2nd Quarter 2018

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For the second quarter of 2018, Thornburg Core Growth Fund returned 6.61% (I shares), outpacing its benchmark, the Russell 3000 Growth Index, which returned 5.87%. This brings the year-to-date return to 13.07% for the fund, versus the index's 7.44%. On June 30, 2018, the net asset value per class I share was $41.10.

Volatility returned to equity markets in early 2018 and continued through the second quarter. Global equities delivered a mixed performance in the April-though-June period, with U.S. indices in positive territory but international indices, particularly emerging market equities, posting negative returns on a dollar- denominated basis. The major theme of the quarter was escalating trade tensions, which dominated the headlines, and the risks they pose to the global economic upswing. We have yet to see recent trade actions play out negatively in corporate earnings in a broad-based manner. However, investors have already become less constructive on economically sensitive risk assets based abroad and market anxiety has appreciably increased.

Performance Discussion

During the quarter, the index delivered positive returns within all sectors except industrials. Energy was the top-performing sector as stocks there rallied on the back of rising oil prices. We saw slightly negative performance in the space as our overweight was offset by stock selection. Consumer discretionary was the second-best performing sector, and our overweight was additive, though stock selection detracted slightly. The sectors that most underperformed the benchmark were industrials and financials. We benefited from having zero holdings in industrials, however, an overweight to financials detracted. Stock selection was most additive within materials and information technology.

Top contributors to performance for the quarter included SVB Financial Group, DexCom, Inc. Facebook, Inc., Amazon. com, Inc., and Inogen, Inc.

SVB Financial Group operates a commercial bank serving emerging growth and middle-market growth companies focused on technology and life sciences. The stock rose following a strong quarterly earnings report, which beat street estimates based on an increase in overall funds, loan growth, and expanding margins, while expenses remained flat.

DexCom makes a glucose-monitoring system for diabetes patients that we believe is the best on the market and will remain so for the foreseeable future. Performance was challenged in 2017 due to concerns around competition. However, the stock bounced back earlier in the year and has continued gaining ground as it became clear that it is the market leader from a technological standpoint.

Internet companies were notable contributors during the period, rebounding strongly after a difficult first quarter. Facebook management's performance in front of legislators and regulators, along with strong earnings, provided comfort that it can sustain its dominance as the leading social media platform.

Amazon continued to deliver very strong fundamental results as its well-publicized businesses grow at a high rate.

Inogen, a medical technology company, primarily develops, manufactures, and markets portable oxygen concentrators for patients, physicians, and other clinicians, and third-party payors in the U.S. and internationally. The company's oxygen concentrators are used to deliver supplemental long-term oxygen therapy to patients suffering from chronic respiratory conditions, which they market directly to consumers. It reported strong quarterly results during the period.

Primary detractors from performance this quarter were Affiliated Managers Group, Inc., Alkermes plc, Zillow Group, Inc., Nevro Corp., and Walmart, Inc.

Affiliated Managers Group is an investment management company with holdings in an array of alternative, hedge fund, private equity, and traditional asset managers. During the period, the firm faced headwinds after announcing the loss of two large institutional clients and concerns that others may follow.

Alkermes saw its shares fall sharply as the FDA sent a Refusal to File (RTF) letter to the company regarding the firm's pipeline depression drug ALKS 5461. Although the FDA rescinded the RTF letter just two weeks later and accepted the drug for review, the stock has yet to fully recover, and we exited the position on heightened pipeline risk and generally weaker trends in its marketed products.

Zillow Group announced significant product and business model changes during the quarter. The changes increased uncertainty around Zillow's outlook, and we exited the stock.

Nevro is a medical device corporation that focuses on a spinal stimulation system for the treatment of chronic pain. Nevro posted earnings results below street expectations, however, guidance for the remainder of the year remained on track.

Walmart's stock declined after disappointing results for its e-commerce segment. We exited the position during the quarter.


The overriding wild card is trade and, given recent events, it is too early to expect a re-acceleration in global growth. The global economy can be vulnerable to even relatively small shocks, such as increased input prices due to tariffs. Trade actions have consequences and, over time, those can spill over into Main Street and the real economy. We hope that more rational heads prevail and trade tensions abate, but, given the risks from rising protectionism, we see volatility remaining heightened.

Our process and approach to investing remains consistent with a focus on high-quality companies with wide economic moats and low dependence on macroeconomic themes. The stocks we own have the potential to grow rapidly because of secular or stock-specific factors that we think can help them sustainably compound business value over long time horizons. This results in a collective portfolio of stocks that we believe can navigate even choppier seas and may provide our investors with a return profile that is attractive on a risk-adjusted basis over a full market cycle.

We thank you for investing alongside us in Thornburg Core Growth Fund.

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, see the mutual funds performance page or call 877-215-1330. The maximum sales charge for the Fund’s A shares is 4.50%.

Important Information
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus or summary prospectus containing this and other information, contact your financial advisor or visit thornburg.com. Read them carefully before investing.

Unless otherwise noted, the source of all data, charts, tables and graphs is Thornburg Investment Management, Inc., as of 6/30/18.

Investments carry risks, including possible loss of principal. Additional risks may be associated with investments outside the United States, especially in emerging markets, including currency fluctuations, illiquidity, volatility, and political and economic risks. Investments in small- and mid-capitalization companies may increase the risk of greater price fluctuations. Investments in the Fund are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.

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.

Any securities, sectors, or countries mentioned are for illustration purposes only. Holdings are subject to change. Under no circumstances does the information contained within represent a recommendation to buy or sell any security.

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