Semi-Annual Report. March 31, 2018

Transcription

1 Semi-Annual Report March 31, 2018

2 About Thornburg Investment Management It s more than what we do. It s how we do it. At Thornburg, we are very different in how we think, invest, and are structured. We believe this difference is what makes us successful in helping individuals reach their long-term financial goals. Flexible Perspective Our perspective on investment opportunities is more flexible than most, viewing a wide range of opportunities beyond conventional boundaries to find hidden value. Collaboration Collectively, we hone ideas via borderless cross-pollination for better judgment and better results. Portfolio Construction Disciplined construction guided more by our convictions than convention. CONVICTION Thorough analysis and our relative-value framework lead to conviction in our securities selection. UNCONVENTIONAL Active management means we seek the best value for our clients rather than using conventional benchmarks as our starting point. Structured for Excellence How we think and how we invest is made possible by how we re structured. TEAM APPROACH FAR FROM THE HERD ACCESS & TRANSPARENCY 2 Semi-Annual Report

3 Thornburg Developing World Fund Semi-Annual Report March 31, 2018 Table of Contents Letter to Shareholders....4 Performance Summary Fund Summary...7 Schedule of Investments...8 Statement of Assets and Liabilities StatementofOperations...13 Statements of Changes in Net Assets Notes to Financial Statements Financial Highlights...24 Expense Example OtherInformation...27 Trustees Statement to Shareholders SHARE CLASS NASDAQ SYMBOL CUSIP Class A THDAX Class C THDCX Class I THDIX Class R5 THDRX Class R6 TDWRX Class I, R5, and R6 shares may not be available to all investors. Minimum investments for Class I shares may be higher than those for other classes. Investments carry risks, including possible loss of principal. Additional risks may be associated with investments outside the United States, especially in emerging markets, including currency fluctuations, illiquidity, volatility, and political and economic risks. Investments in small- and mid-capitalization companies may increase the risk of greater price fluctuations. Please see the Fund s prospectus for a discussion of the risks associated with an investment in the Fund. Investments in the Fund are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity. Funds invested in a smaller number of holdings may expose an investor to greater volatility. Semi-Annual Report 3

4 Letter to Shareholders April 25, 2018 Dear Fellow Shareholder: The last six months were a tale of two halves in global equity markets. The period started with a grind higher that culminated in an almost euphoric turn upward during the month of January. The euphoria quickly wore off and in late January markets began to swoon, with many of the major indices giving back half or more of the gains. A recovery began in February but failed to hold, losing steam again into the end of March. Every pundit has a different narrative about the increase in volatility and atrophying prices after such strong performance in 2017, when volatility was near-zero. From our perspective, there s no sole reason, and we think it s most likely a combination of various headwinds, including higher interest rates, lofty valuations, burgeoning trade conflicts, and weaker economic data. The good news for long-term investors is that, in our opinion, the market became more attractively valued after the recent pull back. Thornburg Developing World Fund delivered a return of 6.09% (I shares) in the prior six-month period, which trailed the index return of 8.96%. Most of the underperformance occurred during the final few weeks of the period, as several stock-specific issues took a toll, but they have not impacted our view of fundamental value for those holdings. Major contributors for the period include Sanlam Limited, Tencent Holdings Ltd., Sberbank Russia OJSC, Itau Unibanco Holding S.A., and Hangzhou Hikvision Digital Technology Co., Ltd. Shares of Sanlam, a South African Insurance company, rose following the election of Cyril Ramaphosa as President of the African National Congress (ANC) during its party Congress in December of Investors see Ramaphosa as a marketfriendly politician with potential to clean up the system following several corruption accusations against former South African President, Jacob Zuma. A more robust outlook for South Africa s equity market should benefit Sanlam, as several of its businesses generate revenues based on fees tied to the level of assets under management. Furthermore, if political change sparks an economic recovery, Sanlam would likely experience an acceleration in sales of new products. Tencent continues to report strong growth in its gaming business, which climbed 42% year-over-year in the most recent quarter. In addition, Tencent s ad revenue once again grew briskly, driven by higher monetization on each ad impression. Tencent continues to invest in its platform, which should keep driving strong return on investment for its advertising customers in the medium to long term. Sberbank, the leading banking franchise in Russia, reported robust results during the third and fourth quarters of Accelerating loan growth combined with falling provisions for doubtful accounts is driving strong earnings growth. The company s investor day also shed light on Sberbank s technology leadership. Lastly, with strong returns on equity and high capital levels, Sberbank communicated to shareholders its commitment to a higher dividend payout ratio. We remain constructive on the long-term prospects for the bank. With the Brazilian economy showing early signs of improvement, investors have become more constructive on the prospects of Itau Unibanco, a leading private sector bank. Better economic growth in an environment of falling inflation and lower interest rates should boost loan demand in Brazil. Itau Unibanco should also recover some of the market share lost to public sector banks in the last five years. Better economic prospects have led to banks taking less loan loss provisions for potentially troubled credits. Like Sberbank, Itau recently made an effort to clarify its capital return policy, which is important as its provision expenses are expected to fall. We are optimistic about the potential that Itau will pay an attractive and growing dividend over the next several years. Hikvision shares rose as the company benefited from strong growth in its core surveillance camera business, which was at the top end of its guided range in the most recent quarter. Meanwhile, the company is also realizing increasing margins through a better overseas mix and growth in its New Solutions segment, which includes unique machine vision and artificial intelligence applications. Major detractors for the period include Baidu, Inc., Bharti Infratel Ltd., China Unicom (Hong Kong) Limited, Emaar Properties (P.J.S.C.) and Kroton Educacional S.A. Shares of Baidu, the dominant search engine in China, weakened in the fourth quarter after management s revenue forecast disappointed investors despite recent progress toward a recovery in the core business. Management subsequently clarified that the business was accelerating on a like-for-like basis. Indeed, results in the fourth quarter of 2017 showed that online advertising revenue growth accelerated for the fourth consecutive quarter. But the shares continued to struggle in the first quarter of this year alongside other technology and internet stocks. We believe the share price offers the core search business at compelling value alongside several potentially valuable options in new fields, such as autonomous driving. The overall thesis continues to track with our expectations. Bharti Infratel is the largest mobile tower operator in India. The shares have recently come under pressure following the merger or bankruptcy of several of their customers, reducing demand for new tower tenancies in the short term. Despite the short-term demand weakness, we remain optimistic about demand for its services as India has become one of the highest consumers of mobile data in the world, yet still has one of the smallest tower bases. Shares China Unicom, one of three main mobile operators in China, fell after the Chinese regulator announced new restrictions on pricing with respect to roaming. We think the 4 Semi-Annual Report

5 Letter to Shareholders, Continued weakness in the shares has provided an attractive point to add to the position considering the limited impact of the pricing adjustments and the progress it s making in subscriber growth. Emaar Properties is a leading real estate developer in Dubai. Its shares detracted from performance in the recent period as they gave back some of the gains from the first half of Investors anticipated that the initial public offering of Emaar Development, the firm s domestic real estate development business, would result in a large one-time special dividend being paid to shareholders. While the company did distribute a portion of those gains to minorities, management decided that some of the proceeds would be kept within the company to fund ongoing growth initiatives. Some investors were disappointed and sold the shares. We remain constructive on the growth opportunities for several of Emaar Property s underlying businesses and see the business as attractively valued. We have used the opportunity to add to the position. Kroton Educacional is one of the leading private education companies in Brazil. The shares were strong during the middle of 2017 thanks to delivery of an internal cost-cutting program, which helped the firm maintain profitability despite sluggish demand. During that period, we significantly reduced our position. Unfortunately, stubbornly high unemployment during the still nascent economic recovery in Brazil has made it difficult for many students who attend school part time while working to continue their studies. The recent reports have shown higher than normal dropouts and weak student intake, which have weighed on the shares. We believe that sellers are confusing cyclical and structural pressures, and that enrollment trends will improve. Looking forward, volatility is higher but valuations are more attractive after the recent pull back. The economic data have improved over the last few years but softened a bit in the last few months. At this point it s pretty easy to take the view of either a bear or a bull at a high level. We instead turn our focus on company fundamentals, where we have high conviction in our portfolio and believe that despite recent setbacks, our holdings remain undervalued with a path to success. As always, we appreciate the opportunity to invest alongside you in the Thornburg Developing World Fund. Sincerely, Ben Kirby, CFA Portfolio Manager Managing Director Charlie Wilson, PhD Portfolio Manager Managing Director The matters discussed in this report may constitute forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of These include any advisor or portfolio manager prediction, assessment, analysis or outlook for individual securities, industries, investment styles, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for each fund in its current prospectus, other factors bearing on these reports include the accuracy of the advisor s or portfolio manager s forecasts and predictions, the appropriateness of the investment strategies designed by the advisor or portfolio manager and the ability of the advisor or portfolio manager to implement their strategies efficiently and successfully. Any one or more of these factors, as well as other risks affecting the securities markets generally, could cause the actual results of any fund to differ materially as compared to its benchmarks. The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market. Performance results of individual share classes will vary based on the fees and expenses associated with each share class, and may be higher or lower than other share classes within the same Fund. Please see Performance Summary for performance results of each share class. Semi-Annual Report 5

6 Performance Summary AVERAGE ANNUAL TOTAL RETURNS 1-YR 3-YR 5-YR SINCE INCEP. Class A Shares (Incep: 12/16/09) Without sales charge 24.14% 6.06% 3.46% 7.20% With sales charge 18.57% 4.44% 2.51% 6.61% Class C Shares (Incep: 12/16/09) Without sales charge 23.21% 5.26% 2.67% 6.44% With sales charge 22.21% 5.26% 2.67% 6.44% Class I Shares (Incep: 12/16/09) 24.63% 6.52% 3.89% 7.73% Class R5 Shares (Incep: 2/1/13) 24.66% 6.54% 3.88% 4.51% Class R6 Shares (Incep: 2/1/13) 24.79% 6.64% 3.98% 4.62% MSCI Emerging Markets Index (Since 12/16/09) 24.93% 8.81% 4.99% 4.70% GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT $20,000 $15,000 $10,000 $5,000 FINAL VALUE Thornburg Developing World Fund, A Shares (with sales charge) $17,002 MSCI Emerging Markets Index $14,631 $0 Dec Dec-11 Dec-13 Dec-15 Mar-18 Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, visit thornburg.com or call The performance information does not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of Fund shares. Returns reflect the reinvestment of dividends and capital gains as well as applicable sales charges. Class A shares are sold with a maximum sales charge of 4.50%. Class C shares are subject to a 1% CDSC for the first year only. There is no sales charge for Class I, R5 and R6 shares. As disclosed in the most recent prospectus, the total annual fund operating expenses before any fee waivers or expense reimbursements are as follows: A shares, 1.56%; C shares, 2.30%; I shares, 1.23%; R5 shares, 1.80%; R6 shares, 1.16%. Thornburg Investment Management and/or Thornburg Securities Corporation have contractually agreed to waive fees and reimburse expenses through at least February 1, 2019, for some of the share classes, resulting in net expense ratios of the following: I shares, 1.09%; R5 shares, 1.09%; R6 shares, 0.99%. For more detailed information on fund expenses and waivers/reimbursements please see the Fund s prospectus. Glossary The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 24 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. The performance of any index is not indicative of the performance of any particular investment. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index. 6 Semi-Annual Report

7 Fund Summary OBJECTIVES AND STRATEGIES The Fund seeks long-term capital appreciation. Under normal market conditions the Fund invests at least 80% of its assets in equity securities and debt obligations of developing country issuers. A developing country issuer is a company or sovereign entity that is domiciled or otherwise tied economically to one or more developing countries. The Fund expects that investments in the Fund s portfolio normally will be weighted in favor of equity securities. MARKET CAPITALIZATION EXPOSURE BASKET STRUCTURE Small Cap (< $2.5 B) Mid Cap ($ B) Large Cap (> $12 B) Basic Value TOP TEN EQUITY HOLDINGS Consistent Earners Emerging Franchise Other Assets Less Liabilities 0.1% 12.9% 87.0% 43.4% 39.0% 12.4% 5.2% Alibaba Group Holding Ltd. 6.1% Tencent Holdings Ltd. 4.7% Industrial & Commercial Bank of China Ltd. Class H 3.5% Unilever N.V. 3.3% Samsung Electronics Co. Ltd. 3.3% ICICI Bank Ltd. 3.3% Reliance Industries Ltd. 2.9% British American Tobacco plc 2.9% HDFC Bank Ltd. 2.9% Baidu, Inc. 2.8% SECTOR EXPOSURE Information Technology 29.9% Financials 26.0% Consumer Discretionary 7.7% Consumer Staples 7.4% Energy 6.9% Telecommunication Services 5.6% Real Estate 4.0% Materials 3.7% Health Care 2.3% Industrials 1.3% Other Assets Less Liabilities 5.2% TOP TEN INDUSTRY GROUPS Banks 20.5% Software & Services 18.0% Energy 6.9% Technology Hardware & Equipment 6.3% Consumer Services 5.8% Semiconductors & Semiconductor Equipment 5.6% Telecommunication Services 5.6% Insurance 4.3% Food, Beverage & Tobacco 4.1% Real Estate 4.0% COUNTRY EXPOSURE* (percent of equity holdings) China 31.8% India 10.9% United Kingdom 8.2% United States 7.2% Brazil 6.3% Mexico 5.6% Russian Federation 5.2% South Korea 4.7% Switzerland 3.9% Hong Kong 3.7% South Africa 2.8% Taiwan 2.3% United Arab Emirates 2.0% Argentina 1.6% Indonesia 1.5% Philippines 1.2% Canada 1.1% * Holdings are classified by country of risk as determined by MSCI and Bloomberg. Semi-Annual Report 7

8 Schedule of Investments SHARES/ PRINCIPAL AMOUNT VALUE COMMON STOCK 94.8% BANKS 20.5% Banks 20.5% Bank Central Asia Tbk PT 8,998,010 $ 15,228,156 BBVA Banco Frances S.A. ADR 730,819 16,669,981 Citigroup, Inc. 213,439 14,407,133 Grupo Financiero Banorte SAB de C.V. 3,573,926 21,675,527 HDFC Bank Ltd. 609,301 18,020,714 HDFC Bank Ltd. ADR 130,292 12,868,941 ICICI Bank Ltd. Sponored ADR 3,957,172 35,020,972 Industrial & Commercial Bank of China Ltd. Class H 44,165,428 37,873,044 Itau Unibanco Holding S.A. ADR 1,700,466 26,527,270 Sberbank of Russia PJSC ADR 1,189,679 22,187, ,479,251 CONSUMER SERVICES 5.8% Diversified Consumer Services 3.0% Kroton Educacional S.A. 4,167,910 17,169,297 TAL Education Group ADR 396,323 14,699,620 Hotels, Restaurants & Leisure 2.8% Galaxy Entertainment Group Ltd. 1,330,720 12,081,038 Yum China Holdings, Inc. 446,989 18,550,044 62,499,999 DIVERSIFIED FINANCIALS 1.2% Diversified Financial Services 1.2% GT Capital Holdings, Inc. 555,710 12,450,290 12,450,290 ENERGY 6.9% Energy Equipment & Services 2.7% Halliburton Co. 626,089 29,388,617 Oil, Gas & Consumable Fuels 4.2% LUKOIL PJSC Sponored ADR 200,981 13,911,905 Reliance Industries Ltd. 2,307,986 31,196,986 74,497,508 FOOD, BEVERAGE & TOBACCO 4.1% Tobacco 4.1% British American Tobacco plc Sponsored ADR 539,951 31,149,773 KT&G Corp. 140,653 13,195,703 44,345,476 HOUSEHOLD & PERSONAL PRODUCTS 3.3% Personal Products 3.3% Unilever N.V. 634,336 35,770,207 35,770,207 INSURANCE 4.3% Insurance 4.3% AIA Group Ltd. 2,994,893 25,338,570 Sanlam Ltd. 2,851,522 20,545,651 45,884,221 MATERIALS 3.7% Metals & Mining 3.7% First Quantum Minerals Ltd. 775,865 10,894,087 Glencore plc 3,370,247 16,729,288 Grupo Mexico SAB de CV Series B Class B 3,677,923 12,271,882 39,895,257 MEDIA 0.7% Media 0.7% Naspers Ltd. Class N 32,409 7,916,515 7,916,515 8 Semi-Annual Report

9 Schedule of Investments, Continued SHARES/ PRINCIPAL AMOUNT VALUE a,b,c c c c c c c PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 2.3% Pharmaceuticals 2.3% China Animal Healthcare Ltd. 35,787,582 $ 1,459,201 Novartis AG Sponored ADR 282,225 22,817,891 24,277,092 REAL ESTATE 4.0% Equity Real Estate Investment Trusts 2.1% Fibra Uno Administracion S.A. de C.V. 15,049,063 22,681,206 Real Estate Management & Development 1.9% Emaar Properties PJSC 13,073,756 20,644,365 43,325,571 RETAILING 1.2% Internet & Direct Marketing Retail 1.2% Ctrip.com International Ltd. ADR 277,209 12,923,484 12,923,484 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 5.6% Semiconductors & Semiconductor Equipment 5.6% ams AG 158,548 16,561,300 QUALCOMM, Inc. 369,799 20,490,563 Taiwan Semiconductor Manufacturing Co., Ltd. 2,790,506 23,352,316 60,404,179 SOFTWARE & SERVICES 18.0% Information Technology Services 1.9% Cielo S.A. 3,302,977 20,699,569 Internet Software & Services 16.1% Alibaba Group Holding Ltd. Sponsored ADR 356,190 65,375,113 Baidu, Inc. Sponored ADR 134,361 29,988,032 Facebook, Inc. Class A 59,460 9,501,113 Tencent Holdings Ltd. 964,693 50,347,949 Yandex N.V. Class A 438,101 17,283, ,194,860 TECHNOLOGY HARDWARE & EQUIPMENT 6.3% Electronic Equipment, Instruments & Components 3.0% Hangzhou Hikvision Digital Technology Co. Ltd. Class A 2,604,153 17,176,971 Sunny Optical Technology Group Co. Ltd. 857,767 15,836,909 Technology Hardware, Storage & Peripherals 3.3% Samsung Electronics Co., Ltd. 15,309 35,216,876 68,230,756 TELECOMMUNICATION SERVICES 5.6% Diversified Telecommunication Services 3.5% Bharti Infratel Ltd. 2,777,808 14,278,378 China Unicom Hong Kong Ltd. 18,242,052 23,011,323 Wireless Telecommunication Services 2.1% China Mobile Ltd. 2,493,966 22,864,096 60,153,797 TRANSPORTATION 1.3% Transportation Infrastructure 1.3% Shanghai International Airport Co. Ltd. Class A 1,890,357 14,304,544 14,304,544 TOTAL COMMON STOCK (Cost $834,011,128) 1,020,553,007 Semi-Annual Report 9

10 Schedule of Investments, Continued SHARES/ PRINCIPAL AMOUNT VALUE SHORT-TERM INVESTMENTS 4.6% d Thornburg Capital Management Fund 4,944,975 $ 49,449,755 TOTAL SHORT-TERM INVESTMENTS (Cost $49,449,755) 49,449,755 TOTAL INVESTMENTS 99.4% (Cost $883,460,883) $1,070,002,762 OTHER ASSETS LESS LIABILITIES 0.6% 6,377,133 NET ASSETS 100.0% $1,076,379,895 Footnote Legend a Illiquid Security. b Security currently fair valued by the Valuation and Pricing Committee using procedures approved by the Trustees Audit Committee. c Non-income producing. d Investment in Affiliates. Portfolio Abbreviations To simplify the listings of securities, abbreviations are used per the table below: ADR American Depositary Receipt See notes to financial statements. 10 Semi-Annual Report

11 Statement of Assets and Liabilities ASSETS Investments at value (Note 3) Non-affiliated issuers (cost $834,011,128) $ 1,020,553,007 Non-controlled affiliated issuer (cost $49,449,755) 49,449,755 Cash denominated in foreign currency (cost $518,631) 523,195 Receivable for investments sold 7,771,569 Receivable for fund shares sold 932,848 Dividends receivable 2,833,134 Dividend and interest reclaim receivable 300,030 Prepaid expenses and other assets 58,921 Total Assets 1,082,422,459 LIABILITIES Payable for investments purchased 1,099,958 Payable for fund shares redeemed 1,097,794 Payable to investment advisor and other affiliates (Note 4) 1,027,359 Deferred taxes payable (Note 2) 1,935,864 Accounts payable and accrued expenses 881,507 Dividends payable 82 Total Liabilities 6,042,564 NET ASSETS $ 1,076,379,895 NET ASSETS CONSIST OF Accumulated net investment income $ 1,758,944 Net unrealized appreciation on investments 184,568,040 Accumulated net realized gain (loss) (142,772,098) Net capital paid in on shares of beneficial interest 1,032,825,009 $ 1,076,379,895 Semi-Annual Report 11

12 Statement of Assets and Liabilities, Continued NET ASSET VALUE Class A Shares: Net asset value and redemption price per share ($133,441,135 applicable to 6,346,846 shares of beneficial interest outstanding - Note 5) $ Maximum sales charge, 4.50% of offering price 0.99 Maximum offering price per share $ Class C Shares: Net asset value and offering price per share* ($105,723,962 applicable to 5,294,415 shares of beneficial interest outstanding - Note 5) $ Class I Shares: Net asset value, offering and redemption price per share ($772,384,190 applicable to 36,026,116 shares of beneficial interest outstanding - Note 5) $ Class R5 Shares: Net asset value, offering and redemption price per share ($4,563,924 applicable to 213,576 shares of beneficial interest outstanding - Note 5) $ Class R6 Shares: Net asset value, offering and redemption price per share ($60,266,684 applicable to 2,809,004 shares of beneficial interest outstanding - Note 5) $ * Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. See notes to financial statements. 12 Semi-Annual Report

13 Statement of Operations Thornburg Developing World Fund Six Months Ended March 31, 2018 (Unaudited) INVESTMENT INCOME Dividend income Non-affiliated issuers (net of foreign taxes withheld of $984,126) $ 8,224,016 Non-controlled affiliated issuer 404,194 Total Income 8,628,210 EXPENSES Investment advisory fees (Note 4) 5,211,631 Administration fees (Note 4) Class A Shares 75,211 Class C Shares 61,958 Class I Shares 248,662 Class R5 Shares 1,555 Class R6 Shares 10,858 Distribution and service fees (Note 4) Class A Shares 169,440 Class C Shares 556,191 Transfer agent fees Class A Shares 81,746 Class C Shares 72,942 Class I Shares 291,815 Class R5 Shares 7,133 Class R6 Shares 3,916 Registration and filing fees Class A Shares 6,851 Class C Shares 6,623 Class I Shares 9,914 Class R5 Shares 7,492 Class R6 Shares 7,484 Custodian fees (Note 2) 268,785 Professional fees 38,775 Trustee and officer fees (Note 4) 24,731 Other expenses 62,314 Total Expenses 7,226,027 Less: Expenses reimbursed by investment advisor (Note 4) (82,613) Investment advisory fees waived by investment advisor (Note 4) (255,297) Net Expenses 6,888,117 Net Investment Income $ 1,740,093 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Non-affiliated issuer investments 89,760,478 Foreign currency transactions (14,356) 89,746,122 Net change in unrealized appreciation (depreciation) on: Non-affiliated issuer investments (net of change in deferred taxes payable of $70,518) (28,396,103) Foreign currency translations (1,058) (28,397,161) Net Realized and Unrealized Gain 61,348,961 Net Increase in Net Assets Resulting from Operations $ 63,089,054 See notes to financial statements. Semi-Annual Report 13

14 Statements of Changes in Net Assets Thornburg Developing World Fund INCREASE (DECREASE) IN NET ASSETS FROM SIX MONTHS ENDED MARCH 31, 2018* YEAR ENDED SEPTEMBER 30, 2017 OPERATIONS Net investment income $ 1,740,093 $ 9,217,721 Net realized gain (loss) on investments and foreign currency transactions 89,746,122 27,124,927 Net unrealized appreciation (depreciation) on investments, foreign currency translations and deferred taxes (28,397,161) 128,774,352 Net Increase in Net Assets Resulting from Operations 63,089, ,117,000 DIVIDENDS TO SHAREHOLDERS From net investment income Class A Shares - (661,266) Class C Shares - (220,121) Class I Shares - (6,435,552) Class R5 Shares - (47,343) Class R6 Shares - (310,277) FUND SHARE TRANSACTIONS (NOTE 5) Class A Shares 652,528 (58,944,051) Class C Shares (9,601,114) (40,460,081) Class I Shares (69,269,252) (177,355,450) Class R5 Shares (1,246,925) (1,570,384) Class R6 Shares 30,875,102 (26,687,949) Net Increase (Decrease) in Net Assets 14,499,393 (147,575,474) NET ASSETS Beginning of Period 1,061,880,502 1,209,455,976 End of Period $ 1,076,379,895 $ 1,061,880,502 Undistributed net investment income $ 1,758,944 $ 18,851 * Unaudited. See notes to financial statements. 14 Semi-Annual Report

15 Notes to Financial Statements NOTE 1 ORGANIZATION Thornburg Developing World Fund (the Fund ) is a diversified series of Thornburg Investment Trust (the Trust ). The Fund commenced operations on December 16, The Trust was organized as a Massachusetts business trust under a Declaration of Trust dated June 3, 1987 and is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund is currently one of twenty-one separate series of the Trust. Each series is considered to be a separate entity for financial reporting and tax purposes and bears expenses directly attributable to it. The Fund seeks long-term capital appreciation. The Fund currently offers five classes of shares of beneficial interest: Class A, Class C, Institutional Class ( Class I ) and Retirement Classes ( Class R5 and Class R6 ). Each class of shares of the Fund represents an interest in the same portfolio of investments, except that (i) Class A shares are sold subject to a front-end sales charge collected at the time the shares are purchased and bear a service fee, (ii) Class C shares are sold at net asset value without a sales charge at the time of purchase, but are subject to a contingent deferred sales charge upon redemption within one year of purchase, and bear both a service fee and a distribution fee, (iii) Class I and Class R5 shares are sold at net asset value without a sales charge at the time of purchase and may be subject to a service fee, (iv) Class R6 shares are sold at net asset value without a sales charge at the time of purchase, and (v) the respective classes may have different reinvestment privileges and conversion rights. Additionally, the Fund may allocate among its classes certain expenses, to the extent allocable to specific classes, including transfer agent fees, government registration fees, certain printing and postage costs, and administrative and legal expenses. Currently, class specific expenses of the Fund are limited to service and distribution fees, administration fees, and certain registration and transfer agent expenses. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund prepares its financial statements in conformity with United States generally accepted accounting principles ( GAAP ), including investment company accounting and reporting guidance in the Financial Accounting Standards Board (the FASB ) Accounting Standard Codification Topic 946. NOTE 2 SIGNIFICANT ACCOUNTING POLICIES Security Valuation: All investments in securities held by the Fund are valued as described in Note 3. Allocation of Income, Gains, Losses and Expenses: Net investment income (other than class specific expenses) and realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative net asset value of outstanding shares (or the value of the dividend-eligible shares, as appropriate) of each class of shares at the beginning of the day (after adjusting for the current capital shares activity of the respective class). Expenses common to all Funds are allocated among the Funds comprising the Trust based upon their relative net asset values or other appropriate allocation methods. Operating expenses directly attributable to a specific class are charged against the operating income of that class. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and may differ from GAAP, are recorded on the ex-dividend date. Ordinary income distributions, if any, are declared and paid annually. Capital gain distributions, if any, are declared and paid annually and more often if deemed necessary by Thornburg Investment Management, Inc., the Trust s investment advisor (the Advisor ). Dividends are paid and are reinvested in additional shares of the Fund at net asset value per share at the close of business on the ex-dividend date, or at the shareholder s option, paid in cash. Investment Income: Dividend income is recorded on the ex-dividend date. Certain income from foreign investments is recognized as soon as information is available to the Fund. Interest income is accrued as earned. Premiums and discounts are amortized and accreted, respectively, to call dates or maturity dates using the effective yield method of the respective investments. These amounts are included in Interest income on the Statement of Operations. Custodian Fees: Custodian fees disclosed in the Statement of Operations may include interest expenses incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on any such cash overdraft at a rate set periodically at the custodian s discretion of the overdraft amount in excess of $50,000. Investment Transactions: Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale of investments are recorded on an identified cost basis. Repurchase Agreements: The Fund may invest excess cash in repurchase agreements whereby the Fund purchases investments, which serve as collateral, with an agreement to resell such collateral to the seller at an agreed upon price at the maturity date of the repurchase agreement. Investments pledged as collateral for repurchase agreements are held in custody until maturity of the repurchase agreement. Provisions in the agreements require that the market value of the collateral is at least equal to the repurchase value in the event of default. In the event of default, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. Under Semi-Annual Report 15

16 Notes to Financial Statements, Continued certain circumstances, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. When-Issued and Delayed Delivery Transactions: The Fund may engage in when-issued or delayed delivery transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of acquiring portfolio investments consistent with the Fund s investment objectives and not for the purpose of investment leverage or to speculate on interest rate or market changes. At the time the Fund makes a commitment to purchase an investment on a when-issued or delayed delivery basis, the Fund will record the transaction and reflect the value in determining its net asset value. When effecting such transactions, assets of an amount sufficient to make payment for the portfolio investments to be purchased will be segregated on the Fund s records on the trade date. Investments purchased on a when-issued or delayed delivery basis do not earn interest until the settlement date. Foreign Currency Translation: Portfolio investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against the U.S. dollar on the date of valuation. Purchases and sales of investments and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. When the Fund purchases or sells foreign investments, it will customarily enter into a foreign exchange contract to minimize foreign exchange risk from the trade date to the settlement date of such transactions. The values of such spot contracts are included in receivable for investments sold and payable for investments purchased on the Statement of Assets and Liabilities. The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on investments held. Such changes are included in net unrealized appreciation (depreciation) from investments. Reported net realized gains and losses from foreign currency transactions arise due to purchases and sales of foreign currencies, currency gains and losses realized between the trade and settlement dates on investment transactions and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund s books, and the U.S. dollar equivalent of the amounts actually received or paid. Net change in unrealized appreciation (depreciation) on foreign currency translations arise from changes in the fair value of assets and liabilities, other than investments at period end, resulting from changes in exchange rates. Guarantees and Indemnifications: Under the Trust s organizational documents (and under separate agreements with the independent Trustees), its officers and Trustees are provided with an indemnification against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business the Trust may also enter into contracts with service providers that contain general indemnifications. The Trust s maximum exposure under these arrangements is unknown. However, based on experience, the Trust expects the risk of loss to be remote. Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases (decreases) in net assets from operations during the reporting period. Actual results could differ from those estimates. Federal Income Taxes: It is the policy of the Trust to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders substantially all investment company taxable income including net realized gains on investments (if any), and tax exempt income of the Fund. Therefore, no provision for federal income or excise tax is required. The Fund files income tax returns in United States federal and applicable state jurisdictions. The statute of limitations on the Fund s tax return filings generally remains open for the three years following a return s filing date. The Fund has analyzed each uncertain tax position believed to be material in the preparation of the Fund s financial statements for the six month period ended March 31, 2018, including open tax years, to assess whether it is more likely than not that the position would be sustained upon examination, based on the technical merits of the position. The Fund has not identified any such position for which an asset or liability must be reflected in the Statement of Assets and Liabilities. At March 31, 2018, information on the tax components of capital was as follows: Cost of investments for tax purposes $ 883,460,883 Gross unrealized appreciation on a tax basis 243,572,294 Gross unrealized depreciation on a tax basis (57,030,415) Net unrealized appreciation (depreciation) on investments (tax basis) $ 186,541,879 At March 31, 2018, the Fund had deferred tax basis capital losses occurring subsequent to October 31, 2016 through September 30, 2017 of $8,658,757. For tax purposes, such losses will be recognized in the year ending September 30, Semi-Annual Report

17 Notes to Financial Statements, Continued At March 31, 2018, the Fund had cumulative tax basis capital losses of $223,037,046 (of which $223,037,046 are short-term and $0 are long-term) generated after September 30, 2011, which may be carried forward to offset future capital gains. To the extent such carryforwards are used, capital gain distributions may be reduced to the extent provided by regulations. Such capital loss carryforwards do not expire. Foreign Withholding Taxes: The Fund is subject to foreign tax withholding imposed by certain foreign countries in which the Fund may invest. Withholding taxes are incurred on certain foreign dividends and are accrued at the time the dividend is recognized based on applicable foreign tax laws. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld, in view of various considerations, including recent decisions rendered by the courts in those and other jurisdictions. The Fund would expect to record a receivable for such a reclaim based on a variety of factors, including assessment of a jurisdiction s legal obligation to pay reclaims, the jurisdiction s administrative practices and payment history, and industry convention. To date the Fund has recorded no such receivable because there is limited precedent for collecting such prior year reclaims and the likelihood of collection remains uncertain. Deferred Foreign Capital Gain Taxes: The Fund is subject to a tax imposed on net realized gains of securities of certain foreign countries. The Fund records an estimated deferred tax liability for net unrealized gains on these investments as reflected in the accompanying financial statements. NOTE 3 SECURITY VALUATION Valuation of the Fund s portfolio investment securities is performed in accordance with policies and procedures adopted by and under the oversight of the Trustees. The Trustees of the Trust have appointed the Advisor to assist the Trustees to obtain market values for portfolio investments, evaluate and monitor professional pricing service providers appointed by the Trustees Audit Committee (the Audit Committee ) to assist in determining fair values for portfolio investments, assist in calculating fair values for portfolio investments in certain circumstances, and to perform other functions in connection with the valuation of investments. The Advisor acts through its Valuation and Pricing Committee (the Committee ) and other employees of the Advisor. The Committee regularly reviews its own valuation calculations, as well as the valuations, valuation techniques and services furnished by pricing service providers, considers circumstances which may require valuation calculations by the Committee, and reviews previous valuation calculations. The Committee reports to the Audit Committee on the Committee s activities, the performance of pricing service providers, and other matters relating to valuation of portfolio investments. In those instances when the Committee assists in calculating a fair value for a portfolio investment, the Committee seeks to determine the price that the Fund would reasonably expect to receive upon a sale of the investment in an orderly transaction between market participants on the valuation date. The Committee customarily utilizes quotations from securities broker dealers in calculating valuations, but also may utilize prices obtained from pricing service providers or other methods approved by the Audit Committee. Because fair values calculated by the Committee are estimates, the calculation of a value for an investment may differ from the price that would be realized by the Fund upon a sale of the investment, and the difference could be material to the Fund s financial statements. The Committee s calculation of a fair value for an investment may also differ from the prices obtained by other persons (including other mutual funds) for the investment. Valuation of Securities: Securities and other portfolio investments which are listed or traded on a United States securities exchange are valued at the last reported sale price on the valuation date. Investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. Portfolio investments reported by NASDAQ are valued at the official closing price on the valuation date. If an investment is traded on more than one exchange, the investment is considered traded on the exchange that is normally the primary market for that investment. Securities and other portfolio investments which are listed or traded on exchanges outside the United States are valued at the last price or the closing price of the investment on the exchange that is normally the primary market for the investment, as of the close of the exchange preceding the Fund s valuation date. Foreign investments listed or traded on an exchange for which there has been no sale that day are valued at the mean between the last reported bid and asked prices on that valuation date. In any case when a market quotation is not readily available for a portfolio investment ordinarily valued by market quotation, the Committee calculates a fair value for the investment using alternative methods approved by the Audit Committee. A market quotation is not readily available when the primary market or exchange for the investment is not open for the entire scheduled day of trading. Market quotations for an investment also may not be readily available if developments after the most recent close of the investment s primary exchange or market, but prior to the close of business on any Fund business day, or an unusual event or significant period of time occurring since the availability of a market quotation, create a serious question concerning the reliability of the most recent market quotation available for the investment. In particular, on days when market volatility thresholds established by the Audit Committee are exceeded, foreign equity investments held by the Fund may be valued using alternative methods. The Committee customarily obtains valuations in these instances from pricing service providers approved by the Audit Committee. Pricing service providers ordinarily calculate valuations using multi-factor models to adjust market prices based upon various inputs, including exchange data, depository receipt prices, futures, index data and other data. Semi-Annual Report 17

18 Notes to Financial Statements, Continued Debt obligations held by the Fund which are not listed or traded on exchanges or for which no reported market exists are ordinarily valued at the valuation obtained from a pricing service provider approved by the Audit Committee. In any case when a pricing service provider fails to provide a valuation for a debt obligation held by the Fund, the Committee calculates a fair value for the obligation using alternative methods under procedures approved by the Audit Committee. Additionally, in cases when management believes that a valuation obtained from a pricing service provider merits review for significant reasons, the Committee decides whether or not to use the valuation calculated by the pricing service provider or to use an alternative method approved by the Audit Committee to calculate a fair value for the obligation. Quotations for foreign investments expressed in foreign currency amounts are converted to U.S. dollar equivalents using a foreign exchange quotation from a third party service provider at the time of valuation. Foreign investments held by the Fund may be traded on days and at times when the Fund is not open for business. Consequently, the value of Fund investments may be significantly affected on days when shareholders cannot purchase or sell Fund shares. Futures contracts and other financial and derivative instruments traded on an exchange are valued at the latest published price for the instrument on its primary exchange. Listed options are valued at the last bid price. Valuation Hierarchy: The Fund categorizes its investments based upon the inputs used in valuing those investments, according to a three-level hierarchy established in guidance from the FASB. Categorization of investments using this hierarchy is intended by the FASB to maximize the use of observable inputs in valuing investments and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in valuing an investment based on available market information. Unobservable inputs are those that reflect assumptions about the information market participants would use in valuing an investment. An investment s level within the hierarchy is based on the lowest level input that is deemed significant to the valuation. The methodologies and inputs used to value investments are not necessarily indications of the risk or liquidity associated with those investments. Various inputs are used in calculating valuations for the Fund s investments. These inputs are generally summarized according to the three-level hierarchy below: Level 1: Quoted prices in active markets for identical investments. Level 2: Other direct or indirect significant observable inputs (including quoted prices for similar investments in active markets and other observable inputs, such as interest rates, prepayment rates, credit risk, etc.). Level 3: Significant unobservable inputs (including the Committee s own assumptions in calculating the fair values of investments). Valuations for debt obligations held by the Fund are typically calculated by pricing service providers approved by the Audit Committee and are generally characterized as Level 2 within the valuation hierarchy. On days when market volatility thresholds established by the Audit Committee are exceeded, foreign securities for which valuations are obtained from pricing service providers are fair valued. On these days, the foreign securities are characterized as Level 2 within the valuation hierarchy and revert to Level 1 after the threshold is no longer exceeded. In a limited number of cases the Committee calculates a fair value for investments using broker quotations or other methods approved by the Audit Committee. When the Committee uses a single broker quotation to calculate a fair value for an investment without other significant observable inputs, or if a fair value is calculated using other significant inputs that are considered unobservable, the investment is characterized as Level 3 within the hierarchy. Other significant unobservable inputs used to calculate a fair value in these instances might include an income-based valuation approach which considers discounted anticipated future cash flows from the investment and application of discounts due to the nature or duration of any restrictions on the disposition of the investment. Valuations based upon the use of inputs from Levels 1, 2 or 3 may not represent the actual price received upon the disposition of an investment, and the Fund may receive a price that is lower than the valuation based upon these inputs when it sells the investment. The following table displays a summary of the fair value hierarchy measurements of the Fund s investments as of March 31, In any instance when valuation inputs from more than one level are used to determine the fair value of a specific investment, the investment is placed in the level of the table based upon the lowest level input that is significant in determining the fair value of the investment: 18 Semi-Annual Report