UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-09521
AMG FUNDS
(Exact name of registrant as specified in charter)
600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip code)
AMG Funds LLC
600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830
(Name and address of agent for service)
Registrant’s telephone number, including area code: (203) 299-3500
Date of fiscal year end: DECEMBER 31
Date of reporting period: JANUARY 1, 2017 – DECEMBER 31, 2017
(Annual Shareholder Report)
Item 1. | Reports to Shareholders |
![]() |
ANNUAL REPORT |
AMG Funds
December 31, 2017
AMG Chicago Equity Partners Balanced Fund
Class N: MBEAX | Class I: MBESX | Class Z: MBEYX
AMG Chicago Equity Partners Small Cap Value Fund
Class N: CESVX | Class I: CESSX | Class Z: CESIX
AMG Managers Amundi Intermediate Government Fund
Class N: MGIDX | Class I: MADIX | Class Z: MAMZX
AMG Managers Amundi Short Duration Government Fund
Class N: MGSDX | Class I: MANIX | Class Z: MATZX
amgfunds.com | | 123117 AR009 |
AMG Funds
Annual Report—December 31, 2017
PAGE | ||||
2 | ||||
3 | ||||
PORTFOLIO MANAGER’S COMMENTS, FUND SNAPSHOTS AND SCHEDULES OF PORTFOLIO INVESTMENTS |
||||
4 | ||||
16 | ||||
23 | ||||
31 | ||||
FINANCIAL STATEMENTS |
||||
41 | ||||
Balance sheets, net asset value (NAV) per share computations and cumulative undistributed amounts |
||||
43 | ||||
Detail of sources of income, expenses, and realized and unrealized gains (losses) during the fiscal year |
||||
44 | ||||
Detail of changes in assets for the past two fiscal years |
||||
46 | ||||
Historical net asset values per share, distributions, total returns, income and expense ratios, turnover ratios and net assets |
||||
58 | ||||
Accounting and distribution policies, details of agreements and transactions with Fund management and affiliates, and descriptions of certain investment risks |
||||
68 | ||||
69 | ||||
70 |
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 mutual funds. Such offering is made only by prospectus, which includes details as to offering price and other material information.
![]() |
Letter to Shareholders |
2
3
AMG Chicago Equity Partners Balanced Fund
Portfolio Manager’s Comments (unaudited)
4
AMG Chicago Equity Partners Balanced Fund
Portfolio Manager’s Comments (continued)
5
AMG Chicago Equity Partners Balanced Fund
Fund Snapshots (unaudited)
December 31, 2017
Because a fund’s strategy may result in multiple investments in particular sectors of the economy, its performance may depend on the performance of those sectors and may fluctuate more widely than investments diversified across more sectors. For additional information on these and other risk considerations, please see the Fund’s prospectus.
Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.
6
AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments
December 31, 2017
The accompanying notes are an integral part of these financial statements.
7
AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
8
AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
9
AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
10
AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
11
AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
12
AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
13
AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2† | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks |
||||||||||||||||
Information Technology |
$ | 33,235,747 | $ | 503,127 | — | $ | 33,738,874 | |||||||||
Consumer Discretionary |
16,974,393 | 827,786 | — | 17,802,179 | ||||||||||||
Industrials |
15,064,347 | 920,779 | — | 15,985,126 | ||||||||||||
Health Care |
15,237,423 | 447,074 | — | 15,684,497 | ||||||||||||
Financials |
14,475,100 | 491,797 | — | 14,966,897 | ||||||||||||
Consumer Staples |
8,824,877 | 116,732 | — | 8,941,609 | ||||||||||||
Energy |
4,532,691 | 206,724 | — | 4,739,415 | ||||||||||||
Real Estate |
4,355,088 | 311,203 | — | 4,666,291 | ||||||||||||
Materials |
3,968,534 | 451,555 | — | 4,420,089 | ||||||||||||
Utilities |
2,830,495 | 98,152 | — | 2,928,647 | ||||||||||||
Telecommunication Services |
1,264,179 | 126,563 | — | 1,390,742 | ||||||||||||
Corporate Bonds and Notes†† |
— | 7,545,518 | — | 7,545,518 | ||||||||||||
U.S. Government and Agency Obligations†† |
— | 61,371,826 | — | 61,371,826 | ||||||||||||
Rights |
— | — | $ | 0 | — | |||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | 2,448,757 | — | 2,448,757 | ||||||||||||
Other Investment Companies |
1,181,536 | — | — | 1,181,536 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 121,944,410 | $ | 75,867,593 | $ | 0 | $ | 197,812,003 | ||||||||
|
|
|
|
|
|
|
|
† | As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.) |
†† | All corporate bonds and notes and U.S. government and agency obligations held in the Fund are Level 2 securities. For a detailed breakout of corporate bonds and notes and U.S. government and agency obligations by major industry or agency classification, please refer to the Fund’s Schedule of Portfolio Investments. |
At December 31, 2017, the Level 3 securities are Rights received as a result of a corporate action. The security’s value was determined by using significant unobservable inputs which generated a change in unrealized depreciation of $7.
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements.
14
AMG Chicago Equity Partners Balanced Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
15
AMG Chicago Equity Partners Small Cap Value Fund
Portfolio Manager’s Comments (unaudited)
16
AMG Chicago Equity Partners Small Cap Value Fund
Portfolio Manager’s Comments (continued)
17
AMG Chicago Equity Partners Small Cap Value Fund
Fund Snapshots (unaudited)
December 31, 2017
Because a fund’s strategy may result in multiple investments in particular sectors of the economy, its performance may depend on the performance of those sectors and may fluctuate more widely than investments diversified across more sectors. For additional information on these and other risk considerations, please see the Fund’s prospectus.
Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.
18
AMG Chicago Equity Partners Small Cap Value Fund
Schedule of Portfolio Investments
December 31, 2017
The accompanying notes are an integral part of these financial statements.
19
AMG Chicago Equity Partners Small Cap Value Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
20
AMG Chicago Equity Partners Small Cap Value Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
21
AMG Chicago Equity Partners Small Cap Value Fund
Schedule of Portfolio Investments (continued)
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks† |
$ | 2,717,187 | — | — | $ | 2,717,187 | ||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | $ | 169,425 | — | 169,425 | |||||||||||
Other Investment Companies |
57,469 | — | — | 57,469 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 2,774,656 | $ | 169,425 | — | $ | 2,944,081 | |||||||||
|
|
|
|
|
|
|
|
† | 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. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements.
22
AMG Managers Amundi Intermediate Government Fund
Portfolio Manager’s Comments (unaudited)
23
AMG Managers Amundi Intermediate Government Fund
Portfolio Manager’s Comments (continued)
24
AMG Managers Amundi Intermediate Government Fund
Fund Snapshots (unaudited)
December 31, 2017
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/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. 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.
25
AMG Managers Amundi Intermediate Government Fund
Schedule of Portfolio Investments
December 31, 2017
The accompanying notes are an integral part of these financial statements.
26
AMG Managers Amundi Intermediate Government Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
27
AMG Managers Amundi Intermediate Government Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
28
AMG Managers Amundi Intermediate Government Fund
Schedule of Portfolio Investments (continued)
TBA Forward Sale Commitments
Security | Principal Amount |
Settlement Date |
Market Value |
Proceeds | ||||||||||||
GNMA, 3.000%, TBA 30 years |
$ | 1,000,000 | 01/22/18 | $ | 1,009,063 | $ | (1,005,078 | ) | ||||||||
|
|
|
|
|||||||||||||
Totals | $ | 1,009,063 | $ | (1,005,078 | ) | |||||||||||
|
|
|
|
Open Futures Contracts
Description | Number of Contracts |
Position | Expiration Date |
Current Notional Amount |
Value and Unrealized Gain/(Loss) |
|||||||||||||||
10-Year U.S. Treasury Note |
2 | Long | 03/20/18 | $ | 248,094 | $ | (1,692 | ) | ||||||||||||
U.S. Ultra Bond CBT Mar 18 |
2 | Long | 03/20/18 | 335,312 | 1,730 | |||||||||||||||
10-Year Interest Rate Swap |
35 | Short | 03/19/18 | (3,438,203 | ) | 10,030 | ||||||||||||||
2-Year U.S. Treasury Note |
3 | Short | 03/29/18 | (642,328 | ) | 1,446 | ||||||||||||||
5-Year Interest Rate Swap |
23 | Short | 03/19/18 | (2,268,196 | ) | 1,919 | ||||||||||||||
5-Year U.S. Treasury Note |
5 | Short | 03/29/18 | (580,820 | ) | 3,151 | ||||||||||||||
|
|
|||||||||||||||||||
Total | $ | 16,584 | ||||||||||||||||||
|
|
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Asset-Backed Securities |
— | $ | 7,779,587 | — | $ | 7,779,587 | ||||||||||
Mortgage-Backed Securities |
— | 484,229 | — | 484,229 | ||||||||||||
U.S. Government and Agency Obligations† |
— | 133,848,527 | — | 133,848,527 | ||||||||||||
Short-Term Investments |
||||||||||||||||
U.S. Government Obligation |
— | 89,878 | — | 89,878 | ||||||||||||
Other Investment Companies |
$ | 17,951,238 | — | — | 17,951,238 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 17,951,238 | $ | 142,202,221 | — | $ | 160,153,459 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
TBA Sale Commitments |
— | $ | (1,009,063 | ) | — | $ | (1,009,063 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Derivative Instruments - Assets |
||||||||||||||||
Interest Rate Contracts |
$ | 18,276 | — | — | $ | 18,276 | ||||||||||
Financial Derivative Instruments - Liabilities |
||||||||||||||||
Interest Rate Contracts |
(1,692 | ) | — | — | (1,692 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Financial Derivative Instruments |
$ | 16,584 | — | — | $ | 16,584 | ||||||||||
|
|
|
|
|
|
|
|
† | All U.S. government and agency obligations held in the Fund are Level 2 securities. For a detailed breakout of U.S. government and agency obligations by agency classification, please refer to the Fund’s Schedule of Portfolio Investments. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements.
29
AMG Managers Amundi Intermediate Government Fund
Schedule of Portfolio Investments (continued)
The following schedule shows the value of derivative instruments at December 31, 2017:
Asset Derivatives |
Liability Derivatives |
|||||||||||
Derivatives not accounted for as hedging instruments |
Statement of Assets and Liabilities Location |
Fair Value | Statement of Assets and Liabilities Location |
Fair Value | ||||||||
Interest rate contracts |
Receivable for variation margin1 | $ | 1,281 | Payable for variation margin1 | $ | 8,102 | ||||||
|
|
|
|
1 | Only current day’s variation margin is reported within the Statement of Assets and Liabilities. The variation margin is included in the open futures cumulative appreciation/depreciation of $16,584. |
For the fiscal year ended December 31, 2017, the effect of derivative instruments on the Statement of Operations for the Fund and the amount of realized gain (loss) and unrealized gain (loss) on derivatives recognized in income is as follows:
Realized Gain (Loss) |
Change in Unrealized Gain (Loss) |
|||||||||||
Derivatives not accounted for as hedging instruments |
Statement of Operations Location |
Realized Gain/(Loss) |
Statement of Operations Location |
Change in Unrealized Gain (Loss) |
||||||||
Interest rate contracts |
Net realized gain (loss) on futures contracts | $ | 5,893 | Net change in unrealized appreciation/ depreciation on futures contracts | $ | (9,807 | ) | |||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
30
AMG Managers Amundi Short Duration Government Fund
Portfolio Manager’s Comments (unaudited)
31
AMG Managers Amundi Short Duration Government Fund
Portfolio Manager’s Comments (continued)
32
AMG Managers Amundi Short Duration Government Fund
Fund Snapshots (unaudited)
December 31, 2017
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/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. 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.
33
AMG Managers Amundi Short Duration Government Fund
Schedule of Portfolio Investments
December 31, 2017
Principal Amount |
Value | |||||||
Asset-Backed Securities - 10.0% |
|
|||||||
AmeriCredit Automobile Receivables Trust |
||||||||
Series 2013-3, Class D 3.000%, 07/08/19 |
$ | 233,343 | $ | 233,577 | ||||
Capital Auto Receivables Asset Trust |
||||||||
Series 2013-4, Class D 3.220%, 05/20/19 |
769,448 | 769,960 | ||||||
Colony American Homes |
||||||||
Series 2014-1A, Class A |
||||||||
(1-Month LIBOR plus 1.150%), 2.627%, 05/17/31 (01/17/18)1,2 |
3,199,403 | 3,208,084 | ||||||
Series 2014-2A, Class A |
||||||||
(1-Month LIBOR plus 0.950%), 2.427%, 07/17/31 (01/17/18)1,2 |
1,154,984 | 1,156,953 | ||||||
Series 2015-1A, Class A |
||||||||
(1-Month LIBOR plus 1.200%), 2.632%, 07/17/32 (01/17/18)1,2 |
3,409,472 | 3,421,055 | ||||||
Drive Auto Receivables Trust |
||||||||
Series 2015-AA, Class C 3.060%, 05/17/211 |
1,269,060 | 1,274,499 | ||||||
Series 2015-BA, Class C 2.760%, 07/15/211 |
1,068,456 | 1,071,927 | ||||||
Series 2015-CA, Class C 3.010%, 05/17/211 |
323,174 | 324,512 | ||||||
Series 2016-BA, Class B 2.560%, 06/15/201 |
502,338 | 502,831 | ||||||
Invitation Homes Trust |
||||||||
Series 2015-SFR3, Class A |
||||||||
(1-Month LIBOR plus 1.300%), 2.760%, 08/17/32 (01/17/18)1,2 |
1,448,436 | 1,457,489 | ||||||
Progress Residential Trust |
||||||||
Series 2016-SFR1, Class A |
||||||||
(1-Month LIBOR plus 1.500%), 2.960%, 09/17/33 (01/17/18)1,2 |
510,382 | 516,123 | ||||||
Santander Drive Auto Receivables Trust |
||||||||
Series 2013-4, Class D 3.920%, 01/15/20 |
2,086,598 | 2,096,361 | ||||||
Series 2014-1, Class C 2.360%, 04/15/20 |
28,361 | 28,371 | ||||||
Total Asset-Backed Securities |
16,061,742 | |||||||
Mortgage-Backed Security - 0.3% |
||||||||
Angel Oak Mortgage Trust |
||||||||
Series 2017-2 2.478%, 07/25/47 (Cost $434,652)1,3 |
434,657 | 430,813 | ||||||
U.S. Government and Agency Obligations -86.5% |
||||||||
Fannie Mae - 54.4% |
||||||||
FNMA, |
||||||||
(US Treasury 1 Year plus 2.111%), 2.907%, 05/01/332 |
975,968 | 1,025,748 | ||||||
FNMA, |
||||||||
(6-Month LIBOR plus 1.500%), 2.912%, 02/01/332 |
712,413 | 735,929 | ||||||
(6-Month LIBOR plus 1.560%), 2.986%, 08/01/332 |
300,710 | 311,621 | ||||||
(US Treasury 1 Year plus 2.025%), 3.046%, 01/01/342 |
501,798 | 525,238 | ||||||
(6-Month LIBOR plus 1.600%), 3.121%, 06/01/342 |
535,381 | 555,666 | ||||||
(US Treasury 1 Year plus 2.253%), 3.148%, 05/01/342 |
1,347,701 | 1,427,342 | ||||||
(12-Month LIBOR plus 1.425%), 3.175%, 09/01/332 |
677,705 | 716,334 | ||||||
(US Treasury 1 Year plus 2.202%), 3.185%, 06/01/332 |
273,711 | 286,723 | ||||||
(US Treasury 1 Year plus 2.187%), 3.298%, 12/01/342 |
1,341,915 | 1,410,697 | ||||||
(12-Month LIBOR plus 1.575%), 3.325%, 12/01/332 |
336,330 | 351,985 | ||||||
(US Treasury 1 Year plus 2.108%), 3.341%, 09/01/332 |
201,785 | 210,472 | ||||||
(12-Month LIBOR plus 1.619%), 3.353%, 03/01/342 |
166,383 | 174,691 | ||||||
(12-Month LIBOR plus 1.616%), 3.375%, 10/01/352 |
929,307 | 975,665 | ||||||
(12-Month LIBOR plus 1.648%), 3.401%, 07/01/342 |
876,669 | 920,620 | ||||||
(12-Month LIBOR plus 1.624%), 3.420%, 08/01/342 |
149,634 | 156,491 | ||||||
(12-Month LIBOR plus 1.800%), 3.431%, 01/01/342 |
951,332 | 1,006,068 | ||||||
(US Treasury 1 Year plus 2.349%), 3.444%, 04/01/342 |
394,683 | 416,884 | ||||||
(US Treasury 1 Year plus 2.332%), 3.453%, 04/01/342 |
309,206 | 326,182 | ||||||
(12-Month LIBOR plus 1.717%), 3.460%, 04/01/372,4 |
2,728,028 | 2,857,086 | ||||||
(12-Month LIBOR plus 1.810%), 3.470%, 01/01/332 |
724,306 | 765,130 | ||||||
(US Treasury 1 Year plus 2.380%), 3.492%, 01/01/362 |
2,465,030 | 2,609,235 | ||||||
(US Treasury 1 Year plus 2.360%), 3.547%, 11/01/342 |
2,142,724 | 2,267,182 | ||||||
(12-Month LIBOR plus 1.857%), 3.557%, 01/01/362 |
21,775 | 22,959 | ||||||
(US Treasury 1 Year plus 2.303%), 3.562%, 12/01/342 |
1,309,757 | 1,378,883 | ||||||
(12-Month LIBOR plus 1.820%), 3.572%, 08/01/352 |
879,286 | 928,442 | ||||||
(12-Month LIBOR plus 1.804%), 3.587%, 06/01/342 |
1,250,235 | 1,321,246 | ||||||
(12-Month LIBOR plus 1.730%), 3.605%, 06/01/352 |
71,468 | 75,158 | ||||||
4.000%, 10/01/21 to 06/01/42 |
9,296,323 | 9,759,826 | ||||||
4.500%, 10/01/19 to 11/01/56 |
15,989,046 | 17,217,928 | ||||||
5.000%, 10/01/19 to 01/01/41 |
10,623,768 | 11,451,478 | ||||||
5.500%, 05/01/34 to 08/01/41 |
9,475,352 | 10,525,842 | ||||||
6.000%, 09/01/21 to 08/01/37 |
4,697,428 | 5,157,114 | ||||||
6.500%, 04/01/18 to 08/01/32 |
2,429,738 | 2,723,459 | ||||||
7.000%, 11/01/22 |
689,550 | 724,027 |
The accompanying notes are an integral part of these financial statements.
34
AMG Managers Amundi Short Duration Government Fund
Schedule of Portfolio Investments (continued)
Principal Amount |
Value | |||||||
Fannie Mae - 54.4% (continued) |
||||||||
FNMA, |
$ | 50,552 | $ | 59,525 | ||||
FNMA Grantor Trust, |
||||||||
Series 2002-T5, Class A1 |
||||||||
(1-Month LIBOR plus 0.120%), 1.568%, 05/25/322 |
162,156 | 161,798 | ||||||
Series 2003-T4, Class 1A |
||||||||
(1-Month LIBOR plus 0.220%), 1.772%, 09/26/332 |
12,977 | 12,913 | ||||||
FNMA REMICS, |
||||||||
Series 1994-31, Class ZC 6.500%, 02/25/24 |
278,144 | 296,925 | ||||||
Series 1994-76, Class J 5.000%, 04/25/24 |
27,302 | 27,399 | ||||||
Series 2001-63, Class FA |
||||||||
(1-Month LIBOR plus 0.550%), 2.041%, 12/18/312 |
293,687 | 298,087 | ||||||
Series 2002-47, Class FD |
||||||||
(1-Month LIBOR plus 0.400%), 1.952%, 08/25/322 |
364,056 | 364,379 | ||||||
Series 2003-2, Class FA |
||||||||
(1-Month LIBOR plus 0.500%), 2.052%, 02/25/332 |
266,283 | 267,502 | ||||||
Series 2003-3, Class HJ 5.000%, 02/25/18 |
735 | 734 | ||||||
Series 2004-1, Class AC 4.000%, 02/25/19 |
3,796 | 3,800 | ||||||
Series 2004-21, Class AE 4.000%, 04/25/19 |
39,052 | 39,203 | ||||||
Series 2004-27, Class HB 4.000%, 05/25/19 |
34,542 | 34,779 | ||||||
Series 2004-53, Class NC 5.500%, 07/25/24 |
213,688 | 226,157 | ||||||
Series 2005-13, Class AF |
||||||||
(1-Month LIBOR plus 0.400%), 1.952%, 03/25/352 |
378,922 | 380,015 | ||||||
Series 2005-19, Class PA 5.500%, 07/25/34 |
95,183 | 98,255 | ||||||
Series 2005-58, Class EP 5.500%, 07/25/35 |
162,632 | 175,784 | ||||||
Series 2005-68, Class PC 5.500%, 07/25/35 |
121,056 | 124,762 | ||||||
Series 2005-68, Class PB 5.750%, 07/25/35 |
17,509 | 18,005 | ||||||
Series 2007-56, Class FN |
||||||||
(1-Month LIBOR plus 0.370%), 1.922%, 06/25/372 |
122,288 | 121,634 | ||||||
Series 2008-59, Class KB 4.500%, 07/25/23 |
23,808 | 24,000 | ||||||
Series 2010-12, Class AC 2.500%, 12/25/18 |
15,832 | 15,812 | ||||||
Series 2011-60, Class UC 2.500%, 09/25/39 |
154,075 | 153,641 | ||||||
FNMA REMICS Whole Loan, |
||||||||
Series 2003-W1, Class 2A 7.500%, 12/25/423 |
14,778 | 16,588 | ||||||
FNMA REMICS Whole Loan, |
||||||||
Series 2003-W13, Class AV2 |
||||||||
(1-Month LIBOR plus 0.280%), 1.832%, 10/25/332 |
9,267 | 9,235 | ||||||
Series 2003-W4, Class 4A 7.500%, 10/25/423 |
303,466 | 339,411 | ||||||
Series 2004-W14, Class 1AF |
||||||||
(1-Month LIBOR plus 0.400%), 1.952%, 07/25/442 |
1,515,378 | 1,497,932 | ||||||
Series 2004-W5, Class F1 |
||||||||
(1-Month LIBOR plus 0.450%), 2.002%, 02/25/472 |
342,780 | 338,846 | ||||||
Series 2005-W2, Class A1 |
||||||||
(1-Month LIBOR plus 0.200%), 1.752%, 05/25/352 |
688,529 | 685,343 | ||||||
Total Fannie Mae |
87,111,815 | |||||||
Freddie Mac - 23.3% |
||||||||
FHLMC, |
||||||||
(US Treasury 1 Year plus 2.250%), 3.039%, 04/01/342 |
383,766 | 405,784 | ||||||
(US Treasury 1 Year plus 2.250%), 3.114%, 03/01/342 |
1,447,439 | 1,529,128 | ||||||
(US Treasury 1 Year plus 2.154%), 3.227%, 10/01/282 |
19,419 | 20,381 | ||||||
(US Treasury 1 Year plus 2.000%), 3.250%, 11/01/332 |
571,024 | 596,707 | ||||||
(US Treasury 1 Year plus 2.406%), 3.317%, 02/01/232 |
54,306 | 56,866 | ||||||
(US Treasury 1 Year plus 2.225%), 3.467%, 10/01/332 |
993,444 | 1,042,582 | ||||||
(US Treasury 1 Year plus 2.219%), 3.467%, 10/01/332 |
569,643 | 598,012 | ||||||
(US Treasury 1 Year plus 2.225%), 3.475%, 11/01/332 |
638,075 | 670,660 | ||||||
(US Treasury 1 Year plus 2.230%), 3.482%, 12/01/332 |
845,747 | 886,719 | ||||||
(US Treasury 1 Year plus 2.250%), 3.523%, 05/01/342 |
1,242,551 | 1,309,975 | ||||||
(US Treasury 1 Year plus 2.514%), 3.551%, 06/01/352 |
441,491 | 468,170 | ||||||
(12-Month LIBOR plus 1.819%), 3.584%, 09/01/332 |
1,229,135 | 1,298,013 | ||||||
(US Treasury 1 Year plus 2.711%), 3.785%, 05/01/352 |
671,778 | 716,833 | ||||||
FHLMC Gold Pool, 3.000%, 04/01/31 |
2,372,459 | 2,419,247 | ||||||
4.000%, 12/01/44 |
3,214,902 | 3,370,077 | ||||||
4.500%, 05/01/19 to 10/01/44 |
10,024,574 | 10,714,312 | ||||||
5.000%, 10/01/18 to 08/01/20 |
455,356 | 466,550 | ||||||
5.500%, 12/01/32 to 08/01/40 |
5,197,881 | 5,768,781 | ||||||
6.000%, 02/01/22 to 01/01/24 |
2,107,138 | 2,210,777 | ||||||
6.500%, 03/01/18 to 10/01/23 |
106,137 | 110,254 | ||||||
7.000%, 07/01/19 |
24,091 | 24,535 | ||||||
7.500%, 03/01/33 |
160,797 | 184,250 | ||||||
FHLMC REMICS, |
||||||||
Series 2627, Class BM 4.500%, 06/15/18 |
9,124 | 9,150 |
The accompanying notes are an integral part of these financial statements.
35
AMG Managers Amundi Short Duration Government Fund
Schedule of Portfolio Investments (continued)
Principal Amount |
Value | |||||||
Freddie Mac - 23.3% (continued) |
||||||||
FHLMC REMICS, |
||||||||
Series 2631, Class PD 4.500%, 06/15/18 |
$ | 2,932 | $ | 2,942 | ||||
Series 2668, Class AZ 4.000%, 09/15/18 |
70,203 | 70,357 | ||||||
Series 2683, Class JB 4.000%, 09/15/18 |
47,059 | 47,153 | ||||||
Series 2786, Class BC 4.000%, 04/15/19 |
26,955 | 27,166 | ||||||
Series 2809, Class UC 4.000%, 06/15/19 |
23,999 | 24,129 | ||||||
Series 2877, Class PA 5.500%, 07/15/33 |
5,905 | 5,913 | ||||||
Series 3033, Class CI 5.500%, 01/15/35 |
7,438 | 7,444 | ||||||
Series 3153, Class UG |
||||||||
(1-Month LIBOR plus 0.450%), 1.927%, 05/15/362 |
1,756,259 | 1,765,541 | ||||||
Series 3535, Class CA 4.000%, 05/15/24 |
12,042 | 12,098 | ||||||
Series 3609, Class LA 4.000%, 12/15/24 |
88,477 | 89,214 | ||||||
Series 3632, Class AG 4.000%, 06/15/38 |
185,901 | 187,951 | ||||||
Series 3653, Class JK 5.000%, 11/15/38 |
103,735 | 106,871 | ||||||
Series 3756, Class DA 1.200%, 11/15/18 |
59,860 | 59,609 | ||||||
Series 3846, Class CK 1.500%, 09/15/20 |
527 | 524 | ||||||
Total Freddie Mac |
37,284,675 | |||||||
Ginnie Mae - 3.8% |
||||||||
GNMA, 4.000%, 09/15/18 |
27,099 | 27,889 | ||||||
6.000%, 01/15/364 |
5,296,944 | 6,028,346 | ||||||
Total Ginnie Mae |
6,056,235 | |||||||
U.S. Treasury Obligations - 2.4% |
|
|||||||
United States Treasury Inflation Indexed Bonds, 2.375%, 01/15/27 |
3,339,172 | 3,906,736 | ||||||
Interest Only Strip - 2.6% |
|
|||||||
FHLMC REMICS, |
||||||||
Series 2922, Class SE |
||||||||
(6.750% minus 1-Month LIBOR, Cap 6.750%, Floor 0.000%), 5.273%, 02/15/352 |
174,560 | 32,136 | ||||||
Series 2934, Class HI 5.000%, 02/15/20 |
21,099 | 751 | ||||||
Series 2934, Class KI 5.000%, 02/15/20 |
11,531 | 383 | ||||||
Series 2965, Class SA |
||||||||
(6.050% minus 1-Month LIBOR, Cap 6.050%, Floor 0.000%), 4.573%, 05/15/322 |
381,424 | 50,361 | ||||||
Series 2967, Class JI 5.000%, 04/15/20 |
69,565 | 2,632 | ||||||
Series 2980, Class SL |
||||||||
(6.700% minus 1-Month LIBOR, Cap 6.700%, Floor 0.000%), 5.223%, 11/15/342 |
247,253 | 56,518 | ||||||
FHLMC REMICS, |
||||||||
Series 2981, Class SU |
||||||||
(7.800% minus 1-Month LIBOR, Cap 7.800%, Floor 0.000%), 6.323%, 05/15/302 |
181,506 | 26,501 | ||||||
Series 3065, Class DI |
||||||||
(6.620% minus 1-Month LIBOR, Cap 6.620%, Floor 0.000%), 5.143%, 04/15/352 |
681,159 | 114,446 | ||||||
Series 3308, Class S |
||||||||
(7.200% minus 1-Month LIBOR, Cap 7.200%, Floor 0.000%), 5.723%, 03/15/322 |
314,615 | 57,317 | ||||||
Series 3424, Class XI |
||||||||
(6.570% minus 1-Month LIBOR, Cap 6.570%, Floor 0.000%), 5.093%, 05/15/362 |
478,019 | 78,235 | ||||||
Series 3489, Class SD |
||||||||
(7.800% minus 1-Month LIBOR, Cap 7.800%, Floor 0.000%), 6.323%, 06/15/322 |
184,129 | 35,902 | ||||||
Series 3685, Class EI 5.000%, 03/15/19 |
20,749 | 190 | ||||||
Series 3731, Class IO 5.000%, 07/15/19 |
14,474 | 133 | ||||||
Series 3882, Class AI 5.000%, 06/15/26 |
33,460 | 952 | ||||||
Series 4395, Class TI 4.000%, 05/15/26 |
579,712 | 54,588 | ||||||
FNMA |
||||||||
Series 306, Class IO 8.000%, 05/25/30 |
54,361 | 15,058 | ||||||
FNMA REMICS, |
||||||||
Series 2004-51, Class SX |
||||||||
(7.120% minus 1-Month LIBOR, Cap 7.120%, Floor 0.000%), 5.568%, 07/25/342 |
204,425 | 37,378 | ||||||
Series 2004-64, Class SW |
||||||||
(7.050% minus 1-Month LIBOR, Cap 7.050%, Floor 0.000%), 5.498%, 08/25/342 |
611,055 | 108,723 | ||||||
Series 2004-66, Class SE |
||||||||
(6.500% minus 1-Month LIBOR, Cap 6.500%, Floor 0.000%), 4.948%, 09/25/342 |
96,252 | 15,231 | ||||||
Series 2005-12, Class SC |
||||||||
(6.750% minus 1-Month LIBOR, Cap 6.750%, Floor 0.000%), 5.198%, 03/25/352 |
223,878 | 35,915 | ||||||
Series 2005-45, Class SR |
||||||||
(6.720% minus 1-Month LIBOR, Cap 6.720%, Floor 0.000%), 5.168%, 06/25/352 |
517,343 | 88,475 | ||||||
Series 2005-5, Class SD |
||||||||
(6.700% minus 1-Month LIBOR, Cap 6.700%, Floor 0.000%), 5.148%, 01/25/352 |
149,356 | 22,927 | ||||||
Series 2005-65, Class KI |
||||||||
(7.000% minus 1-Month LIBOR, Cap 7.000%, Floor 0.000%), 5.448%, 08/25/352 |
1,207,412 | 212,183 | ||||||
Series 2005-66, Class GS |
||||||||
(6.850% minus 1-Month LIBOR, Cap 6.850%, Floor 0.000%), 5.298%, 07/25/202 |
34,804 | 1,275 | ||||||
Series 2006-3, Class SA |
||||||||
(6.150% minus 1-Month LIBOR, Cap 6.150%, Floor 0.000%), 4.598%, 03/25/362 |
229,176 | 33,630 | ||||||
Series 2007-75, Class JI |
||||||||
(6.545% minus 1-Month LIBOR, Cap 6.545%, Floor 0.000%), 4.993%, 08/25/372 |
112,138 | 18,909 |
The accompanying notes are an integral part of these financial statements.
36
AMG Managers Amundi Short Duration Government Fund
Schedule of Portfolio Investments (continued)
Principal Amount |
Value | |||||||
Interest Only Strip - 2.6% (continued) |
||||||||
FNMA REMICS, |
||||||||
Series 2007-85, Class SI |
||||||||
(6.460% minus 1-Month LIBOR, Cap 6.460%, Floor 0.000%), 4.908%, 09/25/372 |
$ | 245,178 | $ | 40,952 | ||||
Series 2008-86, Class IO 4.500%, 03/25/23 |
74,932 | 1,172 | ||||||
Series 2008-87, Class AS |
||||||||
(7.650% minus 1-Month LIBOR, Cap 7.650%, Floor 0.000%), 6.098%, 07/25/332 |
678,303 | 128,984 | ||||||
Series 2009-31, Class PI 5.000%, 11/25/38 |
677,301 | 103,569 | ||||||
Series 2010-105, Class IO 5.000%, 08/25/20 |
137,758 | 4,629 | ||||||
Series 2010-121, Class IO 5.000%, 10/25/25 |
54,865 | 1,117 | ||||||
Series 2010-37, Class GI 5.000%, 04/25/25 |
21,091 | 234 | ||||||
Series 2010-65, Class IO 5.000%, 09/25/20 |
226,257 | 7,560 | ||||||
Series 2010-68, Class SJ |
||||||||
(6.550% minus 1-Month LIBOR, Cap 6.550%, Floor 0.000%), 4.998%, 07/25/402 |
263,997 | 49,926 | ||||||
Series 2011-124, Class IC 3.500%, 09/25/21 |
564,449 | 16,915 | ||||||
Series 2011-63, Class AS |
||||||||
(5.920% minus 1-Month LIBOR, Cap 5.920%, Floor 0.000%), 4.368%, 07/25/412 |
304,855 | 45,335 | ||||||
Series 2011-69, Class AI 5.000%, 05/25/18 |
4,852 | 17 | ||||||
Series 2011-88, Class WI 3.500%, 09/25/26 |
628,134 | 62,156 | ||||||
Series 2012-126, Class SJ |
||||||||
(5.000% minus 1-Month LIBOR, Cap 5.000%, Floor 0.000%), 3.448%, 11/25/422 |
3,324,011 | 432,331 | ||||||
GNMA, |
||||||||
Series 2011-167, Class IO 5.000%, 12/16/20 |
170,421 | 4,785 | ||||||
Series 2011-32, Class KS |
||||||||
(12.100% minus 2 times 1-Month LIBOR, Cap 12.100%, Floor 0.000%), 9.118%, 06/16/342 |
287,249 | 19,795 | ||||||
Series 2011-94, Class IS |
||||||||
(6.700% minus 1-Month LIBOR, Cap 6.700%, Floor 0.000%), 5.209%, 06/16/362 |
367,470 | 41,557 | ||||||
Series 2012-101, Class AI 3.500%, 08/20/27 |
338,690 | 36,238 | ||||||
Series 2012-103, Class IB 3.500%, 04/20/40 |
738,702 | 66,935 | ||||||
Series 2012-140, Class IC 3.500%, 11/20/42 |
609,495 | 123,597 | ||||||
Series 2012-34, Class KS |
||||||||
(6.050% minus 1-Month LIBOR, Cap 6.050%, Floor 0.000%), 4.559%, 03/16/422 |
2,713,315 | 605,698 | ||||||
Series 2012-69, Class QI 4.000%, 03/16/41 |
1,102,609 | 161,654 | ||||||
Series 2012-96, Class IC 3.000%, 08/20/27 |
590,728 | 58,044 | ||||||
GNMA, |
||||||||
Series 2013-5, Class BI 3.500%, 01/20/43 |
244,445 | 44,680 | ||||||
Series 2014-173, Class AI 4.000%, 11/20/38 |
185,157 | 12,866 | ||||||
Series 2016-108, Class QI 4.000%, 08/20/46 |
316,398 | 72,018 | ||||||
Series 2016-118, Class DS |
||||||||
(6.100% minus 1-Month LIBOR, Cap 6.100%, Floor 0.000%), 4.599%, 09/20/462 |
604,758 | 128,448 | ||||||
Series 2016-145, Class UI 3.500%, 10/20/46 |
528,767 | 105,226 | ||||||
Series 2016-17, Class JS |
||||||||
(6.100% minus 1-Month LIBOR, Cap 6.100%, Floor 0.000%), 4.599%, 02/20/462 |
644,830 | 112,795 | ||||||
Series 2016-20, Class SB |
||||||||
(6.100% minus 1-Month LIBOR, Cap 6.100%, Floor 0.000%), 4.599%, 02/20/462 |
649,388 | 116,111 | ||||||
Series 2016-46, Class JI 4.500%, 04/20/46 |
261,433 | 57,192 | ||||||
Series 2016-5, Class CS |
||||||||
(6.150% minus 1-Month LIBOR, Cap 6.150%, Floor 0.000%), 4.649%, 01/20/462 |
608,267 | 112,736 | ||||||
Series 2016-81, Class IO 4.000%, 06/20/46 |
491,234 | 92,984 | ||||||
Series 2016-88, Class SM |
||||||||
(6.100% minus 1-Month LIBOR, Cap 6.100%, Floor 0.000%), 4.599%, 07/20/462 |
624,828 | 121,285 | ||||||
Total Interest Only Strip |
4,090,290 | |||||||
Total U.S. Government and Agency Obligations (Cost $137,647,434) |
138,449,751 | |||||||
Short-Term Investments - 4.2% |
||||||||
U.S. Government and Agency Obligations -2.8% |
||||||||
FHLB, 0.265%, 01/17/185 |
3,000,000 | 2,998,560 | ||||||
FHLB, 0.145%, 01/10/185 |
1,500,000 | 1,499,537 | ||||||
Total U.S. Government and Agency Obligations |
4,498,097 | |||||||
U.S. Government Obligation - 0.5% |
|
|||||||
U.S. Treasury Bill, 0.276%, 02/15/185,6 |
760,000 | 758,970 | ||||||
Shares | ||||||||
Other Investment Companies - 0.9% |
||||||||
Dreyfus Government Cash Management Fund, Institutional Class Shares, 1.18%7 |
1,391,449 | 1,391,449 | ||||||
Total Short-Term Investments (Cost $6,648,516) |
6,648,516 | |||||||
Total Investments - 101.0% (Cost $160,773,776) |
161,590,822 | |||||||
Other Assets, less Liabilities - (1.0)% |
(1,538,096 | ) | ||||||
Net Assets - 100.0% |
$ | 160,052,726 |
The accompanying notes are an integral part of these financial statements.
37
AMG Managers Amundi Short Duration Government Fund
Schedule of Portfolio Investments (continued)
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 buyers. At December 31, 2017, the value of these securities amounted to $13,364,286 or 8.3% of net assets. |
2 | Variable rate security. The rate shown is based on the latest available information as of December 31, 2017. |
3 | 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 | Some of this security has been pledged as collateral for delayed delivery securities. |
5 | Represents yield to maturity at December 31, 2017. |
6 | Some or all of this security is held as collateral for futures contracts. The market value of collateral at December 31, 2017, amounted to $519,295, or 0.3% of net assets. |
7 | Yield shown represents the December 31, 2017, seven day average yield, which refers to the sum of the previous seven days’ dividends paid, expressed as an annual percentage. |
FHLB | Federal Home Loan Bank | |||||
FHLMC | Freddie Mac | |||||
FNMA | Fannie Mae | |||||
GNMA | Ginnie Mae | |||||
IO | Interest Only | |||||
LIBOR | London Interbank Offered Rate | |||||
REMICS | Real Estate Mortgage Investment Conduit | |||||
TBA | To Be Announced |
TBA Forward Sale Commitments
Security | Principal Amount |
Settlement Date |
Market Value |
Proceeds | ||||||||||||||||
FNMA, 4.000%, TBA 30 years |
$ | 3,000,000 | 01/11/18 | $ | 3,137,217 | $ | (3,135,000 | ) | ||||||||||||
FNMA, 4.500%, TBA 30 years |
$ | 1,400,000 | 01/11/18 | 1,489,468 | (1,487,500 | ) | ||||||||||||||
|
|
|
|
|||||||||||||||||
Totals | $ | 4,626,685 | $ | (4,622,500 | ) | |||||||||||||||
|
|
|
|
Open Futures Contracts
Description | Number of Contracts |
Position | Expiration Date | Current Notional Amount |
Value and Unrealized Gain/ (Loss) |
|||||||||||||||
10-Year U.S. Treasury Note |
39 | Long | 03/20/18 | $ | 4,837,828 | $ | (33,023 | ) | ||||||||||||
5-Year U.S. Treasury Note |
44 | Long | 03/29/18 | 5,111,219 | (28,298 | ) | ||||||||||||||
10-Year Interest Rate Swap |
60 | Short | 03/19/18 | (5,894,062 | ) | 17,194 | ||||||||||||||
2-Year U.S. Treasury Note |
68 | Short | 03/29/18 | (14,559,438 | ) | 32,767 | ||||||||||||||
5-Year Interest Rate Swap |
339 | Short | 03/19/18 | (33,431,227 | ) | 28,286 | ||||||||||||||
90-Day Euro Futures |
3 | Short | 12/17/18 | (733,912 | ) | 405 | ||||||||||||||
90-Day Euro Futures |
3 | Short | 03/16/20 | (732,450 | ) | 292 | ||||||||||||||
90-Day Euro Futures |
3 | Short | 03/15/21 | (732,038 | ) | (45 | ) | |||||||||||||
90-Day Euro Futures |
3 | Short | 03/14/22 | (731,588 | ) | (232 | ) | |||||||||||||
90-Day Euro Futures |
3 | Short | 03/19/18 | (736,800 | ) | 67 | ||||||||||||||
90-Day Euro Futures |
3 | Short | 03/18/19 | (733,462 | ) | 367 | ||||||||||||||
90-Day Euro Futures |
3 | Short | 06/15/20 | (732,375 | ) | 142 | ||||||||||||||
90-Day Euro Futures |
3 | Short | 06/14/21 | (731,963 | ) | (120 | ) | |||||||||||||
90-Day Euro Futures |
3 | Short | 06/13/22 | (731,475 | ) | (270 | ) | |||||||||||||
90-Day Euro Futures |
3 | Short | 06/18/18 | (735,562 | ) | 180 | ||||||||||||||
90-Day Euro Futures |
3 | Short | 06/17/19 | (733,050 | ) | 367 | ||||||||||||||
90-Day Euro Futures |
3 | Short | 09/14/20 | (732,300 | ) | 67 | ||||||||||||||
90-Day Euro Futures |
3 | Short | 09/13/21 | (731,850 | ) | (195 | ) | |||||||||||||
90-Day Euro Futures |
3 | Short | 09/19/22 | (731,325 | ) | (270 | ) | |||||||||||||
90-Day Euro Futures |
3 | Short | 09/17/18 | (734,700 | ) | 330 | ||||||||||||||
90-Day Euro Futures |
3 | Short | 09/16/19 | (732,787 | ) | 367 |
The accompanying notes are an integral part of these financial statements.
38
AMG Managers Amundi Short Duration Government Fund
Schedule of Portfolio Investments (continued)
Description | Number of Contracts |
Position | Expiration Date |
Current Notional Amount |
Value and Unrealized Gain/(Loss) |
|||||||||||||||
90-Day Euro Futures |
3 | Short | 12/14/20 | $ | (732,113 | ) | $ | 30 | ||||||||||||
90-Day Euro Futures |
3 | Short | 12/13/21 | (731,663 | ) | (195 | ) | |||||||||||||
90-Day Euro Futures |
3 | Short | 12/16/19 | (732,525 | ) | 330 | ||||||||||||||
U.S. Ultra Bond CBT Mar 18 |
24 | Short | 03/20/18 | (4,023,750 | ) | (21,057 | ) | |||||||||||||
|
|
|||||||||||||||||||
Total | $ | (2,514 | ) | |||||||||||||||||
|
|
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Asset-Backed Securities |
— | $ | 16,061,742 | — | $ | 16,061,742 | ||||||||||
Mortgage-Backed Security |
— | 430,813 | — | 430,813 | ||||||||||||
U.S. Government and Agency Obligations† |
— | 138,449,751 | — | 138,449,751 | ||||||||||||
Short-Term Investments |
||||||||||||||||
U.S. Government and Agency Obligations |
— | 4,498,097 | — | 4,498,097 | ||||||||||||
U.S. Government Obligation |
— | 758,970 | — | 758,970 | ||||||||||||
Other Investment Companies |
$ | 1,391,449 | — | — | 1,391,449 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 1,391,449 | $ | 160,199,373 | — | $ | 161,590,822 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
TBA Sale Commitments |
— | $ | (4,626,685 | ) | — | $ | (4,626,685 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial Derivative Instruments - Assets |
||||||||||||||||
Interest Rate Contract |
$ | 81,191 | — | — | $ | 81,191 | ||||||||||
Financial Derivative Instruments - Liabilities |
||||||||||||||||
Interest Rate Contract |
(83,705 | ) | — | — | (83,705 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Financial Derivative Instruments |
$ | (2,514 | ) | — | — | $ | (2,514 | ) | ||||||||
|
|
|
|
|
|
|
|
† | All U.S. government and agency obligations held in the Fund are Level 2 securities. For a detailed breakout of U.S. government and agency obligations by agency classification, please refer to the Fund’s Schedule of Portfolio Investments. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements.
39
AMG Managers Amundi Short Duration Government Fund
Schedule of Portfolio Investments (continued)
The following schedule shows the value of derivative instruments at December 31, 2017:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not accounted for as hedging instruments |
Statement of Assets and Liabilities Location |
Fair Value | Statement of Assets and Liabilities Location |
Fair Value | ||||||||
Interest rate contracts |
Receivable for variation margin1 |
$ | 12,047 | Payable for variation margin1 |
$ | 55,959 | ||||||
|
|
|
|
1 | Only current day’s variation margin is reported within the Statement of Assets and Liabilities. The variation margin is included in the open futures cumulative appreciation/depreciation of $(2,514). |
For the fiscal year ended December 31, 2017, the effect of derivative instruments on the Statement of Operations for the Fund and the amount of realized gain (loss) and unrealized gain (loss) on derivatives recognized in income is as follows:
Realized Gain (Loss) |
Change in Unrealized Gain (Loss) |
|||||||||||
Derivatives not accounted for as hedging instruments |
Statement of Operations Location |
Realized Gain/(Loss) |
Statement of Operations Location |
Change in Unrealized Gain (Loss) |
||||||||
Interest rate contracts |
Net realized gain (loss) on futures contracts |
$(83,966) | Net change in unrealized appreciation/ depreciation on futures contracts |
$(268,606) | ||||||||
|
|
|
|
The accompanying notes are an integral part of these financial statements.
40
Statement of Assets and Liabilities
December 31, 2017
AMG Chicago Equity Partners Balanced Fund |
AMG Chicago Equity Partners Small Cap Value Fund |
AMG Managers Amundi Intermediate Government Fund# |
AMG Managers Amundi Short Duration Government Fund# |
|||||||||||||
Assets: |
||||||||||||||||
Investments at Value* (including securities on loan valued at $2,374,701, $161,259, $0, and $0, respectively) |
$ | 197,812,003 | $ | 2,944,081 | $ | 160,153,459 | $ | 161,590,822 | ||||||||
Cash |
1,212 | 44 | — | — | ||||||||||||
Foreign currency** |
56,531 | — | — | — | ||||||||||||
Receivable for investments sold |
98,089 | — | — | — | ||||||||||||
Receivable for delayed delivery investments sold |
— | — | 1,523,376 | 4,627,583 | ||||||||||||
Dividend, interest and other receivables |
452,729 | 6,514 | 371,132 | 569,674 | ||||||||||||
Receivable for paydowns |
— | — | 7,415 | 158,299 | ||||||||||||
Receivable for Fund shares sold |
959,521 | — | 267,110 | 363,934 | ||||||||||||
Receivable from affiliate |
10,377 | 8,740 | 21,406 | 15,506 | ||||||||||||
Receivable for variation margin |
— | — | 1,281 | 12,047 | ||||||||||||
Prepaid expenses |
27,193 | 24,431 | 15,231 | 16,024 | ||||||||||||
Total assets |
199,417,655 | 2,983,810 | 162,360,410 | 167,353,889 | ||||||||||||
Liabilities: |
||||||||||||||||
Payable upon return of securities loaned |
2,448,757 | 169,425 | — | — | ||||||||||||
Payable for investments purchased |
181,915 | — | — | — | ||||||||||||
Payable for delayed delivery investments purchased |
— | — | 52,309,032 | — | ||||||||||||
Payable for Fund shares repurchased |
245,909 | 159 | 339,685 | 2,391,163 | ||||||||||||
TBA sale commitments at value (proceeds receivable of $1,005,078 and $4,622,500, respectively) |
— | — | 1,009,063 | 4,626,685 | ||||||||||||
Payable for variation margin |
— | — | 8,102 | 55,959 | ||||||||||||
Accrued expenses: |
||||||||||||||||
Investment advisory and management fees |
100,947 | 1,467 | 45,005 | 56,383 | ||||||||||||
Administrative fees |
25,237 | 355 | 14,064 | 21,144 | ||||||||||||
Distribution fees |
15,946 | 16 | — | — | ||||||||||||
Shareholder service fees |
9,852 | 1,086 | 13,997 | 20,080 | ||||||||||||
Professional fees |
39,060 | 29,593 | 54,508 | 55,875 | ||||||||||||
Trustee fees and expenses |
2,090 | 29 | 1,189 | 1,811 | ||||||||||||
Other |
59,228 | 22,018 | 80,068 | 72,063 | ||||||||||||
Total liabilities |
3,128,941 | 224,148 | 53,874,713 | 7,301,163 | ||||||||||||
Net Assets |
$ | 196,288,714 | $ | 2,759,662 | $ | 108,485,697 | $ | 160,052,726 | ||||||||
* Investments at cost |
$ | 176,142,139 | $ | 2,626,026 | $ | 159,704,263 | $ | 160,773,776 | ||||||||
** Foreign currency at cost |
$ | 56,400 | — | — | — |
The accompanying notes are an integral part of these financial statements.
41
Statement of Assets and Liabilities (continued)
AMG Chicago Equity Partners Balanced Fund |
AMG Chicago Equity Partners Small Cap Value Fund |
AMG Managers Amundi Intermediate Government Fund# |
AMG Managers Amundi Short Duration Government Fund# |
|||||||||||||
Net Assets Represent: |
||||||||||||||||
Paid-in capital |
$ | 169,915,960 | $ | 2,442,498 | $ | 111,223,590 | $ | 166,269,354 | ||||||||
Undistributed (distribution in excess of) net investment income |
(12,953 | ) | — | — | 205,033 | |||||||||||
Accumulated net realized gain (loss) from investments |
4,716,694 | (891 | ) | (3,199,688 | ) | (7,232,008 | ) | |||||||||
Net unrealized appreciation on investments |
21,669,013 | 318,055 | 461,795 | 810,347 | ||||||||||||
Net Assets |
$ | 196,288,714 | $ | 2,759,662 | $ | 108,485,697 | $ | 160,052,726 | ||||||||
Class N: |
||||||||||||||||
Net Assets |
$ | 74,314,956 | $ | 76,466 | $ | 104,846,586 | $ | 135,620,127 | ||||||||
Shares outstanding |
4,363,297 | 7,059 | 9,867,917 | 14,324,148 | ||||||||||||
Net asset value, offering and redemption price per share |
$ | 17.03 | $ | 10.83 | $ | 10.62 | $ | 9.47 | ||||||||
Class I: |
||||||||||||||||
Net Assets |
$ | 114,913,377 | $ | 677,717 | $ | 2,312,744 | $ | 23,757,338 | ||||||||
Shares outstanding |
6,684,538 | 62,640 | 217,713 | 2,510,663 | ||||||||||||
Net asset value, offering and redemption price per share |
$ | 17.19 | $ | 10.82 | $ | 10.62 | $ | 9.46 | ||||||||
Class Z: |
||||||||||||||||
Net Assets |
$ | 7,060,381 | $ | 2,005,479 | $ | 1,326,367 | $ | 675,261 | ||||||||
Shares outstanding |
410,793 | 184,812 | 124,894 | 71,301 | ||||||||||||
Net asset value, offering and redemption price per share |
$ | 17.19 | $ | 10.85 | $ | 10.62 | $ | 9.47 |
# | Effective February 27, 2017, Class S shares were renamed to Class N shares and Class I shares and Class Z shares were added as described in the Note 1 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
42
For the fiscal year ended December 31, 2017
AMG Chicago Equity Partners Balanced Fund |
AMG Chicago Equity Partners Small Cap Value Fund |
AMG Managers Amundi Intermediate Government Fund# |
AMG Managers Amundi Short Duration Government Fund# |
|||||||||||||
Investment Income: |
||||||||||||||||
Dividend income |
$ | 1,826,550 | $ | 80,342 | $ | 182,404 | $ | 23,093 | ||||||||
Interest income |
1,366,759 | — | 2,926,134 | 3,662,796 | ||||||||||||
Securities lending income |
18,293 | 2,669 | — | 2 | ||||||||||||
Foreign withholding tax |
(230 | ) | — | — | — | |||||||||||
Total investment income |
3,211,372 | 83,011 | 3,108,538 | 3,685,891 | ||||||||||||
Expenses: |
||||||||||||||||
Investment advisory and management fees |
1,122,450 | 41,773 | 647,221 | 807,773 | ||||||||||||
Administrative fees |
280,612 | 10,106 | 202,257 | 302,915 | ||||||||||||
Distribution fees - Class N |
221,747 | 165 | — | — | ||||||||||||
Shareholder servicing fees - Class N |
— | 99 | 199,069 | 276,966 | ||||||||||||
Shareholder servicing fees - Class I |
91,837 | 6,809 | 393 | 8,372 | ||||||||||||
Professional fees |
49,659 | 30,168 | 70,627 | 78,728 | ||||||||||||
Registration fees |
72,815 | 49,715 | 66,949 | 64,057 | ||||||||||||
Transfer agent fees |
25,593 | 5,954 | 20,373 | 9,094 | ||||||||||||
Custodian fees |
55,033 | 18,388 | 66,835 | 61,714 | ||||||||||||
Reports to shareholders |
38,405 | 9,322 | 42,301 | 18,544 | ||||||||||||
Trustee fees and expenses |
12,522 | 608 | 10,124 | 15,057 | ||||||||||||
Miscellaneous |
7,062 | 2,172 | 6,698 | 6,878 | ||||||||||||
Total expenses before offsets |
1,977,735 | 175,279 | 1,332,847 | 1,650,098 | ||||||||||||
Expense reimbursements |
(92,722 | ) | (104,187 | ) | (135,196 | ) | — | |||||||||
Expense reductions |
(9,606 | ) | (5,004 | ) | — | — | ||||||||||
Fee waivers |
— | — | (61,463 | ) | (182,649 | ) | ||||||||||
Net expenses |
1,875,407 | 66,088 | 1,136,188 | 1,467,449 | ||||||||||||
Net investment income |
1,335,965 | 16,923 | 1,972,350 | 2,218,442 | ||||||||||||
Net Realized and Unrealized Gain (Loss): |
||||||||||||||||
Net realized gain on investments |
11,775,375 | 1,739,455 | 1,055,935 | 76,802 | ||||||||||||
Net realized gain (loss) on TBA forward sale commitments |
— | — | 2,500 | (45,875 | ) | |||||||||||
Net realized loss on foreign currency transactions |
(30,293 | ) | — | — | — | |||||||||||
Net realized gain (loss) on futures contracts |
— | — | 5,893 | (83,966 | ) | |||||||||||
Net change in unrealized appreciation/depreciation on investments |
14,147,684 | (1,776,787 | ) | (477,597 | ) | (655,370 | ) | |||||||||
Net change in unrealized appreciation/depreciation on foreign currency translations |
(851 | ) | — | — | — | |||||||||||
Net change in unrealized appreciation/depreciation on futures contracts |
— | — | (9,807 | ) | (268,606 | ) | ||||||||||
Net realized and unrealized gain (loss) |
25,891,915 | (37,332 | ) | 576,924 | (977,015 | ) | ||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 27,227,880 | $ | (20,409 | ) | $ | 2,549,274 | $ | 1,241,427 |
# | Effective February 27, 2017, Class S shares were renamed to Class N shares and Class I shares and Class Z shares were added as described in the Note 1 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
43
Statements of Changes in Net Assets
For the fiscal years ended December 31,
AMG Chicago Equity Partners Balanced Fund |
AMG Chicago Equity Partners Small Cap Value Fund |
|||||||||||||||
2017 | 2016## | 2017 | 2016## | |||||||||||||
Increase (Decrease) in Net Assets Resulting From Operations: |
||||||||||||||||
Net investment income |
$ | 1,335,965 | $ | 1,744,880 | $ | 16,923 | $ | 117,437 | ||||||||
Net realized gain on investments |
11,745,082 | 1,942,643 | 1,739,455 | 735,967 | ||||||||||||
Net change in unrealized appreciation/depreciation on investments |
14,146,833 | 5,002,573 | (1,776,787 | ) | 2,288,175 | |||||||||||
Net increase (decrease) in net assets resulting from operations |
27,227,880 | 8,690,096 | (20,409 | ) | 3,141,579 | |||||||||||
Distributions to Shareholders: |
||||||||||||||||
From net investment income: |
||||||||||||||||
Class N |
(544,946 | ) | (899,880 | ) | — | (217 | ) | |||||||||
Class I |
(750,899 | ) | (784,679 | ) | — | (102,530 | ) | |||||||||
Class Z |
(58,823 | ) | (62,513 | ) | — | (19,183 | ) | |||||||||
From net realized gain on investments: |
||||||||||||||||
Class N |
(2,969,365 | ) | (70,151 | ) | (5,985 | ) | — | |||||||||
Class I |
(4,597,864 | ) | (57,353 | ) | (1,212,426 | ) | — | |||||||||
Class Z |
(281,134 | ) | (4,375 | ) | (281,840 | ) | — | |||||||||
From paid in capital: |
||||||||||||||||
Class N |
— | — | (76 | ) | — | |||||||||||
Class I |
— | — | (15,312 | ) | — | |||||||||||
Class Z |
— | — | (3,559 | ) | — | |||||||||||
Total distributions to shareholders |
(9,203,031 | ) | (1,878,951 | ) | (1,519,198 | ) | (121,930 | ) | ||||||||
Capital Share Transactions:1 |
||||||||||||||||
Net increase (decrease) from capital share transactions |
4,076,435 | 10,393,262 | (8,568,796 | ) | (2,861,768 | ) | ||||||||||
Total increase (decrease) in net assets |
22,101,284 | 17,204,407 | (10,108,403 | ) | 157,881 | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of year |
174,187,430 | 156,983,023 | 12,868,065 | 12,710,184 | ||||||||||||
End of year |
$ | 196,288,714 | $ | 174,187,430 | $ | 2,759,662 | $ | 12,868,065 | ||||||||
End of year distribution in excess of net investment income |
$ | (12,953 | ) | $ | (570 | ) | — | — | ||||||||
|
|
|
|
|
|
|
|
## | Effective October 1, 2016, the Funds’ share classes were renamed as described in Note 1 of the Notes to the Financial Statements. |
1 | See Note 1(g) of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
44
Statements of Changes in Net Assets (continued)
For the fiscal years ended December 31,
AMG Managers Amundi Intermediate Government Fund# |
AMG Managers Amundi Short Duration Government Fund# |
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Increase in Net Assets Resulting From Operations: |
||||||||||||||||
Net investment income |
$ | 1,972,350 | $ | 2,538,653 | $ | 2,218,442 | $ | 4,660,640 | ||||||||
Net realized gain (loss) on investments |
1,064,328 | 1,044,235 | (53,039 | ) | 1,422,193 | |||||||||||
Net change in unrealized appreciation/depreciation on investments |
(487,404 | ) | (577,674 | ) | (923,976 | ) | (3,256,852 | ) | ||||||||
Net increase in net assets resulting from operations |
2,549,274 | 3,005,214 | 1,241,427 | 2,825,981 | ||||||||||||
Distributions to Shareholders: |
||||||||||||||||
From net investment income: |
||||||||||||||||
Class N |
(2,210,849 | ) | (2,324,161 | ) | (4,012,537 | ) | (2,527,449 | ) | ||||||||
Class I |
(27,256 | ) | — | (443,522 | ) | — | ||||||||||
Class Z |
(23,041 | ) | — | (15,045 | ) | — | ||||||||||
From net realized gain on investments: |
||||||||||||||||
Class N |
— | (2,763,558 | ) | — | — | |||||||||||
From paid in capital: |
||||||||||||||||
Class N |
(188,523 | ) | — | — | — | |||||||||||
Class I |
(2,324 | ) | — | — | — | |||||||||||
Class Z |
(1,965 | ) | — | — | — | |||||||||||
Total distributions to shareholders |
(2,453,958 | ) | (5,087,719 | ) | (4,471,104 | ) | (2,527,449 | ) | ||||||||
Capital Share Transactions:1 |
||||||||||||||||
Net decrease from capital share transactions |
(58,020,446 | ) | (23,546,144 | ) | (71,286,485 | ) | (161,035,899 | ) | ||||||||
Total decrease in net assets |
(57,925,130 | ) | (25,628,649 | ) | (74,516,162 | ) | (160,737,367 | ) | ||||||||
Net Assets: |
||||||||||||||||
Beginning of year |
166,410,827 | 192,039,476 | 234,568,888 | 395,306,255 | ||||||||||||
End of year |
$ | 108,485,697 | $ | 166,410,827 | $ | 160,052,726 | $ | 234,568,888 | ||||||||
End of year undistributed net investment income |
— | $ | 380,109 | $ | 205,033 | $ | 2,457,695 | |||||||||
|
|
|
|
|
|
|
|
# | Effective October 1, 2016, and February 27, 2017, the Fund’s share classes were renamed or redesignated as described in Note 1 of the Notes to the Financial Statements. |
1 | See Note 1(g) of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
45
AMG Chicago Equity Partners Balanced Fund
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 15.45 | $ | 14.92 | $ | 15.09 | $ | 15.13 | $ | 14.19 | ||||||||||
Income from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.10 | 0.14 | 3 | 0.10 | 4 | 0.11 | 0.10 | 5 | ||||||||||||
Net realized and unrealized gain on investments |
2.30 | 0.54 | 0.23 | 1.37 | 2.33 | |||||||||||||||
Total income from investment operations |
2.40 | 0.68 | 0.33 | 1.48 | 2.43 | |||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.11 | ) | (0.14 | ) | (0.11 | ) | (0.11 | ) | (0.09 | ) | ||||||||||
Net realized gain on investments |
(0.71 | ) | (0.01 | ) | (0.39 | ) | (1.41 | ) | (1.40 | ) | ||||||||||
Total distributions to shareholders |
(0.82 | ) | (0.15 | ) | (0.50 | ) | (1.52 | ) | (1.49 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 17.03 | $ | 15.45 | $ | 14.92 | $ | 15.09 | $ | 15.13 | ||||||||||
Total Return2 |
15.54 | %6 | 4.59 | %6 | 2.19 | %6 | 9.69 | %6 | 17.14 | %6 | ||||||||||
Ratio of net expenses to average net assets7 |
1.09 | % | 1.08 | % | 1.08 | % | 1.07 | % | 1.10 | %8 | ||||||||||
Ratio of gross expenses to average net assets9 |
1.14 | % | 1.25 | % | 1.36 | % | 1.40 | % | 1.55 | %8 | ||||||||||
Ratio of net investment income to average net assets2 |
0.63 | % | 0.94 | % | 0.64 | % | 0.70 | % | 0.62 | %8 | ||||||||||
Portfolio turnover |
75 | % | 119 | % | 105 | % | 92 | % | 90 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 74,315 | $ | 92,502 | $ | 94,476 | $ | 41,751 | $ | 33,151 | ||||||||||
|
|
|
|
|
|
|
|
|
|
46
AMG Chicago Equity Partners Balanced Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class I | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 15.59 | $ | 15.05 | $ | 15.23 | $ | 15.26 | $ | 14.30 | ||||||||||
Income from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.13 | 0.17 | 3 | 0.12 | 4 | 0.15 | 0.13 | 5 | ||||||||||||
Net realized and unrealized gain on investments |
2.31 | 0.54 | 0.23 | 1.37 | 2.36 | |||||||||||||||
Total income from investment operations |
2.44 | 0.71 | 0.35 | 1.52 | 2.49 | |||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.13 | ) | (0.16 | ) | (0.14 | ) | (0.13 | ) | (0.12 | ) | ||||||||||
Net realized gain on investments |
(0.71 | ) | (0.01 | ) | (0.39 | ) | (1.42 | ) | (1.41 | ) | ||||||||||
Total distributions to shareholders |
(0.84 | ) | (0.17 | ) | (0.53 | ) | (1.55 | ) | (1.53 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 17.19 | $ | 15.59 | $ | 15.05 | $ | 15.23 | $ | 15.26 | ||||||||||
Total Return2 |
15.71 | %6 | 4.79 | %6 | 2.29 | %6 | 9.93 | %6 | 17.45 | % | ||||||||||
Ratio of net expenses to average net assets7 |
0.94 | % | 0.93 | % | 0.93 | % | 0.86 | % | 0.92 | %8 | ||||||||||
Ratio of gross expenses to average net assets9 |
0.99 | % | 1.10 | % | 1.21 | % | 1.20 | % | 1.39 | %8 | ||||||||||
Ratio of net investment income to average net assets2 |
0.78 | % | 1.09 | % | 0.80 | % | 0.91 | % | 0.83 | %8 | ||||||||||
Portfolio turnover |
75 | % | 119 | % | 105 | % | 92 | % | 90 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 114,913 | $ | 75,890 | $ | 60,798 | $ | 14,481 | $ | 1,581 | ||||||||||
|
|
|
|
|
|
|
|
|
|
47
AMG Chicago Equity Partners Balanced Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class Z | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 15.58 | $ | 15.05 | $ | 15.22 | $ | 15.26 | $ | 14.31 | ||||||||||
Income from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.15 | 0.18 | 3 | 0.14 | 4 | 0.15 | 0.14 | 5 | ||||||||||||
Net realized and unrealized gain on investments |
2.32 | 0.54 | 0.23 | 1.38 | 2.35 | |||||||||||||||
Total income from investment operations |
2.47 | 0.72 | 0.37 | 1.53 | 2.49 | |||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.15 | ) | (0.18 | ) | (0.15 | ) | (0.15 | ) | (0.13 | ) | ||||||||||
Net realized gain on investments |
(0.71 | ) | (0.01 | ) | (0.39 | ) | (1.42 | ) | (1.41 | ) | ||||||||||
Total distributions to shareholders |
(0.86 | ) | (0.19 | ) | (0.54 | ) | (1.57 | ) | (1.54 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 17.19 | $ | 15.58 | $ | 15.05 | $ | 15.22 | $ | 15.26 | ||||||||||
Total Return2 |
15.90 | %6 | 4.82 | %6 | 2.44 | %6 | 9.97 | %6 | 17.45 | %6 | ||||||||||
Ratio of net expenses to average net assets7 |
0.84 | % | 0.83 | % | 0.83 | % | 0.82 | % | 0.85 | %8 | ||||||||||
Ratio of gross expenses to average net assets9 |
0.89 | % | 1.00 | % | 1.09 | % | 1.15 | % | 1.30 | %8 | ||||||||||
Ratio of net investment income to average net assets2 |
0.88 | % | 1.20 | % | 0.89 | % | 0.95 | % | 0.88 | %8 | ||||||||||
Portfolio turnover |
75 | % | 119 | % | 105 | % | 92 | % | 90 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 7,060 | $ | 5,796 | $ | 1,709 | $ | 12,401 | $ | 11,122 | ||||||||||
|
|
|
|
|
|
|
|
|
|
# | Effective October 1, 2016, the Investor Class, Service Class and Institutional Class were renamed Class N, Class I and Class Z, respectively. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $0.12, $0.15, and $0.16 for Class N, Class I, and Class Z shares, respectively. |
4 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $0.09, $0.11, and $0.13 for Class N, Class I and Class Z shares, respectively. |
5 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $0.09, $0.12, and $0.13 for Class N, Class I, and Class Z shares, respectively. |
6 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
7 | Includes reduction from broker recapture amounting to less than 0.01%, 0.01%, 0.01%, 0.02% and 0.01% for the fiscal years ended 2017, 2016, 2015, 2014 and 2013, respectively. |
8 | Includes non-routine extraordinary expenses amounting to 0.019%, 0.014% and 0.019% of average net assets for the Class N, Class I and Class Z, respectively. |
9 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
48
AMG Chicago Equity Partners Small Cap Value Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal periods ended December 31, | ||||||||||||
Class N | 2017 | 2016# | 2015* | |||||||||
Net Asset Value, Beginning of Period |
$ | 12.02 | $ | 9.39 | $ | 10.00 | ||||||
Income (loss) from Investment Operations: |
||||||||||||
Net investment income (loss)1,2 |
(0.00 | )3 | 0.08 | (0.08 | )4 | |||||||
Net realized and unrealized gain (loss) on investments |
0.55 | 2.64 | (0.53 | ) | ||||||||
Total income (loss) from investment operations |
0.55 | 2.72 | (0.61 | ) | ||||||||
Less Distributions to Shareholders from: |
||||||||||||
Net investment income |
— | (0.09 | ) | — | ||||||||
Net realized gain on investments |
(1.72 | ) | — | — | ||||||||
Paid in capital |
(0.02 | ) | — | — | ||||||||
Total distributions to shareholders |
(1.74 | ) | (0.09 | ) | — | |||||||
Net Asset Value, End of Period |
$ | 10.83 | $ | 12.02 | $ | 9.39 | ||||||
Total Return2,5 |
5.18 | % | 29.00 | % | (6.10 | )%6 | ||||||
Ratio of net expenses to average net assets7 |
1.28 | % | 1.33 | % | 1.32 | %8 | ||||||
Ratio of gross expenses to average net assets9 |
2.90 | % | 2.26 | % | 2.34 | %8 | ||||||
Ratio of net investment income (loss) to average net assets2 |
(0.04 | )% | 0.77 | % | (0.77 | )%8 | ||||||
Portfolio turnover |
121 | % | 146 | % | 138 | %6 | ||||||
Net assets end of period (000’s) omitted |
$ | 76 | $ | 30 | $ | 16 | ||||||
|
|
|
|
|
|
49
AMG Chicago Equity Partners Small Cap Value Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal periods ended December 31, | ||||||||||||
Class I | 2017 | 2016# | 2015* | |||||||||
Net Asset Value, Beginning of Period |
$ | 11.99 | $ | 9.35 | $ | 10.00 | ||||||
Income (loss) from Investment Operations: |
||||||||||||
Net investment income1,2 |
0.02 | 0.09 | 0.10 | 4 | ||||||||
Net realized and unrealized gain (loss) on investments |
0.54 | 2.65 | (0.68 | ) | ||||||||
Total income (loss) from investment operations |
0.56 | 2.74 | (0.58 | ) | ||||||||
Less Distributions to Shareholders from: |
||||||||||||
Net investment income |
— | (0.10 | ) | (0.07 | ) | |||||||
Net realized gain on investments |
(1.71 | ) | — | — | ||||||||
Paid in capital |
(0.02 | ) | — | — | ||||||||
Total distributions to shareholders |
(1.73 | ) | (0.10 | ) | (0.07 | ) | ||||||
Net Asset Value, End of Period |
$ | 10.82 | $ | 11.99 | $ | 9.35 | ||||||
Total Return2,5 |
5.35 | % | 29.34 | % | (5.77 | )%6 | ||||||
Ratio of net expenses to average net assets7 |
1.02 | % | 1.06 | % | 1.03 | %8 | ||||||
Ratio of gross expenses to average net assets9 |
2.64 | % | 1.85 | % | 1.85 | %8 | ||||||
Ratio of net investment income to average net assets2 |
0.21 | % | 0.96 | % | 0.98 | %8 | ||||||
Portfolio turnover |
121 | % | 146 | % | 138 | %6 | ||||||
Net assets end of period (000’s) omitted |
$ | 678 | $ | 10,888 | $ | 11,085 | ||||||
|
|
|
|
|
|
50
AMG Chicago Equity Partners Small Cap Value Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal periods ended December 31, | ||||||||||||
Class Z | 2017 | 2016# | 2015* | |||||||||
Net Asset Value, Beginning of Period |
$ | 11.99 | $ | 9.35 | $ | 10.00 | ||||||
Income (loss) from Investment Operations: |
||||||||||||
Net investment income1,2 |
0.04 | 0.11 | 0.11 | 4 | ||||||||
Net realized and unrealized gain (loss) on investments |
0.55 | 2.65 | (0.68 | ) | ||||||||
Total income (loss) from investment operations |
0.59 | 2.76 | (0.57 | ) | ||||||||
Less Distributions to Shareholders from: |
||||||||||||
Net investment income |
— | (0.12 | ) | (0.08 | ) | |||||||
Net realized gain on investments |
(1.71 | ) | — | — | ||||||||
Paid in capital |
(0.02 | ) | — | — | ||||||||
Total distributions to shareholders |
(1.73 | ) | (0.12 | ) | (0.08 | ) | ||||||
Net Asset Value, End of Period |
$ | 10.85 | $ | 11.99 | $ | 9.35 | ||||||
Total Return2,5 |
5.63 | % | 29.49 | % | (5.69 | )%6 | ||||||
Ratio of net expenses to average net assets7 |
0.88 | % | 0.92 | % | 0.92 | %8 | ||||||
Ratio of gross expenses to average net assets9 |
2.50 | % | 1.71 | % | 3.06 | %8 | ||||||
Ratio of net investment income to average net assets2 |
0.36 | % | 1.04 | % | 1.07 | %8 | ||||||
Portfolio turnover |
121 | % | 146 | % | 138 | %6 | ||||||
Net assets end of period (000’s) omitted |
$ | 2,005 | $ | 1,950 | $ | 1,609 | ||||||
|
|
|
|
|
|
# | Effective October 1, 2016, the Investor Class, Service Class and Institutional Class were renamed Class N, Class I and Class Z, respectively. |
* | Commencement of operations was on January 2, 2015. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | Amount is less than $(0.01) per share. |
4 | Includes non-recurring dividends. Without these dividends, net investment income (loss) per share would have been $(0.09), $0.09, and $0.10 for Class N, Class I and Class Z shares, respectively. |
5 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
6 | Not annualized. |
7 | Includes reduction from broker recapture amounting to 0.07%, 0.01% and 0.03% for the years ended 2017, 2016 and 2015, respectively. |
8 | Annualized. |
9 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
51
AMG Managers Amundi Intermediate Government Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N | 2017# | 2016## | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 10.65 | $ | 10.81 | $ | 10.96 | $ | 10.64 | $ | 10.98 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.16 | 0.14 | 0.11 | 0.17 | 0.18 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
0.02 | 0.01 | 0.01 | 0.54 | (0.32 | ) | ||||||||||||||
Total income (loss) from investment operations |
0.18 | 0.15 | 0.12 | 0.71 | (0.14 | ) | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.19 | ) | (0.13 | ) | (0.10 | ) | (0.17 | ) | (0.18 | ) | ||||||||||
Net realized gain on investments |
— | (0.18 | ) | (0.17 | ) | (0.22 | ) | (0.02 | ) | |||||||||||
Paid in capital |
(0.02 | ) | — | — | — | — | ||||||||||||||
Total distributions to shareholders |
(0.21 | ) | (0.31 | ) | (0.27 | ) | (0.39 | ) | (0.20 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 10.62 | $ | 10.65 | $ | 10.81 | $ | 10.96 | $ | 10.64 | ||||||||||
Total Return2 |
1.68 | %3 | 1.42 | %3 | 1.09 | % | 6.73 | % | (1.25 | )% | ||||||||||
Ratio of net expenses to average net assets |
0.84 | % | 0.88 | % | 0.88 | % | 0.89 | % | 0.91 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
0.99 | % | 0.93 | % | 0.92 | % | 0.96 | % | 0.94 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
1.46 | % | 1.32 | % | 0.99 | % | 1.54 | % | 1.64 | %4 | ||||||||||
Portfolio turnover |
10 | % | 17 | % | 21 | % | 11 | % | 29 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 104,847 | $ | 166,411 | $ | 192,039 | $ | 174,138 | $ | 136,915 | ||||||||||
|
|
|
|
|
|
|
|
|
|
52
AMG Managers Amundi Intermediate Government Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal period ended December 31, |
||||
Class I | 2017* | |||
Net Asset Value, Beginning of Period |
$ | 10.70 | ||
Income (loss) from Investment Operations: |
||||
Net investment income1,2 |
0.15 | |||
Net realized and unrealized loss on investments |
(0.03 | ) | ||
Total income from investment operations |
0.12 | |||
Less Distributions to Shareholders from: |
||||
Net investment income |
(0.18 | ) | ||
Paid in capital |
(0.02 | ) | ||
Total distributions to shareholders |
(0.20 | ) | ||
Net Asset Value, End of Period |
$ | 10.62 | ||
Total Return2 |
1.15 | %3,6 | ||
Ratio of net expenses to average net assets |
0.72 | %7 | ||
Ratio of gross expenses to average net assets5 |
0.88 | %7 | ||
Ratio of net investment income to average net assets2 |
1.68 | %7 | ||
Portfolio turnover |
10 | % | ||
Net assets end of period (000’s) omitted |
$ | 2,313 | ||
|
|
53
AMG Managers Amundi Intermediate Government Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal period ended December 31, |
||||
Class Z | 2017* | |||
Net Asset Value, Beginning of Period |
$ | 10.70 | ||
Income (loss) from Investment Operations: |
||||
Net investment income1,2 |
0.16 | |||
Net realized and unrealized loss on investments |
(0.04 | ) | ||
Total income from investment operations |
0.12 | |||
Less Distributions to Shareholders from: |
||||
Net investment income |
(0.18 | ) | ||
Paid in capital |
(0.02 | ) | ||
Total distributions to shareholders |
(0.20 | ) | ||
Net Asset Value, End of Period |
$ | 10.62 | ||
Total Return2 |
1.15 | %3,6 | ||
Ratio of net expenses to average net assets |
0.69 | %7 | ||
Ratio of gross expenses to average net assets5 |
0.85 | %7 | ||
Ratio of net investment income to average net assets2 |
1.72 | %7 | ||
Portfolio turnover |
10 | % | ||
Net assets end of period (000’s) omitted |
$ | 1,326 | ||
|
|
# | Effective February 27, 2017, Class S was renamed Class N. |
## | Effective October 1, 2016, the shares were reclassified and redesignated as Class S shares. |
* | Commencement of operations was February 27, 2017. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | The total return is calculated using the published Net Asset Value as of fiscal period end. |
4 | Includes non-routine extraordinary expenses amounting to 0.020% of average net assets. |
5 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
6 | Not annualized. |
7 | Annualized. |
54
AMG Managers Amundi Short Duration Government Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N | 2017# | 2016## | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 9.63 | $ | 9.62 | $ | 9.65 | $ | 9.64 | $ | 9.65 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.10 | 0.16 | 0.02 | 0.05 | 0.03 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
(0.04 | ) | (0.05 | ) | (0.03 | ) | 0.01 | (0.01 | ) | |||||||||||
Total income (loss) from investment operations |
0.06 | 0.11 | (0.01 | ) | 0.06 | 0.02 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.22 | ) | (0.10 | ) | (0.02 | ) | (0.05 | ) | (0.03 | ) | ||||||||||
Total distributions to shareholders |
(0.22 | ) | (0.10 | ) | (0.02 | ) | (0.05 | ) | (0.03 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 9.47 | $ | 9.63 | $ | 9.62 | $ | 9.65 | $ | 9.64 | ||||||||||
Total Return2,3 |
0.58 | % | 1.10 | % | (0.15 | )% | 0.60 | % | 0.20 | % | ||||||||||
Ratio of net expenses to average net assets |
0.74 | % | 0.80 | % | 0.79 | % | 0.80 | % | 0.79 | %5 | ||||||||||
Ratio of gross expenses to average net assets7 |
0.83 | % | 0.80 | % | 0.79 | % | 0.80 | % | 0.79 | %5 | ||||||||||
Ratio of net investment income to average net assets2 |
1.07 | % | 1.69 | % | 0.25 | % | 0.47 | % | 0.27 | %5 | ||||||||||
Portfolio turnover |
20 | % | 37 | % | 51 | % | 41 | % | 48 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 135,620 | $ | 234,569 | $ | 395,306 | $ | 385,246 | $ | 422,488 | ||||||||||
|
|
|
|
|
|
|
|
|
|
55
AMG Managers Amundi Short Duration Government Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal period ended December 31, |
||||
Class I | 2017* | |||
Net Asset Value, Beginning of Period |
$ | 9.64 | ||
Income (loss) from Investment Operations: |
||||
Net investment income1,2 |
0.11 | |||
Net realized and unrealized loss on investments |
(0.08 | ) | ||
Total income from investment operations |
0.03 | |||
Less Distributions to Shareholders from: |
||||
Net investment income |
(0.21 | ) | ||
Total distributions to shareholders |
(0.21 | ) | ||
Net Asset Value, End of Period |
$ | 9.46 | ||
Total Return2,3 |
0.31 | %4 | ||
Ratio of net expenses to average net assets |
0.62 | %6 | ||
Ratio of gross expenses to average net assets7 |
0.73 | %6 | ||
Ratio of net investment income to average net assets2 |
1.41 | %6 | ||
Portfolio turnover |
20 | % | ||
Net assets end of period (000’s) omitted |
$ | 23,757 | ||
|
|
56
AMG Managers Amundi Short Duration Government Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal period ended December 31, |
||||
Class Z | 2017* | |||
Net Asset Value, Beginning of Period |
$ | 9.64 | ||
Income (loss) from Investment Operations: |
||||
Net investment income1,2 |
0.12 | |||
Net realized and unrealized loss on investments |
(0.08 | ) | ||
Total income from investment operations |
0.04 | |||
Less Distributions to Shareholders from: |
||||
Net investment income |
(0.21 | ) | ||
Total distributions to shareholders |
(0.21 | ) | ||
Net Asset Value, End of Period |
$ | 9.47 | ||
Total Return2,3 |
0.44 | %4 | ||
Ratio of net expenses to average net assets |
0.57 | %6 | ||
Ratio of gross expenses to average net assets7 |
0.68 | %6 | ||
Ratio of net investment income to average net assets2 |
1.46 | %6 | ||
Portfolio turnover |
20 | % | ||
Net assets end of period (000’s) omitted |
$ | 675 | ||
|
|
# | Effective February 27, 2017, Class S was renamed Class N. |
## | Effective October 1, 2016, the shares were reclassified and redesignated as Class S shares. |
* | Commencement of operations was February 27, 2017. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
4 | Not annualized. |
5 | Includes non-routine extraordinary expenses amounting to 0.019% of average net assets. |
6 | Annualized. |
7 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
57
December 31, 2017
58
Notes to Financial Statements (continued)
59
Notes to Financial Statements (continued)
The tax character of distributions paid during the fiscal years ended December 31, 2017 and December 31, 2016 were as follows:
Balanced | Small Cap Value | |||||||||||||||
Distributions paid from: | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Ordinary income |
$ | 1,336,645 | $ | 1,747,072 | $ | 32,099 | $ | 121,930 | ||||||||
Short-term capital gains |
3,377,861 | — | 833,144 | — | ||||||||||||
Long-term capital gains |
4,487,937 | 131,879 | 635,008 | — | ||||||||||||
Return of capital |
— | — | 18,947 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 9,202,443 | $ | 1,878,951 | $ | 1,519,198 | $ | 121,930 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Intermediate Government | Short Duration | |||||||||||||||
Distributions paid from: | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Ordinary income |
$ | 2,261,146 | $ | 5,087,719 | $ | 4,471,104 | $ | 2,527,449 | ||||||||
Short-term capital gains |
— | — | — | — | ||||||||||||
Long-term capital gains |
— | — | — | — | ||||||||||||
Return of capital |
192,812 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 2,453,958 | $ | 5,087,719 | $ | 4,471,104 | $ | 2,527,449 | |||||||||
|
|
|
|
|
|
|
|
As of December 31, 2017, the components of distributable earnings (excluding unrealized appreciation/depreciation) on tax basis consisted of:
Balanced | Small Cap Value | Intermediate Government | Short Duration | |||||||||||||
Capital loss carryforward |
— | — | $ | 2,178,798 | $ | 5,515,191 | ||||||||||
Undistributed ordinary income |
— | — | — | 205,033 | ||||||||||||
Undistributed short-term capital gains |
$ | 1,664,599 | — | — | — | |||||||||||
Undistributed long-term capital gains |
3,163,719 | — | — | — | ||||||||||||
Late-year loss deferral |
— | — | — | — |
At December 31, 2017, the approximate cost of investments and the aggregate gross unrealized appreciation and depreciation for federal income tax were as follows:
Fund | Cost | Appreciation | Depreciation | Net | ||||||||||||
Balanced |
$ | 176,266,128 | $ | 23,454,226 | $ | (1,909,202 | ) | $ | 21,545,024 | |||||||
Small Cap Value |
2,626,917 | 367,939 | (50,775 | ) | 317,164 | |||||||||||
Intermediate Government |
159,704,263 | 1,376,051 | (930,840 | ) | 445,211 | |||||||||||
Short Duration |
160,773,775 | 2,938,336 | (2,125,475 | ) | 812,861 |
60
Notes to Financial Statements (continued)
For the fiscal years ended December 31, 2017 and December 31, 2016, the capital stock transactions by class for the Funds were as follows:
Balanced | Small Cap Value | |||||||||||||||||||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Class N: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
1,239,936 | $ | 20,491,466 | 3,377,841 | $ | 49,948,934 | 5,673 | $ | 59,815 | 1,549 | $ | 18,593 | ||||||||||||||||||||
Reinvestment of distributions |
180,583 | 3,069,279 | 53,953 | 817,953 | 567 | 5,890 | 17 | 207 | ||||||||||||||||||||||||
Cost of shares repurchased |
(3,044,466 | ) | (50,984,756 | ) | (3,777,688 | ) | (56,409,174 | ) | (1,695 | ) | (17,799 | ) | (783 | ) | (7,962 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
(1,623,947 | ) | $ | (27,424,011 | ) | (345,894 | ) | $ | (5,642,287 | ) | 4,545 | $ | 47,906 | 783 | $ | 10,838 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class I: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
2,705,468 | $ | 45,868,384 | 2,263,148 | $ | 34,028,928 | 47,763 | $ | 556,183 | 181,690 | $ | 1,853,567 | ||||||||||||||||||||
Reinvestment of distributions |
161,858 | 2,780,507 | 19,571 | 299,586 | 118,507 | 1,227,738 | 8,418 | 102,527 | ||||||||||||||||||||||||
Cost of shares repurchased |
(1,051,459 | ) | (17,798,320 | ) | (1,453,335 | ) | (22,061,566 | ) | (1,012,039 | ) | (10,627,683 | ) | (467,369 | ) | (4,771,305 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
1,815,867 | $ | 30,850,571 | 829,384 | $ | 12,266,948 | (845,769 | ) | $ | (8,843,762 | ) | (277,261 | ) | $ | (2,815,211 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class Z: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
77,566 | $ | 1,285,979 | 323,484 | $ | 4,749,655 | 39,324 | $ | 406,905 | 43,104 | $ | 418,513 | ||||||||||||||||||||
Reinvestment of distributions |
19,371 | 332,260 | 4,203 | 64,334 | 27,522 | 285,399 | 1,575 | 19,183 | ||||||||||||||||||||||||
Cost of shares repurchased |
(58,065 | ) | (968,364 | ) | (69,342 | ) | (1,045,388 | ) | (44,678 | ) | (465,244 | ) | (54,112 | ) | (495,091 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
38,872 | $ | 649,875 | 258,345 | $ | 3,768,601 | 22,168 | $ | 227,060 | (9,433 | ) | $ | (57,395 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
Notes to Financial Statements (continued)
Intermediate Government | Short Duration | |||||||||||||||||||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Class N:1 |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
2,506,899 | $ | 26,802,132 | 6,031,612 | $ | 66,129,198 | 4,487,160 | $ | 43,034,526 | 36,112,882 | $ | 103,879,750 | ||||||||||||||||||||
Reinvestment of distributions |
206,475 | 2,204,214 | 431,895 | 4,630,731 | 392,197 | 3,743,767 | 221,824 | 2,135,935 | ||||||||||||||||||||||||
Cost of shares repurchased |
(8,473,695 | ) | (90,681,619 | ) | (8,607,228 | ) | (94,306,073 | ) | (14,919,003 | ) | (142,857,038 | ) | (53,058,101 | ) | (267,051,584 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net decrease |
(5,760,321 | ) | $ | (61,675,273 | ) | (2,143,721 | ) | $ | (23,546,144 | ) | (10,039,646 | ) | $ | (96,078,745 | ) | (16,723,395 | ) | $ | (161,035,899 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class I:2 |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
282,788 | $ | 3,034,044 | — | — | 5,634,803 | $ | 53,874,614 | — | — | ||||||||||||||||||||||
Reinvestment of distributions |
2,771 | 29,580 | — | — | 15,916 | 151,394 | — | — | ||||||||||||||||||||||||
Cost of shares repurchased |
(67,846 | ) | (727,699 | ) | — | — | (3,140,056 | ) | (29,921,094 | ) | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase |
217,713 | $ | 2,335,925 | — | — | 2,510,663 | $ | 24,104,914 | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class Z:2 |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
169,759 | $ | 1,799,841 | — | — | 126,003 | $ | 1,211,014 | — | — | ||||||||||||||||||||||
Reinvestment of distributions |
2,342 | 25,005 | — | — | 1,577 | 15,045 | — | — | ||||||||||||||||||||||||
Cost of shares repurchased |
(47,207 | ) | (505,944 | ) | — | — | (56,279 | ) | (538,713 | ) | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase |
124,894 | $ | 1,318,902 | — | — | 71,301 | $ | 687,346 | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Effective February 27, 2017, Class S was renamed Class N. |
2 | Commencement of operations was February 27, 2017. |
At December 31, 2017, certain unaffiliated shareholders of record individually held greater than 10% of the net assets of the Funds as follows: Small Cap Value - one owns 23%. Transactions by this shareholder may have a material impact on its respective Fund.
62
Notes to Financial Statements (continued)
63
Notes to Financial Statements (continued)
64
Notes to Financial Statements (continued)
65
Notes to Financial Statements (continued)
66
Notes to Financial Statements (continued)
The following table is a summary of the Funds’ open Repurchase Agreements that are subject to a master netting agreement as of December 31, 2017:
Gross Amount Not Offset in the Statement of Assets and Liabilities |
||||||||||||||||
Fund | Net Amounts of Assets Presented in the Statement of Assets and Liabilities |
Financial Instruments Collateral |
Cash Collateral Received |
Net Amount |
||||||||||||
Balanced |
||||||||||||||||
Cantor Fitzgerald Securities, Inc. |
$ | 1,000,000 | $ | 1,000,000 | — | — | ||||||||||
Daiwa Capital Markets America |
448,757 | 448,757 | — | — | ||||||||||||
State of Wisconsin Investment Board |
1,000,000 | 1,000,000 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Totals |
$ | 2,448,757 | $ | 2,448,757 | — | — | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Small Cap Value |
||||||||||||||||
Cantor Fitzgerald Securities, Inc. |
$ | 169,425 | $ | 169,425 | — | — | ||||||||||
|
|
|
|
|
|
|
|
67
Report of Independent Registered Public Accounting Firm
68
69
AMG Funds
Independent Trustees
The following Trustees are not “interested persons” of the Trust within the meaning of the 1940 Act:
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2012 |
Bruce B. Bingham, 69 | |
• Oversees 61 Funds in Fund Complex |
Partner, Hamilton Partners (real estate development firm) (1987-Present); Director of The Yacktman Funds (2000-2012). | |
• Trustee since 1999 - AMG Funds • Trustee since 2000 - AMG Funds II • Oversees 61 Funds in Fund Complex |
Edward J. Kaier, 72 Attorney at Law and Partner, Teeters Harvey Marrone & Kaier LLP (2007-Present); Attorney at Law and Partner, Hepburn Willcox Hamilton & Putnam, LLP (1977-2007); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Kurt A. Keilhacker, 54 Managing Member, TechFund Capital (1997-Present); Managing Member, TechFund Europe (2000-Present); Board Member, 6wind SA, (2002-Present); Managing Member, Elementum Ventures (2013-Present); Trustee, Gordon College (2001-2016). | |
• Trustee since 2004 - AMG Funds Trustee since 2000 - AMG Funds II Oversees 61 Funds in Fund Complex |
Steven J. Paggioli, 67 Independent Consultant (2002-Present); Formerly Executive Vice President and Director, The Wadsworth Group (1986-2001); Executive Vice President, Secretary and Director, Investment Company Administration, LLC (1990-2001); Vice President, Secretary and Director, First Fund Distributors, Inc. (1991-2001); Trustee, Professionally Managed Portfolios (32 portfolios); Advisory Board Member, Sustainable Growth Advisors, LP; Independent Director, Chase Investment Counsel (2008–Present). | |
• Trustee since 2013 Oversees 61 Funds in Fund Complex |
Richard F. Powers III, 72 Adjunct Professor, U.S. Naval War College (2016); Adjunct Professor, Boston College (2010-2013); President and CEO of Van Kampen Investments Inc. (1998-2003). | |
• Independent Chairman Trustee since 1999 - AMG Funds Trustee since 2000 - AMG Funds II Oversees 63 Funds in Fund Complex |
Eric Rakowski, 59 Professor, University of California at Berkeley School of Law (1990-Present); Director of Harding, Loevner Funds, Inc. (9 portfolios); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Victoria L. Sassine, 52 Lecturer, Babson College (2007 – Present). | |
• Trustee since 2004 - AMG Funds • Trustee since 2000 - AMG Funds II • Oversees 61 Funds in Fund Complex |
Thomas R. Schneeweis, 70 Professor Emeritus, University of Massachusetts (2013-Present); Partner, S Capital Wealth Advisors (2015-Present); President, TRS Associates (1982-Present); Board Member, Chartered Alternative Investment Association (“CAIA”) (2002-Present); Director, CAIA Foundation (Education) (2010-Present); Director, Institute for GlobalAsset and Risk Management (Education) (2010-Present); Partner, S Capital Management, LLC (2007-2015); Director, CISDM at the University of Massachusetts, (1996-2013); President, Alternative Investment Analytics, LLC, (formerly Schneeweis Partners, LLC) (2001-2013); Professor of Finance, University of Massachusetts (1977-2013). |
70
AMG Funds
Trustees and Officers (continued)
Interested Trustees
Each Trustee in the following table is an “interested person” of the Trust within the meaning of the 1940 Act. Ms. Carsman is an interested person of the Trust within the meaning of the 1940 Act by virtue of her position with, and interest in securities of, AMG.
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2011 |
Christine C. Carsman, 65 | |
• Oversees 63 Funds in Fund Complex |
Executive Vice President, Deputy General Counsel and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2017-Present); Director (2010-Present) and Chair of the Board of Directors (2015-Present), AMG Funds plc; Director of Harding, Loevner Funds, Inc. (9 portfolios); Senior Vice President and Deputy General Counsel, Affiliated Managers Group, Inc. (2011-2016); Senior Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2007-2011); Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2004-2007); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2004-2011); Senior Counsel, Vice President and Director of Operational Risk Management and Compliance, Wellington Management Company, LLP (1995-2004). |
Officers | ||
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• President since 2014 |
Jeffrey T. Cerutti, 50 | |
• Principal Executive Officer since 2014 Chief Executive Officer since 2016 |
Chief Executive Officer, AMG Funds LLC (2014-Present); Director, President and Principal, AMG Distributors, Inc. (2014-Present); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2014-Present); Chief Executive Officer, President and Principal Executive Officer, AMG Funds IV, (2015-Present); Chief Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Executive Officer, Aston Asset Management, LLC (2016); President, VP Distributors, (2011-2014); Executive Vice President, Head of Distribution, Virtus Investment Partners, Inc. (2010-2014); Managing Director, Head of Sales, UBS Global Asset Management (2001-2010). | |
• Chief Operating Officer since 2007 |
Keitha L. Kinne, 59 Chief Operating Officer, AMG Funds LLC (2007-Present); Chief Investment Officer, AMG Funds LLC (2008-Present); Chief Operating Officer, AMG Distributors, Inc. (2007-Present); Chief Operating Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2007-Present); Chief Operating Officer, AMG Funds IV, (2016-Present); Chief Operating Officer and Chief Investment Officer, Aston Asset Management, LLC (2016); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2012-2014); Managing Partner, AMG Funds LLC (2007-2014); President, AMG Funds (2012-2014); President, AMG Distributors, Inc. (2012-2014); Managing Director, Legg Mason & Co., LLC (2006-2007); Managing Director, Citigroup Asset Management (2004-2006). | |
• Secretary since 2015 • Chief Legal Officer since 2015 |
Mark J. Duggan, 53 Senior Vice President and Senior Counsel, AMG Funds LLC (2015-Present); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2015-Present); Secretary and Chief Legal Officer, AMG Funds IV, (2015-Present); Attorney, K&L Gates, LLP (2009-2015). | |
• Chief Financial Officer since 2017 • Treasurer since 2017 • Principal Financial Officer since 2017 • Principal Accounting Officer since 2017 |
Thomas G. Disbrow, 52 Vice President, Mutual Fund Treasurer & CFO, AMG Funds, AMG Funds LLC (2017-Present); Chief Financial Officer, Principal Financial Officer, Treasurer and Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Managing Director - Global Head of Traditional Funds Product Control, UBS Asset Management (Americas), Inc. (2015-2017); Managing Director - Head of North American Funds Treasury, UBS Asset Management (Americas), Inc. (2011-2015). | |
• Deputy Treasurer since 2017 |
John A. Starace, 47 | |
Director, Mutual Fund Accounting, AMG Funds LLC (2017-Present); Vice President, Deputy Treasurer of Mutual Funds Services, AMG Funds LLC (2014-2017); Deputy Treasurer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Vice President, Citi Hedge Fund Services (2010-2014); Audit Senior Manager (2005-2010) and Audit Manager (2001-2005), Deloitte & Touche LLP. | ||
• Controller since 2017 |
Christopher R. Townsend, 50 | |
Vice President, Business Finance, AMG Funds LLC (2017-Present); Head of Business Finance, AMG Funds LLC (2015-2017); Chief Financial Officer and Financial and Operations Principal, AMG Distributors, Inc. (2016-Present); Controller, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Treasurer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017); Chief Financial Officer, Aston Asset Management LLC (2016); Head of Finance and Accounting, Allianz Asset Management (2006-2015). |
71
AMG Funds
Trustees and Officers (continued)
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• Chief Compliance Officer since 2016 |
Gerald F. Dillenburg, 51 Vice President, Chief Compliance Officer AMG Funds, AMG Funds LLC (2017-Present); Chief Compliance Officer AMG Funds, AMG Funds LLC (2016-2017); Chief Compliance Officer and Sarbanes Oxley Code of Ethics Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); ChiefCompliance Officer, AMG Funds IV (1996-Present); Sarbanes-Oxley Code of Ethics Compliance Officer, AMG Funds IV (2016-Present); Chief Compliance Officer, AstonAsset Management, LLC (2006-2016); Chief Operating Officer, Aston Funds (2003-2016); Secretary, Aston Funds (1996-2015); Chief Financial Officer, Aston Funds(1997-2010); Chief Financial Officer, Aston Asset Management, LLC (2006-2010); Treasurer, Aston Funds (1996-2010). | |
• Anti-Money Laundering Compliance Officer since 2014 |
Patrick J. Spellman, 43 Vice President, Chief Compliance Officer, AMG Funds LLC (2017-Present); Senior Vice President, Chief Compliance Officer, AMG Funds LLC (2011-2017); Chief Compliance Officer, AMG Distributors, Inc., (2010-Present); Anti-Money Laundering Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2014-Present); Anti-Money Laundering Officer, AMG Funds IV, (2016-Present); Compliance Manager, Legal and Compliance, Affiliated Managers Group, Inc. (2005-2011). | |
• Assistant Secretary since 2016 |
Maureen A. Meredith, 32 Director, Counsel, AMG Funds LLC (2017-Present); Vice President, Counsel, AMG Funds LLC (2015-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2016-Present); Associate, Ropes & Gray LLP (2011-2015); Law Fellow, Massachusetts Appleseed Center for Law and Justice (2010-2011). |
72
amgfunds.com | 73
amgfunds.com | |123117 AR009 |
![]() |
ANNUAL REPORT |
AMG Funds
December 31, 2017
AMG GW&K Enhanced Core Bond Fund
Class N: MFDAX | Class I: MFDSX | Class C: MFDCX | Class Z: MFDYX
AMG GW&K Municipal Bond Fund
Class N: GWMTX | Class I: GWMIX
AMG GW&K Municipal Enhanced Yield Fund
Class N: GWMNX | Class I: GWMEX | Class Z: GWMZX
AMG GW&K Small Cap Core Fund
Class N: GWETX | Class I: GWEIX | Class Z: GWEZX
AMG GW&K Small/Mid Cap Fund
(formerly AMG GW&K Small Cap Growth Fund)
Class N: GWGVX | Class I: GWGIX | Class Z: GWGZX
amgfunds.com | | 123117 AR020 |
AMG Funds
Annual Report—December 31, 2017
PAGE | ||||
2 | ||||
3 | ||||
PORTFOLIO MANAGER’S COMMENTS, FUND SNAPSHOTS AND SCHEDULES OF PORTFOLIO INVESTMENTS |
||||
5 | ||||
11 | ||||
20 | ||||
26 | ||||
32 | ||||
39 | ||||
Balance sheets, net asset value (NAV) per share computations and cumulative undistributed amounts |
||||
41 | ||||
Detail of sources of income, expenses, and realized and unrealized gains (losses) during the fiscal year |
||||
42 | ||||
Detail of changes in assets for the past two fiscal years |
||||
44 | ||||
Historical net asset values per share, distributions, total returns, income and expense ratios, turnover ratios and net assets |
||||
59 | ||||
Accounting and distribution policies, details of agreements and transactions with Fund management and affiliates, and descriptions of certain investment risks |
||||
69 | ||||
70 | ||||
71 |
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 mutual funds. Such offering is made only by prospectus, which includes details as to offering price and other material information.
![]() |
Letter to Shareholders |
Dear Shareholder:
2
3
About Your Fund’s Expenses (continued)
4
AMG GW&K Enhanced Core Bond Fund
Portfolio Manager’s Comments (unaudited)
5
AMG GW&K Enhanced Core Bond Fund
Portfolio Manager’s Comments (continued)
6
AMG GW&K Enhanced Core Bond Fund
Fund Snapshots (unaudited)
December 31, 2017
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/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. 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.
7
AMG GW&K Enhanced Core Bond Fund
Schedule of Portfolio Investments
December 31, 2017
Principal Amount |
Value | |||||||
Corporate Bonds and Notes - 50.3% |
||||||||
Energy - 1.5% |
|
|||||||
Newfield Exploration Co. 5.750%, 01/30/22 |
$ | 675,000 | $ | 723,937 | ||||
Financials - 13.1% |
|
|||||||
American Tower Corp. 4.400%, 02/15/26 |
453,000 | 477,160 | ||||||
Bank of America Corp., MTN 3.875%, 08/01/25 |
694,000 | 732,773 | ||||||
CIT Group, Inc. 5.000%, 08/15/22 |
440,000 | 467,500 | ||||||
Crown Castle International Corp. 5.250%, 01/15/23 |
435,000 | 476,831 | ||||||
Host Hotels & Resorts LP, Series C 4.750%, 03/01/23 |
457,000 | 486,678 | ||||||
Morgan Stanley, GMTN 5.500%, 07/28/21 |
409,000 | 447,745 | ||||||
National Rural Utilities Cooperative Finance |
||||||||
Corp., MTN 3.250%, 11/01/25 |
455,000 | 464,364 | ||||||
The Goldman Sachs Group, Inc. 6.125%, 02/15/33 |
763,000 | 974,021 | ||||||
Wells Fargo & Co. |
||||||||
(3-Month LIBOR plus 0.930%) 2.343%, 02/11/221 |
1,163,000 | 1,178,031 | ||||||
Weyerhaeuser Co. 8.500%, 01/15/25 |
525,000 | 690,992 | ||||||
Total Financials |
6,396,095 | |||||||
Industrials - 35.7% |
|
|||||||
The ADT Corp. 6.250%, 10/15/21 |
227,000 | 249,700 | ||||||
American Airlines Group, Inc. 6.125%, 06/01/182 |
245,000 | 248,981 | ||||||
Andeavor Logistics LP / Tesoro Logistics Finance Corp. 5.500%, 10/15/19 |
233,000 | 242,150 | ||||||
Apple, Inc. |
||||||||
(3-Month LIBOR plus 0.500%) 1.903%, 02/09/221 |
1,168,000 | 1,184,773 | ||||||
ArcelorMittal (Luxembourg) 6.000%, 03/01/212 |
225,000 | 244,125 | ||||||
Automatic Data Processing, Inc. 3.375%, 09/15/25 |
660,000 | 681,891 | ||||||
Ball Corp. 5.250%, 07/01/25 |
481,000 | 524,891 | ||||||
Burlington Northern Santa Fe LLC 6.150%, 05/01/37 |
556,000 | 746,695 | ||||||
CDW LLC / CDW Finance Corp. 5.500%, 12/01/24 |
441,000 | 481,792 | ||||||
Charter Communications Operating LLC / Charter Communications Operating Capital 4.908%, 07/23/25 |
447,000 | 475,975 | ||||||
Comcast Corp. 7.050%, 03/15/33 |
345,000 | 480,769 | ||||||
Concho Resources, Inc. 4.375%, 01/15/25 |
225,000 | 234,563 | ||||||
Crown Americas LLC / Crown Americas Capital Corp. IV 4.500%, 01/15/23 |
475,000 | 483,312 | ||||||
CSX Corp. 2.600%, 11/01/26 |
511,000 | 488,583 | ||||||
CVS Health Corp. 5.125%, 07/20/45 |
405,000 | 465,961 | ||||||
Diamondback Energy, Inc. 4.750%, 11/01/24 |
400,000 | 403,500 | ||||||
Georgia-Pacific LLC 8.000%, 01/15/24 |
366,000 | 466,380 | ||||||
HCA, Inc. 5.000%, 03/15/24 |
456,000 | 475,380 | ||||||
International Paper Co. 3.000%, 02/15/27 |
504,000 | 489,617 | ||||||
Kaiser Foundation Hospitals 3.150%, 05/01/27 |
472,000 | 473,014 | ||||||
Leidos Holdings, Inc. 4.450%, 12/01/20 |
225,000 | 234,563 | ||||||
Lennar Corp. 4.750%, 11/15/22 |
454,000 | 478,403 | ||||||
Masco Corp. 4.375%, 04/01/26 |
483,000 | 512,221 | ||||||
McDonald’s Corp., MTN 3.700%, 01/30/26 |
450,000 | 469,870 | ||||||
Microsoft Corp. 3.750%, 02/12/45 |
484,000 | 511,197 | ||||||
Molson Coors Brewing Co. 3.000%, 07/15/26 |
488,000 | 478,536 | ||||||
Murphy Oil USA, Inc. 6.000%, 08/15/23 |
235,000 | 246,163 | ||||||
Northrop Grumman Corp. 3.200%, 02/01/27 |
476,000 | 478,692 | ||||||
NuStar Logistics LP 6.750%, 02/01/21 |
229,000 | 244,458 | ||||||
Omnicom Group, Inc. 3.600%, 04/15/26 |
467,000 | 473,274 | ||||||
Oracle Corp. 3.800%, 11/15/37 |
440,000 | 462,415 | ||||||
Owens Corning 4.200%, 12/15/22 |
470,000 | 493,344 | ||||||
Penske Automotive Group, Inc. 3.750%, 08/15/20 |
470,000 | 479,987 |
The accompanying notes are an integral part of these financial statements.
8
AMG GW&K Enhanced Core Bond Fund
Schedule of Portfolio Investments (continued)
Principal Amount |
Value | |||||||
Industrials - 35.7% (continued) |
||||||||
Toll Brothers Finance Corp. |
$ | 236,000 | $ | 245,735 | ||||
6.750%, 11/01/19 |
226,000 | 243,798 | ||||||
United Continental Holdings, Inc. |
240,000 | 244,200 | ||||||
Verizon Communications, Inc. |
470,000 | 480,342 | ||||||
Vulcan Materials Co. 4.500%, 04/01/25 |
336,000 | 358,582 | ||||||
Walgreens Boots Alliance, Inc. |
721,000 | 714,256 | ||||||
Total Industrials |
17,392,088 | |||||||
Total Corporate Bonds and Notes |
24,512,120 | |||||||
Municipal Bonds - 6.5% |
|
|||||||
California State General Obligation, School |
||||||||
Improvements 7.550%, 04/01/39 |
605,000 | 954,466 | ||||||
JobsOhio Beverage System, Series B 3.985%, 01/01/29 |
445,000 | 472,435 | ||||||
Los Angeles Unified School District, School |
||||||||
Improvements 5.750%, 07/01/34 |
565,000 | 722,019 | ||||||
Metropolitan Transportation Authority, Transit |
||||||||
Improvement 6.668%, 11/15/39 |
350,000 | 496,608 | ||||||
New Jersey Economic Development Authority, |
||||||||
Pension Funding, Series A (National Insured) 7.425%, 02/15/293 |
388,000 | 485,943 | ||||||
Total Municipal Bonds |
|
3,131,471 | ||||||
U.S. Government and Agency Obligations - 39.2% |
|
|||||||
Fannie Mae - 26.4% |
|
|||||||
FNMA, |
2,174,850 | 2,245,725 | ||||||
4.000%, 09/01/25 to 10/01/43 |
5,286,934 | 5,562,347 | ||||||
4.500%, 05/01/39 to 04/01/41 |
4,039,712 | 4,346,083 | ||||||
FNMA, |
658,274 | 715,558 | ||||||
Total Fannie Mae |
12,869,713 | |||||||
Freddie Mac - 3.4% |
|
|||||||
FHLMC Gold Pool, |
110,551 | 114,801 | ||||||
5.000%, 10/01/36 |
1,404,967 | 1,523,661 | ||||||
Total Freddie Mac |
1,638,462 | |||||||
U.S. Treasury Obligations - 9.4% |
|
|||||||
United States Treasury Bonds, |
437,000 | 499,272 | ||||||
4.500%, 02/15/36 |
1,109,000 | 1,428,076 | ||||||
6.250%, 08/15/23 |
666,000 | 806,940 | ||||||
United States Treasury Notes, |
470,000 | 462,362 | ||||||
2.000%, 11/30/22 |
1,405,000 | 1,392,377 | ||||||
Total U.S. Treasury Obligations |
4,589,027 | |||||||
Total U.S. Government and Agency Obligations |
19,097,202 | |||||||
Short-Term Investments - 4.8% |
||||||||
Joint Repurchase Agreements - 1.5%4 |
|
|||||||
State of Wisconsin Investment Board, dated 12/29/17, due 01/02/18, 1.630% total to be received $759,259 (collateralized by various U.S. Government Agency Obligations, 0.125% -3.875%, 01/15/19 - 02/15/46, totaling $780,202) |
759,122 | 759,122 | ||||||
Shares | ||||||||
Other Investment Companies - 3.3% |
|
|||||||
Dreyfus Preferred Government Money Market Fund, Institutional Class Shares, 1.25%5 |
1,589,487 | 1,589,487 | ||||||
Total Short-Term Investments |
2,348,609 | |||||||
Total Investments - 100.8% |
49,089,402 | |||||||
Other Assets, less Liabilities - (0.8)% |
|
(365,726 | ) | |||||
Net Assets - 100.0% |
$ | 48,723,676 |
1 | Variable rate security. The rate shown is based on the latest available information as of December 31, 2017. |
2 | Some or all of these securities, amounting to $739,043 or 1.5% of net assets, were out on loan to various brokers. |
3 | Security is backed by insurance of financial institutions and financial guaranty assurance agencies. At December 31, 2017, the value amounted to $485,943 or 1.0% of net assets. |
4 | Collateral received from brokers for securities lending was invested in these joint repurchase agreements. |
5 | Yield shown represents the December 31, 2017, seven day average yield, which refers to the sum of the previous seven days’ dividends paid, expressed as an annual percentage. |
FHLMC Freddie Mac
FNMA Fannie Mae
GMTN Global Medium-Term Notes
LIBOR London Interbank Offered Rate
MTN Medium-Term Note
National Insured National Public Finance Guarantee Corp.
The accompanying notes are an integral part of these financial statements.
9
AMG GW&K Enhanced Core Bond Fund
Schedule of Portfolio Investments (continued)
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Corporate Bonds and Notes† |
— | $ | 24,512,120 | — | $ | 24,512,120 | ||||||||||
Municipal Bonds†† |
— | 3,131,471 | — | 3,131,471 | ||||||||||||
U.S. Government and Agency Obligations |
— | 19,097,202 | — | 19,097,202 | ||||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | 759,122 | — | 759,122 | ||||||||||||
Other Investment Companies |
$ | 1,589,487 | — | — | 1,589,487 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 1,589,487 | $ | 47,499,915 | — | $ | 49,089,402 | |||||||||
|
|
|
|
|
|
|
|
† | All corporate bonds and notes and U.S. government and agency obligations held in the Fund are Level 2 securities. For a detailed breakout of corporate bonds and notes and U.S. government and agency obligations by major industry or agency classification, please refer to the Fund’s Schedule of Portfolio Investments. |
†† | All municipal bonds held in the Fund are Level 2 securities. For a detailed breakout of municipal bonds by major classification, please refer to the Fund’s Schedule of Portfolio Investments. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements.
10
Portfolio Manager’s Comments (unaudited)
11
AMG GW&K Municipal Bond Fund
Portfolio Manager’s Comments (continued)
12
AMG GW&K Municipal Bond Fund
Portfolio Manager’s Comments (continued)
13
AMG GW&K Municipal Bond Fund
Fund Snapshots (unaudited)
December 31, 2017
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/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. 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.
14
AMG GW&K Municipal Bond Fund
Schedule of Portfolio Investments
December 31, 2017
Principal Amount | Value | |||||||
Municipal Bonds - 98.5% |
||||||||
Arizona - 3.5% |
||||||||
Arizona Department of Transportation State Highway Fund Revenue 5.000%, 07/01/28 |
$ | 5,000,000 | $ | 6,153,300 | ||||
Arizona Water Infrastructure Finance Authority, Water Quality Revenue, Series A 5.000%, 10/01/26 |
15,000,000 | 18,003,600 | ||||||
Salt River Project Agricultural Improvement & Power District, Salt River Project Electrical 5.000%, 01/01/29 |
6,000,000 | 7,548,960 | ||||||
Salt River Project Agricultural Improvement & Power District, Series A 5.000%, 12/01/24 |
5,550,000 | 6,228,931 | ||||||
Total Arizona |
37,934,791 | |||||||
California - 5.0% |
||||||||
California Municipal Finance Authority, Community Medical Centers, Series A 5.000%, 02/01/27 |
950,000 | 1,144,370 | ||||||
California Municipal Finance Authority, Community Medical Centers, Series A 5.000%, 02/01/30 |
1,620,000 | 1,913,884 | ||||||
California Municipal Finance Authority, Community Medical Centers, Series A 5.000%, 02/01/31 |
1,000,000 | 1,174,380 | ||||||
California Municipal Finance Authority, Community Medical Centers, Series A 5.000%, 02/01/32 |
1,855,000 | 2,168,736 | ||||||
California State Tax Exempt General Obligation 5.000%, 03/01/24 |
5,000,000 | 5,922,600 | ||||||
California State University, Series A 5.000%, 11/01/29 |
4,525,000 | 5,374,524 | ||||||
State of California 5.000%, 09/01/25 |
10,000,000 | 12,192,300 | ||||||
State of California 5.000%, 09/01/29 |
5,010,000 | 6,128,282 | ||||||
State of California 5.000%, 08/01/29 |
7,000,000 | 8,555,050 | ||||||
State of California, Series C 5.000%, 09/01/26 |
7,700,000 | 9,394,154 | ||||||
Total California |
53,968,280 | |||||||
Colorado - 1.3% |
||||||||
City & County of Denver CO. Airport System Revenue, Series A 5.000%, 11/15/23 |
6,000,000 | 7,016,940 | ||||||
Regional Transportation District County COPS, Series A 5.000%, 06/01/24 |
6,000,000 | 6,938,700 | ||||||
Total Colorado |
13,955,640 | |||||||
Connecticut - 0.6% |
||||||||
State of Connecticut Special Tax Revenue, Transit Infrastructure 5.000%, 08/01/24 |
5,340,000 | 6,215,386 | ||||||
District of Columbia - 1.7% |
||||||||
District of Columbia Water & Sewer Authority Public Utility Revenue, Sub Lien, Series C 5.000%, 10/01/24 |
5,475,000 | 6,260,115 | ||||||
District of Columbia, Series A 5.000%, 06/01/24 |
5,000,000 | 5,931,350 | ||||||
District of Columbia, Series A 5.000%, 06/01/30 |
5,025,000 | 6,074,170 | ||||||
Total District of Columbia |
18,265,635 | |||||||
Florida - 4.8% |
||||||||
Florida State Board of Education, Series D 5.000%, 06/01/24 |
6,565,000 | 7,254,653 | ||||||
Florida’s Turnpike Enterprise, Department of Transportation, Series C 5.000%, 07/01/28 |
7,075,000 | 8,626,760 | ||||||
Orange County Health Facilities Authority, Series A 5.000%, 10/01/31 |
4,515,000 | 5,289,187 | ||||||
State of Florida, Capital Outlay, Series B 5.000%, 06/01/27 |
9,045,000 | 10,771,871 | ||||||
State of Florida, Capital Outlay, Series B 5.000%, 06/01/25 |
5,970,000 | 6,773,801 | ||||||
State of Florida, Capital Outlay, Series C 5.000%, 06/01/27 |
5,555,000 | 6,868,258 | ||||||
State of Florida, Department of Transportation, Fuel Sales Tax Revenue, Series B 5.000%, 07/01/26 |
5,780,000 | 6,414,066 | ||||||
Total Florida |
51,998,596 | |||||||
Georgia - 3.6% |
||||||||
Atlanta Water & Wastewater Revenue 5.000%, 11/01/25 |
5,100,000 | 6,164,982 | ||||||
Georgia State University & College Improvements, Series A 5.000%, 07/01/24 |
5,000,000 | 5,708,700 | ||||||
Georgia State University & College Improvements, Series A 5.000%, 07/01/27 |
5,450,000 | 6,207,332 | ||||||
Georgia State University & College Improvements, Series A -Tranche 2 5.000%, 02/01/26 |
5,435,000 | 6,618,091 | ||||||
State of Georgia, Series C 5.000%, 09/01/23 |
5,000,000 | 5,731,450 |
The accompanying notes are an integral part of these financial statements.
15
AMG GW&K Municipal Bond Fund
Schedule of Portfolio Investments (continued)
Principal Amount | Value | |||||||
Georgia - 3.6% (continued) |
||||||||
State of Georgia, Series F 5.000%, 01/01/26 |
$ | 7,015,000 | $ | 8,661,841 | ||||
Total Georgia |
39,092,396 | |||||||
Idaho - 0.6% |
||||||||
Idaho Housing & Finance Association 5.000%, 07/15/23 |
5,770,000 | 6,672,428 | ||||||
Illinois - 3.9% |
||||||||
Chicago O’Hare International Airport, Series B 5.000%, 01/01/28 |
10,580,000 | 12,408,436 | ||||||
Illinois State Finance Authority Revenue, Clean Water Initiative Revenue 5.000%, 07/01/27 |
11,000,000 | 13,291,410 | ||||||
Illinois State Finance Authority Revenue, University of Chicago, Series A 5.000%, 10/01/23 |
5,005,000 | 5,830,625 | ||||||
Illinois State Toll Highway Authority, Series A 5.000%, 12/01/31 |
9,260,000 | 10,862,165 | ||||||
Total Illinois |
42,392,636 | |||||||
Indiana - 0.6% |
||||||||
Indiana Finance Authority, Indiana University Health Revenue, Series A 5.000%, 12/01/23 |
5,115,000 | 5,966,392 | ||||||
Iowa - 2.2% |
||||||||
Iowa Finance Authority, Green Bond 5.000%, 08/01/30 |
15,000,000 | 18,579,750 | ||||||
State of Iowa, Series A 5.000%, 06/01/25 |
4,000,000 | 4,838,000 | ||||||
Total Iowa |
23,417,750 | |||||||
Kentucky - 0.6% |
||||||||
Louisville/Jefferson County Metropolitan Government, Norton Healthcare Inc., Series A 5.000%, 10/01/29 |
5,020,000 | 5,948,298 | ||||||
Maryland - 5.8% |
||||||||
State of Maryland, Department of Transportation 5.000%, 05/01/23 |
8,720,000 | 10,179,641 | ||||||
State of Maryland, Department of Transportation 5.000%, 09/01/29 |
11,895,000 | 14,908,598 | ||||||
State of Maryland, Series B 5.000%, 08/01/25 |
20,000,000 | 24,466,800 | ||||||
University System of Maryland, University & College Improvements, Series A 5.000%, 04/01/23 |
5,475,000 | 6,359,815 | ||||||
University System of Maryland, University & College Improvements, Series A 5.000%, 04/01/24 |
5,100,000 | 6,056,352 | ||||||
Total Maryland |
61,971,206 | |||||||
Massachusetts - 7.6% |
||||||||
Commonwealth of Massachusetts Federal Highway Grant Anticipation Note Revenue, Subordinate Revenue, Series A 5.000%, 06/15/24 |
13,770,000 | 16,047,558 | ||||||
Commonwealth of Massachusetts, Series A 5.000%, 07/01/25 |
7,700,000 | 9,348,108 | ||||||
Commonwealth of Massachusetts, Series B 5.000%, 07/01/23 |
5,000,000 | 5,844,900 | ||||||
Massachusetts Development Finance Agency, Partners Healthcare System 5.000%, 07/01/28 |
8,000,000 | 9,774,880 | ||||||
Massachusetts School Building Authority, Series A 5.000%, 08/15/25 |
5,035,000 | 5,738,390 | ||||||
Massachusetts State Development Finance Agency, Boston College, Series S 5.000%, 07/01/23 |
5,700,000 | 6,650,133 | ||||||
Massachusetts Water Resources Authority, Series C 5.000%, 08/01/24 |
10,300,000 | 11,471,110 | ||||||
Massachusetts Water Resources Authority, Series C 5.000%, 08/01/26 |
4,025,000 | 4,983,111 | ||||||
Massachusetts Water Resources Authority, Series C 5.000%, 08/01/31 |
6,000,000 | 7,254,480 | ||||||
The Massachusetts Clean Water Trust 5.000%, 08/01/25 |
4,640,000 | 4,883,275 | ||||||
Total Massachusetts |
81,995,945 | |||||||
Michigan - 3.7% |
||||||||
Michigan Finance Authority, Henry Ford Health System 5.000%, 11/15/29 |
9,950,000 | 11,700,603 | ||||||
Michigan Finance Authority, Hospital Trinity Health Credit 5.000%, 12/01/34 |
5,150,000 | 6,119,642 | ||||||
Michigan State Building Authority Revenue, Series I 5.000%, 04/15/27 |
5,700,000 | 6,849,348 | ||||||
State of Michigan 5.000%, 03/15/27 |
12,640,000 | 15,501,949 | ||||||
Total Michigan |
40,171,542 | |||||||
Minnesota - 1.1% |
||||||||
Minneapolis-St Paul Metropolitan Airports Commission, Series A 5.000%, 01/01/25 |
5,000,000 | 6,010,700 |
The accompanying notes are an integral part of these financial statements.
16
AMG GW&K Municipal Bond Fund
Schedule of Portfolio Investments (continued)
Principal Amount | Value | |||||||
Minnesota - 1.1% (continued) |
||||||||
Minnesota State General Obligation, Series A 5.000%, 08/01/23 |
$ | 5,300,000 | $ | 6,057,052 | ||||
Total Minnesota |
12,067,752 | |||||||
Missouri - 1.7% |
||||||||
Missouri Highway & Transportation Commission, |
||||||||
Fuel Sales Tax Revenue, Series B 5.000%, 05/01/23 |
10,330,000 | 12,030,524 | ||||||
University of Missouri, Series A 5.000%, 11/01/26 |
5,495,000 | 6,569,163 | ||||||
Total Missouri |
18,599,687 | |||||||
New Jersey - 2.7% |
||||||||
New Jersey Health Care Facilities Financing Authority, RWJ Barnabas Health Obligation 5.000%, 07/01/29 |
6,570,000 | 7,780,391 | ||||||
New Jersey State Turnpike Authority Revenue, Series 2012B 5.000%, 01/01/24 |
2,790,000 | 3,194,522 | ||||||
New Jersey State Turnpike Authority Revenue, Series A 5.000%, 01/01/33 |
10,270,000 | 12,199,220 | ||||||
New Jersey State Turnpike Authority Revenue, Series A 5.000%, 01/01/24 |
355,000 | 403,834 | ||||||
New Jersey State Turnpike Authority Revenue, Series B 5.000%, 01/01/28 |
4,000,000 | 4,947,320 | ||||||
Total New Jersey |
28,525,287 | |||||||
New York - 16.1% |
||||||||
Metropolitan Transportation Authority, Climate Bond Certified Green Bond 5.000%, 11/15/33 |
5,000,000 | 6,101,550 | ||||||
Metropolitan Transportation Authority, Fuel Sales Tax Revenue, Series A 5.000%, 11/15/24 |
5,000,000 | 6,004,000 | ||||||
Metropolitan Transportation Authority, Transit Revenue, Series F 5.000%, 11/15/24 |
4,950,000 | 5,704,776 | ||||||
Metropolitan Transportation Authority, Transit Revenue, Series F 5.000%, 11/15/27 |
5,000,000 | 5,722,150 | ||||||
Metropolitan Transportation Authority, Transit Revenue, Series F 5.000%, 11/15/28 |
5,000,000 | 5,962,300 | ||||||
Metropolitan Transportation Authority, Variable, Series A-1, REMK 06/1 1.250%, 11/01/31 1 |
10,500,000 | 10,500,000 | ||||||
New York City General Obligation, Series C 5.000%, 08/01/24 |
5,000,000 | 5,957,500 | ||||||
New York City General Obligation, Series C 5.000%, 08/01/26 |
5,510,000 | 6,763,084 | ||||||
New York City General Obligation, Series G 5.000%, 08/01/23 |
5,000,000 | 5,831,000 | ||||||
New York City General Obligation, Series I 5.000%, 08/01/24 |
11,485,000 | 13,060,397 | ||||||
New York City Transitional Finance Authority, Future Tax Secured Revenue, Series A-2 5.000%, 08/01/34 |
5,000,000 | 6,035,050 | ||||||
New York City Transitional Finance Authority, Future Tax Secured Revenue, Series B 5.000%, 02/01/24 |
5,015,000 | 5,493,331 | ||||||
New York City Transitional Finance Authority, Future Tax Secured Revenue, Series C 5.000%, 11/01/23 |
5,000,000 | 5,872,250 | ||||||
New York City Transitional Finance Authority, Future Tax Secured Revenue, Series C 5.000%, 11/01/26 |
5,200,000 | 6,274,008 | ||||||
New York City Water & Sewer System Revenue, Series FF 5.000%, 06/15/25 |
7,940,000 | 8,582,028 | ||||||
New York City Water & Sewer System Revenue, Series FF 5.000%, 06/15/30 |
5,370,000 | 6,397,925 | ||||||
New York State Dormitory Authority, Series A 5.000%, 12/15/25 |
8,645,000 | 9,984,888 | ||||||
New York State Dormitory Authority, Series A 5.000%, 12/15/27 |
5,640,000 | 6,502,582 | ||||||
New York State Dormitory Authority, Series D 5.000%, 02/15/27 |
5,800,000 | 7,129,592 | ||||||
New York State Dormitory Authority, Series D 5.000%, 02/15/27 |
5,395,000 | 6,079,248 | ||||||
New York State Dormitory Authority, Series E 5.000%, 03/15/32 |
8,370,000 | 10,027,930 | ||||||
New York State Urban Development Corp., Personal Income Tax Revenue, Series A 5.000%, 03/15/24 |
5,000,000 | 5,915,200 | ||||||
Triborough Bridge & Tunnel Authority, MTA Bridge And Tunnel 5.000%, 11/15/27 |
13,845,000 | 17,476,267 | ||||||
Total New York |
173,377,056 | |||||||
North Carolina - 4.6% |
||||||||
North Carolina Municipal Power Agency No. 1, Electric, Power and Light Revenue, Series A 5.000%, 01/01/27 |
5,025,000 | 6,047,236 | ||||||
North Carolina State Limited Obligation, Series A 5.000%, 06/01/26 |
10,515,000 | 13,083,919 | ||||||
North Carolina State Limited Obligation, Series B 5.000%, 05/01/28 |
15,010,000 | 18,607,747 | ||||||
North Carolina State Limited Obligation, Series C 5.000%, 05/01/23 |
5,020,000 | 5,840,820 |
The accompanying notes are an integral part of these financial statements.
17
AMG GW&K Municipal Bond Fund
Schedule of Portfolio Investments (continued)
Principal Amount | Value | |||||||
North Carolina - 4.6% (continued) |
||||||||
The Charlotte-Mecklenburg Hospital Authority, Carolinas Healthcare System 5.000%, 01/15/25 |
$ | 5,000,000 | $ | 5,997,700 | ||||
Total North Carolina |
49,577,422 | |||||||
Ohio - 3.5% |
||||||||
Ohio State General Obligation, Cleveland Clinic Health 5.000%, 01/01/28 |
3,520,000 | 4,389,229 | ||||||
Ohio State General Obligation, Series A 5.000%, 09/01/26 |
7,040,000 | 8,730,656 | ||||||
Ohio State General Obligation, University & College Improvements, Series C 5.000%, 11/01/26 |
5,000,000 | 6,025,100 | ||||||
Ohio Water Development Authority, Water Pollution Control Loan Fund 5.000%, 06/01/23 |
5,035,000 | 5,870,608 | ||||||
Ohio Water Development Authority, Water Pollution Control Loan Fund, Series 2015A 5.000%, 06/01/25 |
10,050,000 | 12,194,067 | ||||||
Total Ohio |
37,209,660 | |||||||
Oklahoma - 1.4% |
||||||||
Grand River Dam Authority, Series A 5.000%, 06/01/28 |
7,820,000 | 9,575,825 | ||||||
Oklahoma Turnpike Authority, Series A 5.000%, 01/01/26 |
5,000,000 | 5,462,850 | ||||||
Total Oklahoma |
15,038,675 | |||||||
Pennsylvania - 0.8% |
||||||||
Lancaster County Hospital Authority, University of Pennsylvania Health Revenue 5.000%, 08/15/26 |
6,730,000 | 8,202,322 | ||||||
Tennessee - 0.8% |
||||||||
State of Tennessee Fuel Sales Tax Revenue, Series B 5.000%, 09/01/26 |
7,365,000 | 8,843,156 | ||||||
Texas - 10.2% |
||||||||
Central Texas Turnpike System Transportation Commission, Series C 5.000%, 08/15/31 |
11,175,000 | 12,802,639 | ||||||
City of Austin TX Water & Wastewater System Revenue 5.000%, 11/15/26 |
5,085,000 | 6,290,755 | ||||||
City of San Antonio TX Electric & Gas Systems Revenue 5.000%, 02/01/26 |
9,300,000 | 11,386,920 | ||||||
Humble Independent School District, Series B 5.000%, 02/15/23 |
5,610,000 | 6,474,725 | ||||||
Metropolitan Transit Authority of Harris County, Series A 5.000%, 11/01/24 |
5,000,000 | 5,966,800 | ||||||
North Texas Municipal Water District Water System Revenue, Refunding And Improvement 5.000%, 09/01/29 |
5,035,000 | 6,083,740 | ||||||
North Texas Tollway Authority Revenue, Special Projects System, 1st Tier, Series A 5.000%, 01/01/25 |
6,370,000 | 7,444,492 | ||||||
North Texas Tollway Authority, 2nd Tier, Series B 5.000%, 01/01/31 |
2,000,000 | 2,353,940 | ||||||
North Texas Tollway Authority, 2nd Tier, Series B 5.000%, 01/01/32 |
4,000,000 | 4,751,400 | ||||||
North Texas Tollway Authority, Series A 5.000%, 01/01/26 |
7,775,000 | 9,076,924 | ||||||
State of Texas, Transportation Commission Highway Improvements Revenue 5.000%, 04/01/25 |
4,950,000 | 5,603,004 | ||||||
Texas A&M University, Financing System, Series E 5.000%, 05/15/28 |
8,740,000 | 10,876,405 | ||||||
Texas Transportation Commission Fund, Series A 5.000%, 04/01/27 |
12,550,000 | 14,161,671 | ||||||
The University of Texas System, Series H 5.000%, 08/15/26 |
5,045,000 | 6,241,876 | ||||||
Total Texas |
109,515,291 | |||||||
Virginia - 1.7% |
||||||||
Virginia College Building Authority, Series B 5.000%, 09/01/23 |
5,350,000 | 6,245,430 | ||||||
Virginia Public Building Authority, Series B 5.000%, 08/01/25 |
9,750,000 | 11,827,627 | ||||||
Total Virginia |
18,073,057 | |||||||
Washington - 7.2% |
||||||||
City of Seattle WA Municipal Light & Power Revenue, Series B 5.000%, 02/01/23 |
4,620,000 | 4,929,910 | ||||||
County of King WA Sewer Revenue, Series B 5.000%, 01/01/24 |
3,085,000 | 3,377,211 | ||||||
Energy Northwest Electric Revenue, Bonneville Power 5.000%, 07/01/25 |
10,000,000 | 12,148,100 | ||||||
State of Washington School Improvements, Series C 5.000%, 02/01/28 |
5,940,000 | 7,198,864 | ||||||
State of Washington, Series R-2015C 5.000%, 07/01/28 |
10,000,000 | 11,941,900 | ||||||
State of Washington, Water Utility Improvements Revenue, Series 2013 A 5.000%, 08/01/25 |
11,925,000 | 13,588,895 | ||||||
University of Washington, University & College Improvements Revenue, Series A 5.000%, 12/01/32 |
5,760,000 | 6,949,785 |
The accompanying notes are an integral part of these financial statements.
18
AMG GW&K Municipal Bond Fund
Schedule of Portfolio Investments (continued)
Principal Amount | Value | |||||||
Washington - 7.2% (continued) |
||||||||
University of Washington, University & College Improvements Revenue, Series C 5.000%, 07/01/27 |
$ | 7,270,000 | $ | 8,338,981 | ||||
Washington Health Care Facilities Authority Multicare Health System, Series B 5.000%, 08/15/23 |
3,940,000 | 4,578,556 | ||||||
Washington Health Care Facilities Authority Providence Health & Services, Series A 5.000%, 10/01/26 |
3,435,000 | 3,926,377 | ||||||
Total Washington |
76,978,579 | |||||||
Wisconsin - 1.2% |
||||||||
Wisconsin State Revenue, Department of Transportation, Series 1 5.000%, 07/01/25 |
2,370,000 | 2,755,623 | ||||||
Wisconsin State Revenue, Department of Transportation, Series A 5.000%, 07/01/24 |
5,000,000 | 5,963,000 | ||||||
Wisconsin State, Series 2 5.000%, 05/01/24 |
3,570,000 | 4,037,134 | ||||||
Total Wisconsin |
12,755,757 | |||||||
Total Municipal Bonds (Cost $1,052,404,795) |
1,058,730,622 | |||||||
Shares | ||||||||
Short-Term Investments - 0.1% |
||||||||
Other Investment Companies - 0.1% |
||||||||
Dreyfus Preferred Government Money Market Fund, Institutional Class Shares, 1.25% 2 |
688,075 | 688,075 | ||||||
Total Short-Term Investments (Cost $688,074) |
688,075 | |||||||
Total Investments - 98.6% (Cost $1,053,092,869) |
1,059,418,697 | |||||||
Other Assets, less Liabilities - 1.4% |
15,493,010 | |||||||
Net Assets - 100.0% |
$ | 1,074,911,707 |
1 | 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. |
2 | Yield shown represents the December 31, 2017, seven day average yield, which refers to the sum of the previous seven days’ dividends paid, expressed as an annual percentage. |
COPS Certificates of Participation
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Municipal Bonds† |
— | $ | 1,058,730,622 | — | $ | 1,058,730,622 | ||||||||||
Short-Term Investments |
$ | 688,075 | — | — | 688,075 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 688,075 | $ | 1,058,730,622 | — | $ | 1,059,418,697 | |||||||||
|
|
|
|
|
|
|
|
† | All municipal bonds held in the Fund are Level 2 securities. For a detailed breakout of municipal bonds by major classification, please refer to the Fund’s Schedule of Portfolio Investments. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements.
19
AMG GW&K Municipal Enhanced Yield Fund
Portfolio Manager’s Comments (unaudited)
20
AMG GW&K Municipal Enhanced Yield Fund
Portfolio Manager’s Comments (continued)
21
AMG GW&K Municipal Enhanced Yield Fund
Fund Snapshots (unaudited)
December 31, 2017
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/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. 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.
22
AMG GW&K Municipal Enhanced Yield Fund
Schedule of Portfolio Investments
December 31, 2017
Principal Amount | Value | |||||||
Municipal Bonds - 97.3% |
||||||||
California - 8.0% |
||||||||
California Municipal Finance Authority, Community Medical Centers, Series A 5.000%, 02/01/47 |
$ | 4,000,000 | $ | 4,580,840 | ||||
California Municipal Finance Authority, Community Medical Centers, Series A 5.000%, 02/01/42 |
2,500,000 | 2,862,625 | ||||||
M-S-R Energy Authority, Natural Gas Revenue, Series C 6.500%, 11/01/39 |
3,660,000 | 5,376,320 | ||||||
State of California 5.000%, 11/01/47 |
5,000,000 | 6,010,600 | ||||||
Total California |
18,830,385 | |||||||
Colorado - 1.8% |
||||||||
Public Authority for Colorado Energy Natural Gas Purchase Revenue, Series 2008 6.500%, 11/15/38 |
2,915,000 | 4,207,598 | ||||||
Florida - 11.6% |
||||||||
Alachua County Health Facilities Authority, |
||||||||
Shands Teaching Hospital & Clinics, Series A 5.000%, 12/01/44 |
6,570,000 | 7,337,770 | ||||||
County of Miami - Dade FL Aviation Revenue 5.000%, 10/01/41 |
2,000,000 | 2,349,260 | ||||||
County of Miami - Dade FL Aviation Revenue, Series B 5.000%, 10/01/40 |
2,000,000 | 2,352,360 | ||||||
Martin County Health Facilities Authority, Martin Memorial Medical Center 5.500%, 11/15/42 |
4,430,000 | 4,899,536 | ||||||
Miami Beach Health Facilities Authority, Mt. Sinai Medical Center 5.000%, 11/15/39 |
5,220,000 | 5,713,969 | ||||||
Orange County Health Facilities Authority, |
||||||||
Orlando Health Inc., Series A 5.000%, 10/01/39 |
4,035,000 | 4,618,824 | ||||||
Total Florida |
27,271,719 | |||||||
Illinois - 14.5% |
||||||||
Chicago O’Hare International Airport, Refunding |
||||||||
General Senior Lien, Series B 5.000%, 01/01/41 |
2,000,000 | 2,303,940 | ||||||
Illinois State General Obligation 5.500%, 07/01/38 |
3,275,000 | 3,553,801 | ||||||
Illinois State General Obligation, Series D 5.000%, 11/01/26 |
5,000,000 | 5,493,350 | ||||||
Illinois State Toll Highway Authority, Series B 5.000%, 01/01/40 |
1,675,000 | 1,932,129 | ||||||
Metropolitan Pier and Exposition Authority |
||||||||
Revenue, McCormick Place Expansion Project, Series 2012 A 5.000%, 06/15/42 |
4,990,000 | 5,260,109 | ||||||
Metropolitan Pier and Exposition Authority |
||||||||
Revenue, McCormick Place Expansion Project, Series B 5.000%, 06/15/52 |
5,910,000 | 6,207,627 | ||||||
Railsplitter Tobacco Settlement Authority 5.000%, 06/01/26 |
5,000,000 | 5,815,050 | ||||||
Railsplitter Tobacco Settlement Authority 5.000%, 06/01/27 |
3,000,000 | 3,484,170 | ||||||
Total Illinois |
34,050,176 | |||||||
Kentucky - 1.2% |
||||||||
Louisville/Jefferson County Metropolitan Government, Norton Healthcare Inc. 5.000%, 10/01/33 |
2,500,000 | 2,909,675 | ||||||
Louisiana - 2.6% |
||||||||
Louisiana Public Facilities Authority, Ochsner Clinic Foundation 5.000%, 05/15/47 |
3,385,000 | 3,793,739 | ||||||
New Orleans Aviation Board, General Airport North Terminal, Series B 5.000%, 01/01/48 |
2,000,000 | 2,297,980 | ||||||
Total Louisiana |
6,091,719 | |||||||
Massachusetts - 3.4% |
||||||||
Massachusetts Development Finance Agency, UMass Boston Student Housing 5.000%, 10/01/48 |
5,000,000 | 5,540,650 | ||||||
Massachusetts Development Finance Agency, UMass Boston Student Housing 5.000%, 10/01/41 |
2,250,000 | 2,496,870 | ||||||
Total Massachusetts |
8,037,520 | |||||||
Michigan - 4.6% |
||||||||
Michigan Finance Authority, Henry Ford Health System 5.000%, 11/15/41 |
5,315,000 | 6,021,948 | ||||||
Michigan Finance Authority, Hospital Trinity Health Credit 5.000%, 12/01/37 |
4,000,000 | 4,718,960 | ||||||
Total Michigan |
10,740,908 | |||||||
Nebraska - 1.6% |
||||||||
Central Plains Energy Project, Project #3, Series A 5.000%, 09/01/42 |
3,000,000 | 3,867,810 | ||||||
New Hampshire - 3.5% |
||||||||
New Hampshire Health and Education Facilities Authority Act, Partners Healthcare System 5.000%, 07/01/41 |
7,000,000 | 8,254,190 |
The accompanying notes are an integral part of these financial statements.
23
AMG GW&K Municipal Enhanced Yield Fund
Schedule of Portfolio Investments (continued)
Principal Amount |
Value | |||||||
New Jersey - 9.0% |
||||||||
New Jersey Economic Development Authority, Series DDD 5.000%, 06/15/42 |
$ | 3,350,000 | $ | 3,674,950 | ||||
New Jersey Economic Development Authority, School Facilities Construction 5.000%, 03/01/25 |
5,205,000 | 5,688,701 | ||||||
New Jersey Economic Development Authority, UMM Energy Partners, Series 2012 A 5.125%, 06/15/43 |
4,450,000 | 4,666,937 | ||||||
New Jersey Health Care Facilities Financing Authority, RWJ Barnabas Health Obligation 5.000%, 07/01/43 |
4,605,000 | 5,284,514 | ||||||
New Jersey Transportation Trust Fund Authority, |
||||||||
Federal Highway Reimbursement Notes 5.000%, 06/15/27 |
1,695,000 | 1,946,351 | ||||||
Total New Jersey |
21,261,453 | |||||||
New York - 6.0% |
||||||||
New York State Dormitory Authority, The New School Project, Series A 5.000%, 07/01/46 |
3,000,000 | 3,467,370 | ||||||
New York Transportation Development Corp., Laguardia Airport Terminal B 5.000%, 07/01/46 |
8,000,000 | 8,798,880 | ||||||
Port Authority of New York and New Jersey Special Project, JFK International Air Terminal LLC Project, Series 2010 6.000%, 12/01/42 |
1,580,000 | 1,758,303 | ||||||
Total New York |
14,024,553 | |||||||
Rhode Island - 2.3% |
||||||||
Tobacco Settlement Financing Corp., Series A 5.000%, 06/01/35 |
2,000,000 | 2,186,100 | ||||||
Tobacco Settlement Financing Corp., Series A 5.000%, 06/01/40 |
3,045,000 | 3,283,058 | ||||||
Total Rhode Island |
5,469,158 | |||||||
Texas - 15.7% |
||||||||
Central Texas Regional Mobility Authority 5.000%, 01/01/46 |
3,750,000 | 4,248,263 | ||||||
Central Texas Regional Mobility Authority 5.000%, 01/01/40 |
4,550,000 | 5,175,261 | ||||||
Central Texas Turnpike System, Series C 5.000%, 08/15/42 |
6,915,000 | 7,730,348 | ||||||
Grand Parkway Transportation Corp., 1st Tier Toll Revenue, Series A 5.500%, 04/01/53 |
3,960,000 | 4,523,548 | ||||||
North Texas Tollway Authority, Second Tier, Series B 5.000%, 01/01/48 |
5,000,000 | 5,800,300 | ||||||
Texas Municipal Gas Acquisition & Supply Corp., Gas Supply Revenue, Senior Lien Series 2008 D 6.250%, 12/15/26 |
2,135,000 | 2,567,209 | ||||||
Texas Private Activity Bond Surface Transportation Corp., Senior Lien-Blueridge Transport 5.000%, 12/31/40 |
2,400,000 | 2,679,288 | ||||||
Texas Private Activity Bond Surface Transportation Corp., Senior Lien-Blueridge Transport 5.000%, 12/31/45 |
3,790,000 | 4,216,981 | ||||||
Total Texas |
36,941,198 | |||||||
Virginia - 6.3% |
||||||||
Chesapeake Bay Bridge & Tunnel District, First Tier General Resolution Revenue 5.000%, 07/01/46 |
4,755,000 | 5,387,225 | ||||||
Chesapeake City Expressway Toll Road Revenue, Series 2012 A 5.000%, 07/15/47 |
3,010,000 | 3,279,335 | ||||||
Virginia Small Business Financing Authority, Transform 66 P3 Project 5.000%, 12/31/49 |
2,500,000 | 2,826,500 | ||||||
Virginia Small Business Financing Authority, Transform 66 P3 Project 5.000%, 12/31/52 |
3,000,000 | 3,365,910 | ||||||
Total Virginia |
14,858,970 | |||||||
West Virginia - 2.4% |
||||||||
West Virginia Hospital Finance Authority, WV United Health System Obligation 5.500%, 06/01/44 |
5,000,000 | 5,672,050 | ||||||
Wisconsin - 2.8% |
||||||||
Wisconsin Health & Educational Facilities Authority, Ascension Health Credit Group 5.000%, 11/15/39 |
1,305,000 | 1,519,895 | ||||||
Wisconsin Health & Educational Facilities Authority, ProHealth Care Obligation Group 5.000%, 08/15/39 |
4,635,000 | 5,197,179 | ||||||
Total Wisconsin |
6,717,074 | |||||||
Total Municipal Bonds (Cost $221,249,401) |
229,206,156 | |||||||
Shares | ||||||||
Short-Term Investments - 1.3% |
|
|||||||
Other Investment Companies - 1.3% |
|
|||||||
Dreyfus Government Cash Management Fund, Institutional Class Shares, 1.18% 1 |
3,096,849 | 3,096,849 | ||||||
Total Short-Term Investments (Cost $3,096,849) |
3,096,849 | |||||||
Total Investments - 98.6% (Cost $224,346,250) |
232,303,005 | |||||||
Other Assets, less Liabilities - 1.4% |
|
$ | 3,270,854 | |||||
Net Assets - 100.0% |
$ | 235,573,859 |
The accompanying notes are an integral part of these financial statements.
24
AMG GW&K Municipal Enhanced Yield Fund
Schedule of Portfolio Investments (continued)
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Municipal Bonds† |
— | $ | 229,206,156 | — | $ | 229,206,156 | ||||||||||
Short-Term Investments |
$ | 3,096,849 | — | — | 3,096,849 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 3,096,849 | $ | 229,206,156 | — | $ | 232,303,005 | |||||||||
|
|
|
|
|
|
|
|
† | All municipal bonds held in the Fund are Level 2 securities. For a detailed breakout of municipal bonds by major classification, please refer to the Fund’s Schedule of Portfolio Investments. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements.
25
Portfolio Manager’s Comments (unaudited)
26
AMG GW&K Small Cap Core Fund
Portfolio Manager’s Comments (continued)
27
AMG GW&K Small Cap Core Fund
Fund Snapshots (unaudited)
December 31, 2017
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.
28
AMG GW&K Small Cap Core Fund
Schedule of Portfolio Investments
December 31, 2017
The accompanying notes are an integral part of these financial statements.
29
AMG GW&K Small Cap Core Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
30
AMG GW&K Small Cap Core Fund
Schedule of Portfolio Investments (continued)
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks† |
$ | 530,179,952 | — | — | $ | 530,179,952 | ||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | $ | 26,435,287 | — | 26,435,287 | |||||||||||
Other Investment Companies |
4,595,414 | — | — | 4,595,414 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 534,775,366 | $ | 26,435,287 | — | $ | 561,210,653 | |||||||||
|
|
|
|
|
|
|
|
† | 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. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements.
31
Portfolio Manager’s Comments (unaudited)
32
AMG GW&K Small/Mid Cap Fund
Portfolio Manager’s Comments (continued)
33
AMG GW&K Small/Mid Cap Fund
Portfolio Manager’s Comments (continued)
34
AMG GW&K Small/Mid Cap Fund
Fund Snapshots (unaudited)
December 31, 2017
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.
35
AMG GW&K Small/Mid Cap Fund
Schedule of Portfolio Investments
December 31, 2017
The accompanying notes are an integral part of these financial statements.
36
AMG GW&K Small/Mid Cap Fund
Schedule of Portfolio Investments (continued)
The accompanying notes are an integral part of these financial statements.
37
AMG GW&K Small/Mid Cap Fund
Schedule of Portfolio Investments (continued)
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks† |
$ | 28,753,320 | — | — | $ | 28,753,320 | ||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | $ | 1,726,848 | — | 1,726,848 | |||||||||||
Other Investment Companies |
1,882,670 | — | — | 1,882,670 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 30,635,990 | $ | 1,726,848 | — | $ | 32,362,838 | |||||||||
|
|
|
|
|
|
|
|
† | 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. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements.
38
Statement of Assets and Liabilities
December 31, 2017
AMG GW&K Enhanced Core Bond Fund# |
AMG GW&K Municipal Bond Fund# |
AMG GW&K Municipal Enhanced Yield Fund# |
AMG GW&K Small Cap Core Fund# |
AMG GW&K Small/Mid Cap Fund# |
||||||||||||||||
Assets: |
||||||||||||||||||||
Investments at Value* (including securities on loan valued at $739,043, $0, $0, $25,730,349, and $1,681,424, respectively) |
$ | 49,089,402 | $ | 1,059,418,697 | $ | 232,303,005 | $ | 561,210,653 | $ | 32,362,838 | ||||||||||
Receivable for investments sold |
— | — | 1,395,030 | — | — | |||||||||||||||
Dividend, interest and other receivables |
453,787 | 12,694,603 | 2,453,310 | 987,791 | 43,892 | |||||||||||||||
Receivable for Fund shares sold |
200,771 | 5,933,718 | 670,904 | 1,613,564 | 1,328,852 | |||||||||||||||
Receivable from affiliate |
10,266 | 81,072 | 18,669 | 5,147 | 8,552 | |||||||||||||||
Prepaid expenses |
27,232 | 24,034 | 24,153 | 29,307 | 16,171 | |||||||||||||||
Total assets |
49,781,458 | 1,078,152,124 | 236,865,071 | 563,846,462 | 33,760,305 | |||||||||||||||
Liabilities: |
||||||||||||||||||||
Payable upon return of securities loaned |
759,122 | — | — | 26,435,287 | 1,726,848 | |||||||||||||||
Payable for investments purchased |
— | 40,386 | 899,978 | — | 641,317 | |||||||||||||||
Payable for Fund shares repurchased |
179,047 | 2,645,843 | 174,585 | 534,804 | 75,000 | |||||||||||||||
Accrued expenses: |
||||||||||||||||||||
Investment advisory and management fees |
12,304 | 188,330 | 89,722 | 321,887 | 15,213 | |||||||||||||||
Administrative fees |
6,152 | 135,674 | 29,907 | 68,976 | 3,511 | |||||||||||||||
Distribution fees |
7,294 | 6,170 | 1,907 | 5,291 | 2 | |||||||||||||||
Shareholder service fees |
953 | 47,754 | 20,112 | 39,071 | 1,972 | |||||||||||||||
Professional fees |
48,927 | 62,326 | 42,415 | 40,303 | 31,018 | |||||||||||||||
Trustee fees and expenses |
519 | 11,186 | 2,473 | 5,694 | 267 | |||||||||||||||
Other |
43,464 | 102,748 | 30,113 | 50,207 | 8,984 | |||||||||||||||
Total liabilities |
1,057,782 | 3,240,417 | 1,291,212 | 27,501,520 | 2,504,132 | |||||||||||||||
Net Assets |
$ | 48,723,676 | $ | 1,074,911,707 | $ | 235,573,859 | $ | 536,344,942 | $ | 31,256,173 | ||||||||||
* Investments at cost |
$ | 48,855,680 | $ | 1,053,092,869 | $ | 224,346,250 | $ | 427,115,848 | $ | 30,572,529 |
The accompanying notes are an integral part of these financial statements.
39
Statement of Assets and Liabilities (continued)
AMG GW&K Enhanced |
AMG GW&K Municipal Bond |
AMG GW&K Municipal |
AMG GW&K Small Cap Core |
AMG GW&K Small/Mid |
||||||||||||||||
Net Assets Represent: |
||||||||||||||||||||
Paid-in capital |
$ | 52,818,368 | $ | 1,068,275,232 | $ | 228,137,519 | $ | 391,250,428 | $ | 29,495,290 | ||||||||||
Accumulated net realized gain (loss) from investments |
(4,328,414 | ) | 310,647 | (520,415 | ) | 10,999,709 | (29,426 | ) | ||||||||||||
Net unrealized appreciation on investments |
233,722 | 6,325,828 | 7,956,755 | 134,094,805 | 1,790,309 | |||||||||||||||
Net Assets |
$ | 48,723,676 | $ | 1,074,911,707 | $ | 235,573,859 | $ | 536,344,942 | $ | 31,256,173 | ||||||||||
Class N: |
||||||||||||||||||||
Net Assets |
$ | 16,027,453 | $ | 29,512,967 | $ | 8,827,761 | $ | 24,988,623 | $ | 10,920 | ||||||||||
Shares outstanding |
1,633,138 | 2,544,777 | 881,350 | 891,057 | 979 | |||||||||||||||
Net asset value, offering and redemption price per share |
$ | 9.81 | $ | 11.60 | $ | 10.02 | $ | 28.04 | $ | 11.15 | ||||||||||
Class I: |
||||||||||||||||||||
Net Assets |
$ | 6,864,480 | $ | 1,045,398,740 | $ | 226,637,907 | $ | 403,309,101 | $ | 24,265,613 | ||||||||||
Shares outstanding |
696,851 | 89,669,335 | 22,645,980 | 14,193,364 | 2,176,569 | |||||||||||||||
Net asset value, offering and redemption price per share |
$ | 9.85 | $ | 11.66 | $ | 10.01 | $ | 28.42 | $ | 11.15 | ||||||||||
Class C: |
||||||||||||||||||||
Net assets per class |
$ | 4,560,822 | — | — | — | — | ||||||||||||||
Shares outstanding |
465,034 | — | — | — | — | |||||||||||||||
Net asset value, offering and redemption price per share |
$ | 9.81 | — | — | — | — | ||||||||||||||
Class Z: |
||||||||||||||||||||
Net Assets |
$ | 21,270,921 | — | $ | 108,191 | $ | 108,047,218 | $ | 6,979,640 | |||||||||||
Shares outstanding |
2,160,919 | — | 10,810 | 3,801,611 | 625,800 | |||||||||||||||
Net asset value, offering and redemption price per share |
$ | 9.84 | — | $ | 10.01 | $ | 28.42 | $ | 11.15 |
# | Effective February 27, 2017, the Funds’ share classes were renamed as described in Note 1 of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
40
For the fiscal year ended December 31, 2017
AMG GW&K Enhanced Core Bond Fund# |
AMG GW&K Municipal Bond Fund |
AMG GW&K Municipal Enhanced Yield Fund |
AMG GW&K Small Cap Core Fund |
AMG GW&K Small/Mid Cap Fund |
||||||||||||||||
Investment Income: |
||||||||||||||||||||
Interest income |
$ | 1,894,053 | $ | 20,145,744 | $ | 8,388,736 | $ | 414 | — | |||||||||||
Dividend income |
7,832 | 172,027 | 57,180 | 5,665,492 | 1 | $ | 153,066 | 2 | ||||||||||||
Securities lending income |
1,655 | — | — | 152,797 | 2,872 | |||||||||||||||
Foreign withholding tax |
— | — | — | (24,350 | ) | (510 | ) | |||||||||||||
Total investment income |
1,903,540 | 20,317,771 | 8,445,916 | 5,794,353 | 155,428 | |||||||||||||||
Expenses: |
||||||||||||||||||||
Investment advisory and management fees |
215,219 | 2,102,015 | 1,047,912 | 3,467,084 | 84,418 | |||||||||||||||
Administrative fees |
97,134 | 1,510,886 | 343,518 | 735,672 | 19,393 | |||||||||||||||
Distribution fees - Class N |
40,593 | 81,542 | 21,323 | 78,257 | 22 | |||||||||||||||
Distribution fees - Class C |
59,207 | — | — | — | — | |||||||||||||||
Shareholder servicing fees - Class N |
— | 39,211 | 14,153 | 49,235 | — | |||||||||||||||
Shareholder servicing fees - Class S## |
— | 121,098 | 6,293 | 12,807 | — | |||||||||||||||
Shareholder servicing fees - Class I |
19,656 | 387,765 | 89,662 | 184,662 | 8,378 | |||||||||||||||
Professional fees |
53,474 | 122,074 | 58,599 | 70,692 | 37,320 | |||||||||||||||
Registration fees |
70,972 | 108,079 | 77,141 | 81,773 | 39,781 | |||||||||||||||
Transfer agent fees |
22,524 | 42,493 | 12,205 | 21,863 | 522 | |||||||||||||||
Custodian fees |
18,262 | 77,770 | 22,242 | 34,215 | 13,458 | |||||||||||||||
Reports to shareholders |
23,239 | 72,650 | 15,850 | 45,202 | — | |||||||||||||||
Trustee fees and expenses |
5,484 | 67,636 | 15,623 | 30,337 | 694 | |||||||||||||||
Miscellaneous |
7,968 | 24,429 | 7,725 | 11,732 | 202 | |||||||||||||||
Repayment of prior reimbursements |
— | — | — | 1,317 | — | |||||||||||||||
Total expenses before offsets |
633,732 | 4,757,648 | 1,732,246 | 4,824,848 | 204,188 | |||||||||||||||
Expense reimbursements |
(185,809 | ) | (703,359 | ) | (232,286 | ) | (51,380 | ) | (85,512 | ) | ||||||||||
Expense reductions |
— | — | — | (24,071 | ) | (14 | ) | |||||||||||||
Fee waivers |
— | (77,768 | ) | — | — | — | ||||||||||||||
Net expenses |
447,923 | 3,976,521 | 1,499,960 | 4,749,397 | 118,662 | |||||||||||||||
Net investment income |
1,455,617 | 16,341,250 | 6,945,956 | 1,044,956 | 36,766 | |||||||||||||||
Net Realized and Unrealized Gain: |
||||||||||||||||||||
Net realized gain on investments |
261,715 | 2,781,551 | 1,907,278 | 39,398,970 | 416,050 | |||||||||||||||
Net change in unrealized appreciation/depreciation on investments |
1,012,966 | 27,347,353 | 12,463,029 | 52,180,026 | 1,558,779 | |||||||||||||||
Net realized and unrealized gain |
1,274,681 | 30,128,904 | 14,370,307 | 91,578,996 | 1,974,829 | |||||||||||||||
Net increase in net assets resulting from operations |
$ | 2,730,298 | $ | 46,470,154 | $ | 21,316,263 | $ | 92,623,952 | $ | 2,011,595 |
# | Effective February 27, 2017, the Funds’ share classes were renamed as described in Note 1 of the Notes to Financial Statements. |
## | Effective June 23, 2017, Class S shares were converted into Class I Shares. |
1 | Includes non-recurring dividends of $1,076,397. |
2 | Includes non-recurring dividends of $32,003. |
The accompanying notes are an integral part of these financial statements.
41
Statements of Changes in Net Assets
For the fiscal years ended December 31
AMG GW&K Enhanced Core Bond Fund |
AMG GW&K Municipal Bond Fund |
|||||||||||||||
2017# | 2016# | 2017# | 2016# | |||||||||||||
Increase (Decrease) in Net Assets Resulting From Operations: |
||||||||||||||||
Net investment income |
$ | 1,455,617 | $ | 2,792,209 | $ | 16,341,250 | $ | 13,478,865 | ||||||||
Net realized gain on investments |
261,715 | 837,864 | 2,781,551 | 11,765,887 | ||||||||||||
Net change in unrealized appreciation/depreciation on investments |
1,012,966 | (777,068 | ) | 27,347,353 | (37,153,635 | ) | ||||||||||
Net increase (decrease) in net assets resulting from operations |
2,730,298 | 2,853,005 | 46,470,154 | (11,908,883 | ) | |||||||||||
Distributions to Shareholders: |
||||||||||||||||
From net investment income: |
||||||||||||||||
Class N |
(365,057 | ) | (414,745 | ) | (424,272 | ) | (337,669 | ) | ||||||||
Class S## |
— | (777,513 | ) | (1,030,308 | ) | (2,154,034 | ) | |||||||||
Class I |
(449,908 | ) | (1,453,169 | ) | (14,934,133 | ) | (11,028,510 | ) | ||||||||
Class C |
(86,218 | ) | (137,712 | ) | — | — | ||||||||||
Class Z |
(563,837 | ) | — | — | — | |||||||||||
From net realized gain on investments: |
||||||||||||||||
Class N |
— | — | (28,908 | ) | (579,320 | ) | ||||||||||
Class S## |
— | — | — | (3,103,417 | ) | |||||||||||
Class I |
— | — | (1,027,689 | ) | (13,370,506 | ) | ||||||||||
Total distributions to shareholders |
(1,465,020 | ) | (2,783,139 | ) | (17,445,310 | ) | (30,573,456 | ) | ||||||||
Capital Share Transactions:1 |
||||||||||||||||
Net increase (decrease) from capital share transactions |
(65,807,448 | ) | 27,097,678 | 122,965,822 | 153,597,847 | |||||||||||
Total increase (decrease) in net assets |
(64,542,170 | ) | 27,167,544 | 151,990,666 | 111,115,508 | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of year |
113,265,846 | 86,098,302 | 922,921,041 | 811,805,533 | ||||||||||||
End of year |
$ | 48,723,676 | $ | 113,265,846 | $ | 1,074,911,707 | $ | 922,921,041 | ||||||||
End of year undistributed net investment income |
— | $ | 9,070 | — | — | |||||||||||
|
|
|
|
|
|
|
|
# | Effective October 1, 2016, and February 27, 2017 the Funds’ share classes were renamed as described in Note 1 of the Notes to the Financial Statements. |
## | Effective June 23, 2017, Class S shares were converted into Class I Shares. |
1 | See Note 1(g) of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
42
Statements of Changes in Net Assets (continued)
For the fiscal years ended December 31,
AMG GW&K Municipal Enhanced Yield Fund |
AMG GW&K Small Cap Core Fund |
AMG GW&K Small/Mid Cap Fund |
||||||||||||||||||||||
2017# | 2016# | 2017# | 2016# | 2017# | 2016# | |||||||||||||||||||
Increase in Net Assets Resulting From Operations: |
||||||||||||||||||||||||
Net investment income (loss) |
$ | 6,945,956 | $ | 7,155,225 | $ | 1,044,956 | $ | 1,422,759 | $ | 36,766 | $ | (6,439 | ) | |||||||||||
Net realized gain (loss) on investments |
1,907,278 | 6,721,972 | 39,398,970 | 14,201,155 | 416,050 | (28,503 | ) | |||||||||||||||||
Net change in unrealized appreciation/depreciation on investments |
12,463,029 | (13,050,976 | ) | 52,180,026 | 49,509,033 | 1,558,779 | 252,237 | |||||||||||||||||
Net increase in net assets resulting from operations |
21,316,263 | 826,221 | 92,623,952 | 65,132,947 | 2,011,595 | 217,295 | ||||||||||||||||||
Distributions to Shareholders: |
||||||||||||||||||||||||
From net investment income: |
||||||||||||||||||||||||
Class N |
(234,480 | ) | (141,532 | ) | — | — | — | — | ||||||||||||||||
Class S## |
(193,559 | ) | (483,507 | ) | — | (32,695 | ) | — | — | |||||||||||||||
Class I |
(6,539,305 | ) | (6,534,101 | ) | (817,532 | ) | (1,399,673 | ) | (26,217 | ) | (1,135 | ) | ||||||||||||
Class Z |
(2,693 | ) | — | (263,165 | ) | — | (10,595 | ) | — | |||||||||||||||
From net realized gain on investments: |
||||||||||||||||||||||||
Class N |
— | (189,462 | ) | (1,290,786 | ) | (1,490,651 | ) | (144 | ) | — | ||||||||||||||
Class S## |
— | (751,847 | ) | — | (721,953 | ) | — | — | ||||||||||||||||
Class I |
— | (9,105,322 | ) | (20,845,694 | ) | (15,063,218 | ) | (294,502 | ) | — | ||||||||||||||
Class Z |
— | — | (5,500,223 | ) | — | (92,029 | ) | — | ||||||||||||||||
Total distributions to shareholders |
(6,970,037 | ) | (17,205,771 | ) | (28,717,400 | ) | (18,708,190 | ) | (423,487 | ) | (1,135 | ) | ||||||||||||
Capital Share Transactions:1 |
||||||||||||||||||||||||
Net increase (decrease) from capital share transactions |
5,434,557 | (1,420,098 | ) | 51,017,083 | 185,281 | 27,436,973 | 841,781 | |||||||||||||||||
Total increase (decrease) in net assets |
19,780,783 | (17,799,648 | ) | 114,923,635 | 46,610,038 | 29,025,081 | 1,057,941 | |||||||||||||||||
Net Assets: |
||||||||||||||||||||||||
Beginning of year |
215,793,076 | 233,592,724 | 421,421,307 | 374,811,269 | 2,231,092 | 1,173,151 | ||||||||||||||||||
End of year |
$ | 235,573,859 | $ | 215,793,076 | $ | 536,344,942 | $ | 421,421,307 | $ | 31,256,173 | $ | 2,231,092 | ||||||||||||
End of year undistributed net investment income |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
# | Effective October 1, 2016, and February 27, 2017 the Funds’ share classes were renamed as described in Note 1 of the Notes to the Financial Statements. |
## | Effective June 23, 2017, Class S shares were converted into Class I Shares. |
1 | See Note 1(g) of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
43
AMG GW&K Enhanced Core Bond Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 9.67 | $ | 9.58 | $ | 10.22 | $ | 9.96 | $ | 11.24 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.21 | 0.22 | 0.29 | 0.29 | 0.24 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
0.15 | 0.09 | (0.64 | ) | 0.26 | (0.21 | ) | |||||||||||||
Total income (loss) from investment operations |
0.36 | 0.31 | (0.35 | ) | 0.55 | 0.03 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.22 | ) | (0.22 | ) | (0.29 | ) | (0.29 | ) | (0.26 | ) | ||||||||||
Net realized gain on investments |
— | — | — | — | (1.05 | ) | ||||||||||||||
Total distributions to shareholders |
(0.22 | ) | (0.22 | ) | (0.29 | ) | (0.29 | ) | (1.31 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 9.81 | $ | 9.67 | $ | 9.58 | $ | 10.22 | $ | 9.96 | ||||||||||
Total Return2 |
3.76 | %3 | 3.26 | % | (3.51 | )% | 5.58 | %3 | 0.29 | %3 | ||||||||||
Ratio of net expenses to average net assets |
0.75 | % | 0.84 | % | 0.84 | % | 0.84 | % | 0.86 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
1.04 | % | 1.05 | % | 1.07 | % | 1.09 | % | 1.08 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
2.19 | % | 2.27 | % | 2.87 | % | 2.82 | % | 2.14 | %4 | ||||||||||
Portfolio turnover |
39 | % | 88 | % | 57 | % | 22 | % | 43 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 16,027 | $ | 16,115 | $ | 20,203 | $ | 27,444 | $ | 32,009 | ||||||||||
|
|
|
|
|
|
|
|
|
|
44
AMG GW&K Enhanced Core Bond Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class I | 2017## | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 9.70 | $ | 9.62 | $ | 10.26 | $ | 9.99 | $ | 11.28 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.23 | 0.24 | 0.30 | 0.31 | 0.26 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
0.16 | 0.08 | (0.63 | ) | 0.27 | (0.22 | ) | |||||||||||||
Total income (loss) from investment operations |
0.39 | 0.32 | (0.33 | ) | 0.58 | 0.04 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.24 | ) | (0.24 | ) | (0.31 | ) | (0.31 | ) | (0.28 | ) | ||||||||||
Net realized gain on investments |
— | — | — | — | (1.05 | ) | ||||||||||||||
Total distributions to shareholders |
(0.24 | ) | (0.24 | ) | (0.31 | ) | (0.31 | ) | (1.33 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 9.85 | $ | 9.70 | $ | 9.62 | $ | 10.26 | $ | 9.99 | ||||||||||
Total Return2,3 |
4.03 | % | 3.31 | % | (3.30 | )% | 5.84 | % | 0.41 | % | ||||||||||
Ratio of net expenses to average net assets |
0.61 | % | 0.69 | % | 0.67 | % | 0.65 | % | 0.69 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | 0.91 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
2.32 | % | 2.39 | % | 2.96 | % | 3.00 | % | 2.31 | %4 | ||||||||||
Portfolio turnover |
39 | % | 88 | % | 57 | % | 22 | % | 43 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 6,864 | $ | 37,952 | $ | 7,463 | $ | 2,480 | $ | 1,563 | ||||||||||
|
|
|
|
|
|
|
|
|
|
45
AMG GW&K Enhanced Core Bond Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class C | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 9.66 | $ | 9.57 | $ | 10.20 | $ | 9.94 | $ | 11.22 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.14 | 0.15 | 0.21 | 0.21 | 0.15 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
0.16 | 0.08 | (0.63 | ) | 0.26 | (0.20 | ) | |||||||||||||
Total income (loss) from investment operations |
0.30 | 0.23 | (0.42 | ) | 0.47 | (0.05 | ) | |||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.15 | ) | (0.14 | ) | (0.21 | ) | (0.21 | ) | (0.18 | ) | ||||||||||
Net realized gain on investments |
— | — | — | — | (1.05 | ) | ||||||||||||||
Total distributions to shareholders |
(0.15 | ) | (0.14 | ) | (0.21 | ) | (0.21 | ) | (1.23 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 9.81 | $ | 9.66 | $ | 9.57 | $ | 10.20 | $ | 9.94 | ||||||||||
Total Return2 |
3.08 | %3 | 2.40 | %3 | (4.15 | )% | 4.79 | %3 | (0.50 | )% | ||||||||||
Ratio of net expenses to average net assets |
1.50 | % | 1.59 | % | 1.59 | % | 1.59 | % | 1.61 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
1.79 | % | 1.80 | % | 1.82 | % | 1.84 | % | 1.83 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
1.43 | % | 1.53 | % | 2.12 | % | 2.07 | % | 1.38 | %4 | ||||||||||
Portfolio turnover |
39 | % | 88 | % | 57 | % | 22 | % | 43 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 4,561 | $ | 7,842 | $ | 11,031 | $ | 15,927 | $ | 20,793 | ||||||||||
|
|
|
|
|
|
|
|
|
|
46
AMG GW&K Enhanced Core Bond Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class Z | 2017## | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 9.70 | $ | 9.61 | $ | 10.25 | $ | 9.99 | $ | 11.28 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.24 | 0.25 | 0.31 | 0.31 | 0.27 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
0.15 | 0.09 | (0.63 | ) | 0.27 | (0.22 | ) | |||||||||||||
Total income (loss) from investment operations |
0.39 | 0.34 | (0.32 | ) | 0.58 | 0.05 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.25 | ) | (0.25 | ) | (0.32 | ) | (0.32 | ) | (0.29 | ) | ||||||||||
Net realized gain on investments |
— | — | — | — | (1.05 | ) | ||||||||||||||
Total distributions to shareholders |
(0.25 | ) | (0.25 | ) | (0.32 | ) | (0.32 | ) | (1.34 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 9.84 | $ | 9.70 | $ | 9.61 | $ | 10.25 | $ | 9.99 | ||||||||||
Total Return2 |
4.01 | %3 | 3.52 | % | (3.15 | )%3 | 5.85 | %3 | 0.46 | %3 | ||||||||||
Ratio of net expenses to average net assets |
0.50 | % | 0.59 | % | 0.59 | % | 0.59 | % | 0.61 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
0.79 | % | 0.80 | % | 0.82 | % | 0.84 | % | 0.83 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
2.43 | % | 2.51 | % | 3.10 | % | 3.05 | % | 2.39 | %4 | ||||||||||
Portfolio turnover |
39 | % | 88 | % | 57 | % | 22 | % | 43 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 21,271 | $ | 51,357 | $ | 47,402 | $ | 41,968 | $ | 59,182 | ||||||||||
|
|
|
|
|
|
|
|
|
|
# | Effective October 1, 2016, the Investor Class, Service Class and Institutional Class were renamed Class N, Class S and Class I, respectively. |
## | Effective February 27, 2017, Class I shares were renamed Class Z and Class S shares were renamed Class I. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
4 | Includes non-routine extraordinary expenses amounting to 0.021%, 0.016%, 0.021% and 0.020% of average net assets for the Class N, Class I, Class C and Class Z, respectively. |
5 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
47
AMG GW&K Municipal Bond Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 11.25 | $ | 11.70 | $ | 11.61 | $ | 11.02 | $ | 11.52 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.15 | 0.13 | 0.15 | 0.18 | 0.18 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
0.36 | (0.25 | ) | 0.24 | 0.63 | (0.47 | ) | |||||||||||||
Total income (loss) from investment operations |
0.51 | (0.12 | ) | 0.39 | 0.81 | (0.29 | ) | |||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.15 | ) | (0.12 | ) | (0.15 | ) | (0.18 | ) | (0.17 | ) | ||||||||||
Net realized gain on investments |
(0.01 | ) | (0.21 | ) | (0.15 | ) | (0.04 | ) | (0.04 | ) | ||||||||||
Total distributions to shareholders |
(0.16 | ) | (0.33 | ) | (0.30 | ) | (0.22 | ) | (0.21 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 11.60 | $ | 11.25 | $ | 11.70 | $ | 11.61 | $ | 11.02 | ||||||||||
Total Return2 |
4.58 | %3 | (1.05 | )%3 | 3.36 | %3 | 7.39 | %3 | (2.51 | )% | ||||||||||
Ratio of net expenses to average net assets |
0.71 | % | 0.71 | % | 0.82 | % | 0.80 | % | 0.81 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
0.78 | % | 0.95 | % | 1.13 | % | 1.12 | % | 1.17 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
1.31 | % | 1.08 | % | 1.28 | % | 1.55 | % | 1.56 | %4 | ||||||||||
Portfolio turnover |
27 | % | 66 | % | 78 | % | 31 | % | 28 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 29,513 | $ | 31,406 | $ | 27,362 | $ | 23,572 | $ | 28,655 | ||||||||||
|
|
|
|
|
|
|
|
|
|
48
AMG GW&K Municipal Bond Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class I | 2017## | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 11.31 | $ | 11.77 | $ | 11.67 | $ | 11.08 | $ | 11.58 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.19 | 0.17 | 0.21 | 0.23 | 0.23 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
0.36 | (0.25 | ) | 0.24 | 0.63 | (0.47 | ) | |||||||||||||
Total income (loss) from investment operations |
0.55 | (0.08 | ) | 0.45 | 0.86 | (0.24 | ) | |||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.19 | ) | (0.17 | ) | (0.20 | ) | (0.23 | ) | (0.22 | ) | ||||||||||
Net realized gain on investments |
(0.01 | ) | (0.21 | ) | (0.15 | ) | (0.04 | ) | (0.04 | ) | ||||||||||
Total distributions to shareholders |
(0.20 | ) | (0.38 | ) | (0.35 | ) | (0.27 | ) | (0.26 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 11.66 | $ | 11.31 | $ | 11.77 | $ | 11.67 | $ | 11.08 | ||||||||||
Total Return2,3 |
4.90 | % | (0.70 | )% | 3.94 | % | 7.80 | % | (2.02 | )% | ||||||||||
Ratio of net expenses to average net assets |
0.37 | % | 0.34 | % | 0.34 | % | 0.34 | % | 0.36 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
0.45 | % | 0.58 | % | 0.65 | % | 0.66 | % | 0.72 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
1.64 | % | 1.45 | % | 1.76 | % | 2.00 | % | 2.01 | %4 | ||||||||||
Portfolio turnover |
27 | % | 66 | % | 78 | % | 31 | % | 28 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 1,045,399 | $ | 728,365 | $ | 655,760 | $ | 393,581 | $ | 204,711 | ||||||||||
|
|
|
|
|
|
|
|
|
|
# | Effective October 1, 2016, the Investor Class, Service Class and Institutional Class were renamed Class N, Class S and Class I, respectively. |
## | Effective June 23, 2017, Class S shares were converted to Class I shares. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
4 | Includes non-routine extraordinary expenses amounting to 0.021% and 0.020% of average net assets for the Class N and Class I, respectively. |
5 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
49
AMG GW&K Municipal Enhanced Yield Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 9.40 | $ | 10.08 | $ | 10.16 | $ | 8.98 | $ | 10.24 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.26 | 0.25 | 0.30 | 0.34 | 0.35 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
0.62 | (0.23 | ) | 0.05 | 1.18 | (1.18 | ) | |||||||||||||
Total income (loss) from investment operations |
0.88 | 0.02 | 0.35 | 1.52 | (0.83 | ) | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.26 | ) | (0.25 | ) | (0.30 | ) | (0.34 | ) | (0.36 | ) | ||||||||||
Net realized gain on investments |
— | (0.45 | ) | (0.13 | ) | — | (0.07 | ) | ||||||||||||
Total distributions to shareholders |
(0.26 | ) | (0.70 | ) | (0.43 | ) | (0.34 | ) | (0.43 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 10.02 | $ | 9.40 | $ | 10.08 | $ | 10.16 | $ | 8.98 | ||||||||||
Total Return2 |
9.51 | %3 | 0.10 | %3 | 3.57 | %3 | 17.14 | %3 | (8.27 | )% | ||||||||||
Ratio of net expenses to average net assets |
1.01 | % | 1.14 | % | 1.07 | % | 1.00 | % | 1.12 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
1.11 | % | 1.30 | % | 1.25 | % | 1.19 | % | 1.30 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
2.67 | % | 2.38 | % | 2.98 | % | 3.46 | % | 3.58 | %4 | ||||||||||
Portfolio turnover |
67 | % | 172 | % | 120 | % | 83 | % | 52 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 8,828 | $ | 4,184 | $ | 5,500 | $ | 8,507 | $ | 8,030 | ||||||||||
|
|
|
|
|
|
|
|
|
|
50
AMG GW&K Municipal Enhanced Yield Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class I | 2017## | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 9.40 | $ | 10.07 | $ | 10.14 | $ | 8.97 | $ | 10.22 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.30 | 0.30 | 0.34 | 0.37 | 0.39 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
0.61 | (0.22 | ) | 0.07 | 1.17 | (1.17 | ) | |||||||||||||
Total income (loss) from investment operations |
0.91 | 0.08 | 0.41 | 1.54 | (0.78 | ) | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.30 | ) | (0.30 | ) | (0.35 | ) | (0.37 | ) | (0.40 | ) | ||||||||||
Net realized gain on investments |
— | (0.45 | ) | (0.13 | ) | — | (0.07 | ) | ||||||||||||
Total distributions to shareholders |
(0.30 | ) | (0.75 | ) | (0.48 | ) | (0.37 | ) | (0.47 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 10.01 | $ | 9.40 | $ | 10.07 | $ | 10.14 | $ | 8.97 | ||||||||||
Total Return2,3 |
9.79 | % | 0.70 | % | 4.15 | % | 17.45 | % | (7.80 | )% | ||||||||||
Ratio of net expenses to average net assets |
0.64 | % | 0.64 | % | 0.64 | % | 0.64 | % | 0.66 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
0.74 | % | 0.80 | % | 0.82 | % | 0.83 | % | 0.84 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
3.05 | % | 2.89 | % | 3.42 | % | 3.83 | % | 4.08 | %4 | ||||||||||
Portfolio turnover |
67 | % | 172 | % | 120 | % | 83 | % | 52 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 226,638 | $ | 195,193 | $ | 212,057 | $ | 226,284 | $ | 201,161 | ||||||||||
|
|
|
|
|
|
|
|
|
|
51
AMG GW&K Municipal Enhanced Yield Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal period ended December 31, |
||||
Class Z | 2017* | |||
Net Asset Value, Beginning of Period |
$ | 9.49 | ||
Income from Investment Operations: |
||||
Net investment income1,2 |
0.25 | |||
Net realized and unrealized gain on investments |
0.52 | |||
Total income from investment operations |
0.77 | |||
Less Distributions to Shareholders from: |
||||
Net investment income |
(0.25 | ) | ||
Total distributions to shareholders |
(0.25 | ) | ||
Net Asset Value, End of Period |
$ | 10.01 | ||
Total Return2 |
8.23 | %3,6 | ||
Ratio of net expenses to average net assets |
0.59 | %7 | ||
Ratio of gross expenses to average net assets5 |
0.69 | %7 | ||
Ratio of net investment income to average net assets2 |
3.07 | %7 | ||
Portfolio turnover |
67 | % | ||
Net assets end of period (000’s) omitted |
$ | 108 | ||
|
|
# | Effective October 1, 2016, the Investor Class, Service Class and Institutional Class were renamed Class N, Class S and Class I, respectively. |
## | Effective June 23, 2017, Class S shares were converted to Class I shares. |
* | Commencement of operations was on February 27, 2017. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
4 | Includes non-routine extraordinary expenses amounting to 0.024% and 0.023% of average net assets for the Class N and Class l, respectively. |
5 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
6 | Not annualized. |
7 | Annualized. |
52
AMG GW&K Small Cap Core Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 24.57 | $ | 21.80 | $ | 23.39 | $ | 24.34 | $ | 17.72 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income (loss)1,2 |
(0.06 | )3 | 0.00 | 4,5 | (0.06 | )6 | (0.07 | )7 | (0.07 | )8 | ||||||||||
Net realized and unrealized gain (loss) on investments |
5.06 | 3.81 | (0.64 | ) | 0.46 | 7.56 | ||||||||||||||
Total income (loss) from investment operations |
5.00 | 3.81 | (0.70 | ) | 0.39 | 7.49 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net realized gain on investments |
(1.53 | ) | (1.04 | ) | (0.89 | ) | (1.34 | ) | (0.87 | ) | ||||||||||
Total distributions to shareholders |
(1.53 | ) | (1.04 | ) | (0.89 | ) | (1.34 | ) | (0.87 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 28.04 | $ | 24.57 | $ | 21.80 | $ | 23.39 | $ | 24.34 | ||||||||||
Total Return2,9 |
20.32 | % | 17.44 | % | (3.02 | )% | 1.53 | % | 42.26 | % | ||||||||||
Ratio of net expenses to average net assets10 |
1.32 | % | 1.33 | % | 1.35 | % | 1.42 | % | 1.37 | %11 | ||||||||||
Ratio of gross expenses to average net assets12 |
1.33 | % | 1.42 | % | 1.46 | % | 1.53 | % | 1.50 | %11 | ||||||||||
Ratio of net investment income (loss) to average net assets2 |
(0.21 | )% | 0.01 | % | (0.24 | )% | (0.28 | )% | (0.32 | )%11 | ||||||||||
Portfolio turnover |
23 | % | 19 | % | 16 | % | 26 | % | 19 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 24,989 | $ | 35,760 | $ | 35,691 | $ | 37,995 | $ | 69,992 | ||||||||||
|
|
|
|
|
|
|
|
|
|
53
AMG GW&K Small Cap Core Fund
Financial Highlights
For a share outstanding throughout each fiscal year
For the fiscal years ended December 31, | ||||||||||||||||||||
Class I | 2017## | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 24.84 | $ | 22.04 | $ | 23.61 | $ | 24.49 | $ | 17.76 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.07 | 3 | 0.10 | 5 | 0.04 | 6 | 0.07 | 7 | 0.02 | 8 | ||||||||||
Net realized and unrealized gain (loss) on investments |
5.10 | 3.86 | (0.65 | ) | 0.44 | 7.58 | ||||||||||||||
Total income (loss) from investment operations |
5.17 | 3.96 | (0.61 | ) | 0.51 | 7.60 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.06 | ) | (0.10 | ) | (0.05 | ) | (0.04 | ) | — | |||||||||||
Net realized gain on investments |
(1.53 | ) | (1.06 | ) | (0.91 | ) | (1.35 | ) | (0.87 | ) | ||||||||||
Total distributions to shareholders |
(1.59 | ) | (1.16 | ) | (0.96 | ) | (1.39 | ) | (0.87 | ) | ||||||||||
Net Asset Value, End of Year |
$ | 28.42 | $ | 24.84 | $ | 22.04 | $ | 23.61 | $ | 24.49 | ||||||||||
Total Return2 |
20.79 | %9 | 17.90 | %9 | (2.63 | )%9 | 2.04 | %9 | 42.81 | % | ||||||||||
Ratio of net expenses to average net assets10 |
0.95 | % | 0.94 | % | 0.95 | % | 0.95 | % | 0.97 | %11 | ||||||||||
Ratio of gross expenses to average net assets12 |
0.96 | % | 1.03 | % | 1.06 | % | 1.07 | % | 1.10 | %11 | ||||||||||
Ratio of net investment income to average net assets2 |
0.24 | % | 0.43 | % | 0.17 | % | 0.30 | % | 0.07 | %11 | ||||||||||
Portfolio turnover |
23 | % | 19 | % | 16 | % | 26 | % | 19 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 403,309 | $ | 367,972 | $ | 302,381 | $ | 291,301 | $ | 168,854 | ||||||||||
|
|
|
|
|
|
|
|
|
|
54
AMG GW&K Small Cap Core Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal period ended December 31, | ||||
Class Z | 2017* | |||
Net Asset Value, Beginning of Period |
$ | 26.13 | ||
Income from Investment Operations: |
||||
Net investment income1,2 |
0.14 | 3 | ||
Net realized and unrealized gain on investments |
3.75 | |||
Total income from investment operations |
3.89 | |||
Less Distributions to Shareholders from: |
||||
Net investment income |
(0.07 | ) | ||
Net realized gain on investments |
(1.53 | ) | ||
Total distributions to shareholders |
(1.60 | ) | ||
Net Asset Value, End of Period |
$ | 28.42 | ||
Total Return2,9 |
14.87 | %13 | ||
Ratio of net expenses to average net assets10 |
0.90 | %14 | ||
Ratio of gross expenses to average net assets12 |
0.91 | %14 | ||
Ratio of net investment income to average net assets2 |
0.56 | %14 | ||
Portfolio turnover |
23 | % | ||
Net assets end of period (000’s) omitted |
$ | 108,047 | ||
|
|
# | Effective October 1, 2016, the Investor Class, Service Class and Institutional Class were renamed Class N, Class S and Class I, respectively. |
## | Effective June 23, 2017, Class S shares were converted to Class I shares. |
* | Commencement of operations was on February 27, 2017. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | Includes non-recurring dividends. Without these dividends, net investment income per class would have been $(0.12), $0.01, and $0.09 for Class N, Class I and Class Z, respectively. |
4 | Rounds to less than $0.01 per share. |
5 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $(0.06) and $0.04 for the Class N, and Class l, respectively. |
6 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $(0.05) and $0.05 for the Class N, and Class l, respectively. |
7 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $(0.11) and $0.03 for Class N, and Class l shares, respectively. |
8 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $(0.09) and $0.00 for the Class N, and Class l respectively. |
9 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
10 | Includes reduction from broker recapture amounting to less than 0.01% for fiscal year ended 2017. |
11 | Includes non-routine extraordinary expenses amounting to 0.015% and 0.018% of average net assets for the Class N and Class I, respectively. |
12 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
13 | Not annualized. |
14 | Annualized. |
55
AMG GW&K Small/Mid Cap Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal period ended | ||||
Class N | December 31, 2017* | |||
Net Asset Value, Beginning of Period |
$ | 10.35 | ||
Income from Investment Operations: |
||||
Net investment income1,2 |
0.01 | 3 | ||
Net realized and unrealized gain on investments |
0.94 | |||
Total income from investment operations |
0.95 | |||
Less Distributions to Shareholders from: |
||||
Net realized gain on investments |
(0.15 | ) | ||
Total distributions to shareholders |
(0.15 | ) | ||
Net Asset Value, End of Period |
$ | 11.15 | ||
Total Return2,4 |
9.17 | %5 | ||
Ratio of net expenses to average net assets6 |
1.10 | %7 | ||
Ratio of gross expenses to average net assets8 |
1.71 | %7 | ||
Ratio of net investment income to average net assets2 |
0.12 | %7 | ||
Portfolio turnover |
38 | % | ||
Net assets end of period (000’s) omitted |
$ | 11 | ||
|
|
56
AMG GW&K Small/Mid Cap Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal years ended December 31, |
For the fiscal period ended December 31, 2015** |
|||||||||||
Class I | 2017 | 2016# | ||||||||||
Net Asset Value, Beginning of Period |
$ | 9.80 | $ | 8.95 | $ | 10.00 | ||||||
Income (loss) from Investment Operations: |
||||||||||||
Net investment income (loss)1,2 |
0.03 | 3 | (0.03 | ) | (0.02 | ) | ||||||
Net realized and unrealized gain (loss) on investments |
1.48 | 0.89 | (1.03 | ) | ||||||||
Total income (loss) from investment operations |
1.51 | 0.86 | (1.05 | ) | ||||||||
Less Distributions to Shareholders from: |
||||||||||||
Net investment income |
(0.01 | ) | (0.01 | ) | — | |||||||
Net realized gain on investments |
(0.15 | ) | — | — | ||||||||
Total distributions to shareholders |
(0.16 | ) | (0.01 | ) | — | |||||||
Net Asset Value, End of Period |
$ | 11.15 | $ | 9.80 | $ | 8.95 | ||||||
Total Return2 |
15.44% | 4 | 9.55% | (10.50 | )%4,5 | |||||||
Ratio of net expenses to average net assets6 |
0.94% | 0.95% | 0.95% | 7 | ||||||||
Ratio of gross expenses to average net assets8 |
1.62% | 4.60% | 11.39% | 7 | ||||||||
Ratio of net investment income (loss) to average net assets2 |
0.26% | (0.38 | )% | (0.39 | )%7 | |||||||
Portfolio turnover |
38% | 48% | 41% | 5 | ||||||||
Net assets end of period (000’s) omitted |
$ | 24,266 | $ | 2 | $ | 1 | ||||||
|
|
|
|
|
|
57
AMG GW&K Small/Mid Cap Fund
Financial Highlights
For a share outstanding throughout each fiscal period
For the fiscal period ended | ||||
Class Z | December 31, 2017* | |||
Net Asset Value, Beginning of Period |
$ | 10.35 | ||
Income from Investment Operations: |
||||
Net investment income1,2 |
0.03 | 3 | ||
Net realized and unrealized gain on investments |
0.94 | |||
Total income from investment operations |
0.97 | |||
Less Distributions to Shareholders from: |
||||
Net investment income |
(0.02 | ) | ||
Net realized gain on investments |
(0.15 | ) | ||
Total distributions to shareholders |
(0.17 | ) | ||
Net Asset Value, End of Period |
$ | 11.15 | ||
Total Return2,4 |
9.34 | %5 | ||
Ratio of net expenses to average net assets6 |
0.85 | %7 | ||
Ratio of gross expenses to average net assets8 |
1.46 | %7 | ||
Ratio of net investment income to average net assets2 |
0.37 | %7 | ||
Portfolio turnover |
38 | % | ||
Net assets end of period (000’s) omitted |
$ | 6,980 | ||
|
|
* | Commencement of operations was on February 27, 2017. |
# | Effective October 1, 2016, Institutional Class was renamed Class I. |
** | Commencement of operations was on June 30, 2015. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | Includes non-recurring dividends. Without these dividends, net investment income per class would have been $(0.01), $0.00, and $0.01 for Class N, Class I and Class Z, respectively. |
4 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
5 | Not annualized. |
6 | Includes reduction from broker recapture amounting to less than 0.01% for fiscal year ended 2017. |
7 | Annualized. |
8 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
58
December 31, 2017
59
Notes to Financial Statements (continued)
60
Notes to Financial Statements (continued)
The tax character of distributions paid during the fiscal years ended December 31, 2017 and December 31, 2016 were as follows:
Enhanced Core Bond | Municipal Bond* | Municipal Enhanced** | ||||||||||||||||||||||
Distributions paid from: | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Ordinary income |
$ | 1,465,020 | $ | 2,783,139 | $ | 16,341,250 | $ | 13,518,971 | $ | 6,970,037 | $ | 7,158,615 | ||||||||||||
Short-term capital gains |
— | — | — | 10,894,944 | — | 5,596,273 | ||||||||||||||||||
Long-term capital gains |
— | — | 1,104,060 | 6,159,541 | — | 4,450,883 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 1,465,020 | $ | 2,783,139 | $ | 17,445,310 | $ | 30,573,456 | $ | 6,970,037 | $ | 17,205,771 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
* | The ordinary income distributions paid by Municipal Bond which were tax-exempt for the periods 2017 and 2016 were $16,185,749 and $13,518,971, respectively. |
** | The ordinary income distributions paid by Municipal Enhanced which were tax-exempt for the periods 2017 and 2016 were $6,915,538 and $7,153,068, respectively. |
Small Cap Core | Small/Mid Cap | |||||||||||||||
Distributions paid from: | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Ordinary income |
$ | 1,075,896 | $ | 1,432,368 | $ | 36,742 | $ | 764 | ||||||||
Short-term capital gains |
823,117 | — | 261,774 | 371 | ||||||||||||
Long-term capital gains |
26,818,387 | 17,275,822 | 124,971 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 28,717,400 | $ | 18,708,190 | $ | 423,487 | $ | 1,135 | |||||||||
|
|
|
|
|
|
|
|
As of December 31, 2017, the components of distributable earnings (excluding unrealized appreciation/depreciation) on tax basis consisted of:
Enhanced Core Bond |
Municipal Bond |
Municipal Enhanced |
Small Cap Core |
Small/ Mid Cap |
||||||||||||||||
Capital loss carryforward |
$ | 4,328,230 | — | $ | 273,380 | — | — | |||||||||||||
Undistributed ordinary income |
— | — | — | — | — | |||||||||||||||
Undistributed short-term capital gains |
— | — | — | $ | 351,412 | — | ||||||||||||||
Undistributed long-term capital gains |
— | $ | 310,654 | — | 11,007,991 | — | ||||||||||||||
Late-year loss deferral |
— | — | — | — | $ | 13,357 |
At December 31, 2017, the approximate cost of investments and the aggregate gross unrealized appreciation and depreciation for federal income tax were as follows:
Fund | Cost | Appreciation | Depreciation | Net | ||||||||||||
Enhanced Core Bond |
$ | 48,855,864 | $ | 621,702 | $ | (388,164 | ) | $ | 233,538 | |||||||
Municipal Bond |
1,053,092,876 | 11,945,284 | (5,619,463 | ) | 6,325,821 | |||||||||||
Municipal Enhanced |
224,593,285 | 8,349,185 | (639,465 | ) | 7,709,720 | |||||||||||
Small Cap Core |
427,475,542 | 153,891,102 | (20,155,991 | ) | 133,735,111 | |||||||||||
Small/Mid Cap |
30,588,598 | 2,264,893 | (490,653 | ) | 1,774,240 |
61
Notes to Financial Statements (continued)
For the fiscal years ended December 31, 2017 and December 31, 2016, the capital stock transactions by class for the Funds were as follows:
Enhanced Core Bond | Municipal Bond | |||||||||||||||||||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Class N: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
545,254 | $ | 5,338,004 | 385,257 | $ | 3,795,029 | 1,383,931 | $ | 15,924,408 | 1,647,974 | $ | 19,577,982 | ||||||||||||||||||||
Reinvestment of distributions |
25,331 | 247,785 | 27,286 | 268,301 | 37,952 | 438,882 | 75,000 | 856,921 | ||||||||||||||||||||||||
Cost of shares repurchased |
(604,413 | ) | (5,915,824 | ) | (853,785 | ) | (8,384,944 | ) | (1,667,771 | ) | (19,328,676 | ) | (1,270,324 | ) | (14,901,658 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
(33,828 | ) | $ | (330,035 | ) | (441,242 | ) | $ | (4,321,614 | ) | (245,888 | ) | $ | (2,965,386 | ) | 452,650 | $ | 5,533,245 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class S: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
— | — | — | — | 3,078,878 | $ | 35,271,698 | 10,232,475 | $ | 121,026,163 | ||||||||||||||||||||||
Reinvestment of distributions |
— | — | — | — | 53,728 | 615,132 | 291,662 | 3,354,153 | ||||||||||||||||||||||||
Cost of shares repurchased |
— | — | — | — | (3,952,625 | ) | (45,334,584 | ) | (7,024,704 | ) | (81,937,500 | ) | ||||||||||||||||||||
Share Conversion |
— | — | — | — | (13,649,760 | ) | (160,111,684 | ) | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
— | — | — | — | (14,469,779 | ) | $ | (169,559,438 | ) | 3,499,433 | $ | 42,442,816 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class I: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
499,155 | $ | 4,874,509 | 3,892,108 | $ | 38,388,245 | 34,230,051 | $ | 396,585,461 | 32,007,506 | $ | 379,279,837 | ||||||||||||||||||||
Reinvestment of distributions |
44,098 | 430,918 | 77,281 | 766,271 | 1,264,901 | 14,708,302 | 2,035,999 | 23,482,851 | ||||||||||||||||||||||||
Cost of shares repurchased |
(3,757,375 | ) | (36,918,527 | ) | (834,296 | ) | (8,310,804 | ) | (23,820,377 | ) | (275,914,801 | ) | (25,376,090 | ) | (297,140,902 | ) | ||||||||||||||||
Share Conversion |
— | — | — | — | 13,603,372 | 160,111,684 | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
(3,214,122 | ) | $ | (31,613,100 | ) | 3,135,093 | $ | 30,843,712 | 25,277,947 | $ | 295,490,646 | 8,667,415 | $ | 105,621,786 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class C: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
1,278 | $ | 12,466 | 2,517 | $ | 24,694 | — | — | — | — | ||||||||||||||||||||||
Reinvestment of distributions |
6,466 | 63,151 | 9,536 | 93,552 | — | — | — | — | ||||||||||||||||||||||||
Cost of shares repurchased |
(354,502 | ) | (3,456,425 | ) | (353,217 | ) | (3,475,625 | ) | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net decrease |
(346,758 | ) | $ | (3,380,808 | ) | (341,164 | ) | $ | (3,357,379 | ) | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
Notes to Financial Statements (continued)
Enhanced Core Bond | Municipal Bond | |||||||||||||||||||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Class Z: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
420,620 | $ | 4,105,961 | 2,391,953 | $ | 23,618,757 | — | — | — | — | ||||||||||||||||||||||
Reinvestment of distributions |
55,590 | 545,034 | 145,492 | 1,436,923 | — | — | — | — | ||||||||||||||||||||||||
Cost of shares repurchased |
(3,611,083 | ) | (35,134,500 | ) | (2,172,562 | ) | (21,122,721 | ) | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
(3,134,873 | ) | $ | (30,483,505 | ) | 364,883 | $ | 3,932,959 | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Municipal Enhanced | Small Cap Core | |||||||||||||||||||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Class N: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
854,262 | $ | 8,245,287 | 569,848 | $ | 5,963,684 | 164,219 | $ | 4,353,577 | 171,093 | $ | 3,879,355 | ||||||||||||||||||||
Reinvestment of distributions |
24,014 | 234,148 | 33,790 | 329,552 | 43,445 | 1,224,282 | 55,106 | 1,367,178 | ||||||||||||||||||||||||
Cost of shares repurchased |
(441,848 | ) | (4,333,836 | ) | (704,478 | ) | (7,269,369 | ) | (771,984 | ) | (20,688,735 | ) | (407,888 | ) | (9,392,744 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
436,428 | $ | 4,145,599 | (100,840 | ) | $ | (976,133 | ) | (564,320 | ) | $ | (15,110,876 | ) | (181,689 | ) | $ | (4,146,211 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class S: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
319,509 | $ | 3,059,584 | 1,219,602 | $ | 12,565,944 | 14,465 | $ | 373,459 | 86,671 | $ | 2,032,563 | ||||||||||||||||||||
Reinvestment of distributions |
20,245 | 193,539 | 127,122 | 1,234,918 | — | — | 29,980 | 750,402 | ||||||||||||||||||||||||
Cost of shares repurchased |
(891,675 | ) | (8,586,630 | ) | (1,192,382 | ) | (12,156,404 | ) | (67,690 | ) | (1,761,714 | ) | (1,074,660 | ) | (25,613,152 | ) | ||||||||||||||||
Share Conversion |
(1,192,488 | ) | (11,722,161 | ) | — | — | (660,652 | ) | (17,976,373 | ) | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
(1,744,409 | ) | $ | (17,055,668 | ) | 154,342 | $ | 1,644,458 | (713,877 | ) | $ | (19,364,628 | ) | (958,009 | ) | $ | (22,830,187 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class I: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
5,135,104 | $ | 49,798,634 | 6,118,953 | $ | 63,716,957 | 4,400,525 | $ | 118,884,418 | 2,961,740 | $ | 68,702,616 | ||||||||||||||||||||
Reinvestment of distributions |
334,730 | 3,259,308 | 835,430 | 8,132,689 | 708,864 | 20,238,054 | 613,419 | 15,384,553 | ||||||||||||||||||||||||
Cost of shares repurchased |
(4,794,481 | ) | (46,538,170 | ) | (7,243,382 | ) | (73,938,069 | ) | (6,389,413 | ) | (183,987,173 | ) | (2,480,898 | ) | (56,925,490 | ) | ||||||||||||||||
Share Conversion |
1,194,920 | 11,722,161 | — | — | 658,716 | 17,976,373 | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
1,870,273 | $ | 18,241,933 | (288,999 | ) | $ | (2,088,423 | ) | (621,308 | ) | $ | (26,888,328 | ) | 1,094,261 | $ | 27,161,679 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class Z:1 |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
10,535 | $ | 100,000 | — | — | 4,253,757 | $ | 125,555,645 | — | — | ||||||||||||||||||||||
Reinvestment of distributions |
275 | 2,693 | — | — | 201,870 | 5,763,389 | — | — | ||||||||||||||||||||||||
Cost of shares repurchased |
— | — | — | — | (654,016 | ) | (18,938,119 | ) | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase |
10,810 | $ | 102,693 | — | — | 3,801,611 | $ | 112,380,915 | — | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
Notes to Financial Statements (continued)
Small/Mid Cap | ||||||||||||||||
December 31, 2017 | December 31, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class N:1 |
||||||||||||||||
Proceeds from sale of shares |
966 | $ | 10,000 | — | — | |||||||||||
Reinvestment of distributions |
13 | 144 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
979 | $ | 10,144 | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Class I: |
||||||||||||||||
Proceeds from sale of shares |
1,961,796 | $ | 20,991,750 | 148,293 | $ | 1,303,687 | ||||||||||
Reinvestment of distributions |
28,697 | 320,262 | 114 | 1,126 | ||||||||||||
Cost of shares repurchased |
(41,659 | ) | (452,348 | ) | (51,818 | ) | (463,032 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
1,948,834 | $ | 20,859,664 | 96,589 | $ | 841,781 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Class Z:1 |
||||||||||||||||
Proceeds from sale of shares |
618,470 | $ | 6,484,063 | — | — | |||||||||||
Reinvestment of distributions |
9,195 | 102,624 | — | — | ||||||||||||
Cost of shares repurchased |
(1,865 | ) | (19,522 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
625,800 | $ | 6,567,165 | — | — | |||||||||||
|
|
|
|
|
|
|
|
1 | Commencement of operations was February 27, 2017. |
64
Notes to Financial Statements (continued)
65
Notes to Financial Statements (continued)
66
Notes to Financial Statements (continued)
The following table is a summary of the Funds’ open Repurchase Agreements that are subject to a master netting agreement as of December 31, 2017:
Gross Amount Not Offset in the Statement of Assets and Liabilities |
||||||||||||||||
Fund | Net Amounts of Assets Presented in the Statement of Assets and Liabilities |
Financial Instruments Collateral |
Cash Collateral Received |
Net Amount | ||||||||||||
Enhanced Core Bond |
||||||||||||||||
State of Wisconsin Investment Board |
$ | 759,122 | $ | 759,122 | — | — | ||||||||||
|
|
|
|
|||||||||||||
Small Cap Core |
||||||||||||||||
Cantor Fitzgerald Securities, Inc. |
$ | 6,278,647 | $ | 6,278,647 | — | — | ||||||||||
Daiwa Capital Markets America |
6,278,647 | 6,278,647 | — | — | ||||||||||||
HSBC Securities USA, Inc. |
6,278,647 | 6,278,647 | — | — | ||||||||||||
Jefferies LLC |
1,320,699 | 1,320,699 | — | — | ||||||||||||
State of Wisconsin Investment Board |
6,278,647 | 6,278,647 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Totals |
$ | 26,435,287 | $ | 26,435,287 | — | — | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Small/Mid Cap |
||||||||||||||||
Cantor Fitzgerald Securities, Inc. |
$ | 1,000,000 | $ | 1,000,000 | — | — | ||||||||||
Daiwa Capital Markets America |
726,848 | 726,848 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Totals |
$ | 1,726,848 | $ | 1,726,848 | — | — | ||||||||||
|
|
|
|
|
|
|
|
67
Notes to Financial Statements (continued)
68
Report of Independent Registered Public Accounting Firm
69
TAX INFORMATION
70
AMG Funds
Independent Trustees
The following Trustees are not “interested persons” of the Trust within the meaning of the 1940 Act:
Number of Funds | ||
Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2012 |
Bruce B. Bingham, 69 | |
• Oversees 61 Funds in Fund Complex |
Partner, Hamilton Partners (real estate development firm) (1987-Present); Director of The Yacktman Funds (2000-2012). | |
• Trustee since 1999-AMG Funds • Trustee since 2000-AMG Fund II • Oversees 61 Funds in Fund Complex |
Edward J. Kaier, 72 Attorney at Law and Partner, Teeters Harvey Marrone & Kaier LLP (2007-Present); Attorney at Law and Partner, Hepburn Willcox Hamilton & Putnam, LLP (1977-2007); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Kurt A. Keilhacker, 54 Managing Member, TechFund Capital (1997-Present); Managing Member, TechFund Europe (2000-Present); Board Member, 6wind SA, (2002-Present); Managing Member, Elementum Ventures (2013-Present); Trustee, Gordon College (2001-2016). | |
• Trustee since 2004-AMG Funds • Trustee since 2000-AMG Fund II • Oversees 61 Funds in Fund Complex |
Steven J. Paggioli, 67 Independent Consultant (2002-Present); Formerly Executive Vice President and Director, The Wadsworth Group (1986-2001); Executive Vice President, Secretary and Director, Investment Company Administration, LLC (1990-2001); Vice President, Secretary and Director, First Fund Distributors, Inc. (1991-2001); Trustee, Professionally Managed Portfolios (32 portfolios); Advisory Board Member, Sustainable Growth Advisors, LP; Independent Director, Chase Investment Counsel (2008–Present). | |
• Trustee since 2013 • Oversees 61 Funds in Fund Complex |
Richard F. Powers III, 72 Adjunct Professor, U.S. Naval War College (2016); Adjunct Professor, Boston College (2010-2013); President and CEO of Van Kampen Investments Inc. (1998-2003). | |
• Trustee since 1999-AMG Funds • Trustee since 2000-AMG Fund II • Oversees 61 Funds in Fund Complex |
Eric Rakowski, 59 Professor, University of California at Berkeley School of Law (1990-Present); Director of Harding, Loevner Funds, Inc. (9 portfolios); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 |
Victoria L. Sassine, 52 | |
• Oversees 63 Funds in Fund |
Lecturer, Babson College (2007 – Present). | |
Complex |
||
• Trustee since 2004-AMG Funds • Trustee since 2000-AMG Fund II • Oversees 61 Funds in Fund Complex |
Thomas R. Schneeweis, 70 Professor Emeritus, University of Massachusetts (2013-Present); Partner, S Capital Wealth Advisors (2015-Present); President, TRS Associates (1982-Present); Board Member, Chartered Alternative Investment Association (“CAIA”) (2002-Present); Director, CAIA Foundation (Education) (2010-Present); Director, Institute for GlobalAsset and Risk Management (Education) (2010-Present); Partner, S Capital Management, LLC (2007-2015); Director, CISDM at the University of Massachusetts, (1996-2013); President, Alternative Investment Analytics, LLC, (formerly Schneeweis Partners, LLC) (2001-2013); Professor of Finance, University of Massachusetts (1977-2013). |
71
AMG Funds
Trustees and Officers (continued)
Interested Trustees
Each Trustee in the following table is an “interested person” of the Trust within the meaning of the 1940 Act. Ms. Carsman is an interested person of the Trust within the meaning of the 1940 Act by virtue of her position with, and interest in securities of, AMG.
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2011 |
Christine C. Carsman, 65 | |
• Oversees 63 Funds in Fund Complex |
Executive Vice President, Deputy General Counsel and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2017-Present); Director (2010-Present) and Chair of the Board of Directors (2015-Present), AMG Funds plc; Director of Harding, Loevner Funds, Inc. (9 portfolios); Senior Vice President and Deputy General Counsel, Affiliated Managers Group, Inc. (2011-2016); Senior Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2007-2011); Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2004-2007); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2004-2011); Senior Counsel, Vice President and Director of Operational Risk Management and Compliance, Wellington Management Company, LLP (1995-2004). | |
Officers | ||
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• President since 2014 |
Jeffrey T. Cerutti, 50 | |
• Principal Executive Officer since 2014 • Chief Executive Officer since 2016 |
Chief Executive Officer, AMG Funds LLC (2014-Present); Director, President and Principal, AMG Distributors, Inc. (2014-Present); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2014-Present); Chief Executive Officer, President and Principal Executive Officer, AMG Funds IV, (2015-Present); Chief Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Executive Officer, Aston Asset Management, LLC (2016); President, VP Distributors, (2011-2014); Executive Vice President, Head of Distribution, Virtus Investment Partners, Inc. (2010-2014); Managing Director, Head of Sales, UBS Global Asset Management (2001-2010). | |
• Chief Operating Officer since 2007 |
Keitha L. Kinne, 59 Chief Operating Officer, AMG Funds LLC (2007-Present); Chief Investment Officer, AMG Funds LLC (2008-Present); Chief Operating Officer, AMG Distributors, Inc. (2007-Present); Chief Operating Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2007-Present); Chief Operating Officer, AMG Funds IV, (2016-Present); Chief Operating Officer and Chief Investment Officer, Aston Asset Management, LLC (2016); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2012-2014); Managing Partner, AMG Funds LLC (2007-2014); President, AMG Funds (2012-2014); President, AMG Distributors, Inc. (2012-2014); Managing Director, Legg Mason & Co., LLC (2006-2007); Managing Director, Citigroup Asset Management (2004-2006). | |
• Secretary since 2015 • Chief Legal Officer since 2015 |
Mark J. Duggan, 53 Senior Vice President and Senior Counsel, AMG Funds LLC (2015-Present); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2015-Present); Secretary and Chief Legal Officer, AMG Funds IV, (2015-Present); Attorney, K&L Gates, LLP (2009-2015). | |
• Chief Financial Officer since 2017 • Treasurer since 2017 • Principal Financial Officer since 2017 • Principal Accounting Officer since 2017 |
Thomas G. Disbrow, 52 Vice President, Mutual Fund Treasurer & CFO, AMG Funds, AMG Funds LLC (2017-Present); Chief Financial Officer, Principal Financial Officer, Treasurer and Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Managing Director - Global Head of Traditional Funds Product Control, UBS Asset Management (Americas), Inc. (2015-2017); Managing Director - Head of North American Funds Treasury, UBS Asset Management (Americas), Inc. (2011-2015). | |
• Chief Compliance Officer since 2016 |
Gerald F. Dillenburg, 51 Vice President, Chief Compliance Officer AMG Funds, AMG Funds LLC (2017-Present); Chief Compliance Officer AMG Funds, AMG Funds LLC (2016-2017); Chief Compliance Officer and Sarbanes Oxley Code of Ethics Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Compliance Officer, AMG Funds IV (1996-Present); Sarbanes-Oxley Code of Ethics Compliance Officer, AMG Funds IV (2016-Present); Chief Compliance Officer, Aston Asset Management, LLC (2006-2016); Chief Operating Officer, Aston Funds (2003-2016); Secretary, Aston Funds (1996-2015); Chief Financial Officer, Aston Funds (1997-2010); Chief Financial Officer, Aston Asset Management, LLC (2006-2010); Treasurer, Aston Funds (1996-2010). | |
• Deputy Treasurer since 2017 |
John A. Starace, 47 Director, Mutual Fund Accounting, AMG Funds LLC (2017-Present); Vice President, Deputy Treasurer of Mutual Funds Services, AMG Funds LLC (2014-2017); Deputy Treasurer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Vice President, Citi Hedge Fund Services (2010-2014); Audit Senior Manager (2005-2010) and Audit Manager (2001-2005), Deloitte & Touche LLP. |
72
AMG Funds
Trustees and Officers (continued)
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• Controller since 2017 |
Christopher R. Townsend, 50 Vice President, Business Finance, AMG Funds LLC (2017-Present); Head of Business Finance, AMG Funds LLC (2015-2017); Chief Financial Officer and Financial and Operations Principal, AMG Distributors, Inc. (2016-Present); Controller, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Treasurer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017); Chief Financial Officer, Aston Asset Management LLC (2016); Head of Finance and Accounting, Allianz Asset Management (2006-2015). | |
• Anti-Money Laundering Compliance Officer since 2014 |
Patrick J. Spellman, 43 Vice President, Chief Compliance Officer, AMG Funds LLC (2017-Present); Senior Vice President, Chief Compliance Officer, AMG Funds LLC (2011-2017); Chief Compliance Officer, AMG Distributors, Inc., (2010-Present); Anti-Money Laundering Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2014-Present); Anti-Money Laundering Officer, AMG Funds IV, (2016-Present); Compliance Manager, Legal and Compliance, Affiliated Managers Group, Inc. (2005-2011). | |
• Assistant Secretary since 2016 |
Maureen A. Meredith, 32 Director, Counsel, AMG Funds LLC (2017-Present); Vice President, Counsel, AMG Funds LLC (2015-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2016-Present); Associate, Ropes & Gray LLP (2011-2015); Law Fellow, Massachusetts Appleseed Center for Law and Justice (2010-2011). |
73
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
amgfunds.com | |
77 |
amgfunds.com | |123117 AR020 |
|
ANNUAL REPORT |
amgfunds.com
|
123117 AR012
|
AMG Funds Annual Report — December 31, 2017 |
![]() |
Letter to Shareholders |
2 |
|
About Your Fund’s Expenses |
As a shareholder of a Fund, you may incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on $1,000 invested at the beginning of the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of the following table provides information about the actual account values and actual expenses. You may use the information in this line, together with the |
amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During 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.
|
3 |
|
The AMG TimesSquare Small Cap Growth Fund (the Fund) seeks to achieve long-term capital appreciation by investing primarily in the stocks of small capitalization companies.
THE PORTFOLIO MANAGER
TimesSquare Capital Management, LLC (TimesSquare), the Fund’s subadvisor, utilizes a bottom-up fundamental approach to small cap investing. Led by co-managers Grant Babyak and Ken Duca, the investment team at TimesSquare believes its proprietary fundamental research skills, which place a particular emphasis on the assessment of management quality and an indepth understanding of superior business models, enable the team to build a diversified portfolio of small cap growth stocks designed to generate good risk-adjusted returns.
THE YEAR IN REVIEW
For the year ended December 31, 2017, the AMG TimesSquare Small Cap Growth Fund’s Class Z returned 21.14%, while its benchmark, the Russell 2000® Growth Index (the “Index”), returned 22.17%.
Equity returns in 2017 marched upward across the globe. Markets climbed steadily throughout the year to post annual returns of 21% to 22% for broad U.S. equity indices,1 25% for non-U.S. equities,2 and 37% for emerging markets.3 These gains coincided with notably muted levels of volatility across all equity markets—including historic lows for the U.S. and developed markets4—and steadily increasing levels of global economic activity from manufacturing and service industries.5 Unemployment rates declined to lows not seen for over a decade in the U.S., the U.K. and Japan among other countries, with Germany at its lowest level since its 1990 reunification.6
In the U.S., the Federal Reserve raised the federal funds rate’s7 target range by 25 basis points for a third time this year, bringing it to 1.25–1.50%, and left in place indications for another three increases in 2018.8 The final reading for the third quarter’s GDP9 annual growth rate was 3.2%, the highest quarterly level in three years.10 In the late summer when the administration began its efforts to significantly change the current tax code, stocks rallied in anticipation of broad benefits to corporations. With the law’s passage in late December, that momentum continued. Potential tax benefits for individuals were less clear, thus while measures of consumer confidence and sentiment climbed during most of 2017, both retreated at the end of the year.11
Commodity prices rose sharply, especially for oil, which ended the year at over $60 per barrel and at a level not seen for 2 1⁄2 years.12 While the price for a |
broad basket of commodities reached a 12-month high, natural gas prices declined,13 likely the result of an overabundant supply. Also slipping toward the end of the year was the U.S. Dollar’s value, which had steadily declined from its highs in 2016.14
Across U.S. stocks, one striking measure was the dominance throughout 2017 of large over small and growth over value. Within small-to-mid capitalization growth, stocks with the highest valuations15 outperformed for the full year, as did companies with higher risk.16 In terms of economic sectors, technology and health care were the strongest areas while energy and consumer staples lagged.
Amidst this environment, the Fund underperformed the Russell 2000 Growth Index for the year. Stock selection had a strong net positive effect. In general, our investments in producer durables, consumer discretionary, materials & processing, financial services, technology, energy and consumer staples outpaced their counterparts in the Index, while our holdings in health care and utilities lagged. Sector allocation had a strong net negative effect and drove our underperformance as our underweights to consumer staples, materials & processing and consumer discretionary and our overweight to utilities helped our returns, while our underweight to health care and our overweights to energy, producer durables and financial services detracted from performance.
The top contributor to our returns for the year hailed from consumer discretionary: 2U, Inc., which provides cloud-based software-as-a-service online learning platform solutions for nonprofit colleges and universities. 2U shares advanced by 116% during the year thanks to a string of new partnerships with schools including Pepperdine University, the University of Southern California and Rice University. 2U also unveiled a program at Yale University that received accreditation and is expected to launch in early 2018. Management noted a strong program launch schedule into 2019. Cross-selling opportunities still exist with many of 2U’s current clients looking to expand into the non-degree products offered by its recent acquisition of GetSmarter, which specializes in online short course certificates for working professionals. Also scoring well with its 123% climb was Chegg, Inc., which provides a learning platform for students with products and services including textbooks in multiple formats, online tutoring and test preparation. Chegg reported several quarters that exceeded expectations with particularly strong organic sales growth that came from areas of |
greater profitability, such as online tutoring. Management also announced a partnership with Sallie Mae, through which Chegg will receive payments from Sallie Mae from its borrowers in exchange for free study and tutor subscriptions. Hibbett Sports, Inc. is a sporting goods retailer focusing on small and mid-sized markets. A slowdown in apparel sales early in the year led to weaker results and a reduction of guidance. After same-store sales weakness persisted through the second quarter and we saw indications that the next quarter’s trends remained lackluster, we closed our position in May. Hibbett lost 37% during the time we held the stock. Motion picture technology provider IMAX Corporation rated poorly with its 27% decline. It appears that significant selling pressure on IMAX’s shares was driven by two investment firms that were large holders with significant client outflows, which forced them to exit many of their positions such as IMAX. There is still a solid slate of movies that is driving interest in IMAX technology installations at movie theaters across the U.S., Europe, China, Taiwan, Japan, Russia and India. We closed our position in March in Sportsman’s Warehouse Holdings, Inc. with its shares down 53% during the time we held the stock. As a specialty retailer of hunting, fishing, camping and related outdoor merchandise, the company faced negative sentiment early in the year following the Republican sweep in Washington. The new administration likely would not seek additional restrictions on the purchases of firearms, which obviated any short-term spike in sales that typically would occur prior to new regulations. After Sportsman’s Warehouse reported its first earnings miss as a public company with worsening trends, we sold the stock on the lack of visibility for improvement.
We closed two of our detractors in the energy sector: PDC and Gulfport. PDC Energy, Inc. is an oil, natural gas and natural gas liquids exploration and production company with operations focused on the Wattenberg Field in Colorado and the Delaware Basin in West Texas. After a different operator in Colorado from years earlier had improperly decommissioned a vertical well, it exploded below an occupied house. The Colorado governor called for increased inspections of pipelines near buildings, few of which PDC had, and most of those had been recently tested; however, all drillers in Colorado saw their stock prices under pressure with PDC as no exception. After PDC reported disappointing well results in their western acreage in the Permian Basin and a lower number of wells coming on line in the |
4 |
AMG TimesSquare Small Cap Growth Fund Portfolio Manager’s Comments (continued) |
Wattenberg Field, we decided to move on. PDC shares fell by 47% during the time we held the stock. Gulfport Energy Corporation is an oil and natural gas exploration and production company with operations focused on the Louisiana Gulf Coast, in the Utica Shale in Ohio, in the Niobrara Formation in Colorado and in the Bakken Formation in North Dakota and Montana. We closed our position following our reduced confidence in management after their questionable deal for acreage in Oklahoma. Shares fell by 41% during the time we owned Gulfport in 2017. Solaris Oilfield Infrastructure, Inc. manufactures and rents patented silo proppant storage systems used by exploration and production operators and pressure pumping service companies to increase efficiency in the well fracturing process. We participated in a secondary offering in the fourth quarter to establish our position in Solaris, and shares have gained 35% since our purchase. The oil well equipment market continues to shift from other open, funnel-based systems that offer little to no storage to Solaris’s vertical sand silo systems, and we are optimistic about Solaris’s ability to continue to gain market share.
In the financial services sector, WEX Inc. provides business payment processing and information management solutions for commercial and government fleets as well as payment processing solutions for brand stores, government departments and service organizations. WEX rose 27% thanks to solid fiscal quarterly results and raised guidance. Its Fleet Solutions unit benefited from volume growth from new customer signings and higher fuel prices, while its health care division signed Bank of America as a new client. WEX also signed another new partnership with Citibank to provide fleet card solutions for several government agencies. The bottom detractor to our returns for the year was Cardtronics plc, which operates a network of automated teller machines and multi-functional financial services kiosks in the U.S., Canada, U.K. and Mexico. Cardtronics experienced difficulties with system upgrades associated with new EMV (Europay, MasterCard and Visa) chip-enabled systems that led to increased downtime for its ATMs. The company also faced uncertainty surrounding U.K. regulatory reviews of its recent acquisition of a rival ATM provider. We decided to close our position in the third quarter with shares depreciating by 48% during the time we held the stock after losing patience with management following several quarters’ worth of disappointing results and lowered guidance.
In health care, we were hurt by the negative sector allocation effect from our typical underweight to the biotechnology industry, which soared 60% in 2017; in |
our managing the risk of the Fund, we generally avoid the more speculative biotech companies that do not have any drugs that have been approved by the Food and Drug Administration (FDA) and, therefore, are not generating revenues. Radius Health, Inc. is a biopharmaceutical company focused on the development of therapies for treating osteoporosis, oncology and endocrine diseases. We initiated a position in Radius in May following FDA’s approval of its lead product, Tymlos, for the treatment of women with postmenopausal osteoporosis; Tymlos appears to us to be a best in class opportunity in an indication that has room to grow. Shares have traded down by -16% since our purchase following disappointing third quarter results. Management missed sales estimates for Tymlos. This drug is on the national preferred formulary list for the pharmacy benefit management company Express Scripts and is scheduled to come online in January 2018, which is expected to mark a large inflection point in Tymlos sales. Dermira, Inc. develops therapies used by dermatologists to treat skin-related conditions such as psoriasis, excessive sweating and acne. In the third quarter, management announced their entering a licensing agreement with pharmaceuticals company Roche under which Dermira will obtain the rights to the atopic dermatitis drug Lebrikizumab, which passed a phase II study. This acquisition of Lebrikizumab raised concerns about the upcoming clinical trial costs for this new drug and cast doubt on the viability of their existing drug pipeline. Dermira later terminated their collaboration with Belgian pharmaceutical company UCB on a psoriatic arthritis drug, despite already having completed pivotal trials. We decided to close our position in December after reduced confidence in the management team’s decision-making; Dermira shares lost 16% during the time we held it. Bucking the trend in our health care holdings with its 77% surge was Inogen, Inc., which specializes in portable oxygen concentrators used to deliver supplemental long-term oxygen therapy to patients suffering from chronic respiratory conditions. Management reported top and bottom line results that beat expectations and raised guidance with accelerating sales growth across all of its businesses. Strength was noted in Inogen’s direct-to-consumer and business-to-business sales, which more than offset a decline in unit rentals primarily due to Medicare reimbursement cuts.
Within producer durables, On Assignment, Inc. is a professional staffing firm that provides flexible and permanent information technology staffing solutions |
for various sectors worldwide. On Assignment rose 46% thanks to several quarters of strong results. Management has noted improving profit margins in its Oxford Global Resources segment focused on recruiting and consulting in North America and Europe as well as continued strong growth in its Apex Systems division, which specializes in information technology staffing. Continued strong free cash flow coupled with a healthy balance sheet afford management the ability to conduct additional share buybacks or make acquisitions. Advisory Board Company provides best practices research, business intelligence, and management and advisory services, primarily to the health care and education industries. Earlier in the year, an activist investor disclosed it had amassed a large stake, and the company later announced plans to “explore strategic alternatives.” We sold our position in September after Advisory Board announced the acquisition and split of the company with OptumCare buying its health care business and Vista Equity Partners buying its education business and the unlikelihood of additional bidders. Shares gained 59% during the time we held the stock. We also closed our position in Electronics For Imaging, Inc. with its shares down 28% prior to our sale in August. Developing digital imaging and printer technologies for the industrial and production markets, the company postponed a fiscal quarterly report while it reassessed its revenue recognition procedures. That review will also cover historical financial controls, which may only indicate timing issues with accounting sales for large format printers from one period to another. We believe that management was less than forthright with the issue and decided to exit the position. WageWorks, Inc. provides tax-advantaged programs for consumer-directed health, commuter and other employee spending account benefits. In the third quarter, shares fell despite reporting solid results across its key segments and still sporting a strong pipeline of new business opportunities. Some investors were hoping for an even larger guidance raise. Shares fell 15% for the year. WageWorks remains as one of the few providers that can handle all parts of the employee benefit chain and still offers a high degree of recurring revenues which provides us with good visibility into its future earnings potential.
In technology, MKS Instruments, Inc. provides instruments, subsystems and process control solutions that measure, control, power, monitor and analyze critical parameters of manufacturing |
5 |
AMG TimesSquare Small Cap Growth Fund Portfolio Manager’s Comments (continued) |
processes to improve process performance and productivity. A series of beat and raise quarters with organic growth in its semiconductor business and a greater contribution from its 2016 acquisition of Newport, a designer of laser and photonics components helped to boost its shares by 61% for the year. Greater demand for memory chips and organic LEDs has also driven higher sales levels, and MKS continues to take market share. Management is executing ahead of schedule on their integration of photonics solutions company Newport Corporation. Appreciating by 76%, Paycom Software, Inc. provides cloud-based human resources technology and payroll services delivered as a single software-as-a-service application for small- to mid-sized companies in the U.S. Paycom issued four straight quarters of better-than-expected results, although fourth quarter guidance was only maintained instead of management’s typical raise due to the hurricane-related disruptions. Paycom continues to expand into new locations by leveraging existing personnel. Management completed their $50 million share repurchase program and authorized a new $75 million program. NIC Inc. is the nation’s leading provider of official government web sites, online services and secure payment processing solutions providing eGovernment services for more than 3,500 federal, state and local agencies in the U.S. Earlier in the year, management announced guidance for 2017 that fell short of expectations. Operating expenses should be higher as NIC continued to build several state-specific platforms; in the future, these could be adapted for sale to other states. Shares also fell on uncertainty over the state of Texas contract renewal in mid-2018. This contract currently represents approximately 20% of NIC’s revenues, and management remains optimistic given they have executed well during the existing contract with Texas. NIC has also benefitted from other contract wins with the states of Illinois and Wisconsin as well | as the federal government. All told, NIC’s shares finished the year down 29%. MACOM Technology Solutions Holdings, Inc. is a high performance analog semiconductor company operating in four primary end markets: Networks, Aerospace & Defense, Automotive and Multi-market. MACOM shares fell by 30% on lower-than-expected top and bottom line results driven by weakness in China for optical networking components from a slowdown in spending by Chinese telecommunication carriers. The company’s datacenter business was also weak due to supply constraints, which are expected to be resolved early next year. While not enough to offset the issues in telecom, results in MACOM’s aerospace & defense and industrials segments were strong. We believe that the stock has reached a trough in performance.
As 2017 closed, the global economies appeared on a uniformly upward growth path for the first time since 2008’s global financial crisis, albeit at different paces. Many global uncertainties remain, including the actual impact of U.S. tax law changes, how much longer a nine-year bull market in the U.S. could continue, the shape of a new U.K. trade agreement with the European Union now that the terms of its Brexit have been set, along with escalating tensions surrounding North Korea. However, our investment experience has shown us that the markets never follow a guaranteed path. As bottom-up active managers, we believe that shifting environments create additional investment opportunities, thus no matter what 2018 brings we are steadfast that our disciplined analysis of business models and management teams should find superior companies.
For the new year, we remain dedicated to adding value to the assets you have entrusted to us and look forward to working with you throughout 2018. As always, please feel free to contact us if you have any questions. |
1 As represented by the S&P 500 and Russell 3000 indexes, respectively
2 As represented by the MSCI EAFE Index
3 As represented by the MSCI Emerging Markets Index
4 As defined by the CBOE set of volatility indexes (based on market expectations of near-term volatility for S&P 500, MSCI EAFE, and MSCI Emerging Markets index option or ETF prices)
5 Source: IHS Markit surveys of global purchasing executives
6 Source: FactSet Economics Standardized Database
7 The federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight, on an uncollateralized basis
8 Source: Board of Governors of the Federal Reserve System
9 Gross Domestic Product
10 Source: Bureau of Economic Analysis of the U.S. Department of Commerce
11 Sources: Nielsen (consumer confidence) and University of Michigan (consumer sentiment)
12 Source: Bloomberg
13 Source: Bloomberg
14 As measured by the Board of Governors of the Federal Reserve System using an average of foreign exchange values with major currencies that circulate widely
15 As measured by price/earnings ratios
16 As measured by Beta
This commentary reflects the viewpoints of the portfolio manager, TimesSquare Capital Management, LLC as of December 31, 2017 and is not intended as a forecast or guarantee of future results, and is subject to change without notice. |
6 |
AMG TimesSquare Small Cap Growth Fund Portfolio Manager’s Comments (continued) |
7 |
AMG TimesSquare Small Cap Growth Fund Fund Snapshots (unaudited) December 31, 2017 |
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 |
AMG TimesSquare Small Cap Growth Fund Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
9 |
AMG TimesSquare Small Cap Growth Fund Schedule of Portfolio Investments (continued) |
The accompanying notes are an integral part of these financial statements. |
10 |
AMG TimesSquare Small Cap Growth Fund Schedule of Portfolio Investments (continued) |
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks† |
$ | 1,118,980,737 | — | — | $ | 1,118,980,737 | ||||||||||
Exchange Traded Funds |
21,470,500 | — | — | 21,470,500 | ||||||||||||
Preferred Stock†† |
— | — | $ | 6,999,997 | 6,999,997 | |||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | $ | 113,387,081 | — | 113,387,081 | |||||||||||
Other Investment Companies |
41,965,145 | — | — | 41,965,145 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 1,182,416,382 | $ | 113,387,081 | $ | 6,999,997 | $ | 1,302,803,460 | ||||||||
|
|
|
|
|
|
|
|
† | 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. |
†† | All preferred stocks held in the Fund are Level 3 securities. For a detailed breakout of preferred stocks by major industry classification, please refer to the Fund’s Schedule of Portfolio Investments. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The following table below is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value at December 31, 2017:
Preferred Stock |
||||
Balance as of December 31, 2016 |
— | |||
Realized gain (loss) |
— | |||
Change in unrealized appreciation/depreciation |
— | |||
Purchases |
$6,999,997 | |||
Sales |
— | |||
Balance as of December 31, 2017 |
$6,999,997 | |||
|
||||
Net change in unrealized appreciation/depreciation on investments still held at December 31, 2017 |
— |
The following table summarizes the quantitative inputs and assumptions used for items categorized in Level 3 of the fair value hierarchy as of December 31, 2017. The table below is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to the Fund’s fair value measurements:
Quantitative Information about Level 3 Fair Value Measurements
Fair Value at December 31, 2017 |
Valuation Technique(s) |
Unobservable Inputs(s) |
Range | Average | ||||||||||||||||
Preferred Stock |
$6,999,997 | Recent Financing | Recent Transaction Price | N/A | N/A | |||||||||||||||
|
|
|||||||||||||||||||
Total |
$6,999,997 | |||||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements. |
11 |
AMG TimesSquare Mid Cap Growth Fund Portfolio Manager’s Comments (unaudited) |
The AMG Timessquare Mid Cap Growth Fund (the Fund) seeks to achieve long-term capital appreciation by investing in the common and preferred stock of U.S. mid-capitalization companies. The Fund invests at least <80%> of its assets in securities of mid-capitalization companies. The Fund’s subadvisor, TimesSquare Capital Management, LLC (TimesSquare), uses a bottom-up, research-intensive approach to identify mid-capitalization growth stocks that it believes have the greatest potential to achieve significant price appreciation over a 12-to-18-month horizon. In this case, mid-capitalization refers to companies that, at the time of purchase, have market capitalizations within the range of the Russell Midcap® Growth Index (the Index), the Fund’s benchmark.
THE YEAR IN REVIEW
For the year ended December 31, 2017, the AMG TimesSquare Mid Cap Growth Fund (Class Z) returned 22.63%, while its benchmark, the Russell Midcap® Growth Index, returned 25.27%.
Equity returns in 2017 marched upward across the globe. Markets climbed steadily throughout the year to post annual returns of 21% to 22% for broad U.S. equity indices,1 25% for non-U.S. equities,2 and 37% for emerging markets.3 These gains coincided with notably muted levels of volatility across all equity markets—including historic lows for the U.S. and developed markets4—and steadily increasing levels of global economic activity from manufacturing and service industries.5 Unemployment rates declined to lows not seen for over a decade in the U.S., the U.K. and Japan, among other countries, with Germany at its lowest level since its 1990 reunification.6
In the U.S., the Federal Reserve raised the federal funds rate’s7 target range by 25 basis points for a third time this year, bringing it to 1.25–1.50%, and left in place indications for another three increases in 2018.8 The final reading for the third quarter’s GDP9 annual growth rate was 3.2%, the highest quarterly level in three years.10 In the late summer when the administration began its efforts to significantly change the tax code, stocks rallied in anticipation of broad benefits to corporations. With the law’s passage in late December, that momentum continued. Potential tax benefits for individuals were less clear, thus while measures of consumer confidence and sentiment climbed during most of 2017, both retreated at the end of the year.11
Commodity prices rose sharply, especially for oil, which ended the year at over $60 per barrel and at a level not seen for 2 1⁄2 years.12 While the price for a |
broad basket of commodities reached a 12-month high, natural gas prices declined,13 likely the result of an overabundant supply. Also slipping toward the end of the year was the U.S. Dollar’s value, which had steadily declined from its highs in 2016.14
Across U.S. stocks, one striking measure was the dominance throughout 2017 of large over small and growth over value, which continued into the fourth quarter. Within small-to-mid capitalization growth, stocks with the highest valuations15 outperformed for the full year, as did companies with higher risk.16 In terms of economic sectors, technology and health care were the strongest areas while energy and consumer staples lagged.
Amidst this environment, the Fund underperformed the Russell Midcap Growth Index for 2017. Relative weakness was found in technology, health care, materials & processing and energy. This was partially offset by strength in financial services, consumer staples, producer durables and consumer discretionary.
With the technology sector, Electronic Arts Inc., a digital interactive entertainment company that develops and delivers video games, jumped 33% for the year. They reported upside to quarterly expectations on better digital revenues. Subscription services have been increasing as a percentage of revenues. Dolby Laboratories creates audio and imaging technologies that are designed to transform entertainment and communications. Their shares rose 39% as the company posted solid results throughout the year and received an additional boost from news that their technology is embedded in Apple’s latest iPhones and iPads. We added Marvell Technology Group during the first quarter. It produces analog, mixed-signal and digital signal processor integrated circuits. We were drawn to the stock due to its attractive valuation, new management team and revamped salesforce. Storage and networking have been areas of strength. In November Marvell announced the acquisition of chipmaker Cavium, thereby diversifying its hard disk drive exposure and gaining scale. Its stock climbed 30% since it was added.
In health care, Henry Schein Inc. is a supplier of health products to dental practitioners, laboratories, physicians and veterinary clinics. Its shares retreated -7% on mixed third quarter results as revenues were above sell-side estimates while earnings were below. We liquidated the position during the fourth quarter due to a slowdown in |
single-use dental products, which management believes will persist into 2018. Premier Inc. specializes in analytics, supply chain solutions, advisory and other services to health care organizations. Its Supply Chain Services segment offers medical & surgical products, pharmaceuticals and laboratory supplies. Its Performance Services business helps customers manage a value-based care reimbursement model and support their regulatory reporting requirements. During the year, Premier encountered headwinds from hospitals cutting back on their discretionary spending and that led to a 4% slide in its shares. Management maintained full year guidance as they set conservative assumptions on utilization levels and regulatory uncertainties. In the third quarter, we added TESARO Inc. to the Fund. This is an oncology-focused biopharmaceutical company with a broad therapy pipeline. They currently have two products on the market: Zejula and Varubi. Zejula is used to treat ovarian cancer while Varubi is used to prevent nausea associated with chemotherapy. TESARO’s shares dropped 28% as third quarter sales of Zejula were slightly ahead of consensus projections, but forward guidance was below. DaVita Inc.’s primary focus is on kidney dialysis services to patients suffering from chronic kidney failure and end-stage renal disease. Their ancillary International and DaVita Medical Group businesses have both fallen short of management’s targets thereby impacting overall company results. In December, the company announced they will be selling the DaVita Medical Group business to United Health/Optum at favorable terms. The market reacted positively to this news as the stock ended the year up 12%. Neurocrine Biosciences Inc. was added to the Fund during the second quarter. It is focused on the discovery and development of pharmaceuticals for the treatment of neurological and endocrine-related disorders. The launch of their Ingrezza drug therapy has been well received, prodded by physician enthusiasm as well as end-user demand. Ingrezza is thus far the only Food & Drug Administration (FDA) approved product on the market for treating tardive dyskinesia, a disorder that results in involuntary and repetitive movements. It has also been granted orphan drug designation by the FDA for pediatric Tourette syndrome. These developments served to lift Neurocrine Biosciences by 53% since it was purchased. Vertex Pharmaceuticals Inc. is focused on developing and commercializing therapies for the treatment of cystic fibrosis and advanced 102% over the year. Their two |
12 |
AMG TimesSquare Mid Cap Growth Fund Portfolio Manager’s Comments (continued) |
drugs currently on the market are Orkambia and Kalydeco, plus Tezacaftor which is in phase III clinical trials.
Within materials & processing, lawn and garden care products company Scotts Miracle-Gro Co. grew 26%. We added this stock to the Fund during the second quarter. Since then, it has beat estimates for two successive quarters driven by strength in its Hawthorne Hydroponic segment. Martin Marietta Materials Inc., a supplier of aggregates and other building materials to the construction industry, netted a 0% return for the year. Storm activity across Texas and the Southeast weighed on revenues and added to expenses. Management broadly reduced guidance to reflect weakness from hurricane-impacted areas and a slower pace of projects. While aggregate volumes declined, pricing was strong. Management sees aggregate shipments increasing mid-single digits, barring disruptions. Within these projections, the residential market remains the healthiest, followed by infrastructure spending and non-residential. Shares of Ecolab Inc. rose 16% throughout the year. The one down period occurred in September when management indicated Hurricane Harvey would impact third quarter results.
In energy, Range Resources Corp. is a natural gas-focused exploration and production company with properties in the Appalachian and Midcontinent regions of the U.S. The acquisition of Memorial Resources resulted in greater balance sheet leverage and questionable acreage. We sold out of the position during the third quarter. Range Resources slipped 47% for the time it was held. We added Concho Resources Inc. during the second quarter. This is an exploration and production company with its principal area of operations in the Permian Basin of southeast New Mexico and west Texas. Concho handily beat third quarter estimates due to higher-than-expected natural gas production, better realized pricing and lower expenses. In recognition of an increased pace of well completions, management expects to exceed the high end of their growth guidance. These developments served to bolster the stock by 14% since it was purchased.
Within financial services, SBA Communications Corp. owns and operates wireless communication towers across North, Central and South America. Its stock was buoyed 41% by the combination of strong results and news of the canceled merger discussions between Sprint and T-Mobile. Sprint subsequently announced plans to substantially increase capital spending on their network. Fuel card |
and payment solutions provider FleetCor Technologies Inc. advanced 36% for the year. They reported solid results and raised full-year guidance due to strong business trends and improving fuel prices. FleetCor announced the acquisition of Creative Lodging Solutions and a two-part agreement with Walmart. FleetCor’s commercial fuel cards will be accepted at Walmart and Sam’s Club fueling stations and will also be the exclusive provider of fleet fuel cards to Walmart’s 4,000 employees that drive company vehicles. Alliance Data Systems Corp. offers data-driven and transaction-based marketing and customer loyalty solutions. The stock recovered after correcting in early 2017 due to choppiness in their private label credit card business. They experienced improvement in this business during the year and this served to offset softer trends in their Epsilon marketing services business. The stock ended the year up 12%. Property & casualty insurer Progressive Corp. was a steady performer in 2017, rising 62%. Their primary focus is on motor vehicles. They consistently reported higher-than-expected results and benefited from industry-wide auto insurance rate increases. Progressive has gained market share and generated profit margin improvement. RenaissanceRe Holdings Ltd., a provider of reinsurance and insurance services, suffered a loss of 7%. Results fell short of estimates primarily due to worse-than-projected prior period reserve development as well as lighter investment income due to catastrophe bond losses. The string of hurricanes in the Atlantic, including three of the costliest since 1970, should result in higher future pricing for reinsurance. Assured Guaranty Ltd. provides credit protection products to public finance, infrastructure and structured finance markets. Their exposure to Puerto Rican debt has been a source of prominent focus by the market as its shares traded off by 9%. Nasdaq Inc. offers trading, clearing, exchange technology, regulatory, securities listing and public company services. While the company delivered solid results for most of the year, management anticipates higher operating expenses associated with the acquisitions of eVestment and Sybenetix. We sold out of the position during the fourth quarter and the stock was up 10% for the time it was held.
In the consumer staples sector, Sprouts Farmers Markets Inc. operates a chain of health-focused grocery stores that offer fresh, natural and organic foods. We used strength from second quarter results and the stock’s 23% year-to-date appreciation as an opportunity to exit the position during the third quarter. McCormick & Company, which was added to |
the Fund during the first quarter, rose 5%. They produce items such as spices, seasoning mixes, and condiments. In July, McCormick announced the acquisition of Reckitt Benckiser (RB) Foods. The stock had uneven performance since then as the market became concerned about near-term retail sales trends in the French’s mustard brand. French’s is facing competition on two fronts: Heinz yellow mustard and an expansion of private label by retailers. Conversely, McCormick is bullish on the prospects for Frank’s RedHot sauce, also a part of RB Foods. They are working to expand distribution and extend the brand.
Within producer durables, CoStar Group Inc. is a provider of information, services and online marketplace to the commercial real estate industry. The stock surged ahead 59% on three solid quarters, with all business segments experiencing accelerated revenue growth. We added Nordson Corp. to the Fund during the second quarter. Its shares gained 24% based on earnings above sell-side projections. They manufacture and market systems used to apply adhesives and coatings. Results were driven by the core Adhesive Dispensing Systems and Advanced Technology Systems segments. Management offered very strong guidance. BWX Technologies Inc., which was added to the Fund during the first quarter, ascended 49%. This company provides nuclear reactor components for the U.S. navy’s submarines and aircraft carriers. The Navy plans to build two Virginia-class submarines per year and are planning for larger Ohio-class construction in years to come. Booz Allen Hamilton Holding provides management and technology consulting services. Its stock recovered after declining from news of a Department of Justice investigation into the company’s cost accounting and indirect cost charging practices. While there may not be a quick resolution (and we believe in management), the underlying business has continued to grow and led to an 8% gain. Hubbell Inc. designs, manufactures and sells electronic products. We exited the position early in the second quarter following mixed results and disappointing forward guidance. Its shares pulled back 2% for the time it was held.
In the consumer discretionary sector, discount variety store operator Dollar Tree Inc. scored a 39% rise. Their namesake branded stores experienced strength across numerous categories and geographies while the Family Dollar business saw improvement in customer traffic, same-store sales and operating margins. WABCO Holdings Inc. supplies electronic, mechanical, electro-mechanical and aerodynamic products to manufacturers of |
13 |
AMG TimesSquare Mid Cap Growth Fund Portfolio Manager’s Comments (continued) |
commercial trucks, buses, trailers and passenger cars. Its shares were lifted 35% by strong revenues that were driven by continued growth in North America with sales of automated manual transmissions, collision mitigation systems and electronic stability controls that are now mandated on heavy duty trucks in the U.S. Sales of antilock braking systems in China were also noteworthy. Domino’s Pizza Inc., a pizza delivery company operating through company-owned and franchised stores, rose 20%. Same-store sales beat sell-side estimates as did earnings. Their domestic business has been doing well and they have made clear progress in the international segment. Tractor Supply Co. operates specialty stores catering to farmers and ranchers. We sold the position out of the Fund in the second quarter due to weak results in recognition of Tractor Supply’s exposure to the weak energy and agriculture markets as well as a lack of near-term signs of improvement. The stock suffered a 28% markdown for the time it was held. Specialty retailer O’Reilly Automotive Inc. is engaged in the distribution and retailing of automotive aftermarket parts, tools, supplies, equipment and accessories in the U.S., serving both professional installers and do-it-yourself customers. The auto parts industry has been beset by a number of factors including less extreme weather and cyclical softness, which has served to dampen consumer demand. Despite having a superior distribution network versus peers, O’Reilly was not immune to these ills as its shares lost 13%. Basic apparel company Hanesbrands Inc. registered a 0% return for the year. The company produced mixed results and expectations for a second half of the year pickup have not materialized in the domestic business. We lost patience with the stock and sold the position during the fourth quarter. |
As 2017 closed, the global economies appeared on a uniformly upward growth path for the first time since 2008’s global financial crisis—albeit at different paces. Many global uncertainties remain, including the actual impact of U.S. tax law changes, how much longer a nine-year bull market in the U.S. could continue, the shape of a new U.K. trade agreement with the European Union now that the terms of its Brexit have been set, along with escalating tensions surrounding North Korea. However, our investment experience has shown us that the markets never follow a guaranteed path. As bottom-up active managers we believe that shifting environments create additional investment opportunities, thus no matter what 2018 brings we are steadfast that our disciplined analysis of business models and management teams should find superior companies.
For the new year, we remain dedicated to adding value to the assets you have entrusted to us, and look forward to working with you throughout 2018. As always, please feel free to contact us if you have any questions.
1 As represented by the S&P 500 and Russell 3000 indexes, respectively
2 As represented by the MSCI EAFE Index
3 As represented by the MSCI Emerging Markets Index
4 As defined by the CBOE set of volatility indexes (based on market expectations of near-term volatility for S&P 500, MSCI EAFE, and MSCI Emerging Markets index option or ETF prices) |
5 Source: IHS Markit surveys of global purchasing executives
6 Source: FactSet Economics Standardized Database
7 The federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight, on an uncollateralized basis
8 Source: Board of Governors of the Federal Reserve System
9 Gross Domestic Product
10 Source: Bureau of Economic Analysis of the U.S. Department of Commerce
11 Source: Nielsen (consumer confidence) and University of Michigan (consumer sentiment)
12 Source: Bloomberg
13 Source: Bloomberg
14 As measured by the Board of Governors of the Federal Reserve System using an average of foreign exchange values with major currencies that circulate widely
15 As measured by price/earnings ratios
16 As measured by Beta
This commentary reflects the viewpoints of the portfolio manager, TimesSquare Capital Management, LLC as of December 31, 2017 and is not intended as a forecast or guarantee of future results and is subject to change without notice. |
14 |
AMG TimesSquare Mid Cap Growth Fund Portfolio Manager’s Comments (continued) |
15 |
AMG TimesSquare Mid Cap Growth Fund Fund Snapshots (unaudited) December 31, 2017 |
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.
16 |
AMG TimesSquare Mid Cap Growth Fund Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
17 |
AMG TimesSquare Mid Cap Growth Fund Schedule of Portfolio Investments (continued) |
The accompanying notes are an integral part of these financial statements. |
18 |
Schedule of Portfolio Investments (continued) |
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks† |
$2,060,444,290 | — | — | $2,060,444,290 | ||||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | $41,151,223 | — | 41,151,223 | ||||||||||||
Other Investment Companies |
28,145,442 | — | — | 28,145,442 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$2,088,589,732 | $41,151,223 | — | $2,129,740,955 | ||||||||||||
|
|
|
|
|
|
|
|
† | 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. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements. |
19 |
AMG TimesSquare International Small Cap Fund Portfolio Manager’s Comments (unaudited) |
The AMG TimesSquare International Small Cap Fund (the Fund) seeks to achieve long-term capital appreciation by investing primarily in the stocks of small capitalization companies located outside the United States.
THE PORTFOLIO MANAGER
TimesSquare Capital Management, LLC (TimesSquare), the Fund’s subadvisor, utilizes a bottom-up fundamental approach to small cap investing. Led by co-managers Magnus Larsson and Robert Madsen, the investment team at TimesSquare believes that its fundamental international equity research skills, which place a particular emphasis on the assessment of management quality and an in-depth understanding of business models and valuation discrepancies, enable the team to build a diversified portfolio of international small cap stocks with the potential to generate superior risk adjusted returns. When selecting international small cap stocks, TimesSquare utilizes a research-intensive approach to identify international small cap stocks which it believes have the greatest potential to achieve price appreciation over a 12- to-18-month horizon.
THE YEAR IN REVIEW
For the year ended December 31, 2017, the AMG TimesSquare International Small Cap Fund’s Class Z returned 38.86%, while its benchmark, the MSCI EAFE Small Cap Index (the “Index”), returned 33.01%.
The global upward march of equity returns continued throughout 2017. Markets climbed steadily throughout the year to post annual returns of 21% to 22% for broad U.S. equity indices,1 25% for non-U.S. equities,2 and 37% for emerging markets.3 These gains coincided with notably muted levels of volatility across all equity markets—including historic lows for the U.S. and developed markets4—and steadily increasing levels of global economic activity from manufacturing and service industries.5 Unemployment rates declined to lows not seen for over a decade in the U.S., the U.K. and Japan, among other countries, with Germany at its lowest level since its 1990 reunification.6
Geopolitics dominated the headlines with elections in France and Germany, the U.K.’s ongoing Brexit negotiations, the rhetoric surrounding North Korea’s missile tests which also led Japan’s Prime Minister Abe to call for snap elections, and President Trump’s first year in office. Despite the noise, global economic indicators remained consistently strong and moved the global markets higher. The European Central Bank guided to scale down but extend its |
quantitative easing program.7 The Japanese economy expanded for seven consecutive quarters8 (the longest streak in 16 years), and corporate profits and margins have reached record highs. Emerging markets continued to move upward riding on strength from export-led Asia, and as India benefited from structural domestic tailwinds.
Performance Attribution The Fund outperformed its benchmark in 2017 owing primarily to stock selection. We delivered positive performance across all regions and most sectors. Contributions were strongest from our holdings in Europe, quarterbacked by Italy. Japan was our second best performing region driven primarily by the export-focused names. Holdings in Asia/Pacific ex-Japan and the Emerging Markets were also positive contributors. The Middle East was our weakest relative contributor but its contribution was still positive overall. Throughout this period, the MSCI EAFE Small Cap Index rose 33.5%, better than the 25.6% gain for the large capitalization MSCI EAFE Index.
Regional Performance: Europe Among our holdings in Europe, Italy was our strongest country contributor. Holdings in Denmark, Spain, Ireland, Sweden and Germany were also beneficial while the U.K. and France were our biggest country detractors. Overall, European small caps outperformed their large cap peers in 2017 as the MSCI Europe Small Cap Index returned 36.1% versus the MSCI Europe Index, which returned 26.2%.
In Italy, FinecoBank is an online financial services firm with one million clients and one of the largest financial advisory networks. The lack of legacy technology is paramount to the new breed of online operators, as they have significant operational leverage when adding customers. The stock price climbed 88% as the company consistently reported solid results and delivered market share gains. Also of note was that a change in Italian regulations allowed financial firms to launch PIR funds (Piani Individuali di Risparmio, or individual savings plans) which have tax advantages for clients while the long-term investments are used to provide capital for small and medium-sized businesses. We expect FinecoBank’s PIR funds to become another source of revenues for years to come. Shares in Interpump Group, an Italian manufacturer of high- and ultra-high-pressure industrial pumps, rose by 91%. There had been some concerns regarding Interpump’s exposure to a potentially weakening truck market in the U.S., which the company dispelled by continuing to deliver market share and earnings that surpassed expectations. Amplifon, the |
global specialty retailer for hearing aids, recovered from a weak showing at the end of 2016 and climbed 60% this year. One of the great growth opportunities for Amplifon is that less than 20% of those who should use hearing aids actually do. Despite initial fears about a new U.S. rule which allows adults with mild to moderate hearing loss to access over-the-counter hearing aids, these concerns of rising competition were shrugged off as management remained optimistic on the remainder of 2017 and maintained targets for 2018.
Our holdings in other European countries also bolstered performance. CIE Automotive, which produces components for both original equipment manufacturers and aftermarket suppliers in the automotive sector, rose 51% as the company’s organic growth outpaced the market’s average growth rate and management reiterated its 2020 guidance. In Germany, we also benefited from RIB Software’s 129% share price rise. RIB develops integrated project management software geared to the construction industry. RIB is a leader in building information modeling (BIM). With 5-dimensional BIM modeling, everyone involved in a construction project can follow it in real time. The company’s margins surged with higher profitability of large license deals illustrating the leverage of RIB’s business. Further, U.S. joint venture partner FLEX announced a delay of the formal deadline of its “put option” for RIB shares and stressed that it is very happy with RIB; the removal of this overhang also led the share price to further rally in fourth quarter. Within the same value chain, we also opened a new position in Nemetschek SE, a leader in design software for the construction industry. Leaving the Fund was Germany-based KION, a manufacturer of forklifts for warehouses and a beneficiary of supply chain automation. A name we have owned since 2015, KION grew past the Fund’s size limit for small capitalization stocks, so we sold the position in May with its stock up 27% throughout the period we owned the name this year.
Moving to the Nordic region, Topdanmark is the second largest non-life insurance company in Denmark. The company has by far the best track record in delivering shareholder returns in the Danish insurance sector. Shares rose 69% as the company raised full year guidance on better investment returns, benign weather related/large claims developments and strength in its overall business. Sweden-based Modern Times Group (MTG), which provides subscription TV, digital entertainment and radio channels in the Nordic countries, rose 40% as investors also cheered the company’s ongoing |
20 |
AMG TimesSquare International Small Cap Fund Portfolio Manager’s Comments (continued) |
transformation from a traditional broadcaster to a leading digital video entertainment provider and as management reported that third quarter cash flow for the MTGx business (online gaming and e-sports) turned positive. In Ireland, Dalata, a leading hotel operator in Ireland, rose 60%. We believe Dalata has the best management in the Irish hotel sector. Over the years the team has perfected the operational side of the business, which places them well ahead of the competition. The company is firing on all cylinders and the large number of rooms coming on stream in 2018 should have their full earnings effect in 2019.
Our holdings experienced performance challenges in the U.K. and were adversely affected by Brexit-related uncertainties. Though a breakthrough on the Brexit divorce was reached with the European Union in the fourth quarter, it will likely cost the U.K. a hefty financial settlement. Greene King, one of the leading operators of pubs and restaurants, declined 19%. While Greene King was better positioned relative to some of its peers, the U.K. is experiencing a general slowdown in dining out due to higher costs for consumers post Brexit/sterling weakness. In addition, costs inflation and competition were on the rise. We decided to close our position based on a challenging operating environment for the foreseeable future. U.K.-based Dignity, a leading provider of funeral-related services, was the top detractor for the Fund with its 22% share price decline since we began buying it in March. In the first quarter, management slightly reduced its long-term earnings growth target from 10% to 8% as its base of business increased, which created an opportunity for us to begin building a position. More recently, management guided that the funeral business was experiencing increasing competition at the lower end of the spectrum. Given that Dignity is primarily positioned at the upper end of the market, we believe that it will still be able to deliver healthy growth in the medium/long term and investors are overstating the risks. There was also relative weakness among our positions in France. Consulting and engineering services company Altran increased a modest 12%. In the fourth quarter, Altran announced the purchase of U.S. design and engineering services firm Aricent which brings technology systems, semiconductors, software and design expertise. This deal raised concerns based on Altran’s historical integration track. As previous acquisitions were integrated under a different management team and as this deal cemented Altran’s move up the value chain, we maintained our conviction and continued to add to this name on |
weakness. We sold out of Teleperformance, a global leader in call center outsourcing with locations across North America, Europe, Latin America and the Pacific Rim, in the fourth quarter as the company exceeded the Fund’s size limit for small capitalization stocks.
Regional Performance: Japan Our holdings in the land of the rising sun also bolstered the Fund’s performance. Disco, the world’s largest manufacturer of dicing and grinding equipment used in the production of semiconductors, returned 86% for the year. This addition to the Fund since the fourth quarter of 2016 has a dominant market share in equipment used to create the ever-thinner wafers for integrated circuits. Disco reported strong results throughout the year and indicated a robust backlog as the company benefited from the semiconductor super cycle. Also delivering a 72% gain was Nihon M&A Center, a boutique advisory firm specializing in mergers and acquisitions (M&A) intermediary services for small-to-mid-sized enterprises (SME). We had added to our position at the beginning of the year and later Nihon reported significant growth in its deal pipeline, which also led the company to increase its forward guidance. Demographics and the need for SME succession plans continue to provide a strong structural tailwind for merger and acquisition activity in Japan and benefit Nihon M&A. We initiated a position in Japan Lifeline, which distributes vascular medical devices from third parties, as well as those designed internally, in mid-April. Over the years the company has transitioned from a distributor to a manufacturer—currently nearly 60% of its sales were of its own brands—and its margins and competitive advantages have increased. This year, the company announced plans to begin export sales, which should dramatically expand its growth potential, and the stock closed the year 116% higher from when we started buying it.
In the first three quarters of the year, there was relative weakness among domestically focused companies as indicators showed lingering weakness in consumer confidence; however, domestic sentiment rebounded in the fourth quarter with the ongoing tightness in the labor market and the government’s push for wage hikes. Shares of Hiroshima Bank, a regional bank in southern Japan, experienced profit-taking following a strong end to 2016. We appreciated Hiroshima Bank’s high market share in the region and long history of steadily increasing profit; also, counter to the norm for Japanese banks, all of its senior managers own stakes in Hiroshima Bank. Shares were sluggish and |
decreased 6% on limited investor appetite for Japanese financials amidst a lower interest rate environment. Another laggard was Sugi Holdings, a chain of community drug stores dispensing prescription medication and offering advice on over-the-counter drugs and cosmetics only. Shares rose a modest 7% as costs rose temporarily due to the hiring of new pharmacists and expenses associated with their newly opened distribution centers. We expect margins to improve as one-time costs disappear and newly hired staff make more of a contribution.
Regional Performance: Asia/Pacific Ex- Japan and Middle East We saw positive contributions across all countries in Asia/Pacific ex-Japan led by Hong Kong. Hong Kong-based luggage company Samsonite International was our biggest contributor in the region. Following the acquisition of the Tumi business in late 2016, its share price rose 62% this year benefiting from the smooth integration of the Tumi business. We are bullish on the outlook for the luggage industry, and drivers include strong emerging market growth driven by a rising middle class, cheaper airfares, consolidation of the industry, changing regulations regarding in-cabin baggage, and weight-based charging for luggage on airplanes. Moving down under, Challenger, an Australian financial services firm offering primarily annuities and other fixed income products, rose 36% on strong growth in assets under management. The company’s early foray into Japanese annuities also showed strong sales momentum. New Zealand-based Fisher & Paykel Healthcare was also no snoozer with shares rising 75%. The company develops respiratory care products, such as for the treatment of obstructive sleep apnea. Management reported strong growth in sales of its nasal high-flow oxygen therapy equipment to hospitals. Investors were also pleased as management reiterated their strategy and outlook for “profitable and sustainable growth.” Finally, our one holding in the Middle East, Israel-based Frutarom, returned 82% this year. Frutarom is a manufacturer of specialty flavors and ingredients for food, beverage, fragrance, pharmaceutical and cosmetic products. Frutarom is a classic example of a mission critical, niche dominator with strong pricing power. Its share price rose as results showed a continuation of strong underlying trends plus M&A initiatives.
Regional Performance: Emerging Markets Emerging markets was the strongest region this year and our holdings provided additional support for the Fund. We remained positive on the Indian financials |
21 |
AMG TimesSquare International Small Cap Fund Portfolio Manager’s Comments (continued) |
sector as it is very underpenetrated and specialty finance companies are positioned to benefit from rising structural demand. Our holdings in India were hurt at the end of 2016 by the government’s surprise demonetarization plans to eliminate the 500 and 1,000 rupee notes. We reversed those losses and made strong gains in 2017 as the structural growth trajectory for the sector resumed. Indiabulls Housing Finance, the country’s second-largest private sector mortgage finance company, charged forward with an 80% return. The company benefited from a government proposal providing interest subsidies for affordable home loans and Modi’s “Housing for All” initiatives. In Malaysia, the share price for AirAsia, the low-cost passenger airline in Southeast Asia, flew 71% as the company reported steady growth in the number of passengers and high load factors, and continued to move forward with its expansion into other countries. AirAsia also announced its intention to divest its aircraft leasing unit, which should result in a large gain that most likely would partly be used for an extraordinary dividend payment. In the third quarter, the company also announced an internal reorganization which investors also saw as positive. Moving north to Taiwan, Chroma Ate is a producer of semiconductor testing equipment that is positioned to benefit from upcoming capital expenditure cycles such as the Chinese electronic vehicle market, increasing use of 3D sensors and rising demand for graphics processing units. The company rose 75% on earnings consistently beating expectations and positive guidance for 2018, and we took the opportunity to trim into strength. | The Americas were a challenging area for us. Shares in Mexico-based Credito Real, which engages in consumer lending to the low and middle income segments of the population, declined 5%. Shares took a dive in the fourth quarter as the company missed results as provisions rose due to late payments in payroll loans from the earthquake in Mexico. Moving over to Asia, motion picture technology provider IMAX China declined 45% while we owned it this year and was the biggest detractor in the region. We were positive on the stock due to a strong backlog of hardware sales to Chinese cinemas and positive long-term trends favoring IMAX-format blockbuster movies. However, IMAX China’s gross box office receipts underperformed the overall film market in China. We also experienced increased difficulty in forecasting IMAX China’s revenues from its biggest client Wanda (a conglomerate) and Wanda’s trading halt in July 2017 elevated our concerns. With decreasing visibility on its key revenue drivers and customers, we let the credits roll and exited the name in the third quarter.
As 2017 closed, the global economies appeared on a uniformly upward growth path for the first time since 2008’s global financial crisis—albeit at different paces. Many global uncertainties remain, including the actual impact of U.S. tax law changes, how much longer a nine-year bull market in the U.S. could continue, the shape of a new U.K. trade agreement with the European Union now that the terms of its Brexit have been set, along with escalating tensions surrounding North Korea. However, our investment experience has shown us that the markets never |
followed a guaranteed path. As bottom-up active managers we believe that shifting environments create additional investment opportunities, thus no matter what 2018 brings we are steadfast that our disciplined analysis of business models and management teams should find superior companies.
For the new year, we remain dedicated to adding value to the assets you have entrusted to us, and look forward to working with you throughout 2018. As always, please feel free to contact us if you have any questions.
1 As represented by the S&P 500 and Russell 3000 indexes, respectively
2 As represented by the MSCI EAFE Index
3 As represented by the MSCI Emerging Markets Index
4 As defined by the CBOE set of volatility indexes (based on market expectations of near-term volatility for S&P 500, MSCI EAFE, and MSCI Emerging Markets index option or ETF prices)
5 Source: IHS Markit surveys of global purchasing executives
6 Source: FactSet Economics Standardized Database
7 Source: Wall Street Journal
8 Source: Bank of Japan
This commentary reflects the viewpoints of the portfolio manager, TimesSquare Capital Management, LLC as of December 31, 2017 and is not intended as a forecast or guarantee of future results and is subject to change without notice. |
22 |
AMG TimesSquare International Small Cap Fund Portfolio Manager’s Comments (continued) |
23 |
AMG TimesSquare International Small Cap Fund Fund Snapshots (unaudited) December 31, 2017 |
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.
24 |
AMG TimesSquare International Small Cap Fund Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
25 |
AMG TimesSquare International Small Cap Fund Schedule of Portfolio Investments (continued) |
The accompanying notes are an integral part of these financial statements. |
26 |
Schedule of Portfolio Investments (continued) |
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2† | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks |
||||||||||||||||
Consumer Discretionary |
$48,618,508 | $112,228,573 | — | $160,847,081 | ||||||||||||
Industrials |
28,729,070 | 127,647,699 | — | 156,376,769 | ||||||||||||
Financials |
32,123,631 | 102,873,037 | — | 134,996,668 | ||||||||||||
Information Technology |
— | 88,114,701 | — | 88,114,701 | ||||||||||||
Health Care |
24,607,298 | 33,440,304 | — | 58,047,602 | ||||||||||||
Materials |
— | 28,394,360 | — | 28,394,360 | ||||||||||||
Consumer Staples |
— | 13,796,858 | — | 13,796,858 | ||||||||||||
Telecommunication Services |
— | 3,052,193 | — | 3,052,193 | ||||||||||||
Participation Notes |
— | 1,710,701 | — | 1,710,701 | ||||||||||||
Warrants |
||||||||||||||||
Financials |
166,529 | — | — | 166,529 | ||||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | 41,281,060 | — | 41,281,060 | ||||||||||||
Other Investment Companies |
18,167,613 | — | — | 18,167,613 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investment in Securities |
$152,412,649 | $552,539,486 | — | $704,952,135 | ||||||||||||
|
|
|
|
|
|
|
|
† | As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.) |
As of December 31, 2017, the Fund had transfers between level 1 and level 2 as follows:
Transfer Level 11 |
Transfer out of Level 11 |
Transfer Level 21 |
Transfer out of Level 21 |
|||||||||||||
Assets: |
||||||||||||||||
Common Stocks |
$12,926,888 | $(5,352,282) | $5,352,282 | $(12,926,888) |
1 As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.)
The accompanying notes are an integral part of these financial statements. |
27 |
AMG TimesSquare International Small Cap Fund Schedule of Portfolio Investments (continued) |
Country |
% of Long-Term Investments | ||||
Australia |
5.9 | ||||
Austria |
0.4 | ||||
Brazil |
0.5 | ||||
Denmark |
2.9 | ||||
France |
5.0 | ||||
Germany |
3.7 | ||||
India |
4.5 | ||||
Indonesia |
0.5 | ||||
Ireland |
4.8 | ||||
Israel |
1.8 | ||||
Italy |
10.3 | ||||
Japan |
27.8 | ||||
Luxembourg |
0.9 | ||||
Malaysia |
1.1 | ||||
Mexico |
0.5 | ||||
New Zealand |
0.7 | ||||
Spain |
5.4 | ||||
Sweden |
5.2 | ||||
Switzerland |
2.1 | ||||
Taiwan |
0.8 | ||||
United Kingdom |
12.4 | ||||
United States |
2.8 | ||||
|
|
||||
100.0 | |||||
|
|
The accompanying notes are an integral part of these financial statements. |
28 |
Statement of Assets and Liabilities December 31, 2017 |
AMG TimesSquare Small Cap Growth Fund# |
AMG TimesSquare Mid Cap Growth Fund# |
AMG TimesSquare International Small Cap Fund# |
||||||||||
Assets: |
||||||||||||
Investments at Value* (including securities on loan valued at $108,634,757, $39,934,682, and $36,122,669, respectively) |
$1,302,803,460 | $2,129,740,955 | $704,952,135 | |||||||||
Foreign currency** |
— | — | 1,589,677 | |||||||||
Receivable for investments sold |
4,726,179 | 12,771,738 | — | |||||||||
Dividend, interest and other receivables |
1,693,225 | 1,109,723 | 662,756 | |||||||||
Receivable for Fund shares sold |
688,506 | 2,276,426 | 10,502,929 | |||||||||
Receivable from affiliate |
— | 860 | 10,597 | |||||||||
Prepaid expenses |
22,751 | 15,289 | 41,212 | |||||||||
Total assets |
1,309,934,121 | 2,145,914,991 | 717,759,306 | |||||||||
Liabilities: |
||||||||||||
Payable upon return of securities loaned |
113,387,081 | 41,151,223 | 41,281,060 | |||||||||
Payable for investments purchased |
11,009 | 4,710,831 | — | |||||||||
Payable for Fund shares repurchased |
8,334,551 | 9,951,279 | 1,038,857 | |||||||||
Payable for foreign capital gains tax |
— | — | 366,726 | |||||||||
Accrued expenses: |
||||||||||||
Investment advisory and management fees |
860,749 | 1,515,654 | 403,851 | |||||||||
Administrative fees |
151,897 | 267,468 | 80,770 | |||||||||
Shareholder service fees |
53,447 | 138,201 | 62,654 | |||||||||
Professional fees |
56,529 | 75,676 | 44,905 | |||||||||
Trustee fees and expenses |
12,356 | 21,742 | 5,858 | |||||||||
Other |
85,462 | 217,850 | 60,396 | |||||||||
Total liabilities |
122,953,081 | 58,049,924 | 43,345,077 | |||||||||
|
| |||||||||||
Net Assets |
$1,186,981,040 | $2,087,865,067 | $674,414,229 | |||||||||
* Investments at cost |
$960,599,312 | $1,404,467,208 | $622,720,497 | |||||||||
** Foreign currency at cost |
— | — | $1,576,609 |
The accompanying notes are an integral part of these financial statements. |
29 |
Statement of Assets and Liabilities (continued) |
AMG TimesSquare Small Cap Growth Fund# |
AMG TimesSquare Mid Cap Growth Fund# |
AMG TimesSquare International Small Cap Fund# |
||||||||||
Net Assets Represent: |
||||||||||||
Paid-in capital |
$821,283,376 | $1,336,337,462 | $596,235,274 | |||||||||
Distribution in excess of net investment income |
– | (1,736,085 | ) | (831,704 | ) | |||||||
Accumulated net realized gain (loss) from investments |
23,493,516 | 27,989,943 | (2,873,536 | ) | ||||||||
Net unrealized appreciation on investments |
342,204,148 | 725,273,747 | 81,884,195 | |||||||||
Net Assets |
$1,186,981,040 | $2,087,865,067 | $674,414,229 | |||||||||
Class N: |
||||||||||||
Net Assets |
$318,627,227 | $519,337,499 | $238,935,012 | |||||||||
Shares outstanding |
18,848,791 | 28,220,530 | 14,066,734 | |||||||||
Net asset value, offering and redemption price per share |
$16.90 | $18.40 | $16.99 | |||||||||
Class I: |
||||||||||||
Net Assets |
$2,065,189 | $397,061,350 | $182,527,906 | |||||||||
Shares outstanding |
119,236 | 21,048,665 | 10,689,277 | |||||||||
Net asset value, offering and redemption price per share |
$17.32 | $18.86 | $17.08 | |||||||||
Class Z: |
||||||||||||
Net Assets |
$866,288,624 | $1,171,466,218 | $252,951,311 | |||||||||
Shares outstanding |
49,981,663 | 62,069,926 | 14,807,447 | |||||||||
Net asset value, offering and redemption price per share |
$17.33 | $18.87 | $17.08 |
# | Effective February 27, 2017, the Funds’ share classes were renamed as described in Note 1 of the Notes to the Financial Statements. |
The accompanying notes are an integral part of these financial statements. |
30 |
For the fiscal year ended December 31, 2017 |
AMG TimesSquare Small Cap Growth Fund# |
AMG TimesSquare Mid Cap Growth Fund# |
AMG TimesSquare International Small Cap Fund# |
||||||||||
Investment Income: |
||||||||||||
Dividend income |
$7,887,230 | 1 | $11,310,571 | 2 | $5,985,190 | 3 | ||||||
Securities lending income |
480,517 | 71,502 | 274,670 | |||||||||
Interest income |
497 | 328 | 108 | |||||||||
Foreign withholding tax |
— | (65,935 | ) | (493,759 | ) | |||||||
Total investment income |
8,368,244 | 11,316,466 | 5,766,209 | |||||||||
Expenses: |
||||||||||||
Investment advisory and management fees |
9,537,155 | 16,890,542 | 2,405,680 | |||||||||
Administrative fees |
1,683,027 | 2,980,684 | 481,136 | |||||||||
Shareholder servicing fees - Class N |
612,919 | 1,430,554 | 294,577 | |||||||||
Shareholder servicing fees - Class I |
913 | 86,900 | 36,151 | |||||||||
Professional fees |
122,740 | 190,229 | 60,084 | |||||||||
Registration fees |
80,024 | 91,203 | 67,907 | |||||||||
Transfer agent fees |
33,702 | 62,221 | 11,219 | |||||||||
Custodian fees |
78,194 | 131,563 | 79,974 | |||||||||
Reports to shareholders |
32,504 | 151,411 | 17,645 | |||||||||
Trustee fees and expenses |
75,493 | 133,158 | 17,064 | |||||||||
Miscellaneous |
25,056 | 39,464 | 5,530 | |||||||||
Repayment of prior reimbursements |
— | — | 225,816 | |||||||||
Total expenses before offsets |
12,281,727 | 22,187,929 | 3,702,783 | |||||||||
Expense reimbursements |
— | — | (5,213 | ) | ||||||||
Expense reductions |
(167,940 | ) | (198,314 | ) | — | |||||||
Fee waivers |
— | (12,258 | ) | (23,483 | ) | |||||||
Net expenses |
12,113,787 | 21,977,357 | 3,674,087 | |||||||||
Net investment income (loss) |
(3,745,543 | ) | (10,660,891 | ) | 2,092,122 | |||||||
Net Realized and Unrealized Gain: |
||||||||||||
Net realized gain on investments |
135,696,788 | 271,824,047 | 1,155,676 | 4 | ||||||||
Net realized loss on foreign currency transactions |
— | — | (271,303 | ) | ||||||||
Net change in unrealized appreciation/depreciation on investments |
84,309,852 | 142,451,089 | 82,007,485 | |||||||||
Net change in unrealized appreciation/depreciation on foreign currency translations |
— | — | (345,165 | ) | ||||||||
Net realized and unrealized gain |
220,006,640 | 414,275,136 | 82,546,693 | |||||||||
Net increase in net assets resulting from operations |
$216,261,097 | $403,614,245 | $84,638,815 |
# | Effective February 27, 2017, the Funds’ share classes were renamed as described in Note 1 of the Notes to the Financial Statements. |
1 | Includes non-recurring dividends of $2,657,706. |
2 | Includes non-recurring dividends of $2,391,400. |
3 | Includes non-recurring dividends of $1,316,312. |
4 | Net of foreign capital gains tax withheld of $702. |
The accompanying notes are an integral part of these financial statements. |
31 |
Statements of Changes in Net Assets For the fiscal years ended December 31, |
AMG TimesSquare Small Cap Growth Fund# |
AMG TimesSquare Mid Cap Growth Fund# |
AMG TimesSquare International Small Cap Fund# |
||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
Increase (Decrease) in Net Assets Resulting From Operations: |
||||||||||||||||||||||||
Net investment income (loss) |
$(3,745,543 | ) | $(2,593,094 | ) | $(10,660,891 | ) | $(4,685,602 | ) | $2,092,122 | $932,068 | ||||||||||||||
Net realized gain on investments |
135,696,788 | 34,814,636 | 271,824,047 | 117,616,326 | 884,373 | 448,859 | ||||||||||||||||||
Net change in unrealized appreciation/depreciation on investments |
84,309,852 | 52,634,807 | 142,451,089 | 15,748,430 | 81,662,320 | (2,709,017 | ) | |||||||||||||||||
Net increase (decrease) in net assets resulting from operations |
216,261,097 | 84,856,349 | 403,614,245 | 128,679,154 | 84,638,815 | (1,328,090 | ) | |||||||||||||||||
Distributions to Shareholders: |
||||||||||||||||||||||||
From net investment income: |
||||||||||||||||||||||||
Class N |
— | (604,904 | ) | — | — | (815,277 | ) | (151,174 | ) | |||||||||||||||
Class I |
— | — | — | — | (802,467 | ) | — | |||||||||||||||||
Class Z |
— | (2,833,145 | ) | — | (498,842 | ) | (1,184,908 | ) | (625,160 | ) | ||||||||||||||
From net realized gain on investments: |
||||||||||||||||||||||||
Class N |
(31,523,286 | ) | (10,046,501 | ) | (67,489,978 | ) | (45,144,770 | ) | (960,276 | ) | (358,289 | ) | ||||||||||||
Class I |
(200,825 | ) | — | (50,207,180 | ) | — | (716,707 | ) | — | |||||||||||||||
Class Z |
(84,833,271 | ) | (24,334,444 | ) | (150,362,115 | ) | (57,720,001 | ) | (1,025,654 | ) | (1,276,271 | ) | ||||||||||||
Total distributions to shareholders |
(116,557,382 | ) | (37,818,994 | ) | (268,059,273 | ) | (103,363,613 | ) | (5,505,289 | ) | (2,410,894 | ) | ||||||||||||
Capital Share Transactions:1 |
||||||||||||||||||||||||
Net increase (decrease) from capital share transactions |
7,384,215 | (46,497,760 | ) | 110,638,897 | (334,049,896 | ) | 466,883,510 | 101,680,176 | ||||||||||||||||
Total increase (decrease) in net assets |
107,087,930 | 539,595 | 246,193,869 | (308,734,355 | ) | 546,017,036 | 97,941,192 | |||||||||||||||||
Net Assets: |
||||||||||||||||||||||||
Beginning of year |
1,079,893,110 | 1,079,353,515 | 1,841,671,198 | 2,150,405,553 | 128,397,193 | 30,456,001 | ||||||||||||||||||
End of year |
$1,186,981,040 | $1,079,893,110 | $2,087,865,067 | $1,841,671,198 | $674,414,229 | $128,397,193 | ||||||||||||||||||
End of year accumulated undistributed (distribution in excess) net investment income |
— | — | $(1,736,085 | ) | $1,284,526 | $(831,704 | ) | $(354,954 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
# | Effective October 1, 2016, and February 27, 2017, the Funds’ share classes were renamed as described in Note 1 of the Notes to the Financial Statements. |
1 | See Note 1(g) of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements. |
32 |
AMG TimesSquare Small Cap Growth Fund For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N |
2017# | 2016## | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$15.52 | $14.84 | $16.44 | $17.80 | $12.82 | |||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment loss1,2 |
(0.08 | )3 | (0.06 | )4 | (0.10 | )5 | (0.08 | )6 | (0.10 | )7 | ||||||||||
Net realized and unrealized gain (loss) on investments |
3.32 | 1.28 | 0.27 | (0.40 | ) | 6.18 | ||||||||||||||
Total income (loss) from investment operations |
3.24 | 1.22 | 0.17 | (0.48 | ) | 6.08 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
— | (0.03 | ) | — | — | — | ||||||||||||||
Net realized gain on investments |
(1.86 | ) | (0.51 | ) | (1.77 | ) | (0.88 | ) | (1.10 | ) | ||||||||||
Total distributions to shareholders |
(1.86 | ) | (0.54 | ) | (1.77 | ) | (0.88 | ) | (1.10 | ) | ||||||||||
Net Asset Value, End of Year |
$16.90 | $15.52 | $14.84 | $16.44 | $17.80 | |||||||||||||||
Total Return2,8 |
20.87 | % | 8.20 | % | 0.90 | % | (2.78 | )% | 47.44 | % | ||||||||||
Ratio of net expenses to average net assets |
1.23 | %10 | 1.23 | %10 | 1.22 | %10 | 1.19 | %10 | 1.19 | %10,11 | ||||||||||
Ratio of gross expenses to average net assets14 |
1.24 | % | 1.24 | % | 1.23 | % | 1.22 | % | 1.20 | %11 | ||||||||||
Ratio of net investment loss to average net assets2 |
(0.48 | )% | (0.38 | )% | (0.60 | )% | (0.47 | )% | (0.63 | )%11 | ||||||||||
Portfolio turnover |
58 | % | 62 | % | 71 | % | 48 | % | 61 | % | ||||||||||
Net assets end of year (000’s) omitted |
$318,627 | $313,713 | $272,609 | $320,512 | $351,132 | |||||||||||||||
33 |
AMG TimesSquare Small Cap Growth Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal period ended December 31, | |||||
Class I |
2017* | ||||
Net Asset Value, Beginning of Period |
$16.52 | ||||
Income (loss) from Investment Operations: |
|||||
Net investment loss1,2 |
(0.05 | )3 | |||
Net realized and unrealized gain on investments |
2.71 | ||||
Total income from investment operations |
2.66 | ||||
Less Distributions to Shareholders from: |
|||||
Net realized gain on investments |
(1.86 | ) | |||
Total distributions to shareholders |
(1.86 | ) | |||
Net Asset Value, End of Period |
$17.32 | ||||
Total Return2,8 |
16.11 | %9 | |||
Ratio of net expenses to average net assets |
1.10 | %12,13 | |||
Ratio of gross expenses to average net assets14 |
1.11 | %12 | |||
Ratio of net investment loss to average net assets2 |
(0.35 | )%12 | |||
Portfolio turnover |
58 | % | |||
Net assets end of period (000’s) omitted |
$2,065 | ||||
34 |
AMG TimesSquare Small Cap Growth Fund Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||
Class Z | 2017# | 2016## | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$15.84 | $15.14 | $16.75 | $18.08 | $13.00 | |||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment loss1,2 |
(0.05 | )3 | (0.03 | )4 | (0.07 | )5 | (0.05 | )6 | (0.08 | )7 | ||||||||||
Net realized and unrealized gain (loss) on investments |
3.40 | 1.31 | 0.26 | (0.39 | ) | 6.28 | ||||||||||||||
Total income (loss) from investment operations |
3.35 | 1.28 | 0.19 | (0.44 | ) | 6.20 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
— | (0.06 | ) | — | — | — | ||||||||||||||
Net realized gain on investments |
(1.86 | ) | (0.52 | ) | (1.80 | ) | (0.89 | ) | (1.12 | ) | ||||||||||
Total distributions to shareholders |
(1.86 | ) | (0.58 | ) | (1.80 | ) | (0.89 | ) | (1.12 | ) | ||||||||||
Net Asset Value, End of Year |
$17.33 | $15.84 | $15.14 | $16.75 | $18.08 | |||||||||||||||
Total Return2,8 |
21.14 | % | 8.45 | % | 1.03 | % | (2.48 | )% | 47.69 | % | ||||||||||
Ratio of net expenses to average net assets |
1.03 | %10 | 1.03 | %10 | 1.02 | %10 | 1.01 | %10 | 1.06 | %10,11 | ||||||||||
Ratio of gross expenses to average net assets14 |
1.04 | % | 1.04 | % | 1.03 | % | 1.04 | % | 1.07 | %11 | ||||||||||
Ratio of net investment loss to average net assets2 |
(0.28 | )% | (0.20 | )% | (0.40 | )% | (0.29 | )% | (0.53 | )%11 | ||||||||||
Portfolio turnover |
58 | % | 62 | % | 71 | % | 48 | % | 61 | % | ||||||||||
Net assets end of year (000’s) omitted |
$866,289 | $766,180 | $806,745 | $768,312 | $896,706 | |||||||||||||||
# | Effective February 27, 2017, the Class I and Class S were renamed Class Z and Class N, respectively. |
## | Effective October 1, 2016, the Institutional Class and Premier Class were renamed Class I and Class S, respectively. |
* | Commencement of operations was on February 27, 2017. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.12), $(0.09) and $(0.09) for Class N, Class I and Class Z, respectively. |
4 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.08) and $(0.05) for Class N and Class Z, respectively. |
5 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.12) and $(0.09) for Class N and Class Z, respectively. |
6 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.12) and $(0.10) for Class N and Class Z, respectively. |
7 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.11) and $(0.09) for Class N and Class Z, respectively. |
8 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
9 | Not annualized. |
10 | Includes reduction from broker recapture amounting to 0.01%, 0.01%, 0.01%, 0.03% and 0.01% for the fiscal years ended 2017, 2016, 2015, 2014 and 2013, respectively. |
11 | Includes non-routine extraordinary expenses amounting to 0.017% and 0.018% of average net assets for the Class N and Class Z, respectively. |
12 | Annualized. |
13 | Includes reduction from broker recapture amounting to 0.01% for the fiscal period ended 2017. |
14 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
35 |
AMG TimesSquare Mid Cap Growth Fund Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N | 2017# | 2016## | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$17.26 | $17.02 | $18.24 | $18.23 | $14.87 | |||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment loss1,2 |
(0.12 | )3 | (0.06 | )4 | (0.07 | )5 | (0.06 | )5 | (0.07 | )6 | ||||||||||
Net realized and unrealized gain on investments |
3.98 | 1.31 | 0.17 | 1.00 | 5.47 | |||||||||||||||
Total income from investment operations |
3.86 | 1.25 | 0.10 | 0.94 | 5.40 | |||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net realized gain on investments |
(2.72 | ) | (1.01 | ) | (1.32 | ) | (0.93 | ) | (2.04 | ) | ||||||||||
Total distributions to shareholders |
(2.72 | ) | (1.01 | ) | (1.32 | ) | (0.93 | ) | (2.04 | ) | ||||||||||
Net Asset Value, End of Year |
$18.40 | $17.26 | $17.02 | $18.24 | $18.23 | |||||||||||||||
Total Return2,7 |
22.40 | % | 7.26 | % | 0.49 | % | 5.12 | % | 36.43 | % | ||||||||||
Ratio of net expenses to average net assets |
1.23 | %9 | 1.23 | %9 | 1.22 | %9 | 1.22 | %9 | 1.24 | %9,10 | ||||||||||
Ratio of gross expenses to average net assets13 |
1.24 | % | 1.24 | % | 1.23 | % | 1.24 | % | 1.25 | %10 | ||||||||||
Ratio of net investment loss to average net assets2 |
(0.66 | )% | (0.36 | )% | (0.37 | )% | (0.34 | )% | (0.38 | )%10 | ||||||||||
Portfolio turnover |
54 | % | 47 | % | 47 | % | 43 | % | 54 | % | ||||||||||
Net assets end of year (000’s) omitted |
$519,337 | $815,473 | $867,245 | $916,541 | $1,214,525 | |||||||||||||||
36 |
AMG TimesSquare Mid Cap Growth Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal period ended December 31, | |||||
Class I |
2017* | ||||
Net Asset Value, Beginning of Period |
$18.73 | ||||
Income (loss) from Investment Operations: |
|||||
Net investment loss1,2 |
(0.09 | )3 | |||
Net realized and unrealized gain on investments |
2.94 | ||||
Total income from investment operations |
2.85 | ||||
Less Distributions to Shareholders from: |
|||||
Net realized gain on investments |
(2.72 | ) | |||
Total distributions to shareholders |
(2.72 | ) | |||
Net Asset Value, End of Period |
$18.86 | ||||
Total Return2,7 |
15.24 | %8 | |||
Ratio of net expenses to average net assets |
1.08 | %11,12 | |||
Ratio of gross expenses to average net assets13 |
1.09 | %11 | |||
Ratio of net investment loss to average net assets2 |
(0.52 | )%11 | |||
Portfolio turnover |
54 | % | |||
Net assets end of period (000’s) omitted |
$397,061 | ||||
37 |
AMG TimesSquare Mid Cap Growth Fund Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||||||||||
Class Z | 2017# | 2016## | 2015 | 2014 | 2013 | |||||||||||||||||||||||
Net Asset Value, Beginning of Year |
$17.61 | $17.33 | $18.54 | $18.49 | $15.05 | |||||||||||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||||||||||
Net investment loss1,2 |
(0.09 | )3 | (0.03 | )4 | (0.03 | )5 | (0.02 | )5 | (0.03 | )6 | ||||||||||||||||||
Net realized and unrealized gain on investments |
4.07 | 1.35 | 0.16 | 1.02 | 5.54 | |||||||||||||||||||||||
Total income from investment operations |
3.98 | 1.32 | 0.13 | 1.00 | 5.51 | |||||||||||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||||||||||
Net investment income |
— | (0.01 | ) | — | — | — | ||||||||||||||||||||||
Net realized gain on investments |
(2.72 | ) | (1.03 | ) | (1.34 | ) | (0.95 | ) | (2.07 | ) | ||||||||||||||||||
Total distributions to shareholders |
(2.72 | ) | (1.04 | ) | (1.34 | ) | (0.95 | ) | (2.07 | ) | ||||||||||||||||||
Net Asset Value, End of Year |
$18.87 | $17.61 | $17.33 | $18.54 | $18.49 | |||||||||||||||||||||||
Total Return2,7 |
22.63 | % | 7.53 | % | 0.67 | % | 5.34 | % | 36.72 | % | ||||||||||||||||||
Ratio of net expenses to average net assets |
1.03 | %9 | 1.03 | %9 | 1.02 | %9 | 1.03 | %9 | 1.04 | %9,10 | ||||||||||||||||||
Ratio of gross expenses to average net assets13 |
1.04 | % | 1.04 | % | 1.03 | % | 1.04 | % | 1.05 | %10 | ||||||||||||||||||
Ratio of net investment loss to average net assets2 |
(0.46 | )% | (0.16 | )% | (0.17 | )% | (0.12 | )% | (0.17 | )%10 | ||||||||||||||||||
Portfolio turnover |
54 | % | 47 | % | 47 | % | 43 | % | 54 | % | ||||||||||||||||||
Net assets end of year (000’s) omitted |
$1,171,466 | $1,026,198 | $1,283,161 | $1,542,214 | $1,319,016 | |||||||||||||||||||||||
# | Effective February 27, 2017, the Class I and Class S were renamed Class Z and Class N, respectively. |
## | Effective October 1, 2016, the Institutional Class and Premier Class were renamed Class I and Class S, respectively. |
* | Commencement of operations was on February 27, 2017. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | Includes non-recurring dividends. Without these dividends, net investment loss would have been $(0.14), $(0.11) and $(0.11) for Class N, Class I and Class Z, respectively. |
4 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.07) and $(0.04) for Class N and Class Z, respectively. |
5 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.08) and $(0.04) for Class N and Class Z, respectively. |
6 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.10) and $(0.06) for Class N and Class Z, respectively. |
7 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
8 | Not annualized. |
9 | Includes reduction from broker recapture amounting to 0.01% for each fiscal year ended 2017, 2016, 2015, 2014 and 2013, respectively. |
10 | Includes non-routine extraordinary expenses amounting to 0.019% and 0.019% of average net assets for the Class N and Class Z, respectively. |
11 | Annualized. |
12 | Includes reduction from broker recapture amounting to 0.01% for the fiscal period ended 2017. |
13 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
38 |
AMG TimesSquare International Small Cap Fund Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||||||||||
Class N | 2017# | 2016## | 2015 | 2014 | 2013* | |||||||||||||||||||||||
Net Asset Value, Beginning of Year |
$12.35 | $12.65 | $11.79 | $11.98 | $10.00 | |||||||||||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||||||||||
Net investment income1,2 |
0.08 | 3 | 0.04 | 0.05 | 0.11 | 0.11 | 4 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investments |
4.69 | (0.11 | ) | 1.43 | 0.11 | 2.35 | ||||||||||||||||||||||
Total income (loss) from investment operations |
4.77 | (0.07 | ) | 1.48 | 0.22 | 2.46 | ||||||||||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||||||||||
Net investment income |
(0.06 | ) | (0.07 | ) | (0.17 | ) | (0.14 | ) | (0.21 | ) | ||||||||||||||||||
Net realized gain on investments |
(0.07 | ) | (0.16 | ) | (0.45 | ) | (0.27 | ) | (0.09 | ) | ||||||||||||||||||
Paid in capital |
— | — | — | — | (0.18 | ) | ||||||||||||||||||||||
Total distributions to shareholders |
(0.13 | ) | (0.23 | ) | (0.62 | ) | (0.41 | ) | (0.48 | ) | ||||||||||||||||||
Net Asset Value, End of Year |
$16.99 | $12.35 | $12.65 | $11.79 | $11.98 | |||||||||||||||||||||||
Total Return2 |
38.63 | %5 | (0.55 | )%5 | 12.51 | %5 | 1.89 | % | 24.77 | %6 | ||||||||||||||||||
Ratio of net expenses to average net assets |
1.29 | % | 1.30 | % | 1.30 | % | 1.30 | % | 1.08 | %7,8 | ||||||||||||||||||
Ratio of gross expenses to average net assets9 |
1.30 | % | 1.39 | % | 1.59 | % | 4.47 | % | 8.50 | %7,8 | ||||||||||||||||||
Ratio of net investment income to average net assets2 |
0.53 | % | 0.32 | % | 0.37 | % | 0.90 | % | 0.97 | %7,8 | ||||||||||||||||||
Portfolio turnover |
48 | % | 58 | % | 95 | % | 61 | % | 58 | %6 | ||||||||||||||||||
Net assets end of year (000’s) omitted |
$238,935 | $28,864 | $337 | $33 | $19 | |||||||||||||||||||||||
39 |
AMG TimesSquare International Small Cap Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal period ended December 31, | |||||
Class I |
2017** | ||||
Net Asset Value, Beginning of Period |
$13.18 | ||||
Income from Investment Operations: |
|||||
Net investment income1,2 |
0.11 | 3 | |||
Net realized and unrealized gain on investments |
3.94 | ||||
Total income from investment operations |
4.05 | ||||
Less Distributions to Shareholders from: |
|||||
Net investment income |
(0.08 | ) | |||
Net realized gain on investments |
(0.07 | ) | |||
Total distributions to shareholders |
(0.15 | ) | |||
Net Asset Value, End of Period |
$17.08 | ||||
Total Return2 |
30.72 | %5,6 | |||
Ratio of net expenses to average net assets |
1.09 | %7 | |||
Ratio of gross expenses to average net assets9 |
1.10 | %7 | |||
Ratio of net investment income to average net assets2 |
0.77 | %7 | |||
Portfolio turnover |
48 | % | |||
Net assets end of period (000’s) omitted |
$182,528 | ||||
40 |
AMG TimesSquare International Small Cap Fund Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||||||||||
Class Z | 2017# | 2016## | 2015 | 2014 | 2013* | |||||||||||||||||||||||
Net Asset Value, Beginning of Year |
$12.41 | $12.69 | $11.82 | $11.98 | $10.00 | |||||||||||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||||||||||
Net investment income1,2 |
0.11 | 3 | 0.28 | 0.13 | 0.14 | 0.10 | 4 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investments |
4.71 | (0.32 | ) | 1.38 | 0.12 | 2.36 | ||||||||||||||||||||||
Total income (loss) from investment operations |
4.82 | (0.04 | ) | 1.51 | 0.26 | 2.46 | ||||||||||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||||||||||
Net investment income |
(0.08 | ) | (0.08 | ) | (0.19 | ) | (0.14 | ) | (0.21 | ) | ||||||||||||||||||
Net realized gain on investments |
(0.07 | ) | (0.16 | ) | (0.45 | ) | (0.28 | ) | (0.09 | ) | ||||||||||||||||||
Paid in capital |
— | — | — | — | (0.18 | ) | ||||||||||||||||||||||
Total distributions to shareholders |
(0.15 | ) | (0.24 | ) | (0.64 | ) | (0.42 | ) | (0.48 | ) | ||||||||||||||||||
Net Asset Value, End of Year |
$17.08 | $12.41 | $12.69 | $11.82 | $11.98 | |||||||||||||||||||||||
Total Return2 |
38.86 | %5 | (0.29 | )%5 | 12.78 | %5 | 2.15 | % | 24.77 | %6 | ||||||||||||||||||
Ratio of net expenses to average net assets |
1.04 | % | 1.05 | % | 1.05 | % | 1.05 | % | 1.07 | %7,8 | ||||||||||||||||||
Ratio of gross expenses to average net assets9 |
1.05 | % | 1.19 | % | 1.30 | % | 4.17 | % | 8.05 | %7,8 | ||||||||||||||||||
Ratio of net investment income to average net assets2 |
0.70 | % | 2.23 | % | 1.04 | % | 1.13 | % | 0.88 | %7,8 | ||||||||||||||||||
Portfolio turnover |
48 | % | 58 | % | 95 | % | 61 | % | 58 | %6 | ||||||||||||||||||
Net assets end of year (000’s) omitted |
$252,951 | $99,533 | $30,119 | $3,045 | $2,768 | |||||||||||||||||||||||
# | Effective February 27, 2017, the Class I and Class S were renamed Class Z and Class N, respectively. |
## | Effective October 1, 2016, the Institutional Class and Premier Class were renamed Class I and Class S, respectively. |
* | Commencement of operations was on January 2, 2013. |
** | Commencement of operations was on February 27, 2017. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $0.02, $0.05 and $0.05 for Class N, Class I and Class Z, respectively. |
4 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $0.10 and $0.09 for Class N and Class Z, respectively. |
5 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
6 | Not annualized. |
7 | Annualized. |
8 | Includes non-routine extraordinary expenses amounting to 0.028% and 0.020% of average net assets for the Class N and Class Z, respectively. |
9 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
41 |
December 31, 2017 |
42 |
Notes to Financial Statements (continued) |
43 |
Notes to Financial Statements (continued) |
The tax character of distributions paid during the fiscal years ended December 31, 2017 and December 31, 2016 were as follows:
Small Cap | Mid Cap | International Small Cap | ||||||||||||||||||||||
Distributions paid from: | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Ordinary income |
– | – | – | – | $ | 2,802,652 | $776,559 | |||||||||||||||||
Short-term capital gains |
$16,815,554 | – | $26,618,955 | – | 2,229,098 | 112,641 | ||||||||||||||||||
Long-term capital gains |
99,741,828 | $ | 37,818,094 | 241,440,318 | $ | 103,363,613 | 473,539 | 1,521,694 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$116,557,382 | $ | 37,818,094 | $ | 268,059,273 | $ | 103,363,613 | $ | 5,505,289 | $ | 2,410,894 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017, the components of distributable earnings (excluding unrealized appreciation/depreciation) on tax basis consisted of:
Small Cap | Mid Cap | International Small Cap | ||||||||||
Capital loss carryforward |
– | – | – | |||||||||
Undistributed ordinary income |
– | – | $1,310,632 | |||||||||
Undistributed short-term capital gains |
$6,836,312 | $520,564 | 1,560 | |||||||||
Undistributed long-term capital gains |
21,535,354 | 43,766,395 | 1,422 | |||||||||
Late-year loss deferral |
– | – | 792,755 |
At December 31, 2017, the approximate cost of investments and the aggregate gross unrealized appreciation and depreciation for federal income tax were as follows:
Fund | Cost | Appreciation | Depreciation | Net | ||||||||||||
Small Cap |
$965,477,462 | $ | 373,959,258 | $ | (36,633,260 | ) | $ | 337,325,998 | ||||||||
Mid Cap |
1,422,500,309 | 732,905,264 | (25,664,618 | ) | 707,240,646 | |||||||||||
International Small Cap |
626,946,596 | 86,592,387 | (8,934,291 | ) | 77,658,096 |
44 |
Notes to Financial Statements (continued) |
For the fiscal years ended December 31, 2017 and December 31, 2016, the capital stock transactions by class for the Funds were as follows:
Small Cap | Mid Cap | |||||||||||||||||||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Class N: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
2,100,733 | $35,399,570 | 5,592,307 | $84,952,891 | 4,524,948 | $85,060,323 | 7,707,833 | $135,693,246 | ||||||||||||||||||||||||
Reinvestment of distributions |
1,860,927 | 31,505,486 | 677,811 | 10,648,411 | 3,664,641 | 67,392,743 | 2,576,404 | 45,035,548 | ||||||||||||||||||||||||
Cost of shares repurchased |
(5,329,379 | ) | (89,150,480 | ) | (4,427,620 | ) | (66,407,791 | ) | (27,228,871 | ) | (525,934,480 | ) | (13,987,697 | ) | (238,278,283 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
(1,367,719 | ) | $(22,245,424 | ) | 1,842,498 | $29,193,511 | (19,039,282 | ) | $(373,481,414 | ) | (3,703,460 | ) | $(57,549,489 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class I: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
141,478 | $2,358,523 | – | – | 19,656,182 | $391,313,696 | – | – | ||||||||||||||||||||||||
Reinvestment of distributions |
11,582 | 200,824 | – | – | 2,655,722 | 50,060,362 | – | – | ||||||||||||||||||||||||
Cost of shares repurchased |
(33,824 | ) | (568,937 | ) | – | – | (1,263,239 | ) | (25,729,820 | ) | – | – | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase |
119,236 | $1,990,410 | – | – | 21,048,665 | $415,644,238 | – | – | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class Z: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
4,491,656 | $78,174,796 | 6,088,679 | $91,368,839 | 10,842,602 | $208,108,076 | 10,615,583 | $186,097,528 | ||||||||||||||||||||||||
Reinvestment of distributions |
4,770,251 | 82,811,556 | 1,662,923 | 26,656,660 | 7,557,327 | 142,531,187 | 3,051,896 | 54,445,814 | ||||||||||||||||||||||||
Cost of shares repurchased |
(7,651,186 | ) | (133,347,123 | ) | (12,656,348 | ) | (193,716,770 | )1 | (14,614,684 | ) | (282,163,190 | ) | (29,433,072 | ) | (517,043,749 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
1,610,721 | $27,639,229 | (4,904,746 | ) | $(75,691,271 | ) | 3,785,245 | $68,476,073 | (15,765,593 | ) | $ | (276,500,407 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Includes redemptions in-kind.
45 |
Notes to Financial Statements (continued) |
International Small Cap | ||||||||||||||||
December 31, 2017 | December 31, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class N: |
||||||||||||||||
Proceeds from sale of shares |
14,670,035 | $228,428,706 | 2,365,243 | $29,747,163 | ||||||||||||
Reinvestment of distributions |
104,871 | 1,775,464 | 39,991 | 491,094 | ||||||||||||
Cost of shares repurchased |
(3,044,725 | ) | (48,697,102 | ) | (95,293 | ) | (1,209,993 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
11,730,181 | $181,507,068 | 2,309,941 | $29,028,264 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Class I: |
||||||||||||||||
Proceeds from sale of shares |
14,921,923 | $239,684,216 | — | — | ||||||||||||
Reinvestment of distributions |
82,263 | 1,400,122 | — | — | ||||||||||||
Cost of shares repurchased |
(4,314,909 | ) | (72,313,277 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
10,689,277 | $168,771,061 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Class Z: |
||||||||||||||||
Proceeds from sale of shares |
8,896,377 | $144,554,627 | 5,827,696 | $75,012,299 | ||||||||||||
Reinvestment of distributions |
129,591 | 2,205,735 | 153,981 | 1,898,583 | ||||||||||||
Cost of shares repurchased |
(2,239,940 | ) | (30,154,981 | ) | (333,427 | ) | (4,258,970 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
6,786,028 | $116,605,381 | 5,648,250 | $72,651,912 | ||||||||||||
|
|
|
|
|
|
|
|
At December 31, 2017, certain unaffiliated shareholders of record individually or collectively held greater than 10% of the net assets of the Funds as follows: International Small Cap - one owns 10%. Transactions by this shareholder may have a material impact on the Fund.
46 |
Notes to Financial Statements (continued) |
47 |
Notes to Financial Statements (continued) |
48 |
Notes to Financial Statements (continued) |
The following table is a summary of the Funds’ open Repurchase Agreements that are subject to a master netting agreement as of December 31, 2017:
Gross Amount Not Offset in the Statement of Assets and Liabilities |
||||||||||||||||||||
Fund | Net Amounts of Assets Presented in the Statement of Assets and Liabilities |
Financial Instruments Collateral |
Cash Collateral Received |
Net Amount | ||||||||||||||||
Small Cap |
||||||||||||||||||||
Bank of Nova Scotia |
$26,930,473 | $26,930,473 | — | — | ||||||||||||||||
Cantor Fitzgerald Securities, Inc. |
26,930,473 | 26,930,473 | — | — | ||||||||||||||||
Daiwa Capital Markets America |
26,930,473 | 26,930,473 | — | — | ||||||||||||||||
Jefferies LLC |
5,665,189 | 5,665,189 | — | — | ||||||||||||||||
State of Wisconsin Investment Board |
26,930,473 | 26,930,473 | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Totals |
$113,387,081 | $113,387,081 | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Mid Cap |
||||||||||||||||||||
Bank of Montreal |
$4,424,799 | $4,424,799 | ||||||||||||||||||
Bank of Nova Scotia NY |
9,773,749 | 9,773,749 | — | — | ||||||||||||||||
Daiwa Capital Markets America |
7,405,177 | 7,405,177 | — | — | ||||||||||||||||
Jefferies LLC |
9,773,749 | 9,773,749 | — | — | ||||||||||||||||
Nomura Securities International, Inc. |
9,773,749 | 9,773,749 | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Totals |
$41,151,223 | $41,151,223 | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
International Small Cap |
|
|||||||||||||||||||
Cantor Fitzgerald Securities, Inc. |
$9,804,641 | $9,804,641 | — | — | ||||||||||||||||
Daiwa Capital Markets America |
9,804,641 | 9,804,641 | — | — | ||||||||||||||||
HSBC Securities USA, Inc. |
9,804,641 | 9,804,641 | — | — | ||||||||||||||||
Jefferies LLC |
2,062,496 | 2,062,496 | — | — | ||||||||||||||||
State of Wisconsin Investment Board |
9,804,641 | 9,804,641 | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Totals |
$41,281,060 | $41,281,060 | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
49 |
Notes to Financial Statements (continued) |
50 |
|
51 |
|
TAX INFORMATION
52 |
AMG Funds |
The Trustees and Officers of the Trust, their business addresses, principal occupations for the past five years and ages are listed below. The Trustees provide broad supervision over the affairs of the Trust and the Funds. The Trustees are experienced executives who meet periodically throughout the year to oversee the Funds’ activities, review contractual arrangements with companies that provide services to the Funds, and
|
review the Funds’ performance. Unless otherwise noted, the address of each Trustee or Officer is the address of the Trust: 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830.
There is no stated term of office for Trustees. Trustees serve until their resignation, retirement or removal in |
accordance with the Trust’s organizational documents and policies adopted by the Board from time to time. The Chairman of the Trustees, President, Treasurer and Secretary of the Trust are elected by the Trustees annually. Other officers hold office at the pleasure of the Trustees. |
Independent Trustees
The following Trustees are not “interested persons” of the Trust within the meaning of the 1940 Act:
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2012 • Oversees 61 Funds in Fund Complex |
Bruce B. Bingham, 69 Partner, Hamilton Partners (real estate development firm) (1987-Present); Director of The Yacktman Funds (2000-2012). | |
• Trustee since 1999 • Oversees 61 Funds in Fund Complex |
Edward J. Kaier, 72 Attorney at Law and Partner, Teeters Harvey Marrone & Kaier LLP (2007-Present); Attorney at Law and Partner, Hepburn Willcox Hamilton & Putnam, LLP (1977-2007); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Kurt A. Keilhacker, 54 Managing Member, TechFund Capital (1997-Present); Managing Member, TechFund Europe (2000-Present); Board Member, 6wind SA, (2002-Present); Managing Member, Elementum Ventures (2013-Present); Trustee, Gordon College (2001-2016). | |
• Trustee since 2004 • Oversees 61 Funds in Fund Complex |
Steven J. Paggioli, 67 Independent Consultant (2002-Present); Formerly Executive Vice President and Director, The Wadsworth Group (1986-2001); Executive Vice President, Secretary and Director, Investment Company Administration, LLC (1990-2001); Vice President, Secretary and Director, First Fund Distributors, Inc. (1991-2001); Trustee, Professionally Managed Portfolios (32 portfolios); Advisory Board Member, Sustainable Growth Advisors, LP; Independent Director, Chase Investment Counsel (2008–Present). | |
• Trustee since 2013 • Oversees 61 Funds in Fund Complex |
Richard F. Powers III, 72 Adjunct Professor, U.S. Naval War College (2016); Adjunct Professor, Boston College (2010-2013); President and CEO of Van Kampen Investments Inc. (1998-2003). | |
• Independent Chairman • Trustee since 1999 • Oversees 63 Funds in Fund Complex |
Eric Rakowski, 59 Professor, University of California at Berkeley School of Law (1990-Present); Director of Harding, Loevner Funds, Inc. (9 portfolios); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Victoria L. Sassine, 52 Lecturer, Babson College (2007 – Present). | |
• Trustee since 2004 • Oversees 61 Funds in Fund Complex |
Thomas R. Schneeweis, 70 Professor Emeritus, University of Massachusetts (2013-Present); Partner, S Capital Wealth Advisors (2015-Present); President, TRS Associates (1982-Present); Board Member, Chartered Alternative Investment Association (“CAIA”) (2002-Present); Director, CAIA Foundation (Education) (2010-Present); Director, Institute for GlobalAsset and Risk Management (Education) (2010-Present); Partner, S Capital Management, LLC (2007-2015); Director, CISDM at the University of Massachusetts, (1996-2013); President, Alternative Investment Analytics, LLC, (formerly Schneeweis Partners, LLC) (2001-2013); Professor of Finance, University of Massachusetts (1977-2013). |
53 |
AMG Funds Trustees and Officers (continued) |
Interested Trustees
Each Trustee in the following table is an “interested person” of the Trust within the meaning of the 1940 Act. Ms. Carsman is an interested person of the Trust within the meaning of the 1940 Act by virtue of her position with, and interest in securities of, AMG.
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2011 • Oversees 63 Funds in Fund Complex |
Christine C. Carsman, 65 Executive Vice President, Deputy General Counsel and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2017-Present); Director (2010-Present) and Chair of the Board of Directors (2015-Present), AMG Funds plc; Director of Harding, Loevner Funds, Inc. (9 portfolios); Senior Vice President and Deputy General Counsel, Affiliated Managers Group, Inc. (2011-2016); Senior Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2007-2011); Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2004-2007); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2004-2011); Senior Counsel, Vice President and Director of Operational Risk Management and Compliance, Wellington Management Company, LLP (1995-2004). | |
Officers | ||
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• President since 2014 • Principal Executive Officer since 2014 • Chief Executive Officer since 2016 |
Jeffrey T. Cerutti, 50 Chief Executive Officer, AMG Funds LLC (2014-Present); Director, President and Principal, AMG Distributors, Inc. (2014-Present); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2014-Present); Chief Executive Officer, President and Principal Executive Officer, AMG Funds IV, (2015-Present); Chief Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Executive Officer, Aston Asset Management, LLC (2016); President, VP Distributors, (2011-2014); Executive Vice President, Head of Distribution, Virtus Investment Partners, Inc. (2010-2014); Managing Director, Head of Sales, UBS Global Asset Management (2001-2010). | |
• Chief Operating Officer since 2007 |
Keitha L. Kinne, 59 Chief Operating Officer, AMG Funds LLC (2007-Present); Chief Investment Officer, AMG Funds LLC (2008-Present); Chief Operating Officer, AMG Distributors, Inc. (2007-Present); Chief Operating Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2007-Present); Chief Operating Officer, AMG Funds IV, (2016-Present); Chief Operating Officer and Chief Investment Officer, Aston Asset Management, LLC (2016); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2012-2014); Managing Partner, AMG Funds LLC (2007-2014); President, AMG Funds (2012-2014); President, AMG Distributors, Inc. (2012-2014); Managing Director, Legg Mason & Co., LLC (2006-2007); Managing Director, Citigroup Asset Management (2004-2006). | |
• Secretary since 2015 • Chief Legal Officer since 2015 |
Mark J. Duggan, 53 Senior Vice President and Senior Counsel, AMG Funds LLC (2015-Present); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2015-Present); Secretary and Chief Legal Officer, AMG Funds IV, (2015-Present); Attorney, K&L Gates, LLP (2009-2015). | |
• Chief Financial Officer since 2017 • Treasurer since 2017 • Principal Financial Officer since 2017 • Principal Accounting Officer since 2017 |
Thomas G. Disbrow, 52 Vice President, Mutual Fund Treasurer & CFO, AMG Funds, AMG Funds LLC (2017-Present); Chief Financial Officer, Principal Financial Officer, Treasurer and Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Managing Director - Global Head of Traditional Funds Product Control, UBS Asset Management (Americas), Inc. (2015-2017); Managing Director - Head of North American Funds Treasury, UBS Asset Management (Americas), Inc. (2011-2015).
| |
• Chief Compliance Officer since 2016 |
Gerald F. Dillenburg, 51 Vice President, Chief Compliance Officer AMG Funds, AMG Funds LLC (2017-Present); Chief Compliance Officer AMG Funds, AMG Funds LLC (2016-2017); Chief Compliance Officer and Sarbanes Oxley Code of Ethics Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Compliance Officer, AMG Funds IV (1996-Present); Sarbanes-Oxley Code of Ethics Compliance Officer, AMG Funds IV (2016-Present); Chief Compliance Officer, Aston Asset Management, LLC (2006-2016); Chief Operating Officer, Aston Funds (2003-2016); Secretary, Aston Funds (1996-2015); Chief Financial Officer, Aston Funds (1997-2010); Chief Financial Officer, Aston Asset Management, LLC (2006-2010); Treasurer, Aston Funds (1996-2010). | |
• Deputy Treasurer since 2017 |
John A. Starace, 47 Director, Mutual Fund Accounting, AMG Funds LLC (2017-Present); Vice President, Deputy Treasurer of Mutual Funds Services, AMG Funds LLC (2014-2017); Deputy Treasurer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Vice President, Citi Hedge Fund Services (2010-2014); Audit Senior Manager (2005-2010) and Audit Manager (2001-2005), Deloitte & Touche LLP. |
54 |
AMG Funds Trustees and Officers (continued) |
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• Controller since 2017 | Christopher R. Townsend, 50 Vice President, Business Finance, AMG Funds LLC (2017-Present); Head of Business Finance, AMG Funds LLC (2015-2017); Chief Financial Officer and Financial and Operations Principal, AMG Distributors, Inc. (2016-Present); Controller, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Treasurer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017); Chief Financial Officer, Aston Asset Management LLC (2016); Head of Finance and Accounting, Allianz Asset Management (2006-2015). | |
• Anti-Money Laundering Compliance Officer since 2014 |
Patrick J. Spellman, 43 Vice President, Chief Compliance Officer, AMG Funds LLC (2017-Present); Senior Vice President, Chief Compliance Officer, AMG Funds LLC (2011-2017); Chief Compliance Officer, AMG Distributors, Inc., (2010-Present); Anti-Money Laundering Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2014-Present); Anti-Money Laundering Officer, AMG Funds IV, (2016-Present); Compliance Manager, Legal and Compliance, Affiliated Managers Group, Inc. (2005-2011). | |
• Assistant Secretary since 2016 |
Maureen A. Meredith, 32 Director, Counsel, AMG Funds LLC (2017-Present); Vice President, Counsel, AMG Funds LLC (2015-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2016-Present); Associate, Ropes & Gray LLP (2011-2015); Law Fellow, Massachusetts Appleseed Center for Law and Justice (2010-2011). |
55 |
THIS PAGE INTENTIONALLY LEFT BLANK
|
Investment Manager and Administrator
AMG Funds LLC 600 Steamboat Road, Suite 300 Greenwich, CT 06830 800.835.3879
Distributor
AMG Distributors, Inc. 600 Steamboat Road, Suite 300 Greenwich, CT 06830 800.835.3879
Subadvisor
TimesSquare Capital Management, LLC 7 Times Square 42nd Floor New York, NY 10036
Custodian
The Bank of New York Mellon 111 Sanders Creek Parkway East Syracuse, NY 13057 |
Legal Counsel
Ropes & Gray LLP Prudential Tower, 800 Boylston Street Boston, MA 02199-3600
Transfer Agent
BNY Mellon Investment Servicing (US) Inc. Attn: AMG Funds P.O. Box 9769 Providence, RI 02940 800.548.4539 |
This report is prepared for the Funds’ shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. To receive a free copy of the prospectus or Statement of Additional Information, which includes additional information about Fund Trustees, please contact us by calling 800.835.3879. Distributed by AMG Distributors, Inc., member FINRA/SIPC.
Current net asset values per share for each Fund are available on the Funds’ website at amgfunds.com.
A description of the policies and procedures the Fund uses to vote its proxies is available: (i) without charge, upon request, by calling 800.835.3879, or (ii) on the Securities and Exchange Commission’s (SEC) website at sec.gov. For information regarding the Fund’s proxy voting record for the 12-month period ended June 30, call 800.835.3879 or visit the SEC website at sec.gov.
The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at sec.gov. A Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1.800.SEC.0330. To review a complete list of the Fund’s portfolio holdings, or to view the most recent quarterly holdings report, semiannual report, or annual report, please visit amgfunds.com. |
amgfunds.com | 57 |
AFFILIATE SUBADVISED FUNDS
BALANCED FUNDS AMG Chicago Equity Partners Balanced Chicago Equity Partners, LLC
AMG FQ Global Risk-Balanced First Quadrant, L.P.
EQUITY FUNDS AMG Chicago Equity Partners Small Cap Value Chicago Equity Partners, LLC
AMG FQ Tax-Managed U.S. Equity AMG FQ Long-Short Equity First Quadrant, L.P.
AMG Frontier Small Cap Growth Frontier Capital Management Company, LLC
AMG GW&K Small Cap Core AMG GW&K Small/Mid Cap AMG GW&K U.S. Small Cap Growth GW&K Investment Management, LLC
AMG Renaissance International Equity AMG Renaissance Large Cap Growth The Renaissance Group LLC
AMG River Road Dividend All Cap Value AMG River Road Dividend All Cap Value II AMG River Road Focused Absolute Value AMG River Road Long-Short AMG River Road Small-Mid Cap Value AMG River Road Small Cap Value River Road Asset Management, LLC
AMG SouthernSun Small Cap AMG SouthernSun Global Opportunities AMG SouthernSun U.S. Equity SouthernSun Asset Management, LLC
AMG Systematic Mid Cap Value Systematic Financial Management, L.P.
AMG TimesSquare Emerging Markets Small Cap AMG TimesSquare International Small Cap AMG TimesSquare Mid Cap Growth AMG TimesSquare Small Cap Growth TimesSquare Capital Management, LLC |
AMG Trilogy Emerging Markets Equity AMG Trilogy Emerging Wealth Equity Trilogy Global Advisors, L.P.
AMG Yacktman AMG Yacktman Focused AMG Yacktman Focused Fund - Security Selection Only AMG Yacktman Special Opportunities Yacktman Asset Management LP
FIXED INCOME FUNDS AMG GW&K Core Bond AMG GW&K Enhanced Core Bond AMG GW&K Municipal Bond AMG GW&K Municipal Enhanced Yield GW&K Investment Management, LLC
OPEN-ARCHITECTURE FUNDS
ALTERNATIVE FUNDS AMG Managers Lake Partners LASSO Alternative Lake Partners, Inc.
BALANCED FUNDS AMG Managers Montag & Caldwell Balanced Montag & Caldwell, LLC
EQUITY FUNDS AMG Managers Brandywine AMG Managers Brandywine Advisors Mid Cap Growth AMG Managers Brandywine Blue Friess Associates, LLC
AMG Managers Cadence Emerging Companies AMG Managers Cadence Mid Cap Cadence Capital Management, LLC
AMG Managers CenterSquare Real Estate CenterSquare Investment Management, Inc.
AMG Managers Emerging Opportunities Lord, Abbett & Co. LLC WEDGE Capital Management L.L.P. Next Century Growth Investors LLC RBC Global Asset Management (U.S.) Inc. |
AMG Managers Essex Small/Micro Cap Growth Essex Investment Management Co., LLC
AMG Managers Fairpointe ESG Equity AMG Managers Fairpointe Mid Cap Fairpointe Capital LLC
AMG Managers Guardian Capital Global Dividend Guardian Capital LP
AMG Managers LMCG Small Cap Growth LMCG Investments, LLC
AMG Managers Montag & Caldwell Growth AMG Managers Montag & Caldwell Mid Cap Growth Montag & Caldwell, LLC
AMG Managers Pictet International Pictet Asset Management Limited
AMG Managers Silvercrest Small Cap Silvercrest Asset Management Group LLC
AMG Managers Skyline Special Equities Skyline Asset Management, L.P.
AMG Managers Special Equity Ranger Investment Management, L.P. Lord, Abbett & Co. LLC Smith Asset Management Group, L.P. Federated MDTA LLC
AMG Managers Value Partners Asia Dividend Value Partners Hong Kong Limited
FIXED INCOME FUNDS AMG Managers Amundi Intermediate Government AMG Managers Amundi Short Duration Government Amundi Pioneer Institutional Asset Management, Inc.
AMG Managers Doubleline Core Plus Bond DoubleLine Capital LP
AMG Managers Global Income Opportunity AMG Managers Loomis Sayles Bond Loomis, Sayles & Co., L.P. |
amgfunds.com | 123117 AR012 |
|
ANNUAL REPORT |
amgfunds.com
|
123117 AR018
|
AMG Funds Annual Report — December 31, 2017 |
![]() |
Letter to Shareholders |
2 |
|
About Your Fund’s Expenses |
As a shareholder of a Fund, you may incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on $1,000 invested at the beginning of the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of the following table provides information about the actual account values and actual expenses. You may use the information in this line, together with the |
amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During 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. |
3 |
AMG Managers Skyline Special Equities Fund Portfolio Manager’s Comments (unaudited) |
For the fiscal year ended December 31, 2017, the AMG Managers Skyline Special Equities Fund (Class N shares) (formerly Class S) returned 8.4%, versus 7.8% for the Russell 2000® Value Index and 14.7% for the Russell 2000® Index.
MARKET OVERVIEW
Stocks responded favorably to an improving backdrop for earnings growth. Economies throughout the world are showing signs of acceleration. In the U.S., gross domestic product (GDP) grew at 3.3% during the third quarter, its strongest showing in three years,1 and the Atlanta Federal Reserve’s GDP model is projecting similar growth for the fourth quarter. U.S. manufacturing is strong, as indicated by September’s ISM manufacturing purchasing managers index (M-PMI) reaching its highest level since 2004.2 Outside the U.S., all 45 countries tracked by the Organisation for Economic Co-operation and Development (OECD) are expected to expand in 2017, something that has occurred rarely over the last 50 years and most recently a decade ago.
Stocks also reacted positively as investors began to factor in the benefits of a decline in the statutory U.S. corporate tax rate to 21% from 35%. Not all of that benefit is likely to be reinvested by companies or competed away, providing a boost to earnings in 2018 and beyond.
PERFORMANCE REVIEW
The Fund slightly outperformed the Russell 2000® Value Index and underperformed the Russell 2000® Index during 2017. The Fund is constructed to own stocks with what the portfolio managers believe to be the best combination of value and earnings growth. Therefore, it does not own the fastest growing small cap stocks (which typically carry high price-to-earnings ratios) that make up a portion of the core Russell 2000® Index. When growth stocks significantly outperform, as they did in 2017, performing well relative to the core index is challenging. At the same time, because we do incorporate a growth component into our investment philosophy, the Fund has tended to perform better than the value benchmark when growth stocks outperform.
The industrials sector contributed most to the Fund’s absolute performance in 2017 due to its heavy weighting and the strong performance of many |
stocks in the sector. To highlight one example, EnPro Industries, Inc., a manufacturer of gaskets, seals and compressor components, was a solid contributor for the year. EnPro reported better-than-expected earnings as the company was able to take advantage of improving industrial end markets.
Among individual stocks, The Children’s Place, Inc., a retailer of children’s apparel, contributed most to the Fund’s absolute return for 2017. Children’s Place has delivered strong results despite the headwinds facing mall-based retailers by improving its systems and merchandising and taking share from weaker competitors. Virtusa Corporation, an offshore IT service provider, was a significant contributor to the Fund’s absolute return for the year as well. Virtusa reported better-than-expected earnings as strong organic growth with new and existing customers drove top line growth and margin expansion.
Among the detractors from the Fund’s performance in 2017 was Veeco Instruments Inc., a manufacturer of equipment to produce LEDs. An adverse patent ruling contributed to its weak price performance during the year. The uncertainty created by the ruling caused us to reassess our investment thesis, resulting in the sale of the stock. In addition, Acadia Healthcare Company, Inc., an operator of mental health facilities, declined due to worse-than-expected results in its recently acquired U.K. operations
The Fund’s outperformance relative to the Russell 2000® Value Index for the full year was due primarily to advantageous sector allocation. A lack of exposure to the poor performing energy sector and a heavy weighting in the strong performing industrials sector were the main contributors
The Fund underperformed the Russell 2000® Index for the year. As mentioned previously, we typically are not able to invest in the fastest growing companies due to our valuation discipline. Those stocks performed well this year, and tend to be concentrated in the information technology and health care sectors. In addition, the Fund was negatively impacted by adverse stock selection within these sectors, including the previously mentioned Veeco Instruments and Acadia Healthcare.
OUTLOOK
We believe the fundamental backdrop for earnings growth is positive. The global economy is experiencing its most synchronized expansion in a |
decade. U.S. GDP grew 3.3% in the third quarter,1 and the outlook remains positive. The current U.S. administration is committed to reducing the impact of regulations on businesses and the passage late in the year of comprehensive tax reform, including a meaningful reduction in the U.S. corporate tax rate, should help the economy and corporate profits.
According to a leading small cap equity strategist, the combination of a strong global economy and lower corporate tax rates could lead to earnings per share (EPS) growth of greater than 20% in 2018, which would be a significant positive for small cap stocks.
In light of the positive outlook for earnings, small cap stocks continue to trade toward the high end of their historical valuation range. Even when factoring in the new, lower corporate tax rates, small cap valuations remain above their long-term averages. We believe current valuations are a reflection of the low returns available on alternative investments like bonds in a low interest rate environment. In our opinion, it is critical for companies to deliver their expected earnings, as there is little valuation support for disappointments.
We are confident the fundamentals of the companies in the Fund remain solid and that their valuations are attractive relative to the typical small cap company. Because of our focus on finding the best combination of above average earnings growth and below average valuations, the Fund has tended to be somewhat more economically sensitive than its benchmarks. We believe the Fund is well positioned to take advantage if earnings improve as we expect.
1U.S. Bureau of Economic Analysis
2Institute of Supply Management
This commentary reflects the viewpoints of the portfolio manager, Skyline Asset Management, L.P. as of December 31, 2017 and is not intended as a forecast or guarantee of future results, and is subject to change without notice. |
4 |
AMG Managers Skyline Special Equities Fund Portfolio Manager’s Comments (continued) |
5 |
AMG Managers Skyline Special Equities Fund Fund Snapshots (unaudited) December 31, 2017 |
Because a fund’s strategy may result in multiple investments in particular sectors of the economy, its performance may depend on the performance of those sectors and may fluctuate more widely than investments diversified across more sectors. For additional information on these and other risk considerations, please see the Fund’s prospectus.
Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.
6 |
AMG Managers Skyline Special Equities Fund Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
7 |
AMG Managers Skyline Special Equities Fund Schedule of Portfolio Investments (continued) |
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks† |
$ | 1,182,117,325 | — | — | $ | 1,182,117,325 | ||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | $ | 36,492,537 | — | 36,492,537 | |||||||||||
Other Investment Companies |
110,604,775 | — | — | 110,604,775 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 1,292,722,100 | $ | 36,492,537 | — | $ | 1,329,214,637 | |||||||||
|
|
|
|
|
|
|
|
† | 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. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements. |
8 |
December 31, 2017 |
AMG Managers Skyline Special Equities Fund |
||||
Assets: |
||||
Investments at Value* (including securities on loan valued at $35,725,082) |
$1,329,214,637 | |||
Receivable for investments sold |
6,100,070 | |||
Dividend, interest and other receivables |
832,873 | |||
Receivable for Fund shares sold |
1,455,700 | |||
Prepaid expenses |
80,170 | |||
Total assets |
1,337,683,450 | |||
Liabilities: |
||||
Payable upon return of securities loaned |
36,492,537 | |||
Payable for Fund shares repurchased |
3,837,163 | |||
Accrued expenses: |
||||
Investment advisory and management fees |
837,007 | |||
Administrative fees |
166,667 | |||
Shareholder service fees |
300,037 | |||
Professional fees |
61,814 | |||
Trustee fees and expenses |
13,678 | |||
Other |
183,209 | |||
Total liabilities |
41,892,112 | |||
|
||||
Net Assets |
$1,295,791,338 | |||
* Investments at cost |
$1,009,579,757 |
The accompanying notes are an integral part of these financial statements. |
9 |
Statement of Assets and Liabilities (continued) |
AMG Managers Skyline Special Equities Fund |
||||
Net Assets Represent: |
||||
Paid-in capital |
$962,232,411 | |||
Accumulated net realized gain from investments |
13,924,047 | |||
Net unrealized appreciation on investments |
319,634,880 | |||
Net Assets |
$1,295,791,338 | |||
Class N# : |
||||
Net Assets |
$923,139,475 | |||
Shares outstanding |
20,988,725 | |||
Net asset value, offering and redemption price per share |
$43.98 | |||
Class I# : |
||||
Net Assets |
$362,723,135 | |||
Shares outstanding |
8,231,988 | |||
Net asset value, offering and redemption price per share |
$44.06 | |||
Class Z# : |
||||
Net Assets |
$9,928,728 | |||
Shares outstanding |
225,251 | |||
Net asset value, offering and redemption price per share |
$44.08 |
# | Effective February 27, 2017, Class S shares were renamed to Class N shares, and Class I shares and Class Z shares were added as described in Note 1 of the Notes to the Financial Statements. |
The accompanying notes are an integral part of these financial statements. |
10 |
For the fiscal year ended December 31, 2017 |
AMG Managers Skyline Special Equities Fund |
||||
Investment Income: |
||||
Dividend income |
$13,642,104 | |||
Securities lending income |
106,664 | |||
Interest income |
1,185 | |||
Foreign withholding tax |
(21,437 | ) | ||
Total investment income |
13,728,516 | |||
Expenses: |
||||
Investment advisory and management fees |
10,374,738 | |||
Administrative fees |
1,901,411 | |||
Shareholder servicing fees - Class N# |
2,805,461 | |||
Shareholder servicing fees - Class I# |
202,653 | |||
Professional fees |
138,599 | |||
Registration fees |
88,805 | |||
Transfer agent fees |
63,803 | |||
Custodian fees |
83,996 | |||
Reports to shareholders |
146,983 | |||
Trustee fees and expenses |
92,159 | |||
Miscellaneous |
32,700 | |||
Repayment of prior reimbursements |
25,896 | |||
Total expenses before offsets |
15,957,204 | |||
Expense reimbursements |
(297,805 | ) | ||
Net expenses |
15,659,399 | |||
Net investment loss |
(1,930,883 | ) | ||
Net Realized and Unrealized Gain: |
||||
Net realized gain on investments |
103,529,105 | |||
Net change in unrealized appreciation/depreciation on investments |
(13,741,245 | ) | ||
Net realized and unrealized gain |
89,787,860 | |||
Net increase in net assets resulting from operations |
$87,856,977 |
# | Effective February 27, 2017, Class S shares were renamed to Class N shares, and Class I shares and Class Z shares were added as described in Note 1 of the Notes to the Financial Statements. |
The accompanying notes are an integral part of these financial statements. |
11 |
Statements of Changes in Net Assets For the fiscal years ended December 31, |
AMG Managers Skyline Special Equities Fund# |
||||||||
2017 | 2016 | |||||||
Increase in Net Assets Resulting From Operations: |
||||||||
Net investment loss |
$(1,930,883 | ) | $(413,688 | ) | ||||
Net realized gain (loss) on investments |
103,529,105 | (3,244,872 | ) | |||||
Net change in unrealized appreciation/depreciation on investments |
(13,741,245 | ) | 275,190,751 | |||||
Net increase in net assets resulting from operations |
87,856,977 | 271,532,191 | ||||||
Distributions to Shareholders: |
||||||||
From net realized gain on investments: |
||||||||
Class N |
(59,015,038 | ) | (343,670 | ) | ||||
Class I |
(23,021,595 | ) | — | |||||
Class Z |
(624,726 | ) | — | |||||
Total distributions to shareholders |
(82,661,359 | ) | (343,670 | ) | ||||
Capital Share Transactions:1 |
||||||||
Net decrease from capital share transactions |
(211,990,807 | ) | (86,547,822 | ) | ||||
Total increase (decrease) in net assets |
(206,795,189 | ) | 184,640,699 | |||||
Net Assets: |
||||||||
Beginning of year |
1,502,586,527 | 1,317,945,828 | ||||||
End of year |
$1,295,791,338 | $1,502,586,527 | ||||||
End of year undistributed net investment income |
— | — | ||||||
|
|
|
|
# | Effective October 1, 2016, and February 27, 2017, the Funds’ share classes were renamed as described in Note 1 of the Notes to the Financial Statements. |
1 | See Note 1(g) of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements. |
12 |
AMG Managers Skyline Special Equities Fund Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||||||||||
Class N | 2017# | 2016## | 2015 | 2014 | 2013 | |||||||||||||||||||||||
Net Asset Value, Beginning of Year |
$43.30 | $35.71 | $39.88 | $39.75 | $26.23 | |||||||||||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||||||||||
Net investment loss1,2 |
(0.08 | ) | (0.01 | ) | (0.03 | )3 | 0.00 | 4,5 | (0.06 | )6 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments |
3.73 | 7.61 | (2.36 | ) | 1.61 | 13.59 | ||||||||||||||||||||||
Total income (loss) from investment operations |
3.65 | 7.60 | (2.39 | ) | 1.61 | 13.53 | ||||||||||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||||||||||
Net investment income |
— | — | (0.00 | )4 | — | (0.01 | ) | |||||||||||||||||||||
Net realized gain on investments |
(2.97 | ) | (0.01 | ) | (1.78 | ) | (1.48 | ) | (0.00 | )4 | ||||||||||||||||||
Total distributions to shareholders |
(2.97 | ) | (0.01 | ) | (1.78 | ) | (1.48 | ) | (0.01 | ) | ||||||||||||||||||
Net Asset Value, End of Year |
$43.98 | $43.30 | $35.71 | $39.88 | $39.75 | |||||||||||||||||||||||
Total Return2 |
8.39 | %7 | 21.31 | %7 | (6.02 | )% | 4.02 | %7 | 51.59 | %7 | ||||||||||||||||||
Ratio of net expenses to average net assets |
1.25 | % | 1.32 | % | 1.32 | % | 1.32 | % | 1.33 | %9 | ||||||||||||||||||
Ratio of gross expenses to average net assets11 |
1.27 | % | 1.42 | % | 1.45 | % | 1.45 | % | 1.47 | %9 | ||||||||||||||||||
Ratio of net investment income (loss) to average net assets2 |
(0.18 | )% | (0.03 | )% | (0.08 | )% | 0.01 | % | (0.18 | )%9 | ||||||||||||||||||
Portfolio turnover |
33 | % | 34 | % | 31 | % | 37 | % | 39 | % | ||||||||||||||||||
Net assets end of year (000’s) omitted |
$923,139 | $1,502,587 | $1,317,946 | $1,383,184 | $969,238 | |||||||||||||||||||||||
13 |
AMG Managers Skyline Special Equities Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal period ended December 31, | |||||
Class I |
2017* | ||||
Net Asset Value, Beginning of Period |
$43.64 | ||||
Income from Investment Operations: |
|||||
Net investment income1,2 |
0.02 | ||||
Net realized and unrealized gain on investments |
3.37 | ||||
Total income from investment operations |
3.39 | ||||
Less Distributions to Shareholders from: |
|||||
Net realized gain on investments |
(2.97 | ) | |||
Total distributions to shareholders |
(2.97 | ) | |||
Net Asset Value, End of Period |
$44.06 | ||||
Total Return2 |
7.73 | %7,8 | |||
Ratio of net expenses to average net assets |
1.13 | %10 | |||
Ratio of gross expenses to average net assets11 |
1.15 | %10 | |||
Ratio of net investment income to average net assets2 |
0.06 | %10 | |||
Portfolio turnover |
33 | % | |||
Net assets end of period (000’s) omitted |
$362,723 | ||||
14 |
AMG Managers Skyline Special Equities Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal period ended December 31, | |||||
Class Z |
2017* | ||||
Net Asset Value, Beginning of Period |
$ | 43.64 | |||
Income from Investment Operations: |
|||||
Net investment income1,2 |
0.08 | ||||
Net realized and unrealized gain on investments |
3.33 | ||||
Total income from investment operations |
3.41 | ||||
Less Distributions to Shareholders from: |
|||||
Net realized gain on investments |
(2.97 | ) | |||
Total distributions to shareholders |
(2.97 | ) | |||
Net Asset Value, End of Period |
$ | 44.08 | |||
Total Return2 |
7.78 | %7,8 | |||
Ratio of net expenses to average net assets |
0.98 | %10 | |||
Ratio of gross expenses to average net assets11 |
1.00 | %10 | |||
Ratio of net investment income to average net assets2 |
0.21 | %10 | |||
Portfolio turnover |
33 | % | |||
Net assets end of period (000’s) omitted |
$ | 9,929 | |||
# | Effective February 27, 2017, Class S was renamed Class N. |
## | Effective October 1, 2016, the Fund’s shares were reclassified and redesignated to Class S. |
* | Commencement of operations was on February 27, 2017. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.04). |
4 | Rounds to less than $0.01 or $(0.01) per share or 0.01% or (0.01)%. |
5 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.08). |
6 | Includes non-recurring dividends. Without these dividends, net investment loss per share would have been $(0.13). |
7 | The total return is calculated using the published Net Asset Value as of fiscal period end. |
8 | Not annualized. |
9 | Includes non-routine extraordinary expenses amounting to 0.012% of average net assets. |
10 | Annualized. |
11 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
15 |
December 31, 2017 |
16 |
Notes to Financial Statements (continued) |
17 |
Notes to Financial Statements (continued) |
For the fiscal years ended December 31, 2017 and December 31, 2016, the capital stock transactions by class for the Fund were as follows:
December 31, 2017 | December 31, 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class N:1 |
||||||||||||||||
Proceeds from sale of shares |
3,153,901 | $138,238,751 | 9,193,732 | $336,675,003 | ||||||||||||
Reinvestment of distributions |
1,321,581 | 58,400,660 | 7,573 | 332,585 | ||||||||||||
Cost of shares repurchased |
(18,187,787) | (788,291,441) | (11,410,317) | (423,555,410) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net decrease |
(13,712,305) | $(591,652,030) | (2,209,012) | $(86,547,822) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Class I:2 |
||||||||||||||||
Proceeds from sale of shares |
8,332,205 | $374,453,289 | — | — | ||||||||||||
Reinvestment of distributions |
513,950 | 22,752,572 | — | — | ||||||||||||
Cost of shares repurchased |
(614,167) | (27,362,881) | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
8,231,988 | $369,842,980 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Class Z:2 |
||||||||||||||||
Proceeds from sale of shares |
226,389 | $9,864,970 | — | — | ||||||||||||
Reinvestment of distributions |
14,105 | 624,726 | — | — | ||||||||||||
Cost of shares repurchased |
(15,243) | (671,453) | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
225,251 | $9,818,243 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
1 Effective February 27, 2017, Class S shares were renamed to Class N shares.
2 Commencement of operations was on February 27, 2017.
18 |
Notes to Financial Statements (continued) |
19 |
Notes to Financial Statements (continued) |
The following table is a summary of the Fund’s open Repurchase Agreements that are subject to a master netting agreement as of December 31, 2017:
Gross Amount Not Offset in the Statement of Assets and Liabilities |
||||||||
Net Amounts of Assets Presented in the Statement of Assets and Liabilities |
Financial Instruments Collateral |
Cash Collateral Received |
Net Amount | |||||
Bank of Nova Scotia
|
$8,667,321 | $8,667,321 | — | — | ||||
Cantor Fitzgerald Securities, Inc.
|
8,667,321 | 8,667,321 | — | — | ||||
Daiwa Capital Markets America
|
8,667,321 | 8,667,321 | — | — | ||||
Jefferies LLC
|
1,823,253 | 1,823,253 | — | — | ||||
State of Wisconsin Investment Board |
8,667,321 | 8,667,321 | — | — | ||||
|
|
|
| |||||
Totals |
$36,492,537 | $36,492,537 | — | — | ||||
|
|
|
|
20 |
|
21 |
|
TAX INFORMATION
22 |
Trustees and Officers |
The Trustees and Officers of the Trust, their business addresses, principal occupations for the past five years and ages are listed below. The Trustees provide broad supervision over the affairs of the Trust and the Funds. The Trustees are experienced executives who meet periodically throughout the year to oversee the Funds’ activities, review contractual arrangements with companies that provide services to the Funds, and | review the Funds’ performance. Unless otherwise noted, the address of each Trustee or Officer is the address of the Trust: 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830.
There is no stated term of office for Trustees. Trustees serve until their resignation, retirement or removal in |
accordance with the Trust’s organizational documents and policies adopted by the Board from time to time. The Chairman of the Trustees, President, Treasurer and Secretary of the Trust are elected by the Trustees annually. Other officers hold office at the pleasure of the Trustees. |
Independent Trustees
The following Trustees are not “interested persons” of the Trust within the meaning of the 1940 Act:
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2012 • Oversees 61 Funds in Fund Complex |
Bruce B. Bingham, 69 Partner, Hamilton Partners (real estate development firm) (1987-Present); Director of The Yacktman Funds (2000-2012). | |
• Trustee since 1999 • Oversees 61 Funds in Fund Complex |
Edward J. Kaier, 72 Attorney at Law and Partner, Teeters Harvey Marrone & Kaier LLP (2007-Present); Attorney at Law and Partner, Hepburn Willcox Hamilton & Putnam, LLP (1977-2007); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Kurt A. Keilhacker, 54 Managing Member, TechFund Capital (1997-Present); Managing Member, TechFund Europe (2000-Present); Board Member, 6wind SA, (2002-Present); Managing Member, Elementum Ventures (2013-Present); Trustee, Gordon College (2001-2016). | |
• Trustee since 2004 • Oversees 61 Funds in Fund Complex |
Steven J. Paggioli, 67 Independent Consultant (2002-Present); Formerly Executive Vice President and Director, The Wadsworth Group (1986-2001); Executive Vice President, Secretary and Director, Investment Company Administration, LLC (1990-2001); Vice President, Secretary and Director, First Fund Distributors, Inc. (1991-2001); Trustee, Professionally Managed Portfolios (32 portfolios); Advisory Board Member, Sustainable Growth Advisors, LP; Independent Director, Chase Investment Counsel (2008–Present). | |
• Trustee since 2013 • Oversees 61 Funds in Fund Complex |
Richard F. Powers III, 72 Adjunct Professor, U.S. Naval War College (2016); Adjunct Professor, Boston College (2010-2013); President and CEO of Van Kampen Investments Inc. (1998-2003). | |
• Independent Chairman • Trustee since 1999 • Oversees 63 Funds in Fund Complex |
Eric Rakowski, 59 Professor, University of California at Berkeley School of Law (1990-Present); Director of Harding, Loevner Funds, Inc. (9 portfolios); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Victoria L. Sassine, 52 Lecturer, Babson College (2007 – Present). | |
• Trustee since 2004 • Oversees 61 Funds in Fund Complex |
Thomas R. Schneeweis, 70 Professor Emeritus, University of Massachusetts (2013-Present); Partner, S Capital Wealth Advisors (2015-Present); President, TRS Associates (1982-Present); Board Member, Chartered Alternative Investment Association (“CAIA”) (2002-Present); Director, CAIA Foundation (Education) (2010-Present); Director, Institute for GlobalAsset and Risk Management (Education) (2010-Present); Partner, S Capital Management, LLC (2007-2015); Director, CISDM at the University of Massachusetts, (1996-2013); President, Alternative Investment Analytics, LLC, (formerly Schneeweis Partners, LLC) (2001-2013); Professor of Finance, University of Massachusetts (1977-2013). |
23 |
AMG Funds Trustees and Officers (continued) |
Interested Trustees
Each Trustee in the following table is an “interested person” of the Trust within the meaning of the 1940 Act. Ms. Carsman is an interested person of the Trust within the meaning of the 1940 Act by virtue of her position with, and interest in securities of, AMG.
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2011 • Oversees 63 Funds in Fund Complex |
Christine C. Carsman, 65 Executive Vice President, Deputy General Counsel and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2017-Present); Director (2010-Present) and Chair of the Board of Directors (2015-Present), AMG Funds plc; Director of Harding, Loevner Funds, Inc. (9 portfolios); Senior Vice President and Deputy General Counsel, Affiliated Managers Group, Inc. (2011-2016); Senior Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2007-2011); Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2004-2007); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2004-2011); Senior Counsel, Vice President and Director of Operational Risk Management and Compliance, Wellington Management Company, LLP (1995-2004). | |
Officers | ||
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• President since 2014 • Principal Executive Officer since 2014 • Chief Executive Officer since 2016 |
Jeffrey T. Cerutti, 50 Chief Executive Officer, AMG Funds LLC (2014-Present); Director, President and Principal, AMG Distributors, Inc. (2014-Present); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2014-Present); Chief Executive Officer, President and Principal Executive Officer, AMG Funds IV, (2015-Present); Chief Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Executive Officer, Aston Asset Management, LLC (2016); President, VP Distributors, (2011-2014); Executive Vice President, Head of Distribution, Virtus Investment Partners, Inc. (2010-2014); Managing Director, Head of Sales, UBS Global Asset Management (2001-2010). | |
• Chief Operating Officer since 2007 |
Keitha L. Kinne, 59 Chief Operating Officer, AMG Funds LLC (2007-Present); Chief Investment Officer, AMG Funds LLC (2008-Present); Chief Operating Officer, AMG Distributors, Inc. (2007-Present); Chief Operating Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2007-Present); Chief Operating Officer, AMG Funds IV, (2016-Present); Chief Operating Officer and Chief Investment Officer, Aston Asset Management, LLC (2016); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2012-2014); Managing Partner, AMG Funds LLC (2007-2014); President, AMG Funds (2012-2014); President, AMG Distributors, Inc. (2012-2014); Managing Director, Legg Mason & Co., LLC (2006-2007); Managing Director, Citigroup Asset Management (2004-2006). | |
• Secretary since 2015 • Chief Legal Officer since 2015 |
Mark J. Duggan, 53 Senior Vice President and Senior Counsel, AMG Funds LLC (2015-Present); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2015-Present); Secretary and Chief Legal Officer, AMG Funds IV, (2015-Present); Attorney, K&L Gates, LLP (2009-2015). | |
• Chief Financial Officer since 2017 • Treasurer since 2017 • Principal Financial Officer since 2017 • Principal Accounting Officer since 2017 |
Thomas G. Disbrow, 52 Vice President, Mutual Fund Treasurer & CFO, AMG Funds, AMG Funds LLC (2017-Present); Chief Financial Officer, Principal Financial Officer, Treasurer and Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Managing Director - Global Head of Traditional Funds Product Control, UBS Asset Management (Americas), Inc. (2015-2017); Managing Director - Head of North American Funds Treasury, UBS Asset Management (Americas), Inc. (2011-2015). | |
• Chief Compliance Officer since 2016 |
Gerald F. Dillenburg, 51 Vice President, Chief Compliance Officer AMG Funds, AMG Funds LLC (2017-Present); Chief Compliance Officer AMG Funds, AMG Funds LLC (2016-2017); Chief Compliance Officer and Sarbanes Oxley Code of Ethics Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Compliance Officer, AMG Funds IV (1996-Present); Sarbanes-Oxley Code of Ethics Compliance Officer, AMG Funds IV (2016-Present); Chief Compliance Officer, Aston Asset Management, LLC (2006-2016); Chief Operating Officer, Aston Funds (2003-2016); Secretary, Aston Funds (1996-2015); Chief Financial Officer, Aston Funds (1997-2010); Chief Financial Officer, Aston Asset Management, LLC (2006-2010); Treasurer, Aston Funds (1996-2010). | |
• Deputy Treasurer since 2017 |
John A. Starace, 47 Director, Mutual Fund Accounting, AMG Funds LLC (2017-Present); Vice President, Deputy Treasurer of Mutual Funds Services, AMG Funds LLC (2014-2017); Deputy Treasurer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Vice President, Citi Hedge Fund Services (2010-2014); Audit Senior Manager (2005-2010) and Audit Manager (2001-2005), Deloitte & Touche LLP. |
24 |
AMG Funds Trustees and Officers (continued) |
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• Controller since 2017 |
Christopher R. Townsend, 50 Vice President, Business Finance, AMG Funds LLC (2017-Present); Head of Business Finance, AMG Funds LLC (2015-2017); Chief Financial Officer and Financial and Operations Principal, AMG Distributors, Inc. (2016-Present); Controller, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Treasurer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017); Chief Financial Officer, Aston Asset Management LLC (2016); Head of Finance and Accounting, Allianz Asset Management (2006-2015). | |
• Anti-Money Laundering Compliance Officer since 2014 |
Patrick J. Spellman, 43 Vice President, Chief Compliance Officer, AMG Funds LLC (2017-Present); Senior Vice President, Chief Compliance Officer, AMG Funds LLC (2011-2017); Chief Compliance Officer, AMG Distributors, Inc., (2010-Present); Anti-Money Laundering Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2014-Present); Anti-Money Laundering Officer, AMG Funds IV, (2016-Present); Compliance Manager, Legal and Compliance, Affiliated Managers Group, Inc. (2005-2011). | |
• Assistant Secretary since 2016 |
Maureen A. Meredith, 32 Director, Counsel, AMG Funds LLC (2017-Present); Vice President, Counsel, AMG Funds LLC (2015-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2016-Present); Associate, Ropes & Gray LLP (2011-2015); Law Fellow, Massachusetts Appleseed Center for Law and Justice (2010-2011). |
25 |
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
|
INVESTMENT MANAGER AND ADMINISTRATOR
AMG Funds LLC 600 Steamboat Road, Suite 300 Greenwich, CT 06830 800.835.3879
DISTRIBUTOR
AMG Distributors, Inc. 600 Steamboat Road, Suite 300 Greenwich, CT 06830 800.835.3879
SUBADVISER
Skyline Asset Management, L.P. 120 South LaSalle Street, Suite 1320 Chicago, IL 60603 |
CUSTODIAN
The Bank of New York Mellon 111 Sanders Creek Parkway East Syracuse, NY 13057
LEGAL COUNSEL
Ropes & Gray LLP Prudential Tower, 800 Boylston Street Boston, MA 02199-3600
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc. Attn: AMG Funds P.O. Box 9769 Providence, RI 02940 800.548.4539 |
This report is prepared for the Funds’ shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. To receive a free copy of the prospectus or Statement of Additional Information, which includes additional information about Fund Trustees, please contact us by calling 800.835.3879. Distributed by AMG Distributors, Inc., member FINRA/SIPC.
Current net asset values per share for each Fund are available on the Funds’ website at amgfunds.com.
A description of the policies and procedures the Fund uses to vote its proxies is available: (i) without charge, upon request, by calling 800.835.3879, or (ii) on the Securities and Exchange Commission’s (SEC) website at sec.gov. For information regarding the Fund’s proxy voting record for the 12-month period ended June 30, call 800.835.3879 or visit the SEC website at sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at sec.gov. A Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1.800.SEC.0330. To review a complete list of the Fund’s portfolio holdings, or to view the most recent quarterly holdings report, semiannual report, or annual report, please visit amgfunds.com. |
amgfunds.com | 29 |
AFFILIATE SUBADVISED FUNDS
BALANCED FUNDS AMG Chicago Equity Partners Balanced Chicago Equity Partners, LLC
AMG FQ Global Risk-Balanced First Quadrant, L.P.
EQUITY FUNDS AMG Chicago Equity Partners Small Cap Value Chicago Equity Partners, LLC
AMG FQ Tax-Managed U.S. Equity AMG FQ Long-Short Equity First Quadrant, L.P.
AMG Frontier Small Cap Growth Frontier Capital Management Company, LLC
AMG GW&K Small Cap Core AMG GW&K Small/Mid Cap AMG GW&K U.S. Small Cap Growth GW&K Investment Management, LLC
AMG Renaissance International Equity AMG Renaissance Large Cap Growth The Renaissance Group LLC
AMG River Road Dividend All Cap Value AMG River Road Dividend All Cap Value II AMG River Road Focused Absolute Value AMG River Road Long-Short AMG River Road Small-Mid Cap Value AMG River Road Small Cap Value River Road Asset Management, LLC
AMG SouthernSun Small Cap AMG SouthernSun Global Opportunities AMG SouthernSun U.S. Equity SouthernSun Asset Management, LLC
AMG Systematic Mid Cap Value Systematic Financial Management, L.P.
AMG TimesSquare Emerging Markets Small Cap AMG TimesSquare International Small Cap AMG TimesSquare Mid Cap Growth AMG TimesSquare Small Cap Growth TimesSquare Capital Management, LLC |
AMG Trilogy Emerging Markets Equity AMG Trilogy Emerging Wealth Equity Trilogy Global Advisors, L.P.
AMG Yacktman AMG Yacktman Focused AMG Yacktman Focused Fund - Security Selection Only AMG Yacktman Special Opportunities Yacktman Asset Management LP
FIXED INCOME FUNDS AMG GW&K Core Bond AMG GW&K Enhanced Core Bond AMG GW&K Municipal Bond AMG GW&K Municipal Enhanced Yield GW&K Investment Management, LLC
OPEN-ARCHITECTURE FUNDS
ALTERNATIVE FUNDS AMG Managers Lake Partners LASSO Alternative Lake Partners, Inc.
BALANCED FUNDS AMG Managers Montag & Caldwell Balanced Montag & Caldwell, LLC
EQUITY FUNDS AMG Managers Brandywine AMG Managers Brandywine Advisors Mid Cap Growth AMG Managers Brandywine Blue Friess Associates, LLC
AMG Managers Cadence Emerging Companies AMG Managers Cadence Mid Cap Cadence Capital Management, LLC
AMG Managers CenterSquare Real Estate CenterSquare Investment Management, Inc.
AMG Managers Emerging Opportunities Lord, Abbett & Co. LLC WEDGE Capital Management L.L.P. Next Century Growth Investors LLC RBC Global Asset Management (U.S.) Inc. |
AMG Managers Essex Small/Micro Cap Growth Essex Investment Management Co., LLC
AMG Managers Fairpointe ESG Equity AMG Managers Fairpointe Mid Cap Fairpointe Capital LLC
AMG Managers Guardian Capital Global Dividend Guardian Capital LP
AMG Managers LMCG Small Cap Growth LMCG Investments, LLC
AMG Managers Montag & Caldwell Growth AMG Managers Montag & Caldwell Mid Cap Growth Montag & Caldwell, LLC
AMG Managers Pictet International Pictet Asset Management Limited
AMG Managers Silvercrest Small Cap Silvercrest Asset Management Group LLC
AMG Managers Skyline Special Equities Skyline Asset Management, L.P.
AMG Managers Special Equity Ranger Investment Management, L.P. Lord, Abbett & Co. LLC Smith Asset Management Group, L.P. Federated MDTA LLC
AMG Managers Value Partners Asia Dividend Value Partners Hong Kong Limited
FIXED INCOME FUNDS AMG Managers Amundi Intermediate Government AMG Managers Amundi Short Duration Government Amundi Pioneer Institutional Asset Management, Inc.
AMG Managers Doubleline Core Plus Bond DoubleLine Capital LP
AMG Managers Global Income Opportunity AMG Managers Loomis Sayles Bond Loomis, Sayles & Co., L.P. |
amgfunds.com | 123117 AR018 |
|
ANNUAL REPORT |
amgfunds.com
|
123117 AR024
|
AMG Funds Annual Report — December 31, 2017 |
![]() |
Letter to Shareholders |
2 |
|
About Your Fund’s Expenses |
As a shareholder of a Fund, you may incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on $1,000 invested at the beginning of the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of the following table provides information about the actual account values and actual expenses. You may use the information in this line, together with the |
amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During 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. |
3 |
|
For the fiscal year ended December 31, 2017, the AMG Renaissance Large Cap Growth Fund (Class Z) (the “Fund”) returned 22.50%, compared to the 30.21% return for the Russell 1000® Growth Index.
MARKET OVERVIEW
The stock market continued to roll ahead in the fourth quarter, as the S&P 500® Index posted another all-time high and gained 6.6% for the quarter. Large cap stocks outperformed smaller cap issues, with technology, financials and consumer discretionary among the stronger performing sectors. Health care and utilities were among the lower performing sectors, and bonds posted slight price declines.
The economy is experiencing its most sustained growth in several years. The unemployment rate ended November at 4.1%, its lowest level in 18 years,1 while inflation remains muted, and GDP growth in recent quarters has been solidly positive. The U.S. economy has benefited not just from good business conditions domestically, but also from strong expansions in overseas markets. Even though the Federal Reserve has raised short-term interest rates three times over the past year, rates overall remain subdued.
As a result, the level of financial stress in the economy is at historically low levels. Over the last year, this led to very low levels of volatility in the stock market, a condition that may not repeat in 2018. Even so, economic fundamentals remain positive, and the passage of significant tax reform legislation in December should provide a boost to both consumer spending and corporate profits. We remain optimistic about another good year for stocks in 2018, albeit with a more normal level of volatility.
Low unemployment and strong GDP growth have contributed to the highest recorded levels of consumer confidence since the late 1990s. Job growth has remained strong throughout the past year, and signs have emerged recently of stronger wage gains as well. Tax cuts should be hitting paychecks early in 2018 for most consumers, with potentially further positive effects for confidence readings. |
Investor confidence has surged as well, helped by extraordinarily low levels of market volatility. The S&P 500 is on track to go 68 weeks without having posted a 2% weekly drop, the longest such stretch for the Index since 1965.2 Perhaps even more impressive is the fact that the S&P 500 posted a positive total return in each month in 2017, the first time ever that the Index did not have at least one month of negative returns in a calendar year. We will go out on a limb and suggest that it is highly unlikely that this will be repeated in 2018. However, while returns may be negative over some shorter-term periods in 2018, we are still optimistic about the year as a whole.
A key reason for optimism is the ongoing rebound in corporate profits. From their lowest point in 2008, corporate profits have gained 176%,3 undermining the notion that gains in stock prices in recent years have been attributable only to low interest rates (although low rates have definitely helped). The tax reform legislation passed in December lowers the corporate tax rate from 35% to 21%, allows the immediate expensing of certain capital expenditures and changes the rules on profits that U.S. companies earn overseas. Together, these measures should increase corporate cash flows in future years and provide further fundamental underpinning for the stock market.
A review of the past year would not be complete without at least a brief mention of cryptocurrencies. A cryptocurrency is a digital asset designed to work as currency, utilizing encryption techniques to secure transactions and control the creation of additional currency units. Bitcoin is the most widely known cryptocurrency, and its price soared 1,204% in 2017, although not without incurring several 20%+ declines during the year, including a 34% decline over the last two weeks of December. Believers in cryptocurrencies say that “virtual” currencies could eventually supersede traditional currencies, due to their potential ease of use, anonymity and limitations on their eventual supply. However, the incredible volatility of Bitcoin over the past year suggests that it is highly inefficient as a medium of exchange. In addition, the supply of cryptocurrencies is growing, potentially driving down prices. There are now 26 |
cryptocurrencies with total market values over $1 billion, while only Bitcoin and Ethereum were in that range a year ago. While intriguing from an intellectual standpoint, we believe that the Bitcoin phenomenon is more akin to a speculative bubble than a replacement for traditional currencies.
In the world of traditional currencies, we continue to favor stocks. Strong economic conditions and rising corporate profits should continue to provide support for higher stock prices in 2018. However, consideration of individual stock valuations is likely to become even more important, given the price gains in the market over the past year. We continue to favor companies in the technology, consumer discretionary, health care and industrials sectors that have especially good combinations of growth opportunities and reasonable valuations.
PERFORMANCE REVIEW
For the year 2017 our selections in the industrial sector along with our under weighted position in the consumer staples sector made the most positive contribution to relative returns for the year. Notable performers over the period include Boeing (+95%), Lam Research (+76%) and Rockwell (+49%). On the negative side, our selections in consumer discretionary and information technology sectors detracted the most from our relative performance for the year. Notable underperformers include Dicks Sporting Goods (-43%), Kroger (-35%) and AutoZone (-29%). The Fund’s attention to valuations provided an additional headwind to relative performance, as high growth and momentum factors significantly outperformed value-oriented factors during the period.
1U.S. Bureau of Labor Statistics
2Bloomberg
3FactSet Earnings Insight
This commentary reflects the viewpoint of the portfolio manager, The Renaissance Group LLC, as of December 31, 2017, and is not intended as a forecast or guarantee of future results and is subject to change without notice. |
4 |
AMG Renaissance Large Cap Growth Fund Portfolio Manager’s Comments (continued) |
5 |
AMG Renaissance Large Cap Growth Fund Fund Snapshots (unaudited) December 31, 2017 |
Because a fund’s strategy may result in multiple investments in particular sectors of the economy, its performance may depend on the performance of those sectors and may fluctuate more widely than investments diversified across more sectors. For additional information on these and other risk considerations, please see the Fund’s prospectus.
Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.
6 |
AMG Renaissance Large Cap Growth Fund Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
7 |
AMG Renaissance Large Cap Growth Fund Schedule of Portfolio Investments (continued) |
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks† |
$ | 182,496,082 | — | — | $ | 182,496,082 | ||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | $ | 1,649,531 | — | 1,649,531 | |||||||||||
Other Investment Companies |
364,169 | — | — | 364,169 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 182,860,251 | $ | 1,649,531 | — | $ | 184,509,782 | |||||||||
|
|
|
|
|
|
|
|
† | 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. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements. |
8 |
AMG Renaissance International Equity Fund Portfolio Manager’s Comments (unaudited) |
For the fiscal year ended December 31, 2017, the AMG Renaissance International Equity Fund (Class Z) (the “Fund”) returned 26.97%, compared to the 27.19% return for the MSCI All Country World ex-USA Index.
MARKET OVERVIEW
International equity markets finished 2017 on a strong note, propelling the MSCI ACWI ex-USA to a 27% gain (in U.S. Dollars) for the year and marking the first time since 2012 that foreign markets outpaced the S&P 500®. Favorable economic readings from Europe, China and the U.S. were more than enough to assuage geopolitical fears ranging from Brexit negotiations to the nuclear ambitions of North Korea. Indicative of the broad economic strength around the globe, the JPMorgan Global PMI Index reached multi-year highs in November and showed strength in both the manufacturing and services components.
Foreign index returns were led by emerging markets, which gained 7.4% for the fourth quarter and 37.3% for the year as measured by the MSCI Emerging Markets Index. After an 11.2% rise in 2016, some investors are wondering if emerging markets may run out of steam in 2018. To put the gains in perspective, based on relative returns going back to the late 1980s, recent emerging market returns do not look excessive, and we may be in a situation of emerging markets performance simply catching up to U.S. markets.
The consistent theme of growth stocks outperforming value stocks in 2017 continued through the fourth quarter. For the year, the MSCI ACWI ex USA Growth Index climbed 32.0% compared to a 22.7% gain in the Value index. Growth stocks beat value stocks across the market cap spectrum and within developed and emerging market indices. Another theme that prevailed throughout 2017 was the decline of the U.S. Dollar, with the weaker greenback adding 9% to U.S. Dollar denominated returns of the MSCI ACWI ex-USA Index and helping ease the pain from the U.S. Dollar’s strength from 2013 to 2016.
During the fourth quarter, European politics also grabbed headlines with the focus on the inability of Germany’s Chancellor Angela Merkel’s Christian Democratic Union (CDU) party to form a new coalition government following September’s national elections. Despite the uncertainty, the German DAX Index still gained for the quarter. Brexit negotiations continued, although attention late in the year was on the first rate hike by the Bank of England since the |
middle of 2007. The widely expected move was in response to higher inflation brought on in part from the weaker pound following the Brexit vote in 2016.
Also boosting markets across the globe was the continued strength of the U.S. economy, which looks to solidify its 2018 economic growth prospects after Congress passed major tax reforms. A positive outlook for the U.S. should lift the economic tide for many nations. According to the October World Economic Outlook from the International Monetary Fund, global GDP growth for 2017 is estimated at 3.6%, rising to 3.7% in 2018, with both estimates up from earlier projections in April.
Breaking down GDP growth by emerging and developed countries, emerging markets have accounted for a large portion of overall global growth, and we believe this is likely to continue for years to come.
China remains the largest driver of world economic growth, and the Fund is positioned to take advantage of this opportunity, with an approximately 14% weighting to China/Hong Kong. One of the concerns with China’s growth has been growing debt levels relative to GDP. While the debt load has increased in recent years, China’s household debt burden compared to major developed countries is still very manageable. Furthermore, China is moving from a period of rapid growth to “a stage of high quality development,” as reported after the 19th National Congress held in October. This focus on quality should alleviate concerns of a debt bubble forming in China.
PERFORMANCE REVIEW
For the year 2017, our selections in both the information technology and materials sectors made the most positive contribution to relative returns for the year. Notable performers over the period include NetEase (+62%) and Akzo Nobel (+49%). On the negative side, our selections in consumer discretionary and health care sectors detracted the most from our relative performance for the year. Notable underperformers include Pandora (-14%) and Sanofi (-12%).
The energy sector performed well in the Fund and was the second best performing sector in our benchmark for the quarter. Crude oil (West Texas Intermediate) gained 16.8% for the final three months of the year, putting the 2017 gain at 12.3%. We remain underweight in the energy sector relative to our benchmark and believe crude oil prices are likely |
range-bound in the near term as OPEC continues to curb production while U.S. shale production puts pressure on the supply side of the equation. One of the biggest potential boosts to energy prices is the continued increase in demand from China. China’s demand for oil has increased dramatically over the last 15 years, but other countries such as the United States and Japan have decreased their appetite for oil. Until we see a clearer picture of crude oil supply/demand dynamics, we will likely remain underweight in the energy sector.
Looking at performance by region, we enjoyed the most success in the Asia/Pacific area where we averaged an almost 40% weighting. Our Chinese holdings contributed the most to returns, while India detracted. Western Europe, our largest regional weight at 46%, was our weakest performing region as positive contributions from Germany were negated by poor returns in Denmark.
POSITIONING AND OUTLOOK
Relative to our benchmark, we ended the year with our largest overweights to the information technology sector, followed by consumer discretionary. We believe that attractive investment opportunities exist in higher growth areas such as semiconductors, autos and leisure, while the Fund remains underweight in slower growth sectors such as financials and consumer staples. Additionally, we remain overweight to emerging markets in the Fund as the asset class offers both better growth rates and attractive valuation.
Although the advances in global equity markets in 2017 were not unprecedented, what was unusual was the lack of volatility, as evidenced by the fact that the MSCI ACWI ex-USA was positive each month of the year. Many market prognosticators look for continued gains in 2018, buoyed in part by good earnings growth. According to earnings estimates compiled by FactSet, international firms are expected to increase 2018 earnings per share close to 10% year-over-year, well above the 4.5% average yearly growth rate since 2005.
Despite the run-up in foreign markets this year, we believe market valuations remain attractive compared to U.S. markets. Favorable valuations are a positive for international equity markets, but one concern for investors is the potential rise in inflation as economies expand. It is unlikely, though, that inflation will rise enough to offset positive growth, even as the U.S. Federal Reserve looks to move rates higher in 2018 and other major central banks look to |
9 |
AMG Renaissance International Equity Fund Portfolio Manager’s Comments (continued) |
taper their monetary easing programs. Despite the almost 50% return in emerging markets since the end of 2015, we believe the asset class still presents opportunities. While emerging markets account for 34% of world GDP, those same countries only represent 21% of global market capitalization, suggesting that emerging equity markets have ample room to expand. | With market sentiment seemingly overwhelmingly bullish, we remain optimistic for 2018, but also cautious given the many uncertainties in the market. We have learned in managing international portfolios for over 23 years that market volatility will inevitably pick up, and we believe that as active | managers we will be able to position the Fund to capitalize on the changing landscape while mitigating risk.
This commentary reflects the viewpoints of The Renaissance Group LLC as of December 31, 2017 and is not intended as a forecast or guarantee of future results. |
10 |
AMG Renaissance International Equity Fund Portfolio Manager’s Comments (continued) |
11 |
AMG Renaissance International Equity Fund Fund Snapshots (unaudited) December 31, 2017 |
Because a fund’s strategy may result in multiple investments in particular sectors of the economy, its performance may depend on the performance of those sectors and may fluctuate more widely than investments diversified across more sectors. For additional information on these and other risk considerations, please see the Fund’s prospectus.
Any sectors, industries, or securities discussed should not be perceived as investment recommendations. Mention of a specific security should not be considered a recommendation to buy or solicitation to sell that security. Specific securities mentioned in this report may have been sold from the Fund’s portfolio of investments by the time you receive this report.
12 |
AMG Renaissance International Equity Fund Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
13 |
AMG Renaissance International Equity Fund Schedule of Portfolio Investments (continued) |
The accompanying notes are an integral part of these financial statements. |
14 |
AMG Renaissance International 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 December 31, 2017:
Level 1 | Level 2† | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks |
||||||||||||||||
Industrials |
$ | 437,687 | $ | 45,779 | — | $ | 483,466 | |||||||||
Information Technology |
482,555 | — | — | 482,555 | ||||||||||||
Financials |
399,538 | 48,658 | — | 448,196 | ||||||||||||
Consumer Discretionary |
444,735 | — | — | 444,735 | ||||||||||||
Materials |
293,120 | 44,353 | — | 337,473 | ||||||||||||
Telecommunication Services |
139,083 | 50,712 | — | 189,795 | ||||||||||||
Health Care |
88,598 | 42,615 | — | 131,213 | ||||||||||||
Energy |
48,483 | 52,907 | — | 101,390 | ||||||||||||
Consumer Staples |
94,752 | — | — | 94,752 | ||||||||||||
Utilities |
41,158 | — | — | 41,158 | ||||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | 247,500 | — | 247,500 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$ | 2,469,709 | $ | 532,524 | — | $ | 3,002,233 | |||||||||
|
|
|
|
|
|
|
|
† | As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.) |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements. |
15 |
Statement of Assets and Liabilities December 31, 2017 |
AMG Renaissance Large Cap Growth Fund |
AMG Renaissance International Equity Fund |
|||||||
Assets: |
||||||||
Investments at Value* (including securities on loan valued at $1,586,205, and $240,704, respectively) |
$184,509,782 | $3,002,233 | ||||||
Foreign currency** |
— | 659 | ||||||
Receivable for investments sold |
2,611,902 | 43,818 | ||||||
Dividend, interest and other receivables |
56,204 | 4,428 | ||||||
Receivable for Fund shares sold |
42,270 | — | ||||||
Receivable from affiliate |
9,631 | 8,106 | ||||||
Prepaid expenses |
21,444 | 11,006 | ||||||
Total assets |
187,251,233 | 3,070,250 | ||||||
Liabilities: |
||||||||
Payable upon return of securities loaned |
1,649,531 | 247,500 | ||||||
Payable for Fund shares repurchased |
164,458 | — | ||||||
Due to custodian |
— | 877 | ||||||
Accrued expenses: |
||||||||
Investment advisory and management fees |
72,922 | 960 | ||||||
Administrative fees |
23,763 | 360 | ||||||
Distribution fees |
15,139 | 56 | ||||||
Shareholder service fees |
7,903 | 214 | ||||||
Professional fees |
35,093 | 29,988 | ||||||
Trustee fees and expenses |
1,925 | 29 | ||||||
Other |
23,984 | 8,240 | ||||||
Total liabilities |
1,994,718 | 288,224 | ||||||
|
| |||||||
Net Assets |
$185,256,515 | $2,782,026 | ||||||
* Investments at cost |
$160,265,897 | $2,524,917 | ||||||
** Foreign currency at cost |
— | $659 |
The accompanying notes are an integral part of these financial statements. |
16 |
Statement of Assets and Liabilities (continued) |
AMG Renaissance Large Cap Growth Fund |
AMG Renaissance International Equity Fund |
|||||||
Net Assets Represent: |
||||||||
Paid-in capital |
$158,874,055 | $2,690,899 | ||||||
Undistributed (distribution in excess of) net investment income |
3,681 | (8,672 | ) | |||||
Accumulated net realized gain (loss) from investments |
2,134,894 | (377,517 | ) | |||||
Net unrealized appreciation on investments |
24,243,885 | 477,316 | ||||||
Net Assets |
$185,256,515 | $2,782,026 | ||||||
Class N: |
||||||||
Net Assets |
$70,780,792 | $193,472 | ||||||
Shares outstanding |
5,044,437 | 18,268 | ||||||
Net asset value, offering and redemption price per share |
$14.03 | $10.59 | ||||||
Class I: |
||||||||
Net Assets |
$13,635,293 | $588,884 | ||||||
Shares outstanding |
962,566 | 55,811 | ||||||
Net asset value, offering and redemption price per share |
$14.17 | $10.55 | ||||||
Class Z: |
||||||||
Net Assets |
$100,840,430 | $1,999,670 | ||||||
Shares outstanding |
7,201,566 | 189,436 | ||||||
Net asset value, offering and redemption price per share |
$14.00 | $10.56 |
The accompanying notes are an integral part of these financial statements. |
17 |
For the fiscal year ended December 31, 2017 |
AMG Renaissance Large Cap Growth Fund |
AMG Renaissance International Equity Fund | |||||||||
Investment Income: |
||||||||||
Dividend income |
$1,975,747 | $64,345 | ||||||||
Securities lending income |
3,890 | 10,924 | ||||||||
Foreign withholding tax |
— | (7,471 | ) | |||||||
Total investment income |
1,979,637 | 67,798 | ||||||||
Expenses: |
||||||||||
Investment advisory and management fees |
601,712 | 10,257 | ||||||||
Administrative fees |
183,759 | 3,846 | ||||||||
Distribution fees - Class N |
79,157 | 899 | ||||||||
Shareholder servicing fees - Class N |
38,194 | 596 | ||||||||
Shareholder servicing fees - Class I |
14,480 | 458 | ||||||||
Professional fees |
41,672 | 32,847 | ||||||||
Registration fees |
61,561 | 53,410 | ||||||||
Transfer agent fees |
17,695 | 416 | ||||||||
Custodian fees |
9,717 | 9,636 | ||||||||
Reports to shareholders |
33,388 | 3,260 | ||||||||
Trustee fees and expenses |
7,862 | 170 | ||||||||
Miscellaneous |
4,148 | 1,945 | ||||||||
Total expenses before offsets |
1,093,345 | 117,740 | ||||||||
Expense reimbursements |
(152,975 | ) | (93,990 | ) | ||||||
Expense reductions |
(6,473 | ) | (954 | ) | ||||||
Net expenses |
933,897 | 22,796 | ||||||||
Net investment income |
1,045,740 | 45,002 | ||||||||
Net Realized and Unrealized Gain: |
||||||||||
Net realized gain on investments |
6,272,146 | 96,867 | ||||||||
Net realized loss on foreign currency transactions |
— | (1,015 | ) | |||||||
Net change in unrealized appreciation/depreciation on investments |
17,629,825 | 432,692 | ||||||||
Net realized and unrealized gain |
23,901,971 | 528,544 | ||||||||
Net increase in net assets resulting from operations |
$24,947,711 | $573,546 |
The accompanying notes are an integral part of these financial statements. |
18 |
Statements of Changes in Net Assets For the fiscal years ended December 31, |
AMG Renaissance Large Cap Growth Fund# |
AMG Renaissance International Equity Fund# |
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Increase (Decrease) in Net Assets Resulting From Operations: |
||||||||||||||||
Net investment income |
$1,045,740 | $552,593 | $45,002 | $41,696 | ||||||||||||
Net realized gain (loss) on investments |
6,272,146 | 1,749,376 | 95,852 | (227,905 | ) | |||||||||||
Net change in unrealized appreciation/depreciation on investments |
17,629,825 | 3,950,607 | 432,692 | 93,548 | ||||||||||||
Net increase (decrease) in net assets resulting from operations |
24,947,711 | 6,252,576 | 573,546 | (92,661 | ) | |||||||||||
Distributions to Shareholders: |
||||||||||||||||
From net investment income: |
||||||||||||||||
Class N |
(328,989 | ) | (12,054 | ) | (2,081 | ) | (7,871 | ) | ||||||||
Class I |
(70,668 | ) | (94,667 | ) | (10,255 | ) | (4,116 | ) | ||||||||
Class Z |
(642,121 | ) | (447,027 | ) | (36,068 | ) | (35,776 | ) | ||||||||
From net realized gain on investments: |
||||||||||||||||
Class N |
(1,856,088 | ) | (41,286 | ) | — | — | ||||||||||
Class I |
(353,807 | ) | (205,073 | ) | — | — | ||||||||||
Class Z |
(2,667,271 | ) | (778,779 | ) | — | — | ||||||||||
From paid in capital: |
||||||||||||||||
Class N |
— | — | — | (3,077 | ) | |||||||||||
Class I |
— | — | — | (1,609 | ) | |||||||||||
Class Z |
— | — | — | (13,989 | ) | |||||||||||
Total distributions to shareholders |
(5,918,944 | ) | (1,578,886 | ) | (48,404 | ) | (66,438 | ) | ||||||||
Capital Share Transactions:1 |
||||||||||||||||
Net increase (decrease) from capital share transactions |
94,519,228 | 3,346,471 | 202,393 | (906,207 | ) | |||||||||||
Total increase (decrease) in net assets |
113,547,995 | 8,020,161 | 727,535 | (1,065,306 | ) | |||||||||||
Net Assets: |
||||||||||||||||
Beginning of year |
71,708,520 | 63,688,359 | 2,054,491 | 3,119,797 | ||||||||||||
End of year |
$185,256,515 | $71,708,520 | $2,782,026 | $2,054,491 | ||||||||||||
End of year undistributed (distribution in excess of) net investment income |
$3,681 | — | $(8,672 | ) | $(5,591 | ) | ||||||||||
|
|
|
|
|
|
|
|
# | Effective October 1, 2016, the Funds’ share classes were renamed as described in Note 1 of the Notes to the Financial Statements. |
1 | See Note 1(g) of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements. |
19 |
AMG Renaissance Large Cap Growth Fund For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$11.86 | $11.10 | $11.51 | $11.80 | $11.63 | |||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.08 | 0.04 | 0.01 | 0.03 | 0.01 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
2.54 | 0.94 | (0.18 | ) | 2.30 | 3.95 | ||||||||||||||
Total income (loss) from investment operations |
2.62 | 0.98 | (0.17 | ) | 2.33 | 3.96 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.07 | ) | (0.05 | ) | – | (0.03 | ) | (0.08 | ) | |||||||||||
Net realized gain on investments |
(0.38 | ) | (0.17 | ) | (0.24 | ) | (2.59 | ) | (3.71 | ) | ||||||||||
Total distributions to shareholders |
(0.45 | ) | (0.22 | ) | (0.24 | ) | (2.62 | ) | (3.79 | ) | ||||||||||
Net Asset Value, End of Year |
$14.03 | $11.86 | $11.10 | $11.51 | $11.80 | |||||||||||||||
Total Return2 |
22.03 | %3 | 8.81 | %3 | (1.53 | )%3 | 19.59 | % | 34.17 | % | ||||||||||
Ratio of net expenses to average net assets4 |
1.02 | % | 1.15 | % | 1.14 | % | 1.14 | % | 1.17 | %5 | ||||||||||
Ratio of gross expenses to average net assets6 |
1.16 | % | 1.44 | % | 1.58 | % | 1.97 | % | 1.71 | %5 | ||||||||||
Ratio of net investment income to average net assets2 |
0.59 | % | 0.39 | % | 0.09 | % | 0.23 | % | 0.10 | %5 | ||||||||||
Portfolio turnover |
33 | % | 37 | % | 48 | % | 60 | % | 53 | % | ||||||||||
Net assets end of year (000’s) omitted |
$70,781 | $3,069 | $2,533 | $7,239 | $984 | |||||||||||||||
20 |
AMG Renaissance Large Cap Growth Fund Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||
Class I | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$11.94 | $11.17 | $11.59 | $11.87 | $11.68 | |||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.11 | 0.08 | 0.06 | 0.07 | 0.07 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
2.58 | 0.94 | (0.20 | ) | 2.33 | 3.97 | ||||||||||||||
Total income (loss) from investment operations |
2.69 | 1.02 | (0.14 | ) | 2.40 | 4.04 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.08 | ) | (0.08 | ) | (0.04 | ) | (0.05 | ) | (0.11 | ) | ||||||||||
Net realized gain on investments |
(0.38 | ) | (0.17 | ) | (0.24 | ) | (2.63 | ) | (3.74 | ) | ||||||||||
Total distributions to shareholders |
(0.46 | ) | (0.25 | ) | (0.28 | ) | (2.68 | ) | (3.85 | ) | ||||||||||
Net Asset Value, End of Year |
$14.17 | $11.94 | $11.17 | $11.59 | $11.87 | |||||||||||||||
Total Return2 |
22.46 | %3 | 9.12 | %3 | (1.23 | )%3 | 20.08 | %3 | 34.75 | %3 | ||||||||||
Ratio of net expenses to average net assets4 |
0.76 | % | 0.81 | % | 0.80 | % | 0.75 | % | 0.77 | %5 | ||||||||||
Ratio of gross expenses to average net assets6 |
0.90 | % | 1.10 | % | 1.23 | % | 1.59 | % | 1.30 | %5 | ||||||||||
Ratio of net investment income to average net assets2 |
0.85 | % | 0.73 | % | 0.52 | % | 0.51 | % | 0.49 | %5 | ||||||||||
Portfolio turnover |
33 | % | 37 | % | 48 | % | 60 | % | 53 | % | ||||||||||
Net assets end of year (000’s) omitted |
$13,635 | $14,173 | $17,189 | $14,343 | $11,336 | |||||||||||||||
21 |
AMG Renaissance Large Cap Growth Fund Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||
Class Z | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$ | 11.81 | $ | 11.04 | $ | 11.45 | $ | 11.76 | $ | 11.58 | ||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.13 | 0.10 | 0.09 | 0.08 | 0.08 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
2.53 | 0.94 | (0.21 | ) | 2.31 | 3.94 | ||||||||||||||
Total income (loss) from investment operations |
2.66 | 1.04 | (0.12 | ) | 2.39 | 4.02 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.09 | ) | (0.10 | ) | (0.05 | ) | (0.07 | ) | (0.13 | ) | ||||||||||
Net realized gain on investments |
(0.38 | ) | (0.17 | ) | (0.24 | ) | (2.63 | ) | (3.71 | ) | ||||||||||
Total distributions to shareholders |
(0.47 | ) | (0.27 | ) | (0.29 | ) | (2.70 | ) | 3.84 | |||||||||||
Net Asset Value, End of Year |
$ | 14.00 | $ | 11.81 | $ | 11.04 | $ | 11.45 | $ | 11.76 | ||||||||||
Total Return2 |
22.50 | %3 | 9.38 | %3 | (1.06 | )%3 | 20.15 | %3 | 34.95 | %3 | ||||||||||
Ratio of net expenses to average net assets4 |
0.65 | % | 0.65 | % | 0.64 | % | 0.64 | % | 0.67 | %5 | ||||||||||
Ratio of gross expenses to average net assets6 |
0.79 | % | 0.94 | % | 1.07 | % | 1.51 | % | 1.16 | %5 | ||||||||||
Ratio of net investment income to average net assets2 |
0.96 | % | 0.89 | % | 0.76 | % | 0.63 | % | 0.58 | %5 | ||||||||||
Portfolio turnover |
33 | % | 37 | % | 48 | % | 60 | % | 53 | % | ||||||||||
Net assets end of year (000’s) omitted |
$ | 100,840 | $ | 54,467 | $ | 43,966 | $ | 8,184 | $ | 3,612 | ||||||||||
# | Effective October 1, 2016, Investor Class, Service Class and Institutional Class were renamed Class N, Class I and Class Z, respectively. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
4 | Includes reduction from broker recapture amounting to less than 0.01%, 0.01%, 0.02%, 0.02% and 0.01%, for the years ended 2017, 2016, 2015, 2014, 2013, respectively. |
5 | Includes non-routine extraordinary expenses amounting to 0.019%, 0.019% and 0.021% of average net assets for the Class N, Class I and Class Z, respectively. |
6 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
22 |
AMG Renaissance International Equity Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal years ended December 31, | For the fiscal period ended December 31, | |||||||||||||||||||
Class N |
2017 | 2016# | 2015 | 2014* | ||||||||||||||||
Net Asset Value, Beginning of Period |
$8.47 | $8.90 | $9.13 | $10.00 | ||||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.14 | 0.12 | 0.06 | 3 | 0.03 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
2.10 | (0.33 | ) | (0.20 | ) | (0.87 | ) | |||||||||||||
Total income (loss) from investment operations |
2.24 | (0.21 | ) | (0.14 | ) | (0.84 | ) | |||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.12 | ) | (0.16 | ) | (0.09 | ) | (0.03 | ) | ||||||||||||
Paid in capital |
– | (0.06 | ) | – | – | |||||||||||||||
Total distributions to shareholders |
(0.12 | ) | (0.22 | ) | (0.09 | ) | (0.03 | ) | ||||||||||||
Net Asset Value, End of Period |
$10.59 | $8.47 | $8.90 | $9.13 | ||||||||||||||||
Total Return2 |
26.39 | %4 | (2.37 | )%4 | (1.56 | )% | (8.45 | )%5 | ||||||||||||
Ratio of net expenses to average net assets6 |
1.23 | % | 1.30 | % | 1.29 | % | 1.12 | %7 | ||||||||||||
Ratio of gross expenses to average net assets8 |
4.94 | % | 4.00 | % | 4.78 | % | 7.85 | %7 | ||||||||||||
Ratio of net investment income to average net assets2 |
1.41 | % | 1.36 | % | 0.68 | % | 0.49 | %7 | ||||||||||||
Portfolio turnover |
52 | % | 93 | % | 46 | % | 20 | %5 | ||||||||||||
Net assets end of period (000’s) omitted |
$193 | $357 | $1,010 | $85 | ||||||||||||||||
23 |
AMG Renaissance International Equity Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal years ended December 31, | For the fiscal period ended December 31, | |||||||||||||||||||
Class I |
2017 | 2016# | 2015 | 2014* | ||||||||||||||||
Net Asset Value, Beginning of Period |
$8.47 | $8.93 | $9.12 | $10.00 | ||||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.17 | 0.13 | 0.11 | 3 | 0.05 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
2.10 | (0.31 | ) | (0.21 | ) | (0.89 | ) | |||||||||||||
Total income (loss) from investment operations |
2.27 | (0.18 | ) | (0.10 | ) | (0.84 | ) | |||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.19 | ) | (0.20 | ) | (0.09 | ) | (0.04 | ) | ||||||||||||
Paid in capital |
– | (0.08 | ) | – | – | |||||||||||||||
Total distributions to shareholders |
(0.19 | ) | (0.28 | ) | (0.09 | ) | (0.04 | ) | ||||||||||||
Net Asset Value, End of Period |
$10.55 | $8.47 | $8.93 | $9.12 | ||||||||||||||||
Total Return2 |
26.77 | %4 | (2.02 | )%4 | (1.11 | )%4 | (8.36 | )%4,5 | ||||||||||||
Ratio of net expenses to average net assets6 |
0.93 | % | 0.90 | % | 0.87 | % | 0.87 | %7 | ||||||||||||
Ratio of gross expenses to average net assets8 |
4.64 | % | 4.00 | % | 4.28 | % | 7.98 | %7 | ||||||||||||
Ratio of net investment income to average net assets2 |
1.71 | % | 1.54 | % | 1.17 | % | 0.86 | %7 | ||||||||||||
Portfolio turnover |
52 | % | 93 | % | 46 | % | 20 | %5 | ||||||||||||
Net assets end of period (000’s) omitted |
$589 | $179 | $177 | $100 | ||||||||||||||||
24 |
AMG Renaissance International Equity Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal years ended December 31, | For the fiscal period ended December 31, | |||||||||||||||||||
Class Z |
2017 | 2016# | 2015 | 2014* | ||||||||||||||||
Net Asset Value, Beginning of Period |
$8.47 | $8.92 | $9.12 | $10.00 | ||||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.18 | 0.15 | 0.13 | 3 | 0.05 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
2.10 | (0.31 | ) | (0.23 | ) | (0.88 | ) | |||||||||||||
Total income (loss) from investment operations |
2.28 | (0.16 | ) | (0.10 | ) | (0.83 | ) | |||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.19 | ) | (0.21 | ) | (0.10 | ) | (0.05 | ) | ||||||||||||
Paid in capital |
– | (0.08 | ) | – | – | |||||||||||||||
Total distributions to shareholders |
(0.19 | ) | (0.29 | ) | (0.10 | ) | (0.05 | ) | ||||||||||||
Net Asset Value, End of Period |
$10.56 | $8.47 | $8.92 | $9.12 | ||||||||||||||||
Total Return2 |
26.97 | %4 | (1.83 | )%4 | (1.08 | )%4 | (8.32 | )%4,5 | ||||||||||||
Ratio of net expenses to average net assets6 |
0.81 | % | 0.80 | % | 0.79 | % | 0.76 | %7 | ||||||||||||
Ratio of gross expenses to average net assets8 |
4.52 | % | 3.79 | % | 4.03 | % | 7.70 | %7 | ||||||||||||
Ratio of net investment income to average net assets2 |
1.83 | % | 1.71 | % | 1.34 | % | 0.91 | %7 | ||||||||||||
Portfolio turnover |
52 | % | 93 | % | 46 | % | 20 | %5 | ||||||||||||
Net assets end of period (000’s) omitted |
$2,000 | $1,519 | $1,933 | $1,944 | ||||||||||||||||
# | Effective October 1, 2016, Investor Class, Service Class and Institutional Class were renamed Class N, Class I and Class Z, respectively. |
* | Commencement of operations was on June 16, 2014. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $0.05, $0.10, $0.12 for the Class N, Class I and Class Z, respectively. |
4 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
5 | Not annualized. |
6 | Includes reduction from broker recapture amounting to 0.04%, 0.05% and 0.06% for the years ended December 31, 2017, December 31, 2016 and December 31, 2015, and Class N 0.10%, Class I and Class Z 0.09% for the period ended December 31, 2014, respectively. |
7 | Annualized. |
8 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
25 |
December 31, 2017 |
26 |
Notes to Financial Statements (continued) |
The tax character of distributions paid during the fiscal years ended December 31, 2017 and December 31, 2016 were as follows:
Large Cap Growth
|
International Equity
|
|||||||||||||||
Distributions paid from:
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
Ordinary income |
$1,042,059 | $552,593 | $48,404 | $47,763 | ||||||||||||
Short-term capital gains |
393,247 | 259,317 | — | — | ||||||||||||
Long-term capital gains |
4,483,638 | 766,976 | — | — | ||||||||||||
Return of capital
|
— | — | — | 18,675 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$5,918,944 | $1,578,886 | $48,404 | $66,438 | |||||||||||||
|
|
|
|
|
|
|
|
27 |
Notes to Financial Statements (continued) |
As of December 31, 2017, the components of distributable earnings (excluding unrealized appreciation/depreciation) on tax basis consisted of:
Large Cap Growth | International Equity | |||||||
Capital loss carryforward |
— | $244,507 | ||||||
Undistributed ordinary income |
$3,681 | — | ||||||
Undistributed short-term capital gains |
— | — | ||||||
Undistributed long-term capital gains |
2,177,168 | — | ||||||
Late-year loss deferral |
— | 1,194 |
At December 31, 2017, the approximate cost of investments and the aggregate gross unrealized appreciation and depreciation for federal income tax were as follows:
Fund | Cost | Appreciation | Depreciation | Net | ||||||||||||
Large Cap Growth |
$160,308,171 | $27,490,645 | $(3,289,034 | ) | $24,201,611 | |||||||||||
International Equity |
2,665,405 | 525,333 | (188,505 | ) | 336,828 |
For the fiscal years ended December 31, 2017 and December 31, 2016, the capital stock transactions by class for the Funds were as follows:
Large Cap Growth | International Equity | |||||||||||||||||||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Class N: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
275,368 | $3,582,061 | 138,761 | $1,589,266 | 131,227 | $1,271,713 | 197,520 | $1,723,821 | ||||||||||||||||||||||||
Reinvestment of distributions |
133,176 | 1,877,777 | 4,416 | 53,340 | 197 | 2,081 | 1,266 | 10,712 |
28 |
Notes to Financial Statements (continued) |
Large Cap Growth | International Equity | |||||||||||||||||||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Proceeds from sale of shares issued in connection with merger# |
4,949,178 | $65,580,049 | — | — | — | — | — | — | ||||||||||||||||||||||||
Cost of shares repurchased |
(572,038 | ) | (7,719,590 | ) | (112,631 | ) | $(1,251,597 | ) | (155,265 | ) | $(1,520,989 | ) | (270,158 | ) | $(2,310,451 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
4,785,684 | $63,320,297 | 30,546 | $391,009 | (23,841 | ) | $(247,195 | ) | (71,372 | ) | $(575,918 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class I: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
314,464 | $4,224,154 | 172,150 | $1,951,891 | 40,197 | $411,257 | 627 | $5,438 | ||||||||||||||||||||||||
Reinvestment of distributions |
28,966 | 412,187 | 24,439 | 297,441 | 973 | 10,255 | 676 | 5,725 | ||||||||||||||||||||||||
Proceeds from sale of shares issued in connection with merger# |
357,760 | 4,782,255 | — | — | — | — | — | — | ||||||||||||||||||||||||
Cost of shares repurchased |
(925,238 | ) | (12,162,312 | ) | (549,050 | ) | (6,135,507 | ) | (6,497 | ) | (67,992 | ) | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
(224,048 | ) | $(2,743,716 | ) | (352,461 | ) | $(3,886,175 | ) | 34,673 | $353,520 | 1,303 | $11,163 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class Z: |
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
978,783 | $12,649,655 | 1,447,385 | $15,950,625 | 6,674 | $60,000 | 7,377 | $62,517 | ||||||||||||||||||||||||
Reinvestment of distributions |
155,290 | 2,184,928 | 47,804 | 575,081 | 3,422 | 36,068 | 5,882 | 49,765 | ||||||||||||||||||||||||
Proceeds from sale of shares issued in connection with merger# |
2,961,729 | 39,171,054 | — | — | — | — | — | — | ||||||||||||||||||||||||
Cost of shares repurchased |
(1,505,944 | ) | (20,062,990 | ) | (864,683 | ) | (9,684,069 | ) | — | — | (50,512 | ) | (453,734 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
2,589,858 | $33,942,647 | 630,506 | $6,841,637 | 10,096 | $96,068 | (37,253 | ) | $(341,452 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# See Note 8 of the Notes to Financial Statements.
At December 31, 2017, certain unaffiliated shareholders of record held greater than 10% of the net assets of the Funds as follows: International Equity - two own 61%. Transactions by these shareholders may have a material impact on their respective Fund.
29 |
Notes to Financial Statements (continued) |
30 |
Notes to Financial Statements (continued) |
31 |
Notes to Financial Statements (continued) |
The following table is a summary of the Funds’ open Repurchase Agreements that are subject to a master netting agreement as of December 31, 2017:
Gross Amount Not Offset in the Statement of Assets and Liabilities |
||||||||
Fund | Net Amounts of Assets Presented in the Statement of Assets and Liabilities |
Financial Instruments Collateral |
Cash Collateral Received |
Net Amount | ||||
Large Cap Growth |
||||||||
Cantor Fitzgerald Securities, Inc. |
$649,531 | $649,531 | — | — | ||||
State of Wisconsin Investment Board |
1,000,000 | 1,000,000 | — | — | ||||
|
|
|
| |||||
Totals |
$1,649,531 | $1,649,531 | — | — | ||||
|
|
|
| |||||
International Equity |
||||||||
State of Wisconsin Investment Board |
$247,500 | $247,500 | — | — | ||||
|
|
|
|
32 |
|
33 |
|
TAX INFORMATION
RESULTS OF SHAREHOLDER MEETING
At a special meeting of shareholders of AMG Managers Cadence Capital Appreciation Fund (“Cadence”), held on July 20, 2017, the shareholders of Cadence voted on the following proposal:
Number of Eligible Voters | ||||||||||||||||
Proposal 1 | For | Broker Non-Votes |
Against | Abstain | ||||||||||||
Approve an Agreement and Plan or Reorganization |
1,168,774 | 451,776 | 39,316 | 59.109 |
34 |
AMG Funds |
The Trustees and Officers of the Trust, their business addresses, principal occupations for the past five years and ages are listed below. The Trustees provide broad supervision over the affairs of the Trust and the Funds. The Trustees are experienced executives who meet periodically throughout the year to oversee the Funds’ activities, review contractual arrangements with companies that provide services to the Funds, and | review the Funds’ performance. Unless otherwise noted, the address of each Trustee or Officer is the address of the Trust: 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830.
There is no stated term of office for Trustees. Trustees serve until their resignation, retirement or removal in |
accordance with the Trust’s organizational documents and policies adopted by the Board from time to time. The Chairman of the Trustees, President, Treasurer and Secretary of the Trust are elected by the Trustees annually. Other officers hold office at the pleasure of the Trustees. |
Independent Trustees
The following Trustees are not “interested persons” of the Trust within the meaning of the 1940 Act:
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2012 • Oversees 61 Funds in Fund Complex |
Bruce B. Bingham, 69 Partner, Hamilton Partners (real estate development firm) (1987-Present); Director of The Yacktman Funds (2000-2012). | |
• Trustee since 1999 • Oversees 61 Funds in Fund Complex |
Edward J. Kaier, 72 Attorney at Law and Partner, Teeters Harvey Marrone & Kaier LLP (2007-Present); Attorney at Law and Partner, Hepburn Willcox Hamilton & Putnam, LLP (1977-2007); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Kurt A. Keilhacker, 54 Managing Member, TechFund Capital (1997-Present); Managing Member, TechFund Europe (2000-Present); Board Member, 6wind SA, (2002-Present); Managing Member, Elementum Ventures (2013-Present); Trustee, Gordon College (2001-2016). | |
• Trustee since 2004 • Oversees 61 Funds in Fund Complex |
Steven J. Paggioli, 67 Independent Consultant (2002-Present); Formerly Executive Vice President and Director, The Wadsworth Group (1986-2001); Executive Vice President, Secretary and Director, Investment Company Administration, LLC (1990-2001); Vice President, Secretary and Director, First Fund Distributors, Inc. (1991-2001); Trustee, Professionally Managed Portfolios (32 portfolios); Advisory Board Member, Sustainable Growth Advisors, LP; Independent Director, Chase Investment Counsel (2008–Present). | |
• Trustee since 2013 • Oversees 61 Funds in Fund Complex |
Richard F. Powers III, 72 Adjunct Professor, U.S. Naval War College (2016); Adjunct Professor, Boston College (2010-2013); President and CEO of Van Kampen Investments Inc. (1998-2003). | |
• Independent Chairman • Trustee since 1999 • Oversees 63 Funds in Fund Complex |
Eric Rakowski, 59 Professor, University of California at Berkeley School of Law (1990-Present); Director of Harding, Loevner Funds, Inc. (9 portfolios); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Victoria L. Sassine, 52 Lecturer, Babson College (2007 – Present). | |
• Trustee since 2004 • Oversees 61 Funds in Fund Complex |
Thomas R. Schneeweis, 70 Professor Emeritus, University of Massachusetts (2013-Present); Partner, S Capital Wealth Advisors (2015-Present); President, TRS Associates (1982-Present); Board Member, Chartered Alternative Investment Association (“CAIA”) (2002-Present); Director, CAIA Foundation (Education) (2010-Present); Director, Institute for GlobalAsset and Risk Management (Education) (2010-Present); Partner, S Capital Management, LLC (2007-2015); Director, CISDM at the University of Massachusetts, (1996-2013); President, Alternative Investment Analytics, LLC, (formerly Schneeweis Partners, LLC) (2001-2013); Professor of Finance, University of Massachusetts (1977-2013).
|
35 |
AMG Funds Trustees and Officers (continued) |
Interested Trustees
Each Trustee in the following table is an “interested person” of the Trust within the meaning of the 1940 Act. Ms. Carsman is an interested person of the Trust within the meaning of the 1940 Act by virtue of her position with, and interest in securities of, AMG.
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2011 • Oversees 63 Funds in Fund Complex |
Christine C. Carsman, 65 Executive Vice President, Deputy General Counsel and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2017-Present); Director (2010-Present) and Chair of the Board of Directors (2015-Present), AMG Funds plc; Director of Harding, Loevner Funds, Inc. (9 portfolios); Senior Vice President and Deputy General Counsel, Affiliated Managers Group, Inc. (2011-2016); Senior Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2007-2011); Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2004-2007); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2004-2011); Senior Counsel, Vice President and Director of Operational Risk Management and Compliance, Wellington Management Company, LLP (1995-2004). |
36 |
AMG Funds Trustees and Officers (continued) |
Interested Trustees
Each Trustee in the following table is an “interested person” of the Trust within the meaning of the 1940 Act. Ms. Carsman is an interested person of the Trust within the meaning of the 1940 Act by virtue of her position with, and interest in securities of, AMG.
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• President since 2014 • Principal Executive Officer since 2014 • Chief Executive Officer since 2016 |
Jeffrey T. Cerutti, 50 Chief Executive Officer, AMG Funds LLC (2014-Present); Director, President and Principal, AMG Distributors, Inc. (2014-Present); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2014-Present); Chief Executive Officer, President and Principal Executive Officer, AMG Funds IV, (2015-Present); Chief Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Executive Officer, Aston Asset Management, LLC (2016); President, VP Distributors, (2011-2014); Executive Vice President, Head of Distribution, Virtus Investment Partners, Inc. (2010-2014); Managing Director, Head of Sales, UBS Global Asset Management (2001-2010). | |
• Chief Operating Officer since 2007 |
Keitha L. Kinne, 59 Chief Operating Officer, AMG Funds LLC (2007-Present); Chief Investment Officer, AMG Funds LLC (2008-Present); Chief Operating Officer, AMG Distributors, Inc. (2007-Present); Chief Operating Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2007-Present); Chief Operating Officer, AMG Funds IV, (2016-Present); Chief Operating Officer and Chief Investment Officer, Aston Asset Management, LLC (2016); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2012-2014); Managing Partner, AMG Funds LLC (2007-2014); President, AMG Funds (2012-2014); President, AMG Distributors, Inc. (2012-2014); Managing Director, Legg Mason & Co., LLC (2006-2007); Managing Director, Citigroup Asset Management (2004-2006). | |
• Secretary since 2015 • Chief Legal Officer since 2015 |
Mark J. Duggan, 53 Senior Vice President and Senior Counsel, AMG Funds LLC (2015-Present); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2015-Present); Secretary and Chief Legal Officer, AMG Funds IV, (2015-Present); Attorney, K&L Gates, LLP (2009-2015). | |
• Chief Financial Officer since 2017 • Treasurer since 2017 • Principal Financial Officer since 2017 • Principal Accounting Officer since 2017 |
Thomas G. Disbrow, 52 Vice President, Mutual Fund Treasurer & CFO, AMG Funds, AMG Funds LLC (2017-Present); Chief Financial Officer, Principal Financial Officer, Treasurer and Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Managing Director - Global Head of Traditional Funds Product Control, UBS Asset Management (Americas), Inc. (2015-2017); Managing Director - Head of North American Funds Treasury, UBS Asset Management (Americas), Inc. (2011-2015). | |
• Chief Compliance Officer since 2016 |
Gerald F. Dillenburg, 51 Vice President, Chief Compliance Officer AMG Funds, AMG Funds LLC (2017-Present); Chief Compliance Officer AMG Funds, AMG Funds LLC (2016-2017); Chief Compliance Officer and Sarbanes Oxley Code of Ethics Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Compliance Officer, AMG Funds IV (1996-Present); Sarbanes-Oxley Code of Ethics Compliance Officer, AMG Funds IV (2016-Present); Chief Compliance Officer, Aston Asset Management, LLC (2006-2016); Chief Operating Officer, Aston Funds (2003-2016); Secretary, Aston Funds (1996-2015); Chief Financial Officer, Aston Funds (1997-2010); Chief Financial Officer, Aston Asset Management, LLC (2006-2010); Treasurer, Aston Funds (1996-2010). | |
• Deputy Treasurer since 2017 | John A. Starace, 47 Director, Mutual Fund Accounting, AMG Funds LLC (2017-Present); Vice President, Deputy Treasurer of Mutual Funds Services, AMG Funds LLC (2014-2017); Deputy Treasurer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Vice President, Citi Hedge Fund Services (2010-2014); Audit Senior Manager (2005-2010) and Audit Manager (2001-2005), Deloitte & Touche LLP. | |
• Controller since 2017 | Christopher R. Townsend, 50 Vice President, Business Finance, AMG Funds LLC (2017-Present); Head of Business Finance, AMG Funds LLC (2015-2017); Chief Financial Officer and Financial and Operations Principal, AMG Distributors, Inc. (2016-Present); Controller, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Treasurer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017); Chief Financial Officer, Aston Asset Management LLC (2016); Head of Finance and Accounting, Allianz Asset Management (2006-2015). | |
• Anti-Money Laundering Compliance Officer since 2014 |
Patrick J. Spellman, 43 Vice President, Chief Compliance Officer, AMG Funds LLC (2017-Present); Senior Vice President, Chief Compliance Officer, AMG Funds LLC (2011-2017); Chief Compliance Officer, AMG Distributors, Inc., (2010-Present); Anti-Money Laundering Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2014-Present); Anti-Money Laundering Officer, AMG Funds IV, (2016-Present); Compliance Manager, Legal and Compliance, Affiliated Managers Group, Inc. (2005-2011). | |
• Assistant Secretary since 2016 | Maureen A. Meredith, 32 Director, Counsel, AMG Funds LLC (2017-Present); Vice President, Counsel, AMG Funds LLC (2015-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2016-Present); Associate, Ropes & Gray LLP (2011-2015); Law Fellow, Massachusetts Appleseed Center for Law and Justice (2010-2011). |
37 |
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
![]() |
INVESTMENT MANAGER AND ADMINISTRATOR
AMG Funds LLC 600 Steamboat Road, Suite 300 Greenwich, CT 06830 800.835.3879
DISTRIBUTOR
AMG Distributors, Inc. 600 Steamboat Road, Suite 300 Greenwich, CT 06830 800.835.3879
SUBADVISER
The Renaissance Group LLC 625 Eden Park Drive, Suite 1200 Cincinnati, OH 45202 |
CUSTODIAN
The Bank of New York Mellon 111 Sanders Creek Parkway East Syracuse, NY 13057
LEGAL COUNSEL
Ropes & Gray LLP Prudential Tower, 800 Boylston Street Boston, MA 02199-3600
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc. Attn: AMG Funds P.O. Box 9769 Providence, RI 02940 800.548.4539 |
This report is prepared for the Funds’ shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. To receive a free copy of the prospectus or Statement of Additional Information, which includes additional information about Fund Trustees, please contact us by calling 800.835.3879. Distributed by AMG Distributors, Inc., member FINRA/SIPC.
Current net asset values per share for each Fund are available on the Funds’ website at amgfunds.com.
A description of the policies and procedures each Fund uses to vote its proxies is available: (i) without charge, upon request, by calling 800.835.3879, or (ii) on the Securities and Exchange Commission’s (SEC) website at sec.gov. For information regarding each Fund’s proxy voting record for the 12-month period ended June 30, call 800.835.3879 or visit the SEC website at sec.gov.
Each Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at sec.gov. A Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1.800.SEC.0330. To review a complete list of the Funds’ portfolio holdings, or to view the most recent quarterly holdings report, semiannual report, or annual report, please visit amgfunds.com. |
amgfunds.com |
41 |
AFFILIATE SUBADVISED FUNDS
BALANCED FUNDS AMG Chicago Equity Partners Balanced Chicago Equity Partners, LLC
AMG FQ Global Risk-Balanced First Quadrant, L.P.
EQUITY FUNDS AMG Chicago Equity Partners Small Cap Value Chicago Equity Partners, LLC
AMG FQ Tax-Managed U.S. Equity AMG FQ Long-Short Equity First Quadrant, L.P.
AMG Frontier Small Cap Growth Frontier Capital Management Company, LLC
AMG GW&K Small Cap Core AMG GW&K Small/Mid Cap AMG GW&K U.S. Small Cap Growth GW&K Investment Management, LLC
AMG Renaissance International Equity AMG Renaissance Large Cap Growth The Renaissance Group LLC
AMG River Road Dividend All Cap Value AMG River Road Dividend All Cap Value II AMG River Road Focused Absolute Value AMG River Road Long-Short AMG River Road Small-Mid Cap Value AMG River Road Small Cap Value River Road Asset Management, LLC
AMG SouthernSun Small Cap AMG SouthernSun Global Opportunities AMG SouthernSun U.S. Equity SouthernSun Asset Management, LLC
AMG Systematic Mid Cap Value Systematic Financial Management, L.P.
AMG TimesSquare Emerging Markets Small Cap AMG TimesSquare International Small Cap AMG TimesSquare Mid Cap Growth AMG TimesSquare Small Cap Growth TimesSquare Capital Management, LLC |
AMG Trilogy Emerging Markets Equity AMG Trilogy Emerging Wealth Equity Trilogy Global Advisors, L.P.
AMG Yacktman AMG Yacktman Focused AMG Yacktman Focused Fund - Security Selection Only AMG Yacktman Special Opportunities Yacktman Asset Management LP
FIXED INCOME FUNDS AMG GW&K Core Bond AMG GW&K Enhanced Core Bond AMG GW&K Municipal Bond AMG GW&K Municipal Enhanced Yield GW&K Investment Management, LLC
OPEN-ARCHITECTURE FUNDS
ALTERNATIVE FUNDS AMG Managers Lake Partners LASSO Alternative Lake Partners, Inc.
BALANCED FUNDS AMG Managers Montag & Caldwell Balanced Montag & Caldwell, LLC
EQUITY FUNDS AMG Managers Brandywine AMG Managers Brandywine Advisors Mid Cap Growth AMG Managers Brandywine Blue Friess Associates, LLC
AMG Managers Cadence Emerging Companies AMG Managers Cadence Mid Cap Cadence Capital Management, LLC
AMG Managers CenterSquare Real Estate CenterSquare Investment Management, Inc.
AMG Managers Emerging Opportunities Lord, Abbett & Co. LLC WEDGE Capital Management L.L.P. Next Century Growth Investors LLC RBC Global Asset Management (U.S.) Inc. |
AMG Managers Essex Small/Micro Cap Growth Essex Investment Management Co., LLC
AMG Managers Fairpointe ESG Equity AMG Managers Fairpointe Mid Cap Fairpointe Capital LLC
AMG Managers Guardian Capital Global Dividend Guardian Capital LP
AMG Managers LMCG Small Cap Growth LMCG Investments, LLC
AMG Managers Montag & Caldwell Growth AMG Managers Montag & Caldwell Mid Cap Growth Montag & Caldwell, LLC
AMG Managers Pictet International Pictet Asset Management Limited
AMG Managers Silvercrest Small Cap Silvercrest Asset Management Group LLC
AMG Managers Skyline Special Equities Skyline Asset Management, L.P.
AMG Managers Special Equity Ranger Investment Management, L.P. Lord, Abbett & Co. LLC Smith Asset Management Group, L.P. Federated MDTA LLC
AMG Managers Value Partners Asia Dividend Value Partners Hong Kong Limited
FIXED INCOME FUNDS AMG Managers Amundi Intermediate Government AMG Managers Amundi Short Duration Government Amundi Pioneer Institutional Asset Management, Inc.
AMG Managers Doubleline Core Plus Bond DoubleLine Capital LP
AMG Managers Global Income Opportunity AMG Managers Loomis Sayles Bond Loomis, Sayles & Co., L.P. |
amgfunds.com | 123117 AR024 |
|
ANNUAL REPORT |
amgfunds.com
|
123117 AR071
|
AMG Funds Annual Report — December 31, 2017 |
![]() |
2 |
|
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 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. |
3 |
Portfolio Manager’s Comments (unaudited) |
2017 was a year in which risks were largely cast aside and markets rocketed higher, led in large part by already expensive growth companies. Volatility levels in markets set record lows and valuations expanded yet again. The Russell 1000® Growth Index was up more than 30% while the Russell 1000® Value Index appreciated 13.7%. Given our goal of generating solid returns over time while managing the level of risk, we were gratified that the AMG Yacktman Fund (“the Fund”) returned more than 18% for the year. This was accomplished even though value was out of favor and excess cash reduced our returns.
We achieved strong results in 2017 through outstanding security selection. Some of our top holdings such as Samsung Electronics Preferred (Samsung) and 21st Century Fox (Fox) delivered exceptional returns for the Fund, enabling us to capture most of the S&P 500® Index’s rise while bearing less risk than the benchmark. We were comfortable owning large positions in Samsung and Fox because we believed they sold at extremely low levels relative to their value. As always, the make-up of the Fund’s portfolio and position weightings will be based on the attributes of individual investments and not on the level of the market.
We recently celebrated the 25th anniversary of the AMG Yacktman Fund. For the 25-year period ending December 31, 2017, the Fund appreciated 10.5% annually compared to 9.7% for the S&P 500 Index. This annual outperformance of nearly 1% over 25 years means that $10,000 invested in the Fund compounded to $111,250 versus $100,988 for an investment in the Index.1 The Fund’s outperformance was particularly impactful during the down markets of 2000–2002 and 2008–2009. The Fund was never constructed to look like a benchmark, and in most years it performed differently than the general market. Our outperformance versus the general market over the 25-year period was especially notable because 1) most managers have underperformed over that time, leading to many investors deciding to purchase index funds in recent years, 2) we achieved our results largely by owning higher quality securities and holding excess cash to manage risk when it was difficult to find bargains and 3) much of our best outperformance came during the down markets of 2000–2002, when the Fund appreciated each year, and 2008–2009.
Today’s market environment reminds us of other periods where investors ignored risks, chased growth and paid little attention to valuations. The combination of these factors can be dangerous, with |
more potential downside scenarios than long-term upside cases. Investing in an expensive market is especially challenging for fund managers like us who are focused on protecting capital, and we are pleased to have navigated 2017 so successfully.
For some historical perspective, the last momentum-oriented growth chasing market like this was in 1999, a year when the Fund declined -16.9% compared to a 21.0% rise in the S&P 500 Index. The insanity of that investment environment set up a remarkable decade for the Fund where it delivered 11.9% annualized returns compared to the S&P 500 Index which declined by 1.0% annually over the same period.2 Translated to Dollars, this return differential means an investor in the Fund ended the decade with $30,816 for each $10,000 invested, compared to only $9,090 for an investment in the S&P 500 Index.3
Top contributors included Samsung, Fox, and Cisco Systems (Cisco)
Samsung’s stock produced strong performance in 2017. The shares were up more than 60% as the company’s operating profit rose more than 70%, largely due to strength in its semiconductor businesses. In 2017, Samsung achieved a significant milestone, becoming the largest semiconductor company in the world by sales and profits, passing Intel—the first time a company has dethroned Intel from its #1 position in 25 years. Samsung’s semiconductor growth has been organic, while Intel and many other competitors have attained their size via significant acquisitions, making Samsung’s #1 ranking all the more impressive. Due to strong earnings growth, Samsung’s shares remain exceptionally cheap at less than 5 times our expectation of 2018 earnings after adjusting for excess cash and investments. We think Samsung is extremely well positioned for continued growth over time as advances in artificial intelligence, smart homes, virtual reality, connected homes and cities and autonomous vehicles will likely require greater amounts of memory chips for many years to come.
Toward the end of 2017, Fox and The Walt Disney Company (Disney) entered into a transformative transaction in which Fox will merge the majority of its assets in exchange for Disney stock in a deal we expect to receive approval from regulatory agencies. In addition to Disney shares, Fox shareholders will receive shares in “New Fox” which will retain valuable businesses including Fox News, Fox Sports, |
Fox Network, television stations, real estate and investments. New Fox and Disney will both benefit significantly from the lower corporate tax rate which was passed in the U.S. in late December.
For several years, we have been puzzled as others looked past the significant value we observed at Fox. We felt the market was largely ignoring Fox’s global businesses that were underearning because management was investing for future growth. Competitors in the industry better understood the value and importance of Fox’s businesses, which was demonstrated by press reports of significant interest in ownership of Star and investment stakes in Sky and Hulu by not only Disney but also Comcast, Sony and Verizon. We believe the proposed transaction with Disney, resulting in a large ownership stake in Disney’s stock, represents an exciting long-term opportunity for Fox investors, and we applaud the Murdoch family and board of directors of Fox for being fantastic stewards for shareholders and always thinking and investing for the long term.
The recent result of our Fox investment should reinforce for the Fund’s shareholders that a combination of patience and a significant discount to fair value should work well over time. Another key takeaway is that we dynamically adjust our position size in response to valuation as a core part of our process. In mid-2014 the Fox position was 7% of assets. Today the weighting has increased because Fox’s business value grew substantially in the ensuing years. In addition to an inexpensive absolute valuation, we believe Fox is a far better deal compared to alternative investment opportunities, which have gotten more expensive through multiple expansion (people paying a higher price for a given level of earnings).
Many investors seek a catalyst that they think will help move shares higher in the short term. Most of the time, our investments lack such a well-defined trigger to unlock value in the near term as we are more interested in a quality business selling at a substantial discount to what we think it is worth. We are willing to wait as long as we see significantly more value than the current trading price. We think our patience is a huge competitive advantage, one that exists because Yacktman is a boutique firm. Your Fund managers control the day-to-day decisions in the Fund and at the firm, and we only answer to ourselves, our Fund board and our investors about long-term results. |
4 |
AMG Yacktman Fund Portfolio Manager’s Comments (continued) |
Cisco shares appreciated in 2017 along with strength in the information technology sector. Microsoft and Oracle were also strong contributors for the year. Cisco continues to migrate its business from larger one-time sales toward subscription services, which makes the company significantly more stable, predictable and valuable. We feel the shares remain attractively priced and the company possesses a strong balance sheet.
Detractors included Avon Products (Avon), Exxon Mobil (Exxon) and Aggreko
In 2017, there were only a handful of securities which produced negative returns. Cash was the biggest negative drag for the Fund, but one we felt was necessary given current valuations and risks.
Avon’s ongoing business struggles led to a stock price decline in 2017. We continue to think Avon has significant brand value and believe a new CEO can significantly improve the business results and restore investor confidence.
Exxon declined with general weakness in the energy sector, one of the few areas of the market to struggle last year. We typically maintain only a modest weighting in energy stocks due to challenges in predicting commodity prices. A further worry is that potential consumption changes are being created by technological developments, especially in the electric vehicle and solar markets.
Aggreko’s stock declined modestly as the company struggled with disappointing orders for its utility business. Revenue growth at Aggreko has also been |
impacted as its energy-related customers faced challenges and competition increased due to industry softness. The recent increase in oil prices may lead to a better environment for Aggreko’s customers in North America.
OTHER
We made several new investments in 2017. Cognizant Technology Solutions Corp and Infosys are both information technology service firms which sell at modest valuations and have significant excess net cash on their balance sheets. Bollore is a diversified French conglomerate with a leading global port business on four continents as well as investments in media and telecommunications. Perhaps that one falls under the category “any port (business) in a storm.”
After a long proxy battle, Procter & Gamble (PG) announced it would add Nelson Peltz of Trian Partners to the board of directors in 2018. We think Mr. Peltz, a significant shareholder and important voice for all owners, will improve PG’s focus. Several of our other highly successful investments—such as Sysco Corporation (where Trian Partners has two board seats), Microsoft and Fox—have benefited greatly from having a shareholder advocate in the boardroom.
CONCLUSION
Despite high market valuations and an investment environment that has fewer true bargains than we would like, we believe we can produce solid returns |
over time while managing risk, even if it takes time to deploy the cash we hold. As always, as we find individual investment opportunities, we make investments regardless of general market valuations.
We are pleased with the strong absolute returns that the Fund delivered in 2017. A market driven by growth-oriented shares in an already expensive investment climate is not one we would have expected to largely keep up with given our strong focus on quality, attractive valuations and risk management. Security selection allowed us to achieve good results and we believe this ability will allow us to thrive going forward. As always, we will continue to be diligent, disciplined and patient in managing the Fund.
1 Dollar figure for the S&P 500 Index does not include potential costs such as fees and transaction costs.
2 Annualized returns for the period 2000–2009.
3 Dollar figure for the S&P 500 Index does not include potential costs such as fees and transaction costs.
This commentary reflects the viewpoints of the portfolio manager, Yacktman Asset Management, L.P. as of December 31, 2017 and is not intended as a forecast or guarantee of future results, and is subject to change without notice. |
5 |
AMG Yacktman Fund Portfolio Manager’s Comments (continued) |
6 |
AMG Yacktman Fund Fund Snapshots (unaudited) December 31, 2017 |
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.
7 |
AMG Yacktman Fund Fund Snapshots (unaudited) For the six months ended December 31, 2017 |
8 |
AMG Yacktman Fund Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
9 |
AMG Yacktman Fund Schedule of Portfolio Investments (continued) |
The accompanying notes are an integral part of these financial statements. |
10 |
AMG Yacktman Fund Schedule of Portfolio Investments (continued) |
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2† | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks |
||||||||||||||||
Consumer Staples |
$1,976,228,130 | $76,788,670 | — | $2,053,016,800 | ||||||||||||
Information Technology |
1,306,525,611 | — | — | 1,306,525,611 | ||||||||||||
Consumer Discretionary |
1,096,965,000 | — | — | 1,096,965,000 | ||||||||||||
Health Care |
624,631,000 | — | — | 624,631,000 | ||||||||||||
Financials |
537,045,800 | — | — | 537,045,800 | ||||||||||||
Energy |
207,795,000 | — | — | 207,795,000 | ||||||||||||
Industrials |
44,545,000 | 88,471,377 | — | 133,016,377 | ||||||||||||
Corporate Bonds and Notes†† |
— | 130,848,582 | — | 130,848,582 | ||||||||||||
Preferred Stock††† |
— | 397,272,136 | — | 397,272,136 | ||||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | 93,768,848 | — | 93,768,848 | ||||||||||||
Other Investment Companies |
2,245,043,530 | — | — | 2,245,043,530 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$8,038,779,071 | $787,149,613 | — | $8,825,928,684 | ||||||||||||
|
|
|
|
|
|
|
|
† | As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.) |
†† | All corporate bonds and notes held in the Fund are level 2 securities. For a detailed breakout of corporate bonds and notes by major industry classification, please refer to the Fund’s Schedule of Portfolio Investments. |
††† | All preferred stocks held in the Fund are Level 2 securities. For a detailed breakout of preferred stocks by major industry classification, please refer to the Fund’s Schedule of Portfolio Investments. |
As of December 31, 2017, the Fund had transfers between level 1 and level 2 as follows:
Transfer into Level 11 |
Transfer out of Level 11 |
Transfer into Level 21 |
Transfer out of Level 21 |
|||||||||||||
Assets: |
||||||||||||||||
Common Stocks |
$470,745 | — | — | $(470,745) |
1 As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.)
The accompanying notes are an integral part of these financial statements. |
11 |
Portfolio Manager’s Comments (unaudited) |
2017 was a year in which risks were largely cast aside and markets rocketed higher, led in large part by already expensive growth companies. Volatility levels in markets set record lows and valuations expanded yet again. The Russell 1000® Growth Index was up more than 30% while the Russell 1000® Value Index appreciated 13.7%. Given our goal of generating solid returns over time while managing the level of risk, we were gratified that the AMG Yacktman Focused Fund (“the Fund”) returned more than 20% for the year. This was accomplished even though value was out of favor and excess cash reduced our returns.
We achieved strong results in 2017 through outstanding security selection. Some of our top holdings such as Samsung Electronics Preferred (Samsung) and 21st Century Fox (Fox) delivered exceptional returns for the Fund, enabling us to capture most of the S&P 500® Index’s rise while bearing less risk than the benchmark. We were comfortable owning large positions in Samsung and Fox because we believed they sold at extremely low levels relative to their value. As always, the make-up of the Fund’s portfolio and position weightings will be based on the attributes of individual investments and not on the level of the market.
We recently celebrated the 20th anniversary of the AMG Yacktman Focused Fund. For the 20-year period ending December 31, 2017, the Fund appreciated 9.3% annually compared to 7.2% for the S&P 500 Index. This annual outperformance of roughly 2% over 20 years means that $10,000 invested in the Fund compounded to $59,014 versus only $40,135 for an investment in the Index.1 The Fund’s outperformance was particularly impactful during the down markets of 2000–2002 and 2008–2009. The Fund was never constructed to look like a benchmark, and in most years it performed differently than the general market. Our outperformance versus the general market over the 20-year period was especially notable because 1) most managers have underperformed over that time period, leading to many investors deciding to purchase index funds in recent years, 2) we achieved our results largely by owning higher quality securities and holding excess cash to manage risk when it was difficult to find bargains and 3) much of our best outperformance came during the down markets of 2000–2002, when the Fund appreciated each year, and 2008–2009.
Today’s market environment reminds us of other periods during which investors ignored risks, chased growth and paid little attention to valuations. The |
combination of these factors can be dangerous, with more potential downside scenarios than long-term upside cases. Investing in an expensive market is especially challenging for fund managers like us who are focused on protecting capital, and we are pleased to have navigated 2017 so successfully.
For some historical perspective, the last momentum-oriented growth chasing market like this was in 1999, a year when the Fund declined 21.9% compared to a 21.0% rise in the S&P 500 Index. The insanity of that investment environment set up a remarkable decade for the Fund in which it delivered 11.8% annualized returns compared to the S&P 500 Index which declined by 1.0% annually over the same period.2 Translated to Dollars, this return differential means an investor in the Fund ended the decade with $30,569 for each $10,000 invested, compared to only $9,090 for an investment in the S&P 500 Index.3
Top contributors included Samsung, Fox, and Cisco Systems (Cisco)
Samsung’s stock produced strong performance in 2017. The shares were up more than 60% as the company’s operating profit rose more than 70%, largely due to strength in its semiconductor businesses. In 2017, Samsung achieved a significant milestone, becoming the largest semiconductor company in the world by sales and profits, passing Intel—the first time a company has dethroned Intel from its #1 position in 25 years. Samsung’s semiconductor growth has been organic, while Intel and many other competitor shave attained their size via significant acquisitions, making Samsung’s #1 ranking all the more impressive. Due to strong earnings growth, Samsung’s shares remain exceptionally cheap at less than 5 times our expectation of 2018 earnings after adjusting for excess cash and investments. We think Samsung is extremely well positioned for continued growth over time as advances in artificial intelligence, smart homes, virtual reality, connected homes and cities and autonomous vehicles will likely require larger amounts of memory chips for many years to come.
Toward the end of 2017, Fox and The Walt Disney Company (Disney) entered into a transformative transaction in which Fox will merge the majority of its assets in exchange for Disney stock in a deal we expect to receive approval from regulatory agencies. In addition to Disney shares, Fox shareholders will receive shares in “New Fox” which will retain valuable businesses including Fox News, Fox Sports, |
Fox Network, television stations, real estate and investments. New Fox and Disney will both benefit significantly from the lower corporate tax rate which was passed in the U.S. in late December.
For several years, we have been puzzled as others looked past the significant value we observed at Fox. We felt the market was largely ignoring Fox’s global businesses that were underearning because management was investing for future growth. Competitors in the industry better understood the value and importance of Fox’s businesses, which was demonstrated by press reports of significant interest in ownership of Star and investment stakes in Sky and Hulu by not only Disney but also Comcast, Sony and Verizon. We believe the proposed transaction with Disney, resulting in a large ownership stake in Disney’s stock, represents an exciting long-term opportunity for Fox investors, and we applaud the Murdoch family and board of directors of Fox for being fantastic stewards for shareholders and always thinking and investing for the long term.
The recent result of our Fox investment should reinforce for the Fund’s shareholders that a combination of patience and a significant discount to fair value should work well over time. Another key takeaway is that we dynamically adjust our position size in response to valuation as a core part of our process. In mid-2014, the Fox position was 7% of assets. Today the weighting has more than doubled because Fox’s business value grew substantially in the ensuing years. In addition to an inexpensive absolute valuation, we believe Fox is a far better deal compared to alternative investment opportunities which have gotten more expensive through multiple expansion (people paying a higher price for a given level of earnings).
Many investors seek a catalyst that they think will help move shares higher in the short term. Most of the time, our investments lack such a well-defined trigger to unlock value in the near term as we are more interested in a quality business selling at a substantial discount to what we think it is worth. We are willing to wait as long as we need to if we see significantly more value than the current trading price. We see our patience as a huge competitive advantage, one that exists because Yacktman is a boutique firm. Your Fund managers control the day-to-day decisions in the Fund and at the firm, and we only answer to ourselves, our Fund board and our investors about long-term results. |
12 |
AMG Yacktman Focused Fund Portfolio Manager’s Comments (continued) |
Cisco shares appreciated in 2017 along with strength in the information technology sector. Microsoft and Oracle were also strong contributors for the year. Cisco continues to migrate its business from larger one-time sales toward subscription services, which makes the company significantly more stable, predictable and valuable. We feel the shares remain attractively priced and the company possesses a strong balance sheet.
Detractors included Avon Products (Avon), Exxon Mobil (Exxon) and Aggreko
In 2017, there were only a handful of securities that produced negative returns. Cash was the biggest negative drag for the Fund, but one we felt was necessary given current valuations and risks.
Avon’s ongoing business struggles led to a stock price decline in 2017. We continue to think Avon has significant brand value and believe a new CEO can significantly improve the business results and restore investor confidence.
Exxon declined with general weakness in the energy sector, one of the few areas of the market to struggle last year. We typically maintain only a modest weighting in energy stocks due to challenges in predicting commodity prices. A further worry is that potential consumption changes are being created by technological developments, especially in the electric vehicle and solar markets.
Aggreko’s stock declined modestly as the company struggled with disappointing orders for its utility business. Revenue growth at Aggreko has also been |
impacted as its energy-related customers faced challenges and competition increased due to industry softness. The recent increase in oil prices may lead to a better environment for Aggreko’s customers in North America.
OTHER
We made several new investments in 2017. Cognizant Technology Solutions Corp and Infosys are both information technology service firms which sell at modest valuations and have significant excess net cash on their balance sheets. Bollore is a diversified French conglomerate with a leading global port business on four continents as well as investments in media and telecommunications. Perhaps that one falls under the category “any port (business) in a storm.”
After a long proxy battle, Procter & Gamble (PG) announced it would add Nelson Peltz of Trian Partners to the board of directors in 2018. We think Mr. Peltz, a significant shareholder and important voice for all owners, will improve PG’s focus. Several of our other highly successful investments—such as Sysco Corporation (where Trian Partners has two board seats), Microsoft and Fox—have benefited greatly from having a shareholder advocate in the boardroom.
CONCLUSION
Despite high market valuations and an investment environment that has fewer true bargains than we would like, we believe we can produce solid returns |
over time while managing risk, even if it takes time to deploy the cash we hold. As always, as we find individual investment opportunities, we make investments regardless of general market valuations.
We are pleased with the strong absolute returns that the Fund delivered in 2017. A market driven by growth-oriented shares in an already expensive investment climate is not one we would have expected to largely keep up with given our strong focus on quality, attractive valuations and risk management. Security selection allowed us to achieve good results and we believe this ability will allow us to thrive going forward. As always, we will continue to be diligent, disciplined and patient in managing the Fund.
1 Dollar figure for the S&P 500 Index does not include potential costs such as fees and transaction costs.
2 Annualized returns for the period 2000–2009.
3 Dollar figure for the S&P 500 Index does not include potential costs such as fees and transaction costs.
This commentary reflects the viewpoints of the portfolio manager, Yacktman Asset Management, L.P. as of December 31, 2017 and is not intended as a forecast or guarantee of future results, and is subject to change without notice. |
13 |
AMG Yacktman Focused Fund Portfolio Manager’s Comments (continued) |
14 |
AMG Yacktman Focused Fund Portfolio Manager’s Comments (continued) |
through changes in the aggregate market value of 500 stocks representing all major industries. Unlike the Fund, the S&P 500® Index is unmanaged, is not available for investment and does not incur expenses. | The S&P 500® Index is proprietary data of Standard & Poor’s, a division of McGraw-Hill Companies, Inc. | Not FDIC insured, nor bank guaranteed. May lose value. |
15 |
AMG Yacktman Focused Fund Fund Snapshots (unaudited) December 31, 2017 |
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.
16 |
AMG Yacktman Focused Fund Fund Snapshots (unaudited) For the six months ended December 31, 2017 |
17 |
AMG Yacktman Focused Fund Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
18 |
AMG Yacktman Focused Fund Schedule of Portfolio Investments (continued) |
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2† | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks |
||||||||||||||||
Consumer Staples |
$1,098,265,000 | $65,018,039 | — | $1,163,283,039 | ||||||||||||
Consumer Discretionary |
736,942,000 | — | — | 736,942,000 | ||||||||||||
Information Technology |
580,574,600 | — | — | 580,574,600 | ||||||||||||
Health Care |
202,594,000 | — | — | 202,594,000 | ||||||||||||
Financials |
83,245,000 | — | — | 83,245,000 | ||||||||||||
Energy |
82,987,500 | — | — | 82,987,500 | ||||||||||||
Industrials |
— | 54,484,190 | — | 54,484,190 | ||||||||||||
Corporate Bonds and Notes†† |
— | 86,719,562 | — | 86,719,562 | ||||||||||||
Preferred Stock††† |
— | 377,798,012 | — | 377,798,012 | ||||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | 24,292,739 | — | 24,292,739 | ||||||||||||
Other Investment Companies |
1,018,572,439 | — | — | 1,018,572,439 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$3,803,180,539 | $608,312,542 | — | $4,411,493,081 | ||||||||||||
|
|
|
|
|
|
|
|
† | As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.) |
†† | All corporate bonds and notes held in the Fund are level 2 securities. For a detailed breakout of corporate bonds and notes by major industry classification, please refer to the Fund’s Schedule of Portfolio Investments. |
††† | All preferred stocks held in the Fund are Level 2 securities. For a detailed breakout of preferred stocks by major industry classification, please refer to the Fund’s Schedule of Portfolio Investments. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements. |
19 |
AMG Yacktman Focused Fund - Security Selection Only Portfolio Manager’s Comments (unaudited) |
Early in 2017, we launched the AMG Yacktman Focused Fund—Security Selection Only Fund (the Fund). We started the Fund due to investor demand for a product that has a limited cash allocation, showcasing our investing skills, even though it reduces our ability to manage risk by carrying excess cash in the absence of bargains. Nothing has changed in our core philosophy or approach that risk management always matters. The Fund was launched to fill a need in the marketplace for advisors who have already made asset allocation decisions to manage risk and want market exposure and our security selection.
We achieved strong results in 2017 through outstanding security selection. Some of our top holdings such as Samsung Electronics Preferred (Samsung) and 21st Century Fox (Fox) delivered exceptional returns for the Fund, enabling us to outperform the S&P 500® Index. We were comfortable owning large positions in Samsung and Fox because we believed they sold at extremely low levels relative to their value. As always, the make-up of the Fund’s portfolio and position weightings will be based on the attributes of individual investments and not on the level of the market.
Top contributors included Samsung, Fox and PepsiCo (Pepsi)
Samsung’s stock produced strong performance in 2017. The shares were up more than 60% as the company’s operating profit rose more than 70%, largely due to strength in its semiconductor businesses. In 2017 Samsung achieved a significant milestone, becoming the largest semiconductor company in the world by sales and profits, passing Intel, and marking the first time a company has dethroned Intel from its leadership position in 25 years. Samsung’s semiconductor growth has been organic, while Intel and many other competitors have attained their size via significant acquisitions, making Samsung’s #1 ranking all the more impressive. Due to strong earnings growth, Samsung’s shares remain exceptionally cheap at less than 5 times our expectation of 2018 earnings after adjusting for excess cash and investments. We think Samsung is extremely well positioned for continued growth over time as advances in artificial intelligence, smart homes, virtual reality, connected homes and cities and autonomous vehicles will likely require greater amounts of memory chips for many years to come. |
Toward the end of 2017, Fox and The Walt Disney Company (Disney) entered into a transformative transaction where Fox will merge the majority of its assets in exchange for Disney stock in a deal we expect to receive approval from regulatory agencies. In addition to Disney shares, Fox shareholders will receive shares in “New Fox” which will retain valuable businesses including Fox News, Fox Sports, Fox Network, television stations, real estate and investments. New Fox and Disney will both benefit significantly from the lower corporate tax rate which was passed in the U.S. in late December.
For several years we have been puzzled as others looked past the significant value we observed at Fox. We felt the market was largely ignoring Fox’s global businesses that were underearning because management was investing for future growth. Competitors in the industry better understood the value and importance of Fox’s businesses, which was demonstrated by press reports of significant interest in ownership of Star and investment stakes in Sky and Hulu by not only Disney but also Comcast, Sony and Verizon. We believe the proposed transaction with Disney, resulting in a large ownership stake in Disney’s stock, represents an exciting long-term opportunity for Fox investors, and we applaud the Murdoch family and board of directors of Fox for being fantastic stewards for shareholders and always thinking and investing for the long term.
Many investors seek a catalyst that they think will help move shares higher in the short term. Most of the time, our investments lack a well-defined trigger to unlock value in the near term as we are more interested in a quality business selling at a substantial discount to what we think it is worth. We are willing to wait as long as we need to if we see significantly more value than the current trading price. We think our patience is a huge competitive advantage, one that exists because Yacktman is a boutique firm. Your Fund managers control the day-to-day decisions in the Fund and at our firm, and we only answer to ourselves, our Fund board and our investors about long-term results.
Pepsi’s shares appreciated in 2017 along with general strength in the consumer staples sector. We feel the company continues to be one of the finest and best positioned consumer companies in the world. |
Detractors included Avon Products (Avon) and Aggreko
Avon’s ongoing business struggles led to a stock price decline in 2017. We continue to think Avon has significant brand value and believe a new CEO can significantly improve the business results and restore investor confidence.
Aggreko’s stock declined modestly as the company struggled with disappointing orders for its utility business. Revenue growth at Aggreko has also been impacted as its energy-related customers faced challenges and competition increased due to industry softness. The recent increase in oil prices may lead to a better environment for Aggreko’s customers in North America.
OTHER
After a long proxy battle, Procter & Gamble (PG) announced it would add Nelson Peltz of Trian Partners to the board of directors in 2018. We think Mr. Peltz, a significant shareholder and important voice for all owners, will improve PG’s focus. Several of our other highly successful investments—such as Sysco Corporation (where Trian Partners has two board seats), Microsoft and Fox—have benefited greatly from having a shareholder advocate in the boardroom.
CONCLUSION
We are pleased with the strong returns that the Fund delivered since its launch in early 2017. A market driven by growth-oriented shares in an already expensive investment climate is not one we would have expected to outperform given our strong focus on quality, attractive valuations and risk management. Security selection allowed us to achieve good results, and we believe this ability will allow us to thrive going forward. As always, we will continue to be diligent, disciplined and patient in managing the Fund.
This commentary reflects the viewpoints of the portfolio manager, Yacktman Asset Management, L.P. as of December 31, 2017 and is not intended as a forecast or guarantee of future results, and is subject to change without notice. |
20
AMG Yacktman Focused Fund - Security Selection Only Portfolio Manager’s Comments (continued) |
21 |
AMG Yacktman Focused Fund - Security Selection Only Portfolio Manager’s Comments (continued) |
22 |
AMG Yacktman Focused Fund - Security Selection Only Fund Snapshots (unaudited) December 31, 2017 |
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.
23 |
AMG Yacktman Focused Fund - Security Selection Only Fund Snapshots (unaudited) For the six months ended December 31, 2017 |
24 |
AMG Yacktman Focused Fund - Security Selection Only Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
25 |
AMG Yacktman Focused Fund - Security Selection Only Schedule of Portfolio Investments (continued) |
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2† | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks |
||||||||||||||||
Consumer Staples |
$370,727 | $22,144 | — | $392,871 | ||||||||||||
Consumer Discretionary |
288,859 | — | — | 288,859 | ||||||||||||
Information Technology |
209,816 | 21,635 | — | 231,451 | ||||||||||||
Health Care |
88,750 | — | — | 88,750 | ||||||||||||
Industrials |
34,853 | 18,898 | — | 53,751 | ||||||||||||
Financials |
27,929 | — | — | 27,929 | ||||||||||||
Energy |
26,674 | — | — | 26,674 | ||||||||||||
Corporate Bonds and Notes†† |
— | 54,220 | — | 54,220 | ||||||||||||
Preferred Stocks |
||||||||||||||||
Information Technology |
— | 200,416 | — | 200,416 | ||||||||||||
Consumer Staples |
13,180 | — | — | 13,180 | ||||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | 10,513 | — | 10,513 | ||||||||||||
Other Investment Companies |
34,175 | — | — | 34,175 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$1,094,963 | $327,826 | — | $1,422,789 | ||||||||||||
|
|
|
|
|
|
|
|
† | As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.) |
†† | All corporate bonds and notes held in the Fund are level 2 securities. For a detailed breakout of corporate bonds and notes by major industry classification, please refer to the Fund’s Schedule of Portfolio Investments. |
As of December 31, 2017, the Fund had no transfers between levels from the beginning of the reporting period.
The accompanying notes are an integral part of these financial statements. |
26 |
AMG Yacktman Special Opportunities Fund Portfolio Manager’s Comments (unaudited) |
27 |
AMG Yacktman Special Opportunities Fund Portfolio Manager’s Comments (continued) |
28 |
AMG Yacktman Special Opportunities Fund Portfolio Manager’s Comments (continued) |
31 |
AMG Yacktman Special Opportunities Fund Portfolio Manager’s Comments (continued) |
predominantly speculative with respect to the issuer’s continuing ability to make principal and interest payments. The issuers of the Fund’s holdings may be involved in bankruptcy proceedings, reorganizations, or financial restructurings, and are not as strong financially as higher-rated issuers.
11 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.
12 The Fund invests in large-capitalization companies that may underperform other stock funds (such as funds that focus on small- and medium-capitalization companies) when stocks of large-capitalization companies are out of favor.
13 The Fund is subject to the special risks associated with investments in micro-cap companies, such as relatively short earnings history competitive conditions, less publicly available corporate information, and reliance on a limited number of products.
14 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.
15 Companies that are in similar businesses 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.
16 The Fund may suffer significant losses on assets that it sells short. Unlike the possible loss on a security that is purchased, there is no limit on the amount of loss on an appreciating security that is sold short.
17 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.
18 The Fund invests in value stocks, which may perform differently from the market as a whole and may be undervalued by the market for a long period of time.
19 The MSCI ACWI All Cap Index captures large, mid, small and micro cap representation across 23 Developed Markets (DM) countries and large, mid and small cap representation across 24 Emerging Markets (EM) countries. |
The index is comprehensive, covering approximately 99% of the global equity investment opportunity set. The developed market country indices included are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the U.K. and the U.S. The emerging market country indices included are: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. Please go to msci.com for most current list of countries represented by the index. Unlike the Fund, the MSCI ACWI All Cap Index is unmanaged, is not available for investment and does not incur expenses. All MSCI data is provided ‘as is.’ The product described herein is not sponsored or endorsed and has 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 product described herein. Copying or redistributing the MSCI data is strictly prohibited.
Not FDIC Insured, nor bank guaranteed. May lose value. |
30 |
AMG Yacktman Special Opportunities Fund Fund Snapshots (unaudited) December 31, 2017 |
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.
31 |
AMG Yacktman Special Opportunities Fund Fund Snapshots (unaudited) For the six months ended December 31, 2017 |
32 |
AMG Yacktman Special Opportunities Fund Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
33 |
AMG Yacktman Special Opportunities Fund Schedule of Portfolio Investments (continued) |
The accompanying notes are an integral part of these financial statements. |
34 |
AMG Yacktman Special Opportunities Fund Schedule of Portfolio Investments (continued) |
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2† | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks |
||||||||||||||||
Consumer Discretionary |
$9,627,915 | $838,329 | $168,794 | $10,635,038 | ||||||||||||
Industrials |
4,377,838 | 1,854,335 | — | 6,232,173 | ||||||||||||
Energy |
3,735,746 | — | — | 3,735,746 | ||||||||||||
Financials |
3,062,860 | 413,395 | — | 3,476,255 | ||||||||||||
Information Technology |
2,373,556 | — | — | 2,373,556 | ||||||||||||
Consumer Staples |
2,123,964 | — | — | 2,123,964 | ||||||||||||
Materials |
773,974 | 425,433 | — | 1,199,407 | ||||||||||||
Telecommunication Services |
454,314 | — | — | 454,314 | ||||||||||||
Utilities |
306,285 | — | — | 306,285 | ||||||||||||
Health Care |
298,029 | — | — | 298,029 | ||||||||||||
Corporate Bonds and Notes†† |
— | 2,480,170 | — | 2,480,170 | ||||||||||||
Preferred Stocks |
||||||||||||||||
Information Technology |
— | 1,849,393 | — | 1,849,393 | ||||||||||||
Industrials |
176,298 | — | — | 176,298 | ||||||||||||
Consumer Discretionary |
159,115 | — | — | 159,115 | ||||||||||||
Short-Term Investments |
||||||||||||||||
Joint Repurchase Agreements |
— | 301,729 | — | 301,729 | ||||||||||||
Other Investment Companies |
2,172,722 | — | — | 2,172,722 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$29,642,616 | $8,162,784 | 168,794 | $37,974,194 | ||||||||||||
|
|
|
|
|
|
|
|
† | As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.) |
†† | All corporate bonds and notes held in the Fund are level 2 securities. For a detailed breakout of corporate bonds and notes by major industry classification, please refer to the Fund’s Schedule of Portfolio Investments. |
As of December 31, 2017, the Fund had transfers between level 1 and level 2 as follows:
Transfer into Level 11 |
Transfer out of Level 11 |
Transfer into Level 21 |
Transfer out of Level 21 |
|||||||||||||
Assets: |
||||||||||||||||
Common Stocks |
$2,977,306 | $(619,655) | $460,311 | $(2,600,604) |
1 As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.)
The accompanying notes are an integral part of these financial statements. |
35 |
AMG Yacktman Special Opportunities Fund Schedule of Portfolio Investments (continued) |
The following table below is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value at December 31, 2017:
Common Stock* |
||||
Balance as of December 31, 2016
|
|
$376,702
|
| |
Accrued discounts (premiums) |
— | |||
Realized gain (loss) |
— | |||
Change in unrealized appreciation/depreciation |
9,450 | |||
Purchases |
— | |||
Sales |
— | |||
Transfers in to Level 3 |
159,344 | |||
Transfers out of Level 3 |
(376,702 | ) | ||
Balance as of December 31, 2017
|
|
$168,794
|
| |
— | ||||
Net change in unrealized appreciation/depreciation on investments still held at December 31, 2017
|
|
$9,450
|
|
* During the fiscal year ended December 31, 2017, the Fund had transfers in and out of Level 3. A security was transferred into Level 3 due to the security halting trading in response to a pending merger and was valued using the last traded market price. Additionally, another security was transferred from Level 3 due to the security resumed trading.
The following table summarizes the quantitative inputs and assumptions used for items categorized in Level 3 of the fair value hierarchy as of December 31, 2017. The table below is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to the Fund’s fair value measurements:
Quantitative Information about Level 3 Fair Value Measurements
Fair Value at December 31, 2017 |
Valuation Technique(s) |
Unobservable Inputs(s) |
Range | Average | ||||||||||||||||||||
Common Stock |
$168,794 | Recent Market Price | Price | N/A | N/A | |||||||||||||||||||
|
|
|||||||||||||||||||||||
Total |
$168,794 | |||||||||||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements.
|
36 |
Statement of Assets and Liabilities December 31, 2017 |
AMG Yacktman Fund |
AMG Yacktman Focused Fund# |
AMG Yacktman Focused Fund - Security Selection Only |
AMG Yacktman Special Opportunities Fund |
|||||||||||||
Assets: |
||||||||||||||||
Investments at Value* (including securities on loan valued at $90,379,707, $23,727,358, $10,332, and $287,172, respectively) |
$8,825,928,684 | $4,411,493,081 | $1,422,789 | $37,974,194 | ||||||||||||
Foreign currency** |
— | — | — | 94,410 | ||||||||||||
Receivable for investments sold |
1,049,699 | — | — | — | ||||||||||||
Dividend, interest and other receivables |
10,824,461 | 6,842,547 | 4,591 | 79,675 | ||||||||||||
Receivable for Fund shares sold |
9,667,217 | 6,507,976 | — | — | ||||||||||||
Receivable from affiliate |
55,305 | 26,811 | — | 11,158 | ||||||||||||
Prepaid expenses |
37,952 | 36,502 | 21,857 | 10,574 | ||||||||||||
Total assets |
8,847,563,318 | 4,424,906,917 | 1,449,237 | 38,170,011 | ||||||||||||
Liabilities: |
||||||||||||||||
Payable upon return of securities loaned |
93,768,848 | 24,292,739 | 10,513 | 301,729 | ||||||||||||
Payable for investments purchased |
3,509,581 | 1,736,337 | — | 36,645 | ||||||||||||
Payable for Fund shares repurchased |
21,572,048 | 11,878,991 | — | — | ||||||||||||
Accrued expenses: |
||||||||||||||||
Investment advisory and management fees |
3,213,628 | 3,275,176 | 4,446 | 60,697 | ||||||||||||
Administrative fees |
1,124,975 | 564,686 | 177 | 4,620 | ||||||||||||
Shareholder service fees |
890,998 | 478,395 | — | 676 | ||||||||||||
Professional fees |
228,679 | 136,165 | 22,071 | 33,270 | ||||||||||||
Trustee fees and expenses |
91,502 | 46,151 | 8 | 375 | ||||||||||||
Other |
787,605 | 493,037 | 2,999 | 20,852 | ||||||||||||
Total liabilities |
125,187,864 | 42,901,677 | 40,214 | 458,864 | ||||||||||||
|
|
|||||||||||||||
Net Assets |
$8,722,375,454 | $4,382,005,240 | $1,409,023 | $37,711,147 | ||||||||||||
* Investments at cost |
$5,961,407,484 | $3,102,411,878 | $1,227,727 | $31,724,508 | ||||||||||||
** Foreign currency at cost |
— | — | — | $93,257 |
The accompanying notes are an integral part of these financial statements. |
37 |
Statement of Assets and Liabilities (continued) |
AMG Yacktman Fund |
AMG Yacktman Focused Fund# |
AMG Yacktman Focused Fund - Security Selection Only |
AMG Yacktman Special Opportunities Fund |
|||||||||||||
Net Assets Represent: |
||||||||||||||||
Paid-in capital |
$5,698,532,044 | $2,971,823,997 | $1,210,444 | $31,098,315 | ||||||||||||
Undistributed (distribution in excess of) net investment income |
299,848 | 297,199 | (11,216 | ) | (150,001 | ) | ||||||||||
Accumulated net realized gain from investments |
159,016,669 | 100,797,427 | 14,725 | 511,962 | ||||||||||||
Net unrealized appreciation on investments |
2,864,526,893 | 1,309,086,617 | 195,070 | 6,250,871 | ||||||||||||
Net Assets |
$8,722,375,454 | $4,382,005,240 | $1,409,023 | $37,711,147 | ||||||||||||
Class N: |
||||||||||||||||
Net Assets |
— | $2,803,230,100 | $17,016 | — | ||||||||||||
Shares outstanding |
— | 132,659,502 | 1,446 | — | ||||||||||||
Net asset value, offering and redemption price per share |
— | $21.13 | $11.77 | — | ||||||||||||
Class I: |
||||||||||||||||
Net Assets |
$8,722,375,454 | $1,578,775,140 | $1,392,007 | $8,377,138 | ||||||||||||
Shares outstanding |
381,740,963 | 74,855,755 | 118,246 | 696,610 | ||||||||||||
Net asset value, offering and redemption price per share |
$22.85 | $21.09 | $11.77 | $12.03 | ||||||||||||
Class Z: |
||||||||||||||||
Net Assets |
— | — | — | $29,334,009 | ||||||||||||
Shares outstanding |
— | — | — | 2,434,846 | ||||||||||||
Net asset value, offering and redemption price per share |
— | — | — | $12.05 |
# | Effective February 27, 2017, the Fund’s Class S shares were renamed as described in Note 1 of the Notes to the Financial Statements. |
The accompanying notes are an integral part of these financial statements. |
38 |
For the fiscal period ended December 31, 2017 |
AMG Yacktman Fund |
AMG Yacktman Focused Fund# |
AMG Yacktman Focused Fund - Security Selection Only## |
AMG Yacktman Special Opportunities Fund | |||||||||||||||||
Investment Income: |
||||||||||||||||||||
Dividend income |
$164,033,033 | $86,100,544 | $23,863 | $554,694 | 1 | |||||||||||||||
Interest income |
18,546,212 | 11,168,953 | 5,327 | 313,817 | ||||||||||||||||
Securities lending income |
110,102 | 16,097 | 16 | 8,265 | ||||||||||||||||
Foreign withholding tax |
(2,459,769 | ) | (2,962,912 | ) | (1,551 | ) | (39,978 | ) | ||||||||||||
Total investment income |
180,229,578 | 94,322,682 | 27,655 | 836,798 | ||||||||||||||||
Expenses: |
||||||||||||||||||||
Investment advisory and management fees |
36,922,602 | 38,835,627 | 9,884 | 579,826 | ||||||||||||||||
Administrative fees |
12,918,787 | 6,695,798 | 1,704 | 44,393 | ||||||||||||||||
Shareholder servicing fees - Class N |
— | 5,585,152 | — | — | ||||||||||||||||
Shareholder servicing fees - Class I |
8,941,917 | — | — | 4,134 | ||||||||||||||||
Professional fees |
729,765 | 402,590 | 22,122 | 39,062 | ||||||||||||||||
Registration fees |
151,328 | 102,221 | 1,925 | 39,621 | ||||||||||||||||
Transfer agent fees |
365,910 | 227,924 | 127 | 1,203 | ||||||||||||||||
Custodian fees |
602,646 | 405,402 | 3,417 | 13,751 | ||||||||||||||||
Reports to shareholders |
391,182 | 119,804 | 3,955 | 14,858 | ||||||||||||||||
Trustee fees and expenses |
592,509 | 312,827 | 49 | 1,853 | ||||||||||||||||
Miscellaneous |
174,879 | 89,062 | 1,357 | 2,422 | ||||||||||||||||
Total expenses before offsets |
61,791,525 | 52,776,407 | 44,540 | 741,123 | ||||||||||||||||
Expense reimbursements |
— | — | (32,271 | ) | (77,255 | ) | ||||||||||||||
Fee waivers |
(769,760 | ) | (372,370 | ) | — | — | ||||||||||||||
Net expenses |
61,021,765 | 52,404,037 | 12,269 | 663,868 | ||||||||||||||||
Net investment income |
119,207,813 | 41,918,645 | 15,386 | 172,930 | ||||||||||||||||
Net Realized and Unrealized Gain: |
||||||||||||||||||||
Net realized gain on investments |
804,297,003 | 491,501,998 | 25,756 | 2,133,120 | ||||||||||||||||
Net realized gain (loss) on foreign currency transactions |
175,514 | 253,039 | (1,519 | ) | (28,383 | ) | ||||||||||||||
Net change in unrealized appreciation/depreciation on investments |
523,240,992 | 287,387,626 | 195,062 | 6,391,848 | ||||||||||||||||
Net change in unrealized appreciation/depreciation on foreign currency translations |
5,693 | 5,414 | 8 | 1,626 | ||||||||||||||||
Net realized and unrealized gain |
1,327,719,202 | 779,148,077 | 219,307 | 8,498,211 | ||||||||||||||||
Net increase in net assets resulting from operations |
$1,446,927,015 | $821,066,722 | $234,693 | $8,671,141 |
# | Effective February 27, 2017, the Fund’s Class S shares were renamed as described in Note 1 of the Notes to the Financial Statements. |
## | Commencement of operations was January 30, 2017. |
1 | Includes non-recurring dividends of $55,952. |
The accompanying notes are an integral part of these financial statements. |
39 |
Statements of Changes in Net Assets For the fiscal years ended December 31, |
AMG Yacktman Fund |
AMG Yacktman Focused Fund |
|||||||||||||||
2017 | 2016# | 2017## | 2016# | |||||||||||||
Increase in Net Assets Resulting From Operations: |
||||||||||||||||
Net investment income |
$119,207,813 | $131,418,087 | $41,918,645 | $48,568,488 | ||||||||||||
Net realized gain on investments |
804,472,517 | 544,335,369 | 491,755,037 | 356,596,227 | ||||||||||||
Net change in unrealized appreciation/depreciation on investments |
523,246,685 | 242,782,534 | 287,393,040 | 121,106,280 | ||||||||||||
Net increase in net assets resulting from operations |
1,446,927,015 | 918,535,990 | 821,066,722 | 526,270,995 | ||||||||||||
Distributions to Shareholders: |
||||||||||||||||
From net investment income: |
||||||||||||||||
Class N |
— | — | (24,704,545 | ) | (48,706,189 | ) | ||||||||||
Class I |
(119,083,479 | ) | (151,070,259 | ) | (17,169,940 | ) | (17,183,317 | ) | ||||||||
From net realized gain on investments: |
||||||||||||||||
Class N |
— | — | (274,734,682 | ) | (325,156,552 | ) | ||||||||||
Class I |
(736,717,154 | ) | (530,811,366 | ) | (156,041,818 | ) | (101,407,185 | ) | ||||||||
Total distributions to shareholders |
(855,800,633 | ) | (681,881,625 | ) | (472,650,985 | ) | (492,453,243 | ) | ||||||||
Capital Share Transactions:1 |
||||||||||||||||
Net decrease from capital share transactions |
(395,915,227 | ) | (646,097,575 | ) | (497,518,385 | ) | (877,375,268 | ) | ||||||||
Total increase (decrease) in net assets |
195,211,155 | (409,443,210 | ) | (149,102,648 | ) | (843,557,516 | ) | |||||||||
Net Assets: |
||||||||||||||||
Beginning of year |
8,527,164,299 | 8,936,607,509 | 4,531,107,888 | 5,374,665,404 | ||||||||||||
End of year |
$8,722,375,454 | $8,527,164,299 | $4,382,005,240 | $4,531,107,888 | ||||||||||||
End of year undistributed net investment income |
$299,848 | — | $297,199 | — | ||||||||||||
|
|
|
|
|
|
|
|
# | Effective October 1, 2016, the Funds’ share classes were renamed or redesignated as described in Note 1 of the Notes to the Financial Statements. |
## | Effective February 27, 2017, the Fund’s Class S shares were renamed as described in Note 1 of the Notes to the Financial Statements. |
1 | See Note 1(g) of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements. |
40 |
Statements of Changes in Net Assets (continued) For the fiscal periods ended December 31, |
AMG Yacktman Focused Fund - Security Selection Only |
AMG Yacktman Special Opportunities Fund | ||||||||||||||
2017# | 2017 | 2016## | |||||||||||||
Increase in Net Assets Resulting From Operations: |
|||||||||||||||
Net investment income |
$15,386 | $172,930 | $443,628 | ||||||||||||
Net realized gain (loss) on investments |
24,237 | 2,104,737 | (30,791 | ) | |||||||||||
Net change in unrealized appreciation/depreciation on investments |
195,070 | 6,393,474 | 3,990,543 | ||||||||||||
Net increase in net assets resulting from operations |
234,693 | 8,671,141 | 4,403,380 | ||||||||||||
Distributions to Shareholders: |
|||||||||||||||
From net investment income: |
|||||||||||||||
Class N |
(303 | ) | — | — | |||||||||||
Class I |
(24,780 | ) | (91,697 | ) | (13,298 | ) | |||||||||
Class Z |
— | (337,180 | ) | (446,336 | ) | ||||||||||
From net realized gain on investments: |
|||||||||||||||
Class N |
(133 | ) | — | — | |||||||||||
Class I |
(10,898 | ) | (290,394 | ) | (7,080 | ) | |||||||||
Class Z |
— | (1,021,519 | ) | (237,650 | ) | ||||||||||
Total distributions to shareholders |
(36,114 | ) | (1,740,790 | ) | (704,364 | ) | |||||||||
Capital Share Transactions:1 |
|||||||||||||||
Net increase from capital share transactions |
1,210,444 | 8,561,808 | 1,260,095 | ||||||||||||
Total increase in net assets |
1,409,023 | 15,492,159 | 4,959,111 | ||||||||||||
Net Assets: |
|||||||||||||||
Beginning of period |
— | 22,218,988 | 17,259,877 | ||||||||||||
End of period |
$1,409,023 | $37,711,147 | $22,218,988 | ||||||||||||
End of period distribution in excess of net investment income |
$(11,216 | ) | $(150,001 | ) | $(75,438 | ) | |||||||||
|
|
|
|
|
|
|
# | Commencement of operations was January 30, 2017. |
## | Effective October 1, 2016, the Funds’ share classes were renamed or redesignated as described in Note 1 of the Notes to the Financial Statements. |
1 | See Note 1(g) of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements. |
41 |
Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||
Class I | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$21.39 | $20.87 | $25.12 | $23.54 | $19.12 | |||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.32 | 0.33 | 0.31 | 0.26 | 0.23 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
3.58 | 2.03 | (1.71 | ) | 2.43 | 5.07 | ||||||||||||||
Total income (loss) from investment operations |
3.90 | 2.36 | (1.40 | ) | 2.69 | 5.30 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.34 | ) | (0.41 | ) | (0.34 | ) | (0.27 | ) | (0.21 | ) | ||||||||||
Net realized gain on investments |
(2.10 | ) | (1.43 | ) | (2.51 | ) | (0.84 | ) | (0.67 | ) | ||||||||||
Total distributions to shareholders |
(2.44 | ) | (1.84 | ) | (2.85 | ) | (1.11 | ) | (0.88 | ) | ||||||||||
Net Asset Value, End of Year |
$22.85 | $21.39 | $20.87 | $25.12 | $23.54 | |||||||||||||||
Total Return2,3 |
18.23 | % | 11.20 | % | (5.63 | )% | 11.33 | % | 27.74 | % | ||||||||||
Ratio of net expenses to average net assets |
0.71 | % | 0.71 | % | 0.71 | % | 0.71 | % | 0.74 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
0.72 | % | 0.72 | % | 0.72 | % | 0.71 | % | 0.75 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
1.38 | % | 1.51 | % | 1.29 | % | 1.08 | % | 1.05 | %4 | ||||||||||
Portfolio turnover |
2 | % | 4 | % | 2 | % | 9 | % | 17 | % | ||||||||||
Net assets end of year (000’s) omitted |
$8,722,375 | $8,527,164 | $8,936,608 | $14,217,017 | $13,931,446 | |||||||||||||||
# | Effective October 1, 2016, the Service Class was renamed Class I. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
4 | Includes non-routine extraordinary expenses amounting to 0.019% of average net assets. |
5 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
42 |
AMG Yacktman Fund Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||
Class N | 2017## | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$19.69 | $19.77 | $25.88 | $25.15 | $20.52 | |||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.19 | 0.19 | 0.22 | 0.17 | 0.15 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
3.75 | 2.05 | (1.51 | ) | 2.54 | 5.39 | ||||||||||||||
Total income (loss) from investment operations |
3.94 | 2.24 | (1.29 | ) | 2.71 | 5.54 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.21 | ) | (0.30 | ) | (0.24 | ) | (0.18 | ) | (0.14 | ) | ||||||||||
Net realized gain on investments |
(2.29 | ) | (2.02 | ) | (4.58 | ) | (1.80 | ) | (0.77 | ) | ||||||||||
Total distributions to shareholders |
(2.50 | ) | (2.32 | ) | (4.82 | ) | (1.98 | ) | (0.91 | ) | ||||||||||
Net Asset Value, End of Year |
$21.13 | $19.69 | $19.77 | $25.88 | $25.15 | |||||||||||||||
Total Return2,3 |
20.03 | % | 11.29 | % | (5.08 | )% | 10.67 | % | 27.01 | % | ||||||||||
Ratio of net expenses to average net assets |
1.22 | % | 1.23 | % | 1.22 | % | 1.22 | % | 1.25 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
1.23 | % | 1.24 | % | 1.22 | % | 1.23 | % | 1.26 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
0.89 | % | 0.94 | % | 0.86 | % | 0.65 | % | 0.62 | %4 | ||||||||||
Portfolio turnover |
2 | % | 4 | % | 6 | % | 16 | % | 17 | % | ||||||||||
Net assets end of year (000’s) omitted |
$2,803,230 | $3,479,880 | $4,062,291 | $7,847,093 | $8,630,019 | |||||||||||||||
43 |
AMG Yacktman Fund Financial Highlights For a share outstanding throughout each fiscal year |
For the fiscal years ended December 31, | ||||||||||||||||||||
Class I | 2017 | 2016# | 2015 | 2014 | 2013 | |||||||||||||||
Net Asset Value, Beginning of Year |
$19.66 | $19.75 | $25.88 | $25.15 | $20.52 | |||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income1,2 |
0.23 | 0.23 | 0.26 | 0.21 | 0.19 | |||||||||||||||
Net realized and unrealized gain (loss) on investments |
3.74 | 2.04 | (1.50 | ) | 2.56 | 5.39 | ||||||||||||||
Total income (loss) from investment operations |
3.97 | 2.27 | (1.24 | ) | 2.77 | 5.58 | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.25 | ) | (0.34 | ) | (0.30 | ) | (0.23 | ) | (0.18 | ) | ||||||||||
Net realized gain on investments |
(2.29 | ) | (2.02 | ) | (4.59 | ) | (1.81 | ) | (0.77 | ) | ||||||||||
Total distributions to shareholders |
(2.54 | ) | (2.36 | ) | (4.89 | ) | (2.04 | ) | (0.95 | ) | ||||||||||
Net Asset Value, End of Year |
$21.09 | $19.66 | $19.75 | $25.88 | $25.15 | |||||||||||||||
Total Return2,3 |
20.25 | % | 11.46 | % | (4.89 | )% | 10.88 | % | 27.19 | % | ||||||||||
Ratio of net expenses to average net assets |
1.05 | % | 1.05 | % | 1.05 | % | 1.05 | % | 1.08 | %4 | ||||||||||
Ratio of gross expenses to average net assets5 |
1.06 | % | 1.06 | % | 1.05 | % | 1.06 | % | 1.09 | %4 | ||||||||||
Ratio of net investment income to average net assets2 |
1.06 | % | 1.11 | % | 1.03 | % | 0.82 | % | 0.78 | %4 | ||||||||||
Portfolio turnover |
2 | % | 4 | % | 6 | % | 16 | % | 17 | % | ||||||||||
Net assets end of year (000’s) omitted |
$1,578,775 | $1,051,228 | $1,312,374 | $3,414,602 | $3,301,204 | |||||||||||||||
## | Effective February 27, 2017, Class S was renamed Class N. |
# | Effective October 1, 2016, the Service Class and Institutional Class were renamed Class S and Class I, respectively. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
4 | Includes non-routine extraordinary expenses amounting to 0.020% and 0.017% of average net assets for the Class N and Class I, respectively. |
5 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
44 |
AMG Yacktman Focused Fund - Security Selection Only Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal period ended December 31, | |||||
Class N |
2017 | 1 | |||
Net Asset Value, Beginning of Period |
$10.00 | ||||
Income from Investment Operations: |
|||||
Net investment income2,3 |
0.14 | ||||
Net realized and unrealized gain on investments |
1.94 | ||||
Total income from investment operations |
2.08 | ||||
Less Distributions to Shareholders from: |
|||||
Net investment income |
(0.22 | ) | |||
Net realized gain on investments |
(0.09 | ) | |||
Total distributions to shareholders |
(0.31 | ) | |||
Net Asset Value, End of Period |
$11.77 | ||||
Total Return3,4 |
20.81 | %5 | |||
Ratio of net expenses to average net assets |
1.08 | %6 | |||
Ratio of gross expenses to average net assets7 |
3.77 | %8 | |||
Ratio of net investment income to average net assets3 |
1.35 | %6 | |||
Portfolio turnover |
12 | %5 | |||
Net assets end of period (000’s) omitted |
$17 | ||||
45 |
AMG Yacktman Focused Fund - Security Selection Only Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal period ended December 31, | |||||
Class I |
20171 | ||||
Net Asset Value, Beginning of Period |
$10.00 | ||||
Income from Investment Operations: |
|||||
Net investment income2,3 |
0.14 | ||||
Net realized and unrealized gain on investments |
1.94 | ||||
Total income from investment operations |
2.08 | ||||
Less Distributions to Shareholders from: |
|||||
Net investment income |
(0.22 | ) | |||
Net realized gain on investments |
(0.09 | ) | |||
Total distributions to shareholders |
(0.31 | ) | |||
Net Asset Value, End of Period |
$11.77 | ||||
Total Return3,4 |
20.81 | %5 | |||
Ratio of net expenses to average net assets |
1.08 | %6 | |||
Ratio of gross expenses to average net assets7 |
3.77 | %8 | |||
Ratio of net investment income to average net assets3 |
1.35 | %6 | |||
Portfolio turnover |
12 | %5 | |||
Net assets end of period (000’s) omitted |
$1,392 | ||||
1 | Commencement of operations was on January 30, 2017. |
2 | Per share numbers have been calculated using average shares. |
3 | Total returns and net investment income would have been lower had certain expenses not been offset. |
4 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
5 | Not annualized. |
6 | Annualized. |
7 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
8 | Ratio does not reflect the annualization of audit expenses. |
46 |
AMG Yacktman Special Opportunities Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal years ended December 31, | For the fiscal period ended December 31, | ||||||||||||||
Class I |
2017 | |
2016# |
20151 | |||||||||||
Net Asset Value, Beginning of Period |
$9.37 | $7.75 | $9.40 | ||||||||||||
Income (loss) from Investment Operations: |
|||||||||||||||
Net investment income3,4 |
0.06 | 5 | 0.18 | 0.20 | |||||||||||
Net realized and unrealized gain (loss) on investments |
3.18 | 1.75 | (1.49 | ) | |||||||||||
Total income (loss) from investment operations |
3.24 | 1.93 | (1.29 | ) | |||||||||||
Less Distributions to Shareholders from: |
|||||||||||||||
Net investment income |
(0.14 | ) | (0.20 | ) | (0.23 | ) | |||||||||
Net realized gain on investments |
(0.44 | ) | – | (0.13 | ) | ||||||||||
Paid in capital |
– | (0.11 | ) | – | |||||||||||
Total distributions to shareholders |
(0.58 | ) | (0.31 | ) | (0.36 | ) | |||||||||
Net Asset Value, End of Period |
$12.03 | $9.37 | $7.75 | ||||||||||||
Total Return4 |
34.67 | %7 | 24.88 | % | (13.77 | )%8 | |||||||||
Ratio of net expenses to average net assets |
2.33 | %9 | 1.90 | %10 | 1.27 | %11,12 | |||||||||
Ratio of gross expenses to average net assets13 |
2.59 | %9 | 2.29 | %10 | 1.88 | %11,12 | |||||||||
Ratio of net investment income (loss) to average net assets4 |
0.50 | %9 | 2.08 | %10 | 3.40 | %11,12 | |||||||||
Portfolio turnover |
36 | % | 29 | % | 30 | %8 | |||||||||
Net assets end of period (000’s) omitted |
$8,377 | $700 | $83 | ||||||||||||
47 |
AMG Yacktman Special Opportunities Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal years ended December 31, | For the fiscal period ended December 31, | |||||||||||||||||||
Class Z |
2017 | 2016 | # | 2015 | 2014 | 2 | ||||||||||||||
Net Asset Value, Beginning of Period |
$9.38 | $7.75 | $9.45 | $10.00 | ||||||||||||||||
Income (loss) from Investment Operations: |
||||||||||||||||||||
Net investment income3,4 |
0.07 | 5 | 0.20 | 0.22 | (0.00 | )6 | ||||||||||||||
Net realized and unrealized gain (loss) on investments |
3.19 | 1.74 | (1.56 | ) | (0.54 | ) | ||||||||||||||
Total income (loss) from investment operations |
3.26 | 1.94 | (1.34 | ) | (0.54 | ) | ||||||||||||||
Less Distributions to Shareholders from: |
||||||||||||||||||||
Net investment income |
(0.15 | ) | (0.20 | ) | (0.23 | ) | (0.01 | ) | ||||||||||||
Net realized gain on investments |
(0.44 | ) | – | (0.13 | ) | – | ||||||||||||||
Paid in capital |
– | (0.11 | ) | – | – | |||||||||||||||
Total distributions to shareholders |
(0.59 | ) | (0.31 | ) | (0.36 | ) | (0.01 | ) | ||||||||||||
Net Asset Value, End of Period |
$12.05 | $9.38 | $7.75 | $9.45 | ||||||||||||||||
Total Return4 |
34.81 | %7 | 25.05 | %7 | (14.22 | )% | (5.39 | )%7,8 | ||||||||||||
Ratio of net expenses to average net assets |
2.23 | %9 | 1.63 | %10 | 1.24 | %12 | 1.65 | %11 | ||||||||||||
Ratio of gross expenses to average net assets13 |
2.49 | %9 | 2.01 | %10 | 1.74 | %12 | 2.60 | %11 | ||||||||||||
Ratio of net investment income (loss) to average net assets4 |
0.60 | %9 | 2.34 | %10 | 2.47 | %12 | (0.04 | )%11 | ||||||||||||
Portfolio turnover |
36 | % | 29 | % | 30 | % | 7 | %8 | ||||||||||||
Net assets end of period (000’s) omitted |
$29,334 | $21,519 | $17,177 | $17,545 | ||||||||||||||||
# | Effective October 1, 2016, the Service Class and Institutional Class were renamed Class I and Class Z, respectively. |
1 | Commencement of operations was on July 1, 2015. |
2 | Commencement of operations was on June 30, 2014. |
3 | Per share numbers have been calculated using average shares. |
4 | Total returns and net investment income (loss) would have been lower had certain expenses not been offset. |
5 | Includes non-recurring dividends. Without these dividends, net investment income per share would have been $0.04 and $0.05 for Class I and Class Z, respectively. |
6 | Rounds to less than $(0.01) per share or (0.01)%. |
7 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
8 | Not annualized. |
9 | Includes a performance adjustment amounting to 0.59% of average daily net assets. (See Note 2 of Notes to Financial Statements). |
10 | Includes a performance adjustment amounting to (0.02)% of average daily net assets. (See Note 2 of Notes to Financial Statements). |
11 | Annualized. |
12 | Includes a performance adjustment amounting to (0.42)% of average daily net assets. (See Note 2 of Notes to Financial Statements). |
13 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
48 |
December 31, 2017 |
49 |
Notes to Financial Statements (continued) |
The tax character of distributions paid during the fiscal periods ended December 31, 2017 and December 31, 2016 were as follows:
Yacktman Fund | Yacktman Focused | Yacktman Focused Selection Only |
||||||||||||||||||
Distributions paid from: | 2017 | 2016 | 2017 | 2016 | 2017 | |||||||||||||||
Ordinary income |
$119,083,479 | $150,864,833 | $41,874,485 | $65,559,618 | $25,083 | |||||||||||||||
Short-term capital gains |
43,274,367 | 4,336,688 | 16,858,923 | 3,409,293 | 11,031 | |||||||||||||||
Long-term capital gains |
693,442,787 | 526,680,104 | 413,917,577 | 423,484,332 | — | |||||||||||||||
Return of capital |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$855,800,633 | $681,881,625 | $472,650,985 | $492,453,243 | $36,114 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
50 |
Notes to Financial Statements (continued) |
Yacktman Special Opportunities | ||||||||
Distributions paid from: | 2017 | 2016 | ||||||
Ordinary income |
$428,877 | $459,634 | ||||||
Short-term capital gains |
345,412 | — | ||||||
Long-term capital gains |
966,501 | — | ||||||
Return of capital |
— | 244,730 | ||||||
|
|
|
|
|||||
$1,740,790 | $704,364 | |||||||
|
|
|
|
As of December 31, 2017, the components of distributable earnings (excluding unrealized appreciation/depreciation) on tax basis consisted of:
Yacktman Fund | Yacktman Focused | Yacktman Focused Selection Only | Yacktman Special Opportunities | |||||||||||||
Capital loss carryforward |
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
| ||||
Undistributed ordinary income |
|
$299,848
|
|
|
$297,199
|
|
|
$9,492
|
|
|
$50,251
|
| ||||
Undistributed short-term capital gains |
|
6,987
|
|
|
8,066
|
|
|
14,725
|
|
|
147,724
|
| ||||
Undistributed long-term capital gains |
|
159,774,205
|
|
|
101,552,809
|
|
|
—
|
|
|
409,496
|
| ||||
Late-year loss deferral |
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
At December 31, 2017, the approximate cost of investments and the aggregate gross unrealized appreciation and depreciation for federal income tax were as follows:
Fund | Cost | Appreciation | Depreciation | Net | ||||||||||||
Yacktman Fund
|
|
$5,962,172,007
|
|
|
$3,033,976,960
|
|
|
$(170,214,590)
|
|
|
$2,863,762,370
|
| ||||
Yacktman Focused
|
|
3,103,175,326
|
|
|
1,390,876,103
|
|
|
(82,552,934)
|
|
|
1,308,323,169
|
| ||||
Yacktman Focused Selection Only
|
|
1,248,435
|
|
|
207,048
|
|
|
(32,686)
|
|
|
174,362
|
| ||||
Yacktman Special Opportunities
|
|
31,970,018
|
|
|
7,352,242
|
|
|
(1,346,881)
|
|
|
6,005,361
|
|
51 |
Notes to Financial Statements (continued) |
For the fiscal years ended December 31, 2017 and December 31, 2016, the capital stock transactions by class for the Funds were as follows:
Yacktman Fund | Yacktman Focused | |||||||||||||||||||||||||||||||
December 31, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||
Class N:
|
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
— | — | — | — | 10,466,211 | $224,290,360 | 19,051,312 | $391,663,441 | ||||||||||||||||||||||||
Reinvestment of distributions |
— | — | — | — | 14,063,019 | 296,448,444 | 18,524,482 | 366,784,746 | ||||||||||||||||||||||||
Cost of shares repurchased |
— | — | — | — | (68,602,009) | (1,482,158,582) | (66,271,725) | (1,362,455,866) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net decrease |
— | — | — | — | (44,072,779) | $(961,419,778) | (28,695,931) | $(604,007,679) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Class I:
|
||||||||||||||||||||||||||||||||
Proceeds from sale of shares |
39,676,324 | $915,572,764 | 45,044,689 | $976,295,059 | 32,254,309 | $701,822,790 | 11,307,426 | $228,537,114 | ||||||||||||||||||||||||
Reinvestment of distributions |
34,574,873 | 789,690,099 | 29,074,070 | 626,836,953 | 6,428,016 | 135,245,464 | 3,913,673 | 77,373,312 | ||||||||||||||||||||||||
Cost of shares repurchased |
(91,124,561) | (2,101,178,090) | (103,628,124) | (2,249,230,663) | (17,292,601) | (373,166,861) | (28,201,506) | (579,278,015) | ||||||||||||||||||||||||
Capital contribution |
— | — | — | 1,076 | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net increase (decrease) |
(16,873,364) | $(395,915,227) | (29,509,365) | $(646,097,575) | 21,389,724 | $463,901,393 | (12,980,407) | $(273,367,589) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yacktman Focused Selection Only |
Yacktman Special Opportunities | |||||||||||||||||||||||
December 31, 2017 | December 31, 2017 | December 31, 2016 | ||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||
Class N:
|
||||||||||||||||||||||||
Proceeds from sale of shares |
1,409 | $14,331 | — | — | — | — | ||||||||||||||||||
Reinvestment of distributions |
37 | 436 | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase |
1,446 | $14,767 | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Class I:
|
||||||||||||||||||||||||
Proceeds from sale of shares |
115,212 | $1,160,100 | 638,304 | $7,092,111 | 67,650 | $571,616 | ||||||||||||||||||
Reinvestment of distributions |
3,044 | 35,678 | 32,271 | 382,091 | 2,196 | 20,378 | ||||||||||||||||||
Cost of shares repurchased |
(10) | (101) | (48,669) | (564,041) | (5,803) | (54,081) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase |
118,246 | $1,195,677 | 621,906 | $6,910,161 | 64,043 | $537,913 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Class Z:
|
||||||||||||||||||||||||
Proceeds from sale of shares |
— | — | 124,116 | $1,456,721 | 4,246 | $40,039 | ||||||||||||||||||
Reinvestment of distributions |
— | — | 114,266 | 1,355,198 | 73,428 | 682,143 | ||||||||||||||||||
Cost of shares repurchased |
— | — | (97,696) | (1,160,272) | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase |
— | — | 140,686 | $1,651,647 | 77,674 | $722,182 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017, certain unaffiliated shareholders of record individually or collectively held greater than 10% of the net assets of the Funds as follows: Yacktman Focused Selection Only - two collectively own 98%; Yacktman Special Opportunities - two collectively own 49%. Transactions by these shareholders may have a material impact on their respective Fund.
52 |
Notes to Financial Statements (continued) |
53 |
Notes to Financial Statements (continued) |
54 |
Notes to Financial Statements (continued) |
55 |
Notes to Financial Statements (continued) |
The following table is a summary of the Funds’ open Repurchase Agreements that are subject to a master netting agreement as of December 31, 2017:
Gross Amount Not Offset in the Statement of Assets and Liabilities |
||||||||||||
Fund | Net Amounts of Assets Presented in the Statement of Assets and Liabilities |
Financial Instruments Collateral |
Cash Collateral Received |
Net Amount | ||||||||
Yacktman Fund
|
||||||||||||
Cantor Fitzgerald Securities, Inc.
|
$22,270,928 | $22,270,928 | — | — | ||||||||
Daiwa Capital Markets America
|
22,270,928 | 22,270,928 | — | — | ||||||||
Jefferies LLC
|
4,685,136 | 4,685,136 | — | — | ||||||||
RBC Dominion Securities, Inc.
|
22,270,928 | 22,270,928 | — | — | ||||||||
State of Wisconsin Investment Board
|
22,270,928 | 22,270,928 | — | — | ||||||||
|
|
|
|
|
| |||||||
Totals |
$93,768,848 | $93,768,848 | — | — | ||||||||
|
|
|
|
|
| |||||||
Yacktman Focused
|
||||||||||||
Cantor Fitzgerald Securities, Inc.
|
$5,769,594 | $5,769,594 | — | — | ||||||||
Daiwa Capital Markets America
|
5,769,594 | 5,769,594 | — | — | ||||||||
HSBC Securities USA, Inc.
|
5,769,594 | 5,769,594 | — | — | ||||||||
Merrill Lynch, Pierce, Fenner & Smith, Inc.
|
1,214,363 | 1,214,363 | — | — | ||||||||
State of Wisconsin Investment Board
|
5,769,594 | 5,769,594 | — | — | ||||||||
|
|
|
|
|
| |||||||
Totals |
$24,292,739 | $24,292,739 | — | — | ||||||||
|
|
|
|
|
| |||||||
Yacktman Focused Selection Only |
||||||||||||
Cantor Fitzgerald Securities, Inc. |
$10,513 | $10,513 | — | — | ||||||||
|
|
|
|
|
| |||||||
Yacktman Special Opportunities |
||||||||||||
State of Wisconsin Investment Board |
$301,729 | $301,729 | — | — | ||||||||
|
|
|
|
|
|
56 |
|
57 |
|
TAX INFORMATION
58 |
Trustees and Officers |
The Trustees and Officers of the Trust, their business addresses, principal occupations for the past five years and ages are listed below. The Trustees provide broad supervision over the affairs of the Trust and the Funds. The Trustees are experienced executives who meet periodically throughout the year to oversee the Funds’ activities, review contractual arrangements with companies that provide services to the Funds, and
|
review the Funds’ performance. Unless otherwise noted, the address of each Trustee or Officer is the address of the Trust: 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830.
There is no stated term of office for Trustees. Trustees serve until their resignation, retirement or removal in |
accordance with the Trust’s organizational documents and policies adopted by the Board from time to time. The Chairman of the Trustees, President, Treasurer and Secretary of the Trust are elected by the Trustees annually. Other officers hold office at the pleasure of the Trustees. |
Independent Trustees
The following Trustees are not “interested persons” of the Trust within the meaning of the 1940 Act:
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2012 • Oversees 61 Funds in Fund Complex |
Bruce B. Bingham, 69 Partner, Hamilton Partners (real estate development firm) (1987-Present); Director of The Yacktman Funds (2000-2012). | |
• Trustee since 1999 • Oversees 61 Funds in Fund Complex |
Edward J. Kaier, 72 Attorney at Law and Partner, Teeters Harvey Marrone & Kaier LLP (2007-Present); Attorney at Law and Partner, Hepburn Willcox Hamilton & Putnam, LLP (1977-2007); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Kurt A. Keilhacker, 54 Managing Member, TechFund Capital (1997-Present); Managing Member, TechFund Europe (2000-Present); Board Member, 6wind SA, (2002-Present); Managing Member, Elementum Ventures (2013-Present); Trustee, Gordon College (2001-2016). | |
• Trustee since 2004 • Oversees 61 Funds in Fund Complex |
Steven J. Paggioli, 67 Independent Consultant (2002-Present); Formerly Executive Vice President and Director, The Wadsworth Group (1986-2001); Executive Vice President, Secretary and Director, Investment Company Administration, LLC (1990-2001); Vice President, Secretary and Director, First Fund Distributors, Inc. (1991-2001); Trustee, Professionally Managed Portfolios (32 portfolios); Advisory Board Member, Sustainable Growth Advisors, LP; Independent Director, Chase Investment Counsel (2008–Present). | |
• Trustee since 2013 • Oversees 61 Funds in Fund Complex |
Richard F. Powers III, 72 Adjunct Professor, U.S. Naval War College (2016); Adjunct Professor, Boston College (2010-2013); President and CEO of Van Kampen Investments Inc. (1998-2003). | |
• Independent Chairman • Trustee since 1999 • Oversees 63 Funds in Fund Complex |
Eric Rakowski, 59 Professor, University of California at Berkeley School of Law (1990-Present); Director of Harding, Loevner Funds, Inc. (9 portfolios); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Victoria L. Sassine, 52 Lecturer, Babson College (2007 – Present). | |
• Trustee since 2004 • Oversees 61 Funds in Fund Complex |
Thomas R. Schneeweis, 70 Professor Emeritus, University of Massachusetts (2013-Present); Partner, S Capital Wealth Advisors (2015-Present); President, TRS Associates (1982-Present); Board Member, Chartered Alternative Investment Association (“CAIA”) (2002-Present); Director, CAIA Foundation (Education) (2010-Present); Director, Institute for GlobalAsset and Risk Management (Education) (2010-Present); Partner, S Capital Management, LLC (2007-2015); Director, CISDM at the University of Massachusetts, (1996-2013); President, Alternative Investment Analytics, LLC, (formerly Schneeweis Partners, LLC) (2001-2013); Professor of Finance, University of Massachusetts (1977-2013). |
59 |
AMG Funds Trustees and Officers (continued) |
Interested Trustees
Each Trustee in the following table is an “interested person” of the Trust within the meaning of the 1940 Act. Ms. Carsman is an interested person of the Trust within the meaning of the 1940 Act by virtue of her position with, and interest in securities of, AMG.
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2011 • Oversees 63 Funds in Fund Complex |
Christine C. Carsman, 65 Executive Vice President, Deputy General Counsel and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2017-Present); Director (2010-Present) and Chair of the Board of Directors (2015-Present), AMG Funds plc; Director of Harding, Loevner Funds, Inc. (9 portfolios); Senior Vice President and Deputy General Counsel, Affiliated Managers Group, Inc. (2011-2016); Senior Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2007-2011); Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2004-2007); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2004-2011); Senior Counsel, Vice President and Director of Operational Risk Management and Compliance, Wellington Management Company, LLP (1995-2004). | |
Officers | ||
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• President since 2014 • Principal Executive Officer since 2014 • Chief Executive Officer since 2016 |
Jeffrey T. Cerutti, 50 Chief Executive Officer, AMG Funds LLC (2014-Present); Director, President and Principal, AMG Distributors, Inc. (2014-Present); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2014-Present); Chief Executive Officer, President and Principal Executive Officer, AMG Funds IV, (2015-Present); Chief Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Executive Officer, Aston Asset Management, LLC (2016); President, VP Distributors, (2011-2014); Executive Vice President, Head of Distribution, Virtus Investment Partners, Inc. (2010-2014); Managing Director, Head of Sales, UBS Global Asset Management (2001-2010). | |
• Chief Operating Officer since 2007 |
Keitha L. Kinne, 59 Chief Operating Officer, AMG Funds LLC (2007-Present); Chief Investment Officer, AMG Funds LLC (2008-Present); Chief Operating Officer, AMG Distributors, Inc. (2007-Present); Chief Operating Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2007-Present); Chief Operating Officer, AMG Funds IV, (2016-Present); Chief Operating Officer and Chief Investment Officer, Aston Asset Management, LLC (2016); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2012-2014); Managing Partner, AMG Funds LLC (2007-2014); President, AMG Funds (2012-2014); President, AMG Distributors, Inc. (2012-2014); Managing Director, Legg Mason & Co., LLC (2006-2007); Managing Director, Citigroup Asset Management (2004-2006). | |
• Secretary since 2015 • Chief Legal Officer since 2015 |
Mark J. Duggan, 53 Senior Vice President and Senior Counsel, AMG Funds LLC (2015-Present); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2015-Present); Secretary and Chief Legal Officer, AMG Funds IV, (2015-Present); Attorney, K&L Gates, LLP (2009-2015). | |
• Chief Financial Officer since 2017 • Treasurer since 2017 • Principal Financial Officer since 2017 • Principal Accounting Officer since 2017 |
Thomas G. Disbrow, 52 Vice President, Mutual Fund Treasurer & CFO, AMG Funds, AMG Funds LLC (2017-Present); Chief Financial Officer, Principal Financial Officer, Treasurer and Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Managing Director - Global Head of Traditional Funds Product Control, UBS Asset Management (Americas), Inc. (2015-2017); Managing Director - Head of North American Funds Treasury, UBS Asset Management (Americas), Inc. (2011-2015). | |
• Chief Compliance Officer since 2016 |
Gerald F. Dillenburg, 51 Vice President, Chief Compliance Officer AMG Funds, AMG Funds LLC (2017-Present); Chief Compliance Officer AMG Funds, AMG Funds LLC (2016-2017); Chief Compliance Officer and Sarbanes Oxley Code of Ethics Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Compliance Officer, AMG Funds IV (1996-Present); Sarbanes-Oxley Code of Ethics Compliance Officer, AMG Funds IV (2016-Present); Chief Compliance Officer, Aston Asset Management, LLC (2006-2016); Chief Operating Officer, Aston Funds (2003-2016); Secretary, Aston Funds (1996-2015); Chief Financial Officer, Aston Funds (1997-2010); Chief Financial Officer, Aston Asset Management, LLC (2006-2010); Treasurer, Aston Funds (1996-2010). | |
• Deputy Treasurer since 2017 | John A. Starace, 47 Director, Mutual Fund Accounting, AMG Funds LLC (2017-Present); Vice President, Deputy Treasurer of Mutual Funds Services, AMG Funds LLC (2014-2017); Deputy Treasurer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Vice President, Citi Hedge Fund Services (2010-2014); Audit Senior Manager (2005-2010) and Audit Manager (2001-2005), Deloitte & Touche LLP. |
60 |
AMG Funds Trustees and Officers (continued) |
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• Controller since 2017 | Christopher R. Townsend, 50 Vice President, Business Finance, AMG Funds LLC (2017-Present); Head of Business Finance, AMG Funds LLC (2015-2017); Chief Financial Officer and Financial and Operations Principal, AMG Distributors, Inc. (2016-Present); Controller, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Treasurer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017); Chief Financial Officer, Aston Asset Management LLC (2016); Head of Finance and Accounting, Allianz Asset Management (2006-2015). | |
• Anti-Money Laundering Compliance Officer since 2014 |
Patrick J. Spellman, 43 Vice President, Chief Compliance Officer, AMG Funds LLC (2017-Present); Senior Vice President, Chief Compliance Officer, AMG Funds LLC (2011-2017); Chief Compliance Officer, AMG Distributors, Inc., (2010-Present); Anti-Money Laundering Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2014-Present); Anti-Money Laundering Officer, AMG Funds IV, (2016-Present); Compliance Manager, Legal and Compliance, Affiliated Managers Group, Inc. (2005-2011). | |
• Assistant Secretary since 2016 | Maureen A. Meredith, 32 Director, Counsel, AMG Funds LLC (2017-Present); Vice President, Counsel, AMG Funds LLC (2015-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2016-Present); Associate, Ropes & Gray LLP (2011-2015); Law Fellow, Massachusetts Appleseed Center for Law and Justice (2010-2011). |
61 |
Approval of Amendment to Investment Management and Subadvisory Agreement |
At an in-person meeting held on September 14-15, 2016, the Board of Trustees (the “Board” or the “Trustees”) of AMG Funds (the “Trust”), and separately a majority of the Trustees who are not “interested persons” of the Trust (the “Independent Trustees”) within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”), unanimously voted to approve an amendment to the Investment Management Agreement (the “Investment Management Agreement”) between AMG Funds LLC (the “Investment Manager”) and the Trust relating to AMG Yacktman Focused Fund – Security Selection Only, a new series of the Trust (the “New Fund”), and an amendment to the Subadvisory Agreement between the Investment Manager and Yacktman Asset Management LP (“Yacktman”) relating to the New Fund (the “Subadvisory Agreement” and, together with the Investment Management Agreement, the “New Fund Agreements”). The Trustees were separately represented by independent legal counsel in their consideration of the New Fund Agreements.
In considering the New Fund Agreements, the Trustees reviewed a variety of materials relating to the New Fund, the Investment Manager and Yacktman, including fee and expense information for an appropriate peer group of similar mutual funds for the New Fund (the “Peer Group”) and other information regarding the nature, extent and quality of services to be provided by the Investment Manager and Yacktman under their respective agreements. Because the New Fund is a newly created series of the Trust and has not yet begun operations, no comparative performance information for the New Fund was provided. The Trustees, however, considered the performance of other funds sub-advised by Yacktman in the AMG Funds Family of Funds, which, as of September 14-15, 2016, consisted of 70 funds (the “AMG Fund Complex”), for various time periods, noting that the New Fund will be managed by the same portfolio managers as, and use an investment philosophy and process that will closely resemble that used for, AMG Yacktman Focused Fund. Prior to voting, the Independent Trustees: (a) reviewed the foregoing information with their independent legal counsel and with management and (b) discussed with legal counsel the legal standards applicable to their consideration of the New Fund Agreements.
NATURE, EXTENT AND QUALITY OF SERVICES
In considering the nature, extent and quality of the services to be provided by the Investment Manager under the Investment Management Agreement, the |
Trustees took into account information provided periodically throughout the previous year by the Investment Manager in Board meetings relating to the Investment Manager’s financial information, operations and personnel, the performance of its duties with respect to other funds in the AMG Fund Complex, the quality of the performance of the Investment Manager’s duties and the Trustees’ knowledge of the Investment Manager’s management team.
In the course of their deliberations regarding the Investment Management Agreement, the Trustees evaluated, among other things: (a) the quality of the monitoring services intended to be performed by the Investment Manager in overseeing the portfolio management responsibilities of Yacktman; (b) the Investment Manager’s ability to supervise the New Fund’s other service providers; and (c) the Investment Manager’s compliance program. The Trustees also took into account that, in performing its functions under the Investment Management Agreement and supervising Yacktman, the Investment Manager will: perform periodic detailed analyses and reviews of the performance by Yacktman of its obligations to the New Fund, including without limitation analysis and review of portfolio and other compliance matters and review of Yacktman’s investment performance with respect to the New Fund; prepare and present periodic reports to the Trustees regarding the investment performance of Yacktman and other information regarding Yacktman, at such times and in such forms as the Trustees may reasonably request; review and consider any changes in the personnel of Yacktman responsible for performing Yacktman’s obligations and make appropriate reports to the Trustees; review and consider any changes in the ownership or senior management of Yacktman and make appropriate reports to the Trustees; perform periodic in-person or telephonic diligence meetings, including with respect to compliance matters, with representatives of Yacktman; assist the Trustees and management of the Trust in developing and reviewing information with respect to the initial approval of the Subadvisory Agreement and annual consideration of the Subadvisory Agreement thereafter; prepare recommendations with respect to the continued retention of Yacktman or the replacement of Yacktman, including at the request of the Board; identify potential successors to or replacements of Yacktman or potential additional subadvisors; perform appropriate due diligence, and |
develop and present to the Trustees a recommendation as to any such successor, replacement, or additional subadvisor, including at the request of the Board; designate and compensate from its own resources such personnel as the Investment Manager may consider necessary or appropriate to the performance of its services; and perform such other review and reporting functions as the Trustees shall reasonably request consistent with the Investment Management Agreement and applicable law. The Trustees noted the affiliation of Yacktman with the Investment Manager, noting any potential conflicts of interest. The Trustees also took into account the financial condition of the Investment Manager with respect to its ability to provide the services required under the Investment Management Agreement and noted that, as of June 30, 2016, the Investment Manager had approximately $27.4 billion in mutual fund assets under management. The Trustees also considered the Investment Manager’s risk management processes.
In the course of their deliberations regarding the nature, extent and quality of services to be provided by Yacktman under the Subadvisory Agreement, the Trustees evaluated, among other things: (a) the expected services to be rendered by Yacktman to the New Fund; (b) the qualifications and experience of Yacktman personnel; and (c) the Yacktman compliance program. The Trustees also took into account the financial condition of Yacktman with respect to its ability to provide the services required under the Subadvisory Agreement and noted that, as of June 30, 2016, Yacktman managed approximately $16.8 billion in assets. The Trustees also considered Yacktman’s risk management processes. The Trustees also noted that Yacktman sub-advised three other funds in the AMG Fund Complex, and that the Trustees had overseen funds subadvised by Yacktman since 2012.
The Trustees also considered information regarding the nature, extent and quality of services provided by the Investment Manager and Yacktman, as applicable, to funds in the AMG Fund Complex in connection with the Trustees’ annual consideration of the existing funds’ contractual arrangements. The Trustees considered the investment philosophy, strategies and techniques that are intended to be used in managing the New Fund. Among other things, the Trustees reviewed biographical information on portfolio management and other |
62 |
Approval of Amendment to Investment Management and Subadvisory Agreement (continued) |
professional staff and information regarding Yacktman’s organizational and management structure. The Trustees considered specific information provided regarding the experience of the individuals at Yacktman that are expected to have portfolio management responsibility for the New Fund, including the information set forth in the New Fund’s prospectus and statement of additional information to be filed with the Securities and Exchange Commission. The Trustees noted that one of the proposed portfolio managers is the Chief Investment Officer and Senior Vice President of Yacktman and the other portfolio manager is a Senior Vice President of Yacktman. In addition, the Trustees observed that Yacktman’s investment process focuses on intrinsic value, all capitalization ranges, bottom-up security selection, internal research and stocks that offer a compelling price given their underlying assets.
PERFORMANCE
Because the New Fund has not yet commenced operations, the Trustees noted that they could not draw any conclusions regarding the performance of the New Fund. The Trustees, however, considered the performance of Yacktman with respect to the other funds it manages in the AMG Fund Complex, including AMG Yacktman Focused Fund.
ADVISORY FEES, EXPENSES, PROFITABILITY AND ECONOMIES OF SCALE
In considering the reasonableness of the advisory fee charged by the Investment Manager for managing the New Fund, the Trustees noted that the Investment Manager, and not the New Fund, is responsible for paying the fees charged by Yacktman, and, therefore, that the fees paid to the Investment Manager cover the cost of providing portfolio management services as well as the cost of providing search, selection and monitoring services in operating a “manager-of-managers” complex of mutual funds. The Trustees also noted that the Investment Manager would indirectly benefit from the portion of the advisory fees paid to Yacktman by the Investment Manager because the Investment Manager and Yacktman are affiliated. The Trustees noted that the New Fund’s proposed advisory and administration fees and total gross expenses were both higher than the average for the New Fund’s Peer Group, measured as of July 31, 2016. The Trustees also took into account the fact that the Investment Manager has contractually agreed, through at least May 1, 2018, to limit the total annual |
operating expenses (exclusive of taxes, interest (including interest incurred in connection with bank and custody overdrafts), shareholder servicing fees, distribution and service (12b-1) fees, brokerage commissions and other transaction costs, acquired fund fees and expenses, and extraordinary expenses) of the New Fund to the annual rate of 1.08% of the New Fund’s average daily net assets, noting that the net expenses of the New Fund were higher than the average for the New Fund’s Peer Group. The Trustees took into account management’s discussion of the New Fund’s expenses. The Trustees concluded that, in light of the nature, extent and quality of the services to be provided by the Investment Manager and Yacktman and the considerations noted above with respect to the Investment Manager and Yacktman, the New Fund’s advisory fees and subadvisory fees are reasonable.
In considering the anticipated profitability of the Investment Manager with respect to the provision of investment advisory services to the New Fund, the Trustees considered all revenues and other benefits, both direct and indirect (including any so-called “fallout benefits” such as reputational value derived from the Investment Manager serving as investment manager to the New Fund), received by Investment Manager and its affiliates attributable to managing all the mutual funds in the AMG Fund Complex, the cost of providing such services, the entrepreneurial risk undertaken as Investment Manager and sponsor of the New Fund and the resulting profitability to the Investment Manager and its affiliates from these relationships. The Trustees also considered the amount of the advisory fee retained by the Investment Manager after payment of the subadvisory fee with respect to the New Fund. Based on the foregoing, the Trustees concluded that the profitability to the Investment Manager is expected to be reasonable and that, since the New Fund does not currently have any assets, the Investment Manager is not realizing any material benefits from economies of scale. With respect to economies of scale, the Trustees also noted that as the New Fund’s assets increase over time, the New Fund may realize economies of scale to the extent that the increase in assets is proportionally greater than the increase in certain other expenses.
In considering the anticipated profitability of Yacktman with respect to the provision of subadvisory services to the New Fund, although recognizing that profitability with respect to the New Fund is speculative, the Trustees considered information regarding Yacktman’s organization, |
management and financial stability. The Trustees noted that, because Yacktman is an affiliate of the Investment Manager, a portion of Yacktman’s revenues or anticipated profitability might be shared directly or indirectly with the Investment Manager. The Trustees also noted that the subadvisory fees are to be paid by the Investment Manager out of its advisory fee. The Board took into account management’s discussion of the proposed subadvisory fee structure, and the services Yacktman is expected to provide in performing its functions under the Subadvisory Agreement. The Trustees also considered the anticipated net assets of the New Fund for its first year of operations. The Trustees also were provided, in their June 22-23, 2016 meeting, with the profitability of Yacktman with respect to the other funds it manages in the AMG Fund Complex. Based on the foregoing, the Trustees concluded that the profitability to Yacktman is expected to be reasonable and that, since the New Fund does not currently have any assets, Yacktman is not realizing material benefits from economies of scale. Also with respect to economies of scale, the Trustees noted that as the New Fund’s assets increase over time, the New Fund may realize other economies of scale to the extent the increase in assets is proportionally greater than the increase in certain other expenses.
After consideration of the foregoing, the Trustees reached the following conclusions (in addition to the conclusions discussed above) regarding the New Fund Agreements: (a) the Investment Manager and Yacktman have demonstrated that they possess the capability and resources to perform the duties required of them under the Investment Management Agreement and the Subadvisory Agreement; (b) Yacktman’s investment strategy is appropriate for pursuing the New Fund’s investment objectives; (c) Yacktman is reasonably likely to execute its investment strategy consistently over time; and (d) the Investment Manager and Yacktman maintain appropriate compliance programs.
Based on all of the above-mentioned factors and their related conclusions, with no single factor or conclusion being determinative and with each Trustee not necessarily attributing the same weight to each factor, the Trustees concluded that approval of the New Fund Agreements would be in the best interests of the New Fund and its shareholders. Accordingly, on September 14-15, 2016, the Trustees, and separately a majority of the Independent Trustees, unanimously voted to approve the New Fund Agreements. |
63 |
THIS PAGE INTENTIONALLY LEFT BLANK
![]() |
Investment Manager and Administrator
AMG Funds LLC 600 Steamboat Road, Suite 300 Greenwich, CT 06830 800.835.3879
Distributor
AMG Distributors, Inc. 600 Steamboat Road, Suite 300 Greenwich, CT 06830 800.835.3879
Subadvisor
Yacktman Asset Management LP 6300 Bridgepoint Parkway Building One, Suite 500 Austin, TX 78730
Custodian
The Bank of New York Mellon 111 Sanders Creek Parkway East Syracuse, NY 13057 |
Legal Counsel
Ropes & Gray LLP Prudential Tower, 800 Boylston Street Boston, MA 02199-3600
Transfer Agent BNY Mellon Investment Servicing (US) Inc. Attn: AMG Funds P.O. Box 9769 Providence, RI 02940 800.548.4539 |
This report is prepared for the Funds’ shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. To receive a free copy of the prospectus or Statement of Additional Information, which includes additional information about Fund Trustees, please contact us by calling 800.835.3879. Distributed by AMG Distributors, Inc., member FINRA/SIPC.
Current net asset values per share for each Fund are available on the Funds’ website at amgfunds.com.
A description of the policies and procedures the Fund uses to vote its proxies is available: (i) without charge, upon request, by calling 800.835.3879, or (ii) on the Securities and Exchange Commission’s (SEC) website at sec.gov. For information regarding the Funds’ proxy voting record for the 12-month period ended June 30, call 800.835.3879 or visit the SEC website at sec.gov.
The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at sec.gov. A Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1.800.SEC.0330. To review a complete list of the Funds’ portfolio holdings, or to view the most recent quarterly holdings report, semiannual report, or annual report, please visit amgfunds.com. |
amgfunds.com | 65 |
AFFILIATE SUBADVISED FUNDS
BALANCED FUNDS AMG Chicago Equity Partners Balanced Chicago Equity Partners, LLC
AMG FQ Global Risk-Balanced First Quadrant, L.P.
EQUITY FUNDS AMG Chicago Equity Partners Small Cap Value Chicago Equity Partners, LLC
AMG FQ Tax-Managed U.S. Equity AMG FQ Long-Short Equity First Quadrant, L.P.
AMG Frontier Small Cap Growth Frontier Capital Management Company, LLC
AMG GW&K Small Cap Core AMG GW&K Small/Mid Cap AMG GW&K U.S. Small Cap Growth GW&K Investment Management, LLC
AMG Renaissance International Equity AMG Renaissance Large Cap Growth The Renaissance Group LLC
AMG River Road Dividend All Cap Value AMG River Road Dividend All Cap Value II AMG River Road Focused Absolute Value AMG River Road Long-Short AMG River Road Small-Mid Cap Value AMG River Road Small Cap Value River Road Asset Management, LLC
AMG SouthernSun Small Cap AMG SouthernSun Global Opportunities AMG SouthernSun U.S. Equity SouthernSun Asset Management, LLC
AMG Systematic Mid Cap Value Systematic Financial Management, L.P.
AMG TimesSquare Emerging Markets Small Cap AMG TimesSquare International Small Cap AMG TimesSquare Mid Cap Growth AMG TimesSquare Small Cap Growth TimesSquare Capital Management, LLC |
AMG Trilogy Emerging Markets Equity AMG Trilogy Emerging Wealth Equity Trilogy Global Advisors, L.P.
AMG Yacktman AMG Yacktman Focused AMG Yacktman Focused Fund - Security Selection Only AMG Yacktman Special Opportunities Yacktman Asset Management LP
FIXED INCOME FUNDS AMG GW&K Core Bond AMG GW&K Enhanced Core Bond AMG GW&K Municipal Bond AMG GW&K Municipal Enhanced Yield GW&K Investment Management, LLC
OPEN-ARCHITECTURE FUNDS
ALTERNATIVE FUNDS AMG Managers Lake Partners LASSO Alternative Lake Partners, Inc.
BALANCED FUNDS AMG Managers Montag & Caldwell Balanced Montag & Caldwell, LLC
EQUITY FUNDS AMG Managers Brandywine AMG Managers Brandywine Advisors Mid Cap Growth AMG Managers Brandywine Blue Friess Associates, LLC
AMG Managers Cadence Emerging Companies AMG Managers Cadence Mid Cap Cadence Capital Management, LLC
AMG Managers CenterSquare Real Estate CenterSquare Investment Management, Inc.
AMG Managers Emerging Opportunities Lord, Abbett & Co. LLC WEDGE Capital Management L.L.P. Next Century Growth Investors LLC RBC Global Asset Management (U.S.) Inc. |
AMG Managers Essex Small/Micro Cap Growth Essex Investment Management Co., LLC
AMG Managers Fairpointe ESG Equity AMG Managers Fairpointe Mid Cap Fairpointe Capital LLC
AMG Managers Guardian Capital Global Dividend Guardian Capital LP
AMG Managers LMCG Small Cap Growth LMCG Investments, LLC
AMG Managers Montag & Caldwell Growth AMG Managers Montag & Caldwell Mid Cap Growth Montag & Caldwell, LLC
AMG Managers Pictet International Pictet Asset Management Limited
AMG Managers Silvercrest Small Cap Silvercrest Asset Management Group LLC
AMG Managers Skyline Special Equities Skyline Asset Management, L.P.
AMG Managers Special Equity Ranger Investment Management, L.P. Lord, Abbett & Co. LLC Smith Asset Management Group, L.P. Federated MDTA LLC
AMG Managers Value Partners Asia Dividend Value Partners Hong Kong Limited
FIXED INCOME FUNDS AMG Managers Amundi Intermediate Government AMG Managers Amundi Short Duration Government Amundi Pioneer Institutional Asset Management, Inc.
AMG Managers Doubleline Core Plus Bond DoubleLine Capital LP
AMG Managers Global Income Opportunity AMG Managers Loomis Sayles Bond Loomis, Sayles & Co., L.P. |
amgfunds.com | 123117 AR071 |
|
ANNUAL REPORT |
amgfunds.com
|
123117 AR083
|
AMG Funds Annual Report — December 31, 2017 |
![]() |
Letter to Shareholders |
2 |
|
About Your Fund’s Expenses |
As a shareholder of a Fund, you may incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on $1,000 invested at the beginning of the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of the following table provides information about the actual account values and actual expenses. You may use the information in this line, together with the |
amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During 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. |
3 |
AMG TimesSquare Emerging Markets Small Cap Fund |
YEAR IN REVIEW
For the year ended December 31, 2017, the AMG TimesSquare Emerging Markets Small Cap Fund (the “Fund”) (Class Z shares) returned 32.85%, while its benchmark, the MSCI Emerging Markets Small Cap Index (the “Index”), returned 33.84%.
Markets climbed steadily throughout the year to post annual returns of 22% to 21% for broad U.S. equity indexes,1 25% for non-U.S. equities,2 and 37% for emerging markets (EM).3 These gains coincided with notably muted levels of volatility across all equity markets—including historic lows for the U.S. and developed markets4—and steadily increasing levels of global economic activity from manufacturing and service industries.5 Emerging markets also benefited from a benign global environment and an increase in global trade. The MSCI Emerging Markets Small Cap universe lagged its large cap counterparts in the first half of the year but started catching up in the second half. Steady performance was helped by more stable currencies, strong export volumes, recovering domestic economies particularly in BRIC (Brazil, Russia, India and China). According to Capital Economics, aggregate EM GDP6 growth reached 5% in 2017 while inflation moderated to a seven-year low.
Growth differentiation was noticeable in countries with reform-oriented governments. In Asia, India’s introduction of Goods and Services Tax (GST) in July and demonetization reforms led to a re-rating of the market in 2017. The international ratings agency Standard & Poor’s recognized Indonesia’s progress and upgraded its rating to Investment Grade. In Europe, the Middle East and Africa (EMEA), under an International Monetary Fund program, the Egyptian government started reducing energy subsidies while the central bank took a hawkish stance on monetary policy and depreciated the currency by 50%. The Greek government opted to remain in the Eurozone, pushed for labor and pension reforms and started a new privatization program. In South Africa, both the Rand and the stock market rallied following Cyril Ramaphosa’s victory in the African National Congress. Ramaphosa, a reformer, will likely become the next president of South Africa by 2019. After trying unsuccessfully populist regimes for decades, Latin America (e.g., Argentina, Brazil) has been moving toward more orthodox policies with fiscal and monetary discipline. In the Frontier markets, the Vietnamese government continued to relax foreign ownership rules and is in the midst of a privatization program. |
The Fund’s index agnostic investment framework focuses on businesses with superior, sustainable growth and long-term cash flow generation in emerging and frontier countries. We believe businesses should benefit from a number of structural tailwinds such as young demographics, growing infrastructure and productivity, and reform-oriented government policies.
FUND PERFORMANCE ATTRIBUTION
The Fund modestly underperformed the MSCI Emerging Markets Small Cap Index in 2017. Our contributions were strongest from our holdings in EMEA, stock selection as well as our overweight in Egypt paid off, and we further increased our exposure to the region to position for a potential 2018 recovery. In contrast, there was weakness among our holdings in Saudi Arabia driven by the slow economic activity and negative political sentiment. Our positioning in Latin America benefited from our stock picking and allocation in Brazil. Asia was not a substantial contributor to performance and positive contributions from our holdings in Southeast Asia were offset by our underweight and selections in Taiwan and China. Lastly, our holdings in the Frontier Markets, notably Vietnam and Argentina, boosted the Fund’s performance.
Regional Performance: Asia Our cautious stance on Asia, reflected in our underweight to the region, is due in part to our concerns regarding export-oriented economies such as China, Taiwan and Korea where demographics and the sustainability of growth are more challenging relative to the rest of the Emerging Markets; that said, the Taiwanese and Korean markets trended higher in the last twelve months as beneficiaries of global growth. Within Taiwan, we encountered challenges due to our stock selection. Falling by 36% while we owned it was Tung Thih, a manufacturer of sensors used in automobiles, which was a beneficiary of the increasing electrification of cars. The company’s margins came under significant pricing pressure from Chinese competition which made us revise down our earnings. In light of the difficult competitive landscape, we exited the name in June. Shares of contact lens maker Ginko International dropped by 20% while it was held due to higher-than-expected bad debt provisioning and high inventory days. Ginko sells traditional and disposable contact lenses and lens care products under the brand names Horien and Hydron. Most of the company’s sales come from China where it has over 30% market share and only 7% of the population wears contact lenses. Visibility into the
|
company got murkier when one of the company’s factories in China was shut down by the Chinese regulators in April, which also triggered us to sell out of the name. Bucking the trend was Chroma Ate, a producer of semiconductor equipment that is positioned to benefit from upcoming capital expenditure cycles such as the Chinese electronic vehicle market, increasing use of 3D sensors, and rising demand for graphics processing units. We bought the stock in the third quarter and shares rose 140% on earnings consistently beating expectations and positive guidance for 2018.
In China, our top contributor was Sunny Optical Technology, a leading maker of automobile and smartphone camera lenses. Shares charged ahead by 89% while we owned it due to improving margins thanks to a better product mix and increasing demand for multiple cameras on electronic devices. We sold the name in June when its share price reached our target. Technology peer Kingsoft was also a positive contributor, rising 64%. Kingsoft is leading provider of online offerings such as gaming, marketing services, and software services. Management communicated confidence in next year’s games growth and looked to cooperate with Tencent to jointly introduce three mobile games in 2018. On the other side of the spectrum were AviChina Industry & Technology Co. and PAX Global Technology. AviChina Industry & Technology designs and manufactures civil aircraft and aviation components. Its share price dropped 23% this year as military reforms led delays in orders. PAX, a designer and manufacturer of electronic payment terminals for point-of-sale locations, declined 35% until we sold it. PAX experienced a delay in product launches and also announced a profit warning that fiscal year 2017 net profits were likely to decrease by 40–50% year-over-year from an increase in R&D expenses and impairment losses. With our confidence in management shaken, we exited the name in the fourth quarter. We also let the credits roll and closed our position in motion picture technology provider IMAX China Holding with the stock declining 44% throughout the period during which we held the name. We were positive on the stock due to a strong backlog of hardware sales to Chinese cinemas and positive long-term trends favoring IMAX-format blockbuster movies. However, IMAX China’s gross box office receipts underperformed the overall film market in China throughout the year. We also experienced increased difficulty in forecasting IMAX’s tie up with its biggest client Wanda (a conglomerate), and Wanda’s trading |
4 |
AMG TimesSquare Emerging Markets Small Cap Fund Portfolio Manager’s Comments (continued) |
halt in July 2017 elevated our concerns. With decreasing visibility on its key revenue drivers and customers, we sold the name in the third quarter.
In Korea, stock selection had a slightly positive impact but was offset by our underweight positioning. Shares in Koh Young Technology Inc., an inspection technology company, rose 105% after the stock was added to the Robo Index in June; the index consists of 84 global robotics and automation companies. The company also posted strong earnings momentum owing to growing demand for its 3D automated optical inspection (AOI) technology. Lagging in performance with a 2% decline in 2017 was i-SENS, a health care manufacturer selling biosensors for the glucose monitoring market. Shares corrected in the third quarter due to worse-than-expected operating profit owing to one-off items. We view increasing meter sales throughout 2017 as a positive indicator for the longer term as sales of strips should follow gradually within the next couple of years.
We benefited from our exposure to the Southeast Asian countries as growth and reform momentum continued. In Indonesia, Bank Tabungan Negara climbed 108% on robust affordable mortgage demand and continued improvements in loan quality. Bank Tabungan is a major beneficiary of President Jokowi’s affordable housing programs for the poor. We remain positive in Indonesia as government-induced infrastructure policies will likely lead to an increase of capital spending and we are optimistic on the prospects of private consumption. Contributions from our Indian holdings were also strong. Vakrangee, which specializes in providing “last mile” retail services in suburban and rural communities for e-government, logistics, e-commerce, and banking, climbed 104%. Vakrangee offers a unique way to play all growth drivers in India as a key beneficiary of major government reforms. Moving in a similar direction was home improvement and building material retailer Shankara Building Products which gained 61% as end demand was also strong on Modi’s “Housing for All” initiatives.
Regional Performance: EMEA Our contributions were strongest from our holdings in EMEA with Egypt leading the way. We turned bullish on Egypt earlier this year after a decade of turmoil. With Egypt aligning itself with the International Monetary Fund (IMF), economic reforms are underway. The Egyptian government floated the currency in late 2016 which led to a 50% depreciation in the Egyptian pound. Our holdings in Juhayna Food Industries, a leading manufacturer of |
juice, yogurt and dairy products, gained 77% this year. Following the foreign currency depreciation and a subsequent sell-off in the shares, we took a stake in the company earlier in the year and looked forward to high pricing power and a quick margin recovery. Management proved us right as the company hiked prices across the board. We see Juhayna as a long-term growth story as the Egyptian packaged dairy, yogurt and cheese market remains largely underpenetrated and we look forward to margin improvement in 2018 when volumes should exhibit a strong recovery.
South Africa was also a positive contributor for the region. Hailing from South Africa, Mr. Price Group, which engages in the clothing and retail business, was another top contributor in the Fund. The South African economy slowed down in 2017, which drove down retail valuations; however, value-oriented players like Mr. Price were positioned to benefit from more cost conscious consumers. Mr. Price is the only retailer in South Africa for which both margins and returns have improved following all three previous downturns. Shares rose 75% as margins expanded due to rising sales and operating leverage. Generating negative alpha with a 30% fall was Alpha Bank, the fourth largest Greek bank by total assets. We believe that the Greek economy may have reached an inflection point but volatility abounds as Alpha Bank saw a meaningful correction in the third quarter on renewed concerns over an upcoming stress test by European regulators. The International Monetary Fund’s push for further capitalization was also taken as a negative sign by the market.
Saudi Arabia and Russia were our biggest country detractors in EMEA. In Russia, leading food retailer and hypermarket Lenta declined 29% as the macroeconomic recovery has not yet been reflected by retail spending in Russia. Lenta is known for it its low price and low cost culture and strong presence in hypermarkets. Finally, we de-risked in Saudi Arabia following the recent purge within the royal family. Saudi Arabia is undergoing a major transformation in both politics and macroeconomics. A number of prominent Saudi Arabian princes, government ministers, and business people were arrested in November 2017 following the creation of an anti-corruption committee led by Crown Prince Mohammad bin Salman. With political risks on the rise, we sold our Saudi holdings Herfy Food Services and Bupa Arabia for Cooperative Insurance and concluded the year with no holdings in the country. Herfy Food Services, a leading operator of restaurants, declined 18% throughout the period. Bupa, a single line insurance company, declined 14% |
given an increasingly challenging economic environment. Saudi Arabia was our biggest country detractor in EMEA.
Regional Performance: Americas Holdings in the Americas generated positive contributions led by Brazil, while Colombia detracted. After experiencing two years of a severe recession, the Brazilian economy slowly recovered in 2017. Brazilian health care and benefits administrator Qualicorp rose 64%. The company provides administration services for corporate health plans of national and multinational companies. The company reported strong first quarter results driven by better expense control and a focus on cash flow generation. Also climbing 57% was Ser Educacional SA, which operates a private education institution providing undergraduate, graduate programs, and distance learning. Shares moved to the head of the class as the company delivered solid results in the third quarter with healthy growth in the distance learning student base, an increasingly important and high-margin business. We believe Ser will continue to show sustainable growth as scale benefits have already started kicking in with its nationwide expansion strategy and focus on online education. Moving in the opposite direction was Banco Davivienda, the third-largest bank in Colombia by assets and profits. Its share price declined 12% in the fourth quarter and closed out the year netting only a 2% gain for the partial year. The company’s fourth quarter decline was attributable to higher-than-expected loan loss provisions and lower-than-anticipated net interest income. We were a buyer on weakness as we believe the bank is positioned to benefit from a recovery in economic growth and continue to lead in consumer lending.
Moving on to other countries, shares in Mexico-based BanRegio Grupo Financiero, a financial institution that provides banking services for small and medium-sized companies, declined 2% for the full year on lower-than-anticipated income on slower loan growth. As the bank has one of the most reputable management teams with a long and successful track record, we continued to add to our position. Moving south, Alicorp, a Peru-based fast moving consumer company with dominant market shares in detergents, mayonnaise and pasta, rose 52% as margins expanded throughout the year and benefited from the company’s efficiency seeking initiatives. We also benefited from Chile-based Forus’ 35% share price gain as sales experienced healthy year-over-year growth. Forus is a Chilean leader in retail with 36 years of experience and offers global brands such as Hush Puppies, Columbia, Nine West, |
5 |
AMG TimesSquare Emerging Markets Small Cap Fund Portfolio Manager’s Comments (continued) |
Patagonia, JanSport and Billabong among others. The consumer and retail sectors are key beneficiaries of the economic recovery, low rates and a stable currency. We added to our exposure in Chile as we expect the result of the presidential elections to further boost economic sentiment next year. Despite the broad correction in the Latin American markets in the final quarter of 2017, we see this region as one of the most attractive regions going into 2018.
Regional Performance: Frontier Frontier was the second best performing region in terms of contribution. In Vietnam, Masan Group Corporation, a conglomerate that engages in the consumer products, financial services, and resources sectors, was one of our top winners with shares rising 85%. Masan has several positive catalysts in 2018 including its banking subsidiary Techcombank’s initial public offering as well as an expected recovery in consumer products segment following restructuring initiatives. In Argentina, Grupo Supervielle SA, a small capitalization bank with just a 2% market share of total system assets rose 75%. We believe the company offers an attractive earnings growth story and is positioned to benefit from the underpenetrated credit market; Argentina’s bank credit to GDP of 14% ranks as the lowest in Latin America. The company achieved broad-based above-market loan and deposit growth, while driving efficiency and profitability gains; further, the successful completion of their follow-on equity offering in September provided additional capital to support accelerated growth. |
Conclusion Entering 2018, global economic momentum remains firm and even strengthening on the margin. We expect growth leadership in EM to shift from export-and commodities-driven in 2017 to a more domestic consumption- and investment-driven one in 2018. EM aggregate growth ex-China is expected to recover further in the next twelve months. Following a seven-year cycle of U.S. Dollar strength, EM currencies should be supportive of inflationary outlook and investor sentiment. We will be closely watching global central banks and monetary policies and also China’s policy agenda. In addition, there will be a heavy election cycle in a number of Emerging and Frontier markets including Brazil, Mexico, Colombia, Russia, Egypt and Zimbabwe in 2018.
We see Latin America as the most attractive region with economic recovery strengthening in a number of countries such as Brazil, Chile, Peru and Argentina. In EMEA, we added to our positions in Greece, South Africa and Egypt in preparation for 2018. Egypt in particular has individual companies that we believe have better-than-expected earnings reports over the next twelve months. We are also positive on Greece as we expect significant normalization after a prolonged period of depression with potential for upside surprises on growth. In Asia, China will be critical for EM sentiment on two fronts: (1) supply side consolidation helping commodity prices; (2) GDP growth slowdown. In China, we remain focused on new economy companies andsectors which will likely benefit from government policies (e.g., environmental, healthcare, education and internet). |
We continue to be underweight the export-oriented economies, materials, and deep cyclicals in China, Taiwan and Korea. We are also underweight India with valuations being stretched and bond yields rising. We prefer countries with government-induced infrastructure policies leading to a capital expenditure cycle such as Indonesia, Philippines, India and Peru. We also believe that smaller markets and Frontier (e.g., Vietnam, Sri Lanka and Pakistan) should relatively outperform in 2018. As fundamental investors, we will continue to differentiate and deliver performance by distinguishing fundamentals from noise and focus on long-term quality, cash flows and growth.
For the new year, we remain dedicated to adding value to the assets you have entrusted to us, and look forward to working with you throughout 2018.
1 As represented by the S&P 500 and Russell 3000 indexes
2 As represented by the MSCI EAFE Index
3 As represented by the MSCI Emerging Markets Index
4 As defined by the CBOE set of volatility indexes (based on market expectations of near-term volatility for S&P 500, MSCI EAFE, and MSCI Emerging Markets index option or ETF prices)
5 Source: IHS Markit surveys of global purchasing executives
6 Gross Domestic Product
The views expressed represent the opinions of TimesSquare Capital Management, LLC as of December 31, 2017 and are not intended as a forecast or guarantee of future results, and are subject to change without notice. |
6 |
AMG TimesSquare Emerging Markets Small Cap Fund Portfolio Manager’s Comments (continued) |
7 |
AMG TimesSquare Emerging Markets Small Cap Fund Fund Snapshots (unaudited) December 31, 2017 |
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 |
AMG TimesSquare Emerging Markets Small Cap Fund Schedule of Portfolio Investments December 31, 2017 |
The accompanying notes are an integral part of these financial statements. |
9 |
AMG TimesSquare Emerging Markets Small Cap Fund Schedule of Portfolio Investments (continued) |
The accompanying notes are an integral part of these financial statements. |
10 |
Schedule of Portfolio Investments (continued) |
The following table summarizes the inputs used to value the Fund’s investments by the fair value hierarchy levels as of December 31, 2017:
Level 1 | Level 2† | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks |
||||||||||||||||
Consumer Discretionary |
$1,037,411 | $613,740 | — | $1,651,151 | ||||||||||||
Financials |
839,870 | 653,386 | — | 1,493,256 | ||||||||||||
Industrials |
592,392 | 273,838 | — | 866,230 | ||||||||||||
Information Technology |
214,479 | 620,477 | — | 834,956 | ||||||||||||
Real Estate |
493,649 | — | — | 493,649 | ||||||||||||
Health Care |
245,523 | 232,142 | — | 477,665 | ||||||||||||
Consumer Staples |
413,591 | — | — | 413,591 | ||||||||||||
Materials |
178,160 | 51,983 | — | 230,143 | ||||||||||||
Energy |
84,589 | — | — | 84,589 | ||||||||||||
Telecommunication Services |
— | 76,312 | — | 76,312 | ||||||||||||
Preferred Stock |
||||||||||||||||
Financials |
101,191 | — | — | 101,191 | ||||||||||||
Rights |
||||||||||||||||
Industrials |
— | 418 | — | 418 | ||||||||||||
Participation Notes |
||||||||||||||||
Consumer Staples |
— | 151,426 | — | 151,426 | ||||||||||||
Short-Term Investments |
||||||||||||||||
Other Investment Companies |
23,195 | — | — | 23,195 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments in Securities |
$4,224,050 | $2,673,722 | — | $6,897,772 | ||||||||||||
|
|
|
|
|
|
|
|
† | As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.) |
As of December 31, 2017, the Fund had transfers between level 1 and level 2 as follows:
Transfer into Level 11 |
Transfer out of Level 11 |
Transfer into Level 21 |
Transfer out of Level 21 |
|||||||||||||
Assets: |
||||||||||||||||
Common Stocks |
$579,890 | $(77,096) | $77,096 | $(579,890) |
1 As a result of the fair valuation policy utilized by the Fund, certain international equity securities may be level 2 and could result in transfers between level 1 to level 2. (See Note 1(a) in the Notes to Financial Statements.)
The accompanying notes are an integral part of these financial statements. |
11 |
AMG TimesSquare Emerging Markets Small Cap Fund Schedule of Portfolio Investments (continued) |
Country
|
% of Long-Term
| ||||
Argentina |
3.8 | ||||
Brazil |
6.8 | ||||
Chile |
3.5 | ||||
China |
5.6 | ||||
Colombia |
2.7 | ||||
Egypt |
8.7 | ||||
Georgia |
1.1 | ||||
Greece |
4.7 | ||||
Hong Kong |
2.5 | ||||
India |
12.2 | ||||
Indonesia |
4.9 | ||||
Malaysia |
1.0 | ||||
Mexico |
2.5 | ||||
Netherlands |
1.8 | ||||
Peru |
2.5 | ||||
Philippines |
2.9 | ||||
Poland |
1.1 | ||||
Romania |
1.2 | ||||
South Africa |
6.0 | ||||
South Korea |
11.2 | ||||
Sri Lanka |
2.2 | ||||
Taiwan |
6.8 | ||||
Thailand |
2.7 | ||||
United States |
1.2 | ||||
Vietnam |
0.4 | ||||
100.0 | |||||
The accompanying notes are an integral part of these financial statements.
|
12 |
Statement of Assets and Liabilities December 31, 2017 |
AMG TimesSquare Emerging Markets Small Cap Fund | |||||
Assets: |
|||||
Investments at Value* |
$6,897,772 | ||||
Foreign currency** |
106 | ||||
Receivable for investments sold |
50,529 | ||||
Dividend, interest and other receivables |
5,810 | ||||
Receivable from affiliate |
22,083 | ||||
Prepaid expenses |
19,880 | ||||
Total assets |
6,996,180 | ||||
Liabilities: |
|||||
Payable for foreign capital gains tax |
30,137 | ||||
Accrued expenses: |
|||||
Investment advisory and management fees |
5,378 | ||||
Administrative fees |
849 | ||||
Distribution fees |
9 | ||||
Shareholder service fees |
29 | ||||
Professional fees |
27,914 | ||||
Trustee fees and expenses |
89 | ||||
Other |
25,378 | ||||
Total liabilities |
89,783 | ||||
Net Assets |
$6,906,397 | ||||
* Investments at cost |
$5,713,534 | ||||
** Foreign currency at cost |
$106 |
The accompanying notes are an integral part of these financial statements. |
13 |
Statement of Assets and Liabilities (continued) |
AMG TimesSquare Emerging Markets Small Cap Fund | |||||
Net Assets Represent: |
|||||
Paid-in capital |
$5,763,492 | ||||
Distribution in excess of net investment income |
(24,670 | ) | |||
Accumulated net realized gain from investments |
13,445 | ||||
Net unrealized appreciation on investments |
1,154,130 | ||||
Net Assets |
$6,906,397 | ||||
Class N: |
|||||
Net Assets |
$42,754 | ||||
Shares outstanding |
3,469 | ||||
Net asset value, offering and redemption price per share |
$12.32 | ||||
Class I: |
|||||
Net Assets |
$13,351 | ||||
Shares outstanding |
1,081 | ||||
Net asset value, offering and redemption price per share |
$12.35 | ||||
Class Z: |
|||||
Net Assets |
$6,850,292 | ||||
Shares outstanding |
554,794 | ||||
Net asset value, offering and redemption price per share |
$12.35 |
The accompanying notes are an integral part of these financial statements. |
14 |
For the fiscal year ended December 31, 2017 |
AMG TimesSquare Emerging Markets Small Cap Fund | |||||
Investment Income: |
|||||
Dividend income |
$111,009 | ||||
Securities lending income |
166 | ||||
Foreign withholding tax |
(10,501 | ) | |||
Total investment income |
100,674 | ||||
Expenses: |
|||||
Investment advisory and management fees |
53,683 | ||||
Administrative fees |
8,476 | ||||
Distribution fees - Class N |
49 | ||||
Shareholder servicing fees - Class N |
29 | ||||
Professional fees |
37,184 | ||||
Registration fees |
22,178 | ||||
Transfer agent fees |
861 | ||||
Custodian fees |
32,781 | ||||
Reports to shareholders |
19,226 | ||||
Amortization of offering costs |
80,814 | ||||
Trustee fees and expenses |
270 | ||||
Miscellaneous |
3,857 | ||||
Total expenses before offsets |
259,408 | ||||
Expense reimbursements |
(188,695 | ) | |||
Net expenses |
70,713 | ||||
Net investment income |
29,961 | ||||
Net Realized and Unrealized Gain: |
|||||
Net realized gain on investments1 |
464,704 | ||||
Net realized loss on foreign currency transactions |
(13,712 | ) | |||
Net change in unrealized appreciation/depreciation on investments |
1,149,155 | ||||
Net change in unrealized appreciation/depreciation on foreign currency translations |
(30,093 | ) | |||
Net realized and unrealized gain |
1,570,054 | ||||
Net increase in net assets resulting from operations |
$1,600,015 |
1 | Net of foreign capital gains tax withheld of $7,565. |
The accompanying notes are an integral part of these financial statements. |
15 |
Statements of Changes in Net Assets For the fiscal periods ended December 31 |
AMG TimesSquare Emerging Markets Small Cap Fund | ||||||||||
2017 | 2016* | |||||||||
Increase in Net Assets Resulting From Operations: |
||||||||||
Net investment income |
$29,961 | $2,057 | ||||||||
Net realized gain (loss) on investments |
450,992 | (2,698 | ) | |||||||
Net change in unrealized appreciation/depreciation on investments |
1,119,062 | 35,068 | ||||||||
Net increase in net assets resulting from operations |
1,600,015 | 34,427 | ||||||||
Distributions to Shareholders: |
||||||||||
From net investment income: |
||||||||||
Class N |
(469 | ) | — | |||||||
Class I |
(161 | ) | — | |||||||
Class Z |
(82,986 | ) | — | |||||||
From net realized gain on investments: |
||||||||||
Class N |
(2,663 | ) | — | |||||||
Class I |
(829 | ) | — | |||||||
Class Z |
(426,772 | ) | — | |||||||
Total distributions to shareholders |
(513,880 | ) | — | |||||||
Capital Share Transactions:1 |
||||||||||
Net increase from capital share transactions |
1,572,957 | 4,212,878 | ||||||||
Total increase in net assets |
2,659,092 | 4,247,305 | ||||||||
Net Assets: |
||||||||||
Beginning of period |
4,247,305 | — | ||||||||
End of period |
$6,906,397 | $4,247,305 | ||||||||
End of period distribution in excess of net investment income |
$(24,670 | ) | $(327 | ) | ||||||
|
|
|
|
|
|
* | Commencement of operations was on December 15, 2016. |
1 | See Note 1(g) of the Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements. |
16 |
AMG TimesSquare Emerging Markets Small Cap Fund For a share outstanding throughout each fiscal period |
For the fiscal period ended December 31, | |||||
Class N |
2017* | ||||
Net Asset Value, Beginning of Period |
$10.94 | ||||
Income from Investment Operations: |
|||||
Net investment income1,2 |
0.03 | ||||
Net realized and unrealized gain on investments |
2.33 | ||||
Total income from investment operations |
2.36 | ||||
Less Distributions to Shareholders from: |
|||||
Net investment income |
(0.15 | ) | |||
Net realized gain on investments |
(0.83 | ) | |||
Total distributions to shareholders |
(0.98 | ) | |||
Net Asset Value, End of Period |
$12.32 | ||||
Total Return2,3 |
21.72 | %4 | |||
Ratio of net expenses to average net assets |
1.65 | %5 | |||
Ratio of gross expenses to average net assets6 |
5.02 | %5 | |||
Ratio of net investment income to average net assets2 |
0.28 | %5 | |||
Portfolio turnover |
81 | % | |||
Net assets end of period (000’s) omitted |
$43 | ||||
17 |
AMG TimesSquare Emerging Markets Small Cap Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal year ended December 31, | For the fiscal period ended December 31, | |||||||||
Class I |
2017 | 2016** | ||||||||
Net Asset Value, Beginning of Period |
$ | 10.05 | $ | 10.00 | ||||||
Income from Investment Operations: |
||||||||||
Net investment income1,2 |
0.06 | 0.01 | ||||||||
Net realized and unrealized gain on investments |
3.23 | 0.04 | ||||||||
Total income from investment operations |
3.29 | 0.05 | ||||||||
Less Distributions to Shareholders from: |
||||||||||
Net investment income |
(0.16 | ) | – | |||||||
Net realized gain on investments |
(0.83 | ) | – | |||||||
Total distributions to shareholders |
(0.99 | ) | – | |||||||
Net Asset Value, End of Period |
$ | 12.35 | $ | 10.05 | ||||||
Total Return2,3 |
32.85 | % | 0.50 | %4 | ||||||
Ratio of net expenses to average net assets |
1.25 | % | 1.34 | %5 | ||||||
Ratio of gross expenses to average net assets6 |
4.59 | % | 7.09 | %5,7 | ||||||
Ratio of net investment income to average net assets2 |
0.53 | % | 1.27 | %5 | ||||||
Portfolio turnover |
81 | % | 0 | %4 | ||||||
Net assets end of period (000’s) omitted |
$ | 13 | $ | 10 | ||||||
18 |
AMG TimesSquare Emerging Markets Small Cap Fund Financial Highlights For a share outstanding throughout each fiscal period |
For the fiscal year ended December 31, | For the fiscal period ended December 31, | |||||||||
Class Z |
2017 | 2016 | ** | |||||||
Net Asset Value, Beginning of Period |
$10.05 | $10.00 | ||||||||
Income from Investment Operations: |
||||||||||
Net investment income1,2 |
0.06 | 0.01 | ||||||||
Net realized and unrealized gain on investments |
3.23 | 0.04 | ||||||||
Total income from investment operations |
3.29 | 0.05 | ||||||||
Less Distributions to Shareholders from: |
||||||||||
Net investment income |
(0.16 | ) | – | |||||||
Net realized gain on investments |
(0.83 | ) | – | |||||||
Total distributions to shareholders |
(0.99 | ) | – | |||||||
Net Asset Value, End of Period |
$12.35 | $10.05 | ||||||||
Total Return2,3 |
32.85 | % | 0.50 | %4 | ||||||
Ratio of net expenses to average net assets |
1.25 | % | 1.34 | %5 | ||||||
Ratio of gross expenses to average net assets6 |
4.59 | % | 7.09 | %5,7 | ||||||
Ratio of net investment income to average net assets2 |
0.53 | % | 1.27 | %5 | ||||||
Portfolio turnover |
81 | % | 0 | %4 | ||||||
Net assets end of period (000’s) omitted |
$6,850 | $4,237 |
* | Commencement of operations was on February 27, 2017. |
** | Commencement of operations was on December 15, 2016. |
1 | Per share numbers have been calculated using average shares. |
2 | Total returns and net investment income would have been lower had certain expenses not been offset. |
3 | The total return is calculated using the published Net Asset Value as of fiscal year end. |
4 | Not annualized. |
5 | Annualized. |
6 | Excludes the impact of expense reimbursement or fee waivers and expense reductions such as brokerage credits, but includes expense repayments and non-reimbursable expenses, if any, such as interest, taxes, and extraordinary expenses. (See Note 1(c) and 2 in the Notes to Financial Statements.) |
7 | Ratio does not reflect the annualization of audit, excise tax and organization expenses. |
19 |
December 31, 2017 |
20 |
Notes to Financial Statements (continued) |
The tax character of distributions paid during the fiscal periods ended December 31, 2017 and December 31, 2016 were as follows:
Distributions paid from:
|
2017 | 2016 | ||||||
Ordinary income | $83,616 | — | ||||||
Short-term capital gains
|
429,537 | — | ||||||
Long-term capital gains | 724 | — | ||||||
|
|
|
|
|||||
$ | 513,877 | — | ||||||
|
|
|
|
As of December 31, 2017, the components of distributable earnings (excluding unrealized appreciation/depreciation) on tax basis consisted of:
Capital loss carryforward
|
— | |||
Undistributed ordinary income |
$ | 25,747 | ||
Undistributed short-term capital gains
|
13,445 | |||
Undistributed long-term capital gains |
— | |||
Late-year loss deferral
|
— |
At December 31, 2017, the approximate cost of investments and the aggregate gross unrealized appreciation and depreciation for federal income tax were as follows:
Cost | Appreciation | Depreciation | Net | |||||||||||||
$5,763,951 | $1,245,931 | $(142,218) | $1,103,713 |
21 |
Notes to Financial Statements (continued) |
For the fiscal periods ended December 31, 2017 and December 31, 2016, the capital stock transactions by class for the Fund were as follows:
December 31, 2017 | December 31, 2016 | |||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||
Class N: |
||||||||||||||||
Proceeds from sale of shares |
3,212 | $37,517 | — | — | ||||||||||||
Reinvestment of distributions |
257 | 3,131 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
3,469 | $40,648 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Class I: |
||||||||||||||||
Proceeds from sale of shares |
— | — | 1,000 | $10,000 | ||||||||||||
Reinvestment of distributions |
81 | $991 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
81 | $991 | 1,000 | $10,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Class Z: |
||||||||||||||||
Proceeds from sale of shares |
93,198 | $1,043,026 | 421,615 | $4,202,977 | ||||||||||||
Reinvestment of distributions |
39,991 | 488,292 | — | — | ||||||||||||
Cost of shares repurchased |
— | — | (10 | ) | (99 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase |
133,189 | $1,531,318 | 421,605 | $4,202,878 | ||||||||||||
|
|
|
|
|
|
|
|
At December 31, 2017, certain unaffiliated shareholders of record individually or collectively held greater than 10% of the net assets of the Fund as follows: four own 80%. Transactions by these shareholders may have a material impact on the Fund.
22 |
Notes to Financial Statements (continued) |
23 |
Notes to Financial Statements (continued) |
24 |
Notes to Financial Statements (continued) |
25 |
|
26 |
|
TAX INFORMATION
27 |
AMG Funds |
The Trustees and Officers of the Trust, their business addresses, principal occupations for the past five years and ages are listed below. The Trustees provide broad supervision over the affairs of the Trust and the Funds. The Trustees are experienced executives who meet periodically throughout the year to oversee the Funds’ activities, review contractual arrangements with companies that provide services to the Funds, and |
review the Funds’ performance. Unless otherwise noted, the address of each Trustee or Officer is the address of the Trust: 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830.
There is no stated term of office for Trustees. Trustees serve until their resignation, retirement or removal in |
accordance with the Trust’s organizational documents and policies adopted by the Board from time to time. The Chairman of the Trustees, President, Treasurer and Secretary of the Trust are elected by the Trustees annually. Other officers hold office at the pleasure of the Trustees. |
Independent Trustees
The following Trustees are not “interested persons” of the Trust within the meaning of the 1940 Act:
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2012 • Oversees 61 Funds in Fund Complex |
Bruce B. Bingham, 69 Partner, Hamilton Partners (real estate development firm) (1987-Present); Director of The Yacktman Funds (2000-2012). | |
• Trustee since 1999 • Oversees 61 Funds in Fund Complex |
Edward J. Kaier, 72 Attorney at Law and Partner, Teeters Harvey Marrone & Kaier LLP (2007-Present); Attorney at Law and Partner, Hepburn Willcox Hamilton & Putnam, LLP (1977-2007); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Kurt A. Keilhacker, 54 Managing Member, TechFund Capital (1997-Present); Managing Member, TechFund Europe (2000-Present); Board Member, 6wind SA, (2002-Present); Managing Member, Elementum Ventures (2013-Present); Trustee, Gordon College (2001-2016). | |
• Trustee since 2004 • Oversees 61 Funds in Fund Complex |
Steven J. Paggioli, 67 Independent Consultant (2002-Present); Formerly Executive Vice President and Director, The Wadsworth Group (1986-2001); Executive Vice President, Secretary and Director, Investment Company Administration, LLC (1990-2001); Vice President, Secretary and Director, First Fund Distributors, Inc. (1991-2001); Trustee, Professionally Managed Portfolios (32 portfolios); Advisory Board Member, Sustainable Growth Advisors, LP; Independent Director, Chase Investment Counsel (2008–Present). | |
• Trustee since 2013 • Oversees 61 Funds in Fund Complex |
Richard F. Powers III, 72 Adjunct Professor, U.S. Naval War College (2016); Adjunct Professor, Boston College (2010-2013); President and CEO of Van Kampen Investments Inc. (1998-2003). | |
• Independent Chairman • Trustee since 1999 • Oversees 63 Funds in Fund Complex |
Eric Rakowski, 59 Professor, University of California at Berkeley School of Law (1990-Present); Director of Harding, Loevner Funds, Inc. (9 portfolios); Trustee of Third Avenue Trust (5 portfolios); Trustee of Third Avenue Variable Trust (1 portfolio). | |
• Trustee since 2013 • Oversees 63 Funds in Fund Complex |
Victoria L. Sassine, 52 Lecturer, Babson College (2007 – Present). | |
• Trustee since 2004 • Oversees 61 Funds in Fund Complex |
Thomas R. Schneeweis, 70 Professor Emeritus, University of Massachusetts (2013-Present); Partner, S Capital Wealth Advisors (2015-Present); President, TRS Associates (1982-Present); Board Member, Chartered Alternative Investment Association (“CAIA”) (2002-Present); Director, CAIA Foundation (Education) (2010-Present); Director, Institute for GlobalAsset and Risk Management (Education) (2010-Present); Partner, S Capital Management, LLC (2007-2015); Director, CISDM at the University of Massachusetts, (1996-2013); President, Alternative Investment Analytics, LLC, (formerly Schneeweis Partners, LLC) (2001-2013); Professor of Finance, University of Massachusetts (1977-2013). |
28 |
AMG Funds Trustees and Officers (continued) |
Interested Trustees
Each Trustee in the following table is an “interested person” of the Trust within the meaning of the 1940 Act. Ms. Carsman is an interested person of the Trust within the meaning of the 1940 Act by virtue of her position with, and interest in securities of, AMG.
Number of Funds Overseen in Fund Complex |
Name, Age, Principal Occupation(s) During Past 5 Years and Other Directorships Held by Trustee | |
• Trustee since 2011 • Oversees 63 Funds in Fund Complex |
Christine C. Carsman, 65 Executive Vice President, Deputy General Counsel and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2017-Present); Director (2010-Present) and Chair of the Board of Directors (2015-Present), AMG Funds plc; Director of Harding, Loevner Funds, Inc. (9 portfolios); Senior Vice President and Deputy General Counsel, Affiliated Managers Group, Inc. (2011-2016); Senior Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2007-2011); Vice President and Chief Regulatory Counsel, Affiliated Managers Group, Inc. (2004-2007); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2004-2011); Senior Counsel, Vice President and Director of Operational Risk Management and Compliance, Wellington Management Company, LLP (1995-2004). | |
Officers | ||
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• President since 2014 • Principal Executive Officer since 2014 • Chief Executive Officer since 2016 |
Jeffrey T. Cerutti, 50 Chief Executive Officer, AMG Funds LLC (2014-Present); Director, President and Principal, AMG Distributors, Inc. (2014-Present); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2014-Present); Chief Executive Officer, President and Principal Executive Officer, AMG Funds IV, (2015-Present); Chief Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Executive Officer, Aston Asset Management, LLC (2016); President, VP Distributors, (2011-2014); Executive Vice President, Head of Distribution, Virtus Investment Partners, Inc. (2010-2014); Managing Director, Head of Sales, UBS Global Asset Management (2001-2010). | |
• Chief Operating Officer since 2007 |
Keitha L. Kinne, 59 Chief Operating Officer, AMG Funds LLC (2007-Present); Chief Investment Officer, AMG Funds LLC (2008-Present); Chief Operating Officer, AMG Distributors, Inc. (2007-Present); Chief Operating Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2007-Present); Chief Operating Officer, AMG Funds IV, (2016-Present); Chief Operating Officer and Chief Investment Officer, Aston Asset Management, LLC (2016); President and Principal Executive Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2012-2014); Managing Partner, AMG Funds LLC (2007-2014); President, AMG Funds (2012-2014); President, AMG Distributors, Inc. (2012-2014); Managing Director, Legg Mason & Co., LLC (2006-2007); Managing Director, Citigroup Asset Management (2004-2006). | |
• Secretary since 2015 • Chief Legal Officer since 2015 |
Mark J. Duggan, 53 Senior Vice President and Senior Counsel, AMG Funds LLC (2015-Present); Secretary and Chief Legal Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2015-Present); Secretary and Chief Legal Officer, AMG Funds IV, (2015-Present); Attorney, K&L Gates, LLP (2009-2015). | |
• Chief Financial Officer since 2017 • Treasurer since 2017 • Principal Financial Officer since 2017 • Principal Accounting Officer since 2017 |
Thomas G. Disbrow, 52 Vice President, Mutual Fund Treasurer & CFO, AMG Funds, AMG Funds LLC (2017-Present); Chief Financial Officer, Principal Financial Officer, Treasurer and Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Managing Director - Global Head of Traditional Funds Product Control, UBS Asset Management (Americas), Inc. (2015-2017); Managing Director - Head of North American Funds Treasury, UBS Asset Management (Americas), Inc. (2011-2015). | |
• Chief Compliance Officer since 2016 |
Gerald F. Dillenburg, 51 Vice President, Chief Compliance Officer AMG Funds, AMG Funds LLC (2017-Present); Chief Compliance Officer AMG Funds, AMG Funds LLC (2016-2017); Chief Compliance Officer and Sarbanes Oxley Code of Ethics Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-Present); Chief Compliance Officer, AMG Funds IV (1996-Present); Sarbanes-Oxley Code of Ethics Compliance Officer, AMG Funds IV (2016-Present); Chief Compliance Officer, Aston Asset Management, LLC (2006-2016); Chief Operating Officer, Aston Funds (2003-2016); Secretary, Aston Funds (1996-2015); Chief Financial Officer, Aston Funds (1997-2010); Chief Financial Officer, Aston Asset Management, LLC (2006-2010); Treasurer, Aston Funds (1996-2010). | |
• Deputy Treasurer since 2017 | John A. Starace, 47 Director, Mutual Fund Accounting, AMG Funds LLC (2017-Present); Vice President, Deputy Treasurer of Mutual Funds Services, AMG Funds LLC (2014-2017); Deputy Treasurer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Vice President, Citi Hedge Fund Services (2010-2014); Audit Senior Manager (2005-2010) and Audit Manager (2001-2005), Deloitte & Touche LLP. |
29 |
AMG Funds Trustees and Officers (continued) |
Position(s) Held with Fund and Length of Time Served |
Name, Age, Principal Occupation(s) During Past 5 Years | |
• Controller since 2017 | Christopher R. Townsend, 50 Vice President, Business Finance, AMG Funds LLC (2017-Present); Head of Business Finance, AMG Funds LLC (2015-2017); Chief Financial Officer and Financial and Operations Principal, AMG Distributors, Inc. (2016-Present); Controller, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017-Present); Treasurer, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2017); Chief Financial Officer, Aston Asset Management LLC (2016); Head of Finance and Accounting, Allianz Asset Management (2006-2015). | |
• Anti-Money Laundering Compliance Officer since 2014 |
Patrick J. Spellman, 43 Vice President, Chief Compliance Officer, AMG Funds LLC (2017-Present); Senior Vice President, Chief Compliance Officer, AMG Funds LLC (2011-2017); Chief Compliance Officer, AMG Distributors, Inc., (2010-Present); Anti-Money Laundering Compliance Officer, AMG Funds, AMG Funds I, AMG Funds II, and AMG Funds III (2014-Present); Anti-Money Laundering Officer, AMG Funds IV, (2016-Present); Compliance Manager, Legal and Compliance, Affiliated Managers Group, Inc. (2005-2011). | |
• Assistant Secretary since 2016 | Maureen A. Meredith, 32 Director, Counsel, AMG Funds LLC (2017-Present); Vice President, Counsel, AMG Funds LLC (2015-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II, AMG Funds III and AMG Funds IV (2016-Present); Associate, Ropes & Gray LLP (2011-2015); Law Fellow, Massachusetts Appleseed Center for Law and Justice (2010-2011). |
30 |
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
|
Investment Manager and Administrator
AMG Funds LLC 600 Steamboat Road, Suite 300 Greenwich, CT 06830 800.835.3879
Distributor
AMG Distributors, Inc. 600 Steamboat Road, Suite 300 Greenwich, CT 06830 800.835.3879
Subadvisor
TimesSquare Capital Management, LLC 7 Times Square 42nd Floor New York, NY 10036
Custodian
The Bank of New York Mellon 111 Sanders Creek Parkway East Syracuse, NY 13057 |
Legal Counsel
Ropes & Gray LLP Prudential Tower, 800 Boylston Street Boston, MA 02199-3600
Transfer Agent
BNY Mellon Investment Servicing (US) Inc. Attn: AMG Funds P.O. Box 9769 Providence, RI 02940 800.548.4539 |
This report is prepared for the Funds’ shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. To receive a free copy of the prospectus or Statement of Additional Information, which includes additional information about Fund Trustees, please contact us by calling 800.835.3879. Distributed by AMG Distributors, Inc., member FINRA/SIPC.
Current net asset values per share for each Fund are available on the Funds’ website at amgfunds.com.
A description of the policies and procedures the Fund uses to vote its proxies is available: (i) without charge, upon request, by calling 800.835.3879, or (ii) on the Securities and Exchange Commission’s (SEC) website at sec.gov. For information regarding the Fund’s proxy voting record for the 12-month period ended June 30, call 800.835.3879 or visit the SEC website at sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at sec.gov. A Fund’s Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1.800.SEC.0330. To review a complete list of the Fund’s portfolio holdings, or to view the most recent quarterly holdings report, semiannual report, or annual report, please visit amgfunds.com.
|
amgfunds.com | 33 |
AFFILIATE SUBADVISED FUNDS
BALANCED FUNDS AMG Chicago Equity Partners Balanced Chicago Equity Partners, LLC
AMG FQ Global Risk-Balanced First Quadrant, L.P.
EQUITY FUNDS AMG Chicago Equity Partners Small Cap Value Chicago Equity Partners, LLC
AMG FQ Tax-Managed U.S. Equity AMG FQ Long-Short Equity First Quadrant, L.P.
AMG Frontier Small Cap Growth Frontier Capital Management Company, LLC
AMG GW&K Small Cap Core AMG GW&K Small/Mid Cap AMG GW&K U.S. Small Cap Growth GW&K Investment Management, LLC
AMG Renaissance International Equity AMG Renaissance Large Cap Growth The Renaissance Group LLC
AMG River Road Dividend All Cap Value AMG River Road Dividend All Cap Value II AMG River Road Focused Absolute Value AMG River Road Long-Short AMG River Road Small-Mid Cap Value AMG River Road Small Cap Value River Road Asset Management, LLC
AMG SouthernSun Small Cap AMG SouthernSun Global Opportunities AMG SouthernSun U.S. Equity SouthernSun Asset Management, LLC
AMG Systematic Mid Cap Value Systematic Financial Management, L.P.
AMG TimesSquare Emerging Markets Small Cap AMG TimesSquare International Small Cap AMG TimesSquare Mid Cap Growth AMG TimesSquare Small Cap Growth TimesSquare Capital Management, LLC |
AMG Trilogy Emerging Markets Equity AMG Trilogy Emerging Wealth Equity Trilogy Global Advisors, L.P.
AMG Yacktman AMG Yacktman Focused AMG Yacktman Focused Fund - Security Selection Only AMG Yacktman Special Opportunities Yacktman Asset Management LP
FIXED INCOME FUNDS AMG GW&K Core Bond AMG GW&K Enhanced Core Bond AMG GW&K Municipal Bond AMG GW&K Municipal Enhanced Yield GW&K Investment Management, LLC
OPEN-ARCHITECTURE FUNDS
ALTERNATIVE FUNDS AMG Managers Lake Partners LASSO Alternative Lake Partners, Inc.
BALANCED FUNDS AMG Managers Montag & Caldwell Balanced Montag & Caldwell, LLC
EQUITY FUNDS AMG Managers Brandywine AMG Managers Brandywine Advisors Mid Cap Growth AMG Managers Brandywine Blue Friess Associates, LLC
AMG Managers Cadence Emerging Companies AMG Managers Cadence Mid Cap Cadence Capital Management, LLC
AMG Managers CenterSquare Real Estate CenterSquare Investment Management, Inc.
AMG Managers Emerging Opportunities Lord, Abbett & Co. LLC WEDGE Capital Management L.L.P. Next Century Growth Investors LLC RBC Global Asset Management (U.S.) Inc. |
AMG Managers Essex Small/Micro Cap Growth Essex Investment Management Co., LLC
AMG Managers Fairpointe ESG Equity AMG Managers Fairpointe Mid Cap Fairpointe Capital LLC
AMG Managers Guardian Capital Global Dividend Guardian Capital LP
AMG Managers LMCG Small Cap Growth LMCG Investments, LLC
AMG Managers Montag & Caldwell Growth AMG Managers Montag & Caldwell Mid Cap Growth Montag & Caldwell, LLC
AMG Managers Pictet International Pictet Asset Management Limited
AMG Managers Silvercrest Small Cap Silvercrest Asset Management Group LLC
AMG Managers Skyline Special Equities Skyline Asset Management, L.P.
AMG Managers Special Equity Ranger Investment Management, L.P. Lord, Abbett & Co. LLC Smith Asset Management Group, L.P. Federated MDTA LLC
AMG Managers Value Partners Asia Dividend Value Partners Hong Kong Limited
FIXED INCOME FUNDS AMG Managers Amundi Intermediate Government AMG Managers Amundi Short Duration Government Amundi Pioneer Institutional Asset Management, Inc.
AMG Managers Doubleline Core Plus Bond DoubleLine Capital LP
AMG Managers Global Income Opportunity AMG Managers Loomis Sayles Bond Loomis, Sayles & Co., L.P. |
amgfunds.com | 123117 AR083 |
Item 2. | CODE OF ETHICS |
Registrant has adopted a Code of Ethics. See attached Exhibit (a)(1).
Item 3. | AUDIT COMMITTEE FINANCIAL EXPERT |
Registrant’s Board of Trustees has determined that independent Trustee Mr. Steven J. Paggioli qualifies as an Audit Committee Financial Expert. Mr. Paggioli is “independent” as such term is defined in Form N-CSR.
Item 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
(a) | Audit Fees |
The aggregate fees billed by the Funds’ independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), to the Funds for the Funds’ two most recent fiscal years for professional services rendered for audits of annual financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements (“Audit Fees”) were as follows:
Fund - AMG Funds |
Fiscal 2017 | Fiscal 2016 | ||||||
AMG GW&K Municipal Enhanced Yield Fund |
$ | 35,946 | $ | 28,533 | ||||
AMG GW&K Small Cap Core Fund |
$ | 31,786 | $ | 21,983 | ||||
AMG GW&K Municipal Bond Fund |
$ | 50,385 | $ | 33,209 | ||||
AMG GW&K Small/Mid Cap Fund |
$ | 29,086 | $ | 20,763 | ||||
AMG Managers Skyline Special Equities Fund |
$ | 45,051 | $ | 25,016 | ||||
AMG TimesSquare Mid Cap Growth Fund |
$ | 53,528 | $ | 27,692 | ||||
AMG TimesSquare Small Cap Growth Fund |
$ | 41,959 | $ | 23,279 | ||||
AMG TimesSquare International Small Cap Fund |
$ | 32,079 | $ | 26,334 | ||||
AMG TimesSquare Emerging Markets Small Cap Fund |
$ | 29,437 | $ | 16,000 | ||||
AMG Renaissance Large Cap Growth Fund |
$ | 24,754 | $ | 19,980 | ||||
AMG Renaissance International Equity Fund |
$ | 24,398 | $ | 21,722 | ||||
AMG Yacktman Focused Fund |
$ | 99,340 | $ | 28,360 | ||||
AMG Yacktman Fund |
$ | 157,278 | $ | 29,479 | ||||
AMG Yacktman Special Opportunities Fund |
$ | 29,572 | $ | 25,182 | ||||
AMG Yacktman Focused Fund-Security Selection Only |
$ | 16,313 | $ | 0 | ||||
AMG Chicago Equity Partners Small Cap Value Fund |
$ | 30,384 | $ | 16,906 |
(b) | Audit-Related Fees |
There were no fees billed by PwC to the Funds in their two recent fiscal years for services rendered for assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements, but are not reported as Audit Fees (“Audit-Related Fees”).
For the Funds’ two most recent fiscal years, there were no Audit-Related Fees billed by PwC for engagements related directly to the operations and financial reporting of one or more Funds by a Fund Service Provider. A Fund Service Provider is (a) any investment adviser to the Fund (not including any Subadvisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) or (b) any entity that provides ongoing services to the Fund and is controlling, controlled by or under common control with a Fund investment adviser described in (a).
(c) | Tax Fees |
The aggregate fees billed by PwC to the Funds for the two most recent fiscal years for professional services rendered for tax compliance, tax advice, and tax planning (“Tax Fees”) were as follows:
Fund - AMG Funds |
Fiscal 2017 | Fiscal 2016 | ||||||
AMG GW&K Municipal Enhanced Yield Fund |
$ | 8,196 | $ | 8,196 | ||||
AMG GW&K Small Cap Core Fund |
$ | 7,369 | $ | 7,369 | ||||
AMG GW&K Municipal Bond Fund |
$ | 8,196 | $ | 8,196 | ||||
AMG GW&K Small/Mid Cap Fund |
$ | 7,453 | $ | 7,453 | ||||
AMG Managers Skyline Special Equities Fund |
$ | 7,369 | $ | 7,369 | ||||
AMG TimesSquare Mid Cap Growth Fund |
$ | 7,369 | $ | 7,369 | ||||
AMG TimesSquare Small Cap Growth Fund |
$ | 7,369 | $ | 7,369 | ||||
AMG TimesSquare International Small Cap Fund |
$ | 8,236 | $ | 8,236 | ||||
AMG TimesSquare Emerging Markets Small Cap Fund |
$ | 7,412 | $ | 3,496 | ||||
AMG Renaissance Large Cap Growth Fund |
$ | 9,369 | $ | 7,369 | ||||
AMG Renaissance International Equity Fund |
$ | 8,283 | $ | 8,283 | ||||
AMG Yacktman Focused Fund |
$ | 8,196 | $ | 8,196 | ||||
AMG Yacktman Fund |
$ | 8,196 | $ | 8,196 | ||||
AMG Yacktman Special Opportunities Fund |
$ | 7,653 | $ | 7,653 | ||||
AMG Yacktman Focused Fund-Security Selection Only |
$ | 5,740 | $ | 0 | ||||
AMG Chicago Equity Partners Small Cap Value Fund |
$ | 7,453 | $ | 7,453 |
For the Funds’ two most recent fiscal years, Tax Fees billed by PwC for engagements by Fund Service Providers that related directly to the operations and financial reporting of the Funds were $0 for fiscal 2017 and $0 for fiscal 2016, respectively.
The services for which Tax Fees were charged comprise all services performed by professional staff in PwC’s tax division except those services related to the audit. Typically, this category would include fees for tax compliance, tax planning, and tax advice. Tax compliance, tax advice, and tax planning services include preparation of original
and amended tax returns, claims for refund and tax payment-planning services, assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities.
(d) | All Other Fees |
There were no other fees billed by PwC to the Funds for all other non-audit services (“Other Fees”) during the Funds’ two most recent fiscal years. During the same period, there were no Other Fees billed by PwC for engagements by Fund Service Providers that related directly to the operations and financial reporting of the Funds.
(e)(1)According to policies adopted by the Audit Committee, services provided by PwC to the Funds must be pre-approved by the Audit Committee. On an annual basis, the Audit Committee reviews and pre-approves various types of services that PwC may perform for the Funds without specific approval of each engagement, subject to specified budget limitations. As contemplated by the Sarbanes-Oxley Act of 2002 and related SEC rules, the Audit Committee also pre-approves non-audit services provided by PwC to any Fund Service Provider for any engagement that relates directly to the operations and financial reporting of the Funds. Any engagement that is not already pre-approved or that will exceed a pre-approved budget must be submitted to the Audit Committee for pre-approval. The Chairman of the Audit Committee is authorized on behalf of the Board of Trustees and the Audit Committee to approve the engagement of PwC to perform non-audit services subject to certain conditions, including notification to the Audit Committee of such pre-approval not later than the next meeting of the Audit Committee following the date of such pre-approval.
(e)(2) None.
(f) Not applicable.
(g) The aggregate fees billed by PwC in 2017 and 2016 for non-audit services rendered to the Funds and Fund Service Providers were $222,059 and $144,603, respectively. For the fiscal year ended December 31, 2017, this amount reflects the amounts disclosed above in Item 4(b), (c),(d), plus $98,200 in fees billed to the Fund Service Providers for non-audit services that did not relate directly to the operations and financial reporting of the Funds. For the fiscal year ended December 31, 2016, this amount reflects the amounts disclosed above in Item 4(b),(c),(d), plus $32,400 in fees billed to the Fund Service Providers for non-audit services that did not relate directly to the operations and financial reporting of the Funds.
(h) The Trust’s Audit Committee has considered whether the provision of non-audit services by registrant’s independent registered public accounting firm to the registrant’s investment advisor, and any entity controlling, controlled, or under common control with the investment advisor that provided ongoing services to the registrant that were not pre-approved by the Committee (because such services did not relate directly to the operations and financial reporting of the registrant) was compatible with maintaining the independence of the independent registered public accounting firm.
Item 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS |
Not applicable.
Item 6. | SCHEDULE OF INVESTMENTS |
The schedule of investments in unaffiliated issuers as of the close of the reporting period is included as part of the shareholder report contained in Item 1 hereof.
Item 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
Not applicable.
Item 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
Not applicable.
Item 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANIES AND AFFILIATED PURCHASERS |
Not applicable.
Item 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
Not applicable.
Item 11. | CONTROLS AND PROCEDURES |
(a) The Registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing of this report, that the Registrant’s disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes in the Registrant’s internal control over financial reporting during the Registrant’s fourth fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to affect, the internal control over financial reporting.
Item 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
Not applicable.
Item 13. | EXHIBITS |
(a)(1) | Any Code of Ethics or amendments hereto. Filed herewith. |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 - Filed herewith. |
(a)(3) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 - Filed herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMG FUNDS
By: |
/s/ Jeffrey T. Cerutti | |
Jeffrey T. Cerutti, Principal Executive Officer | ||
Date: |
March 9, 2018 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Jeffrey T. Cerutti | |
Jeffrey T. Cerutti, Principal Executive Officer | ||
Date: | March 9, 2018 | |
By: | /s/ Thomas Disbrow | |
Thomas Disbrow, Principal Financial Officer | ||
Date: | March 9, 2018 |