N-CSR 1 d398011dncsr.htm AMG FUNDS I AMG Funds I
Table of Contents

 

 

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: 811-06520

 

 

AMG Funds I

(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: OCTOBER 31

Date of reporting period: NOVEMBER 1, 2021 – OCTOBER 31, 2022

(Annual Shareholder Report)

 

 

 


Table of Contents
Item 1.

Reports to Shareholders


Table of Contents
LOGO    ANNUAL REPORT

 

 

 

 

    

AMG Funds

 

October 31, 2022

 
    

 

LOGO

 
     AMG GW&K Core Bond ESG Fund
 
     Class N: MBGVX    |    Class I: MBDFX    |    Class Z: MBDLX
 
     AMG GW&K Emerging Markets Equity Fund
 
     Class N: TLEVX     |    Class I: TLESX       |    Class Z: TLEIX
 
     AMG GW&K Emerging Wealth Equity Fund
 
     Class N: TYWVX    |    Class I: TYWSX     |    Class Z: TYWIX
 
     AMG GW&K Small/Mid Cap Growth Fund
 
     Class N: ACWDX   |    Class I: ACWIX      |    Class Z: ACWZX
 
    
 
    

 

 

 

 

 

amgfunds.com           103122            AR069


Table of Contents


Table of Contents
    

    

AMG Funds

Annual Report — October 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 Core Bond ESG Fund

     4  
 
   

AMG GW&K Emerging Markets Equity Fund

     12  
 
   

AMG GW&K Emerging Wealth Equity Fund

     19  
 
   

AMG GW&K Small/Mid Cap Growth Fund

     26  
 
    FINANCIAL STATEMENTS   
 
   

Statement of Assets and Liabilities

     32  
 
   

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

  
 
   

Statement of Operations

     34  
 
   

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

  
 
   

Statements of Changes in Net Assets

     35  
 
   

Detail of changes in assets for the past two fiscal years

  
 
   

Financial Highlights

     37  
 
   

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

  
 
   

Notes to Financial Statements

     49  
 
   

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      58  
 
    OTHER INFORMATION      59  
 
    TRUSTEES AND OFFICERS      60  
 
    ANNUAL RENEWAL OF INVESTMENT MANAGEMENT AND SUBADVISORY AGREEMENTS      63  
   

    

  

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.

 

 

 


Table of Contents
LOGO   Letter to Shareholders

 

Dear Shareholder:

The fiscal year ended October 31, 2022, was a volatile period for risk assets, as uncertainties mounted about high inflation, tighter financial conditions, and the Russian invasion of Ukraine. Global equity and bond markets fell in tandem amid sharply higher interest rates and eroding investor confidence as worries of an impending recession loomed over markets. 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 stubbornly high inflation has necessitated that the U.S. Federal Reserve (the Fed) and other global central banks take more aggressive policy action in an effort to bring down inflation. While the outlook is uncertain given the recent negative returns across many asset classes, one silver lining is that global stock and bond valuations are now more attractive than they were at the start of the year.

There was very wide dispersion in sector performance. Energy significantly outperformed all other sectors with a gain of 64.97% as the price of oil surged during the period. Defensive-oriented sectors also outperformed with a 4.86% return from consumer staples and 2.85% gain in utilities. 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 (40.67)% return during the fiscal year, followed by declines of (28.53)% for consumer discretionary, (20.64)% for real estate, and (20.23)% for information technology. Value stocks held up much better than growth stocks as the Russell 1000® Value Index returned (7.00)% compared to the (24.60)% return for the Russell 1000® Growth Index. Small cap stocks struggled as the Russell 2000® Index lost (18.54)%. Outside the U.S., foreign developed markets lagged their U.S. counterparts as the U.S. dollar surged and the MSCI EAFE Index fell (23.00)%. Emerging Markets underperformed with a (31.03)% return for the MSCI Emerging Markets Index.

The 10-year Treasury yield more than doubled during the period, surging to the highest levels since before the Great Financial Crisis. Rapidly rising rates from a very low base led to historically bad performance for bonds as the Bloomberg U.S. Aggregate Bond Index, a broad measure of U.S. bond market performance, lost (15.68)% over the period. Investment-grade corporate bonds underperformed as the Bloomberg U.S. Corporate Bond Index returned (19.57)% for the year. High yield bonds held up better with a (11.76)% return as measured by the return of the Bloomberg U.S. Corporate High Yield Bond Index. Municipal bonds suffered steep losses but outperformed the broader market with a (11.98)% return for the Bloomberg Municipal Bond Index. Non-U.S. bonds delivered weak performance and were also impacted by the stronger dollar as the Bloomberg Global Aggregate ex U.S. fell (24.60)%.

AMG Funds appreciates the privilege of providing investment tools to you and your clients. Our foremost goal is to provide investment solutions that help our shareholders successfully reach their long-term investment goals. AMG Funds provides access to a distinctive array of actively managed return-oriented investment strategies. We thank you for your continued confidence and investment in AMG Funds. You can rest assured that under all market conditions our team is focused on delivering excellent investment management services for your benefit.

Respectfully,

 

LOGO

Keitha Kinne

President

AMG Funds

 

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

Large Cap

  (S&P 500® Index)     (14.61 )%      10.22     10.44

Small Cap

  (Russell 2000® Index)     (18.54 )%      7.05     5.56

International

  (MSCI ACWI ex USA)     (24.73 )%      (1.68 )%      (0.60 )% 

Bonds:

                           

Investment Grade

  (Bloomberg U.S. Aggregate Bond Index)     (15.68 )%      (3.77 )%      (0.54 )% 

High Yield

  (Bloomberg U.S. Corporate High Yield Bond Index)     (11.76 )%      0.31     2.01

Tax-exempt

  (Bloomberg Municipal Bond Index)     (11.98 )%      (2.18 )%      0.37

Treasury Bills

  (ICE BofAML U.S. 6-Month Treasury Bill Index)     0.55     0.65     1.27

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

 

 

 

2


Table of Contents
    

 

    

    

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

  October 31, 2022

  

Expense

Ratio for

the Period

 

Beginning

Account

Value

05/01/22

  

Ending

Account

Value

10/31/22

   

Expenses

Paid

During

the Period*

AMG GW&K Core Bond ESG Fund

Based on Actual Fund Return

Class N

   0.88%   $1,000      $922      $4.26

Class I

   0.54%   $1,000      $923     $2.62

Class Z

   0.48%   $1,000      $924     $2.33

Based on Hypothetical 5% Annual Return

Class N

   0.88%   $1,000        $1,021     $4.48

Class I

   0.54%   $1,000      $1,022     $2.75

Class Z

   0.48%   $1,000      $1,023     $2.45

AMG GW&K Emerging Markets Equity Fund**

Based on Actual Fund Return

Class N

   1.32%   $1,000      $830     $6.09

Class I

   1.03%   $1,000      $832     $4.76

Class Z

   0.92%   $1,000      $831     $4.25

Based on Hypothetical 5% Annual Return

Class N

   1.32%   $1,000        $1,019     $6.72

Class I

   1.03%   $1,000      $1,020     $5.24

Class Z

   0.92%   $1,000      $1,021     $4.69

AMG GW&K Emerging Wealth Equity Fund

Based on Actual Fund Return

Class N

   1.42%   $1,000      $838     $6.58

Class I

   1.12%   $1,000      $839     $5.19

Class Z

   1.02%   $1,000      $838     $4.73

Based on Hypothetical 5% Annual Return

Class N

   1.42%   $1,000        $1,018     $7.22

Class I

   1.12%   $1,000      $1,020     $5.70

Class Z

   1.02%   $1,000      $1,020     $5.19

  Six Months Ended

  October 31, 2022

   Expense
Ratio for
the Period
  Beginning
Account
Value
05/01/22
   Ending
Account
Value
10/31/22
    Expenses
Paid
During
the Period*

AMG GW&K Small/Mid Cap Growth Fund

Based on Actual Fund Return

Class N

   1.02%   $1,000      $968      $5.06

Class I

   0.87%   $1,000      $968     $4.32

Class Z

   0.82%   $1,000      $968     $4.07

Based on Hypothetical 5% Annual Return

Class N

   1.02%   $1,000      $1,020     $5.19

Class I

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

Class Z

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

 

  *

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.

 

  **

Includes interest expense related to participation in the interfund lending program. If excluded, your annualized expense ratios would be 1.27%, 0.98% and 0.87% for Class N, Class I and Class Z, respectively, and your actual and hypothetical expenses paid during the period would be $5.86, $4.53 and $4.02, and $6.46, $4.99 and $4.43 for Class N, Class I and Class Z, respectively.

 

 

 

3


Table of Contents
    

 

    

AMG GW&K Core Bond ESG Fund

Portfolio Manager’s Comments (unaudited)

 

   

    

 

      

 

THE YEAR IN REVIEW

 

For the 12 months ended October 31, 2022, AMG GW&K Core Bond ESG Fund’s (the “Fund”) Class I shares returned (16.99)%, compared to the return of (15.68)% for the Bloomberg U.S. Aggregate Bond Index (the “Index”).

 

MARKET OVERVIEW

 

Fixed income markets were effectively flat in late 2021, despite major narrative shifts with respect to inflation, monetary policy, and COVID-19. Signs of easing supply-chain pressures and continued labor market normalization were not enough to quell concerns about rising inflation, which printed at its highest level in almost 40 years. The U.S. Federal Reserve (the “Fed”) executed a “hawkish pivot” in acknowledging more persistent inflationary forces and signaled its intention to respond accordingly. The extremely contagious Omicron variant rapidly established itself as the dominant strain around the globe, forcing a reappraisal of reopening timelines and reviving the specter of lockdowns and healthcare rationing. Ironically, the combined effect of these various forces essentially netted to zero; solid economic data and a broadly constructive outlook from the Fed were met with the prospect of tightening financial conditions and growth fears posed by Omicron. But trading overall was orderly, and after the prior two years investors seemed well practiced at looking past near-term volatility toward the next stage of a return to normalcy.

 

For the first quarter of 2022, fixed income markets experienced their worst period in more than four decades amid an extraordinary confluence of economic and geopolitical shocks. Core inflation jumped to 5.4%, its highest level since 1983, on a broad-based rise in consumer prices. The Fed responded in kind, intensifying its hawkish rhetoric and laying out an aggressive course of hikes to bring inflation back to target. In addition to exacting a tragic human toll, Russia’s invasion of Ukraine exacerbated already strained supply chains and commodity markets, threatening acute and prolonged shortages of materials vital to the basic functioning of the global economy. But for all this uncertainty and turmoil, there was a notable divergence between the performance of rates and credit; the former extended a historically severe downdraft, while the latter continued to enjoy a remarkably benign trading environment. How this disconnect was to be resolved was the central question before investors, though policy uncertainty and heightened tensions were deemed unlikely to subside anytime soon.

      

In the second quarter of 2022, fixed income markets experienced another extremely volatile period, trading in a wide range and struggling to commit to a consistent narrative. The central question remained how persistent inflation would be and what policy measures would be necessary to quell it. A natural deceleration would allow the Fed to pursue less aggressive policy and possibly achieve a soft landing; more recalcitrant price pressure would require the Fed to mount a harsher response and invite a potential recession. The implications of these two different paths were starkly at odds, leading to a broad lack of conviction with no clear market direction. Similarly puzzling was a consumer with a strong proclivity to spend but a deeply pessimistic outlook and a corporate sector earning solid profits but starting to announce layoffs. Additionally, China offered a potential bright spot as it emerged from recent shutdowns, but the Ukraine conflict lingered as a major threat to global energy and commodity markets. An imminent resolution to any of these tensions seemed unlikely, so disciplined risk management and careful analysis of relative value were of particular importance for the months ahead.

 

Fixed income markets were under extraordinary pressure in the third quarter of 2022, as investors continued to adapt to restrictive monetary policy after more than a decade of accommodation. Stubbornly rising prices, hawkish central banks, and various geopolitical forces combined to tighten financial conditions and raise the cost of borrowing around the world. Defying expectations that it had peaked, inflation remained elevated and manifested across a broader and more entrenched collection of goods and services. The Federal also confounded expectations by projecting a more cautious outlook and a more aggressive path of hikes than most economists had anticipated. International pressures escalated as well, as currency market dislocations, political leadership changes in Europe and Asia, and multiple energy crises collectively drove a heightened sense of uncertainty. The variety and momentum of these forces suggested no near-term end to volatility, especially against a backdrop of increasingly expensive capital.

 

Fixed income markets were once again under pressure to end the fiscal year in October. Inflation continued to rise as the Fed reiterated its commitment to subduing it. The housing sector deteriorated further, and consumer sentiment

      

remained dour, while the labor market showed few signs of weakening. Minutes from the September meeting made clear that the Fed will raise rates aggressively and keep them high until it sees evidence that inflation is coming down. Yields across the curve were higher on the month, briefly touching new cyclical peaks before retreating. The front end sold off in response to increased Fed hawkishness, while long rates reflected rising confidence that the end of the hiking cycle is near.

 

FUND REVIEW

 

The Fund underperformed its benchmark as an above-benchmark allocation to spread sectors was one of the main detractors from returns. Specifically, an overweight to investment grade corporate bonds was the largest negative, but also hurting performance were overweights to both taxable municipals and agency mortgage-backed securities (“MBS”). On the other hand, an out of benchmark allocation to fixed-to-floating preferreds aided returns. The Fund’s notable underweight was to the Treasury sector contributed to relative return. Security selection also lagged, with the largest affect coming from investment grade corporates. Consumer cyclicals was a notable detractor while communications contributed positively. Security selection in MBS was also a negative. The Fund’s duration positioning was its top contributor. Rates rose during the period and the Fund’s shorter duration compared to the benchmark proved favorable. Due to the Fund’s generally neutral yield curve positioning, the affect here was minimal.

 

Environmental, social and governance practices (“ESG”) remained an important area of focus for the corporate bond market in what could be viewed as a transition year in 2022. A growing list of companies have moved beyond publishing sustainability reports to set emissions reduction and net zero targets over the past year. Investors shook off an overall difficult market environment, from geopolitical turmoil to interest rate volatility, to demonstrate continued strong interest in ESG. This was also a landmark year for global sustainability regulation, with regulators across Europe, North America, and Asia introducing new rules and proposals related to reporting for both corporations and investors. In the U.S., the Inflation Reduction Act is poised to provide policy support for many companies of interest to ESG investors. We continue to integrate ESG as a core part of our

 

 

4


Table of Contents
    

 

    

AMG GW&K Core Bond ESG Fund

Portfolio Manager’s Comments (continued)

 

   

    

 

      

 

fundamental investment process, while monitoring regulatory and policy actions that could influence the ESG investing landscape in the coming years.

 

We conducted the following trades based on ESG factors over the period:

 

•  We purchased Merck & Co., a high-quality investment grade sustainable bond

 

•  We bought Sonoco Products Co., a recent green bond new issue

 

•  We added a California State Health Facilities bond

 

OUTLOOK

 

Expectations of a Fed “pivot” have been relegated to the closing months of 2023, suggesting investors have become more comfortable with

      

higher-for-longer monetary policy. Additionally, investors seem to have registered acceptance of the “pain” that Chairman Powell has warned might be necessary to quell inflation. Rate volatility has consequently risen to levels last seen at the outset of the pandemic and, prior to that, the global financial crisis. With such an uncertain fundamental backdrop and a wide dispersion of possible paths for both the level and shape of the yield curve, we have maintained essentially neutral duration and curve positioning.

 

While our outlook for corporate credit is constructive from a bottom-up perspective–given years of prudent balance sheet management and robust profitability–we recognize the rising risks that macroeconomic factors pose to the sector. As such, our exposure is at the lower end of its historical

      

range. Within corporates, we continue to prefer higher quality names with less exposure to cyclical industries. We remain opportunistic with respect to idiosyncratic stories and have been active in credits that we expect to improve their leverage profiles or which have sold off unduly. Our outlook for mortgages has informed a neutral exposure, given potential event risk surrounding quantitative tightening and elevated rate volatility, even as recent underperformance has brought spreads to the wider end of their recent range.

 

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

 

 

5


Table of Contents
   

    

AMG GW&K Core Bond ESG Fund

Portfolio Manager’s Comments (continued)

 

 

 

CUMULATIVE TOTAL RETURN PERFORMANCE

AMG GW&K Core Bond ESG 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. This graph compares a hypothetical $10,000 investment made in the AMG GW&K Core Bond ESG Fund’s Class I shares on October 31, 2012, to a $10,000 investment made in the Bloomberg U.S. 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 index excludes 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 Core Bond ESG Fund and the Bloomberg U.S. Aggregate Bond Index for the same time periods ended October 31, 2022.

 

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

  AMG GW&K Core Bond ESG Fund2, 3, 4, 5, 6, 7, 8, 9

 

Class N

     (17.18 %)      (1.22 %)             (0.27 %)      05/08/15  

Class I

     (16.99 %)      (0.92 %)      0.45%        4.78     04/30/93  

Class Z

     (16.85 %)      (0.82 %)             0.14     05/08/15  

Bloomberg U.S. Aggregate Bond Index10

     (15.68 %)      (0.54 %)      0.74%        4.35      04/30/93  

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 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 October 31, 2022. All returns are in U.S. Dollars($).

 

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

 

3  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.

 

4  Active and frequent trading of a fund may result in higher transaction costs and increased tax liability.

 

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 may invest in derivatives such as options and futures; the complexity and rapidly changing structure of derivatives markets may increase the possibility of market losses.

 

7  Many bonds have call provisions which allow the debtors to pay them back before maturity. This is especially true with mortgage securities, which can be paid back anytime. Typically debtors prepay their debt when it is to their advantage (when interest rates drop making a new loan at current rates more attractive), and thus likely to the disadvantage of bondholders, who may have to reinvest prepayment proceeds in securities with lower yields. Prepayment risk will vary depending on the provisions of the security and current interest rates relative to the interest rate of the debt.

 

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  Applying the Fund’s ESG investment criteria may result in the selection or exclusion of securities of certain issuers for reasons other than performance, and the Fund may underperform funds that do not utilize an ESG investment strategy. The application of this strategy may affect the Fund’s exposure to certain companies, sectors, regions, countries or types of investments, which could negatively impact the Fund’s performance depending on whether such investments are in or out of favor. Applying ESG criteria to investment decisions is qualitative and subjective by nature, and there is no guarantee that the criteria utilized by the Subadviser or any judgment exercised by the

 

 

 

 

6


Table of Contents
    

 

    

AMG GW&K Core Bond ESG Fund

Portfolio Manager’s Comments (continued)

 

   

    

 

      

 

Subadviser will reflect the beliefs or values of any particular investor.

 

10 The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds. Unlike the Fund, the Bloomberg U.S. Aggregate Bond Index is unmanaged, is not available for investment and does not incur expenses.

      

“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.

 

 

7


Table of Contents
   

AMG GW&K Core Bond ESG Fund

Fund Snapshots (unaudited)

October 31, 2022

 

 

 

PORTFOLIO BREAKDOWN

 

    Category   

% of

Net Assets

 

U.S. Government and Agency Obligations

   51.9
 

Corporate Bonds and Notes

   36.0
 

Municipal Bonds

     7.5
 

Foreign Government Obligations

     0.9
 

Short-Term Investments

     2.7
 

Other Assets, Less Liabilities

     1.0

 

    Rating    % of Market Value1
 

U.S. Government and Agency Obligations

   53.8
 

Aaa/AAA

     3.9
 

Aa/AA

     9.4
 

A

   10.4
 

Baa/BBB

   22.5

 

1 

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

TOP TEN HOLDINGS

 

    Security Name   

% of

Net Assets

 

U.S. Treasury Notes, 2.000%, 06/30/24

   4.2
 

U.S. Treasury Bonds, 2.250%, 05/15/41

   3.7
 

FHLMC, 3.500%, 10/01/45

   2.5
 

Verizon Communications, Inc., 3.875%, 02/08/29

   2.2
 

U.S. Treasury Bonds, 6.250%, 08/15/23

   2.1
 

FNMA, 3.500%, 02/01/47

   2.1
 

U.S. Treasury Notes, 2.375%, 05/15/27

   2.0
 

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

   2.0
 

FHLMC, 3.000%, 11/01/49

   2.0
 

U.S. Treasury Bonds, 3.500% , 02/15/39

   1.9
    

 

 

Top Ten as a Group

       24.7    
  

 

 

 

Credit quality ratings shown above reflect the highest rating assigned by either Standard & Poor’s (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”). 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.

 

 

8


Table of Contents
   

AMG GW&K Core Bond ESG Fund

Schedule of Portfolio Investments

October 31, 2022

 

 

 

     

Principal

Amount

     Value  

Corporate Bonds and Notes - 36.0%

 

  

Financials - 12.7%

 

  

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

     $1,650,000        $1,497,600  

American Express Co.

     

(3.550% to 09/15/26 then U.S. Treasury Yield Curve CMT 5 year + 2.854%), 3.550%, 09/15/261,2,3

     973,000        750,426  

American Tower Corp.
3.600%, 01/15/28

     1,680,000        1,488,749  

Bank of America Corp.

     

MTN, (4.330% to 03/15/49 then 3 month LIBOR + 1.520%), 4.330%, 03/15/501,3

     1,600,000        1,244,374  

The Bank of New York Mellon Corp.

     

MTN, 2.450%, 08/17/26

     937,000        849,517  

Series G, (4.700% to 09/20/25 then U.S. Treasury Yield Curve CMT 5 year + 4.358%), 4.700%, 09/20/251,2,3

     460,000        440,450  

Boston Properties, LP

     

3.400%, 06/21/29

     1,841,000        1,522,076  

Citigroup, Inc.

     

(3.980% to 03/20/29 then 3 month LIBOR + 1.338%), 3.980%, 03/20/301,3

     1,677,000        1,477,577  

Crown Castle, Inc.

     

4.000%, 03/01/27

     1,800,000        1,665,268  

The Goldman Sachs Group, Inc.

     

3.500%, 11/16/26

     2,676,000        2,453,984  

JPMorgan Chase & Co.

     

(1.470% to 09/22/26 then SOFR + 0.765%), 1.470%, 09/22/271,3

     871,000        731,742  

MetLife, Inc.

     

Series G, (3.850% to 09/15/25 then U.S. Treasury Yield Curve CMT 5 year + 3.576%), 3.850%, 09/15/251,2,3

     1,409,000        1,238,143  

Morgan Stanley

     

(4.431% to 01/23/29 then 3 month LIBOR + 1.628%), 4.431%, 01/23/301,3

     1,624,000        1,481,905  

Wells Fargo & Co.

     

MTN, (5.013% to 04/04/50 then SOFR + 4.502%), 5.013%, 04/04/511,3

     1,411,000        1,195,980  

Total Financials

        18,037,791  

Industrials - 21.2%

     

Alcoa Nederland Holding, B.V. (Netherlands)

     

4.125%, 03/31/294

     1,275,000        1,079,705  

Anglo American Capital PLC (United Kingdom)
2.875%, 03/17/314

     919,000        706,376  

Ashtead Capital, Inc.
1.500%, 08/12/264

     1,786,000        1,481,645  

AT&T, Inc.
4.300%, 12/15/42

     1,710,000        1,317,214  
     

Principal

Amount

     Value  

Block Financial LLC
3.875%, 08/15/30

     $1,667,000        $1,400,118  

Broadcom Corp./Broadcom Cayman Finance, Ltd.
3.875%, 01/15/27

     1,808,000        1,661,501  

Charter Communications Operating LLC/Charter Communications Operating Capital
2.250%, 01/15/29

     2,000,000        1,578,274  

CommonSpirit Health
3.347%, 10/01/29

     1,737,000        1,457,627  

Dell International LLC/EMC Corp. 6.200%, 07/15/30

     1,512,000        1,481,158  

Discovery Communications LLC 3.950%, 03/20/28

     1,766,000        1,532,843  

The Ford Foundation
Series 2020, 2.415%, 06/01/50

     2,207,000        1,274,092  

HCA, Inc.

     

4.125%, 06/15/29

     842,000        742,988  

4.500%, 02/15/27

     874,000        818,257  

Merck & Co., Inc.

     

1.900%, 12/10/28

     1,897,000        1,589,602  

Microsoft Corp.
2.525%, 06/01/50

     2,165,000        1,358,165  

Parker-Hannifin Corp.
3.250%, 06/14/29

     1,623,000        1,407,678  

PulteGroup, Inc.
5.000%, 01/15/27

     761,000        730,861  

Smith & Nephew PLC (United Kingdom)
2.032%, 10/14/30

     1,010,000        741,981  

Sonoco Products Co.
2.850%, 02/01/325

     1,852,000        1,443,393  

Sysco Corp.
2.400%, 02/15/30

     2,284,000        1,847,932  

Verizon Communications, Inc.
3.875%, 02/08/29

     3,403,000        3,093,150  

Walgreens Boots Alliance, Inc.
4.800%, 11/18/44

     1,593,000        1,249,355  

Total Industrials

        29,993,915  

Utilities - 2.1%

     

Dominion Energy, Inc.

     

Series B, (4.650% to 12/15/24 then U.S. Treasury Yield Curve CMT 5 year + 2.993%), 4.650%, 12/15/241,2,3

     978,000        846,476  

National Rural Utilities Cooperative Finance Corp.
1.350%, 03/15/31

     2,024,000        1,454,910  

Northern States Power Co.
2.900%, 03/01/50

     1,000,000        635,228  

Total Utilities

        2,936,614  

Total Corporate Bonds and Notes
(Cost $62,975,896)

        50,968,320  
 

 

 

 

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

9


Table of Contents
   

    

AMG GW&K Core Bond ESG Fund

Schedule of Portfolio Investments (continued)

 

 

 

      Principal
Amount
     Value  

Municipal Bonds - 7.5%

 

  

California Health Facilities Financing Authority
4.190%, 06/01/37

     $775,000        $653,272  

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

     2,410,000        2,885,290  

Commonwealth of Massachusetts Series B, 4.110%, 07/15/31

     1,040,000        992,202  

JobsOhio Beverage System
Series B, 4.532%, 01/01/35

     1,705,000        1,571,841  

Los Angeles Unified School District, School Improvements
5.750%, 07/01/34

     1,775,000        1,801,304  

Massachusetts School Building Authority
Series B, 1.753%, 08/15/30

     2,017,000        1,637,975  

University of California, University & College Improvements
Series BD, 3.349%, 07/01/29

     1,310,000        1,169,005  

Total Municipal Bonds

 

  

(Cost $12,564,216)

        10,710,889  
U.S. Government and Agency Obligations - 51.9%

 

  

Fannie Mae - 22.9%

     

FNMA

     

2.000%, 02/01/36 to 10/01/50

     2,017,188        1,682,847  

3.000%, 06/01/38

     1,180,482        1,079,662  

3.500%, 03/01/30 to 07/01/50

     12,394,645        11,286,818  

4.000%, 03/01/44 to 01/01/51

     8,422,706        7,812,991  

4.500%, 04/01/39 to 08/01/52

     8,777,950        8,470,612  

5.000%, 07/01/47 to 02/01/49

     2,085,049        2,068,894  

Total Fannie Mae

        32,401,824  

Freddie Mac - 10.4%

     

FHLMC

     

2.500%, 10/01/34 to 08/01/50

     4,160,413        3,658,775  

3.000%, 11/01/49 to 03/01/50

     4,101,498        3,547,704  

3.500%, 10/01/45

     3,856,151        3,473,611  

4.000%, 07/01/48 to 09/01/50

     1,289,177        1,190,472  

4.500%, 05/01/48

     301,073        291,367  

5.000%, 07/01/44

     1,323,752        1,325,131  

FHLMC Gold Pool

     

3.500%, 07/01/32 to 05/01/44

     1,316,512        1,230,880  

Total Freddie Mac

       

 

14,717,940

 

 

 

      Principal
Amount
     Value  

U.S. Treasury Obligations - 18.6%

 

  

U.S. Treasury Bonds

     

1.875%, 02/15/51

     $3,958,000        $2,423,193  

2.250%, 05/15/41

     7,180,000        5,177,173  

3.125%, 05/15/48

     1,998,000        1,620,799  

3.500%, 02/15/39

     3,044,000        2,763,619  

5.000%, 05/15/37

     978,000        1,062,620  

6.250%, 08/15/23

     2,968,000        3,003,941  

6.750%, 08/15/26

     1,339,000        1,448,683  

U.S. Treasury Notes

     

2.000%, 06/30/24

     6,268,000        6,006,262  

2.375%, 05/15/27

     3,141,000        2,892,296  

Total U.S. Treasury Obligations

        26,398,586  

Total U.S. Government and Agency Obligations

 

  

(Cost $85,331,985)

        73,518,350  

Foreign Government Obligation - 0.9%

 

  

The Korea Development Bank (South Korea)
0.500%, 10/27/23
    (Cost $1,383,846)

     1,385,000        1,328,254  

Short-Term Investments - 2.7%

 

  

Joint Repurchase Agreements - 0.1%6

 

  

HSBC Securities USA, Inc., dated 10/31/22, due 11/01/22, 3.010% total to be received $157,617 (collateralized by various U.S. Treasuries, 0.000% - 7.625%, 01/15/23 - 08/15/52, totaling $160,756)

     157,604        157,604  

Repurchase Agreements - 2.6%

 

  

Fixed Income Clearing Corp., dated 10/31/22, due 11/01/22, 2.900% total to be received $3,645,294 (collateralized by a U.S. Treasury, 1.625%, 05/15/31, totaling $3,717,974)

     3,645,000        3,645,000  

Total Short-Term Investments

 

  

(Cost $3,802,604)

        3,802,604  

Total Investments - 99.0%

 

  

(Cost $166,058,547)

        140,328,417  

Other Assets, less Liabilities - 1.0%

 

     1,388,160  

Net Assets - 100.0%

 

    

 

$141,716,577

 

 

 

 

 

1 

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

 

2 

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

 

3 

Variable rate security. The rate shown is based on the latest available information as of October 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.

4 

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 October 31, 2022, the value of these securities amounted to $3,267,726 or 2.3% of net assets.

 

5 

Some of this security, amounting to $151,198 or 0.1% of net assets, was out on loan to various borrowers and is collateralized by cash. See Note 4 of Notes to Financial Statements.

 

6 

Cash collateral received for securities lending activity was invested in the joint repurchase agreement.

 

 

 

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

10


Table of Contents
   

    

AMG GW&K Core Bond ESG Fund

Schedule of Portfolio Investments (continued)

 

 

 

CMT    Constant Maturity Treasury    LIBOR    London Interbank Offered Rate
FHLMC    Freddie Mac    MTN    Medium-Term Note
FNMA    Fannie Mae    SOFR    Secured Overnight Financing Rate

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

 

     Level 1      Level 2      Level 3      Total  

 Investments in Securities

           

Corporate Bonds and Notes

          $ 50,968,320             $ 50,968,320  

Municipal Bonds

            10,710,889               10,710,889  

U.S. Government and Agency Obligations

            73,518,350               73,518,350  

Foreign Government Obligation

            1,328,254               1,328,254  

Short-Term Investments

           

Joint Repurchase Agreements

            157,604               157,604  

Repurchase Agreements

            3,645,000               3,645,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Investments in Securities

          $ 140,328,417             $ 140,328,417  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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.

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

 

 

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

11


Table of Contents
    

 

    

AMG GW&K Emerging Markets Equity Fund

Portfolio Manager’s Comments (unaudited)

 

   

    

 

      

 

MARKET OVERVIEW

 

Emerging markets fell sharply during the fiscal year ended October 31, 2022 amid Russia’s invasion of Ukraine, numerous headwinds in China, and a challenging inflation backdrop that saw several countries aggressively tighten monetary policy. Brent Crude oil initially traded above the $100/barrel level for the first time in seven years on U.S. sanctions targeting Russia’s energy industry. Other commodity prices were mixed; grains were well supported, but metals dropped on recession concerns. The MSCI Emerging Markets (“EM”) Index declined (31.0)%, while the MSCI EM ex China Index declined (21.9)%. This compares to an (18.5)% loss for the MSCI World Index of developed markets.

 

Performance was mixed geographically, with commodity rich Latin America a standout performer, gaining 16.1% led by Brazil. The region is expected to benefit from the conflict driven surge in energy and agricultural commodity prices. EMEA oil producers in the Persian Gulf posted respectable gains—but Russia’s elimination from the MSCI EM Index weighed on the region’s aggregate performance. Eastern European countries with proximity to the conflict and trade ties to Russia also capped gains in the EMEA region. North Asia was particularly weak due to external demand worries and ongoing market pressure in China. South Korea and Taiwan both fell sharply on the backup in U.S. interest rates and slowing demand in the IT hardware and semiconductor industries. Foreign investors shed Chinese equities en masse due to the country’s growth-stifling zero-COVID policy, ongoing real estate industry turmoil, and President Xi’s consolidation of power at the National Party Congress. The MSCI China Index declined (47.9)%, bringing its Index weight down to 27% from 35% at the beginning of the period. Indonesia bucked the negative trend in Asia, rising modestly on positive earnings momentum. Sector performance was broadly negative, with utilities down modestly compared to the broader group. Financials also outperformed on a relative basis as investors looked to banks as proxies for several commodity producing countries including South Africa, UAE, and Brazil.

      

Consumer discretionary, communication services, health care declined on China concerns, while slowing orders weighed on information technology.

 

FUND REVIEW

 

For the fiscal year ended October 31, 2022, AMG GW&K Emerging Markets Equity Fund (the “Fund”) Class N shares returned (32.5)%, underperforming the (31.0)% return for the MSCI EM Index. Stock selection within financials was the main source of the performance shortfall. For example, the portfolio had less exposure to banks in commodity-rich countries, such as South Africa and the Middle East oil markets, which were up sharply on investment inflows. In addition, though we exited the position immediately after the invasion, Sberbank Russia also weighed on the sector return, as did OTP Bank, a Hungarian bank with operations in Russia and Ukraine. OTB was subsequently sold later in the year. There was also weakness in Taiwan Semiconductor Manufacturing due to slowing orders and challenging comparable earnings from the prior year. Although, the Fund outperformed in China, regulatory changes hit internet giant Tencent Holdings and Prosus, a holding company with a stake in Tencent. Finally, sector allocation was negative, mainly due to a higher weight in consumer discretionary and no exposure to utilities.

 

Encouragingly, stock selection was positive in several sectors and markets, with health care China, and Mexico key contributors. China Resources Sanjiu Medical & Pharmaceutical, a branded OTC drug and traditional Chinese medicine (TCM) specialist, gained on solid earnings due to market share gains and cost optimization. In Mexico, Grupo Financiero Banorte reported good earnings backed by both net interest and fee income growth, and airport operator Grupo Aeroportuario del Pacífico reported strong revenue growth compared to pre-pandemic periods driven by increased volumes and pricing.

 

OUTLOOK

 

Emerging markets are now at levels not seen since early in the pandemic or, looking further back, 2015. Although there are several pressing issues circulating in world capital markets that won’t

      

immediately be resolved, emerging market valuations are clearly compelling, even when factoring in lower near-term growth. The 40% decline since their February 2021 peak brings the 2023 and 2024 estimated PE ratios to 10.5x and 9.3x, respectively. To be sure, the global backdrop remains turbulent, as developed market central banks continue to hike interest rates and China remains entangled in multiple layers of economic and political uncertainty. Still, this presents a unique opportunity for us to invest in quality businesses that are benefiting from the ongoing economic development of emerging markets but are often fully priced. In addition, history shows that MSCI EM Index has troughed ahead of the S&P 500® Index in four of the 10 prior bear markets and on the same date as the S&P 500® Index on three occasions. Given that China is more likely to be stimulating their economy when other major nations are still curbing growth, we suspect that MSCI EM Index will trough ahead of developed markets in this cycle.

 

With respect to the Fund’s structure, trading and market activity during the fiscal year resulted in increased exposures to the industrials, health care, and consumer staples, while our weights in consumer discretionary, energy, and communication services decreased. At the close of the period, the Fund had overweight positions in the consumer discretionary, information technology, financials, consumer staples, health care, and communication services sectors and underweight positions in the materials, utilities, energy, real estate, and industrials sectors relative to the benchmark. Geographically, the portfolio finished the fiscal year with 75% in Asia, 14% in the EMEA region, and 8% in Latin America.

 

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

 

 

12


Table of Contents
    

 

    

AMG GW&K Emerging Markets Equity Fund

Portfolio Manager’s Comments (continued)

 

   

    

 

      

 

CUMULATIVE TOTAL RETURN PERFORMANCE

AMG GW&K Emerging Markets Equity 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. This graph compares a hypothetical $10,000 investment made in the AMG GW&K Emerging Markets Equity Fund’s Class N shares on October 31, 2012, to a $10,000 investment made in the MSCI Emerging Markets 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 excludes 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 Emerging Markets Equity Fund and the MSCI Emerging Markets Index for the same time periods ended October 31, 2022.

 

     One   Five   Ten  
  Average Annual Total Returns1    Year   Years   Years  

AMG GW&K Emerging Markets Equity Fund2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12

 

Class N

   (32.50%)   (4.87%)     (0.61%)  

Class I

   (32.28%)   (4.56%)     (0.26%)  

Class Z

   (32.20%)   (4.49%)     (0.17%)  

MSCI Emerging Markets Index13

   (31.03%)   (3.09%)     0.79%  

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 October 31, 2022. All returns are in U.S. Dollars ($).

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

 

3  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.

 

4  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.

 

5  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.

 

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 may invest in derivatives such as options and futures; the complexity and rapidly changing structure of derivatives markets may increase the possibility of market losses.

 

8  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.

 

9  Investing in initial public offerings (IPOs) is risky and the prices of stocks purchased in IPOs tend to fluctuate more widely than stocks of companies that have been publicly traded for a longer period of time. Stocks purchased in IPOs generally do not have a trading history, and information about the companies may be available for very limited periods.

 

10 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.

 

11 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.

    

 

 

 

13


Table of Contents
    

 

    

AMG GW&K Emerging Markets Equity Fund

Portfolio Manager’s Comments (continued)

 

   

    

 

      

 

12 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.

 

13 The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. Please go to msci.com for most current list of countries represented by the index. Unlike the Fund, the MSCI Emerging Markets 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.

 

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

         

 

 

 

14


Table of Contents
   

AMG GW&K Emerging Markets Equity Fund

Fund Snapshots (unaudited)

October 31, 2022

 

 

 

PORTFOLIO BREAKDOWN

 

    Sector   

% of

Net Assets

 

Financials

       27.5
 

Information Technology

       22.7
 

Consumer Discretionary

       18.3
 

Communication Services

       8.6
 

Consumer Staples

       8.1
 

Industrials

       5.6
 

Health Care

       4.9
 

Energy

       3.7
 

Short-Term Investments

       2.9
 

Other Assets, Less Liabilities

       (2.3 )

TOP TEN HOLDINGS

 

    Security Name    % of
Net Assets
 

Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan)

       7.4    
 

Samsung Electronics Co., Ltd. (South Korea)

       5.7    
 

HDFC Bank, Ltd. (India)

       4.7    
 

Housing Development Finance Corp., Ltd. (India)

       4.3    
 

Reliance Industries, Ltd. (India)

       3.7    
 

Bank Mandiri Persero Tbk PT (Indonesia)

       2.9    
 

Alibaba Group Holding, Ltd. (China)

       2.8    
 

Grupo Financiero Banorte, S.A.B de CV, Class O (Mexico)

       2.7    
 

Yum China Holdings, Inc. (China)

       2.4    
 

Grupo Aeroportuario del Pacifico, S.A.B de CV, Class B (Mexico)

       2.2    
      

 

 

 
 

Top Ten as a Group

             38.8    
    

 

 

 

 

 

 

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.

 

 

 

15


Table of Contents
   

AMG GW&K Emerging Markets Equity Fund

Schedule of Portfolio Investments

October 31, 2022

 

 

 

      Shares      Value  

Common Stocks - 99.4%

     

Communication Services - 8.6%

 

  

Baidu, Inc., Class A (China)*

     29,816        $285,846  

Kingsoft Corp., Ltd. (China)

     71,200        215,604  

Kuaishou Technology (China)*,1

     26,000        107,376  

MultiChoice Group (South Africa)

     32,058        209,482  

NetEase, Inc. (China)

     12,425        137,859  

Tencent Holdings, Ltd. (China)

     13,506        354,894  

Tencent Music Entertainment Group, ADR (China)*

     19,872        71,738  

Total Communication Services

        1,382,799  

Consumer Discretionary - 18.3%

     

Alibaba Group Holding, Ltd. (China)*

     58,428        454,272  

Feng TAY Enterprise Co., Ltd. (Taiwan)

     39,355        195,448  

H World Group Ltd., ADR (China)

     5,750        155,710  

Haidilao International Holding, Ltd. (China)*,1

     49,000        72,757  

JD.com, Inc., Class A (China)

     7,652        139,347  

Li Ning Co., Ltd. (China)

     46,000        237,954  

MakeMyTrip, Ltd. (India)*

     10,648        296,334  

Midea Group Co., Ltd., Class A (China)

     33,385        183,914  

Pepco Group, N.V. (United Kingdom)*,1,2

     10,017        70,378  

Prosus, N.V. (Netherlands)

     4,562        197,269  

Sands China, Ltd. (Macau)*

     97,950        171,239  

Shenzhou International Group Holdings, Ltd. (China)

     4,160        28,883  

Trip.com Group, Ltd., ADR (China)*

     15,677        354,770  

Yum China Holdings, Inc. (China)

     9,467        391,460  

Total Consumer Discretionary

        2,949,735  

Consumer Staples - 8.1%

     

Angel Yeast Co., Ltd., Class A (China)

     13,600        67,634  

Bid Corp., Ltd. (South Africa)

     15,193        244,461  

CP All PCL (Thailand)

     52,668        83,074  

Dino Polska, S.A. (Poland)*,1

     3,001        195,882  

Fomento Economico Mexicano, S.A.B de CV (Mexico)2

     27,996        200,845  

Orion Corp. (South Korea)

     2,785        198,186  

Vietnam Dairy Products JSC (Vietnam)

     23,700        74,808  

Wal-Mart de Mexico, S.A.B. de CV (Mexico)

     60,873        235,160  

Total Consumer Staples

        1,300,050  

Energy - 3.7%

     

Reliance Industries, Ltd. (India)

     19,188        592,080  

Financials - 27.5%

     

AIA Group, Ltd. (Hong Kong)

     42,768        323,959  

B3, S.A. - Brasil Bolsa Balcao (Brazil)

    

 

32,300

 

 

 

    

 

93,795

 

 

 

      Shares      Value  

Banco Bradesco, S.A., ADR (Brazil)2

     66,983        $253,866  

Bank Mandiri Persero Tbk PT (Indonesia)

     685,216        462,900  

Bank Rakyat Indonesia Persero Tbk PT (Indonesia)

     834,336        248,910  

BDO Unibank, Inc. (Philippines)

     144,490        319,379  

China International Capital Corp., Ltd., Class H (China)1

     184,800        256,820  

East Money Information Co., Ltd., Class A (China)

     45,600        97,753  

Grupo Financiero Banorte, S.A.B de CV, Class O (Mexico)

     53,742        437,493  

HDFC Bank, Ltd. (India)

     41,340        750,257  

HDFC Life Insurance Co., Ltd. (India)1

     18,500        120,900  

Housing Development Finance Corp., Ltd. (India)

     22,969        686,745  

Ping An Insurance Group Co. of China, Ltd., Class H (China)

     29,000        116,098  

XP, Inc., Class A (Brazil)*,2

     14,106        258,563  

Total Financials

        4,427,438  

Health Care - 4.9%

     

China Resources Sanjiu Medical & Pharmaceutical Co., Ltd., Class A (China)

     25,800        192,970  

CSPC Pharmaceutical Group, Ltd. (China)

     103,408        106,217  

Fleury, S.A. (Brazil)

     57,322        205,851  

Jinxin Fertility Group, Ltd. (China)1

     39,500        19,471  

Lepu Medical Technology Beijing Co., Ltd., Class A (China)

     23,800        82,516  

Odontoprev, S.A. (Brazil)

     85,461        136,327  

Syngene International, Ltd. (India)1

     6,010        45,857  

Total Health Care

        789,209  

Industrials - 5.6%

     

Contemporary Amperex Technology Co., Ltd., Class A (China)

     4,100        210,411  

Copa Holdings, S.A., Class A (Panama)*

     2,550        191,837  

Grupo Aeroportuario del Pacifico, S.A.B de CV, Class B (Mexico)

     22,955        356,044  

International Container Terminal Services, Inc. (Philippines)

     32,100        96,225  

Shenzhen Inovance Technology Co., Ltd., Class A (China)

     5,900        54,055  

Total Industrials

        908,572  

Information Technology - 22.7%

     

Advantech Co., Ltd. (Taiwan)

     10,727        97,183  

Delta Electronics, Inc. (Taiwan)

     28,100        223,587  

FPT Corp. (Vietnam)

     20,000        60,857  

Globant SA (Uruguay)*

     800        150,944  

Infosys, Ltd., Sponsored ADR (India)

     5,676        106,311  

MediaTek, Inc. (Taiwan)

    

 

12,000

 

 

 

    

 

218,738

 

 

 

 

 

 

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

16


Table of Contents
   

    

AMG GW&K Emerging Markets Equity Fund

Schedule of Portfolio Investments (continued)

 

 

 

     

    

Shares

     Value  

Information Technology - 22.7%
(continued)

     

Pagseguro Digital, Ltd., Class A (Brazil)*

     3,838        $52,504  

Samsung Electronics Co., Ltd. (South Korea)

     22,067        918,425  

Silergy Corp. (China)

     4,000        46,127  

SK Hynix, Inc. (South Korea)

     5,884        340,634  

Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan)

     99,632        1,197,797  

Tata Consultancy Services, Ltd. (India)

     2,184        84,285  

TOTVS, S.A. (Brazil)

     25,300        163,540  

Total Information Technology

        3,660,932  

Total Common Stocks
(Cost $15,063,802)

        16,010,815  

Rights - 0.0%#

 

  

Health Care - 0.0%#

     

Fleury, S.A., Expiration 11/25/22 (Brazil)* (Cost $0)

     12,746        3,208  

 

 

* 

Non-income producing security.

 

# 

Less than 0.05%.

 

1 

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 October 31, 2022, the value of these securities amounted to $889,441 or 5.5% of net assets.

      Principal
Amount
     Value  

Short-Term Investments - 2.9%

 

  

Joint Repurchase Agreements - 2.4%3

 

  

National Bank Financial, dated 10/31/22, due 11/01/22, 3.090% total to be received $383,247 (collateralized by various U.S. Treasuries, 0.000% - 4.078%, 11/01/22 - 09/09/49, totaling $390,878)

     $383,214        $383,214  

Repurchase Agreements - 0.5%

 

  

Fixed Income Clearing Corp., dated 10/31/22, due 11/01/22, 2.900% total to be received $85,007 (collateralized by a U.S. Treasury, 1.625%, 05/15/31, totaling $86,772)

     85,000        85,000  

Total Short-Term Investments
(Cost $468,214)

        468,214  

Total Investments - 102.3%
(Cost $15,532,016)

        16,482,237  

Other Assets, less Liabilities - (2.3)%

 

     (372,047

Net Assets - 100.0%

      $ 16,110,190  

 

2 

Some of these securities, amounting to $637,837 or 4.0% 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.

 

3 

Cash collateral received for securities lending activity was invested in the joint repurchase agreement.

ADR    American Depositary Receipt

 

 

 

 

 

 

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

17


Table of Contents
   

    

AMG GW&K Emerging Markets Equity 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 October 31, 2022:

 

     Level 1      Level 21      Level 3      Total  

  Investments in Securities

           

Common Stocks

           

Financials

     $1,043,717        $3,383,721               $4,427,438  

Information Technology

     473,299        3,187,633               3,660,932  

Consumer Discretionary

     1,198,274        1,751,461               2,949,735  

Communication Services

     281,220        1,101,579               1,382,799  

Consumer Staples

     680,466        619,584               1,300,050  

Industrials

     547,881        360,691               908,572  

Health Care

     342,178        447,031               789,209  

Energy

            592,080               592,080  

Rights

           

Health Care

     3,208                      3,208  

Short-Term Investments

           

Joint Repurchase Agreements

            383,214               383,214  

Repurchase Agreements

            85,000               85,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

  Total Investments in Securities

  

$

4,570,243

 

  

$

11,911,994

 

  

 

 

  

$

16,482,237

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 

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 October 31, 2022, there were no transfers in or out of Level 3.

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

 

 Country    % of Long-Term
Investments

 Brazil

     7.3

 China

   27.7

 Hong Kong

     2.0

 India

   16.8

 Indonesia

     4.5

 Macau

     1.1

 Mexico

     7.7

 Netherlands

     1.2

 Panama

     1.2

 Philippines

     2.6

 

 Country    % of Long-Term
Investments

 Poland

       1.2

 South Africa

       2.8

 South Korea

       9.1

 Taiwan

     12.1

 Thailand

       0.5

 United Kingdom

       0.4

 Uruguay

       0.9

 Vietnam

       0.9
  

 

     100.0
  

 

 

 

 

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

18


Table of Contents
    

 

    

AMG GW&K Emerging Wealth Equity Fund

Portfolio Manager’s Comments (unaudited)

 

   

    

 

      

 

MARKET OVERVIEW

 

Emerging markets fell sharply during the fiscal year ended October 31, 2022, amid Russia’s invasion of Ukraine, numerous headwinds in China, and a challenging inflation backdrop that saw several countries aggressively tighten monetary policy. Brent Crude oil initially traded above the $100/barrel level for the first time in seven years on U.S. sanctions targeting Russia’s energy industry. Other commodity prices were mixed; grains were well supported, but metals dropped on recession concerns. The MSCI Emerging Markets (“EM”) Index declined (31.0)%, while the MSCI EM ex China Index declined (21.9)%. This compares to an (18.5)% loss for the MSCI World Index of developed markets.

 

Performance was mixed geographically, with commodity rich Latin America a standout performer, gaining 16.1% led by Brazil. The region is expected to benefit from the conflict-driven surge in energy and agricultural commodity prices. EMEA oil producers in the Persian Gulf posted respectable gains—but Russia’s elimination from the MSCI EM Index weighed on the region’s aggregate performance. Eastern European countries with proximity to the conflict and trade ties to Russia also capped gains in the EMEA region. North Asia was particularly weak due to external demand worries and ongoing market pressure in China. South Korea and Taiwan both fell sharply on the backup in U.S. interest rates and slowing demand in the IT hardware and semiconductor industries. Foreign investors shed Chinese equities en masse due to the country’s growth stifling Covid-zero policy, ongoing real estate industry turmoil, and President Xi’s consolidation of power at the National Party Congress. The MSCI China Index declined (47.9)%, bringing its index weight down to 27% from 35% at the beginning of the period. Indonesia bucked the negative trend in Asia, rising modestly on positive earnings momentum. Sector performance was broadly negative, with utilities down modestly compared to the broader group. Financials also outperformed on a relative basis as investors looked to banks as proxies for several commodity producing countries including South Africa, UAE, and Brazil. Consumer

      

discretionary, communication services, and health care declined on China concerns, while slowing orders weighed on information technology.

 

FUND REVIEW

 

For the fiscal year ended October 31, 2022, AMG GW&K Emerging Wealth Equity Fund (the “Fund”) Class N shares returned (33.9)%, underperforming the MSCI EM Index, which returned (31.0)%. This was primarily due to our strategic focus on the benefits of wealth creation in emerging markets, which generally leads to higher portfolio exposure in consumer related industries and China. Both market segments underperformed materially over the past 12 months, causing sector and country allocation to negatively impact the Fund’s relative performance. Encouragingly, stock selection in China, which averaged 54% of the Fund, and consumer discretionary, which averaged 32%, was positive. The Fund’s top performing company was China Resources Sanjiu Medical & Pharmaceutical, a branded OTC drug and traditional Chinese medicine (TCM) specialist that delivered solid earnings due to market share gains and cost optimization. Although markets proved challenging this year, there were a few companies that bucked the downward trend including India’s Eicher Motors, which reported better-than-expected margins due to improving volumes and mix benefits, and Titan Company, which benefited from resilient jewelry demand in India. Wal-Mart de Mexico, also rebounded late in the period on the company’s continued market share gains.

 

Still, it was difficult to avoid the market turmoil and several of the portfolio’s holdings sold off as market sentiment turned more bearish. Southeast Asian internet platform, Sea Ltd. dropped sharply on mounting competition amid heavy selling of global growth stocks. Chinese ecommerce and internet platform giants Alibaba Group Holdings and Tencent Holdings were hard hit by regulatory uncertainty and slowing consumption. Power semiconductor producer, Infineon Technologies declined on near-term margin concerns as the company ramps up higher generation fabrication plants.

 

      

OUTLOOK

 

Emerging markets are now at levels not seen since early in the pandemic or, looking further back, 2015. Although there are several pressing issues circulating in world capital markets that won’t immediately be resolved, emerging market valuations are clearly compelling, even when factoring in lower near-term growth. The (40)% decline since their February 2021 peak brings the 2023 and 2024 estimated PE ratios to 10.5x and 9.3x, respectively. To be sure, the global backdrop remains turbulent, as developed market central banks continue to hike interest rates and China remains entangled in multiple layers of economic and political uncertainty. Still, this presents a unique opportunity for us to invest in quality businesses that are benefiting from the ongoing economic development of emerging markets but are often fully priced. In addition, history shows that MSCI EM Index has troughed ahead of the S&P 500® Index in four of the 10 prior bear markets and on the same date as the S&P® 500 Index on three occasions. Given that China is more likely to be stimulating their economy when other major nations are still curbing growth, we suspect that MSCI EM Index will trough ahead of developed market in this cycle.

 

With respect to the Fund’s structure, trading and market activity during the fiscal year resulted in increased exposure to financials, consumer staples, and industrials, while consumer discretionary, health care, and communication services declined. At the close of the period, the Fund had overweight positions in the consumer discretionary, health care, and financials sectors and underweight positions in the information technology, materials, energy, and industrials sectors relative to the benchmark. Geographically, the portfolio finished the fiscal year with exposures of 78.9% in Asia, 16.0% in Developed Markets, and 3.2% in Latin America.

 

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

 

 

19


Table of Contents
    

 

    

AMG GW&K Emerging Wealth Equity Fund

Portfolio Manager’s Comments (continued)

 

   

    

 

      

 

CUMULATIVE TOTAL RETURN PERFORMANCE

AMG GW&K Emerging Wealth Equity 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. This graph compares a hypothetical $10,000 investment made in the AMG GW&K Emerging Wealth Equity Fund’s Class N shares on March 19, 2015 (inception date), to a $10,000 investment made in the MSCI Emerging Markets 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 excludes 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 Emerging Wealth Equity Fund and the MSCI Emerging Markets Index for the same time periods ended October 31, 2022.

 

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

AMG GW&K Emerging Wealth Equity Fund2, 3, 4, 5, 6, 7, 8, 9

Class N

   (33.89%)   (4.78%)   0.23%   03/19/15

Class I

   (33.68%)   (4.51%)   0.49%   03/19/15

Class Z

   (33.61%)   (4.42%)   0.60%   03/19/15

MSCI Emerging Markets Index10

   (31.03%)   (3.09%)   0.73%   03/19/15

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 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 October 31, 2022. All returns are in U.S. Dollars ($).

 

2  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.

 

3  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.

 

4  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.

 

5  The Fund may invest in derivatives such as options and futures; the complexity and rapidly changing structure of derivatives markets may increase the possibility of market losses.

 

6  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.

 

7  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.

 

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  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.

 

10 The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. Please go to msci.com for most current list of countries represented by the index. Unlike the Fund, the MSCI Emerging Markets Index is unmanaged, is not available for investment and does not incur expenses.

    

 

 

 

20


Table of Contents
    

 

    

AMG GW&K Emerging Wealth Equity Fund

Portfolio Manager’s Comments (continued)

 

   

    

 

      

 

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.

    

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

 

 

21


Table of Contents
   

AMG GW&K Emerging Wealth Equity Fund

Fund Snapshots (unaudited)

October 31, 2022

 

 

 

PORTFOLIO BREAKDOWN

 

    Sector   

% of

Net Assets

 

Consumer Discretionary

       32.0
 

Financials

       24.8
 

Information Technology

       15.1
 

Consumer Staples

       7.1
 

Communication Services

       7.0
 

Health Care

       6.0
 

Industrials

       3.6
 

Materials

       3.0
 

Short-Term Investments

       1.7
 

Other Assets, Less Liabilities

       (0.3 )

TOP TEN HOLDINGS

 

    Security Name    % of
Net Assets
 

HDFC Bank, Ltd., ADR (India)

       5.6    
 

Kotak Mahindra Bank, Ltd. (India)

       5.4    
 

Trip.com Group, Ltd., ADR (China)

       5.1    
 

Yum China Holdings, Inc. (China)

       4.7    
 

QUALCOMM, Inc.

       4.4    
 

Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan)

       4.3    
 

Sands China, Ltd. (Macau)

       4.2    
 

Infineon Technologies AG (Germany)

       3.9    
 

AIA Group, Ltd. (Hong Kong)

       3.7    
 

Alibaba Group Holding, Ltd. (China)

       3.3    
      

 

 

 
 

Top Ten as a Group

 

           44.6    
    

 

 

 
 

 

 

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.

 

 

22


Table of Contents
   

AMG GW&K Emerging Wealth Equity Fund

Schedule of Portfolio Investments

October 31, 2022

 

 

 

      Shares      Value  

Common Stocks - 98.6%

     

Communication Services - 7.0%

 

  

Baidu, Inc., Class A (China)*

     167,100        $1,601,988  

Kingsoft Corp., Ltd. (China)

     199,500        604,115  

Sea, Ltd., ADR (Singapore)*

     7,000        347,760  

Tencent Holdings, Ltd. (China)

     89,340        2,347,569  

The Walt Disney Co. (United States)*

     1,778        189,428  

Total Communication Services

        5,090,860  

Consumer Discretionary - 32.0%

 

  

Alibaba Group Holding, Ltd. (China)*

     308,948        2,402,042  

Eicher Motors, Ltd. (India)

     21,710        1,011,544  

H World Group Ltd., ADR (China)

     86,759        2,349,434  

Haidilao International Holding, Ltd. (China)*,1

     681,000        1,011,171  

Hermes International (France)

     389        503,516  

JD.com, Inc., Class A (China)

     14,650        266,784  

Jubilant Foodworks, Ltd. (India)

     109,610        808,585  

Li Ning Co., Ltd. (China)

     159,500        825,081  

LVMH Moet Hennessy Louis Vuitton SE (France)

     736        464,412  

MakeMyTrip, Ltd. (India)*

     53,109        1,478,024  

Moncler SpA (Italy)2

     13,003        561,005  

Sands China, Ltd. (Macau)*

     1,724,090        3,014,096  

Titan Co., Ltd. (India)

     38,010        1,268,320  

Trip.com Group, Ltd., ADR (China)*

     163,242        3,694,166  

Yum China Holdings, Inc. (China)

     82,478        3,410,465  

Total Consumer Discretionary

        23,068,645  

Consumer Staples - 7.1%

     

Angel Yeast Co., Ltd., Class A (China)

     38,850        193,204  

The Estee Lauder Cos., Inc., Class A (United States)

     1,465        293,718  

Foshan Haitian Flavouring & Food Co., Ltd., Class A (China)

     96,810        793,447  

Wal-Mart de Mexico, S.A.B. de CV (Mexico)

     381,820        1,475,016  

Wuliangye Yibin Co., Ltd., Class A (China)

     128,203        2,349,797  

Total Consumer Staples

        5,105,182  

Financials - 24.8%

     

AIA Group, Ltd. (Hong Kong)

     354,530        2,685,492  

Bank Central Asia Tbk PT (Indonesia)

     1,031,400        583,027  

China International Capital Corp., Ltd., Class H (China)1

     1,724,900        2,397,128  

East Money Information Co., Ltd., Class A (China)

     463,174        992,903  

HDFC Bank, Ltd., ADR (India)

     64,673        4,029,775  

HDFC Life Insurance Co., Ltd. (India)1

     350,320        2,289,393  

Hong Kong Exchanges & Clearing, Ltd. (Hong Kong)

     37,650        999,367  
      Shares      Value  

Kotak Mahindra Bank, Ltd. (India)

     169,126        $3,894,145  

Total Financials

        17,871,230  

Health Care - 6.0%

     

China Resources Sanjiu Medical & Pharmaceutical Co., Ltd., Class A (China)

     122,812        918,568  

CSPC Pharmaceutical Group, Ltd. (China)

     1,437,600        1,476,648  

Novo Nordisk A/S, Class B (Denmark)

     17,714        1,926,066  

Total Health Care

        4,321,282  

Industrials - 3.6%

     

Contemporary Amperex Technology Co., Ltd., Class A (China)

     26,100        1,339,445  

Copa Holdings, S.A., Class A (Panama)*

     6,245        469,811  

Shenzhen Inovance Technology Co., Ltd., Class A (China)

     84,300        772,345  

Total Industrials

        2,581,601  

Information Technology - 15.1%

 

  

Beijing Kingsoft Office Software, Inc., Class A (China)

     7,000        279,616  

Dlocal, Ltd. (Uruguay)*,2

     16,460        367,058  

Infineon Technologies AG (Germany)

     114,945        2,789,196  

Mastercard, Inc., Class A (United States)

     3,420        1,122,375  

QUALCOMM, Inc. (United States)

     27,274        3,209,059  

Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan)

     257,500        3,095,719  

Total Information Technology

        10,863,023  

Materials - 3.0%

     

Asian Paints, Ltd. (India)

     23,578        887,548  

Chr Hansen Holding A/S (Denmark)2

     10,833        601,677  

Skshu Paint Co., Ltd., Class A (China)*

     59,250        707,433  

Total Materials

        2,196,658  

Total Common Stocks
(Cost $78,787,366)

        71,098,481  
    

Principal

Amount

        

Short-Term Investments - 1.7%

 

  

Joint Repurchase Agreements - 1.7%3

 

  

Citigroup Global Markets, Inc., dated 10/31/22, due 11/01/22, 3.000% total to be received $256,679 (collateralized by various U.S. Treasuries, 0.125% - 4.375%, 11/15/31 - 02/15/52, totaling $261,945)

     $256,658        256,658  
 

 

 

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

23


Table of Contents
   

AMG GW&K Emerging Wealth Equity Fund

Schedule of Portfolio Investments (continued)

 

 

 

      Principal
Amount
     Value  

Joint Repurchase Agreements - 1.7%3
(continued)

 

  

RBC Dominion Securities, Inc., dated 10/31/22, due 11/01/22, 3.050% total to be received $1,000,085 (collateralized by various U.S. Government Agency Obligations and U.S. Treasuries, 0.500% - 5.000%, 02/28/26 - 10/20/52, totaling $1,020,000)

   $ 1,000,000        $1,000,000  

Total Short-Term Investments
(Cost $1,256,658)

        1,256,658  
     

    

                

     Value  

Total Investments - 100.3%
(Cost $80,044,024)

      $ 72,355,139  

Other Assets, less Liabilities - (0.3)%

 

     (231,474

Net Assets - 100.0%

      $ 72,123,665  
 

 

* 

Non-income producing security.

 

1 

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 October 31, 2022, the value of these securities amounted to $5,697,692 or 7.9% of net assets.

 

2 

Some of these securities, amounting to $1,183,977 or 1.6% of net assets, were out on loan to various borrowers and are collateralized by cash. See Note 4 of Notes to Financial Statements.

3 

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

ADR     American Depositary Receipt

 

 

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

 

     Level 1      Level 21      Level 3      Total  

  Investments in Securities

           

Common Stocks

           

Consumer Discretionary

   $ 10,932,089      $ 12,136,556             $ 23,068,645  

Financials

     4,029,775        13,841,455               17,871,230  

Information Technology

     4,698,492        6,164,531               10,863,023  

Consumer Staples

     1,768,734        3,336,448               5,105,182  

Communication Services

     537,188        4,553,672               5,090,860  

Health Care

            4,321,282               4,321,282  

Industrials

     469,811        2,111,790               2,581,601  

Materials

            2,196,658               2,196,658  

Short-Term Investments

           

Joint Repurchase Agreements

            1,256,658               1,256,658  
  

 

 

    

 

 

    

 

 

    

 

 

 

  Total Investments in Securities

  

$

22,436,089

 

  

$

49,919,050

 

  

 

 

  

$

72,355,139

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 

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 October 31, 2022, there were no transfers in or out of Level 3.

 

 

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

24


Table of Contents
   

AMG GW&K Emerging Wealth Equity Fund

Schedule of Portfolio Investments (continued)

 

 

 

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

 

 Country    % of Long-Term
Investments

 China

     43.2

 Denmark

       3.6

 France

       1.4

 Germany

       3.9

 Hong Kong

       5.2

 India

     22.0

 Indonesia

       0.8

 Italy

       0.8

 Macau

       4.2

 Mexico

       2.1

 Panama

       0.7

 Singapore

       0.5

 Taiwan

       4.3

 United States

       6.8

 Uruguay

       0.5
  

 

     100.0
  

 

    

 

 

 

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

25


Table of Contents
    

 

    

AMG GW&K Small/Mid Cap Growth Fund

Portfolio Manager’s Comments (unaudited)

 

     
     

 

AMG GW&K Small/Mid Cap Growth Fund (the “Fund”) Class N shares outperformed its benchmark for the 12 months ended October 31, 2022, returning (23.88)% vs. the Russell 2500® Growth Index (the “Index”) return of (27.38)%.

 

MARKET OVERVIEW

 

For the year ended October 31, 2022, U.S. equity markets faced several macro challenges that produced difficult performance returns. Well-known issues including surging inflation, rapidly increasing interest rates, the Russia/Ukraine war, elevated commodity prices and COVID-restrained growth in China compressed valuation multiples and challenged corporate profits. While October witnessed a strong rally, double-digit declines were posted by the major averages over the full year. Domestic small/mid cap equities slightly underperformed larger cap stocks, reflected by the Russell 2500® Index moving (17.58)% lower, compared to the (14.61)% decline in the S&P 500® Index. Cyclical and defensive stocks helped small/mid value stocks produce better relative returns while valuation compression, most noticeably in health care and information technology, caused small/mid growth stocks to give back a large portion of prior appreciation.

 

FUND REVIEW

 

The Fund fell sharply during the year but still outperformed its benchmark. Stock selection was the primary driver of the outperformance. Health care was the largest contributor with a broad number of holdings playing a role. Better than expected patient volumes and revenue/day metrics pushed Acadia Healthcare 31.1% higher while its peer group fell

  

(22.5)%. HealthEquity, a provider of health savings account platforms, continued to increase its market share and benefited from higher interest rates. In biopharma, a focus on companies with promising new products and late-stage commercial pipelines enabled Halozyme Therapeutics and Neurocrine Biosciences to post positive returns and attracted takeover bids for Biohaven Pharmaceuticals and Arena Pharmaceuticals. Industrials saw multiple areas of performance support. The successful integration of an acquisition moved RBC Bearings into a high single-digit gain. Billings and pipelines that were above expectations lifted consulting firms Booz Allen Hamilton Holdings and CACI International. A timely purchase of IDEX resulted in respectable contribution. Although slightly lower over the year, Ritchie Bros. Auctioneers, Ingersoll Rand, and Graco added to relative returns. Shifting to consumer discretionary, Grand Canyon Education reported an inflection in new online student starts in the September quarter and raised guidance for the balance of 2022. Texas Roadhouse beat consensus earnings expectations and posted impressive comparable restaurant sales of 8.2%.

 

Fund sectors lagging the Index included information technology and financials. Two stocks accounted for the information technology underperformance. Cerence reported disappointing earnings and turnover in the executive suite and was sold. HubSpot’s results over the past year were quite respectable, but investors fretted over the company’s meaningful exposure to overseas markets and small and medium sized businesses. In financials, most of the underperformance was explained by MarketAxess Holdings. The stock was weak due to investor concerns about market share, and the

  

uptick in interest rates pressured high multiple equities like MarketAxess. Looking at relative performance through a factor lens, the Fund’s allocation toward higher quality stocks helped results by about 130 basis points based on an average of seven factors, with earnings being the most prominent factor.

 

OUTLOOK

 

Looking forward, we anticipate the U.S. Federal Reserve’s (the Fed) commitment to higher interest rates and their impact on U.S. economic growth and corporate profits are likely to keep market volatility in an elevated status. Our current base case is that a deeper and/or more prolonged U.S. recession can still be avoided. In our view, the steep decline in the Index would indicate that investors are certainly not ignoring the potential for lower corporate earnings power or the effects of higher interest rates. On a positive note, compression in P/E multiples for small/mid cap growth stocks has created more attractive valuations in this complex climate. Our strategy is to invest and hold companies with strengths in competitive position, financials, and management where the stocks appear reasonably priced relative to risks. This approach has served us well in the past and we will stick with it during these challenging times.

 

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

 

 

26


Table of Contents
    

 

    

AMG GW&K Small/Mid Cap Growth Fund

Portfolio Manager’s Comments (continued)

 

   

    

 

     

 

CUMULATIVE TOTAL RETURN PERFORMANCE

AMG GW&K Small/Mid Cap Growth 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 Growth Fund’s Class N shares on October 31, 2012, to a $10,000 investment made in the Russell 2500® Growth 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 excludes 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 Growth Fund and the Russell 2500® Growth Index for the same time periods ended October 31, 2022.

 

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

AMG GW&K Small/Mid Cap Growth Fund2, 3, 4, 5, 6, 7, 8, 9, 10, 11

 

Class N

  (23.88%)     9.06%       10.29%        9.71%        11/03/10  

Class I

  (23.82%)     9.25%       10.52%        8.40%        06/01/11  

Class Z

  (23.76%)                  (18.65%)        08/31/21  

Russell 2500® Growth Index12

  (27.38%)     7.41%       11.38%        11.20%         11/03/10  

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 October 31, 2022. All returns are in U.S. Dollars ($).

 

2  As of March 19, 2021, the Fund’s subadviser was changed to GW&K Investment Management, LLC. Prior to March 19, 2021, the Fund was known as the AMG Managers LMCG Small Cap Growth Fund and had different principal investment strategies and corresponding risks. Effective March 19, 2021, the Fund changed its name to AMG GW&K Small Cap Fund II. Effective May 21, 2021, the Fund changed its name to AMG GW&K Small/Mid Cap Growth Fund and made changes to its principal investment strategies. Performance shown for periods prior to March 19, 2021, reflects the performance and investment strategies of the Fund’s previous subadviser, LMCG Investments, LLC. The Fund’s past performance would have been different if the Fund were managed by the current subadviser and strategy, and the Fund’s prior performance record might be less pertinent for investors considering whether to purchase shares of the Fund.

 

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

 

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  Active and frequent trading of a fund may result in higher transaction costs and increased tax liability.

 

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  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  Investing in initial public offerings (IPOs) is risky and the prices of stocks purchased in IPOs tend to fluctuate more widely than stocks of companies that have been publicly traded for a longer period of time. Stocks purchased in IPOs generally do not have a trading history, and information about the companies may be available for very limited periods.

 

9  The Fund is subject to risks associated with investments in mid-capitalization companies such as greater price volatility, lower trading volume, and

    

 

 

 

27


Table of Contents
    

 

    

AMG GW&K Small/Mid Cap Growth Fund

Portfolio Manager’s Comments (continued)

 

   

    

 

     

 

   less liquidity than the stocks of larger, more established companies.

 

10 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.

 

11 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.

 

12 The Russell 2500® Growth Index measures the performance of the small- to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500® companies with higher price-to-book ratios and higher forecasted growth values. Unlike the Fund, the Russell 2500® Growth

    

  

   Index is unmanaged, is not available for investment and does not incur expenses.

 

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

 

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

 

 

28


Table of Contents
    

 

AMG GW&K Small/Mid Cap Growth Fund

Fund Snapshots (unaudited)

October 31, 2022

 

   

    

 

     

 

 

PORTFOLIO BREAKDOWN

 

   Sector    % of
Net Assets
 
Health Care    22.9
 
Information Technology    22.1
 
Industrials    18.7
 
Consumer Discretionary    15.6
 
Energy      6.1
 
Financials      5.6
 
Materials      3.4
 
Consumer Staples      1.6
 
Real Estate      1.2
 
Short-Term Investments      3.7
 
Other Assets, Less Liabilities    (0.9)

 

TOP TEN HOLDINGS

 

   Security Name   % of
Net Assets
 
 

Paylocity Holding Corp.

    2.7      
 

RBC Bearings, Inc.

    2.4      
 

HubSpot, Inc.

    2.3      
 

Ritchie Bros. Auctioneers, Inc. (Canada)

    2.3      
 

Matador Resources Co.

    2.2      
 

Manhattan Associates, Inc.

    2.2      
 

Atkore, Inc.

    2.0      
 

Texas Roadhouse, Inc.

    2.0      
 

Five Below, Inc.

    1.9      
 

Globant SA (Uruguay)

    1.9      
 

 

 

 
 

Top Ten as a Group

 

        21.9      
 

 

 

 
 

 

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.

 

 

 

29


Table of Contents
    

 

AMG GW&K Small/Mid Cap Growth Fund

Schedule of Portfolio Investments

October 31, 2022

 

   

    

 

      

 

     

    

Shares

     Value  

Common Stocks - 97.2%

     

Consumer Discretionary - 15.6%

 

  

Bright Horizons Family Solutions, Inc.*

     2,006        $131,032  

Burlington Stores, Inc.*,1

     3,129        447,322  

Churchill Downs, Inc.

     2,280        474,035  

Five Below, Inc.*

     4,153        607,792  

Grand Canyon Education, Inc.*

     4,669        469,841  

Holley, Inc.*,1

     30,100        119,798  

Krispy Kreme Inc.

     21,435        307,592  

Lithia Motors, Inc., Class A

     1,194        236,591  

LKQ Corp.

     9,899        550,780  

Pool Corp.

     1,290        392,457  

Revolve Group, Inc.*,1

     13,855        332,520  

Texas Roadhouse, Inc.

     6,403        633,577  

Vail Resorts, Inc.

     989        216,720  

Total Consumer Discretionary

        4,920,057  

Consumer Staples - 1.6%

     

Performance Food Group Co.*

     5,475        284,919  

PriceSmart, Inc.

     3,156        201,889  

Total Consumer Staples

        486,808  

Energy - 6.1%

     

ChampionX Corp.

     16,700        477,954  

Matador Resources Co.

     10,650        707,692  

Ovintiv, Inc.

     6,850        346,953  

SM Energy Co.

     8,750        393,575  

Total Energy

        1,926,174  

Financials - 5.6%

     

Evercore, Inc., Class A

     2,748        288,815  

Houlihan Lokey, Inc.

     4,950        442,134  

MarketAxess Holdings, Inc.

     1,471        358,983  

Pinnacle Financial Partners, Inc.

     5,045        418,685  

Signature Bank

     1,680        266,330  

Total Financials

        1,774,947  

Health Care - 22.9%

     

ABIOMED, Inc.*

     1,175        296,194  

Acadia Healthcare Co., Inc.*

     6,122        497,719  

Albireo Pharma, Inc.*,1

     13,484        276,692  

Azenta, Inc.

     6,982        310,001  

Bio-Rad Laboratories, Inc., Class A*

     607        213,488  

Catalent, Inc.*

     5,391        354,350  

Chemed Corp.

     636        296,929  

CryoPort, Inc.*

     6,983        193,848  

Globus Medical, Inc., Class A*

    

 

8,530

 

 

 

    

 

571,510

 

 

 

     

    

Shares

     Value  

Halozyme Therapeutics, Inc.*

     11,599        $554,548  

HealthEquity, Inc.*

     6,857        534,229  

Horizon Therapeutics Plc*

     4,358        271,590  

ICU Medical, Inc.*

     863        128,078  

Integra LifeSciences Holdings Corp.*

     6,534        328,333  

Intra-Cellular Therapies, Inc.*

     5,993        273,700  

Medpace Holdings, Inc.*

     2,493        553,396  

Neurocrine Biosciences, Inc.*

     4,316        496,858  

Oyster Point Pharma, Inc.*,1

     18,021        141,285  

Phathom Pharmaceuticals, Inc.*

     20,238        214,523  

Syneos Health, Inc.*

     7,160        360,721  

West Pharmaceutical Services, Inc.

     1,599        367,930  

Total Health Care

        7,235,922  

Industrials - 18.7%

     

Atkore, Inc.*

     6,733        641,655  

Booz Allen Hamilton Holding Corp.

     3,600        391,860  

CACI International, Inc., Class A*

     1,418        431,114  

Dycom Industries, Inc.*

     2,035        240,496  

Gibraltar Industries, Inc.*

     1,893        96,694  

Graco, Inc.

     5,932        412,749  

IDEX Corp.

     1,800        400,158  

Ingersoll Rand, Inc.

     9,482        478,841  

Knight-Swift Transportation Holdings, Inc.

     5,822        279,631  

RBC Bearings, Inc.*

     3,000        760,590  

Ritchie Bros. Auctioneers, Inc. (Canada)

     10,983        717,519  

SiteOne Landscape Supply, Inc.*

     4,734        548,529  

The Toro Co.

     4,560        480,761  

Total Industrials

        5,880,597  

Information Technology - 22.1%

     

Cognex Corp.

     12,121        560,354  

CyberArk Software, Ltd. (Israel)*

     2,060        323,235  

The Descartes Systems Group, Inc. (Canada)*

     5,712        394,528  

Entegris, Inc.

     5,504        436,687  

Globant SA (Uruguay)*

     3,163        596,795  

HubSpot, Inc.*

     2,484        736,655  

MACOM Technology Solutions Holdings, Inc.*

     5,365        310,472  

Manhattan Associates, Inc.*

     5,722        696,196  

Paycor HCM, Inc.*

     13,735        418,505  

Paylocity Holding Corp.*

     3,675        851,828  

Power Integrations, Inc.

     4,215        281,183  

Rapid7, Inc.*

     4,883        221,053  

Silicon Laboratories, Inc.*

     2,132        245,009  

SS&C Technologies Holdings, Inc.

    

 

4,090

 

 

 

    

 

210,308

 

 

 

 

 

 

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

30


Table of Contents
    

 

    

AMG GW&K Small/Mid Cap Growth Fund

Schedule of Portfolio Investments (continued)

 

   

    

 

     

 

     

    

Shares

     Value  

Information Technology - 22.1%

     

(continued)

     

Tyler Technologies, Inc.*

     851        $275,154  

Zebra Technologies Corp., Class A*

     1,494        423,131  

Total Information Technology

        6,981,093  

Materials - 3.4%

     

AptarGroup, Inc.

     2,909        288,427  

Avient Corp.

     6,182        213,217  

Eagle Materials, Inc.

     1,199        146,650  

RPM International, Inc.

     4,507        426,227  

Total Materials

        1,074,521  

Real Estate - 1.2%

     

Sun Communities, Inc., REIT

     2,776        374,344  

Total Common Stocks
(Cost $34,265,445)

        30,654,463  
     Principal
Amount
        

Short-Term Investments - 3.7%

     

Joint Repurchase Agreements - 1.6%2

 

  

Citigroup Global Markets, Inc., dated 10/31/22, due 11/01/22, 3.000% total to be received $510,000 (collateralized by various U.S. Treasuries, 0.125% - 4.375%, 11/15/31 - 02/15/52, totaling $520,462)

     $509,958        509,958  
      Principal
Amount
     Value  

Repurchase Agreements - 2.1%

 

  

Fixed Income Clearing Corp., dated 10/31/22, due 11/01/22, 2.900% total to be received $670,054 (collateralized by a U.S. Treasury, 1.625%, 05/15/31, totaling $683,465)

     $670,000        $670,000  

Total Short-Term Investments
(Cost $1,179,958)

        1,179,958  

Total Investments - 100.9%
(Cost $35,445,403)

        31,834,421  

Other Assets, less Liabilities - (0.9)%

        (289,265

Net Assets - 100.0%

        $31,545,156  

 

 

 

* 

Non-income producing security.

 

1 

Some of these securities, amounting to $1,104,767 or 3.5% 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

 

 

     Level 1      Level 2      Level 3      Total  

 Investments in Securities

           

Common Stocks

  

$

30,654,463

 

  

 

 

  

 

 

  

  $

30,654,463

 

Short-Term Investments

           

Joint Repurchase Agreements

          $ 509,958               509,958  

Repurchase Agreements

            670,000               670,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

 Total Investments in Securities

  

$

30,654,463

 

  

$

1,179,958

 

  

 

 

  

  $

31,834,421

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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 October 31, 2022, there were no transfers in or out of Level 3.

 

 

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

31


Table of Contents
    

 

    

Statement of Assets and Liabilities

October 31, 2022

 

   

    

 

     

 

 

     AMG GW&K
Core Bond
ESG Fund
   AMG GW&K
Emerging Markets
Equity Fund
   AMG GW&K
Emerging Wealth
Equity Fund
   AMG GW&K
Small/Mid Cap
Growth Fund

 Assets:

                   

 Investments at value1 (including securities on loan valued at $151,198, $637,837, $1,183,977, and $1,104,767, respectively)

       $140,328,417        $16,482,237        $72,355,139        $31,834,421

 Cash

       594,678        4,683               266,970

 Foreign currency2

              44,625        896,319       

 Receivable for investments sold

              116,197        807,033       

 Dividend and interest receivables

       1,093,081        8,828        86,527        7,104

 Securities lending income receivable

              380        174        289

 Receivable for Fund shares sold

       1,328        171        2,525        907

 Receivable from affiliate

       163        18,891        11,356        9,896

 Prepaid expenses and other assets

 

      

 

13,788

 

 

      

 

3,423

 

 

      

 

8,528

 

 

      

 

7,852

 

 

 Total assets

       142,031,455        16,679,435        74,167,601        32,127,439

 Liabilities:

                   

 Payable upon return of securities loaned

       157,604        383,214        1,256,658        509,958

 Payable for investments purchased

              39,275              

 Payable for Fund shares repurchased

       13,017        52,417        325,886        105

 Payable for foreign capital gains tax

                     24,233       

 Due to custodian

                     252,217       

 Accrued expenses:

                   

 Investment advisory and management fees

       36,550        7,968        37,457        15,862

 Administrative fees

       18,275        2,173        10,216        3,838

 Distribution fees

       364        43        75        6,046

 Shareholder service fees

              1,747        947        268

 Other

 

      

 

89,068

 

 

      

 

82,408

 

 

      

 

136,247

 

 

      

 

46,206

 

 

 Total liabilities

       314,878        569,245        2,043,936        582,283

 

                   

  Net Assets

       $141,716,577        $16,110,190        $72,123,665        $31,545,156

  1 Investments at cost

       $166,058,547        $15,532,016        $80,044,024        $35,445,403

  2 Foreign currency at cost

              $45,913        $941,300       

 

 

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

32


Table of Contents
    

 

    

    

Statement of Assets and Liabilities (continued)

 

   

    

 

     

 

 

     AMG GW&K
Core Bond
ESG Fund
  AMG GW&K
Emerging Markets
Equity Fund
  AMG GW&K
Emerging Wealth
Equity Fund
  AMG GW&K
Small/Mid Cap
Growth Fund

  Net Assets Represent:

                

  Paid-in capital

       $171,061,413       $20,590,248       $107,268,377       $34,738,637

  Total distributable loss

       (29,344,836 )       (4,480,058 )       (35,144,712 )       (3,193,481 )

  Net Assets

       $141,716,577       $16,110,190       $72,123,665       $31,545,156

  Class N:

                

  Net Assets

       $1,715,755       $180,081       $329,551       $24,993,735

  Shares outstanding

       200,490       26,074       37,613       1,858,483

  Net asset value, offering and redemption price per share

       $8.56       $6.91       $8.76       $13.45

  Class I:

                

  Net Assets

       $137,805,654       $8,519,686       $39,367,094       $6,539,630

  Shares outstanding

       16,094,762       1,246,241       4,433,508       466,712

  Net asset value, offering and redemption price per share

       $8.56       $6.84       $8.88       $14.01

  Class Z:

                

  Net Assets

       $2,195,168       $7,410,423       $32,427,020       $11,791

  Shares outstanding

       256,574       1,089,990       3,654,553       841

  Net asset value, offering and redemption price per share

       $8.56       $6.80       $8.87       $14.02

 

 

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

33


Table of Contents
    

 

    

Statement of Operations

For the fiscal year ended October 31, 2022

 

   

    

 

      

 

 

     AMG GW&K
Core Bond
ESG Fund
  AMG GW&K
Emerging Markets
Equity Fund
  AMG GW&K
Emerging Wealth
Equity Fund
  AMG GW&K
Small/Mid Cap
Growth Fund

  Investment Income:

                

  Dividend income

             $909,142       $1,427,820       $145,683

  Interest income

       $3,989,503       173       282       133

  Securities lending income

       30       4,195       6,659       11,425

  Foreign withholding tax

             (120,540 )       (90,387 )       (2,854 )

  Total investment income

       3,989,533       792,970       1,344,374       154,387

  Expenses:

                

  Investment advisory and management fees

       505,313       247,455       847,647       217,378

  Administrative fees

       252,657       67,488       231,176       52,592

  Distribution fees - Class N

       4,705       770       1,518       53,569

  Shareholder servicing fees - Class N

       2,823       462       911      

  Shareholder servicing fees - Class I

       114,934       18,550       53,198       3,164

  Professional fees

       66,075       55,833       76,985       32,967

  Registration fees

       29,382       10,797       36,153       26,523

  Custodian fees

       26,347       69,061       155,861       20,104

  Transfer agent fees

       19,501       3,238       8,341       8,065

  Reports to shareholders

       11,612       7,981       23,440       12,441

  Trustee fees and expenses

       11,592       3,157       10,807       2,370

  Interest expense

             8,120       1,041      

  Miscellaneous

       8,016       4,111       8,104       4,200

  Total expenses before offsets

       1,052,957       497,023       1,455,182       433,373

  Expense reimbursements

       (121,994 )       (77,630 )       (11,356 )       (89,139 )

  Expense reductions

                         (2,196 )

  Net expenses

       930,963       419,393       1,443,826       342,038

  

                

  Net investment income (loss)

       3,058,570       373,577       (99,452 )       (187,651 )

  Net Realized and Unrealized Loss:

                

  Net realized gain (loss) on investments

       (3,645,263 )       (4,918,955 )       (25,349,394 )       687,666 1 
         

  Net realized loss on foreign currency transactions

             (60,876 )       (86,225 )      

  Net change in unrealized appreciation/depreciation on investments

       (30,052,410 )       (11,633,429 )       (37,837,055 )       (10,773,348 )

  Net change in unrealized appreciation/depreciation on foreign currency translations

             4,031       (48,355 )      

  Net realized and unrealized loss

       (33,697,673 )       (16,609,229 )       (63,321,029 )       (10,085,682 )

  

                

  Net decrease in net assets resulting from operations

       $(30,639,103)         $(16,235,652)         $(63,420,481)         $(10,273,333)  

1 Includes a non-recurring securities litigation gain of $316,570.

 

 

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

34


Table of Contents
    

 

    

Statements of Changes in Net Assets

For the fiscal years ended October 31,

 

   

    

 

      

 

 

     AMG GW&K
Core Bond ESG Fund
  AMG GW&K
Emerging Markets
Equity Fund
     2022   2021   2022   2021

 Increase (Decrease) in Net Assets Resulting From Operations:

        

Net investment income

     $3,058,570           $2,873,232         $373,577           $333,862    

Net realized gain (loss) on investments

     (3,645,263     4,909,231       (4,979,831     564,430  

Net change in unrealized appreciation/depreciation on investments

     (30,052,410     (7,605,124     (11,629,398     2,359,554  
        

Net increase (decrease) in net assets resulting from operations

     (30,639,103     177,339       (16,235,652     3,257,846  

 Distributions to Shareholders:

        

Class N

     (76,235     (21,649     (2,402     (17,233

Class I

     (7,327,695     (2,789,712     (249,212     (1,069,474

Class Z

     (112,920     (57,930     (382,214     (1,249,608

Total distributions to shareholders

     (7,516,850     (2,869,291     (633,828     (2,336,315

 Capital Share Transactions:1

        

Net increase (decrease) from capital share transactions

     (16,283,055     (9,231,990     (25,653,747     13,857,527  
        

Total increase (decrease) in net assets

     (54,439,008     (11,923,942     (42,523,227     14,779,058  

 Net Assets:

        

Beginning of year

     196,155,585       208,079,527       58,633,417       43,854,359  
        

End of year

     $141,716,577       $196,155,585       $16,110,190       $58,633,417  

1 See Note 1(g) of the Notes to Financial Statements.

 

 

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

35


Table of Contents
    

 

    

Statements of Changes in Net Assets (continued)

For the fiscal years ended October 31,

 

   

    

 

      

 

 

     AMG GW&K
Emerging Wealth
Equity Fund
    AMG GW&K
Small/Mid Cap
Growth Fund
 
     2022     2021     2022     2021  

 Increase (Decrease) in Net Assets Resulting From Operations:

        

Net investment loss

     $(99,452     $(547,863     $(187,651     $(375,973

Net realized gain (loss) on investments

     (25,435,619     2,871,609       687,666       16,012,613  

Net change in unrealized appreciation/depreciation on investments

     (37,885,410     (5,026,545     (10,773,348     (137,250
        

Net increase (decrease) in net assets resulting from operations

     (63,420,481     (2,702,799     (10,273,333     15,499,390  

 Distributions to Shareholders:

        

 From net investment income and/or realized gain on investments:

        

Class N

     (10,519                 (14,397,541

Class I

     (417,335                 (3,078,320

Class Z

     (1,915,232     (35,421            

 From paid-in capital:

        

Class N

                       (674,816

Class I

                       (144,282

Total distributions to shareholders

     (2,343,086     (35,421           (18,294,959

 Capital Share Transactions:1

        

Net increase (decrease) from capital share transactions

     (87,822,351     18,163,731       (2,280,329     11,502,921  
        

Total increase (decrease) in net assets

     (153,585,918     15,425,511       (12,553,662     8,707,352  

 Net Assets:

        

Beginning of year

     225,709,583       210,284,072       44,098,818       35,391,466  
        

End of year

     $72,123,665       $225,709,583       $31,545,156       $44,098,818  

1 See Note 1(g) of the Notes to Financial Statements.

 

 

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

36


Table of Contents
    

 

AMG GW&K Core Bond ESG Fund

Financial Highlights

For a share outstanding throughout each fiscal year

 

   

    

 

      

 

 

     For the fiscal years ended October 31,
 Class N    2022     2021     2020     2019     2018  

 Net Asset Value, Beginning of Year

     $10.75         $10.90         $10.53         $9.67         $10.14    

 Income (loss) from Investment Operations:

          

Net investment income1,2

     0.14       0.12       0.18       0.21       0.18  

Net realized and unrealized gain (loss) on investments

     (1.93     (0.15     0.37       0.86       (0.46

 

          

Total income (loss) from investment operations

     (1.79     (0.03     0.55       1.07       (0.28

 Less Distributions to Shareholders from:

          

Net investment income

     (0.15     (0.12     (0.18     (0.21     (0.19

Net realized gain on investments

     (0.25                        

 

          

Total distributions to shareholders

     (0.40     (0.12     (0.18     (0.21     (0.19

 Net Asset Value, End of Year

     $8.56       $10.75       $10.90       $10.53       $9.67  

 

          

 Total Return2,3

     (17.18 )%      (0.27 )%      5.31     11.20     (2.79 )% 

Ratio of net expenses to average net assets

     0.88     0.88     0.88     0.88     0.88

Ratio of gross expenses to average net assets4

     0.95     0.94     0.96     0.95     0.93

Ratio of net investment income to average net assets2

     1.49     1.12     1.69     2.10     1.88

Portfolio turnover

     34     62     56     48     17

Net assets end of year (000’s) omitted

     $1,716       $2,125       $1,905       $1,255       $502  
                                          

 

 

 

37


Table of Contents
    

 

AMG GW&K Core Bond ESG Fund

Financial Highlights

For a share outstanding throughout each fiscal year

 

   

    

 

      

 

 

     For the fiscal years ended October 31,
 Class I    2022   2021   2020   2019   2018

 Net Asset Value, Beginning of Year

     $10.76         $10.90         $10.54         $9.67         $10.15  

 Income (loss) from Investment Operations:

          

Net investment income1,2

     0.18       0.16       0.22       0.24       0.22  

Net realized and unrealized gain (loss) on investments

     (1.95     (0.14     0.36       0.88       (0.48
          

Total income (loss) from investment operations

     (1.77     0.02       0.58       1.12       (0.26

 Less Distributions to Shareholders from:

          

Net investment income

     (0.18     (0.16     (0.22     (0.25     (0.22

Net realized gain on investments

     (0.25                        
          

Total distributions to shareholders

     (0.43     (0.16     (0.22     (0.25     (0.22

 Net Asset Value, End of Year

     $8.56       $10.76       $10.90       $10.54       $9.67  
          

 Total Return2,3

     (16.99 )%      0.15     5.55     11.70     (2.59 )% 

Ratio of net expenses to average net assets

     0.55     0.56     0.55     0.55     0.56

Ratio of gross expenses to average net assets4

     0.62     0.62     0.63     0.62     0.61

Ratio of net investment income to average net assets2

     1.82     1.44     2.01     2.42     2.20

Portfolio turnover

     34     62     56     48     17

Net assets end of year (000’s) omitted

     $137,806       $190,306       $202,363       $212,801       $264,795  
                                          

 

 

 

38


Table of Contents
    

 

AMG GW&K Core Bond ESG Fund

Financial Highlights

For a share outstanding throughout each fiscal year

 

   

    

 

      

 

 

     For the fiscal years ended October 31,
 Class Z    2022     2021     2020     2019     2018  

 Net Asset Value, Beginning of Year

     $10.75       $10.90       $10.53       $9.67       $10.14  

 Income (loss) from Investment Operations:

          

Net investment income1,2

     0.18       0.16       0.22       0.25       0.23  

Net realized and unrealized gain (loss) on investments

     (1.94     (0.15     0.38       0.87       (0.47
          

Total income (loss) from investment operations

     (1.76     0.01       0.60       1.12       (0.24

 Less Distributions to Shareholders from:

          

Net investment income

     (0.18     (0.16     (0.23     (0.26     (0.23

Net realized gain on investments

     (0.25                        
          

Total distributions to shareholders

     (0.43     (0.16     (0.23     (0.26     (0.23

 Net Asset Value, End of Year

     $8.56       $10.75       $10.90       $10.53       $9.67