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Semi-Annual Report

iMGP Equity Fund

iMGP International Fund

iMGP Oldfield International Value Fund

iMGP SBH Focused Small Value Fund

iMGP Alternative Strategies Fund

iMGP High Income Alternatives Fund

iMGP Dolan McEniry Corporate Bond Fund

iMGP DBi Managed Futures Strategy ETF

iMGP DBi Hedge Strategy ETF

iMGP RBA Responsible Global Allocation ETF

June 30, 2022

 


Table of Contents

 

 
ii       Litman Gregory Funds Trust


Table of Contents

LOGO

 

Contents

 

 

Our Commitment to Shareholders

   2

Funds’ Performance

   5

Letter to Shareholders

   6

iMGP Equity Fund

  

Equity Fund Review

   8

Equity Fund Managers

   13

Equity Fund Schedule of Investments

   14

iMGP International Fund

  

International Fund Review

   16

International Fund Managers

   21

International Fund Schedule of Investments

   22

iMGP Oldfield International Value Fund

  

Oldfield International Value Fund Review

   23

Oldfield International Value Fund Schedule of Investments

   26

iMGP SBH Focused Small Value Fund

  

SBH Focused Small Value Fund Review

   27

SBH Focused Small Value Fund Schedule of Investments

   31

iMGP Alternative Strategies Fund

  

Alternative Strategies Fund Review

   32

Alternative Strategies Fund Managers

   44

Alternative Strategies Fund Schedule of Investments

   45

iMGP High Income Alternatives Fund

  

High Income Alternatives Fund Review

   87

High Income Alternatives Fund Managers

   92

High Income Alternatives Fund Schedule of Investments

   93

iMGP Dolan McEniry Corporate Bond Fund

  

Dolan McEniry Corporate Bond Fund Review

   109

Dolan McEniry Corporate Bond Fund Schedule of Investments

   112

iMGP DBi Managed Futures Strategy ETF

  

DBi Managed Futures Strategy ETF Review

   114

DBi Managed Futures Strategy ETF Consolidated Schedule of Investments

   116

iMGP DBi Hedge Strategy ETF

  

DBi Hedge Strategy ETF Review

   118

DBi Hedge Strategy ETF Schedule of Investments

   120

iMGP RBA Responsible Global Allocation ETF

  

RBA Responsible Global Allocation ETF Review

   122

RBA Responsible Global Allocation ETF Schedule of Investments

   126

Expense Examples

   127

Statements of Assets and Liabilities

   129

Statements of Operations

   133

Statements of Changes in Net Assets

  

Equity Fund

   136

International Fund

   136

Oldfied International Value Fund

   137

SBH Focused Small Value Fund

   137

Alternative Strategies Fund

   138

High Income Alternatives Fund

   138

Dolan McEniry Corporate Bond Fund

   139

DBi Managed Futures Strategy ETF (Consolidated)

   140

DBi Hedge Strategy ETF

   140

RBA Responsible Global Allocation ETF

   141

Financial Highlights

  

Equity Fund

   142

International Fund

   143

Oldfied International Value Fund

   144

SBH Focused Small Value Fund

   145

Alternative Strategies Fund

   146

Alternative Strategies Fund Investor Class

   147

High Income Alternatives Fund

   148

Dolan McEniry Corporate Bond Fund

   149

Dolan McEniry Corporate Bond Fund Investor Class

   150

DBi Managed Futures Strategy ETF (Consolidated)

   151

DBi Hedge Strategy ETF

   152

RBA Responsible Global Allocation ETF

   153

Notes to Financial Statements

   154

Other Information

   186

Index Definitions

   187

Industry Terms and Definitions

   190

Trustee and Officer Information

   195

Privacy Notice

   197

This report is intended for shareholders of the funds and may not be used as sales literature unless preceded or accompanied by a current prospectus for the iMGP Funds. Statements and other information in this report are dated and are subject to change.

iM Global Partner Fund Management, LLC has ultimate responsibility for the funds’ performance due to its responsibility to oversee its investment managers and recommend their hiring, termination and replacement.

 

 
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iM Global Partner Fund Management

Commitment to Shareholders

 

 

 

We are deeply committed to making each iMGP Fund a highly satisfying long-term investment for shareholders. In following through on this commitment we are guided by our core values, which influence four specific areas of service:

First, we are committed to the IMGP concept.

 

 

We will only hire managers who we strongly believe will deliver exceptional long-term returns relative to their benchmarks. We base this belief on extremely thorough due diligence research. This not only requires us to assess their stock-picking skills, but also to evaluate their ability to add incremental performance by investing in a concentrated portfolio of their highest conviction ideas.

 

 

We will monitor each of the managers so that we can maintain our confidence in their ability to deliver the long-term performance we expect. In addition, our monitoring will seek to assess whether they are staying true to their IMGP Funds mandate. Consistent with this mandate, we focus on long-term performance evaluation so that the IMGP managers will not be distracted by short-term performance pressure.

Second, we will do all we can to ensure that the framework within which our stock pickers do their work further increases the odds of success.

 

 

Investments from new shareholders in each fund are expected to be limited so that each fund’s asset base remains small enough to retain flexibility to add value.

 

 

The framework also includes either a single-manager or a multi-manager structure; the former allowing each fund an individual, highly disciplined investment process, and the latter making it possible for each manager to invest, when appropriate, in an opportunistic manner knowing that the potential volatility within his or her portfolio will be diluted at the fund level by the performance of the other managers. In this way, the multi-manager structure seeks to provide fund-level diversification.

 

 

We will work hard to discourage short-term speculators so that cash flows into the funds are not volatile. Lower volatility helps prevent our managers from being forced to sell stocks at inopportune times or to hold excessive cash for non-investment purposes.

Third, is our commitment to do all we can from an operational standpoint to maximize shareholder returns.

 

 

We will remain attentive to fund overhead, and whenever we achieve savings we will pass them through to shareholders. For example, we have had several manager changes that resulted in lower sub-advisory fees to our funds. In every case we have passed through the full savings to shareholders in the form of fee waivers.

 

 

We will provide investors with a low minimum, no-load, no 12b-1 Institutional share class for all iMGP Funds, and a low minimum, no-load Investor share class for the Alternative Strategies and Dolan McEniry Corporate Bond Fund.

 

 

We also will work closely with our managers to make sure they are aware of tax-loss selling opportunities (only to be taken if there are equally attractive stocks to swap into). We account for partial sales on a specific tax lot basis so that shareholders will benefit from the most favorable tax treatment. The goal is not to favor taxable shareholders over tax-exempt shareholders but to make sure that the managers are taking advantage of tax savings opportunities when doing so is not expected to reduce pre-tax returns.

Fourth, is our commitment to communicate honestly about all relevant developments and expectations.

 

 

We will continue to do this by providing thorough and educational shareholder reports.

 

 

We will continue to provide what we believe are realistic assessments of the investment environment.

Our commitment to iMGP Funds is also evidenced by our own investment. Our retired founders and current employees have, collectively, substantial investments in the funds, as does our company retirement plan. In addition, we use the funds extensively in the client accounts of our investment advisor practice (through our affiliate Litman Gregory Wealth Management, LLC). We have no financial incentive to do so because the fees we receive from iMGPFunds held in client accounts are fully offset against the advisory fees paid by our clients. In fact, we have a disincentive to use the funds in our client accounts because each iMGP Fund is capacity constrained (they may be closed as mentioned above), and by using them in client accounts we are using up capacity for which we may not be paid. But we believe these funds offer value that we can’t get elsewhere and this is why we enthusiastically invest in them ourselves and on behalf of clients.

While we believe highly in the ability of the Funds’ sub-advisors, our commitments are not intended as guarantees of future results.

While the funds are no-load, there are management fees and operating expenses that do apply, as well as a 12b-1 fee that applies to Investor class shares. Please refer to the prospectus for further details.

Diversification does not assure a profit or protect against loss in a declining market.

Must be preceded or accompanied by a prospectus.

 

 
2       Litman Gregory Funds Trust


Table of Contents

Must be preceded or accompanied by a prospectus.

Effective December 16, 2021 the name of the PartnerSelect Funds was changed to iMGP Funds.

Effective October 1, 2021 the name of the Advisor to the Funds was changed from Litman Gregory Fund Advisors LLC to iM Global Partner Fund Management LLC.

On September 20, 2021 the iM Dolan McEniry Corporate Bond Fund, iM DBI Managed Future Strategy ETF and iM DBI Hedge Strategy EFT were acquired by the Litman Gregory Funds Trust by merger. Performance reported for each of these funds for periods prior to the merger date represents the performance of the Predecessor Funds.

Each of the funds may invest in foreign securities. Investing in foreign securities exposes investors to economic, political, and market risks and fluctuations in foreign currencies. Each of the funds may invest in the securities of small companies. Small-company investing subjects investors to additional risks, including security price volatility and less liquidity than investing in larger companies. Debt obligations of distressed companies typically are unrated, lower rated, in default or close to default and may become worthless. The International Fund will invest in emerging markets. Investments in emerging market countries involve additional risks such as government dependence on a few industries or resources, government-imposed taxes on foreign investment or limits on the removal of capital from a country, unstable government, and volatile markets. Investments in debt securities typically decrease when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in mortgage-backed securities include additional risks that investor should be aware of including credit risk, prepayment risk, possible illiquidity, and default, as well as increased susceptibility to adverse economic developments. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. The funds may invest in master limited partnership units. Investing in MLP units may expose investors to additional liability and tax risks. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management, and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. The funds may make short sales of securities, which involves the risk that losses may exceed the original amount invested.

A commission may apply when buying or selling an ETF.

© 2021 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

The iMGP International Fund uses the iShares MSCI AWCI ex U.S. ETF for weightings comparisons because of its readily available information. We believe this particular ETF is the most relevant to our fund and is widely recognized by investors. The iShares MSCI ACWI ex U.S. ETF seeks to track the investment results of an index composed of large- and mid-capitalization non-U.S. equities Its expenses are 0.34% gross and 0.32% net. It may invest up to an aggregate amount of 15% of its assets in illiquid investments. An investment in the ETF is not a bank deposit and it is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency, BFA or any of its affiliates. As with any investment, you could lose all or part of your investment in the ETF and the ETF’s performance could trail that of other investments. The ETF intends to make distributions that may be taxable to you as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement such as a 401(k) plan or an IRA, in which case, your distributions generally will be taxed when withdrawn.

Merger arbitrage investments risk loss if a proposed reorganization in which the fund invests is renegotiated or terminated.

Investments in absolute return strategies are not untended to outperform stocks and bonds during strong market rallies.

Multi-investment management styles may lead to higher transaction expenses compared to single investment management styles. Outcomes depend on the skill of the sub-advisors and advisor and the allocation of assets amongst them.

Past performance does not guarantee future results.

Mutual fund investing involves risk; loss of principal is possible.

Performance discussion for the Alternative Strategies and Dolan McEniry Corporate Bond Funds is specifically related to the Institutional share class.

Some of the comments are based on current management expectation and are considered “forward-looking statements”. Actual future results, however, may prove to be different from our expectations. You can identify forward-looking statement by words such as “estimate”, “may”, “expect”, “should”, “could”, “believe”, “plan”, and similar terms. We cannot promise future returns and our opinions are a reflection of our best judgment at the time this report is compiled.

Opinions expressed are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security.

 

 
Fund Summary         3


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See pages 10, 18, 23, and 29 for each equity fund’s top contributors. See pages 14, 22, 26, and 31 for each equity fund’s portfolio composition. See pages 34 for the Alternative Strategies Fund’s individual strategy portfolio allocations. See pages 91 for the High Income Alternative Fund’s individual strategy portfolio allocations. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.

Diversification does not assure a profit or protect against a loss in a declining market.

Leverage may cause the effect of an increase or decrease in the value of the portfolio securities to be magnified and the fund to be more volatile than if leverage was not used.

References to other mutual funds should not be interpreted as an offer of these securities.

iM Global Partner Fund Management LLC has ultimate responsibility for the performance of the iMGPFunds due to its responsibility to oversee the investment managers and recommend their hiring, termination and replacement.

Any tax or legal information provided is merely a summary of our understanding and interpretation of some of the current income tax regulations and it is not exhaustive. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation. Neither the Funds nor any of their representatives may give legal or tax advice.

Please see page 187 for index definitions. You cannot invest directly in an index.

Please see page 190 for industry definitions.

 

 
4       Litman Gregory Funds Trust


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iMGP Funds Performance

 

 

 

 

iMGP Funds Performance as of June 30, 2022

 

     Average Annual Total Returns  
     Year to
Date
Return
     One-Year      Three-Year      Five-Year      Ten-Year      Since
Inception
 

iMGP Equity Fund (Inception 12/31/1996)

    -27.13%        -26.41%        3.17%        5.76%        9.91%        7.58%  

Russell 3000 Index

    -21.10%        -13.87%        9.77%        10.60%        12.57%        8.59%  

Morningstar US Large Blend Category

    -19.26%        -11.87%        8.42%        9.21%        10.99%        7.13%  

Gross Expenses 1.29%, Net Expenses 1.16%

                  
                                                      

iMGP International Fund (Inception 12/1/1997)

    -22.46%        -20.26%        0.18%        0.24%        3.88%        5.93%  

MSCI EAFE Index NET

    -19.57%        -17.77%        1.07%        2.20%        5.40%        4.35%  

Morningstar Foreign Large Blend Category

    -19.25%        -18.72%        1.14%        1.89%        4.82%        3.63%  

Gross Expenses 1.38%, Net Expenses 1.15%

                  
                                                      

iMGP Alternative Strategies Fund Instl (Inception 9/30/2011)

    -8.51%        -8.78%        1.16%        1.82%        3.27%        3.72%  

iMGP Alternative Strategies Fund Inv

    -8.62%        -9.09%        0.90%        1.56%        3.02%        3.47%  

ICE BofA US 3-Month Treasury Bill

    0.14%        0.17%        0.63%        1.11%        0.64%        0.60%  

Bloomberg Aggregate Bond Index

    -10.35%        -10.29%        -0.93%        0.88%        1.54%        1.76%  

Morningstar Multistrategy Category

    -4.18%        -3.08%        1.90%        1.99%        2.57%        2.71%  

Inst Class Gross Expenses 1.72%, Net Expenses 1.44%, Adjusted Expeneses 1.30%

                  
                                                      

iMGP High Income Alternatives Fund (inception 9/28/2018)

    -7.85%        -6.02%        2.02%              2.27%  

Bloomberg Aggregate Bond Index

    -10.35%        -10.29%        -0.93%              1.27%  

ICE BofAML U.S. High Yield TR USD Index

    -14.04%        -12.66%        -0.04%              1.29%  

Morningstar US Fund Nontraditional Bond Category

    -6.68%        -6.96%        -0.07%              0.62%  

Gross Expenses 1.44%, Net Expenses 0.98%

                  
                                                      

iMGP SBH Focused Small Value Fund (Inception 7/31/2020)

    -19.78%        -17.51%                 10.92%  

Russell 2000 Value

    -17.31%        -16.28%                 20.17%  

Morningstar Small Value Category

    -15.10%        -12.02%                 22.25%  

Gross Expenses 1.48%, Net Expenses 1.15%

                  
                                                      

iMGP Oldfield Internatl Value Fund (Inception 11/30/2020)

    -16.72%        -18.95%                 -0.04%  

MSCI EAFE Value NR USD

    -12.12%        -11.95%                 1.77%  

Morningstar Fund Foreign Large Value

    -13.30%        -13.12%                 1.96%  

Gross Expenses 1.52%, Net Expenses 0.94%

                  
                                                      

iMGP DBi Managed Futures Strategy ETF (NAV) (Inception 5/7/2019)

    26.24%        25.04%        15.03%              15.25%  

iMGP DBi Managed Futures Strategy ETF (Price)

    25.60%        25.49%        15.37%              15.58%  

SG CTA

    21.14%        20.74%        10.40%              10.34%  

Morningstar US Fund Systematic Trend

    15.94%        14.34%        7.73%              7.78%  

Gross Expenses 0.95%, Adjusted Expenses 0.85%

                  
                                                      

iMGP DBi Hedge Strategy ETF (NAV) (inception 12/17/2019)

    -6.02%        -6.42%                 8.16%  

iMGP DBi Hedge Strategy ETF (Price)

    -6.07%        -6.42%                 8.08%  

Morningstar US Fund Long-Short Equity Category

    -9.65%        -6.58%                 2.90%  

Gross Expenses 0.85%

                  
                                                      

iMGP Dolan McEniry Corporate Bond Instl (inception 9/28/2018)

    -9.06%        -9.75%        -0.59%              1.31%  

iMGP Dolan McEniry Corporate Bond Inv (inception 5/17/2019)

    -9.14%        -9.92%        -0.91%              -0.31%  

Bloomberg US Intermediate Credit Index

    -8.52%        -8.96%        -0.14%              1.82%  

Bloomberg US Aggregate Bond TR USD

    -10.35%        -10.29%        -0.93%              1.27%  

US Fund Corporate Bond Category

    -13.86%        -13.92%        -1.04%              1.35%  

Inst Class Gross Expenses 096%, Net Expenses 0.70%

                  
                                                      

iMGP RBA Responsible Global Allocation ETF (NAV) Inception 2.1.2022)

    -11.61%                    -11.61%  

iMGP RBA Responsible Global Allocation ETF (Price)

    -11.72%                    -11.72%  

65/35 Blend of MSCI ACWI Index & Bloomberg US Aggregate Bond Index

    -13.35%                    -13.35%  

Morningstar US Fund World Allocation Category

    -11.32%                    -11.32%  

Gross Expenses 0.75%, Net Expenses 0.69%

                                                    

Past performance does not guarantee future results. Index performance is not illustrative of fund performance. An investment cannot be made directly in an index. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. To obtain the performance of the funds as of the most recently completed calendar month, please visit www.imgpfunds.com. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced.

The Equity, International and Alternative Strategies Funds all have contractual fee waivers in effect through April 30, 2023. The Advisor has agreed to limit the expenses of the High Income Alternatives, SBH Focused Small Value, Oldfield International Value and Dolan McEniry Corporate Bond Funds through April 30, 2023. See the Prospectus for more information.

Performance does not reflect taxes a shareholder might incur on the sale of shares. Performance does not reflect fees or commissions a shareholder may pay on the purchase or sale of shares.

A commission may apply when buying or selling shares of an ETF.

MSCI index returns source: MSCI. Neither MSCI nor any other party involved in or related to compiling, computing, or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability, or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates, or any third party involved in or related to compiling, computing, or creating the data have any liability for any direct, indirect, special, punitive, consequential, or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent. Source note: Returns prior to 1999 are the MSCI ACWI ex-US GR index. Returns from 1999 onwards are MSCI ACWI ex-US NR index.

 

 
Fund Summary         5


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Dear Fellow Shareholder,

It’s been a rough year, with equity markets down more than 20% and “low-risk” bond markets registering low double-digit losses. The S&P 500 dropped 16.1% for the second quarter and is down 20% for the year, after being down as much as 24% through mid-June. Foreign stocks fared slightly better with Developed international markets (MSCI EAFE Index) down 14.5% for the quarter and 19.6% YTD. Emerging Market stocks (MSCI Emerging Markets Index) held up a bit better, dropping 11.4% for the quarter, and down 17.6% YTD.

Core investment-grade bonds were pummeled again in the second quarter, with the benchmark Bloomberg U.S. Aggregate Bond Index (the “Agg”) dropping 4.7%. This puts the “safe-haven” Agg down an incredible 10.3% for the year to date — its worst first-half ever. In other segments of the fixed-income market, high-yield bonds (ICE BofA Merrill Lynch U.S. High Yield Cash Pay Index) fell 9.9% and floating rate loans (S&P/LSTA Leveraged Loan index) dropped 4.5% for the quarter. For the year to date through the end of June, these indexes are down 14.0% and 4.6%, respectively.

As we have long pointed out, core bonds are not low-risk or defensive assets in an inflationary (rising interest rate) environment. Taken together with the equity bear market, this is by far the worst first-half performance for a traditional “60/40” balanced portfolio (60% S&P 500/40% Aggregate Bond Index) since at least 1950, down 16.1%. The previous worst first half was in 1962, down 12%.

Portfolio diversification into “non-traditional” asset classes, non-core and flexible fixed-income strategies, and alternative strategies can be particularly valuable in an inflationary or stagflationary environment. We saw this in the first half of the year. Trend-following managed futures strategies led the way posting 20%-plus returns, benefiting from short positions in bond and stock markets, and long exposures to commodities and the US dollar. It’s worth noting the benchmark SG Trend Index has now outperformed both global stocks (MSCI ACWI) and core bonds (the Agg) by wide margins over the past three and five years through the end of June.

Given this macro backdrop, the iMGP Funds family offers several strong options that we believe can improve the risk-adjusted performance of a traditional stock/bond balanced portfolio: namely, our DBi Managed Futures Strategy ETF, DBi Hedge Strategy ETF, Alternative Strategies Fund, High Income Alternatives Fund, RBA Responsible Global Allocation ETF and Dolan McEniry Corporate Bond Fund.

For more risk-tolerant investors, our high-conviction, concentrated equity funds seek to generate long-term capital growth exceeding passive indexes. They can serve as core equity holdings, or as satellite positions around core equity-market index allocations.

We believe the iMGP Funds can fill a valuable role within diversified investment portfolios. Each Fund is sub-advised by highly disciplined, deeply experienced, and skilled investors who we believe can outperform their respective benchmarks and peer groups over full market cycles.

We strongly encourage shareholders to read the enclosed individual fund and ETF semi-annual reports for portfolio manager commentary and performance details.

As always, we thank you for your continued trust and confidence. Our commitment and confidence are reflected in the collective personal investments in the funds by iMGP management, employees, and the Funds’ trustees and portfolio managers of over $15 million, as of June 30, 2022.

 

 
6       Litman Gregory Funds Trust


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Sincerely,

Jeremy DeGroot, President and Portfolio Manager

 

LOGO

Jack Chee, Portfolio Manager

 

LOGO

Jason Steuerwalt, Portfolio Manager

 

LOGO

Kiko Vallarta, Portfolio Manager

 

LOGO

 

 
Fund Summary         7


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iMGP Equity Fund (MSEFX)

 

 

 

The iMGP Equity Fund lost 27.13% in the first half of 2022, lagging the 21.1% decline for the fund’s Russell 3000 Index benchmark and the 19.26% loss for the Morningstar Large Blend category. Since the fund’s inception on December 31, 1996, the fund’s 7.58% annualized return is slightly behind the benchmark return of 8.59% but ahead of its peer group’s 7.13% return.

 

           

Performance as of 6/30/2022

                                           
     Average Annual Total Returns  
     Year to
Date
Return
    

One-

Year

     Three-
Year
     Five-
Year
    

Ten-

Year

     Since
Inception
(12/31/1996)
 

iMGP Equity Fund

    -27.13%        -26.41%        3.17%        5.76%        9.91%        7.58%  

Russell 3000 Index

    -21.10%        -13.87%        9.77%        10.60%        12.57%        8.59%  

S&P 500 Index

    -19.96%        -10.62%        10.60%        11.31%        12.96%        8.61%  

Morningstar Large Blend Category

    -19.26%        -11.87%        8.42%        9.21%        10.99%        7.13%  
 
Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the funds may be lower or higher than the performance quoted. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit www.imgpfunds.com. The Advisor has contractually agreed to waive fees or limit the expenses of the fund through April 30, 2023.

 

Performance of Managers

 

Of the fund’s six sub-advisors, only one (Nuance Investments) outperformed their respective benchmark in the first half of 2022. Of the remaining managers, one manager (Fiduciary Management) performed in line, while the others underperformed. The fund’s sole growth manager, Sands Capital, suffered one of their worst absolute and relative performances in the six-month period, losing 50.11% and lagging the Russell 1000 Growth benchmark by 22.04% in the period. (Returns are net of sub-advisor management fees.)

Key Performance Drivers

 

In the first half of 2022, both sector allocation and stock selection had negative impacts on performance. It is important to understand that the portfolio is built stock by stock and that sector weightings are a residual of the bottom-up, fundamental stock-picking process employed by each sub-advisor. That said, we do report on the short-term relative performance of both sector weights and stock selection to help shareholders understand the drivers of recent performance. It is also important to remember that the performance of a stock over a relatively short period tells us nothing about whether it will be a successful position; that is only known at the point when the stock is sold.

At the overall sector level, Consumer Discretionary, Industrials, and Real Estate were the three contributors. The portfolio’s consumer discretionary exposure benefitted from better relative stock performance, but this was partially offset by an overweight (17.08% vs. 11.45%) to an underperforming sector relative to the benchmark. Within the sector, Amazon.com was a meaningful detractor (down 36.3%) in the period. The stock is owned by both Sands Capital and Davis Advisors. Davis says the stock’s performance reflects the near-term uncertainty in e-commerce growth following accelerated adoption of e-commerce during the pandemic. In addition, excess capacity along with wage and fuel inflation are negatively impacting Amazon’s current e-commerce margins, leading some investors to question whether the e-commerce business is structurally less profitable than previously thought. While Amazon’s cloud business continues to perform very well on both the top and bottom-lines, growth could slow over the next few quarters if concerns about the economy materialize.

Sectors that detracted most from performance in the period were communication services, health care, and energy. The negative impact from communication services was primarily due to stock selection. Sea Limited was a leading detractor, falling 70.11%. Sea is an internet business in Southeast Asia that operates leading platforms for video games (Garena), ecommerce (Shopee), and digital financial services (SeaMonkey). Sands Capital says Sea’s core geographic market benefits from several secular trends—including above-average economic growth, young demographics, and low digital adoption levels—that the team believes will underpin strong growth for its core businesses. Sands says Sea’s shares have contended with several headwinds over the past several quarters, including the sell-off in high-growth, high-valuation stocks and company-specific headwinds (e.g., Tencent’s stock sale and voting restructuring, India’s gaming ban and ecommerce exit, and slowing gaming growth). The market’s elevated focus on near-term profitability has also weighed on Sea, but the company’s first-quarter results strengthened Sands’ conviction in the profit potential of what they view as its biggest growth driver: Shopee, its ecommerce segment.

Shopee grew gross merchandise volume and revenue by 39% and 64%year-over-year, respectively, well ahead of consensus expectations. Loss per order improved in both Southeast Asia & Taiwan, and the company committed to the segment breaking even in 2023. Loss per order also improved in Brazil. Shopee remains the crux of the investment case. Sands believes that Shopee can ultimately account for nearly a fifth of total retail sales in Taiwan and Southeast Asia, with profitability driven by take-rate expansion and cost dilution.

 

 
8       Litman Gregory Funds Trust


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Outside of ecommerce, Sea’s digital financial services business grew revenue 360% year-over-year and losses narrowed to $125 million from $150 million in the prior quarter. Gaming, which Sands doesn’t view as a core growth driver but still attracts investor focus due to its historical importance to the overall business, met expectations. Today, Sands views Sea’s long-term risk/reward profile as among the most attractive in their portfolio. They continue to view the company as the best-positioned business to capture the growth opportunity in Southeast Asia over the next decade as it caters to the population’s underserved retail, financial services, and digital entertainment needs.

Another detractor in communication services was Meta Platforms, which was owned by two managers, Bill Nygren of Harris Associates and Fiduciary Management. FMI’s view is that Meta is the #1 social media company globally, with incredible scale (2.7bn users), network effects, and best-in-class advertising ROI. The company’s ability to evolve its engagement models in a shifting social media landscape highlights its durability. As a result of its leading reach and high engagement, the company has built a dominant position in the secularly growing digital advertising market. There’s opportunity to improve monetization on multiple fronts including the messaging platforms and outside the United States. Meta’s e-commerce and augmented reality/virtual reality efforts also provide optionality. Pricing headwinds from Apple’s iOS changes, a shift of engagement towards Reels which monetizes at a lower rate than Feed and Stories, competition (TikTok), investment spend in the Metaverse, and recession fears have weighed on the stock. The stock has a great balance sheet, better than average long-term growth prospects, and trades at a discount to the market (~12x depressed earnings, before accounting for $44bn of net cash). FMI wants to give management some time to see how they navigate the current fundamental challenges before taking any further action.

While energy exposure was an overall detractor, EOG Resources, owned by Bill Nygren of Harris Associates was a top contributor in the period, gaining 28.83%. In the team’s view, EOG Resources is one of the best positioned U.S. energy companies as its focus on capital productivity made it a true low-cost producer. At a broad level, Nygren believes EOG Resources is a rare exploration and production company that generates unusually high returns on its acreage position while sustaining those returns by reloading the inventory base with additional unusually high-return acres. In his estimation, EOG Resource’s new CEO Ezra Yacob is off to a favorable start, adding on to a management team that strives to optimize operations for value creation and capitalize on positive developments in the external environment.

Specific to the stock’s recent performance, EOG Resources’ share price benefitted from the surge in energy prices in the first quarter due to the crisis in Ukraine. In addition, the company released its fourth-quarter earnings report revealing a 100 basis point increase in oil production year-over-year with capital expenditures flat sequentially and below consensus estimates. Guidance for 2022 remained in-line with estimates, and management plans to increase oil production by 4% year-over-year due to their belief that drilling is the best use of capital with 20 years of premium inventory. Management also believes the company will be able to offset inflation fully with drilling efficiencies. A $1 per share special dividend was awarded to shareholders for the second straight quarter while maintaining the regular $0.75 per share dividend. Despite its strong balance sheet relative to peers, management also said the company intends to build cash in 2022. Later, EOG Resources delivered good first-quarter earnings results, as production grew 2% quarter-over-quarter and finished above consensus expectations. Importantly, Nygren and his team find that the company’s absolute results are solid, and appreciated management’s commitment to returning 60% of its free cash flow to shareholders. They met with EOG’s new CEO Ezra Yacob in the second quarter, who reiterated the company’s goal to reduce finding and development costs every year and organically replenish drilling inventory. EOG also remains ready and willing to buy back stock in a downturn opportunistically.

Within industrials, CK Hutchison Holdings was leading performance contributor in the period. The FMI team says the company is a blue-chip holding conglomerate that owns relatively defensive, quality businesses (telecom, infrastructure, retail, etc.). The company has taken steps to create value over the past couple years (sale-and-leaseback of European tower assets, deconsolidation of Husky Energy, etc.), yet the stock price has barely budged. Despite a strong balance sheet, based on FMI’s estimates the stock trades at around a 50% discount to net asset value. Based on 2022 estimated earnings, the stock trades, at only ~5 times earnings and pays a healthy dividend (5% yield). FMI believes the current stock price undervalues the business. However, sentiment has been weak as the company has been less aggressive with shareholder returns (buying back stock, increasing the dividend) than investors had expected following the tower sale. FMI had written a letter to management and the board to encourage additional activity on this front, but was disappointed with their subsequent conversation with management, and have concerns they may pursue M&A. FMI sold their position in April, and rolled the proceeds into Sodexo, an investment where they have higher conviction: a simple, defensive compounder, which is cheap and out of favor, but one where they have greater confidence in management creating shareholder value.

 

 
Fund Summary         9


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Top Contributors for the Six Months Ended June 30, 2022
Holding   Weight %     Return %     Contribution %     Benchmark
Weight %
    Sector

EOG Resources Inc

    1.25       28.83       0.31       0.16     Endergy

CalMaine Foods

    0.51       33.58       0.20           Consumer Staples

Cigna Corp

    1.14       15.81       0.14       0.19     HealthCare

CK Hutchison Holdings Ltd

    0.64       11.71       0.12           Industrials

Reinsurance Group of America

    1.24       8.48       0.10       0.02     Financials

The Travelers Companies Inc

    0.62       9.26       0.10       0.10     Financials

Dollar General Corp

    1.76       4.51       0.07       0.12     Consumer Discretionary

American International Group Inc

    0.18       7.26       0.07       0.11     Financials

Equity Commonwealth REIT

    1.00       6.29       0.06           Real Estate

Clorox Co

    0.34       11.34       0.05       0.04     Consumer Staples

 

Top Detractors for the Six Months Ended June 30, 2022
Holding   Weight %     Return %     Contribution %     Benchmark
Weight %
    Sector

Netflix Inc

    1.82       (70.97     (1.99     0.32     Communication Services

Sea Ltd ADR

    1.20       (70.11     (1.42         Communication Services

Dexcom Inc

    1.24       (86.12     (1.29     0.09     HealthCare

Amazon.com Inc

    3.36       (36.29     (1.29     2.84     Consumer Discretionary

Meta Platforms Inc Class A

    1.96       (52.06     (1.14     1.21     Communication Services

Alphabet Inc Class A

    4.62       (24.78     (1.11     1.79     Communication Services

Block Inc Class A

    1.13       (61.95     (0.97     0.12     Information Technology

GoHealth Inc Ordinary Shares - Class A

    0.49       (84.22     (0.96         HealthCare

Shopify Inc

    0.64       (77.32     (0.92         Information Technology

Capital One Financial Corp

    3.73       (27.54     (0.89     0.13     Financials

General Motors Co

    1.65       (45.83     (0.88     0.14     Consumer Discretionary

Portfolio Mix

The Equity Fund portfolio is the result of six bottom-up stock pickers with diverse investment approaches building concentrated portfolios. Therefore, the portfolio often looks quite different from its benchmark. For example, it is common for the fund to have meaningful sector over- or underweights. As of mid-year, the fund was 9.7% overweight to the consumer discretionary sector (20.3% vs. 10.6%) and underweight to the information technology sectors by an equal amount (15.7% vs. 25.5%). The fund is also overweight to the finance and communication services sectors—8.7% and 4.3% overweight relative to Russell 3000 Index, respectively.

The fund’s position in foreign equities increased slightly from the start of the year (up from 15% to 16.2% through mid-year). The fund’s weighted-average market cap stands at close to $240 billion at the end of June, while its median market cap is $39.4 billion (both figures are lower than where they stood at the start of the year).

We believe the fund comprises an eclectic mix of highly skilled, disciplined, and opportunistic stock pickers who have the potential to add significant additional value through concentrating in only their highest-conviction names.

 

Portfolio Breakdown as of 06/30/2022

 

By Sector

  Fund     Russell
3000
    +/-  

Finance

    20.3%       11.6%       8.7%  

Consumer Discretionary

    20.3%       10.6%       9.7%  

Information Technology

    15.7%       25.5%       -9.8%  

Communication Services

    12.4%       8.1%       4.3%  

Health Care & Pharmaceuticals

    13.4%       14.9%       -1.5%  

Industrials

    7.6%       8.9%       -1.2%  

Consumer Staples

    4.5%       6.4%       -1.9%  

Real Estate

    2.7%       3.7%       -1.0%  

Utilities

    0.3%       3.0%       -2.8%  

Energy

    1.2%       4.4%       -3.2%  

Materials

    0.0%       2.9%       -2.9%  

Cash

    1.6%       0.0%       1.6%  

 

 
10       Litman Gregory Funds Trust


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By Market Cap

  By Region
LOGO   LOGO

Small Cap < $6.1 billion

Mid Cap >$6.1 Billion<$33.9 billion

Large Cap >$33.9 billion

 

Significant Post June 30 Event

 

iM Global Partner Fund Management, the Investment Advisor for iMGP Equity Fund, is making significant changes to the fund’s line up of Subadvisors that includes the addition of a dedicated small/mid-cap manager as well as expanding each manager’s ability to own their highest-conviction ideas globally (the fund has always had the flexibility to invest globally but it is now a formal part of its investment objective). These changes were made with an effective date of August 1, 2022.

While these changes are material in scope, we believe them to be consistent with the fund’s original premise when it was launched back in 1996. It is with enthusiasm and confidence that we share details and rationale behind these changes.

Current managers Sands Capital, Fiduciary Management Inc., Harris Associates, and Davis [<<clean up names]—all long-time Subadvisors on the fund—were removed effective close of business on July 29, 2022. Polen Capital and Scharf Investments were being added and will manage sleeves alongside Nuance Investments, who will remain on the fund.

In total the new manager line-up includes four separate strategies as outlined below:

Strategy: Global Large-Cap Growth (20%)

Sub-Advisor: Polen Capital

Managers: Damon Ficklin and Jeff Mueller

Global Large-Cap Value (30%)

 

   

Sub-Advisor: Scharf Investments

 

   

Managers: Brian Krawez and Gabe Houston

Global Small and Midcap (SMID) Growth (20%)

 

   

Sub-Advisor: Polen Capital

 

   

Manager: Rob Forker

Global Mid-Cap Value (30%)

 

   

Sub-Advisor: Nuance Investments

 

   

Managers: Scott Moore and Chad Baumler

The changes are the result of an in-depth analysis focused on configuring a combination of managers we believe to be skilled in a way that can deliver the alpha we expected when we originally launched the fund. It reflects what we’ve learned after decades of research on active managers both in terms of the skills and discipline that give a manager an edge and how to craft and oversee mandates that individually and in combination maximize the odds of success—defined as materially beating a passive benchmark after fees.

 

 
Fund Summary         11


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We continue to believe, as we did when the fund was launched in 1996, that allowing skilled managers to own only their highest-conviction ideas is better than owning more-diversified portfolios because owning a large number of names leads to more index-like performance. We don’t believe in paying fees that are higher than those charged by index funds to get index-like performance. An additional benefit to these changes is a reduction in the operating expense ratio as IM Global Partner Fund Management has contractually agreed to limit the expenses of the fund to 0.98% through at least April 30, 2023.

We also continue to believe that giving managers latitude in the types of stocks they can own can confer an advantage over managers who are more tightly constrained to a “style box.” Those beliefs underlay the original premise of the fund to seek skilled managers, give them broad flexibility, limit them to their highest-conviction ideas, and create diversification by choosing managers with complementary styles to reduce risk. We believe that the revised configuration of fund preserves, if not enhances, those foundational concepts.

 

 
12       Litman Gregory Funds Trust


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iMGP Equity Fund Managers

 

 

 

INVESTMENT
MANAGER
  FIRM   TARGET
MANAGER
ALLOCATION
  MARKET
CAPITALIZATION
OF COMPANIES
IN PORTFOLIO
  STOCK-PICKING
STYLE
  BENCHMARK
Christopher Davis Danton Goei   Davis Selected Advisers, L.P.   15%   Mostly large companies   Blend   S&P 500 Index
Pat English Jonathan Bloom   Fiduciary Management, Inc.   15%   All sizes   Blend   S&P 500 Index
Bill Nygren   Harris Associates L.P.   15%   Mostly large- and mid-sized companies   Value   Russell 3000 Value Index
Clyde McGregor   Harris Associates L.P.   15%   All sizes, but mostly large- and mid-sized companies   Value   Russell 3000 Value Index
Scott Moore
Chad Baumler
  Nuance Investments, LLC   15%   All sizes   Value   Russell 3000 Value Index
A. Michael Sramek   Sands Capital Management, LLC   25%   All sizes, but mostly large- and mid-sized companies   Growth   Russell 1000 Growth Index

iMGP Equity Fund Value of Hypothetical $10,000

 

The value of a hypothetical $10,000 investment in the iMGP Equity Fund from December 31, 1996 to June 30, 2022 compared with the Russell 3000 Index and Morningstar Large Blend Category

 

LOGO

The hypothetical $10,000 investment at fund inception includes changes due to share price and reinvestment of dividends and capital gains. The chart does not imply future performance. Indexes are unmanaged, do not incur fees, expenses or taxes, and cannot be invested in directly.

Performance quoted does not include a deduction for taxes that a shareholder would pay on the redemption of fund shares.

 

 
Fund Summary         13


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iMGP Equity Fund

SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2022 (Unaudited)

 

Shares           Value  
 

COMMON STOCKS: 98.4%

 
  Communication Services: 12.4%  
  3,990     Alphabet, Inc. - Class A*    $ 8,695,247  
  886     Alphabet, Inc. - Class C*      1,938,081  
  2,610     Charter Communications, Inc. - Class A*      1,222,863  
  5,600     Liberty Broadband Corp. - Class C*      647,584  
  23,850     Meta Platforms, Inc. - Class A*      3,845,813  
  10,790     Netflix, Inc.*      1,886,847  
  22,898     Sea Ltd. - ADR*      1,530,960  
  25,800     Tencent Holdings Ltd. - ADR      1,171,062  
    

 

 

 
     20,938,457  
  

 

 

 
  Consumer Discretionary: 20.3%  
  17,010     Alibaba Group Holding Ltd. - ADR*      1,933,697  
  50,580     Amazon.com, Inc.*      5,372,102  
  2,450     Booking Holdings, Inc.*      4,285,025  
  16,150     Dollar General Corp.      3,963,856  
  77,280     General Motors Co.*      2,454,413  
  25,810     Hilton Worldwide Holdings, Inc.      2,876,266  
  22,860     JD.com, Inc. - ADR      1,468,069  
  23,190     Lear Corp.      2,919,389  
  6,600     Lithia Motors, Inc.      1,813,746  
  42,440     Prosus N.V. - ADR      555,540  
  36,000     Sodexo S.A.*      2,527,263  
  25,900     Sony Group Corp.      2,117,772  
  28,355     Thor Industries, Inc.      2,118,969  
    

 

 

 
     34,406,107  
  

 

 

 
  Consumer Staples: 4.5%  
  76,290     Beiersdorf AG - ADR      1,556,316  
  14,097     Cal-Maine Foods, Inc.      696,533  
  8,744     Clorox Co. (The)      1,232,729  
  164,319     Henkel AG & Co. KGaA - ADR      2,507,508  
  12,181     Kimberly-Clark Corp.      1,646,262  
    

 

 

 
     7,639,348  
  

 

 

 
  Energy: 1.2%  
  18,400     EOG Resources, Inc.      2,032,096  
    

 

 

 
  Financials: 20.3%  
  77,300     Ally Financial, Inc.      2,590,323  
  44,300     Bank of America Corp.      1,379,059  
  41,015     Bank of New York Mellon Corp. (The)      1,710,736  
  14     Berkshire Hathaway, Inc. - Class A*      5,725,300  
  11,400     Berkshire Hathaway, Inc. - Class B*      3,112,428  
  56,360     Capital One Financial Corp.      5,872,149  
  44,050     Charles Schwab Corp. (The)      2,783,079  
  44,600     Citigroup, Inc.      2,051,154  
  759,900     GoHealth, Inc. - Class A*      454,344  
  17,000     Reinsurance Group of America, Inc.      1,993,930  
  4,779     Travelers Cos., Inc. (The)      808,272  
  40,320     US Bancorp      1,855,526  
  104,640     Wells Fargo & Co.      4,098,749  
    

 

 

 
     34,435,049  
  

 

 

 
  Health Care: 13.4%  
  22,049     Baxter International, Inc.      1,416,207  
  9,730     Cigna Corp.      2,564,050  
  40,359     Dentsply Sirona, Inc.      1,442,027  
  27,772     DexCom, Inc.*      2,069,847  
  19,517     Edwards Lifesciences Corp.*      1,855,872  
  5,923     ICU Medical, Inc.*      973,682  
Shares           Value  
  Health Care (continued)  
  85,400     Koninklijke Philips N.V.    $ 1,837,637  
  51,665     LivaNova Plc*      3,227,513  
  90,583     Smith & Nephew Plc - ADR      2,529,077  
  6,600     UnitedHealth Group, Inc.      3,389,958  
  8,852     Universal Health Services, Inc. - Class B      891,485  
  4,624     Zimmer Biomet Holdings, Inc.      485,797  
    

 

 

 
     22,683,152  
  

 

 

 
  Industrials: 7.6%  
  17,475     Carlisle Cos., Inc.      4,169,710  
  24,325     Ferguson Plc      2,718,518  
  24,575     General Electric Co.      1,564,690  
  95,900     KAR Auction Services, Inc.*      1,416,443  
  33,229     Knorr-Bremse AG - ADR      472,849  
  31,350     PACCAR, Inc.      2,581,359  
    

 

 

 
     12,923,569  
  

 

 

 
  Information Technology: 15.7%  
  1,019     Adyen N.V.*(a)      1,480,635  
  9,454     Atlassian Corp. Plc - Class A*      1,771,680  
  24,127     Block, Inc.*      1,482,845  
  15,040     Cloudflare, Inc. - Class A*      658,000  
  34,190     Intel Corp.      1,279,048  
  4,994     Intuit, Inc.      1,924,887  
  36,000     Micron Technology, Inc.      1,990,080  
  6,774     ServiceNow, Inc.*      3,221,172  
  27,500     Shopify, Inc. - Class A*      859,100  
  8,898     Snowflake, Inc. - Class A*      1,237,356  
  29,270     TE Connectivity Ltd.      3,311,901  
  9,512     Twilio, Inc. - Class A*      797,201  
  33,636     Visa, Inc. - Class A      6,622,592  
    

 

 

 
     26,636,497  
  

 

 

 
  Real Estate: 2.7%  
  22,300     CBRE Group, Inc. - Class A*      1,641,503  
  99,500     Cushman & Wakefield Plc*      1,516,380  
  49,303     Equity Commonwealth - REIT*      1,357,311  
    

 

 

 
     4,515,194  
  

 

 

 
  Utilities: 0.3%  
  19,065     United Utilities Group Plc - ADR      482,726  
    

 

 

 
 

TOTAL COMMON STOCKS
(Cost $145,045,995)

     166,692,195  
  

 

 

 
Principal
Amount
              
 

SHORT-TERM INVESTMENTS: 1.6%

 
 

REPURCHASE AGREEMENTS: 1.6%

 
  $2,682,037     Fixed Income Clearing Corp. 0.240%, 6/30/2022, due 07/01/2022 [collateral: par value $1,313,900, U.S. Treasury Inflation Index Bond, 3.625%, due 04/15/2028 value $2,736,138] (proceeds $2,682,055)      2,682,037  
    

 

 

 
 

TOTAL SHORT-TERM INVESTMENTS
(Cost $2,682,037)

     2,682,037  
    

 

 

 
 

TOTAL INVESTMENTS
(Cost: $147,728,032): 100.0%

     169,374,232  
  

 

 

 
  Other Assets in Excess of Liabilities: 0.0%      7,369  
  

 

 

 
 

NET ASSETS: 100.0%

   $ 169,381,601  
    

 

 

 

 

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

 

 
14       Litman Gregory Funds Trust


Table of Contents

iMGP Equity Fund

SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2022 (Unaudited) (Continued)

 

Percentages are stated as a percent of net assets.

 

ADR

American Depositary Receipt

REIT

Real Estate Investment Trust

*

Non-Income Producing Security.

(a)

Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under Securities Act of 1933.

 

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

 

 
Schedule of Investments         15


Table of Contents

iMGP International Fund (MSILX)

 

 

 

The iMGP International Fund lost 22.46% in the first half of 2022, lagging the 19.57% decline for the fund’s MSCI EAFE benchmark and the 19.25% loss for the Morningstar Foreign Large Blend category. Since the fund’s inception on December 1, 1997, the fund’s 5.93% annualized return is ahead of both the benchmark return of 4.35% and its peer group’s 3.63% return. Note that effective October 1, 2021 the fund changed its primary benchmark from the MSCI ACWI Index to the MSCI EAFE Index to reflect the current managers’ emphasis on investing in developed markets.

 

   

Performance as of 6/30/2022

       
     Average Annual Total Returns  
     Year to
Date
Return
     One-
Year
     Three-
Year
     Five-
Year
     Ten-
Year
     Since
Inception
(12/1/1997)
 

iMGP International Fund

    -22.46%        -20.26%        0.18%        0.24%        3.88%        5.93%  

MSCI ACWI ex US Index NET

    -18.42%        -19.42%        1.35%        2.50%        4.83%        4.71%  

MSCI EAFE Index NET

    -19.57%        -17.77%        1.07%        2.20%        5.40%        4.35%  

Morningstar Foreign Large Blend Category

    -19.25%        -18.72%        1.14%        1.89%        4.82%        3.63%  
 
Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the funds may be lower or higher than the performance quoted. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit www.imgpfunds.com. The Advisor has contractually agreed to waive a portion of its management fee through April 30, 2023.

 

Performance of Managers

 

Of the fund’s three sub-advisors, only one (Mark Little, Lazard Asset Management) outperformed their respective benchmark in the first half of 2022. David Herro (Harris Associates) underperformed his value benchmark, while the Polen Capital team trailed their growth benchmark.

Key Performance Drivers

 

In the first half of 2022, both sector allocation and stock selection had negative impacts on performance. It is important to understand that the portfolio is built stock by stock and that sector weightings are a residual of the bottom-up, fundamental stock-picking process employed by each sub-advisor. That said, we do report on the short-term relative performance of both sector weights and stock selection to help shareholders understand the drivers of recent performance. It is also important to remember that the performance of a stock over a relatively short period tells us nothing about whether it will be a successful position; that is only known at the point when the stock is sold.

Selection within three sectors—industrials, information technology, and materials—contributed to returns in the first half of 2022. The portfolio’s industrial exposure benefited from CAE, a Canadian provider of pilot training services primarily for the civil aviation and defense markets. This holding is owned by Mark Little, who believes the company has exposure to the structural increase in demand for pilots, given the growth in air travel, aging demographics of certified pilots, and the ongoing regulatory requirement to maintain pilot skills. As the pandemic ensued, management has taken costs out of the business and has made accretive acquisitions, positioning the company to be larger and more profitable in the recovery. Now, pilots laid off during the pandemic are starting to work again and have urgent training requirements, leading to significant order intake for CAE’s civil business. On the defense side, the company has won a record number of orders from their pipeline before defense budget increases were announced—putting its book-to-bill ratio above 1x for the first time in four years. Additionally, CAE is the training provider for the German Air Force so should benefit from material defense spending increases in coming years.

Glencore, owned by David Herro, had a strong first half and was a leading contributor within the materials sector.

Herro notes that his team likes that Glencore is run by smart, hyper-competitive and value-focused managers with a focus on improving asset returns. In his estimation, Glencore differentiates itself from other miners with its trading business that provides high returns and cash flow with low cyclicality and significant barriers to entry. They appreciate the company’s leading market positions in attractive commodities and believe existing mining operations will benefit from normalized prices, higher volumes, lower costs, and the move towards a low carbon economy.

In Herro’s view, Glencore delivered a solid fiscal year 2021 earnings report as financial metrics improved materially year-over-year. In the marketing segment, earnings handily bested expectations ($3.7 billion vs. $3.5 billion). In metals, earnings increased to $2.5 billion from $1.7 billion for the year-ago period due to strong demand, supply constraints and inventory drawdowns. Herro’s team met with CEO Gary Nagle and CFO Steve Kalmin and discussed the massive impact the crisis in Ukraine is having on Glencore’s markets. As customers bypass Russian oil, natural gas and coal, the tightened supply translated to large price increases. In particular, European nations are now buying coal at elevated prices as a replacement for Russian natural gas, leading to stronger than expected free cash flow. Management also noted that the company now has 27 assets either in sale processes or under consideration on top of the nine assets already sold as part of the

 

 
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portfolio simplification. In April, the company’s first-quarter production report showed strong performance from coal, which Herro found important given the high prices in the first quarter. Later, Glencore reached settlements for the U.S., U.K. and Brazil investigations with figures that look to align with the $1.5 billion provision from fiscal year 2021. Herro appreciates that Glencore is in strong financial shape in terms of its balance sheet and current cash flow generation and believe the company is well positioned to move forward with dividends and share repurchase programs. In June, Glencore provided a positive trading update, as marketing earnings for the first-half are expected to exceeded $3.2 billion, which is the at the top end of the company’s long-term earnings range for a fiscal year.

Despite overall stock selection being negative in the health care sector, the fund’s top contributor in the first half of 2022 was Bayer (owned by Herro). In his determination, Bayer’s merger with Monsanto creates the best agriculture business in the world within its vertical markets in terms of size and quality. Despite some recent glyphosate-related litigation issues, he believes Bayer’s collaboration with Monsanto should deliver benefits to its crop sciences business from increased channel access in the U.S. thanks to Monsanto’s direct dealings with farmers and expanded application of its seed growth solutions on additional quantities of Monsanto seed, which would afford a pathway to near-term revenue synergies. Bayer’s pharmaceutical business developed blood thinning drug XARELTO®, which is in wide use and has an excellent outlook over the medium-term, in Herro’s view, given that its patent is held until at least 2023 (or beyond depending on the country). In addition to its crop sciences and pharmaceutical businesses, Bayer is a leading global provider of over-the-counter consumer health products and possesses a robust portfolio of brands (including Aleve, Alka Seltzer, Claritin, Afrin and MiraLAX, among others), which supports a healthy level of continuing cash flow.

Bayer reported strong earnings results for 2021, in Herro’s view, with growth exceeding expectations across divisions. Notably, the crop science division delivered 11% growth, staging a robust recovery following two years of an agriculture downcycle and competitive challenges. Management’s increased guidance for crop sciences in 2022 calls for 7% organic growth and a 25-26% margin, which Herro believes is a key positive for the segment as it signals a long-awaited favorable transition toward profitable growth. In the pharmaceuticals division, revenue growth of more than 7% also bested expectations, supported by a strong recovery of Eylea, continued growth of Xarelto and the ramp of new products. Moreover, Bayer’s pipeline enjoyed notable successes in the period, including a favorable read-out for cancer drug Nubeqa. The Harris Associate’s team spoke with Bayer CFO Wolfgang Nickl who noted that tailwinds are robust in the business today. Notably, he expressed confidence in both the pricing and competitive backdrop in the crop sciences business as rate increases are layering into sales growth and cost cuts begin to come through. Bayer’s first quarter earnings report showed strength, in Herro’s view, surpassing consensus estimates across the board. In the crop business, growth accelerated 60% from herbicides as industry-wide capacity shortages led to windfall pricing and volume share gains for the company. However, supply and demand for glyphosate is expected to normalize in the second half of 2022. Without the tailwind from herbicides, the crop business still grew over 10% and margins improved ahead of forecasts as well. Strong consumer growth persisted and is now 27% above pre-Covid-19 levels. The pharma segment was the weakest as sales were pressured by volume-based pricing impacts on Xarelto, this is consistent with expectations and management still expects roughly flat product revenue for the year.

Turning to portfolio detractors for the period, ICON was a material drag on performance within the health care sector. The co-portfolio manager team at Polen Capital contends that ICON remains one of the world’s largest contract research organizations, structuring, administering, and delivering successful drug trial outcomes for the global biopharma industry. ICON completed a transformational acquisition in July 2021 when it acquired PRA Health Sciences, a deal that roughly doubled the company’s breadth and reach. The integration is going well with minimal employee and customer attrition. The team believes the company is well positioned to grow sales and profits at a steady clip in the coming five years. Deal synergies are being realized, including the tax benefits accruing from ICON’s Ireland domicile being applied to PRA’s US operations. Shares have underperformed this year as ICON’s valuation multiple compressed. Though some investors harbor cyclical concerns about early-stage funding drying up for venture backed biotech companies, such businesses account for less than 15% of ICON’s revenues. Further, management does not believe this cohort is at risk for funding shortfalls. Polen is looking through investor concerns and believes ICON’s business has superior scale and process management capabilities enabling it to win share within a steadily growing market. These views support Polen’s conviction that ICON can continue growing its earnings at a mid-teens rate for the next five years. Shares trade at ~17x forward 12 months earnings.

Although overall stock selection within the information technology sector was positive for the fund in the first half of 2022, Worldline, owned by Herro, was a large detractor. Herro appreciates Worldline’s position as a leader in European payments, and believes it has a long growth runway ahead due to Europe’s lower cashless penetration and higher levels of bank payment in-sourcing when compared to the U.S. He believes the payments industry is structurally attractive with high recurring revenues, low customer churn and strong free cash flow generation. In Herro’s view, Worldline’s revenue acceleration, which is driven by e-commerce business, travel recovery and synergy opportunities, is underappreciated by the market.

Early in the first quarter, Worldline completed its acquisition of Axepta Italy, a strategic partnership with BNL. It now owns 80% of Axepta Italy, which is a significant bank acquirer in the country. The partnership with BNL is in merchant services and is part of Worldine’s strategy to increase its presence across Europe. Worldline later posted strong fiscal year earnings results as revenue (EUR 3.69 billion vs. EUR 3.66 billion) and free cash flow (EUR 407 million vs. EUR 390 million) exceeded analysts’ estimates. Herro appreciated that fourth-quarter organic growth reached 12% versus the year-ago period and improved about 7% on a two-year basis, driven by merchant services’ 15.1% organic growth year-over-year. Moreover, Worldline’s organic revenues continued to progressively improve each quarter in 2021, leading to 6.8% organic growth for the full year, and margins improved 220 basis points in 2021 to reach 25.3%. The company also entered into an

 

 
Fund Summary         17


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agreement with Apollo Funds for the sale of its terminals, solutions & services business for a total consideration of EUR 2.3 billion in February. Management also struck a bullish tone on deal prospects in the coming year and highlighted that its pipeline is as full as it has ever been. Worldline also released an update on its exposure to the situation in Ukraine. It is enforcing all applicable sanctions and confirmed its exposure to business related to Russia was limited, accounting for just 1.5% of estimated 2021 pro forma revenue. Later, the company delivered a strong set of first-quarter earnings results, as exhibited by its 15.3% growth, of which 11.6% was organic growth. The merchant acquiring business drove much of this growth given: (1) the continued double-digit growth of the merchant count, (2) strong recovery in offline retail and travel, (3) ongoing cash to cashless transitions and (4) recent mergers and acquisitions. In addition, Worldline announced that CFO Eric Heurtaux would step down and be replaced by Gregory Lambertie who currently runs strategy, mergers and acquisitions and public/regulatory affairs at Worldline. In Herro’s estimation, the replacement could prove to be a good upgrade. The Harris Associates team met with CEO Gilles Grapinet in June, who expressed that the business is doing well, supported by a healthy European consumer in the second quarter. Overall, the investment thesis for the company remains intact.

Stock selection within the consumer discretionary sector was negative over the first six months. Evolution Gaming, owned by the team at Polen Capital, was a headwind to performance. They own Evolution Gaming because it is the world’s premier digital back-end solutions provider to the gaming industry. The business is poised to enjoy secular growth for a generation as gaming transforms from a destination-based experience to one enjoyed at home. Over the next 10-20 years, they believe gaming will increasingly shift out of the casino and into consumers’ homes via digital connectivity over the internet, cellular devices and connected TVs. This transition is just beginning in some important markets like the US and should largely flow through Evolution Gaming’s solutions. The company white labels live gaming so that casino operators can engage with consumers by offering a full suite of games from slots to game shows, to table games. The front-end experience bears the casino operator’s branding and management, but the games are administered by Evolution. Over the last quarter Evolution shares underperformed as investor sentiment soured on consumer discretionary businesses. This is linked to macro-oriented fears that consumer spending could wane from here. At roughly 20x forward 12-month earnings the team feels the stock is compellingly valued now given a long-term view that the company can compound earnings at greater than 20% per annum.

 

Top Contributors for the Six Months Ended June 30, 2022
Holding   Weight %     Return %     Contribution %     Benchmark
Weight %
    Sector

Bayer AG

    1.98       13.66       0.39       0.4     Healthcare

Glencore PLC

    1.30       8.71       0.24       0.38     Materials

Incitec Pivot

    0.45       31.62       0.23       0.00     Materials

Hensoldt AG

    1.23       2.21       0.04       0     Information Technology

Grupo Televisa SAB ADR

    1.45       -12.00       0.02           Communication Services

JD.com Inc

    0.01       -22.41       -0.01       0     Consumer Discretionary

Kering

    0.18       -1.10       -0.04       0.3     Consumer Discretionary

CAE Inc

    2.43       -2.66       -0.06           Industrial

Informa PLC

    2.15       -8.22       -0.15       0.07     Communication Services

Sampo Oyj Class A

    2.54       -7.09       -0.16       0.15     Financials

CocaCola European Partners

    2.57       -7.16       -0.17       0.07     Consumer Staples

 

Top Detractors for the Six Months Ended June 30, 2022
Holding   Weight %     Return %     Contribution %     Benchmark
Weight %
    Sector

SAP SE

    3.26       -34.74       -1.23       0.74     Information Technology

Credit Suisse Group AG

    2.62       -41.09       -1.18       0.13     Financials

Icon PLC

    3.38       -30.03       -1.16           HealthCare

Evolution Gaming

    2.67       -36.08       -1.11       0.12     Consumer Discretionary

adidas AG

    2.38       -37.90       -1.02       0.27     Consumer Discretionary

Worldline SA

    2.68       -33.64       -0.97       0.07     Information Technology

Siemens Healthineers AG

    2.76       -31.50       -0.95       0.11     HealthCare

Ryanair Holdings PLC ADR

    3.23       -34.28       -0.94           Industrials

Temenos AG

    1.82       -37.95       -0.81       0.04     Information Technology

Accenture PLC Class A

    2.02       -32.65       -0.79           Information Technology

 

 
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Portfolio Mix

The International Fund portfolio is the result of three bottom-up stock pickers with diverse investment approaches building concentrated portfolios. Therefore, the portfolio often looks quite different from its benchmark. For example, it is common for the fund to have meaningful sector over- or underweights. As of mid-year, the fund was 8.3% overweight to the technology sector (16.1% vs. 7.8%) and underweight to the consumer staples and materials sectors by 6.0% and 6.3%, respectively. There were no significant changes in sector weightings over the first half of the year.

The fund’s position across different countries and regions did not materially change since the start of 2022. A significant overweight to Europe (84.4% versus 63.1% in the index) remains in place. The fund also remains without exposure to Japan—which is a 22.3% weighting with the index.

We believe the fund comprises an eclectic mix of highly skilled, disciplined, and opportunistic stock pickers who have the potential to add significant additional value through concentrating in only their highest-conviction names.

Portfolio Breakdown as of 06/30/2022

 

By Sector

  Fund     iShares
EAFE
ETF
    +/-  

Finance

    20.3%       17.6%       2.7%  

Consumer Discretionary

    14.2%       11.3%       2.9%  

Information Technology

    16.1%       7.8%       8.3%  

Communication Services

    9.0%       5.0%       4.0%  

Health Care & Pharmaceuticals

    9.9%       13.8%       -3.9%  

Industrials

    14.4%       14.9%       -0.5%  

Consumer Staples

    4.8%       10.9%       -6.0%  

Real Estate

    0.0%       2.9%       -2.9%  

Utilities

    5.5%       3.5%       1.9%  

Energy

    0.0%       4.7%       -4.7%  

Materials

    1.2%       7.5%       -6.3%  

Cash

    4.6%       0.0%       4.6%  

 

By Region

  By Market Cap
LOGO   LOGO

 

 

 
Fund Summary         19


Table of Contents

By Region

  Fund     iShares
EAFE
ETF
    +/-  

Europe

    84.4%       63.1%       21.3%  

North America

    5.4%       1.0%       4.3%  

Asia ex-Japan

    5.4%       4.8%       0.7%  

Japan

    0.0%       22.3%       -22.3%  

Latin America

    1.4%       0.1%       1.3%  

Africa

    0.0%       0.0%       0.0%  

Australia/New Zealand

    0.0%       8.0%       -8.0%  

Middle East

    3.4%       0.7%       2.7%  

Other Countries

    0.0%       0.0%       0.0%  

* Cash is excluded from calculation.

 

 
20       Litman Gregory Funds Trust


Table of Contents

iMGP International Fund Managers

 

 

 

INVESTMENT
MANAGER
  FIRM   TARGET
MANAGER
ALLOCATION
  MARKET CAPITALIZATION
OF COMPANIES
IN PORTFOLIO
  STOCK-PICKING
STYLE
  BENCHMARK
David Herro   Harris Associates L.P.   33.33%   All sizes, but mostly large- and mid-sized companies   Value   MSCI World ex U.S. Value Index
Mark Little   Lazard Asset Management, LLC   33.33%   All sizes   Blend/Relative Value   MSCI World ex U.S. Index
Todd Morris, Daniel Fields   Polen Capital Management LLC   33.33%   All sizes   Growth   MSCI EAFE Index

iMGP International Fund Value of Hypothetical $10,000.

 

The value of a hypothetical $10,000 investment in the iMGP International Fund from December 1, 1997 to June 30, 2022 compared with the MSCI EAFE Index and Morningstar Foreign Large Blend Category.

 

LOGO

The hypothetical $10,000 investment at fund inception includes changes due to share price and reinvestment of dividends and capital gains. The chart does no imply future performance. Indexes are unmanaged, do not incur fees, expenses or taxes, and cannot be invested in directly.

Performance quoted does not include a deduction for taxes that a shareholder would pay on the redemption of fund shares.

 

 
Fund Summary         21


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iMGP International Fund

SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2022 (Unaudited)

 

Shares           Value  
 

COMMON STOCKS: 94.9%

 
  Argentina: 0.6%  
  2,300     MercadoLibre, Inc.*    $ 1,464,801  
    

 

 

 
  Australia: 1.2%  
  566,700     Glencore Plc*      3,068,475  
    

 

 

 
  Canada: 2.7%  
  272,913     CAE, Inc.*      6,725,296  
    

 

 

 
  China: 5.9%  
  3,562,000     China Longyuan Power Group Corp. Ltd. - Class H      6,947,418  
  73,314     Prosus N.V.*      4,840,111  
  66,300     Tencent Holdings Ltd.      3,010,761  
    

 

 

 
     14,798,290  
  

 

 

 
  Denmark: 2.0%  
  38,531     Carlsberg A/S - Class B      4,909,474  
  

 

 

 
  Finland: 2.6%  
  150,318     Sampo Oyj - Class A      6,539,083  
  

 

 

 
  France: 10.7%  
  120,000     BNP Paribas S.A.      5,707,554  
  567,425     Engie S.A.      6,578,855  
  6,290     Kering S.A.      3,264,592  
  7,510     LVMH Moet Hennessy Louis Vuitton SE      4,629,804  
  173,600     Worldline S.A.*(a)      6,415,218  
    

 

 

 
     26,596,023  
  

 

 

 
  Germany: 20.7%  
  30,575     Adidas AG      5,401,855  
  24,160     Allianz SE      4,607,158  
  58,300     Bayer AG      3,460,171  
  53,091     Continental AG      3,695,864  
  91,291     CTS Eventim AG & Co. KGaA*      4,778,455  
  94,115     Daimler AG      5,440,705  
  157,718     Daimler Truck Holding AG*      4,111,940  
  197,602     Hensoldt AG      4,985,760  
  90,780     SAP SE      8,261,616  
  132,520     Siemens Healthineers AG(a)      6,729,374  
    

 

 

 
     51,472,898  
  

 

 

 
  Ireland: 6.8%  
  41,110     ICON Plc*      8,908,537  
  120,314     Ryanair Holdings Plc - ADR*      8,091,117  
    

 

 

 
     16,999,654  
  

 

 

 
  Israel: 3.2%  
  1,526,215     Israel Discount Bank Ltd. - Class A      7,993,233  
    

 

 

 
  Italy: 1.4%  
  434,618     GVS SpA(a)*      3,552,542  
    

 

 

 
  Mexico: 1.4%  
  410,270     Grupo Televisa SAB - ADR      3,356,009  
    

 

 

 
  Netherlands: 5.3%  
  8,660     ASML Holding N.V.      4,175,169  
  73,728     EXOR N.V.      4,622,483  
  222,163     Universal Music Group N.V.      4,483,910  
    

 

 

 
     13,281,562  
  

 

 

 
  South Korea: 1.2%  
  15,610     NAVER Corp.      2,896,096  
  

 

 

 
Shares           Value  
  Spain: 4.1%  
  110,740     Amadeus IT Group S.A.*    $ 6,215,320  
  215,590     Siemens Gamesa Renewable Energy S.A.*      4,065,869  
    

 

 

 
     10,281,189  
  

 

 

 
  Sweden: 2.6%  
  71,582     Evolution AB(a)      6,511,239  
    

 

 

 
  Switzerland: 4.3%  
  1,099,738     Credit Suisse Group AG*      6,257,993  
  51,650     Temenos AG      4,405,386  
    

 

 

 
     10,663,379  
  

 

 

 
  United Kingdom: 10.4%  
  358,184     CNH Industrial N.V.      4,152,855  
  138,595     Coca-Cola European Partners Plc      7,106,935  
  604,211     Informa Plc*      3,890,796  
  10,592,750     Lloyds Banking Group Plc      5,459,609  
  699,870     Sage Group Plc (The)      5,408,685  
    

 

 

 
     26,018,880  
  

 

 

 
  United States: 7.8%  
  17,743     Accenture Plc - Class A      4,926,344  
  33,916     Aon Plc - Class A      9,146,467  
  60,104     Medtronic Plc      5,394,334  
    

 

 

 
     19,467,145  
  

 

 

 
 

TOTAL COMMON STOCKS
(Cost $274,800,048)

     236,595,268  
  

 

 

 
Principal
Amount
              
 

SHORT-TERM INVESTMENTS: 3.4%

 
 

REPURCHASE AGREEMENTS: 3.4%

 
  $8,588,473     Fixed Income Clearing Corp. 0.240%, 6/30/2022, due 07/01/2022 [collateral: par value $4,207,100, U.S. Treasury Inflation Index Bond, 3.625%, due 04/15/2028 value $8,761,096] (proceeds $8,588,530)      8,588,473  
    

 

 

 
 

TOTAL SHORT-TERM INVESTMENTS
(Cost $8,588,473)

     8,588,473  
  

 

 

 
 

TOTAL INVESTMENTS
(Cost: $283,388,521): 98.3%

     245,183,741  
  

 

 

 
  Other Assets in Excess of Liabilities: 1.7%      4,254,600  
  

 

 

 
 

NET ASSETS: 100.0%

   $ 249,438,341  
  

 

 

 

Percentages are stated as a percent of net assets.

 

ADR

American Depositary Receipt

L.P.

Limited Partnership

*

Non-Income Producing Security.

(a)

Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under Securities Act of 1933.

 

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

 

 
22       Litman Gregory Funds Trust


Table of Contents

iMGP Oldfield International Value Fund

 

 

 

The iMGP Oldfield International Value Fund declined 16.72% in the six-month period, compared to losses of 12.12% for the MSCI EAFE Value Index and a 13.30% decline for the Morningstar Foreign Large Value Category.

 

       

Performance as of 6/30/2022

                         
     Year to
Date
Return
     One-Year      Average Annual
Total Return
Since Inception
11/30/2020)
 

iMGP Oldfield International Value Fund

    -16.72%        -18.95%        -0.04%  

MSCI EAFE Value NR USD

    -12.12%        -11.95%        1.77%  

MSCI EAFE NR USD

    -19.57%        -17.77%        -6.35%  

Morningstar Fund Foreign Large Value

    -13.30%        -13.12%        1.96%  
Past performance does not guarantee future results. Index performance is not illustrative of fund performance. An investment cannot be made directly in an index. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. To obtain the performance of the funds as of the most recently completed calendar month, please visit www.imgpfunds.com. Investment performance reflects fee waivers and expense limitations in effect through April 30, 2023. In the absence of such waivers, total return would be reduced.

 

In the first six months of 2022, the iMGP Oldfield International Value Fund and its MSCI EAFE Value benchmark fell by less than the broader MSCI EAFE Index. Value is doing better, as one might expect, given its propensity to have lower starting valuations and is helping protect capital in the current environment. At the end of June, the Financial Times reported that equity markets had suffered their worst first half performance in more than 50 years after the declines seen so far in 2022, triggered by the Federal Reserve curtailing Quantitative Easing. Risks remain around further de-rating and earnings expectations. At the stock level, companies are facing severe margin pressures across the board owing to rising interest rates, wages, input costs, pricing pressures and concerns around end demand.

The stocks with the biggest negative impact on relative performance during the period were, Embraer (-51%, total return in local currency), Siemens (-34%), easyJet (-34%), E.on (31%) and Samsung Electronics (-27%).

The share price of Embraer, the Brazilian aircraft manufacturer and leading global producer of regional jets, has been weak given the month-long shutdown in production announced earlier in the year. This is due to a final re-integration of the commercial aviation unit after the aborted bid by Boeing. In addition, the collapse of investor appetite for Special Purpose Acquisition Companies, or SPACS, has also impacted Embraer’s SPAC for its EVE unit. EVE is developing a short range electric vertical take-off and landing ‘flying taxi’ seating five people that will aim to replace helicopters and some taxi routes primarily in urban settings. Whilst we acknowledge that this remains a somewhat speculative endeavour it has more chance of success than most with Embraer’s excellent engineering track record, a 5bn order backlog and targeting commercial operations by 2026. We do not include this in our valuation and yet some analysts are valuing this well in excess of the entire market value of Embraer. Embraer continues to recover from its COVID induced collapse and we see its intrinsic value as significantly higher than today’s level.

Siemens, as a German industrial, has been impacted by the ongoing conflict in the Ukraine which threatens the supply of energy to Germany which is heavily reliant on Russian gas which accounted for some 55% of Germany’s gas consumption (40% for Europe as a whole) before the war. These concerns were heightened by Russia curtailing supplies through the existing Nord Stream 1 pipeline seemingly to prevent Germany building gas inventories over the summer months. We believe the impact on the fundamentals of Siemens has been more than priced into the shares. Earnings projections for Siemens remain flat over the last six months and we note that it is now a global business with only 28% of its workforce based in Germany. If we strip out the current market value of the Siemens Healthineers business which has a separate listing, the forward PE for the Siemens group is around 8x which is very low for the quality of this business. Concerns around energy supply have also impacted E.on, which as the main German energy networks business which should be a relatively defensive share in more normal times. Its valuation has now fallen to 9x price-to-earnings when a more normalised valuation level of 14x is deemed appropriate. It now offers an attractive dividend yield of 6.3% which is 1.8x covered.

The global airline sector has been up ended by COVID followed by the oil price increase. We are witnessing the pent-up demand for foreign holidays recover which paradoxically is shown by the chaos at European airports. The recovery in demand is greater than available airport capacity. These issues should be ironed out over the next few months. Delays in giving airport staff security clearance were one of the main reasons highlighted by the industry for continued travel disruption. The UK’s Department for Transport states that the time taken for security clearance is now 10 days, half the time it took in March. Leisure travel is seen as discretionary spend and hence vulnerable in any downturn. However, given the recovery, as we emerge from two years of COVID induced lockdowns, it is evident that consumers are starting to prioritize services over goods in their spending. We hold a leading low-cost airline in easyJet, who will not only out-compete their legacy rivals but also benefit from consumers trading down.

The stocks with the largest positive impact on the strategy’s relative performance were, in order of their impact, Mitsubishi Heavy Industries (MHI) (+81%, total return in local currency), Bayer (+25%), BT Group (+10%), Sanofi (+13%) and Mitsubishi UFJ Financial (+19%).

 

 

 
Fund Summary         23


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MHI, the Japanese industrial conglomerate covering sectors such as energy, aviation, and logistics, is the biggest contributor to fund performance year to date, providing a total return of +81% in local currency terms and, despite the weakness of the Yen, +54% in US dollar terms. In its Energy business it is one of the world’s largest suppliers of power installations from gas turbines to nuclear. Clearly in a world where energy security concerns will be elevated, it has numerous businesses which are highly relevant. It is also a leader in the growing areas of hydrogen and carbon capture technologies that will be needed to reach Net Zero targets. At the end of December last year, Seiji Izumisawa, the Chief Executive of MHI briefed reporters that the group could require a sweeping overhaul and restructuring to focus the group on businesses with the strongest opportunity set. We have been engaging on this issue with the company since we bought the shares in 2017. MHI’s shares were strong from the start of 2022 on the back of the CEO’s comments but since the war in Ukraine began investors have also noted that MHI is Japan’s largest defence contractor.

Over the period, we completed the sales of Nokia and Kansai Electric Power and the purchase of a new position in LG Household & Health Care (LG H&H). In March, we switched some of the Sanofi holding that had been defensive into Fresenius that had suffered a weak share price after its poorly handled results day announcement. LG H&H is a Korean consumer goods company with three core businesses: Home Care & Daily Beauty (HDB), Cosmetics, and Refreshments. Since IPO in 2001, Cosmetics comprise 70% of operating profit and has grown rapidly over the last decade at about 14% per annum, driven primarily by its luxury skin care brand “The History of Whoo” in China. A large part of Whoo sales are to Chinese consumers through resellers buying the products in duty free stores in Korea. This channel has been hit by COVID-related travel restrictions which has seen a 97% fall in Chinese tourist numbers visiting South Korea which has led resellers to seek price discounts. It continues to be impacted by the continued lockdowns in China. On any relaxation of the COVID-related travel restrictions between China and Korea, we expect the revenues to increase. LG H&H’s shares have more than halved in price since their January 2021 peak. We view fair value at 50% above the prevailing price on a two-year view. We have now also taken a third bite in easyJet and hence have reached our limits in adding to that position, with the second bite being the participation in the rights issue. The weighted average upside in the portfolio is now at 55% this this is one of the highest levels seen in recent years.

Portfolio Breakdown as of 06/30/2022

 

By Sector

  Fund     iShares EAFE
Value ETF
    +/-  

Finance

    21.7%       25.1%       -3.4%  

Consumer Discretionary

    9.6%       8.5%       1.1%  

Information Technology

    4.3%       2.6%       1.7%  

Communication Services

    7.5%       6.4%       1.2%  

Health Care & Pharmaceuticals

    15.3%       10.4%       4.9%  

Industrials

    17.8%       10.2%       7.6%  

Consumer Staples

    12.1%       8.0%       4.0%  

Real Estate

    0.0%       4.6%       -4.6%  

Utilities

    3.1%       6.0%       -2.9%  

Energy

    4.4%       8.8%       -4.4%  

Materials

    0.0%       9.4%       -9.4%  

Cash

    4.2%       0.0%       4.2%  

By Region

  Fund     iShares EAFE
Value ETF
    +/-  

Europe

    60.4%       63.5%       -3.1%  

North America

    0.0%       0.8%       -0.8%  

Asia ex-Japan

    17.1%       4.4%       12.7%  

Japan

    19.4%       22.6%       -3.2%  

Latin America

    3.1%       0.2%       2.9%  

Africa

    0.0%       0.0%       0.0%  

Australia/New Zealand

    0.0%       7.9%       -7.9%  

Middle East

    0.0%       0.7%       -0.7%  

Other Countries

    0.0%       0.0%       0.0%  

* Cash is excluded from calculation.

 

 
24       Litman Gregory Funds Trust


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iMGP Oldfield International Value Fund Value of Hypothetical $10,000

 

The value of a hypothetical $10,000 investment in the iMGP Oldfield International Value Fund from November 30, 2020 to June 30, 2022 compared with the MSCI EAFE Value Index and Morningstar Foreign Large Value Category.

 

LOGO

The hypothetical $10,000 investment at fund inception includes changes due to share price and reinvestment of dividends and capital gains. The chart does not imply future performance. Indexes are unmanaged, do not incur fees, expenses or taxes, and cannot be invested in directly.

Performance quoted does not include a deduction for taxes that a shareholder would pay on the redemption of fund shares.

 

 
Fund Summary         25


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iMGP Oldfield International Value Fund

SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2022 (Unaudited)

 

Shares           Value  
 

COMMON STOCKS: 93.3%

 
  Brazil: 3.0%  
  72,300     Embraer S.A. - ADR*    $ 634,794  
    

 

 

 
  China: 3.9%  
  58,700     Alibaba Group Holding Ltd.*      837,296  
    

 

 

 
  France: 4.4%  
  9,324     Sanofi      941,906  
    

 

 

 
  Germany: 17.9%  
  22,397     Bayer AG      1,329,287  
  79,094     E.ON SE      662,899  
  32,623     Fresenius SE & Co. KGaA      987,447  
  8,244     Siemens AG      838,174  
    

 

 

 
     3,817,807  
  

 

 

 
  Italy: 4.4%  
  78,302     Eni SpA      929,234  
    

 

 

 
  Japan: 18.6%  
  10,600     East Japan Railway Co.      542,314  
  26,500     Mitsubishi Heavy Industries Ltd.      927,481  
  212,800     Mitsubishi UFJ Financial Group, Inc.      1,138,501  
  188,600     Nomura Holdings, Inc.      689,770  
  42,700     Toyota Motor Corp.      657,562  
    

 

 

 
     3,955,628  
  

 

 

 
  Netherlands: 4.1%  
  14,037     EXOR N.V.      880,070  
    

 

 

 
  South Korea: 12.5%  
  12,189     KT&G Corp.      771,569  
  1,842     LG H&H Co. Ltd.      965,301  
  847     Samsung Electronics Co. Ltd. - GDR      924,077  
    

 

 

 
     2,660,947  
  

 

 

 
  Sweden: 3.4%  
  85,855     Svenska Handelsbanken AB - Class A      733,641  
    

 

 

 
  United Kingdom: 21.1%  
  708,527     BT Group Plc      1,606,534  
  191,899     easyJet Plc*      857,258  
  2,313,079     Lloyds Banking Group Plc      1,192,184  
  268,677     Tesco Plc      835,026  
    

 

 

 
     4,491,002  
  

 

 

 
 

TOTAL COMMON STOCKS
(Cost $23,199,453)

     19,882,325  
  

 

 

 
 

PREFERRED STOCK: 2.6%

 
  Germany: 2.6%  
  8,319     Porsche Automobil Holding SE - (Preference Shares)      549,706  
    

 

 

 
 

TOTAL PREFERRED STOCK
(Cost $625,505)

     549,706  
  

 

 

 
 

TOTAL INVESTMENTS
(Cost: $23,824,958): 95.9%

     20,432,031  
  

 

 

 
  Other Assets in Excess of Liabilities: 4.1%      878,759  
  

 

 

 
 

NET ASSETS: 100.0%

   $ 21,310,790  
  

 

 

 

Percentages are stated as a percent of net assets.

 

ADR

American Depositary Receipt

GDR

Global Depositary Receipt

*

Non-Income Producing Security.

 

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

 

 
26       Litman Gregory Funds Trust


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iMGP SBH Focused Small Value Fund (PFSVX)

 

 

 

The iMGP SBH Focused Small Value Fund fell 19.78% in the first half of 2022, finishing the period behind the 17.31% loss for the Russell 2000 Value Index benchmark, and the 15.10% decline for the Morningstar Small Value category. Since the fund’s inception in July 2020, the fund has gained 10.92% compared to the 20.17% gain for the benchmark.

 

       

Performance as of 6/30/2022

                         
     Year to
Date
Return
     One-Year      Average
Annual Total
Return Since
Inception
(7/31/2020)
 

iMGP SBH Focused Small Value Fund

    -19.78%        -17.51%        10.92%  

Russell 2000 Value

    -17.31%        -16.28%        20.17%  

Russell 2000

    -23.43%        -25.20%        9.00%  

Morningstar Small Value Category

    -15.10%        -12.02%        22.25%  
 

Gross Expenses : 1.48%, Net Expenses: 1.15%

 

Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the funds may be lower or higher than the performance quoted. Short term performance is not a good indication of the fund’s future performance and should not be the sole basis for investing in the fund. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit www.imgpfunds.com. Returns less than one year are not annualized. The Advisor has contractually agreed to limit the expenses of the fund through April 30, 2023.

 

 

Portfolio Commentary from SBH

When it comes to our outlook and positioning, there are two issues that currently frame our thinking. First, supply chain issues continue to plague corporate America. Many of the companies in the portfolio have struggled to show an effective turnaround. The economic slowdown should help this situation and lead to improved production runs, as well as demonstrate the improvements implemented by management teams in recent quarters. There were glimpses of the supply chain improvement and improving visibility of production efficiencies early this year until the Russia/Ukraine war occurred followed shortly by the zero-COVID lockdowns in China which wreaked havoc on normalcy. While we are disappointed by these circumstances, we believe the management teams are pragmatic and creative when identifying solutions that will service customers. Indeed, in meeting with management teams this quarter, we were taken aback to learn that many of them were hoping for a recession to help reset demand factors, in order to speed up the return to “normal” supply chains. The Federal Reserve (Fed) seems to be focused on facilitating this outcome given its recent tightening of interest rates and consequently the cost of capital and liquidity dynamics. While we do not wish for recessions, we believe the portfolio’s companies can manage downturns due to their focus on return improvement.

The other source of disappointment for us during the quarter was our downside capture. This was atypical for our portfolio and due almost exclusively to our significant underexposure to Energy. The sector was a significant headwind during the second quarter (and first half of the year), exacerbated by Energy being over 10% of the index weight (the June Russell index reconstitution cut Energy’s percentage in half). The Russia/Ukraine war materially benefited the sector’s outperformance which is highly dependent on the disruption continuing and global demand holding up. We focus on management teams that have self-help and significant improvement in rates of change on Return on Invested Capital (ROIC) through better decision making and an improved overall focus on culture, incentives, and governance. Companies in the Energy sector offer limited control on many of these factors with profit performance often predicated on the “spot” price of an underlying commodity as opposed to “good people doing the right thing.” For this reason, the portfolio has been historically underweight the sector. At times, this will hurt performance.

As we look to the second half of 2022, we are faced with the daunting task of trying to understand the macro environment and anticipate the effects of the many moving parts well outside the normal economic cycle factors. What we see is not encouraging from an overall economic perspective given the significant increase in interest rates and, accordingly, costs of capital. Additionally, margins broadly are being negatively impacted by the inflation backdrop while demand destruction has just begun. Historically, as companies’ margins degrade, employment starts to show weakening signs. The slew of companies which were able to raise capital over the last couple of years, companies that in our view should not have received a dime under normal capital outlay scenarios, will be facing a reckoning should policymakers be dedicated to getting things back into balance. Until the global central bankers stop the tightening of conditions on a rate of change basis, volatility will remain (inflation-driven bear markets historically are some of the most volatile).

If there is any bright spot in such a scenario, it is that companies executing on well-conceived plans to allocate capital will thrive while those who relied on perpetual easy money will fall by the wayside. Trying to determine whether the monetary authorities or Congress will have the political fortitude to stay the course and let inflationary pressures subside and allow interest rates to find their own level or not is close to being a fool’s errand. We think focusing on putting your capital with management teams that respect capital, proactively prepare

 

 
Fund Summary         27


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for negative shocks, and can withstand a period of less than robust economic conditions are of utmost importance, and a far better use of our time. We have raised our cash levels over the last few months to improve liquidity in order to redeploy capital into an increasing number of what we feel are attractive opportunities, some of which have already pulled back 80% to 90% over the last year with plenty of financial flexibility and should be positioned for secular tailwinds. We believe the coming months will prove to be some of the most critical in our investment career given the rates of change and systemic risks. We clearly are not perfect, but we are constantly seeking ways to improve our growing team. As always, we appreciate your interest and vote of confidence in our philosophy and process.

Key Performance Drivers

The three sectors that contributed most to the portfolio’s performance relative to its benchmark in the first half of year were Real Estate (driven by selection), Health Care (driven by allocation), and Communication Services (driven by allocation). Real Estate holding Equity Commonwealth was a top contributor on an individual stock basis. Company management team has remained extremely patient in deploying capital over the last couple of years as it was not seeing attractive risk-adjusted return opportunities. As interest rates have risen and overall economic activity is at risk of entering a recession, we see a solid backdrop for the company to be in an enviable position of deploying its significant cash holdings into mispriced opportunities in the market.

Another key stock contributor in the period was Modine Manufacturing, a maker of automotive components. The stock’s performance was driven by the company’s new CEO’s significant rejuvenation of the organization. The management team has adopted a simplification approach to all revenue streams which is eliminating complexity and driving both pricing, margins, and Return on Invested Capital (ROIC) higher. We believe the stock is attractively valued based on the current run-rate of earnings and profitability being generated.

Mercury Systems, a technology company serving the aerospace and defense industry, was the second-largest individual contributor in the period. Our thesis for owning Mercury was driven by the company’s initiative to reduce internal costs, which should improve capital allocation and result in higher margins as defense spending across the globe provides a sizeable tailwind to the business. We believe the business should be attractive to strategic and/or financial organizations, as two activist investors now are represented on the board of directors. We believe the business remains undervalued.

The three sectors that detracted most from the portfolio’s performance relative to its benchmark in the quarter were Energy (driven by allocation), Materials (driven by selection) and Consumer Staples (driven by selection). Materials holding Compass Minerals was the top detractor during the quarter after having been a strong contributor in the first quarter. Compass has faced rapidly rising fuel costs this year, which they have not been able to pass along quickly to customers. We do expect that as their annual contracts renew over the next couple months, they will be able to recover most, if not all, of these higher expenses on a go-forward basis.

Within Consumer Staples, Hain Celestial was the largest detractor. HAIN faced facing significant inflationary and supply chain issues over the last year and the invasion of Ukraine has further accelerated some of these issues. Although HAIN has been very aggressively raising prices to offset these higher costs, the timing of a full recovery and the overall elasticity of their price increases are more in question as demand patterns become less clear going forward.

Six Flags Entertainment was at Consumer Discretionary company that declined in the period. Our thesis for owning Six Flags was driven by the new CEO’s strategy, which is to focus on premium pricing while upgrading the amusement parks to be more family friendly by providing higher quality food and drink offerings. The stock has underperformed as investors worry a recession will cause further pressure on park attendance. We believe the stock is attractively valued; however, the new premium pricing strategy is early in its rollout and therefore we will wait for further evidence it will add value.

Another Consumer Discretionary holding that detracted from relative performance was Gildan Activewear. The reason for adding Gildan to the portfolio centered around the company being the most vertically-scaled and integrated manufacturer of apparel in the U.S. The management team has implemented a “Back to Basics” strategy to focus on simplicity (e.g., reducing selling, general and administrative expenses (SG&A), massively reducing stock-keeping units (SKUs), and exiting an unproductive private label) which has driven ROICs from a historical 14-15% range to ~20%+. We believe the current valuation of the stock is very compelling as the business is not receiving credit for the structural improvements that have been made to its business model and its attractive ROIC profile. The stock has underperformed year-to-date primarily due to concerns around the consumer slowing, cotton price volatility, and the potential for channel destocking. We believe the concerns are reasonable and may be impactful in the short term; however, longer term prospects are compelling as Gildan maintains structurally higher margins and an attractive ROIC profile as more retailers look to near-shore their apparel sourcing for which Gildan is well positioned.

Materials holding, Glafelter Corp. was a top detractor in the period. Our thesis for owning Glafelter was driven by the company’s dominant market share globally in its core engineered material markets which we believed would significantly improve returns and growth; however, the rapid rise of European energy costs has caused a large cost headwind. The management team is aggressively renegotiating contracts with customers and implementing a dynamic pricing model in order to recapture these costs. The largest driver of the company’s underperformance was the worsening situation in Europe which caused earnings to miss expectations. We believe the stock is attractively valued; however, until we see some resolution of the Russia/Ukraine war, which would cause energy prices to fall, the company has to focus on paying down debt.

 

 
28       Litman Gregory Funds Trust


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While the Energy sector was a large detractor in the period, one the portfolio’s top contributors in the period was PDC Energy. Our thesis for owning PDC Energy was driven by the company’s transformation of refocusing capital towards its highest-return acreage in Colorado while committing to paying down a significant amount of debt. Overall profitability and returns have been buoyed by higher oil and natural gas prices. We view its valuation as attractive given the current level of oil and gas prices; however, prices could remain volatile and influence valuation.

 

Top Contributors for the Six Months Ended June 30, 2022
Holding   Weight %     Return %     Contribution %     Benchmark
Weight %
    Sector

PDC Energy Inc

    2.21       27.28       0.43       0.46     Energy

Mercury Systems

    1.34       20.51       0.28           Information Technolgoy

SP Plus Corp

    2.96       8.86       0.21           Industrials

Equity Commonwealth

    2.56       6.29       0.13       0.22     Real Estate

Modine Manufacturing

    1.94       4.36       0.10           Industrials

Helmerich & Payne Inc

    0.05       12.34       0.09       0.31     Energy

KBR Inc

    3.46       2.10       0.09       0.06     Industrials

CSG Systems Intl

    1.65       4.49       0.06       0.07     Information Technolgoy

Lakeland Financial

    0.20       1.12       0.04       0.13     Financials

Southstate Corp

    0.05       2.87       0.01       0.45     Financials
Top Detractors for the Six Months Ended June 30, 2022
Holding   Weight %     Return %     Contribution %     Benchmark
Weight %
    Sector

Glatfelter Corp

    2.58       -58.72       -1.93       0.04     Materials

The Hain Celestial Group

    3.04       -44.29       -1.57           Consumer Staples

Coty Inc Class A

    4.22       -23.71       -1.22           Consumer Discretionary

Faro Technologies Inc

    1.49       -54.91       -1.22       0.03     Information Technolgoy

Regal Rexnord Corp

    3.04       -32.94       -1.08           Industrials

Compass Minerals Intl

    3.65       -30.29       -1.00           Materials

Six Flags Entertainment

    1.90       -49.04       -0.95           Consumer Discretionary

Circor International Inc

    2.01       -39.70       -0.85           Industrials

Gildan Activewear Inc

    2.36       -31.41       -0.81           Consumer Discretionary

NCR Corp

    3.38       -22.61       -0.74           Information Technology

Portfolio Breakdown as of 06/30/2022

 

By Sector

  Fund     Russell 2000
Value
    +/-  

Finance

    16.6%       28.4%       -11.8%  

Consumer Discretionary

    7.1%       9.6%       -2.5%  

Information Technology

    12.9%       6.1%       6.8%  

Communication Services

    0.0%       3.3%       -3.3%  

Health Care & Pharmaceuticals

    5.0%       11.0%       -6.0%  

Industrials

    34.4%       12.7%       21.6%  

Consumer Staples

    6.3%       2.9%       3.4%  

Real Estate

    3.2%       11.9%       -8.7%  

Utilities

    0.0%       5.3%       -5.3%  

Energy

    3.7%       5.0%       -1.3%  

Materials

    6.9%       3.9%       3.0%  

Cash

    4.1%       0.0%       4.1%  

    

 

 
Fund Summary         29


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Summary Statistics  

Market Cap Median (bn)

    2.4  

Weighted Average Market Cap (bn)

    2.9  

# of Holdings

    40  

    

 

iMGP SBH Focused Small Value Fund Value of Hypothetical $10,000.

 

The value of a hypothetical $10,000 investment in the iMGP SBH Focused Small Value Fund from July 31, 2020 to June 30, 2022 compared with the Russell 2000 Value Index and Morningstar Small Value Fund Category.

 

LOGO

The hypothetical $10,000 investment at fund inception includes changes due to share price and reinvestment of dividends and capital gains. The chart does not imply future performance. Indexes are unmanaged, do not incur fees, expenses or taxes, and cannot be invested in directly.

Performance quoted does not include a deduction for taxes that a shareholder would pay on the redemption of fund shares.

 

 
30       Litman Gregory Funds Trust


Table of Contents

iMGP SBH Focused Small Value Fund

SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2022 (Unaudited)

 

Shares           Value  
 

COMMON STOCKS: 95.9%

 
  Consumer Discretionary: 7.1%  
  39,054     Gildan Activewear, Inc.    $ 1,123,974  
  24,234     Harley-Davidson, Inc.      767,248  
  118,634     Modine Manufacturing Co.*      1,249,216  
  18,718     Six Flags Entertainment Corp.*      406,181  
    

 

 

 
     3,546,619  
  

 

 

 
  Consumer Staples: 6.3%  
  266,468     Coty, Inc. - Class A*      2,134,409  
  41,534     Hain Celestial Group, Inc. (The)*      986,017  
    

 

 

 
     3,120,426  
  

 

 

 
  Energy: 3.7%  
  14,123     Helmerich & Payne, Inc.      608,136  
  19,608     PDC Energy, Inc.      1,208,049  
    

 

 

 
     1,816,185  
  

 

 

 
  Financials: 16.6%  
  28,235     Glacier Bancorp, Inc.      1,338,904  
  38,822     National Bank Holdings Corp. - Class A      1,485,718  
  27,989     Pacific Premier Bancorp, Inc.      818,398  
  47,570     Seacoast Banking Corp. of Florida      1,571,713  
  7,005     SouthState Corp.      540,436  
  64,688     Umpqua Holdings Corp.      1,084,818  
  46,542     United Community Banks, Inc.      1,405,103  
    

 

 

 
     8,245,090  
  

 

 

 
  Health Care: 4.9%  
  7,959     ICU Medical, Inc.*      1,308,380  
  49,000     Orthofix Medical, Inc.*      1,153,460  
    

 

 

 
     2,461,840  
  

 

 

 
  Industrials: 34.3%  
  36,075     Apogee Enterprises, Inc.      1,414,862  
  16,455     Astec Industries, Inc.      671,035  
  31,482     AZZ, Inc.      1,285,095  
  18,707     Beacon Roofing Supply, Inc.*      960,792  
  52,313     CIRCOR International, Inc.*      857,410  
  13,466     EnerSys      793,955  
  39,547     KBR, Inc.      1,913,679  
  15,799     Mercury Systems, Inc.*      1,016,350  
  45,016     Quanex Building Products Corp.      1,024,114  
  11,604     Regal Beloit Corp.      1,317,286  
  105,966     REV Group, Inc.      1,151,850  
  57,295     SP Plus Corp.*      1,760,102  
  31,446     SPX Corp.*      1,661,607  
  56,411     Sterling Construction Co., Inc.*      1,236,529  
    

 

 

 
     17,064,666  
  

 

 

 
  Information Technology: 12.9%  
  36,256     Belden, Inc.      1,931,357  
  116,908     Conduent, Inc.*      505,043  
  15,718     CSG Systems International, Inc.      938,050  
  50,267     NCR Corp.*      1,563,806  
  32,173     Progress Software Corp.      1,457,437  
    

 

 

 
     6,395,693  
  

 

 

 
  Materials: 6.9%  
  41,452     Compass Minerals International, Inc.      1,466,986  
  60,205     Element Solutions, Inc.      1,071,649  
Shares           Value  
  Materials (continued)  
  127,809     Glatfelter Corp.    $ 879,326  
    

 

 

 
     3,417,961  
  

 

 

 
  Real Estate: 3.2%  
  57,269     Equity Commonwealth - REIT*      1,576,616  
    

 

 

 
 

TOTAL COMMON STOCKS
(Cost $47,508,274)

     47,645,096  
  

 

 

 
 

TOTAL INVESTMENTS
(Cost: $47,508,274): 95.9%

     47,645,096  
  

 

 

 
  Other Assets in Excess of Liabilities: 4.1%      2,030,260  
  

 

 

 
 

NET ASSETS: 100.0%

   $ 49,675,356  
  

 

 

 

Percentages are stated as a percent of net assets.

 

REIT

Real Estate Investment Trust

*

Non-Income Producing Security.

 

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

 

 
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iMGP Alternative Strategies Fund

 

 

 

The iMGP Alternative Strategies Fund (Institutional Share Class) declined 8.51% for the first six months of 2022. During the same period, the ICE BofA 3-Month Treasury Bill Index returned 0.14%, the Morningstar Multistrategy category declined 4.18%, the HFRX Global Hedge Fund Index lost 5.05%, and the Bloomberg U.S. Aggregate Bond Index dropped 10.35%.

Note: Given the phase-out of LIBOR indexes, the fund’s official benchmark has changed to the ICE BofA 3-Month Treasury Bill Index.

 

 

Performance as of 6/30/2022

 

     Average Annual Performance  
    

Year

to Date

     One
Year
     Three
Year
     Five
Year
     Ten
Year
     Since
Inception
(9/30/11)
 

iMGP Alternative Strategies Fund Instl

    -8.51%        -8.78%        1.16%        1.82%        3.27%        3.72%  

iMGP Alternative Strategies Fund Inv

    -8.62%        -9.09%        0.90%        1.56%        3.02%        3.47%  

ICE BofA US 3-Month Treasury Bill

    0.14%        0.17%        0.63%        1.11%        0.64%        0.60%  

Bloomberg Aggregate Bond Index

    -10.35%        -10.29%        -0.93%        0.88%        1.54%        1.76%  

Morningstar Multistrategy Category

    -4.18%        -3.08%        1.90%        1.99%        2.57%        2.71%  
 
Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. Other share classes may impose other fees. To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit wwwpartnerselectfunds.com. The Advisor has contractually agreed to waive a portion of its management fee through April 30, 2023.

 

Since its inception on September 30, 2011, the fund’s annualized return is 3.72% with a volatility (standard deviation) of 4.72%, and a beta to the U.S. stock market (Russell 3000) of 0.28. This compares to the 3-Month Treasury Bill Index return of 0.60%, the Morningstar Multistrategy category return of 2.71%, the HFRX Global Hedge Fund Index return of 1.86% and the U.S. Aggregate Bond Index return of 1.76%.

The Risk/Return Statistics table below presents some of the key performance metrics that we track for the fund.

 

 
iMGP Alternative Strategies Fund, Risk/Return Statistics, 6/30/22

 

     MASFX     

Bloomberg

Barclays Agg

    

Morningstar

Multistrategy
Category

    

HFRX Global

Hedge Fund

 

Annualized Return

    3.72        1.76        2.71        1.86  

Total Cumulative Return

    48.15        20.64        33.27        21.88  

Annualized Std. Deviation

    4.72        3.41        4.25        4.24  

Sharpe Ratio (Annualized)

    0.67        0.35        0.50        0.31  

Beta (to Russell 1000)

    0.28        0.03        0.27        0.25  

Correlation of MASFX to...

    1.00        0.26        0.91        0.87  

Worst 12-Month Return

    -8.78        -10.29        -5.71        -8.19  

% Positive 12-Month Periods

    0.83        0.70        0.78        0.71  

Upside Capture (vs. Russell 1000)

    27.34        6.65        25.38        22.12  

Downside Capture (vs. Russell 1000)

    27.74        0.04        31.45        31.27  

Upside Capture (vs. AGG)

    83.64        100.00        69.24        46.45  

Downside Capture (vs. AGG)

    22.07        100.00        28.36        17.70  

Source: Morningstar Inc.

            

Since inception (9/30/11)

                                  

Portfolio Commentary

 

The fund is down 8.5% for the first half of the year. Without mincing words, this is disappointing to us, both as stewards of your capital as well as fellow shareholders. Part of our goal is preserving capital while generating good absolute returns over a full market cycle. This recent absolute performance is short of what we would have hoped to deliver. But since the Fund’s inception, we have also been clear that shareholders could expect the fund to be down in the mid-single digits during an equity bear market. And we have seen that play out so far this year.

Although the fund trailed the Agg slightly in the second quarter, it is still outperforming by nearly 200 basis points through the first half of the year (and roughly 13 percentage points cumulatively over the last two years).

 

 
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We all recognize the main drivers, clear in retrospect: stubbornly high and persistent inflation, exacerbated by Russia’s war in Ukraine, which drove accelerated aggressive monetary tightening by the Fed. This in turn punished long-duration assets: bonds obviously, but also previous market leaders like dominant large cap growth stocks, which had been seen as relative safe havens compared to more cyclical assets, resulting in rich valuation multiples that have been crushed by higher discount rates and fear of slowing growth.

The virtuous cycle of QE is also reversing, draining liquidity from the system and tightening financial conditions when consumer confidence is already extremely low. Much of the financial market commentary and discussion now is of the other shoe dropping, whether it be a technical recession or “just” slowing growth accompanied by falling corporate profits, which would presumably result in further equity market losses. Losses in one or multiple areas of financial markets often drives selling in other parts, causing risk premia to widen even in areas not directly impacted, even including those with reasonably strong fundamentals, producing contagion. The chances of the Fed “threading the needle” and controlling inflation without significantly hurting the economy seem remote at this point. None of this is breaking news, of course, but negative headlines abound. However, without minimizing the challenges (and of course the related “real-world” pain), we think there is reason for cautious optimism.

A lot of bad news and negative sentiment are already priced into financial markets. Things can always be worse than consensus expectations, and we fully recognize the Fed seems committed to breaking inflation almost regardless of the cost to equity markets. However, we think the Alternative Strategies Fund is set up to produce quite attractive performance over the next multiple quarters or more going forward. (This is not to say that returns couldn’t decline further from here in the short or even medium term—they absolutely could.) In the past we have bristled at managers seemingly brushing off periods of weak performance and focusing only on the glorious outlook going forward, as if no one experienced the painful road traveled to arrive at the precipice of the promising future. That is not our intention, but having acknowledged the challenges both in the fund’s recent performance and the economy and markets, we think it is important to maintain a balanced perspective.

The fund’s portfolio has rarely been as attractive as it is currently, in our view. The credit strategies are yielding in the upper single digits on a blended basis (and have some dry powder in cash) with a blended duration under three years. The merger arbitrage portfolio offers an average annualized deal spread well into the teens after holding up relatively well during the difficult first half of the year. Deals can break, spreads can widen, and defaults can increase, but these spread levels have historically been very attractive entry points even if they don’t necessarily mark “the bottom” for merger arbitrage returns, which is of course impossible to time with any precision. The long-short credit strategy has protected capital well through market turmoil, and its fundamental drivers now appear to be at their most attractive since late 2018/early 2019 (which preceded the strategy’s strongest year of performance): credit spreads are wide, volatility is increasing, and there is wide dispersion in company fundamentals and default probabilities, which are still in the early stages of being fully reflected by the market. Lastly, FPA’s portfolio, the largest contributor to returns since inception but the most volatile and highly correlated with the equity market, has unsurprisingly been hit the hardest this year. Without going into detail here, we believe it is also attractive, with a mix of value and quality growth businesses at reasonable valuations, pockets of special situations, and the optionality of a healthy cash balance. The FPA sleeve is the most market-sensitive, but is the smallest allocation within the fund. It also has the highest short-term upside in the event of positive surprises relative to market expectations.

Finally, we will also note that we are in the later innings of research and discussions about adding a new strategy to the fund and will very likely be able to announce something later this year. The strategy would have been extremely beneficial over the last two to four quarters, but is not so geared to a particular macro or market environment that it would have detracted from the fund’s performance in other periods. It should improve the fund’s risk-adjusted returns across different environments and reduce drawdowns like the current one. We have always tried to avoid overreacting to recent events (for example, we evaluated but didn’t add tail-risk strategies following March 2020, to the benefit of returns the rest of the year and in 2021), so we wouldn’t say this is a reaction to performance this year. In fact, strategies of this type have been the subject of our interest and research for several years, and 2022 certainly did nothing to temper our enthusiasm. We are excited about the prospects for the fund going forward, and even more so as we envision it with this likely addition.

Thank you for your investment in the fund. We look forward to updating you at year-end, hopefully with significantly better results.

Performance of Managers

For the first half of 2022, the returns by manager/strategy are as follows: Blackstone Credit Systematic Group down 1.07%; Water Island down 2.73%; DoubleLine down 10.50%; Loomis Sayles down 12.07%; and FPA Contrarian Opportunity strategy down 13.73%. (All returns are net of the management fee charged to the fund.)

Strategy Allocations

The fund’s capital is allocated according to its strategic target allocations: 25% to DoubleLine, 19% each to Blackstone Credit Systematic Group (DCI), Loomis Sayles, and Water Island, and 18% to FPA. We use the fund’s daily cash flows to bring the manager allocations toward their targets when differences in shorter-term relative performance cause divergences.

 

 
Fund Summary         33


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CURRENT TARGET STRATEGY ALLOCATIONS AS OF JUNE 30, 2022

 

 

LOGO

Manager Commentaries

Blackstone Credit Systematic Group (formerly DCI):

 

The Blackstone Long-Short Systematic Credit strategy returned -1.07% (net of fees) in H1, after returning -0.04% (net) in Q2, even as the S&P 500 declined 21%, credit indices dropped 14%, and the U.S. 10-year Treasury returned -11% for the first half. Risk-repricing dominated the market as valuations declined along with higher discount rates and on growing fears of a profits slowdown and potential recession. Rates moves have been very large as the Treasury yields rocketed higher on the torrid inflation data and the Fed’s move to jumbo-sized rate hikes; and interest rate volatility hit crisis levels as the MOVE index matched its Covid heights. High yield index spreads were nearly 300 bps wider over the 6 months and the VIX index jumped up to end the quarter at 29. Only oil bucked the trend as crude rallied further and WTI closed June at about $106.

The long-short systematic credit strategy continued to deliver mixed performance as both the bond sleeve and CDS overlay delivered only modest alpha gains for the first half and the contribution from residual betas was negative. The net contribution on credit beta, which is well matched in the portfolio, was a few bps negative. The rates contribution accounted for most of the strategy’s underperformance for H1. The portfolio is well-hedged out the rate curve but retains some residual exposure to front-end yields. This net duration has been close to 12 year, which accounts for about -0.80% to portfolio performance amidst the move higher in Fed funds this year. Given the aggressive Fed pricing already in the market, this exposure becomes a modest tailwind going forward and, indeed, was a small positive contributor in Q2.

The alpha environment has continued to be challenging amidst the beta-dominant market moves, and we are eagerly anticipating an opportunity to generate more consistent alpha as the market finally differentiates along fundamentals in the second half. The alpha potential has gotten large as spreads, volatilities, and dispersion of fundamentals and default probabilities are all elevated. The CDS strategy delivered small positive gains, led by gains from short retail and short autos positions and mostly offset by long transports and energy. Alpha in the bond sleeve was a small positive as our long positions, especially in energy held up well.

Our portfolio views have not changed much and we continue to see balanced positioning across recovery names in the portfolio, which remains comforting amidst the new reopening. Energy continues to be attractive to us, despite the market rally, because the sector recovery has gained traction and the longer-term prospects—particularly so given higher oil prices—look positive relative to spread levels. The portfolio risk spend is, as usual, concentrated in idiosyncratic names and the portfolio continues to be unusually neutral in most sectors. We are long in energy and newly long again in consumer goods (favoring some selective retail and consumer brands). We also are broadly neutral, running a bit underweight, in financials. We remain long in technology (especially consumer-facing and networking) and short in telecoms.

DoubleLine:

 

For the six months ended June 30, 2022, the DoubleLine Opportunistic Income portfolio performed approximately in-line with the Bloomberg US Aggregate Bond Index return of -10.35%.

 

 
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Market Environment

 

This period in the markets was a rather unfavorable investment environment as inflation readings remained high and the Federal Reserve (Fed) consequently pursued hawkish monetary policy. Specifically, the Fed hiked its policy rate by 150 basis points during the period and also announced the official tapering of its asset purchasing (QE) program. US Treasury yields rose rapidly, with total increases of 222 basis points for 2-year notes and 150 basis points for 10-year notes. The response from financial assets was unfavorable across-the-board as both stocks and bonds experienced steep declines. In total for the period, the Bloomberg US Treasury Index fell 9.14%, the Bloomberg Investment Grade Corporate Bond Index fell 14.39%, the Bloomberg High Yield Bond Index fell 14.19%, and the S&P 500 Index fell 19.96%.

Relative Performance Discussion

 

The Opportunistic Income portfolio maintained a large allocation to fixed income credit throughout this period, consistent with its opportunistic mandate. The portfolio’s benchmark, the Bloomberg US Aggregate Bond Index, perennially maintains a roughly 70% allocation to government-backed assets. Our portfolio was able to perform in-line with the Agg Index, despite its higher credit risk, due to active duration management and asset allocation. In terms of duration management, the portfolio consistently maintained a lower duration than the Index which bolstered relatively performance as rates rose sharply. As for asset allocation, most of the credit sectors in the portfolio outperformed the credit allocation in the Index, resulting in some additional boost to relative performance.

The top-performing sectors in the portfolio over this period were non-Agency CMBS and non-Agency RMBS. These sectors generated high levels of monthly interest income which helped offset price declines from rising rates and rising credit risk premiums. In addition, strong property valuations caused generally high levels of borrower equity and therefore reduced or created non-existent incentives for default. The worst-performing sectors were Agency MBS and emerging market debt. The emerging market holdings experienced credit spread widening during the latter portion of this performance period as recessionary fears gripped global markets. Agency MBS experienced duration-related price declines as well as some negative sentiment in the market stemming from the Federal Reserve’s tapering of monthly asset purchases.

Forward Outlook

 

With the Federal Reserve taking strong measures to tighten financial conditions, we expect volatility in financial markets to remain elevated. Consequently, we will continue to manage the Opportunistic Income portfolio with a sizeable allocation to fully secured assets with low structural leverage, such as residential and commercial mortgage loans. On the corporate side, we see some risks to corporate earnings in the coming quarters and will therefore continue to take a more targeted approach to investing in these assets. Exposures will be selected on a line item basis and will often include out-of-index assets.

FPA:

 

Performance Overview

The FPA Contrarian Opportunity strategy declined 10.88% (net of fees) in 2022’s second quarter and declined 12.69% for the trailing twelve months. The Fund generated 85.0% of the average of the S&P 500 and MSCI ACWI NR USD’s (“MSCI ACWI”) return in the trailing twelve months, underperforming its 74.6% average net risk exposure.1

During the first half of 2022, from its peak on January 5th to the end of June, the MSCI ACWI declined more than 20%. As discussed in prior commentaries, we had been concerned about inflation and were running the portfolio more invested than the recent past in an effort to protect purchasing power. With an average net risk exposure of 73% during this same period, the Fund was not immune to the market selloff, capturing 67% of the average market decline (based on the average return of the S&P 500 and MSCI ACWI indices).2

The decline in global equity indexes was broad-based, leaving little unscathed, with energy as one of the few exceptions, as rising interest rates, high inflation, fears of a weakening economy, and greater caution around funding risky, money-losing companies. Market declines can be psychologically difficult, but are to be expected, and can be used to allocate capital towards re-priced and newly attractive opportunities. We are predisposed to lean into price weakness by adding to what we believe are quality businesses at increasingly attractive prices, acquiring debt at equity-like returns, building positions in long-admired franchises, and occasionally seeking out opportunities in distressed and deeply out-of-favor situations.

 

1 

Risk assets are any assets that are not risk free and generally refers to any financial security or instrument, such as equities, commodities, high-yield bonds, and other financial products that are likely to fluctuate in price. Risk exposure refers to the Fund’s exposure to risk assets as a percent of total assets. The Fund’s net risk exposure as of June 30, 2022 was 75.1%.

2 

The recent market decline for the MSCI ACWI index began January 5, 2022 and is ongoing. During the period Jan 5, 2022 through June 30, 2022, the S&P 500 and the MSCI ACWI NR USD declined 20.42% and 20.57%, respectively; while the Fund declined 13.77% during the same period.

 

 
Fund Summary         35


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Portfolio discussion

Exhibit B: Trailing Twelve-Month Contributors and Detractors as of June 30, 20223

 

Contributors      Perf.
Cont.
     Avg.%
of Port.
           Detractors      Perf.
Cont.
     Avg.%
of Port.
 

Glencore

       0.56%        2.2%       LG Corp        -2.63%        1.1%  

Meggitt

       0.51%        0.2%       Meta Platforms        -1.51%        2.5%  

LPL Financial

       0.28%        1.0%       Charter Communications        -0.83%        2.4%  

Aon

       0.28%        2.2%       Naspers & Prosus        -0.77%        2.2%  

American International Group

       0.25%        2.8%       Citigroup        -0.73%        2.2%  
    

 

 

    

 

 

   

 

 

        

 

 

    

 

 

 
       1.86%        8.4%              -6.48%        10.4%  

In the last twelve months, the Fund’s top five performers contributed 1.9% to its return, while its bottom five detracted 6.5%. We believe that some of these ups and downs might prove ephemeral, but we address where our thesis is being validated or where it might be broken.

Glencore is one of the largest globally diversified commodity businesses operating both industrial and marketing businesses. Importantly, we believe Glencore operates in a genuinely shareholder-oriented manner. We purchased Glencore off-and-on from 2018 through 2020 at what we believe is a single digit multiple of normal earnings power. The opportunity presented itself when investors were less willing to own commodity sensitive businesses due to a period of low inflation and general disregard for valuation. Net of distributions of above average cyclical profits likely to be earned in 2022, we believe the company still trades at an attractive valuation relative to its long-term earnings power, justifying its continued presence in the portfolio.

Our investment thesis on the names that have detracted from performance have not materially changed but we highlight the following two.

Prosus’ stock price has declined along with the values of their investment portfolio. Our thesis has somewhat improved as management recently announced a share repurchase program that will be funded, in part, by periodic and partial sales of its Tencent holding. Given that its stock price trades at a greater than 35% discount to its estimated net asset value (NAV), share repurchases should be accretive. The Company’s stock price has appreciated 26% since the announcement.4

Charter Communications, one of the portfolio’s investments in the US cable industry, is an example of us leaning into fear. This investment has underperformed in the last year but still trades above the Fund’s cost basis. The industry has been plagued by fears of video cord cutting, and competition from 5G and Fiber to the Home. This allowed us to buy and to continue to hold Charter Communications. This business trades at what we believe is a reasonable valuation and we think should have attractive growth in free cash flow over the next decade. We expect that it will allocate that free cash flow in the best interest of shareholders, given that it is controlled by owner-operators.

The Contrarian Opportunity portfolio had net risk exposure at the end of the second quarter of 75.51%, marginally higher (just 1%) than its exposure at the end of the first quarter. We added eight new positions to the portfolio and exited four in the quarter. Some of the new positions in the portfolio include CarMax and investments in convertible bonds.

CarMax has three operating segments: used retail, used wholesale, and used auto lending. The general market decline and recession concerns have caused its stock price to decline by almost half since it peaked in Q4 2021. CarMax is the largest US company in the used car retail space. We think CarMax has the opportunity to gain share in the market due to its strong wholesale business, historically good returns on capital, and an excellent management team that invests for the future and allocates capital with an owner-oriented mindset.5 Recessionary concerns are valid as their lending business, in particular, will likely be hurt. We would not be surprised to see its stock price decline as a result and would consider the opportunity to increase the portfolio’s stake at that time.

Convertible Bonds—High-yield exposure in the portfolio fell to just 1.0% in Q4 of last year. We explained in Q4 2021 this low exposure was because of historically low yields and spreads to Treasuries. Since Q4, the U.S. high-yield bond index has declined 10% as both Treasury yields have increased, and credit spreads have widened. We have begun to see some compelling risk-adjusted opportunities in convertible bonds specifically for the first time since 2000. Many stocks have seen a tremendous decline in price, particularly those companies that are still in their earlier stages with business models that have yet to be optimized. Some of these companies had raised money to fund their growth via convertible bonds initially with yields of 1% and lower. With the conversion price now well out of the money due the decline in

 

    

Past Performance is no guarantee, nor is it indicative, of future results.    

3 

Reflects the top five contributors and detractors to the Fund’s performance based on contribution to return for the trailing twelve months (“TTM”). Contribution is presented gross of investment management fees, transactions costs, and Fund operating expenses, which if included, would reduce the returns presented. The information provided does not reflect all positions purchased, sold or recommended by FPA during the quarter. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities listed.

    

Past performance is no guarantee, nor is it indicative, of future results.

4 

Source: Prosus announcement, June 27, 2022. Appreciation is in Euros, the local currency. https://www.prosus.com/news/the-group-announces-the-beginning-of-an-open-ended-share-repurchase-programme-of-prosus-and-naspers-shares/

5 

Source: FPA, recent Company filings, Automotive News. As of June 30, 2022.

 

 
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their stock prices, the bonds have traded down and now offer what we believe are attractive yields to intermediate term maturities that leave some optionality should these businesses succeed. If this is the case, we would expect the market to reward them with a higher stock price that should translate to a higher bond price; and an outside chance that the convertible feature pays off prior to maturity. The average yield-to-maturity of these bonds is currently 11.5%, 310 basis points better than the 8.4% yield currently offered in the U.S. high-yield market.6 The allocation to these bonds is small for now, but we are hopeful a combination of a further increase in interest rates and continued stock market volatility may allow us to increase the allocation to this space.

Outlook (observations on current environment)

 

We are often asked about our “outlook.” Which is kind of funny because we have never made a market forecast and, like everyone else, are regularly surprised by world events. While there is always plenty to worry about (insert list of worries), we agree with Jamie Dimon, who on JP Morgan’s second quarter 2022 call, in response to a question about pending economic hurricanes, observed “going through a storm,—that gives us opportunities, too. I always remind myself the economy will be a lot bigger in 10 years, we’re here to serve clients through thick or thin.” There will always be a place in the portfolio for good businesses at good prices, and you should expect to see the portfolio’s risk exposure increase should those prices become attractive. As always, we will be conservative in our underwriting, and let price be our guide.

Despite our no-market prediction philosophy, we do think it is useful to observe current conditions and pricing for financial assets, in order to avoid potholes, focus research attention and calibrate risk appetite.

In bonds, we mentioned the initial fruits of our labor in convertible bonds. Stepping back, we would observe that the U.S. high-yield market is approaching 2016 and 2020 yield levels, but credit spreads are still below the 800+ basis point spreads seen in both of those periods, despite there being no official recession in 2016.

Exhibit C: US High-Yield Effective Yield and Option-Adjusted Spread7

 

LOGO

 

6 

Source: FPA, Bloomberg. As of June 30, 2022.

    

Past performance is no guarantee, nor is it indicative, of future results.

7 

Source: Federal Reserve Economic Data (FRED). As of June 30, 2022.

    

Past performance is no guarantee, nor is it indicative, of future results.

 

 
Fund Summary         37


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In equities, more traditional value stocks are no longer as inexpensive, unlike March 2020 when value spreads (the cheapest 20% of the market versus the market average) got to 2008 levels of cheapness. We have therefore spent more time considering (and adding to) faster growing, better quality businesses, many of which are both less expensive than the market today and where they have historically been valued, as supported in the following Exhibits D and E

Exhibit D: Valuation Spreads—The Cheapest Quintile Compared to the Market Average (1926 – June 30, 2022)8

 

LOGO

 

 

8 

Source: Empirical Research Analysis, National Bureau of Economic Research. As of June 30, 2022. Cheapest quintile refers to the most undervalued 20% of stocks in an analysis of large-capitalization US stocks. Standard Deviation is a measure of dispersion of a data set from its mean. Prior to 1952, the spread is measured using the price-to-book data of the largest 1,500 stocks. Current Level refers to the valuation spread as of June 30, 2022 which is 0.4 standard deviations above the mean.

 

 
38       Litman Gregory Funds Trust


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Exhibit E: The Big Growers—Relative Price to Sales Ratio9

 

LOGO

We will remain flexible and seek to take advantage of opportunities that present a margin of safety, whether they are perceived as “value” or “growth.”10

Relatively speaking, international markets continue to trade at lower valuations than that of the US, as shown in Exhibit F below. That explains, in part, the portfolio’s increase in international exposure from 19.1% to 26.7% of the portfolio’s net equities over the last three and a half years. We continue to find attractive opportunities outside of the U.S.

 

9 

Source: Empirical Research Partners (“ERP”) Analysis, National Bureau of Economic Research, as of June 5, 2022. Equally-weighted data. ERP categorized a group of 75 US large-capitalization stocks that they have faster and stronger growth credentials than the rest of the US large-cap universe as ‘Big Growers’. The analysis covers the period January 1960 through June 5, 2022.

10 

Margin of Safety—Buying with a “margin of safety” is when a security is purchased at a discount to the portfolio manager’s estimate of its intrinsic value. Buying a security with a margin of safety is designed to protect against permanent capital loss in the case of an unexpected event or analytical mistake. A purchase made with a margin of safety does not guarantee the security will not decline in price.

    

Past performance is no guarantee, nor is it indicative, of future results.

 

 
Fund Summary         39


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Exhibit F: Twelve-Month Forward Price to Earnings Ratio Discount MSCI AC World Index ex-US vs S&P 500 Index11

 

LOGO

Closing

 

We are living through what is not our first volatile period. While we cannot tame volatility, we have learned to make friends with it. A decline in price can afford us the opportunity to buy as much as an increase can offer the chance to sell. We believe our hyper focus on price and business quality should allow us to successfully navigate this current turbulent moment in time.

Respectfully submitted,

FPA Contrarian Value Portfolio Management Team

 

11 

As of June 30, 2022. Source: Factset, MSCI, Standard & Poor’s, J.P. Morgan Asset Management Guide to the Markets. Forward Price to Earnings is a version of the ratio of price-to-earnings (P/E) that uses forecasted earnings for the P/E calculation.

    

Past results are no guarantee, nor are they indicative, of future results.

 

 
40       Litman Gregory Funds Trust


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Loomis Sayles:

 

PORTFOLIO REVIEW

With a semi-annual net return of -12.07%, the portfolio trailed its benchmark, the three-month Treasury Bill Index, which returned 0.14%

High yield corporate bond spreads significantly widened during the first half of the year; reflecting risk- off sentiment driven by challenging macroeconomic and technical dynamics. Lingering covid effects contributed to supply chain issues and knock-on inflationary pressure. Within the portfolio, high yield corporates detracted from performance. Consumer and communications issues were primarily responsible for the sector’s negative performance.

During the period, emerging market assets faced headwinds caused by a US dollar, global growth concerns, inflationary pressures, and broad aversion to risk. Within the portfolio, emerging markets assets weighed on performance, with Chinese and Mexican exposures being primarily responsible.

Despite generally supportive fundamentals, investment grade corporate bond spreads meaningfully widened over the period amid uncertainty around the persistency of inflation and the pace of central bank tightening in response. For the portfolio, investment grade corporates detracted from performance, with financial and communications names being particularly responsible.

Our global rates tools, primarily through the usage of sovereign bonds and interest rate futures, contributed to performance. The yields of the benchmark 10-year and 30-year US treasuries experienced volatility during the period as a result of persistent elevated inflation and Fed hawkishness. These key yields increased from 1.52% to 2.98% and 1.93% to 3.14% respectively. Within the portfolio, our short exposure to US treasury futures was primarily responsible for the allocation’s positive performance over the period.

OUTLOOK

Throughout the first half of 2022, the macroeconomic environment and outlook became more challenging. Increased geopolitical risk, led by the Russian invasion of Ukraine, added a strong supply chain shock to an already concerning inflationary environment just as continued Covid-19 shutdowns in China created further uncertainty. The US Federal Reserve, in an effort to get ahead of these shocks, announced the end of its quantitative easing program and delivered increasingly aggressive rate hikes of 25 basis points in March, 50 basis points in May and 75 basis points in June. As investors priced in a more hawkish Fed and growth expectations diminished, interest rates continued their move higher and risk assets came under pressure.

In our view, the credit cycle has shifted from the “expansion” phase to “late cycle” with a macroeconomic environment that consists of potentially slower growth and inflation that will likely moderate but remain above the Fed’s target. In our base case, growth will likely trend lower but stay resilient as a healthy consumer, positive corporate fundamentals and a strong banking system should help provide a backdrop for continued economic activity. Inflationary pressures will potentially remain sticky, with expectations for elevated commodity prices and persistent supply issues combined with a tight labor market. We believe this environment warrants an accelerated process of normalizing monetary policy, which would increase the potential for a policy mistake as the Fed, and other global central banks, embark on tighter monetary policy to combat inflation even as growth concerns have been increasing.

We are mindful of the risks inherent to our credit cycle and macroeconomic outlook, such as ongoing global supply chain disruptions, tighter financial conditions resulting from global central bank rate hikes and quantitative tightening, slowing Chinese growth and increased geopolitical risk. All of the turmoil around the world leaves us with a wide range of potential outcomes, but the probability of a downturn in 2023 has risen. As a result, we have modestly reduced portfolio risk and increased the level of cash reserve-like, higher quality instruments that can offer flexibility. With increased uncertainty surrounding economic activity, the path of inflation and subsequent Fed policy, we expect volatility to remain elevated in the second half of 2022, which could help drive future opportunities for investors.

Given the upward movement of yields seen so far in 2022, fixed income markets currently offer higher levels of income that can help dampen downside risk for investors and have the potential to provide attractive total returns. As a result, we believe that future pockets of short-term market volatility can offer opportunities to reduce holdings of higher quality, liquid investments in favor of adding credit exposure; however, we will be patient and selective in doing so. We continue to favor issuers with strong carry potential, solid corporate profits and relatively low interest rate sensitivity and believe that increased volatility will help drive wider performance dispersion across sectors, industries and issuers.

In this environment, we believe that individual issuer selection will be key in seeking to deliver favorable performance for the remainder of 2022. We remain comfortable with corporate fundamentals, and while we expect the rate of defaults and losses to rise in the intermediate term we believe they should stay below their long-term averages.

With respect to interest rate risk, we expect an active Fed at each meeting for the rest of 2022 and have more modest expectations for rising nominal US Treasury rates following the significant increase seen in the first half of the year. We remain positioned shorter than broad market benchmarks from the perspective of duration and corresponding interest rate sensitivity to help minimize any negative performance impact from a further rise in interest rates. With the yield curve flattening experienced in 2022, short-dated maturity bonds currently offer favorable levels of income with potentially less volatility, without materially sacrificing yield relative to longer maturities.

 

 
Fund Summary         41


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While we remain cautious on our outlook, we continue to focus on seeking to deliver higher levels of income and total return potential over time. As economic and central bank developments continue to unfold, we remain focused on our investing framework, philosophy and strategy to guide us.

Water Island:

 

As we reach the halfway point of 2022, we reflect on a difficult period not just for broader capital markets but also for event-driven strategies. After reaching all-time highs at the start of 2022, the S&P 500 index—a popular proxy for the stock market—embarked on a downturn that officially entered bear market territory. The Bloomberg US Aggregate Bond index, which is reflective of the broad investment grade bond market, was down more than 10% year-to-date through June 30, extending a drawdown that began in 2020 and is now the largest bond market drawdown in more than 40 years. There has been no shortage of pressures driving the volatility: a pandemic that has now entered its third year; malfunctioning supply chains; runaway inflation; rapidly rising interest rates; recession fears; domestic discord and imminent midterm elections in the US; and geopolitical tensions and the Russia/Ukraine conflict have all played a part.

More pertinent to our event-driven strategies, volatility began to spike about a year ago, in June 2021, when the Department of Justice (DOJ) sued to block the merger of insurance brokers Willis Towers Watson and Aon—a large, widely held deal that had already acquired necessary regulatory approvals in all jurisdictions but the US. Since then, competition regulation has remained at the forefront of merger arbitrage investors’ minds, as the Biden administration takes an increasingly strict view of antitrust. The DOJ, Federal Trade Commission (FTC), Federal Communications Commission (FCC), and Committee on Foreign Investment in the United States (CFIUS) are just a handful of a stable of global regulators—including the pro-consumer European Commission and the unpredictable State Administration for Market Regulation in China—whose views often must be properly assessed to predict deal success, and with US regulators now straying from historical precedent more frequently, deal spreads have been experiencing atypical spikes in volatility.

When the volatility within our strategy was met with broader capital market drawdowns, the impact was dramatic. Forced and panicked selling can often cause correlations to converge, and in late Q2 we saw spreads in our universe of announced mergers and acquisitions (M&A) gap wider, as arbitrageurs exited positions en masse—even in deals where there had been no change to the underlying fundamentals of the transaction. We have seen similar behavior before—for example, in the midst of the Global Financial Crisis of 2008, and more recently at the onset of the COVID-19 pandemic in the first quarter of 2020. That said, we view these movements as mere mark-to-market losses. We continue to have conviction that the vast majority of pending deals will reach a successful conclusion (as over 90% of announced M&A has done, historically, according to Dealogic data), at which point their spreads will narrow to zero and losses will reverse.

For the first six months of the year, our sleeve of the fund incurred losses in both its merger arbitrage investments and hard and soft catalyst special situations investments. The top detractor for the period was our position in the failed merger of Momentive Global and Zendesk. In October 2021, Zendesk—a US-based developer of software for customer support and customer communications—agreed to acquire Momentive Global—a US-based developer of software for conducting web-based surveys—for $4.1 billion in stock, after an activist investor in Momentive pushed for a sale process. In January, however, yet another activist investor—this time at Zendesk—began to push Zendesk’s board of directors and management to reject the acquisition, believing the company should instead be put up for sale itself. The very next month, Zendesk management rejected an offer from a private equity consortium that would have valued the company at $17 billion—yet Zendesk shareholders appear to have agreed with the activist, as they overwhelmingly rejected the Momentive deal mere days later. Subsequent share price volatility led to mark-to-market losses for the fund; however, we have maintained our Momentive exposure as not only has its activist reemerged, but the proxy background of the Zendesk merger indicated there were at least two other interested parties who put forth bids for the company before Zendesk won the initial sale process. We believe there is more left to this story.

Conversely, the top contributor in the portfolio was the fund’s investment in the merger of Xilinx and Advanced Micro Devices. In October 2020, Xilinx—a US-based semiconductor manufacturer—agreed to be acquired by local peer Advanced Micro Devices for $35.7 billion in stock. This transaction experienced ongoing volatility in the deal spread, in large part due to its lengthy timeline stemming from continued delays in receiving regulatory approval from China (a required condition to complete the deal, where antitrust reviews are a notoriously opaque process). The companies ultimately received approval from China in February 2022 and the merger subsequently closed successfully, leading to gains for the fund.

As we look ahead, with volatility extending throughout the credit and equity markets, we continue to believe merger arbitrage and other hard catalyst merger-related investments remain the appropriate area toward which to direct our focus. We anticipate M&A will remain an important avenue for corporations to drive growth, and we have no doubt dealmakers will adapt to model rising interest rates and high inflation into their valuations, fueling deal flow even if we enter a broader economic downturn. We also believe acquirers will continue to engage in M&A as a path to shore up weakened supply chains, diminished workforces, and inadequate technology infrastructure—common themes of the past year. Strategic acquirers in a position of strength can often find their best opportunities to deliver strong return on investment when valuations are dislocated, and deals with a strong strategic rationale can create long term value for shareholders. Lest we forget financial buyers, private equity (PE) acquisition activity—which now comprises nearly half of global deal value—should continue, as PE shops still have more than $2 trillion in dry powder on the books, waiting to be deployed. We intend to introduce select soft catalyst opportunities—which tend to be more sensitive to broader market moves—to the portfolio only with appropriate risk mitigation strategies in place.

 

 
42       Litman Gregory Funds Trust


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As event-driven investors, our objective remains to generate returns sourced from the outcomes of idiosyncratic corporate events, rather than from the overall direction of broader credit or equity markets. We believe market volatility will remain heightened in the year ahead, but we are optimistic about the prospects for our strategies. Volatility can present opportunities to trade around positions and find attractive entry points. Furthermore, the risk-free interest rate is a fundamental building block of a deal spread, and rising interest rates have historically provided a tailwind to merger arbitrage returns. In this favorable environment, our goal, as always, remains to implement strong risk mitigation strategies as we seek to deliver non-correlated return streams with as little volatility as possible.

Sub-Advisor Portfolio Composition as of June 30, 2022

 

 

Blackstone Credit Systematic Group (DCI) Long-Short Credit Strategy

Bond Portfolio Top Five Sector Exposures

 

Energy

    14.7%  

Consumer Non-Discretionary

    11.7%  

Consumer Discretionary

    11.0%  

Materials

    9.1%  

Investment Vehicles/REITs

    8.2%  

CDS Portfolio Statistics

 

    Long     Short  

Number of Issuers

    73       73  

Average Credit Duration

    4.5       4.5  

Spread

    255 bps       244 bps  

DoubleLine Opportunistic Income Strategy

Sector Exposures

 

Cash

    10.9%  

Government

    3.5%  

Agency Inverse Interest-Only

    6.9%  

Agency CMO

    0.3%  

Agency PO

    0.3%  

Non-Agency Residential MBS

    33.2%  

Commercial MBS

    14.4%  

Collateralized Loan Obligations

    10.8%  

ABS

    5.6%  

Bank Loan

    5.8%  

Emerging Markets

    5.4%  

Other

    2.9%  
 

 

 

 

TOTAL

    100.0%  
 

 

 

 

FPA Contrarian Opportunity Strategy

Asset Class Exposures

 

U.S. Stocks

    47.0%  

Foreign Stocks

    24.7%  

Bonds

    1.8%  

Limited Partnerships

    1.6%  

Cash

    24.9%  
 

 

 

 

TOTAL

    100.0%  
 

 

 

 

Loomis Sayles Absolute Return Strategy

Strategy Exposures

 

    Long Total     Short Total     Net Exposure  

Securitized

    29.4%       0.0%       29.4%  

High-Yield Corporate

    26.2%       -0.7%       25.6%  

Investment-Grade Corp.

    17.4%       0.0%       17.4%  

Dividend Equity

    10.0%       -0.7%       9.4%  

Emerging Market

    5.7%       -2.2%       3.5%  

Convertibles

    5.7%       0.0%       5.7%  

Global Rates

    1.5%       0.0%       1.5%  

Bank Loans

    0.4%       -0.2%       0.2%  

Global Credit

    0.3%       -0.3%       0.0%  

Subtotal

    96.7%       -4.1%       92.6%  

Cash & Equivalents

    6.3%       0.0%       6.3%  

Water Island Arbitrage and Event-Driven Strategy

Sub-Strategy Exposures

 

    Long     Short     Net  

Merger Arbitrage – Equity

    91.7%       -2.0%       89.7%  

Merger Arbitrage – Credit

    2.9%       0.0%       2.9%  

Total Merger-Related

    94.6%       -2.0%       92.6%  

Special Situations – Equity

    0.5%       0.0%       0.5%  

Special Situations – Credit

    1.5%       0.0%       1.4%  

Total Special Situations

    1.9%       0.0%       1.9%  
 

 

 

   

 

 

   

 

 

 

Total

    96.5%       -2.0%       94.5%  
 

 

 

   

 

 

   

 

 

 

 

 
Fund Summary         43


Table of Contents

iMGP Alternative Strategies Fund Managers

 

 

 

INVESTMENT MANAGER    FIRM    TARGET
MANAGER
ALLOCATION
   Strategy

Stephen Kealhofer

Paul Harrison

Adam Dwinells

   Blackstone Credit/DCI, LLC    19%    Long-Short Credit

Jeffrey Gundlach

Jeffrey Sherman

   DoubleLine Capital LP    25%    Opportunistic Income

Steven Romick

Brian Selmo

Mark Landecker

   First Pacific Advisors, LLC    18%    Contrarian Opportunity

Matt Eagan

Brian Kennedy

Elaine Stokes

Todd Vandam

   Loomis Sayles & Company, LP    19%    Absolute-Return

John Orrico

Todd Munn

Roger Foltynowicz

Gregg Loprete

   Water Island Capital, LLP    19%    Arbitrage

iMGP Alternative Strategies Fund Value of Hypothetical $100,000

 

The value of a hypothetical $100,000 investment in the iMGP Alternative Strategies Fund from September 30, 2011, 1996 to June 30, 2022 compared with the ICE BofA 3 Month Treasury Index and Morningstar Multistrategy Category

 

LOGO

The hypothetical $100,000 investment at fund inception includes changes due to share price and reinvestment of dividends and capital gains. The chart does not imply future performance. Indexes are unmanaged, do not incur fees, expenses or taxes, and cannot be invested in directly.

Performance quoted does not include a deduction for taxes that a shareholder would pay on the redemption of fund shares.

 

 
44       Litman Gregory Funds Trust


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iMGP Alternative Strategies Fund

SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2022 (Unaudited)

 

Shares           Value  
 

COMMON STOCKS: 30.5%

 
  Communication Services: 4.8%  
  131,856     Activision Blizzard, Inc.    $ 10,266,308  
  3,896     Alphabet, Inc. - Class A*      8,490,397  
  2,733     Alphabet, Inc. - Class C*      5,978,301  
  84,001     Altice USA, Inc. - Class A*      777,009  
  33,347     Baidu, Inc. - Class A*      631,057  
  202,054     Bollore SE      934,919  
  11,701     Charter Communications, Inc. - Class A*      5,482,270  
  54,867     Cineplex, Inc.*      460,777  
  224,150     Comcast Corp. - Class A      8,795,646  
  114,390     Escrow Altegrity, Inc.*(a)      583,389  
  24,160     iHeartMedia, Inc. - Class A*      190,622  
  7,971     Intelsat Emergence S.A.*      215,217  
  31,687     Meta Platforms, Inc. - Class A*      5,109,529  
  8,836     Netflix, Inc.*      1,545,151  
  58,363     Nexon Co. Ltd.      1,194,874  
  2,898     Nintendo Co. Ltd.      1,253,259  
  19,071     T-Mobile US, Inc.*      2,565,812  
  331,213     TEGNA, Inc.(b)      6,945,537  
  95,329     Twitter, Inc.*      3,564,351  
  423,581     Uniti Group Ltd.*      1,439,015  
    

 

 

 
     66,423,440  
  

 

 

 
  Consumer Discretionary: 2.5%  
  2,951     Airbnb, Inc. - Class A*      262,875  
  123,962     Alibaba Group Holding Ltd.*      1,767,681  
  48,160     Amazon.com, Inc.*      5,115,074  
  187     Booking Holdings, Inc.*      327,061  
  27,257     CarMax, Inc.*      2,466,213  
  4,305     Carnival Corp.*      37,238  
  19,900     Cie Financiere Richemont S.A. - Class A      2,117,598  
  16,544     Delivery Hero SE*(c)      619,504  
  94,760     Entain Plc*      1,435,003  
  11,361     Flutter Entertainment Plc*      1,139,234  
  776     Home Depot, Inc. (The)      212,834  
  46,340     Just Eat Takeaway.com N.V.*(c)      730,867  
  530     LVMH Moet Hennessy Louis Vuitton SE      322,745  
  15,226     Marriott International, Inc. - Class A*      2,070,888  
  1,788     McDonald’s Corp.      441,422  
  329     MercadoLibre, Inc.*      209,530  
  2,525     NIKE, Inc. - Class B      258,055  
  4,011     Norwegian Cruise Line Holdings Ltd.*      44,602  
  70,869     Prosus N.V.      4,635,341  
  2,729     Royal Caribbean Cruises Ltd.*      95,269  
  7,656     Starbucks Corp.      584,842  
  228,170     Tenneco, Inc. - Class A*      3,915,397  
  54,491     Terminix Global Holdings, Inc.*      2,215,059  
  1,559,745     Vivo Energy Plc(c)      2,769,905  
  1,845     Wynn Resorts Ltd.*      105,128  
    

 

 

 
     33,899,365  
  

 

 

 
  Consumer Staples: 1.0%  
  15,012     Coca-Cola Co. (The)      944,405  
  1,243     Estee Lauder Cos., Inc. (The) - Class A      316,555  
  28,086     Herbalife Nutrition Ltd.*      574,359  
  119,500     JDE Peet’s N.V.      3,397,676  
  6,874     Procter & Gamble Co. (The)      988,412  
  22,397     Sanderson Farms, Inc.      4,827,225  
  132,577     Swedish Match AB      1,349,134  
Shares           Value  
  Consumer Staples (continued)  
  5,176     Walmart, Inc.    $ 629,298  
    

 

 

 
     13,027,064  
  

 

 

 
  Energy: 0.3%  
  18,829     Battalion Oil Corp.*      160,611  
  17,596     California Resources Corp.      677,446  
  8,225     Gulfport Energy Corp.*      653,970  
  155,610     Kinder Morgan, Inc.      2,608,023  
  1,258     Pioneer Natural Resources Co.      280,635  
  7,419     Williams Cos., Inc. (The)      231,547  
    

 

 

 
     4,612,232  
  

 

 

 
  Financials: 4.2%  
  12,475     Alleghany Corp.*      10,392,922  
  560     Alpha Partners Technology Merger Corp.*      5,482  
  128,235     American International Group, Inc.      6,556,656  
  12,743     Angel Pond Holdings Corp. - Class A*      125,327  
  19,191     Aon Plc - Class A      5,175,429  
  2,792     Apollo Strategic Growth Capital II*      27,515  
  5,085     Atlantic Coastal Acquisition Corp. II*      50,748  
  68,106     Avanti Acquisition Corp.*      678,676  
  568     BlackRock, Inc.      345,935  
  280,770     Brewin Dolphin Holdings Plc      1,748,554  
  14,913     BurTech Acquisition Corp.*      149,950  
  3,884     C5 Acquisition Corp.*      38,801  
  105,610     Citigroup, Inc.      4,857,004  
  67,864     Contra Zogenix, Inc.      47,566  
  4,507     COVA Acquisition Corp. - Class A*      44,304  
  60,800     Fast Sponsor Capital*(a)      60,800  
  292,982     First Horizon Corp.(b)      6,404,587  
  58,037     Groupe Bruxelles Lambert S.A.      4,841,039  
  7     GSR II Meteora Acquisition Corp.*      71  
  12,520     Hartford Financial Services Group, Inc. (The)      819,184  
  77,470     Jefferies Financial Group, Inc.      2,139,721  
  8,893     LPL Financial Holdings, Inc.      1,640,581  
  14,054     Macondray Capital Acquisition Corp. I*      139,275  
  7,468     Metals Acquisition Corp. - Class A*      73,112  
  320,179     Moneylion, Inc.*      422,636  
  3,350     Morgan Stanley      254,801  
  6,266     Pershing Square Tontine Holdings Ltd. - Class A*      125,132  
  776     PowerUp Acquisition Corp.*      7,830  
  85,548     Sanne Group Plc*      942,750  
  1,174     Signature Bank      210,393  
  1,763     Silver Spike Acquisition Corp. II - Class A*      17,269  
  117,140     Wells Fargo & Co.      4,588,374  
  19,850     Willis Towers Watson Plc      3,918,191  
    

 

 

 
     56,850,615  
  

 

 

 
  Health Care: 2.9%  
  2,082     Abbott Laboratories      226,209  
  2,926     AbbVie, Inc.      448,146  
  22,209     Biohaven Pharmaceutical Holding Co. Ltd.*(b)      3,236,073  
  3,869     Bristol-Myers Squibb Co.      297,913  
  531,651     Change Healthcare, Inc.*      12,259,872  
  155,642     Covetrus, Inc.*      3,229,572  
  462     Elevance Health, Inc.      222,952  
  85,639     Inovalon Holdings, Inc. - Class A*      3,618,248  
  6,413     Johnson & Johnson      1,138,372  

 

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

 

 
Schedule of Investments         45


Table of Contents

iMGP Alternative Strategies Fund

SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2022 (Unaudited) (Continued)

 

Shares           Value  
 

COMMON STOCKS (CONTINUED)

 
  Health Care (continued)  
  35,075     LHC Group, Inc.*    $ 5,462,580  
  5,619     Merck & Co., Inc.      512,284  
  50,092     Natus Medical, Inc.*      1,641,515  
  97,766     Swedish Orphan Biovitrum AB*      2,111,991  
  270     Thermo Fisher Scientific, Inc.      146,686  
  41,342     Turning Point Therapeutics, Inc.*      3,110,986  
  339     UnitedHealth Group, Inc.      174,121  
  20,451     UpHealth, Inc.*      12,117  
  12,855     Vifor Pharma AG*      2,227,168  
    

 

 

 
     40,076,805  
  

 

 

 
  Industrials: 4.2%  
  108,170     Aerojet Rocketdyne Holdings, Inc.*      4,391,702  
  77,763     Atlantia SpA      1,821,870  
  207,910     Cornerstone Building Brands, Inc.*      5,091,716  
  1,105     Cummins, Inc.      213,851  
  3,695     CWT Travel Group, Inc.      73,900  
  722     Deere & Co.      216,217  
  3,415     Expeditors International of Washington, Inc.      332,826  
  13,540     Ferguson Plc      1,499,013  
  75,543     HomeServe Plc      1,076,912  
  1     Hornbeck Offshore Services, Inc.      10  
  105,955     Howmet Aerospace, Inc.      3,332,285  
  130,915     Intertrust N.V.*(c)      2,623,105  
  217     L3Harris Technologies, Inc.      52,449  
  45,628     LG Corp.      2,737,539  
  896     Lockheed Martin Corp.      385,244  
  25,696     ManTech International Corp. - Class A      2,452,683  
  565,707     McDermott International Ltd.*      321,850  
  590,897     McDermott International Ltd.*      336,811  
  341,452     Nielsen Holdings Plc      7,928,515  
  42,919     Rush Enterprises, Inc. - Class A      2,068,696  
  27,722     Safran S.A.      2,734,046  
  20,938     Samsung C&T Corp.      1,983,498  
  51,080     Siemens Gamesa Renewable Energy S.A.*      957,703  
  17,500     Sound Holding FP Luxemburg*(a)      1,859,991  
  52,416     Uber Technologies, Inc.*      1,072,431  
  1,416     Union Pacific Corp.      302,005  
  1,633     United Parcel Service, Inc. - Class B      298,088  
  57,500     Univar Solutions, Inc.*      1,430,025  
  319,101     Welbilt, Inc.*      7,597,795  
  31,520     Westinghouse Air Brake Technologies Corp.      2,587,162  
    

 

 

 
     57,779,938  
  

 

 

 
  Information Technology: 6.8%  
  965     Accenture Plc - Class A      267,932  
  48,690     Analog Devices, Inc.      7,113,122  
  5,579     Apple, Inc.      762,761  
  2,262     Applied Materials, Inc.      205,797  
  832     Autodesk, Inc.*      143,071  
  204,898     Avast Plc(c)      1,288,507  
  14,183     Black Knight, Inc.*(b)      927,426  
  12,702     Broadcom, Inc.      6,170,759  
  28,844     CDK Global, Inc.      1,579,786  
  6,461     Cisco Systems, Inc.      275,497  
  68,273     Citrix Systems, Inc.      6,634,087  
Shares           Value  
  Information Technology (continued)  
  454,075     Ideagen Plc    $ 1,927,576  
  321     KLA Corp.      102,425  
  91,341     Magnachip Semiconductor Corp.*      1,327,185  
  417,761     Mandiant, Inc.*(b)      9,115,545  
  1,300     MasterCard, Inc. - Class A      410,124  
  3,636     Microchip Technology, Inc.      211,179  
  1,363     Microsoft Corp.      350,059  
  336,781     Momentive Global, Inc.*      2,963,673  
  1,376     NVIDIA Corp.      208,588  
  14,376     NXP Semiconductors N.V.      2,128,079  
  70,530     Open Text Corp.      2,668,855  
  934     PayPal Holdings, Inc.*      65,231  
  172,800     Plantronics, Inc.*      6,856,704  
  4,094     Qualcomm, Inc.      522,968  
  24,822     Rogers Corp.*      6,505,598  
  87,230     Sailpoint Technologies Holdings, Inc.*      5,467,576  
  1,100     salesforce.com, Inc.*      181,544  
  15,047     Silicon Motion Technology Corp. - ADR(b)      1,259,434  
  124,433     Switch, Inc. - Class A      4,168,505  
  55,961     TE Connectivity Ltd.      6,331,987  
  2,151     Visa, Inc. - Class A      423,510  
  23,050     VMware, Inc. - Class A*      2,627,239  
  344,512     Vonage Holdings Corp.*      6,490,606  
  68,228     Zendesk, Inc.*      5,053,648  
    

 

 

 
     92,736,583  
  

 

 

 
  Materials: 1.3%  
  225,306     Cemex SAB de C.V. - ADR*      883,200  
  946,357     Glencore Plc      5,123,551  
  29,950     HeidelbergCement AG      1,437,228  
  164,687     Holcim AG      7,042,621  
  30,262     International Flavors & Fragrances, Inc.      3,604,809  
  4,442     Newmont Corp.      265,054  
    

 

 

 
     18,356,463  
  

 

 

 
  Real Estate: 0.7%  
  72,130     American Campus Communities, Inc. - REIT      4,650,221  
  1,366     American Tower Corp. - REIT      349,136  
  61,924     Deutsche EuroShop AG      1,439,118  
  31,812     Duke Realty Corp. - REIT      1,748,069  
  297,322     Swire Pacific Ltd. - Class A      1,771,308  
    

 

 

 
     9,957,852  
  

 

 

 
  Special Purpose Acquisition Companies: 0.3%  
  25     Accelerate Acquisition Corp.*      245  
  2,368     African Gold Acquisition Corp.*      23,372  
  13,096     Agile Growth Corp.*      128,799  
  6,668     Ares Acquisition Corp.*      65,747  
  16,681     Atlantic Coastal Acquisition Corp. - Class A*      163,140  
  11,288     Broadscale Acquisition Corp. - Class A*      110,848  
  8,316     Churchill Capital Corp. VII*      81,913  
  13,902     Colonnade Acquisition Corp. II*      136,240  
  7,012     DHC Acquisition Corp.*      68,648  
  972     Digital Transformation Opportunities Corp.*      9,487  
  13,902     Disruptive Acquisition Corp. I*      136,935  
  2     ESM Acquisition Corp.*      20  
  13,902     Flame Acquisition Corp.*      137,074  
  16,730     Forest Road Acquisition Corp. II*      163,954  
  6,664     Fortress Value Acquisition Corp. IV*      65,041  

 

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

 

 
46       Litman Gregory Funds Trust


Table of Contents

iMGP Alternative Strategies Fund

SCHEDULE OF INVESTMENTS IN SECURITIES at June 30, 2022 (Unaudited) (Continued)

 

Shares           Value  
 

COMMON STOCKS (CONTINUED)

 
  Special Purpose Acquisition Companies (continued)  
  1,678     FTAC Hera Acquisition Corp.*    $ 16,587  
  2,338     Fusion Acquisition Corp. II*      22,901  
  13,945     Glenfarne Merger Corp.*      139,868  
  5,221     Global Partner Acquisition Corp. II*      51,557  
  13,902     Golden Arrow Merger Corp.*      135,823  
  65     Gores Holdings VII, Inc.*      638  
  3,177     Gores Holdings VIII, Inc. - Class A*      31,293  
  88     Gores Technology Partners II, Inc.*      867  
  8,746     GX Acquisition Corp. II - Class A*      85,623  
  16,773     Hudson Executive Investment Corp. III*      164,375  
  11,615     InterPrivate IV InfraTech Partners, Inc.*      114,292  
  13,902     Kismet Acquisition Three Corp.*      135,962  
  16,705     Landcadia Holdings IV, Inc.*      164,294  
  506     Lazard Growth Acquisition Corp. I*      4,979  
  1,510     Lead Edge Growth Opportunities Ltd.*      14,881  
  10,143     Mason Industrial Technology, Inc.*      99,452  
  8,259     Mission Advancement Corp.*      80,690  
  940     Monument Circle Acquisition Corp.*      9,240  
  7,430     Northern Star Investment Corp. III*      73,297  
  5,739     Northern Star Investment Corp. IV*      56,443  
  3,367     Orion Acquisition Corp.*      33,030  
  7,873     Peridot Acquisition Corp. II*      77,155  
  13,031     Pine Technology Acquisition Corp. - Class A*      127,313  
  13,079     Plum Acquisition Corp. I*      128,305  
  3,118     Ross Acquisition Corp. II*      30,743  
  133     RXR Acquisition Corp.*      1,310  
  9,637     Slam Corp.*      95,117  
  9,063     Stratim Cloud Acquisition Corp.*      88,591  
  1,601     TCW Special Purpose Acquisition Corp.*      15,738  
  3,992     Tio Tech A*      39,261  
  16,730     TLG Acquisition One Corp.*      164,121  
  13,335     Twelve Seas Investment Co. II*      130,950  
    

 

 

 
     3,626,159  
  

 

 

 
  Utilities: 1.5%  
  28,145     Albioma S.A.      1,469,644  
  8,935     Duke Energy Corp.      957,921  
  73,324     FirstEnergy Corp.      2,814,908  
  4,694     NextEra Energy, Inc.      363,597  
  200,775     PG&E Corp.*      2,003,735  
  136,935     PNM Resources, Inc.(b)      6,542,754  
  178,658     South Jersey Industries, Inc.(b)      6,099,384  
    

 

 

 
     20,251,943  
  

 

 

 
 

TOTAL COMMON STOCKS
(Cost $414,685,260)

     417,598,459  
  

 

 

 
 

RIGHTS/WARRANTS: 0.0%

 
  4,247    

Angel Pond Holdings Corp.

(Expiration date 12/31/27)*

     1,805  
  5,560    

Atlantic Coastal Acquisition Corp.

(Expiration date 12/31/27)*

     445  
  3,595    

BigBear.ai Holdings, Inc.

(Expiration date 12/31/28)*

     1,438  
  24    

Biote Corp.

(Expiration date 02/12/27)*

     9  
  2,822    

Broadscale Acquisition Corp.

(Expiration date 02/02/26)*

     668  
Shares           Value  
  64,680    

Cie Financiere Richemont S.A.

(Expiration date 11/22/23)*

   $ 35,209  
  2,253    

COVA Acquisition Corp.

(Expiration date 12/31/27)*

     226  
  397    

Gores Holdings VIII, Inc.

(Expiration date 12/31/27)*

     241  
  2,915    

GX Acquisition Corp. II

(Expiration date 12/31/28)*

     495  
  1,333    

Heliogen, Inc.

(Expiration date 03/31/28)*

     351  
  389    

Hornbeck Offshore SRVC, Inc.

(Expiration date 04/09/30)*

     0  
  11    

Hornbeck Offshore SRVC, Inc.

(Expiration date 04/09/30)*

     106  
  834    

Intelsat Jackson Holdings S. A.

(Expiration date 12/05/25)*

     3,128  
  834    

Intelsat Jackson Holdings S. A.

(Expiration date 12/05/25)*

     3,336  
  2,489    

Metals Acquisition Corp.

(Expiration date 07/12/26)*

     1,258  
  4,343    

Pine Technology Acquisition Corp.

(Expiration date 03/31/28)*

     353  
  145    

Prenetics Global Ltd.

(Expiration date 12/31/26)*

     43  
  440    

Silver Spike Acquisition Corp. II

(Expiration date 02/26/26)*

     26  
  367    

Swvl Holdings Corp.

(Expiration date 03/31/27)*

     201  
  2,045    

UpHealth, Inc.

(Expiration date 07/01/24)*

     143  
  1,275    

Virgin Orbit Holdings, Inc.

(Expiration date 12/29/26)*

     737