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: 06/30/08
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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
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
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.
Markman
CORE GROWTH FUND
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A Value-Added
Large Growth Strategy
06.30.2008
Semi-Annual Report
(unaudited)
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Dear Fellow Shareholders,
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[PHOTO]
I am pleased to report to you that, in the face of a very difficult market, your
Fund has had a successful first half, outperforming the S&P 500 as well as the
averages of the funds in our peer groups.
Few participants, even those most prone to a 'glass half empty' stance, really
anticipated the depth of darkness that so suddenly descended on the investment
landscape in the opening weeks of 2008. Sure, we all knew the markets were in
the midst of a continuing unwinding of the great credit bubble. The road
continued to look tough for home builders, banks, and other institutions that
rode up the great credit bubble. But the element that surfaced in 2008 was the
fear not just of the 'bad actors' getting their come-uppance, but of the entire
global system being brought crashing down by their misdeeds.
It's hard to remember that 2007 ended on a relatively benign and positive note;
seems like a long ago fantasy: Oil at $70 per barrel, Citigroup shares at $30.
Wait a minute--was that just six months ago? Yikes!
The Amazing Bear Stearns Story
Things seemed to have come to a head with the Bear Stearns debacle. It is, in my
view, a revealing and instructive story, somewhat of a microcosm of the entire
financial crisis. Bear Stearns was a venerable old Wall Street institution and
the sixth largest investment bank in America. In January 2007, Bear Stearns
stock was trading for $180 per share. As the financial crisis unfolded for real
during the summer of 2007, the stock price steadily fell to almost $100. Quite a
decline in such a short period of time. It was about then that a well-known
British billionaire investor, Joe Lewis, caused a stir by stepping up and buying
about a billion dollars worth of Bear Stearns stock at a price of about $100 per
share. Many thought that this was another example of a savvy rich guy swooping
in at the bottom and buying a big stake at bargain prices. And, in fact, the
stock price did rally to over $122 per share by the end of September.
Then commenced the true 'seizing up' of the financial markets; few financial
institutions wanted to lend to other financial institutions out of fear that
they could no longer assess the safety of their loans in this environment. Bear
Stearns stock thus began a sickening slide from over $120 in the fall to $31 per
share by Friday, March 14. That is when it got really scary. By Sunday the 16th,
it was clear that Bear Stearns was facing bankruptcy. The 'powers that be' could
not let this happen. Because of the complex interconnectedness of the global
financial system, and given the already high lack of confidence in the safety of
any institution, a Bear Stearns bankruptcy had the very real potential to create
a cascade of bankruptcies that would take years and untold hundreds of billions
of dollars to resolve and heal. The result would very likely be global
depression. Yes, it was that serious.
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First Half of 2008 Performance Comparisons Against
Market Index and Fund Peers
[BAR CHART]
percentage gain/loss
MTRPX -9.74%
Russell 1000 Growth -9.05%
Morningstar LCG -11.23%
Lipper LCG -10.14%
S&P 500 -11.91%
Category Rankings
One Year Three Year Five Year Ten Year
Morningstar 28th percentile 21st percentile 5th percentile 43rd percentile
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Lipper 33rd percentile 17th percentile 1st percentile 39th percentile
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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 index does not include transaction costs associated with buying
and selling securities or any mutual fund expenses. It is not possible to invest
directly in an 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.
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. 770 funds are in the catagory as of 6/30/08.
The S&P 500 Index, a market capitalization-weighted unmanaged index based on the
average weighted performance of 500 widely held common stocks. An index does not
include transaction costs associated with buying and selling securities or any
mutual fund expenses. It is not possible to invest directly in an index.
Past performance is not a guarantee of future results.
1
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Pulled Back From the Brink
As Monday March 17 began, markets in Asia and Europe began to decline at an
alarming rate. We braced for the open in New York, with the futures signaling an
expected opening decline of over 500 points in the Dow. That was when the
announcement was made that the Fed had stepped in and on Sunday night had
constructed a 'sale' of Bear Stearns to J.P. Morgan for the astonishing price of
$2 per share. (Heck, the Bear Stearns office building in Manhattan alone was
worth more than that!) Not only that, but the Fed was guaranteeing Morgan's
assumption of $30 billion of Bear Stearns' debt.
Many have criticized this deal as one in which the government 'bailed out' Bear
Stearns. I'm not so sure. Certainly, they 'preserved' Bear Stearns, but to
construct a deal where shareholders (including blameless employees who owned a
large percentage of the firm) received mere pennies on the dollar for their
shares hardly seems like a bailout.
In reality, it was the global financial system--including you and me--that was
'bailed out.' For had this deal not been rammed through, it is likely that we
all would have seen much larger, longer lasting declines in our
investments--homes and stocks included.
Question: Why?
Answer: Leverage
There are many reasons for the financial crisis, and many culprits, but at the
end of the day in my view, what it all comes down to is too much money, with too
loose standards, using too much leverage. Money was thrown at borrowers.
Investments were made using huge amounts of margin, with little thought as to
the possible "what ifs?"
Of course, leveraging an investment is not, in and of itself, bad. The fact is
we all, at one time or another, use that tool. If you bought a home, even if you
put 50% down, in reality you used 50% leverage on the investment. This is never
really a problem if the leverage is not too high and the asset purchased has
reasonable short term price stability. The current financial crisis occurred
because neither happened: people used too much leverage and prices became more
volatile than expected. We can see how this impacted homeowners first and then
big time institutions like Bear Stearns.
The homeowner story is pretty well known. It seems that a lot of people bought
homes using 100% leverage--no money down--under the assumption that prices would
continue to go up, or, at the very worst stay relatively stable. But what
happens if prices go down? And go down a lot? When that home purchased for
$450,000 with a $450,000 mortgage suddenly becomes worth only $350,000...well,
you don't need to be a rocket scientist to see how that could screw up the whole
system.
On the other end of the spectrum are the big investment firms. They bundled
together all sorts of mortgages, from different parts of the country containing
a range of credit quality. The reasoning back then was this broad
diversification in mortgages would actually make these instruments safer than
past investments in this arena.
Unfortunately, in the greedy quest for extra return, far too much leverage was
used. We're not talking about the relatively benign levels of leverage you might
use to buy a home. These rocket scientists at certain hedge funds and mortgage
companies were using 20:1, 30:1, even 40:1 leverage! What 30:1 leverage means is
that you borrow $30,000 for every $1,000 you invest. Gulp!
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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: 1.29
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Five Year Alpha vs. Russell 1000 Growth Index: 4.81
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Average Market Cap: $34.68 billion
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Morningstar Star Ratings (Large Cap Growth Catagory)
o Three Years Four Stars (out of 1488 funds) * * * *
o Five Years Five Stars (out of 1215 funds) * * * * *
o Ten Years Three Stars (out of 589 funds) * * *
o Overall Four Stars (out of 1488 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
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So let's say you invest $1,000 and leverage that 30:1 so that you now have a
$30,000 portfolio of mortgage loans. If the market price of these loans remains
stable, you're making out like a bandit. But if instability enters the market
well, cue the Jaws music. (And instability is exactly what walking in the door
due to the no down payment/no doc/overpriced market scenario noted above.) If
your $30,000 portfolio of mortgages decline just 3%--that's over $1,000--you
will get margin calls that might be too large to meet. Thus even relatively
small market declines could effectively wipe you out. That is how seemingly
strong, prosperous firms went from master of the universe status to near
bankruptcy in what seems like the blink of an eye. Few in the financial arena
were aware of just how leveraged some of these firms were and thus
under-estimated the severity and speed with which the financial meltdown could
and would occur.
That leveraged meltdown is my take on what happened with Bear Stearns.
The Idiocy of Hope
While the market rallied strongly on the back of the Fed engineered 'rescue' of
Bear, it soon became evident that we still hadn't seen the bottom in the
financial sector. By the middle of May, prices of banks, brokers, homebuilders,
etc. once again resumed their sickening slide. Come June 30, most of even the
major, 'blue chip' players in these sectors were not only lower than the panic
lows of March, they had declined 40-80% from their levels of just 18 months
before. Some were on their way to 80-90% declines. Without a doubt, this was a
crash not unlike the tech crash of 2000-2002.
The hope that surfaced after the Bear Stearns rescue was quickly dashed. Recall
that in the Fund's 2007 Annual report I wrote: "Hope is the most dangerous of
investment emotions. Hope, not greed, is the emotion that makes us hang on to
losing positions far longer than we should. Hope, not greed, is what makes us
stick to our guns when the world is telling us that our decisions are not
working. Hope, not greed, is what makes investors average down on devastatingly
losing positions. Hope is what ultimately makes otherwise smart investors ignore
the reality in front of them. The hopeful investor is capable of losing a
fortune..."
Nevertheless, many investors and fund managers clung to the hope that we had put
in a bottom in financials. All they got for their hope was double digit second
quarter losses on top of the damage already done in the first quarter. Rather
than being open minded and listening to what the market was saying, they
continued to try to force their preconceived notions about the 'right price' and
the 'right way' to look at things. In their quest to be right, they sacrificed
results.
Simultaneous with these historic price changes, we experienced a second tectonic
shift: energy prices exploded. It seems almost quaint to remember how we worried
about $70 oil last year. Month by month in the first half of 2008 we saw energy
prices rise to levels few would have believed possible. $80 per barrel oil was
breeched, then $90. It seemed like $100 would be a tough level to rise above,
but then prices blasted through that benchmark and began a steady march to the
$140's by the end of June.
And just like with the financials, many managers, pundits and media talking
heads railed about how this was not the way things should be; how prices in both
the energy and agriculture sectors must come down sooner or later and that they
were being artificially kept aloft by nefarious speculators. That, in my
opinion, is simply baloney.
Commodities all across the board have seen extreme price increases over the past
couple of years--including those not traded on exchanges. Take steel, for
example. It is not traded on commodities futures markets and thus is not subject
to having its price distorted by those shadowy speculators. Yet steel has
skyrocketed in price. Why? For the same reason oil has! There is a large and
unexpected increase in global demand that cannot be met by available global
supplies. In my view, it's just that simple, folks.
As I wrote in the 2007 Annual Report about managers who find the winds of the
market turning against them: "It's almost as if the manager is sending the
message that, 'I know this is not working, but I'm going to stick to my guns
until the market realizes that I am right, regardless of how much pain we have
to endure along the way.'" And so, as 2008 unfolded, we witnessed the spectacle
of some of the most rigorous minds on Wall Street pooh-pooh the global commodity
story and tout the 'values' in the beaten down financials. Very sad. I can
already see the media vultures, drunk with schadenfreude, circling the
carcasses.
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Mid-Year Check-ups
o WE REMAIN TAX EFFICIENT!
We are pleased to report to you that our projections for 2008 indicate
that there will be no taxable distributions this year. This will be the
sixth consecutive year in which the Fund's capital loss carryforward
helped create no capital gain distribution. As you may know, many funds
began once again to distribute significant taxable year-end distributions
last year. All indications point to these distributions growing even
larger this year. If you own mutual funds in a taxable account, we urge
you to check with your other funds to see what the taxable impact will be
this year, and plan accordingly.
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[PIE CHART]
Small (under 1.5 billion) 6.3%
Mid (1.5-8 billion) 4.6%
Large (over 8 billion) 89.1%
Market Caps 06.30.08
(as a percentage of the stock portion of the portfolio)
Top Ten Holdings
of the Stock Portfolio 06.30.08
Oil Service Holdrs 4.4%
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Potash Corp. 4.3%
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Chesapeake Energy 4.3%
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Peabody Energy 4.2%
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Mosaic Co. 4.2%
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Petrobras 4.2%
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Norfolk Southern 4.1%
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ABB Ltd. 4.1%
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Monsanto Co. 4.1%
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U.S. Natural Gas LP 4.0%
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Total in Top Ten 41.9%
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3
Top Five Weighted Sectors
Energy/Natural Resources 21.2%
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Agriculture/Food Products 16.4%
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Metals & Mining 15.0%
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Engineering Services 12.4%
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Financial Services 9.6%
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I'm Not Perfect, Either
I confess to being as surprised as any at the speed and severity of the
downdraft at the beginning of the year. We began the year leaning with a
relatively heavy weighting in financials. With the market going down in big
chunks almost daily, I expected some sort of countertrend rally at a number of
points. Thus, I did not get out of the way of the speeding train as I would, in
hindsight, have liked. On the contrary, I even attempted to 'bottom fish' in
some of the beat up financials before I realized that the area had indeed become
too toxic to touch at that time.
In addition, the overall market panic also struck heavily at companies that had
little, if anything, to do with the storms caused by the financial melt-down and
the energy melt-up. For example, in just the first five weeks of the year Apple,
our largest holding at the time, dropped a sickening 38%. Madden-ingly, nothing
in Apple's fundamentals had weakened. If anything, we continued to get
indications that the company's business was just getting stronger and stronger.
Neverthe-less, that kind of short term decline is enough to shoot a hole in any
portfolio.
These were among the factors that led to very disappointing first quarter
performance. By March 30, the Fund was down 17.25%, well below the market
averages and our peer groups. But, as I noted in the Annual Report, it's OK to
be wrong, but it's not OK to stay wrong.
Tailwinds, Not Headwinds
So we walked our talk in the second quarter, moving away from sectors and
companies in the financial and retail sectors that continued to face headwinds
and toward companies that benefitted from the continuing tailwind of global
growth.
We made additions to our agriculture, energy and global build-out positions. We
also fine-tuned our financial exposure (selling banks and brokerages while
buying MasterCard and Visa--two 'financials' that actually benefit from consumer
pressures). Lastly, we stood our ground in selected holdings like Apple,
believing that the fundamentals of the company were not only sound, but actually
were improving. These moves helped the Fund to return a solid 9.08% in the
second quarter, placing us among the top performers in the large cap growth
space. This was particularly impressive given the continued market malaise and
the fact that most of the market averages were actually down for the quarter.
When all was said and done, once we went through the horrible first quarter and
fine second quarter we ended up in the 'satisfactory' position we find ourselves
in on June 30--if not in absolute terms, at least relative to our peers. Whew!
So what now?
Will it Be Ain't No Cure for the Summertime Blues, or Summertime and the Living
is Easy?
The fact that the markets stumbled and tumbled to end the second quarter makes
it hard to imagine a quick upturn as we begin the summer. As I've noted, the
financial sector still remains toxic, home prices have not even begun to
stabilize, and no one--I repeat, no one--knows just what the impact of $140 oil
will be. So there's quite a compelling list of problems that the markets need to
sort out before we can even think about being out of the woods.
There is, though, another side to the story. Apart from the obvious pain being
suffered by companies in the financial and consumer sectors, there is much
positive news to report. The Global Build-Out story remains firmly in place,
with new cities sprouting like mushrooms after a heavy rain. According to the
United Nations Population Division(1), Asia will experience a new urban influx
the size of three Clevelands--every month--for the next seven years. Companies
that are connected to steel, cement, electrical generation, and engineering and
construction are looking at a long, clear and open road to profits in the years
to come. That said, U.S.-centric traders and managers seem to buy and sell in
and out of these sectors with every twitch in the U.S. economy, but that is just
smoke and dust that obscures what I believe to be the true underlying trend. My
guess is that the folks racing to build out Shanghai or the United Arab Emirates
don't spend too much time worrying about condo values in Las Vegas, car sales in
Columbus, or the price of gas in New Jersey.
Global agriculture plays continue to benefit from strong tailwinds. The shift in
dietary habits on the part of a billion consumers is still in its early stages.
This is a mutli-year trend and it is very unlikely to be derailed for long due
to short term problems in the financial markets. In my opinion, seed and
fertilizer stocks, while certainly volatile, offer the best prospects for growth
in this sector.
I also remain firm in my belief that the prospects for market leading technology
companies like Apple, Research in Motion and Google make owning their stock very
attractive propositions.
Last, but not least, I have to circle back and once again reiterate what I wrote
in the 2007 Annual Report: "At some point, and I have no idea when, we will
likely see a long term low in the broad financial sector." I still think so. At
the rate these stocks have been declining, it may come sooner than later. When
it does, we could well have an opportunity to buy at once-in-a-generation
prices.
Bottom line on all this is that if we can keep our heads through the inevitable
spasms, panics and fear mongering that inevitably occurs at market bottoms, we
have the potential of reaping handsome rewards much sooner than you might think.
1 United Nations Population Division, World Urbanization Prospect 2007
Revision
4
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PORTFOLIO OF INVESTMENTS June 30, 2008 (Unaudited)
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Shares Market Value
COMMON STOCKS--100.2%
ENERGY/NATURAL RESOURCES--21.2%
10,300 Oil Service HOLDRs Trust $ 2,286,703
34,000 Chesapeake Energy Corp. 2,242,640
25,000 Peabody Energy Corp. 2,201,250
31,000 Petroleo Brasileiro S.A.-ADR 2,195,730
33,500 United States Natural Gas Fund LP* 2,104,135
$ 11,030,458
AGRICULTURE/FOOD PRODUCTS--16.4%
9,900 Potash Corp. of Saskatchewan $ 2,262,843
15,200 The Mosaic Co.* 2,199,440
16,700 Monsanto Co. 2,111,548
48,000 PowerShares DB Agriculture Fund 1,954,080
$ 8,527,911
METALS & MINING--15.0%
17,000 Schnitzer Steel Industries, Inc. $ 1,948,200
20,000 BHP Billiton Ltd. - ADR 1,703,800
17,000 ArcelorMittal - ADR 1,684,190
36,000 Companhia Vale do Rio Doce 1,289,520
13,000 SPDR Gold Trust* 1,188,200
$ 7,813,910
ENGINEERING SERVICES--12.4%
75,000 ABB Ltd.* $ 2,124,000
8,500 Fluor Corp. 1,581,680
18,000 Jacobs Engineering Group, Inc.* 1,452,600
77,000 Hill International, Inc.* 1,265,880
$ 6,424,160
FINANCIAL SERVICES--9.6%
6,400 MasterCard, Inc. $ 1,699,328
3,200 CME Group, Inc. 1,226,208
65,400 U.S. Global Investors, Inc.- Class A 1,095,450
12,000 Visa, Inc.-Class A* 975,720
$ 4,996,706
DIVERSIFIED INDUSTRIAL/MEDICAL/FINANCIAL--5.1%
32,000 Cummins, Inc. $ 2,096,640
20,000 General Electric Co. 533,800
$ 2,630,440
TRANSPORTATION & DELIVERY--4.1%
34,000 Norfolk Southern Corporation $ 2,130,780
CONSUMER ELECTRONICS--3.9%
12,000 Apple, Inc.* $ 2,009,280
LEISURE--3.4%
22,000 McDonald's Corp. $ 1,236,840
11,000 Las Vegas Sands Corp.* 521,840
$ 1,758,680
CONSUMER PRODUCTS--3.0%
16,000 Philip Morris International, Inc. $ 790,240
38,000 Altria Group, Inc. 781,280
$ 1,571,520
HEALTH CARE/MEDICAL--2.7%
15,000 Quest Diagnostics, Inc. $ 727,050
10,000 Zimmer Holdings, Inc.* 680,500
$ 1,407,550
SOFTWARE & SERVICES--1.8%
25,000 Blackboard, Inc.* $ 955,750
INTERNET COMMERCE--1.6%
1,600 Google, Inc. - Class A* $ 842,272
TOTAL COMMON STOCKS-100.2% $ 52,099,417
(Cost $47,878,967)
LIABILITIES IN EXCESS OF
OTHER ASSETS--(0.2%) (126,033)
NET ASSETS--100.0% $ 51,973,384
* Non-income producing security.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
5
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STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008 (Unaudited)
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ASSETS
Investment securities:
At acquisition cost $ 47,878,967
=============
At market value $ 52,099,417
Accrued income 26,837
Receivable for securities sold 22,288,560
Receivable from Adviser 40,660
Other assets 19,631
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TOTAL ASSETS 74,475,105
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LIABILITIES
Payable for securities purchased 20,556,416
Payable for capital shares redeemed 32,145
Payable to Adviser 37,697
Payable to other affiliates 12,396
Line of Credit 1,863,067
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TOTAL LIABILITIES 22,501,721
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NET ASSETS $ 51,973,384
=============
Net assets consist of:
Paid-in capital $ 78,489,301
Accumulated net investment loss (483,234)
Accumulated net realized losses
from security transactions (30,253,133)
Net unrealized appreciation on investments 4,220,450
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NET ASSETS $ 51,973,384
=============
Pricing of Class I Shares
Net assets attributable to Class I shares $ 51,973,384
Shares of beneficial interest outstanding
(unlimited number of shares authorized,
no par value) 3,896,663
Net asset value, offering price and
redemption price per share $ 13.34
See accompanying notes to financial statements.
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STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2008 (Unaudited)
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INVESTMENT INCOME
Dividends $ 265,892
-------------
EXPENSES
Investment advisory fees 243,652
Custodian fees 149,094
Professional fees 65,740
Line of Credit Interest Expense 63,417
Sub transfer agent fees 50,086
Compliance fees and expenses 31,957
Administration fees 29,500
Shareholder report costs 29,109
Accounting services fees 17,500
Registration fees 15,821
Transfer agent fees 15,000
Postage and supplies 14,804
Trustees fees and expenses 13,143
Distribution fees - Class A 280
Other expenses 10,187
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TOTAL EXPENSES 749,290
Fees Waived (164)
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NET EXPENSES 749,126
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NET INVESTMENT LOSS (483,234)
REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS
Net realized gains from security transactions 241,809
Net change in unrealized appreciation/
depreciation on investments (5,881,654)
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NET REALIZED AND UNREALIZED
LOSSES ON INVESTMENTS (5,639,845)
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NET DECREASE IN NET ASSETS
FROM OPERATIONS $ (6,123,079)
=============
See accompanying notes to financial statements.
6
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STATEMENTS OF CHANGES IN NET ASSETS
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For the Six Months Ended
June 30, 2008(b) For the Year Ended
(Unaudited) December 31, 2007(a)
FROM OPERATIONS
Net investment loss $ (483,234) $ (277,990)
Net realized gains from security transactions 241,809 7,576,463
Net change in unrealized appreciation/depreciation on investments (5,881,654) 2,045,900
------------ ------------
Net increase (decrease) in net assets from operations (6,123,079) 9,344,373
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS I
Proceeds from shares sold 1,589,118 10,010,824
Payments for shares redeemed (5,733,024) (12,250,857)
------------ ------------
Net decrease in net assets from Class I capital share transactions (4,143,906) (2,239,763)
------------ ------------
CLASS A
Proceeds from shares sold 174,965 318,079
Payments for shares redeemed (479,087) --
------------ ------------
Net increase (decrease) in net assets from Class A capital share transactions (304,122) 318,079
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (10,571,107) 7,422,689
NET ASSETS
Beginning of period 62,544,491 55,121,802
------------ ------------
End of period $ 51,973,384 $ 62,544,491
============ ============
ACCUMULATED NET INVESTMENT LOSS $ (483,234) $ --
============ ============
(a) Except for Class A Shares, which represents the period from commencement
of operations (May 1, 2007) through June 30, 2007.
(b) Except for Class A Shares, which represents the period from January 1,
2008 through April 30, 2008.
- --------------------------------------------------------------------------------
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, 2008 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 2007 2006 2005 2004 2003
Net asset value at beginning of period $ 14.78 $ 12.71 $ 11.00 $ 10.24 $ 9.02 $ 6.30
--------- --------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income (loss) (0.12) (0.07) (0.04) 0.05 0.07 0.08
Net realized and unrealized gains
(losses) on investments (1.32) 2.14 1.75 0.76 1.22 2.72
--------- --------- --------- --------- --------- ---------
Total from investment operations (1.44) 2.07 1.71 0.81 1.29 2.80
--------- --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income -- -- -- (0.05) (0.07) (0.08)
--------- --------- --------- --------- --------- ---------
Net asset value at end of period $ 13.34 $ 14.78 $ 12.71 $ 11.00 $ 10.24 $ 9.02
========= ========= ========= ========= ========= =========
Total return (9.74%)(a) 16.29% 15.55% 7.94% 14.31% 44.40%
========= ========= ========= ========= ========= =========
Net assets at end of period (000s) $ 51,973 $ 62,210 $ 55,122 $ 55,115 $ 60,132 $ 59,614
========= ========= ========= ========= ========= =========
Ratio of net expenses to
average net assets 2.82%(b) 1.70% 1.58% 1.58% 1.44% 1.50%
Ratio of net investment income (loss)
to average net assets (1.82%)(b) (0.45%) (0.33%) 0.46% 0.71% 0.97%
Portfolio turnover rate 2,429%(b) 1,098% 799% 658% 472% 228%
(a) Not annualized.
(b) Annualized.
See accompanying notes to financial statements.
7
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 2008 (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 to investors, the Markman Core
Growth Fund (the "Fund").
The Fund was authorized to offer two classes of shares: Class A shares and Class
I shares. Each Class A and Class I share of the Fund represented identical
interests in the Fund's assets and had the same rights, except that (i) Class A
shares adopted a Distribution Plan pursuant to Rule 12b-1 (Note 3) and (ii)
certain other class specific expenses were borne solely by the class to which
such expenses were attributable. Effective April 30, 2008, Class A shares were
converted into Class I shares.
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. Under normal market conditions, at least 80% of the Fund's assets
will be invested in the common stock of large U.S. companies selected for their
growth potential. The Fund may also invest in real estate investment trusts,
money market securities and high yield debt securities.
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.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
o Level 1 - quoted prices in active markets for identical securities
o Level 2 - other significant observable inputs (including quoted
prices for similar securities, interest rates, prepayment speeds,
credit risk, etc.)
o Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. For
example, money market securities are valued using amortized cost, in accordance
with rules under the Investment Company Act of 1940. Generally, amortized cost
approximates the current fair value of a security, but since the value is not
obtained from a quoted price in an active market, such securities are reflected
as Level 2.
The following is a summary of the inputs used to value the Fund's net assets as
of June 30, 2008:
Level 2-
Other Level 3-
Level 1- Significant Significant
Quoted Observable Unobservable
Prices Inputs Inputs
Investments in Securities $ 52,099,417 $ -- $ --
- --------------------------------------------------------------------------------
Short sales - The Fund may sell securities short. In a short sale, the Fund
sells stock it does not own and makes delivery with securities "borrowed" from a
broker. The Fund then becomes obligated to replace the security borrowed by
purchasing it at the market price at the time of replacement. This price may be
more or less than the price at which the security was sold by the Fund. Until
the security is replaced, the Fund is obligated to pay to the lender any
dividends or interest accruing during the period of the loan. In order to borrow
the security, the Fund may be required to pay a premium that would increase the
cost of the security sold. The proceeds of the short sale will be retained by
the broker, to the extent necessary to meet margin requirements, until the short
position is closed out. The amount of any gain will be decreased and the amount
of any loss increased by the amount of any premium, dividends or interest the
Fund may be required to pay in connection with a short sale.
When it engages in short sales, the Fund must also deposit in a segregated
account an amount of cash or U.S. Government securities equal to the difference
between (1) the market value of the securities sold short at the time they were
sold short and (2) the value of the collateral deposited with the broker in
connection with the short sale (not including the proceeds from the short sale).
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.
Allocations - Investment income earned, realized capital gains and losses, and
unrealized appreciation and depreciation for the Fund was allocated daily to
each class of shares based upon its proportionate share of total net assets of
the Fund. Class specific expenses were charged directly to the class incurring
the expense. Common expenses, which were not attributable to a specific class,
were allocated daily to each class of shares based upon its proportionate share
of total net assets of the Fund.
Security transactions - Security transactions are accounted for on the trade
date. Securities sold are determined on a specific identification basis.
8
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 2008 (Unaudited), continued
- --------------------------------------------------------------------------------
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, 2007:
Tax cost of portfolio investments $ 55,937,938
-------------
Gross unrealized appreciation on investments $ 8,338,978
-------------
Gross unrealized depreciation on investments (2,009,074)
-------------
Net unrealized appreciation on investments 6,329,904
-------------
Capital loss carryforward (26,722,742)
-------------
Accumulated deficit $ (20,392,838)
================================================================================
During the year ended December 31, 2007, the Fund utilized $10,120,730 of
capital loss carry-forwards. As of December 31, 2007, the Fund had a net capital
loss carryforward of $26,722,742 of which $8,407,034 will expire in 2008,
$12,127,416 will expire in 2009 and $6,188,292 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, 2008, the Fund's federal tax cost of securities was $51,651,167
resulting in net unrealized appreciation of $448,250 derived from $3,089,166 of
unrealized gross appre- ciation less $2,640,916 unrealized gross depreciation.
The Fund paid no distributions to shareholders during the six months ended June
30, 2008.
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 net investment losses.
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, 2007, the Fund made the following
reclassification:
- --------------------------------------------------------------------------------
Undistributed
Paid-in Net Investment Realized
Capital Income Capital Losses
($293,126) $ 264,424 $ 28,702
================================================================================
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. The Fund has analyzed its tax positions taken on Federal income
tax returns for all open years (December 31, 2004 through 2007) for purposes of
implementing FIN 48 and have concluded that no provision for income tax is
required in the financial statements.
2. Investment Transactions
During the six months ended June 30, 2008, the cost of purchases and proceeds
from sales of portfolio securities, other than short-term investments and
government securities amounted to $719,301,025 and $723,555,083, 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.
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 is made at
the end of each calendar month, 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, 2008, the
Adviser's base fee was increased by $17,675 under the Performance Fee
Adjustment.
9
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 2008 (Unaudited), continued
- --------------------------------------------------------------------------------
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 an asset-based administrative fee and 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 adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under
the Act, whereby it reimbursed 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 Class A 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 were
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 were
made pursuant to the Plan and distribution agreements entered into between such
service providers and the Distributor or the Fund directly.
UNDERWRITING AGREEMENT
IFS Fund Distributors, Inc. (the "Underwriter") is the Fund's principal
underwriter and, as such, acts as the exclusive agent for distribution of the
Fund's shares. Under the terms of the Underwriting Agreement between the Trust
and Underwriter, the Underwriter earned $67 and $1,425 from underwriting and
broker commissions on the sale of shares, respectively, for the six months ended
June 30, 2008 for Class A shares. During the six months ended June 30, 2008, the
Adviser paid no underwriting fees from its investment advisory fee.
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.
- --------------------------------------------------------------------------------
4. Capital Share Transactions
Proceeds and payments from capital share transactions as shown on 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, 2008 (unaudited)(b) December 31, 2007(a)
Class I
Shares sold 121,798 760,960
Shares redeemed (434,803) (889,072)
------------- -------------
Net decrease in shares outstanding (313,005) (128,112)
Shares outstanding, beginning of year 4,209,668 4,337,780
------------- -------------
Shares outstanding, end of year 3,896,663 4,209,668
============= =============
Class A
Shares sold 13,982 --
Shares redeemed (36,576) 22,594
------------- -------------
Net increase (decrease) in shares outstanding (22,594) 22,594
Shares outstanding, beginning of period 22,594 --
------------- -------------
Shares outstanding, end of period -- 22,594
============= =============
(a) Except for Class A Shares, which represents the period from commencement
of operations (May 1, 2007) through December 31, 2007.
(b) Except for Class A Shares, which represents the period from January 1,
2008 through April 30, 2008.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
10
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS June 30, 2008 (Unaudited), continued
- --------------------------------------------------------------------------------
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.
6. Borrowing Agreement
Effective February 25, 2008, the Trust entered into a Borrowing Agreement on
behalf of the Fund with the Fund's custodian. Under the Borrowing Agreement, the
Fund may borrow up to $15 million. Proceeds from such borrowings will be used
only for the Fund's daily cash needs as a temporary measure for extraordinary or
emergency purposes, or for clearance of transaction, including without
limitation the payment of redemptions occurring after the Fund's cash funds have
already been committed to overnight investments and which might otherwise
require the untimely disposition of the Fund's portfolio securities, or to
finance the purchase (on an interim basis) of portfolio securities. As of June
30, 2008, the Fund had $1,863,067 outstanding under the Borrowing Agreement.
- --------------------------------------------------------------------------------
ADDITIONAL NOTES June 30, 2008 (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 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 952-920-4848. Information on
the operation of the Public Reference Room may be obtained by calling
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 held for the entire period (January 1, 2008 through
June 30, 2008).
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, 2008" 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 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
June 30, 2008 January 1, 2008 June 30, 2008 June 30, 2008*
Markman Core Growth Fund
Class I Actual 2.82% $ 1,000.00 $ 902.60 $ 13.34
-------------------------------------------------------------------------
Class I Hypothetical 2.82% $ 1,000.00 $ 1,010.84 $ 14.10
====================================================================================================
* 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).
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
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 February 5, 2008.
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 outperformed the average of both its Lipper and
Morningstar peer groups for the one- three- and five-year periods ended December
31, 2007 and outperformed the S&P 500 Index and the Russell 1000 Growth Index
over the same periods. Among other performance data, the Board of Trustees also
noted that the Fund ranked in the 36th, 8th and 1st percentiles, respectively,
of its Lipper peer group for the same periods and also took into account the
Fund's Morningstar rankings.
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 entered into an expense limitation
agreement with respect to Class A of 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 entered 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.
12
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST (Unaudited))
- --------------------------------------------------------------------------------
Listed 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: 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.
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: 55
- ---------------------------------------------------------------------------------------------------------------------------
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: 53 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: 57
1 Each Trustee is elected to serve in accordance with the Declaration of Trust and By-Laws of the Trust until his or her
successor is duly elected and qualified.
===========================================================================================================================
===========================================================================================================================
Position(s)
Held With Term of Office and Principal Occupation(s)
Name/Address/Age Trust Length of Time Served During Last 5 yrs
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OFFICERS:
Judith E. Fansler Secretary Since Inception Chief Operations Officer,
6600 France Ave. South Treasurer Since May 2003 Markman Capital Management, Inc.
Edina, MN 55435 Chief
Compliance
Age: 56 Officer Since October 2004
===========================================================================================================================
The Statement of Additional Information contains additional information about
the Trustees and is available without charge upon request by calling
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
- --------------------------------------------------------------------------------
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 $500. 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
www.markman.com
An investor should carefully consider the investment objectives, risks, charges,
and expenses found in the prospectus. For a prospectus containing complete
information about the Markman Core Growth Fund, contact your financial
professional, call Markman at 800-707-2771, or visit the funds' website at
www.markman.com.
Please read the prospectus carefully before investing or sending money.
Investment products offered are not FDIC insured, may lose value, and have no
bank guarantee.
Past performance is not a guarantee of future results.
13
Markman
CORE GROWTH FUND
- ----------------------------
A Value-Added
Large Growth Strategy
6600 France Avenue South
Minneapolis, Minnesota 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 25, 2008
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 25, 2008
By (Signature and Title)
- ---------------------------
/s/ Judith E. Fansler
Judith E. Fansler
Treasurer and Chief Financial Officer
Date: August 25, 2008