To approve a new subadvisory agreement between AMG Funds LLC (the “Investment Manager”), 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830 on April 16, 2019 at 3:00 p.m. Eastern Time for the purposes listed below:
|
| 2. |
|
| 3. |
|
After careful consideration, the Trust’s Board of Trustees (the “Board” or the “Trustees”) unanimously recommends that shareholders vote “FOR” the proposals.each proposal.
Shareholders of record at the close of business on February 11, 2019[December 14, 2020] are entitled to notice of, and to vote at, the Meeting, even if any such shareholders no longer own shares.
If you wish to attend the Meeting, please register by sending an email to attendameeting@astfinancial.com and provide us with your full name and address in order to receive the conference call dial-in information. Please use the email subject line “AMG GW&K Small Cap Value Fund”, and include in your email your full name along with your request for the conference line number. That number will be sent back to you, allowing you to call into the meeting. We encourage you to vote your shares prior to the Meeting.
We call your attention to the accompanying proxy statement. You are requested to complete, date, and sign the enclosed proxy card and return it promptly in the envelope provided for that purpose. Your proxy card also provides instructions for voting by telephone or over the Internet if you wish to take advantage of these voting options. Proxies may be revoked prior to the Meeting by timely executing and submitting a revised proxy (following the methods noted above), by giving written notice of revocation to the Fund(s)Fund prior to the Meeting, or by voting in person at the Meeting. Please call AST Fund Solutions, the Funds’Fund’s proxy solicitor, toll-free at800-848-3374800-769-4414 if you have any questions relating to attending the Meeting in person or your vote instructions.
| By Order of the Board of Trustees, |
| Mark Duggan |
| Secretary |
vi
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE MEETING TO BE HELD ON APRIL 16, 2019[FEBRUARY 25, 2021]
This Proxy Statement and the accompanying Notice of Combined Special Meeting of Shareholders are available at the website listed on your proxy card. In addition, shareholders can find important information about eachthe Fund in suchthe Fund’s annual report, dated OctoberDecember 31, 2018,2019, including financial reports for the fiscal year ended OctoberDecember 31, 2018.2019, and in the Fund’s semi-annual report, dated June 30, 2020. You may obtain copies of these reports without charge, upon request, by writing to AMG Funds LLC, 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830, or by calling1-800-548-4539, or on the Funds’ website atwww.amgfunds.com.
YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS IMPORTANT THAT YOUR PROXY CARD BE RETURNED PROMPTLY.
FOR YOUR CONVENIENCE, YOU MAY ALSO VOTE BY TELEPHONE OR OVER THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD. IF YOU VOTE BY TELEPHONE OR OVER THE INTERNET, PLEASE DO NOT RETURN YOUR PROXY CARD UNLESS YOU ELECT TO CHANGE YOUR VOTE.
vii
AMG FUNDS
AMG GW&K TRILOGY EMERGING MARKETS EQUITYSMALL CAP VALUE FUND
(FORMERLY AMG TRILOGY EMERGING MARKETS EQUITY FUND)
AMG GW&K TRILOGY EMERGING WEALTH EQUITY FUND
(FORMERLY AMG TRILOGY EMERGING WEALTH EQUITYMANAGERS SKYLINE SPECIAL EQUITIES FUND)
JOINT PROXY STATEMENT
COMBINED SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 2019[FEBRUARY 25, 2021]
This joint proxy statement (“Proxy Statement”) and enclosed notice and proxy card are being furnished in connection with the solicitation of proxies by the Board of Trustees (the “Board” or the “Trustees”) of AMG Funds (“AMG Funds” or the “Trust”) and its series, AMG GW&K Trilogy Emerging Markets EquitySmall Cap Value Fund (formerly AMG Trilogy Emerging Markets EquityManagers Skyline Special Equities Fund) (the “Markets Fund”) and AMG GW&K Trilogy Emerging Wealth Equity Fund (formerly AMG Trilogy Emerging Wealth Equity Fund) (the “Wealth Fund”) (each a “Fund,” and collectively, the “Funds”“Fund”). The proxies are being solicited for use at a combined special meeting of shareholders of the FundsFund to be held on [February 25, 2021] at the offices of AMG Funds LLC (the “Investment Manager”), 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830 on April 16, 2019 at 3:[11:00 p.m.a.m.] Eastern Time, and at any and all adjournments or postponements of all or any portion thereof (the “Meeting”). In light of the COVID-19 pandemic, the Meeting will be a virtual meeting heldvia telephone only.
The Board has called the Meeting and is soliciting proxies from shareholders of the FundsFund for the purposes listed below:
Proposal Summary
| 1. |
| ||
|
| |||
| 2. |
| |||
|
|
| ||
| 3. | To transact such other business as may properly come before the Meeting or any adjournment(s) or postponement(s) thereof. |
This Proxy Statement and the accompanying notice and the proxy card are being first mailed to shareholders on or about February 19, 2019.[December 29, 2020].
Shareholders of record at the close of business on February 11, 2019[December 14, 2020] (the “Record Date”) are entitled to notice of, and to vote at, the Meeting, even if such shareholders no longer own shares.
If you have any questions about the proposals or about voting, please call AST Fund Solutions, the Funds’Fund’s proxy solicitor, toll-free at800-848-4539.800-769-4414.
OVERVIEW OF THE PROPOSALS
Introduction
The Trust is currently comprised oftwenty-one nineteen]mutual funds, but only the Funds areFund is the subject of this proxy statement. The Trust is a registered management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and is organized as a Massachusetts business trust. The Investment Manager, located at 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830, is a subsidiary of Affiliated Managers Group, Inc. (“AMG”), located at 777 South Flagler Drive, West Palm Beach,
1
Florida 33401. The Investment Manager serves as investment manager and administrator of the FundsFund and is responsible for the Funds’Fund’s overall administration and operations.
1
AMG Distributors, Inc. (the “Distributor”), a wholly owned subsidiary of the Investment Manager, located at 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830, serves as the Funds’Fund’s distributor.
The principal executive offices of the Trust are located at 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830.
Proposal 1: Approval of New subadvisory agreements are being proposed because GW&K and Trilogy Global Advisors, LP (“Trilogy”), each an affiliate of AMG, have recently completed a transaction (the “Transaction”) whereby the Trilogy portfolio managers that were previously primarily responsible for theday-to-day management of each Fund’s portfolio while at Trilogy have joined GW&K. The Transaction was completed on January 31, 2019 (the “Implementation Date”). The Transaction is not expected to have any effect on the Funds’ portfolio managers, fees and expenses, investment objectives and principal investment strategies and risks.Subadvisory Agreement
At anin-persona meeting held on December 6, 2018,3, 2020, and based upon the recommendation of the Investment Manager and other factors, the Board, including a majority of the Trustees who are not “interested persons” (as such term is defined in the 1940 Act) of the Trust (the “Independent Trustees”) determined that, terminated the subadvisory agreement (the “Former Subadvisory Agreement”) with Skyline Asset Management, L.P. (“Skyline”), the then-current subadviser of the Fund, and approved the appointment of GW&K should serveInvestment Management, LLC (“GW&K”) as each Fund’sthe subadviser and votedto the Fund on an interim basis to replace TrilogySkyline, with GW&K effective&K’s services beginning on or about the Implementation Date. Accordingly, on that date, the subadvisory agreements between theDecember 4, 2020. The Investment Manager and Trilogythe Board believed that termination of the Former Subadvisory Agreement and the proposed new arrangements with respect toGW&K were in the Funds (each a “Former Subadvisory Agreement”best interests of the Fund and collectively, the “Former Subadvisory Agreements”) terminated andits shareholders. GW&K began serving as the Funds’was appointed interim subadviser pursuant to newan interim subadvisory agreementsagreement between the Investment Manager and GW&K (each an(the “Interim Subadvisory Agreement” and, collectively, the “Interim Subadvisory Agreements”). As required by applicable law, each Interim Subadvisory Agreement is, to be effective until the earlier of 150 days after the termination of the applicable Former Subadvisory Agreement or the approval of the corresponding New Subadvisory Agreement (as defined below). The Former Subadvisory Agreement and by shareholders of the Interim Subadvisory Agreement relating toFund. At the Markets Fund are referred to herein as the “Former Markets Subadvisory Agreement” and the “Interim Markets Subadvisory Agreement,” respectively. The Former Subadvisory Agreement and the Interim Subadvisory Agreement relating to the Wealth Fund are referred to herein as the “Former Wealth Subadvisory Agreement” and the “Interim Wealth Subadvisory Agreement,” respectively.
Also, at itsmeeting held on December 6, 2018in-person meeting,3, 2020, the Board, including a majority of the Independent Trustees, also approved (i) the longer-term appointment of GW&K as the subadviser to the Funds,Fund, (ii) a new subadvisory agreement between the Investment Manager and GW&K with respect to the Markets Fund (the “New Markets Subadvisory Agreement”), and (iii) a new subadvisory agreement between the Investment Manager and GW&K with respect to the Wealth Fund (the “New Wealth Subadvisory Agreement,” and together with the New Markets Subadvisory Agreement, the “New Subadvisory Agreements”), and (iv) the submission of the New Subadvisory AgreementsAgreement to shareholders of the FundsFund for approval. In accordance with Rule 15a-4 under the 1940 Act, shareholders of the Fund must approve the New Subadvisory Agreement on or before May 3, 2021 in order for GW&K to serve as subadviser to the Fund on an uninterrupted basis following that date (“Proposal 1”). As discussed in greater detail below, the Board has unanimously determined to recommend a vote “FOR” Proposal 1.
The material differences between the Interim Subadvisory AgreementsAgreement and the Former Subadvisory AgreementsAgreement with respect to the Funds,Fund, as well as the material differences between the New Subadvisory AgreementsAgreement approved by the Board and the Former Subadvisory Agreements,Agreement, are described below under “The“Description of The Interim Markets Subadvisory Agreement” and “Terms“Description of the New Markets Subadvisory Agreement” in the section describing Proposal 1 and under “The Interim Wealth Subadvisory Agreement” and “Terms of the New Wealth Subadvisory Agreement” in the section describing Proposal 2. GW&K manages the Funds under the Interim Subadvisory Agreements with the same portfolio management team and investment objectives and strategies as those used by Trilogy under the Former Subadvisory Agreements and intends to do the same under the New Subadvisory Agreements..
If the shareholders of the FundsFund approve the New Subadvisory AgreementsAgreement between the Investment Manager and GW&K, (each a “Proposal” and collectively, the “Proposals”), GW&K will continue to serve as subadviser to the FundsFund under the terms of the New Subadvisory Agreements.Agreement. If shareholders of the Markets Fund do not approve the New Markets Subadvisory Agreement, the New Markets Subadvisory Agreement will not take effect, and the Board will determine what further action is appropriate for the Markets Fund. Likewise, if shareholders
In connection with the hiring of GW&K, effective December 4, 2020, the Fund (i) changed its name from AMG Managers Skyline Special Equities Fund to AMG GW&K Small Cap Value Fund, (ii) made changes to its investment objective, principal investment strategies and principal risks, and (iii) removed the Russell 2000® Index as the Fund’s secondary benchmark. Also in connection with the hiring of GW&K, effective as of the Wealth Fund do not approveImplementation Date, (i) the New Wealth Subadvisory Agreement, the New Wealth Subadvisory Agreement will not take effect, and the Board will determine what further action is appropriatemanagement fee for the Wealth Fund. An unfavorable vote on either ProposalFund was reduced from 0.73% to 0.70%, (ii) the Fund’s existing contractual expense limitation agreement with the Investment Manager was replaced with a new contractual expense limitation agreement with the Investment Manager pursuant to which the Investment Manager has agreed, through at least May 1, 2022, to limit total annual operating expenses (exclusive of taxes, interest (including interest incurred in connection with bank and custody overdrafts and in connection with securities sold short), shareholder servicing fees, distribution and service (12b-1) fees, brokerage commissions and other transaction costs, dividends payable with respect to securities sold short, acquired fund fees and expenses, and extraordinary expenses) of the Fund to the annual rate of 0.90% of the Fund’s average daily net assets, subject to later reimbursement by the shareholdersFund in certain circumstances, and (iii) the amount of shareholder servicing fees Class I shares of the applicable Fund will not affectare authorized to pay to financial intermediaries was decreased from 0.15% to 0.05%. For more information regarding these and other changes to the implementation ofFund, please see the other Proposal.supplements dated December 4, 2020 to the Fund’s prospectus dated May 1, 2020, which are attached as Appendix B to the Proxy Statement.
2
Proposal 2: Approval of a Manager-of-Managers Structure
Proposal 2 relates to a proposed “manager-of-managers” structure for the Fund. Under Section 15(a) of the 1940 Act, an investment adviser to a mutual fund generally cannot enter into or materially amend a subadvisory agreement without obtaining shareholder approval. The Investment Manager has obtained an exemptive order (the “AMGF Order”) issued by the Securities and Exchange Commission (the “SEC”) that enables the Investment Manager, subject to the approval of the Board, but without the need for shareholder approval, to enter into and materially amend subadvisory agreements with unaffiliated subadvisers for funds in the AMG Funds complex whose shareholders have approved the operation of their fund in a “manager-of-managers” structure. To date, shareholders of the Fund have not voted on the adoption of a “manager-of-managers” structure. The proposed “manager-of-managers” structure would permit the Investment Manager, subject to the approval of the Board, but without the need for shareholder approval, to enter into and materially amend subadvisory agreements with unaffiliated and affiliated subadvisers in reliance on the terms of the AMGF Order, as modified by the exemptive order obtained by Carillon Tower Advisers, Inc., et al., Investment Company Release Nos. 33464 (May 2, 2019) (notice) and 33494 (May 29, 2019) (order) (the “Carillon Order” and together with the AMGF Order, the “Manager-of-Managers Orders”). In addition, the Carillon Order permits funds to disclose fees paid to subadvisers on an aggregate, rather than individual, basis. Subject to shareholder approval of Proposal 2 and approval by the SEC of an amendment to the changes described above, atAMGF Order, the Fund would be permitted to disclose fees paid to subadvisers on an aggregate, rather than individual, basis. Fund shareholder approval is being sought to provide the Fund with flexibility to operate under the Manager-of-Managers Orders (“Proposal 2”). As discussed in greater detail below, the Board meeting heldhas unanimously determined to recommend a vote “FOR” Proposal 2.
If shareholders approve Proposal 2, the Fund will operate under a manager-of-managers structure pursuant to the Manager-of-Managers Orders and the Investment Manager will have flexibility, subject to certain terms and requirements, to enter into and materially amend subadvisory agreements with affiliated and unaffiliated subadvisers without the need for shareholder approval. The Fund would also have flexibility to disclose fees paid to subadvisers on December 6, 2018,an aggregate, rather than individual, basis, subject to approval by the Board also approved (i) a proposalSEC of an amendment to change the Markets Fund’s name from AMG Trilogy Emerging Markets EquityAMGF Order. If shareholders do not approve Proposal 2, the Fund will continue to AMG GW&K Trilogy Emerging Markets Equity Fund,be required to seek the approval of its shareholders to enter into or materially amend subadvisory agreements with unaffiliated and (ii) a proposal to change the Wealth Fund’s name from AMG Trilogy Emerging Wealth Equity Fund to AMG GW&K Trilogy Emerging Wealth Equity Fund, each of which became effective as of the Implementation Date.affiliated subadvisers.
Voting Procedures
Shareholders of the FundsFund who own shares at the close of business on the Record Date will be entitled to notice of, and to vote at, the Meeting and any adjournment(s) or postponement(s) thereof. You are entitled to one vote, or fraction thereof, for each share of athe Fund, or fraction thereof, that you own on each matter as to which such shares are to be voted at the Meeting. Shares may be voted in person or by proxy. Where shareholders may pursuant to the terms of a notice of a meeting of shareholders (which may be amended from time to time) participate in and vote at such meeting by means of remote communication, shares voted by means of such remote communication shall constitute shares voted in person.
A quorum must be present at the Meeting for the transaction of business. For each of the Funds, theThe holders of 30% of the aggregate number of shares of the Fund entitled to vote present in person or by proxy constitute a quorum for the transaction of business with respect to thatthe Fund. Abstentions and brokernon-votes do not represent votes cast for the Proposalsa proposal but will be counted for purposes of determining whether a quorum is present. “Brokernon-votes” are shares held by a broker or nominee as to which instructions have not been received from the beneficial owners or persons entitled to vote, and the broker or nominee does not have discretionary voting power but for which a broker or nominee returns the proxy card or otherwise votes without actually voting on the relevant Proposal.a proposal. Because the affirmative “vote of a majority of the outstanding voting securities,” as defined below, of the respective Fund is required to approve each Proposal,proposal, abstentions and brokernon-votes will have the effect of a vote against such Proposal.a proposal.
Whether or not a quorum is present at the Meeting, the chair of the Meeting may propose one or more adjournments of the Meeting to permit further solicitation of proxies. Any adjourned session or sessions may be held, any time after the date set for the Meeting, without the necessity of further notice. Upon motion of the chair of
3
the Meeting, the question of adjournment may be (but is not required to be) submitted to a vote of the shareholders, and in that case, any adjournment with respect to one or more matters must be approved by the vote of a majority of the votes cast in person or by proxy at the Meeting with respect to the matter or matters adjourned, whether or not a quorum is present with respect to such matter or matters, and, if approved, such adjournment shall take place without the necessity of further notice. Unless a proxy is otherwise limited in this regard, any shares present and entitled to vote at a meeting may, at the discretion of the proxies named therein, be voted “FOR” a proposal in favor of such an adjournment.
Information regarding the number of issued and outstanding shares of eachthe Fund as of the Record Date is provided under “Additional Information” below, representing the same number of votes for eachthe Fund. The persons who are known to have owned beneficially or of record 5% or more of eachthe Fund’s outstanding shares as of January 31, 2019,November 30, 2020 are also listed in the “Additional Information” section.
The person(s) named as proxies on the enclosed proxy card will vote in accordance with your directions, if your proxy card is received properly executed or if you vote appropriately by phone or over the Internet. If we receive your proxy card, and it is executed properly, but you give no voting instructions with respect to the Proposals,a proposal, your shares will be voted in accordance with management’s recommendation. The duly appointed proxies may, in their discretion, vote upon such other matters as may properly come before the Meeting and any adjournment(s) or postponement(s) thereof.
Under the Amended and Restated Agreement and Declaration of Trust of the Trust, when any share is held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such share, unless at or prior to exercise of the proxy the Trust receives a specific written notice to the contrary from any one of them.
3
In order that your shares may be represented at the Meeting, you are requested to vote your shares by mail, over the Internet or by telephone by following the instructions on your proxy card. IF YOU VOTE BY TELEPHONE OR OVER THE INTERNET, PLEASE DO NOT RETURN YOUR PROXY CARD, UNLESS YOU LATER ELECT TO CHANGE YOUR VOTE. You may revoke your proxy: (a) at any time prior to its exercise by written notice of its revocation to the Secretary of the Trust prior to the Meeting; (b) by the subsequent execution and timely return of another proxy prior to the Meeting (following the methods noted above); or (c) by being present and voting in person at the Meeting and giving oral notice of revocation to the chair of the Meeting. However, attendancein-person at the Meeting, by itself, will not revoke a previously-tendered proxy.
The cost of preparing, printing and mailing the enclosed proxy card and proxy statement and all other costs incurred in connection with the solicitation of proxies, including any additional solicitation made by letter, telephone or facsimile will be paid by Trilogy.the Investment Manager and GW&K. Please see “Additional Information” below for more information regarding solicitation of proxies. If you planwish to vote in person by attendingattend the Meeting, please contactregister by sending an email to attendameeting@astfinancial.com and provide us with your full name and address in order to receive the Fundsconference call dial-in information. Please use the email subject line “AMG GW&K Small Cap Value Fund”, and include in writing atyour email your full name along with your request for the conference line number. That number will be sent back to you, allowing you to call into the meeting. We encourage you to vote your shares prior to the Meeting.
4
PROPOSAL 1: APPROVAL OF THE NEW SUBADVISORY AGREEMENT BETWEEN THE INVESTMENT MANAGER AND GW&K WITH RESPECT TO AMG GW&K SMALL CAP VALUE FUND
Board of Trustees Approvals
At a meeting held on December 3, 2020, and based upon the recommendation of the Investment Manager and other factors, the Board approved the appointment of GW&K as the subadviser to the Fund on an interim basis to replace Skyline, with GW&K’s services beginning on December 4, 2020, and approved the Interim Subadvisory Agreement. As a consequence, on December 4, 2020, Skyline ceased serving as subadviser to the Fund, and GW&K began serving as the subadviser to the Fund on an interim basis as permitted by Rule 15a-4 under the 1940 Act. At the meeting held on December 3, 2020, the Board also approved the longer-term appointment of GW&K as the subadviser to the Fund and approved the New Subadvisory Agreement, subject to shareholder approval. In approving the Interim Subadvisory Agreement and the New Subadvisory Agreement, the Board, including a majority of the Independent Trustees, determined that the hiring of GW&K is in the best interests of the Fund and its shareholders and does not involve a conflict of interest from which the Investment Manager or an affiliated subadviser derives an inappropriate advantage. The Board’s determination to approve the appointment of GW&K as subadviser of the Fund and to approve the Interim Subadvisory Agreement and the New Subadvisory Agreement was based on a variety of factors and considerations, including (i) recommendation by the Investment Manager, which was based on its ongoing evaluation of Fund characteristics and exposures and subadviser performance and investment strategy, (ii) qualitative and quantitative analysis of GW&K’s organizational structure, investment process, style and long-term performance record, (iii) that the management fee paid by the Fund would be reduced in connection with the appointment of GW&K as subadviser and that GW&K would receive a lower rate of compensation under the Interim Subadvisory Agreement and New Subadvisory Agreement than Skyline received under the Former Subadvisory Agreement, and (iv) the Board’s knowledge of GW&K as subadviser to other funds in the AMG Funds 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830,Family of Funds. The recommendation to hire GW&K was based on the Investment Manager’s belief that GW&K is a high quality investment adviser with a demonstrated ability to manage equity portfolios and to manage the overall risk of the Fund’s portfolio and would be appropriately suited to manage assets for the Fund. Accordingly, the Board, including a majority of the Independent Trustees, unanimously approved (i) the hiring of GW&K, (ii) the adoption of the Interim Subadvisory Agreement, effective on December 4, 2020, until the earlier of 150 days after the termination of the Former Subadvisory Agreement or the approval of the New Subadvisory Agreement by telephone atshareholders of the Fund (as provided by Rule 1-800-548-4539,15a-4), for directions.and (iii) subject to shareholder approval, the adoption of the New Subadvisory Agreement. A form of the proposed New Subadvisory Agreement is attached as Appendix A.
Information About GW&K
The following is a description of GW&K, based solely on information provided to the Investment Manager by GW&K.
GW&K manages the Fund’s portfolio using its small cap value strategy. Under Skyline’s management of the Fund’s portfolio, the Fund’s investment objective was “to seek maximum capital appreciation primarily through investment in common stocks that the Fund’s Subadviser, Skyline Asset Management, L. P., considers to be undervalued” and, under normal circumstances, the Fund invested at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities and invested primarily in the common and preferred stocks of small-capitalization U.S. companies. Under GW&K’s management, each Fund is managed by the same portfolio management team and has the sameFund’s investment objective investment strategiesis “to seek to provide long-term capital appreciation,” and risks as compared to Trilogy’s management ofunder normal circumstances, the Fund underinvests at least 80% of its net assets, plus the applicable Former Subadvisory Agreement.amount of any borrowings for investment purposes, in equity securities of small-capitalization companies.
GW&K, located at 222 Berkeley Street, Boston, Massachusetts 02116, is an investment management firm that has advised individual and institutional clients since 1974. As of December 31, 2018,September 30, 2020, the firm had approximately $34.4$47 billion in assets under management. In 2008, GW&K became an affiliate of AMG. Under this partnership, AMG, through its wholly-owned subsidiary, AMG Boston Holdings, LLC, indirectly owns a majority interest in GW&K, with the remaining ownership interest held among members of GW&K’s management team.
5
GW&K’s management team is responsible for theday-to-day management of the firm and maintains full autonomy over the investment process. AMG is a publicly traded, global asset management company (NYSE:AMG) with investments in a diverse group of boutique investment management firms. As of September 30, 2018,2020, AMG had approximately $830$654 billion in assets under management by its affiliated investment management firms.
Information about the directors and principal executive officers of GW&K is set forth below. The address of each of them is c/o GW&K Investment Management, LLC, 222 Berkeley Street, Boston, Massachusetts 02116.
Name of Directors and Principal Executive Officers | Principal Occupation(s) | |
| Harold G. Kotler, CFA | Chief Executive Officer; Chief Investment Officer | |
| Thomas Williams Roberts, III | Co-President; Chief Compliance Officer | |
| Thomas F.X. Powers | Co-President |
4
PROPOSAL 1: APPROVAL OF THE NEW SUBADVISORY AGREEMENT BETWEEN THE INVESTMENT MANAGER AND GW&K WITH RESPECT TO AMG GW&K TRILOGY EMERGING MARKETS EQUITY FUND
Board of Trustees Approvals
At anin-person meeting held on December 6, 2018, and based upon the recommendationDescription of the Investment Manager and other factors, the Board approved the appointment of GW&K as the subadviser to the Markets Fund on an interim basis to replace Trilogy, with GW&K’s services beginning on the Implementation Date, and approved the Interim Markets Subadvisory Agreement. As a consequence, on the Implementation Date, Trilogy ceased serving as subadviser to the Markets Fund, and on the Implementation Date, GW&K began serving as the subadviser to the Markets Fund on an interim basis as permitted by Rule15a-4 under the 1940 Act. At thein-person meeting held on December 6, 2018, the Board also approved the longer-term appointment of GW&K as the subadviser to the Markets Fund and approved the New Markets Subadvisory Agreement, subject to shareholder approval. In approving the Interim Markets Subadvisory Agreement and the New Markets Subadvisory Agreement, the Board, including a majority of the Independent Trustees, determined that the hiring of GW&K is in the best interests of the Markets Fund and its shareholders and does not involve a conflict of interest from which the Investment Manager or an affiliated subadviser derives an inappropriate advantage. The Board’s determination to approve the appointment of GW&K as subadviser of the Markets Fund and to approve the Interim Markets Subadvisory Agreement and the New Markets Subadvisory Agreement was based on a variety of factors and considerations, including (i) recommendation by the Investment Manager, which was based on its ongoing evaluation of Markets Fund characteristics and exposures and subadviser performance and investment strategy, (ii) qualitative and quantitative analysis of GW&K’s organizational structure, investment process, style and long-term performance record, (iii) GW&K’s ability to maintain the same portfolio management team and investment process and strategies for the Markets Fund, and (iv) the Board’s knowledge of GW&K as subadviser to other funds in the AMG Funds Family of Funds. The recommendation to hire GW&K was based on the Investment Manager’s belief that the appointment of GW&K as subadviser to the Markets Fund would offer continuity in portfolio management for the Markets Fund and its shareholders, while providing stability to the investment process and operations. Accordingly, the Board, including a majority of the Independent Trustees, unanimously approved (i) the hiring of GW&K, (ii) the adoption of the Interim Markets Subadvisory Agreement, effective on the Implementation Date until the earlier of 150 days after the termination of the Former Markets Subadvisory Agreement or the approval of the New Markets Subadvisory Agreement by shareholders of the Markets Fund (as provided by Rule15a-4), and (iii) subject to shareholder approval, the adoption of the New Markets Subadvisory Agreement. A form of the proposed New Markets Subadvisory Agreement is attached as Appendix A.
The Interim Markets Subadvisory Agreement
The terms of the Interim Markets Subadvisory Agreement are the same, in all material respects (including with respect to subadvisory fees), as the terms of the Former Markets Subadvisory Agreement, with certain exceptions described below. Under the terms of the Former Markets Subadvisory Agreement, dated March 1, 2011, as amended, Trilogy received, and under the Interim Markets Subadvisory Agreement, GW&K receives, a subadvisory fee at an annual rate of 0.45% of the average daily net assets of the Markets Fund. For the fiscal year ended October 31, 2018, the Investment Manager paid Trilogy $690,414 for subadvisory services provided to the Markets Fund. Among the differences between the agreements is that, while the Former Markets Subadvisory Agreement provided that the agreement may be terminated by vote of the Trustees of the Trust or a majority of the Markets Fund’s outstanding voting securities upon 60 days’ written notice to the other parties, the Interim Markets Subadvisory Agreement provides, as required by Rule15a-4 under the 1940 Act, that the agreement may be terminated by vote of the Trustees of the Trust or a majority of the Markets Fund’s outstanding voting securities on not more than 10 days’ written notice to GW&K. Furthermore, the Interim Markets Subadvisory Agreement provides that subadvisory fees due to GW&K since the effective date of the Interim Markets Subadvisory Agreement are to be held in an interest-bearing escrow account. If the New Markets Subadvisory Agreement is subsequently approved by shareholders of the Markets Fund, GW&K will continue as subadviser to the Markets Fund, and the escrowed funds, including interest, will be paid to GW&K. If the New Markets Subadvisory Agreement is not approved, GW&K will be entitled to an amount equal to the lesser of (a) the costs of performing its services during the interim period plus interest or (b) the amount in the escrow account plus interest. Finally, in accordance with Rule15a-4 under the 1940 Act, Markets Fund shareholders must approve the New Markets Subadvisory Agreement before June 30, 2019 in order for GW&K to serve as subadviser to the Markets Fund on an uninterrupted basis following that date.
5
Terms of the New Markets Subadvisory Agreement
The terms of the New Markets Subadvisory Agreement are not materially different from the terms of the Former Markets Subadvisory Agreement, (including with respect to subadvisory fees), with certain exceptions. These exceptions are described below under “Comparison with Terms of the Former Markets Subadvisory Agreement.” The description of the New Subadvisory Agreement as set forth herein is qualified in its entirety by the provisions of the form of the New Subadvisory Agreement in Appendix A.
Services
Under the New Markets Subadvisory Agreement, if Proposal 1 is approved by Markets Fund shareholders, GW&K agrees, subject to the stated investment objective and policies of the Markets Fund as set forth in the Trust’s current registration statement and subject to the supervision of the Investment Manager and the Board, to (i) develop and furnish continuously an investment program and strategy for the Markets Fund in compliance with the Fund’s investment objective and policies as set forth in the Trust’s current registration statement, (ii) provide research and analysis relative to the investment program and investments of the Markets Fund, (iii) determine (subject to the overall supervision of the Board) what investments shall be purchased, held, sold or exchanged by the Markets Fund and what portion, if any, of the assets of the Markets Fund shall be held in cash or cash equivalents, and (iv) make changes on behalf of the Trust in the investments of the Markets Fund. GW&K will also arrange for the placing of all orders for the purchase and sale of securities and other investments for the Markets Fund’s account and will exercise full discretion and act for the Trust in the same manner and with the same force and effect as the Trust might or could do with respect to such purchases, sales or other transactions, as well as with respect to all other things necessary or incidental to the furtherance or conduct of such purchases, sales or transactions. GW&K will also make its officers and employees available to meet with the Investment Manager’s officers and directors on due notice at reasonable times to review the investments and investment program of the Markets Fund in light of current and prospective economic and market conditions.
Under the New Markets Subadvisory Agreement, GW&K will exercise voting authority with respect to proxies that the Markets Fund is entitled to vote by virtue of the ownership of assets attributable to that portion of the Markets Fund for which GW&K has investment management responsibility; provided that the exercise of such voting authority isshall be subject to periodic review by the Investment Manager and the Trustees and can be revoked in whole or in part by the Investment Manager if required by applicable law. GW&K will exercise its proxy voting authority in accordance with such proxy voting policies and procedures as the Trust may designate from time to time. GW&K will provide such information relating to its exercise of proxy voting authority (including the manner in which it has voted proxies and its resolution of conflicts of interest) as reasonably requested by the Investment Manager from time to time. (These terms governing GW&K’s proxy voting authority are collectively referred to herein as the “New Markets Proxy Voting Provisions.”) GW&K will also have authority to select brokers or dealers to execute purchase and sale transactions for the Trust. As subadviser to the Markets Fund, GW&K will be required to provide periodic and special reports as the Board may request with respect to matters relating to the duties of GW&K under the New Markets Subadvisory Agreement.
Compensation
Pursuant to the New Markets Subadvisory Agreement, the Investment Manager will pay GW&K a fee at the annual rate of 0.45% of the Markets Fund’s average daily net assets. The fees paid to GW&K under the New Markets Subadvisory Agreement are not paid by the Markets Fund but are paid by the Investment Manager out of the management fees the Investment Manager receives from the Markets Fund. The hiring of GW&K and the approval of the New Markets Subadvisory Agreement will not increase the management fee paid by Markets Fund shareholders. Under the investment management agreement between the Trust and the Investment Manager dated October 19, 1999, as amended, the Markets Fund pays the Investment Manager a fee at the annual rate of 0.55% of the Fund’s average daily net assets. For the fiscal year ended October 31, 2018, the Markets Fund paid the Investment Manager $843,839 for advisory servicesBoard; provided, to the Markets Fund.
6
Comparison with Terms of the Former Markets Subadvisory Agreement
As noted above, the terms of the New Markets Subadvisory Agreement are not materially different from the terms of the Former Markets Subadvisory Agreement, except for the differences described in this paragraph. Among the differences between the agreements is that the New Markets Subadvisory Agreement adds provisions clarifying that (i) GW&K is authorized on behalf of the Markets Fund to enter into agreements and execute any documents required to make investments pursuant to the Markets Fund’s prospectus; (ii) GW&K’s responsibility for providing portfolio management services under the New Markets Subadvisory Agreement is limited to only those assets of the Markets Fund which the Investment Manager determines to allocate to GW&K; and (iii) GW&K will not consult with any investment adviser to the Markets Fund or any other registered investment company or portfolio series thereof under common control with the Markets Fund concerning transactions for such assets in securities or other assets such that the exemptions under Rule10f-3, Rule12d-3, and/or Rule17a-10 under the 1940 Act would not be available with respect to the Markets Fund. In addition, the New Markets Subadvisory Agreement clarifies GW&K’s proxy voting authority by adding the New Markets Proxy Voting Provisions discussed under “Services” above and by adding a provision explicitly authorizing GW&K to engage a third party for purposes of providing proxy advisory and/or voting services. The New Markets Subadvisory Agreement removes language that was in the Former Markets Subadvisory Agreement prohibiting the subadviser from directing portfolio transactions on behalf of the Markets Fund to any broker/dealer in recognition of sales of shares of any investment company or receipt of research or other service without prior written approval from the Investment Manager (though the New Markets Subadvisory Agreement retains the provision prohibiting GW&K from directing portfolio transactions for the Markets Fund through any broker or dealer that is an “affiliated person,” as defined in the 1940 Act, of GW&K without the Investment Manager’s prior written approval). The Board, including a majority of the Independent Trustees, last approved the continuation of the Former Markets Subadvisory Agreement at anin-person meeting held on June27-28, 2018. The Former Markets Subadvisory Agreement was submitted to a vote of its sole shareholder on February 25, 2011, for the purpose of organizing the Markets Fund.
Portfolio Managers
If shareholders approve the New Markets Subadvisory Agreement, it is expected that GW&K’s current portfolio management team that has managed the Markets Fund under the Former Markets Subadvisory Agreement and the Interim Markets Subadvisory Agreement since March 1, 2011 will continue to manage the Markets Fund’s assets.
GW&K manages the Markets Fund using the same investment objective and strategies employed by Trilogy under the Former Markets Subadvisory Agreement. Pablo Salas and William Sterling serve as the portfolio managers jointly and primarily responsible for theday-to-day management and strategic oversight of the Markets Fund’s investments. Both Mr. Salas and Mr. Sterling have served asco-managers of the Markets Fund since its inception. They are continuing to manage the Markets Fund as employees of GW&K as of January 31, 2019. Mr. Salas serves as Portfolio Manager at GW&K and Mr. Sterling serves as Global Strategist at GW&K, positions each has held since 2019. Mr. Salas served as the lead portfolio manager for Trilogy’s Emerging Markets Equity Strategy, and he served as a Managing Director and Senior Portfolio Manager of Trilogy from 2005 to 2019. Mr. Sterling served as the Chief Executive Officer, Chairman, Chief Investment Officer, and Senior Portfolio Manager of Trilogy from 1999 to 2019.
Board of Trustees Recommendation
At anin-person meeting held on December 6, 2018, the Board, and separately a majority of the Independent Trustees, unanimously voted to approve the Interim Markets Subadvisory Agreement between the Investment Manager and GW&K, the New Markets Subadvisory Agreement between the Investment Manager and GW&K (together with the Interim Markets Subadvisory Agreement, the “Markets Agreements”), and the presentation of the New Markets Subadvisory Agreement for shareholder approval at a special meeting to be held for such purpose. The Independent Trustees were separately represented by independent legal counsel in their consideration of the Markets Agreements.
7
In considering the Markets Agreements, the Trustees considered the information relating to the Markets Fund and GW&K provided to them in connection with the meeting on December 6, 2018 and other meetings of the Board throughout the year. In considering the Markets Agreements, the Trustees also considered information relating to the seven other funds that GW&Ksub-advises in the AMG Funds Family of Funds, which, as of December 6, 2018, consisted of 59 funds (the “AMG Funds Complex”). Prior to voting, the Independent Trustees: (a) reviewed the foregoing information; (b) received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the Markets Agreements; and (c) met with their independent legal counsel in a private session at which no representatives of management were present.
Nature, extent and quality of services. In considering the nature, extent and quality of the services to be provided by GW&K, the Trustees reviewed information relating to GW&K’s financial condition, operations and personnel and the investment philosophy, strategies and techniques (the “Investment Strategy”) that are intended to be used by GW&K in managing the Markets Fund. Among other things, the Trustees reviewed biographical information on portfolio management and other professional staff, information regarding GW&K’s organizational and management structure and GW&K’s brokerage policies and practices. The Trustees considered specific information provided regarding the experience of the individuals to be at GW&K that are expected to have portfolio management responsibility for the Markets Fund, including the information set forth in the Markets Fund’s prospectus and statement of additional information filed with the Securities and Exchange Commission. The Trustees noted that GW&K would hire all of the portfolio managers who were previously primarily responsible for theday-to-day management of the Markets Fund’s portfolio while at Trilogy, each of whom has served as aco-portfolio manager of the Markets Fund since its inception in 2011. In addition, the Trustees observed that GW&K proposes to manage the Markets Fund’s portfolio using the same investment strategies and processes employed by Trilogy under the Former Markets Subadvisory Agreement. In the course of their deliberations, the Trustees evaluated, among other things: (a) the expected services to be rendered by GW&K to the Markets Fund; (b) the qualifications and experience of the individuals to be at GW&K that are expected to have portfolio management responsibility for the Markets Fund and GW&K’s other personnel; and (c) GW&K’s compliance program. The Trustees also considered GW&K’s risk management processes. The Trustees also took into account the financial condition of GW&K with respect to its ability to provide the services required under the Agreements and noted that, as of September 30, 2018, GW&K managed approximately $36 billion in assets.
Performance. The Trustees considered information relating to the Markets Fund’s and GW&K’s performance. Among other information, the Trustees considered the performance of the Markets Fund, noting that GW&K intends to manage the Markets Fund with the same portfolio management team and the same investment objective and strategies as those used by Trilogy. The Trustees noted that the Markets Fund’s performance (all share classes) for theone-year, three-year and five-year periods ended September 30, 2018 and the period from the Markets Fund’s inception (March 1, 2011 for Class I and Class Z shares and March 1, 2012 for Class N shares) through September 30, 2018 was below, above, below, and below, respectively, the performance of the MSCI Emerging Markets Index. The Trustees also considered comparative performance information for an appropriate peer group of similar mutual funds that was provided to them in connection with their June27-28, 2018in-person meeting. Taking into account the desire for continuity of portfolio management, the Trustees concluded that this performance record supported the approval of the Markets Agreements.
Subadvisory Fees, Profitability and Economies of Scale. The Trustees noted that the Investment Manager, and not the Markets Fund, is responsible for paying the fees charged by GW&K. In considering the anticipated profitability of GW&K with respect to the provision of subadvisory services to the Markets Fund, the Trustees considered information regarding GW&K’s organization, management and financial stability. The Trustees noted that, because GW&K is an affiliate of the Investment Manager, a portion of GW&K’s revenues or anticipated profits might be shared directly or indirectly with the Investment Manager. The Trustees also noted that the subadvisory fee rate to be paid to GW&K under each Markets Agreement was the same as the rate paid to Trilogy under the Former Markets Subadvisory Agreement. The Board took into account management’s discussion of the proposed subadvisory fee structure, and the services GW&K is expected to provide in performing its functions under the Markets Agreements. The Trustees also were provided, in their June27-28, 2018in-person meeting, with the profitability of GW&K with respect to the other funds itsub-advises in the AMG Funds Complex. Based on the foregoing, the Trustees concluded that the profitability to GW&K is expected to be reasonable and that GW&K is not expected to realize material benefits from economies of scale that would warrant adjustments to the subadvisory fees at this time. Also with respect to economies of scale, the Trustees noted that as the Markets Fund’s assets increase over time, the Markets Fund may realize other economies of scale to the extent the increase in assets is proportionally greater than the increase in certain other expenses.
8
In addition, the Trustees considered other potential benefits of the subadvisory relationship to GW&K, including, among others, the potential broadening of GW&K’s equity investment capabilities, as well as the indirect benefits that GW&K may receive from GW&K’s relationship with the Markets Fund, including anyso-called “fallout benefits” to GW&K, such as reputational value derived from GW&K serving as subadviser to the Markets Fund, which bears GW&K’s name. In addition, with respect to fee comparisons, the Trustees noted that the fee rates to be charged by GW&K are the same as those charged by Trilogy under the Former Markets Subadvisory Agreement with respect to the Markets Fund. Taking into account all of the foregoing, including the desire for continuity of portfolio management, the Trustees concluded that, in light of the nature, extent and quality of the services to be provided by GW&K, and the other considerations noted above with respect to GW&K, the Markets Fund’s subadvisory fees are reasonable.
* * * *
After consideration of the foregoing, the Trustees reached the following conclusions (in addition to the conclusions discussed above) regarding each Markets Agreement: (a) GW&K has demonstrated that it possesses the capability and resources to perform the duties required of it under each Markets Agreement; (b) GW&K’s Investment Strategy is appropriate for pursuing the Markets Fund’s investment objectives; (c) GW&K is reasonably likely to execute its investment strategy consistently over time; and (d) GW&K maintains 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 each Markets Agreement would be in the best interests of the Markets Fund and its shareholders. Accordingly, on December 6, 2018, the Trustees, and separately a majority of the Independent Trustees, unanimously voted to approve each Markets Agreement.
Required Vote
Proposal 1 must be approved by a “vote of a majority of the outstanding voting securities” of the Markets Fund. The “vote of a majority of the outstanding voting securities” is defined in the 1940 Act as the lesser of the vote of (i) 67% or more of the voting securities of the Markets Fund entitled to vote on Proposal 1 present at the Meeting or represented by proxy, if more than 50% of the Markets Fund’s outstanding voting securities are present or represented by proxy; or (ii) more than 50% of the outstanding voting securities of the Markets Fund entitled to vote on Proposal 1. If the vote required to approve Proposal 1 is not obtained from the Markets Fund, the New Markets Subadvisory Agreement between the Investment Manager and GW&K will not be approved, and the Trustees will consider what other actions to take in the best interests of the Markets Fund.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE MARKETS FUND VOTE “FOR” PROPOSAL 1.
9
PROPOSAL 2: APPROVAL OF THE NEW SUBADVISORY AGREEMENT BETWEEN THE INVESTMENT MANAGER AND GW&K WITH RESPECT TO AMG GW&K TRILOGY EMERGING WEALTH EQUITY FUND
Board of Trustees Approvals
At anin-person meeting held on December 6, 2018, and based upon the recommendation of the Investment Manager and other factors, the Board approved the appointment of GW&K as the subadviser to the Wealth Fund on an interim basis to replace Trilogy, with GW&K’s services beginning on the Implementation Date, and approved the Interim Wealth Subadvisory Agreement. As a consequence, on the Implementation Date, Trilogy ceased serving as subadviser to the Wealth Fund, and on the Implementation Date, GW&K began serving as the subadviser to the Wealth Fund on an interim basis as permitted by Rule15a-4 under the 1940 Act. At thein-person meeting held on December 6, 2018, the Board also approved the longer-term appointment of GW&K as the subadviser to the Wealth Fund and approved the New Wealth Subadvisory Agreement, subject to shareholder approval. In approving the Interim Wealth Subadvisory Agreement and the New Wealth Subadvisory Agreement, the Board, including a majority of the Independent Trustees, determined that the hiring of GW&K is in the best interests of the Wealth Fund and its shareholders and does not involve a conflict of interest from which the Investment Manager or an affiliated subadviser derives an inappropriate advantage. The Board’s determination to approve the appointment of GW&K as subadviser of the Wealth Fund and to approve the Interim Wealth Subadvisory Agreement and the New Wealth Subadvisory Agreement was based on a variety of factors and considerations, including (i) recommendation by the Investment Manager, which was based on its ongoing evaluation of Wealth Fund characteristics and exposures and subadviser performance and investment strategy, (ii) qualitative and quantitative analysis of GW&K’s organizational structure, investment process, style and long-term performance record, (iii) GW&K’s ability to maintain the same portfolio management team and investment process and strategies for the Wealth Fund, and (iv) the Board’s knowledge of GW&K as subadviser to other funds in the AMG Funds Family of Funds. The recommendation to hire GW&K was based on the Investment Manager’s belief that the appointment of GW&K as subadviser to the Wealth Fund would offer continuity in portfolio management for the Wealth Fund and its shareholders, while providing stability to the investment process and operations. Accordingly, the Board, including a majority of the Independent Trustees, unanimously approved (i) the hiring of GW&K, (ii) the adoption of the Interim Wealth Subadvisory Agreement, effective on the Implementation Date until the earlier of 150 days after the termination of the Former Wealth Subadvisory Agreement or the approval of the New Wealth Subadvisory Agreement by shareholders of the Wealth Fund (as provided by Rule15a-4), and (iii) subject to shareholder approval, the adoption of the New Wealth Subadvisory Agreement. A form of the proposed New Wealth Subadvisory Agreement is attached as Appendix B.
The Interim Wealth Subadvisory Agreement
The terms of the Interim Wealth Subadvisory Agreement are the same, in all material respects (including with respect to subadvisory fees), as the terms of the Former Wealth Subadvisory Agreement, with certain exceptions described below. Under the terms of the Former Wealth Subadvisory Agreement, dated March 15, 2015, as amended, Trilogy received, and under the Interim Wealth Subadvisory Agreement, GW&K receives, a subadvisory fee at an annual rate of 0.45% of the average daily net assets of the Wealth Fund. For the fiscal year ended October 31, 2018, the Investment Manager paid Trilogy $307,079 for subadvisory services provided to the Wealth Fund. Among the differences between the agreements is that, while the Former Wealth Subadvisory Agreement provided that the agreement may be terminated by vote of the Trustees of the Trust or a majority of the Wealth Fund’s outstanding voting securities upon 60 days’ written notice to the other parties, the Interim Wealth Subadvisory Agreement provides, as required by Rule15a-4 under the 1940 Act, that the agreement may be terminated by vote of the Trustees or a majority of the Wealth Fund’s outstanding voting securities on not more than 10 days’ written notice to GW&K. Furthermore, the Interim Wealth Subadvisory Agreement provides that subadvisory fees due to GW&K since the effective date of the Interim Wealth Subadvisory Agreement are to be held in an interest-bearing escrow account. If the New Wealth Subadvisory Agreement is subsequently approved by shareholders of the Wealth Fund, GW&K will continue as subadviser to the Wealth Fund, and the escrowed funds, including interest, will be paid to GW&K. If the New Wealth Subadvisory Agreement is not approved, GW&K will be entitled to an amount equal to the lesser of (a) the costs of performing its services during the interim period plus interest or (b) the amount in the escrow account plus interest. Finally, in accordance with Rule15a-4 under the 1940 Act, Wealth Fund shareholders must approve the New Wealth Subadvisory Agreement before June 30, 2019 in order for GW&K to serve as subadviser to the Wealth Fund on an uninterrupted basis following that date.
10
Terms of the New Wealth Subadvisory Agreement
The terms of the New Wealth Subadvisory Agreement are not materially different from the terms of the Former Wealth Subadvisory Agreement (including with respect to subadvisory fees), with certain exceptions. These exceptions are described below under “Comparison with Terms of the Former Wealth Subadvisory Agreement.”
Services
Under the New Wealth Subadvisory Agreement, if Proposal 2 is approved by Wealth Fund shareholders, GW&K agrees, subject to the stated investment objective and policies of the Wealth Fund as set forth in the Trust’s current registration statement and subject to the supervision of the Investment Manager and the Board, to (i) develop and furnish continuously an investment program and strategy for the Wealth Fund in compliance with the Wealth Fund’s investment objective and policies as set forth in the Trust’s current registration statement, (ii) provide research and analysis relative to the investment program and investments of the Wealth Fund, (iii) determine (subject to the overall supervision of the Board) what investments shall be purchased, held, sold or exchanged by the Wealth Fund and what portion, if any, of the assets of the Wealth Fund shall be held in cash or cash equivalents, and (iv) make changes on behalf of the Trust in the investments of the Wealth Fund. GW&K will also arrange for the placing of all orders for the purchase and sale of securities and other investments for the Wealth Fund’s account and will exercise full discretion and act for the Trust in the same manner and with the same force and effect as the Trust might or could do with respect to such purchases, sales or other transactions, as well as with respect to all other things necessary or incidental to the furtherance or conduct of such purchases, sales or transactions. GW&K will also make its officers and employees available to meet with the Investment Manager’s officers and directors on due notice at reasonable times to review the investments and investment program of the Wealth Fund in light of current and prospective economic and market conditions.
Under the New Wealth Subadvisory Agreement, GW&K will exercise voting authority with respect to proxies that the Wealth Fund is entitled to vote by virtue of the ownership of assets attributable to that portion of the Wealth Fund for which GW&K has investment management responsibility; providedfurther, that such voting authority is subject to periodic review by the Investment Manager and the Trustees and canmay be revoked in whole or in part by the Investment Manager if required by applicable law. GW&K will exercise its proxy voting authority in accordance with such proxy voting policies and procedures as the Trust may designate from time to time. GW&K will provide such information relating to its exercise of proxy voting authority (including the manner in which it has voted proxies and its resolution of conflicts of interest) as reasonably requested by the Investment Manager from time to time. GW&K will also have authority to select brokers or dealers to execute purchase and sale transactions for the Trust. As subadviser to the Wealth Fund, GW&K will be required to provide periodic and special reports as the Board may request with respect to matters relating to the duties of GW&K under the New Wealth Subadvisory Agreement.
6
Compensation
Pursuant toUnder the New Wealth Subadvisory Agreement,investment management agreement between the Trust and the Investment Manager will pay GW&Kdated October 19, 1999, as amended (the “Management Agreement”), the Fund pays the Investment Manager a fee at the annual rate of 0.45%0.70% of the Wealth Fund’s average daily net assets. In connection with the hiring of GW&K, effective as of the Implementation Date, the management fee for the Fund was reduced from 0.73% to 0.70%. During the fiscal year ended December 31, 2019, the Fund paid the Investment Manager a fee at the annual rate of 0.73% of the Fund’s average daily net assets. For the fiscal year ended December 31, 2019, the Fund paid the Investment Manager $4,179,594 for advisory services provided to the Fund.
Under the terms of the Former Subadvisory Agreement, dated January 23, 2009, as amended, Skyline received a subadvisory fee paid by the Investment Manager at an annual rate of 0.62% of the average daily net assets of the Fund managed by the subadviser. Under the terms of the New Subadvisory Agreement, GW&K is proposed to receive a subadvisory fee paid by the Investment Manager at an annual rate of 0.425%.
The following is a comparison of the subadvisory fees paid by AMGF to Skyline during the fiscal year ended December 31, 2019 with the subadvisory fees that would have been paid if the proposed subadvisory fee to be paid to GW&K had been in effect:
| Subadvisory fees paid by the Investment Manager to Skyline for the fiscal year ended December 31, 2019 | Subadvisory fees paid by the Investment Manager if the proposed fee for GW&K had been in effect during the fiscal year ended December 31, 2019 | Percent Difference | ||
| $3,549,792 | $2,433,325 | -31% |
The hiring of GW&K and the approval of the New Subadvisory Agreement will not increase the management fee paid by Fund shareholders. The fees paid to GW&K under the New Wealth Subadvisory Agreement are not paid by the Wealth Fund but are paid by the Investment Manager out of the management fees the Investment Manager receives from the Wealth Fund. The hiringShareholders will not experience an increase in expenses as a result of the change in subadvisory fee paid to GW&K andas there will be no increase in the approval oftotal expense ratio for the New Wealth Subadvisory Agreement will not increase the management fee paid by Wealth Fund shareholders. Under the investment management agreement between the Trust and the Investment Manager dated October 19, 1999, as amended, the Wealth Fund pays the Investment Manager a fee at the annual rate of 0.55% of the Fund’s average daily net assets. For the fiscal year ended October 31, 2018, the Wealth Fund paid the Investment Manager $375,319 for advisory services provided to the Wealth Fund.
11
Comparison with Terms of the Former Wealth Subadvisory Agreement
As noted above, the terms of the New Wealth Subadvisory Agreement are not materially different from the terms of the Former Wealth Subadvisory Agreement, except for the differences described in this paragraph. Among the differences between the agreements is thatFormer Subadvisory Agreement and the New Wealth Subadvisory Agreement adds provisions clarifying that (i) GW&K is authorized on behalf ofare the Wealth Fund to enter into agreements and execute any documents required to make investments pursuant to the Wealth Fund’s prospectus; (ii) GW&K’s responsibility for providing portfolio management services under the New Wealth Subadvisory Agreement is limited to only those assets of the Wealth Fund which the Investment Manager determines to allocate to GW&K; and (iii) GW&K will not consult with any investment adviser to the Wealth Fund or any other registered investment company or portfolio series thereof under common control with the Wealth Fund concerning transactions for such assets in securities or other assets such that the exemptions under Rule10f-3, Rule12d-3, and/or Rule17a-10 under the 1940 Act would not be available with respect to the Wealth Fund. In addition, whereas the Former Wealth Subadvisory Agreement authorized the Investment Manager to identify specific issuers, brokers or dealers affiliated with the Investment Manager through which portfolio transactions may not be effected, the New Wealth Subadvisory Agreement broadens this provision to permit the Investment Manager to identify any securities that may not be purchased and/or brokers or dealers through which portfolio transactions may not be effected. In addition, the New Wealth Subadvisory Agreement removes provisions (i) requiring the Investment Manager to provide the subadviser with a quarterly list of clients invested in the Wealth Fund that the Investment Manager has determined may be the subject of the prohibitions set forth in Rule206-5 under the Investment Advisers Act of 1940, as amended; and (ii) requiring the Investment Manager to provide documentation to the subadviser to substantiate the Wealth Fund’s average daily net assets. Furthermore, while the Former Wealth Subadvisory Agreement obligated the Trust to pay all Wealth Fund expenses, the New Wealth Subadvisory Agreement provides that the Trust is obligated to pay only certain enumerated Wealth Fund expenses. Additionally, the New Wealth Subadvisory Agreement provides that, during any period in which the Investment Manager waives all or a portion of the advisory fee payable to it with respect to the Wealth Fund, GW&K will, at the Investment Manager’s request, waive a pro rata share of the subadvisory fee in proportion to the amount of the advisory fee waived by the Investment Manager. That same proportion shall govern the amount that the Investment Manager pays to GW&K in connection with any payment by the Trust to the Investment Manager of fees that the Investment Manager previously waived. following:
| Subject Matter | Former Subadvisory Agreement | New Subadvisory Agreement | ||
| Duration | The Former Subadvisory Agreement continued in effect only so long as its continuance was specifically approved at least annually by the Trustees or the shareholders of the Fund in the manner required by the 1940 Act. | The New Subadvisory Agreement, after its initial two-year term, will continue in full force and effect for periods of one year thereafter so long as such continuance is approved at least annually (a) by either the Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, and (b) in either event, by the vote of a majority of the Trustees of the Trust who are not parties to the New Subadvisory Agreement or “interested persons” (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval to the extent required by applicable law. |
7
| Subject Matter | Former Subadvisory Agreement | New Subadvisory Agreement | ||
| Termination | The Former Subadvisory Agreement could be terminated by (i) the Investment Manager at any time without penalty, upon notice to Skyline and the Trust, (ii) at any time without penalty by the Trust or by vote of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act) on notice to Skyline or (iii) by Skyline at any time without penalty, upon thirty (30) days’ written notice to the Investment Manager and the Trust. | The New Subadvisory Agreement may be terminated at any time, without payment of any penalty, (i) by vote of the Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, (ii) by the Investment Manager, or (iii) by GW&K, in each case on sixty (60) days’ prior written notice to the other party. | ||
| Subadviser Authority to Enter into Agreements on Behalf of the Target Fund | None. | Under the New Subadvisory Agreement, GW&K is authorized on behalf of the Fund to enter into agreements and execute any documents required to make investments pursuant to the Fund’s prospectus. | ||
| Proxy Voting Authority | The Former Subadvisory Agreement provided that the Investment Manager had the authority to revoke, in whole or in part, Skyline’s proxy voting authority at any time upon notice to Skyline. | The New Subadvisory Agreement provides that AMGF may revoke, in whole or in part, GW&K’s proxy voting authority if required by applicable law. The New Subadvisory Agreement also clarifies GW&K’s proxy voting authority by adding a provision explicitly authorizing GW&K to engage a third party for purposes of providing proxy advisory or voting services. |
8
| Subject Matter | Former Subadvisory Agreement | New Subadvisory Agreement | ||
| Portfolio Transactions/Brokerage Allocation Practices | The Former Subadvisory Agreement set forth terms under which the Investment Manager could direct Skyline to execute portfolio transactions on behalf of the Fund with brokers and dealers providing brokerage or research services to the Fund or the Investment Manager, subject to such broker or dealer being able to obtain the best net price and execution on any such transaction. Under the Former Subadvisory Agreement, Skyline agreed that it would not execute any portfolio transactions with a broker, dealer or futures commission merchant which is an “affiliated person” (as defined in the 1940 Act) of the Trust, the Investment Manager or any subadviser for the Trust except in accordance with procedures adopted by the Board of Trustees of the Trust. The Former Subadvisory Agreement did not include terms addressing Skyline’s authority to buy securities for the Fund at the same time it was selling such securities for another client account, to sell securities for the Fund at the same time it was buying such securities for another account, to effectuate cross transactions or to aggregate securities to be sold or purchased, nor did it specifically address the subadviser’s responsibility for the custody of the Fund’s assets or acts of the Fund’s custodian. | The New Subadvisory Agreement does not include terms under which AMGF can direct GW&K to execute portfolio transactions. Under the New Subadvisory Agreement, GW&K agrees that (i) the Investment Manager shall have the right by written notice to identify securities that may not be purchased on behalf of the Fund and/or brokers and dealers through which portfolio transaction on behalf of the Fund may not be effected, including, without limitation, brokers or dealers affiliated with the Investment Manager, and (ii) GW&K shall refrain from purchasing such securities for the Fund or directing any portfolio transaction to any such broker or dealer on behalf of the Fund, unless and until the written approval of the Investment Manager to do so is obtained, but GW&K shall not be liable to the Fund for so acting. Also under the New Subadvisory Agreement, GW&K agrees that it shall not direct portfolio transactions for the Fund through any broker or dealer that is an “affiliated person” of GW&K (as that term is defined in the 1940 Act or interpreted under applicable rules and regulations of the SEC) without the prior written approval of the Investment Manager, which shall not be unreasonably withheld. The New Subadvisory Agreement clarifies that: (i) GW&K may buy securities for the Fund at the same time it is selling such securities for another client account and to sell securities for the Fund at the time it is buying such securities for another client account; (ii) GW&K may, subject to applicable legal and regulatory requirements, and in compliance with such procedures of the Trust as may be in effect from time to time, effectuate cross transactions between the Fund and such other account if it deems this to be advantageous; (iii) to the extent permitted by applicable laws and regulations, and in compliance with such procedures of the Trust as may be in effect from time to time, GW&K may aggregate the securities to be sold or purchased in order to obtain best execution and lower brokerage commissions, if any, and will allocate such aggregated securities and expenses incurred in such transactions in a manner GW&K considers to be most equitable and consistent with its fiduciary obligations; and (iv) GW&K will not have possession or custody of any Fund investments and, upon giving proper instructions to the custodian, will not be responsible or liable for the acts, omissions or other conduct of the custodian. |
9
| Subject Matter | Former Subadvisory Agreement | New Subadvisory Agreement | ||
| Assignment of Expenses | None. | The New Subadvisory Agreement provides that (a) GW&K will bear all expenses incurred by it in the performance of its duties under the New Subadvisory Agreement, other than those expenses specifically assumed by the Trust under the New Subadvisory Agreement; (b) subject to any expense limitation agreement as in effect from time to time with respect to the Fund, the Trust shall assume and shall pay (i) issue and transfer taxes chargeable to the Trust in connection with securities transactions to which the Fund is a party, and (ii) interest on borrowed money, if any; and (c) in addition to these expenses, the Trust shall pay all brokers’ and underwriting commissions chargeable to the Trust in connection with the securities transactions to which the Fund is a party. | ||
| Indemnification | None. | The New Subadvisory Agreement provides that the Investment Manager and GW&K will indemnify each other from and against certain damages related to the performance of services by the other party under the New Subadvisory Agreement. | ||
| Standard of Care | The Former Subadvisory Agreement provided that the subadviser was not subject to any liability for any act or omission, error of judgment, or mistake of law or for any loss suffered by the Investment Manager or the Trust in connection with the matters to which the Former Subadvisory Agreement related, except, among other things, by reason of the subadviser’s gross negligence in the performance of its duties. | The New Subadvisory Agreement provides that GW&K is not subject to any liability for any error of judgment or mistake of law or for any loss suffered by the Investment Manager or the Fund in connection with the matters to which the New Subadvisory Agreement relates, except, among other things, by reason of GW&K’s negligence in the performance of its duties. | ||
| Applicable Law | The Former Subadvisory Agreement was governed by Connecticut law. | The New Subadvisory Agreement is governed by Massachusetts law. |
The Board, including a majority of the Independent Trustees, last approved the continuation of the Former Wealth Subadvisory Agreement at anin-persona meeting held on June27-28, 2018. 25, 2020. The Former Wealth Subadvisory Agreement was last submitted to a vote of its sole shareholdershareholders on March 12, 2015,January 23, 2009, for the purpose of organizingapproving the Wealth Fund.adoption of the Former Subadvisory Agreement.
In accordance with Rule 15a-4 under the 1940 Act, Fund shareholders must approve the New Subadvisory Agreement before May 3, 2021 in order for GW&K to continue serving as subadviser to the Fund on an uninterrupted basis following that date.
10
Description of the Interim Subadvisory Agreement
The terms of the Interim Subadvisory Agreement are not materially different from the terms of the Former Subadvisory Agreement, with certain exceptions. The differences between the terms of the Interim Subadvisory Agreement and those of the Former Subadvisory Agreement are identical to the differences between the New Subadvisory Agreement and the Former Subadvisory Agreement, as described in “Description of the New Subadvisory Agreement” above, except that, unlike the New Subadvisory Agreement, the Interim Subadvisory Agreement will continue in effect until the earlier of 150 days from the Implementation Date or the date upon which the New Subadvisory Agreement is approved by a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act).
Portfolio Managers
If shareholders approve the New Wealth Subadvisory Agreement, it is expected that GW&K’s current portfolio management team that has managed the Wealth Fund under the Former Wealth Subadvisory Agreement and the Interim Wealth Subadvisory Agreement since March 19, 2015December 4, 2020 will continue to manage the Wealth Fund’s assets.
GW&K manages the Wealth Fund using the same investment objectiveits small cap value strategy. Jeffrey O. Whitney, CFA, and strategies employed by Trilogy under the Former Wealth Subadvisory Agreement. William Sterling, Thomas Masi, and Nuno Fernandes serve asDaniel L. Miller, CFA, are the portfolio managers jointly and primarily responsible for theday-to-day management and strategic oversight of the Wealth Fund’s investments. Each portfolio, manager has served asco-managerand have managed the Fund since December 4, 2020. Mr. Whitney joined GW&K in 2005 and is a Partner and Equity Portfolio Manager. He is a member of the Wealth Fund since its inception. They are continuingGW&K Equity team analyzing small cap companies and is also a member of the firm’s Investment Committee. Prior to manage the Wealth Fund as employees of GW&K as of January 31, 2019. Mr. Sterling serves as Global Strategist atjoining GW&K, Mr. Masi serves asWhitney was an Assistant Portfolio Manager at ING Investment Management and a Vice President and Equity Analyst at J.P. Morgan Fleming Asset Management. Mr. Miller joined GW&K in December 2008 as Partner and Director of Equities, responsible for overseeing all aspects of GW&K’s equity group, including portfolio management, research and trading. He is a member of GW&K’s Investment Committee. Mr. Fernandes serves as Portfolio ManagerMiller spent 21 years at GW&K, positions each has held since 2019. Mr. Sterling served as the Chief Executive Officer, Chairman,Putnam Investments, where he was Chief Investment Officer for the Specialty Growth Group from 1996 to 2004. After retiring from Putnam Investments in 2004, Mr. Miller worked as an investment consultant and Senior Portfolio Manager of Trilogy from 1999 to 2019. Mr. Masi served as a Senior Portfolio Manager and Director of Research at Trilogyfinancial consultant for various companies from 2004 to 2019. Mr. Fernandes served2008, until he joined GW&K.
Information Regarding Similar Funds
GW&K does not currently act as Associate Directorinvestment adviser or subadviser with respect to any other investment company registered under the 1940 Act with similar investment objectives and strategies to those of Research at Trilogy from 2013 through 2019.the Fund.
Board of Trustees Recommendation
At anin-persona telephonic meeting held on December 6, 2018,3, 2020,1 the Board, and separately a majority of the Independent Trustees, unanimously voted to approve the Interim Wealth Subadvisory Agreement between the Investment Manager and GW&K with respect to the Fund, the New Wealth Subadvisory Agreement between the Investment Manager and GW&K with respect to the Fund (together with the Interim Wealth Subadvisory Agreement, the “Wealth Agreements”“Agreements”), and the presentation of the New Wealth Subadvisory Agreement for shareholder approval at a special meeting to be held for such purpose. The Independent Trustees were separately represented by independent legal counsel in their consideration of the Wealth Agreements.
12
In considering the Wealth Agreements, the Trustees considered the information relating to the Wealth Fund and GW&K provided to them in connection with the meeting on December 6, 20183, 2020 and other meetings of the Board throughout the year.last twelve months, as well as in prior years. In considering the Wealth Agreements, the Trustees also considered information relating to the seveneleven other funds that GW&Ksub-advises in the AMG Funds Family of Funds, which, as of December 6, 2018,3, 2020, consisted of 5949 funds (the “AMG Funds Complex”). Prior to voting, the Independent
| 1 | The Trustees determined that the conditions surrounding the COVID-19 virus constituted unforeseen or emergency circumstances and that reliance on the SEC’s exemptive order, which provides relief from the in-person voting requirements of the 1940 Act in certain circumstances (the “In-Person Relief”), was necessary or appropriate due to the circumstances related to current or potential effects of COVID-19. The Trustees unanimously wished to rely on the In-Person Relief with respect to the approval of those matters on the agenda for the December 3, 2020 meeting that would otherwise require in-person votes under the 1940 Act. See Investment Company Release No. 33897 (June 19, 2020). This exemptive order supersedes, in part, a similar, earlier exemptive order issued by the SEC (Investment Company Release No. 33824 (March 25, 2020)). |
11
Trustees: (a) reviewed the foregoing information; (b) received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the Wealth Agreements; and (c) met with their independent legal counsel in a private session at which no representatives of management were present.
Nature, extent and quality of servicesservices.. In considering the nature, extent and quality of the services to be provided by GW&K, the Trustees reviewed information relating to GW&K’s financial condition, operations and personnel and the investment philosophy, strategies and techniques (the “Investment Strategy”) that are intended to be used by GW&K in managing the Wealth Fund. Among other things, at this meeting and/or prior meetings, the Trustees reviewed biographical information on portfolio management and other professional staff, information regarding GW&K’s organizational and management structure, GW&K’s compliance policies and procedures, and GW&K’s brokerage policies and practices. The Trustees considered specific information provided regarding the experience of the individuals to be at GW&K that are expected to have portfolio management responsibility for the Wealth Fund, including the information set forth in the Wealth Fund’s prospectus and statement of additional information filed with the Securities and Exchange Commission.Fund. The Trustees noted that one proposed portfolio manager joined GW&K would hire allin 2005 and the other proposed portfolio manager joined GW&K in 2008. The Trustees further noted that one of the proposed portfolio managers who were previously primarily responsible for theday-to-day management of the Wealth Fund’s portfolio while at Trilogy, each of whom has servedserves as aco-portfolio manager ofon other funds subadvised by GW&K in the Wealth Fund since its inception in 2015. In addition, the Trustees observed that GW&K proposes to manage the Wealth Fund’s portfolio using the same investment strategies and processes employed by Trilogy under the Former Wealth Subadvisory Agreement.AMG Funds Complex. In the course of their deliberations, the Trustees evaluated, among other things: (a) the expected services to be rendered by GW&K to the Wealth Fund; (b) the qualifications and experience of the individuals to be at GW&K that are expected to have portfolio management responsibility for the Wealth Fund and GW&K’s other personnel; and (c) GW&K’s compliance program. The Trustees alsoadditionally considered GW&K’s risk management processes. The Trustees also took into account the financial condition of GW&K with respect to its ability to provide the services required under the Agreements and noted that, as of September 30, 2018,2020, GW&K managed approximately $36$47 billion in assets.
PerformancePerformance.. Because GW&K was proposing to manage the Fund with its small cap value investment strategy, the Trustees noted that they could not draw any conclusions regarding the performance of the Fund. The Trustees, however, considered information relatingthe performance of GW&K with respect to the Wealth Fund’s and GW&K’s performance. Among other information, theits Small Cap Value Composite. The Trustees further considered the performance of the Wealth Fund, noting that GW&K intends to manage the Wealth Fund with the same portfolio management team and the same investment objective and strategies as those used by Trilogy. The Trustees noted that the Wealth Fund’s performance (all share classes) for theone-year and three-year periods ended September 30, 2018 and the period from the Wealth Fund’s inception on March 19, 2015 through September 30, 2018 was below (aboveother funds in the case of Class Z shares), above and above, respectively, the performance of the MSCI Emerging Markets Index. The Trustees also considered comparative performance information for an appropriate peer group of similar mutual funds that was provided to them in connection with their JuneAMG Funds Complex 27-28,sub-advised 2018in-person meeting. Taking into account the desire for continuity of portfolio management, the Trustees concluded that this performance record supported the approval of the Wealth Agreements.by GW&K.
Subadvisory Fees, Profitability and Economies of ScaleScale. . The Trustees noted that the Investment Manager, and not the Wealth Fund, is responsible for paying the fees charged by GW&K. In considering the anticipated profitability of GW&K with respect to the provision of subadvisory services to the Wealth Fund, the Trustees considered information regarding GW&K’s organization, management and financial stability. The Trustees noted that, because GW&K is an affiliate of the Investment Manager, a portion of GW&K’s revenues or anticipated profits might be shared directly or indirectly with the Investment Manager. The Trustees also noted that the subadvisory fee rate to be paid to GW&K under each Wealth Agreement was the same aslower than the rate paid to TrilogySkyline under the Former Wealth Subadvisory Agreement.
The Board took into account management’s discussion of the proposed subadvisory fee structure, and the services GW&K is expected to provide in performing its functions under the Wealth Agreements. The Trustees also were provided, in advance of their June27-28, 2018in-person 25, 2020 meeting, with the profitability of GW&K with respect to the other funds itsub-advises in the AMG Funds Complex. Based on the
13
foregoing, the Trustees concluded that the profitability to GW&K is expected to be reasonable and that GW&K is not expected to realize material benefits from economies of scale that would warrant adjustments to the subadvisory fees at this time. Also with respect to economies of scale, the Trustees noted that as the Wealth Fund’s assets increase over time, the Wealth Fund may realize other economies of scale to the extent the increase in assets is proportionally greater than the increase in certain other expenses.
In addition, the Trustees considered other potential benefits of the subadvisory relationship to GW&K, including, among others, the potential broadening of GW&K’s equitysmall cap value investment capabilities, as well as the indirect benefits that GW&K may receive from GW&K’s relationship with the Wealth Fund, including anyso-called “fallout benefits” to GW&K, such as reputational value derived from GW&K serving as subadviser to the Wealth Fund, which bears GW&K’s name. In addition, with respect to fee comparisons, the Trustees noted that the fee rates to be charged by GW&K are the same as those charged by Trilogy under the Former Wealth Subadvisory Agreement with respect to the Wealth Fund. Taking into account all of the foregoing, including the desire for continuity of portfolio management, the Trustees concluded that, in light of the nature, extent and quality of the services to be provided by GW&K, and the other considerations noted above with respect to GW&K, the Wealth Fund’s subadvisory fees are reasonable.
12
* * * *
After consideration of the foregoing, the Trustees reached the following conclusions (in addition to the conclusions discussed above) regarding each Wealth Agreement: (a) GW&K has demonstrated that it possesses the capability and resources to perform the duties required of it under each Wealth Agreement; (b) GW&K’s Investment Strategy is appropriate for pursuing the Wealth Fund’s investment objectives; (c) GW&K is reasonably likely to execute its investment strategy consistently over time; and (d) GW&K maintains 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 each Wealth Agreement would be in the best interests of the Wealth Fund and its shareholders. Accordingly, on December 6, 2018,3, 2020, the Trustees, and separately a majority of the Independent Trustees, unanimously voted to approve each Wealth Agreement.
Required Vote
Proposal 21 must be approved by a “vote of a majority of the outstanding voting securities” of the Wealth Fund. The “vote of a majority of the outstanding voting securities” is defined in the 1940 Act as the lesser of the vote of (i) 67% or more of the voting securities of the Wealth Fund entitled to vote on Proposal 21 present at the Meeting or represented by proxy, if more than 50% of the Wealth Fund’s outstanding voting securities are present or represented by proxy; or (ii) more than 50% of the outstanding voting securities of the Wealth Fund entitled to vote on Proposal 2.1. If the vote required to approve Proposal 21 is not obtained from the Wealth Fund, the New Wealth Subadvisory Agreement between the Investment Manager and GW&K will not be approved, and the Trustees will consider what other actions to take in the best interests of the Wealth Fund.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE WEALTHFUND VOTE “FOR” PROPOSAL 1.
13
PROPOSAL 2: APPROVAL OF A MANAGER-OF-MANAGERS STRUCTURE FOR THE FUND THAT WOULD PERMIT THE INVESTMENT MANAGER TO ENTER INTO AND MATERIALLY AMEND SUBADVISORY AGREEMENTS WITH UNAFFILIATED AND AFFILIATED SUBADVISERS WITHOUT OBTAINING SHAREHOLDER APPROVAL AND WOULD ALSO PERMIT THE FUND TO DISCLOSE FEES PAID TO SUBADVISERS ON AN AGGREGATE, RATHER THAN INDIVIDUAL, BASIS.
Under Section 15(a) of the 1940 Act, an investment adviser to a mutual fund generally cannot enter into or materially amend a subadvisory agreement without obtaining shareholder approval. For funds in the AMG Funds complex whose shareholders have approved the operation of their fund in a “manager-of-managers” structure, the AMGF Order allows the Board to enter into or materially amend subadvisory agreements without a shareholder vote if the subadviser is not affiliated with the Investment Manager; if the subadviser is an affiliate, a shareholder vote is required. To date, shareholders of the Fund have not voted on the adoption of a “manager-of-managers” structure. The Fund and the Investment Manager would like to rely on the AMGF Order and recent SEC relief that would modify the Investment Manager’s existing manager-of-managers relief and, together, would permit the Investment Manager to enter into or materially amend a subadvisory agreement with an “affiliated person” (as such term is defined in Section 2(a)(3) of the 1940 Act) of the Investment Manager or the Fund or an unaffiliated person without first obtaining shareholder approval, provided that the shareholders of the Fund had previously authorized the Investment Manager to do so and the Investment Manager complies with certain conditions. In the absence of reliance on the AMGF Order and recent SEC relief, in order to enter into or materially amend a subadvisory agreement, the Fund must obtain shareholder approval by undertaking the costly and time-consuming effort to conduct a shareholder meeting, including preparing and distributing proxy materials and soliciting votes from shareholders. The Board believes that it is in the best interests of shareholders if the Board represents their interests in approving or rejecting recommendations made by the Investment Manager regarding subadvisers. This approach will avoid the costs and delays associated with holding shareholder meetings to obtain approval for future changes. Accordingly, the Board and the Investment Manager are asking shareholders to grant authority to the Investment Manager and the Trust to enter into and materially amend investment subadvisory agreements with subadvisers regardless of whether they are affiliated persons or unaffiliated persons of AMGF or the Fund, with the approval of the Board, but without obtaining additional shareholder approval.
Exemptive Relief
On May 29, 2019, the SEC issued the Carillon Order to Carillon Tower Advisers, Inc., et al. that allows (i) the Carillon Series Trust and its investment adviser, without the approval of fund shareholders, to enter into or amend a subadvisory agreement with a subadviser (“Subadviser Voting Relief”), including any subadviser that is an affiliated person of the investment adviser or a fund (an “Affiliated Subadviser”), and (ii) the series of Carillon Series Trust to disclose the advisory fees paid to subadvisers on an aggregate, rather than individual, basis. The Carillon Order is the first exemptive order issued by the SEC extending multi-manager exemptive relief to Affiliated Subadvisers and contains several conditions, some of which are already included in the AMGF Order.
On July 9, 2019, the staff of the SEC’s Division of Investment Management issued a no-action letter to the BNY Mellon family of funds and BNY Mellon Investment Adviser, Inc. (the “BNYM No-Action Letter”) stating that the staff would not recommend enforcement action if a fund complex and adviser that previously obtained a “manager of managers” exemptive order extends that order to cover Affiliated Subadvisers without seeking an amended exemptive order from the SEC. The staff’s no-action position is conditioned on compliance with the conditions set forth in the Carillon Order. The BNYM No-Action Letter and the Carillon Order are referred to herein as the “Relief.”
Under the Relief, the Investment Manager and the Trust are subject to several conditions imposed by the SEC to ensure that the interests of the Fund’s shareholders are adequately protected. Among these conditions are that, within ninety (90) days of the hiring of a new subadviser, shareholders of the Fund will be furnished with an information statement that contains substantially the same information about the subadviser and the subadvisory agreement that the Fund would otherwise have been required to send to shareholders in a proxy statement. The prospectus for the Fund will disclose the existence, substance and effect of reliance on the Relief and that the Investment Manager has the ultimate responsibility, subject to oversight by the Board, to oversee the Fund’s subadvisers and recommend their hiring, termination, and replacement. Also, as noted above, shareholders must
14
approve the Investment Manager’s and the Fund’s authority to enter into and materially amend these investment subadvisory agreements. In addition, the Carillon Order permits funds to disclose fees paid to subadvisers on an aggregate, rather than individual, basis. Subject to shareholder approval of Proposal 2 and approval by the SEC of an amendment to the AMGF Order, the Fund would be permitted to disclose fees paid to subadvisers on an aggregate, rather than individual, basis.
Board of Trustees Recommendations
The Trustees believe that approval of the “manager-of-managers” structure is in the best interest of the Fund and its shareholders in order to afford the Investment Manager the flexibility to provide investment advisory services to the Fund through one or more subadvisers, including Affiliated Subadvisers, that have particular expertise in the type of investments in which the Fund invests.
As described above, without the ability to utilize the Relief, in order for the Investment Manager and the Board to appoint a new subadviser for the Fund or materially modify a subadvisory agreement with a subadviser, the Board must call and hold a shareholder meeting of the Fund, create and distribute proxy materials and solicit votes from the Fund’s shareholders. This process is time consuming and costly. Without the delay inherent in holding shareholder meetings, the Investment Manager would be able to act more quickly to appoint a new subadviser if and when the Board and the Investment Manager believe that the appointment would benefit the Fund. The Trustees also took into account that if the Investment Manager and the Board appoint a subadviser, the Fund’s shareholders would receive an information statement containing substantially the same information about the subadviser and the subadvisory agreement that the Fund would otherwise have been required to send shareholders in a proxy statement. The Investment Manager and the Board will continue to be subject to their fiduciary duty to act in the best interest of the Fund and it shareholders. The Trustees believe that granting the Investment Manager and the Board maximum flexibility to select subadvisers without incurring the delay or expense of obtaining further shareholder approval, is in the best interest of shareholders because it will allow the Fund to operate more efficiently and cost-effectively.
Finally, the Trustees believe that they will retain sufficient oversight of the Fund’s investment subadvisory arrangements to seek to ensure that shareholders’ interests are protected whenever the Investment Manager selects a subadviser or materially modifies an investment subadvisory agreement with a subadviser. The Board, including a majority of the Independent Trustees, will continue to evaluate and to approve all proposed investment subadvisory agreements, as well as any proposed modifications to existing subadvisory agreements. In doing so, the Trustees will analyze such factors as they consider to be relevant to the approval of or proposed modifications to an investment subadvisory agreement. As with the Fund’s investment advisory agreement, the terms of each investment subadvisory agreement will include those required by applicable provisions of the 1940 Act.
Subadviser Oversight
The Investment Manager serves as investment manager to the Fund under the Management Agreement. The Management Agreement provides that the Investment Manager is specifically responsible for the following services:
developing and furnishing continuously an investment program and strategy for the Fund in compliance with the Fund’s investment objective and policies as set forth in the Trust’s current Registration Statement;
providing research and analysis relative to the investment program and investments of the Fund;
determining (subject to the overall supervision and review of the Board) what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held in cash or cash equivalents; and
making changes on behalf of the Trust in the investments of the Fund.
15
In performing the functions set forth above and supervising the Fund’s subadviser, the Investment Manager:
performs periodic detailed analysis and reviews of the performance by the subadviser of its obligations to the Fund, including without limitation analysis and review of portfolio and other compliance matters and review of the subadviser’s investment performance in respect of the Fund;
prepares and presents periodic reports to the Board regarding the investment performance of the subadviser and other information regarding the subadviser, at such times and in such forms as the Board may reasonably request;
reviews and considers any changes in the personnel of the subadviser responsible for performing the subadviser’s obligations and makes appropriate reports to the Board;
reviews and considers any changes in the ownership or senior management of the subadviser and makes appropriate reports to the Board;
performs periodic in-person or telephonic diligence meetings, including with respect to compliance matters, with representatives of the subadviser;
assists the Board and management of the Trust in developing and reviewing information with respect to the initial approval of each subadvisory agreement with the subadviser and annual consideration of each subadvisory agreement thereafter;
prepares recommendations with respect to the continued retention of the subadviser or the replacement of the subadviser, including at the request of the Board;
identifies potential successors to or replacements of the subadviser or potential additional subadvisers, performs appropriate due diligence, and develops and presents to the Board a recommendation as to any such successor, replacement, or additional subadviser, including at the request of the Board;
designates and compensates from its own resources such personnel as the Investment Manager may consider necessary or appropriate to the performance of its services; and
performs such other review and reporting functions as the Board shall reasonably request consistent with the Management Agreement and applicable law.
The Investment Manager will retain these responsibilities if Proposal 2 is approved.
Required Vote
Proposal 2 must be approved by a “vote of a majority of the outstanding voting securities” of the Fund. The “vote of a majority of the outstanding voting securities” is defined in the 1940 Act as the lesser of the vote of (i) 67% or more of the voting securities of the Fund entitled to vote on Proposal 2 present at the Meeting or represented by proxy, if more than 50% of the Fund’s outstanding voting securities are present or represented by proxy; or (ii) more than 50% of the outstanding voting securities of the Fund entitled to vote on Proposal 2. If the vote required to approve Proposal 2 is not obtained from the Fund, the Fund will continue to be required to seek the approval of its shareholders to enter into or materially amend subadvisory agreements with unaffiliated and affiliated subadvisers.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE FUND VOTE “FOR” PROPOSAL 2.
1416
OTHER BUSINESSInformation Regarding Similar Funds
GW&K does not currently act as investment adviser or subadviser with respect to any other investment company registered under the 1940 Act with similar investment objectives and strategies to those of the Fund.
Board of Trustees Recommendation
At a telephonic meeting held on December 3, 2020,1 the Board, and separately a majority of the Independent Trustees, unanimously voted to approve the Interim Subadvisory Agreement between the Investment Manager and GW&K with respect to the Fund, the New Subadvisory Agreement between the Investment Manager and GW&K with respect to the Fund (together with the Interim Subadvisory Agreement, the “Agreements”), and the presentation of the New Subadvisory Agreement for shareholder approval at a special meeting to be held for such purpose. The Independent Trustees were separately represented by independent legal counsel in their consideration of the Agreements.
In considering the Agreements, the Trustees considered the information relating to the Fund and GW&K provided to them in connection with the meeting on December 3, 2020 and other meetings of the Board throughout the last twelve months, as well as in prior years. In considering the Agreements, the Trustees also considered information relating to the eleven other funds that GW&K sub-advises in the AMG Funds Family of Funds, which, as of December 3, 2020, consisted of 49 funds (the “AMG Funds Complex”). Prior to voting, the Independent
| 1 | The Trustees determined that the conditions surrounding the COVID-19 virus constituted unforeseen or emergency circumstances and that reliance on the SEC’s exemptive order, which provides relief from the in-person voting requirements of the 1940 Act in certain circumstances (the “In-Person Relief”), was necessary or appropriate due to the circumstances related to current or potential effects of COVID-19. The Trustees unanimously wished to rely on the In-Person Relief with respect to the approval of those matters on the agenda for the December 3, 2020 meeting that would otherwise require in-person votes under the 1940 Act. See Investment Company Release No. 33897 (June 19, 2020). This exemptive order supersedes, in part, a similar, earlier exemptive order issued by the SEC (Investment Company Release No. 33824 (March 25, 2020)). |
11
Trustees: (a) reviewed the foregoing information; (b) received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the Agreements; and (c) met with their independent legal counsel in a private session at which no representatives of management were present.
Nature, extent and quality of services. In considering the nature, extent and quality of the services to be provided by GW&K, the Trustees reviewed information relating to GW&K’s financial condition, operations and personnel and the investment philosophy, strategies and techniques (the “Investment Strategy”) that are intended to be used by GW&K in managing the Fund. Among other things, at this meeting and/or prior meetings, the Trustees reviewed information on portfolio management and other professional staff, information regarding GW&K’s organizational and management structure, GW&K’s compliance policies and procedures, and GW&K’s brokerage policies and practices. The Trustees do not knowconsidered specific information provided regarding the experience of any additional mattersthe individuals at GW&K that are expected to have portfolio management responsibility for the Fund. The Trustees noted that one proposed portfolio manager joined GW&K in 2005 and the other proposed portfolio manager joined GW&K in 2008. The Trustees further noted that one of the proposed portfolio managers serves as co-portfolio manager on other funds subadvised by GW&K in the AMG Funds Complex. In the course of their deliberations, the Trustees evaluated, among other things: (a) the expected services to be presented atrendered by GW&K to the Meeting other than those set forthFund; (b) the qualifications and experience of GW&K’s personnel; and (c) GW&K’s compliance program. The Trustees additionally considered GW&K’s risk management processes. The Trustees also took into account the financial condition of GW&K with respect to its ability to provide the services required under the Agreements and noted that, as of September 30, 2020, GW&K managed approximately $47 billion in this Proxy Statement. If other business should properly come beforeassets.
Performance. Because GW&K was proposing to manage the Meeting, proxies will be voted in accordanceFund with its small cap value investment strategy, the judgmentTrustees noted that they could not draw any conclusions regarding the performance of the persons namedFund. The Trustees, however, considered the performance of GW&K with respect to its Small Cap Value Composite. The Trustees further considered the performance of the other funds in the accompanying proxy or any adjournment(s) or postponement(s) thereof.AMG Funds Complex sub-advised by GW&K.
ADDITIONAL INFORMATION
Other Information
Subadvisory Fees, Profitability and Economies of Scale. The SEC maintainsTrustees noted that the Investment Manager, and not the Fund, is responsible for paying the fees charged by GW&K. In considering the anticipated profitability of GW&K with respect to the provision of subadvisory services to the Fund, the Trustees considered information regarding GW&K’s organization, management and financial stability. The Trustees noted that, because GW&K is an Internet web site (at http://www.sec.gov), which contains proxy materials, reports, and other information filed by the Funds.
Voting Information
Proxy Solicitation
Representativesaffiliate of the Investment Manager, a portion of GW&K’s revenues or anticipated profits might be shared directly or indirectly with the Investment Manager. The Trustees also noted that the subadvisory fee rate to be paid to GW&K under each Agreement was lower than the rate paid to Skyline under the Former Subadvisory Agreement.
The Board took into account management’s discussion of the proposed subadvisory fee structure, and the services GW&K is expected to provide in performing its functions under the Agreements. The Trustees also were provided, in advance of their June 25, 2020 meeting, with the profitability of GW&K with respect to the other funds it sub-advises in the AMG Funds Complex. Based on the foregoing, the Trustees concluded that the profitability to GW&K is expected to be reasonable and that GW&K is not expected to realize material benefits from economies of scale that would warrant adjustments to the subadvisory fees at this time. Also with respect to economies of scale, the Trustees noted that as the Fund’s assets increase over time, the Fund may solicit proxiesrealize other economies of scale to the extent the increase in assets is proportionally greater than the increase in certain other expenses.
In addition, the Trustees considered other potential benefits of the subadvisory relationship to GW&K, including, among others, the potential broadening of GW&K’s small cap value investment capabilities, as well as the indirect benefits that GW&K may receive from GW&K’s relationship with the Fund, including any so-called “fallout benefits” to GW&K, such as reputational value derived from GW&K serving as subadviser to the Fund, which bears GW&K’s name. Taking into account all of the foregoing, the Trustees concluded that, in light of the nature, extent and quality of the services to be provided by telephone, letterGW&K, and the other considerations noted above with respect to GW&K, the Fund’s subadvisory fees are reasonable.
12
* * * *
After consideration of the foregoing, the Trustees reached the following conclusions (in addition to the conclusions discussed above) regarding each Agreement: (a) GW&K has demonstrated that it possesses the capability and resources to perform the duties required of it under each Agreement; (b) GW&K’s Investment Strategy is appropriate for pursuing the Fund’s investment objectives; (c) GW&K is reasonably likely to execute its investment strategy consistently over time; and (d) GW&K maintains appropriate compliance programs.
Based on all of the above-mentioned factors and their related conclusions, with no single factor or personallyconclusion being determinative and will receive no additional compensation for these services.with each Trustee not necessarily attributing the same weight to each factor, the Trustees concluded that approval of each Agreement would be in the best interests of the Fund and its shareholders. Accordingly, on December 3, 2020, the Trustees, and separately a majority of the Independent Trustees, unanimously voted to approve each Agreement.
Required Vote
Proposal 1 must be approved by a “vote of a majority of the outstanding voting securities” of the Fund. The Trust may also use one“vote of a majority of the outstanding voting securities” is defined in the 1940 Act as the lesser of the vote of (i) 67% or more of the voting securities of the Fund entitled to vote on Proposal 1 present at the Meeting or represented by proxy, solicitation firmsif more than 50% of the Fund’s outstanding voting securities are present or represented by proxy; or (ii) more than 50% of the outstanding voting securities of the Fund entitled to assistvote on Proposal 1. If the vote required to approve Proposal 1 is not obtained from the Fund, the New Subadvisory Agreement between the Investment Manager and GW&K will not be approved, and the Trustees will consider what other actions to take in the best interests of the Fund.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE FUND VOTE “FOR” PROPOSAL 1.
13
PROPOSAL 2: APPROVAL OF A MANAGER-OF-MANAGERS STRUCTURE FOR THE FUND THAT WOULD PERMIT THE INVESTMENT MANAGER TO ENTER INTO AND MATERIALLY AMEND SUBADVISORY AGREEMENTS WITH UNAFFILIATED AND AFFILIATED SUBADVISERS WITHOUT OBTAINING SHAREHOLDER APPROVAL AND WOULD ALSO PERMIT THE FUND TO DISCLOSE FEES PAID TO SUBADVISERS ON AN AGGREGATE, RATHER THAN INDIVIDUAL, BASIS.
Under Section 15(a) of the 1940 Act, an investment adviser to a mutual fund generally cannot enter into or materially amend a subadvisory agreement without obtaining shareholder approval. For funds in the AMG Funds complex whose shareholders have approved the operation of their fund in a “manager-of-managers” structure, the AMGF Order allows the Board to enter into or materially amend subadvisory agreements without a shareholder vote if the subadviser is not affiliated with the mailing and tabulation effort and any special personal solicitation of proxies. Banks, brokers, fiduciaries and nominees will, upon request, be reimbursed for their reasonable expenses in sending proxy material to beneficial owners of shares ofInvestment Manager; if the Funds.
AST Fund Solutions (the “Solicitor”) has been engaged to assist in the solicitation of proxies, atsubadviser is an estimated cost of approximately $8,300, plus expenses. As the Meetingaffiliate, a shareholder vote is required. To date, approaches, certain shareholders of the Funds may receiveFund have not voted on the adoption of a telephone call from“manager-of-managers” structure. The Fund and the Investment Manager would like to rely on the AMGF Order and recent SEC relief that would modify the Investment Manager’s existing manager-of-managers relief and, together, would permit the Investment Manager to enter into or materially amend a representativesubadvisory agreement with an “affiliated person” (as such term is defined in Section 2(a)(3) of the Solicitor1940 Act) of the Investment Manager or the Fund or an unaffiliated person without first obtaining shareholder approval, provided that the shareholders of the Fund had previously authorized the Investment Manager to do so and the Investment Manager complies with certain conditions. In the absence of reliance on the AMGF Order and recent SEC relief, in order to enter into or materially amend a subadvisory agreement, the Fund must obtain shareholder approval by undertaking the costly and time-consuming effort to conduct a shareholder meeting, including preparing and distributing proxy materials and soliciting votes from shareholders. The Board believes that it is in the best interests of shareholders if the Board represents their votes haveinterests in approving or rejecting recommendations made by the Investment Manager regarding subadvisers. This approach will avoid the costs and delays associated with holding shareholder meetings to obtain approval for future changes. Accordingly, the Board and the Investment Manager are asking shareholders to grant authority to the Investment Manager and the Trust to enter into and materially amend investment subadvisory agreements with subadvisers regardless of whether they are affiliated persons or unaffiliated persons of AMGF or the Fund, with the approval of the Board, but without obtaining additional shareholder approval.
Exemptive Relief
On May 29, 2019, the SEC issued the Carillon Order to Carillon Tower Advisers, Inc., et al. that allows (i) the Carillon Series Trust and its investment adviser, without the approval of fund shareholders, to enter into or amend a subadvisory agreement with a subadviser (“Subadviser Voting Relief”), including any subadviser that is an affiliated person of the investment adviser or a fund (an “Affiliated Subadviser”), and (ii) the series of Carillon Series Trust to disclose the advisory fees paid to subadvisers on an aggregate, rather than individual, basis. The Carillon Order is the first exemptive order issued by the SEC extending multi-manager exemptive relief to Affiliated Subadvisers and contains several conditions, some of which are already included in the AMGF Order.
On July 9, 2019, the staff of the SEC’s Division of Investment Management issued a no-action letter to the BNY Mellon family of funds and BNY Mellon Investment Adviser, Inc. (the “BNYM No-Action Letter”) stating that the staff would not yet been received. Proxiesrecommend enforcement action if a fund complex and adviser that previously obtained a “manager of managers” exemptive order extends that order to cover Affiliated Subadvisers without seeking an amended exemptive order from the SEC. The staff’s no-action position is conditioned on compliance with the conditions set forth in the Carillon Order. The BNYM No-Action Letter and the Carillon Order are obtained telephonicallyreferred to herein as the “Relief.”
Under the Relief, the Investment Manager and the Trust are subject to several conditions imposed by the SEC to ensure that the interests of the Fund’s shareholders are adequately protected. Among these conditions are that, within ninety (90) days of the hiring of a new subadviser, shareholders of the Fund will be recordedfurnished with an information statement that contains substantially the same information about the subadviser and the subadvisory agreement that the Fund would otherwise have been required to send to shareholders in accordance witha proxy statement. The prospectus for the procedures described below. Fund will disclose the existence, substance and effect of reliance on the Relief and that the Investment Manager has the ultimate responsibility, subject to oversight by the Board, to oversee the Fund’s subadvisers and recommend their hiring, termination, and replacement. Also, as noted above, shareholders must
14
approve the Investment Manager’s and the Fund’s authority to enter into and materially amend these investment subadvisory agreements. In addition, the Carillon Order permits funds to disclose fees paid to subadvisers on an aggregate, rather than individual, basis. Subject to shareholder approval of Proposal 2 and approval by the SEC of an amendment to the AMGF Order, the Fund would be permitted to disclose fees paid to subadvisers on an aggregate, rather than individual, basis.
Board of Trustees Recommendations
The Trustees believe that these procedures are reasonably designedapproval of the “manager-of-managers” structure is in the best interest of the Fund and its shareholders in order to afford the Investment Manager the flexibility to provide investment advisory services to the Fund through one or more subadvisers, including Affiliated Subadvisers, that have particular expertise in the type of investments in which the Fund invests.
As described above, without the ability to utilize the Relief, in order for the Investment Manager and the Board to appoint a new subadviser for the Fund or materially modify a subadvisory agreement with a subadviser, the Board must call and hold a shareholder meeting of the Fund, create and distribute proxy materials and solicit votes from the Fund’s shareholders. This process is time consuming and costly. Without the delay inherent in holding shareholder meetings, the Investment Manager would be able to act more quickly to appoint a new subadviser if and when the Board and the Investment Manager believe that the appointment would benefit the Fund. The Trustees also took into account that if the Investment Manager and the Board appoint a subadviser, the Fund’s shareholders would receive an information statement containing substantially the same information about the subadviser and the subadvisory agreement that the Fund would otherwise have been required to send shareholders in a proxy statement. The Investment Manager and the Board will continue to be subject to their fiduciary duty to act in the best interest of the Fund and it shareholders. The Trustees believe that granting the Investment Manager and the Board maximum flexibility to select subadvisers without incurring the delay or expense of obtaining further shareholder approval, is in the best interest of shareholders because it will allow the Fund to operate more efficiently and cost-effectively.
Finally, the Trustees believe that they will retain sufficient oversight of the Fund’s investment subadvisory arrangements to seek to ensure that bothshareholders’ interests are protected whenever the identityInvestment Manager selects a subadviser or materially modifies an investment subadvisory agreement with a subadviser. The Board, including a majority of the shareholder castingIndependent Trustees, will continue to evaluate and to approve all proposed investment subadvisory agreements, as well as any proposed modifications to existing subadvisory agreements. In doing so, the vote andTrustees will analyze such factors as they consider to be relevant to the voting instructionsapproval of or proposed modifications to an investment subadvisory agreement. As with the Fund’s investment advisory agreement, the terms of each investment subadvisory agreement will include those required by applicable provisions of the shareholder are accurately determined.1940 Act.
In all cases where a telephonic proxy is solicited,Subadviser Oversight
The Investment Manager serves as investment manager to the Solicitor’s representative is required to ask for each shareholder’s full name and address, orFund under the zip code or employer identification number, and to confirmManagement Agreement. The Management Agreement provides that the shareholder has received the proxy materials in the mail. If the shareholderInvestment Manager is a corporation or other entity, the Solicitor’s representative is required to askspecifically responsible for the person’s titlefollowing services:
developing and confirmation thatfurnishing continuously an investment program and strategy for the person is authorized to direct the voting of the shares. If the information solicited agreesFund in compliance with the information provided to the Solicitor, then the Solicitor’s representative has the responsibility to explain the process, read the applicable Proposal(s) listed on the proxy cardFund’s investment objective and ask for the shareholder’s instructions on the Proposal(s). Although the Solicitor’s representative is permitted to answer questions about the process, he or she is not permitted to recommend to the shareholder how to vote, other than to read any recommendationpolicies as set forth in this Proxy Statement. The Solicitor will record the shareholder’s instructions,Trust’s current Registration Statement;
providing research and within 72 hours,analysis relative to the shareholder willinvestment program and investments of the Fund;
determining (subject to the overall supervision and review of the Board) what investments shall be sent a letterpurchased, held, sold ore-mail to confirm his exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held in cash or her votecash equivalents; and asking
making changes on behalf of the shareholder to call the Solicitor immediately if his or her instructions are not correctly reflectedTrust in the confirmation.
If a shareholder wishes to participate ininvestments of the Meeting and does not wish to authorize the execution of a proxy by telephone, mail, facsimile or Internet, the shareholder may vote at the Meeting in person.Fund.
If you require additional information regarding the proxy or replacement proxy cards, please call the Solicitor toll free at800-848-3374. Any proxy given by a shareholder, whether in writing, by telephone, by facsimile or the Internet, is revocable until voted at the Meeting.
Shareholders Sharing the Same Address
15
In performing the functions set forth above and supervising the Fund’s subadviser, the Investment Manager:
performs periodic detailed analysis and reviews of the performance by the subadviser of its obligations to the Fund, including without limitation analysis and review of portfolio and other compliance matters and review of the subadviser’s investment performance in respect of the Fund;
prepares and presents periodic reports to the Board regarding the investment performance of the subadviser and other information regarding the subadviser, at such times and in such forms as the Board may reasonably request;
reviews and considers any changes in the personnel of the subadviser responsible for performing the subadviser’s obligations and makes appropriate reports to the Board;
reviews and considers any changes in the ownership or senior management of the subadviser and makes appropriate reports to the Board;
performs periodic in-person or telephonic diligence meetings, including with respect to compliance matters, with representatives of the subadviser;
assists the Board and management of the Trust in developing and reviewing information with respect to the initial approval of each subadvisory agreement with the subadviser and annual consideration of each subadvisory agreement thereafter;
prepares recommendations with respect to the continued retention of the subadviser or the replacement of the subadviser, including at the request of the Board;
identifies potential successors to or replacements of the subadviser or potential additional subadvisers, performs appropriate due diligence, and develops and presents to the Board a recommendation as to any such successor, replacement, or additional subadviser, including at the request of the Board;
designates and compensates from its own resources such personnel as the Investment Manager may consider necessary or appropriate to the performance of its services; and
performs such other review and reporting functions as the Board shall reasonably request consistent with the Management Agreement and applicable law.
The FundsInvestment Manager will mail only one copyretain these responsibilities if Proposal 2 is approved.
Required Vote
Proposal 2 must be approved by a “vote of this proxy statement to a household, even if more than one personmajority of the outstanding voting securities” of the Fund. The “vote of a majority of the outstanding voting securities” is defined in a household is a Fund shareholderthe 1940 Act as the lesser of record, unless the Funds have received contrary instructions from onevote of (i) 67% or more of the shareholders.voting securities of the Fund entitled to vote on Proposal 2 present at the Meeting or represented by proxy, if more than 50% of the Fund’s outstanding voting securities are present or represented by proxy; or (ii) more than 50% of the outstanding voting securities of the Fund entitled to vote on Proposal 2. If you need additional copies of this proxy statement and you are a holder of record of your shares, please call the Funds at1-800-548-4539. If your shares are held in broker street name, please contact your financial service firmvote required to obtain additional copies of this proxy statement. If inapprove Proposal 2 is not obtained from the future you do not wantFund, the mailing of proxy statementsFund will continue to be combinedrequired to seek the approval of its shareholders to enter into or materially amend subadvisory agreements with those of other members of your household, or if you have received multiple copies of this proxy statementunaffiliated and want future mailings to be combined with those of other members of your household, please contact the Funds in writing at AMG Funds, 600 Steamboat Road, Greenwich, Connecticut 06830, or by telephone at1-800-548-4539, or contact your financial service firm. The Funds undertake to deliver promptly upon written or oral request a separate copy of the proxy statement to a security holder at a shared address to which a single copy of the document was delivered.affiliated subadvisers.
Principal Holders and Management Ownership
The total number of shares of each Fund outstanding, as of the Record Date, and information concerning the shareholders who owned beneficially or of record 5% or more of each class of each Fund’s outstanding securities, as of January 31, 2019, is set forth below.
AMG GW&K Trilogy Emerging Markets Equity Fund
As of the Record Date, the total number of the Markets Fund’s outstanding shares was 17,957,540.
As of January 31, 2019, the following persons or entities owned of record 5% or more of each class of the Markets Fund’s outstanding securities:THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE FUND VOTE “FOR” PROPOSAL 2.
Name and Address | Number of Shares | Percentage | ||||||
AMG GW&K Trilogy Emerging Markets Equity Fund | ||||||||
Class N | ||||||||
Charles Schwab & Co. Inc. Special Custody Account FBO Customers Attn: Mutual Funds 211 Main Street San Francisco, California 94105 | 9,262.409 | 25.28 | % | |||||
National Financial Services LLC For the Exclusive Benefit of Our Customers Attn: Mutual Funds Department 4th Floor 499 Washington Boulevard Jersey City, New Jersey 07310-2010 | 8,906.663 | 24.31 | % | |||||
TD Ameritrade Inc. For the Exclusive Benefit of Our Clients P.O. Box 2226 Omaha, Nebraska 68103-2226 | 5,524.775 | 15.08 | % | |||||
Charles Schwab & Co. Inc. Special Custody Account for the Exclusive Benefit of Customers Attn: Mutual Funds 101 Montgomery Street San Francisco, California 94104-4122 | 5,341.304 | 14.58 | % | |||||
16
Name and Address | Number of Shares | Percentage | ||||||
Vanguard Brokerage Services P.O. Box 1170 Valley Forge, Pennsylvania 19482-1170 | 3,270.715 | 8.93 | % | |||||
Ranjita C. Morton & David J. Morton JTWROS 1920 Conte Way Morgan Hill, California 95037 | 2,272.338 | 6.20 | % | |||||
Class I | ||||||||
SEI Private Trust Company Attn: Mutual Funds One Freedom Valley Drive Oaks, Pennsylvania 19456 | 1,258,616.579 | 61.18 | % | |||||
National Financial Services LLC For the Exclusive Benefit of Our Customers Attn: Mutual Funds Department 4th Floor 499 Washington Boulevard Jersey City, New Jersey 07310-2010 | 459,579.468 | 22.34 | % | |||||
Wells Fargo Clearing Services LLC 2801 Market Street Saint Louis, Missouri 63103 | 117,262.438 | 5.70 | % | |||||
Class Z | ||||||||
U.S. Bank N.A.* FBO U.S. Bank Pension Plan P.O. Box 1787 Milwaukee, Wisconsin 53201-1787 | 13,693,526.713 | 86.49 | % | |||||
Sentinel Trust Company, L.B.A. 2001 Kirby Drive, Suite 1200 Houston, Texas 77019-6095 | 1,407,211.601 | 8.89 | % | |||||
|
As of February 8, 2019, all management personnel (i.e., Trustees and Officers of the Trust) as a group owned beneficially less than 1% of the outstanding shares of each class of the Markets Fund.
Since the beginning of the most recently completed fiscal year, no Trustee has purchased or sold securities of the Investment Manager, GW&K or any of their respective parents and subsidiaries exceeding 1% of the outstanding securities of any class of securities issued by the Investment Manager, GW&K or any of their respective parents or subsidiaries.
17
Certain Trustees and Officers may from time to time own securities of AMG, including securities received as compensation for services to AMG or its affiliates.
AMG GW&K Trilogy Emerging Wealth Equity Fund
As of the Record Date, the total number of the Wealth Fund’s outstanding shares was 6,972,099.
As of January 31, 2019, the following persons or entities owned of record 5% or more of each class of the Wealth Fund’s outstanding securities:
Name and Address | Number of Shares | Percentage | ||||||
AMG GW&K Trilogy Emerging Wealth Equity Fund | ||||||||
Class N | ||||||||
UBS WM USA Special Custody Account for the Exclusive Benefit of Customers of UBSFSI 1000 Harbor Boulevard Weehawken, New Jersey 07086 | 67,308.069 | 36.61 | % | |||||
Charles Schwab & Co. Inc. Special Custody Account for the Exclusive Benefit of Customers Attn: Mutual Funds 101 Montgomery Street San Francisco, California 94104-4122 | 28,931.210 | 15.73 | % | |||||
TD Ameritrade FBO Customer Rollover IRA TD Ameritrade Clearing, Custodian 1205 Boll Weevil Circle Enterprise, Alabama 36330-1377 | 13,222.347 | 7.19 | % | |||||
Charles Schwab & Co. Inc. Special Custody Account FBO Customers Attn: Mutual Funds 211 Main Street San Francisco, California 94105 | 11,435.951 | 6.22 | % | |||||
Class I | ||||||||
UBS WM USA Special Custody Account for the Exclusive Benefit of Customers of UBSFSI 1000 Harbor Boulevard Weehawken, New Jersey 07086 | 75,760.474 | 41.93 | % | |||||
18
Name and Address | Number of Shares | Percentage | ||||||
National Financial Services LLC For the Exclusive Benefit of Our Customers Attn: Mutual Funds Department 4thFloor 499 Washington Boulevard Jersey City, New Jersey 07310-2010 | 54,765.045 | 30.31 | % | |||||
LPL Financial Omnibus Customer Account Attn: Lindsay O’Toole 4707 Executive Drive San Diego, California 92121 | 18,367.092 | 10.16 | % | |||||
Pershing LLC 1 Pershing Plaza Jersey City, New Jersey 07399-0002 | 10,382.227 | 5.75 | % | |||||
Class Z | ||||||||
Band & Co. C/O U.S. Bank N.A.* 1555 N. Rivercenter Drive Suite 302 Milwaukee, Wisconsin 53212 | 5,773,200.404 | 86.84 | % | |||||
Capinco C/O U.S. Bank N.A. 1555 N. Rivercenter Drive Suite 302 Milwaukee, Wisconsin 53212 | 461,997.111 | 6.95 | % | |||||
|
As of February 8, 2019, all management personnel (i.e., Trustees and Officers of the Trust) as a group owned beneficially less than 1% of the outstanding shares of each class of the Wealth Fund.
Since the beginning of the most recently completed fiscal year, no Trustee has purchased or sold securities of the Investment Manager, GW&K or any of their respective parents and subsidiaries exceeding 1% of the outstanding securities of any class of securities issued by the Investment Manager, GW&K or any of their respective parents or subsidiaries.
Certain Trustees and Officers may from time to time own securities of AMG, including securities received as compensation for services to AMG or its affiliates.
Information Regarding Similar Funds
GW&K does not currently act as an investment adviser or subadviser with respect to any other investment company registered under the 1940 Act with similar investment objectives and strategies to those of eitherthe Fund.
Board of Trustees Recommendation
At a telephonic meeting held on December 3, 2020,1 the Board, and separately a majority of the Independent Trustees, unanimously voted to approve the Interim Subadvisory Agreement between the Investment Manager and GW&K with respect to the Fund, the New Subadvisory Agreement between the Investment Manager and GW&K with respect to the Fund (together with the Interim Subadvisory Agreement, the “Agreements”), and the presentation of the New Subadvisory Agreement for shareholder approval at a special meeting to be held for such purpose. The Independent Trustees were separately represented by independent legal counsel in their consideration of the Agreements.
In considering the Agreements, the Trustees considered the information relating to the Fund and GW&K provided to them in connection with the meeting on December 3, 2020 and other meetings of the Board throughout the last twelve months, as well as in prior years. In considering the Agreements, the Trustees also considered information relating to the eleven other funds that GW&K sub-advises in the AMG Funds Family of Funds, which, as of December 3, 2020, consisted of 49 funds (the “AMG Funds Complex”). Prior to voting, the Independent
| 1 | The Trustees determined that the conditions surrounding the COVID-19 virus constituted unforeseen or emergency circumstances and that reliance on the SEC’s exemptive order, which provides relief from the in-person voting requirements of the 1940 Act in certain circumstances (the “In-Person Relief”), was necessary or appropriate due to the circumstances related to current or potential effects of COVID-19. The Trustees unanimously wished to rely on the In-Person Relief with respect to the approval of those matters on the agenda for the December 3, 2020 meeting that would otherwise require in-person votes under the 1940 Act. See Investment Company Release No. 33897 (June 19, 2020). This exemptive order supersedes, in part, a similar, earlier exemptive order issued by the SEC (Investment Company Release No. 33824 (March 25, 2020)). |
11
Trustees: (a) reviewed the foregoing information; (b) received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the Agreements; and (c) met with their independent legal counsel in a private session at which no representatives of management were present.
Nature, extent and quality of services. In considering the nature, extent and quality of the services to be provided by GW&K, the Trustees reviewed information relating to GW&K’s financial condition, operations and personnel and the investment philosophy, strategies and techniques (the “Investment Strategy”) that are intended to be used by GW&K in managing the Fund. Among other things, at this meeting and/or prior meetings, the Trustees reviewed information on portfolio management and other professional staff, information regarding GW&K’s organizational and management structure, GW&K’s compliance policies and procedures, and GW&K’s brokerage policies and practices. The Trustees considered specific information provided regarding the experience of the individuals at GW&K that are expected to have portfolio management responsibility for the Fund. The Trustees noted that one proposed portfolio manager joined GW&K in 2005 and the other proposed portfolio manager joined GW&K in 2008. The Trustees further noted that one of the proposed portfolio managers serves as co-portfolio manager on other funds subadvised by GW&K in the AMG Funds Complex. In the course of their deliberations, the Trustees evaluated, among other things: (a) the expected services to be rendered by GW&K to the Fund; (b) the qualifications and experience of GW&K’s personnel; and (c) GW&K’s compliance program. The Trustees additionally considered GW&K’s risk management processes. The Trustees also took into account the financial condition of GW&K with respect to its ability to provide the services required under the Agreements and noted that, as of September 30, 2020, GW&K managed approximately $47 billion in assets.
Performance. Because GW&K was proposing to manage the Fund with its small cap value investment strategy, the Trustees noted that they could not draw any conclusions regarding the performance of the Fund. The Trustees, however, considered the performance of GW&K with respect to its Small Cap Value Composite. The Trustees further considered the performance of the other funds in the AMG Funds Complex sub-advised by GW&K.
Subadvisory Fees, Profitability and Economies of Scale. The Trustees noted that the Investment Manager, and not the Fund, is responsible for paying the fees charged by GW&K. In considering the anticipated profitability of GW&K with respect to the provision of subadvisory services to the Fund, the Trustees considered information regarding GW&K’s organization, management and financial stability. The Trustees noted that, because GW&K is an affiliate of the Investment Manager, a portion of GW&K’s revenues or anticipated profits might be shared directly or indirectly with the Investment Manager. The Trustees also noted that the subadvisory fee rate to be paid to GW&K under each Agreement was lower than the rate paid to Skyline under the Former Subadvisory Agreement.
The Board took into account management’s discussion of the proposed subadvisory fee structure, and the services GW&K is expected to provide in performing its functions under the Agreements. The Trustees also were provided, in advance of their June 25, 2020 meeting, with the profitability of GW&K with respect to the other funds it sub-advises in the AMG Funds Complex. Based on the foregoing, the Trustees concluded that the profitability to GW&K is expected to be reasonable and that GW&K is not expected to realize material benefits from economies of scale that would warrant adjustments to the subadvisory fees at this time. Also with respect to economies of scale, the Trustees noted that as the Fund’s assets increase over time, the Fund may realize other economies of scale to the extent the increase in assets is proportionally greater than the increase in certain other expenses.
In addition, the Trustees considered other potential benefits of the subadvisory relationship to GW&K, including, among others, the potential broadening of GW&K’s small cap value investment capabilities, as well as the indirect benefits that GW&K may receive from GW&K’s relationship with the Fund, including any so-called “fallout benefits” to GW&K, such as reputational value derived from GW&K serving as subadviser to the Fund, which bears GW&K’s name. Taking into account all of the foregoing, the Trustees concluded that, in light of the nature, extent and quality of the services to be provided by GW&K, and the other considerations noted above with respect to GW&K, the Fund’s subadvisory fees are reasonable.
12
* * * *
After consideration of the foregoing, the Trustees reached the following conclusions (in addition to the conclusions discussed above) regarding each Agreement: (a) GW&K has demonstrated that it possesses the capability and resources to perform the duties required of it under each Agreement; (b) GW&K’s Investment Strategy is appropriate for pursuing the Fund’s investment objectives; (c) GW&K is reasonably likely to execute its investment strategy consistently over time; and (d) GW&K maintains 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 each Agreement would be in the best interests of the Fund and its shareholders. Accordingly, on December 3, 2020, the Trustees, and separately a majority of the Independent Trustees, unanimously voted to approve each Agreement.
Required Vote
Proposal 1 must be approved by a “vote of a majority of the outstanding voting securities” of the Fund. The “vote of a majority of the outstanding voting securities” is defined in the 1940 Act as the lesser of the vote of (i) 67% or more of the voting securities of the Fund entitled to vote on Proposal 1 present at the Meeting or represented by proxy, if more than 50% of the Fund’s outstanding voting securities are present or represented by proxy; or (ii) more than 50% of the outstanding voting securities of the Fund entitled to vote on Proposal 1. If the vote required to approve Proposal 1 is not obtained from the Fund, the New Subadvisory Agreement between the Investment Manager and GW&K will not be approved, and the Trustees will consider what other actions to take in the best interests of the Fund.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE FUND VOTE “FOR” PROPOSAL 1.
13
PROPOSAL 2: APPROVAL OF A MANAGER-OF-MANAGERS STRUCTURE FOR THE FUND THAT WOULD PERMIT THE INVESTMENT MANAGER TO ENTER INTO AND MATERIALLY AMEND SUBADVISORY AGREEMENTS WITH UNAFFILIATED AND AFFILIATED SUBADVISERS WITHOUT OBTAINING SHAREHOLDER APPROVAL AND WOULD ALSO PERMIT THE FUND TO DISCLOSE FEES PAID TO SUBADVISERS ON AN AGGREGATE, RATHER THAN INDIVIDUAL, BASIS.
Under Section 15(a) of the 1940 Act, an investment adviser to a mutual fund generally cannot enter into or materially amend a subadvisory agreement without obtaining shareholder approval. For funds in the AMG Funds complex whose shareholders have approved the operation of their fund in a “manager-of-managers” structure, the AMGF Order allows the Board to enter into or materially amend subadvisory agreements without a shareholder vote if the subadviser is not affiliated with the Investment Manager; if the subadviser is an affiliate, a shareholder vote is required. To date, shareholders of the Fund have not voted on the adoption of a “manager-of-managers” structure. The Fund and the Investment Manager would like to rely on the AMGF Order and recent SEC relief that would modify the Investment Manager’s existing manager-of-managers relief and, together, would permit the Investment Manager to enter into or materially amend a subadvisory agreement with an “affiliated person” (as such term is defined in Section 2(a)(3) of the 1940 Act) of the Investment Manager or the Fund or an unaffiliated person without first obtaining shareholder approval, provided that the shareholders of the Fund had previously authorized the Investment Manager to do so and the Investment Manager complies with certain conditions. In the absence of reliance on the AMGF Order and recent SEC relief, in order to enter into or materially amend a subadvisory agreement, the Fund must obtain shareholder approval by undertaking the costly and time-consuming effort to conduct a shareholder meeting, including preparing and distributing proxy materials and soliciting votes from shareholders. The Board believes that it is in the best interests of shareholders if the Board represents their interests in approving or rejecting recommendations made by the Investment Manager regarding subadvisers. This approach will avoid the costs and delays associated with holding shareholder meetings to obtain approval for future changes. Accordingly, the Board and the Investment Manager are asking shareholders to grant authority to the Investment Manager and the Trust to enter into and materially amend investment subadvisory agreements with subadvisers regardless of whether they are affiliated persons or unaffiliated persons of AMGF or the Fund, with the approval of the Board, but without obtaining additional shareholder approval.
Exemptive Relief
On May 29, 2019, the SEC issued the Carillon Order to Carillon Tower Advisers, Inc., et al. that allows (i) the Carillon Series Trust and its investment adviser, without the approval of fund shareholders, to enter into or amend a subadvisory agreement with a subadviser (“Subadviser Voting Relief”), including any subadviser that is an affiliated person of the investment adviser or a fund (an “Affiliated Subadviser”), and (ii) the series of Carillon Series Trust to disclose the advisory fees paid to subadvisers on an aggregate, rather than individual, basis. The Carillon Order is the first exemptive order issued by the SEC extending multi-manager exemptive relief to Affiliated Subadvisers and contains several conditions, some of which are already included in the AMGF Order.
On July 9, 2019, the staff of the SEC’s Division of Investment Management issued a no-action letter to the BNY Mellon family of funds and BNY Mellon Investment Adviser, Inc. (the “BNYM No-Action Letter”) stating that the staff would not recommend enforcement action if a fund complex and adviser that previously obtained a “manager of managers” exemptive order extends that order to cover Affiliated Subadvisers without seeking an amended exemptive order from the SEC. The staff’s no-action position is conditioned on compliance with the conditions set forth in the Carillon Order. The BNYM No-Action Letter and the Carillon Order are referred to herein as the “Relief.”
Under the Relief, the Investment Manager and the Trust are subject to several conditions imposed by the SEC to ensure that the interests of the Fund’s shareholders are adequately protected. Among these conditions are that, within ninety (90) days of the hiring of a new subadviser, shareholders of the Fund will be furnished with an information statement that contains substantially the same information about the subadviser and the subadvisory agreement that the Fund would otherwise have been required to send to shareholders in a proxy statement. The prospectus for the Fund will disclose the existence, substance and effect of reliance on the Relief and that the Investment Manager has the ultimate responsibility, subject to oversight by the Board, to oversee the Fund’s subadvisers and recommend their hiring, termination, and replacement. Also, as noted above, shareholders must
14
approve the Investment Manager’s and the Fund’s authority to enter into and materially amend these investment subadvisory agreements. In addition, the Carillon Order permits funds to disclose fees paid to subadvisers on an aggregate, rather than individual, basis. Subject to shareholder approval of Proposal 2 and approval by the SEC of an amendment to the AMGF Order, the Fund would be permitted to disclose fees paid to subadvisers on an aggregate, rather than individual, basis.
Board of Trustees Recommendations
The Trustees believe that approval of the “manager-of-managers” structure is in the best interest of the Fund and its shareholders in order to afford the Investment Manager the flexibility to provide investment advisory services to the Fund through one or more subadvisers, including Affiliated Subadvisers, that have particular expertise in the type of investments in which the Fund invests.
As described above, without the ability to utilize the Relief, in order for the Investment Manager and the Board to appoint a new subadviser for the Fund or materially modify a subadvisory agreement with a subadviser, the Board must call and hold a shareholder meeting of the Fund, create and distribute proxy materials and solicit votes from the Fund’s shareholders. This process is time consuming and costly. Without the delay inherent in holding shareholder meetings, the Investment Manager would be able to act more quickly to appoint a new subadviser if and when the Board and the Investment Manager believe that the appointment would benefit the Fund. The Trustees also took into account that if the Investment Manager and the Board appoint a subadviser, the Fund’s shareholders would receive an information statement containing substantially the same information about the subadviser and the subadvisory agreement that the Fund would otherwise have been required to send shareholders in a proxy statement. The Investment Manager and the Board will continue to be subject to their fiduciary duty to act in the best interest of the Fund and it shareholders. The Trustees believe that granting the Investment Manager and the Board maximum flexibility to select subadvisers without incurring the delay or expense of obtaining further shareholder approval, is in the best interest of shareholders because it will allow the Fund to operate more efficiently and cost-effectively.
Finally, the Trustees believe that they will retain sufficient oversight of the Fund’s investment subadvisory arrangements to seek to ensure that shareholders’ interests are protected whenever the Investment Manager selects a subadviser or materially modifies an investment subadvisory agreement with a subadviser. The Board, including a majority of the Independent Trustees, will continue to evaluate and to approve all proposed investment subadvisory agreements, as well as any proposed modifications to existing subadvisory agreements. In doing so, the Trustees will analyze such factors as they consider to be relevant to the approval of or proposed modifications to an investment subadvisory agreement. As with the Fund’s investment advisory agreement, the terms of each investment subadvisory agreement will include those required by applicable provisions of the 1940 Act.
Subadviser Oversight
The Investment Manager serves as investment manager to the Fund under the Management Agreement. The Management Agreement provides that the Investment Manager is specifically responsible for the following services:
developing and furnishing continuously an investment program and strategy for the Fund in compliance with the Fund’s investment objective and policies as set forth in the Trust’s current Registration Statement;
providing research and analysis relative to the investment program and investments of the Fund;
determining (subject to the overall supervision and review of the Board) what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held in cash or cash equivalents; and
making changes on behalf of the Trust in the investments of the Fund.
15
In performing the functions set forth above and supervising the Fund’s subadviser, the Investment Manager:
performs periodic detailed analysis and reviews of the performance by the subadviser of its obligations to the Fund, including without limitation analysis and review of portfolio and other compliance matters and review of the subadviser’s investment performance in respect of the Fund;
prepares and presents periodic reports to the Board regarding the investment performance of the subadviser and other information regarding the subadviser, at such times and in such forms as the Board may reasonably request;
reviews and considers any changes in the personnel of the subadviser responsible for performing the subadviser’s obligations and makes appropriate reports to the Board;
reviews and considers any changes in the ownership or senior management of the subadviser and makes appropriate reports to the Board;
performs periodic in-person or telephonic diligence meetings, including with respect to compliance matters, with representatives of the subadviser;
assists the Board and management of the Trust in developing and reviewing information with respect to the initial approval of each subadvisory agreement with the subadviser and annual consideration of each subadvisory agreement thereafter;
prepares recommendations with respect to the continued retention of the subadviser or the replacement of the subadviser, including at the request of the Board;
identifies potential successors to or replacements of the subadviser or potential additional subadvisers, performs appropriate due diligence, and develops and presents to the Board a recommendation as to any such successor, replacement, or additional subadviser, including at the request of the Board;
designates and compensates from its own resources such personnel as the Investment Manager may consider necessary or appropriate to the performance of its services; and
performs such other review and reporting functions as the Board shall reasonably request consistent with the Management Agreement and applicable law.
The Investment Manager will retain these responsibilities if Proposal 2 is approved.
Required Vote
Proposal 2 must be approved by a “vote of a majority of the outstanding voting securities” of the Fund. The “vote of a majority of the outstanding voting securities” is defined in the 1940 Act as the lesser of the vote of (i) 67% or more of the voting securities of the Fund entitled to vote on Proposal 2 present at the Meeting or represented by proxy, if more than 50% of the Fund’s outstanding voting securities are present or represented by proxy; or (ii) more than 50% of the outstanding voting securities of the Fund entitled to vote on Proposal 2. If the vote required to approve Proposal 2 is not obtained from the Fund, the Fund will continue to be required to seek the approval of its shareholders to enter into or materially amend subadvisory agreements with unaffiliated and affiliated subadvisers.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE FUND VOTE “FOR” PROPOSAL 2.
16
OTHER BUSINESS
The Trustees do not know of any additional matters to be presented at the Meeting other than those set forth in this Proxy Statement. If other business should properly come before the Meeting, proxies will be voted in accordance with the judgment of the persons named in the accompanying proxy or any adjournment(s) or postponement(s) thereof.
ADDITIONAL INFORMATION
Other Information
The SEC maintains an Internet website (at http://www.sec.gov), which contains proxy materials, reports, and other information filed by the Fund.
Voting Information
Proxy Solicitation
Representatives of the Investment Manager may solicit proxies by telephone, letter or personally and will receive no additional compensation for these services. The Trust may also use one or more proxy solicitation firms to assist with the mailing and tabulation effort and any special personal solicitation of proxies. Banks, brokers, fiduciaries and nominees will, upon request, be reimbursed for their reasonable expenses in sending proxy material to beneficial owners of shares of the Fund.
AST Fund Solutions (the “Solicitor”) has been engaged to assist in the solicitation of proxies, at an estimated cost of approximately $150,000, plus expenses. As the Meeting date approaches, certain shareholders of the Fund may receive a telephone call from a representative of the Solicitor if their votes have not yet been received. Proxies that are obtained telephonically will be recorded in accordance with the procedures described below. The Trustees believe that these procedures are reasonably designed to ensure that both the identity of the shareholder casting the vote and the voting instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the Solicitor’s representative is required to ask for each shareholder’s full name and address, or the zip code or employer identification number, and to confirm that the shareholder has received the proxy materials in the mail. If the shareholder is a corporation or other entity, the Solicitor’s representative is required to ask for the person’s title and confirmation that the person is authorized to direct the voting of the shares. If the information solicited agrees with the information provided to the Solicitor, then the Solicitor’s representative has the responsibility to explain the process, read the proposals listed on the proxy card and ask for the shareholder’s instructions on the proposals. Although the Solicitor’s representative is permitted to answer questions about the process, he or she is not permitted to recommend to the shareholder how to vote, other than to read any recommendation set forth in this Proxy Statement. The Solicitor will record the shareholder’s instructions, and within 72 hours, the shareholder will be sent a letter or e-mail to confirm his or her vote and asking the shareholder to call the Solicitor immediately if his or her instructions are not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Meeting and does not wish to authorize the execution of a proxy by telephone, mail, facsimile or Internet, the shareholder may vote at the Meeting.
If you require additional information regarding the proxy or replacement proxy cards, please call the Solicitor toll free at 800-769-4414. Any proxy given by a shareholder, whether in writing, by telephone, by facsimile or the Internet, is revocable until voted at the Meeting.
17
Shareholders Sharing the Same Address
The Fund will mail only one copy of this proxy statement to a household, even if more than one person in a household is a Fund shareholder of record, unless the Fund has received contrary instructions from one or more of the shareholders. If you need additional copies of this proxy statement and you are a holder of record of your shares, please call the Fund at 1-800-548-4539. If your shares are held in broker street name, please contact your financial service firm to obtain additional copies of this proxy statement. If in the future you do not want the mailing of proxy statements to be combined with those of other members of your household, or if you have received multiple copies of this proxy statement and want future mailings to be combined with those of other members of your household, please contact the Fund in writing at AMG Funds, 600 Steamboat Road, Greenwich, Connecticut 06830, or by telephone at 1-800-548-4539, or contact your financial service firm. The Fund undertakes to deliver promptly upon written or oral request a separate copy of the proxy statement to a security holder at a shared address to which a single copy of the document was delivered.
Principal Holders and Management Ownership
The total number of shares of the Fund outstanding, as of the Record Date, and information concerning the shareholders who owned beneficially or of record 5% or more of each class of the Fund’s outstanding securities, as of November 30, 2020, is set forth below.
As of the Record Date, the total number of the Fund’s outstanding shares was [________________].
As of November 30, 2020, the following persons or entities owned of record 5% or more of each class of the Fund’s outstanding securities:
Name and Address | Number of Shares | Percentage | ||||||
AMG GW&K Small Cap Value Fund | ||||||||
Class I | ||||||||
Charles Schwab & Co. Inc. Special Custody Account for the Exclusive Benefit of Customers Attn: Mutual Funds 101 Montgomery Street San Francisco, California 94104-4122 | 754,361.613 | 26.20 | % | |||||
National Financial Services LLC For the Exclusive Benefit of Our Customers Attn: Mutual Funds Department, 4th Floor 499 Washington Boulevard Jersey City, New Jersey 07310-2010 | 424,604.435 | 14.75 | % | |||||
Pershing LLC 1 Pershing Plaza Jersey City, New Jersey 07399-0002 | 191,362.213 | 6.65 | % | |||||
Class N | ||||||||
National Financial Services LLC For the Exclusive Benefit of Our Customers Attn: Mutual Funds Department, 4th Floor 499 Washington Boulevard Jersey City, New Jersey 07310-2010 | 2,213,578.399 | 31.58 | % | |||||
18
Name and Address | Number of Shares | Percentage | ||||||
Charles Schwab & Co. Inc. Special Custody Account for the Exclusive Benefit of Customers Attn: Mutual Funds 101 Montgomery Street San Francisco, California 94104-4151 | 1,479,569.427 | 21.11 | % | |||||
Hartford Life Insurance Co. Separate Account 1 Griffin Road North Windsor, Connecticut 06095-1512 | 890,493.670 | 12.70 | % | |||||
Pershing LLC 1 Pershing Plaza Jersey City, New Jersey 07399-0002 | 485,113.044 | 6.92 | % | |||||
Class Z | ||||||||
Ascensus Trust Company For the Benefit of Affiliated Managers Group, Inc. 401(K) P.O. Box 10758 Fargo, North Dakota 58106 | 99,765.928 | 34.94 | % | |||||
BNYM I S Trust Co. Cust. Rollover IRA William M. Dutton 845 South Elm Street Hinsdale, Illinois 60521-4511 | 64,150.912 | 22.47 | % | |||||
Mark Odegard FBO Skyline Asset Management LP 401(K) 120 South LaSalle Street Chicago, Illinois 60603 | 61,282.955 | 21.46 | % | |||||
BNYM I S Trust Co. Cust. IRA FBO Mark N. Odegard c/o Skyline Asset Management LP 120 South LaSalle Street Chicago, Illinois 60603 | 27,301.275 | 9.56 | % | |||||
Nabank & Co. P.O. Box 2180 Tulsa, Oklahoma 74101 | 20,865.971 | 7.31 | % | |||||
| * | Denotes persons or entities that owned 25% or more of the outstanding shares of beneficial interest of the Fund as of November 30, 2020, and therefore may be presumed to “control” the Fund under the 1940 Act. Except for these persons or entities, the Trust did not know of any person or entity who, as of November 30, 2020, “controlled” (within the meaning of the 1940 Act) the Fund. A person or entity that “controls” the Fund could have effective voting control over the Fund. It may not be possible for matters subject to a vote of a majority of the outstanding voting securities of the Fund to be approved without the affirmative vote of such “controlling” shareholders, and it may be possible for such matters to be approved by such shareholders without the affirmative vote of any other shareholders. |
19
As of November 13, 2020, all management personnel (i.e., Trustees and Officers of the Trust) as a group owned beneficially less than 1% of the outstanding shares of each class of the Fund.
Since the beginning of the most recently completed fiscal year, no Trustee has purchased or sold securities of the Investment Manager, GW&K or any of their respective parents and subsidiaries exceeding 1% of the outstanding securities of any class of securities issued by the Investment Manager, GW&K or any of their respective parents or subsidiaries.
Certain Trustees and Officers may from time to time own securities of AMG, including securities received as compensation for services to AMG or its affiliates.
The Investment Manager serves as administrator of the Fund under an Amended and Restated Administration Agreement between the Investment Manager and the Trust with respect to the Fund (the “Fund Administration Agreement”). For the fiscal year ended December 31, 2019, the Fund paid $858,821 to the Investment Manager under the Fund Administration Agreement. The Distributor serves as the principal distributor and underwriter for the Fund under a Distribution Agreement between the Distributor and the Trust with respect to the Fund. Class N, Class I and Class Z shares of the Fund are not subject to the expenses of any Plan of Distribution Pursuant to Rule 12b-1. The Distributor receives no compensation from the Fund for its services as distributor. The Investment Manager and Distributor will continue to provide these administrative and distribution services, respectively, to the Fund after the New Subadvisory Agreement is approved.
For the fiscal year ended December 31, 2019, the Fund did not pay any commissions to any affiliated broker-dealer.
Shareholder Proposals
The Trust does not hold regularly scheduled meetings of the shareholders of the Funds.Fund. Any shareholder desiring to present a proposal for inclusion at the meeting of shareholders next following this Meeting should submit such proposal to the Trust at a reasonable time before the solicitation is made.
TO ENSURE THE PRESENCE OF A QUORUM AT THE COMBINED SPECIAL MEETING, PROMPT VOTING IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE IF YOU WISH TO VOTE BY MAIL, ALONG WITH INSTRUCTIONS ON HOW TO VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU PREFER TO VOTE BY ONE OF THOSE METHODS.
| By Order of the Board of Trustees, |
| Mark Duggan |
| Secretary |
20
APPENDIX A
The Form of New Markets Subadvisory Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any factual information about the Markets Fund. Accordingly, shareholders should not rely on the representations and warranties in the Form of New Markets Subadvisory Agreement as characterizations of the actual state of facts at the time they were made or otherwise. In addition, the Form of New Markets Subadvisory Agreement may be revised from that shown here prior to its execution, and may be amended after its execution. Should material changes be made to the Form of New Markets Subadvisory Agreement, the Markets Fund will take such steps as may be required by applicable law.
FORM OF NEW MARKETS SUBADVISORY AGREEMENT BETWEEN THE INVESTMENT MANAGER AND GW&K INVESTMENT MANAGEMENT, LLC WITH RESPECT TO AMG GW&K TRILOGY EMERGING MARKETS EQUITYSMALL CAP VALUE FUND
AGREEMENT made as of the [ ][_______ day of [ ], [ ],____, ____], between AMG FundsFUNDS LLC, a limited liability company organized under the laws of the state of Delaware and having its principal place of business inat 600 Steamboat Road, Suite 300, Greenwich, Connecticut 06830 (the “Adviser”) and GW&K INVESTMENT MANAGEMENT, LLC, a limited liability company organized under the laws of the State of Delaware and having its principal place of business at 222 Berkeley Street, Boston, Massachusetts 02116 (the “Subadviser”).
WHEREAS, the Adviser is engaged principally in the business of rendering investment management services and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”); and
WHEREAS, the Subadviser is engaged principally in the business of rendering investment management services and is registered as an investment adviser under the Advisers Act; and
WHEREAS, AMG FUNDS, a Massachusetts business trust (the “Trust”), engages in business as anopen-end management investment company and is so registered under the Investment Company Act of 1940, as amended (the “1940 Act”); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in a series, AMG GW&K Trilogy Emerging Markets EquitySmall Cap Value Fund (the “Fund”); and
WHEREAS, pursuant to an Investment Management Agreement, dated as of October 19, 1999, between the Trust and the Adviser, as amended (the “Advisory Agreement”), the Adviser is required to perform investment advisory services for the Fund.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties hereto as follows:
1.
| 1. | APPOINTMENT OF SUBADVISER. |
The Adviser hereby employs the Subadviser to provide investment advisory services to the Fund for the period and on the terms herein set forth. The Subadviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided.
2. DUTIES OF ADVISER AND SUBADVISER.
21
| 2. | DUTIES OF ADVISER AND SUBADVISER. |
(i)DeliveryDelivery of Documents. The Adviser has furnished the Subadviser with true copies of each of the following:
(a) The Trust’s Amended and Restated Agreement and Declaration of Trust, as filed with the Secretary of State of The Commonwealth of Massachusetts and all amendments and supplements thereto (such Amended and Restated Agreement and Declaration of Trust, as presently in effect and as it shall from time to time be amended or supplemented, is herein called the “Declaration”);
(b) The Trust’sBy-Laws and amendments and supplements thereto (suchBy-Laws, as presently in effect and as it shall from time to time be amended and supplemented, is herein called the“By-Laws”);
(c) Resolutions of the Trust’s Board of Trustees authorizing the appointment of the Adviser and Subadviser and approving the Advisory Agreement and this Agreement and copies of the minutes of the initial meeting of shareholders of the Fund;
(d) The Trust’s Registration Statement and each Post-Effective Amendment thereto on FormN-1A under the Securities Act of 1933 as amended (the “1933 Act”) and the 1940 Act (FileNos. 333-84639 and811-09521) with respect to the Fund as filed with the Securities and Exchange Commission and all amendments thereto (the “Registration Statement”);
(e) The most recent prospectus (such prospectus, as in effect from time to time and all amendments and supplements thereto are herein called a “Prospectus”) of the Fund;
(f) All resolutions of the Board of Trustees of the Trust pertaining to the objectives, investment policies and investment restrictions of the Fund; and
(g) Copies of the executed Advisory Agreement between the Trust and the Adviser relating to the Fund.
The Adviser will furnish the Subadviser from time to time with copies of all amendments of or supplements to items (a), (b), (c), (d), (e), (f), and (g) to the extent such amendments or supplements relate to or affect the obligations of the Subadviser hereunder with respect to the Fund.
(ii) The Subadviser, at its own expense, shall furnish the following services to the Trust with respect to the Fund:
(a)Investment Program. The Subadviser is hereby authorized and directed and hereby agrees, subject to the stated investment objective and policies of the Fund as set forth in the Trust’s current Registration Statement and subject to the supervision of the Adviser and the Board of Trustees of the Trust, to (i) develop and furnish continuously an investment program and strategy for the Fund in compliance with the Fund’s investment objective and policies as set forth in the Trust’s current Registration Statement, (ii) provide research and analysis relative to the investment program and investments of the Fund, (iii) determine (subject to the overall supervision of the Board of Trustees of the Trust) what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held in cash or cash equivalents, and (iv) make changes on behalf of the Trust in the investments of the Fund. In accordance with paragraph 2(ii)(b), the Subadviser shall arrange for the placing of all orders for the purchase and sale of securities and other investments for the Fund’s account and will exercise full discretion and act for the Trust in the same manner and with the same force and effect as the Trust might or could do with respect to such purchases, sales or other transactions, as well as with respect to all other things necessary or incidental to the furtherance or conduct of such purchases,
22
sales or transactions. The Subadviser will make its officers and employees available to meet with
22
the Adviser’s officers and directors on due notice at reasonable times to review the investments and investment program of the Fund in the light of current and prospective economic and market conditions. The Subadviser is authorized on behalf of the Fund to enter into agreements and execute any documents required to make investments pursuant to the Prospectus as may be amended from time to time. The Subadviser’s responsibility for providing portfolio management services hereunder shall be limited to only those assets of the Fund which the Adviser determines to allocate to the Subadviser (those assets being referred to as the “Fund Account”), and the Subadviser agrees that it shall not consult with any investment advisor(s) (within the meaning of the 1940 Act) to the Fund or any other registered investment company or portfolio series thereof under common control with the Fund concerning transactions for the Fund Account in securities or other assets such that the exemptions under Rule10f-3, Rule12d-3 and/or Rule17a-10 under the 1940 Act would not be available with respect to the Fund.
The Subadviser shall exercise voting authority with respect to proxies that the Fund is entitled to vote by virtue of the ownership of assets attributable to that portion of the Fund for which the Subadviser has investment management responsibility; provided that the exercise of such authority shall be subject to periodic review by the Adviser and the Trustees of the Trust; provided, further that such authority may be revoked in whole or in part by the Adviser if required by applicable law. The Subadviser shall exercise its proxy voting authority hereunder in accordance with such proxy voting policies and procedures as the Trust may designate from time to time. The Subadviser shall provide such information relating to its exercise of proxy voting authority hereunder (including the manner in which it has voted proxies and its resolution of conflicts of interest) as reasonably requested by the Adviser from time to time.
In the performance of its duties hereunder, the Subadviser is and shall be an independent contractor and except as expressly provided for herein or otherwise expressly provided or authorized shall have no authority to act for or represent the Fund or the Trust in any way or otherwise be deemed to be an agent of the Fund, the Trust or of the Adviser. If any occasion should arise in which the Subadviser gives any advice to its clients concerning the shares of a Fund, the Subadviser will act solely as investment counsel for such clients and not in any way on behalf of the Trust or the Fund.
(b)Portfolio Transactions. In connection with the management of the investment and reinvestment of the Fund, the Subadviser, acting by its own officers, directors or employees or by a duly authorized subcontractor, is authorized to select the broker or dealers that will execute purchase and sale transactions for the Trust.
In executing portfolio transactions and selecting brokers or dealers, if any, the Subadviser will use its best efforts to seek on behalf of the Fund the best overall terms available. In assessing the best overall terms available for any transaction, the Subadviser shall consider all factors it deems relevant, including the breadth of the market in and the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any, with respect to the specific transaction and on a continuing basis. In evaluating the best overall terms available, and in selecting the broker or dealer, if any, to execute a particular transaction, the Subadviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Subadviser with respect to the Fund and/or other accounts over which the Subadviser exercises investment discretion. The Subadviser may pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Subadviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided.
The Subadviser may buy securities for the Fund at the same time it is selling such securities for another client account and may sell securities for the Fund at the time it is buying such securities for another client account. In such cases, subject to applicable legal and regulatory
23
requirements, and in compliance with such procedures of the Trust as may be in effect from time to time, the Subadviser may effectuate cross transactions between the Fund and such other account if it deems this to be advantageous. The Subadviser also may cause the Fund to enter into other types of investment transactions (e.g., a long position on a particular securities index) at the same time it is causing other client accounts to take opposite economic positions (e.g., a short position on the same index).
On occasions when the Subadviser deems the purchase or sale of a security to be in the best interest of the Fund as well as other clients, the Subadviser, to the extent permitted by applicable laws and regulations, and in compliance with such procedures of the Trust as may be in effect from time to time, may aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner it considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such clients.
The Subadviser will advise the Fund’s custodian or such depository or agents as may be designated by the custodian and the Adviser promptly of each purchase and sale of a portfolio security, specifying the name of the issuer, the description and amount or number of shares of the security purchased, the market price, the commission and gross or net price, the trade date and settlement date and the identity of the effecting broker or dealer. The Subadviser shall not have possession or custody of any Fund investments. The Trust shall be responsible for all custodial agreements and the payment of all custodial charges and fees and, upon the Subadviser giving proper instructions to the custodian, the Subadviser shall have no responsibility or liability for the acts, omissions or other conduct of the custodian.
The Subadviser shall, upon due notice from the Adviser, provide such periodic and special reports describing any such research, advice or other services received and the incremental commissions, net price or other consideration to which they relate.
Notwithstanding the foregoing, the Subadviser agrees that the Adviser shall have the right by written notice to identify securities that may not be purchased on behalf of the Fund and/or brokers and dealers through which portfolio transaction on behalf of the Fund may not be effected, including, without limitation, brokers or dealers affiliated with the Adviser. The Subadviser shall refrain from purchasing such securities for the Fund or directing any portfolio transaction to any such broker or dealer on behalf of the Fund, unless and until the written approval of the Adviser to do so is obtained, but the Subadviser shall not be liable to the Fund for so acting. In addition, the Subadviser agrees that it shall not direct portfolio transactions for the Fund through any broker or dealer that is an “affiliated person” of the Subadviser (as that term is defined in the 1940 Act or interpreted under applicable rules and regulations of the Securities and Exchange Commission) without the prior written approval of the Adviser, which shall not be unreasonably withheld. The Adviser agrees that it will provide the Subadviser with a list of brokers and dealers that are “affiliated persons” of the Fund.
(c)Reports. The Subadviser shall render to the Board of Trustees of the Trust such periodic and special reports as the Board of Trustees may request with respect to matters relating to the duties of the Subadviser set forth herein.
(iii) Notwithstanding anything to the contrary in this Agreement, the Subadviser shall have the right to engage a third-party for purposes of providing proxy advisory and/or voting services.
3. SUBADVISORY FEE.
For the services to be provided by the Subadviser as provided in Paragraph 2 hereof, the Adviser shall pay to the Subadviser an annual fee as set forth on Schedule A to this Agreement.
24
In the case of commencement or termination of this Agreement with respect to the Fund during any calendar month, the fee with respect to the Fund for that month shall be reduced proportionately based upon the number of calendar days during which it is in effect, and the fee shall be computed during the average daily net assets of the Fund for the days during which it is in effect.
4. EXPENSES.
During the term of this Agreement, the Subadviser will bear all expenses incurred by it in the performance of its duties hereunder, other than those expenses specifically assumed by the Trust hereunder. Subject to any expense limitation agreement as in effect from time to time with respect to the Fund, the Trust shall assume and shall pay (i) issue and transfer taxes chargeable to the Trust in connection with securities transactions to which the Fund is a party, and (ii) interest on borrowed money, if any. In addition to these expenses, the Trust shall pay all brokers’ and underwriting commissions chargeable to the Trust in connection with the securities transactions to which the Fund is a party.
5. COMPLIANCE WITH APPLICABLE REGULATIONS.
In performing its duties hereunder, the Subadviser
(i) shall establish compliance procedures (copies of which shall be provided to the Adviser, and shall be subject to review and approval by the Adviser) reasonably calculated to ensure compliance at all times with: all applicable provisions of the 1940 Act and the Advisers Act, and any rules and regulations adopted thereunder; Subchapter M of the Internal Revenue Code of 1986, as amended; the provisions of the Registration Statement; the provisions of the Declaration and theBy-Laws of the Trust, as the same may be amended from time to time; and any other applicable provisions of state, federal or foreign law.
(ii) acknowledges that the Trust has adopted a written code of ethics complying with the requirements of Rule17j-1 under the 1940 Act and that the Subadviser and certain of its employees, officers and directors may be subject to reporting requirements thereunder and, accordingly, agrees that it shall, on a timely basis, furnish, and shall cause its employees, officers and directors to furnish, to the Adviser and/or to the Trust, all reports and information required to be provided under such code of ethics with respect to such persons.
(iii) agrees that it will maintain for the Trust all and only such records as required under Rules31a-1 and31a-2 under the 1940 Act in respect to its services hereunder and that such records are the property of the Trust and further agrees to surrender promptly to the Trust any such records upon the Trust’s request all in accordance with Rule31a-3 under the 1940 Act.
6. LIABILITY OF SUBADVISER; INDEMNIFICATION.
Neither the Subadviser nor the officers, directors, employees, agents, or legal representatives (collectively, “Related Persons”) of the Subadviser shall be liable for any error of judgment or mistake of law, or for any loss suffered by the Fund or its shareholders in connection with the matters to which this Agreement relates; provided that, except as set forth in the succeeding paragraph, no provision of this Agreement shall be deemed to protect the Subadviser or its Related Persons against any liability to which it might otherwise be subject by reason of any willful misfeasance, bad faith or negligence or the reckless disregard of the Subadviser’s obligations and duties (each of which is hereby referred to as a “Culpable Act”) under this Agreement.
Neither the Subadviser nor its Related Persons shall be liable for any error of judgment or mistake of law, or for any loss suffered by the Adviser or its Related Persons in connection with the matters to which this Agreement relates; provided that this provision shall not be deemed to protect the Subadviser or its Related Persons against any liability to which it might otherwise be subject by reason of any Culpable Act by the Subadviser or its Related Persons.
25
The Adviser shall indemnify the Subadviser and its Related Persons and hold them harmless from and against any and all actions, suits or claims whether groundless or meritorious and from and against any and all losses, damages, costs, charges, reasonable counsel fees, payments, expenses and liabilities (collectively, “Damages”) arising directly or indirectly out of or in connection with the performance of services by the Subadviser or its Related Persons hereunder to the extent such Damages result from any Culpable Act of the Adviser or any Related Person of the Adviser.
The Subadviser shall indemnify the Adviser and its Related Persons from and against any Damages arising directly or indirectly out of or in connection with the performance of services by the Adviser or its Related Persons under this Agreement or the Advisory Agreement, in each case, to the extent such Damages result from any Culpable Act of the Subadviser or any of its Related Persons.
7. REPRESENTATIONS AND WARRANTIES.
(a)Adviser. The Adviser represents and warrants to the Subadviser that (i) the retention of the Subadviser by the Adviser as contemplated by this Agreement is authorized by the respective governing documents of the Trust and the Adviser; (ii) the execution, delivery and performance of each of this Agreement and the Advisory Agreement does not violate any obligation by which the Trust or the Adviser or their respective property is bound, whether arising by contract, operation of law or otherwise; and (iii) each of this Agreement and the Advisory Agreement has been duly authorized by appropriate action of the Trust and the Adviser and when executed and delivered by the Adviser will be the legal, valid and binding obligation of the Trust and the Adviser, enforceable against the Trust and Adviser in accordance with its terms hereof subject, as to enforcement, to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and to general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or law).
(b)Subadviser. The Subadviser represents and warrants to the Adviser that (i) the retention of the Subadviser by the Adviser as contemplated by this Agreement is authorized by the Subadviser’s governing documents; (ii) the execution, delivery and performance of this Agreement does not violate any obligation by which the Subadviser or its property is bound, whether arising by contract, operation of law or otherwise; and (iii) this Agreement has been duly authorized by appropriate action of the Subadviser and when executed and delivered by the Subadviser will be the legal, valid and binding obligation of the Subadviser, enforceable against the Subadviser in accordance with its terms hereof, subject, as to enforcement, to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and to general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or law).
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a)Duration. This Agreement shall become effective with respect to the Fund on [ ] (the “Effective Date”). Unless terminated as herein provided, this Agreement shall remain in full force and effect for two years from the Effective Date. Subsequent to such initial periods of effectiveness, this Agreement shall continue in full force and effect for periods of one year thereafter with respect to the Fund so long as such continuance with respect to the Fund is approved at least annually (a) by either the Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, and (b) in either event, by the vote of a majority of the Trustees of the Trust who are not parties to this Agreement or “interested persons” (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval.
(b)Amendment. This Agreement may be amended by agreement of the parties, provided that the amendment shall be approved both by the vote of a majority of the Trustees of the Trust, including a majority of the Trustees who are not parties to this Agreement or interested persons of any such party to this Agreement cast in person at a meeting called for that purpose, and, to the extent required by the 1940 Act, by the holders of a majority of the outstanding voting securities of the Trust in the manner required by the 1940 Act.
26
(c)Termination. This Agreement may be terminated with respect to the Fund at any time, without payment of any penalty, (i) by vote of the Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, (ii) by the Adviser, or (iii) by the Subadviser, in each case on sixty (60) days’ prior written notice to the other party. Upon the effective date of termination of this Agreement, the Subadviser shall deliver all books and records of the Trust or the Fund held by it (i) to such entity as the Trust may designate as a successor, or (ii) to the Adviser.
(d)Automatic Termination. This Agreement shall automatically and immediately terminate in the event of its assignment (as defined in the 1940 Act). The Subadviser shall notify the Trust in writing sufficiently in advance of any proposed change of control, as defined in Section 2(a)(9) of the 1940 Act, as will enable the Trust to consider whether an assignment under the 1940 Act will occur, and to take the steps necessary to enter into a new contract with the Subadviser or such other steps as the Trustees of the Trust may deem appropriate.
(e)Approval, Amendment or Termination by Individual Fund. Any approval, amendment or termination of this Agreement by the holders of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund shall be effective to continue, amend or terminate this Agreement with respect to any such Fund notwithstanding (i) that such action has not been approved by the holders of a majority of the outstanding voting securities of any other Fund affected thereby, and (ii) that such action has not been approved by the vote of a majority of the outstanding voting securities of the Trust, unless such action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE.
The services of the Subadviser to the Adviser in connection with the Fund hereunder are not to be deemed exclusive, and the Subadviser shall be free to render similar services to others so long as its services hereunder are not impaired thereby. It is understood that the persons employed by the Subadviser to assist in the performance of its duties hereunder will not devote their full time to such services and nothing hereunder contained shall be deemed to limit or restrict the right of the Subadviser to engage in or devote time and attention to other businesses or to render services of whatever kind or nature.
10. RESERVATION OF NAME.
The parties hereby acknowledge that AMG Funds LLC has reserved the right to grant the nonexclusive use of the name “AMG” or “AMG Funds” or any derivative thereof to any other investment company, investment adviser, distributor or other business enterprise, and to withdraw from the Trust the use of the name “AMG” or “AMG Funds.” The name “AMG” or “AMG Funds” will continue to be used by the Trust so long as such use is mutually agreeable to AMG Funds LLC and the Trust. The Subadviser and the Trust acknowledge that the Trust shall cease using the name “AMG” or “AMG Funds” as a part of the Trust’s name and that the Subadviser, the Trust or the Fund, or any of their affiliates, shall not promote the Trust or the Fund or conduct the business of the Trust or the Fund in any way in such name if this Agreement is terminated for any reason and the Adviser does not expressly consent in writing to such use of the name “AMG” or “AMG Funds.” Future names adopted by the Trust for itself or the Fund, insofar as such names include identifying words requiring the consent of the Adviser, shall be the property of the Adviser and shall be subject to the same terms and conditions. Notwithstanding the above, AMG Funds LLC consents to the use of its name, including in connection with the name of the Trust or the Fund, in a representative client list in connection with the completion of marketing materials.
27
11. MISCELLANEOUS.
(a)Notices. All notices or other communications given under this Agreement shall be made by guaranteed overnight delivery, telecopy or certified mail; notice is effective when received. Notice shall be given to the parties at the following addresses:
|
| |
|
(b)Severability. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder shall not be thereby affected.
(c)Applicable Law. This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Massachusetts.
(d)Counterparties. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
(e)Entire Agreement. This Agreement states the entire agreement of the parties hereto, and is intended to be the complete and exclusive statement of the terms hereof. It may not be added to or changed orally, and may not be modified or rescinded except by a writing signed by the parties hereto and in accordance with the 1940 Act, when applicable.
28
IN WITNESS WHEREOF, the Adviser and the Subadviser have caused this Agreement to be executed as of the date first set forth above.
| ||
| ||
Acknowledged and agreed to as of the date first set forth above with respect to the Trust’s obligations under this Agreement.
| ||
29
SCHEDULE A
AMG GW&K Trilogy Emerging Markets Equity Fund
The Adviser shall pay to the Subadviser an annual gross investment Subadvisory fee equal to 0.45% per annum of the average daily net assets of the Fund. Such fee shall be accrued daily and paid as soon as practical after the last day of each calendar month.
The Subadviser may voluntarily waive all or a portion of the Subadvisory fee payable from time to time hereunder. The Adviser agrees that, during any period in which the Subadviser has voluntarily waived all or a portion of the Subadvisory fee hereunder, if requested by the Subadviser, the Adviser will waive an equal amount (or such lesser amount as the Subadviser may request) of the advisory fee payable by the Trust to the Adviser with respect to the Fund under the Advisory Agreement.
The Subadviser agrees that, during any period in which the Adviser has waived all or a portion of the advisory fee payable by the Trust to the Adviser under the Advisory Agreement with respect to the Fund, if requested by the Adviser, the Subadviser will waive a pro rata share (or such lesser share as the Adviser may request) of the Subadvisory fee payable hereunder with respect to the Fund, such that the amount waived by the Subadviser shall bear the same ratio to the total amount of the subadvisory fees payable hereunder with respect to the Fund as the amount waived by the Adviser bears to all fees payable to the Adviser under the Advisory Agreement with respect to the Fund.
The Adviser agrees that, in addition to any amounts otherwise payable to the Subadviser with respect to the Fund hereunder, the Adviser shall pay the Subadviser all amounts previously waived by the Subadviser with respect to the Fund to the extent that such amounts are subsequently paid by the Trust to the Adviser under the Advisory Agreement, it being further agreed that, with respect to any such amounts subsequently paid by the Trust to the Adviser, the amount to be paid by the Adviser to the Subadviser shall bear the same ratio to the total amount paid by the Trust as the total amount previously waived by the Subadviser bears to the total amount of the fees previously waived by the Adviser under the Advisory Agreement with respect to the Fund.
The Subadviser agrees that, during any period in which the Adviser has agreed to pay or reimburse the Trust for expenses of the Fund, if requested by the Adviser, the Subadviser shall pay or reimburse the Trust for the entire amount of all such expenses of the Fund (or such lesser amount as the Adviser may request). The Adviser agrees that, in addition to any amounts otherwise payable to the Subadviser with respect to the Fund hereunder, the Adviser shall pay the Subadviser all amounts previously paid or reimbursed by the Subadviser with respect to the Fund to the extent that such amounts are subsequently paid by the Trust to the Adviser under the Advisory Agreement.
30
APPENDIX B
The Form of New Wealth Subadvisory Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any factual information about the Wealth Fund. Accordingly, shareholders should not rely on the representations and warranties in the Form of New Wealth Subadvisory Agreement as characterizations of the actual state of facts at the time they were made or otherwise. In addition, the Form of New Wealth Subadvisory Agreement may be revised from that shown here prior to its execution, and may be amended after its execution. Should material changes be made to the Form of New Wealth Subadvisory Agreement, the Wealth Fund will take such steps as may be required by applicable law.
FORM OF NEW WEALTH SUBADVISORY AGREEMENT BETWEEN THE INVESTMENT MANAGER AND GW&K INVESTMENT MANAGEMENT, LLC WITH RESPECT TO AMG GW&K TRILOGY EMERGING WEALTH EQUITY FUND
AGREEMENT made as of the [ ] day of [ ], [ ], between AMG Funds LLC, a limited liability company organized under the laws of the state of Delaware and having its principal place of business in Greenwich, Connecticut (the “Adviser”) and GW&K INVESTMENT MANAGEMENT, LLC, a limited liability company organized under the laws of the State of Delaware and having its principal place of business at 222 Berkeley Street, Boston, Massachusetts 02116 (the “Subadviser”).
WHEREAS, the Adviser is engaged principally in the business of rendering investment management services and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”); and
WHEREAS, the Subadviser is engaged principally in the business of rendering investment management services and is registered as an investment adviser under the Advisers Act; and
WHEREAS, AMG FUNDS, a Massachusetts business trust (the “Trust”), engages in business as anopen-end management investment company and is so registered under the Investment Company Act of 1940, as amended (the “1940 Act”); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and
WHEREAS, the Trust offers shares in a series, AMG GW&K Trilogy Emerging Wealth Equity Fund (the “Fund”); and
WHEREAS, pursuant to an Investment Management Agreement, dated as of October 19, 1999, between the Trust and the Adviser, as amended (the “Advisory Agreement”), the Adviser is required to perform investment advisory services for the Fund.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties hereto as follows:
1. APPOINTMENT OF SUBADVISER.
The Adviser hereby employs the Subadviser to provide investment advisory services to the Fund for the period and on the terms herein set forth. The Subadviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided.
31
2. DUTIES OF ADVISER AND SUBADVISER.
(i)Delivery of Documents. The Adviser has furnished the Subadviser with true copies of each of the following:
(a) The Trust’s Amended and Restated Agreement and Declaration of Trust, as filed with the Secretary of State of The Commonwealth of Massachusetts and all amendments and supplements thereto (such Amended and Restated Agreement and Declaration of Trust, as presently in effect and as it shall from time to time be amended or supplemented, is herein called the “Declaration”);
(b) The Trust’sBy-Laws and amendments and supplements thereto (suchBy-Laws, as presently in effect and as it shall from time to time be amended and supplemented, is herein called the“By-Laws”);
(c) Resolutions of the Trust’s Board of Trustees authorizing the appointment of the Adviser and Subadviser and approving the Advisory Agreement and this Agreement and copies of the minutes of the initial meeting of shareholders of the Fund;
(d) The Trust’s Registration Statement and each Post-Effective Amendment thereto on FormN-1A under the Securities Act of 1933 as amended (the “1933 Act”) and the 1940 Act (FileNos. 333-84639 and811-09521) with respect to the Fund as filed with the Securities and Exchange Commission and all amendments thereto (the “Registration Statement”);
(e) The most recent prospectus (such prospectus, as in effect from time to time and all amendments and supplements thereto are herein called a “Prospectus”) of the Fund;
(f) All resolutions of the Board of Trustees of the Trust pertaining to the objectives, investment policies and investment restrictions of the Fund; and
(g) Copies of the executed Advisory Agreement between the Trust and the Adviser relating to the Fund.
The Adviser will furnish the Subadviser from time to time with copies of all amendments of or supplements to items (a), (b), (c), (d), (e), (f), and (g) to the extent such amendments or supplements relate to or affect the obligations of the Subadviser hereunder with respect to the Fund.
(ii) The Subadviser, at its own expense, shall furnish the following services to the Trust with respect to the Fund:
(a)Investment Program. The Subadviser is hereby authorized and directed and hereby agrees, subject to the stated investment objective and policies of the Fund as set forth in the Trust’s current Registration Statement and subject to the supervision of the Adviser and the Board of Trustees of the Trust, to (i) develop and furnish continuously an investment program and strategy for the Fund in compliance with the Fund’s investment objective and policies as set forth in the Trust’s current Registration Statement, (ii) provide research and analysis relative to the investment program and investments of the Fund, (iii) determine (subject to the overall supervision of the Board of Trustees of the Trust) what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held in cash or cash equivalents, and (iv) make changes on behalf of the Trust in the investments of the Fund. In accordance with paragraph 2(ii)(b), the Subadviser shall arrange for the placing of all orders for the purchase and sale of securities and other investments for the Fund’s account and will exercise full discretion and act for the Trust in the same manner and with the same force and effect as the Trust might or could do with respect to such purchases, sales or other transactions, as well as with respect to all other things necessary or incidental to the furtherance or conduct of such purchases, sales or transactions. The Subadviser will make its officers and employees available to meet with
32
the Adviser’s officers and directors on due notice at reasonable times to review the investments and investment program of the Fund in the light of current and prospective economic and market conditions. The Subadviser is authorized on behalf of the Fund to enter into agreements and execute any documents required to make investments pursuant to the Prospectus as may be amended from time to time. The Subadviser’s responsibility for providing portfolio management services hereunder shall be limited to only those assets of the Fund which the Adviser determines to allocate to the Subadviser (those assets being referred to as the “Fund Account”), and the Subadviser agrees that it shall not consult with any investment advisor(s) (within the meaning of the 1940 Act) to the Fund or any other registered investment company or portfolio series thereof under common control with the Fund concerning transactions for the Fund Account in securities or other assets such that the exemptions under Rule10f-3, Rule12d-3 and/or Rule17a-10 under the 1940 Act would not be available with respect to the Fund.
The Subadviser shall exercise voting authority with respect to proxies that the Fund is entitled to vote by virtue of the ownership of assets attributable to that portion of the Fund for which the Subadviser has investment management responsibility; provided that the exercise of such authority shall be subject to periodic review by the Adviser and the Trustees of the Trust; provided, further that such authority may be revoked in whole or in part by the Adviser if required by applicable law. The Subadviser shall exercise its proxy voting authority hereunder in accordance with such proxy voting policies and procedures as the Trust may designate from time to time. The Subadviser shall provide such information relating to its exercise of proxy voting authority hereunder (including the manner in which it has voted proxies and its resolution of conflicts of interest) as reasonably requested by the Adviser from time to time.
In the performance of its duties hereunder, the Subadviser is and shall be an independent contractor and except as expressly provided for herein or otherwise expressly provided or authorized shall have no authority to act for or represent the Fund or the Trust in any way or otherwise be deemed to be an agent of the Fund, the Trust or of the Adviser. If any occasion should arise in which the Subadviser gives any advice to its clients concerning the shares of a Fund, the Subadviser will act solely as investment counsel for such clients and not in any way on behalf of the Trust or the Fund.
(b)Portfolio Transactions. In connection with the management of the investment and reinvestment of the Fund, the Subadviser, acting by its own officers, directors or employees or by a duly authorized subcontractor, is authorized to select the broker or dealers that will execute purchase and sale transactions for the Trust.
In executing portfolio transactions and selecting brokers or dealers, if any, the Subadviser will use its best efforts to seek on behalf of the Fund the best overall terms available. In assessing the best overall terms available for any transaction, the Subadviser shall consider all factors it deems relevant, including the breadth of the market in and the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any, with respect to the specific transaction and on a continuing basis. In evaluating the best overall terms available, and in selecting the broker or dealer, if any, to execute a particular transaction, the Subadviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the Subadviser with respect to the Fund and/or other accounts over which the Subadviser exercises investment discretion. The Subadviser may pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Subadviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided.
3323
The Subadviser may buy securities for the Fund at the same time it is selling such securities for another client account and may sell securities for the Fund at the time it is buying such securities for another client account. In such cases, subject to applicable legal and regulatory requirements, and in compliance with such procedures of the Trust as may be in effect from time to time, the Subadviser may effectuate cross transactions between the Fund and such other account if it deems this to be advantageous. The Subadviser also may cause the Fund to enter into other types of investment transactions (e.g., a long position on a particular securities index) at the same time it is causing other client accounts to take opposite economic positions (e.g., a short position on the same index).
On occasions when the Subadviser deems the purchase or sale of a security to be in the best interest of the Fund as well as other clients, the Subadviser, to the extent permitted by applicable laws and regulations, and in compliance with such procedures of the Trust as may be in effect from time to time, may aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner it considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such clients.
The Subadviser will advise the Fund’s custodian or such depository or agents as may be designated by the custodian and the Adviser promptly of each purchase and sale of a portfolio security, specifying the name of the issuer, the description and amount or number of shares of the security purchased, the market price, the commission and gross or net price, the trade date and settlement date and the identity of the effecting broker or dealer. The Subadviser shall not have possession or custody of any Fund investments. The Trust shall be responsible for all custodial agreements and the payment of all custodial charges and fees and, upon the Subadviser giving proper instructions to the custodian, the Subadviser shall have no responsibility or liability for the acts, omissions or other conduct of the custodian.
The Subadviser shall, upon due notice from the Adviser, provide such periodic and special reports describing any such research, advice or other services received and the incremental commissions, net price or other consideration to which they relate.
Notwithstanding the foregoing, the Subadviser agrees that the Adviser shall have the right by written notice to identify securities that may not be purchased on behalf of the Fund and/or brokers and dealers through which portfolio transaction on behalf of the Fund may not be effected, including, without limitation, brokers or dealers affiliated with the Adviser. The Subadviser shall refrain from purchasing such securities for the Fund or directing any portfolio transaction to any such broker or dealer on behalf of the Fund, unless and until the written approval of the Adviser to do so is obtained, but the Subadviser shall not be liable to the Fund for so acting. In addition, the Subadviser agrees that it shall not direct portfolio transactions for the Fund through any broker or dealer that is an “affiliated person” of the Subadviser (as that term is defined in the 1940 Act or interpreted under applicable rules and regulations of the Securities and Exchange Commission) without the prior written approval of the Adviser, which shall not be unreasonably withheld. The Adviser agrees that it will provide the Subadviser with a list of brokers and dealers that are “affiliated persons” of the Fund.
24
(c)Reports. The Subadviser shall render to the Board of Trustees of the Trust such periodic and special reports as the Board of Trustees may request with respect to matters relating to the duties of the Subadviser set forth herein.
(iii) Notwithstanding anything to the contrary in this Agreement, the Subadviser shall have the right to engage a third-party for purposes of providing proxy advisory and/or voting services.
3.
| 3. | SUBADVISORY FEE. |
For the services to be provided by the Subadviser as provided in Paragraph 2 hereof, the Adviser shall pay to the Subadviser an annual fee as set forth on Schedule A to this Agreement.
34
In the case of commencement or termination of this Agreement with respect to the Fund during any calendar month, the fee with respect to the Fund for that month shall be reduced proportionately based upon the number of calendar days during which it is in effect, and the fee shall be computed during the average daily net assets of the Fund for the days during which it is in effect.
4.
| 4. | EXPENSES. |
During the term of this Agreement, the Subadviser will bear all expenses incurred by it in the performance of its duties hereunder, other than those expenses specifically assumed by the Trust hereunder. Subject to any expense limitation agreement as in effect from time to time with respect to the Fund, the Trust shall assume and shall pay (i) issue and transfer taxes chargeable to the Trust in connection with securities transactions to which the Fund is a party, and (ii) interest on borrowed money, if any. In addition to these expenses, the Trust shall pay all brokers’ and underwriting commissions chargeable to the Trust in connection with the securities transactions to which the Fund is a party.
5.
| 5. | COMPLIANCE WITH APPLICABLE REGULATIONS. |
In performing its duties hereunder, the Subadviser
(i) shall establish compliance procedures (copies of which shall be provided to the Adviser, and shall be subject to review and approval by the Adviser) reasonably calculated to ensure compliance at all times with: all applicable provisions of the 1940 Act and the Advisers Act, and any rules and regulations adopted thereunder; Subchapter M of the Internal Revenue Code of 1986, as amended; the provisions of the Registration Statement; the provisions of the Declaration and theBy-Laws of the Trust, as the same may be amended from time to time; and any other applicable provisions of state, federal or foreign law.
(ii) acknowledges that the Trust has adopted a written code of ethics complying with the requirements of Rule17j-1 under the 1940 Act and that the Subadviser and certain of its employees, officers and directors may be subject to reporting requirements thereunder and, accordingly, agrees that it shall, on a timely basis, furnish, and shall cause its employees, officers and directors to furnish, to the Adviser and/or to the Trust, all reports and information required to be provided under such code of ethics with respect to such persons.
(iii) agrees that it will maintain for the Trust all and only such records as required under Rules31a-1 and31a-2 under the 1940 Act in respect to its services hereunder and that such records are the property of the Trust and further agrees to surrender promptly to the Trust any such records upon the Trust’s request all in accordance with Rule31a-3 under the 1940 Act.
6.
25
| 6. | LIABILITY OF SUBADVISER; INDEMNIFICATION. |
Neither the Subadviser nor the officers, directors, employees, agents, or legal representatives (collectively, “Related Persons”) of the Subadviser shall be liable for any error of judgment or mistake of law, or for any loss suffered by the Fund or its shareholders in connection with the matters to which this Agreement relates; provided that, except as set forth in the succeeding paragraph, no provision of this Agreement shall be deemed to protect the Subadviser or its Related Persons against any liability to which it might otherwise be subject by reason of any willful misfeasance, bad faith or negligence or the reckless disregard of the Subadviser’s obligations and duties (each of which is hereby referred to as a “Culpable Act”) under this Agreement.
Neither the Subadviser nor its Related Persons shall be liable for any error of judgment or mistake of law, or for any loss suffered by the Adviser or its Related Persons in connection with the matters to which this Agreement relates; provided that this provision shall not be deemed to protect the Subadviser or its Related Persons against any liability to which it might otherwise be subject by reason of any Culpable Act by the Subadviser or its Related Persons.
35
The Adviser shall indemnify the Subadviser and its Related Persons and hold them harmless from and against any and all actions, suits or claims whether groundless or meritorious and from and against any and all losses, damages, costs, charges, reasonable counsel fees, payments, expenses and liabilities (collectively, “Damages”) arising directly or indirectly out of or in connection with the performance of services by the Subadviser or its Related Persons hereunder to the extent such Damages result from any Culpable Act of the Adviser or any Related Person of the Adviser.
The Subadviser shall indemnify the Adviser and its Related Persons from and against any Damages arising directly or indirectly out of or in connection with the performance of services by the Adviser or its Related Persons under this Agreement or the Advisory Agreement, in each case, to the extent such Damages result from any Culpable Act of the Subadviser or any of its Related Persons.
7.
| 7. | REPRESENTATIONS AND WARRANTIES. |
(a)Adviser. The Adviser represents and warrants to the Subadviser that (i) the retention of the Subadviser by the Adviser as contemplated by this Agreement is authorized by the respective governing documents of the Trust and the Adviser; (ii) the execution, delivery and performance of each of this Agreement and the Advisory Agreement does not violate any obligation by which the Trust or the Adviser or their respective property is bound, whether arising by contract, operation of law or otherwise; and (iii) each of this Agreement and the Advisory Agreement has been duly authorized by appropriate action of the Trust and the Adviser and when executed and delivered by the Adviser will be the legal, valid and binding obligation of the Trust and the Adviser, enforceable against the Trust and Adviser in accordance with its terms hereof subject, as to enforcement, to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and to general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or law).
(b)Subadviser. The Subadviser represents and warrants to the Adviser that (i) the retention of the Subadviser by the Adviser as contemplated by this Agreement is authorized by the Subadviser’s governing documents; (ii) the execution, delivery and performance of this Agreement does not violate any obligation by which the Subadviser or its property is bound, whether arising by contract, operation of law or otherwise; and (iii) this Agreement has been duly authorized by appropriate action of the Subadviser and when executed and delivered by the Subadviser will be the legal, valid and binding obligation of the Subadviser, enforceable against the Subadviser in accordance with its terms hereof, subject, as to enforcement, to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and to general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or law).
8. DURATION AND TERMINATION OF THIS AGREEMENT.
26
| 8. | DURATION AND TERMINATION OF THIS AGREEMENT. |
(a)Duration. This Agreement shall become effective with respect to the Fund on [ ][______] (the “Effective Date”). Unless terminated as herein provided, this Agreement shall remain in full force and effect for two years from the Effective Date. Subsequent to such initial periods of effectiveness, this Agreement shall continue in full force and effect for periods of one year thereafter with respect to the Fund so long as such continuance with respect to the Fund is approved at least annually (a) by either the Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, and (b) in either event, by the vote of a majority of the Trustees of the Trust who are not parties to this Agreement or “interested persons” (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval.approval to the extent required by applicable law.
(b)Amendment. This Agreement may be amended by agreement of the parties, provided that the amendment shall be approved both by the vote of a majority of the Trustees of the Trust, including a majority of the Trustees who are not parties to this Agreement or interested persons of any such party to this Agreement cast in person at a meeting called for that purpose to the extent required by applicable law, and, to the extent required by the 1940 Act, by the holders of a majority of the outstanding voting securities of the Trust in the manner required by the 1940 Act.
36
(c)Termination. This Agreement may be terminated with respect to the Fund at any time, without payment of any penalty, (i) by vote of the Trustees of the Trust or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, (ii) by the Adviser, or (iii) by the Subadviser, in each case on sixty (60) days’ prior written notice to the other party. Upon the effective date of termination of this Agreement, the Subadviser shall deliver all books and records of the Trust or the Fund held by it (i) to such entity as the Trust may designate as a successor, or (ii) to the Adviser.
(d)Automatic Termination. This Agreement shall automatically and immediately terminate in the event of its assignment (as defined in the 1940 Act). The Subadviser shall notify the Trust in writing sufficiently in advance of any proposed change of control, as defined in Section 2(a)(9) of the 1940 Act, as will enable the Trust to consider whether an assignment under the 1940 Act will occur, and to take the steps necessary to enter into a new contract with the Subadviser or such other steps as the Trustees of the Trust may deem appropriate.
(e)Approval, Amendment or Termination by Individual Fund. Any approval, amendment or termination of this Agreement by the holders of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund shall be effective to continue, amend or terminate this Agreement with respect to any such Fund notwithstanding (i) that such action has not been approved by the holders of a majority of the outstanding voting securities of any other Fund affected thereby, and (ii) that such action has not been approved by the vote of a majority of the outstanding voting securities of the Trust, unless such action shall be required by any applicable law or otherwise.
9.
| 9. | SERVICES NOT EXCLUSIVE. |
The services of the Subadviser to the Adviser in connection with the Fund hereunder are not to be deemed exclusive, and the Subadviser shall be free to render similar services to others so long as its services hereunder are not impaired thereby. It is understood that the persons employed by the Subadviser to assist in the performance of its duties hereunder will not devote their full time to such services and nothing hereunder contained shall be deemed to limit or restrict the right of the Subadviser to engage in or devote time and attention to other businesses or to render services of whatever kind or nature.
10.
27
| 10. | RESERVATION OF NAME. |
The parties hereby acknowledge that AMG Funds LLC has reserved the right to grant the nonexclusive use of the name “AMG” or “AMG Funds” or any derivative thereof to any other investment company, investment adviser, distributor or other business enterprise, and to withdraw from the Trust the use of the name “AMG” or “AMG Funds.” The name “AMG” or “AMG Funds” will continue to be used by the Trust so long as such use is mutually agreeable to AMG Funds LLC and the Trust. The Subadviser and the Trust acknowledge that the Trust shall cease using the name “AMG” or “AMG Funds” as a part of the Trust’s name and that the Subadviser, the Trust or the Fund, or any of their affiliates, shall not promote the Trust or the Fund or conduct the business of the Trust or the Fund in any way in such name if this Agreement is terminated for any reason and the Adviser does not expressly consent in writing to such use of the name “AMG” or “AMG Funds.” Future names adopted by the Trust for itself or the Fund, insofar as such names include identifying words requiring the consent of the Adviser, shall be the property of the Adviser and shall be subject to the same terms and conditions. Notwithstanding the above, AMG Funds LLC consents to the use of its name, including in connection with the name of the Trust or the Fund, in a representative client list in connection with the completion of marketing materials.
| 11. | CONFIDENTIALITY. |
The Subadviser shall treat as confidential all information pertaining to the Fund and actions of the Fund, the Adviser and the Subadviser, provided that it may disclose such information to those third parties required to carry out its duties hereunder, and the Adviser shall treat as confidential all information furnished to the Fund or the Adviser by the Subadviser in connection with its duties under the Agreement, provided that it may disclose such information to those third parties required to carry out its duties hereunder (collectively, the “Confidential Information”). The term “Confidential Information” will not include information which (i) is or becomes publicly available other than as a result of a disclosure by a receiving party in violation of this Agreement, (ii) is or becomes available to a receiving party on a nonconfidential basis from a source which, to the best knowledge of the receiving party after reasonable inquiry, is not prohibited from disclosing such information by a legal, contractual or fiduciary obligation to the other, or (iii) is independently developed without reference to or reliance on the Confidential Information.
In the event that a party is requested pursuant to, or required by, applicable law, regulation or legal process to disclose any of the Confidential Information, such party will promptly notify the disclosing party so that it may seek a protective order or other appropriate remedy or, in its sole discretion, waive compliance with the terms of this Agreement. In the event that no such protective order or other remedy is obtained, or a party does not waive compliance with the terms of this Agreement, a party will furnish only that portion of the Confidential Information which it is advised by counsel is legally required and will exercise all reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information.
| 12. |
|
(a)Notices. All notices or other communications given under this Agreement shall be made by guaranteed overnight delivery, telecopy or certified mail; notice is effective when received. Notice shall be given to the parties at the following addresses:
The Adviser: | AMG Funds LLC | |
600 Steamboat Road, Suite 300 | ||
Greenwich, Connecticut 06830 | ||
Facsimile No.: | ||
Attention: Legal and Compliance Department |
28
Subadviser: | GW&K Investment Management, LLC | |
222 Berkeley Street | ||
Boston, Massachusetts 02116 | ||
Facsimile No.: | ||
Attention: Compliance Officer |
(b)Severability. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder shall not be thereby affected.
(c)Applicable Law. This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Massachusetts.
(d)Counterparties. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
(e)Entire Agreement. This Agreement states the entire agreement of the parties hereto, and is intended to be the complete and exclusive statement of the terms hereof. It may not be added to or changed orally, and may not be modified or rescinded except by a writing signed by the parties hereto and in accordance with the 1940 Act, when applicable.
3829
IN WITNESS WHEREOF, the Adviser and the Subadviser have caused this Agreement to be executed as of the date first set forth above.
| AMG FUNDS LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
| GW&K | ||
| By: | ||
| Name: | ||
| Title: | ||
Acknowledged and agreed to as of the date first set forth above with respect to the Trust’s obligations under this Agreement.
| AMG FUNDS | ||
| By: | ||
| Name: | ||
| Title: | ||
3930
SCHEDULE A
AMG GW&K Trilogy Emerging Wealth EquitySmall Cap Value Fund
For services provided to the Fund Account, the Adviser will pay a base monthly fee for each calendar month at an annual rate of 0.425% of the average net assets in the Fund Account during the month. Average assets shall be determined using the average daily net assets in the Fund Account during the month. The Adviserfee shall be pro-rated for any calendar month during which the contract is in effect for only a portion of the month.
31
APPENDIX B
Filed pursuant to 497(e)
File Nos. 333-84639 and 811-09521
AMG FUNDS
AMG Managers Skyline Special Equities Fund
Supplement dated December 4, 2020 to the Prospectus, dated May 1, 2020
The following information supplements and supersedes any information to the contrary relating toAMG Managers Skyline Special Equities Fund (the “Fund”), a series of AMG Funds (the “Trust”), contained in the Fund’s Prospectus (the “Prospectus”), dated as noted above.
At a meeting held on December 3, 2020 (the “Meeting”), the Trust’s Board of Trustees (the “Board”) approved the appointment of GW&K Investment Management, LLC (“GW&K” or the “Subadviser”) as the subadviser to the Fund on an interim basis to replace Skyline Asset Management, L.P. (“Skyline”), effective December 4, 2020 (the “Implementation Date”). The appointment of GW&K was pursuant to an interim subadvisory agreement between AMG Funds LLC (“AMGF”) and GW&K (the “Interim Subadvisory Agreement”), to be effective until the earlier of 150 days after the termination of the former subadvisory agreement between AMGF and Skyline with respect to the Fund (the “Former Subadvisory Agreement”), which occurred on December 4, 2020, or the approval of a new subadvisory agreement between AMGF and GW&K by the Board and Fund shareholders. At the Meeting, the Board also approved the longer-term appointment of GW&K as the subadviser to the Fund, a new subadvisory agreement between AMGF and GW&K (the “New Subadvisory Agreement”), and the submission of the New Subadvisory Agreement to Fund shareholders for approval. The rate of compensation to be received by GW&K under the Interim Subadvisory Agreement approved by the Board is lower than the rate of compensation that Skyline would have received under the Former Subadvisory Agreement.
In connection with the hiring of GW&K, effective as of the Implementation Date, the Fund (i) changed its name from AMG Managers Skyline Special Equities Fund to AMG GW&K Small Cap Value Fund, (ii) made changes to its investment objective, principal investment strategies and principal risks, and (iii) removed the Russell 2000® Index as the Fund’s secondary benchmark. Also in connection with the hiring of GW&K, effective as of the Implementation Date, (i) the management fee for the Fund was reduced from 0.73% to 0.70%, (ii) the Fund’s existing contractual expense limitation agreement with AMGF was replaced with a new contractual expense limitation agreement with AMGF pursuant to which AMGF has agreed, through at least May 1, 2022, to limit total annual operating expenses (exclusive of taxes, interest (including interest incurred in connection with bank and custody overdrafts and in connection with securities sold short), shareholder servicing fees, distribution and service (12b-1) fees, brokerage commissions and other transaction costs, dividends payable with respect to securities sold short, acquired fund fees and expenses, and extraordinary expenses) of the Fund to the annual rate of 0.90% of the Fund’s average daily net assets, subject to later reimbursement by the Fund in certain circumstances, and (iii) the amount of shareholder servicing fees Class I shares of the Fund are authorized to pay to financial intermediaries was decreased from 0.15% to 0.05%. AMGF pays a portion of the management fee to the Fund’s subadviser for its services.
In addition, effective as of the Implementation Date, the Prospectus is amended as follows:
All references to the name of the Fund shall refer to AMG GW&K Small Cap Value Fund. All references to Skyline shall be deleted and all references to the subadviser to the Fund shall refer to GW&K. All references to William F. Fiedler, Michael Maloney and Mark N. Odegard as portfolio managers of the Fund shall be deleted and all references to the portfolio managers of the Fund shall refer to Jeffrey O. Whitney, CFA and Daniel L. Miller, CFA.
The section titled “Summary of the Fund – AMG Managers Skyline Special Equities Fund – Investment Objective” on page 3 is deleted and replaced with the following:
32
INVESTMENT OBJECTIVE
The investment objective of AMG GW&K Small Cap Value Fund (the “Fund”) is to seek to provide long-term capital appreciation.
The sections under “Summary of the Fund – AMG Managers Skyline Special Equities Fund” titled “Fees and Expenses of the Fund” and “Expense Example” on page 3 are deleted and replaced with the following:
FEES AND EXPENSES OF THE FUND
The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. If you transact in Class I shares of the Fund through a financial intermediary, you may be required to pay a commission to the financial intermediary for effecting such transactions. Such commissions are charged by the financial intermediary and are not reflected in the table or Expense Example below.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class N | Class I | Class Z | ||||
Management Fee1 | 0.70% | 0.70% | 0.70% | |||
| Distribution and Service (12b-1) Fees | None | None | None | |||
Other Expenses1 | 0.50% | 0.30% | 0.25% | |||
Acquired Fund Fees and Expenses | 0.01% | 0.01% | 0.01% | |||
Total Annual Fund Operating Expenses2 | 1.21% | 1.01% | 0.96% | |||
Fee Waiver and Expense Reimbursements3 | (0.05)% | (0.05)% | (0.05)% | |||
Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements2,3 | 1.16% | 0.96% | 0.91% |
| 1 | Expense information has been restated to reflect current fees. |
| 2 | The Total Annual Fund Operating Expenses and Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements do not correlate to the ratios of expenses to average net assets in the Financial Highlights section of this Prospectus, which reflect only the operating expenses of the Fund and do not include fees and expenses of any acquired fund. |
| 3 | AMG Funds LLC (the “Investment Manager”) has contractually agreed, through at least May 1, 2022, to waive management fees and/or pay or reimburse the Fund’s expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements (exclusive of taxes, interest (including interest incurred in connection with bank and custody overdrafts and in connection with securities sold short), shareholder servicing fees, distribution and service (12b-1) fees, brokerage commissions and other transaction costs, dividends payable with respect to securities sold short, acquired fund fees and expenses, and extraordinary expenses) of the Fund to the annual rate of 0.90% of the Fund’s average daily net assets (this annual rate or such other annual rate that may be in effect from time to time, the “Expense Cap”), subject to later reimbursement by the Fund in certain circumstances. In general, for a period of up to 36 months after the date any amounts are paid, waived or reimbursed by the Investment Manager, the Investment Manager may recover such amounts from the Fund, provided that such repayment would not cause the Fund’s Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements (exclusive of the items noted in the parenthetical above) to exceed either (i) the Expense Cap in effect at the time such amounts were paid, waived or reimbursed, or (ii) the Expense Cap in effect at the time of such repayment by the Fund. The contractual expense limitation may only be terminated in the event the Investment Manager or a successor ceases to be the investment manager of the Fund or a successor fund, by mutual agreement between the Investment Manager and the AMG Funds Board of Trustees or in the event of the Fund’s liquidation unless the Fund is reorganized or is a party to a merger in which the surviving entity is successor to the accounting and performance information of the Fund. |
EXPENSE EXAMPLE
This Example will help you compare the cost of investing in the Fund to the cost of investing in other mutual funds. The Example makes certain assumptions. It assumes that you invest $10,000 as an initial investment in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. It also assumes that your investment has a 5% total return each year and the Fund’s operating expenses remain the same. The Example includes the Fund’s contractual expense limitation through May 1, 2022. Although your actual costs may be higher or lower, based on the above assumptions, your costs would be:
33
| 1 Year | 3 Years | 5 Years | 10 Years | |||||||||||||
Class N | $ | 118 | $ | 374 | $ | 655 | $ | 1,456 | ||||||||
Class I | $ | 98 | $ | 311 | $ | 548 | $ | 1,227 | ||||||||
Class Z | $ | 93 | $ | 296 | $ | 521 | $ | 1,168 | ||||||||
The section titled “Summary of the Fund – AMG Managers Skyline Special Equities Fund – Principal Investment Strategies” beginning on page 3 is deleted and replaced with the following:
PRINCIPAL INVESTMENT STRATEGIES
Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of small-capitalization companies. Small-capitalization companies are those with a market capitalization at the time of purchase of less than $5 billion or otherwise within the range of capitalizations of companies in the Russell 2000® Index, the S&P SmallCap 600 Index, or the Dow Jones U.S. Small-Cap Total Stock Market Index. As of May 8, 2020, the date of the latest reconstitution of the Russell 2000® Index (implemented by the Index June 26, 2020), the range of market capitalizations of the Russell 2000® Index was $94.8 million to $4.4 billion. As of October 31, 2020, the range of market capitalizations of the S&P SmallCap 600 Index was $40.99 million to $4.33 billion. As of October 31, 2020, the range of market capitalizations of the Dow Jones U.S. Small-Cap Total Stock Market Index was $40.99 million to $12.34 billion. These capitalization ranges will change over time. The Fund may continue to hold securities of a portfolio company that subsequently appreciates above the small-capitalization threshold. Because of this, the Fund may have less than 80% of its net assets in equity securities of small-capitalization companies at any given time. The Fund may also invest in real estate investment trusts (“REITs”).
Through its fundamental research and proprietary screening, GW&K Investment Management, LLC, the subadviser to the Fund (“GW&K” or the “Subadviser”), seeks to identify well-managed, undervalued companies with improving fundamental and financial characteristics. GW&K seeks to assemble a portfolio of securities diversified as to companies and sectors.
The section titled “Summary of the Fund – AMG Managers Skyline Special Equities Fund – Principal Risks” on page 4 is revised to reflect that the Fund is subject to the following additional principal risk:
Real Estate Industry Risk—investments in the Fund may be subject to many of the same risks as a direct investment in real estate. The stock prices of companies in the real estate industry, including REITs, are typically sensitive to changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use, and rents, as well as the management skill and creditworthiness of the issuer. REITs also depend generally on their ability to generate cash flow to make distributions to shareholders or unitholders and are subject to the risk of failing to qualify for favorable tax treatment under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).
Also with respect to the section titled “Summary of the Fund – AMG Managers Skyline Special Equities Fund – Principal Risks” on page 4,
“Sector Risk” is deleted and replaced with the following:
Sector Risk—issuers and companies that are in similar industry sectors may be similarly affected by particular economic or market events; to the extent the Fund has substantial holdings within a particular sector, the risks associated with that sector increase. Stocks in the financials sector may comprise a significant portion of the Fund’s portfolio. Unique risks of the financials sector include, but are not limited to, government regulation uncertainty, yield curve fluctuation, asset flow fluctuation, and capital market fluctuations.
34
Also with respect to the section titled “Summary of the Fund – AMG Managers Skyline Special Equities Fund – Principal Risks” on page 4, the principal risks shall appear in the following order: Market Risk; Small-Capitalization Stock Risk; Value Stock Risk; Management Risk; Liquidity Risk; Real Estate Industry Risk; and Sector Risk.
In the section titled “Summary of the Fund – AMG Managers Skyline Special Equities Fund – Performance” beginning on page 4, the first paragraph is deleted and replaced with the following:
The following performance information illustrates the risks of investing in the Fund by showing changes in the Fund’s performance from year to year and by showing how the Fund’s performance compares to that of a broad-based securities market index. As always, past performance of the Fund (before and after taxes) is not an indication of how the Fund will perform in the future.
As of December 4, 2020, GW&K was appointed as subadviser to the Fund and the Fund changed its name to “AMG GW&K Small Cap Value Fund” and adopted its current investment strategies. The Fund’s performance information for periods prior to December 4, 2020 reflects the Fund’s investment strategy that was in effect at that time and may have been different had the Fund’s current investment strategy been in effect. Effective February 27, 2017, outstanding Class S shares of the Fund (formerly shares of the Fund’s sole share class, which were reclassified and redesignated as Class S shares on October 1, 2016) were renamed Class N shares.
The Average Annual Total Returns table in the section titled “Summary of the Fund – AMG Managers Skyline Special Equities Fund – Performance” beginning on page 4 is deleted and replaced with the following:
Average Annual Total Returns as of 12/31/19
AMG GW&K Small Cap Value Fund | 1 Year | 5 Years | 10 Years | Since Inception1 | ||||
Class N Return Before Taxes | 28.64% | 5.18% | 11.58% | – | ||||
Class N Return After Taxes on Distributions | 26.61% | 3.55% | 10.58% | – | ||||
Class N Return After Taxes on Distributions and Sale of Fund Shares | 18.40% | 3.78% | 9.46% | – | ||||
Class I Return Before Taxes | 28.86% | – | – | 4.26% | ||||
Class Z Return Before Taxes | 28.94% | – | – | 4.33% | ||||
Russell 2000® Value Index (reflects no deduction for fees, expenses or taxes) | 22.39% | 6.99% | 10.56% | 4.51% |
| 1 | Class I, Class Z and Index performance shown reflects performance since the inception date of the Fund’s Class I and Class Z shares on February 24, 2017. |
The section titled “Summary of the Fund – AMG Managers Skyline Special Equities Fund – Portfolio Management” on page 5 is deleted and replaced with the following:
PORTFOLIO MANAGEMENT
Investment Manager
AMG Funds LLC
SubadviserGW&K Investment Management, LLC
(pursuant to an interim subadvisory agreement in anticipation of shareholder approval of a definitive subadvisory agreement)
35
Portfolio Managers
Jeffrey O. Whitney, CFA Partner and Equity Portfolio Manager of GW&K; Portfolio Manager of the Fund since December 2020.
Daniel L. Miller, CFA
Partner and Director of Equities of GW&K; Portfolio Manager of the Fund since December 2020.
The section titled “Additional Information About the Fund – AMG Managers Skyline Special Equities Fund – Additional Information About the Fund’s Principal Investment Strategies” on page 7 is deleted and replaced with the following:
ADDITIONAL INFORMATION ABOUT THE FUND’S PRINCIPAL INVESTMENT STRATEGIES
Through its fundamental research and proprietary screening, GW&K seeks to identify well-managed, undervalued companies with improving fundamental and financial characteristics. The Fund seeks to hold securities for the long term until value is recognized in the market place. The Fund aims to participate in rising markets and defend in down markets.
GW&K utilizes its proprietary screening process to narrow the investment universe of small-capitalization companies. GW&K’s proprietary screening process evaluates:
Valuation, uncovering undervalued stocks;
Quality, identifying sustainable and reliable earnings; and
Change, focusing on positive trends.
In selecting companies for the Fund, GW&K seeks to identify firms with the following key attributes:
Attractive valuation;
Motivated leadership, high-quality management;
Companies in stable or improving markets;
Improving financial metrics; and
Companies with a positive catalyst for change
GW&K seeks to manage risk through its proprietary screening process, rigorous valuation discipline, in-depth fundamental research and portfolio construction.
Various factors may lead GW&K to consider selling a particular security, such as the company’s valuation (for example, when GW&K’s estimate of intrinsic value is reached), management (for example, changes in the management team or corporate governance issues), market positioning (for example, a deterioration of fundamentals), financial stability (for example, increased levels of debt or declining profit margins) and/or growth profile (for example, a deteriorating earnings outlook).
Until February 2, 2021, under normal circumstances, the Fund will invest at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities. The Fund provided shareholders with at least 60 days’ prior written notice that this policy will be removed on February 2, 2021. It will be removed in light of the Fund’s adoption of a policy that, under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of small-capitalization companies. The Fund will provide shareholders with at least 60 days’ prior written notice of any change in this policy.
The Fund’s compliance with its investment limitations and requirements described in the Prospectus is usually determined at the time of investment. If such percentage limitation is complied with at the time of an investment, any subsequent change in percentage resulting from a change in values or assets, or a change in market capitalization of a company in which the Fund invests, will not constitute a violation of that limitation.
36
The first and second paragraphs in the section titled “Additional Information About the Fund – AMG Managers Skyline Special Equities Fund – Additional Information About the Fund’s Expenses and Performance” on page 8 are deleted and replaced with the following:
Under “Fees and Expenses of the Fund” in the Fund’s summary section, because Class N and Class I shares are authorized to pay up to 0.25% and 0.05% in shareholder servicing fees, respectively, Total Annual Fund Operating Expenses and Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements may fluctuate from year-to-year based on the actual amount of shareholder servicing fees incurred. Shareholder servicing fees paid by Class N and Class I shares are reflected in “Other Expenses” in the Annual Fund Operating Expenses table for such classes. Please see “Choosing a Share Class” for more information on the Fund’s shareholder servicing fees. The Fund’s annual operating expenses may vary throughout the period and from year to year. The Fund’s expenses for the current fiscal year may be different than the expenses listed in the Fund’s fee and expense table above.
As discussed under “Fees and Expenses of the Fund” in the Fund’s summary section, the Investment Manager has contractually agreed, through at least May 1, 2022, to waive management fees and/or pay or reimburse the Fund’s expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements (exclusive of taxes, interest (including interest incurred in connection with bank and custody overdrafts and in connection with securities sold short), shareholder servicing fees, distribution and service (12b-1) fees, brokerage commissions and other transaction costs, dividends payable with respect to securities sold short, acquired fund fees and expenses, and extraordinary expenses) of the Fund to the annual rate of 0.90% of the Fund’s average daily net assets (this annual rate or such other annual rate that may be in effect from time to time, the “Expense Cap”), subject to later reimbursement by the Fund in certain circumstances. In general, for a period of up to 36 months after the date any amounts are paid, waived or reimbursed by the Investment Manager, the Investment Manager may recover such amounts from the Fund, provided that such repayment would not cause the Fund’s Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursements (exclusive of the items noted in the parenthetical above) to exceed either (i) the Expense Cap in effect at the time such amounts were paid, waived or reimbursed, or (ii) the Expense Cap in effect at the time of such repayment by the Fund. The contractual expense limitation may only be terminated in the event the Investment Manager or a successor ceases to be the investment manager of the Fund or a successor fund, by mutual agreement between the Investment Manager and the AMG Funds Board of Trustees or in the event of the Fund’s liquidation unless the Fund is reorganized or is a party to a merger in which the surviving entity is successor to the accounting and performance information of the Fund.
The section titled “Additional Information About the Fund – Summary of the Fund’s Principal Risks” beginning on page 9 is revised to reflect that the Fund is subject to the following additional principal risk:
REAL ESTATE INDUSTRY RISK
The stock prices of companies in the real estate industry, including REITs, are typically sensitive to changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use, and rents, as well as the management skill and creditworthiness of the issuer. Companies in the real estate industry may also be subject to liabilities under environmental and hazardous waste laws that could negatively affect their value. These factors may reduce the value of the Fund’s investments in REITs and the real estate industry. REITs depend generally on their ability to generate cash flow to make distributions to shareholders or unitholders, which may be subject to defaults by borrowers and self-liquidations, and some REITs may have limited diversification. REITs are also subject to the risk of failing to qualify for favorable tax treatment under the Internal Revenue Code. Pursuant to proposed regulations on which the Fund may rely, distributions by the Fund to its shareholders that the Fund properly reports as “section 199A dividends,” as defined and subject to certain conditions described in the SAI, are treated as qualified REIT dividends in the hands of non-corporate share-holders. See “Certain U.S. Federal Income Tax Matters – REITs” in the SAI for further details.
Also with respect to the section titled “Additional Information About the Fund – Summary of the Fund’s Principal Risks” beginning on page 9, “Sector Risk” is deleted and replaced with the following:
37
SECTOR RISK
Issuers and companies that are in similar industry sectors may be similarly affected by particular economic or market events. As a result, the Fund’s performance could be more volatile than the performance of a fund that is more diversified across industry sectors. Stocks in the financials sector may comprise a significant portion of the Fund’s portfolio. Unique risks of the financials sector include, but are not limited to, government regulation uncertainty, yield curve fluctuation, asset flow fluctuation, and capital market fluctuations.
Also with respect to the section titled “Additional Information About the Fund – Summary of the Fund’s Principal Risks” beginning on page 9, the principal risks shall appear in the following order: Market Risk; Small-Capitalization Stock Risk; Value Stock Risk; Management Risk; Liquidity Risk; Real Estate Industry Risk; and Sector Risk.
In the section titled “Additional Information About the Fund – Fund Management” beginning on page 10, the third and fourth paragraphs are deleted and replaced with the following:
GW&K has day-to-day responsibility for managing the Fund’s portfolio pursuant to an interim Subadvisory Agreement that became effective on December 4, 2020 and will remain in effect for 150 days or until shareholders of the Fund approve a definitive Subadvisory Agreement with GW&K, if earlier. GW&K, located at 222 Berkeley Street, Boston, Massachusetts 02116, has advised individual and institutional clients since 1974 and, as of September 30, 2020, had assets under management of approximately $47 billion. AMG indirectly owns a majority interest in GW&K.
Jeffrey O. Whitney, CFA and Daniel L. Miller, CFA are the portfolio managers jointly and primarily responsible for the day-to-day management of the Fund’s portfolio, and have managed the Fund since December 2020. Mr. Whitney joined GW&K in 2005 and is a Partner and Equity Portfolio Manager. He is a member of the GW&K Equity team analyzing small cap companies and is also a member of the firm’s Investment Committee. Prior to joining GW&K, Mr. Whitney was an Assistant Portfolio Manager at ING Investment Management and a Vice President and Equity Analyst at J.P. Morgan Fleming Asset Management. Mr. Miller joined GW&K in December 2008 as Partner and Director of Equities, responsible for overseeing all aspects of GW&K’s equity group, including portfolio management, research and trading. He is a member of GW&K’s Investment Committee. Mr. Miller spent 21 years at Putnam Investments, where he was Chief Investment Officer for the Specialty Growth Group from 1996 to 2004. After retiring from Putnam Investments in 2004, Mr. Miller worked as an investment consultant and financial consultant for various companies from 2004 to 2008, until he joined GW&K.
The Fund is obligated by its Investment Management Agreement to pay an annual gross investment Subadvisorymanagement fee equal to 0.45% per annumthe Investment Manager of 0.70% of the average daily net assets of the Fund. Such fee shall be accrued daily and paid as soon as practical after the last day of each calendar month.
The Subadviser may voluntarily waive all orInvestment Manager, in turn, pays GW&K a portion of this fee for its services as Subadviser. Under a separate Administration Agreement with the Subadvisory fee payable from time to time hereunder. The Adviser agrees that, during any period in whichFund, the Subadviser has voluntarily waived all orInvestment Manager provides a portionvariety of the Subadvisory fee hereunder, if requested by the Subadviser, the Adviser will waive an equal amount (or such lesser amount as the Subadviser may request) of the advisory fee payable by the Trust to the Adviser with respectadministrative services to the Fund underand receives an annual administrative fee from the Advisory Agreement.Fund for these services of 0.15% of the Fund’s average daily net assets.
The Subadviser agrees that, during any periodsection titled “Shareholder Guide – Choosing a Share Class – Class I Shares” on page 13 is deleted and replaced with the following:
CLASS I SHARES
Class I shares have no up-front sales charges or deferred sales charges. Your entire amount invested purchases Fund shares at the Class I’s NAV. Shareholders may bear shareholder servicing fees of up to 0.05% for shareholder servicing provided by financial intermediaries, such as broker-dealers (including fund supermarket platforms), banks, and trust companies. See “Investing Through an Intermediary” below for more information on shareholder servicing fees paid to financial intermediaries. The Class I shares do not pay distribution (12b-1) fees. Shareholders who transact in which the Adviser has waived all orClass I shares through a portion of the advisory fee payable by the Trustfinancial intermediary may be required to pay a commission to the Adviser under the Advisory Agreement with respect to the Fund, if requested by the Adviser, the Subadviser will waive a pro rata share (orfinancial intermediary for effecting such lesser share as the Adviser may request) of the Subadvisory fee payable hereunder with respect to the Fund, such that the amount waived by the Subadviser shall bear the same ratio to the total amount of the subadvisory fees payable hereunder with respect to the Fund as the amount waived by the Adviser bears to all fees payable to the Adviser under the Advisory Agreement with respect to the Fund.transactions.
The Adviser agrees that, in addition to any amounts otherwise payable to the Subadviser with respect to the Fund hereunder, the Adviser shall pay the Subadviser all amounts previously waived by the Subadviser with respect to the Fund to the extent that such amounts are subsequently paid by the Trust to the Adviser under the Advisory Agreement, it being further agreed that, with respect to any such amounts subsequently paid by the Trust to the Adviser, the amount to be paid by the Adviser to the Subadviser shall bear the same ratio to the total amount paid by the Trust as the total amount previously waived by the Subadviser bears to the total amount of the fees previously waived by the Adviser under the Advisory Agreement with respect to the Fund.
The Subadviser agrees that, during any period in which the Adviser has agreed to pay or reimburse the Trust for expenses of the Fund, if requested by the Adviser, the Subadviser shall pay or reimburse the Trust for the entire amount of all such expenses of the Fund (or such lesser amount as the Adviser may request). The Adviser agrees that, in addition to any amounts otherwise payable to the Subadviser with respect to the Fund hereunder, the Adviser shall pay the Subadviser all amounts previously paid or reimbursed by the Subadviser with respect to the Fund to the extent that such amounts are subsequently paid by the Trust to the Adviser under the Advisory Agreement.PLEASE KEEP THIS SUPPLEMENT FOR FUTURE REFERENCE
4038
Filed pursuant to 497(e)
File Nos. 333-84639 and 811-09521
AMG FUNDS
AMG Managers Skyline Special Equities Fund
Supplement dated December 4, 2020 to the Prospectus, dated May 1, 2020
The following information supplements and supersedes any information to the contrary relating toAMG Managers Skyline Special Equities Fund (the “Fund”), a series of AMG Funds, contained in the Fund’s Prospectus, dated as noted above.
IMPORTANT NOTICE REGARDING CHANGE IN INVESTMENT POLICY
Effective as of February 2, 2021, the Fund’s policy to, under normal circumstances, invest at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities will be removed.
PLEASE KEEP THIS SUPPLEMENT FOR FUTURE REFERENCE
39
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for signing proxy cards may be of assistance to you and may help to avoid the time and expense involved in validating your vote if you fail to sign your proxy card properly.
| 1. | Individual Accounts: Sign your name exactly as it appears on the proxy card. |
| 2. | Joint Accounts: Either party may sign, but the name of the party signing should conform exactly to a name shown on the proxy card. |
| 3. | All Other Accounts: The capacity of the individual signing the proxy card should be indicated unless it is reflected in the name of the proxy card. For example: |
Registration | Valid Signature | |
Corporate Accounts | ||
(1) ABC Corp. | (1) ABC Corp. John Doe, Treasurer | |
(2) ABC Corp. c/o John Doe, Treasurer | (2) John Doe, Treasurer | |
(3) ABC Corp. Profit Sharing Plan | (3) John Doe, Trustee | |
Trust Accounts | ||
(1) ABC Trust | (1) Jane Doe, Trustee | |
(2) Jane Doe, Trustee u/t/d 12/28/78 | (2) Jane Doe | |
Custodial Accounts | ||
(1) John Smith, Custodian f/b/o John Smith, Jr. UGMA | (1) John Smith | |
(2) John Smith | (2) John Smith, Executor | |
AMG Funds
AMG GW&K Small Cap Value Fund
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN.PLEASE CAST YOUR PROXY VOTETODAY!
SHAREHOLDER’S REGISTRATION PRINTED HERE
***BOXES FOR TYPSET PURPOSES ONLY***
THIS BOX AND BOX ABOVE ARE NOT PRINTED ON ACTUAL PROXY BALLOTS.
PROXY CARD
AMG FUNDS
AMG GW&K Trilogy Emerging Markets Equity FundSMALL CAP VALUE FUND
PROXY FOR A COMBINED SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 16, 2019FEBRUARY 25, 2021
The undersigned, revoking all previous proxies, if any, with respect to the Shares (defined below), hereby appoints Thomas G. Disbrow, Mark J. Duggan and Maureen A. Meredith proxies, each with full power of substitution, to vote at the combined Special Meeting of Shareholders and at any adjournments or postponements thereof (the “Meeting”) of AMG GW&K Trilogy Emerging Markets EquitySmall Cap Value Fund (the “Markets Fund”“Fund”) (the shares of beneficial interest of the Markets Fund, the “Shares”) to be held on February 25, 2021 at the offices of AMG Funds LLC (the “Investment Manager”) on April 16, 2019 at 3:11:00 p.m.,a.m. Eastern Time, or at any adjournmentadjournments or postponements thereof, upon the Proposals described in the Notice of Combined Special Meeting and accompanying Proxy Statement, which have been received by the undersigned. In light of the COVID-19 pandemic, the Meeting will be a virtual meeting held via telephone only.
If you wish to attend the Meeting, please register by sending an email to attendameeting@astfinancial.com and provide us with your full name and address in order to receive the conference call dial-in information. Please use the email subject line “AMG GW&K Small Cap Value Fund”, and include in your email your full name along with your request for the conference line number. That number will be sent back to you, allowing you to call into the Meeting. We encourage you to vote your shares prior to the Meeting.
Do you have questions?If you have any questions about how to vote your proxy or about the meeting in general, please call toll-free (800)848-3374.769-4414. Representatives are available to assist youMonday through Friday 9 a.m. to 1011 p.m. Eastern Time.
Important Notice Regarding the Availability of Proxy Materials for the Combined Special Meeting:
The Notice of Combined Special Meeting and Proxy Statement are available at
https://www.proxyonline.com/vote.proxyonline.com/AMG/docs/AMG2019.pdfGWK_SmallCapFundValue.pdf
| [PROXY ID NUMBER HERE] | [BAR CODE HERE] | [CUSIP HERE] |
AMG GW&K Trilogy Emerging Markets Equity FundSMALL CAP VALUE FUND
YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. The undersigned acknowledges receipt with this Proxy of a copy of the Notice of Combined Special Meeting of Shareholders and the Proxy Statement. Your signature(s) on this Proxy should be exactly as your name(s) appear on this Proxy. If the shares are held jointly, each holder should sign this Proxy.Attorneys-in-fact, executors, administrators, trustees or guardians should indicate the full title and capacity in which they are signing.
PROXY CARD
| SIGNATURE (AND TITLE IF APPLICABLE) | DATE | |||
| SIGNATURE (IF HELD JOINTLY) | DATE | |||
This proxy is solicited on behalf of the Board of Trustees of AMG Funds (the “Trust”), and may be revoked prior to its exercise by filing with the Secretary of the Trust an instrument revoking this proxy or a duly executed proxy bearing a later date, or by appearing in personattending and voting at the combined Special Meeting.
THE BOARD OF TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMENDS THAT YOU VOTEAfter careful consideration, the Trust’s Board of Trustees unanimously recommends that
shareholders vote “FOR” THE PROPOSAL.each proposal.
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED HEREIN BY THE SIGNING SHAREHOLDER(S). IF NO CONTRARY DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED, THIS PROXY WILL BE VOTED “FOR” THE FOLLOWING PROPOSALPROPOSALS AND WILL BE VOTED IN THE APPOINTED PROXIES’ DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE COMBINED SPECIAL MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
TO VOTE, MARK CIRCLES BELOW IN BLUE OR BLACK INK AS FOLLOWS: Example 
PROPOSAL:🌑
| PROPOSALS: | FOR | AGAINST | ABSTAIN | |||
1. |  | | | |||
2. To approve a manager-of-managers structure for the Fund that would permit the Investment Manager to enter into and materially amend subadvisory agreements with unaffiliated and affiliated subadvisers without obtaining shareholder approval and would also permit the Fund to disclose fees paid to subadvisers on an aggregate, rather than individual, basis. | o | o | o | |||
PLEASE DATE, SIGN AND RETURN THIS CARD USING THE ENCLOSED, POSTAGE-PAID ENVELOPE
THANK YOU FOR VOTING
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN.PLEASE CAST YOUR PROXY VOTETODAY!
PROXY CARD
AMG GW&K Trilogy Emerging Wealth Equity Fund
PROXY FOR A COMBINED SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 16, 2019
The undersigned, revoking all previous proxies, if any, with respect to the Shares (defined below), hereby appoints Thomas G. Disbrow, Mark J. Duggan and Maureen A. Meredith proxies, each with full power of substitution, to vote at the combined Special Meeting of Shareholders and at any adjournments or postponements thereof (the “Meeting”) of AMG GW&K Trilogy Emerging Wealth Equity Fund (the “Wealth Fund”) (the shares of beneficial interest of the Wealth Fund, the “Shares”) to be held at the offices of AMG Funds LLC (the “Investment Manager”) on April 16, 2019 at 3:00 p.m., Eastern Time, or at any adjournment thereof, upon the Proposal described in the Notice of Combined Special Meeting and accompanying Proxy Statement, which have been received by the undersigned.
Do you have questions?If you have any questions about how to vote your proxy or about the meeting in general, please call toll-free (800)848-3374. Representatives are available to assist youMonday through Friday 9 a.m. to 10 p.m. Eastern Time.
Important Notice Regarding the Availability of Proxy Materials for the Combined Special Meeting:
The Notice of Combined Special Meeting and Proxy Statement are available at
https://www.proxyonline.com/docs/AMG2019.pdf
AMG GW&K Trilogy Emerging Wealth Equity Fund
YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. The undersigned acknowledges receipt with this Proxy of a copy of the Notice of Combined Special Meeting of Shareholders and the Proxy Statement. Your signature(s) on this Proxy should be exactly as your name(s) appear on this Proxy. If the shares are held jointly, each holder should sign this Proxy.Attorneys-in-fact, executors, administrators, trustees or guardians should indicate the full title and capacity in which they are signing.
PROXY CARD
This proxy is solicited on behalf of the Board of Trustees of AMG Funds (the “Trust”), and may be revoked prior to its exercise by filing with the Secretary of the Trust an instrument revoking this proxy or a duly executed proxy bearing a later date, or by appearing in person and voting at the combined Special Meeting.
THE BOARD OF TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSAL.
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED HEREIN BY THE SIGNING SHAREHOLDER(S). IF NO CONTRARY DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED, THIS PROXY WILL BE VOTED “FOR” THE FOLLOWING PROPOSAL AND WILL BE VOTED IN THE APPOINTED PROXIES’ DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE COMBINED SPECIAL MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
TO VOTE, MARK CIRCLES BELOW IN BLUE OR BLACK INK AS FOLLOWS: Example
PROPOSAL:
| [PROXY ID NUMBER HERE] | ||||||
| | |
PLEASE DATE, SIGN AND RETURN THIS CARD USING THE ENCLOSED, POSTAGE-PAID ENVELOPE
THANK YOU FOR VOTING