3rd Quarter 2017

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For the third quarter of 2017, Thornburg Global Equity Income Fund produced a total return of 4.22% (Class A at net asset value), versus 4.84% for the benchmark MSCI World Index. This brings our year-to-date return to 18.38% for the Fund, versus 16.01% for the same index. Recall that the Fund is designed to deliver an attractive total return using a focused yet diverse portfolio of dividend- paying or future dividend-paying stocks from around the world. We believe the structure of the Fund—built on our core investment principles of flexibility, focus, and value—gives us a durable framework for value-added investing.

As the name implies, dividend income forms a core part of the underlying philosophy of Thornburg Global Equity Income Fund. We invest for income and capital appreciation via a portfolio of companies that have both the ability and willingness to pay dividends. Dividend income has historically been a primary driver of equity returns and can offer a tangible measure of corporate health. Rather than focus on companies with the highest absolute dividend yields, however, we focus on companies that offer value on a total risk/reward basis. As at 30 September 2017, the dividend yield of the Fund was 2.89% compared to 2.35% for the MSCI World Index.

Markets advanced again in the third quarter of 2017, marking the fifth consecutive quarter of positive returns for most major indices. Asset prices and global economic expansion continued to be aided by accommodative monetary policies, and a weakening U.S. dollar boosted developing markets. Against a favorable macroeconomic backdrop, rising geopolitical tensions on the Korean peninsula and the terrorist attack in Barcelona did little to disrupt investor optimism during the period. From an industry perspective, 10 of the MSCI World Index's 11 sectors delivered positive returns for the September quarter, ranging from 1.9% (real estate) to 9.0% (energy). Consumer staples was the only sector with a negative result, producing a negative 0.50% return.

The Fund's third-quarter results illustrate the merits of our geographic flexibility, as only one U.S.-domiciled holding placed among our top five contributors. Performance was led by a diversified group of companies.

Automotive supplier Adient plc was a standout during the quarter, with the shares rising nearly 30% to a new high. Adient announced an accretive acquisition that provides exposure to new end markets, and the shares reacted favorably to a "friendly activist" investor taking a stake in the company.

Shares of CF Industries Holdings Inc., a U.S. producer of nitrogen-based fertilizer, also perked up in the third quarter as the North American fertilizer market showed signs of thawing. Following a long period of oversupply and a profit drought for CF, competition from imported fertilizer seems to be shriveling. Rounding out the top five contributors were Bellway plc, a U.K.-based homebuilder; Carsales.com Ltd., an Australian leader in automotive websites; and Teekay LNG Partners L.P., an owner of liquefied natural gas carrier ships.

A handful of holdings also declined in the quarter. Shares of Spanish airport operator Aena were hampered by management turnover, uncertainty regarding its dividend, and the terrorist attack in Barcelona. Colony North- Star, Inc., a diversified REIT and asset manager, disappointed with financial guidance at the low end of expectations. Kraft Heinz continued to see softer sales trends across all regions of the world. Altice NV, a multi-national telecommunications company declined as acquisition prospects seemed to ebb. Lastly, low-cost U.K. airline easyJet plc also descended during the quarter as profit expectations were tempered by stronger-than-expected industry capacity growth.

Late in the quarter, we made a new purchase of New World Development, a Hong Kong–based real estate group. Founded in 1970 by Cheng Yu-tung, New World is a leading property developer and landlord with additional operations in infrastructure, facility services, and hospitality. One of the company's largest property developments to date, Victoria Dockside, a mixed-use site on the waterfront in Kowloon, Hong Kong, is opening late this year and expected to be fully occupied in 2019. New World also owns a large tract of Hong Kong farmland, which could be developed for residential use in a market that is physically supply-constrained. Beyond property development, management's recent efforts to simplify its portfolio and improve capital allocation are encouraging. For now, New World Development trades at a material discount to book value and offers a 4% dividend yield.

Earlier in the quarter, we established new positions in MGM China Holdings, which operates casinos in Macau, and Seritage Growth Properties, a REIT that is repurposing retail space as Sears Holdings reduces its store footprint. We sold our remaining stakes in Sands China, Koninklijke (Royal) Philips, and CenturyLink, Inc.

Relative to the index, we are overweight consumer discretionary, industrials, real estate, and energy. We are underweight financials, information technology, materials, health care, and utilities. Geographically, the portfolio is overweight Europe and Asia, and underweight the United States. The Fund has no direct exposure to Japan and holds approximately 10% of its investments in emerging markets, which are not included in the index. The average oneyear forward price-to-earnings multiple of the companies owned in Thornburg Global Equity Income Fund stands at 15.2x, vs. 17.4x for the MSCI World Index.

During the third quarter of 2017, investors debated the future economic direction of China, Europe, various emerging markets, and the U.S. They considered potential policy actions by the U.S. Federal Reserve, Congress, the Trump administration, and the implications of significant elections in France and Germany. Many political and macroeconomic issues remain open; importantly, however, overall global consumer spending is growing and most macroeconomic indicators around the world have positively surprised year to date, with the U.S. a relative laggard.

Earnings expectations for the MSCI World Index portfolio for 2017 have improved following strong recent results in most markets, and global economic growth expectations have risen. These trends continue to support a rotation of investor preferences toward more economically sensitive investments. Under the current administration, political gridlock seems likely to persist in Washington, DC. While the U.S. Federal Reserve has stepped up the pace of Federal funds target rate hikes, most major central banks continue to pursue very easy monetary conditions.

We remind investors to maintain a long-term investment perspective. Though we remain constructive about the long-term prospects for the Fund, we expect periods of volatility. Our experience over many years supports the notion that our investment framework—predicated on bottom-up, fundamental value investing— can add value versus broad equity benchmarks over time.

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 the Prices & Performance page.

Important Information

Source of data: Factset, BBH, Confluence, Bloomberg—unless otherwise stated
Date of data: 30 September 2017—unless otherwise stated

Investments carry risks, including possible loss of principal. Additional risks may be associated with investments 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 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.

The Fund is a sub-fund of Thornburg Global Investment plc, an open-ended umbrella type investment company with segregated liability between sub-funds, authorised by the Central Bank of Ireland (CBI) on 25 November 2011 as an investment company pursuant to the UCITS Regulations. Authorisation of the Company by the CBI is not an endorsement or guarantee of the Company by the CBI nor is the CBI responsible for the contents of the Prospectus or KIID.

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To determine a fund's Morningstar Rating™, funds and other managed products with at least a three-year history are ranked in their categories by their Morningstar Risk-Adjusted Return scores. The top 10% receive 5 stars; the next 22.5%, 4 stars; the middle 35%, 3 stars; the next 22.5%, 2 stars; and the bottom 10% receive 1 star. The Risk-Adjusted Return accounts for variation in a managed product's monthly excess performance (excluding sales charges), placing more emphasis on downward variations and rewarding consistent performance. Other share classes may have different performance characteristics. © 2017 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

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