N-CSR 1 d441260dncsr.htm AMG FUNDS AMG Funds

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-09521

 

 

AMG FUNDS

(Exact name of registrant as specified in charter)

 

 

680 Washington Boulevard, Suite 500, Stamford, Connecticut 06901

(Address of principal executive offices) (Zip code)

 

 

AMG Funds LLC

680 Washington Boulevard, Suite 500, Stamford, Connecticut 06901

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (203) 299-3500

Date of fiscal year end: DECEMBER 31

Date of reporting period: JANUARY 1, 2022 – DECEMBER 31, 2022

(Annual Shareholder Report)

 

 

 


Item 1.

Reports to Shareholders


LOGO    ANNUAL REPORT

 

 

 

    

AMG Funds

 

December 31, 2022

 
     LOGO
 
     AMG GW&K Small Cap Core Fund
 
     Class N: GWETX    |    Class I: GWEIX    |    Class Z: GWEZX
 
     AMG GW&K Small Cap Value Fund
 
     Class N: SKSEX     |    Class I: SKSIX       |    Class Z: SKSZX
 
     AMG GW&K Small/Mid Cap Fund
 
     Class N: GWGVX    |    Class I: GWGIX     |    Class Z: GWGZX
 
     AMG GW&K Global Allocation Fund
 
     Class N: MBEAX   |    Class I: MBESX      |    Class Z: MBEYX
 
    
 
    

 

 

 

 

 

 

amgfunds.com           123122            AR089



    

    

AMG Funds

Annual Report — December 31, 2022

 

 

 

    

         
       TABLE OF CONTENTS    PAGE  
 

 

 
   

LETTER TO SHAREHOLDERS

     2  
 
   

ABOUT YOUR FUND’S EXPENSES

     3  
 
    PORTFOLIO MANAGER’S COMMENTS, FUND SNAPSHOTS AND SCHEDULES OF PORTFOLIO INVESTMENTS   
 
   

AMG GW&K Small Cap Core Fund

     4  
 
   

AMG GW&K Small Cap Value Fund

     10  
 
   

AMG GW&K Small/Mid Cap Fund

     16  
 
   

AMG GW&K Global Allocation Fund

     22  
 
    FINANCIAL STATEMENTS   
 
   

Statement of Assets and Liabilities

     33  
 
   

Balance sheets, net asset value (NAV) per share computations
and cumulative distributable earnings (loss)

  
 
   

Statement of Operations

     35  
 
   

Detail of sources of income, expenses, and realized and
unrealized gains (losses) during the fiscal year

  
 
   

Statements of Changes in Net Assets

     36  
 
   

Detail of changes in assets for the past two fiscal years

  
 
   

Financial Highlights

     38  
 
   

Historical net asset values per share, distributions, total returns, income
and expense ratios, turnover ratios and net assets

  
 
   

Notes to Financial Statements

     50  
 
   

Accounting and distribution policies, details of agreements and
transactions with Fund management and affiliates, and descriptions of
certain investment risks

  
 
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      60  
 
    OTHER INFORMATION      61  
 
    TRUSTEES AND OFFICERS      62  
   

    

  

Nothing contained herein is to be considered an offer, sale or solicitation of an offer to buy shares of any series of the AMG Funds Family of Funds. Such offering is made only by prospectus, which includes details as to offering price and other material information.

 

 


LOGO   Letter to Shareholders

 

Dear Shareholder:

We are pleased to provide this annual report for your investment with AMG Funds. Our foremost goal is to provide investment solutions that help our shareholders successfully achieve their long-term investment goals. We appreciate the privilege of providing you with investment tools.

The past year was a challenging period for investors, as uncertainties about high inflation, tighter financial conditions, and the Russian invasion of Ukraine led to significant volatility. Global equity and bond markets fell in tandem amid sharply higher interest rates and eroding investor confidence as worries of an impending recession lingered most of the year. A global commodity shock caused by the war in Ukraine only made matters worse. The S&P 500® Index slipped into a bear market with the Index falling more than (24)% from its peak earlier in the year. The abrupt shift in markets this year has reset expectations around future growth, as the U.S. Federal Reserve (the Fed) and other global central banks have taken aggressive policy action to bring down inflation. While the outlook is uncertain given recent negative returns across many asset classes, global stock and bond valuations are now far more attractive entering 2023 compared to a year ago.

There was very wide dispersion in S&P 500® Index sector performance. Energy significantly outperformed all other sectors with a gain of 65.72% as the price of oil surged during the period. The defensive-oriented sectors also outperformed, although utilities was the only other sector with a positive return, gaining 1.54%. Consumer staples and health care were slightly negative with returns of (0.62)% and (1.95)%, respectively. High-growth technology and mega cap internet-related companies underperformed during the period, and real estate was impacted by higher interest rates. Communications services fell the most with a (39.93)% return during the year, followed by declines of (37.03)% for consumer discretionary, (28.14)% for information technology and (26.13)% for real estate. Value stocks held up much better than growth stocks as the Russell 1000® Value Index returned (7.54)% compared to the (29.14)% return for the Russell 1000® Growth Index. Small cap stocks struggled as the Russell 2000® Index lost (20.44)%. Outside the U.S., foreign developed markets were negative with a (14.45)% return for the MSCI EAFE Index, however a very strong fourth quarter rally drove international equity returns ahead of their U.S. counterparts for the year.

The 10-year Treasury yield more than doubled during the year, surging to the highest levels since before the Great Financial Crisis. Rapidly rising rates from a very low base led to historic negative performance for bonds as the Bloomberg U.S. Aggregate Bond Index, a broad measure of U.S. bond market performance, lost (13.01)% over the period. Investment-grade corporate bonds underperformed, returning (15.76)% for the year. High yield bonds held up better with a (11.19)% return as measured by the return of the Bloomberg U.S. Corporate High Yield Bond

Index. Municipal bonds were also negative, but outperformed the broader market with a (8.53)% return for the Bloomberg Municipal Bond Index.

AMG Funds provides access to a distinctive array of actively managed return-oriented investment strategies. You can rest assured that under all market conditions our team is focused on delivering excellent investment management services for your benefit. For more information about AMG Funds’ wide range of products and resources, please visit www.amgfunds.com. We thank you for your investment and continued trust in AMG Funds.

Respectfully,

 

LOGO

Keitha Kinne

President

AMG Funds

 

        Periods ended  
Average Annual Total Returns   December 31, 2022*  
Stocks:        1 Year     3 Years     5 Years  

Large Cap

  (S&P 500® Index)     (18.11 )%      7.66     9.42

Small Cap

  (Russell 2000® Index)     (20.44 )%      3.10     4.13

International

  (MSCI ACWI ex USA)     (16.00 )%      0.07     0.88

Bonds:

                           

Investment Grade

  (Bloomberg U.S. Aggregate Bond Index)     (13.01 )%      (2.71 )%      0.02

High Yield

  (Bloomberg U.S. Corporate High Yield Bond Index)     (11.19 )%      0.05     2.31

Tax-exempt

  (Bloomberg Municipal Bond Index)     (8.53 )%      (0.77 )%      1.25

Treasury Bills

  (ICE BofAML U.S. 6-Month Treasury Bill Index)     1.34     0.82     1.39

*Source: FactSet. Past performance is no guarantee of future results.

 

 

 

2


    

    

About Your Fund’s Expenses

   

    

 

     

 

As a shareholder of a Fund, you may incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on $1,000 invested at the beginning of the period and held for the entire period as indicated below.

 

ACTUAL EXPENSES

 

The first line of the following table provides information about the actual account values and

    

actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.

 

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

 

The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s

      

actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

         

 

 

 

  Six Months Ended

  December 31, 2022

   Expense
Ratio for
the Period
  Beginning
Account
Value
07/01/22
   Ending
Account
Value
12/31/22
     Expenses
Paid
During
the Period*

AMG GW&K Small Cap Core Fund

Based on Actual Fund Return

Class N

   1.30%   $1,000      $1,055      $6.73

Class I

   0.95%   $1,000      $1,057      $4.93

Class Z

   0.90%   $1,000      $1,057      $4.67

Based on Hypothetical 5% Annual Return

Class N

   1.30%   $1,000      $1,019      $6.61

Class I

   0.95%   $1,000      $1,020      $4.84

Class Z

   0.90%   $1,000      $1,021      $4.58

AMG GW&K Small Cap Value Fund

Based on Actual Fund Return

Class N

   1.15%   $1,000      $1,035      $5.90

Class I

   0.95%   $1,000      $1,036      $4.88

Class Z

   0.90%   $1,000      $1,036      $4.62

Based on Hypothetical 5% Annual Return

Class N

   1.15%   $1,000      $1,019      $5.85

Class I

   0.95%   $1,000      $1,020      $4.84

Class Z

   0.90%   $1,000      $1,021      $4.58

AMG GW&K Small/Mid Cap Fund

Based on Actual Fund Return

Class N

   1.07%   $1,000      $1,040      $5.50

Class I

   0.87%   $1,000      $1,041      $4.48

Class Z

   0.82%   $1,000      $1,042      $4.22

Based on Hypothetical 5% Annual Return

Class N

   1.07%   $1,000      $1,020      $5.45

Class I

   0.87%   $1,000      $1,021      $4.43

Class Z

   0.82%   $1,000      $1,021      $4.18

  Six Months Ended

  December 31, 2022

   Expense
Ratio for
the Period
  Beginning
Account
Value
07/01/22
   Ending
Account
Value
12/31/22
    Expenses
Paid
During
the Period*

AMG GW&K Global Allocation Fund

Based on Actual Fund Return

Class N

   1.08%   $1,000      $1,005      $5.46

Class I

   0.89%   $1,000      $1,006     $4.50

Class Z

   0.83%   $1,000      $1,007     $4.20

Based on Hypothetical 5% Annual Return

Class N

   1.08%   $1,000      $1,020     $5.50

Class I

   0.89%   $1,000        $1,021     $4.53

Class Z

   0.83%   $1,000        $1,021     $4.23

 

  *

Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), then divided by 365.

 

 

 

3


    

    

AMG GW&K Small Cap Core Fund

Portfolio Manager’s Comments (unaudited)

 

   

    

 

      

 

 

THE YEAR IN REVIEW

 

For the year ended December 31, 2022, AMG GW&K Small Cap Core Fund (the “Fund”) Class N shares returned (16.58)%, compared to the Fund’s benchmark, the Russell 2000® Index (the “Index”), which returned (20.44)%.

 

It is starting to become an unwelcome tagline for this decade: 202x was a challenging year for investors to navigate. So far, each year in this nascent decade has been uncertain and confounding for investors. 2022 fit that mold as well, but this year the pain was felt in our wallets too as stocks and asset values of all kinds declined sharply. The Index dropped (20.44)% and finished just a bit above its June lows. The simple mathematical determinants of stock prices tell us they can fall because investors: 1) lower their accepted valuation levels, 2) lower their earnings expectations, or 3) lower both. For 2022, reason 1 was dominant for small cap stocks as rising inflation and interest rates led to a significant de-rating in valuations. However, late in the year analysts began to more actively mark down earnings estimates as well. There were myriad factors contributing to the uncertainty and subsequent estimate revisions. A list of prominent factors would likely include changing consumer spending preferences (services versus goods), lower end demand in housing and other related industries, uncertainty about the duration of the U.S. Federal Reserve’s (the Fed) tightening campaign, lingering supply-chain challenges (inflation and availability), a very uncertain reopening in China, and Russia’s war on Ukraine. To keep investors more off balance, small-cap stocks rallied in the final quarter of the year. Short-term oriented investors will ask whether expectations have fallen enough for stocks to have bottomed. We are skeptical that anyone can answer this correctly with high confidence, so it may not be the best question to ponder to maximize long-term returns.

 

The Fund outperformed the Index during the year. Within the benchmark, style factors indicated a preference for higher-quality attributes in the selloff

  

of 2022. Broadly speaking, the lower quality the stock the more poorly it performed over the course of the year. This was most evident in characteristics such as low return-on-equity (ROE), non-earners, high beta, and negative equity, which all meaningfully underperformed the Index. During 2022, the benchmark had only one sector in positive territory, but it was a noteworthy one with energy up an impressive 53.2%. Utilities and consumer staples were next best sectors given their relatively stable cash flows, finishing down single digits. Five sectors dropped more than 25% on the year, each having significantly more exposure to the weaker factors mentioned above.

 

The strong relative outperformance of the Fund in 2022 came from a combination of allocation toward higher-quality companies and strong stock selection. On the factor side, averaging the allocation impact for the six quality factors we follow implies about 150 basis points of positive impact to relative performance. The impact was greater for earnings-specific factors. The strong stock selection came prominently from health care, with six other sectors also making positive contributions. Health care benefited from an underweight to Biotechnology, but also suffered from an overweight in Life Science Tools/Service. While the health care portion of the benchmark dropped 28.7%, eight of our holdings were up, of which ChemoCentryx Inc., LHC Group Inc., and Covetrus, Inc. were the beneficiaries of takeout bids. The remaining five are still in the Fund and each finished in the black based on improved long-term cash flow outlooks. Energy was the poorest relative performing sector. Our underweight position was responsible for 85% of the deficit. The materials sector was hurt by our lack of exposure to relatively strong industries such as metals & mining, as well as a (38.2)% decline in our largest position in the sector, Avient Corp, due to weak earnings results.

 

Whether the June lows for the Index turn out to be THE lows or not will depend on the answers to several other important and complex questions. It

  

appears that inflation has peaked, but will the stickiest elements (especially labor costs) recede quickly enough for the Fed to pause their interest rate increases and avoid further compression of end demand and corporate profits? Is there some part of our economic system that “breaks” due to the dramatic tightening actions of the Fed and other central banks? Will China’s new COVID policies result in a public health policy challenge that lasts months or much longer? Could more strains emerge that defy current vaccines? Finally, is there an acceptable end game for Russia’s war against Ukraine, or is there a further serious escalation? Instead of trying to correctly answer all these questions, a fool’s errand if there ever was one, we think it is best to focus on what opportunities exist today in the small cap market. Two years ago, investors were convinced energy stocks were a black hole while Amazon and Tesla would grow to the sky. Since then, small cap energy stocks are up 156% while Amazon and Tesla are off their highs for the year by (40)% or more. What do investors collectively think they know with high confidence today? Which stocks in the Index and in our Fund reflect excessive optimism? What segments of the market are investors too fearful to own? Fear today can often be the fuel for tomorrow’s returns. Sometimes, that tomorrow can be slower than we would like to arrive. We believe our best course is to continue to look for stocks priced at reasonable valuations relative to the strength of their long-term business outlook. And be patient. The 2020s still have seven more years to go.

 

The views expressed represent the opinions of GW&K Investment Management, LLC as of December 31, 2022, and are not intended as a forecast or guarantee of future results, and are subject to change without notice.

 

 

4


   

    

AMG GW&K Small Cap Core Fund

Portfolio Manager’s Comments (continued)

 

 

CUMULATIVE TOTAL RETURN PERFORMANCE

AMG GW&K Small Cap Core Fund’s cumulative total return is based on the daily change in net asset value (NAV), and assumes that all dividends and distributions were reinvested. The graph compares a hypothetical $10,000 investment made in the AMG GW&K Small Cap Core Fund’s Class N shares on December 31, 2012, to a $10,000 investment made in the Russell 2000® Index for the same time period. The graph and table do not reflect the deduction of taxes that a shareholder would pay on a Fund distribution or redemption of shares. The listed returns for the Fund are net of expenses and the returns for the index exclude expenses. Total returns would have been lower had certain expenses not been reduced.

 

LOGO

The table below shows the average annual total returns for the AMG GW&K Small Cap Core Fund and the Russell 2000® Index for the same time periods ended December 31, 2022.

 

     One     Five     Ten      Since     Inception  
  Average Annual Total Returns1    Year     Years     Years      Inception     Date  

  AMG GW&K Small Cap Core Fund2, 3, 4, 5, 6

 

Class N

     (16.58 %)      5.94     10.20%        8.08     12/10/96  

Class I

     (16.27 %)      6.30     10.62%        12.31     07/27/09  

Class Z

     (16.25 %)      6.35     —         7.93     02/24/17  

Russell 2000® Index7

     (20.44 %)      4.13     9.01%        7.68      12/10/96  

The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

 

Investors should carefully consider the Fund’s investment objectives, risks, charges and expenses before investing. For performance information through the most recent month end, current net asset values per share for the Fund and other information, please call 800.548.4539 or visit our website at amgfunds.com for a free prospectus. Read it carefully before investing or sending money.

Distributed by AMG Distributors, Inc., member FINRA/SIPC.

 

 

Date reflects the inception date of the Fund, not the index.

 

1 

Total return equals income yield plus share price change and assumes reinvestment of all dividends and capital gain distributions. Returns are net of fees and may reflect offsets of Fund expenses as described in the prospectus. No adjustment has been made for taxes payable by shareholders on their reinvested dividends and

    capital gain distributions. Returns for periods greater than one year are annualized. The listed returns on the Fund are net of expenses and based on the published NAV as of December 31, 2022. All returns are in U.S. Dollars ($).

 

2  From time to time, the Fund’s investment manager has waived its fees and/or absorbed Fund expenses, which has resulted in higher returns.

 

3  Market prices of investments held by the Fund may fall rapidly or unpredictably due to a variety of economic or political factors, market conditions, disasters or public health issues, or in response to events that affect particular industries or companies.

 

4  The Fund invests in growth stocks, which may be more sensitive to market movements because their prices tend to reflect future investor expectations rather than just current profits. Growth stocks may underperform value stocks during given periods.

 

5  The Fund is subject to risks associated with investments in small-capitalization companies, such as erratic earnings patterns, competitive conditions, limited earnings history, and a reliance on one or a limited number of products.

 

6  The Fund invests in value stocks, which may perform differently from the market as a whole and may be undervalued by the market for a long period of time.

 

7  The Russell 2000® Index is composed of the 2,000 smallest stocks in the Russell 3000® Index and is widely regarded in the industry as the premier measure of small-cap stock performance. Unlike the Fund, the Russell 2000® Index is unmanaged, is not available for investment and does not incur expenses.

 

The Russell Indices are trademarks of the London Stock Exchange Group companies.

 

Not FDIC insured, nor bank guaranteed. May lose value.

 
 
 

 

 

5


   

AMG GW&K Small Cap Core Fund

Fund Snapshots (unaudited)

December 31, 2022

 

 

PORTFOLIO BREAKDOWN

 

    Sector    % of
Net Assets
 

Health Care

   19.6
 

Financials

   17.4
 

Industrials

   15.1
 

Consumer Discretionary

   12.8
 

Information Technology

   11.7
 

Materials

     5.2
 

Real Estate

     5.1
 

Energy

     4.8
 

Consumer Staples

     3.8
 

Utilities

     2.7
 

Short-Term Investments

     2.0
 

Other Assets, less Liabilities

     (0.2)

 

TOP TEN HOLDINGS

 

    Security Name   

% of

Net Assets

 

Performance Food Group Co.

   2.6
 

SPX Technologies, Inc.

   2.2
 

Matador Resources Co.

   2.2
 

Halozyme Therapeutics, Inc.

   2.0
 

MACOM Technology Solutions Holdings, Inc.

   2.0
 

Texas Roadhouse, Inc.

   2.0
 

RBC Bearings, Inc.

   1.9
 

Globus Medical, Inc., Class A

   1.9
 

Seacoast Banking Corp. of Florida

   1.7
 

Ameris Bancorp

   1.7
    

 

 

Top Ten as a Group

       20.2    
  

 

 

 

 

Because a fund’s strategy may result in multiple investments in particular sectors of the economy, its performance may depend on the performance of those sectors and may fluctuate more widely than investments diversified across more sectors. For additional information on these and other risk considerations, please see the Fund’s prospectus.

Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.

 

 

6


   

AMG GW&K Small Cap Core Fund

Schedule of Portfolio Investments

December 31, 2022

 

 

          
Shares
     Value  

Common Stocks - 98.2%

 

  

Consumer Discretionary - 12.8%

 

  

Boot Barn Holdings, Inc.*

     82,568        $5,162,151  

Churchill Downs, Inc.

     46,372        9,804,432  

Chuy’s Holdings, Inc.*

     141,824        4,013,619  

Five Below, Inc.*

     32,250        5,704,058  

Grand Canyon Education, Inc.*

     103,089        10,892,384  

Helen of Troy, Ltd.*

     46,330        5,138,460  

Lithia Motors, Inc., Class A1

     34,160        6,993,918  

Oxford Industries, Inc.

     87,680        8,170,022  

Patrick Industries, Inc.1

     76,735        4,650,141  

Revolve Group, Inc.*,1

     76,441        1,701,577  

Skyline Champion Corp.*

     141,260        7,276,303  

Texas Roadhouse, Inc.

     142,303        12,942,458  

Wolverine World Wide, Inc.

     203,928        2,228,933  

Total Consumer Discretionary

        84,678,456  

Consumer Staples - 3.8%

     

Central Garden & Pet Co., Class A*

     222,609        7,969,402  

Performance Food Group Co.*

     292,289        17,066,755  

Total Consumer Staples

        25,036,157  

Energy - 4.8%

     

ChampionX Corp.

     139,958        4,057,382  

Magnolia Oil & Gas Corp., Class A1

     431,517        10,119,074  

Matador Resources Co.1

     249,377        14,274,340  

Patterson-UTI Energy, Inc.

     196,482        3,308,757  

Total Energy

        31,759,553  

Financials - 17.4%

     

Ameris Bancorp

     242,138        11,414,385  

AMERISAFE, Inc.

     106,723        5,546,394  

Cathay General Bancorp

     237,022        9,668,127  

Cohen & Steers, Inc.1

     136,806        8,832,195  

Glacier Bancorp, Inc.

     151,804        7,502,154  

Horace Mann Educators Corp.

     251,174        9,386,372  

Houlihan Lokey, Inc.

     116,309        10,137,493  

Independent Bank Corp.

     88,812        7,498,397  

OceanFirst Financial Corp.

     360,300        7,656,375  

Pacific Premier Bancorp, Inc.

     268,100        8,461,236  

Seacoast Banking Corp. of Florida

     367,860        11,473,554  

Stifel Financial Corp.

     157,726        9,206,467  

Veritex Holdings, Inc.

     284,291        7,982,891  

Total Financials

        114,766,040  

Health Care - 19.6%

     

Arcutis Biotherapeutics, Inc.*

 

    

 

251,328

 

 

 

    

 

3,719,654

 

 

 

          
Shares
     Value  

Artivion, Inc.*

     264,636        $3,207,388  

AtriCure, Inc.*

     179,231        7,954,272  

Azenta, Inc.

     103,364        6,017,852  

BioCryst Pharmaceuticals, Inc.*,1

     291,366        3,344,882  

Castle Biosciences, Inc.*

     93,190        2,193,693  

CryoPort, Inc.*

     148,604        2,578,279  

Globus Medical, Inc., Class A*

     171,470        12,735,077  

Halozyme Therapeutics, Inc.*,1

     234,021        13,315,795  

HealthEquity, Inc.*

     150,700        9,289,148  

ICU Medical, Inc.*,1

     34,297        5,401,092  

Insmed, Inc.*

     184,678        3,689,866  

Integra LifeSciences Holdings Corp.*

     136,764        7,668,357  

Intra-Cellular Therapies, Inc.*

     126,421        6,690,199  

Medpace Holdings, Inc.*

     42,784        9,087,749  

Phreesia, Inc.*

     334,214        10,815,165  

Progyny, Inc.*

     170,591        5,313,910  

Supernus Pharmaceuticals, Inc.*,1

     264,556        9,436,713  

Syneos Health, Inc.*

     64,793        2,376,607  

Veracyte, Inc.*

     183,894        4,363,805  

Total Health Care

        129,199,503  

Industrials - 15.1%

     

Alamo Group, Inc.

     68,502        9,699,883  

Allegiant Travel Co.*,1

     44,496        3,025,283  

Heartland Express, Inc.

     177,672        2,725,488  

Helios Technologies, Inc.

     120,426        6,555,991  

ICF International, Inc.

     92,202        9,132,608  

ITT, Inc.

     89,625        7,268,588  

Primoris Services Corp.

     326,956        7,173,415  

RBC Bearings, Inc.*,1

     60,880        12,745,228  

Shoals Technologies Group, Inc.,
Class A*

     94,089        2,321,176  

The Shyft Group, Inc.

     271,399        6,746,979  

SPX Technologies, Inc.*

     223,437        14,668,639  

Terex Corp.

     177,479        7,581,903  

UFP Industries, Inc.

     128,453        10,179,900  

Total Industrials

        99,825,081  

Information Technology - 11.7%

     

The Descartes Systems Group, Inc. (Canada)*

     130,116        9,062,580  

Endava PLC, ADR (United Kingdom)*

     48,128        3,681,792  

Flywire Corp.*

     433,563        10,609,287  

MACOM Technology Solutions Holdings, Inc.*

     210,121        13,233,421  

Novanta, Inc.*

     71,938        9,774,216  

Paycor HCM, Inc.*

     287,138        7,026,267  

Rapid7, Inc.*

     105,031        3,568,953  
 

 

 

The accompanying notes are an integral part of these financial statements.

7


   

    

AMG GW&K Small Cap Core Fund

Schedule of Portfolio Investments (continued)

 

 

 

          
Shares
     Value  

Information Technology - 11.7% (continued)

 

  

Silicon Laboratories, Inc.*,1

     58,624        $7,953,518  

Thoughtworks Holding, Inc.*,1

     600,086        6,114,876  

Viavi Solutions, Inc.*

     632,438        6,646,923  

Total Information Technology

        77,671,833  

Materials - 5.2%

     

Avient Corp.

     305,162        10,302,269  

Balchem Corp.

     65,410        7,987,215  

Minerals Technologies, Inc.

     140,057        8,504,261  

Silgan Holdings, Inc.

     141,653        7,343,292  

Total Materials

        34,137,037  

Real Estate - 5.1%

     

Agree Realty Corp., REIT

     115,823        8,215,325  

National Health Investors, Inc., REIT

     98,117        5,123,670  

Ryman Hospitality Properties, Inc., REIT

     111,710        9,135,644  

STAG Industrial, Inc., REIT

     348,059        11,245,786  

Total Real Estate

        33,720,425  

Utilities - 2.7%

     

IDACORP, Inc.

     74,083        7,989,852  

NorthWestern Corp.

     170,238        10,101,923  

Total Utilities

        18,091,775  

Total Common Stocks

 

  

(Cost $534,382,503)

        648,885,860  
     Principal
Amount
        

Short-Term Investments - 2.0%

 

  

Joint Repurchase Agreements - 0.3%2

 

  

Citigroup Global Markets, Inc., dated 12/30/22, due 01/03/23, 4.250% total to be received $248,899 (collateralized by various U.S. Treasuries, 0.000% - 4.500%, 04/11/23 - 10/31/29, totaling $253,758)

 

    

 

$248,782

 

 

 

    

 

248,782

 

 

 

     

Principal

Amount

     Value  

National Bank Financial, dated 12/30/22, due 01/03/23, 4.340% total to be received $1,000,482 (collateralized by various U.S. Treasuries, 0.000% - 4.435%, 01/03/23 - 09/09/49, totaling $1,020,000)

     $1,000,000        $1,000,000  

RBC Dominion Securities, Inc., dated 12/30/22, due 01/03/23, 4.300% total to be received $1,000,478 (collateralized by various U.S. Government Agency Obligations, 2.000% - 6.000%, 09/01/24 - 10/20/52, totaling $1,020,000)

     1,000,000        1,000,000  

Total Joint Repurchase Agreements

 

     2,248,782  

Repurchase Agreements - 1.7%

     

Fixed Income Clearing Corp., dated 12/30/22 due 01/03/23, 4.150% total to be received $10,903,025 (collateralized by a U.S. Treasury, 0.125%, 01/15/32, totaling $11,116,004)

     10,898,000        10,898,000  

Total Short-Term Investments

 

  

(Cost $13,146,782)

        13,146,782  

Total Investments - 100.2%

 

  

(Cost $547,529,285)

        662,032,642  

Other Assets, less Liabilities - (0.2)%

 

     (1,492,527

Net Assets - 100.0%

 

 

    

 

$660,540,115

 

 

 

 

 

*

Non-income producing security.

 

1 

Some of these securities, amounting to $30,453,990 or 4.6% of net assets, were out on loan to various borrowers and are collateralized by cash and various U.S. Treasury Obligations. See Note 4 of Notes to Financial Statements.

 

2 

Cash collateral received for securities lending activity was invested in these joint repurchase agreements.

ADR     American Depositary Receipt
REIT    Real Estate Investment Trust
 

 

 

The accompanying notes are an integral part of these financial statements.

8


   

    

AMG GW&K Small Cap Core Fund

Schedule of Portfolio Investments (continued)

 

 

 

The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2022:

 

     Level 1      Level 2      Level 3      Total  

  Investments in Securities

           

Common Stocks

   $ 648,885,860                    $ 648,885,860  

Short-Term Investments

           

Joint Repurchase Agreements

          $ 2,248,782               2,248,782  

Repurchase Agreements

            10,898,000               10,898,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

  Total Investments in Securities

   $ 648,885,860      $ 13,146,782             $ 662,032,642  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

All common stocks held in the Fund are Level 1 securities. For a detailed breakout of common stocks by major industry classification, please refer to the Fund’s Schedule of Portfolio Investments.

For the fiscal year ended December 31, 2022, there were no transfers in or out of Level 3.

 

 

The accompanying notes are an integral part of these financial statements.

9


   

    

AMG GW&K Small Cap Value Fund

Portfolio Manager’s Comments (unaudited)

 

 

 

For the fiscal year ended December 31, 2022, AMG GW&K Small Cap Value Fund (the “Fund”) Class N shares returned (15.33)%, compared to a (14.48)% return for the Russell 2000® Value Index (the “Index”), the Fund’s benchmark.

 

It is starting to become an unwelcome tagline for this decade: 202x was a challenging year for investors to navigate. So far, each year in this nascent decade has been uncertain and confounding for investors. 2022 fit that mold as well, but this year the pain was felt in our wallets too as stocks and asset values of all kinds declined sharply. The Index dropped (20.48)% and finished just a bit above its June lows. The simple mathematical determinants of stock prices tell us they can fall because investors: 1) lower their accepted valuation levels, 2) lower their earnings expectations, or 3) lower both. For 2022, reason number 1 was dominant for small cap stocks as rising inflation and interest rates led to a significant de-rating in valuations. However, late in the year analysts began to more actively mark down earnings estimates as well. There were myriad factors contributing to the uncertainty and subsequent estimate revisions. A list of prominent factors would likely include changing consumer spending preferences (services versus goods), lower end demand in housing and other related industries, uncertainty about the duration of the U.S. Federal Reserve’s (the Fed) tightening campaign, lingering supply-chain challenges (inflation and availability), a very uncertain reopening in China, and Russia’s war on Ukraine. To keep investors more off balance, small-cap stocks rallied in the final quarter of the year. Short-term oriented investors will ask whether expectations have fallen enough for stocks to have bottomed. We are skeptical that anyone can answer this correctly with high confidence, so it may not be the best question to ponder to maximize long-term returns.

 

The Fund underperformed the Index during the year. In 2022, the benchmark had only one sector in positive territory, but it was a noteworthy one with

    

energy up an impressive 60.5%. Utilities and consumer staples were the next best sectors given their relatively stable cash flows, finishing down single digits. Not surprisingly, style factors indicated a preference for higher-quality attributes in the selloff of 2022. Broadly speaking, within the Index, the lower quality the stock, the more poorly it performed over the course of the year. This was most evident in characteristics such as low return-on-equity (ROE), non-earners, high beta, and negative equity, which all meaningfully underperformed the Index. Five sectors dropped more than 24% on the year, each having significantly more exposure to the weaker factors mentioned above.

 

The Fund benefited in 2022 from a combination of allocation toward higher-quality stocks and stock selection. On the factor side, averaging the allocation impact for the six quality factors we follow implies about 130 basis points of positive impact. The impact was greater for earnings specific factors. The positive stock selection came primarily from industrials with financials, health care, real estate, and communication services also making positive contributions. Industrials benefited from an overweight in the professional services industry, with two names, CBIZ, Inc. and CACI International up double digits in a sector that was down 12.8%. CACI International was sold during the period. Strong stock selection in banking drove the relative outperformance in financials. In health care, the Fund benefited from an underweight position in Biotechnology and good stock selection across other industries. Energy was the poorest relative performing sector, with our underweight position to this strong performing area was a significant detractor from relative results. The consumer discretionary sector was also a significant headwind, due to our overweight exposure and weak stock selection in the specialty retail and the hotel restaurants and leisure industries.

      

Whether the June lows for the Index turn out to be THE lows or not will depend on the answers to several other important and complex questions. It appears that inflation has peaked, but will the stickiest elements (especially labor costs) recede quickly enough for the Fed to pause their interest rate increases and avoid further compression of end demand and corporate profits? Is there some part of our economic system that “breaks” due to the dramatic tightening actions of the Fed and other central banks? Will China’s new COVID policies result in a public health policy challenge that lasts months or much longer? Could more strains emerge that defy current vaccines? Finally, is there an acceptable end game for Russia’s war against Ukraine, or is there a further serious escalation? Instead of trying to correctly answer all these questions, a fool’s errand if there ever was one, we think it is best to focus on what opportunities exist today in the small cap market. Two years ago, investors were convinced energy stocks were a black hole while Amazon and Tesla would grow to the sky. Since then, small cap energy stocks are up 156% while Amazon and Tesla are off their highs for the year by (40)% or more. What do investors collectively think they know with high confidence today? Which stocks in the Index and in our Fund reflect excessive optimism? What segments of the market are investors too fearful to own? Fear today can often be the fuel for tomorrow’s returns. Sometimes that tomorrow can be slower than we would like to arrive. We believe our best course is to continue to look for stocks priced at reasonable valuations relative to the strength of their long-term business outlook. And be patient. The 2020s still have seven more years to go.

 

The views expressed represent the opinions of GW&K Investment Management, LLC as of December 31, 2022, and are not intended as a forecast or guarantee of future results, and are subject to change without notice.

 

 

10


    

AMG GW&K Small Cap Value Fund

Portfolio Manager’s Comments (continued)

 

 

 

CUMULATIVE TOTAL RETURN PERFORMANCE

AMG GW&K Small Cap Value Fund’s cumulative total return is based on the daily change in net asset value (NAV), and assumes that all dividends and distributions were reinvested. The graph compares a hypothetical $10,000 investment made in the AMG GW&K Small Cap Value Fund’s Class N shares on December 31, 2012, to a $10,000 investment made in the Russell 2000® Value Index for the same time period. The graph and table do not reflect the deduction of taxes that a shareholder would pay on a Fund distribution or redemption of shares. The listed returns for the Fund are net of expenses and the returns for the index exclude expenses. Total returns would have been lower had certain expenses not been reduced.

 

LOGO

The table below shows the average annual total returns for the AMG GW&K Small Cap Value Fund and the Russell 2000® Value Index for the same time periods ended December 31, 2022.

 

    One     Five     Ten       Since     Inception  
  Average Annual Total Returns1   Year     Years     Years       Inception     Date  

AMG GW&K Small Cap Value Fund2, 3, 4, 5, 6, 7, 8

 

   

Class N

    (15.33 %)      3.91     8.97%       10.94%       04/23/87  

Class I

    (15.19 %)      4.09           4.81%       02/24/17  

Class Z

    (15.16 %)      4.16           4.88%       02/24/17  

Russell 2000® Value Index9

    (14.48 %)      4.13     8.48%              

The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

 

Investors should carefully consider the Fund’s investment objectives, risks, charges and expenses before investing. For performance information through the most recent month end, current net asset values per share for the Fund and other information, please call 800.548.4539 or visit our website at amgfunds.com for a free prospectus. Read it carefully before investing or sending money.

Distributed by AMG Distributors, Inc., member FINRA/SIPC.

 

1 

Total return equals income yield plus share price change and assumes reinvestment of all dividends and capital gain distributions. Returns are net of fees and may reflect offsets of Fund expenses as described in the prospectus. No adjustment has been made for taxes payable by shareholders on their reinvested dividends and capital gain distributions. Returns for periods greater than one year are annualized. The listed returns on the Fund are net of expenses and based on the published NAV as of December 31, 2022. All returns are in U.S. Dollars ($).

2  From time to time, the Fund’s investment manager has waived its fees and/or absorbed Fund expenses, which has resulted in higher returns.

 

3  As of December 4, 2020, the Fund’s subadvisor was changed to GW&K Investment Management, LLC. Prior to December 4, 2020, the Fund was known as the AMG Managers Skyline Special Equities Fund, and had different principal investment strategies and corresponding risks. Performance shown for periods prior to December 4, 2020 reflects the performance and investment strategies of the Fund’s previous subadvisor, Skyline Asset Management, L.P. The Fund’s past performance would have been different if the Fund were managed by the current subadvisor and strategy, and the Fund’s prior performance record might be less pertinent for investors considering whether to purchase shares of the Fund.

 

4  The Fund is subject to risks associated with investments in small-capitalization companies, such as erratic earnings patterns, competitive conditions, limited earnings history and a reliance on one or a limited number of products.

 

5  Companies that are in similar industry sectors may be similarly affected by particular economic or market events; to the extent the Fund has substantial holdings within a particular sector, the risks associated with that sector increase.

 

6  Market prices of investments held by the Fund may fall rapidly or unpredictably due to a variety of economic or political factors, market conditions, disasters or public health issues, or in response to events that affect particular industries or companies.

 

7  The Fund is subject to special risk considerations similar to those associated with the direct ownership of real estate. Real estate valuations may be subject to factors such as changing general and local economic, financial, competitive, and environmental conditions.

 

8  The Fund invests in value stocks, which may perform differently from the market as a whole and may be undervalued by the market for a long period of time.

 

9  The Russell 2000® Value Index is an unmanaged, market-value weighted, value-oriented index comprised of small stocks that have relatively low price-to-book ratios and lower forecasted growth values. Unlike the Fund, the Russell 2000® Value Index is unmanaged, is not available for investment and does not incur expenses.

 

The Russell Indices are trademarks of the London Stock Exchange Group companies.

 

Not FDIC insured, nor bank guaranteed. May lose value.

 

 

 

11


   

AMG GW&K Small Cap Value Fund

Fund Snapshots (unaudited)

December 31, 2022

 

 

PORTFOLIO BREAKDOWN

 

    Sector   

% of

Net Assets

 

Financials

       28.5
 

Industrials

       15.0
 

Health Care

       11.2
 

Real Estate

       10.3
 

Consumer Discretionary

       10.0
 

Energy

       5.5
 

Information Technology

       4.5
 

Materials

       4.4
 

Utilities

       3.8
 

Communication Services

       2.8
 

Consumer Staples

       2.6
 

Short-Term Investments

       4.4
 

Other Assets, less Liabilities

       (3.0 )

 

TOP TEN HOLDINGS

 

    Security Name   

% of

Net Assets

 

Selective Insurance Group, Inc.

       2.3    
 

Group 1 Automotive, Inc.

       2.3    
 

Independence Realty Trust, Inc.

       2.2    
 

Ameris Bancorp

       2.0    
 

First Interstate BancSystem, Inc., Class A

       2.0    
 

Tenet Healthcare Corp.

       1.9    
 

CBIZ, Inc.

       1.9    
 

Atlantic Union Bankshares Corp.

       1.8    
 

ICF International, Inc.

       1.8    
 

Piper Sandler Cos.

       1.8    
      

 

 

 
 

Top Ten as a Group

           20.0    
    

 

 

 
 

 

Because a fund’s strategy may result in multiple investments in particular sectors of the economy, its performance may depend on the performance of those sectors and may fluctuate more widely than investments diversified across more sectors. For additional information on these and other risk considerations, please see the Fund’s prospectus.

Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.

 

 

12


   

AMG GW&K Small Cap Value Fund

Schedule of Portfolio Investments

December 31, 2022

 

 

          
Shares
     Value  

Common Stocks - 98.6%

     

Communication Services - 2.8%

 

  

Gray Television, Inc.

     252,726        $2,828,004  

IMAX Corp. (Canada)*

     153,235        2,246,425  

Ziff Davis, Inc.*

     24,200        1,914,220  

Total Communication Services

        6,988,649  

Consumer Discretionary - 10.0%

     

Academy Sports & Outdoors, Inc.

     66,425        3,489,969  

Boot Barn Holdings, Inc.*

     67,612        4,227,102  

First Watch Restaurant Group, Inc.*

     258,011        3,490,889  

Group 1 Automotive, Inc.

     31,794        5,734,684  

Helen of Troy, Ltd.*

     24,300        2,695,113  

Leslie’s, Inc.*

     205,955        2,514,711  

Topgolf Callaway Brands Corp.*,1

     151,684        2,995,759  

Total Consumer Discretionary

        25,148,227  

Consumer Staples - 2.6%

     

Central Garden & Pet Co.*

     113,080        4,234,846  

Hostess Brands, Inc.*

     108,600        2,436,984  

Total Consumer Staples

        6,671,830  

Energy - 5.5%

     

Earthstone Energy, Inc., Class A*,1

     191,553        2,725,799  

Magnolia Oil & Gas Corp., Class A

     116,685        2,736,263  

Matador Resources Co.1

     64,371        3,684,596  

ProPetro Holding Corp.*

     249,914        2,591,608  

Solaris Oilfield Infrastructure, Inc., Class A

     214,865        2,133,610  

Total Energy

        13,871,876  

Financials - 28.5%

     

Ameris Bancorp

     108,536        5,116,387  

Atlantic Union Bankshares Corp.

     129,829        4,562,191  

Cathay General Bancorp

     83,722        3,415,020  

City Holding Co.1

     37,149        3,458,200  

Community Bank System, Inc.

     60,600        3,814,770  

Enterprise Financial Services Corp.

     72,040        3,527,078  

Federal Agricultural Mortgage Corp., Class C

     34,265        3,862,008  

First Financial Bancorp

     135,954        3,294,166  

First Interstate BancSystem, Inc., Class A

     127,615        4,932,320  

International Bancshares Corp.

     83,563        3,823,843  

OceanFirst Financial Corp.

     203,268        4,319,445  

Pacific Premier Bancorp, Inc.

     137,124        4,327,634  

Piper Sandler Cos.

     34,072        4,435,834  

PJT Partners, Inc., Class A

     36,321        2,676,495  

Selective Insurance Group, Inc.1

     65,075        5,766,296  

Stifel Financial Corp.

 

    

 

61,835

 

 

 

    

 

3,609,309

 

 

 

          
Shares
     Value  

Walker & Dunlop, Inc.

     54,280        $4,259,894  

WesBanco, Inc.

     68,733        2,541,746  

Total Financials

        71,742,636  

Health Care - 11.2%

     

Albireo Pharma, Inc.*

     119,200        2,575,912  

Arcutis Biotherapeutics, Inc.*

     169,827        2,513,440  

BioCryst Pharmaceuticals, Inc.*,1

     207,809        2,385,647  

Integer Holdings Corp.*,1

     51,449        3,522,199  

Ligand Pharmaceuticals, Inc.*

     27,445        1,833,326  

NeoGenomics, Inc.*

     309,348        2,858,376  

OmniAb, Inc.*

     135,707        488,545  

OmniAb, Inc.*,2,3

     10,502        0  

OmniAb, Inc.*,2,3

     10,502        0  

SeaSpine Holdings Corp.*

     383,738        3,204,212  

Supernus Pharmaceuticals, Inc.*

     115,006        4,102,264  

Tenet Healthcare Corp.*

     98,333        4,797,667  

Total Health Care

        28,281,588  

Industrials - 15.0%

     

Atkore, Inc.*

     30,306        3,437,307  

CBIZ, Inc.*

     99,304        4,652,392  

Columbus McKinnon Corp.

     102,102        3,315,252  

Comfort Systems USA, Inc.

     31,053        3,573,579  

Herc Holdings, Inc.

     21,360        2,810,335  

Hillenbrand, Inc.

     67,241        2,869,173  

ICF International, Inc.

     45,073        4,464,481  

Primoris Services Corp.

     123,020        2,699,059  

RBC Bearings, Inc.*

     14,615        3,059,650  

Terex Corp.

     85,160        3,638,035  

UFP Industries, Inc.

     41,387        3,279,920  

Total Industrials

        37,799,183  

Information Technology - 4.5%

     

American Software, Inc., Class A

     213,708        3,137,233  

Power Integrations, Inc.

     46,305        3,320,995  

Silicon Laboratories, Inc.*,1

     18,157        2,463,360  

Viavi Solutions, Inc.*

     221,560        2,328,596  

Total Information Technology

        11,250,184  

Materials - 4.4%

     

Minerals Technologies, Inc.

     43,121        2,618,307  

Orion Engineered Carbons, S.A. (Luxembourg)

     208,251        3,708,950  

Schnitzer Steel Industries, Inc., Class A

     67,510        2,069,182  

Worthington Industries, Inc.1

     54,218        2,695,177  

Total Materials

 

       

 

11,091,616

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

13


   

    

AMG GW&K Small Cap Value Fund

Schedule of Portfolio Investments (continued)

 

 

 

 

      Shares      Value  

Real Estate - 10.3%

     

Agree Realty Corp., REIT

     49,370        $3,501,814  

Four Corners Property Trust, Inc., REIT 1

     151,003        3,915,508  

Getty Realty Corp., REIT 1

     124,607        4,217,947  

Independence Realty Trust, Inc., REIT

     323,197        5,449,101  

LXP Industrial Trust, REIT

     172,384        1,727,288  

STAG Industrial, Inc., REIT

     94,640        3,057,818  

Summit Hotel Properties, Inc., REIT

     222,335        1,605,259  

Xenia Hotels & Resorts, Inc., REIT

     189,036        2,491,494  

Total Real Estate

        25,966,229  

Utilities - 3.8%

     

IDACORP, Inc.

     37,411        4,034,776  

NorthWestern Corp.

     52,943        3,141,638  

Southwest Gas Holdings, Inc.

     40,684        2,517,526  

Total Utilities

        9,693,940  

Total Common Stocks
(Cost $224,336,717)

        248,505,958  
     Principal
Amount
        

Short-Term Investments - 4.4%

 

  

Joint Repurchase Agreements - 3.4%4

 

  

Cantor Fitzgerald Securities, Inc., dated 12/30/22, due 01/03/23, 4.300% total to be received $2,004,257 (collateralized by various U.S. Government Agency Obligations, 0.000% - 9.000%, 01/15/23 - 11/20/72, totaling $2,043,366)

     $2,003,300        2,003,300  

Citadel Securities LLC, dated 12/30/22, due 01/03/23, 4.410% total to be received $2,004,282 (collateralized by various U.S. Treasuries, 0.125% - 6.250%, 04/15/23 - 11/15/52, totaling $2,044,367)

     2,003,300        2,003,300  
      Principal
Amount
     Value  

Citigroup Global Markets, Inc., dated 12/30/22, due 01/03/23, 4.250% total to be received $420,901 (collateralized by various U.S. Treasuries, 0.000% - 4.500%, 04/11/23 - 10/31/29, totaling $429,116)

     $420,702        $420,702  

National Bank Financial, dated 12/30/22, due 01/03/23, 4.340% total to be received $2,004,241 (collateralized by various U.S. Treasuries, 0.000% - 4.435%, 01/03/23 - 09/09/49, totaling $2,043,341)

     2,003,275        2,003,275  

RBC Dominion Securities, Inc., dated 12/30/22, due 01/03/23, 4.300% total to be received $2,004,232 (collateralized by various U.S. Government Agency Obligations, 2.000% - 6.000%, 09/01/24 - 10/20/52, totaling $2,043,341)

     2,003,275        2,003,275  

Total Joint Repurchase Agreements

        8,433,852  

Repurchase Agreements - 1.0%

     

Fixed Income Clearing Corp., dated 12/30/22 due 01/03/23, 4.150% total to be received $2,574,186 (collateralized by a U.S. Treasury, 0.125%, 01/15/32, totaling $2,624,509)

     2,573,000        2,573,000  

Total Short-Term Investments
(Cost $11,006,852)

        11,006,852  

Total Investments - 103.0%

     

(Cost $235,343,569)

        259,512,810  

Other Assets, less Liabilities - (3.0)%

 

     (7,601,504

Net Assets - 100.0%

 

     $251,911,306  

 

 

 

*

Non-income producing security.

 

1 

Some of these securities, amounting to $18,116,821 or 7.2% of net assets, were out on loan to various borrowers and are collateralized by cash and various U.S. Treasury Obligations. See Note 4 of Notes to Financial Statements.

 

2 

Security’s value was determined by using significant unobservable inputs.

 

3 

These securities are restricted and are not available for re-sale. Ligand Pharmaceuticals, Inc. (“Ligand”) completed a spin-off of OmniAb, Inc on November 2,2022. Ligand shareholders received OmniAb common stock and two new holdings of OmniAb earn-out shares. The market value of OmniAb common stock and earn-out shares were $327,055 and $0, respectively on the date of the spin-off, which equates to $2.41 and $0 per share, respectively. At December 31, 2022, the cost of OmniAb, Inc. common shares was $576,806 and market value was $488,545 which equates to less than 1% of net assets. For each holding of OmniAb earn-out shares the cost was $19,190 and the market value of each was $0 which has no impact on total net assets. The total value of restricted securities held is $0, which represents 0% of net assets.

4 

Cash collateral received for securities lending activity was invested in these joint repurchase agreements.

REIT    Real Estate Investment Trust

 

 

 

The accompanying notes are an integral part of these financial statements.

14


   

    

AMG GW&K Small Cap Value Fund

Schedule of Portfolio Investments (continued)

 

 

 

The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2022:

 

     Level 1      Level 2      Level 3      Total  

  Investments in Securities

           

Common Stocks

           

Financials

     $71,742,636                      $71,742,636  

Industrials

     37,799,183                      37,799,183  

Health Care

     28,281,588               $0        28,281,588  

Real Estate

     25,966,229                      25,966,229  

Consumer Discretionary

     25,148,227                      25,148,227  

Energy

     13,871,876                      13,871,876  

Information Technology

     11,250,184                      11,250,184  

Materials

     11,091,616                      11,091,616  

Utilities

     9,693,940                      9,693,940  

Communication Services

     6,988,649                      6,988,649  

Consumer Staples

     6,671,830                      6,671,830  

Short-Term Investments

           

Joint Repurchase Agreements

            $8,433,852               8,433,852  

Repurchase Agreements

            2,573,000               2,573,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

     $248,505,958        $11,006,852        $0        $259,512,810  
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2022, the Level 3 common stocks were received as a result of a corporate action. The security’s value was determined by using significant unobservable inputs, which generated a change in unrealized depreciation of $38,380.

For the fiscal year ended December 31, 2022, there were no transfers in or out of Level 3. The Fund did not have any purchases and sales of Level 3 securities for the same period.

 

 

The accompanying notes are an integral part of these financial statements.

15


   

    

AMG GW&K Small/Mid Cap Fund

Portfolio Manager’s Comments (unaudited)

 

 

 

THE YEAR IN REVIEW

 

For the year ended December 31, 2022, AMG GW&K Small/Mid Cap Fund (the “Fund”) Class I shares returned (18.01)%, compared to the Fund’s benchmark, the Russell 2500® Index (the “Index”), which returned (18.37)%.

 

It is starting to become an unwelcome tagline for this decade: 202x was a challenging year for investors to navigate. So far, each year in this nascent decade has been uncertain and confounding for investors. 2022 fit that mold as well, but this year the pain was felt in our wallets too as stocks and asset values of all kinds declined sharply. The Index dropped (18.37)% and finished just a bit above the lows it made in June and September. The simple mathematical determinants of stock prices tell us they can fall because investors: 1) lower their accepted valuation levels, 2) lower their earnings expectations, or 3) lower both. For 2022, reason number 1 was dominant for small/mid cap stocks as rising inflation and interest rates led to a significant de-rating in valuations. However, late in the year analysts began to more actively mark down earnings estimates as well. There were myriad factors contributing to the uncertainty and subsequent estimate revisions. A list of prominent factors would likely include changing consumer spending preferences (services versus goods), lower end demand in housing and other related industries, uncertainty about the duration of the U.S. Federal Reserve’s (the Fed) tightening campaign, lingering supply-chain challenges (inflation and availability), a very uncertain reopening in China, and Russia’s war on Ukraine. To keep investors more off balance, small- and mid-cap stocks rallied in the final quarter of the year. Short-term oriented investors will ask whether expectations have fallen enough for stocks to have bottomed. We are skeptical that anyone can answer this correctly with high confidence, so it may not be the best question to ponder to maximize long-term returns.

 

The Fund modestly outperformed the Index during the year. Within the benchmark, style factors indicated a preference for higher-quality attributes in

      

the selloff of 2022. Broadly speaking, the lower quality the stock the more poorly it performed over the course of the year. This was most evident in characteristics such as low return-on-equity (ROE), non-earners, high beta, and negative equity, which all meaningfully underperformed the Index. During 2022, the benchmark had only one sector in positive territory, but it was a noteworthy one with energy up an impressive 50.0%. Utilities and consumer staples were next best sectors given their relatively stable cash flows, finishing down single digits. Five sectors dropped more than 25% on the year, each having significantly more exposure to the weaker factors mentioned above.

 

The relative outperformance of the Fund in 2022 came from a combination of allocation toward higher-quality companies and strong stock selection. On the factor side, averaging the allocation impact for the six quality factors we follow implies about 100 basis points of positive impact to relative performance. The impact was greater for earnings-specific factors. The good stock selection came prominently from health care, with three other sectors also making positive contributions. Health care benefited from an underweight to Biotechnology, but also suffered from an overweight in Life Science Tools & Service. While the health care portion of the benchmark dropped 28.2%, nine of our holdings were up on the year, of which Biohaven Pharmaceutical Holding Co. Ltd. and Horizon Therapeutics PLC were the beneficiaries of takeout bids. The remaining seven are still in the Fund and each finished in the black based on improved long-term cash flow outlooks. The Fund also had its share of weaker performers, led by information technology, financials, and energy. Within information technology, we had two holdings with weakening fundamentals—Cerence Inc. and Rapid7, Inc.—which were responsible for about half the relative loss. Cerence was sold during the period. The financials sector was hit mostly by two poorly performing Bank holdings—Signature Bank and Western Alliance Bancorp. The Fund continued to be underweight energy, which drove the majority of sector underperformance.

    

Whether the September lows for the Index turn out to be THE lows or not will depend on the answers to several other important and complex questions. It appears that inflation has peaked, but will the stickiest elements (especially labor costs) recede quickly enough for the Fed to pause their interest rate increases and avoid further compression of end demand and corporate profits? Is there some part of our economic system that “breaks” due to the dramatic tightening actions of the Fed and other central banks? Will China’s new COVID policies result in a public health policy challenge that lasts months or much longer? Could more strains emerge that defy current vaccines? Finally, is there an acceptable end game for Russia’s war against Ukraine, or is there a further serious escalation? Instead of trying to correctly answer all these questions, a fool’s errand if there ever was one, we think it is best to focus on what opportunities exist today in the small and mid-cap market. Two years ago, investors were convinced energy stocks were a black hole while Amazon and Tesla would grow to the sky. Since then, small/mid cap energy stocks are up 172% while Amazon and Tesla are off their highs for the year by (40)% or more. What do investors collectively think they know with high confidence today? Which stocks in the Index and in our Fund reflect excessive optimism? What segments of the market are investors too fearful to own? Fear today can often be the fuel for tomorrow’s returns. Sometimes, that tomorrow can be slower than we would like to arrive. We believe our best course is to continue to look for stocks priced at reasonable valuations relative to the strength of their long-term business outlook. And be patient. The 2020s still have seven more years to go.

 

The views expressed represent the opinions of GW&K Investment Management, LLC as of December 31, 2022, and are not intended as a forecast or guarantee of future results, and are subject to change without notice.

 

 

16


    

AMG GW&K Small/Mid Cap Fund

Portfolio Manager’s Comments (continued)

 

 

 

CUMULATIVE TOTAL RETURN PERFORMANCE

AMG GW&K Small/Mid Cap Fund’s cumulative total return is based on the daily change in net asset value (NAV), and assumes that all dividends and distributions were reinvested. The graph compares a hypothetical $10,000 investment made in the AMG GW&K Small/Mid Cap Fund’s Class I shares on June 30, 2015, to a $10,000 investment made in the Russell 2500® Index for the same time period. The graph and table do not reflect the deduction of taxes that a shareholder would pay on a Fund distribution or redemption of shares. The listed returns for the Fund are net of expenses and the returns for the index exclude expenses. Total returns would have been lower had certain expenses not been reduced.

 

LOGO

The table below shows the average annual total returns for the AMG GW&K Small/Mid Cap Fund and the Russell 2500® Index for the same time periods ended December 31, 2022.

 

     One   Five   Since   Inception  
  Average Annual Total Returns1    Year   Years   Inception   Date  

AMG GW&K Small/Mid Cap Fund2, 3, 4, 5, 6, 7, 8

 

Class N

   (18.15%)   8.70%   9.01%     02/24/17  

Class I

   (18.01%)   8.88%   7.59%     06/30/15  

Class Z

   (17.94%)   8.98%   9.28%     02/24/17  

Russell 2500® Index9

   (18.37%)   5.89%   7.27%      06/30/15  

The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

 

Investors should carefully consider the Fund’s investment objectives, risks, charges and expenses before investing. For performance information through the most recent month end, current net asset values per share for the Fund and other information, please call 800.548.4539 or visit our website at amgfunds.com for a free prospectus. Read it carefully before investing or sending money.

Distributed by AMG Distributors, Inc., member FINRA/SIPC.

 

 

Date reflects the inception date of the Fund, not the index

 

1 

Total return equals income yield plus share price change and assumes reinvestment of all dividends and capital gain distributions. Returns are net of fees and may reflect offsets of Fund expenses as described in the prospectus. No adjustment has been made for taxes payable by shareholders on their reinvested dividends and

capital gain distributions. Returns for periods greater than one year are annualized. The listed returns on the Fund are net of expenses and based on the published NAV as of December 31, 2022. All returns are in U.S. Dollars ($).

 

2  From time to time, the Fund’s investment manager has waived its fees and/or absorbed Fund expenses, which has resulted in higher returns.

 

3  The Fund is subject to risks associated with investments in small-capitalization companies, such as erratic earnings patterns, competitive conditions, limited earnings history, and a reliance on one or a limited number of products.

 

4  The Fund is subject to risks associated with investments in mid-capitalization companies such as greater price volatility, lower trading volume, and less liquidity than the stocks of larger, more established companies.

 

5  The Fund is subject to special risk considerations similar to those associated with the direct ownership of real estate. Real estate valuations may be subject to factors such as changing general and local economic, financial, competitive, and environmental conditions.

 

6  The Fund invests in growth stocks, which may be more sensitive to market movements because their prices tend to reflect future investor expectations rather than just current profits. Growth stocks may underperform value stocks during given periods.

 

7  The Fund invests in value stocks, which may perform differently from the market as a whole and may be undervalued by the market for a long period of time.

 

8  Market prices of investments held by the Fund may fall rapidly or unpredictably due to a variety of economic or political factors, market conditions, disasters or public health issues, or in response to events that affect particular industries or companies.

 

9  The Russell 2500® Index is composed of the 2,500 smallest stocks in the Russell 3000® Index and is widely regarded in the industry as the premier measure of small/mid cap stock performance. Unlike the Fund, the Russell 2500® Index is unmanaged, is not available for investment and does not incur expenses.

 

The Russell Indices are trademarks of the London Stock Exchange Group companies.

 

Not FDIC insured, nor bank guaranteed. May lose value.

 

 

 

 

17


   

AMG GW&K Small/Mid Cap Fund

Fund Snapshots (unaudited)

December 31, 2022

 

 

PORTFOLIO BREAKDOWN

 

    Sector   

% of

Net Assets

 

Industrials

       19.3
 

Health Care

       17.2
 

Consumer Discretionary

       13.7
 

Information Technology

       13.2
 

Financials

       11.6
 

Real Estate

       6.4
 

Materials

       6.1
 

Consumer Staples

       5.1
 

Energy

       4.1
 

Utilities

       2.3
 

Short-Term Investments

       2.2
 

Other Assets, less Liabilities

       (1.2 )

TOP TEN HOLDINGS

 

    Security Name  

% of

Net Assets

 
 

Horizon Therapeutics Plc

    2.4      
 

BJ’s Wholesale Club Holdings, Inc.

    2.1      
 

Manhattan Associates, Inc.

    1.9      
 

Nordson Corp.

    1.8      
 

Ingersoll Rand, Inc.

    1.8      
 

Voya Financial, Inc.

    1.7      
 

RBC Bearings, Inc.

    1.7      
 

Booz Allen Hamilton Holding Corp.

    1.7      
 

Performance Food Group Co.

    1.6      
 

Element Solutions, Inc.

    1.6      
   

 

 

 
 

Top Ten as a Group

        18.3      
 

 

 

 
 

 

Because a fund’s strategy may result in multiple investments in particular sectors of the economy, its performance may depend on the performance of those sectors and may fluctuate more widely than investments diversified across more sectors. For additional information on these and other risk considerations, please see the Fund’s prospectus.

Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.

 

 

18


   

AMG GW&K Small/Mid Cap Fund

Schedule of Portfolio Investments

December 31, 2022

 

 

          
Shares
     Value  

Common Stocks - 99.0%

     

Consumer Discretionary - 13.7%

 

  

Bright Horizons Family Solutions, Inc.*

     45,269        $2,856,474  

Burlington Stores, Inc.*

     36,579        7,416,758  

Carter’s, Inc.1

     72,127        5,381,395  

Cavco Industries, Inc.*

     32,730        7,405,163  

Dorman Products, Inc.*

     71,359        5,770,802  

Five Below, Inc.*

     50,431        8,919,731  

Gentherm, Inc.*

     81,254        5,305,074  

Grand Canyon Education, Inc.*

     38,915        4,111,759  

Krispy Kreme Inc.

     179,515        1,852,595  

Lithia Motors, Inc., Class A

     32,158        6,584,029  

Polaris, Inc.

     73,981        7,472,081  

Texas Roadhouse, Inc.

     96,061        8,736,748  

Vail Resorts, Inc.

     22,278        5,309,961  

Total Consumer Discretionary

        77,122,570  

Consumer Staples - 5.1%

     

BJ’s Wholesale Club Holdings, Inc.*

     176,461        11,674,659  

Lancaster Colony Corp.

     41,951        8,276,932  

Performance Food Group Co.*

     153,727        8,976,120  

Total Consumer Staples

        28,927,711  

Energy - 4.1%

     

ChampionX Corp.

     121,726        3,528,837  

Magnolia Oil & Gas Corp., Class A

     248,661        5,831,100  

Ovintiv, Inc.

     108,670        5,510,656  

ProPetro Holding Corp.*

     272,233        2,823,056  

SM Energy Co.

     149,136        5,194,407  

Total Energy

        22,888,056  

Financials - 11.6%

     

Artisan Partners Asset Management, Inc., Class A

     65,869        1,956,309  

Atlantic Union Bankshares Corp.

     178,251        6,263,740  

Glacier Bancorp, Inc.

     95,590        4,724,058  

Kinsale Capital Group, Inc.

     30,957        8,095,875  

MarketAxess Holdings, Inc.

     17,880        4,986,553  

Pinnacle Financial Partners, Inc.

     119,611        8,779,447  

Piper Sandler Cos.

     56,761        7,389,715  

Signature Bank

     45,230        5,211,401  

Voya Financial, Inc.1

     158,232        9,729,686  

Western Alliance Bancorp.

     135,458        8,067,878  

Total Financials

        65,204,662  

Health Care - 17.2%

     

Acadia Healthcare Co., Inc.*

     88,572        7,291,247  

Azenta, Inc.

     55,756        3,246,114  
          
Shares
     Value  

Bio-Rad Laboratories, Inc., Class A*

     16,516        $6,944,813  

Catalent, Inc.*

     144,812        6,517,988  

Globus Medical, Inc., Class A*

     111,701        8,296,033  

Halozyme Therapeutics, Inc.*

     122,565        6,973,949  

Hologic, Inc.*

     72,878        5,452,003  

Horizon Therapeutics PLC.*

     117,816        13,407,461  

Integer Holdings Corp.*,1

     75,174        5,146,412  

Intra-Cellular Therapies, Inc.*

     104,835        5,547,868  

Jazz Pharmaceuticals PLC (Ireland)*

     49,042        7,812,881  

Molina Healthcare, Inc.*

     19,972        6,595,154  

Neurocrine Biosciences, Inc.*

     74,284        8,872,481  

Syneos Health, Inc.*

     55,502        2,035,813  

Vericel Corp.*

     120,002        3,160,853  

Total Health Care

        97,301,070  

Industrials - 19.3%

     

Atkore, Inc.*

     57,079        6,473,900  

Booz Allen Hamilton Holding Corp.

     89,243        9,327,678  

Columbus McKinnon Corp.

     139,363        4,525,117  

Comfort Systems USA, Inc.

     65,293        7,513,919  

Exponent, Inc.

     62,901        6,232,860  

Federal Signal Corp.

     173,006        8,039,589  

Gates Industrial Corp. PLC*

     502,820        5,737,176  

Gibraltar Industries, Inc.*

     118,685        5,445,268  

Hexcel Corp.

     107,305        6,314,899  

Ingersoll Rand, Inc.

     191,457        10,003,628  

Lincoln Electric Holdings, Inc.

     51,497        7,440,802  

Nordson Corp.

     42,743        10,160,866  

RBC Bearings, Inc.*

     44,952        9,410,701  

Schneider National, Inc., Class B

     159,069        3,722,215  

The Toro Co.

     74,972        8,486,830  

Total Industrials

        108,835,448  

Information Technology - 13.2%

 

  

Cognex Corp.

     173,369        8,167,414  

CyberArk Software, Ltd. (Israel)*

     49,223        6,381,762  

Entegris, Inc.

     90,824        5,957,146  

Globant SA (Uruguay)*

     46,729        7,857,949  

HubSpot, Inc.*

     25,075        7,249,935  

Manhattan Associates, Inc.*

     88,040        10,688,056  

Paylocity Holding Corp.*

     41,241        8,011,477  

Power Integrations, Inc.

     56,542        4,055,192  

Rapid7, Inc.*

     88,426        3,004,715  

Silicon Laboratories, Inc.*

     48,787        6,618,932  
 

 

 

The accompanying notes are an integral part of these financial statements.

19


   

    

AMG GW&K Small/Mid Cap Fund

Schedule of Portfolio Investments (continued)

 

 

 

     

    

Shares

     Value  

Information Technology - 13.2%
(continued)

     

Zebra Technologies Corp., Class A*

     24,728        $6,340,506  

Total Information Technology

        74,333,084  

Materials - 6.1%

     

AptarGroup, Inc.

     35,988        3,957,960  

Eagle Materials, Inc.

     61,723        8,199,900  

Element Solutions, Inc.

     492,968        8,967,088  

Quaker Chemical Corp.1

     34,374        5,737,021  

RPM International, Inc.

     80,166        7,812,177  

Total Materials

        34,674,146  

Real Estate - 6.4%

     

Agree Realty Corp., REIT

     96,226        6,825,310  

Easterly Government Properties, Inc., REIT 1

     304,612        4,346,813  

EastGroup Properties, Inc., REIT

     38,558        5,708,898  

National Storage Affiliates Trust, REIT

     82,819        2,991,422  

Physicians Realty Trust, REIT

     325,932        4,716,236  

Summit Hotel Properties, Inc., REIT

     457,668        3,304,363  

Sun Communities, Inc., REIT

     57,994        8,293,142  

Total Real Estate

        36,186,184  

Utilities - 2.3%

     

IDACORP, Inc.

     68,498        7,387,509  

Portland General Electric Co.1

     115,069        5,638,381  

Total Utilities

        13,025,890  

Total Common Stocks
(Cost $533,089,996)

        558,498,821  
     Principal
Amount
        

Short-Term Investments - 2.2%

 

  

Joint Repurchase Agreements - 1.7%2

 

  

Cantor Fitzgerald Securities, Inc., dated 12/30/22,due 01/03/23, 4.300% total to be received $2,268,884 (collateralized by various U.S. Government Agency Obligations, 0.000% - 9.000%, 01/15/23 - 11/20/72, totaling $2,313,156)

     $2,267,800        2,267,800  

 

      Principal
Amount
     Value  

Citadel Securities LLC, dated 12/30/22, due 01/03/23, 4.410% total to be received $2,268,911 (collateralized by various U.S. Treasuries, 0.125% - 6.250%, 04/15/23 - 11/15/52, totaling $2,314,289)

     $2,267,800        $2,267,800  

Citigroup Global Markets, Inc., dated 12/30/22,due 01/03/23, 4.250% total to be received $476,555 (collateralized by various U.S. Treasuries, 0.000% - 4.500%, 04/11/23 - 10/31/29, totaling $485,857)

     476,330        476,330  

National Bank Financial, dated 12/30/22, due 01/03/23, 4.340% total to be received $2,268,900 (collateralized by various U.S. Treasuries, 0.000% - 4.435%, 01/03/23 - 09/09/49, totaling $2,313,162)

     2,267,806        2,267,806  

RBC Dominion Securities, Inc., dated 12/30/22,due 01/03/23, 4.300% total to be received $2,268,890 (collateralized by various U.S. Government Agency Obligations, 2.000% - 6.000%, 09/01/24 - 10/20/52, totaling $2,313,162)

     2,267,806        2,267,806  

Total Joint Repurchase Agreements

 

     9,547,542  

Repurchase Agreements - 0.5%

 

  

Fixed Income Clearing Corp., dated 12/30/22 due 01/03/23, 4.150% total to be received $2,762,273 (collateralized by a U.S. Treasury, 0.125%, 01/15/32, totaling $2,816,240)

     2,761,000        2,761,000  

Total Short-Term Investments
(Cost $12,308,542)

        12,308,542  

Total Investments - 101.2%
(Cost $545,398,538)

        570,807,363  

Other Assets, less Liabilities - (1.2)%

 

     (6,653,243

Net Assets - 100.0%

      $ 564,154,120  
 

 

* 

Non-income producing security.

 

1 

Some of these securities, amounting to $29,481,147 or 5.2% of net assets, were out on loan to various borrowers and are collateralized by cash and various U.S. Treasury Obligations. See Note 4 of Notes to Financial Statements.

2 

Cash collateral received for securities lending activity was invested in these joint repurchase agreements.

REIT    Real Estate Investment Trust

 

 

 

The accompanying notes are an integral part of these financial statements.

20


   

    

AMG GW&K Small/Mid Cap Fund

Schedule of Portfolio Investments (continued)

 

 

 

The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2022:

 

     Level 1      Level 2      Level 3      Total  

  Investments in Securities

           

Common Stocks

  

$

558,498,821

 

  

 

 

  

 

 

  

 

$558,498,821

 

Short-Term Investments

           

Joint Repurchase Agreements

            $9,547,542               9,547,542  

Repurchase Agreements

            2,761,000               2,761,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

  Total Investments in Securities

  

$

558,498,821

 

  

$

12,308,542

 

  

 

 

  

$

570,807,363

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

All common stocks held in the Fund are Level 1 securities. For a detailed breakout of common stocks by major industry classification, please refer to the Fund’s Schedule of Portfolio Investments.

For the fiscal year ended December 31, 2022, there were no transfers in or out of Level 3.

 

 

The accompanying notes are an integral part of these financial statements.

21


   

    

AMG GW&K Global Allocation Fund

Portfolio Manager’s Comments (unaudited)

 

 

 

THE YEAR IN REVIEW

 

For the year ended December 31, 2022, AMG GW&K Global Allocation Fund (the “Fund”) Class N shares returned (20.04)%, compared to the (17.22)% return for its blended benchmark which consists of 60% the MSCI All Country World (ACWI) Index (“MSCI ACWI Index”) and 40% the Bloomberg Barclays Global Aggregate Bond Index.

 

ASSET ALLOCATION

 

The asset allocation framework for the Fund continues to favor equities over fixed income. At the end of the year, the equity/fixed income asset allocation stood at 65%/35%, where it has remained since early March 2022. For the full year, the 60% MSCI ACWI Index/40% Barclays Global Aggregate Index benchmark lost (17.22)% following the sharp weakness of equity and bond markets in the first three quarters of 2022. The current very modest tilt toward equities reflects our judgment that global equities should outperform global fixed income over the coming quarters, albeit with significant volatility along the way.

 

The continued tilt toward equities is based on both quantitative and qualitative judgments. First, relative asset-class valuations continue to support a significant allocation to equities, despite the rise in most developed market government bond yields last year. Second, we expect the global economy to continue to expand for the next several years, although recession risks are significant for both the U.S. and Europe. Inflation continues to be a challenge for global central banks, with the U.S. Federal Reserve (the Fed) projecting that it will hike the upper range of the Fed funds rate to 5.25% by the end of this year compared to its current level of 4.5%. With the exception of the Bank of Japan and the People’s Bank of China, most other major central banks are also hiking rates to curb inflation. Rising rates provided headwinds to global equity and bond markets last year. Fortunately, those headwinds appear to be moderating as reflected in softer inflation reports and more resilient growth reports in recent months in both the U.S. and Europe. Notably, recession fears for Europe have started to ease in response to an 80% drop in natural gas prices since last August thanks to warm weather and aggressive efforts to diversify gas supplies away from Russia. China is also expected to post stronger growth this year thanks to policy support and a recent pivot away from extreme COVID suppression measures. In short, we remain cautiously optimistic that the global economy has sufficient momentum to continue to

      

expand despite higher rates and that a positive tailwind of corporate earnings growth should still favor equities over fixed income.

 

A key valuation metric for global equities is the Long-term Earnings Yield MSCI ACWI. That stood at 5.1% at the end of 2022, and is based on the inverse of the corresponding Shiller Price/Earning (PE) ratio of 19.6 times. By way of comparison, the Long-term Earnings Yield of MSCI ACWI has averaged 5.1% since 2005, corresponding to an average Shiller PE ratio of 19.8 times. Those figures suggest that equities fairly valued relative to their own history.

 

For asset allocation purposes, however, a relevant comparison of the Long-term Earnings Yield is to the real yield of U.S. Treasuries. At the end of September, the yield on 10-Year US Treasury Inflation-Protected Securities (TIPS) stood at 1.6%. The gap between the Long-term Earnings Yield of 5.1 for global equities and 1.6% for TIPS securities suggests the potential for global equities to outperform bonds by about 3.5% per annum in inflation-adjusted terms over the next five-to-ten years.

 

In short, investors continue to have reasonable incentive to favor equities over fixed income, notwithstanding the potential for greater volatility in equities. Key risks would be if the ongoing expansion that is evident in global economic data gives way to pronounced weakness or if major central banks significantly accelerate their rate hiking agendas beyond what is currently priced into markets. Those risks will be monitored carefully, but we currently view such risks to be sufficiently discounted by markets to justify a significant tilt toward equities.

 

EQUITY

 

It was a disappointing year for global equity markets as Russia invaded Ukraine amid a challenging inflationary backdrop and the long-awaited liftoff in U.S. interest rates. Markets finished off the lows, however, thanks to a fourth-quarter rally prompted by softer inflation readings in several countries, receding energy shortage fears in Europe, and the abrupt end to China’s zero-COVID policy. The MSCI ACWI Index declined (18.4)%, with all regions down on the year. Sector performance was broadly negative, aside from energy which rose sharply on surging crude oil and gas prices. The U.S. dollar gained 7.9%, as the Fed aggressively tightened monetary policy.

 

The Fund’s equity sleeve underperformed the benchmark during the year. Stock selection in the health care and information technology (IT) sectors

      

were main detractors, along with an overweight allocation to the underperforming consumer discretionary sector, though strong stock selection more than offset this allocation impact. Two U.S. holdings were the main culprits within health care. Avantor, Inc., a Biopharma and healthcare supplier, was plagued by some headwinds that are non-core to their fundamentals such as China lockdowns, foreign currency headwinds, and fading COVID tailwinds. IDEXX Laboratories, Inc., a leader in companion animal health diagnostics, experienced slowing growth against tough comparisons and its relatively high multiple contracted due to higher U.S. interest rates. Within technology two European holdings and one U.S. were the main detractors. Payment processing companies Adyen N.V. (Netherlands) and PayPal, Inc. (U.S.) were victims of the selloff in high multiple growth stocks, and in the case of Paypal disappointing earnings results also weighed on the stock. Paypal was sold during the period. Halma PLC (UK), a company focused on safety and environmental products, returned (45)% despite reporting solid results throughout the year.

 

Consumer discretionary was by far the top contributing sector, due entirely to stock selection, mostly in China. Trip.com Group Ltd., Yum China Holding, Inc. and H World Group Ltd. all rallied towards the end of the year as the market began to price in the benefits these travel and restaurant-oriented companies will enjoy as China moves away from a zero-COVID policy and begins to reopen their economy.

 

On a geographic level, Asia, most notably China, was the equity sleeve’s top regional contributor due entirely to stock selection, (key contributors noted above) while the overweight allocation was a very modest drag. India also contributed to results, due to a combination of allocation and security selection; the Indian market held up well with only an (8.0)% decline and the Fund’s holdings delivered a positive return of 3%.

 

Western Europe and North America were the two biggest detractors. In addition to the detractors mentioned above Infineon Technologies AG (Germany) and Goosehead Insurance, Inc. (U.S.) were also weak. Goosehead was sold during the period. Semiconductor stocks in general were weak on concerns related to excess inventory from over ordering while higher rates impacted the homeowners and auto insurance business at Goosehead.

 

 

22


   

    

AMG GW&K Global Allocation Fund

Portfolio Manager’s Comments (continued)

 

 

 

“The only function of economic forecasting is to make astrology look respectable.” This quote is attributed to Ezra Solomon in a 1985 Readers’ Digest piece, as noted by Bloomberg in “What Will Happen in 2023: All the Latest Predictions for Next Year.” The same can obviously be said for market forecasting, so we will refrain from making any bold 2023 predictions. Strategists’ views vary, but many are calling for relatively better results in Asia thanks to China’s zero-COVID pivot and renewed focus on economic expansion, a mild economic and earnings recession in the U.S., and a demanding year for Europe, which is still facing energy security risks but should also benefit from policy changes in China. What we do know is that equities have proven resilient over the long-term, despite some notable bouts of macro weakness and market volatility. Regardless of how the numerous forecasts play out this year, our focus will remain on finding good companies that can adeptly manage various business cycles, particularly those that are the most challenging.

 

FIXED INCOME

 

For 2022, the fixed income sleeve finished ahead of its benchmark. Currency effect was the largest positive contributor to relative performance as the

      

Fund’s holdings are primarily dollar-denominated during a period when the dollar depreciated. Our overweight to U.S. rates was the largest detractor for the year amid the sharp selloff in U.S. rates. Our overweight to U.S. markets and overweight to spread product also detracted. This was somewhat offset by our overweight to higher coupon mortgage-backed securities (MBS) within securitized as well as our allocation and selection within Government-Related. Security selection within corporates had minimal impact.

 

The disconnect between the Fed’s projections and market pricing has widened following the most recent Summary of Economic Projections (SEP). The median estimate of Federal Open Market Committee (FOMC) participants for the overnight rate at the end of 2023 is 5.125%, up from 4.625% in September; the Fed funds futures market sees a terminal rate of nearly 5.00% in June of 2023 and then two cuts by year end. There has also been a small but not insignificant chorus of economists calling for the FOMC to raise its target inflation to 3% from 2%, prompting objections that this would undermine the Fed’s hard-earned credibility. These are just two sources of tension in the rates market, and their resolution could have significant implications for both the level and the shape of the yield curve. We

      

don’t believe investors are being sufficiently compensated for these risks. Our fundamental view of credit is broadly constructive, and we believe balance sheets in general are sound and liquidity is sufficient. But we recognize the potential for macroeconomic forces to alter this landscape and we don’t believe all these risks are adequately reflected in valuations. Within the space, we see the best value at the front end, where higher quality credits in less rate-sensitive sectors offer attractive yields and compelling breakevens. We have also been able to identify names that we believe can improve their credit profiles independently of a challenging macro backdrop. In the mortgage sector, we believe the benefits of lower originations and potentially lower rate volatility are offset by event risks surrounding quantitative tightening and middling spread levels.

 

The views expressed represent the opinions of GW&K Investment Management, LLC as of December 31, 2022, and are not intended as a forecast or guarantee of future results, and are subject to change without notice.

 

 

23


    

AMG GW&K Global Allocation Fund

Portfolio Manager’s Comments (continued)

 

 

 

CUMULATIVE TOTAL RETURN PERFORMANCE

AMG GW&K Global Allocation Fund’s cumulative total return is based on the daily change in net asset value (NAV), and assumes that all dividends and distributions were reinvested. The graph compares a hypothetical $10,000 investment made in the AMG GW&K Global Allocation Fund’s Class N shares on December 31, 2012, to a $10,000 investment made in the 60% MSCI ACWI/40% Bloomberg Global Aggregate Bond Index for the same time period. The graph and table do not reflect the deduction of taxes that a shareholder would pay on a Fund distribution or redemption of shares. The listed returns for the Fund are net of expenses and the returns for the indexes exclude expenses. Total returns would have been lower had certain expenses not been reduced.

 

LOGO

The table below shows the average annual total returns for the AMG GW&K Global Allocation Fund and the 60% MSCI ACWI/40% Bloomberg Global Aggregate Bond Index for the same time periods ended December 31, 2022.

 

     One   Five   Ten
  Average Annual Total Returns1    Year   Years   Years

AMG GW&K Global Allocation Fund2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12

Class N

   (20.04%)   2.04%   5.79%

Class I

   (19.91%)   2.20%   5.97%

Class Z

   (19.85%)   2.30%   6.06%

60% MSCI ACWI/40% Bloomberg Global Aggregate Bond Index13, 14

   (17.22%)   2.79%   4.81%

MSCI ACWI Index 13

   (18.36%)   5.23%   7.98%

Bloomberg Global Aggregate Bond Index14

   (16.25%)   (1.66%)   (0.44%)

The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

 

Investors should carefully consider the Fund’s investment objectives, risks, charges and expenses before investing. For performance information through the most recent month end, current net asset values per share for the Fund and other information, please call 800.548.4539 or visit our website at amgfunds.com for a free prospectus. Read it carefully before investing or sending money.

Distributed by AMG Distributors, Inc., member FINRA/SIPC.

 

1 

Total return equals income yield plus share price change and assumes reinvestment of all dividends and capital gain distributions. Returns are net of fees and may reflect offsets of Fund expenses as described in the prospectus. No adjustment has been made for taxes payable by shareholders on their reinvested dividends and capital gain

distributions. Returns for periods greater than one year are annualized. The listed returns on the Fund are net of expenses and based on the published NAV as of December 31, 2022. All returns are in U.S. Dollars ($).

 

2  From time to time, the Fund’s investment manager has waived its fees and/or absorbed Fund expenses, which has resulted in higher returns.

 

3  As of April 17, 2020, the Fund’s subadvisor was changed to GW&K Investment Management, LLC. Prior to April 17, 2020, the Fund was known as the AMG Chicago Equity Partners Balanced Fund, and had different principal investment strategies and corresponding risks. Performance shown for periods prior to April 17, 2020 reflects the performance and investment strategies of the Fund’s previous subadvisor, Chicago Equity Partners, LLC. The Fund’s past performance would have been different if the Fund were managed by the current subadvisor and strategy, and the Fund’s prior performance record might be less pertinent for investors considering whether to purchase shares of the Fund.

 

4  To the extent that the Fund invests in asset-backed or mortgage-backed securities, its exposure to prepayment and extension risks may be greater than investments in other fixed income securities.

 

5  The Fund is subject to the risks associated with investments in debt securities, such as default risk and fluctuations in the perception of the debtor’s ability to pay its creditors. Changing interest rates may adversely affect the value of an investment. An increase in interest rates typically causes the value of bonds and other fixed income securities to fall.

 

6  The Fund invests in value stocks, which may perform differently from the market as a whole and may be undervalued by the market for a long period of time.

 

7  Investments in international securities are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. These risks are magnified in emerging markets.

 

8  The Fund is subject to the risks associated with investments in emerging markets, such as erratic earnings patterns, economic and political instability, changing exchange controls, limitations on repatriation of foreign capital and changes in local governmental attitudes toward private investment, possibly leading to nationalization or confiscation of investor assets.

 

9  The Fund invests in growth stocks, which may be more sensitive to market movements because their prices tend to reflect future investor expectations rather than just current profits. Growth stocks may underperform value stocks during given periods.

 

 

 

24


   

    

AMG GW&K Global Allocation Fund

Portfolio Manager’s Comments (continued)

 

 

 

10 Market prices of investments held by the Fund may fall rapidly or unpredictably due to a variety of economic or political factors, market conditions, disasters or public health issues, or in response to events that affect particular industries or companies.

 

11 The Fund’s investments may not be allocated in the best performing asset classes.

 

12 The Fund is subject to currency risk resulting from fluctuations in exchange rates that may affect the total loss or gain on a non-U.S. Dollar investment when converted back to U.S. Dollars.

 

13 The MSCI All Country World Index (ACWI) is a free-float adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. Please go to msci.com for most current list of countries represented by the Index. Unlike the Fund, the ACWI is unmanaged, is not available for investment and does not incur expenses.

  

14 The Bloomberg Global Aggregate Bond Index provides a broad-based measure of the global investment-grade fixed income markets. The three major components of this index are the U.S. Aggregate, the Pan-European Aggregate, and the Asian-Pacific Aggregate Indices. The Index also includes Eurodollar and Euro-Yen corporate bonds, Canadian government, agency and corporate securities, and USD investment grade 144A securities. Unlike the Fund, the Bloomberg Global Aggregate Bond Index is unmanaged, is not available for investment and does not incur expenses.

 

All MSCI data is provided “as is”. The products described herein are not sponsored or endorsed and have not been reviewed or passed on by MSCI. In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind in connection with the MSCI data or the products described herein. Copying or redistributing the MSCI data is strictly prohibited. All holdings and sector/region allocations are subject to review and adjustment in accordance

  

with the Portfolio’s investment strategy and may vary in the future, and should not be considered recommendations to buy or sell any security.

 

“Bloomberg®” and any Bloomberg index described herein are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by AMG Funds LLC. Bloomberg is not affiliated with AMG Funds LLC, and Bloomberg does not approve, endorse, review, or recommend the fund described herein. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to such fund.

 

Not FDIC insured, nor bank guaranteed. May lose value.

 

 

25


   

AMG GW&K Global Allocation Fund

Fund Snapshots (unaudited)

December 31, 2022

 

 

PORTFOLIO BREAKDOWN

 

    Sector    % of 
Net Assets 
 

Consumer Discretionary

   15.1
 

Industrials

   14.5
 

U.S. Government and Agency Obligations

   13.3
 

Information Technology

   13.2
 

Financials

   10.4
 

Health Care

     9.3
 

Foreign Government Obligations

     8.1
 

Energy

     4.4
 

Communication Services

     3.6
 

Utilities

     2.8
 

Real Estate

     1.9
 

Municipal Bonds

     0.9
 

Short-Term Investments

     4.4
 

Other Assets, less Liabilities

     (1.9)

 

TOP TEN HOLDINGS

 

    Security Name   % of 
Net Assets 
 

UnitedHealth Group, Inc.

  3.7
 

The Charles Schwab Corp.

  2.9
 

Hess Corp.

  2.6
 

AIA Group, Ltd. (Hong Kong)

  2.4
 

NextEra Energy, Inc.

  2.3
 

Infineon Technologies AG (Germany)

  2.3
 

HDFC Bank, Ltd., ADR (India)

  2.2
 

H World Group Ltd., ADR (China)

  2.2
 

STERIS PLC

  2.2
 

Yum China Holdings, Inc. (China)

  2.1
   

 

 

Top Ten as a Group

  24.9
 

 

 

 

    Rating   % of Market Value1
 

U.S. Government and Agency Obligations

      39.2
 

Aaa/AAA

      13.6
 

Aa/AA

      14.5
 

A

      3.0
 

Baa/BBB

      19.6
 

Ba/BB

      9.1
 

B

      1.0
 

 

1 

Includes market value of long-term fixed-income securities only.

 

Credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”), Moody’s Investors Service, Inc. (“Moody’s”) or Fitch. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB- or higher. Below investment grade ratings are credit ratings of BB+ or lower. Investments designated N/R are not rated by any of the rating agencies. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

Because a fund’s strategy may result in multiple investments in particular sectors of the economy, its performance may depend on the performance of those sectors and may fluctuate more widely than investments diversified across more sectors. For additional information on these and other risk considerations, please see the Fund’s prospectus.

Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.

 

 

26


   

AMG GW&K Global Allocation Fund

Schedule of Portfolio Investments

December 31, 2022

 

 

 

      Shares      Value  

Common Stocks - 63.6%

     

Communication Services - 3.6%

 

  

Alphabet, Inc., Class A*

     9,520        $839,950  

Tencent Holdings, Ltd. (China)

     14,600        619,045  

Total Communication Services

        1,458,995  

Consumer Discretionary - 15.1%

 

  

Alibaba Group Holding, Ltd. (China)*

     52,500        576,078  

Amazon.com, Inc.*

     6,633        557,172  

H World Group Ltd., ADR (China)

     21,035        892,305  

JD.com, Inc., Class A (China)

     880        24,567  

LVMH Moet Hennessy Louis Vuitton SE (France)

     919        668,750  

MakeMyTrip, Ltd. (India)*

     30,251        834,020  

Moncler SpA (Italy)1

     12,596        669,312  

Sands China, Ltd. (Macau)*

     85,600        280,788  

Trip.com Group, Ltd. (China)*

     24,100        831,199  

Yum China Holdings, Inc. (China)

     15,700        876,686  

Total Consumer Discretionary

        6,210,877  

Energy - 4.4%

 

  

Canadian Natural Resources, Ltd. (Canada)1

     13,046        724,467  

Hess Corp.

     7,620        1,080,669  

Total Energy

        1,805,136  

Financials - 7.5%

 

  

AIA Group, Ltd. (Hong Kong)

     88,500        977,340  

The Charles Schwab Corp.

     14,103        1,174,216  

HDFC Bank, Ltd., ADR (India)

     13,494        923,125  

Total Financials

        3,074,681  

Health Care - 9.3%

 

  

Avantor, Inc.*

     32,300        681,207  

IDEXX Laboratories, Inc.*

     1,763        719,233  

STERIS PLC

     4,807        887,805  

UnitedHealth Group, Inc.

     2,881        1,527,449  

Total Health Care

        3,815,694  

Industrials - 6.2%

 

  

Casella Waste Systems, Inc., Class A*

     8,807        698,483  

MISUMI Group, Inc. (Japan)

     30,650        666,157  

TransDigm Group, Inc.

     964        606,982  

Union Pacific Corp.

     2,800        579,796  

Total Industrials

        2,551,418  

Information Technology - 13.2%

 

  

Adyen, N.V. (Netherlands)*,2

     518        719,113  

Black Knight, Inc.*

     11,918        735,937  

Halma PLC (United Kingdom)

     28,111        669,462  

Infineon Technologies AG (Germany)

     30,707        933,245  
      Shares      Value  

Mastercard, Inc., Class A

     2,503        $870,368  

Microsoft Corp.

     3,361        806,035  

Taiwan Semiconductor Manufacturing Co., Ltd. ADR, Sponsored ADR (Taiwan)

     9,221        686,872  

Total Information Technology

        5,421,032  

Real Estate - 1.9%

 

  

American Tower Corp., REIT

     3,725        789,179  

Utilities - 2.4%

     

NextEra Energy, Inc.

     11,509        962,152  

Total Common Stocks
(Cost $20,256,428)

        26,089,164  
     Principal
Amount
        

Corporate Bonds and Notes - 11.6%

 

  

Financials - 2.9%

 

  

AerCap Ireland Capital DAC/AerCap Global Aviation Trust (Ireland) 1.650%, 10/29/24

     $280,000        258,272  

Aircastle, Ltd. (Bermuda)
5.250%, 08/11/252

     91,000        87,518  

American Tower Corp.
2.750%, 01/15/27

     160,000        145,042  

Bank of America Corp.

     

MTN, (4.330% to 03/15/49 then 3 month LIBOR + 1.520%), 4.330%, 03/15/503,4

     50,000        41,009  

Citigroup, Inc.

     

(3.875% to 02/18/26 then U.S. Treasury Yield Curve CMT 5 year + 3.417%), 3.875%, 02/18/263,4,5

     85,000        72,463  

First-Citizens Bank & Trust Co.

     

6.125%, 03/09/28

     78,000        79,269  

Landwirtschaftliche Rentenbank, EMTN (Germany)

     

1.750%, 01/14/27

     175,000        159,095  

MetLife, Inc.

     

Series G, (3.850% to 09/15/25 then U.S. Treasury Yield Curve CMT 5 year + 3.576%), 3.850%, 09/15/251,3,4,5

     163,000        151,386  

SBA Communications Corp.

     

3.875%, 02/15/27

     52,000        46,983  

Sprint Capital Corp.

     

6.875%, 11/15/28

     60,000        62,276  

Truist Financial Corp.

     

Series N, (4.800% to 09/01/24 then U.S. Treasury Yield Curve CMT 5 year + 3.003%), 4.800%, 09/01/243,4,5

     106,000        95,427  

Total Financials

        1,198,740  

Industrials - 8.3%

     

AECOM

     

5.125%, 03/15/27

     56,000        53,900  
 

 

 

The accompanying notes are an integral part of these financial statements.

27


   

    

AMG GW&K Global Allocation Fund

Schedule of Portfolio Investments (continued)

 

 

 

      Principal
Amount
     Value  

Industrials - 8.3% (continued)

     

Alcoa Nederland Holding, B.V. (Netherlands)

     

4.125%, 03/31/292

     $200,000        $177,432  

Amazon.com, Inc.

     

4.600%, 12/01/251

     123,000        122,697  

Anheuser-Busch InBev Worldwide, Inc.

     

4.375%, 04/15/38

     72,000        64,362  

Ardagh Metal Packaging Finance USA LLC/Ardagh Metal Packaging Finance PLC

     

3.250%, 09/01/281,2

     185,000        157,147  

AT&T, Inc.

     

4.300%, 12/15/42

     96,000        78,758  

Ball Corp.

     

4.875%, 03/15/26

     71,000        68,773  

The Boeing Co.

     

5.805%, 05/01/50

     32,000        29,670  

Callon Petroleum Co.

     

6.375%, 07/01/26

     147,000        137,011  

Centene Corp.

     

2.500%, 03/01/31

     51,000        39,906  

3.375%, 02/15/301

     39,000        32,969  

Cisco Systems, Inc.

     

5.500%, 01/15/40

     58,000        60,355  

Cogent Communications Group, Inc.

     

3.500%, 05/01/262

     68,000        61,774  

Crown Americas LLC/Crown Americas Capital Corp. V

     

4.250%, 09/30/261

     54,000        51,493  

Dell, Inc.

     

7.100%, 04/15/28

     65,000        69,313  

Delta Air Lines, Inc.

     

7.375%, 01/15/261

     70,000        71,522  

Embraer Netherlands Finance BV (Netherlands)

     

5.050%, 06/15/25

     135,000        131,019  

HB Fuller Co.

     

4.250%, 10/15/28

     74,000        65,490  

HCA, Inc.

     

3.500%, 09/01/30

     67,000        57,786  

KB Home

     

4.000%, 06/15/311

     48,000        38,585  

Kinder Morgan, Inc.

     

4.300%, 06/01/25

     146,000        143,180  

Kraft Heinz Foods Co.

     

4.375%, 06/01/46

     71,000        57,695  

Lamar Media Corp.

     

3.750%, 02/15/28

     64,000        57,287  

MEG Energy Corp. (Canada)

     

5.875%, 02/01/292

     52,000        49,037  

Microsoft Corp.

     

2.525%, 06/01/50

     55,000        36,193  
      Principal
Amount
     Value  

Murphy Oil Corp.

     

6.375%, 07/15/281

     $90,000        $86,629  

Murphy Oil USA, Inc.

     

5.625%, 05/01/27

     57,000        55,348  

Nestle Holdings, Inc.

     

1.000%, 09/15/272

     275,000        232,986  

Newell Brands, Inc.

     

4.450%, 04/01/266

     64,000        60,211  

NuStar Logistics LP

     

5.750%, 10/01/25

     80,000        76,907  

Oracle Corp.

     

2.800%, 04/01/27

     161,000        146,509  

Pernod Ricard International Finance LLC

     

1.250%, 04/01/282

     250,000        206,300  

Silgan Holdings, Inc.

     

4.125%, 02/01/28

     69,000        63,836  

SK Hynix, Inc. (South Korea)

     

2.375%, 01/19/312

     200,000        146,633  

Smith & Nephew PLC (United Kingdom)

     

2.032%, 10/14/301

     107,000        83,634  

Teva Pharmaceutical Finance Netherlands III, B.V. (Netherlands)

     

3.150%, 10/01/26

     69,000        60,340  

Travel + Leisure Co.

     

5.650%, 04/01/246

     56,000        55,157  

United Rentals North America, Inc.

     

3.875%, 02/15/31

     56,000        46,944  

Verizon Communications, Inc.

     

3.875%, 02/08/291

     54,000        50,666  

Walmart, Inc.

     

4.050%, 06/29/48

     50,000        44,373  

Western Digital Corp.

     

4.750%, 02/15/26

     48,000        45,203  

Yum! Brands, Inc.

     

3.625%, 03/15/31

     43,000        36,055  

Total Industrials

        3,411,085  

Utilities - 0.4%

     

Dominion Energy, Inc.

     

Series B, (4.650% to 12/15/24 then U.S. Treasury Yield Curve CMT 5 year + 2.993%), 4.650%, 12/15/243,4,5

     131,000        114,625  

Northern States Power Co.

     

2.900%, 03/01/50

     63,000        43,090  

Total Utilities

        157,715  

Total Corporate Bonds and Notes
(Cost $5,417,510)

        4,767,540  

Municipal Bonds - 0.9%

     

California State General Obligation, School Improvements Build America Bonds, 7.550%, 04/01/39

     60,000        75,098  
 

 

 

The accompanying notes are an integral part of these financial statements.

28


   

    

AMG GW&K Global Allocation Fund

Schedule of Portfolio Investments (continued)

 

 

 

      Principal
Amount
     Value  

Municipal Bonds - 0.9% (continued)

 

  

JobsOhio Beverage System

     

Series B, 4.532%, 01/01/35

     $130,000        $125,402  

Los Angeles Unified School District, School Improvements

     

5.750%, 07/01/34

     85,000        88,789  

New Jersey Transportation Trust Fund Authority

     

Series C, 5.754%, 12/15/28

     90,000        90,672  

Total Municipal Bonds
(Cost $460,225)

        379,961  

U.S. Government and Agency Obligations - 13.3%

 

  

Fannie Mae - 4.5%

 

  

FNMA

     

3.000%, 10/01/37 to 01/01/38

     179,589        166,640  

4.000%, 11/01/44 to 02/01/50

     636,758        608,622  

4.500%, 09/01/46 to 02/01/49

     365,321        360,970  

5.000%, 08/01/49

     259,414        261,108  

5.500%, 02/01/37

     4,970        5,074  

FNMA Pool

     

3.500%, 05/01/52

     479,755        442,829  

Total Fannie Mae

        1,845,243  

Freddie Mac - 0.8%

     

FHLMC Gold Pool

     

3.000%, 02/01/38

     74,068        68,330  

FHLMC Pool

     

4.500%, 07/01/44

     253,776        249,489  

Total Freddie Mac

        317,819  

U.S. Treasury Obligations - 8.0%

     

U.S. Treasury Bonds

     

2.250%, 05/15/41 to 02/15/52

     881,000        618,952  

3.000%, 11/15/44 to 02/15/49

     431,000        355,205  

4.375%, 02/15/38

     527,000        551,765  

4.500%, 08/15/39

     492,000        521,693  

U.S. Treasury Notes

     

1.500%, 02/15/30

     448,000        381,780  

2.250%, 02/15/27

     364,000        338,733  

2.875%, 05/15/32

     590,000        543,722  

Total U.S. Treasury Obligations

        3,311,850  

Total U.S. Government and Agency Obligations
(Cost $5,875,460)

        5,474,912  

Foreign Government Obligations - 8.1%

 

  

African Development Bank
(Côte d’Ivoire) Series GDIF

     

0.875%, 03/23/261

     135,000        120,715  

Agence Francaise de Developpement (France)

     

0.625%, 01/22/26

     200,000        177,890  

Asian Development Bank (Philippines)

     

1.750%, 09/19/29

     165,000        142,006  

BNG Bank, N.V. (Netherlands)

     

0.875%, 05/18/262

     200,000        177,581  
      Principal
Amount
     Value  

European Investment Bank (Luxembourg)

     

0.625%, 10/21/271

     $122,000        $103,484  

Finland Government International Bond (Finland)

     

0.875%, 05/20/302

     200,000        158,490  

Inter-American Development Bank

     

4.375%, 01/24/44

     310,000        303,541  

International Bank for Reconstruction & Development

     

Series GDIF

     

3.125%, 11/20/25

     275,000        265,672  

International Finance Corp.

     

2.125%, 04/07/26

     160,000        149,412  

Japan Finance Organization for Municipalities (Japan)

     

1.000%, 05/21/252

     300,000        274,041  

Kingdom of Belgium Government International Bond (Belgium)

     

1.000%, 05/28/30

     200,000        159,139  

Kommunalbanken A.S. (Norway)

     

1.125%, 10/26/262

     200,000        177,125  

The Korea Development Bank (South Korea)

     

0.500%, 10/27/23

     299,000        288,791  

1.375%, 04/25/27

     200,000        172,906  

Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden, N.V. (Netherlands)

     

0.875%, 06/15/26

     300,000        265,733  

Philippine Government International Bond (Philippines)

     

1.648%, 06/10/31

     200,000        159,535  

Province of Ontario Canada (Canada)

     

1.050%, 05/21/271

     151,000        130,918  

Province of Quebec Canada (Canada)

     

1.350%, 05/28/30

     123,000        99,634  

Total Foreign Government Obligations
(Cost $3,847,388)

        3,326,613  

Short-Term Investments - 4.4%

 

  

Joint Repurchase Agreements - 3.4%7

 

  

National Bank Financial, dated 12/30/22, due 01/03/23, 4.340% total to be received $1,000,482 (collateralized by various U.S. Treasuries, 0.000% - 4.435%, 01/03/23 - 09/09/49, totaling $1,020,000)

     1,000,000        1,000,000  

Nomura Securities International, Inc., dated 12/30/22, due 01/03/23, 4.300% total to be received $405,232 (collateralized by various U.S. Government Agency Obligations, 1.973% - 9.000%, 02/01/23 - 07/01/60, totaling $413,139)

     405,038        405,038  

Total Joint Repurchase Agreements

        1,405,038  
 

 

 

The accompanying notes are an integral part of these financial statements.

29


   

    

AMG GW&K Global Allocation Fund

Schedule of Portfolio Investments (continued)

 

 

 

      Principal
Amount
     Value  

Repurchase Agreements - 1.0%

 

  

Fixed Income Clearing Corp., dated 12/30/22 due 01/03/23, 4.150% total to be received $381,176 (collateralized by a U.S. Treasury, 0.125%, 01/15/32, totaling $388,645)

     $381,000        $381,000  

Total Short-Term Investments
(Cost $1,786,038)

        1,786,038  
          
    
     Value  

Total Investments - 101.9%
(Cost $37,643,049)

      $ 41,824,228  

Other Assets, less Liabilities - (1.9)%

 

     (775,084

Net Assets - 100.0%

      $ 41,049,144  
 

 

* 

Non-income producing security.

 

1 

Some of these securities, amounting to $1,896,239 or 4.6% of net assets, were out on loan to various borrowers and are collateralized by cash and various U.S. Treasury Obligations. See Note 4 of Notes to Financial Statements.

 

2 

Security exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2022, the value of these securities amounted to $2,625,177 or 6.4% of net assets.

 

3 

Fixed to variable rate investment. The rate shown reflects the fixed rate in effect at December 31, 2022. Rate will reset at a future date.

 

4 

Variable rate security. The rate shown is based on the latest available information as of December 31, 2022. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description above.

5 

Perpetuity Bond. The date shown represents the next call date.

 

6 

Step Bond: A debt instrument with either deferred interest payments or an interest rate that resets at specific times during its term.

 

7 

Cash collateral received for securities lending activity was invested in these joint repurchase agreements.

 

ADR   American Depositary Receipt
CMT   Constant Maturity Treasury
EMTN   European Medium Term Note
FHLMC   Freddie Mac
FNMA   Fannie Mae
LIBOR   London Interbank Offered Rate
MTN   Medium-Term Note
REIT   Real Estate Investment Trust
 

 

 

The accompanying notes are an integral part of these financial statements.

30


   

    

AMG GW&K Global Allocation Fund

Schedule of Portfolio Investments (continued)

 

 

 

The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2022:

 

     Level 1      Level 21      Level 3      Total  

  Investments in Securities

           

Common Stocks

           

Consumer Discretionary

   $ 2,283,497      $ 3,927,380             $ 6,210,877  

Information Technology

     3,099,212        2,321,820               5,421,032  

Health Care

     3,815,694                      3,815,694  

Financials

     2,097,341        977,340               3,074,681  

Industrials

     1,885,261        666,157               2,551,418  

Energy

     1,805,136                      1,805,136  

Communication Services

     839,950        619,045               1,458,995  

Utilities

     962,152                      962,152  

Real Estate

     789,179                      789,179  

Corporate Bonds and Notes

  

 

 

  

 

4,767,540

 

  

 

 

  

 

4,767,540

 

Municipal Bonds

  

 

 

  

 

379,961

 

  

 

 

  

 

379,961

 

U.S. Government and Agency Obligations

  

 

 

  

 

5,474,912

 

  

 

 

  

 

5,474,912

 

Foreign Government Obligations

  

 

 

  

 

3,326,613

 

  

 

 

  

 

3,326,613

 

Short-Term Investments

           

Joint Repurchase Agreements

            1,405,038               1,405,038  

Repurchase Agreements

            381,000               381,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

  Total Investments in Securities

  

$

17,577,422

 

  

$

24,246,806

 

  

 

 

  

$

41,824,228

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

All corporate bonds and notes, municipal bonds, U.S. government and agency obligations, and foreign government obligations held in the Fund are Level 2 securities. For a detailed breakout of corporate bonds and notes, municipal bonds, U.S. government and agency obligations and foreign government obligations by major industry or agency classification, please refer to the Fund’s Schedule of Portfolio Investments.

 

1 

An external pricing service is used to reflect any impact on security value due to market movements between the time the Fund valued such foreign securities and the earlier closing of foreign markets.

For the fiscal year ended December 31, 2022, there were no transfers in or out of Level 3.

 

 

The accompanying notes are an integral part of these financial statements.

31


   

    

AMG GW&K Global Allocation Fund

Schedule of Portfolio Investments (continued)

 

 

 

The country allocation in the Schedule of Portfolio Investments at December 31, 2022, was as follows:

 

 Country    % of Long-Term
Investments

 Belgium

     0.4

 Bermuda

     0.2

 Canada

     2.5

 China

     9.5

 Côte d’Ivoire

     0.3

 Finland

     0.4

 France

     2.1

 Germany

     2.7

 Hong Kong

     2.4

 India

     4.4

 Ireland

     0.7

 Italy

     1.7

 Japan

     2.4

 Luxembourg

     0.3

 Macau

     0.7

 Netherlands

     3.8

 Norway

     0.4

 Philippines

     0.8

 South Korea

     1.5

 Taiwan

     1.7

 United Kingdom

     1.9

 United States

   59.2
  

 

     100.0
  

 

 

 

 

The accompanying notes are an integral part of these financial statements.

32


   

 

    

Statement of Assets and Liabilities

December 31, 2022

 

 

 

    AMG
GW&K Small Cap
Core Fund
  AMG
GW&K Small Cap
Value Fund
  AMG
GW&K Small/Mid
Cap Fund
  AMG
GW&K Global
Allocation Fund

 Assets:

               

 Investments at value1 (including securities on loan valued at $30,453,990, $18,116,821, $29,481,147, and $1,896,239, respectively)

      $662,032,642       $259,512,810       $570,807,363       $41,824,228  

 Cash

      961       158,555       822       560,926  

 Foreign currency2

                        1,137  

 Receivable for investments sold

      1,041,005             2,991,862       —  

 Dividend and interest receivables

      485,336       303,916       341,432       168,814  

 Securities lending income receivable

      1,793       1,503       2,896       311  

 Receivable for Fund shares sold

      231,184       718,134       636,432       396  

 Receivable from affiliate

      3,302       5,075       11,869       10,081  

 Prepaid expenses and other assets

     

 

18,759

 

 

     

 

12,180

 

 

     

 

29,483

 

 

     

 

18,146  

 

 

 Total assets

      663,814,982       260,712,173       574,822,159       42,584,039  

 Liabilities:

               

 Payable upon return of securities loaned

      2,248,782       8,433,852       9,547,542       1,405,038  

 Payable for Fund shares repurchased

      405,537       55,818       620,970       27,635  

 Accrued expenses:

                    

 Investment advisory and management fees

      401,608       153,241       303,527       21,941  

 Administrative fees

      86,059       32,837       73,434       5,485  

 Distribution fees

      1,854             11,222       5,188  

 Shareholder service fees

      19,953       38,776       10,869       —  

 Other

     

 

111,074

 

 

     

 

86,343

 

 

     

 

100,475

 

 

     

 

69,608  

 

 

 Total liabilities

      3,274,867       8,800,867       10,668,039       1,534,895  

 

                    

  Net Assets

      $660,540,115       $251,911,306       $564,154,120       $41,049,144  

  1 Investments at cost

      $547,529,285       $235,343,569       $545,398,538       $37,643,049  

  2 Foreign currency at cost

                        $1,044  

 

 

The accompanying notes are an integral part of these financial statements.

33


   

    

    

Statement of Assets and Liabilities (continued)

 

 

 

     AMG
GW&K Small Cap
Core Fund
  AMG
GW&K Small Cap
Value Fund
   AMG
GW&K Small/Mid
Cap Fund
   AMG
GW&K Global
Allocation Fund

  Net Assets Represent:

                  

  Paid-in capital

       $546,247,805          $226,581,215        $544,114,477        $36,512,353   

  Total distributable earnings

       114,292,310       25,330,091        20,039,643        4,536,791

  Net Assets

       $660,540,115       $251,911,306        $564,154,120        $41,049,144

  Class N:

                  

  Net Assets

       $8,532,923       $162,010,756        $51,332,648        $23,430,255

  Shares outstanding

       311,060       6,297,767        3,417,086        1,681,604

  Net asset value, offering and redemption price per share

       $27.43       $25.73        $15.02        $13.93

  Class I:

                  

  Net Assets

       $433,065,845       $81,318,785        $250,023,584        $16,074,200

  Shares outstanding

       15,335,387       3,165,246        16,585,463        1,136,656

  Net asset value, offering and redemption price per share

       $28.24       $25.69        $15.07        $14.14

  Class Z:

                  

  Net Assets

       $218,941,347       $8,581,765        $262,797,888        $1,544,689

  Shares outstanding

       7,747,166       335,369        17,404,458        109,324

  Net asset value, offering and redemption price per share

       $28.26       $25.59        $15.10        $14.13

 

 

The accompanying notes are an integral part of these financial statements.

34


   

    

Statement of Operations

For the fiscal year ended December 31, 2022

 

 

     AMG
GW&K Small Cap
Core Fund
  AMG
GW&K Small Cap
Value Fund
  AMG
GW&K Small/Mid
Cap Fund
  AMG
GW&K Global
Allocation Fund

  Investment Income:

        

  Dividend income

     $7,120,891       $4,721,476       $6,189,733       $533,907  

  Interest income

     254,871       58,851       168,748       551,415  

  Securities lending income

     47,800       25,658       37,239       8,295  

  Foreign withholding tax

     (21,029     (3,581     (18,764     (33,992 )   

  Total investment income

     7,402,533       4,802,404       6,376,956       1,059,625  

  Expenses:

        

  Investment advisory and management fees

     4,826,899       2,091,338       3,562,334       438,869  

  Administrative fees

     1,034,336       448,144       861,855       109,717  

  Distribution fees - Class N

     22,782             143,033       71,624  

  Shareholder servicing fees - Class N

     13,669       453,622              

  Shareholder servicing fees - Class I

     230,145       47,390       131,987       38,535  

  Custodian fees

     73,945       53,904       60,199       35,522  

  Professional fees

     64,313       54,244       66,530       43,187  

  Registration fees

     61,540       50,094       56,783       48,600  

  Trustee fees and expenses

     48,096       20,474       40,586       4,805  

  Reports to shareholders

     34,736       23,929       39,360       15,057  

  Transfer agent fees

     25,447       27,182       28,927       5,585  

  Interest expense

     3,657       3,414       227       8,384  

  Miscellaneous

     25,281       12,916       19,674       7,360  

  Repayment of prior reimbursements

     23,921             14,991        

  Total expenses before offsets

     6,488,767       3,286,651       5,026,486       827,245  

  Expense reimbursements

     (12,500     (93,363     (39,766     (116,229

  Expense reductions

     (54,366     (40,501     (23,627      

  Net expenses

     6,421,901       3,152,787       4,963,093       711,016  

 

        

  Net investment income

     980,632       1,649,617       1,413,863       348,609  

  Net Realized and Unrealized Loss: