United States
Securities And Exchange Commission
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-8820
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The Markman MultiFund Trust
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(Exact name of registrant as specified in charter)
6600 France Avenue South, Minneapolis, Minnesota 55435
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(Address of principal executive offices) (Zip code)
Robert J. Markman, 6600 France Avenue South, Minneapolis, Minnesota 55435
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(Name and address of agent for service)
Registrant's telephone number, including area code: (952) 920-4848
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Date of fiscal year end: 12/31
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Date of reporting period: 12/31/03
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ITEM 1. REPORTS TO STOCKHOLDERS.
The Markman Total Return Portfolio Annual Report
MARKMAN
TOTAL RETURN
PORTFOLIO
Review of
Strategies
The Stories Behind
the Bottom Line
What worked,
what did not
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Annual Report
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December 31, 2003
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The Year in review
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Dear Fellow Shareholders,
It was a very good year. Your Total Return Portfolio gained 44.4% in 2003,
outpacing by a considerable margin its fund peer group and comparable indices. I
will discuss 2003 performance and portfolio activity in greater depth later in
this report, but I first want to take a little time to share some history and
context about the Portfolio.
2003 was the first full year of operation for the Total Return Portfolio. Many
of you are shareholders as a result of the merger of the three Markman
MultiFunds at the end of 2002, so what we are doing may be a change from what
you are accustomed. Understandably, I have been asked by several investors to
use this report to again share our thoughts on why we created the Total Return
Portfolio and what our strategies, techniques and viewpoints are.
HOW AND WHY WE GOT HERE
From the beginning of 1995, when The Markman MultiFunds were formed, through the
first part of 2000, our Portfolios performed well, achieving spots at or near
the top of their respective Funds of Funds categories. By the summer of 2002,
though, it was clear that we were no longer producing the kind of results you as
shareholders and I, as shareholder and manager, expected. Heck, let's be
frank--performance stunk for two years. And that was unacceptable. I took a long
hard look at the mechanics of what we were doing (our process), the tools we
were using (no-load funds) and the decision patterns we had established (my
personality and world view). In doing so, I concluded that change in four main
areas was needed to create the environment and machinery to potentially once
again generate excellent results:
WE WANTED INCREASED FLEXIBILITY.
The MultiFunds were restricted to investments solely in open-end mutual funds.
We felt that by broadening our list of possible investments to include exchange
traded funds (ETFs), closed end funds, and individual stocks, we would increase
our potential to meet the investment goals of our shareholders.
WE NEEDED TO REDUCE EXPENSES AND BETTER CONTROL TAXES.
Open-end funds can be disadvantageous and cumbersome from a tax standpoint. The
inclusion of more tax friendly and flexible ETFs and stocks in the Portfolio
could help us maintain more control and create more favorable capital gain tax
outcomes.
SHAREHOLDERS PREFERRED SIMPLIFICATION.
The three-portfolio structure, in which shareholders, making their own
decisions, could move dollars from portfolio to portfolio as they saw fit,
proved to be less desirable than we originally intended. Extensive conversations
over the years with shareholders convinced us that most of them preferred a
basic diversified approach in which we, as managers, would then have the
flexibility to get either more aggressive or more conservative as conditions
dictated.
I WAS BETTER SUITED TO A MORE FOCUSED AND SIMPLIFIED STRUCTURE.
Managing conservative, moderate, and aggressive portfolios simultaneously was
mentally conflicting and emotionally challenging, to say the least. In my
twenty-plus years in the investment world my greatest successes grew out of a
long-term strategy and personality which generally kept me in the middle of the
road, yet allowed me to tilt a bit more aggressively or conservatively from time
to time.
We recognized that we could never be all things to all people. If we were to
make changes in these four areas, our most conservative and aggressive
shareholders might need to find alternative homes. But it was our belief that,
for the larger majority of shareholders, the new Total Return Portfolio that we
created would be what they were looking for.
THE TOTAL RETURN PORTFOLIO STRATEGY
While we know this may not be the case in reality, we will act as if your
investment in our Portfolio represents 100% of your long-term growth dollars.
Just as we would with our personal dollars, we
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"Change was needed in four main areas to potentially
once again generate excellent results."
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Markman Total Return Portfolio 1
act on certain expectations and understandings:
o The Portfolio should be positioned to offer the potential for above
average long-term growth.
o All investment vehicles (stocks, exchange traded funds, bonds, and no
load funds) should be considered when appropriate. In addition, growth
opportunities should be pursued in both U.S. and International
investments.
o We should make investment selections solely on the merits of the
opportunity and need not be constrained by artificial distinctions
such as market cap, growth, or value.
o In order to help maximize returns, we should make every effort to
execute our trades at the lowest possible cost.
o To ensure that risk levels do not get out of hand, the Portfolio must,
at all times, be at least 20% invested in more stable income producing
asset classes such as bonds, real estate investment trusts and money
markets.
o While recognizing that short-term market timing is rarely effective
over time, we still want the flexibility to move a portion of assets
at any time out of equities and into more stable asset classes.
Bottom Line:
RESULTS OF THE TOTAL RETURN STRATEGY IN 2003
As I previously noted, we ended 2003 with an excellent gain. The Portfolio
returned 44.4% on a pre tax basis and 44.2% on an after tax basis. The S&P 500
gained 28.7%, pretax, over this same period.
Recall that, for stability purposes, the Portfolio must at all times have at
least 20% of the assets in income producing investments such as money markets,
bonds, or real estate investment trusts. We will usually have more than 20% in
those allocations. Because of mandated diversification, in addition to
comparisons with the S&P 500, we have created an alternative benchmark
comparison. This will help you get a fuller sense of the Portfolio's
performance. The benchmark is a blend of 80% of the S&P return and 20% of the
return of the Lehman Intermediate Government Bond Index. This blend returned
23.2% in 2003.
The Total Return Portfolio is categorized as a Large Cap Blend Fund by
Morningstar, and a Flexible Portfolio Fund by Lipper Fund Services. Our return
for 2003 placed us in the top 2% of all funds in each of those categories. Given
the fact that by many statistical measures our Portfolio has lower "risk" than
its average peer, this performance in an up market is noteworthy.
You'll pardon me if I seem to be only stating the obvious by pointing out that
this level of superior performance is not sustainable over time and I would not
want anyone to make plans as if it were.
I also want to take this opportunity to formally address what has been a source
of confusion to many of you: what to make of the long term performance numbers
reported. At the end of 2002, the three Markman MultiFund Portfolios were merged
to form the Total Return Portfolio. This new fund has a portfolio structure,
cost, and strategies very different from those of the former MultiFunds. We are
nevertheless required to retain the performance history of the Moderate
Allocation Portfolio. This history would then be "attached" to the new
performance history being created by the Total Return Portfolio. The upshot of
all this is that performance numbers for the period after December 31, 2002
reflect the actual Total Return Portfolio, while all data previous to that time
reflects performance of a Fund that was invested in a considerably different
manner and no longer exists.
Comparative growth of a $10,000 investment:
Since Inception 1/26/95
Average Annual Returns*
1 Year 5 Year Since Inception**
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44.40% (3.65%) 5.57%
[Data below represents a line chart in the original report.]
1/31/95 12/31/02
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S&P 500 $10,000 $27,611
Comparative Blend $10,000 $26,277
Markman Moderate Allocation Fund (until 12/31/02) $10,000
Markman Total Return Portfolio (1/1/03-12/31/03) $16,223
Past performance is not predictive of future performance.
* The performance of the above portfolio does not reflect the deduction of
taxes that a shareholder would pay on Portfolio distributions or the
redemption of Portfolio shares.
** The Fund's inception was January 26, 1995.
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2 December 31, 2003
COMPARATIVE GROWTH OF A $10,000 INVESTMENT:
SINCE INCEPTION OF TOTAL RETURN PORTFOLIO 1/1/03
2003 Returns
S&P 500 Blend MTRPX
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28.69% 23.22% 44.40%
[Data below represents a line chart in the original report.]
01/01/03 12/31/03
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S&P 500 $10,000 $12,869
Comparative Blend $10,000 $12,309
Markman Total Return Portfolio $10,000 $14,438
Past performance is not predictive of future performance.
* The performance of the above portfolio does not reflect the deduction of
taxes that a shaholder would pay on distributions or the redemption of
Portfolio shares.
PERFORMANCE: MARKMAN TOTAL RETURN PORTFOLIO
[Data below represents bar graphs in the original report.]
1 Year 5 Years
ended ended Since
December 31, 2003 December 31, 2003 Inception
----------------- ----------------- ---------
Blend 23.22 4.75 11.07
S&P 500 28.69 -0.57 12.04
MTRPX* 44.46 3.65 5.57*
* Performance numbers for all periods prior to December 31, 2002 are those of
the Markman Moderate Allocation Portfolio, and not those of the Markman
Total Return Portfolio.
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Markman Total Return Portfolio 3
DISCUSSION OF INVESTMENTS
THE STAGE IS SET
IT'S HARD TO REMEMBER AND FULLY APPRECIATE FROM A ROSIER YEAR-END PERCH, BUT OUR
WORLD SEEMED TO BE COMING DISTINCTLY UNGLUED IN FIRST PART OF 2003. A PALL OF
NEGATIVITY AND APPREHENSION WAS COLORING MANY FOLKS' THOUGHT PROCESSES.
Much of the Fall of 2002 had been filled with troubling economic stats. The
stock market had just finished its third devastating losing year in a row, and
it looked like we were about to go to war with a madman who might have--and be
willing to use--chemical, biological and nuclear weapons. On January 10, North
Korea added fuel to the fire by pulling out of the Nuclear Nonproliferation
treaty. That same day, it was reported that the U.S. economy lost 101,000 jobs
in December, the most in ten months.
February began with another emotional blow: the Shuttle Columbia disaster.
Within days, Secretary of State Colin Powell presented the Bush administration's
"War Brief" to the UN, claiming lies and deceit on the part of Iraq. No wonder
that the Investors Business Daily Economic Optimism Index fell to a level lower
than at the start of the recession in 2001. Soon after, the Consumer Confidence
Index measured its lowest level since 1993. By the end of the month we faced oil
futures hitting a 12-year peak of $39.99 per barrel.
March brought reality to all investors' worst fears, a fourth year of heavy
decline on Wall Street in the making. After a brief surge in January, all the
major market indices had again plunged double digits by the second week in
March. On the 20th, the U.S. launched the war to oust Saddam Hussein and we were
soon hearing stories of troops being "bogged down" on the road to Baghdad. It
was then announced that February job losses were revised upward to 357,000--the
largest drop since 9/11. Understandably, fear drove decisions: $11.1 billion was
yanked from equity funds by month end.
By the time SARS headlines began to dominate the front pages, many investors had
begun to look longingly at their mattresses as an appropriate depository for
life savings. Of course, in rueful hindsight, we see that was the "exquisite
moment" to buy stocks.
CARPE DIEM (LATIN FOR "FULLY INVESTED IN 2003")
Nevertheless we chose to position the Portfolio to be almost fully invested
during the first quarter, keeping not much more than 25% in bond funds and cash.
Why? First, we saw very real signs that even though psychology was thickly
negative; the real economy had begun to stabilize. Manufacturing statistics were
showing signs of growth after months of decline. Corporate balance sheets, which
had deteriorated so badly over the previous two years, were being ruthlessly
"healed." (Albeit often on the backs of downsized workforces.)
INCOME INVESTMENTS SHINE
Even before 2003 began, the bond market was telegraphing that the repair was
working. Junk bonds, those most sensitive to economic conditions, had been on a
tear since October: financially, the first robin of spring.
This looked to us to be a "once in a cycle" opportunity to capture returns far
in excess of the actual risk associated with the investment. We recalled that
coming out of the last recession in the early nineties there was an extended
period in which high yield bonds actually outperformed the S&P 500. So even
though our bond allocation would normally be invested in higher quality bonds,
we decided to invest a significant portion in high yield bond funds.
We executed this strategy by combining funds like Northeast Investors, Janus
High Yield, and Pimco High Yield, which have historically been among the more
cautious in their category, with more aggressive closed end funds like Dreyfus
High Yield, Senior High Income and DHL High Yield. The results were excellent.
Rounding out the income/stability portion of the portfolio were significant
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"BY MARCH, NEGATIVITY WAS SO STRONG, YOU COULD CUT IT WITH A KNIFE: OF COURSE WE
SEE NOW THAT WAS THE 'EXQUISITE MOMENT' TO BUY STOCKS."
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4 December 31, 2003
allocations to funds that invest in REITS as well as this year's Oscar winner
for performance in a bond fund, PIMCO Emerging Markets Bond. (+32.6% in 2003!)
You can bet that we are highly unlikely to repeat the glorious trifecta of
returns seen in REITS, high yields, and emerging market bonds in 2003. I'll be
monitoring this portion of the portfolio with extra special care and expect to
lighten up in these areas in 2004.
STOCK PORTFOLIO HIGHLIGHTS
In addition to the overall stabilization we saw in the broad economy,
historically low interest rates were fueling a housing/ refinancing boom,
putting billions of dollars directly and immediately into the pockets of
millions of consumers. By mid-year we began to see the initial effects of the
Bush tax cut. There was ample evidence that many Americans, as glum as they
seemed to be, would nevertheless be frowning all the way to the mall, so to
speak. In an economy like ours, which is so driven and dependent on consumer
spending, this was shaping up to be the pivotal story of the year.
With that in mind, we found ourselves gravitating toward stocks in the sectors
such as financial services, retail, and other consumer services. Though the
market returned once again to obsessing on technology stocks, we constantly saw
good opportunities in what we felt were more predictable, safer alternatives.
Here are a few thoughts on some of them.
A COUPLE OF TAKE-IT-EASY STOCKS
A good example, and one of the first stocks we bought for the portfolio, was
Select Comfort (SCSS). This company manufactures and markets the "Sleep Number"
bed. This is an adjustable air chamber mattress (yes, an air mattress!) and the
fact is, owners swear by them. Management has done a great job of taking a
company that was a mess just a few years ago and turning it around into a real
force in the industry. They have a retail presence in just a few markets now,
but if their share in those markets is any indication of their future growth
potential, this could be one of the great growth stocks of the decade. We built
our position early in the year at the $9-$10/share level. One of my biggest
mistakes in 2003 was repeatedly selling too soon, and I did so along the way
with Select Comfort, taking substantial profits in the $13-$20/share range. And
though it still remains one of our top ten positions, at a closing 2003 price of
$24.76, well... woulda, shoulda, coulda.
Another company that was flying under the radar of many Wall Street analysts was
Royal Caribbean Cruise Lines (RCL). My family had taken a vacation on one of
their ships in 2001, so I knew from personal experience that they provided an
excellent vacation experience. (Next time I talk to you remind me to tell you of
my bingo jackpot fiasco.) In March, with war with Iraq imminent, Royal Caribbean
shares were driven down to prices not seen since the dark days of post 9/11.
This seemed to be a textbook example of how short term fears--fears that had
nothing to do with what might happen long term with the company--create a
pricing inefficiency that was too good to pass up.
We built our position rapidly, buying shares from $13.06 up to $15.60. I never
expected this to be a "hot" stock, and again gave in to caution and took chips
off the table at various prices all the way up to just over $31/share. It closed
the year at $34.79 and looks poised to go even higher.
FINANCIAL SERVICES STAND OUT
One of the biggest mysteries to me in 2003 was how much skepticism there
continued to be about many companies in the financial services arena. Our
research turned up so many quality candidates, the hardest part here was simply
choosing. Two made the cut: Countrywide Financial (CFC) and Capital One (COF).
Countrywide is one of the nation's leading mortgage origination and servicing
outfits. (Full disclosure: my home loan payments are made to Countrywide). The
bearish rap on Countrywide kept rising to the surface when on several occasions
it looked as if mortgage refinancing and new home sales would finally peter out.
This was not an unreasonable concern; but what the bears were not fully
factoring in was the enormous servicing business Countrywide had built up during
the mortgage boom. Even factoring
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"WE ARE HIGHLY UNLIKELY TO REPEAT THE GLORIOUS TRIFECTA OF RETURNS SEEN IN
REITS, HIGH YIELDS, AND EMERGING MARKET BONDS IN 2003."
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"SKEPTICISM ABOUT FINANCIAL SERVICES COMPANIES? HAH! OUR RESEARCH TURNED UP SO
MANY POSSIBILITIES THE HARDEST PART WAS CHOOSING."
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Markman Total Return Portfolio 5
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"I SAW IT AS SOMETHING OF A ONE-TWO PUNCH: MR. AND MRS. JONES BUY NEW HOME AND
THEN GO TO THE MALL TO BUY FURNITURE, DISHES, VELVET PAINTINGS OF ELVIS, ETC. TO
FURNISH IT--USING THEIR CAPITAL ONE CREDIT CARD! SO FAR, SO GOOD"
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in something of a slowdown from 2003's torrid pace, the stock appeared
undervalued to us. It still does.
Capital One is a large credit card com-pany. They have made great strides in
improving the quality of their customer base and have made some very smart
strategic moves. Doubters on this stock continually pointed to the potential for
the consumer to get tapped out and overextended. But with a recovery in place,
tax cuts sending more money home in each paycheck, and the reliquification of
millions of consumers through mortgage refinancing, this appeared to be a
scenario that was unlikely to occur over the near term.
In both cases, it seemed to me that the investment stars were favorably aligned:
a positive, steadily improving macro economic environment; good management that
was aggressively, but prudently looking for ways to expand the business and
enhance shareholder value; interest rate trends that supported the profitability
of their business model; and consumer activity in the area of home buying and
refinancing that was exploding at a near exponential rate. I saw it as something
of a one-two punch: Mr. and Mrs. Jones buy or refinance-- mortgage courtesy of
Countrywide--then go to the mall to buy furniture, dishes, velvet paintings of
Elvis, etc. to furnish it--using their Capital One credit card! So far, so good.
A DISASTER RIGHTS ITSELF
With all the negative publicity it generated over the past couple of years, it
surprised many of you to hear me talk of AOL Time Warner (TWX) all through 2003
as a lower risk value stock. Enough has been written about this mother of all
merger fiascos; no need to rehash it here. Many in the investment community, by
obsessing over how they were burned by all the merger hype and subsequent
sleaziness, lost sight of a pretty important fact: the shares of this company
had finally fallen to a point where the sum of the assets equaled far more than
the share price reflected. By focusing almost exclusively on the AOL part of the
equation (even though AOL by mid 2003 was accounting for only about 20% of
revenues and profits) investors foolishly ignored the real value in the broad
list of Time Warner assets.
We believed those assets to be worth $20-$25/share; by the end of the first
quarter we had accumulated a full position at an average cost of $12.20/share.
As the year unfolded, slow and painful progress was made: housecleaning at AOL
got rid of many of the bad actors from yesteryear. A long overdue name change
from AOL Time Warner to simply Time Warner helped to psychologically clear the
air and set a new context; and the continuing strength of the economy had a
positive impact on several divisions of the Company. And though the closing 2003
price of $17.99 was not what I hoped for, it still represented a return well
above the market. I'm still positive on Time Warner and would not be surprised
to see a move into the mid $20's in 2004.
DIGITIAL AND E-COMMERCE GROWTH PLAYS
I think we'll look back on 2003 as the year when digital finally went
mainstream. From cameras and cell phones to music recorders and video
players--if it was digital, it was hot. At the heart of many of these devices
are those postage stamp-sized wafers commonly called flash memory cards. These
are the little doohickeys that allow us to record and store photos, music, or
video and instantly retrieve it in a portable, easy to manipulate package.
SanDisk (SNDK) is the major player in this market. This is an impressive company
that has done a great job of keeping their product line on the cutting edge of
technology and consumer need. SanDisk is truly in the "sweet spot" of the
digital revolution and though it on the surface sports a pretty high valuation,
its growth rate is more
TOP TEN HOLDINGS
of the Stock Portfolio 12/31/03
SanDisk 5.7%
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E*Trade 4.8%
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Time Warner 4.7%
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Cendant 4.3%
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Select Comfort 4.2%
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Capital One 4.1%
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Countrywide 3.7%
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Wipro 3.6%
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Ebay 3.5%
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China Yuchai 3.5%
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TOTAL IN TOP TEN 42.1%
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"By obsessing on the AOL portion of the equation, many smart investors missed
the boat by ignoring the real value in Time Warner's broad list of assets."
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6 December 31, 2003
KEY RATIOS
of the Stock Portfolio 12/31/03
MTRPX S&P 500
Weighted Median Forward P/E Ratio 15.7x 18.0x
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Weighted Median Earnings Growth Rate 16.6% 14.0%
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PEG (Price to Earnings Growth) 1.0 1.3
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Price to Book 2.5x 3.1x
than high enough to justify its stock price, in our opinion.
While high growth stories like SanDisk always attract their shares of doubters,
for some reason SanDisk has been the recipient of a healthy helping of
skepticism that doesn't seem to jibe with the fact that the company is executing
in all areas fantastically. Nevertheless, it is what it is, and the reality is
that this skepticism subjects the stock to pretty impressive "mood swings."
SanDisk began the year at about $21/share and ran up with little interruption to
over $80 by Halloween. As we did in a number of cases in 2003, we sold some of
our position into this incredible run-up; between the end of September and
mid-November our average sale price was about $75/share. Then over a period of
six weeks through mid-December SanDisk shares, on fears of a "chip glut"
plummeted from a high of $84.77 to $60.99. We didn't see it that way. In fact,
we saw demand increasing. So we went back in and bought again, at an average
price of $62.48. By being an active participant when the markets present us with
the opportunity, we try to reduce the risk in some of our more volatile
holdings. I fully expect this pattern to repeat itself over 2004, hopefully with
profitable results.
Most of the dreams and schemes that constituted the Internet bubble have long
faded from the scene. Four companies, born in the heat of the Internet frenzy,
have survived and are well on their way to becoming embedded institutions in the
economic landscape. They are Yahoo, Amazon.com, eBay, and Interactive Corp.
Yahoo and Amazon have become essential in my life--but I can't find much
attractive there as an investment. To me, though, eBay (EBAY) and Interactive
Corp (IACI) fall into a wholly different category. Not only do both companies
have fantastic visionary leadership (Meg Whitman at eBay and Barry Diller at
Interactive Corp), both have found a way to use and leverage the internet to
create an essential way to do business in a particular space.
EBay, of course, needs little explanation. I imagine a fair number of you are
already addicts. Few, though, know much about InterActive Corp. Founder Barry
Diller is quickly building a stable of the leading Internet companies that
provide direct-to-customer transactions. The concept, though, is not only
simple--you're probably already a steady customer! Do these names sound
familiar: Expedia, Home Shopping Network, Ticketmaster, Hotels.com, and
LendingTree.com? These are some of the names--all sector leaders--that Diller
has collected under the InterActive tent. As regular use of direct internet
retailers and service providers increases, Diller's InterActive Corp is quickly
being developed as something of an internet Wal-Mart.
BEYOND THE SEA
No overview of what we're up to in the portfolio would be complete if I didn't
share with you my excitement over the investment possibilities overseas. Three
markets in particular, Russia, India, and China stand out as places where we're
facing a potential rising tide that may easily lift most investment boats. In
addition to positions in diversified country specific funds that target India
and China, we have made investments in the leading Russian telecom companies, a
Chinese diesel engine manufacturer, and an Indian information services company.
IF YOU'RE SO SMART...
Ponder, study, research ... pray. Still, the bottom line is they can't all be
gems. And 2003 contained its share of Bob's knuckleheaded calls. I bought shares
in Coinstar (CSTR), a company that makes and operates coin counting machines
located largely in supermarkets. I thought this was a very interesting little
niche play that seemed to have a sound
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"There seemed to be ample evidence that many Americans, glum as they seemed to
be, were frowning all the way to the mall."
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MARKET CAPS 12/31/03
(As a percentage of the stock portion of the portfolio)
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Small (under $1.5 billion) 10.3%
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Medium ($1.5-$10 billion) 54.1%
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Large (over $10 billion) 35.6%
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[Data below represents a pie chart in the original report.]
small cap 10.3%
medium cap 35.6%
large cap 54.1%
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Markman Total Return Portfolio 7
business plan. In July, it was announced that one of their major supermarket
partners would no longer carry their machines. This had always been the scenario
feared by skeptical investors in the stock. The stock plummeted over 30% in a
matter of days. It appeared to me that this was now a broken growth story. I
sold. Coinstar subsequently managed to right itself somewhat and has slowly but
steadily moved back up to about where it was before the decline.
Cerner (CERN), a company that provides software solutions for medical
facilities, was another position in which I lost confidence. After a substantial
decline, Cerner has moved back up nicely, but I note that its advocates in the
fund world tend to be either healthcare funds, or very aggressive growth funds.
The relative lack of interest on the part of value or moderate growth funds is a
good "tell" that we're looking at something still pretty chancy here.
In both cases I'm glad I repositioned the dollars, but the fact remains that my
hasty actions earned me the "sold at the absolute bottom" award for 2003.
I also remained skeptical on technology stocks in general last year. The
Portfolio began the year with a heavier tech weighting than we ended. Along the
way, I increasingly found it difficult to justify many of the prices I was
seeing. Of course, as we now know, these stocks had fantastic years. I'm not
sure eschewing speculative tech qualifies as a "mistake," but I did, in
hindsight, sacrifice a fair amount of potential gains by moving the dollars
elsewhere. Still I'm nothing if not consistent in my wrongness: I remain
convinced that there has been too much speculation built into these prices, and
my desire to keep the risk level down in the Portfolio forces me to pass at this
time. We're just not running that kind of ship.
IT SHOULDN'T BE SO HARD:
MORAL MIDGETS AND YOUR RIGHT TO A FAIR SHAKE
[photo of Bob Markman]
My take on the guys running funds who have been caught with their hands in your
pockets? Moral midgets would be an accurate description. But I suppose that's
not fair to midgets. In any case, there's already been so much written about the
various fund scandals of the past year, you don't need me pontificating and
rehashing it all. You deserve to hear these facts in plain English:
o We don't allow market timing in any way shape or form.
o We don't allow anyone associated with the fund to make or time
purchases that would give them an unfair advantage over other
shareholders.
o We accept no soft dollars for directed trades from anyone, anytime,
anywhere. Markman Capital pays for everything we need to manage the
portfolio out of our own pocket. We have no tit-for-tat deals.
o We have made arrangements that result in what we believe may be the
lowest trading costs in the industry. It is widely reported that many
mutual funds pay commissions on their stock purchases of up to 5 cents
per share. The Markman Total Return Portfolio pays, on average, about
three tenths of one cent per share commission on a trade.
o Since there's no official disclosure requirement in place yet, we'll
just tell you outright: commissions paid to buy and sell in the
Portfolio in 2003 totaled $74,078. This added about 13 basis points
(13 hundredths of a percent) to the cost of managing the Portfolio for
you. I expect this number to be even lower in 2004 for two reasons:
first, the commissions paid in 2003 were larger than a normal year due
to the fact that the entire Portfolio had to be invested from scratch
last January. We go into 2004 already invested. Second, we negotiated
an even lower rate of commission last fall, which will reduce costs
going forward.
We're not saints, and make no special ethical purity claims. It just seems
obvious to us that this is the way it should be done, which is why we set it up
this way a year and a half ago when we created the new fund--long before these
mutual fund scandals hit. Simply put, it's the way we would want it done for us.
On behalf of everyone working with the Markman Total Return Portfolio, thank you
for being a shareholder. Please feel free to call or email if you have
questions, concerns or comments.
/s/ Bob Markman
---------------
Bob Markman
bob@markman.com
================================================================================
8 December 31, 2003
PORTFOLIO OF INVESTMENTS Markman Total Return Portfolio--December 31, 2003
Shares Fund Market Value
COMMON STOCKS 75.0%
FINANCIAL 16.8%
230,000 E*TRADE Group, Inc.* $ 2,909,501
39,900 Capital One Financial Corporation* 2,445,471
29,333 Countrywide Financial Corporation 2,224,908
550 Berkshire Hathaway, Inc. - Class B 1,548,250
10,000 Marsh & McLennan Co's., Inc. 478,900
10,000 Alliance Capital Management
Holding L.P. 337,500
$ 9,944,530
INTERNET COMMERCE 6.4%
33,000 eBay, Inc. $ 2,131,470
50,000 InterActiveCorp* 1,696,500
$ 3,827,970
HOME BUILDERS 6.3%
11,000 Hovnanian Enterprises, Inc.* $ 957,660
6,500 The Ryland Group, Inc. 576,160
6,000 Lennar Corporation 576,000
12,000 Toll Brothers, Inc.* 477,120
4,000 Centex Corporation 430,600
4,000 Beazer Homes U.S.A.* 390,640
5,000 KB Home 362,600
$ 3,770,780
TELECOMMUNICATIONS 6.0%
25,000 AO VimpelCom* $ 1,837,500
21,000 Mobile Telesystems 1,738,800
$ 3,576,300
ELECTRONICS 5.7%
56,000 SanDisk Corporation* $ 3,423,840
AUTOMOTIVE 5.3%
68,000 China Yuchai International Ltd. 2,080,800
20,000 General Motors Corporation 1,068,000
$ 3,148,800
MEDIA 4.7%
156,370 Time Warner, Inc.* $ 2,813,096
CONSUMER SERVICES 4.3%
115,000 Cendant Corporation* $ 2,561,050
SPECIALTY RETAIL 4.2%
101,450 Select Comfort Corporation $ 2,511,902
TECHNOLOGY SERVICES 3.6%
45,000 Wipro Ltd. $ 2,169,000
DEFENSE 3.0%
20,000 General Dynamics $ 1,807,800
MANUFACTURING 2.9%
65,000 Tyco International Ltd. $ 1,722,500
LEISURE 2.8%
48,000 Royal Caribbean Cruises Ltd. $ 1,669,920
MEDICAL 2.1%
26,700 The Cooper Companies, Inc. $ 1,258,371
CONSTRUCTION 0.9%
13,800 Lafarge North America, Inc. $ 559,176
TOTAL COMMON STOCKS $ 44,765,035
STOCK FUNDS 9.5%
55,000 India Fund, Inc.* $ 1,386,000
35,229 Stratton Monthly Dividend REIT 1,157,623
50,300 Cohen & Steers Premium Income
Realty Fund, Inc. 935,580
108,331 US Global Investors Global
Resources Fund 926,230
36,600 Scudder RREEF Real Estate Fund, Inc. 701,988
38,446 Matthews China Fund 542,859
TOTAL STOCK FUNDS $ 5,650,280
BOND FUNDS 15.5%
358,833 PIMCO Emerging Markets
Bond Fund - INST Class $ 3,771,338
315,842 Northeast Investors Trust 2,340,390
121,822 PIMCO High Yield Fund - INST Class 1,190,201
100,600 Dreyfus High Yield Strategies Fund 544,246
96,000 Credit Suisse High Yield Bond Fund 511,680
79,800 Senior High Income Portfolio, Inc. 500,346
30,000 Alliance World Dollar
Government Fund II 390,900
TOTAL BOND FUNDS $ 9,249,101
MONEY MARKET FUNDS 0.1%
29,861 5/3 Prime Money Market Fund $ 29,861
TOTAL INVESTMENT SECURITIES
(Cost $45,654,304) 100.1% $ 59,694,277
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%) (80,613)
NET ASSETS 100.0% $ 59,613,664
* Non-income producing security.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Markman Total Return Portfolio 9
STATEMENT OF ASSETS
AND LIABILITIES December 31, 2003
ASSETS
Investment securities:
At acquisition cost $ 45,654,304
=============
At value $ 59,694,277
Accrued income 62,240
Receivable for capital shares sold 3,582
Other assets 6,669
-------------
TOTAL ASSETS 59,766,768
=============
LIABILITIES
Distributions payable 11,011
Payable for capital shares redeemed 92,180
Payable to Adviser 29,492
Payable to affiliates 7,615
Other accrued expenses and liabilities 12,806
-------------
TOTAL LIABILITIES 153,104
-------------
NET ASSETS $ 59,613,664
Net assets consist of:
Paid-in capital $ 109,191,860
Undistributed net investment income 3
Accumulated net realized losses
from security transactions (63,618,172)
Net unrealized appreciation on investments 14,039,973
-------------
NET ASSETS $ 59,613,664
=============
Shares of beneficial interest outstanding
(unlimited number, no par value) 6,611,386
=============
Net asset value, offering price and
redemption price per share $ 9.02
=============
See accompanying notes to financial statements.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2003
INVESTMENT INCOME
Dividends $ 1,288,545
------------
EXPENSES (Note 3)
Investment advisory feesa 498,509
Administration fees 45,000
Other expenses 43,672
Professional fees 38,970
Transfer agent fees 30,000
Accounting services fees 30,000
Custodian fees 22,200
Postage and supplies 21,063
Registration fees 20,916
Shareholder report costs 19,671
Trustees fees and expenses 18,250
------------
TOTAL EXPENSES 788,251
------------
Fees waived by the Adviser (7,585)
------------
NET EXPENSES 780,666
------------
NET INVESTMENT INCOME 507,879
------------
REALIZED AND UNREALIZED
GAINS ON INVESTMENTS
Net realized gains from security transactions 4,625,636
Net change in unrealized appreciation/
depreciation on investments 14,252,089
------------
NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS 18,877,725
------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 19,385,604
============
(a) Includes previously waived/reimbursed investment advisory fees and expenses
recouped by the Adviser (See Note 3).
See accompanying notes to financial statements.
================================================================================
10 December 31, 2003
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
FROM OPERATIONS
Net investment income $ 507,879 $ 471,728
Net realized gains (losses) from security transactions 4,625,636 (7,586,682)
Net change in unrealized appreciation/depreciation on investments 14,252,089 (927,265)
------------ ------------
Net increase (decrease) in net assets from operations 19,385,604) (8,042,219)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (507,876) (432,877)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 4,229,619) 2,435,148)
Proceeds from shares issued in connection with acquisitions (Note 4) -- 37,275,307
Net asset value of shares issued in reinvestment of
distributions to shareholders 496,866 424,464
Payments for shares redeemed (16,286,159) (16,910,293)
------------ ------------
Net increase (decrease) in net assets from capital share transactions (11,559,674) 23,224,626)
------------ ------------
TOTAL INCREASE IN NET ASSETS 7,318,054 14,749,530
NET ASSETS
Beginning of year 52,295,610 37,546,080
------------ ------------
End of year $ 59,613,664 $ 52,295,610
============ ============
CAPITAL SHARE ACTIVITY
Sold 572,074 333,079
Shares issued in connection with acquisitions (Note 4) -- 5,905,324
Reinvested 55,085 66,318
Redeemed (2,323,254) (2,317,274)
------------ ------------
Net increase (decrease) in shares outstanding (1,696,095) 3,987,447
Shares outstanding, beginning of year 8,307,481 4,320,034
------------ ------------
Shares outstanding, end of year 6,611,386 8,307,481
============ ============
See accompanying notes to financial statements.
===============================================================================================================
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Year
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2003 2002 2001 2000 1999
Net asset value at beginning of year $ 6.30 $ 8.69 $ 11.67 $ 16.69 $ 13.35
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income 0.08 0.18 0.24 0.11 0.31
Net realized and unrealized gains (losses)
on investments 2.72 (2.40) (2.98) (4.35) 4.43
-------- -------- -------- -------- --------
Total from investment operations 2.80 (2.22) (2.74) (4.24) 4.74
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.08) (0.17) (0.24) (0.10) (0.29)
-------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- (0.68) (1.11)
-------- -------- -------- -------- --------
Total distributions (0.08) (0.17) (0.24) (0.78) (1.40)
-------- -------- -------- -------- --------
Net asset value at end of year $ 9.02 $ 6.30 $ 8.69 $ 11.67 $ 16.69
======== ======== ======== ======== ========
Total return 44.40% (25.63%) (23.54%) (25.38%) 35.49%
======== ======== ======== ======== ========
Net assets at end of year (000s) $ 59,614 $ 52,296 $ 37,546 $ 64,572 $100,799
======== ======== ======== ======== ========
Ratio of net expenses to average net assets 1.50% 0.96% 0.95% 0.95% 0.95%
Ratio of net investment income to average net assets 0.97% 1.89% 2.32% 0.64% 1.98%
Portfolio turnover rate 228% 145%(a) 162% 142% 68%
(a) This calculation does not include securities acquired in the acquisitions.
(See Note 4).
================================================================================
Markman Total Return Portfolio 11
NOTES TO FINANCIAL STATEMENTS December 31, 2003
1. Significant Accounting Policies
Markman MultiFund Trust (the Trust) is registered under the Investment Company
Act of 1940, as amended (the 1940 Act), as an open-end diversified management
investment company. The Trust was organized as a Massachusetts business trust on
September 7, 1994. The Trust offers one series of shares to investors, the
Markman Total Return Portfolio (the Portfolio). Prior to December 30, 2002, the
Markman Conservative Allocation Portfolio, the Markman Aggressive Allocation
Portfolio and the Markman Moderate Allocation Portfolio were series of the
Trust. Effective December 30, 2002, the Markman Aggressive Allocation Portfolio,
Markman Conservative Allocation Portfolio and Markman Moderate Allocation
Portfolio each exchanged substantially all of their respective net assets for
shares of the Portfolio (see Note 4). The performance and accounting history of
the Markman Moderate Allocation Portfolio is being assumed by the Portfolio. The
total returns of the Portfolio are therefore those of the Markman Moderate
Allocation Portfolio for periods prior to December 30, 2002.
The Portfolio seeks maximum total return with reduced risk by investing in
individual securities, open-end mutual funds, closed-end funds and exchange
traded funds. The Portfolio seeks to minimize risk through allocation among
asset classes and through global diversification.
The following is a summary of the Trust's significant accounting policies:
SECURITIES VALUATION -- Shares of common stocks, closed-end funds and exchange
traded funds are valued as of the close of business of the regular session of
trading on the New York Stock Exchange (normally 4:00 p.m., Eastern time).
Securities which are quoted by NASDAQ are valued at the NASDAQ Official Closing
Price. Shares of open-end mutual funds and money market funds in which the
Portfolio invests are valued at their respective net asset values as reported by
the underlying funds. Securities for which market quotations are not readily
available are valued at their fair value as determined in good faith in
accordance with consistently applied procedures established by and under the
general supervision of the Board of Trustees.
SHARE VALUATION -- The net asset value per share of the Portfolio is calculated
daily by dividing the total value of assets, less liabilities, by the number of
shares outstanding, rounded to the nearest cent. The offering and redemption
price per share are equal to the net asset value per share.
INVESTMENT INCOME -- Dividend income is recorded on the ex-dividend date. For
financial reporting purposes, the Portfolio records distributions of short-term
capital gains made by mutual funds in which the Portfolio invests as dividend
income and long-term capital gains made by mutual funds in which the Portfolio
invests as realized gains.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders arising from net
investment income and net realized capital gains, if any, are distributed at
least once each year. Income distributions and capital gain distributions are
determined in accordance with income tax regulations.
SECURITY TRANSACTIONS -- Security transactions are accounted for on the trade
date. Securities sold are determined on a specific identification basis.
ESTIMATES -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
FEDERAL INCOME TAX -- It is the Portfolio's policy to comply with the special
provisions of the Internal Revenue Code (the Code) available to regulated
investment companies. As provided therein, in any fiscal year in which the
Portfolio so qualifies and distributes at least 90% of its taxable net income,
the Portfolio (but not the shareholders) will be relieved of federal income tax
on the income distributed. Accordingly, no provision for income taxes has been
made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Portfolio's intention to declare and pay as
dividends in each calendar year at least 98% of its net investment income
(earned during the calendar year) and 98% of its net realized capital gains
(earned during the calendar year) plus undistributed amounts from prior years.
The Portfolio files a tax return annually using tax accounting methods required
under provisions of the Code that may differ from accounting principles
generally accepted in the United States, the basis on which these financial
statements are prepared. The differences arise primarily from the treatment of
short-term gain distributions made by mutual funds in which the Portfolio
invests and the deferral of certain losses under Federal income tax regulations.
Accordingly, the amount of net investment income and net realized capital gain
or loss reported in the financial statements may differ from that reported in
the Portfolio's tax return and, consequently, the character of distributions to
shareholders reported in the Statements of Changes in Net Assets and the
Financial Highlights may differ from that reported to shareholders for federal
income tax purposes. As a result of such differences, reclassifications are made
to the components of net assets to conform to accounting principles generally
accepted in the United States.
The following information is computed on a tax basis as of December 31, 2003:
Cost of portfolio investments $ 46,010,415
============
Gross unrealized appreciation on investments $ 13,918,760
Gross unrealized depreciation on investments (234,898)
------------
Net unrealized appreciation on investments 13,683,862
Undistributed net investment income 3
Capital loss carryforward (63,262,061)
------------
Accumulated deficit $(49,578,196)
============
As of December 31, 2003, the Portfolio had a net capital loss carryforward of
$63,262,061 of which $11,601,633 will expire in 2008, $35,711,878 will expire in
2009 and $15,948,550 will expire in 2010. To the extent future capital gains are
offset by capital loss
================================================================================
12 December 31, 2003
carryforwards, such gains will not be distributed. Based on certain provisions
in the Internal Revenue Code, various limitations regarding the future
utilization of these carryforwards, brought forward as a result of the
acquisitions described in Note 4, may apply. Based on such limitations, unless
the tax law changes, approximately $18,039,838 of these losses will expire
unutilized.
The tax character of distributions paid by the Portfolio for the years ended
December 31, 2003 2002 was as follows:
2003 2002
From ordinary income $ 507,876 $ 432,877
2. INVESTMENT TRANSACTIONS
During the year ended December 31, 2003, the cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$124,843,608 and $112,043,561, respectively.
3. TRANSACTIONS WITH AFFILIATES
The Chairman of the Board and President of the Trust is also the President of
Markman Capital Management, Inc. (the Adviser). Certain other Trustees and
officers of the Trust are also officers of the Adviser or of Integrated Fund
Services, Inc. (IFS), the administrative services agent, shareholder servicing
and transfer agent, and accounting services agent for the Trust.
INVESTMENT MANAGEMENT AGREEMENT
The Portfolio's investments are managed by the Adviser pursuant to the terms of
an Investment Management Agreement. Effective December 30, 2002, the Portfolio
pays the Adviser an investment management fee, computed and accrued daily and
paid monthly, at an annual rate of 0.75% of average daily net assets of the
Portfolio. The Adviser has agreed to contractually limit total annual operating
expenses of the Portfolio to 1.50% of average daily net assets through December
31, 2003 and therefore will waive its advisory fee and/or reimburse other
expenses of the Portfolio to maintain this operating expense ratio. If the
Portfolio's expenses fall below 1.50% within three years after the Adviser has
made such a waiver/reimbursement, the Portfolio, subject to the approval of the
Board of Trustees, will reimburse the Adviser up to an amount not to exceed its
expense limitation.
For the year ended December 31, 2003, the Adviser recouped $107,849 of
previously waived fees. As of December 31, 2003, the Portfolio had $7,585 of
cumulative waivers that could potentially be reimbursed to the Adviser in the
future.
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT
Under the terms of the Administration, Accounting, and Transfer Agency Agreement
between the Trust and IFS, IFS supplies non-investment related statistical and
research data, internal regulatory compliance services and executive and
administrative services for the Portfolio. IFS coordinates the preparation of
tax returns for the Portfolio, reports to shareholders of the Portfolio, reports
to and filings with the Securities and Exchange Commission and state securities
commissions and necessary materials for meetings of the Board of Trustees. In
addition, IFS maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Portfolio's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. IFS also
calculates the daily net asset value per share and maintains the financial books
and records of the Portfolio. For the performance of these services, the
Portfolio pays IFS a monthly base fee, an asset-based fee, and a fee based on
the number of shareholder accounts. In addition, the Portfolio pays
out-of-pocket expenses including, but not limited to, postage and supplies.
4. ACQUISITIONS
On December 30, 2002, the Portfolio acquired all of the net assets of the
Markman Aggressive Allocation Portfolio, Markman Conservative Allocation
Portfolio and Markman Moderate Allocation Portfolio pursuant to a Plan of
Reorganization approved by their respective shareholders on December 27, 2002.
The acquisition was accomplished by a tax-free exchange of 5,905,324 shares of
the Portfolio (valued at $37,275,307) for the 3,983,745 and 1,275,901 shares of
Markman Aggressive Allocation Portfolio and Markman Conservative Allocation
Portfolio, respectively, outstanding on December 30, 2002. Additionally,
effective December 30, 2002, all shares of the Markman Moderate Allocation
Portfolio, the "accounting survivor," were exchanged on a one-for-one, tax-free
basis for shares of the Portfolio. Markman Aggressive Allocation Portfolio and
Markman Conservative Allocation Portfolio's net assets at that date, $27,522,748
and $9,752,559, respectively, including unrealized appreciation of $1,894,987
and unrealized depreciation of $209,310, respectively, and accumulated net
realized losses from security transactions of $42,445,473 and $6,241,643,
respectively, were combined with those of the accounting survivor, and
ultimately, the Portfolio. The aggregate net assets of the Markman Moderate
Allocation Portfolio, Markman Aggressive Allocation Portfolio and Markman
Conservative Allocation Portfolio immediately before the acquisition were
$17,071,232, $27,522,748 and $9,752,559, respectively. The combined net assets
of the Portfolio immediately following the acquisitions were $54,346,539.
- --------------------------------------------------------------------------------
DIVIDENDS RECEIVED DEDUCTION (UNAUDITED)
For corporate shareholders, 8.16% of the total ordinary income distribution paid
during the current fiscal year ended December 31, 2003 qualifies for the
corporate dividends received deduction.
TAX INFORMATION (UNAUDITED)
For the fiscal year ended December 31, 2003, certain dividends paid by the Fund
may be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during
the fiscal year, $41,443 may be considered qualified dividend income.
The information and distributions reported herein may differ from the
information and distributions reported to shareholders for the calendar year
ended December 31, 2003, which will be reported in conjunction with your 2003
Form 1099-DIV.
================================================================================
Markman Total Return Portfolio 13
REPORT OF INDEPENDENT AUDITORS December 31, 2003
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF THE MARKMAN MULTIFUND TRUST
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Markman Total Return Portfolio (the
"Fund"), a series of the Markman MultiFund Trust as of December 31, 2003, and
the related statement of operations for the year then ended, and the statements
of changes in net assets and financial highlights for each of the two years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights presented herein for each of the years in the
period ended December 31, 2001 were audited by other auditors who have ceased
operations. Those auditors expressed an unqualified opinion on the financial
highlights in their report dated January 11, 2002.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2003, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Markman Total Return Portfolio at December 31, 2003, the results of its
operations for the year then ended, and the changes in its net assets and
financial highlights for each of the two years in the period then ended in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Cincinnati, Ohio
January 15, 2004
================================================================================
14 December 31, 2003
MANAGEMENT OF THE TRUST (Unaudited)
Listed in the charts below is basic information regarding the Trustees and
officers of the Markman MultiFund Trust (the "Trust").
Number of Other
Portfolios in Directorships
Position(s) Fund Complex Held by Trustee
Held With Term of Office(1) and Principal Occupation(s) Overseen by Outside the Fund
Name/Address/Age Trust Length of Time Served During Last 5 yrs Trustee Complex
- -------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE:
Robert J. Markman(2) Chairman of Since Inception President, Treasurer and 1 N/A
6600 France Ave. South the Board Secretary of Markman
Edina, MN 55435 and President Capital Management, Inc.
Age: 52
(1) Each Trustee is elected to serve in accordance with the Declaration of
Trust and By-Laws of the Trust until his or her successor is duly elected
and qualified.
(2) Mr. Markman is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because of his relationship
with Markman Capital Management, Inc. Markman Capital Management, Inc.
serves as the investment adviser to the Trust and, accordingly, as
investment adviser to the Portfolio.
Number of Other
Portfolios in Directorships
Position(s) Fund Complex Held by Trustee
Held With Term of Office(1) and Principal Occupation(s) Overseen by Outside the Fund
Name/Address/Age Trust Length of Time Served During Last 5 yrs Trustee Complex
- -------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES:
Susan Gale Trustee Since Inception Real Estate Advisor; 1 N/A
6600 France Ave. South Edina Realty.
Edina, MN 55435
Age: 51
- -------------------------------------------------------------------------------------------------------------------------------
Melinda S. Machones Trustee Since Inception Director of Technology 1 N/A
6600 France Ave. South and Strategy, Duluth
Edina, MN 55435 New Tribune; Self-employed
Age: 49 management and technology
consultant; Director of
Information Technologies,
The College of
St. Scholastica.
- -------------------------------------------------------------------------------------------------------------------------------
Michael J. Monahan Trustee Since Inception Vice President-External 1 N/A
6600 France Ave. South Relations, Ecolab.
Edina, MN 55435
Age: 53
- -------------------------------------------------------------------------------------------------------------------------------
(1) Each Trustee is elected to serve in accordance with the Declaration of
Trust and By-Laws of the Trust until his or her successor is duly elected
and qualified.
Position(s)
Held With Term of Office and Principal Occupation(s)
Name/Address/Age Trust Length of Time Served During Last 5 yrs
- -------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OFFICERS:
Judith E. Fansler Secretary Since Inception Chief Operations Officer;
6600 France Ave. South Treasurer Since May 2003 Markman Capital Management, Inc.
Edina, MN 55435
Age: 53
- -------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information contains additional information about
the Trustees and is available without charge upon request by calling 1-800-
707-2771.
================================================================================
Markman Total Return Portfolio 15
- --------------------------------------------------------------------------------
Stay Informed
- --------------------------------------------------------------------------------
WEBSITE PROVIDES UPDATES ON-LINE
For expanded performance information, portfolio allocations updated regularly,
on-line access to the prospectus and forms, and other helpful information, log
on to
www.markman.com
THESE FORMS ARE AVAILABLE:
o Account Application
o IRA/Roth Application
o IRA transfer request
o Systematic Withdrawal Plan Request
o Automatic Investment Request
o Company Retirement Account Application
o 403(b) Plan and Application
The minimum direct investment is $5,000. If you want to invest less than $5,000,
you may purchase the Markman Total Return Portfolio through: Charles Schwab &
Company (800-266-5623), Fidelity Investments (800-544-7558), and TD Waterhouse
(800-934-4443), among others. There is no transaction fee when you purchase the
Markman Total Return Portfolio through these discount brokers.
For additional forms or answers to any questions just contact the Markman Total
Return Portfolio (between the hours of 8:30 AM and 5:30 PM EST). Toll-free:
800-707-2771.
PORTFOLIO/STRATEGY UPDATE
800-975-5463
Bob Markman's weekly market overview and portfolio activity report.
ONLINE
www.markman.com
Check for net asset values and more.
PRICELINE
800-536-8679
Up-to-the-minute net asset values and account values.
HELPLINE
800-707-2771
For a prospectus, an application form, assistance in completing an application,
or for general administrative questions.
MARKMAN Investment Adviser Shareholder Services
TOTAL RETURN Markman Capital Management, Inc. c/o Integrated Fund Services, Inc.
PORTFOLIO 6600 France Avenue South P.O. Box 5354
- ----------------------- Minneapolis, Minnesota 55435 Cincinnati, Ohio 54201-5354
FOR INVESTORS TOO SMART Telephone: 952-920-4848 Toll-free: 800-707-2771
TO DO IT THEMSELVES(R) Toll-free: 800-395-4848
Authorized for distribution only if preceded or accompanied by a current
prospectus.
================================================================================
16 December 31, 2003
MARKMAN
TOTAL RETURN
PORTFOLIO
- -----------------------
FOR INVESTORS TOO SMART
TO DO IT THEMSELVES(R)
6600 France Avenue South
Minneapolis, Minnesota 55435
- --------------------------------------------------------------------------------
First Class
- --------------------------------------------------------------------------------
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions, regardless of whether these individuals
are employed by the registrant or a third party.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that the registrant does not
have an audit committee financial expert. The Trustees determined that no member
of the Audit Committee was qualified to be considered an audit committee
financial expert
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
December 31, 2003 December 31, 2002
Audit Fees $19,000 $18,000
Audit-Related Fees 0 13,000
Tax Fees 2,000 4,400
All Other Fees 0 0
ITEM 5. AUDIT COMMITTEE OF LISTED COMPANIES.
Not applicable.
ITEM 6. RESERVED.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END FUNDS.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END FUNDS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940), the registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
are effective as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's last fiscal half-year that have materially
affected, or are reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of Ethics identified in Item 2 of Form N-CSR are filed herewith.
(a)(2) Certifications required by Item 10(a) of Form N-CSR are filed herewith.
(b) Certifications required by Item 10(b) of Form N-CSR are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Markman MultiFund Trust
By (Signature and Title)
/s/ Robert J. Markman
- ----------------------------
Robert J. Markman
President
Date: March 5, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)
/s/ Robert J. Markman
- ----------------------------
Robert J. Markman
President
Date: March 5, 2004
By (Signature and Title)
/s/ Judith E. Fansler
- ----------------------------
Judith E. Fansler
Treasurer and Chief Financial Officer
Date: March 5, 2004