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
---------------------------------------------
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
-----------------------------
Date of fiscal year end: 12/31
--------------------
Date of reporting period: 12/31/05
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
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Item 1. Reports to Stockholders.
Annual Report
[FRONT COVER]
Markman
TOTAL RETURN
CORE FUND
[PHOTOS]
12.31.2005
Annual Report
[* * * * *]
You Own a Five-Star Fund!
I am pleased to report that the Markman Total Return Core Fund has received a 5
Star Overall rating from Morningstar Ratings(TM) for the three year period ended
December 31, 2005, with an actual ranking of 24th out of 1,353 funds in the
large cap growth category.
For each fund with at least a three year history, Morningstar calculates a
Morningstar Rating based on a Morningstar Risk-Adjusted return measure that
accounts for variation in a fund's monthly performance (including effects of
sales charges, loads and redemption fees), placing more emphasis on downside
variations and rewarding consistent performance. These ratings change monthly.
The top 10% of funds in an investment category receive five stars, the next
22.5% receive four stars, the next 35% receive three stars, the next 22.5%
receive two stars, and the bottom 10% receive one star. Morningstar does not
guarantee the accuracy of this information. Past performance is no guarantee of
future results.
Dear Fellow Shareholders,
[PHOTO]
I am pleased to report that in 2005 the Markman Total Return Core Fund
outperformed the S&P 500 as well as our primary mutual fund peer benchmark, the
Morningstar Large Cap Growth Fund category. The Fund gained 7.94%, versus a
return of 4.91% for the S&P 500 and 4.51% for the Morningstar Large Cap Growth
Fund category. With this third consecutive year of superior relative results,
the Fund's risk-adjusted returns are strong enough to earn a Five Star rating
from Morningstar, awarded only to those funds that have achieved risk adjusted
returns in the top 10% of their category. To be more specific, the Markman Total
Return Core Fund was actually in the top 3% of its category during the trailing
three year period ended 12/31/05.
1
Haven't I Seen You Before..?
When I sat down to assemble my thoughts for this year's letter, I was struck by
the astonishing similarity between the basic themes of 2004 and 2005. In last
year's (2004) Annual Report, I noted these negatives that the market had to
overcome in 2004:
o Daily images of carnage and disarray from Iraq
o Concerns about job creation and outsourcing
o Bitter political environment
o Energy price spike
o Interest rate increases by the Fed
Hmmm. Doesn't that sound like a list of what the market faced in 2005?
More eerily, the positives I observed in 2004 could just as readily hold true
with little or no change for 2005:
o Corporate earnings growing at a rate even greater than analysts expect
o Hiccups occur, but the economy continues to grow at a rate strong enough
to forestall any thought of imminent recession
o Oil and gas price spikes do not appear to put any real damper on consumer
spending or broader economic activity
o Synchronized global growth
o Corporate America continues steady progress toward financial health.
Balance sheets strengthened. Cash hoards accumulated
All this merely highlights for us all how much reporting energy is expended in
the course of a year, breathlessly reporting on the crisis du jour while the
larger, more impactful story continues to unfold beneath the surface.
The Story: What Didn't Happen
In a famous Sherlock Holmes dialogue, Holmes notes to Watson the "curious
incident of the dog in the night time." Watson protests that the dog did nothing
in the night time. "That was the curious incident," replies Holmes. The fact
that the dog did not bark--as expected--was the key to understanding what
happened and solving the mystery.
As we look back on the events of 2005, it may be more valuable for us as
investors to focus not so much on what happened but, rather, what did not
happen. Naturally, what happened is normally the focus of our attention. And so
we would tend to look at 2005 through the lens of economically impactful events
such as Hurricanes Rita and Katrina, oil spiking to $70 per barrel, gas soaring
to $3 per gallon, bloodshed in Iraq, gold prices rising above $500 per ounce,
terror bombings in London, General Motors teetering on the edge of bankruptcy,
and regular bumps in interest rates from the Fed, among other events. But in
this context, what was the 'dog that didn't bark?'
Inflation remained tamer than most economists expected. Core Producer Prices
rose at just 1.7% for the year, below the 2.3% rate in 2004 (source: BLS). And
though the final numbers for Core Consumer Prices are not in as of this writing,
they, too, are likely to be benign. Here we are, entering the fourth year of an
economic recovery with above trend global growth and soaring commodity prices,
yet we see little evidence of sustained pick-up in inflation. The
dog--inflation--is silent. The question to ask is why?
Performance: Markman Total Return Core Fund
[The following table represents the bar chart depicted in the printed material.]
Since
1 Year 3 Year 5 Year 10 Year Inception
------ ------ ------ ------- ---------
MTRPX 7.94% 21.23% 0.26%* 4.86%* 6.56%*
S&P 500 4.90% 14.40% 0.50% 9.10% 9.17%
Past performance is not predictive of future performance.
* Performance numbers for all periods prior to December 30, 2002 are those
of the Markman Moderate Allocation Portfolio, the Markman Total Return
Portfolio's performance predecessor.
The performance of the Fund above does not reflect the deduction of taxes
that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
2
There's the much maligned consumer. If you had polled any economic guru three
years ago and asked what would happen to consumer spending if oil prices soared
and remained at the $50-$60 level, you would have been told any number variation
on the theme of reduced spending. Yet as Mark Twain would say, reports of their
demise has been greatly exaggerated. This dog--a 'spent-up' consumer--is silent
as well. Why?
Interest rates, too, can be seen as a 'curious incident.' The Federal Reserve
has been raising rates relentlessly for more than two years and while rates on
the short end have gone up with those actions, longer term rates have not budged
one bit. It has gotten to the point where the yield curve is threatening to
invert (that is where short term rates are higher than long term rates) an event
that is more consistent with looming recessions than economic booms. Why have
long rates stayed so low?
Finally, there is the overall economy. Under the burden of rising rates, soaring
commodity prices and Washington disarray, the economy should be at least showing
signs of fraying around the edges. Yet by any number of measures--corporate
profits, job growth, productivity gains--the U.S. economy continued to be a
potent engine of prosperity. Again, the bark of a stumbling economy was not
heard. And it's the reason for the absence of that sound that is the story.
The answers to why these dogs did not bark could have significant implications
for our portfolio as we'll see shortly when we look ahead to 2006. But for now,
I'd like to drill down a bit in our 2005 results and share with you some
insights about how we did--the good, the bad, the complimentary and the
embarrassing.
2005 Management Report Card and Analysis
As previously noted, the Fund portfolio return of 7.94% bested by a goodly
margin the returns of both the S&P 500 and our average fund peer. This was due
to a number of things we executed well on:
o Our general take on the market and the economy was correct. We expected
energy prices to stay high, but not high enough to derail the economy. It
was also our opinion that real estate, as represented by both homebuilders
and REITS, would remain strong. Lastly, we saw little evidence, given
employment numbers, that the consumer was ready to give up the ghost.
o Overall tactical asset allocation was good, and our stock and fund
selection was excellent. We were overweighted much of the year in Real
Estate, Energy, Health Care and Retailing, and top performing stocks like
Valero Energy, Chico's, United Health, Cerner, Rayonier, and Apple played
prominent roles in the portfolio.
These positives were, in my opinion, a direct result of the multi-disciplinary
approach we take to portfolio construction. We are categorized as a large cap
growth fund and by and large, most of our holdings will fall in that category.
We do, though, reserve the flexibility to add small or mid caps as opportunities
arise. We've also taken positions in value stocks and international stocks.
Since our radar, so to speak, covers such a broad spectrum, we put ourselves in
a position to be open to a mix of
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Comparative Growth of a $10,000 Investment
Since Inception of Total Return Core Fund 1/1/03
Average Annual
Total Returns*
1 Year 5 Year 10 Year
-----------------------
7.94% 0.26% 4.86%
[The following data represents the line chart depicted in the printed material.]
12/31/05
--------
Markman Fund $17,817
S&P 500 $14,969
Past performance is not predictive of future performance.
- --------------------------------------------------------------------------------
Comparative Growth of a $10,000 Investment
Since Inception 1/28/95(A)
Total 2003-2005 Returns
S&P 500 MTRPX*
-----------------
49.69% 78.17%
[The following data represents the line chart depicted in the printed material.]
12/31/05
--------
Markman Fund $20,017
S&P 500 $32,179
Past performance is not predictive of future performance.
- --------------------------------------------------------------------------------
* Performance numbers for all periods prior to December 30, 2002 are those
of the Markman Moderate Allocation Portfolio, the Markman Total Return
Portfolio's performance predecessor.
The performance of the Fund above does not reflect the deduction of taxes
that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3
ideas and concepts that some other funds may be forced to dismiss out of hand.
Always Room for Improvement
But enough with the pats on the back. Not everything went the way I planned or
would have preferred. This is the time of year when, internally at Markman
Capital, we review all the decisions made over the previous twelve months to see
what we can learn. Not surprisingly, this review is often accompanied with a
healthy slice of humble pie. (I find it to be somewhat on the bitter side, but
very intellectually nutritious.)
Naturally, the numerous decisions involved in running a fund portfolio will
inevitably result in a mixed bag of good and bad choices. I have to chuckle when
I hear or read stories of fund managers who only seem to crow about the stock
they've bought that has doubled, tripled, or quintupled since they bought it. Or
the great sector calls they've made. I often wonder why, if they make such great
choices, their fund's results are so, well....ordinary?
True, it is more pleasant to talk about good rather than bad judgement calls.
It's equally true that in real life we often learn the most from our mis-steps.
A teacher long ago told me that wisdom only comes from experience. And
experience only comes from errors in judgement. Any investor worth his or her
salt will, on a regular basis, review decisions to see what can be learned.
As I analyze the portfolio over the past year, I see a tendency to sell too
soon. What made this so frustrating for me in 2005 is that I did it with a
number of positions that were nicely profitable but could have been even more
profitable had I not sold.
Selling Too Soon
Cerner Corporation (CERN) is a good example. Cerner creates, installs and
maintains software systems for hospitals and clinics that enable these
organizations to better maintain information and deliver efficient and safe
care. It is one of the major players in the dynamically growing sector of
medical information technology. My research showed me that there were
indications of accelerating earnings potential in the company. At the same time,
Cerner had an astonishingly large short interest of 30% or more, creating an
environment for a potentially explosive upside. Short interest is the amount of
stock that is being shorted at any time. Short interest above 10% is considered
high. 30% is sky high! Here's the interesting strategic part: if the investors
who are selling short (betting that the stock will decline) are wrong and the
stock goes up, many of these short sellers would have to cover their short by
buying back the stock they shorted. This added buying pressure can dynamically
drive the price up even further. A 30% short interest figure indicated that
there were an enormous amount of shares that would have to be bought back if the
price continued to rise.
You can see from the chart the results of a combination of favorable macro
environment for these stocks, good quarterly results from Cerner, and an ongoing
short squeeze: The price of Cerner stock was driven upward with remarkably few
pauses and corrections until year end.
At some point, though, this seemed too much of a good thing. My analysis was
showing that the price had gotten well ahead of the fundamentals, and any
disciplined investor would choose to at least take some profits and reduce the
position. That was not, however, the only option. Among other things, I could
have simply set a broad stop price to allow my profits to run, while protecting
most of my gains. A case could even be made, from a momentum standpoint, for
continuing to buy more as the price went up. At the same time, what I considered
other great opportunities were flashing on my screens. But where, if not from
taking some profits, could I raise money in the portfolio to take advantage of
new lower cost opportunities that were arising? Thus the dilemma we all face as
investors: on one shoulder is the `let your profits run' angel; on the other
shoulder is the `bulls make money, bears make money, pigs get slaughtered'
angel.
In this case, I erred on the side of caution and regularly sold pieces on the
way up, unloading the final blocks of shares in the mid-November to mid-December
topping period. Because I actually rebought and then sold shares along the way,
when the dust
Example: Cerner Stock Prices in 2005
[The following data represents the line chart depicted in the printed material.]
***need plot points***
[Side Bar]
"You can see from the chart the results of a combination of favorable macro
environment for these stocks, good quarterly results from Cerner, and an ongoing
a short squeeze: The price of Cerner stock was driven upward with remarkably few
pauses and corrections until year end."
4
settled I had captured almost 80% of the gain I would have had I simply bought
and held. So this was by no mean a disaster. But in this business, we fight hard
for every fraction of a percent gain.
Much the same dynamic occurred in positions we held in Apple, United Health, and
Valero Energy. In hindsight I cringe at some of the prices I sold at. Sure, I
can point, in each case, to an analysis that showed that the shares were valued
at a level that called for at least a partial sale, but who's kidding who?
Everyone in my position knows that any investment model, with just the smallest
tweak in assumptions, can lead you to value a given stock at $50 per share
rather than $40. For every clear cut valuation conclusion, there are dozens of
hazy, assumption-dependent guesses. All of us managing money are looking through
a glass darkly to some degree. The only difference is that some are better than
others at solving real-world equations with multiple unknowns.
What bothers me most about this is that it occurred in holdings in which I have
a high degree of confidence. They are all well-run companies in good market
segments that I believe have the potential to show gains for some time. I've
tried to ameliorate the effects of this by jumping back in once I've realized
that it may have been preferable not to sell. Interestingly, sometimes that
in-and-out has generated greater gains than a simple buy and hold. Fortunately,
our trading commissions are extremely low, so the cost of these trades has no
noticeable impact on our returns. In addition, our small size allows us to
quickly buy and sell the mostly large cap stocks we traffic in--with no market
impact that I've been able to discern. But I'm not looking to analyze what went
right. I want to fix what I think is not working as well as it might.
Top Ten Holdings
of the Stock Portfolio 12.31.05
Vornado Realty 3.4%
---------------------------
FedEx 3.2%
---------------------------
Procter & Gamble 2.9%
---------------------------
UnitedHealth Group 2.8%
---------------------------
Zimmer Holdings 2.8%
---------------------------
McDonald's 2.8%
---------------------------
St. Jude Medical 2.7%
---------------------------
Johnson & Johnson 2.7%
---------------------------
Norfolk Southern 2.7%
---------------------------
Starbucks 2.7%
---------------------------
Total in Top Ten 28.7%
This is not just an exercise in 20/20 hindsight. The important question for me
is: why do I do this? I know I'm not stupid; the Fund I manage has, for all my
faults, beaten the S&P and its peer group for the past three years.
Portfolio Manager Challenges
My first challenge is how to control the abundance of potentially great stocks
and funds that are uncovered by our far ranging multi-disciplinary investment
process. When virtually the entire investment world is your playground, it can
be difficult to narrow the final choices down to just 30-40 positions. By its
very nature and scope, this process is continually pulling up new names to
consider for purchase. Inevitably there will come a decision to make: Do you
sell a stock at $50, even though you think it is likely to go to $70 (another
40%) in order to buy another stock at $30 that you think can go to $50 (another
67%)? Is the reward worth the risk?
I'm not convinced this 'problem' can ever be completely eliminated. I have,
though, run numbers that suggest to me that I need to widen the spread of
expected returns between the bird in hand I own and the one in the bush I want
to buy. This will likely cut down somewhat on the number of flips that result in
only marginal advantage.
The second challenge is the very person who I see in the mirror every day. Those
of you who have gotten to know me over the years know that even on my gloomy
days, I'm likely to be the biggest optimist in the room. But sometimes the
wisest conclusion in the investment arena is that the glass is half empty, not
half full. Just as this Fund has, I believe, an advantage in its non- dogmatic
flexibility, I as a manager, continue to work on making sure that my 'sunny
disposition' does not potentially obscure very real risks before us. In other
words, I'm trying to get in touch with my inner grouch.
Skepticism does not come easy to us optimists. But I've come to accept this
unavoidable formulation: when I am reaching maximum levels of comfort, I am
aware that this is probably when the risk is highest.
Over the past three years I've forced myself, when confronted with the 'let your
profits run' versus the 'bulls/bears/pigs' cliche, to take at least some of the
chips off the table. After all, in hindsight who would not have ultimately been
happy selling at least some Cisco at $45 or $55 rather than riding it all up to
$80 and then back down to $10?
For this recovering perma-optimist, selling regularly as prices rise creates the
comfort level I need to be assured that we won't be 'all in' at the top. I like
that. Yet I'm still searching for a way to reconcile all this so that I can
squeeze more out of my good calls, without aggravating the bad ones. Fundamental
analysis is not likely to provide much help, but I have been designing and
testing a number of technical analysis methodologies that may well address this
specific concern. I expect potential improvement with the implementation of
these-- and I hope that's not just the optimist in me talking!
What I love most about this business is that there is no limit to how well one
can do, no end to the growing process. We can make 20% in a year and still study
to learn why we did not make 21%. Our glorious human ability to adapt and change
is the reason people, not machines are running the show (at least for the time
being!). So while I will never be able to guarantee specific results, I can give
you my solemn oath that this personal evaluation process, as painful as it is
sometimes, will always be front and center. I apologize if a 'warts and all'
discussion is troubling. But I've always operated under the premise that an
honest public education of both strengths and weaknesses is a healthy and sound
business practice. My hope is that, in doing so, we will continue to create the
potential for above-market results on your behalf.
/s/ Bob Markman
Bob Markman
bob@markman.com
5
The Dog Didn't Bark.
Maybe It Was Just Pointing. [PHOTO]
Let's go back now to the economically curious incident of the dog that didn't
bark.
The commonality in each instance is a surprising resilience and resistance:
o Resilience on the part of both consumers and corporate America in the face
of interest rate and energy pressures that theoretically should have an
impact.
o Resistance on the inflation and interest rate front to pressures from
commodities and monetary authorities that would have been expected to
drive up both interest rates and inflation.
Interest Rates Increase--To New Low Levels!
Many market watchers and economists were taken aback at how resilient consumers
and corporate spending was even as interest rates rose. Their
thinking--conventional in the extreme--was that rising rates would choke off
activity. But they missed one important point: RATES STARTED FROM SUCH A LOW
POINT THAT EVEN AFTER REPEATED INCREASES, THEY ARE NOT HIGH!!!
A little historical perspective may help. Comparing today's interest rate
landscape with that of the 1995-1999 period, when economic activity was charging
along at a historically rapid pace is illuminating. The yield on the 10-year
Treasury note at the end of 2005 was 4.37%. The average yield on the 10-year
during the 1995-1999 period was 6.05%. The one-year T-Bill rate at year's end
was 4.36%. During '95-'99 it averaged 5.44%. No question, borrowing money and
carrying debt is a lot cheaper now than it was during the boom nineties. So why
would anyone think these rates would choke off economic activity?
The same holds true for mortgage rates. The lowest 1-year adjustable rate seen
during the '95-'99 period was 5.42%. The highest one year ARM rate was 6.87%.
Most of the time, the one year rate was well above 6%. Today, we're still not
much above 5%. The lowest 30-year rate during the boom '90's period was 6.85%.
The highest was 9.33%. Imagine that high of a rate! Does anyone recall hearing
anything about the housing market being choked off in 1999 when that rate was
last seen? Today we 'labor' under a 30-year mortgage rate that has 'skyrocketed'
all the way to the 6.25-6.50% range. (Source: HSH Associates)
Just because the temperature rises from 5 degrees to 20 degrees, doesn't mean
it's now hot outside. And just because rates have risen from the lowest level
since the 1960's doesn't make them high by any absolute measure. Anyone who was
expecting economic activity to slow down, either on the consumer or corporate
level due to higher rates, was looking for something that was not likely to
happen. If we were concerned about consumer spending, we would not have written
about Chico's last June in our Semi Annual, and subsequently watch it appreciate
some 28% between that time and the end of the year!
That is not to say that rates may not rise enough at some point to impact
growth; but bear in mind that the Fed needed to get short-term (one-year) rates
as high as 6.33% in May of 2000 to begin to put the brakes on the economy.
Today, they're at 4.35%. The dog didn't bark because there simply was nothing to
bark at.
With Commodities Going Through the Roof, Where's the Seventies-Style inflation?
After two years of commodity prices going through the roof, one might expect
that these increased prices would be passed along to consumers and show up in
CPI figures. Interestingly, though, the Core CPI, which measures prices
excluding food and energy, increased only 2.2% in 2005. Even more puzzling is
that this number is the same as the 2.2% core rate we saw in 2004. Of course,
one might protest that to exclude food and energy gives a false sense of
inflation's impact. But bear in mind that we have also used this Core measure
during times when energy prices were coming down. For instance, during 2000-2001
energy prices actually brought down the overall inflation numbers. In fact, the
core rates in 2000 and 2001 were 2.6% and 2.7% respectively (Source: Federal
Reserve). This seemingly creates something of an economic non sequitor: after
commodity prices have risen to their highest levels in a generation, the
apples-to-apples core rate of inflation has actually declined. Hey, I'm just
reporting the facts.
The bond market is confirming this unusual circumstance. Over the past year or
more, as the Fed has steadily bumped up interest rates, the long end of the
yield curve has remained stubbornly in place. There was a period in mid-2005
when market observers looked with mouth agape as the yield on the ten-year
treasury amazingly dipped below what the yield had been a year earlier, before
all the subsequent rate increases. Keep in mind that the Fed really only has
control of short-term rates. Long-term rates are set by the marketplace (the
collective investment community commonly known as the 'bond vigilantes'). These
investors in the market move rates dependent on their view of what inflation is
likely to be. The fact that long rates have stayed so relatively low, even in
the face of Fed tightening, even in the face of sustained economic growth, and
even in the face of substantial regular gains in employment numbers, seems to be
sending
6
a very clear message: forget about the short term noise and static, commonly
expected increased inflation is simply not on the horizon.
Admittedly, there are areas--important areas--like health care where costs are
soaring out of control. But why, then, the benign overall numbers?
I think a significant part of the answer lies in the productivity numbers.
Although the officially reported productivity rate slowed a bit in 2005 from
previous years, U.S. productivity still came in at the high end of all the
industrialized countries. This strong showing is impressive, given the stage we
are in in our economic recovery.
The source of this sustained productivity performance lies in two places:
Increased effective implementation of technological improvements put in place
over the past five to ten years, and the ongoing globalization of the
manufacturing and service sector. The high tech/internet promises of the 1990's
boom--those same promises that seemed to crumble to dust with the 2000-2002
market crash--have in reality become embedded throughout the American economy.
There is not a major industry that is not being run leaner and more efficiently
today due to software and communications solutions that were first implemented
several years ago. The 'new era' burst of productivity and prosperity that was
promised in the late 1990's was not just a hollow claim--it only took a little
time longer in coming.
Technological advances have also allowed many industries to globalize in ways
that never were possible before. As we all know, outsourcing has progressed far
beyond making shirts in Bangladesh or machine tools in Taiwan. The ability and
willingness of companies to outsource even sophisticated services, as opposed to
just basic manufacturing is revolutionary. Here, of course, is not the place to
debate the merits, ethics, or patriotism of this trend. We must, however,
understand and be aware of it. For it's not only a primary reason why the dog
did not bark; embracing this knowledge will also help us to identify some of our
most dynamic investment opportunities.
The Year Ahead:
Viewpoints, Strategies, Tactics
Realizing that economic forecasters were invented to make weather forecasters
look good, I wonder about the wisdom of putting pen to paper under a headline
that says "The Year Ahead." Its true that there is a danger for investors to get
so wrapped up in their 'scenario' or 'big picture story' that they lose sight of
what may actually be unfolding before them.
The classic example is still fresh in all our minds: The Internet Revolution did
indeed, as its advocates promised, revolutionize business and social interaction
in America. It created the ability to deliver and create choice, efficiency and
communication unimaginable 20 years ago. Even so, the fulfillment of that broad
promise was also accompanied by the crash of internet stocks, with the
accompanying loss of billions of investor dollars. Moral: stock prices and mega
trends don't always move in lock-step.
With that caveat in mind, there are two major themes that will be important for
us to understand and keep firmly in our sights as we attempt to maximize our
results in 2006.
Theme #1; "Mullah This Over": Oil Prices Are Likely to Go Up Even Higher
In a free market economy, the ultimate law is that of supply and demand. If
demand exceeds supply, prices go up until demand slackens enough to create a new
equi- librium. The quick phrase used in the energy sector to describe this
dynamic is "high prices solve high prices."
Few observers at this stage doubt that our global energy infrastructure ever
anticipated the kind of simultaneous global growth we are now experiencing. In
particular, the emergence of two emerging energy mega consumers like India and
China is throwing all previous demand projections out the window. And it looks
to get even worse: according to the International Energy Agency, global demand
for oil is likely to increase at a rate even higher than it did in 2005. As long
as emerging economies like China and India continue their rapid, energy
inefficient growth, demand is going to continue on an inexorable upward trend.
Under normal market conditions, with any other commodity, this demand increase
alone would be sufficient to put upward pressure on prices. In the case of oil,
how-ever, the imbalance becomes further skewed by the shortage of supply,
particularly supply from reliable sources. The world is now starting to feel the
impact of years of cautious actions on the part of major energy companies. In
past booms, oil companies ramped up expensive expansion efforts only to be left
holding the bag when prices collapsed again. This has led the industry to
conclude that it was better to merely re-arrange the furniture, i.e. buy and
sell reserves amongst themselves, than take the risk of throwing billions away
on finding new reserves. On the production end, high costs, low margins and
increasingly stringent environmental regulations virtually shut down real
expansion of U.S. refining capacity for almost three decades. Of course, now
that this cautious conventional wisdom is fully implemented as the industry
model, the landscape changes and we see that, in hindsight, generally everyone
was wrong about industry investment patterns over the past twenty years.
[PHOTO]
7
The only way this supply problem can go away quickly is to have a global
economic slowdown that immediately reduces demand. That does not seem likely.
But as long as demand keeps up, the problem will get worse quicker than our
ability to address it. This is not a matter of money. Oil companies and
governments that control their national oil companies are awash with cash. The
problem is that the lead time between investment and final production are so
astonishingly long. It takes years to build a new refinery, years to find and
develop new oil fields.
As if this basic supply/demand imbalance were not enough, a goodly percentage of
global production rests in the hands of some of the most unfriendly and unstable
governments on the planet. The list is chilling: Venezuela, ruled by an
anti-U.S. Castro wannabe; Nigeria, battling chronic rebellions that regularly
disrupt production; Iraq, likely to face instability for a long time to come;
Russia, not hesitant to use oil and gas as a weapon of foreign policy to squeeze
the west; Saudi Arabia, a political house of cards ready to topple sometime in
the next generation--also in my opinion, likely not telling the truth about
their actual proven reserves; and last, but by no means least Iran.
The Mullahs who rule Iran and control one of the world's largest pools of proven
oil reserves are virulently anti-Western. I believe we can expect no quarter
from them when it comes to pricing; it is entirely in their best interest to
roil the market until the price rises almost high enough to tip the world into
recession, and then stop there at the point of maximum pain. We know that price
is a good deal higher than $60, or $70 per barrel. Is it $80? $90? $100+? We
don't know. Unfortunately, we may find out.
Asset Allocation 12.31.05
(as a percentage of net assets)
[The following data represents the pie chart depicted in the printed material.]
Cash 6.6%
REITS 13.4%
Bonds 2.2%
Stocks 77.8%
Iran's threat to the energy markets extends beyond just its oil producing
capabilities. Their commitment to pursuing nuclear weapons technology adds a
level of instability that is difficult to measure. There is nothing in the
history of Iran's relations with the rest of the world that would suggest that
we will be able to easily negotiate this away. Nuclear power status is an
essential goal of the regime. I am not a geopolitical expert, and I am making no
predictions on that score other than to say I believe it is highly likely that
Iran's truculent stance will create a level of fear and instability that can
only serve to push oil prices higher.
I think that the best overall performance in 2006 will come to those portfolios
that have an intelligently broad overweighting in energy. As I noted, a large
part of the problem in the energy sector stems from the lack of development over
the past decade. Given the enormous cash hoard and current cash flows being
generated by oil producers, I believe it is reasonable to speculate that
investment in exploration and infrastructure is likely to increase dramatically
over the next year.
Unfortunately, it is hard to identify an investment sector that is more subject
to manic highs and lows. Nevertheless, it is my intention, as the New Year
begins, to continue to build a larger energy allocation. While this will
undoubtedly contribute to increased short term volatility, I think the weight of
the evidence points to it being the right thing to do longer term.
As of 12/31/05, our positions in this area were: the Oil Service HOLDRs (OIH),
which gives us broad exposure in energy infra-structure and service companies
such as Schlumberger, Halliburton, Baker Hughes and Transoceon, among others;
Valero Energy (VLO), the sour crude refining giant I wrote about in the June
Semi Annual Report, and Peabody Energy (BTU) a major coal producer.
[PHOTO]
Theme #2: Forever Young?
Boomers Turn 60!
It's official! On January 1, the first Baby Boomers turned 60. It's no secret
that the Boom generation is notoriously self absorbed, so it should come as no
surprise that its birthday might be touted as an epochal event. But if you
subscribe to the theory--as I do--that demographics is destiny, attention must
be paid. I know you may be sick of hearing about baby boomer this, or baby
boomer that; after all, that generation has been a topic of social and economic
speculation for decades. From an investment perspective, much of the chatter in
the past has been relatively useless. As I noted previously, mega trends and
stock prices do not necessarily correlate.
In one area, though, it would behoove us to pay close attention to the potential
impact of this mega trend: the broad medical/health care sector of our economy.
Here's what we know:
o Numbers: Biggest single population group
o Money: Enormous current wealth, likely to be supplemented over the next
decade by transfer of additional wealth as parents pass away
o Vanity: The most self consciously vain generation. Ongoing obsession with
staying 'young'
o Indulgence: Desire for immediate gratification and willingness to pay
money to purchase it
o Self Absorption: It's all about me. Less cultural desire to `pass on'
assets to children. Higher spending patterns
8
While these characteristics can and will impact many industries, most of them
involve products or services, like entertainment, clothing, recreation, etc.,
that could be thought of as discretionary. Products and services in the
medical/health sector are certainly less likely to be subject to whim or choice.
If you've got a bum knee and it can be replaced with a bionic part that will
enable you to golf again, is there any question that the response is going to be
"how soon can I schedule the procedure?" Growth in this investment arena is
limited only by the number of body parts we need to repair, diseases we need to
cure, and bodily malfunctions we wish to set right again.
We expect the Fund will benefit from positions in companies like St. Jude
Medical (STJ) and Zimmer Holdings (ZMH) as this theme plays out.
The boomer angle simply makes the overall medical/health play that much more
compelling. Even absent the specific characteristics of this unusual population
bulge, there is little question that one of the biggest--if not the
biggest--domestic economic issues is going to be our healthcare system. The
theme to be followed overall will be cost reduction and efficiency. Since our
health care problems are problems of cost and delivery of services, those
companies that can create profitable efficiencies, and thus the most value for
consumers and industry players, will very likely prosper.
Companies like United Health (UNH) and Quality Systems (QSII) are examples of
how we would be positioned to benefit from this theme.
Market Caps 12.31.05
(as a percentage of the stock portion of the portfolio)
[The following data represents the pie chart depicted in the printed material.]
Small (under 1.5 billion) 3%
Medium (1.5 - 10 billion) 17.5%
Large (over 10 billion) 79.5%
Fund Continues to be Highly Tax Efficient
Those of you who are taxable shareholders in The Markman Total Return Core Fund
continue to benefit from our capital loss carry forward. For 2005, the third
year in a row, there was no capital gain distribution to declare on your taxes,
making the Fund very tax-efficient. If reasonably normal circumstances prevail,
it is our expectation that this favorable tax situation will continue for at
least another 3 years.
How We Are Managing Trading and Taxes on Our Behalf
The total commission expense of the Fund in 2005 was $58,800. This added less
than 11 basis points (11 one-hundredths of one percent) to the cost of managing
the Fund for you. I believe this represents a very low commission expense
relative to many other funds. It certainly is extremely low given the high
turnover rate in the portfolio. This piece of data is not required to be
disclosed in a fund's annual report and I am discouraged by how difficult many
funds make it for their shareholders to find this information. My professional
opinion is that this is a very relevant piece of information, one that can have
a significant impact on your total costs as a shareholder. It is also my opinion
that when a business makes it difficult to find an important piece of data, it
is usually because they do not feel promotion of that data to be in their best
interest. If you own other mutual funds, I urge you to inquire as to their
trading costs.
As I've noted to you before, high turnover rate is generally frowned on in the
fund world as it tends to lead to significantly higher expenses for
shareholders. However, because we have entered into no costly soft-dollar
brokerage agreements, we have been able to negotiate trade executions at a low
cost that averages about one third of a cent per share.
Keeping taxes to a minimum
While the primary motivation behind every trade is to maximize return and
minimize risk, I also manage the portfolio with a fiduciary's eye toward
minimizing taxes. This has not been the case for many other fund investors.
After a brief respite for a couple of years, this year many fund investors in
taxable accounts once again have to confront the unpleasant event of a large
capital gain distribution from their fund. According to the Wall Street
Journal(1) "Many funds are expected to make their largest year-end capital gains
payouts since 2000 this year."
When the Markman Total Return Core Fund was formed at the end of 2002 by merging
the three Markman MultiFunds together, we were able to keep a large tax loss
carry-forward on the books. This tax loss carry-forward can be used to offset
the normal capital gains distributions that the Fund would produce in subsequent
years. Tax laws, however, prevent us from carrying the total amount forward
indefinitely. As we have regularly disclosed in the Notes To Financial
Statements that appear at the end of our Annual and Semi-Annual Reports, a large
amount of these tax loss carry-forward will expire in future years.
Prudent tax management of a portfolio would normally call for holding positions
as long as possible, thus deferring the ultimate tax to be paid on the sale for
as long as possible. In our case, I believe an alternative strategy to be more
tax advantageous to shareholders: Even when I intend to hold a position long
term, I may find it beneficial to sell all or part of the position and buy it
back. At the present time, that gain will be essentially tax free and I will
have established a new, higher cost basis that will help to reduce taxable gains
down the road. To the extent I have tax loss carry forwards that I can use in
this manner, the trading in the Fund may occur at a higher rate than it might
otherwise. Nevertheless, the benefits of reduced taxable gains far exceed the
very minimal costs of trading.
I will attempt to stretch this favorable tax treatment out as far as possible,
and can say with a high degree of assurance that we will continue to have no
taxable capital gain distributions for the next two years.
(1) WSJ online 10/5/05, Tom Herman, Diya Gullapall.
9
Spotlight on:
[PHOTO]
Franklin Resources BEN Apple Computers
More commonly known as Franklin Templeton Investments, Franklin Resources is one
of the largest mutual fund managers in the world. From an investment standpoint,
this industry is somewhat unique in that three of the largest fund
companies--Vanguard, Fidelity, and Capital Research and Management--are private.
Of the publicly-traded major fund managers, I believe Franklin has a combination
of strengths that make it the superior play in this sector.
Franklin's fund mix is, in my opinion, among the best of the public managers.
About 60% of their assets are in equity funds, with the remaining in fixed
income, hybrid, and money market vehicles. With their purchase a few years ago
of the Templeton Group of funds, Franklin, which had been known for its strong
bond and domestic value line-up, gained a strong presence in the international
fund arena. International funds, with their generally higher management fees,
can be a very profitable slice of the investment manager's business. In recent
years more dollars have gravitated to international funds.
Still, as most U.S. investors are under-weighted in International funds, I see
that trend not only continuing, but accelerating.
Franklin's broad mix of fund offerings, from California Municipal bonds to
Russian growth funds, gives it a more stable growth footprint than some other
fund complexes. A broad base like this has enabled the company to avoid the
boom/bust dynamic of fund groups like Janus that had hitched their star to a
narrower product mix. Since no one really knows what investors' favorite flavor
of the month will be in the future, it appears to me that Franklin is
l have participation in whatever it is.
In addition, Franklin is unique among the largest public fund managers in that
its primary distribution channel (over 75% of sales) is through brokers. This
helps it to achieve more consistent client inflows and greater 'stickiness' of
assets than funds that are dependent on the no load, direct-to-investor model.
[PHOTO]
This has got to be the most astonishing business transformation in our
lifetimes. Left for dead--or worse--irrelevant just three years ago, Apple now
finds itself at the center of revolutionary developments in three
industries--computers, music, and video. Of course, you all have read countless
articles about the ipod, the mini, the shuffle, and the nano. In the span of two
years, by virtue of superior design and magnificently created 'cool' factor,
these devices have captured some 80% of a market that many thought would be a
fight to the death with major players such as Sony, Microsoft, and Samsung. In
the process they have completely changed the paradigm of how media can be priced
and delivered to consumers.
Yet this would all still merely be a fascinating product line story and not
necessarily a great investment were it not for how Apple has managed to make
their products the de facto standard for this new paradigm and leveraged their
new found cachet into growth in their core computer area.
Much has been made of the 'halo' effect. This refers to the hoped for dynamic
where a customer buys an ipod as a first time Apple customer and likes the
'Apple experience' so much he purchases his next computer from
10
[PHOTO]
AAPL
Apple. There is already evidence that this is happening and, given the huge
number of consumer becoming newly introduced to Apple through the ipod line, the
potential for growth is truly exciting.
The halo effect is being brilliantly cultivated by the opening of their Apple
Stores. Millions of potential computer buyers enter these gorgeous stores on
their way to buy an ipod and are seeing, feeling, and actually able to 'test
drive' Apple computer products that they would normally have never come into
contact with. This is a very powerful experience.
Apple's earnings growth, and the rate at which they are introducing new and
transformational product, have left most Wall Street analysts gasping in
amazement. Charting new territory, as they have, does have its downside: the
stock will be subject to above average volatility. Apple bulls and Apple bears
regularly slug it out and sentiment swings wildly sometime from "Jobs is God" to
"Apple has blown it again." But that's OK. I intend to hold Apple long term as a
core holding; but by actively adding to or decreasing our position as the winds
blow to and fro, I hope to take advantage of this volatility and maximize our
results.
[PHOTO]
Oil Service HOLDRs OIH
The Oil Service HOLDRs (OIH) is an exchange traded fund (ETF) that holds a
basket of companies involved in the oil drilling and service industry. It is one
of the more concentrated ETFs with the top ten holdings representing almost 80%
of the portfolio. Top names in the Oil Service HOLDRs you may be familiar with
are Halliburton, Schlumberger, Transocean and Baker Hughes.
As I noted earlier in this report, over the past couple of decades, the major
oil companies, in the belief that prices would remain low, mistakenly
underinvested in exploration and development. With the new reality of higher oil
prices, however, the major integrated oil companies can now easily justify
spending dollars--not just to buy other companies' reserves as in the past--but
to actually go out and find new reserves. Adding to this imperative (rightly or
wrongly) is the glare of Congress, ready to impose windfall profits taxes on
greedy oil companies that don't seem to be working too hard to develop new
resources. Given that the majors are awash with cash, the way is clear for large
spending increases. Since only a small fraction of the money that, say, an Exxon
Mobil will spend on exploration is spent internally, we believe that any
increased dollars thrown this way will directly benefit the companies in the
broad oil service sector.
These companies tend to be very capital intensive and carry relatively large
amounts of debt. Because of this, bad times can be very bad, and good times can
be excitingly leveraged to the upside. Though the upside nature of this cycle
may appear obvious, many observers have clung to the belief that prices could be
ready to plummet at any time. Thus, these stocks are relatively under owned on
Wall Street and valuations in this sector have lagged behind the reality of the
profits they are making.
No single company in this sector that mirrors all the ways the industry needs to
expand: some are land-based, others are off-shore oriented. Some are driven by
international oil prices, others by domestic natural gas prices. Rather than
attempting to guess the single best company for any moment in time, owning this
representative basket offers us the safest and surest way to catch the major
move of this wave.
11
PORTFOLIO OF INVESTMENTS December 31, 2005
Shares MarketValue
COMMON STOCKS 86.0%
HEALTH CARE/MEDICAL 18.1%
25,000 UnitedHealth Group, Inc. $ 1,553,500
23,000 Zimmer Holdings, Inc.* 1,551,120
30,000 St. Jude Medical, Inc.* 1,506,000
25,000 Johnson & Johnson 1,502,500
25,000 McKesson Corp. 1,289,750
20,000 Quest Diagnostics, Inc. 1,029,600
10,000 Express Scripts, Inc.* 838,000
14,000 Caremark Rx* 725,060
$ 9,995,530
REAL ESTATE INVESTMENT TRUST 13.4%
22,000 Vornado Realty Trust $ 1,836,340
36,500 Rayonier, Inc. 1,454,525
25,000 The Mills Corporation 1,048,500
23,000 New Century Financial Corp. 829,610
22,000 LaSalle Hotel Properties 807,840
10,000 SL Green Realty Corp. 763,900
8,000 Alexandria Real Estate Equities, Inc. 644,000
$ 7,384,715
FINANCIAL 9.3%
4,000 The Chicago Mercantile Exchange $ 1,469,960
14,000 Franklin Resources, Inc. 1,316,140
15,000 Capital One Financial Corporation 1,296,000
50,000 E*TRADE Group, Inc.* 1,043,000
$ 5,125,100
INTERNET COMMERCE 6.8%
3,500 Google Inc. - Class A* $ 1,452,010
30,000 eBay, Inc.* 1,297,500
11,000 Getty Images, Inc.* 981,970
$ 3,731,480
TRANSPORTATION & DELIVERY 5.9%
17,000 FedEx Corporation $ 1,757,630
33,000 Norfolk Southern Corporation 1,479,390
$ 3,237,020
ENERGY/NATURAL RESOURCES 5.5%
11,000 Oil Service HOLDRs Trust $ 1,418,450
10,000 Peabody Energy Corporation 824,200
15,000 Valero Energy Corporation 774,000
$ 3,016,650
RETAIL 4.8%
49,000 Starbucks Corporation* $ 1,470,490
27,000 Chico's FAS, Inc.* 1,186,110
$ 2,656,600
CONSUMER ELECTRONICS 4.3%
20,000 Apple Computer, Inc.* $ 1,437,800
40,000 Motorola, Inc. 903,600
$ 2,341,400
LEISURE 4.0%
46,000 McDonald's $ 1,551,120
15,000 Royal Caribbean Cruises Ltd. 675,900
$ 2,227,020
HOMEBUILDERS/REAL ESTATE DEVELOPMENT 4.0%
15,000 The St. Joe Company $ 1,008,300
18,000 Toll Brothers, Inc.* 623,520
15,000 Pulte Homes, Inc. 590,400
$ 2,222,220
CONSUMER SERVICES 2.8%
27,000 Procter & Gamble Co. $ 1,562,760
AIRCRAFT 2.5%
20,000 Boeing Company* $ 1,404,800
METAL MINING 2.0%
20,000 Freeport-McMoRan Copper
& Gold, Inc.--Class B $ 1,076,000
MEDIA 1.5%
30,000 XM Satellite Radio Holdings, Inc.* $ 818,400
SOFTWARE & SERVICES 1.1%
35,000 Symantec Corporation* $ 612,500
TOTAL COMMON STOCKS $ 47,412,195
MONEY MARKET FUNDS 6.3%
3,470,265 5/3 Prime Money Market Fund $ 3,470,265
INTERNATIONAL STOCK FUNDS 5.1%
35,000 India Fund, Inc.* $ 1,390,550
105,000 iShares MSCI Japan Index Fund 1,417,500
$ 2,808,050
BOND FUNDS 2.2%
107,354 PIMCO Emerging Markets
Bond Fund--INST Class $ 1,198,074
TOTAL INVESTMENT SECURITIES 99.6% $ 54,888,584
(Cost $49,547,486)
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4% 226,573
NET ASSETS 100.0% $ 55,115,157
* Non-income producing security.
See accompanying notes to financial statements.
12
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2005
- --------------------------------------------------------------------------------
ASSETS
Investment securities:
At acquisition cost $ 49,547,486
============
At market value $ 54,888,584
Dividends receivable 231,145
Receivable for capital shares sold 155,743
Other assets 17,376
------------
TOTAL ASSETS 55,292,848
------------
LIABILITIES
Income distributions payable 5,841
Payable for capital shares redeemed 69,932
Payable to Adviser 40,475
Payable to other affiliates 12,001
Payable to Trustees 1,603
Other accrued expenses and liabilities 47,839
------------
TOTAL LIABILITIES 177,691
------------
NET ASSETS $ 55,115,157
Net assets consist of:
Paid-in capital $ 93,385,517
Undistributed net investment income 7,897
Accumulated net realized losses
from security transactions (43,619,355)
Net unrealized appreciation on investments 5,341,098
------------
NET ASSETS $ 55,115,157
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) 5,011,869
============
Net asset value, offering price and
redemption price per share $ 11.00
============
See accompanying notes to financial statements.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2005
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (Net of withholding taxes of $1,754) $ 1,142,129
------------
EXPENSES
Investment advisory fees 456,924
Professional fees 68,000
Compliance fees and expenses 59,945
Administration fees 50,000
Sub transfer agent fees 50,000
Accounting services fees 30,000
Transfer agent fees 30,000
Custodian fees 29,999
Shareholder report costs 28,000
Registration fees 26,320
Postage and supplies 21,499
Trustees fees and expenses 18,000
Other expenses 14,435
------------
TOTAL EXPENSES 883,122
------------
NET INVESTMENT INCOME 259,007
------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions 7,623,834
Net change in unrealized appreciation/depreciation
on investments (3,883,316)
------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 3,740,518
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,999,525
============
See accompanying notes to financial statements.
13
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended For the Year Ended
December 31, 2005 December 31, 2004
FROM OPERATIONS
Net investment income $ 259,007 $ 414,248
Net realized gains from security transactions 7,623,834 12,216,594
Net change in unrealized appreciation/depreciation on investments (3,883,316) (4,815,559)
------------ ------------
Net increase in net assets from operations 3,999,525 7,815,283
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (266,678) (414,247)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 4,058,376 5,988,905
Net asset value of shares issued in
reinvestment of distributions to shareholders 260,837 405,838
Payments for shares redeemed (13,068,413) (13,277,933)
------------ ------------
Net decrease in net assets from capital share transactions (8,749,200) (6,883,190)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (5,016,353) 517,846
NET ASSETS
Beginning of year 60,131,510 59,613,664
------------ ------------
End of year $ 55,115,157 $ 60,131,510
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME $ 7,897 $ 7,686
============ ============
CAPITAL SHARE ACTIVITY
Sold 391,401 655,480
Reinvested 23,712 39,633
Redeemed (1,275,013) (1,434,730)
------------ ------------
Net decrease in shares outstanding (859,900) (739,617)
Shares outstanding, beginning of year 5,871,769 6,611,386
------------ ------------
Shares outstanding, end of year 5,011,869 5,871,769
============ ============
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,
2005 2004 2003 2002 2001
Net asset value at beginning of year $ 10.24 $ 9.02 $ 6.30 $ 8.69 $ 11.67
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income 0.05 0.07 0.08 0.18 0.24
Net realized and unrealized gains (losses)
on investments 0.76 1.22 2.72 (2.40) (2.98)
---------- ---------- ---------- ---------- ----------
Total from investment operations 0.81 1.29 2.80 (2.22) (2.74)
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.05) (0.07) (0.08) (0.17) (0.24)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year $ 11.00 $ 10.24 $ 9.02 $ 6.30 $ 8.69
========== ========== ========== ========== ==========
Total return 7.94% 14.31% 44.40% (25.63%) (23.54%)
========== ========== ========== ========== ==========
Net assets at end of year (000s) $ 55,115 $ 60,132 $ 59,614 $ 52,296 $ 37,546
========== ========== ========== ========== ==========
Ratio of net expenses to average net assets 1.58% 1.44% 1.50% 0.96% 0.95%
Ratio of net investment income to average net assets 0.46% 0.71% 0.97% 1.89% 2.32%
Portfolio turnover rate 658% 472% 228% 145%(a) 162%
(a) This calculation does not include securities acquired in the acquisitions
(see Note 4).
See accompanying notes to financial statements.
14
NOTES TO FINANCIAL STATEMENTS December 31, 2005
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 Core Fund (the Fund) (formerly the Markman Total Return
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 Fund. The performance and
accounting history of the Markman Moderate Allocation Portfolio is being assumed
by the Fund. The total returns of the Fund are therefore those of the Markman
Moderate Allocation Portfolio for periods prior to December 30, 2002.
The Fund seeks maximum total return with reduced risk by investing in individual
securities, open-end mutual funds, closed-end funds and exchange traded funds.
The Fund seeks to minimize risk through careful allocation among asset classes,
security size, 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 Fund
invests are valued at their respective net asset values as reported by the
underlying funds. Securities for which market quotations are not readily
available, or are unreliable, 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 Fund 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 Fund records distributions of short-term
capital gains made by mutual funds in which the Fund invests as dividend income
and long-term capital gains made by mutual funds in which the Fund invests as
realized capital 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 U.S.
generally accepted accounting principles (GAAP) 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 Fund's policy to continue 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 Fund so qualifies and distributes at least 90% of its taxable net income,
the Fund (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 Fund'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 following information is computed on a tax basis as of December 31, 2005:
- --------------------------------------------------------------------------------
Tax cost of portfolio investments $ 50,333,680
------------
Gross unrealized appreciation on investments $ 5,800,010
Gross unrealized depreciation on investments (1,245,106)
------------
Net unrealized appreciation on investments 4,554,904
Capital loss carryforward (42,819,423)
Other temporary differences (5,841)
------------
Accumulated deficit $(38,270,360)
- --------------------------------------------------------------------------------
During the year ended December 31, 2005, the Fund utilized $7,616,247 of capital
loss carryforwards. As of December 31, 2005, the Fund had a net capital loss
carryforward of $42,819,423 of which $10,901,646 will expire in 2008,
$15,969,227 will expire in 2009 and $15,948,550 will expire in 2010. To the
extent future capital gains are offset by capital loss 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 in 2002, 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 Fund for the years ended December
31, 2005 and 2004 was as follows:
- --------------------------------------------------------------------------------
2005 2004
From ordinary Income $ 266,678 $ 414,247
- --------------------------------------------------------------------------------
Certain reclassifications, the result of permanent differences between financial
statement and income tax reporting requirements have been made to the components
of capital. Reclassi-fications result primarily from the difference in the tax
treatment of income received from REIT securities and distributions in excess of
net investment income. These reclassifications have no impact on the net assets
or net asset value per share of the Fund and are designed to present the Fund's
capital accounts on a tax basis.
15
For the year ended December 31, 2005, the Fund made the following
reclassification:
- --------------------------------------------------------------------------------
Undistributed
Paid-in Net Investment Realized
Capital Income Capital Gains
($157,263) $7,882 $149,381
- --------------------------------------------------------------------------------
2. Investment Transactions
During the year ended December 31, 2005, the cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments and government
securities, amounted to $365,694,689 and $377,048,862, 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 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 Fund's investments are managed by the Adviser pursuant to the terms of an
Investment Management Agreement. Effective May 1, 2005, the Fund pays the
Adviser a fee (Total Fee) composed of: (1) a base fee, calculated daily and paid
monthly, at an annual rate of 0.85% of the Fund's average daily net assets (the
Base Fee), and (2) a Performance Fee Adjustment that will add to or subtract
from the Base Fee depending on the performance of the Fund in relation to the
investment performance of the S&P 500 Index (the "Index"), the Fund's benchmark
index, for the preceding twelve month period (the "performance fee adjustment").
The Base Fee will be decreased in a series of breakpoints as the total assets
under management for the Fund increase. The break points, and the corresponding
Base Fee are as follows:
- ----------------------------------------------------
$0 - $200 million 0.85%
- ----------------------------------------------------
Next $150 million 0.80%
(on assets from $200 - $350 million)
- ----------------------------------------------------
Next $150 million 0.75%
(on assets from $350 - $500 million)
- ----------------------------------------------------
Next $150 million 0.70%
(on assets from $500 - $650 million)
- ----------------------------------------------------
Next $150 million 0.65%
(on assets from $650 - $800 million)
- ----------------------------------------------------
All additional dollars 0.60%
(on assets over $800 million)
- ----------------------------------------------------
The maximum yearly Performance Fee Adjustment would be 10 basis points, or
one-tenth of a percent, up or down. The Performance Fee Adjustment will not be
applied until the agreement has been in effect for the 12 months ending April
30, 2006 (the "Initial Period"). For the Initial Period, the Adviser will
receive only the Base Fee. The Performance Fee Adjustment will be made at the
end of each calendar month, after the Initial Period, based on the performance
of the Fund relative to the Index for the preceding twelve months, to determine
the Total Fee payable for that month.
Prior to May 1, 2005, the Fund paid 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 Fund.
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 Fund. IFS coordinates the preparation of tax
returns for the Fund, reports to shareholders of the Fund, 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 Fund'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 Fund. For the performance of these services, the Fund pays IFS a monthly
base administrative fee, an asset-based accounting fee, and a transfer agent fee
based on the number of shareholder accounts. In addition, the Fund pays
out-of-pocket expenses including, but not limited to, postage and supplies.
COMPLIANCE SERVICES
The Trust has contracted with the Adviser to provide the Chief Compliance
Officer to the Trust, subject to approval by the board of trustees. The Chief
Compliance Officer and his or her designees will perform the duties and
responsibilities in accordance with Rule 38a-1 under the Investment Company Act
of 1940, as amended. The Chief Compliance Officer will, among other things,
oversee an annual review of the policies and procedures of the Trust and its
service providers and will provide a summary report of his or her findings to
the Board of Trustees. The Chief Compliance Officer's compensation will be paid
by the Adviser and the Trust will reimburse the Adviser for such costs.
In addition, the Trust has contracted with IFS to provide certain compliance
services on behalf of the Trust. Subject to the direction of the Trustees of the
Trust, IFS developed and assisted in implementing a compliance program for IFS
on behalf of the Fund and; provides administrative support services to the
Fund's Compliance Program and Chief Compliance Officer.
4. Commitments and Contingencies
The Fund indemnifies the Trust's officers and Trustees for certain liabilities
that might arise from their performance of their duties to the Fund.
Additionally, in the normal course of business, the Fund enters into contracts
that contain a variety of representations and warranties and which provide
general indemnifications. The Fund's maximum exposure under these arrangements
is unknown, as this would involve future claims that may be made against the
Fund that have not yet occurred. However, based on experience, the Fund expects
the risk of loss to be remote.
16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees 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 Core Fund (the
"Fund"), formerly the Markman Total Return Portfolio, a series of the Markman
MultiFund Trust, as of December 31, 2005, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the four 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 the year 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 the standards of the Public Company
Accounting Oversight Board (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.
We were not engaged to perform an audit of the Fund's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2005, by correspondence with the
custodian. 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 Core Fund as of December 31, 2005, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the four years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young, LLP
Cincinnati, Ohio
January 24, 2006
17
ADDITIONAL NOTES (Unaudited)
DIVIDENDS RECEIVED DEDUCTION
For corporate shareholders, 100% of the total ordinary income paid during the
current fiscal year ended December 31, 2005, qualifies for the corporate
dividends received deduction.
PROXY VOTING GUIDELINES
The Adviser is responsible for exercising the voting rights associated with the
securities purchased and held by the Fund. A description of the policies and
procedures the Adviser uses in fulfilling this responsibility and information
regarding how those proxies were voted during the twelve month period ended June
30 are available without charge, upon request, by calling 1-952-920-4848. They
are also available on the Securities and Exchange Commission's website at
http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The Trust files a complete listing of portfolio holdings as of the end of the
first and third quarters of each fiscal year on Form N-Q. The complete listing
(i) is available on the Commission's website; (ii) may be reviewed and copied at
the Commission's Public Reference Room in Washington, DC; and (iii) will be made
available to shareholders upon request by calling 1-952-920-4848. Information on
the operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
SCHEDULE OF SHAREHOLDER EXPENSES
As a shareholder of the Fund, you incur ongoing costs, including investment
advisory fees and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (July 1, 2005 through December 31, 2005).
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six
Months Ended December 31, 2005" to estimate the expenses you paid on your
account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Net Expense Ratio Beginning Ending Expenses Paid
Annualized Account Value Account Value Six Months Ended
December 31, 2005 July 1, 2005 December 31, 2005 December 31, 2005*
Markman Total Return Core Fund
Actual 1.58% $ 1,000.00 $ 1,048.70 $ 8.16
................................................................................
Hypothetical 1.58% $ 1,000.00 $ 1,017.24 $ 8.03
................................................................................
* Expenses are equal to the Fund's annualized expense ratio, multiplied by
the average account value over the period, multiplied by [number of days
in most recent fiscal half-year/365] (to reflect the one-half year
period).
18
MANAGEMENT OF THE TRUST (Unaudited)
Listed in below are the Trustees and principal 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
Name/Address/Age Trust Length of Time Served During Last 5 yrs Trustee Fund 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: 54
(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 Fund.
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
Name/Address/Age Trust Length of Time Served During Last 5 yrs Trustee Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES:
Susan Gale Levy Trustee Since Inception Real Estate Advisor, 1 N/A
6600 France Ave. South Edina Realty.
Edina, MN 55435
Age: 53
- ------------------------------------------------------------------------------------------------------------------------------
Melinda S. Machones Trustee Since Inception Director of Technology 1 St. Luke's
6600 France Ave. South and Strategy, Duluth Hospital;
Edina, MN 55435 New Tribune; Self-employed St. Luke's
Age: 51 management and technology Foundation;
consultant; Director of Marshall
Information Technologies, School
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: 55
(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(1) 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 Chief
Compliance
Age: 54 Officer Since October 2004
- ------------------------------------------------------------------------------------------------------------------------------
The Statement of Additional Information contains additional information about
the Trustees and is available without charge upon request by calling
1-800-707-2771.
Authorized for distribution only if preceded or accompanied by a current
prospectus.
Investment Adviser Shareholder Services
Markman Capital Management, Inc. c/o Integrated Fund Services, Inc.
6600 France Avenue South P.O. Box 5354
Minneapolis, Minnesota 55435 Cincinnati, Ohio 54201-5354
Telephone: 952-920-4848 Toll-free: 800-707-2771
Toll-free: 800-395-4848
[SIDE BAR]
Stay Informed
Check for net asset values and more.Portfolio/Strategy Updates online
www.markman.com
Call for Bob Markman's weekly market overview and portfolio activity report
800-975-5463
For up-to-the-minute net asset values and account values, all the PriceLine
800-536-8679
For a prospectus, application forms, assistance in completing an application, or
general administrative questions, call our HelpLine
800-707-2771
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
19
[BACK COVER]
Markman
Total Return
Core Fund
- -----------------------
For investors too smart
to do it themselves (R)
6600 France Avenue South
Minneapolis, Minnesota 55435
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 its principal executive officer and principal
financial officer. During the period covered by this report, no amendments were
made to the provisions of the code of ethics, nor did the registrant grant any
waivers, including any implicit waivers, from the provisions of the code of
ethics.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that the registrant has at
least one audit committee financial expert serving on its audit committee. Mr.
Michael J. Monahan is the registrant's "audit committee financial expert" and is
"independent" (as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. Audit fees totaled $23,000 for the December 31, 2005 fiscal year
and $20,200 for the December 31, 2004 fiscal year, including fees associated
with the annual audit and filings of the registrant's Form N-1A and Form N-SAR.
(b) Audit-Related Fees. There were no audit-related fees for the December 31,
2005 or December 31, 2004 fiscal years.
(c) Tax Fees. Tax fees totaled $2,225 for the December 31, 2005 fiscal year and
$2,100 for the December 31, 2004 fiscal year and consisted of fees for tax
compliance services during both years.
(d) All Other Fees. There were no other fees for the December 31, 2005 or
December 31, 2004 fiscal years.
(e) (1) Audit Committee Pre-Approval Policies. The Audit Committee's
pre-approval policies describe the types of audit, audit-related, tax and other
services that may receive the general pre-approval of the Audit Committee. The
pre-approval policies provide that annual audit service fees, tax services not
specifically granted pre-approval, services exceeding pre-approved cost levels
and other services that have not received general pre-approval will be subject
to specific pre-approval by the Audit Committee. The pre-approval policies
further provide that the Committee may grant general pre-approval to other audit
services (statutory audits and services associated with SEC registration
statements, periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings), audit-related
services (accounting consultations related to accounting, financial reporting or
disclosure matters not classified as "audit services," assistance with
understanding and implementing new accounting and financial reporting guidance
from rulemaking authorities, agreed-upon or expanded audit procedures related to
accounting and/or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters and assistance with
internal control reporting requirements under Form N-SAR and Form N-CSR), tax
services that have historically been provided by the auditor that the Committee
believes would not impair the independence of the auditor and are consistent
with the SEC's rules on auditor independence and permissible non-audit services
classified as "all other services" that are routine and recurring services.
(e)(2) All services described in paragraphs (b) through (d) of Item 4 were
approved by the Audit Committee.
(f) Not applicable
(g) The aggregate non-audit fees for services to the registrant, its investment
adviser and any entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant were $2,225 for the
fiscal year ended December 31, 2005 and $2,100 for the fiscal year ended
December 31, 2004.
(h) Not applicable
Item 5. Audit Committee of Listed Registrants.
Not applicable
Item 6. Schedule of Investments.
The Schedule of Investments in securities of unaffiliated issuers is included in
the Annual Report.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant does not have procedures by which shareholders may recommend
nominees to its Board of Trustees.
Item 11. 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), as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer have
concluded that the registrant's disclosure controls and procedures are
effective.
(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 12. Exhibits.
(a)(1) Code of Ethics for Senior Financial Officers is filed herewith
(a)(2) Certifications required by Item 12(a) of Form N-CSR are filed herewith.
(a)(3) Not applicable.
(b) Certification required by Item 12(b) of Form N-CSR is 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 1, 2006
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 1, 2006
By (Signature and Title)
/s/ Judith E. Fansler
- ------------------------------------
Judith E. Fansler
Treasurer and Chief Financial Officer
Date: March 1, 2006