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: 06/30/07
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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
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
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burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
Item 1. Reports to Stockholders.
The Markman Core Growth Fund Semiannual Report
[Markman Core Growth Fund logo]
A Value-Added
Large Growth Strategy
06.30.2007
Semi-Annual Report
(unaudited)
Dear Fellow Shareholders,
Mid-year finds all of our relevant indices and comparatives in an unusually
tight bunch. The S&P 500 Index, the Russell 1000 Growth Index, and both the
Morningstar and Lipper Large Cap Growth Fund Averages all reached June 30 within
a fraction of a percent of each other. As you can see in the accompanying table,
the no-load performance of the Markman Core Growth Fund placed us right in the
middle of this pack, a fraction above the S&P 500 Index and the Lipper Large Cap
Growth Fund average and a fraction below the Russell 1000 Growth Index and the
Morningstar Large Cap Growth Fund average.
As is also evident from the return stats, we continue to significantly outpace
all of our relevant comparisons over the trailing one, three and five year
periods. The persistence of our long-term return advantage since the formation
of the Core Growth Fund in 2002 from the merged Markman fund of funds is
attributable to two things: luck, and our value added investment process. I plan
to take some time later in this report to share in greater depth how our
investment process works.
Oceans of Cash
By mid-year, many veteran market observers were left scratching their heads,
wondering how the stock market managed to pull off the best first half
performance since 2003. (It's true: for the past four years almost all of the
annual gains have come in the last four months of each year.) Sober assessments
certainly seemed to be prudent. We were, after all, looking at a stock market
that, entering its fifth year, was no longer young and sassy. Worse, this aging
bull was facing some significant threats: oil prices once again grinding up to
$70 per barrel, with no real top in sight; a post bubble house-of-pain housing
market; sub-prime meltdowns that threatened to create a credit crunch; interest
rates rising; and irresponsible threats from economically clueless congressmen
of both parties on the protectionism and regulatory fronts. What more invitation
does a bear need?
The RUSSELL 1000 GROWTH INDEX measures the performance of those stocks in the
Russell 1000 with higher price-to-book ratios and higher relative forecasted
growth rates. An investment cannot be made directly in the index.
Morningstar Large Cap Growth
Funds that invest in big U.S. companies (stocks in the top 70% of the
capitalization of the U.S. market) that are projected to grow faster than other
large cap stocks. Growth is defined based on fast or high growth rates for
earnings, sales, book value and cash flow, and high valuation based on price
ratios and low dividend yields. Most of these portfolios focus on companies in
rapidly growing industries. (Does not reflect sales load.)
Lipper Large Cap Growth
Funds that by portfolio practice invest at least 75% of their equity assets in
companies with a market capitalization greater than 300% of the median market
cap of the S&P Mid-Cap 400 Index. These funds normally invest in companies with
earnings expected to grow significantly faster than the earnings of the stocks
represented in a major unmanaged stock index and will have above average
valuation ratios compared to the U.S. diversified large cap funds universe.
(Does not reflect sales load.)
Past performance is not a guarantee of future results.
First Half of 2007 Performance Comparisons Against
Market Index and Fund Peers
[BAR CHART]
MTRPX Class I 7.71%
MARKX Class A 7.79%
MARKX with maximum 5.5% sales load 1.86%*
RUSSEL 1000 Growth 8.13%
Morningstar LCG 8.06%
Lipper LCG 7.59%
S&P 500 6.96%
* Since Inception 05/01/07
Category Rankings Class I Shares
One Year Three Year Five Year
Morningstar 13th percentile 8th percentile 3rd percentile
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Lipper 8th percentile 2nd percentile 1st percentile
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1
Yet after a stomach churning late winter swoon (precipitated by a perceived
'mini-crash' in the Chinese stock market) global markets went on a spring buying
binge that left even many bulls awed. While the bearish camp insisted on seeing
this reaction as classic 'whistling past the graveyard' behavior, I think the
continued rally is entirely rational. In my view, it is what results when
reasonable stock valuations meet a veritable tsunami of global liquidity.
In our last Annual Report I touched on one element of the global liquidity story
in my discussion of 'The Incredible Shrinking Stock Market.' The increased
reduction of shares that I noted had occurred over the past couple of years has
not only continued but in fact, has accelerated in 2007. Takeovers and buyouts
in the $20, $30, even $40 billion range are becoming familiar stories. But, as I
said, that is just one element of a larger picture.
Recycling, Wall Street Style
Think for a moment about the two biggest global economic stories: increased oil
prices and the growth of China/India. I'd wager that most of the mainstream
media reporting on these issues frame these stories in problem terms for the
U.S. economy: Higher oil prices obviously create pain at the pump and put
pressure on corporate profit margins; and our increasing trade deficit with the
fast growing Chinese economy is leading to call for protectionist legislation
from Congress. I'll not deny the downside reality at play here. But if we can
free ourselves from the anchored perspective that the media remains stuck in, we
might see that these two 'problems' are actually global wealth multipliers, and
are just what is keeping the economy and markets humming much longer than
expected.
Take oil. At $70 per barrel, enormous wealth is being amassed by a small group
of fortunate countries. While a disgraceful amount of that wealth is being
dissipated by corrupt rulers, the cash flow is so large that even spendthrift
government officials are finding it impossible to throw it away fast enough. Oil
producers from Norway to the United Arab Emirates are so flush with cash that
they have more than enough official government reserves. They are now creating
and adding to what are known as 'sovereign wealth funds.' (Russia, which was
nearly bankrupt a decade ago for Pete's sake, now has over $350 billion in
reserves--so much that they, too, are looking to create a special 'Future
Generations Fund.') Unlike official government reserves, which traditionally are
invested largely in U.S. and European government bonds, these sovereign wealth
funds look to enhance returns for their country by investing in stocks and real
estate.
The size of these funds is enormous. It is estimated that they may currently
hold as much as $2.5 trillion in assets and could swell to a staggering $12
trillion by 2015. Compare that to the current $5 trillion held globally in
official government reserves, and you get the idea--we may well be entering new,
uncharted money flow territory.
Given the nature of the source of these dollars, the likelihood is that the bulk
of the flows will be directed to purchases of large, blue chip stocks and
'trophy' real estate. As this story unfolds, you should not be surprised if
these asset classes move higher in price--and sustain those gains for longer
periods--than one might traditionally expect.
Portfolio Data
Morningstar Category: Large Cap Growth
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Lipper Category: Large Cap Growth
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Five Year Beta vs. Russell 1000 Growth Index: .86
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Five Year Alpha vs. Russell 1000 Growth Index: 6.16
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Average Market Cap: $46.34 billion
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Morningstar Star Ratings (load waived)
o Three Years Five Stars (out of 1455 funds) *****
o Five Years Five Stars (out of 1168 funds) *****
o Overall Four Stars (out of 1455 funds) ****
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 the effects of
sales charges, loads, and redemption fees), placing more emphasis on downward
variations and rewarding consistent performance.
The top 10 percent in a category receive five stars, the next 22.5 percent
receive four stars, and the next 35 percent receive three stars, the next 22.5
percent receive two stars and the bottom 10 percent receive one star. (Each
share class is counted as a fraction of one fund within the scale and rated
separately, which may cause slight variation in the distribution percentages.)
Morningstar proprietary ratings on U.S.-domiciled funds reflect historical
risk-adjusted performance, and are subject to change every month. They are
derived from a weighted average of the performance figures associated with its
three-, five- and ten-year (if applicable) Morningstar Rating metrics.
2
Selling Pencils to China
There is more to the story, though, than simple liquidity. We've all heard some
variation on the old joke about how a guy plans to get rich selling pencils for
a penny a piece; "If I can sell just one to everyone in China....." Indeed, one
billion new consumers is no joke; and when you add in India's billion, you can't
help but remember Senator Everett Dirksen's famous quip about government
spending: "A billion dollars here, a billion dollars there, and before you know
it you're talking real money." Today, you can almost hear the corporate chieftan
thinking things like, "A billion consumers here, a billion consumers there, and
before you know it you're talking real sales increases." Of course, of these two
billion souls, most are still desperately poor and register little on the global
economic scale. Still, between these two emerging giants there exists a rapidly
growing middle class whose joint size exceeds the total population of the
European Union or the U.S.
That's one heck of a lot of consumers. Since we've seen that infrastructure
growth is driven by and follows middle class consumer growth (new homes and
apartments built to house new middle class families; roads built to accommodate
the cars sold, etc., etc.) we can expect the Asian boom to include not just
lattes and Levis, but heavy and complex growth elements as well.
As I've noted on numerous occasions, we've never before in history--never-- seen
such a huge and sudden expansion of global economic participation. The closest
example--the post World War Two recoveries of Japan, Great Britain, Germany,
Italy and France--involved populations half the size of those we are speaking of
now. Even so, it helped support a long boom of prosperity that lasted for some
twenty years after 1950 and created the modern economic world. And remember, in
many ways, that the long post war boom was not 'the good old days': hot wars in
Korea and Vietnam were just the bubbling surface manifestations of what was then
an accepted 'long twilight struggle.' We were spending enormous resources, with
no end in sight and no guarantee of victory, in the struggle against communism.
The threat of nuclear devastation was real and never far from most folks
calculations.
Yet with all the political and societal upheaval of the 1950-1970 period, the
lasting economic story was one of how the pie was made larger by the
incorporation of countries--previously devastated by the World War--into the
system of regulated global capitalism. What we have learned from this is that
economic growth is not a zero sum game. We did not become less prosperous
between 1950 and 1970 by virtue of the fact that Germany and Japan recovered and
became more prosperous than ever before. As goods and services are produced and
change hands there is a multiplier effect that actually increases the total
amount of wealth.
As a large cap U.S. growth fund, we find a number of prudent ways to potentially
benefit from this historic global realignment. The wide range of metals and
minerals that feed manufacturing will be supplied by diversified global mining
giants like BHP Billiton, one of our top ten holdings. The machinery to build
all these new roads, bridges, and office towers may be supplied by another top
ten holding, Caterpillar. We are also moving into an expanded era of air travel.
We will be seeing increased travel between far flung spots (what's the flight
time between Abu Dubai and Shanghai?) that cannot be accommodated by car, train
or ship. Additionally, the growth of the emerging Asian middle class means more
consumer based leisure travel. Another of our holdings, Boeing, is uniquely
positioned to benefit from these long term trends.
Mid-Year Check-ups
o TAXES: We are pleased to announce that our projections for 2007 indicate
that there will be no taxable distribution this year.
o TRADING COSTS: We are also pleased to report that the commissions paid by
the Fund to purchase and sell portfolio securities in the first six months
of 2007 were significantly below those paid at this time last year. As of
June 30, 2007 the Fund had paid $24,424 in commissions compared with
$32,234 paid in the first six months of 2006. This represents a 27%
expense reduction.
[PIE CHART]
Small (under 1.5 billion) 4.9%
Mid (1.5-8 billion) 4.0%
Large (over 8 billion) 91.1%
Market Caps 06.30.07
(as a percentage of the stock portion of the portfolio)
Top Ten Holdings
of the Stock Portfolio 06.30.07
Google 6.17%
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Apple 6.14%
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Mastercard 4.96%
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Goldman Sachs 4.91%
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Valero Energy 4.65%
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AT&T 4.57%
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Caterpillar 4.31%
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Sears Holding 4.27%
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BHP Billiton 4.23%
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Oil Service Holdrs 4.12%
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Total in Top Ten 48.33%
3
On a sobering note, we will take care not to confuse a generally positive long
term trend with 'new paradigm kool-aid.' The market physics of greed, fear,
optimism and despair will have not been overturned and it is hard-wired human
nature to drive market valuations and activity to unhealthy and unsustainable
levels. You can count on even seemingly bright investors to always find a way to
mess up a good thing. When those times occur, my expectation--although there is
no guarantee--is that our proactive trading approach will provide the potential
context for us to shift to reduce damage and potentially enhance returns.
"Between the two emerging giants, China and India, there exists a rapidly
growing middle class whose joint size exceeds the total population of the
European Union or the U.S. That's one heck of a lot of consumers."
Top Five Weighted Sectors
Energy/Natural Resources 13.01%
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Financial Services 12.16%
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Telecommunications 11.23%
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Health Care 8.17%
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Leisure 6.88%
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***** A Primer on Our Process:
How We Attempt To Add Value in a Large Cap Growth Portfolio
We believe a fund manager should be able to demonstrate--through results--a good
reason for investors to use a managed strategy over a passive index or ETF
approach. Active management must create regular and ongoing value--what in the
money management industry is referred to as 'alpha'--over these alternatives.
Our process is constructed to provide us with the highest potential to achieve
this performance objective.
The process (what we consider to be the 'strategic foundation') begins with the
identification of what we call Best of Breed companies. Though there are a
number of specific criteria that go into determining a Best of Breed company,
four of the most important characteristics are:
o Unique and durable branding (assuming the company competes in an
industry where branding is important)
o Market segment domination
o A culture that encourages ongoing innovation (through actions and
not just lip service)
o A high degree of 'destiny control.' That is, the ability to dictate
and not just react to events in its space.
Although this list may appear to be benignly simple, you'd be surprised how few
companies actually pass muster when these criteria are rigorously applied. We
also find that by focusing on these main criteria we find ourselves, by default,
left with companies that have both superior financials and management teams.
The second part of the process involves adding a 'tactical overlay' on to the
strategic foundation. For us, this tactical overlay is our willingness and
ability to use proactive trading strategies. In other words, to buy and sell
with a higher degree of frequency than many of our peers.
We have seen that is has the potential to create significant value. Markets will
often over react in the short term, creating pricing inefficiencies that can be
exploited by a nimble investor. Thus, even in quality long term core holdings,
attractive points to increase or decrease position size occur with some
regularity. Our willingness and ability to 'trade around' core positions
increases, in our opinion, the potential for more positive risk/reward outcomes.
The combination of our relatively small size, extremely low cost of trading, and
high liquidity of the large cap stocks we trade, gives us a tactical opening
that many other funds do not have--even if they were emotionally so inclined to
use this process. And that is a good thing. As legendary fund manager Bill
Miller (he's the gentleman who gained renown for beating the S&P 500 fifteen
years in a row) once observed, "If you do what other people do, you'll get the
results other people do." You have not hired us to run a closet index fund that
just hugs the market averages. We will continue to use and refine our unique
process so that as events unfold we continue to have the potential to deliver
significant alpha for the large cap growth portion of your portfolio.
4
Quick Takes on the Top Ten
Google 6.17%
By providing the best online search engine among the 'majors' (Yahoo, MSN, AOL)
Google has become the dominant player in search related advertising, with a
market share of upwards of 70%. And as Google continues to roll out innovative
and free online services, its dominance becomes even greater. Many fear Google's
seemingly lofty $500+ share price. But that price only reflects the fact that
the stock has not split. Valuations are actually very reasonable, if not
downright cheap; its sustainable growth rates are not fully priced into the
stock, giving Google a PEG ratio some 75% lower than its closest competitor,
Yahoo.
Apple 6.14%
With the enormously successful launch of the iPhone, Apple has created another
'game changer' that is already reorienting the world's thinking about portable
computing devices and cell phones. The growth potential this creates both in
Apple's core business and its new products are far greater than many of the old
school, PC-centric Wall Street analysts are willing to credit. Today, and into
the future, it will all be about 'ease of use' in the software interface, and
this is where Apple has an insurmountable lead. I've learned over the years to
trust the consumer instincts of my daughters who maintain that "Once you go Mac,
you never go back."
Mastercard 4.96%
The world's largest public credit card brand. (Visa, though much larger, is
still privately owned, although a Visa IPO is in the works for Fall 2007.) Like
so many of our current holdings, Mastercard is a beneficiary of the current long
boom in global growth. As we contemplate the emergence of a half billion person
middle class in Asia over the next decade, one can see what growth potential
lies in the fees to be earned by the major credit brands.
Goldman Sachs 4.91%
In a world of increasingly large and complex financial activity, it makes sense
to own the gold standard in global investment banking, securities and money
management. Though Goldman has become much more diversified and sheltered from
the kind cyclical buffeting it had experienced in the past, the market is still
applying a low multiple as if the old model were still in place. So in addition
to organic growth, multiple expansion could drive the shares significantly
higher in the years to come. Goldman possesses possibly the best and deepest
management bench in the business as evidenced by the fact that some of the most
respected and successful cabinet officers in the past two decades have been
former Goldman CEO's: Robert Rubin, Treasury Secretary under Bill Clinton and
Henry Paulson, Treasury Secretary under George Bush.
Valero Energy 4.65%
Many debate whether there is an oil shortage. What is unquestionable, though, is
that there is a refining shortage. No new oil refinery has been built in the
U.S. for thirty years, yet demand has grown enormously. This puts Valero, as
North America's largest refiner, in an enviable position with its refineries
operating at full capacity 24/7/365. Valero has also wisely chosen to specialize
in the refining of 'sour crude.' This is oil that is dirtier and more difficult
to refine and this is available to Valero at a significant discount to 'light
sweet crude.' This enables Valero to earn outsize returns that are likely to
persist for some time to come.
AT&T 4.57%
Ma Bell is back! AT&T sports the largest wireless customer base as well as the
largest home internet customer base in the U.S. The significance of this lies in
the opportunities it provides for selling additional services at a scale that
few competitors can match. AT&T's teaming up with Apple as the exclusive U.S.
provider of the new iPhone is an indication of the company's willingness to take
risks and should pay off as customers migrate from competitors in order to buy
the decade's hottest new tech toy.
Caterpillar 4.31%
Another play on global growth. Think mining. Think office and residential
construction from Denver to Dubai. Think infrastructure build out--roads,
bridges, tunnels and dams. As the strongest global brand in this space
Catepillar is playing a central role in the long term global growth story.
Impressively, management has not just scooped up the easy money but has made
aggressive and innovative moves to make the company more diversified and
efficient than in the past. This will help to smooth out earnings and ultimately
create a higher multiple.
Sears Holdings 4.27%
Name notwithstanding, this is not about retail. We believe the stores will
ultimately be seen as just a temporary cash cow. The eventual unlocking of the
true value of this company will be seen in both the real estate the stores sit
on and the capital allocating acumen of company Chairman Eddie Lampert. The
Sears Board has given Lampert carte blanche to invest the company's massive cash
hoard as he sees fit. Many observers, looking at his hedge fund record, consider
Lampert to have the potential to be this generation's Warren Buffet. Recall that
Buffet built his empire from the shell of a struggling textile company
(Berkshire Hathaway). It is not a stretch to think that a skilled investor like
Lampert could not achieve significant results starting with an even more viable
vehicle like Sears.
5
BHP Billiton 4.23%
Producing everything from petroleum to platinum, BHP is the world's largest
mining and minerals company. It has both a widely diversified product base as
well as a broadly geographically diversified customer base, allowing it to
benefit from economic growth and development around the world. As long as the
current global boom continues--and we fully expect it to for some time--BHP
Billiton will continue to generate record profits.
Oil Service Holdrs 4.12%
This concentrated ETF (80% in the top ten holdings) gives broad exposure to a
basket of companies in the oil service and drilling industry. With the reality
of a new era of higher oil prices upon us, the global energy complex will have
an imperative to make up for two lost decades in which exploration for new
resources was significantly curtailed. At current price levels, not only do
increased expenditures in these sectors make economic sense, the major oil
companies face the possibility of legislative penalties if they do not channel
an increased portion of their huge profit toward increasing supply.
PORTFOLIO OF INVESTMENTS June 30, 2007 (Unaudited)
Shares Market Value
COMMON STOCKS 97.6%
ENERGY/NATURAL RESOURCES 13.0%
40,000 Valero Energy Corp. $ 2,954,400
45,000 BHP Billiton Ltd. - ADR 2,688,750
15,000 Oil Service HOLDRS Trust 2,622,750
$ 8,265,900
FINANCIAL 12.2%
19,000 MasterCard, Inc. $ 3,151,530
14,400 The Goldman Sachs Group, Inc. 3,121,200
11,000 Franklin Resources, Inc. 1,457,170
$ 7,729,900
TELECOMMUNICATIONS 11.2%
70,000 AT&T, Inc. $ 2,905,000
23,000 Vimpel-Communications 2,423,280
37,000 Akamai Technologies, Inc* 1,799,680
$ 7,127,960
HEALTH CARE/MEDICAL 8.1%
35,000 Amgen, Inc.* $ 1,935,150
30,000 Cerner Corp.* 1,664,100
12,000 Zimmer Holdings, Inc.* 1,018,680
9,000 Johnson & Johnson 554,580
$ 5,172,510
LEISURE 6.8%
50,000 McDonald's Corp. $ 2,538,000
20,000 Las Vegas Sands Corp.* 1,527,800
6,000 Royal Caribbean Cruises Ltd. 257,880
$ 4,323,680
RETAIL 6.2%
16,000 Sears Holdings Corp.* $ 2,712,000
48,000 Starbucks Corp.* 1,259,520
$ 3,971,520
INTERNET COMMERCE 6.2%
7,500 Google, Inc. - Class A* $ 3,925,350
CONSUMER ELECTRONICS 6.1%
32,000 Apple Computer, Inc.* $ 3,905,280
SOFTWARE & SERVICES 4.5%
45,000 Adobe Systems, Inc.* $ 1,806,750
21,000 Infosys Technologies Ltd. 1,057,980
$ 2,864,730
INDUSTRIAL EQUIPMENT & COMPONENTS 4.3%
35,000 Caterpillar, Inc. $ 2,740,500
AUTOMOTIVE 4.0%
20,000 Toyota Motor Corp. $ 2,517,600
CONSUMER PRODUCTS 3.6%
33,000 Altria Group, Inc. $ 2,314,620
AIRCRAFT 3.6%
24,000 Boeing Co. $ 2,307,840
REAL ESTATE INVESTMENT TRUST 3.5%
20,000 Vornado Realty Trust $ 2,196,800
DEFENSE 2.0%
16,000 General Dynamics Corp. $ 1,251,520
CORRECTIONAL INSTITUTIONS 1.8%
18,000 Corrections Corporation of America* $ 1,135,980
HOMEBUILDERS/REAL ESTATE DEVELOPMENT 0.5%
12,000 Toll Brothers, Inc.* $ 299,760
TOTAL COMMON STOCKS $ 62,051,450
INTERNATIONAL STOCK FUNDS 2.1%
10,000 iShares MSCI Emerging Markets Index $ 1,313,700
MONEY MARKET FUNDS 0.2%
139,907 5/3 Prime Money Market Fund $ 139,907
TOTAL INVESTMENT SECURITIES 99.9% $ 63,505,057
(Cost $54,193,339)
OTHER ASSETS IN EXCESS OF LIABILITIES 0.1% 62,681
NET ASSETS 100.0% $ 63,567,738
* Non-income producing security.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007 (Unaudited)
ASSETS
Investment securities:
At acquisition cost $ 54,193,339
============
At market value $ 63,505,057
Accrued income 47,231
Receivable for securities sold 5,691,040
Receivable for capital shares sold 1,528
Receivable from Adviser 46,705
Other assets 29,529
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TOTAL ASSETS 69,321,090
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LIABILITIES
Payable for securities purchased 5,648,236
Payable for capital shares redeemed 24,688
Payable to Adviser 45,022
Payable to other affiliates 34,621
Payable to Trustees 785
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TOTAL LIABILITIES 5,753,352
------------
NET ASSETS $ 63,567,738
============
Net assets consist of:
Paid-in capital $ 89,090,227
Accumulated net investment loss (170,221)
Accumulated net realized losses
from security transactions (34,663,986)
Net unrealized appreciation on investments 9,311,718
------------
NET ASSETS $ 63,567,738
============
Pricing of Class I Shares
Net assets attributable to Class I shares $ 63,471,391
Shares of beneficial interest outstanding
(unlimited number of shares authorized,
no par value) 4,637,551
Net asset value, offering price and
redemption price per share $ 13.69
Pricing of Class A Shares
Net assets attributable to Class A shares $ 96,347
Shares of beneficial interest outstanding
(unlimited number of shares authorized,
no par value) 7,031
Net asset value, offering price and
redemption price per share $ 13.70
See accompanying notes to financial statements.
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2007(a) (Unaudited)
INVESTMENT INCOME
Dividends $ 253,527
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EXPENSES
Investment advisory fees 251,909
Professional fees 87,187
Compliance fees and expenses 27,500
Administration fees 26,250
Sub transfer agent fees 18,909
Custodian fees 17,776
Shareholder report costs 17,512
Accounting services fees 16,250
Transfer agent fees 15,000
Registration fees 13,908
Postage and supplies 13,283
Trustees fees and expenses 9,987
Distribution fees - Class A 118
Other expenses 32,103
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TOTAL EXPENSES 547,692
Fees Waived (110,378)
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NET EXPENSES 437,314
NET INVESTMENT LOSS (183,787)
-------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from
security transactions 3,436,121
Net change in unrealized appreciation/
depreciation on investments 1,255,514
-------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 4,691,635
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,507,848
=============
(a) Except for Class A, which represents the period from commencement of
operations (May 1, 2007) through June 30, 2007.
See accompanying notes to financial statements.
7
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended
June 30, 2007(a) For the Year Ended
(Unaudited) December 31, 2005
FROM OPERATIONS
Net investment loss $ (183,787) $ (181,283)
Net realized gains from security transactions 3,436,121 5,472,693
Net change in unrealized appreciation/
depreciation on investments 1,255,514 2,715,106
------------ ------------
Net increase in net assets from operations 4,507,848 8,006,516
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS CLASS I
Proceeds from shares sold 8,863,457 4,862,373
Payments for shares redeemed (5,016,235) (12,862,244)
------------ ------------
Net increase (decrease) in net assets from
Class I capital share transactions 3,847,222 (7,999,871)
------------ ------------
CLASS A
Proceeds from shares sold 90,866 --
------------ ------------
TOTAL INCREASE IN NET ASSETS 8,445,936 6,645
NET ASSETS
Beginning of period 55,121,802 55,115,157
------------ ------------
End of period $ 63,567,738 $ 55,121,802
============ ============
ACCUMULATED NET INVESTMENT INCOME (LOSS) $ (170,221) $ 13,566
============ ============
(a) Except for Class A shares, which represents the period from commencement
of operations (May 1, 2007) through June 30, 2007.
FINANCIAL HIGHLIGHTS Selected Per Share Data and Ratios for a Share Outstanding
Throughout Each Period
CLASS I
--------------------------------------------------------------------------------------------
Six Months
Ended Year Ended Year Ended Year Ended Year Ended Year Ended
June 30, December 31, December 31, December 31, December 31, December 31,
2007 2006 2005 2004 2003 2002
(Unaudited)
Net asset value at beginning
of period $ 12.71 $ 11.00 $ 10.24 $ 9.02 $ 6.30 $ 8.69
----------- ------------ ------------ ------------ ------------ -------------
Income (loss) from investment
operations:
Net investment income (loss) (0.04) (0.04) 0.05 0.07 0.08 0.18
Net realized and unrealized
gains (losses) on investments 1.02 1.75 0.76 1.22 2.72 (2.40)
----------- ------------ ------------ ------------ ------------ -------------
Total from investment operations 0.98 1.71 0.81 1.29 2.80 (2.22)
----------- ------------ ------------ ------------ ------------ -------------
Less distributions:
Dividends from net
investment income -- -- (0.05) (0.07) (0.08) (0.17)
----------- ------------ ------------ ------------ ------------ -------------
Net asset value at
end of period $ 13.69 $ 12.71 $ 11.00 $ 10.24 $ 9.02 $ 6.30
=========== ============ ============ ============ ============ =============
Total return 7.71%(b) 15.55% 7.94% 14.31% 44.40% (25.63%)
=========== ============ ============ ============ ============ =============
Net assets at end of
period (000s) $ 63,471 $ 55,122 $ 55,115 $ 60,132 $ 59,614 $ 52,296
=========== ============ ============ ============ ============ =============
Ratio of net expenses to
average net assets 1.43%(c) 1.58% 1.58% 1.44% 1.50% 0.96%
Ratio of net investment
income (loss) to
average net assets (0.60%)(c) (0.33%) 0.46% 0.71% 0.97% 1.89%
Portfolio turnover rate 493%(c) 799% 658% 472% 228% 145%(a)
(a) This calculation does not include securities acquired in connection with
certain acquisitions in 2002.
(b) Not annualized.
(c) Annualized.
See accompanying notes to financial statements.
8
FINANCIAL HIGHLIGHTS Selected Per Share Data and Ratios for a Share Outstanding
Throughout The Period
CLASS A(a)
-------------
Period Ended
June 30, 2007
(Unaudited)
Net asset value at beginning of period $ 13.28
-------------
Income (loss) from investment operations:
Net investment loss (0.01)
Net realized and unrealized gains
on investments 0.43
-------------
Total from investment operations 0.42
-------------
Net asset value at end of period $ 13.70
=============
Total return 3.16%(b)
=============
Net assets at end of period (000s) $ 96
=============
Ratio of net expenses to
average net assets 1.49%(c)
Ratio of net investment income (loss)
to average net assets (1.00%)(c)
Portfolio turnover rate 493%(c)
(a) Represents the period from commencement of operations (May 1, 2007)
through June 30, 2007.
(b) Not annualized.
(c) Annualized.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
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 Core Growth Fund (the Fund). 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 was 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.
Effective May 1, 2007, the Fund is authorized to offer two classes of shares:
Class A shares and Class I shares. Each Class A and Class I share of the Fund
represents identical interests in the Fund's assets and has the same rights,
except that (i) Class A shares have adopted a Distribution Plan pursuant to Rule
12b-1 (Note 3) and (ii) certain other class specific expenses are borne solely
by the class to which such expenses are attributable.
The Fund seeks long-term growth of capital by investing in securities including
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 (stocks, bonds, cash), security size (large cap, mid-cap, small
cap), investment style (growth, value), 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 that 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.
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value sets out a framework for measuring fair value and requires additional
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. The changes to
current generally accepted accounting principles from the application of this
Statement relate to the definition of fair value, the methods used to measure
fair value, and the expanded disclosures about fair value measurements. As of
June 30, 2007, the Fund does not believe the adoption of SFAS No. 157 will
impact the amounts reported in the financial statements, however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements reported on the statement of
changes in net assets for a fiscal period.
9
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 2007 (Unaudited), continued
- --------------------------------------------------------------------------------
Share valuation - The net asset value per share of the Fund is calculated daily
by dividing the total value of assets, minus 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 income 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, 2006:
Tax cost of portfolio investments $ 48,355,672
------------
Gross unrealized appreciation on investments $ 7,650,303
Gross unrealized depreciation on investments (837,168)
------------
Net unrealized appreciation on investments 6,813,135
Capital loss carryforward (36,843,472)
------------
Accumulated deficit $(30,030,337)
================================================================================
During the year ended December 31, 2006, the Fund utilized $5,975,951 of capital
loss carry-forwards. As of December 31, 2006, the Fund had a net capital loss
carryforward of $36,843,472 of which $9,654,340 will expire in 2008, $12,127,416
will expire in 2009 and $15,061,716 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.
As of June 30, 2007, the Fund's federal tax cost of securities was $55,449,974
resulting in net unrealized appreciation of $8,055,084 derived from $9,160,347
of unrealized gross appreciation less $1,105,263 unrealized gross depreciation.
The tax character of distributions paid by the Fund for the year ended December
31, 2006 was as follows:
2006
From ordinary Income $ --
================================================================================
Certain reclassifications, the result of permanent differences between financial
statement and income tax reporting requirements have been made to the components
of capital. Reclassifications 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. For the year ended December 31, 2006, the Fund
made the following reclassification:
Undistributed
Paid-in Net Investment Realized
Capital Income Capital Gains
($233,507) $186,952 $46,555
================================================================================
On July 13, 2006, the FASB released FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Funds' tax returns
to determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or expense in
the current year. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of the
effective date. As of June 30, 2007, Management has determined that the Fund has
no uncertain tax positions.
2. Investment Transactions
During the six months ended June 30, 2007, the cost of purchases and proceeds
from sales of portfolio securities, other than short-term investments and
government securities amounted to $151,894,836 and $147,941,600, 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 JPMorgan Chase Bank, N.A.
("JPMorgan"), the administrative services agent, shareholder servicing and
transfer agent, and accounting services agent for the Trust.
10
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 2007 (Unaudited), continued
- --------------------------------------------------------------------------------
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 (Investment Advisory 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 was not
applied until the agreement had been in effect for 12 months ended April 30,
2006 (the "Initial Period"). For the Initial Period, the Adviser received only
the Base Fee. The Performance Fee Adjustment is 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 Investment
Advisory Fee payable for that month. During the six months ended June 30, 2007,
the Adviser's base fee was reduced by $8,420 under the Performance Fee
Adjustment.
Markman Capital Management, Inc. (the Adviser) entered into an expense
limitation agreement pursuant to which the Adviser agreed to waive fees and/or
reimburse expenses to the extent necessary in order to limit the Fund's total
operating expenses on Class A shares to 1.49% of average daily net assets. The
Fund has agreed to repay the Adviser for the amounts waived and/or reimbursed to
Class A shares by the Adviser pursuant to the expense limitation agreement
provided that such repayment does not cause the total annual fund operating
expenses of Class A shares to exceed 1.49%. The Adviser has agreed to maintain
the expense limitation with regard to Class A shares through May 1, 2008.
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT
Under the terms of the Administration, Accounting, and Transfer Agency Agreement
between the Trust and JPMorgan, JPMorgan supplies non-investment related
statistical and research data, internal regulatory compliance services and
executive and administrative services for the Fund. JPMorgan 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 materials for meetings of the Board of Trustees. In
addition, JPMorgan 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. JPMorgan 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
JPMorgan 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.
PLAN OF DISTRIBUTION
Effective May 1, 2007, IFS Fund Distributors, Inc. (the "Distributor") acts as
the Fund's Distributor and is registered as a broker-dealer under the Securities
and Exchange Act of 1934. The Distributor, which is the principal underwriter of
the Fund's shares, renders its services to the Fund pursuant to a distribution
agreement.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act, whereby it reimburses the Distributor or others in an amount not
to exceed 0.25% per annum of the average daily net assets of the Markman Core
Growth Fund Class A shares for expenses incurred in the promotion and
distribution of shares of the Fund. These expenses include, but are not limited
to, the printing of prospectuses, statements of additional information, and
reports used for sales purposes, expenses of preparation of sales literature and
related expenses (including Distributor personnel), advertisements and other
distribution-related expenses, including a prorated portion of the Distributor's
overhead expenses attributable to the distribution of shares. Such payments are
made monthly. The 12b-1 fee includes, in addition to promotional activities, the
amount the Fund may pay to the Distributor or others as a service fee to
reimburse such parties for personal services provided to shareholders of the
Fund and/or the maintenance of shareholder accounts. Such Rule 12b-1 fees are
made pursuant to the Plan and distribution agreements entered into between such
service providers and the Distributor or the Fund directly.
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 perform the duties and
responsibilities in accordance with Rule 38a-1 under the 1940 Act. The Chief
Compliance Officer, among other things, oversees an annual review of the
policies and procedures of the Trust and its service providers and provides a
summary report of his or her findings to the Board of Trustees. The Chief
Compliance Officer's compensation is paid by the Adviser and the Trust
reimburses the Adviser for such costs.
In addition, the Trust has contracted with JPMorgan to provide certain
compliance services on behalf of the Trust. Subject to the direction of the
Trustees of the Trust, JPMorgan developed and assisted in implementing a
compliance program for JPMorgan on behalf of the Fund and; provides
administrative support services to the Fund's Compliance Program and Chief
Compliance Officer. For these services, JPMorgan receives a quarterly fee from
the Trust.
11
4. Capital Share Transactions
Proceeds and payments on capital shares as shown in the Statements of Changes in
Net Assets are the result of the following capital share transactions:
Markman Core Growth Fund
---------------------------------------------
For the Six Months Ended For the Year Ended
June 30, 2007(a) December 31,2006
(Unaudited)
Class I
Shares sold 676,784 418,517
Shares redeemed (376,601) (1,092,606)
---------------------------------------------
Net increase (decrease) in shares outstanding 300,183 (674,089)
Shares outstanding, beginning of period 4,337,368 5,011,869
---------------------------------------------
Shares outstanding, end of period 4,637,551 4,337,780
=============================================
Class A
Shares sold 7,031
------------------------
Shares outstanding, beginning of period --
------------------------
Shares outstanding, end of period 7,031
========================
(a) Except for Class A shares, which represents the period from commencement
of operations (May 1, 2007) through June 30, 2007.
5. 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.
- --------------------------------------------------------------------------------
ADDITIONAL NOTES June 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
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, distribution (12b-1) fees, and other Fund expenses. The 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 (May 1, 2007 for Class A; January 1, 2007 for Class
I and held for the entire period through June 30, 2007).*
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 June 30, 2007" 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 Funds' actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Funds' 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 Funds 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
June 30, 2007 January 1, 2007 June 30, 2007 June 30, 2007*
Markman Core Growth Fund
Class A Actual 1.49% $ 1,000.00 $ 1,031.60 $ 2.53
----------------------------------------------------------------------
Class A Hypothetical 1.49% $ 1,000.00 $ 1,005.87 $ 2.50
-----------------------------------------------------------------------------------------------
Class I Actual 1.43% $ 1,000.00 $ 1,077.10 $ 7.36
----------------------------------------------------------------------
Class I Hypothetical 1.43% $ 1,000.00 $ 1,017.70 $ 7.15
-----------------------------------------------------------------------------------------------
* 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 [or 366] (to reflect the one-half year
period).
12
- --------------------------------------------------------------------------------
APPROVAL OF MANAGEMENT AGREEMENT
- --------------------------------------------------------------------------------
The Board of Trustees, and by a separate vote, the Trustees who are not
considered to be "interested persons" of the Trust or the Adviser as defined in
the Investment Company Act of 1940 (the "Independent Trustees"), approved the
Management Agreement between the Trust and the Adviser with respect to the Fund
at a meeting held on May 1, 2007.
In determining whether to approve the continuation of the Management Agreement,
the Board of Trustees evaluated information furnished by the Adviser that the
Board deemed necessary to determine whether continuance of the Management
Agreement was in the best interests of the Fund and its shareholders. In making
the recommendation to approve the Management Agreement, the Board of Trustees
gave careful consideration to all factors deemed to be relevant to the Fund,
including, but not limited to: (1) the nature, extent and the quality of the
services to be provided to be rendered to the Fund by the Adviser, including the
history, reputation, qualification and background of the Adviser as well as the
qualifications of its key personnel; (2) the investment performance of the Fund
as compared to similar mutual funds and relevant indices; (3) the level of fees
paid to the Adviser as compared to similar mutual funds; (4) the cost of
services to be provided and the profits to be realized by the Adviser from its
relationship with the Trust; and (5) the possible economies of scale that would
be realized due to Fund growth and whether fee levels reflect such economies of
scale for the benefit of shareholders.
Prior to voting, the Independent Trustees reviewed the proposed continuance of
the Management Agreement with management and with experienced independent legal
counsel and received materials from such counsel discussing the legal standards
for their consideration of the proposed continuation of the Management Agreement
with respect to the Fund. The Independent Trustees also reviewed the proposed
continuation of the Management Agreement in a private session with counsel at
which no representatives of management were present.
In considering the nature, extent and quality of services to be provided by the
Adviser, the Board of Trustees reviewed the investment advisory and other
services provided to the Trust and its shareholders, and the Adviser's
personnel. The Board of Trustees considered the level and depth of knowledge of
the Adviser. In evaluating the quality of services provided by the Adviser, the
Board of Trustees took into account its familiarity with the Adviser's
management through Board meetings, conversations and reports during the
preceding year. The Board of Trustees took into account the Adviser's
willingness to consider and implement organizational and operational changes
designed to improve investment results and lower fees and expenses. The Board of
Trustees also took into account the Adviser's compliance policies and
procedures. The Board of Trustees also received a copy of the Adviser's
financial statement and discussed the financial condition of the Adviser. The
Board of Trustees also considered the Adviser's role in coordinating the
activities of the Fund's other service providers, as well as the services that
the Adviser provides to the Fund's shareholders.
The Board of Trustees discussed the Fund's performance and expenses, including
the performance fee component of the advisory fee. The Board of Trustees also
noted that the Board reviews on a quarterly basis information about the Fund's
performance results, portfolio composition and investment strategy. The Board
took into account the Fund's overall strong performance relative to its peer
group, noting that the Fund has outperformed the average of both its Lipper and
Morningstar peer groups for the one- and three-year periods ended December 31,
2006. Among other performance data, the Board of Trustees also noted the Fund's
5-star Morningstar ranking for the same periods and that the Fund ranked in the
2nd and 1st percentiles, respectively, of its Lipper peer group for the same
periods. The Board of Trustees also considered the information provided in the
Board materials comparing the expenses of the Fund to its peers. The Board
compared the advisory fees and total expense ratios for the Fund with various
comparative data, including the industry average advisory fees and expense
ratios in the Fund's Morningstar category. The Board of Trustees noted that the
Fund's advisory fee and total expenses were above the average of other mutual
funds in the Fund's Morningstar category. The Board took into account the impact
that the size of the Fund has on expenses. The Board of Trustees also took into
account the quality of services received by the Fund, as well as the Fund's
performance. The Board also noted that the Adviser had proposed to enter into an
expense limitation agreement with respect to the Fund effective May 1, 2007.
The Board also took into consideration the financial condition and profitability
of the Adviser and any indirect benefits derived by the Adviser from the
Adviser's relationship with the Fund. In considering the Adviser's
profitability, the Board of Trustees reviewed the cost to the Adviser of
providing services to the Fund and the resulting profitability. The Board of
Trustees also noted that the Adviser had proposed to enter into an expense
limitation agreement with respect to the Fund. The Board concluded that the
Adviser has the financial wherewithal to perform the services under the
Management Agreement and that the Adviser's level of profitability from its
relationship with the Fund was reasonable. The Board of Trustees concluded
further that any indirect benefits the Adviser derives from its relationship
with the Fund are incidental to the management fee the Adviser earns.
The Board of Trustees considered the relatively small size of the Fund and the
effect of any potential future growth on its expenses and performance, noting
that the advisory fee contains breakpoints, which could potentially result in
economies of scale if the Fund's assets grow. The Board of Trustees also noted
that if the Fund's assets increase over time, the Fund may also realize other
economies of scale if assets increase proportionally more than certain other
expenses.
In considering the approval of the Management Agreement, the Board of Trustees,
including the Independent Trustees, did not identify any single factor as
controlling. Based upon their review and consideration of the information
provided in the Board materials prior to this meeting and also distributed at
previous meetings, as well as their familiarity with the Adviser through the
Board of Trustees' meetings throughout the years, the Board of Trustees reached
the following conclusions regarding the Management Agreement, among others: (A)
the Adviser has demonstrated that it possesses the capability and resources to
perform the duties required of it under the Management Agreement; (B) the
Adviser maintains appropriate compliance programs; (C) the performance of the
Fund is reasonable in relation to the performance of funds with similar
investment objectives and to relevant indices; and (D) the Fund's advisory
expenses are reasonable in relation to those of similar funds and to the
services to be provided by the Adviser. Based on their conclusions, the Trustees
determined that approval of the Management Agreement would be in the best
interests of the Fund and its shareholders.
13
- --------------------------------------------------------------------------------
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: 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.
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 Equitable Realty.
Edina, MN 55435
Age: 54
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: 52 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: 56
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: 55 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 JPMorgan Chase Bank, N.A.
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
- --------------------------------------------------------------------------------
Stay Informed
- --------------------------------------------------------------------------------
Check for net asset values and more Portfolio/Strategy Updates online
www.markman.com
Call for Bob Markman's market overview and portfolio activity report
800-975-5463
For up-to-the-minute net asset values and account values, call 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 Core Growth Fund 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 Core Growth Fund through these discount brokers.
For additional forms or answers to any questions just contact the Markman Core
Growth Fund, between the hours of 8:30 AM and 5:30 PM EST, toll-free
800-707-2771.
14
[Markman Core Growth Fund logo]
A Value-Added
Large Growth Strategy
6600 France Avenue South
Minneapolis, Minnestoa 55435
Item 2. Code of Ethics.
Not required in semiannual report filings.
Item 3. Audit Committee Financial Expert.
Not required in semiannual report filings.
Item 4. Principal Accountant Fees and Services.
Not required in semiannual report filings.
Item 5. Audit Committee of Listed Companies.
Not applicable and not required in semiannual report filings.
Item 6. Schedule of Investments.
The schedule is included as part of The Markman Core Growth Portfolio Semiannual
Report file under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not Applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers.
Not Applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 11. Controls and Procedures.
(a) 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 second fiscal quarter of the period covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable in semiannual filing.
(a)(2) Certifications required by Item 12(a) of Form N-CSR are filed herewith.
(a)(3) Not applicable.
(b) Certifications required by Item 12(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: August 28, 2007
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: August 28, 2007
By (Signature and Title)
/s/ Judith E. Fansler
- -------------------------------------
Judith E. Fansler
Treasurer and Chief Financial Officer
Date: August 28, 2007