — 20.05% | ||||||||||||
Banks — 20.05% | ||||||||||||
BBVA Banco Frances SA ADR | 1,235,362 | $ | 25,189,031 | |||||||||
Citigroup, Inc. | 261,436 | 19,016,855 | ||||||||||
Credicorp Ltd. | 50,726 | 10,399,845 | ||||||||||
Grupo Financiero Banorte, S.A.B. de C.V. | 1,431,207 | 9,853,400 | ||||||||||
HDFC Bank Ltd. | 381,484 | 10,608,199 | ||||||||||
HDFC Bank Ltd. ADR | 219,926 | 21,194,269 | ||||||||||
ICICI Bank Ltd. ADR | 3,134,340 | 26,829,950 | ||||||||||
Industrial and Commercial Bank of China Ltd. | 37,085,270 | 27,535,276 | ||||||||||
Itau Unibanco Holding SA ADR | 722,533 | 9,898,702 | ||||||||||
PT Bank Central Asia | 15,567,229 | 23,462,376 | ||||||||||
Sberbank ADR | 2,028,799 | 28,950,962 | ||||||||||
|
| |||||||||||
| 212,938,865 | ||||||||||||
|
| |||||||||||
CONSUMER DURABLES & APPAREL — 0.70% | ||||||||||||
Household Durables — 0.70% | ||||||||||||
Coway Co., Ltd. | 91,177 | 7,482,986 | ||||||||||
|
| |||||||||||
| 7,482,986 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 7.05% | ||||||||||||
Diversified Consumer Services — 3.00% | ||||||||||||
Kroton Educacional S.A. | 5,037,458 | 31,890,196 | ||||||||||
Hotels, Restaurants & Leisure — 4.05% | ||||||||||||
MGM China Holdings Ltd. | 10,338,353 | 24,775,202 | ||||||||||
| a | Yum China Holdings, Inc. | 454,604 | 18,170,522 | |||||||||
|
| |||||||||||
| 74,835,920 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 1.54% | ||||||||||||
Diversified Financial Services — 1.54% | ||||||||||||
GT Capital Holdings, Inc. | 714,427 | 16,327,912 | ||||||||||
|
| |||||||||||
| 16,327,912 | ||||||||||||
|
| |||||||||||
ENERGY — 4.75% | ||||||||||||
Energy Equipment & Services — 1.65% | ||||||||||||
Halliburton Co. | 381,545 | 17,562,516 | ||||||||||
Oil, Gas & Consumable Fuels — 3.10% | ||||||||||||
Lukoil PJSC ADR | 221,931 | 11,769,001 | ||||||||||
Reliance Industries Ltd. | 1,769,378 | 21,161,024 | ||||||||||
|
| |||||||||||
| 50,492,541 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 5.07% | ||||||||||||
Beverages — 0.80% | ||||||||||||
Kweichow Moutai Co., Ltd. | 108,206 | 8,429,832 | ||||||||||
Tobacco — 4.27% | ||||||||||||
British American Tobacco plc ADR | 446,258 | 27,868,812 | ||||||||||
KT&G Corp. | 190,006 | 17,501,753 | ||||||||||
|
| |||||||||||
| 53,800,397 | ||||||||||||
|
| |||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 3.34% | ||||||||||||
Health Care Providers & Services — 3.34% | ||||||||||||
| a | Celltrion Healthcare Co., Ltd. | 260,137 | 12,605,407 | |||||||||
Sinopharm Group Co., Ltd. | 5,190,478 | 22,857,346 | ||||||||||
|
| |||||||||||
| 35,462,753 | ||||||||||||
|
| |||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 1.59% | ||||||||||||
Personal Products — 1.59% | ||||||||||||
Unilever N.V. | 285,436 | 16,852,141 | ||||||||||
|
| |||||||||||
| 16,852,141 | ||||||||||||
|
| |||||||||||
8 | Annual Report
Schedule of Investments, Continued
Thornburg Developing World Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
INSURANCE — 5.21% | ||||||||||||
Insurance — 5.21% | ||||||||||||
AIA Group Ltd. | 3,849,652 | $ | 28,385,984 | |||||||||
Sanlam Ltd. | 5,395,144 | 26,962,271 | ||||||||||
|
| |||||||||||
| 55,348,255 | ||||||||||||
|
| |||||||||||
MATERIALS — 2.43% | ||||||||||||
Metals & Mining — 2.43% | ||||||||||||
Mining and Metallurgical Co. Norilsk Nickel PJSC ADR | 421,599 | 7,257,827 | ||||||||||
Rio Tinto plc ADR | 392,596 | 18,526,605 | ||||||||||
|
| |||||||||||
| 25,784,432 | ||||||||||||
|
| |||||||||||
MEDIA — 1.02% | ||||||||||||
Media — 1.02% | ||||||||||||
| a | IMAX China Holding, Inc. | 3,585,512 | 10,832,363 | |||||||||
|
| |||||||||||
| 10,832,363 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 2.11% | ||||||||||||
Pharmaceuticals — 2.11% | ||||||||||||
| a,b | China Animal Healthcare Ltd. | 35,787,582 | 0 | |||||||||
Novartis AG ADR | 260,870 | 22,395,690 | ||||||||||
|
| |||||||||||
| 22,395,690 | ||||||||||||
|
| |||||||||||
REAL ESTATE — 4.90% | ||||||||||||
Equity Real Estate Investment Trusts — 2.26% | ||||||||||||
Fibra Uno Administracion S.A. de C.V. | 14,229,406 | 24,004,797 | ||||||||||
Real Estate Management & Development — 2.64% | ||||||||||||
China Resources Land Ltd. | 3,875,770 | 11,858,122 | ||||||||||
Emaar Properties PJSC | 7,015,581 | 16,218,015 | ||||||||||
|
| |||||||||||
| 52,080,934 | ||||||||||||
|
| |||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 3.57% | ||||||||||||
Semiconductors & Semiconductor Equipment — 3.57% | ||||||||||||
Applied Materials, Inc. | 205,674 | 10,713,559 | ||||||||||
Qualcomm, Inc. | 211,505 | 10,964,419 | ||||||||||
Taiwan Semiconductor Manufacturing Co., Ltd. | 2,277,820 | 16,262,631 | ||||||||||
|
| |||||||||||
| 37,940,609 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 20.63% | ||||||||||||
Information Technology Services — 2.88% | ||||||||||||
Cielo S.A. | 4,404,087 | 30,564,335 | ||||||||||
Internet Software & Services — 17.75% | ||||||||||||
| a | Alibaba Group Holding Ltd. ADR | 375,662 | 64,880,584 | |||||||||
| a | Baidu, Inc. ADR | 154,348 | 38,230,456 | |||||||||
| a | Facebook, Inc. | 91,878 | 15,699,194 | |||||||||
Tencent Holdings Ltd. | 1,303,900 | 56,117,976 | ||||||||||
| a | Yandex NV | 411,428 | 13,556,552 | |||||||||
|
| |||||||||||
| 219,049,097 | ||||||||||||
|
| |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 6.25% | ||||||||||||
Electronic Equipment, Instruments & Components — 2.23% | ||||||||||||
Hangzhou Hikvision Digital Technology Co., Ltd. | 3,958,536 | 19,069,241 | ||||||||||
Largan Precision Co., Ltd. | 26,091 | 4,585,972 | ||||||||||
Technology, Hardware, Storage & Peripherals — 4.02% | ||||||||||||
Samsung Electronics Co. Ltd. | 19,060 | 42,668,041 | ||||||||||
|
| |||||||||||
| 66,323,254 | ||||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — 3.63% | ||||||||||||
Diversified Telecommunication Services — 1.20% | ||||||||||||
Bharti Infratel Ltd. | 2,097,849 | 12,771,121 | ||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Developing World Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
Wireless Telecommunication Services — 2.43% | ||||||||||||
China Mobile Ltd. | 2,540,787 | $ | 25,744,187 | |||||||||
|
| |||||||||||
| 38,515,308 | ||||||||||||
|
| |||||||||||
TRANSPORTATION — 1.99% | ||||||||||||
Airlines — 0.95% | ||||||||||||
| a | Controladora Vuela Compania de Aviacion, S.A.B. de C.V. ADR | 851,925 | 10,112,350 | |||||||||
Transportation Infrastructure — 1.04% | ||||||||||||
Shanghai International Air Co., Ltd. | 1,925,846 | 11,016,762 | ||||||||||
|
| |||||||||||
| 21,129,112 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCK (Cost $802,584,067) | 1,017,592,569 | |||||||||||
|
| |||||||||||
| SHORT TERM INVESTMENTS — 4.63% | ||||||||||||
| c | Thornburg Capital Management Fund | 4,915,846 | 49,158,463 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $49,158,463) | 49,158,463 | |||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 100.46% (Cost $851,742,530) | $ | 1,066,751,032 | ||||||||||
| LIABILITIES NET OF OTHER ASSETS — (0.46)% | (4,870,530 | ) | ||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 1,061,880,502 | ||||||||||
|
| |||||||||||
Footnote Legend
| a | Non-income producing. |
| b | Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees’ Audit Committee. |
| c | Investment in Affiliates - Shown below are holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940, including companies for which the Fund’s holding represented 5% or more of the company’s voting securities, and a series of the Thornburg Investment Trust in which the Fund invested for cash management purposes during the period: |
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, | MARKET VALUE SEPTEMBER 30, | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | ||||||||||||||||||||||||||
Thornburg Capital Management Fund | 8,651,050 | 38,823,612 | 42,558,816 | 4,915,846 | $ | 49,158,463 | $ | 416,975 | $ | – | $ | – | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 4.63% of net assets |
| $ | 49,158,463 | $ | 416,975 | $ | – | $ | – | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ADR | American Depositary Receipt |
See notes to financial statements.
10 | Annual Report
Statement of Assets and Liabilities
Thornburg Developing World Fund | September 30, 2017
ASSETS |
| |||
Investments at value (Note 3) |
| |||
Non-affiliated issuers (cost $802,584,067) | $ | 1,017,592,569 | ||
Non-controlled affiliated issuer (cost $49,158,463) | 49,158,463 | |||
Cash denominated in foreign currency (cost $651,907) | 655,170 | |||
Receivable for investments sold | 10,528,998 | |||
Receivable for fund shares sold | 1,015,552 | |||
Dividends receivable | 765,117 | |||
Dividend and interest reclaim receivable | 140,200 | |||
Prepaid expenses and other assets | 21,507 | |||
|
| |||
Total Assets | 1,079,877,576 | |||
|
| |||
LIABILITIES |
| |||
Payable for investments purchased | 13,151,604 | |||
Payable for fund shares redeemed | 1,373,768 | |||
Payable to investment advisor and other affiliates (Note 4) | 937,833 | |||
Deferred taxes payable (Note 2) | 2,006,382 | |||
Accounts payable and accrued expenses | 527,405 | |||
Dividends payable | 82 | |||
|
| |||
Total Liabilities | 17,997,074 | |||
|
| |||
NET ASSETS | $ | 1,061,880,502 | ||
|
| |||
NET ASSETS CONSIST OF |
| |||
Undistributed net investment income | $ | 18,851 | ||
Net unrealized appreciation on investments | 212,965,201 | |||
Accumulated net realized gain (loss) | (232,518,220 | ) | ||
Net capital paid in on shares of beneficial interest | 1,081,414,670 | |||
|
| |||
| $ | 1,061,880,502 | |||
|
| |||
Annual Report | 11
Statement of Assets and Liabilities, Continued
Thornburg Developing World Fund | September 30, 2017
NET ASSET VALUE |
| |||
Class A Shares: |
| |||
Net asset value and redemption price per share | $ | 19.86 | ||
Maximum sales charge, 4.50% of offering price | 0.94 | |||
|
| |||
Maximum offering price per share | $ | 20.80 | ||
|
| |||
Class C Shares: |
| |||
Net asset value and offering price per share* | $ | 18.93 | ||
|
| |||
Class I Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 20.21 | ||
|
| |||
Class R5 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 20.14 | ||
|
| |||
Class R6 Shares: |
| |||
Net asset value, offering and redemption price per share | $ | 20.21 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
12 | Annual Report
Thornburg Developing World Fund | Year Ended September 30, 2017
INVESTMENT INCOME |
| |||
Dividend income |
| |||
Non-affiliated issuers (net of foreign taxes withheld of $2,245,340) | $ | 21,162,193 | ||
Non-controlled affiliated issuer | 416,975 | |||
Interest income (net of foreign taxes withheld of $21) | 994,367 | |||
|
| |||
Total Income | 22,573,535 | |||
|
| |||
EXPENSES |
| |||
Investment advisory fees (Note 4) | 10,105,151 | |||
Administration fees (Note 4) | ||||
Class A Shares | 168,793 | |||
Class C Shares | 141,717 | |||
Class I Shares | 386,014 | |||
Class R5 Shares | 2,852 | |||
Class R6 Shares | 9,308 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 336,722 | |||
Class C Shares | 1,131,521 | |||
Transfer agent fees | ||||
Class A Shares | 214,301 | |||
Class C Shares | 180,121 | |||
Class I Shares | 733,929 | |||
Class R5 Shares | 17,604 | |||
Class R6 Shares | 8,001 | |||
Registration and filing fees | ||||
Class A Shares | 22,628 | |||
Class C Shares | 18,218 | |||
Class I Shares | 46,690 | |||
Class R5 Shares | 21,005 | |||
Class R6 Shares | 18,970 | |||
Custodian fees (Note 2) | 761,508 | |||
Professional fees | 74,230 | |||
Accounting fees (Note 4) | 18,538 | |||
Trustee fees | 44,134 | |||
Other expenses | 168,560 | |||
|
| |||
Total Expenses | 14,630,515 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (467,850 | ) | ||
Investment advisory fees waived by investment advisor (Note 4) | (806,851 | ) | ||
|
| |||
Net Expenses | 13,355,814 | |||
|
| |||
Net Investment Income | $ | 9,217,721 | ||
|
| |||
Annual Report | 13
Statement of Operations, Continued
Thornburg Developing World Fund | Year Ended September 30, 2017
REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
Net realized gain (loss) on: | ||||
Non-affiliated issuer investments (net of realized capital gain taxes paid of $1,562,735) | $ | 30,114,286 | ||
Forward currency contracts (Note 7) | (2,358,123 | ) | ||
Foreign currency transactions | (631,236 | ) | ||
|
| |||
| 27,124,927 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Non-affiliated issuer investments (net of change in deferred taxes payable of $1,338,759) | 127,800,674 | |||
Forward currency contracts (Note 7) | 1,073,912 | |||
Foreign currency translations | (100,234 | ) | ||
|
| |||
| 128,774,352 | ||||
|
| |||
Net Realized and Unrealized Gain | 155,899,279 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 165,117,000 | ||
|
| |||
See notes to financial statements.
14 | Annual Report
Statements of Changes in Net Assets
Thornburg Developing World Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM |
| |||||||||
OPERATIONS |
| |||||||||
Net investment income | $ | 9,217,721 | $ | 5,848,787 | ||||||
Net realized gain (loss) on investments, forward currency contracts, foreign currency transactions, and capital gain taxes | 27,124,927 | (9,043,921 | ) | |||||||
Net unrealized appreciation (depreciation) on investments, forward currency contracts, foreign currency translations, and deferred taxes | 128,774,352 | 154,540,479 | ||||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 165,117,000 | 151,345,345 | ||||||||
DIVIDENDS TO SHAREHOLDERS |
| |||||||||
From net investment income |
| |||||||||
Class A Shares | (661,266 | ) | (343,296 | ) | ||||||
Class C Shares | (220,121 | ) | – | |||||||
Class I Shares | (6,435,552 | ) | (4,899,868 | ) | ||||||
Class R5 Shares | (47,343 | ) | (35,207 | ) | ||||||
Class R6 Shares | (310,277 | ) | (276,797 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) |
| |||||||||
Class A Shares | (58,944,051 | ) | (61,310,070 | ) | ||||||
Class C Shares | (40,460,081 | ) | (36,759,558 | ) | ||||||
Class I Shares | (177,355,450 | ) | (267,526,805 | ) | ||||||
Class R5 Shares | (1,570,384 | ) | 200,879 | |||||||
Class R6 Shares | (26,687,949 | ) | 23,520,145 | |||||||
|
| |||||||||
Net Decrease in Net Assets | (147,575,474 | ) | (196,085,232 | ) | ||||||
NET ASSETS |
| |||||||||
Beginning of Year | 1,209,455,976 | 1,405,541,208 | ||||||||
|
| |||||||||
End of Year | $ | 1,061,880,502 | $ | 1,209,455,976 | ||||||
|
| |||||||||
Undistributed (distribution in excess of) net investment income | $ | 18,851 | $ | (1,751,077 | ) | |||||
See notes to financial statements.
Annual Report | 15
Thornburg Developing World Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg Developing World Fund (the “Fund”) is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on December 16, 2009. The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of twenty-one 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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: 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. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default.
16 | Annual Report
Notes to Financial Statements, Continued
Thornburg Developing World Fund | September 30, 2017
In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
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 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.
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 (depreciation) from investments.
Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and 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 (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required. The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 852,546,096 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 259,794,609 | |||
Gross unrealized depreciation on a tax basis | (45,570,823 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 214,223,786 | |||
|
|
Temporary book to tax adjustments made to the cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of outstanding wash sale losses and marked-to-market of foreign currency transactions.
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg Developing World Fund | September 30, 2017
At September 30, 2017, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $8,658,757. For tax purposes, such capital losses will be recognized in the year ending September 30, 2018.
At September 30, 2017, the Fund had cumulative tax basis capital losses of $223,037,046, (of which $223,037,046 are short-term and $0 are 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.
In order to account for permanent book to tax differences, the Fund increased undistributed net investment income by $226,766, increased accumulated net realized loss by $164,865 and decreased net capital paid in on shares of beneficial interest by $61,901. Reclassifications have no impact upon the net asset value of the Fund and resulted primarily from foreign currency gains (losses), disposition of passive foreign investment company (“PFIC”) investments, and foreign capital gain taxes.
At September 30, 2017, the Fund had no undistributed tax basis ordinary investment income or undistributed tax basis capital gains.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: |
| |||||||||
Ordinary income | $ | 7,674,559 | $ | 5,555,168 | ||||||
Capital gains | – | – | ||||||||
|
| |||||||||
Total | $ | 7,674,559 | $ | 5,555,168 | ||||||
|
| |||||||||
Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assessment of a jurisdiction’s legal obligation to pay reclaims, the jurisdiction’s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain.
Deferred Foreign Capital Gain 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.
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg Developing World Fund | September 30, 2017
Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund’s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date.
In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment’s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data.
Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Quotations for foreign investments expressed in foreign currency amounts are converted to U.S. dollar equivalents using a foreign exchange quotation from a third party service provider at the time of valuation. Foreign investments held by the Fund may be traded on days and at times when the Fund is not open for business. Consequently, the value of Fund investments may be significantly affected on days when shareholders cannot purchase or sell Fund shares. Futures contracts and other financial and derivative instruments traded on an exchange are valued at the latest published price for the instrument on its primary exchange. Listed options are valued at the last bid price.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
On days when market volatility thresholds established by the Audit Committee are exceeded, foreign securities for which valuations are obtained from pricing service providers are fair valued. On these days, the foreign securities are characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
Annual Report | 19
Notes to Financial Statements, Continued
Thornburg Developing World Fund | September 30, 2017
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs 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, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3(a) | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities* | ||||||||||||||||||||
Common Stock | $ | 1,017,592,569 | $ | 1,017,592,569 | $ | – | $ | – | ||||||||||||
Short Term Investments | 49,158,463 | 49,158,463 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 1,066,751,032 | $ | 1,066,751,032 | $ | – | $ | – | ||||||||||||
Liabilities | ||||||||||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Spot Currency | $ | (19,636 | ) | $ | (19,636 | ) | $ | – | $ | – | ||||||||||
| * | 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. |
| (a) | In accordance with the guidance prescribed in Accounting Standards Update (“ASU”) No. 2011-04, a fair value determination was applied to a portfolio security characterized as a Level 3 investment at September 30, 2017. China Animal Healthcare Ltd., was priced at zero value as determined by the Valuation and Pricing Committee due to an ongoing trading suspension, lack of information and no liquidity. |
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, 2017, 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, 2017 is as follows:
| COMMON STOCK | TOTAL(b) | |||||||||
Beginning Balance 9/30/2016 | $ | 2,306,972 | $ | 2,306,972 | ||||||
Accrued Discounts (Premiums) | – | – | ||||||||
Net Realized Gain (Loss) | – | – | ||||||||
Gross Purchases | – | – | ||||||||
Gross Sales | – | – | ||||||||
Net Change in Unrealized Appreciation (Depreciation)(a) | (2,306,972 | ) | (2,306,972 | ) | ||||||
Transfers into Level 3 | – | – | ||||||||
Transfers out of Level 3 | – | – | ||||||||
|
| |||||||||
Ending Balance 9/30/2017 | $ | – | $ | – | ||||||
| (a) | Amount of net change in unrealized appreciation (depreciation) on investments recognized in income is included in the Fund’s Statement of Operations for the year ended September 30, 2017. The net change in unrealized appreciation (depreciation) attributable to securities owned on September 30, 2017 which were valued using significant unobservable inputs is ($2,306,972). |
| (b) | Level 3 investments represent 0% of total net assets at the year ended September 30, 2017. Significant fluctuations of the unobservable inputs applied to portfolio securities characterized as Level 3 investments could be expected to increase or decrease the fair value of these portfolio securities. |
20 | Annual Report
Notes to Financial Statements, Continued
Thornburg Developing World Fund | September 30, 2017
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
| Management Fee Schedule | |||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.975 | % | |||
Next $500 million | 0.925 | ||||
Next $500 million | 0.875 | ||||
Next $500 million | 0.825 | ||||
Over $2 billion | 0.775 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.945% of the Fund’s average net assets (before applicable management fee waiver of $806,851).
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $18,538 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $12,376 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $4,687 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A, Class C, Class I, and Class R5 shares of the Fund to obtain various shareholder and distribution related services. For the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I or Class R5 shares. Class R6 shares are not subject to a service plan. The Advisor and Distributor each 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 under which the Fund compensates the Distributor for services in promoting the sale of Class C shares of the Fund at an annual rate of up to .75 of 1% per annum of the average daily net assets attributable to Class C shares.
Total fees incurred by each class of shares of the Fund under their respective service and distribution plans for the year ended September 30, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor voluntarily waived Fund level investment advisory fees of $806,851. The Advisor contractually reimbursed certain class specific expenses administrative fees, and distribution fees of $6,575 for Class C shares, $389,830 for Class I shares, $35,165 for Class R5 shares, and $36,280 for Class R6 shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 3.9%.
Annual Report | 21
Notes to Financial Statements, Continued
Thornburg Developing World Fund | September 30, 2017
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had no such transactions with affiliated funds.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 1,289,759 | $ | 22,171,402 | 3,308,344 | $ | 52,192,505 | ||||||||||
Shares issued to shareholders in | 31,888 | 614,785 | 18,515 | 317,350 | ||||||||||||
Shares repurchased | (4,820,106 | ) | (81,730,238 | ) | (7,300,644 | ) | (113,819,925 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (3,498,459 | ) | $ | (58,944,051 | ) | (3,973,785 | ) | $ | (61,310,170 | ) | ||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 499,116 | $ | 8,103,815 | 1,054,538 | $ | 15,948,557 | ||||||||||
Shares issued to shareholders in | 11,284 | 208,667 | – | – | ||||||||||||
Shares repurchased | (2,991,611 | ) | (48,772,563 | ) | (3,507,682 | ) | (52,708,115 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (2,481,211 | ) | $ | (40,460,081 | ) | (2,453,144 | ) | $ | (36,759,558 | ) | ||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 12,552,451 | $ | 219,327,001 | 23,659,769 | $ | 375,895,310 | ||||||||||
Shares issued to shareholders in | 301,037 | 5,820,402 | 262,131 | 4,510,533 | ||||||||||||
Shares repurchased | (23,095,483 | ) | (402,502,853 | ) | (41,050,094 | ) | (647,932,648 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (10,241,995 | ) | $ | (177,355,450 | ) | (17,128,194 | ) | $ | (267,526,805 | ) | ||||||
|
| |||||||||||||||
Class R5 Shares | ||||||||||||||||
Shares sold | 135,799 | $ | 2,404,963 | 154,398 | $ | 2,473,042 | ||||||||||
Shares issued to shareholders in | 2,455 | 47,343 | 2,053 | 35,206 | ||||||||||||
Shares repurchased | (225,830 | ) | (4,022,690 | ) | (147,926 | ) | (2,307,369 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (87,576 | ) | $ | (1,570,384 | ) | 8,525 | $ | 200,879 | ||||||||
|
| |||||||||||||||
Class R6 Shares | ||||||||||||||||
Shares sold | 593,504 | $ | 10,364,683 | 2,141,556 | $ | 34,838,084 | ||||||||||
Shares issued to shareholders in | 16,103 | 307,869 | 15,902 | 275,102 | ||||||||||||
Shares repurchased | (2,009,514 | ) | (37,360,501 | ) | (720,421 | ) | (11,593,041 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) | (1,399,907 | ) | $ | (26,687,949 | ) | 1,437,037 | $ | 23,520,145 | ||||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $795,142,950 and $1,083,965,958, respectively.
22 | Annual Report
Notes to Financial Statements, Continued
Thornburg Developing World Fund | September 30, 2017
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 the 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, 2017, 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 Fund’s Advisor is unable to correctly implement its strategy in using a contract. In any such instance, the Fund may not achieve the intended benefit of entering into a contract, and may experience a loss.
The Fund entered into forward currency contracts during the year ended September 30, 2017 in the normal course of pursuing its investment objectives, with the objective of purchasing foreign investments or with the intent of reducing the risk to the value of the Fund’s foreign investments from adverse changes in the relationship between the U.S. dollar and foreign currencies. In each case these contracts have been initiated in conjunction with foreign investment transactions. The quarterly average value of open sell currency contracts for the year ended September 30, 2017 was $74,443,085.
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.
As of September 30, 2017, the Fund did not have any outstanding forward currency contracts.
Forward currency contracts were entered into with State Street Bank and Trust Company (“SSB”), pursuant to an International Swaps and Derivatives Association (“ISDA”) Master Agreement. In the event of a default or termination under the ISDA Master Agreement with SSB, 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 with SSB does not result in an offset of reported amounts of financial assets and 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.
The net realized gain (loss) from forward currency contracts and the net change in unrealized appreciation (depreciation) on outstanding forward currency contracts recognized in the Fund’s Statement of Operations for the year ended September 30, 2017 are disclosed in the following tables:
| NET REALIZED GAIN (LOSS) ON DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | (2,358,123 | ) | $ | (2,358,123 | ) | ||
| NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF DERIVATIVE FINANCIAL INSTRUMENTS RECOGNIZED IN INCOME FOR THE YEAR ENDED SEPTEMBER 30, 2017 | ||||||||
| TOTAL | FORWARD CURRENCY CONTRACTS | |||||||
Foreign exchange contracts | $ | 1,073,912 | $ | 1,073,912 | ||||
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 small- and mid-cap 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 23
Thornburg Developing World Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 30, | NET ASSET VALUE, BEGINNING OF YEAR | NET INVESTMENT INCOME | NET REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS FROM NET INCOME | DIVIDENDS FROM NET REALIZED GAINS | TOTAL DIVIDENDS | NET ASSET END OF YEAR | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 16.98 | 0.09 | 2.89 | 2.98 | (0.10 | ) | – | (0.10 | ) | $ | 19.86 | ||||||||||||||||||||||||||||
2016(b) | $ | 15.03 | 0.04 | 1.94 | 1.98 | (0.03 | ) | – | (0.03 | ) | $ | 16.98 | ||||||||||||||||||||||||||||
2015(b) | $ | 18.61 | 0.02 | (3.58 | ) | (3.56 | ) | (0.02 | ) | – | (0.02 | ) | $ | 15.03 | ||||||||||||||||||||||||||
2014(b) | $ | 17.77 | 0.03 | 0.81 | 0.84 | – | – | – | $ | 18.61 | ||||||||||||||||||||||||||||||
2013(b) | $ | 15.71 | 0.01 | 2.06 | 2.07 | (0.01 | ) | – | (0.01 | ) | $ | 17.77 | ||||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 16.26 | (0.03 | ) | 2.74 | 2.71 | (0.04 | ) | – | (0.04 | ) | $ | 18.93 | |||||||||||||||||||||||||||
2016 | $ | 14.48 | (0.08 | ) | 1.86 | 1.78 | – | – | – | $ | 16.26 | |||||||||||||||||||||||||||||
2015 | $ | 18.03 | (0.09 | ) | (3.46 | ) | (3.55 | ) | – | – | – | $ | 14.48 | |||||||||||||||||||||||||||
2014 | $ | 17.34 | (0.11 | ) | 0.80 | 0.69 | – | – | – | $ | 18.03 | |||||||||||||||||||||||||||||
2013 | $ | 15.44 | (0.12 | ) | 2.02 | 1.90 | – | – | – | $ | 17.34 | |||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 17.26 | 0.19 | 2.92 | 3.11 | (0.16 | ) | – | (0.16 | ) | $ | 20.21 | ||||||||||||||||||||||||||||
2016 | $ | 15.27 | 0.11 | 1.97 | 2.08 | (0.09 | ) | – | (0.09 | ) | $ | 17.26 | ||||||||||||||||||||||||||||
2015 | $ | 18.92 | 0.10 | (3.65 | ) | (3.55 | ) | (0.10 | ) | – | (0.10 | ) | $ | 15.27 | ||||||||||||||||||||||||||
2014 | $ | 18.05 | 0.10 | 0.84 | 0.94 | (0.07 | ) | – | (0.07 | ) | $ | 18.92 | ||||||||||||||||||||||||||||
2013 | $ | 15.96 | 0.09 | 2.09 | 2.18 | (0.09 | ) | – | (0.09 | ) | $ | 18.05 | ||||||||||||||||||||||||||||
| CLASS R5 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 17.20 | 0.18 | 2.92 | 3.10 | (0.16 | ) | – | (0.16 | ) | $ | 20.14 | ||||||||||||||||||||||||||||
2016 | $ | 15.22 | 0.12 | 1.96 | 2.08 | (0.10 | ) | – | (0.10 | ) | $ | 17.20 | ||||||||||||||||||||||||||||
2015 | $ | 18.86 | 0.12 | (3.65 | ) | (3.53 | ) | (0.11 | ) | – | (0.11 | ) | $ | 15.22 | ||||||||||||||||||||||||||
2014 | $ | 18.04 | 0.13 | 0.80 | 0.93 | (0.11 | ) | – | (0.11 | ) | $ | 18.86 | ||||||||||||||||||||||||||||
2013(c) | $ | 17.49 | 0.08 | 0.47 | 0.55 | – | – | – | $ | 18.04 | ||||||||||||||||||||||||||||||
| CLASS R6 SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 17.25 | 0.20 | 2.93 | 3.13 | (0.17 | ) | – | (0.17 | ) | $ | 20.21 | ||||||||||||||||||||||||||||
2016 | $ | 15.25 | 0.13 | 1.98 | 2.11 | (0.11 | ) | – | (0.11 | ) | $ | 17.25 | ||||||||||||||||||||||||||||
2015 | $ | 18.91 | 0.15 | (3.68 | ) | (3.53 | ) | (0.13 | ) | – | (0.13 | ) | $ | 15.25 | ||||||||||||||||||||||||||
2014 | $ | 18.08 | 0.11 | 0.84 | 0.95 | (0.12 | ) | – | (0.12 | ) | $ | 18.91 | ||||||||||||||||||||||||||||
2013(c) | $ | 17.51 | 0.04 | 0.53 | 0.57 | – | – | – | $ | 18.08 | ||||||||||||||||||||||||||||||
| (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, 2013. |
| (d) | Annualized. |
| (e) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
24 | Annual Report
Financial Highlights, Continued
Thornburg Developing World Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | EXPENSE REDUCTIONS AND CREDITS (%) | EXPENSES, BEFORE EXPENSE REDUCTIONS (%) | TOTAL RETURN (%)(a) | PORTFOLIO TURNOVER RATE (%)(a) | NET ASSETS AT END OF YEAR (THOUSANDS) | ||||||||||||||||||||||||
| 0.54 | 1.52 | 1.52 | 1.60 | 17.58 | 77.61 | $ | 125,427 | |||||||||||||||||||||||
| 0.25 | 1.52 | 1.52 | 1.57 | 13.20 | 94.68 | $ | 166,655 | |||||||||||||||||||||||
| 0.14 | 1.53 | 1.53 | 1.53 | (19.12 | ) | 96.74 | $ | 207,282 | ||||||||||||||||||||||
| 0.15 | 1.45 | 1.45 | 1.45 | 4.73 | 61.46 | $ | 459,121 | |||||||||||||||||||||||
| 0.05 | 1.48 | 1.48 | 1.59 | 13.19 | 61.67 | $ | 347,073 | |||||||||||||||||||||||
| (0.16 | ) | 2.26 | 2.26 | 2.34 | 16.65 | 77.61 | $ | 109,227 | ||||||||||||||||||||||
| (0.51 | ) | 2.29 | 2.29 | 2.34 | 12.29 | 94.68 | $ | 134,129 | ||||||||||||||||||||||
| (0.55 | ) | 2.27 | 2.27 | 2.27 | (19.69 | ) | 96.74 | $ | 154,943 | |||||||||||||||||||||
| (0.62 | ) | 2.23 | 2.23 | 2.23 | 3.98 | 61.46 | $ | 232,493 | ||||||||||||||||||||||
| (0.71 | ) | 2.26 | 2.26 | 2.40 | 12.31 | 61.67 | $ | 106,168 | ||||||||||||||||||||||
| 1.05 | 1.07 | 1.07 | 1.20 | 18.06 | 77.61 | $ | 793,069 | |||||||||||||||||||||||
| 0.70 | 1.07 | 1.07 | 1.16 | 13.68 | 94.68 | $ | 853,866 | |||||||||||||||||||||||
| 0.52 | 1.09 | 1.09 | 1.14 | (18.75 | ) | 96.74 | $ | 1,016,898 | ||||||||||||||||||||||
| 0.54 | 1.09 | 1.09 | 1.09 | 5.20 | 61.46 | $ | 2,376,420 | |||||||||||||||||||||||
| 0.52 | 1.04 | 1.04 | 1.22 | 13.74 | 61.67 | $ | 828,147 | |||||||||||||||||||||||
| 1.04 | 1.08 | 1.08 | 1.77 | 18.06 | 77.61 | $ | 5,506 | |||||||||||||||||||||||
| 0.74 | 1.08 | 1.08 | 1.75 | 13.65 | 94.68 | $ | 6,208 | |||||||||||||||||||||||
| 0.66 | 1.09 | 1.09 | 1.67 | (18.72 | ) | 96.74 | $ | 5,363 | ||||||||||||||||||||||
| 0.67 | 1.09 | 1.09 | 1.90 | 5.17 | 61.46 | $ | 7,433 | |||||||||||||||||||||||
| 0.47 | (d) | 1.07 | (d) | 1.07 | (d) | 17.45 | (d)(e) | 3.14 | 61.67 | $ | 697 | |||||||||||||||||||
| 1.14 | 0.97 | 0.97 | 1.13 | 18.16 | 77.61 | $ | 28,652 | |||||||||||||||||||||||
| 0.80 | 0.97 | 0.97 | 1.12 | 13.81 | 94.68 | $ | 48,598 | |||||||||||||||||||||||
| 0.84 | 0.99 | 0.99 | 1.10 | (18.68 | ) | 96.74 | $ | 21,055 | ||||||||||||||||||||||
| 0.57 | 0.99 | 0.99 | 1.10 | 5.26 | 61.46 | $ | 22,727 | |||||||||||||||||||||||
| 0.20 | (d) | 0.98 | (d) | 0.98 | (d) | 1.99 | (d) | 3.26 | 61.67 | $ | 14,422 | |||||||||||||||||||
Annual Report | 25
Report of Independent Registered Public Accounting Firm
Thornburg Developing World Fund
To the Trustees and Shareholders of
the 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 the Thornburg Developing World Fund (the “Fund”) as of September 30, 2017, 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 indicated, 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 as of September 30, 2017 by correspondence with the custodian, brokers, and transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
26 | Annual Report
Thornburg Developing World Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
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 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,172.30 | $8.43 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.31 | $7.82 | ||||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,168.00 | $12.32 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.70 | $11.45 | ||||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,174.80 | $5.93 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.61 | $5.51 | ||||||||||
| CLASS R5 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,174.90 | $5.94 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.60 | $5.52 | ||||||||||
| CLASS R6 SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,175.20 | $5.38 | ||||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,020.12 | $5.00 | ||||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.55%; C: 2.27%; I: 1.09%; 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. |
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.
Annual Report | 27
Thornburg Developing World Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
28 | Annual Report
Trustees and Officers, Continued
Thornburg Developing World Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 29
Trustees and Officers, Continued
Thornburg Developing World Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
30 | Annual Report
Thornburg Developing World Fund | September 30, 2017 (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, 2017, dividends paid by the Thornburg Developing World Fund of $7,674,559 are being reported as taxable ordinary investment income dividends for federal income tax purposes.
For the tax year ended September 30, 2017, 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 5.93% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2017 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2017, foreign source income and foreign taxes paid is $23,015,297 and $3,808,076, 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, 2017 . Complete information will be reported in conjunction with your 2017 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 Developing World Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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.
Annual Report | 31
Other Information, Continued
Thornburg Developing World Fund | September 30, 2017 (Unaudited)
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the agreement, the Trustees did not identify any single factor as controlling and considered a wide range of information, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 created by an independent mutual fund analyst firm, and to a broad-based securities index, (4) the Fund’s investment performance for the 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 created 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, (5) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, (6) comparison of the Fund’s annualized return since inception to the Fund’s benchmark index, and (7) comparative measures of estimated earnings growth, and risk and return statistics. The Trustees generally attach additional significance to investment performance from the perspective of longer term shareholders. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectus. Information noted by the Trustees as having been considered in evaluating the Fund’s fees and expenses included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and level of total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses for two of the Fund’s share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. Comparative fee and expense data noted as having been considered by the Trustees showed that the Fund’s advisory fee level was comparable to the median and average levels for the fund category, the level of total expense for one share class of the Fund was comparable to the median and average levels for the category, and that the level of total expense for a second
32 | Annual Report
Other Information, Continued
Thornburg Developing World Fund | September 30, 2017 (Unaudited)
share class was lower than the median and average total expense levels for the category. Peer group data showed the Fund’s advisory fee level was comparable to the median levels of the two peer groups, the total expense level for one of two share classes was comparable to the median level of its peer group, and that the total expense level for the second share class was lower than the median level of its 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. In reviewing the profitability of the Advisor’s services to the Fund the Trustees considered an analysis of the Advisor’s costs and the profitability to the Advisor of its services, together with data respecting the overall profitability of a selection of other investment management firms. The Trustees noted that a portion of the Advisor’s profits are an important element in the compensation of shareholder employees. The Trustees considered in this regard information from the Advisor respecting investment of its profits to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. The Trustees also considered the contribution of the Advisor’s cost management to its profitability, and the relationship of the Advisor’s financial resources and profitability in previous years to its ability to attract necessary personnel, invest in systems and other assets required for its service to the Fund, and maintain or improve service levels for the Fund notwithstanding fluctuations in revenues and profitability. The information considered did not indicate to the Trustees that the Advisor’s profitability was excessive.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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, the effects of the breakpoint structure and other expense factors realized by the Fund and certain other funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 33
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
34 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 35
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 |
Annual Report September 30, 2017 THORNBURG BETTER WORLD INTERNATIONAL FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Better World International Fund
Annual Report ^ September 30, 2017
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class A | TBWAX | 885-216-721 | ||||||||
| Class C | TBWCX | 885-216-713 | ||||||||
| Class I | TBWIX | 885-216-697 | ||||||||
Class I shares may not be available to all investors. Minimum investments for Class I shares may be higher than those for other classes.
Investments carry risks, including possible loss of principal. Additional 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- and mid-capitalization companies may increase the risk of greater price fluctuations. Investments in the Fund are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.
Funds invested in a smaller number of holdings may expose an investor to greater volatility.
Annual Report | 3
Thornburg Better World International Fund | September 30, 2017 (Unaudited)
October 12, 2017
Dear Fellow Shareholder:
We are pleased to present the annual report for Thornburg Better World International Fund for the year ended September 30, 2017. As a reminder, Better World International Fund seeks what we view as attractively priced stocks of quality companies that have sustainable business models, compelling growth prospects and improving “ESG” standards of environmental sensitivity, social responsibility, and corporate governance. In our research and experience running socially responsible separate accounts for several years prior to launching our own ESG fund, we have found that companies with durable business models incorporating these values outperform over time. The coupling of ESG and financial advantages often leads to lower regulatory and legal risks, enhanced marketplace reputations, reduced operating costs, and more effective capital allocation. We believe that these advantages create a positive self-reinforcing cycle to the benefit of clients, employees, and shareholders.
A year following the strong results in our inaugural annual report, performance for the Fund has shifted in the short term. As mentioned in our first annual report, our expectations for the up-capture ratio of the portfolio to come down from the then-elevated level have largely played out. In the period, Better World International Fund gained 8.61% (A shares without sales charge), underperforming the MSCI AC World ex-U.S. Index’s 19.61% return. That brought the since inception return to 12.53% (A shares without sales charge), versus 14.32% for the benchmark. We don’t expect to always outperform in shorter timespans. But, we do aim to provide investors with superior returns over the long run, and we believe that our investment philosophy and process provide a sound framework to add value. Given the current construction of the portfolio and the prevailing environment, we expect the relative performance of the Fund to improve.
The first half of the period proved challenging for international equity investors amidst a series of sharp market and geopolitical shifts. During the fourth quarter of 2016, the U.S. presidential election dominated headlines across the globe. Donald Trump’s surprise win quickly reverberated throughout markets, altering the landscape for both equity and fixed income investors. Although the market’s knee-jerk reaction to Trump’s triumph was decidedly negative, the skepticism was quickly replaced with enthusiasm as investors assessed the possibility of a pro-business, pro-growth agenda being implemented by a Republican-controlled U.S. government.
Global growth expectations have risen throughout the year, albeit from a low base, and earnings expectations have followed. Our conservative positioning, motivated by what we viewed as relatively high asset valuations around the world, weighed on performance during the period. The most significant detractors were our holdings in consumer discretionary and our high cash position. One notable detractor was an online used car sales company, Carvana, which experienced a disappointing initial public offering (IPO). As part of our long-standing tradition surrounding continual improvement, our experience with the company has led to various improvements in processes and procedures surrounding similar organizations and deal structures. Overall, we believe these process changes will greatly benefit long-term investors in the Fund. On a sunnier note, during the year we deployed incremental capital into some new promising sustainable businesses, particularly in the industrial and materials areas. Additionally, we’ve invested in several promising companies in the financial sector, an area that had previously been difficult given our ESG standards.
As mentioned earlier in this letter, the Fund has remained conservatively positioned during the year. Extreme central bank intervention in asset markets, strong risk-seeking behavior among market participants, and elevated valuations have merited increased attention to protection against downside risk exposure as outlined in our most recent quarterly commentary. However, global markets generally appreciated over the period and became even more expensive.
Over our eight-year journey developing a homegrown Thornburg ESG investment philosophy, we have experienced mostly rising markets. In a late cycle environment with valuations as expensive as they are, this is our toughest time to endure. The Fund is generally designed to be conservative and fare well during periods of volatility and has performed as expected on the downside. As mentioned in the third quarter 2017 commentary, based on Morningstar data there have been 504 trading days since the inception of Thornburg Better World International Fund, even in a generally up market there have been 229 trading days where the ACWI ex-U.S. was down; of those 229 days where the market slipped, we outperformed on 79% of them. Furthermore, the portfolio has a downside capture ratio of 64.5% as of September 30, 2017. We are not simply focused on the downside, however, as we believe risk-adjusted returns are the best indicators of long-term success. For example, according to Morningstar, the Fund has produced alpha of 2.65 and a Sharpe ratio of 1.22 since inception through the end of September 2017. This is achieved through what we view as our unique approach to investing in companies exhibiting attractive cash flow-based valuations, strong moats, and runways for growth, as well as synergistic financial and ESG characteristics. Ultimately, we believe the proactive incorporation of ESG metrics is a unique lens to measure management quality, effective capital allocation, and sustainable returns.
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Better World International Fund | September 30, 2017 (Unaudited)
Now is likely the time to align yourself with a manager that is particularly focused on risk. When the tide turns and stock valuations come down from the above-average levels we see today, we believe this portfolio can do very well. Once we see good businesses at cheap valuations, we will become more aggressive. But today it is time to exercise caution in our view.
Thank you for investing alongside us in Thornburg Better World International Fund.
Sincerely,
Rolf Kelly,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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
Annual Report | 5
Thornburg Better World International Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | SINCE INCEP. | |||||||||
Class A Shares (Incep: 9/30/15) | ||||||||||
Without sales charge | 8.61% | 12.53% | ||||||||
With sales charge | 3.74% | 9.98% | ||||||||
Class C Shares (Incep: 9/30/15) | ||||||||||
Without sales charge | 7.97% | 11.88% | ||||||||
With sales charge | 6.97% | 11.88% | ||||||||
Class I Shares (Incep: 9/30/15) | 9.58% | 13.44% | ||||||||
MSCI AC World ex-U.S. Index (Since 9/30/15) | 19.61% | 14.32% | ||||||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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 information does 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. The maximum sales charge for the Fund’s A shares is 4.50%. C shares are subject to a 1% contingent deferred sales charge (CDSC) for the first year only. There is no sales charge for Class I shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses before any fee waivers or expense reimbursements are as follows: A shares, 7.27%; C shares, 13.13%; I shares, 2.28%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least April 10, 2018, for these share classes, resulting in net expense ratios of the following: A shares, 1.83%; C shares, 2.38%; I shares, 1.09%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus.
Glossary
The MSCI All Country (AC) World ex-US Index is 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. Beginning in January 2001, the index is calculated with net dividends reinvested in U.S. dollars. Prior data is calculated with gross dividends.
The MSCI EAFE (Europe, Australasia, Far East) Index is an unmanaged index. It is a generally accepted benchmark for major overseas markets. Index weightings represent the relative capitalizations of the major overseas developed markets on a U.S. dollar adjusted basis. The index is calculated with net dividends reinvested in U.S. dollars.
The performance of any index is not indicative of the performance of any particular investment. 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.
Alpha – A measure of the difference between a portfolio’s actual returns and its expected performance, given its level of risk as measured by beta. A positive alpha figure indicates the portfolio performed better than its beta would predict. In contrast, a negative alpha indicates under-performance, given the expectations established by the beta.
Sharpe Ratio – A risk-adjusted measure developed by Nobel Laureate William Sharpe. It is calculated by using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe Ratio, the better the fund’s historical risk-adjusted performance. The Geometric Sharpe ratio is calculated for the past three-year period by dividing a fund’s annualized excess returns by its annualized standard deviation.
Upside/Downside Capture Ratio – A ratio that shows whether a given fund has outperformed—gained more or lost less than—a broad market benchmark during periods of market strength and weakness, and if so, by how much.
6 | Annual Report
Thornburg Better World International Fund | September 30, 2017 (Unaudited)
OBJECTIVES AND STRATEGIES
The Fund seeks long-term capital appreciation.
The Fund invests primarily in a broad range of foreign companies that demonstrate one or more positive environmental, social, and governance (ESG) characteristics that the investment manager identifies as significant. The Fund targets companies of any size or country of origin, and which we believe are high-quality and attractively valued.
MARKET CAPITALIZATION EXPOSURE
BASKET STRUCTURE
TOP TEN EQUITY HOLDINGS
| ING Groep N.V. | 3.1% | ||||
| UBS Group AG | 3.0% | ||||
| Brenntag AG | 2.9% | ||||
| Reckitt Benckiser plc | 2.7% | ||||
| Intact Financial Corp. | 2.7% | ||||
| Sumitomo Mitsui Financial Group, Inc. | 2.6% | ||||
| AIA Group Ltd. | 2.6% | ||||
| Europris ASA | 2.6% | ||||
| Compass Group plc | 2.5% | ||||
| Orange SA | 2.5% |
There is no guarantee that the Fund will meet its investment objective.
All portfolio information is subject to change. Charts may not add up to 100% due to rounding.
| * | The country assignment 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. |
SECTOR EXPOSURE
| Financials | 22.4% | ||||
| Consumer Staples | 14.1% | ||||
| Industrials | 13.3% | ||||
| Consumer Discretionary | 12.6% | ||||
| Health Care | 11.2% | ||||
| Telecommunication Services | 6.0% | ||||
| Information Technology | 3.0% | ||||
| Utilities | 2.6% | ||||
| Materials | 2.5% | ||||
| Other Assets Less Liabilities | 12.4% |
TOP TEN INDUSTRY GROUPS
| Banks | 9.9% | ||||
| Pharma, Biotech & Life Sciences | 9.7% | ||||
| Food, Beverage & Tobacco | 6.9% | ||||
| Diversified Financials | 6.8% | ||||
| Transportation | 6.3% | ||||
| Telecommunication Services | 6.0% | ||||
| Insurance | 5.8% | ||||
| Food & Staples Retailing | 4.4% | ||||
| Commercial & Professional Services | 4.1% | ||||
| Media | 3.0% |
COUNTRY EXPOSURE*
(percent of equity holdings)
| Japan | 13.3% | ||||
| United Kingdom | 10.1% | ||||
| Switzerland | 9.1% | ||||
| United States | 8.8% | ||||
| Germany | 7.2% | ||||
| Ireland | 5.4% | ||||
| Norway | 4.9% | ||||
| France | 4.5% | ||||
| Netherlands | 4.4% | ||||
| Canada | 3.6% | ||||
| China | 3.5% | ||||
| India | 3.0% | ||||
| Hong Kong | 2.9% | ||||
| Italy | 2.6% | ||||
| Colombia | 2.5% | ||||
| Taiwan | 2.2% | ||||
| Vietnam | 1.9% | ||||
| United Arab Emirates | 1.8% | ||||
| Singapore | 1.8% | ||||
| Philippines | 1.7% | ||||
| Mexico | 1.7% | ||||
| Spain | 1.6% | ||||
| Argentina | 1.3% |
Annual Report | 7
Thornburg Better World International Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
| COMMON STOCK — 87.58% | ||||||||||||
AUTOMOBILES & COMPONENTS — 1.49% | ||||||||||||
Automobiles — 1.49% | ||||||||||||
Subaru Corp. | 28,385 | $ | 1,024,155 | |||||||||
|
| |||||||||||
| 1,024,155 | ||||||||||||
|
| |||||||||||
BANKS — 9.86% | ||||||||||||
Banks — 9.86% | ||||||||||||
BBVA Banco Frances SA ADR | 38,551 | 786,055 | ||||||||||
ICICI Bank Ltd. | 225,823 | 957,639 | ||||||||||
ING Groep N.V. | 115,369 | 2,127,133 | ||||||||||
Sumitomo Mitsui Financial Group, Inc. | 47,234 | 1,813,382 | ||||||||||
United Overseas Bank Ltd. | 62,405 | 1,081,144 | ||||||||||
|
| |||||||||||
| 6,765,353 | ||||||||||||
|
| |||||||||||
CAPITAL GOODS — 2.91% | ||||||||||||
Trading Companies & Distributors — 2.91% | ||||||||||||
Brenntag AG | 35,805 | 1,993,810 | ||||||||||
|
| |||||||||||
| 1,993,810 | ||||||||||||
|
| |||||||||||
COMMERCIAL & PROFESSIONAL SERVICES — 4.08% | ||||||||||||
Professional Services — 4.08% | ||||||||||||
Bureau Veritas SA | 38,718 | 999,187 | ||||||||||
Nielsen Holdings plc | 23,262 | 964,210 | ||||||||||
RELX plc | 38,179 | 837,487 | ||||||||||
|
| |||||||||||
| 2,800,884 | ||||||||||||
|
| |||||||||||
CONSUMER DURABLES & APPAREL — 3.00% | ||||||||||||
Household Durables — 3.00% | ||||||||||||
| a | Cairn Homes plc | 407,766 | 827,730 | |||||||||
Sony Corp. | 33,121 | 1,232,122 | ||||||||||
|
| |||||||||||
| 2,059,852 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 2.51% | ||||||||||||
Hotels, Restaurants & Leisure — 2.51% | ||||||||||||
Compass Group plc | 81,071 | 1,719,693 | ||||||||||
|
| |||||||||||
| 1,719,693 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 6.79% | ||||||||||||
Capital Markets — 2.96% | ||||||||||||
UBS Group AG | 118,868 | 2,031,564 | ||||||||||
Diversified Financial Services — 3.83% | ||||||||||||
Cerved Information Solutions S.p.A. | 134,442 | 1,588,971 | ||||||||||
GT Capital Holdings, Inc. | 45,372 | 1,036,957 | ||||||||||
|
| |||||||||||
| 4,657,492 | ||||||||||||
|
| |||||||||||
FOOD & STAPLES RETAILING — 4.43% | ||||||||||||
Food & Staples Retailing — 4.43% | ||||||||||||
Tsuruha Holdings, Inc. | 11,243 | 1,343,864 | ||||||||||
| a | US Foods Holding Corp. | 63,593 | 1,697,933 | |||||||||
|
| |||||||||||
| 3,041,797 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 6.91% | ||||||||||||
Food Products — 6.91% | ||||||||||||
Grupo Nutresa SA | 163,873 | 1,497,762 | ||||||||||
Marine Harvest ASA | 16,967 | 335,527 | ||||||||||
Orkla ASA | 82,362 | 844,871 | ||||||||||
Premium Brands Holdings Corp. | 4,443 | 354,300 | ||||||||||
Vietnam Dairy Products JSC | 178,410 | 1,171,266 | ||||||||||
Wessanen NV | 28,452 | 534,676 | ||||||||||
|
| |||||||||||
| 4,738,402 | ||||||||||||
|
| |||||||||||
8 | Annual Report
Schedule of Investments, Continued
Thornburg Better World International Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 1.51% | ||||||||||||
Health Care Equipment & Supplies — 1.51% | ||||||||||||
Olympus Corp. | 30,608 | $ | 1,036,361 | |||||||||
|
| |||||||||||
| 1,036,361 | ||||||||||||
|
| |||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 2.74% | ||||||||||||
Household Products — 2.74% | ||||||||||||
Reckitt Benckiser plc | 20,563 | 1,877,282 | ||||||||||
|
| |||||||||||
| 1,877,282 | ||||||||||||
|
| |||||||||||
INSURANCE — 5.76% | ||||||||||||
Insurance — 5.76% | ||||||||||||
AIA Group Ltd. | 239,726 | 1,767,656 | ||||||||||
Intact Financial Corp. | 22,147 | 1,829,446 | ||||||||||
| a | ZhongAn Online P&C Insurance Co. | 43,279 | 351,535 | |||||||||
|
| |||||||||||
| 3,948,637 | ||||||||||||
|
| |||||||||||
MATERIALS — 2.47% | ||||||||||||
Construction Materials — 2.47% | ||||||||||||
CRH plc | 44,606 | 1,695,732 | ||||||||||
|
| |||||||||||
| 1,695,732 | ||||||||||||
|
| |||||||||||
MEDIA — 3.02% | ||||||||||||
Media — 3.02% | ||||||||||||
China South Publishing & Media Group Co., Ltd. | 453,728 | 1,042,998 | ||||||||||
Megacable Holdings S.A.B. de C.V. | 247,152 | 1,029,460 | ||||||||||
|
| |||||||||||
| 2,072,458 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 9.65% | ||||||||||||
Biotechnology — 2.80% | ||||||||||||
| a | Alkermes plc | 13,838 | 703,524 | |||||||||
Gilead Sciences, Inc. | 15,020 | 1,216,920 | ||||||||||
Life Sciences Tools & Services — 1.85% | ||||||||||||
Thermo Fisher Scientific, Inc. | 6,701 | 1,267,829 | ||||||||||
Pharmaceuticals — 5.00% | ||||||||||||
| a | Galenica Sante Ltd. | 30,158 | 1,429,496 | |||||||||
Novartis AG | 11,784 | 1,008,823 | ||||||||||
Roche Holding AG | 3,899 | 995,335 | ||||||||||
|
| |||||||||||
| 6,621,927 | ||||||||||||
|
| |||||||||||
RETAILING — 2.57% | ||||||||||||
Multiline Retail — 2.57% | ||||||||||||
Europris ASA | 367,278 | 1,766,181 | ||||||||||
|
| |||||||||||
| 1,766,181 | ||||||||||||
|
| |||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — 1.93% | ||||||||||||
Semiconductors & Semiconductor Equipment — 1.93% | ||||||||||||
Taiwan Semiconductor Manufacturing Co., Ltd. ADR | 35,231 | 1,322,924 | ||||||||||
|
| |||||||||||
| 1,322,924 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 1.05% | ||||||||||||
Internet Software & Services — 1.05% | ||||||||||||
Scout24 AG | 17,640 | 721,366 | ||||||||||
|
| |||||||||||
| 721,366 | ||||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — 6.01% | ||||||||||||
Diversified Telecommunication Services — 6.01% | ||||||||||||
Bharti Infratel Ltd. | 137,618 | 837,780 | ||||||||||
Nippon Telegraph & Telephone Corp. | 34,104 | 1,562,980 | ||||||||||
Orange SA | 104,950 | 1,719,201 | ||||||||||
|
| |||||||||||
| 4,119,961 | ||||||||||||
|
| |||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Better World International Fund | September 30, 2017 (Unaudited)
| SHARES | VALUE | |||||||||||
TRANSPORTATION — 6.30% | ||||||||||||
Air Freight & Logistics — 2.32% | ||||||||||||
Deutsche Post AG | 35,672 | $ | 1,587,985 | |||||||||
Transportation Infrastructure — 3.98% | ||||||||||||
Aena S.A. | 5,235 | 945,102 | ||||||||||
DP World Ltd. | 49,244 | 1,106,020 | ||||||||||
Shanghai International Air Co., Ltd. | 119,134 | 681,504 | ||||||||||
|
| |||||||||||
| 4,320,611 | ||||||||||||
|
| |||||||||||
UTILITIES — 2.59% | ||||||||||||
Electric Utilities — 0.22% | ||||||||||||
Nextera Energy, Inc. | 1,039 | 152,265 | ||||||||||
Multi-Utilities — 2.37% | ||||||||||||
National Grid plc | 131,371 | 1,627,639 | ||||||||||
|
| |||||||||||
| 1,779,904 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCK (Cost $53,858,922) | 60,084,782 | |||||||||||
|
| |||||||||||
| SHORT TERM INVESTMENTS — 11.28% | ||||||||||||
| b | Thornburg Capital Management Fund | 773,888 | 7,738,888 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $7,738,888) | 7,738,888 | |||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 98.86% (Cost $61,597,810) | $ | 67,823,670 | ||||||||||
| OTHER ASSETS LESS LIABILITIES — 1.14% | 782,159 | |||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 68,605,829 | ||||||||||
|
| |||||||||||
Footnote Legend
| a | Non-income producing. |
| b | Investment in Affiliates - Shown below are holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940, including companies for which the Fund’s holding represented 5% or more of the company’s voting securities, and a series of the Thornburg Investment Trust in which the Fund invested for cash management purposes during the period: |
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2017 | MARKET VALUE SEPTEMBER 30, 2017 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | ||||||||||||||||||||||
Thornburg Capital Management Fund | 493,408 | 3,596,912 | 3,316,432 | 773,888 | $ | 7,738,888 | $ | 61,680 | $ | – | $ | – | ||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 11.28% of net assets |
| $ | 7,738,888 | $ | 61,680 | $ | – | $ | – | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
Portfolio Abbreviations
To simplify the listings of securities, abbreviations are used per the table below:
| ADR | American Depositary Receipt |
See notes to financial statements.
10 | Annual Report
Statement of Assets and Liabilities
Thornburg Better World International Fund | September 30, 2017
ASSETS | ||||
Investments at value (Note 3) | ||||
Non-affiliated issuers (cost $53,858,922) | $ | 60,084,782 | ||
Non-controlled affiliated issuer (cost $7,738,888) | 7,738,888 | |||
Cash | 4,336 | |||
Cash denominated in foreign currency (cost $229,031) | 229,013 | |||
Receivable for investments sold | 654,097 | |||
Receivable for fund shares sold | 141,198 | |||
Dividends receivable | 98,952 | |||
Dividend and interest reclaim receivable | 15,190 | |||
Prepaid expenses and other assets | 18,220 | |||
|
| |||
Total Assets | 68,984,676 | |||
|
| |||
LIABILITIES | ||||
Payable for investments purchased | 204,232 | |||
Payable for fund shares redeemed | 2,974 | |||
Payable to investment advisor and other affiliates (Note 4) | 20,843 | |||
Deferred taxes payable (Note 2) | 34,248 | |||
Accounts payable and accrued expenses | 116,550 | |||
|
| |||
Total Liabilities | 378,847 | |||
|
| |||
NET ASSETS | $ | 68,605,829 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 76,197 | ||
Net unrealized appreciation on investments | 6,193,506 | |||
Accumulated net realized gain (loss) | 407,116 | |||
Net capital paid in on shares of beneficial interest | 61,929,010 | |||
|
| |||
| $ | 68,605,829 | |||
|
| |||
Annual Report | 11
Statement of Assets and Liabilities, Continued
Thornburg Better World International Fund | September 30, 2017
NET ASSET VALUE | ||||
Class A Shares: | ||||
Net asset value and redemption price per share | $ | 14.13 | ||
Maximum sales charge, 4.50% of offering price | 0.67 | |||
|
| |||
Maximum offering price per share | $ | 14.80 | ||
|
| |||
Class C Shares: | ||||
Net asset value and offering price per share* | $ | 14.02 | ||
|
| |||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 14.33 | ||
|
| |||
* Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
12 | Annual Report
Thornburg Better World International Fund | Year Ended September 30, 2017
INVESTMENT INCOME | ||||
Dividend Income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $90,615) | $ | 1,119,292 | ||
Non-controlled affiliated issuer | 61,680 | |||
|
| |||
Total | 1,180,972 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 474,275 | |||
Administration fees (Note 4) | ||||
Class A Shares | 6,159 | |||
Class C Shares | 1,882 | |||
Class I Shares | 21,105 | |||
Distribution and service fees (Note 4) | ||||
Class A Shares | 12,353 | |||
Class C Shares | 15,089 | |||
Transfer agent fees | ||||
Class A Shares | 37,360 | |||
Class C Shares | 3,255 | |||
Class I Shares | 20,186 | |||
Registration and filing fees | ||||
Class A Shares | 30,504 | |||
Class C Shares | 25,344 | |||
Class I Shares | 25,087 | |||
Custodian fees (Note 2) | 120,625 | |||
Professional fees | 61,139 | |||
Accounting fees (Note 4) | 1,461 | |||
Trustee fees | 1,521 | |||
Other expenses | 50,869 | |||
|
| |||
Total Expenses | 908,214 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (135,348 | ) | ||
Investment advisory fees waived by investment advisor (Note 4) | (252,584 | ) | ||
|
| |||
Net Expenses | 520,282 | |||
|
| |||
Net Investment Income | $ | 660,690 | ||
|
| |||
Annual Report | 13
Statement of Operations, Continued
Thornburg Better World International Fund | Year Ended September 30, 2017
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Non-affiliated issuer investments (net of realized capital gain taxes paid of $6,648) | $ | 587,738 | ||
Foreign currency transactions | 18,789 | |||
|
| |||
| 606,527 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Non-affiliated issuer investments (net of change in deferred taxes payable of $31,769) | 4,206,251 | |||
Foreign currency translations | 2,092 | |||
|
| |||
| 4,208,343 | ||||
|
| |||
Net Realized and Unrealized Gain | 4,814,870 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 5,475,560 | ||
|
| |||
See notes to financial statements.
14 | Annual Report
Statements of Changes In Net Assets
Thornburg Better World International Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016* | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 660,690 | $ | 137,184 | ||||||
Net realized gain (loss) on investments, foreign currency transactions, and capital gain taxes | 606,527 | 1,582,461 | ||||||||
Net unrealized appreciation (depreciation) on investments, foreign currency translations, and deferred taxes | 4,208,343 | 1,985,163 | ||||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 5,475,560 | 3,704,808 | ||||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class A Shares | (49,779 | ) | (7,285 | ) | ||||||
Class C Shares | (10,230 | ) | (3,171 | ) | ||||||
Class I Shares | (583,812 | ) | (123,062 | ) | ||||||
From realized gains | ||||||||||
Class A Shares | (177,797 | ) | – | |||||||
Class C Shares | (45,820 | ) | – | |||||||
Class I Shares | (1,502,645 | ) | – | |||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class A Shares | 4,455,372 | 1,518,080 | ||||||||
Class C Shares | 1,275,340 | 753,057 | ||||||||
Class I Shares | 29,500,849 | 24,426,364 | ||||||||
|
| |||||||||
Net Increase in Net Assets | 38,337,038 | 30,268,791 | ||||||||
NET ASSETS | ||||||||||
Beginning of Year | 30,268,791 | – | ||||||||
|
| |||||||||
End of Year | $ | 68,605,829 | $ | 30,268,791 | ||||||
|
| |||||||||
Undistributed (distribution in excess of) net investment income | $ | 76,197 | $ | (14,634 | ) | |||||
*The Fund commenced operations on October 1, 2015.
See notes to financial statements.
Annual Report | 15
Thornburg Better World International Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg Better World International Fund (the “Fund”) is a diversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on October 1, 2015. 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 twenty-one separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund seeks long-term capital appreciation.
The Fund currently offers three classes of shares of beneficial interest: Class A, Class C, and Institutional Class (“Class I”). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, (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.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Income, Gains, Losses and Expenses: 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. Operating expenses directly attributable to a specific class are charged against the operating income of that class.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: 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. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
16 | Annual Report
Notes to Financial Statements, Continued
Thornburg Better World International Fund | September 30, 2017
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 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.
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 (depreciation) from investments.
Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and 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 (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 61,686,407 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 6,769,093 | |||
Gross unrealized depreciation on a tax basis | (631,830 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 6,137,263 | |||
|
|
Temporary book to tax adjustments made to the cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of wash sale losses.
Annual Report | 17
Notes to Financial Statements, Continued
Thornburg Better World International Fund | September 30, 2017
In order to account for permanent book to tax differences, the Fund increased undistributed net investment income by $73,962 and decreased accumulated net realized gain by $73,962. Reclassifications have no impact upon the net asset value of the Fund and resulted primarily from foreign currency gains (losses), disposition of passive foreign investment company (“PFIC”) investments, and foreign capital gain taxes.
At September 30, 2017, the Fund had $231,533 of undistributed tax basis net ordinary investment income and $340,377 of undistributed tax basis capital gains.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Ordinary income | $ | 2,370,083 | $ | 133,518 | ||||||
Capital gains | – | – | ||||||||
|
| |||||||||
Total | $ | 2,370,083 | $ | 133,518 | ||||||
|
| |||||||||
Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assessment of a jurisdiction’s legal obligation to pay reclaims, the jurisdiction’s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain.
Deferred Foreign Capital Gain 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.
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund’s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date.
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg Better World International Fund | September 30, 2017
In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment’s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data.
Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Quotations for foreign investments expressed in foreign currency amounts are converted to U.S. dollar equivalents using a foreign exchange quotation from a third party service provider at the time of valuation. Foreign investments held by the Fund may be traded on days and at times when the Fund is not open for business. Consequently, the value of Fund investments may be significantly affected on days when shareholders cannot purchase or sell Fund shares. Futures contracts and other financial and derivative instruments traded on an exchange are valued at the latest published price for the instrument on its primary exchange. Listed options are valued at the last bid price.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
On days when market volatility thresholds established by the Audit Committee are exceeded, foreign securities for which valuations are obtained from pricing service providers are fair valued. On these days, the foreign securities are characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs when it sells the investment.
Annual Report | 19
Notes to Financial Statements, Continued
Thornburg Better World International Fund | September 30, 2017
The following table displays a summary of the fair value hierarchy measurements of the Fund’s investments as of September 30, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities* | ||||||||||||||||||||
Common Stock | $ | 60,084,782 | $ | 60,084,782 | $ | – | $ | – | ||||||||||||
Short Term Investments | 7,738,888 | 7,738,888 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 67,823,670 | $ | 67,823,670 | $ | – | $ | – | ||||||||||||
Liabilities | ||||||||||||||||||||
Other Financial Instruments** | ||||||||||||||||||||
Spot Currency | $ | (43 | ) | $ | (43 | ) | $ | – | $ | – | ||||||||||
| * | 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, 2017, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
Management Fee Schedule
|
| ||||
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 0.975 | % | |||
Next $500 million | 0.925 | ||||
Next $500 million | 0.875 | ||||
Next $500 million | 0.825 | ||||
Over $2 billion | 0.775 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 0.975% of the Fund’s average net assets (before applicable management fee waiver of $252,584).
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $1,461 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to 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. Total administrative service fees incurred by each class of shares of the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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, 2017, the Distributor has advised the Fund that it earned net commissions aggregating $8,130 from the sale of Class A shares, and collected contingent deferred sales charges aggregating $46 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 pay to the Distributor or securities dealers and other financial institutions at the Distributor’s direction an amount not to exceed .25 of 1% per annum of the average daily net assets attributable to Class A, Class C, and Class I shares of the Fund to obtain various shareholder and distribution related services. For
20 | Annual Report
Notes to Financial Statements, Continued
Thornburg Better World International Fund | September 30, 2017
the year ended September 30, 2017, there were no 12b-1 service plan fees charged for Class I shares. The Advisor and Distributor each 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 shares, under which the Fund compensates the Distributor for services in promoting the sale of Class C shares of the Fund at an annual rate of up to .75 of 1% per annum of the average daily net assets attributable to Class C shares.
Total fees incurred by each class of shares of the Fund under their respective service and distribution plans for the year ended September 30, 2017, 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 expenses of certain share classes do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before April 10, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor voluntarily waived Fund level investment advisory fees of $252,584. For the year ended September 30, 2017, the Advisor contractually reimbursed certain class specific expenses, administrative fees, and distribution fees of $44,236 for Class A shares, $24,733 for Class C shares, and $66,379 for Class I shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 39.3%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had no such transactions with affiliated funds.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016* | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class A Shares | ||||||||||||||||
Shares sold | 386,475 | $ | 5,145,982 | 132,207 | $ | 1,665,516 | ||||||||||
Shares issued to shareholders in | 17,306 | 219,209 | 515 | 7,141 | ||||||||||||
Shares repurchased | (67,442 | ) | (909,819 | ) | (12,528 | ) | (154,577 | ) | ||||||||
|
| |||||||||||||||
Net increase | 336,339 | $ | 4,455,372 | 120,194 | $ | 1,518,080 | ||||||||||
|
| |||||||||||||||
Class C Shares | ||||||||||||||||
Shares sold | 99,435 | $ | 1,303,381 | 59,567 | $ | 752,758 | ||||||||||
Shares issued to shareholders in | 4,469 | 56,050 | 230 | 3,171 | ||||||||||||
Shares repurchased | (6,250 | ) | (84,091 | ) | (215 | ) | (2,872 | ) | ||||||||
|
| |||||||||||||||
Net increase | 97,654 | $ | 1,275,340 | 59,582 | $ | 753,057 | ||||||||||
|
| |||||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 2,273,986 | $ | 30,676,477 | 1,992,451 | $ | 24,462,178 | ||||||||||
Shares issued to shareholders in | 143,963 | 1,848,995 | 6,180 | 86,279 | ||||||||||||
Shares repurchased | (222,307 | ) | (3,024,623 | ) | (9,255 | ) | (122,093 | ) | ||||||||
|
| |||||||||||||||
Net increase | 2,195,642 | $ | 29,500,849 | 1,989,376 | $ | 24,426,364 | ||||||||||
|
| |||||||||||||||
| * | The Fund commenced operations on October 1, 2015. |
Annual Report | 21
Notes to Financial Statements, Continued
Thornburg Better World International Fund | September 30, 2017
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of investments (excluding short-term investments) of $74,906,516 and $44,704,632, respectively.
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, 2017, 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 small- and mid-cap companies and non-U.S. issuers (including developing country issuers), credit risk, social investing risk, real estate investment trusts, 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
22 | Annual Report
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Annual Report | 23
Thornburg Better World International Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS A SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 13.86 | 0.09 | 0.99 | 1.08 | (0.12 | ) | (0.69 | ) | (0.81 | ) | $ | 14.13 | |||||||||||||||||||||||||||
2016(b)(c) | $ | 11.94 | 0.03 | 2.04 | 2.07 | (0.15 | ) | – | (0.15 | ) | $ | 13.86 | ||||||||||||||||||||||||||||
| CLASS C SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.79 | 0.02 | 0.97 | 0.99 | (0.07 | ) | (0.69 | ) | (0.76 | ) | $ | 14.02 | |||||||||||||||||||||||||||
2016(c) | $ | 11.94 | (0.05 | ) | 2.04 | 1.99 | (0.14 | ) | – | (0.14 | ) | $ | 13.79 | |||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017 | $ | 13.96 | 0.20 | 1.02 | 1.22 | (0.16 | ) | (0.69 | ) | (0.85 | ) | $ | 14.33 | |||||||||||||||||||||||||||
2016(c) | $ | 11.94 | 0.10 | 2.01 | 2.11 | (0.09 | ) | – | (0.09 | ) | $ | 13.96 | ||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Fund commenced operations on October 1, 2015. |
| (d) | Due to the size of net assets and fixed expenses, ratios may appear disproportionate. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
24 | Annual Report
Financial Highlights, Continued
Thornburg Better World International Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 0.64 | 1.79 | 1.79 | 3.21 | 8.61 | 105.55 | $ | 6,450 | |||||||||||||||||||||||
| 0.21 | 1.83 | 1.83 | 7.27 | (d) | 16.60 | 180.60 | $ | 1,666 | ||||||||||||||||||||||
| 0.18 | 2.32 | 2.32 | 4.48 | 7.97 | 105.55 | $ | 2,205 | |||||||||||||||||||||||
| (0.40 | ) | 2.38 | 2.38 | 13.13 | (d) | 15.94 | 180.60 | $ | 822 | |||||||||||||||||||||
| 1.48 | 0.94 | 0.94 | 1.62 | 9.58 | 105.55 | $ | 59,951 | |||||||||||||||||||||||
| 0.76 | 1.09 | 1.09 | 2.28 | 17.44 | 180.60 | $ | 27,781 | |||||||||||||||||||||||
Annual Report | 25
Report of Independent Registered Public Accounting Firm
Thornburg Better World International Fund
To the Trustees and Shareholders of
the Thornburg Better World International 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 the Thornburg Better World International Fund (the “Fund”) as of September 30, 2017, the results of its operations for the year then ended and the changes in its net assets and financial highlights for the year then ended and for the period October 1, 2015 (commencements of operations) through September 30, 2016, 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 as of September 30, 2017 by correspondence with the custodian, brokers, and transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
26 | Annual Report
Thornburg Better World International Fund | September 30, 2017 (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, 2017, and held until September 30, 2017.
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 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS A SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,080.90 | $ | 9.55 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,015.89 | $ | 9.25 | |||||||||
| CLASS C SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,089.00 | $ | 12.45 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,013.15 | $ | 12.00 | |||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,084.40 | $ | 5.35 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,019.93 | $ | 5.19 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (A: 1.83%; C: 2.38%; I: 1.02%) 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.
Annual Report | 27
Thornburg Better World International Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
28 | Annual Report
Trustees and Officers, Continued
Thornburg Better World International Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 29
Trustees and Officers, Continued
Thornburg Better World International Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
30 | Annual Report
Thornburg Better World International Fund | September 30, 2017 (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 tax year ended September 30, 2017, dividends paid by Thornburg Better World International Fund of $2,370,083 are being reported as taxable ordinary investment income dividends.
For the tax year ended September 30, 2017, the Fund is reporting 43.34% (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 1.88% (or the maximum allowed) of the ordinary income distributions paid by the Fund for the fiscal year ended September 30, 2017 as qualified for the corporate dividends received deduction.
For the year ended September 30, 2017, foreign source income and foreign taxes paid are $1,169,222 and $97,262, 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, 2017. Complete information will be reported in conjunction with your 2017 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 Better World International Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm engaged by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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.
Annual Report | 31
Other Information, Continued
Thornburg Better World International Fund | September 30, 2017 (Unaudited)
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the agreement, the Trustees considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions relating to the nature, extent and quality of services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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) the Fund’s investment performance for the three-month, year-to-date and one-year periods ending with the second quarter of the current year comparing the Fund’s annualized returns to two mutual fund categories created 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, (4) comparative performance data for fund peer groups selected by an independent mutual fund analyst firm engaged by the independent Trustees, (5) comparison of the Fund’s annualized return since inception to the Fund’s benchmark index, and (6) comparative measures of estimated earnings growth, and risk and return statistics. The Trustees generally attach additional significance to investment performance from the perspective of longer term shareholders, and noted the limited information available for the Fund since its inception in 2015. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectuses. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses of two Fund share classes to the fee levels and expenses for fund peer groups selected from the category by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. The Trustees noted that, because the Fund commenced investment operations in 2015, the Advisor has agreed to certain fee waivers and expense reimbursements for the current period. Comparative fee and expense data noted as having been considered by the Trustees showed that, after fee waivers and expense reimbursements, the level of total expense for one share class of the Fund was higher than the median and average levels of total expenses for the category, and that the level of total expense for a second share class was comparable to the
32 | Annual Report
Other Information, Continued
Thornburg Better World International Fund | September 30, 2017 (Unaudited)
median level and lower than the average level for the category. Peer group data showed that the Fund’s stated advisory fee was comparable to the stated median levels for two peer groups and higher than the stated medians of two other groups, the total expense level of one of the Fund’s share classes after waivers and reimbursements was higher than the medians of its peer groups, and that the total expense level of a second share class after waivers and reimbursements was comparable to the medians of its peer groups. The Trustees did not find the differences significant in view of their findings and conclusions respecting 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. The Trustees noted the costs incurred by the Advisor in initiating and managing the Fund and the Advisor’s waivers of fees and reimbursements of expenses for the Fund, and further noted that the Fund produces no profits for the Advisor.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted in their evaluation 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 two peer groups selected by an independent mutual fund analyst firm, the effects of the breakpoint structure and other expense factors realized by certain funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, current fee waivers and expenses, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 33
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
34 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 35
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 | TH3644 |
Annual Report September 30, 2017 THORNBURG CAPITAL MANAGEMENT FUND
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Capital Management Fund
Annual Report ^ September 30, 2017
Table of Contents
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class I | N/A | 885-216-739 | ||||||||
Annual Report | 3
Thornburg Capital Management Fund | September 30, 2017 (Unaudited)
October 13, 2017
Dear Shareholder:
Thornburg Capital Management Fund (TCMF) was started on July 31, 2015, with the goal of providing superior risk exposures for cash management across the Thornburg family of funds with higher returns and lower costs. Through September 30, 2017, we have generally invested approximately $1.15 billion of Thornburg Investment Trust cash in high-quality, short-term instruments. With the custodian of the Thornburg Investment Trust funds charging 20 basis points (0.20%) for large cash balances, the annualized distribution yield from the portfolio of 1.23% represents a significant pick-up in return.
As a reminder to all shareholders, by combining the cash balances of all eligible Thornburg Investment Trust portfolios into a single pool, we reduce the costs of investing and significantly diversify and reduce risk exposures in any given portfolio. While individual transaction costs appear low (ticketing costs are $6 and an additional $6 for every maturity), these costs add up quickly in a portfolio of overnight securities. Duplicate trades in different portfolios incur separate charges, and with 11 different eligible portfolios, the multiplier effect on costs is high. The creation and the continued management of Thornburg Capital Management Fund helps illustrate our long-standing culture of efficient capital stewardship, benefiting all eligible portfolios through reduced transaction costs and more efficient management.
All of the Fund’s investments are rated A-1+, A-1 or A-2 by S&P. As of September 30, 2017, 38.8% of the portfolio was invested in instruments with maturities of one day. As of that same date 78.4% of the total portfolio had maturities of 14 days or less. The weighted average maturity (WAM) of the portfolio, ex-cash was 10 days. Volvo Treasury currently represents our largest single exposure outside of supranationals or U.S. government entities. At the end of the period, this exposure represented 1.68% of the portfolio. Keep in mind that at the investing fund level, this is 1.68% of the cash position. As an example, if cash in the investing fund sat at
10%, the investing fund’s Volvo Treasury position would be 0.168%. As we generally expect to have a large pool of assets, we have the ability to purchase a large number of different issues and still expect to have a vast cost advantage versus splitting investments amongst portfolios.
The above figures should give investors a picture of a very high-quality, very short-term, very liquid portfolio that avoids undue fees and provides a notable return over the custodian’s negative 20 basis point (0.20%) penalty rate. We continue to believe that this structure is a significant improvement over a fragmented, costly, less diversified outcome of investing the cash of each fund separately, and should be a benefit to all of the participating portfolios of Thornburg Investment Trust.
Sincerely,
Jason Brady,CFA
Portfolio Manager
CEO, President, and Managing Director
Lon R. Erickson,CFA
Portfolio Manager
Managing Director
Jeff Klingelhofer,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.
The views expressed by the portfolio managers reflect their professional opinions and are subject to change. Under no circumstances does the information contained within represent a recommendation to buy or sell any security.
4 | Annual Report
Thornburg Capital Management Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | SINCE INCEP. | |||||||||
I Shares (Incep: 7/31/15) | 0.87% | 0.63% | ||||||||
Citigroup 1-Month T-Bill Index (Since 7/31/15) | 0.60% | 0.35% | ||||||||
30-DAY YIELDS
Annualized Distribution Yield | 1.23% | ||||
SEC Yield | 1.23% |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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, call 800-847-0200. There is no sales charge for class I shares.
Fund Summary
PORTFOLIO COMPOSITION
Glossary
Citigroup One-Month Treasury Bill Index – Measures monthly return equivalents of yield averages that are not marked to market. The One-Month Treasury Bill Index consists of the last one-month Treasury bill issue.
The performance of any index is not indicative of the performance of any particular investment. 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 or net asset value.
Short-Term Credit Ratings – A bond credit rating assesses the financial ability of a debt issuer to make timely payments of principal and interest. Short-term obligation ratings of A-1 (the highest), A-2 and A-3 are investment-grade quality. Ratings of B, C and D (the lowest) are considered below investment grade, speculative grade, or junk bonds.
Annual Report | 5
Thornburg Capital Management Fund | September 30, 2017
| Shares/ Principal Amount | Value | |||||||||||
| SHORT TERM INVESTMENTS — 96.19% | ||||||||||||
| a | Agrium, Inc., 1.36%, 10/6/2017 | $ | 2,669,000 | $ | 2,668,496 | |||||||
| a | Agrium, Inc., 1.38%, 10/13/2017 | 3,645,000 | 3,643,323 | |||||||||
| a | Agrium, Inc., 1.42%, 10/26/2017 | 2,686,000 | 2,683,351 | |||||||||
Ameren Illinois Co., 1.30%, 10/2/2017 | 16,000,000 | 15,999,422 | ||||||||||
American Honda Finance, 1.10%, 10/24/2017 | 3,300,000 | 3,297,681 | ||||||||||
| b | Amgen Inc., 1.29%, 10/3/2017 | 1,000,000 | 999,928 | |||||||||
| b | Amgen Inc., 1.31%, 10/12/2017 | 1,600,000 | 1,599,360 | |||||||||
| b | Amgen Inc., 1.32%, 10/24/2017 | 15,400,000 | 15,387,013 | |||||||||
| b | Archer Daniels Midland, 1.07%, 10/12/2017 | 17,000,000 | 16,994,442 | |||||||||
| b | Atmos Energy Corp., 1.17%, 10/4/2017 | 1,526,000 | 1,525,851 | |||||||||
| b | Autozone Inc., 1.35%, 10/6/2017 | 1,600,000 | 1,599,700 | |||||||||
| b | Autozone Inc., 1.35%, 10/13/2017 | 8,000,000 | 7,996,400 | |||||||||
| b | Autozone Inc., 1.35%, 10/16/2017 | 5,000,000 | 4,997,188 | |||||||||
| b | Autozone Inc., 1.35%, 10/17/2017 | 1,600,000 | 1,599,040 | |||||||||
| b | Avery Dennison Corp., 1.30%, 10/2/2017 | 16,000,000 | 15,999,422 | |||||||||
Bank of New York Tri-Party Repurchase Agreement 1.36% dated 9/29/2017 due 10/2/2017, repurchase price $45,005,100 collateralized by 42 corporate debt securities and 5 U.S. Government debt securities, having an average coupon of 3.88%, a minimum credit rating of BBB-, maturity dates from 10/2/2017 to 3/15/2055, and having an aggregate market value of $48,217,453 at 9/29/2017 | 45,000,000 | 45,000,000 | ||||||||||
| b | Berkshire Hathaway Energy, 1.27%, 10/2/2017 | 3,500,000 | 3,499,877 | |||||||||
| b | Berkshire Hathaway Energy, 1.27%, 10/25/2017 | 8,960,000 | 8,952,414 | |||||||||
| b | Brown-Forman Corp., 1.22%, 10/3/2017 | 4,000,000 | 3,999,729 | |||||||||
| b | Brown-Forman Corp., 1.24%, 10/6/2017 | 2,000,000 | 1,999,656 | |||||||||
| b | Brown-Forman Corp., 1.26%, 10/11/2017 | 1,500,000 | 1,499,475 | |||||||||
| b | Brown-Forman Corp., 1.24%, 10/18/2017 | 9,000,000 | 8,994,730 | |||||||||
| b | Campbell Soup Co., 1.26%, 10/24/2017 | 7,362,000 | 7,356,014 | |||||||||
| a,b | Carnival Corp., 1.33%, 10/2/2017 | 19,000,000 | 18,999,298 | |||||||||
| b | Centerpoint Energy, Inc., 1.33%, 10/2/2017 | 16,000,000 | 15,999,409 | |||||||||
| b | Church & Dwight Co., Inc., 1.28%, 10/2/2017 | 17,000,000 | 16,999,395 | |||||||||
| b | Colgate-Palmolive Co., 1.08%, 10/23/2017 | 17,000,000 | 16,988,780 | |||||||||
| b | Consolidated Edison, Inc., 1.21%, 10/2/2017 | 2,450,000 | 2,449,918 | |||||||||
| b | Consolidated Edison, Inc., 1.25%, 10/3/2017 | 6,000,000 | 5,999,583 | |||||||||
| b | Cummins, Inc., 1.12%, 10/5/2017 | 1,550,000 | 1,549,807 | |||||||||
Delmarva Power & Light, 1.28%, 10/2/2017 | 17,000,000 | 16,999,396 | ||||||||||
| a,b | Diageo Capital plc, 1.25%, 10/2/2017 | 17,000,000 | 16,999,410 | |||||||||
| b | Dollar General Corp., 1.25%, 10/2/2017 | 15,000,000 | 14,999,479 | |||||||||
| b | Dover Corp., 1.30%, 10/5/2017 | 16,000,000 | 15,997,689 | |||||||||
| b | Dr. Pepper Snapple Group, 1.35%, 10/13/2017 | 14,000,000 | 13,993,700 | |||||||||
| b | Edison International, 1.30%, 10/2/2017 | 19,000,000 | 18,999,314 | |||||||||
| b | Emerson Electric Co., 1.05%, 10/12/2017 | 17,000,000 | 16,994,546 | |||||||||
| a,b | Experian Finance plc, 1.36%, 10/23/2017 | 10,400,000 | 10,391,356 | |||||||||
Farmer Mac Discount Note, 0.70%, 10/2/2017 | 25,000,000 | 24,999,514 | ||||||||||
Federal Farm Credit Bank Discount Note, 0.70%, 10/2/2017 | 20,000,000 | 19,999,611 | ||||||||||
Federal Home Loan Bank Discount Note, 0.97%, 10/16/2017 | 1,200,000 | 1,199,515 | ||||||||||
Federal Home Loan Bank Discount Note, 0.98%, 10/27/2017 | 42,532,000 | 42,501,897 | ||||||||||
Florida Power & Light Co., 1.15%, 10/4/2017 | 17,000,000 | 16,998,371 | ||||||||||
| b | General Mills, Inc., 1.25%, 10/2/2017 | 8,000,000 | 7,999,722 | |||||||||
| b | General Mills, Inc., 1.28%, 10/3/2017 | 5,506,000 | 5,505,608 | |||||||||
| b | Hitachi America Capital, 0.998%, 10/2/2017 | 16,000,000 | 15,999,409 | |||||||||
| b | Illinois Tool Works, Inc., 1.12%, 10/5/2017 | 8,300,000 | 8,298,967 | |||||||||
| b | Illinois Tool Works, Inc., 1.12%, 10/11/2017 | 4,906,000 | 4,904,474 | |||||||||
| b | Intercontinental Exchange, Inc., 1.11%, 10/5/2017 | 8,500,000 | 8,498,952 | |||||||||
| a | International Bank for Reconstruction and Development, 1.03%, 10/10/2017 | 13,000,000 | 12,996,652 | |||||||||
| b | Interpublic Group of Companies, Inc., 1.32%, 10/6/2017 | 17,000,000 | 16,996,883 | |||||||||
| b | Kimberly-Clark Corp., 1.07%, 10/10/2017 | 8,500,000 | 8,497,726 | |||||||||
| b | L’Oreal USA, Inc., 1.13%, 10/3/2017 | 5,000,000 | 4,999,686 | |||||||||
| b | L’Oreal USA, Inc., 1.13%, 10/5/2017 | 12,000,000 | 11,998,493 | |||||||||
| b | Louisville Gas & Electric Co., 1.32%, 10/3/2017 | 11,000,000 | 10,999,193 | |||||||||
| b | Louisville Gas & Electric Co., 1.34%, 10/5/2017 | 7,000,000 | 6,998,958 | |||||||||
| b | Marriott International, 1.35%, 10/5/2017 | 1,000,000 | 999,850 | |||||||||
| b | Marriott International, 1.40%, 10/17/2017 | 1,200,000 | 1,199,253 | |||||||||
| b | Mondelez International, Inc., 1.25%, 10/2/2017 | 8,000,000 | 7,999,722 | |||||||||
6 | Annual Report
Schedule of Investments, Continued
Thornburg Capital Management Fund | September 30, 2017
| Shares/ Principal Amount | Value | |||||||||||
| b | Mondelez International, Inc., 1.33%, 10/5/2017 | $ | 8,000,000 | $ | 7,998,818 | |||||||
| b | Nestle Capital Corp., 0.99%, 10/11/2017 | 1,000,000 | 999,725 | |||||||||
| b | NextEra Energy Capital Holdings, Inc., 1.34%, 10/6/2017 | 7,370,000 | 7,368,628 | |||||||||
| b | Nike, Inc., 1.07%, 10/4/2017 | 17,000,000 | 16,998,484 | |||||||||
| b | Novartis Finance Corp., 1.12%, 10/6/2017 | 5,000,000 | 4,999,222 | |||||||||
| b | Novartis Finance Corp., 1.12%, 10/20/2017 | 11,000,000 | 10,993,498 | |||||||||
| b | Oglethorpe Power Corp., 1.37%, 10/2/2017 | 12,702,000 | 12,701,517 | |||||||||
| b | Oglethorpe Power Corp., 1.37%, 10/10/2017 | 2,515,000 | 2,514,139 | |||||||||
| b | Oglethorpe Power Corp., 1.35%, 10/13/2017 | 4,783,000 | 4,780,848 | |||||||||
| b | Pacific Gas & Electric, 1.18%, 10/2/2017 | 8,240,000 | 8,239,730 | |||||||||
| b | Pacific Gas & Electric, 1.20%, 10/2/2017 | 8,760,000 | 8,759,708 | |||||||||
Peoples Gas, Light, & Coke, 1.28%, 10/2/2017 | 19,000,000 | 18,999,324 | ||||||||||
| b | PepsiCo, Inc., 1.05%, 10/20/2017 | 17,000,000 | 16,990,579 | |||||||||
| b | Pinnacle West Capital, 1.17%, 10/2/2017 | 17,000,000 | 16,999,448 | |||||||||
Praxair, Inc., 1.08%, 10/23/2017 | 17,000,000 | 16,988,780 | ||||||||||
| a,b | Reckitt Benckiser Group plc, 1.40%, 10/17/2017 | 18,000,000 | 17,988,800 | |||||||||
| b | Roche Holding, Inc., 1.00%, 10/2/2017 | 16,000,000 | 15,999,551 | |||||||||
Ryder System, Inc., 1.40%, 10/17/2017 | 1,000,000 | 999,378 | ||||||||||
Ryder System, Inc., 1.37%, 10/23/2017 | 3,900,000 | 3,896,735 | ||||||||||
| b | Snap-on, Inc., 1.18%, 10/6/2017 | 1,000,000 | 999,836 | |||||||||
South Carolina Electric & Gas, 1.40%, 10/13/2017 | 2,800,000 | 2,798,693 | ||||||||||
South Carolina Electric & Gas, 1.41%, 10/18/2017 | 8,000,000 | 7,994,673 | ||||||||||
South Carolina Electric & Gas, 1.40%, 10/18/2017 | 4,800,000 | 4,796,827 | ||||||||||
South Carolina Electric & Gas, 1.43%, 10/24/2017 | 1,400,000 | 1,398,721 | ||||||||||
| b | Southern California Edison Co., 1.20%, 10/2/2017 | 16,000,000 | 15,999,467 | |||||||||
| b | Southern Co. Gas Capital Corp., 1.37%, 10/3/2017 | 7,000,000 | 6,999,467 | |||||||||
| b | Southern Co. Gas Capital Corp., 1.30%, 10/23/2017 | 5,729,000 | 5,724,449 | |||||||||
| b | Southern Co. Gas Capital Corp., 1.33%, 10/25/2017 | 4,271,000 | 4,267,213 | |||||||||
| b | Spectra Energy Partners, 1.32%, 10/5/2017 | 2,505,000 | 2,504,633 | |||||||||
| b | Spectra Energy Partners, 1.43%, 10/5/2017 | 835,000 | 834,867 | |||||||||
| b | Spectra Energy Partners, 1.40%, 10/13/2017 | 5,500,000 | 5,497,433 | |||||||||
| b | Spectra Energy Partners, 1.40%, 10/27/2017 | 8,160,000 | 8,151,749 | |||||||||
Tennessee Valley Authority Discount Note, 1.00%, 10/3/2017 | 6,580,000 | 6,579,634 | ||||||||||
Tennessee Valley Authority Discount Note, 1.00%, 10/10/2017 | 38,000,000 | 37,990,500 | ||||||||||
| b | The J.M. Smucker Co., 1.32%, 10/6/2017 | 18,000,000 | 17,996,700 | |||||||||
| b | Tyson Foods, Inc., 1.31%, 10/10/2017 | 7,000,000 | 6,997,708 | |||||||||
| b | Unilever Capital Corp., 1.04%, 10/2/2017 | 16,000,000 | 15,999,538 | |||||||||
United States Treasury Bill, 0.957%, 10/5/2017 | 29,000,000 | 28,997,072 | ||||||||||
United States Treasury Bill, 0.65%, 10/5/2017 | 50,000,000 | 49,996,233 | ||||||||||
| b | Volvo Group Treasury, 1.41%, 10/25/2017 | 19,000,000 | 18,982,140 | |||||||||
| b | Wal-Mart Stores, Inc., 1.03%, 10/2/2017 | 1,000,000 | 999,971 | |||||||||
| b | Wal-Mart Stores, Inc., 1.10%, 10/2/2017 | 1,000,000 | 999,969 | |||||||||
| b | Wal-Mart Stores, Inc., 1.08%, 10/10/2017 | 15,000,000 | 14,995,950 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $1,086,966,403) |
| 1,086,966,403 | ||||||||||
|
| |||||||||||
| TOTAL INVESTMENTS — 96.19% (Cost $1,086,966,403) | $ | 1,086,966,403 | ||||||||||
| OTHER ASSETS LESS LIABILITIES — 3.81% | 43,054,432 | |||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 1,130,020,835 | ||||||||||
|
| |||||||||||
Footnote Legend
| 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. As of September 30, 2017, the aggregate value of these securities in the Fund’s portfolio was $696,566,579, representing 61.64% of the Fund’s net assets. |
See notes to financial statements.
Annual Report | 7
Statement of Assets and Liabilities
Thornburg Capital Management Fund | September 30, 2017
ASSETS | ||||
Investments at value (cost $1,086,966,403) (Note 3) | $ | 1,086,966,403 | ||
Cash | 22,926,108 | |||
Receivable for investments sold | 20,000,000 | |||
Interest receivable | 190,715 | |||
|
| |||
Total Assets | 1,130,083,226 | |||
|
| |||
LIABILITIES | ||||
Accounts payable and accrued expenses | 62,309 | |||
Dividends payable | 82 | |||
|
| |||
Total Liabilities | 62,391 | |||
|
| |||
NET ASSETS | $ | 1,130,020,835 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Undistributed net investment income | $ | 23,695 | ||
Net capital paid in on shares of beneficial interest | 1,129,997,140 | |||
|
| |||
| $ | 1,130,020,835 | |||
|
| |||
NET ASSET VALUE | ||||
Class I Shares: | ||||
Net asset value and redemption price per share | $ | 10.00 | ||
|
| |||
See notes to financial statements.
8 | Annual Report
Thornburg Capital Management Fund | Year Ended September 30, 2017
INVESTMENT INCOME |
| |||
Interest income (net of premium amortized of $14,336) | $ | 10,123,418 | ||
|
| |||
EXPENSES | ||||
Transfer agent fees | 3,012 | |||
Custodian fees (Note 2) | 175,202 | |||
Professional fees | 42,292 | |||
Accounting fees (Note 4) | 34,577 | |||
Trustee fees | 14,100 | |||
Other expenses | 33,663 | |||
|
| |||
Total Expenses | 302,846 | |||
|
| |||
Net Investment Income | $ | 9,820,572 | ||
|
| |||
See notes to financial statements.
Annual Report | 9
Statements of Changes in Net Assets
Thornburg Capital Management Fund
| YEAR ENDED SEPTEMBER 30, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM | ||||||||||
OPERATIONS | ||||||||||
Net investment income | $ | 9,820,572 | $ | 7,036,117 | ||||||
|
| |||||||||
Net Increase in Net Assets Resulting from Operations | 9,820,572 | 7,036,117 | ||||||||
DIVIDENDS TO SHAREHOLDERS | ||||||||||
From net investment income | ||||||||||
Class I Shares | (9,820,572 | ) | (7,036,117 | ) | ||||||
FUND SHARE TRANSACTIONS (NOTE 5) | ||||||||||
Class I Shares | (263,515,419 | ) | (379,323,866 | ) | ||||||
|
| |||||||||
Net Decrease in Net Assets | (263,515,419 | ) | (379,323,866 | ) | ||||||
NET ASSETS | ||||||||||
Beginning of Year | 1,393,536,254 | 1,772,860,120 | ||||||||
|
| |||||||||
End of Year | $ | 1,130,020,835 | $ | 1,393,536,254 | ||||||
|
| |||||||||
Undistributed net investment income | $ | 23,695 | $ | 23,695 | ||||||
See notes to financial statements.
10 | Annual Report
Thornburg Capital Management Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg Capital Management 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 twenty-one 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 liquidity management and safety of capital.
The Fund currently offers one class of shares of beneficial interest: Institutional Class (“Class I”). This class of shares of the Fund represents all interest in the portfolio of investments. 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. All expenses are allocated to the class including transfer agent fees, government registration fees, printing and postage costs, and legal expenses.
Shares of the Fund are issued solely in private placement transactions that do not involve any “public offering” within the meaning of Section (4)2 of the 1933 Act. Investments in the Fund may only be made by investment companies, or other persons that are “accredited investors” within the meaning of Regulation D under the 1933 Act. Currently, the Fund’s shares are only sold to certain other series of the Trust. Thornburg Investment Management, Inc., acting as the agent for the other series of the Trust will affect all purchases and sells of shares of the Fund on behalf of any series of the Trust.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Allocation of Expenses: 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.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
Annual Report | 11
Notes to Financial Statements, Continued
Thornburg Capital Management Fund | September 30, 2017
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 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.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 1,086,966,403 | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 0 | |||
|
|
There is no unrealized gain (loss) in the Fund at September 30, 2017 due to all securities with less than 60 days to maturity being valued by the amortized cost method.
At September 30, 2017, the Fund had $23,777 undistributed tax basis net ordinary income and no undistributed tax basis capital gains.
The tax character of distributions paid during the year ended September 30, 2017, and September 30, 2016, was as follows:
| 2017 | 2016 | |||||||||
Distributions from: | ||||||||||
Ordinary income | $ | 9,820,572 | $ | 7,036,117 | ||||||
Capital gains | – | – | ||||||||
|
| |||||||||
Total | $ | 9,820,572 | $ | 7,036,117 | ||||||
|
| |||||||||
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the
12 | Annual Report
Notes to Financial Statements, Continued
Thornburg Capital Management Fund | September 30, 2017
Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from the FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs 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, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities | ||||||||||||||||||||
Short Term Investments | $ | 1,086,966,403 | $ | – | $ | 1,086,966,403 | $ | – | ||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 1,086,966,403 | $ | – | $ | 1,086,966,403 | $ | – | ||||||||||||
Annual Report | 13
Notes to Financial Statements, Continued
Thornburg Capital Management Fund | September 30, 2017
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, 2017.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, the Advisor serves as the investment advisor and performs services for the Fund. The Fund does not pay an advisory fee to the Advisor under this agreement.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $34,577 for these accounting services. The Advisor provides certain administrative services to the Fund. No fees are charged for those services.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had transactions with affiliated funds of $24,000,000 in sales generating no realized gains or losses.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017 | YEAR ENDED SEPTEMBER 30, 2016 | |||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Class I Shares | ||||||||||||||||
Shares sold | 876,780,189 | $ | 8,767,801,887 | 1,098,287,670 | $ | 10,982,876,709 | ||||||||||
Shares issued to shareholders in | 982,057 | 9,820,572 | 703,612 | 7,036,117 | ||||||||||||
Shares repurchased | (904,113,788 | ) | (9,041,137,878 | ) | (1,136,923,669 | ) | (11,369,236,692 | ) | ||||||||
|
| |||||||||||||||
Net decrease | (26,351,542 | ) | $ | (263,515,419 | ) | (37,932,387 | ) | $ | (379,323,866 | ) | ||||||
|
| |||||||||||||||
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had no purchase and sale transactions of investments other than short-term.
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, diversification risk, foreign investment 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
14 | Annual Report
This page intentionally left blank.
Annual Report | 15
Thornburg Capital Management Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 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 | ||||||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 10.00 | 0.09 | – | 0.09 | (0.09 | ) | – | (0.09 | ) | $ | 10.00 | ||||||||||||||||||||||||||||
2016(b) | $ | 10.00 | 0.05 | – | 0.05 | (0.05 | ) | – | (0.05 | ) | $ | 10.00 | ||||||||||||||||||||||||||||
2015(b)(d) | $ | 10.00 | – | (e) | – | (f) | – | (g) | – | (h) | – | – | $ | 10.00 | ||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Sales loads are not reflected in computing total return. |
| (c) | Portfolio turnover rate equals zero due to no long term investment transactions in the period. |
| (d) | Fund commenced operations on July 31, 2015. |
| (e) | Net investment income (loss) was less than $0.01 per share. |
| (f) | Net realized and unrealized gain (loss) on investments was less than $0.01 per share. |
| (g) | Net investment income (loss) was less than $0.01 per share. |
| (h) | Dividends from net investment income per share were less than $(0.01). |
| (i) | Annualized. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
16 | Annual Report
Financial Highlights, Continued
Thornburg Capital Management Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| 0.89 | 0.03 | 0.03 | 0.03 | 0.87 | – | (c) | $ | 1,130,021 | ||||||||||||||||||||||
| 0.45 | 0.03 | 0.03 | 0.03 | 0.45 | – | (c) | $ | 1,393,536 | ||||||||||||||||||||||
| 0.26 | (i) | 0.03 | (i) | 0.03 | (i) | 0.03 | (i) | 0.04 | – | (c) | $ | 1,772,860 | ||||||||||||||||||
Annual Report | 17
Report of Independent Registered Public Accounting Firm
Thornburg Capital Management Fund
To the Trustees and Shareholders of the
Thornburg Capital Management 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 the Thornburg Capital Management Fund (the “Fund”) as of September 30, 2017, 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 indicated, 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 as of September 30, 2017 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
18 | Annual Report
Thornburg Capital Management Fund | September 30, 2017 (Unaudited)
As a shareholder of the Fund, you incur ongoing costs of investing in the Fund. Because the Fund does not pay any management fee or distribution and/or service (12b-1) fee, the Fund’s ongoing costs are comprised of other Fund expenses. Shareholders of the Fund do not incur any transaction costs.
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, 2017, and held until September 30, 2017.
| BEGINNING ACCOUNT VALUE 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,005.60 | $ | 0.11 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,024.96 | $ | 0.11 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (I: 0.02%) 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.
Annual Report | 19
Thornburg Capital Management Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
20 | Annual Report
Trustees and Officers, Continued
Thornburg Capital Management Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 21
Trustees and Officers, Continued
Thornburg Capital Management Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries 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.
22 | Annual Report
Thornburg Capital Management Fund | September 30, 2017 (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 Capital Management Fund pursuant to an investment advisory agreement. The Trustees consider this agreement for renewal annually, and determined to renew the agreement on September 11, 2017.
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 factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. Information noted by the Trustees in their evaluation as having been considered included oral and written reports received from the Advisor respecting the Advisor’s selection of investments and execution of the Fund’s investment strategies, achievement of the Fund’s investment objectives, and other factors. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports respecting additions to its information management and other electronic systems. The Trustees also noted in this regard their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors. Portfolio holdings and related information confirmed that the Advisor had managed the Fund since commencement of investment operations in accordance with the Fund’s prospectus. Reports on services rendered by the Advisor to the Fund over the course of the year confirmed to the Trustees that the nature, extent and quality of those services remained sufficient.
Investment Performance. Dividend distribution and other information received by the Trustees respecting the investments by the Fund was viewed as consistent with expectations respecting the Fund’s investment performance in view of current market conditions.
Comparisons of Fee and Expense Levels. The Trustees did not consider fee levels because the Advisor does not charge fees to the Fund. Expense levels were consistent with expectations.
Costs and Profitability of Advisor. The Trustees did not consider the profitability of the Advisor in reviewing the advisory agreement, because the Advisor does not charge fees under that agreement.
Potential Economies of Scale. The Trustees did not consider any economies of scale potentially available to the Fund in reviewing the advisory agreement, because the Advisor does not receive a fee under that agreement.
Potential Ancillary Benefits. The Trustees did not identify any collateral benefits to the Advisor because of its relationship to the Fund.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated objectives
Annual Report | 23
Other Information, Continued
Thornburg Capital Management Fund | September 30, 2017 (Unaudited)
and adhere to the Fund’s investment policies, and that the Fund’s investment performance remained satisfactory in view of its objectives and strategies. The Trustees further concluded that the level of the Fund’s expenses was reasonable. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
24 | Annual Report
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
Annual Report | 25
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
26 | Annual Report
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Annual Report | 27
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 | TH3477 |
About Thornburg Investment Management
It’s more than what we do.
It’s how we do it.
At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals.
Flexible Perspective
Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value.
Collaboration
Collectively, we hone ideas via borderless cross-pollination for better judgment and better results.
Portfolio Construction
Disciplined construction guided more by our convictions than convention.
CONVICTION
Thorough analysis and our relative-value framework lead to conviction in our securities selection.
UNCONVENTIONAL
Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point.
Structured for Excellence
How we think and how we invest is made possible by how we’re structured.
TEAM APPROACH
FAR FROM THE HERD
ACCESS & TRANSPARENCY
2 | Annual Report
Thornburg Long/Short Equity Fund
Annual Report ^ September 30, 2017
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| SHARE CLASS | NASDAQ SYMBOL | CUSIP | ||||||||
| Class I | THLSX | 885-216-689 | ||||||||
Investments carry risks, including possible loss of principal. Additional 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- and mid-capitalization companies may increase the risk of greater price fluctuations. A short position will lose value as the security’s price increases. Theoretically, the loss on a short sale can be unlimited. Investments in derivatives are subject to the risks associated with the securities or other assets underlying the pool of securities, including illiquidity and difficulty in valuation. Non-diversified funds can be more volatile than diversified funds. Investments in the Fund are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.
Annual Report | 3
Thornburg Long/Short Equity Fund | September 30, 2017
October 31, 2017
Dear Fellow Shareholder:
Thornburg Long/Short Equity Fund’s 2017 fiscal year (which spans nine months beginning at the mutual fund’s inception on December 30, 2016) was strong. The Fund returned 11.3% (I shares) vs. the S&P 500 Index return of 14.2%. We were able to capture just more than 80% of the market’s return during the period with only a third of the net market exposure of the index (averaging 32% during the period).
“Owner’s Manual”
While new to the mutual fund world, Thornburg Long/Short Equity Fund has been around much longer than just these last 10 months. In fact, the original LP structure hedge fund was started in early 2008 and was converted to a mutual fund on December 30, 2016. We will celebrate the strategy’s 10th anniversary in February of 2018. In our 2013 partner letter, we provided a brief Owner’s Manual of sorts, and we would like to include a similar disclosure here for the mutual fund. While this manual will look a little bit different than what we wrote then, it’s heartening how little has changed. So, here goes.
Thornburg Long/Short Equity Fund is an opportunistic strategy that will generally own a portfolio of long investments (30 to 40 stocks), against a portfolio of short investments (also 30 to 40 stocks).
We seek to limit the net market exposure of the Fund to 30% to 50%. Our current net exposure is lower (by a lot) than our average peer in the Morningstar Long/Short Equity category. Our net exposure range is also more limited (and therefore more predictable). While we have tremendous flexibility to buy, or short, the investments that we are most excited about, we remain mindful of the Fund’s net market exposure when exercising that discretion because we view the maintenance of a 30% - 50% net exposure as a way to reduce volatility. (We don’t believe in market timing, holding to heart economist John Kenneth Galbraith’s saying: “There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.”)
Geographically, we can invest anywhere in the world, though our history and our expectation is that we will tend to do more investing in the U.S. than elsewhere. We are multi-cap and growth-oriented investors on both sides of the book.
We seek to manage the risks of the portfolio through both qualitative and quantitative risk management. We strive to allow our stock selection to tell the story; that is, we work to have similar sector, market cap, geographic, and risk-factor exposures on each side of the book. Our basket approach, as well as our risk reporting and monthly risk meetings, aid us in this endeavor.
OUR THREE-BASKET CONSTRUCT
| Long Book | Short Book | |
| Growth Industry Leaders | Cycle Victims | |
| Consistent Growers | Stumbling Stalwarts | |
| Emerging Growth Companies | Falling Stars |
Our goal is that through long and short investing we will be able to generate broad equity index-like returns over the cycle, while minimizing the bumps along the way (i.e., provide lower equity market exposure and volatility).
Fund Long-Term Results
What’s most important in the previous sentence is the term “over the cycle.” We are in a historically long drought between bear markets. If the S&P 500 Index finishes positive for 2017 (which seems likely, given the 14% return year-to-date as of September 30, 2017 — though stranger things have happened), it will mark nine consecutive years of positive total returns. The only other time this has happened since the founding of the original Composite Index in 1923 (which later became the S&P 500 Index) was in the nine years ending in 1999 (Let’s party like it’s 1999!). Given the long bull run, we think a risk-adjusted return measure is a reasonable way to examine our results. In Charts 1 and 2, you can see the annualized alpha generated over the last five years and since inception for the strategy against the S&P 500, as well as how our peer group has fared.
| Chart 1 | | | Five-Year Track Record (9/30/12–9/30/17) |
Source: FactSet, Morningstar, and Thornburg.
4 | Annual Report
Letter to Shareholders, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
| Chart 2 | | | Since-Inception Track Record (2/1/08–9/30/17) |
Source: FactSet, Morningstar, and Thornburg.
We are excited to have provided good up-market participation for the strategy during the long rally, despite our low net exposure. We are also excited that our investment process has contributed to alpha on both sides of the book. Our alpha generation on the short side seems particularly distinctive over the last five years. Keep in mind trailing returns would look better if we excluded the 20% incentive fee we previously charged when the Fund was a private vehicle.
The Fiscal Year (inception date of 12/30/16)
2017 YEAR TO DATE
| TOTAL RETURN | AVG. WGT | |||
| Long Book | 24.93% | 107.4% | ||
| Short Book | 16.36% | -74.9% | ||
| Fund | 11.30% | 32.6% | ||
| S&P 500 Index | 14.24% | – | ||
| Russell 2000 Index | 10.94% | – |
Source: Kiski.
The table above summarizes our market exposure and the total return for the fiscal year since inception of the Fund. This year, our strong risk-adjusted returns have been driven by outstanding results on the long side of our book. Our longs were up nearly 25%, well outpacing the 14.2% of the S&P 500 for the period. Our shorts hurt our performance during the period, both in absolute and relative terms. Our shorts were up (i.e., we lost money) nearly 16.4% during the period vs. the S&P 500 return of 14.2%. Our goal is to outperform the S&P 500 in our short book over the long term, that is, to decline more or go up less. We didn’t accomplish this goal during the fiscal year. That said, we aim to balance the exposure in our long and short books and it was a relatively good year for the sorts of things we invest in (e.g., growth, health care, information technology), and it showed on both sides of the portfolio. The spread between our long-book return (25%) and our short-book return (16%) created a good overall outcome for our investors this year.
Best Performers
All five top contributors during the fiscal year were long investments. This isn’t surprising given the strong overall market environment.
Long Book
| • | Grand Canyon Education, Inc. (LOPE) |
The for-profit education company Grand Canyon was a great stock for us during the fiscal year. During the period we have also materially trimmed our exposure as the stock has approached our price target—it had been our largest position but has now fallen well outside of our top-10 current positions. We have long believed Grand Canyon to be different from its peers, and better. Its ground campus and Division I athletics differentiate the brand, which the company leverages in its online programs. Strong business execution and a more benign environment both aided stock price performance during the year.
| • | Activision Blizzard, Inc. (ATVI) |
Video game manufacturer Activision’s stock appreciated materially during the fiscal year. Activision has had strong success in both the popularity of their game franchises and in their ability to better monetize their customer base in-game (get more dollars per game player over time).
| • | Facebook, Inc. (FB) |
Facebook continues to grow both the usage and engagement of its products globally, while also attracting more global advertising dollar spend. We continue to view the shares as undervalued today as revenue and earnings include very little contribution from the company’s large and popular messaging platforms.
| • | Akorn, Inc. (AKRX) |
Specialty pharmaceutical manufacturer Akorn, a new investment during the fiscal year, paid off quickly for our shareholders. We believed the company’s marketed products and generic pipeline was underappreciated by investors. We initially invested in late February. Fresenius Kabi announced they planned to acquire Akorn in early April.
| • | Netflix, Inc. (NFLX) |
Netflix continues to be one of the main beneficiaries of the move from the traditional television bundle to over-the-top streaming. We have invested successfully in Netflix twice over the last 10 years. Our current ownership period began in late August of 2016 following a disappointing earnings report in July. While subscriber adds at Netflix have been lumpy, the smoothed trend line has consistently pointed up and to the right. The company’s ability to buy content once and stream it to its global subscriber base creates significant network effects. While we have trimmed our position somewhat as it approaches our price target, we remain excited about the company’s long-term competitive position.
Worst Performers
Four of our five top detractors during the fiscal year were shorts, again, not surprising considering the stock market’s strong returns.
Long Book
| • | Carvana (CVNA) |
Carvana Co (CVNA) is a technology start-up based in Phoenix, AZ. Carvana, a leading online used car seller, was spun out from parent
Annual Report | 5
Letter to Shareholders, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
Drivetime, a brick-and-mortar used car dealership, during the fiscal year. Questions about the long-term viability of the company’s business model, and some in-depth public short reports, have weighed on the company’s share price. Further, Carvana’s disappointing initial public offering weighed on fund performance during the fiscal year.
Short Book
| • | Myriad Genetics, Inc. (MYGN) |
Myriad showed stability in its core hereditary cancer-testing business late in the fiscal year after many quarters of declines. The stock responded favorably to this development. We remain short. Myriad will face new contract renewals in this increasingly competitive space in the coming years.
| • | Arista Networks (ANET) |
Arista is a software-driven cloud networking company. Shares increased during the year due to a better-than-expected business development. Our short thesis had been predicated on a slowdown in revenue growth, driven by white box cannibalization, increased competition, and legal disruptions. We closed this position during the year due to fundamental deterioration against our short thesis.
| • | Petmed Express Inc. (PETS) |
Petmed Express provides online prescription and non-prescription pet medications, health products, and supplies for dogs and cats. The closure of a competitor website and a shift towards higher margin items helped both the top and bottom line in 2017.
| • | Mixi Inc. (2121 JP) |
Mixi owns Monster Strike, a gaming app for mobile phones. Monster Strike revenues grew in 2017 after an anniversary marketing campaign following revenue declines.
Overall, we are very satisfied with our first nine months as a ‘40 Act Fund. We will continue to operate just as we had as a hedge fund, attempting to construct our portfolio so that our stock selection provides excess returns, both long and short.
We very much appreciate the confidence you’ve placed in the team with your investment in our Fund.
Sincerely,
Connor Browne,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.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
6 | Annual Report
Thornburg Long/Short Equity Fund | September 30, 2017 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| 1-YR | 3-YR | 5-YR | SINCE INCEP. | |||||||||||||||||
I Shares (Incep: 12/30/16) | 12.58% | 5.81% | 8.93% | 7.12% | ||||||||||||||||
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
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. Due to the Fund’s relatively small asset base in initial stages, performance was positively impacted by IPOs to a greater degree than it may be in the future. IPO investments are not an integral component of the Fund’s investment process and may not be utilized to the same extent in the future. 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 information does 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. There is no sales charge for Class I shares.
As disclosed in the most recent prospectus, the total annual fund operating expenses before waivers and expense reimbursements are as follows: I shares, 3.01%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least February 1, 2018, for some of the share classes, resulting in net expense ratios of the following: I shares, 2.74%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund’s prospectus.
Performance prior to 12/30/2016 is from the predecessor fund, which was managed in a materially equivalent manner to the Thornburg Long/Short Equity Fund. The predecessor fund was not a registered mutual fund and was not subject to the same investment restrictions as the Long/Short Equity Fund. If the predecessor fund had been registered under the 1940 Act, the performance may have been different.
Glossary
The S&P 500 Index is an unmanaged broad measure of the U.S. stock market.
HFRX Equity Hedge Index is composed of strategies that maintain positions both long and short in primarily equity and equity derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. Equity Hedge managers would typically maintain at least 50%, and may in some cases be substantially entirely invested in equities, both long and short. Hedge Fund Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to construct the HFRX Hedge Fund Indices. The methodology is based on defined and predetermined rules and objective criteria to select and rebalance components to maximize representation of the Hedge Fund Universe. HFRX Indices utilize state-of-the-art quantitative techniques and analysis; multi-level screening, cluster analysis, Monte-Carlo simulations and optimization techniques ensure that each Index is a pure representation of its corresponding investment focus.
HFRI Equity Hedge Index is an equal-weighted performance index composed of strategies that maintain positions both long and short in primarily equity and equity derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies
can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. Equity Hedge managers would typically maintain at least 50% exposure to, and may in some cases be entirely invested in, equities - both long and short.
The performance of any index is not indicative of the performance of any particular investment. 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.
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.
Alpha – A measure of the difference between a portfolio’s actual returns and its expected performance, given its level of risk as measured by beta. A positive alpha figure indicates the portfolio performed better than its beta would predict. In contrast, a negative alpha indicates under-performance, given the expectations established by the beta.
Morningstar Long/Short Equity Category – Long/short portfolios hold sizeable stakes in both long and short positions in equities, exchange traded funds, and related derivatives. At least 75% of the assets are in equity securities or derivatives, and funds in the category will typically have beta values to relevant benchmarks of between 0.3 and 0.8 over a three-year period.
Annual Report | 7
Thornburg Long/Short Equity Fund | September 30, 2017 (Unaudited)
OBJECTIVE AND STRATEGIES
The Fund seeks long-term capital appreciation. There is no guarantee that the Fund will meet its objective.
The Fund pursues its investment goal by investing a significant amount of its assets in long and short positions in a broad range of equity securities. While the Fund normally expects to invest a larger portion of its portfolio in long positions than short positions, the Fund expects to invest a significant portion of its assets in short positions.
SECTOR ALLOCATION
| Information Technology | 13.1% | ||||
| Energy | 6.1% | ||||
| Health Care | 6.1% | ||||
| Consumer Staples | 5.7% | ||||
| Consumer Discretionary | 5.3% | ||||
| Financials | 0.5% | ||||
| Utilities | 0.0% | ||||
| Real Estate | -0.6% | ||||
| Industrials | -0.6% | ||||
| Materials | -0.7% | ||||
| Telecommunication Services | -2.3% | ||||
| Other Assets Less Liabilities | 67.5% |
PORTFOLIO EXPOSURE
| 3Q17 | 2Q17 | |||||||||
| Gross Long | 107.1% | 105.8% | ||||||||
| Gross Short | -74.6% | -74.8% | ||||||||
| Net Equity | 32.5% | 31.0% |
ASSETS BY GEOGRAPHY
| Long | Short | |||||||||
| United States | 88.3% | -65.6% | ||||||||
| Ex-U.S. | 18.8% | -9.0% |
There is no guarantee that the Fund will meet its investment objective.
All portfolio information is subject to change.
TOP TEN LONG HOLDINGS
| Gilead Sciences, Inc. | 6.4% | ||||
| Alkermes plc | 4.7% | ||||
| Wal-Mart Stores, Inc. | 4.6% | ||||
| ViaSat, Inc. | 4.5% | ||||
| Oaktree Capital Group, LLC | 4.1% | ||||
| Alphabet, Inc. Class C | 4.0% | ||||
| Facebook, Inc. | 3.8% | ||||
| Pure Storage, Inc. | 3.8% | ||||
| Domino’s Pizza Group plc | 3.7% | ||||
| TRI Pointe Homes, Inc. | 3.7% |
8 | Annual Report
Thornburg Long/Short Equity Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
| COMMON STOCK — 106.17% | ||||||||||||
CAPITAL GOODS — 3.49% | ||||||||||||
Industrial Conglomerates — 3.49% | ||||||||||||
| a | General Electric Co. | 115,250 | $ | 2,786,745 | ||||||||
|
| |||||||||||
| 2,786,745 | ||||||||||||
|
| |||||||||||
CONSUMER DURABLES & APPAREL — 7.28% | ||||||||||||
Household Durables — 3.69% |
| |||||||||||
| a,b | TRI Pointe Homes, Inc. | 212,758 | 2,938,188 | |||||||||
Leisure Products — 3.59% |
| |||||||||||
| a | Callaway Golf Co. | 198,458 | 2,863,749 | |||||||||
|
| |||||||||||
| 5,801,937 | ||||||||||||
|
| |||||||||||
CONSUMER SERVICES — 5.02% | ||||||||||||
Diversified Consumer Services — 1.27% |
| |||||||||||
| a,b | Grand Canyon Education, Inc. | 11,177 | 1,015,095 | |||||||||
Hotels, Restaurants & Leisure — 3.75% |
| |||||||||||
Domino’s Pizza Group plc | 718,417 | 2,986,228 | ||||||||||
|
| |||||||||||
| 4,001,323 | ||||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — 9.30% | ||||||||||||
Capital Markets — 6.49% |
| |||||||||||
Apollo Global Management, LLC | 63,629 | 1,915,233 | ||||||||||
Oaktree Capital Group, LLC | 69,321 | 3,261,553 | ||||||||||
Mortgage Real Estate Investment Trusts — 2.81% |
| |||||||||||
| a | PennyMac Mortgage Investment Trust | 128,626 | 2,236,806 | |||||||||
|
| |||||||||||
| 7,413,592 | ||||||||||||
|
| |||||||||||
ENERGY — 5.97% | ||||||||||||
Oil, Gas & Consumable Fuels — 5.97% |
| |||||||||||
| a | Devon Energy Corp. | 73,656 | 2,703,912 | |||||||||
Teekay LNG Partners LP | 115,322 | 2,052,731 | ||||||||||
|
| |||||||||||
| 4,756,643 | ||||||||||||
|
| |||||||||||
FOOD & STAPLES RETAILING — 8.02% | ||||||||||||
Food & Staples Retailing — 8.02% |
| |||||||||||
| a,b | US Foods Holding Corp. | 101,986 | 2,723,026 | |||||||||
| a | Wal-Mart Stores, Inc. | 46,995 | 3,672,190 | |||||||||
|
| |||||||||||
| 6,395,216 | ||||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — 3.32% | ||||||||||||
Food Products — 3.32% |
| |||||||||||
| b | Nomad Foods Ltd. | 181,597 | 2,645,868 | |||||||||
|
| |||||||||||
| 2,645,868 | ||||||||||||
|
| |||||||||||
HEALTH CARE EQUIPMENT & SERVICES — 3.18% | ||||||||||||
Health Care Equipment & Supplies — 3.18% |
| |||||||||||
Medtronic plc | 32,552 | 2,531,569 | ||||||||||
|
| |||||||||||
| 2,531,569 | ||||||||||||
|
| |||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — 2.69% | ||||||||||||
Personal Products — 2.69% |
| |||||||||||
KOSE Corp. | 18,744 | 2,147,169 | ||||||||||
|
| |||||||||||
| 2,147,169 | ||||||||||||
|
| |||||||||||
INSURANCE — 2.64% | ||||||||||||
Insurance — 2.64% |
| |||||||||||
| a | Assured Guaranty Ltd. | 55,735 | 2,103,996 | |||||||||
|
| |||||||||||
| 2,103,996 | ||||||||||||
|
| |||||||||||
Annual Report | 9
Schedule of Investments, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
MATERIALS — 0.76% | ||||||||||||
Metals & Mining — 0.76% |
| |||||||||||
Warrior Met Coal, Inc. | 25,700 | $ | 605,749 | |||||||||
|
| |||||||||||
| 605,749 | ||||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — 12.97% | ||||||||||||
Biotechnology — 11.09% |
| |||||||||||
| b | Alkermes plc | 73,619 | 3,742,790 | |||||||||
| a | Gilead Sciences, Inc. | 62,915 | 5,097,373 | |||||||||
Pharmaceuticals — 1.88% |
| |||||||||||
| b | Akorn, Inc. | 20,282 | 673,160 | |||||||||
Phibro Animal Health Corp. | 22,368 | 828,734 | ||||||||||
|
| |||||||||||
| 10,342,057 | ||||||||||||
|
| |||||||||||
REAL ESTATE — 1.54% | ||||||||||||
Equity Real Estate Investment Trusts — 1.54% |
| |||||||||||
Fibra Uno Administracion S.A. de C.V. | 730,242 | 1,231,908 | ||||||||||
|
| |||||||||||
| 1,231,908 | ||||||||||||
|
| |||||||||||
RETAILING — 12.27% | ||||||||||||
Internet & Direct Marketing Retail — 7.80% |
| |||||||||||
| a,b | Amazon.com, Inc. | 2,796 | 2,687,934 | |||||||||
| a | Expedia, Inc. | 20,069 | 2,888,732 | |||||||||
| b | Netflix, Inc. | 3,565 | 646,513 | |||||||||
Specialty Retail — 4.47% |
| |||||||||||
| b | Carvana Co. | 48,844 | 717,030 | |||||||||
| b | O’ Reilly Automotive, Inc. | 11,052 | 2,380,269 | |||||||||
Office Depot, Inc. | 102,300 | 464,442 | ||||||||||
|
| |||||||||||
| 9,784,920 | ||||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — 11.66% | ||||||||||||
Information Technology Services — 1.20% |
| |||||||||||
Cognizant Tech Solutions Corp. | 13,151 | 953,974 | ||||||||||
Internet Software & Services — 7.86% |
| |||||||||||
| a,b | Alphabet, Inc. Class C | 3,363 | 3,225,487 | |||||||||
| a,b | Facebook, Inc. | 17,801 | 3,041,657 | |||||||||
Software — 2.60% |
| |||||||||||
| a | Activision Blizzard, Inc. | 32,110 | 2,071,416 | |||||||||
|
| |||||||||||
| 9,292,534 | ||||||||||||
|
| |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — 16.08% | ||||||||||||
Communications Equipment — 12.31% |
| |||||||||||
| b | ARRIS International plc | 78,324 | 2,231,451 | |||||||||
| b | EchoStar Corp. | 27,828 | 1,592,596 | |||||||||
| a,b | Palo Alto Networks, Inc. | 16,586 | 2,390,043 | |||||||||
| a,b | ViaSat, Inc. | 55,985 | 3,600,955 | |||||||||
Technology, Hardware, Storage & Peripherals — 3.77% |
| |||||||||||
| a,b | Pure Storage, Inc. | 187,927 | 3,004,953 | |||||||||
|
| |||||||||||
| 12,819,998 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCK (Cost $72,192,669) |
| 84,661,224 | ||||||||||
|
| |||||||||||
TOTAL LONG-TERM INVESTMENTS — 106.17% (Cost $72,192,669) | 84,661,224 | |||||||||||
|
| |||||||||||
| SHORT TERM INVESTMENTS — 21.77% | ||||||||||||
| c | Thornburg Capital Management Fund | 1,735,960 | 17,359,603 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $17,359,603) | 17,359,603 | |||||||||||
|
| |||||||||||
| OTHER ASSETS LESS LIABILITIES — 46.93% | 37,420,127 | |||||||||||
|
| |||||||||||
| COMMON STOCK SOLD SHORT — (74.58)% | ||||||||||||
AUTOMOBILES & COMPONENTS — (2.25)% |
| |||||||||||
Auto Components — (2.25)% |
| |||||||||||
The Goodyear Tire & Rubber Co. | (53,879 | ) | (1,791,477 | ) | ||||||||
|
| |||||||||||
| (1,791,477 | ) | |||||||||||
|
| |||||||||||
10 | Annual Report
Schedule of Investments, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
BANKS — (4.74)% | ||||||||||||
Banks — (2.42)% |
| |||||||||||
Westamerica Bancorporation | (32,429 | ) | $ | (1,930,823 | ) | |||||||
Thrifts & Mortgage Finance — (2.32)% |
| |||||||||||
| b | Bofi Holding, Inc. | (65,041 | ) | (1,851,717 | ) | |||||||
|
| |||||||||||
| (3,782,540 | ) | |||||||||||
|
| |||||||||||
CAPITAL GOODS — (4.16)% | ||||||||||||
Machinery — (1.80)% |
| |||||||||||
KONE Oyj | (27,123 | ) | (1,436,140 | ) | ||||||||
Trading Companies & Distributors — (2.36)% |
| |||||||||||
W.W. Grainger, Inc. | (10,463 | ) | (1,880,724 | ) | ||||||||
|
| |||||||||||
| (3,316,864 | ) | |||||||||||
|
| |||||||||||
CONSUMER DURABLES & APPAREL — (2.55)% | ||||||||||||
Household Durables — (2.55)% |
| |||||||||||
Garmin Ltd. | (13,374 | ) | (721,795 | ) | ||||||||
| b | iRobot Corp. | (16,977 | ) | (1,308,247 | ) | |||||||
|
| |||||||||||
| (2,030,042 | ) | |||||||||||
|
| |||||||||||
CONSUMER SERVICES — (6.24)% | ||||||||||||
Diversified Consumer Services — (3.99)% |
| |||||||||||
| b | Chegg, Inc. | (98,402 | ) | (1,460,286 | ) | |||||||
H&R Block, Inc. | (64,872 | ) | (1,717,810 | ) | ||||||||
Hotels, Restaurants & Leisure — (2.25)% |
| |||||||||||
Sonic Corp. | (70,493 | ) | (1,794,047 | ) | ||||||||
|
| |||||||||||
| (4,972,143 | ) | |||||||||||
|
| |||||||||||
DIVERSIFIED FINANCIALS — (6.96)% | ||||||||||||
Capital Markets — (4.72)% |
| |||||||||||
FactSet Research Systems, Inc. | (10,609 | ) | (1,910,787 | ) | ||||||||
Financial Engines, Inc. | (53,271 | ) | (1,851,167 | ) | ||||||||
Consumer Finance — (2.24)% |
| |||||||||||
| b | Credit Acceptance Corp. | (6,387 | ) | (1,789,446 | ) | |||||||
|
| |||||||||||
| (5,551,400 | ) | |||||||||||
|
| |||||||||||
FOOD & STAPLES RETAILING — (1.90)% | ||||||||||||
Food & Staples Retailing — (1.90)% |
| |||||||||||
Colruyt SA | (29,524 | ) | (1,512,150 | ) | ||||||||
|
| |||||||||||
| (1,512,150 | ) | |||||||||||
|
| |||||||||||
FOOD, BEVERAGE & TOBACCO — (4.38)% | ||||||||||||
Food Products — (4.38)% |
| |||||||||||
Sanderson Farms, Inc. | (10,735 | ) | (1,733,917 | ) | ||||||||
Conagra Brands, Inc. | (52,010 | ) | (1,754,817 | ) | ||||||||
|
| |||||||||||
| (3,488,734 | ) | |||||||||||
|
| |||||||||||
HEALTH CARE EQUIPMENT & SERVICES — (7.62)% | ||||||||||||
Health Care Equipment & Supplies — (4.50)% |
| |||||||||||
ResMed, Inc. | (22,418 | ) | (1,725,289 | ) | ||||||||
| b | Haemonetics Corp. | (41,538 | ) | (1,863,810 | ) | |||||||
Health Care Providers & Services — (0.83)% |
| |||||||||||
| b | Select Medical Holdings Corp. | (34,687 | ) | (665,990 | ) | |||||||
Health Care Technology — (2.29)% |
| |||||||||||
Computer Programs and Systems, Inc. | (61,719 | ) | (1,823,797 | ) | ||||||||
|
| |||||||||||
| (6,078,886 | ) | |||||||||||
|
| |||||||||||
HOUSEHOLD & PERSONAL PRODUCTS — (2.16)% | ||||||||||||
Household Products — (2.16)% |
| |||||||||||
Church & Dwight Co, Inc. | (35,463 | ) | (1,718,182 | ) | ||||||||
|
| |||||||||||
| (1,718,182 | ) | |||||||||||
|
| |||||||||||
Annual Report | 11
Schedule of Investments, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
MATERIALS — (1.47)% | ||||||||||||
Chemicals — (1.47)% | ||||||||||||
Orica Ltd. | (75,756 | ) | $ | (1,174,793 | ) | |||||||
|
| |||||||||||
| (1,174,793 | ) | |||||||||||
|
| |||||||||||
MEDIA — (4.52)% | ||||||||||||
Media — (4.52)% | ||||||||||||
New York Times Co. Class A | (88,621 | ) | (1,736,972 | ) | ||||||||
| b | E.W. Scripps Co. | (97,683 | ) | (1,866,722 | ) | |||||||
|
| |||||||||||
| (3,603,694 | ) | |||||||||||
|
| |||||||||||
PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES — (2.51)% | ||||||||||||
Biotechnology — (2.51)% | ||||||||||||
| b | Myriad Genetics, Inc. | (55,277 | ) | (1,999,922 | ) | |||||||
|
| |||||||||||
| (1,999,922 | ) | |||||||||||
|
| |||||||||||
REAL ESTATE — (2.19)% | ||||||||||||
Equity Real Estate Investment Trusts — (2.19)% | ||||||||||||
Extra Space Storage, Inc. | (21,853 | ) | (1,746,492 | ) | ||||||||
|
| |||||||||||
| (1,746,492 | ) | |||||||||||
|
| |||||||||||
RETAILING — (3.74)% | ||||||||||||
Internet & Direct Marketing Retail — (1.62)% | ||||||||||||
PetMed Express, Inc. | (38,988 | ) | (1,292,452 | ) | ||||||||
Specialty Retail — (2.12)% | ||||||||||||
| b | Dufry AG | (10,653 | ) | (1,691,983 | ) | |||||||
|
| |||||||||||
| (2,984,435 | ) | |||||||||||
|
| |||||||||||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT — (1.76)% | ||||||||||||
Semiconductors & Semiconductor Equipment — (1.76)% | ||||||||||||
| b | Advanced Micro Devices, Inc. | (109,928 | ) | (1,401,582 | ) | |||||||
|
| |||||||||||
| (1,401,582 | ) | |||||||||||
|
| |||||||||||
SOFTWARE & SERVICES — (9.93)% | ||||||||||||
Information Technology Services — (2.18)% | ||||||||||||
Paychex, Inc. | (28,984 | ) | (1,737,881 | ) | ||||||||
Internet Software & Services — (1.73)% | ||||||||||||
mixi, Inc. | (28,531 | ) | (1,376,790 | ) | ||||||||
Software — (6.02)% | ||||||||||||
Fair Isaac Corp. | (11,450 | ) | (1,608,725 | ) | ||||||||
Symantec Corp. | (55,039 | ) | (1,805,829 | ) | ||||||||
| b | Ellie Mae, Inc. | (16,908 | ) | (1,388,654 | ) | |||||||
|
| |||||||||||
| (7,917,879 | ) | |||||||||||
|
| |||||||||||
TECHNOLOGY HARDWARE & EQUIPMENT — (3.17)% | ||||||||||||
Communications Equipment — (2.00)% | ||||||||||||
ADTRAN, Inc. | (66,361 | ) | (1,592,664 | ) | ||||||||
Technology, Hardware, Storage & Peripherals — (1.17)% | ||||||||||||
| b | Electronics for Imaging, Inc. | (21,926 | ) | (935,802 | ) | |||||||
|
| |||||||||||
| (2,528,466 | ) | |||||||||||
|
| |||||||||||
TELECOMMUNICATION SERVICES — (2.34)% | ||||||||||||
Diversified Telecommunication Services — (2.34)% | ||||||||||||
Cogent Communications Holdings, Inc. | (38,232 | ) | (1,869,545 | ) | ||||||||
|
| |||||||||||
| (1,869,545 | ) | |||||||||||
|
| |||||||||||
TOTAL COMMON STOCK SOLD SHORT (Proceeds $55,687,764) | (59,469,226 | ) | ||||||||||
|
| |||||||||||
| EXCHANGE-TRADED FUNDS SOLD SHORT — (0.29)% | ||||||||||||
| b | Direxion Daily Developed Markets Bear 3X | (550 | ) | (7,595 | ) | |||||||
| b | Direxion Daily Emerging Markets Bear 3X | (4,595 | ) | (51,464 | ) | |||||||
| b | Direxion Daily Energy Bear 3X | (2,677 | ) | (29,152 | ) | |||||||
| b | Direxion Daily Financial Bear 3X | (3,601 | ) | (52,503 | ) | |||||||
| b | Direxion Daily S&P 500 Bear 3X | (266 | ) | (9,661 | ) | |||||||
12 | Annual Report
Schedule of Investments, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
| SHARES | VALUE | |||||||||||
| b | Direxion Daily Semiconductors Bear 3X | (66 | ) | $ | (1,394 | ) | ||||||
| b | Direxion Daily Small Cap Bear 3X | (255 | ) | (3,481 | ) | |||||||
| b | iPath S&P 500 VIX Short-Term Futures ETN | (1,835 | ) | (71,914 | ) | |||||||
| b | ProShares UltraPro Short QQQ | (221 | ) | (5,925 | ) | |||||||
|
| |||||||||||
TOTAL EXCHANGE-TRADED FUNDS SOLD SHORT (Proceeds $5,102,095) | (233,089 | ) | ||||||||||
|
| |||||||||||
TOTAL SECURITIES SOLD SHORT (Proceeds $60,789,859) | $ | 59,692,315 | ||||||||||
|
| |||||||||||
| NET ASSETS — 100.00% | $ | 79,738,639 | ||||||||||
|
| |||||||||||
Footnote Legend
| a | All or a portion of the security is pledged as collateral for securities sold short. At September 30, 2017, the value of securities pledged was $51,052,257. An additional $37,350,773 in cash has been segregated for collateral on securities sold short. |
| b | Non-income producing. |
| c | Investment in Affiliates - Shown below are holdings of voting securities of each portfolio company which is considered “affiliated” to the Fund under the Investment Company Act of 1940, including companies for which the Fund’s holding represented 5% or more of the company’s voting securities, and a series of the Thornburg Investment Trust in which the Fund invested for cash management purposes during the period: |
| ISSUER | SHARES/PRINCIPAL SEPTEMBER 30, 2016 | GROSS ADDITIONS | GROSS REDUCTIONS | SHARES/PRINCIPAL SEPTEMBER 30, 2017 | MARKET VALUE SEPTEMBER 30, 2017 | INVESTMENT INCOME | REALIZED GAIN (LOSS) | UNREALIZED GAIN (LOSS) | ||||||||||||||||||||||||||||||||||||||
Thornburg Capital Management Fund | —* | 7,697,616 | 5,961,656 | 1,735,960 | $ | 17,359,603 | $ | 155,772 | $ | – | $ | – | ||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||
Total non-controlled affiliated issuers - 21.77% of net assets | $ | 17,359,603 | $ | 155,772 | $ | – | $ | – | ||||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||
| *The | Fund commenced operations on December 30, 2016. |
See notes to financial statements.
Annual Report | 13
Statement of Assets and Liabilities
Thornburg Long/Short Equity Fund | September 30, 2017
ASSETS | ||||
Investments at value (Note 3) | ||||
Non-affiliated issuers (cost $72,192,669) | $ | 84,661,224 | ||
Non-controlled affiliated issuer (cost $17,359,603) | 17,359,603 | |||
Cash segregated as collateral on securities sold short | 37,350,773 | |||
Receivable for investments sold | 28,456 | |||
Receivable for fund shares sold | 208,000 | |||
Dividends receivable | 72,146 | |||
Dividend and interest reclaim receivable | 910 | |||
Prepaid expenses and other assets | 22,496 | |||
|
| |||
Total Assets | 139,703,608 | |||
|
| |||
LIABILITIES | ||||
Securities sold short (proceeds $60,789,859) | 59,702,315 | |||
Payable to investment advisor and other affiliates (Note 4) | 93,315 | |||
Payable for short sale financing | 19,578 | |||
Accounts payable and accrued expenses | 75,893 | |||
Dividends payable for short sales | 73,868 | |||
|
| |||
Total Liabilities | 59,964,969 | |||
|
| |||
NET ASSETS | $ | 79,738,639 | ||
|
| |||
NET ASSETS CONSIST OF | ||||
Accumulated net investment loss | $ | (694,107 | ) | |
Net unrealized appreciation on investments | 13,556,099 | |||
Accumulated net realized gain (loss) | 1,375,608 | |||
Net capital paid in on shares of beneficial interest | 65,501,039 | |||
|
| |||
| $ | 79,738,639 | |||
|
| |||
NET ASSET VALUE | ||||
Class I Shares: | ||||
Net asset value, offering and redemption price per share | $ | 11.13 | ||
|
| |||
See notes to financial statements.
14 | Annual Report
Thornburg Long/Short Equity Fund | Period Ended September 30, 2017*
INVESTMENT INCOME | ||||
Dividend income | ||||
Non-affiliated issuers (net of foreign taxes withheld of $16,456) | $ | 633,363 | ||
Non-controlled affiliated issuer | 155,772 | |||
|
| |||
Total Income | 789,135 | |||
|
| |||
EXPENSES | ||||
Investment advisory fees (Note 4) | 528,706 | |||
Administration fees (Note 4) | ||||
Class I Shares | 21,148 | |||
Transfer agent fees | ||||
Class I Shares | 10,694 | |||
Dividend expense on securities sold short | 545,913 | |||
Short sale financing fees | 285,422 | |||
Custodian fees (Note 2) | 25,338 | |||
Professional fees | 83,248 | |||
Accounting fees (Note 4) | 1,377 | |||
Trustee fees | 1,738 | |||
Other expenses | 96,979 | |||
|
| |||
Total Expenses | 1,600,563 | |||
Less: | ||||
Expenses reimbursed by investment advisor (Note 4) | (153,501 | ) | ||
|
| |||
Net Expenses | 1,447,062 | |||
|
| |||
Net Investment Loss | (657,927 | ) | ||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain (loss) on: | ||||
Non-affiliated issuer investments | ||||
Long positions | 3,989,058 | |||
Short positions | (2,690,119 | ) | ||
Foreign currency transactions | 20,324 | |||
|
| |||
| 1,319,263 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Non-affiliated issuer investments | ||||
Long positions | 7,738,753 | |||
Short positions | (2,863,772 | ) | ||
|
| |||
| 4,874,981 | ||||
|
| |||
Net Realized and Unrealized Gain | 6,194,244 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 5,536,317 | ||
|
| |||
* The Fund commenced operations on December 30, 2016
See notes to financial statements.
Annual Report | 15
Statement of Changes in Net Assets
Thornburg Long/Short Equity Fund
| PERIOD ENDED SEPTEMBER 30, 2017* | |||||
INCREASE (DECREASE) IN NET ASSETS FROM | |||||
OPERATIONS | |||||
Net investment income (loss) | $ | (657,927 | ) | ||
Net realized gain (loss) on investments and foreign currency transactions | 1,319,263 | ||||
Net unrealized appreciation (depreciation) on investments | 4,874,981 | ||||
|
| ||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 5,536,317 | ||||
FUND SHARE TRANSACTIONS (NOTE 5) | |||||
Class I Shares | 74,202,322 | ||||
|
| ||||
Net Increase in Net Assets | 79,738,639 | ||||
NET ASSETS | |||||
Beginning of Period | 0 | ||||
|
| ||||
End of Period | $ | 79,738,639 | |||
|
| ||||
Accumulated net investment loss | $ | (694,107 | ) | ||
* For the period from commencement of operations on December 30, 2016 through September 30, 2017.
See notes to financial statements.
16 | Annual Report
Thornburg Long/Short Equity Fund | Period Ended September 30, 2017 *
| Cash Flows from Operating Activities: | ||||
Net change in net assets resulting from operations | 5,536,317 | |||
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used for) operating activities: | ||||
Purchases of investments in securities | (69,405,351 | ) | ||
Payments to cover securities sold short | (20,500,423 | ) | ||
Proceeds from disposition of investments in securities | 42,237,863 | |||
Proceeds from securities sold short | 42,456,729 | |||
Purchases of short term investments, net | (17,223,411 | ) | ||
Net realized (gain) loss: | ||||
Investment transactions | (3,989,058 | ) | ||
Short sales | 2,690,119 | |||
Foreign Currency | (20,324 | ) | ||
Net unrealized (gain) loss: | ||||
Investments | (7,738,753 | ) | ||
Short sales | 2,863,772 | |||
Changes in assets and liabilities: | ||||
(Increase) decrease in assets: | ||||
Cash segregated as collateral on securities sold short | (4,442,162 | ) | ||
Receivable for investment securities sold | (28,456 | ) | ||
Dividend and interest receivable | 36,907 | |||
Increase in receivable for fund shares sold | (208,000 | ) | ||
Other assets | (15,182 | ) | ||
Increase (decrease) in liabilities: | ||||
Payable for short sale financing | (14,434 | ) | ||
Payable for dividends on short sales | 20,935 | |||
Payable to investment adviser | 93,315 | |||
Accrued expenses and other payables | 73,013 | |||
|
| |||
| Net cash used in operating activities | (27,576,584 | ) | ||
|
| |||
| Cash flows from Financing Activities: | ||||
Fund shares sold | 31,289,733 | |||
Fund shares redeemed | (3,713,149 | ) | ||
|
| |||
| Net cash received from financing activities | 27,576,584 | |||
|
| |||
| Net increase in cash during the period | – | |||
| Cash and foreign currency, beginning of period: | $ | 0 | ||
| Cash and foreign currency, end of period: | $ | 0 | ||
Non-cash Activities: | ||||
In-kind contribution | 46,625,738 | |||
Reinvestment of Fund distributions | 136,192 | |||
* The Fund commenced operations on December 30, 2016
Annual Report | 17
Thornburg Long/Short Equity Fund | September 30, 2017
NOTE 1 – ORGANIZATION
Thornburg Long/Short Equity Fund (the “Fund”) is a nondiversified series of Thornburg Investment Trust (the “Trust”). The Fund commenced operations on December 30, 2016. 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 twenty-one 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.
Effective December 30, 2016, the assets of Thornburg Partners Fund, L.P., a private investment vehicle for which Thornburg Investment Management, Inc. served as general partner and investment advisor (the “Partnership”), were transferred to the Fund, in exchange for Class I shares of beneficial interest of the Fund, and the Fund assumed certain liabilities of the Partnership. The transaction was structured to qualify as a tax-free transaction under the Internal Revenue Code. The net assets the Fund received from the Partnership in the transaction had a value of $46,625,738 at the time of the transaction. The Partnership received 4,662,574 Class I shares of the Fund, each with a NAV per share of $10.00. Those Class I shares were distributed in pro rata amounts to the partners of the Partnership based on their partner’s capital balance on the effective date of the exchange, and the Partnership subsequently dissolved. The investment policies and restrictions of the Fund are in all material respects equivalent to those of the Partnership, except that the Partnership was not registered as an investment company under the Investment Company Act of 1940 and was not, therefore, subject to certain investment restrictions, diversification requirements, and other restrictions imposed on registered investment companies by the 1940 Act or the Internal Revenue Code of 1986. The Fund’s portfolio management team is the same as the Partnership’s portfolio management team.
The Fund currently offers one class of shares of beneficial interest: Institutional Class (“Class I”). This class of shares of the Fund represents all interest in the portfolio of investments. 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. All expenses are allocated to the class including transfer agent fees, government registration fees, printing and postage costs, and legal expenses.
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles (“GAAP”), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standard Codification Topic 946.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Security Valuation: All investments in securities held by the Fund are valued as described in Note 3.
Restricted Cash: As of September 30, 2017, the Fund has restricted cash in the amount of $37,350,773. The restricted cash represents collateral pledged in relation to short sale securities. The carrying value of the restricted cash approximates fair value.
Allocation of Expenses: 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.
Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid quarterly. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust’s investment advisor (the “Advisor”). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder’s option, paid in cash.
Investment Income: 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. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations. For securities sold short, the Fund is generally required to pay the lender amounts equal to any dividend or interest which accrues on the borrowed security during the period of the loan. These amounts are included in Dividend expense on securities sold short on the Statement of Operations.
Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate equal to 2.50% of the overdraft amount in excess of $50,000.
18 | Annual Report
Notes to Financial Statements, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis.
Short Sales: A short sale involves the sale by the Fund of a security that the Fund does not own. The Fund borrows the security that it intends to sell from a broker or other institution, and at a later date the Fund completes the short sale by purchasing that same security on the open market and delivering it to the lending institution. The Fund may be required to pay a premium, fee, or other amount to the lender in exchange for borrowing the security. These amounts are included in Short sale financing fees on the Statement of Operations. When it enters into a short sale, the Fund seeks to profit on a decline in the price of the security between the date the Fund borrows the security and the date the Fund purchases the security to deliver it to the lender. If, however, the price of the security increases between those dates, or if the price of the security declines by an amount which is not sufficient to cover the expenses of borrowing the security, the Fund will experience a loss. Although the potential for gain as a result of a short sale is limited to the price at which the Fund sold the security short less the cost of borrowing the security, the potential for loss is theoretically unlimited because there is no limit to the cost of replacing the borrowed security. Short sales held by the Fund are fully collateralized by segregated cash or other securities which are denoted on the Schedule of Investments.
Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings.
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 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.
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 (depreciation) from investments.
Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and 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 (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates.
Guarantees and Indemnifications: Under the Trust’s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. 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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates.
Annual Report | 19
Notes to Financial Statements, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
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 investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required.
The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three years following a return’s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund’s financial statements for the fiscal year ended September 30, 2017, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities.
At September 30, 2017, information on the tax components of capital was as follows:
Cost of investments for tax purposes | $ | 29,261,994 | |||
|
| ||||
Gross unrealized appreciation on a tax basis | $ | 19,170,319 | |||
Gross unrealized depreciation on a tax basis | (6,113,801 | ) | |||
|
| ||||
Net unrealized appreciation (depreciation) on investments (tax basis) | $ | 13,056,518 | |||
|
|
Temporary book to tax adjustments to cost of investments and net unrealized appreciation (depreciation) for tax purposes result primarily from deferral of outstanding wash sales and outstanding publicly traded partnerships (“PTP”) and real estate investment trusts (“REITs”) tax basis adjustments.
At September 30, 2017, the Fund had deferred tax basis late year ordinary losses occurring subsequent to December 31, 2016 through September 30, 2017 of $588,485. For tax purposes, such losses will be recognized in the year ending September 30, 2018.
In order to account for permanent book to tax differences, the Fund increased accumulated net investment loss by $36,180, increased accumulated net realized gain by $56,345, and decreased net capital paid in on shares of beneficial interest by $20,165. Reclassifications have no impact upon the net asset value of the Fund and resulted primarily from foreign currency gains (losses), investments in publicly traded partnerships (“PTPs”) and real estate investment trusts (“REITs”), equalization of undistributed capital gains to shareholders, outstanding temporary partnership adjustments, and nondeductible expenses.
As September 30, 2017, the Fund had no undistributed tax basis net ordinary investment income and $1,875,189 of undistributed tax basis capital gains.
Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assessment of a jurisdiction’s legal obligation to pay reclaims, the jurisdiction’s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain.
Deferred Foreign Capital Gain 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.
NOTE 3 – SECURITY VALUATION
Valuation of the Fund’s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees.
The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees’ Audit Committee (the “Audit Committee”) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the “Committee”) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee’s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments.
20 | Annual Report
Notes to Financial Statements, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
In those instances when the Committee assists in calculating 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 on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund’s financial statements. The Committee’s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment.
Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund’s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date.
In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment’s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data.
Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee.
In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation.
Quotations for foreign investments expressed in foreign currency amounts are converted to U.S. dollar equivalents using a foreign exchange quotation from a third party service provider at the time of valuation. Foreign investments held by the Fund may be traded on days and at times when the Fund is not open for business. Consequently, the value of Fund investments may be significantly affected on days when shareholders cannot purchase or sell Fund shares.
Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. 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 valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments.
Various inputs are used in calculating valuations for 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 calculating the fair values of investments).
Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy.
Annual Report | 21
Notes to Financial Statements, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
On days when market volatility thresholds established by the Audit Committee are exceeded, foreign securities for which valuations are obtained from pricing service providers are fair valued. On these days, the foreign securities are characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded.
In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment, and application of discounts 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 based upon these inputs 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, 2017. 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, 2017 | ||||||||||||||||||||
| TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||||||||||
Assets | ||||||||||||||||||||
Investments in Securities* | ||||||||||||||||||||
Common Stock | $ | 84,661,224 | $ | 84,661,224 | $ | – | $ | – | ||||||||||||
Short Term Investments | 17,359,603 | 17,359,603 | – | – | ||||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | 102,020,827 | $ | 102,020,827 | $ | – | $ | – | ||||||||||||
Liabilities | ||||||||||||||||||||
Investments in Securities Sold Short* | ||||||||||||||||||||
Common Stock | $ | (59,469,226 | ) | $ | (59,469,226 | ) | $ | – | $ | – | ||||||||||
Exchange-Traded Funds | (233,089 | ) | (233,089 | ) | – | – | ||||||||||||||
|
| |||||||||||||||||||
Total Investments in Securities | $ | (59,702,315 | ) | $ | (59,702,315 | ) | $ | – | $ | – | ||||||||||
| * | See Schedule of Investments for a summary of the industry exposure as grouped according to the Global Industry Classification Standard (GICS), which is an industry taxonomy developed by MSCI, Inc. and Standard & Poor’s (S&P). |
In accordance with the guidance prescribed in ASU No. 2011-04, 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, 2017, other than when the Fund exceeded market volatility thresholds for foreign equity investments during the period.
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an investment advisory agreement, 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. Under the investment advisory agreement, the Fund pays the Advisor a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
Management Fee Schedule
| DAILY NET ASSETS | FEE RATE | ||||
Up to $500 million | 1.250 | % | |||
Next $500 million | 1.200 | ||||
Next $1 billion | 1.150 | ||||
Over $2 billion | 1.100 | ||||
The Fund’s effective management fee for the year ended September 30, 2017 was 1.25% of the Fund’s average net assets.
The Fund pays to the Advisor the costs of personnel who perform certain accounting services for the Fund. For the year ended September 30, 2017 the Fund incurred $1,377 for these accounting services. The Trust has also entered into administrative service agreements with the Advisor, whereby the Advisor will perform certain administrative services related to the Fund’s shares and for which fees will be payable at an annual rate of up to .05 of 1% per annum of the average daily net assets attributable to each class of shares. Total administrative service fees incurred by the Fund for the year ended September 30, 2017, are set forth in the Statement of Operations.
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.
22 | Annual Report
Notes to Financial Statements, Continued
Thornburg Long/Short Equity Fund | September 30, 2017
The Advisor and Distributor have contractually agreed to waive fees and reimburse expenses incurred by the Fund so that actual expenses do not exceed levels as specified in each Fund’s most recent prospectus. The agreement may be terminated by the Fund at any time, but may not be terminated by the Advisor or Distributor before February 1, 2018, 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 may recoup amounts waived or reimbursed during the fiscal year if expenses fall below the contractual limit during that year.
For the year ended September 30, 2017, the Advisor contractually reimbursed expenses and administrative fees of $153,501 for Class I shares.
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.
The percentage of direct investments in the Fund held by the Trustees, officers of the Trust, and the Advisor is approximately 52.8%.
The Fund may purchase or sell securities from, or to an affiliated fund, provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees, and provided that all such transactions will comply with Rule 17a-7 under the 1940 Act. For the year ended September 30, 2017, the Fund had no such transactions with affiliated funds.
NOTE 5 – SHARES OF BENEFICIAL INTEREST
At September 30, 2017, 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, 2017* | ||||||||
| SHARES | AMOUNT | |||||||
Class I Shares | ||||||||
In-kind re-organization | 4,662,574 | $ | 46,625,738 | |||||
Shares sold | 2,847,668 | 31,289,733 | ||||||
Shares repurchased | (348,991 | ) | (3,713,149 | ) | ||||
|
| |||||||
Net increase | 7,161,251 | $ | 74,202,322 | |||||
|
| |||||||
* The Fund commenced operations on December 30, 2016.
NOTE 6 – INVESTMENT TRANSACTIONS
For the year ended September 30, 2017, the Fund had purchase and sale transactions of long investments of $69,405,351 and $42,456,729, respectively, and cover and sale transactions of securities sold short of $20,500,423 and $42,237,863, respectively (excluding short term investments and securities transferred from the partnership).
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, 2017, 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 small- and mid-cap companies and non-U.S. issuers (including developing country issuers), short sale risk, diversification risk, derivatives risk, credit risk, counterparty 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, 2017 and the date of issuance of the financial statements that require adjustment to or disclosure in the accompanying financial statements.
Annual Report | 23
Thornburg Long/Short Equity Fund
| PER SHARE PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR) | ||||||||||||||||||||||||||||||||||||||||
| UNLESS OTHERWISE NOTED, PERIODS ARE FISCAL YEARS ENDED SEPTEMBER 30, | NET ASSET VALUE, 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 END OF PERIOD | ||||||||||||||||||||||||||||||||
| CLASS I SHARES | ||||||||||||||||||||||||||||||||||||||||
2017(b) | $ | 10.00 | (0.13 | ) | 1.26 | 1.13 | – | – | – | $ | 11.13 | |||||||||||||||||||||||||||||
| (a) | Not annualized for periods less than one year. |
| (b) | Fund commenced operations on December 30, 2016. |
| (c) | Annualized. |
| (d) | The Fund incurs certain expenses and fees in connection with investments in short positions. If such expenses and fees had not occurred, the Expenses Before Expense Reductions ratio would have been 1.81%. |
| + | Based on weighted average shares outstanding. |
See notes to financial statements.
24 | Annual Report
Financial Highlights, Continued
Thornburg Long/Short Equity Fund
| RATIOS TO AVERAGE NET ASSETS | SUPPLEMENTAL DATA | |||||||||||||||||||||||||||||
| EXPENSES, AFTER | ||||||||||||||||||||||||||||||
| NET INVESTMENT INCOME (LOSS) (%) | EXPENSES, AFTER EXPENSE REDUCTIONS (%) | 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) | ||||||||||||||||||||||||
| (1.56 | )(c) | 1.45 | (c) | 1.45 | (c) | 3.78 | (c)(d) | 11.30 | 61.69 | % | $ | 79,739 | ||||||||||||||||||
Annual Report | 25
Report of Independent Registered Public Accounting Firm
Thornburg Long/Short Equity Fund
To the Trustees and Shareholders of the Thornburg Long/Short Equity Fund
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, of changes in net assets, and of cash flows and the financial highlights present fairly, in all material respects, the financial position of the Thornburg Long/Short Equity Fund (the “Fund”) as of September 30, 2017, and the results of its operations, the changes in its net assets, its cash flows and the financial highlights for the period December 30, 2016 (commencement of operations) through September 30, 2017, 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 as of September 30, 2017 by correspondence with the custodian, transfer agent, and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
November 20, 2017
26 | Annual Report
Thornburg Long/Short Equity Fund | September 30, 2017 (Unaudited)
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, 2017, and held until September 30, 2017.
| BEGINNING ACCOUNT VALUE 4/1/17 | ENDING ACCOUNT VALUE 9/30/17 | EXPENSES PAID DURING PERIOD† 4/1/17–9/30/17 | |||||||||||||
| CLASS I SHARES | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,066.10 | $ | 7.77 | |||||||||
Hypothetical* | $ | 1,000.00 | $ | 1,017.55 | $ | 7.59 | |||||||||
| † | Expenses are equal to the annualized expense ratio for each class (I: 1.50%) 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.
Annual Report | 27
Thornburg Long/Short Equity Fund | September 30, 2017 (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, 72 Trustee since 1984, Chairman of Trustees(3) | Chairman and controlling shareholder of Thornburg Investment Management, Inc. (investment advisor); Chairman and controlling shareholder of Thornburg Securities Corporation (securities dealer); Chairman and CEO of Chamisa Energy, LLC; President of the Thornburg Foundation (nonprofit). | None | ||
Brian J. McMahon, 62 Trustee since 2001, Vice Chairman of Trustees, Member of Governance and Nominating Committee & Operations Risk Oversight Committee(5) | Vice Chairman, Chief Investment Officer, Managing Director, and Portfolio Manager and, until 2016, CEO and President of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | None | ||
INDEPENDENT TRUSTEES(1)(2)(4) | ||||
David A. Ater, 72 Trustee since 1994, Lead Independent Trustee, Chairman of Governance and Nominating Committee & Member of Audit 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 | ||
Sally Corning, 56 Trustee since 2012, Chairman of Audit Committee | Partner in Sun Mountain Capital, Santa Fe, NM (private equity firm with investment programs encompassing venture capital, mezzanine debt, and growth equity). | None | ||
Susan H. Dubin, 68 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 | ||
David L. Gardner, 54 Trustee since 2015, Member of Operations Risk Oversight Committee | Until 2012, head of EMEA (Europe, Middle East and Africa) Sales for iShares of Blackrock, Inc., EMEA Executive Committee Member and EMEA Operating Committee Member at Blackrock, Inc. | None | ||
Owen D. Van Essen, 63 Trustee since 2004, Chairman of Operations Risk Oversight Committee & Member of Governance and Nominating Committee | President of Dirks, Van Essen & Murray, Santa Fe, NM (newspaper mergers and acquisitions). | None | ||
James W. Weyhrauch, 58 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 | ||
28 | Annual Report
Trustees and Officers, Continued
Thornburg Long/Short Equity Fund | September 30, 2017 (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)(7) | ||||
Nimish Bhatt, 54 Treasurer since 2016(6) | Chief Financial Officer and Treasurer of Thornburg Investment Management, Inc. and Thornburg Securities Corporation since 2016; Senior Vice President (2004-2016), Chief Financial Officer (2011-2016), and Head of Fund Administration (2011-2016) of Calamos Asset Management, Inc., Calamos Investments LLC, Calamos Advisors LLC, and Calamos Wealth Management; Director of Calamos Global Funds plc (2007-2016). | Not applicable | ||
Jason Brady, 43 President since 2016(6) | Director since 2017, CEO and President since 2016, and Portfolio Manager and Managing Director of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation since 2016. | Not applicable | ||
Connor Browne, 38 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Randy Dry, 43 Vice President since 2014 | Managing Director, Director of Institutional Group from 2014-2016, and since 2016, Chief Administrative Officer of Thornburg Investment Management, Inc. | Not applicable | ||
Greg Dunn, 41 Vice President since 2014 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. since 2012. | Not applicable | ||
Lon Erickson, 42 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
William V. Fries, 78 Vice President since 1995 | Senior Advisor and Managing Director and until 2016, portfolio manager of Thornburg Investment Management, Inc. | Not applicable | ||
Thomas Garcia, 46 Vice President since 2006 | Managing Director, Head Equity Trader, and Associate Portfolio Manager of Thornburg Investment Management, Inc. | Not applicable | ||
Rolf Kelly, 38 Vice President since 2016 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Ben Kirby, 37 Vice President since 2014 | Portfolio Manager and Managing Director since 2013 and Associate Portfolio Manager from 2011–2013 of Thornburg Investment Management, Inc. | Not applicable | ||
Jeff Klingelhofer, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015, and Associate Portfolio Manager from 2012–2015, of Thornburg Investment Management, Inc. | Not applicable | ||
Ponn Lithiluxa, 46 Vice President since 2017 | Manager, Tax & Fund Administration of Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund Services, Inc. (2014–2017); Vice President, Citi Fund Services, Inc. (2007–2014). | Not applicable | ||
Rob MacDonald, 41 Vice President since 2016 | Managing Director since 2015, Portfolio Manager since 2014, and Associate Portfolio Manager from 2011–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Leigh Moiola, 50 Vice President since 2001 | Managing Director and Director of Marketing of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Christopher Ryon, 61 Vice President since 2008 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Troy Statczar, 46 Assistant Treasurer since 2017 | Director of Fund Administration of Thornburg Investment Management, Inc. since 2017; Director US Operations, Henderson Global Investors N.A., Inc. and Treasurer Henderson Global Funds (2012-2016). | Not applicable | ||
Sean Koung Sun, 36 Vice President since 2017 | Portfolio Manager and Managing Director since 2017, Associate Portfolio Manager from 2015-2016, and Equity Research Analyst from 2012-2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Nicholos Venditti, 36 Vice President since 2016 | Portfolio Manager and Managing Director since 2015 and Associate Portfolio Manager from 2011–2015 of Thornburg Investment Management, Inc. | Not applicable | ||
Annual Report | 29
Trustees and Officers, Continued
Thornburg Long/Short Equity Fund | September 30, 2017 (Unaudited)
| NAME, AGE, YEAR ELECTED POSITION HELD WITH FUND | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS | OTHER DIRECTORSHIPS HELD BY TRUSTEE | ||
Vinson Walden, 47 Vice President since 2004 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Lei Wang, 46 Vice President since 2006 | Portfolio Manager and Managing Director of Thornburg Investment Management, Inc. | Not applicable | ||
Sasha Wilcoxon, 43 Vice President since 2003 Secretary since 2007(6) | Managing Director and Director of Mutual Fund Operations of Thornburg Investment Management, Inc.; Vice President of Thornburg Securities Corporation. | Not applicable | ||
Charles Wilson, 42 Vice President since 2016 | Portfolio Manager and Managing Director since 2014 and Associate Portfolio Manager from 2012–2014 of Thornburg Investment Management, Inc. | Not applicable | ||
Di Zhou, 39 Vice President since 2016 | Portfolio Manager and Managing Director since 2016, Associate Portfolio Manager from 2014–2016, and Equity Research Analyst from 2010–2014 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 a separate investment “Fund” 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, all the Funds of the Trust. Each Trustee oversees all the Funds of the Trust. |
| (3) | Mr. Thornburg is considered an “interested” Trustee under the Investment Company Act of 1940 because he is a director and controlling shareholder of Thornburg Investment Management, Inc., the investment advisor to the 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 by the end of the calendar year during which the Trustee 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 a director and the chief investment officer of Thornburg Investment Management, Inc. |
| (6) | The Trust’s president, secretary, and treasurer each serves a one-year term or until the election and qualification of a successor; each other officer serves at the pleasure of the Trustees. |
| (7) | Assistant vice presidents and assistant secretaries are not shown. |
The Statement of Additional Information for each Fund of the Trust includes additional information about the Trustees and is available, without charge and upon request, by calling 1-800-847-0200.
30 | Annual Report
Thornburg Long/Short Equity Fund | September 30, 2017 (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. Because the Fund commenced operations on December 30, 2016, the information in the most recent proxy report is for the period from the Fund’s inception through June 30, 2017. 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 Long/Short Equity Fund pursuant to an investment advisory agreement. The Trustees consider the renewal of this agreement annually, and most recently determined to renew the agreement on September 11, 2017.
In anticipation of their recent consideration of the advisory agreement’s renewal, the independent Trustees met in May 2017 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 discuss preliminarily the information the Advisor would present to the Trustees for their review. The independent Trustees met in a second independent session in July to further define certain portions of the information to be submitted by the Advisor. The independent Trustees met again in a September independent session with a mutual fund analyst firm retained by the independent Trustees to provide explanations of comparative cost and expense information, comparative investment performance information and other data obtained and analyzed by the consulting firm, and in their independent session discussed their evaluations of the Fund’s fee and expense levels, investment performance and other information presented for the Fund. The independent Trustees also conferred independently with legal counsel respecting the factors typically considered in evaluating renewal of an advisory agreement, and conferred in a separate portion of their session with representatives of management to receive explanations of certain aspects of the information they had requested. Representatives of the Advisor subsequently reviewed portions of the information with the Trustees and addressed questions from the Trustees at a full meeting session of the Trustees scheduled later in September for that purpose, and the independent Trustees thereafter met in independent session to consider the Advisor’s presentations 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.
Annual Report | 31
Other Information, Continued
Thornburg Long/Short Equity Fund | September 30, 2017 (Unaudited)
The information below summarizes certain factors considered by the Trustees in connection with the determination to renew the advisory agreement. In determining to renew the agreement, the Trustees considered a wide range of information and did not identify any single factor as controlling, and this summary does not describe all of the factors and other matters considered by the Trustees in making their determination.
Nature, Extent and Quality of Services. The Trustees considered in their evaluation of the advisory agreement reports on a wide variety of topics by personnel from the Advisor’s portfolio management, accounting and administration, operations and compliance staffs at quarterly meetings of the Trustees throughout the year and at meetings of the Trustees’ standing committees. The Trustees also considered in this evaluation presentations and explanations made by representatives of the Advisor in meeting sessions scheduled for consideration of a renewal of the advisory agreement. The Trustees further noted in their evaluation the consideration they had given to a number of topics in previous years.
Information identified by the Trustees in their evaluation as having been considered and contributing to their conclusions respecting the nature, extent and quality of the services rendered to the Fund by the Advisor included the Fund’s achievement of its investment objectives and absolute and relative investment performance over different periods of time, portfolio managers’ cognizance of and strategies to pursue the Fund’s objectives and address pertinent market and economic trends and conditions, the evaluation and selection of individual investments, the structuring and composition of the Fund’s portfolio, management of Fund liquidity requirements, the Advisor’s evaluation and selection of firms providing portfolio trade execution to the Fund and the Advisor’s measures to obtain favorable trade execution, and efforts to achieve tax efficiency. The Trustees noted their assessments of the Advisor’s personnel developed in formal and informal meetings throughout the year, the Advisor’s staffing resources and competencies, measures to expand and improve the Advisor’s staff competencies and the value and quality of the work produced by members of its staff, and the Advisor’s collaborative approach to investment management. The Trustees also noted the Advisor’s reports through the year respecting extensive, multi-year additions to its information collection, storage and analysis capabilities, and the addition or expansion of other electronic systems and the enlistment of outside firms to assist in the Advisor’s initiatives to continually enhance its electronic systems capabilities and competitiveness. The Trustees further noted their consideration of the Advisor’s performance of accounting and other services, the Advisor’s continued commitment to observance of compliance and regulatory requirements, the Advisor’s responsiveness to the Trustees, the quality and extent of written and oral reports to the Trustees over the course of the year, and other factors.
Based upon these and other considerations, the Trustees concluded that the Advisor’s management of the Fund’s investments continued to conform to the Fund’s stated objectives and policies, and that the nature, extent and quality of the services provided to the Fund by the Advisor remained sufficient.
Investment Performance. The Trustees noted in their evaluation of the Fund’s investment performance the reports they had received in each regular meeting over the course of the year from the Advisor’s portfolio management personnel. The Trustees also noted in their evaluation their consideration of 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: (1) the Fund’s absolute investment performance and achievement of stated objectives; (2) the Advisor’s written and oral 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 eight calendar years (which included data for a predecessor fund), comparing the Fund’s investment performance to a fund category created by an independent mutual fund analyst firm, and to a broad-based securities index, (4) performance data 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 (which include returns for a predecessor fund) to two mutual fund categories and to a broad-based securities index, and assigning a ranking to the Fund’s performance for each period relative to the two fund categories for the year-to-date and three-month periods, (5) comparative performance data for a fund peer group selected by an independent mutual fund analyst firm engaged by the independent Trustees, (6) comparison of the Fund’s annualized return since inception to the Fund’s benchmark index, and (7) a comparative measure of portfolio volatility, and risk and return statistics. The Trustees generally attach additional significance to investment performance from the perspective of longer term shareholders. Based upon their consideration of this and other information, the Trustees concluded that the Fund’s absolute and relative investment performance over a range of pertinent holding periods, including the performance of the predecessor fund, on the whole was satisfactory in view of its objectives and strategies.
Comparisons of Fee and Expense Levels. The Trustees recognized in their evaluation the clear disclosures of the Advisor’s fees and Fund expenses in the Fund’s prospectus. Information noted by the Trustees as having been considered in this context included a variety of comparative data respecting the Fund’s fee and expense levels. This information included comparisons of the Fund’s advisory fee and
total expenses to median and average fees and expenses charged to a mutual fund category created by an independent mutual fund analyst firm, comparisons of the advisory fee and total expenses of the Fund’s sole share class to the fee levels and expenses for a fund peer group selected by a second independent mutual fund analyst firm, the perspectives and advice from the second mutual fund analyst firm respecting comparisons of fund fee levels and expenses to fund peer groups, and other information. The Trustees noted that the Advisor has agreed to certain fee waivers and expense reimbursements for the current period. Comparative fee and expense data noted as having been considered by the Trustees showed that the Fund’s stated advisory fee level was lower than the median and average fee levels for the fund category, and the level of total expense for the Fund after fee waivers and expense reimbursements was lower than the
32 | Annual Report
Other Information, Continued
Thornburg Long/Short Equity Fund | September 30, 2017 (Unaudited)
category’s median and average expense levels. Peer group data showed that the Fund’s stated advisory fee level was lower than the stated median level for the peer group, and that the total expense level for the Fund after fee waivers and expense reimbursements was comparable to the median level 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, descriptions of distinguishing characteristics of the sub-advised funds served by the Advisor, 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.
Costs and Profitability of Advisor. The Trustees noted the costs incurred by the Advisor in initiating and managing the Fund and the Advisor’s waivers of fees and reimbursements of expenses for the Fund, and further noted that the Fund is not currently profitable to the Advisor.
Potential Economies of Scale. In reviewing the extent to which economies of scale would be realized by the Fund as it grows and whether fee levels reflect potential economies of scale, the Trustees noted their evaluation of 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 peer groups selected by an independent mutual fund analyst firm, the effects of the breakpoint structure and other expense factors realized by certain other funds of the Trust as their asset levels had increased, and the Advisor’s expenditures from its own profits and resources to maintain staffing levels and expand staff competencies, pay competitive levels of compensation, and add to its information management and other electronic systems so as to maintain or improve service levels. 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 the peer groups, and that shareholders may be expected to benefit from any economies of scale, due to the advisory agreement’s breakpoint fee structure for the Fund and other factors.
Potential Ancillary Benefits. In reviewing potential benefits to the Advisor because of its relationship to the Fund, the Trustees noted explanations 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.
Summary of Conclusions. The Trustees concluded that the general nature, extent and quality of the Advisor’s services performed under the advisory agreement remained sufficient, the Advisor had continued to actively and competently pursue the Fund’s stated investment objectives and adhere to the Fund’s investment policies, and that the absolute and relative investment performance of the Fund over pertinent holding periods on the whole was satisfactory in the context of its objectives and strategies. The Trustees further concluded that the level of the advisory fee charged to the Fund by the Advisor is fair and reasonable in relation to the services provided by the Advisor, in view of the nature, extent and quality of those services, the investment performance of the Fund after fees and expenses, the clear disclosure of fees and expenses in the Fund’s prospectuses, comparisons of fees and expenses charged to the Fund to fees and expenses charged to other mutual funds, and the other factors considered. The Trustees accordingly determined to renew the Fund’s investment advisory agreement with the Advisor for an additional term of one year.
Annual Report | 33
Trustees’ Statement to Shareholders
Readopted September 11, 2017
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.
Trustees of Thornburg Investment Trust
34 | Annual Report
Thornburg Funds
Thornburg Investment Management is a privately-owned global investment firm that offers a range of solutions for retail and institutional investors. Founded in 1982 and headquartered in Santa Fe, New Mexico, we manage approximately $49 billion (as of September 30, 2017) across U.S. mutual funds, separate accounts for high-net-worth investors, institutional accounts, and UCITS funds for non-U.S. investors.
EQUITY FUNDS
| ∎ | Thornburg Investment Income Builder Fund |
| ∎ | Thornburg Global Opportunities Fund |
| ∎ | Thornburg International Value Fund |
| ∎ | Thornburg Better World International Fund |
| ∎ | Thornburg International Growth Fund |
| ∎ | Thornburg Developing World Fund |
| ∎ | Thornburg Value Fund |
| ∎ | Thornburg Core Growth Fund |
FIXED INCOME FUNDS
| ∎ | 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 |
ALTERNATIVE FUNDS
| ∎ | Thornburg Long/Short Equity 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
Annual Report | 35
| To receive shareholder reports, prospectuses, and proxy statements electronically, go to www.thornburg.com/edelivery. |  | |||
| 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 | TH3931 |
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 the Trust have determined that two members of the Trust’s audit committee, David A. Ater and Sally Corning, are each audit committee financial experts as defined in Item 3 of Form N-CSR. Mr. Ater 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 the 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, 2016 | Year Ended September 30, 2017 | |||||||
Thornburg Investment Trust | $ | 680,460 | $ | 736,325 | ||||
Audit-Related Fees
The fees billed to the 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, 2016 | Year Ended September 30, 2017 | |||||||
Thornburg Investment Trust | $ | 45,000 | $ | 12,500 | ||||
Tax Fees
The fees billed to the 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, including amounts paid in connection with filing foreign tax reclaims, are set out below.
| Year Ended September 30, 2016 | Year Ended September 30, 2017 | |||||||
Thornburg Investment Trust | $ | 374,392 | $ | 442,500 | ||||
All Other Fees
The fees billed to the 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, 2016 | Year Ended September 30, 2017 | |||||||
Thornburg Investment Trust | $ | 5,400 | $ | 7,065 | ||||
The figure shown under All Other Fees for the year ended September 30, 2016 includes amounts from out of pocket expenses during the 2015 annual audit. The figure shown under All Other Fees for the year ended September 30, 2017 includes amounts from out of pocket expenses during the 2016 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, 2017, 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 the Trust’s disclosure controls and procedures provide reasonable assurance that material information relating to the 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 the 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, Developing World Fund, Better World International Fund, Capital Management Fund, and Long/Short Equity Fund.
| By: | /s/ Jason H. Brady | |
| Jason H. Brady | ||
| President and principal executive officer | ||
| Date: | November 20, 2017 | |
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/ Jason H. Brady | |
| Jason H. Brady | ||
| President and principal executive officer | ||
| Date: | November 20, 2017 | |
| By: | /s/ Nimish Bhatt | |
| Nimish Bhatt | ||
| Treasurer and principal financial officer | ||
| Date: | November 20, 2017 | |