Thornburg
Investment Trust
Statement of Additional Information
Dated February 1,
2023 for
Thornburg Global
Opportunities Fund |
Thornburg
Small/Mid Cap Growth Fund |
(“Global Opportunities
Fund”) |
(“Small/Mid Cap Growth
Fund”) |
Class R3: THORX |
Class R3: THCRX |
Class R4: THOVX |
Class R4: TCGRX |
Class R5: THOFX |
Class R5: THGRX |
Class R6: THOGX |
|
|
|
Thornburg International Equity
Fund |
Thornburg Investment Income Builder
Fund |
(“International Equity
Fund”) |
(“Income Builder
Fund”) |
Class R3: TGVRX |
Class R3: TIBRX |
Class R4: THVRX |
Class R4: TIBGX |
Class R5: TIVRX |
Class R5: TIBMX |
Class R6: TGIRX |
Class R6: TIBOX |
|
|
Thornburg International Growth
Fund |
Thornburg Limited Term U.S.
Government Fund |
(“International Growth
Fund”) |
(“Limited Term U.S. Government
Fund”) |
Class R3: TIGVX |
Class R3: LTURX |
Class R4: TINVX |
Class R4: LTUGX |
Class R5: TINFX |
Class R5: LTGRX |
Class R6: THGIX |
|
|
|
Thornburg Developing World
Fund |
Thornburg Limited Term Income
Fund |
(“Developing World
Fund”) |
(“Limited Term Income
Fund”) |
Class R5: THDRX |
Class R3: THIRX |
Class R6: TDWRX |
Class R4: THRIX |
|
Class R5: THRRX |
|
Class R6: THRLX |
|
|
Thornburg Small/Cap Core
Fund |
Thornburg Strategic Income
Fund |
(“Small/Mid Cap Core
Fund”) |
(“Strategic Income
Fund”) |
Class R3: TVRFX |
Class R3: TSIRX |
Class R4: TVIRX |
Class R4: TSRIX |
Class R5: TVRRX |
Class R5: TSRRX |
|
Class R6:
TSRSX |
2300
North Ridgetop Road
Santa Fe, New Mexico 87506
This
Statement of Additional Information is not a prospectus but should be read in
conjunction with the Funds’ “Thornburg Retirement Plan Shares” Prospectus dated
February 1, 2023 (the “Prospectus”). A copy of the Prospectus and the most
recent Annual and Semiannual Reports for each of the Funds may be obtained at no
charge by contacting the administrator of your retirement plan, by telephoning a
Fund Support Representative at 1-800-847-0200 or by writing to the distributor
of the Funds’ shares, Thornburg Securities Corporation, at 2300 North Ridgetop
Road, Santa Fe, New Mexico 87506. The audited financial statements contained in
the Annual Reports to Shareholders for each of the Funds for the fiscal year
ended September 30, 2022 are incorporated herein by reference. This Statement of
Additional Information is incorporated by reference into the Prospectus.
The
description of investment policies and limitations that appears in this
Statement of Additional Information and the Prospectus does not impose a
contractual duty on the Funds or their investment advisor to comply with those
policies and limitations, and no express or implied contract is created among a
Fund and its shareholders by virtue of those shareholders having made an
investment in the Fund or having received this Statement of Additional
Information or the Prospectus. Furthermore, while the Trust may enter into
contracts with third parties to manage the Funds’ assets and provide other
services, as described in this Statement of Additional Information and the
Prospectus, the Trust and each such third party are the sole intended
beneficiaries of those contracts, and the Funds’ shareholders are not third
party beneficiaries of those contracts.
ORGANIZATION OF THE FUNDS
Global
Opportunities Fund, International Equity Fund, International Growth Fund,
Developing World Fund, Small/Mid Cap Core Fund, Small/Mid Cap Growth Fund,
Income Builder Fund, Limited Term U.S. Government Fund, Limited Term Income
Fund, and Strategic Income Fund are diversified series of Thornburg Investment
Trust, a Massachusetts business trust (the “Trust”) organized on June 3, 1987 as
a diversified, open-end management investment company under a Declaration of
Trust (the “Declaration”). The Trust currently has 21 active Funds, 10 of which
are the subject of this Statement of Additional Information. The Trustees are
authorized to divide the Trust’s shares into additional series and classes.
The
assets received for the issue or sale of shares of each Fund and all income,
earnings, profits, and proceeds thereof, subject only to the rights of
creditors, are especially allocated to the Fund, and constitute the underlying
assets of that Fund. The underlying assets of each Fund are segregated on the
books of account, and are charged with the liabilities with respect to that Fund
and with a share of the general expense of the Trust. Expenses with respect to
the Trust are allocated in proportion to the asset value of the respective
series and classes of the Trust except where allocations of direct expense can
otherwise be fairly made. The officers of the Trust, subject to the general
supervision of the Trustees, determine which expenses are allocable to a given
Fund, or generally allocable to all of the Funds of the Trust. In the event of
the dissolution or liquidation of the Trust, shareholders of each Fund are
entitled to receive as a class the underlying assets of that Fund which are
available for distribution.
Each
of the Funds may in the future, rather than invest in securities generally, seek
to achieve its investment objective(s) by pooling its assets with assets of
other funds for investment in another investment company having the same
investment objective(s) and substantially similar investment policies and
restrictions as the Fund. The purpose of such an arrangement is to achieve
greater operational efficiencies and to reduce cost. It is expected that any
such investment company would be managed by Thornburg Investment Management,
Inc. (“Thornburg”) in a manner substantially similar to the corresponding Fund.
Shareholders of each Fund would receive prior written notice of any such
investment, but may not be entitled to vote on the action. Such an investment
would be made only if at least a majority of the Trustees of the Fund determined
it to be in the best interest of the participating Fund and its
shareholders.
The
Trust is an entity of the type commonly known as a “Massachusetts business
trust.” Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable for the obligations of the trust. The
Declaration of Trust provides that the Trust shall not have any claim against
shareholders except for the payment of the purchase price of shares. However,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which a Fund itself would be unable to
meet its obligations. Thornburg believes that, in view of the above, the risk of
personal liability to shareholders is remote.
Each
Fund may hold special shareholder meetings and transmit proxy materials. These
meetings may be called to elect or remove Trustees, change fundamental
investment policies, or for other purposes. Shareholders not attending these
meetings are encouraged to vote by proxy. Each Fund will transmit proxy
materials in advance, including a voting card and information about the
proposals to be voted on. The number of votes you are entitled to is based upon
the number of shares you own. Shares do not have cumulative rights or preemptive
rights.
State
Street Bank and Trust Company, Boston, Massachusetts, is custodian of the assets
of the Funds. The Custodian is responsible for the safekeeping of the Funds’
assets and the appointment of subcustodian banks and clearing agencies. The
Custodian takes no part in determining the investment policies of the Funds or
in deciding which securities are purchased or sold by the Funds.
INVESTMENT POLICIES
Information
about each Fund’s principal investment strategies and the principal risks
associated with those investment strategies is provided in the Prospectus. A
“principal investment strategy” of a Fund is a strategy which Thornburg
anticipates may be important in pursuing the investment objective(s) stated in
the Fund’s prospectus and which Thornburg anticipates may have a significant
effect on the Fund’s performance. In general, a security or investment strategy
will not be considered a principal strategy of a Fund if it will not represent
more than ten percent of a Fund’s assets.
The
following discussion supplements the information in the Prospectus by providing
additional detail about some of the investments that a Fund is generally
permitted, but not required, to make in pursuing the Fund’s investment
objective(s) and certain risks associated with those investments or to which a
Fund may be otherwise subject. Not all of the investments identified below will
be used by each Fund, and some investments that may be used by a Fund would not
ordinarily be considered a principal investment strategy of the Fund. In
general, a Fund may make any investment, including investments which are not
identified below, if the investment advisor reasonably believes that the
investment is consistent with the Fund’s investment objective(s) and policies
and the Fund’s investment limitations do not expressly prohibit the Fund from
doing so.
Under
certain circumstances, a Fund is only permitted to invest a certain percentage
of its assets in a particular investment strategy. For more information about
the specific investment limitations that may be applicable to a Fund, please
refer to the Prospectus and to the “Investment Limitations” section of this
Statement of Additional Information. For purposes of any such limitation on the
percentage of a Fund’s assets that could be invested in a particular investment
strategy, the term “assets” means net assets of the Fund (determined immediately
after and as a result of the Fund’s acquisition of a given investment) plus the
amount of borrowings for investment purposes.
Global
Opportunities Fund, International Equity Fund, International Growth Fund,
Developing World Fund, Small/Mid Cap Core Fund, Small/Mid Cap Growth Fund, and
Income Builder Fund are sometimes referred to collectively in this Statement of
Additional Information as the “Equity Funds.” Limited Term U.S. Government Fund,
Limited Term Income Fund and Strategic Income Fund are sometimes referred to
collectively in this Statement of Additional Information as the “Fixed Income
Funds.”
Investing in Debt Obligations
Bonds
and other debt obligations are used by issuers to borrow money from investors.
The issuer pays the investor a fixed or variable rate of interest, and must
repay the amount borrowed at maturity. The values and yields of debt obligations
are dependent upon a variety of factors, including the condition of the general
market, general market interest rates, the size of a particular debt offering,
the maturity of the debt obligations, and the creditworthiness and rating of the
issuer. Variations in the value of a debt obligation held in the Fund’s
portfolio arising from these or other factors will cause changes in the net
asset value of the Fund’s shares.
The
following discussion contains additional detail about debt obligations,
including some of the specific types of debt obligations in which a Fund may
invest and certain risks associated with those investments. You should read the
Prospectus for more information about the characteristics and risks of debt
obligations. You should also read “Investing in Foreign Debt Obligations and
Foreign Equity Securities” below for information about some of the
characteristics and risks of foreign debt obligations.
Bond Ratings
Many
bonds and other debt obligations are assigned credit ratings by ratings agencies
such as Moody’s Investors Service (“Moody’s”) or S&P Global Ratings
(“S&P”). The ratings of Moody’s and S&P represent their current opinions
as to the creditworthiness of the issuers of the debt obligations which the
ratings agencies undertake to rate. In determining credit ratings, ratings
agencies evaluate each issuer’s capacity and willingness to meet its financial
commitments as they come due, and may assess terms, such as collateral security
and subordination, which could affect payment in the event of the issuer’s
default.
While
credit ratings may be helpful in evaluating the safety of principal and interest
payments under debt obligations, credit ratings do not reflect the risk that
market values of debt obligations will fluctuate with changes in interest rates,
general economic trends or other factors. Accordingly, even the highest rated
debt obligation may experience wide price movements. Credit rating agencies may
also fail to change credit ratings in a timely fashion to reflect events
occurring subsequent to the initial ratings. Furthermore, it should be
emphasized that credit ratings are general and are not absolute standards of
quality. Debt obligations with the same maturity, coupon and rating may have
different yields, while debt obligations of the same maturity and coupon with
different ratings may have the same yield.
In
addition to using information provided by ratings agencies, Thornburg will
subject each debt obligation under consideration for investment to its own
credit analysis in an effort to assess each issuer’s financial soundness. This
analysis is performed by Thornburg for a particular debt obligation at the time
that a Fund purchases that obligation and will be reviewed by Thornburg from
time to time thereafter.
Each
ratings agency uses its own rating classification system to indicate the credit
rating assigned to a particular debt obligation. In general, the ratings
agencies classify debt obligations into two categories for purposes of the
ratings process – long term and short term. The ratings agencies typically
assign short term ratings to debt obligations that are considered short term in
the relevant market. In the United States, for example, the ratings agencies
deem short term debt obligations to include commercial paper and other
obligations with an original maturity of no more than 365 days. The following is
a brief description of the applicable ratings symbols and their meanings for
each of Moody’s and S&P.
Ratings
for Long Term Debt Obligations
Rating |
Description |
Aaa
(Moody’s)
AAA
(S&P) |
Debt obligations judged to be of the
highest quality, with minimal credit risk. The issuer is determined to
have an extremely strong capacity to pay principal and interest on the
obligation. |
|
|
Aa
(Moody’s)
AA
(S&P) |
Debt obligations judged to be of high
quality, with very low credit risk. The issuer is determined to have a
very strong capacity to pay principal and interest on the
obligation. |
|
|
A (Moody’s and S&P) |
Debt obligations judged to be of
upper-medium grade quality, with low credit risk. The issuer is determined
to have a strong capacity to pay principal and interest on the
obligation. |
|
|
Baa
(Moody’s)
BBB
(S&P) |
Debt obligations judged to be of medium
grade quality, with moderate credit risk and certain speculative
characteristics. Adverse economic conditions may weaken the ability of the
issuer to pay principal and interest on the obligation. This is the last
of the ratings categories commonly referred to as “investment
grade.” |
|
|
Ba
(Moody’s)
BB
(S&P) |
Debt obligations judged to have
speculative elements and are subject to substantial credit risk. The
issuer may face major ongoing uncertainties, and adverse economic
conditions may weaken the ability of the issuer to pay principal and
interest on the obligation. This is the first of the ratings categories
commonly referred to as “below investment grade,” “non- investment grade”
or “speculative grade.” |
|
|
B (Moody’s and S&P) |
Debt obligations judged to be
speculative and subject to high credit risk. Although the issuer currently
has the capacity to make principal and interest payments on the
obligation, adverse economic conditions will likely impair the ability of
the issuer to meet those financial commitments. |
|
|
Caa
(Moody’s)
CCC
(S&P) |
Debt obligations judged to be of poor
standing and subject to very high credit risk. Such obligations are
currently vulnerable to nonpayment by the issuer, particularly in the
event of adverse economic conditions or changing
circumstances. |
|
|
Ca
(Moody’s)
CC
(S&P) |
Debt obligations judged to be highly
speculative. These obligations are likely in, or very near, default, with
some prospect of recovery of principal and interest. |
|
|
C (Moody’s and S&P) |
Debt obligations that are currently
highly vulnerable to nonpayment, debt obligations that permit payment
arrearages, or debt obligations of an issuer that is the subject of a
bankruptcy petition or similar action but has not yet experienced a
payment default. These obligations have little prospect for recovery of
principal and interest. |
|
|
D (Moody’s and S&P) |
Debt obligations that are currently in
payment default. |
Moody’s
may append the numerical modifiers 1, 2 or 3 to any debt obligation rated Aa
through Caa to indicate the relative standing of that obligation within its
principal rating category. Similarly, S&P may append a “+” or “-” to any
debt obligation rated AA through CCC to indicate the relative standing of that
obligation within its principal rating category. The foregoing ratings are
sometimes presented in parentheses preceded with “Con.” (Moody’s) or “p”
(S&P), indicating that the obligations are rated
conditionally/provisionally. Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition may be rated in this
fashion. The parenthetical rating denotes the probable credit status upon
completion of construction or elimination of the basis of the condition.
Ratings
for Short Term Debt Obligations
Rating |
Description |
P-1
(Moody’s)
A-1
(S&P) |
Issuer has a superior ability to repay
its short term debt obligations. S&P may also designate this type of
obligation with a “+” to indicate that the issuer’s capacity to repay the
obligation is extremely strong. |
|
|
P-2
(Moody’s)
A-2
(S&P) |
Issuer has a strong ability to repay its
short term debt obligations, though repayment of these obligations is
somewhat more susceptible to adverse economic conditions than obligations
in the higher rated category. |
|
|
P-3
(Moody’s)
A-3
(S&P) |
Issuer has an acceptable ability to
repay its short term debt obligations. Adverse economic conditions are
more likely to weaken the ability of the issuer to meet its financial
commitments on these types of obligations. |
|
|
NP (Moody’s) |
To the extent a short term debt
obligation does not fall into one of the three previous categories,
Moody’s identifies that obligation as NP or Not Prime. |
|
|
B (S&P) |
The short term debt obligation is judged
to have significant speculative characteristics. Although the issuer
currently has the capacity to meet financial commitments on these
obligations, the issuer faces ongoing uncertainties which could affect the
issuer’s ability to meet those commitments. S&P may further delineate
this ratings category into “B-1,” “B-2” or “B-3 to indicate the relative
standing of an obligation within the category. |
|
|
C (S&P) |
The short term debt obligation is
currently vulnerable to nonpayment, and the issuer is dependent on
favorable economic conditions to continue to meet its commitments on the
obligation. |
|
|
D (S&P) |
The short term debt obligation is in
payment default. |
Ratings
of Municipal Notes. In addition to the foregoing, the ratings agencies may
separately categorize municipal notes. Municipal notes are debt obligations
issued by states, cities and local authorities and which mature in one year or
less. When rating municipal notes, Moody’s uses ratings symbols MIG 1, MIG 2,
MIG 3, MIG 4 and SG, and S&P uses ratings symbols SP-1+, SP-1, SP-2 and
SP-3. As with the ratings systems used for other debt obligations, the rating
agencies’ categorization of municipal notes reflects a decreasing judgment of
the ability of the issuer to meet its financial obligations under the note.
Dual
Ratings. The rating agencies may assign dual ratings to all long term debt
obligations that have a demand or multiple redemption feature. The first rating
addresses the likelihood of repayment of principal and interest as due and the
second rating addresses only the demand feature. The long term debt rating
symbols are used to denote the long term maturity and the short term debt rating
symbols are used to denote the put option (for example, “AAA/A-1+”). For certain
“demand notes” maturing in 3 years or less, the respective municipal note rating
symbols, combined with the short term debt obligation symbols, are used (for
example. “SP-1/A-1”).
Determining a Portfolio’s Average
Maturity
As
discussed in the Prospectus, Limited Term U.S. Government Fund and Limited Term
Income Fund seek to reduce changes in the value of their shares by maintaining a
portfolio of investments with a certain dollar-weighted average maturity. A debt
obligation’s maturity generally represents the time remaining until the
principal amount of that obligation becomes due and payable.
For
purposes of determining an investment’s maturity, Thornburg will treat a debt
obligation as having a maturity earlier than its stated maturity date if the
instrument has technical features (such as put or demand features) or a variable
rate of interest which, in the judgment of Thornburg, will result in the
instrument being valued in the market as though it has an earlier maturity.
In
addition, each Fund may estimate the expected maturities of certain securities
it purchases in connection with achieving its investment objectives. Certain
obligations, such as United States Treasury Bills and United States Treasury
Notes, have stated maturities. However, other obligations a Fund may acquire are
interests in pools of mortgages or other loans having varying maturities. Due to
prepayments of the underlying mortgage instruments or other loans, such
securities do not have a known actual maturity (the stated maturity date of
collateralized mortgage obligations is, in effect, the maximum maturity date).
In order to determine whether such a security is a permissible investment for a
Fund (and assuming the security otherwise qualifies for purchase by the Fund),
the security’s remaining term will be deemed equivalent to the estimated average
life of the underlying mortgages at the time of purchase of the security by the
Fund. Average life will be estimated by a Fund based on Thornburg’s evaluation
of likely prepayment rates after taking into account current interest rates,
current conditions in the relevant housing markets and such other factors as it
deems appropriate. There can be no assurance that the average life as estimated
will be the actual average life. For example, the mortgage instruments in the
pools underlying mortgage-backed securities may have a range of different
original maturities. The average life of such a security at the time of purchase
by a Fund is likely to be substantially less than the maximum original maturity
of the mortgage instruments underlying the security because of prepayments of
the mortgage instruments, the passage of time from the issuance of the security
until its purchase by a Fund and, in some cases, the wide dispersion of the
original maturity dates of the underlying mortgage instruments.
Certain
securities which have variable or floating interest rates or demand or put
features may be deemed by Thornburg to have remaining actual lives which are
less than their stated nominal lives. In addition, certain asset-backed
securities which have variable or floating interest rates may be deemed by
Thornburg to have remaining lives which are less than the stated maturity dates
of the underlying mortgages.
Determining a Debt Obligation’s
Duration
Each
of the Fixed Income Funds may from time to time seek to reduce changes in the
value of its shares by maintaining a portfolio of investments with a particular
dollar-weighted average duration, or may otherwise monitor a portfolio’s average
duration. Duration is an estimate of the sensitivity of a debt obligation to
changes in interest rates, and is consequently a measure of interest rate risk.
The duration of a given debt obligation represents an approximation of the
expected percentage change in a debt obligation’s value in response to a change
in interest rates. Duration is commonly expressed as a number of years, and the
value of an obligation or a portfolio of obligations with a higher number—a
longer duration—will be more volatile in response to changes in interest
rates.
Computations
of duration for a specific debt obligation or for a portfolio of debt
obligations will vary depending upon various factors, including the assumptions
employed in performing the computations. Because duration figures are estimates,
the actual changes in market values of specific debt obligations or portfolios
of obligations may be different from the estimated changes in valuations based
upon durations computed for the obligations or portfolios of obligations.
Lower-Quality Debt Obligations
Each
of the Funds may purchase debt obligations which are of lower-quality at the
time of purchase or which, due to issuer default or credit ratings downgrades,
are determined subsequent to purchase to be of lower-quality.
For
these purposes, “lower-quality” debt obligations include debt obligations rated
below Baa by Moody’s or BBB by S&P, and unrated securities judged by
Thornburg to be of equivalent quality. Lower-quality debt obligations typically
have poor protection with respect to the payment of interest and repayment of
principal, and may be in default. These obligations are often considered to be
speculative and involve greater risk of loss or price changes due to changes in
the issuer’s capacity to pay. The market prices of lower-quality debt
obligations may fluctuate more than those of higher-quality debt obligations and
may decline significantly in periods of general economic difficulty, which may
follow periods of rising interest rates.
The
market for lower-quality debt obligations may be thinner and less active than
that for higher-quality debt obligations, which can adversely affect the prices
at which the former are sold. If a Fund experiences unexpected net redemptions,
it could be forced to sell lower-quality debt obligations in its portfolio at
disadvantageous prices without regard to those obligations’ investment merits,
which could depress the Fund’s net asset value and reduce the Fund’s overall
investment performance. If market quotations are not available, lower-quality
debt obligations will be valued in accordance with procedures established by the
Trustees, including the use of outside pricing services. Judgment plays a
greater role in valuing lower-quality debt obligations than is the case for
securities for which more external sources for quotations and last-sale
information are available. Adverse publicity and changing investor perceptions
may affect the ability of outside pricing services to value lower-quality debt
obligations and a Fund’s ability to sell these securities. Since the risk of
default is higher for lower-quality debt obligations, Thornburg’s research and
credit analysis are an especially important part of managing securities of this
type held by a Fund. In considering investments for a Fund, Thornburg will
attempt to identify those issuers of high-yielding securities whose financial
condition is adequate to meet future obligations, has improved, or is expected
to improve in the future. Thornburg’s analysis focuses on relative values based
on such factors as interest or dividend coverage, asset coverage, earnings
prospects, and the experience and managerial strength of the issuer.
A
Fund may choose, at its expense or in conjunction with others, to pursue
litigation or otherwise to exercise its rights as a security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of the Fund’s shareholders.
The
Funds may also invest from time to time in unrated obligations. Unrated
obligations may be less liquid than comparable rated obligations and may be more
difficult to value. Moreover, unrated obligations may be more difficult for
Thornburg to evaluate and there is the risk that Thornburg may not accurately
evaluate an investment’s actual credit quality. In particular, an unrated
obligation that Thornburg believes is equivalent to an investment grade
obligation could ultimately exhibit characteristics associated with lesser rated
obligations.
Mortgage-Backed Securities, Mortgage
Pass-Through Securities and Asset-Backed Securities
Mortgage-Backed
Securities. Each Fund may invest in mortgage-backed securities, in debt
obligations which are secured with collateral consisting of mortgage-backed
securities (see “Structured Finance Arrangements - Collateralized Mortgage
Obligations” below), and in other types of mortgage-related securities.
Mortgage-backed
securities are interests in pools of mortgage loans, including mortgage loans
made by savings and loan institutions, mortgage bankers, commercial banks and
others. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private organizations.
A decline in interest rates may lead to a faster rate of repayment of the
underlying mortgages, which may expose a Fund to a lower rate of return upon
reinvestment of the prepayments. Additionally, the potential for prepayments in
a declining interest rate environment might tend to limit to some degree the
increase in net asset value of a Fund because the value of some mortgage-backed
securities held by a Fund may not appreciate as rapidly as the price of
non-callable debt obligations. During periods of increasing interest rates,
prepayments likely will be reduced, and the value of the mortgage-backed
securities will decline.
Interests
in pools of mortgage-backed securities differ from other forms of debt
obligations. Whereas other forms of debt obligations normally provide for
periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates, mortgage-backed securities provide a monthly
payment which consists of both interest and principal payments. In effect, these
payments are a “pass-through” of the monthly payments made by the individual
borrowers on their mortgage loans, net of any fees paid to the issuer or insurer
of such securities. Additional payments are caused by repayments of principal
resulting from the sale of the underlying property, or upon refinancing or
foreclosure, net of fees or costs which may be incurred. Some mortgage-related
securities (such as securities issued by the Government National Mortgage
Association) are described as “modified pass-through.” These securities entitle
the holder to receive all interest and principal payments owed on the mortgage
pool, net of certain fees, on the scheduled payment dates regardless of whether
or not the mortgagor actually makes the payment.
The
principal governmental guarantor of mortgage-related securities is the
Government National Mortgage Association (“Ginnie Mae”). Ginnie Mae is a
wholly-owned United States Government corporation within the Department of
Housing and Urban Development. Ginnie Mae is authorized to guarantee, with the
full faith and credit of the United States government, the timely payment of
principal and interest on securities issued by institutions approved by Ginnie
Mae (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of mortgages insured or guaranteed by the Federal
Housing Administration, the U.S. Department of Veteran Affairs or the Farmers
Home Administration. These guarantees, however, do not apply to the market value
or yield of mortgage-backed securities or to the value of Fund shares. Also,
Ginnie Mae securities often are purchased at a premium over the maturity value
of the underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs.
Government-related
guarantors (i.e., not backed by the full faith and credit of the United States
Government) include the Federal National Mortgage Association (“Fannie Mae”) and
the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Fannie Mae is a
government-sponsored corporation subject to general regulation by the Secretary
of Housing and Urban Development. Fannie Mae purchases conventional (i.e., not
insured or guaranteed by any government agency) mortgages from a list of
approved seller/servicers which include state and federally-chartered savings
loan associations, mutual savings banks, commercial banks and credit unions and
mortgage bankers. Pass-through securities issued by Fannie Mae are guaranteed as
to timely payment of principal and interest by Fannie Mae but are not backed by
the full faith and credit of the United States Government. Freddie Mac is a
corporate instrumentality of the United States Government and was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the twelve Federal Home
Loan Banks. Freddie Mac issues Participation Certificates (“PCs”), which
represent interests in conventional mortgages from Freddie Mac’s national
portfolio. Freddie Mac guarantees the timely payment of interest and ultimate
collection of principal, but PCs are not backed by the full faith and credit of
the United States Government.
In
September 2008, the U.S. Government placed Fannie Mae and Freddie Mac into
conservatorship overseen by the Federal Housing Finance Authority. That
arrangement is intended to provide additional financial support to Fannie Mae
and Freddie Mac. Since 2009, Fannie Mae and Freddie Mac have also each received
significant capital support through the purchase of United States Treasury
stock, and the United States Treasury has announced its expectation that it
would continue providing such support in order to prevent either Fannie Mae or
Freddie Mac from having negative net worth. Despite these measures, there can be
no assurance that Fannie Mae and Freddie Mac will remain successful in meeting
their financial commitments under the debt obligations that they issue or
guarantee. There is also an ongoing debate among federal policy makers regarding
whether Fannie Mae and Freddie Mac should be nationalized, privatized,
restructured, or eliminated altogether.
Mortgage
Pass-Through Securities. Limited Term Income Fund, Strategic Income Fund and
each of the Equity Funds may also purchase pass-through pools of conventional
mortgage loans that have been created by commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers. Such issuers may, in addition, be the originators
and/or servicers of the underlying mortgage loans as well as the guarantors of
the mortgage-related securities. Pools created by such non-governmental issuers
generally offer a higher rate of interest than government and government-related
pools because there are no direct or indirect government or agency guarantees of
payments. Timely payment of interest and principal of these pools may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit. The insurance and
guarantees are issued by governmental entities, private insurers and the
mortgage poolers. Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a mortgage-related
security meets a Fund’s investment quality standards, if any. There can be no
assurance that the private insurer or guarantors can meet their obligations
under the insurance policies or guarantee arrangements. A Fund may buy
mortgage-related securities without insurance or guarantees if, through an
examination of the loan experience and practices of the originators/servicers
and poolers, Thornburg determines that the securities meet the Fund’s quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable.
Asset-Backed
Securities. Limited Term Income Fund, Strategic Income Fund and each of the
Equity Funds may invest in asset-backed securities.
The
securitization techniques used to develop mortgage-backed securities (see
“Mortgage-Backed Securities” and “Mortgage Pass-Through Securities” above) are
also applied to a broad range of assets. Through the use of trusts and special
purpose corporations, various types of assets, including automobile loans,
computer leases and credit card receivables, are securitized in pass-through
structures similar to the mortgage pass-through structures described below or in
structures similar to the CMO pattern (see “Structured Finance Arrangements --
Collateralized Mortgage Obligations” below). In general, the collateral
supporting these securities is of shorter maturity than mortgage loans and is
less likely to experience substantial prepayments with interest rate
fluctuations.
One
example of this type of asset-backed security is a Certificate of Automobile
Receivables (“CARS”). CARS represent undivided fractional interests in a trust
whose assets consist of a pool of motor vehicle retail installment sales
contracts and security interests in the vehicles securing the contracts.
Payments of principal and interests on CARS are passed through monthly to
certificate holders, and are guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution unaffiliated
with the trustee or originator of the trust. An investor’s return on CARS may be
affected by early prepayment of principal on the underlying vehicle sales
contracts. If the letter of credit is exhausted, the trust may be prevented from
realizing the full amount due on a sales contract because of state law
requirements and restrictions relating to foreclosure sales of vehicles and the
obtaining of deficiency judgments following such sales or because of
depreciation, damage or loss of a vehicle, the application of federal and state
bankruptcy and insolvency laws, or other factors. As a result, certificate
holders may experience delays in payments or losses if the letter of credit is
exhausted.
Asset-backed
securities may present certain risks that are not presented by mortgage-backed
securities. Primarily, these securities may not have the benefit of any security
interest in the related assets. Credit card receivables are generally unsecured
and the debtors are entitled to the protection of bankruptcy laws and of a
number of state and federal consumer credit laws, many of which give such
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. There is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities.
Asset-backed
securities are often backed by a pool of assets representing the obligations of
a number of different parties. To lessen the effect of failures by obligors on
underlying assets to make payments, the securities may contain elements of
credit support which fall into two categories: (i) liquidity protection; and
(ii) protection against losses resulting from ultimate default by an obligor on
the underlying assets. Liquidity protection refers to the provision of advances,
generally by the entity administering the pool assets, to ensure that the
receipt of payment on the underlying pool occurs in a timely fashion. Protection
against losses results from payment of the insurance obligations on at least a
portion of the assets in the pool by the issuer or sponsor from third parties,
through various means of structuring the transaction or through a combination of
such approaches. Limited Term Income Fund, as a possible purchaser of such
securities, will not pay any additional or separate fees for credit support. The
degree of credit support provided for each issue is generally based on
historical information respecting the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that anticipated or failure
of the credit support could adversely affect the return on an investment in such
a security.
Limited
Term Income Fund, Strategic Income Fund and each of the Equity Funds may also
invest in residual interests in asset-backed securities. In the case of
asset-backed securities issued in a pass-through structure, the cash flow
generated by the underlying assets is applied to make required payments on the
securities and to pay related administrative expenses. The residual in an
asset-backed security pass-through structure represents the interest in any
excess cash flow remaining after making the foregoing payments. The amount of
the residual will depend on, among other things, the characteristics of the
underlying assets, the coupon rates on the securities, prevailing interest
rates, the amount of administrative expenses and the actual prepayment
experience on the underlying assets. Asset-backed security residuals not
registered under the Securities Act of 1933 (the “1933 Act”) may be subject to
certain restrictions on transferability. In addition, there may be no liquid
market for such securities.
The
availability of asset-backed securities may be affected by legislative or
regulatory developments. It is possible that such developments may require a
Fund holding these securities to dispose of the securities.
Thornburg
expects that governmental, government-related or private entities may create
mortgage-backed, mortgage pass-through and asset-backed securities in addition
to those described above. If otherwise consistent with a Fund’s investment
objectives, policies and quality standards, Thornburg may consider investing on
behalf of a Fund in such new types of investments.
Municipal Obligations
Each
Fund may invest in municipal obligations.
Municipal
obligations include debt and lease obligations issued by states, cities and
local authorities to obtain funds for various public purposes, including the
construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, schools, streets and water
and sewer works. Other public purposes for which municipal obligations may be
issued include the refunding of outstanding obligations, the procurement of
funds for general operating expenses and the procurement of funds to lend to
other public institutions and facilities. In addition, certain types of
industrial development bonds are issued by or on behalf of public authorities to
obtain funds to provide privately-operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit, port or
parking facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity or sewage or solid waste disposal.
Municipal obligations have also been issued to finance single-family mortgage
loans and to finance student loans. Such obligations are included within the
term “municipal obligations” for this discussion if the interest paid thereon is
exempt from federal income tax.
Municipal
obligations are generally classified as municipal bonds or municipal notes. A
municipal bond typically has a maturity of more than one year and is issued by a
state, city or local authority to meet longer-term capital needs. The two
principal classifications of municipal bonds are “general obligation” and
“revenue” bonds. General obligation bonds are secured by the issuer’s pledge of
its faith, credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
specific revenue source. Industrial development bonds are in most cases revenue
bonds and are generally not secured by the pledge of the credit or taxing power
of the issuer of such bonds. There are, of course, variations in the security of
municipal bonds, both within a particular classification and between
classifications, depending on numerous factors. In contrast to municipal bonds,
municipal notes typically have a maturity of one year or less and are issued by
states, cities and local authorities to provide for short-term capital needs,
often as an interim step in anticipation of the municipality receiving future
revenue.
From
time to time, proposals have been introduced before Congress for the purpose of
restricting or eliminating the federal income tax exemption for interest on
municipal securities. Similar proposals may be introduced in the future. These
proposals, if enacted, may have the effect of reducing the availability of
investments in municipal obligations and may adversely affect the value of a
Fund’s portfolio. Although the interest received from municipal securities
generally is exempt from federal income tax, a Fund may invest a portion of its
total assets in municipal securities subject to the federal alternative minimum
tax. Accordingly, investment in a Fund could cause noncorporate shareholders to
be subject to (or result in an increased liability under) the federal
alternative minimum tax. If this is the case, the Fund’s net after-tax return to
you may be lower.
Auction
Rate Securities. An auction rate security is a municipal obligation with a
long-term nominal maturity for which the interest rate is reset at specific
shorter frequencies (typically every seven to 35 days) through an auction
process. The auction is a competitive bidding process used to determine interest
rates on each auction date. In the auction, broker dealers submit bids to the
auction agent on behalf of investors. The winning bid rate is the rate at which
the auction clears, meaning the lowest possible interest rate at which the
specific issue of municipal obligations can be sold at par. The clearing rate of
interest established in the auction is paid on the entire issue of the municipal
obligations for the upcoming period to the holders of those obligations.
Investors who bid an interest rate above the clearing rate of interest receive
no portion of the issue of municipal obligations, while those whose bids were at
or below the clearing rate receive the clearing rate for the next period.
Although the auction rate process is intended to permit the holders of a given
issue of municipal obligations to sell their holdings at par in the auction at
specified intervals, there is the risk that an auction will fail due to an
insufficient demand for the obligations that are the subject of the auction,
preventing the holders of the obligations from disposing of their holdings,
potentially for an indeterminate period of time. In addition, auction rate
securities may be subject to changes in interest rates, including decreased
interest rates, thereby reducing the yields to holders of the obligations.
Fixed
Rate Demand Obligations. A Fund may purchase fixed rate municipal demand
obligations or instruments either in the public market or privately. Such
instruments may provide for periodic adjustment of the interest rate paid to the
holder. The “demand” feature permits the holder to demand payment of principal
and interest prior to the instrument’s final stated maturity, either from the
issuer or by drawing on a bank letter of credit, a guarantee or insurance issued
with respect to the instrument. In some cases these demand instruments may be in
the form of units, each of which consists of (i) a municipal obligation and (ii)
a separate put option entitling the holder to sell to the issuer of such option
the municipal obligation in the unit, or an equal aggregate principal amount of
another municipal obligation of the same issuer, issue and maturity as the
municipal obligation, at a fixed price on specified dates during the term of the
put option. In those cases, each unit taken as a whole will be considered a
municipal obligation, based upon an accompanying opinion of counsel. The credit
quality of such investments will be determined by Thornburg at the time of
purchase, and will be reviewed by Thornburg from time to time thereafter.
Floating
Rate and Variable Rate Demand Obligations. Floating rate and variable rate
demand notes, obligations or instruments are municipal obligations or
participations therein, either publicly underwritten and traded or privately
purchased, that provide for a periodic adjustment of the interest rate paid on
the instrument and may permit the holder to demand payment of the unpaid
principal amount and accrued interest upon not more than seven days’ notice
either from the issuer or by drawing on a bank letter of credit, a guarantee or
insurance issued with respect to such instrument. Such letters of credit,
guarantees or insurance will be considered in determining whether a municipal
obligation meets the Fund’s investment criteria. The issuer of a variable rate
demand instrument may have the corresponding right to prepay the principal
amount prior to maturity.
Mortgage-Backed
Municipal Obligations. Some municipal obligations a Fund may purchase are
backed by mortgage loans made by financial institutions or governmental agencies
to finance single and multi-family housing projects or other real estate-related
projects. Repayment of these municipal obligations may be secured by the
revenues from a single housing project, or may be secured by a number of housing
units. Interests in securities backed by a pool of mortgages on multiple housing
units differ from other forms of debt obligation, which normally provide for
periodic payment of interest in fixed amounts with principal payments at
maturity or specified payment dates. Instead, these securities provide for a
periodic (typically monthly) payment which consists of both interest and
principal payments. For more information about the characteristics and risks of
mortgage-backed securities, see “Mortgage-Backed Securities, Mortgage
Pass-Through Securities and Asset-Backed Securities” above.
Municipal
Leases. A Fund may at times invest in municipal obligations, including lease
revenue bonds and certificates of participation, which provide the Fund with a
proportionate interest in payments made by the governmental issuer on an
underlying municipal lease. Although municipal lease obligations do not
constitute general obligations of the governmental issuer for which the issuer’s
taxing power is pledged, these lease obligations are typically backed by the
issuer’s covenant to budget for, appropriate and make the payments due on the
underlying lease. However, certain municipal lease obligations may include
“non-appropriation” clauses, which provide that the governmental issuer has no
obligation to make lease payments unless money is appropriated each year for
that purpose. While the lease obligation might be secured by the leased
property, it might be difficult for a Fund to dispose of the leased property in
case of a default by the governmental lessee. In addition, some municipal lease
obligations may be less liquid than other debt obligations, making it difficult
for a Fund to sell the obligation at an acceptable price. In seeking to reduce
the special risks associated with investment by a Fund in municipal lease
obligations, Thornburg will consider: (i) whether the underlying lease can be
canceled; (ii) whether the nature of the leased equipment or property is such
that its ownership or use is deemed essential to a governmental function of the
governmental lessee (e.g., the potential for an “event of nonappropriation”);
(iii) in cases where the obligation gives a Fund a secured interest in the
underlying equipment, whether that equipment has elements of portability or use
that enhance its marketability in the event of a default by the governmental
lessee; (iv) whether the governmental issuer’s general credit is adequate; and
(v) such other factors concerning credit quality or the Fund’s legal recourse in
the event of a default by the governmental issuer as Thornburg may deem
relevant. Thornburg will also evaluate the liquidity of each municipal lease
obligation upon its acquisition and periodically while it is held based upon
various factors, including: (a) the frequency of trades and quotes for the
obligation; (b) the number of dealers who will buy or sell the obligation and
the potential buyers for the obligation; (c) the willingness of dealers to make
a market for the obligation; (d) the nature and timing of marketplace trades;
and (e) such other factors concerning the trading market as Thornburg may deem
relevant.
Tender
Option Bonds. Each of the Funds may invest in tender option bonds. Tender
option bonds are created when the owner or owners of one or more fixed rate
municipal obligations sell or transfer those obligations to a trust that is
sponsored by a broker- dealer or other third party. The trust then issues two
new securities, each of which represents a beneficial interest in the trust. One
of these securities is a short-term, floating-rate security, sometimes referred
to as a “senior certificate” or a “floater.” The interest rate on the senior
certificate is initially set at a level that is lower than the interest rate on
the underlying municipal obligation(s), and resets periodically based on the
movement of a short-term benchmark interest rate. The senior certificates also
have a demand feature which permits the security holder to put the security back
to the trust after a specified notice period. In that event the security holder
is entitled to receive the principal amount of the senior certificate plus
accrued interest. Those amounts are paid by either the sponsor of the trust or
by a third party that acts as a liquidity provider for the trust. The other
security issued by the trust is a long-term, floating-rate security, sometimes
referred to as a “residual interest” or an “inverse floater.” The residual
interests pay an interest rate equal to the interest that is paid on the
underlying municipal obligation(s) less the interest that was paid to the
holders of the senior certificates and less any expenses of the trust. Unlike
the senior certificates, the residual interest securities do not have a put
feature. Upon maturity of the underlying municipal obligation(s) or another
event which causes the termination or liquidation of the trust, holders of the
senior certificates are generally entitled to receive the principal amount of
their security plus a portion of any gains in the market value of the underlying
municipal obligations, while holders of the residual interest are generally
entitled to receive whatever amounts remain in trust after payment to the senior
certificate holders and payment of trust expenses.
The
senior certificates are sold to third parties, which may include the Funds, in a
private placement transaction. Because the senior certificates have first
priority to the cash flows from the underlying municipal obligation(s), and
because the holders of senior certificates have a right to put those securities
back to the trustee or to a third party liquidity facility, investments in
senior securities are generally perceived as involving less interest rate,
credit, and market risk than investments in the residual interests. Investors in
senior certificates are, however, exposed to the risk that the trust sponsor or
third party liquidity facility fails to meet its contractual obligation to buy
back the security when the investor exercises its put option.
The
residual interests are issued to the person(s) that transferred the municipal
obligation(s) to the trust. The residual interest holders also receive the
proceeds from the sale of the senior certificates, less certain transaction
costs and trustee fees. Risks associated with an investment in residual
interests include the risks associated with an investment in the underlying
municipal obligations, and the risk that increases in short-term interest rates
will increase interest payments to the senior certificate holders and therefore
reduce interest payments to the residual interest holders. Investments in
residual interests also typically involve leverage, which may magnify an
investor’s losses.
Structured Finance Arrangements
Collateralized
Mortgage Obligations (“CMOs”). Each Fund may invest in CMOs.
A
CMO is a hybrid between a mortgage-backed bond and a mortgage pass-through
security (see discussion of those instruments under “Mortgage-Backed Securities,
Mortgage Pass-Through Securities and Asset-Backed Securities” above). Similar to
a bond, interest and prepaid principal are paid, in most cases, semiannually.
CMOs may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
Ginnie Mae, Freddie Mac, or Fannie Mae, and their income streams.
CMOs
are structured into multiple classes, each bearing a different stated maturity.
Actual maturity and average life will depend upon the prepayment experience of
the collateral. CMOs provide for a modified form of call protection through a de
facto breakdown of the underlying pool of mortgages according to how quickly the
loans are repaid. Monthly payment of principal received from the pool of
underlying mortgages, including prepayments, is first returned to investors
holding the shortest maturity class. Investors holding the longer maturity
classes receive principal only after the first class has been retired. An
investor is partially guarded against unanticipated early return of principal
because of the sequential payments.
In
a typical CMO transaction, a corporation issues multiple series, (e.g., A, B, C,
Z) of CMO bonds. Proceeds of the offering are used to purchase mortgage
pass-through certificates (the “collateral”). The collateral is pledged to a
third party trustee as security for the CMO bonds. Principal and interest
payments from the collateral are used to pay principal on the CMO bonds in the
order A, B, C, Z. The Series A, B, and C bonds all bear current interest.
Interest on the Series Z bond is accrued and added to principal and a like
amount is paid as principal on the Series A, B, or C bond currently being paid
off. Once the Series A, B, and C bonds are paid in full, interest and principal
on the Series Z Bond begins to be paid currently. With some CMOs, the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios.
The
market for some CMOs may be less liquid than other debt obligations, making it
difficult for a Fund to value its investment in the CMO or sell the CMO at an
acceptable price.
Each
Fund may also invest in CMOs issued by Freddie Mac. Like other CMOs, Freddie Mac
CMOs are issued in multiple classes having different maturity dates. Freddie Mac
CMOs are secured by the pledge of a pool of conventional mortgage loans
purchased by Freddie Mac. Payments of principal and interest on the CMOs are
typically made semiannually, as opposed to monthly. The amount of principal
payable on each semiannual payment date is determined in accordance with Freddie
Mac’s mandatory sinking fund schedule, which, in turn, is equal to approximately
100% of the Federal Housing Administration prepayment experience applied to the
mortgage collateral pool. All sinking fund payments in the CMOs are allocated to
the retirement of the individual classes of bonds in the order of their stated
maturities. Payment of principal on the mortgage loans in the collateral pool in
excess of the amount of Freddie Mac’s minimum sinking fund obligation for any
payment date are paid to the holders of the CMOs as additional sinking fund
payments. Because of the “pass-through” nature of all principal payments
received on the collateral pool in excess of Freddie Mac’s minimum sinking fund
requirement, the rate at which principal of the CMOs is actually repaid is
likely to be such that each class of bonds will be retired in advance of its
scheduled date. If collection of principal (including prepayments) on the
mortgage loans during any semiannual payment period is not sufficient to meet
Freddie Mac’s minimum sinking fund obligation on the next sinking fund payment
date, Freddie Mac agrees to make up the deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the CMOs are identical to
those of Freddie Mac PCs. Freddie Mac has the right to substitute collateral in
the event of delinquencies or defaults.
Other
Structured Finance Arrangements. Each of the Equity Funds, Limited Term
Income Fund, and Strategic Income Fund may also invest in other types of
structured finance arrangements besides CMOs.
Other
types of structured finance arrangements that are currently available for
investment include collateralized bond obligations (“CBOs”), collateralized loan
obligations (“CLOs”) and similarly structured securities. A CBO is a trust or
other special purpose entity (“SPE”) which is typically backed by a diversified
pool of fixed income securities (which may include high risk, below investment
grade securities). A CLO is a trust or other SPE that is typically
collateralized by a pool of loans, which may include, among others, domestic and
non-U.S. senior secured loans, senior unstructured loans, and subordinate
corporate loans, including loans rated below investment grade or equivalent
unrated loans. CMOs, CBOs, CLOs and other similarly structured securities are
sometimes referred to generally as collateralized debt obligations (“CDOs”).
The
cashflows from a CDO’s trust or SPE are split into two or more portions, called
tranches, varying in risk and yield. The riskiest portion is the “equity”
tranche, which bears the first loss from defaults from the bonds or loans in the
trust or SPE and serves to protect the other, more senior tranches from defaults
(though such protection is not complete). Since it is partially protected from
defaults, a senior tranche from a CBO or CLO typically has higher ratings and
lower yields than its underlying securities, and may be rated investment grade.
Despite the protection from the equity tranche, CBO or CLO tranches can
experience substantial losses due to actual defaults, increased sensitivity to
defaults due to collateral default and the disappearance of protecting tranches,
market anticipation of defaults, and/or investor aversion to CBO or CLO
securities as a class. Interest on certain tranches of a CDO may be paid in kind
(i.e., in the form of obligations of the same type, rather than cash), which
involves continued exposure to default risk with respect to such payments.
Although
certain CDOs may receive credit enhancement in the form of a senior-subordinate
structure, over-collateralization or bond insurance, such enhancement may not
always be present and may fail to protect the Fund against the risk of loss on
default of the collateral. Certain CDOs may use derivative contracts, such as
credit default swaps, to create “synthetic” exposure to assets rather than
holding such assets directly, which entails the risk of derivative instruments
described elsewhere in this Statement of Additional Information. See, e.g.,
“Investing in Derivative Instruments - Swap Agreements, Caps, Floors and
Collars” below. CDOs may charge management fees and administrative expenses,
which are in addition to those of the Fund. A Fund will not invest in CDOs that
are managed by Thornburg or its affiliates.
The
risks of investment in a CDO depend largely on the type of collateral securities
and the class of the CDO in which a Fund invests. Normally, CBOs, CLOs and other
CDOs are privately offered and sold, and thus, are not registered under the
securities laws. As a result, investments in CDOs may be characterized by a Fund
as illiquid securities. However, an active dealer market may exist for CDOs,
which may allow a CDO to qualify for resale to qualified institutional buyers
pursuant to Rule 144A under the 1933 Act. In addition to the normal risks
associated with fixed income securities described elsewhere in this Statement of
Additional Information and the Prospectus (e.g., interest rate risk and credit
risk), CDOs carry additional risks including, but not limited to: (i) the
possibility that distributions from collateral securities will not be adequate
to make interest or other payments; (ii) the qualify of the collateral may
decline in value or default; (iii) the Fund may invest in tranches of CDOs that
are subordinate to other tranches; (iv) the complex structure of the security
may not be fully understood at the time of investment and may produce disputes
with the issuer or unexpected investment results; and (v) the CDO’s manager may
perform poorly.
U.S. Government Obligations
Each
of the Funds may invest in obligations of the U.S. Government.
U.S.
Government Obligations include bills, certificates of indebtedness, notes and
bonds issued or guaranteed as to principal or interest by the United States or
by agencies or authorities controlled or supervised by and acting as
instrumentalities of the U.S. government and established under the authority
granted by Congress, including, but not limited to, Ginnie Mae, the Tennessee
Valley Authority, the Bank for Cooperatives, the Farmers Home Administration,
Federal Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks,
Farm Credit Banks and Fannie Mae. Some obligations of U.S. government agencies,
authorities and other instrumentalities are supported by the full faith and
credit of the U.S. Treasury; others by the right of the issuer to borrow from
the Treasury; others only by the credit of the issuing agency, authority or
other instrumentality. In the case of securities not backed by the full faith
and credit of the United States, the investor must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment, and may
not be able to assert a claim against the United States itself in the event the
agency or instrumentality does not meet its commitments. All U.S. Government
Obligations are subject to the same risks affecting other debt obligations. Even
if a U.S. Government Obligation is backed by the full faith and credit of the
U.S. Treasury, it is possible that the U.S. government may be unable or
unwilling to repay principal and interest when due, and may require that the
terms for payment be renegotiated.
One
specific type of U.S. Government Obligation is a Treasury Inflation Protected
Security (“TIPS”). TIPS are debt obligations issued by the U.S. Treasury which
are intended to protect investors from the negative effects of inflation. The
principal value of the TIPS is periodically adjusted according to the rate of
inflation, as measured by changes in the Consumer Price Index. Interest on TIPS
is paid semi-annually as a fixed percentage of the inflation-adjusted principal
amount. Typically, the interest rate on TIPS is lower than the interest rate
paid on other U.S. Government Obligations of the same maturity.
Zero Coupon Bonds and “Stripped”
Securities
Each
of the Funds may purchase zero coupon bonds, including stripped securities.
Zero
coupon bonds are corporate or government-issued debt obligations which do not
require the periodic payment of interest and are issued at a significant
discount from face value. The discount approximates the total amount of interest
the bonds will accrue and compound over the period until maturity at a rate of
interest reflecting the market rate of the obligation at the time of
issuance.
A
“stripped” security is a zero coupon bond created by separating the principal
and interest cash flows from another debt obligation, typically a U.S. Treasury
security. The principal component is often referred to as a “principal only” or
“P/O” security, while the interest component is often referred to as an “income
only” or “I/O” security.
Because
zero coupon bonds pay no interest and compound semi-annually at the rate fixed
at the time of their issuance, their market value is generally more volatile
than the market value of comparable, interest-paying bonds, particularly during
periods of changing interest rates. A Fund is required to accrue income from
zero coupon bonds on a current basis even though it does not receive the income
currently in cash, and a Fund is required to distribute that income for each
taxable year. To generate the cash necessary to satisfy such distributions, a
Fund invested in zero coupon bonds may have to sell portfolio securities that it
otherwise might have continued to hold or use cash flows from other sources,
including the sale of Fund shares.
Investing in Equity Securities
Equity
securities represent an ownership interest in the entity issuing the security.
Common stocks, the most familiar type of equity security, represent an ownership
interest in a corporation. The values of equity securities fluctuate
significantly in response to changes in market conditions, political and
economic news, changes in company earnings and dividends, changes in the
prospects for company businesses, industry and technological developments,
changes in interest rates, and developments affecting specific companies. When
equity securities held by a Fund decline in value, the value of the Fund’s
shares declines. These declines may be significant and there is no assurance
that declines in value can be recaptured by future gains in value. When equity
securities held in short positions by a Fund increase in value, the Fund may
experience a loss, as described in “Short Sales,” below.
The
following discussion contains additional detail about equity securities,
including some of the specific types of equity securities in which a Fund may
invest and certain risks associated with those investments. You should read the
Prospectus for more information about the characteristics and risks of equity
securities. You should also read “Investing in Foreign Debt Obligations and
Foreign Equity Securities” below for information about some of the
characteristics and risks of foreign equity securities.
Closed End Funds
Each
of the Equity Funds and Strategic Income Fund may invest in the shares of closed
end funds, including closed end funds which have elected to be treated as
business development companies under the Investment Company Act of 1940 (the
“1940 Act”).
Closed
end funds are investment companies that invest in various securities and other
financial assets, and which issue shares that trade on exchanges in a manner
similar to the shares of exchange traded funds (see “Exchange Traded Funds”
below). The shares of a closed end fund change in value as the values of its
component securities and other investments fluctuate with market changes. In
contrast to exchange traded funds, however, the trading values of a closed end
fund’s shares often diverge to a greater extent from the net asset value of the
fund’s underlying portfolio investments. A closed end fund incurs its own
operating expenses, so that if a Fund invests in a closed end fund, shareholders
of the Fund bear the closed end fund’s expenses in addition to the expenses of
the Fund.
Convertible Securities
Each
of the Equity Funds, Limited Term Income Fund and Strategic Income Fund may
invest in convertible debt obligations, and each of the Equity Funds and
Strategic Income Fund may also invest in convertible preferred equity
securities.
Convertible
debt obligations may be converted or exchanged within a specified period of time
and under certain conditions into a certain amount of common stock of the same
or a different issuer. As with non-convertible debt obligations, the market
value of a convertible debt obligation may vary with changes in prevailing
interest rates and changing evaluations of the ability of the issuer to meet
principal and interest payments. The market value of a convertible debt
obligation may also vary in accordance with the market value of the underlying
stock. As a result, convertible debt obligations held by a Fund will tend to
perform more like equity securities when the underlying stock price is high
(because it is assumed that a Fund will convert the obligation), and more like
non-convertible debt obligations when the underlying stock price is low (because
it is assumed that a Fund will not convert the obligation). Because its market
value can be influenced by several factors, a convertible debt obligation will
not be as sensitive to interest rate changes as a similar non-convertible debt
obligation, and generally will have less potential for gain or loss than the
underlying stock.
As
with convertible debt, a convertible preferred equity security may be converted
or exchanged within a specified period of time and under certain conditions into
a certain amount of common stock. The market value of the convertible preferred
equity security typically varies in accordance with the market value of the
underlying common stock and, accordingly, is subject to the same risks affecting
the underlying common stock.
Exchange Traded Funds
Each
of the Equity Funds and Strategic Income Fund may invest in the shares of
exchange traded funds (“ETFs”).
ETFs
are investment companies that invest in various securities and financial assets.
ETFs are created either to provide investment results corresponding to a
securities index, or are actively managed in a manner corresponding more closely
to a traditional mutual fund. ETFs are typically available to investors as units
of beneficial interest in a trust, and are purchased and sold on an exchange in
the same way as common stocks. The values of ETF shares increase and decline as
the values of the ETF’s component securities and other investments fluctuate
with the market changes, and usually trade in a relatively narrow range relative
to the net asset value of its underlying portfolio investments because the
structure of an ETF permits certain major market participants to redeem shares
of the ETF for a “basket” of the ETF’s underlying investments. Shares in an ETF
held by a Fund are consequently subject to the same general market risks that
affect the underlying investments by the ETF, except that a Fund’s investments
in an ETF may not exactly match the performance of any specific index (and may
not perform as well as any specific index) because of differences between the
ETF’s investments and the index or other factors. In addition, each ETF incurs
its own operating expenses, so that if a Fund invests in an ETF, shareholders of
the Fund bear the ETF’s expenses in addition to the expenses of the Fund.
From
time to time a Fund may take short positions in leveraged ETFs. Leveraged ETFs
are ETFs that use derivatives instruments or other investment techniques to try
to generate returns that exceed the returns of their underlying portfolio
investments. The use of leverage by ETFs tends to exaggerate the effect of any
increase or decrease in the value of the ETF’s underlying investments and may,
therefore, cause the value of the ETF’s shares to be more volatile than if the
ETF did not use leverage.
Initial Public Offerings
Each
of the Equity Funds and Strategic Income Fund may invest in common stock or
other equity securities offered through initial public offerings (“IPOs”).
An
IPO is an issuer’s first offering of equity securities to the public. The issuer
of IPO securities may have a limited operating history, and limited information
about the issuer may be available to potential purchasers. Accordingly, the
market for IPO securities may be more volatile and involve greater risk of loss
than investments in the equity securities of more established companies. At
times a Fund may sell its investment in IPO securities shortly after the Fund
purchased those securities, which may result in increased transaction costs for
the Fund. There can be no assurance that a Fund will have access to profitable
IPOs and, as the Fund’s assets grow, any positive impact of IPO investments on
the Fund’s performance likely will decline.
Investments in the Equity Securities of
Smaller Companies
Smaller,
less seasoned companies are generally subject to greater price fluctuations,
limited market liquidity, higher transaction costs and generally higher
investment risks. Smaller companies may have limited product lines, markets or
financial resources, may have more limited management expertise and resources,
and have more limited financing and capital. There may be less available
information respecting these companies.
Limited Partnership Interests
Each
of the Equity Funds and Strategic Income Fund may invest in interests issued by
limited partnerships and master limited partnerships (“MLPs”). MLPs are business
enterprises in which ownership interests are publicly traded, and which
typically own interests in properties or businesses related to the oil and gas
industries, although they may own other types of investments. Ownership
interests in limited partnerships other than MLPs may not be publicly traded,
which may decrease the liquidity of those investments. Investments in MLPs and
other limited partnerships are subject to the risks associated with equity
investments generally and to the risks associated with the specific industry or
industries in which the partnership operates. Investments in MLPs and other
limited partnerships are also subject to certain additional risks when compared
to investments in corporations, including certain tax risks, a more limited
ability for investors to elect or remove the issuer’s management, and more
limited voting rights for investors.
Preferred Stock
Each
of the Equity Funds, Limited Term Income Fund, and Strategic Income Fund may
invest in preferred stock.
Preferred
stock is a class of stock that generally pays dividends at a specified rate and
has preference over common stock in the payment of dividends and liquidation.
Preferred stock generally does not carry voting rights. Preferred stock
dividends are generally fixed in advance, but the issuing company may not be
required to pay a dividend if, for example, it lacks the financial ability to do
so. Dividends on preferred stock may be cumulative, meaning that, in the event
the issuer fails to make one or more dividend payments on the preferred stock,
no dividends may be paid on the issuer’s common stock until all unpaid preferred
stock dividends have been paid. Preferred stock also may be subject to optional
or mandatory redemption provisions.
REITs and Other Real Estate-Related
Instruments
Each
of the Equity Funds and Strategic Income Fund may invest in real estate
investment trusts (“REITS”).
REITs
are pooled investment vehicles that invest in real estate or real estate-related
companies. Types of REITs in which a Fund may invest include equity REITs, which
own real estate directly, mortgage REITs, which make construction, development,
or long-term mortgage loans, and hybrid REITs, which share characteristics of
equity REITs and mortgage REITs. A Fund may also invest in other real
estate-related instruments, such as commercial and residential mortgage-backed
securities and real estate financings.
Investments
in REITs and other real-estate related instruments are subject to risks
affecting real estate investments generally, including overbuilding, property
obsolescence, casualty to real estate, and changes in real estate values,
property taxes and interest rates. In addition, the value of a Fund’s
investments in REITs may be affected by the quality and skill of the REIT’s
manager, the internal expenses of the REIT, and, with regard to REITs issued in
the United States, the risk that the REIT will fail to qualify for tax-free
pass-through of income under the Internal Revenue Code of 1986 and/or maintain
exemption from registration under the 1940 Act.
Short Sales
Each
of the Equity Funds and Strategic Income Fund may enter into short sales with
respect to an investment that Thornburg believes to be overvalued or to hedge
against the Fund’s long exposures. The Fund may engage in short selling with
respect to any of the securities in which the Fund is permitted to invest,
including domestic and foreign equity securities and debt obligations.
In
a short sale, the Fund borrows a security from a lender and then sells that
borrowed security to another party. In order to complete the short sale, the
Fund must return the borrowed security to the lender, which the Fund normally
does by purchasing that security on the open market and delivering it to the
lender. The Fund will realize a gain if the price of the security declines
between the date the Fund borrowed the security and the date the Fund purchased
the security to replace the borrowed security. The Fund will incur a loss if the
price of the security increases between those dates. The Fund is required to pay
to the lender amounts equal to any dividend or interest which accrues on the
borrowed security during the period of the loan. The Fund may also be required
to pay a premium, fee, or other amount to the lender in exchange for borrowing
the security.
Although
the Fund hopes to profit from its short sales, short sales may include risks
that are different than, and in some respects may exceed, the Fund’s long
investments. Because there is no limitation on the amount to which the price of
a security may increase between the date that the Fund borrows it from the
lender and the date that the Fund must purchase the security on the open market
to deliver it to the lender, the losses that the Fund incurs from a short sale
are potentially limitless. In contrast, the losses that the Fund may realize on
its long positions cannot exceed the total amount of the Fund’s investments in
those positions. The lender in a short sale transaction may have a right to
require the Fund to return the borrowed securities earlier than scheduled, in
which case the Fund may have to purchase the securities on the open market at a
time when the securities’ prices are unfavorable. To the extent the Fund is
required to deliver collateral to the lender in response to declines in the
value of the Fund’s short positions, the Fund may have to sell other securities
in its portfolio to meet those collateral requirements. Such sales may not be at
favorable prices, or may impede the pursuit of the Fund’s investment
strategy.
When
the Fund sells securities short, it may use the proceeds from the sales to
purchase long positions in additional securities that it believes will
outperform the market or its peers. This strategy may effectively result in the
Fund having a leveraged investment portfolio. The use of leverage tends to
exaggerate the effect of any increase or decrease in the value of the Fund’s
underlying investments, and may, therefore, cause the Fund’s share price to be
more volatile.
Warrants and Rights
Subject
to certain limitations, as described in “Investment Limitations” below, each of
the Equity Funds, Limited Term Income Fund and Strategic Income Fund may invest
in warrants and similar rights. A warrant represents an option to purchase a
stated number of shares of common stock of an issuer at a specified price during
a specified period of time. The prices of warrants will not always correlate
with the prices of the underlying shares of stock. In addition to the risks
relating to the underlying stock, the purchase of warrants involves the risk
that the effective price paid for the warrant, when added to the subscription
price of the underlying stock, will exceed the market price of the underlying
stock. Rights represent a preemptive right to purchase additional shares of an
issuer’s common stock at the time of a new offering of those shares, thereby
permitting the rights holder to retain the same ownership percentage after the
new offering.
Investing in Foreign Debt Obligations and Foreign
Equity Securities
Each
of the Equity Funds, Limited Term Income Fund and Strategic Income Fund may make
investments in foreign debt obligations or foreign equity securities.
International Equity Fund, International Growth Fund, and Developing World Fund
invest primarily in foreign securities, Global Opportunities Fund invests in a
portfolio of both domestic and foreign securities, and at times the portfolios
of other Funds may contain a significant percentage of foreign securities.
A
Fund’s investment in a foreign debt obligation or foreign equity security
typically involves all of the risks inherent in the same type of debt obligation
or equity security issued by a domestic issuer. In addition, foreign investments
can involve significant risks in addition to the risks inherent in U.S.
investments. The following discussion contains additional detail about the types
of foreign investments which a Fund may make and certain risks associated with
those investments. You should read the Prospectus for more information about
these investments and their risks.
Foreign Investments
Foreign
investments can involve significant risks in addition to the risks inherent in
U.S. investments. The value of securities denominated in or indexed to foreign
currencies, and of dividends and interest from such securities, can change
significantly when foreign currencies strengthen or weaken relative to the U.S.
dollar. Foreign securities markets generally have less trading volume and less
liquidity than U.S. markets, and prices on some foreign markets can be highly
volatile. Many foreign countries lack uniform accounting and disclosure
standards comparable to those applicable to U.S. companies, and it may be more
difficult to obtain reliable information regarding an issuer’s financial
condition and operations. Some foreign countries impose conditions and
restrictions on foreigners’ ownership of interests in local issuers, including
restricting ownership to certain classes of investment in an issuer, which may
reduce potential investment returns and impair disposition of those investments.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions, and custodial costs, are generally higher than for U.S.
investments.
Foreign
markets may offer less protection to investors than U.S. markets. Foreign
issuers, brokers, and securities markets may be subject to less government
supervision. Foreign securities trading practices, including those involving the
release of assets in advance of payment, may involve increased risks in the
event of a failed trade or the insolvency of a broker-dealer, and may involve
substantial delays. It may also be difficult to enforce legal rights in foreign
countries, because of inconsistent legal interpretations or less defined legal
and regulatory provisions, or because of corruption or influence on local
courts.
Investing
abroad also involves different political and economic risks. Foreign investments
may be affected by actions of foreign governments adverse to the interests of
U.S. investors, including the possibility of expropriation or nationalization of
assets, confiscatory taxation, restrictions on U.S. investment or on the ability
to repatriate assets or convert currency into U.S. dollars, or other government
intervention. There may be a greater possibility of default by foreign
governments or foreign government-sponsored enterprises, and securities issued
or guaranteed by foreign governments, their agencies, instrumentalities, or
political subdivisions, may or may not be supported by the full faith and credit
and taxing power of the foreign government. Investments in foreign countries
also involve a risk of local political, economic, or social instability,
military action or unrest, or adverse diplomatic developments. There is no
assurance that Thornburg will be able to anticipate these potential events or
counter their effects.
Depositary Receipts
American
Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”) and Global
Depositary Receipts (“GDRs”) are certificates evidencing ownership of shares of
a foreign-based issuer. These certificates are issued by a bank or similar
financial institution and generally trade on an established securities market in
the U.S. or elsewhere. An investment in ADRs, EDRs or GDRs is an alternative to
the purchase of the underlying securities in their national markets and
currencies. However, ADRs, EDRs and GDRs remain subject to many of the risks
associated with investing directly in foreign securities, including the
political and economic risks associated with the underlying issuer’s country.
Additionally, the bank or other financial institution which issues the
depositary receipt may charge the security holder fees for various services,
such as forwarding dividend and interest payments. The Fund’s investments in
depositary receipts evidencing ownership in shares of a developing country
issuer will be deemed to be an investment in that developing country issuer for
purposes of the Fund’s investment policies and restrictions.
Developing Countries
The
considerations noted above generally are intensified for investments in
developing countries, potentially including investments in issuers which are not
domiciled in a developing country but which have reference to a significant
percentage of their business in developing countries. Developing countries may
have relatively unstable governments, economies based on only a few industries,
and securities markets that trade a small number of securities.
Foreign Currency Transactions
Each
of the Equity Funds, Limited Term Income Fund and Strategic Income Fund may
conduct foreign currency transactions on a spot (i.e., cash) basis or by
entering into forward contracts and futures contracts to purchase or sell
foreign currencies at a future date and price. Additional detail about foreign
currency transactions is provided below in the sections entitled “Investing in
Derivative Instruments - Foreign Currency Transactions,” “Investing in
Derivative Instruments - Futures Contracts - Futures Relating to Foreign
Currencies,” “Investing in Derivative Instruments - Options - Options Relating
to Foreign Currencies,” and “Investing in Derivative Instruments - Swap
Agreements, Caps, Floors and Collars - Currency Swaps.”
Investing in Derivative Instruments
A
derivative instrument or derivatives transaction is a financial contract the
value of which depends on, or is derived from, the value of some other
underlying asset, reference rate, or index, such as equity securities, bonds,
commodities, currencies, or interest rates. The use of derivative instruments
may involve risks different from, or potentially greater than, the risks
associated with investing directly in the underlying reference asset. In
particular, the use by a Fund of privately negotiated, over-the-counter (“OTC”)
derivatives contracts exposes the Fund to the risk that the counterparty to the
OTC derivatives contract will be unable or unwilling to make timely payments
under the contract or otherwise honor its obligations. Although Thornburg
intends to monitor the creditworthiness of counterparties, there can be no
assurance that a counterparty will meet its obligations, especially during
periods of adverse market conditions. The market for certain types of derivative
instruments may also be less liquid than the market for the underlying reference
asset, making it difficult for a Fund to value its derivative investments or
sell those investments at an acceptable price. Derivative instruments may also
involve the risk that changes in their value may not correlate perfectly with
the assets, rates or indices they are designed to track.
A
Fund’s investment in derivative instruments may be limited by the requirements
of Subchapter M of the Internal Revenue Code for qualification as a regulated
investment company. See “Taxes.” A Fund’s investment in derivative instruments
may also be limited to the extent Thornburg intends to continue to claim
exclusion from the definition of “commodity pool operator” under the Commodity
Exchange Act. See “Commodity Exchange Act Registration Exemption.”
The
U.S. Securities and Exchange Commission (the “SEC”) has adopted rule 18f-4 of
the 1940 Act related to the use of derivatives, short sales, reverse repurchase
agreements and certain other transactions by registered investment companies,
and in connection with the adoption of that rule, the SEC rescinded and withdrew
certain previous guidance of the SEC and its staff regarding the use of asset
segregation and cover transactions as a means to reduce the potential that a
fund’s use of derivatives may constitute the issuance of “senior securities” by
the fund. Rule 18f-4 requires a fund that enters into derivatives and certain
other transactions which create future payment or delivery obligations (except
reverse repurchase agreements and similar financing transactions) to be subject
to a value-at-risk (“VaR”) leverage limit and certain derivatives risk
management program and reporting requirements. Generally, these requirements
apply unless the fund qualifies as a “limited derivatives user,” as defined in
the rule. Under rule 18f-4, when a Fund trades reverse repurchase agreements or
similar financing transactions it needs to aggregate the amount of indebtedness
associated with those investments with the aggregate amount of any other senior
securities representing indebtedness when calculating the Fund’s asset coverage
ratio or treat all such transactions as derivatives transactions. Reverse
repurchase agreements or similar financing transactions, including certain
tender option bonds, aggregated with other indebtedness do not need to be
included in the calculation of whether a fund is a limited derivatives user, but
for funds subject to the VaR testing, reverse repurchase agreements and similar
financing transactions must be included for purposes of such testing whether
treated as derivatives transactions or not.
The
Trust has adopted written policies and procedures to manage the derivatives
risks of the Funds and comply with the requirements of rule 18f-4. Each Fund is
currently classified as a limited derivatives user under rule 18f-4. As a
limited derivatives user, each Fund’s derivatives exposure, excluding certain
currency and interest rate hedging transactions, may not exceed 10% of its net
assets. The Funds may exclude from treating as a derivative certain currency or
interest rate derivatives that are not used for investment purposes but are
instead are entered into and maintained by the fund for hedging purposes; and
the notional amounts of such derivatives do not exceed the value of the hedged
investments by more than 10%. Each Fund’s limit on its derivatives exposure of
10% of its net assets is not fundamental and may be changed by the Fund without
a shareholder vote. If a Fund were to no longer be classified as a limited
derivatives user, the more extensive requirements of rule 18f-4 which would then
apply to the Fund may limit the ability of the Fund to use derivatives and
reverse repurchase agreements and similar financing transactions as part of its
investment strategies, and may also increase the cost of the Fund’s investments
and cost of doing business, which could adversely affect investors.
The
following discussion contains additional detail about the types of derivative
instruments in which a Fund may invest and certain risks associated with those
investments. You should also read the Prospectus for more information about
derivative instruments and their risks.
Combined Positions
Any
Fund which is permitted to purchase or sell forward contracts, futures contracts
and options (see “Forward Contracts”, “Futures Contracts” and “Options” below)
may also purchase and sell such forward contracts, futures contracts and options
in combination with one another in order to adjust the risk and return
characteristics of the overall position. For example, a Fund may purchase a put
option and write a call option on the same underlying instrument, in order to
construct a combined position whose risk and return characteristics are similar
to selling a futures contract. Another possible combined position would involve
writing a call option at one strike price and buying a call option at a lower
price, in order to reduce the risk of the written call option in the event of a
substantial price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult to
open and close out. A combined transaction will usually contain elements of risk
that are present in each of its component transactions. Although combined
transactions are normally entered into based on Thornburg’s judgment that the
combined strategies will reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the combination will
instead increase such risks or hinder achievement of the goal.
Eurodollar Instruments
Each
of the Equity Funds, Limited Term Income Fund and Strategic Income Fund may make
investments in Euro dollar instruments.
Eurodollar
instruments are U.S. dollar-denominated futures contracts or options thereon
which are linked to the London Interbank Offered Rate (“LIBOR”), although
foreign currency-denominated instruments are available from time to time.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for the
lending of funds and sellers to obtain a fixed rate for borrowings. A Fund might
use Eurodollar futures contracts and options thereon to hedge against changes in
the LIBOR, to which many interest rate swaps and fixed income instruments are
linked.
The
U.K.’s Financial Conduct Authority, which regulates LIBOR, has announced that it
intends to stop compelling or inducing banks to submit LIBOR rates after 2021.
The ICE Benchmark Administration Limited, the administrator of LIBOR, has ceased
publishing certain LIBOR rates on December 31, 2021, and is expected to cease
publishing the remaining LIBOR rates on June 30, 2023. While there remains
uncertainty regarding the future use of LIBOR and the nature of any replacement
rate., alternatives to LIBOR are established or in development in most major
currencies, including the Secured Overnight Financing Rate (SOFR), which is
intended to replace U.S. dollar LIBOR. The transition process away from LIBOR
may involve, among other things, increased volatility or illiquidity in markets
for instruments that currently rely on LIBOR. The transition process may also
result in a reduction in the value of certain instruments held by a Fund or
reduce the effectiveness of related Fund transactions such as hedges.
Volatility, the potential reduction in value, and/or the hedge effectiveness of
financial instruments may be heightened for financial instruments that do not
include fallback provisions that address the cessation of LIBOR. Any potential
effects of the transition away from LIBOR on any of the Funds or on financial
instruments in which a Fund invests, as well as other unforeseen effects, could
result in losses to a Fund.
Foreign Currency Transactions
Limited
Term Income Fund, Strategic Income Fund and each of the Equity Funds may conduct
foreign currency transactions on a spot (i.e., cash) basis or by entering
into forward contracts to purchase or sell foreign currencies at a future date
and price.
Conversions
on a Spot Basis. A Fund may convert currency on a spot basis from time to
time. Although foreign exchange dealers generally do not charge a fee for
conversion, they do realize a profit based on the difference between the prices
at which they are buying and selling various currencies. Thus, a dealer may
offer to sell a foreign currency to a Fund at one rate, while offering a lesser
rate of exchange should the Fund desire to resell that currency to the
dealer.
Currency
Forward Contracts. A currency forward contract is a privately negotiated
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. The parties to a forward
contract may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated currency
exchange. A Fund may use currency forward contracts for any purpose consistent
with its investment objectives. The following discussion summarizes the
principal currency management strategies involving forward contracts that could
be used by a Fund. A Fund may also use swap agreements, indexed securities, and
options and futures contracts relating to foreign currencies for the same
purposes.
In
those instances when a Fund enters into a forward currency contract, it
typically does so for portfolio hedging purposes. In that regard, a Fund may
enter into a forward contract to sell a foreign currency in which certain of its
portfolio investments are denominated as a strategy to reduce the risk that a
decline in the value of the foreign currency relative to the U.S. dollar will
diminish the value of the portfolio investments denominated in that foreign
currency. For example, if a Fund owned securities denominated in pounds
sterling, it could enter into a forward contract to sell pounds sterling in
return for U.S. dollars to hedge against possible declines in the pound’s value.
Such a hedge, sometimes referred to as a “position hedge,” would tend to offset
both positive and negative currency fluctuations, but would not offset changes
in security values caused by other factors. A Fund could also hedge the position
by selling another currency expected to perform similarly to the pound sterling.
This type of hedge, sometimes referred to as a “proxy hedge,” could offer
advantages in terms of cost, yield, or efficiency, but generally would not hedge
currency exposure as effectively as a simple hedge into U.S. dollars. Proxy
hedges may result in losses if the currency used to hedge does not perform
similarly to the currency in which the hedged securities are denominated. A Fund
could use a similar hedging strategy in an “indirect hedge” with respect to
securities holdings that are denominated in U.S. dollars or another currency,
but which do a substantial amount of business in a given foreign currency and
are consequently exposed to a risk that the value of that foreign currency will
decline relative to the U.S. dollar or other currency in which the holding is
denominated. The Funds do not enter into hedging transactions in all instances
when it might be desirable to do so, and any Fund may be exposed to currency
risk some or most of the time without any hedging position for purposes of
reducing that risk.
A
Fund may also enter into forward contracts to shift investment exposure from one
currency into another. This may include shifting exposure from U.S. dollars to a
foreign currency, or from one foreign currency to another foreign currency. For
example, if a Fund held investments denominated in pounds sterling, the Fund
could enter into forward contracts to sell pounds sterling and purchase Swiss
francs. This type of strategy, sometimes known as a “cross hedge,” will tend to
reduce or eliminate exposure to the currency that is sold, and increase exposure
to the currency that is purchased, much as if the Fund had sold a security
denominated in one currency and purchased an equivalent security denominated in
another. Cross-hedges protect against losses resulting from a decline in the
hedged currency, but will cause a Fund to assume the risk of fluctuations in the
value of the currency it purchases.
In
another circumstance, a Fund that has agreed to buy or sell a security
denominated in a foreign currency may seek to “lock in” the U.S. dollar price of
the security by entering into a forward contract to buy or sell the relevant
foreign currency for a fixed amount of U.S. dollars. This technique, sometimes
referred to as a “settlement hedge” or “transaction hedge,” is intended to
protect a Fund against an adverse change in foreign currency values between the
date the security is purchased or sold and the date on which payment is made or
received. A Fund also may enter into forward contracts to purchase or sell a
foreign currency in anticipation of future purchases or sales of securities
denominated in foreign currency, even if the specific investments have not yet
been selected by Thornburg.
Currency
transactions can result in losses to the Fund if the currency being hedged
fluctuates in value to a degree or in a direction that is not anticipated.
Further, there is the risk that the perceived linkage between various currencies
may not be present or may not be present during the particular time that the
Fund is engaged in a currency hedging transaction.
Because
currency control is of great importance to the issuing governments and
influences economic planning and policy, purchases and sales of currency and
related instruments can be negatively affected by government exchange controls,
blockages, and manipulations or exchange restrictions imposed by governments.
Those can result in losses to a Fund if it is unable to deliver or receive
currency in settlement of obligations and could also cause hedges it has entered
into to be rendered ineffective, resulting in full currency exposure as well as
incurring transaction costs. Currency futures are also subject to risks
pertaining to futures contracts generally. See “Futures Contracts,” below.
Options trading on currency futures is subject to market liquidity, and
establishing and closing positions may be difficult. Currency exchange rates may
fluctuate based on factors extrinsic to the issuing country’s own economy.
Successful
use of currency management strategies will depend on Thornburg’s skill in
analyzing and predicting currency values. Currency management strategies may
substantially change a Fund’s investment exposure to changes in currency
exchange rates, and could result in losses to the Fund if currencies do not
perform as Thornburg anticipates. For example, if a currency’s value rose at a
time when Thornburg had hedged a Fund’s exposure by selling that currency in
exchange for dollars, the Fund would be unable to participate in the currency’s
appreciation. If Thornburg hedges currency exposure through proxy hedges, a Fund
could realize currency losses from the hedge and the security position at the
same time if the two currencies do not move in tandem. Similarly, if Thornburg
increases the Fund’s exposure to a foreign currency, and that currency’s value
declines, the Fund will realize a loss. There is no assurance that Thornburg’s
use of currency management strategies will be advantageous to a Fund or that it
will hedge at an appropriate time.
Futures Contracts
Each
of the Equity Funds, Limited Term Income Fund and Strategic Income Fund may
purchase or sell futures contracts to hedge against anticipated interest rate,
currency or market changes, for duration management or risk management purposes,
or to enhance potential income and gains.
When
a Fund purchases a futures contract, it agrees to purchase a specified
underlying instrument at a specified future date at a specified price. When a
Fund sells a futures contract, it agrees to sell the underlying instrument at a
specified future date at a specified price. Futures contracts are typically
bought and sold on exchanges or boards of trade where the contracts are listed.
Some currently available futures contracts are based on specific securities,
such as U.S. Treasury bonds or notes, and some are based on indices of
securities prices, such as the Standard & Poor’s 500 Composite Stock Price
Index (“S&P 500”). Futures can be held until their delivery dates, or can be
closed out before then if a liquid secondary market is available. The value of a
futures contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will tend to
increase a Fund’s exposure to positive and negative price fluctuations in the
underlying instrument, much as if it had purchased the underlying instrument
directly. When a Fund sells a futures contract, by contrast, the value of its
futures position will tend to move in a direction contrary to the market.
Selling futures contracts, therefore will tend to offset both positive and
negative market price changes, much as if the underlying instrument had been
sold.
Distributions
to shareholders associated with income or net gains realized by a Fund from
transactions in futures contracts (or options on futures contracts) may be
subject to federal income tax.
Liquidity
of Futures Contracts. Some futures contracts may become illiquid under
adverse market conditions, and there is no assurance that a liquid market will
exist for any particular futures contract at any particular time. Exchanges and
boards of trade may establish daily price fluctuation limits for options and
futures contracts, and may halt trading if a contract’s price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached or a trading halt is imposed, it may not be
possible for a Fund to enter into new positions or to close out existing
positions. If the market for a contract is not liquid because of price
fluctuation limits or otherwise, it could prevent prompt liquidation of
unfavorable positions, and potentially could require a Fund to continue to hold
a position until expiration regardless of unfavorable changes in its value. In
that instance, the Fund’s access to other assets that it has deposited to cover
its futures positions also could be impaired.
Margin
Payments. The purchaser or seller of a futures contract is not required to
deliver or pay for the underlying instrument unless the contract is held until
the delivery date. However, in any instance when a Fund enters into a futures
contract, either as purchaser or as seller, the Fund will segregate with its
custodian or with a futures commission merchant (“FCM”) as initial margin assets
sufficient to meet its obligations under the contract. The Fund will also
deposit daily “variation margin” payments as required during the term of the
contract in order settle the change in the contract’s value on a daily basis (a
process known as “marking to market”). Segregated assets may consist of cash,
cash equivalents or high grade liquid debt obligations, or other assets agreed
to by the parties to the futures contract. Initial and variation margin payments
do not constitute purchasing securities on margin for purposes of a Fund’s
investment limitations. In the event of the bankruptcy of a FCM that holds
margin on behalf of a Fund, the Fund may be entitled to return of margin owed to
it only in proportion to the amount received by the FCM’s other customers,
potentially resulting in losses to the Fund.
Correlation
of Price Changes. Because there are a limited number of types of futures
contracts, it is likely that the standardized contracts available will not match
a Fund’s current or anticipated investments exactly. A Fund may invest in
futures contracts based on securities with different issuers, maturities, or
other characteristics from the securities in which it typically invests, which
involves a risk that the futures position will not track the performance of the
Fund’s other investments. Futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match the
Fund’s investments well. Futures prices are affected by such factors as current
and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in futures markets and the
securities markets, from structural differences in how futures and securities
are traded, or from imposition of daily price fluctuation limits or trading
halts. A Fund may purchase or sell futures contracts with a greater or lesser
value than the securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price changes
in the Fund’s futures positions are poorly correlated with its other
investments, the positions may fail to produce anticipated gains or result in
losses that are not offset by gains in other investments.
Futures
Relating to Foreign Currencies. Currency futures contracts are similar to
forward currency exchange contracts (see “Currency Forward Contracts” above),
except that they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or delivery in U.S. dollars.
The
uses and risks of currency futures are similar to futures relating to other
securities or indices. A Fund may purchase and sell currency futures to increase
or decrease its exposure to different foreign currencies. A Fund also may
purchase and write currency futures in conjunction with each other or with
currency options or forward contracts. Currency futures values can be expected
to correlate with exchange rates, but may not reflect other factors that affect
the value of the Fund’s investments. A currency hedge, for example, should
protect a Yen-denominated security from a decline in the Yen, but will not
protect the Fund against a price decline resulting from deterioration in the
issuer’s creditworthiness. Because the value of each Fund’s foreign-denominated
investments changes in response to many factors other than exchange rates, it
may not be possible to match the amount of currency futures to the value of the
Fund’s investments exactly over time. See “Foreign Currency Transactions”
above.
Indexed Securities
Each
of the Equity Funds and Strategic Income Fund may purchase securities whose
prices are indexed to the prices of other securities, securities indices,
currencies, precious metals or other commodities or other financial
indicators.
Indexed
securities typically, but not always, are debt obligations or deposits whose
value at maturity or coupon rate is determined by reference to a specific
instrument or statistic. Gold-indexed securities, for example, typically provide
for a maturity value that depends on the price of gold, resulting in a security
whose price tends to rise and fall together with gold prices. Currency indexed
securities typically are short-term to intermediate-term debt obligations whose
maturity values or interest rates are determined by reference to the values of
one or more specified foreign currencies, and may offer higher yields than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed securities
may be positively or negatively indexed; that is, their maturity value may
increase when the specified currency value increases, resulting in a security
that performs similarly to a foreign-denominated instrument, or their maturity
value may decline when foreign currencies increases, resulting in a security
whose price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values of a
number of different foreign currencies relative to each other.
The
performance of indexed securities depends to a great extent on the performance
of the security, currency or other instrument to which they are indexed, and may
also be influenced by interest rate changes in the U.S. and abroad. At the same
time, indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer’s creditworthiness deteriorates. Recent issuers of indexed securities
have included banks, corporations, and certain U.S. government agencies. Indexed
securities may be more volatile than their underlying instruments.
Options
Each
of the Equity Funds, Limited Term Income Fund and Strategic Income Fund may
purchase or write put and call options to hedge against anticipated interest
rate or market changes, for duration management or risk management purposes, or
to enhance potential income and gains.
Purchasing
Put and Call Options. By purchasing a put option, a Fund obtains the right
(but not the obligation) to sell the option’s underlying instrument at a fixed
exercise or “strike” price. In return for this right, a Fund pays the current
market price for the option (known as the option premium). Options have various
types of underlying instruments, including specific equity securities or debt
obligations, indices of securities prices, and futures contracts. A Fund may
terminate its position in a put option it has purchased by allowing it to expire
or by exercising the option. If the option is allowed to expire, the Fund will
lose the entire premium it paid. If a Fund exercises the option, it completes
the sale of the underlying instrument at the strike price. A Fund may also
terminate a put option position by closing it out in the secondary market at its
current price, if a liquid secondary market exists.
The
buyer of a typical put option can expect to realize a gain if security prices
fall substantially. However, if the underlying instrument’s price does not fall
enough to offset the cost of purchasing the option, the owner of the put option
will experience a loss measured by the premium paid to buy the option, plus
related transaction costs.
The
features of call options are similar to those of put options, except that the
purchaser of a call option obtains the right to purchase, rather than sell, the
underlying instrument at the option’s strike price. A call buyer typically
attempts to participate in potential price increases of the underlying
instrument with risk limited to the cost of the option if security prices fall.
At the same time, the buyer will experience a loss if the underlying
instrument’s price does not rise sufficiently to offset the buyer’s cost of
purchasing the option and transaction costs.
The
purchase of options increases a Fund’s costs because it must pay premiums to
purchase the options, and the exercise of put and call options by a Fund will
increase portfolio turnover and associated transaction costs. Because premiums
for the purchase of options are typically much smaller than the prices to
purchase the underlying instruments, the use of options creates leverage, which
might result in a Fund’s net asset value being more sensitive to changes in the
instruments underlying the options.
An
American-style put or call option may be exercised at any time during the option
period while a European-style put or call options may be exercised only upon
expiration of the option period or during a fixed period prior thereto.
Writing
Put and Call Options. When a Fund sells or “writes” a put option, it takes
the opposite side of the transaction from the option’s purchaser. In return for
receipt of the premium, a Fund, as writer of such an option, would be obligated
to pay the strike price for the option’s underlying instrument if the other
party to the option chooses to exercise it. When writing an option on a futures
contract, a Fund would be required to make margin payments to cover the Fund’s
potential obligation to pay the strike price if the other party chooses to
exercise the option. A Fund may seek to terminate its position in a put option
it writes before it is exercised by closing out the option in the secondary
market at its then current price. If, however, the secondary market is not
sufficiently liquid, the Fund may not be able to close out its position and
would, therefore, remain obligated to purchase the underlying instrument at the
strike price if the option is exercised. If the price of the underlying
instrument rises, the writer of a put ordinarily will profit by the amount of
the premium received on writing the option. If the price of the instrument
declines, the writer may experience a loss, although the amount of the loss is
offset to some degree by the amount of the premium received.
Writing
a call option obligates the writer to sell or deliver the option’s underlying
instrument, in return for the strike price, upon exercise of the option by the
holder. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or decline. Through receipt of the option
premium, a Fund as the writer of such an option would seek to mitigate the
effects of a decline in the price of the underlying instrument. At the same
time, a Fund which writes an option must be prepared to deliver the underlying
instrument in return for the strike price, even if the current value of the
instrument is higher than the strike price. In that event, a Fund will
experience a loss to the extent that the value of the underlying instrument
exceeds the total of the strike price and the premium that it received when it
wrote the option.
Exchange-Traded
Options. Options may be traded on exchanges, or may be traded
“over-the-counter” (see discussion of “OTC Options” below). Exchange-traded
options are issued by a regulated intermediary, which guarantees the performance
of the obligations of the parties to such options. With certain exceptions,
exchange-traded options generally settle by physical delivery of the underlying
security or currency, although in the future cash settlement may become
available. Frequently, rather than taking or making delivery of the underlying
instrument through the process of exercising the option, exchange-traded options
are closed by entering into offsetting purchase or sale transactions that do not
result in ownership of the new option.
A
Fund’s ability to close out its position as a purchaser or seller of an
exchange-traded option is dependent, in part, upon the liquidity of the option
market. Among the possible reasons for the absence of a liquid option market on
an exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities including reaching daily price
limits; (iv) interruption of the normal operations of the exchange; (v)
inadequacy of the facilities of an exchange to handle current trading volume; or
(vi) a decision by one or more exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the relevant market
for that option on that exchange would cease to exist, although outstanding
options on that exchange would generally continue to be exercisable in
accordance with their terms.
The
hours of trading for listed options may not coincide with the hours during which
the underlying financial instruments are traded. To the extent that the option
markets close before the markets for the underlying financial instruments,
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the option markets.
OTC
Options. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of over-the-counter options generally are established through
negotiation with the other party to the contract. While such arrangements allow
greater flexibility to a Fund to tailor an option to its needs, “OTC” options
generally involve greater credit risk than exchange-traded options, which are
backed by the clearing organization of the exchange where they are traded.
Accordingly, Thornburg must assess the creditworthiness of each counterparty or
any guarantor or credit enhancement of the counterparty’s credit to determine
the likelihood that the terms of the OTC option will be satisfied.
The
staff of the SEC currently takes the position that OTC options are illiquid, and
investments by each Fund in those instruments will be subject to each Fund’s
limitation on investments in illiquid instruments. See “Illiquid Investments”
below.
Limited
Term Income Fund will engage in OTC option transactions only with United States
government securities dealers recognized by the Federal Reserve Bank in New York
as “primary dealers,” broker dealers, domestic or foreign banks or other
financial institutions which have received a short-term credit rating of “A-1”
from Standard & Poor’s Corporation or “P-1” from Moody’s Investor Services
or have been determined by Thornburg to have an equivalent credit rating.
Additionally, Limited Term Income Fund will only enter into OTC options that
have a buy-back provision permitting the Fund to require the counterparty to buy
back the option at a formula price within seven days. Limited Term Income Fund
expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Liquidity
of Options. Some options become illiquid under adverse market conditions,
and there is no assurance a liquid secondary market will exist for any
particular options contract at any particular time. Options may have relatively
low trading volume and liquidity if their strike prices are not close to the
underlying instrument’s current price. In addition, exchanges may establish
daily price fluctuation limits for options, and may halt trading if a contract’s
price moves upward or downward more than the limit in a given day. On volatile
trading days when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible for a Fund to enter into new positions or close
out existing positions. If the secondary market for a contract is not liquid
because of price fluctuation limits or otherwise, it could prevent prompt
liquidation of unfavorable positions, and potentially could require the Fund to
continue to hold a position until delivery or expiration regardless of changes
in its value. As a result, the Fund’s access to other assets held to cover its
options positions could also be impaired.
Correlation
of Price Changes. Because there are a limited number of types of
exchange-traded options, it is likely that the standardized contracts available
will not match a Fund’s current or anticipated investments exactly. A Fund may
invest in options based on securities with different issuers, maturities, or
other characteristics from the securities in which it typically invests, which
involves a risk that the options position will not track the performance of the
Fund’s other investments. Options prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match the
Fund’s investments well. Options prices are affected by such factors as current
and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options markets and the
securities markets, from structural differences in how options and securities
are traded, or from imposition of daily price fluctuation limits or trading
halts. A Fund may purchase or sell options contracts with a greater or lesser
value than the securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price changes
in the Fund’s options positions are poorly correlated with its other
investments, the positions may fail to produce anticipated gains or result in
losses that are not offset by gains in other investments.
Credit
Options. Credit options are options whereby the purchaser has the right, but
not the obligation, to enter into a transaction involving either an asset with
inherent credit risk or a credit derivative, at terms specified at the inception
of the option.
Options
Relating to Foreign Currencies. The underlying instrument of a currency
option may be a foreign currency, which generally is purchased or delivered in
exchange for U.S. dollars, or may be a futures contract. The purchaser of a
currency call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying
currency.
The
uses and risks of currency options are similar to options relating to other
securities or indices. A Fund may purchase and write currency options to
increase or decrease its exposure to different foreign currencies. A Fund also
may purchase and write currency options in conjunction with each other or with
currency futures or forward contracts. Currency options values can be expected
to correlate with exchange rates, but may not reflect other factors that affect
the value of the Fund’s investments. A currency hedge, for example, should
protect a Yen-denominated security from a decline in the Yen, but will not
protect the Fund against a price decline resulting from deterioration in the
issuer’s creditworthiness. Because the value of each Fund’s foreign-denominated
investments changes in response to many factors other than exchange rates, it
may not be possible to match the amount of currency options to the value of the
Fund’s investments exactly over time. See “Foreign Currency Transactions”
above.
Options
on Futures Contracts. Options on futures contracts are similar to options on
securities, except that an option on a futures contract gives the purchaser the
right in return for the premium paid to assume a position in the underlying
futures contract. If a Fund exercises an option on a futures contract it will be
obligated to deposit initial margin (and potential subsequent variation margin)
for the resulting futures position just as it would for any other futures
contract position.
Options
on Indices. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement (i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option except if, in the case of
an OTC option, physical delivery is specified). This amount of cash is equal to
the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based rather than price
movements in individual securities, as is the case with respect to options on
securities.
Structured Notes
Each
of the Equity Funds, Limited Term Income Fund and Strategic Income Fund may
invest in structured notes.
Structured
notes are derivative debt obligations, the interest rate or principal of which
is determined by reference to changes in the value of a specific asset,
reference rate or index, or the relative change in two or more reference assets.
The interest rate or the principal amount payable upon maturity or redemption
may increase or decrease, depending upon changes in the value of the reference
asset. The terms of a structured note may provide that, in certain
circumstances, no principal is due at maturity and, therefore, may result in a
loss of invested capital by a Fund. Structured notes may be indexed positively
or negatively, so that appreciation of the reference asset may produce an
increase or decrease in the interest rate or value of the principal at maturity.
In addition, changes in the interest rate or the value of the principal at
maturity may be fixed at a specified multiple of the change in the value of the
reference asset, making the value of the note particularly volatile.
Structured
notes may entail a greater degree of market risk than other types of debt
obligations because the investor bears the risk of the reference asset. As noted
above, the value of structured notes also may be more volatile than other debt
obligations.
Swap Agreements, Caps, Floors, and
Collars
Each
of the Equity Funds, Limited Term Income Fund and Strategic Income Fund may
enter into swap agreements and related caps, floors and collars. None of these
Funds are limited to any particular form of swap agreement, provided that
Thornburg determines that the agreement it is consistent with the Fund’s
investment objective and policies.
Swap
agreements involve the exchange by a Fund and another party of their respective
commitments to pay or receive cash flows. Although swaps can take a variety of
forms, typically one party pays fixed and receives floating rate payments and
the other party receives fixed and pays floating rate payments. Swap agreements
can be individually negotiated and structured to include exposure to a variety
of different types of investments or market factors. Swap agreements will tend
to shift a Fund’s investment exposure from one type of investment to another.
For example, if a Fund agreed to exchange payments in dollars for payments in
foreign currency, the swap agreement would tend to decrease the Fund’s exposure
to U.S. interest rates and increase its exposure to foreign currency and
interest rates. Caps and floors have an effect similar to buying or writing
options. Depending on how they are used, swap agreements may increase or
decrease the overall volatility of a Fund’s investments and its share price and
yield. The most significant factor in the performance of swap agreements is the
change in the specific interest rate, currency, or other factors that determine
the amounts of payments due to and from the Fund. If a swap agreement calls for
payments by a Fund, the Fund must be prepared to make such payments when due. In
addition, if the counterparty’s credit worthiness declined or if the
counterparty defaults, the Fund will likely have contractual remedies available
to it, but the value of the swap or other agreement would be likely to decline,
potentially resulting in losses. Each Fund expects to be able to eliminate its
exposure under swap agreements either by assignment or other disposition, or by
entering into an offsetting swap agreement with the same party or a similarly
creditworthy party.
Credit
Default Swaps. A credit default swap is a credit derivative in which two
parties enter into an agreement to transfer the credit exposure of fixed income
securities. The buyer of credit protection (or seller of credit risk) agrees to
pay the counterparty a fixed, periodic premium for a specified term. In return,
the counterparty agrees to pay a contingent payment to the buyer in the event of
an agreed upon credit occurrence which is typically a default by the issuer of a
debt obligation.
Currency
Swaps. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them. Typically, the interest rates that determine the currency swap payments
are fixed, although occasionally one or both parties may pay a floating rate of
interest. Changes in foreign exchange rates and changes in interest rates may
negatively affect the value of a currency swap.
Equity
Swaps. In a typical equity swap, one party agrees to pay another party the
return on a stock, stock index or basket of stocks in exchange for a specified
interest rate. By entering into an equity index swap, for example, the index
receiver can gain exposure to stocks making up the index of securities without
actually purchasing those stocks. Equity index swaps involve not only the risks
associated the investment in the securities represented in the index, but also
the risk that the performance of such securities, including dividends, will not
exceed the return on the interest rate that the Fund is committed to pay to the
counterparty.
Interest
Rate Swaps and Forward Rate Contracts. Interest rate swaps involve the
exchange by the Fund with another party of their respective commitments to pay
or receive interest, e.g., an exchange of fixed rate payments for floating rate
payments. The Fund may also enter forward rate contracts. Under these contracts,
the buyer locks in an interest rate at a future settlement date. If the interest
rate on the settlement date exceeds the lock rate, the buyer pays the seller the
difference between the two rates. Any such gain received by a Fund would be
taxable. If the other party to an interest rate swap or forward rate contract
defaults, a Fund’s risk of loss consists of the net amount of payments that the
Fund is contractually entitled to receive. The net amount of the excess, if any,
of the Fund’s obligations over its entitlements will be maintained in a
segregated account by the Fund’s custodian. The Fund will not enter into any
interest rate swap or forward rate contract unless the claims-paying ability of
the other party thereto is considered satisfactory by Thornburg. If there is a
default by the other party to such a transaction, the Fund will have contractual
remedies pursuant to the agreements related to the transaction. These
instruments are traded in the over-the-counter market.
Total
Return Swaps. A total return swap is a credit derivative in which the buyer
receives a periodic return equal to the total economic return of a specified
security, securities or index, for a specified period of time. In return, the
buyer pays the counterparty a variable stream of payments, typically based upon
short-term interest rates, possibly plus or minus an agreed upon spread.
Caps,
Floors and Collars. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling the cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
For example, an interest rate cap is an agreement between two parties over a
specified period of time where one party makes payments to the other party equal
to the difference between the current level of an interest rate index and the
level of the cap, if the specified interest rate index increases above the level
of the cap. The purchase of a floor entitles the purchaser to receive payments
on a notional principal amount from the party selling the floor to the extent
that a specified index falls below a predetermined interest rate or amount. For
example, an interest rate floor is similar except the payments are the
difference between the current level of an interest rate index and the level of
the floor if the specified interest rate index decreases below the level of the
floor. A collar is a combination of a cap and a floor that preserves a certain
return within a predetermined range of interest rates or values. For example, an
interest rate collar is the simultaneous execution of a cap and floor agreement
on a particular interest rate index.
Other Investments, Investment Techniques and Other
Risks
The
following contains additional detail about certain other investments a Fund may
make and certain other risks to which a Fund may be subject.
Consideration of Environmental, Social and
Governance (“ESG”) Characteristics
When
evaluating a potential investment opportunity, each of the Funds may consider
the issuer’s ESG characteristics. Thornburg defines a significant ESG
characteristic as one which may materially affect an issuer’s risk and return
profile and, accordingly, the issuer’s long-term investment performance. In this
way, Thornburg’s consideration of ESG characteristics is no different than its
consideration of more traditional financial metrics or other factors which may
affect the risks and returns of a Fund’s investments. The specific ESG
characteristics which Thornburg determines to be significant will vary over time
and among different financial sectors and industries, but will generally include
environmental, social capital, human capital, business model and innovation, and
leadership and governance characteristics. Examples of potentially significant
environmental characteristics include: greenhouse gas emissions; air quality;
energy management; water and wastewater management; waste and hazardous
materials management; and ecological impacts. Examples of potentially
significant social capital characteristics include: human rights and community
relations; customer privacy; data security; access & affordability; product
quality and safety; customer welfare; and selling practice and product labeling.
Examples of potentially significant human capital characteristics include: labor
practices; employee health & safety; and employee engagement, diversity and
inclusion. Examples of potentially significant business model and innovation
characteristics include: product design and lifecycle management; business model
resilience; supply chain management; materials sourcing and efficiency; and the
physical impacts of climate change. Examples of potentially significant
leadership and governance characteristics include: business ethics; competitive
behavior; management of the legal and regulatory environment; critical risk
management; and systemic risk management.
While
Thornburg makes its own judgments about the ESG characteristics of each Fund’s
investments, Thornburg’s approach may be informed by third party data and other
research tools, including consideration of the list of material ESG factors
established by the Sustainability Accounting Standards Board.
There
are no universally agreed upon objective standards for assessing ESG
characteristics, and they can vary over different periods and evolve over time.
Certain ESG characteristics are subjective and can be difficult to analyze, and
the evaluation of ESG characteristics frequently involves assessing various
risks relating to the financial stability and sustainability of an investment,
and ESG characteristics may not always be reflected in third party data. ESG
characteristics may also be difficult to apply consistently across regions,
countries, industries, or sectors. Given the absence of generally accepted
criteria, investors and others may disagree as what constitutes a significant
ESG characteristic, or may otherwise assign a greater or lesser emphasis than
Thornburg to a particular ESG characteristic. In addition, there may be
situations where Thornburg determines that an issuer has been identified by
Thornburg as having both positive and negative ESG characteristics. For example,
an issuer may extract or use fossil fuels in a manner which may contribute to
negative environmental outcomes, but that same issuer is making investments to
prepare for a transition to cleaner sources of energy. In those instances,
Thornburg may consider as part of its investment analysis how both the positive
and negative ESG characteristics are likely to affect the issuer’s long-term
investment performance.
Cash Management
Each
Fund except Limited Term U.S. Government Fund may also invest a portion or all
of the Fund’s daily cash balance in Thornburg Capital Management Fund, a
separate series of the Trust (the “Capital Management Fund”). The Capital
Management Fund’s shares are not publicly available. The Capital Management Fund
is not a money market fund and does not seek to maintain a stable net asset
value of $1.00. The Capital Management Fund seeks current income consistent with
liquidity management and safety of capital. To pursue that investment objective,
the Capital Management Fund invests principally in short-term obligations which
are determined by Thornburg to be of high quality including, but not limited to,
obligations issued by U.S. and foreign companies, U.S. and foreign banks, U.S.
and foreign governments, U.S. agencies, states, and municipalities, and
international organizations such as the World Bank and the International
Monetary Fund, and repurchase agreements based on those obligations. The Capital
Management Fund does not currently pay a separate investment advisory fee or
administrative services fee to Thornburg, but Funds which invest in the Capital
Management Fund would indirectly bear the other operating expenses of the
Capital Management Fund. Those indirect expenses are similar to the expenses
paid by other businesses owned by the Funds, are not direct costs paid by Fund
shareholders, are not used to calculate a Fund’s net asset value, and have no
impact on the costs associated with Fund operations.
Certificates of Deposit
Each
Fund may under certain circumstances purchase bank certificates of deposit. Each
Municipal Fund may invest in certificates of deposit of domestic banks with
assets of $1 billion or more as part of the Fund’s permitted “temporary
investments” (see “Temporary Investments” below). Limited Term U.S. Government
Fund may invest up to 20% of its assets in: (i) certificates of deposit maturing
in one year or less after the date of acquisition and issued by domestic banks
with assets of $1 billion or more; and (ii) certificates of
deposit insured as to principal by the Federal Deposit Insurance Corporation. If
any certificate of deposit in which Limited Term U.S. Government Fund invests
(whether or not insured in whole or in part) is nonnegotiable and matures in
more than seven days, the certificate of deposit will be deemed by Limited Term
U.S. Government Fund to be illiquid and will, therefore, be subject to the
Fund’s investment restriction respecting investment in illiquid securities.
Limited Term Income Fund may invest in certificates of deposit of domestic and
foreign banks with assets of $1 billion or more, including foreign branches of
domestic banks. Limited Term Income Fund may also invest in certificates of
deposit issued by banks and savings and loan institutions with assets of less
than $1 billion, provided that (i) the principal amounts of such certificates of
deposit are insured by an agency of the U.S. Government, (ii) at no time will
the Fund hold more than $100,000 principal amount of certificates of deposit of
any one such bank, and (iii) at the time of acquisition, no more than 10% of the
Fund’s assets (taken at current value) are invested in certificates of deposit
of such banks. Strategic Income Fund and each of the Equity Funds may invest in
certificates of deposit issued by domestic and foreign banks, including foreign
branches of domestic banks.
Investments
in certificates of deposit issued by foreign banks or foreign branches of
domestic banks involves investment risks that are different in some respects
from those associated with investment in certificates of deposit issued by
domestic banks. (See “Foreign Investments” above).
Cyber Security Risks
As
the use of technology has become more prevalent, the Funds and their service
providers have become potentially more susceptible to intentional and
unintentional cyber events including, but not limited to: computer processing
errors; malfunctions, disruptions, or failures in computer systems or other
technologies; computer viruses; the theft or corruption of electronic data;
unauthorized access to digital systems; and cyber attacks that shut down,
disable or otherwise disrupt business operations. These events may adversely
affect the Funds or their shareholders, causing disruptions in business
operations and potentially resulting in financial losses. For example, a cyber
attack against the computer systems of the Funds or their service providers may
interfere with the ability to process Fund shareholder transactions or to
calculate a Fund’s net asset value, impede trading activity by the Funds, result
in the release or misappropriation of confidential information about the Funds
or their shareholders, or subject the Funds to regulatory fines or penalties and
to other, additional costs (including increased costs to remediate the effects
of the attack or to develop additional systems to prevent other similar
attacks). While the Funds and Thornburg have established procedures and systems
to seek to prevent and mitigate the risks associated with cyber events, and
while Thornburg seeks to determine that other third party service providers for
the Funds have established such procedures and systems, there are inherent
limitations in the ability of such procedures and systems to identify all
potential cyber events or to completely prevent or mitigate the occurrence or
effects of those events. Additionally, cyber events affecting the electronic
systems of the Funds’ trading counterparties, issuers in which the Funds invest,
or securities markets and exchanges may also result in financial losses for the
Funds or their shareholders.
Dollar Roll Transactions
Each
Fund may enter into “dollar roll” transactions.
Dollar
roll transactions consist of the sale by a Fund to a bank or broker-dealer (the
“counterparty”) of Ginnie Mae certificates or other mortgage-backed securities
together with a commitment to purchase from the counterparty similar, but not
identical, securities at a future date at the same price. The counterparty
receives all principal and interest payments, including prepayments, made on the
security while it is the holder. The selling Fund receives a fee from the
counterparty as consideration for entering into the commitment to purchase.
Dollar rolls may be renewed over a period of several months with a new purchase
and repurchase price fixed and a cash settlement made at each renewal without
physical delivery of securities. Moreover, the transaction may be preceded by a
firm commitment agreement pursuant to which a Fund agrees to buy a security on a
future date.
Dollar
rolls are currently treated for purposes of the 1940 Act as borrowings of the
Fund entering into the transaction because they involve the sale of a security
coupled with an agreement to repurchase, and are, therefore, deemed by the Trust
to be subject to the investment restrictions applicable to any borrowings made
by the Fund. Like all borrowings, a dollar roll involves costs to the borrowing
Fund. For example, while the borrowing Fund receives a fee as consideration for
agreeing to repurchase the security, the Fund forgoes the right to receive all
principal and interest payments while the counterparty holds the security. These
payments to the counterparty may exceed the fee received by the Fund, thereby
effectively charging the Fund interest on its borrowing. Further, although the
Fund can estimate the amount of expected principal prepayment over the term of
the dollar roll, a variation in the actual amount of prepayment could increase
or decrease the cost of the Fund’s borrowing.
Dollar
rolls involve potential risks of loss to the selling Fund which are different
from those related to the securities underlying the transactions. For example,
if the counterparty becomes insolvent, the Fund’s right to purchase from the
counterparty may be restricted. Additionally, the value of such securities may
change adversely before a Fund is able to purchase them. Similarly, the selling
Fund may be required to purchase securities in connection with a dollar roll at
a higher price than may otherwise be available on the open market. Since, as
noted above, the counterparty is required to deliver a similar, but not
identical security to the Fund, the security which the Fund is required to buy
under the dollar roll may be worth less than an identical security. Finally,
there can be no assurance that a Fund’s use of the cash that it receives from a
dollar roll will provide a return that exceeds borrowing costs.
Illiquid Investments
Illiquid
investments are investments that cannot be sold or disposed of in the ordinary
course of business at approximately the prices at which they are valued. Under
the supervision of the Trustees, Thornburg determines the liquidity of
investments by the Funds. In determining the liquidity of the Funds’
investments, Thornburg may consider various factors, including (1) the frequency
of trades and quotations, (2) the number of dealers and prospective purchasers
in the marketplace, (3) dealer undertakings to make a market, (4) the nature of
the security (including any demand or lender features), and (5) the nature of
the market place for trades (including the ability to assign or offset each
Fund’s rights and obligations relating to the investment).
Investments
currently considered by Thornburg to be illiquid include repurchase agreements
not entitling the holder to payment of principal and interest within seven days,
over-the-counter options, and municipal lease obligations subject to
non-appropriation risk where the underlying lease is not rated (at the time the
obligation is purchased by the Fund) within the four highest grades of Moody’s
or S&P and is not subject to a remarketing agreement (or not currently
subject to remarketing, pursuant to the conditions of any such agreement then in
effect, with a responsible remarketing party, deemed by Thornburg to be capable
of performing its obligations) except that Thornburg also may determine an
unrated lease obligation to be readily marketable because it is backed by an
irrevocable bank letter of credit or an insurance policy. Based on its ongoing
review of the trading markets and other factors affecting the Funds’
investments, Thornburg may determine from time to time that other investments
are illiquid, including certain types of restricted securities, mortgage-backed
securities and asset-backed securities, developing country securities, or
derivative instruments. With respect to any over-the-counter options that a Fund
writes, all or a portion of the value of the underlying instrument may be
illiquid depending on the assets held to cover the option and the nature and
terms of any agreement the Fund any have to close out the option before
expiration. In the absence of market quotations, illiquid investments are priced
at fair value as determined utilizing procedures approved by the Trustees.
Each
Fund is limited from investing more than a certain percentage of its net assets
in illiquid securities. Please see “Investment Restrictions” below for a
discussion of the specific limitations applicable to each Fund’s investment in
illiquid securities. If through a change in values, net assets, or other
circumstances, a Fund were in a position where the percentage of its portfolio
comprised of illiquid securities exceeded that Fund’s percentage investment
restriction on investment in illiquid securities, the Fund would seek to take
appropriate steps to protect liquidity.
Repurchase Agreements
Each
Fund may enter into repurchase agreements.
In
a repurchase agreement, a Fund purchases a security and simultaneously commits
to resell that security to the seller at an agreed upon price on an agreed upon
date within a number of days from the date of purchase. The resale price
reflects the purchase price plus an agreed upon incremental amount which is
unrelated to the coupon rate or maturity of the purchased security. A repurchase
agreement involves the obligation of the seller to pay the agreed upon price,
which obligation is in effect secured by the value (at least equal to the amount
of the agreed upon resale price and marked to market daily) of the underlying
security. The Fund may engage in repurchase agreements with respect to any
security in which it is authorized to invest.
A
Fund may enter into these arrangements with member banks of the Federal Reserve
System or any domestic broker-dealer if the creditworthiness of the bank or
broker-dealer has been determined by Thornburg to be satisfactory. These
transactions may not provide the Fund with collateral marked-to-market during
the term of the commitment.
A
repurchase agreement may be viewed as a loan from a Fund to the seller of the
security subject to the repurchase agreement. It is not clear whether a court
would consider the security purchased by the Fund subject to a repurchase
agreement as being owned by the Fund or as being collateral for a loan by the
Fund to the seller. In the event of the commencement of bankruptcy or insolvency
proceedings with respect to the seller of the security before repurchase of the
security under a repurchase agreement, the Fund may encounter delay and incur
costs before being able to sell the security. Delays may involve loss of
interest or decline in the price of the underlying security. If the court
characterized the transaction as a loan and the Fund has not perfected a
security interest in the underlying security, the Fund may be required to return
the security to the seller’s estate and be treated as an unsecured creditor of
principal and income involved in the transaction. As with any unsecured debt
obligation purchased for the Fund, Thornburg seeks to minimize the risk of loss
through repurchase agreements by analyzing the creditworthiness of the obligor,
in this case the seller of the security. Apart from the risk of bankruptcy or
insolvency proceedings, there is also the risk that the seller may fail to
repurchase the security, in which case the Fund may incur a loss if the proceeds
to the Fund of the sale to a third party are less than the repurchase price.
However, if the market value (including interest) of the security subject to the
repurchase agreement becomes less than the repurchase price (including
interest), the Fund will direct the seller of the security to deliver additional
securities so that the market value (including interest) of all securities
subject to the repurchase agreement will equal or exceed the repurchase price.
It is possible that the Fund will be unsuccessful in seeking to impose on the
seller a contractual obligation to deliver additional securities.
Restricted Securities
Restricted
securities generally can be sold in privately negotiated transactions, pursuant
to an exemption from registration under the 1933 Act, or in a registered public
offering. Where registration is required, a Fund could be obligated to pay all
or part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time it is permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security. A restricted security may be liquid or illiquid, depending on whether
it satisfies relevant liquidity requirements, as determined by Thornburg. See
“Illiquid Investments” above.
Reverse Repurchase Agreements
Each
Fund may enter into reverse repurchase agreements. Neither Limited Term U.S.
Government Fund nor Income will enter into a reverse repurchase agreement if, as
a result, more than 5% of the Fund’s total assets would then be subject to
reverse repurchase agreements.
In
a reverse repurchase agreement, a Fund sells a portfolio instrument to another
party, such as a bank or broker-dealer, in return for cash and agrees to
repurchase the instrument at a particular price and time. While a reverse
repurchase agreement is outstanding, the Fund will maintain appropriate liquid
assets in a segregated custodial account to cover its obligation under the
agreement. A Fund will enter into reverse repurchase agreements only with
parties whose creditworthiness has been found satisfactory by Thornburg. Such
transactions may increase fluctuations in the market value of the Funds’ assets
and may be viewed as a form of leverage.
Securities Lending
Each
Fund may lend securities to parties such as broker-dealers or institutional
investors. Securities lending allows a Fund to retain ownership of the
securities loaned and, at the same time, to earn additional income. Since there
may be delays in the recovery of loaned securities, or even a loss of rights in
collateral supplied should the borrower fail financially, loans will be made
only to parties deemed by Thornburg to be of good standing. Furthermore, they
will only be made if, in Thornburg’s judgment, the consideration to be earned
from such loans would justify the risk.
Thornburg
understands that it is the current view of the SEC Staff that a Fund may engage
in loan transactions only under the following conditions: (1) the Fund must
receive 100% collateral in the form of cash or cash equivalents (e.g., U.S.
Treasury bills or notes) from the borrower; (2) the borrower must increase the
collateral whenever the market value of the securities loaned (determined on a
daily basis) rises above the value of the collateral; (3) after giving notice,
the Fund must be able to terminate the loan at any time; (4) the Fund must
receive reasonable interest on the loan or a flat fee from the borrower, as well
as amounts equivalent to any dividends, interest, or other distributions on the
securities loaned and to any increase in market value; (5) the Fund may pay only
reasonable custodian fees in connection with the loan; and (6) the Trustees must
be able to vote proxies on the securities loaned, either by terminating the loan
or by entering into an alternative arrangement with the borrower.
Cash
received through loan transactions may be invested in any security in which a
Fund is authorized to invest. Investing this cash subjects that investment, as
well as the security loaned, to market forces (i.e., capital appreciation or
depreciation).
Temporary Investments
Each
Fund may from time to time invest a keep a portion of its portfolio in cash or
other short-term, fixed income securities. Such investments may be made due to
market conditions, pending investment of idle funds, or to afford liquidity.
When-Issued Securities
Each
Fund may purchase securities offered on a “when-issued” or “delayed delivery”
basis. When-issued and delayed delivery transactions arise when securities are
purchased or sold with payment and delivery beyond the regular settlement date.
When-issued transactions normally settle within 30-45 days, though the
settlement cycles for some when-issued transactions are longer. On such
transactions the payment obligation and the interest rate are fixed at the time
the buyer enters into the commitment. The commitment to purchase securities on a
when-issued or delayed delivery basis may involve an element of risk because the
value of the securities is subject to market fluctuation, no interest accrues to
the purchaser prior to settlement of the transaction, and at the time of
delivery the market value may be less than the purchase price. Additionally,
purchasing securities on a when-issued or delayed delivery basis involves the
risks that the security will never be issued or that the other party to the
transaction will not meet its obligation, in which events the Fund any gain in
that security’s price. At the time a Fund makes the commitment to purchase a
security on a when-issued or delayed delivery basis, it will record the
transaction and reflect the value of the security in determining its net asset
value. Pursuant to current SEC guidance, a transaction involving a when-issued
security will not be deemed to involve a senior security as long as the Fund
intends to settle the transaction physically and the transaction settles within
35 days. While when-issued or delayed delivery securities may be sold prior to
the settlement date, it is intended that the Fund will purchase such securities
with the purpose of actually acquiring them unless sale appears desirable for
investment reasons. If a when-issued security is sold before delivery any gain
or loss would not be tax-exempt.
COMMODITY EXCHANGE ACT REGISTRATION
EXEMPTION
In
connection with its management of the Trust, Thornburg has filed a notice of
eligibility for exclusion from the definition of the term “commodity pool
operator” in accordance with Rule 4.5 under the U.S. Commodity Exchange Act, as
amended (the “CEA”) and, therefore, neither Thornburg nor the Trust is currently
subject to registration or regulation as a commodity pool operator under the
CEA. The U.S. Commodity Futures Trading Commission (“CFTC”) recently adopted
amendments to Rule 4.5 under the CEA that reduce the ability of certain
regulated entities, including registered investment companies and their
investment advisors, to claim the exclusion from the definition of the term
“commodity pool operator.” Among other requirements, the CFTC’s amendments
impose limitations on the use of certain derivative instruments, including
certain types of commodity futures contracts, commodity options contracts, and
swaps, by entities seeking to rely on Rule 4.5. Thornburg currently intends to
manage the Funds’ assets in a manner which is consistent with the limitations
imposed by Rule 4.5. To the extent Thornburg or the Funds became no longer
eligible to claim an exclusion from the definition of the term “commodity pool
operator,” then Thornburg or some or all of the Funds may become subject to
registration and regulation under the CEA. Such regulation may have an adverse
effect on Thornburg’s ability to manage the Funds, may impair the ability of the
Funds to achieve their investment objective(s), and may result in higher
operating expenses for the Funds and reduced investment returns to Fund
investors.
INVESTMENT LIMITATIONS
The
following policies and limitations supplement those set forth in the Prospectus.
Unless otherwise noted, whenever an investment policy or limitation states a
maximum percentage of a Fund’s assets that may be invested in any security or
other asset, that percentage limitation will be determined immediately after and
as a result of the Fund’s acquisition of such security or other asset.
Accordingly, any subsequent change in values, net assets, or other circumstances
will not be considered when determining whether the investment complies with the
Fund’s investment policies and limitations. For those policies and limitations
which can only be changed by a majority of a Fund’s outstanding voting shares,
the term “majority” means the lesser of (i) 67% of the shares of the Fund
present in person or by proxy at a meeting of the holders of more than 50% of
the Fund’s outstanding shares, or (ii) more than 50% of the outstanding shares
of the Fund.
Global Opportunities Fund, International Equity
Fund, International Growth Fund, Small/Mid Cap Core Fund, Small/Mid Cap Growth
Fund, Income Builder Fund, and Strategic Income Fund
Thornburg
Investment Trust has adopted the following fundamental investment policies
applicable to Global Opportunities Fund, International Equity Fund,
International Growth Fund, Small/Mid Cap Core Fund, Small/Mid Cap Growth Fund,
Income Builder Fund, and Strategic Income Fund, which may not be changed by any
Fund unless approved by a majority of the outstanding shares of that Fund.
Strategic Income Fund, Small/Mid Cap Core Fund, International Equity Fund,
Small/Mid Cap Growth Fund, International Growth Fund, Income Builder Fund, or
Global Opportunities Fund may not:
(1)
with respect to 75% of the Fund’s total assets, purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S. government or any
of its agencies or instrumentalities) if, as a result, (a) more than 5% of the
Fund’s total assets would be invested in the securities of that issuer, or (b)
the Fund would hold more than 10% of the outstanding voting securities of that
issuer;
(2) issue
senior securities, except as permitted under the 1940 Act;
(3)
borrow money, except for temporary or
emergency purposes or except in connection with reverse repurchase agreements;
in an amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that come to
exceed this amount will be reduced within three days (not including Sundays and
holidays) to the extent necessary to comply with the 33 1/ % limitation;
(4)
underwrite any issue of securities (except to the extent that the Fund may be
deemed to be an underwriter within the meaning of the 1933 Act in the
disposition of restricted securities);
(5)
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities)
if, as a result, more than 25% of the Fund’s total assets would be invested in
the securities of companies whose principal business activities are in the same
industry;
(6)
purchase or sell real estate unless acquired as a result or ownership of
securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business);
(7)
purchase or sell physical commodities unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
purchasing or selling options and futures contracts or from investing in
securities or other instruments backed by physical commodities); or
(8)
lend any security or make any other loan if, as a result, more than 33 1/3% of
its total assets would be lent to other parties, but this limitation does not
apply to purchases of debt securities or to repurchase agreements.
For
the purposes of applying the limitation set forth in paragraph (6) above, a Fund
is permitted to hold real estate if doing so is the result of the Fund’s efforts
to restructure a bond or other loan obligation that was secured by real
estate.
The
following investment limitations are not fundamental and may be changed without
shareholder approval as to each Fund:
(i) The
Fund does not currently intend to sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the securities
sold short, and provided that transactions in futures contracts and options are
not deemed to constitute selling securities short.
(ii) The
Fund does not currently intend to purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that any initial and variation margin payments that
the Fund may be required to make in connection with its permitted investment
strategies do not constitute the purchase of securities “on margin” for purposes
of this limitation.
(iii) The
Fund may borrow money only (a) from a bank or (b) by engaging in reverse
repurchase agreements with any party. The Fund will not purchase any security
while borrowings representing more than 5% of its total assets are
outstanding.
(iv) The
Fund does not currently intend to purchase any security if, as a result, more
than 15% of its net assets would be invested in securities that are deemed to be
illiquid because they are subject to legal or contractual restrictions on resale
or because they cannot be sold or disposed of in the ordinary course of business
at approximately the prices at which they are valued.
(v) The
Fund does not currently intend to purchase interests in real estate investment
trusts that are not readily marketable or interests in real estate limited
partnerships that are not listed on an exchange or traded on the NASDAQ National
Market System if, as a result, the sum of such interests and other investments
considered illiquid under the limitation in the preceding paragraph would exceed
the Fund’s limitations on investments in illiquid securities.
(vi) The
Fund does not currently intend to (a) purchase securities of other investment
companies, except in the open market where no commission except the ordinary
broker’s commission is paid, or (b) purchase or retain securities issued by
other open-end investment companies. Limitations (a) and (b) do not apply to the
Fund’s investments in Thornburg Capital Management Fund or in any other
investment company within the same “group of investment companies” (as defined
in Section 12(d)(1)(G) of the 1940 Act), provided that any such investments
comply with Section 12(d)(1)(G) of the 1940 Act and rules thereunder, or to
securities received as dividends, through offers of exchange, or as a result of
a reorganization, consolidation, or merger.
(vii) The
Fund does not currently intend to purchase the securities of any issuer (other
than securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof) if, as a result, more than 5% of its total
assets would be invested in the securities of business enterprises that,
including predecessors, have a record of less than three years of continuous
operation. The foregoing does not apply to the Fund’s investments in Thornburg
Capital Management Fund or in any other investment company within the same
“group of investment companies” (as defined in Section 12(d)(1)(G) of the 1940
Act); provided that any such investments will comply with Section 12(d)(1)(G) of
the 1940 Act and rules thereunder.
(viii) The
Fund does not currently intend to purchase warrants, valued at the lower of cost
or market, in excess of 5% of the Fund’s net assets. Included in that amount,
but not to exceed 2% of the Fund’s net assets, may be warrants that are not
listed on the New York Stock Exchange or the American Stock exchange. Warrants
acquired by the Fund in units or attached to securities are not subject to these
restrictions.
(ix) The
Fund does not currently intend to invest in oil, gas or other mineral
exploration or development programs or leases.
(x) The
Fund does not currently intend to purchase the securities of any issuer if those
officers and Trustees of the trust and those officers and directors of Thornburg
who individually own more than 1/2 of 1% of the securities of such issuer
together own more than 5% of such issuer’s securities.
(xi)
The Fund will not (a) sell futures contracts, purchase
put options, or write call options if, as a result, more than 25% of the Fund’s
total assets would be hedged with futures and options under normal conditions;
(b) purchase futures contracts or write put options if, as a result, the Fund’s
total obligations upon settlement or exercise of purchased futures contracts and
written put options would exceed 25% of its total assets; or (c) purchase call
options if, as a result, the current value of option premiums for call options
purchased by the Fund would exceed 5% of the Fund’s total assets. These
limitations do not apply to options attached to or acquired or traded together
with their underlying securities, and do not apply to securities that
incorporate features similar to options.
Developing World Fund
Thornburg
Investment Trust has adopted the following fundamental investment policies
applicable to Developing World Fund which may not be changed unless approved by
a majority of the outstanding shares of the Fund. Developing World Fund may
not:
(1) issue
senior securities, except as permitted under the 1940 Act;
(2)
borrow money, except as
permitted under the 1940 Act;
(3) underwrite
any issue of securities (except to the extent that the Fund may be deemed to be
an underwriter within the meaning of the 1933 Act in the disposition of
portfolio securities);
(4) purchase
or sell real estate unless acquired as a result or ownership of securities or
other instruments (but this shall not prevent the Fund from investing in
securities or other instruments backed by real estate or securities of companies
engaged in the real estate business, nor shall it prevent the Fund from holding
real estate as a result of the Fund’s efforts to restructure a bond or other
investment that was backed by real estate);
(5) purchase
or sell physical commodities unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Fund from
purchasing or selling options, futures contracts and other derivative
instruments or from investing in securities or other instruments backed by
physical commodities);
(6) lend
any security or make any other loan if, as a result, more than 33 1/3% of its
total assets would be lent to other parties, but this limitation does not apply
to lending of portfolio securities, purchases of debt obligations or other
instruments, or to repurchase agreements; or
(7) with
respect to 75% of the Fund’s total assets, purchase the securities of any issuer
(other than securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, (a) more than 5% of the Fund’s
total assets would be invested in the securities of that issuer, or (b) the Fund
would hold more than 10% of the outstanding voting securities of that
issuer.
(8) invest
more than 25% of its total assets in any one industry.
In
connection with restriction number 2, above, the 1940 Act currently permits an
investment company to borrow money if the borrowings do not exceed one-third of
the company’s total assets after subtracting liabilities other than the
borrowings.
In
determining whether an issuer should be classified in a particular industry for
purposes of restriction number 8 above, Thornburg may rely on its own analysis
of the issuer or on available third party industry classifications. Securities
of the U.S. Government and its agencies and instrumentalities are not considered
to represent industries for this purpose.
The
following investment limitations are not fundamental and may be changed without
shareholder approval; provided that the first investment limitation listed below
may only be changed to the extent that the Fund’s Trustees provide 60 days’
prior written notice of the change to the Fund’s shareholders:
(i) The
Fund will invest at least 80% of its assets (which, for this purpose, refers to
the net assets of the Fund plus the amount of any borrowings) in developing
country issuers, as defined in the Fund’s Prospectus;
(ii) The
Fund does not currently intend to sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the securities
sold short, and provided that transactions in futures contracts and options are
not deemed to constitute selling securities short.
(iii) The
Fund does not currently intend to purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that any initial and variation margin payments that
the Fund may be required to make in connection with its permitted investment
strategies do not constitute the purchase of securities “on margin” for purposes
of this limitation.
(iv) The
Fund may borrow money only (a) from a bank or (b) by engaging in transactions
that are deemed to be borrowings under the 1940 Act because they involve the
sale of a security coupled with an agreement to repurchase that security. The
Fund will not purchase any security while borrowings representing more than 5%
of its total assets are outstanding.
(v) The
Fund does not currently intend to purchase any security if, as a result, more
than 15% of its net assets would be invested in securities that are considered
by Thornburg to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(vi) The
Fund will not (a) sell futures contracts, purchase put options, or write call
options if, as a result, more than 25% of the Fund’s total assets would be
hedged with futures and options under normal conditions; (b) purchase futures
contracts or write put options if, as a result, the Fund’s total obligations
upon settlement or exercise of purchased futures contracts and written put
options would exceed 25% of its total assets; or (c) purchase call options if,
as a result, the current value of option premiums for call options purchased by
the Fund would exceed 5% of the Fund’s total assets. These limitations do not
apply to options attached to or acquired or traded together with their
underlying securities, and do not apply to securities that incorporate features
similar to options.
Limited Term U.S. Government Fund
Thornburg
Investment Trust has adopted the following fundamental investment policies
applicable to Limited Term U.S. Government Fund which may not be changed unless
approved by a majority of the outstanding shares of the Fund. Limited Term U.S.
Government Fund may not:
(1)
Invest more than 20% of the Fund’s assets in securities other than obligations
issued or guaranteed by the United States Government or its agencies,
instrumentalities and authorities, or in participations in such obligations or
repurchase agreements secured by such obligations, generally described (but not
limited) in the Prospectus, and then only in the nongovernmental obligations
described in the Prospectus;
(2)
Purchase any security if, as a result, more than 5% of its total assets would be
invested in securities of any one issuer, excluding obligations of, or
guaranteed by, the United States government, its agencies, instrumentalities and
authorities;
(3)
Borrow money, except (a) as a temporary measure, and then only in amounts not
exceeding 5% of the value of the Fund’s total assets or (b) from banks, provided
that immediately after any such borrowing all borrowings of the Fund do not
exceed 10% of the Fund’s total assets. The exceptions to this restriction are
not for investment leverage purposes but are solely for extraordinary or
emergency purchases or to facilitate management of the Fund’s portfolio by
enabling the Fund to meet redemption requests when the liquidation of portfolio
instruments is deemed to be disadvantageous. The Fund will not purchase
securities while borrowings are outstanding. For purposes of this restriction
(i) the security arrangements described in restriction (4) below will not be
considered as borrowing money, and (ii) reverse repurchase agreements will be
considered as borrowing money;
(4)
Mortgage, pledge or hypothecate any assets except to secure permitted
borrowings. Arrangements to segregate assets with the Fund’s custodian with
respect to when-issued and delayed delivery transactions, and reverse repurchase
agreements, and deposits made in connection with futures contracts, will not be
considered a mortgage, pledge or hypothecation of assets;
(5)
Underwrite any issue of securities, except to the extent that, in connection
with the disposition of portfolio securities, it may be deemed to be an
underwriter under federal securities laws;
(6)
Purchase or sell real estate and real estate mortgage loans, but this shall not
prevent the Fund from investing in obligations of the U.S. Government or its
agencies, relating to real estate mortgages as described generally in the
Prospectus;
(7)
Purchase or sell commodities or commodity futures contracts or oil, gas or other
mineral exploration or development programs. Investment in futures contracts
respecting securities and in options on these futures contracts will not be
considered investment in commodity futures contracts;
(8)
Make loans, except through (a) the purchase of debt obligations in accordance
with the Fund’s investment objectives and policies; (b) repurchase agreements
with banks, brokers, dealers and other financial institutions; and (c) loans of
securities;
(9)
Purchase any security on margin, except for such short-term credits as are
necessary for the clearance of transactions. For purposes of this restriction,
the Fund’s entry into futures contracts will not be considered the purchase of
securities on margin;
(10)
Make short sales of securities;
(11)
Invest more than 5% of its total assets in securities of unseasoned issuers
which, together with their predecessors, have been in operation for less than
three years excluding obligations of, or guaranteed by, the United States
government, its agencies, instrumentalities and authorities;
(12)
Invest more than 5% of its total assets in securities which the Fund is
restricted from selling to the public without registration under the 1933 Act.
The Fund has no present intention to purchase any such restricted
securities;
(13)
Purchase securities of any issuer if the purchase at the time thereof would
cause more than 10% of the voting securities or more than 10% of any class of
securities of any such issuer to be held by the Fund;
(14)
Purchase securities of other investment companies, except in connection with a
merger, consolidation, reorganization or acquisition of assets;
(15)
Purchase securities (other than securities of the United States government, its
agencies, instrumentalities and authorities) if, as a result, more than 25% of
the Fund’s total assets would be invested in any one industry;
(16)
Purchase or retain the securities of any issuer other than the securities of the
Fund if, to the Fund’s knowledge, those officers and Trustees of the Fund, or
those officers and directors of Thornburg, who individually own beneficially
more than 1/2 of 1% of the outstanding securities of such issuer, together own
beneficially more than 5% of such outstanding securities;
(17)
Enter into any reverse repurchase agreement if, as a result thereof, more than
5% of its total assets would be subject to its obligations under reverse
purchase agreements at any time;
(18)
Purchase or sell any futures contract if, as a result thereof, the sum of the
amount of margin deposits on the Fund’s existing futures positions and the
amount of premiums paid for related options would exceed 5% of the Fund’s total
assets;
(19)
Purchase any put or call option not related to a futures
contract;
(20)
Purchase the securities of any issuer if as a result more than 10% of the value
of the Fund’s net assets would be invested in securities which are considered
illiquid because they are subject to legal or contractual restrictions on resale
(“restricted securities”) or because no market quotations are readily available;
or enter into a repurchase agreement maturing in more than seven days, if as a
result such repurchase agreements together with restricted securities and
securities for which there are no readily available market quotations would
constitute more than 10% of the Fund’s net assets; or
(21)
Issue senior securities, as defined under the 1940 Act, except that the Fund may
enter into repurchase agreements and reverse repurchase agreements, lend its
portfolio securities, borrow, and enter into when-issued and delayed delivery
transactions as described in the Prospectus or this Statement of Additional
Information and as limited by the foregoing investment limitations.
Whenever
an investment policy or restriction states a minimum or maximum percentage of
the Limited Term U.S. Government Fund’s assets which may be invested in any
security or other assets, it is intended that the minimum or maximum percentage
limitations will be determined immediately after and as a result of the Fund’s
acquisition of the security or asset. Accordingly, any later increase or
decrease in the relative percentage of value represented by the asset or
security resulting from changes in asset values will not be considered a
violation of these restrictions.
In
applying the percentage restrictions on the Limited Term U.S. Government Fund’s
investments described under the caption “Principal Investment Strategies” in the
Fund’s Prospectuses, and in applying the restriction described in item (1),
above, “assets” is understood to mean net assets plus borrowings for investment
purposes.
For
the purposes of applying the limitation set forth in paragraph (6) above, the
Fund is permitted to hold real estate if doing so is the result of the Fund’s
efforts to restructure a bond or other loan obligation that was secured by real
estate.
For
the purposes of applying the limitation set forth in paragraph (9) above, any
initial and variation margin payments that a Fund may be required to make in
connection with its permitted investment strategies do not constitute the
purchase of securities “on margin.”
Although
the Limited Term U.S. Government Fund has the right to pledge, mortgage or
hypothecate its assets subject to the restrictions described above, in order to
comply with certain state statutes on investment restrictions, the Fund will
not, as a matter of operating policy (which policy may be changed by the
Trustees without shareholder approval), mortgage, pledge or hypothecate its
portfolio securities to the extent that at any time the percentage of pledged
securities will exceed 10% of its total assets.
Limited Term Income Fund
Thornburg
Investment Trust has adopted the following fundamental investment policies
applicable to Limited Term Income Fund which may not be changed unless approved
by a majority of the outstanding shares of the Fund. Limited Term Income Fund
may not:
(1)
with respect to 75% of its total assets taken at market value, purchase more
than 10% of the voting securities of any one issuer or invest more than 5% of
the value of its total assets in the securities of any one issuer, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies;
(2)
borrow money, except as a temporary measure for extraordinary or emergency
purposes or except in connection with reverse repurchase agreements; provided
that the Fund maintains asset coverage of 300% for all borrowings;
(3)
purchase or sell real estate (except that the Fund may invest in (i) securities
of companies which deal in real estate or mortgages, and (ii) securities secured
by real estate or interests therein and that the Fund reserves freedom of action
to hold and sell real estate acquired as a result of the Fund’s ownership of
securities) or purchase or sell physical commodities or contracts relating to
physical commodities;
(4)
act as underwriter of securities issued by others, except to the extent that it
may be deemed an underwriter in connection with the disposition of portfolio
securities of the Fund;
(5)
make loans to any other person, except (a) loans of portfolio securities, and
(b) to the extent that the entry into repurchase agreements and the purchase of
debt securities in accordance with its investment objectives and investment
policies may be deemed to be loans;
(6)
issue senior securities, except as appropriate to evidence indebtedness which it
is permitted to incur, and except for shares of the separate classes of a fund
or series of the Trust provided that collateral arrangements with respect to
currency-related contracts, futures contracts, options, or other permitted
investments, including deposits of initial and variation margin, are not
considered to be the issuance of senior securities for purposes of this
restriction;
(7)
purchase any securities which would cause more than 25% of the market value of
its total assets at the time of such purchase to be invested in the securities
of one or more issuers having their principal business activities in the same
industry, provided that there is no limitation with respect to investments in
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities (for the purposes of this restriction, telephone companies are
considered to be in a separate industry from gas and electric public utilities,
and wholly-owned finance companies are considered to be in the industry of their
parents if their activities are primarily related to financing the activities of
the parents).
For
the purposes of applying the limitation set forth in paragraph (3) above, the
Fund is permitted to hold real estate if doing so is the result of the Fund’s
efforts to restructure a bond or other loan obligation that was secured by real
estate.
The
following investment limitations are not fundamental and may be changed without
shareholder approval:
(a)
The Fund does not currently intend to purchase or retain securities of any
open-end investment company, or securities of any closed-end investment company
except by purchase in the open market where no commission or profit to a sponsor
or dealer results from such purchases, or except when such purchase, though not
made in the open market, is part of a plan of merger, consolidation,
reorganization or acquisition of assets. The Fund will not acquire any security
issued by another investment company (the “acquired company”) if the Fund
thereby would own (i) more than 3% of the total outstanding voting securities of
the acquired company, or (ii) securities issued by the acquired company having
an aggregate value exceeding 5% of the Fund’s total assets, or (iii) securities
issued by investment companies having an aggregate value exceeding 10% of the
Fund’s total assets. The limitations stated in this subparagraph (a) do not
apply to the Fund’s investments in Thornburg Capital Management Fund or in any
other investment company within the same “group of investment companies” (as
defined in Section 12(d)(1)(G) of the 1940 Act); provided that any such
investments will comply with Section 12(d)(1)(G) of the 1940 Act and rules
thereunder.
(b)
The Fund will not pledge, mortgage or hypothecate its assets in excess, together
with permitted borrowings, of 1/3 of its total assets.
(c) The
Fund does not currently intend to purchase or retain securities of an issuer any
of whose officers, directors, trustees or security holders is an officer or
Trustee of the Fund or a member, officer, director or trustee of the investment
advisor of the Fund if one or more of such individuals owns beneficially more
than one-half of one percent (1/2%) of the outstanding shares or securities or
both (taken at market value) of such issuer and such shares or securities
together own beneficially more than 5% of such shares or securities or both.
(d) The
Fund does not currently intend to purchase securities on margin or make short
sales, unless, by virtue of its ownership of other securities, it has the right
to obtain securities equivalent in kind and amount to the securities sold and,
if the right is conditional, the sale is made upon the same conditions, except
in connection with arbitrage transactions, and except that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases and
sales of securities. Any initial and variation margin payments that the Fund may
be required to make in connection with its permitted investment strategies do
not constitute the purchase of securities “on margin” for purposes of this
limitation.
(e) The
Fund does not currently intend to purchase any security if, as a result, more
than 15% of its net assets would be invested in securities that are considered
by Thornburg to be illiquid because they are subject to legal or contractual
restrictions on resale or because they cannot be sold or disposed of in the
ordinary course of business at approximately the prices at which they are
valued.
(f) The
Fund does not currently intend to purchase securities of any issuers with a
record of less than three years of continuous operations, including
predecessors, except U.S. government securities, securities of such issuers
which are rated by at least one nationally recognized statistical rating
organization, municipal obligations and obligations issued or guaranteed by any
foreign government or its agencies or instrumentalities, if such purchase would
cause the investments of the Fund in all such issuers to exceed 5% of the total
assets of the Fund taken at market value. The foregoing does not apply to the
Fund’s investments in Thornburg Capital Management Fund or in any other
investment company within the same “group of investment companies” (as defined
in Section 12(d) (1)(G) of the 1940 Act); provided that any such investments
will comply with Section 12(d)(1)(G) of the 1940 Act and rules thereunder.
(g) The
Fund does not currently intend to purchase more than 10% of the voting
securities of any one issuer, except securities issued by the U.S. Government,
its agencies or instrumentalities. The foregoing does not apply to the Fund’s
investments in Thornburg Capital Management Fund or in any other investment
company within the same “group of investment companies” (as defined in Section
12(d)(1)(G) of the 1940 Act); provided that any such investments will comply
with Section 12(d)(1)(G) of the 1940 Act and rules thereunder.
(h) The
Fund will not buy options on securities or financial instruments, unless the
aggregate premiums paid on all such options held by the Fund at any time do not
exceed 20% of its net assets; or sell put options in securities if, as a result,
the aggregate value of the obligations underlying such put options would exceed
50% of the Fund’s net assets.
(i) The
Fund will not enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial margin with
respect to all futures contracts entered into on behalf of the Fund and the
premiums paid for options on futures contracts does not exceed 5% of the fair
market value of the Fund’s total assets; provided that in the case of an option
that is in-the-money at the time of purchase, the in-the-money amount may be
excluded in computing the 5% limit.
(j) The
Fund does not currently intend to invest more than 5% of its assets in
derivative instruments, although this limitation will not apply to investments
in derivative instruments made by the Fund for bona fide hedging or risk
management purposes.
(k) The
Fund does not currently intend to invest in oil, gas or other mineral leases, or
exploration or development programs (although it may invest in issuers which own
or invest in such interests).
(l) The
Fund will not borrow money except as a temporary measure, and then not in excess
of 5% of its total assets (taken at market value) unless the borrowing is from
banks, in which case the percentage limitation is 10%; reverse repurchase
agreements and dollar rolls will be considered borrowings for this purpose, and
will be further subject to total asset coverage of 300% for such agreements.
(m) The
Fund does not currently intend to purchase warrants if as a result warrants
taken at the lower of cost or market value would represent more than 5% of the
value of the Fund’s total net assets or more than 2% of its net assets in
warrants that are not listed on the New York or American Stock Exchanges or on
an exchange with comparable listing requirements (for this purpose, warrants
attached to securities will be deemed to have no value).
(n) The
Fund will not make securities loans if the value of such securities loaned
exceeds 30% of the value of the Fund’s total assets at the time any loan is
made; all loans of portfolio securities will be fully collateralized and marked
to market daily. The Fund has no current intention of making loans of portfolio
securities that would amount to greater than 5% of the Fund’s total assets.
(o)
The Fund does not currently intend to
purchase or sell real estate limited partnership interests.
Restrictions
with respect to repurchase agreements shall be construed to be for repurchase
agreements entered into for the investment of available cash consistent with
Limited Term Income Fund’s repurchase agreement procedures, not repurchase
commitments entered into for general investment purposes.
CALCULATION OF PERFORMANCE INFORMATION
Each
Fund will from time to time display performance information, including yield,
dividend returns total return, and average annual total return, in advertising,
sales literature, and reports to shareholders. Yield is computed by dividing the
Fund’s net interest and dividend income for a given 30 days or one month period
by the maximum share offering price at the end of the period. The result is
“annualized” to arrive at an annual percentage rate. In addition, the Fund may
use the same method for 90 day or quarterly periods. Total return is the change
in share value over time, assuming reinvestment of any dividends and capital
gains. “Cumulative total return” describes total return over a stated period,
while “average annual total return” is a hypothetical rate of return which, if
achieved annually, would have produced the same cumulative total return if
performance had been constant for the period shown. Average annual return tends
to reduce variations in return over the period, and investors should recognize
that the average figures are not the same as actual annual returns. A Fund may
display return information for differing periods without annualizing the results
and without taking sales charges into effect.
All
performance figures are calculated separately for each class of shares of a
Fund. The figures are historical, and do not predict future returns. Actual
performance will depend upon the specific investments held by a Fund, and upon
the Fund’s expenses for the period.
Yield
quotations include a standardized calculation which computes yield for a 30-day
or one month period by dividing net investment income per share during the
period by the maximum offering price on the last day of the period. The
standardized calculation will include the effect of semiannual compounding and
will reflect amortization of premiums for those bonds which have a market value
in excess of par. New schedules based on market value will be computed each
month for amortizing premiums. With respect to mortgage-backed securities or
other receivables-backed obligations, the Fund will amortize the discount or
premium on the outstanding principal balance, based upon the cost of the
security, over the remaining term of the security. Gains or losses attributable
to actual monthly paydowns on mortgage-backed obligations will be reflected as
increases or decreases to interest income during the period when such gains or
losses are realized. Provided that any such quotation is also accompanied by the
standardized calculation referred to above, a Fund may also quote
non-standardized performance data for a specified period by dividing the net
investment income per share for that period by either the Fund’s average public
offering price per share for that same period or the offering price per share on
the first or last day of the period, and multiplying the result by 365 divided
by the number of days in the specified period. For purposes of this non-
standardized calculation, net investment income will include accrued interest
income plus or minus any amortized purchase discount or premium less all accrued
expenses. The primary differences between the results obtained using the
standardized performance measure and any non-standardized performance measure
will be caused by the following factors: (1) The non-standardized calculation
may cover periods other than the 30-day or one month period required by the
standardized calculation; (2) The non-standardized calculation may reflect
amortization of premium based upon historical cost rather than market value; (3)
The non-standardized calculation may reflect the average offering price per
share for the period or the beginning offering price per share for the period,
whereas the standardized calculation always will reflect the maximum offering
price per share on the last day of the period; (4) The non-standardized
calculation may reflect an offering price per share other than the maximum
offering price, provided that any time the Fund’s return is quoted in reports,
sales literature or advertisements using a public offering price which is less
than the Fund’s maximum public offering price, the return computed by using the
Fund’s maximum public offering price also will be quoted in the same piece; (5)
The non-standardized return quotation may include the effective return obtained
by compounding the monthly dividends.
For
the Funds’ investments denominated in foreign currencies, income and expenses
are calculated first in their respective currencies, and are then converted to
U.S. dollars, either when they are actually converted or at the end of the
30-day or one month period, whichever is earlier. Capital gains and losses
generally are excluded from the calculation as are gains and losses from
currency exchange rate fluctuations.
Income
calculated for the purposes of calculating the Funds’ yields differs from income
as determined for other accounting purposes. Because of the different accounting
methods used, and because of the compounding of income assumed in yield
calculations, a Fund’s yield may not equal its distribution rate, the income
paid to a shareholder’s account, or the income reported in the Fund’s financial
statements.
Yield
information may be useful in reviewing a Fund’s performance and in providing a
basis for comparison with other investment alternatives. However, each Fund’s
yield fluctuates, unlike investments that pay a fixed interest rate over a
stated period of time. When comparing investment alternatives, investors should
also note the quality and maturity of the portfolio securities of respective
investment companies they have chosen to consider.
Total
returns quoted in advertising reflect all aspects of a Fund’s return, including
the effect of reinvesting dividends and capital gain distributions, and any
change in the Fund’s net asset value (“NAV”) over a stated period. Average
annual total returns are calculated by determining the growth or decline in
value of a hypothetical historical investment in a Fund over a stated period,
and then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative total return of 100% over
ten years would produce an average annual return of 7.18%, which is the steady
annual rate of return that would equal 100% growth on a compounded basis in ten
years. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that a Fund’s performance is
not constant over time, but changes from year to year, and the average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the Fund. In addition to average annual total returns, a Fund may
quote unaveraged or cumulative total returns reflecting the simple change in
value an investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, or a series of
redemptions, over any time period. Total returns may be broken down into their
components of income and capital (including capital gains and changes to share
price) in order to illustrate the relationship of these factors and their
contributions to total return. Total returns may be quoted on a before-tax or
after-tax basis and may be quoted with or without taking a Fund’s maximum sales
charge into account. Excluding a Fund’s sales charge from a total return
calculation produces a higher total return figure. Total returns, yields, and
other performance information may be quoted numerically or in a table, graph, or
similar illustration.
Limited
Term U.S. Government Fund, Limited Term Income Fund or Strategic Income Fund
also may illustrate performance or the characteristics of its investment
portfolio through graphs, tabular data or other displays which describe (i) the
average portfolio maturity or average duration of the Fund’s portfolio
securities relative to the maturities or durations of other investments, (ii)
the relationship of yield and maturity of the Fund to the yield and maturity of
other investments (either as a comparison or through use of standard bench marks
or indices such as the Treasury yield curve), (iii) changes in the Fund’s share
price or net asset value in some cases relative to changes in the value of other
investments, and (iv) the relationship over time of changes in the Fund’s (or
other investments’) net asset value or price and the Fund’s (or other
investments’) investment return.
Charts
and graphs using the Fund’s net asset values, adjusted net asset values, and
benchmark indices may be used to exhibit performance. An adjusted NAV includes
any distributions paid by the Fund and reflects all elements of its return.
Unless otherwise indicated, the Fund’s adjusted NAVs are not adjusted for sales
charges, if any.
The
Funds may illustrate performance using moving averages. A long-term moving
average is the average of each week’s adjusted closing NAV or total return for a
specified period. A short-term moving average NAV is the average of each day’s
adjusted closing NAV for a specified period. Moving average activity indicators
combine adjusted closing NAVs from the last business day of each week with
moving averages for a specified period the produce indicators showing when an
NAV has crossed, stayed above, or stayed below its moving average.
Each
Fund’s performance may be compared to the performance of other mutual funds in
general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund ranking prepared by Lipper
Analytical Services, Inc. (“Lipper”), an independent service that monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of total
return, assuming reinvestment of distributions, but does not take sales charges
or redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings the Fund’s performance may
be compared to stock, bond, and money market mutual fund performance indices
prepared by Lipper or other organizations. When comparing these indices, it is
important to remember the risk and return characteristics of each type of
investment. For example, while stock mutual funds may offer higher potential
returns, they also carry the highest degree of share price volatility. Likewise,
money market funds may offer greater stability of principal, but generally do
not offer the higher potential returns from stock mutual funds. From time to
time, the Fund’s performance may also be compared to other mutual funds tracked
by financial or business publications and periodicals. For example, the Fund may
quote Morningstar, Inc. in its advertising materials. Morningstar, Inc. is a
mutual fund rating service that rates mutual funds on the basis of risk-adjusted
performance. Rankings that compare the performance of Thornburg Funds to one
another in appropriate categories over specific periods of time may also be
quoted in advertising. Performance rankings and ratings reported periodically in
financial publications also may be used. These performance analyses ordinarily
do not take sales charges into consideration and are prepared without regard to
tax consequences.
Each
Fund may be compared in advertising to Certificates of Deposit (“CDs”) or other
investments issued by banks or other depository institutions. Mutual funds
differ from bank investments in several respects. For example, while a Fund may
offer greater liquidity or higher potential returns than CDs, a Fund does not
guarantee a shareholder’s principal or return, and Fund shares are not FDIC
insured.
Thornburg
may provide information designed to help individuals understand their investment
goals and explore various financial strategies. Such information may include
information about current economic and political conditions; materials that
describe general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; questionnaires designed to
help create a personal financial profile; worksheets used to project savings
needs bases on assumed rates of inflation and hypothetical rates of return; and
action plans offering investment alternatives. Materials may also include
discussions of other Thornburg mutual funds.
Ibbotson
Associates, a wholly owned subsidiary of Morningstar, Inc. (“Ibbotson”),
provides historical returns of the capital markets in the United States,
including common stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the CPI), and combinations of various
capital markets. The performance of these capital markets is based on the
returns of differed indices.
The
Funds may use the performance of these capital markets in order to demonstrate
general risk-versus-reward investment scenarios. Performance comparisons may
also include the value of a hypothetical investment in any of these capital
markets. The risks associated with the security types in the capital market may
or may not correspond directly to those of a Fund. A Fund may also compare
performance to that of other compilations or indices that may be developed and
made available in the future, and advertising, sales literature and shareholder
reports also may discuss aspects of periodic investment plans, dollar cost
averaging and other techniques for investing to pay for education, retirement
and other goals. In addition, a Fund may quote or reprint financial or business
publications and periodicals, including model portfolios or allocations, as they
relate to current economic and political conditions, fund management, portfolio
composition, investment philosophy, investment techniques and the desirability
of owning a particular mutual fund. A Fund may present its fund number and CUSIP
number, and discuss or quote its current portfolio manager.
The
Funds may quote various measures of volatility and benchmark correlation in
advertising. In addition, the Funds may compare these measures to those of other
funds. Measures of volatility seek to compare a Fund’s historical share price
fluctuations or total returns to those of a benchmark. Measures of benchmark
correlation indicate how valid a comparative benchmark may be. All measures of
volatility and correlation are calculated using averages of historical data. In
advertising, a Fund may also discuss or illustrate examples of interest rate
sensitivity.
Momentum
indicators show a Fund’s price movements over specific periods of time. Each
point on the momentum indicator represents the Fund’s percentage change in price
movements over that period. A Fund may advertise examples of the effects of
periodic investment plans, including the principle of dollar cost averaging. In
such a program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more shares
when prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor’s average cost per share can be
lower than if fixed numbers of shares are purchased at the same intervals. In
evaluating such a plan, investors should consider their ability to continue
purchasing shares during periods of low price levels. The Funds may be available
for purchase through retirement plans or other programs offering deferral of, or
exemption from, income taxes, which may produce superior after-tax returns over
time. For example, a $1,000 investment earning a taxable return of 10% annually
would have an after-tax value of $1,949 after ten years, assuming tax was
deducted from the return each year at a 31% rate. An equivalent tax-deferred
investment would have an after-tax value of $2,100 after ten years, assuming tax
was deducted at a 31% rate from the tax-deferred earnings at the end of the
ten-year period.
Market Indices Information
The
benchmark indices described in the Prospectus are products of third party index
providers. Data respecting those benchmark indices are the property of those
third party providers and have been licensed for use by the Funds. The Funds
accept no liability for any errors or omissions relating to the benchmark index
data, and the third party providers accept no liability for the use of those
data by the Funds. The following additional disclaimers relate to certain of the
benchmark indices.
ICE
BofA
Source
ICE Data Indices, LLC (“ICE DATA”), is used with permission. ICE DATA, ITS
AFFILIATES AND THEIR RESPECTIVE THIRD PARTY SUPPLIERS DISCLAIM ANY AND ALL
WARRANTIES AND REPRESENTATIONS, EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, INCLUDING THE
INDICES, INDEX DATAANDANYDATAINCLUDED IN, RELATED TO, OR DERIVED THEREFROM.
NEITHER ICE DATA, ITS AFFILIATES NOR THEIR RESPECTIVE THIRD PARTY PROVIDERS
SHALL BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH RESPECT TO THE ADEQUACY,
ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES OR THE INDEX DATA OR ANY
COMPONENT THEREOF, AND THE INDICES AND INDEX DATA AND ALL COMPONENTS THEREOF ARE
PROVIDED ON AN “AS IS” BASIS AND YOUR USE IS AT YOUR OWN RISK. ICE DATA, ITS
AFFILIATES AND THEIR RESPECTIVE THIRD PARTY SUPPLIERS DO NOT SPONSOR, ENDORSE,
OR RECOMMEND THORNBURG INVESTMENT TRUST OR ANY OF ITS PRODUCTS OR SERVICES.
MSCI
Source:
MSCI. The MSCI information may only be used for your internal use, may not be
reproduced or redisseminated in any form and may not be used as a basis for or a
component of any financial instruments or products or indices. None of the MSCI
information is intended to constitute investment advice or a recommendation to
make (or refrain from making) any kind of investment decision and may not be
relied on as such. Historical data and analysis should not be taken as an
indication or guarantee of any future performance analysis, forecast or
prediction. The MSCI information is provided on an “as is” basis and the user of
this information assumes the entire risk of any use made of this information.
MSCI, each of its affiliates and each other person involved in or related to
compiling, computing or creating any MSCI information (collectively, the “MSCI
Parties”) expressly disclaims all warranties (including, without limitation, any
warranties of originality, accuracy, completeness, timeliness, non-infringement,
merchantability and fitness for a particular purpose) with respect to this
information. Without limiting any of the foregoing, in no event shall any MSCI
Party have any liability for any direct, indirect, special, incidental,
punitive, consequential (including, without limitation, lost profits) or any
other damages. (www.msci.com)
ADDITIONAL MATTERS RESPECTING TAXES
The
following discussion summarizes certain federal tax considerations generally
affecting the Funds and shareholders and is primarily relevant to shareholders
which are subject to federal income tax. This discussion does not provide a
detailed explanation of all tax consequences, and shareholders are advised to
consult their own tax advisors with respect to the particular federal, state,
local and foreign tax consequences to them of an investment in the Funds. In
particular, this discussion addresses aspects of investment by persons who are
not individuals only in a very limited manner. Further, this discussion does not
address the tax aspects associated with contributions to, and withdrawals from,
qualified retirement plans or similar programs.
This
discussion is based on the Internal Revenue Code of 1986, as amended (the
“Code”), Treasury Regulations issued thereunder, and judicial and administrative
authorities as in effect on the date of this Statement of Additional
Information, all of which are subject to changes, which changes may be
retroactive.
Elections by the Funds – Subchapter M
Each
Fund has elected and intends to qualify for treatment as a regulated investment
company under Subchapter M of the Code. In each taxable year when a Fund
qualifies for treatment as a regulated investment company, it will not be
subject to federal income tax on net investment income and net capital gains
which are timely distributed to its shareholders.
If
in any year a Fund fails to qualify for the treatment afforded by Subchapter M
of the Code, the Fund would be taxed as a corporation on its income.
Distributions to the shareholders would be treated as ordinary income to the
extent of the Fund’s earnings and profits, and would be treated as nontaxable
returns of capital to the extent of the shareholders’ respective bases in their
shares. Further distributions would be treated as amounts received on a sale or
exchange or property. In any year a Fund qualifies as a regulated investment
company but fails to distribute all of its net investment income and net capital
gains, the Fund would be subject to taxes on the undistributed portion of its
net income and capital gains. Although each Fund intends to distribute all of
its net income currently and any capital gains annually, it could have
undistributed net income if, for example, expenses of the Fund were reduced or
disallowed on audit.
Backup Withholding
Each
shareholder will be notified annually by their Fund as to the amount and
characterization of distributions paid to or reinvested by the shareholder for
the preceding taxable year. The Fund may be required to withhold federal income
tax from distributions otherwise payable to a shareholder if (i) the shareholder
has failed to furnish the Fund with his taxpayer identification number, (ii) the
Fund is notified that the shareholder’s number is incorrect, (iii) the Internal
Revenue Service notifies the Fund that the shareholder has failed properly to
report certain income, or (iv) when required to do so, the shareholder fails to
certify under penalty of perjury that he is not subject to this withholding. The
backup withholding tax rate on distributions is currently 28%.
Certain
shareholders specified in the Code are exempt from the backup withholding noted
in the preceding paragraph. A Fund may be required to obtain certain information
from a shareholder to identify that shareholder’s status as a person exempt from
backup withholding. Persons exempt from the backup withholding noted in the
preceding paragraph may under certain circumstances still be subject to other
types of federal income tax withholding. Shareholders should consult their tax
advisors for more information.
Distributions by Investment Companies - In
General
Distributions
of investment company taxable income (including net short-term capital gains)
are taxable to shareholders as ordinary income. Distributions of investment
company taxable income may be eligible for the corporate dividends-received
deduction to the extent attributable to a Fund’s dividend income from U.S.
corporations, and if other applicable requirements are met. However, the
alternative minimum tax applicable to corporations may reduce the benefit of the
dividends-received deduction. Distributions of net capital gains (the excess of
net long-term capital gains over net short-term capital losses) designated by a
Fund as capital gain dividends are not eligible for the dividends-received
deduction and will generally be taxable to shareholders as long-term capital
gains, regardless of the length of time the Fund’s shares have been held by a
shareholder. Generally, dividends and distributions are taxable to shareholders,
whether received in cash or reinvested in shares of a Fund. Any distributions
that are not from a Fund’s investment company taxable income or net capital gain
may be characterized as a return of capital to shareholders or, in some cases,
as capital gain. Shareholders will be notified annually as to the federal tax
status of dividends and distributions they receive and any tax withheld
thereon.
A
person seeking to invest in shares of a Fund through a taxable account should
consider a Fund’s unrealized gains and losses, and any capital loss
carryforwards, which are disclosed in the annual and semiannual reports to
shareholders issued by the Fund. Embedded, unrealized gains, if realized by the
Fund upon a sale or other disposition of the investments to which the gains
relate, and not offset by realized losses, result in capital gains distributions
to all shareholders, including persons who just purchased Fund shares, which may
be subject to income tax. Unrealized losses, if realized by the Fund through
sales of investments, and capital loss carryforwards from previously realized
losses, may offset gains realized by the Fund on sales of appreciated
investments, so offsetting the capital gains distributions that otherwise would
be made to shareholders.
Pursuant
to the American Taxpayer Relief Act of 2012, the maximum federal tax rate for
individual taxpayers on long-term capital gains from sales of securities, and on
certain qualifying dividends on corporate stock issued by domestic corporations
and certain “qualified foreign corporations,” is 20%. Qualified foreign
corporations are corporations incorporated in a U.S. possession, corporations
whose stock is readily tradable on an established securities market in the U.S.
and corporations eligible for the benefits of a comprehensive income tax treaty
with the United States and which satisfy certain other requirements. Foreign
personal holding companies, foreign investment companies and passive foreign
investment companies are not treated as qualified foreign corporations. These
rates do not apply to corporate taxpayers. Each Fund will separately designate
distributions of any qualifying long-term capital gains or qualifying dividends
earned by the Fund. A shareholder must also satisfy a 60-day holding period
requirement with respect to any distributions of qualifying dividends in order
to obtain the benefit of the lower tax rates imposed on those distributions.
Distributions attributable to a Fund’s income from bonds and other debt
obligations, dividends from most foreign companies, and distributions by real
estate investment trusts or regulated investment companies will not generally
qualify for the lower rates. Some hedging activities may cause a dividend that
would otherwise be subject to the lower tax rate applicable to a qualifying
dividend to be taxed at the rate of tax applicable to ordinary income.
A
Fund’s investments in certain derivatives, foreign currency transactions,
options, futures contracts, hedging transactions, forward contracts, investments
in passive foreign investment companies, and certain other transactions will be
subject to special tax rules, the effect of which may be to accelerate income to
the Fund, defer Fund losses, convert capital gain into taxable ordinary income
or convert short-term capital losses into long-term capital losses. Engaging in
swap transactions also may result in distributions of taxable income or gain to
shareholders, and also may cause a Fund to currently recognize income with
respect to payments to be received in the future. Certain Fund transactions,
including investments in derivative instruments, transactions in foreign
currencies or foreign currency-denominated instruments, and hedging activities
may produce differences between the Fund’s book and taxable income, and
distributions by the Fund may consequently be treated in some instances as
returns of capital.
A
Fund’s distributions of realized capital gains may be reduced if the Fund has
capital loss carryforwards available. Other regulations or circumstances may
limit or reduce the use of net capital loss carryforwards. A Fund’s net capital
losses are not deductible against the Fund’s net investment income.
Distributions
by a Fund result in a reduction in the net asset value of the Fund’s shares.
Should distributions reduce the net asset value below a shareholder’s cost
basis, the distribution would nevertheless be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Persons purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
A
3.8% Medicare contribution tax is imposed on the “net investment income” of
individuals, estates, and trusts whose income exceeds certain threshold amounts.
Net investment income generally includes for this purpose distributions of
income dividends and capital gains paid by the Funds and otherwise includible in
adjusted gross income, and capital gains recognized on the sale, redemption or
exchange of Fund shares. Shareholders are advised to consult their tax advisors
regarding the possible implications of this additional tax on their investment
in a Fund.
Foreign Currency Transactions
Under
the Code, gains or losses attributable to fluctuations in foreign currency
exchange rates which occur between the time a Fund accrues income or other
receivable or accrues expenses or other liabilities denominated in a foreign
currency and the time a Fund actually collects such receivable or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt obligations denominated in a foreign currency
and on disposition of certain financial contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as “Section 988” gains and losses, may increase or decrease the amount of a
Fund’s net investment income to be distributed to its shareholders as ordinary
income.
Foreign Withholding Taxes
Income
received by a Fund from sources within foreign countries may be subject to
withholding and other income or similar taxes imposed by such countries. If more
than 50% of the value of a Fund’s total assets at the close of its taxable year
consists of securities of foreign corporations, that Fund will be eligible and
may elect to “pass through” to the Fund’s shareholders the amount of foreign
income and similar taxes paid by that Fund. Pursuant to this election, a
shareholder will be required to include in gross income (in addition to taxable
dividends actually received) his pro rata share of the foreign taxes paid by a
Fund, and will be entitled either to deduct (as an itemized deduction) his pro
rata share of foreign income and similar taxes in computing his taxable income
or to use it as a foreign tax credit against his U.S. federal income tax
liability, subject to limitations. No deduction for foreign taxes may be claimed
by a shareholder who does not itemize deductions, but such a shareholder may be
eligible to claim the foreign tax credit (see below). Each shareholder will be
notified within 60 days after the close of the relevant Fund’s taxable year
whether the foreign taxes paid by the Fund will “pass through” for that year.
Furthermore, the amount of the foreign tax credit that is available may be
limited to the extent that dividends from a foreign corporation qualify for the
lower tax rate on “qualifying dividends.”
Generally,
a credit for foreign taxes is subject to the limitations that it may not exceed
the shareholder’s U.S. tax attributable to his foreign source taxable income.
For this purpose, if the pass-through election is made, the source of a Fund’s
income flows through to its shareholders. With respect to a Fund, gains from the
sale of securities will be treated as derived from U.S. sources and certain
currency fluctuations gains, including fluctuation gains from foreign currency
denominated debt obligations, receivables and payables, will be treated as
ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit), including the foreign source passive income
passed through by a Fund. Shareholders may be unable to claim a credit for the
full amount of their proportionate share of the foreign taxes paid by a Fund.
The foreign tax credit limitation rules do not apply to certain electing
individual taxpayers who have limited creditable foreign taxes and no foreign
source income other than passive investment-type income. The foreign tax credit
is eliminated with respect to foreign taxes withheld on dividends if the
dividend-paying shares or the shares of the Fund are not held by the Fund or the
shareholders, as the case may be, for periods specified in the Code. If a Fund
is not eligible to make the election to “pass through” to its shareholders its
foreign taxes, the foreign income taxes it pays generally will reduce the Fund’s
investment company taxable income and the distributions by a Fund will be
treated as United States source income.
Short Sales
If
a Fund engages in short selling of securities, the gain or loss on the short
sale is generally recognized when the Fund closes the short sale by delivering
the borrowed securities to the lender, rather than when the borrowed securities
are sold. Short sales may increase the net short-term capital gains realized by
a Fund, which would be taxable as ordinary income when distributed to the Fund’s
shareholders.
Redemption or Other Disposition of Shares
Upon
the sale or exchange of his shares, a shareholder realizes a taxable gain or
loss depending upon his basis in the shares. The gain or loss will be treated as
capital gain or loss if the shares are capital assets in the shareholder’s
hands, which generally may be eligible for reduced federal tax rates, depending
on the shareholder’s holding period for the shares. Any loss realized on a sale
or exchange will be disallowed to the extent that the shares disposed of are
replaced (including replacement through the reinvestment of dividends and
capital gain distributions in a Fund) within a period of 61 days beginning 30
days before and ending 30 days after the disposition of the shares. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a shareholder on the sale of a Fund’s
shares held by the shareholder for six months or less will be treated for
federal income tax purposes as a long-term capital loss to the extent of any
distributions of capital gains dividends received by the shareholder with
respect to such shares.
In
some cases, shareholders will not be permitted to take sales charges into
account for purposes of determining the amount of gain or loss realized on the
disposition of their shares. This prohibition generally applies where (1) the
shareholder incurs a sales charge in acquiring the shares of a regulated
investment company, (2) the shares are disposed of before the 91st day after the
date on which they were acquired, and (3) the shareholder subsequently acquires
shares of the same or another regulated investment company and the otherwise
applicable sales charge is reduced or eliminated under a “reinvestment right”
received upon the initial purchase of the shares. In that case, the gain or loss
recognized will be determined by excluding from the tax basis of the shares
exchanged all or a portion of the sales charge incurred in acquiring those
shares. This exclusion applies to the extent that the otherwise applicable sales
charge with respect to the newly acquired shares is reduced as a result of
having incurred a sales charge initially. Sales charges affected by this rule
are treated as if they were incurred with respect to the shares acquired under
the reinvestment. This provision may be applied to successive acquisitions of
shares.
State and Local Taxes
The
laws of the several states and local taxing authorities vary with respect to the
taxation of distributions, and shareholders of each Fund are advised to consult
their own tax advisors in that regard. In particular, investors who are not
individuals are advised that the preceding discussion relates primarily to tax
consequences affecting individuals, and the tax consequences of an investment by
a person which is not an individual may be very different.
Foreign Account Tax Compliance Act
The
Foreign Account Tax Compliance Act (“FATCA”) generally requires a Fund to obtain
information sufficient to identify the status of each of its shareholders under
FATCA, as described more fully below. If a shareholder fails to provide this
information or otherwise fails to comply with FATCA, a Fund may be required to
withhold under FATCA at a rate of 30% with respect to that shareholder,
depending on the type of payment and shareholder account, on certain payments
made from the Fund, including distributions characterized by the Fund as capital
gain dividends and the proceeds of the sale, redemption or exchange of Fund
shares. If a payment by a Fund is subject to FATCA withholding, the Fund or its
agent is required to withhold even if such payment would otherwise be exempt
from withholding.
Payments
to a Fund shareholder will generally not be subject to FATCA withholding,
provided the shareholder provides the Fund with such certifications, waivers or
other documentation or information as the Fund requires, including, to the
extent required, documentation or information respecting such shareholder’s
direct and indirect owners, to establish the shareholder’s FATCA status and
otherwise to comply with these rules. In order to avoid withholding, a
shareholder that is a “foreign financial institution” (“FFI”) must either (i)
become a “participating FFI” by entering into a valid U.S. tax compliance
agreement with the IRS, (ii) qualify for an exception from the requirement to
enter into such an agreement, for example by becoming a “deemed compliant FFI,”
or (iii) be covered by an applicable intergovernmental agreement between the
United States and a non-U.S. government to implement FATCA. In any of these
cases, the investing FFI generally will be required to provide a Fund with
appropriate identifiers, certifications or documentation concerning its
status.
A
Fund will disclose the information that it receives from (or concerning) its
shareholders to the IRS, non-U.S. taxing authorities or other parties as
necessary to comply with FATCA, related intergovernmental agreements or other
applicable law or regulation.
Each
investor and prospective investor is urged to consult its tax adviser regarding
the applicability of FATCA and any other reporting requirements with respect to
the investor’s own situation.
DISTRIBUTIONS AND SHAREHOLDER ACCOUNTS
Any
distributions of investment income, net of expenses, and the annual
distributions of net realized capital gains, if any, will be credited to the
accounts of shareholders in full and fractional shares of the Fund at net asset
value on the payment or distribution date, as the case may be.
INVESTMENT ADVISOR, INVESTMENT ADVISORY
AGREEMENTS,
AND ADMINISTRATIVE SERVICES AGREEMENTS
Investment Advisory Agreement
Pursuant
to an Investment Advisory Agreement in respect of each Fund, Thornburg
Investment Management, Inc. (“Thornburg” or the “advisor”), 2300 North Ridgetop
Road, Santa Fe, New Mexico 87506, acts as investment advisor for, and will
manage the investment and reinvestment of the assets of, each of the Funds in
accordance with the Funds’ respective investment objectives and policies,
subject to the general supervision and control of the Trustees of Thornburg
Investment Trust.
Thornburg
is paid a fee by each Fund, in the percentage amounts set forth in the
Prospectus.
The
fee paid by each Fund is allocated among the different classes of shares offered
by the Fund based upon the average daily net assets of each class of shares. All
fees and expenses are accrued daily and deducted before payment of dividends. In
addition to the fees of Thornburg, each Fund will pay all other costs and
expenses of its operations. Each Fund also will bear the expenses of registering
and qualifying the Fund and its shares for distribution under federal and state
securities laws, including legal fees.
The
Trust’s Trustees (including a majority of the Trustees who are not “interested
persons” within the meaning of the 1940 Act) have approved the Investment
Advisory Agreement applicable to each of the Funds, and annually consider the
renewal of the agreement applicable to each of the Funds. In connection with
their general supervision of Thornburg, and as an important element of their
annual consideration of a renewal of the Investment Advisory Agreement
applicable to each Fund, the Trustees receive and consider reports from
Thornburg throughout the year. These reports address a wide variety of topics,
including particularly Thornburg’s services to each Fund and its selection of
investments of pursuit of each Fund’s investment objectives.
The
Trustees have considered the responsibilities of mutual fund trustees generally
and the Trustees’ understandings of shareholders’ expectations about the
management of the mutual funds in which they have invested. The Trustees have
concluded, based upon these discussions and a consideration of applicable law,
that the principal obligation of mutual fund trustees is to assess the nature
and quality of an investment advisor’s services, and to confirm that the advisor
actively and competently pursues the mutual fund’s objectives. The Trustees have
further concluded that while mutual fund trustees should determine that a fund’s
fees and costs are reasonable in relation to the services rendered and generally
in line with those charged by other investment advisors, putting an investment
advisory agreement “out to bid” as a matter of course would be inconsistent with
shareholder interests and contrary to shareholder expectations when they
invested in a fund, and that mutual fund trustees should not do so unless an
advisor materially failed to pursue a fund’s objectives in accordance with its
policies or for other equally important reasons. The Trustees also observed in
their deliberations that Thornburg Fund shareholders appear to invest with a
long-term perspective, and that in reviewing the Funds’ performance, the
Trustees should focus on the longer-term perspective rather than current
fashions or short-term performance.
The
Trust’s Trustees most recently determined to renew the Investment Advisory
Agreement applicable to each Fund on September 13, 2022.
In
anticipation of their recent consideration of the Investment Advisory
Agreement’s renewal, the independent Trustees met in May 2022 to consider
aspects of their annual evaluation of the advisor’s service to all of the Funds,
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 2022 to further define certain portions of the information to be submitted
by the advisor. The independent Trustees met again in a September 2022
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 Funds’ fee and expense levels, investment performance
and other information presented for each 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.
A
discussion regarding the basis for the approval of each Fund’s Investment
Advisory Agreement by the Trustees for the period ending October 31, 2023 is
contained in the Fund’s Annual Report to Shareholders for the year ended
September 30, 2022.
The
Investment Advisory Agreement applicable to each Fund may be terminated by
either party, at any time without penalty, upon 60 days’ written notice, and
will terminate automatically in the event of its assignment. Termination will
not affect the right of Thornburg to receive payments on any unpaid balance of
the compensation earned prior to termination. The Agreement further provides
that in the absence of willful misfeasance, bad faith or gross negligence on the
part of Thornburg, or of reckless disregard of its obligations and duties under
the Agreement, Thornburg will not be liable for any action or failure to act in
accordance with its duties thereunder.
For
the three most recent fiscal years with respect to each Fund, Thornburg was
entitled to receive the following amounts from each Fund pursuant to the
Investment Advisory Agreement applicable to the Fund.
|
|
Year Ended September 30,
2020 |
|
|
Year Ended September 30,
2021 |
|
|
Year Ended September 30,
2022 |
|
Global Opportunities Fund |
|
$ |
9,061,315 |
|
|
$ |
8,969,271 |
|
|
$ |
8,553,002 |
|
International Equity Fund |
|
$ |
22,741,644 |
|
|
$ |
27,218,387 |
|
|
$ |
21,870,175 |
|
International Growth Fund |
|
$ |
12,400,287 |
|
|
$ |
15,955,407 |
|
|
$ |
11,772,104 |
|
Developing World Fund |
|
$ |
8,040,561 |
|
|
$ |
10,869,056 |
|
|
$ |
10,271,806 |
|
Small/Mid
Cap Core Fund |
|
$ |
6,821,818 |
|
|
$ |
7,203,827 |
|
|
$ |
6,041,811 |
|
Small/Mid
Cap Growth Fund |
|
$ |
5,438,904 |
|
|
$ |
6,340,126 |
|
|
$ |
3,969,580 |
|
Income
Builder Fund |
|
$ |
84,738,795 |
|
|
$ |
74,957,105 |
|
|
$ |
76,480,645 |
|
Limited Term U.S. Government
Fund |
|
$ |
1,081,141 |
|
|
$ |
1,330,448 |
|
|
$ |
1,045,837 |
|
Limited Term Income Fund |
|
$ |
20,723,267 |
|
|
$ |
29,821,307 |
|
|
$ |
29,147,067 |
|
Strategic
Income Fund |
|
$ |
11,636,292 |
|
|
$ |
18,454,062 |
|
|
$ |
24,748,192 |
|
For
some or all of the three most recent fiscal years, Thornburg has waived its
rights to certain fees which it was otherwise entitled to receive from certain
Funds pursuant to the Investment Advisory Agreement applicable to those Funds.
The specific amounts waived by Thornburg are as follows:
|
|
Year Ended September 30,
2020 |
|
|
Year Ended September 30,
2021 |
|
|
Year Ended September 30,
2022 |
|
Global Opportunities Fund |
|
$ |
474,833 |
|
|
$ |
402,051 |
|
|
$ |
521,139 |
|
International Equity Fund |
|
$ |
187,754 |
|
|
$ |
0 |
|
|
$ |
2,468,450 |
|
International Growth Fund |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
29,465 |
|
Developing World Fund |
|
$ |
243,905 |
|
|
$ |
16,756 |
|
|
$ |
1,087,271 |
|
Small/Mid
Cap Core Fund |
|
$ |
3,022 |
|
|
$ |
1,264,332 |
|
|
$ |
408,108 |
|
Small/Mid
Cap Growth Fund |
|
$ |
2,858 |
|
|
$ |
1,107,296 |
|
|
$ |
316,748 |
|
Strategic Income Fund |
|
$ |
3,059,462 |
|
|
$ |
3,028,073 |
|
|
$ |
3,020,273 |
|
Thornburg
may (but is not obligated to) waive its rights to any portion of its fees in the
future, and may use any portion of its fees for purposes of shareholder and
administrative services and distribution of Fund shares.
Garrett
Thornburg, Chairman and Trustee of Thornburg Investment Trust, is also a
director and controlling shareholder of Thornburg, and Brian McMahon, Vice
Chairman and Trustee of Thornburg Investment Trust, is also a director of
Thornburg. In addition, various individuals who are officers of the Trust also
serve as officers of Thornburg, as described below under the caption
“Management.”
Proxy Voting Policies
Thornburg
is authorized by the Trust to vote proxies respecting voting securities held by
the Funds. In those cases, Thornburg votes proxies in accordance with written
Proxy Voting Policies and Procedures (the “Policy”) adopted by Thornburg. The
Policy states that the objective of voting a security is to enhance the value of
the security, or to reduce potential for a decline in the security’s value. The
Policy prescribes procedures for assembling voting information and applying the
informed expertise and judgment of Thornburg on a timely basis in pursuit of
this voting objective.
The
Policy also prescribes a procedure for voting proxies when a vote presents a
conflict between the interests of the Fund and Thornburg. If the vote relates to
the election of a director in an uncontested election or ratification or
selection of independent accountants, the investment advisor will vote the proxy
in accordance with the recommendation of any proxy voting service engaged by
Thornburg. If no such recommendation is available, or if the vote involves other
matters, Thornburg will refer the vote to the Trust’s operations risk oversight
committee for direction on the vote or consent to vote on Thornburg’s
recommendation.
The
Policy authorizes Thornburg to utilize various sources of information in
considering votes, including the engagement of service providers who provide
analysis and information on the subjects of votes and who may recommend voting
positions. Thornburg has engaged Institutional Shareholder Services (“ISS”) to
provide these services to Thornburg in connection with voting proxies for each
of the Funds. Thornburg may or may not accept recommendations from ISS.
Thornburg also may decline to vote in various situations, including cases where
an issue is not relevant to the Policy’s voting objective or where it is not
possible to ascertain what effect a vote may have on the value of an investment.
Thornburg may not be able to vote proxies in cases where proxy voting materials
are not delivered to Thornburg in sufficient time for evaluation and voting.
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.
Administrative Services Agreement
Administrative
services are provided to the Funds under the Third Restated Administrative
Services Agreement between the Trust and Thornburg dated February 1, 2018 (the
“Administrative Services Agreement”) which requires Thornburg to perform certain
administrative services and engage in activities beyond those specifically
required by the Investment Advisory Agreement, and to provide related services.
The activities and services to be provided by Thornburg under the Administrative
Services Agreement include the administration, monitoring, supervision,
performance or direction of certain administrative functions necessary or
desirable for the operation of the Funds, generally including: monitoring,
supervision and direction of fund accounting and administration, tax accounting
and reporting, custodial and transfer agent services, account administration,
information technology services, legal services, and other services provided by
third parties to the Funds; coordination and management of financial audits;
monitoring of financial intermediaries in connection with their provision of
non-distribution services to the Funds; supervision and direction of and
assistance in the preparation of registration statements and other governmental
filings, income and other tax returns, and reports and other communications to
shareholders; coordination and supervision of certain portfolio valuation
functions; monitoring, supervision and conduct of legal compliance functions;
providing personnel necessary to furnish the services required by the
Administrative Services Agreement together with the office space and other
support necessary for those services; and such other services and activities as
the parties may agree from time to time.
The
Trust pays Thornburg a fee for the services that Thornburg provides pursuant to
the Administrative Services Agreement. That fee is computed as an annual
percentage of the aggregate average daily net assets of all share classes of all
Funds described in this Statement of Additional Information, paid monthly, as
follows:
Net Assets |
Percentage Rate |
0 to $20
billion |
0.100% |
$20 billion
to $40 billion |
0.075% |
$40 billion
to $60 billion |
0.040% |
Over $60
billion |
0.030% |
together
with any applicable sales or similar tax.
For
the three most recent fiscal years with respect to each Fund, the amounts paid
to Thornburg by each Fund under the Administrative Services Agreements were as
follows:
|
|
|
Year
Ended
September
30, 2020 |
|
|
Year Ended September 30, 2021 |
|
|
Year
Ended
September
30, 2022 |
Global
Opportunities Fund |
|
$ |
951,860 |
|
$ |
901,917 |
|
$ |
865,561 |
International Equity Fund |
|
$ |
2,655,976 |
|
$ |
3,113,901 |
|
$ |
2,458,049 |
International Growth Fund |
|
$ |
1,335,082 |
|
$ |
1,697,327 |
|
$ |
1,221,727 |
Developing World Fund |
|
$ |
746,016 |
|
$ |
982,717 |
|
$ |
933,690 |
Small/Mid
Cap Core Fund |
|
$ |
705,359 |
|
$ |
716,742 |
|
$ |
601,467 |
Small/Mid
Cap Growth Fund |
|
$ |
557,344 |
|
$ |
628,265 |
|
$ |
389,224 |
Income
Builder Fund |
|
$ |
10,785,438 |
|
$ |
9,126,071 |
|
$ |
9,410,549 |
Limited
Term U.S. Government Fund |
|
$ |
255,780 |
|
$ |
302,107 |
|
$ |
239,000 |
Limited
Term Income Fund |
|
$ |
5,714,454 |
|
$ |
8,290,204 |
|
$ |
8,155,582 |
Strategic
Income Fund |
|
$ |
1,545,596 |
|
$ |
2,599,775 |
|
$ |
3,721,381 |
The
agreements applicable to each class may be terminated by either party, at any
time without penalty, upon 60 days’ written notice, and will terminate
automatically upon assignment. Termination will not affect the service
provider’s right to receive fees earned before termination. The agreements
further provide that in the absence of willful misfeasance, bad faith or gross
negligence on the part of the service provider, or reckless disregard of its
duties thereunder, the provider will not be liable for any action or failure to
act in accordance with its duties thereunder.
SERVICE AND DISTRIBUTION PLANS
Service Plan
Each
of the Funds has adopted a plan of distribution pursuant to Rule 12b-1 under the
1940 Act (“Service Plan”), which is applicable to Class R3, Class R4 and Class
R5 shares of the Fund. The Service Plan authorizes each Fund to pay to Thornburg
Securities Corporation (“TSC”), or to such persons as TSC may direct, out of the
assets of the Fund, an annual amount not exceeding 0.25% of the Fund’s assets,
together with any applicable gross receipts tax, sales tax, value added tax,
compensating tax or similar exaction imposed by any federal, state or local
government, though the aggregate of those taxes shall not exceed 10%. Each Fund
has also entered into a distribution agreement with TSC, pursuant to which TSC
agrees to provide or obtain from other persons the services described in the
Service Plan, and the Fund agrees to pay TSC or other persons as TSC directs for
providing or obtaining those services.
Payments
by a Fund under the Service Plan and the related distribution agreement with TSC
may be made for: (a) expenses incurred by TSC, or by other persons at the
request or direction of TSC or the Trust, for the promotion and distribution of
the shares of the Fund, including but not limited to, printing of prospectuses
and reports used for sales purposes, advertisements, expenses of preparation and
printing of sales literature and other distribution-related expenses, and
further including any compensation paid to securities dealers and other
financial intermediaries which have executed selling agreements with TSC; and
(b) expenses incurred by TSC, or by other persons at the request or direction of
the Trust or TSC, in connection with the provision of services to the
shareholders of the Fund pursuant to selling agreements with TSC or other
service agreements or similar arrangements with TSC, Thornburg or the Trust,
which services include providing personal services to shareholders and
maintaining shareholder accounts, including, but not limited to, administrative,
transactional, distribution and redemption, and accounting and reporting
services with respect to Fund shareholders and accounts, and providing
information to shareholders and responding to shareholder inquiries; and (c)
such other services and activities as may from time to time be agreed upon by
Trustees of the Trust and TSC. Payments by the Fund pursuant to the Service Plan
and the related distribution agreement with TSC shall be in addition to any
payments made outside of the Service Plan, as authorized by the Trustees of the
Trust as not being primarily intended to result in the sale of Fund shares.
In
the two most recent fiscal years, the principal type of activity for which
payments were made by the Funds under the Service Plan was compensation to
securities broker-dealers, financial institutions and other organizations which
render services to the applicable class of shareholders, including distribution,
shareholder account services, and administrative services. Reimbursements for
expenditures incurred by TSC or by other persons at the request or direction of
the Trust or TSC for the printing and distribution of reports and prospectuses
for use by potential investors in the Funds, preparing and distributing sales
literature, providing advertising and engaging in other promotional activities,
and other services were de minimis relative to payments made to broker-dealers,
financial institutions and other organizations under the Service Plan. The
Service Plan does not provide for accrued but unpaid reimbursements for such
expenditures to be carried over and reimbursed in later years. TSC has no
current intention to request or receive any payment under the Service Plan in
respect of a Fund’s Class R5 shares.
Class
R6 shares of the Funds are not subject to any plan pursuant to Rule 12b-1 under
the 1940 Act.
Class R3 Distribution Plan
Each
Fund offering Class R3 shares has adopted a plan of distribution pursuant to
Rule 12b-1 under the 1940 Act, applicable only to the Class R3 shares of that
Fund (“Distribution Plan”). The Distribution Plan authorizes each Fund to pay to
TSC, or to such persons as TSC may direct, out of the assets of each share class
of the Fund to which the Distribution Plan is applicable, an annual amount of
0.25% of the average daily net assets attributable to the Fund’s Class R3
shares, together with any applicable gross receipts tax, sales tax, value added
tax, compensating tax or similar exaction imposed by any federal, state or local
government, though the aggregate of those taxes shall not exceed 10%. Each Fund
has also entered into a distribution agreement with TSC, pursuant to which TSC
agrees to provide or obtain from other persons the services described in the
Distribution Plan, and the Fund agrees to pay TSC or other persons as TSC
directs for providing or obtaining those services.
Payments
by a Fund under the Distribution Plan and the related distribution agreement
with TSC may be made for: (a) compensation and ongoing commissions (including
incentive compensation) to securities dealers, financial institutions and other
organizations which render distribution and administrative services in
connection with the distribution of the share classes of the Funds; (b) the
printing and distribution of reports and prospectuses for the use of potential
investors; (c) preparing and distributing sales literature; (d) providing
advertising and engaging in other promotional activities, including direct mail
solicitation, and television, radio newspaper and other media advertisements;
and (e) such other services and activities as may from time to time be agreed
upon by Trustees of the Trust and TSC. The Trust and TSC are authorized under
the Distribution Plan to instruct the Funds’ transfer agent or other agents of
the Funds to pay these amounts directly to financial services firms or other
persons engaged to provide the foregoing services.
Amounts Paid Under Rule 12b-1 Plans and
Agreements
For
each Fund, the following table shows amounts paid by the Fund in each of the
last two fiscal years pursuant to the Service Plan adopted by the Fund.
|
|
Year
Ended
September
30, 2021 |
|
|
Year Ended September 30,
2022 |
|
Global Opportunities
Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
10,023 |
|
|
$ |
8,502 |
|
Class R4 |
|
$ |
15,451 |
|
|
$ |
14,354 |
|
International Equity Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
419,819 |
|
|
$ |
335,364 |
|
Class R4 |
|
|
273,141 |
|
|
$ |
223,318 |
|
International Growth Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
20,158 |
|
|
$ |
15,086 |
|
Class R4 |
|
|
23,140 |
|
|
$ |
21,632 |
|
Small/Mid Cap Core Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
62,626 |
|
|
$ |
46,726 |
|
Class R4 |
|
|
12,335 |
|
|
$ |
9,328 |
|
Small/Mid Cap Growth Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
79,579 |
|
|
$ |
49,093 |
|
Class R4 |
|
|
6,092 |
|
|
$ |
3,685 |
|
Income Builder Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
64,972 |
|
|
$ |
61,170 |
|
Class R4 |
|
$ |
33,930 |
|
|
$ |
31,794 |
|
Limited Term U.S. Government
Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
21,239 |
|
|
$ |
13,557 |
|
Class R4 |
|
$ |
6,268 |
|
|
$ |
4,262 |
|
Limited Term Income Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
148,580 |
|
|
$ |
137,345 |
|
Class R4 |
|
$ |
21,369 |
|
|
$ |
29,250 |
|
Strategic Income Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
2,431 |
|
|
$ |
1,874 |
|
Class R4 |
|
$ |
4,690 |
|
|
$ |
5,343 |
|
For
each Fund that offers Class R3 shares, the following table shows amounts paid by
the Fund in each of the last two fiscal years pursuant to the Distribution Plan
adopted by the Fund:
|
|
Year
Ended
September
30, 2021 |
|
|
Year Ended September 30,
2022 |
|
Global Opportunities Fund |
|
|
|
|
|
|
|
|
Class
R3 |
|
$ |
10,023 |
|
|
$ |
8,502 |
|
International Equity Fund |
|
|
|
|
|
|
|
|
Class
R3 |
|
$ |
419,819 |
|
|
$ |
335,364 |
|
International Growth Fund |
|
|
|
|
|
|
|
|
Class
R3 |
|
$ |
20,158 |
|
|
$ |
15,086 |
|
Small/Mid Cap Core Fund |
|
|
|
|
|
|
|
|
Class
R3 |
|
$ |
62,625 |
|
|
$ |
46,726 |
|
Small/Mid
Cap Growth Fund |
|
|
|
|
|
|
|
|
Class
R3 |
|
$ |
79,579 |
|
|
$ |
49,092 |
|
Income
Builder Fund |
|
|
|
|
|
|
|
|
Class
R3 |
|
$ |
64,971 |
|
|
$ |
61,170 |
|
Limited Term U.S. Government
Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
21,239 |
|
|
$ |
13,557 |
|
Limited Term Income Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
148,580 |
|
|
$ |
137,345 |
|
Strategic Income Fund |
|
|
|
|
|
|
|
|
Class R3 |
|
$ |
2,430 |
|
|
$ |
1,875 |
|
FINANCIAL INTERMEDIARY COMPENSATION
Financial
advisors and financial intermediaries who sell shares and hold shares for
investors (“intermediaries”) charge compensation in connection with the sale of
Fund shares and the servicing of shareholder accounts. Intermediaries receiving
this compensation may include securities brokers and dealers, registered
investment advisors, banks, trust companies, insurance companies, employee
benefit plan and retirement plan administrators, and other institutions that
have entered into arrangements with Thornburg or TSC under which they are paid
compensation for the sale of Fund shares or the servicing of accounts for their
customers. Intermediaries may categorize and disclose these payments to their
customers and to members of the public differently than the disclosures in the
Prospectus and this SAI.
Thornburg
or TSC may pay compensation charged by intermediaries out of amounts that
Thornburg or TSC receive from the Funds. Examples of such payments include, but
are not limited to: (i) share sales commissions and ongoing asset-based
compensation paid by Thornburg or TSC out of sales charges received or expected
to be received from the Funds; (ii) amounts paid out of the Rule 12b-1 service
and distribution fees that TSC receive from the Funds; and (iii) amounts paid by
the Funds to compensate intermediaries who perform services, including
subaccounting and subtransfer agency services, that would otherwise need to be
provided by the Funds’ transfer agent or other persons hired directly by the
Funds. The Funds do not pay any of the foregoing amounts with respect to Class
R6 shares.
To
the extent permitted by applicable law, including applicable rules promulgated
by the Securities and Exchange Commission and the Financial Industry Regulatory
Authority (“FINRA”), Thornburg or TSC may also compensate intermediaries out of
Thornburg’s or TSC’s own resources. This compensation may be in the form of
commissions, finder’s fees or similar cash incentives, “revenue sharing,” and
marketing and advertising support. An intermediary may receive this compensation
in addition to the Rule 12b-1 or other compensation that the intermediary
receives out of the assets of the Funds. This compensation from Thornburg or TSC
may provide an incentive to financial intermediaries to actively market the sale
of shares of the Funds or to support the marketing efforts of Thornburg or TSC.
Examples of the types of services which an intermediary may provide (or may
arrange to have a third party provide) in exchange for receiving this
compensation from Thornburg or TSC include, but are not limited to: Fund due
diligence and business planning assistance; marketing programs and support;
operations and systems support; and training for the intermediary’s personnel
respecting the Funds and the financial needs of Fund shareholders. Each of
Thornburg or TSC may also make payments out of its own resources to compensate
an intermediary for costs associated with the intermediary’s marketing efforts
(including the cost of attendance at training and educational conferences), and
for costs associated with the intermediary’s shareholder support and account
maintenance services for its customers or transaction processing (including the
payment of certain ticket charges). Notwithstanding the foregoing, neither
Thornburg nor TSC pays any amount to financial intermediaries with respect to
Class R6 shares for shareholder support, account maintenance or administration,
recordkeeping, subaccounting or subtransfer agency, transaction processing or
similar service.
During
the fiscal year which ended September 30, 2022, Thornburg or TSC paid amounts
from its own resources to the following member firms of FINRA, or to the
affiliates of such firms, pursuant to written agreements with such firms:
American
Enterprise Investment Services, Inc.
Citigroup
Global Markets Inc.
Commonwealth
Financial Network
Empower
Financial Services, Inc.
Goldman
Sachs & Co.
Lincoln
Financial Advisors Corp.
Lincoln
Financial Securities Corp.
LPL
Financial Corporation
Merrill
Lynch, Pierce, Fenner & Smith Inc.
Morgan
Stanley Smith Barney
National
Financial Services, LLC
Pershing,
LLC
Principal
Life Insurance Company
Raymond
James & Associates, Inc.
RBC
Wealth Management
UBS
Financial Services, Inc.
Voya
Financial Advisors
Wells
Fargo Clearing Services, LLC
Each
of Thornburg and TSC may also make payments out of its own resources to
institutions that are not member firms of FINRA and that are not included among,
or affiliated with, the institutions listed above.
PORTFOLIO TRANSACTIONS
All
orders for the purchase or sale of portfolio securities are placed on behalf of
each of the Funds by Thornburg pursuant to its authority under each Fund’s
investment advisory agreement. Thornburg also is responsible for the placement
of transaction orders for other clients for whom it acts as investment
advisor.
Thornburg,
in effecting purchases and sales of fixed income securities for the account of
each of the Funds, places orders in such a manner as, in the opinion of
Thornburg, offers the best available price and most favorable execution of each
transaction. Portfolio securities normally will be purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in such
securities, unless it appears that a better price of execution may be obtained
elsewhere. Purchases from underwriters will include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers will include
the spread between the bid and asked price.
Similarly,
Thornburg places orders for transactions in equity securities in such a manner
as, in the opinion of Thornburg, will offer the best available price and most
favorable execution of these transactions. In selecting broker dealers, subject
to applicable legal requirements, Thornburg considers various relevant factors,
including, but not limited to: the size and type of the transaction; the nature
and character of the markets for the security to be purchased or sold; the
execution efficiency, settlement capability, and financial condition of the
broker-dealer firm; the broker-dealer’s execution services rendered on a
continuing basis; and the reasonableness of any commissions; and arrangements
for payment of Fund expenses. Generally commissions for foreign investments
traded will be higher than for U.S. investments and may not be subject to
negotiation.
Thornburg
may execute a Fund’s portfolio transactions with broker-dealers who provide
research and brokerage services to Thornburg. Such services may include, but are
not limited to, provision of market information relating to the security,
economy, industries or specific companies; order execution systems; technical
and quantitative information about the markets; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). Research and brokerage services include information and analysis
provided electronically through online facilities. The receipt of research from
broker-dealers who execute transactions on behalf of the Funds may be useful to
Thornburg in rendering investment management services to the Funds. The receipt
of such research may not reduce Thornburg’s normal independent research
activities; however, it may enable Thornburg to avoid the additional expenses
that could be incurred if Thornburg tried to develop comparable information
through its own efforts.
Thornburg
may pay, or be deemed to pay, to broker-dealers who provide research and
brokerage services to Thornburg, commission rates higher than might otherwise be
obtainable from other broker-dealers. Thornburg does not attempt to assign a
specific dollar value to the research provided in connection with trades for
client accounts or to allocate the relative cost or benefit of research or
brokerage services. The research and brokerage services may benefit client
accounts other than the specific client account(s) for which a trade is
effected, and some or all of the research or brokerage services received with
respect to a specific trade may not be used in connection with the account(s)
for which the trade was executed. Some of the described services may be
available for purchase by Thornburg on a cash basis.
It
is Thornburg’s policy, in circumstances where Thornburg receives research or
brokerage services from a broker-dealer, to determine in accordance with federal
securities laws that: (i) the research or brokerage services are “brokerage or
research services” as that term is defined in Section 28(e) of the Securities
and Exchange Act of 1934, as amended; (ii) the services provide lawful and
appropriate assistance in the performance of Thornburg’s investment management
decisions; and (iii) the commissions paid are reasonable in relation to the
value of the research or brokerage services provided. In circumstances where
Thornburg determines that it has received research or brokerage services that
fulfill the requirements under Thornburg’s policy, Thornburg determines the
portion of non-qualifying products or services and pays for those products or
services from its own resources.
During
some or all of the three most recent fiscal years brokerage commissions were
paid by Global Opportunities Fund, International Equity Fund, International
Growth Fund, Developing World Fund, Small/Mid Cap Core Fund, Small/Mid Cap
Growth Fund, Income Builder Fund, and Strategic Income Fund. The aggregate
commissions paid by each of those Funds during each of the last three fiscal
years are as follows:
|
|
|
Year
Ended
Sept.
30, 2020 |
|
|
Year
Ended
Sept.
30, 2021 |
|
|
Year Ended September 30,
2022 |
|
Global Opportunities Fund |
|
|
$ |
984,040 |
|
|
$ |
443,351 |
|
|
$ |
599,629 |
|
International Equity Fund |
|
|
$ |
5,092,629 |
|
|
$ |
3,364,153 |
|
|
$ |
3,358,162 |
|
International Growth Fund |
|
|
$ |
924,449 |
|
|
$ |
1,194,279 |
|
|
$ |
1,951,237 |
|
Developing World Fund |
|
|
$ |
1,184,200 |
|
|
$ |
2,299,378 |
|
|
$ |
2,182,952 |
|
Small/Mid
Cap Core Fund |
|
|
$ |
266,689 |
|
|
$ |
874,555 |
|
|
$ |
550,869 |
|
Small/Mid
Cap Growth Fund |
|
|
$ |
191,440 |
|
|
$ |
686,511 |
|
|
$ |
399,860 |
|
Income
Builder Fund |
|
|
$ |
13,465,959 |
|
|
$ |
4,584,036 |
|
|
$ |
5,907,506 |
|
Strategic
Income Fund |
|
|
$ |
45,167 |
|
|
$ |
7,139 |
|
|
$ |
2,163 |
|
Increases
in brokerage commissions paid by a Fund from year to year are primarily
attributable to increases in the number of equity trades placed by the Fund,
while decreases in brokerage commissions paid by a Fund from year to year are
primarily attributable to decreases in the number of equity trades placed by the
Fund. The variance in equity trading activity from year-to-year may reflect a
number of factors, including the advisor’s identification of investment
opportunities for a Fund, the advisor’s decision to rebalance a Fund’s portfolio
in response to actual or anticipated changes in market conditions, equity
purchases made in response to shareholder inflows to a Fund, and equity sales
made to meet shareholder redemption requests.
Some
of the Funds owned during the fiscal year securities issued by certain of their
regular broker dealers. Those broker dealers and the aggregate dollar value of
each such broker dealer’s securities held by a Fund on September 30, 2022 are
shown below:
|
|
Limited Term
Income Fund |
|
|
Income Builder
Fund |
|
|
Global
Opportunities Fund |
|
|
Strategic
Income Fund |
|
CitiGroup |
|
$ |
47,735,681 |
|
|
$ |
41,386,602 |
|
|
$ |
21,793,410 |
|
|
$ |
20,809,582 |
|
Credit Suisse |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldman Sachs |
|
$ |
2,988,609 |
|
|
|
|
|
|
|
|
|
|
$ |
22,200,762 |
|
HSBC |
|
$ |
37,695,613 |
|
|
|
|
|
|
|
|
|
|
$ |
17,118,668 |
|
JP Morgan |
|
$ |
41,856,316 |
|
|
$ |
189,877,963 |
|
|
|
|
|
|
$ |
19,468,656 |
|
Liquidnet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merrill Lynch |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morgan Stanley |
|
$ |
22,773,393 |
|
|
$ |
2,397,600 |
|
|
|
|
|
|
$ |
1,518,738 |
|
Sanford Bernstein |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UBS |
|
$ |
25,641,098 |
|
|
$ |
61,300,090 |
|
|
|
|
|
|
$ |
10,701,660 |
|
Thornburg
may use research services provided by and place portfolio transactions with
brokerage firms that have provided assistance in the distribution of shares of
the Funds to the extent permitted by law. Thornburg may use research services
provided by and place agency transactions with TSC if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated, qualified
brokerage firms for similar services. Thornburg may allocate brokerage
transactions to broker-dealers who have entered into arrangements with Thornburg
under which the broker-dealer allocates a portion of the commissions paid by the
Fund toward payment of the Fund’s expenses, such as transfer agent fees or
custodian fees. The transaction quality must, however, be comparable to those of
other qualified broker-dealers.
Thornburg
reserves the right to manage other investment companies and investment accounts
for other clients which may have investment objectives similar to those of the
Funds. Subject to applicable laws and regulations, Thornburg will attempt to
allocate equitably portfolio transactions among the Funds and the portfolios of
its other clients purchasing securities whenever decisions are made to purchase
or sell securities by a Fund and one or more of such other clients
simultaneously. In making such allocations the main factors to be considered
will be the respective investment objectives of the Fund and the other clients,
the size and nature of investment positions then held by the Fund and the other
clients, and the strategy, timing and restrictions applicable respectively to
the Fund and the other clients. While this procedure could have a detrimental
effect on the price or amount of the securities available to a Fund from time to
time, it is the opinion of the Funds’ Trustees that the benefits available from
Thornburg’s organization will outweigh any disadvantage that may arise from
exposure to simultaneous transactions.
Portfolio Turnover Rates
The
Funds’ respective portfolio turnover rates for the two most recent fiscal years
are as follows:
|
|
Year Ended Sept. 30, 2021 |
|
|
Year Ended Sept. 30, 2022 |
|
Global Opportunities
Fund |
|
|
25.48 |
% |
|
|
26.92 |
% |
International Equity Fund |
|
|
42.85 |
% |
|
|
48.88 |
% |
International Growth Fund |
|
|
34.41 |
% |
|
|
63.54 |
% |
Developing World Fund |
|
|
61.50 |
% |
|
|
68.24 |
% |
Small/Mid Cap Core Fund |
|
|
135.80 |
% |
|
|
46.19 |
% |
Small/Mid Cap Growth Fund |
|
|
161.43 |
% |
|
|
57.56 |
% |
Income Builder Fund |
|
|
18.99 |
% |
|
|
25.31 |
% |
Limited Term U.S. Government
Fund |
|
|
9.50 |
% |
|
|
28.92 |
% |
Limited Term Income Fund |
|
|
33.37 |
% |
|
|
46.77 |
% |
Strategic Income Fund |
|
|
28.55 |
% |
|
|
27.19 |
% |
Variations
in a Fund’s portfolio turnover rate from year-to-year are generally due to
repositioning of the Fund’s portfolio in response to changing market
conditions.
DISCLOSURE OF PORTFOLIO SECURITIES HOLDINGS
INFORMATION
The
Trustees have adopted policies and procedures respecting and limiting the
circumstances under which nonpublic holdings information respecting the Funds’
current portfolio holdings information may be disclosed to persons not
associated with the Funds, Thornburg, or TSC. “Nonpublic Holdings Information”
means any information respecting portfolio investments of any Fund (including
but not limited to, the identity of the issuer, number of shares, denominations,
purchase or sale dates, countries of origin, maturities or duration, credit
ratings, currency in which investments are denominated or corresponding hedging
positions, or options, futures or other derivative positions) which has not been
made publicly available. The objective in adopting these policies and procedures
is to reduce the exposure of the Funds and their shareholders to harm resulting
from trading of Fund shares by persons in possession of material nonpublic
information respecting the Funds’ portfolio holdings. These policies and
procedures are intended to operate in conjunction with Thornburg’s policies
prohibiting securities transactions using material nonpublic information.
Neither the Funds nor Thornburg nor any affiliate thereof receives compensation
or other consideration in connection with the disclosure of information about
the Funds’ portfolio holdings.
Selective Disclosure of Nonpublic Holdings
Information
Disclosure
of nonpublic information respecting current Fund portfolio holdings information
is generally prohibited. However, nonpublic holdings information may be
disclosed to specified persons in accordance with the Trust’s policy and
procedures for the disclosure of such information. Pursuant to the policy and
procedures, nonpublic portfolio holdings information may be disclosed under
certain circumstances to: the Trust’s registered independent public accounting
firm, independent accounting firms and legal counsel; the Trust’s custodian,
subcustodians and securities depositories; valuation and pricing services and
agents; financial printing services; mutual fund analysts; securities broker
dealers in connection with placing a specific trade in a particular portfolio
security; financial consultants to the Funds or investment advisor; certain
other specified persons; and persons who are not otherwise specified in the
policy in connection with a legitimate business purpose of any Fund and with the
approval of the Trust’s chief compliance officer or the chief compliance
officer’s designee, the Trustees, or the Trustees’ Governance and Nominating
Committee. In any case where nonpublic portfolio holdings information is
disclosed to a third party, Thornburg seeks to confirm that the person to whom
the disclosure is made is subject to a contractual provision, professional rule
or obligation, or undertaking respecting the maintenance of the confidentiality
of the nonpublic information. Nonpublic holdings information may also be
disclosed to cooperate fully regulatory authorities, subject to laws and
regulations respecting disclosure of private or nonpublic information.
As
of the date of this Statement of Additional Information, Thornburg has ongoing
arrangements that would permit Thornburg to disclose the Funds’ nonpublic
portfolio holdings information to the persons noted in the following table.
Unless otherwise noted in the table below, there will typically be no lag time
between the date of the information and the date on which the information is
disclosed.
Name
of Recipient |
Frequency |
Time
Lag Between Date of Information and Date of Disclosure |
Bloomberg
L.P. |
Daily
(Pricing) |
None |
Empire
Valuation Consultants, LLC |
Quarterly
(Pricing) |
None |
FactSet
Research Systems |
Daily |
None |
ICE
Data Services |
Daily
(Pricing) |
None |
IHS
Markit Ltd. |
Daily
(Pricing) |
None |
Institutional
Shareholder Services, Inc. |
Daily |
None |
J.P
Morgan Pricing Direct Inc. |
Daily
(Pricing) |
None |
Bank
of America Merrill Lynch |
Daily
(Pricing) |
None |
Valuation
Research Corporation |
Quarterly
(Pricing) |
None |
Morgan
Stanley Smith Barney |
Weekly |
One
day |
PricewaterhouseCoopers
LLP |
Daily |
None |
Quality
EDGAR Solutions, LLC |
Monthly |
One
month or less, depending on the date of request |
Refinitiv |
Daily
(Pricing) |
None |
Donnelley
Financial Solutions (DFIN) |
Monthly |
One
month or less, depending on the date of request |
State
Street Bank and Trust |
Daily |
None |
MSCI |
Daily |
None |
April,
Dolan, Hickey & Koehler, P.C. |
As
needed in connections with the legal services provided to the
Fund |
None |
Clearwater
Analytics |
Daily |
None |
Making Holdings Information Publicly
Available
In
addition to the ongoing arrangements described above, the Trust’s policy and
procedures respecting disclosure of portfolio holdings information provide for
periodic public disclosure of that, as follows:
|
● |
Disclosure of the Funds’ nonpublic holdings
information on a publicly available website maintained by or for the Trust
or the Advisor. The Trust will typically display the monthly portfolio
holdings of each Equity Fund (including top ten holdings) approximately 30
days after the end of that calendar month (e.g. June 30 information
will be displayed on July 31). The Trust will typically display the
monthly top ten holdings of some of the Fixed Income Funds approximately
30 days after the end of that calendar month. Approximately 60 days after
the end of each calendar quarter, the Trust also typically includes on its
website a list of each Funds’ holdings as of the last day of that calendar
quarter. |
|
● |
Disclosure of portfolio holdings in publicly
available reports and filings filed with the Securities and Exchange
Commission on its Electronic Data Gathering, Analysis and Retrieval System
(EDGAR). |
|
● |
Disclosure of portfolio holdings of any Fund in
reports and communications mailed and otherwise disseminated to
shareholders of the Fund in accordance with the 1940 Act or any regulation
thereunder. |
In
any case where it becomes apparent that nonpublic portfolio holdings information
has been disclosed other than in accordance with the Trust’s policy and
procedures, the Trust’s chief compliance officer shall determine appropriate
action to be taken, which may include making a corrective public disclosure of
the relevant nonpublic information
Portfolio
holdings information made publicly available in accordance with this section is
no longer nonpublic information subject to the disclosure restrictions in the
policies and procedures.
MANAGEMENT
Each
of the Funds is a separate “series” or investment portfolios of the Trust. The
names of Trustees and officers of the Funds and their principal occupations and
affiliations during the past five years are set forth in the table below.
Additional information about the particular experiences, qualifications,
attributes and skills of each Trustee appears after the table.
Interested Trustees
Name, Address(1) and
Age |
Position(s) Held with
Trust(2) |
Term of Office and Length of Time
Served(3) |
Principal Occupation(s) During Past 5
Years |
Number of Portfolios in Fund Complex Overseen
by Director(2) |
Other Directorships Held by Director During
Past Five Years |
Garrett Thornburg, 76 |
Chairman of Trustees(4) |
Trustee Since 1984 |
Chairman
and controlling shareholder of Thornburg Investment Management, Inc.
(investment advisor); Chairman and controlling shareholder of Thornburg
Securities Corporation (securities dealer);
Chairman
of the Thornburg Foundation (nonprofit). |
Twenty One |
None |
|
|
|
|
|
|
Brian J. McMahon, 67 |
Vice
Chairman of Trustees, Member of Governance & Nominating Committee and
Operations Risk Oversight Committee(5) |
Trustee since 2001 |
Vice Chairman, Chief Investment Strategist,
Managing Director, and Portfolio Manager and, until 2016, CEO and
President, of Thornburg Investment Management, Inc.; Vice President of
Thornburg Securities Corporation. |
Twenty One |
None |
Independent Trustees
Name, Address(1) and
Age |
Position(s) Held with
Trust(2) |
Term of Office and Length of Time
Served |
Principal Occupation(s) During Past 5
Years |
Number of Portfolios in Fund Complex Overseen
by Director(2) |
Other Directorships Held by Director During
Past Five Years |
Sally Corning, 61 |
Trustee,
Member of Audit Committee, and Governance & Nominating
Committee |
Trustee since 2012 |
Partner in Sun Mountain Capital, Santa Fe,
NM (private equity firm with investment programs encompassing venture
capital, mezzanine debt, and growth equity). |
Twenty One |
None |
Susan H. Dubin, 73 |
Trustee, Member of Audit Committee, and Operations
Risk Oversight Committee |
Trustee since 2004 |
President
of Dubin Investments, Ltd., Greenwich, CT (private investment fund);
Director and officer of various charitable organizations. |
Twenty One |
None |
|
|
|
|
|
|
David L. Gardner, 59 |
Trustee,
Chair of Governance & Nominating Committee, and Member of Operations
Risk Oversight Committee
|
Trustee since 2015 |
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. |
Twenty One |
None |
|
|
|
|
|
|
Patrick J. Talamantes, 58 |
Trustee, Chair of Audit Committee |
Trustee since 2019 |
President of Talamantes Strategies, a management
consulting firm, since 2018. Until 2017, President and Chief Executive
Officer of The McClatchy Company, Sacramento, CA (news and media
company). |
Twenty One |
None |
|
|
|
|
|
|
Owen D. Van Essen, 68 |
Lead
Independent Trustee, Member of Audit Committee and Governance &
Nominating Committee |
Trustee since 2004 |
President of Dirks, Van Essen & April, Santa
Fe, New Mexico (newspaper mergers and acquisitions). |
Twenty One |
None |
|
|
|
|
|
|
James W. Weyhrauch, 63 |
Trustee,
Chair of Operations Risk Oversight Committee, and Member of Audit
Committee
|
Trustee since 1996 |
Real
estate broker, Santa Fe Properties, Santa Fe, NM; General Partner,
Investments of Genext LLC (a family investment partnership); until 2019,
Vice Chairman of Nambé LLC, Santa Fe, NM (manufacturing and design
company).
|
Twenty One |
None |
Officers
of the Fund (who are not Trustees)(6)
Name, Address(1) and
Age |
Position(s) Held with
Trust(2) |
Term of Office and Length of Time
Served |
Principal Occupation(s) During Past 5
Years |
Number of Portfolios in Fund Complex
Overseen(2) |
Other Directorships Held During Past Five
Years |
Nimish Bhatt, 59 |
Chief Financial Officer |
Chief
Financial Officer since 2019, Treasurer 2016-2019,
Secretary 2018-2019(6)
|
Chief
Financial Officer and Treasurer of Thornburg Investment Management, Inc.
and Thornburg Securities Corporation since 2016, and Secretary of
Thornburg Securities Corporation since 2018; 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 |
Not applicable |
|
|
|
|
|
|
Jason Brady, 48 |
President |
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. |
Not applicable |
Not applicable |
|
|
|
|
|
|
Name, Address(1) and
Age |
Position(s) Held with
Trust(2) |
Term of Office and Length of Time
Served |
Principal Occupation(s) During Past 5
Years |
Number of Portfolios in Fund Complex
Overseen(2) |
Other Directorships Held During Past Five
Years |
Randy Dry, 48 |
Vice President |
Vice President since 2014 |
Chief Operating Officer since 2020, Chief
Administrative Officer (2016-2020), and Director of Institutional Group
(2014-2016) of Thornburg Investment Management, Inc. |
Not applicable |
Not applicable |
|
|
|
|
|
|
John
Hackett, 56
|
Vice President |
Vice President since 2020 |
Chief Marketing Officer, Thornburg Investment
Management, Inc. (since 2020); Global Head of Product Marketing, Northern
Trust Asset Management (2016-2020); Principal and Head of Marketing and
Business Development, The Townsend Group (2013-2016) |
Not applicable |
Not applicable |
|
|
|
|
|
|
Curtis Holloway, 55 |
Treasurer |
Treasurer since 2019(6) |
Director of Finance since 2021 and Director of
Fund Administration since 2019 of Thornburg Investment Management, Inc.;
Senior Vice President, Head of Fund Administration (2017-2019) and Vice
President, Fund Administration (2010-2017) of Calamos Investments, and
Chief Financial Officer (2017-2019) and Treasurer (2010-2019) of Calamos
Funds. |
Not applicable |
Not applicable |
|
|
|
|
|
|
Ben Kirby, 42 |
Vice President |
Vice President since 2014 |
Head of Investments since 2019, and Portfolio
Manager and Managing Director since 2013, of Thornburg Investment
Management, Inc. |
Not applicable |
Not applicable |
|
|
|
|
|
|
Jeff Klingelhofer, 41 |
Vice President |
Vice President since 2016 |
Head of Investments since 2019, Portfolio Manager
and Managing Director since 2015, Associate Portfolio Manager from
2012-2015, of Thornburg Investment Management, Inc. |
Not applicable |
Not applicable |
Name, Address(1) and
Age |
Position(s) Held with
Trust(2) |
Term of Office and Length of Time
Served |
Principal Occupation(s) During Past 5
Years |
Number of Portfolios in Fund Complex
Overseen(2) |
Other Directorships Held During Past Five
Years |
Ponn Lithiluxa, 51 |
Vice President |
Vice President since 2017 |
Manager, Tax & Fund Administration of
Thornburg Investment Management, Inc.; Senior Vice President, Citi Fund
Services, Inc. from 2014-2017; Vice President, Citi Fund Services, Inc.
from 2007-2014. |
Not applicable |
Not applicable |
|
|
|
|
|
|
Christopher Luckham, 45 |
Assistant Treasurer |
Assistant Treasurer since 2022 |
Senior Manager, Fund Administration of Thornburg
Investment Management, Inc. since 2010. |
Not applicable |
Not applicable |
|
|
|
|
|
|
Natasha
Rippel, 40
|
Secretary |
Secretary since 2021(6) |
Director of Fund Operations since 2021, Supervisor
of Fund Operations (2017-2021), and Senior Associate of Fund Operations
(2015-2017) of Thornburg Investment Management, Inc. |
Not applicable |
Not applicable |
Name, Address(1) and
Age |
Position(s) Held with
Trust(2) |
Term of Office and Length of Time
Served |
Principal Occupation(s) During Past 5
Years |
Number of Portfolios in Fund Complex
Overseen(2) |
Other Directorships Held During Past Five
Years |
Stephen Velie, 55 |
Chief Compliance Officer |
Chief Compliance Officer since 2009 |
Chief Compliance Officer of Thornburg Investment
Trust and Thornburg Investment Management, Inc. |
Not applicable |
Not applicable |
|
(1) |
Each
person’s address is 2300 North Ridgetop Road, Santa Fe, New Mexico
87506. |
|
(2) |
The Trust is organized as a Massachusetts business
trust, and currently comprises a complex of 21 separate investment “Funds”
or “series.” Thornburg Investment Management, Inc. is the investment
advisor to, and manages, the 21 Funds of the Trust. Each Trustee oversees
the 21 Funds of the Trust. |
|
(3) |
The Bylaws of the Trust currently require that
each Independent 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. |
|
(4) |
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 21 active Funds of the Trust, and is the sole
director and controlling shareholder of Thornburg Securities Corporation,
the distributor of shares of the Trust. |
|
(5) |
Mr. McMahon is considered an “interested” Trustee
under the Investment Company Act of 1940 because he is a director and the
chief investment strategist of Thornburg Investment Management,
Inc. |
|
(6) |
The Trust’s president, chief financial officer,
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. |
Additional Information about the Experiences,
Qualifications, Attributes and Skills of Each Trustee
The
following disclosure is intended to provide additional information about the
particular experiences, qualifications, attributes and skills of each Trustee of
the Trust. The Trustees believe that each Trustee is qualified to serve on the
board of Trustees in view of (i) the particular experiences, qualifications,
attributes and skills of that Trustee, as summarized below and in the table
above, and (ii) the actual service and commitment of each Trustee during his or
her tenure with the Trust, including the demonstrated ability of each Trustee to
exercise effective business judgment in the performance of his or her
duties.
Interested Trustees
Garrett
Thornburg, Chairman of Trustees since 1984. Garrett Thornburg is the
chairman of Trustees for Thornburg Investment Trust. Mr. Thornburg founded
Thornburg Investment Management, Inc. in 1982, Thornburg Securities Corporation
in 1984, and Thornburg Investment Trust in 1984. Before forming Thornburg, Mr.
Thornburg was a limited partner of Bear Stearns & Co. and a founding member
of that firm’s public finance department. He also was chief financial officer of
New York State’s Urban Development Corporation, and served as financial advisor
to the State of New Mexico’s Board of Finance. He is a member of the Board of
Governors of the Investment Company Institute and serves on the Board of
Directors of the New Mexico School for the Arts – Art Institute. He is also the
President of the Thornburg Foundation, and former recipient of the
Philanthropist of the Year award from the Journal Santa Fe. He is a former board
member of the National Dance Institute of New Mexico, the Santa Fe Institute and
the Santa Fe Community Foundation. Mr. Thornburg received his BA from Williams
College and his MBA from Harvard University.
Brian
J. McMahon, Trustee since 2001, member of Governance & Nominating
Committee and Operations Risk Oversight Committee. Brian McMahon is the vice
chairman of Thornburg Investment Trust and a managing director, and the chief
investment strategist of Thornburg Investment Management, Inc. Joining Thornburg
in 1984, Mr. McMahon participated in organizing and managing each Fund of the
Trust, served as Thornburg’s president from 1997 until 2016, as its chief
executive officer from 2008 until 2016, as its chief investment officer from
2016 until 2019, and, as chief investment strategist, he currently serves as a
key voice for the investment team and Thornburg clients. Before joining
Thornburg, Mr. McMahon held various corporate finance positions at Norwest Bank.
Mr. McMahon received his BA in Economics and Russian Studies from the University
of Virginia and his MBA from the Amos Tuck School at Dartmouth College.
Independent Trustees
Sally
Corning, Trustee since 2012, member of Audit Committee and member of
Governance & Nominating Committee. Sally Corning is a founding partner of
Santa Fe, New Mexico based private equity firm, Sun Mountain Capital. Prior to
forming Sun Mountain, Ms. Corning spent 15 years working in private equity and
investment banking for Credit Suisse, Morgan Stanley and Dean Witter Reynolds.
In addition to sitting on the corporate boards of certain of the private
portfolio companies that Sun Mountain Capital has invested in, Ms. Corning has
served on the boards of several nonprofit organizations, including the Santa Fe
Preparatory School, the Santa Fe Community Foundation, the Santa Fe Mountain
Center, and the Westside YMCA in New York City, and is a current member of the
board and the finance committee of Excellent Schools New Mexico. Ms. Corning
holds a bachelor’s degree in Finance from Georgetown University and an MBA from
Columbia University’s Graduate School of Business.
Susan
H. Dubin, Trustee since 2004, member of Audit Committee and Operations Risk
Oversight Committee. Susan Dubin manages the investments for her extended
family. From 1974 to 1996 Ms. Dubin was a vice president of JP Morgan Chase
& Co. (formerly Chemical Bank) where she was involved in corporate banking,
marketing of financial services to corporate customers, and the delivery of
private banking services. Ms. Dubin has served with numerous community and
charitable organizations, including the MICDS (Mary Institute and St. Louis
Country Day School) in St. Louis, Missouri, the Battery Dance Company in New
York City, and the National Dance Institute – New Mexico, Inc. She received her
BA from Briarcliff College.
David
L. Gardner, Trustee since 2015, Chair of Governance & Nominating
Committee and member of Operations Risk Oversight Committee. David Gardner is a
retired executive from the global asset management industry, most notably as an
original team member of iShares ETFs. Mr. Gardner has over 25 years of
experience in the global asset management industry and has worked extensively in
the US, Asia and Europe. Prior to joining iShares Mr. Gardner worked for US
based asset management firms in distribution management capacities. Mr. Gardner
holds a BA in Economics from Eastern Illinois University and a CIMA
Certification from Wharton School and Investment Management Consultants
Associations.
Patrick
J. Talamantes, Trustee since 2019, Chair of Audit Committee. Patrick
Talamantes is President of Talamantes Strategies, a management consulting firm.
Mr. Talamantes is a former executive from the news and media industry, most
recently having served as Chief Executive Officer, and prior to that Chief
Financial Officer, of The McClatchy Company, a publicly traded local news
organization in various local markets across the U.S. Mr. Talamantes has over 30
years of experience in corporate finance and banking, having served as Chief
Financial Officer of Sinclair Broadcast Group, Inc., Treasurer of River City
Broadcasting, LP, and Vice President of Chemical Banking Corporation. Mr.
Talamantes has board experience through his service on the boards of various
McClatchy investees. He has also served as a past chair of the Greater
Sacramento Economic Council, a private-public partnership led by area CEOs to
develop an advanced economy. In addition, Mr. Talamantes serves on the board of
Recruitology, an HR technology startup in the recruitment space, and serves on
the board of the Breakthrough Collaborative, a non-profit that seeks to improve
education equity in 24 cities across the U.S. Mr. Talamantes has also been a
director of The Associated Press and the News Media Alliance. Mr. Talamantes
received his A.B. in Economics from Stanford University and his MBA from The
Wharton School of the University of Pennsylvania.
Owen
D. Van Essen, Trustee since 2004, Lead Independent Trustee and member of
Audit and Governance & Nominating Committees. Owen Van Essen is the
president of Dirks, Van Essen & April LLC, Santa Fe, New Mexico, which acts
as a broker, appraiser and consultant to the newspaper publishing industry.
Before joining the firm, he was general manager and business manager of the
Worthington Daily Globe, Worthington, Minnesota. Mr. Van Essen has served with
numerous community, educational, professional and charitable organizations,
including most recently the St. Michaels High School Foundation and the Santa Fe
Preparatory School. He received his BA in Business Administration from Dordt
College, Iowa.
James
W. Weyhrauch, Trustee since 1996, Chair of Operations Risk Oversight
Committee and member of Audit Committee. James Weyhrauch is a real estate broker
in Santa Fe, New Mexico. Until 2019, he was the vice chairman of the board of
directors, and was from 1997-2000 president and from 2000-2004 chief executive
officer, of Nambe LLC, a Santa Fe, New Mexico manufacturer of tabletop and
giftware products; and since 2015 has served as General Partner, Investments of
Genext LLC, a family investment partnership. Mr. Weyhrauch also has extensive
experience with other privately held enterprises, and a background in sales and
marketing. He participates in a variety of community and charitable
organizations, including the Santa Fe Chamber of Commerce, the Santa Fe
Preparatory School and Junior Achievement. Mr. Weyhrauch received his BA in
Finance from Southern Methodist University.
Structure and Responsibilities of the Board of
Trustees
The
board of Trustees is currently comprised of nine Trustees, two of whom are
“interested persons” of the Funds (as the term “interested” is defined in the
1940 Act) and seven of whom are not interested persons of the Funds. Garrett
Thornburg currently serves as the chairman of the board of Trustees, and Owen
Van Essen currently serves as the lead independent Trustee. The lead independent
Trustee is a spokesman for and leader of the independent Trustees, and in that
role the lead independent Trustee performs a variety of functions, including:
presiding at all sessions of the independent Trustees and, in consultation with
legal counsel, preparing the agenda for each session of independent Trustees and
coordinating and directing the preparation and delivery of materials and
presentations appropriate for each session; in consultation with the Trust’s
chairman, president, fund accounting and legal counsel, preparing the draft
agenda for each general meeting of Trustees; acting as a liaison between the
independent Trustees and senior management of the advisor respecting
communications on certain topics; coordinating with and directing legal counsel
in the acquisition, preparation and development of information for review and
consideration of continuation of contracts with the advisor and affiliates; and
performing such other functions as the independent Trustees may request from
time to time. The Trustees have also established three standing committees, the
Audit Committee, the Governance and Nominating Committee, and the Operations
Risk Oversight Committee, each of which is discussed in more detail below under
the section entitled “Structure and Responsibilities of the Committees of the
Trustees.” The Trustees may form other committees when deemed appropriate.
The
Trustees review the leadership structure of the board of Trustees and the
performance of the Trustees on an annual basis. The Trustees currently believe
that the leadership structure of the board of Trustees is appropriate, in light
of the characteristics of the Trust and each of the Funds, to enable the
Trustees to oversee the Trust and its service providers. The Trustees have
considered the number of Funds in the Trust, and the similarities and
differences among the investment objectives and strategies of those Funds, and
have determined that the board of Trustees contains a sufficient number of
Trustees, and a sufficient percentage of independent Trustees, to discharge the
Trustees’ oversight function. The Trustees believe that Mr. Thornburg’s long
tenure as a Trustee of the Trust, his ongoing association with the Trust’s
advisor and the fact that that association allows Mr. Thornburg to interact
routinely with members of the advisor’s staff, and his familiarity with the
Trust’s business and affairs and with events impacting the investment management
industry more broadly, enable Mr. Thornburg to serve as an effective chairman of
the board of Trustees. The Trustees believe that Mr. Van Essen’s long tenure as
a Trustee of the Trust, his business and other professional experience, and his
familiarity with the Trust’s business and affairs and with events impacting the
investment management industry more broadly, enable Mr. Van Essen to serve as an
effective lead independent Trustee The Trustees also believe that the scope of
each committee’s activities and the composition of each committee is currently
appropriate, and that the committee structure allows the Trustees to allocate
responsibility for various topics among the board and its committees in a manner
which facilitates the oversight of the Trust and its service providers.
The
Trustees are responsible for the general supervision of the Funds, including the
supervision of Thornburg, which provides day-to-day management of the Funds
under the terms of the Investment Advisory Agreement and Administrative Services
Agreement. As part of their annual review of the leadership structure of the
board of Trustees, described above, the Trustees consider whether the structure
of the board and its committees continues to permit the Trustees to effectively
exercise their oversight function. In that regard, the Trustees typically
consider, among other factors: the number of Trustees and each Trustee’s
qualifications, experience and skills; the frequency with which the Trustees and
their committees confer with representatives of Thornburg and the Trust’s other
service providers; the number of Funds and the ability of the Trustees to devote
sufficient time and attention to matters specific to each Fund; the role of the
Funds’ chief compliance officer and the opportunity for the Trustees to interact
with the chief compliance officer; and the composition of each committee of the
Trustees and the scope of the responsibilities delegated to those
committees.
The
Funds are subject to a number of risks, including investment, compliance,
operational and valuation risks. On a day-to-day basis, risk management is the
responsibility of Thornburg and the Funds’ other service providers. Risk
oversight also comprises part of the Trustees’ general oversight function. The
Trustees and their committees seek to monitor risks to the Funds by meeting no
less frequently than quarterly (and in practice, more often) with senior
officers of the Trust, members of the Funds’ portfolio management teams, the
Funds’ chief compliance officer and the Funds’ legal counsel, and by receiving
periodic reports from the Funds’ independent registered public accounting firm
and other service providers to the Funds. The Trust’s Operations Risk Oversight
Committee assists the Trustees in reviewing and evaluating the identification,
analysis and management of operations risk by Thornburg and other significant
service providers to the Trust. The duties of the Operations Risk Oversight
Committee are described in more detail below under the section entitled
“Structure and Responsibilities of the Committees of the Trustees.” The Trustees
have also adopted various written policies and procedures designed to address
particular risks to the Funds, including the detection and prevention of
violations of federal securities laws. At least annually, the Trustees receive a
report from the Funds’ chief compliance officer respecting the effectiveness of
those policies and procedures. Notwithstanding the foregoing, the Trustees
acknowledge that it is not possible to identify all of the risks that may affect
the Funds or to develop processes and controls to eliminate or mitigate the
occurrence or effects of certain risks on the Funds. Furthermore, some risks may
simply be beyond the control of the Funds or their service providers. The
Trustees may, at any time and in their sole discretion, change the manner in
which they supervise risk.
Structure and Responsibilities of the Committees of
the Trustees
The
Trustees have an Audit Committee, which is comprised of five Trustees who are
not interested persons, Patrick J. Talamantes (chair), Sally Corning, Susan H.
Dubin, Owen Van Essen, and James W. Weyhrauch. The Audit Committee discharges
its duties in accordance with an Audit Committee Charter, which provides that
the committee will, among other functions: (i) evaluate the independence,
performance and qualifications of the Trust’s independent accountants; (ii)
receive and review reports from the independent accountants respecting the
planning, scope and staffing of audits of the Funds’ financial statements, the
accountants’ independence, the accountants’ internal quality control procedures,
all accounting policies and procedures identified by the accountants as critical
to the preparation of the Funds’ annual financial statements, all non-audit
services provided by the auditors for the Funds, and any material issues in any
peer review, governmental investigation, or otherwise respecting any audit
conducted by the accountants; (iii) receive and review results of audits of the
Funds’ financial statements with the independent accountants, including any
deficiencies, uncorrected misstatements, or similar matters identified by the
accountants during such an audit, any material alternative accounting treatments
that the accountants discussed with the Funds’ management during the audit, and
any disagreements between the accountants and management respecting financial
reporting matters; (iv) perform the applicable duties imposed on a mutual fund’s
governing board by the Investment Company Act of 1940, and by regulations and
guidance thereunder, with respect to oversight of portfolio pricing and
valuation; (v) receive and review the Funds’ annual audited financial statements
and semi-annual unaudited financial statements; (vi) receive and review
communications from management, and at least annually from the independent
accountants, respecting matters arising in connection with periodic
certifications under Form N-CSR; (vii) receive and review complaints from any
source regarding accounting, internal accounting controls, financial reporting
or disclosure, and audit matters relating to the Trust; (viii) require the
Trust’s legal counsel to report to the committee any matter which may have a
significant effect on a Fund’s financial statements; (ix) receive and review any
report made to the committee in accordance with any compliance policy or
procedure subject to the oversight of the committee, and receive and review
reports from the chief compliance officer on matters relating to the committee’s
responsibilities; (x) receive and review reports from management’s mutual fund
administration department to evaluate the functioning of that department;
(xi) to the extent the Audit Committee determines that it may be necessary
or appropriate to the functions of the committee, receive and review reports
from representatives of other significant service providers to the Trust to
evaluate the services delivered by those providers; and (xii) such other matters
assigned by the Trustees to the committee. The Audit Committee is also
responsible for the selection of the independent accountants that audit the
Funds’ annual financial statements. The committee held four meetings in the
Trust’s fiscal year ended September 30, 2022.
The
Trustees have a Governance and Nominating Committee, which is comprised of four
Trustees, David Gardner (chair), Brian J. McMahon, Sally Corning, and Owen D.
Van Essen. Mr. Gardner, Ms. Corning and Mr. Van Essen are not interested
persons. Mr. McMahon is an interested person because he is a director and an
officer of the Funds’ investment advisor, but is prohibited from participating
in the selection or nomination of individuals to serve as independent Trustees
of the Trust. The Governance and Nominating Committee discharges its duties in
accordance with a Governance and Nominating Committee Charter, which provides
that the committee will: (i) conduct evaluations of the performance of the
Trustees and their committees in accordance with the Trust’s Corporate
Governance Procedures and Guidelines (the “Governance Procedures”); (ii) select
and nominate individuals for election as Trustees of the Trust who are not
“interested persons” of the Trust as that term is defined in the 1940 Act; and
(iii) perform the additional functions specified in the Governance Procedures
and such other functions assigned by the Trustees to the committee from time to
time. The committee is authorized to consider for nomination as candidates to
serve as Trustees individuals recommended by shareholders in accordance with the
Trust’s Procedure for Shareholder Communications to Trustees. In accordance with
that Procedure for Shareholder Communications to Trustees, shareholders may
recommend candidates to serve as Trustees by sending their recommendations to
any one or more of the Trustees by United States. Mail or courier delivery at
the address of the Trust’s investment advisor. The committee held two meetings
in the Trust’s fiscal year ended September 30, 2022.
The
Trustees have an Operations Risk Oversight Committee, which is comprised of four
Trustees, James W. Weyhrauch (chair), Susan H. Dubin, David L. Gardner, and
Brian J. McMahon. Mr. Van Essen, Mr. Gardner, Ms. Dubin, and Mr. Weyhrauch are
not interested persons. As noted above, Mr. McMahon is an interested person
because he is a director and an officer of the Funds’ investment advisor. The
Operations Risk Oversight Committee discharges its duties in accordance with an
Operations Risk Oversight Committee Charter, which provides that the committee
will: (i) receive and review, preliminary to its presentation to the Trustees,
the annual report of the Trust’s chief compliance officer respecting the Trust’s
compliance policies and procedures; (ii) receive and review reports from
Thornburg respecting trade execution and the use of client commissions; (iii)
receive and review reports from Thornburg respecting its administration of the
investment advisor’s policy on voting proxies; (iv) receive and review reports
from Thornburg respecting the Funds’ account service arrangements; (v) receive
each report submitted by Thornburg or counsel which is required to be submitted
to the committee by a policy or procedure of the Trust or Thornburg; (vi)
receive and review reports submitted by the chief compliance officer or counsel
with respect to any compliance policy or procedure subject to the oversight of
the committee that relates to (A) any revision to such a policy or procedure
identified by the chief compliance officer or counsel as potentially material,
(B) any violation of such a policy or procedure identified as potentially
material, and (C) any error or exception in the administration of such a policy
or procedure identified as potentially material; (vii) receive and review
reports submitted by Thornburg respecting the Trust’s transfer agent, firms
providing shareholder services, custodians, records storage providers, business
continuity and disaster recovery contractors, and other significant service
providers to evaluate the services delivered by those providers; (viii) receive
and review reports submitted by Thornburg respecting computer systems and
software, electronic communications systems and other technological systems and
developments pertaining to the operations of the Trust; (ix) receive and review
any changes to contracts with the providers referenced in the preceding two
items which are submitted to the committee for review, to the extent such
changes would materially affect the scope of the services that those providers
deliver to the Trust; (x) confer with Thornburg respecting liability insurance
and fidelity bond coverage for the Trust and the Trustees, at the time of
proposed renewals of those policies, and make recommendations respecting
coverage to the Trustees; (xi) receive and review reports submitted by Thornburg
relating to Thornburg’s committee and staff assigned to risk identification,
analysis and management; (xii) receive and review reports submitted by Thornburg
relating liquidity, cybersecurity, derivatives transactions, and anti-money
laundering compliance; and (xiii) such other matters assigned by the Trustees to
the committee. The committee held three meetings in the Trust’s fiscal year
ended September 30, 2022.
Compensation of Trustees
The
officers and Trustees affiliated with Thornburg serve without any compensation
from the Trust. The Trust compensates each Trustee who is not an interested
person of the Trust at an annual rate of $210,000, payable quarterly. Fifteen
percent of each quarterly payment must be invested by the Trustee in one or more
of the Funds, as the Trustee selects, and is subject to an undertaking by the
Trustee to retain the shares during the Trustee’s tenure. In addition, the Trust
compensates each Trustee $20,000 for each meeting of Trustees attended by the
Trustee in person, or video conference, or by telephone, provided, however, that
the compensation is $10,000 for each meeting attended by video conference or by
telephone in excess of one such meeting or session in any calendar year. General
meetings of Trustees on two or more successive days will be considered one
meeting for this purpose.
The
Trust also compensates each Trustee $7,000 for each session of independent
Trustees attended by the Trustee in excess of five sessions in any calendar
year. Notwithstanding the preceding sentence, a session of independent Trustees
will not be considered separately compensable if held within one day before or
after any session of a general meeting of Trustees.
The
Trust compensates the lead independent Trustee and the chair of each standing
committee an additional annual compensation, payable in quarterly installments.
The individual who serves as lead independent Trustee receives an additional
annual compensation of $50,000, the chair of the Audit Committee receives an
additional annual compensation of $20,000, and the chair of the Governance and
Nominating Committee and the chair of the Operations Risk Oversight Committee
each receive an additional annual compensation of $15,000.
The
Trust compensates each independent Trustee $3,500 for each session with a Trust
service provider, except that if the Trustee is required to travel away from
home for the session or sessions, the Trust compensates the Trustee $7,000 for
each session of one or two days and $3,500 for each additional day on which a
session is conducted.
Independent
Trustees are not separately compensated for days spent attending continuing
education programs, or for time spent traveling to meetings, continuing
education programs or sessions with service providers, apart from the
compensation stated in the preceding paragraphs.
The
Trust reimburses each independent Trustee for travel and certain out-of-pocket
expenses incurred by the Trustee in connection with attending meetings,
including attendance at any seminar or educational program relating to the
Trustee’s service for the Trust. The Trust does not pay retirement or pension
benefits.
The
Trust paid fees to the Trustees during the fiscal year ended September 30, 2022
as follows:
Name of Trustee |
|
Aggregate Compensation from
Trust |
|
|
Pension or Retirement Benefits
Accrued as Part of Expenses |
|
|
Estimated Annual Benefits Upon
Retirement |
|
|
Total Compensation from Trust
and Fund Complex Paid to Trustee |
|
Interested Trustees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garrett
Thornburg |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Brian J. McMahon |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Independent
Trustees |
Sally
Corning |
|
$ |
316,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
316,000 |
|
Susan H.
Dubin |
|
$ |
311,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
311,000 |
|
David L.
Gardner |
|
$ |
326,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
326,000 |
|
Patrick
J. Talamantes |
|
$ |
326,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
326,000 |
|
Owen D.
Van Essen |
|
$ |
354,750 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
354,750 |
|
James W.
Weyhrauch |
|
$ |
326,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
326,000 |
|
Certain Ownership Interests of Trustees
Column
(2) of the following table shows the dollar range of the shares owned
beneficially by each Trustee as of December 31, 2022 in each Fund described in
this Statement of Additional Information.
Garrett
Thornburg |
Global
Opportunities Fund |
Over
$100,000 |
|
|
International
Equity Fund |
Over
$100,000 |
|
|
International
Growth Fund |
Over
$100,000 |
|
|
Developing
World Fund |
Over
$100,000 |
|
|
Small/Mid
Cap Core Fund |
Over
$100,000 |
|
|
Small/Mid
Cap Growth Fund |
Over
$100,000 |
|
|
Investment
Income Builder Fund |
Over
$100,000 |
|
|
Total
Holdings |
|
Over
$100,000 |
|
|
|
|
Brian
J. McMahon |
Global
Opportunities Fund |
Over
$100,000 |
|
|
International
Equity Fund |
Over
$100,000 |
|
|
International
Growth Fund |
Over
$100,000 |
|
|
Developing
World Fund |
Over
$100,000 |
|
|
Small/Mid
Cap Core Fund |
Over
$100,000 |
|
|
Small/Mid
Cap Growth |
Over
$100,000 |
|
|
Investment
Income Builder Fund |
Over
$100,000 |
|
|
Total
Holdings |
|
Over
$100,000 |
|
|
|
|
Sally
Corning |
Global
Opportunities Fund |
Over
$100,000 |
|
|
International
Equity Fund |
Over
$100,000 |
|
|
International
Growth Fund |
$50,001
- $100,000 |
|
|
Developing
World Fund |
Over
$100,000 |
|
|
Small/Mid
Cap Core Fund |
Over
$100,000 |
|
|
Small/Mid
Cap Growth Fund |
$50,001
- $100,000 |
|
|
Investment
Income Builder Fund |
$50,001
- $100,000 |
|
|
Limited
Term U.S. Government Fund |
$1-$10,000 |
|
|
Limited
Term Income Fund |
$1-$10,000 |
|
|
Strategic
Income Fund |
Over
$100,000 |
|
|
Total
Holdings |
|
Over
$100,000 |
|
|
|
|
Susan
H. Dubin |
Global
Opportunities Fund |
Over
$100,000 |
|
|
International
Equity Fund |
$50,001
- $100,000 |
|
|
International
Growth Fund |
$50,001
- $100,000 |
|
|
Developing
World Fund |
Over
$100,000 |
|
|
Investment
Income Builder Fund |
$50,001
- $100,000 |
|
|
Strategic
Income Fund |
$50,001
- $100,000 |
|
|
Small/Mid
Cap Core Fund |
$10,001-$50,000 |
|
|
Small/Mid
Cap Growth Fund |
$10,001-$50,000 |
|
|
Limited
Term Income Fund |
$50,001
- $100,000 |
|
|
Total
Holdings |
|
Over
$100,000 |
|
|
|
|
David
L. Gardner |
Small/Mid
Cap Core Fund |
Over
$100,000 |
|
|
Total
Holdings |
|
Over
$100,000 |
|
|
|
|
Patrick
J. Talamantes |
Investment
Income Builder Fund |
Over
$100,000 |
|
|
Total
Holdings |
|
Over
$100,000 |
|
|
|
|
Owen
Van Essen |
Global
Opportunities Fund |
Over
$100,000 |
|
|
International
Equity Fund |
Over
$100,000 |
|
|
International
Growth Fund |
Over
$100,000 |
|
|
Developing
World Growth Fund |
Over
$100,000 |
|
|
Investment
Income Builder Fund |
Over
$100,000 |
|
|
Strategic
Income Fund |
Over
$100,000 |
|
|
Total
Holdings |
|
Over
$100,000 |
|
|
|
|
James
W. Weyhrauch |
Global
Opportunities Fund |
$50,001
- $100,000 |
|
|
International
Equity Fund |
$10,001-$50,000 |
|
|
Developing
World Fund |
$10,001-$50,000 |
|
|
Small/Mid
Cap Core Fund |
$50,001
- $100,000 |
|
|
Small/Mid
Cap Growth Fund |
$10,001-$50,000 |
|
|
Investment
Income Builder Fund |
Over
$100,000 |
|
|
Strategic
Income Fund |
$10,001-$50,000 |
|
|
Total
Holdings |
|
Over
$100,000 |
Personal Securities Transactions of
Personnel
The
Trust, the investment advisor to the Trust, and the distributor for advisor and
the Trust, each have adopted a code of ethics under Rule 17j-1 of the 1940 Act.
Specified personnel of the Trust, investment advisor and distributor, including
individuals engaged in investment management activities and others are permitted
under the codes of make personal investments in securities, including securities
that may be purchased or held by the Funds. Certain investments are prohibited
or restricted as to timing, and personnel subject to the codes must report their
investment activities to a compliance officer.
INFORMATION ABOUT PORTFOLIO MANAGERS
Displayed
below is additional information about the portfolio managers identified in the
Prospectus.
Portfolio Manager Compensation
The
compensation of each portfolio and co-portfolio manager includes an annual
salary, annual bonus, and company-wide profit sharing. Each manager currently
named in the Prospectus also owns equity shares in the investment advisor,
Thornburg. Both the salary and bonus are reviewed approximately annually for
comparability with salaries of other portfolio managers in the industry, using
survey data obtained from compensation consultants. The annual bonus is
subjective. Criteria that are considered in formulating the bonus include, but
are not limited to, the following: revenues available to pay compensation of the
manager and all other expenses related to supporting the accounts managed by the
manager, including the Trust; multiple year historical total return of accounts
managed by the manager, including the Trust, relative to market performance and
similar investment companies; single year historical total return of accounts
managed by the manager, including the Trust, relative to market performance and
similar investment companies; the degree of sensitivity of the manager to
potential tax liabilities created for account holders in generating returns,
relative to overall return. There is no material difference in the method used
to calculate the manager’s compensation with respect to the Trust and other
accounts managed by the manager, except that certain accounts managed by the
manager may have no income or capital gains tax considerations. To the extent
that the manager realizes benefits from capital appreciation and dividends paid
to shareholders of Thornburg, such benefits accrue from the overall financial
performance of Thornburg.
Conflicts of Interest
Most
investment advisors and their portfolio managers manage investments for multiple
clients, including mutual funds, private accounts, and retirement plans. In any
case where a portfolio or co-portfolio manager manages the investments of two or
more accounts, there is a possibility that conflicts of interest could arise
between the manager’s management of a Fund’s investments and the manager’s
management of other accounts. These conflicts could include:
|
● |
Allocating a favorable investment
opportunity to one account but not another. |
|
● |
Directing
one account to buy a security before purchases through other accounts
increase the price of the security in the
marketplace. |
|
● |
Giving
substantially inconsistent investment directions at the same time to
similar accounts, so as to benefit one account over
another. |
|
● |
Obtaining services from brokers
conducting trades for one account, which are used to benefit another
account. |
The
Trust’s investment advisor, Thornburg, has informed the Trust that it has
considered the likelihood that any material conflicts of interest could arise
between a manager’s management of the Funds’ investments and the manager’s
management of other accounts. Thornburg has also informed the Trust that it has
not identified any such conflicts that may arise, and has concluded that it has
implemented policies and procedures to identify and resolve any such conflict if
it did arise.
Accounts Managed By Portfolio Managers
Set
out below for each portfolio manager named in the Prospectus is information
respecting the accounts managed by the manager. Except as otherwise noted below,
the information presented is current as of September 30, 2022. The information
includes the Fund or Funds as to which each individual is a portfolio manager.
Except as noted below, as of September 30, 2022 the advisory fee for each of the
accounts was not based on the investment performance of the account.
Nick Anderson
Type of Account |
Number
of
Accounts
Managed |
Total
Assets
Managed |
Registered Investment Companies: |
1 |
920,688,900 |
Other Pooled Investment Vehicles: |
0 |
0 |
Other Accounts: |
177 |
28,543,781 |
Jason Brady
Type of Account |
Number
of
Accounts
Managed |
Total
Assets
Managed |
Registered Investment Companies: |
6 |
24,798,082,891 |
Other Pooled Investment Vehicles: |
6 |
351,517,585 |
Other Accounts: |
15 |
376,701,813 |
Matt Burdett
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed |
Registered Investment Companies: |
3 |
11,911,695,502 |
Other Pooled Investment Vehicles: |
4 |
72,424,903 |
Other Accounts: |
74 |
105,910,298 |
Lon Erickson
Type of Account |
Number
of
Accounts
Managed |
Total
Assets
Managed |
Registered Investment Companies: |
5 |
15,456,879,578 |
Other Pooled Investment Vehicles: |
5 |
331,674,301 |
Other Accounts: |
15 |
376,701,813 |
Ali Hassan
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed |
Registered Investment Companies: |
1 |
4,735,223,187 |
Other Pooled Investment Vehicles: |
4 |
208,126,200 |
Other Accounts: |
1 |
231,929,173 |
Christian Hoffmann*
Type of Account |
Number
of
Accounts
Managed |
Total
Assets
Managed |
Registered Investment Companies: |
5 |
15,456,879,578 |
Other Pooled Investment Vehicles: |
5 |
331,674,301 |
Other Accounts: |
15 |
376,701,813 |
Ben Kirby
Type of Account |
Number
of
Accounts
Managed |
Total
Assets
Managed
|
Registered Investment Companies: |
4 |
10,794,105,743 |
Other Pooled Investment Vehicles: |
4 |
30,507,569 |
Other Accounts: |
118 |
103,374,388 |
Jeff Klingelhofer
Type of Account |
Number
of
Accounts
Managed |
Total
Assets
Managed |
Registered Investment Companies: |
6 |
15,560,303,385 |
Other Pooled Investment Vehicles: |
5 |
331,674,301 |
Other Accounts: |
16 |
423,582,805 |
Steven Klopukh
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed
|
Registered Investment Companies: |
2 |
821,373,937 |
Other Pooled Investment Vehicles: |
0 |
0 |
Other Accounts: |
15 |
24,735,869 |
Emily Leveille
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed
|
Registered Investment Companies: |
1 |
920,688,900 |
Other Pooled Investment Vehicles: |
0 |
0 |
Other Accounts: |
177 |
28,543,781 |
Tim McCarthy
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed
|
Registered Investment Companies: |
2 |
821,373,937 |
Other Pooled Investment Vehicles: |
0 |
0 |
Other Accounts: |
15 |
24,735,869 |
Brian J. McMahon
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed
|
Registered Investment Companies: |
2 |
10,120,574,462 |
Other Pooled Investment Vehicles: |
4 |
77,294,892 |
Other Accounts: |
2 |
282,872,986 |
Miguel Oleaga
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed
|
Registered Investment Companies: |
1 |
799,214,432 |
Other Pooled Investment Vehicles: |
3 |
57,451,608 |
Other Accounts: |
2 |
282,872,986 |
Josh Rubin
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed
|
Registered Investment Companies: |
1 |
934,670,713 |
Other Pooled Investment Vehicles: |
3 |
10,664,285 |
Other Accounts: |
115 |
32,377,087.52 |
Sean Sun
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed
|
Registered Investment Companies: |
1 |
920,688,900 |
Other Pooled Investment Vehicles: |
0 |
0 |
Other Accounts: |
177 |
28,543,781 |
Lei Wang
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed |
Registered Investment Companies: |
2 |
2,492,639,483.80 |
Other Pooled Investment Vehicles: |
3 |
52,581,619.21 |
Other Accounts: |
74 |
83,313,198.35 |
Charles Wilson
Type of Account |
Number
of
Accounts
Managed
|
Total
Assets
Managed
|
Registered Investment Companies: |
1 |
934,670,713 |
Other Pooled Investment Vehicles: |
3 |
10,664,285 |
Other Accounts: |
115 |
32,377,088 |
*Mr.
Hoffmann became a portfolio manager of the Limited Term U.S. Government Fund and
Limited Term Income Fund on February 1, 2023, and management of those Funds is
included in the number of accounts; however, total assets for the number of
accounts shown are as of September 30, 2022.
Portfolio Managers’ Ownership of Shares in the
Funds
Displayed
below for each of the portfolio managers named in the Prospectus is the dollar
range of the individual’s beneficial ownership of shares in the Fund or Funds as
to which the individual is a manager. Except as otherwise noted below, the
information presented is current as of September 30, 2022. In each case, the
dollar range listed may include shares owned by the portfolio manager through
the manager’s self-directed account in Thornburg’s retirement plan. In addition
to the holdings noted below, each of the portfolio managers is a participant in
Thornburg’s profit sharing plan, which invests in shares of each of the
Funds.
Nick Anderson |
|
International Growth Fund |
$100,001–$500,000 |
|
|
Jason Brady |
|
Limited Term U.S. Government
Fund |
$50,001 - $100,000 |
Limited Term Income Fund |
over $1,000,000 |
Strategic Income Fund |
over $1,000,000 |
Income Builder Fund |
over $1,000,000 |
|
|
Matt Burdett |
|
Income Builder Fund |
Over $1,000,000 |
International Equity Fund |
$100,001-$500,000 |
|
|
Lon Erickson |
|
Limited Term U.S. Government
Fund |
$10,001 - $50,000 |
Limited Term Income Fund |
$10,001 - $50,000 |
Strategic Income Fund |
$10,001 - $50,000 |
|
|
Ali Hassan |
|
Strategic Income Fund |
$100,001–$500,000 |
|
|
Christian Hoffmann |
|
Limited Term U.S. Government
Fund |
None |
Limited Term Income Fund |
None |
Strategic Income Fund |
$100,001–$500,000 |
|
|
Ben Kirby |
|
Income Builder Fund |
over $1,000,000 |
Developing World Fund |
$500,001 - $1,000,000 |
|
|
Jeff Klingelhofer |
|
Limited Term U.S. Government
Fund |
$10,001 - $50,000 |
Limited Term Income Fund |
$100,001–$500,000 |
Strategic Income Fund |
$100,001–$500,000 |
|
|
Steven Klopukh |
|
Small/Mid Cap Core Fund |
None |
Small/Mid Cap Growth Fund |
None |
|
|
Emily Leveille |
|
International Growth Fund |
$1–$10,000 |
|
|
Tim McCarthy |
|
Small/Mid Cap Core Fund |
None |
Small/Mid Cap Growth Fund |
None |
|
|
Brian J. McMahon |
|
Income Builder Fund |
over $1,000,000 |
Global Opportunities Fund |
over $1,000,000 |
|
|
Miguel Oleaga |
|
Global Opportunities Fund |
$500,001–$1,000,000 |
|
|
Josh Rubin |
|
Developing World Fund |
$100,001–$500,000 |
|
|
Sean Sun |
|
International Growth Fund |
$500,001 - $1,000,000 |
|
|
Lei Wang |
|
International Equity Fund |
$100,001–$500,000 |
|
|
Charles Wilson |
|
Developing World Fund |
$500,001–$1,000,000 |
PRINCIPAL
HOLDERS OF SECURITIES
Global
Opportunities Fund
As
of December 31, 2022, the officers and Trustees of the Trust, as a group, held
approximately 68% of the Class R6 shares of the Fund and held less than one
percent of the Class R3, Class R4 or Class R5 shares of the Fund. As of December
31, 2022, Garret Thornburg, 2300 North Ridgetop Road, Santa Fe, New Mexico
87506-8361, was the beneficial owner of approximately 64% of the Fund’s Class R6
shares. Shareholders that beneficially own more than 25% of the voting
securities of a Fund could control the outcome of proposals presented to
shareholders for approval. As of December 31, 2022, the following persons were
known to have held of record or beneficially 5% or more of the Fund’s Class R3,
Class R4, Class R5, or Class R6 shares:
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Global Opportunities Fund |
Class R3 shares |
EMPOWER TRUST FBO EMPLOYEE BENEFITS CLIENTS 401K 8515 E ORCHARD RD 2T2 GREENWOOD VILLAGE CO 80111-5002
|
34.24% |
Global Opportunities Fund |
Class R3 shares |
FIIOC FBO
WEBB WRITES LLC 401K PS PLAN 100
MAGELLAN WAY COVINGTON
KY 41015-1987 |
10.76% |
Global Opportunities Fund |
Class R3 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
5.85% |
Global Opportunities Fund |
Class R3 shares |
MATRIX TRUST COMPANY AS AGENT FOR ADVISOR TRUST, INC MIDDLETOWN
SPRINKLER CO 717 17TH STREET,
SUITE 1300 DENVER
CO 80202-3304 |
5.56% |
Global Opportunities Fund |
Class R4 shares |
EMPOWER TRUST FBO RECORDKEEPING FOR EMPLOYEE
BENEFITS 8515 E ORCHARD RD #
2T2 GREENWOOD VLG
CO 80111-5002 |
27.98% |
Global Opportunities Fund |
Class R4 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
20.54% |
Global Opportunities Fund |
Class R4 shares |
DCGT AS TTEE AND/OR CUST FBO PLIC VARIOUS RETIREMENT PLANS ATTN NPIO TRADE DESK OMNIBUS 711 HIGH ST DES MOINES IA 50392-0001 |
5.11% |
Global Opportunities Fund |
Class R5 shares |
NATIONWIDE TRUST COMPANY FSB C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029 |
14.82% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Global Opportunities Fund |
Class R5 shares |
EMPOWER TRUST FBO EMPLOYEE BENEFITS CLIENTS 401K 8515 E ORCHARD RD 2T2 GREENWOOD VILLAGE CO 80111-5002
|
13.35% |
Global Opportunities Fund |
Class R5 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
13.01% |
Global Opportunities Fund |
Class R5 shares |
TIAA, FSB CUST/TTEE FBO: RETIREMENT PLANS FOR WHICH TIAA ACTS AS
RECORDKEEPER ATTN TRUST
OPERATIONS 211 N BROADWAY STE
1000 SAINT LOUIS
MO 63102-2748 |
12.98% |
Global Opportunities Fund |
Class R5 shares |
JOHN HANCOCK LIFE INSURANCE COMPANY (USA) ATTN: JHRPS TRADING OPS ST6 200 BERKELEY ST BOSTON MA 02116-5023 |
8.48% |
Global Opportunities Fund |
Class R5 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
6.04% |
Global Opportunities Fund |
Class R6 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE BENEFIT OF
CUSTOMERS REINVEST ACCT ATTN MUTUAL FUNDS DEPARTMENT 211 MAIN ST SAN FRANCISCO CA 94105-1901 |
22.92% |
Global Opportunities Fund |
Class R6 shares |
PECOS RIVER MANAGEMENT INC TTEE UA DTD 12/27/2000 OPPENHEIMER DESCENDANTS TRUST PO BOX 2554 JACKSON WY 83001-2554 |
12.95% |
Global Opportunities Fund |
Class R6 shares |
THORNBURG FOUNDATION 2300 N RIDGETOP RD SANTA FE NM 87506-8361 |
12.83% |
Global Opportunities Fund |
Class R6 shares |
PECOS RIVER MANAGEMENT INC TTEE UA DTD 12/24/1994 THORNBURG DESCENDANTS TRUST PO BOX 2554 JACKSON WY 83001-2554 |
12.71% |
Global Opportunities Fund |
Class R6 shares |
GARRETT THORNBURG REVOCABLE LIVING TRUST DTD
07-27-90 2300 N RIDGETOP
RD SANTA FE
NM 87506-8361 |
11.15% |
Global Opportunities Fund |
Class R6 shares |
GARRETT THORNBURG TTEE THORNBURG FAMILY THOGX GRAT 2022 UA DTD 07/08/2022 2300 N RIDGETOP RD SANTA FE NM 87506-8361 |
7.97% |
Global Opportunities Fund |
Class R6 shares |
LLOYD J THORNBURG TTEE LLOYD J THORNBURG REVOCABLE TRUST UA DTD 05/14/2019 C/O THORNBURG INVESTMENT MANAGEMENT
INC 2300 N RIDGETOP
RD SANTA FE
NM 87506-8361 |
7.72% |
International
Equity Fund
As
of December 31, 2022, the officers and Trustees of the Trust, as a group, held
approximately 12% of the Class R6 shares of the Fund, and held less than 1% of
the Class R3, Class R4 or Class R5 shares of the Fund. As of December 31, 2022,
the following persons were known to have held of record or beneficially 5% or
more of the Fund’s Class R3, Class R4, Class R5, and Class R6 shares:
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
International Equity Fund |
Class R3 shares |
DAVID TENBROECK MARK STROGOFF HARTFORD INSURANCE CO SEPARATE ACCOUNT 401(K) PLAN PO BOX 2999 HARTFORD CT 06104-2999 |
27.12% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
International Equity Fund |
Class R3 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
12.25% |
International Equity Fund |
Class R3 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
7.73% |
International Equity Fund |
Class R3 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED LIFE AUL GROUP RETIREMENT ANNUITY SEPARATE ACCOUNT II PO BOX 368 INDIANAPOLIS IN 46206-0368 |
6.40% |
International Equity Fund |
Class R4 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
15.54% |
International Equity Fund |
Class R4 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
12.72% |
International Equity Fund |
Class R4 shares |
VRSCO FBO AIGFSB CUST TTEE FBO STATE UNIV SYSTEM OF FLORIDA 403B 2929 ALLEN PKWY STE A6-20 HOUSTON TX 77019-7100 |
12.57% |
International Equity Fund |
Class R4 shares |
JOHN HANCOCK TRUST COMPANY LLC 690 CANTON ST STE 100 WESTWOOD MA 02090-2324 |
7.84% |
International Equity Fund |
Class R4 shares |
AMERITAS LIFE INSURANCE CORP SEPARATE ACCOUNT G 5900 O ST LINCOLN NE 68510-2234 |
5.75% |
International Equity Fund |
Class R4 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
5.51% |
International Equity Fund |
Class R4 shares |
DAVID TENBROECK MARK STROGOFF HARTFORD INSURANCE CO SEPARATE ACCOUNT 401(K) PLAN PO BOX 2999 HARTFORD CT 06104-2999 |
5.29% |
International Equity Fund |
Class R5 shares |
MASSACHUSETTS MUTUAL INSURANCE
COMPANY 1295 STATE ST
SPRINGFIELD
MA 01111-0001 |
19.61% |
International Equity Fund |
Class R5 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
16.13% |
International Equity Fund |
Class R5 shares |
TIAA, FSB CUST/TTEE FBO: RETIREMENT PLANS FOR WHICH TIAA ACTS AS
RECORDKEEPER ATTN TRUST
OPERATIONS 211 N BROADWAY STE
1000 SAINT LOUIS
MO 63102-2748 |
10.27% |
International Equity Fund |
Class R5 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED LIFE AUL GROUP RETIREMENT ANNUITY SEPARATE ACCOUNT II PO BOX 368 INDIANAPOLIS IN 46206-0368 |
10.10% |
International Equity Fund |
Class R5 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
9.46% |
International Equity Fund |
Class R5 shares |
EMPOWER TRUST FBO EMPOWER BENEFIT GRANDFATHERED PLAN 8515 E ORCHARD RD # 2T2 GREENWOOD VLG CO 80111-5002 |
5.64% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
International Equity Fund |
Class R6 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE
BENEFIT OF CUSTOMERS REINVEST
ACCT ATTN MUTUAL FUNDS DEPARTMENT
211 MAIN ST SAN FRANCISCO CA 94105-1901 |
10.75% |
International Equity Fund |
Class R6 shares |
PIMS/PRUDENTIAL RETIREMENT AS NOMINEE FOR THE TTEE/CUST PL
719 SIKA CORPORATION
401(K) 201 POLITO
AVE LYNDHURST
NJ 07071-3601 |
9.63% |
International Equity Fund |
Class R6 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
6.99% |
International Equity Fund |
Class R6 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
6.35% |
International Equity Fund |
Class R6 shares |
TIAA, FSB CUST/TTEE FBO: RETIREMENT PLANS FOR WHICH TIAA ACTS AS
RECORDKEEPER ATTN TRUST
OPERATIONS 211 N BROADWAY STE
1000 SAINT LOUIS
MO 63102-2748 |
5.20% |
International
Growth Fund
As
of December 31, 2022, the officers and Trustees of the Trust, as a group, held
approximately 35% of the Class R6 shares of the Fund and held less than one
percent of the Class R3, Class R4, or Class R5 shares of the Fund. As of
December 31, 2022, Garret Thornburg, 2300 North Ridgetop Road, Santa Fe, New
Mexico 87506-8361, was the beneficial owner of approximately 34% of the Fund’s
Class R6 shares. Shareholders that beneficially own more than 25% of the voting
securities of a Fund could control the outcome of proposals presented to
shareholders for approval. As of December 31, 2022, the following persons were
known to have held of record or beneficially 5% or more of the Fund’s Class R3,
Class R4, Class R5, or Class R6 shares:
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
International Growth Fund |
Class R3 shares |
DCGT AS TTEE AND/OR CUST FBO PLIC VARIOUS
RETIREMENT PLANS OMNIBUS ATTN NPIO
TRADE DESK 711 HIGH
ST DES MOINES
IA 50392-0001 |
27.59% |
International Growth Fund |
Class R3 shares |
ASCENSUS TRUST COMPANY FBO THREE WAY CHEVROLET CO. 401(K) PLAN 216238 P.O. BOX 10758 FARGO ND 58106-0758 |
10.93% |
International Growth Fund |
Class R3 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
7.78% |
International Growth Fund |
Class R4 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
53.58% |
International Growth Fund |
Class R4 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
13.33% |
International Growth Fund |
Class R4 shares |
EMPOWER TRUST FBO EMPLOYEE BENEFITS CLIENTS 401K 8515 E ORCHARD RD 2T2 GREENWOOD VILLAGE CO 80111-5002
|
7.79% |
International Growth Fund |
Class R5 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE BENEFIT OF CUSTOMERS REINVEST ACCT ATTN MUTUAL FUNDS DEPARTMENT 211 MAIN ST SAN FRANCISCO CA 94105-1901 |
38.71% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
International Growth Fund |
Class R5 shares |
JOHN HANCOCK LIFE INSURANCE COMPANY
(USA) ATTN: JHRPS TRADING OPS
ST6 200 BERKELEY
ST BOSTON MA 02116-5023
|
19.30% |
International Growth Fund |
Class R5 shares |
JOHN HANCOCK TRUST COMPANY LLC 690 CANTON ST STE 100 WESTWOOD MA 02090-2324 |
7.63% |
International Growth Fund |
Class R6 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
30.57% |
International Growth Fund |
Class R6 shares |
GARRETT THORNBURG REVOCABLE LIVING TRUST DTD
07-27-90 2300 N RIDGETOP
RD SANTA FE
NM 87506-8361 |
9.30% |
International Growth Fund |
Class R6 shares |
DCGT AS TTEE AND/OR CUST FBO PLIC VARIOUS
RETIREMENT PLANS OMNIBUS ATTN NPIO
TRADE DESK 711 HIGH
ST DES MOINES
IA 50392-0001 |
8.05% |
International Growth Fund |
Class R6 shares |
THORNBURG FOUNDATION 2300 N RIDGETOP RD SANTA FE NM 87506-8361 |
6.57% |
International Growth Fund |
Class R6 shares |
PECOS RIVER MANAGEMENT INC TTEE UA DTD 12/27/2000 OPPENHEIMER DESCENDANTS TRUST PO BOX 2554 JACKSON WY 83001-2554 |
6.48% |
International Growth Fund |
Class R6 shares |
PECOS RIVER MANAGEMENT INC TTEE UA DTD 12/24/1994 THORNBURG DESCENDANTS TRUST PO BOX 2554 JACKSON WY 83001-2554 |
6.31% |
International Growth Fund |
Class R6 shares |
LLOYD J THORNBURG TTEE LLOYD J THORNBURG REVOCABLE TRUST UA DTD 05/14/2019 C/O THORNBURG INVESTMENT MANAGEMENT
INC 2300 N RIDGETOP
RD SANTA FE
NM 87506-8361 |
5.5% |
International Growth Fund |
Class R6 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE BENEFIT OF CUSTOMERS REINVEST ACCT ATTN MUTUAL FUNDS DEPARTMENT 211 MAIN ST SAN FRANCISCO CA 94105-1901 |
5.03% |
Developing
World Fund
As
of December 31, 2022, the officers and Trustees of the Trust, as a group, held
approximately 48% of the Class R6 shares of the Fund and held less than one
percent of the Class R5 shares of the Fund. As of December 31, 2022, Garret
Thornburg, 2300 North Ridgetop Road, Santa Fe, New Mexico 87506-8361, was the
beneficial owner of approximately 46% of the Fund’s Class R6 shares.
Shareholders that beneficially own more than 25% of the voting securities of a
Fund could control the outcome of proposals presented to shareholders for
approval. As of December 31, 2022, the following persons were known to have held
of record or beneficially 5% or more of the Fund’s Class R5 or Class R6
shares:
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Developing World Fund |
Class R5 shares |
EMPOWER TRUST FBO EMPLOYEE BENEFITS CLIENTS 401K 8515 E ORCHARD RD 2T2 GREENWOOD VILLAGE CO 80111-5002
|
22.04% |
Developing World Fund |
Class R5 shares |
FIIOC FBO RAILWORKS CORP INCENTIVE PLAN TTEE 401(K) PLAN 100 MAGELLAN WAY COVINGTON KY 41015-1987 |
20.07% |
Developing World Fund |
Class R5 shares |
EMPOWER TRUST FBO CERTAIN RETIREMENT PLANS 8515 E ORCHARD ROAD 2T2 GREENWOOD VLG CO 80111-5002 |
10.40% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Developing World Fund |
Class R5 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE BENEFIT OF CUSTOMERS REINVEST ACCT ATTN MUTUAL FUNDS DEPARTMENT 211 MAIN ST SAN FRANCISCO CA 94105-1901 |
9.46% |
Developing World Fund |
Class R5 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
5.77% |
Developing World Fund |
Class R5 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
5.34% |
Developing World Fund |
Class R6 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE BENEFIT OF CUSTOMERS REINVEST ACCT ATTN MUTUAL FUNDS DEPARTMENT 211 MAIN ST SAN FRANCISCO CA 94105-1901 |
10.50% |
Developing World Fund |
Class R6 shares |
GARRETT THORNBURG TTEE THORNBURG FAMILY TDWRX GRAT 2022 UA DTD 07/08/2022 2300 N RIDGETOP RD SANTA FE NM 87506-8361 |
9.94% |
Developing World Fund |
Class R6 shares |
GARRETT THORNBURG REVOCABLE LIVING TRUST DTD
07-27-90 2300 N RIDGETOP
RD SANTA FE
NM 87506-8361 |
8.59% |
Developing World Fund |
Class R6 shares |
THORNBURG FOUNDATION 2300 N RIDGETOP RD SANTA FE NM 87506-8361 |
7.80% |
Developing World Fund |
Class R6 shares |
PECOS RIVER MANAGEMENT INC TTEE UA DTD 12/27/2000 OPPENHEIMER DESCENDANTS TRUST PO BOX 2554 JACKSON WY 83001-2554 |
7.69% |
Developing World Fund |
Class R6 shares |
PECOS RIVER MANAGEMENT INC TTEE UA DTD 12/24/1994 THORNBURG DESCENDANTS TRUST PO BOX 2554 JACKSON WY 83001-2554 |
7.58% |
Small/Mid
Cap Core Fund
As
of December 31, 2022, the officers and Trustees of Thornburg Investment Trust,
as a group, held less than 1% of the Class R3, Class R4 or Class R5 shares of
the Fund. As of December 31, 2022, the following persons were known to have held
of record or beneficially 5% or more of the Fund’s Class R3, Class R4 and Class
R5 shares:
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Small/Mid Cap Core Fund |
Class R3 shares |
DAVID TENBROECK MARK STROGOFF HARTFORD INSURANCE CO SEPARATE ACCOUNT 401(K) PLAN PO BOX 2999 HARTFORD CT 06104-2999 |
27.86% |
Small/Mid Cap Core Fund |
Class R3 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
20.16% |
Small/Mid Cap Core Fund |
Class R3 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
11.56% |
Small/Mid Cap Core Fund |
Class R3 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED LIFE AUL GROUP RETIREMENT ANNUITY SEPARATE ACCOUNT II PO BOX 368 INDIANAPOLIS IN 46206-0368 |
8.64% |
Small/Mid Cap Core Fund |
Class R3 shares |
EMPOWER TRUST FBO EMPOWER BENEFIT GRANDFATHERED PLAN 8515 E ORCHARD RD # 2T2 GREENWOOD VLG CO 80111-5002 |
6.29% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Small/Mid Cap Core Fund |
Class R3 shares |
MASSACHUSETTS MUTUAL INSURANCE
COMPANY 1295 STATE ST
SPRINGFIELD
MA 01111-0001 |
5.71% |
Small/Mid Cap Core Fund |
Class R4 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
67.90% |
Small/Mid Cap Core Fund |
Class R4 shares |
DAVID TENBROECK MARK STROGOFF HARTFORD INSURANCE CO SEPARATE ACCOUNT 401(K) PLAN PO BOX 2999 HARTFORD CT 06104-2999 |
14.14% |
Small/Mid Cap Core Fund |
Class R4 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
6.61% |
Small/Mid Cap Core Fund |
Class R5 shares |
MASSACHUSETTS MUTUAL INSURANCE
COMPANY 1295 STATE ST
SPRINGFIELD
MA 01111-0001 |
49.91% |
Small/Mid Cap Core Fund |
Class R5 shares |
DCGT AS TTEE AND/OR CUST FBO PLIC VARIOUS
RETIREMENT PLANS OMNIBUS ATTN NPIO
TRADE DESK 711 HIGH
ST DES MOINES
IA 50392-0001 |
34.20% |
Small/Mid Cap Core Fund |
Class R5 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
6.25% |
Small/Mid
Cap Growth Fund
As
of December 31, 2022, the officers and Trustees of Thornburg Investment Trust,
as a group, held less than 1% of the Class R3, Class R4 or Class R5 shares of
the Fund. As of December 31, 2022, the following persons were known to have held
of record or beneficially 5% or more of the Fund’s Class R3, Class R4 and Class
R5 shares:
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Small/Mid Cap Growth Fund |
Class R3 shares |
DAVID TENBROECK MARK STROGOFF HARTFORD INSURANCE CO SEPARATE ACCOUNT 401(K) PLAN PO BOX 2999 HARTFORD CT 06104-2999 |
30.57% |
Small/Mid Cap Growth Fund |
Class R3 shares |
EMPOWER TRUST FBO EMPOWER BENEFIT GRANDFATHERED PLAN 8515 E ORCHARD RD # 2T2 GREENWOOD VLG CO 80111-5002 |
10.15% |
Small/Mid Cap Growth Fund |
Class R3 shares |
DCGT AS TTEE AND/OR CUST FBO PLIC VARIOUS
RETIREMENT PLANS OMNIBUS ATTN NPIO
TRADE DESK OMNIBUS (BPS 75) 711
HIGH ST DES MOINES
IA 50392-0001 |
8.29% |
Small/Mid Cap Growth Fund |
Class R3 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED LIFE AUL GROUP RETIREMENT ANNUITY SEPARATE ACCOUNT II PO BOX 368 INDIANAPOLIS IN 46206-0368 |
7.61% |
Small/Mid Cap Growth Fund |
Class R3 shares |
MATRIX TRUST COMPANY TRUSTEE TRAILS WEST MANUFACTURING OF IDAHO 717 17TH STREET SUITE 1300 DENVER CO 80202-3304 |
6.13% |
Small/Mid Cap Growth Fund |
Class R3 shares |
ASCENSUS TRUST COMPANY FBO AG RISK SOLUTIONS RETIREMENT PLAN
83806 PO BOX 10758
FARGO ND 58106-0758
|
5.03% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Small/Mid Cap Growth Fund |
Class R4 shares |
DAVID TENBROECK MARK STROGOFF HARTFORD INSURANCE CO SEPARATE ACCOUNT 401(K) PLAN PO BOX 2999 HARTFORD CT 06104-2999 |
28.38% |
Small/Mid Cap Growth Fund |
Class R4 shares |
FIIOC FBO WILLIAM B MEYER INCORPORATED RETIREMENT AND 401K PLAN 100 MAGELLAN WAY COVINGTON KY 41015-1987 |
26.47% |
Small/Mid Cap Growth Fund |
Class R4 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
25.78% |
Small/Mid Cap Growth Fund |
Class R4 shares |
EMPOWER TRUST FBO EMPOWER BENEFIT PLAN 8515 E ORCHARD RD # 2T2 GREENWOOD VLG CO 80111-5002 |
9.37% |
Small/Mid Cap Growth Fund |
Class R5 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
36.90% |
Small/Mid Cap Growth Fund |
Class R5 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED LIFE AUL GROUP RETIREMENT ANNUITY SEPARATE ACCOUNT II PO BOX 368 INDIANAPOLIS IN 46206-0368 |
14.12% |
Small/Mid Cap Growth Fund |
Class R5 shares |
MASSACHUSETTS MUTUAL INSURANCE
COMPANY 1295 STATE ST
SPRINGFIELD
MA 01111-0001 |
11.54% |
Small/Mid Cap Growth Fund |
Class R5 shares |
NATIONWIDE TRUST COMPANY FSB C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029 |
9.16% |
Small/Mid Cap Growth Fund |
Class R5 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED LIFE AUL AMERICAN UNIT INVESTMENT TRUST ATTN: SEPARATE ACCOUNTS PO BOX 368 INDIANAPOLIS IN 46206-0368 |
6.64% |
Small/Mid Cap Growth Fund |
Class R5 shares |
MATRIX TRUST COMPANY CUST. FBO EDMOND DOOR & PLYWOOD, INC.
401(K) 717 17TH STREET SUITE
1300 DENVER
CO 80202-3304 |
5.10% |
Income
Builder Fund
As
of December 31, 2022, the officers and Trustees of the Trust, as a group, held
approximately 38% of the Class R6 shares of the Fund, and held less than one
percent of the Class R3, Class R4, or Class R5 shares of the Fund. As of
December 31, 2022, Garret Thornburg, 2300 North Ridgetop Road, Santa Fe, New
Mexico 87506-8361, was the beneficial owner of approximately 35% of the Fund’s
Class R6 shares. Shareholders that beneficially own more than 25% of the voting
securities of a Fund could control the outcome of proposals presented to
shareholders for approval. As of December 31, 2022, the following persons were
known to have held of record or beneficially 5% or more of the Fund’s Class R3,
Class R4, Class R5, and Class R6 shares:
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Income Builder Fund |
Class R3 shares |
MORGAN STANLEY SMITH BARNEY LLC FOR THE EXCLUSIVE BENE OF ITS CUST
1 NEW YORK PLZ FL
12 NEW YORK
NY 10004-1965 |
22.56% |
Income Builder Fund |
Class R3 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
14.75% |
Income Builder Fund |
Class R3 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
13.62% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Income Builder Fund |
Class R4 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
33.85% |
Income Builder Fund |
Class R4 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
12.29% |
Income Builder Fund |
Class R4 shares |
MATRIX TRUST COMPANY CUST. FBO MILE HIGH BEVERAGES, INC. 401(K)
PR 717 17TH STREET SUITE
1300 DENVER
CO 80202-3304 |
10.00% |
Income Builder Fund |
Class R4 shares |
EMPOWER TRUST FBO EMPLOYEE BENEFITS CLIENTS 401K 8515 E ORCHARD RD 2T2 GREENWOOD VILLAGE CO 80111-5002
|
8.57% |
Income Builder Fund |
Class R4 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE BENEFIT OF CUSTOMERS REINVEST ACCT ATTN MUTUAL FUNDS DEPARTMENT 211 MAIN ST SAN FRANCISCO CA 94105-1901 |
7.27% |
Income Builder Fund |
Class R4 shares |
MATRIX TRUST COMPANY CUST. FBO MCT, INC. 401(K) RETIREMENT
PLAN 717 17TH STREET SUITE
1300 DENVER
CO 80202-3304 |
6.22% |
Income Builder Fund |
Class R5 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
31.05% |
Income Builder Fund |
Class R5 shares |
DCGT AS TTEE AND/OR CUST FBO PLIC VARIOUS RETIREMENT PLANS
OMNIBUS ATTN NPIO TRADE
DESK 711 HIGH ST DES MOINES IA 50392-0001 |
15.21% |
Income Builder Fund |
Class R5 shares |
EMPOWER TRUST FBO EMPLOYEE BENEFITS CLIENTS 401K 8515 E ORCHARD RD 2T2 GREENWOOD VILLAGE CO 80111-5002
|
7.31% |
Income Builder Fund |
Class R6 shares |
GARRETT THORNBURG REVOCABLE LIVING TRUST DTD
07-27-90 2300 N RIDGETOP
RD SANTA FE
NM 87506-8361 |
15.56% |
Income Builder Fund |
Class R6 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE BENEFIT OF CUSTOMERS REINVEST ACCT ATTN MUTUAL FUNDS DEPARTMENT 211 MAIN ST SAN FRANCISCO CA 94105-1901 |
12.99% |
Limited
Term U.S. Government Fund
As
of December 31, 2022, the officers and Trustees of Thornburg Investment Trust,
as a group, held less than 1% of the Class R3, Class R4, or Class R5 shares of
the Fund. As of December 31, 2022, the following persons were known to have held
of record or beneficially 5% or more of the Fund’s Class R3, Class R4, or Class
R5 shares:
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Limited Term U.S. Government Fund |
Class R3 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
57.05% |
Limited Term U.S. Government Fund |
Class R3 shares |
RELIANCE TRUST CO FBO MASSMUTUAL VARIOUS NON QUALIFIED
R PO BOX 78446 ATLANTA GA 30357 |
13.29% |
Limited Term U.S. Government Fund |
Class R3 shares |
FIIOC FBO SPILLER ASSOCIATED FURNITURE STORES INC
PROFIT SHARING
PLAN 100 MAGELLAN WAY
COVINGTON
KY 41015-1987 |
7.53% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Limited Term U.S. Government Fund |
Class R3 shares |
FIIOC FBO EVANS MEATS INC 401K PLAN 100 MAGELLAN WAY COVINGTON KY 41015-1987 |
5.29% |
Limited Term U.S. Government Fund |
Class R4 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
81.70% |
Limited Term U.S. Government Fund |
Class R4 Shares |
FIIOC FBO POLY-MED INC 401K 100 MAGELLAN WAY COVINGTON KY 41015-1987 |
18.10% |
Limited Term U.S. Government Fund |
Class R5 shares |
MID ATLANTIC TRUST COMPANY FBO T&R OIL 401(K) PROFIT SHARING
PLAN 1251 WATERFRONT PLACE, SUITE
525 PITTSBURGH
PA 15222-4228 |
28.54% |
Limited Term U.S. Government Fund |
Class R5 shares |
EMPOWER TRUST FBO EMPOWER BENEFIT PLAN 8515 E ORCHARD RD # 2T2 GREENWOOD VLG CO 80111-5002 |
16.80% |
Limited Term U.S. Government Fund |
Class R5 shares |
MID ATLANTIC TRUST COMPANY FBO ASSOCIATED MUSICIANS OF GREATE 401 1251 WATERFRONT PL STE 525 PITTSBURGH PA 15222-4228 |
9.49% |
Limited Term U.S. Government Fund |
Class R5 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
8.44% |
Limited Term U.S. Government Fund |
Class R5 shares |
MATRIX TRUST COMPANY CUST FBO LYNDEX-NIKKEN INC PSP 717 17TH ST STE 1300 DENVER CO 80202-3304 |
8.40% |
Limited Term U.S. Government Fund |
Class R5 shares |
MID ATLANTIC TRUST
COMPANY FBO HAYWORTH-MILLER FUNERAL HOME
401(K) 1251 WATERFRONT PL STE
525 PITTSBURGH
PA 15222-4228 |
6.13% |
Limited Term U.S. Government Fund |
Class R5 shares |
JOHN HANCOCK TRUST COMPANY LLC 690 CANTON ST STE 100 WESTWOOD MA 02090-2324 |
5.26% |
Limited
Term Income Fund
As
of December 31, 2022, the officers and Trustees of Thornburg Investment Trust,
as a group, as a group, held approximately 4% of the Class R6 shares of the Fund
and held less than 1% of the Class R3, Class R4, or Class R5 shares of the Fund.
As of December 31, 2022, the following persons were known to have held of record
or beneficially 5% or more of the Fund’s Class R3, Class R4, Class R5 or Class
R6 shares:
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Limited Term Income Fund |
Class R3 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED LIFE AUL GROUP RETIREMENT ANNUITY SEPARATE ACCOUNT II PO BOX 368 INDIANAPOLIS IN 46206-0368 |
31.68% |
Limited Term Income Fund |
Class R3 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
18.18% |
Limited Term Income Fund |
Class R3 shares |
DCGT AS TTEE AND/OR CUST FBO PLIC VARIOUS RETIREMENT PLANS
OMNIBUS ATTN NPIO TRADE DESK
711 HIGH ST DES MOINES IA 50392-0001 |
8.89% |
Limited Term Income Fund |
Class R3 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE BENEFIT OF CUSTOMERS REINVEST ACCT ATTN MUTUAL FUNDS DEPARTMENT 211 MAIN ST SAN FRANCISCO CA 94105-1901 |
8.60% |
Limited Term Income Fund |
Class R3 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED LIFE AUL AMERICAN UNIT INVESTMENT TRUST ATTN: SEPARATE ACCOUNTS PO BOX 368 INDIANAPOLIS IN 46206-0368 |
5.89% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Limited Term Income Fund |
Class R4 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
73.60% |
Limited Term Income Fund |
Class R4 Shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
10.75% |
Limited Term Income Fund |
Class R4 Shares |
MATRIX TRUST COMPANY CUST FBO REX ENGINEERING CORPORATION 717 17TH ST STE 1300 DENVER CO 80202-3304 |
5.52% |
Limited Term Income Fund |
Class R5 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED
LIFE AUL GROUP RETIREMENT
ANNUITY SEPARATE ACCOUNT
II PO BOX 368 INDIANAPOLIS IN 46206-0368 |
26.65% |
Limited Term Income Fund |
Class R5 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE BENEFIT OF CUSTOMERS REINVEST ACCT ATTN MUTUAL FUNDS DEPARTMENT 211 MAIN ST SAN FRANCISCO CA 94105-1901 |
15.45% |
Limited Term Income Fund |
Class R5 shares |
PRINCIPAL TRUST COMPANY FBO ARCTIC SLOPE REG CORP DEF COMP ATTN PLAN TRUSTEE PLAN 11 1013 CENTRE RD WILMINGTON DE 19805-1265 |
7.38% |
Limited Term Income Fund |
Class R5 shares |
EMPOWER TRUST FBO EMPOWER BENEFIT PLANS 8515 E ORCHARD RD 2T2 GREENWOOD VILLAGE CO 80111-5002
|
6.72% |
Limited Term Income Fund |
Class R6 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED
LIFE AUL GROUP RETIREMENT
ANNUITY SEPARATE ACCOUNT
II PO BOX 368 INDIANAPOLIS IN 46206-0368 |
36.86% |
Limited Term Income Fund |
Class R6 shares |
INSURANCE COMPANY SEPARATE ACCOUNT AMERICAN UNITED LIFE AUL AMERICAN UNIT INVESTMENT TRUST ATTN: SEPARATE ACCOUNTS PO BOX 368 INDIANAPOLIS IN 46206-0368 |
9.35% |
Limited Term Income Fund |
Class R6 Shares |
DCGT AS TTEE AND/OR CUST FBO PLIC VARIOUS RETIREMENT PLANS ATTN NPIO TRADE DESK OMNIBUS 711 HIGH ST DES MOINES IA 50392-0001 |
9.07% |
Limited Term Income Fund |
Class R6 Shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
6.47% |
Limited Term Income Fund |
Class R6 Shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
5.19% |
Strategic
Income Fund
As
of December 31, 2022, the officers and Trustees of Thornburg Investment Trust,
as a group, held approximately 7% of the Class R6 shares of the Fund and held
less than 1% of the Class R3, Class R4 or Class R5 shares of the Fund. As of
December 31, 2022, the following persons were known to have held of record or
beneficially 5% or more of the Fund’s Class R3, Class R4, Class R5, or Class R6
shares:
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Strategic Income Fund |
Class R3 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
22.50% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Strategic Income Fund |
Class R3 shares |
FIIOC FBO KENNETH T WASHKO DDS 401K PLAN 100 MAGELLAN WAY COVINGTON KY 41015-1987 |
21.31% |
Strategic Income Fund |
Class R3 shares |
RELIANCE TRUST COMPANY FBO RETIREMENT PLANS SERVICED BY
METLIF C/O FASCORE
LLC 8515 E ORCHARD RD #
2T2 GREENWOOD VLG
CO 80111-5002 |
14.33% |
Strategic Income Fund |
Class R3 shares |
FIIOC FBO WYCLIFFE GOLF & COUNTRY CLUB INC
401K 100 MAGELLAN WAY
COVINGTON
KY 41015-1987 |
11.46% |
Strategic Income Fund |
Class R3 shares |
MID ATLANTIC TRUST COMPANY FBO BONETTI KOZERSKI STUDIO LLC 401(K) 1251 WATERFRONT PLACE, SUITE 525 PITTSBURGH PA 15222-4228 |
10.32% |
Strategic Income Fund |
Class R3 shares |
MORGAN STANLEY SMITH BARNEY LLC FOR THE EXCLUSIVE BENE OF ITS CUST 1 NEW YORK PLZ FL 12 NEW YORK NY 10004-1965 |
8.45% |
Strategic Income Fund |
Class R4 shares |
MICHAEL KAMINSKI TTEE VOYA RETIREMENT INSURANCE AND ANNUITY COMPANY
401(K) PLAN 1 ORANGE
WAY WINDSOR
CT 06095-4773 |
21.70% |
Strategic Income Fund |
Class R4 shares |
FIIOC FBO
POLYMER VENTURES 401K PLAN 100
MAGELLAN WAY COVINGTON
KY 41015-1987 |
20.65% |
Strategic Income Fund |
Class R4 shares |
ASCENSUS TRUST COMPANY FBO T & B SPORTS
EMPLOYEE PROFIT SHARIN 217375 PO
BOX 10758 FARGO
ND 58106-0758 |
11.93% |
Strategic Income Fund |
Class R4 shares |
STATE STREET BANK & TRUST AS TTEE AND/OR CUST FBO ADP ACCESS PRODUCT 1 LINCOLN ST BOSTON MA 02111-2900 |
11.08% |
Strategic Income Fund |
Class R4 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
9.26% |
Strategic Income Fund |
Class R4 shares |
MATRIX TRUST COMPANY CUST FBO T E M GROUP INC 717 17TH ST STE 1300 DENVER CO 80202-3304 |
7.41% |
Strategic Income Fund |
Class R5 shares |
MINNESOTA LIFE INSURANCE COMPANY 400 ROBERT ST N STE A SAINT PAUL MN 55101-2099 |
49.76% |
Strategic Income Fund |
Class R5 shares |
T ROWE PRICE RETIREMENT PLAN SERVICES 4515 PAINTERS MILL RD OWINGS MILLS MD 21117-4903 |
8.80% |
Strategic Income Fund |
Class R5 shares |
EMPOWER TRUST FBO RECORDKEEPING FOR VARIOUS BENEFIT
P C/O MUTUAL FUND
TRADING 8525 E ORCHARD
RD GREENWOOD VILLAGE
CO 80111-5002 |
7.34% |
Strategic Income Fund |
Class R5 shares |
NATIONAL FINANCIAL SERVICES LLC 499 WASHINGTON BLVD JERSEY CITY NJ 07310-1995 |
6.94% |
Strategic Income Fund |
Class R6 shares |
SEI PRIVATE TRUST COMPANY C/O PRINCIPAL FINANCIAL GRP ID 636
1 FREEDOM VALLEY DR
OAKS PA 19456-9989
|
15.68% |
Strategic Income Fund |
Class R6 shares |
INSURANCE COMPANY SEPARATE AMERICAN UNITED LIFE
AUL AMERICAN UNIT PO BOX 368 INDIANAPOLIS IN 46206-0368 |
14.36% |
Fund |
Class
of Shares |
Shareholder |
% of Total Shares
of Class |
Strategic Income Fund |
Class R6 shares |
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS ATTN FUND ADMINISTRATION 97HP7 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 |
14.01% |
Strategic Income Fund |
Class R6 shares |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY ACCT FOR EXCLUSIVE BENEFIT OF CUSTOMERS REINVEST ACCT ATTN MUTUAL FUNDS DEPARTMENT 211 MAIN ST SAN FRANCISCO CA 94105-1901 |
8.38% |
Strategic Income Fund |
Class R6 shares |
THORNBURG FOUNDATION 2300 N RIDGETOP RD SANTA FE NM 87506-8361 |
5.60% |
NET ASSET VALUE
Each
Fund will calculate its net asset value as of 4:00 p.m. Eastern Time on days
when the New York Stock Exchange is open for trading, and more frequently if
deemed desirable by the Fund. Net asset value will not be calculated on New
Year’s Day, Washington’s Birthday (on the third Monday in February), Good
Friday, Memorial Day (on the last Monday in May), Independence Day, Labor Day,
Thanksgiving Day, Christmas Day, on the preceding Friday if any of the foregoing
holidays falls on a Saturday, and on the following Monday if any of the
foregoing holidays falls on a Sunday. Under the 1940 Act, net asset value must
be computed at least once daily on each day (i) in which there is a sufficient
degree of trading in a Fund’s portfolio securities that the current net asset
value of its shares might be materially affected by changes in the value of such
securities and (ii) on which an order for purchase or redemption of its shares
is received.
DISTRIBUTOR
Pursuant
to a Distribution Agreement with Thornburg Investment Trust, Thornburg
Securities Corporation (“TSC”) acts as principal underwriter of each of the
Funds. The Funds do not bear selling expenses except (i) those involved in
registering its shares with the Securities and Exchange Commission and
qualifying them or the Fund with state regulatory authorities, and (ii) expenses
paid under the Service Plans and Distribution Plans which might be considered
selling expenses. Terms of continuation, termination and assignment under the
Distribution Agreement are identical to those described above with regard to the
Investment Advisory Agreements, except that termination other than upon
assignment requires six months’ notice.
Garrett
Thornburg, Chairman and Trustee of Thornburg Investment Trust, is also director
and controlling stockholder of TSC.
ADDITIONAL INFORMATION RESPECTING PURCHASE AND
REDEMPTION OF SHARES
Shares
of the Funds are qualified for sale under the laws of every state or territory
of the United States.
Redemption
proceeds are normally paid in cash. Each Fund generally expects to meet
redemption requests out of its holdings of cash, or by selling portfolio
investments to generate cash to meet those requests. If considered appropriate
by Thornburg, and subject to terms and conditions approved by the Trustees, a
Fund may pay redemption proceeds in portfolio securities rather than cash.
The
Funds have elected to pay in cash all requests for redemption by any
shareholder. They may, however, limit such cash in respect to each shareholder
during any 90-day period to the lesser of $250,000 or 1% of the net asset value
of a Fund at the beginning of such period. This election has been made pursuant
to Rule 18f-1 under the 1940 Act and is irrevocable while the Rule is in effect
unless the Securities and Exchange Commission, by order, permits its withdrawal.
If a Fund redeems shares by distributing portfolio securities, the shareholder
would be subject to the risk of a subsequent adverse change in the market value
of those securities, the brokerage and related costs of selling the securities,
and the possibility that there is not a liquid market for some or all of the
distributed securities.
Eligibility for Class R6 Shares
As
described in the Prospectus, employees, officers, trustees, and directors of any
Fund or Thornburg company, as well as the families of such persons and any trust
established for the benefit of such persons or their families, are eligible to
purchase Class R6 shares provided that those shares are held in an account
direct with TSC. In addition, pursuant to procedures adopted by the Trustees of
Thornburg Investment Trust, the advisor is authorized to make Class R6 shares of
the Funds available to certain categories of investors upon a determination by
the advisor that the sale of Class R6 shares to that investor will not involve
any sales expense to the Funds or to TSC, and is not expected to involve
administrative services by the Fund or the advisor significantly exceeding the
administrative services that are customarily provided to accounts that own Class
R6 shares.
BUSINESS CONTINUITY PLAN
Thornburg
and TSC have each adopted a business continuity plan that seeks to anticipate
significant business disruptions to its operations, including disruptions to the
securities markets due to terrorist attack. In accordance with this plan,
Thornburg and TSC have each identified and made provision to recover all the
critical systems required to protect its customers in the event of a significant
business disruption.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
PricewaterhouseCoopers
LLP , whose principal business address is 300 Madison Avenue, New York, New York
10017, is the independent registered public accounting firm for the Funds.